Strategy, Leadership and Change : A Practical Guide for Busy Executives [1 ed.] 9781874997870, 9781869221850

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A Practical Guide for Busy Executives

Executives are fundamentally responsible for formulating and executing strategy. In addition, they lead their organisations to ensure the implementation of a chosen strategy and manage any changes associated with such new strategies. Strategy, Leadership & Change provides practical guidelines on strategic and organisational design, leadership and change. Based on Terry Meyer’s in-depth knowledge and experience in the areas of strategy, leadership and change, this publication is aimed at executives who do not have the time to search for or study the plethora of books written on the subject. The author combines useful information with practical answers to many of the challenges facing modern-day executives. The book consists of four sections: • Section one provides a background to systems thinking and strategic problem solving – the philosophy on which the book is based. • Section two highlights the issues involved in formulating and executing strategy. It also addresses the design of organisations which have the necessary capability to implement strategy successfully. Given that strategy is as much an art as it is a science, political and other concomitant intangible issues are covered. • Section three addresses three aspects of leadership: the importance and nature of transformational leadership, the processes which leading global companies apply to build future leaders, and how to make leadership part of an organisation’s DNA. • Section four explores the concepts and general principles associated with change and the processes involved in the implementation of change strategies. It highlights the processes that go into reconfiguring organisations and addresses how leaders should work to build change-ready, agile organisations. Based on sound theoretical principles and presented in a readable, jargon-free style, with an emphasis on practical application, this publication is aimed at both current and future executives.

Strategy Leadership & Change.indd 1

STRATEGY, LEADERSHIP & CHANGE: A Practical Guide for Busy Executives • Terry Meyer

STRATEGY, LEADERSHIP & CHANGE

 

Terry Meyer

STRATEGY, LEADERSHIP & CHANGE A Practical Guide for Busy Executives

3/7/12 2:49:26 PM

STRATEGY, LEADERSHIP & CHANGE

STRATEGY, LEADERSHIP & CHANGE A Practical Guide for Busy Executives by Terry Meyer

2012

Copyright © Knowres Publishing and Terry Meyer 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 authors. 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 published in 2012 ISBN: 978-1-874997-87-0 Ebook Published by Knowres Publishing (Pty) Ltd P O Box 3954 Randburg 2125 Republic of South Africa Tel: (011) 880-8540 Fax: (011) 880-8700/9829 E-mail: [email protected] Website: www.kr.co.za Printing and binding: Replika Press Pvt Ltd, Haryana, India Typesetting, layout and design: Replika Press Pvt Ltd, Haryana, India Cover design: Sean Sequeira, idDigital, [email protected] Editing and proofreading: Elsa Crous, [email protected] Project management: Cia Joubert, [email protected]

CONTENTS About the author_____________________________________ vii_ Preface_______________________________________________ ix_ Introduction___________________________________________x SECTION 1: INTRODUCTION__________________________1 Chapter 1: Solving problems in a complex world__________3 Introduction___________________________________________3 What is the difference between linear problems and complex problems?__________________________________________4_ Systems thinking_______________________________________7 Organisational systems__________________________________8 Characteristics of organisational systems_________________10 Levels of systemic enquiry______________________________15 Organisational systems architecture______________________16 Mental models________________________________________18 Conclusion___________________________________________19_ SECTION 2: INTRODUCTION TO STRATEGY__________21 Chapter 2: Formulating strategy_________________________25 Introduction__________________________________________25 Assumptions__________________________________________25 Outcomes_____________________________________________29 Strategy insert_________________________________________30 Process_______________________________________________32_ Understanding context_________________________________33 Scenario building: What are the possible futures?__________35 Strategy insert_________________________________________36 Positioning: Scope and strategic choices__________________39 Strategy insert_________________________________________40 Building identity: Mission, vision and values (MVV)_______45 Strategy insert_________________________________________47 Winning the game: Determining strategic thrusts__________48 Conclusion___________________________________________48 i

STRATEGY, LEADERSHIP & CHANGE

Chapter 3: Implementing strategy_______________________51 Introduction__________________________________________51_ Why strategy implementation fails_______________________51 The strategy implementation process_____________________60 Strategy implementation insert__________________________65 Conclusion___________________________________________67 Chapter 4: Designing organisations_____________________69 Introduction__________________________________________69 Designing organisations insert___________________________70 Organisational paradoxes and tensions___________________71 Designing organisations insert___________________________80 Designing organisations insert___________________________87 Organisational roles____________________________________89 Conclusion___________________________________________99 Chapter 5: The art of strategy – dealing with the intangibles_______________________________________101 Introduction_________________________________________101 Some processes and assumptions_______________________102 Guidelines for CEOs__________________________________109 Conclusion__________________________________________110 Section 3: INTRODUCTION TO LEADERSHIP_________113 Chapter 6: Transformational leadership_________________115 Introduction_________________________________________115 Transformational leaders______________________________117 Conclusion__________________________________________128 Chapter 7: Building tomorrow’s leaders_________________129 Introduction_________________________________________129 Identifying future challenges___________________________132 Identifying future leaders______________________________133 Creating a leadership pipeline__________________________139 Leadership development insert_________________________141 Formal leadership development________________________142 ii

CONTENTS

Informal leadership development processes: The role of executives________________________________________150 Leadership development insert_________________________151 Governance__________________________________________153 Conclusion__________________________________________154 Chapter 8: Creating leadership DNA___________________155 Introduction_________________________________________155 Institutionalising leadership____________________________157 Conclusion__________________________________________167 SECTION 4: LEADING CHANGE_____________________169 Chapter 9: Introduction to change: Some basic concepts_________________________________________171 Introduction_________________________________________171 What has to change?__________________________________171 Is it change or transformation?_________________________172 The magnitude of change______________________________174 Pressures for change__________________________________175 Cycles of change______________________________________176 Phases of change_____________________________________178 Resistance to change__________________________________184 Conclusion__________________________________________186 Chapter 10: Implementing a change strategy____________189 Introduction_________________________________________189 The steps in a change process__________________________190 Implementing change insert____________________________203 Conclusion__________________________________________204 Chapter 11: Reconfiguring organisations________________205 Introduction_________________________________________205 Reconfiguring an organisation__________________________205 Conclusion__________________________________________219

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Chapter 12: Building a change-ready organisation_______221 Introduction_________________________________________221 Building a change-ready organisation___________________221 Create conversations__________________________________230 Support innovation___________________________________235 Reward performance__________________________________239 Build mental models__________________________________240 Conclusion__________________________________________244 References___________________________________________245 Index_______________________________________________247

LIST OF FIGURES Figure 1: The framework of this book_____________________ ix Figure 2: Types of problems ____________________________4 Figure 3: Organisational systems _________________________9 Figure 4: Levels of systemic inquiry and intervention ______16 Figure 5: Organisational system architecture ______________17 Figure 6: The four elements of the strategy process_________21 Figure 7: The strategy formulation process________________32 Figure 8: A strategy implementation approach ____________61 Figure 9: Reporting lines _______________________________83 Figure 10: Role players in an organisation_________________90 Figure 11: The sphere of influence of transformational leaders___________________________________________124 Figure 12: The process of developing future leaders_______131 Figure 13: Development methodologies__________________145 Figure 14 Institutionalising leadership__________________156 Figure 15: Leadership competency framework____________159 Figure 16: The sigmoid curve___________________________177 Figure 17: Phases in organisational change_______________179 Figure 18: Positive responses to change _________________186 Figure 19: Typical responses to uncertainty ______________186 Figure 20: Generic steps in a change process______________189 iv

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Figure 21: Staff generally belong to one of three parties___________________________________________198 Figure 22: Petitioning those with influence_______________199 Figure 23: Reconfiguring an organisation ________________206 Figure 24: Importance/effectiveness framework__________209 Figure 25: Building a change-ready organisation__________222 Figure 26: Interaction between significant players_________225 Figure 27: Conversation matrix_________________________233

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ABOUT THE AUTHOR Terry Meyer is a consultant, academic, author and speaker. He has extensive consulting experience and specialises in strategy and organisational design, leadership, change and human capital strategy. In addition to extensive experience consulting to a variety of companies in these fields, Terry lectures at Stellenbosch Business School (where he runs the HR Executive Programme), the Wits Business School (where he was previously a full-time faculty member and now heads up the International Executive Programme in Learning and Development (L&D)). Until recently he taught at the Unisa School of Business Leadership (SBL) in the Executive Development Programme (EDP). In addition, Terry runs innovative programmes for companies on an in-house basis, and has facilitated a number of international study tours to learn from the world’s best organisations in the United Kingdom, Europe and the United States of America. Terry has written and edited a number of books and contributes regularly to professional journals. He has presented at several local and international conferences. In 2007 he received the IPM Presidential Award for his contribution to the profession, and in 2010 was awarded the Pride of the HR Profession Award at the Global Human Resources Development Congress in Mumbai, India. Terry has the ability to blend extensive research and academic knowledge with practical experience in a corporate role, as an academic and consultant. He is considered a leading thinker and advisor in his various fields of expertise.

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In his spare time, Terry manages a small family property portfolio and is an enthusiastic amateur photographer. Contact details Telephone: +27 (0)83 2515019 E-mail: [email protected] Web address: www.leadershipsa.com

Publications by the author include Meyer, T. 1996. Competencies: Creating competitive advantage. Rosebank: Knowledge Resources. Meyer, T. & Boninelli, I. 2004. Conversations in leadership: South African perspectives. Rosebank: Knowledge Resources. Boninelli, I. & Meyer, T. 2004. Building human capital: South African perspectives. Rosebank: Knowledge Resources. Babb, S. & Meyer, T. 2005. Perspectives in learnerships. Rosebank: Knowledge Resources. Boninelli, I. & Meyer, T. 2011. Human capital trends. Rosebank: Knowledge Resources.

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PREFACE Strategy, leadership and change The fundamental assumption of this book is that the key roles of executives involve strategy, leadership and change. Strategy is about setting the direction of the organisation – something which frequently involves the growth strategy of the business. In a fast-changing business environment, strategy changes over time – either through a major reinvention of the organisation or through continuous corrections. Effective organisational change is required to facilitate the implementation of new strategy. High levels of leadership energy are needed to guide the strategy process and to mobilise the players involved to commit to the necessary changes. For executives, then, these are critical and inseparable skills. The reason why many potentially successful organisations have failed or are absorbed into other organisations, is that one or more of these processes were not implemented effectively by the executives involved. This book is based on the following framework:

Strategy

Leadership

Change

Figure 1: The framework of this book ix

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INTRODUCTION Leadership in the modern world is not for the faint-hearted! For executives, the world is becoming increasingly complex, uncertain and ambiguous, and is changing rapidly. To help executives deal with these challenges millions of Google sites, hundreds of thousands of articles, thousands of books, blogs, webinars and wikis, as well as a plethora of consultants and gurus of every description are available to provide answers to those problems that keep them awake at night. Generally, each of the answers provided is positioned as the solution. Given the number of disparate solutions available as regards issues of leadership, it is impossible for all of them to be the sole and best solution. Yet, most such solutions have considerable merit when applied at the right time, in the right place. This book does not claim to provide single solutions. In fact, when I begin a lecture on anything to do with leadership and change, I start with the disclaimer that whatever framework, practice or theory I cover, the opposite is also true. Strategy, organisational design, leadership and change are contextual. There are many possible solutions to specific challenges, and the choice of solution has as much to do with the perspective of the executive(s) involved at the time, as it has to do with the situation that needs to be addressed. Clearly, for any given challenge there are many ‘wrong’ solutions ... but there are also many possible ‘right’ solutions. This book, therefore, aims to provide perspectives on strategy and organisational design (two sides of the same coin), x

INTRODUCTION

leadership and change. Being my perspectives, they consist of a blend of my own learning (from students) during the various courses I run at business schools, my own reading, as well as personal experiences in facilitating all of these processes in a variety of organisations. I do not claim to provide solutions for all leaders in all circumstances. My perspectives are, however, based on sound theory as well as successful practice. Much of the theory underpinning the book is based on systems thinking, which is necessary when dealing with the complexity and uncertainty that leaders and organisations are faced with. However, the theory remains largely hidden – except for the first chapter. The book consists of four sections, each with specific chapters on strategy, leadership and change. Section one and Chapter one, which stand alone, provide a background to systems thinking and strategic problem solving. The assumption is that at executive levels, solutions to complex, strategic problems require a redesign of the organisational system, rather than the use of band-aids to mask the symptoms. This section is concerned with themes and patterns, rather than with responding to events. Section two is about strategy. Chapter two highlights the issues involved in formulating strategy, while in Chapter three the focus is on issues of strategy execution. Chapter four addresses the design of organisations – something which is critical to strategy execution. In Chapter five, many of the intangible issues around strategy are covered in ‘the art of strategy’. Section three is about leadership. It addresses three aspects of leadership in three short chapters. In Chapter six, essential concepts around transformational leadership are presented, since this is the most important ingredient of successful change xi

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and transformation. In Chapter seven the processes which global companies apply to build future leaders, are discussed. Finally, in Chapter eight, while individual leaders are important, the institutionalisation of leadership is what provides sustainable leadership for companies that have been in existence for a long time. Section four is about change. As strategy changes, so must the organisation. Chapter nine explores some of the concepts and general principles associated with change, including the phases involved in organisational change. Chapter ten outlines the processes which assist in the implementation of change strategies. In Chapter eleven a process for reconfiguring organisations is discussed, along with all the concomitant challenges. Finally, in Chapter twelve the concept of a changeready organisation comes under the spotlight, and processes are proposed which will help create such an organisation. All of the above chapters are presented in a user-friendly way. Although based on sound theory, it is the practical application which is relevant to executives. For my part, the most difficult decisions were related to what to exclude from the text, in order to keep it simple (as opposed to simplistic) and readable. The book is also intended to provide useful reading for participants involved in business school programmes. Where executives wish to explore subjects in greater detail, or require help with the implementation of strategy, leadership and change or transformation, extensive support is provided through Leadership SA (see www.leadershipsa.com). They can also contact the author ([email protected]). Assistance can be given in the form of presentations, advice and support, process facilitation and the training of internal change agents.

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Section 1 INTRODUCTION In a very complex and uncertain world it is all too tempting to simply deal with events. However, this approach often has unintended consequences and the real problems are not addressed. Hence they reappear in different forms. Effective strategy, leadership and the implementation of change in a complex world demand of executives that they think systemically. Their role is to bring about change at a systemic level rather than one at the level of an “event”. To be effective they need to understand how things connect and how a change in one part of the organisation or strategy will impact the rest. Often they have not been trained to view the world through a systemic perspective and do not have the tools to solve problems systemically. This chapter provides an introduction to systems thinking and strategic problem solving. All of the assumptions of the other chapters are based on a systemic mental model. It is the one part of the book that is rather conceptual, but it is at a conceptual level and through their ability to solve complex and strategic problems that executives make their greatest contribution to strategy, leadership and organisational change and transformation.

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Chapter 1 SOLVING PROBLEMS IN A COMPLEX WORLD Introduction At the level at which executives are expected to operate, problems generally manifest as symptoms of deeper, systemic problems. Hence, problem solving at this level involves understanding the systemic issues and redesigning the (generally organisational) system, so that the presenting problem goes away. Hence, the occurrence of accidents or quality-related problems in an organisation may be ascribed to the organisation’s safety or quality systems, but they may also be the result of pressure on the part of management for production at the expense of safety or quality which, in turn, is a result of the global financial crisis. By redesigning the safety or quality system, symptoms in the form of accidents or rejects will be eliminated.

In reality the world is complex, connected and volatile, and understanding patterns rather than events is a necessary executive capability.

This is a relatively simple example.

In reality the world is increasingly complex, connected and volatile, and understanding patterns rather than focusing on events is a necessary executive capability. This also means that many executives focus on applying ‘band-aids’ to problems, rather than understanding the deeper causes and resolving those causes.

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This chapter does not provide ‘how-to’ steps to help navigate the complexities which executives face. Rather, it attempts to help executives understand the characteristics of systems – organisational systems in particular – and the implications for strategy, leadership and change.

What is the difference between linear problems and complex problems? One of the reasons why change efforts in organisations so frequently fail is that leaders apply linear change processes to complex problems. It is important to understand the difference, because the processes for dealing with linear and complex problems are very different. This difference is clearly outlined in the following matrix, adapted from Dave Snowden, a UK academic:1

Complex

Chaos

Figure 2: Types of problems

4

Complicated

Simple

CHAPTER 1: SOLVING PROBLEMS IN A COMPLEX WORLD

Quadrant 1 Simple problems are typically operational problems. Once the (generally single) cause has been determined through a linear process of elimination, the problem can easily be fixed. For example, a machine operates to a certain specification, but at some point its performance drops. Once the cause has been established, the machine is repaired and its performance reverts to standard. Quadrant 2 In quadrant 2, problems have the same characteristics as those in Quadrant 1, but are more complicated. Instead of the operator fixing the problem, a highly qualified expert is required. Hence, when a whole ERP system collapses, it is possible to employ a highly qualified IT specialist to identify the cause of the crash and fix it. Again, a linear process is followed, even though it may be highly specialised. Quadrant 3 Problems in Quadrant 3, which are very different from those in Quadrants 1 and 2, are referred to as complex problems. Such problems tend to have the following characteristics: • They tend to be ‘messy’ and are often ill defined. Different people would describe them differently. • These problems generally have multiple causes, and the relationship between cause and effect is not obvious. When a business is not performing, there are generally a number of contributing causes. • Generally, multiple stakeholders are involved – one person alone cannot fix the problem. 5

STRATEGY, LEADERSHIP & CHANGE

Most problems concerned with people and organisations are complex due to the unpredictability of human behaviour; therefore attempting to fix the problem by decree, following a linear process, seldom works. Quadrant 4 In Quadrant 4 the entire system has collapsed and the only viable response is to stabilise the system as soon as possible. A useful analogy for a complex environment is that of an ecosystem: change one aspect of it by, for example, killing a species of insect or introducing a new species of plant, and the whole system may be destroyed as a result of the unpredictable consequences of such an action. One of the most important paradigm shifts executives need to make is to realise that there is seldom a single cause when it comes to a complex problem: the interaction of many variables causes the problem. The solution often lies at a different level, or follows a logic which differs from the problem itself. Furthermore, complex problems are seldom predictable. Here, the notion of a ‘black swan’ event is useful. Put very simply, a ‘black swan’ event is catastrophic in magnitude and could not have been predicted. The recent global financial crisis is a good example. In early 2007, those who suggested that the astronomical growth rate would not continue were ridiculed. A crash was ‘not possible’. The important characteristic of such an occurrence is that, looking back on events prior to the crisis, all the signs were there to suggest that it would happen. Similarly, with 9/11 the signs were there, but no one picked up on them or connected the dots. Had someone done so, a relatively simple solution could have averted the catastrophe. In both cases, multiple factors worked together to result in a crisis in which multiple role players interacted. In the case of 6

CHAPTER 1: SOLVING PROBLEMS IN A COMPLEX WORLD

the financial crisis, these factors included a lack of regulation, a willingness by banks to make and then package toxic loans, individuals’ insatiable appetite for credit, and even a lack of discipline on the part of business schools, which taught students how to create questionable financial instruments. The same principle applies to businesses that fail. In the case of Enron (and others) the signs were there, but no one connected the dots. Even at an individual level, in the case of, say, a divorce, the signs are normally there, but are not recognised by one (or both) parties involved. Hence, operational problem solving by executives who are required to function at a strategic level will generally not work, and different processes will be required.

Systems thinking Systems thinking is a world view or mental model that enables people to see the connection between events, and to understand themes and patterns, rather than isolated events. It involves the ability to understand the interaction between systems and subsystems. Systems thinking varies from hard systems analysis (e.g. how engineers optimise different types of equipment when building a power station) to the almost esoteric, where the world is perceived as a whole living system (which humankind is in the process of destroying). This chapter is concerned with understanding the properties of organisational systems, and the way in which redesigning organisational systems can resolve problems which hamper organisational effectiveness. 7

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Organisational systems Any system is a set of related entities, and its demarcation will depend on the purpose of the analysis. Systems in the human body include the circulatory, respiratory and nervous system, amongst others. Each has elements which have to work together in order for the system to function. Therefore the heart, the blood vessels and the lymphatic system all have to work in combination, in order for the circulatory system to be effective. If one element of the system fails, the entire system fails. Similarly, all the systems have to work together for the human body, as a system, to work. If the nervous system works superbly but the respiratory system fails, the body will no longer function. At a higher level, the human body (i.e. each individual) is part of a family system, a social system, and so forth. Similarly, organisations consist of multiple systems. The financial system, the operations system, the marketing system and others all have components which contribute to the effectiveness of the organisation as a whole. The role of executives is to optimise the effectiveness of all the systems and subsystems of the organisation, so that the whole is effective. If one part fails, the organisation as a whole cannot be fully effective. Where an organisation is not effective, all the subsystems and the relationships between them needs to be redesigned, so as to improve the performance of the organisation as a whole. According to Dostel2 there are two types of organisational systems:

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• Process or activity systems, which include processes such as procurement and recruitment (these processes cut across different parts of the organisation); • Entity or structural systems, which are those points at which processes intersect in a function, department, division or other part of the structure. Hence, the procurement department is a structural system, as is the HR department. Organisational systems can be represented as a spider’s web: Activity/ Process System

Entity/ Structural System

Figure 3: Organisational systems

Taking the analogy further, when a moth lands on the far side of the spider’s web it creates vibrations which travel throughout the web. In an organisational context, any intervention in one part of the organisation sets up ‘vibrations’ which have implications throughout.

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Characteristics of organisational systems Certain characteristics of organisational systems may explain dysfunctional behaviour and can help to improve the performance of the organisation through effective design. Principle of interconnectedness This has been referred to above, but is so often (in my experience) the cause of organisational dysfunction. When leaders change processes or structures in their departments without considering the impact on other parts of the organisation, it frequently results in dysfunctional behaviour. For example, the introduction of a complex procurement system may improve inventory levels and reduce fraud, but it may also impede the effective functioning of other departments, which will have to wait for long periods to fulfil their orders or pay suppliers. It is, therefore, important that leaders understand the effect that changes they make in one area will have elsewhere in the organisation. Principle of optimisation This principle follows on from that of interconnectedness. Optimisation relates to one critical role of a chief executive officer (CEO). Consider a manufacturing organisation: the drivers of manufacturing are cost reduction, which in turn flows from standardisation, long manufacturing runs, etc. The drivers of the sales function are quite different, and include the ability to offer customers a customised product in a way and at a time when they want it. Immediately there is a dilemma which, 10

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in some organisations, becomes extremely toxic. There is competition as to which is the dominant driver. Generally, only the CEO or the top executive can optimise competing drivers. Another example frequently occurs with the introduction of new technology. New gadgets or tools may be wonderful, but if the operators and users are not properly trained, the system performance will be sub-optimal. The most technologically advanced bicycle in the world will not win the race if its rider is unfit! Principle of emergence Many leaders who have been trained in operational problem solving have difficulty with this principle. Think of two teams, both with competent members. One team functions extremely well, and is energised and innovative. The other is toxic due to competition for leadership roles and bad group dynamics. One could not generally predict the way in which the team members will interact, and forming different combinations of team members may produce different results. The reason for this is that the chemistry that emerges from the interaction between members depends on the unique combination and dynamics of the group. Hence, interpersonal chemistry is emergent. In dealing with complex change it is often necessary to apply processes in which the result is not predictable – it emerges from the processes as they unfold. Culture, for example, is emergent: one cannot decree In dealing with complex change what culture will be, one can only apply certain processes it is often necessary to apply that will, hopefully, result processes in which the result is in the organisational culture not predictable. that management envisages. 11

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Large systems change requires this type of intervention, and processes such as open space technology, world café and future search are used to allow solutions to organisational problems to emerge from within the organisational system itself. Emergence is a key characteristic of complexity and complex problems. The unique combination (chemistry) of different players and elements in the system will result in a particular behaviour or change emerging. It is the principle that results in the whole being greater (or less than) the sum of the parts. Principle of multiple causality As discussed previously, complex problems, unlike operational problems, seldom have a single cause. Take the problem of crime in South Africa: at dinner parties or in newspapers, individuals express their views on the causes of crime. These include corrupt police officials, police incompetence, society’s lack of moral values, a lack of education, poverty, and many other factors. Which is the actual cause? In reality, they all are. All the above factors contribute to the prevalence of crime. In an organisational context, if an organisation or function is not performing, there are normally a number of factors that contribute to the problem. Simply identifying and fixing a single cause will most likely not make the problem disappear. The example of an accident, referred to earlier, highlights the issue of multiple causality. As a consultant, one quickly learns that the problem (or 12

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solution) presented by management (for instance, the need to restructure) seldom solves a problem. By understanding the multiple causes involved it becomes possible to address a complex problem in multiple ways. Hence, restructuring to solve an organisational performance problem, using the same people, generally does not solve the problem. Principle of unintended consequences The principle of unintended consequences relates to the interconnectedness of everything, even over time. It demonstrates that a small event somewhere in the system can have a significant impact due to the accumulation of a number of small events. This idea gave rise to the chaos theory, for example, according to which a butterfly flapping its wings in Beijing can cause a storm in New York. Say, for instance, within an organisational context a new supervisor is appointed. S/he is not the right person for the job. Over time employees become disgruntled, the quality of the product or service drops, major customers leave, there is the need for expensive recalls, etc. One relatively small action has escalated, over time, into a huge problem. The decision by Toyota to adopt the laudable goal to be the world’s biggest car manufacturer set in motion a chain of events which, in due course, resulted in certain problems emerging in the United States. The goal was sound, but the consequences in terms of behaviour and subsequent events were neither predicted nor intended. Principle of self-organisation and learning Complex adaptive systems, such as organisations, have the ability to learn and adapt. 13

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This also speaks to the idea of emergence. Faced with a problem, organisations can generally adapt and find solutions from within. One of the problems common to organisations is the perceived need to impose structure on how the organisation responds to a p roble m. Ma n y managers want to impose a solution, rather than allowing those involved to solve it. Hence, people learn not to learn. Complex adaptive systems, such as organisations, have the ability to learn and adapt.

An example is certain kinds of meetings or workshops. Managers set tight agendas with every moment mapped out, and they feel duty-bound to conform to this blueprint, no matter what. In reality, the best results occur when a much less structured process is applied, and when the people involved in the process steer the conversation based on the direction that emerges, often thanks to a skilled facilitator. When this approach is institutionalised in an organisation, the process becomes self-regulatory and the results are far superior to those resulting from imposed structures and processes. In other words, the organisation learns how to solve its own problems. Processes such as leaderless group discussions and action research tap into the potential of groups to organise themselves to learn. Principle of entropy Entropy, at a basic level, has to do with energy – in this case, organisational energy. 14

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Generally, over time, if organisational energy is not renewed it will decrease and the system will be less able to function effectively. Like all dynamic systems, organisational systems require energy to perform – the greater the positive energy, the better the performance. In general, organisational systems derive their energy from their leaders, because leaders energise the people who make up the organisation. When organisational change occurs, high levels of such energy are required to successfully navigate the change. Furthermore, within organisations, leadership energy can be high or low, positive or negative. High levels of negative energy can be highly destructive, whereas low levels of positive energy can result in stagnation. Obviously, the ideal state is high levels of positive energy. By understanding the characteristics of organisational systems, many of the dynamics can be explained. Through leveraging such characteristics, leaders can design and lead effective organisations through the maelstroms of a complex and volatile world.

Levels of systemic enquiry Very often problems or issues arise about which there are neverending discussions, but for which there are no resolutions. A good example is the performance management system. If there is no system in the organisation in which policy and system architecture are designed, each individual issue will be up for debate time and again. In addition, the system may have been agreed to at some stage, but if the philosophy underlying the system is not articulated it never rests, and whenever someone disagrees with the result, the discussion starts afresh. 15

STRATEGY, LEADERSHIP & CHANGE

One of the reasons for this is a lack of prior agreement at a philosophical level. Until that occurs, each event or problem will be debated repeatedly. The following diagram illustrates the concept:

Issues

System (policies & architecture)

Philosophy (principles)

Figure 4: Levels of systemic inquiry and intervention

Before specific issues can be addressed, a system needs to be created to deal with recurring issues. However, to design the system a philosophy needs to be in place. That is why it is essential for executives to work at the level of philosophy, to provide the underlying basis for the development of policies and systems in the organisation.

Organisational systems architecture Having understood the interconnectedness of organisational systems, what does this mean for analysing organisational systems?

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It means that there needs to be a framework to ensure that all elements of the organisational system are analysed – this, to outline the workings of the whole, rather than having to start with the symptom of a problem and trying to fix it with a band-aid. There are many such frameworks, one of which is the 7 S model developed by McKinsey. The following framework provides a similar model for analysing an organisational system in order to identify problems or to redesign the system. The framework is applicable to structural systems (e.g. why is division X not performing?) as well as process systems (e.g. why is the procurement process not working?). External environment

Culture

People

Aims & purpose

Governance Structures Processes Technology

Figure 5: Organisational system architecture2 Source: Adapted from E. Dostel.

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The framework recognises that any organisational system interacts with an external environment, and any internal or external changes will impact that relationship. The pervasive internal organisational environment strongly influences how the system works. This is what makes up the culture and leadership style of the organisation. Against this backdrop, it is possible to analyse the organisational system (or to design a new one) using a number of subsystems.

Mental models Systems thinking is as much a mindset or mental model as it is a methodology. One of the characteristics of organisational systems is that they involve paradox – something many executives have difficulty with. Managing paradox is the ability to hold two apparently opposing concepts in one’s mind simultaneously. Much of strategy, leadership and change has to do with balancing Managing paradox is paradoxes. the ability to hold two apparently opposing concepts in one’s mind simultaneously.

There are a number of archetypal paradoxes that executives have to deal with. The reality is that in making a decision it is not about ‘either/or’ solutions, but about ‘both/and’ solutions. Hence, it is about balancing opposing constructs to obtain a high level of both. The following are examples:

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• Concern for results vs. concern for people: the solution is not one or the other, it is about obtaining high levels of both; • Change vs. stability: the more change occurs, the more certain factors need to remain stable, such as values; • Centralisation vs. decentralisation: the more an organisation is decentralised, the more processes need to be applied to ensure cohesion; • Control vs. autonomy: the more autonomy is encouraged, the more controls (of various descriptions) need to be applied. An optimum degree of both is required; • Short-term results vs. long-term sustainability: organisational strategy is required to achieve both of these imperatives, and one cannot be favoured over the other; • Freedom vs. security: on a broader level, the world has learnt that for freedom to exist, greater security measures are required. Both are a necessity in a modern democracy. Whenever discussions on strategy, organisational design, leadership and change take place, paradoxes emerge. As such, it is essential for executives to view such paradoxes through the lenses of balancing two or more ends of a continuum, rather than adopting an ‘either/or’ approach. In a complex environment one of the most important abilities executives require, is the ability to manage paradox.

Conclusion In a world in which complexity and volatility are the norm, it is essential for executives to have processes in place to deal 19

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with complex problems. Recognising the type of problem is the first step in dealing with a complex issue. Understanding the nature of organisational systems and redesigning systems rather than fixing symptoms in the short term are essential capabilities for every executive. Finally, the ability to incorporate paradox into strategy, leadership and change, is an essential mental model in the arsenal of each executive. All the chapters in this book are based on a systemic view of strategy, leadership and change, and they each attempt to provide practical ways in which to apply systems thinking methodologies.

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Section 2 INTRODUCTION TO STRATEGY Alice: Which way should I go? Cat:

That depends where you are going.

Alice: I don’t know where I am going! Cat:

Then it doesn’t matter which way you go!!1

Strategy is a primary role of executives. It is the process by which executives determine the nature of the business and communicate this to all stakeholders. This book deals with four elements of the strategy process, using the following framework:

Strategy formulation

The art of strategy

Strategy

Strategy execution

Organisational design

Figure 6: The four elements of the strategy process

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The first step in strategy is strategy formulation. This involves the decisions leaders take about the future direction of the organisation. It provides the centre of gravity and focus for all stakeholders in the business. The context in which strategy is formulated and by whom has a significant impact on the outcome of the process. It is as much a political process as it is a rational linear process. The outcome can represent a major change of direction for the organisation (consider IBM’s shift from PC manufacturer to a services business), or it could involve incremental corrections and relatively small changes in response to changes in the business environment. Having formulated the strategy and the path into the future, the strategy needs to be executed. While one is an extension of the other, it is important that effective implementation strategies are applied – particularly when significant changes in direction are contemplated. In my experience organisational design is the other side of the strategy coin. Once the external positioning of the business has been determined, the way that resources are allocated and how the organisation is designed, are essential components of successful strategy implementation. Finally, as indicated earlier, strategy is not a purely rational, linear process. It is systemic and dynamic it involves people and social structures, and is largely influenced by the values of management and the culture of the organisation. The chapter on ‘The art of strategy’ will speak to many of the intangible aspects of successful strategy formulation and execution.

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There are many approaches to strategy, amongst which are Michael Porter’s competitive forces approach, Prahalad and Hamel’s core competence of the organisation, as well as scenario planning, first advocated by Shell. Numerous processes are adopted by organisations. Some are transformational and innovative, while others are procedural and bureaucratic. Some provide an excuse for an executive retreat, with very little consequence beyond a bonding experience for those concerned. The following chapters provide a series of fundamental processes that executives can use as a basis for strategy formulation and implementation. In addition, I will attempt to provide insights into many of the nuances associated with strategy. In the final analysis, the formulation and execution of a winning strategy is the responsibility of the CEO and the executive of any organisation. Without these two aspects, everything else becomes irrelevant.

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Chapter 2 FORMULATING STRATEGY Introduction The purpose of this chapter is to set out a process for strategy formulation which is relatively user friendly. It can be as simple or as complex as the circumstances demand. The process itself, however, is relatively straightforward. At the outset, I would like to pay tribute to Clem Sunter and Chantell Ilbury who, in their books such as The Strategy is largely about games foxes play, 2 provide determining the identity and a clear and concise process scope of an organisation, and what needs to be done to win the for strategy formulation, combined with considerable game it chooses to play. wisdom and insight. Strategy is largely about determining the organisation’s identity (Who are we?) and scope of business (What game are we playing?) as well as what needs to be done to win the game the organisation chooses to play (How do we win?).

Assumptions Before proceeding with the process, it is important to identify a number of assumptions and issues which are relevant to strategy formulation: • Although the overall process is similar, it is important to distinguish corporate strategy from business unit strategy. Corporate strategy is largely about determining

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the investment priorities of the parent organisation. It is about the allocation of capital and other resources, and the respective return on investment.

Based on a global survey, McKinsey3 points out that the “development of a corporate strategy should amount to more than the aggregation of business unit strategies. The best corporate strategies ... force a multi-business company to make clear choices about its portfolio and the allocation of resources”.



Importantly, it is also about making decisions regarding the scope of the business. Some businesses are largely managed investment vehicles covering a wide variety of investments which have to meet certain investment criteria. These include companies such as Remgro, Bidvest and Barlow World, amongst others. Within each of these conglomerates there are operational businesses which need to craft their own strategy, generally with a much narrower scope.



This may sound simple, but it can push executives to do some very deep soul searching, and frequently results in corporate expansion, followed by the selling off of ‘noncore’ businesses during times of consolidation.



This chapter focuses more on strategy formulation as it relates to operational businesses.

• The formulation of strategy demands a perspective in which organisations are perceived to be increasingly ‘open systems’. This means whatever happens in the environment in which it conducts business, will have an increasing impact on the organisation. Modern values and technology are forcing organisations to recognise that they are (willingly or unwillingly) connected to just about everything, and that boundaries are continuously being 26

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breached. Therefore, what happens in their environment can have an instant impact on their operations. This demands a heightened sensitivity to the environment, as well as the ability to identify weak signs of change before they can impact the business. • In my experience, in strategy formulation there is often confusion about the external positioning of the organisation and the internal resourcing strategies necessary to achieve that positioning. These are two sides of the same coin, but clearly decisions about the growth and scope of the business (such as products, markets and geography) need to be made before deciding on resource allocation (such as capital, technology and people). Effective and innovative decisions are often stifled due to the restraints imposed by psychological perceptions of resource availability. This is one of the limitations of SWOT analyses, because threats and opportunities which have an external focus are often tempered by perceived strengths and weaknesses which are essentially internally focused descriptions of current reality. • At the start of a strategy process it is vital to determine the time horizons to which the strategy applies. In fastchanging environments, any process taking longer than a year may be irrelevant. However, in other It is important to distinguish sectors, such as resources, investment between the external positioning of the organisation and the decisions have a time internal resourcing strategy. frame extending over decades. Furthermore, even businesses subject to relatively rapid change may need to take a longer-term view on issues such as technology. A pulp and paper business may need a strategy for its current business, but it also needs to consider the longer-term impact of electronic 27

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books on the industry as a whole. Generally, a rolling three-year time horizon provides a realistic opportunity to implement strategy, while forcing management to think beyond this year’s budget. • In most organisations there is tension between long-term and short-term planning, which is reflected in strategy formulation. For example, are pressures for short-term financial growth so severe that sustainability over time is lost in the quarterly reporting cycle, or paid lip service in a paragraph in the annual report? For most organisations, sustainability has to be balanced with shorter-term financial growth. • For many organisations, strategic planning occurs once a year, generally at an exotic venue, and is attended by top management. In practice, strategy should be a rolling conversation which takes place throughout the year. The annual strategy workshop should be the culmination of such conversations. In most organisations, many of the key strategic issues will have been researched and debated in various forums long before the strategy workshop is held. The workshop should be used for making decisions about the way forward based on informed research and thinking, rather than by engaging in superficial dialogue. Hence, strategy formulation is an ongoing process rather than an event. • It is important for organisations to incorporate strategy into a business planning cycle. Strategy should set the scene for operational planning, the drawing up of scorecards and budgeting. However, those activities need to be able to deliver the strategy. • I am a great believer in the magic number 5. The purpose of strategy is to identify how the organisation will position 28

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itself in its environment and then focus its efforts and scarce resources on achieving such positioning. It is also a process during which stakeholders can align their efforts and activities. Compiling laundry lists of activities does not help to achieve focus. It is generally In practice, strategy should be a accepted that people can rolling conversation which takes keep between three and place throughout the year. seven issues in mind simultaneously. I always encourage organisations to identify the five to seven key strategic thrusts that will help to achieve their strategy. Within each of those thrusts, between three and seven key activities can be identified which, in turn, will comprise action plans. In this way, when someone is asked what the company strategy is, they will not have to scratch around in a drawer to find some bulky document that nobody even remembers compiling in the first place.

Outcomes Effective strategy formulation achieves a number of goals: • It enables an organisation to have a strategic conversation and to take decisions on the identity of the organisation, including the mission, vision and values (MVV). • This, in turn, influences and is influenced by the scope of the business. The scope clarifies the products and services, market segments, geography and other aspects of the (general) growth strategy. • The outcome of strategy formulation should be to provide a variety of stakeholders with clarity on the future direction of the organisation. 29

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Strategy Strategy stress tests McKinsey recently undertook research which resulted in ten stress tests for strategy, post the financial crisis.3 Interestingly, an analysis of company strategies indicated that few met more than three of the requirements of the tests, which were the following: • Will your strategy beat the market?

To beat the market, advantages have to be robust and responsive. Just playing along is not sufficient.

• Does your strategy tap a true source of advantage?

Competitive advantage stems from two sources of scarcity: positional advantage and special capabilities.

• Is your strategy granular about where to compete?

Defining and understanding detailled market segments is one of the most important steps a company can take to improve its strategy.

• Does your strategy put you ahead of trends?

A major shock can result in a transformed industry. However, many trends emerge slowly and therefore companies often fail to respond to them.

• Does your strategy rest on privileged insights?

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Developing propriety insights is not easy, but it is essential

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n the context of making cheap and abundant data available to everyone. • Does your strategy embrace uncertainty?

The challenge of strategy is that choices need to be made now, while payoffs occur in an environment that cannot as yet be known.

• Does your strategy balance commitment and uncertainty?

Balancing commitment to key strategic initiatives and building the ability to remain flexible are ongoing tensions in strategy formulation.

• Is your strategy contaminated by bias?

It is critical to bring in fresh eyes to issues and to maintain a culture of challenge, in which the obligation to voice dissent is fostered.

• Is there the conviction to act on your strategy?

Many strategies fall short when it comes to implementation, because of an absence of conviction in the organisation – especially amongst members of the top team.

• Have you translated your strategy into an action plan?

Make sure that each ‘from–to’ shift ensures that people have the energy, resources and plans to make it happen.

How many of these test requirements does your strategy comply with?

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• It should result in the articulation of the key strategic thrusts which will outline, for all members of the organisation, their priorities, focus and direction. • It provides the basis for operational planning and the development of departmental and individual scorecards, and forms the basis of budgeting and performance management. • Of considerable importance, especially for senior executives involved in such strategy formulation, is the fact that it provides a shared meaning and understanding of the current reality, the desired future of the organisation, and the key strategies necessary to arrive at that goal.

Process The following is a generic process that I apply in strategy formulation. In almost all cases it is necessary to make modifications to the process, to accommodate the specific context of each organisation. There are many variations on the theme. Understand context: PESTEL; stakeholder analysis; maket inteligence; scenario building

Strategy formulation

Positioning: Products & services; target markets; geographies; growth strategy; supply chain position Identity building: Mission; vision; values

Winning the game: Strategic thrusts

Figure 7: The strategy formulation process

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Understanding context What is going on around us now? What can we expect in the future? The purpose of understanding context is that it enables an organisation to identify those trends and other factors in the business environment that will influence strategy. Generally, the focus is on what has changed (or might, in future, change) and on the possible impact of such changes. Many organisations are in crisis or go out of business because they were unable to pick up on the signals indicating that the environment around them has changed, or because their managers’ mental filters excluded important information. This tendency is particularly characteristic of successful organisations where complacency, and often denial, hide the potential pitfalls of the future. Environmental scanning There are a number of levels at which the environment needs to be scanned. First, at a macro level, a typical PESTEL analysis needs to be undertaken. I normally employ experts from different fields to undertake this analysis. These experts could typically include a leading economist, a social analyst, and people who can speak on trends pertaining to technology and talent. Where possible, I try to bring in speakers who can deliver a ‘wow’ presentation. The purpose of such external speakers is to challenge and open up management’s frames of thinking. Such

The purpose of external speakers is to challenge management thinking and open up their frames of thinking. 33

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speakers are able to identify signs which are at the edge of the radar screen, but which, in time, could potentially have a significant impact on the organisation and its environment. For example, only a few years ago the advent of social networking barely featured on any corporate strategy agenda. Yet it has a potentially profound impact on the relationship between organisations, employees and customers. Early adopters are often able to exploit opportunities before their competitors can. The use of particular speakers sets the tone for future conversations over time, and as a result important new issues begin to feature in strategic conversations. Having a line-up of speakers at a strategy workshop has value, but this is greatly enhanced if time is made for leaders to engage with the subject and to interrogate the implications for the organisation. Stakeholder analysis The next level of environmental scanning has to do with stakeholder analysis. This process helps leaders to clarify the expectations stakeholders have of the organisation, and ensure that strategy delivers on these expectations. Often, some form of broad consultation or engagement with stakeholders provides unexpected insights about their expectations, and challenges the assumptions management hold about their stakeholders’ perceptions. Market intelligence A particular focus area that is often of great value is an analysis of competitors through effective market intelligence. In one example, a presentation of competitor intelligence of the financial services sector in another African country enabled the detailled positioning of the client in terms of market segment, product range and geography, relative to 16 other banks in 34

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the country. Niche areas were identified which leveraged the client’s strengths relative to those of his competitors. Strategy guru Kenichi Ohmae states that “on a political map boundaries between countries are as clear as ever. But on a competitive map, a map showing the real flows of financial and industrial activity, those boundaries have largely disappeared.”4 This type of analysis is normally best conducted by a specialist external consultant who is independent. Finally, a micro environmental analysis addresses questions regarding changes in customers, and their needs and expectations within a particular sector. It is a useful exercise to arrange for internal cross-functional teams to undertake this level of analysis, as they are generally closely associated with the market. Scanning the environment can be a lengthy process, if done in depth. Generally, the focus is, almost without exception, on what has changed. Consequently, the aim is to understand the changes as well as their implications. In my experience, a micro-level analysis is best done prior to a strategic workshop, whereas a macro-level analysis is useful to challenge mindsets at the start of a workshop.

Scenario building: What are the possible futures? Strategy is about creating the future. As we know, it is almost impossible to predict the future and as the time horizon is extended, the ability to predict the future becomes less precise and more ambiguous. Few organisations still use the principle of extrapolating the past to predict the future.

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Strategy McKinsey identified five global forces or “crucibles of change that will restructure the world economy for the foreseeable future. Companies that understand them will stand the best chance of shaping it.” These are:

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•

The great rebalancing: the coming decade will be the first in 200 years when emerging market countries contribute more growth than the developed ones. This growth will not only create a wave of new middle-class consumers but also drive profound innovations in product design, market infrastructure and value chains.

•

The productivity imperative: developed world economies will need to generate pronounced gains in productivity to power continued economic growth. The most dramatic innovations in the western world are likely to be those that accelerate economic productivity.

•

The global grid: the global economy is growing ever more connected. Complex flows of capital, goods, information and people are creating an interlinked network that spans geographies, social groups and economies in ways that permit large-scale interactions at any moment. This expanding grid is seeding new business models and accelerating the pace of innovation. It also makes destabilising cycles of volatility more likely.

•

Pricing the planet: a collision is shaping up among rising demand for resources, constrained supplies, and changing social attitudes towards environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean tech industries, and regulatory initiatives.

•

The market state: the often contradictory demands of driving economic growth and providing the necessary safety nets to maintain social stability have put governments under

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extraordinary pressure. Globalisation applies additional heat; how will distinctly national entities govern in an increasingly globalised world? Source: McKinsey Quarterly, June 2010. Similarly, the Monitor Group identified four profound sources of global transformation: • Post-Western globalisation: an emerging economic order; • Where sectors converge: a weave of public, moral and market values; • Sustainability and climate change: debates give way to consensus and action; • Connective technologies deliver liberated networks of cocreation. The implications for the future include • a new social contract: growing civic expectations and obligations; • profoundly changing customers – and ways to engage them; • the innovation imperative: new directions, pressures and means; • the rapid evolution of organisational models. The challenge to organisations is to develop strategic and operational responses to the above. “Those (leaders) who succeed will not only claim the future for their organisations, but will also help define the future for us all.” Source: Kelly, E. 2010. Taking advantage of tumultuous times: Claiming the future. The Monitor Group, www.monitor.com

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While understanding trends provides useful insights and helps with some assumptions about the future, the probability of a specific future materialising is increasingly remote. Hence, organisations use scenarios to consider a number of possible futures and to understand what their organisations could look like under each future. It helps to provide leaders with the agility to respond to changes in the environment. Scenarios are developed by identifying key uncertainties (generally two at a time) over which the organisation has little or no control, and plotting the implications of these. Such uncertainties could include issues such as commodity price, the state of the economy, exchange rates and sociopolitical stability. Once the factors have been determined they are plotted on the basis of high/low, positive/negative, etc. Generally, four quadrants emerge, each of which offers a different scenario of the future. In one example, a client in the agro-processing sector identified commodity availability and commodity price as two critical uncertainties over which he had little control. The scenarios that emerged were: • Commodity shortage and low prices (out of business); • Commodity shortage and high prices; • Commodity abundance and low prices; • Commodity abundance and high prices. This enabled the organisation to consider a strategy for each of the possible futures which tend to occur in cycles, and to design the organisation in such a way as to mitigate the impact of negative scenarios.

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Generally, scenarios are named to reflect the emerging ‘story’ associated with each. Scenarios have been used very effectively at country level to facilitate conversations about a possible future. The most recent South African examples are the Dinokeng Scenarios, which stimulated debate about possible futures for the country. Companies such as Shell, which is largely credited with inventing the concept of scenarios, need to engage Organisations use scenarios to in very long-term planning. consider a number of possible One example is their energy futures and to understand what scenarios, which have a their organisations could look very long time horizon and like under each future. It helps provide a basis for working provide leaders with the agility with the future. to respond to changes in the environment. Scenario development is a particularly useful approach to leadership development, as it challenges organisational orthodoxies and individual mindsets. Having identified four possible scenarios, the process then requires leaders to describe their organisations and what they could look like under each scenario. When detailled strategies are finally When detailled strategies deci ded on , scen arios are finally decided, scenarios provide the organisation provide the organisation with a with a basis against which basis against which to test the to test the robustness of the robustness of the strategy in each strategy in each of the of the different possible futures. different possible futures.

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Strategy Using scenarios for organisational agility In his book Foxy futurists and how to become one, Clem Sunter points out that “foxes ... hold multiple scenarios in mind and as the future unfolds they gradually adjust the odds they give to each scenario”. The key question is how to use scenarios in such a way that they provide concrete ways of dealing with the future. Having gone through the traditional scenario-building process, the first step is to identify the scenario you are in at the moment. Second, identify the possible pathways that could lead to other scenarios. Third, identify the flags that would suggest you are moving from one future (scenario) to another. Such flags need to be very concrete. For example, what were the flags that signalled a shift from a growth economy to the start of the financial crisis? What flags would signal changes in political stability, consumer behaviour, new technology or changes in regulation, to name a few? The final step in the process is to determine an appropriate strategy to enable the organisation to be effective in a new and different scenario. Those leadership teams that have undertaken a process to identify the flags will be in a much better position to respond sooner to changes in the environment around them. They will also be better able to avoid potential threats and take advantage of potential opportunities. From: Sunter, C. 2010. Foxy futurists and how to become one. Cape Town: Human & Rousseau Tafelberg.

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Positioning: Scope and strategic choices Once an organisation understands the changes in the business environment and the possible futures that may emerge, the time has come to make strategic choices about the scope of the business.

The decision about what business an organisation should not be in, is often as important and difficult as deciding in which businesses it should be a player.

In my experience, the decision about what businesses the organisation should not be in is often as important and as difficult as deciding in which businesses it should be a player.

There are two levels at which decisions need to be made in respect of the scope of the business. On the one hand, most strategies begin with a discussion and a decision on the vision, mission and values of the business, before moving on to the detailled specification of products and services, target markets and geography. I find that it is often better to begin with the latter, so that the formulation of the vision, mission and values emerges from that discussion. Often it is an iterative process. However, the sequence is largely dependent on the organisational context. Generally, strategy has a growth imperative. It aims to provide answers as to where growth targets are best achieved. There are commonly three areas in which the scope of an organisation may change:

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Products and services An extreme case of profound strategy changing the entire nature of the organisation over time, is that of IBM. Due to changes in the environment, the organisation changed from a primary provider of mainframe computers to a leader in the provision of PCs, before becoming a largely services organisation. Few organisations have to make such radical decisions, but changing circumstances require them to review their products and services on a regular basis. This is particularly influenced by technology, hence the changes in banking channels, for instance. The shift from an exclusive focus on product sales, to the provision of client solutions that cell phone companies are trying to offer with the growth of 3G and other data products, are just two examples of the impact of significant external changes. Where markets are changing there is a strong temptation to stay with the familiar. It is here that tough decisions need to be made about what should be discontinued, as well as where new products and services need to be created. Such decisions often have a significant impact on organisational culture, and of course have the effect of challenging existing power bases at a leadership level. Market segmentation With changing markets, organisations need to review the market sector in which they provide products and services. Changes in this area are mainly driven by changing demographics, which results in different growth opportunities. Hence the need for one South African bank to shift from a focus on relatively high net-worth individuals to a much broader market. 42

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The fact that most mainstream banks had great difficulty designing a model for the lower end of the ‘pyramid’ provided Capitec with a wonderful opportunity to break into that market. Based on the market dynamics of the sector, organisations may choose to be highly focused, or they may choose to cater for a wide spread of customers. Often, organisations create new organisations with a different brand – this, to service specific sectors. Of course, their product or service offering is market-segment-specific. An organisation in the retail furniture sector may, for instance, create different companies with their own brand, to address each of the LSM levels in the market. Geography For many organisations, their home market is mature and opportunities for growth are limited. Hence many South African companies have taken the decision to establish operations elsewhere in Africa, or even overseas. This has been done with mixed success. The shift from being a domestic player to being a regional player is significant, and the challenges involved are often underestimated. Where companies have been successful, the returns have frequently been outstanding. In taking decisions regarding geography, very specific criteria need to be identified against which to evaluate investment opportunities. Organisations ignore the political, cultural and social environments of different countries at their own peril. Growth strategies: Organic growth or acquisition It goes without saying that organic growth through expanding current operations into new markets, products and services, 43

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and even geographies, needs to be balanced against acquisitions as an option. Both have their advantages and disadvantages, but focusing on these issues is beyond the scope of this book. Whichever option is chosen, a clear understanding of the risks – both financial and non-financial – is needed. Supply chain Another area in which strategic decisions often have to be made relates to those aspects of the supply chain that are to be included (or excluded) from the organisation’s business. This is largely driven by the organisation’s philosophy on vertical and horizontal integration, and whether there is an appetite for outsourcing and managing partnerships, rather than taking central ownership and control of all aspects of the supply chain. Increasingly, the trend is to view organisations and their supply chains as open systems in which boundaries are less defined and cohesion results from managed partnerships. Organisational identity can be quite nuanced as a result of the focus of the supply chain. A simple example is the question of whether the sales arm of an FMCG (fast-moving consumer goods) company or even a commodities business exists to sell the products which are produced by manufacturing, or whether manufacturing is supposed to produce goods which the sales operation wishes to sell. This distinction can have a profound effect on the focus of an organisation. How an organisation exercises control over its supply chain is one of many essential strategic decisions executives need to make.

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Building identity: Mission, vision and values (MVV) The mission, vision and values combine to provide a highlevel definition of the organisation. They answer the question: Who are we? For many (if not most) organisations, MVVs have little or no value whatsoever. I have facilitated strategy workshops where the mission and vision would not distinguish a multi-million rand organisation from the McDonalds down the road, and so many value lists are ‘motherhood’ statements which bear no resemblance to the behaviour of the organisation. Ask an executive in such an organisation what the MVVs of their organisation are, and they would have to ask around or look them up on their own website. My favourite management philosopher, Charles Handy, once wrote that the world is full of visionless visions. Where MVVs are meaningful, however, it creates the context for the future direction of the organisation. Different authorities have different views on the meaning of these respective terms. My own view is the following: In many organisations the mission, vision and values have • Mission: What business little or no value whatsoever. are we in (or not in)? • Vision: Where do we want to take the business in the future? • Values: How do we want to behave? What are some of the characteristics of useful MVV statements? 45

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• They differentiate the organisation from other organisations. • The vision should ideally be inspirational and should focus the direction of the organisation. It should provide stakeholders with some aspirational stretch. • They are relatively short and memorable. This applies particularly to the vision statement, which should not be longer than a short sentence. Increasingly, organisations have a metric as their vision, which is easily remembered and is also a concrete target. One client has 12:12 as vision, which everyone understands to mean a 12 per cent reduction in costs by 2012. Others use profitability and sector ranking as their visions. Purists may argue that these are goals, not inspirational visions, but the fact remains that everyone knows what the aim of the business is and everything is focused on achieving it. Most people want to be part of a winning team, and in any event bonus payments are generally linked to financial achievement which, for many, is quite inspirational. • They provide a degree of stability and a centre of gravity for the organisation in a changing world. MVVs that change every year after the strategy workshop offer little value. What is of value is where a serious conversation about the organisation’s identity occurs, and where any change in the MVV reflects a significant change in organisational identity and direction. • Values, in particular, need to be behavioural and should be applied as part of the organisation’s DNA. Much has been written on the subject. Suffice to say that real values are emergent and not imposed on the organisation by management or by an external consultant. Values are best articulated by distilling what has made the organisation successful in the past, and what will make it successful 46

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Strategy Values Johnson & Johnson is famous for its credo, developed by one of the founding fathers of the company in 1943. It is considered part of the company’s DNA (www.jnj.com).



Our Credo We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfil their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens, support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.

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in the future. It is essential for values to be interrogated throughout the organisation. They must also be reinforced by the behaviour of the executives. • During a recent visit to a number of world-class organisations in the United States, one characteristic of these remarkable and sustainable organisations emerged: they all subscribed to a deeper purpose. Hence, IBM is about progress and about impacting the world, and this is incorporated into its focus on a “smarter planet”. Siemens is about providing Americans (and now other countries) with answers in the fields of engineering, medical equipment and industry.5

Winning the game: Determining strategic thrusts Identifying the strategic thrusts necessary to achieve the pre-determined positioning is the bridge between strategy formulation and execution. It provides the organisation with those areas of focus required to win the game. There should generally be between five and seven Strategic thrusts provide the strategic thrusts, and the organisation with the areas of focus necessary to win the game. temptation to have a long list of key focus areas should be avoided at all costs. The purpose is to determine what will result in a win, to create focus for all stakeholders and to prevent the dilution of activity. Strategic thrusts have a time horizon and are usually applicable for the duration of the coming year (or three). They should provide a platform for the implementation of the detailled execution strategy, which is the next phase in the process. 48

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Conclusion The purpose of formulating strategy is to determine what the organisation needs to do and for what purpose. At the conclusion of a strategy formulation exercise, the following should already have been achieved: • The overall purpose of the organisation should exist in the form of a mission, a vision and values. This will clarify the organisation’s purpose, scope and strategies. • The strategy provides a centre of gravity for all key stakeholders. These include shareholders, management, employees and customers, amongst others. It enables consistent communication with stakeholders on an ongoing basis. • The strategy provides guidance in respect of the many balances that have to be achieved, such as between shortterm delivery and long-term sustainability. • The strategy provides the basis for organisational scorecards, and for these to be translated into individual scorecards and performance management tools. • The strategy provides a backdrop against which ongoing tactical and operational decisions need to be made at all levels in the organisation. • Finally, it should provide inspiration to stakeholders to want to be part of a winning team. Strategy formulation is an essential task of a CEO and other executives. It is partly what they are paid for. Stewardship in strategy formulation and final approval is another essential role of boards and other governance structures. However, 49

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as stated in a number of places in this book, great strategies fail because they are not implemented effectively. Implementing strategy is an essential phase of the process. Although the formulation and the execution of strategy are covered in two separate chapters, they should not be seen as two distinct processes. Strategy formulation is the result of a series of rolling conversations in organisations, although final decisions may be taken at a specific event. Strategy formulation and implementation are iterative processes. The next chapter focuses on strategy implementation.

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Chapter 3 IMPLEMENTING STRATEGY Introduction It goes without saying that strategy implementation is a continuation of strategy formulation. Where the strategy from year to year does not change substantially, implementation is easier. It is then merely a case of making minor adjustments. However, where pressures for growth or changes in the business environment demand a significant change in strategy, the processes applied to implement the new strategy becomes critical. This chapter examines why strategy implementation often fails and what executives can do to facilitate effective implementation.

Why strategy implementation fails There are a number of reasons why strategy implementation fails, and several things executives can do that will assist in strategy implementation. Lack of participation One of the most important questions that need to be answered in strategy formulation, is: Who should be involved and when? It stands to reason that high-level positioning decisions are best made by top management, with input from senior managers. They alone (should) have the ‘bigger picture’ vision, independence and a clear understanding of the available information. They are able to formulate the strategic intent 51

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of the organisation which, in turn, provides the framework for lower-level managers and staff to undertake the activities necessary to make those intentions a reality. What managers and employees at all levels need to know, is: What does it mean for me?

What managers and employees at all levels need to know, is: What does it mean for me?

Where strategy involves, for example, expanding into different countries, it may not affect most members of staff directly.

Where strategy involves a new focus on different markets, cost reduction, enhanced customer service (to name but a few possible new strategies or focus areas), employees are directly affected. They are responsible for implementing the strategies and therefore they need to be involved as early in the process as possible. There is a difference between ‘push’ and ‘pull’ processes. In ‘push’ processes, top management makes high-level strategy decisions and then implements processes from a ‘top-down’ perspective. ‘Pull’ processes generally require divisions and functions throughout the organisation to propose how they are going to implement the required business strategy. Generally, organisations adopt a blend of the two approaches. This facilitates an organisation-wide response, while allowing each division or function to determine its own contribution, for approval by the executive. In one organisation, the executive had determined a number of strategic thrusts for the short to medium term. One such thrust included growth through acquisition in different countries. 52

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A specific division was given responsibility for this strategy. However, other strategic thrusts included optimising the value chain and transformation, amongst others. To implement these, each division was required to identify the current reality (as is), the desired future (to be) and the key actions that would be required to achieve this. The sum total of the plans for each division and function was factored into the medium-term financial model, to confirm that the numbers at the end would meet the corporate target. Where necessary, stretch was imposed from the top. This is a typical top-down, bottom-up, top-down approach. It ensures that the people who have to ‘make it work’ are intimately involved in working out how to do so. This process is described in greater detail at the end of the chapter. Not having the correct people This is a very sensitive, yet critical issue. Where strategy requires significant changes in direction or behaviour, a CEO (or board) has to ask whether Where strategy requires his/her executives are the significant changes in direction right people to drive the or behaviour, a CEO has to ask change. whether his/her executives are the right people to drive the This is not just about skill change. – skills can be learnt. To a large extent it is about the ability to deal with the new degree of complexity involved in the new strategy. People who were able to solve yesterday’s problems in a previous 53

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context are not necessarily the right people to solve tomorrow’s problems or work in a new context. Often the problem is one of attitude and passion. New strategy requires high levels of leadership energy, and someone who is not committed will not be the right person to drive the strategy. In his book From good to great, Jim Collins states that it is important to get “the right people on the bus and the wrong people off the bus” prior to setting strategy. He brands this an essential feature of organisations that are able to successfully reinvent themselves.1 A CEO therefore has to look objectively at his/her executive team and to ensure that they are the right people to implement the strategy. In the same vein, levels of management below that need to take similar decisions. Lack of organisational capability It is my observation that a lack of organisational capability is often the reason why good strategies fail. Failure frequently occurs where an organisation wishes to replicate what it does well in one context (e.g. market or country) in a different context. Management then invariably finds out that replication is not easy, and that context matters. The biggest obstacle to replication is not necessarily people’s skills, but rather intangibles that impact the organisation’s ability. These include, for example, the impact of growth on the organisation’s design and management, or the challenges of operating in a new national culture or market segment.

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Hence, leaders understand that they have the necessary skills and processes in place, but they underestimate the impact of a different context on what they do well. Another example may be outsourcing. Being proficient in a particular part of the value chain does not necessarily prepare an organisation to manage complex partnerships in the case of an outsourcing arrangement: the required organisational capabilities are different. The same principle may apply to mergers and acquisitions. This also does not mean that an organisation cannot build the new capabilities which are required. What it does mean is that doing so may take longer and may cost more than initially planned. The ability to replicate an effective business model in different places is, in itself, a capability that can be built. In fact, a number of South African companies have done so very successfully. Lack of communication New strategy generally involves change. People do not, as a rule, respond well to change – especially if it is Most importantly, people need not well communicated. to know how change will affect them personally and what it Most importantly, people means in terms of what they need to know how change need to do. will affect them personally, and what it means in terms of what they need to do. In order for staff to engage with the new strategy, it is essential that they understand why a change was necessary in the first 55

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place. They need to understand the pressures for change and what it means for them. When leaders disappear for a few days on their annual strategic workshop, employees know that this is what they are doing. They anticipate that new directions may emerge and that these may present both threats and opportunities. Where management does not communicate – even if only to say that a more comprehensive communication will follow – employees will draw their own conclusions. This easily results in an over-active grapevine, where employees are generally misinformed. Arguably the worst thing executives can do is to let employees hear about proposed new strategies from unofficial sources. It is important that whatever is communicated is consistent. Allowing each executive to communicate their interpretation of what happened and what may happen as a result of the process is a recipe for inconsistencies, miscommunication and ultimately disengagement by staff and managers alike. I strongly advise clients that some type of communication must be issued immediately after a process has occurred or decisions have been made. Communication is not only important to staff – a number of stakeholders need to be kept abreast of developments, and this needs to be done professionally and timeously. Stakeholders such as customers, investors and suppliers do not want to hear news through informal channels. It is also important that organisations keep their websites up to date. If the decision has been made to modify the vision and mission, for example, then whatever information is on the website needs to be current. 56

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Lack of leadership energy As will be discussed later in this book, change requires considerable leadership energy. Where the impact of strategy is substantial, substantial leadership energy is required. This is often reflected in the way the new strategy is branded internally, and the extent to which people want to connect to the energy which is generated. Where new focus areas are dictated by new strategy, leaders need to be champions of change. They need to be the face of the change and need to help their staff (at all levels) understand what the implications are for them personally. Simply sending out a document or communicating once via a brief is not enough. Leaders need to provide the energy that the organisation and the people in it need, in order to implement what has been decided. As such, change requires high levels of emotional intelligence (also known as EQ), as it always affects the emotional domain of employees – whether it is through promoting opportunities for individuals and the organisation, or through dealing with the threats arising from a new strategy. Another reason why leadership energy is required, is to keep the process alive. In too many cases a strategy is launched with considerable fanfare, before being ignored and disappearing off everyone’s agenda. Lack of a change strategy As indicated above, no change in direction or behaviour happens automatically.

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Change processes will be discussed elsewhere in this book, but suffice to say that a change strategy is required. This applies to expansion and to internal changes in strategy (as discussed above). Where expansion occurs through mergers and acquisitions (M&As) or through internal change, it is essential that a change strategy be determined and implemented. It is well known that M&As which have met all the financial and business case criteria often fail due to the absence of a change process. At best, the tensions resulting from an M&A will remain in the organisation for years to come. Frequently, the required change involves a change in mindset, for example, where a shift occurs from a product and technology focus to a customer focus. Such change does not occur through a series of linear processes – it is complex, rather than linear. This type of change, where it is successful, occurs as a result of strong leadership, not through re-engineering. It is for this reason that strategy, leadership and change are so integrally connected. Not connecting strategy to operations It may be stating the obvious, but the balanced scorecard mainly evolved from the need to connect strategy to HR leaders, in particular, have operations. an enormous role to play in facilitating the connection Organisations need to between strategy and individual institutionalise the connecperformance. tion between strategy, operations and targets, as well as performance consequences. This connection needs to create a seamless thread to take strategy into the organisation and to support the performance and behaviour that will result in its achievement. 58

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Again, it is essential that executives look at the whole system rather than at each part of the various processes involved. HR leaders, in particular, have an enormous role to play in facilitating the connection between strategy and individual performance. All too often the HR function is so preoccupied with the implementation of the performance management process that managers take their eye off the ball when it comes to strategic intent. Lack of monitoring In many organisations the complaint is often heard, from leaders and staff alike, that management meetings only focus on day-to-day operations, rather than on strategic issues. While there is no doubt that reporting and other operational activities need to be discussed in management and executive meetings, it is equally important for strategy to be allocated equal (if not more) time. Including strategy at such meetings allows leaders to step back and see the organisation through a ‘big picture’ lens. When done properly, the process enables leaders to continually challenge assumptions and to ensure that strategic goals are being achieved, along with the immediate operational objectives and scorecards. Focus on the short term Strategy has to move through a series of time horizons. If such a horizon is too short-term, the critical issues which need to be addressed for long-term sustainability will be forgotten or ignored. If the organisation’s focus ignores the pressures of immediate financial and other imperatives it may not have a long lifespan. 59

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Generally, organisations focus on the short term at the expense of the long term. Line managers, given a choice between achieving short-term financial gains (that impact their bonuses) and allocating resources to issues that will impact the organisation in the longer term (when they may no longer be around), will not take long to make their choice. This reinforces the argument, mentioned above, that the performance management system has to ensure that both short and long-term goals and objectives are aligned in the reward system.

The strategy implementation process The strategy implementation process is largely dependent on the context of the organisation. In those organisations with a history of effective strategy implementation, there is normally a well-defined process which is followed. However, even in these organisations the jump from strategy to budget is often tenuous, with a focus on short-term quantifiable targets, rather than high-level strategic thinking. When Jack Welsh transformed GE he famously implemented what was known as the ‘workout’ process. Since then, Geoff Immeldt has taken the process and applied it, not to improving operational efficiencies, but to bettering the level of strategic thinking in the organisation. There are many approaches to implementation, but the following incorporates a systemic approach to the practice, based largely on the work of Russel Ackoff, a leading systems thinker. The approach, which is not unlike the GE ‘workout’ process, is illustrated below:

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Create teams Analyse current reality (as is) Strategy implementation

Create desired future (to be) Key implementation strategies Action plans, scorecards, budgets Monitoring & review

Figure 8: A strategy implementation approach

Create teams One effective way of implementing strategy is through the use of teams. They may be natural work teams, cross-functional or cross-divisional teams, or a combination of these. The purpose of such teams is to take the strategic thrusts and make these operational within as short a time frame as possible. The process adopted by the teams includes the remaining steps in the framework (see Figure 8), as detailled below. Generally, teams work in project mode until such time as the strategy becomes an integral part of their day-to-day operations. The selection of team members is important. It is a highly effective way of developing high-potential leaders. Ideally, team members should provide for diversity in respect of experience, functional and divisional perspective, and level 61

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of seniority (amongst other factors). Where innovation and thinking ‘outside the box’ are important, this should be reflected in balancing experience with new thinking. Such creative tension is an important ingredient for moving forward. What is essential is that the chemistry in the teams results in sound team practices, and that team members have the necessary credibility to be taken seriously by the rest of the organisation. Teams that are perceived as dumping grounds or that comprise solely functional (rather than line) members are doomed to fail. The purpose of teams is to take the strategic thrusts and make these as operational within as short a time frame as possible.

Another danger is that team members are not afforded sufficient time to devote their attention to strategy: as a result either their normal role or the strategic role suffers, and neither situation is useful to the company. In managing the team aspects of strategy implementation, it is essential that combined teams be project managed effectively. The whole needs to be greater than the sum of the parts. In one large, multi-divisional organisation that was familiar with the ‘workout’ process, the management teams in each division and function were required to follow the process for their part of the business. The process was centrally coordinated, and the final targets and action plans that emerged were consolidated, such that the corporate financial stretch goals were achieved. It was a significant logistical exercise but, unlike previous strategy initiatives, it was inclusive of as many people as possible. The process was, therefore, embraced throughout the business at many levels, in all divisions and functions. In the end, the process ensured that corporate strategy was cascaded throughout the organisation. 62

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Understand current reality (as is) Understanding current reality is the first and very important step in the process. Current reality is the ‘as is’ situation. Typically, divisions and functions are required to describe their current reality. That is to say, they need to determine which current metrics and non-tangible issues relate to the strategic thrusts of the strategy. If cost, for example, were a strategic thrust, then the key costs would be quantified. If it were transformation, the less tangible ‘as is’ situation in respect of transformation would be explored and articulated. This is not always as simple are not tangible, frequently they reflect on individual leaders, and they are almost always seen through the eyes of those who collect the information.

as it seems. Many of the issues Many of the issues are intangible, frequently they reflect on the individual leaders, and they are almost always seen through the eyes of those who collect the information.

It is very easy, at this stage, for the organisation to either work in a state of denial, or to be overly self-critical. What is important is that as many intangible issues as possible are made tangible. In the case of transformation, for example, a culture or values survey will provide concrete information on the perceptions which are prevalent throughout the organisation. In addition to defining the current reality, it is often useful to discuss the ‘current future’. This is the impact of the current reality, if it continues. For example, in an organisation that is entering a period of turbulence, what would be the consequence of continuing with a ‘command and control’ leadership style? The value of such questions is that they create a burning platform for change. 63

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Determine the desired future The ‘desired future’ is the ‘to be’ situation in respect of strategic thrusts. It provides the next level of detail in implementing strategy. The general response to this scenario is to set targets. However, the process ideally should describe more than mere quantitative goals. At this time it is useful to stretch people’s thinking as regards what is possible, and to do this on a ‘clean sheet’. It is as much a visioning process, during which the future vision is formulated in greater detail and in operational terms. Hence, a balance between creativity, inspiration and operational reality needs to be achieved. When determining the desired future it is important to balance the need for stretch with realistic and achievable goals. Often, many ideas are generated which have to be reduced through a process of selection. From formulation to implementation, strategy is a continual and iterative process. The aggregate ‘to be’ situation of each team, division or function should contribute to corporate goals. Identify the key strategies or actions necessary to achieve the desired future A very useful approach to this phase is to work ‘from the future backwards’. This involves the following question: Assume it is three years from now. You have fully achieved your goals and are considered leaders in your field. What was it that you did three years ago that enabled you to achieve this? The aim here is not to outline detailled actions, rather it is to identify the key steps that need to be initiated now, in order 64

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Strategy implementation Take the example of human capital identified as a strategic thrust in one organisation (fictitious). Current reality (as is) To understand the current reality, information was collected from a variety of sources, ranging from turnover of scarce skills to demographic profiles to the results of a cultural audit. This information was documented and problem issues were identified. It was then ‘parked’. The impact on the business – if nothing changed – was debated. Desired future (to be) In answering the question: ‘What would tell you that you are a world-class employer of choice, with the best skills in the industry?’, the following is a small sample of responses: • • • • • • •

Low turnover and high levels of employee engagement; High-performance culture; Highly effective transformational leaders; Diverse workforce; Cutting-edge self-service-driven HR technology; Clear, visible employee value proposition; High success rate in attracting best talent.

Key strategies In answering the question: ‘Assume it is three years from now and you have been extraordinarily successful. What major strategies did you implement during the past three years?’ The sample of responses included the following: • • • •

Formulated and communicated overall human capital strategy; Reviewed all HR policies and ensured they support the goals; Reviewed HR function effectiveness; Ensured leaders are trained and evaluated on their leadership

performance;

• Reviewed HR technology and systems.

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to achieve future goals. These steps are then further broken down into detailled activities. The steps can then be quantified and action plans developed. Develop action plans, scorecards and budgets Much has been written about the balanced scorecard. It is a useful concept, and many organisations have used it to operationalise their strategy. Whatever tool is used, the end result should be a specific set of activities with responsibility allocated for each, along with time frames. These should then become an integral part of performance contracts with the people responsible. Whatever tool is used, the end result should be a specific set of activities with responsibility allocated for each, along with time frames.

One danger is that the necessary collective thrust is dissipated, and that each individual only focuses on completing their piece of the puzzle. The notion that the whole should be greater than the sum of the parts, should always be the guiding principle. It is remarkable how, in some organisations, the budgeting process (run by Finance) still seems to bear little resemblance to the strategy implementation process. I have seen organisations in which the budget is completed before the strategy process. The budget should be a financial representation of the strategy. Monitoring and review It goes without saying that implementation needs to be monitored and corrective action taken, where necessary. 66

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A question that provides useful insight into an organisation relates to the way in which meetings are held and reports are completed in the business. Does the organisation have a ‘meetings and reporting’ architecture in which the relevant meetings and reports have clear goals and are structured appropriately, with the right people involved, covering the correct issues? There are many reasons for holding meetings. They do play an important role in strategy review. An important question is: What percentage of exco’s time is spent on strategy review relative to operational management? Similarly, ask: How many standard reports report on strategic issues? The meeting and reporting architecture and the extent to which it effectively cascades up and down the organisation will have a direct impact on the application of strategy.

Conclusion Strategy implementation is about turning intention into reality. It requires constant iterations between seeing the big picture and paying attention to detailled actions. There need to be very clear lines of sight between the strategy, the various scorecards and the performance management process in the organisation. Finally, the people who implement the strategy need to provide and generate the energy that all employees require, in order to commit to the success of the strategy implementation process.

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Chapter 4 DESIGNING ORGANISATIONS Introduction “Our research convinces us that in the digital age there is no better use of a CEO’s time than making organisations work better. By remaking the organisation to mobilize the mind power of the workforce and tap into its underutilized talents, knowledge, relationships and skills, companies can both help their people to undertake more rewarding, productive work and create sources of significantly new work at Organisational design is both an relatively low cost”1. art and a science. This is not a ‘how to’ chapter. A process to reconfigure organisations is presented in the section change management. Organisational design is about far more than organisational structure. In fact, whenever a client asks me to get involved in organisational structuring, I know that the problem does not lie with the structure. Generally, it lies with the people heading up the structure; at times this may even be the CEO him/herself. As indicated in the introduction, organisations are social systems. To understand and design the optimal organisation, a systems approach to organisational design is required. Organisational design is both an art and a science. There is a rational component to designing organisations optimally, but there is also a socio-political dimension – it is the effective management of this dimension that distinguishes the CEO who displays wisdom over and above rational analysis. 69

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Designing organisations Communities of practice and organisational performance:2 Whilst the formal structuring of organisations is an essential component of ensuring that they are able to deliver on their strategy, the informal relationships are an equally important determinant of organisational performance. More on this subject is discussed in the chapters on change. One organisational construct that can improve organisational performance is that of communities of practice (CoPs). The following links between CoPs and organisational performance are based on research by IBM. As organisations grow in size, geographical scopes and complexity, it is increasingly apparent that sponsorship and support of communities of practice—groups whose members regularly engage in sharing and learning, based on common interests—can improve organisational performance. To build an understanding of how communities of practice create organisational value, we suggest thinking of a community as an engine for the development of social capital. We argue that the social capital resident in communities of practice leads to behavioural changes, which in turn positively influence business performance. There are three primary dimensions of social capital: • There must be a series of connections that individuals have to others. They must perceive themselves as part of a network (the structural dimension). Technology can enhance this dimension considerably. • A sense of trust must be communicated across these connections (relational dimension).

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• Members of the network must have a common interest or share a common understanding of the issues facing the organisation. The IBM analysis identified four areas of organisational performance impacted by ongoing CoPs: • Decreasing learning curve of new employees; • Responding more rapidly to customer needs and enquiries; • Reducing rework and preventing reinvention of the wheel; • Spawning new ideas for products and services. By understanding how CoPs deliver benefits to their larger organisations, leaders can design interventions that will support community formation and development.

Organisational design is largely about balances and paradox. It is strongly about optimisation, and it is only from the level of the CEO that the (often competing) parts of the organisation can be orchestrated in such a way that the whole is greater than the sum of the parts. This chapter explores some of the paradoxes and tensions inherent in the design of modern and complex organisations.

Organisational paradoxes and tensions Organisational boundaries Organisational structures, by definition, create boundaries. Processes and relationships cross boundaries. Therefore, effective

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organisations need to have both effective structures and effective processes that transcend structure. Organisations are – willingly or unwillingly – becoming increasingly open systems. That is to say, the boundaries between the organisation and its environment are becoming more porous and more closely connected. The implication of this is that events in the business environment have a greater and quicker impact on the organisation, and value chains rather than single organisations are becoming the unit of design. Within successful organisations, boundaries are being attacked. Organisations such as IBM are increasingly truly networked organisations, where technology-enabled networks allow anyone in the organisation to access anyone else in the organisation as a resource, to achieve organisational goals. It is all about “connecting clever people”.3 The foregoing has resulted in a significant shift in power. Consumers, communities and employees now have far greater power, thanks to social networking and other forms of connectivity. Decisions about where an organisation begins and ends influence many of the paradoxes discussed below. The balance between a completely virtual organisation which connects a value chain, and the traditional organisation The greater the centrifugal forces in which control is vested (differentiation/decentralisation), in the executive, depends the greater the need for gravity partly on the philosophy (processes and structures to underpinning the create alignment). organisational design.

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The greater the centrifugal forces (differentiation/ decentralisation), the greater the need for gravity (processes and governance to create alignment). Unless dealt with up-front, this philosophical issue will continue to manifest throughout any organisational design process. Designing the value chain Often referred to as ‘vertical integration’, the extent to which an organisation incorporates different elements of the value chain is a very strategic decision. Most product value chains involve at least the following elements: • Sourcing the commodity • Refining the commodity • Manufacturing and packing • Distribution • Sales and marketing • Product development. A services value chain would include at least the following: • Product/service development • Operations management • Marketing and sales • Customer service. All of the above are supported by service functions such as finance, HR, IT, etc. 73

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At one extreme, virtual organisations outsource almost all the elements of the value chain. On the other side of the continuum, vertically integrated organisations own all the elements in the value chain. Another decision that will influence the design is the possible creation of different business units or subsidiaries for different parts of the value chain. This can create interesting philosophical issues, apart from having financial and tax implications. At a client of mine, the sales and distribution functions were separate companies which were controlled from the ‘corporate’ centre. The question then became: Was sales there to sell the agricultural commodity produced, or was it free to sell and distribute other FMCG products to its many retail clients and resource itself for that? In addition: Were the many possible byproducts of the central commodity, produced by businesses in their own right, allowed to pursue their own strategy or were they there to get the best return on the central commodity? The above possibilities pose very strategic questions about the identity of the business as a whole, and about the business units or subsidiaries. It has significant implications for power relations within the organisation, for where the centre lies, and the degree of freedom that each business is allowed in order to pursue its own strategy from a blank page. Generally, in practice, the decision will evolve from history rather than from a rational analysis, although both should play a role. A balance is needed between the complete autonomy of each business unit and the cohesive strategy of the ‘parent’ business.

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The role of corporate and subsidiaries/business units The above paradoxes speak to the issue of the respective roles of the ‘corporate’ centre and the subsidiaries/business units. This is largely dependent on the parenting strategy of the organisation. In most organisations, the role of corporate is to allocate capital, management and other resources, with a The role of corporate is to allocate capital, management and view to achieving the best returns. Normally this is other resources, with a view to done within a defined achieving the best returns. business arena. The extent to which the ‘corporate’ centre influences day-today management is where crucial decisions need to be made. A lack of clarity and a failure to legitimise decision making at each point can result in extreme organisational dysfunction. Companies such as Bidvest, Remgro, GE and others have taken the view that the corporate centre will remain relatively ‘hands off’ in respect of day-to-day management issues. These companies are essentially concerned with overseeing the delivery of results, as businesses pursue their own strategies. Even within a closely defined sector such as banking, different strategies are applied by different companies. One large bank requires every business unit to be a profit centre. Other banks are much more centrally controlled, with more centralised services, to achieve economies of scale and policy consistency. Many large South African and global companies are strongly integrated, to the point where local MDs mainly act as coordinators, with their divisional or functional heads reporting into their counterparts at a regional or global centre.

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As a principle, the more diverse the types of business, the less central control is exercised; the more similar the businesses, the greater the central control. In such situations the ‘corporate’ centre has a different strategy from that of the business unit. As discussed previously, one’s strategy is about where to invest and ensure subsidiary performance; the other’s is about implementing its own business strategy specific to its sector. On occasions these strategies expose elements of conflict, which the CEO of the corporate entity needs to resolve. In-sourcing and outsourcing Many companies have learnt, to their detriment, that outsourcing may have financial benefits on paper, but when it comes to implementation it is very costly. This is because companies need to build the skills of partnering and managing partnerships with outsourced vendors. There are many good reasons for outsourcing. Functions that are non-core often distract the organisation from its core business; specialist companies have the ability, through systems and skills, to be more efficient in specific types of operation. This includes service centres, such as call centres and administrative processing centres. Unilever has outsourced its HR transactional functions to Accenture, which established a huge resource base in India and elsewhere to deal with the task. The jury is still out on its effectiveness. Many organisations have outsourced their processing operations to mainly Indian companies, which offer a 24/7 service. Problems arise, however, when the partnership does not work. Either the outsource company does not know the business well enough to meet the subtle requirements of effective operations, 76

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or else expectations are misaligned. One large banking group outsourced its card operations and the result was a nightmare for customers, who had to deal with extensive inefficiency. The organisation was forced to resume control of the process within a relatively short period of time. There is, however, no doubt that if done properly, significant efficiencies and other benefits can accrue from outsourcing. For smaller businesses, the advent of the ‘virtual assistant’ (VA) can be of great benefit. Companies such as GetFriday and Brickwork, based in Bangalore, provide services which include anything from making a dinner reservation for you, to assembling a team of MBAs to develop your business plan. The costs are relatively low, and the 24/7 service is highly efficient. (For more information, google VAs.) Centralisation and decentralisation This is a never-ending source of organisational conflict, and many of the issues involved have been referred to above. Many organisations go through cycles, moving from central control to a decentralised model and back again. The argument for decentralisation is that leaders are empowered to manage a complete set of resources within their control, and that such resources, policies and processes will be focused on the business needs of the business unit or subsidiary. There is a strong argument Many companies go through for this, and there are many cycles, moving from central examples of highly successful control to a decentralised model decentralised models. and back again. The argument for centralisation is based on economies of scale and efficiencies, as well as consistent policies and processes. Certainly, my 77

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visits to leading global companies in the US, Europe and the UK in recent years have confirmed that centralisation is a global trend, with globally integrating businesses emerging as an organising strategy. Most organisations will, arguably, develop a blended model to achieve the best at each end of the continuum. Centralisation tends to offer efficiencies in respect of ‘service’ or support functions. Hence, arguments for centrally driven HR, IT, marketing or other functions include the following: • Efficiencies of scale: skills and processes are available to all parts of the organisation and can be optimally deployed, as required; • Optimisation of scarce skills: expensive skills are not duplicated in each business unit and the whole organisation benefits from those centrally employed; • Policy and process consistency: this is a strong argument to ensure that policies and processes are proactively driven throughout the organisation. Individual managers are then less able to ‘abuse’ local specialists, and are required to conform to central policy. Properly done, this approach ensures that policy formulation and system design include the local needs of business units and allow sufficient flexibility to enable businesses to respond to their unique circumstances. This philosophy determines the role of service or support functions and, in particular, their reporting relationships. Role and positioning of support services In good times service functions tend to grow, as there is a perceived need for more and more services of better quality. 78

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In times of financial pressure this trend is reversed, and there is competition for dominance and survival between line/ business unit functions and service functions. Often, for political reasons, service functions that are perceived to be less than effective at a corporate level are duplicated at divisional level, to meet the specific needs of the business. Hence, costs actually escalate until rationalisation is forced on the business, and one or other service function is disbanded. There is an inherent tenThere is an inherent tension sion between corporate between corporate service service functions, and functions, and divisions or divisions or business business units. units. At times this tension becomes very intense and deeply rooted. Such is the political nature of organisations. When times are difficult, for instance during a financial crisis, these tensions increase substantially. Historically, service functions are included in a corporate overhead cost which business units must pay. In many organisations the time comes for the value of the service to be questioned, and questions are asked as to whether the service could be better acquired from external providers. This is because the organising and service delivery principles are not clear – a situation which can be highly dysfunctional, if not addressed. In many organisations, the tension is less about the fact that services are required and more about how costs should be allocated.

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Designing organisations In one client organisation that was expanding regionally, the role of support services such as legal, HR, IT, business processes, group marketing, risk etc, in providing services to established business units as well as the newly acquired businesses in the region, became a bone of contention. This was resolved in the following way: All support services were subsumed within a division titled Group Professional Services. This had a profound impact on organisational dynamics. First, service departments which previously considered themselves part of the corporate executive were required to demonstrate the value of the services they offered and to create service-level agreements with their ‘clients’. Positioning themselves as internal consultants completely altered their identity and their relationship (especially the power relationship) with clients. Consequently, they were required to shift beyond their functional specialisation and to behave like a professional services firm. This confirms the need to learn more about consulting skills and client relationship management. Most profound, however, were the debates as to who should pay for what service and who determined what services were required. Different payment models for different services emerged: from fixed-fee contracts based on service-level agreements, to hourly rates for specialised work. Finally, it largely helped clarify the relationship with clients. For example, corporate functions are largely responsible for group strategy and policy. In this model, costs for this role were allocated to the Group CEO, who had a budget for such

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services. In fact, the CEO, rather than the operating businesses, became the primary client of service functions in terms of policy and assurance. Where business units were clients, an appropriate cost allocation process was agreed with them. In an article entitled ‘Reshaping the corporate centre’ (www. adl.com) the consulting firm Arthur D Little emphasises the importance of identifying the true value service functions provide to the organisation, both in quantitative and qualitative terms. In assessing the value creation processes of such functions, the firm examines the following: • Professional competence • Quality of cooperation • Delivery reliability • Communication behaviour • Duration • Creativity • Accuracy • Client orientation • Reaction time. Professional competence and client orientation receive the highest weighting in terms of importance.

Two dangers are apparent in such an organising arrangement: first, the situation can become very complicated when, for instance, the overhead costs for internal ‘consultants’ are questioned and the consultants, under cost pressure, want to move to less expensive premises, In most organisations the tension is less about the fact that services are required and more about how costs should be allocated.

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to reduce costs. Taking it to its logical conclusion, decisions need to be made as to whether business units are authorised to use external suppliers (if they prefer to do so), and whether internal ‘consultants’ are at liberty to access external clients. Experience has shown that internal service providers are best treated as cost centres, rather than profit centres (see discussion below). Second, if service providers do not deliver the required level of service, action needs to be taken as the tensions that emerge from ineffective service provision have the potential to destroy the system. It is the exclusive role of the CEO to create balances and to ensure the integrity of the organisation, for the greater good. The extent to which executives of business units are prepared to depend on resources over which they have no control, is largely determined by the mindset of the executive and the culture of the organisation. Where an organisation has a culture of cooperation and joint accountability, the centralisation of services can work very effectively. Where the opposite is true and relationships are competitive, rational design may say it can work, but political realities dictate that it will not. Reporting lines Closely related to the above options is the question of where functions which service specific operations should report. Using HR as a good example, the following demonstrates the options:

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Divisional Manager

Div HR Exec HRBP

HRBP

Specialists

Corporate HR Exec

Service Centre Div HR Exec

HRBP

HRBP

HRBP

HRBP

Figure 9: Reporting lines

In this example of a dilemma, does the HR business partner at business unit level report to the HR director at corporate and provide a consulting service to the divisional manager, or does s/he report to the divisional manager, with a functional ‘dotted line’ reporting relationship to the HR director? There is no right answer, but based on the above debate there are advantages to a central reporting approach, namely consistency in implementing HR strategy and policies. It also enhances the functional depth of the HR business partners and often offers greater control over the effectiveness of HR staff in divisions, due to proper selection and development. The crucial success factor is the ability of the HR business partner to provide a highly professional internal consulting service that the divisional manager would be more than willing to pay for. Cost or profit centres Where organisations have created service functions and they perform well after building up specific scarce skills, there is often a temptation to turn them into a profit centre (from a cost centre). In my experience this is very dangerous. Take the example of corporate training centres, where the temptation to establish a profit centre is often considerable. 83

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The likely outcome of this is that the centre will focus its attention on attracting customers from other organisations, because it can generally achieve higher margins that way. Hence, the staff at the centre take their eyes off the ball and forget their primary function, which is to build the skills the parent organisation requires for itself. Since the profit centre is run as an independent business, the relationship with the organisation becomes one of an independent supplier, rather than an internal partner. Given the political nature of organisations, this will result in a preference amongst internal clients to use other providers, which further erodes the relationship between the parties. Furthermore, when the accountants look at the training centre they include the capital costs of buildings and other infrastructure as overhead costs, which often has The benefit of cost centres is a catastrophic effect on that they are incorporated and profitability. treated as costs associated with improving the performance of the primary business, and their existence is justified on the basis of these benefits, rather than on their own profitability potential.

Finally, the training facility is eventually seen as superfluous to the parent organisation, and it is separated or shut down due to either a perceived lack of delivery to the organisation, or a lack of profitability. There are a number of real case studies in South African corporations that illustrate the fallacy of the ‘profit centre’ argument. The benefit of cost centres is that they are incorporated and treated as costs associated with improving the performance of the primary business, and their existence is justified on the basis of these benefits, rather than on their own profitability potential. 84

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Levels of work Many organisations use the principles of ‘levels of work’, which are based on the Stratified systems theory of the wellknown academic, Eliot Jacques. Space does not permit a description of the theory in depth. It is based on extensive quantitative research, internationally and in South Africa. Essentially, Stratified systems theory defines five levels of work in a normal organisation, based on the complexity and degree of discretion required by the job. At levels 1 and 2, jobs are highly structured, work occurs within routine parameters and discretion is minimal. At level 5, executives are required to determine the strategic intent of an organisation within a complex business environment and have substantial discretion to take long-term decisions. At a global level, where even greater complexity occurs, level 6 and 7 roles can be found. The framework provides a useful approach to ensuring that an organisation is designed so that people at each level focus on the kind of work that is appropriate for that level. Hence, a manager at a strategic level should be spending significant amounts of time working on strategic issues, rather than on operational issues. The process also provides a way of assessing the degree of complexity and the level at which individuals are able to operate effectively, thereby ensuring that people are matched to roles at the appropriate level. Optimising the present and creating the future One of the frequent tensions in organisations exists between that part of the business which is concerned with generating 85

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money from existing businesses, and that which is involved in creating future business.

The cultures of an operating business and that of a new business development function are often very different. One is driven by efficiencies, the other by innovation and experimentation.

In a McKinsey Review article, The adaptable corporation, Bein h ock e r ma k e s th e point that “[t]o survive organisations must execute in the present and adapt to the future. Few do both well.”4

In many organisations, those parts of the organisation which are responsible for creating the future (such as geologists in mining, product development functions, research and development functions, amongst others) are perceived to be draining cash from the business. Furthermore, the culture of an operating business and that of a new business development function is often very different. One is driven by standardisation, efficiencies and short-term gains, the other by innovation and experimentation with a longer-term perspective. On the one hand it is easy for those involved in creating the future to adopt an unbridled approach to research and development, and this is not acceptable. There need to be parameters within which such research is undertaken, and the research needs to be focused. On the other hand, those involved in current operations need to understand that knowledge work has certain characteristics which are different from those of operational management. In many organisations, these functions are separated so that they can each benefit from their own culture and internal 86

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Designing organisations “You can only win the war with ideas, not with spending cuts” CEO, Siemens AG In the McKinsey Global CEO survey of 2006, the focus was entirely on innovation. The study found that innovation needs to happen at three levels: •

The business model: innovation in the structure and/or financial model of the business;

•

Operations: innovation that improves the effectiveness and efficiency of the core processes and functions;

•

Products/services/markets: innovation that applies to products, services or ‘go-to’ activities.

The study identified three key conclusions expressed by CEOs: • Business model innovation matters; • External collaboration is indispensible; • Innovation requires orchestration from the top. Based on these insights, the authors offered five considerations that can help organisations sharpen their own innovative agendas: • Think broadly, act personally and manage the innovation mix; • Make your business model deeply different; • Ignite innovation through business and technology integration; • Defy collaboration limits; • Force an outside look ... every time.

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processes. However, it is equally important that appropriate people from operations are involved in development projects at appropriate times, so that in creating the future there is a connection with what is possible, while not constraining innovation. The structuring of innovation and the creation of new products and services (and even new businesses) require careful thought, in which the balance between thinking “outside the constraints of the present” and delivering a realistic future is maintained. With respect to research initiatives, decisions need to be made about whether pure research is appropriate – organisations such as Sasol and pharmaceutical companies engage in upstream research requiring huge capital over long periods of time. However, for most organisations with limited technical skills, research tends to be of an applied nature. Finally, the importance of partnerships cannot be where people are expected over-emphasised; the cost to use increasing levels and resources needed to of discretion, there is an develop new technologies argument for designing are often mitigated through jobs around people. leveraging partnerships with universities and other research organisations. This results in the concept of centres of excellence, with skills and resources being shared across a number of organisations, with mutual benefit. ... at higher level roles,

Matching people and structure HR 101 teaches that, following proper analysis, people are selected to meet the criteria associated with specific jobs. Where there are gaps in their ability, an investment is made to reduce the gap. 88

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The principle is one of fitting people to jobs, mainly based on job competencies. I would argue that at higher-level roles, where people are expected to use increasing levels of discretion, there is an argument for designing jobs around people. This is because people who are allowed to design their role around their strengths and passions will be far more likely to drive those agendas, than people who are forced into a corporate box where weaknesses form the basis of their performance feedback. Amongst executive teams in particular, wise CEOs who know their employees well will always sculpt roles around the strengths of their people. Hence, a management team with a scorecard that needs to be achieved will allocate the contribution of each person and each role according to the strengths and passions of their team members, thus achieving their results as a whole. It is, therefore, argued that traditional HR processes need to be tempered with the wisdom of leadership from leaders who know the strengths of their staff. The design of organisations – especially at senior levels – will therefore be influenced by the individuals in the organisation at a specific point in time, and the structure may change as people change.

Organisational roles Much organisational dysfunction results from a lack of role clarity. In fact, I often say in lectures that the relationship between many of these roles varies from low-intensity guerrilla warfare to all-out nuclear warfare. Clashes between these roles can destroy organisations. Many of the issues discussed above contribute to the discussion around organisational roles. 89

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Corporate executives

Outsourcing partners

Business unit executives

Role players Shared service functions

Corporate specialists

Business unit functional leaders

Figure 10: Role players in an organisation

A number of roles can be identified in organisations. These roles will be discussed with a view to identifying some of the key factors associated with each. Corporate executives The roles of executives at a corporate level differ from those at business unit level. In saying this, it is assumed that a single business organisation is, in effect, a business unit. Where there are a number of business units or subsidiaries, there is a corporate executive role. Often, in large, complex organisations, such executives are formally the executives of a ‘holding company’; however, this is not necessary in order for the role to occur.

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As organisations grow and become more ‘divisionalised’, the role of ‘corporate’ expands. Corporate executives are likely to focus on at least the following roles: • Looking after the interests of shareholders. Not with standing the role of boards of directors within the context of governance, corporate executives are concerned with the oversight of business units or operating companies. They are concerned with ensuring that the investment of the corporate entity is protected or enhanced. • As such, they are concerned with corporate strategy and policy, which is different from that of business units. Corporate strategy has more to do with the nature of investments than with the specific positioning and focus of a business unit. As discussed previously, corporate strategy, and by definition the role of corporate executives, is concerned with determining what businesses the organisation should be invested in (and what it should not invest in). Over time, corporate entities are easily persuaded to invest in seemingly appropriate businesses; then, after a period of expansion, non-core businesses are shed and the corporate entity becomes more focused once again. Coincidentally, this often occurs when a new CEO is appointed. Anglo American is a good example of this. • Corporate executives have to make decisions about how capital and other resources (such as management) are best allocated. In an organisation with multiple business units or subsidiaries there is competition for scarce corporate resources, and corporate executives need to make decisions based on the best sustainable returns on such resources.

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• Corporate executives play an essential role in managing the risk of the corporate entity, as well as ensuring the risk management of businesses. • Closely aligned to this function, they need to decide on the design of the organisation as a whole, and on where synergies can result in benefit for the greater good. • Leading corporations view leadership as an essential resource. A critical role of corporate executives is to ensure that there is a pipeline of suitable future leaders through effective succession, and to monitor the performance of current business unit executives. • Closely aligned with this is the role of allocating executive rewards based on performance within the parameters of remuneration committee mandates. • Finally, many corporate executives provide leadership to the organisation as a whole. In some companies the boundaries between the roles of corporate executives and business unit executives become blurred, and this puts serious strain on relations between them. Business unit executives Business unit or subsidiary executives clearly have a much more hands-on role than their corporate counterparts. Specifically, they are generally responsible for the following: • The strategy formulation and implementation of the business itself; • The operational management of the business; 92

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• The resourcing and financial management of the business; • Ensuring effective risk management; • Providing leadership to the operation by providing organisational energy. Corporate specialists The role of a corporate specialist is often very tenuous and it requires considerable skill to manage. It should be emphasised that those on the corporate executive often have to play the role of both executive and corporate specialist. In respect of the latter role, the following are key responsibilities: • Corporate specialists are responsible for scanning the environment and connecting to cutting-edge thinking in their field of specialisation. They are the people who should provide the conduit for relevant, external expertise to come into the organisation. • They are largely responsible for ensuring policy formulation and assurance. Hence, the Chief Marketing Officer is responsible for advising the corporate exco (of which s/he may be part) on brand policy for the corporate entity. It is important to note that in this case the CEO and the corporate exco are his/her client in respect to policy advice, since it is only the exco – and specifically the CEO – that has the ultimate authority to determine policy and instruct business units to adhere to such policy. • Generally, corporate specialists are tasked with establishing the corporate architecture for their field of responsibility. Hence, the CFO or CIO is responsible for establishing the policies, strategies, standards, processes and systems for 93

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corporate-wide financial and information management respectively. • While corporate specialists have a role to play in policy formulation and assurance (a ‘policeman’ role), they are also responsible for providing advisory and support services to businesses. The role of shared services is discussed below. • Finally, corporate specialists are often responsible for corporate procurement. The Chief Marketing Officer, for example, may determine which advertising agency the business employs, or the HR Director may secure the services of a particular business school for leadership development. Business unit functional specialists Business unit specialists also have a difficult balancing act to maintain in their role. In particular, they are responsible for aligning the specific needs of their business unit with the overall policy and strategy of the corporate entity. The HR Director of a business unit or subsidiary must therefore balance the needs of his/her organisation with the talent management strategy of the parent organisation. The extent to which business units are involved in corporate strategy and policy formulation, and the degree of cooperation between the individuals concerned, determine the degree of alignment between the two entities. Shared services Shared services are generally stand-alone operations that manage transactional activities in areas as diverse as finance, 94

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HR and IT, amongst others. Such activities are generally facilitated through the use of technology and, unlike professional work, such services are largely ‘information and administrative factories’. They are generally centralised and are accessible through help desks, call centres and other forms of remote technology. The introduction of shared services poses a considerable challenge to the design of traditional organisations. While the technology, structuring and establishment of the facility in themselves present challenges, the biggest challenge is to impact on the culture of the organisation and the behaviour of its customers. Whereas previously it was easy to walk down the corridor and speak to the HR, finance or IT support staff, this now has to be done remotely. Remote access requires a significant shift in the mental models and behaviour of managers, employees, and those who remain in professional roles at business unit level. HR is a good example. When HR-shared service facilities are created, it is accepted that the system, technology and people need to be efficient and that they need to deliver on the relevant SLAs. For many, the shift in such a facility is aimed at driving efficiencies and making effective use of metrics. Hence, the culture is indeed customer focused, but is also more like that of a factory, than the traditional HR role would imply. Another major shift is needed for those ‘retained’ HR professionals or business partners and specialists, as they are generally termed. They and their clients have to reshape their behaviour and expectations, so that they do not become bogged down in transactional activities – often a comfort zone for them. Finally, customers of the system (i.e. employees and managers) need to be trained and motivated to ‘self-manage’ their 95

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transactional activities, generally online or via a call centre. For ‘traditional managers’ this presents a challenge. In some organisations, the process has enormous ramifications. As mentioned earlier, Unilever outsourced a number of these functions to Accenture, which required several centres to take on a project of this size.3 Thus, the new roles of shared services, as well as all others in the system, need to be carefully and comprehensively defined for such an organisational design to work effectively. In more advanced and significantly integrated organisations, high-level services and expertise are incorporated into the shared services facility, allowing for the optimal deployment of scarce skills to where they are needed most. Outsourced partners Outsourced partners are key players in the design of an organisation and have specific roles. The outsourcing philosophy of an organisation is fundamental to the organisational design. Some organisations are almost virtual in their design, while others follow the approach that they should control every aspect of the business. Most organisations are hybrids. For the organisational system in its totality to be effective, it is essential that all players are effective. The system as a whole is only as strong as its weakest link. There are no standard answers to whether a particular activity or work should be outsourced. The principles that a company uses as criteria to determine what should be outsourced, need to be determined as part of the organising principles of the organisation as a whole. 96

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What is important is the management of whatever is outsourced. This is where perfectly good business cases for outsourcing are not successful due to poor implementation. A critical skill for such arrangements is the management of partnerships. An outsourced function is really an extension of the organisation, falling just outside of its day-to-day control. Strong leadership within both parties is required to manage the relationship, which should take on the characteristics of a partnership, rather than a mechanistic application of a contract. It is a difficult relationship to manage, with the outsourcing organisation often adopting a dictatorial rather than a partnership approach. The roles of the CEO and COO When designing an organisation, the role of the CEO becomes a central issue, as it influences the roles of all other executives on an exco. In May 2009, A.G. Lafley published an article in the Harvard Business Review in which he shared his views on where CEOs should focus, regardless of where an organisation is in the business cycle.5 Lafley’s fundamental premise is that the CEO has a fundamental role which only s/he can perform, namely to link the external world with the internal organisation. The author identifies four tasks that CEOs need to perform, in order to achieve that goal: • Define the meaningful outside: this has to do with developing a deep understanding of external and internal stakeholders. In particular, not only the customer but also other stakeholders need to be identified and the CEO needs to ensure that sound partnerships are created, to the benefit of all parties. This ensures an understanding of 97

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the expectations of important stakeholders, and of what needs to be delivered. • Decide what business you are in: this task is about identifying the competitive spaces in which you will play to win. It is also about identifying those spaces the organisation will not be in. This is often a difficult task, since different businesses have strong interests at executive levels. It is really only the CEO who is able to view the playing fields from a non-partisan perspective. • Balance the present with the future: this involves identifying and balancing both short- and long-term goals for the organisation. In P&G, the CEO was involved in leadership development and career planning, as these factors were perceived to have a major impact on the company’s longterm future. • Shape values and standards: if a company is to win, its values need to be connected to the meaningful outside, and they need to be relevant for both the present and the future. In my experience there is often tension between pressures to fulfil the role of the external face of the organisation, and having to manage the operations of the business. I take the view that the CEO has to be the face of the organisation externally, and that s/he needs to spend time interacting with customers and other important stakeholders. The internal focus needs to be on strategy and organisational design, as well as on the culture and values which shape the organisation’s behaviour and the management of executive performance. This leadership role can only be performed by the CEO. However, day-to-day operations should not be the primary focus of a CEO. In my experience, that is where the value of a COO lies. 98

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The COO is generally responsible for managing operations; the CEO for creating organisational balances. CEOs normally have the functional leaders of Finance, Marketing and HR reporting to them, and they have to balance the strategic policies and strategies of those functions with the operational needs of the business, which is usually represented by a COO. This helps to optimise short- and long-term strategies, while facilitating sustainability.

Conclusion Fulfilling the executive role of organisational design is not easy. While the ‘hard’ issues of structure and processes are in themselves challenging, it is the largely intangible issues which determine whether a structure or process will work, and whether the organisation is competitive on a sustainable basis. In most cases, the markets and the environment in which a sector does business are similar; it is the organisational design, in its broadest sense, that will differentiate and determine the effectiveness of each player in the competitive space. Frequently, what keeps The challenge lies in creating CEOs and other executives the chemistry that results in the awake at night are the whole being greater and more decisions that need to be effective than the sum of the made to ensure that the parts. right people are positioned and configured to implement strategy within the changing landscape of the business environment, and that they have the agility to continually reconfigure the organisation in response to rapid change. The challenge lies in creating the chemistry that results in the whole being greater and more effective than the sum of the parts. 99

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This is the significance of organisational design and it is, along with strategy formulation, an essential competence of a successful executive. The process of reconfiguring organisations is outlined in a later chapter.

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Chapter 5 THE ART OF STRATEGY – DEALING WITH THE INTANGIBLES Introduction The business sections of bookshops are filled with books on strategy, and all business journals deal with aspects of strategy on a regular basis. Strategy has preoccupied leaders since Sun Tzu wrote his treatise The art of war in 2000 BC. Equally, there are many schools on the subject, with widely divergent perspectives. These include Porter’s Five forces model, Prahalad and Hamel’s Core competency approach, Harvard’s Resource-based methodology, and Scenario planning, to name a few. All have their place and, if selected appropriately, can provide a useful guide to organisational strategy development. However, no matter how rigorous or inclusive a strategic process or how much expertise a facilitator brings to the process, wise executives know that strategic thinking, strategy formulation and strategy implementation are not purely rational processes. Yet little seems to have been written on the many intangible (generally human) factors that so often derail even the most logical, well-conceived process. This chapter aims to explore some of these intangible factors, and their impact on strategy formulation and implementation. First, the aim is to identify certain assumptions and processes that underpin strategy. Thereafter several intangible obstacles to strategy will be explored, after which guidelines will be provided to help CEOs mitigate against these factors. 101

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Finally, it must be emphasised that sound strategy without implementation is of little value. Implementation depends largely on the design of the organisation to give effect to strategy. Although seldom recognised, strategy and organisational design are generally two sides of the same coin, and both are fundamentally the responsibility of the CEO. The chapter on organisational design is an extension of this chapter.

Some processes and assumptions In their simplest (thereby most useful) form, most strategy processes include the following generic steps: • Understand what is happening: this is generally known as environmental scanning, where changes in the environment of a business are analysed and their relevance to Leaders’ world view or mental strategy is evaluated. It models create the filters through is at this point that one which they determine whether or of the most pervasive not issues in the environment are obstacles to effective relevant. strategy frequently intervenes, namely the world view of an organisation’s leadership. Leaders’ world view or mental models create the filters through which they determine whether or not issues in the environment are relevant. By rejecting as superfluous new information that will impact the business, leaders often do not see a major threat or opportunity at the edge of the radar screen. This is one of the reasons why many large Fortune 500 companies either no longer exist or have been taken over by more astute organisations. The American automotive industry is a very good example of where assumptions about US consumer behaviour were based on traditional 102

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assumptions which turned out to be erroneous, and as a result offered the more cognitively agile Japanese and other automotive firms a great opportunity.

The other obstacle to understanding what is happening around an organisation is the inability to detect weak signals and to connect the dots in respect of events in the economy or in society. Few economists or executives recognised the multiple causes that, combined, contributed to the recent financial crisis. Yet, in hindsight the signs were all there.



The same psychological phenomena occur within organisations in the context of strategy. The mental models and assumptions that executives bring to the process filter out vital information which can have a profound impact on strategy decisions.

• Understand possible futures: in many companies the assumption is made that extrapolating the past provides a sound basis for predicting and understanding the future. Sustainable organisations recognise that the future is unpredictable – the greater the time horizon, the greater the uncertainty.

Many organisations, however, have to make decisions now regarding the long term (e.g. resources industries). With the release of the i-pad and related gadgets, paper producers have had to consider the impact of such technology on the need for paper over a 10–20-year horizon.



It is here that scenario thinking becomes useful, as it helps leaders to consider different possible futures, and to envisage the kind of organisations that will be necessary for any one scenario that may emerge. This enables agile organisations to respond to change more rapidly. 103

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• Determine who you are and who you want to be: this part of strategy is concerned with defining the mission (what business you are in), the vision (what business you want to be in) and often the values (how the organisation behaves).

Obstacles that are frequently encountered here include the broadness of the mission, the insipidness of the vision and the ‘motherhood’ statements of values. In my experience in facilitating discussion on these issues, there is often a complete lack of meaningful definition to provide stakeholders with a clear understanding of the focus of the business and how it differentiates itself from its competitors. As a result, the strategy that emerges is usually equally uninspiring.



This traditional approach to defining organisational parameters is acceptable in a low-change environment, but in the modern economy this applies to very few organisations.

• Determine the playing fields: this phase of a strategy process should feed the mission, vision and values. It is about deciding what business the organisation is in and what business it is not in (i.e. products and services). It is about customer segmentation and about deciding where the organisation wishes to position itself. Finally, it is about determining the geographical footprint.

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One of the key obstacles during this phase is emotional attachment to what has been the scope of the business, as well as concerns about venturing into new territory. Such stagnation is also driven by mental models and preconceived ideas about what can and cannot work.



A good example is the banking industry which, for many years, was unwilling to find innovative solutions to enable

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the ‘unbanked’ to access banking products. Since then, organisations with different mindsets have entered that market and thrived. A particular example of new strategy based on new management with new mindsets, is the shift within one of the major banks, from a focus on the financial ‘elite’ to the mass market. • Set goals and targets, and manage performance: this is an area in which most executives and managers are comfortable. It largely consists of the implementation phase of strategy.

Although this is an essential phase, things tend to go wrong in the communication of strategy and the monitoring of performance.



Simply sending out a brief about business strategy is not sufficient to enable people at all levels to engage with the strategy, nor does it help them to understand what it means for them, or indicate their direct contribution to the strategy. People at all levels need to feel they have a role to play in implementing the strategy, and they also need feedback on the progress that has been made.



Problems occur in the monitoring of performance when the processes, normally in the form of reports and progress meetings, become so focused on the operational targets that the strategy behind them is neglected or ignored. Many leaders complain that once the strategy is set they never again have an opportunity to evaluate the ‘big picture’, or to fine-tune strategy where things have changed. The focus is on quarterly results and not the thinking behind the strategy. Reports and meetings become sterile when there is no opportunity to engage with key issues or the implications of strategy.

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A useful approach to implementing strategy is through the use of broad project or action learning teams that also have a learning goal and comprise high-potential future leaders. This involves managers at many levels engaging with the strategy and contributing to its implementation. At the appropriate point, project teams ensure that the strategy becomes part of the operations of the business.



The above problems occur at each phase of a typical strategy process. In most cases these obstacles occur not because of problems with the rational process and strategic decision making, but rather as a result of the less tangible, yet equally important, context in which strategy is set.

There are, in addition, a number of assumptions about strategy that will influence the effectiveness of strategic thinking and the choices a firm makes. • Like the Greek god, Janus, strategy requires the ability to look forward and backward simultaneously. The history of the organisation plays a huge role in what it has learnt from the past and how it will view and respond to the future. There is continued tension between organisational memory and its future vision. Prahalad and Hamel state that “great organisations die when they are unable to let go of the past or create the future”. The role of the CEO is to harness the experience of the organisation, yet also to challenge the assumptions that its history embeds in it. • Another tension is the balance between an internal and an external focus. On the one hand, strategy is externally focused in terms of positioning the organisation Strategy requires the ability in its environment; on the to look forward and backward other the extent to which it is simultaneously. able to do that, is dependent 106

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on the internal capabilities and strategies of the business. In my experience, the two should be iterative conversations, but in reality they frequently result in confusion in a variety of ways. Ideally, the business strategy is aimed at externally positioning the organisation in a market. What is then required are strategies to ensure that the organisation is designed and resourced to achieve the strategy. Organisational design, including total resourcing, is the other side of the strategy coin. The two should be inseparable. • Strategy does not occur in a vacuum. It is a snapshot in time of a series of rolling conversations that culminate in key decisions at the annual strategy workshop. This is because many of the strategic issues that an organisation needs to deal with are not initially clear – they begin to appear at the edge of the radar screen before they can be defined and their impact assessed. The opportunity for, and quality of, ongoing strategic conversations is an essential component of strategic thinking which leads to strategy decisions. Agile, sustainable organisations recognise this and hence the strategy ‘bosberaad’ is a snapshot in time of processes which unfold on an ongoing basis. • Strategy has many functions and speaks to many stakeholders. It provides direction to managers and employees, but it also offers insight in terms of which external stakeholders, often with competing interests, evaluate the organisation (these include investors, customers, suppliers, unions, communities, competitors, the press and many others). Hence, a strategy document needs to speak to a variety of influential stakeholders, and they need to see their interests accommodated. The days of a strategy being hidden in the drawers of the CEO and CFO’s desks are long gone. In public entities, particularly, strategies need to be open for public scrutiny. 107

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• Experience has shown that strategy formulation and strategic thinking are both an art and a science. They are both rational and intuitive. It is the wisdom to manage the balances and tensions implicit in strategy that distinguishes an astute CEO from the rest. • Internally, the strategy-setting process is often as much a political process as it is rational. Strategy determines the availability of resources to managers in the organisation and this, in turn, determines status and influence. By nature, people perceive strategy with their functional or divisional hats on, and they usually find ways to justify additional resources for their area of responsibility. In this situation the (very difficult) role of the CEO is to be impartial as regards the effects of strategy on departments and to optimise the allocation of resources rationally and for the good of the greater whole, without fear or favour. This again illustrates the view that strategy does not stop once decisions have been made, but that it must be followed up by effective, high-level organisational design. • Another common obstacle to effective strategy is the often profound effect of the ‘elephant in the room’ or ‘ghost voices’. These are issues that are sacrosanct and cannot be challenged or even publicly discussed. Everyone is, however, aware of them and they strongly influence behaviour. All too frequently they are determined by the CEO or other powerful executives, and no-one has the courage to risk their careers by putting the issues on the table. Often they are related to ‘softer’ issues, A common obstacle to strategy is such as transformation the often profound effect of ‘the and leadership, which elephant in the room’ or ‘ghost have strong emotional voices’. connotations for one or more executive. 108

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• A major threat to rational strategy is the executive ego. Particularly in times of high growth, executive egos can propel organisations on a trajectory which they cannot hope to achieve and which filters out any consideration of obstacles to growth. During these times contrary voices tend to have very limited careers, and everyone believes what they want to believe (or what they think is expedient to believe). This is known elsewhere as ‘hubris’ or pride which comes before the fall. • The dangers of ‘group think’ are well documented. However, many organisations still suffer from this problem and they are unable (or unwilling) to accommodate diversity – especially at management levels. All of the above are relatively intangible factors which influence the strategy process in organisations. As such, CEOs need to recognise that strategy is not a purely rational process.

Guidelines for CEOs In light of the above, what should CEOs do to ensure that the strategy process is rigorous in respect of both tangible and intangible factors? • Recognise your own assumptions and those of your executive team: everyone sees the world from a particular perspective. What is important is to recognise possible blinkers and to consciously find people to challenge your assumptions – particularly as regards strategy. Leading companies frequently arrange for external speakers to work with the executive team – speakers who are counter culture and challenge the way people think. • Make sure that strategy is, in fact, a rolling process and not an annual ‘bosberaad’: ensure that the big business ‘problems’ 109

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are openly discussed and explored throughout the year, and that candid conversations create an understanding of the relevant issues. • Recognise the political nature of strategy; avoid being naive: be able and prepared to draw the line when competition for resources – by parts of the organisation – damages the value of the healthy, optimal whole. • Involve as many people as possible in the formulation and, particularly, the implementation of strategy: ensure that strategy is the centre of gravity for all organisational projects and change initiatives. • Hire a good consultant/advisor: it is often difficult for a CEO to find someone who is impartial, to discuss sensitive issues. Someone who is able to see the ‘big’ picture and provide honest feedback regarding the process is an invaluable asset. Such a person needs to have credibility with the executive and also needs to have some knowledge of the organisation and its dynamics. However, such an individual needs to have an external perspective and personal wisdom, yet should not have vested interests in what happens in the company.

Conclusion This chapter set out to demonstrate that strategy formulation and implementation are not purely rational processes, and that many intangible factors can and will influence the outcome of the supposedly ‘rational’ component of the process. In the final analysis, the CEO of an organisation is responsible for crafting and implementing strategy, just as s/he is responsible for designing the organisation in its totality. 110

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In the Harvard Business Review of May 2009, A.G. Lafley, CEO of Proctor & Gamble, states that ”the CEO has a very specific job that only he or she can do: link the external world with the internal organisation”. That is largely what strategy and organisational design are all about. Strategy is as much an art as it is a science, and it is not for the faint-hearted.

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Section 3 INTRODUCTION TO LEADERSHIP Implementing strategy and the changes that go with it requires extraordinary leadership. Many good strategies fail because the leadership of the organisation remain relatively passive, and assume that strategy will be operationalised. Chapter 6 addresses the issue and importance of transformational leadership and what leaders do to make a difference. Chapter 7 provides processes for building leaders in organisations that are ready to deal with the challenges of the future. Finally, Chapter 8 describes what leading organisations do to make leadership part of their organisational DNA. Leaders provide the energy that an organisation needs to be effective, and good leaders are an intangible asset that increases the market value of an organisation and ensures both short-term financial results and sustainability over time.

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Chapter 6 TRANSFORMATIONAL LEADERSHIP Introduction Most people in leadership roles in most reasonably successful organisations meet certain leadership requirements. They set the direction for their team, they determine goals and manage performance, they provide development and coaching for their staff, and they reward or sanction behaviour. Transformational leadership is about making a difference.

These are all necessary requirements for someone in a leadership position.

In my view this is ‘maintenance’ leadership; it is not transformational, no matter how well the tasks are performed. Transformational leadership is different. It is about making a difference. Think of some of the high-profile corporate leaders who are known for having transformed their organisations. They are not remembered for setting goals, managing performance or developing subordinates, despite doing all these things. They are remembered for those few things they did that made a difference. They will leave a legacy for which people will remember them. They are truly transformational leaders. When an organisation or part of an organisation needs to reinvent itself due to a change in strategy or because it has ‘fallen asleep’, transformational leadership is essential. It is by 115

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definition about leading change. Since the world is changing so rapidly, transformational leadership needs to become part of the DNA of most organisations. In clarifying the concept of transformational leadership, certain key concepts need to be considered. • Transformational leadership requires high levels of leadership energy. This is emotional and often spiritual energy (see below). • Accordingly, transformational leaders have to make a choice. Are they prepared for the challenges and personal sacrifices that are so frequently associated with transformational leadership? • Do they initiate transformation for the right reason, namely to meet a need? Or are they in it for an ego boost? • Transformational leadership can be a lonely process, although this is not necessarily so. The most difficult form of transformational leadership occurs when the leader needs to challenge his/her loyal followers. F.W. de Klerk is a good example of a leader who was forced to do so, challenging not only his followers, but also the deeply held emotional beliefs of his constituents. • Transformational leaders need to be able to view the world through different lenses. They need cognitive agility and the ability to deal with ambiguity. This involves seeing the big picture as well as the detail. • Finally, transformational leaders represent a cause.

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Transformational leaders The leadership cause Although volumes have been written about the qualities and characteristics of leaders, less has been said about the causes that leaders represent. At a global socio-political level, Nelson Mandela, Martin Luther King, Gandhi and even Osama bin Laden represent causes that were emotive to their followers at a specific point in history. It is the causes they represented as much as the mobilisation of their followers for which they will be remembered. In business, Bill Gates, Jack Welsh, Richard Branson, Steve Jobs and others are remembered for what they stood for at a specific point in time. They symbolised a cause which was transformational and was relevant to their respective organisations at that time in history. At a micro level, the supervisor in a factory, who transforms the productivity of his/her team through personal leadership, or the sales manager who improves sales by driving customer satisfaction, is transformational. Such leaders will be remembered, and no doubt promoted, on the basis of their willingness and their ability to transform the behaviour of their teams – not for following the day-to-day HR processes of the organisation. One of the characteristics of a cause is that it needs to be relevant at a given point in time. When one goal has been achieved, the successful leader needs to move on to a new cause. There is nothing more tragic or destructive than a leader who cannot let go of a redundant cause. Revolutionaries who cannot recognise the need to move on are highly destructive and often become tragic figures. 117

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The brilliance of Nelson Mandela is that he was able to change his cause from the ‘struggle’ to one of reconciliation, when it was appropriate and when history and the context of his leadership changed. In the corporate environment, transformational leaders who drive change understand that once their mission is complete it is probably best for them to move on to new challenges which suit their particular style, be it within the organisation or elsewhere. Once Sol Kerzner has completed a new dream project, it would be counterproductive for him to hang around and continue to incrementally improve performance. He needs to be chasing and driving the next dream. Transformational leadership is not linear and incremental. It is In the corporate world, episodic. leaders who have the ability to recognise key issues on the edge of the radar screen, position themselves to be the ‘face’ of that issue and then shape the way the organisation deals with it, are the leaders who people remember and who make a difference. This is usually also reflected in their careers. Hence, for transformational leaders it is necessary to adopt one or more causes for which they will be remembered and where they will make a difference – at whatever level in the organisation they find themselves. Transformational leadership is not linear and incremental. It is episodic. Transformational leaders are remembered for the few impactful things they achieved, rather than for their ongoing activities. It is these achievements in the form of events that define them and their underlying values. In an analysis of 14 of South Africa’s most successful CEOs, David Gleason and Stella Nkomo relate those events for which 118

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they will be remembered as transformational leaders. In almost all cases those leaders are remembered for a series of events that shaped their careers and created their legacies.1 In addition to specific ‘causes’, however, transformational leaders need to know what they stand for. This requires considerable introspection, objectivity and the willingness to make personal sacrifices. They often need to draw a line in the sand and, if necessary, should be prepared to put their jobs at risk, in order to uphold what they stand for. Furthermore, transformational leaders ensure that those around them know what they stand for, and what is (or is not) acceptable to them. This is, in many ways, what characterises the personal brand of the transformational leader. Personal branding I often ask delegates attending courses how many in the group have a brand. Most now recognise that they each have a brand – for better or for worse. Few, however, actively manage their brand. Transformational leaders generally have a strong, well-known brand. Most, to a greater or lesser degree, manage or at least consciously influence their brand. It communicates who they are and what they stand for, and it is an important factor in determining the impact they have on the people around them, and on their organisation. An entire industry has been developed around personal branding. The following are some of the key elements of a well-crafted personal branding strategy:

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• Consciously communicate, through different means and at every possible opportunity, what you stand for. In many respects this speaks to who you are, which is just as important as what you do. Like any branding, who you are needs to be communicated in a way that is consistent in all circumstances – especially under pressure. • Build networks inside and outside your organisation. Connectivity is central to the modern business environment, as it opens doors and helps you get things done. We all know people we are more likely to turn to, to help connect us with people who can help us to achieve our goals. Knowing the right person to get things done in, say, in the IT department or in a supply chain, is an essential tool for transformational leaders, not to mention executive PAs who act as gatekeepers to important people. • Your clothing and other symbols tell people about who you are. We all have a tendency to categorise and stereotype people. It is these symbols that create the first and, often most important, impressions. Someone who is smartly dressed in a suit or designer casual clothes and drives a luxury car is much more likely to be taken seriously in the corporate world than someone who dresses Good packaging without anything down. People who make useful inside does not create a an impact dress the part. sustainable brand. It is also true Supporting symbols that many people who have much such as a specific type to contribute are not impactful of car or housing create because no one pays them any a brand that tells people attention. who you are. • In most ‘communities’ – be they businesses, trade unions, political affiliations, different professions – there is a ‘uniform’ which speaks to the person’s identity 120

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and influences individual credibility amongst his/her constituents.

Of course, this does not mean that symbols confirm a person’s true persona. Good packaging without anything useful inside does not create a sustainable brand. However, it is also true that many people who have much to contribute are not impactful because no one pays them any attention, due to their plain ‘wrapping’.



Many transformational leaders consciously or unconsciously have something memorable about their dress, or sport other recognisable symbols. Nelson Mandela’s shirts are iconic; has anyone seen Clem Sunter with his shirt tails tucked in? Many academics (especially in the US) who influence business leaders dress in spotted bowties and braces, and tend to use bicycles as their preferred mode of transport.



Whatever someone’s choice, symbols such as dress and other public representations of one’s persona or identity are important and need to be managed. For most people, adopting a counter-role image or culture has serious risks attached.

• Transformational leaders need to build a variety of skills and abilities. First, they need to be experts in their field of endeavour. However, even more important is their ability to understand process, as well as the content of their interactions. This is referred to as meta-cognition. Good negotiators have this highly developed skill: not only do they know the substantive issues being discussed (such as wage packages or the financial aspects of a deal), they also read the non-verbal signals and the interactive processes taking place, and manage their own strategic and tactical behaviour accordingly. Transformational leaders 121

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are generally very astute when it comes to interpersonal processes and behaviours. They plan their own behaviour, provide considered opinions and avoid ‘shooting from the hip’. Manage the signals One of the most telling moments in the film Invictus was when Madiba went to the Springboks while they were practising, despite his many other pressing engagements. He was a master at managing the signals through, amongst other things, meeting with diverse stakeholders, including the wife of the former apartheid stalwart, John Vorster, in addition to his own constituents. Effective transformational leaders manage their signals. They model, in many different ways, the behaviour needed to honour their cause and they hence achieve consistency in what they espouse, in their brand and through their actions. Despite this, many get it wrong. Large executive bonuses, when organisations are cutting costs, performing badly or even retrenching, is a common example of inappropriate signals in modern society. It causes significant resentment and a breakdown of trust at a global level. There are many examples where what is said and what is done, send two different signals. Actions are always more powerful, believable and persuasive than words. By definition, transformational leaders guide their organisations through change and transformation. During these times, in particular, organisations are like the proverbial sensitive tooth – the slightest change in temperature is accentuated and painful. In organisations, this sensitivity is 122

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attuned to the actions and words of leaders. Whatever leaders do or say and whatever they do not say and do send loud messages to the organisation, and the impact of these signals is accentuated in times of uncertainty. Transformational leaders are able to carefully and consciously manage the signals they send to the organisation, through what they do and say as well as what they do not do or say. These signals are relevant to the context at the time, yet they also are constantly consistent with the values of the leader and what s/he stands for. Portfolio leadership The traditional language of leaders includes references to ‘my team’ or ‘my organisation’. In the past, managers viewed themselves at the apex of their team or organisation, with their primary loyalty and influence being situated within that space. That, by definition, created boundaries between teams and organisations, each with their own identities. In a modern, networked environment, that scenario is less relevant. Rather, using the image of a wheel, a leader is the spoke in his/her network of stakeholders. Transformational leaders influence, through their leadership behaviours, many diverse stakeholders, many of whom they have no authority over. This scenario can be represented as follows:

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Subordinates Boss

In

Colleagues

l na

Pe r

r te

Church

so na

l

Community

Leader Family

Suppliers

External Profession

Customers Industry

Figure 11: The sphere of influence of transformational leaders

Stakeholders within the organisation include subordinates (own team), colleagues and the boss. A leader obviously needs to influence his/her team in terms of direction, sanction and reward, development and motivation. However, a leader equally has a duty to influence other members of the organisation through information flow, skills transfer or coaching, and by challenging the team’s thinking. Furthermore, good leaders tell their boss what they (both the leader and the boss) should be doing in the areas of their expertise and responsibility, thereby contributing to organisational goals. Leaders do not wait to be told. This proactive approach to leadership is relevant at any level in the organisation, and is often what distinguishes potential high-flyers from the rest. External stakeholders include suppliers, customers, the industry and the profession. 124

Getting this portfolio leadership balance right can be very stressful.

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Gone are the days of treating suppliers as the enemy, in order to get the best deal from them. The focus has shifted to building partnerships with strategic suppliers. Leading organisations recognise that they have a duty whereby it is in their interests to build the capacity of suppliers so that all parties are successful. Leaders often create a culture in their organisations that contributes to finding solutions to customers’ needs, beyond the traditional supplier role. In many cases, customers do not know what is possible. This speaks to a solutions-focused approach, rather than a mere sales-oriented approach. Leaders who are transformational often have an impact not only at their organisational level, but also at industry or professional levels. They occupy leadership positions in both types of organisation, and hence their impact is far greater than the local level. Another feature is the aspect of ‘giving back’ to their profession or industry: many leave a legacy with academic institutions such as business schools or specialist faculties at universities or colleges. Finally, successful transformational leaders are able to provide leadership in their family, church or community context. Getting this ‘portfolio’ leadership balance right is extremely difficult and can be very stressful. There are many examples of leaders who have been pulled into industry transformation and leadership, and ended up neglecting their own organisation’s needs. Similarly, leaders can become so absorbed in organisational challenges that they neglect their family and suffer the consequences of divorce. Seeing leadership responsibilities as a portfolio of responsibilities and getting the balance right is difficult and personally challenging. 125

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The role of power The role of power is not often associated with transformational leaders; it is more often associated with autocratic leaders. My experience is that transformational leadership is not possible without taking into account the role of power. Transformational leaders have the ability to use power in a variety of ways that extend well beyond ‘position power’. They tend to be very powerful despite having little or no positional power. This should not be taken to mean that transformational leaders do not use power: they do so in a highly sophisticated way. Jeffrey Pfeffer of Stanford Business School wrote a very useful article in the Harvard Business Review on the role and exercise of power.2 The essence of Pfeffer’s argument is:

“Any new strategy worth implementing has some controversy surrounding it and someone with a counter agenda fighting it. When push comes to shove, you need more than logic to carry the day. You need power.”

Very briefly, Pfeffer identifies a number of issues which come into play in the exercise of power: • Mete out resources: when you control important resources such as information or money, you have power. • Shape behaviour through rewards and punishments: people who wield influence will make it clear that you will receive

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rewards if you help them, but will encounter problems if you don’t. • Advance on multiple fronts: promote your cause in a variety of places. • Make the first move: gain the advantage before your opponents can mobilise resistance. • Co-opt antagonists: find win-win opportunities to counteract the agendas of people who are potential threats. • Remove rivals – nicely, if possible: those with influence who oppose your cause need to be neutralised in the most effective way possible. • Don’t draw unnecessary fire: choose your battles strategically and ensure that they help you achieve your goal. • Use the personal touch: build personal relations with important people, including executive PAs, and avoid damaging relations for emotional or ego reasons. This is where sophistication and diplomacy are essential to transformational leadership. • Persist: persistence wears down the opposition. • Make important relationships work, no matter what: find ways to build relationships with important people, even if they hold contrary views or positions. • Make the vision compelling: it is easier to exercise power when you are aligned with a compelling, socially valuable objective.

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The use of power, when a leader does not have position power or authority, is a critical capability of transformational leaders. This does not mean that position power should not be used. Many successful transformational leaders are, however, highly sophisticated in their application of power in promoting their cause.

Conclusion Being a leader in the modern world is not easy, and can take a significant toll on that person’s energy and emotions. Being a transformational leader is even more demanding and requires choices to be made – some of which will be personal and challenging. However, the rewards of such endeavours include a track record of having ‘made a difference’ where needed. One of the questions executives need to ask is whether their organisations will accommodate transformational leaders. Almost by definition, a transformational leader is a maverick who challenges the status quo. In many organisations the organisational culture is such that the ‘immune system’ forces out mavericks and those who want to bring about change and seek to challenge people’s comfort zones. For transformational leaders to thrive and make the desired impact, executives need to create conditions where they are valued. Young leaders in particular need the support and guidance of experienced executives. They need to be given the space to challenge conformity and the guidance to bring about change in a more sophisticated and effective manner. Executives who are themselves transformative need to nurture the next generation of transformational leaders. 128

Chapter 7 BUILDING TOMORROW’S LEADERS Introduction For decades the question has been asked: Are leaders born or are they made? The truth is probably both. Many leaders demonstrate leadership from an early age and go on to grow their natural abilities into corporate or other leadership roles. Similarly, some people do not demonstrate leadership abilities and are not comfortable in such roles. Alternatively, their leadership is expressed in other ways such as through their field of endeavour (e.g. science or writing). They may not be executives, but they can provide leadership in their field and have a powerful impact on the world and their chosen field of speciality. The assumption here is that One of the roles of executives is people with a significant propensity for executive to grow the leaders of tomorrow for their organisations. leadership can be identified and, with the necessary support and development, can become even better leaders. It is also assumed that one of the roles of executives is to grow the leaders of tomorrow for their organisations. Since 2001, Hewitt Associates, in conjunction with partners RBL and Fortune, have identified the Top companies for leaders1 on

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a biannual basis. The last study, undertaken in 2009, identified the top two companies as IBM and P&G, followed by many well-known global businesses. The report identified the following differentiators, amongst others, in the 2009 research: • They cast a business lens on leadership – business strategy = leadership strategy; • Leaders are actively involved in building better leaders – significant investment of personal time and attention from the top; • Leaders transfer wisdom, not just knowledge; • Talent development is seen as a mission-critical business process; • Development is accelerated, in measurable terms; • They banish ‘nice-to-have’ programmes and practices, and focus on the few initiatives that have impact; • They think in rhythms, not initiatives; • Leadership is a mindset – a way of behaving – and it is ingrained in everything the organisation does.

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“Seventy two percent of the Global Top Companies rate the ability to effectively develop other leaders as one of the top five leadership skills and experiences most critical to the future success of their firm (versus 39% of all other companies).”2

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IBM has put considerable effort into understanding and implementing leadership within the context of a globally integrated enterprise (GIE).3 P&G is well known for its long history of leadership excellence, which is considered a business imperative. One of the characteristics of sustainable organisations is their ability to build their own leadership pipeline, and key leadership appointments are generally made from within, after careful and deliberate development. Such organisations are able to balance internal leadership development, along with the stability and strong culture that this fosters, with the ability to respond rapidly to changes in the environment. The following is a process for ensuring an organisation has the future leaders it requires: Identify future challenges

Provide informal development

Identify future leaders Governance

Provide formal development

Create the leadership pipeline

Figure 12: The process of developing future leaders

To ensure that the organisation has the leaders it requires to claim the future, it needs to be specific about the challenges it is likely to face in the future.

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Identifying future challenges Leaders who were able to solve yesterday’s problems are not necessarily the leaders who will solve tomorrow’s challenges. As the strategy of an organisation changes, so the demands of leadership often change. The rational, technocratic Leaders who were able to solve leader, who grew an yesterday’s problems are not organisation successfully necessarily the leaders who will in the past, may not solve tomorrow’s challenges. be the person to lead transformation. Similarly, the leader who successfully managed an organisation within a single geography may not be able to deal with the complexity of regional or global expansion. Classically speaking, different stages of an organisation’s life cycle frequently require different leadership styles. Boards and CEOs need to understand what the future challenges will be in the long term, and must ensure that their leaders are suited to meet those challenges. This does not suggest that a change in leadership is needed whenever there is a change in strategy. There are times, however, when old leadership behaviour becomes an obstacle to strategy implementation and new leadership becomes necessary. In most enduring and successful organisations, existing leaders are developed to deal with new strategies and new environments, and they have the innate capability to adapt to new challenges. In the Bloomberg Business Week Best Companies for Leadership survey of 2010, a key trend was the shift in emphasis from the previous year’s focus on execution, to a 132

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focus on strategic thinking and sustainability. Following the financial crisis, the shift has been from short to long term, and the top 20 companies are more likely than others to find value in “being inclusive, socially responsible, and globally aware of their outlook”.4

Identifying future leaders This is a very contentious and politically sensitive issue in most organisations. It is particularly difficult when the future demands different styles of leadership and current leaders have to identify successors who are not mere clones of themselves. The willingness and the wisdom to do this are two vital abilities any successful executive must have. In many organisations, the key to identifying future leaders is a competency framework setting out the attributes and behaviours that will characterise such leaders. Most organisations have a leadership competency model which is often supported by values. When applied effectively, these competencies are used as a basis for assessing leadership competence and potential. One of the decisions an organisation needs to make is how to frame such a competency model. In some organisations, each position has a list of specific competencies which are defined in great detail. In my view this is a very reductionist approach to identifying future leaders, particularly when applied to senior positions.

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Most highly successful organisations have a reduced list of competencies – between seven and ten – which are considered essential to the success of the organisation in the future, and which reflect the leadership philosophy of the organisation. This is discussed in greater detail in the chapter: Institutionalising leadership. While competencies are clearly important in identifying future leaders, many other success factors need to be considered, which are often neglected during traditional HR selection processes. One of the most important factors is strategic fit, i.e. the extent to which the leader ‘fits’ the culture of the organisation. It is said that organisations hire on competence and fire on lack of cultural fit. Hence, many successful organisations spend considerable time ensuring that candidates for positions – especially leadership positions – are aligned with the organisational culture. Often leaders are hired or grown on the assumption that they will bring a counter-culture perspective. Transformation in South Africa is one frequently cited example of where this is deliberately done. It is also one of the reasons why such appointments frequently fail, at great cost to all concerned. The power which culture exerts on leadership success or failure cannot be over-emphasised. Executives who deliberately appoint leaders who are counter-culture need to ensure that they have significant support and are part of a well-managed change process. In identifying cultural fit, then, it is essential that leaders define the culture that the future leader needs to represent. Considerable time and introspection need to be devoted to any future culture which may be different from the existing one. 134

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Other factors that need to be considered include the willingness of leaders to relocate to meet company resourcing needs and to build exposure to different environments. Off-shore experience is becoming a prerequisite for leadership advancement in most global organisations. In this regard, the ability of the family to adapt to different environments is as important as the adaptability of the employee. It is also true that highly competent individuals can fail in a leadership role as a result of ‘derailers’. A derailer is a behaviour or characteristic that is unacceptable to the organisation, specifically when it manifests in a leadership role. Hence, as an extreme example, a highly competent person who continues to make unwelcome sexual advances or who cracks racial jokes will never be acceptable in a leadership role – not in most organisations, anyway. High levels of essential skills do not compensate for unacceptable derailer behaviour. Finally, while competencies are important, who the leader is and what s/he stands for plays a role in their potential success. Hence, a white male in South Africa would have great difficulty being taken seriously in a leadership position in which transformation and diversity are the primary Assessment of leadership strategic goals. It is also a potential is never a pure science. reality that in appointing leaders one needs to take account of who the ‘followers’ will be. It is vital to ensure that there is compatibility. Having established the success factors for identifying future leaders, how does an organisation assess leadership potential to ensure that development dollars are spent effectively and that appointments deliver the required results?

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The assessment of potential – especially leadership potential – is always difficult and is never a pure science. Like any other management decision, the more the information available, the greater the confidence one has in the quality of the decision. Hence, the assessment strategy requires access to as much information about individuals as possible. Sophisticated organisations apply a number of processes to assess an individual’s potential. If the results from each process provide consistent findings, people will have more confidence in the conclusions; if there are significant discrepancies it is necessary to collect more information. Each of the following processes contributes important information on an individual’s potential, yet on its own each assessment process has limitations. Track record A person’s track record is an important indicator of how s/he has performed in a particular role in a particular context. However, this type of assessment has its limitations. Success in one role is not necessarily a predictor of success in a different role. Typically, leaders who are operationally excellent when placed in role requiring strategic long-term thinking, revert to their comfort zone of operational management. Similarly, there are many examples of leaders who are successful in one organisation, and even at a specific period in time in the organisation, but are unable to perform in a different organisation or in a different era in the same organisation. Manager assessment One of the key roles of executives and boards is to assess the potential of leaders. Unfortunately, this is something many are not good at. 136

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First, many leaders find it uncomfortable to pass judgement on others, particularly when they have a good, long-standing relationship with them. Second, it is very difficult to be objective, especially in the face of significant differences in leadership style. Leaders tend to give more favourable evaluations of people who are similar to themselves. Finally there is the issue of politics, where a leader may feel threatened by another with greater potential, or where there have been clashes of interest, amongst other factors. To reiterate, the assessment of potential is as much a political process as a rational one, and it is good to bear in mind that leaders have agendas. Psychometric assessment There was a time when psychometric assessment, because it is norm based, was seen as biased and as having the potential of excluding people. This is no longer an issue and most leading companies make extensive use of this assessment method. However, in some organisations it is still a sensitive matter. Psychometric assessment generally involves an assessment of cognitive ability and personality, both of which are essential characteristics of effective leaders. Space here does not permit detailled descriptions of the various assessments. Suffice to say that most assessments are based on a psychological framework that enables one to estimate how effective a person will be in a particular context, when faced with particular challenges.

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Psychometric assessment is an important source of information regarding leadership potential at different levels. It is also an important development tool, in the sense that the person being assessed usually receives feedback which can provide self-insight and can form the basis of future coaching and career development. The great danger of psychometric assessment is that managers use it exclusively for decision making, thereby avoiding the need to take responsibility for their decisions. It should never be used as the sole predictor on which career and appointment decisions are made. Assessment centres Assessment centres offer very powerful tools with which to assess a person’s performance in an objective setting. Such centres replicate much of what happens during psychometric assessment. At the centres participants are presented with challenges, after which trained assessors evaluate the participants’ responses. Unlike psychometric assessment, however, such assessment centres are not norm based. Most assessment centres are very resource intensive, utilising a number of trained assessors to assess performance. The service they offer is therefore very expensive. Such centres can be seen as important developmental tools, as they provide useful information on performance in a relatively objective manner. 360 degree assessment The advantage of 360 degree assessment is that a number of different people (typically the boss, colleagues, subordinates and 138

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customers) are involved in providing assessment information on a specific individual. Hence, this form of assessment is much less open to individual bias than assessment which is done solely by a manager. This type of assessment does, however, provide information on how a person is perceived to have performed in a particular role in a particular context. The importance of effectively identifying the right leaders to deal with future challenges is an essential executive task, both in terms of achieving future strategy and deciding where to invest scarce training funds to get the best returns. Most importantly, knowing what potential exists in the organisation enables executives to manage risks associated with leadership gaps and succession. Hence, while an official organisational view of an individual’s leadership potential is essential, the strategic value lies in looking at the organisational pool of leadership talent available to take the organisation into the future.

Creating a leadership pipeline Creating a leadership pipeline is about ensuring that there is a pool of leadership talent available at various levels in the organisation – this, to ensure sustainability and to mitigate the risk associated with the resignation or retirement of key people with mission-critical skills, including leadership skills. It involves succession planning, nine-box grids, talent pools, and many other processes which are beyond the scope of this book. When the iconic Jack Welsh retired from GE the market was completely unaffected. It was known that three highly 139

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competent potential successors had been lined up, and when the appointment was announced, within three months the remaining two individuals were appointed to executive positions in other large organisations. Succession planning is one of the most important responsibilities of all executives. It provides the blueprint for the organisation’s future leadership not only Succession planning is one of the at executive level, but most important responsibilities of throughout the various all executives. levels of the organisation. Great organisations groom their leadership talent to meet the challenges of the future, and most provide leadership beyond their own needs. They have a leadership surplus, rather than a leadership deficit. This is not to say that all leadership positions need to be filled from within. The balance between internal and external appointments is determined by the context of the organisation, and may vary over time. Whatever the solution for a particular organisation, it should not be left to chance. Most leading organisations have structured processes for leadership succession and career development. At each level in the organisation they typically have appropriate assessment processes which provide information to both the organisation and the participant, on his/her suitability for the next level of leadership. They have customised development programmes to build the next level of capability, and they effectively manage transitions from one level to the next. Hence, there are elements of both formal, structured development experiences, as well as informal support from other leaders in the organisation. There is a constant interplay of providing challenges, assessing responses and giving feedback to facilitate learning. 140

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Leadership development Integrated leadership development Global steel company, ArcelorMittal, has an integrated strategy for leadership development. Known as the Global Executive Development Programme (GEDP), it integrates four key processes which are globally coordinated: • Performance management • Talent identification • Development • Succession management. It is based on five key Group competencies: • Change management • Decision making • Results orientation • Strategic thinking • Teamwork. Furthermore, high-potential talent is identified using three essential criteria: • Aspiration • Engagement • Ability. The ArcellorMittal University plays a major role in offering programmes aimed at different levels and a variety of different functional and business areas. Specifically, they have a Leadership and Management Academy, various Functional Academies and an increasingly important e-Academy. One of the key success factors has been the support of the Chairman and CEO, and the cooperation between the corporate leadership development team and a network of segment and business unit leadership development teams. This information was based on a case study article in5.

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Formal leadership development Leading organisations generally have structured development processes which meet the needs of both the organisation (in terms of dealing with strategy implementation) and the individual needs and career aspirations of a specific future leader. .

Leadership development strategy: Principles Most organisations have a leadership development strategy, which should be based on a few key principles: • Invest in the right people: recently, a client of mine, the CEO of a global pharmaceutical organisation, asked his HR team: “If I had a million rand, over and above the normal training budget, to invest in future leaders, who would they be?” This is a question that all executives should be asking. It emphasises the importance of effective assessment and the identification of those future leaders who will provide an exceptional return on investment. • Align development to business strategy: one of the key findings in research done by Duke Corporate Education in a survey on what will be different after the financial crisis, was that development dollars will be spent on a rifle-shot approach to development, focusing on a contribution to strategy, rather than a shotgun approach involving generic courses. • Align development to personal needs and career development: this refers to a focus on development which is customised to meet the needs of each individual. Again, it moves away from a shotgun approach. It reinforces the need for detailled information about a person’s strengths and weaknesses, based on effective assessment. 142

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• Involve executives personally: great leaders such as Jack Welsh spent considerable personal time (formally and informally) interacting with future leaders in various settings. In doing so he picked up on what they were thinking and also challenged their thinking at a strategic level. • Create stretch: research has shown that optimal learning occurs when individuals face adversity. While it is important not to set people up for failure, creating stretch in a variety of ways that challenges individuals and removes them from their comfort zone is a powerful element in development.6 • Work with individuals and teams: most development occurs within the context of a social group. In my experience it is as important to build effective teams (big or small) as it is to build individual capability. Team effectiveness is determined by the chemistry of the team, which may enhance performance or, in the case of toxic chemistry, could pose a major obstacle to performance. • Manage transitions: organisations such as Johnson & Johnson spend considerable time managing the transition of leaders from one level or role in the organisation to another. Different role levels require qualitatively different work; not simply doing something better than it was done before. It is essential that leaders moving up the corporate pipeline receive support and the necessary development to prepare them for their different roles, and that they manage the transition as quickly as possible.

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• The use of technology and generational differences: the use of technology has great potential to reduce costs. It also enables individuals to learn in their own time, on demand. This applies to everyone, but especially to younger generations who are technologically savvy. The financial crisis resulted in a renewed interest and investment in learning technology as a cost-effective method of training. Technology in itself, however, seldom compensates for classroom interaction, where thinking is challenged and learning occurs from the chemistry of interaction. Technology can nevertheless improve efficiency by enabling content to be accessed prior to group sessions. The above principles provide the underlying philosophy for leadership development. Any formal leadership development process needs to make use of a blend of learning methodologies. These can be incorporated into a specific programme or may be in the form of learning options available to learners and executives who are planning leadership development interventions. Leadership development strategy: Methodologies The following are some development methodologies used by organisations and their providers of formal programmes: Connectivity Technology has had a profound impact on learning – apart from traditional e-learning. Probably the greatest impact technology has had in the leadership development and learning space, is its facilitation of connectivity. Enabling connectivity within and outside the organisation is a great source of sharing and professional interaction. Organisation such as IBM, Accenture and Microsoft create a culture and provide the technology 144

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Build connectivity Formal training

Continuing education

Future challenges

Coaching and mentoring

Experiential learning

Businessdriven action learning

Projects and assignments

Figure 13: Development methodologies

to facilitate interaction with colleagues around the world, who have experience in specific projects and client solutions. The focus of learning therefore shifts from programme-centric to learner-centric, where the leader learner is a focal point in accessing knowledge and intellectual resources from a variety of sources, as well as from the experience of others. Generally, internal or open social networking sites are used along with blogs, wikis and other interactive knowledgegeneration technology. For the younger generation technology has become central to the learning experience. Continuing education This, the most common form of leadership development, involves future leaders participating in public or customised in-house programmes, generally run by a business school. The decision whether to run in-house programmes or make use of public programmes is important, as both have benefits.

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In-house programmes can be customised and participants generally discuss real-life issues which are pertinent to the business at that point in time. The disadvantage is the potential for group think, but the use of external faculty largely mitigates that. Also, in-house programmes create strong internal networks. Public programmes such as an MBA or an EDP have the benefit of exposing participants to their peers, who come from a variety of organisations from different sectors. I have long contended that innovation seldom occurs within a sector – it is the application of learning from other sectors and industries that mainly results in new and innovative thinking. Furthermore, participants build a strong external network through such exposure. Whatever decision is taken, it is essential to expose future leaders to formal experiences at the right time in their career – this, to prepare them for transitions and make their learning relevant to them personally. Business-driven action learning Action learning is a holistic learning experience where participants in a team are provided with (or choose) a real strategic problem and then follow a particular process to propose a solution to the problem to the organisation’s executive. It is holistic because it forces participants to cross organisational boundaries, it teaches them to work in teams and develops insight into their own behaviour and abilities. A key element of true action learning is the role of a team coach, who provides feedback on group dynamics, processes and individual behaviour. 146

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The result can be of enormous direct benefit to the organisation. In one large mobile phone operator that I was involved with, action learning teams were sent to different mobile companies around the world, to analyse the business. They then made presentations to executives on the learning and the applicability of that learning to their organisation. Another South African (and now global) organisation applies action learning by identifying the key strategic issues facing the organisation in a particular year, and choosing teams from its high-potential stars. The teams analyse issues and propose how to deal with these at a strategic level. Both such approaches are focused on the analysis and implementation of strategic issues in the organisation. Hence, it is a combined learning intervention and strategy implementation process, with significant potential return on investment. Projects and assignments Most organisations have various project teams working on specific initiatives at a given point in time. Like structured action learning projects which have learning as the primary driver, business projects offer a great opportunity to expose learners to new and often cross-functional experiences. Projects, however, generally have a finite life span and as part of a team often do not provide the opportunity to take responsibility for a team or department over an extended period in a way that is central to the business. Appointing leaders to new and substantive roles in the organisation provides them with an opportunity to deliver results in a permanent role. Frequently, organisations ensure that high-potential leaders are appointed to positions in 147

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different functions, divisions and geographies, to run part of the business long enough to deliver results. Such a process exposes the learner leader to a variety of different challenges which stretch him/her beyond their comfort zone. For this purpose there is limited value in assigning someone to a ‘maintenance’ role. Rather, the role should be one in which significant change or a turnaround strategy is required, and in which the trainee is provided with a mandate for change from the CEO or other executive. Using this approach, the organisation secures the best talent available to deal with problem parts of the business, and the learner has a challenging and meaningful experience. Experiential exposure One of the most important processes in developing tomorrow’s leaders is to build cognitive agility and expose people to situations outside their comfort zones. Many organisations create structured experiences to take leaders out of their comfort zones (e.g. in Sandton), and put them into an environment with which they are unfamiliar (e.g. a township or a bush experience). Such experiences bring another dimension to a leader’s world view. One experiential initiative that can be very powerful is international exposure through study tours. This enables participants to visit leading global organisations and interact with their employees, to gain insight into global best practice. Where I have run such study schools the learning has been extraordinary. It is not something that can be replicated as part of a normal business visit.

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Coaching and mentoring Seldom has an industry grown at the pace of executive coaching. Most organisations employ executive coaches to provide personal feedback on behaviour and performance, and to work collaboratively to improve the performance of an executive. The same applies at different levels of the organisation, where such coaching can be more or less structured. Mentoring schemes, few of which are successful, tend to be applied to graduate or other entry-level groups. Mentorship schemes often fail because line managers, with the best intentions in the world, do not have the time to fulfil their obligations and the time commitments required by the role. In addition to the traditional coaching and mentoring roles, sponsorship for women and minorities is important. One executive at Citi Group in the US told us that despite many people being mentored and coached, all too often they do not receive the necessary internal sponsorship. Furthermore, women in particular have greater difficulty building internal organisational networks – something which is an important factor for success.7 With regard to coaching, and to some degree mentoring, I am a strong advocate of team coaching. This enables the coach to facilitate learning with the individual. It also influences the team chemistry which, in turn, impacts individual performance in that context. In my view, the same coach should provide both team and individual coaching, as in the final analysis it

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is the performance of the team and the individual together that contributes to organisational performance improvement. Formal training courses Despite all the criticism of formal courses, they clearly have a role. Short courses such as negotiating skills, interviewing skills etc are useful supplements to formal, more substantial continuing education programmes. Many organisations have a set of competencies which individuals are required to master, generally in their own time. In most cases there is a formal assessment, and on completion of the various modules some type of certificate is awarded. It is often in this context that technology is applied through various e-learning programmes which participants can complete at their own pace, in their own time and which usually form the basis of ‘learning on demand’. Such courses provide material which can be discussed either in groups, or through assignments and via electronic communication. Whatever formal processes an organisation creates to build a leadership pipeline, it is the informal processes – specifically the role of executives – that can determine whether such a strategy is a powerful force for change and strategy implementation, or a reductionist, mechanistic process that keeps the HR function busy.

Informal leadership development processes: The role of executives I often ask participants in programmes what their most important learning experiences were. Most commonly, two experiences consistently emerge. 150

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Leadership development Women leaders: The hard truth about soft skills In their Leadership trends for 2010, Bloomberg, Business Week and the Hay Group identified ‘Expanding roles for women’ as one of the top leadership trends for 2010 and beyond. Studies by the Hay Group and others amongst top leadership companies, including IBM, Pepsico and Unilever, resulted in the view that “organisations should also be exploring how women change the leadership equation, both in terms of strengths they bring to an organisation and the barriers they face”. Their research showed that women used a “broader, more effective range of leadership styles to motivate and engage people. The outstanding women (studied) used a better blend of what we think of as masculine styles – being directive, authoritative and leading by example, as well as feminine ones. The women leaders knew when to be more nurturing, inclusive and collaborative.” According to Mary Fontaine, Head of Hay Group Leadership practice, “when you’re operating in the vast white space of today’s organisations with just a handful of direct reports, where new roles carry far more accountability but with far less direct authority, you can coerce and demand until the cows come home, but no-one will pay attention. If you are going to be successful you have to know how to influence, collaborate and subtly gain the trust of others – skills women may be inherently better at than men.” Increasingly, organisations are focusing on the value women leaders add to the business, and are examining and dealing with obstacles to their success.

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The first is the role of someone who took an interest in them and provided them with coaching, support and guidance. This does not necessarily refer to the formal coaching programmes organisations offer, but rather to special individuals who played a pivotal role in their lives at various stages in their career. Such people challenged them and also offered them their wisdom and encouragement. The second experience that consistently emerges is the role of adversity. Many high-profile and successful leaders experienced adversity on one or more occasions throughout their career, and successfully overcame that challenge. These themes also emerged in the interviews with 14 South African CEOs, captured by David Gleason in the book Courageous conversations.9 The willingness to provide great, and often uncomfortable, learning experiences and to conduct courageous conversations (generally informally) with their staff is the mark of a great executive. Remarkable executives have the ability to offer guidance and wisdom, while allowing their mentees to build their own identity – they do not expect them to become their clones.

Remarkable executives have the ability to offer guidance and wisdom, while allowing mentees to build their own identity – they do not expect them to become their clones.

This is the art of leadership development. Ideally it should be an integral part of the DNA of an organisation, where leaders at all levels facilitate learning in this way and are themselves provided with opportunities to build their own capacity.

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Governance It goes without saying that executives need to ensure that formal development processes are effective and focused on creating the capacity to achieve the organisation’s strategy. For this to be effective, a governance structure and governance processes are strongly recommended in the form of a talent board or panel, which sets targets and reviews progress on the formal developmental processes in the organisation. This is a necessary, but not sufficient, condition for building the leadership pipeline, to ensure effective strategy implementation on a sustainable basis. A talent board or panel has general responsibility for the total talent management strategy of the business, but it has a number of very specific roles in developing future leaders. These include the following: • Looking at the leadership ‘map’ of the organisation as a whole and ensuring that the pipeline is appropriate, given the future needs of the organisation; • Identifying leadership talent at an early stage; • Mandating and monitoring formal development processes in respect of identified future leaders; • Managing succession to ensure that leaders receive exposure in the right places at the right time; • Developing a shared and official organisational ‘view’ or position on individual leadership potential; • Monitoring leadership performance and solving problems where they occur. 153

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The other role players in developing future leaders include line managers, the HR function and the future leaders themselves. All need to have clearly defined roles. One of the most important lessons taken from my visits to remarkable global companies was the commitment of the CEO and executives to the development of their future leaders. In almost all cases leadership development was an integral part of the CEO’s strategy delivery. Furthermore, in most companies executives, including the CEO, were part of the faculty of leadership development programmes. The HR function should never be the driving force responsible for leadership development – that is the role of the executives. HR is the custodian of process, and facilitates and advises on leadership strategy. HR staff are a powerful resource for executives. Like any strategic process, leadership development requires planning, processes and clear roles to which all role players are firmly committed.

Conclusion While this chapter addressed leadership development from a largely individual perspective, organisations that are known for their leadership practices and excellence build leadership into the fabric of the business. It forms an integral part of their culture. The next chapter examines the way in which organisations can make leadership part of their DNA, so that it is a sustainable feature of the business that extends well beyond the tenure and practices of individual leaders.

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Chapter 8 CREATING LEADERSHIP DNA Introduction While the ability to grow a pipeline of leaders – and particularly transformational leaders – is a characteristic of many leading global organisations, leadership DNA is an essential ingredient for sustaining leadership in many remarkable organisations. Individual leaders come and go, and the successful ones have an impact in a way that builds on the collective leadership capacity of the organisation. However, those organisations that have been successful over time have a leadership capacity which transcends individual leaders and enables the organisation to reinvent itself, without losing many of the deep-seated values that have made it successful over time. Companies such There is a difference between as Shell, IBM, Unilever, focusing only on leaders P&G and even BP have the and building organisational ability to face crises in the leadership. business. Often, as in the case of IBM, they totally reinvent themselves. This requires a leadership capability that is largely intangible, but is deeply ingrained in the business. Ask most executive teams (not to mention the company as a whole) what leadership means in the organisation, and in general there will be as many answers as there are people who were questioned. Ask the same people what productivity means and they will probably pull out the same set of metrics. If leadership is a critical success factor in organisations, then leadership performance needs to be measured.

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There is a difference between focusing only on leaders and building organisational leadership. Many successful organisations do not consciously identify and nurture core leadership competencies and behaviours; in these organisations these skills are implicit in the culture. Increasingly, however, organisations are explicitly identifying leadership success criteria, thus creating the basis for conversations on leadership as well as mapping out the ‘rules of the game’. This is a deliberately short chapter as it incorporates much that is discussed in other sections, but within the context of institutionalising leadership in the organisation. The Chapter: Building a change-ready organisation will further elaborate on building leadership into the culture of the organisation and will highlight the importance of conversations in the process. The following framework will assist executives to institutionalise leadership: Communicate future challenges

Identify future leadership behaviours Institutionalising leadership Implement leadership strategies

Reinforce leadership behaviours

Figure 14: Institutionalising leadership

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Institutionalising leadership Communicate future leadership challenges For individuals to psychologically connect to a leadership philosophy, it is important that they also connect to the challenges the organisation will be dealing with in the future. This has been discussed elsewhere. It is about creating the ‘burning platform’ which is necessary to mobilise people. This process is not difficult for most organisations. Changes in the business environment continually establish the need for new strategies It is the signals that leaders, and and new organisational specifically executives, send to the designs. What is important organisation that really have an to communicate in this impact on people. context is the impact of such changes on leaders and leadership in the organisation. That connection should be as explicit as possible. As indicated elsewhere, there are many ways to communicate the impact of change on leadership. The obvious way is through normal communications channels (e.g. newsletters). However, beyond that it is the signals that leaders – and specifically executives – send to the organisation that really have an impact on people. Simply espousing the importance of a different leadership style, say within the context of transformation, will have limited impact on behaviour. When one or more leaders who do not subscribe to that style of leadership are fired, people will pay attention. 157

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Identify leadership behaviours Many leading organisations have a set of leadership competencies, behaviours or values that largely define the basis for leadership in the organisation. These provide the basis for selecting leaders, training leadership and rewarding leadership behaviour. Most importantly, they form the basis for determining leadership performance. Normally there would be between five and seven such leadership competencies, and each of these would be further defined through behavioural indicators. An example is Boehringer Ingelheim, a leading global pharmaceutical company. The centre of the company’s leadership philosophy is a framework known as ‘Lead and learn’, and five leadership competencies are identified: • Set direction • Lead people • Lead and manage change • Lead innovation • Deliver results.1 Each of these has a set of behavioural indicators that more clearly defines each competency. In my experience and from research I have identified a leadership performance framework that applies to most organisations. The important issue is that leaders need to perform effectively as leaders, and need to demonstrate their performance through the application of certain behaviours.

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Personal effectiveness

Leading transformation

Achieving sustainable results

Team effectiveness

Organisational collaboration

Figure 15: Leadership competency framework

Each of the competencies is briefly described below. For each competency a number of questions have been devised which will help determine the extent to which an individual demonstrates a particular competency. Personal effectiveness Personal effectiveness refers to the ability to make an impact and to manage oneself in a complex and fast-changing environment. This wide-ranging subject includes a person’s ability to define and act on priorities, communicate effectively, develop a personal brand, apply sound ethics and have impact, amongst other competencies. It is about personal leadership. A sample of typical questions that demonstrate performance include the following: • Does the leader deliver on commitments to stakeholders? • Does the leader identify priorities and spend time on the right things?

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• Is the leader decisive? • Does the leader build professional networks outside the organisation? Many similar questions can be formulated, and in an organisation they can be tailor-made to meet specific needs. Team effectiveness The ability of a leader to build effective, high-performance teams and to function as a member of other teams is an essential part of leadership performance. This ranges from the resourcing and management of such teams, to the ability to inspire team members, such that the team contributes to the strategy of the organisation. It refers to both project and natural work teams. A sample of typical questions associated with this leadership performance includes: • Are the goals and objectives of the team clearly understood by all members? • Are team members empowered to proactively improve the performance of the team? • Does the leader instil a passion to succeed amongst team members? • Does the leader regularly provide feedback and coaching to improve team effectiveness? Strong teams working in a high-performance culture are the essence of most highly successful organisations.

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Organisational collaboration Many organisations, large and small, are dysfunctional due to silo behaviour. Ironically, strong teams can be counterproductive when their own identity becomes more important than that of the greater organisation. In many organisations, knowledge and information are sources of power for individuals and can be used very In many organisations, knowledge destructively as a weapon. and information are sources of power and can be used as a For an organisation to be weapon. greater than the sum of its parts, collaboration is an essential behaviour. This is a mainstream factor identified in leadership research by gurus such as Lynda Gratton of the London Business School and Dave Ulrich of the Michigan Business School. It is also discussed further within the context of culture. A sample of typical questions associated with this performance includes the following: • Does the leader proactively promote collaboration across team and organisational boundaries? • Does the leader actively seek and share knowledge and information with other leaders and teams across the organisation? • Does the leader actively participate in cross-functional teams, to continually improve communication? Research has consistently shown that organisational collaboration is an essential prerequisite for innovation. 161

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Lead transformation It should be evident by now that leaders play an essential role in transforming organisations, thus enabling them to respond to new strategies and changing business environments. In the South African environment, transformation has a particular meaning which impacts on the culture and degree of diversity in the organisation. However, this is also a global imperative. Many global projects see 20 or more nationalities and language groups working together. Diversity is a global phenomenon which leaders need to manage. A sample of typical questions associated with this performance includes the following: • Does the leader consistently challenge conventional thinking and encourage experimentation? • Does the leader apply effective change and transformation processes when implementing change? • Does the leader consistently mobilise the talent, skills and experience of diverse employees at all levels to facilitate change? • Does the leader actively promote diversity in respect of race, gender and disability? This is a critical skill for any leader in a modern economy anywhere in the world, and especially in the South African context. Achieve sustainable results No matter how effective a leader is in other respects, his/her primary goal is to apply their skills to achieve results. For 162

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this to occur, the nature of the results needs to be agreed on beforehand. Does it refer to short-term, financial results, or does it include applying practices that contribute to long-term sustainability? Clearly a balance needs to be achieved, but great leaders are able to think beyond short-term achievements to create a sustainable future. A sample of typical questions associated with this performance includes: • Does the leader understand the ‘big picture’ of the organisational strategy? • Does the leader consistently create a high-performance culture? • Does the leader sincerely and effectively balance the needs of the communities and environments in which the business operates, with financial demands on the business?

In the modern socio-political context of business the balance between long-term sustainability and short-term financial performance is a business imperative.

• Does the leader ensure that employees are emotionally engaged with the organisation? In the modern socio-political context of business, the balance between long-term sustainability and short-term financial performance is a business imperative that needs to permeate throughout the organisation.

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These behaviours are critical in most modern organisational contexts. The value of defining them is that they can be used as the basis for a number of HR processes and, over time, will become the essence of leadership performance and organisational culture. Over time, the relative importance of the behaviours may change. In one organisation that adopted a modified version of this model, leading transformation was a particular imperative at that time. In another, organisational collaboration was a key focus due to internal silo behaviour. Such behaviours provide a degree of continuity in a fastchanging organisational context, while having the flexibility to respond to specific prevailing organisational imperatives. Implement leadership strategies Simply having a set of leadership competencies, behaviours or values does not necessarily result in their application throughout the organisation. There needs to be an implementation strategy, and it needs to be at the core of most HR processes. In an organisation where a leadership framework has been determined, the following are some of the strategies executives can apply to institutionalise them into the DNA of the organisation: • Continually communicate them internally and externally: there are numerous opportunities for executives to refer to the success criteria of the organisation in the future, and it is up to executives to make them visible. In many organisations such frameworks are branded within the context of the business strategy, or are noted as cultural change. 164

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• Use them as a basis for selection and appointments to leadership positions: this will ensure that the competencies and behaviours are reflected in future leaders, over time. Where a candidate for a leadership position clearly does not conform to one or more of the expected behaviours, appointing him/her for his/her technical or functional expertise, as is often the practice, will immediately discredit the leadership philosophy. Where leadership is an important element of a role, leadership competencies should form the primary basis from which selections and appointments are made. • Focus leadership development activities on competencies and behaviours: once the framework has been determined, all leadership development interventions should be focused on building competencies and reinforcing their importance. Training curricula at all levels should be built around the model and it should form the basis for career development and transitions. • Ensure consequences in the form of rewards and sanctions for living the behaviours: while people may have the skill to behave in a particular way, if there are no consequences for performance – good or bad – their behaviour will not change. The competency model needs to be incorporated into the performance management system for leadership positions, and a meaningful portion of the rewards structure needs to be based on those competencies and behaviours. In one organisation, over 40 per cent of executives’ bonuses were determined by leadership behaviour. This can present executives with a dilemma: a leader may achieve outstanding business results in the short term without conforming to leadership behaviours. It is a reflection of the classic long-term/short-term dilemma. If the organisation rewards results without balancing the importance of behaviours which reflect leadership values, they will be 165

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totally discredited. Therefore, the reward associated with short-term results should be tempered by the need for behaviour that contributes to sustainability. This was the essence of Jack Welsh’s leadership philosophy at GE. Reinforce leadership behaviour This has been referred to on numerous occasions, but cannot be over-emphasised. The reinforcement of behaviours occurs both formally and informally. An analogy which most organisations in primary or secondary business can relate to, is that of safety. When there is a risk to the safety of their employees, all organisations try to build safety into their DNA. They know that simply training for safely does not result in safe behaviour. They achieve this in the following ways: • Safety is publicised at every opportunity on notice boards, in newsletters and in many other innovative ways; • Managers constantly list this item on agendas or refer to safety in meetings; • There is a comprehensive set of metrics that shows leaders how the organisation as a whole, sections and individual managers are performing; • There is continual training to make sure employees know the rules and how to deal with unsafe situations. The list can be expanded. If executives wish to make leadership part of the organisation’s DNA, they need to pay attention to it and let people know that it is important. This is what organisational leadership is about. 166

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Conclusion Defining leadership behaviours is an important element of those organisations that take leadership seriously. How they are derived is determined by the journey the organisation follows and the role players involved. In some cases the behaviours derive from values, while in others they result from a leadership competency model. Whatever the case may be, those behaviours need to be more than a list which is stuck to a wall in the reception area. These behaviours need to be an essential part of the fabric and dayto-day life of the organisation. Without a behavioural framework an organisation will have great difficulty surviving new strategies and changes in leadership, as behaviours and values provide a reference point and a degree of stability during times of significant change. Furthermore, they ensure leadership sustainability at all levels in the organisation. Does this mean that organisations should create leadership clones who are conformist and lack the ability and the willingness to challenge the status quo? That is certainly not the case. Leadership values, competencies and behaviours should be generic enough to encourage individuality. A culture of self-reflection and organisational renewal should be an explicit element of the model. What it does mean is that individuals do not rise to be more important and powerful than the organisation, and that dysfunctional behaviour is not tolerated. It means that when people are asked ‘What does leadership mean here?’, there will be consistent answers.

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Section 4 LEADING CHANGE Leading change in a volatile, uncertain and unpredictable environment requires every executive to be an expert in change management. Yet it is also true that there are many kinds of change, at various levels of complexity and with very different intended outcomes. This section provides an introduction to several of the change concepts that need to be understood around the dynamics of change. Chapter 10 provides a series of practical processes that can be applied to many of the change projects undertaken in organisations. Chapter 11 covers a specific type of change process which is concerned with reconfiguring organisations and outlines practical processes to bring this about. Finally, in Chapter 12 the argument is made that creating an agile, change-ready organisation is a far better option than having to manage change projects where the organisational culture is an obstacle. Change is normally a result of some shift in the external environment that presents a challenge or an opportunity to an organisation. This change often means a new strategy or a variation on an existing strategy. Most importantly, during change transformational leadership is the most essential ingredient of successful change.

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Chapter 9 INTRODUCTION TO CHANGE: SOME BASIC CONCEPTS Introduction Introducing a new or modified strategy, by definition, demands change. Change can be complex, and much has been written on the subject. Companies invest millions of rand in employing high-priced consultants to assist with the implementation of change. Despite that, it is said that up to 70 per cent of change efforts fail. This chapter reviews some of the issues associated with change and provides select frameworks to help executives design change initiatives.

What has to change? It is remarkable how many change projects are conceived without a clear indication of what has to change. Is it processes? Is it behaviour? What needs to be different? At a strategic level, what has to change are some elements or the entire organisational system. Hence, a move into other markets requires changes to all elements of the system: processes, technology, structures, people ... and even culture. As far as executives are concerned, it is essential that they view change systemically. Changing one element without ensuring alignment with the other elements is a recipe for future problems. 171

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Is it change or transformation? For many years I experienced a disconnect between what large consulting companies offered and defined as ‘change management’, and what I found in the way of successful organisational turnarounds in books. The approach of consultants tends to focus on the ‘hard’ aspects of change: redesigning processes, structures and technology. It is a linear, project-driven process. Start at point A and follow a series of steps, and the change will have been implemented at the end. Because the process becomes more efficient and there is a strong business case, it is assumed behaviour will change and people will welcome the change. It all makes sense. Yet, when you look at the numerous books at airport bookshops around the world and read stories about how large corporations were turned around or became admired companies, you are hard pressed to find a single publication on a project-managed, linear change process. What you find is that what resulted in the change was strong leadership which inspired people to change. Such change undoubtedly was multi-faceted, it addressed many elements of the system, but above all leaders provided the energy for the change. This is not to say that processes, structures and technology were not re-engineered. The primary driver of behavioural change was, however, leadership from the top. Decades ago the Gartner Group identified three levels of change:

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• First-order change: this refers to a simple change in procedure. For example, a new version of MS Office requires the user to learn to work the new system. • Second-order change: this refers to changing roles in organisations. Hence, in the HR profession, the role of a business partner results in the need for new skills and behaviours amongst people in that profession. • Third-order change: this refers to deep change in the culture and DNA of the organisation. It is true organisational transformation. What has become clear to me is that the processes involved in introducing straightforward new technology or processes There is a difference between require a very different change management and approach to third-order transformation. and even second-order change. The former, which is generally linear, can be project driven with associated ‘change and stakeholder management’ processes to support it. This is change management. However, transformation, which is very different, is complex (non-linear), ambiguous and unpredictable. It is driven by leadership. In South Africa, where organisations attempt to apply linear, project-driven techniques to bring about transformation, in the local context of the word it does not work. Where the culture and DNA of the organisation need to change, different processes must be applied. Transformational change is always driven at an emotional level – and even at a spiritual level, in some cases. It is not purely rational and is largely emergent. 173

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The magnitude of change There is no doubt that the pace of change is accelerating. Change needs to happen more quickly and on an ongoing basis. Organisational agility is needed for an organisation to function in a modern economy. This means that people can easily become ‘change fatigued’. Organisations or leaders that institute change for the sake of it can be disruptive and can cause a great deal of harm to the organisation. One of the paradoxes of change is that the greater the change, the greater the need for stability. In addition to accelerating, change tends to become increasingly complex. It involves not only changed processes and technology, but it also changes in the way people think and behave, and it impacts the whole fabric of the organisation. This is where leadership becomes increasingly essential in providing an organisational centre of gravity as well as organisational energy. Finally, in addition to accelerating in terms of pace and having a deeper impact, the volume of change is increasing. In most large organisations there are numerous change projects underway simultaneously. These involve different The greater the need for change, functions and often different the greater the need for stability. consultants. In many organisations there is a need for a ‘change office’ or project office that is able to provide cohesion to the change projects being driven from different parts of the organisation. Such an office, which provides standardised methodologies 174

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and cutting-edge processes, is generally staffed with wellqualified organisational development (OD) professionals. The staff can offer high-potential line managers an opportunity to gain experience in change management and transformation.

Pressures for change Knowledge of the need for change and the ability to behave differently do not necessarily result in changed behaviour. Even in life-threatening situations, where an individual’s safety is at risk or there is the risk of contracting HIV/Aids, knowledge of the dangers does not necessarily result in consistently safe behaviour. For change to occur there has to be a compelling reason for people to change their behaviour. This can be in the form of opportunities and threats or rewards and sanctions, but some incentive is needed. Simply sending people on courses to learn how to ‘supervise’, or applying high levels of customer service or following safety procedures will not have much of an impact. Whenever I am involved in significant change projects I always start with the question: What is the burning platform? The term burning platform arose from research into why people jumped from a height of 15 stories into the Change needs to start with a burning North Sea when, burning platform. some decades ago, the oil rig Alpha Piper exploded and burst into flames. The answer was obvious: staying on the platform was not an option. 175

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In the corporate world there are many potential burning platforms. One of the most dramatic is a sudden takeover bid by a rival company. Many South African companies have unexpectedly had their complacency shattered when a competitor made an unsolicited offer to purchase them. Other burning platforms could be new competition, new legislation and new technology which force organisations to change or reinvent themselves. The extent to which change is dramatic or evolutionary depends on the heat of the burning platform. Where the pressure is not immediate, it can be built into the nature of the organisation. Here Toyota’s continuous improvement processes serve as an example. However, the need for change needs to exist and it needs to be personalised at an emotional level. Hence, when embarking on a change initiative, it is essential that executives know and communicate the pressures for change and, if necessary, create a burning platform that is obvious to everyone affected. Such pressures for change can also present opportunities which will be missed if the organisation does not change.

Cycles of change Organisations, like all systems, move through cycles. The most notable cycle relating to organisational change and leadership is known as the sigmoid curve. Simply put, during the start-up phase of the organisation, leadership is driven by the ideas and energy of the founder(s). It is largely their expertise and passion that make things happen. Leadership in this phase is often directive and decisions are made rapidly, as circumstances dictate. 176

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PHASES OF CHANGE III Integrative II Normative I Formative

Figure 16: The sigmoid curve

If the organisation is successful it moves to a state of maturity. The transition from the emergent to the maturity phase is probably the most dangerous phase in the life cycle of the organisation. As the organisational system grows it requires management systems, such as financial and HR processes and procedures. Decisions can no longer be made ‘on the back of a cigarette box’. Yet the introduction of such systems is counter to exactly that which made the organisation successful in the first place, namely entrepreneurship. Many small, highly successful organisations fail when management cannot adjust to the need for systems and ‘professional’ management. Simply put: let the visionary entrepreneur create the startup, but then s/he needs to move on to new start-ups, or s/he should significantly change their management style as the business grows. As organisations grow and are successful, there is a danger of complacency and an inability to recognise and adapt to changes in the environment. 177

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The next phase is when the external environment of the organisation changes – as it invariably does! The common response of management is to do the same things better and more efficiently. It requires the organisation, or parts of it, to reinvent itself and lay down the tracks for a different future. Rather than doing the same things better, it has to do different things and do them differently. The leadership style during this phase requires a relatively sophisticated approach to transformation, hence transformational leadership is a critical leadership capability. In relatively stable times, external shocks – and therefore the need to transform – occur relatively infrequently. However, in modern times changes to the external environment have become endemic and hence, for most organisations, the time frame between maturity and transformation is much shorter; for some it is a continual blur. The importance of the sigmoid curve is that leaders are able to discuss with their organisational members where they are on the curve. This helps them understand what the appropriate strategy is for the phase they are in.

Phases of change Understanding the phases of change in more depth provides leaders with the ability to choose the appropriate strategy for the relevant phase of change. The following framework shows the different phases an organisation progresses through as it moves through a change process. For each phase a specific strategy can be identified. 178

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THE CHANGE HOUSE The four rooms

Complacency

Renewal

Denial

Transition

Figure 17: Phases in organisational change

Although in reality the boundaries between phases are not that clearly defined, each phase can be identified by the language typically associated with it. Complacency During this phase the organisation (specifically management) is not reading the signals. • We are the best • It does not affect us • Keep doing what we do, better • Do not challenge management (a very career-limiting action when an organisation is doing well) • Focus on the short term • Follow rules and procedures.

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In his book How the mighty fall, Jim Collins1 refers to the first phase of organisational decline as “Hubris born of success”. This means that success blinds leaders to changes in the environment and causes them to lose the deeper insight which is necessary to understand the reasons for their success. Denial This phase is an extension of complacency, but with greater ‘push back’ from organisational members: • Sales, production, the union etc are responsible – blamefixing • It doesn’t affect me – ‘head in the sand’ • The figures are wrong – go and check them • Keep out of my space – territorial imperative • It’s always done this way • My manager wants to build his reputation. This is identified by Jim Collins2 as Phase 3 of organisational decline. During this time disturbing data are explained away and discounted as ‘temporary’. Transition This is the most dangerous phase. It is chaotic, politically fraught and disruptive. It is when, in extreme cases, people jump off buildings and commit family murders. • What are we doing? • What should we be doing? • Let’s hire consultants • It’s time for new blood 180

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• I miss the old days (mourning for the past) • Nobody tells me anything • It’s time to quit (and leave, or quit and stay). It is during this phase that strong leadership and considerable leadership energy are required to move the organisation towards its desired future. Renewal • Let’s do it together • The team has clear objectives • Now I understand • We can innovate • I trust my colleagues. This should be an exciting phase for the organisation as it moves towards the new or ‘reinvented’ state, and new energy is derived from the commitment and engagement of staff. Research suggests that all organisations and individuals go through these phases when faced with change. Some phases may unfold quickly, while some people may be stuck in a phase for a considerable period of time. What is important is that leaders apply the appropriate strategy for each phase. These are briefly listed below, although in the first two phases the change strategy is similar: Complacency and denial • Educate people on the changes that are happening and why; • Provide information (newsletters, workshops etc); 181

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• Undertake benchmarking studies; • Review performance criteria; • Create alliances with change supporters/early adopters; • Use all of the above to create a burning platform to encourage people to move out of their comfort zone. This strategy is very much about providing information and understanding – it forces people to confront the fact that things have changed around them, and that the organisation needs to effectively respond to such changes. Burning platforms have to be created (where remaining the same is not an option) and discomfort with the present needs to be created. This can be done with a ‘big bang’ approach or incrementally, depending on the nature of the change (see discussion on change). Transition This is a difficult time for all concerned. • Engage with people. This is not about one-way communication, but about allowing people to process the intended changes at both a cognitive and an emotional level. It is a time when investment in workshops to engage with people will pay off by counteracting a lack of commitment, nurturing understanding, and even avoiding sabotage in the future. • Where necessary (e.g. during restructuring and retrenchments), provide counselling and support. If needed, provide access to an employee assistance programme (EAP) with specialist, independent expertise. • Continually communicate on the process and what will be happening as the process moves forward (e.g. in M&As). 182

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• Recognise that this is a messy phase and allow solutions to emerge from those affected. Manage the politics! • Provide as much structure and direction as possible, especially to lower-level staff who have greater difficulty dealing with ambiguity. • Help people to let go of the past and the safety associated with the way things were done. • For those who refuse to get on the new bus, leave them at the bus stop and drive off without them! • Begin to celebrate the successes of the change and recognise those who have contributed and embraced the change. During this time relevant processes need to be facilitated to enable people to engage with the change, to understand its impact on them, and to ‘rewire’ their mental models to accommodate the changes. Renewal This should be an exciting, inspiring time. • Let people know the value (to them!) of being on this new bus; • Celebrate successes; • Reward and reinforce new behaviour; • Develop new rituals and symbols; • Rebrand what has changed. An important prerequisite to the success of this phase is that “the right people are on the bus and the wrong people are 183

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off the bus”.[2] Retaining the wrong people, i.e. people who consistently resist change, creates toxicity that will continue to sabotage the creation of the new organisation. The above is a very brief description of the different strategies that can be used in the different phases of a typical change process. They can apply to individuals and the organisation as a whole, or to part of it. Individuals or parts of the organisation may be in different phases at the same time, or in different phases for different change initiatives.

Resistance to change In my view, the traditional resistance to change is far less of an issue in modern organisations than it was in the past. Few people can remain immune to the reality of constant change. Yet even those of us who constantly initiate change resist change that is imposed on us from above, from outside, or as a result of circumstances beyond our control. People resist change for a number of reasons: • They don’t agree that it is the right thing to do; • It is perceived as being against their interests and they see themselves as losers in the equation; • Because of how change happened in the organisation in the past. Where initiatives were started with great fanfare and promises, but failed to materialise, people will ignore or resist new initiatives. A culture emerges where employees ‘blow with the wind’ just enough to get by, knowing that the next gust is on its way; 184

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• Trust. Where staff do not trust management they always view change initiatives with suspicion. In one organisation, a retrenchment which was badly handled five years earlier completely sabotaged attempts at a totally unrelated change process many years later; • They have not had time to process the change at a cognitive or an emotional level.

Most people resist change when it is forced on them.

In the last case, the human psyche has great difficulty accommodating cognitive dissonance, i.e. things that don’t fit with an individual’s current mental model. What is required is time to reconstruct or reframe their mental model, in order to create congruence. Leaders need to work with people to help them reconstruct their mental models, using (in many cases) the strategies outlined above. Finally, how people ‘resist’ change varies considerably, and it is important for leaders to understand individuals’ responses to change. The following are ways in which people respond to change, both positively and negatively.

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Learn new skills

Enthusiasm & positive energy

Support others

Explore options

Share knowledge & information Rebrand self

Change mindsets

Influence the future

Figure 18: Positive responses to change Paralysis

Avoidance Flight

Demand an answer

Blame

Glorify the past

Fight Need for control Judgement

Figure 19: Typical responses to uncertainty

These behaviours need to be managed and dealt with at an individual level.

Conclusion Leading change is a significant responsibility for any executive. Simply ‘shooting from the hip’ will not work in a modern, sophisticated organisation. Leading change is as much an art as it is a science. There are no ’silver bullet’ approaches that are foolproof; results are

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unpredictable and processes need to be flexible enough to respond to the emerging chemistry associated with change. What executives need to avoid is applying project-driven, linear processes to complex change. What is required is strong leadership – and leadership energy in particular.

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Chapter 10 IMPLEMENTING A CHANGE STRATEGY Introduction Each change initiative has its own genesis and its own dynamics. It is therefore only possible to provide general principles, with the understanding that each organisation and change imperative is unique and, contrary to ‘consultant speak’, requires its own strategy. There are, however, some generic steps that can provide a useful structure to a change process. These can be shown as follows:

Change:

Answer key questions

Stakeholder engagement

Implementing a change strategy

Assess organisational readiness Clarify roles & governance Establish support Design strategies

Figure 20: Generic steps in a change process

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The steps in a change process Answer key questions Change is expensive, whichever way you look at it. You either pay for it upfront in applying effective change processes, or afterwards, when you have to repair the damage caused by a lack of change processes. Right at the start it is necessary to ask a number of key questions: • Is the change important – what is the burning platform? • What will need to change – the whole organisation, or parts of it? • How deep is the change – is it at a process level, are roles going to change or will it require the organisational culture, its DNA, to transform? • How will we know it has been successful – how do we measure success? • What would enhance the likelihood of success and what are the potential obstacles to change? Stakeholder engagement The extent to which stakeholders are consulted and when this happens are important decisions. As a general principle, stakeholders should be involved in the process in a transparent manner from an early stage. Increasingly, processes aimed at transformational change are emergent: that is, they involve many (or all) employees 190

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and other stakeholders in the organisation. One of the primary processes Jack Welch used to transform GE was his famous ‘workout’. This involved people from all levels in the organisation. In 2011, the CEO of IBM conducted what is known within the company as a ‘jam session’ to review the organisation’s values. Using technology such as internal social networking, all 400 000 staff members across the world were able to comment on and ‘discuss’ the company’s values. This approach was recently used at national level by the National Planning Commission in South Africa, with a nationwide ‘jam session’ on economic planning policy. These are emergent processes in that many people are involved and exact outcomes are unpredictable. There is no doubt that where people are involved in formulating and planning change, commitment is increased, shared meaning develops and the probability of successful ... the dynamics and outcomes change is greatly enhanced. are neither predictable nor controllable. This approach, however, is not comfortable for leaders, because the dynamics and outcomes of the processes are neither predictable nor controllable. Taking the concept of stakeholders to a broader level, at worst it is better to know your stakeholders’ views on the change, so that you can formulate strategies to deal with any opposition and use your supporters to build supportive coalitions that will influence others. Assess organisational readiness Organisational readiness refers to the extent to which those who will be involved in the change are likely to be willing and able to commit to the change. 191

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While modern organisations are in a state of constant change in respect of process redesign and even organisational redesign, there are many examples of where people (or parts of the organisation) are not willing or able to commit to change. The emphasis is on the word commit. As indicated on a number of occasions, change requires energy – especially from leadership. In most change initiatives there are those who are early adopters and who embrace and drive the change; there are those who sit on the fence and passively wait to see what happens; and then there are those who actively or subversively resist change. For level 2 and level 3 change initiatives it is important to understand who will commit to the change, who will adopt a passive stance, and who may sabotage the process. Obviously this applies in particular to the leadership of the organisation who have to ensure that the change is implemented. People’s readiness for change largely depends on the nature of the change. Simply redesigning processes is unlikely to result in significant resistance. Redesigning structures, such as centralising transactional processing or changing the culture to implement transformation and employment equity targets, is likely to be less easily ‘sold’ to members of the organisation. The importance of this process is to identify where people are likely not to commit to the change and then to adopt strategies – from education, to creating a burning platform – to prepare them and help them to embrace change. One of the first of John Kotter’s eight steps to implementing change is the creation of coalitions. This is about identifying those people who are likely to be champions of change and using them to influence others in the right direction. 192

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Depending on the size of the organisation that is affected by the change, different tools can be applied to establish organisational readiness. These can include surveys (e.g. climate surveys) or interviews, time permitting. When it comes to leaders and key players I generally advocate interviews or focus groups since they not only provide information about readiness to commit to the change, but enable you to understand, at a more granular level, where the areas of difficulty and resistance may be. In one organisation where I was asked to propose a restructuring, an integral part of my proposal was to centralise certain service and transactional functions for purposes of efficiency and focus – a solution which had worked well with a different client and is a global trend. The executive did not even consider it; their frame of reference was decentralisation and the leap to a centralised mental model just did not fly. Had I realised this, I would have approached the proposal from a completely different angle and saved everyone a great deal of time. Investment in understanding where individuals and an organisation are in terms of a specific proposed change, can save a lot of financial and other costs later in the process. Clarify roles and governance As with any project implementation, it is important to establish the roles and governance structures that will drive the process from the outset. There are a number of roles in a change process and these are frequently misunderstood, resulting in conflicting expectations and political dysfunction.

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The following broad roles can be identified in a change process: Sponsor The change sponsor is normally the person with the organisational authority and resources to ensure that change occurs. Executives generally fall into this category. They may not be involved in the day-to-day implementation of the change, but they are accountable for its implementation. One frequent mistake that executives make is that they initiate change and then expect the appropriate functional leader to make it happen, only putting in an appearance when things go wrong. Sponsors have the following roles in change implementations: • Clarify the outcomes of the change; • Ensure that those affected know why it is an imperative and that it is not simply a ‘useful’ exercise; • Identify and engage with critical stakeholders; • Determine the success criteria, what will be measured and how; • Resolve problems that others at a lower level are not able to; • Review progress and take corrective action on a regular basis; • Hold change leaders throughout the organisation accountable for the success of the change; • Empower change agents and change leaders to fulfil their roles; • Provide the necessary resources, including an appropriate amount of time; 194

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• Be a champion of change at every opportunity. Change leader Change has to be implemented from the level of the sponsor, down through the line structures of the organisation. For this reason, leaders at every level must be change leaders. Although some initiatives are organic and cut across levels and functions in the organisation, in the final analysis it is the leaders’ responsibility to motivate and implement change in that part of the business for which they are responsible. It is an essential performance criterion against which they have to perform. This is a particular challenge in middle management levels. Frequently change is initiated at the top and probably accepted at the bottom, but a ‘black Black holes develop in the centre hole’ develops in the centre where decisions just are not of the organisation. passed down from the sponsoring levels. Hence it is essential for change to be performance managed throughout the lines of command – even in a very non-hierarchical organisation. Change leaders have the following responsibilities: • Commit themselves to the change; • Project manage implementation at the appropriate levels; • Clarify for themselves and others the outcomes of the change; • Provide the energy and leadership to engage people in the change; 195

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• Identify and resolve obstacles to change; • Walk the talk and act as a change champion; • Hold subordinates responsible for the change. Little guarantees the failure of a change initiative more than a line manager who says: “We have to do this because they (leadership) say we must”. Change agents Most significant change initiatives have one or more change agents or facilitators, who play an important role in designing process and smoothing the implementation. Frequently they are internal HR or OD participants, or external change agents. If they are good, leaders all too frequently abdicate the management of change to the change agent. This is Change agents cannot be held suicide for both the change accountable for change. agent and the process – especially where great sensitivity is required. A change agent cannot be held accountable for the change; it is like asking an accountant to make money for the organisation! Change agents have the following important roles: • Develop personal credibility to gain the respect, trust and confidence of all stakeholders in the organisation. This requires the change agent to maintain the role of an ‘honest broker’ without ‘political baggage’; • Assist in designing the process and tactics;

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• Act as facilitator and catalyst throughout the process. They should have outstanding group facilitation skills; • Continually keep in touch with players and take the ‘temperature of the water’ as the process unfolds. Within the confines of confidentiality, they need to provide ‘unofficial’ feedback to the leadership in respect of what is really happening in the organisation; • As custodians of the process they need to be able to look beyond the content of conversations to the process, and to interpret the body language and other non-verbal cues people use to communicate; • Act as a ‘lightning conductor’ for the frustration and other emotions that emerge from difficult change processes. They need to be emotionally mature and resilient. They also have to help leaders deal with the emotional consequences of change. For change to be successful, all role players need to understand their roles, and they should have the skills and attributes to fulfil them. Most importantly, it is essential that all players and stakeholders understand who is fulfilling each role and what this means. In addition to individual roles, the governance of the project needs to be determined during the preparatory phases. In most cases there will be a steering committee, comprising senior and important stakeholders. Their role is to oversee the project and to pull together all the threads to achieve the overall objective.

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Establish support Change is never a neutral process – it is as much a political process as it is a rational one. Generally, people in an organisation fall into three camps or ‘political parties’ when significant change is introduced:

Conservative party

Centre party

Progressive party

Figure 21: Staff generally belong to one of three parties

People in the progressive party are the initiators and active supporters of change. Those in the conservative party passively (or actively) oppose change. Most people sit in the centre party and they are (especially in the initial stages) relatively undecided on the value of the change. The other parties usually work on those in the centre party, with the aim of capturing their hearts and minds. In a change situation, the aim of the progressive party is to put into place strategies to convince members of the centre party that the change will be of value to them and the organisation. They also attempt to discredit or neutralise the effect of the conservatives – ideally by convincing them to shift their view and their support. However, in the makeup of political parties, not everyone has the same influence or impact on the potential success (or 198

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otherwise) of the change. Some individuals wield considerable influence, and it is important to understand their impact. The following is a framework for identifying people with influence and where they are positioned. Thereafter, change leaders and change agents need to find ways to either neutralise those with influence who oppose the change, or to leverage those who have influence and also support the change. High

Threat

Partner

Potential threat

Ally

Influence

Low

Support

High

Figure 22: Petitioning those with influence

The more people perceive that they (or their job or status in the organisation) are under threat, the more likely they are to be a potential threat. It is foolhardy not to recognise and deal with the political elements associated with change, and sometimes difficult decisions need to be made at the level of the sponsor. Designing strategies for change It is well beyond the scope of this book to prescribe change processes – there are many. What is important is that once the decision has been made that certain changes have to be implemented, the unfolding 199

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process will, to a greater or lesser degree, invite participation from those affected. This is generally an executive decision. The decision to restructure is not up for discussion, although consultation may take place before the decision is made. If the strategy demands that transformation is a business imperative or that the culture must change to facilitate innovation or improved customer service, then the executive need to make that decision. Different degrees of involvement arise in the shaping of change. On the one hand a decision to restructure in a particular way may demand rapid implementation, with little or no debate. The change strategy there would be to announce, implement and attempt to get all concerned on board and supportive. Such a process would include workshops with those involved as regards the implications, along with a willingness to address concerns and a detailled implementation strategy. After initial consultation it is unlikely that there will be much discussion on what the structure will finally look like. There are too many vested interests and such discussions could potentially go on forever, in an increasingly toxic environment. Once a decision has been taken to transform or change the culture of an organisation, the shape of that change is generally best achieved through extensive involvement and consultation. Hence an ‘emergent’ process would Once a decision has been made be applied in which the to transform the culture of an shape of transformation or a organisation, the shape of that change is best achieved through culture of, say, innovation, would be the end product. involvement and consultation. In such a process a strategy of large systems change would be more appropriate, and would have a far better chance of success than a top-down approach. 200

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Emergent processes have a number of characteristics that executives are often uncomfortable with. In most cases it has to do with control. An emergent process is not controlable and the outcomes cannot be fully predicted. Take, for example, a company in which the executive decided on a cost reduction of x percent. Through a series of crossfunctional workshops, using a process such as the GE ‘workout’ process, areas for optimisation emerge. Assuming that conditions have been created for a positive experience, all those involved (and, ideally, all those affected) will have a commitment to those strategies that they have contributed to and have helped to shape. Implementation is therefore more secure. In another example, a homogenous company wishes to commit to transformation. Workshops are held with large numbers of people to define what is meant by transformation and how this could be implemented. One or more outside party is involved to provide external perspectives and challenge conventional thinking. The final transformation strategy will be a unique outcome of the chemistry of the process, and participants will have developed a shared vision and meaning of what transformation should be for the company, and on how best to achieve it. In emergent processes the role of management is to create conditions in which those affected determine the best way to implement change. This should not be allowed to negate the decision to change; the nature and process of the change, however, emerges from the journey, rather than from executives being prescriptive at the start. It is like whitewater rafting: you know the final destination, but the journey to get there will be determined by the turbulance of the river and the actions the people in the raft take as they travel down-stream. 201

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There are a number of processes facilitators can choose from to facilitate an emergent process, when working with an organisation. One is called ‘world café’. In this process a number of small groups answer specific questions. After each question the people move and reconvene in small groups, and so the process continues with individuals reconvening in different combinations to work on each new question. The value is that each small group creates its own chemistry, which results in new levels of creativity. Ultimately, the results of the conversations are combined and everyone can see their contributions included in the final outcome. Another process is ‘future search’, in which groups describe the organisation as it was in the past, as it is in the present, and what it may look like in the future. Again, small groups contribute to the larger group outcome. The most emergent process is probably ‘open space technology’, in which people are invited to a large group gathering. They identify the elements of the issue concerned, voluntarily break into groups to discuss the elements (individuals choose where they want to go) and then reconvene to consolidate. The whole process is very unstructured, with voluntary participation throughout. Regardless of the specific technique used, the end result should enable deep conversations involving large numbers of people.

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Implementing change Future search I recently applied a future search process at the leadership conference of the local operations of a global pharmaceutical company. It involved the top 50 leaders building a common view of what it means to be great, which was the theme of the conference. Any future search begins with an understanding of the past. Where has the company come from and what were the iconic moments in its history? This is done in the form of a time line in which the key moments are reviewed – both good and bad experiences. This understanding of themes emerging from the past is used by leading global companies such as IBM and Siemens US to reinforce the impact these organisations have had on the world, and it forms their springboard for the future. The next part of the process reviews where the company is now. I used a mind map to identify the current challenges and issues facing the organisation. Finally, the participants need to describe the organisation as it should be in the future. In this case, I asked the participants to draw a picture of the future so that the outcome was creative and holistic. The results were remarkable, and the final pictures will be framed and hung in the company offices. The process is a systemic and emergent one in which high levels of creativity and energy are unleashed. It is not intended to replace traditional strategy or the quantitative aspects of business planning, but what it does is to build a shared understanding of the ideal future at both a rational and an emotional level.

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Conclusion In designing a change strategy, leaders need to pay attention to a number of factors, from the ‘hard’ project management processes to the intangible political dynamics of the change. Most importantly, if sustainable change is to occur, those involved need to be held accountable for ensuring that it happens, in the same way as they would be held accountable for any other area of responsibility.

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Chapter 11 RECONFIGURING ORGANISATIONS Introduction Many change consultants will attest to the fact they are frequently asked to restructure an organisation. Simply restructuring is seldom, if ever, a viable strategy. Structure is one component of an organisational system, and a simple knowledge of systems thinking demonstrates the danger of changing one part of the system without changing the rest, to ensure organisational alignment. This chapter, therefore, employs the term ‘reconfiguration’ which, it is felt, is far more appropriate for what is commonly referred to as restructuring, since it encompasses many elements of an organisation. The steps below can be identified for reconfiguring organisations. Like all change initiatives, this is seldom a clean, linear process. Each element of the process overlaps with and informs others. A common theme throughout the process is change, which is commonly referred to as ‘journey management’.

Reconfiguring an organisation Prepare Preparing for organisational reconfiguration is much the same as any other change process. The steps are described in the chapter: Implementing change. 205

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Prepare

Change: Review key processes

Reconfiguring organisations

Design role profiles Assess and appoint staff Align policies

Change management

Determine roles and structures

Build capacity Manage performance

Figure 23: Reconfiguring an organisation

The steps in the process include: • Stakeholder engagement; • Assessment of organisational readiness; • Clarification of roles and governance; • Establishment of support; • The design of the strategies to be employed. Like any other change, reconfiguring an organisation (or part of it) takes extraordinary leadership energy. Since restructuring is generally a central part of the process it can be very sensitive, as it impacts on an individual’s identity and status in the organisation and even beyond. Where retrenchments are an outcome, it can be hugely traumatic for all involved. 206

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Anyone who has been through the process will attest to the fact that it is seldom done well. I am aware of some horrific occurrences in a number of blue-chip South African companies that have left people at best disengaged and at worst traumatised. One success story that I often quote in this regard, occurred many years ago when I was teaching at Wits Business School on a MAP course. One of the participants had recently been retrenched from IBM – not a pleasant Preparation, in order to place the experience. However, he process in a meaningful context, said he understood why it is essential. had happened, he could see the business case for it, and he was still an ambassador for IBM as a company. Few organisations can get that right. Preparation, in order to place the process in a meaningful context, is an essential first step. Get that right or wrong at the outset, and it will impact the flavour and consequent effectiveness of the entire process. Review key processes This is an area where most large consulting companies are very effective, since the process is quite linear and analytical. One of the key success factors in this regard is the alignment of processes. Sound analysis needs to demonstrate how one process interacts with others, and what effect decisions in one part of the organisation have on other parts. Where organisations introduce new technology, such as SAP, process analysis and design are usually highly detailled and need to relate to the technology. 207

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There are cases where such detail is not required. Furthermore, most large, complex organisations have hundreds – if not thousands – of processes. The challenge then becomes: Which processes awaiting review, are a priority? And when these processes are driven by a function such as procurement or HR, the ‘process owners’ may feel that they are leadingedge, whereas ‘process users’ feel they are inefficient and bureaucratic. In deciding what processes need reviewing and in what way, it is important to involve all stakeholders who may affect or may be affected by the process. When confronted with this issue I follow steps that prioritise the processes which have to be dealt with, and involve all key stakeholders. The first step is to identify the major processes. This generally involves specialists in the field. Through a series of workshops involving various stakeholders I then rate the processes in respect of two factors: importance and effectiveness. The results are plotted in a framework (see Figure 24). Obviously those issues that fall into the 1st quadrant are the priorities. They are important and ineffective. Those that fall into Quadrant 2 are less important, but not effective. The effectiveness of those in Quadrants 3 and 4 needs to be maintained. This process provides a means to prioritise and to achieve quick wins for the organisation. Another question that needs to be answered is: What kinds of processes need to be reviewed? Normally, the focus is on business processes such as manufacturing or sales. 208

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I M P O R T A N C E

Low

1

3

2

4

Effectiveness

High

Figure 24: Importance/effectiveness framework

Of equal importance (and of considerable impact on the business processes) are the support processes. These include procurement, HR and accounting, amongst others. It goes without saying that where these are ineffective the impact on the business is profound, and a balance needs to be maintained between cutting-edge functional process effectiveness and what is good for the business. In many companies, for example, procurement processes meet the criteria of good governance, materials and inventory management in the extreme. However, they are so onerous to the people running the business that they are an obstacle, rather than something that enhances the agility of the business. The third category of processes, that is very often overlooked in process reviews, is that of management processes. These generally refer to issues such as how meetings and reports are managed. Ask most people in organisations about the effectiveness of meetings and they will tell you that the wrong people are there and the wrong things are discussed. This applies from the executive team downwards. Many executive teams spend most of their time on operational issues, while strategic issues fall off the agenda. Alternatively, there are 209

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ghost voices stalking the boardroom – issues which everyone knows about and which influence what they say and how, but which no one is prepared to confront. This issue is discussed in greater detail elsewhere. The same problems occur with reporting. Many people will acknowledge that they spend far too much time generating reports which no one reads. In both cases, what is required is a meeting and reporting architecture which sets out the structure of formal meeting processes, from the executive to the ‘shop floor’, which specifies who should attend which meetings, and what the agenda will or will not cover. Skills in meeting management need to be built. Similarly, a reporting architecture that is efficient and effective needs to be developed. Hence, in reviewing business processes, support and management processes need to be included in the review. This requires prioritisation. Conventional wisdom states that process redesign precedes structural redesign. In my experience this is seldom totally true. In reality it is an iterative process, where processes and structures need to be considered together. Determine roles and structures This is where the ‘rubber hits the road’. It is personal. One question that has to be answered is: Should structures be reviewed by current incumbents in the system, or by an independent outsider? In my view the answer is ‘both’. Should structure be determined by current incumbents, or by an independent outsider?

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It is very difficult for those affected to objectively determine what is best for the organisation, without considering their own interests. However, it is also very difficult for an outsider to really understand the complexities of a specific role – especially at senior and executive levels. Therefore it is often useful to have someone who is trained in organisational design to interact with the people involved, before making an independent proposal. An example of the complexities involved would be the role of the CEO and other executive team members. There is considerable literature on the roles of the CEO, CFO, CIO, CHRO etc. In addition, the relative roles of the CEO and COO need to be defined. At lower levels, roles are often professionally defined and related to qualifications. For instance, within the finance discipline, there are well-documented roles for financial and management accountants. In HR the roles of the specialist and the business partner are generally determined by the professional. Determining the structure becomes more complex where a corporate role and business units or subsidiaries are involved. In most large ‘corporates’ the roles of corporate governance, executive management, functional specialists and business unit or subsidiary executives and functional specialists need to be defined. To a large extent, these are dependent on the parenting philosophy of the organisation (see chapter on organisational design). While the respective roles need to be outlined, this is an example of where management processes need to be defined at the same time. 211

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First, the way in which policy setting and other activities are done will strongly influence the roles of and the future relationship between role players. This involves the need for business unit or subsidiary participation in corporate policy to ensure corporate consistency, while addressing local realities. Second, in my experience it is important to superimpose governance structures on management structures. For example, in any diverse corporation there are a number of HR leaders, finance leaders etc. In order to achieve consistency, alignment and the participation of all levels in the organisation, an HR or finance forum, community of practice or other structure would greatly facilitate the functioning of that aspect of the business. Finally, contrary to HR 101, there are frequently valid reasons for designing roles around people – especially at senior levels. This not only capitalises on people’s strengths, it also provides opportunities to facilitate individual development. These issues are addressed in more detail in the chapter on organisational design. Design role profiles Role profiles serve two purposes: first, they provide a basis for the key outputs of the role. Typically, I use the following headings: Job title Job purpose Key stakeholders Key result areas, with key activities Person specifications. 212

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It is important to recognise that job profiles are not job descriptions. Job descriptions provide considerable detail about the tasks a person performs, while role profiles provide a high-level overview of a role. Role profiles are used to specify the kind of person who would typically fill the role. This includes personal attributes, skills and competencies (both leadership and functional), as well as any other characteristics (e.g. attitudes and values). These should not simply represent a thumb-suck followed by a list of competencies. The description of the person specification needs to be the result of deep thought into what is (or is not) required. When writing a role profile where a new structure is considered, it is important to use the process to discuss the relative roles in a team. I have written profiles on executive teams where a golden opportunity was missed, because time was not allocated for powerful conversations about the various roles on the team. It is of limited value for the Financial Director to understand his/her role when the team has a different or superficial understanding of that role. All roles need to be legitimised by all members of the team. Assess and appoint staff Simply taking the current people in a structure and appointing them in different roles is likely to have limited impact. It is the proverbial ‘rearranging of the deck chairs’. The assessment and appointment of current staff into a new structure, if done badly, can result in good people leaving and a deterioration of morale.

In many cases restructuring occurs because the strategy requires people in roles to function at a higher level or with renewed energy. In practice, some (or even 213

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many) of the people in the old structure will represent the desired future. However, many may not. Having identified the ‘person specifications’ for the new roles, the next step is to assess and appoint the most suitable people. Where there are legacy issues and ‘baggage’ this can be a very difficult process for the CEO and other executives. The assessment and appointment of current staff, if done badly, can result in good people leaving and a general deterioration of morale. In some cases it can alienate entire parts of the organisation. Hence it is a very sensitive process, to be handled with great care. Where an organisation has sophisticated assessment processes in place, it is probably not necessary to undertake a new assessment – it can use the information available. Assessing someone’s potential to perform in another role involves managerial judgement. Like any other judgement, the more information available, the greater the confidence one can have in that judgement. Therefore, leaders need to collect as much information from as many different sources as possible. If the message is consistent, there can be greater confidence in the judgement; if there are discrepancies further investigation is required. Information on potential can be obtained from the following sources: • Qualifications • Interviews • Track record • Managers’ assessments and appraisal results • Technical and functional experts 214

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• 360 degree assessment • Psychometric assessment • Assessment centres. It is beyond the scope of this book to discuss each type of assessment in detail. Suffice to say that each one on its own provides useful information, despite having limitations. Hence, managerial assessment may be biased or performance may be misjudged. Psychometric assessments need to be matched to what is known about the person’s performance in the workplace. Collectively, information from as many of these sources as possible will provide a balanced and comprehensive perspective on which to make a judgement and subsequently an appointment. At executive levels many factors influence decisions on appointments, such as new organisational strategy, cultural fit, the need for transformation and the talent pipeline. Generally, when an entire structure is to be appointed, a comprehensive assessment of everyone is undertaken and a panel decides on the final appointments. The following issues need to be considered when making appointments to a new structure: • Appointments need to be based on well-thought-out role profiles; • They need to be future focused in terms of strategy, the challenges facing the organisation and the role of all players; • The process must be perceived as open, fair and transparent; 215

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• It is essential that the process be concluded as soon as possible. Where decisions take a long time to be made, the organisation will remain in a state of uncertainty, and it is likely that good talent will move on and political dynamics and competitiveness will become destructive; • From the start of the process, top talent need to be reassured that they have a future with the organisation; • While it is important to celebrate appointments to key positions, it is equally important to deal constructively with disappointments. It is very easy for disillusioned people to create toxicity when leaders have not dealt with the issue of disappointments. This is the time of highest risk in any reconfiguration process. It is also the time when strong leadership is most needed at the executive and, in particular, CEO levels. Align policies This is a relatively simple process, though one that is often neglected or forgotten. When an organisation wants to transform itself into a customerfocused, dynamic, innovative and agile entity, it does not help that people have to wade through numerous levels of bureaucracy or have to wait months to make a decision or buy a laptop (or iPad). Policies need to reflect the future culture of the organisation and it is important to identify policy or procedural obstacles to the achievement of reconfiguration goals. Frequently such policies are hidden in the functions of procurement, accounts, HR, IT and other support services, becoming self-serving to that function. 216

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Build capacity This is stating the obvious. However, in the changes and dynamics associated with reconfiguring the organisation while keeping the business on track, the process is often postponed or neglected entirely. Building new skills in functional areas is straightforward. The problem arises in the leadership arena, for instance where, as a result of the process, people have been promoted to higher levels and new levels of complexity need to be mastered. Where a new role requires a person to think strategically when their previous role required good operational management, interventions need to be put in place to clarify the new expectations and to provide the necessary skills. These new expectations need to be made clear and coaching must be provided to offer support for the new incumbent. Generally, career discussions and effective talent management need to be implemented during (and as soon as possible after) the reconfiguration process. Based on new roles and expectations, performance contracts with staff need to be revised in terms of new expectations. Manage performance Very much in alignment with capacity building, new roles require new performance contracts. These need to be designed in terms of the role profiles and business strategy. Once again, the emphasis needs to be on clarifying the new expectations and performance requirements of both individuals, teams, and the organisation as a whole.

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As with any other performance management experience, leadership is the defining success factor. The need to set the direction, measure performance and provide feedback on an ongoing basis is a given leadership requirement. During times of reconfiguration, the need simply becomes so much more intense. Manage change Throughout this process change or ‘journey’, management is a necessity. Many of the interventions that need to be applied during the process have been discussed elsewhere, especially in the chapter: Introduction to change. What needs to be emphasised in this process is the importance of ongoing engagement with the people who are affected, as well as ongoing communication of the process. The notion of engagement, in addition to that of communication, is important, as illustrated by a personal experience. In a medium-sized SOE, colleagues and I were asked to review the effectiveness of the HR function, with a view to its possible reconfiguration. No one was in danger of losing their jobs. At the start of the process the CEO gathered all the HR staff in an auditorium and explained the process. After What needs to be emphasised in this process is the importance of 2 0 m i n u t e s h e a s k e d whether there were any ongoing engagement with the questions. Remarkably, people affected by the process. every point he had made was queried, as if the people had not heard him in the first instance. When we left, he asked 218

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if people had not been listening. The reality is that when people hear news that may affect them (such as information on reconfiguration), emotional filters block out what is being said and people need time to ‘process’, cognitively and emotionally, what is involved. This was a very important lesson on how communication is perceived. Engagement suggests ongoing dialogue, to help people reframe their mental models to accommodate change. In the light of the emotional sensitivity of reconfiguration, it is essential that change agents are constantly taking the ‘temperature of the water’ and responding proactively to problems before or as they arise. As indicated, another essential ingredient is the need for speed and decisiveness. Where ambiguity continues over time, political dynamics become more evident and good talent will leave. People want to know how change will affect them personally before they start paying attention to the ‘greater good’ and the benefits the company will derive. It is also important for leaders to understand that the moment an announcement is made or that rumours of such a process start circulating, the entire dynamics of the organisation change. The level of conversations amongst staff will increase exponentially and if clarity is not continually provided on the process, assumptions will be made – correctly or incorrectly.

Conclusion Reconfiguring organisations, or parts of it, is not something to be taken lightly. It has a serious impact on individuals, their families and the performance of the organisation as a whole. Where necessary, leadership energy and transformational leadership skills are imperative. Leaders undertaking this 219

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process, and the change agents assisting them, must be prepared to be lightning conductors for all the emotions arising during the process. All too often organisations reconfigure to the point where change fatigue begins to have a negative impact. When done properly, it can have a significant impact on organisational effectiveness and performance.

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Chapter 12 BUILDING A CHANGE-READY ORGANISATION Introduction While the many processes discussed in the preceding chapters on change are important tools for executives contemplating significant change(s) in their organisations, the most effective strategy in a changing environment is to create an organisation that is agile and can respond quickly to new strategies and environmental shocks. In regular CEO surveys conducted by several top consulting firms, organisational agility is a theme that emerges consistently. How do executives create a culture in which change is part of the DNA? Organisations that have been sustainable over many decades, and even centuries, have created a culture that enables them to proactively respond to local or global changes – even where this has required them to completely reinvent themselves. There are a number of things that such organisations do to create a sustainable and change-ready organisation.

Building a change-ready organisation Connect with the outside Inward-focused organisations have great difficulty adapting to change. They become insular and, particularly when they are successful, start to believe their own ‘hype’. There is, of course, nothing more threatening to the sustainability of an 221

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Change:

Connect with the outside Shape culture

Building a change-ready organisation

Create conversations Support innovation

Reward behaviour Build mental models

Figure 25: Building a change-ready organisation

organisation than success. Significant organisational failure has its seeds in success. To repeat the issue raised in an earlier chapter: Jim Collins, in his book How the mighty fall1 makes the point: “Stage 1 of decline is Hubris born of success: great enterprises can become insulated by success”. As discussed in the chapters on strategy, effective organisations need to be attuned to the signals of change in the external environment, to be able to ‘connect the dots’ and to understand the significance of such changes. There is no greater threat to the sustainability of an organisation Organisations with this than success. capability have very porous

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They are ‘connected’ to external centres of excellence and have multiple partnerships, where cutting-edge thinking is accessed on a regular basis. Many create their own centres of excellence, in partnership with universities and other specialist organisations, to create and disseminate knowledge. Companies such as SABMiller are ‘plugged into’ universities and business schools around the world, where they access top-level technology, processes and leadership practices. This is funnelled into the organisation through their corporate universities and other institutions. Depending on their business model, many large organisations have their own applied R&D facilities which are incubators of innovation and new products, technologies and business models. Benchmarking is another way in which such companies are able to track their relative competitiveness amongst their peers and competitors. This is generally done through independent organisations which conduct surveys in specialised areas. Many use professional bodies to engage with other organisations, in order to build communities of practice. With the emergence of social networking connectivity has been enhanced considerably, so that sites such as LinkedIn facilitate the formation of professional groups and their interaction on a global basis. Most importantly, in order for the external environment to be understood in the organisation, the culture or DNA needs to be shaped to allow the organisation to ‘hear’ what is happening outside itself.

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Shape culture Shaping organisational culture is probably the most important role an executive (and, in particular, the CEO) can play. Shaping culture is not a linear process. It is complex and more about chemistry and ‘alchemy’ than about rational logic. There are, however, a number of things executives can do to shape culture. Facilitate information and energy flow While organisational structures are useful for understanding some of the formal reporting relationships and responsibilities, it is the unseen and intangible flow of information and energy that really reveals how the organisation works. Technology has broken down many barriers to accessing information, but it is still frequently used as a weapon in many organisations. Whoever has access to information and knowledge has power. One of the roles of effective executives is to facilitate and enhance the flow of information and to remove obstacles to such flow. Rather than looking at an organisation as a set of vertically connected boxes, consider seeing an organisation as a set of pipes, similar to those in a chemical plant. In ineffective organisations those pipes are rusty, blocked and continually leak or are broken. In effective organisations they are stainless steel, offering minimal resistance to whatever flows in them. In organisations, what flows is information and energy, and it is up to executives to maintain and enhance the flow.

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Consider the flowing diagram:

Figure 26: Interaction between significant players

With yourself as the circle in the centre, plot your relationship to the significant players you interact with. Some lines will be solid, representing a powerful and effective relationship in which information and energy constantly flow. Others will be dotted, representing blocked communication and ineffective relationships. The challenge is to identify the dotted lines and find ways to convert them to solid lines. In this way, one can view individual relationships in the organisation, as well as functional and divisional relationships and the extent to which Hotspots cannot be decreed. They the organisation fosters collaboration. are emergent and executives need to create the conditions for them to emerge.

Lynda Gratton of the London Business School uses a similar approach in what she terms ‘hotspots’.2 Based on her

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research, she invites executives to survey the landscape of their organisations through thermal imaging (night vision) lenses. The landscape is mostly green, but in some areas there are red spots and in others blue. The red spots are ‘hotspots’ and the blue are ‘frozen spots’. Hotspots are those places in all organisations where energy abounds and where innovation and results are outstanding. When in that part of the organisation, one can feel the ‘vibe’ and energy. In ‘frozen spots’ little emerges and energy levels are low or non-existent. The fact is that hotspots cannot be decreed. They are emergent, and what executives need to do is to create conditions in which they will naturally emerge. Gratton identified four conditions for the emergence of hotspots: • A cooperative mindset: hotspots emerge when innovative, energised people interact. It is an interaction where the whole (result of the interaction) is greater than the sum of the individual parts. Hence the willingness to cooperate is an essential ingredient. • Boundary spanning: innovation occurs as a result of the various and novel combinations of ideas, knowledge and insights of people from different parts of the organisation or team. Silos are, therefore, the antithesis of hotspot creation. • Igniting purpose: relationships ignite due to a commitment to an igniting purpose. It is the purpose that fuels the relationships. It is also why project teams are so frequently hotspots in organisations: they have a clear purpose that acts as an energiser. 226

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• Productive capacity: this refers to the ability of the players to contribute to the relationships and the purpose of the organisation. Not only ‘hard’ skills are referred to, but also the ability to manage relationships and personal effectiveness. Most recent research amongst 40 leading companies resulted in the following conclusion regarding the importance of collaboration in complex environments. Based on Gratton’s research, collaboration has to occur at three levels in the organisation: 1. It works at the level of the collaborative unit, when members of a formal work group, department, project or community work hand in hand with each other; 2. Collaboration is equally important when it comes to co-creating solutions with stakeholders across your internal or external value chains. Suppliers are a source of precious knowledge, core competencies and performance benchmarks, and should be tapped. Creative solutions are developed when you partner with clients or customers, not just team members; 3. There has to be a formalisation of the corporate structure, to encourage and frame collaboration. This could occur through the establishment of powerful practices, such as clear goal and role definition in performance management, or through creating formal role models in the organisation’s senior executives.3 The role of executives in creating the conditions for hotspots is to establish what are known as ‘signature processes’ to facilitate the emergence of hotspots. The book referenced above is essential reading for any executive. 227

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Manage symbolism Organisational symbols tell members what the organisation is actually about. Symbols send messages, and like all messages they can be interpreted in diverse ways. Two categories of symbols are important in organisations: the first is executive behaviour. It is particularly important during times of change, where the organisation is like a Whatever leaders do or say, or do sensitive tooth and people not do or say sends a message to are hungry to interpret the organisation. any messages – tangible or intangible. Executives need to understand that whatever they say and do or whatever they don’t say or do sends a message to the organisation. In almost all the records of where new leaders have transformed organisations, they consciously did things or did not do things that sent a strong signal to the organisation about what matters and what will matter in the future. This may have been as serious as replacing people who did not reflect the new values and norms, or as simple as spending time outside the executive suite with staff or customers. It may be appointing black or female executives, or combining the managers’ canteen with that of the workers. Whatever executives do or fail to do sends out a signal, and executives need to consciously manage the impact of those signals. The way they unconsciously send messages by, for example, inviting some people but not others to a meeting, is as important as those things they consciously choose to do. The other form of symbolism is the physical arrangement of the organisation. 228

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Most obvious is the physical space and buildings. Private banks tend to be opulent, with a premium on privacy in terms of their design, and this supports such a culture. Hi-tech companies tend to be open and to facilitate crossboundary innovation. Many traditional organisations have offices with closed doors, demonstrating a hierarchical culture. Organisations with opulent, insulated executive suites also send a message about their culture. The most obvious examples of good practice are organisations such as Google and Microsoft, which pay considerable attention to the configuration of office space. Other symbols play a role: organisations that value diversity may, for instance, showcase pictures and designs that reflect their cultural diversity, rather than only showcasing traditional Anglo-Saxon cultural symbols. Manage leader behaviour In addition to the symbolic behaviours of leaders referred to above, there are many behaviours that embed a particular culture. Role modelling the kind of behaviour they expect from others, is an obvious example. In a number of high-profile South African organisations, the behaviour of the leaders bears no resemblance to the espoused values of the organisation, whether in the area of corporate governance, or ethics and integrity. Leaders need to walk the talk and must consistently behave in ways that shape the culture of their organisation. What leaders pay attention to, influences culture.

At a more subtle level, simply what leaders pay attention to will influence 229

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the culture. Are they focused on the financial and technical aspects of the business, or is the phrase ‘people are our most important asset’ reflected in the time and attention they pay to people issues? Similarly, the way in which leaders allocate resources and rewards impact culture. When times are tough, where are the first cost cuts made? Which functions are less well resourced than others? These actions all send messages. Hire and lead for the correct culture Who leaders hire has an important impact on the culture of an organisation. In organisations where the culture is considered a strategic asset, leaders spend considerable time selecting people who fit the culture and promote the values underpinning it. Furthermore, how people are performance managed greatly influences culture. Jack Welsh often referred to the supremacy of GE values over short-term performance. Faced with the dilemma of a high performer, e.g. a rainmaker, who does not apply the values of the organisation (such as teamwork), where will the organisation’s priorities lie? These are issues and decisions that leaders have to take when they consider shaping the kind of culture they want and need for organisational agility.

Create conversations Conversations are the way in which organisations create meaning and construct their reality. As indicated in the relevant chapters, strategy does not occur in a vacuum. It is the result of a series of rolling conversations. 230

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It stands to reason that the more effective an organisation’s conversations are, the more agile and able it will be to deal with new situations and environments. In a way, scenarios are conversations about possible futures, so that when one or the other materialises, leaders have engaged on the implications and can respond quickly. Conversations can occur formally and informally. Formal conversations normally occur in meetings of various kinds, hence the importance of an effective meeting architecture. Where formal conversations are ineffective, the real conversations will happen around the ‘water cooler’ or after-hours in the pub. Executives have an enormous influence on how effective conversations are. The greatest impediments to effective conversations are the notions of ‘holy cows’ and ‘ghost voices’. These factors affect people’s behaviour and what they feel able to speak about, but are generally not verbalised. Yet they have a strong ‘presence’. Conversations are the way in which organisations create meaning and construct their reality.

Holy cows refer to those rules, people and assumptions that cannot be challenged: the CEO or other high-placed executives protect them. ‘Ghost voices’ are even more insidious. They are topics that are important and influence behaviour, but cannot be spoken of. Transformation and even subtle racism are often ghost voices when a strong member of the executive opposes transformation. Leadership style is another. The consequence of both is that effective conversations cannot occur and assumptions cannot be challenged. Hence, 231

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complacency or denial set in and issues are not addressed. There is no meeting of the minds after rigorous debate and analysis. Research by Lynda Gratton of the London Business School has resulted in a useful model to identify an organisation’s propensity to hold powerful conversations. The quality of conversations can be plotted on two axes. On the first, conversations about the rational aspects of the business are evaluated. These would, for instance, consider the extent to which assumptions about processes, technology and systems are challenged and continually reviewed. On the second, conversations about emotional issues facing the organisation are evaluated. These would, for example, include issues about leadership, change management and transformation. Generally organisations place quite highly on the rational axis; it is conversations about emotional issues that are often more difficult. Ideally, an organisation should be able to conduct deep conversations on both axes and should challenge deeply held assumptions constructively. Great organisations and those that are sustainable over time, have deep conversations on issues affecting both the ‘rational’ operations of the business and the emotional issues. This results in the following matrix (adapted from Gratton):

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Disciplined debate • • • •

Socratic Challenge assumptions Rational Sterile (transformation)

Creative dialogue • Yin/yang • Hard/soft • Holistic impact of change

Analytical rationality

Dehydrated talk • Rituals • Mechanistic • Ghost voices

Low

Intimate exchange • • • •

Leadership authenticity Trust Diversity Culture

Emotional authenticity

High

Figure 27: Conversation matrix

Ideally, organisational culture should therefore facilitate conversations in the ‘creative dialogue’ quadrant. Frequently good businesses are successful in the ‘disciplined debate’ quadrant, while some (such as certain NGOs and others which are closely involved in development) are good at the ’intimate exchange’ quadrant. Unfortunately, too many organisations fall towards the ‘dehydrated talk’ quadrant, where things are discussed superficially at formal meetings and in more depth informally, where rumours circulate and assumptions are made. Managing conversations is the primary means by which organisations develop a new understanding of important issues as they arise, and foster the ability to deal with change. The quality of the conversations in organisations is largely the responsibility of executives. Lynda Gratton identifies a number of conditions for effective conversations: 233

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• Institutionalise questioning and doubt: executives need to require people in the organisation to continuously question assumptions (about both the axes referred to above). They need to do it themselves. The emphasis is on challenging and questioning issues, not people. The willingness of everyone concerned to challenge their own thinking and that of others will only occur when it is modelled by executives, and when people trust they will feel safe despite challenging issues. When people feel they are being targeted personally, the result is defensive behaviour. • Create space: it is very difficult to have effective conversations in crowded and noisy conditions. Where effective problem solving and creativity are the aims, space (in the form of venues) needs to be made available. Many leading organisations create room for such meetings and discussions. Furthermore, many such conversations occur in an informal setting, and are often spontaneous. Hence, places where people can meet informally, such as coffee rooms etc, are as important as formal meetings. Of course, virtual space through the use of social networking and similar processes will, in future, increasingly facilitate conversations. • Create time: when people are constantly on the treadmill, adhering to tight deadlines, deep conversations will always disappear from the agenda. Important long-term issues are always subservient to short-term urgent issues. It is therefore important to have a formal meeting architecture, where people have the time and space to discuss key issues. The quality circles and subsequent iterations of that methodology provide people with the time and space to discuss important questions, on issues from productivity improvement to transformation initiatives. Executive teams often do not make the time to discuss strategy creatively and in depth. 234

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• Legitimise broad questions: it is important to enable people to ask the big questions, as a matter of principle. These include conversations about, for example, what leadership means in the organisation, or what transformation means. These are complex questions which address complex problems. • Develop new rules: change the way things are done, to take people out of their comfort zones and create new ‘vibrations’ in the system. This enables them to see things from a different perspective. • Facilitate authenticity: if conversations occur and it is clear that leaders are not really interested in the content or have fixed preconceived ideas, people will disconnect. Conversations – especially where less ‘rational’ issues are discussed – need to be authentic, or they will deteriorate into rituals with no substance. The facilitation of important conversations which create new meaning and understanding is an essential process in shaping organisational culture. In turn, organisational culture is an essential basis for innovation.

Support innovation In the 2010 IBM CEO survey, the overarching emerging challenge facing executives was managing complexity. One of the essential ways of dealing with organisational complexity is that of creative leadership. To quote: “CEOs now realise that creativity trumps other leadership characteristics. Creative leaders are comfortable with ambiguity and experimentation. To connect with and inspire

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a new generation, they lead and interact in entirely new ways.”4 Creative leadership is an essential basis for creating a culture of innovation. Much has been written on the subject of innovation; much of it is somewhat esoteric. There are, however, a number of considerations that can help executives enhance their organisation’s ability to innovate. Where should innovation be located? An argument is to be made that everyone in the organisation should be innovative and creative. In practice, this has limitations in respect of where creativity should make a significant impact. While it may be useful to elicit the ideas of bank tellers to improve practices or operators to improve safety practices, it is not desirable for them to apply innovation in their practices outside of strict procedures. Where standardisation and consistency are necessary, a means to involve people in improving procedures may be of benefit, but beyond that procedures need to be adhered to. This begs the question: Where should the drivers of innovation be located in the organisation? Depending on the kind of innovation, there are many places that can act as crucibles for innovation. In some organisations the epicentre is located in specific functions such as R&D, marketing or product development.

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In others it is to be found in project teams which capitalise on their ability to optimise cross-functional and cross-divisional synergies. In yet others it may be located in collaborative processes with external organisations, such as universities. In these situations, the outcome may well be breakthrough innovation that can alter the business offerings of the organisation and disrupt the industry. In other cases, innovation forms part of the culture that continually strives for improvement, for instance, the creation of green areas, or opportunities to tap into the creative capability of all workers. Types of innovation Traditionally, the focus on innovation was on two areas: • Product innovation, in which new or improved products or services or new applications for existing products enabled the organisation to stay ahead of its competitors. In some cases such innovation is industry disruptive (see, for example, the history of Apple or Virgin); • Process innovation, which enabled organisations to be more effective and efficient in bringing products or services to market. This tended to be internally focused on the As the world becomes more processes applied by the complex, new innovations are organisation. replicated more easily. As the world becomes more complex and new innovations are replicated more quickly, another type of innovation is becoming more central to executives, namely innovation in respect of new business models. Innovation in 237

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this space is concerned with finding new sources of revenue and, frequently, finding ways to disrupt an industry or sector. One sector that is faced with significant business model disruption is the banking sector. New channels – and specifically the use of new technologies such as cell phone banking – will have a substantial effect on the traditional industry. Capitec is a good example of how a new business model challenged traditional banking assumptions; the relationship between banks and mobile phone companies is another challenge to traditional banking, especially at the bottom of the ‘pyramid’. FNB, for example, is betting heavily on mobile banking as a major new banking channel. With these levels of complexity, executives need to make difficult decisions about what strategy will fly in a changing world, before ensuring that it leads innovation in that field. Focused innovation In advertising and other creative sectors, the scope of innovation is quite broad, although even there it is necessary to provide boundaries for creativity within a strategic context. In most organisations innovation needs to be focused within certain strategic parameters else it becomes unbridled, producing creative solutions to problems that are not relevant to the business. Even in industries such a pharmaceutical or biotech R&D, there needs to be focus. The role of executives is to provide parameters without

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inhibiting creativity. Hence, an innovation policy would provide demonstrable goals to focus efforts and resources. Collaboration While it is true that certain divisions of the organisation are likely to produce ground-breaking innovation, it is essential that collaboration across functions and divisions is facilitated. Like any organisational activity, an inward focus, often exacerbated by parochial interests, is the antithesis of innovative practice. One area where innovation is often stifled is in the natural tension between those functions ‘creating the future’ (such as R&D, marketing, product development, mining exploration etc) and the ‘cash cows’ of the business (usually operations and production). The revenues earned by these operations are what funds innovative experimentation – something which tends to be seen (by the current business) as a drain on resources. Furthermore, where there is no consultation, the practical application of innovative products and services is seen as impractical by the current business. Executives need to pay special attention to achieving a common understanding of the need to create the future, how that will be resourced and when results will be delivered. This will go a long way toward reducing organisational tensions which stifle innovation and the possibilities associated with it.

Reward performance It goes without saying that people focus their efforts and behaviour according to how they are rewarded, both tangibly and intangibly.

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If rewards are determined exclusively by financial or other business results, short-term behaviour will result. Where people are rewarded for both their business results and their behaviour and performance in respect of factors that contribute to sustainable performance over time, there is a greater chance that an effective balance will be achieved. It is beyond the scope of this book to be specific about performance management and remuneration practices, but considerable attention needs to be paid to achieving the necessary balance. Suffice to say that a clear understanding of a leader’s role needs to be achieved, to ensure s/he is being rewarded for the right things. In the case of leaders, they are employed to get results through the creation of highperformance behaviour amongst staff. Just as important as financial rewards are the intangible rewards people receive. These can be as insubstantial as leadership praise when work has been done well, to more formal systems. In a number of organisations, a clearly defined system of intangible rewards is designed. This rewards the important behaviour people display in addition to the results they are paid to achieve. Hence, someone who has delivered outstanding customer service, or who has been identified by staff as a ‘great boss’ will collect points that will enable them, at an appropriate time, to receive a reward (such as a trip overseas). This is a tangible reward for supporting the organisation’s culture. The behaviour to be rewarded will be determined by the priorities of the organisation at that time, and may include innovation or continuous performance improvement and change.

Build mental models Simply put, the philosophical basis for constructivism and 240

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Mental models are what determine our interpretation of the world.

post-modernism is the view that there is no such thing as objective reality; reality is mentally ‘constructed’ by people.

A mental model, also known as a world view or frame of reference, is what determines our interpretation of the world. Mental models are the mental frameworks and filters that provide meaning to what we experience, and determine how we respond to the information our senses record. At a basic level, mental models determine how we classify the world, primarily through language. When we see something, we determine whether it is a house, an animal, a rock, a person etc. Generally, this occurs in terms of a classification system that is either universal or common to a specific language or culture. It provides meaning to raw data. In addition, we experience things through emotional frameworks: something is good or bad, safe or dangerous, beautiful or ugly etc. These frameworks tend to be value driven and culturally determined; they vary according to culture, religion, language etc. Finally, these filters determine what we pay attention to and what we mentally discard. Walk down a busy street and you will not see each individual person, but when a car speeds towards you, your senses will subconsciously determine that it is a threat and the car will come into focus. Organisations and other groups (such as countries, markets etc) have mental models that dominate how their members perceive the world. In a fast-changing world, cognitive agility, i.e. the ability to 241

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change one’s mental model, is an essential competence. It is necessary to see the world through different lenses. Leaders need to recognise that their world view, and that of other people, can and will change. For example, in the US the automotive market was based on the assumption that people wanted large, powerful vehicles; then came the oil crisis and that mental model turned out to be false, to the great benefit of Japanese automakers. In different parts of the world, people experience the ‘war on terror’ in very different ways. It is the same event, for which different mental models exist. In South Africa, the mental model of the economy varies widely amongst different stakeholders. It ranges from assumptions that the market is best with minimal regulation, to perceptions for the need for extensive state control and even economic ownership. Same issue, different mental models. The dominant mental model determines the strategic direction an organisation follows, based on assumptions contained in that model. Such assumptions and perspectives reinforce each other and need to be consistent both for individuals and organisations. In organisations, these self-reinforcing assumptions determine behaviour, become part of the culture, and are known as organisational orthodoxies. When appropriate, they are a force for productive sustainability, such as a strong belief in quality and continuous improvement. Such a belief fosters deeply ingrained processes in the organisation. However, when the world changes they can become an obstacle to agility. Leaders who want to create agile organisations need to constantly challenge the mental models they have of 242

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themselves, other people and the organisation as a whole, and must disrupt some organisational orthodoxies. Importantly, mental models also act as filters to leaders in selecting what is or is not important. Hence, a leadership mental model that holds that the US auto market wants large, gas-guzzling cars shuts out the possibility that this is no longer the case. Many great organisations have disappeared because their leaders viewed the world through a particular framework that excluded other possibilities. Hence, they did not pick up on the signals that the world around them was changing. Individuals and organisations that open their minds to a different interpretation of the world are likely to cope with change in a far more agile manner than those with a rigid view of the world. Executives help their organisations and individuals Mental models act as filters to to see the world through leaders in selecting what is or is different lenses by creating not important. ‘cognitive dissonance’. They introduce ideas or challenge assumptions so that individuals have to reframe their perspective of reality, i.e. ‘rewire’ their brains. Hence, in the mining industry, if the collective world view is that women are not suited to production management roles, the introduction of a highly effective female production manager will require those who held the traditional view to reframe their view of reality. Reframing reality extends well beyond a specific issue. All internal assumptions held by the individual will need to be consistent with the ‘new reality’.

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Conclusion The most effective way of leading change is to create an organisation that is agile, able and willing to respond to change in the environment. Creating such an organisation is not easy: there are no linear formulae that will take an organisation from here to there. The dynamics of each organisation are different, and emerge as the process unfolds. For those executives who are able to facilitate the process, however, the benefits are enormous. For those who cannot get the chemistry right, the outcome is likely to be extinction at some time in the future. A useful analogy is to be found in the health sector. Primary healthcare and attention to wellness will strongly reduce the expensive curative care required, because people will become ill less often. Similarly, organisations that pay attention to being agile and change-ready are far less likely to require expensive ‘change management’ processes when the world around them changes.

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REFERENCES Chapter 1 1

Snowden, D.J. & Boone, M.E. 2007. A leader’s framework for decision making. Harvard Business Review, November.

2

E. Dostel, et al. 2005. Bioatrix. Self-published.

Chapter 2 1

McKinsey Quarterly. January 2011. http://www.mckinseyquarterly.com/ newsletters/2011_01.html.

2

Ilbury C. & Sunter, C. 2005. Games foxes play, Cape Town: Human & Rousseau Tafelberg.

3

McKinsey Quarterly. January 2011. http://www.mckinseyquarterly.com/ newsletters/2011_01.html.

4

Ohmae, K. 1991. Managing in a borderless world. Harvard Business Review.

5

WBS International Executive Programme in L&D visits, March 2011.

Chapter 3 1

Collins, J. 2001. From good to great. London: Random House.

Chapter 4 1

McKinsey Quarterly. May 2006. http://www.mckinseyquarterly.com/ newsletters/2011_01.html.

2

Lesser E.L & Storck J. 2001. Communities of practice and organisational performance. IBM Systems Journal. www.ibm.com.

3

Interview with Howard Stafford, IBM South Africa.

5

Beinhocker, E.D. 2006. The adaptable corporation. McKinsey Quarterly, No 2.

5

Lafley, A.G. 2009. What only the CEO can do. Harvard Business Review, May.

Chapter 6 1

Gleason, D.; Nkomo, S. and De Jong, D. 2011. Courageous conversations. Pretoria: Van Schaik.

2

Pfeffer, J. 2010. Power play. Harvard Business Review, July – August.

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Chapter 7 1

­ Top companies for leaders 2009; www.hewitt.com/companies. 2

Top companies for leaders 2009; www.hewitt.com/companies.

3

Developing global leadership: How IBM engages the workforce of a globally integrated business, IBM Global Business Services.

4

Bloomberg Business Week: Best companies for leadership, www. businessweek.com, Leadership trends for 2010.

5

Boninelli, I. & Meyer, T. 2011. Human capital trends. Rosebank: Knowledge Resources.

6

Macaux, W.P. 2010. Making the most of stretch assignments. T&D, June.

7

WBS International Programme in L&D, US visit March 2011.

8

Bloomberg Business Week: Best companies for leadership, 2010. www.businessweek.com.

9

Gleason, D., Nkomo, S. M. & De Jongh, D. 2011. Courageous conversations: A collection of interviews and reflections on responsible leadership by South African captains of industry. Pretoria: Van Schaik.

Chapter 8 1

Mark Russell, HR Director, Boehringer Ingelheim South Africa.

Chapter 9 1

Collins, J. 2009. How the mighty fall. New York: Random House.

2

Collins, J. 2001. From good to great. London: Random House.

Chapter 12 1 2

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Collins, J. 2009. How the mighty fall. New York: Random House. Gratton, L. 2007. Hotspots: Why some companies buzz with energy and others don’t. Harlow: Financial Times/Prentice Hall.

3

www.hotspotsmovement.com. June 2011.

4

IBM Institute for Business Value, 2010 CEO survey.

INDEX Page numbers in bold refer to figures. A Ackoff, R. 60 action learning 145–147 action learning teams 106, 147 action plans 29, 31, 61–62, 66 activities focus leadership development 165 transactional 94–95 adversity 143, 152 agility 38–39, 99, 209, 242 alignment 72–73, 94, 171, 207, 212, 217 applying effective change processes 190 appointments 134–135, 140, 165, 215 key leadership 131 architecture, reporting 67, 210 assess organisational readiness 191 assessment 136–137, 139, 213–215 360 degree 188 effective 142 assessment centres 138, 215 assessment of leadership 135 assessment of organisational readiness 206 assessment processes 136, 140 sophisticated 214 assignments 145, 147, 150 attention 62, 84, 120–121, 130, 151, 157, 166, 204, 230, 241, 244 B Barlow World 26 behavioural changes 70, 172 behavioural indicators 158 behaviours executive 228 high-performance 240 safe 166, 175 Beinhocker, E.D 86 Best Companies for Leadership 133

Best Companies for Leadership survey 132 better leaders 130 bias 81, 139 Bidvest 26, 75 Bin Laden, O 117 Bloomberg Business 132 boards 50, 53, 91, 132, 136, 166, 200 talent 153 Borderless World Harvard Business Review 37 boundaries 27, 37, 44, 71–72, 92, 123, 179, 238 brand 43, 54, 119–120, 122 sustainable 120–121 Branson, R 117 budgets 60–61, 66, 80 build mental models 240 building change-ready organisation 221, 222 identity (MVV) 45 tomorrow’s leaders 129 burning platform 63, 157, 175–176, 182, 190, 192 business acquired 80 commodities 44 core 76 current 27, 239 global 130 good 233 independent 84 integrated 131 modern socio-political context of 163 non-core 26, 91 normal 148 organisation’s 44 parent 74 primary 84 secondary 166 business areas 141 business arena, defined 75 business case criteria 58 business cycle 97 business development function 86

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business-driven action learning 146 business environment 22, 33, 41, 72, 99, 157 complex 85 modern 120 business environments, changing 162 business models 87, 223, 237 effective 55 new 35, 238 business offerings 237 business partners 95, 211 business plan 77 business planning 203 business process, mission-critical 130 business processes 80, 208–210 business projects 147 business results 165, 239–240 business schools 7, 94, 125, 145, 223 business strategy 76, 105, 107, 130, 142, 164, 217 business unit executives 82, 90, 92 business unit functions 79 business unit leadership development teams 141 business unit level 90, 95 business unit specialists 94 business units, multiple 91 C capability 55, 140, 222 executive 3 capacity 125, 152–153, 206 capital 26–27, 35, 75, 88, 91 social 70 career development 138, 140, 142, 165 careers 108, 118–119, 138, 146, 152, 217 causality, multiple 12 centralisation 19, 77–78, 82 centralising transactional processing 192 centres 74, 76, 84, 94–95, 138, 158, 195, 225 administrative processing 76 corporate 74–76 profit 75, 82–84

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centrifugal forces 72–73 CEO (Chief Executive Officer) 10, 11, 23, 50, 53, 54, 69, 71, 76, 80–82, 87, 89, 91, 93, 97–100, 101, 102, 106–111, 118, 132, 141, 142, 148, 152, 154, 191, 211, 214, 216, 218, 221, 224, 231, 235, 236 CEO, guidelines for 109 challenges, organisational 125 champions 57, 192, 195 change agents 194, 196, 199, 219–220 first-order 173 second-order 173 third-order 173 cycles of 176 leader 194–195, 199 leading 169 magnitude of 174 management 69, 141, 169, 172–173, 175, 206, 232 phases of 178 pressures for 175 process/es 174, 190, 244 projects 169, 171 resistance to 184 strategy 57–58, 181, 189, 200, 204 transformation 172 transformational leadership 169 chemistry 11–12, 62, 99, 143–144, 187, 201–202, 224, 244 Chief Marketing Officer 93–94 client orientation 81 clients 34, 38, 46, 56, 69, 74, 80–81, 93, 95, 142, 193, 227 coaching 115, 124, 138, 145, 149, 152, 160, 217 executive 149 collaboration 161, 225, 227, 239 collaborative processes 237 Collins, J 54, 180, 187, 222 comfort zones 95, 136, 143, 148, 182, 235 commitment 154, 159, 181–182, 191, 201, 226 commodity 73 central 74 commodity abundance 39 commodity price 38

INDEX

commodity shortage 39 communication 55–56, 105, 161, 218–219 communities 47, 70, 72, 107, 120, 163, 212 Communities of practice and organisational performance 70 companies, global 75, 78, 154, 203 competition 11, 79, 91, 110 competitors 34, 37, 104, 107, 176, 223, 237 complacency 33, 176–177, 179–181, 232 complex adaptive systems 13–14 complex change 11, 187 complex problems 4–6, 12–13, 20, 235 complexity 4, 12, 19, 53, 70, 85, 132, 169, 211, 217, 238 concise process 25 conditions 47, 128, 153, 201, 225– 227, 233 confidence 136, 196, 214 connect 1, 57, 103, 120, 157, 221– 222, 235 connection 7, 58–59, 70–71, 88, 157 connectivity 72, 120, 144–145 consequences 13, 125, 165 unintended 1, 13 constituents 116, 121–122 consultants 12, 81–82, 172, 174, 180 consultation 34, 200, 239 context, strategic 238 continuous improvement processes 176 control 19, 38, 44, 72, 77, 82, 96–97, 126, 184, 186, 201 central 76–77 conversation matrix 233 conversations effective 231–234 formal 231 rolling 28–29, 50, 107, 231 corporate entity 76, 91, 93–94 corporate executive role 90–91 corporate executives 90–92 corporate leadership development team 141 corporate specialists 93–94 corporate strategy agenda 34

cost allocation process 81 cost centres 82–84 costs, overhead 81, 84 countries 37, 39, 44, 48, 52, 54, 241 creating a leadership pipeline 139 creating leadership DNA 155 creation 88, 184, 192, 237, 240 creative leaders 235 creativity 64, 81, 202–203, 234, 236, 238 credo 47 crisis 6, 33, 155 cultural fit 134, 215 culture high-performance 65, 160, 163 organisation’s 240 current reality 27, 32, 53, 61, 63, 65 current staff, appointment of 213– 214 curve, sigmoid 176, 178 cutting-edge processes 175 D dangers 62, 66, 81, 109, 175, 177, 205, 218 dealing with the intangibles 101 decentralisation 19, 73, 77, 193 decisions difficult 199, 238 executive 200 innovative 27 defining leadership behaviours 167 degree 74, 85, 94, 162, 164, 200 degree assessment 138, 215 degree of stability 46, 167 denial 33, 63, 179–181 derailers 135 design strategies 189 designing organisations box 70, 80, 87 determining strategic thrusts 48 development, product 73, 236, 239 development methodologies 144– 145 difference 4, 52, 113, 115, 118, 155–156, 173 dimension 69–70, 148 direction, strategic 242 Dinokeng Scenarios 39

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discretion 85, 89 diversity 61, 109, 135, 162, 233 DNA 116, 152, 154, 164, 166, 173, 190, 221, 223 organisation’s 48, 166 Dostel, E 8, 17 drivers 10, 236 dynamics 11, 15, 110, 169, 189, 191, 217, 219, 244 dysfunctional behaviour 10, 167 E EAP (Employee Assistance programme) 182 economies 35, 38, 75, 77, 103, 242 effective strategy formulation 29 effectiveness 8, 76, 83, 87, 99, 106, 208–209, 218 cutting-edge functional process 209 efficiencies 77–78, 86–87, 144, 193 efforts 29, 239 emergence, principle of 11, 12 emergence 11–12, 14, 35, 223 emergent processes 191, 200–202 emotional issues 232 emotional level 173, 176, 182, 185, 203 endeavours 121, 128–129 energy organisational 14–15, 92, 174 positive 15, 186 engagement 34, 122, 141, 181, 218–219 ongoing 218 entropy, principle of 14 environmental scanning 33–34, 102 excellence 88, 154, 223 execution 23, 48, 132 executive coaches 149 executive egos 109 executive levels 98, 140, 211, 215 executive PAs 120, 127 executive retreat 23 executive task, essential 139 executives effective 224 essential strategic decisions 45 female 228

250

high-placed 231 important abilities 19 important paradigm shifts 6 role of 8, 99, 150, 227, 238 strategies 164 subsidiary 92, 211 expanding roles for women 151 expansion 58, 91 expectations 34, 37, 77, 95, 97, 193, 217 experimentation 86, 162, 235 experts 33, 121, 169 exposure, experiential 149 external environment 17–18, 169, 178, 222–223 F facilitators 101, 196–197 feedback 105, 138, 140, 146, 160, 218 filters 102, 109, 241, 243 finance 66, 73, 94–95, 98 financial crisis 7, 30, 40, 79, 103, 133, 142, 144 financial performance, short-term 163 Financial Times/Prentice Hall 225 focus, organisation’s 59 followers 116–117, 135 formal development processes 153 formal leadership development 142 formal leadership development process 144 formal meeting processes 210 formal processes 150 formulating strategy 25 formulation 23, 26, 41, 50, 64, 110 Fortune 102, 129 Foxy futurists 40 framework/s ix, 17–18, 52, 61, 85, 158, 164–165, 171, 199, 208, 241, 243 following 17, 21, 156, 178 leader’s 4 leadership competency 159 freedom 19, 74 frozen spots 226 future challenges 132 leaders 133

INDEX

search 202–203 futures, possible 38–39, 41, 103, 231 G Gandhi, M 117 Gates, B 117 GEDP (Global Executive Development Programme) 141 generic process 32 steps 189 geographies 27, 29, 32, 35, 37, 41, 43–44, 148 GIE (globally integrated enterprise) 131 Gleason, D 118, 119, 152 Global Executive Development Programme (GEDP) 141 governance processes 153 Gratton, L 225–226, 232 gravity 72–73, 174 centre of 22, 46, 49, 110 groups 11, 14, 70, 119, 146, 150, 202, 241 leaderless 14 small 202 growth 27, 35, 42–43, 51–52, 54, 109 economic 35–36 organic 44 growth strategies 29, 32, 44 guidance 49, 128, 152 guidelines for CEOs 109 H Harvard Business Review 4, 37, 97, 111, 126 Hay Group 151 Hewitt Associates 129 high-potential leaders 147 developing 61 high-profile corporate leaders 115 HIV/Aids 175 hotspots 225–227 emergence of 226, 228 HR business partners 83 HR Director 83, 94 HR function 59, 150, 154, 218 HR leaders 58–59, 212

HR processes 117, 164, 177 traditional 89 HR selection processes, traditional 134 hubris 109, 180, 222 I IBM 42, 48, 70, 72, 130–131, 144, 151, 155, 207 IBM Global Business Services 131 IBM Institute for Business Value 236 Identifying leadership talent 153 identity 25, 29, 74, 80, 121, 123, 152, 161 organisation’s 25, 46 igniting purpose 226 Ilbury, C 25 Immeldt, G 60 Implement leadership strategies 164 implementation strategy 164 detailled 200 implementing change box 203 implementing strategy 51 implications 4, 9, 34, 36–38, 57, 72, 105, 200, 231 importance/effectiveness framework 209 important roles, following 196 in-house programmes 145–146 incumbents, current 210 industry 28, 48, 65, 119, 124–125, 146, 149, 237–238 influence business performance 70 informal leadership development processes 150 informal processes 150 ingrained processes 242 innovation focused 238 new 237 product 237 process 237 institutionalising leadership 134, 156–157 in-sourcing 76 intangible factors 101, 109–110

251

STRATEGY, LEADERSHIP & CHANGE

integrated leadership development 141 interact 11, 148, 211, 225–226, 235 interaction 6–7, 11, 121, 144–145, 223, 225–226 interactive processes 121 interconnectedness 10, 13, 16 International Executive Programme in L&D 48 interpersonal processes 122 interventions 9, 12, 16, 217–218 interviews 100, 152, 193, 214 introduction 1, 10–11, 21, 69, 95, 113, 169, 171, 177, 243 investment 26, 88, 91, 142, 144, 147, 182, 193 Invictus 122 J Jack Welsh’s leadership philosophy 166 Johnson & Johnson 47, 143 Jacques, E. 85 journey 167, 201, 218 judgement 186, 214–215 K Kerzner, S 118 key strategies 32, 64–65 King, M.L 117 L Lafley, A.G 97, 100, 111 large executive bonuses 122 leader learner 145 leaders appointing 147 autocratic 125 current 133 effective 137 functional 90, 98, 194 good 113, 124 great 143, 163 individual 63, 154–155 learner 148 new 228 right 139

252

selecting 158 successful 117, 152 women 151 leadership building 156 building organisational 155 creating DNA 155 creative 235–236 development box 141, 151 executive 129 extraordinary 113 global 131 implementing 131 individual 153 individual’s 139 institutionalise 156 institutionalising leadership 157 maintenance 115 new 132 organisation’s 102 personal 117, 159 pipeline 139 strong 58, 97, 172, 181, 187, 216 sustaining 155 training 158 leadership abilities 129 leadership advancement 135 Leadership and Management Academy 141 leadership arena 217 leadership authenticity 233 leadership behaviours 123, 132, 156, 158, 165 leadership capability 155 critical 178 leadership capacity 155 collective 155 leadership cause 117 leadership challenges 157 leadership characteristics 235 leadership clones 167 leadership competence 133 leadership competencies 158, 164–165 nurture core 156 leadership competency framework 159 leadership competency model 133, 167

INDEX

leadership deficit 140 leadership development 41, 94, 98, 141, 144–145, 152, 154 addressed 154 internal 131 leadership development interventions 165 planning 144 leadership development programmes 154 leadership development strategy 142 leadership development strategy methodologies 144 leadership development strategy principles 142 leadership DNA 155 leadership energy 15, 54, 57, 116, 187, 219 considerable 57, 181 extraordinary 206 leadership equation 151 leadership excellence 131 leadership framework 164 leadership gaps 139 leadership level 42 leadership performance 65, 155, 158, 160, 164 leadership performance framework 158 leadership philosophy 134, 157, 165 company’s 158 leadership pipeline 131, 139, 150, 153 leadership positions 115, 125, 134– 135, 140, 165 leadership practices 154, 223 leadership requirements 115, 218 leadership research 161 leadership responsibilities 125 leadership roles 11, 98, 115, 129, 135 leadership skills 130, 139 leadership strategies 130, 154, 156 leadership styles 18, 132–133, 137, 151, 157, 178, 231 leadership success 134 leadership succession 140 leadership surplus 140 leadership survey 132

leadership sustainability 167 leadership talent 139–140 leadership teams 40 leadership trends 133, 151 leadership values 165, 167 learning 13, 70, 140, 144–149, 152 legacies 115, 119, 125 lenses 19, 116, 226, 241, 243 levels of systemic inquiry and intervention 16 life cycle, organisation’s 132 linear change processes 4, 172 linear process 5–6, 22, 58, 187, 205, 224 lines, reporting 82 Little, A.D 81, 196 London Business School 161, 225, 232 long-term thinking, strategic 136 M manage leader behaviour 229 management, executive 211 management processes 209–211 management teams 62, 89 managers divisional 83 individual 78, 166 managing paradox 18 Mandela, N 117–118, 121 manufacturing 10, 44, 73, 208 matrix 232, 233 maturity 177–178 mavericks 128 mechanistic process 150 meetings executive 59 formal 233–234 mental models 18 mentee 152 mission, vision and values (MVVs) 29, 45–46 model 17, 43, 80, 122, 164–165, 167, 242 decentralised 77 Monitor Group 36–37 monitoring leadership performance 153 morale, deterioration of 213–214

253

STRATEGY, LEADERSHIP & CHANGE

multi-business company 26 N natural work teams 61, 160 network 70–71, 120, 123, 141 internal organisational 149 neutral process 198 O obstacles 54, 102–104, 106, 109, 132, 143, 151, 169, 196, 209, 224, 242 common 108 OD (organisational development) 175 Ohmae, K. 37 operational issues 85, 209 operations, processing 76 optimisation 10, 71, 201 optimisation, principle of 10 optimise 8, 11, 108, 236 opulent 229 organisation benefits 78 organisation changes 132, 178, 219 organisational 3, 70, 166, 180 organisational activity 239 organisational agility 40, 174, 221, 230 organisational alignment 205 organisational authority 194 organisational balances, creating 98 organisational boundaries 71, 146, 161 organisational capabilities, required 55 organisational capability 54 organisational centre 174 organisational change 1, 15, 176, 179 organisational collaboration 159, 161, 164 organisational complexity 235 organisational conflict 77 organisational context 9, 12–13, 42 fast-changing 164 organisational contexts, modern 164 organisational culture 11, 42, 128, 134, 164, 169, 190, 233, 235

254

organisational design, high-level 108 organisational design process 73 organisational DNA 113 organisational dynamics 80 organisational dysfunction 10 extreme 75 organisational effectiveness 220 organisational goals 72, 124 organisational identity 44, 46 organisational imperatives 164 organisational level 125 organisational members 178, 180 organisational memory 106 organisational models 36 organisational orthodoxies 242 organisational paradoxes 71 organisational performance 70–71 organisational performance improvement 150 organisational performance problem 13 organisational pool 139 organisational projects 110 organisational readiness 189, 191, 193, 206 organisational reconfiguration 205 organisational renewal 167 organisational roles 89 organisational scorecards 49 organisational strategy 19, 163 new 215 organisational strategy development 101 organisational structures 69, 71, 224 organisational structuring 69 organisational symbols 228 organisational systems architecture 9, 16, 17 organisational transformation, true 173 organisational turnarounds, successful 172 organisations agile 103, 242 change-ready 156, 169, 221–222 client 80 complex 71, 90, 208 designing 69 effective 15, 72, 222, 224

INDEX



enabled 237 external 237 global 135, 148, 155 global pharmaceutical 142 great 106, 232, 243 high-profile South African 229 independent 223 ineffective 224 integrated 74, 96 internal 97, 111 large 140, 174, 223 manufacturing 10 modern 184, 192 multi-divisional 62 multi-million rand 45 networked 72 new 43, 184 normal 85 optimal 69 outsourcing 97 parent 26, 84, 94 political nature of 79, 84 reconfiguring 99, 169, 205–206, 219 services 42 single 72 single business 90 specialist 223 successful 33, 72, 115, 132, 134, 156, 160, 177 sustainable 48, 103, 107, 131 traditional 72, 95, 229 transformed 228 transforming 162 very non-hierarchical 195 virtual 72 world-class 48 organisation’s ability 54, 236 organisation’s behaviour 98 organisation’s priorities 230 organisation’s propensity 232 outcomes 22, 29, 32, 110, 191, 194– 195, 201, 203, 206, 237, 244 outsider, independent 210 outsourced partners 96 outsourcing 44, 55, 76–77, 96 P paradoxes 18–20, 71–72, 75, 174

parameters defining organisational 104 strategic 238 participants 138, 140, 146, 148, 150, 201, 203, 207 participation, lack of 51 partnerships 76, 88, 96–97, 223 passions 54, 89, 160, 176 performance executive 98 individual 58–59, 149 performance management 32, 141, 227, 240 performance management experience 218 performance management process 59, 67 performance management system 15, 60, 165 person 5, 89, 110, 121, 132, 135, 137, 139, 194, 213, 217, 241 person specifications 212–214 personal branding 119 personal effectiveness 159, 227 personal time 130 perspective 26, 109, 235, 242–243 pervasive internal organisational environment 18 Pfeffer, J 126 phases, dangerous 177, 179, 180 philosophy 15–16, 72, 78, 144 organisation’s 44 players 12, 41, 96, 99, 197, 227 significant 225 policies, strategic 98 policy formulation 78, 93–94 political process 22, 108, 137, 198 portfolio leadership 123 portfolio leadership balance 124– 125 position power 126–127 positioning 27, 29, 32, 41, 78, 80, 91, 106–107 external 22, 27–28 positions 29, 104, 118, 127, 133–134, 147, 153 executive 140 positive responses to change 186 power 35, 72, 126–127, 134, 224 role of 125–126

255

STRATEGY, LEADERSHIP & CHANGE

sources of 161 practice, communities of 70, 223 predictor 136, 138 prescribe change processes 199 presentations 33–34, 147 pressures 3, 28, 36, 51, 56, 59, 98, 120, 175–176 primary processes 191 prioritise 208 problem issues 65 problems complex 3, 4 linear 4 operational 5, 12 organisational 12 strategic 1 systemic 3 Proctor & Gamble 111 product/service development 73 production management roles 243 professional competence 81 project management processes 204 projects 62, 95, 106, 145, 147, 160, 173, 195, 197, 227 psychometric assessment 137–138, 215 purpose, organisation’s 49 R rainmaker 230 Random House 54, 187, 222 rational processes 101, 106, 109–110 reconfiguration 205, 218–219 reconfiguration process 216–217 reconfiguring 205–206, 217 reconfiguring organisations 205 redesign, even organisational 192 redesigning organisational systems 7 redesigning processes 172, 192 reinforce leadership behaviour 166 research organisations 88 resist change 184–185, 192 resources, allocation of 26–27, 108 responses 6, 22, 64–65, 99, 138, 140, 185–186 responsibility, important 140 retrenchments 182, 185, 206

256

revenues 237, 239 review 42–43, 61, 66, 100, 191, 208, 210, 218 review key processes 206–207 rewards 115, 123, 126, 128, 165–166, 175, 183, 239–240 risks 44, 80, 91, 108, 119, 121, 139, 166, 175 robustness 39, 41 role players 90, 154, 167, 197, 212 role profiles 212–213, 217 roles changing 173 clear 154 critical 10, 92 defined 154 designing 212 essential 50, 91, 162 exclusive 82 following 90, 194 fundamental 97 hands-on 92 higher-level 88 important 67, 196, 224 individual 197 key 136 leader’s 240 maintenance 148 mentoring 149 new 96, 151, 214, 217 normal 62 permanent 147 pivotal 152 policeman 93 primary 21 professional 95 strategic 62 substantive 147 well-documented 211 roles of executives 90, 129 S safety 3, 166, 183 organisation’s 3 Sasol 88 scenario-building process, traditional 40 science 69, 108, 111, 129, 135–136, 186

INDEX

scenario building 38 scorecards 28, 59, 61, 66–67, 89 sectors 27, 36–37, 43, 76, 99, 146, 237–238 agro-processing 38 self-organisation, principle of 13 senior executives 32 organisation’s 227 service functions 73, 79, 81, 83 service-level agreements 80 services value chain 73 shaping organisational culture 224, 235 shared services 94–96 Shell 23, 39, 155 shotgun approach 142 Siemens, A.G. 48, 87, 203 Sigmoid curve 177 significant organisational failure 222 solving problems operational 7, 11 strategic 1 sophisticated organisations 136, 186 sources 30, 36–37, 65, 69, 145, 214–215, 227 space 85, 97, 123, 128, 137, 180, 234, 237 competitive 97, 99 specialists, functional 211 sphere of influence of transformational leaders 124 sponsor 194–195, 199 stakeholder analysis 32, 34 stakeholder engagement 189–190, 206 stakeholders, important 97–98, 197 Stanford Business School 126 stockholders 47 strategic conversations 29, 34 ongoing 107 strategic decisions 44, 106 strategic problem, real 146 strategic workshop 38 annual 56 strategy art of 22 assessment 136 best corporate 26



business unit 26 cohesive 74 company 29–30 corporate 25–26, 62, 91, 94 detailled execution 49 effective 1, 108, 221 effective implementation 22 final transformation 201 fine-tune 105 formulation process 32 group 80 human capital 65 implementation approach 61 implementing 50, 61, 64, 106, 110, 113 implementing HR 83 integrated 141 internal resourcing 27–28 key implementation 61 long-term 99 modified 171 organisation’s 153 organising 78 profound 42 rational 109 sound 102 traditional 203 turnaround 148 well-crafted personal branding 119 winning 23 strategy document 107 strategy execution 21, 50 strategy formulation, successful 23 strategy formulation exercise 49 strategy formulation process 32 strategy implementation 50–51, 61–62, 67, 101, 110, 132, 142, 150 effective 60, 153 successful 22 strategy implementation approach 61 strategy implementation process 60, 66–67, 147 strategy implementation process 60 strategy initiatives 62 strategy process 21, 27, 66, 102, 104, 106, 109 strategy review 67 strategy-setting process 108

257

STRATEGY, LEADERSHIP & CHANGE

strategy stress tests 30 strategy workshop 28, 34, 46 annual 28, 107 Stratified systems theory 85 structured development processes 142 structured processes 14, 140 subsidiaries/business units 75 success criteria, identifying leadership 156 succession planning 139–140 Sunter, C. 25, 40, 40, 121 support functions 78 support innovation 222, 235 support services 78, 80, 216 sustainability 28, 36, 99, 113, 133, 139, 166, 221–222 long-term 19, 49, 59, 163 symbols 120–121, 183, 228–229 symptoms 3, 17 systemic 1, 20, 22, 203 systems, structural 9, 17 systems thinking 1, 7, 18, 205 T talent management strategy 94 total 153 team effectiveness 143, 159–160 team members 11, 61–62, 89, 160, 227 executive 211 teams, strong 160–161 technology, new 11, 40, 88, 173, 176, 207, 238 tensions 28, 58, 71, 79, 81–82, 98, 106, 108 themes 7, 32, 152, 203, 221 threats 27, 56–57, 102, 109, 175, 199, 241 potential 40, 127, 199 time commitments 149 time horizons 27, 38, 49, 59, 103 rolling three-year 28 very long 39 tools 1, 11, 66, 138, 193 top 11, 53, 87, 130, 133, 172, 195, 203, 221 top leadership companies 151 top leadership trends 151

258

top management 28, 51–52 track record 128, 136, 214 trained assessors 138 transformational leaders effective 65, 122 successful 125, 127 transformational leadership skills 219 tumultuous times 37 types of problems 4 typical responses to uncertainty 186 U Ulrich, D 161 understanding context 33 Unilever 76, 95, 151, 155 unrelated change process 185 unintended consequences, principle of 13 V value chain 35, 53, 55, 72–74 value creation processes 81 values market 36, 113 organisation’s 191 strategic 139 virtual organisations 74 visioning process 64 W web, spider’s 9 websites 45, 56 well-conceived process 101 well-managed change process 134 well-qualified organisational development 175 Wits Business School 207 women 47, 149, 151, 243 work, levels of 85 workforce 65, 69, 131 workout process 60, 62, 201 workshops 14, 28, 38, 182, 200–201, 208

INDEX

facilitated strategy 45 world corporate 118, 120, 176 world economies 35 Y Young leaders 128

259

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