insigniam quarterly fall 2014 - change management

VO L U M E 2 , I S S U E 3 | Fa l l 2 014

THE BEAUTY OF EVERYDAY TRANSFORMATIONS

Flipping the Switch For CEO Daniel Hager, reinventing his family’s energy company was a highly charged experience.

Where the Rubber Meets the RoadFor Japanese tire manufacturer Bridgestone, traction comes from bridging international and cultural gaps.

RAVISHING RESULTS

Mary Kay CMO Sheryl Adkins-

Green says lasting transformations need not stop

traffic.

HOW MARY KAY HAS SUSTAINED 50 YEARS OF RADIANT SUCCESS

™

Change and transformation are not the same. Change, by its very nature, is rooted in being different or better

than what has been and is currently being done. Change is a product of the past.

Transformation is putting the past where it belongs, in the past, and not letting it determine the present or the future. Far from it. Yet leaders of companies, large and

small, continue to crave change rather than triumph with transformation.

— NATHAN OWEN ROSENBERG

CO-FOUNDING PARTNER, INSIGNIAM

RRecently, during a lively dinner conversation with a large group

of friends, the subject of change was brought up. A dear friend of mine, herself

a C-Suite executive, made a point that change is not only inevitable but also

necessary for growth and survival.

While I hardly dispute the value of adaptation, who wants to simply survive?

Far too often, people confuse change — a product of the past — for transformation,

which is the process of unlocking uncharted possibilities that are completely new

and revolutionary.

But transformation, whether you’re cultivating an entirely new corporate culture

or bringing a groundbreaking new product to market, can be risky. Consider the

iPhone, something I consider to be a transformational product that created, not just

added, value. Had the product been based on a gimmick or billed as being able to

offer an experience beyond its capabilities, not only would Apple’s reputation —

and stock — have paid a price, but so too would have consumer sentiment. This

could have had a negative impact on R&D investments as demand for over-hyped

smartphone products dwindled.

As we know, this was not the case. Not only has the iPhone been wildly

successful but it has also transformed the way we interact and communicate. As is

our position at Insigniam, transformations almost always require many large, critical

initiatives to be executed simultaneously toward a unified goal, without losing any

altitude in current operational efficiency — something we refer to as Breakthrough

Performance.

But do all transformations look the same? Hardly. In the case of our cover story

— an interview with Mary Kay Chief Marketing Officer Sheryl Adkins-Green

— the cosmetics giant’s transformations were calculated and measured, and have

resulted in more than 50 years of sustained success. On the other hand, in the case

of Hager Group, it took a transformational leader in the form of CEO Daniel

Hager to reinvent his family’s company into an unstoppable competitive force —

one not only intent on surviving, but thriving.

With that, I present our fall issue, focused on the challenges and successes

wrought by transformation. Transformation can be treacherous, but on behalf of

everyone at Insigniam, we look forward to partnering with you along each step of

the journey to help you arrive at a destination you can only imagine.

LETTER

FALL 2014 INSIGNIAM QUARTERLY 1

Shideh Sedgh Bina

Founding Partner, Insigniam

TRANSFORM YOUR DEFINITION OF TRANSFORMATION

FALL 20142 INSIGNIAM QUARTERLY

26DOES YOUR CULTURE FUEL YOUR STRATEGY?Shideh Sedgh Bina, Insigniam

The results of your business are a product of action

— and culture decides the action in your company.42

STOKING THE FIRES OF TRANSFORMATION Nathan Owen Rosenberg, Insigniam

Think change and transformation are the same?

It’s time to change your perception.

52PREVENTING CROSS-CULTURAL BURNOUT Jeff Bounds

How Japanese tire manufacturer Bridgestone

treaded cultural issues to gain market traction.60

THE SKY’S THE LIMIT FOR AT&TJoe Guinto

How continual transformations put the telecom

giant at the forefront of cloud-based solutions.

FEATURES

THE BEAUTY OF EVERYDAY TRANSFORMATIONSAccording to Mary Kay

CMO Sheryl Adkins-

Green, lasting corporate

transformations don’t

always stop traffic.

Sometimes, the

understated can yield

ravishing results.

COVER STORY34

TABLE OF CONTENTS


EDITOR-IN-CHIEF Shideh Sedgh Bina

[email protected]

EXECUTIVE EDITOR Nathan O. Rosenberg

[email protected]

CHIEF FINANCIAL OFFICER Ralph Gotto

DIRECTOR OF WORLDWIDE Karen Turner

CLIENT SERVICES [email protected]

DIRECTOR OF SPECIAL PROJECTS Alexes Fath

PUBLISHER Gordon Price Locke

[email protected]

EDITORIAL DIRECTOR Amy Robinson

[email protected]

MANAGING EDITOR Jonathan Ball

[email protected]

CREATIVE DIRECTOR Kyle Phelps

[email protected]

ASSISTANT ART DIRECTOR Emily Slack

PRODUCTION MANAGER Pedro Armstrong

IMAGING SPECIALIST John Gay

DIRECTOR OF CLIENT SOLUTIONS Jas Robertson

ACCOUNT DIRECTOR Cory Davies

EDITORIAL QUERIES

750 N. Saint Paul Street

Suite 2100

Dallas, Texas 75201

www.dcustom.com

214.523.0300

For advertising information, contact Jas Robertson at

214.937.9811 or [email protected]

Insigniam Quarterly is published by D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. Copyright 2014 by Insigniam. All rights reserved. Letters to the editors may be sent to Insigniam Quarterly c/o D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit www.insigniamquarterly.com.

Q U A R T E R LY

VOLUME 2, ISSUE 3 | FALL 2014

“Change is the law of life and those who look only to

the past or present are certain to miss the future.”

— U.S. PRESIDENT JOHN F. KENNEDY

THE TICKERTransformation, by the numbers.

BLOOD, SWEAT & TEARSDaniel Hager, CEO, The Hager Group

How Hager — a worldwide leader in electrical

engineering — flipped the switch.

FROM THE BOARDROOM Is your board the master chef behind innovation?

WRITING THE BOOK ON TRANSFORMATIONAuthor and Harvard professor Rosabeth Moss Kanter

on navigating successful transformation.

IQ BOOSTScott Beckett, Insigniam

The power of coordinated action.

IS YOUR OUTSOURCING SOCIALLY RESPONSIBLE?Elisabeth Gegner, Insigniam

Outsourcing need not result in the all too familiar “blood

on the floor.”

2014 EXECUTIVE SENTIMENT SURVEY What keeps 80% of executives up at night? Find out.

TRANSFORMATION IN THE DRIVER’S SEAT For Faurecia — a world leader in auto parts —

revolutionizing results began by reengineering

corporate culture.

0410

14

64

18

4856

DEPARTMENTS

On the coverMary Kay CMO

Sheryl Adkins-Green

Insigniam and its publisher, D Custom, distribute this editorial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insigniam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or provided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose.

MINI-FEATURES

22

™


THE TICKER

Seven years ago, Home Depot’s stock price and sales

lagged that of its main –— yet considerably smaller –—

competitor, Lowe’s. Chairman and CEO Frank Blake

set out to transform the company just as the financial

meltdown of 2008 began to transform every market

across the board.

Blake changed how Home Depot marketed its

products. Rather than continue to tailor advertisements

to contractors and cater to the handyman, the company

began running television commercials for a new primer-

painter combo with women doing much of the work.

And while it used to be a joke that trying to find someone

in an orange apron to help you find your way through one

of the cavernous big box retailer’s stores was impossible,

Blake also changed that. He put more employees on the

floor, inspiring them to be attentive, while boosting their

pay and instructing them to focus on the customer first.

Everything else fell into place as employees responded

to that environment.

In August, after reporting robust quarterly sales that

once again bested those of Lowe’s and topped analysts’

estimates, Home Depot announced Blake will transition

his CEO duties to Craig Menear, the company’s president

of U.S. retail, while retaining the chairman role effective

November 1.

Menear certainly has his work cut out for him as

Home Depot’s profit has increased for five straight years.

Second-quarter revenue rose 5.7 percent from a year

earlier while same-store sales climbed 5.8 percent for

the three months ended June 30. Not to mention Home

Depot’s share price is up 127 percent since Blake

took over.

HOME DEPOT’S CEO HAMMERS DOWN RESULTS


5.7%

5.8%

127%

increase in

second quarter

revenues from the

previous year.

sales increase

for three months

ended June 30.

increase in share

price since Blake

took over.

BY THE NUMBERS


THE TICKER

APPLE’S MOST EXCITING OFFERING: CEO TIM COOKIn early September, Apple CEO Tim Cook played to a full

house at the Flint Center for Performing Arts — the same venue

where the original Mac was announced more than 30 years

ago — to introduce Apple’s newest products. Co-founder and

former CEO Steve Jobs made Apple events into a marketing

spectacle, and since Jobs’ death Cook has struggled with finding

his stride on a stage that Jobs once commanded.

But this event, perhaps because it ostensibly featured the first

set of products fully overseen by Cook, was different. There

was an energy that got journalists and consumers alike excited

about the new products and had many surmising that the most

exciting new product unveiled was Cook himself in the role of

Apple’s transformational leader.

Cook and company witnessed positive results from his

showing less than one week later.

According to a report from The

Wall Street Journal, preorders for the

iPhone 6 and 6 Plus exceeded 4

million in just 24 hours. And both the

tech and financial worlds are buzzing

about Cook’s “one more thing,” the

Apple Watch, which is the company’s

first new product in four years.

While no one can fully replace an innovative visionary

like Steve Jobs, it’s clear that Apple is in the business of

creating not just cutting-edge technology, but also the kinds

of transformational leaders that will keep them ahead of

the competition.

Honda Motor Company, billed as

Japan’s second-largest auto manufacturer,

has a unique corporate culture; one that

is constructed around the idea of fixing

problems and spurring innovation. All of the

company’s associates dress in white jumpsuits

with their name stitched on the chest. Every

employee, from chief executive to the person

turning the screwdrivers, wears this uniform

to smooth out any sense of hierarchy and

promote an environment where everyone’s

opinion matters — regardless of title or

seniority.

As Jeffrey Rothfeder discusses in his

new book Driving Honda: Inside the World’s

Most Innovative Car Company, the concept

of waigaya leads directly to “significant

improvements in productivity, process, and

performance that would otherwise have

been absent.” In practice, Honda encourages

spontaneous meetings filled with off-the-

cuff remarks as a way to solve problems and

gain access to insights and opinions across

the corporate spectrum.

Case in point, Rothfeder says, was an

issue that arose at an assembly plant after a

worker discovered an issue with a handful

of camshafts. Due to limited space under

the hood, factory workers assumed the

entire engine would have to be removed

from the vehicle to repair and remedy the

issue. Following waigaya, a small team of

assemblers and managers met to discuss

solutions in real time.

Just as managers were making plans to

ship the affected cars to another factory for

servicing — a sizeable production setback

— an assembly worker suggested a way to

fix the camshaft without having to remove

the engine; a process that a worker had seen

performed at a sister plant.

Strategy + Business, which profiled

Rothfeder’s book, noted that the plant

supervisor remarked, “If we had used the old

style of management at Honda that says ‘do

it this way’ … we would be literally sliding

engines in and out of cars every day, not

knowing that [one of our associates] would

think [of a] better way.”

WAIGAYA: HONDA’S SECRET TO SUSTAINED SUCCESS

“IF WE DON’T INCLUDE OUR ASSOCIATES IN THE DECISION MAKING, WE’RE IGNORING POTENTIALLY OUR MOST VALUABLE ASSET.”- HONDA EXECUTIVE

When people matter — change management matters.

Advancing the Disciplineof Change Management

As

so

cia

tio

n of Change M

ana

ge

me

nt

Professionals

ACMP

Fostering the change management profession ACMP offers the space to learn, share, and cultivate

professional change practices to achieve your organization’s intended outcomes and results.

We are the Association of Change Management Professionals — Change is our focus. Learn more by

visiting: www.ACMPGlobal.org

8 INSIGNIAM QUARTERLY FALL 2014

TOP LINE

TRANSFORMATION BY THE NUMBERSCOMPILED BY GEOFF WILLIAMS

“IF WE HADN’T IMPROVED THE RELIABILITY OF HARLEY-DAVIDSON PRODUCTS, THE COMPANY WOULDN’T BE HERE TODAY.”

Former IBM CEO Lou Gerstner, who took a company on the verge of bankruptcy in the 1990s

and transformed it into a powerhouse. It’s currently No. 35 on Forbes’ list of the largest

companies in the world.

The amount of money future rival Microsoft invested in Apple in 1997, when

the company was on the verge of bankruptcy and Steve Jobs, co-founder

of Apple, needed an infusion of cash to help transform the company

from producing PCs to restructuring the entire product line. We hear the

company is doing pretty well now.

35no. Transformation of an enterprise begins with a sense of

crisis or urgency. No institution will go through fundamental

change unless it believes it is in deep trouble and needs to

do something different to survive.

Cash flow pre-Microsoft investment

Cash flow after Microsoft investment

Z

— Richard Teerlink, in 2003, commenting on the

turnaround the company had after 1982 when it

was $90 million in debt. $150 million

INSIGNIAM QUARTERLY 9FALL 2014

Amount Ford Motor Company was losing in 2008 — each day.

But the company was already working on a comeback. Mulally

was named CEO in 2006 and that year mortgaged all of Ford’s

assets for $23.6 billion in loans. Believed to be a desperate

move at the time, it’s now seen as a shrewd one.$83 MIL

LIO

N

According to a 2002 industry study, when an organization’s change management is implemented successfully, ROI is143 percent. That is, businesses can expect to make 43 cents for every dollar spent on OCM.

ARE YOU LOSING, OR MAKING, MONEY?

$2.6 billionFord Motor Company’s profits in the second quarter

of 2014. CEO Alan Mulally transformed Ford by

simplifying the company’s organizational structure,

cutting operating costs, and improving efficiency — as

well as offering a simpler, more innovative product line.

2014SECOND QUARTER

PROFIT$2.6 BILLION

2014FIRST QUARTER

PROFIT$1.3 BILLION

“THERE IS A DIFFERENCE BETWEEN MOVING QUICKLY — WHICH NETFLIX HAS DONE VERY WELL FOR YEARS — AND MOVING TOO FAST, WHICH IS WHAT WE DID IN THIS CASE.”

— NETFLIX CEO REED HASTINGS

800,000The number of subscribers that Netflix lost in the third quarter of 2011.

610,000The number of subscribers Netflix gained in the fourth quarter of 2011.

60%PRICE HIKE

7

In the aftermath of major changes in 2011, in which the company attempted to spin off its DVD mail service into a new business called Quikster, and instituted a 60 percent price hike.


FLIPPING THE SWITCH ON TRANSFORMATION

Hager Group, an independent, family-owned company founded in 1955 by the father and uncle of current

CEO Daniel Hager, has grown steadily since its inception,

growing organically as well as acquiring other manufacturers

of electrical and related systems used in residential, commer-

cial, and industrial buildings.

The acquisitions have averaged about one a year over a 20-

year period. While each newly acquired

business added to the company’s bot-

tom line (as a privately held company,

Hager Group isn’t required to divulge

its financial results), it also meant the

corporation was continuing to add dis-

parate brands and organizations, all with

their different sales teams, different ad-

ministrative executives, and different

ways of conducting business.

By the time Daniel Hager became

part of the company’s management in the middle of the last

decade, Hager Group — based in Blieskastel, Germany —

had grown to two-dozen different brands, often operating

with the same customer base through the same sales channel.

As a result, customers viewed Hager Group as a product

specialist company rather than offering a broad portfolio. Cus-

tomers would often buy one product from Hager, but might

BY PHIL BRITT

For Daniel Hager, CEO of Hager Group — a worldwide leader in electrical engineering — transforming his company’s business model was a highly charged experience.

BLOOD, SWEAT & TEARS

FALL 2014 INSIGNIAM QUARTERLY 11INSIGNIAM QUARTERLY 11

buy a related product from a competitor. To advance to the

next level, in which the customer would turn to Hager Group

for full solutions like an energy distribution system rather than

for individual component(s) of the system, Hager Group had

to change its focus from a product focus to a solution focus —

a major transformation in the way the company historically

conducted business, Daniel Hager says.

IMPROVED VALUE PROPOSITION

In 2006, Hager developed a transfor-

mational strategy — one that focused on

branding — that the company began ex-

ecuting in 2008.

“It was a dramatic change in our infra-

structure,” Hager recalls. “With 24 brands,

you’re not able to convince the mind of the

customer what your value proposition is.”

The transformation from a product-

based company to a solutions-based com-

pany necessitated that Hager Group re-

design their marketing and organize their

internal structure differently to deliver

these promised solutions. Hager knew that

his future, as well as that of the company as

a whole, relied on the successful transfor-

mation of the company from a brand focus

to a solutions company.

“We needed to break barriers, which we

hadn’t done in the past. You cannot have

different silos from a solutions perspective; so we started melt-

ing down the barriers between internal groups,” Hager says.

“Taking out the different brands and focusing on one brand

with one value proposition enabled us also to focus on one

solution to meet the market needs and forget about what we

might lose emotionally.”

It also meant a long-term focus on the company’s strategy

and direction according to Hager. “The most critical issue was

to determine where we were headed in the future.”

“This holistic approach to transforming the Hager value

proposition is the key to their success,” says Katerin Le Fol-

calvez, Insigniam partner. “Too often we see companies at-

tempt to transform their brand-model without reconstituting

their organization to be a match for

the new proposition. A brand-model

transformation is a total enterprise

transformation and Daniel Hager and

his team understood that.”

His uncle and father had turned

over control of the company to a non-

family CEO in 1988, a person Hager

had to convince of the new direction

for the company.

If his presentation or the execution

of it failed, he might not have ascend-

ed to the CEO position, he may have

been out of the company entirely. He

needed the support of the CEO and of

other key personnel in order to move

forward with his planned strategy.

“I had to ensure that I was showing

the commitment needed. The cred-

ibility of the organization was at stake,”

Hager says. “It was a difficult time for

me and those I convinced to follow

me. We didn’t know what to expect from the present CEO.

He had his own way of functioning. We had to convince the

CEO and other key people that this was the right way of

moving forward.”

Hager started with a group of 10 core people to launch

his vision, and brought others on board through “a lot of

“TOO OFTEN WE SEE COMPANIES ATTEMPT TO TRANSFORM THEIR BRAND-MODEL WITHOUT RECONSTITUTING THEIR ORGANIZATION TO BE A MATCH FOR THE NEW PROPOSITION.” — KATERIN LE FOLCALVEZ, INSIGNIAM PARTNER

TIMELINE

1955Hager Group is founded.

1962Develops new logo and corporate identity.

1969Rotary Fuse carrier is invented.

1974 Launches the first modular system on the French market.


BLOOD, SWEAT & TEARS

one-on-one discussions.”

From the time the change in direction was envisioned in

2006 to the launch in 2008, there were large commitments in

time, with numerous two-day working sessions.

From the initial group of 10, Hager

developed a leadership committee of 30

to drive the transformation and the di-

rection of the brands. “Herein is another

critical success factor,” says Insigniam

partner, Marie-Caroline Chauvet. “Dan-

iel and the top leadership also took on

reinventing themselves as leaders in order

to be effective in executing on the new

model. That took courage and wisdom.

In turn, this led to a transformation of the

Hager culture.”

Rather than the top-down manage-

ment style of the past, the new strategy

also relied on a collaborative management

style, with more input from managers and

employees not in the C-Suite.

“It’s something that our people

weren’t used to … we were creating a

space where we could discuss and build the future together,”

says Hager, who admits, in hindsight, that implementing the

change in strategies was a more daunting challenge than he

had initially envisioned. “There were a lot of dragons to fight.”

Though there was some hesitation among a few of the

company managers and employees, there wasn’t a forklift

change in terms of personnel. Most who didn’t embrace

the new direction of the company immediately did so

over time.

“Some left because they didn’t want to cope with the new

culture,” Hager says, though he let time (people retiring, leav-

ing the company for promotions, etc.) handle the majority of

the personnel shift.

“One of the key success factors of this transformation was

Daniel Hager’s determination to build on the company’s in-

credible cultural assets rather than change

everything,” says Chauvet. “The branding

transformation became a way to express

Hager’s commitments to all of its stake-

holders in a very clear and tangible way.”

Rather than 24 different brands, the

Hager brand today consists of products

ranging from energy distribution through

cable management and wiring accessories

to building automation and security sys-

tems. Other brands of the Hager Group

are Berker, Daitem, Diagral, Efen, and

Elcom. These have a clear value proposi-

tion to defined customers and through

defined sales channels; different from that

of the Hager brand.

“Some of the brands now are bigger

than they ever were before,” Hager says.

The company’s solid growth has contin-

ued as well, something that Hager doubts would have been

as strong without the transformation in focus.

LOOKING AHEAD

Though the focus on solutions rather than products “is now

part of our culture,” according to Hager, the transformation

is continuing. Such a change was much more involved than

Hager envisioned when he first proposed it. But it also set the

tone for the next transformation for the company, which he

also expects to lead.

Hager Group will soon develop its 2020 strategy, termed

1982Industrialization of the first residual current circuit breaker.

1988Begins manufacturing 6 and 10kA MBCs.

1991ISO 9001 certification.

TIMELINE CONTINUED

“DANIEL AND THE TOP LEADERSHIP ALSO TOOK ON REINVENTING THEMSELVES AS LEADERS IN ORDER TO BE EFFECTIVE IN EXECUTING ON THE NEW MODEL.”

— MARIE-CAROLINE CHAUVET, INSIGNIAM PARTNER


Project 2020, which will focus on expansions beyond Eu-

rope to become a truly global organization, as well as further

growth into the servicing of residential, commercial, and in-

dustrial building systems.

Hager also expects to further refine the company’s focus

to be solutions-driven, with different systems controlled on

a common platform — such as through mobile technologies

— and he seeks to position Hager Group in the thick of the

B2B portion of that market. And he’s prepped and ready to

meet a few more dragons along the way.

FROM THE INITIAL GROUP OF 10, HAGER DEVELOPED A LEADERSHIP COMMITTEE OF 30 TO DRIVE THE TRANSFORMATION AND THE DIRECTION OF THE BRANDS.

1997Launch of the Quadro series.

2004Acquisition of Atral in France.

2006Hager develops a transformational strategy, one focused on branding.

2008Hager begins implementing its transformational branding strategy.

THE BOARDROOM

Your board of directors can facilitate and advance transformational change, or hinder it. Just like a well-meaning

chef who’s heavy handed with the salt shaker, sometimes

an attempt to guide change actually results in bitter failure.

So how do you ensure your attempts will result in success?

It begins with avoiding common pitfalls.

According to Gallup’s Business Journal, more

than 70 percent of change initiatives fail.

From resistance to change and dependence

on legacy systems to a lack of executive

consensus and unrealistic expectations, all

are regularly cited as hallmarks of failure.

If there was a secret recipe to board

involvement, it would be the oft-repeated

“nose in, fingers out” philosophy. Using the

recipe analogy, Cynthia Pharr Lee says, “The

board would be involved in selecting the menu and approving

the recipe, but certainly not measuring out the ingredients.”

Lee is president of C.Pharr & Co. and is an independent board

director at several companies. This includes the 15 years she spent

on the board of CEC Entertainment, Inc., the company that

Too many cooks in the kitchen can sour your transformation initiatives. So what’s the perfectrecipe for board involvement?

BY STACEY CLOSSER

IS YOUR BOARD THE MASTER CHEF BEHIND TRANSFORMATION?



operates and franchises Chuck E. Cheese’s restaurants.

It’s the difference between being a hands-on operator and a

strategic business advisor, she says.

“Management runs the company. The board does not,”

says Greg Pratt, chairman of Carpenter Technology Corp., an

international iron and steel developer with $3 billion in total

assets. It can be tempting when things are going haywire to

overstep the board function, so it’s imperative to keep that role

top-of-mind. “You have two duties,” says Pratt. “A duty of loyalty

and a duty of care. As a fiduciary, your role is very different than

your role as manager.”

CHOOSE THE BEST INGREDIENTS

The first step to being a positive, contributing influence

during times of organizational change happens long before the

strategy sessions; it happens when each member of

the board is selected. Just as it is with any secret sauce,

the better the ingredients, the better the outcome.

“After integrity, strategic judgment is probably the

most important characteristic for a board member,”

says Lee. “It helps to have lines of business experience

and it certainly helps to have diversity in experience in

the boardroom, but the value of good judgment can’t

be overstated.”

The trait Martin Coyne likes to see most on a board:

experience in successful change management. These

are board members who possess the fortitude to

work the plan, to support the management team

through unforeseen obstacles, and to adapt when

circumstances dictate. “The road to change is

bumpy,” says Coyne, who serves on the board of

directors for Akamai Technologies, which posted a

2013 annual revenue of $1.58 billion, up 18 percent

year-over-year. “If it was smooth, it would be easy.”

Coyne recounts a time when a CEO attempted to

drive change even as key people in the organization

weren’t buying into it. “When you waver on the

commitment of ‘Here’s where I want to go to and

why,’ and people detect that wavering, it’s incredibly

disruptive and can become dysfunctional,” he says.

Board members should possess excellent

communication skills, including the ability to ask

questions and the ability to listen to others on the

board. And continuous learning is a given: “Good

directors are constantly working and reading and

learning. If you’re not, you fall behind so quick

you’re like a dinosaur,” says Coyne.

RESEARCH AND ASK QUESTIONS

Much of the board’s role revolves around information

gathering — asking the right questions in a way that promotes

collaboration and provides oversight to management, as well as

researching industry trends and possible risks.

For example, when it comes to an acquisition, “Hopefully

the CEO has the most knowledge of the transaction,” says

Tony LeVecchio, who serves on the board of directors for

ViewPoint Financial Group, which is listed on The NASDAQ

Global Select Market, and is chairman of its Audit Committee.

But LeVecchio is quick to point out: “No one person can or

should decide everything.”

The CEO and management team can be expected

to understand the market dynamics, competitor threats,

and organizational strengths and

weaknesses. The executive team is also

responsible for creating the strategy.

In years past, the “imperial CEO”

would give a strategy presentation and

the board would give the thumbs-up.

That process has given way to a more

collaborative relationship. Today’s well-

constructed board uses its broad range

of experience to evaluate the strategy

Cynthia Pharr Lee, president of C. Pharr & Co. and formerly an independent board director at CEC Entertainment, Inc., the company that operates and franchises Chuck E. Cheese’s, notes that a company’s board is most effective when a “nose in, fingers out” approach is utilized.


THE BOARDROOM

and guide management through the process of due diligence.

“A good board will discuss and debate the amount of risk

in the strategy — the risk of executing on the strategy and the

risk of not executing on it,” says Coyne.

CREATE METRICS FOR SUCCESS

The board’s role, with management, is also to determine the

key performance indicators (KPIs) for the change initiative and

then hold fast to them. Those indicators might include revenue,

but not always.

“I operate in a manufacturing company, and I believe there’s

a direct correlation between your safety record and how you are

managing change,” says Pratt. “It gives us a window into what’s

going on in the company.”

As an executive and as a board member, Coyne prefers to hear

about hard numbers versus descriptive adjectives. For example,

the statement, “Sales are going great” is not as useful as, “Sales

are up 23 percent.” Concrete, measurable metrics are valuable

in denoting important milestones and raising red flags. “If you

don’t have a clear path on how you’re going to measure the

progress, you leave yourself open for failure,” says Coyne.

BE PREPARED TO RESPOND, INNOVATE

Well-informed directors are assets to the organization,

especially when change quickly comes from outside sources.

As recently as five to 10 years ago, boards would meet annually

to discuss strategy at focused retreats. “In a world changing as fast

as it is now, you have to have continuous strategy discussions at

every meeting,” advises Coyne. It might be a competitive review,

an assessment of the business model, or hosting an industry

expert guest speaker.

Companies attributed with revolutionizing an industry are

often labeled as disruptive. Coyne sees it another way: These

“IN A WORLD CHANGING AS FAST AS IT IS NOW, YOU HAVE TO HAVE CONTINUOUS STRATEGY DISCUSSIONS AT EVERY MEETING.” — MARTIN COYNE, BOARD OF DIRECTORS, AKAMAI TECHNOLOGIES


companies begin not by trying to disrupt the marketplace,

but by attempting to improve their offering (faster, cheaper,

better) through continuous innovation. “If you do that long

enough, it becomes disruptive,” he says. “It’s an evolution versus

a revolution.”

ACCEPT THAT FAILURE IS

A (VERY REAL) POSSIBILITY

Change initiatives’ high failure rate doesn’t surprise or even

scare experienced board members, many of whom would guess

the number is even higher than 70 percent at times.

LeVecchio has learned successful due diligence requires

establishing a thorough process and parlaying that with prior

experience. “But when you find out you’ve missed something,

you just have to deal with it and move forward,” he says.

Or as Coyne says, “Learn fast from failures.”

Boards get in trouble when they spend too much time doing

deep dives on performance, says Pratt. You won’t find where

you’re going using the rearview mirror.

“However good your plan is, when you get on the field, your

plan changes,” he says. “You need to be in a position to respond

to that change.” For example, when Pratt’s board decided to

split the role of chairman and CEO, the CEO chose to leave

instead of accepting what he perceived as a reduced role. The

board acted quickly and named Pratt interim CEO while they

searched for a replacement. The process expanded the board’s

aperture, giving it wider access to senior management and vice

versa. “It worked out splendidly,” Pratt says. What began as an

unplanned executive departure turned into an opportunity for

improved internal communication.

There will be times when a third party is needed to resolve

internal conflict, either within the board itself or between the

board and the management team. Pratt recommends using

outisde firms that can provide direction, competitive analysis,

and other fact-based research. “Everybody is entitled to their

own opinion, but there is only one set of facts,” says Pratt.

THE TAKE AWAY

Members on boards of directors have a choice: Be a catalyst for

transformation or be an impediment. Successful transformation

— regardless of the overarching goal — requires boards to

strategize, ask questions, commit to a plan, and prepare to change

course at any moment. And, of course, go easy on the salt.

TRANSFORMATIONAL STATS

70%of change

intiatives fail

71%of executives are only “somewhat

prepared” to generate the

needed level of innovation

42%of leaders are frustrated with their employees

47%of executives blame culture as the biggest roadblock to innovation

* TRANSFORMATIONAL STATS TAKEN FROM INSIGNIAM’S EXECUTIVE SENTIMENT SURVEY


While most perceive global outsourcing as an increasingly popular cost-cutting tactic — with Plunkett

Research, Ltd., estimating the industry at $507 billion in

2014 — the savvy business manager recognizes it as much

more; nothing short of a powerful growth strategy. By taking

the long view with a social conscience, outsourcing need not

result in the all too familiar “blood on the floor,” which can

mean a long-term loss of a company’s muscle strength. Rather,

a much stronger business case can be made for outsourcing

as a strategic tool to free up and elevate the capability and

performance of existing resources, all while achieving targeted

cost savings. Indeed, this is the stuff of business transformation,

which only happens when employees see what the future

holds with new eyes, approach it without fear, and take charge

of their destiny to intentionally

build this new future.

Of course, this approach, coined

Socially Responsible Outsourcing

(SRO), is of a higher order and is

easier said than done. Why? First,

outsourcing as a cost-savings

initiative occurs as incompatible

with social responsibility or

“investing in people.” And, second,

executives may perceive SRO as

complex, requiring them to rethink their approach every

time the market changes.

THE OUTSOURCING LANDSCAPE

Plunkett estimates that today’s highest areas for outsourcing,

defined as the hiring of an outside company to perform a task

otherwise performed internally, include: 1) logistics, sourcing,

and distribution services; 2) information technology services,

including the creation of software and the management of

computer centers; and 3) Business Process Outsourcing (BPO)

areas such as call centers, financial transaction processing, and

human resource management. However, these traditionally

“non-core” functions are really just a starting place as

outsourcing companies themselves become more sophisticated

IS YOUR OUTSOURCING SOCIALLY RESPONSIBLE?

BY ELISABETH GEGNER, INSIGNIAM CONSULTANT

Outsourcing need not result in the all too familiar “blood on the floor,” which can often impact a company’s strength over the long-term.


in their capabilities. Expect Knowledge Process

Outsourcing (KPO) to become commonplace,

with outsourced workers performing business

tasks that require judgment and analysis.

Examples including patent research, legal research,

architecture, design, engineering, website design,

market research, scientific research, accounting and tax return

preparation are potential tasks that already are going offshore.

One driver for KPO could well be the emergence of a new

level of automated systems such as forms classification and

data capture. As these systems get better, DATAMARK, Inc.,

predicts that they will displace outsourced staff who are currently

performing dull, low-skill repetitive tasks like healthcare coding,

which is going through dramatic changes in the U.S. due to

adoption of ICD-10 standards. This sets the stage for a new level

of outsourcing workers with more sophisticated skills.

However, DATAMARK predicts that the transition is still

approximately two years away, due in large part to a lack of

industry standards and a reluctance on the part of companies

to adopt the new technologies. More use of mobile apps for

business functions also is likely, along with a range of new

cloud services. Look for Business Process as a Service (BPaaS)

applications beginning to crop up on a consumption or

subscription basis.

Offshore choices for outsourcing are also expanding.

While China and India have bolstered

their economies significantly thanks to

outsourcing opportunities that have created

tens of millions of jobs, it deserves mention

that they no longer are the only game in town.

As labor costs and infrastructure issues plague

China and India, companies are looking to the Philippines,

Malaysia, and Indonesia, which Plunkett says were among the

most promising Southeast Asian outsourcing destinations in

2013. Near-shoring and re-shoring also are growing trends.

Examples include the U.K. outsourcing to Eastern Europe, or

a U.S. or Canadian company outsourcing to Mexico or Latin

America. The obvious reason is that outsourcing can be very

difficult to control, with companies finding management issues

less challenging when the companies are closer to home.

TAKING CARE OF YOUR OWN

These trends are still no substitute for the institutional

knowledge and dedication of an existing workforce — any

company’s most valuable asset. One example of effectively

leveraging the advantages of outsourcing while preserving

internal talent can be found in an early effort at SAP, the

Germany-based information technology giant. In the early

2000s, under the leadership of Carol Wilson, then-chief

information officer and current senior vice president for

EARLY EFFORTS AT

SAP (ABOVE) WERE

JUST ONE EXAMPLE

OF EFFECTIVE

OUTSOURCING.


work place services at T-Systems, SAP sought to reinvent its

internal IT department, realigning employees who spent most

of their time maintaining operations to more strategic roles.

Because SAP had never outsourced to an offshore consultancy

company, this was a controversial departure from the norm. The

business case behind the initiative was threefold: 1) lower costs

by reallocating work often performed by external consultants

to SAP resources; 2) achieve the benefits of more standardized

processes; and 3) elevate the level of value

and services provided to SAP IT customers.

The first order of business was to define

the new direction through scenario

simulation and then broadly communicate

this new future across the organization,

as well as to key stakeholders, including

unions and the press. Because outsourcing

had gotten a bad name, especially in the

German media, allaying fears was perhaps

the most challenging hurdle to overcome.

In this sense, inspiring people to actively

participate in the transformation and

perform at a higher level was crucial. This

was accomplished by focusing on two key

points: 1) Employees were encouraged to

choose their future by going through an

orientation and development process to

take on new roles; and, 2) The success of

the project rested on employees’ thoroughly transferring critical

knowledge to other SAP colleagues and to the third party taking

over their tasks. This required a fundamental shift in a culture

that valued and rewarded resident expertise and was imperative

to delivering on all three elements of the business case.

In an unprecedented move to gain trust, one non-negotiable

item was no layoffs. “The risk of this mandate proved small,”

Wilson recalls, because “the business case was good to develop

our own people. Most had multiple years of experience on the

lower end of the IT food chain and had a propensity to learn. It

was better to pull people up the learning curve, versus spending

a fortune with independent consultants to fill the gaps.”

Quelling and ultimately eliminating employees’ fear also

required answering a very fundamental question: “What

is going to happen to me?” To provide an adequate answer,

SAP identified core roles based on the re-defined vision, and

then actively engaged employees and

their supervisors in assessing aspirations,

strengths, weaknesses, and overall fit for

the new opportunities. Driving the overall

effort were the 4Rs (Right people with

the Right skills, in the Right place and

with the Right partner), guided by

principles of fairness, transparency, and

the promise of a better future.

Rather than “assessment,” the

process was coined “Orientation and

Development,” and, as such, provided

ongoing coaching, training, and career

development support. “This helped

employees determine the next steps of

their career and see where they compared

to the open market,” Wilson explains.

Ultimately, the onus was on employees to

choose new roles, with SAP suspending its

standard performance evaluation process for two years to allow

time to become proficient.

One area that pollinated a number of new opportunities was

SAP’s newly created project management office. Led at the time

by Mark Hutchins, who is now with TCS, a multinational IT

service company headquartered in India — one of SAP’s original

partners — it helped delineate between roles that maintained

operations (non-core) versus ever-changing service projects

SAP IDENTIFIED CORE ROLES BASED ON THE RE-DEFINED VISION, AND THEN ACTIVELY ENGAGED EMPLOYEES AND THEIR SUPERVISORS IN ASSESSING ASPIRATIONS, STRENGTHS, WEAKNESSES, AND OVERALL FIT FOR THE NEW OPPORTUNITIES.


(core). “It was through the core projects,” says

Hutchins, “that we were able to build career

paths to support the organizational change.”

Facilitating this shift were SAP managers,

whose role was to coach employees through

the process while ensuring that the transition

to the overseas resources progressed smoothly.

Involving the managers was key, as lack of

cooperation from middle management is one

of the largest contributors to failed change.

This approach made them partners with

the responsibility for success placed on their

shoulders. Ultimately, middle managers were

the “superheroes.”

Armin Kaltenmeier, today SAP global vice

president of corporate audit, was one such

manager in the hot seat. Reflecting back, he

says, “We communicated it to employees as

an extended workbench and asked them not

to look at the overseas resource as an outsider

but as part of the team. As an organization we

were still responsible for delivering great work;

we just needed to be smart and more efficient

about how we did it.”

However, training the outsourcing resources

proved to be a grueling “painful exercise,”

Kaltenmeier recalls, requiring considerable

patience, particularly at the beginning. “The

outsourcing companies were experiencing

a lot of turnover at the time and we were

constantly retraining new resources. At some

point we established a core team that could

train its new team members, but it was only

after six to 12 months that we were able

to harvest the fruits and see results.” Again,

fundamental to this was setting the right

context so that the “experts” were willing to

freely share their knowledge.

On a personal level, Kaltenmeier adds

that it was difficult letting go of existing

responsibilities, no matter how much business

sense this made. “Along with being good

for the company, we had to convince our

employees that ‘this is good for you. You’ll be

learning and growing,’ which turned out to

be very positive,” setting an example for other

departments to emulate.

To understand what the employees he

managed were going through, Kaltenmeier

willingly participated in the assessment process

alongside them, a decision he says benefitted

him greatly. “What I found was that I was

strong in leading and managing teams. I

also was strong at setting vision and leading

people to follow the vision. It personally gave

me confidence and helped me see where my

career could go.”

FINDING A BALANCE

Ultimately, as companies go about

the business of outsourcing in a socially

responsible way, Wilson challenges others

to find the strategic balance between being

fair and improving the bottom line. “In

many ways SAP was a luxurious situation,”

she recalls, “We really were quite generous

to the employees. It was the first time SAP

had done outsourcing and it was their first

time to use a partner in India, so we were

not under a lot of pressure and we were able

to budget enough money to do it right. Still,

she says, “there are ways to manage, even

without access to the extraordinary funding

that we had.” What any organization can

always do is “give people a choice, coach

them, and help them grow,” as part of the

process. Since leaving SAP, she says she

has seen the process work at a number of

other companies, including Microsoft and

PriceWaterhouse Coopers.

On a broader level, being socially

responsible when outsourcing also helps

to protect and preserve culture. With

the growing trend toward specialization,

Hutchins cautions companies to think

twice about outsourcing the majority of

entry level jobs. “It’s a moral dilemma,” he

explains. “If you eliminate the entry level

people who have traditionally worked their

way up, what happens to your culture? The

specialists don’t know you like your own

people do.”

Successfully managing people and performance aspects of outsourcing depends on:

1 Positive branding and buzz around the transformation from the beginning through quick wins, structured communication, and early enrollment of key stakeholders

2 Collaboration and partnership with key constituencies, including unions

3 A smooth transition of the retained organization

4 Retention of high performers needed in the new structure

5 A “high performance organization structure” aligned to the future vision and strategy

6 A transparent, fair, and reliable selection process, resulting in the right people with the right skills in the right place

7 Quick and effective knowledge transfer to the third party

8 A short performance ramp up for the “new” organizations: both retained and outsourced

9 Managers actively leading the transformation, rather than falling victim

q Alignment and strengthening of leaders and talent management processes to support continuous performance improvement

TOP 10 BENEFITS FROM SOCIALLY RESPONSIBLE OUTSOURCING


Author of Change Masters: Innovation and Entrepreneurship in the American Corporation, Rosabeth Moss Kanter knows what it takes to navigate successful transformation. Do you?

WRITING THE BOOK ON TRANSFORMATIONAL CHANGE

BY GEOFF WILLIAMS


Every company and industry goes through transformational change, if for no other reason than society and

industries are always changing. Nothing ever stays the same. But

companies should want to go through transformation changes

on purpose and on their own terms — rather than having it

thrust upon them.

If that seems rather obvious, that may be in part due to

Rosabeth Moss Kanter’s book Change Masters: Innovation and

Entrepreneurship in the American Corporation, a business classic

about how corporations can successfully and dramatically

evolve. It hit bookshelves in 1983 to great acclaim and was

named by the Financial Times as one of the most influential

business books of the 20th century. In the 21st century, Kanter

has been no less influential. She holds an endowed chair, the

Ernest L. Arbuckle Professorship, at Harvard Business School,

specializing in teaching strategy, innovation, and leadership for

change. Kanter, who has 23 honorary degrees from colleges

and universities, has been named to numerous lists, such as the

Times of London’s “50 Most Powerful Women in the World.” Her

last book, SuperCorp: How Vanguard Companies Create Innovation,

Profits, Growth, and Social Good was named one of the best 10

books in 2009 by Amazon.com.


In other words, any conversation about transformation should

begin by talking with Kanter. She can’t offer any CEO a recipe

for transformational change. Nobody can; like snowflakes and

fingerprints, every company’s challenges are different. But

when it comes to going through a transformational change

successfully, Kanter says that there

are some characteristics that every

successful organization shares.

A WILLINGNESS TO LET GO OF

WHAT BROUGHT SUCCESS

You shouldn’t reinvent yourself

just for the sake of it, and a dramatic

transformation needn’t mean your

company stops doing what it’s always

done best. As Kanter observes, “Delta

went through a transformational

change, but they’re still an airline.”

“One of the dilemmas of trying to

transform a company is that you need

to have top management who really

believes that you have a model for the future,” Kanter says. “And

that can be challenging because the old model may still have

merit. So you have to be willing to let go of your legacy in order

to try something new, or to think about what aspects of the

legacy business are worth preserving for the future.”

The shareholders sometimes will stand in the way as well,

Kanter adds. “You can’t cut your way to growth. You have to

invest your way to growth. But if you aren’t doing well financially,

sometimes investors won’t let you invest.”

A CULTURE THAT EMBRACES INNOVATION

Kanter cites what she calls the innovation pyramid as being

the best strategy for executives who want their company to

explore and discover new business frontiers.

“At the top of the pyramid, you have a few big bets, and

you invest really big in those bets,” she says. “So if you’re in

manufacturing, you might focus on related area services. At the

middle of the pyramid portfolio, you’re funding promising new

ventures, but you really don’t know yet whether they’ll pay off.

And at the bottom of the base, you put a little funding into a

lot of ideas, including improving existing products and services.

And you might borrow a portfolio strategy in the same way an

investor does. If you’re a giant company in the Fortune 100 or

200, you might have 60 or 70 experimental projects, where you

expect 10 percent to pay off in a big way, 10 percent to fail, and

the others will wind up somewhere in the middle.”

“If you’re a smaller company,” she adds,

“maybe you have a dozen projects.”

Kanter says that the innovation pyramid

is designed as such to win the argument

that “you don’t get innovation without a

marketplace of ideas.”

She suggests that even companies

with visionary, transformational leaders

— think of the late Steve Jobs — would

benefit from this approach. “Even if you

have a genius at the top, he or she might

not always be right. You need employees

and customers to weigh in, and that’s why

the culture matters,” Kanter says.

Kanter cites Gillette, now owned by

Procter & Gamble, as a company that

mastered the innovation pyramid. For many years, the company

had focused on unveiling the latest and greatest in new razors,

but eventually management came to realize that those big

blockbuster products were always going to be spaced out —

YOU CAN’T JUST STARE OUT THE WINDOW AND BELIEVE YOU HAVE A SENSE OF WHAT’S GOING ON OUTSIDE — YOU HAVE TO INVITE THE OUTSIDE INTO YOUR OFFICES.

GILLETTE’S FUSION SHAVING SYSTEM CAME ABOUT FROM THE COMPANY’S DECISION TO INNOVATE ACROSS THE BOARD, MAKING THE COMPANY A MASTER AT UTILIZING THE INNOVATION PYRAMID.


and that between their big product splashes, they could be trying

to gain market share with additional product offerings. So the

company began innovating across the board, and that’s how the

battery-powered (Gillette manufactures

Duracell batteries) Oral-B toothbrushes

and the five-blade, battery-powered

Fusion shaving system both came to be.

Gillette’s innovations, however, weren’t

limited to what they sold but how the

company operated, making improvements

in marketing, human resources technology,

and even in its legal department.

And, of course, it sounds like a lot of

common sense, but it can be difficult to

execute. “It’s easy to say that we’re going

to fund innovation, but you have to make

investment decisions today, and every

division is going to argue that you should

invest in them, and it’s not always clear

what you should invest in. And executives

can think they’re open and shoot down

every idea, and they can rightfully say that

it’s difficult to decide to bet on something

unknown and uncertain when you have

a clear business already. But when you

manage to transform your company

through new concepts that excite the

company and energize its people, you can

sometimes do great things.”

A COMPANY THAT REFLECTS THE OUTER WORLD

You can’t just stare out the window and believe you have

a sense of what’s going on outside — you have to invite the

outside into your offices. In other words, the people you meet in

the hallways and see at the cafeteria should look like the public

your company serves.

“The emphasis on having a diverse workforce and knowing

how to work with a diverse workforce is talked about, but not

enough,” Kanter says.

Kanter also sees a pressing need for corporations to attract

the millennial workforce.

“We give lip service to new

workplace models that are much more

flexible, but companies need to be able

to handle people who work part-time,

shared jobs because we’re going to lose

a lot of talent if we don’t,” Kanter says.

“Already, the millennial generation isn’t

interested in working for big companies.

They want to be entrepreneurs.”

Kanter adds: “There also isn’t

enough emphasis on how big and

small companies can work together. Big

companies can embrace the talent and

drive at smaller companies by investing

in them and learning from those small

companies, by helping them grow

and sometime by being partners. Big

companies want the connections from

the smaller, leaner companies, but they

don’t know how to work in a different

way because by definition, established

companies have routines and processes

and small startups don’t.”

It’s a symbiotic relationship, Kanter

suggests. Smaller companies benefit

from tapping into a bigger company’s

distribution network, and the bigger companies benefit from

being exposed to fresh ideas, Kanter says. And, regardless of size,

a business that needs to transform itself in a hurry needs to be

agile-thinking and nimble enough to act quickly.

Because as Kanter says, “It’s never totally clear when you have

to decide that you need to change. When it is totally clear, it’s

often too late.”

“ONE OF THE DILEMMAS OF TRYING TO TRANSFORM A COMPANY IS THAT YOU NEED TO HAVE TOP MANAGEMENT WHO REALLY BELIEVES THAT YOU HAVE A MODEL FOR THE FUTURE,” KANTER SAYS.

ROSABETH MOSS KANTER’S CHARACTERISTICS SHARED BY SUCCESSFUL ORGANIZATIONS

1 2 3A willingness to let go of what brought success

A culture that embraces innovation

A company that reflects the outer world


DOES YOUR CULTURE FUEL YOUR STRATEGY — OR DOES IT

DEVOUR IT?The results of your business are a product of action — and culture decides the action in your company.BY SHIDEH SEDGH BINA

INSIGNIAM QUARTERLY 27FALL 2014


The investigation doesn’t pinpoint a single cause of this failure. But it unequivocally

states that a dysfunctional corporate culture was a primary hurdle standing in the

way of GM’s expressed strategy of producing high-quality and reliable automobiles.

Over and over the report details a culture that prevented employees from raising

and addressing safety issues and prevented managers from taking responsibility.

The lack of accountability was so endemic that there was even an internal

language for it. “One witness described the GM phenomenon of avoiding

responsibility as the GM salute; a crossing of the arms and pointing outward

toward others, indicating the responsibility belongs to someone else, not me,”

write the investigators. To be clear, GM is just the most recent and high profile

demonstration that Drucker’s observation was accurate. There are plenty

of other equally distressing cases of

culture trumping strategy. Conversely,

a company culture that meshes and

strengthens strategy — so evident

at successful companies like Google,

Apple, and Under Armour — can yield

exceptional performance and innovation.

So how do you get a clear perspective

on exactly what your corporate culture

is and ensure that you have one that fuels

your strategy rather than devours it? And

just whose responsibility is it to create that

winning culture?

The first step toward shaping culture

in a positive and intentional way is to

understand what culture actually is and

how it operates. Music is an apt way to

think about culture and its pervasive

influence in a company. Like music at a

concert or a dinner party, or even in an

elevator, culture is in the background yet

very much influencing the actions we

take in the foreground.

It sets the tone, pace, and

tempo of our actions,

allowing for certain

things and prohibiting

others; some music

encourages toe tapping,

for instance, while other

tunes demand that you

get up and dance. In the

case of culture, each action

reinforces the “music”

and serves to make it

even louder and more

pervasive. And when you

consider that all corporate performance

and its results are a product of action, it

becomes immediately clear why culture

trumps strategy in driving corporate

performance. And if the culture, or music,

is not harmonious with the strategic

dance you want to encourage, it’s just

not going to work.

The good news is that you are not

stuck with the culture you have. In fact, in

our work supporting strategy realization,

Management guru Peter Drucker’s famous observation

that “culture eats strategy for breakfast” is as valid today as

ever. For proof, one only needs to read through the 300-plus-

page report that details the causes of the General Motors

ignition switch failures, a debacle that led to numerous

accidents and deaths and the recall of millions of automobiles.

M


we often have to work with executives to catalyze a cultural transformation.

This is a task that, quite frankly, is best engineered by outsiders who can assess

it dispassionately and can see the different facets of the culture without having

been blinded by being part of it. And we have found that revealing the existing

culture goes a long way toward unhooking it. But in order to alter the culture,

you must first clearly see and understand your current culture.

We have pinpointed nine specific facets of corporate culture. You can use this

framework to discern — and if needed, begin to alter — the culture that arises

from the mass of human interactions that take place each day in your company.

LANGUAGE AND NETWORK OF CONVERSATIONS

One can argue that every aspect of work in an enterprise involves some kind

of conversation. So the content, structure, and distribution of the conversations

of an enterprise are its most potent mechanism for reinforcing culture.

Simply paying attention to how people in a company interact, what they

talk about, the language they use, and how their conversations are structured is

essential. This is a standard practice for us when we are asked to work on strategy

implementation or culture initiatives: We go in and interview employees to get

a clearer sense of the music they’re dancing to by paying attention to the content

and structure of their conversations. We worked with a company where one of

the important success factors for their new strategy was collaboration. Yet when

we met with senior executives, we heard repeatedly about email wars, which told

us plenty about a deeply ingrained, adversarial atmosphere of “gotcha” at the

company. And you can be sure that “gotcha” was going to trump collaboration.

The remaining eight facets are all found in the conversations people are

engaged in together and with customers and suppliers.

CUSTOMER ORIENTATION

Since all enterprises exist to serve the needs of some set of customers, how the

customer is viewed, served, and interacted with is another important window

into culture. One hospital system we worked with had set for itself the strategy

of becoming a national leader in patient service, satisfaction, and outcomes.

Despite this patient-first aspiration, when we interviewed hospital executives

and staff, nobody spoke about the patients without prompting. Yet they waxed

on and on about financial concerns. When we asked, we inevitably were told that

“of course” the patient was important. If your culture is truly patient-centered,

then the patient is not a background concern and the budget is not the main

topic of discussion.

Another window into customer orientation is to discern how the employees

are also viewed and treated. As one CEO said, describing the corrosive customer

service culture in his organization, “The top guy kicks the guy or gal in the next

level down, who kicks the guy or gal in the next level below, and this goes on

down to the last guy or gal in the employee chain, the one who deals with the

customer. And what does that guy or gal do? He or she kicks the customer.”

WHAT IS ACTUALLY VALUED

Values determine choices and effective performance requires the right choices.

The best way to find out what values are operational in your organization

is to listen to how leaders assess each

other. Note what is recognized and

complimented and what is looked down

upon. Ask people what it really takes to

succeed. At GM, safety was put forth

as a high-priority value and strategy.

Yet the investigators who dissected the

company’s culture found that what was

truly held in high regard was not doing

or saying anything to make the company

look bad. Looking at what people truly

hold to be important will tell you what

is framing their choices and is a far better

way to gauge culture than examining

values written on a poster.

ACCOUNTABILITY AND

RESPONSIBILITY

Accountability is being answerable for

providing or governing so as to meet the

conditions needed to bring about the

intended results. Without accountability

the organization drifts; with accountability

it is taken somewhere. And responsibility

is about dedication beyond your stated

job. Nevertheless, the actual connection

INVESTIGATORS IN THE GM IGNITION SWITCH FAILURES RECOUNTED THAT SUPERVISORS TOLD EMPLOYEES TO “NEVER PUT THE COMPANY AT RISK.”

between results and accountability, as well as responsibility, is often hazy or gets

lost in a sea of circumstances and excuses. We were once brought in to work

with a company for a breakthrough project that was $50 million behind a $500

million target. By way of getting to know the interviewee, we asked executives

to describe the jobs and the results for which they were accountable. One after

another, we heard answers that talked about a series of tasks. Not one person

other than the person who hired us talked about results. One of the senior

leadership executives even shrugged and said that in his role he had absolutely

no accountability for business results. How about that for a bird’s-eye view of

culture and its impact on performance?

TRADITIONS, RITUALS, HEROES, LEGENDS, AND ARTIFACTS

To better discern what is reinforced, make an effort to understand a company’s

status symbols and what gives people a sense of belonging and pride. We once

worked with a new CEO whose

company had long-term success in

the past, but was now struggling with

a protracted stretch of flat growth

and lower margins compared to their

competitors. The CEO believed one

way to kick-start competitiveness was

to create a thrifty corporate culture

and restore profitability. But what we

discovered was that a sign of being a successful executive at this particular company

was wearing a diamond-encrusted Rolex. How can you authentically drive a

culture of thrift while sitting in a room full of diamond-encrusted watches?

There are also legends or stories that are

repeated and referred to almost on a daily

or weekly basis. Often these stories have a

negative tone and can even be corrosive,

such as with one manufacturing company

we worked with. The business had been

struggling with quality issues, and when

we interviewed employees we repeatedly

heard about a wave of layoffs that had

occurred seven years earlier. The workers

who remained at the company identified

themselves as “survivors,” which created

a serious sense of disenfranchisement

between them and management that had

to be addressed before the culture could

begin to change.

LEADERSHIP DYNAMICS

We all know that the tone of an

enterprise is set at the top. How leadership

is viewed and overall leadership style

in a company is another significant

contributor to culture and the ability to

execute on strategy. For example, one

very successful bank we worked with was

intent on creating a culture of customer

CULTURE TRUMPS STRATEGY IN DRIVING CORPORATE PERFORMANCE

ALL OF THE AVENUES TO SUCCESS WITHIN AN ORGANIZATION ARE NOT SPELLED OUT IN THE EMPLOYEE HANDBOOK. RECOGNIZING THESE UNWRITTEN RULES — AND ALTERING THEM, IF NECESSARY — IS AN ESSENTIAL PART OF A CULTURAL TRANSFORMATION.


service. As part of that effort, executives were required to spend several hours

each week listening in on customer calls and a certain chunk of time each month

actually answering calls. Every floor in the headquarters had glass-enclosed

“listening rooms” where management could be seen listening to customer calls.

Executives also served lunch to employees in the company cafeteria during the

holidays. All of these things reinforced that great service was essential to the

company’s core.

UNWRITTEN RULES FOR SUCCESS

As much as we’d like to think otherwise, all of the avenues to success within

an organization are not spelled out in the employee handbook. Recognizing

these unwritten rules — and altering them, if necessary — is an essential part

of a cultural transformation. Indeed, one company we assisted was a top three

performer in an industry, yet couldn’t catch its leading rivals. Part of the reason

was because there was an out-and-out adversarial relationship between the chief

merchandising officer and the chief store officer in this retail operation. Far from

being a results-driven meritocracy, everyone in the company knew that in order

to get promoted you had to align yourself with one of these executives and were

judged based on your loyalty to them. While everyone was busy navigating this

dynamic, the overall success of the company became secondary.

DECISION RIGHTS AND PROCESSES

One of the most powerful tools in setting a culture is who makes what

decisions, at what pace, and whom they have to consult to make those calls.

In successful service-oriented companies like Ritz-Carlton, each employee is

allowed to spend up to $2,000 per day to “delight” a customer or fix a problem

without consulting a manager. But in other companies, decision rights are

extremely limited. One global company we worked with had 45,000 employees

and instituted a rule that no contract involving more than $25,000 or travel over

$500 could be approved by anyone outside the C-Suite. It was an aspect of the

culture that made it very difficult for senior vice presidents and anyone lower

in the company hierarchy to feel independently accountable or responsible.

And managing these relatively minute amounts of money took up a significant

amount of the executive’s time, keeping them from being out in the field or

meeting customers. And most importantly, these actions reinforced the idea

that money saved was more important than taking care of customers — which

resulted in a stream of customers lost to competitors.

LEGACY

Every company has a story about the origins of the company, the visions of

the founders, or major successes and failures along the way. Spend more than a

day in any Johnson & Johnson Company and someone will bring up the J&J

Credo as a reference point for action. The credo is a clear-cut statement aimed at

generating an allegiance to the mission of serving patients, physicians, nurses, and

so on — and makes a point to list shareholders last in a long list of stakeholders.

And whilst the company has at times had breakdowns, the credo always serves

as a mechanism to get back on course, resulting in one of the most consistently

high-performing companies of all time.


80PERCENTAGE OF EXECUTIVES RESPONDING TO THE 2014 INSIGNIAM EXECUTIVE SENTIMENT SURVEY SAID THEY “LOSE SLEEP” OVER PEOPLE ISSUES IN THE COMPANY THEY LEAD

Understanding the power of culture,

having accountability at the top for

the culture, and revealing the facets of

the current culture goes a long way in

managing and guiding the culture of your

enterprise. However, there is one more

critical dynamic, and that is aligning

strategy and culture with individual

transformation.

It requires executives and employees to

take ownership of their part in creating

that culture. All too often people discuss

culture as though it’s something that

has been imposed on them. We all play

a role in maintaining and reinforcing it.

Once that is understood, it is much easier

for people to begin acting in a way that

invents a culture everyone desires.

One thing we’ve learned over the

course of almost three decades of work

supporting executives in generating new

levels of performance is that amazing

things happen as this evolution unfolds.

Engaging employees and executives to

create a new culture quickly unshackles

everyone from the old way of doing things

and energizes them with a passion, purpose,

and potency for new achievements.


At any company, corporate culture is your most

prized asset — it supports the strength and

viability of all your operational objectives.

OF EXECUTIVES LOSE SLEEP OVER PEOPLE-RELATED ISSUES

80%ACCORDING TO GALLUP, THE MAIN REASON PEOPLE STAY IN THEIR JOB ROLE: CULTURE

1ST

AMOUNT GM’S RECALL DEBACLE — A CULTURAL BREAKDOWN — HAS COST THE AUTOMAKER

$1.3 BILLION

NINE FACETS OF CORPORATE CULTURE


LANGUAGE AND NETWORK OF CONVERSATIONS

CUSTOMER ORIENTATION

WHAT IS ACTUALLY VALUED

ACCOUNTABILITY & RESPONSIBILITY

TRADITIONS, RITUALS, HEROES, LEGENDS & ARTIFACTS

LEADERSHIP DYNAMICS

UNWRITTEN RULES FOR SUCCESS

DECISION RIGHTS AND PROCESSES

LEGACY


According to Mary Kay CMO Sheryl Adkins-Green, powerful, lasting corporate transformations need not always stop traffic. Sometimes, understated transformations can yield ravishing results.

BY CHRIS WARREN WITH GORDON PRICE LOCKE

FALL 2014

It all could have ended very badly. A few years ago the local marketing team for Mary Kay Inc. in China came up with the idea for a promotion — a model search contest — that frankly didn’t dovetail neatly with the global brand strategy the cosmetics giant had developed at its corporate headquarters a world away in Dallas, Texas. Faced with the question of whether to

nix the idea altogether, Mary Kay’s chief marketing officer, Sheryl Adkins-Green, instead offered some guidance about how her Chinese colleagues could tweak their idea to be more synergistic with company-wide efforts, but otherwise gave her blessing. “We said we look forward to what you’re going to learn from this,” recalls Adkins-Green, who has been Mary Kay’s CMO for the past five years.

Mary Kay Inc. celebrates its 50th anniversary with the company’s largest ever pink Cadillac rally, 50 years to the day after the iconic beauty company was founded.

36 INSIGNIAM QUARTERLY


The resulting program was such a

rousing success that the team behind

it was invited to the company’s global

marketing conference to share what they

learned – the contest has continued to

evolve, and Adkins-Green herself is now

a judge. More importantly, the hands-off

approach is symbolic of the philosophy

that has allowed this half-a-century-old

company to grow from founder Mary

Kay Ash’s single 500-square-foot Dallas

storefront into a global leader in the ultra-

competitive cosmetics industry. “I think

that is an example of knowing when,

where, and how to let go and leverage

local insight and the talent of the local

marketing team and look to that as

content that other markets are going to be able to leverage down the road,” says

Adkins-Green.

In other words, it’s about trusting and empowering people to drive the kind of

continual transformation companies need to flourish — both internationally and at

home. There is an abundance of evidence to demonstrate that this quintessentially

American brand has developed an enviably successful approach to the always complicated

and nettlesome goal of global expansion. Indeed, Mary Kay, which manufactures and

distributes over 600 cosmetic and beauty products, currently operates in 37 countries

and has a global network of over 3 million independent sales consultants.

China has long been a focus of attention, particularly areas of the country other

retailers might ignore. “Over the course of the last five to eight years, we’ve started

to look at what China will need in five years,” Mary Kay CEO David Holl told

Bloomberg News in 2011. “We’ve managed the transition, so it’s no longer all about

the U.S. …We don’t need a shopping mall to sell, so we can do extremely well in

[Chinese] cities where they don’t have all the infrastructure.”

It has been an effective strategy. At the start of this year, Forbes ranked Mary Kay

at number 163 on its list of the largest privately held companies, with estimated


[Clockwise from top left] Independent sales force members organize and host Mary Kay Skin Care Parties — a critical component to the company’s business model; Scenes from the 2014 Mary Kay Seminar, an 18-day event in Dallas, which is estimated to have pumped $32.1 million into the local economy; Mary Kay’s corporate headquarters, located in Dallas; Mary Kay Foundation donates $25,000 to Hope’s Door, which is aimed at helping families affected by domestic violence; Purdue University Calumet wins the 2014 AAF National Student Advertising Competition for a campaign showcasing Mary Kay.


revenues of around $3.5 billion annually.

Several independent analysts pegged

2013 as a marquee year for Mary Kay

— it’s estimated that the company

recorded a number of its highest grossing

months in history during the year — and

international sales play a central role in

its ongoing growth. In fact, over the past

decade, the portion of Mary Kay’s overall

revenue from international markets

spiked from 30 percent to 70 percent,

with countries like China, Russia and

Brazil growing in importance.

While Mary Kay has clearly found

a recipe that seems to work as well in

Shanghai and São Paulo as it does in St.

Louis and Seattle, Adkins-Green is the

first to say there’s nothing easy about

international success (see sidebar for

her tips on going global). Take China,

now the company’s largest market.

Everything about succeeding there

is a challenge, starting with the huge

geographic distance, which makes it

hard to train or even communicate in

real-time with colleagues. But even when

communication is not an issue, culture is.

“The challenge with China is not actually

because of cooperation, but culturally,

it’s probably the most different than the

U.S.,” Adkins-Green says.

A CULTURE OF QUIET,

EVERYDAY TRANSFORMATION

Although it’s just one small example,

the Chinese model search contest Mary

Kay pulled off is emblematic of the kind

of transformation and adaptation that is

required to win in new and challenging

markets — one that doesn’t necessarily

require seismic changes to strategy

and culture. Rather, while less splashy

and much less disruptive, Mary Kay

has established a culture that embraces

daily transformation — perhaps more

accurately described as evolution — that

nimbly adapts to the inevitable avalanche

of new opportunities and challenges.

TIPS ON PURSUING GLOBAL GROWTH

Expanding into global markets isn’t easy. Besides the obvious

challenge of different languages and cultures, there are legal

and regulatory hurdles to overcome. Is it worth the hassle? Well,

for Mary Kay, which first ventured internationally when it entered

the Australian market in 1971, the answer is a resounding “yes.”

Over the past 10 years, the company’s international revenues

have grown from 30 percent of total earnings to 70 percent.

As one of the executives who has helped guide that growth,

CMO Sheryl Adkins-Green has some suggestions about how

brands can successfully expand globally.

1 THINK LIKE MARCO POLO: When you have an

explorer’s mindset, she says, you are not judging

but you’re very open to learning.

2 GIVE YOUR EARS A WORKOUT: Engaging a

global team will determine your success. And they

have a lot to tell you about what works and what

doesn’t on a local level. Listen to them.

3 MAKE THOMAS EDISON PROUD: Or, for that

matter, make Mary Kay Ash proud. Ash once said

“we fail forward to our success,” which is an eloquent

way of saying that you won’t succeed if you don’t embrace

experimentation. Adkins-Green says she loves that she can go

back to those words and encourage her team that it’s OK to fail

when something hasn’t gone as planned. Although she has

a team of perfectionists, she often points out why a particular

action was taken, what was learned, and why it’s usable.

4 COLLABORATE: This doesn’t just mean

coordination and consensus building. Collaboration,

Adkins-Green says, relies on trust. To collaborate

means you let go and let your partners run with the ball. If the

CMO is the quarterback, you need to be comfortable handing

things off.

5 CELEBRATE: If you have success in your overseas

efforts, indulge in some well-deserved celebration.

It’s a way to keep good things going. Bring the

energy back to what got accomplished, what was fun along

the way, and the excitement of that accomplishment. It is that

energy that’s going to fuel the next round. That’s how you keep

momentum going.


Adequately listening to and serving the

needs of millions of beauty consultants

located around the globe requires the

capacity to adapt and transform on a daily

basis. Still, while allowing for the sort of

fluidity and flexibility that is so essential in

order to have success in different markets,

there is a bedrock core to the Mary Kay

culture that provides important focus.

“We are all aligned around a common

mission of enriching women’s lives and

supporting the success of the sales force,”

says Adkins-Green. “By definition, we are

all on the same page.”

Which is not to say that the best way

to serve the sales force and, ultimately,

women customers is not a subject of

vigorous internal debate. “While we have

differences of opinion, it will never really

get to the point of being a struggle or an

argument,” she says. “When we do have

a difference of opinion, we talk in terms

of what is going to help the independent

beauty consultant be successful and that is

usually the tie-breaker if there is a debate.”

With customers and beauty consultants located across the globe, one of the most

difficult questions Adkins-Green has faced as CMO is how to settle on the right

messages to appeal to customers. “The toughest challenge when I took over

this responsibility was to really consolidate and combine our brand messaging

around the world because it means so many things to different people,” she

says. As a start, she examined the kind of adjectives people already used to

describe Mary Kay and found a mixture of positive and negative, old-fashioned

and innovative terms — it was a confusing mélange for some members of the

executive team, many of whom didn’t agree on what the brand stood for. So

Adkins-Green worked with a team to crystallize the essence of the brand and

develop a vision statement. “It’s aligned around three key components: irresistible

products, a rewarding opportunity, and positive community impact. So, with just seven words, we built a communication strategy

that not only resonated with the Mary Kay business around the world but, most importantly, with the independent sales force.”

DISTILLING THE MARY KAY MESSAGE

Mary Kay VP of Public Affairs, Anne Crews (right) with winners of the Unsung Heroes Awards — an anti-domestic violence task force — in Washington, D.C.

There are a host of reasons why Mary Kay eschews the typically painful culture

pivots that so many companies endure when they decide reinvention is a must.

Simply put, the company’s executives have never lost sight of the value of the

trusted relationships between the Mary Kay sales force and their customers.

“In the case of Mary Kay, the brand is the independent beauty consultant,”

says Adkins-Green. “The independent beauty consultant knows her customer

personally,” she says. “She’s going to see her next week at the PTA meeting, so

there’s an accountability and trust that comes out of that relationship.”

The CMO says it’s the executive team’s job to provide their salespeople with

whatever they need to excel — which, of course, makes sense because the

company’s business model is such that the individual success of a salesperson

translates to company success. The most obvious way Mary Kay helps its beauty

consultants is by developing and distributing a steady stream of high-quality

products while also handling the not insignificant regulatory requirements that

come from serving dozens of markets around the world.


Like every large company, Mary Kay grapples with how to best

use technology to drive results. “As a brand that has always been

driven by word of mouth, the whole shift for digital and social media

to be the primary marketing channels is a huge opportunity for

Mary Kay,” says Adkins-Green.

“The independent beauty consultants websites are like a

personal makeup concierge,” Sara Friedman, Mary Kay Inc.’s vice

president of U.S. marketing, said in a press release announcing the

changes, which came as part of the company’s 50th anniversary

celebrations in 2013. “Once a woman goes to her personal Mary

Kay independent beauty consultant’s website or connects with

one through the help of the consultant locator, she can save her

favorite products, view application tips, get personal product

recommendations, and order products. Plus, she can always see

how the newest trend looks on her with our popular online virtual

makeover. The website makes running a Mary Kay business easier

and makes buying our products even more fun and convenient.”

TECHNICALLY BEAUTIFUL THE COLLABORATIVE NATURE

OF TRANSFORMATIONAL

LEADERSHIP

For her part, Adkins-Green feels

as though she landed at just the right

company to match her own personality,

skills, and leadership style. Before

arriving at Mary Kay in 2009, Adkins-

Green held senior marketing positions at

Alberto Culver, a leading beauty products

manufacturer whose brands include

Noxema and St. Ives, as well as Citibank

and Kraft Foods. As has been the case

in her previous jobs, Adkins-Green has

seen her role largely as a facilitator. “I’m

passionate about connecting ideas and

people and I think that’s always been my

strength,” she says.

While that talent has undoubtedly

played a central role in Adkins-Green’s

successful career, at Mary Kay the

ability to build and foster relationships

is particularly resonant — after all, that’s

how the company’s beauty consultants

have performed so exceptionally. Not

surprisingly, Adkins-Green estimates

that about 80 to 90 percent of her time

is spent engaging people at Mary Kay

and cultivating relationships — which

is far different from her job at Kraft, for

example, which included devoting plenty

of hours to product development.

It’s important to understand the

nature of all of this people-focused

effort. While it’s true that Adkins-Green

has an essential role in developing and

implementing branding and marketing

strategies, she also says that it’s her task to

influence and shape decisions rather than

outright dominate them. Part of that, she

says, means being an internal advocate.

“Part of my style is that I’m a cheerleader

for the brand and for marketing’s role in

the sales force’s success every day,” she

says. “So when it comes time to actually

advocate for a new initiative, I feel like I

already have some momentum before the

conversation even starts.”

Clearly, that’s not all there is to making sure that marketing efforts receive the

C-Suite attention and assistance they need. When she wants to push an important

initiative that she thinks is the “proverbial no-brainer,” she’ll often “come in and

hit it hard with an energetic pitch.” Then again, if something is potentially more

controversial and delicate, she’ll seek out input from as many people as possible

before she even puts together a recommendation. “It really does depend on the

initiative and where I think that stakeholder is, in terms their ability and readiness

to support,” she says.

But if Adkins-Green wants any confirmation that she made the right decision

in coming to Mary Kay, it comes each night at bedtime. What prevents slumber

aren’t challenges and headaches and deadlines, she says. “What keeps me up, with

all sincerity, is excitement about what we can do and what we will be doing,”

she says. And when does she sleep like a baby? “It’s when I have good feedback

from the sales force.”

STOKING THE FIRES OF TRANSFORMATIONBY NATHAN OWEN ROSENBERG

Think change and transformation are the same? It’s time to transform your perception.



source of great stress, tension, and lots of sweat. I tried every

tip and technique to relax and make it easier — to change the

situation, but it never really improved.

One day, I was flying with a mustang lieutenant commander,

returning from a mission. “Okay, Nate, you’ve got it. Bring us in.”

I locked my eyes on the deck of the carrier — pitching,

slewing, and rolling — and could feel my grip on the stick

tighten automatically; sweat began rolling down my spine.

Starting down the glide path, I tried to keep up with the dancing

motion of the ship.

Jack Shioli’s voice came through my earphones, “Look at

the horizon.”

Every instructor with whom I had ever flown said, “Look

at the horizon.” I glanced up at the horizon to comply and

immediately bore-sighted right back to the deck of the ship.

“Dammit, Nate, look at the horizon.” Jack grabbed my helmet

and pulled my head up, so that I had to actually see the horizon.

I realized that, while the ship was moving all over the place, the

horizon was not moving. A moment later, we eased on the deck.

After that I never had a problem landing on the ship — a

transformation in my experience and ability, not just a change.

Change and transformation are not the same. Having said

that, if you read most management literature, visit the websites

of the big IT consulting firms, and listen to corporate executives,

you would conclude that transformation is simply big change. This

lack of distinction is costing companies and other organizations

significant opportunities for real competitive advantage and

organizational success. Different than what? Different than what

already is? Different than the past? Change, by its very nature, is

rooted in more than, different than, or better than what has been.

Change keeps us attached to the past in some way.

Apple’s dictionary defines change as “make or become

different.”

The same dictionary defines transformation as “(in physics)

the induced or spontaneous change of one element into another

by a nuclear process.” Think transubstantiation.

Transformation is putting the past where it belongs, in the

past, and not letting it determine the present or the future.

Looking at change in mathematical terms, you start with X,

which represents current circumstances, and then you change

x or ∆X. You end up with some function of X or ƒ(X). That

is change.

With transformation, you start with current circumstances,

represented by X and then, putting X into the past, you have ø

and end up with {…} — a space of possibility within which

you can create possibilities, a new something or, even, some

of X that is desirable. This is transformation. This work is

absolutely essential before an organization can transform. By

completing the past, you generate a space to create — not fix

or improve or upgrade. It is this space of creating from nothing

that distinguishes transformation from change. Without doing

this work, the best you can expect is good change.

Transformation is a powerful discipline for shifting what

people think is possible in a company and what is possible for

themselves. At its most fundamental level, transformation is

opening up a new possibility or a shift in one’s point of view.

In the ’70s, Werner Erhard, who Fortune called the father

of humanistic management, developed a method of personal

transformation with the highly popular “est” training. In this

training, people from all walks of life created new possibilities

for themselves and transformed their lives. A decade later, these

generating principles began to be widely applied in businesses

and other organizations and institutions.

As far as we know, the first intentional organizational

transformation of a large corporation occurred at Ford Motor

Company. In the midst of the onslaught of Japanese competition,

AS A YOUNG ENSIGN AND NAVAL AVIATOR, LANDING ON THE SHIP WAS A


Don Peterson and Harold “Red” Poling, Ford’s CEO and COO,

realized that Henry Ford’s corporate culture was no longer a

source of the company’s success and was actually interfering

with the company’s ability to compete in a rapidly globalizing

marketplace. They wanted to replace the old culture, not merely

change it. Nobody knew how to do it but doing so was an

organizational imperative.

When we began working with the automaker in the early ’80s,

we interviewed executives, managers, and line employees. At

Ford, they talked about “The Job” and “Job One” as a shorthand

for an urgent priority. We asked a plant manager what Ford’s

number-one job was; he replied, “Getting cars out,” the answer

that we heard most often in one form or another. When Red

Poling was asked the same question, he replied emphatically,

“Quality is job one.” That one statement, the COO’s crystal-

clear stand, was transformative. The now famous ad slogan “At

Ford, Quality Is Job One” encapsulated the transformation that

fueled the company’s sluggish sales and degrading reputation,

leading to record profits.

Transformation occurs on three levels: individual,

organizational, and strategic. Sometimes, a transformation in

strategy requires an organizational transformation and then the

people in the company have their own personal transformation.

Sometimes, an organizational transformation opens up a strategic

transformation. Most often, a CEO sees new possibilities for the

company and leads the organization’s transformation.

How does a leader inspire, lead, and realize transformation

in her or his organization? Quite simply, by being transformed

him or herself.

Warren Bennis, who just passed away and who was the

godfather of leadership studies, points to a crucible experience as

a common thread that he discovered in hundreds of transformed

business leaders. He defines a crucible experience as a severe

test or trial that is intense, often traumatic, always unplanned,

and transformative. “Crucibles,” explained Bennis and his co-

author, “force leaders into deep self-reflection, where they

examine their values, question their assumptions, and hone

their judgment.”1 As a transformed individual, he or she is

not managing the organization based on the past; his or her

leadership is based on their commitment to a new future for

the organization that is discontinuous from its past.

As Tim Bailey, Executive Vice President, Global Product

Supply, Business Services & Technology, at S.C. Johnson & Son,

Inc. puts it, “If you start with possibility and work your way back

to the current circumstances, you always end up with something

bigger than if you start with the circumstances and try to figure

out what is possible.” Tim is a brilliant, transformational leader

who knows what it takes to cause a breakthrough, having led

and championed dozens of breakthrough projects that have

brought hundreds of thousands of dollars to the bottom line.

In the Winter 2013 issue of IQ, Werner H. Erhard and Michael

C. Jensen authored “The Four Ways of Being That Create the

Foundation for Great Leadership, A Great Organization & A

Great Personal Life.”

These foundations are central to a leader’s transformation

and ultimate success in transforming his or her organization.

How does an executive know that it is time to transform the

organization? The most common sign is that by doing what it

knows to do with a reasonable rate of improvement, the likely

results are not acceptable or satisfactory. Amazingly, the best time

to transform is on the shoulder of organizational success — just

when everyone else wants to reproduce and proceduralize the

source of that success.

Most companies are saddled with “that’s the way we get

things done around here” or “that’s the way things work around

here.” We call that ‘business as usual’ which sets up predictable

results that we call ‘the drift.’ These are proven ways of working

and operating that reduce risk and deliver expected results.

Performance improvement is tied to past performance. The best

that can be achieved is incremental improvement.

Breakthrough performance requires a transformation —

breaking out of the business as usual — inventing anew the

way the organization perceives what is possible and thinks and

acts. Transform any one element — perceiving, thinking, acting

— and you are on the road to transformation and breakthrough

performance.

1. Bennis, Warren G. and Thomas, Robert J., “Crucibles of Leadership,” Harvard Business Review, September 2002, pg 1.

Authors Werner H. Erhard and Michael C. Jensen describe the four foundations of being a great leader as such:

1 Being authentic

2 Being the cause in the matter of everything in your life

3 Being committed to something bigger than yourself

4 Being a person and an organization of integrity


A plant manager at a large telecommunications firm told us,

“All of this quality stuff is just a waste of time. But, I’m going back

to the plant and acting like I believe in it because that is what

the company wants.” At the time, Total Quality Management

was relatively new and was transformational when done right.

He started acting in the way that his manager expected him to

and simply repeating what he heard in our work session. Four

months later, he was the company’s biggest proponent of total

quality next to the chief quality officer and the CEO. He saw

the impact of his new actions on his people and the results

that they were producing. This transformation in acting led

to a transformation in thinking and perception that began the

transformation of his plant and achieving a breakthrough in

performance: a 32 percent increase in quality and a 27 percent

decrease in cost in two years.

Transformation happens in a moment and, at the same time,

is a structured journey. The first step is facing reality, separating

fact from interpretation and assessment and peeling back the

long-held layers of belief and misperception that are inherent in

the corporate culture. As a part of this work, we interview and

survey a big sample of folks from every level and every function.

We listen for aspirations as well as likely barriers. We ask, “When

you need advice about something, to whom do you go?” and

“When you hear a rumor, with whom do you check it?” The

folks whose names are mentioned most often are invited to

serve with selected executives to lead the effort.

Next comes letting go of decisions about how it is and must

be and putting those in the past, creating a space to design a

future from possibility. This also requires confronting the future

that is predictable based on business as usual and the drift.

Starting with this blank sheet of paper, the executives work

together to create a bold, exciting, inspiring, and challenging

future for the company. We use the Merlin process, working

backwards from the future to the present, to identify what it will

take to make the future happen and to get the organization to

achieve a breakthrough. The executives then design a corporate

culture that will pull for success in that future, one that would

be a source of competitive advantage in the marketplace of

the future.

Then, we launch an intensive campaign to enroll everyone in

the organization. Both titled and informal leaders enroll people

throughout the organization to inspire and gain authentic

commitment.

When people are truly enrolled — having authentically

chosen to get on the bus traveling the transformation journey

— sustaining transformational momentum is relatively easy,

given executive courage and sustained commitment. There is

nothing more transformative than involving people in the work

to achieve transformation, so we get people to work on projects

that are critical to fulfilling the new future.

The projects are derived from a keystone project that was

designed and committed to by the executives. A keystone

project is a commitment to critical business results that are

achievable only in the new culture. The keystone

project team is led by the CEO and made up by

select executives and key informal leaders.

The first ground rule for the project teams is

to operate consistent with the new culture. A

cross-functional team works on the project, and,

as they progress, the process of transformation is

accelerated. This focus on performing work and

achieving results that seemed impossible in the old culture keeps

everyone’s eye on the prize.

Managers are equipped to educate employees about

the changes that are taking place, what’s different, what the

organization won’t be doing any longer, and what the company

will start doing differently. Every person in the company is

educated in how to operate in the new culture and is given the

opportunity to discover what aspect of the new future inspires

her or him. They have the opportunity to sign up for various

roles in the company’s transformation: project team leaders,

project team members, coaches, and trainers. The executive

team serves as the steering committee for transformation with

the CEO leading the entire effort.

Paradoxically, the biggest barrier to transformation is past

success. We all want to win. Once we have a formula for

winning, we hold on for dear life. When the formula for success

stops working, we tend to hold on even harder, do more of what

made us successful. This is true for executives and organizations.

They are like a survivor in the middle of the ocean holding onto

a deflated life preserver. As long as they hold onto the past, even

past successes, transformation is not possible. The point is not

to forget the past; the point is not to be dictated to by the past.

The second key barrier is senior executives’ need to look

good and be well thought of. Most senior executives operate

like they know more than anyone else in the room. The bad

ones operate like they are the smartest ones in the room. It is

a rare executive who openly admits mistakes and is willing to


TRANSFORMATION HAPPENS IN A MOMENT AND, AT THE SAME TIME, IS A STRUCTURED JOURNEY.


Sus saepre pelique velenimus unt, que

quiant quid ersperum aborero videbis sequi

doluptatem ut labo. Harupta eceatur, si dolup-

tata quo beaquate nos sam se cum illabo-

ratem. Nemolor epereped ut eos escilignis

ventur, vende nis quaspe voluptur autem la

nos eic temporerem quia volupta vel ideriant

inus, ut a cor andignamus anis quo eic tem

lam lant faces nihiliquam, sincipiet earum is

et ipsandaes ut voluptasped magnimin pedi-

taturit as ut ut aut hitas dem. Atus.

Agni cuptibus as experia tumquide necti

idis ex essi il is et, apelliam fugitam quis

pos net est facil imintem rerenis cone nihit

volesciist, verisin tionsecti reperci psantio cor

seque et volorerspiti rernam arumquos eium

nonsecto occus molupiendae nulparu ndan-

dicias alicto dolor re vel eum volupta quis mo-

lesequam, offictotati bla volorest, totasimus

volut maxime offic te pos quae rectiur si debis

ideni offictendae volorer epudam, cuptat es et

volecte eicimuscidel ilitat.

Accabor poribeaque consedi psumqui

conem quam, ut pla quaerib uscipsam, ulpari

imusapi ctectae ctotaest vendi doluptat.

UM FUGA. RES PRO DOLUPTATEM REM SI

IF VELISSINT FUGIT QUIBUS DOLORIA PE ET, NIS AS EXPLAM IDE ET ALITIIS

INDIVIDUAL

STRATEGIC

ORGANIZATIONAL

THE THREE LEVELS OF TRANSFORMATION


be accountable for failures. The myopia produced by success

and looking and sounding like you know it all precludes

transformation. Too many executives are unwilling to let go of

what has made them individually successful for the possibility

of greater organizational success. Putting the past in the past

and venturing into the unknown territory of a new, unproven

possibility involves a high risk of failure. In a transformed

organization, everyone is a beginner. Better to keep doing what

you are already doing to look good and appear smart.

The third barrier is closely related to the second: fear. Fear of

failure. Fear of the unknown. Fear of looking bad. Fear of loss

of approval. Fear of not being liked or not fitting in. There are

almost no facts known about the future. Indeed, the nature of the

future is that it is unknowable. What can be predicted is a kind of

security blanket for too many executives. Predictability has given

them confidence that they will succeed. Fear freezes them, stops

radical thinking and acting which in turn stifles the possibility of

transformation. In the middle of every transformation effort on

which Insigniam has worked, there is a moment of truth — the

valley of the shadow of death — in which the transformation

becomes risky and the executives want to go back to what

they know. If they do, this ends transformation, and the people

who are the organization are demoralized. When the executives

lead and choose to persist — despite contrary evidence —

breakthrough results start to build up.

If you can see opportunities that are outside the reach of your

organization, embrace transformation. Put the past in the past.

Create a space for possibility. Enroll others in the transformation.

These are the ingredients for stamping out the instrumentalism

of change and stoking the fires of transformation.


INSIGNIAM’S 2014

EXECUTIVE SENTIMENT

SURVEYRESULTS FROM OUR ANNUAL SURVEY SHOW CULTURE

IS THE MOST CRITICAL FACTOR OF SUCCESSFUL TRANSFORMATIONS


In1835, Samuel Slater — widely considered to be the father of the American

industrial revolution, as denoted by U.S. President Andrew

Jackson — published his memoir. Slater, a textile magnate,

wrote that “graduate and elevation of standing are founded

… on the industry and enterprise of the people.”

Amazingly, 179 years later, executives are still trying to

crack people and culture issues.

The latest snapshot of executive thinking and motivation,

captured in the 2014 Insigniam Sentiment Survey, captures

an environment beset by disruption; one that challenges

executive leaders to reconsider their strategies for achieving

organizational success and sharpen their focus on the

powerful impact of culture and alignment.

Our annual survey captures the thinking of Insigniam’s

extensive international network of major business

sectors including healthcare, pharmaceuticals, chemicals,

manufacturing, fast-moving consumer goods, energy, and

biotech industries.

Organizational culture and its influence on a company’s

ability to launch a major change initiative was a key

component of this year’s survey. Why this focus on culture?

When asked what aspect of their job caused them to lose

sleep, 80 percent respondents identified issues related to

people — culture, talent, accountability, and execution.

Surprisingly, only half of the executives surveyed said

that their company’s actual culture matches what the

company claims to have. Some executives said that even if

the actual culture matched the stated culture, it still needed

to be changed, regardless of current circumstances.

Perhaps the most shocking finding related to culture

was that many respondents said their organization’s culture

couldn’t help them realize their strategy because they had

no strategy in the first place.

Alignment between corporate culture and strategy

was another major theme highlighted in the survey.

Respondents recognized the cost of misalignment to

their organizations. Seven out of 10 who reported that

their company’s culture did not align with their strategy

said that their employees were more likely to have lower

engagement and suffer from lower morale, with one-

half believing that it would cause a drop in performance

and one in three saying it increased staff turnover and

contributed to a loss of talent.

Interestingly, those who felt their previous change

initiatives were not successful cited a lack of resources as a

perceived inhibitor. However, those who had led successful

transformations said an overreliance on resources was,

instead, a factor for failure.

So what actions need to be taken? In our forthcoming

report, coming late 2014, we’ll diagnose the breakdowns

and offer pathways for breakthroughs. Before it arrives,

take an advanced look at the data that unpins our findings.

CONTINUED


CULTURE TRUMPS STRATEGY Results From Insigniam’s Executive Sentiment Survey Show Culture is The Most Critical Factor in Successful Transformation

$20 billion of leaders felt previous change initiatives were fully successful

50% of European and Asian executives said their company’s stated culture doesn’t match actual culture vs. 40% of American executives

93% of American executives believe proper alignment is critical for a successful change initiative vs. 50% of European executives who hold this belief

of executives from all geographies agree that efficiency and execution are

critical to success

of executives cited insufficient resources as a cause of a less than

successful change initiative

of executives don’t believe their company’s culture is the one it claims

or strives to have

Leaders of companies with revenue above $20B worry about culture twice as much as leaders of smaller firms.

29%

50% 40%

93% 50%

75% 44% 50%

Insigniam’s 2014 Executive Sentiment Survey captures a snapshot of what’s keeping global leaders awake at night and their thinking about their

organization’s culture and the importance of alignment with current strategies to ensure successful implementation of change initiatives.


agreement on the benefit of having a culture that aligns with corporate

strategy

50% of European leaders have attempted a change initiative during the past two years vs. 75% of U.S. executives

of respondents reporting successful change initiatives cited communication

and transparency as crucial factors

of executives believe a misalignment between company culture and strategy

would cause a drop in performance

types of results

executives point to

from proper align-

ment: financial and

perfomance-based.

A heightened awareness of

culture is shown to influence success

Poor planning is repeatedly cited in unsuccessful

initiatives

The most critical factor for achieving

transformation? Alignment.

75%

100% 50% 71%

50%

Once executives were able to align corporate strategy and corporate culture

55%cited

increased focus and

direction for the company

55% reported better

results

58.4% believe there is increased collaboration

VStop2

When a company gets to be 83 years old, such as the tire manufacturing giant Bridgestone Corp. — with well

over $33 billion in annual revenue — it can get set in its ways.

And when a company has manufacturing, research, and

development operations in 25 countries, as is the case with

Bridgestone, problems such as poor internal communications

and cross-cultural misunderstandings can become roadblocks

to the company’s success.

Such was the state of affairs in June 2013, when Steve

Shelton was promoted to the newly created position of senior

vice president, Technology, Manufacturing and Procurement at

Bridgestone Americas Tire Operations.

Between 2010 and 2013, Shelton had run what is now

called the Bridgestone Americas Technical

Center for Research and Technology in

Akron, Ohio. The Center, a key research and

development shop for the company, simply

wasn’t on the same page as the Bridgestone

Americas headquarters it reported to in

Nashville, Tenn.

“The business side of the house didn’t

think we were responsive to their needs,” Shelton says.

“Geographically, we were in different places. As an R&D group,

we weren’t as responsive as we could have been,” says Shelton,

a 30-year veteran of the tire industry who has held 14 different

jobs at Bridgestone during his 21-year tenure with the company.

The “us vs. them” mentality that existed in the Akron facility

was apparent to outsiders as well.

“One of the things they were convinced of was that nobody

really understood their business. Nashville and Japan didn’t,” says

Bruce Zimmer, a partner and consultant at Insigniam, which

Bridgestone engaged in 2013 to help. “That perspective and

belief resulted in them not being proactive in critical areas.”

In fairness to the Akron folks, they simply had a tangled web


PREVENTING CROSS-CULTURAL BURNOUT How Japanese tire manufacturer Bridgestone treaded cultural issues to gain market traction. BY JEFF BOUNDS


of people to answer to and had been boxed into

focusing on execution, Zimmer says.

“They had a complexity of relationships to

manage, very often with conflicting messages

and priorities,” Zimmer says. Indeed, the

Americas unit of Bridgestone “needed an American identity,

rather than just a top-down structure from Japan.”

As de rigueur in Japanese companies, the American managers

and executives who were in place had been judged by their

ability to make the proverbial trains run on time and not on

dealing with the bigger picture.

“They had been trained in executing what had been given

to them, instead of thinking about what was needed for success

tomorrow,” Zimmer says.

HYDROPLANING INTO CULTURAL ISSUESIt’s easy enough for differences to arise between working

groups in different cities, such as in Akron and Nashville. It’s

even easier to have that happen in a company like Bridgestone,

whose global headquarters is half a world away in Tokyo.

A major reason why cross-cultural differences can arise in this

scenario is that Japanese society typically places

a greater emphasis on harmony and consensus

than does America, according to Dr. R. Ray

Gehani, an associate professor at the University

of Akron whose titles include Founding

Director of Graduate Programs in Technology Management

and Innovation.

“What I’ve found is that, cross-culturally speaking, the Japanese

are highly civilized and highly conforming,” says Gehani, who

has worked in that country and speaks fluent Japanese.

Most new college graduates in Japan “end up conforming to

either what their bosses say they want or what they think their

bosses want,” he adds.

While Japanese values such as harmony and consensus-

building work well on many fronts, they “can act as brakes to

radical innovation,” Gehani says.

Indeed, the ability to bring innovation and positive change in

a business is a big factor in determining which companies remain

at or near the top of the Fortune 500 list over time, according to

Dr. Derrick D’Souza, professor of management at the University

of North Texas, College of Business.

IT’S EASY ENOUGH FOR DIFFERENCES TO ARISE BETWEEN

WORKING GROUPS IN DIFFERENT U.S CITIES, LET ALONE IN TOKYO.


Firms that fall out of the top slots of that

ranking can experience everything from inept

management and rigid cultures to organizational

complexities, D’Souza says. Winners like Wal-

Mart and ExxonMobil, on the other hand,

“change constantly,” he says.

“It’s the ability to change — and change in a way that allows

them to compete differently,” he says.

NAVIGATING THE CHICANES

When Shelton first took over the job of running the Akron

R&D facility in 2010, he not only had to deal with the cultural

dynamics and regional tensions he encountered, but also a series

of ancillary issues that needed solving.

One of the immediate issues was with Bridgestone’s

involvement with the Indy Racing League. The league, an

American-based sanctioning body for championship open-

wheel racing, at the time oversaw four racing series: the premier

IndyCar Series and three developmental series, including Indy

Lights, the Pro Mazda Championship, and the U.S. F2000

National Championship. “It was too expensive for the value

we were getting,” Shelton says. But keeping that relationship

was important to the company, the brand, and to the employees.

This management realignment came on the heels of an 18

percent staff reduction. That cost cutting, Shelton says, allowed

for the rescue of Bridgestone’s participation

in the Indy Racing League, and “that got us

credibility with the team in Akron,” he adds.

Shelton also realized that the gaps in

collaboration were aggravated by a lack

of understanding between colleagues of each manager’s

job function. To help stimulate greater adhesion within the

Bridgestone organization, Shelton rotated 70 percent of that

group to different roles.

“There’s nothing like walking in the shoes of another person’s

job,” he says.

To further develop his managers to acquire a broader

perspective, Shelton had Bridgestone participate in a program

called “Leadership Akron.” The initiative involved having a

Bridgestone employee visit six companies in the Northeast

Ohio area to see how things could be done differently, Shelton

says.

“With all of that, the executive team developed the view that

if we’d done such a good job with the R&D group, we could

roll the manufacturing and procurement arms together and get

synergies, and then take further steps,” Shelton says. “That’s the

purpose of what we’re doing now.”

GOING FOR ANOTHER LAPStill, there was a less than perfect harmony between the Akron

FOR BRIDGESTONE, PARTICIPATION IN THE INDY RACING LEAGUE

WAS IMPORTANT TO THE COMPANY, BRAND, AND EMPLOYEES.


group, the manufacturing arm, and the procurement unit. So Shelton did what

he has done so many times before: He took a different job to get a new view.

“I became a procurement guy for four months,” he says. “I had no experience

in that. I wanted to see what we were doing.”

And, not surprisingly, he began making changes. For instance, Shelton began

buying forward commodities to take advantage of inexpensive prices. More

importantly, Shelton began making the procurement group more responsive

to the needs of the other Bridgestone units it served.

“We’d been getting a lot of complaints from our Latin American business

group about not helping them with their procurement,” Shelton says. After our

changes, “We pounded stuff for them in a fashion they’d never seen before. We

took those who had been our biggest detractors and made them our promoters.”

Finally, Shelton hired a top-notch procurement expert to take his place in

that group.

The end result: “We’ve made dramatic savings in procurement,” Shelton says.

On another front, Bridgestone officials from Akron began meeting with the

folks they worked with in Nashville.

“A lot of them got to see that embedded assumptions didn’t have anything

to do with the reality today,” Zimmer says. “They started to repair relationships

that, in the normal course of events, were damaged. And they started to take

responsibility for their role in the disconnect, rather than blaming the other

group.”

As a result, Akron and Nashville are getting along much better. “There’s now

an environment where things work a whole heck of a lot better and great things

are getting done,” Zimmer says.

THE NEXT MILEPresently, a significant focus for Shelton is on Bridgestone’s manufacturing.

“It’s world class,” he says. “But world class today probably isn’t good enough

for tomorrow.”

One of the broader Bridgestone goals is to reduce the time it takes to

make a tire — from compound to finished product — from 24 to 12 months,

according to Zimmer.

While that process is still underway, ratings firms like J.D. Power have

recognized Bridgestone quality in all four categories in which the company

competes.

Going forward, Bridgestone will become more focused on who the decision

maker is for buying its tires, be that for passenger cars, buses, or tractor-trailers,

Shelton says.

“We need to better understand what they want,” he says. “We want to be

the brand of choice for the decision makers, and our chief marketing officer

is doing a lot of work to ensure we’re defining what those parameters are.”

The tire business is competitive, which means Bridgestone lacks the luxury

of resting on its laurels. “We’re in the durable goods business,” Shelton says. “We

have to be sharp in everything we do.”

BRIDGESTONE FACTS

6,656 MILES SEPARATE THE HEADQUARTERS LOCATIONS

NUMBER OF COUNTRIES WHERE BRIDGESTONE

MAINTAINS MANUFACTURING, RESEARCH AND DEVELOPMENT

OPERATIONS

YEAR BRIDGESTONE WAS FOUNDED IN FUKUOKA, JAPAN

IN ANNUAL REVENUE

NASHVILLE

TOKYO

1931$33 BILLION

25


Over the past five years, Faurecia has achieved a

great deal. It has doubled its size to reach € 18 billion in 2013

revenues and to become the sixth-largest maker of autoparts

in the world, according to Automotive News. The company,

headquartered in Nanterre, France, operates 320 production sites

and 30 research and development centers across the world.

Its customer list includes all the major automakers: Nissan,

the Volkswagen Group, Ford, General Motors, and others.

Coming out of the 2008-2009

economic downturn — at a time

when many companies were slow to

reinvest their resources due to lingering

concerns about market instability — the

French company’s leadership team took

a proactive stance, readily identifying

areas and processes that were ripe for

enhancement.

Doubling the number of employees

in just a few years had put a huge strain

on the management system. In addition, two major acquisitions

had brought different cultures into play, including the doubling

of the company’s size in North America.

As a consequence, the company had become increasingly

top-down and focused on its procedures and reporting. The

result was that local managers no longer felt accountable for

their performance and decisions had to be passed to the remote

headquarters in France.

TRANSFORMATION IN THE DRIVER’S SEAT

BY JEFF BOUNDS

For Faurecia — a world leader in auto parts manufacturing — revolutionizing results began by reengineering corporate culture.


“We realized that we could experience a

fantastic return on investment if we explored

ways to empower our employees in a way that

didn’t feel like the top-down approach other

companies sometimes use, which we felt was

inefficient and too administrative,” says Patrick Koller, Executive

Vice President of the Automotive Seating Business Group.

TRANSFORMATION: BEING FAURECIA

At the beginning of 2014, Faurecia launched a new initiative

dubbed “Being Faurecia” aimed at transforming the company’s

management style to be one where employees take responsibility

both for the targets they are supposed to meet and the ways in

which they achieve them.

“We have decentralized our organization,” Koller says.

“We are trying to simplify and reduce the complexity of our

organization wherever possible, and make people autonomous

and accountable.”

Faurecia has two broad types of divisions, which Koller calls

“the key elements of our organization.” One

division type is regional, meaning managers

are in charge of large geographic territories,

such as North America, Europe, or China. The

other type of division centers on product lines,

albeit with global scope. “We make sure we produce products

to the same quality level in different locations,” says Koller,

who also notes that division managers are both accountable

and autonomous. Managers are given benchmark targets, and

then propose budgets of their own. “We want our managers to

behave as entrepreneurs,” he adds. They are responsible for the

company’s assets and for creating value. Be they managers of

plants, programs, or customer business units, these entrepreneurs

have benchmarks, and they work in concert with corporate

leadership to set their targets accordingly. Furthermore, given

Faurecia’s progressive culture, they have significant flexibility in

how to achieve them.

To help deploy the new culture, Faurecia has also nominated

“Being Faurecia Champions” in each division who essentially

FOR THE COMPANY TO KEEP ITS POSITION AND GROW, FAURECIA KNEW IT HAD TO CULTIVATE A NEW MANAGEMENT CULTURE.


conduct themselves as role models.

“We make them visible so others can

understand how to behave and what’s

expected,” Koller says. To get all employees

on board, Faurecia managers and executives

spread the message about goals and

expectations.

“We elaborate with the team so it’s

their objective,” Koller says. “They accept

this objective in order to be recognized as

a performer in our organization.” To chart

progress, Faurecia utilizes score cards, which

maintain performance scores and the results

that each business unit is to achieve. “That’s

a very useful management tool,” Koller says.

REFINING ITS EDGE

Although the business launched the Being

Faurecia project recently, it has been working

for years to hone its innovative edge. Since

2006, it has launched three “think tanks” –

collectively called the global xWorks network

– in Germany, Shanghai, and Michigan, along

with an outpost in Palo Alto.

The think tanks’ purpose is to build

relationships with universities, research

centers, and other companies with which

Faurecia can cooperate on future products,

such as automotive seats.

“They fulfill a critical role, helping us to

understand consumer needs,” Koller says.

Through this network that the think tanks

are forging, Faurecia also has what are called

“technology scouts” whose job is to keep tabs

on products, services, and innovative thinking

from newcomers to the market. “We want to

explore ways these ideas could create value,”

Koller says.

THE CHALLENGE OF AN EVOLVING

CULTURE

Fewer things are tougher to change at a

large corporation than its culture, experts say.

“Culture change, by definition, is not for the

faint of heart,” says Larry Peters, professor of

Management & Leadership Development

in the Neeley School of Business at Texas

Christian University. “We’re not trying to

change one person at a time,” Peters adds.

“We’re trying to change all the people [in

FAURECIA ORGANIZED

THREE INTERNAL THINK TANKS

TO BUILD RELATIONSHIPS

WITH UNIVERSITIES, RESEARCH

CENTERS, AND OTHER COMPANIES

TO COOPERATE ON FUTURE

PRODUCTS, SUCH AS AUTOMOTIVE

SEATS


the business] all the time.”

To succeed, any culture change initiative needs to involve

all level of leaders in the business — from executives to the

employee on the production line, says Bill Becker, a professor

at the Neeley School. “You need to get them to buy in, he says.

“Then, leaders should address and understand any concerns

their people may have. That’s when they’ll start to believe it.”

“This is the approach taken at Faurecia where the new culture

is being deployed in service of real business issues,” says Katerin

Le Folcavez, partner at Insigniam.

ACCELERATED RESULTS

All the work aimed at changing the business seems to be

paying off. Koller reports that by mobilizing the right resources

in areas like manufacturing and engineering, Faurecia was able

to put a new generation of seat mechanisms on the market

within four years. “Which is short,” he says. “We’re now

producing millions of units per year and the seat mechanism

is a key element in safety, so we can’t take any shortcuts.”

“What is also very encouraging is how much the teams at

the divisional level now own their targets,” says Le Folcavez.

“Prior to the new culture, we had gotten to the point where

someone in France was supposed to validate the recruitment

of a quality supervisor in Mexico, even if the situation was

urgent and within the budget of the plant, ” Koller says. Now,

local teams are responsible and the number of validations has

been slashed from seven to three.

The most notable thing about Faurecia’s overhaul,

according to Koller, is how the employees have reacted.

“What’s remarkable about this initiative, this cultural shift,

is the enthusiasm we’ve generated,” he says. “We’re telling

employees that they’re the creators. We’re telling them what

the expectations are, and it’s up to them to help transform

the company.”

That, in turn, has led to a big change in how management

and employees interact. “We’ve been able to improve

communication and give better direction to our employees,

which has resulted in more trust, greater empowerment, and

more autonomy to the people,” Koller says.

Koller also concedes that large-scale, strategic

transformations and more granular tactical changes can be

difficult for everyone involved. “A few years ago, we weren’t

prepared for this,” he says. “It took time to get the results to

where we wanted, to have a good chance to perform.”

But even now, he says, the evolution at Faurecia is alive

and organic.

“Will it be easy? Not every day. We have to deal with issues

related to this significant change,” he says. “But I’m optimistic.

People are dealing with this at the right level and with the

right understanding.”

CHANGE ISN’T EASY, BUT KOLLER SAYS HE’S VERY OPTIMISTIC. “PEOPLE ARE DEALING WITH THIS AT THE RIGHT LEVEL,” HE SAYS.


THE SKY’S THE

LIMIT FOR AT&T

BY JOE GUINTO

How a process of continual

transformation put the telecom giant at the forefront of cloud-based,

mobile technology solutions.


But we do know that for more than 100 years, people have

been making a statement about New York City that, more or

less, goes like this: “New York will be a superb/great/wonderful

city when it is finished.”

When will that be? In New York today, construction cranes

still dot the landscape. No, it’s not finished. It never will be. But

the continual process of transformation is part of what makes

New York superb.

AT&T knows something about this kind of continual

transformation. The company’s history stretches back nearly as

long as people have been commenting on New York’s ongoing

transformation. The American Telephone and Telegraph

Company was established in 1885, as a small subsidiary of the

Bell Telephone Co. that was founded by Alexander Graham Bell.

He was a visionary and transformative figure, but it’s still hard to

believe Bell could have imagined that AT&T would someday

transform into a multinational diversified telecommunications

company providing everything from long-distance services to

cutting-edge, cloud-based mobile technology solutions. In fact,

just seven years ago, it was hard to believe that AT&T would even

transform into the diversified telecommunications provider it

is today.

In 2007, AT&T’s executives set the company — and its

subsidiaries — on its current course, in what was a dramatic

departure from the company’s longtime roots in long-distance

service.

One of the first things the company did was to declare, both

internally and externally, that they would be known as a wireless

company. AT&T’s executives have noted, in various interviews,

that there was pushback from the owners, stating that the fixed-

line side of the business generated a majority of revenue and

that’s where the bulk of the company’s employees worked.

Other companies trying to implement transformation know

something about this. Transforming an enterprise carries risk.

It can fail in small ways that slow the company’s progress. Or it

can fail outright.

For AT&T, failure was not an option. Last year it made

$18.2 billion on $129 billion in revenue thanks to the high-

level transformation that shifted the company’s strategy toward

wireless service, as well as other, smaller transformations that

have changed everything from the company’s financial systems

to the way AT&T’s corporate offices look.

But AT&T, like New York, is still not finished. It’s now

embarking on a transformation of its cloud-based services, one

it hopes can help other companies transform the core of their

businesses — moving increasingly to the cloud as a way of

doing business.

CRYSTAL CLEAR RECEPTION

When you adopt cloud-based solutions, you’re not just

upgrading an operating system, you’re embarking on a new

way of doing business. You’re embarking on a transformation.

Or, certainly, that’s how Jon Summers, senior vice president

for growth platforms at AT&T who is responsible for cloud and

security solutions targeted to AT&T business customers, sees it.

And he sees the cloud as a tool for change.

“Businesses are looking at cloud and evaluating it as a

significant opportunity to improve efficiencies for their

business,” Summers says. “They view it as an opportunity to

help them increase their agility and help them deliver products

and services to the market faster.”

But moving to cloud-based methods of doing business,

whether it’s just giving your employees access to all of their

internal communications tools or developing sales platforms that

customers can access with mobile devices, is a big change. And

Summers says many businesses are cautious about committing

to that kind of transformation.

“Customers are really looking hard at making this shift,”

he says. “They want to enable their workforce with mobile

applications on mobile devices. But, at the same time, they want

NO ONE KNOWS WHO SAID IT FIRST.


to have some degree of control in terms of providing security

for those mobile users. This is the dilemma a lot of them are

working their way through.”

Concerning security, Summers notes that many CIOs

are increasingly concerned regarding the exposure of highly

sensitive or proprietary information.

“By combining our mobility, security, NetBond (the

company’s proprietary cloud-computing platform which

isolates traffic from other customer traffic, creating a private

network connection), and cloud capabilities, AT&T is able to

deliver a differentiated, secure mobile cloud solution.”

DIALING IN ON GROWTH

Summers says AT&T is aggressively working to not only

transform the customer relationship, but to also deliver innovative

solutions in new growth areas.

“Our growth platforms not only expand our clients business

potential and contribute significantly to revenue growth, but

they also reduce churn and create value with our core network

and mobility services,” says Summers.

For the moment, he says some of the companies who are

adopting cloud-based solutions are start-ups and web developers.

There are other cloud users in the enterprise space who will

require products like NetBond to enable migration to the cloud,

and AT&T is currently enabling NetBond with companies like

IBM and HP.

Furthermore, AT&T is starting to

convince clients across an array of

industries — everything from retail

to healthcare to manufacturing —

that it has secure and reliable cloud

platforms that bypass the public

Internet and can reshape everyday

business.

“We see a hybrid landscape

evolving in which companies

require choice,” says Steve Caniano,

vice president of networked cloud

solutions, who is on Summers’

team at AT&T. “That’s why AT&T

introduced NetBond and our network-enabled cloud. We want

to create a seamless, on-net service that delivers an enterprise-

class solution with performance, cost, and security advantages.”

Summers says that the shift toward the mobile cloud is

revolutionary for the industry.

“This is a pretty massive transformation for AT&T and for

our customers,” Summers says. “Like our customers, we want

to take advantage of cloud. When we started this effort a few

years ago, the cloud market was still in its infancy.

However, according to AT&T, one thing is fairly constant

as cloud adoption advances: Decision makers are not just

following the latest technology buzz when they consider their

next-generation cloud architectures. They are balancing business

needs, such as market differentiation, economics, ROI, and

scalability, with a build-vs.-buy analysis.

“As we study the market and talk to customers, we see

even more growth ahead as these issues around security and

performance are addressed. We think as customers gain more

confidence about the security and performance of cloud that

the adoption rate will start to accelerate.”

Just seven years ago, AT&T was a long-distance company

whose move to mobile was scoffed at both internally and

externally. But after a successful transition helped it become a

leader in the space, today, when a company official says, “Mobility

is how businesses do business,” it’s hard not to listen closely.

TRANSFORMATIONS HAVE CHANGED EVERYTHING FROM AT&T’S FINANCIAL SYSTEMS TO THE WAY THE COMPANY’S CORPORATE OFFICES LOOK.

IQ BOOST

BY SCOTT BECKETT

THE POWER OF COORDINATED ACTION

Extraordinary success is accomplished when multiple

people working on a multitude of tactical objectives

toward a common goal are able to coordinate their

actions — and pull in the same direction — because

they have established trust in their colleagues and

counterparts by being able to take them at their word.

If at first blush it seems obvious, it’s actually quite

novel.

While coordinated action, in literal terms, is the

ability to coordinate the contributions of many toward

a singular goal, the most critical facet in aligning these

efforts is our ability, as leaders, to say what we will do

and do what we say. This is imperative to not only the

success of executing our plans but also maintaining

accountability with those we lead.

At any company, a leader sets forth visions and

goals and maintains momentum. So how can leaders

coordinate large-scale strategic plans — and nurture

a culture where colleagues can trust that their

counterparts are just as dedicated to achieving an

intended result — if everyone inside an organization

cannot be taken at their word?

The key to successful coordinated action lies in

the operational context that dominates one’s life:

Are you committed to honoring your words over

circumstances? If you are setting forth a strategy or

executing any number of action items but continually

point to circumstances undermining your best efforts,

it becomes obvious that you can’t be taken at your

word. And despite all modern advances to assist in

productivity, accountability is still the most important

metric for success that, culturally, you’ll find in any

organization.

Scott Beckett is an Insigniam partner. He serves as

a member of Insigniam’s Design & Innovation Team

and is a member of the Management Committee,

responsible for consultant talent acquisition.


3XFind out why companies like HP, Fossil, Texas Farm Bureau Insurance Company, Teradata, Omni Hotels & Resorts, Lennox Industries, Inc., and Dell have turned to us for content marketing strategy and brand communications programs.

Learn how you can join them in transforming your marketing at dcustom.com/contentstrategy.

If you want to generate more revenue, maybe you need a new plan.

CONTENT MARKETING PRODUCES THREE TIMES THE LEADS PER DOLLAR THAN TRADITIONAL MARKETING AND ADVERTISING.

www.pdma.org

Brought to you by

WHERE INNOVATORS TAKE ACTION

PIM2014 PRODUCT

INNOVATIONMANAGEMENTCONFERENCE

WHERE INNOVATORS TAKE ACTION

Attend PIM 2014 and get the tools to create transformative change at your organization. Come experience the year’s event by registering with the code TRANSFORM to receive a 50% discount.

October 18-22, 2014 • Grand Hyatt Denver • Denver, Colorado • #PIM14www.pim.pdma.org

U.S. Postage

PAIDLiberty, MO

Permit No. 441301 Woodbine AvenueNarberth, PA 19072

Change Service Requested

More and more, enterprises are demanding significant ROI on consulting projects. That’s understandable. Hiring a consulting firm is never cheap. So how does 50 times ROI sound? That’s what Insigniam delivers.

By marrying breakthrough performance and innovation, we have helped our clients document, in aggregate, more than 50 times ROI on management results that they consider critical and essential to the success of their enterprise.

DID YOUR LAST CONSULTANT DELIVER?50X

RETURN ON INVESTMENT

ARE YOU READY TO SEE RESULTS LIKE THIS? Then visit insigniam.com/client-roi for more information, or call +1 610 667 7822 to talk to one of our consultants.

insigniam quarterly fall 2014 - change management

Leadership & Management

subject of change

transformational product

lasting transformations

groundbreaking new product

case of hager group

familys company

form of ceo daniel hager

s s u e