Leadership Revolution : Creating a High Performance Organisation [1 ed.] 9781869222178, 9781869221652

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CREATING A HIGH PERFORMANCE ORGANISATION Using South African case studies and examples benchmarked against global best practices, the areas of focus covered in the book include: • the way you execute your strategy

THE LEADERSHIP

• the way you organise your people in order to achieve your strategy • how you recruit, retain and manage your talent • how you reward and celebrate their success • the way you measure your efforts to achieve your strategy and implement the controls you need to achieve it

• how you manage the change leadership that is required to make all of this happen

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It will require both revolutionary and evolutionary changes to remodel your organisation and adopt the actions and behaviours required from leaders who create High Performance Organisations.

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• the values you embed that all stakeholders need to buy into

Christo Nel and Nolan Beudeker

Creating a sustainable High Performance Organisation (HPO) is one of the primary leadership challenges facing any leader. This has always been the case in any era and organisation, but the nature of this challenge has undergone a revolution since the 1960s. The world of work has evolved. The emerging generation of talented people and future leaders increasingly rejects authoritarian, command-and-control-style leaders as the norm. The focus on discipline and the delivery of high performance has not decreased. In the globalised world, this demand is increasing. The difference is that leaders and organisations that deliver sustainable competitiveness have discovered that they have to place equal emphasis on performance AND people; being competitive AND caring; being courageous AND consistent. The reality is that your organisation is first and foremost a human system, so it needs to be designed and run in ways that are fit and friendly for human life. In order to achieve this new way of being, it is important that all leaders in your organisation, regardless of their seniority, focus on the behaviours and actions that will generate energy and therefore productivity in the organisation.

THE LEADERSHIP

THE LEADERSHIP

Ne

l and Nolan

 

CREATING A HIGH PERFORMANCE ORGANISATION

THE LEADERSHIP

(R)EVOLUTION

THE LEADERSHIP (R)EVOLUTION Creating a High Performance Organisation Christo Nel and Nolan Beudeker

2011

Copyright © Knowres Publishing, Christo Nel and Nolan Beudeker All reasonable steps have been taken to ensure that the contents of this book do not, directly or indirectly, infringe any existing copyright of any third person and, further, that all quotations or extracts taken from any other publication or work have been appropriately acknowledged and referenced. The publisher, editors and printers take no responsibility for any copyright infringement committed by an author of this work. Copyright subsists in this work. No part of this work may be reproduced in any form or by any means without the written consent of the publisher or the author. While the publisher, editors and printers have taken all reasonable steps to ensure the accuracy of the contents of this work, they take no responsibility for any loss or damage suffered by any person as a result of that person relying on the information contained in this work.

First Edition, First Published 2009 Second updated edition 2011 ISBN: 978-1-86922-217-8 Ebook Published by Knowres Publishing (Pty) Ltd P O Box 3954 Randburg 2125 Republic of South Africa Tel: 011 706 6009 Fax: 011 706 1127 E-mail: [email protected] Website: www.kr.co.za Printed and bound: Replika Press Pvt Ltd, Haryana, India Typesetting, layout and design: Cia Joubert, [email protected] Cover design: Enid de Beer Editing: Marí Lategan, Nolan Beudeker & Alison Westwood Proofreading: Adrienne Pretorius, [email protected] Project management: Cia Joubert, [email protected]

To South Africa, with love

CONTENTS Acknowledgements.............................................................................................................. ii How to use this book............................................................................................................ v Introduction.......................................................................................................................... vi 1.

The New Economy – a revolution of leadership........................................................ 1

2.

The values shift........................................................................................................ 15

3.

The journey to new economy leadership and sustainable competitiveness............ 35

4.

VISA to (w)hole strategy execution.......................................................................... 47

5.

Structures................................................................................................................ 75

6.

Talent creation....................................................................................................... 103

7.

Business disciplines............................................................................................... 133

8.

Recognition and reward......................................................................................... 157

9.

Change leadership................................................................................................. 179

10.

Stakeholder value.................................................................................................. 223

Epilogue: A revolution of democratisation ....................................................................... 245

Appendix A....................................................................................................................... 269 Appendix B....................................................................................................................... 276 Appendix C....................................................................................................................... 285 Index . ............................................................................................................................. 289



The Leadership (R)evolution: Creating a High Performance Organisation

ACKNOWLEDGEMENTS From Christo: First and foremost, thank you to the dozens of clients with whom I have had the privilege of working over more than two decades. This book is a tribute to them. It is a compilation of learning from both success stories and failures. Several of these clients are mentioned in the book, and without the learning I gleaned from them, it could not have been written. Every client I have ever had the privilege to work with has contributed to my learning – even, and perhaps especially, where I experienced failures in what my colleagues and I were trying to accomplish. But it is the lasting elements of success that offer the inspiration to strive towards the elusive goal of creating a High Performance Organisation (HPO). Some cynics may claim that it is not possible for an organisation operating in South Africa ever to entrench all of the drivers of a HPO culture. Companies such as SAB Ltd have proved them wrong. They have largely mastered and entrenched all of the drivers we address in this book, and have gone on to turn this into a cornerstone of their exceptionally successful international expansion. That is why they are such an internationally successful and respected organisation. And they have achieved it with South African managers and workers, South African unions, and operating within the frameworks of South African labour relations. SAB remains a primary point of reference for me, and the years of involvement with them in the early 1990s set me on my own quest to identify and capture the recipe that makes the difference between HPOs and also-rans. There have been divisions within a client that can claim to match the SAB example, and there are many other organisations that have been core to identifying and developing an understanding of what it takes to achieve excellence in each of the HPO drivers. Some have since experienced significant failures, and others continue to grow from strength to strength. One of the greatest privileges has been that I have often worked with a client for several years, going through several cycles of development with them. This has been like being on a perpetual MBA or Doctorate programme! I have learnt such valuable lessons from Eskom, LifeLine, IDC, Andersen SA (before someone discovered a shredder), Woolworths, Edcon, Distell, ABI, Macsteel, Old Mutual, PG Bison, Santam, Hewlett Packard, IBM, Johannesburg Metropolitan Council, Sanlam, Caltex, SARS, MNet, Volkswagen, Sasol Mining, Parmalat, National Union of Mineworkers, Fancourt, Airports Company SA, Johannesburg City Power, Post Office, SA National Blood Services, Ooba and Gijima. Certain of my clients deserve special mention. At various times over the past two decades SAB, Absa, MultiChoice, TransUnion, Total SA, Toyota SA, and Cliffe Dekker (now Cliffe Dekker Hofmeyr) gave me the opportunity of working with them for anything from five ii

ACKNOWLEDGEMENTS

years to more than a decade. The privilege of working with an organisation and being part of its evolution, successes, concerns and resolve to enhance their resilience continuously is both rare and valuable. There are several dozen other clients with whom I have had the privilege of short engagements, and more than 300 hundred organisations who were involved in the work I did during Project Free Enterprise and in establishing the Consultative Business Movement. More than 40 000 people have at one time or another participated in completing HPO assessments of their organisations, and this wealth of data has provided the confidence to draw conclusions and make connections that would otherwise have been mere speculation. To all of you I offer my sincerest gratitude for contributing to my life’s work, passion and fulfilment. My fellow directors at The Village of Leadership Consulting have been a source of ongoing support, never-ending constructive feedback and shared passion for the work underlying the (R)evolution. Kerry Sandison, Goodnews Cadogan, Paul de Beer, Kim Kirsten and Tlhopheho Modise have shared experiences with me going back to the 1980s. At many levels this book represents a matrix of converging beliefs, values, passion and dedication to creating organisations that are fit and friendly for human life, and are capable of unleashing the fullness of the human soul, spirit, mind and body. Professors Eon Smit and Wim Gevers at the University of Stellenbosch Business School (USB) have given me the opportunity to turn the contents of the (R)evolution into programmes for the USB MBA programme. There is little as satisfying and challenging as working with MBA students who challenge, cajole and persistently engage you as a provider of thinking and learning. Several MBA students have also used the principles of the HPO covered in this book as the basis for conducting research. The dialogues with several hundred MBA students have shaped the content of what we have written. Johan Burger, also of USB, has been a champion of this work and continues to ensure that it is included in the many programmes for MBA student groups from so many business schools across Africa, Europe and Britain. Professor Laetitia van Dyk, a lifelong friend from our own university days, previous HR Director at Absa, and now a colleague at USB, has been a mentor, fellow visionary and idealist, and stalwart in the search for what it takes to create HPOs. Marí Lategan was drawn into this project by Nolan. What a discovery. Her pragmatism and executive experience have been invaluable, refining our work and driving it to fruition. Nolan, my co-author, without you this book may have been written, although I doubt it. You brought a sense of user-friendliness and accessibility of which I am incapable. You are the most complex and audacious mixture of perfectionism, creativity, zaniness and grounded being that I have encountered. Thanks largely to you, we can share our ideas about the (R)evolution with so many more people for years to come. iii

The Leadership (R)evolution: Creating a High Performance Organisation

From Nolan: To begin at the very beginning, I would like to thank Kim Kirsten for thinking of me when Christo approached her to write the book in 2004; or perhaps I should thank Dylan Kirsten for making his entrance into the world right about when Christo wanted someone to start on the project. If Christo had known then that the process would take four years, perhaps he would have thought otherwise. There have been so many people who have encouraged me along the way (believe me, one needs lots of encouragement over a four-year period). Thank you all. Special thanks go to: Garron – always. All the Village directors and associates (past and present) – without you I do not think that I would have evolved sufficiently to complete this book. Max Schupach, for helping me understand that there is more to a process than the end result. Sián Evans, for helping me sort through material, edit and structure the book in the very early days. Sián, you helped me find the ‘voice’ of the book. Natalie Eekhout, for researching and writing the chapter on Recognition and Reward – an area outside both Christo, and my expertise. Sheana Jones and Sheila Faure, for getting me back into the right head space to finish the book. Alison Westwood, for accepting the role of sub-editor at the eleventh hour and completing the task in record time. Marguerite Groenewald, for your patience (how many times did I shift the deadline?) and organisational efficiency. Marí Lategan, for re-energising me in the last haul. Marí, without your help I do not think this book would ever have been published. All the long hours you have spent reading, editing, formatting and cajoling me are most appreciated. And finally, Christo, without you there would definitely be no book. You are the revolution. Your thoughts, research, client relationships, and genius are the soul of this book.

iv

HOW TO USE THIS BOOK We aim to provide you with frameworks and techniques that you can use in your quest to aid your organisation in its shift towards ‘New Economy’ practices. The first two chapters provide background information on the New Economy and the values shift that is driving organisations to change. Chapter 3 introduces the Beehive − the main framework upon which our New Economy practices are based. Each of the seven Beehive elements is dealt with as separate concepts in chapters 4 to 10, and each chapter covers the pertinent best practice research, case studies, and ‘how-to’ techniques of a Beehive element. We have designed the chapters to include theory, practical examples and ‘hands-on’ exercises or self-assessment instruments, and each Beehive chapter ends with key leadership questions to assist you on your quest. The following symbols are used to facilitate your reading experience:





Case study alert

‘Hands-on’ assignments, or ‘pause-for-thought’ pointers

We have provided notes at the end of each chapter, and appendices are grouped together at the back of the book.



The Leadership (R)evolution: Creating a High Performance Organisation

INTRODUCTION Usually the introduction is written by someone other than the authors. However, the personal persuasions and values that underpin the (R)evolution serve as the most appropriate introduction because they tell a story of more than two decades of exploration and research, and a journey that in many ways reflects the spirit and values that are required of leaders to create a High Performance Organisation (HPO).

PAST In the mid 1980s Christo was the project leader of one of the largest nationwide business and political studies ever conducted in South Africa, Project Free Enterprise. It was conducted under the auspices of the UNISA School of Business Leadership and involved the CEOs of more than 100 of South Africa’s most prominent organisations, and more than 3 000 of their managers. This research arrived at two core conclusions:  The macro socio-political and economic policies of the time made it impossible to cultivate a sustainable competitive and market-based economy; and  At a micro level the majority of organisations reflected many of the coercive values and ‘us and them' ethos of the larger authoritarian, apartheid system. At that time there was already a growing body of research that proved that sustainably competitive organisations were adopting practices that could be broadly defined as participative, non-coercive, collaborative, high involvement, boundaryless, and transparent. Tom Peters and Robert Waterman set the business and leadership world alight with their groundbreaking book In Search of Excellence. More than two decades before this, Peter Drucker had already espoused the need for significantly different approaches to organisational leadership. The work of three of the pioneers of the quality movement, Kaoru Ishikawa, Edwards Deming and Joseph Juran, empathetically demonstrated that a prerequisite for sustainable enhancement of quality and productivity was the necessity to provide people with adequate information, enable and empower them to take charge of their environments, and drive fear out of the workplace. Russel Ackoff pioneered fundamentally different approaches to achieving sustainable competitiveness, which culminated in his book The Democratic Corporation in 1994. The growing message was that sustainably competitive organisations were adopting the principles of democracy and human rights in the workplace. Principles such as vi

INTRODUCTION

transparency, accountability of leadership, right to dissent, protection of basic employment rights, empowerment and inclusion in decision-making that affected people’s work, access to information, continuous development, and people-driven performance were becoming increasingly powerful. Sadly, the vast majority of South African organisations – and the majority of organisations in all countries – were clearly still stuck in an antiquated system of practices and world views that were aligned to the centrist control-and-command principles of East European communism and authoritarian practices. The disconcerting contradiction is that the people who led their organisations in this manner were more often than not also strong proponents of democracy and market-based economics. In 1993, Christo and Pat McLagan wrote a bestselling book, The Age of Participation. In it they captured their thinking and experience on what it takes to operate successfully and lead an organisation in the new world of work. The problem with this and other similar books is that they were generally based on research and case studies of American and, to a lesser extent, Japanese and European organisations. But there was a dearth of information on South African case studies and experiences. In 1994, South Africa experienced its momentous transformation to democracy. After almost a decade of intensive dialogue and exhaustive effort, the political practices of apartheid were at last abolished. In some ways this could be defined as the first revolution. But the legacy of authoritarianism and poor competitiveness continued to live on in organisations across the private and public sectors, and government at every level. It became clear that the majority of organisations had to undergo a revolution of their own to establish the type of practices that were aligned to sustainable competitiveness and the principles of the new world of work. In 1998, Christo launched a research project with the support of the University of Stellenbosch Business School and Andersen SA. Over a period of two years, representatives from more than 300 organisations across all sectors representing more than 400 000 employees participated in this research. The research, which culminated in this book, went through six broad phases: 1. A survey of international publications was undertaken to identify the range of best operating practices that drive sustainable competitiveness. 2. Representatives from more than 70 organisations were involved in focus groups which used the international data and evidence to define the relevance for South African organisations. 3. Based on this, a framework was developed that has commonly become known as the Beehive. 4. In an initial survey, representatives of more than 300 organisations across the private vii

The Leadership (R)evolution: Creating a High Performance Organisation

and public sectors assessed the status of their organisations. These representatives were a cross section of supervisory, middle management and senior management levels. 5. Two years later, a further 259 then currently-employed MBAs assessed the status of their organisations. This provided further information about the perceptions of people at middle to senior managerial levels representing small, medium and large organisations. 6. Since then several dozen organisations have used the Beehive to assess the status of their organisations’ cultures and the extent to which they were developing as High Performance Organisations. All of this has been ploughed back into developing and consolidating the thinking, ideas, insights and suggestions contained in this book.

PRESENT Over the past decade, this body of work has been developed into an integrative Organisational Development framework that has contributed to the development of HPO practices in organisations across several sectors. It has become a cornerstone of leadership development, and forms the core of the work in modules addressing this strategic imperative in the USB MBA programme. Nolan joined the project in 2004, and together we have striven to offer something that is user-friendly, pragmatic, and above all else rooted in the values that underpin a new and sustainably competitive society. Our core belief is that organisations are first and foremost HUMAN SYSTEMS and so they have to be designed to be Fit and Friendly for Human Life. Our own experience and that of many of our clients is that when the seven drivers of an HPO come alive within a team, department, division or organisation, a step has been taken towards fulfilling this quest. Thank you for joining us on it.

FUTURE Although this book strives to be as practical as possible, we understand that there is still a need for a Beehive field guide. A book that provides practical best practice advice on how to go about implementing the ideas presented in this book. This is our next project. Please check our website for more information about us and our activities: www.villageofleaders.co.za.

viii

1 THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. Bill Gates1

2020: ARE YOU READY? You have taken the afternoon off to do some shopping for your three-year-old son’s birthday party. The Cape Town CBD is alive with tourists. You engage your Personal Digital Assistant (PDA). It's the latest device that is now the size of a quarter carat diamond stud earring. It’s wireless, connected 24/7, with voice recognition, and is capable of delivering TV-quality sound and visual content via your sunglasses. All you have to do is to ask it for what you want. Within seconds your PDA has engaged the Internet.



“I’m looking for something that can entertain my three-year-old for his birthday party. Something the other kids can also share.” Ten seconds, wait... “The last profile of your son shows he enjoys interactive puzzles and animated adventure stories where he can enter his own variables. There is a new programme available that is compatible with your present home entertainment system just four blocks away from where you are at present. Would you prefer to view it first through your PDA Visual Connect?” Your PDA has established the whereabouts through its permanently connected Global Positioning System (GPS). “Let me view it,” you respond. Instantly a 3D visual image appears on the lens of your sunglasses. Without breaking your stride, you watch a short demonstration of the latest interactive puzzles and animated adventure stories. “I like it. Please auction.” Your PDA engages all known suppliers throughout the world and invites them to engage in an auction for this once-off sale of one item. Fifteen seconds... “Your cheapest option is via electronic purchase from Mumbai, including 72-hour delivery costs. Your best immediate option is three blocks ahead; turn right at Strand Street. It’s on the corner of Strand and Long Street. The cost is 10% higher than the Mumbai option. Only two items in stock.” “Book it for me. Charge to my credit account.” Three seconds... “Done. You can collect it when ready.” 

The Leadership (R)evolution: Creating a High Performance Organisation

You are pottering around the kitchen and wondering what to do for dinner tonight. “Fridge, activate,” you say. Immediately the 24/7 connected, wireless programme kicks in. “You have a dinner party here tonight. What would you like to serve?”



You mull this over for a moment. “Please check my partner’s PDA for her dietary requirements this week.” Five seconds... “Your partner would like grilled fish and salad tonight,” your fridge tells you. “But,” it adds, “an electronic inventory check shows you have no fresh fish. An order has been placed with Home Foods Delivery. They will deliver at 17h00 this afternoon. Your PDA indicates you should be home by 16h30. Is this in order?” “Confirmed,” you say. Science fiction, or fact a mere ten to twelve years from now? Are you, and your organisation, getting ready for the New Economy Revolution? The easy part is going to be getting up to speed with the technology. We refer to this as the hard revolution. The really difficult part is going to be the massive revolution in values, talent, people competencies, managerial processes, and, more specifically, the type of leadership that is required. This is what we call the soft revolution. Since the early 1990s, and through most of the first decade of the current century, organisations throughout the world have been focusing enormous energy on implementing Enterprise Resource Planning (ERP) solutions such as SAP and Oracle. The search for the consistently interactive, ‘boundaryless’ office has largely been solved through the Internet, although things will continue to get faster, more integrated and more interactive. The ongoing convergence of technologies will continue to change radically the ways in which sound, voice, visual and digital information is delivered through integrated systems such as cell phones, televisions, computers, and so forth. As indicated above, it’s the soft revolution that is the really difficult part; and it is taking place in parallel with the ongoing hard or technological revolution. The soft revolution is about values, world views, attitudes about self and others, self mastery, power relationships, personal relationships, attitudes towards authority and rank. It cuts to the core of leadership and organisational culture. Embracing the hard revolution is a given. If your organisation does not do this, it will rapidly become as obsolete as an enterprise operating without electricity, telephones and flushing toilets would. You will be reduced to the margins of the economy.



How technologically savvy is your organisation? Are your information systems, website, intranet, customer care system, call centre system, and so on, leading edge or bare minimum techology solutions?

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

Not embracing the hard revolution is a disqualifying factor; if you aren’t up to speed with the latest technology, you’re disqualified. If you do embrace it, it merely means you have gained entry to participation in the New Economy because technology alone offers no sustainable competitive advantages. It definitely offers no guarantee of profitability. The leaders and organisations that adopt and entrench the accompanying soft revolution of values, transformed workplace practices, and radically altered approaches to people leadership are the ones that will succeed in the New Economy.

IN THE VORTEX OF THE REVOLUTION The first two decades of the New Millennium may see one of the greatest shifts ever experienced by modern humanity, because this revolution is being driven by a combination of hard as well as soft factors. As you now know, the hard factors are technological in nature, the soft factors are human. Together these hard and soft revolutions are driving the fundamental transformation of our political-economy and society at every level of existence. Because of the very real implications for how organisations and societies are led, we have opted to define this period as the New Economy. There is the risk that some will tend to associate the revolution with only the hard or technological elements of the New Economy. It is precisely for this reason that we have chosen to stick with the name. The New Economy has a lot to do with technology, the Internet, Google, dotcoms and dotbombs, but economics is about so much more. It is about everything that weaves human endeavour together to create and sustain enterprises, to create and conduct meaningful work, to identify and fulfil the spectrum of human needs, and about doing it in ways that take the wellbeing of future generations into consideration. Some time during the first two decades of this century the true scope and impact of the New Economy will have hit home. By 2020 you will, with the pleasure of hindsight, be capable of understanding more fully the astonishing impact of the birth of the New Economy. But now, following the turn of the 21st Century, you are still too caught up in the vortex of change and transformation to truly appreciate what we are going through. There is insufficient distance for any of us really to gain a perspective of what is happening. It is perhaps useful to compare the New Economy revolution, which probably began to emerge during the early 1960s, with a previous revolution of comparable magnitude. 1850 to 1980: Try to visualise life prior to electricity, telecommunications and the internal combustion engine. Life in 1850 had its own set of widespread characteristics:



The Leadership (R)evolution: Creating a High Performance Organisation

 The vast majority of the world lived in rural, subsistence environments.  Very few large organisations existed outside the church, government and the military.  People generally were born, lived, worked and died in the same limited geographical area.  People lived in villages. Even the few large cities that existed were more like conglomerations of villages rather than the highly mobile and connected cities of today.  Unskilled and illiterate people had a wide range of jobs they were sufficiently equipped for.  The way organisations and communities were structured was essentially based upon top-down and often authoritarian or patriarchal power.  Democracy existed in only a few small pockets. Where it did exist, it was limited to the privileged few. Even in the United States of America (USA), which was then one of the most advanced democracies, many citizens did not have the vote because of race or gender discrimination.  Globalised and market-based economics, as we know them today, did not exist.  Life may appear to have been more leisurely and simple, but life expectancy in the most developed countries was an astonishing 40 percent lower than today, and infant mortality was high. At the turn of the nineteenth century, three major technological advances were occurring: 1. The widespread use of commercially viable electricity. 2. Telecommunications was fast becoming a powerful new way of interacting and communicating. 3. The internal combustion engine was opening up the way for ‘the machine that changed the world’ – the motor car – and later, air travel. These hard technological revolutions contributed to, and laid the foundation for, the transformation of society, economics and politics. Anyone living in 1850 hearing stories of telephone calls across the globe, electric stoves and geysers, air and space travel, never mind computers and the Internet, would have thought that it was sheer science fiction. There was perhaps an even more profound revolution occurring at the same time – the soft revolution. A quick glance through history books shows that certain practices were still widely endorsed within even the most advanced societies in the 1850s: 

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

 Slavery was still condoned if not practiced in many areas of the world.  Racist and sexist practices were legally endorsed and accepted as ways of structuring life in even the most advanced societies.  Exploitative colonialism was elevated to national priorities for various nations.  Authoritarian monarchies and aristocratic elites controlled many societies, often in brutal ways.  The rule of law and the entrenchment of human rights were still concepts in the distant future for even the most developed nations.  Child labour and exploitation of workers were practised widely in virtually all societies.  Stronger nations viewed it as their right to wage war against weaker nations without any provocation, and to obliterate their cultures and communities. These world views and the values that supported them were the rule and not the exception in the mid 1800s. This is a very short time ago. To put it into perspective, anyone who turned 40 during the 1990s would have had great-grandparents who were children at that time. Our great-great grandparents would have been either the strong supporters or victims of these practices. The reality is, of course, even harsher.  Colonialism was still being practised by England, Portugal, France, Spain, Belgium and Germany as recently as the Second World War.  Legalised and institutionalised racism was still practised in the USA in the 1960s.  Apartheid with all of its atrocities was dismantled only in the 1990s.  The Holocaust in Germany took place not yet fully two generations ago.  Gender discrimination remained present in the majority of societies. At a different level, the pervasiveness of Old Economy mindsets and values are still driving the systematic erosion of our environment. The pollution of our water systems and air; the destruction of vital rain forests; the extinction of species at unprecedented rates; the toxification of our soil; the sickeningly named ‘ethnic cleansings’ of the past three decades in Eastern Europe and Africa; and the ongoing conflicts across the globe are all at some level the direct consequence of values that do not yet appreciate the intricate interdependencies of life on earth. When globally branded organisations such as Nike are accused of sourcing products from sweat shops which apply exploitative labour practices; when the subsidies of the USA and European Union (EU) which protect their agricultural sectors are significantly greater than their aid to Africa; when executives at Enron and WorldCom enrich themselves and destroyed global organisations; then we know that the Old Economy is still alive.



The Leadership (R)evolution: Creating a High Performance Organisation

The above examples are extreme, but what is your organisation doing about saving the environment? What is your organisation doing to preserve the planet for future generations? Are there practices in your organisation that perpetuate Old Economy thinking and values? While we can confidently identify many of the shifts and gains accompanying the New Economy, it is by no means yet the pervasive way of viewing the world and work. Paradoxically, the pervasiveness of the Old Economy is one of the dominant reasons that organisations in the private and public sectors need to make a serious effort to develop a sustainable New Economy Leadership culture. The Old Economy may still be pervasive, but as far back as 1980, in tandem with the hard revolution, the soft revolution had already begun to change the lives of millions of people. The steady growth of democracy, protection of human rights, entrenchment of civil liberties, and the rule of law had made many of the previously accepted behaviours crimes against humanity and abuse of human rights. The leadership challenge: Think about this revolution from the perspective of leadership. Imagine a significant leader of the 1850s – a senior politician, a general in the army, a wealthy merchant, a monarch, a leader in the church. He (with the exception of a few queens, it was a male, dominated world) falls into a deep coma, and like Rip van Winkle2 of fairytale fame, wakes up in the 1980s. When he fell asleep, a mere four generations ago, he knew exactly how to respond to his environment. He was so used to the ways in which he could wield power and exercise control that he hardly had to think about it. By some miracle he awakes 130 years later and is immediately appointed to a similar position of leadership. What would happen to this man if he dared to live out the exact same values that were so widely endorsed in the 1850s? The chances are he would be sued, fired or jailed within months. Practices that he viewed as his legal right in 1850 had by 1980 become sexual harassment and abuse, racist, illegal labour practices, abuse of human rights, and illegal abuse of power. This leader has just run full tilt into the reality of the soft revolution. 1980 to 2020 – the revolution we are in: We choose 1980 as a starting point because it is roughly in sync with the advent of the personal computer. It was the decade during which the Berlin Wall fell and democracy rapidly spread into Eastern Europe; it saw the early dismantling of apartheid, the collapse of the Soviet Union, and the rapid deployment of information technology. The roots of the New Economy lie deeper. At least as early as the 1960s it became apparent that the speed of decision-making, the increasingly rapid diffusion of information, and the early days of globalisation of economics and politics were going to have a major impact. 

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

We choose 2020 because every indication is that by then the convergence of the technologies that are part of the New Economy revolution will have reached a significantly more mature state. Nordstrom3 of Sweden already claims that the Information Age is dead, and that we are rapidly entering the Age of Imagination. In many ways you are now, technologically speaking, in an equivalent position to organisations in the first decade of the previous century. These organisations were developing and executing electrification strategies, telephone implementation strategies, and perhaps even flushing toilet programmes. Since the 1990s, you will have seen the large-scale adoption of new information technologies. It has been a disruptive time, with many missed calls and false starts. Even as recently as the early 1990s, Bill Gates of Microsoft famously claimed that the Internet would have no meaningful impact on the world of information. Needless to say, he changed his mind quite radically. But things are starting to settle down as far as the integration and adoption of the New Economy’s technologies are concerned. If you do not manage to become part of the seamless, super-fast, interactive information network, you will be out of your market. If you are still wondering what to do about the essentials of 24/7, wireless and real-time interconnectivity, you will be about as incapable of being competitive as an organisation refusing to install electricity and telephones. What could 2020 look like? Imagine the following scenario: You get up and get ready for work. You use the toilet, which does an analysis of your blood sugar levels and conducts various simple tests to give you immediate feedback on your general wellbeing. The minute computer device implanted in your arm takes readings of your blood pressure, skin tension, and temperature, and feeds this back into the toilet’s analysis system. As you wash your face, a short health check report flashes up on your mirror (you are very pleased with the new super-thin plasma screen TV that doubles up as a mirror; the resolution is far superior to the previous one).



As you go about your morning bathroom routine, you greet your voice-activated mirror/TV screen (it also operates as a large touch-sensitive computer screen). “Go to daily activities,” you instruct. As you move through your home, your interactive computer and information service tracks your movements through the personalised computer device implanted in your arm. It reminds you of your itinerary for the day, and asks some questions regarding your proposed movements. As you get into your car, your personal device automatically switches over to the standard on-board communication system. “The analysis of your movements for today shows that your personal risk factor for an automobile accident is 5 percent lower than average. Your short-term insurance needs for the day have just been auctioned on the Internet, and for today you will be covered by Petal Insurance of Beijing.” Even though 

The Leadership (R)evolution: Creating a High Performance Organisation

you are used to this routine, you can’t help but smile. Yesterday’s 24-hourly update of your personal financial affairs showed that the investment in this daily short-term insurance auction has saved you enough to plan that tropical holiday you want to take. Science fiction or probability? As the miniaturisation of computer-chip technology converges with the increasing abundance and availability of broadband, and as nanotechnology converges with microbiology, scenes like this could be commonplace within a decade. Think about this possibility: A team of surgeons and medical specialists are conducting advanced and very sensitive brain surgery on a patient with a rare disease. As they talk to one another, their conversation is immediately picked up by the small transmitters on their lapels. It is translated into a globally standardised digital language. At the same time, perfect images of the patient’s brain, together with his reactions to the anaesthetic, blood type, genealogical history, and thousands of other bits of information, are fed into the Internet.



Tenth-generation search engines scan the globally indexed knowledge system and feed back only the information and most recent international research experience that relates to this specific patient’s condition. Real-time visual and auditory information is downloaded onto a large, paper-thin screen that provides guidance to the team of specialists. The latest thinking of every Nobel Prize winner, every laboratory in the world, every latest discovery becomes immediately accessible in ways that do not overwhelm them. Where it used to take several years for this type of information to become available, it is now, to all intents and, instantaneous. The development, integration and diffusion of knowledge have reached a point of singularity. It is already possible to make some predictions about life in 2020, at least as far as the hard revolution is concerned:  You will be able to use a pinhead-sized computer device to have constant access to virtually any source of information you want. This will include entertainment, business and academic information, audio and visual transmissions, and live interactive communication.  You will be able to download real-time audiovisual information anywhere in the world as and when you need it.  With hundreds of millions, and probably billions, of people interconnected and contributing to the knowledge of the world, the half-life of knowledge could be down to a few days, and even hours. 

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

 You will be permanently and wirelessly linked to the Internet, and your access will be enabled through voice recognition. .

THE NEW ECONOMY LEADERSHIP CHALLENGE The leader from the 1850s waking up in the 1980s would have had to undergo a total shift in paradigm to cope with the challenges of the later era. The combination of the hard and soft revolutions would have made the most of what he knew and relied on the obsolete. The same is true for you as a leader in the New Economy. This challenge is one of your single biggest strategic challenges as a leader. Consider the following questions:  What happens when the majority of your customers or consumers have access to vast quantities of data that is well organised and easy to access?  What happens when your customers go online to participate in global or local auctions, which invite various organisations to bid for their purchases?  What demands will your employees place on your leadership when they experience instantaneous access to information and the capacity to enjoy a degree of freedom of choice and personal empowerment as yet unknown today?  How will the relationships between your suppliers and customers need to be changed to remain competitive in this environment?  What are the competitive challenges that will emerge when your customers can scan the globe online for the best deals and service on a 24/7 basis?  What will be the expectations of customers and employees who have grown up in an environment that makes access to information, and the capacity to challenge the views of specialists and leaders, a given?  How will you need to operate to provide meaningful leadership that is capable of: – harnessing the contributions of such informed and interactive people? – interacting with your customers’ expectations and demands? – keeping track of competitive threats and rapid responses to your own organisation’s innovations and strategies?  How will you have to adjust your own world views, values and behaviours to provide effective leadership in the New Economy? Meeting these challenges requires no less than a revolution in leadership and organisational practices. The leaders who rely on the generally accepted practices 

The Leadership (R)evolution: Creating a High Performance Organisation

and values that still prevailed in the 1990s will soon be as obsolete as their imaginary counterparts of 1850 flailing about in 1980. Is there any evidence that New Economy Leadership works? In the reference section at the end of this book, we provide a summary of some of the research that demonstrates the superiority of New Economy Leadership. Hardly a week goes by without some new research being published. The evidence is clear: New Economy Leadership is the primary organisational driver to achieve a sustainable competitive edge. The New Economy is revolutionising what it takes to be competitive. It does not simply represent an incremental adjustment of the status quo. Nor is it a situation in which the rules of the game have changed. If only the rules were changing, it would mean that the players could comfortably continue to play the same game, albeit it in a slightly different manner. This is not the case. The game has changed. The new playing fields don’t look even vaguely like those of the past. If the old game was played in water, the new game is being contested in the mountains. The Old Economy consisted of ‘scuba divers searching for treasure’. The New Economy requires ‘adventurers searching for lost cities in the mountains’. The skills and knowledge required to survive and win in the water bear no resemblance to what it takes to meet the challenges of the mountains. There is no incremental way in which people can transform from participating in the water adventure to meeting the challenges of the mountains. Imagine trying to climb Mount Kilimanjaro wearing a wetsuit with a diving mask and carrying a snorkel, because you are good at snorkelling. It seems so obvious, yet we still encounter organisations and leaders who are hiking through the mountains of New Economy competitiveness still wearing their Old Economy wetsuits and fins, and dragging a rubber dinghy along just in case there is a flood. It would have the same catastrophic results as trying to dive for sunken treasures wearing hiking boots and carrying a well-stocked backpack with a small tent and sleeping bag for good measure. It sounds ridiculous, but this is exactly how many organisations and stakeholders appear to be approaching the challenges posed by the New Economy. The result is ongoing and is often met with dismal failure to meet the challenges of global competitiveness.

THE STATE OF THE NATION – NOT GREAT In 1999, and again in 2003, we conducted nationwide research to establish the extent to which South African organisations had adopted New Economy Leadership and organisational practices. To achieve this, we asked managers to rate the extent to which their organisations had transformed seven key organisational practices that in essence carry the DNA of their culture. 10

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

The 1999 study involved managers from a broad variety of sectors including financial services, mining, civil service, defence force, fast-moving consumer goods (FMCG), retail, parastatals, manufacturing (both light and heavy), and both long- and short-term insurance industries. We asked them to rate their organisation’s practices against a range of Old versus New Economy practices. To do this we took the following steps: 1. We conducted an international research survey of established best practices that have been proved to enhance the sustainable competitiveness of organisations. 2. We also reviewed the literature on leadership practices that have been shown to enhance the performance of individuals, teams and organisations. 3. We then involved several dozen managers in discussion groups to identify patterns within this wealth of research. 4. This enabled us to create a seven-factor framework, which has become known as the Beehive. 5. We then defined each of the seven clusters in terms of Old Economy practices that undermine competitiveness, and New Economy practices that enhance sustainable competitiveness of organisations. In other words, we created a framework of polarities that enabled participants to rate the extent to which Old versus New Economy practices were prevalent in their organisations. The results were significant. The vast majority of South African organisations still clearly relied on Old Economy practices, with scant exceptions. Not surprisingly, the best-inclass organisation was South Africa’s most globally competitive organisation, SAB Ltd. As illustrated below, SAB is head and shoulders above the average.

11

The Leadership (R)evolution: Creating a High Performance Organisation

S AB L td 2000 vs Average for a ll B eehives in databas e 2008 Old Economy

New Economy 15%

85%

Strategy

39%

57%

Structures

29% 40%

71% 55%

16%

84%

Talent Creation

35%

60%

Business Disciplines

21% 36%

79% 59%

15% 30%

Stakeholder Value

30% 41%

Recognition and Reward

85% 63% 70% 53%

Change Leadership

20% 37%

58%

Total

21% 37%

79% 58%

100%

SAB Ltd Average SA

21% 37%

50%

0%

80%

50%

100%

79% 58%

In 2003 we did the research again. This time we focused on currently employed MBAs. We wanted to get an idea of the perceptions of middle to senior managers who had undergone advanced managerial education. The results were somewhat better, but nothing to get happy about. As illustrated below, middle to senior managers with MBAs still felt that their organisations were somewhere between 50 percent Old and New Economy. So, while people at these levels felt somewhat more optimistic, they still indicated that they believed their own organisations had not yet managed to entrench sustainable high performance and New Economy culture. As the SAB figure above demonstrates, your organisation and leadership needs to target the 70 percent mark on the New Economy side of the graph to ensure that you can rely on your culture to contribute significantly to sustainable competitiveness. The research conducted in 2003 amongst currently employed MBAs shows that smaller organisations are marginally better than others, with medium-sized organisations faring the worst. In follow-up focus groups, one of the primary reasons that emerged is that the smaller enterprises, with fewer than 50 people, had managed to retain more informal, interactive, and often personalised relationships. Medium-sized enterprises with between 50 and 500 people were often struggling to come to grips with the complexities of managing larger workforces, and had not yet invested in establishing the disciplines and practices that drive a high performance and New Economy culture. Large organisations with more than 500 people fared marginally better, but it appears that the legacy of the Old Economy is still very pervasive. 12

CHAPTER 1: THE NEW ECONOMY — A REVOLUTION OF LEADERSHIP

Currently employed MBAs by size of company Less than 50 51 – 500 501+

Old Economy

New Economy

Strategy Execution Structures Talent Creation Business Disciplines Stakeholder Value Reward and Recognition Change Leadership

Total

100%

0%

100%

What is the size of your organisation? Is your organisation small enough that everyone knows everyone else’s name, or are the large majority of the people in your organisation complete strangers? What are the relationships between people like? How would you describe your organisation’s culture? Since 2003, several dozen organisations have evaluated the status of their culture and related leadership practices using the Beehive survey. The database at the beginning of 2008 contained almost 28 000 assessments. The good news is that several South African organisations have been capable of making exceptional progress within one to two years. The progress in entrenching a New Economy Leadership culture has been accompanied by, amongst other indicators, the following:  Significant improvements in employee morale and employee satisfaction surveys.  Improvements in attraction and retention of talent.  Greater achievement of budgets.  Share price growth.  Brand reputation.  Public reputation for having good leadership in place.

13

The Leadership (R)evolution: Creating a High Performance Organisation

This progress is in line with the growing body of international evidence that shows leadership and culture are primary drivers of sustainable competitiveness. But it’s still much too early to declare victory for the New Economy. Many leaders and organisations are still caught in the vortex and still need to learn how to transform themselves to gain sustainable competitiveness. You are about to explore the exciting but still poorly mapped territory of the soft elements of the New Economy. You will be posed many questions (you will also begin to ask yourself many more), and you will discover how leaders and organisations are starting to transform themselves to meet the challenges and tap into the enormous potential of New Economy Leadership. Are you up for the challenge?

NOTES 1 ������������������������������������������������������������������������������������������� William Henry Gates III (Bill, born 1955) is an American business magnate, philanthropist, one of the world’s richest people, and chairman of Microsoft, the software company he founded with Paul Allen. (From Wikipedia, the free online encyclopedia.)

14

2

‘Rip Van Winkle’ is a short story by the American author Washington Irving, published in 1819, as well as the name of the story’s fictional protagonist.

3

Kjell Anders Nordström (born 1958) is a Swedish economist, writer and public speaker. (From Wikipedia, the free online encyclopedia.)

2 THE VALUES SHIFT Our ancient Roman virtues are virtues no longer.

Lester Thurow1

THE OLD AND NEW ECONOMIES ARE NOT VALUE FREE The New Economy represents an historic values shift as profound as the transformation of societies and worldviews between 1850 and 1980. No facet of human life is value free. Even the most quantitative of the so-called hard sciences is predicated upon a set of values that in turn is based upon a particular worldview that we tend to take for granted. As Fritjof Capra2 points out in The Web of Life,3 “Values are not peripheral to science and technology but constitute their very driving force and basis ... In reality, scientific facts emerge out of an entire constellation of human perceptions, values, and actions – in one word, out of a paradigm – from which they cannot be separated”. This is particularly true for the challenge of transforming an organisation from the Old to the New Economy. As you will discover, every facet of leadership practices and organisational life is an extension of deeper underlying values. In fact, it goes even deeper. Creating a fundamental shift in values is a primary leadership challenge. The revolution from the Old to the New Economy is above all else a transformation of values. It signifies a powerful, but slow, shift from one large system of values to another that is to all intents and purposes mutually exclusive. One of the reasons that organisations attempt multiple times to create a transformation of organisational leadership and culture is because leaders underestimate what it takes to shift the behaviours that demonstrate a true transformation of values. There are many examples of executive teams who have attempted to brainstorm the ‘new’ values for their organisation. These then get published in the company newsletter, are sometimes captured in glossy brochures, or are posted on the walls all over the organisation. But that is often as far as it goes. Peter Senge4 is dedicated to the interdependent development of people and the institutions in which they work. He is also the author of The Fifth Discipline,5 in which he claims that the single most powerful leadership intervention that can be undertaken is to alter the values of an organisation or community. Do not underestimate this primary task. If you do, as a consequence you will fail to recognise the extent to which existing organisational and leadership practices reinforce Old Economy 15

The Leadership (R)evolution: Creating a High Performance Organisation

values, even while you may be sincere in wanting to make a meaningful and lasting impact. Values are expressed through behaviour. Values are not ‘nice-sounding statements’ aimed at enhancing the public relations image of an organisation. They are rooted in the real-time behaviours and practices within your organisation by your people and leaders. So, if an organisation provides misleading information to customers, or pays out huge bonuses to senior managers while they fail to provide cost efficient services, it tells us that their true values are to exploit customers for as long as possible – regardless of what may be stated in the chairman’s report or on fancy posters. If an organisation’s leaders claim that they are committed to creating and attracting talent, yet slash the training and development budgets as a first port of call when there is a squeeze on costs – and at the same time make no move to adjust executive bonuses – the message is clear: our values are that executive bonuses in the short-term are more important than the development of people for the long-term. If you want to issue fine-sounding statements, but lack the stamina and will to accompany this with much deeper transformation of behaviours, it is better to do nothing at all. Publishing a set of values without altering behaviour to demonstrate true commitment creates cynicism. Some time ago, Christo and a colleague, Aitken Ramudzuli, worked with a manufacturing client near Johannesburg. During their initial interview with the CEO and his team, they explored the extent to which the leaders and organisation had developed a set of shared values. The executive team was quite adamant that this was in place. In fact, they quite proudly pointed to the framed copy of the values that hung in the boardroom.



A while later Christo and Aitken conducted focus groups with some of the production workers. Aitken asked them about the values, but it was clear there was no real understanding of what he was talking about. Aitken pointed to the poster containing the values that was stuck against one of the walls of the canteen and asked what they thought of it. “Oh that,” replied one of them, “I’m not sure but it’s probably got something to do with the new disciplinary code. We saw the HR man put it up the other day.” Never accept how well values are being lived within your organisation without exploring the extent to which people across all levels in your organisation share a deep and common understanding of what they mean in practice. More importantly, you need to know the extent to which, and how such values are being lived by people in your organisation, regardless of their position. Living the values is a non-negotiable performance requirement. Value statements without aligned behaviours are worthless. And value statements without processes to identify and forthrightly address non-conformance are equally meaningless. Jack Welch6, the celebrated business leader and past CEO of General Electric, takes values extremely seriously. He believes that people’s underlying values should be a primary 16

CHAPTER 2: THE VALUES SHIFT

determinant in their selection, retention and development within an organisation. He defined four value-driven types in one of his CEO reports. 1. People who deliver high performance and live the organisation’s values. These are the jewels of the organisation and they need to be retained because they hold the future in their hands. 2. People who live the values but do not deliver high performance. They should be treated with tolerance and given the opportunity to improve their performance – because it is much easier to improve performance than to change values. 3. People who do not perform and who do not live the values.They may require counselling, but if there is not rapid improvement across values and performance, they need to leave the company. 4. People who deliver exceptional performance, but do not live the values. Such people, says Jack, must be treated with minimal tolerance. They must be given a short time to demonstrate their capacity to live the values, and if they fail they must depart. Jack made it clear that it was not acceptable to tolerate high performance when the individual was clearly not living the values. The moment leaders allow this they are essentially saying, “The ends justify the means. It does not matter what and how you do things, as long as you deliver good results”. This type of tolerance will steadily erode the moral fibre of your organisation. It is simply not possible to embark upon the development of a high performance organisation based on New Economy Leadership without also consciously entrenching the values shift that must accompany this. Conversely, it is not wise to make fine sounding statements about commitment to a new value system if it is not accompanied by equally firm transformation of organisational and leadership practices.

FOUR WAVES OF VALUES There are four clearly discernible waves of values that are present in varying degrees all of the time. Broadly these can be defined as follows: 1. First wave – driven by coercion 2. Second wave – driven by co-option 3. Third wave – driven by collaboration 4. Fourth wave – driven by co-creation

17

The Leadership (R)evolution: Creating a High Performance Organisation

 First and second wave values in action. The people who base their choices and deeds predominantly on the first and second waves will demonstrate the following behaviour: –

Before getting together, different parties will be inclined to take an early position on what they want to get out of the interaction.

–

Without getting together, the conflicting parties will spend time strategising how they are going to outwit their ‘opponents’.

–

In particular, they will spend quite a bit of time determining and agreeing what information they will divulge, and what they will keep secret or try to hide from the others.

–

During the first interaction, if it does infact occur, the various parties will rapidly move to take up positions. They will enter into a bartering process, exchanging one gain for another.

–

The atmosphere will generally be one of suspicion, cautiousness and uncertainty.

–

A small minority often dominate discussions, with many remaining silent. Those who do not speak either do so because they feel that their views will not be heard, or if they hold an unpopular view, voicing it could amount to a ‘career-limiting move’.

–

There is an underlying tension between the parties, which can be interpreted as ’I thought you were going to hit me, so I hit you back first’.

–

These people will, in the opinion of Jim Collins7, remain entrapped in the ‘Tyranny of the OR’.

The key issue is to determine the ‘values centre of gravity’, which guides the behaviours of individuals, teams, organisations and entire societies. Another way of looking at it is to determine the extent to which the third and fourth waves are generally subservient to the first and second. And, when the situation demands first and second wave responses, these responses are still carried out in ways that do not undermine or ignore the third and fourth waves of values. On 11 September 2001, the Twin Towers in New York were destroyed in one of the most brutal terrorist attacks in history. Few people could deny that this invited a response from the USA government that fell firmly into the first and second waves of values. Under the leadership of George W. Bush, the USA embarked upon a ‘war against terror’.



18

CHAPTER 2: THE VALUES SHIFT

Even in the early days it became clear that the Americans were not going to adhere to the requirements of third and fourth wave values. Notwithstanding the magnitude of the trauma that they had experienced, they still had the choice to follow a route of optimum co-determination and co-creation. The tragic war in Iraq, the selective suspension of basic civil liberties by the USA government, the lengthy detention without trial of suspects, and the refusal to co-operate with internationally respected institutions and governments, all set the scene for an extended conflict caught in the whirlpool of Old Economy values. Both Osama Bin Laden and George W. Bush had become entrapped in fundamentalism and mutual mistrust, with a desire to kill one another. In essence they were, and still are, both trapped and willing participants in first and second wave values.  Third and fourth wave values in action. If faced with conflicting interests and perspectives, people who base their choices and deeds predominantly on the third and fourth waves will be inclined to act in the following manner: –

Identify people with vested interests in the situation – even and especially if their views are in conflict with one’s own.

–

Contribute to getting the diverse people together so that they can openly and forthrightly present their views and declare their interests.

–

Recognise that all perspectives contain some validity and need to be explored.

–

Create specific opportunity for people to raise dissenting views and to explore these.

–

Respect and value the diversity of participants.

–

No matter how much one person or group believes that their perspective is most appropriate, that person or group will not fall into the trap of sustained advocacy of their position. Instead, they will take the time to develop a deeper understanding and appreciation of the others’ perspectives.

–

Share information abundantly with a willingness to learn from one another.

–

Generally share a deep conviction that even though a process may feel slow and tedious, it will in the end deliver faster and more lasting results.

–

Have the courage to state their views because they know that it is expected of them, and that even if they are ultimately wrong, it will not be held against them.

–

Generally adopt an attitude of “When I feel a desire to reject what you are saying, I’ll assume that perhaps I’m not understanding it yet – and so I’ll first endeavour to comprehend what you are really trying to say”.

19

The Leadership (R)evolution: Creating a High Performance Organisation

–

The people participating in this process will clearly have mastered what Jim Collins8 calls ‘the genius of the AND’.

There is no simplistic or absolute cut-off point between Old and New Economy values. Instead there is a spectrum of worldviews and values that represent everything from harsh autocracy and control, to open system engagement and integration of interests. The post-apartheid South African experience has in many ways been the exact opposite of the USA/Iraq affair. If the new government, under the leadership of the African National Congress (ANC), had opted to remain embroiled in Old Economy values, then the atrocities of apartheid might well have led to Nuremburg-type trials for crimes against humanity. Instead, under the leadership of people such as Nelson Mandela9 and Archbishop Desmond Tutu10, everyone opted for a different approach. Nowhere was this more clearly demonstrated than through the extensive Truth and Reconciliation Commission hearings.



The atrocities that people committed were generally driven by first and second wave values. Yet, in dealing with these deeds, the new post-apartheid society chose to approach it from third and fourth wave perspectives. Not everyone was absolved of guilt. Some people were jailed. In that sense, the harsher punishment of typical first and second wave values were still applied. But it was done from a perspective of inclusivity, transparency, acknowledgement of the interrelatedness of society, and the need to act in ways that would benefit generations to come. It would be naïve to believe that the first and second waves of values can or should ever be totally eradicated. The forcefulness and even aggression that is associated with the first two waves are often required in times of extreme crisis or threat. They are also probably the source of the requisite arrogance that individuals require to believe that they are capable of coping with the often anxiety-provoking complexities of life and organisational competitiveness. The inclination of an individual, team, organisation or even entire society will be to respond in terms of a spectrum of values that encompass all four waves. The system’s values profile will have a profound impact on how it approaches a given situation. You always need to determine what your organisation’s real, as opposed to espoused, value system is before you can take action. In practice this may be as simple as spending some time discussing what the typical leadership and organisational behaviours in your organisation look like on a daily basis.

20

CHAPTER 2: THE VALUES SHIFT

The figure below provides a graphic representation of two organisations with opposing value systems, with System A illustrating the values profile for a typical third and fourth wave organisation, and System B a first and second wave profile. As you read through this section on values, ask yourself to what extent your own behaviours are demonstrating first, second, third or fourth wave practices and worldviews. Complete the questionnaire ‘Living the four waves of values in practice’, marked Appendix A, in order to determine your team or organisation’s values profile.

Each of the waves of values forms an intricate web of attitudes, relationships, beliefs and behaviours. Three integrated elements of each value system become deeply entrenched through generations of subtle and overt cultural development.

S tatus of the organis ation

%

Old E c onomy

100

New E c onomy

90 80 70 60 50 40 30 S ys tem A:

20 10 0

S ys tem B : Coercive Dependence

Co-optive Co-dependence

Collaborative Independence

Co-creative Interdependence

The three elements are: 1. Primary intent. The deeper underlying intent of behaviours and leadership styles, and the conscious or unconscious impact of the values. 2. Secondary affect and application. The ways in which the value system is generally played out, and the imperative to sustain it. 21

The Leadership (R)evolution: Creating a High Performance Organisation

3. Relational impact. The impact it has on relationships and how it shapes the interaction and relationships between individuals and groups.

These elements are linked to the four waves of values as illustrated. Web of attitudes, relationships, beliefs and behaviours Old Economy

Primary Intent

First wave

Second wave

Third wave

Fourth wave

Coercion

Co-option

Collaboration

Co-creation

Violence and Secondary affect

Demand

and Application Overt or Sublimated

Relational Impact

New Economy

Dependence

Money and Control

Knowledge and Participation

Ecology, Community and Imagination

Ownership and

Information and

Environment and

Patronage

Self-insight

‘7th Generation’

Co-dependence

Independence and Interdependence

Integration

Studies indicate that it is essential for the vast majority of people to learn what is acceptable and not condoned within their cultural environment early on in life to ensure acceptance by the larger system and therefore survival. David Johnson concludes that we spend the first half of our lives learning how to cope with and respond to the cultures we live in, and the second part recovering from it. This is one of the reasons that changing an organisation’s value system is so incredibly difficult. From an early age we are expected to comply with a specific value system. Our family upbringing, schooling, social life, religion, university life and work life all tend to reinforce meta-value systems. Compliance to the system reinforces social acceptance. Contravening the system brings with it censure. To add to the difficulty, adversaries within a system of values will share those values – even if they claim to detest them. For example, management and organised labour may be stuck in the second wave of co-option and co-dependence. As a result, they will remain embroiled in low-intensity conflict that sometimes erupts into strikes 22

CHAPTER 2: THE VALUES SHIFT

or large-scale dismissals. But at least both parties understand how to interact with one another within this system. What they don’t know is how to operate within a third and fourth wave value system. So they will both tend to remain embroiled within the territory they know and have learnt to cope with. The ongoing conflict in the Middle East between Israel and Palestine is a tragic example. Both parties are locked into first and second wave value systems. They consistently want to prove that the ongoing violence is the other side’s fault. Both claim the moral high ground. Both claim it is always the other side that first breaks agreements. Both claim to have historic claims. And both would appear to be willing to die fighting rather than break out of the comfort of combat that their shared value systems have locked them into.

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For this reason any attempt to engineer a lasting shift in values has to be approached with deep thought and undiluted commitment to acting in ways that are generally totally different from the present. New Economy Leadership, and creating a high performance organisation that drives sustainable competitiveness, is about making this shift. The seven elements of organisational transformation discussed in this book define the foundation stones for making this shift. It is not for the faint hearted. It is, after all, the single most profound leadership undertaking any person or organisation can embark upon. Everyone in your organisation, but specifically senior leadership, needs to develop a clear understanding of what acceptable and unacceptable values look like in practice. Your senior leaders have the added accountability of consistently maintaining the tension between what is desired and what is unacceptable. They can do this only if they have developed a vivid mental image of various waves of values so that they can quickly identify when behaviours are aligned to an unacceptable value system and how to address it, and to clearly articulate what the desired behaviours and values look like in practice. This provides the foundation for enabling your organisation as a whole to become active participants in entrenching the desired values through day-to-day living. It also enables everyone to take personal charge of flagging and addressing behaviours when they do not live the desired values. SAB Ltd, South Africa’s dominant beer brewer and part of the global SABMiller group, is widely recognised as one of the world’s most effective and sustainably competitive organisations. In the early 1990s they embarked upon an enterprise-wide world-class manufacturing and integrated management practices intervention. This included involving nearly all their employees in developing a set of shared values. It

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culminated in a small pocket book that contained the values, with each one defined in terms of critical behaviours through which to live the values. Literally thousands of people had participated in this process as peers. The values come alive. A few months after enterprise-wide discussion groups had taken place for people to develop a shared understanding of what it meant to live the values, a production foreman instructed a forklift driver to load a pallet of beer onto a truck. The driver pointed out that the labels on the bottles were not pasted on properly and this did not meet quality standards. The foreman told the driver to do as instructed. At this point the driver removed his little values book from his pocket, turned to the page on quality, and pointed to one of the behaviours. “This says that anyone can and must prevent poor quality products leaving the grounds. Shall we discuss this, or do we need to discuss it with the General Manager?” Everyone in SAB knew that the CEO and executive committee were primary champions of the values. This enabled the forklift driver to engage with a foreman and flag that the behaviour was not aligned to the values. It is only when this can occur without fear of retribution that values come alive.

You must explore what the various waves of values look like so that: 1. people can develop a shared meaning of what is acceptable and what is not; 2. leaders can communicate what is expected and what will no longer be accepted; and 3. everyone can join forces in driving the shift to New Economy Leadership and values.

 First Wave: coercion – violence and demand – dependence. The values of coercion depend on the capacity of one party to force another to submit to their views or demands. This coercion may be very obvious and overt. You will see this when a leader threatens to fire someone or even kill someone. Some of the great dictators of the world have been masters of this. In most modern societies you will not really encounter this too often; it is often more polite and sublimated. The intent is the same – to force others to subjugate their views. Some time ago Christo facilitated a session with the CEO team of a major manufacturing company. An organisational culture diagnosis was conducted and it demonstrated that the company was firmly entrenched in Old Economy practices. The focus groups had given ample evidence that ‘management by fear’ was common practice. As Christo was giving the feedback, it became apparent that the CEO was irritated and unwilling to acknowledge some of the challenges facing the firm.

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After numerous of the research results had been rejected, it became clear that he had had enough. He pushed his spectacles onto the front of his nose, gazed around the room full of executives and asked, “Are there any more questions?” Everyone remained quiet. With one gesture he had effectively silenced a room full of wellqualified individuals who were all earning seven figure incomes per year. The CEO did not have to wield a weapon or force anyone into prison without trial. All he had to do was assert his autocratic power to impose his will on others. His rule of fear had been successful. He acted in a seemingly well-mannered way, but the message was clear: “If anyone dares to disagree with me they will face some rather unpleasant consequences.” The result is that a system of passivity, and unwillingness to challenge any view or opinion of a more senior person, is created. The culture of implicit or overt fear makes people too uncertain to assert themselves. It creates a culture of dependency where individuals and groups are too afraid to ‘rock the boat’ and steadily decline into a swamp of passivity, apathy, and at most, passive-aggression. How often have you seen this in organisations? –

The leader who tells people to ‘either fit in or leave’ and proves unwilling and incapable of creating the space for constructive dissent.

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The person with more rank who says ‘I don’t have time for people who can’t see it as it is’ – meaning do it my way or leave.

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The employee who arrives at work day-in-and-day-out and simply follows instructions.

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The clerk who rigidly follows the rules even if means that customers will get sufficiently irritated to take their business elsewhere.

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The employees who wait passively for their leaders to give direction, and then follow it without question.

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The individual who says, ’I am not to blame. I was simply following orders’.

One of the most common results of this wave of values is that even the most mundane decisions often have to be made by people in very senior positions. People are treated as if they are either untrustworthy or incapable of making judgements and decisions that will benefit the organisation. Procedures and controls that suffocate individual imagination and endeavours are a common feature.  Second wave: co-option – money and control – co-dependence. As is the case with the first wave of values, the second also has the effect of undermining the authenticity and basic adult capabilities of people. The major difference is that the style 25

The Leadership (R)evolution: Creating a High Performance Organisation

of leadership often shifts from the more harsh authoritarian style of the first wave to that of the ‘hero leader’. In essence, the underpinning leadership values are still based on the leader knowing best and needing to demonstrate the capacity to be in charge all or at least the vast majority of the time. Leaders and organisations that rely heavily on these values have some common characteristics: –

Leaders appear not to be open to challenge, although they will engage with people under circumstances where they are clearly in control.

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Leaders have a strong aversion to appearing as if they do not have an answer or do not know what is going on.

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It is important to be seen to endorse the leaders because your own wellbeing will generally be affected by whether the leader likes or dislikes you.

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It is more important to do some right than do the right thing. For this reason people are not generally willing to identify and admit personal errors openly.

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Errors are not welcomed and are definitely not used to stimulate learning.

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The system as a whole is risk averse because there is not a culture of learning.

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The need to be, or at least appear to be, in control encourages silo behaviour. Leaders and people within silos do not readily interact with one another if they cannot quite clearly define separate accountabilities – mostly to ensure that the ‘we’ cannot be blamed for something ‘they have’ done.

–

People are loth to get involved with activities where they cannot take charge and control resources.

–

Departments and divisions that are essentially interdependent and need to rely on one another to deliver services and products to the customers are often at loggerheads or simply do not understand one another’s roles and needs. Production blames sales for expecting unrealistic flexibility and prices; sales blame production and warehousing for not having the right stocks at hand; finance blames everyone for allowing costs to get out of hand; HR blames line management for not allowing adequate budgets for training and development; and sales blames finance for being too slow in authorising credit for customers.

–

One function is often viewed as significantly more important than another. This is often related to which function the CEO and the most influential executives view as the most important.

These systems rely a great deal on the extent to which they can co-opt others to provide support. Money, privilege and patronage regularly play a significant role in this. The people with the power to allocate money, privilege and patronage use this to 26

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reward those who are loyal to them and withhold it from those who are not favoured as much. Straight talking and robust feedback are often absent because in these systems forthright honesty in expressing views and providing feedback may reduce one’s own capacity to receive money and privilege. Likewise management will often be loth to give direct feedback on inadequate performance because they do not want to run the risk of becoming unpopular with peers and people reporting to them. In worst cases relationships become co-dependent, or counter-dependent, as some may define it. When this occurs, relationships are often characterised by passiveaggression. Tense relationships between management and unions, or between the organisation and a key supplier, such as its bank, can often develop into co-dependence. Essentially the different parties do not trust one another or like one another much, but they need one another regardless. Co-dependence and counter-dependence require at least two parties to collude with one another to continuously reinforce a system that undermines the long-term and sustainable interests of both parties. At best the diverse parties will develop a pattern of behaviour that perpetually fluctuates from attempts to co-opt one another, to outbreaks of aggression, and is continuously underpinned by mistrust. A ‘politeness barrier’ is maintained which enables the parties to pretend that everything is fine, but at a deeper level everyone knows it is only a temporary truce. Perhaps the worst aspect of the ‘politeness barrier’ is that people are never truly honest, open and forthright with one another. As a consequence, everyone is left guessing where they stand with each another, rather than relying on straight talk and demonstrating the courage it takes to have a tough conversation.  Third wave: collaboration – information and self insight – independence and interdependence. The shift from first and second wave values to third wave values is perhaps the most difficult one. In many ways it represents a revolution rather than evolution. As the questionnaire ‘Living the four waves of values in practice’ illustrates, the shift from the first to second wave is generally an incremental one. But the next shift, to third wave values, represents a significant leap over a chasm dividing two often mutually exclusive worlds of values. At the very least, this soft revolution is as disruptive as the hard revolution shift from paper-based information systems and seaor air-based postal services in one world, and electronic information systems and the Internet in another world. Perhaps the dominant reason that so few organisations have embraced New Economy Leadership is because the values shift is inherently disruptive. Examples of this include: –

A horse-drawn cart cannot be incrementally adapted into an internal combustion motor car. This is true even though some rules may remain the same for both, for 27

The Leadership (R)evolution: Creating a High Performance Organisation

example, which side of the road to travel on. But the leap from the one to the other is disruptive. –

Apartheid could not be incrementally adjusted into democracy. It required a disruptive leap from one system to the other, even though the parliament of both systems still sits in Cape Town.

–

No amount of incremental adjustments can turn a manual typewriter into a laptop computer with word-processing packages, even though both use the same alphabet.

–

The primary motive of sustainable profitability is the same for companies operating in the Old or New Economy, but the ways of achieving it are radically different.

Leaders often resist accepting the quantum leap nature of transforming their organisations into New Economy Leadership because they claim that the basics remain the same. This is as true as claiming that manual typewriters and computerised word-processing both use the same alphabet, and that there is therefore no need for fundamental change. Think back to the imaginary leader falling into a coma in 1850 and waking up in 1980. What would have happened to him if he claimed that the country he was in was still populated with diverse people, and so it was unnecessary to stop buying and selling slaves in the local supermarket? The shift to third wave values and practices represents a radical move which accepts that the entire value stream, all stakeholders, and people at every level of the organisation have vitally important contributions to make. Leaders of such organisations fully comprehend and demonstrate that they believe that organisations are first and foremost human systems, and therefore have to be designed accordingly. This is not another ‘new age’ and ‘fluffy’ approach. Instead it is one that moves sharply away from authority-driven performance to a culture and workplace practices that encourage and enable self-mastery and people-driven performance. New Economy Leaders comprehend that sustainable competitiveness can be achieved only if all of the stakeholders and people are dedicated collaborators who have a shared passion to make the organisation succeed in both the short and long term. For this reason New Economy Organisations entrench an integrated set of business processes and practices that tap into and remain committed to unleashing the full potential of people. Rather than controlling people, these leaders and organisations recognise that the secret to success is to unleash and harness the energy that exists within the majority of adults. Energising interdependence can be achieved only by individuals who have a healthy sense of self and independence. It is only when individuals and stakeholders in your organisation truly believe that their right to independent existence is not threatened 28

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that they will become lasting collaborators in achieving sustainable competitiveness. This can be achieved only once the majority of individuals, and all stakeholders, genuinely feel that their own independence and right to exist is appreciated and valued. People or stakeholders who have not yet developed a healthy sense of identity and capacity to assert their own presence in a lasting and non-threatening manner cannot become effective collaborators in achieving sustainable competitiveness. Healthy independence is in this way the cornerstone of lively and energising interdependence. The two go hand-in-hand. At the root of this is the capacity to reflect, to develop self-insight, and to use information actively to drive continuous change and improvement. People who are fearful and feel that they are not truly respected as individuals, or for what they stand, will not make this leap. This is equally true for a senior executive and an operational worker. The third wave represents leaders and organisations who have a passion for unleashing the energy of people, to unleash the collective genius of teams, and to harness the integrated power of the entire value stream and community within which it flows.  Fourth wave: co-creation – environment and ‘seventh generation’ – integration. Since the Second World War the role of organisations and both the private and public sectors have become increasingly important at both national and international levels. By the end of the twentieth century it had become safe to say that companies, and specifically those with global reach, had become the primary shapers of social norms and values. In many ways the global organisation today wields even more influence than most governments. An organisation with global reach can enter into agreements with foreign governments and companies with much greater speed than most governments can in their own countries. The globalisation accompanying the New Economy is moving the corporate world into the forefront of exercising intended and often unintended influence far beyond the realms of traditional business and economic practices. As both the hard and soft revolutions continue to take root, organisations, and specifically those within the private and parastatal sectors, will need to review seriously how they view and act within the local global communities they serve and are served by. Governments, and their various departments, have the increasing accountability to review their roles in contributing to the establishment of societies – both their own and with their trading partners – that are healthy, independent, capable of resilient interdependence, and ultimately sustainable. 29

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The Bioss organisation11, well known for the Career Path Appreciation (CPA) evaluation process, defines this as Corporate Citizenship and Corporate Prescience. Corporate Citizenship has to do with the realisation that organisations need to be positioned in the present to secure their viability for periods of 15 to 20 years into the future. This requires a specific leadership intent and capability to obtain, interpret and shape information at levels of global as well as local relevance and complexity. It goes far beyond the bounds of traditional organisational life. Instead it seeks to make sense of, and respond to, political, economic, social, technological, environmental, regulatory and religious trends that may be all but invisible at present. Needless to say, this requires enhanced capacity to feel comfortable and work with fuzzy information, ambiguity and paradoxes. At this level, leaders are increasingly expected to develop a deeper understanding of other cultures, to sense what may be developing, and to make their organisation aware of it in ways that stimulate executives to interpret it and turn it into viable strategies. Corporate Prescience goes further. It requires organisations and their leaders to consider how decisions will affect generations to come. We call this the ‘seventh generation’. In other words, leaders have to facilitate the creation of organisations and processes that take account of the wellbeing of the great-great-great-great grandchildren of the present generation. This requires a sense of purpose and seamless integration with the larger global society that is often absent in present organisations and governments. One of the things that make this task so difficult is that it is necessary to consider and respond in terms of social structures, organisations, nations, groupings and systems that do not yet exist. From the vantage point of the first decade of 2000, it may appear to be unrealistically idealistic to consider that leaders and organisations would ever consider embracing fourth wave values and the deeds this requires. Yet there are famous historic examples where this has already occurred. President Abraham Lincoln must have suffered extraordinary angst as he witnessed his country embroiled in the destruction of civil war. Yet the farreaching dream of people living free from the inhumanity of slavery burned brighter than the pain of war. It would ultimately take more than a hundred years for the fullness of civil liberties to be granted to the offspring of the slaves that were freed in the mid1800s, but without that war it might have taken longer.

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In the 1950s, the ANC, and leaders like Oliver Thambo, Govan Mbeki, Walter Sisulu and Nelson Mandela, embarked upon an armed struggle against

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apartheid. From the start they were committed to targeting non-human targets. Their deeply held belief was that the harsh system would not be removed without such pressure, but they also resisted wholesale terrorism that would inflict harm on innocents. It was only decades later, when the apartheid state had turned to hit squads, torture and murder of detainees, that the armed struggle was escalated to include human targets. It would take more than 40 years before the dream of democracy was attained, and will probably take another few generations before the legacy of apartheid is fully eliminated. It is much too early to judge whether the premier third and fourth wave initiative in Africa will succeed, but in the 1990s President Thabo Mbeki of South Africa played a major role in conceptualising and establishing the New Partnership for Africa’s Development (NEPAD). If it succeeds, it will contain many of the characteristics of third and fourth wave values and leadership, of Corporate Citizenship and Prescience. If it fails, it will probably be because leaders and organisations proved to be incapable of escaping the web of first and second wave values.

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These examples are drawn from the deeds of leaders of governments and nations. It may still be too early to identify examples confidently from the world of business, although there are some instances where, for a while, leaders and their organisations appear to have risen to this level. When Henry Ford committed himself and his organisation to manufacture motor cars that were inexpensive enough so that every worker in his factory could own one, he set a revolution in motion. When he went a step further and paid his employees almost twice as much as the norm, he forever transformed the world of work and the relationship with his employees.

 

When Bill Gates set out to fulfil his vision that there should be a PC on every office desk and one in every home, he also set a revolution in motion.

When in the mid-1980s, Eskom, South Africa’s electricity utility-bucked every trend of the time, they had already begun contributing to the growth of a new society and a New Economy, something no one thought would be realised in their lifetime. They committed themselves to becoming the cheapest provider of electricity in the world; to establish a Southern African electricity grid; and to provide electricity for all South Africans. They did this at a time when they were a bloated bureaucracy and monopoly that made profits by simply putting up prices; when South Africa was

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The Leadership (R)evolution: Creating a High Performance Organisation

effectively involved in low-density war with its neighbours; and when the apartheid government was still committed to treating black society as second-class citizens with no rights to vote, never mind access to electricity. It is easy to become sceptical and cynical when you try to locate enduring examples of third and especially fourth wave values operating in modern day organisations and societies. Perhaps the slaves, colonial servants, and children tied to machines in factories employing child-labour, felt the same in the 1850s. The African Americans must at times have despaired when the leaders of the Civil Rights movement in the USA in the 1960s were being persecuted and assassinated. When, one wonders, did Mahatma Ghandi start believing that his campaign of passive resistance was really going to bear fruit? This is a book of hope and celebration of what is already starting to happen in organisations. We cannot truthfully claim that New Economy Leadership practices are pervasive. But there are enough case studies to believe that the New Economy revolution is gaining momentum. Your leadership challenge is to embark upon the journey. Every lesson and experience along the way will provide new insights, create greater hope and courage, and contribute to the achievement of a sustainably competitive organisation that is fit and friendly for human life.

NOTES 1 �������������������������������������������������������������������������������������� Lester Carl Thurow (born 1938) is a former dean of the MIT Sloan School of Management and author of numerous bestsellers on economic topics. (From Wikipedia, the free online encyclopedia.) 2 ����������������������������������������������������������������� Fritjof Capra (born 1939) is an Austrian-born American physicist. 3 ���������������������� Capra, Fritjof. 1997. The Web of Life. 4 ������������������������������������������������������������������������������������ Peter Michael Senge (born 1947) is an American scientist and director of the Center for Organizational Learning (a global community of corporations, researchers, and consultants) at the MIT Sloan School of Management. (From Wikipedia, the free online encyclopedia.) 4 �������������������� Senge, Peter. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization. 5 ������������������������������������������������������������������������������������ John Francis “Jack” Welch, Jr. (born 1935) was Chairman and CEO of General Electric between 1981 and 2001. (From Wikipedia, the free online encyclopedia.) 6 ���������������������������������������������������������������������������������� James C. “Jim” Collins III (born 1958, Boulder, Colorado) is an American business consultant, author, and lecturer on the subject of company sustainability and growth. (From Wikipedia, the free online encyclopedia.) 32

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7 ������������������� Jim Collins. 2001. Good to Great: Why Some Companies Make the Leap … and Others Don’t. 8

Nelson �������������������������������� Rolihlahla Mandela (born 1918) ������ is ���������������������������������������������������� a former President of South Africa, the first to be elected in fully representative democratic elections. Before his presidency, Mandela was an anti-apartheid activist and leader of the African National Congress and its armed wing, Umkhonto we Sizwe. He spent 27 years in prison, much of it on Robben Island, on convictions for crimes that included sabotage committed while he spearheaded the struggle against apartheid. (From Wikipedia, the free online encyclopedia.)

9 ���������������������������������������������������������������������������������� Desmond Mpilo Tutu (born 1931) is a South African cleric and activist who rose to worldwide fame during the 1980s as an opponent of apartheid. In 1984, Tutu became the second South African to be awarded the Nobel Peace Prize. Tutu was elected and ordained the first black South African Anglican Archbishop of Cape Town, South Africa, and primate of the Church of the Province of Southern Africa (now the Anglican Church of Southern Africa). Tutu chaired the Truth and Reconciliation Commission and is currently the chairman of The Elders. (From Wikipedia, the free online encyclopedia.) 10 ��������������������������������������������������������������������������������� BIOSS International was established in 1970, as a global consulting network with expertise in Talent, Strategy and Leadership (see www.bioss.com). BIOSS Southern Africa emerged in its present form in 1999 when Third Foundation Systems incorporated the BIOSS International-licensed activities of the Anglo American Corporation’s Central Training Unit (as it then was) to form BIOSS Southern Africa (see www.bioss.co.za).

33

3 THE JOURNEY TO NEW ECONOMY LEADERSHIP AND SUSTAINABLE COMPETITIVENESS A people who mean to be their own governors must arm themselves with the power knowledge gives. James Madison1

WHERE TO FROM HERE? At this point you should have a better idea of what the New Economy is all about. We know that if one were to look at the rate at which things are changing currently and push that kind of change out over the next decade, by 2020 the world would look very different to the one we know today. We all know that the world is changing, and will continue to do so. But surely there are some basic principles that remain relatively fixed? So, what is all this fuss about a New Economy? It is about doing everything differently. Even though basic timeless principles still form the cornerstones of what we do, in the New Economy, there is a transformation of leadership and a range of business practices needed to undergo significant change. We therefore need to reconsider how to go about achieving sustainable competitiveness. As discussed, by 2020, largely because of the rapid changes in, and uptake of, new technologies and the impact that this will have on society as a whole, the socio-technological fabric of our environment both at work and at home will have been revolutionised. It is the next wave of business principles revolving around democracy in the workplace, and the speed of events, that is affecting how we live and work. This means that a typical new enterprise striving towards sustainable competitiveness must be flexible and able to respond quickly to new developments in a dramatically changing world. It means that people are increasingly demanding more information, deeper insight and increased participation – all of which is driving a new era of independence, with a greater need for increasing interdependence and integration. The old social contract between organisations and their employees is gone. No longer is the social contract based on the premise that ‘if you work for us for life, then we will be 35

The Leadership (R)evolution: Creating a High Performance Organisation

loyal to you. You are not going to leave here rich, but you are going to leave secure, and you will have a pension fund, and medical aid, until the day you die’. Organisations are unable to make or keep promises like this anymore. Through the rapid advance of information technology, deregulation, globalisation, the rise of the Internet and e-Commerce, and many other rapidly evolving business practices, the so-called X and Y generations have experienced redundancy in the workplace for either their parents or themselves. This is why people of these generations are beginning to claim their independence and insisting on more control over their lives; accordingly, organisations have to restructure the ways they engage with their people. So how do you harness this to ensure optimal performance in your organisation? We have developed an integrated framework, based on more than twenty years of research that is specifically engineered to assist your organisation in achieving optimal performance. Although the framework comprises a number of stand-alone tools, it is only when they are used in conjunction with one another that you will truly be able to achieve the type of turnaround required to take your organisation to world-class status. To transform your organisation and entrench New Economy Leadership practices, you will need to execute changes in seven key organisational practices. The bulk of this book explores each of these seven areas of organisational excellence. Each of these areas makes up an element of a framework that we call the Beehive. There is, however, a practical challenge that you will have to consider at all times. This book provides insights into the best operating practices that sustainably competitive organisations have entrenched through many years of effort and focused leadership. Our research and experience with clients has taught us that it is impossible to achieve success with one great leap. There is no evidence at all of any organisation that has ever achieved world-class status in any of the seven elements of the Beehive in a short period. Instead, all world-class case studies have one thing in common. The process of transformation in each of these organisations resembled the steady, and often arduous, climbing of Mount Everest. We have defined this as a series of evolutionary steps.

THE FIVE STEPS OF EVOLUTION TO EXCELLENCE Each step poses very different leadership and organisational development challenges, and provides a platform for the next phase of development and execution while it draws on the experience and achievement of the previous step. The journey to world-class status is therefore structured much like the way in which you would ascend Everest. You need to approach your ascent in a very organised and methodical way. Firstly, you will need to be 36

CHAPTER 3: THE JOURNEY TO NEW ECONOMY LEADERSHIP AND SUSTAINABLE COMPETITIVENESS

at a certain level of fitness before you can even consider the trip to Nepal. Once you get there, you have to get to base camp to start acclimatising to the atmosphere. After each climb to the next camp, you will need to descend to the camp below in order to ensure that you acclimatise properly. In order to become sustainably competitive, your organisation will also need to plan a step-by-step approach to reach world-class levels. There are five steps in all to reach the summit: 1. Slip-sliding away (shape-up-or-ship-out) 2. Establish base camp 3. Set off to best operating practices (BOP) 4. Regroup for the final assault 5. Shout from the summit  Step one: slip-sliding away (shape-up-or-ship-out). The very first step may seem incredibly simple, but it is fundamental to the success of your journey. Your leadership team must decide that they do indeed want the organisation to embark on the journey to greatness. Evolution, in the corporate sense, requires a conscious decision. You will not happen upon the summit of Everest while taking a casual Sunday stroll in Nepal, and neither will you become a great organisation by applying ‘business-as-usual’ principles. You have got to consciously decide that you want to climb the mountain and that you are prepared to put in the hard work required to get you to the top. As Jim Collins so aptly puts it in Good to Great, “Good is the enemy of Great.” If good is good enough, you will never reach the summit.  Step two: establish base camp. Once you have decided to embark on the journey, you will first need to assess your organisation’s ‘level of fitness’ before it can begin the climb to world-class levels. At this point you must assess your organisation’s ‘as is’ status, then determine the gap that has to be bridged between your ‘as is’ status and your ‘to be’ aspirations. At this stage a primary challenge is not to position the shift to New Economy practices as something more to do, but rather as doing different things. A useful metaphor is that of shifting to a healthy eating plan. You stop eating the unhealthy foods and start eating the healthy foods – the essential message being that you have to eat. It is not a case of now having to continue eating the unhealthy food and trying to find the space and time also to eat the healthy food. This is a crucial insight for you to grasp. All too often one of the reasons for not taking the first step is that there is supposedly not enough time for it, and that it will overburden the organisation. Of course there are new competencies (knowledge, attitudes, skills and expertise) that have to be developed and applied, but it is not about doing more. Instead it is often about doing less, but doing more of it. In other words, doing everything about some 37

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things and not doing something about everything. Meeting this challenge is one of the primary requirements for this step. For this reason the development of a really good execution plan is critical. At the start of any new process it is unlikely that significant shifts will occur without the discipline of developing and executing clear plans of action.  Step three: set off to BOP. You will now need to focus on the execution of the desired best practices. In other words, you must establish the initial building blocks for selected shifts that need to be undertaken. This invariably requires a certain degree of up-skilling to ensure that people across all levels appreciate what is required of them, and how they need to operate differently into the future. One of the most important elements of this step is to establish ways in which progress and adherence to the required New Economy practices can be evaluated and improved. It is the time of ‘virtuous monitoring’ in, during which people establish ways of regularly evaluating progress. This information is used to stimulate dialogue on how to improve practices further and to overcome bottlenecks where they may exist. Whereas step two is largely to do with developing the commitment and establishing the first basic remedial steps, this step is about developing greater clarity about the desired end-state and establishing increasing understanding of what that end-state has to look like in practice. At this stage there must be a critical mass of people in your organisation who understand what it takes to entrench the best practices and evolutionary pathway to get there. They continuously engage the system and management teams to ensure that continuous progress is occurring. Usually this is the role of change leaders who form a ‘creative minority’ and operate with the support of senior executives, and take charge of driving the shifts towards the required behaviour by leaders at all levels. Best practices should now start to emerge across your organisational system. Different areas of your organisation will start to experience shifts in a variety of areas. One of the dominant forces that will accelerate execution now is the capacity of your people to learn from what is happening in the organisation, and to spread this learning as widely as possible. During this step the people in your organisation will begin to develop a clearer understanding of what is required to make the shift to New Economy Leadership and competitiveness. More and more people will begin to realise that this not about doing more things but about doing more things differently.  Step four: regroup for final assault. As the best practices and new competencies start to become entrenched, your people will become increasingly ready to make the quantum shift that will transform the organisation. It now becomes possible to expect and demand the wide-spread execution of New Economy Leadership and competitiveness 38

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practices, and to require the leaders across all levels in your organisation to live the values that accompany this shift. In change leadership terms, it is the time when it is both possible and desirable to increase the pressure requiring everyone to practice the New Economy Leadership behaviours. By this stage all your policies and procedures, as well as practices that contribute to organisational development and culture, should be aligned to the shift towards New Economy Leadership and competitiveness. One of the most critical challenges at this stage is to ensure that the people in senior levels of leadership within your organisation demonstrate commitment and adherence to the required practices. This entails a combination of: – providing support for functions that are involved in the execution of the new culture; – increasing the number of people who take on change leadership roles; – insisting that people who are being considered for promotion should have a track record of living the New Economy Leadership and Competitiveness culture; and – making the ongoing development of the high performance culture a primary focus of management at every level of your organisation.  Step five: shout from the summit. You have made it to the top. The gruelling journey has paid off. You should now be a sustainably competitive organisation. Your entire organisation views the world from the summit and uses this as a platform for a next stage of learning and development (of the organisation and the environment). The following should now be evident in your organisation: – You rate above 75 percent for all aspects of the New Economy practices. – Your organisation plays an active role in enhancing the thinking of the industry with regard to developing and continuously enhancing a high performance culture. – The larger economic and academic community recognises your organisation’s leadership for sustaining a high performance culture and practicing New Economy Leadership behaviours. – Your organisation supports the endeavours of any person to explore and develop breakthrough thinking and practice that enhances the high performance culture and leadership in innovative new ways. – The leaders of your organisation play an active role in propagating the need for business to play a leadership role in entrenching practices that enhance the overall sustainability of the community and society at large. 39

The Leadership (R)evolution: Creating a High Performance Organisation

– Your organisation plays an active role in getting participants in its entire supply chain together to explore and develop breakthrough ways of enhancing the high performance culture of the sector as a whole. – Your organisation adopts an ‘abundance’ approach to its best practices and readily shares them in the knowledge that anyone else – including competitors – would have to copy everything precisely to effectively challenge your competitiveness. – Your senior executives encourage both managers and employees to engage with other organisations, even competitors, as part of continuously renewing and enhancing the overall competitiveness and high performance culture of the sector and economy as a whole. – People at all levels are actively involved in creating a workplace culture and leadership that is recognised as being ‘fit and friendly for human life’, and that delivers consistently superior performance. – Your organisation is an active practitioner of high involvement leadership and workplace practices. – The leaders of your organisation play an active role in influencing the development of high performance cultures and leadership of the stakeholders within their supply chain. Staying at the summit is now the next challenge. You will regularly have to ‘descend’ to stay acclimatised. Returning to reassess steps three and four periodically will be required to remain truly sustainably competitive. Where is your organisation on this journey? Are you at step one or step five? Assess your organisation’s status (see Appendix B for more details).

THE BEEHIVE OF SUSTAINABLE COMPETITIVENESS AND HIGH PERFORMANCE CULTURE For each of the five steps undertaken in the ‘evolution to excellence’, we use a benchmarking tool to assist organisations to make the leap to the right, out of the Old Economy and into the New – a leap towards the imagination age. The Beehive framework is essentially an integrated framework specifically focussed on implementing best operating practices. Kicking-off in the late-1990s, Christo, then a partner of Andersen Consulting South Africa, and later a lecturer at the University of Stellenbosch Business School (USB), commenced 40

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the international search on best practice for sustainably competitive organisations detailed in chapter one. As mentioned, the research team studied research on sustainably competitive organisations in the developed world, and the prevailing best practices in these organisations. South African managers were engaged on the findings, specifically probing for the key elements that are needed in the South African context. Seven areas were identified as important: Strategy Execution, Structure, Talent Creation, Business Disciplines, Reward and Recognition, Stakeholder Value and Change Leadership. These seven areas have been defined in terms of ‘old society’ and ‘new society’ practices (what we have been referring to as New Economy practices) – the latter being those that are associated with sustainable high competitiveness. This was the birthing process of the Beehive framework. Several hundred representatives from more than 60 South African organisations participated in the original Beehive surveys. Sustainable competitiveness has been benchmarked in the South African context in this way. Several South African organisations have used the Beehive to evaluate the status of their culture. Companies like Absa, Woolworths, Total SA, Parmalat SA, Cliffe Dekker and Old Mutual have used it to track their own evolution. The Beehive framework and survey is a robust and practical model, designed to achieve whole systems improvement, useful across a number of organisational settings, and is pertinent to any industry. Research has shown that an integrated approach to the seven workplace practices covered by the model is strongly related to superior performance in the New Economy. Although this section of the book covers the frameworks mentioned in this chapter, the emphasis is on the seven elements of the Beehive, which form the crux of what you need to implement to shift towards the New Economy. You will discover that the Beehive embraces leadership techniques and business practices that will drive your organisation to sustainable competitiveness. Each of the seven sets of critical workplace practices has eight pairs of indicators, which (when applied in a questionnaire format) are used to obtain a snapshot of how well the organisation – and its parts – are performing. This information will provide you, your managers and change agents with a profile of your organisation’s performance that can be compared with current best practices. The Beehive assessment gives an organisation, department or business unit the opportunity to re-think those workplace practices that research has shown to be strongly related to superior performance in the New Economy2. This means that a CEO’s preoccupation with the balance sheet (statement of financial position) and profit and loss account as the primary means of determining business performance is in the past. Of course, nobody will be foolish enough to deny that the balance sheet and profit and loss accounts provide critical information on how to improve profitability by focusing on improvement initiatives in operations by lowering costs or increasing revenues. However, 41

The Leadership (R)evolution: Creating a High Performance Organisation

the balance sheet and profit and loss account will tell you precious little about the people in your organisation. Information that is as important to your organisation as its financial wellbeing includes:3  how well your people are organised around and within the company’s core business processes to efficiently and effectively produce its goods and services;  how your leadership practices may be influencing (adversely or positively) employees’ ability to effectively execute their day-to-day work responsibilities;  how your key human resource management systems and practices such as performance management and strategic compensation are used to reinforce a climate of high performance; and  how well managers and employees at all levels within your organisation are able to quickly respond to change, whether that change be driven by customers, new technologies, market dynamics, economic forces, regulatory trends, or other internal dynamics. The Beehive framework shows the relationship between strategy execution and six other key practices that need to be aligned with strategy to entrench change and high performance. These are the seven Beehive elements: 1. Strategy Execution: The ways in which strategy is formulated and then utilised as a primary driver of performance within your organisation. 2. Structures: The extent to which structures are designed to reinforce and drive performance by optimising your organisation’s supply chain and the fulfillment of accountability at all levels. 3. Talent Creation: Workplace practices and disciplines that ensure the optimum attraction of talent and the development and utilisation of your people, and their ability to contribute to performance. 4. Business Disciplines: The adoption and widespread use of a set of integrated business disciplines that reinforce and cause high performance. 5. Stakeholder Value: Developing the alignment of all your stakeholders so that they operate as active contributors to the competitiveness of the organisation. 6. Reward and Recognition: The alignment of pay and incentive systems that attract, retain, and enhance the commitment of people across all levels within your organisation. 7. Change Leadership: The use of proven leadership and processes for implementing change and turning strategy into operational action which delivers competitive performance. 42

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The Beehive flow STRATEGY EXECUTION: THIS IS THE STARTING POINT. WITHOUT STRATEGY EXECUTION THE ORGANISATION WILL NOT GET TO WHERE IT WANTS TO GO. THE SINGLE BIGGEST CHALLENGE FACING LEADERSHIP IN THE NEW ECONOMY IS TO CRAFT, MOULD AND EXECUTE A STRATEGY THAT SERVES THE ORGANISATION’S LONG-TERM SUSTAINABILITY. STRUCTURES: FOR SOUND STRATEGY EXECUTION TO SUCCEED, ONE NEEDS PEOPLE AT THE VARIOUS LEVELS OF THE ORGANISATION WHO ARE COMPETENT AND (HELD) ACCOUNTABLE. STRUCTURES ARE AN ESSENTIAL MANIFESTATION AND OUTFLOW OF STRATEGY. IN PARTICULAR, STRUCTURES MUST ENABLE PEOPLE TO LEAD ACROSS DIFFERENT THEMES OF WORK, AND TO CREATE THE SHARP FOCUS THAT DRIVES EXECUTION ACROSS ALL LEVELS. TALENT CREATION: COMPETENCE IMPLIES THAT YOU NEED TO ATTRACT AND RETAIN THE APPROPRIATE TALENT. ATTRACTING, DEVELOPING AND RETAINING THE RIGHT PEOPLE WITH THE RIGHT TALENT AND WITH CAPACITY TO PROVIDE LEADERSHIP ACROSS THE DIFFERENT THEMES OF WORK IS INCREASINGLY THE SINGLE GREATEST COMPETITIVE

BUSINESS DISCIPLINES: TALENT NEEDS PERFORMANCE MANAGEMENT TO ENSURE MOTIVATION AND GROWTH, AND TO CREATE A CULTURE OF CONTINUOUS LEARNING AND COACHING. THE FOCUSED EMPOWERMENT OF PEOPLE DOES NOT OCCUR IN A VACUUM; IT REQUIRES THE PROVISION OF INFORMATION AND RIGOUR OF DYNAMIC, INTEGRATED PERFORMANCE MANAGEMENT TO ENSURE THE ALIGNMENT OF ACTION WITH STRATEGY. STAKEHOLDER VALUES: THE ORGANISATION’S CULTURE NEEDS TO BE UNITED AND SUSTAINED

CHANGE LEADERSHIP

ADVANTAGE FOR ORGANISATIONS IN THE NEW ECONOMY.

BY A SET OF VALUES THAT ARE LIVED AND HAVE CONSEQUENCES. THE INTEGRATIVE NATURE OF THE NEW ECONOMY REQUIRES THE CO-CREATION OF VALUES THAT ENABLE ALL STAKEHOLDERS TO FEEL THAT THE ORGANISATION’S PERFORMANCE ALSO BENEFITS THEM, AND THAT THEY SERVE THEIR OWN INTERESTS BY ALSO FULFILLING THE ORGANISATION’S. REWARD AND RECOGNITION: THE REWARD SYSTEM NEEDS TO BE ALIGNED WITH THE VALUES, IN THAT IT NEEDS TO REWARD THE APPROPRIATE BEHAVIOUR (VALUES AND PERFORMANCE). PEOPLE ACROSS ALL LEVELS MUST BELIEVE THAT THE WAY IN WHICH THEY ARE RECOGNISED AND REWARDED IS FAIR AND JUST, AND THAT IT ALIGNS THEIR BEHAVIOUR WITH STRATEGY EXECUTION. CHANGE LEADERSHIP: IN ORDER FOR PEOPLE TO SUCCEED, THEY NEED TO BE ABLE TO COPE ON A DEEP LEVEL WITH PERMANENT CHANGE. IN A WORLD OF CONTINUOUS CHANGE, THE COMPETENCE OF CHANGE LEADERSHIP IS CORE TO LEADERSHIP. BUT, ENABLING PEOPLE TO DEVELOP SELF-MASTERY AND CONFIDENCE IN THE FACE OF CONTINUOUS CHANGE IS LIKEWISE A CORE CAPABILITY IN THE NEW ECONOMY.

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The seven elements of the Beehive form part of an integrated and holistic system. Changes in one arena have to be matched by complementary shifts in all of the other areas. Any attempt to make a shift in only one or two areas is doomed to fail. As the Beehive flow figure illustrates, there is a certain flow from one area to the other. But this is oversimplifying the reality of organisational life. As macro and micro forces cause evolution in one area, so all other areas must also adjust to accommodate and reinforce the shifts. This is one of the greatest New Economy Leadership challenges: What must I, and we as leaders, do to ensure the continuous evolution of our organisations in order to remain a sustainable participant in the competitive quest? In developing the Beehive, we have endeavoured to consolidate the explosion of research and more than 20 years of experience in medium to large organisations into a relatively simple and integrated framework. It purposefully focuses on the interdependent organisational practices and processes that support and reinforce sustainable competitiveness. It strives to provide a framework, a starting point, for leaders to position their organisations so that they can meet the challenges of the next few decades. KEY LEADERSHIP QUESTIONS: GENERAL  Is your organisation’s culture well entrenched in New Economy behaviours and values?  How do your leaders demonstrate their commitment to and consciously influence the development of organisational practices that drive sustainable competitiveness through New Economy behaviours?  What are the benchmarks against which your organisation has to measure sustainable competitiveness?  Is your company separating leadership questions from ‘happiness’ surveys? (Note: a ‘happy’ company is not necessarily sustainable into the future.)  Are you measuring the impact of your leadership?  Is management driving the shift to increase conformance towards competitiveness practices?  What are the consequences if the shift is not being made towards conforming to competitive practices?  Do you drive sustainable improvement with the same vigour that you drive day-to-day practices?  How are you communicating your competitive practices to your people?  How do you make people aware of the fact that you are introducing change and that the change is in fact taking root?

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 If people are not aware of the change, what are your senior and middle managers doing to communicate this?  Are your executives and middle managers ‘walking the talk’?  Are your executives and middle managers ‘talking the walk’? (Note: to ‘talk the walk’, practices must be in place.)  To what extent has the definition and execution of sustainable competitiveness become an agenda item for your executive team?  How do you ensure that excellent past practices are replicated into the future (continuity processes)?

NOTES REFERENCESREFERENCESREFERENCE 1 James Madison (1751-1836) was an American politician and the fourth president of the United States. (From Wikipedia, the free online encyclopedia.) 2 Mario Denton & Ernst Bouwer. 2003. Global Conference on Business and Economics, London. 3 Jeff Sacht, Christo Nel & Tracy Lamb. 2003. The Beehive Model: Giving CEOs the Right Levers to Pull to Entrench Change and High Performance. [Online] Available: www. equityskillsweb.com.

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4

VISA TO (W)HOLE STRATEGY EXECUTION To accomplish great things, we must not only act, but also dream, not only plan, but also believe. Anatole France1

THE ASPIRATIONAL VIEW OF

STRATEGY EXECUTION Strategy is seen by people as something that is executed at all levels. To achieve this, there are widely understood frameworks and timetables of strategic work that occur at all levels of the organisation. The various levels of leadership are competent at embedding the strategy execution disciplines within their areas of accountability. All leaders are inducted into these disciplines.

CHARACTERISTICS OF STRATEGY EXECUTION IN THE NEW ECONOMY  Executive leadership drives the principle of democratisation of strategy.  The organisation’s ‘village’ is involved in co-creating and owning the execution of strategy.  All divisions and stakeholders focus on the execution of strategy because they appreciate that it meets their needs as well.  People across all levels know how and when they contribute to the creation and execution of strategy. 47

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The sole purpose of any organisation is to create and keep more customers2. A strategy to achieve this can be effective only if it is executed, and strategic leadership is required to achieve (w)hole strategy execution. Got it? Think you need a special endorsement in your leadership ‘passport’ to get this right? In a way you do. However, before we get to the details on the required ‘VISA’, you might be wondering why the ‘w’ in ‘(w)hole’ is bracketed. As you will see, VISA to Strategy Execution is about integrating four different disciplines into your organisational strategy; this integration is represented by the word ‘whole’. However, there is almost always a ‘weakness’ in one or more of the disciplines that requires some work; this is represented by the word ‘hole’. So writing the word in this way, ‘(w)hole’, emphasises the challenge you face as a leader in executing your strategy. VISA is a model that details four disciplines required to achieve effective strategy execution. The model has its roots in the work of Peter Drucker, who proposes that organisational strategy needs to accommodate four elements (Kim S. Cameron and Robert E. Quinn of the University of Michigan Business School have also done exceptional work on identifying the paradoxes of efficiency vs effectiveness, short- vs long-term): 1.

Effectiveness: Taking the most appropriate actions. Choosing the most appropriate things that have to be done.

2.

Efficiency: Ensuring that the actions are executed correctly, and criteria are developed to measure the achievement of goals.

3.

Long-term: Anticipating the future and positioning the organisation now so that it will benefit in the long run.

4.

Short-term: Identifying immediate outputs that should be achieved. Identifying obvious and immediate things to get done.

These four elements have to be an integral part of your strategy to ensure success; business strategy has to be effective, and efficient, in the long- and short-term. Achieving this type of integration in the New Economy context demands Vision, Interdependence, Structure and Action. These four disciplines are extrapolated from the work of Jim Collins3; Jim actually talks of only three disciplines (Thinking, People and Tough Facts), but he also indicates that strategy execution requires ‘ferocious intent for delivery’, which we have interpreted as Execution (see figure on p.49).

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VISA for strategic leadership

V – Vision

Disciplined about Tough Facts

Structure

Disciplined about People

I – Interdependence S – Structure A – Action

Action Disciplined about Execution

Interdependence

Vision

Disciplined about Thinking

The two dimensions of time (long- and short-term) and focus (doing the right things and doing things right) serve to create four quadrants of strategic leadership accountability. These four critical elements influence one another and require the development of a strategic leadership that is capable of fulfilling four integrated and aligned demands of Vision, Interdependence, Structure and Action. Strategic Leadership = VISA Everything is part of strategic leadership. Strategic leadership is fulfilled through everything.

V

ision = long-term effectiveness: Understanding the organisation’s total competitive environment and positioning it in the present so that it is appropriately placed three to five or more years from now. This cannot be achieved through traditional strategic planning interventions or top-down approaches to strategic leadership. It requires an ongoing dedication to moulding and crafting the strategic leadership to ensure that it remains responsive to the ever-changing environment.

49

The Leadership (R)evolution: Creating a High Performance Organisation

I

nterdependence = long-term efficiency: Identifying, balancing, integrating and aligning all of the external and internal variables and people that are likely to have an impact on the organisation’s capacity to fulfil its strategic leadership. This includes the identification of trends, patterns and possible reactions that may be caused by the activation of the strategic leadership. Interdependencies are thus not purely people-orientated, although peoplerelated issues are the dominant factor. In particular, this will focus on balancing the interests of all stakeholders – customers, employees, suppliers, shareholders, management, and the community within which the organisation operates.

S

tructure = short-term efficiency: Establishing replicable standards, approaches and methods which minimise the need for duplication and enhance the capacity to deliver uniform or required quality as a matter of course. This focuses primarily on the efficient utilisation of resources to ensure that continuous improvement in productivity and service forms an integral part of strategic leadership. It also identifies the critical competencies – skills, knowledge and attitudes – that need to be fulfilled to ensure the achievement of optimum levels of predictable outputs.

A

ction = short-term effectiveness: Taking the necessary steps and action to ensure the delivery of products and services which meet the needs of both internal and external customers in ways that continuously serve to create, delight and keep more customers. Issues such as empowerment and personal accountability for in-built quality are important factors at this level of strategic leadership.

What are the practices you have to grow to fly your organisation’s strategy kite? (The VISA to (W)hole Strategy Execution questionnaire may be used to evaluate your organisation’s strategy kite – see Appendix B.) As is indicated by the figure below, your organisational evaluation has to show scores in the early threes in each discipline to indicate the potential for sustainable competitiveness. Once you have reached threshold, you will find that different companies, depending on what territory they are occupying, will become superior in one or two areas.

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VISA strategy kite The primary challenge is to reach threshold on all VISA elements, then become superior in one or two areas.

S

4

3 2 1

A

4

3

2

1

1

2

3

4

I

1 2

3

4

V 4: Superior

3: Very Good 2: Average – required improvement 1: Inadequate – cause of problems

If we look at SAB’s ideal profile, it would probably be very high on the S and A disciplines, and at least at threshold on the I and V, because their superiority in the beer world is in their logistics, distribution, and cost efficiency.



Different companies will therefore have different profiles, but you have to reach threshold in all the disciplines before you can develop a superior strength in any of them. This means that every activity in your company has to reflect and reinforce the different disciplines that make up the components of an integrated strategy. Each of the VISA elements must be integrated into your company’s strategic thinking on an equal footing. If you do not reach 51

The Leadership (R)evolution: Creating a High Performance Organisation

threshold, then the lowest threshold will drag you down to the lowest common denominator. So if one element dominates, strategy will be skewed. Invariably an organisation tends to rely too much on one or two of the four disciplines, which means strategy will break down at some or other level. These are the results of skewed strategy:  Vision dominance = exciting bankruptcy: There is no shortage of ideas, but very little gets implemented. Companies where strategic thinking commands all the attention are usually thrilling environments. Managing the tedious day-to-day practicalities is not a priority, while creative thinking and scenario planning are more appreciated. Unfortunately, no company can survive only on a great set of plans for the future. Vision-dominated companies often see management conjuring up fantastic strategies that are totally out of touch with the requirements and capabilities of the operational levels. Employees in these companies are also frequently more occupied with figuring out strategies to solve other divisions’ problems than their own.  Interdependence dominance = happy bankruptcy: Everyone knows the company is going down in flames, but at least we can agree why. There is an enhanced sense of confusion by mutual consent, although a committee is looking into it. When interdependence dominates, companies get caught up in a never-ending cycles of consultation. Stakeholders undermine optimum service delivery because they believe that the only valid strategy is one that addresses their own relatively narrow interests. This occurs quite easily when various stakeholders forget that their own needs can be fulfilled only if the demands of the organisation as a whole are satisfied.  Structure dominance = precise bankruptcy: Every possible eventuality has been precisely described and shaped to form beautiful procedures. “We are going bankrupt, but at least it’s on time.” When management is more concerned about how things get done than what gets done, short-term efficiency has gone too far. A preoccupation with creating procedures and systems to cope with every development will lead to suffocating bureaucracy and strangulation in red tape. When bean counters run rampant and there are too many procedural demands, inefficiency will follow.  Action dominance = busy bankruptcy: The crisis is so momentous there is no time to think. No one is quite sure what is going on, but at least ‘we are going to die trying to put out the fires’. Action-dominated companies are a paradise for adrenaline junkies. Crisis management is the only management style these companies are acquainted with and no time is ‘wasted’ on thinking through processes and strategy. Companies focused on action-orientation and short-term delivery look like a hub of productive activity from the outside, but in reality people are occupied only with fighting fires that they lit in the first 52

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place because of inadequate planning and strategising. The company is caught in a downward spiral of activity for activity’s sake. On the other hand, strategy will also fall flat when a VISA element is absent:  Absence of vision: Employees lack a common direction and feel uncertain. Because there is no direct contact between the leadership and the employees (otherwise known as ‘Power of Presence’ – which is explained on page 56), the employees do not know what the company’s overall strategy is, or how their own activities can be aligned to it. People become demotivated because they do not know where the organisation is going and how they fit into the big picture.  Absence of interdependence: This causes turf wars between divisions. When stakeholders are ignorant of others’ needs, or unwilling to work for the greater good of everyone involved, conflict is inevitable. Stakeholders will feel that as their legitimate interests are not being met, they have the right to undermine performance, and the company’s supply chain is disrupted by ongoing power plays and conflict.  Absence of structure: There are few rules or regulations, which creates the perfect environment for non-performance. Resources are abused or exploited, and an insufficient emphasis on standardisation leads to weak quality and continuous errors.  Absence of action: This undermines the delivery of performance across all levels; it creates an environment of passivity and entitlement. Customers complain and take their business elsewhere. There is a complete lack of innovation and creative problemsolving. Now you know what happens when things go wrong with strategy execution. But more importantly, what should you be doing to make sure that it does not? Strategy, in its own right, requires immediacy – in other words, what you are doing right now is important. It is the thinking discipline. Strategy is not what is decided at the bosberaad4, it is the accumulated impact of thousands upon thousands of activities on a day-to-day basis. Take the following two examples provided by Christo. The first concerns a niche, elite retail clothing store catering for the upper income groups. Christo spotted the perfect linen suit in their window display, so he entered to enquire whether they had his size. After his enquiry he had made the store assistant brought him a jacket, which fitted beautifully, so he asked her to bring him the matching trousers. She then provided a pair of trousers some 12 sizes smaller than the jacket.



Christo thanked her for the compliment, but pointed out that he would fall over if he had such proportions. She informed him that the trousers she had provided were the largest 53

The Leadership (R)evolution: Creating a High Performance Organisation

size they had in stock. As he really liked the jacket, he told her that he would purchase it. At this point he was told that this particular chain had a policy not to split suits. As was blatantly obvious, someone had already ignored this rule, but the assistant insisted that Christo could not purchase the jacket on its own, nor could he purchase a different pair of trousers to go with the jacket. Growing tired of his discussion with the floor assistant, he requested to speak with the store manager. Again he was stone-walled by the ‘no splitting’ policy. He demanded they phone their head office, and requested to speak to the highest ranking officer available. He was put through to the financial director, who – after hearing the whole story – gave him exactly the same drill, “We do not split suits”. So, Christo walked out, entered their competitor’s store next door and promptly bought a more expensive suit. So what is this company’s strategy? From the behaviour of the floor assistant, store manager and financial director, their primary strategy is to prevent customers from spending money. And, of course, to get us to tell you about the effectiveness of their strategy. The second example deals with a restaurant chain. Christo particularly likes this chain because of their bright orange uniforms, which have the slogan ‘work is love made visible’ emblazoned on the back.



Christo and his partner once visited one of these restaurants after the movies, only to find a long queue outside. Christo asked the maitre d’ how long it would take to be seated, and was informed “approximately 30 minutes” – at which point he began to turn away. The young fellow immediately offered Christo and his partner some wine while they waited, and provided a wine list for them to choose from (they were at least 30 metres out into the corridor outside the restaurant). Hooked, they ordered a bottle of wine. A few moments later two waiters charged out of the restaurant clanging pans (no managers were in sight) – making a terrible racket – whilst a third appeared with a bottle of schnapps, which he proceeded to pour down the throats of the delighted folk queuing outside the restaurant. Every few minutes they were given a report on how much longer they had to wait, until finally they were told that the wait would be over in 15 minutes, and were advised to place their order so that it would be ready by the time they were seated. It is highly unlikely that there is any written rule that says “when there are 15 people standing outside the door, grab a bottle of apple schnapps and pour it down their throats”. But obviously, there has been extensive dialogue on what to do about queues. This is effective strategy execution.

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Look at your organisation and ask, “What are our thinking and talking disciplines regarding strategy?” Go and ask others in the organisation the same question. Now compare this information to your business plan or strategy document. Is there a match? The crux of strategy execution is to get the actual strategy (the daily activities) and the desired strategy (the business plan) as close as possible to one another. In the Old Economy, strategy execution tended to be top down; in the New Economy, strategy execution rests with everyone (as can be seen from our examples above). The ‘what’ of strategy will always come top down, so it is the execution that is different in the New Economy. We can all go about our business brainstorming and creating something we call strategy, but the institutional capacities and capabilities of driving it through onto ground level is a totally different challenge. Leadership fluctuates. In the Old Economy, leadership was clear.We knew who the leader was and who the followers were. In the New Economy, the leader sometimes needs to be a follower. As Jim Collins5 has so brilliantly put it, we cannot see something from the perspective of another if we do not have deep humility, because without it we impose our own perspective or analyse things from our own perspective only; we will not see the other person’s viewpoint. What this means is that the leaders of an organisation need to redress their role in terms of practices and power. You need to consider whether your leaders recognise, appreciate and embrace their power.  Power of purpose and principle: Do the leaders in your company have a powerful, shared purpose – beyond vision, mission and strategy – and do they voice it on a regular basis? Leadership is the articulate, continuous voice of the purpose. All the leaders must therefore send out the same messages; the message must be interpreted in the same way. When the purpose is not cohesive, your strategy is useless.  Power of people and participation: You cannot delegate participation. You need to get in-depth knowledge about the perspectives of others. Participation requires presence; this is where a lot of leaders fall short, because they do not make the time to be present. As stated before, the key thing to understand is that leadership fluctuates. It all depends on situational requirements. Now there can be reverse mentoring between leader and follower; this requires leadership humility.  Power of parameters and processes: This power is about the extent to which the leaders are voicing the constraints, and dealing with the consequences of not living by them. Do you have the discipline of Big Hairy Audacious Goals (BHAGs6)? You must be able to adjust a BHAG in the event of a mis-analysis of trends or strategy, otherwise the market will dictate such adjustments. Change the BHAGs that turn into wild woolly dreams. Be very circumspect about those that have too much invested in a BHAG that should be changed. Keep checking the assumptions behind the BHAGs. 55

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 Power of presence and persistence: You cannot execute strategy if you, the leader, are not making direct eyeball contact with your employees. You need to conduct deep dives; go down into the system, because whilst you have an integrated view of the whole system, the lower levels do not, and they need you to help them make connections they otherwise would not make. This will enable your people to leap up to your level; always remember, you cannot shape the strategy of your company if you do not pick up the intelligence on the ground. The sweat and intensity of this eyeball-toeyeball interaction will shape the strategy of the organisation. Personal leadership impact

V

I

Power of purpose and principle

Power of participation and people

• Comprehend strategic context • Make sense of chaotic and fuzzy information • Live with ambiguity and uncertainty • Provide the ‘inner dream’ and direction • Demonstrate leadership optimism • Be open to the unexpected and ‘unacceptable’ invite and expect dissidence

• Know the critical role players and trends • Appreciate stakeholder interests and contributions • Display empathy • Value diversity and contributions of all • Engage diverse and opposing views to craft alignment

S

A

Power of parameters and processes • Establish the essential constraints within which freedom operates • Define the critical issues that require compliance • Exercise consequences of noncompliance • Set stretch objectives – BHAGs • Apply ‘rules of the game’ with consistency • Expect what you inspect – no measure, no get

Power of presence and persistence • Interact personally across levels and functions • Learn-by-doing: do not expect perfection • Use success and failure for learning • Require delivery on top of process • Emphasise outputs, not methodology • Sustain tension between dream and reality • Energise the contributions of others

All of the above revolves around practical thoughts, views, ideas and examples of how to expand your VISA kite. 56

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A leader’s use of these powers becomes a leadership habit, which is part of creating a leadership culture. Probe these areas within your company. Without careful monitoring, your assumptions will drive the strategy, and the strategy will be built to reinforce the assumptions and soon you will be caught in a dangerous spiral. Now put together a plan of action to get each of the four powers in place, as listed in the next table. One of the most dramatic effects on the market in South Africa has been the cellphone industry. When this industry first launched, the telecommunications companies made margin on people making calls; increasingly, their margins are now coming from things like digital signals. Even retailers have experienced this change; a leading lowcost retailer now derives one, third of their profit from pre-paid telephone cards. Companies can take advantage of this type of trend only if they are able to escape the past and invent the future.

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A framework to explore this thinking – adapted from the work of Gary Hamel and C.K. Prahalad7 – is presented in the table below.

Analysing present and future tensions Present – Future Tensions What current executive competencies make us

What future executive competencies will make us

effective?

succeed?

What workplace attitudes have stood us in good

What future workplace attitudes will be essential

stead?

for success?

How have we effectively ensured good past

What will be necessary to ensure great future

performance?

performance?

What are the future imperatives that we have

What are the past traditions that we will have to

resisted the most?

abandon urgently?

What have we done in the past to ensure ad-

What will we have to do in the future to ensure

equate innovation?

adequate innovation?

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So what will be necessary to ensure great future performance? What are past traditions that we have to abandon urgently? How will we make sure that people at every level are providing innovation? If the future you are creating is not discernibly different from the present you are living, then you are in trouble. However, pain remains the greatest motivator of change, and by the time you are experiencing pain, it may already be too late. Many companies live under the illusion that just because they are successful now, they have a successful strategy. What they do not realise is that today’s success is generally based on the strategy you executed two to five years ago. What they are confusing are the lag indicators and lead factors of performance. Lag factors are post factum indicators of a successful or poor strategy; lead factors are performance-enhancing processes and workplace practices that will determine the true performance of the organisation (see the figure below). This is based on the premise that you must ‘expect what you inspect – no measure, no get’. Sustainable competitiveness is not an accident. It is the result of identifying and executing ‘everything about some things’ and tracking progress with consequence. Sustainable competitiveness – drivers and measures Sustainable competitiveness

Leadership drivers • • • •

Lead factors

VISA Leadership Profile & Style Structured 360o Dynamic 360o VISA to Conscious Leadership Practices o Ten High Performance Leadership Competencies o High Impact Leadership Team Practices • VISA to five Performance Enhancement Processes

• Authentic Sector Factors • The ‘Beehive’ of Sustainable Competitiveness: o Strategy Execution o Structures o Change Leadership o Talent Creation o Stakeholder Commitment o Business Disciplines o Pay and incentives • Balanced Scorecard • Seven S alignment

Lag indicators • Traditional Indicators: o Share price o ROCE o ROI o Profits o Market share o Customer service index o Employee satisfaction index

Performance Matrix of Systemically Aligned Indicators

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The tension between destroying the present and creating the future is difficult to live with. Warren Bennis8 calls this constructive destruction. The New Economy requires that we democratise strategy if we want to achieve this. A leading upmarket retailer and a petro-chemicals company in South Africa have followed similar techniques in democratising strategy. Small core teams are set up specifically to formulate strategy; however, the team is tasked with the responsibility of interacting with dozens of people in the organisation; of engaging with those with vested interests – the stakeholders – and gathering information. What they are doing is providing thoughts that go into the larger system, and then consolidating things back in the centre. The principle of democratisation is that you want as many voices as possible to be heard. Although there is always someone who makes the final decision in business, it is vital that the process allows for everyone to provide input first.

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Microsoft has a strategy circus. They bring in people from all walks of life – management experts, priests, teenagers, and middle managers, the gurus – and get them to comment on their strategy. In this way they ensure that they minimise the blind spots by getting multiple people from a variety of experiential backgrounds to review their strategy. Because some of the people are not necessarily used to developing strategy, they may not have learned a particular way of doing strategy analysis and so will look at the strategy from totally different perspectives, adding knowledge not only from the corporate village but also from life as a whole. These techniques are used to increase the chance of strategy execution under a larger banner of democratising strategy. This type of cycle breeds deep trust, because people know that there are opportunities to have access to the system.

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We need to build a number of stepping-stones into the strategy process in order to make this work (see figure on p.60).

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Strategy formulation EASY INTENT

TOUGH SUCCESS

Formulate Congruence

Intensive exploration of total environment

Alignment of stakeholders

Consensus

Constant resources

Translate and Communicate Relevance

Make relevant to all levels and functions

Establish specific, aligned imperatives

Agree monitoring processes

Implement feedback loops

Implement Conformance

Establish detailed goals

Define quality requirements

Disciplined processes and tools

Feedback and development

Monitor Assurance

Constant review of progress and circumstances

Feedback from customers and other stakeholders

Evaluate status of practices

Consolidate and digest implications

Moulding Responsiveness

Define changing circumstances

Review present responses

Eliminate redundant responses

Identify emerging challenges

V

I

S

A

We return now to the VISA model for (W)hole Strategy Execution. As stated before, each of the elements must be integrated to ensure success. So how do we align them? Vision guides companies in the right direction, providing a compelling goal that galvanises and aligns the behaviour and contributions of people across all levels and functions. Many people confuse vision with a company motto, or an official document listing an organisation’s aspirations or dreams. Vague, passive pleasantries do not add up to real vision. Effective company vision is specific, detailing possible threats and counteractions, and is a call to action for all employees, at all levels. An unlikely inspiration in this regard is the strategic approach of Michelangelo. Once, when an acquaintance enquired about his plans for a large block of marble, he answered that he was going to free the angel trapped inside. Months later, the man

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went to view the angel sculpture and, in awe, asked Michelangelo how he had managed to transform the marble into such a masterpiece. The artist replied that it was easy, because the angel was trapped inside the marble all along. All he had to do was pick up his hammer and chisel away every little piece around her. Michelangelo’s approach contains the four crucial elements of truly integrated vision: 1. It has to have a compelling dream, which guides everything else. Without this dream, even the most dedicated labour will not achieve anything worthwhile. 2. It has to have the stamina of sustained activity to chase the dream, otherwise it remains trapped within the rock. 3. Continuous adjustment and moulding are essential. 4. Humility of the dreamer is to do the rote work well. Over and above these elements, the visionary aspect of strategy also requires you to:  continuously scrutinise the external environment;  formulate a challenging view of the future;  scrutinise the present with strategic intensity;  act with insufficient information; and  communicate the future vision with passion.  Continuously scrutinise the external environment: Your company has to cope with any number of curve-balls, thrown from any angle. Developing a blind spot can have disastrous consequences. The only way to avoid this is to scan and evaluate the external environment and conditions at all times. You will have to analyse continuously the full spectrum of factors that may have an impact on your company in the future: political, economical, social, technological, environmental and regulatory – locally and globally. Ignoring or forgetting one small factor in any of these spheres can lead to the downfall of your company. The continuous scanning and evaluation of the external environment should then give shape to an understanding of the long-term forces of change that could impact your company. This cannot be achieved by brainstorming during a meeting or a three-day workshop. It requires an ongoing conversation between knowledgeable and curious people, who are searching for clues about what the future holds for them. Forerunner companies like Microsoft revolutionised this process (remember our example of the strategy circus?) receiving input about the long-term forces of change from a range of people – many from outside the company – across the whole spectrum of disciplines and age groups. 61

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 Formulate a challenging view of the future: It is up to you and the executive leadership of your company to formulate a challenging view of the future, providing your employees with a clear idea of where threats could come from and how the company is positioning itself to cope with it. Having some certainty amidst the uncertainty of the future is crucial. While endless scanning and assessing of all factors cannot pre-empt future threats completely, your people have to know that there is a plan to cope with some eventualities.  Scrutinise the present with strategic intensity: Focusing only on the future is shortsighted – the present should be scrutinised with the same kind of strategic intensity. Current practices that could jeopardise your company’s ability to cope with future threats should be identified and eradicated. It is up to you to keep the tension between ‘what is’ and ‘what should be’ alive and encourage your people to evaluate how their present activities clash with how the company is positioning itself for the future. Obstacles to progress have to be identified and either aligned or eliminated. This process should be maintained on an ongoing basis. As the competitive environment changes and new challenges emerge, your company will have to adapt its vision and re-evaluate whether the current operational procedures fulfil new needs. Updates about changes in the environment and how they will affect your activities need to be communicated to your people across all levels.  Act with insufficient information: Certainty is not an option in the New Economy. You cannot afford to wait until the future is spelt out before taking action. True visionaries have to act with insufficient information and be prepared to make giant leaps of faith on a daily basis. Your actions must still be determined and steadfast even in the face of uncertainty. In essence, vision is what strategy was in the Old Economy: the long-term positioning of a company. But the New Economy has necessitated three added dimensions to strategy: Interdependence, Structure and Action.  Communicate the future vision with passion: Company vision can be brought to life only if it is communicated effectively to the people who have to live it. With the pressures of technology and competition in the New Economy, it is very easy to lose sight of the human element. Yet, as the world and the challenges become more complex, it is increasingly important for you as a leader to interact personally with your people to help them to mould their responses to the vision. This requires patience and a willingness to interact with people over a sustained period of time. The opportunity must be provided for your people to interact with you and the other leaders; to raise concerns; to ask questions; and to receive clarity about how they should respond to challenges in their day-to-day activities. Forget indirect non-human processes like newsletters, e-mails, poster campaigns, and even audiovisual communication. You will need to be physically 62

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present, and able to translate vision to all levels of employees, in order to communicate the vision with passion. Microsoft CEO Steve Ballmer has become a legend in this regard. Video clips of his passionate antics at company gatherings – screaming at the top of his lungs, running around on stage while professing his enthusiasm in no uncertain terms – are hosted on a number of Internet sites and attract thousands of hits daily. (It can come at a cost, though; Steve had to have throat surgery because of his passionate communication.)

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Communication about a company’s vision has to be: – understandable and rousing. You will have to translate your company’s vision to your employees so that it makes sense to them. All employees ought to have a firm grasp on the external challenges and long-term forces of change that gave shape to the vision. Equally important, you should encourage them to bring the macro-vision to their own areas of work, and align their individual activities to the company direction. – clear about potential burning platforms. Most people will only change their way of doing things only when they realise that the comfortable status quo threatens their survival. The implications of remaining complacent and not changing the current, dangerous way of doing things – the burning platforms – should be presented on an ongoing basis. You have to maintain a consistent tension between the desirable future and those elements in the present that could inhibit progress. – optimistic. While the external challenges can look pretty menacing, you need to convey your conviction that the company vision will be able to achieve success. – brutally honest. Any communication has to be honest, especially when it comes to the tough facts which will be present in any vision. Interdependence: Development within a company involves identifying, balancing, integrating and aligning all the external and internal variables that are likely to have an impact on your company’s capacity to fulfil its strategy. No company operates in isolation. Every organisation is a system operating within a system. A company’s immediate microcosm exists of shareholders, customers, the employees, suppliers, management, unions and the community. The larger macrocosm impacting on a company is a wide range of social trends, political persuasions, economic forces and technological developments. Legislative authorities, regulators, international trade organisations and increasingly countries and global competitors all form part of the organisation’s macro context. 63

The Leadership (R)evolution: Creating a High Performance Organisation

You are therefore forced to look at all the links in the greater supply chain. Interdependent strategic thinking therefore necessitates taking a step back when looking at the supply chain. It is not enough to worry only about the immediate links such as direct suppliers of goods or services, and direct customers; you have to scrutinise the greater supply chains within which you operate to pre-empt any future challenges that could come from indirect customers or suppliers, and achieve greater efficiencies by interacting with suppliers two or three times removed, or anticipating indirect customer needs. Interdependent thinking should also compel you to think about non-traditional ‘customers’ or groups, which may have a direct or indirect impact on your company in the future, such as politicians, people in local government, interest groups, environmental lobbyists and upstream providers of services. Interdependent strategy within your company means aligning the interests and commitment of your employees and all significant stakeholders to a common goal. In practice, this requires a culture of customer service among all groups in your company; getting them to view your other divisions and stakeholders as their clients. This cannot be achieved without opening up channels of communication. All stakeholders – including company divisions, the employees, unions, shareholders and management – should have an appreciation of each other’s interests and problems. Poor interdependence almost always leads to some stakeholders feeling that their legitimate interests are not being met, so they respond by not consciously enhancing performance. Many companies have learnt to their detriment that they can only be as strong as the commitment and contribution of their weakest stakeholder. The interdependent (or long-term efficiency) component of strategy is fulfilled by:  identifying all interdependent variables;  defining and appreciating all stakeholder interests;  facilitating interaction and solving conflict;  defining mutual roles and accountabilities;  keeping everyone informed and involved; and  personally translating strategy.  Identifying all interdependent variables: This should include all possible elements that could have any effect on your company: politics, economics, social factors, technology and the environment, regulation, consumer trends, market forces, and so forth. However, scrutinising a particular variable in isolation is insufficient. You and your fellow managers need to understand the relationships and interaction between 64

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all variables to appreciate fully how the company can be affected. Note that the complex web of variables that could impact on your company is not something that can be untangled or understood in the short-term. It requires ongoing and long-term commitment to identify, and pre-empt, these interdependent challenges. Anticipating the future in this way will not only help you avert threats, it can also open up great windows of opportunity. Companies which have a clear grasp on future trends can prepare for,and benefit from, shifting consumer needs.  Defining and appreciating all stakeholder interests: Internal interdependencies will be optimised when all stakeholders in your company work together to achieve greater efficiency and service. To establish relationships and structures between your stakeholders to achieve this, you will first have to identify all stakeholders, find out what their needs and interests are, and involve them in, and align them to, company strategy. – Identifying stakeholders: Everyone who has an impact on your company’s performance (shareholders, employees, management, unions, customers, suppliers and regulators) should be included in this process. – Comprehending their needs: Your stakeholders should be given the opportunity to state their needs and interests, what they require to function optimally, and how their efforts are obstructed. This does not mean that you should accept and address all these demands and allegations at face value. Often one group’s interests and needs will appear to be in direct conflict with another, or, unfortunately, in direct conflict with the best interests of the larger organisation. While submitting to these needs can therefore not be entertained, the reasons for not adhering to them must be made known. Ignoring your stakeholders’ interests will only aggravate the situation. – Balancing stakeholder needs: Once the interests of all stakeholders are understood, it becomes necessary to balance and meet their diverse needs. Interdependent strategy should fulfil, and at the same time link up, the requirements of your three most important stakeholder groups – your customers, shareholders and employees. The needs of your customers (quality services and competitively priced products), shareholders (return on investment and growth) and employees (fair remuneration and opportunity to grow) should be addressed at the same time, in a way that is mutually rewarding for everyone.  Facilitating interaction and solving conflict: Ongoing communication is crucial in getting your people to appreciate the interdependence of their activities and understand the needs of your other stakeholders. Unfortunately this is often not as easy as seating them around a table, especially if there has been a history of adversarial relationships. Almost inevitably, there will be discord between a company’s stakeholders. 65

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Shareholders want higher growth and returns, employees want more pay and opportunities, the community wants jobs and development, and so forth. Conflict must not be avoided, but you should address and resolve it with compassion. Your stakeholders need to know that their needs are recognised and will be incorporated in your company’s macro-strategy, if it is in the interest of your organisation as a whole. They also need to appreciate how they will benefit from fulfilling other stakeholders’ needs.  Defining mutual roles and accountabilities: For an interdependent strategy to work, it must be crystal clear to every individual what contribution he or she is expected to make, and what their responsibilities in your company’s value stream are. This is especially crucial in times of change, when people are required to evolve their own activities to cope with new challenges, and abandon old ways of operating. However, your people will not automatically relate their roles and accountabilities to a change in strategy. You need to introduce and manage processes that will empower your employees, at all levels, to adapt and align their own activities to new challenges.  Keeping everyone informed and involved: The key to interdependence is mutual trust and respect. This cannot be nurtured if your people feel uncertain, or do not understand the environment in which they operate. Transparency, and developing the information systems, will enable all stakeholders to contribute appropriately. Trust and respect are also dependent on a sense of ownership. Stakeholders tend to be more committed to strategy, and linking their needs with others, if they have the capacity to influence the processes that affect their work lives. It is therefore advisable to democratise strategic thinking about interdependence, allowing your stakeholders to participate constructively in building up interconnected value streams and supply chains.  Personally translating strategy: You and your fellow managers should take it on yourselves to explain how the company’s value stream is optimised to cope with challenges and, in particular, how all stakeholders should align their activities to the achievement of strategy. Structure became more important towards the end of the previous century, when there was an increasing recognition – reflected in the business bestsellers of that time – that the old-style procedures of planning, organising and controlling were inadequate in the New Economy. The bureaucratic tendencies – strict discipline and red tape – did not fit in with the breakneck speed with which companies had to react to new developments and competitive challenges. Out was the reliance on the ‘left brain’ approach: rational and procedural approaches to control activities and human behaviour, in other words, task vs. process, and intellect 66

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vs. emotion. The strict authoritarian processes that laid the foundation for mass production by co-ordinating the efforts of large numbers of people and analysing the performance of systems according to strict guidelines were not sufficient to deal with the required urgent strategic shifts. This has led companies to embrace ‘chaos’, abandoning rigid structures when surfing the waves of change. The focus shifted to the right side of the brain: creative solutionfinding and management by impulse. But companies who discarded discipline have found to their detriment that they could not cope with the pressure of providing quality products or services at all times. Paradoxically, as organisations become more complex and the world increasingly unpredictable, the need for stability increases significantly. A team sport, like soccer or rugby, is a good example of where the modern game has evolved into one where speed, innovation, and individual flair are the norm. The top teams can achieve success by adopting their game plans to any eventuality, quickly and creatively. But while each player is free to demonstrate his own ability in any way, everyone has to stick to the same rules. If one party violates a rule, the whole game can turn into an unsustainable mess.



Your strategy has to be rooted in a commitment to the elements (‘game rules’) that provide stability: replicable standards, approaches and methods that minimise the need for duplication and enhance the capacity to deliver uniform or required quality as a matter of course. These short-term efficiencies provide the benchmarks for quality and performance throughout your company. Without them your company would be vulnerable to unsatisfactory outputs, inefficiencies and abuse. The structural component of strategy is fulfilled by:  quantifying and qualifying of company objectives;  establishing benchmarks;  identifying continuous targets;  monitoring performance;  providing information; and  defining the consequences of non-conformance.  Quantifying and qualifying of company objectives: You first have to decide what your company wants to achieve, before you can determine the how. All your stakeholders should work together to set the objectives that should be achieved.

This can be done only if there are already adequate levels of interdependence 67

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established between your stakeholders. Without the necessary understanding of your other stakeholders’ needs and interests, parties will remain caught up in their own interests and demand the unfeasible. For instance, shareholders may demand unrealistically high returns on investment, which increases the cost of capital and leads to unproductiveness, or managers may set unrealistic time frames that require unsustainable sacrifices from operational levels. Dominant customers may insist on prices that undermine the development and growth of the supplier or employees may demand benefits and wages that could cripple an organisation financially. Your stakeholders will need to appreciate all interests and other parties’ needs when determining the objectives of company strategy.  Establishing benchmarks: Once your company strategy and its objectives are established, benchmarks defining best practices and performance goals should be set at all levels of your organisation. These benchmarks can include aspects like financial expectations, speed to market, quality, productivity and customer satisfaction, as well as human resource and knowledge capital development within the organisation. To some degree, benchmarks need to be a collective effort. Objectives will not be achieved if they clash with stakeholders’ interests. Often executives design fantastic performance goals, ignoring the harsh realities and constraints within which the operatives function. Also, because companies are under enormous competitive pressure these days, they have to re-invent their action plans, standards and benchmarks continuously. Your employees will need to adapt their activities to these moving targets, which will necessitate a more flexible, people-friendly approach to setting standards. The old approach of setting standards and goals at the top and forcing them down does not work for other reasons as well: – The speed with which your company has to cope with change, while maintaining competitive standards, will not allow it to rely on the onerous process of information filtering from one level to the next. Your employees will have to adapt performance goals and benchmarks to changed conditions themselves. – Filtering information through also does not work in globalised companies with offices around the world and complex structures. Also, these employees cannot be expected to adhere to strict benchmarks, which are not compatible with their activities, thought up by a head office on another continent. They should be empowered to set their own objectives. – On top of that, authoritarianism is a thing of the past. Democracy is now an ingrained part of employees’ lives and they increasingly insist on taking greater control over their own work lives. 68

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In place of the old top-down approach comes empowerment. Your employees should be empowered to make a meaningful contribution to setting and fulfilling competitive standards within their own areas of accountability. Democratising benchmarks requires that your people have the necessary skills to analyse problems, evaluate options, define the possible implication of various options, implement solutions and track success. This kind of empowerment also allows for much greater innovation on an individual level.  Identifying continuous targets: Instead of a fixed point on the horizon, standards have become moving targets. As soon as a company has set and achieved a new level of performance, competitors are already finding ways of doing it better. To remain in the game, your company will have to rely on its employees. A culture of pro-active targeting that encourages employees to identify and pursue targets continuously will improve service and products.  Monitoring performance: Fast-moving and frequently chaotic conditions demand the disciplined monitoring of performance. This should not be an exercise in blame or seeking scapegoats for problems, but an attempt to address errors and underperformance. Monitoring cannot be efficient without the feedback of customers. Your employees should have a very clear understanding of what customers think of their service delivery through constant feedback. Monitoring conventional standards like quality, sales and production targets is only the first step in creating stable conditions. Equally important are your company’s achievements in areas like people development, living its values or transparency. These less quantifiable elements are often ignored because it requires more effort to set standards and evaluate conformance in these areas. But international experience has shown that it is the accomplishment of softer variables that ensures achievement of the harder targets. The softer variables contain the genetic code and DNA of an organisation’s strategy, providing the human impetus to execute strategy and achieve success.  Providing information: The right kind of information is integral to the process of performance monitoring. Your people have to be able to access relevant and useful information to measure their progress and adherence to standards. Unfortunately many companies have responded to the coming of the ‘Information Age’ by just generating more and more data and forcing it on stakeholders. Information about your company’s performance objectives and standards must be designed to address the specific context and requirements of the users. Specialist functions like sales, finance and production in particular have to learn how to shape information to empower people. The information should measure their performance against 69

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benchmarks in no uncertain terms, preferably understandable at a glance. The information should also be able to excite your employees to action, compelling them to initiate measures to enhance their performance.  Defining the consequences of non-conformance: The thriving twenty-first century workplace is far removed from Siberian labour camp autocracy, but it is also not a free love commune. Often managers equate inclusiveness, participation and transparency with disorder or pseudo-humanist principles like self-realisation. Whilst a liberating structure results in empowerment, liberation does not mean a lack of structure. On the contrary, a democratised workplace – as with a well-established democratic society – should run according to rules, regulations and prescriptive behaviours. The stability of strategy can be fulfilled only if there is discipline. Everyone in your company must know the rules of the game, what is expected of them, and that there will be consequences in the case of non-conformance. While not being vindictive or harsh, you have to be assertive when enforcing these consequences. If they fail, the discipline (and credibility) of performance management processes will suffer. Action (or short-term effectiveness) is the level at which products and services are delivered to your customers. It is, in the words of Peter Drucker, “the cornerstone for creating and keeping more customers”. Action involves the steps you must take to deliver products and services, to both internal and external customers, in ways that continuously delight, create and retain them. Ultimately your company can survive and satisfy the interests of all its stakeholders only if it has a high propensity for action. This is equally true for a corner café, global corporations, local authorities and national governments – or any other institution that is dependent on user satisfaction for its success. Sustained action is achieved by:  determining internal and external customer needs;  maintaining a ‘ready-fire-aim’ attitude;  placing accountability as close as possible to the action;  initiating a continuous improvement mentality;  driving competency development; and  making vision relevant to operational areas.  Determining internal and external customer needs: In practice this means that any person at any level in your company must be capable of readily identifying who the users of their job outputs are, what the users’ needs are, and how well they are fulfilling those needs. This involves interaction with customers outside your organisation, and 70

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within it. Divisions and teams should know whom they serve in your organisation, and be in constant communication about service requirements.  Maintaining a ‘ready-fire-aim’ attitude: In the Old Economy, companies could spend months hatching the perfect action plan. These days, companies have to move much more quickly. This requires a propensity for innovation and action to deliver services and products that satisfy customers at all times. Your employees, especially those at operational levels, should be encouraged to adopt an entrepreneurial approach to their work. Creative thinking, proactivity and decisive action should be supported and rewarded. A mentality of taking swift, innovative action should invigorate your company, turning problems into opportunities where customer dissatisfaction will become a catalyst for improvement. But the ‘ready-fire-aim’ attitude can work only if there is an acceptance that actions will sometimes miss the mark. This is not a licence for negligence. As long as the components of structure (benchmarks and performance management processes) are in place, the cost of discouraging innovation is far greater than allowing for the occasional failure.  Placing accountability as close as possible to the action: Accountability should be placed in the hands of the people who do the work. By holding the people delivering specific services and products in your company responsible for those outputs, time and resources will be saved because (a) the responsible person can be approached directly about his/her output, (b) non-performance is easier to uncover; and (c) tiresome fingerpointing is avoided. While this sounds easy in theory, in practice it requires the exacting task of clearly defining and allocating accountabilities at all levels within the organisation. It is crucial, though, not only for pinning down accountability, but also to give your employees a clear comprehension of their roles and expected contributions. People have to understand the limits of their accountability and what they are empowered to do without supervision. They should also be involved in determining the constraints within which they are expected to operate. Accountability cannot be bestowed in an irresponsible manner. If people are to be held responsible, they should have the necessary information, monitoring tools, problem-solving capacity and motivation to deliver high-performance work.  Initiating a continuous improvement mentality: Accountability also plays an important part in growing your company’s market share and returns. Your employees have to take ownership of the continuous improvement of their own activities, not only in service delivery, but also in enhancing productivity, the improved use of resources, or living your company’s vision. The vast majority of your people have to be fired up 71

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about new ways of improving even the smallest activities that they are involved in. The ultimate strategic success of your organisation is based upon the capacity of the multitudes to do thousands of little things better, day after day.  Driving competency development: Without the development of human and knowledge capital, the necessary innovative thinking and informed actions will remain absent in your company. Gone is the patriarchal order that saw the elite making decisions about which employees should be trained in what areas. In the democratised workplace, the development of personal and team competencies should be placed in the hands of the people. Employees at all levels should feel personally accountable for developing their own capabilities. Organisations should become ‘supermarkets of learning’ by providing the opportunities for development.  Making vision relevant to operational areas: Translating vision into action is difficult enough. Trying to understand the executive’s spectacular new vision, as well as the complexities of the larger competitive environment which gave shape to it, without any guidance, is even tougher, especially if you work in the operational levels. This is one of the key reasons for the failure of two-thirds of organisational strategies. Strategy is not explained to employees, and they are not empowered to align their own actions to the greater strategy. You have to interact with your people at operational levels in person. You have to convey the larger challenges and environment within which the organisation operates. Your employees should be able to ask questions, raise concerns and make contributions, as well as receive the tools to measure and align their performances against your organisation’s strategies. You and your fellow managers have to see this as a personal accountability, and be committed to allocating adequate time to convey performance requirements. Leaders and managers often complain that they do not have the time to do this. This is probably because they are so embroiled in work that should be done at more operational levels that they do not have the time to fulfil their own strategic accountabilities. In the absence of leadership, and those who fulfil the personal power of presence, people at more operational levels tend to lose direction, and their activities can detract from the larger strategic vision. From this chapter it should be clear that business is a human process. Can you imagine telling a new born baby when it starts crying, “Hold on, it’s not time for a nappy change yet. We change nappies at 12h00 here.” We cannot predict life in that manner, so companies that are really brilliant at executing strategy have a deep capacity for responsiveness, adaptation and change. Underlying this, they have order.

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Key leadership questions: Strategy  Are you adequately tapping into different schools of thought around strategy? – How do you access intelligence across the company in order to influence strategy? – How do you ensure the business is accessible to information you do not overtly think about? – Are your executives consciously exposing themselves and their strategy to different views? – How do your executives remain ‘porous’ to external information? – Is your strategy more than brainstorming?  How well is your company strategy being executed?  What are the key components that will make your strategy work?  How are the real strategy and strategy on the ground aligned?  What is the vision of your company and what processes are in place to assist the company in reaching this vision? – Does your company vision specifically define who you are? – What are the interdependencies that can prevent you from reaching your vision? – What tangible disciplines are in place to assist with reaching the vision? – How clear are the rules? – What are the non-negotiable deliverables? – What are the consequences for non-compliance to the rules?  What physical presence does your executive team have at all levels of the business (power or presence)? – What support infrastructure is in place to allow your executives the time to communicate strategy across all levels and engage people in dialogue on what the strategy means for them? – Are your executives spending enough time engaging people across all levels? – What percentage of time do your executives spend in ‘deep dives’ to gain personal exposure to the operational realities of the business?  Is your company strategy a living instrument?

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NOTES 1 Anatole France (1844–1924) was a French writer, member of the French Academy and winner of the Nobel Prize for Literature in 1921. (From Wikipedia, the free online encyclopedia.) 2 Peter Ferdinand Drucker (1909 – 2005) was a writer and management consultant, and considered to be the father of modern management. He coined the term ‘knowledge worker’. (From Wikipedia, the free online encyclopedia.) 3 Collins, Jim. 2001. Good to Great: Why Some Companies Make the Leap . . . And Others Don’t. 4 Bosberaad: strategy meeting held away from the office, for example at a game reserve. 5 Collins, Jim. 2001. Good to Great: Why Some Companies Make the Leap . . . And Others Don’t. 6 The phrase Big Hairy Audacious Goal (‘BHAG’) was proposed by Jim Collins and Jerry Porras in their 1996 article entitled ‘Building Your Company’s Vision’ (www.jimcollins. com). 7 ������������������������������������� Hamel, Gary and Prahalad, C.K. 1996. Competing for the Future. 8 Warren Bennis (born 1925) is an organisational consultant and widely regarded as a pioneer of the contemporary field of leadership studies. (From Wikipedia, the free online encyclopedia.)

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5

STRUCTURES A company has to be fit and friendly for human life and it has to be designed to achieve that. Peter Drucker1

THE ASPIRATIONAL VIEW OF

STRUCTURES Structures are designed to drive the execution of strategy. They enable people to define the expectations that they have to fulfil – in ways that are always focused on enhancing the capacity of the system to create, delight and keep customers. To achieve this, the organisation clearly defines what people at every theme of work are required to fulfil. This provides the core for all business processes.

CHARACTERISTICS OF STRUCTURES IN THE NEW ECONOMY  People at every theme use their understanding of strategy to define their outputs and contributions.  The agendas of people and meetings focus on very specific themes of work.  All other business practices are aligned to reinforce themes of work.  Anyone, anywhere, can engage anyone to enhance performance.  Applying themes of work is a core leadership competence. 75

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If you can ensure that the people who perform different themes of work in your company have clarity about what they can and should contribute, you will drive your company’s performance to extraordinary heights. This is particularly true if you support the school of thought (as we do) which believes that structure follows strategy. Robert Waterman2, coauthor of In Search of Excellence, re-emphasises this in his second book, The Frontiers of Excellence, in which he states that structure is one of the most important expressions of strategy. We have already discussed how hierarchy in the New Economy moves from the old style of command and control orientation to one of participation, inclusiveness and contribution. This is what makes it so important that themes of work, at which people make different contributions, are clearly defined. You need to be able to understand properly the differentiating factors between the themes of work in your company; in other words, what general management contributes that differentiates them from middle management, what differentiates middle managers from line managers, line managers from operations, and so on. If you cannot differentiate between themes of contribution, then why have them at all? It is this type of thinking that has seen significant flattening of organisations, and as a result, layers upon layers of management have been ripped out. In its own right, the flattening of management layers within organisations has been good, but the danger is that often, in the process, the role of management is not re-engineered. It is vital that the role of management is understood along with what it is that management must actually do. You cannot have fewer themes without reallocating the work. Whether or not we flatten the hierarchy, silos are still alive and well in the New Economy; however, these silos are not structured to fragment the organisation by being predominantly status orientated; rather, the New Economy silo is based on an interactive value stream. So the paradox of the New Economy is that structure must carry both silos and integration. Draw your organisation’s organogram. Can you identify whether your organisation has a structure that lends itself to fragmentation and silos? How many layers of management are there? Elliott Jaques3 has produced volumes of work on sustainable competitiveness and the clarity of each theme of work (Elliott refers to managerial accountability hierarchies). He concludes in his research that the single most powerful thing a business can do is clarify what is expected of its people. His research indicates that essentially there are seven themes of complexity in a company. Following on this research, and by working with a range of clients, we have established a template that readily defines the optimum themes of accountability needed in order to clarify the expectations a company has of its people. 76

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The table (as illustrated) provides information on the seven themes of work. Each theme is described by its theme name followed by a numerical ranking indicating the relative strength of focus. The complexity of information and roles is described in terms of reach and influence, responsibility time span, and general contextual descriptors.

Themes of work – leveraging the hierarchy Themes

Complexity of information and roles

Corporate prescience

7 6 5 432

1

Corporate citizenship

7 6 5 4321

• • • • • • • • • • • • •

Strategic intent

7 6 5 4321

• • • • • • •

Reach and influence: Global presence; determine industry design Responsibility time span: 20 years, extended long-term Work with ‘fuzzy’ information without distinct probabilities Cope with and integrate chaotic relationships Co-create the industry and global direction Influence global socio-economic philosophy Reach and influence: Interact globally; regional economic presence and competitiveness Responsibility time span: ten years, long-term Anticipate global trends and identify probabilities Interpret the potential impact of global trends Use defined ‘fuzzy’ information to formulate scenarios Define the probability of scenarios and initiate proactive responses Define key strategic objectives ‘by picture’ Reach and influence: National focus; total supply chain integration; total supply chain competitiveness Responsibility time span: five years, medium to longterm Interpret global trends and pre-empt national/regional trends Align the external and internal supply chain Inform the formulation of scenarios Translate strategy into meaningful language for operations Select a balanced scorecard of performance indicators

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Strategic intent

•

7 6 5 4321

• • • • •

Strategic development

765

432

1

• • • • • •

Reach and influence: Organisation; internal supply chain integration; focus on divisional excellence Responsibility time span: three years, medium-term Translate information into meaningful operational targets Integrate and optimise the internal supply chain Comprehend and integrate internal stakeholder perspectives Establish balanced scorecards for each theme within divisions Reach and influence: Organisation; internal supply chain integration; focus on divisional excellence Responsibility time span: three years, medium-term Translate information into meaningful operational targets Integrate and optimise the internal supply chain Comprehend and integrate internal stakeholder perspectives Establish balanced scorecards for each theme within divisions

The divide between long- and short-term focus

Best practice 765 4

321

Service

765 4

32 1

• • • • • • • • • • • •

78

Reach and influence: Localised focus; nationally competitive performance; departmental excellence Responsibility time span: one year, short to mediumterm Benchmark competitive performance measures Tangible, past-based information tracking Determine, create and track performance criteria Establish a balanced scorecard of operational measures Reach and influence: Functional, specialised excellence; sections; project teams Responsibility time span: three months, short-term Identify variances from benchmarked norms/standards Apply basic statistical analysis to track performance variations Resolve operational performance variations Escalate unsolved problems to higher themes

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Quality

765 4

321

• • • • • •

Reach and influence: Micro unit excellence; operational teams; individuals Responsibility time span: one day, immediacy Access and respond to concrete performance information Drive immediate response times Use information to deliver in-built excellence Initiate resolution of operational problems

Elliot did some research in terms of sustainable competitiveness in the context of the organisation and the clarity of each theme of work. He essentially identified seven themes to which organisations belong and then described them.

7

A Theme Seven organisation would be one that redesigned the industry globally; typically these would be fewer in number, for example Boeing, Microsoft, Sony, IBM and Airbus. There are no Theme Seven organisations in South Africa, as there is no South African company that designs and determines the industry on a global basis. The closest we have is De Beers, although De Beers is not a true Theme Seven company as its sphere of influence extends only as far as the delivery of raw diamonds, and most of the money made in the diamond industry is in the beneficiation processes that occur after this delivery.

6

Theme Six organisations have a national and international influence. Here South Africa has several examples: SAB, Sappi, Amplats, Anglo Gold, Sasol, and perhaps Eskom. These organisations have an international presence and one that is strong enough to influence the industry although not strong enough to design and determine it.

5

Examples of Theme Five organisations would be most of the leading banks in South Africa. Woolworths is also a good example. The relationship a Theme Five organisation has with the supply chain is perhaps its most characteristic aspect. These organisations will actually invest in making the supply chain capable of delivering the quality they require of it. Another good example of a Theme Five company is SAB Ltd in South Africa. An anecdotal example that illustrates this is from Nampak, where a manager once said that SAB was the toughest customer they had ever had. But SAB’s custom made them more profitable than any of their other customers because of the rigours and discipline that they exercise and demand from their suppliers. True Theme Five organisations also influence the industry on a national regulatory and legislative basis by playing a role in shaping the national agenda relating to that particular industry.



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4

Theme Four organisations are usually divisions within a Level Five company. So, for example, it could be a particular Hypermarket within Pick n Pay, or a division of Old Mutual. But this does not mean that there cannot be Theme Four organisations that exist in their own right. A classic example of this would be a major hotel.

321

From Theme Three downwards, we usually find the entity being an organisation within an organisation. For example, Theme Three could be a store within a franchise group; Theme Two could be a small centre of excellence within a business; and, Theme One could be the day-to-day service provider within a company. However, there are also a number of independent Theme One organisations. In Camps Bay there is a great example of a Theme One business. Ed’s Great Car Wash is a one-man business. Ed does everything himself. He is responsible for advertising and marketing his business (he puts up posters every morning and dons a T-shirt with Ed’s Great Car Wash emblazoned across the back). He also washes the cars himself. The joy of a Theme One organisation is that results are far easier to ascertain and appreciate immediately. Whereas Ed can tell what his profits will be on a daily basis, it takes far longer for SAB to determine their profit and loss.



What is your organisation’s theme? Draw the organogram for your whole organisation. How many layers of management are there? Do the layers correspond with the various themes required to ensure that your organisation is designed for effective contributions at every layer? For example, if your organisation is a Theme Five company, is your structure designed to ensure contributions at Themes One, Two, Three, Four and Five? Does your organisation have too many or too few layers that prevent effective contributions from all your people? Organisations that are transforming their structures and hierarchies define each theme to describe the content of specific accountabilities for that theme. This process is used to evaluate the extent to which people at various themes are held accountable for, and enabled to fulfil the outputs for, their respective themes. A simple rating system can be applied to outputs to indicate the extent to which people at each theme are focusing on the accountabilities that are typical for that theme. Typically focus groups are conducted, during which people, representing various themes, evaluate the extent of their involvement in, and accountability for, the outputs of various themes. The structured framework enables the focus groups to respond to issues that are otherwise often too complex or vague for them to work with. Instead, the field-tested methods are very accessible to anyone with basic literacy. This work enables the focus groups to create profiles that define the existing and 80

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desired accountabilities for the various themes. Determining the appropriate themes for an organisation is important for two reasons: 1.

Defining the highest ‘centre of gravity’ for an organisation or entity establishes the type of work that should constitute the primary focus for the most senior people within that organisation or entity. This, in turn, serves as the primary point of reference to define the roles and accountabilities for all subsequent themes of work. Perhaps of greater importance is the need to define the work that must not be the focus for a particular theme, because it contains the roles and accountabilities for people at other themes. Failing this, the common tendency is for the most senior people to remain involved in work, and in trying to deliver outputs, that should be the task of people at more operational themes. This creates compression, with the subsequent development of vacuums and depression. (Compression, vacuums and depression are discussed in detail below.)

2.

Clearly defining the appropriate ‘centre of gravity’ for an organisation establishes the essential outputs that have to be delivered by people operating at the various themes. For instance, people operating at Theme Four (Strategic Development) have a major accountability to ensure that the organisation’s internal supply chain is delivering optimum added value, and that the various functions within the organisation are aligned and committed to adding value throughout the supply chain. If, for instance, the Theme Four people are not held accountable for achieving these outputs, organisations regularly fail to optimise the value-adding capacity of various functions and the total internal supply chain suffers. They typically will operate in silos that do not interact adequately across boundaries. As a result, people will look after their own turf rather than looking after the interests of the company as a whole.

Roles and themes in typical organisations 7 6 5 4 3 2 1

General Electric; Toyota; Boeing; Microsoft; De Beers; Anglo American Gold, Implats SABMiller PLC; Old Mutual; SAPPI; Eskom (aspiring) SAB Ltd; Pick n Pay; South African banks; Eskom Toyota S.A. manufacturing department; SAB Rosslyn brewery; Investec off-shore investments SAB finance department; Toyota S.A. production department; Pick n Pay Hypermarket stores Franchised Spar store; training and development function; payroll administration Self-managing production team; secretary 81

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CENTRE OF GRAVITY The profile or ‘centre of gravity’ for a particular theme is determined by evaluating the scope of involvement and influence that people exercise at various themes of work. For instance, someone operating at Theme Three would be expected to have certain involvement at Theme Four, very little at Theme Five, and virtually nothing at Themes Six and Seven. The relative strength of focus is illustrated in the left-hand column of the table ‘Themes of work – leveraging the hierarchy’. The profile could also be illustrated as indicated. A healthy profile for any particular theme displays the characteristic sharp peak. It also demonstrates the rapid reduction of involvement in themes above or below that particular area of work. Ideal profile based centre of gravity Ideal profile bas edonon c entre of gravi

Profile or centre of gravity Incidental

77

Awareness

Input

Influence

dominant Focus

66

Ideal

55 44 33 22 11

COMPRESSION, VACUUMS, DEPRESSION AND INFLATION Since the late 1990s, we have worked with a range of clients to evaluate the status of hierarchy within their organisations. Certain clear patterns emerged in all of the case studies. We have defined the patterns as compression, vacuums, depression and inflation. The first three of these patterns are closely interconnected, with the one reinforcing and driving the others.

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Compression occurs when people at a particular theme remain involved in the roles and accountabilities that should be fulfilled by people at more operational themes. The desired and healthy sharp peak develops a ‘middle-age spread’, which indicates that people at a particular theme are focusing their energy on work which they should not be that involved in, as indicated in the above figure. In this instance, the people at Theme Four are operating largely at Themes Three and Two rather than focusing their energy at their correct Theme Four. Some of the classic symptoms of compression:  People feel overstretched and incapable of completing everything that is demanded of them. This is primarily due to the fact that the few people operating at a more strategic theme struggle to fulfil the outputs required by the greater number of people operating at the more operational themes.  Bottlenecks occur in decisionmaking because the people that are causing compression are simply not available.  People complain of crisis management and seemingly never having enough time to complete their work, feeling that they are constantly ‘putting out fires’ and operating in a reactive rather than a proactive manner.  Individuals who are causing compression often claim that the people at more operational themes are not yet competent to fulfil the tasks that have been allocated to them. This often indicates a lack of trust in people operating at operational themes.  This can often lead to over-employment at more strategic themes. This is a reaction to the perception that there is too much work to be done by the people in, for instance, general management roles. In reality it is because people within general management may be doing too much work that should not be addressed their theme in the first place. Vacuums are a direct consequence of compression. When people remain involved in themes of work with a more operational focus than their own work requires, they rapidly lose the ability to invest adequate time to fulfil their designated roles and accountabilities. This creates a vacuum. In practice it means that people at, for instance, Theme Four do not fulfil true Theme Four roles and accountabilities. As a consequence, certain critical outputs are not achieved. This invariably has repercussions, with a range of knock-on effects that ripple throughout the organisation. Some of the symptoms of vacuums are listed below.  People who have been appointed to senior management and executive positions complain that they do not have time to explore the strategic challenges of the organisation.

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 At the same time, people within operations and middle management complain that the organisation lacks strategic direction.  The organisation or entity suffering from ‘vacuums’ regularly appears to get caught unawares by new, developing, competitive challenges.  People who should be fulfilling the outputs associated with the vacuum are invariably exceptionally busy. Their daily workloads can be hectic, and often border on the frenetic. They often complain that even though they are so busy it feels as if they are not getting much done.  When vacuums have existed for a long period of time, there is often a sense of panic rather than urgency. At the same time, people experience a lack of direction and apathy.  People often complain that initiatives are launched but seldom fulfilled. A good example of a vacuum in practice is illustrated by Absa’s performance, and the criticism they came under, in 1998 to 1999. The analysts attacked Absa’s leadership, saying it was not adequate to run the bank. A few years later, when analysts were once again attacking the leadership within the banking industry in South Africa, nothing was said of Absa. Had the leadership changed? No. What had changed was that the leaders had consciously stepped into a Theme Five/Six role (or a previous vacuum within the organisation) and left the Theme Four activities to the people who should have been accountable for them in the first place. This freed up their time to engage properly in issues more appropriate for their roles as Theme Five/Six leaders, and accordingly they spent more time engaging with the government, the Reserve Bank, and corporate clients, and made themselves available to financial analysts and the press.



Depression is a result of the combination of compressions and vacuums. It has a particularly powerful impact on people at the operational themes, and is therefore commonplace for people operating at Themes One, Two and Three. Some of the symptoms of depression include:  People feeling disempowered and complaining that it is difficult to get things done.  People losing faith in the senior leadership of the organisation and the focus or direction of the organisation.

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 When depression has set in, people at more strategic themes often complain that those at the operational themes do not exhibit an adequate sense of innovation and accountability.  The operational people, in turn, become prone to ‘abdicating accountability upwards’ and waiting for instructions rather than personally taking the initiative. A vicious cycle is formed by the dynamics of compression, vacuums and depression. Within this cycle, the three dynamics continuously reinforce and facilitate one another. The experience gained in case studies suggests that it is not possible to break out of this vicious cycle in a systematic and chronologically sequential manner. In other words, it is not possible to rectify the problems first at a higher theme, then at the next down, and slowly work down to operational themes. Instead, it is essential to address such problems in a systematic and simultaneous manner. So it is not only necessary but in fact essential to success to, conduct a set of interventions rapidly, and in parallel. Such interventions will commonly include:  Redefining the roles and accountabilities for the various themes.  Specifically identifying which theme must not become involved in any longer.  Clearly spelling out the outputs for which people will be held accountable in future.  Investing sustained effort to prevent upward abdication of accountability by people at more operational themes, who may feel inadequate and incapable of fulfilling their new higher-order outputs.  Ensuring that people at more strategic themes stop interfering in, or maintaining control of, the work and outputs of more operational themes.  Clearly describing the competencies (skills, knowledge, experience and attitudes) that are required to fulfil the newly defined roles and accountabilities. Where competencies have been defined accurately, it has been possible to evaluate rapidly the capacity of people at various themes to fulfil their roles and accountabilities and deliver the required outputs for that theme. Initiating such a series of incisive interventions is not without risk. Some of the implications and consequences of such an approach are discussed under the heading ‘Implications and requirements of decompression’.

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Inflation occurs when people at a particular theme believe, and act, as if they should be involved in work that is the accountability of people at more strategic themes. People who are contributing to role inflation are often guilty of two behaviours: 1. They believe that they should be consulted on or are capable of exercising meaningful influence over decisions that are made at much more strategic themes. For instance, operational workers may claim that they should be involved in influencing and even directing strategic restructuring decisions. Similarly, members of a general management team may claim that they should be involved in scoping the organisation’s long-term strategy at national or even international themes. This is akin to people operating at at local government theme believing that they should have a direct say in formulating a country’s foreign and defence policies. 2. They hold the perception that they should be involved in significantly higher themes of strategic work and the related demand that occurs is often a ruse that ultimately amounts to upward abdication. This happens when people claim that they cannot be held accountable for the delivery of outputs at their theme because they are not adequately involved at more strategic themes. When this is allowed to continue, people become increasingly capable of abdicating accountability for the outputs that are appropriately associated with their specific theme of work.

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Some of the typical symptoms of inflation include:  There is a perpetual process of consultation and setting up of committees that attempt to accommodate people and involve them in more strategic work.  Managers often complain that they are disempowered and not able to fulfil their accountabilities because of perceived excessive consultation and interference from people at more operational themes.  People at more strategic themes, particularly Themes Five and Four, spend unproductive time exploring large-scale and global issues while not focusing adequately on achieving the outputs for their particular theme of work.  It becomes difficult to pinpoint who should be accountable for particular outputs.  The risk of ‘consultation psychosis’ develops. This manifests itself as endless rounds of consultation, workshopping, and debates about what should be done. There is, however, a distinct lack of hard and observable delivery, and in fact, it often prevents delivery at all. Role inflation Profile or centre of gravity Incidental 7 6 5 4

Awareness

Input

Influence

dominant Focus

Ideal Inflation

3 2 1

What is your Theme of Work? Define the appropriate role and accountabilities for your theme. Identify what it is (behaviours, actions or activities) that you must stop doing, those that you must start doing, and those that you should continue with. Specifically identify areas of compression, depression and vacuums. Now identify an appropriate descriptor of the role and accountabilities of one theme above and two below you. This analysis should form the basis of your next performance discussion with your manager, and with your direct reports. 87

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SOME CAUSES AND CONSEQUENCES OF COMPRESSION, VACUUMS, DEPRESSION AND INFLATION The practical experiences of the past decade have made it possible to identify a range of dynamics and habits that contribute to the erosion of value-adding hierarchies. These are described below.  Bureaucracy: Many South African organisations still demonstrate attitudes of control and utilise procedures that are a hangover from the pre-information technology era. Prior to the advent of integrated information systems and the capacity to rely upon systems to exercise controls, organisations had no choice other than to implement paper trails, several layers of checks and balances, and procedures that prevented abuse of the organisation’s resources. It was also possible to accommodate much higher degrees of bureaucracy in an era when responses to challenges could be much slower; time was not of the essence. People were also more willing to tolerate the practice of being controlled by others. The combination of technology-driven information processes, and new attitudes of demanding an increasing say over how one should deliver outputs has changed the world of work. Old-style bureaucracy, however, is tenacious and has habits that are difficult to eliminate. Anecdotal evidence and empirical observations suggest that there is a strong link between bureaucracy and problems related to compression, vacuums and depression.  Centrism: There is still a high degree of centrism present in South African organisations. Decisions that can and should be made at operational levels often still have to pass through people, and meetings, at much more strategic themes. This creates bottlenecks as a myriad of operational decisions and issues need to be channeled upwards to higher themes where there are fewer and fewer people to make the decisions and consult on issues. Centrism, together with bureaucracy, automatically drags people in more strategic positions into more operational activities. Conversely, centrism encourages workplace attitudes that reinforce upwards abdication. The essential message is: “It is not necessary for us at these operational themes to make decisions or take the risk of initiating anything. We can readily abdicate our accountabilities upwards because there is no doubt someone at a more strategic theme that will take the accountability off our shoulders.”  Authoritarian leadership and management styles: Many of the causes and dynamics that are related to compression, vacuums and depression stem from an overarching authoritarian approach to leadership and management. When people within the strategic themes operate from an authoritarian paradigm, there is a tendency 88

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towards compression, vacuums and depression. A powerful, if unintended, message of an authoritarian leadership and management style is that the people at more strategic themes do not trust and are not willing to devolve responsibility and hold people at more operational themes accountable for delivering certain outputs. One of the most debilitating impacts of authoritarian styles is that people at more operational themes adopt a passive-aggressive stance. This exhibits itself in behaviours where people at more operational themes resist taking accountability, with the consequences that flow from that behaviour being felt by the organisation. At the same time they blame people in positions of more strategic authority for not giving adequate direction and disempowering people at more operational themes. A situation is created whereby people at an operational theme do not want to become accountable because they feel disempowered; and they are disempowered by the strategic theme leaders who are unable to empower them by trusting be accountable consciously.  Transition from short- to long-term accountabilities: Research and case studies strongly suggest that a major problem lies in the inability of organisations and people to facilitate the transition from short- to longer-term roles and accountabilities. There is a fairly distinct cut-off point between Theme Three and Theme Four. Themes One, Two and Three essentially focus on shorter-term accountabilities and outputs. Theme Four work, however, enters the realm of longer-term accountabilities and outputs. This creates a set of interrelated problems. –

People who are promoted into positions that operate at Theme Four and above are invariably evaluated on the basis of their abilities at Themes Two and Three. In other words, people are promoted to positions at Theme Four and above that demand excellence in managing longer-term and significantly more complex work because they have demonstrated their ability to cope with the shorter-term and more focused accountabilities of Themes One, Two and Three.

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The competencies that are developed at Themes One, Two and Three are essential but inadequate for succeeding at Theme Four and beyond. Consequently, people are often promoted into a theme for which they lack the necessary competencies.

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Case studies indicate that there is a general lack of development of the competencies required to enable them to successfully make the transition from essentially short-term and focused activities to significantly longer-term and more complex activities.

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As a consequence of the above, individuals tend to ‘migrate upwards’ with their earlier views of management and leadership. Instead of rapidly developing new competencies that would equip them to deal better with the longer-term and more complex demands that they face, they try to cope by using and adapting the 89

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competencies that they have applied and that have stood them in good stead in the past. It is ultimately a case of people continuing to operate within their comfort zones when the competencies that have served them well in the past have reached their expiry date.  Masked incompetence: This is a very interesting and at times sensitive dynamic. It occurs when people have not yet developed the competence for a position, but for a variety of reasons are capable of masking or camouflaging their incompetence. This does not necessarily mean that the people are incapable of acquiring the competencies. It does, however, often occur when people have been placed in positions of accountability based upon past success but without proven capacity to deliver outputs at the new theme of accountability. Explorations within a range of organisations indicate that this is a fairly wide-spread phenomenon. One of the primary driving forces that serves to sustain the problem of masked incompetence is a tendency for people not to recognise that they either do not yet have the necessary competencies, or, alternatively, are not willing to admit that they are not yet competent. This may to some extent have its roots in South Africa’s recent past of racial discrimination when people were often appointed to positions because of race, rather than appointing people because of long-standing and prove capacity to deliver outputs at a specific theme of accountability. The same dynamic now continues, albeit with people who are being appointed once again because of race, but nowadays because of being black. There is, however, a set of more resilient and powerful reasons that sustain masked incompetence, which are divorced from racial issues:

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Most South African organisations have a long track record of inadequate investment in developing the managerial and leadership talents of people (regardless of race).

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Essential business disciplines, such as performance management, have often not been developed adequately. Consequently, there are regularly inadequate frameworks in place to rigorously evaluate the competence of individuals prior to giving them the opportunity to fill positions with increased accountability and complexity.

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The skills shortage in South Africa has led to people being promoted more rapidly than would otherwise have been the case. As a consequence, people often find themselves in positions prematurely, long before they have had the opportunity to develop the competencies demanded by that position.

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South African organisations generally still lack a learning culture. The need for people with experience to transfer skills and knowledge to others without similar themes of experience is not yet the norm. Many managers and specialists do not yet view the training of others as a primary, personal accountability.

 Lack of delegation: International research indicates that the primary opportunities for learning and development occur within the workplace and through day-to-day activities. This requires an ongoing dedication to delegating tasks to people so that they can test their ability to deliver the outputs required for such tasks. The workplace cultures that allow compression, vacuums and depression to develop are, however, not conducive to delegation. As one senior manager put it, “We have to learn that it is essential to give people the opportunity to prosper, paddle or perish. This does not mean that we should throw people into the deep-end and watch them sink or swim. Instead, it means that we have to learn to take the risk of giving people structured opportunities within which they can significantly enhance their own skills. This occurs only by giving them the opportunity to face up to the challenges demanded of higher order work and tasks.” The lack of adequate delegation is driven by a range of dynamics: – Managers who should be delegating work to people at operational themes claim that those individuals are not yet equipped or competent enough to do the task. – When tasks have been delegated, the attitudes that contribute to compression cause managers to maintain too much control over the task. This inhibits the capacity of the recipients of the task to test their own abilities and capacity to cope with the delegated work. – When delegating work, managers often underestimate the scope and complexity of the work. They may not consciously understand the range of skills and experience that they themselves have applied when doing the work prior to delegating it. As a consequence, the people at more operational themes struggle and cannot complete the work within the timeframes that have been set. When this occurs, managers may take the work back because ‘it is faster to do it ourselves’. – There is also the real problem that the skills shortage does in fact provide inadequate capacity at more operational themes. The most debilitating impact of inadequate delegation is that it erodes the opportunity for people to learn by doing. It creates a vicious cycle in which the lack of delegation helps to sustain the underdevelopment of people. This in turn reinforces the belief that it is premature to delegate. The lack of delegation is often accompanied by upward abdication.

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Sasol Mining is a very good example of how to counteract the delegation problem and the positive effects this can have. The company restructured their information systems to make them more user friendly. They also helped their unskilled mine employees to become literate. This enabled them to provide access to workstations deep in the bowels of the earth to the miners. These workstations provided the necessary data, to enable people doing the work to plan their production for the day. They were able to track their activity and manage their own productivity. They were more accountable, but also more able to deliver efficient and effective outputs.

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 Upward abdication: People who have been canvassed in various case studies regularly report that they have problems with upward abdication. This occurs when people at more operational themes either fail or refuse to take accountability for resolving problems and addressing workplace issues within their control. Instead, the people who should be fulfilling specific roles and accountabilities continual refer the issues to people at more strategic themes for decisions and direction. Upward abdication is concluded when the people at more strategic themes accept the responsibility for making the decision. This alleviates the responsibility of individuals who should be fulfilling certain roles and accountabilities from delivering those outputs. Upward abdication has its own way of perpetuating itself: – Individuals at a particular theme encounter a problem that requires action. Instead of resolving it at their theme, people pass the problem upwards to others operating at more strategic themes. – The people who are initiating the upward abdication often claim that they are not allowed to make the decision at their own theme of accountability. The past history of bureaucracy, centrism and authoritarian styles often lends credence to this excuse. However, in several instances this is no longer the case, but people still resist taking accountability at their own themes. – The cycle of upward abdication is perpetuated when people at more strategic themes accept the responsibility of making the decision on behalf of the people who should be held accountable for delivering the ultimate outputs. Instead of giving the problem back to the people concerned, individuals at more strategic themes may be prone to saying, “OK, let me have a look at it and I’ll get back to you.” – The moment this has occurred, it enables the people who should have addressed the problem to claim that they have already done something about it, albeit all that they have done is to pass it upwards to someone else. – This is often accompanied by people complaining that ‘nothing gets done’ because management is too busy or does not understand the importance of the issue. 92

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– Management, in turn, can continue to claim that people at more operational themes do not show initiative and are unwilling to accept responsibility. In this way the cycle of upward abdication feeds into and perpetuates the lack of delegation.  Inadequate capacity: There is no doubt that many organisations suffer from a lack of adequate capacity and talent to maintain high themes of competitive performance. The scarcity of skills is not unique to South Africa. The war for talent is spreading rapidly throughout the developed world, and is encroaching even more rapidly upon the developing world. Many people have commented that the lack of adequate capacity is a major reason for compression, lack of delegation and upward abdication. There is, however, a strong case to be made for the exactly opposite conclusion, namely: ongoing compression, lack of delegation and upward abdication is a primary cause for the inadequate development of people within organisations. International research and local case studies indicate that the primary source of learning for people exists within the workplace and through day-to-day activities. People learn more through their daily work than any other activity geared at training, education and development. This means that people have to be given the opportunity to apply themselves to tasks for which they may not yet have gained adequate ability. It also places additional accountability in the hands of people with prove competence who are responsible for coaching and training those with less skill and experience. This requires three simultaneous commitments: 1. It is essential to decompress roles and accountabilities so that people are held accountable for delivering outputs at their specific themes of work. 2. Clear delegation of work makes it possible to hold people at various themes ultimately accountable for delivering the relevant outputs. It also serves to expose rapidly a lack of skills, knowledge and experience, which can then be addressed. 3. Upward abdication must be identified and eliminated to prevent people from escaping the responsibility of delivering outputs at their appropriate theme of work. During a practical investigation one of the participants relayed an anecdote which reflects the necessity for decompression, adequate delegation and preventing upward abdication at all costs. The story refers to one of South Africa’s business leaders of the previous two decades. As executive chairman of one of South Africa’s largest industrial and commodity groups, he was well known for his no-nonsense style of leadership. Two of his directors made an appointment with him to discuss a problem. They arrived at the meeting and described the problem. The nature of the issue had to do with their respective divisions, and was causing conflict between the two of them.

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When he had heard their problem, he commented: “That is great. I will do whatever I can to help you.” With this he took his jacket and started to walk out of his office. One of the directors stopped him and said: “But we thought that you were going to help us to sort out this problem.” He turned back to the two directors. “Yes, I will help you. You can use my office for as long as it takes you to solve the problem. Please let me know what you decide.” With this he turned and left without another word. The message that this leader was sending out to his directors was that he would not be guilty of colluding in compression, inadequate delegation and upward abdication.  Hiding place for laggards: A frequent comment is that compression and inadequate clarity of roles and accountabilities creates hiding places for laggards. It enables people who are not adequately equipped to do a job, or are not capable of developing the necessary competencies, to remain hidden. This has several knock-on effects: –

The laggards prove incapable of delivering outputs required of them. Work piles up. This is often misinterpreted as having inadequate resources and people available to deliver the outputs.

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If upward abdication or inadequate delegation accompanies the problem, it creates the impression that there are also inadequate numbers of people and resources available at the more strategic themes.

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As a consequence, there has been a tendency to employ more people than are really needed at various themes.

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This in turn creates an even more conducive environment for laggards.

 Busy ineffectiveness: Case studies never seem to encounter an environment where people claim that they are not busy. To the contrary, even the environments with the most obvious and sustained cases of compression, vacuums and depression are awash with complaints that everyone is too busy and there is simply too much work to get everything done. This is one of the more toxic symptoms of compression, vacuums and depression. People are often exceptionally busy but incapable of delivering outputs that ensure the competitive capacity of the organisation and fulfil the needs of customers. This does not necessarily mean that people are not doing the work they are busy with well. To the contrary, work is often done very efficiently. The key question is whether it should be done in the first place. Peter Drucker highlights this concern when he states that “one of the greatest sins of any organisation is to do work incredibly well that should not have been done at all.” It is a matter of efficiency (doing work correctly) versus effectiveness (doing the correct work). Busy ineffectiveness is often characterised by people doing large quantities of work very correctly, but not necessarily questioning whether the work is adding real value to the competitiveness and customer-focus of the organisation. 94

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Go back and review your analysis of your role, the one above and the two below yours. Of the items you listed as ‘stop doing’, how many can be linked to the causes and consequences of compression, vacuums, depression and inflation described above? How do you plan to address these areas within your realm of influence?

IMPLICATIONS AND REQUIREMENTS OF DECOMPRESSION The challenge facing you in the New Economy is to ensure optimum decompression of work. This means that your company must be driven by people who operate within clearly defined themes that require the fulfilment of specific roles and accountabilities. This does not mean that more layers should be added to your organisation’s hierarchy. To the contrary, decompression is a prerequisite for creating a competitive, customer-facing, and flat organisation. The case studies have identified a few critical requirements and implications of decompression that you should consider:  Redefine output requirements: The outputs that have to be fulfilled by people at various themes in your organisation need to be redefined and communicated very clearly. In particular, this should include roles and accountabilities that relate to the following: – setting and managing budgets; – setting performance targets; – business management and growth accountabilities; – levels of authority to manage and apply resources; – accountabilities for meeting business objectives; and – roles relating to interaction with the organisation’s internal and external supply chains, as well as meeting customer requirements. A redefinition of roles needs to define clearly the work that must be fulfilled at various themes. It must also define the work people at a particular theme should not get involved in. This provides the basis for decompression, appropriate delegation and eliminating upward abdication.  Discover the stars: The good news about decompression is that it will enable you to uncover people with exceptional abilities. Compression has often not enabled these people to flourish. Once decompression is initiated, the stars rapidly appear. They relish the challenge of greater accountability and fulfil their roles with enthusiasm. It is 95

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important for you to identify these previously hidden stars rapidly and to give them the opportunity to fulfil roles and accountabilities that have been kept from them in the past. These stars play the vital role of fulfilling accountabilities that absorbed a great deal of the time of people at more strategic themes. This releases time for your senior people to focus on entrenching the New Economy and high performance practices necessary for the successful operation of your organisation. It also frees up the time and energy of the strategic leaders who can then actively participate in helping everyone to understand their new roles and accountabilities and what these involve.  Uncover the laggards: It is unfortunately not all good news. Case studies show that the laggards who have been in hiding will now be exposed. In some instances such people may have the ability to develop new competencies and fulfil their required roles and accountabilities. But there are always some people who prove incapable of taking up the challenge. One of the problems with laggards is that they operate as ‘deadwood’ within your organisation. Consequently, they make very few errors. After all, it is necessary to do something to make errors. A true-blue laggard has refined the skill of doing nothing, passing everything onto someone else, calling a committee meeting whenever possible, and masking their incompetence by never running the risk of having to make a decision and thus making a mistake. They may appear to be very reliable people. There are very seldom major problems in their immediate vicinity. The laggards are past masters at playing the political games that enable them to be present at any relevant meeting while at the same time being an irrelevant part of meetings that they participate in. One of the critical elements of establishing New Economy hierarchies is for you to identify the laggards, and to ensure that they either rapidly develop new competencies or are removed, so that the ‘deadwood’ is pruned, destructive attitudes do not spread, and your organisation is allowed to grow.  Redefine competencies: The most valuable source for developing competencies (skills, knowledge, experience and attitudes) that are required to fulfil the roles and accountabilities for a specific theme is the opportunity to perform appropriate work on a day-to-day basis. Compression, vacuums and depression prevent this by not allowing the relevant theme the chance to perform at the appropriate theme of work. People have therefore often not developed the competencies that are required for delivering the necessary outputs at their appointed theme of work. Nor is there necessarily a clear understanding of the competencies that are required to operate at the appropriate themes. This makes it essential that you clearly define the competencies for jobs at all the various themes.

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 Address competency under-development: Organisations that have been involved in restructuring regularly report that they underestimated the new competencies that had to be developed. On the other hand, successful case studies invariably invested significant time in developing the competencies that people needed to fulfil their new roles and accountabilities because they understood the importance of developing the correct competencies. Failure to do so makes it very difficult to break the cycles of inadequate delegation and upward abdication.  Flattened structures: A South African organisation employing approximately 4 000 people and operating in the fast-moving consumer goods (FMCG) sector has used international benchmarks to reduce its broad-banded themes of work to only four themes. Likewise, a leading financial services institution has reduced the number of broadbanded themes to four, with only the CEO operating at Theme Five. A critical component of flattening structures is the redefinition of roles and accountabilities for the various themes. The flattening of structures means that people generally have to be held accountable for delivering outputs without the comfort of close supervision. Instead, the people doing the work are more accountable for the quality of the work they produce. This requires three tough stances: 1. the people doing the work must be trusted to do the work; 2. the people doing the work must be capable of doing the work; and 3. information systems must provide adequate checks and balances to prevent abuse.  Streamline systems: Case studies have found it essential to streamline systems and eliminate unnecessary procedures or bureaucratic controls that do not add value. This is vital. The work processes that exist within your organisation may have been designed within the context of Old Economy approaches to the hierarchy. In redesigning the hierarchy it becomes critical for you to also redesign the systems and procedures. A big South African parastatal, for instance, has reduced the time it takes to process a particular transaction from more than 60 days to less than five days. A financial institution has streamlined its systems to deliver outputs that used to take close to two months to under two weeks. The elimination of unnecessary bureaucracy and ineffective work activities is a prerequisite for establishing New Economy approaches to the hierarchy and for flattening structures.  Transform the leadership style – the power of personal presence: Redesigning the hierarchy has major implications for leadership style. Case studies indicate that leadership within a redesigned hierarchy needs to be characterised by the following traits: 97

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Participate with people at various themes to define their roles and accountabilities clearly and to specify the outputs that have to be delivered.

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Invest a significant amount of time to work with people at various themes, but in a position of facilitating performance and problem-solving rather than one of maintaining control of activities.

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Continually think about ways of optimising the hierarchy. Adopt a specific role to make people aware of roles and accountabilities that are not being fulfilled. Do not take responsibility for fulfilling those accountabilities, because that is how you will contribute to the elimination of upward abdication.

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Be readily accessible to people from other themes. This is not to take back responsibility, but rather to provide advice, information and the experience people may require to take charge of delivering their required outputs. The New Economy hierarchies cannot operate without intensive presence of leaders across all themes. In one of South Africa’s largest and most successful organisations, many of the executive directors operating at Themes Four and Five spend two to three days per week on average interacting directly with people at more operational themes. These directors view the power of personal presence as a critical role and way for them to contribute to the success of the organisation.

 Visualising new structures: The classic organogram has become one of the most familiar representations of organisational life. Even today many of the foremost specialists still tend to depict organisations in this manner. It clearly reflects both the hierarchy and functional fields or silos. The New Economy requires a new way of depicting the structures of organisations, as well as their customer-focused purpose. Two useful models help to visualise structures and hierarchies in fundamentally different ways; these are the ‘value streams of service provision model’ and the molecular structure. – Value streams of service provision model: The first challenge is for you to design work in terms of processes that provide competitive service to customers. This cuts across functions and places accountability for delivery at the most operational theme possible. As depicted in the table on page 100, there are various value streams within every organisation, with each one operating at a more or less complex theme of service creation and delivery. – Molecular structures: The advent of self-managing teams and the increasing need to empower people to take maximum accountability for their areas of work provides you with the basis for visualising the molecular structures for a fast and flexible organisation. Your people will increasingly operate in small teams that������ will be accountable for delivering a specific part of your product or service. They will 98

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be united through a series of small value streams that all contribute to your larger value stream. These teams may exist for several months and even years, or for no more than a few days. As your organisation’s demand for speed and flexibility increases, your people will move from team to team with increasing frequency. In most organisations today, managers at higher themes in the hierarchy often control who is allocated to which team. In the not too distant future, this accountability will devolve to individuals. The independent person will identify project opportunities that fit his/her competencies or developmental needs; he/she will initiate interaction with the necessary people to obtain a place on an appropriate team; and then he/she will contribute to that team for the duration of the project or for as long as he/she can be of worth. Organisational structures will become ‘shopping malls’ of work and learning opportunities, and individuals will have to take significantly greater charge of his/her own involvement in making a meaningful contribution to the organisation. As this unfolds there will be a core team of permanent people employed by organisations to provide stability and to position the organisation in the market. But it is not inconceivable that in the next one or two decades organisations will increasingly need to view and design themselves as portals for talent application. In such a world, the organisation’s worth is its capacity to be recognised as a respectable provider of services and products, while individuals with the requisite talent ‘shop and scout around’ to find meaningful applications for their talents and learning requirements. Tom Peters4 provided us with a preview of this state of organisational life when he claimed that organisations would increasingly have to operate in the same ways as the large consulting houses, such as McKinsey and Arthur Andersen. This type of model of organisational structure is already being explored by this type of organisation, although by no means at the extreme themes of flexibility and personal accountability that will evolve in years to come. You now understand that the classic organogram is one of the most powerful and resilient symbols of the Old Economy. The New Economy will, without any doubt, lead to the destruction of this proud symbol and replace it with an image that we are only starting to glimpse as it emerges from the future.

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KEY LEADERSHIP QUESTIONS: STRUCTURES  What distinguishes the focus and delivery accountability of your employees from theme to theme? – What dominates your focus and your contribution?  Leveraging the hierarchy – are there distinct bands of consequence and accountability?  Is there compression within the company? In other words, are executives and senior managers operating at themes not aligned to the job they should be doing? – What is the theme at which the business should operate? – How good is your organisation at operating at this theme? – Is the middle management team the crucible of excellence? – Do you have clarity at each theme? – Is there accountability at each theme? – Is your organisation expanding beyond its capacity? – Are you causing compression within the business by not operating at the required theme? – How do you ensure that when a person moves up a theme, he/she is able to relinquish control over the previous theme? – Are these competencies in place? – Do you have gateways in place when people move in between themes? (Particularly Themes Two to Three and Three to Four. Themes Five and above are more value focused.)  Promotion – how are you testing a candidate’s ability to move from technical to tactical to transactional? – How do you ensure that you don’t turn excellent technical players into poor political players with a promotion?

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NOTES 1 Peter Ferdinand Drucker (1909 – 2005) was a writer, management consultant, and selfdescribed ‘social ecologist.’ Widely considered to be the father of ‘modern management’, His 39 books and countless scholarly and popular articles explored how humans are organised across all sectors of society — in business, government and the non-profit world. (From Wikipedia, the free online encyclopedia.) 2 �������������������������� Waterman, Robert H. 1994. The Frontiers of Excellence: Learning from Companies that Put People First. 3 Elliott Jaques (1917 – 2003) was a Canadian psychoanalyst and organisational psychologist. He developed the notion of requisite organisation, running counter to many others in the field of organisational development. Although he is most widely known for developing the concept of ‘social systems as defence against unconscious anxiety’ (Jaques, 1951) which shed light on the close relationship between organisational task (i.e. the main aim of an organisation, such as to produce, cure, and so on.) and unconscious group dynamics and how each can aid or distort the other. Jaques’s ideas are still very influential in the psychoanalytical study of organisations. (From Wikipedia, the free online encyclopedia.) 4 �������������������������������������������������������������������������� Thomas J. Peters (born 1942) is an American writer on business management practices. His best-known work is In Search of Excellence (co-authored with Robert H. Waterman).

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6

TALENT CREATION People are not your most important asset. The right people are. Jim Collins1



THE ASPIRATIONAL VIEW OF

TALENT CREATION We are recognised as a premier portal for talent. Talented people are drawn to us because we provide them with opportunities to accelerate their own development. Talent is seen as an organisation-wide resource, and the most senior leaders deploy talent to ensure their optimum growth and retention. Leaders at every level have the capacity to identify and grow talent as a premier resource.

CHARACTERISTICS OF TALENT CREATION IN THE NEW ECONOMY  The organisation is widely recognised as a portal for talent. People want to work here because it makes their CVs so much more valuable.  The organisation understands that in today’s world it is difficult to retain the best talent all of the time, so when people leave they are treated as valued alumni.  People who leave the organisation remain raving fans of the place. They tell others that it is a great place to work. 103

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 Talented people are readily transferred across boundaries to optimise their growth.  The organisation sees itself as a contributor to the interests of individuals – inside or outside the organisation.  Leaders are rewarded for their capacity to spot and grow talent. Of all the challenges facing South African businesses right now, one of the most important and most pressing is that of finding the right people to do the right job. This is one of the most difficult challenges in the New Economy. Businesses in South Africa already face a serious skills shortage, which will be exacerbated in the years to come. Some of the broader and more serious concerns are outlined below:  Aids: Some 4.8 million South Africans are HIV positive and will be unable to make a positive and lasting contribution to the labour force. The loss of these people will have a profound impact on South Africa’s labour force and skills base. dec lining supply o f to future ex ec utives i n the uS A Number o f 35 - 44 y ear ol ds in the uS A: Index 220

– 1970 = 1 00

demand

S upply P eak in 2 000 (190)

200

T rough ( 163)

180 160 140

15% dec line from p eak to trough over 1 5 years . demand u p by 3 0%

120 100 80

1970

1980

1990

2000

2010

2020

 The brain drain: It is estimated that between 1.1 million and 1.6 million professionals have left South Africa since 1994 to work overseas.2 Already there is an estimated shortfall of between 350 000 and 500 000 skilled workers in the managerial and technical sectors.3 The gap is not adequately being filled with a new, skilled work force. The problem of an emigrating workforce is not something peculiar to South Africa. This is part of a larger problem facing the developing world. One of the reasons it is so difficult to counteract is pressure from internal and external forces. 104

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As the population growth rates in European countries slow down and in some cases contract, concerns mount about an aging population retiring from the labour market with too few newcomers stepping up to replace them. These countries are ‘poaching’ skilled individuals from the developing world to fill the gaps in their shrinking workforces. Even the US will struggle with a significant shortfall in its labour market in the foreseeable future. It is estimated that around 30 million people will retire in the US in the next two decades. In addition to this shortfall, economic expansion will create another twenty million positions. It is estimated that the shrinking US labour force will not be able to take up about a fifth of these vacancies, with the shortfall being filled by employees from the developing world (see figure on the previous page). This phenomenon has aptly been named the ‘donut economy’. The dilemma of the ‘donut economy’ (where the size of the doughnut expands as the economy grows but the hole in the middle of the doughnut also gets bigger as the limited skilled labour force is stretched to its limit, with no backup emerging to relieve the pressure) has profound consequences on the supply of talent in emerging countries like South Africa, which has an attractive skilled labour force. With international organisations targeting the local talent pool aggressively, South African businesses have to adopt extremely attractive practices in order to persuade the local talent to remain in South Africa and thus to get their share of the skilled labour force. South Africa is firmly embroiled in a struggle with a donut economy. The South African economy was fairly flat between 1984 and 1994, and there wasn’t any significant fluctuation in the local talent pool. The relationship between available talent and economic growth thus remained relatively stable. However, this situation has been changing. Since 1994 the economy has been expanding, albeit at a very slow rate, but the talent pool – skilled and portable employees – has not grown at all. This, together with the pull from the developed world, has accelerated the need for critical attention.  Unskilled talent pool: South Africa’s vulnerable talent pool is a tragic testimony to our political past. The inadequacies of the apartheid government’s Bantu education system, an insufficient investment in the education of the black population as a whole, and the consequences of the black population’s political policy of ‘liberation before education’, which kept schools empty and children uneducated, created a ‘lost generation’ of millions of uneducated and unskilled people. While school attendance and, by some accounts, the quality of education have improved in recent years and could have a positive impact on the future of South Africa’s unskilled talent pool, the immediate problem is more pressing. As Thabo Mbeki said, South Africa does not have an unemployment problem, it has an ‘unemployability’ problem. The profile of the local labour force as it currently exists in South Africa leaves South African businesses seriously out of kilter with the

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demands of the New Economy. Manufacturing and raw materials were the engines of the Old Economy and the needs and demands placed on the labour force were very different. The bulk of the labour force was unskilled or semi-skilled (semi-illiterate and with limited numeracy skills) as the services they were supplying were not based upon anything that required literacy or numeracy of any standard. The labour force that the Old Economy employed was not required to be skilled in order to meet their demands. However, this is not so with the New Economy. The situation that existed previously, whereby a largely unskilled labour force could and did meet the demands of the Old Economy, is no longer workable. The New Economy, a technology-driven and servicesbased phenomenon, has little need for these workers. The New Economy labour force needs to be educated, wired, English-conversant and highly mobile. ‘donut’ economics – the talent gap 1984

1994

2000

Not enough dough – too much hole

As illustrated above, the talent pool (or the ‘dough’) has remained relatively constant over the past decade and a half. Since 1994, the economy has been growing faster in any five-year period than any comparable 15 year period before then. One of the greatest threats to South African economic growth is the skills shortage. If the USA or Europe achieve significant growth it is certain that they will embark upon talent poaching to fill their own depleted reserves. It is already common practice for organisations to approach newly graduated people with offers of work abroad. In early 2006, one of England’s premier law firms launched a concerted effort to head hunt young partners and senior lawyers from large South African law practices. Barclays in the UK has a simple approach to talent: find the best talent available anywhere in the world and pay whatever is required. The extraordinary growth of China, and the ongoing growth of India, will further fuel the global talent shortage. 106

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Aside from the broader and more serious concerns facing the South African economy and workforce, the whole nature and concept of employment has changed to such an extent that it should almost be redefined altogether. Approaching employment in the New Economy requires an expectation paradigm shift. Gone is the implicit social contract of long-term organisation loyalty in exchange for job security and a pension. In the Old Economy, employees generally remained with organisations for decades and staff turnover was very low. This model was seen to reflect success and was one which was desired and planned for. The onset of the ‘freer’ age of democracy and self-realisation, globalisation, the speed of change in the marketplace, and the need for organisations to turn on a penny to adapt and so be successful – and to adjust their labour forces accordingly – have heralded a radical departure from long-term employment. It is now viewed as the norm not to spend decades with an organisation, and far more commonplace to find people changing jobs every five years or so. The entry of Generation X and Y into the workplace also forced a revolution upon managers used to managing organisation ‘lifers’. This group of westernised twenty- and thirtysomethings grew up in relative comfort and security, in a time when the luxuries of self-actualisation and personal fulfillment became mantras in popular culture. Their need to realise their own potential and be happy are often more important to them than the financial stability sought by the older generation. Loyalty was once offered in exchange for security. Nowadays this offer of security on a longer term is not always possible for organisations – and it is not always sought by this new generation of employees. Organisations need to challenge these employees continuously and help them to expand their skills. The Generation X and Y employees’ formative years were also times of great disillusionment with authority (Watergate, Vietnam, the threat of nuclear war, apartheid and the Southern African border wars). This has had a profound impact on their relationship with authority and their willingness to pledge allegiance to any organisation. Loyalty is no longer offered merely in exchange for security but needs to be based upon something larger than that, and is probably more an emotive decision than a financial one. All of this contributes to a fickle, highly mobile labour force, burdening organisations with a high rate of employee turnover and continuous skill loss. Rather than complaining about this, organisations have to face up to the consequences of this phenomenon and even try to make the most of it. This is a reality in the New Economy, so it needs to be turned into a positive factor. Organisations need to reframe their approach to their employees and thus reframe this negative as an asset. Because so many people will move in and out of your organisation, you have to start seeing them as customers. The business maxim that satisfied customers 107

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will tell three to four people about your organisation, but the dissatisfied ones will complain to fourteen to eighteen, also holds in this regard. Employees talk. Organisations’ reputations as employers are shaped by the way they treat their employees, especially the ones who leave. Because it is acceptable to migrate between jobs and organisations these days, it is no longer necessarily because of unhappiness that someone will choose to leave. And you don’t want the reason for their leaving to be a reflection of their unhappiness with your organisation. If they speak highly of their time at your organisation and the skills that they acquired, this will probably encourage other people to seek employment with your organisation. At SABMiller being a well-liked and respected employer in talent retention is important. SAB Ltd in South Africa pitch their pay levels at about the 75th percentile of the going market rates. So they pay good money, but they are not pitching themselves as the best payers in the market. (However, they do pay the best in the market at operational levels.) SAB provides incredible opportunities for their top talent, who then have the security of feeling that “even if I leave here, I’ll get a job elsewhere because I have SAB on my CV”. They also create alumni so that when people leave, they leave as raving fans of the organisation rather than nay-sayers and critics. This is in line with the findings of Jim Collins4, which demonstrate that the CEOs of great organisations, on average, earn less than their counterparts at competitors.

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Accepting the phenomenon of employee mobility does not mean surrendering to it. More than ever, organisations have to be aggressive in identifying, retaining and developing talent. You need to be proactive and creative in identifying strategies for retaining this talent and not continue to apply the old mechanisms of remuneration and benefits as the sole means of enticing and holding onto your employees. McKinsey’s5 study on the issues of talent management and retention discovered that in order for an organisation to succeed in retaining and enticing talent they had to have certain elements present. They discovered that organisations needed to redefine and strengthen the role that HR played, becoming credible to their employees in a business sphere as well as on a personal level. Line managers also had to assume responsibility for talent management and the organisation itself had to have a clear and strong talent value proposition. In other words, the organisation needed to have a clear idea of what sort of person they wanted to entice and retain, what would make them decide to work for their organisation rather than another, and then develop a strong brand to support this proposition, which the employee would then sell to the end consumer. The worrying phenomenon is that three years later McKinsey undertook a followup study6 and discovered that, even though they had indicated the importance of talent 108

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management, and even though it can be shown that the most successful organisations are those that manage talent best, few organisations are taking the necessary action to manage talent effectively. They also discovered that it is not only managing talent that matters to the success of an organisation; tolerating poor performance will undermine any efforts towards achieving a high performing organisation7.

IDENTIFYING TALENT While an aggressive recruitment strategy to obtain the best prospective employees is crucial and should not be abandoned or put on a back burner, a more immediate task is the retention and development of existing talent within the organisation. Talent needs to be identified within the organisation as an initial point of departure. A variety of preference profiles and aptitude tests, in combination with regular performance reviews, can form part of a ‘talent matrix’, which creates a clear matrix of diversely performing people. Once you have identified the talent base you wish to incubate and grow, you can start to determine how you are going to achieve this growth. There are generally five groups of people whose skills and capacity should be identified and nurtured accordingly.  The stars: These people are superior achievers, high performers with great potential, who have the necessary cognitive and visionary skills to lead an organisation to success. Unfortunately, they are also the most mobile because of their ‘star quality’. Organisations cannot afford turnover of more than one percent of this category of employee, and should invest the necessary resources to prevent this – for example, stars should earn 35 percent to 40 percent more than the norm. Many organisations have also tried alternative strategies to nurture and retain star performers. A couple of financial organisations – including First National Bank (FNB) and Rand Merchant Bank (RMB) – launched advertising campaigns proclaiming and publicly commending the quality of their employees. The adverts serve not only to promote their business competence amongst the general population, but also have the added benefit of attracting new talent. Equally, and perhaps more importantly, they create a sense of loyalty amongst their star employees, encouraging them by providing an alternative reason to remain within the organisation. This in turn will limit the pull of other employment by diluting the value of money as a reward for employment. Organisations seeking to poach star performers will have to do more than rely on a dangling financial carrot.

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 The high flyers: Second in line in the desirability ranks are the high flyers. While they lack the rare and exceptional talents and capacity of the stars, they are well above average achievers with unrealised potential. In the New Economy context, the high flyers are often relatively young employees, promoted recently (without having the mentoring to assist them in their new roles), and frequently out of their depth, lacking in the emotional wisdom or life skills to make an exceptional contribution (although they may possess the ability, if nurtured). They often clash with co-workers and structures because of their lack of political savvy and experience in working within a corporate hierarchy. They desperately need the appropriate coaching and mentoring to hone their raw skills and talents and so derive the full potential of their abilities. The return on investment with high flyers will soon be evident to an organisation that invests this time. High flyers could potentially become star performers and should be nurtured through opportunities to grow and shine. These opportunities could be in the form of special projects or overseas postings which will challenge the high flyer and force them to acquire new skills and develop their existing talents.  Knowledge anchors: These employees are generally approaching the end of their careers, or have reached a plateau and have built up a wealth of knowledge about a business. Losing them can come at an enormous cost to any organisation as not only are easily measurable skills, talents and outputs lost when a knowledge anchor leaves, but the organisation also loses a less tangible but more important and harder to replace benefit in the institutional memory that such a person possesses. A knowledge anchor has an extensive knowledge of the organisation, the industry within which the organisation operates and the intricacies of their particular job. One of the biggest mistakes an organisation can make is to release knowledge anchors on early retirement before their skills and knowledge have been transferred. A shrewd move in this regard is to link them up with high flyers as a mentor, which will hone and shape the unrealised potential within the high flyer. Losing a knowledge anchor to retirement is a loss to the organisation, but losing their knowledge before it has been transferred is a tragedy. When knowledge anchors do retire, organisations should consider not terminating their relationship completely. Often it will be attractive to both parties to retain the knowledge anchor on a consultancy or project-by-project basis. Many businesses, like Absa, have benefited from the objective insights and knowledge of retired managers used in special projects. This can often avoid the costly and time-consuming business of duplicating work already done by the organisation by allowing the knowledge memory to be transferred back into a new pool of employees.

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 Solid citizens: You can rely on solid citizens to deliver every time, on time. Consistency is their forte. If the bulk of your organisation’s employees are from this group, count yourself lucky. Solid citizens are usually passive learners and while they are not innovative, they are good at providing support. This solid support is necessary to form the foundation upon which the high flyers and stars can build your organisation’s castle. A common mistake with managing solid citizens is promoting them to their level of incompetence. Just because someone is good at what they do, it doesn’t mean they will be good at something else. You need the right person doing the right job. Because they are usually long-term employees and deliver steady returns, they are often advanced one level above their capabilities, when actually their benefit lay in that they did what they were doing very well. Because this group should form the major component of your employee profile, some staff turnover in this group can be tolerated. On the other side of the spectrum, there are usually a few specific types of people who should be identified and weeded out of the organisation.  Icarus (vexation): This person is probably an organisation’s worst enemy. An Icarus is an employee who has climbed the corporate ladder too quickly, who is in the wrong job, who is not capable of acknowledging a lack of capacity, and whose misjudgements pose a serious threat to the wellbeing of the organisation. An Icarus candidate could be a meticulous number-cruncher who becomes head of marketing, or a creative spirit in charge of the financial division. An Icarus is a person with great potential, but who flies too high and with the wrong set of wings. We all know what happened to Icarus. The Icarus individual needs intensive counselling and most probably also a career shift so that his liability is limited and his true potential applied in the right arena. The three groups below are the toughest to deal with in an organisation, but you should never ignore them. If you do not deal with these people, you run the risk of creating a toxic environment in your organisation.  Passive headache: There are always people who have potential, but do not perform at all. They can often come across as passive and have little energy to get things done. These people are stuck with cancerous attitudes and have no inclination to innovate. Their potential is not put to any good use. Resolving problems with this group is best done with a direct approach – they should be confronted about their performance and counselled. If, after attempting counselling to improve their performance, the interventions prove to be unsuccessful, the person should be exited from the organisation. The dead weight they add will enhance nothing and detract from positive growth.  Spare wheels: These people are average achievers who have gone ‘flat’ – they have reached their ability plateau and have little to contribute to an organisation any more. Their function within an organisation is effectively obsolete and they should be re111

The Leadership (R)evolution: Creating a High Performance Organisation

educated so that they can start to contribute in a positive manner. Alternatively they should be required to leave. Spare wheels utilise valuable resources that could be put to more profitable use elsewhere in the organisation.  Deadwood: Deadwood within an organisation consists of under-achievers who cannot be saved by any amount of counselling and re-education. Every organisation should assess their workforce regularly by reviewing and measuring their performance. Nonperformers, like deadwood, should be pruned quickly, not only because they are a deterrent to performance, but also because they chase the motivated and superior achievers away. Go-getters do not like to surround themselves with indifferent people who slow efficiency down. It is frustrating to work to achieve something when you are surrounded by people who seem to have no drive to get things done, and in fact seem to be obstructionist, with their lack of performance and indifference to their output. Unfortunately, deadwood is astonishingly difficult to get rid of. Under-achievers never do anything wrong, because they never do anything. Performance / potential matrix HI

Icarus/ Vexation: Re-deploy Coach Passive/ Headache

Potential

Work out poor performance

High Flyers: Nurture Attitude/focus Solid Citizen: Nurture Spare Wheels/

Work out:

Staid Solid

Deadwood

Citizen: Revitalise

LO LO

Perform - Capable

Stars: Cherish and retain Knowledge Anchor: Focused coaches Solid Citizen: Retain

HI

Ranking employees according to a talent matrix is only the first step in the process of identifying and retaining talent. The knowledge acquired from the matrix has to be put to further use in a talent audit so that the benefits of the matrix can be drawn out to enhance your organisation’s performance. 112

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The main function of a talent audit is to analyse and take stock of people in key jobs, assessing whether or not their current capabilities are matched to those required by their positions. At the same time, the audit also scrutinises the deployment of talent in an organisation with the goal to ensure the maximum spread of performance. In other words, make certain that talent is assigned to the divisions where it is lacking by taking it away from the divisions where there is currently surplus and therefore a wasted pool of talent. This talent could be utilised better in an area where the potential is sorely needed. This is a good way of ensuring that talent within an organisation is leveraged to its best ability. Perform this exercise from the top (CEO-level, preferably). The view of talent is better from that height, because their day-to-day working lives are not intertwined with the individuals being assessed. Executives are therefore better able and more prepared to be ruthlessly objective about what is in an organisation’s best interest when it comes to talent redeployment. Understandably and probably unconsciously, managers often hog talent because it makes their lives easier to work with capable people.

ATTRACTING AND RETAINING TALENT The best way of retaining and attracting talent is by being a great organisation who treats their employees in a great manner. At the very least, your organisation should have a sound business strategy, top-notch financial and procedural systems, cutting-edge technology, a valid vision, great values, and a healthy relationship with employees. These are no-brainer prerequisites. One of our clients had a very different mindset. They countered that they did not want to be an employer of choice, but instead wanted to attract employees of choice. Their strong brand was indeed capable of attracting talented people, but then people often encountered a system that was not up to scratch. It showed in their unsustainably high staff turnover that far exceeded the market average. In today’s world the reality is stark – if you are not perceived as a choice employer you are not going to attract choice employees.

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As an organisation, you also need to be more human in the way you deal with failure. When people are learning and stretching themselves, they will make mistakes. If they are not making mistakes, they are not growing and taking on new responsibilities. Organisations need to learn to celebrate failure.

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A legendary example is attributed to Tom Watson Jnr, the past CEO of IBM in its heyday in the 1970s. A senior executive was involved in a project that at the time resulted in a $2 million loss. Tom asked him to come and see him. As he entered the CEO’s office he said, “I suppose you want my resignation.” Tom replied, “Don’t be a fool, we’ve just spent $2 million educating you.”

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By instilling a truly talent-friendly culture within your organisation, you can differentiate your organisation from the rest and make it an irresistible place to be employed. There is no enigmatic approach that will achieve this. To illustrate, we can simply learn from global best practice. Over the past decade, the Gallup organisation has polled 60 000 managers in twelve industries from 24 different countries to find out what high, performing work places have in common. They discovered 12 questions that can be used to determine an organisation’s chances of success8. As the talent pool dries up, and quality employees are aggressively headhunted, these 12 questions will also be the questions that your talented employees will ask themselves as the pressure to leave your organisation mounts. These questions are critical and could mean the difference between keeping your stars, or losing them to a more attractive organisation. The questions correspond closely with Abraham Maslow’s well known Hierarchy of Needs, and can be seen as an evolving ‘climb’ towards the summit of achievement in the context of an employee’s career. The questions have been broken up into a series of ‘camps’ illustrating the climb towards the summit of a mountain, which represents your employment. Ask yourself the 12 questions listed below. Then begin asking your people if, and at which camp, they are ‘stuck’.  Base Camp: What do I get? 1. Do I know what is expected of me by the organisation? 2. Do I have the resources – materials and equipment (and context) – to do my work properly? These questions are very important to an employee. Ambivalence is death to productivity as you are never sure what you are meant to be doing, so there is a lack of focus which leads to a decline in output. Employees should have a clear understanding of what is required from them in terms of what they should be delivering and by when. Constant feedback and information will empower employees to achieve and innovate. They will experience the need to have a clear framework within which to operate and a sounding board to assess and monitor (and if necessary adjust) their performance constantly. 114

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 Camp 1: What do I give and feel? 3. Do I have the opportunity to do what I do best every day? 4. In the last seven days, have I received recognition or praise for good work? 5. Does my supervisor/manager or someone at work seem to care about me as a person? 6. Is there someone at work who encourages my development? South African organisations regularly score the lowest on the responses to these questions. Treating employees like adults has often not been a major objective. But increasingly organisations are learning that individual attention and encouragement boost performance (in some cases this alone can be more important than remuneration). Employees must be assisted and given the opportunity to grow, especially in the development of their skills base. Ken Blanchard9 has a great way of putting this: walking around continuously catching people doing things right. This is a relatively easy paradigm shift that very rarely gets applied and has a massive impact on the morale, motivation and performance of an employee.  Camp 2: Do I belong here? 7. At work, do my opinions seem to count? 8. Does the mission of my organisation make me feel my job is important? 9. Are my co-workers committed to doing quality work? 10. Do I have a best friend at work? The above questions are all about fitting in with the people at work and the culture of an organisation. The organisation’s values should correspond with the individual’s and the kind of employees attracted to the organisation should also inspire loyalty. As the boundaries between social life and work are diminished, this becomes even more important. This also changes the nature of employment, where the individual is evaluating the organisation as much as the organisation is evaluating it. The individual needs to know that he/she will be content in their work environment, and feel comfortable with the ethos of the organisation.  Camp 3: How can we all grow? 11. In the last six months, has someone talked to me about my progress? 12. This last year have I had the opportunities at work to learn and grow? As the basic needs of individuals in the workplace are fulfilled, the focus turns towards a set of more sophisticated desires: how do we achieve full individual and collective potential. This is important when it comes to talent creation. Talent may either already manifest within an individual, or may require some fostering to bring it to the fore. As the term implies, this is about talent ‘creation’. Creation of anything requires input and opportunities for growth. 115

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Only a foolish organisation in the ‘donut economy’ would ignore these important questions and rely on the old style methods of retaining employees by merely offering financial rewards and incentives. A successful organisation with an enduring and loyal talent pool is one that takes a creative approach to talent creation, is concerned about the growth of their employees’ potential and their happiness at work over and above offering them competitive financial packages.

TALENT MOBILITY AND DEPLOYMENT Sustainably competitive organisations accept that talented people are likely to be more mobile and desire a greater spread of career challenges. This, combined with a market that is constantly hunting for talent, creates a significantly more mobile workforce than ever before. One of the measures to counter this is to imitate the market by using the organisation as a seamless larger environment within which people readily get moved around. This serves two purposes: 1. As people evolve from one Theme of Work to the next, their roles alter quite radically. One of the most common problems is that people who are promoted from middle management to general management roles often do not make the transition from a functional area, such as finance or production, to focusing on the integration across functional areas to build optimum synergies and high performance value streams. A primary reason for this is that the individual often has not developed adequate understanding of other areas with which to interact. As a consequence, the newly appointed general manager will all too often continue to focus on internal divisional interests rather than engaging with and influencing the activities of other divisions. SAB has a long track record of moving talented people from one discipline to another. As talented individuals progress from one Theme of Work to the next, it is not strange to find someone being moved from sales to production to HR to marketing, and along the way they start to understand other divisions from within, and from the narrower perspective of their own initial area of functional expertise.

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2. The second benefit of internal talent mobility and deployment is that the individual is given the opportunity of developing alternative competencies as well as developing a multi-streamed career. Instead of the individual needing to leave the organisation to be 116

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able to experience alternative options elsewhere, the organisation becomes a replica of the market and offers the individual the same flexibility and opportunity. Alan Clarke was identified as a talented individual from the day he was recruited by SAB Ltd in South Africa. But SAB knows that talent alone is not enough; it has to be developed so that the individual can perform to the level of his potential. Alan started out as a specialist in Industrial Psychology. He was soon given tasks in the development and execution of world-class manufacturing practices. This laid a foundation for him to spend a few years as a general manager in production for one site. The next step was executive in charge of production for a region with several sites. From there he had a lateral move to executive in charge of marketing. He then became CEO of a subsidiary company, which was the stepping stone to head of SABMiller operations in Europe. Within the space of 15 years, Alan had experienced at least five different career options. Clearly his talent and capacity to act on these opportunities was an essential ingredient, but he also experienced the full potential and variety that the market had to offer – without leaving SAB.

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TALENT AS ENTERPRISE-WIDE RESOURCE Talent mobility and deployment is impossible to achieve if managers in different departments and divisions are allowed to hoard talent as their property. This is a natural and understandable response. Whenever a manager loses a talented person it always places pressure on the organisation until the scarce resource can be replaced. For this reason, it is essential to put processes in place that enable the organisation to have a single view of the talent pool, and to oversee it as an enterprise-wide resource. There are no short cuts. It requires stamina to entrench a range of interrelated best practices:  The first three layers of leadership need to develop a coherent understanding and approach to defining and identifying talent. This requires specific development in assessing whether a person has the essential combination of high performance and high potential. HR plays an important support role, but this is essentially line accountability.  The people with a track record of high performance and who have been identified as high potential (the capacity to advance at least one to two more levels) need to be identified. This constitutes the Stars, High Flyers and Knowledge Anchors.  HR must have the wherewithal to provide a single view of this talent pool. This needs to include a record of assessments, previous performance discussions and reviews, and reports from the managers who provide feedback on the individual’s performance, potential and track record in previous and current roles. 117

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 The CEO and executive team take shared accountability to review the talent pool at least once a year. During this review they discuss each person and explore the following critical facets: – Is the person living up to expectations in the current role? – Does the person have the potential to move into another role, vertically or horizontally? If not, why? – How long has the person been in the current role and is there any chance that (s)he may be become bored or frustrated in this role? – Is there a close match of potential, competence and challenge? – If the potential is proving to be too low for this role, what re-deployment is possible? – If the competence is proving to be too low, what immediate development is required? – If the challenge is too low, how can the job be re-engineered to give greater accountability, what challenging projects are available, or what advancement is possible? – What are the risk factors of losing this person? – What is the relationship between the person and immediate superiors? Are there any risks in the relationship? – If this person is evaluated at present, where would (s)he be placed on the Performance-Potential matrix? – Is there another area of the organisation that needs this person more than the current area of work? – What short-term development needs does the person have, and how will they be fulfilled through a combination of mentoring, coaching, training and education, or redeployment?  An important activity at this stage is to identify any area within the organisation where there appears to be an ongoing talent shortfall. This invariably has to do with managers in that area who are not taking the development and retention of talent seriously enough. Such situations are viewed as executive committee concerns and handled accordingly.  The recommendations for each individual within the talent pool become part of the performance contract for that individual’s direct manager. The manager must ensure that the required actions are fulfilled. In this way, the first three tiers of the organisation’s leadership become the active custodians and executors of talent creation.

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TALENT COVER An essential element of the talent review is to determine the talent cover for mission critical roles. This consists of two types of roles: 1. Roles that are specific to the organisation or are essential to sustain its competitiveness. 2. Roles where there is a real shortage of required skills in the market. By managing talent as an enterprise-wide resource, it becomes possible to establish talent cover and review tables as illustrated below. This provides a single view of the challenges facing a particular layer of mission-critical roles. In the past this was a laborious manual exercise, but with modern Enterprise Resource Planning (ERP) solutions this is no longer the case, although it can take several months to establish the initial database.

Talent pool assessment CRM

R&D

GM

Finance

Marketing

Mary

Mannie

Gustav

John

Gillian

XX

XXX

XXX

XX

XXX

Fred

Steve

Gerald

Susan

Peter

X

0

XXX

0

0

Garry

Thsepo

0

XXX

Superior XXX Competent XX Good Potential X Concern 0 With this type of single view of the talent pool, it becomes possible to establish and maintain a simple yet effective review and deployment of talent across the enterprise. At its most basic it looks something like the table over the page.

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Talent development, retention and deployment Gerald Mannie

Who

Exposure Current GMs are young Recently completed MBA Ready to seek alternatives Been in R&D for 7 years Record of staff turnover Possible knowledge capital thief Not developing people

• • • • • • •

Mary

• •

Gillian

• •

Seriously overstretched Fred has potential but requires 2 years’ experience Inherited bad situation Over-extended, with poor support

• • • •

Response Move to finance Put in charge of new systems integration Counsel on need to train successor – temporarily let R&D report to Gustav Second to marketing for product launch

•

Search for support in market – active headhunt

• • •

Review Peter’s capacity Move Tshepo to marketing Second Mannie to marketing and put on Coaching and Developing People programme

THE VITALITY DISTRIBUTION CURVE Jack Welch10 provided some of the greatest breakthroughs in business thinking over a period of almost three decades, but one of his less popular contributions was the approach to the so-called Vitality Curve, or normal distribution curve, to evaluate the performance of people. The vitality cure – constructive discrimination

+70% B Players

+20% A Players

+10% C Players Below average

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Mid-range

Above average

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Jack got important parts of it right, but there was one major flaw. He introduced the practice that every manager on an annual basis had to assess staff and identify the top 20 percent of performers, the 70 percent of solid performers, and the 10 percent of poorest performers. Here’s where his flaw occurred. He then insisted that the bottom 10 percent of people had to be fired every year. By his own admission this worked for the first one or two years, but thereafter it became increasingly difficult. In fact, it rapidly becomes impossible. Imagine any world-class sports team, such as the Manchester United soccer team or the Australian cricket team, firing the bottom 10 percent of performers every year. They would soon shatter the continuity and morale of their teams. Jack’s error does not lie in the identification of the bottom 10 percent of performers, but in the edict that they have to be fired. Apart from the near impossible task of separating out and firing the bottom 10 percent every year, there is also the simple reality that there is not so much talent in the market that an organisation can realistically hope never to have any ‘C players’ in the system. Furthermore, the ‘C player’ model provides development opportunities for younger talent just entering into a new role. The other problem is that as soon as this type of forced firing becomes policy, it immediately makes it possible for managers to place the blame for addressing ongoing poor performance on ‘the policy’ instead of assertively and courageously having the tough performance discussions that are an integral part of New Economy Leadership and sustainable competitiveness. Notwithstanding his error, Jack did get an essential thing right when he insisted that managers had to have the guts to apply so-called forced ranking to identify the 10:70:20 distribution of competence. What does your organisation’s performance rating curve look like? Does it resemble the graph below? The vitality cure – constructive discrimination

65% 60% 55% 50%

1: Did not meet 0.026% 2: Met some, not all 1.18% 3: Met all 59.97% 4: Exceeded to some extent 33.48% 5: Exceeded greatly 0.89% N/A: Cannot yet rate 4.45%

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

1

2

3

4

5

N/A

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The case study on the previous page (comprising more than 31 000 performance reviews) provides some significant challenges. We call this type of curve the ‘tyranny of averaging’. It conveys the following messages:  There are almost zero under-performers in the organisation, and only a fraction more of below par performers.  Then a miracle occurs – almost 60 percent of people meet all expectations.  The miracle continues – more than 30 percent perform exceptionally well.  Suddenly the miracle ends – less than 1 percent of people are super performers. When we conducted focus groups to find out why these types of results are so common place in organisations we got the following answers:  Managers are loth to provide uncomfortable feedback to people who are underperforming. What is more, such conversations will place pressure on them to invest in the under-performer’s development and take up valuable managerial time coaching the individual.  It is easier just to rate everyone as acceptable. It creates less conflict.  We are told that there is no such thing as a ‘five-rated’ performer. Such people would need to be capable of walking on water.  When someone is rated as a five performer, it raises expectations and they want to be either promoted or earn more money. Does this sound vaguely familiar? If so, your performance review processes are to all intents and purposes useless. The system may be OK, but how it is being applied is a waste of time. This is more often than not a managerial and leadership problem, and will almost always require the development of capabilities to conduct tough conversations and apply more assertive performance reviews. This is where Jack got it right. He realised that there was a very slim chance of achieving a workable and valuable performance review process if he did not create the imperative that every manager had to arrive at a 10:70:20 distribution curve. In our experience, we have never encountered an organisation that is capable of overcoming the tyranny of averaging without creating the requirement that managers have to deliver a bell-shaped distribution curve. Without this demand, you will continue to get performance reviews that fail to address under-performance in a constructive manner or celebrate superior performance in ways that reward and retain talent. This is arguably one of the toughest elements of New Economy Leadership. It always creates resistance and excuses about why it is not possible to achieve. People who approach the idea of forced ranking from first and second wave perspectives will always have problems with this concept. 122

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THE 10:70:20 OF CONTINUOUS LEARNING AND TALENT CREATION Entrenching the vitality curve in your organisation drills down into the art of measuring, coaching, learning and growing talent.  Has your organisation ever claimed that it is or wants to be a learning organisation?  Has your organisation become concerned about the talent it requires for the future?  Has your organisation stated that it wants to attract and retain the best people?  Does your organisation claim that people are its most important resource? If you have answered yes to any two of these questions you have clearly developed awareness of the critical role that ongoing talent creation plays to ensure that your organisation will remain competitive. Now, please answer the next question.  Does your organisation have a performance review system? If so, does it have a rating scale that resembles this? – 1: Failed expectations – 2: Failed some and met some expectations – 3: Met all expectations – 4: Met all and exceeded some expectations – 5: Exceeded all expectations If you have answered yes to this question you have just failed one of the crucial tests of talent creation and retention. What is more, if you are calling yourself a learning organisation, think again. This type of rating system sends out a simple and unambiguous message: – people are not encouraged to learn; – people are expected to do what they do well over and over again; – people must not make mistakes; – people must not experiment; – people must not learn; and – people must play it safe. Sound harsh? Let’s explore it.

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You have just bought your five year old son his first two wheel bicycle. He’s so excited he immediately wants to try it out. You walk with him to the nearby park and show him the basics. Then you allow him to get onto the bike. Like your father taught you, you hold onto the saddle and run behind your son as he learns to balance and pedal at the same time. Then you let go so that he can ride without help. Like every youngster before him, your son pedals a few metrss, wobbles and crashes down. He grazes his knee and it bleeds a bit. He tries to bite back the tears. You run to where he is lying on the ground.

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Scenario One – You spring into traditional performance review mode using the 5-point rating system. “Son, you’re useless. You haven’t met any of my expectations. In fact, I’ve got a good mind not to let you get onto the bike again until you can prove to me that you can ride it. ” It may sound silly, yet this is precisely what happens when organisations use a rating system that punishes attempts to learn that are accompanied by inevitable failure. Scenario Two – You act in a natural and constructive manner – without knowing it, you use a New Economy approach. “Wow, son, you rode a whole three metres without falling. Here, let me look at your knee. Gee, that’s quite a scratch you’ve got there. I bet you’ll show it to the guys at school on Monday. Does anyone else have a scar from falling off their bike? Do you want to try again? I’ll hold on until you tell me to let go.” With a smile your son jumps onto his bike, ready to try again – knowing it’s okay to fail as long as he doesn’t become afraid to learn. One of the greatest secrets to constructive performance review is life-long learning. When practiced consistently over time by enough leaders and teams, it has several powerful effects:  it creates a workforce that is excited by the prospect of making new contributions;  people are not reticent to discover what they cannot do;  incompetence is appreciated as an essential component of learning; and  incompetence in the quest for learning and developing high performance is celebrated, and not branded as ‘failing to meet expectations’. Perhaps this is what Peter Senge had in mind when he said that to be a learner is to be ignorant and incompetent, and unfortunately not too many executives are up to that. But in our experience, it is the inevitable consequence of hanging onto antiquated definitions that erode the energy and space for people to embrace learning and the inevitable incompetence that must accompany it. One of the great New Economy Leadership challenges is to transform the way you view incompetence and learning. In particular, it means that you need to consider seriously 124

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changing how you define various levels of competence. For as long as you hang onto the Old Economy terminology and sentiments, you can forget about developing talent and stimulating the learning that is required to cope with the ongoing change, speed and pressures of the New Economy. This is not merely a case of playing with words. It requires a deep shift in how you approach continuous learning and talent creation. There are some essential ground rules.  Learn about learning: As a point of departure it is necessary to develop ways of rating various stages of learning that are appreciative and constructive rather than punitive, as is the case with the Old Economy terminology and categories. The table on the previous page provides a high level summary of the various facets of ongoing learning. In the New Economy, with its continuously accelerating integration and accessibility of information, leaders and entire organisations will need to create a culture in which understanding and celebrating the full spectrum of learning is shared and lived by everyone. To be a learner you need to understand learning. This serves as no more than the most basic exploration.  Initiate/trainee: This is the start of anyone’s learning process. The executive who is promoted to CEO, the graduate starting a first job, the youngster going to school for the first time, all share the same characteristics. Relative to your established competencies you become an initiate and trainee who needs to develop new competencies. It requires thinking and learning processes that you may have become unfamiliar with and have to adopt from scratch. It can be a time of tension and even anxiety, especially for people who are already in senior leadership positions. It requires a real capacity for humility and openness to learn from others. The downside is that if you remain in this specific state for too long, you will become a performance problem.  Apprentice/active learner: As you become aware of what it will take to master new skills, you will become even more aware of your own incompetence. A person who has never touched a violin, who is an initiate, has no context within which to measure personal incompetence. It is as you step into the learning process that you start to appreciate just how difficult it will be truly to master the new competencies. It is a time of learning from others. It is also a time to experiment actively with new skills and attitudes that at times will feel uncomfortable.  Team player/artisan: As your new competencies take root, your ability to make productive contributions within a team develops. But you still need the team. It is like playing a game of cards for which you have not yet learnt all the rules. The team can give you immediate feedback and support. As soon as you have to work without the team, you start to struggle and forget certain of the competencies that are not yet deeply entrenched. The capacity of a team to become the custodians of learning and providing support to one another is exceptionally important. 125

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 Virtuoso/specialist: This is that delicious stage when you feel on top of everything. You are ‘in the flow’, independently capable of fulfilling tasks without any reference to others. In fact, you become the reference for others. There is conventional wisdom that says you develop from unconscious incompetence to conscious incompetence, then develop conscious competence before slipping into unconscious competence. In our work with managers and executives, we have often witnessed people apparently moving from conscious incompetence to unconscious competence. As a result, they do not structure their learning so that they can make this available to others. This is the biggest trap for the virtuoso or specialist. It causes them to become knowledge capital thieves.  Artist/coach: The artist and coach is the specialist who has developed conscious competence and is capable of accelerating the learning of others. This occurs when you accept your innate responsibility as a leader to be a coach and teacher. In the New Economy every person, regardless of rank, will need to take on the role of artist and coach. The vast majority of learning and training will have to occur on a daily basis as a normal part of daily work. In the Old Economy training and development was often something that took place in the classroom. Line managers were seldom required to take on the role of trainer and coach consciously, although there are obviously wonderful examples of people who have taken on the role of cherished mentor and coach, even when everything around them was infused with Old Economy values.  Knowledge capital thief: The very best security system in the world cannot prevent one of the most prevalent forms of theft occurring in every organisation. It is the theft of knowledge and experience by people who often are not even aware they are doing it. We have all encountered them. When they go on leave, there are problems, because they leave holes in the system that no one else can fill. They may even claim that “it would take three people to fill my job if I leave”. And of course, leave they will – upon retirement, joining another organisation or dying. When they do, they take their experience and knowledge with them. This is not necessarily with bad intent. It is mostly unconscious. They pose a major risk to the organisation if they cannot be convinced of the need to become active coaches who pass on expertise and learning to others. Leadership and learning are symbiotic twins joined at the head, heart and guts.

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Perpetual learning and building knowledge power 0 Initiate / Trainee

1 Apprentice / Active learner

2 Team player / Artisan

3 Virtuoso / Specialist

4 Artist / Coach

Knowledge capital thief (-1)

Status of knowledge – Innocent bystander – Don’t know what there is to know – Regularly getting lost

– Unconscious incompetence – Don’t know what you don’t know – Unstructured searching

– Conscious incompetence – Know what you don’t know – Structured searching

– Unconscious – Conscious competence competence – Don’t know – Help others what you know to know even – Unstructured better experience – Structured experience

– Hoarding competence – Claim others don’t know enough, ever – Keeping others searching

Essential competencies and disciplines – Observe – Study – Memorise

– Imitate – Replicate – Procedurise

– Integrate – Conform – Systemise

– Innovate – Add value – Systemise

– Experiment – Cross boundaries – Visualise

– Transform self – Transfer knowledge – Include

Greatest threats to perpetual learning and building knowledge power – Over-eager – Lack of rote work – Inadequate practice

– Passivity – Reliance on habit – Lazy spontaneity – Undisciplined exploration

– Low commitment – Erratic delivery – Homogeneity – Lowest common denominator

– Risk aversion – Arrogance – Individualism – Functional preoccupation

– Stagnation – Alienation – Rote learning – Lose touch with production / delivery

– Fear of others – Hang onto power – Impatience – “I made it my way”

– Define limits and start from there – New fields exploration – Expressive leadership – Sponsor others – Dedicated coaching – Prepare personal transformation

– Commit to leaving a legacy – Relish the growth of others – Explore personal reticence – Value teaching – Learn to coach – Adopt a protégé for ‘the duration’

Key learning methodologies – Find focus – Personally commitment – Clarify personal intent – Practice patience – Define the ‘learning curriculum’ – Evaluate personal competence

– Conscious learning – Note taking – Questioning for clarification and content – Check personal understanding – Mind mapping – Summaries of key points

– Ask for critique – Focused subject reading – Debate and question assumptions – Develop themes – Practice, rehearse to ‘perfection’ – Establish patterns of knowledge

– Challenge content and standards – Theme reading beyond the known – Personal research – Write articles, present papers – Reform the known – Mentor others

Becoming perpetual learners with the capacity to live with the full spectrum of learning taking place within yourself and others is one of the most important New Economy Leadership competencies that your organisation needs to target as part of its competitive quest.

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PERSONAL 10:70:20 PROFILES OF LEARNING Anyone who claims to be highly competent at everything they are doing can know only one thing for certain: they have reached a stage of stagnation and are stuck in a rut. A healthy alternative is to constantly encourage individuals and even teams to identify the areas in which they are under-developed, developed and highly developed. The 10:70:20 of leadership and learning Initiate and Trainee

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Apprentice and Active learner

Team player and Artisan

Virtuoso and Specialist

Artist and Coach

C – Underdeveloped learning

B – Developed: Good

A – Highly developed: Great

This individual is aware of the area in which development is required. She does not try to hide this. Instead she applies her mind to studying and practising the new skill. She readily models her nascent skill on others, and seeks advice on how to improve.

This individual has progressed well and can apply the skills in a predictable manner. He will seldom let anyone down and can deliver consistent outputs that fulfil the ongoing demands of the job.

This individual is simply streets ahead of anyone else in what she does. There is a natural flow and seemingly magical ease at play when she is working. For her, this part of her work has lost its boundaries between art and endeavour.

Research demonstrates that it is within the grasp of anyone to make this improvement if they are willing to put in the effort. They will never become totally comfortable, but they will get to the point where they can add value, albeit under the guidance and with the support of colleagues.

He may not be independently capable of delivering good results, but everyone knows that when he works in and with a team, his performance is valued. He is admired for his reliability and dogged determination to deliver contributions that fulfil expectations.

People sometimes stand a bit in awe of what she does. Where others see problems, she simply sees an empty canvas that is waiting for her to engage with it so that it bursts into the colours and shades of a master-piece. She is the first source of reference when someone needs assistance in her area of mastery.

Metaphorically this is the person Metaphorically he is the person who can plonk out Chopsticks who can provide great on the piano, but that’s about it. entertainment and play the piano while everyone joins in a fun-filled sing-along.

Metaphorically she is the concert pianist who entices goose flesh on our skin as she transports us into the magic of the music.

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When an individual describes his or her competencies within this format, and they are required to rate themselves truthfully on a diverse set of high performance leadership competencies, we generally get the type of profile depicted in the diagram on the next page. Personal 10:70:20 of leadership and learning Initiate and Trainee

Apprentice and Active Learner

C – Underdeveloped Learning

Team Player and Artisan B – Developed: Good

Virtuoso and Specialist

Artist and Coach

A – Highly-developed: Great

In 2005, Barclays UK bought the controlling share in South Africa’s largest retail bank, Absa. During one of the early executive leadership workshops in which all of the directors participated, each individual was required to develop a personal profile of leadership and executive competencies required to ensure that the acquisition would be a success, and what it would take to achieve their strategic objectives. Each team member then gave colleagues feedback on their personal assessment, and made suggestions on other competencies to consider in the three broad areas of personal evaluation. At the end of the exercise Steve Booysen, the CEO, remarked, “it is quite a relief to recognise what I’m good at, but also that I do not have to be good at everything, and that there is always room to learn.”

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The combination of speed, responsiveness and unleashing the energy of individuals across all levels in your organisation requires sustained adherence to a set of new ‘rules of the game’. Individuals who follow no rules are anarchists who feel entitled; rules in an environment that does not encourage learning and growth amount to suffocating bureaucracy and enforced hierarchies. The New Economy brings with it an increasing demand to define the ‘rules of the game’, and to exercise consequences of non-compliance. So dealing with your talent requires robust and sustainable performance enhancement. Performance reviews remain sterile tools if the overarching performance culture has not been developed. This chapter should give you the foundations to begin a talent creation programme in your organisation.

KEY LEADERSHIP QUESTIONS: TALENT CREATION  Do you have formal processes in place to identify and retain talent?  Is there a place at executive level that has a ‘one shot’ view of the talent?  To what extent is your organisation making real impact in targeting these behaviours?  Do you have disciplines in place to manage talent interdepartmentally?  Are you breeding the type of leaders who will drive the 12 questions of talent creation?  Do your leaders have the necessary soft skills? NOTES 1 �������������������� Collins, Jim. 2001. Good to Great: Why Some Companies Make the Leap . . . And Others Don’t. 2 �������������������������������� Business Day, 23 February 2001. 3 Business Day, 5 April 2001. 4 �������������������� Collins, Jim. 2001. Good to Great: Why Some Companies Make the Leap . . . And Others Don’t. 5 The War on Talent, McKinsey Quarterly, 1998 Volume 3, (49–50). 6 The War on Talent Part Two, McKinsey Quarterly, 2001 Volume 2, (1–2). 7 The War on Talent Part Two, McKinsey Quarterly, 2001 Volume 2, (3). 8 Buckingham, Marcus and Coffman, Curt. 1999. First, Break All the Rules: What the 130

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World’s Greatest Managers Do Differently. 9 ������������������������������������������������������������������������������ Ken Blanchard (born 1939) is an American author and management expert. He has co-authored over 30 books, once of which is the international best-seller, The OneMinute Manager (co-authored with Spencer Johnson). (From Wikipedia, the free online encyclopedia.) 10 ������������������������������������������������������������������������������������ John Francis “Jack” Welch (born 1935) was Chairman and CEO of General Electric from 1981 to 2001. Jack gained a solid reputation for uncanny business acumen and unique leadership strategies at GE. (From Wikipedia, the free online encyclopedia.)

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BUSINESS DISCIPLINES Insanity: doing the same thing over and over again and expecting different results. Albert Schweitzer1

THE ASPIRATIONAL VIEW OF

BUSINESS DISCIPLINES Information systems are accessible, and enable people at all levels to define readily what they need to do to enhance performance. This forms an integral part of integrated business performance management processes (BPM). BPM forms the backbone of our capacity to execute strategy and evaluate the performance of individuals and teams. We use this to drive feedback and development.

CHARACTERISTICS OF BUSINESS DISCIPLINES IN THE NEW ECONOMY  Business information systems enable people at every level to see and respond to actual delivery.  People at every level apply constructive and robust feedback disciplines to enhance learning.  Performance feedback focuses on building the muscle and leveraging the strengths of people.  Feedback about development needs is widely accepted as essential for personal progress. 133

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Business management in the Old Economy was a bit like a daily commute to work. Picture someone in a station wagon, who drives along the same straight stretch of highway every day. Sometimes driving at 80km/h, sometimes 100km/h, but never more than 120km/h, and always keeping a respectful distance from other drivers. In comparison, the New Economy is more like Formula One racing. The basic ingredients are the same. There is a driver, a car and a road. But that is where the similarities end. The pace is no longer a modest 100km/h but more like 320km/h and your course, rather than being familiar and straight with no obstacles to deter you, is lined with sudden speed changes, hairpin bends, spectacular crashes, fires, and disastrous engine trouble. While going this fast brings an obvious sense of exhilaration and liberation, the rules of the game have never been more important. Without disciplined driving and rigorous maintenance of the car, the consequences are disastrous. The rules of the Formula One racetrack translate to rules regarding a number of accepted New Economy business processes that executives, as ‘drivers’ of the organisation, must follow. Implementing these processes should force executives to break their Old Economy habits, democratising their businesses and introducing transparency and inclusiveness into the workplace. This does not mean that established management disciplines such as planning, organising, delegating and controlling are dead. These principles can just no longer be leveraged through the Old Economy’s hierarchies and bureaucratic structures. In the New Economy, the speed at which organisations have to respond to challenges has necessitated greater empowerment of people and doing away with old structures. Organisations just cannot afford the slow pace with which objectives were communicated in the Old Economy: from executives to general management, from general management to middle management, from middle management to operational levels, and so forth. This was clumsy and time consuming and led to business being lost to organisations which could perform in a rapid and responsive manner. New business processes are needed. These disciplines and processes must link the activities of all your employees to the greater strategy of your organisation, providing your people with the skills and information that they need to respond to challenges at their own theme of work. The key business process, from which everything else is leveraged in the New Economy, is information management. In the Old Economy, information was available on a need-to-know basis. It was kept ‘close to the chest’ of top management. Employees on the operational levels were not provided with a comprehensive view of the business, because the stability of the environment, and subdued pace of innovation did not require it. All they needed was information relating to the very small sphere within which they were expected to operate. 134

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This practice of disclosing information on a ‘need-to-know’ basis is no longer workable. The speed and severity of competitive challenges require all employees, especially those on operational levels, to adapt their activities to ‘sudden gear changes’ and strategic challenges. Business process – information O ld E c o n o m y

C e n trist S e c re tive D is trib u te d

N ew E c o n o m y

P e rva s ive T ra n s p a re n t A c c e s s ib le

The onerous Old Economy filtering-through of information does not allow for this type of responsiveness; the New Economy requires a totally different approach. This approach is called radical openness. Many leaders who feel that lower-level employees do not require strategic information to do their jobs have not accepted this requirement of responsiveness. But there is an increasing appreciation that humans are a species driven by information. From ancient times, our kind has not been much of a physical match to the larger predators and forces of nature we have had to face. Our survival depended on our ability to assimilate, exchange and respond to information. In order to combat the challenges facing organisations in a rapidly changing environment, leaders have to start tapping into the most fundamental instinct of humans: anticipating and responding to challenges in the short-term. Most humans do not live by browsing around, hunting for food whenever they are hungry and otherwise lying about. They are geared towards anticipating the short-term future, planning and preparing for it. This instinct cannot be unleashed without information.

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Withholding information from employees is the equivalent of cutting off their oxygen. It could leave your organisation asphyxiated. Information-starved people tend to fill in the gaps themselves, with dangerous consequences. Employees will make up their own truth by assessing the environment around them and responding as they see fit – often in an inappropriate manner because they do not have all the information needed to assess and respond to the situation at hand. Organisations meeting the challenges of the New Economy are feeding a rich and varied fare of information to their employees. But a healthy diet also has to be balanced – and herein lies an important challenge. Thanks to the information explosion in recent decades, there is an overwhelming amount of information readily available. Clearly your employees do not require all available information all of the time. You have to ensure that the information provided to your employees is:  Relevant: Information you give employees should provide a clear understanding of how their activities link to the overall direction of the organisation. People need to feel that their work is important within the context of the strategic direction of the business.  Galvanising: Information has to be a call-to-action, assisting in problem solving and determining immediate workplace priorities.  Forward-looking: The input has to maintain a constructive tension between where your organisation is and where it should be. It should provide a stimulus for individuals, teams and departments to bridge the gap between where they are and where they want to be and should be.  Customer-driven: This is and must be the core principle of information provision. To determine whether information is appropriate, the receivers need to be treated as customers. You, as the information provider, should shape information to fit the needs of this ‘customer’, who should ultimately provide feedback on its pertinence. Information not matched to its receiver is useless, no matter how well intended. An organisation on the East Rand, invited Christo and a colleague to behold its ‘progressive’ information-sharing: balance sheets (statements of financial position) posted on notice boards and in the canteen. Of the organisation’s management team, only the financial manager and perhaps one or two others had a clear comprehension of what the information meant. This information was largely useless to the majority of the people for whom it was provided.

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In contrast, in a Sasol coalmine near Secunda, we had to travel 200 metres down a shaft, get in a truck, and drive for half an hour underground to reach one of its key workstations. At that station, workers gathered around a table and an information board, which featured precise data on that section’s tonnage mined, the quality of coal and the organisation targets versus actual performance. The real beauty of the information on display was its relevance and comprehensibility to the illiterate and semi-literate people who used it. It was presented with clear illustrations and also conveyed the context of that small section of the mine within the larger organisation’s strategy. If it can happen underground, it can happen anywhere.

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BUSINESS PERFORMANCE MANAGEMENT The Old Economy promoted a traditional ‘performance review’, a rigid and uncomfortable affair, conducted once or twice a year with a fixed set of benchmarks against which each employee’s performance was measured. Successful organisations in the current environment have evolved. New Economy processes simultaneously evaluate and stimulate achievement, but also align all the activities within a group to the organisation’s overall strategy. Achieving this requires a shift to a comprehensive business performance management process that requires transformation on four levels: 1. formulation; 2. translation and communication; 3. implementation; and 4. adherence.  Formulation: From the start, your leadership should include every level of the organisation. Have you redesigned your way of formulating business objectives, (a) by continuously asking how your top-level strategy will be entrenched on operational levels and not getting stuck in the visionary aspects of strategy, and (b), by opening up the formulation process, inviting input from the whole organisation?

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This does not mean that every employee should have a say in every organisation objective. But it does mean that employees at an operational level should be given the opportunity to influence performance objectives by providing inputs informed by their experience of working within the organisation. You should allow your people to express their concerns and raise questions on objectives addressed, and in this way they will be better able to reach an understanding on why objectives, against which they have to perform have been set. Successful New Economy organisations use operational input sessions to achieve the inclusive formulation of objectives. These sessions, usually held twice a year, bring employees in direct contact with senior management. At these sessions you must communicate the following to all your employees in clearly understandable language: – a review of the current environment; – competitive challenges facing the business; – strategic thinking; – budgeting goals; – objectives for the forthcoming year; and – broad performance parameters against which performance will be measured. When the reasoning behind the objectives and strategy are communicated to your employees in a convincing manner, the ‘buy-in’ at operational levels, and active support of targets, should ensure significant efficiencies. Also, the knowledge that all your employees will be involved in the communication and shaping of business strategy at regular intervals should establish stability and trust. People will appreciate that they will not be hit by bombshells like sudden budget cuts or revised targets. Input sessions should also instil confidence in management. If your senior leadership can show that they have a comprehensive understanding of the challenges facing the organisation and can communicate this and formulate a satisfactory response to it, the organisation will reap the benefits. Operational input meetings are relatively common in many South African organisations. But traditionally they have been restricted to senior management, and only a very limited summary of what was discussed was allowed to be filtered through from level to level. This is Old Economy style thinking. The challenges of the current environment do not allow for such a lengthy information process. The whole organisation must regularly be brought up to speed to ensure fast and integrated responses to the operational challenges. Even if the formulation of business objectives and performance goals is very inclusive, it is worthless if all the goals are not implemented on every level of an organisation. Business objectives should become part of each activity in your business to ensure that the operations of the organisation are aligned with its objectives. 138

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 Translation and communication: Objectives are only as powerful as the clarity with which people understand them; if your strategy is not made relevant to each employee’s work, it is has no meaning or immediate relevance to that employee. At Nedcor, during a session with some middle managers, one of the directors came in to do a presentation. One of the middle managers said to the director: “But we haven't heard about the strategy - where's the business at?” The director turned around and said: “You mean you don't know the strategy is on the website? Why haven't you looked?” Potentially a good point, but we had a look. It was a marvellous website, but it didn't tell us much about the strategy of the organisation. More importantly, it didn't help us to understand how it affected life as an employee on a day-to-day basis.

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Translating and communicating overall strategy to all employees (and encouraging them to make it part of their daily activities) is a crucial skill of successful executives in the new environment. You should spend a significant chunk of your time interacting with your employees. In this way you will get people to comprehend your organisation’s objectives; what is in it for them and what they have to do to achieve it, explaining the context within which each employee operates. Context is crucial to this debate. Understanding where their activities fit into the global scheme of things provides employees with the incentive and responsibility to perform. Translating the context of an activity should start at the outermost layer: the external environment. Changes and challenges in the global market place, as well as the competitive pressures facing an organisation should be explained. Next the organisation’s internal strategy to meet these challenges should be linked to the activities of a particular department, production line and individual employee. Ideally very specific activities, efficiencies or delivery targets should be placed within the context of your organisation’s strategy to competitive threats. Explaining the context of employees’ activities also affords them the capacity to take responsibility, they should understand that their non-performance would result in a chink in the armour of the organisation. An important aspect of communicating context to your employees is constant feedback. Business environments, competitive challenges and operational targets all change. People need to know that senior management will explain the changing context of their activities regularly. It is also the executives’ responsibility to equip people at operating levels with the skills necessary to align their own goals and activities to the macro-strategy of the organisation. Employees should continually be encouraged to translate each of the operation’s 139

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business targets into personal goals. This includes budget, operational, delivery and productivity targets. They should therefore have the opportunity to participate directly in setting these targets for their own activities. This does not mean that their proposed goals are just accepted, but that they provide sufficient input to enhance the viability of the goals. In this way they will also view budgets and performance targets as challenges, not impositions. It is noticeable that employees of truly transformed organisations talk comfortably about their individual goals. They have a firm grasp on what needs to be done and what the challenges are. They are like athletes interviewed before a race identifying their strategy, the speed at which they will have to run and possible hazards in the race. When you walk into MultiChoice, through the main foyer in Randburg, there is an electronic scoreboard which flashes sixty-second updates on a consistent basis. Every sixty seconds you see an update on the business: number of clients acquired, number of clients lost or defaulted, number of units sold, the equivalent information in Rands, and how all of this measures up against budget and other targets. Everybody walks through that foyer on a daily basis. It is fascinating to watch the reactions of people as they walk through. They glance at the scoreboard, go and have their coffee; they come back and glance at the scoreboard again, because it is a different scoreboard now. A past Finance Director (FD) said he started understanding the importance of this scoreboard during one of the wage and salary negotiations. MultiChoice is a white-collar environment, so they do not have a unionised environment, but they do have a worker forum and committee, which participates in formal negotiations every year. The FD had asked the worker committee and chairperson to put forward their demand for an increase during a management meeting. The worker forum chairperson, rather than making a demand as they usually do, bounced the onus back to the organisation. He said: “We would like to understand what the organisation can afford this year.” This totally threw the organisation’s executive team. They had their Human Resources advisor there, but they were unsure whether it was an unfair labour practice or unconstitutional to make a decision on increase percentages in the absence of a demand. The management team did not know how to respond and so asked for caucus time. They walked out and caucused and said: “We can't have this, we can't respond to emptiness. We're all used to the process as it stood.” They returned and said, “Terribly sorry, we really appreciate that you want some more information, but we really do need a demand from you.” So the workers went out and they caucused and came back in, and the request/demand was for a 6,5% increase (this was in 2004). Management looked at this and they said they'd like to take this under consideration, walked out and caucused, came back with a counter offer of half a percentage point higher. The

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consistency of business review, and the consistency of information provided by the scoreboard, makes each employee operate in the same way as Ed of Ed’s Great Car Wash in Camps Bay. Although employees cannot put their hands into their pockets and say: “Aah, we see we’ve made fifty bucks today,” they can walk past the scoreboard and say: “Oops, we're not hitting target today. We see that our costs and profitability aren't looking too good.” The constant reminder provided by the scoreboard drives home a realistic view of the performance of the business and a view on an individual’s contribution to that performance. Armed with this kind of information, it is easy for a worker forum to determine a realistic wage increase and for the individual who receives it to understand why it is what it is. Now, within that context, performance review is really hot.  Implementation: The implementation of performance management processes requires that skills be developed at team and individual levels to define goals. Just as importantly, a rigorous system must be in place to measure the accomplishment of goals. – In the New Economy there is a greater need for people to operate in teams, either as stable teams, project teams or on an ad hoc basis. Teams of employees should have the skills and the necessary frameworks to enable them to set goals easily in order to understand the diversity of the roles that have to be fulfilled. Accountabilities should also be allocated to each team member. – Employees have to devise their own personal goals, using the aims identified on a team and personal activity level to identify what they should achieve in a specific timeframe. – These objectives can be hard or soft. Hard objectives include specific requirements such as operational efficiencies and budgeting goals; soft objectives are more abstract and difficult to measure. Soft objectives include establishing better working relationships between departments or the personal development of the employee. In the dynamic environment of the New Economy, it is necessary to maintain discipline to ensure that objectives are attained. Rigorous feedback is required. In many organisations it is common to meet on a weekly or monthly basis to review processes against the goals set. Team and personal goals should be highly visible throughout the organisations. Another element of measuring performance is one-on-one employee assessment: – The performance review is dead, long live the performance development discussion. 141

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The traditional performance review is still valid in the New Economy, but with a significant twist. The old performance review form, which benchmarked employee performance against the same fixed elements for years on end, is out. Instead, performance in the New Economy is measured against real challenges in the current competitive context. The employee’s performance is measured against his or her specific goals for a specific time period and in direct response to the current challenges of the organisation. It has absolute relevance to the organisation’s objectives at the time of the evaluation and with regards to the person evaluated.  Adherence: High performance organisations do not leave anything to chance. They implement formal monitoring processes to evaluate performance management practices throughout the organisation. One can apply the VISA principles to performance management as depicted by the four principles/steps outlined above. Strategy formulation is the V in VISA, strategy translation and communicating are the I, strategy adherence is the S, and strategy implementation is the A.

BUSINESS PROCESSES There are ten business processes, benchmarked against global practice and local requirements, which are critical to the success of organisations in the New Economy. Five are considered to be performance-related or ‘hard’: 1.

service excellence,

2.

resource efficiency,

3.

market and financial competitiveness,

4.

quality superiority, and

5.

asset effectiveness.

The other five are people-driven or ‘soft’: 6.

participation,

7.

information,

8.

knowledge development,

9.

goal focus, and

10. unity in diversity. These practices form the pillars of business success in the New Economy. They cannot be separated, and the absence or neglect of one leads to collapse. 142

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Business processes – people and performance People

• • • • •

Participation Information driven Goals focused Knowledge development Unity in diversity

Performance

• Service excellence • Resource efficiency • Market and financially competitive • Quality superiority • Asset effectiveness

1. Service excellence: Service excellence in the New Economy is no longer a competitive advantage. It is an imperative. Broad measures for service excellence include:  Delivery. Employees deliver products and services on time consistently.  Customer satisfaction. Customers are satisfied that their needs are being met and they have an open channel to provide feedback.  Inclusive setting of standards. Employees are involved in setting standards for excellent customer services.  Customer awareness. There is a clear understanding of what services have to be delivered to customers and who exactly their customers are − external (consumers or customers) or internal (the delivery of services or products to other departments or divisions of the business). Just under half of all organisations that participated in our research recognised these principles, which indicates a moderate acceptance of the basic elements of service excellence. However, one crucial element was missing in two-thirds of these organisations:  Internal customer focus. This evaluates the extent to which different departments and divisions within the organisation view one another as customers. Also, whether or not the continuous improvement of these internal services is a priority. South African organisations have particular problems with understanding the internal aspects of service delivery. Many managers view ‘service’ as the sole responsibility of people who interact directly with customers. This places an unfair 143

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burden on divisions such as sales and call centres, with the rest of the employees not necessarily consciously adding value. Every employee in your organisation should be in the service business, because each division of an organisation probably serves a customer, even if that customer is in the same organisation. In high performance organisations, the different divisions and functions quite clearly view one another and speak about one another as customers. They understand that they are service partners and work on how to continuously improve service provision. Provider and receiver are in constant dialogue, with feedback occurring in real time. Without internal service excellence, external service will not amount to much. Service delivery experts tell us that bad service within an organisation will disrupt the chain of service delivery to the customer and will result in deficient products or services to external clients. A culture of service delivery has to be ingrained at all levels of an organisation, and all employees should be geared to deliver superior support and service within as well as outside of an organisation. The first step towards achieving internal service excellence is determining who your customer is. Once the users of your outputs have been identified, their true service or product requirements have to be ascertained and outputs modified to fit that bill. Further imperatives are the setting and monitoring of standards for internal service delivery. This requires holding people accountable for delivering the best possible products and services on time, followed by feedback from customers as to whether or not this has been achieved. 2. Resource efficiency: Many organisations have to cope with frequent requests from employees to upgrade technology. However, few employees appreciate the cost of new technology and the issue of whether or not expenditure on the previous technology has already been recovered through performance gains. Your organisation cannot have a cost-efficient culture without your employees understanding the real value of resources. Moreover, they should be made aware of their personal accountability to add value to your organisation’s investments, be it property, equipment or technology. Measurements of resource efficiency are:  Target determination. Individuals, teams or departments set annual targets to improve the use of resources across all areas.  Target awareness. Everyone is familiar with the targets that have to be met to ensure the best use of resources.  Resource utilisation. Employees are regularly involved in identifying areas of waste, the incorrect use of materials, or general poor use of resources. 144

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 Individual impact. All individuals understand how their activities can affect the costs of the business. According to our research, South African organisations have the best of intentions when it comes to resource efficiency. They scored quite high on determining and being aware of targets in this area. But when it came to actually doing something about implementing the targets and taking individual responsibility for resource efficiency, things fell apart. While South African organisations rate well on how people should implement processes to optimise resource efficiencies, the actual implementation and results of these processes seem less important. This obviously does not help much towards increasing the effectiveness of an organisation in the New Economy. The lack of individual responsibility and awareness is also worrying and clearly illustrates the liabilities of an undemocratic workplace. If employees are not included in strategic processes and not asked for their input, they will not feel ownership for the business and its resources. The research also showed that employees are quite ignorant about the costs of inputs and resources, even when it came to their own costs. In a recent survey we did among mid-level managers, we asked them what their actual cost to the organisation is. More than 90 percent of them considered only their salary and benefits, with the majority overlooking their employers’ contributions to their pension funds and medical aids. Other costs such as overhead expenses, technical equipment, technical and administrative support, insurance, office space, and personal infrastructure expenditure were not considered at all. Another key indicator of whether a business is achieving success with resource efficiency is:  Internal assistance. Individuals, teams or departments try to assist one another when help is needed. Internal assistance and cross-pollination of ideas and inputs are the upshots of the erosion of bureaucratic structures and hierarchies between divisions and departments – a prerequisite for the democratisation of an organisation.

MARKET AND FINANCIAL COMPETITIVENESS Smoke and mirrors have been part of South African corporate culture for years, contributing to widespread confusion about competitiveness, especially amongst employees. 145

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During the apartheid years, it was quite common for South African organisations to enhance their profitability by hiking prices. The lack of competitive pressures because of tariff protection and the absence of international players supported this practice. While much has changed in the past 16 years, these furtive practices have left a legacy. Organisations are still not candid about their revenue drivers and employees are left with muddled clues about where profit comes from. Two-thirds of the participants in our research felt their organisations lack the two key elements of market and financial competitiveness:  Profit factors awareness. Everyone in the organisation knows how profit is derived.  Information about competitiveness. Management shares information with all employees about the organisation’s market and financial competitiveness. Without information about profit drivers and competitiveness, your employees will operate in a vacuum and cannot be expected to make a contribution to your organisation’s wellbeing. If they don’t even know where your profit comes from, how can they be expected to assist in making it grow for you? Your leaders should urgently introduce the best practices of information-sharing and inclusiveness by:  educating employees about the imperative to become competitive and profitable, stressing the link between employees’ own welfare and the organisation’s returns;  providing information about the organisation’s market and financial competitiveness to provide a context within which employees can position their activities; and  motivating employees to align their own activities to enhance the group’s competitiveness and profitability. No less important are the other elements of market and financial competitiveness:  Measurability of success. All divisions know whether they are on budget and how much they contribute to the commercial success of the organisation.  Cost savings. Everyone in the organisation knows what they have to do to save costs and keep customers happy.  Employee commitment. Employees are committed to improving productivity.

SUPERIORITY OF QUALITY The quality revolution transformed Japanese industries in the 1960s and swept through the United States and Europe in the following decade. By the 1980s quality was no longer 146

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a competitive advantage but a disqualifying factor. Organisations which could not deliver outstanding quality could not compete. Our research shows worrying signs that the quality revolution is still only a distant rumble on the horizon for many local companies and superior quality has not become the crucial issue that it should. The five measures of superiority of quality are: 1.

Adherence to standards. People in teams, departments and divisions always meet quality standards.

2.

Individual responsibility. Individuals are responsible for meeting quality standards for their particular activities.

3.

Comprehension of quality standards. All employees have a clear understanding of the quality specifications that they need to fulfill. Employees understand why the specifications have to be met, what the implications are if they are not met and what the effects are of poor quality services and products.

4.

Regular assessment. People regularly measure and assess the observance of quality standards.

5.

Information. Information about quality standards is readily available to everyone in the organisation.

The research showed very weak scores in all areas of quality management, apart from individual responsibility (78%). This illustrates the pitiable logic of South African companies: we hold people responsible for quality, but organisations do not adhere to their own quality standards; they do not even understand the standards. There is also no information or regular feedback available on quality standards. The clear lack of an entrenched culture of quality puts South African organisations at an enormous disadvantage versus the rest of the developed world, where the area of quality superiority has perhaps received more attention than any of the other components of competitiveness. Key factors which you can use to introduce a focus on quality in your organisation are:  Information-sharing. Your leadership should encourage the free flow of information about quality in all areas of the organisation. A culture of transparency, which invites all participants to contribute their inputs on quality improvement, should be established.  Global best practices. Provide an abundance of literature, research and case studies that define what has to be done to establish and entrench quality superiority. These international best quality practices should be studied and put to use where appropriate and applicable. 147

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 Accountability: Your leaderships should start to view quality superiority as a primary personal accountability that they have to drive.

ASSET EFFECTIVENESS Asset effectiveness relates to the optimising of an organisation’s resources and systems. In a dynamic business, every employee should feel personally accountable for the optimal application of assets and the efficiency of all business processes. They should also feel free to suggest better ways of doing things. Creating an organisational culture in which people feel personally responsible for assets and systems entails:  The identification of obstacles. All rules, regulations and procedures that diminish performance should be identified and removed.  Proactivity. People at all levels identify and remove obstacles to performance.  Asset utilisation. People across all levels clearly understand the cost of assets and that their utilisation needs to be improved to become competitive.  Stakeholder collaboration. Managers, workers and unions regularly co-operate in finding ways to increase the effective use of assets.  Information. Employees are given information that will improve their understanding of the use of assets in their work areas. Our research shows that these elements are present in very few South African organisations. In fact, asset effectiveness as a concept is virtually unknown in the local business environment and, almost all organisations showed a very poor grasp of it. Asset effectiveness is undermined by a number of factors:  employees do not view themselves as users of the organisation’s assets nor do they accept accountability for optimising the assets;  they do not understand the cost of assets nor the imperative for utilising assets in ways that add value;  employees either abuse or unconsciously under-utilise the assets at their disposal;  people may have the misconception that organisations have access to virtually limitless resources and an accordingly limitless capacity to invest in resources; and  there is no clear accountability for asset effectiveness in organisations.

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But the biggest problem seems to be proactivity. Only 13 percent of our research participants felt that employees were proactive in identifying and removing obstacles to ensure top performance. Addressing these concerns will take a concerted effort from management that will have to include the education of employees about the role and value of assets within the organisation. Employees need to understand that if assets – tangible or not – are leveraged in the right way, it could prove to be a real competitive edge and contribute to their own prosperity. This should go together with establishing an attitude of proactivity. Continuous encouragement and reward of enterprising thinking is part of it, as is the removal of any rules and regulations that could discourage proactivity. Stakeholders – including management, workers, unions and customers – should also regularly collaborate on finding ways of making assets more productive and on using assets more effectively.

PARTICIPATION Nowhere is South Africa’s legacy of oppression and distrust more evident in the workplace than in the lack of participation. Organisations’ flawed participation practices have serious implications for all other business processes, which rely heavily on the participation and buy-in of employees. International case studies2 have also shown that the ‘Five Fs’ of competitive organisations (as coined by Rosabeth Moss Kanter) – fast, focused, flexible, friendly and fun – can be achieved only in dynamic, open systems characterised by participation. The conditions of successful participation are:  Training employees in decision-making. Employees need to have the necessary skills to address the challenges and implement actions.  Participation in decision-making. The organisation must decide what decisions employees can participate in.  Participation as performance measure. Leaders are measured on the success of employee participation.  Awareness of participation. It is generally understood that higher levels of performance and responsibility are expected of everyone in a participative workforce.  Initiation of participation. All employees can initiate participation.

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Our research shows that while most South African organisations indicated a moderately high awareness of the need for participation, there is a lack of real commitment to and encouragement of more inclusive practices. This reluctance, which is particularly worrying in light of the entrenched tensions and racial divides still present in South Africa, probably stems from misplaced fears that participation would lead to slow-moving, laissez faire or downright anarchic working conditions. Participation does not mean discussion-upon-discussion-upon-discussion. It involves the inclusive deliberation of an issue followed by a conclusion and action. Key to the success of participation in the local complex environments is the discipline of decisionmaking, which is recognised as a corner stone of competitiveness by management experts like Joseph Juran, William Edwards Deming and Kaoru Ishikawa. Giving employees the skills to make decisions is crucial. Accountability is another key element. Processes should be in place to determine whether decisions have been implemented and to hold specific individuals accountable.

KNOWLEDGE DEVELOPMENT Conditions of knowledge development are:  Personal responsibility. People are encouraged to improve their skills through selflearning.  Availability of training. Training programmes allow employees to participate in their own learning.  Knowledge of options. Employees know what training and self-improvement options are available.  Personal identification of needs. Employees and teams decide on their own development needs.  New skills rewarding. Employees are paid more when they demonstrate their capacity to apply new skills over a period of time. The speed and challenges inherent to the New Economy make old style training and development redundant. Organisations cannot afford to pump limitless resources into unfocused knowledge development, hoping that a few employees will pick up new skills along the way. The shift is towards people personally taking charge of their own knowledge development. In the past, training and development were viewed as being ‘given’ or ‘done’ to people. Now, 150

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people are encouraged to take charge of improving their own skills and identifying gaps within their current abilities. Organisations should equip employees with the skills needed to identify their own shortcomings. Executives should also raise awareness of training and development opportunities on offer, whether formal programmes or, increasingly, informal training opportunities like working on specific projects or becoming part of teams with advanced skill sets. Internet-based training, like that offered by US based Thomson NETg3, is also emerging as a cost- and time-effective answer. Employees can receive training on an individual basis at minimal disruption to operations and without incurring travel and other expenses. It would seem that South African organisations have started to wake up to the need for training and development and are investing more resources in this as a high priority for success within the New Economy. Unfortunately, this begs the question – if there is such a heightened focus on training and development, why are the other business processes not improving radically? This is because the development is not necessarily targeted in the correct direction. The worst possible sin to commit in business is to do something exceptionally well that should not have been done in the first place, warns Peter Drucker. Knowledge development should target factors that directly improve the competitiveness of an organisation, not competencies that are nice to have. The only way to establish this is for management to take on the role of discerning customers when deciding on training and development. Processes to distinguish between ‘nice-to-have’ and ‘profit-driving’ training and development should be established. Key to this are the following:  Directors, senior management and line management should be involved in identifying the focus of investment in knowledge development.  People in charge of training and knowledge development should view themselves as service providers who must first and foremost analyse the needs of their internal customers and not supply what they think the organisation needs.  The impact of training and knowledge development should be evaluated in terms of enhanced performance. A number of measures have been developed whereby organisations can evaluate the return on investment delivered by training and development. These are not widely used in South Africa.

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FOCUSED ON GOALS The benchmarks for goal achievement in the New Economy are:  Annual targets. All individuals, teams and departments set yearly performance targets.  Customer influence. Customers influence performance targets.  Customer expectations. Employees talk to customers to find out what they expect.  Measuring against organisational goals. People at all levels and functions can measure their performance against the organisation’s overall goals.  Goal alignment. Individual team and organisation goals are aligned to the organisation’s goals. While most businesses understand the importance of setting goals, aligning the goals to a common strategy is not a priority. This is a grave oversight. Every level of an organisation has to move in one direction to ensure fluid and efficient service delivery. If the goals of the operational levels do not correspond to the strategic goals of the executive levels, the organisation is bound to be stretched in every direction, losing direction along the way. In this way, goal setting becomes the cause of an organisation’s failure rather than being one of the catalysts of its success. It hinders rather than propels an organisation. The main problem in this regard is the lack of information among lower-level employees. If your employees do not comprehend the competitive positioning of your organisation, and are not informed of its strategic thinking and goals, how can they align their own activities to support your macro-goals? Also, employees will not demonstrate adequate commitment to your goals if they do not have a thorough understanding of the bigger picture. They need to know that their every activity is important to the prosperity of your organisation. They need to know the ‘what’ and the ‘why’ of their actions.

UNITY IN DIVERSITY There is probably more cultural diversity in one division of a typical South African organisation than in whole organisations in many other parts of the world. With eleven official languages, an abundance of cultures, huge wealth and education contrasts, as well as religious and other differences, our shop floors and offices are truly a vibrant mix. Diversity takes on an added dimension in the New Economy. Executives have to manage 152

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a huge diversity of stakeholders, suppliers, and in particular, the diverse functions and roles within an organisation. In the Old Economy, these different divisions, like marketing and sales, tended to be protected in pockets of similitude. In the New Economy, as organisations are streamlined and democratised, the different divisions have to interact continuously to gather input and serve each other as customers. They have to learn to operate successfully within their differences and not just in their sameness. Experience has shown that only organisations who operate from a set of values supported by all employees can harness diversity to create a truly unified and competitive organisation. These values should focus on people and performance objectives, and performance should regularly be measured against them. Organisations have two options when creating the values that will unify diversity in their companies:  Starting from scratch. Encouraging dialogue and getting people to identify and rally behind the type of values that would drive competitiveness.  Evolution. Allowing values to be shaped over years, an ongoing process of continually defining and redefining the key principles of achieving success. There are a number of measures to gauge whether the values of an organisation would promote unity in diversity:  Diverse input into values. Everybody has participated in developing the organisation’s values.  Stakeholder involvement. All stakeholders have been involved in developing the values on participative practices, and are the values clearly defined.  Compliance evaluation. All people are regularly evaluated on how they are applying these values on a day-to-day basis.  Impact of non-compliance. Employees know what would happen if they did not comply with the value standards.  Awareness of rights. Everybody in the organisation knows what his or her own rights and accountabilities are. Many organisations have found that after embarking on very good value processes, spending resources and involving employees at all levels to establish a code of values, competitive performance has not improved. This is probably because every individual has not internalised the values or integrated them into his or her activities. Values without performance are pointless. Values must be translated into practical measures for them to carry any weight. 153

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Some employees are inherently reluctant to adopt the organisation values in their activities. In this regard, General Electric4 developed a helpful matrix that guides evaluation of employees. The template measures individuals according to how well they perform and ‘live the values’. Four types of employees emerged: 1.

High on performance, live the values. Exactly the right mix: people who have both of these features should be treasured for they are the future of the business.

2.

Low on performance, but live the values. Management should have tolerance for these employees, because it is easier to crank up performance than it is to change values. These employees need to be coached and developed, and if their performance abilities do not improve, other options should be looked it.

3.

Do not live the values, do not perform. The exact expectations (values and performance targets) should be defined for these employees. If they do not comply, they must leave the organisation.

4.

Perform, but do not live the values. This is the most difficult group of employees. Management should have a low tolerance for these workers and clearly send out the message that the end does not justify any means.

Unifying individuals to ensure business success in an extraordinarily diverse country like South Africa is not only about bridging gaps and building bridges between employees. It is about demonstrating courage to rally employees behind business values that will ensure optimum performance. The New Economy, like democracy, brings some marvellous new freedoms, opportunities and personal growth prospects. It may also bring prosperity. But it necessitates discipline in the creation and entrenchment of these business processes. Without strict adherence to these processes, the New Economy cannot survive. The dot bombs illustrated that a laissez faire attitude towards revenues and management does not work. Similarly, the greater freedoms and democratic processes on shop floors everywhere should also not lead to anarchy. These business processes should establish the necessary checks and balances to ensure the discipline needed to keep the organisation moving forward in the desired direction. Without them, we are allowing organisations to demonstrate typical commuter driving techniques on a Formula One race track. Do you really need the consequences of this spelt out?

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KEY LEADERSHIP QUESTIONS: BUSINESS DISCIPLINES  Do you have a culture and processes in place that enable you to constructively discriminate on performance?  Can you show the performance rating distribution and how this can be rectified/ improved on?  What do you do with your ‘knowledge capital thief’? (This needs to be identified at every theme of work.) – How do you teach your ‘knowledge capital thieves’ to become teachers?  Are you encouraging ignorance and incompetence as a source of learning?

NOTES 1 Albert Schweitzer (1875 – 1965) was an Alsatian theologian, musician, philosopher, and physician. He received the 1952 Nobel Peace Prize in 1953 for his philosophy of ‘reverence for life’. (From Wikipedia, the free online encyclopedia.) 2 Handy, Charles. The Handy Guide to the Gurus of Management: Programme 9 – Rosabeth Moss Kanter. Available [Online] http://www.bbc.co.uk/worldservice/ learningenglish/work/handy 20 November 2008. 3 ���������������������������������������������������������������������������������� Thomson NETg is a premier provider of instructional eLearning solutions featuring innovative technologies delivered directly to your desktop. www.netg.com 4 The General Electric Company or GE is a multinational American technology and services conglomerate incorporated in the State of New York. (From Wikipedia, the free online encyclopedia.)

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8 RECOGNITION AND REWARD The great leaders are like the best conductors – they reach beyond the notes to reach the magic in the players. Blaine Lee1

THE ASPIRATIONAL VIEW OF

RECOGNITION AND REWARD Recognition and reward (R & R) systems and culture reinforce strategy execution, the fulfilment of outputs, across Themes of Work, and the fulfilment of Business Disciplines. R & R is seen as an output and not an input to performance. It reinforces and does not pretend to drive sustainable high impact performance and leadership. New Economy R & R systems support and sustain a culture of transparency and widespread trust.

CHARACTERISTICS OF RECOGNITION AND REWARD IN THE NEW ECONOMY  R & R systems focus on the combination of Lag, Lead and Leadership metrics.  The most senior leaders are rewarded for their contribution to the long-term sustainable performance of the organisation.  R & R is aligned to reinforce the Themes of Work contributions.  R & R recognises both individual and team contributions.

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Comparing the research conducted in 2003 amongst MBA students versus the averages for all organisations that had completed the Beehive survey up to June 2008 shows that R & R in South African organisations appears to have made a healthy shift towards more New Economy practices. However, many leaders still say that surveys on pay and remuneration will always rate low because employees will always want to be paid more. However, New Economy recognition and reward does not focus on how happy your employees are with their rate of pay, but rather whether your organisation focuses on the following:  whether pay is recognised as a variable in motivation;  the clarity, understanding and transparency of pay systems;  performance feedback and consequence management (if poor performance is accepted then poor performers are getting part of the reward pool);  if output-based incentive systems exist;  the alignment of short- and long-term incentive systems; and  the long-term incentives across all levels in the organisation. MBA leadership survey 2003 vs average for all Beehives in database 2008 Old Economy Leadership Survey 2003

New Economy Leadership Survey 2003

n = 249

Old Economy Overall NORM

New Economy Overall NORM

n = 37968

OVERALL Strategy Execution Structures Talent Creation Business Disciplines Stakeholder Value

46.8% 38.9%

51.0% 57.3%

44.6% 40.6%

52.8% 55.4%

41.5% 35.2%

55.9% 60.3%

45.0% 36.0%

51.1% 59.1%

35.1% 30.3%

Reward and Recognition Change Leadership Total 100%

59.7% 62.8%

45.8% 41.3%

49.1% 53.4%

49.3% 37.4%

47.6% 57.6%

44.0% 37.1%

52.5% 58.0%

50%

0%

50%

100%

In understanding how to reward and recognise your people, you need to appreciate the context in which you operate. The Beehive segments all interlink and influence the way in which you operate within the world of work, strategy, leadership and talent creation. You 158

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need to realise that these aspects dramatically influence how recognition and reward needs to shift to cater for the New Economy way of being. The extensive influences of organisational development and New Economy Leadership practices contribute meaningfully to creating organisations that are ‘competitive and caring, and fit and friendly for human life’, and this has extended to how recognition and reward need to operate. This means that you need to understand how recognition and reward practices need to be structured in order to acknowledge the ‘adulthood and dignity’ of employees, and how these practices contribute to deepening the conviction that people are whole beings. What are the tenets that underpin your recognition and reward system? Can you clearly link the success of your strategy execution, performance management and talent creation to the way you reward people? In the Old Economy, the critical assets were raw materials, land, labour and machinery. The use of these assets required simple jobs that had clear tangible outputs. Measuring work was very easy. Today, the types of assets we value are know-how, creativity, entrepreneurship, innovation, and a new way of working. Networks are the main way of organising the knowledge economy. Knowledge is fast becoming the most valuable corporate resource. Entrepreneurship is critical for future prosperity and competitiveness and is driven by teams of people, involving collaboration across your whole organisation. These factors all impact on the type of roles required to achieve success. These new roles are not easy to measure; work is now more intangible, and therefore, more difficult to measure. Charles Leadbeater2 says that in our current world, more and more of us make our livings from ‘thin air’ – from our ideas and know-how. This is because knowledge is becoming the most creative force in the modern economy. Ultimately people in the New Economy are reassessing the way they make a living, how to learn, what to do in their free time, and what improvements to make in social wellbeing. So how do you remunerate people in this world? The New Economy, as described in many different definitions of the triple bottom line, is all about people. Today a successful organisation will be built around talented individuals. Andy Hickford3 says that how much you pay your volunteers is relevant to employee retention. He considers this important, because you need to view your employees as volunteers. Your best people will always be able to earn more money elsewhere, so you have to provide other incentives to keep them. As documented in many retention strategy documents, the main reason provided for leaving an organisation is not because of pay. 159

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Pay is usually the third or fourth reason that people leave. This highlights the impact of the new world of work. Andy said that 76% of people leave their jobs because of management (people work for people). As such, employers need to start thinking beyond money. He argues that employees are like volunteers, as they can choose to leave whenever they want. Your people want to feel valued, and they want to feel as though they are being developed and invested in. They also want your trust and the freedom to have a degree of dignity in what they do. People want independence at work, and independence from work. From this it should be obvious that the ‘old way’ of rewarding people is no longer valid, as so many of the rules of the game have changed. If your organisation is able to make the most of its people and their knowledge, you will be best placed to thrive in the twenty-first century. Employee ownership and equity-based pay will be vital to creating the networked, knowledge-creating organisation of the future. Using employee ownership, which allows employees to be paid in part with shares, helps to create more participatory management and reform corporate governance. Some of the top-rated organisations to work for in South Africa have the following in place to ensure the above:  share schemes and profit sharing schemes to ensure employee ownership;  equal pay for equal work (alignment of pay for similar roles); and  talent management programmes to enable effective career management, graduate programmes, secondment programmes, and training and development and rotation programmes to enable effective knowledge use. Owing to macro changes, your board members and leaders have some exceptional issues facing them in the New Economy. Your leaders need to be focused on:  the drive to become efficient (the Old Economy pay practice of increasing base pay is not sustainable);  the necessity to grow and retain talent, knowledge and experience because of talent shortages;  making the best use of human capital; and  ways to make people feel they are valued. Your leaders must deal, communicate and manage in a culture of transparency. Executive pay is usually a ‘hot button’, as it often seems out of proportion to that of other employees. Often, this is more of an issue when executive pay is out of proportion with the success of the organisation and everyone else who works there.

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Michael Eisner’s4 compensation was rarely questioned during his first ten years at Disney because the organisation was growing and successful. It became an issue only during the last half of his tenure, when the stock price stagnated and he became more imperious, domineering and arbitrary.

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“Employee salary increases have barely covered cost-of-living adjustments, while CEO pay has skyrocketed,” John Hollon5 says. “To have the highest-paid executives attempt to get even more money by backdating stock options is undoubtedly and understandably being viewed with considerable ire among rank-and-file employees. The result could be lower productivity, decreased morale, higher turnover, and an inability to recruit top talent.” What has not changed for most organisations is that remuneration generally remains the largest expense. It is important for you to distinguish between pay, remuneration and reward. In doing this you need to focus on how these concepts align with the other Beehive segments, as this will dictate how you manage recognition and reward in the New Economy.  Strategy execution: Helps you determine what is important and which rewards and remunerations should be attached to which short- and long-term outputs.  Business disciplines and stakeholder value: Provides clear mandates and accountabilities which are essential to enabling remuneration and pay for performance. In addition, accountability increases value and transparency to stakeholders and increases shareholder value.  Talent creation: Ensures innovative ways of rewarding top talent and increasing knowledge as a way of recognition and reward. In addition to career mobility and remuneration, flexibility is important for talent creation and retention.  Structure: Assists the separation of traditional Old Economy pay and structure hierarchies from following the organisational hierarchy. As such, structure can be a liberating lever enabling your leaders to reward specialists operating within a specific Theme of Work without having to promote them to management positions.  Change leadership: Facilitates the integration of all the different aspects around the remuneration issue. Change leadership is at the heart of managing the change on how to remunerate the right people whilst focusing on remunerating the right things, with the right types of pay, at the right levels, with the right communication and culture.

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PAY, RENUMERATION AND REWARD A reward system consists of financial rewards (fixed and variable) and employee benefits, which together are referred to as total remuneration. Extrinsic rewards can include money (salary, hourly wages, bonuses, commissions, pay incentives) and benefits (insurance, retirement, paid vacations, paid holidays, food services, recreation facilities). Non-financial rewards such as recognition, achievement and personal growth are often incorporated into the rewards system. Intrinsic and non-financial rewards are often accepted as promotion opportunities, working conditions, interesting work, learning and development opportunities, and quality of work life. Remuneration is typically monetary compensation for services, work or duties rendered within the context of employment. There are various forms of remuneration; the two most common are wages or salaries, and benefits. Remuneration is a general term covering the monetary and related entitlements of employees, paid by employers in return for the work of employees. Examples include monthly guaranteed pay, 13th cheques, share options, pension schemes, paid leave, bonus schemes and medical aid. Your organisation should have a reward strategy, encompassing both remuneration and recognition, to define your approach to reward and how this methodology integrates with your business strategy and the other Beehive segments.  Reward strategy: Strategic issues around your reward strategy should focus on competitive pay – using pay as a lever for performance, pay decisions, involvement of employees in reward matters, increasing competence and increasing your skill base. Principles for consideration include the reward mix, differentials, flexibility, neutrality of pay (gender, race, control, where to position pay versus the market – highest, lowest, median – and transparency). Recognition and reward programmes are an important way to engage and motivate employees. People want to feel good about the job they do. Employees who have a positive self-esteem work harder and are more committed. Recognition and rewards contribute to building feelings of self-worth and contribute to the organisation’s culture.  Alignment with recognition and reward programmes: This should be viewed and developed as part of your overall human capital management and retention strategy, and not as a stand-alone talent management process. Progressive-thinking organisations view integrated human capital as the backbone of their talent management process, with pay, benefits, rewards and recognition, job design, leader training and even corporate culture contributing to it.

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SABMiller has positioned their expansion as a human capital proposition. They believe it provides them with the capability and capacity to build great routes to market, great brands and great companies in all the markets in which they compete internationally.

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 Elements of reward: This includes, but is not limited to, base or guaranteed pay, contingent pay, variable pay, individual and team reward, employee benefits, shares, wealth creation, long-term incentives, bonuses and partnership, success sharing, short-term team incentives, and a special bonus pool for high achievers.  Different types of pay: – Guaranteed pay. Individual pay, pay for the role or work, pay for demonstrated capacities in delivery of the work, and market trends for specific jobs that will assist to define guaranteed pay. Each role must have a pay line (a minimum and a maximum); the more complex the role, the higher the pay. – Bonus pool. Pay for once-off exceptional performance. – Short-term incentive. Team business success shared once-off, financially funded goal. – Long-term incentive. Organisational, long-term performance sustained retention tools. – Benefits: These should be calculated as part of the total cost of remuneration or pay for work being done. Included in benefits are medical aid contributions, pension funds, leave, canteen allowances, car schemes, loan facilities and study funding. How is your reward system structured? Is this uniform for all Themes of Work, or not? Why is it structured this way? Is there scope for differential pay based on performance? To what extent are nonfinancial rewards used to incentivise your people? Most of the organisations that have rated well in the ‘The Best Company To Work For’ survey run by Deloitte and Touche (South Africa)6, as well as many other blue chip South African organisations such as Absa, Nedbank, FirstRand Bank, Liberty Life and WesBank, have all implemented broadband guaranteed pay systems (minimum and maximum pay bands for a role) to enable increases in pay for individuals as their competence develops. A major challenge that faces this type of system is that increases ‘slow down’ in times of lower inflationary figures. This creates a dramatic shift in employee expectations because 163

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the move from high to low inflationary periods means a significant drop in annual increase percentages. This also makes pay differentiation exceptionally tough as increase pools are small. Annual increases are therefore no longer a way to differentiate guaranteed pay. Your leaders need more freedom to change employees’ guaranteed pay when required; alternate variable pay is also crucial as guaranteed pay and year-on-year increases are still Old Economy principles that no longer provide effective mechanisms to reward performance. Broad band schemes also provide scope to increase an employee’s pay within a specified range without having to promote them. Innovative variable pay systems exist in organisations that use sign-on or once-off bonuses, or long-term share options, to attract talent to come and work for an organisation. In addition, once-off short-term bonuses may be based on specific organisation-wide financial targets. A well-known South African financial organisation gave all employees a TV set on meeting a specified financial target, and on meeting the next financial milestone, all employees received a DVD player. This would be considered a short-term team once-off recognition bonus.

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In this type of innovative culture, bonuses can be driven by non-monetary means. It is also a powerful tool for you to unify all your employees regardless of grade or role, where they all receive the same reward and recognition. The added advantage is that this type of reward promotes transparency. Rewards like this also narrow the recognition and reward perception gap between employers and employees. Total cost to company (TCTC), total cost of employment (TCOE) or total package is a structured package used to calculate the full remuneration cost (including monetary pay as well as benefits). This enables measurement of fairness and equity. In the Old Economy, separating the various elements of the remuneration package facilitated the practice of giving higher ranked managers ‘perks’, special organisation benefits, and privileges not financially included in every employee’s package. The top ten among the ‘Best Company To Work For’ consistently have remuneration packages calculated on TCOE or total package. Most Old Economy organisations will still advertise base pay plus benefits. This is not a global phenomenon and varies extensively worldwide depending on the culture, values and financial metrics of an organisation.

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WHAT DO THE OLD ECONOMY AND THE NEW ECONOMY LOOK LIKE, AND WHAT DOES THIS MEAN FOR REMUNERATION? Local and international trends reflect the shift from HR-driven remuneration design and management to a decentralised approach. This is achieved through organisation-wide leadership participation and aims to create a remuneration strategy that supports the business strategy and places the accountability for remuneration of employees with the line-managers in the business. This decentralised pay management takes into account diverse business needs, varying business life cycles, and shifting employee requirements. It supports the transformation of the workplace from old-style bureaucratic and authoritarian practices to New Economy Leadership that enables more effective management of dynamic stakeholder relationships. One of the most dramatic shifts is in the contractual relationship with an employee. The New Economy places the emphasis on a cultural fit and a relationship based on engagement with employees who are often part owners through share schemes. Performance is reinforced by variable pay incentives that focus on leadership accountability, and inclusive employee share participation is used as a vehicle to create wealth and encourage employees to become owners of the organisation. In understanding compensation in the New Economy, it is important to look at the journey of recognition and reward to understand the fundamental differences of managing compensation, and some of the fundamental shifts that are taking place. Compensation has a direct link to performance management, as well as talent management, career development and, fundamentally, work. Your focus is on a new environment where flat business structures and hierarchies, as well as increased pressure to be customer focused, cost effective and increase shareholder value are simultaneously required. Change leadership and cultural transformation set the scene for how the environment in which remuneration operates must change. In looking at the shift, it is important to see what Old Economy practices look like and then focus on the New Economy change that is occurring.  Pay in the Old Economy: Old Economy practices still focus on the job with limited consideration for the person and non-financial methods of rewards. Compensation focuses on incentivising a few ‘special’ employees. The focus in the work environment is on having clear, specific job descriptions, which are largely based on fulfilling a number of activities. If these activities and inputs are ticked off against the list, it means that you have done a good job. Where you fit into the hierarchy as well as your length of service is critical to how much you get paid, and as such, ‘climbing the corporate ladder’ is expected and encouraged, which often leads to many good technical people becoming very poor leaders. This is the only way someone can increase their financial earnings and it is the only career path available. Limited empowerment is given to the lower levels in the hierarchy and, power-based positions are important. All issues and 165

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communication have to go up and down the chain of command. No one is encouraged to work across the organisation, which means unhealthy silo behaviour is encouraged. You are expected to focus on only your line of business, regardless of whether it is at the expense of the larger organisation. Measuring what a particular job is worth is easy as jobs are very specific and focused. Most organisations operating out of’ the Old Economy have similar types of jobs, and these are stable and consistently understood in the market, resulting in good market salary comparisons. – Old Economy compensation techniques include job evaluation, narrow grading systems, consistent, stable, available market compensation data and performance ratings based on input and activities. – Old Economy compensation characteristics are steep pay and work hierarchies, status, guaranteed pay, benefits, entitlement and bargaining.  Pay in the New Economy: Edward Lawler7 has written extensively on pay in the New Economy, focusing when formulating policies on an understanding of organisations’ goals, values, culture and challenges within a more competitive global economy. He advocates people-based pay instead of job-based pay. Edward sees pay in the New Economy focusing on helping to achieve both organisational and individual goals. The future of work focuses on energising the person. There are no jobs, only work. Personal growth and future viability is achieved by valuing the whole person. The market is chaotic, and information to match pay information with the market is extremely difficult to come by. Work is about creativity and leadership. There is an increasing demand for talent, and delivery of customer value is key. Change and the pace of business continues to be faster and faster. Work viability is changing. Outsourcing of procedural work globally to different countries is still on the up. Technology is fully integrating the way work is done. Energising the whole organisation is critical to business success. Work is about the knowledge, value-add and output of all employees. New Economy work is all about collaboration across silos, knowledge sharing, human capital utilisation, shortand long-term assignments and opportunities, individual accountability to collective success, developing talent and knowledge, and contributing distinctive knowledge. – New Economy compensation techniques include total package or TCOE, variable pay, team-based performance rewards (not individual), empowered line management, broadbanding, internal relativity and some market data, flexible package structuring, flexible benefits, and separating pay from the work hierarchy. The New Economy is about individual growth, a compelling future, affinity with the organisation, and total remuneration with flexibility and choice. This becomes quite apparent when asking employees why they leave or under-perform within a particular organisation. An organisation can have the best remuneration strategy and design 166

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in the world, but if the non-financial components are absent, retention of talent and sustainable delivery of high performance is very unlikely. These include8: – career and future prospects; – meaningful work; – leadership; – organisation affinity and being part of a team; – autonomy and independence; and – feeling valued and recognised. If your attention to the above criteria is average, and your remuneration design is poor, you are on a slippery slope. However, even if your strategic goal alignment and talent management is functioning well and your remuneration and reward strategy is poor, your organisation is still at a distinct disadvantage.

A comparison of old and new economy remuneration and pay Category

Old Economy

New Economy

Remuneration philosophy

One pay structure for jobs in same role and all employees.

Multiple pay structures, taking into account different variables: different type of roles, specific skills, business types and business life cycles.

Remuneration strategy and philosophy is focused on financial and often guaranteed reward.

Remuneration and rewards include financial and nonfinancial recognition and reward.

Paternalistic philosophy to recognition and reward.

Treatment of employees like adults, choice of package structuring.

Centralised HR design. HR manages pay, and dictates to business.

HR designs schemes with management participation to set framework and policy. Decentralised management of pay by management. Board governance over pay strategy.

Who designs and manages pay?

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How is financial / direct remuneration composed?

168

Guaranteed pay.

Total package with guaranteed pay mixed with high focus on variable pay, (flexible benefit offerings, share schemes, bonuses, performance, retention and sign-on bonuses) as well as incentive trips and rewards.

Paternalistic plus fixed and compulsory benefit design.

Flexible benefits, with options of cash and lifestyle balance.

How is non-financial reward composed?

Job for life. Paid for length of stay in organisation (longservice awards).

Career options, challenging and varying opportunities, secondments, learning and development, lifestyle balance, future prospects, recognising the person’s capability and what is delivered.

How is non-financial reward composed?

Pay for attendance.

Pay for value add, delivery and performance.

Pay is directly aligned with the level and status in the hierarchy.

Allows higher pay at lower levels of work, e.g. sales, customer facing and specialist skills.

Communication and transparency of remuneration.

Limited explanation about pay policy, pay levels and why you are paid that salary.

Transparency of pay. Communication about pay policy, and how an employee can increase pay. Communication about package structuring. Knowledge of pay bands. Communication / wealth statements regarding the value of total pay package. Public reporting of executive and Board remuneration.

Pay tools and concepts

Narrowly defined jobs.

Broad generic roles and broadbanding.

Inflexible evaluation systems. Higher value attached to jobs with status and power, and number of direct reports.

Flexible job evaluation tools focusing on values, level of work complexity, and often job families. Ability to size specialist and sales roles.

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Hierarchical and rigid pay structures, driven through promotion and status.

Broadband pay structures, flexible pay and continuous improvement. Increase pay laterally through increased versatility.

Individual reward and pay.

Team-based pay and share award schemes.

Inability to have consolidated employee cost.

Total cost of employment is easy to track and manage. Enhanced comparability between employees.

Limited knowledge and innovation.

Knowledge and benchmarking on variable pay. Long-term incentives, bonus schemes.

In the Old Economy, pay focused on pay-for-the-job; then there was a big shift towards equal-pay-for-equal-work; now there is movement towards equal-pay-for-equal-value. You need to be explicit about what elements will not be used as pay determinants in your organisation. Some of these should include: position in the hierarchy, number of direct reports, future potential, gender, length of service, and marital status. In countries (like South Africa), where there is specific focus on transformation and skills development for previously disadvantaged individuals, and where there is therefore a high demand for skills from specific race groups, it is more challenging to agree that belonging to a specific population group will not be used as a pay determinant. Historically it has always been easier to increase one’s pay by resigning and moving to the same or similar position within a new organisation. New Economy cultures allow employees to engage with their current leaders openly discussing other roles in the organisation that pay more, the competencies required and how to move to those roles in order to increase their pay. This may mean a lateral move in the organisation. However, the role may be more complex, requiring different specialist skills, or part of a different job family carrying increased accountability, and so forth. In a truly New Economy culture, people may decide that they want less stress and pressure, and although wanting to still work, they choose a lesser paid role to have more work-life balance, and decrease their responsibility for managing their lives, their futures, and their careers by working for organisations that are flexible in meeting their individual needs and which focus on the whole person.

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KEY FACTORS OF RECOGNITION AND REWARD IN THE NEW ECONOMY The goal of remuneration is to drive New Economy organisational practices through organisational culture, performance management, strategy execution, talent creation and shareholder value. The management of total spend through total package management is seen as an asset investment and not as a cost – the most effective way to utilise human capital. The ideal is to be flexible and innovative in the package components, focusing on addressing motivation and individual needs. Remuneration should differentiate the valueadd of the people. The principles of an effective reward strategy in the New Economy are:  Reward strategy and policy should support the business model. If the business model is one of integration, the rewards you offer must focus on non-silo behaviour that supports the integration of the business. Your business life cycles must also be aligned to remuneration. Start-ups should reward customer acquisitions, whereas in a mature life cycle you want to ensure and reward asset efficiency.  Reward strategy must attract, retain and encourage the employees to be energised and add value to the organisation. Proactive organisations reward innovative ‘thinktanks’ or ideas provided by employees that can assist the organisation to achieve its strategy whether for growth or cost reduction. The reward should not be limited to ideas for their own department and could be generated in the form of discussion chat rooms on intranets. The types of payment could be in the form of monetary rewards, trips, competitions and job rotations.  Rewards should encourage learning and growth. Growth and development of new skills enable job rotation, talent mobility, graduate programmes and more opportunities for increased pay as part of most good reward strategies. Individual learning and growth must be built into each employee’s performance contract, and each manager should be made responsible for the learning and growth of their direct reports. Through this type of performance rating, remuneration becomes a way to ensure that some of the employee’s workday is committed to development and growth. This also enables effective use of human capital and the organisation’s skills base. Many large organisations have corporate universities that enable development of technical, leadership and ‘soft’ skills to enable growth and career management. These universities often also include career management planning, career ‘pathing’ and assessment centres to enable employees to assess development areas. Organisations such as Dimension Data, Old Mutual and SABMiller have well-established corporate universities, as well as entrenched graduate programmes, similar to those at the renowned international organisation, General Electric. 170

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 The policy must be credible, well understood and communicated. You need to set the scene for success sharing. Transparency, communication and the way your organisation extends rewards need to be aligned with culture, goal and strategy execution. Policy rollout and accessibility is essential. Innovative organisations have good intranets, HR helpdesks and call centres, and require leaders to engage in faceto-face communications, ensuring that all methods of communication are used in an effort to ensure that policies are well understood. Once a year in organisations such as Old Mutual, the leaders communicate their strategy, targets and how these business objectives cascade to each individual, which is then reflected in each employee’s performance contract. Bonus schemes are discussed as part of this process, describing what is required for success sharing. A further innovative way of communicating pay is by means of total rewards or remuneration statements, also known as wealth statements. These enable employees to understand easily their total cost of employment (guaranteed pay, plus variable pay and benefits).

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Many top South African organisations have online payroll and HR systems that enable people to obtain this information freely and model different package options for themselves.  Reward strategy and policy need to have elements that value New Economy practices, including entrepreneurship and knowledge-sharing. Microsoft SA has a monthly get together of all staff to recognise a staff member that has achieved a ‘wow’ factor for achieving something out of the ordinary. The staff member receives recognition from colleagues and leaders alike; the knowledge is spread, and the employee receives a voucher of appreciation. This could be in any area of the business, and is a great example of recognition and reward for innovation and knowledge-sharing in the New Economy.  Unique reward programmes will help keep you ahead of your competitors. Regular review and change is required. It is not about changing your reward strategy, but how it is implemented. For example, without changing the value of bonuses, change the frequency of payments. Dimension Data found an innovative way of changing the frequency of bonus payments. Depending on the Theme of Work, a performance bonus could be paid monthly, quarterly or annually. This allowed the organisation to reward people in keeping with the time span associated with their Theme of Work – in other words, when and how their work was delivered.

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 Rewards need to support your organisation’s values and culture and must be applied in a manner that is fair and equitable. Conventional share schemes have traditionally been reserved for management only. Microsoft SA issues shares to all staff. They align all staff and hold them all accountable for the achievement of organisational objectives.

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 Recognise the whole person. New Economy practices focuses on Intelligence Quotient (IQ), Emotional Intelligence (EQ), Physical Intelligence (PQ) and Spiritual Intelligence (SQ). Reward strategies that support the whole person focus less on the monetary components of the pay strategy and more on the lifestyle choices of the employees. These include things such as: – Buying up or selling leave annually, giving your people life choice options. – Allowing a total leave allocation so that people may take spiritual leave (this accommodates different religious choices) or family responsibility leave as they see fit. – Enabling application for part-time and flexible work hours, allowing people to create an appropriate work-life balance. – Providing flexible pension choice percentage contributions that appeal to different generations. – Rewarding people in non-monetary ways through recognition ceremonies, feeding the motivational and emotional people requirements. – Creating opportunities for healthy living by providing onsite sports facilities, subsidised sports club memberships or sponsored medical checkups.  The use of variable pay mechanisms for ‘hot skills’: This is recommended, as organisations end up paying a premium for skills that were once in demand but that are no longer required. The ‘year 2000’ technology scare saw many organisations paying significant premiums for relevant IT skills (for example COBOL programmers). Three to five years into the new millennium, adjustments were difficult to make in order to ‘normalise’ excessive guaranteed pay portions for these resources when the demand for their skills decreased substantially. In other examples of highly sought-after skills (such as actuarial resources), more innovative ways are being used to retain them. These include: – Paying for studies. – Rotation of resources to increase experience and keep them stimulated. – Having an additional variable bonus pool to distribute to these employees for performance instead of guaranteed pay. 172

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 Reward philosophies or strategies that support New Economy practices: – Pay for personal capacity to contribute. – Pay for growth, versatility, attitude and values. Free people to grow and contribute. Organise around your clients. – Provide less structure, more information and knowledge. – Make line managers accountable for their direct line reports’ total cost of employment, based on appropriate information. – Make line managers accountable for dialogue about pay decisions and making pay decisions transparent.  Critical requirements: – Pay for performance. Every organisation says they pay for performance, but there is a vast difference between what they say and what they do. There is a strong link between employee success and business success. There must be a willingness to differentiate performance and get the most out of differentiating pay. You must find mechanisms for leveraging pay to drive the business outcomes. One of your options is to rank people according to performance and then attach the pay, clearly communicating the reasons for the difference. – Remuneration packages and policies must include a focus on quality of life or work balance, intrinsic rewards and non-financial components. Your remuneration strategy must align and integrate with your rewards philosophy. – Leadership involvement. Involve all leaders in the design of pay schemes. It is no longer HR’s responsibility to design things in the back-office. You need to trust that your leaders will make the right decisions. – Variable pay. See variable pay as a communication vehicle rather than a pay delivery vehicle. – The democratisation of remuneration design and access to relevant information. Preferred employers tend to consult widely and have successfully implemented effective sharing and transparency of their remuneration information. House information on your human resources intranet site, role and pay information on your self-service human resources or payroll systems that enable package structuring, pay line information, and the option of wealth statements. – Remuneration that rewards leadership behaviour. This is where ‘how’ the delivery happens is as important as ‘what’ is delivered. You need to ensure that your values drive the way you reward your people, so employees who deliver the best results, but do so at the expense of your organisation’s values and culture, must forfeit bonuses and rewards. 173

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– Career progression. Make the best use of your organisation’s talent, variability of roles, lateral moves, job rotation and future prospects. Reward observable behaviour leading to business success rather than hierarchical progression. This facilitates employee-driven career planning and contributes to career progression by optimising continued employability as opposed to short status-based financial gain. In 2005, SABMiller9 developed its ‘total employment offering’, or TEO. Based on extensive feedback from SAB employees, TEO was designed to make sure that SAB continued to attract new talent and retain the best South Africa has to offer by creating a flexible work environment that could respond to the demands of diverse employees. This ‘value proposition’ included the policies, measures, practices, behaviours and culture that shape the experience of work, and strategically aligned with New Economy remuneration strategies within the organisation. More particularly, it covered:

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 Personal (non-work) support processes and structures that would allow employees to achieve a balance between work and family responsibilities – including flexi-time and flexi-workplace opportunities.  Financial and career growth opportunities, rewards and recognition.  Challenging work through enriched, empowered jobs, traineeships, projects and assignments, and an environment supporting a high performance culture.  A social environment promoting open communication, a fun atmosphere, and a dynamic culture embracing diversity.  Stability in working for an organisation with a clear vision and demonstrating leadership by example.  Work managed professionally through training and development, mentoring, coaching and career planning (SABMiller’s purpose-built Training Institute providing ‘Corporate University’ programmes was aimed at enhancing core competence and operational expertise).  Personal achievement through accountability, responsibility and stretch goals.  Encouraging social responsibility by allocating each person a day’s community leave every year.

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SO WHAT DOES THIS MEAN FOR LEADERS?  Communication is a fundamental factor and needs to include transparency.  Subscribe to a common business strategy.  Create structures based on Themes of Work.  Have clearly defined processes and role expectations.  Use multi-skilling and team based approaches.  Align pay for performance and competencies.  Have a robust total cost management system.  Strive for multiple career paths or multiple pay paths. Without effective performance management, not even a world-class remuneration system can succeed. You need to ensure that your remuneration design is rewarding the right things. It is more dangerous to say you pay for performance and don’t, than not to pay for performance. Astrid Warren, Human Resource Director at Microsoft SA, believes proactive and ongoing communication between management and staff has made a tremendous contribution to nurturing and establishing the Microsoft culture of personal empowerment. “This has strengthened morale and has had a direct impact on organisation performance,” says Astrid. She adds that, leap “through two one-on-one meetings a month with their direct reports, managers remain in the front line when dealing with problems and solving them.” In this way, leaders are not only able to determine what employees want, but involve them in the problem-solving process too. “This promotes employee participation and stresses the importance of individual contribution. By proactively engaging with employees, managers always have their fingers on the pulse of employees’ impressions and opinions, which enhances mutual trust and respect. Managers are also actively involved in celebrating individual and team accomplishments.” 10

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In conclusion, recognition and reward in the New Economy has little to do with monetary pay. Rather it is about how to use rewards to leverage and drive business performance. You need to use rewards to direct and ensure your business strategy is achieved and performance outcomes are met. Rewards need to assist with managing talent and enabling and supporting the culture and values of your organisation. Recognition and reward should be one of your most effective change management tools.

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KEY LEADERSHIP QUESTIONS: RECOGNITION AND REWARD  Does your organisation have a clearly defined reward strategy?  Is this reward strategy aligned to your culture and values? Does it assist in delivering organisational and individual goals?  Does your strategy take financial and non-financial rewards into account?  Does it translate into a policy that defines the various components of remuneration?  What are you rewarding – and do you align this with Themes of Work?  What are you paying for? – Leadership versus financials – Cross-organisational goals versus line of sight? – Tangible outcomes or behavioural values versus the way the outcome is achieved?  What is your pay mix? How much is based on financial rewards and how much on non-monetary rewards?  How empowered are your line managers to manage and make decisions about remuneration?  Does your remuneration policy distinguish between businesses in different life cycles?  What are you doing about remuneration packages in a mobile world? Are you rotating talent?  How do you reward knowledge workers and innovation – the new drivers of the world of work?  How is your compensation delivered? How much personal input is obtained on what all the stakeholders want? How do you communicate policy and transparency of pay and remuneration to managers and employees?  How involved is your Board in structuring the remuneration strategy and executive compensation? How do your career opportunities differentiate in total remuneration from your competitors’?  What alternatives and flexibility does your remuneration have – cost of tuition, flexible work hours or flexible benefit structures?

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 Are your incentives seen as an entitlement? Are they an integral part of a total reward system that recognises individual and team performance? Do you reward poor performance or only good performers?  Review your organisation’s mission statement and identify behaviours that are deemed critical to success. Does your remuneration reinforce these behaviours and reward employees for driving improved business results using them?

NOTES 1 Blaine Pardoe Lee is the author of numerous books of science fiction, military nonfiction, and business management. (From www.blainepardoe.com.) 2 From www.charlesleadbeater.net. 3 ��������������������������������������������������������������������������������������� Andy Hickford is an associate of Signify (bsignificant.com), a UK-based motivation and leadership development organisation. 4 Michael Eisner (born 1942) was CEO of the Walt Disney Company from 1984 to 2005. (From Wikipedia, the free online encyclopedia.) 5 Hollon, John. 2006. Workforce Management, December 11, (74). 6 ������������������������������������� Deloitte: www.bestorganisation.co.za. 7 Edward Lawler. Rewarding Excellence: Pay Strategies for the New Economy. Book review Administrative Science Quarterly,  March, 2002. 8 Louis Marx. 2006. Pay Inequity – Perception or Reality, November, Deloitte. 9 SAB Website: www.sab.co.za. 10 Deloitte: Press release: The four focus areas key to being an employer of choice. www. bestorganisation.co.za. THIS CHAPTER WAS RESEARCHED AND WRITTEN BY NATALIE EEKHOUT

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9 CHANGE LEADERSHIP Change in all things is sweet. Aristotle1

THE ASPIRATIONAL VIEW OF

CHANGE LEADERSHIP The continuous presence of change, and the capacity of individuals and teams to respond to it, forms a core competence of our sustainable competitiveness. We develop the competencies (skills, knowledge and attitudes) of people at all levels to live with and stimulate continuous change. Change is not seen as a cause of uncertainty, but as an essential part of learning and growth.

CHARACTERISTICS OF CHANGE LEADERSHIP IN THE NEW ECONOMY  It is required practice that disciplined change leadership practices and processes must be applied to any change.  People are recognised as responsible adults and thus involved in influencing any change that affects them.  Leaders across all levels are ‘change masters’.  Self mastery forms a core competence across all levels. 179

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The New Economy is about perpetual change. Unremitting revolutions in new technologies, customer needs, the speed of communication and the intensity of global competition compel organisations to be in an almost constant state of transformation because the environment is characterised by continual flux. This constant change is either the making or breaking of an organisation, and they must learn to deal with this as an ever-present element or they will not be able to sustain any sort of success in the New Economy. In order to demonstrate the impact that change can have on an organisation, some of the sobering statistics about change are listed below:  In research done by Hammer and Champey2, it was discovered that on average, about 70 percent of change objectives are not achieved by organisations at all, or are not achieved within the desired time frame and budget in order for the change to be considered a success.  Only about 30 percent of all corporate activities, such as mergers with and / or acquisitions of another organisation, have added value to shareholders or realised the anticipated gains presented to decision-makers within the organisation when deciding on undertaking such activities and following such a path.  Andy Andrews3, director of the Graduate Institute of Management Technology in the United States and former head of the Wits Business School, did research that ascertained that no more than 30 percent of the success of any change strategy depends on the preparation and plans for such change. Furthermore, more than 60 percent of the success of any change strategy actually hinges on organisation responsiveness to the change and on how the strategy is implemented. In other words, even if you do the planning part 100 percent right and identify exactly the right new technology or system, or the perfect takeover or merger target, you are still not even a third of the way to guaranteeing any sort of success. With this in mind, we repositioned our initial focus from ‘change leadership’ to ‘high performance organisational leadership’. Leading change is not enough. Transformation has to be accompanied by disciplined and professional interventions and processes. The organisation needs to be geared towards an environment of change. To beat the odds when they attend to issues of organisational transformation, leaders must:  take charge of change; and  embrace disciplined change leadership processes.

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CHANGE LEADERSHIP PROCESSES Change leadership processes hinge on people dynamics. It boils down to identifying and managing the various responses humans have to change. In the Old Economy, how people reacted to change was not important. With adequate autocratic power structures in place, change could be forced down on employees without fuss. The dominant hierarchical structures ensured that people did not question orders from their leaders and were very good at following them without questioning or quibbling. The other fact that made it easier to deal with was that change very seldom occurred. The need for organisational transformation came along maybe once in a leader’s career. After the change occurred there would be years of stability, which allowed time for things to settle down. There was plenty of time for adjustment and adaptation. These days leaders have to cope with radical changes a couple of times a year, never mind a couple of times a decade. In a world where your organisation’s position is under constant attack by global competitors, where tariff or trade barriers are diminished, and where the speed of technical innovation can erase all market gains in an instant, organisations have to adapt or they will die. Fast. Change is a given that must now be factored into corporate strategy. At any time, and without warning, an organisation could be forced to cope with four or five sets of overlapping changes. These could range from a new technology being introduced to mergers and acquisitions, from changes in consumer preferences to social trends and additional markets being entered into, new legislation could be promulgated and passed; the list goes on and on. Anything that could change in an organisation’s internal or external environment will change at some point in any leader’s life with the organisation. This is why it is imperative for your organisation to cope with constant change. The top-down autocratic style of forcing employees to change direction and adapt to new circumstances under duress cannot work when they have to do it frequently. This constant change requires that the majority of people actually buy into the shift in direction and the reason for the shift. They need to support it actively. Without this level of organisationwide buy-in, the wheels will come off. As was stated earlier, it is not the planning and preparation for change that is the dominant reason for the success of the change, but the overall responsiveness of the organisation to change and the manner in which the change strategy is implemented within the organisation. This requires employee buy-in. The pressure on organisations to democratise their relationship with their employees, allowing for more transparency and ensuring that their decision-making processes are more consensus-seeking rather than autocratic, adds to the importance of incorporating people’s input during the change process. Managing human responses is very difficult. Instinctively, most people resist change. 181

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They love their comfort zone and the security bred by routine and familiarity. When something comes along which threatens the status quo, it will unleash a set of responses, which at face value look negative. These responses could range from dozens of employees picketing the organisation’s head office, to a spate of resignations by middle managers, or rude commentary spray painted on an executive’s car. Though not particularly pleasant to experience, these are all good signs that change is on track. Powerful emotions and responses are always unleashed by change and as such are strong indicators that transformation is taking place. Change is not comfortable, and if people are not uncomfortable during the change process, then change is probably not really happening at any meaningful level or to any real extent. You should be worried if restructuring elicits no unsettling responses from your employees rather than eliciting a series of unpleasant attacks. The absence of the ‘symptoms’ associated with change can indicate that nothing consequential is happening. Compare an organisation undergoing change with a newborn baby. In the initial stages of infancy if she cries, wakes up in the middle of the night, and demonstrates awkward but impressive digestive capabilities, you know everything is well and progressing as it should. You would worry if the infant displayed none of these behaviours. While the powerful human responses unleashed by change should be welcomed as indications that transformation is taking place, the bad news is that the process is totally unruly, unpleasant for everyone, and frequently unmanageable. Forget about preparing for and pre-empting employee reaction as a means of damage limitation, because human responses are almost impossible to predict. Nobody can envisage how and when people will respond to change. It is therefore crucial to allow time and scope for the ‘human factor’ involved in change. People should be able to express their reservations without fear of recrimination and be given adequate opportunity to work through them, even if it delays the process. Even the best prepared and researched project plan will come off the tracks from time to time and will need to be adjusted accordingly. This is a reality.

THE STAGES OF CHANGE RESPONSES While you cannot anticipate how and when people will react to major change, the good news is that the how is quite easy to identify. There are recognisable levels or stages of response to change, which are almost always conspicuous in organisations confronted with major transformation. These stages of change are:

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1.

Old contentment

2.

Denial

3.

Fight, flight or freeze

4.

Testing

5.

Acceptance

6.

Proactive

1. Old contentment: Often when people are first confronted with the possibility of change, their initial reaction is to retreat even further into their current comfort zone. They convince themselves that the future will be a replica of the current environment, or maybe a slight variation. They constantly reassure each other that the status quo is the correct place to be and that radical change will only affect others: other organisations, other divisions and other people. People in an ‘old contentment’ frame of mind are often highly competent. They fear that their skills will soon be made redundant. The feeling of total incompetence when facing this future is intimidating. Anyone who has had a sudden confrontation with new technology and does not know what to do with it will confirm this fear. These feelings are natural but the problem is that they are a major obstruction to embracing change. Forcing people out of their comfort zone is very tough, possibly tougher than evicting defaulting tenants. People create massively interwoven webs of dynamics and structures to cope with every eventuality and to provide constancy and consistency. Comfort zones are not only about the type of work you do or how you do it, but are also a way of thinking, or an outmoded but familiar way of doing something. The way in which we relate to each other, the language that we use and how we address people higher or lower in the organisation hierarchy are all indications of an organisation’s convictions. Being stuck in a redundant past and clinging to the security blanket of your comfort zone is exemplified in small things like a separate demarcated parking lot for executives or a resistance to employees working flexi-time. The problem with this desire to cling to comfort zones, and an outmoded status quo, is that as the pressure to change starts to mount, the human resolve to resist intensifies. The greater the need for change, the greater the resolve to resist tends to be. 2. Denial: Denial can be the weapon of choice for even the most successful and visionary business leaders. At this stage, people prefer to persevere with business as usual rather than deal with the hounds of change howling at the door. They remain inflexible, unwilling to accommodate anything new or even to consider that change could be here to stay. 183

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Perhaps the most apt example of denial can be embodied in this statement made by Bill Gates on 11 July 1995. In response to mounting pressure against Microsoft with regard to their anti-competitive practices and the associated legal enquiries, Bill was said to have stated, “This antitrust thing will blow over.” 4 In retrospect, and even at the time, it was clear that this was wishful thinking on his part and that he was deep in denial about the changes that would soon be affecting Microsoft.

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Denial can be manifested and recognised in a number of symptoms including:  Disbelief: “It won’t happen to us, we are different.” Disbelief has caused the destruction of many organisations, especially in the New Economy, where one mistake or delay can come at a great cost. Technology-based paradigm shifts have been the most difficult to make. IBM is a prime example: not only did this organisation give up the chance to dominate the lucrative global software market, but it also stuck by its belief that the demand for mainframe computers would be limited to a couple of defence forces and national governments.

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Resistance to technology changes can also be seen in the absence of computers on the desktops of many executives until a couple of years ago, as well as in the initial resistance to fax machines.  Rejection: “We are not going to take this.” Stakeholders take a more aggressive stance against the realities of impending change, declining to even consider the need for change or the proposed transformation.  Rationalisation: “We are not going to be affected, and this is why.”  Reinventing the past: “It was so much better in the old days.” Unwilling to face change, people will start to panelbeat the past so that it looks more appealing than the uncertain future.  Doing new things without doing anything new: “Let’s reshuffle the deckchairs on the Titanic.” The introduction of worker councils in the 1980s is a prime example of this. In a desperate attempt to avoid dealing with unions, organisations introduced worker councils. While it was a new initiative, the councils were toothless and did not improve communication between labour and management. Something was created that could change nothing. Change to prevent real change. Eventually however, pressures increase to such a degree that denial no longer suffices. When this critical mass of pressure is reached, people have no choice but to start facing the impending change. This is not acceptance of the change, though. People will still try to control the change and will now react, but only on their own terms. 184

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 Bargaining: As the forces of transformation intensify and people start to feel an impending loss of their familiar comforts, they begin to sense that their lives will change and that the forces of transformation are bigger than their will to oppose it. The deeprooted instinct to hang on to what they have at any cost will kick in and they start to look at ways and means to maintain the status quo. We see this in South Africa fairly often when leaders are under pressure to democratise their organisations. They cannot, for instance, fight the greater need for disclosure at all levels, but they will typically only allow it on their terms. They will only distribute information that they think employees will need, the classic ‘need to know’ basis of dissemination, or they will release information ill-suited to the needs of workers by being too complex or too vague so that it is not information at all. They distort the transparency process by not allowing sufficient information to flow freely to the people who need it. The first signs of insecurity are usually seen in the denial stage. Now people are starting to feel intensely uncertain. They feel less confident about what they are doing, less competent about their ability to survive in the future. This can have nasty consequences on how they respond to imminent changes. People react to insecurity in a number of different ways. They can be non-reactive and passive, or they can become aggressive and confrontational. Often they try to retain a semblance of power or control by being manipulative or by subtly sabotaging the change process. This does not mean that people are malicious in their intent; this will often be a subconscious response, but these subconscious actions can undermine transformation. Whilst people are frequently in superficial compliance, they are merely paying lip service to the changes. You do not have to look far to find an issue that elicited this type of reaction in South Africa, namely employment equity. The need for black advancement was recognised decades before it was publicly defined in the 1980s. But even after that, organisations chose not to make a serious effort to bridge the gap between black and white workers. Most organisations started addressing the issue by launching investigation after investigation into the nature of employment equity. Committees were appointed to scrutinise it from all sides. Meanwhile, as part of their efforts to address the issue, they launched ‘culture awareness’ campaigns, an attempt to encourage greater attentiveness among employees. But nothing real happened on the employment equity front. Nothing really changed for the better. Investments may have been made in nursery schools, bursaries may have been given, and other commendable causes addressed and sponsored, but employee ratios did not change. Changes were made, and in the most part these were all good changes, but none of them went towards changing the inequalities relating to employment in South Africa. 185

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When confronted by questions about employment equity, management could point to all their efforts: committees, research reports, community projects and investments. But these efforts were largely discursive and the real issue, employment equity, was not addressed. The basic reason for this was not malevolence, but fear of change. Organisations tried to bargain their way out of the really painful issues around transformation by focusing on the side shows. The change process can very easily get stuck in this bargaining dimension, because the veneer of action could make it seem as though transformation is on its way when it takes the organisation further away from real change. This is because it temporarily alleviates the mounting pressure to change. 3. Fight, flight or freeze: This dimension of change responses can be the most intimidating.  Fight: A very small minority will take on a combative stance, aggressively challenging change initiatives. While this confrontation can cause discomfort and disruption, the ‘fight’ symptom is a welcome sign that a breakthrough in the change process is possible. In the South African context, this was seen when far-right resistance movements emerged in the early 1990s. In previous decades these factions had not felt a need for such militancy, because change was too far away and posed no real threat to the status quo. ‘Fighters’ will often display angry resistance to change and transformation processes. They will threaten to resign, blatantly ignore instructions, or ridicule the leaders of change.  Flight: Another minority will choose to retreat rather than adopt and adapt to change. They will often become apathetic, rejecting the planned change and transformation process and deny their part in the past, making it someone else’s problem. They have an enhanced sense of loss and are often unwilling to cope with new dynamics. Typically these people take early retirement packages or they leave the organisation. They will display their disdain for the process publicly, claiming that the new direction is totally wrong and will only lead to chaos. The ‘flight syndrome’ is common in South Africans who have emigrated or are planning to leave. Often they are the country’s worst ambassadors, criticising South Africa whenever and wherever they can. But the fighters and the defectors together represent only a minority response.  Freeze: Most people within an organisation will neither fight nor flee; they will simply retreat into inactivity. The fear of change and the volatility and uncertainty that go along with it will leave them apathetic and unable to move in any direction, be it in the direction of change or the direction against change. Too scared to venture an opinion, they will abdicate accountability, reject innovation, and wait for orders. The ‘freezers’ are sometimes hard to spot because often they are abuzz with activity. Unfortunately 186

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it is the wrong kind of busy-ness. It is an unfocused high energy that achieves little due to its lack of direction. These employees are rushing around in every direction, ostensibly addressing transformation, holding meeting after meeting, maintaining a superficial air of frenetic activity, masquerading at facilitating change while nothing is being achieved. While breaking the ‘fight, flight, freeze’, hold on an organisation takes concerted effort, the good news is that it signals a point of no return in the change process. While these symptoms demonstrate the crossing of a threshold, they by no means provide indicators of the success of the change process, merely that the process has now developed a momentum of its own that will drive it forward, be it successful or not. The next stage could provide the initial signals that the first real breakthrough on the way to acceptance and successful transformation has occurred. 4. Testing: When the realisation dawns that change is not going to go away, an alternative future should slowly start to emerge. The inevitability of transformation forces stakeholders to explore, evaluate and test new alternatives in the face of the impossibility of the old solutions. This is particularly true when new technology is introduced, or when it relates to people, especially in the case of new relationship structures − such as will arise with unions, customers and suppliers. Reaching the testing stage does not mean that the change process has hit a home-run and the organisation is now home free. In fact, the testing phase presents a potentially dangerous pitfall in the process: that of perpetual pre-planning as a means to try and secure perfection. Because of the loss of certainty and the forced ejection from their old comfort zone, where everything was familiar, tried and tested, structured and well-oiled, stakeholders may try to overcompensate for the uncertainty by trying to anticipate every small eventuality. They over-plan to try to acquire the same sense of clarity about the future as they had about the past. Or, in an effort to establish democratic transformation, they try to engage every party on every issue and over-consult, paralysing themselves and getting lost in a labyrinthine roadmap for the change process’s success.

While there should, of course, be adequate planning and consultation, exaggerated preparation trying to achieve unanimous agreement on every detail can delay and eventually divert the whole change process from one of direction and success to one of directionless stalling.

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people start to recognise their own contributions to the past. This means acknowledging the ways in which their past behaviour, willingly or unconsciously, formed part of the problem. Your organisation will only change when enough of your employees accept the need to change and the importance of being responsible for that change on a personal level. Acceptance of a problem and the need for change as well as the acceptance of personal liability for that problem, whether it is large or small, direct or indirect, is especially difficult in South Africa, where the blame game is a national sport. Because of the historical realities of South Africa, there is a strong inclination to focus on the guilt and past behaviour of others and to deny culpability. For example, management may not necessarily recognise how they may have undermined the capacity of employees in the past, and unions may not recognise how their attitudes have undermined change and performance in the past. It is important to accept culpability on some level because this allows an evaluation of what was done in the past and how this could now be done differently. But this requires an acceptance of having done something wrong in the first place. Acceptance has to begin on a personal level for it to become a reality. People should at this stage of the change process start to take full accountability for the new future and look for ways in which they can contribute, at an individual or collective level, to the success of the new strategy. They should be encouraged to identify different behaviour patterns that will successfully complement the new dispensation. There are two types of acceptance that occur in organisations undergoing change: active and supportive acceptance. Both are positive and both should be represented in any successful change process. A minority will take an active lead to promote change, and if they are absent the change will falter. The majority of people will tend to provide support. Often management expects every stakeholder to take an active role in furthering the change process. This is unrealistic. Not everyone has leadership or visionary tendencies. The leaders should be able to tap into the support of followers. In short, without dynamic vision, a change strategy will fail. If the vision is not supported, the strategy and organisation will be no better off. At this stage, the change leadership should also become more realistic. When the transformation process is launched, the goals and anticipated achievements of the process are often overstated and idealistic. At the end of the battle, at the acceptance phase, the realities of the situation emerge and ambitions are tempered to fit the real circumstances. At this point a real analysis should be done of the change process and strategy, and it should be rationalised to fit with current circumstances and facts that were not present initially. There should always be reconciliation and adjustment of the change strategy as it moves forward so that it continues to be relevant. 188

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6. Proactivity: At the last stage of change response, people have completely internalised change and have taken ownership of the new structures. They have regained the courage and self-confidence to innovate and are now starting to contribute in positive ways. The six elements of human response to change are helpful to recognise and track the progress and success of transformation. This seems all very nice and tidy does it not? There is a catch. The stages of change do not occur in a nice chronological sequence. It is consequently incredibly difficult to manage or pre-empt, because all of the responses take place at the same time. The centre of gravity merely shifts.

Surfing the human response to change New Contentment Proactivity Acceptance Testing Fight-Flight Freeze Denial Old Contentment

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STAGES OF CHANGE There are generally four broad stages of change.  The first stage: This is centered on old contentment, denial and bargaining. Resistance is powerful and self-delusion reigns supreme. People refuse to believe that anything will change.  The second stage: This occurs when old contentment and existing comfort zones are demolished, insecurity and denial set in and there is a definite shift towards resistance (‘fight, flight, freeze’).  The third stage: This is normally dominated by hard resistance, but is softened by an emerging acceptance that the future will inevitably look different. This stage is usually characterised by great conflict: the majority of people are still stuck in an outdated mindset, while a minority of revolutionaries, eager to initiate change, are fighting ahead.  The fourth stage: At the final breakthrough stage, the centre of gravity shifts towards active acceptance. The majority of stakeholders agree with the necessity to transform and so have begun to initiate actions to support the change process. When managing human responses to change, it is key to remember to always go along with the natural human responses and not contrary to them. A common trap for change leaders is that they approach the transformation process from the fourth stage. They expect people to be immediately content with the new direction because they see the logic in the change process. People need to see the logic for themselves in order to accept it. This is totally contrary to human experience. When people’s instinctive responses to radical change are not allowed, the suppressed dynamics of denial and resistance will drag the whole process down. Leaders have to ‘surf’ the waves of human responses to change and just go with the flow. These sometimes riotous emotional reactions to change are normal and healthy and should not be seen as negative. In fact they are constructive signals that change is happening. Assuming these symptoms are malicious and responding to them in a negative manner is counterproductive. When a storm approaches a village, some will build hedgerows, and others windmills, the Chinese saying goes. If the energy unleashed by radical change is blocked or ignored, it will become destructive. But if it is recognised and valued, it can make an immense contribution to success. Your leaders have to take cognisance of the different instinctive reactions to change and work with individuals to design their interventions around it.

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Helpful in this regard is the identification of four different groups (the ‘CMs’) who typically respond to change in different ways. The CMs of change

Change

Creative

Critical

Committed

Competent

Mavericks

Minority

Mass

Majority

Masses

 Change mavericks: Change is invariably driven by change mavericks. In a sense, change is initially driven by ‘the power of one’. This does not at all mean that any single person or even a small group of people will ever prove capable of initiating and sustaining change. It is also equally true that at its earliest stages change of any magnitude has very few supporters. Without committed drivers of change, people who are capable of seeing the necessity for change and willing to engage in it, transformation cannot happen. Change mavericks are dynamic visionaries, capable of dreaming and doing. They can also effectively and compellingly communicate their vision to other people. But no maverick is an island. Usually an organisation only has one or two of them, and while the power of their conviction may be robust, they cannot create change by themselves. This makes it absolutely essential for the initiating change mavericks to consolidate a creative minority who can take the process further. This may often prove to be a very difficult decision for the individual or few individuals who have invested 191

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a great deal of effort and probably even created significant resistance to themselves in the process of initiating the change. Without the necessary support they will get swamped. Chris Ball, a past managing director of Barclays Bank, was the change maverick who managed the transition of Barclays Bank into First National Bank and was one of the first business leaders in South Africa who interacted with the then banned ANC and UDM. He also enabled the financing of advertisements calling for the unbanning of these organisations, a revolutionary act in those days. But while his actions were visionary, he did not have the adequate network of support to keep him standing and as a consequence, he lost his position at First National Bank.

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To stand any chance of success, the change maverick has to encourage the development of a creative minority of change leaders.  Creative minority: The creative minority usually represents less than one percent of an organisation. They are a group of early adaptors, eagerly embracing the vision of the change mavericks. Encouraging the development of a creative minority is an effective shortcut to success. Rather than investing tremendous time and resources in trying to win over the masses, organisations have learnt to focus their energies on a creative minority. This group is capable of inspiring and driving the creation of the critical mass. Some people refer to the role of creative minorities as the trim-tab factor. This refers to the small unit which forms part of a ship’s major rudder. The main rudder which is moved to redirect the ship cannot turn quickly enough due to the resistance of the ship’s forward movement and the pressure of water. Consequently, a ‘little rudder’ is built into the main rudder, and it is this trim-tab which is moved first. It contributes to breaking the initial resistance of both the ship’s forward direction and water resistance, and thus helps the main rudder to move in the desired direction. The creative minority, constituting a very small number of the entire organisation’s community (managers, employees, union officials, shareholders, and ultimately customers and suppliers) need to develop a high level of intellectual capital and conviction if they are to succeed in initiating the large scale redirection and transformation of the organisation’s mode of governance or strategic direction. If their enthusiasm is not matched by complementary skills and experience, the lack of intellectual capital will lead to their either making proposals or championing responses which are impractical and doomed to failure. Alternatively, they will wither in the heat of resistance and slowly but surely lose interest and motivation. Ensuring that such a creative minority 192

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possesses sufficient magnitude of intellectual capital (and not just ‘rah-rah’ enthusiasm) is essential for the success of the transformation processes.  Critical mass: The critical mass represents about 15 percent of an organisation. This is a key number: research indicates that once 15 persent of employees have moved in a new direction, the rest of the organisation will follow. The critical mass may not be composed of visionaries or leaders, but they are realists. They will be able to understand the need for change and will be willing to change their own way of thinking in order to complement a valid vision. In order to achieve this, the creative minority needs to be equipped with the necessary skills and intellectual capital to successfully transfer knowledge and expertise to the critical mass. A frequent flaw which occurs at this stage is that the creative minority forgets the learning process they had to go through and hopes to transfer the experience and knowledge to the critical mass through policy driven methods. As is the case with any relatively complex issue, people have to go through an extended period of realignment and learning before they will internalise the new demands and become capable of sustaining them. The critical mass becomes the important point of access and leverage to roll out the process of change to the rest of the organisation. If, for whatever reason, they are ill equipped or have not been given the opportunity to develop the necessary new skills and abilities, then whatever they roll out will tend to become a mutated form of the past rather than an enduring transformation into the future. This is a most important facet of any change management process. It is self evident that if the creative minority is ill equipped to begin with, the critical mass is doomed to fail.  Committed majority: With the creative minority and critical mass firmly in place, it is possible to concentrate constructively and productively on the development of a committed majority. The committed majority is created when the mainstream starts flowing in a new direction. Between 40 percent and 55 percent of an organisation should buy into the new strategy at this stage. They should be committed to transformation and have a relatively clear understanding and acceptance of why the organisation needs to change. This sets in motion a series of concentric waves of change which can be remarkably effective in rapidly spreading throughout the entire organisation. It is only at this stage that more conventional training and communication methods are likely to succeed and have an enduring impact. When a committed majority is established, the process of change is well on its way and the chances of a return to the old order are slim. Whether the change process will be successful in achieving its goals is still a moot point, but that change will happen is certain. 193

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 Competent masses: A change strategy cannot be successful if 80 percent to 90 percent of the people within an organisation do not have the skills to function efficiently in the transformed environment. Sufficient support should be given to equip the ‘masses’ with new competencies. Ensuring that the organisation’s members become a competent mass who support and contribute to the organisation’s change objectives is easier today than ever before. By making use of a combination of techniques, it is possible to very rapidly cascade learning throughout an organisation. Some of the well-tested and proved methods incorporate a mixture of the following: – Organisation-specific audiovisual support materials which enable line managers without any real training experience to facilitate learning within operational teams. – Distributed learning and communication technology makes it possible for a workforce of thousands to get exactly the same message at the same time. – Relocating learning and communication processes into the work stream by utilising a combination of team leaders and well trained facilitators minimises disruption and also serves to make it much more practical for people to link learning and communication to their own work areas. – Large group interventions have become a proved and reliable way of rapidly realigning practices and thinking within an organisation and also create a selfreinforcing environment in which the creative minority and critical mass can readily reinforce and sustain the commitment and competence of the majority of people. The key to managing change with the CM groups in mind is not to work against the natural tide. Many organisations have spent enormous resources in order to try and rally the masses around change initiatives without success. Encouraging smaller dynamic groups, who then go on to seed the rest of the organisation themselves, is much easier and more effective. When the organisation does not follow this process through correctly, and instead introduces premature procedures and relies on policy, the organisation takes refuge in mechanistic and administrative methods with the hope that the progress that has been made to date can now be institutionalised through ‘less messy and more methodical means’. They are incapable of developing the dynamic and responsive spirit which will make people sufficiently confident to participate in and drive the required changes. Procedures and policies should be positioned as a later consequence of the change process rather than as a method of managing change in its own right. One of the major challenges facing any organisation that is embarking upon change is that when a paradigm shift occurs, all people effectively revert to zero. The experience base and assumptions that have been formed over many years, and have been driving 194

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the responses and practices of stakeholders, become redundant. When this occurs, it is normal for people to start relying upon old or confusing assumptions. One of the most prevalent dynamics during the early phases of change – at least until a well-informed critical mass has been established – is for people to base their reactions upon conflicting sets of assumptions. If their responses and analyses are based upon conflicting assumptions, then their judgements about circumstances that have to be changed will remain at odds with one another. This will create conflict, which can be prevented by first establishing a set of congruent assumptions by questioning and evaluating existing assumptions as they pertain to the entire strategic environment at macro, micro and operational levels. It would be naive to believe that any stakeholder grouping can quickly change existing assumptions and readily recreate a new set of interdependent and congruent assumptions which serve to reinforce the new paradigm of high involvement and high performance workplace practices. The only way of effectively addressing these dynamics is to engage stakeholder groupings − either by group or as interactive groups – in processes which enable them to explore and redefine their assumptions in depth. This can be done in wellstructured ways, which facilitate the capacity of different stakeholders and individuals to remain committed to the core purpose of the change.

THE ESP OF CHANGE Arguably two of the greatest causes of failure that bedevil change initiatives are the naive beliefs that:  change occurs spontaneously and should be allowed to flourish in the warm glow of human intentions; and  there is one or other method which is the best way of ensuring successful change. There is a range of activities, awarenesses and methods that must be applied when creating change. The ESP of change provides a set of methods that need to be applied to any one of the levers of change that are presented in the previous chapters of this book. The content of the nine elements of ESP will vary depending upon the lever of change that it is being applied to, but the essence of the nine elements remains constant across all the facets of change. What is ESP? All nine of the elements or techniques are infused with varying levels of ESP, or Empathy, Space and Pressure.  Empathy: Regardless of the element that is being addressed, there has to be a pervasive presence of empathy. It remains perhaps the most essential yet least appreciated facet of guiding and entrenching change. As discussed earlier, it is normal, healthy and even essential for people to experience certain human responses to change. All of us, 195

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regardless of who or what we may be, will experience certain inevitable responses. While the intensity may vary from individual to individual, the experiences are everpresent. When designing and applying any of the nine ESP tools it is essential to build empathy into the process. This is achieved by providing for at least the following opportunities: – time to digest information regarding change; – time to interact with others to debate the change; – opportunity to question the stakeholder/s who are driving or proposing the change; – freedom to voice concerns and cynicism; – opportunity to hear answers to questions and concerns ‘from the horse’s mouth’ − that is directly from the drivers or proponents of change; – opportunity to interact directly with the drivers or proponents of change instead of hearing the entire message through second parties (interact with senior management as well and not only with human resource or training and development specialists); and – freedom from the fear that questioning and voicing concerns will be interpreted as malicious resistance or cause for victimisation.  Space: During the earlier stages of introducing change, it is important for people to be given the time and opportunity to digest and internalise the reasons and implications of change. Methods that focus on offering or creating personal space enable individuals and groups to experience their own early human responses to change. On the whole, methods that offer space create the foundation upon which a creative minority and critical mass can work to build a committed, although probably inactive and cautious, majority.  Pressure: There is an old saying which states that ‘people will change only when their current state of joy is surpassed by a far greater state of sorrow’. Stated differently, empathy and space help people to question their old habits and traditions, but pressure makes them behave differently. Pressure methods turn on the screws. They make it increasingly uncomfortable for people to persist with their old behaviours while making it more essential for them to adopt and entrench the requirements of the future.

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The ESP of change Directives Recognition and rewards

Pressure

m

Persuasion

p

Structures, systems, policies and procedures

a

Education and training

t

Opinion leaders

h

Collaboration Information Grass roots

E

Space

y

As illustrated, the required depth of empathy is relatively constant for all nine methods, but each method has varying levels of space and pressure. This has some general implications for planning and implementing of the ESP process.  The action-stakes increase from space to pressure: At the deep end of space, the stakes to take action are not very high. Change is being debated. Opinions are tested and shaped. People are often oscillating between old contentment, denial, co-option and active resistance (fight, flight, freeze). As we move across to the deep end of pressure, the stakes increase rapidly. Change becomes increasingly non-negotiable. Individuals, groups and all stakeholders are obliged to change their behaviours, attitudes and responses − both to one another and in how they behave within and towards the organisation. In the pressure zone, the methods tend to rely upon extrinsic controls that demand compliance. At the opposite end of the scale, in the space zone, the methods rely primarily upon intrinsic motivation and self-regulation.

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Over the past few decades there have been various schools of thought that have been biased towards one or other end of this scale. Pressure approaches have included policy pronouncements by edict, intensive public relations and marketing campaigns, and selective application of recognition and reward systems to recognise or punish people through disciplinary procedures. Space approaches have included non-directive group discussions, brainstorming, open-ended exploration and creative thinking and scenario development. People who have a strong belief in human nature and potential tend to prefer to use space approaches. People with more procedural or rational worldviews and beliefs tend to rely more on the pressure approaches. The important point is that neither of these extremes is adequate. The entire spectrum must be applied to drive and ensure lasting change.  Relying on or entering too soon into pressure zones creates counter-productive reactions: The old authoritarian modes of operating have created a false belief that people can be forced or manipulated to change against their will. This does not mean that it is impossible to coerce people to change. The problem is that as soon as the pressure is removed, people tend to revert to their old habits. Ideally the earlier phases of change should provide empathy and space, with a steady move towards decreasing space and increasing pressure. Conversely, it is useful to remember the old adage which warns: “People who are convinced against their own will are still of the same opinion.”  Relying primarily on methods in the space zone entrenches very little change: During the early days of trying to create a participative workplace, organisations often tended to rely too much upon the somewhat naive belief in the spontaneous motivation and willingness of humanity to respond positively if only given the opportunity. While it is essential to provide space, it is not sufficient. Relying primarily upon space methods will possibly encourage some individuals to take action. It will in all probability remain a talk-shop with ongoing discussion, much philosophising, and very little real action.  Utilising the ESP tools or approaches is not a linear or chronological approach: The progression of the ESP methods in ideal circumstances is roughly one of starting at the deep-end of space and moving towards the deep end of pressure. As this progression takes place, the methods within the space zone must not disappear. They must remain in place and be utilised as the fueling force and continuous reinforcement of the pressure zone’s methods. The pressure zone’s methods may therefore almost be absent during the initial phases of change, while emphasis is placed on those in the space zone. Over time, greater emphasis must be placed on the methods that induce pressure.

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There is really only one type of situation where this progression is inappropriate, and that is when there is a short-term crisis that can be solved in only one way. In this case, it may be necessary to leap into the deep end of the pressure zone by using some of those methods to force change through. It is, however, necessary to realise that the entire problem must be resolved and entrenched while pressure is still being applied. As a rule, this is a viable alternative only if the change that is being ‘forced in’ is relatively simple, can be readily defined and contained, and can be completed in a short period of time. The nine ESP approaches are discussed below in sequence from greatest space zone to greatest pressure zone activities. Keep in mind that several of these would be applied in parallel and would thus be taking place simultaneously. Also, every one of them contains essential components of empathy, as defined earlier. There is no absolute sequence to follow. The more urgent the change is, the greater the need to initiate change by using pressure-led approaches. Thereafter space-led approaches can be used to gain the understanding and support of stakeholders. This is normally the best route to follow for major restructuring, cost-efficiency drives and entrenching new work place practices. Change which is more organic and can afford to occur over a lengthy period can be driven by space-led approaches. In either instance, it is essential to reinforce the chosen approach by introducing the opposite disciplines. For instance, a space-led approach needs pressure-led processes to entrench it in the system. Likewise, pressure-led approaches require space-led processes to obtain understanding and buy-in.

THE NINE ELEMENTS OF ESP The nine elements of ESP are: 1. Grass roots 2. Information 3. Collaboration 4. Opinion leaders 5. Education and training 6. Structures, systems, policies and procedures 7. Persuasion 8. Recognition and reward 9. Directives 199

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1. Grass roots: The core ethos of a grass roots approach is the belief that people should be personally involved in issues that affect them. It also expresses the belief that the thoughts of the collective group or even masses will provide greater wisdom than relying purely on the contributions of only a few individuals or the views of only one or two stakeholders. The greatest value of the grass roots approach is that it involves everybody at the earliest stages of a change process. During 1993 and 1994, the ANC arranged a series of large rallies during which some of their more senior leaders interacted with several hundred people at a time to discuss economic needs and requirements. These rallies laid the foundation for the Reconstruction and Development Programme (RDP). Prior to these events, the ANC and its alliance partners had already done in-depth studies to determine some of the economic constraints and basic problems that would have to be faced. They did not, therefore, go into these meetings without any information. Instead, they had established a broad context within which to absorb and respond to the issues that were raised. Nor does it mean that the issues that were raised were accepted at face value. Over a period of months, many themes emerged. Several of the themes reinforced the picture that already had been created, while other emerging themes necessitated a review of certain assumptions and refocusing the emphasis in certain areas. Trevor Manuel, who was then Minister of Trade and Industry, commented on his experience at the World Economic Forum convention held in Cape Town in 1994. He acknowledged that the mass rallies often caused the senior leadership to rethink some of their assumptions, but not because they had underestimated needs. Instead he mentioned that they were often ‘humbled by the understanding’ that the impoverished masses showed. Rather than demanding free houses, their own realism motivated them to ask for access to fresh water and clinics. Therefore, when the RDP document was released, it could truly claim to represent the will of the masses.

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A few years ago there was a general strike in South Africa’s motor car manufacturing industry. It lasted for several weeks. As a result, one of the major problems a particular organisation experienced was that they had not been able to keep up with the delivery of spare parts to their many distributors. One would expect that there would therefore be an overwhelming urgency amongst management to get workers back into the warehouses as quickly as possible after the strike. This organisation took a very different stance. Once the date for the end of the strike had been announced, they immediately interacted with shop stewards and suggested that the entire striking workforce should be involved in a mass meeting over a period of two days. In effect they were extending the strike by three days, with one day for preparatory consultation

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and two consecutive days for a mass rally workshop. Several hundred workers and several dozen managers all got together in a large community hall. During this two-day workshop, the entire workforce interacted directly with the managing director as well as all the other managers. Together they identified issues that had to be addressed and allocated accountabilities to ensure that things would get done. One of the primary concerns was the need to wipe out the backlog that had been created by the strike of almost six weeks, but in ways which would still enable the organisation to meet its ongoing demands to deliver parts to the distributors. The entire backlog was wiped out in slightly more than eight weeks while still maintaining full delivery of spare parts required during those eight weeks. This represented an increase of almost 70 percent in productivity. The organisation achieved what appeared to be impossible by tapping into the often extraordinary capacity of grass roots involvement. The above anecdotes provide concrete thoughts and guidelines for grass roots involvement. Dialogue itself becomes a powerful contribution to change. It is, however, also obvious that it would be futile to rely only on grass roots methods. Such reliance readily leads to ‘mobocracy’ or ‘autocracy of the mob’. For this reason there are certain rules for grass roots initiatives:  Representatives of all parties who will be involved at grass roots levels must be involved from the outset to plan (not necessarily design) the initiatives.  The grass roots activities must have a clear focus of discussion or purpose.  The direct involvement of people at a personal level must be balanced by using legitimate representatives who consolidate and refine the inputs gained through the grass roots discussions.  The refined inputs must be fed back to the participants at grass roots level to give them the opportunity to review and question the consolidated inputs.  Wherever the inputs from grass roots’ activities are impractical or impossible, sound reasons must be provided in an open and straightforward manner.  Whenever a question is asked for which there is no ready answer it is vital to not make up answers. Instead, leaders need to demonstrate the honesty of acknowledging they don’t have an answer at that stage. In preparing a grass roots initiative, ask yourself the following questions. –

What is the core purpose of this grass roots intervention? 201

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– Who should be involved in the planning? – Do we possess the necessary skills to facilitate it? – What inputs must be provided to participants to provide an adequate context for discussions? – What critical information must be imparted to create sufficient discomfort for motivating people to consider change? – How will we ensure that people have sufficient time to engage in dialogue? – How will we ensure that people establish a common context for discussion? – What concrete outputs must be achieved after each encounter? – In what form must the outputs be consolidated? – Who will consolidate the outputs? – How will the broad-based legitimacy of and belief in the consolidated outputs be ensured? – When and how will feedback occur to everyone who has been involved in the grass roots initiative? 2. Information: There is an old saying, ‘Feedback is the food of champions.’ The same could be said of information. The primary motivation for applying information as a driving force of change is that it shapes and provides the context within which people need to act. One of the most frequent errors made by people who want to initiate change is that they assume that other people share a common or similar understanding of circumstances. To the contrary, various stakeholders or people with potentially conflicting interests will invariably search for and rely on information which reinforces their own perspective. Virtually every stakeholder or individual will at times develop selective blindness by ignoring information which contradicts their prevailing views. .

The primary challenge for using information is to ensure that it respects and responds to all points of view. Conversely, any attempt at presenting only one perspective or approaching a situation from primarily one point of view at the cost of others will almost certainly be seen as manipulative and dishonest. This principle provides the foundation for certain requirements and rules of the game:  Information must be scrupulously correct and honest.  Sources of information must be legitimate.  Information needs to focus on and serve to enhance understanding of the issue at hand.  People must be allowed and encouraged to question and test information. 202

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 The information must be presented in ways that make it relatively easy for people to comprehend.  At all costs do not use information to ‘prove’ to others that they are incompetent for example, by presenting it in a complex manner that relies on specialist jargon.  Give people the opportunity to engage in discussion about the information.  Provide the time for people to discuss what the implications of the information are.  Preferably record the insights and implications as they are defined by people.  Whenever possible encourage people to develop possible responses to the implication.  Don’t expect too many concrete or practical responses at first. It takes time for people to learn how to respond to information. When preparing information for a change initiative, respond to the following questions: – What critical information is necessary to enable people to understand the (negative) consequences of continuing in the old ways of doing things? – What information is essential to provide a balanced view that incorporates the past and present perspectives of all participants? – Could any particular information be viewed as one-sided or manipulative, and if so, how can this be overcome? – What information is needed to create sufficient discomfort with the status quo? – What information is needed to create an attractive view of the future? – How must information be structured and presented to optimise the understanding and applicability of the data? – At what intervals should people be given the opportunity to discuss the implications and insights generated by the information? – If people reject the legitimacy of the information what responses can be used to overcome this resistance? A prominent group of construction organisations were suffering a major downturn in the early 1990s. They had managed to secure some contracts, and were under severe pressure to deliver on time or suffer serious penalties for delays. The combination of the economic downturn together with the potential threat of penalties was placing high pressure on their profit margins. Then it was time for the annual round of wage negotiations.

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The union was aware of the fact that the organisation could not afford the penalties, and were using the threat of a work stoppage as a bargaining chip. Until then, the organisation had never entered into transparent information disclosure with the union. As the threat of deadlock in wage negotiations and the potential of work stoppages increased, management became willing to review their stance on information transparency. A few preliminary meetings were held with union officials and shop stewards, and a session was arranged for management to do a presentation on the economic well-being of the organisation. The union was given the opportunity to have auditors they had appointed to check the figures that would be presented prior to the work session. The auditors were able to satisfy the union representatives and shop stewards that the figures were indeed correct and complete. The managing director took personal accountability for doing the presentation. At one stage when he had provided input on the shortages of work in the construction industry and how this was affecting the organisation’s potential to survive, one of the senior union officials stopped him and asked, “How long have you had these facts and known about these trends?” The managing director replied that they had been worrying about it for the past 18 months. “So you actually want this organisation to go bankrupt?” replied the union leader. “Of course not,” said the managing director. “Well why are you only giving this information to us now? Do you not realise that if we had had all of these facts at our disposal we could already have contributed in many ways? Now you have caused even more problems for us because we will have to go back to the work force and give them facts that we did not have a few weeks ago. It is going to make us look like fools as well,” the union leader said. Notwithstanding the fact that the information disclosure came very late, it still helped to break the deadlock and enabled the management, unions and worker leaders to arrive at a settlement which was capable of addressing the interests of all stakeholders. 3. Collaboration: Collaboration demonstrates the belief that various stakeholders have valuable contributions to make, and that optimum ownership of the change process is created by involving stakeholders in co-designing or at least co-managing change initiatives and objectives. The difference between grass roots and collaboration is that collaboration has a more deliberate objective of achieving certain outputs. In practice, collaboration tends to occur between representatives of stakeholders rather than by involving everyone, as would be the case with a grass roots initiative. Because of this, it is critical to link collaborative and grass roots approaches continuously. Failing this, the collaboration runs the risk of being viewed as an elitist activity which is not giving the rest of the people an opportunity to be involved. 204

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The very best option is to set up a dialectical interactive relationship between collaborative and grass roots approaches. This consideration influences certain rules of the game for collaboration:  If collaboration takes place through representatives (as opposed to directly at operational levels), it is essential to utilise democratic and legitimate means of electing the representatives.  People involved in collaboration must provide regular feedback to others to prevent accusations of taking unilateral action.  Involve ‘the entire system’ in collaboration to ensure that all views and perspectives are acknowledged.  Clarify the purpose of collaboration early in the process.  Ensure that the people who are interacting develop a common context of the change that is required.  Establish formal guidelines to guide the proceedings and interaction through the involvement of the collaborating parties.  Build in maximum transparency to ensure that everyone is aware of what is occurring within the collaborative processes. In many instances people are involved directly in collaboration which focuses on their own workplace activities. The above rules of the game are still valid, and the following ones become even more important:  Provide sufficient time for people to feel that their views have been heard and that they have influenced outcomes. Failing this, they will feel manipulated.  Regularly review progress that has been achieved. Some of the more pertinent questions that must be asked when applying collaboration are: – Who must be involved in this collaboration? – Is this collaboration generally of a strategic or operational nature, and what does this imply? – Are the decisions reached through consensus or consultation, and what does this imply? – What are the essential outcomes that must be achieved through collaboration? – What are the consequences of not achieving the essential outcomes? – If there should be irreconcilable differences in opinion, how will they be resolved? 205

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– Who should initiate collaboration? – How will people who are not directly involved be kept informed, and by what means could they exercise indirect influence on the process? One of the greatest dangers of using collaboration in isolation or in ways that dominate all other processes is that it opens itself up to accusations of ‘cabal rule’ or operating as an ‘elite aristocracy controlling the process’, especially if collaborators are people in formal positions of power. One of South Africa’s biggest trade unions with a track record of militancy and strikes had got involved in very progressive work with the management of one of the larger organisations where they were the dominant union. Long before the Labour Relations Act 66 of 1995 had made proposals for the introduction of workplace forums, this union and the management established a prototype forum where a variety of strategic issues were debated. The union had full participation on several senior decision-making bodies, and were in many ways as informed as any other general manager. It had taken the union leaders, shop stewards and managers almost a year of intensive collaboration and discussions to establish the forums.

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This intensive process as well as the ongoing involvement in a variety of decisionmaking forums started to have a major impact on management as well as union thinking. Individuals were being exposed to facts and information which they had never seriously considered in the past. This was enabling them to change their own worldviews quite significantly. But they were missing one point. The membership was not experiencing the same opportunity of learning and adjusting their views. In some ways both the management and union representatives had started to lose contact with the workforce even while their own mutual trust and respect for one another was growing. The union leaders and shop stewards started to experience criticism from their members. As one of the senior union leaders said with some amazement and a little disgust, “I can’t believe it. We are now being accused of being a sweetheart union. Who would ever have thought that?” 4. Opinion leaders: Has there ever been a situation requiring significant change where people have not longed for a ‘knight in shining armour’ to ride forth and save the day? How many times have the thoroughly bruised, and often self-proclaimed, saviours not crept away claiming that ‘prophets are not appreciated in their own lands’? Perhaps one of the most misused, abused and misunderstood elements of change is the role and contribution of opinion leaders. It is largely due to the legacy 206

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of authoritarianism which has often seen power concentrated in the hands of very few people ‘at the top or in command’. One of the lasting myths of authoritarianism is that such disproportionate concentration of power also imbued people with equally disproportionate expectations (but not necessarily capacity) to make things happen. Thus the belief developed that if only someone somehow could magically take hold of sufficient power and influence ‘they’ could wave their figurative wands of change and make things happen. Part of this myth from the age of authoritarianism also implies that then ‘we’ could wait for and rely on ‘them’ to initiate change, thereby freeing ‘us’ from the pressure of personal accountability. The benefits of hindsight provide a radically different picture. Concentration of power in a classic authoritarianism sense has mostly enabled the holders of power to prevent things from happening while proving much less capable of enabling those same people to actually change things. Studies of people in positions of formal power, for instance the president of a country, highlight just how remarkably little capacity they have of fulfilling expectations of a ‘knight in shining armour’. This, more than anything else, shapes the activities and roles of opinion leaders. Success stories show that opinion leaders who have really made a difference rely very little upon their own independent capacity to initiate and direct change. Instead, they make use of an array of approaches whereby they systematically grow a critical mass of support. The true role of opinion leaders is perhaps best presented by the ancient Chinese sage, Lao Tze Tung, when he said, “The bad leaders are despised and feared by the people; the good leaders are revered by the people; the great leaders are those who, when they leave, the people proclaim, ‘we did it ourselves’.” This does not mean that opinion leaders are invisible or constantly take a low profile. Many do operate in this way, but many more fluctuate between taking an overt stance and courageously pursuing a less well trodden path, only to concentrate on enabling others to emulate them and to achieve even more by building upon their endeavours. The true opinion leader rarely stands on another’s shoulders. Instead he allows others to climb up onto his shoulders to enable them to see over the beckoning horizons. The true opinion leader moves about creating heroes and feeds upon the satisfaction of witnessing those whom he has empowered or supported achieving even more than they have. There can be few modern day examples of true leadership greater than Nelson Mandela. Since his release in 1990 and becoming President of South Africa in 1994, he has gone out of his way to ‘create heroes’. Some of his initiatives in this

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regard have occurred in the full glare of the public eye. Who can ever forget the magic moment when he walked onto the rugby field for the World Cup final in 1995, wearing the number six jersey of the Springbok rugby captain, Francois Pienaar did it for other sports heroes as well. His deeds of bolstering the confidence and motivation of other people go far beyond sports heroes. Business leaders, union leaders, cabinet ministers and a host of others have been the recipients of ‘Mabida Magic’. The extraordinary way in which he participated in ensuring a smooth transfer of power to his successor, Thabo Mbeki, was also a case study in true leadership. Rather than hog the limelight and make it difficult for any successor to step into his shoes, Madiba systematically started to withdraw from the dayto-day management of government and prominent public platforms to allow his successor the opportunity of becoming acceptable to a broad range of often critical observers. It is most productive and preferable to ensure that people with formal power in relatively influential positions become opinion leaders. The following rules of the game help to prevent their becoming battered knights and prophets without a home. If you want to play this role personally, apply the rules to yourself: – Identify potential opinion leaders from within the ranks of various stakeholders. – Interact with them over a period of time to gain their support. – Do not expect them to react rapidly – give them time to prepare and consolidate themselves. – Ensure that opinion leaders operate from an informed position based upon knowledge of the field, rather than relying upon conviction without substance. – Encourage opinion leaders to become both students and proponents of the change process by, for example, reading up-to-date case studies, books and articles, interacting with opinion leaders from other organisations, attending seminars and workshops, writing position papers, and preparing and delivering presentations on the topic as well as relating their own experiences to others. – Provide them with case studies, articles, books or parts of books, videos and any other material to enhance their personal grasp of the change. – Create as many opportunities as possible for them to interact personally and talk about the change with people across all levels and functions, as well as with various stakeholders. – Ensure that they articulate a clear and consistent message. – Help opinion leaders to accept that they do not need to portray a false sense of perfection, and that they should readily admit their own vulnerabilities and uncertainties. 208

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At the most advanced level, it is very worthwhile for opinion leaders to get involved in intensive processes of self-development. While it may at first feel strange and uncomfortable, highly committed opinion leaders should give serious consideration to getting involved in processes which explore the deeper mythology, philosophy and self-evolution of personality development. Individuals who have been in the role of opinion leaders over a lengthy period of time often comment that they have over time experienced limitations or blockages which were personal rather than external to themselves. Their further progress then required intensive personal development and introspection. In a sense, the ultimate opinion leader is someone who lives by the motto that ‘change, like charity, begins at home’. Important questions to consider in this area are:  Who are the people who can, and are willing to, provide leadership?  Who do they represent, and are they willing to operate across levels and functions?  Can they, and will they be willing to, interact openly and honestly with other stakeholders?  What are their existing strengths as far as the particular change process is concerned?  What are their weaknesses, and what can be done to address them?  How can it be ensured that the opinion leader develops networks and enables other people?  What should be some core messages that the opinion leader/s carry consistently?  What personal exposure, development and training do they require? 5. Education and training: Change of any magnitude will invariably necessitate the development of certain new attitudes, knowledge and skills. In the normal course of work it is still possible for people to develop the necessary competencies for fulfilling their roles over a period of time. This is especially true when a situation has been relatively stable for quite some time. The capacity for people to learn through experience is, however, very dependent upon an environment designed to reinforce and encourage the development of competencies required by the known and wellestablished circumstances. When a person enters into such a relatively stable and wellestablished environment, there are invariably many people who share a broad array of experiences and capacities they can transfer to the new individual or can otherwise use to support the individual until he or she acquires the necessary competencies.

This is not the case when really significant change occurs. Real change 209

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represents a shift in the environment and consequently requires an equally great shift of competencies to cope with the demands of the new environment. In a sense, change of any magnitude reduces most of the people in that environment to a zero-base, at least as far as the changes are concerned. In an earlier anecdote, the transformation of relationships between management and labour within an organisation was discussed. One of the issues that the union representatives, shop stewards and management in this case study experienced was that they were suddenly confronted with a set of challenges and requirements which they could not adequately fulfil.

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This does not mean that all of their past experience suddenly became redundant. Management still had a wealth of valuable knowledge and skills which they had to bring to the table, and the worker representatives likewise needed to maintain many of their past methods of work. But nothing that any of the participants had experienced prepared them for the challenge of co-operative problem solving and coping with transparent information sharing. The skills sets for traditional negotiation and collective bargaining became redundant in the face of information transparency and co-operative problem solving approaches to negotiations. During the first year it created major discomfort, with all parties recognising that they could not continue in the old way but not yet knowing how to interact constructively and productively in the new environment. It was only when a range of new and progressive negotiation skills had been introduced to all of the participants that they were able to make the most of the new circumstances. Understanding the need to develop new skills, attitudes and knowledge so that people can cope with new challenges and circumstances is one of the most important issues for all South African organisations. The unfortunate reality is that the vast majority of South African organisations have simply not yet developed a recognition of people as an appreciating asset, nor of training and education as an essential investment for the well-being of the organisation and all its stakeholders. The earlier elements of the ESP of change normally prove most capable of increasing the willingness of people to embrace and support change. The later elements of the ESP of change are more capable of empowering and persuading people to change. The middle phases of the ESP of change – none more so than education and training – ensure the enablement of people to change and align their own behaviours in support of the change. The three elements of willingness, enablement and empowerment are all equally important. None of them can be left out. Most importantly, no amount of creating willingness and insisting upon the empowerment of people will bear any fruit if they are not given the necessary education and training to enable them to respond with confidence. 210

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Some of the essential guidelines and rules for education and training are:  Do not wait until the latest stages of the change process before new skills development takes place.  Start analysing the new skills requirements well in advance.  Investigate the best training and education methods and content which will make it possible for the majority of people to develop the new competencies they will need in future.  It is often very difficult for people to know what new skills and attitudes they will need, seeing as they in all probability will have had very little experience of the new environment. Do not, therefore, expect people to exhibit some level of clairvoyance by asking them to define their needs without substantial guidance.  Reinventing wheels is a real waste of time and money. The chances are great that other organisations have experienced similar problems and have made some progress in establishing appropriate education and training. Instead of starting from scratch, identify such organisations and build on what they have already established.  Establish formal structures and processes for enabling people to develop the new competencies.  Set clear deadlines by which people should have undergone the minimum necessary levels of training and education.  Actively remove any managerial or structural barriers which prevent people from making use of the training and development opportunities.  Make it clear to everyone that, whilst the training and education are being made available, it is their responsibility to make use of these opportunities. If people refuse to make use of such opportunities it is necessary to make them understand that their careers will be negatively affected by such an attitude. Ideally the development of new competencies should be integrated into an approach of total competency-based human resource practices. This should include a menu of competencies required to fulfil the demands of the organisation’s value stream. In this way the new training and education which takes place is immediately linked to the productive requirements of the organisation. Some key questions to ask when designing an education and training intervention as part of a change process are:  What new skills, attitudes and knowledge will people at various levels require to enable them to fulfil the objectives of the change process?

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 What current skills’ shortages do people have which may inhibit their ability to acquire the new competencies?  If there are any such prevailing skills’ shortages, how will we ensure that they are addressed soon enough to overcome the inhibiting effect that they could have?  Where could we find out about organisations and specialists who have already experience in establishing the new competencies that will be required by the people within our organisation?  Has our organisation committed itself fully to setting aside the necessary time and financial resources to make the education and training possible?  Is there sufficient slack within our organisation at the moment to release people for the necessary education and training?  Do we already have a culture of personal learning, in which case we can rely upon individuals and teams to initiate their own education and training as long as our organisation makes it available for them?  If we do not yet have a culture of self-motivated learning, how must we go about ensuring that people make use of the opportunity for further education and training?  How many hours of additional education and training will people have to receive on average?  What logistical problems (for example shift work, pressures on staffing levels and historic unwillingness to introduce non-negotiable budgetary targets for education and training) exist, and how will they be addressed?  Will the budgets for education and training be controlled at a central or head office level, or will operational units be obliged to provide for their own budgets?  Will we be making use of external specialists, trained in-house facilitators, or a mixture of both?  How will we handle managers who do not make it easy for their workers to receive education and training as well as workers who do not make use of the opportunities? 6. Structures, systems, policies and procedures: The well-known biblical proverb cautions: “Do not pour new wine into old wine skins, for the skins will burst and you will lose the wine and the skins.”5 This can be applied directly to the structures, systems, policies and procedures of the organisation with their levels of control, chains of command and channels of communication. An organisation’s structures, systems, policies and procedures are themselves a manifestation of particular worldviews and assumptions. The classic organogram with its relatively rigid lines and boxes resounds with messages of top-down control, strict separation of levels, functional silos that 212

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prevent people from interacting freely across functions and general inflexibility. In most instances a change process requires, at a minimum, adjustment of structures, systems, policies and procedures. More often than not, quite fundamental changes to structures, systems, policies and procedures must be made to house the new requirements that are introduced by the change processes. While it is relatively easy to define the rules of the game, it requires dedication and commitment to make the structural changes and follow them through to successful adoption. Some of the essential guidelines to consider are:  Identify elements of the current structures, systems, policies and procedures that inhibit change, ideally by involving people in the debate.  Specifically determine whether existing use of chains of command, levels of control and channels of communication are conducive to change or retard it. Make the necessary changes to these elements to ensure that they reflect and reinforce the change objectives.  Eliminate counter-productive levels that people need to communicate through to get things done.  Make it possible for anyone to make contact with anyone else, anywhere, and at any time to resolve issues that inhibit performance and progress. Ensure that people across all levels and functions comprehend the purpose, roles, accountabilities and output requirements of various levels within the organisation.  Continuously ask: are these structures, systems, policies and procedures optimising our organisation’s capacity to create, keep and delight more customers?  Analyse how the existing chains of command, channels of communication and levels of control could inhibit the achievement of the change objectives.  Redesign all inhibiting channels of communication, chains of command and levels of control so that they reinforce the change objectives.  Make the changes known to the entire workforce.  Devise and publish short case studies to show how things operated within the old methods and how they can now operate in the new world.  Review all human resource practices and systems to determine whether they are reinforcing or inhibiting the achievement of the change objectives.  Wherever necessary, either scrap or transform existing human resource practices and methods so that they reinforce the requirements of the change process. A great deal has been written about restructuring and re-engineering organisations. 213

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Since the late 1980s through to the mid 1990s this has become one of the most popular buzz words. In practice it has been little more than a euphemism for getting rid of people. While many organisations have undoubtedly needed to make certain cuts, it has often led to the creation of ‘organisational anorexia’ rather than creating ‘mean and lean’ workplaces. It is interesting to note that by 1996 many well-known organisations such as IBM, Kodak and others who had been at the forefront of downsizing at the start of the decade were starting to re-employ people. Perhaps it has something to do with James Champey’s6 confession in his sequel to the international best seller he co-authored with Michael Hammer, Re-engineering the Corporation. In his follow-up best seller, Re-engineering Management7, James states that they got it wrong. He goes on to explain that he now realises that structural adjustments must be accompanied by an equal amount of new capacity creation to ensure that people can cope with the new challenges created by the restructured organisation. Amongst many other things, he is cautionary that structures, systems, policies and procedures have to do with so much more than organograms and figures. They need to be filled with the essential spirit and attitudes that make the ‘re-engineered structures’ come alive and help to deliver the new expectations. In addressing restructuring as a change driver, ask the following questions:  What values and beliefs do our current structures communicate (with their existing chains of commands, channels of communications and levels of control)?  How do the existing structures contradict the change objectives we have set, and how must those retarding elements either be altered or eliminated?  What obvious gaps are there in our existing structures which are making it difficult to formalise and standardise new relationships and power dynamics?  Is there resistance to establishing formal structures to house the change, and if so, why?  Are we relying too much on informal and relationships-based methods to sustain the change, and if so, why?  What are the consequences of leaving our structures exactly as they are?  How do the existing structures reflect the old ways of doing things?  In what way do the existing structures truly drive customer service, value-adding activities and productivity – or how do they serve to diminish these objectives?  If we had to start from scratch, but with the commitment to make the desired changes a part of our organisation’s life, how would we structure the organisation?

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7. Persuasion: Persuasion is based upon the realistic belief that many people, and probably the vast majority, will not readily embrace change if they are either uncertain of the effects it will have on them or are not convinced that it will benefit them. It could be argued that it is wise to enter into persuasion much earlier in the change process. However, at the beginning of a change process the majority of people are invariably still trying to come to grips with the need to relinquish the past rather than becoming overly enthused by or interested in what the future holds. Thus, while it is necessary to employ certain levels of persuasion during the earlier grassroots and information stages of the ESP of change, it usually becomes necessary to embark upon a new and more assertive phase of persuasion during the later stages of change. A story tells of a young man who visited the dentist. He was filled with trepidation and worried that he was going to get hurt. In particular he hated the high and whining sound of the dentist’s drill. The dentist gave him an injection to dull his nerves and pushed the reclining dentist’s chair back. “Open your mouth please,” said the dentist as he approached with his drill.

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As the dentist approached, the young patient whipped a pair of pliers out of his pocket and grabbed hold of the dentist’s ear. “We’re not going to hurt one another now are we?” said the patient. Persuasion is somewhat like this story. It is necessary to articulate clearly the desired end result, but in a way that leaves no doubt that it is not possible to accommodate ongoing non-conformance to those requirements. For this reason, persuasion has to be accompanied by adequate levels of formal power and a clear indication that there will be consequences for ongoing non-conformance. In preparing persuasion approaches, the following guidelines and rules will help to ensure that it becomes a positive intervention:  Clearly articulate the objectives of the change initiative, giving examples of what the organisation will look like once these objectives have been achieved.  Define the benefits and new opportunities that the change process holds for the entire workforce.  Describe in clear detail what type of practices and behaviours will be expected in the future, and how various stakeholders will be expected to contribute to the fulfilment of these practices and behaviours. 215

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 Present a clear picture of why the change is necessary and what the consequences of continuing with the status quo would be.  Reduce the potential uncertainty that people may be feeling by telling them what type of support they will get to enable them to fulfil the new requirements and obligations.  Leave no doubt that the change process carries the full support and uncompromising commitment of people in positions of formal power. It is virtually impossible for staff or relatively junior people to carry out the message of persuasion. Consequently it is necessary for the senior management of the organisation to take personal accountability for carrying out this message. Approximately one year into a major change process, it became clear that there were still some people in the organisation who either did not believe that it would finally be implemented or still showed an unwillingness to take personal responsibility for getting the necessary education and training that the organisation had made available. The CEO discussed the problem with the external consultant and HR director. He agreed that he and his team of senior managers should take personal accountability for a persuasion intervention.

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The external specialist and HR director, together with a group of internal change leaders, developed a set of ten slides which graphically illustrated why the change process was necessary. The various slides contained messages which left no doubt as to the seriousness of the situation, but it also described the potential benefits very clearly. The final slide contained a simple message: “This is the picture of the world of work in our organisation in the future. It is the only way in which we will operate. If I (the general manager making the presentation) have been unable to make this message understood, or if I do not live up to the requirements that have been described in this presentation, please phone the CEO.” The CEO’s name and telephone number was on the slide. The presentation was delivered to the CEO and his general managers for comment, and after they had made some adjustments, deadlines were set by which time each general manager had to have done the presentation to 100 percent of the people in his or her area of responsibility. Persuasion does not have to be a long and drawn out affair, nor should it be very complex. The message must be clear and unambiguous. Remember that by this time people will have been involved in several of the elements contained within the ESP of change. It should therefore no longer come as a surprise that the change must occur. Persuasion is a time of committed certainty during which people with substantial influence and authority once and

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for all pin their colours firmly to the mast. An underlying message which forms a critical part of persuasion is that the time is soon coming when there will be no more excuses. Some questions to ask in preparing for persuasion are:  Are we satisfied that our formal leaders, in particular the CEO and other senior managers, understand the purpose of the change process very well?  Do the senior leaders share a common understanding and are they capable of carrying a congruent message which will not send out mixed signals?  What type of additional work must the senior managers participate in to ensure that they carry an unambiguous message?  How will we ensure that the message is carried rapidly, with high level of congruence and without creating confusion?  Are we able to articulate clearly why the change is necessary and what the consequences of maintaining the status quo could be?  How can we clearly describe what the future will look like?  What is expected of various stakeholders and what roles will individuals and stakeholders need to fulfil in future?  What methods of support and reinforcement will the organisation provide to ensure that people can cope confidently with the new challenges? 8. Recognition and reward: One of the most complex interventions, filled with many potential pitfalls, is recognition and reward. This is because:  Recognition cannot occur in a vacuum and must be based upon a commonly understood set of criteria against which progress is being evaluated; and  Reward, whether of a financial or other nature, implicitly means that while some people will receive acknowledgement, others will not be recognised and are thus potentially being punished, at least at some level. The moment a change process enters into a stage of recognition and reward, it sends out a powerful message: in future, people who adhere to and fulfil these requirements will be viewed in a more positive light than those who do not. It is inevitable that some will be doing better than others. For these reasons it is recommended that recognition and reward systems are should not be introduced prematurely as a means to reinforce or motivate change. It is essential that they are introduced at some or other stage because of the power of their message. 217

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The change process within an organisation had reached a mature stage of development. Several facets of the change process had progressed well. One hundred percent of the work force had already undergone training and development which enabled them to fulfil the new practices and behaviours. Senior management had participated in a range of grass roots activities during the early stages, and had subsequently fundamentally restructured their information processes to reinforce the change process. Influential opinion leaders had been recruited and developed as change leaders, creating a potent force of people who understood the change process very well and were at the same time respected by people across all levels and functions. To top it all, the CEO and his senior management team had personally taken charge of a persuasion campaign, leaving no doubt in anyone’s mind that they were serious about the change.

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An initial survey had shown that some progress was being made, but that it was not yet up to standard in most areas of the organisation. The change leaders and opinion leaders were brought together to discuss a strategy of recognition and reward. It was decided that teams of in-house auditors would be established to evaluate the progress in the change process within all business units and regions. Over a period of two days they established measurable criteria against which the conformance to standards could be evaluated. They also designed an integrated auditing process which would make it possible for them to evaluate various business units in a congruent manner. Auditing teams were established and each team was allocated one or two regions which they would audit. A mandate was developed which endorsed the capacity of the teams to audit various business units and the CEO signed it personally. A deadline was set by which time every business unit or region had to have been audited. The auditing teams were given full authority to establish dates with the managers of each region, and each business unit or region received a full description of the things against which they would be audited. Immediately after each audit, the auditing team responsible for that region or business unit completed a report spelling out what progress had been made, what bottlenecks still existed, and which practices were not yet being fulfilled according to the requirements of the change process. Two weeks after the final audit had taken place, the CEO and his entire team studied the reports for all the business units and regions. A work session was then held which was attended by the auditing teams, the CEO and his team, and managers representing the various business units and regions. During this session the auditing teams explained how they had gone about their task and what their findings meant. The representatives of the various business units that had been audited were given an opportunity to clarify any concerns or issues that they wanted to raise. At the end of the meeting the CEO announced a set of benchmarks that had to be met within six months. Minimum benchmark levels were set which each business unit had to aspire to meet. Every business unit and region was also given four weeks to prepare and 218

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deliver an integrated action plan which spelt out how they would set about meeting the objectives. It was agreed that the auditing teams would repeat the same exercise in six months. Finally, the CEO confirmed that 20 percent of annual incentives would be based upon whether the required objectives had been met. If the audit indicated that the objectives had not yet been met by any particular business unit or region then that area would receive nothing of the 20 percent portion. Such a step indicates that there is no turning back. It also signals a profound shift away from interventions that offer space and toward interventions that apply pressure. This shift makes it essential to adhere to certain guidelines and rules:  People within the organisation must have received the necessary practical education and training to enable them to fulfill the expectations that are demanded of them.  The criteria that must be fulfilled need to be spelled out in a very clear, unambiguous and monitorable manner.  People across all levels and functions must have open access to such criteria.  Formally trained people (such as the auditing teams) must be made available to provide guidance and support for people so that they can have an optimum chance of fulfilling the requirements that have been laid down.  The methods used for evaluating and recognising progress or lack thereof must receive the full and uncompromising support of the CEO and senior management.  The people who are carrying out the evaluations may not be compromised in any way whatsoever. Their final evaluation may not be challenged.  The people carrying out the evaluations and auditing must have received sufficient training and education themselves to ensure high standards of congruence and objective evaluation.  The entire process may not be positioned as a policing act.  The recognition and reward intervention must at all times be positioned as an honest attempt to encourage and support people in the ongoing quest for continuous improvement and aspiring to meet and exceed the objectives of the change process. It is almost inevitable that once such interventions are launched, people will start getting embroiled in potentially destructive competition. The purpose is not one of proving that some people are better than others, or that certain units within the organisation or particular managers are incompetent. It will always be the case that some areas will be further ahead than others. This needs to be considered during the evaluation. Thus, if a business 219

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unit which has been very far behind manages to increase its conformance to standards significantly when compared to the difference others had to make up in order to conform, it should be taken into consideration. The issue that is really being recognised and rewarded is improvement rather than absolute levels, although certain minimum levels do need to be set to provide sufficient stretch across the whole organisation. When considering a recognition and reward intervention, the following questions should be asked:  Are we quite certain that all of the affected people within the organisation have received the necessary support and capacity to develop new skills which they will need to fulfil the criteria for the change process?  Has everyone been informed about the fact that they will now be audited?  Have the benchmarks and criteria against which monitoring and auditing will take place been clearly spelled out and distributed to everyone concerned?  Are the methods that will be used to evaluate progress standardised and will they deliver congruent results from area to area?  Is there any possibility at all that senior management may undermine the credibility of the auditing process and people carrying it out?  Will the various areas within the organisation receive sufficient time to achieve measurable and observable progress before they are audited again?  Does management have the will to take the necessary hard actions if any specific area or people show no improvement even after having been given sufficient time and support? 9. Directives: There comes a time in any change process when conformance to new requirements is no longer negotiable, but is essential. This is a time when clearly defined requirements have to be stipulated, and people need to commit themselves openly to fulfilling those requirements. Formal leaders amongst all stakeholders need to support one another in making it clear to the various groups and individuals throughout the organisation what is expected and why deviance from standards cannot be accepted any longer. Directives without clearly spelled out consequences of non-conformance amount to no more than empty threats. It therefore becomes necessary to introduce formal processes through which ongoing non-conformance will be addressed. If the periods of persuasion and recognition and reward have been handled thoroughly, it will almost not be necessary to introduce directives. Notwithstanding how well they are introduced, however, there is still always a possibility that some people will maintain their old ways of doing things. 220

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An example of this is an organisation that had been busy with its change processes for a long time. One of the earliest agreements was that information had to be restructured in such a way that people at operational levels could easily understand it. The finance department in particular had to put in a lot of work to fulfil its obligations. The financial director did not agree with these changes and refused to initiate the adjustment of systems, that were required. Even after several attempts had been made by the task group charged with accountability for ensuring restructuring of information systems no progress had been made. The CEO set up a meeting with the financial director and members of the task group that had to oversee this particular facet of change. In everyone’s presence the CEO asked the financial director to explain why he had not been forthcoming to date. He could offer no reasons other than to restate his fundamental rejection of the changes that he was required to make. The CEO asked the task group members to leave and told the financial director that he had to comply with the changes. “Or,” the CEO said, “please show me how we can part with dignity.” A month later the financial director tendered his resignation.

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There are really not many more things to say about directives. There comes a time when the talking is over and when non-negotiable and unambiguous demands are either fulfilled or the people who still inhibit change need to leave the organisation. It is a time when it is essential to state unambiguously: lead with courage, follow with loyalty or get out of the way – but do something. Evaluate your personal tendencies, strengths and weaknesses as they relate to the nine elements of the ESP of change. Discuss your personal evaluation with a colleague.

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KEY LEADERSHIP QUESTIONS: CHANGE LEADERSHIP  Is the competency of understanding and leading change well developed within your organisation?  Do you effectively differentiate between project management and change leadership?  When there are major projects or initiatives, do you consciously develop change leadership capacity and apply change leadership disciplines to drive the initiative?  To what extent do you ensure that the less predictable and dynamic elements of change receive as much attention as the ‘rational and mechanical’ elements of an initiative?

NOTES 1 Aristotle (Greek: Ἀριστοτέλης Aristotélēs) (384 BC – 322 BC) was a Greek philosopher, a student of Plato and teacher of Alexander the Great. He wrote on many subjects, including physics, metaphysics, poetry, theatre, music, logic, rhetoric, politics, government, ethics, biology and zoology. (From Wikipedia, the free online encyclopedia.) 2 Hammer, Michael and James Champey. 1993. Reengineering the Corporation. HarperBusiness. 3 ���������������������������������������������������������������������������� Andy Andrews BCom, MBA, PhD. Professor at Henley Management College, UK and founder of the Graduate Institute of Management and Technology. He is also Professor at IESE Business School in Barcelona, which was rated in the top 3 schools in Europe by the Financial Times in 2001. On 15 October 2001, Business Week rated IESE as # 1 in the world for ‘Custom Programmes’ for senior executives. He is an Academic Director on several of these high-level senior executive programmes as well as being a member of the teaching faculty. [Online] Available http://www.speakersofnote.co.za/backend/ documents/0andyandrewscv.pdf. 4 Steve Lohr. New York Times. Gates Quoted As Seeing Case ‘Blow Over’. 11 November 1998. 5 ������������� Matthew 9:17. 6 Hammer, Michael and James Champey. 1993. Reengineering the Corporation. HarperBusiness. 7 Champey, James. Reengineering Management, HarperBusiness, 1995.

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10 STAKEHOLDER VALUE I’ve got to follow them; I’m their leader. Alexandre Ledru-Rollin1

THE ASPIRATIONAL VIEW OF

STAKEHOLDER VALUE We consciously build alignment of values, interests and contributions of all stakeholders. This is rooted in commitment to shared New Society values, and continuous enhancement of stakeholder value creation. This includes the commitment to living values and focusing on optimum client delight. In essence it recognises that the organisation is only as strong as the weakest commitment of a stakeholder.

CHARACTERISTICS OF STAKEHOLDER VALUE IN THE NEW ECONOMY  Anyone, anywhere, can address non-compliance to values with anyone, regardless of rank.  Living values is a premier consideration for promotion.  The satisfaction of all stakeholders is evaluated and shapes annual business plans.  Understanding, responding to and satisfying the diverse needs of staff, customers, community and shareholders are seen as vital to enduring success. 223

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Communication. Respect. Integrity. Excellence. Sounds like a fairly good set of corporate values, don’t you think? As Patrick Lencioni puts it, “Strong, concise, meaningful. They may even resemble your own company’s values, the ones you spent so much time writing, debating and revising. If so, you should be nervous. These are the corporate values of Enron, as stated in the company’s 2000 annual report. And as events have shown, they’re not meaningful, they’re meaningless.”2 The story that unfolds in this chapter is about creating shared meaningful values. Again, we caution you that if you take the quest of world-class competitiveness seriously, know that your journey will never truly be completed. The enormous and continuous economic challenges facing organisations everywhere, and specifically in South Africa, make it unproductive for any organisation to wait many years to offer and learn valuable lessons, as has been the case in most developed economies (the Enron saga being a prime example). Values are not just a set of words in your annual report or framed and hung up on your office walls. Empty value statements “create cynical and dispirited employees, alienate customers and undermine managerial credibility”.3 Herein lies perhaps the key requirement of developing and entrenching third and fourth wave values as a basis for achieving sustainable enterprise leadership and performance. Developing and living New Economy values is like falling in love. You cannot do it on behalf of anyone else. The development and entrenchment of third and fourth wave values cannot be achieved in first and second wave ways. It is not possible to establish democracy through authoritarian dictates. Nor is it possible to tell people how to behave in a democratic and New Economy way if they are being coerced into doing it using first and second wave values. This has been very aptly demonstrated in the USA’s war against Iraq, where external forces have in essence demanded the establishment of a democratic disposition, but without allowing the people who must ostensibly run the democracy to be the real co-creators of the system in its own right. There is a powerful dialectic relationship between the establishment of third and fourth wave values, and how this is done. If people at the top of the organisation go away and brainstorm the values, and then tell the rest of the organisation about it, it will fail. This is using first and second wave methods to develop New Economy practices. It’s like Faber and Castell, the famous manufacturers of clutch pencils and erstwhile global leaders of slide rules. As portable calculators entered the market, they realised that their position as a premier provider of fast calculating tools was being threatened. So they developed a slide rule with a calculator attached to the back. It failed. The lesson from international case studies is straightforward: third and fourth wave values and New Economy Leadership can be developed and entrenched only through third and fourth wave methods. This chapter offers insights into best practices gleaned from 224

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several South African organisations such as SAB and Eskom. We use a manufacturing company, Olson Plastics4, as an example of courageous actions that were taken as long ago as the early 1990s. The changes that we discuss here represent at best 30 percent of the required journey. Initially leaders balk at the idea that the transformation of values should require so much effort. The leaders of SAB did not. They understood how important this was to their own transformation from local to global competitiveness. As organisations and a critical mass of their people slowly adopt New Economy Leadership practices, there will probably come a time when it gets much easier. However, in a world where Old Economy practices often hold sway, we are convinced that there is as yet no short cut, no quick fix. This story of a transformation of values describes three phases: 1.

The lead-in period;

2.

initiating change; and

3.

consolidation of progress and the way forward.

These three phases are discussed in more depth in the following sections.

THE LEAD-IN PERIOD Nothing denies the worth of dedication to fulfilling tasks or fulfilling high degrees of technical excellence. But values are not only about tasks or technical excellence, so increasingly the same message will start to appear: ‘where and how do people fit into all of this?’  World-class orientation and insights: As crucial as dedication to task and technological excellence is, it is worthless without an equal dedication to superior people involvement. But beware: when people are suddenly recognised as important contributors and stakeholders, they view this development with suspicion. When asked to contribute, they tend to ask, “Why now? What’s in it for us?” Or may even claim, “Finally. Now we can demand rights – and don’t expect new accountability from our side. We’ll see if management is serious”. – Value statements must be true for your organisation before they can set your company apart and motivate your employees to achieve greater heights. Even so, sticking to your core values is an equal challenge. Getting to a shared values statement is only half the game won.  Acknowledging blind spots: Change begins at home. You and your leadership team have to acknowledge your own blind spots. This will occur over time at varying rates. It 225

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is an ongoing process as managers, worker leaders, workers and union representatives learn to interact with one another in different ways. As you become aware of blind spots, a new generation of challenges will open up. With every new challenge comes more uncharted territory and therefore the need for ongoing self-discovery. – The single most important success factor will depend on your leadership team’s willingness to acknowledge personal blind spots and an understanding of how this acknowledgement impacts your workers and workers’ leaders, allowing them space to also acknowledge their own blind spots. If you are successful, your leadership team and worker representatives will start to recognise and respect one another and realise that they want to and can learn from one another. – We have found that the dominant blindspot for many leadership teams is a poor track record in people-orientated change interventions. Successes in task- and technology-related fields often foster a shallow wellbeing, a sense of, ‘We’re doing OK, why change?’ Without people-driven growth you will hit a ceiling on performance. To move through that ceiling you need to achieve excellence in the third side of the golden triangle of competitiveness: people focus and involvement.  First steps of the marathon: Your leadership team should gain exposure to the experience of other organisations and people who have done work in the field of change management, focusing on people involvement as a crucial component of world-class competitiveness. At this point it is not crucial to obtain full consensus, but you will require sufficient consensus amongst the leaders to move forward, knowing that you are choosing to live with the passive acceptance of some.  Change drivers: Regardless of whether you have some passive passengers, it is important that there is a sufficient level of consensus on the reason for change. In other words you need a ‘burning platform’ creating sufficient need to change. The old saying urges that, “People will only change when their existing state of joy is surpassed by a significantly greater state of sorrow”. Perhaps some of the following realities may present such a ‘burning platform’: – Truly world-class competition is a real threat. – The speed with which the South African government has introduced changes indicates that major change is possible in a relatively short time. – The opening of the borders of South Africa to international competition from other developing nations – who often do not yet operate under the constraints of democracy and a Constitution that enshrines the protection of civil liberties and human rights – will continue to place enormous pressures on South African organisations to become globally competitive. 226

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– New legislation will undoubtedly place new demands on how you manage people, and what is required to fulfill requirements of labour legislation, skills development, employment equity and black economic empowerment. – There are real limitations to improvement through technology, optimising throughput and systems if the people part of the equation is not met. – South African management generally lacks the capacity to integrate all the components of becoming world-class. This is because of blind spots that are not being addressed with patience, learning and perseverance. Although none of these change drivers may threaten your short-term viability, there is little doubt that maintaining an Old Economy status quo will be disastrous. In 1995 the lack of an obvious threat or driving force made the task to shift to world-class competitiveness more difficult for Olson. At the first meeting of the total workforce, a manager provided the following lesson. He displayed two bottles of water, one from South Africa and one from Italy. At that time the local bottle cost almost R5, while the imported bottle cost close to R4. When asked which they would buy, the majority of the workforce responded that they would choose the cheaper (Italian) bottle; The manager pointed out that the imported product used an imported plastic bottle therefore it was an indirect competitor to Olson. Suddenly everyone understood the burning platform.

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How well do your leaders communicate the realities of global markets and competitiveness? How well do they define what makes change inevitable for your organisation? How well do your organisation’s leaders, and the leaders of all relevant stakeholders, understand the demands of third and fourth wave values, and how to act in ways that reinforce this as part of the values transformation?  Senior and middle management orientation: Within weeks of your leadership team’s initiation, draw all of your operational management teams together for a workshop of learning, evaluating and planning. Expose the teams to the principles of the participative workplace. The design of the workshop must provide an indication of things to come: – Provide everyone with pre-work to study. – Get teams to prepare half-hour presentations on an element of participative governance. – Managers must do presentations on participative governance to their peers 227

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introducing the concept of self-learning and presenting ideas. – Prioritise areas that require specific attention. – Elect a ‘Creative Minority’ of change leaders to be trained to drive the process during its initial stages. Draw these change leaders from middle and senior management levels, and ensure they represented at least 2 percent of the workforce. – Leave the workshop with firm deadlines and broad action plans already defined.

This initial phase intentionally will not constitute a representative forum. This is not due to a form of elitism or authoritarianism. It is merely an honest recognition that this group represents the bulk of formal power and capacity to make decisions at this stage. Denying this reality will deny that your senior leaders have a managerial accountability to take responsibility for initiating change. If you are open about this, then the honest and productive involvement of the rest of your workforce can be expected.

This approach does not represent a classic ‘top-down’ approach. Senior and middle management must make initial judgments about broad change strategies, but they must also accept accountability for creating the strategic framework and space to enable the entire workforce to participate meaningfully. This group must not drive the strategic framework on its own. The next stage must involve entire work-forces. Democratically elected ‘Stakeholder Continuity Groups’ (SGCs) representing the entire workforce must take charge of the change process for their own business units. Perhaps a better name for this orientation phase is top-in, emphasising the need for the majority of management to comprehend and support the envisaged changes. The characteristics for a top-in approach are: – All top, senior and middle managers participate in personal and team-based development and contribute in defining the direction for change. – The change leaders must be managers and be accountable for progress. – Line managers must be personally involved in all facets of managing the change initiative. (This demands more than ten working days of involvement from every manager within the first year.) – Accountability may not be delegated. – Staff functions are expected to provide support, offer innovation and challenge mind-sets. – Line and staff managers have to become students of the change process. – Never wait until everyone feels ready. Continue to learn-by-doing. – There must be sufficient ‘stick’. The reality is that every organisation has enough to keep busy, which detracts from change initiatives, especially in the early stages. 228

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Operational management teams should provide monthly reports on the progress in their areas to the CEO.  Lessons from the lead-in: Many of the elements of the lead-in, especially relating to management, should become an entrenched part of the ongoing process, particularly for top-in orientations. This is arguably the most important lesson of the lead-in, namely establish and sustain a dedication to top-in and do not enable or allow management to keep a hands-off approach. All other lessons are largely dependent upon the capacity to establish a top-in commitment: – Expose a few ‘almost converted’ to the full scope and implications of the challenges to be addressed. – The CEO must provide air cover by giving support when there is report back. – Expose the top team, but don’t wait for total consensus. – Initiate a ‘big bang’ exposure for senior and middle management. – Pose the question in terms of ‘How will we do this?’ and not ‘whether’ or ‘if’. – Set deadlines. Fast. – Develop a nucleus of change leaders. – Sustain the CEO’s power of personal presence.

INITIATING THE CHANGE The next strategic and change priorities emerge as you move through the process. Peter Senge5 emphasises that one of the most profound acts of leadership is to intervene in, and change, the values of the organisation. If the entrenched values within your organisation are rooted in a past of authoritarianism, inadequate performance, discrimination and not valuing people involvement as a core component of competitiveness, all your stakeholders are a part of this reality. Management, workers, worker leaders and unions will all share this value system – they will merely practise it in different ways. If you identify with any of the first or second wave values, it should now be obvious that your organisation and its stakeholders have to undergo a values shift. This is a process focused on re-engineering your shared, core belief systems and world views. In order to become globally competitive you need a shared value system rooted in democracy and delivery, involvement and performance, and participation and productivity. If your historic dedication is to task and technology it should be easy to embrace ideas such as delivery, performance and productivity. Your blind spots relating to people will make it difficult to acknowledge and digest concepts such as democracy, involvement and 229

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participation, which probably conjure images of a loss of control and a fear that your workers will not rise to the challenge. Interestingly, in our experience, these are often some of the same fears highlighted by workers when management first approaches them with the idea of a significant shift in how the organisation should be run. At this point you should experience the first real test of your conviction. You will more than likely discover during your lead-in work that superior service delivery, high performance and ongoing productivity are all only possible if driven by systems of democratic and participative governance. Such a system of governance requires transformations of power, decision-making, entrenchment of rights and personal accountabilities. Theoretically, it is easy; practically, very difficult. The old world-views stated that it was all right for management to develop the organisation’s values, and then to ‘communicate them to the workforce’. Some organisations we have been exposed to initiate an extension of this by involving management and a ‘sample group of workers’ to develop the values, merely expanding the small authoritarian elite. But if you are truly committed to change, you need to demonstrate your belief in democracy, involvement and participation as the foundation and impetus for delivery, performance and productivity. The stage after lead-in should demonstrate these commitments through action:  Accept that 100 percent of the workforce must be personally involved in exploring and creating the values shift.  There are only two options on how to involve 100 percent of the people. You either needed to run several dozen smaller workshops for 20 to 30 people, or you need to apply a ‘mass rally’ option. Olson opted for the ‘mass rally’ option, resulting in them closing each factory for two days at a time. During these two days the entire workforce was involved in the same sessions. The belief that motivated this step is simple: truly valuing and respecting diversity can only be developed if the different people interact face-to-face, and shape new values through eye-to-eye debate and contact. External specialists facilitated the series of two day workshops – one for each business unit or region. Everyone participated to create a common context. This was vital. Olson’s strategic environment included an acknowledgement and deeper understanding of their collective past. (It is futile to suggest that ‘we must start with a clean slate’.) The entire workforce participated in exploring the history of authoritarianism and apartheid, and the sadness it holds for all South Africans. The creation of a common context also contained a detailed analysis of the competitive challenges facing Olson at that time, including a transparent analysis of trends in costs, throughput, pricing and market share.

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Once you have the background established, everyone must participate in creating an alternative vision of the future. This entails specific outputs:  Burning questions: The CEO and local senior management must invite people to list all the ‘burning issues’ they want addressed at some level. They should respond to these immediately to the best of their ability and available knowledge. We have seen the issues range from executives’ luxury company cars and basic information on medical aid through to deep concerns about whether the organisation can cope with the challenges of global competitiveness.  New values foundation: During the workshops a set of values should be developed which express both the style of governance (democracy, involvement, participation) as the means and the outputs of production (delivery, performance, productivity) as the end. The values that emerge will then define both the means and the end, eliminating the old authoritarian-based view that ‘the end justifies the means’. It is also a radical shift from old values statements which have tended to focus only on the ends. This method establishes a new reality:  Both the means (style of governance), and the end (purpose and outputs of production) must be defined in the values.  Both the means and the end must be justified by the same set of values.  The means and the end may not make use of contradictory values.  Everyone, regardless of status, is equal in the light of the values. This linkage, placing equal importance on both governance (the means) and performance (the end), is important. Large-scale international research projects conducted over the last 15 years reach the conclusion that systems of participative governance cause productivity. Conversely, South Africa’s uniformly poor productivity is largely due to inappropriate forms of governance. It becomes a strategic imperative to clearly define the type of governance you must establish to ensure you achieve your objectives. At the end of this process a set of values emerges which should be further defined in terms of the type of behaviours needed to live the values. The combination of values and behaviours that came out of the workshops became part of Olson’s Creed of Accountabilities, Rights and Empowerment, or CARE document. During a values indaba, representatives from every site refined and endorsed the final Olson CARE.

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 New roles for all: The workshops should be used to establish a leadership creed that defines the type of behaviours various stakeholders and functions have to strive to fulfil in support of the values. The leadership creed focuses on the desired practices for senior management, middle management, supervisors, workers, worker leaders, unions, human resource functions and functions in finance and management information systems. In each instance the following categories of behaviour must be defined:  Abandon: The existing behaviours, attitudes and practices that are not in keeping with the values.  Construct: The new behaviours, attitudes and practices that must be established.  Rights: Specific rights must be acknowledged, protected and fulfilled to ensure a particular stakeholder can be a productive workplace citizen.  Accountabilities: The particular roles and responsibilities that a specific stakeholder must fulfil to earn and maintain his/her workplace citizenship.  Key focus areas: Each workshop group should identify three to four specific issues which, in the view of participants, are priorities that have to be addressed. Task Action Groups (TAGs) should be nominated for each issue and mandated to investigate ways of resolving them. TAGs report to the stakeholder continuity groups.  Representative stakeholder continuity groups: Every unit participates in nominating and electing people who represent them in a stakeholder continuity group(s). The stakeholder continuity groups then become responsible and accountable for managing, controlling and driving change at local levels.  Confession of honesty: In the South African context, one occurrence is often the most uncomfortable for management. This relates to the collusion of management and organisations in apartheid, discrimination and authoritarianism. Kadar Asmal6 has highlighted the ways in which senior business leaders either overtly or tacitly reinforced the sentiments of apartheid. Events such as the Truth and Reconciliation Commission and the trial of Eugene de Kock laid bare the atrocities and sad legacy of South Africa’s history and recent past. This has encouraged the workforce, especially previously disadvantaged people, to question openly why companies did not take a more active stance against the abuses of the past. It is not possible for the majority of organisations and management to claim they never knew of, supported or reinforced the past systems, at least passively. Managers of South African companies practised the spirit of apartheid through pathetically poor training and development of our people; by promoting white males into positions of authority; and by generally disempowering the workforce because we were simply not willing to trust. The culture of apartheid, with its particular brand of authoritarianism and discrimination, permeated our institutions. 232

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The humble recognition of this unpalatable reality is part of our own journey of transformation. Frustrations and anger from the past may result in workers asking management to apologise for the way in which it colluded by maintaining abusive systems. Conversely, it could be argued that the workers and their representatives also need to consider apologising for their own excesses, but that is not the point. The belief is taking root that management has no choice other than to take the lead. You must demonstrate the courage to show your own vulnerability, and to have the humility to say sorry when it is warranted. During all but one of their workshops, the CEO and the General Manager of Olson apologised to the workforce. In one instance the entire management team shared in this confession of honesty. And in every case the mass of workers burst out in spontaneous applause to recognise and embrace management’s newly found honesty.

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The workshops are therefore crucial to the process, but cannot contribute anything without a range of parallel initiatives, which provide the mechanisms for driving change. The following initiatives are of particular importance:  CEO’s role;  Creative minority of change leaders;  Concrete demonstration of valuing diversity and participation in action (through stakeholder continuity groups);  Adequate development and allocation of resources; and  Monitoring and controls.  The CEO’s role: It is conventional wisdom that the CEO must be totally committed to this type of change to succeed. The challenge is to determine how such commitment is demonstrated. The CEO must be seen to be the dominant champion of the change. But this does not occur in absentia. There is one absolute necessity: the CEO must demonstrate commitment through the power of personal presence in the change process. Broken down it looks like this:

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CEO’s power of presence Activity

Days

Top team introduction

1

Change leader training and development

5

Mass rallies values workshops 4 x 2 days

8

Follow up per business unit

8

Personal interaction with consultants

2

Values indaba

2

TOTAL PERSONAL INVESTMENT OF DAYS IN YEAR ONE

29

This does not include time spent during senior management meetings, participating in administration and control related issues as well as in stakeholder continuity groups. During each of the sessions the CEO delivers personal inputs, from analysis of financial performance and strategies, through to facilitating group discussions. It is difficult, if not impossible, to envisage how change of this nature can ever be driven without such commitment from the CEO.  Creative minority of change leaders: Your senior and middle managers elect a group of peers early in the process to facilitate the change in-house. Their purpose is to provide a core of deeper understanding about the change. In practice this has had mixed success. The majority adds real value, but it seems realistic to accept that some change leaders make it, and some fake it. It is therefore necessary to build in excess capacity to cater for inevitable attrition. You need a group constituting at least 1 to 2 percent of the workforce, which means you will need to train a complement of between 2 and 3 percent. This gives you a comfortable but realistic buffer for attrition of approximately 1 in 3 people. Change leaders are a valuable resource to the stakeholder continuity groups. They establish access to senior management and proven management and administration skills. One particularly valuable role is their capacity to carry change into their areas of work. They all run departments, and their deeper understanding and knowledge helps to craft practical changes in day-to-day operations. 234

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 Concrete demonstration of valuing diversity and participation (through stakeholder continuity groups): The core of workplace transformation lies in the belief of the value of everyone’s contribution and involvement of people in processes which affect their work lives. This is an issue easily debated philosophically, but difficult to demonstrate practically. Related is the need to involve everyone in guiding and controlling the change process, either directly or through legitimate representatives. There are two challenges to meet:



1.

Demonstrate commitment to diversity and participation practically; and

2.

Spread authority and responsibility for guiding / controlling to all levels.

These two needs can be met through one response. The stakeholder continuity groups take responsibility for managing the process when they are elected. They should be provided with detailed guidelines, but the real learning and understanding of what is involved occurs at a level of doing. Initially, they need to explore their own areas of need for development, when stumbling blocks will emerge rapidly. This is a period of learningby-doing. Once some progress is made, they participate in two full days of intensive and task-orientated development centring on specific outputs that must be fulfilled within the next two to three months. This gives them the skills to take administrative and operational leadership of the process. They will be under continuous pressure as monthly minutes defining progress have to be provided to the CEO and a series of projects, which become inputs into the change process, emerge as structured outputs and guidelines for the change. The importance of this process was aptly illustrated during Olson’s values indaba. Senior and middle managers sat together with shop stewards and workers (representing people from four different unions) as well as staff and supervisors. They analysed and refined their emerging values, evaluated and determined appropriate support behaviours, defined new roles for all stakeholders, developed a range of human resource practices and policies for participative decision-making, debated and evaluated progress, established processes to deal with ongoing non-conformance and monitored the status of change. All of this was completed in two days. The magnitude of output delivered by the stakeholder continuity groups, who were themselves learning as they acted, was enormous. It refuted the fear that involvement, participation and democracy in the workplace must reduce performance.

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 Adequate development and allocation of resources: In the first year you should focus most of your development energy and resources on the establishment of a creative minority of change leaders and a critical mass of committed and equipped 235

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people. It would be impractical to spread your effort too widely during the first stage of change. The focus is therefore initially on management, change leaders and worker representatives in the stakeholder continuity groups. The next phase establishes a committed and competent majority. During the first year your overall commitment of time and related resources should look like the table below:

Focus of development and approximate resources by day Activity Retention and use of external specialists to facilitate learning and change

50

Management training and involvement per person

16

Change leader training and involvement per person

10

Stakeholder continuity groups training and involvement per person CEO’s power of presence 100% of employee involvement per business unit TOTAL INVESTMENT OF DAYS



Days

8 10 3 97

Some individuals will be involved as managers, change leaders, stakeholder continuity group members and total workforce involvement and may spend up to 30 days or more on the change process during the first year – and keep their normal jobs going.

 Monitoring and controls: Your capacity to monitor and track progress for capital expenditure (CAPEX) programmes, projects and monthly results needs to be well established. At this stage you will probably be using seven inter-related practices to monitor progress and ensure that sufficient controls meet the imperatives of transforming the workplace.  Practices surveys: Your values, behaviours and leadership creed describe the new practices which turn the ideals of change into realities. These frameworks form the basis for evaluating how well the practices are applied.  Action plans: Each business unit has to develop an action plan in conjunction with your stakeholder continuity groups. The plan defines the steps you will be taking to improve your current status. A national minimum benchmark has been set to provide sufficient challenge and stretch at operational levels. 236

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 Monthly progress reports: Each business unit’s management team, together with their stakeholder continuity groups, reports to the executive committee on a monthly basis. They report on progress, problems, recent and planned actions.  Role call of progress: The stakeholder continuity groups of each business unit maintain a public tracking board which records progress for activities. Activities are viewed as successfully concluded only when 95 percent of the affected people agree this is the case.  New decision-making practices: A ‘starter pack’ of new guidelines must be developed which defines minimum levels and modes of participation for business activities. Each guideline determines whether the decision is of a strategic or operational nature, who should be involved, whether the final decision must be reached through consultation or consensus, what minimum quality requirements must be met, and where the final prerogative rests. The approach addresses issues such as recruitment of team members, recruitment and appointment of supervisors and managers, analysis of training needs, goal setting and handling of non- conforming behaviour. Tight deadlines for making the entire workforce aware of these new policies and procedures ensure that every stakeholder continuity group and business unit sets and implements appropriate action plans for their region. The development of new decision-making practices is an ongoing process.  Values improvement process (VIP): A formal procedure for identifying and facilitating the correction of non-conforming behaviour must be developed and members of stakeholder continuity groups need to be trained how to use it. Any worker or manager may initiate the VIP to address perceived non-conformance by anybody else.  National democracy action team: Each unit has two to three representatives elected by their respective stakeholder continuity groups. They, together with the executive management committee, meet on a quarterly basis to evaluate both local and national progress. Prior to electing these national-level representatives, they should define their requisite characteristics: – proven track record of ability to get things done; – do not give up easily; – persevere with issues, even when there is resistance; – constructively confront anyone regardless of position to resolve issues; – perseverance in the face of difficulties; – readily take personal accountability for tasks; and – self- disciplined and willing to make extra effort to resolve problems.

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This group is drawn from the ranks of your worker representatives and middle management. At local levels they continue to be part of their respective stakeholder continuity groups. At a national level their roles and tasks are as follows: – ultimate responsibility and accountability for the success of the process within their business units; – direct interaction with their respective general managers and management teams to ensure progress; – direct interaction with the executive management committee to resolve issues not addressed at local levels; – local and national monitoring of progress; – report to the executive management committee on progress; – participate in and drive resolution of national issues affecting all units; – identification of emerging successes and best operating practices, and assistance in spreading these experiences to other business units; – accessibility to any person within the business unit to ensure the resolution of problems at the most operational level possible; – oversee development of unit action plans for the change process; – refinement and implementation of guidelines for new participative decision-making policies and procedures; – application of tools and processes for guiding and managing change; – sharing insights, recording successful resolution of problems, and spread ongoing learning within local stakeholder continuity groups and management teams. – ensure that the entire workforce comprehends what the values, behaviours and the leadership creed entail; – ensure everyone is aware of the VIP and how it can be used to handle nonconformance to the values and behaviours in a constructive manner; and – the involvement of people to identify development and skills needed to cope with challenges of democracy and delivery, involvement and performance, participation and productivity.  Consolidating progress and the way forward: By now the stage has been set for consolidating progress and moving into the phase of entrenching change at all levels. Building on achievements to date and tapping into some of the realities of change provides a sound bridge into the next few years. Consolidating progress provides a clear framework and vision of the desired future that is the product of real and deep participation by the entire workforce. 238

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The overall change management disciplines, applied consciously, use vital consolidation as leverage for the next stage. Change is prone to cause uncertainty and confusion. Disciplined, periodic consolidation helps to create a point of reference that shows how far you’ve come and where you need to move to next, providing valuable confidence and a growing sense of certainty about capacity and commitment to progress. Representatives from all levels and functions for each unit map the process to date, recording perceived positives and negatives, achievements and problems. Everyone ends with a zig-zag path of progress that provides essential learning points. In our experience, the following are typical learning points: – change can never occur through a series of purely positive experiences and achievements; – there will always be perceived negative or problematic experiences; – the so-called negatives or problems are an integral part of change and progress, and generally offer opportunities for making real progress; – discovery of new issues and problems are cause for celebration because it proves you are making progress; – real progress is a recurring pattern of experiencing problems, resolving them and recording achievements; – each level of achievement always opens up a new level of issues or problems that have to be resolved, but at a different level of complexity from earlier problems; and – progress occurs only when everyone develops a combination of deep patience, tolerance, tenacity and a will to resolve issues together. Part of the ongoing challenge is making everyone in your company truly aware of the inevitable realities of change. Sadly, there is often intolerance between various stakeholders. Authoritarianism and the resultant alienation between stakeholders breed high levels of intolerance and suspicion. Especially during the early stages of change, one group seems to expect perfection of progress from the other, while pleading for comprehension of problems for itself. Unions and workers will, for instance, expect unrealistically fast and predominantly positive achievements from management, being overly critical and using problems to fuel cynicism about management paying lip-service. Meanwhile they often plead for more time to report back to workers or get their commitment for even minor decisions. Tolerance is onesided. Management is usually equally guilty, regularly expecting workers, shop stewards and union representatives to embrace overtures of involvement and participation spontaneously. Furthermore, management is often unrealistic in their own expectations, expecting people 239

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who have never been allowed to participate in problem-solving and decision-making to now become constructive, informed, productive and highly interactive participants of change. It is unrealistic to hope that years of mistrust, disrespect and alienation will dissolve in a flare of common purpose. Yet management often views initial worker unwillingness to participate, or tendencies to first demand the resolution of a list of grievances, as evidence of untrustworthiness and an inability to cooperate. Meanwhile, management will also plead for more time to analyse complex issues and reach decisions. The realisation that everyone tends to act in such ways should help your management and workers to slowly but surely overcome these bad habits and craft new and productive relationships.  Business as usual doesn’t stop: The scariest part initially is imagining how you will manage all these changes and activities, and still run your business successfully. It is tough. These concerns are mostly to do with the normal human responses to change. People will initially go through a range of reactions which may be interpreted as resistance. These reactions are often camouflaged as realistic concerns: –

Where will we get the time to do all of this?

–

We have a business to run. Who is going to do all of this?

–

Impossible. The workers won’t respond.

–

Impossible. Management won’t remain committed.

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We don’t have the resources.

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This will definitely cause a loss of production.

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Will senior management be expecting the same targets to be met?

These responses are normal, to be expected, and healthy. They indicate that something is happening. Experience has placed these concerns in a proper context. ‘Business as usual’ does not disappear or go into terminal arrest. During the lead-in and initiation stages, you will also have to cope with a few other challenges. At Olson the large-scale restructuring of their major site was accomplished without much upheaval. This included negotiated downsizing of the workforce. Another site introduced a new production line. They entered into a process of shutting down a site and consolidating its operations into its neighbouring business unit. All went remarkably well. Each one of these initiatives alone is capable of taxing the resources of any organisation. Olson succeeded whilst simultaneously making significant inroads into transforming their culture and style of workplace governance.

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 Business performance: International research proves that “sets of simultaneous change interventions cause improved performance. Ad hoc, once-off or isolated interventions have no or little impact”. 240

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This proved true for Olson. The change described in some of our examples in this chapter was not as a result of one intervention. We have merely described the major people-focused intervention. It, together with other initiatives, had a positive impact. Performance levels, in spite of the huge time and resources invested in the various change initiatives, showed these positive results after the interventions:

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returns on capital employed: 7 percent per annum improvement;

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working capital of sales:12 percent per annum reduction; and

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1994 levels pitched at 100 percent.

Just the fact that their performance improved during the change process was indicative of major gains. As with any such change, it takes more work and time to experience the desired ultimate quantum lift in performance. The re-allocation of resources and time is usually significant. Most organisations argue that such a reallocation would require reductions elsewhere. The reality is different. You will realise that people development is not a cost or a sacrifice but a primary investment. Apart from the tangible results reflected above, Olson experienced progress in various other areas: – Communication and co-operation within an initial core of managers and democratically elected worker representatives improved significantly. – Information transparency took root and led to constructive debate. – Fears of anarchy or ‘democracy running wild’ were put to rest. – Participative problem-solving and decision-making improved rapidly. – Worker empowerment increased, even into such sensitive and symbolically important areas as recruitment and promotion. – A new and commonly developed system of values was finalised. – Agreement was reached on the reciprocal new roles, rights and accountabilities for all of the most significant internal stakeholders. – A starter pack of new policies and procedures entrenching participative decisionmaking was implemented. – They moved into decentralisation of accountability and authority with formal structures of centralised monitoring and control of change. – Representatives of management and workers managed ongoing progress through monitoring, action planning and evaluation. – Formal learning and corrective processes enabled everyone to address nonconforming behaviour anywhere, at any time. – Everyone had direct access, through their representatives, to the decision-making levels of the organisation. 241

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– The stakeholder continuity groups and TAGs became prominent centres of excellence for communication, problem solving, valuing diversity and learning-by-doing. – Performance improved, in some instances in leaps. – A national democratic action team was put in place to drive progress. Olson did not achieve all their goals immediately. They have experienced many hiccups since we last interacted with them We have merely described the beginning of their perpetual journey towards sustainable competitiveness.  Living with the dark and tough side of change: Change is not easy or a smooth ride. Research conducted by Professor Norman Faull of the University of the Cape Town Graduate School of Business (GSB)7 indicates major reasons for the dismal record of South African organisations include: – management persists in looking for a ‘quick fix’ or panacea; – management tends to back off as soon as the initiative hits the first major resistance or problems; – management rapidly turns it into a human resource or other functional intervention. This is not delegation, it is abdication; – management appears to lack the stamina and personal involvement to stay with the process; and – the inevitable human and emotional responses put management off. You have to learn to live with the ‘dark and tough sides’ of change, which are proof that something is stirring. You have to learn that these symptoms are inevitable and must provide opportunities for management to respond to them. Constructive responses will demonstrate your commitment and will accelerate the change process. The most common symptoms are: – Ongoing suspicion of the process. People find it difficult to believe that there is not some or other hidden agenda. Lesson for you? Don’t back off or become disenchanted. Explore the suspicion. Recognise its roots readily. Make and invite suggestions on how to disprove the suspicion. – Sceptics resist change – stick with them. They are often voicing concerns others have as well. Lesson for you? Don’t argue from a personal view. Provide facts. Identify small gains. Don’t wait until everyone is on board. – It is difficult to maintain union involvement. The unions’ lack of resources makes it difficult to establish ongoing involvement. Lesson for you? Involve them as far as possible. Encourage shop stewards to maintain continuous contact and feedback. 242

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– Fear of making mistakes. People believe that perceived mistakes will amount to career-limiting actions. The old styles of governance have not created a culture of perceived tolerance and willingness to acknowledge errors as the foundation of learning. Lesson for you? Management must take the lead by acknowledging personal mistakes and flaws. Demonstrate the willingness to be vulnerable. Introduce formal and constructive methods to address mistakes as opportunities for personal learning. – Adults treated as adults, act like adults. Notwithstanding these ‘dark and tough’ sides of change, overall levels of maturity will be high. Adults generally respond in remarkably trustworthy ways as part of their daily lives and you need to allow people to bring the trustworthiness, maturity and tenacity they display in their world of life into the world of work. – What’s in it for us? Worker leaders and union representatives often raise this issue because they know their members will ask it of them. The answer is simple and complex. Complex because there is no quick-fix. Simple because it creates space for the upgrading of skills; influencing decisions; gaining true empowerment in practice and not rhetoric; and sharing in the greater creation of wealth. But these are medium-term gains. In the interim it is important to increase information transparency and involve people in evaluating progress in meeting new objectives.  Ongoing challenges: It is dangerous to declare ‘victory’ too soon. Premature celebration has the tendency to signal that sustained effort is no longer necessary. Ways of maintaining ongoing focus include: – Mass meetings. Some units could hold bi-monthly or quarterly mass meetings of the entire workforce. Any issue may be raised and must be recorded. If possible immediate answers should be given. If not, issues become topics for new TAGs. Progress and achievements are recorded and recognised. – Giving rights and accountabilities. Democracy requires recognition and protection of rights. But it also demands deeper levels of personal and collective responsibility and accountability. The ongoing focus on supporting people to understand, accept and fulfil their greater personal and collective accountabilities is an essential component of success. This requires much greater investment in clearly defining what is expected of people, especially as far as performance, competencies, outputs and roles are concerned.

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KEY LEADERSHIP QUESTIONS: STAKEHOLDER VALUE  Do you have a tight-fit culture that drives high performance within your organisation?  Do you comprehend and align the interdependencies of diverse stakeholders?  Is there a compelling system of values that all stakeholders are committed to?  Do people across all levels have a crisp and clear understanding of what the values are and how they look when vibrant and living within the organisation?  Are there enterprise-wide processes in place that enable anyone, regardless of position or rank, to identify and address non-compliance to values without fear of retribution?  Is the living of your values a prerequisite for being considered for promotion?  If a high performer is not living the values, are you certain that they will be confronted with this and given no option other than to adapt their behaviour?

NOTES 1 Alexandre Ledru-Rollin (1807-1874) was a French politician. (From Wikipedia, the online encyclopedia.) Quote from http://www.leader-values.com 2 Lencioni, Patrick. M. 2002. ‘Make your values work for you’ Harvard Business Review, July. 3 See 2 above. 4 ����������������������������������������������������������� Olson Plastics is a pseudonym at the request of the client. 5 �������������������� Senge, Peter. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization. 6 Kadar Asmal (born 1934) is a South African politician. He was a professor of human rights at the University of the Western Cape, chairman of the council of the University of the North and vice-president of the African Association of International Law. (From Wikipedia, the free online encyclopedia.) 7 Norman H.B. Faull is Professor of Operations Management at the University of Cape Town and Managing Director of the Lean Institute, Africa.

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Epilogue A REVOLUTION OF DEMOCRATISATION The significant problems we face today cannot be solved at the same level of thinking we were at when we created them. Albert Einstein1

WHAT DOES THE FUTURE HOLD? “Where will all of this end?” we are often asked. “Is this not just a fad, a brief aberration that will go away?” In this book we’ve tried to steer clear of forecasting what lies too far into the future. Our own experience and research, as well as the vast body of research that reinforces our views, makes it possible to make some confident conclusions that New Economy Leadership is the way of the future. We also know from experience that as more organisations embark on this journey it will rapidly give rise to practices and experiences that would at present sound mind boggling. We have no doubt that in the foreseeable future there will be leaders and organisations entrenching practices that make most of what we’ve written sound quite mundane. That is the beauty of progress. So if we had to commit to what we believe is possible and probable, what would it be? It may take 10 years or 50 years, but we are convinced that in future generations you will witness the large-scale democratisation of leadership and organisations. The forces driving the New Economy and the challenge of sustainable enterprise leadership will settle for no less. The future will belong to leaders and organisations that understand the power of democracy and harness it to fuel sustainable competitiveness. The New Economy is no less than a revolution of democratisation. It is about Democracy with a capital D, and not only the democracy that enables people to vote every few years to determine which political party will govern their country or community for the next few years. All too often we encounter organisational leaders who still proclaim that ‘business is not a democracy’. This was probably true in the first half of the 20th century. By the turn 245

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of this century it was open to serious challenge. As New Economy Leadership takes root and increasingly becomes the norm, organisations will indeed have to be democratised to survive, let alone prosper. As we engage with leaders in organisations of all shapes and sizes, and as we constantly review the growing body of research and literature, we can come to only one conclusion: there is a simultaneous evolution and convergence of six immense democratic forces that are driving the New Economy, each representing a revolution in its own right. Together these forces characterise what is arguably one of the greatest dislocations and transformations of the social and economic status quo in human history. These multi-faceted forces, listed and discussed below, are underpinning and propelling the New Economy at national, organisational, group and individual levels. They are the:  democratisation of politics;  democratisation of power;  democratisation of technology;  democratisation of information;  democratisation of finance; and the  democratisation of decision-making. Democracy from a political standpoint has been around much longer than the other democratic forces, which have received serious attention only in the past one or two decades. The relatively recent appearance of the other forces of democracy does not, however, indicate transience in these newer forms, nor does it foster hope that they may disappear. These forces of democracy are fast becoming the norm, even while the habits of the Old Economy may still enjoy widespread support. They herald the maturing of the New Economy. They are also driving the transformation and largely determining the sustainable competitive capacity of organisations throughout the world.

DEMOCRATISATION OF POLITICS Political democracy has informed philosophical debate for centuries, but only became part of the wider social debate during the 20th century. Even the USA, which has the oldest democratic constitution, could not claim to be a fully-fledged political democracy until well into the 1960s. It was only then that African Americans gained full rights of citizenship. In countries such as England, there are still powerful undemocratic institutions, such as the House of Lords, which are hangovers from an earlier undemocratic era. The First 246

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and Second World Wars, the Cold War, decades-long tension between communism and capitalism, the battle against European colonialism that lasted well into the 1960s and the fight against apartheid in South Africa all involved struggles against undemocratic forces. The steady growth of democracy throughout the 20th century, and particularly after the Second World War, has had a marked impact on the economic growth of countries. There is a direct and positive correlation between democracy and sustained economic growth. Countries that have most successfully embraced the twinned elements of democracy and market economics have enjoyed a greater level of sustained economic growth than others. The emerging truism is simple: the more democratic a country, and the more market-friendly its economic policies over a sustained period, the greater its economic growth. There have been some short-term contradictions to this rule. Some of the so-called Pacific Tigers in Asia proved capable of generating significant economic growth without embracing real democracy or truly open and market-orientated economic policies. This was also true of Russia during the 1950s, when it recorded some of the highest growth rates in the world. These exceptions have been short-lived, proving unsustainable within one or two decades. Countries with well-entrenched democracies and a general adherence to market-friendly economic policies have prospered more than those that have resisted the democratisation of politics. This has very important implications from an organisational viewpoint. Organisations within democratic and market-orientated countries cannot escape the slow infusion of democratic principles. The same people who are citizens of the democratic and marketorientated state are the ones who come to work every morning. Congruence between national and organisational values becomes increasingly inevitable. For many years, business leaders in most countries refused to accept this. The often heard sentiment that ‘business is not a democracy’ (referred to earlier) is true only if democracy is seen within the narrow political context of regular elections, with various parties garnering votes of supporters, and the most popular or respected leaders becoming the formal leaders. However, these are merely some of the formal characteristics of a democratic dispensation. They are the instruments that enable the principles of democracy to be sustained and applied within the government of each nation. When democracy is seen as a set of integrated principles that need to be upheld, a different perspective emerges. International research into the competitiveness and effectiveness of organisations demonstrates that all of the primary characteristics of democracy are also embedded in the organisations that deliver sustainable, superior performance in the economic realm. The New Economy is clearly demonstrating the necessity of adhering to these integrated principles of democracy – within our countries, our organisations and in our dealings with others. Organisations that deliver sustainable, superior performance display all of the primary 247

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characteristics of democracy. The dominant integrated principles of democracy that increasingly form the foundation for high performance organisations and New Economy Leadership are:  Transparency: Transparency is not necessarily offered gladly and readily. It needs to be supported by other institutions such as a free press, an independent ombudsman, and enabling parliamentary processes. Nonetheless, transparency is a cornerstone of democracy. It gives people access to the type of information they need to make informed decisions. It assumes that well-informed people are less likely to be manipulated or influenced by rumours. Economic globalisation also demands ever-increasing levels of transparency. Investors hate, fear and are deterred by surprises. Transparency reduces the risk of being caught off balance by the unexpected.  Standards and compliance: Uniform accounting standards constitute one of the best examples of the type of essential standards that make it possible for people from diverse backgrounds to interact with one another in a sensible manner. Democracy has steadily established similarly widespread standards in other disciplines, ranging from laws regulating land ownership and the protection of physical and intellectual property rights, to well-defined company laws that investors can rely on for protection and definition of both rights and obligations. Compliance with these standards and laws is the accepted norm in more mature democracies. In younger democracies such as South Africa, citizens often labour under the misconception that democracy offers freedom to express one’s own desires and exercise one’s rights without constraint. This is as true for the errant taxi driver or tax evader as it is for the affluent businessman who lights up a cigarette in a clearly marked non-smoking public place. Democracy is based upon liberalism and liberalism loosely embodies the principle that the freedom to exercise your rights only extends insofar as in doing so you don’t infringe someone else’s rights.  Honesty and reliability: The principles of honesty and reliability are often described in the negatives of corruption and failure to take responsibility. A mainstay of democracy is the extent to which people can rely upon honest and reliable treatment and services. The opposite extreme is one in which corruption suffocates the capacity of entrepreneurs and investors to participate in the political economy of the country. Corruption makes one dependent upon the whims of individual bureaucrats or criminals. Mature democracies may still bemoan the bureaucracy that permeates many of their institutions, but at least this offers generally honest and reliable service. Likewise, their business environments may experience fraud and irregularities, but these are the exceptions rather than the norm.  Freedom of expression: Democracy offers people the freedom to speak their minds, but it also requires the courage to speak out. A vibrant democracy thrives 248

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on the capacity of individuals and groups to voice their concerns and express their views. Institutions such as a free press are an essential but insufficient component of democracy. Democracy gains much of its vibrancy and tenacity from the willingness of individuals and groups to identify concerns and voice their opinions accordingly. This is the foundation for constructive activism that takes nothing for granted and seeks responses that are not necessarily seeking to maintain the status quo. In one sense, freedom of expression can be seen as encompassing the notion of creativity of thought and a willingness to communicate this thought together with the countervailing factor of a willingness to let the thought be spoken irrespective of its actual ‘worth’ and whether it gets taken on. In organisational terms the same spirit is translated into innovation and entrepreneurship.  Protection of human rights: Prior to the widespread evolution and practice of democracy, power was concentrated in the hands of relatively small groups of people. The interests of the vast majority of individuals were subordinate to those of a minority, so-called elite. There were no reliable norms that determined what individuals could expect. In the worst cases, the individual’s fate was dependent on the moods and beliefs of those with power, with no recourse to a system of formal checks and balances on this power. A similar arbitrariness prevails in organisations that have not adopted democratic principles, and have historically granted managers and owners ‘aristocratic’ control over the workforce. Democratic beliefs have, on the other hand, championed the cause of all individuals, regardless of race, gender, creed or station in life. While there are still major disparities, overall the individual within a democracy can rely on the recognition and protection of essential rights. The development of modern-day labour legislation is one organisational manifestation of democracy.  Leadership accountability: Democracy recognises the need for formal leadership and rank, but it does not grant leaders disproportionate and unchecked power. On the contrary, democracy strives to hold leaders more accountable precisely because they enjoy the rank and authority that goes with it. The role of leadership is thus open to scrutiny. Being a leader in a democratic environment offers only temporary tenure. Leaders who fail to provide honest and effective leadership run the risk of being publicly criticised and removed from power. This principle of accountability has evolved furthest in the political terrain. In the New Economy it is rapidly gaining ground in the organisational and business arena. Democratic principles within the workplace offer relief and redress for many individuals, but the flip side of this protection is that there is a greater level of accountability and responsibility. Jobs are no longer secured permanently irrespective of performance. Individuals in demanding more rights, has also acquired certain obligations and accountabilities whereby they are assessed on their performance. 249

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 Wealth creation and accessibility: At national levels, the political economy of a democracy cannot survive without a bond or stock market. The wealth of the nation is distributed more evenly through pension and mutual funds within democracies. This does not dispel the disconcerting inequality that still characterises most societies, but it does at least provide a mechanism for participation in one’s own democracy. The New Economy, in particular, demands greater participation. A well-established bond market has the added advantage of enabling a much more diverse group of people to send direct and indirect messages to nations and organisations regarding the way in which they are responding to the challenges of democracy and the New Economy. As volatile as it may seem, this instrument of democracy is becoming one of the most valuable sources of feedback, encouraging leaders to make the changes that are essential for long-term economic growth and competitiveness. The presence of these non-negotiable principles and instruments of democracy undoubtedly contributed to Winston Churchill’s2 comment that democracy is a terrible system, but it is the best one we have. In a similar vein, Ricardo Semler3, the author of the best seller Maverick cautions that democracy (in the workplace) is a much messier system than autocracy. It lacks the neat predictability and illusion of control offered by the Old Economy with its bureaucracy and autocracy. Democracy’s power lies in the system’s ability to accommodate a wide diversity of people and to respond more rapidly to changing circumstances. This combination of valuing diversity and more rapid responsiveness is what makes democracy more capable of survival than the centrist planning and autocracy of systems such as communism and old-style, East European socialism. Or, for that matter, the old-style approaches to managing organisations that also have their roots in the redundant systems and styles of the Old Economy. Democratic systems are durable because they are designed to accommodate diversity and to be more responsive to change. Organisations that have adopted basic democratic principles into the design of their workplace practices and relationships generally outperform those that still cling to antiquated Old Economy and non-democratic mind-sets and practices. The research on which this book is based shows that the average South African organisation still operates along the lines of the Old Economy. Most have not adopted workplace practices that reflect the more competitive principles of democracy and marketoriented economics. This is ironic. The leaders of private and public sector companies in South Africa have, by and large, been the espoused supporters of market-friendly and democratic dispensations. During the dark years of apartheid, and specifically during the 1980s, prominent business leaders regularly made strong statements endorsing the need for free enterprise and market-based economic policies. Yet the supposed champions of markets, democracy and free enterprise continue to run their organisations along lines that 250

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would make old-style centrist planners and bureaucratic socialists proud. In all fairness, workforces and unions, which share the values and principles of the increasingly redundant past, often ably reinforce management’s attitudes. The Old Economy dies reluctantly. Despite this, the steady growth of political democracy and market-oriented economics continues to have a positive domino effect. Democratisation cannot be contained only within the traditional arenas of party politics and regular elections. As people get used to having certain rights within the political arena and to being heard, so they start to demand and expect that these rights will be afforded them in the economic and organisational arena. It is permeating every facet of social, political and economic life. It is making it necessary for countries, organisations of all sizes and individuals to reassess their values and their responses to the challenges of democratisation and the New Economy.

DEMOCRATISATION OF POWER The democratisation of politics put the vote into the hands of individuals. The exercise and entrenchment of the core principles of democracy has extended this empowerment of people. It has devolved power and is continuing to make individuals and interest groups more capable of influencing their own environments. The process and practicalities of democratised power may be frustratingly slow, but it is meant to be in order for real and lasting change to occur. As a result the new order is durable and resilient. In the hands of committed individuals and small groups it is proving to be a force that even the largest organisations and countries have to contend with. Several organisations have experienced it firsth and. The Exxon oil spill of the late 1980s raised the ire of environmentalists and forced the company to adopt a very different stance with regard to their environmental policies. Similarly, Shell ran into sustained demonstrations in Europe during the early 1990s when it wanted to scuttle an oilrig in the North Sea. The groundswell of public resistance forced Shell to change its strategy. In 1999, the world’s most famous brand, Coca-Cola, ran into resistance over a scare of contamination of its products in Europe. And in 2000, the mighty Microsoft was found guilty of unfair business practice. In each instance, the mood of the masses had an impact on shifting the decisions and practices of organisations.

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People are increasingly demanding similar powers in the workplace to those afforded them in the political environment. They are reiterating their belief that, “We are mature and capable enough to elect the leaders of the country, make our opinions known to the giant corporations of the world, have a direct say over the education of our children, and help to 251

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shape how organisations respond to new challenges. Why is it not then possible for us to have a meaningful impact on our own workplaces and organisations?” They are demanding that the democratisation spreads to their personal sphere of influence. The democratisation of power must be seen within the context of the information explosion. People, especially those in more developed and affluent democracies, have infinitely more information at their disposal than ever before. This is only the beginning. The X and Y generations are growing up with the assumption, and almost unconscious habit, of accessing information wherever and whenever they wish. They are more informed about more things than ever before. They consequently claim the right to influence matters that may have an impact on their lives. An ethos of participatory decision-making is penetrating deeper into everyday working life. Informed people who can no longer rely upon the long-term security of lifelong employment expect to be involved in decisions that could have an impact on them. Management can still hold back in this regard, but at a cost: the erosion of competitiveness. It is a competitive necessity to allow people to exercise significant and meaningful power as an everyday part of their work.

DEMOCRATISATION OF TECHNOLOGY The sheer force of economics is driving the democratisation of technology. The rapid reduction of prices and the even faster improvements are making technology available and accessible to more people than ever before. There are, however, certain social and economic realities surrounding South Africa which are limiting the uptake of improvements in technology. Since the rapid growth and absorption of the Internet into everyday life, be it for reasons of social, economic or political inequalities in South Africa, the historical divide between those who have and those who have not has been highlighted. In the burgeoning arena of information and communications technologies, this divide or gap has been defined as the digital divide4. The regulatory framework within South Africa needs to alleviate the problem that this divide causes, widening the gap between the haves and the have-nots. Thus one of the issues that must arise in this debate is that of broadband.  Broadband and bandwidth: Broadband can be defined in simplistic terms as any technological means allowing the rapid transfer of large amounts of information, be it in the form of text, audio, video or data. In the USA, the body in charge of regulating telecommunications and broadcasting, the Federal Communications Commission, proactively encouraged the growth of broadband and facilitated the implementation 252

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of broadband amongst the public. They took an executive decision not to regulate the use of broadband in an attempt to foster competition and encourage growth and acceptance of new technology into the economy and public use. The availability and cost of bandwidth was, until the late 1990s, a major constraint to even more rapid advances in information technology and communications. However, estimates in the late 1990s and early 2000s showed that bandwidth availability was doubling every 12 months, with costs decreasing at a similar rate. The equations are startling: – The simultaneous doubling of information technology power and halving of relative costs every 12 to 18 months, known as Moore’s law, means that within 10 years technology will be almost 18 times faster than it was in the year 2000, and could cost no more than 15 percent of 2000 levels. – The even faster progress in the development of bandwidth means that within a 10-year period bandwidth costs should fall to less than 10 percent of initial levels, while bandwidth availability is predicted to increase by an astonishing 32 to 64 times during the same 10-year span. – When these two forces of technological progress converge, it has mind-boggling implications. The processing power of one of the most powerful laptops of 2000 could, by 2010, be contained in a microchip no bigger than two-by-two millimetres – approximately the size of a pinhead, only much thinner. The challenge becomes one of how and where to store it. It will be so light that a breeze could blow it away. Some commentators believe that the easiest solution would be to implant it under the skin. This computer could have voice recognition power, and could be permanently linked to the Internet. It is within the realm of possibility that every citizen could permanently carry around a powerful computer embedded under the wrist or thumb within the first quarter of this century. The image of the comic book character, Dick Tracy5, communicating via his wristwatch radio becomes a relic of the past. Rather imagine people logging onto their minuscule personal computer devices and sending or receiving information and messages on a continuous basis. With voice recognition capabilities and permanent linkage to the Internet, such devices might have the capacity to totally transform today’s cellular telephones, or probably make them redundant. New protocols such as WAP (wireless application protocol), selectively available since 1999, and rapidly becoming universal, offer cell phone users a mobile and personal connection to the Internet. When initially launched, systems like Bluetooth technology and WAP were not really a viable alternative to traditional means of connecting to the Internet. But as technology is adopted by the mainstream, so it is also improved. What was 253

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previously a geek’s hi-tech gadget, rather than an easily workable and reliable alternative, has now become a real solution and option for the mobile individual needing to have a reliable means of internet connectivity. These advances virtually guarantee that technology can be made available to the masses provided that access to bandwidth does not continue to be prohibitively expensive. Like the Henry Ford vision of manufacturing cars affordable to every worker, every citizen could within the foreseeable future have access to personal computer devices on hitherto unprecedented scales. Even the initial development of cellular telephone connectivity is opening doors, particularly in under-developed and developing contexts where masses of individuals and communities do not have the telephony infrastructure many people take for granted. Cellular technology has been adopted on a widespread basis by many individuals who don’t have landlines. Not having a landline previously meant that internet connectivity was not possible. With this new technology and improvements, Internet connection is possible. Take GPRS available on most of the new cellular telephones. You can connect to the Internet, send and receive emails anywhere, anytime – as long as you have a cellular connection – whilst chatting on the phone. On GPRS, you don’t pay for the length of the call but for megabytes downloaded. This once again opens up a wealth of opportunity.  The technology power index: The information technology revolution is creating its own set of competitive requirements for countries and organisations. It is becoming increasingly essential for countries and cities to measure themselves against these benchmarks and countries have to measure up to the technology power index: – PCs per household: Steve Ballmer, the number two man and president of Microsoft in 1995, defined how they measured the potential power of countries in PCs per household. As costs of personal computers continue to fall, and as the next jumps in technological progress and innovation become a reality, countries that optimise computerised citizenship will be able to participate in the New Economy. Countries that miss this boat will remain uncompetitive. Likewise, organisations populated by workplace citizens who take personal computing power and competence for granted are the ones that will prosper. – Degree of connectivity: A step already being taken is the connection of defined groups of personal computers into networks that can interact with one another. Local Area Networks (LAN), which forge a link between the computers within an organisation or selected group, have, to a limited extent, been around in large corporations and state departments since the 1990s. This interconnectedness and access to common communication tools is now seen as a necessary operational environment by companies, schools, local and provincial governments, departments of state, universities, hospitals and other organisations of moderate 254

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size. An organisational network allows people to optimise the use of systems, to control performance, maintain compliance to essential practices and leverage continuous learning as a major source of perpetual innovation and improvement in competitive capacity. – The second stage, the forging of interconnectivity between organisations and important stakeholders who form part of it and their own value chain, is also already a reality within some business or institutional networks. – Finally, whole areas, such as a city or province, need to provide the capacity for members of the appropriate community to become interconnected – easily, efficiently and cheaply. In South Africa, a small town known as Knysna is wirelessly linked throughout the town. This means that everyone is able to make local calls via this wireless network (eliminating the need to use the monopoly operator Telkom, who charge for local calls) and connect to the Internet – anywhere in the town, all for a monthly fee. – Abundance of bandwidth: Connectivity is closely associated with the availability and cost of bandwidth. Bandwidth is to the Information Age what the railways and motor highways were to the Industrial Age. It provides the transport potential for information. The countries and organisations that set themselves up with the necessary technology and regulatory environment to embrace new developments and make bandwidth as available as possible, are the ones that will lead in the quest for New Economy competitiveness. This is new ground for all societies and organisations. No one has yet been able to become a leader because the component parts required to take a lead have not been available. Interestingly, the more developed countries and organisations face a challenge that could make them less capable of taking the lead than developing countries or recently transformed organisations. The current economic giants of the world, whether at national or organisational level, have all built their capacity on technology that predates the current surge of developments. They consequently have huge investments in infrastructure and competencies that are not necessarily compatible with the new wave of possibilities. Developing countries, and organisations that are in catch-up mode, have the opportunity of leapfrogging over the existing technologies and cultures, and becoming the leaders in the newest technologies that the New Economy can offer. This means that the leaders of countries and organisations need the courage to identify and leap into the unoccupied territory of the near future. They need to establish themselves not as people who are perpetually trying to catch up, but rather as leaders who are willing to set the pace for the foreseeable future. 255

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 Creative destruction: Peter Drucker claims that the specific task of leadership, and of business in general, is to initiate perpetually the destruction of the present and replace it with the requirements of the future. Jack Welch of General Electric once instructed all of his senior executives to devise business plans for alternative businesses that would cannibalise their existing business activities. In years gone by, manufacturers of white goods and motor vehicles spoke of built-in obsolescence. The theory was that it was necessary to build obsolescence into products so that they would have a limited lifespan, after which consumers would need to purchase a new product – which probably was not that much different from the one they initially purchased. Today organisations have operated on the premise of ensured obsolescence. The outcome is the same. The cause is different. The speed of innovation means that organisations and countries need to cultivate cultures that are perpetually dissatisfied with the current products or services and are developing more attractive alternatives, even before the current market offering has shown its full return on investment. The motto is simple: if you cannot make your own products and services obsolete, someone else will. It may not be a different product, but the way of delivering it may be so radically different that it makes your business obsolete. So, cannibalise yourself before someone else does it for you. This challenge is about being fast. Some of the criteria for speed in the New Economy are: – The government’s capacity and willingness to process approvals, transactions, investments and requests for information or support to economic and specifically entrepreneurial endeavours. – The speed at which enterprising people can turn their start-up ventures into mainstream businesses. – The availability and speed at which entrepreneurs can get financing for new and even seemingly crazy ventures. – The pervasiveness of innovation and the capacity of people to create new ideas; and the capacity of organisations to encourage and enable people to be innovative – at speed. – The speed at which organisations, new ventures and new products or services can be launched, and how fast inefficient attempts are destroyed to prevent them from hoarding scarce resources. It’s all about being fast. Speed to market. Speed to adopt. Speed to adapt. Speed to respond. Speed to deliver. None of these speed-inducing habits can form within the Old Economy. Countries and organisations that still tolerate the old-style ways of doing things run the risk of falling behind at an exponential rate, even if they are still capable of generating apparently safe revenues. 256

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DEMOCRATISATION OF INFORMATION The Old Economy has relied to a great extent upon the capacity of some people to access and control information. This has enabled people to concentrate power in the hands of those who control the information. In earlier years this was also driven by certain practical constraints. The cost of generating and making information available prohibited its distribution to the masses. Old-style values also motivated people with control over information to limit its distribution on a ‘need to know’ basis. The New Economy, with the able support of accelerating advances in technology, is changing this forever. This has particular ramifications for the competitiveness of organisations. It would appear that there is some truth in the common-sense assumption that wellinformed people are more productive and better performers. Information allows people to evaluate situations, analyse problems and respond in a proactive and productive manner. Well-informed individuals create value throughout an organisation. The great gurus of the quality movement, W Edwards Deming6, Joseph Juran7 and Ishikawa8 emphasised the need for people to have access to, and the ability to use, information as the driving force for self-managed delivery of high quality products and services. The latter-day democratisation of information is no more than an extension of what these leaders were propagating in the 1950s. The availability of cheap, continuously linked up information technology is already revolutionising the capacity of societies and organisations to use information as a driving force for competitiveness. Interestingly, the major challenge will probably have nothing to do with the capacity of technology. The extent to which organisations embrace the creation of information-driven workplaces and make information available in abundance will be largely determined by values, leadership styles, workplace cultures and stakeholder relationships. The ‘hard’ issues in many instances are proving to be the easy ones, while the ‘soft’ issues demand tough choices.  The power of knowledge: A spin-off of the democratisation of information is the need for countries and organisations to consolidate and turn their knowledge into highleverage competitive advantage. Some people call this knowledge management. But this definition runs the risk of limiting the notion of leveraging knowledge to how well we can capture, store and retrieve it. Leveraging knowledge requires a conscious commitment and access to a range of focused disciplines and business processes that pursue and mine the knowledge of the system. This occurs only when people respect knowledge as a lively and dynamic organism in its own right. Leveraging knowledge taps into the capacity of people to search for new insights that often occur outside the borders of their own more focused disciplines. Jan Smuts9 touched on this in the 1920s when he correctly predicted that major new insights would be gained from the interplay 257

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between disciplines, rather than by maintaining a narrow focus on only one area of specialisation. Charles Handy10 identifies another important attribute for leveraging learning when he states that we need to cultivate decent doubt as the basis for continuous learning. By this he means that even the most respected specialist needs to doubt perpetually whether he or she has really discovered the totality of knowledge in a particular arena. Needless to say, in an ever-expanding universe where every day sees the equivalent of thousands of books being published, no one can afford to feel comfortable about their state of knowledge. This state of perpetual learning goes back to the old dictum of being conscious of at least four states of knowledge:  Unconscious incompetence or not even knowing what we do not know. This is regularly underpinned by a combination of arrogance and ignorance. It afflicts societies, organisations and individuals that are unwilling to recognise that there is something new, albeit discomforting, that needs to be learnt and considered.  Conscious incompetence or demonstrating the humility to acknowledge a lack of adequate knowledge. This is a driving force of learning, as long as it is turned into an active pursuit of new learning. This can only occur in an environment that encourages people to actively experiment, make mistakes and turn the errors into the basis for next steps of learning.  Unconscious competence is the signal that one is entering the dangerous territory of comfort zones and incipient redundancy. It is also the breeding ground for knowledge capital thieves – those people who often unintentionally, and equally often in a miserly fashion, hoard knowledge. They leave the premises of our organisations every day and pass safely through every security check, but they take the most valuable resource with them. When they leave, retire or die, they rob the organisation of its knowledge. This malaise plagues every organisation that has not yet recognised the need to respect and leverage its knowledge. Addressing it is a prerequisite for leveraging knowledge.  Conscious competence develops when societies, organisations and individuals adopt the ‘abundance’ approach to knowledge. Short of selling the secret formula to CocaCola, it means that people must not view knowledge as a zero sum game. Knowledge in the New Economy reflects the biblical suggestion that we should cast our bread on the waters, and it will return multifold. The countries, organisations and individuals which learn to utilise and multiply their knowledge the best will be the winners. An executive from one of the organisations participating in our research put it succinctly when he said to some of his managers, “Each 258

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one of you needs to be a teacher. The experience that you carry around in your heads must be passed on to the people in your teams. If you cannot or will not do this, you have no right to call yourself a manager, and you are definitely not a leader. The training and development function is there to provide some generic training. You are there to provide everyday learning to every person with whom you interact.” Managers who enable an everyday learning and knowledge-sharing environment add to the total value of organisations. The countries and organisations that have bought into this crucial characteristic of the New Economy revel in learning and sharing experience in an open, robust and often almost ruthless manner. The successes and failures of organisations and individual leaders are front-page stories in popular magazines and journals. Publicly available case studies form part of being successful – and of failing. Bestselling books graphically describe what differentiates the superstars from the also-rans. Successful politicians and business leaders attain the same high profile exposure and following as pop and movie stars – at least within the relevant community. The democratic principles of transparency, accountability and publicly communicated standards are woven through the approaches to knowledge. Old Economy mind-sets operate from behind screens of secrecy, there’s an unwillingness to be quoted, a fear that operational secrets will be exposed and enable competitors to steal a lead, and a general closed-minded mentality that maintains laagers and silos – both within and outside the organisation. This book concludes that South African organisations and society are still firmly rooted in an Old Economy mind-set. This is inhibiting South Africa from embracing the New Economy, which would launch us onto the road to widespread global competitiveness.

DEMOCRATISATION OF FINANCE Since the late 1990s, globalisation has been repeatedly under attack. The globalisation impulse has been portrayed as selfish, interested only in short-term gain and willing to mete out harsh punishment to societies. The emerging markets crisis of 1998 for many exemplified the worst face of globalisation and the New Economy. Nothing has contributed more to these negative perceptions than the democratisation of finance. But, as is the case with every element of the New Economy, the signs have been present for at least one-anda-half decades. Thomas Friedman11 provides a provocative synopsis of the changing world of global finance in his book The Lexus and the Olive Tree. He identifies two large groupings of people who have a powerful impact on the financial well being of societies.  The electronic herd: This herd moves at the speed of Internet connections. They track financial markets on a 24-hour basis. Their cellphones or PDAs warn them of slight 259

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shifts in the markets of the world. They move vast sums of money around the globe with a few quick entries on their laptops or cellphones. – Thomas distinguishes between the long horn and short horn herds. The long horn herd is comprised of investors who are willing to set up operations within a country. They are motivated by stable legislative environments and economic policies, predictable tax regimes, skilled and productive workforces and the capacity to repatriate adequate profits. Above all, they seek environments where they can produce their products and services at globally competitive prices with the certainty of quality delivery. They do not move in and out of countries as fast as the short horn variety, but they are nonetheless capable of surprisingly rapid responses. – The short horns are more fickle. They are unashamedly in it for the fast buck. This does not mean that they are not willing to invest for the long term, but they are ruthless in their judgments. They operate exactly like a herd of wildebeest or impala on the plains of Africa. They are consistently wary and panic in an instant. They do not wait around to carefully analyse whether the noise they hear in the grass is a dangerous predator that could threaten their returns on investment. If they sense something may be wrong, they bolt. And once one animal bolts, the herd stampedes, often devastating the stock markets and economies of less stable or less proven markets. – Of the two, the long horn variety is the most influential and potentially the most dangerous. Because they invest with the longer term in mind they go out of their way to get to know the countries in which they have chosen to invest. They get to know the political and institutional leaders. A major part of their own leadership accountability is to identify and appoint talented people into tough leadership positions. After all, the wellbeing of their organisations rests on their peoplejudgement skills. These leaders of the long horned electronic herd form perceptions and make informed judgments of the leaders of the countries with whom they are associated. They readily differentiate between senior leaders – cabinet ministers, directors’ general or senior officials – who are competent and those who range anywhere from political chum to charlatan. – They meet with other business leaders at the World Economic Forum in Davos12 during February of every year. They are trusted in the hallways of business throughout the world. Once they conclude that a country and its policies are not worth investing in, their damning impressions echo throughout the business world. If they withdraw from a country, it can take decades before you see them or others of note return.

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– Together, the short and long horned investors of the world have established a set of rules, which define the New Economy from an investment perspective. The rules of the game are not too flexible. Countries and organisations either play by them or are relegated to the sidelines. The good news about these rules is that over time, they create trust and tolerance. The investors of the world reward countries and organisations that adhere to them.  The rules of the game for economic democratisation: These rules are a conglomeration of emerging and already well-established guidelines for countries and organisations. Some of them are clearly the primary task of government, some fall more under the control of business and some represent a mixture of accountabilities. – The private sector is viewed and operates as the primary engine of economic growth. – Inflation is maintained at low rates, thereby supporting price stability. – The state bureaucracy is reduced and shrunk to divert funds to more productive and value-adding endeavours. – The national budget is balanced, or kept close to being balanced, with preference being given to generating surpluses. – Tariffs on imported goods are reduced and ultimately eliminated to encourage open trade and expose internal organisations to competition. – Restrictions on foreign goods are removed. – Restrictions on foreign investment are removed, enabling free flow of capital. – Protective quotas and domestic monopolies are eliminated. – Economic growth is reinforced by increasing exports and creating a more resilient economic environment. – State-owned enterprises and utilities are commercialised and privatised. – Capital markets are deregulated and allowed to fluctuate according to market forces and convertible currencies. – Industries, stock and bond markets are opened for direct foreign ownership, investment and competition. – The economy is deregulated to allow maximum internal competition. – Government corruption, subsidies and kickbacks are eliminated and punished strongly. – The banking and telecommunications systems are opened for private ownership and competition. – Citizens are capable of and allowed to choose from an array of competing pension 261

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funds, as well as from foreign-managed pension and mutual funds. – Political checks and balances, and independent protection of a constitution/legal rights are put in place. – Legislation that enables and encourages entrepreneurial activity is established. – There is a robust system and attitude of supporting entrepreneurial activities, and a willingness to invest in new and higher risk ventures. – Credible financial institutions provide reliable and trustworthy services. An overview of these guidelines and their application within South Africa indicates that South Africa still has a mixed record. Good to excellent progress has been made in several areas. Others are still cause for concern. The important thing to note is that both government and organisations, specifically the private sector, need to demonstrate significant improvement in the various areas where progress is lacking. The New Economy, especially in the context of a developing or emerging economy, poses significant challenges at national and organisational levels. In many instances the solutions rely upon the exercise of joint leadership accountability at national and organisational levels. South Africa’s record of fulfilling the rules of the game for economic democratisation remains mixed.  The real opposition: Parliamentary politics and multi-party political systems remain important, but as far as the New Economy is concerned, the real ‘opposition’ for a country like South Africa are the long and short horned investors. They provide a powerful counterfoil for abuses of power. They rapidly and very effectively signal to the country if they believe that the government is not remaining true to the rules of the game. And they do this with significantly less fanfare than the average opposition party in parliament. This is a reality that needs to be considered by opposition political parties in any developing country.

DEMOCRATISATON OF DECISION-MAKING World Link magazine neatly defines the context of the democratisation of decision making when it states that the world has moved from a command and control paradigm to a leadership model that is based upon command and connect. The forces of democratisation and the New Economy – and particularly the necessity for speed and efficiency that accompany competitiveness – mean that a few leaders ‘at the top’ can no longer make the majority of the most important decisions. Towards the end of the Second World War, Harry Truman became president of the USA. He had a quote displayed on his desk, which read: ‘The buck stops here’. If he had been alive today and still held such high office, the quote might have read: The buck starts here – it stops everywhere. 262

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More than any of the other forces of democratisation, the transformation of decisionmaking has a direct impact on how organisations are run. Peter Drucker was one of the first to define this change when he stated that every person within the workplace has to operate as a manager – not only of people but also of resources. The sweeper has to make decisions about how to best deploy cleaning duties and materials, the secretary on how to deliver support service with built-in quality, and the shift leader on how to optimise production for his or her shift. Demings and Juran, the two foremost leaders of the quality revolution, pioneered the use of statistical analysis and operational problem solving as a prerequisite for delivering quality services and products. Tom Peters also insists that every person needs to be viewed and operate as a leader of his or her own workspace, and as a manager not only of people, but also of resources. The average adult member of the workforce lives out a full and quite complex life as a member of society. Outside the workplace they are generally adept at fulfilling a diversity of roles: parents, volunteers in community organisations, juggling family budgets, coping with the complexities of family and neighbourhood affairs and a myriad of other daily challenges. They cope by making use of their full adult and intellectual capacity. Until they come to work. Then they often have to ‘leave their brains at the door’ because they are not expected, or allowed, to make too much use of them during working hours. This is the Old Economy way. It is safe because it channels decision-making through a few people at the top, who are considered to be more trustworthy than everyone else. It also slows the process down so much that at times the only real mistake that can occur is to become redundant. The New Economy does not tolerate this. It acknowledges that there are risks involved in giving people the freedom and accountability to make and implement decisions, but it relies on a range of competitive workplace practices to minimise risk. Even if exposure to risk does result in a percentage of errors, this is viewed as a necessary prerequisite to learning. The democratisation of decision-making does not amount to a laissez faire approach in which everyone is free to do his or her own thing. It operates within the framework of New Economy workplace practices.  The context of democratised decision-making: There are a few essential ground rules that prevent the democratisation of decision-making from running riot: – Power of personal presence: Senior leaders of the organisation regularly interact with a wide range of people to communicate the vision and strategy of the organisation. While he was CEO of ABB, Percy Barnevick set himself the goal of interacting intensively with between 4000 and 5000 members of the workforce per year. He viewed communication of the direction and requirements of the business as an essential task. He expected each of his executives to do the same 263

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by meeting with an equivalent number of people every year. John Chambers of Cisco13 makes it clear that he still remains finally in charge, but that his role is to give people adequate understanding of the strategic direction and priorities so that they can be empowered to take charge and make appropriate decisions. In the absence of this essential leadership role, people will go off in their own direction. – Tapping into the collective genius: Warren Bennis14 in Organizing Genius, states: “None of us is as smart as all of us.” The New Economy lives by a new mantra that challenges the notion that the ‘leaders up there’ have all or better answers. The New Economy thrives on tapping into the capacity of dozens and even hundreds of people who all have a contribution to make. It has the humility to acknowledge that every person we meet is capable of offering each one of us something new and worthwhile. This is easy enough to accept in relation to people we respect or agree with. The real challenge is to afford people whom we do not respect and totally disagree with the same acknowledgement. It also requires what Charles Handy defines so eloquently as decent doubt – or the capacity to question one’s own knowledge perpetually and to admit that there is something important that exists beyond the boundaries of one’s own existing knowledge and experience base. – Setting people free: In his seminal article, How I Learned to Let My Workers Lead, Ralph Stayer,15 Chief Executive of Johnsonville Sausage LLC, describes his journey. It started when he realised that he was inhibiting the performance of the organisation by not allowing members of the workforce to make a multitude of decisions for which he felt accountable. One of his major personal insights occurred once he had started to involve others in decision-making. He shifted from simply telling people what was expected to involving people in discussions about decisions. However, he still had specific even if unspoken outcomes in mind. As he puts it, he’d moved from telling people what his views were, to “forcing them to guess what they were”. It was only when he realised this that he started truly to liberate people to exercise their personal initiative, take charge of making and implementing decisions and making mistakes. – Democracy with rules: Democracy is a system of rules. It works because people generally keep to the rules. In fact, well-developed democracies have significantly more rules and regulations than dictatorships and authoritarian states. In the latter, it is often left to individuals or power elites to decide whether someone has broken a rule or not, or simply to make up the rules as they please. Democracies have clearly spelt out constraints. They offer significantly greater liberties and rights to those people who broadly adhere to the rules. Within healthy democracies, greater freedom entails greater responsibility. The same relationship between 264

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freedom and responsibility is workable within organisations. However, several organisations have made the error of giving people freedom without spelling out the requirements and expectations that go hand in hand with this freedom. This is not democracy. It is either abdication or ‘mobocracy’ – autocracy of the mob. – Democracy has to deliver; participation must produce: The critical reality about the democratisation of decision-making is the hard fact that democracy and its organisational equivalent of participation depend on delivery and production. Democracy without delivery fails. Participation without a demonstrable impact and tangible results is not participation, it is a get-together. Without the imperative of results, participation deteriorates into an amorphous and unsustainable cycle of consultation. Collectively we need to discover each individual’s unique potential to contribute something better than others can, and turn this to the common good. The six forces of democratisation are combining to create an entirely new value system that differentiates the Old from the New Economy. These global forces do not yet affect the daily lives of the majority of the world’s citizens, but they do to a large extent serve to differentiate the competitive from the less competitive nations. In the short term some of the countries that ignore or resist these forces of democratisation will undoubtedly experience spurts of growth, but the historic evidence shows that it is not sustainable in the long term. The rapid advance of the New Economy means it is fast becoming essential for countries and organisations to adopt the practices that ensure alignment to these global forces. For most this will be not be an easy task. The magnitude of the shift required for organisations and leaders to embrace and make the New Economy a reality is today generally a dream. Did the slave shackled and helpless in the hold of a ship dream of freedom? Did Thomas Edison dream of homes lit with glowing electric lamps when experiment after experiment failed? Just how long did Nelson Mandela’s dream of a long walk to freedom have to be no more than a dream before he walked free? For most the dream of widely entrenched democratisation of leadership and organisations may feel like no more than a fantasy, some weird science fiction that cannot be taken too seriously. But it is no longer a dream. The evidence is building that an increasing number of leaders and organisations are taking this quest seriously – not from the goodness of their hearts or for some philosophical belief – but because they know it makes good economic and social sense. Realising this dream is all that New Economy Leadership is about.

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NOTES 1 Albert Einstein (1879 – 1955) was a German-born theoretical physicist. He is best known for his theory of relativity and specifically mass–energy equivalence, E = mc 2. Einstein received the 1921 Nobel Prize in Physics. (From Wikipedia, the free online encyclopedia.) 2 Sir Winston Leonard Spencer-Churchill, (1874 – 1965) was a British politician known primarily for his leadership of the United Kingdom during World War II. (From Wikipedia, the free online encyclopedia.) 3 Ricardo Semler (born 1959) is the CEO and majority owner of Semco SA, a Brazilian company best known for its radical form of industrial democracy and corporate reengineering. He has written two books in English on the transformation of Semco and workplace re-engineering: Maverick, an English version of Turning Your Own Table, published in 1993 and an international bestseller, and The Seven Day Weekend, published in 2003. (From Wikipedia, the free online encyclopedia.) 4 ��������������������������������������������������������������������������������������� The term ‘digital divide’ refers to the gap between those people with effective access to digital and information technology and those without. It includes the imbalances in physical access to technology as well as the imbalances in resources and skills needed to effectively participate as a digital citizen. In other words, it’s the unequal access by some members of the society to information and communications technology, and the unequal acquisition of related skills. The digital divide exists between groups of various genders, incomes, races and locations. The term global digital divide refers to differences in technology access between countries. (From Wikipedia, the free online encyclopedia.) 5 ��������������������������������������������������������������������������������������� Dick Tracy is a comic strip featuring a popular and familiar character in American pop culture. Dick Tracy is a hard-hitting, fast-shooting, and supremely intelligent police detective who has matched wits with a variety of often grotesquely ugly villains. Created by cartoonist Chester Gould in 1931, the strip made its debut appearance in 1931 distributed by the Chicago Tribune Syndicate. Gould wrote and drew the strip until 1977. (From Wikipedia, the free online encyclopedia.) 6 William Edwards Deming (1900 to 1993) was an American statistician, college professor, author, lecturer, and consultant. Deming is widely credited with improving production in the United States during World War II, although he is perhaps best known for his work in Japan. There, from 1950 onwards he taught top management how to improve design (and thus service), product quality, testing and sales (the last through global markets) through various methods, including the application of statistical methods. (From Wikipedia, the free online encyclopedia.) 266

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7 �������������������������������������������������������������������������� Joseph Moses Juran (1904 – 2008) was a 20th century management consultant who is principally remembered as an evangelist for quality and quality management, writing several influential books on those subjects. (From Wikipedia, the free online encyclopedia.) 8 Kaoru Ishikawa (1915-1989) was a Japanese university professor and influential quality management innovator best known in North America for the Ishikawa or cause and effect diagram (also known as the Fishbone Diagram), used in the analysis of industrial processes. (From Wikipedia, the free online encyclopedia.) 9 Jan Christiaan Smuts (1870 – 1950) was a prominent South African and British Commonwealth statesman, military leader and philosopher. In addition to various cabinet appointments, he served as Prime Minister of the Union of South Africa from 1919 until 1924 and from 1939 until 1948. (From Wikipedia, the free online encyclopedia.) 10 Charles Handy (born 1932) is an Irish author/philosopher specialising in organisational behaviour and management. (From Wikipedia, the free online encyclopedia.) 11 Thomas Lauren Friedman (born 1953) is an American journalist, columnist and author. He is known for supporting a compromise resolution to the Israeli-Palestinian conflict, modernisation of the Arab world, environmentalism and globalisation. (From Wikipedia, the free online encyclopedia.) 12 ����������������������������������������������������������������������������������� The World Economic Forum is an independent international organisation committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. The World Economic Forum is under the supervision of the Swiss Federal Government. (From www.weforum.org) 13 John T. Chambers is Chairman of the Board and CEO of Cisco Systems, Inc. (From Wikipedia, the free online encyclopedia.) 14 Warren Gamaliel Bennis (born 1925) is an American scholar, organisational consultant and author who is widely regarded as a pioneer of the contemporary field of leadership studies. (From Wikipedia, the free online encyclopedia.) 15 ��������������������������������������������������� Ralph and Alice Stayer founded Johnsonville Sausage LLC, a Wisconsin-based sausage producer, in 1945. In 2004 Johnsonville became the largest sausage company in the United States in terms of sales. (From Wikipedia, the free online encyclopedia.)

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APPENDIX A

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So discuss the real-life way that things are done most of the time, and then reach a conclusion on your organisation’s REAL values. What does this say of how individuals at every level within the organisation may behave and respond?

Remember, the organisation’s – and our personal – values are first and foremost expressed through our individual and collective behaviours. Approaches to Management and Leadership are ultimately no more or less than the conscious or unconscious bias towards certain Waves of Values, and living those values through how we believe an organisation should be run. This will largely determine how individuals and teams exercise power, conduct performance reviews, develop people, etc.

As you review these 4 Waves of Values, put on a ‘75 percent Hat’. In other words, ask yourself what you think the general response of 75 percent of the people would be if they were given the opportunity to assess the REAL as opposed to ESPOUSED values of the organisation.

Please use this evaluation to determine the deep underlying values that drive decisions, leadership, responses to the larger environment, how the organisation is managed, and how people are led within your organisation.

The World of Deep Values

The Leadership (R)evolution: Creating a High Performance Organisation

Leadership and

Hierarchy

Information

Strategy Execution

Power

Organisational Practice withheld from others. Privileged and informal networks

superiority exist.

People are viewed as servants to

•

Dissent is frowned upon.

• •

are told.

Secrecy is prevalent.

•

•

•

things go badly. People are expected to operate

through the chains of command.

•

Contribution determines status.

interference.

•

at each level.

Advice from others is seen as

Roles are very clearly defined

anywhere to resolve a problem.

direction is not welcomed.

•

• state of the organisation. Everyone can approach anyone •

Continuous feedback on the

all users.

Structured to meet the needs of

needing to become managers.

their specialist field without

managers, or by deepening

people to advance either as

management. The hierarchy enables

information to guide self

People are equipped to use

required.

determine what information is

People are involved to friendly.

that lives across all levels.

dynamic and ongoing process

Strategy execution is a

views. Readily accessible and user-

•

•

objectives.

roles contribute to strategic

All levels understand how their

Servant Leadership.

People with influence practice

widely.

is understood and practiced

High involvement leadership

disagreement and dissenting

Leaders openly invite

provide inputs.

All affected stakeholders can

and transparent.

determines status.

What and who is controlled

•

•

•

The process is well established •

well and widely developed.

involvement practices are very

Skills of participative, high

through affected people.

Power is exercised with and

Co-creation

New Economy Collaboration

Crossing boundaries in any •

expectations. Silos operate largely in isolation.

•

People caught by surprise when

•

•

is guarded in order not to raise

•

Often inadequate.

•

•

Inaccessible to operational people. • Bad news is shared. Good news

management. •

information.

•

•

•

•

•

•

Only the ‘elite’ have access to

Designed for use by senior

People abdicate upwards.

prevails. •

•

People are expected to do as they

Strict executive prerogative

People don’t know what the

organisation’s strategy is.

instruction.

people at the top. •

•

others. Strategy sits in the heads of a few

•

There are distinct favourites and

•

Power is exerted by some over

• ‘secondary’ citizens. Strategy is generally a top-down

hold and control power.

•

Power is granted to some and

Clear patterns of subservience and •

Co-option

Old Economy

be led.

•

•

Coercion

LIVING THE FOUR WAVES OF VALUES IN PRACTICE

APPENDIX A

271

272

Leadership and

Change Leadership

Diversity

Decision making

Organisational Practice

Diversity is loved, not just

expertise, etc.

Minimal investment is made in

rational manner.

consciously invests in adequate • change leadership activities.

Change process is often rushed or underestimated

•

•

seen as negative.

Every change process

all levels of work.

•

change leadership competencies.

•

leadership competence across

Change leadership is a core

Human responses to change are

•

adequate change leadership.

Managed almost entirely in a

•

•

Project management is seen as

Change occurs through imposition. •

•

•

communities.

experience, race, gender,

unpopular views are side lined.

•

of others – be that style,

People with conflicting or

•

beliefs.

value and mine the diversity

mistrust or suspicion.

Change does not cause

ongoing and inevitable.

Change is accepted as

truly change fit.

managed. The vast majority of people are

of all stakeholders and

define and include the diversity

Conscious effort is made to

advantage.

them head on.

People have astute ability to

•

homogenous in outlook and

•

and tolerated without addressing

Groups in power are relatively

a significant competitive

Unleashing diversity is

•

competitiveness.

element of sustainable

•

Subtle racism and/or sexism exist

productivity and quality. Diversity is seen as a core

value streams and innovation.

The focus is on enhancing

them.

important roles. •

•

The focus is on improving

•

Overt racism and/or sexism exist.

Certain types of people dominate

•

work.

level by the people doing the

executed at the most effective

people in decisions that affect

Every effort is made to involve

excluded from important jobs.

Certain types of people are •

•

The focus is on not making

mistakes.

People often feel disempowered.

•

compliance. The focus is on ensuring control.

high up or by too many people.

Emphasis is on subordinate

•

•

•

•

•

Decisions are made and

•

Decisions have to be cleared too

•

significantly.

Well-developed team decisionmaking skills are in place.

•

influence allowed.

People are informed with no real

People are not involved

•

Decisions are made ‘at the top’.

Co-creation

New Economy Collaboration

•

Co-option

Old Economy

•

Coercion

The Leadership (R)evolution: Creating a High Performance Organisation

Leadership and

Stakeholdership

Talent creation

(PM)

Performance Management

Organisational Practice

•

•

•

•

•

•

•

•

Feedback ratings often catch

Feedback is negligible except

exploit.

interests dominate.

Shareholder and executive

•

Natural and people resources are

viewed as property and rights to

and dominant stakeholder.

power is prevalent.

•

The shareholders are the favoured •

and direct interests of those with •

are common.

Power plays between stakeholders

seen as important.

•

Fulfilling the (largely short-term)

competing interests.

Stakeholders generally focus on

controllers of the organisation are •

•

Only the direct owners or

fit and friendly for human life.

Organisations are created to be

norms of business.

community beyond the usual

engage and benefit the larger

Leaders operate in ways that

stakeholders.

interests and benefit all

the specific intent to balance

The organisation is run with

•

•

•

or best developed.

Talented people are readily transferred where most needed •

•

disloyal and are rejected.

•

resisted.

Silos hoard their talented people.

•

People who leave are viewed as

enterprise wide asset.

Talented people are seen as an •

execution and service delivery.

PM is directly linked to strategy

•

•

Inter-divisional talent transfers are

development.

of time.

•

The first budgets to be cut are for

Development of people is a waste •

•

people by surprise.

when things go wrong.

process.

People trust and enjoy the

•

organisation.

part of regular work. •

PM does not form an energising

involvement.

•

Expectations are altered without

PM forms an integral part of the daily running of the

•

feedback.

PM consists largely of ad hoc

community and global citizens.

Leaders accept their role as

organisation’s long term future.

the stewards who secure the

Leaders view themselves as

on the ‘7th Generation’.

against the impact it will have

relations are maintained. Every decision is measured

as valuable alumni and

People who leave are viewed

talent.

a portal and springboard for

The organisation sees itself as

PM well, and is energised by it.

The entire organisation uses

of level or position.

receive feedback – regardless

People consistently give and

Co-creation

New Economy Collaboration

expected of them.

•

Co-option

Old Economy

People have little clarity on what is

Coercion

APPENDIX A

273

274

Total

1st Wave

Old Economy 2nd Wave

Read the definitions for the four waves of values in the table and then rate your organisation by allocating 10 points across each of the four waves for each of the Leadership and Organisational Practices. For example, your rating for the first one may look like this:

Stakeholdership

Talent creation

Performance Management (PM)

Change Leadership

Diversity

Decision-making

Hierarchy

Information

Strategy

Power

Leadership and Organisational Practice

1st Wave 2

2nd Wave 6

3rd Wave 2

New Economy

4th Wave 0

4th Wave

Now add up the total for every column and plot it on the next page.

Power

3rd Wave

WHAT IS YOUR ORGANISATION’S VALUES PROFILE?

The Leadership (R)evolution: Creating a High Performance Organisation

0

10

20

30

40

50

60

70

80

90

100

Practice

Leadership and Organisational 1st Wave

Old Economy 2nd Wave

3rd Wave

New Economy 4th Wave

WHAT LEADERSHIP AND ORGANISATIONAL CHALLENGES DOES THIS PROFILE HOLD FOR YOU?

APPENDIX A

275

276

APPENDIX B

3. There is widely held agreement on the nature of emerging challenges and how we should respond.

2. Long-term forces of change are regularly identified to ensure that we respond timeously to emerging challenges.

1. My organisation’s strategy analyses our global, local and internal competitive challenges on a regular basis.

A: Please rate the extent to which this behaviour is true for your organisation:

0

1

2

3

4

Please respond by indicating the extent to which you believe each of the forty practices is true for your team or division or organisation (depending on how this questionnaire is going to be used). You rate each statement on a scale of 0 – 4, as indicated on the questionnaire by selecting the appropriate block next to the statement, e.g.

PLEASE COMPLETE THE SURVEY

This questionnaire uses VISA to explore people’s current experience of how effectively strategy is carried out in this environment. It does not measure the quality of the content of the strategy, but the process used to execute it.

VISA to (W)hole Strategy Execution™

APPENDIX B

277

278

Long-term forces of change are regularly identified to ensure that we respond timeously to emerging challenges.

There is widely held agreement on the nature of emerging challenges and how we should respond.

The implications of not introducing essential changes are understood well and communicated to people across all levels.

The vision of the organisation is communicated to people across all levels in ways that they can understand it and respond proactively within their own areas of accountability.

We maintain a positive tension between things that need to be maintained and new initiatives that have to be implemented.

The senior leadership demonstrates a capacity to operate with insufficient information and yet respond in ways that engender confidence in others.

People feel that the senior leadership provide clear and firm direction which defines the direction that the organisation is moving in.

The senior leadership personally interacts with people across all levels to ensure that they understand the vision.

2.

3.

4.

5.

6.

7.

8.

9.

0: Not true at all

1: Seldom true

2: Sometimes true 3: True most of the time 4: Definitely true

Total out of 40:

10. The senior leadership personally interacts with people to enable them to translate the vision and strategy in ways that make sense to them in their areas of work.

My organisation’s strategy analyses our global, local and internal competitive challenges on a regular basis.

1.

A: Please rate the extent to which this behaviour is true for your organisation:

0

1

2

3

4

The Leadership (R)evolution: Creating a High Performance Organisation

Stakeholders are involved in setting strategic direction for the organisation.

information they need to contribute to optimum added value.

We ensure that people at all levels, and all stakeholders, are kept adequately informed and have all the

0: Not true at all

1: Seldom true

Total out of 40:

2: Sometimes true 3: True most of the time 4: Definitely true

interdependent parties contribute to optimum added value.

10. There is a common understanding of our organisation’s authentic value stream and how the various

9.

8.

Senior leadership spends significant time interacting with stakeholders to ensure optimum alignment to between

7.

them.

We involve stakeholders in processes to define one another’s interdependent roles and accountabilities.

because they understand how they will also benefit.

All of the stakeholders in our supply chain are strongly committed to contributing to our organisation’s strategy

anticipate their interests.

We interact meaningfully with all stakeholders to identify their priorities and determine how we need to respond to

strategy to respond appropriately.

We clearly understand the interests of all stakeholders within our organisation’s value stream and design our

respond to the complex dynamics that may emerge.

The interaction and relationships between various trends and stakeholder interests are explored to ensure that we

of the organisation.

We make a great effort to identify all of the potential variables that may have an impact on the future performance

6.

5.

4.

3.

2.

1.

B: Please rate the extent to which this behaviour is true for your organisation:

0

1

2

3

4

APPENDIX B

279

280

We ensure that there are monitorable benchmarks for all levels that define best practice performance for people

2.

People are capable of accessing and using information to track their own performance and initiate actions to meet

5.

We have a clear understanding of what our customers think of our performance and service delivery.

in an assertive manner.

The consequences of poor performance and non-delivery of required performance is understood and introduced

own performance.

There is continuous monitoring of how well we are meeting our customer’s needs and how we can improve our

and performance standards.

People at all levels proactively define and set continuous improvement targets that meet customer expectations

0: Not true at all

performance.

1: Seldom true

2: Sometimes true 3: True most of the time

4: Definitely true

Total out of 40:

10. We use disciplined and integrated performance management processes to drive the achievement of competitive

9.

8.

7.

6.

Relevant and user-friendly information is readily available to people across all levels and functions.

4.

their objectives.

Action plans are quantified and communicated widely to everyone that is affected by them.

3.

to strive towards.

Our strategy is translated into objectives that are relevant to the various levels of our organisation.

1.

C: Please rate the extent to which this behaviour is true for your organisation:

0

1

2

3

4

The Leadership (R)evolution: Creating a High Performance Organisation

Specific performance standards are used by individuals and teams to direct performance.

The accountability for performance is placed in the hands of the people who do the work.

We regularly interact with our customers to determine their needs and how well we are meeting those needs.

People clearly understand the limits of their accountability and what they are empowered to do without supervision.

Senior managers maintain regularly interact with operational people to help them to solve problems and understand performance requirements.

There is a continuous improvement mind-set that encourages people to take the initiative to improve performance and service delivery.

People take personal accountability for improving productivity and improving the use of resources in their own areas of work

People take personal responsibility for ensuring in-built quality in their own areas of work, and actively identify obstacles to delivering quality.

2.

3.

4.

5.

6.

7.

8.

9.

0: Not true at all

1: Seldom true

2: Sometimes true 3: True most of the time 4: Definitely true

Total out of 40:

10. When mistakes are made, people readily and openly identify them and speak out about them so that the problems can resolved quickly.

People at all levels, and especially operational levels, are committed to delivering services and products that satisfy our customers.

1.

D: Please rate the extent to which this behaviour is true for your organisation:

0

1

2

3

4

APPENDIX B

281

282 4

3

2

1

v

4

3

2

1

1

2

3

4

1

2

3

4

I

4: Superior 3: Very Good 2: Average – requires improvement 1: Inadequate – cause of problems

A

s

Divide each total above (in A – D) by 10, and transfer your score into the axes below: A onto V (Vision); B onto I (Interdependence); C onto S (Structure); D onto A (Action) Now link the dots with straight lines to produe the Strategy Execution kite.

Strategy Execution Kite

The Leadership (R)evolution: Creating a High Performance Organisation

Personal Notes

Personal Notes

2–3 It is likely that strategy is still viewed as largely a senior executive accountability, with limited involvement from people are more operational levels. People may have a general understanding of the strategy, but it is not yet a core driver of creating aligned priorities and sharpening the focus of the organisation. And its people.

3–4 Strategy development and execution processes have become a powerful contributor to achieving organisational results. Strategy is seen as something that can only be achieved if people across all levels comprehend it, and appreciate what they have to do to ensure strategy execution within their area of influence.

3–4 indicates that this is a primary way of responding to situations. Personal Notes

2–3 indicates that this is a secondary way of operating.

1–2 The organisation may have a strategy, but it is unlikely that people understand it, or that it is interpreted in a congruent manner across divisions and levels. It is likely that the strategy does not have a meaningful influence on how people conduct their work and how priorities are set within the organisation.

1–2 indicates that this is not a primary way of operating.

VISA to (W)hole Strategy Execution™ Strategy Execution VISA Profile: Interpretation of Score

APPENDIX B

283

284

Action Demonstrating the capacity for ongoing learning; the ability to gain the trust of others; the passion to achieve results; and the desire to create new ways to enhance competitiveness.

Structure Designing and implementing competitive workplace processes; resolving issues in ways that entrench high performance practices; and managing consequences.

Interdependence Gaining the commitment of diverse people, empowering others to deliver superior performance, and enabling people to drive innovation at their own levels.

Vision Comprehending the context of the organisation, unit, team and self; enabling others to make sense of it to respond to it in ways that enhance performance.

VISA to (W)hole Strategy Execution™ Description of the four VISA Quadrants

The Leadership (R)evolution: Creating a High Performance Organisation

285

APPENDIX C

286

4.

3.

2.

1.

Mario Denton and Ernst Bouwer undertook a study to explain the rationale behind the Beehive Model and questionnaire indicators as justified by academic literature. Academic literature was reviewed to determine whether there was support for the strategic importance of the Beehive Model’s workplace practices of organisational renewal in entrenching change and high performance.

Entrenching Change and High Performance Through the Beehive Model of Organisational Renewal (Global Conference on Business and Economics, London, July 5 – 7 2003):

Christo co-authored this book with Patricia McLagan. It went to three prints, two in the USA and one in South Africa. Patricia and Christo conducted a review of international publications and literature as part of this book.

The Age of Participation (Berret Kohler, San Francisco, 1994):

Representatives of more than 100 companies were involved in defining the role that business could play in the transformation of South Africa in the early 1990s. Christo formulated and led this research project. The findings of this research were published under the editorship of Dr. Theunis Eloff.

ROBIT – The Role of Business in Transformation (CBM, 1991):

This nation-wide research project involved more than 3 000 managers from more than 100 companies over a period of two years. It explored the macro and micro/organisational changes that were required to secure a market-driven and democratic dispensation in South Africa. It included a combination of qualitative and quantitative research processes, and culminated in a research report that sold more than ten thousand copies. Christo designed the research process and was the primary author of the resultant book.

Economic Participation in South Africa – Strategies for survival and growth (UNISA SBL, South Africa, 1985):

BEEHIVE RESEARCH

The Leadership (R)evolution: Creating a High Performance Organisation

5.

This research is being used by several South African organisations and more than 40 000 respondents to date (ranging from supervisory to executive levels), to guide organisational change and leadership development. Our research base represents respondents from more than 500 South African organisations.

This research was repeated from July to August 2003, and the results were published in September 2003. It targeted currently employed (part-time) MBA students from USB, Henley, Edinburgh, Millpark and Damelin business schools. This industry-wide research was again repeated in September 2008, and the results were available from October 2008.

As a partner of Andersen, and together with the University of Stellenbosch Business School (USB), Christo designed and led research into the status of leadership and workplace practices that are associated with sustainable competitiveness. The questionnaires that were designed for this research have been statistically validated with sample groups of more than 3 000 participants. Mario Denton, who was a senior lecturer at USB, delivered a paper on this research in London in July 2003.

New Economy Leadership and Workplace Practices (USB and Andersen, 1998–2000, repeated in 2003 and 2008):

APPENDIX C

287

Index A

B

Absa – 41, 84, 110, 129, 163 Absence - action – 53 - demand – 140 - interdependence – 53 - leadership – 72 - structure - 53 - vision – 53 Acceptance – 22, 71, 143, 183, 184, 187-190, 193, 226, 255 Action - dominance – 52 - plans – 68, 228, 236, 237, 238, 282 Adherence to standards – 69, 147 Africa – 5, 31, 33, 79, 185, 262 African National Congress (ANC) – 20, 33 Aids – 104, 145 Aitken Ramudzuli – 16 Alan Clarke - 117 Albert Einstein – 246, 268 Albert Schweitzer – 133, 156 Alexandre Ledru-Rollin – 223, 245 Americans – 19, 32, 248 Anatole France 47, 74 Andersen Consulting South Africa – 40 Andy Andrews – 180, 222 Andy Hickford – 159, 177 Anglo American Gold – 81 Annual targets – 144, 152 Anti-semitism – 5 Appendix – 21, 40, 50, 271, 278, 287 Apprentice/active learner – 125 Archbishop Desmond Tutu – 20, 33 Aristotle – 179, 222 Artist/coach – 126 Aspirational view – 47, 75, 103, 133, 157, 179, 223 Asset effectiveness – 142, 148 Asset utilization – 148 Astrid Warren – 175 Authoritarian - approach - 88 - leadership – 88 - modes – 198 - monarchies – 5 - paradigm – 88 - practice – 165 - processes - 67 - style – 26, 89, 92 Availability of training – 150 Awareness of rights – 153

Bargaining – 166, 185, 186, 189, 190, 204, 210 Base camp – 37, 114 Belgium – 5 Best operating practices (BOP) – 36, 37, 40, 238 Bill Gates – 1, 7, 31, 184 Blaine Pardoe Lee – 157, 177 Boeing – 79, 81 Bonuses – 16, 162, 163, 164, 168, 171, 173 Bosberaad – 53, 74 Boundaryless – 2 Brain drain – 104 Brand reputation – 13 Buckingham, Marcus - 131 Building knowledge power – 127 Bureaucracy – 31, 52, 88, 92, 97, 130, 250, 252, 263 Business Day – 131 Business - disciplines – 43, 133, 155, 157, 161 - process – 28, 42, 75, 134, 142, 148, 149, 151, 154, 259

C C.K. Prahalad – 57 Cape Town – 1, 28, 33, 200, 242, 245 Case studies – 32, 36, 82, 85, 89, 92-97, 147, 149, 208, 213, 224, 261 Centre of gravity – 18, 81, 82, 86, 189, 190 Centrism – 88, 92 Change - leadership – 12, 13, 39, 41-43, 58, 161, 165, 179, 180, 181, 188, 222, 274, 276 - mavericks – 191, 192 Characteristics – 3, 26, 31, 47, 75, 103, 125, 133, 157, 166, 179, 223, 228, 237, 249, 250 Charles Leadbeater - 159 China - 106 Chronological approach - 198 Cliffe Dekker – 41 Curt Coffman – 131 Colonialism – 5, 249 Commissions – 162 Committed majority – 193 Company objectives – 67 Company’s performance – 65, 69, 76 Compensation – 42, 161, 162, 165, 166, 176 Competent masses – 194 Compliance evaluation – 153 Comprehension of quality standards – 147 Compression – 81-89, 91- 96, 100

289

The Leadership (R)evolution: Creating a High Performance Organisation Consolidating progress – 238 Cost - effective – 165 - savings- 146 Creative minority – 38, 191-194, 196, 228, 233, 234, 235 Critical mass – 38, 184, 192-196, 207, 225, 235 Customer - awareness – 143 - driven – 136 - expectations 152, 282 - focused – 98, 165 - influence – 152 - satisfaction – 68, 143

D De Beers – 79, 81 Dead wood – 112 Decision - making – 6, 83, 149, 181, 206, 230, 235, 237, 238, 240, 241, 248, 254, 264-267, 274, 276 Delegation – 91-95, 97, 242 Deloitte and Touche – 163 Democratisation of - decision-making – 248, 265, 267 - finance – 248, 261 - information – 248, 259 - politics – 248, 249, 253 - power – 248, 253, 254 - technology – 248, 254 Denial – 183-185, 189, 190, 197 Depression Different types of pay - benefits – 68, 162-164, 166, 168, 171 - bonus pool – 163, 172 - guaranteed pay – 162-164, 166, 168, 171, 172 - long-term incentive – 158, 163 - short-term incentive – 163 Diversity – 19, 56, 141, 142, 152, 153, 174, 230, 233, 235, 242, 252, 265, 274, 276

E Eastern Europe – 5, 6 Economic democratisation – 263, 264 Education and training – 197, 199, 209-212, 216, 219 Edward Lawler - 177 Effectiveness – 48-50, 54, 70, 94, 142, 145, 148, 249 Efficiency – 1, 48, 50-52, 64, 65, 94, 112, 142, 144, 145, 148, 170, 199, 264 Electronic herd – 261, 262 Elements of reward – 163 Elliott Jaques - 101 Empathy – 56, 195, 196, 197, 198, 199 Employee commitment – 146 England – 5, 248 Enron – 5, 224 Enterprise Resource Planning (ERP) – 2 Eskom – 31, 79, 81, 225

290

ESP of change – 195, 210, 215, 216, 221 Establishing benchmarks – 67, 68 European Union (EU) – 5 Evolution – 27, 37, 40, 41, 44, 209, 248, 251 Excellence – 36, 40, 76, 78-80, 89, 100, 101, 142, 143, 144, 177, 224-226, 242 External environment – 61, 139, 181

F Facilitating – 64, 65, 98, 187, 234, 237 Fight, flight or freeze – 183, 186 First National Bank (FNB) – 109, 192 FirstRand Bank – 163 Fixed and variable – 162 Flattened structures – 197 Food services – 162 Formula One racing – 134 Formulation – 60, 77, 137, 138, 142 Forward-looking – 136 France – 5, 74 Franchised Spar store – 81 Francois Pienaar – 208 Freedom of expression – 250 251 Fritjof Capra - 32

G Galvanizing – 136 Gary Hamel – 57 Gender discrimination – 4, 5 Genealogical history – 8 General Electric – 16, 32, 81, 131, 156, 170, 258 George W. Bush – 18, 19 Germany – 5 Global best practices – 147 Global Positioning System (GPS) – 1 Globalised – 4, 68 Goal - alignment – 152, 167 - focus – 142 Graduate Institute of Management Technology – 180

H Handy, Charles – 156, 266, 269 High flyers – 110, 111, 117 High performance culture – 39, 40, 174 Highly mobile labour force – 107 Historic claims – 23 Hollon, John – 177 Holocaust – 5 Honesty and reliability – 250 Hourly wages – 162 Human rights – 5, 6, 226, 245, 251

I Icarus (vexation) – 111, 112 Identification of obstacles – 148

INDEX Identify people – 19 Identifying - continuous targets – 67, 69 - talent – 109, 117 Impact of non-compliance – 153 Implats – 81 Implementation – 7, 137, 141, 142, 145, 238, 254 Improvement mentality – 70, 71 In Search of Excellence – 76, 101 Inadequate capacity – 91, 93 Incompetence - conscious – 126, 127, 260 - unconscious – 126, 127, 260 Individual - impact – 145 - responsibility – 145, 147 Ineffectiveness – 94 Inflation – 82, 86-88, 95, 263 Information - about competitiveness – 146 - sharing – 136, 146, 147, 210 - technology – 6, 36, 88, 255, 256, 259, 268 Initiate/trainee - 125 Initiation of participation – 149 Insurance – 7, 8, 11, 145, 162 Interdependence - dominance – 52 - variables – 64 Internal - assistance – 145 - customer focus - 143 Investec off-shore investments – 81

J Jack Welch – 32, 131, 258 James Madison – 45 Jim Collins – 32, 37, 74 John Francis – 32, 131 John Hollon – 177 Journey – 32, 35-37, 39-41, 43, 45, 165, 224, 225, 233, 242, 247, 266

K Kadar Asmal – 245 Key leadership questions – 44, 73, 100, 130, 155, 176, 222, 244 Knowledge - anchors – 110, 117 - capital thief – 120, 126, 127, 155 - development – 142, 143, 150, 151 - of options – 150

L Labour Relations Act – 206 Laggards – 94, 96 Lao Tze Tung – 207 Leadership

- accountability – 49, 165, 251, 262, 264 - challenge – 6, 9, 15, 32 Lead-in period – 225 Learn about learning – 125 Lencioni, Patrick. M – 224, 245 Lester Thurow – 32 Leveraging the hierarchy – 77, 82, 100 Liberty Life – 163

M Mabida Magic – 208 Management styles – 88 Managers - greatest – 131 - higher ranked – 164 - line – 76, 108, 126, 165, 173, 176, 194, 228 - middle – 45, 59, 76, 139, 182, 228, 234, 235 - senior – 12, 16, 100, 216, 217, 217, 283 - South African – 41 Market and financial competitiveness – 142, 145, 146 MBA – 120, 158, 222, 289 McKinsey – 99, 108, 131 Measurability of success – 146 Measuring against organisational goals – 152 Medical specialists – 8 Michael Eisner – 177 Michael Hammer – 180, 214, 222 Microsoft – 7, 14, 59, 61, 63, 79, 81, 171, 172, 175, 184, 184, 253, 256 Middle East – 23 Monitoring - and controls – 233, 236 - performance – 67, 69 Mount Kilimanjaro – 10 Mutual roles – 64, 66

N Natalie Eekhout – 177 National democracy action team – 237 Nedbank – 163 Nelson Mandela – 30, 207 New - millennium – 3, 173 - skills rewarding – 150 New York – 18, 156, 222 Nike – 5 Nobel Prize – 8, 74, 268 Non - financial – 162, 165, 167, 168, 173, 176 - negotiable – 16, 73, 197, 212, 221, 252 Nordstrom – 14 Norman H.B. Faull –242, 245 Notes – 14, 32, 45, 74, 101, 131, 156, 157, 177, 222, 245, 268

O Old contentment – 183, 189, 190, 197

291

The Leadership (R)evolution: Creating a High Performance Organisation Old Mutual – 41, 80, 81, 170, 171 Old versus New Economy – 11 Olson Plastics – 245 Operational areas – 70, 72 Opinion leaders – 197, 199, 206-209, 218 Organisation’s values – 17, 21, 115, 153, 172, 173, 230, 276 Osama Bin Laden – 19

P Paid - holidays – 162 - vacations – 162 Palestine – 23 Parmalat SA – 41 Passive headache – 111, 112 Pay - old economy – 160, 161, 169 - new economy - incentives – 162, 165 - remuneration and reward – 161 Payroll admin – 81 People leadership – 3 Performance - levels – 241 - measure - 149 Perpetual learning – 127, 260 Personal Digital Assistant (PDA) – 1 Personal - identification of needs – 150 - leadership impact – 56 - responsibility – 150, 216, 283 Persuasion – 197, 199, 215-218, 220 Petal Insurance of Beijing – 7 Peter Ferdinand Drucker – 48, 70, 74, 94, 101, 151, 258, 265 Peter Senge – 32, 124, 245 Pick ‘n Pay – 80, 81 Pick ‘n Pay Hypermarket store – 81 Political-economy – 3 Portugal – 5 Post-apartheid South African – 20 Potential matrix – 112, 118 Power of - knowledge – 259 - parameters and processes – 55, 56 - people and participation – 55 - presence and persistence – 56 - purpose and principle – 55, 56 Practices surveys - 236 Pro - action – 183, 189 - activity – 71, 148, 149 Profit factors awareness – 146 Progress reports – 237 Protection of human rights – 6, 251 Psychology – 117

292

Q Quality superiority – 142, 143, 147, 148 Quantifying and qualifying – 67

R Rand Merchant Bank (RMB) – 109 Recognition and reward (R & R) – 157-159, 161, 162, 164, 165, 167, 170, 171, 175, 176, 198, 199, 217-220 Reconstruction and Development Programme (RDP) – 200 Recreation facilities – 162 Re-engineering Management – 214 Re-engineering the Corporation – 214 Regular assessment – 147 Relevant – 60, 69, 70, 72, 93, 96, 136, 139, 159, 172, 173, 188, 227, 261, 282 Remuneration philosophy Resource - efficiency – 142, 144, 145 - utilisation – 144 Restructuring – 86, 96, 182, 199, 213, 214, 221, 240 Retirement – 110, 126, 162, 186 Revolution of Leadership – 1 Reward - philosophies – 173 - programmes – 162, 171 - recognition – 13, 41, 42, 43, 164 - strategy – 162, 167, 170, 171, 176 Rip van Winkle – 14 Robert Waterman – 101 Role call of progress – 237 Rosabeth Moss Kanter – 149, 156

S SAB finance department – 81 SAB Ltd – 11, 12, 23, 79, 81, 108, 117 SAB Rosslyn brewery – 81 SABMiller PLC – 81 Salary – 140, 145, 161, 162, 166, 168 SAPPI – 79, 81 Sasol Mining – 92 Science – 2, 4, 8, 15, 177, 267 Second World War – 5, 29, 249, 264 Secretary – 81, 265 Self-managing production team – 81 Service excellence – 142-144 Setting of standards – 143 Share price growth – 13 Shareholders – 50, 63-66, 68, 180, 192, 223, 275 Slavery – 5, 30 Solid citizens – 111 Solving conflict – 64, 65 South African Banks – 81 Spain – 5 Spare wheels – 111, 112 Stakeholder Continuity Groups’ (SGCs) – 228 Stakeholder - collaboration – 148

INDEX - interest – 56, 64, 65, 281 - involvement – 153 - value – 12, 13, 41, 42, 161, 223, 244 Steve Ballmer – 63, 256 Strategy formulation – 60, 142 Streamline systems – 97 Structure dominance – 52 Superiority of quality – 146, 147 Suppliers – 1, 9, 50, 63, 64, 65, 79, 153, 187, 192 Surgeons – 8 Sweden – 7

T Talent - creation – 12, 13, 41-43, 58, 103, 115, 116, 118, 123, 125, 130, 158, 159, 161, 170, 275, 276 - matrix – 109, 112 - pool assessment - 119 Target - awareness – 144 - determination – 144 Team player/artisan – 125 Testing – 100, 183, 187, 189, 269 Thabo Mbeki – 31, 105, 208 The Fifth Discipline – 32, 245 The Frontiers of Excellence – 76, 101 The General Electric Company – 156 The War on Talent – 131 Themes of work – 43, 75, 76, 77, 81, 82, 93, 97, 157, 163, 175, 176 Thomas J. Peters – 101, 265 Thomson NETg – 156 Total cost of employment (TCOE) – 164, 169, 171, 173 Total cost to company (TCTC) – 164 Total SA – 41 Toxification – 5 Toyota – 81 Toyota S.A. manufacturing department – 81 Toyota S.A. production department – 81 Training and development function – 81. 261 Transition – 89, 116, 192 Translation and communication – 137, 139 Truth and Reconciliation Commission – 20, 33, 232 Twin Towers – 18

Values - improvement process (VIP) – 237 - shift – 15, 17, 27, 229, 230 Vietnam - 107 Virtuoso/specialist – 126 VISA (Vision, Interdependence, Structure, Action) – 47-51, 53, 55, 57, 58, 60, 142, 279, 285, 286 VISA strategy kite – 51 Vision dominance – 52 Visualising new structures 98 Vitality curve – 120, 123 Vortex – 3, 14

W Warren Bennis – 74 Watergate – 107, Waterman, Robert H – 101 Waves of values – 17, 18, 20-24, 27, 272, 273, 276 Wealth creation and accessibility – 252 WesBank – 173 Wits Business School – 180 Woolworths – 41, 79 WorldCom – 5

X X generation – 36, 107, 254

Y Y generation – 36, 107, 254

U Unemployability – 105 Union officials – 192, 204 United States of America (USA) – 4 Unity in diversity – 142, 152, 153 University of Stellenbosch Business School (USB) – 40, 289 Unskilled talent pool – 105 Upward abdication – 85, 86, 91-95, 97, 98 USA government – 18, 19

V Vacuums – 81-85, 87-89, 91, 94-96

293