The Fight Against Corporate Inertia

People do not resist change, companies do.

Companies are designed for inertia. They are made up from standard processes to drive productivity and policies to ensure people do not cross lines. We hire people who are like us and place them in an organisational structures where they sit with people with the same skills. We set higher performance targets each year but the default mechanism to achieving them is to work harder rather than change the way we work. To drive improvement in this environment is to push against the very fabric of the organisation and any brute force attempt to do so is destined for failure. Only by systematically addressing each of these components will a climate for change emerge where people can embrace change and sustained transformation becomes possible. In parallel, leaders need to be the enemy of the status quo and create the expectation that improvement across the company is the norm. There are 3 essential areas for leaders to focus on.

Create the expectation to improve

Over a decade ago, when I was studying lean principles, I travelled to Japan on a study trip to tour to and learn from respected manufacturing plants. I was guided round one of the factories by a sensei (quality guru). At one of the stations he stopped, glanced at some documentation displayed and proceeded to scream at the section supervisor in Japanese. Once he had finished he explained to me very calmly that the supervisor had not updated his standard work for 6 weeks meaning that he had not found any improvements on how the job should get done. He added that the role of leaders is to solve problems and drive improvement. Otherwise why did we need leaders? He expected that each supervisor should update their standard work at least weekly. Whilst I did not support his fear-inducing leadership style, his drive of continuous improvement was a light bulb moment for me. The sensei had created an expectation for improvement. He went on to tell me that the 2 most important questions for a leader to ask were firstly “How are you performing to standard?” in other words: given the current resources and processes are you hitting the expected levels of productivity, quality etc. And secondly “What experiments have you run to move to your target state?” You will only be able to improve if you change the way you work – it is not about working harder and this is best achieved through experimentation.

These two questions may seem very operational in nature but they can and should be adapted to all parts of an organisation. People across the company should be rewarded for improving how the job is done not just performing the job.

Create the bandwidth to change and then move to BAU

Back in 2009, shortly after I joined DBS my team ran a programme aimed at taking customer waiting time out of our processes. DBS was known as Damn Bloody Slow since we were famous for long queues at our branches, ATMs and call centres. My team set up a program of process improvement events (PIEs) which were week-long workshops attended by employees who between them knew the target end-to-end process. They physically walked the process identifying issues and then back in the room ideated improvement ideas and implemented as many as possible in the week. In the first year we ran close to 50 PIEs and we dramatically reduced the customer waiting times, taking an estimated 250 million waiting hours out of our processes. We went from the bottom to the top of the customer satisfaction scores in 12 months. The PIE program could only have happened had there been a dedicated transformation team driving it from the centre. The team designed the approach, scheduled the workshops, provided the training, facilitated the sessions and reported on the progress to the CEO. We were highly successful for a couple of years but as focus moved onto the next transformation and since the people participating in the PIEs had day jobs, the focus began to wane. The improvement workshops were seen as one-off exercises. The expectation for improvement was episodic and not continuous.

We realised that we had to embed the need for improvement into BAU. We pivoted the program after a couple of years to replace the workshops with DMS (DBS Management System). Business reviews were no longer conducted in meeting rooms but on the operations floor at visual management boards. Leaders asked a version of the 2 questions from the Japanese sensei – “What are the issues that are preventing you performing to standard levels of quality, productivity and risk?” and “What experiments are you planning to get to the target improved state?”

With this approach the onus was on the leader to walk the floor, to ask the right questions and create the expectation that driving improvement was part of the day job, not a one-off project.

Create a safe environment to challenge

There are points where even the most empowered team feel that they have hit a brick wall. This typically happens when they run into an ingrained corporate habit or out of date policy? Common comments include “We cannot change, it is against the policy” or “our compliance team will never agree”. For people to be able to overcome such situations, it is important to put in place mechanisms to allow anything to be challenged safely. In the PIE program we ensured that there was a compliance person in the PIE team to address concerns early and be part of the solution. Later we set up a Kiasu committee (Kiasu is a Singapore dialect term meaning fear of missing out or to be overly conservative). Anyone could bring a policy to a Kiasu Committee to be reviewed. The committee was chaired by the Compliance head (who dressed up a like a judge and had an over-sized gavel) and made up of a “jury” comprising senior and junior employees who deliberated whether the policy was “guilty” of being Kiasu. If found guilty the process would be amended. The environment was fun and good-natured. In the first year, around 100 policies were challenged with over half being found “guilty” and amended. Quite often the owners of the policies that were deemed to be “not Kiasu” felt that they could improve and amended their policies anyway.

“Insistence on Improvement” is the first of the 6 essential habits of leading transformation. I will be covering the other 5 in coming weeks.

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A Ticking Timebomb

When the pandemic first hit most of us were surprised at the effectiveness of distributed virtual workforces. We also learnt how relentless Zoom calls and lack of demarcation between work and home can lead to burnout and other mental health issues. However, as we gradually emerge from COVID 19 it seems that most office-based companies intend to reap benefits of reduced real estate cost and employee flexibility by adopting some version of hybrid working. Whilst such a move has clear upsides, there is a ticking time bomb that is not receiving enough consideration. Unless we have a radical rethink on how to protect corporate culture it will whither to the point companies will be destroyed. The impact will affect the very nature of work for future generations. What can leaders do now to halt the decline?

Back in February 2020, a son of a friend of mine was excited to join a financial services company straight from college as a software developer. The company was located downtown of a vibrant city and he was looking forward to both learning new skills and forging new relationships in the office, over lunches and drinks after work. Five weeks later and before he was able to make any meaningful relationships he, like many others, was working from home. Meetings switched immediately to Microsoft Teams and were largely camera-off affairs. When he needed help, rather than chat to the person sitting beside him he was told to schedule a meeting. As the pandemic eased, as soon as he was allowed to do so, he returned to the office but he discovered that he was alone – his colleagues preferred to continue to work from home. After two and a half years he still has not an inkling about the company culture, has become disengaged and is now looking for a new job.  

Because of COVID, employees of companies worldwide have experienced the flexibility of working from home and the elimination of painful and expensive commutes and are now choosing to work from home and are prepared to move to companies that allow them to do so. They are prioritising convenience and flexibility over comradeship and culture. This is not only impacting the minority who are looking for an office-based experience (especially those new to the company) but is putting entire companies at risk over the long term. It is hard to see how corporate culture is going to survive. Given weaker culture, less and less people are going to engage with the companies and work will become increasingly transactional.  

Interestingly most of us did not feel the way about our families as we emerged from the pandemic. We did not decide to move to a hybrid model for hanging out with our friends. We have returned to the traditional model of hanging out face to face. In this case we have prioritised camaraderie and relationships over “flexibility”.  What does this tell us about what we really think about work?

Leaders, especially those driving transformation need to focus more than ever on building culture. When your team is physically in the same location it makes it far easier to drive engagement and culture. Observing the informal rituals, having conversations in the corridor, even seeing how people are dressed inform people of the culture. Leaders of transformation have more opportunities to impact the culture when people are in the office. For example the characteristics of the physical office space drive behaviour more than most give credit for. At one point in my career in addition to my role as Chief Transformation Officer, I oversaw the real estate and facilities for DBS. It was during that time I discovered how powerful physical space can be as a driver of positive change. People tend to behave based on the physical environment around them – you behave differently in a library and a supermarket.

Left untended desired culture will decay over time. When people are not physically together the culture half life reduces dramatically. As people leave and new people join the culture will be lost and engagement will drop. As people feel less engaged they will look for higher pay and flexibility elsewhere. Companies will not be able to attract talent. There will be no engaged army for future transformation.  Companies will erode and ultimately whither.

Leaders need to act now. They should understand the drivers of decay. Some of the factors are as follows.

  1. Starting health of culture
  2. Attrition rate
  3. How much effort leadership puts into maintaining and developing culture. Taking a culture by design approach is key.  Scott Anthony and I wrote about this in HBR.org and the approach is detailed in our book.

 Leaders have 3 choices.

  1. Do nothing.  Believe corporate culture is a thing of the past and accept that work will be increasingly transactional. 
  2. Insist people come into the office and work on the employee experience so that more employees will prioritise camaraderie and culture over flexibility and reduce the risk of people looking to other companies that provide flexibility and offer higher pay.
  3. Continue with hybrid working and work ten times harder on developing culture using a “culture by design” approach.

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It’s breakfast time and digital culture is hungry

Why is it that everyone sagely agrees with Peter Drucker’s aphorism that culture eats strategy for breakfast but the vast majority of companies spend far more time on their strategy than their culture? We organise strategy offsites, strategy departments are set up, extensive strategy documentation is developed, expensive strategy consultants are engaged and we present strategies for endorsement to our boards. Yet for most companies any focus on culture is simply well-meaning lip service or a part-time hobby for an overstretched HR department.  Is this because defining and progressing towards a target state culture is hard?  Is it because demonstrating that culture yields direct business benefits is not possible?  Is it because we do not really believe Peter Drucker?  

As I wrote in the first post in this blog the single biggest insight of my career to date is that transformation is about people. Processes and technology do not change themselves. People drive change and to drive transformation at scale you need to create any army of engaged and motived people. There are many stats quoted (mainly in the presentations from those highly paid strategy consultants) on the low percentages of successful transformation programs. These failures are often due to the lack of focus on culture, not the application of the wrong strategy.

More and more strategies are centred around digital transformation. Successful digital transformation is not about the blind implementation of new technologies but the mindset of continuously improving customer solutions by the application of suitable technology. True digital leaders are impatiently curious about what works and what does not. This is a culture issue not a strategy issue – digital culture eats digital strategy for breakfast, lunch and dinner.  Strategy, digital or otherwise is important in setting direction but sustained execution depends on behaviours. Yet pretty well everyone I speak to agrees that in their companies there is much more focus on digital strategy and little or no attention to the behaviours. Part of the reason is because how to develop corporate culture is not taught in business schools, it is not role modeled by leaders – it is new for most people. The good news is that more and more companies are believing in the importance of developing a digital culture although are not sure exactly how to go about it.  The even better news is that it is not difficult if you are prepared to focus on it. Here is the high level approach.

  1. Be explicit about your desired culture. Corporate culture is the sum of the behaviours of the people in the company. You should define the desired behaviours that are going to enable the purpose and accelerate the strategy of the company.  This helps to address the link between culture and business outcomes.  At DBS we set out to be a 27,000 person startup as we wished to operate at speed and at scale.  Clearly we were not a startup, we were a fifty year old bank but we precisely defined the behaviours of a startup that we wished to emulate.
  2. Build a dedicated program to develop the future state culture based on the “culture by design” approach that we pioneered at DBS and set out in the book Eat Sleep Innovate that I co-authored with Scott Anthony, Natalie Painchaud and Andy Parker.  I shall be writing more about this in future posts so you do not need to buy the book to learn more but essentially you will need to address culture blockers through the conscious introduction of rituals, vocabulary and enablers.
  3. Measure progress.  The future state culture must be defined in terms of observable behaviours so that progress can be measured and issues identified.

The corollary of the afore-mentioned “one big insight” that transformation is about the people is that corporate culture is an important asset of the company. The leadership of a company are the custodians of this asset. The board should ensure that culture is nutured and developed by the leadership. There should be culture offsites and teams dedicated to defining and developing the culture. Progress should be reported in annual reports

And of course if you need a highly paid culture consultant you know how to reach me!!!

Leadership Lessons

  1. Spend as much time (if not more) on culture as you do on strategy.  Culture improvement is your most powerful execution enabler!
  2. Be explicit on the behaviours that are required to deliver on your strategy.  This is your future state culture.
  3. Implement a program to develop the future state culture.

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The Biggest Silo of them All

What happens in your company when IT systems fail, software development projects are late or there is a data breach?  Do the business people indignantly escalate the issues to the IT department? Do they write angry emails to the CIO?  If that is the case and you aspire to be a digital company then you have a problem. Such friction between business and tech teams is indicative of a company that does not realise what it means to be digital and is a huge obstacle to transformation. Digital companies do not differentiate between business and technology. Leaders of digital companies are ambidextrous – they know how to prioritise between investment in system performance and revenue generating features. They know that they are accountable for keeping for system stability, security, customer experience as well as  meeting financial targets. Unfortunately ambidextrous talent does not typically exist in legacy companies where organisational structures and processes tend to reinforce the tech and business silos. However It is possible to bridge the chasm.

In 2017 at DBS we had huge digital transformation aspirations. We had stopped comparing ourselves to our traditional competition and started to use the big tech companies as a benchmark. Our internal mantra was to put the D in GANDALF, where GANDALF was an acronym made up from Google, Apple, Netflix, DBS, Amazon LinkedIn and Facebook. But we had a hit a roadblock. The silo between our business teams and tech teams was creating a blame culture. Whenever there was a systems issue the business team finger pointed to the tech team. The CIO would get a stream of escalation emails. The IT team complained that they did not have enough budget to cover stability, security and end of life investments while the business teams accused the tech teams of sandbagging budget to fulfil their own agenda. The relationship between the two departments was not conducive to achieving our digital ambition. So we approached some our friends in a couple of the GANDALF companies and asked how they dealt with the silo between tech and business. They all looked at us as though we were stupid. They told us “Tech is business and the business is tech”.  There is no silo. But you do need leaders who can span both disciplines.”  

This was a lightbulb moment for us. We realised we needed to fuse out business and tech teams together. We looked at how tech companies were organised. We studied the Spotify model that had been embraced by fellow financial companies like ING. Eventually we landed on something that we called a Platform Operating Model (POM). 

  1. We grouped our applications, associated talent and budget into logical groups aligned to business, support and enterprise functions. 
  2. We appointed joint leadership – one from tech  and one from the business.  This “2 in a box” structure was a proxy for ambidextrous leadership
  3. Each platform had a joint (across business and tech) strategy, budget and KPIs

We took 6 months to design the details and implement.  But when we implemented the new model in early 2018, the finger pointing between business and tech stopped literally overnight.

There was immediate recognition that in a digital business keeping the systems up and running is a business responsibility not something that can be mentally outsourced to the tech leader. At business reviews our CEO started to ask business leaders to explain the tech elements of the joint strategy and the tech leader the business components.  Platforms were given a single performance rating at the end of the year.

Other challenges remained and took time to tune and resolve. But this single change to the operating model had put us on track to become a GANDALF company.

Leadership Lessons

If your tech and business teams are at odds you will never become a digital company

Develop ambidextrous talent but you may have to develop intermediate steps such as 2 on a box to get there.

Address corporate process such as budgets and performance management to reinforce alignment between the IT and business functions

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T Shaped Transformations

I often hear alpha type leaders tell me with pride that they intend to fire those that do not get on board with their plans for transformation. This is not an act of courage and decisiveness but rather a failure in leadership. Very few people come to work with the intent to do poor work or sabotage change efforts. When there is resistance there is a reason. There are real and perceived barriers preventing people embracing the transformation. Barriers that have been put, or left, in place by the same leaders who are so eager to fire the change laggards. It is an essential leadership responsibility to create the right environment that dissolves resistance and nurtures enthusiasm. Sustainable transformations require everyone to feel they are equipped, enabled and empowered. At the same time the program needs to deliver results. This is not an easy leadership task – harder than simply firing the people “getting in the way”.  How to make this happen? Design a program that is T-shaped.

A T shaped transformation has 2 components…

The first is the broad top section of the T. In a T-shaped approach, change programs are designed to engage the breadth of the organisation. It is important to lower the barriers to entry, reward participation over outcome and develop a feeling of contribution to the overall results. At DBS when we started our decade long transformation we created a program of improvement workshops called Process Improvement Events or PIEs. No pre-requisites were required. Training was given as part of the workshop, people were empowered to make change and ideas were implemented immediately. We created an iconic success measure for the program – the customer hour – a measure of customer waiting time whether it be in branches, at ATMs or receiving new credit cards. It was something everyone could contribute to and was a fantastic way of communicating progress. Rather than auditing the outcomes we recognised people for having the courage to participate. Over 2 years we ran 200 workshops reducing overall waiting times by 250 million hours per year – if you go back in time 250 million hours you end up in the stone age – it was a lot of time. Our customers noticed the difference and we went from the bottom of the customer satisfaction scores to the top in the space of 12 months. 

The second part is to go deep. Leaders choose 5 – 10 areas that are most critical and apply management oversight and investment. At DBS we identified the Big 6 – the six most urgent areas for us to fix our customer service. We put dedicated teams in place, top level governance and investment.

This two pronged approach yielded results. We improved the service in each of the Big 6 focus areas. A couple of years after starting we went back and reviewed each of the PIEs to ascertain how many had actually delivered results. We were delighted to find that around 75% had had a significant impact on reducing waiting times. More importantly we had unlocked the passion of the company and we now had an army of people enthusiastic about, and capable of, driving change. We had built the foundation of the success that would follow. The T-shaped approach became the template for all the subsequent transformation programs we ran.  And we never fired anyone for not getting on board.

Leadership Lessons

If you experience resistance from some of your people the chances are that you have not created the right environment.

For a sustained transformation you will need to engage everyone and unlock their passion through a program designed to both engage and deliver results.

Define success and communicate progress by creating iconic measures that everyone can contribute to.

The System Always Wins.

“When a great person takes on a bad system the system always wins”. Frank Voehl. The internal systems and processes of legacy companies are designed to protect the status quo and when left unchanged, present insurmountable barriers to any significant and sustainable transformation. The way investment decisions are made, the way people are hired and rewarded, how resources are allocated even where people physically sit (remember that?) all promote inertia. Since the system always wins, leaders of transformation need to change the system rather than blame the people.  But why is it so hard?

Back in the sixteen century Nicolaus Copernicus challenged the universally held belief that the Earth was the centre of the universe by claiming the Earth, in fact, revolved around the Sun. His ideas were met with ridicule and accusations of blasphemy and only after his death were his ideas accepted. With the benefit of hindsight it is easy to snigger at the ignorance of the people of the time. However it is very difficult to convince anyone that their deeply ingrained beliefs are incorrect. Yet it is often these beliefs that hold us back. I am not sure if we would not have put a man on the moon had we not accepted Copernicus’s heliocentric view.

As a transformation leader it was my job to challenge traditional and ingrained corporate processes that were getting in the way. Over the past decade I have suggested that: 

  • there are better ways other than interviews to select the best talent
  • personal objectives and KPIs drive the wrong behaviour and need to be supplemented with team targets 
  • job grades create unnecessary hierarchies and should be abolished
  • we should not sit together by department but by how the work gets done 
  • we should align the organisation to optimise for customer experience rather than the convenience of the bosses
  • we do not need an annual budget and planning process

Every time I raised these suggestions I was greeted in a way that Copernicus would have recognised. This was naive on my part (I should have learnt from Copernicus who was apparently quite cautious). I learnt that challenging such beliefs head on and getting frustrated was not sensible. It did not yield results and I realised that I needed to change my approach. After all, I also held ingrained beliefs that would be a challenge for anyone else to alter. So over many iterations with the help from my team, we developed a new approach. One that was less confrontational and when adopted, yielded better outcomes. With the exception of one (I will leave you to guess) we were able to at least partially implement the suggestions referred to above. Here are the some of the components of the approach we developed using the hiring process as an example.

Be clear about the purpose and success criteria of the corporate process and list assumptions.  

It is easy to forget the intent of a deeply ingrained process and we seldom check to see if the approach is working. For example the desired outcome of the hiring process is to attract and hire the very best people for the job. There is an assumption that the interview process is the best available way to select the best people.

Determine how to measure the effectiveness of the process

In the case of hiring we looked at the performance measures of new hires (although this in turn can be questioned)

Run an alternative approach 

We designed a hackathon event where IT candidates were invited to join internal developers in creating solutions to real problems over a 48 hour time frame where we could observe the candidates in action as well as assessing their technical capability first hand.

Leadership Lessons

Protect your Copernicuses.  Every company has people with radical ideas. If you do not see them you have not created an environment of psychological safety.  Search them out and encourage their suggestions.

Be open to try new things.  As a leader never dismiss ideas including the radical ones.  Help to unpack suggestions to their outcomes and assumptions. Then experiment with an open mind.

Measure.  Be clear how you are going to measure success.  If you cannot measure you cannot know whether the incumbent process is superior to the challenger.