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1

Welcome to the Denison Certification Workshop

Building and Sustaining High Performing Organizations and Leaders

Denison Consulting | March 2015

2

Workshop Schedule

March 11, 2015

NETWORKING BREAKFAST

Welcome and Introductions Culture & leadership Denison Model and Link to Performance

Path to High Performance Overview of the change process framework Discovery Planning and overview of Denison tools Diagnosis Analysis Honest Conversation Action Planning Sustainable Improvement

Case study DOCS an DLDS results interpretation/analysis Prioritization and action planning

(Breaks and Lunch provided)

GROUP DINNER

March 12, 2015

NETWORKING BREAKFAST

Highlights and re-cap of Day 1

Transformation & Turnaround

Strategic Alignment

M&A

Leadership Development

Wrap-up and Q&A

(Breaks and Lunch provided)

CONCLUSION

3

Path to High PerformanceWhy is culture

important to the performance of your

organization?How can we ensure

effective and sustainable culture

development?

What is your current state?

What is the impact?

How do we translate results

into thoughtful actions?

What is data telling us?How do we create

common understanding?

4

TRANSFORMATION & TURNAROUND

5

Private Equity Companies

What is the link between culture and performance?

49PE Portfolio Companies

103 separate lines-of-business (P&Ls)

a)Completed a Denison Culture Survey prior to January 2014

b)Financial data was available for the same time period as the Denison Culture Survey

Study sample includes... Inclusion criteria…

Methodology

6

Growth Metric

Growth metrics provide an apples-to-apples point of comparison within a diverse sample of companies representing various industries, sizes, etc.

Rolling averages provide a stable estimate:

a) EBITDA Growth*

b) Sales Growth

Focus on Growth

*Two outliers were excluded from the EBITDA Growth analysis

3-year rolling averages(Average growth over a 3 year period)

Methodology

7

Link to Growth: Top vs. Bottom Companies

Avg. EBITDA Growth

Avg. Sales Growth

7%

-3%

17%

5%

2.5X

+5X

2.5x EBITDA Growth

+5x Sales Growth

Bottom Half Top Half

8

Link to Growth:Predictive Analysis

Across P&Ls, the Involvement trait was most strongly and consistently correlated with EBITDA Growth & Sales Growth

Where should we stick the crowbar?

9

Culture Change over Time

+ 13 pts. on average from 1st to 2nd culture survey

1st Survey 2nd Survey

10

BUSINESS CASE STUDY:Earthlink

11

What would excite you most about integrating Company A? Company B?http://youtu.be/C4Cv6fL-km8

12

What would concern you most about integrating Company A? Company B?http://youtu.be/8DLv5GjEJ5s

13

Fast Forward….Emphasizing Strategic Alignment

14

Culture Development remains a challenging journey

as we work to unite and transform our business.

The need to: Led to:

Define the desired customer experience

Customer segmentation and re-organization

Design integrated processes and systems

Corporate process improvement team and OSS efforts, training, and education

Empower teams to drive change

Now “teams” reported as the primary way work gets done

In 2013 . . .

15

Mission (Vision, Strategy & Goals) are becoming less clear or

being viewed with skepticism.Impact in the market is suspect.Less confidence in our ability to

work effectively across the organization to create the

necessary change.Employees feeling less valued and

skill deficits are a concern.

16

Strategic Clarity & Alignment

17

MERGERS & ACQUISITIONS

18

The M&A Landscape

This looks great on paper!

“I remember saying at a vital board meeting where we approved this, that life was going to be different going forward because they’re very different

cultures, but I have to tell you, I underestimated

how different”Richard Parsons, Time

Warner

19

Worldwide M&A activity

$3 trillion

70% of deals do not realize

the originally stated goals

“Buying is fun, merging is

hell!”

20

Keeping Culture ‘front & center’in the M&A conversation

21

Managing culture throughout the M&A Process

TRANSITION

Transition team

to plan integration

INTEGRATION

Integration effort

to create‘one’ business

CULTURAL DUE DILIGENCE

Define the target & Reduce the risks

DATA DESERT

Deal

22

Growth Strategy

Internal Integration

STRATEGY

CULTURE

23

What level of integration do we need?

ABSORPTIONTarget companyconforms to acquirerCultural Assimilation

TRANSFORMATIONBoth companies findnew ways to operate

Cultural Transformation

PRESERVATIONTarget companyretains independenceCultural Autonomy

REVERSE MERGERUnusual case of

target firm leadingCultural Assimilation

BEST OF BOTH

Additive from both sidesCultural

Integration

LOW HIGH

LOW

HIG

H

Degree of change in acquiring company

Deg

ree

of c

hang

e in

targ

et c

ompa

ny

Adapted from Marks and Mirvis (2010)

24

What is the Starting Point?

Interviews to surface Leadership

mindset/beliefs (planning, decision

making, communication, etc.)

Employee insights

Archival Data

25

Identifying Potential

• Areas of leverage/synergy: Practices, habits and behaviors that each organization seem to value and demonstrate

• Best practices: Practices, habits and behaviors that one organization has that are missing or underutilized by the other organization(s) – that can be captured and shared

• Blind spots: Practices, habits and behaviors where none of the organizations have clearly demonstrated capabilities - and that need development to maximize performance

The more color we see in any given area – the more likely leaders and employees can articulate the beliefs and habits that have driven the high

level of clarity and alignment indicated

26

Clarity & Alignment:A double-edged sword?

Best Practice

s?

Wealth of Arrogance

?

27

BUSINESS CASE STUDY:RJR

28

Consumer Products Co.

Merger of 2 consumer products companies “We’re two old companies with rich histories”

Strong competitors with one another “We are constantly fighting each other for shelf space and brand

recognition”

Organization’s leaders see value in using the Denison Model “We need help and using a model that neither organization has used is

good”

29

Consumer Products Co (cont.)

Decided not to conduct Denison Culture survey just prior to - or immediately after the merger “There will be a lot of turmoil in the first 120 days. We know there will be

uncertainty and confusion”

New leadership team is a combination of execs from each legacy company “We want this to be viewed as a ‘merger of equals’ – not an acquisition”

Seeking a ‘best of both’ approach to integration “Together we can be much stronger than either of us on our own”

±6,500 employees (post-merger) “We have to get this right, our market is not growing and cost savings and

research are what we need.”

30

The Goal:

To create a Single, High Performing Organization

31

Consumer Products Merger

How might you utilize the Denison Model without conducting the survey in the early stages of the merger*?*Early stages = first 6 - 9 months of the integration effort

32

Habits & Routines

100 Most Powerful Women: Susan

Ivey

“For those history buffs among us, or for anyone who has ever played a sport or cheered for your favorite team…you know what it takes to win battles…you know what it takes to win championships. It is a camaraderie, an esprit de corps, a common interest. For us, its company culture – the way we think…the way we act…and the way we operate as an organization. Show me an army, a team or a company that has achieved greatness…that have been winners…and I’ll show you a group of individuals with a well-defined culture, brought together in a common interest, with clear goals and a passion for success.”

Ivey has maintained the company's market share,

and the company has consistently beat analysts'

expectations. The stock has risen 33% since her post-merger takeover in 2004.

33

A Habit – using the culture model for framing activitiesNew company – A Single High-Performance Culture

Sales force integration

Launched Core Values

Immediate all-employee meetings

100 Day Focus Groups

Formed High Performance Culture integration teams

Defined Vision and Roadmap

34

9 Months Post-Merger

35

Did we mention…

Integration of 1,200 new employees, equipment transfers, facility closings

Continuous Productivity Improvement initiatives launched

Replaced 70 systems with SAP

New business/portfolio strategy

Stock price up SUBSTANTIALLY Pre-merger stock price of $57.00 Immediately after merger $70.00 18 months after the merger: $104 -$115

Dividend up to $5 per share annually Exceeded all key financial and market-share targets Resulted in highest-ever performance bonus payout to employees

36

BUSINESS CASE STUDY:Cultural Due Diligence

37

Cultural Due Diligence

ExternalStakeholders

Social Media& Public Data

HR Data On-Site Deal

HighLowInvasiveness

External InternalData location

38

Understand your culture first

Assess your own culture1

Define strengths you are trying to build2

Define the limitations you are trying to overcome3Define the ideal culture for your target acquisition4

CDD FRAMEWORK

39

Clarity the end state

ABSORPTIONTarget companyconforms to acquirerCultural Assimilation

TRANSFORMATIONBoth companies findnew ways to operate

Cultural Transformation

PRESERVATIONTarget companyretains independenceCultural Autonomy

REVERSE MERGERUnusual case of

target firm leadingCultural Assimilation

BEST OF BOTH

Additive from both sidesCultural

Integration

LOW HIGH

LOW

HIG

H

Degree of change in acquiring company

Deg

ree

of c

hang

e in

targ

et c

ompa

ny

Adapted from Marks and Mirvis (2010)

CDD FRAMEWORK

40

“We are acquiring a firm. How do we make sure

there will be a good culture fit?”

CULTURAL DUE DILIGENCE1. Inform strategy of deal process2. Highlight integration challenges

41

Social Media Analysis

Employee Generated

SocialMediaData

COMPETITORAnalysis

CultureProfile

Estimate

QualitativeCommentTHEMES

1

2

3

4

5

Overall Culture Work-life Sr Mgmt Compensation Career

TARGET Competitor A Competitor B Competitor C Competitor D

40%

55%49%

39%

71%

87%

43% 45%

36% 33%

Recommendas employer

CEO approval

Talent

Teamwork/

Training

Career Conflict

CustomerFocus

Industryleadership Strategy

GoalsSr. mgmt

Alignment

Marketing

Values

CDD FRAMEWORK

42

Social Media Analysis

Talented and hard-working people Overall healthy culturePay & benefits / Work-life balance

Unclear future directionTalent management challenges

Quality of products Employee discounts

SilosShort-term focusLeadership challenges

Acquiring Firm Target Firm

Cultureprofile

Estimate

QualitativeCommentThemes

80% recommend as an employer 40% recommend as an employer

CDD FRAMEWORK

43

External Stakeholder Interviews

ACQUIRERFormer Executives

Former Employees Suppliers

Customers

Channel partners

TARGETFormer Executives

Former Employees Suppliers

Customers

Channel partners

Semi-structured interviews with various stakeholders including previous employees to understand the target firm’s culture

CDD FRAMEWORK

44

HR Data & Previous Survey

Survey (Data)

Mapping

Comment Analysis

HR Data Review

CDD FRAMEWORK

45

HR Data & Previous Survey

ArchivalEmployee

SurveyMapping

QualitativeCommentAnalysis

Acquiring Firm Target Firm

Autonomy/

Talentmgmt

Teamwork/Collaboration

Culture

InnovationIndustryleadership

StrategyLeadership

Values Flexibility Teamwork/

CustomerProducts

CDD FRAMEWORK

46

Internal Stakeholder Interviews

ACQUIRER

Leadership TeamMiddle ManagersDeal Team

Sample of employees

TARGET

Leadership TeamMiddle ManagersDeal Team

Front Line Employees (sample)

Interviews with current leaders, managers, and employees to identify the target firm’s cultural strengths and weaknesses

CDD FRAMEWORK

47

Internal Stakeholder Interviews

Semi-structured interviews with the transition Team and leadership

ABSORPTIONTarget companyconforms to acquirerCultural Assimilation

TRANSFORMATIONBoth companies findnew ways to operate

Cultural Transformation

PRESERVATIONTarget companyretains independenceCultural Autonomy

REVERSE MERGERUnusual case of

target firm leadingCultural Assimilation

BEST OF BOTH

Additive from both sides

Cultural Integration

LOW HIGH

LOW

HIG

H

Degree of change in acquiring company

Deg

ree

of c

hang

e in

targ

et c

ompa

ny

Adapted from Marks and Mirvis (2010)

Target’sexpectation

THE END STATE REVISITED

This Acquisition

CDD FRAMEWORK

48

Synthesis

1. The points of synergy Passion for the products and customer Strong relationships Deal in-character for the acquiring company

2. Cultural differences Speed of decision-making and operations Emphasis on values and people

3. Key integration challenges Different integration expectations Management and organization structure Branding of retail stores Talent management

49

LEADERSHIP DEVELOPMENT

50

BUSINESS CASE STUDY:Silicon Valley HR Executive

51

Background

Sr. Vice President of Human Resources entering a 12 week leadership development program

Program goal is to gain initial insights about their leadership capabilities Program includes:

approximately 20 participants a combination of on-site training Action Learning team assignments individual activity

Each leader receives their 360 feedback prior to the first on-site meeting

Combined Other Raters3 Peers7 Direct Reports1 Boss3 Other

52

53

54

55

Thought Questions

What are your initial impressions of this leader? What might be some reasons or possible explanations for the

feedback this leader is receiving? What does the feedback from each sub-group (Peers, Direct

Reports, Boss, Others) tell us about the leader? What would you recommend to this leader to help him/her

move forward with the feedback?

56

57

58

59

60

61

62

BUSINESS CASE STUDY:Culture & Leadership DevelopmentAt a large public institution

63

Background

Going through a lot of change, with more coming Budget & resource constraints Restructuring:

Consolidating roles, functions, changing reporting structures

Utilizing both OCS & LDS

64

Unit X

Largely blue collar workforce in service and maintenance positions

Wide gaps between staff and leadership

Largely impacted by org restructure

65

Unit X

66

67

68

69

70

Discussion Questions

How would you help this organization summarize this data?

What would you suggest they focus on?

71

Overall Summary & Recommendations

Customer Focus remains a clear cultural strength

Build involvement through a focus on Mission Work to better define and track on Goals & Objectives and allow

people to work autonomously Build empowerment by engaging people to feel part of the process Leverage strength in customer focus and change in structure to begin to

drive greater clarity in mission Parallel path approach for relentless communication Continually connect initiatives to Mission – provide the “why”

Focus on creating an environment of “with” not “to”

72

This Unit’s Executive Vice President

73

This Unit’s Executive Vice President

74

This Unit’s Executive Vice President

75

Discussion Questions

What do you see as this leader’s Strengths to build on?

Where does this leader have areas of opportunity for improvement and development?

How does the culture data help inform your interpretation of this leader’s data?

76

Patterns and Themes

Strengths to build on: Visionary, strategic, forward thinking Leading strategic change rooted in customer Integrity, do the right thing

Comments: Vision for the future, highly strategic Change oriented, lead others to change Honesty, respected, walks the talk

77

Patterns and Themes

Potential opportunities in: Managing downward Empowerment and skill building of others Facilitating agreement incorporating diverse perspective

Comments: Trust staff, delegate, ability to make decisions

78

Wrap-up

79

Your Pilot

25 person Denison Organizational Culture

Survey

1 Person Leadership Development Survey

OR

Your pilot package includes the full survey of your choice, full report generation, and basic interpretation and feedback on

results from a Senior Denison Consultant.

80

Solutions Essentials

Learning the Basics Understanding Denison’s Solutions Selling the Solutions Sample Proposals Preparing for the Survey Interpreting the Results Linking to Denison And more……………..

81

Final Questions?

82

Thank You!

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