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Creativity and innovation are essential to an organization’s success, and both should be infused into every aspect of a business. Companies with creative and innovative employees keep up with industry changes and have a competitive advantage. Human Resources (HR) can help to foster a workplace’s culture.

For this assignment, assume the role of HR Manager. The HR Director has asked you to define the ideal qualities of the employees and leadership for cultivating a culture of creativity and innovation.

Instructions

Use the readings in the attachments and answer each question listed below.

Define corporate culture and how to create a culture of trust and integrity.

Describe the ideal qualities of a leader who inspires a culture of creativity and innovation.

Describe the steps a leader may take to be a contributor to a culture of creativity and innovation.

Identify two important leadership qualities of an individual aspiring to be a leader.

Describe barriers to fostering a culture of creativity and innovation from a leadership and employee perspective.

Discuss ways that the leadership may coach and support employees with overcoming the barriers.

Responses to each question should be at least one and a half paragraphs. Note: A paragraph is normally 4 -6 sentences.

https://issuu.com/workforce-magazine/docs/wf_q320_…

More attachments to follow

Business
Innovation in the Workplace: Processes that foster innovation
Abdulrazak Abyad
A. Abyad, MD, MPH, MBA, DBA, AGSF , AFCHSE
CEO, Abyad Medical Center, Lebanon.
Chairman, Middle-East Academy for Medicine of Aging
President, Middle East Association on Age & Alzheimer’s
Coordinator, Middle-East Primary Care Research Network
Coordinator, Middle-East Network on Aging
Correspondence:
Abdulrazak Abyad
Email: aabyad@cyberia.net.lb
Introduction
Innovation in organizations has been considered a key means
of generating competitiveness (Beer et al., 1990). Within the
field of Business Management many theoretical arguments
have been put forward demonstrating the various different
organizational factors that affect innovation, such as organizational design, motivation and systems of incentives (Drake,
1999; Lipman and Leavitt, 1999), the capacity for absorption of
knowledge (Cohen and Levinthal, 1990) and the capacity for
organizational learning (Akgünet al., 2007); and the human
capital of the company (Dyer and Shafer,1999; Subramanian
and Youndt, 2005.
While normally overlooked in the planning process adoption
hurdles can make or break the commercial viability of the
most powerful innovative ideas. Therefore successful innovators focus on the product’s utility. Talking about music does
not make you a singer. Attending live concerts may help you
appreciate music but it still does not make you a singer. To be
a singer you need to learn music and practice under the guidance of a good teacher. This is true of sports too. There is no
substitute for learning and practising under continuous guidance.
This is equally true for organisations that want to foster innovation. Talking about innovation does not help. Innovation training sows the seed for innovation thinking. But what
makes it grow is nurturing and a good encouraging climate.
Very few Business Leaders know how to do this well. This dual
process recognises the specific roles that the business leader
and his team need to play – alone and together – to deliver innovation that matters.
There was a time when the concept of creativity was only associated with writers, painters, musicians and similar people in
artistic professions. But with the ever-increasing necessity of
cultivating a unique brand personality, the need for creative
thinking has transitioned from the arts into everyday business.
In addition, the act of producing a product that distinguishes
itself from competitors in a marketplace where differences are
often hard to come by demands a high degree of creativity
both in innovation and marketing.
As a result, it’s now become commonplace for companies
– both large and small – to adopt policies that foster creativity
and thereby promote innovation.
Fostering Innovation and a Creative Environment
Creativity is the mental and social process used to generate
ideas, concepts and associations that lead to the exploitation
of new ideas. Or to put it simply: innovation. Through the creative process, employees are tasked with exploring the profitable outcome of an existing or potential endeavor, which typically involves generating and applying alternative options to
a company’s products, services and procedures through the
use of conscious or unconscious insight. This creative insight
is the direct result of the diversity of the team – specifically,
individuals who possess different attributes and perspectives.
It’s important to note that innovation is usually not a naturally-occurring phenomenon. Like a plant, it requires the proper
nutrients to flourish, including effective strategies and frameworks that promote divergent levels of thinking. For example,
by supporting an open exchange of ideas among employees
at all levels, organizations are able to inspire personnel and
maintain innovative workplaces.
Therefore supervisors must manage for the creative process
and not attempt to manage the creativity itself, as creativity
typically does not occur exclusively in an individual’s head but
is the result of interaction with a social context where it’s codified, interpreted and assimilated into something new. Within
this system, incentives are paramount – ranging from tangible
rewards such as monetary compensation to the intangible, including personal satisfaction and social entrepreneurship.
Corporations in nearly every sector of the economy
are on a quest for innovation – be it a new techno gadget, a
more effective means of delivering a critical service, or strategies for breaking into new markets. Unfortunately, many people believe that innovation is an almost magical quality that
only a few prodigies possess. In reality, nearly every employee
– and certainly every corporation – is capable of at least some
level of innovation. Executives, managers, and other leaders
just need to understand what innovation is and what it isn’t
– and how to create a workplace culture that promotes, rather
than dampens, innovation
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Business
Innovation: What it is and isn’t
Innovation, broadly speaking, is about change or a novelty that
provides an advantage. When a company innovates, it revises
an existing product or service to add value or creates something new that promotes growth. Typically, innovation is not:
•
the same as “right-brain” creativity
•
the result of a sudden insight or brainstorm
•
something that executives can simply mandate
On the contrary, hard work, focus, and investigation drive innovation. One common mistake corporations make is looking
at innovation as a quest for blockbuster ideas. In reality, something as simple as developing a routine that increases nurse
response time by 10 percent is an important innovation. Most
companies’ continued success depends far more on a steady
stream of small innovations than a huge innovation windfall.
Emphasizing these small but regular improvements is critical
since they’re more sustainable than constantly reinventing
routines or disrupting markets.
Leaders who want to promote innovation in the workplace
should focus on their organization’s culture and organizational processes. Most professionals already have the desire to innovate. Creating a physical and social environment conducive
to innovation will help them realize their ambitions.
Principles for Fostering Innovation
Establishing a creative environment takes more than just turning your employees loose and giving them free reign in the
hope they’ll hit on something valuable. As with any other system, the process of creativity requires the proper framework
to operate effectively, which also enables management to
evaluate the profitability of the results.
Leaders can develop and retain their company’s talent pool
by:
• Providing regular training, professional development and
mentoring opportunities
• Giving employees a forum for expressing their ideas, sharing
their accomplishments, and connecting with others whose
ideas and projects interest them
• Implementing a liberal job and department transfer policy
• Paying top dollar to a broad group of top talent rather than
sensational bonuses to a small number of “rock stars.”
3. Spaces for Collaboration – and Solitude
The workplace’s physical environment can dramatically affect
innovation. A landmark study in 2002 by McCoy and Evans
found that employees given tasks requiring creativity did
most of their thinking in complex spaces that included wide
views (especially of nature) and promoted social interaction.
But research has also shown that once workers develop an
idea, they need solitude and freedom from distraction to produce results.
Create a stimulating environment. Offices that include stimulating objects such as journals, art, games and other items
– some of which may not even be directly related to your business – serve as sources of inspiration. In addition, structuring
the work area by removing physical barriers between people
will improve communication and promote creative interaction
Companies hoping to prime their physical space for innovation should:
• Create central common spaces where people want to linger,
such as cafes or courtyards
1. Time and Autonomy
Bell Laboratories has brought the world more innovations than
virtually any other company. The researchers there invented
the first transistors, the photovoltaic cell, the C programming
language, the first communications satellite, the wireless local
area network and much more.
• Include as much light and nature, and as many windows and
natural materials as possible
• Design traffic paths that encourage encounters with as many
people as possible and provide nooks for casual interaction
The secret of Bell’s success? Time and autonomy. Executives
hoping to emulate Bell Labs should create an environment
where potential innovators can:
• Give knowledge workers their own offices or workspaces
away from the bustle of call desks, meeting rooms, and cubicles
• Explore new ideas without worrying about immediately
monetizing or marketing them
4. Tolerance for Failure
• Use their own methods for developing and investigating potential innovations at their own pace
• Work within a relatively flat hierarchy that eliminates needless bureaucracy
• Freely discuss ideas and collaborate with colleagues without
seeking management approval or calling formal meetings
2. A Critical Mass of Talent
Bell Labs – as well as companies like IBM, Apple and Google
– owe much of their innovation success to a deep talent
pool. Mervin Kelly, a senior executive at Bell for 23 years, believed that bringing lots of smart people into close physical

proximity was a critical component of innovation, and far outweighed the contributions of any single superstar.
A key unifying feature of all innovative companies is frequent
– sometimes spectacular – failure. For example, Apple has experienced past and present failure with the Apple Lisa, Power
Mac Cube, Copland OS, MobileMe and even Apple TV. Google’s no stranger to failure either. Take Buzz, Wave, Orkut and
Froogle.
Like companies, employees seeking to innovate are bound to
fail. When they do, leaders should:
• Create opportunities for collaborative reflection and peer review
• Provide prompt, constructive feedback while discussing what
went wrong and why
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Business
• Identify and highlight the specific areas where employees did
things right
• Encourage employees to move on to the next project without adding additional barriers or bureaucracy
5. Reward Efforts
Reward efforts through positive psychological reinforcement.
Encourage your employees to take risks, rewarding them for
creative ideas and not penalizing them when they fail. In doing
so, you’ll enable people to more readily take on assignments
that stretch their potential (and that of your organization),
discussing in advance any foreseeable risks and creating the
necessary contingency plan. Encourage employees at all levels to contribute suggestions for improving current business
operations.
6. Different Points of View
Foster different points of view through outside perspectives.
Innovation can often spring from a review of how your customers view and use your products and services. Soliciting
their opinions can provide valuable insight into potential areas for improvement as well as areas where you’re succeeding (essential knowledge for positioning against competitors).
Other perspectives might include: vendors, speakers from
other industries or consumers using a competitor’s products
or services.
References
Akgun, A.E., Kesbin, H., Byrne, J.C., Aren, S., 2007.“Emotional and
learning capability and their impact on product innovativeness and firm performance” Technovation 27(9), 501-513.
Beer, M., Eisenhart, R., Spector, B. 1990. The critical path to corporate renewal. Harvard Business School Press, Boston, MA.
Cohen, W.M., Levinthal, D.A. 1990. “Absorptive capacity: A new
perspective on learning and innovation”. Administrative Science Quarterly 35(1), 128-152.
Drake, A.R., 1999. “Cost system and incentive structure effects
on innovation, efficiency and profitability in teams”. The Accounting Review 74, 323-346.
Dyer L., Shafer R., 1999. “From human resource strategy to organizational effectiveness: lessons from research in organizational agility”. Research in Personnel and Human Resource
Management. Supplement. 4, 145-174.
Lipman, J., Leavitt, H. J., 1999.“Hot groups and the HR manager:
How to fire up your employees”. HR Focus 76, 11-14.
Subramaniam, M., Youndt, M.A., 2005.“The influence of intellectual capital on the types of innovative capabilities”. Academy of
Management Journal 48(3), 450-463.
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Copyright of Middle East Journal of Business is the property of Medi+WORLD International
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Seven Leadership Strategies that Improve Engagement
And keep the employees happy!
Interactive
By Mina Brown
Engagement and retention has increasingly become the top chal- and tired. Engagement and retention suffer.
lenge among almost all large organizations. Studies consistently show
that positive or negative engagement factors directly affect employee
retention and have far-reaching impacts on productivity, morale,
quality, customer satisfaction, and ultimately, profits and sustainability. Most organizations understand the importance of engaging
and keeping key employees, and they make serious efforts in these
areas. Often, however, these efforts fall short, and the most valuable
employees walk (or run) out the door.
There is no magic potion or silver bullet to ensure employee loyalty,
but here are seven crucial leadership strategies that will radically
improve employee engagement and increase the stickiness factors for
the “A” players.
1. Cultivate High Trust
We expect a lot from our managers. In order for an organization to
remain competitive, a good manager must create an atmosphere of
teamwork and performance. Hopefully we’ve all experienced at least
one of these managers during our careers—the person you look back
on and say, “Wow, that person really had a way of inspiring me and
those around me, in both good times and bad.”
In order to create this kind of energy and commitment, a manager
must be socially and emotionally intelligent, proactively anticipate
the needs of the team, lead from the front, and know what it takes to
motivate and inspire. All great managers—bar none—share one thing
in common. They cultivate trust. It is this trust, when all is said and
done, that serves as the backbone of a cohesive team.
According to Stephen M. R. Covey’s insightful book, The Speed of
Trust, the two critical components of trust are character and competence. It takes both to deserve high trust. He writes:
“
Character includes your integrity, your motive, your
intent with people. Competence includes your capabilities, your skills, your results, your track record.
And both are vital.”
Leadership coaching can help managers understand their personal
trust and credibility scores, develop a game plan to improve their trust
“index,” and create an environment that contributes to higher levels
of employee commitment.
2. Model Core Values
For the past several years, the business world has been pretty topsyturvy. From the headline-generating scandals of big corporations
like Enron to the collapse and tentative rebuilding of the global
economy, today’s organizations—and their leaders—face more challenges than ever.
How are your leaders responding to these challenges? If they are
running around putting out fires rather than preventing fires in the
first place, employees are probably feeling frustrated, unmotivated,
7
Strong core values provide a reliable framework to help employees
make decisions and take actions in challenging times, when the answers
are far from easy. The best leaders walk their talk and practice what
they preach. They act with passion, integrity, and courage. These
leaders instill confidence and trust in their employees.
Seven Leadership Strategies that
Improve Engagement
1. Cultivate High Trust
2. Model Core Values
3. Encourage Debate and Risk Taking
4. Listen, Really Listen
5. Leverage Strengths—Mitigate Weaknesses
Leadership coaching can help managers clarify their core values, communicate them, and ensure alignment with the organization’s values.
3. Encourage Debate and Risk Taking
A study done by Leadership IQ showed that entrepreneurial cultures—
those that promote risk-taking, creativity, and intelligence—have the
highest employee engagement. Yet, in the same study only 19% of
respondents said their organizational cultures were entrepreneurial.
The best employees want to be in organizational cultures where their
opinions matter, where debate is accepted, where they are encouraged
to take risks and learn from mistakes, and where there is a constant
sense of adventure and growth. And managers and leaders are directly
responsible for the development of this kind of environment.
Obviously there are penalties for making mistakes which can result in
leaders holding a tight rein on employee decision making and creativity.
Too little freedom suffocates good employees but too much freedom
can spell trouble, big trouble. The balance is tricky. With the help of
a professional coach, leaders can strengthen their ability to delegate
authority and learn how to create entrepreneurial cultures in which
debate and risk taking is encouraged and embraced.
4. Listen, Really Listen
We often hear that good communication practices foster the type of
positive environments needed to keep the best employees. But what
we don’t hear enough about is how important being a good listener is
to being a good communicator. The best communicators know when
to keep their lips zipped and their ears open.
leadership excellence essentials presented by HR.com | 03.2014
Seven Leadership Strategies that Improve Engagement
In today’s hard-charging corporate cultures, listening is too often
overlooked, underestimated, and underdeveloped. For successful
leaders who are always racing against the clock, it’s powerfully tempting
to share opinions and advice freely when asked (and sometimes even
when not asked). This impulse, however, robs others of the thinking
process required to come up with their own opinions or solutions.
Often professional coaches are uniquely skilled to help executives
learn how to:
• Invite and show appreciation for feedback.
• Become adept at asking questions.
• Remain insulated (and grateful) for negative feedback.
• Listen for much more than just words.
When leaders open their eyes and ears and listen, really listen, the
information that employees share provides valuable direction to those
in power—information that can result in a happier, more productive,
and overall better workplace.
5. Leverage Strengths—Mitigate Weaknesses
Most motivated, high-performing employees will look past the 95%
they are doing well and zero in on the 5% that needs improvement.
Of course, this isn’t all bad. It’s what keeps us competitive and thriving in a fast moving world.
“
Only 20% of employees use their strengths every
day.“
In recent years, there has been an important awakening and even
celebration of unique talents and strengths. Gallup researchers Marcus
Buckingham and Donald O. Clifton concluded that the most effective way to motivate employees is to build on their strengths rather
than correct their weaknesses. They discovered that only 20% of two
million employees interviewed were using their strengths every day.
Working from strengths is what will get you ahead. Focusing only
on improving weaknesses will usually leave you with “better” weaknesses—but weaknesses nonetheless.
Ideally, individual leaders with the support of an executive coach can
leverage their strengths while mitigating their weaknesses—an approach
that can be replicated throughout their organizations. The keys are:
• Becoming best-in-class at their strengths.
• Carefully choosing roles that leverage and support strengths.
• Learning how to compensate for weaknesses.
6. Be Savvy about Organizational Nuances
The word “politics” really isn’t a dirty word even though a lot of
people feel it is. The reality is that company politics exist, and the best
leaders learn how to manage successfully within the system of quid pro
quo rather than hold themselves apart with disdain. They understand
and accept the massive impact of interpersonal relationships on the
allocation of resources, strategies, business processes, interdependent
goals, performance, and outcomes.
Leaders who know how to manage and exploit company politics
will gain credibility among employees and peers. In addition, the
way a leader navigates company politics can significantly impact
their organization’s success. Employees who feel that their leader “has
their backs” will feel that their goals are more attainable, resulting in
improved motivation, performance, engagement, and retention. Top
leadership excellence essentials presented by HR.com | 03.2014
employees are attracted to the “winning teams.”
The best employees also know that a well-connected leader is a better
bet for personal recognition, rewards, and future career opportunities.
When promotions and bonuses are on the line, the politically savvy
leader will be more successful in lobbying for their employees’ benefits.
Plus, their voices may hold more sway in succession planning meetings.
Even today, some leaders try to avoid “politics” and assume that if
they simply work hard and achieve positive results, they will be rewarded and recognized accordingly. This is just naïve and potentially
dangerous. To ignore the subtle but crucial dimension of organizational
nuance, such leaders are risking their personal effectiveness and the
success of their entire team. An executive coach can help leaders reframe
their attitude about and approach to company politics, so that they
can more effectively ensure the success of their team or department.
7. Imagine the Future
Good leaders must be able to imagine the future and then communicate it cogently to employees. When leaders can clearly articulate
the organization’s long-term vision and link employees’ work to the
attainment of that vision, their employees are more motivated to contribute. Let’s be honest. We all want to believe that what we do matters.
Executive coaching can help leaders delve into the future and imagine
the possibilities.
“
By not having ‘the answer’, executive coaches stimulate creativity and allow leaders to shape their own
vision for the company.”
It Starts—and Ends—with Leadership
While it may be true that some people are “natural leaders,” great
leaders can be cultivated and molded from the essential raw ingredients of emotional intelligence and desire. Even if leadership basics
could be taught in a classroom, the most impactful development tool
for dynamic environments is professional coaching. Yes, training
programs, compensation, and recognition can be useful in securing
employee motivation and loyalty. Most people do not stay or leave
companies because of these factors.
Organizations that really care about their employees, invest in
developing great leaders. Leadership coaching uniquely helps leaders
develop the credibility, values, risk tolerance, listening skills, strengths,
political savvy, and vision they need to ensure that employees are
engaged, productive, happy and loyal workers. S&P
Mina Brown, MBA, NLPC, Board Certified Coach has been an executive
coach, leadership consultant, and entrepreneur for over sixteen years. As a
former senior operations executive and CFO, she brings together a successful
leadership track record and hands-on business experience plus unusual intuition, deep compassion, and unflinching candor.
Visit www.positivecoach.com
Email MinaBrown@PositiveCoach.com
LinkedIn www.linkedin.com/in/minabrown
White Paper
“Employee Engagement &
Retention”
8
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individual use.
THE 2%
COMPANY:
Excelling at Efficiency
and Innovation
Companies that excel at both efficiency and innovation share
some key characteristics. And there are far too few of them.
by Knut Haanaes, Martin Reeves and Jules Wurlod
VERY FEW COMPANIES excel at innovation and efficiency at the same
time. Of the 2,500 public companies we recently analyzed, just
two per cent consistently outperform their peers on both growth
and profitability during good and bad times. These ‘2% companies’, as we call them, are able to renew themselves in large part
by driving exploration and exploitation simultaneously.
Being excellent at both exploration (the quest for new ideas
and innovation) and exploitation (operational efficiency) is particularly challenging because these activities pull a company in
different directions. They require different skills, different approaches to performance management, and an ability to drive
success with different time perspectives. Each is also a potential trap in its own way: Pursuing too much innovation tempts
companies to seek further change before they see the benefits
of the initial change; and conversely, operational success makes
it more difficult to make time to explore. Following are a few
examples of how companies manifest their ‘2% status’ in very
different ways:
• Fashion retailer Zara has developed ‘fast fashion’ DNA that
combines adaptive innovation with speed-to-store. It consistently taps into unpredictable changes in taste through excellence in
design agility and fosters continuous improvements in efficiency
through a very tight supply chain.
• Amazon CEO Jeff Bezos constantly pushes for a culture of innovative thinking through his ‘day one’ mantra—stressing how
the company should never stop behaving like a start-up. In parallel, the global retailer is able to drive efficiency by building an
ever-tighter customer insight, logistics and delivery operation.
• Toyota has been on a long-term quest to develop new products (such as hybrid engines) and continuously improve its lean
manufacturing system. By playing the long game, it has shown
that gradual improvements in quality and manufacturing can be
combined with breakthrough innovation and industry shaping.
These and other 2% companies share four traits:
1. THEY ARE HIGHLY SKILLED AT BOTH EXPLORATION AND EXPLOITATION.
They continually rethink and revise their strategies and operating models while improving their current products and operations.
2. THEY RETAIN AN ‘OUTSIDE-IN’ FOCUS, EVEN WHEN THEY BECOME
SUCCESSFUL. By bringing outside perspectives in, they avoid
succumbing to the risks posed by success and growth, which,
although they are positive and desired outcomes, tend to increase organizational complication and push companies towards
rotmanmagazine.ca / 33
Maintaining an outside-in perspective starts by continuously scanning
the market, both demand and supply.
an internal focus. In a rapidly changing environment, any company with too much of an ‘inward gaze’ will fail to detect fundamental external market changes.
3. THEY EMBRACE NECESSARY DISRUPTIONS (EVEN IF PAINFUL). This also
implies deprioritizing previously profitable businesses to bet on
future growth areas and build early-mover advantages.
4. THEY HAVE A CLEAR MODEL FOR RENEWAL. Renewal models help
to manage the inevitable trade-offs between short- and longterm objectives. They also fit specific business environments
and organizational capabilities. For instance, in industries where
disruption is imminent but directionally unclear and when goto-market capabilities are strong, companies can capitalize on
innovation from outside by scanning the market for relevant innovations, bringing them in-house and commercializing them.
This allows them to build an early-mover advantage while avoiding the risk of going full steam in the wrong direction.
Becoming Part of the 2%
Having studied these companies closely, we have developed
three principles for getting your organization into the 2% club.
PRINCIPLE 1: MAINTAIN AN ‘OUTSIDE-IN’ FOCUS, EVEN AMIDST SUCCESS
Disruption usually comes from the outside, and being too inward-looking puts companies at risk of missing key customer or
market trends. The 2% companies don’t just excel at both exploration and exploitation activities, they also manage to keep an external (outside-in) focus, even as they succeed. This is not as easy
as it seems, because successful enterprises very often become
‘introverted’. History is paved with examples of companies that
reached the top of their industry but failed to remain there. Just
think of Motorola, Blockbuster, Dell, Nokia and Kodak.
Some current industry leaders — flush with current success
— might be overlooking emerging threats. Traditional banks, for
example, may be underestimating fintechs. A recent report from
the Bank of England found that traditional banks believe they
can cope with fintech competition without making big changes
to their existing models or taking on more risk — but also that fin34 / Rotman Management Winter 2019
techs may cause greater and faster disruption to their business
models than the banks themselves project.
When successful companies grow, so do the breadth and
depth of their business requirements. As a response, they tend
to create dedicated structures, processes, systems and metrics
that increase the complexity factor of the organization. Significant resources and attention must then be devoted to internal
management.
Success can also make companies look inward because, by
generating too much free cash flow for allocation, it can exacerbate an agency problem. Managers might push to keep as many
resources as possible under their control and thus invest all extra cash in projects in-house, while in contrast, board members
might want to maximize the payoff for shareholders and thus
avoid investing in projects that gradually become, according to
the law of diminishing returns, less attractive.
Maintaining an outside-in perspective starts by continuously scanning the market, both demand and supply. On the demand side, successful companies must see themselves through
the eyes of the customer and constantly look out for early signs
of potential megatrends. On the supply side, they must be willing
and able to engage in partnerships and collaborations.
For example, in 2011, Umicore, a Belgian metals and mining company, wanted to expand its recycling activities in order
to recover rare earth elements from rechargeable batteries. The
company possessed a state-of-the-art battery-recycling process
— the Ultra High Temperature (UHT) process — but lacked the
capabilities to refine rare earth elements. It thus partnered with
Rhodia, a French chemical company, and together, the two
companies developed the first industrial process that closed the
loop on the rare earths contained in batteries. The fact is, breakthrough innovation is rarely performed by a single actor from
end-to-end. Participation in relevant partnerships, platforms or
ecosystems can be key.
PRINCIPLE 2: EMBRACE DISRUPTION
When disruptive shocks hit, they must be fully embraced —
but doing so first requires companies to recognize risks. Strategic decision-making in the context of risk can be subject to
multiple cognitive biases. One example is loss aversion, whereby
the thought of losing something one currently has is more painful than not taking advantage of a new opportunity for gain. As
a result of this common bias, there is a tendency to over-value
current business models compared with new, disruptive models
and their opportunities. To sidestep this problem, companies
must be brutally honest and recognize that market conditions
will not remain the same forever; they never do. Profitable businesses inevitably attract potential entrants with innovative business models.
In practice, fully embracing disruption means that at times,
companies must respond by being disruptive themselves, rather than making small incremental fixes to their current model.
Tobacco companies understood this when they invested massively in electronic cigarettes. Ecigarettes have been around for
nearly 30 years, but they gained strong momentum only recently,
pushed by small emerging players such as V2, Juul and Mig Vapor. Large tobacco companies decided to embrace disruption by
bringing to market their own solutions. Philip Morris International (PMI), for example, invested about US$ 3 billion to develop its Iqos — despite the high cannibalization risk to its current
business. PMI’s CEO André Calantzopoulos has even declared
that this new technology will eventually fully replace traditional
cigarettes. Elsewhere, when telecom companies faced the arrival
of mobile technologies, they could have responded either by incrementally refining their old landline business or by using those
innovative mobile technologies themselves to become part of
the disruptive force. In the longer term, only the latter approach
would enable them to realize the full benefits of disruption.
Overall, when disruption hits, major commitments must be
made, and that might mean deprioritizing profitable activities
to focus resources — management attention, talent or financial
resources — on disruptive trends. Neste, a Finnish oil-refining
company, invested heavily in renewable-diesel production, foreseeing regulatory changes in the EU that would create a market
for diesel made from renewable sources. The firm developed a
technology that allows it to produce diesel from vegetable oils
and waste animal fats. With this technology, it is possible to slash
CO2 emissions by 40 to 60 per cent. This strategy has paid off:
Thanks to high margins, renewable products have reached close
to 50 per cent of its total operating margin, for approximately
20 per cent of total revenue.
PRINCIPLE 3: HAVE THE RIGHT MODEL FOR RENEWAL
The 2% companies have an explicit model for managing the inevitable trade-offs between near- and long-term priorities. The
right model for the subsequent renewal also optimally leverages
the capabilities of the company and fits the organizational culture. Needless to say, these models are company specific and
there is no ‘one size fits all’; but we have identified a few common examples.
• THE SPECIFIC TIMEFRAME MODEL. In this model, companies de-
fine a specific time horizon and operate within this window
to optimize their existing product portfolio and pursue exploration activities accordingly. This can be a good strategy
if, for example, management has limited long-term priorities, can predict the near future fairly confidently, has the resources to invest in the desired product enhancements, and
believes that building these enhancements upfront will deliver a competitive advantage. Private equity firms are good
examples of businesses that invest to create value within a
defined time window — usually three to five years. When
taking on a company, they will do the exploration that creates visible value in the medium term.
• THE NO-REGRETS MODEL. This strategy means making sure that
your company encounters no surprises in its market domain.
Companies need to identify the domain they are playing in
and then, within it, engage a wide variety of technological
options. By adopting this strategy, they guarantee an earlymover advantage, whatever winning option the market
ultimately picks. Companies need to be able to recognize
winners early by picking up weak signals. A case in point: Essilor, the world leader in eyeglass lenses, has proved that it
can stay successful by continuously scanning and engaging
with all novelties in its domain that might disrupt the industry. With this strategy, the company has successfully caught
rotmanmagazine.ca / 35
Breakthrough innovation is rarely performed by
a single actor from end-to-end.
multiple innovation waves, such as online retailing, plastic
lenses, sunglasses and low-cost manufacturing in Asia.
• THE COMMERCIALIZER MODEL. Companies do not always have
a monopoly on good ideas. The commercializer model
implies scanning externally for relevant products, bringing them in-house and then commercializing them. This
strategy requires strong go-to-market capabilities and the
resources necessary to acquire the targets identified. It also
rests on the ability to scan the market for relevant opportunities and recognize them early, before their market value
shoots up. To some extent, this strategy complements a
strong in-house innovation engine. Most big pharma companies rely on this model to supplement their own drug
pipelines, for instance. By in-licensing products that are
already fairly well developed, getting regulatory approval
and taking them to market quickly, they can ensure a steady
stream of new products with faster time-to-market and lower R&D risks.
• THE WIN-STAY/LOSE-SHIFT MODEL. Another model is to gather,
screen and test many ideas quickly, with minimal financial
investment in each. This diversified strategy can be far less
risky than one big bet-the-farm commitment. But it requires
the company to identify early on the ideas that prove less
promising and to ‘fail fast’ before too many resources are
spent. It therefore necessitates clear criteria and metrics
and disciplined objectivity. Once a winner is identified,
the company also needs the capabilities to quickly scale
up. Fashion retailer Zara has mastered this model. Another good example is Amgen, the biotech company used
to fund as many drugs as possible and hope for the best.
Now, although Amgen’s R&D strategy still focuses only on
breakthrough drugs, the company evaluates drugs quickly,
weeding out candidates that don’t make the grade. This failfast approach saved the company US$ 1 billion in research
spending on just a single drug.
36 / Rotman Management Winter 2019
• THE INNOVATION PLATFORM MODEL. Some companies are able
to create an attractive technology platform on which other
companies can build their businesses. Amazon and Alibaba have made this strategy work to great effect, providing
partners with tools, data and other services to help online
businesses succeed. Key success factors here include a truly
differentiated platform, cutting-edge technology, the satisfaction of merchants and business partners, and the continuous incorporation of new ideas and improvements. There
must be a clear reason why an outside business would want
to use your platform rather than taking products to market
themselves or through others.
Our Recommendations
We offer the following five recommendations for becoming a
2% company:
1. INVITE CHALLENGE AND COACHING FROM THE OUTSIDE. Welcome differing opinions and be willing to learn from others. No one can
be right all the time, and welcoming outsiders so that you can
benefit from their unbiased, outside-in perspectives will help
you stay close to customers and nascent market trends. Having
a clear picture of those trends will also prevent your company
from setting out in a wrong direction and provides the confidence necessary to make difficult decisions.
2. THINK IN MULTIPLE TIMEFRAMES. Ask yourself what you’re doing
to best position yourself for next year, five years from now and
ten years from now. This mindset will enable both exploration
and exploitation activities and strike the right balance of the
two. Thinking in multiple timeframes is also a critical first step
towards defining the right renewal model for your company, as
it ensures that your chosen strategy will deliver results for relevant timeframes.
3. GET AHEAD OF ANY CRISIS. Recognize risk and be brutally honest. Once risks and opportunities have been clearly identified,
The 2% Cockpit: A Sample View
Are We Addressing Disruption?
1. Embracing disruption
Action
Reality
5. Organizational alignment
2. Balancing exploration
and exploitation
Intent
Action
Alignment Score
2. Balancing exploration
and exploitation
5.0
0.0
0.0
Reality > Action
5.0
Intent > Action
How Are We Addressing Disruption?
3. Remaining outside-in
Action
Intent
5.0
0.0
Intent > Action
1. Embracing
disruption
3. Remaining
outside-in
4. Fitting renewal model
to business footprint
Model/footprint fit
0.0
5.0
Model > footprint
5. Organizational
alignment
Intent
4. Fitting renewal model
to business footprint
Action
Source: BCG analysis
FIGURE ONE
make sure you address disruption in the way that best positions
your company and takes full advantage of the disruptive forces.
Have the courage to act promptly and pre-emptively. Establishing an early-mover advantage can be instrumental for sustainable success.
4. BE SKEPTICAL OF YOUR CURRENT SUCCESS. Never rest on your laurels. Successful companies must remain humble and modest
so as to avoid creating a culture that rests on complacency and
self-satisfaction. Instead, keep a mindset of continuous quest for
improvement and search for novel ideas. This will trickle down
through the entire organization and ensure that key stakeholders
always push the frontier of possibilities.
5. REVIEW YOUR RENEWAL STRATEGIES EXPLICITLY. Pursuing excel-
lence on all four of the previous traits can be exhausting. As a
result, explicitly reviewing your company’s performance is necessary to ensure that all dimensions are tackled and that there
are no gaps between intention and action. To this end, we have
built a simple, pragmatic assessment tool that helps executives
rapidly weigh their strategies against the four traits. We call it
the 2% cockpit, because it helps to show executives how to pilot
their organizations the way that 2% companies do. Figure One
provides a sample cockpit view.
In closing
As indicated, 2% companies set a high bar. But by emulating
these performance leaders and heeding the recommendations
set forth herein, other companies can achieve and sustain a higher level of success than they currently enjoy. Ten years from now,
we hope to find ourselves talking about new manifestations of exploration and exploitation and an expanded roster of companies
that excel at both: the 5% — or more.
Knut Haanaes is a Professor of Strategy
and Deputy Dean of the MBA Program at
IMD business school in Switzerland. Martin
Reeves is Senior Partner and Managing
Director at the Boston Consulting Group
(BCG) and Director of the BCG Henderson Institute. Jules
Wurlod is a Consultant at BCG based in Geneva and an
ambassador of the BCG Henderson Institute.
rotmanmagazine.ca / 37
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practice
DOI:10.1145/ 3343048

Article development led by
queue.acm.org
Transitioning up the ladder.
BY KATE MATSUDAIRA
The
Evolution of
Management
I HAVE B EEN thinking a lot about the different
transitions I have made as I have been promoted
to different levels of management, from individual
contributor to manager to organization leader in
charge of hundreds of people.
With each step up, the job changes—but not all of
the changes are obvious. You must shift your mindset
and focus on building new skills that are often very
different from the skills that made you successful in
your previous role.
There are lots of great resources for first-time
managers, and many books designed for CEOs or
top-level executives—but there are fewer resources
specifically for the people in the middle.
Some ideas translate well from the CEO/executive
content (such as establishing a team culture), but very
little of the available content translates to running
technical software teams at scale.
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This in-between space is where I have
spent almost all of my career—somewhere between individual contributor
(abbreviated as IC here) and CEO. Many
people (even if they are not yet managers) might be interested in practical advice for managing these transitions, so
I have compiled everything I possibly
could on the topic for this article.
Individual Contributor
to Entry-Level Manager
Every time you move up as a leader you
go through a set of changes. One of the
biggest transitions occurs when you first
move from an IC role into a management position.
Your impact becomes difficult to
measure. As an IC you are hands-on
and doing things yourself. You have a
direct line between your daily tasks and
the results: You write code for a feature
for your team’s product, and you can
see the feature right before your eyes
once you are finished. Every time your
team reaches a milestone, you know exactly what you contributed to that success (and you can even quantify these
contributions if you choose to).
When you move into management,
you step away from that direct line. It is
no longer your job to do the work yourself; instead, your role is to mentor,
motivate, and guide your team to do the
work, while you maintain the connection to the big-picture vision/strategy
and make it easier for your team to get
things done.
This can be one of the most difficult
parts of the job for new managers to
get used to. They just want to jump in
and solve problems themselves, but (as
anyone who has had a manager do this
knows), this actually tends to do more
harm than good. Those who try to do
the work themselves can end up micromanaging or becoming a bottleneck
on the project.
Your new job is to solve problems
by removing roadblocks (including
yourself), streamlining processes, and
helping others be productive. You don’t
solve the problem yourself now; you create an environment where other people
IMAGE BY BERTOL D WERKM ANN
can solve the problem. This is how you
add value.
This is a big shift in mindset: how you
think about yourself and how you define
your success.
Measurements of success become
lagging indicators. Unfortunately,
there are not the same accolades for
making that shift as there were in your
previous role as an IC. Streamlining
processes and mentoring your team are
essential tasks but less immediately rewarding; it can sometimes take a while
for the effects of your work to be truly
felt and appreciated.
Understanding your impact can be
elusive when the work is being done by
others. And when you have a strong team,
the value that you, as a leader, are bringing to the table can be hard to judge or
see (this becomes more and more true
as you go further up the ladder).
It is up to you to define what success
means to you and your team. You achieve
this by being the connection between the
parent organization and your team.
Communication becomes a prized
skill. Leadership is based on two-way
communication (between you and
your leaders, and then between you
and your team), whereas before communication was more of a one-way
street between your manager and you.
You must be in frequent communication with your own manager and
leadership in order to understand the
bigger vision for the organization, and
then you can drill down on what your
team needs to accomplish and why.
You must work closely with your staff
to make sure the best possible work
gets done by the best possible people; a
large part of this is helping them to understand the big-picture impact of what
they are doing.
You must look further into the future than you have probably ever before to see not just the project your
team is working on today, but how it
will connect to projects that will be
done one to two years in the future.
In summary, these are the biggest
transitions that occur when moving
from IC to entry-level manager:
˲˲ Let go of the immediate/quick sense
of gratification that comes from doing/
building/creating.
˲˲ Accolades and recognition become
less frequent as you move up.
˲˲ You derive your sense of accomplishment from mentoring, growing,
and furthering the work of your team
and those around you.
˲˲ Add value by removing roadblocks,
streamlining processes, and helping
others be productive.
˲˲ Think one to two years out for your
project and roadmap.
˲˲ Help people connect their work to
the parent organization or company,
and help them see their individual impact and value.
Entry-Level Manager
to Manager of Managers
By the time you are promoted to become a manager of managers, you have
some established management skills
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43
practice
and experience under your belt. This
means a less shocking transition than
the one from IC to manager, but there
are still plenty of changes to adapt to.
For example, you should be well
practiced at letting go of micromanaging and instead trusting the people on
your team to do good work (that is, delegation). As a manager of managers,
however, the stakes of the work your
direct reports are doing increase.
Trusting your leaders. Now, instead
of your reports writing code that could
be fixed in a day or two, they are making hiring decisions, managing performance, and driving strategy. A mistake
here could have long-range and costly
consequences, so you must learn how
to balance trusting your team with
avoiding a disaster. If you override
your leads, it can erode trust in your
team—and you quickly become a micromanager rather than a boss who
empowers the team.
This ultimately comes down to knowing what calls really matter. Where do
you need to be right, and where can you
trust that your reports will make the
right call or be able to course-correct
from a bad call? Overriding your direct
reports can erode their trust in you.
Knowing what calls matter comes
from understanding what is most important, and how these decisions influence the overall strategy. To put things in
perspective, zoom out two to three years
into the future and ask yourself the following questions:
˲˲ How do all of your teams fit together?
˲˲ How should resources be distributed?
˲˲ Which projects and people are
critical to the organization’s most important goals?
˲˲ What lessons do you need your
managers to learn?
˲˲ Where can you allow them to take
control and make mistakes?
˲˲ What areas cannot fail and therefore need your oversight?
Once you have criteria for what matters, the key is implementing the right
checks and balances so you can feel confident in the decisions being made (and
have enough time to make adjustments
when things go astray).
Your most important job becomes
picking your leads. As the manager
of one team, it’s still possible to keep
tabs on every single person. Not only
do you know their names, but you
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probably have at least a semi-clear
idea of what they are spending their
time on day to day.
As a manager of managers, you have
not only your direct reports but also
their teams under you. That is a lot to
keep track of. In fact, it is more than you
can keep track of.
This is why it becomes critically
important to get the right people into
a few key roles. In engineering teams,
culture can be established at the manager/product level, but it can also come
in the functional unit. As such, having
a few really good senior people (technologists, project managers, product managers and UX leads) can help
you maintain quality, excellence, and
progress. Connect with those people
and make sure they know how important they are.
The way you manage people will
also change. The people you are managing in these roles have been working for a while; they know how the
game is played. They are there for performance ratings, promotions, and
compensation. As a result, you can be
more transparent in your discussions
with them.
That does not mean you can completely forget about coaching and mentoring, though. As a manager, it is still
your job to help your direct reports
achieve their career objectives.
Planning for the future. As you move
up through the ranks at your organization, so do the people underneath you. If
you are an entry-level manager who loses
an engineer, that won’t sink the ship. As
the people who report to you take on
increasingly important and hard-to-replace roles, however, you have to prepare
for succession.
˲˲ What will you do if your best [fill-inthe-blank] leaves?
˲˲ What can you do to help make your
best people want to stay with your team?
˲˲ Which resources do you need today,
and what will you need a year from now?
˲˲ Who is on your team right now who
could move up in the future?
˲˲ Which jobs don’t exist today that
you will need filled in the future?
˲˲ Have any team members outgrown
their roles, or have any of the roles
changed enough that they are no longer
filled by the right people?
You need to be continually looking
into the future—not only in managing
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your people, but also in managing your
team’s work and objectives.
You need to know where you are going—again, you are looking at a two- to
three-year time horizon—and then it’s
your job to set up systems that will allow you to get there. When you manage
so many teams, you need to find ways to
make it easy to know what is going on:
˲˲ What metrics do you need to measure and pay attention to? Why?
˲˲ How do you set up structures for visibility into progress?
This can be done in a variety of ways,
from having skip-level meetings (those
that involve managers and employees
more than one level apart in the chain
of command) to setting up reporting
systems that automatically filter key
data points up to you. Don’t rely on just
one method. Be creative, and make sure
you are not getting a one-sided view.
Finally, how do you communicate
those key metrics to your leadership?
How will you communicate about success and failure?
Your success as a manager is now
even harder to define, because what you
do all day probably just looks like going
to lots of meetings. There is almost no
immediate, concrete output. It becomes
even more critical that you get clarity
from your leadership on what successful
outcomes will look like for you and your
team, and that you do the hard work today for big-picture results tomorrow.
Here is an overview of the transitions involved in becoming a manager
of managers:
˲˲ Continue learning to let go of control
and allow people to make mistakes. Balance the importance of getting your way
with the risk of undermining your people. Focus on the calls that really matter.
˲˲ People management is still about
mentoring, but there is a new level of
transparency with your direct reports
about the rewards of their work.
˲˲ Your job is to think into the future.
How do all of your teams fit together?
How do changes in priorities affect the
way people and resources are distributed? It is always better to be the person
who can do more with less.
˲˲ Succession planning comes into
play. Make sure you have a solid plan
to grow your leadership bench and
maintain successors (or a plan) for all
critical roles.
˲˲ You are responsible for progress and
practice
execution. It’s your job to make systems
that work, track the right metrics, and
share those results with your leadership.
Manager of Managers
to Organization Leader
When moving into a role that is several
layers above the engineers, your role
changes again. Now you are managing organizations consisting of unique
teams that may each have their own
culture, process, priorities, and mode
of operation.
You have to decide where the teams
should have similarities and what most
benefits the organization as a whole.
Each structure is different, so it helps to
understand the principles that hold everything together: Is it about an aligned
strategy, decision making, sharing resources, or something else?
Moving from manager to executive is
a huge shift in your career. Probably the
biggest change you will deal with is this:
Your job is no longer the “what.” Your job is
now the “how.”
This shift will define almost everything you do in this leadership role.
When you manage hundreds of people,
you become too far removed from the
people doing the “what.” Instead, the
way you add value is by defining and
streamlining the “how.”
Your job is to make an entire organization successful. Here are some of the
strategies that have worked well for me
in practice.
Establishing your team culture. Give
up now on the idea that you will be able
to stay aware of everything going on
within the teams you manage. If you try
to make that part of your job, you will become the thing that holds back the talented people you have in place—which
is no way to retain top talent.
Instead, it is your job to establish a
culture for your organization. Once you
have the right people in the right places,
you need to step back and let them do
the work.
What does it mean to establish a
culture and values? Ask yourself these
questions:
˲˲ What does it mean to be in [team
name]?
˲˲ What do you stand for?
˲˲ How should decisions be made?
˲˲ How should issues be escalated?
˲˲ What are the principles used to
make tough calls?
Every time
you move up
as a leader
you go through
a set of changes.
One of the biggest
transitions occurs
when you first move
from an individual
contributor role
into a management
position.
Start by defining the values that you
feel are most important to your organization. This will inform everything
else. You want to start at the heart of
the matter—what does it mean to be
on this team and what do we stand
for?—and that will inform the rest of
your decisions.
For example, an Amazon manager
told me he never does pre-reads for the
meetings he runs. Instead, he sets aside
the first few minutes of every meeting
for all participants to read whatever document is being discussed in this meeting. In his view, very few people pre-read,
and this ensures the remaining meeting
time is effective.
This might seem like a small detail,
but it is indicative of someone who has
a clear understanding of his own values
and how he translates those values to
his team. It is one small way that he executes his vision for his team culture.
You will find that a large part of your
role is creating and maintaining a structure for work to be done within and communicated about. Which meetings need
to happen every week? Which happen
monthly, quarterly, and so on? How often do you meet with the entire organization? How do you share the roadmap,
and how often?
It is also critical to identify the culture-keepers in your organization. Are
they the managers? Your senior engineers? Make sure you know who they
are, but also that they know who they are.
Show them you understand their value.
Help them see themselves as leaders
and mentors.
Every decision you make at this level
must be deliberate and reflect your organizational values. Once you make a decision, be open to reviewing it. If it’s not
working, iterate until it does.
Growth, mentoring, and people
management. How do you connect
with your team when there are too
many people to count?
The answer is, you try different things
until you see what works best. And then
you keep trying new things to avoid falling into a rut.
Here are a few ways to make yourself
available to connect with the people who
report to you:
˲˲ Office hours
˲˲ Group lunches with different teams,
randomly selected groups, and so on
˲˲ Sporadic one-on-ones
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45
practice
˲˲ Skip-level meetings
˲˲ Large-group all-hands meetings
˲˲ Regular outbound communication
via email, videos, among others.
You now manage more people than
you could ever possibly keep track of in
your head. You may work with teams
distributed around the country or
around the world. Does it matter if every
single engineer working on a team within a team that you manage feels like he
or she knows you? That might feel like
an impossible challenge if you are managing hundreds of people. But do not
forget, your role is to be the organization
at this level. You represent the company
and its goals.
Feeling a connection with you is a
way for the people on your team to feel
connected with the company they work
for. No, you won’t be friends or even on
a first-name basis with everyone under
you but making an effort to be accessible will help people want to follow your
lead over time. Based on my experience,
the more people spend time with you
and get to know you, the more effective
you can be as a leader.
The name of the game now is trust.
Your people need to trust you, and you
need to trust your people.
Trust, but verify. But there is a caveat
to that trust: You must also audit. Yes,
you trust your managers, but you also do
the work to check in.
This can take a number of forms; for
example, you might do a really deep dive
into one or two programs on some regular cadence. You will get a presentation
from the key players and have time to ask
questions about the work, timeline, and
goals. You will get the chance to review
architecture, call out red flags, and confirm that progress is what is expected.
Just as startups have board meetings,
you can also set up monthly updates or
quarterly business reviews. My favorite
format involves having highlights, lowlights, and sections for special topics.
These forums are a chance for you
to answer questions for the people doing (or, more likely, leading) the work,
clarify your vision or goals for the project, and make sure your team is aligned.
This is a much more sustainable way
to work than just assuming you know
what’s going well and what’s not, based
on a bunch of status reports.
You cannot keep your eye on every
single project and person every single
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You must look
further into the
future than you
have probably ever
before to see not
just the project your
team is working
on today, but how
it will connect to
projects that will
be done one to two
years in the future.
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day, but you can set up systems that allow you to keep in touch with the work
being done on your team so you can
communicate effectively with your peers
and your leadership.
If you work with a manager over time
and don’t feel that sense of trust, it is
critical to get that person out of that role
or into another position as soon as possible. Your job just doesn’t work without
being able to trust your key leads.
Oversight and project reporting. Your
managers are essentially acting as “you”
(and, in turn, the organization) when
they speak to their teams. You need
managers in place who are in line with
your vision and who will accurately present to their teams what you tell them.
If there is dissonance between what
you say and what the managers say, this
will gro w into a bad situation. Likewise,
if what you say is different from what
your peers or CEO say, that is also an opportunity to breed mistrust.
If there are managers who are not
representing you accurately, then you
need to correct them or replace them as
soon as possible.
You should be upfront and clear with
your managers about your expectations:
What is their job? What is your job?
Their job is to deeply understand the
company goals, and how their team fits
within those goals, and to communicate
to you where things are working well and
where they need help.
Your job is to support their decisions
(which is possible when you know you
have managers who innately understand the company goals) and to communicate clearly on behalf of the company’s leadership.
With so many people and projects
in your purview, it is important you get
regular status reports that are presented
in the language of your organization (for
example, OKRs at Google, Red/Yellow/
Green at Nordstrom, and others). This
will enable you to share progress upward
as efficiently as possible.
These reports, however, will give you
only the simplest view of the work being
done. To truly understand what is happening on your teams, you must maintain high-quality communication with
the managers working for you.
One trick another executive told me
about was to select several projects to
review (not exactly a deep dive but devoting more time than just reading a report)
practice
every week. Look at key metrics, milestones, deadlines, and overall status.
This is a good way to quickly and randomly audit the work being done, but it
is an even better way to get insight into
early red flags: Are there risks? Dependencies? Changes that need to be made?
Create a spreadsheet or other structured format for reviewing projects, so
that each one can be judged and discussed using the same language.
Talent review. You are now managing high-level people in important roles.
It is now even more important to think
about the future of those people and
those roles, and to have a plan should
someone need to be replaced.
Make a point of identifying the highpotential people on your team. Who are
they? Are they getting what they need?
What will their path forward be? You can
ask your managers for their recommendations, but it is likely some standouts
will be clear to you even from your relative distance.
You should also identify people who
are critical—perhaps too critical—to the
team’s success. There should never be
a single point of failure. If you would be
in danger if a key person left, then you
are in a really bad position that needs to
be fixed right now. Find ways to create
backups and have redundancy for your
most critical people.
Ensure you are involved in the hiring and evaluation process for your
teams, even being part of interview
loops for certain positions. Sit in and
hear how your managers are giving
feedback to employees and how managers are interviewing potential new
hires. This could teach you a lot about
your team and how the culture is being
broadcast. It’s an opportunity to catch
big red flags that could have really
long-term results.
When people do leave, always take
the time to do exit interviews. Uncovering the flaws in your people-management system is just as important as
finding the flaws in your programs and
projects. There is always a push and a
pull when someone leaves, so try to uncover both and identify a way to improve.
One friend told me, always look for
and check in with the smartest and most
dissatisfied people on your team. They
will alert you to problems within the
team that might be small now but will be
big problems for you in the future.
Managing your own time and resources. In this executive role, the work
never stops. There will always be more
than you can do. It is up to you to decide
what is the most valuable use of your
time and get out of the way of everything
else. Hire people you trust who will help
you be more effective by keeping the
wheels turning while you focus on your
most important tasks.
One important way you can do this
is to make sure you have an exceptional
assistant or other support staff. This
should be someone who can read and
respond to your email, because you will
have a lot and most of it will not be worth
your time. Get someone who is really invested in the job and who you can spend
significant time with, allowing this person to understand how to make your life
easier and more efficient.
You could hire a chief of staff who
acts as your number two and can speak
on your behalf to make decisions for
the team when you are not available.
This is a person who you will spend a
lot of time with, working through ideas
and making sure you are always on the
same page. This can be a formal or informal role, but it is essential to have
someone you can count on in this role.
Talk to your CEO about the best uses
of your time. Talk about this with your
peers, too. How do they spend their
time? What do they delegate?
Make sure that, even as you delegate
many tasks, you continue to put a priority on time with your customers. With all
the internal work you do, it can be easy
to forget about the people outside of
your organization who really matter. If
you lose touch with your customers, you
lose touch with your goals. You cannot
lead your team effectively without knowing your customers, so it is worth your
while to carve out regular time in your
schedule to get in tune with customers.
Working on a five-plus-year timeline. When you think about concerns,
you should be thinking further out. It is
not uncommon to be focused on problems two to five years in the future. It
can be a distraction to get mired in the
details and tactical work, but when you
can, you should delegate that to your
very capable leads.
One way to help this process is simply
to write it all down. Create a living document that defines your priorities and
high-level goals. Write out your aspira-
tional timeline and outline your strategy
for achieving it. Update your document
every year and refer to it often. This will
be your guide.
Maintain an open communication
loop from your team, to you, to your
CEO, then back to you, and then your
team. You are the in-between, and
you will learn how to be successful
by listening.
Make sure you stay knowledgeable
about your industry. You are no longer
solving the problem in front of you;
you are looking years into the future.
Where is your industry going? What is
your competition working toward? Is
your company on track to fundraise,
go public, multiply in size, completely
change direction … ?
Set goals that are continually growing. Make sure every person on your
team has goals. Some should be stretch
goals, and some should be practical.
Create a culture that places value on
doing work that matters and gets the
team’s goals done, not on being the
busiest or smartest or loudest person
in the room.
Finally, create a roadmap and share
it. You do not have to share every detail
of what the next five years are going to
look like, but do share the vision of what
you have been working on with your
team and with your CEO. Get people on
board with your vision and with you, so
you will have their trust and enthusiasm
on the journey.
This job isn’t easy, but the rewards of
executing amazing work on such a huge
scale are some of the best you will ever
experience.
Related articles
on queue.acm.org
Evolution of the Product Manager
Ellen Chisa
https://queue.acm.org/detail.cfm?id=2683579
Getting What You Measure
Eric Bouwers, Joost Visser,
and Arie van Deursen
https://queue.acm.org/detail.cfm?id=2229115
Mal Managerium: A Field Guide
Phillip Laplante
https://queue.acm.org/detail.cfm?id=1066076
Kate Matsudaira (katemats.com) is an experienced
technology leader. She has worked at Microsoft and Amazon
and successful startups before starting her own company,
Popforms, which was acquired by Safari Books.
Copyright held by author/owner.
Publication rights licensed to ACM.
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SPOTLIGHT THE LEADER’S GUIDE TO CORPORATE CULTURE
The Leader’s
Guide to
Corporate
Culture
HOW TO MANAGE THE EIGHT CRITICAL
ELEMENTS OF ORGANIZATIONAL LIFE
BY BORIS GROYSBERG, JEREMIAH LEE,
JESSE PRICE, AND J. YO-JUD CHENG
44 HARVARD BUSINESS REVIEW JANUARY–FEBRUARY 2018
Strategy and culture are among
the primary levers at top leaders’
disposal in their never-ending quest to
maintain organizational viability and
effectiveness. Strategy offers a formal
logic for the company’s goals and
orients people around them. Culture
expresses goals through values and
beliefs and guides activity through
shared assumptions and group norms.
JANUARY–FEBRUARY 2018 HARVARD BUSINESS REVIEW 45
SPOTLIGHT THE LEADER’S GUIDE TO CORPORATE CULTURE
Strategy provides clarity and focus for
collective action and decision making. It relies on plans and sets of choices to mobilize
people and can often be enforced by both
concrete rewards for achieving goals and
consequences for failing to do so. Ideally,
it also incorporates adaptive elements that
can scan and analyze the external environment and sense when changes are required to maintain continuity and growth.
Leadership goes hand-in-hand with strategy formation, and most leaders understand the fundamentals. Culture, however,
is a more elusive lever, because much of it is
anchored in unspoken behaviors, mindsets,
and social patterns.
For better and worse, culture and leadership are inextricably linked. Founders and
influential leaders often set new cultures
in motion and imprint values and assumptions that persist for decades. Over time an
organization’s leaders can also shape culture, through both conscious and unconscious actions (sometimes with unintended
consequences). The best leaders we have
observed are fully aware of the multiple
cultures within which they are embedded,
can sense when change is required, and can
deftly influence the process.
Unfortunately, in our experience it is far
more common for leaders seeking to build
high-performing organizations to be confounded by culture. Indeed, many either
let it go unmanaged or relegate it to the HR
function, where it becomes a secondary concern for the business. They may lay out detailed, thoughtful plans for strategy and execution, but because they don’t understand
culture’s power and dynamics, their plans go
off the rails. As someone once said, culture
eats strategy for breakfast.
It doesn’t have to be that way. Our work
suggests that culture can, in fact, be managed. The first and most important step leaders can take to maximize its value and minimize its risks is to become fully aware of how
it works. By integrating findings from more
than 100 of the most commonly used social
and behavioral models, we have identified
eight styles that distinguish a culture and
can be measured. (We gratefully acknowledge the rich history of cultural studies—
going all the way back to the earliest explorations of human nature—on which our work
builds.) Using this framework, leaders can
model the impact of culture on their business and assess its alignment with strategy.
We also suggest how culture can help them
achieve change and build organizations that
thrive in even the most trying times.
DEFINING CULTURE
Culture is the tacit social order of an organization: It shapes attitudes and behaviors
in wide-ranging and durable ways. Cultural
norms define what is encouraged, discouraged, accepted, or rejected within a group.
When properly aligned with personal values, drives, and needs, culture can unleash
tremendous amounts of energy toward a
shared purpose and foster an organization’s
capacity to thrive.
Culture can also evolve flexibly and autonomously in response to changing opportunities and demands. Whereas strategy is
typically determined by the C-suite, culture
can fluidly blend the intentions of top leaders with the knowledge and experiences of
frontline employees.
The academic literature on the subject is
vast. Our review of it revealed many formal
definitions of organizational culture and a
variety of models and methods for assessing
it. Numerous processes exist for creating and
changing it. Agreement on specifics is sparse
across these definitions, models, and methods, but through a synthesis of seminal work
As someone
once said,
culture eats
strategy for
breakfast.
46 HARVARD BUSINESS REVIEW JANUARY–FEBRUARY 2018
by Edgar Schein, Shalom Schwartz, Geert
Hofstede, and other leading scholars, we have
identified four generally accepted attri­butes:
Shared. Culture is a group phenomenon.
It cannot exist solely within a single person,
nor is it simply the average of individual characteristics. It resides in shared behaviors, values, and assumptions and is most commonly
experienced through the norms and expectations of a group—that is, the unwritten rules.
Pervasive. Culture permeates multiple
levels and applies very broadly in an organization; sometimes it is even conflated with
the organization itself. It is manifest in collective behaviors, physical environments,
group rituals, visible symbols, stories, and
legends. Other aspects of culture are unseen, such as mindsets, motivations, unspoken assumptions, and what David Rooke
and William Torbert refer to as “action logics” (mental models of how to interpret and
respond to the world around you).
Enduring. Culture can direct the thoughts
and actions of group members over the long
term. It develops through critical events in
the collective life and learning of a group. Its
endurance is explained in part by the attraction-selection-attrition model first introduced
by Benjamin Schneider: People are drawn to
organizations with characteristics similar to
their own; organizations are more likely
to select individuals who seem to “fit in”; and
over time those who don’t fit in tend to leave.
Thus culture becomes a self-reinforcing social pattern that grows increasingly resistant
to change and outside influences.
Implicit. An important and often overlooked aspect of culture is that despite its
subliminal nature, people are effectively
hardwired to recognize and respond to it
instinctively. It acts as a kind of silent language. Shalom Schwartz and E.O. Wilson
have shown through their research how evolutionary processes shaped human capacity;
because the ability to sense and respond to
culture is universal, certain themes should
be expected to recur across the many models, definitions, and studies in the field. That
is exactly what we have discovered in our
research over the past few decades.
EIGHT DISTINCT CULTURE STYLES
Our review of the literature for commonalities and central concepts revealed two primary dimensions that apply regardless of organization type, size, industry, or geography:
people interactions and response to change.
INTEGRATED CULTURE THE FRAMEWORK
On the basis of decades of experience analyzing organizations, executives,
and employees, we developed a rigorous, comprehensive model to
identify the key attri­butes of both group culture and individual leadership
styles. Eight characteristics emerge when we map cultures along two
dimensions: how people interact (independence to interdependence)
and their response to change (flexibility to stability). The relative salience
of these eight styles differs across organizations, though nearly all are
strongly characterized by results and caring.
The spatial relationships are important. Proximate styles, such as
safety and order, or learning and enjoyment, will coexist more easily
than styles that are far apart on the chart, such as authority and purpose,
or safety and learning. Achieving a culture of authority often means
gaining the advantages (and living with the disadvantages) of that culture
but missing out on the advantages (and avoiding the disadvantages)
of a culture of purpose.
FLEXIBILITY
ENJOYMENT
INDEPENDENCE
PURPOSE
HOW PEOPLE RESPOND TO CHANGE
LEARNING
CARING
HOW PEOPLE INTERACT
RESULTS
ORDER
AUTHORITY
INTERDEPENDENCE
Understanding a company’s culture requires
determining where it falls along these two
dimensions.
People interactions. An organization’s
orientation toward people interactions and
coordination will fall on a spectrum from
highly independent to highly interdependent. Cultures that lean toward the former
place greater value on autonomy, individual
action, and competition. Those that lean
toward the latter emphasize integration,
managing relationships, and coordinating
group effort. People in such cultures tend to
collaborate and to see success through the
lens of the group.
Response to change. Whereas some
cultures emphasize stability—prioritizing
consistency, predictability, and maintenance of the status quo—others emphasize
flexibility, adaptability, and receptiveness
to change. Those that favor stability tend
to follow rules, use control structures such
as seniority-based staffing, reinforce hierarchy, and strive for efficiency. Those that
favor flexibility tend to prioritize innovation, openness, diversity, and a longer-term
orientation. (Kim Cameron, Robert Quinn,
and Robert Ernest are among the researchers who employ similar dimensions in their
culture frameworks.)
By applying this fundamental insight
about the dimensions of people interactions
and response to change, we have identified
eight styles that apply to both organizational
cultures and individual leaders. Researchers
at Spencer Stuart (including two of this
article’s authors) have interdependently
studied and refined this list of styles across
both levels over the past two decades.
Caring focuses on relationships and mutual trust. Work environments are warm, collaborative, and welcoming places where people help and support one another. Employees
are united by loyalty; leaders emphasize sincerity, teamwork, and positive relationships.
Purpose is exemplified by idealism and
altruism. Work environments are tolerant,
compassionate places where people try to do
good for the long-term future of the world.
Employees are united by a focus on sustainability and global communities; leaders
emphasize shared ideals and contributing
to a greater cause.
Learning is characterized by exploration,
expansiveness, and creativity. Work environments are inventive and open-minded
places where people spark new ideas and
explore alternatives. Employees are united
SAFETY
STABILITY
SOURCE SPENCER STUART
JANUARY–FEBRUARY 2018 HARVARD BUSINESS REVIEW 47
SPOTLIGHT THE LEADER’S GUIDE TO CORPORATE CULTURE
INTEGRATED CULTURE LEADER STATEMENTS
Top leaders and founders often express cultural sentiments within the
public domain, either intentionally or unintentionally. Such statements
can provide important clues to how these leaders are thinking about
and leading their organizations’ cultures.
TESLA LEARNING
FLEXIBILITY
ZAPPOS
ENJOYMENT
DISNEY CARING
“It is incredibly important to
be open and accessible and
treat people fairly and look
them in the eye and tell them
what is on your mind.”
—Bob Iger, CEO
“Have fun. The game is a
lot more enjoyable when
you’re trying to do more
than make money.”
—Tony Hsieh, CEO
SEC ORDER
GSK RESULTS
“I’ve tried to keep us focused
on a very clear strategy of
modernizing ourselves.”
—Sir Andrew Witty, former CEO
HUAWEI AUTHORITY
“Rule making is a key function
of the commission. And when
we are setting the rules
for the securities markets,
there are many rules we,
the SEC, must follow.”
—Jay Clayton, chairman
“We have a ‘wolf’ spirit in our
company. In the battle with lions,
wolves have terrifying abilities.
With a strong desire to win and
no fear of losing, they stick to
the goal firmly, making the lions
exhausted in every possible way.”
—Ren Zhengfei, CEO
INTERDEPENDENCE
INDEPENDENCE
WHOLE FOODS PURPOSE
“Most of the greatest companies
in the world also have great
purposes….Having a deeper, more
transcendent purpose is highly
energizing for all of the various
interdependent stakeholders.”
—John Mackey, founder and CEO
“I’m interested in things that change
the world or that affect the future
and wondrous new technology
where you see it and you’re like
‘Wow, how did that even happen?’”
—Elon Musk, cofounder and CEO
LLOYD’S OF LONDON SAFETY
“To protect themselves, businesses
should spend time understanding what
specific threats they may be exposed
to and speak to experts who can help.”
—Inga Beale, CEO
STABILITY
by curiosity; leaders emphasize innovation,
knowledge, and adventure.
Enjoyment is expressed through fun and
excitement. Work environments are lighthearted places where people tend to do what
makes them happy. Employees are united by
playfulness and stimulation; leaders emphasize spontaneity and a sense of humor.
Results is characterized by achievement
and winning. Work environments are outcome-oriented and merit-based places
where people aspire to achieve top performance. Employees are united by a drive for
capability and success; leaders emphasize
goal accomplishment.
Authority is defined by strength, decisiveness, and boldness. Work environments
are competitive places where people strive
to gain personal advantage. Employees are
united by strong control; leaders emphasize
confidence and dominance.
Safety is defined by planning, caution,
and preparedness. Work environments
are predictable places where people are
risk-conscious and think things through
carefully. Employees are united by a desire to
feel protected and anticipate change; leaders
emphasize being realistic and planning ahead.
Order is focused on respect, structure,
and shared norms. Work environments are
48 HARVARD BUSINESS REVIEW JANUARY–FEBRUARY 2018
methodical places where people tend to play
by the rules and want to fit in. Employees
are united by cooperation; leaders emphasize shared procedures and time-honored
customs.
These eight styles fit into our integrated culture framework (see the exhibit
“Integrated Culture: The Framework”) according to the degree to which they reflect
independence or interdependence (people
interactions) and flexibility or stability (response to change). Styles that are adjacent
in the framework, such as safety and order,
frequently coexist within organizations
and their people. In contrast, styles that are
located across from each other, such as
safety and learning, are less likely to be found
together and require more organizational
energy to maintain simultaneously. Each
style has advantages and disadvantages, and
no style is inherently better than another.
An organizational culture can be defined by
the absolute and relative strengths of each
of the eight and by the degree of employee
agreement about which styles characterize the organization. A powerful feature of
this framework, which differentiates it from
other models, is that it can also be used to
define individuals’ styles and the values of
leaders and employees.
Inherent in the framework are fundamental trade-offs. Although each style can
be beneficial, natural constraints and competing demands force difficult choices about
which values to emphasize and how people
are expected to behave. It is common to find
organizations with cultures that emphasize
both results and caring, but this combination
can be confusing to employees. Are they expected to optimize individual goals and strive
for outcomes at all costs, or should they work
as a team and emphasize collaboration and
shared success? The nature of the work itself,
the business strategy, or the design of the organization may make it difficult for employees to be equally results focused and caring.
In contrast, a culture that emphasizes
caring and order encourages a work environment in which teamwork, trust, and respect
are paramount. The two styles are mutually
reinforcing, which can be beneficial but can
also pre­sent challenges. The benefits are
strong loyalty, retention of talent, lack of conflict, and high levels of engagement. The challenges are a tendency toward groupthink,
reliance on consensus-based decisions,
avoidance of difficult issues, and a calcified
sense of “us versus them.” Leaders who are
THE PROS AND CONS OF CULTURE STYLES
Every culture style has strengths and weaknesses. The table below
summarizes the advantages and disadvantages of each style and how
frequently it appears as a defining culture characteristic among the
companies in our study.
RANKED
1ST OR 2ND
CULTURE STYLE
ADVANTAGES
DISADVANTAGES
CARING
Improved teamwork,
engagement,
communication, trust,
and sense of belonging
Overemphasis on consensus
building may reduce exploration
of options, stifle competitiveness,
and slow decision making
63%
Improved appreciation
for diversity,
sustainability,
and social
responsibility
Overemphasis on a long-term
purpose and ideals may get
in the way of practical and
immediate concerns
9%
Improved innovation,
agility, and
organizational learning
Overemphasis on exploration
may lead to a lack of focus and
an inability to exploit existing
advantages
Warm, sincere,
relational
PURPOSE
Purpose driven,
idealistic, tolerant
LEARNING
Open, inventive,
exploring
ENJOYMENT
Playful,
instinctive,
fun loving
RESULTS
Achievement
driven, goal
focused
AUTHORITY
Bold, decisive,
dominant
SAFETY
Realistic, careful,
prepared
ORDER
Rule abiding,
respectful,
cooperative
• Evaluate the level of consistency in
employees’ views of the culture
7%
• Identify subcultures that may account
for higher or lower group performance
• Pinpoint differences between legacy
cultures during mergers and acquisitions
Improved employee
morale, engagement,
and creativity
Overemphasis on autonomy and
engagement may lead to a lack of
discipline and create possible
compliance or governance issues
Improved execution,
external focus,
capability building,
and goal achievement
Overemphasis on achieving
results may lead to
communication and collaboration
breakdowns and higher levels of
stress and anxiety
89%
Improved speed of
decision making and
responsiveness to
threats or crises
Overemphasis on strong
authority and bold decision
making may lead to politics,
conflict, and a psychologically
unsafe work environment
4%
Improved risk
management,
stability, and business
continuity
Overemphasis on standardization
and formalization may lead to
bureaucracy, inflexibility, and
dehumanization of the work
environment
Improved operational
efficiency, reduced
conflict, and greater
civic-mindedness
Overemphasis on rules
and traditions may reduce
individualism, stifle creativity,
and limit organizational agility
NOTE SUM OF PERCENTAGES IS GREATER THAN 100 BECAUSE STYLES WERE COUNTED AS DOMINANT
IF THEY WERE RANKED 1 OR 2 OVERALL.
more focused on results and learning may find
the combination of caring and order stifling
when they seek to drive entrepreneurship
and change. Savvy leaders make use of existing cultural strengths and have a nuanced understanding of how to initiate change. They
might rely on the participative nature of a
culture focused on caring and order to engage
team members and simultaneously identify a
learning-oriented “insider” who has the trust
of his or her peers to advocate for change
through relationship networks.
The eight styles can be used to diagnose
and describe highly complex and diverse behavioral patterns in a culture and to model
how likely an individual leader is to align with
and shape that culture. Using this framework
and multilevel approach, managers can:
• Understand their organization’s culture
and assess its intended and unintended
effects
2%
8%
15%
• Rapidly orient new executives to the
culture they are joining and help them
determine the most effective way to
lead employees
• Measure the degree of alignment
between individual leadership styles and
organizational culture to determine what
impact a leader might have
• Design an aspirational culture and
communicate the changes necessary
to achieve it
THE LINK BETWEEN CULTURE
AND OUTCOMES
Our research and practical experience
have shown that when you are evaluating
how culture affects outcomes, the context in which the organization operates—
geographic region, industry, strategy, leadership, and company structure—matters,
as does the strength of the culture. (See
“Context, Conditions, and Culture,” page
56.) What worked in the past may no longer
work in the future, and what worked for one
company may not work for another.
We have arrived at the following insights:
When aligned with strategy and
leadership, a strong culture drives
JANUARY–FEBRUARY 2018 HARVARD BUSINESS REVIEW 49
SPOTLIGHT THE LEADER’S GUIDE TO CORPORATE CULTURE
positive organizational outcomes.
Consider the case of a best-in-class retailer
headquartered in the United States. The
company had viewed its first priority as providing top-notch customer service. It accomplished this with a simple rule—Do right by
the customer—that encouraged employees
to use their judgment when providing service. A core HR training practice was to help
every salesperson see customer interactions
as an opportunity to create “service stories
that become legendary.” Employees were reminded to define service from the customer’s
perspective, to constantly engage customers
with questions geared toward understanding
their specific needs and preferences, and to
go beyond their expectations.
In measuring the culture of this company, we found that like many other large
retailers, it was characterized primarily by
a combination of results and caring. Unlike
many other retailers, however, it had a culture that was also very flexible, learning oriented, and focused on purpose. As one top
executive explained, “We have freedom as
long as we take good care of the customer.”
Furthermore, the company’s values and
norms were very clear to everyone and consistently shared throughout the organization.
As the retailer expanded into new segments
and geographies over the years, the leadership strove to maintain an intense customer
focus without diluting its cherished culture.
Although the company had historically focused on developing leaders from within—
who were natural culture carriers—recruiting
outsiders became necessary as it grew. The
company preserved its culture through this
change by carefully assessing new leaders
and designing an onboarding process that
reinforced core values and norms.
Culture is a powerful differentiator for
this company because it is strongly aligned
with strategy and leadership. Delivering outstanding customer service requires a culture
and a mindset that emphasize achievement,
impeccable service, and problem solving
through autonomy and inventiveness. Not
surprisingly, those qualities have led to a variety of positive outcomes for the company,
including robust growth and international
expansion, numerous customer service
awards, and frequent appearances on lists
of the best companies to work for.
Selecting or developing leaders for
the future requires a forward-looking
strategy and culture. The chief executive
of an agriculture business was planning
to retire, spurring rumors about a hostile
takeover. The CEO was actively grooming a
successor, an insider who had been with the
company for more than 20 years. Our analysis revealed an organizational culture that
strongly emphasized caring and purpose. As
one leader reflected, “You feel like part of a
large family when you become an employee
at this company.”
The potential successor understood the
culture but was far more risk-averse (safety)
and respectful of traditions (order) than the
rest of the company. Given the takeover rumors, top leaders and managers told the CEO
that they believed the company needed to
take a more aggressive and action-oriented
stance in the future. The board decided to
consider the internal candidate alongside
people from outside the company.
Three external candidates emerged: one
who was aligned with the current culture
(purpose), one who would be a risk taker
and innovative (learning), and one who was
hard-driving and competitive (authority).
After considerable deliberation, the board
chose the highly competitive leader with the
authority style. Soon afterward an activist
investor attempted a hostile takeover, and
the new CEO was able to navigate through
the precarious situation, keep the company
Cultural
dynamics
represent one
of the greatest
yet most
frequently
overlooked
factors in
postmerger
performance.
50 HARVARD BUSINESS REVIEW JANUARY–FEBRUARY 2018
independent, and simultaneously begin to
restructure in preparation for growth.
In a merger, designing a new culture
on the basis of complementary strengths
can speed up integration and create more
value over time. Mergers and acquisitions
can either create or destroy value. Numerous
studies have shown that cultural dynamics
represent one of the greatest yet most frequently overlooked determinants of integration success and postmerger performance.
For example, senior leaders from two
merging international food retailers had
invested heavily in their organizations’ cultures and wanted to preserve their unique
strengths and distinct heritages. An assessment of the cultures revealed shared values
and areas of compatibility that could provide
a foundation for the combined culture, along
with important differences for which leaders
would have to plan: Both companies emphasized results, caring, and order and valued
high-quality food, good service, treating employees fairly, and maintaining a local mindset. But one operated in a more top-down
manner and scored much higher on authority,
especially in the behavior of leaders.
Because both companies valued teamwork and investments in the local community, the leaders prioritized caring and purpose. At the same time, their strategy required
that they shift from top-down authority to a
learning style that would encourage innovation in new-store formats and online retailing. As one senior leader said of the strategic
aspiration, “We need to dare to do things
differently, not play by the old rule books.”
Once they had agreed on a culture, a rigorous assessment process identified leaders at
both organizations whose personal style and
values would allow them to serve as bridges
to and champions for it. Then a program was
launched to promote cultural alignment
within 30 top teams, with an emphasis on
clarifying priorities, making authentic connections, and developing team norms that
would bring the new culture to life.
Finally, structural elements of the new
organization were redesigned with culture
in mind. A model for leadership was developed that encompassed recruitment, talent
assessment, training and development, performance management, reward systems,
and promotions. Such design considerations
are often overlooked during organizational
change, but if systems and structures don’t
align with cultural and leadership imperatives,
prog­ress can be derailed.
In a dynamic, uncertain environment,
in which organizations must be more agile, learning gains importance. It’s not
surprising that results is the most common
culture style among all the companies we
have studied. Yet during a decade of helping leaders design aspirational cultures, we
have seen a clear trend toward prioritizing
learning to promote innovation and agility as
businesses respond to increasingly less predictable and more complex environments.
And although learning ranks fourth within
our broader database, small companies (200
employees or fewer) and those in newer industries (such as software, technology, and
wireless equipment) accord it higher values.
Consider one Silicon Valley–based tec…
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