Change Management - The WHOLE Equation

Executive Summary

Cultivating corporate culture can be part of your competitive strategy to increase shareholder value. It provides you with a degree of invisibility against your rivals, and allows your bank to adapt with flexibility to new conditions in such a way you will catch the competition unaware. Yet all too often, while senior executives will manage change by addressing strategic policy and process issues, they pass off the third part of the equation – the people – to Human Resources. While HR does have a key role to play, particularly in these days of turbulence and increasing corporate governance, it is a support role. Leadership for cultivating organizational culture, values and reputation in its markets and with all stakeholders (staff, shareholders, customers, suppliers, partners and regulatory and official bodies) rests with the CEO.

In transient Hong Kong, CEO executive development seminars and industry magazines evidence a strong focus on "hard issues" to the detriment of "soft issues." Also locally, recent trends in employment opportunities reflect a strong demand for sales skills which bring in quick and readily tangible results. Overseas, posts for senior executives with strong change management skills are common and reflect long term planning. In a time of huge industry consolidation with mergers, acquisitions and downsizing the norm, this variance gives cause for concern.

Research shows that the majority of change efforts fail and in Asia, the recent Hewitt Asia Pacific survey¹ found that companies in the region have much to do if they want to promote a high performance workplace culture. In this article which reinforces the role of the CEO as a leader of the workforce, a skills gap in the boardroom is identified with valuable pointers given on executive sponsorship. The author headed a major culture change programme for a premier global bank, under the leadership of the local CEO.

Managing organisational culture is the foremost challenge of any C.E.O. In a highly competitive environment where financial institutions are seeking to retain their existing customer base, obtain more wallet share from existing customers and attract customers away from the competition, a happy and productive workforce is key to improving customer service and strengthening organizational performance.

However, as financial institutions are re-inventing themselves to meet evolving customer needs and new market requirements, fulfilling the new vision all too often involves mergers and acquisitions, pay-freezes, redundancies and outsourcing. This drives more policy and process changes down the line which in turn require of your workforce a new way of thinking and doing things – in effect, a shift in your current corporate culture. The challenge to implement change is compounded when you are dealing with an inflexible conservative culture, or merging separate companies where staff from the different entities will have their own distinct way of doing things. A clash will ensue, causing energy to be directed inwards to resolve internal conflicts, rather than outwards to meet customer needs.

So much change can trigger shock, anger and denial in the workforce with energies channeled to unproductive activities (see Diagram 1). This makes the ability to navigate the emotional challenge of organizational transformation a key skill requirement for executives.

Diagram 1: The Change Curve - A Predictable Process

Fortunately, peoples' responses to change are reasonably predictable. The depth of the curve (amount of energy expended) and the length of the curve (the timeline) are influenced directly by the interventions of management.

Navigating the emotional dynamics of change is a skill which is in short supply. In transient Hong Kong there is the temptation for executives to focus on short-term activities. HR and Recruitment consultancy firms report that there is little awareness or understanding of the need to manage corporate culture change during major industry upheaval with the focus instead on strengthening the sales force to bring in quick results. This contrasts with the international picture where demand for senior executives with change management skills is a norm, reflecting long term planning and value for relevant skills in a time of major turbulence.

Also, busy executives tend to be more quantitative in their orientation. In male-dominated boardrooms, while most will eagerly roll-up their shirt sleeves to devise new strategic policies and processes, executives can get distinctly uncomfortable discussing emotions and behaviours. "Soft" issues are hastily passed to Human Resources. Local CEO executive development events and industry magazines reflect this trend with Change Management topics focusing heavily on policy and process issues in line with customer "wants" as opposed to "needs".

Managing culture change is not a soft issue to manage - by any measure. Any seasoned Change Agent will testify that it is an uphill struggle which requires the tenacity of a pit bull terrier and the patience of a buddist monk. The experiences are all too common. People you relied on as advisors have become subversive and protect their own turf, self-interest triumphing over organizational interest. Others have donned blinkers with the hope that if they refuse to acknowledge change they just might make it go away. Previously loyal champions have abandoned the cause, resulting in a talent drain. Relations are strained with soldiers digging deep into their respective trenches.

Chinese people say that where there is crisis, there is opportunity. Change Agents quickly identify the opportunities and thrive on the challenges. They have a particularly strong orientation to change, innovation and creativity and will naturally have great tenacity and resilience. KAI² is an excellent tool for helping you measure an individual's orientation to change and is a valuable resource for building your team. It is used extensively in the US, UK and several other countries for planning major changes that require considerable re-thinking of how business is done.

Ideally, the CEO as executive sponsor will be a Change Agent. The CEO will have the authority to speak on behalf of the leadership team and should be accessible to the programme head. They will be responsible for providing guidance and clarity at key points in the programme and have the ability to remove potential roadblocks. The programme head has a time-intensive role and is your implementation champion. They must be a Change Agent with proven skills in navigating the organization to quickly access needed resources. They will have excellent project management skills and have the support and confidence of the executive sponsor.

While identified Change Agents will have specific responsibilities to drive policy, processes and people on a large scale, embracing change is a collective and organization-wide responsibility. The reward is to be reaped when staff all over the corporation take up the baton and run with it!

HR has a key role to play in supporting the implementation of a culture change programme, ensuring that HR policy and processes align the workforce with corporate strategy via recruitment, job descriptions, core competencies and behaviours and performanc-related pay. There will be a big demand for Training support to reinforce new knowledge, skills and attitudes. The traditional reactive HR function will have mostly an administrative role and will not be a facilitator of change. In turbulent times, the role of HR must expand to that of strategic partner, champion of the workforce and facilitator of change. Also, boundaries between top management and general staff need to come down with upward communication encouraged and valued. For a large workforce, electronic forums work best and strong support from the top team, through timely and transparent responses and appropriate policy changes, will encourage staff motivation and ownership in the business.

Talented individuals with a strong orientation to change and innovation need to be attracted to your financial institution so that they can champion the cause for you. Attraction-Selection-Attrition theory states that people are attracted to a corporation if the values it espouses are in line with their own. If new recruits find, over time, that the prevailing culture is not supportive of the espoused values, they will leave because personal values are being undermined or they will stay and under-perform. HR needs to support the CEO in managing culture change to not only attract – but retain and motivate talent. Diversity must be encouraged also as diversity brings with it optimal problem-solving skills.

Since the Asian crisis in the late 1990’s, increasing corporate governance is demanding that promotions and senior succession planning decisions are based on merit rather than the "old boys’ network" with the ability to achieve business results valued over shoe shining and maintaining the status quo. Given the spate of corporate scandals in the US in 2002, the conduct and accountability of senior executives is coming more and more under the microscope with individual liability now a given. HR needs to keep abreast of all these issues to support the change process, and provide strategic partnership to top executives.

Research shows that most change efforts are derailed by resistance. The 2000 Prosci Change Management study³ combined findings over a two year period from 254 organisations from 40 countries and 6 continents. The report states that the most noted obstacle to the change effort was "management behaviours not supportive of the change". The implication is that management protected the status quo. Overwhelmingly in the success stories participants cited executive sponsorship participation as the single greatest contributor to the success of their change management programme.

In one premier global bank where a major corporate culture management programme was implemented for 15,000+ local staff with strong leadership from the local CEO, fundamental changes were made to how the workforce did business.

After a large-scale event to raise awareness to environmental changes and reinforce key corporate values, the 10 top executives gathered with the programme head to develop workplace learning tools which would help staff transfer Event learning to the business. Over time, they reported many line successes from teams including significant reductions in the amount of overtime required, an increase in the number of new accounts opened, increases in customer satisfaction, increased product knowledge resulting in a significant - reduction in the number of referrals to supervisors (improving service to branches and other internal customers) - and more efficient workflows. Also, to follow up on live Q&A sessions between top management and staff, the change team created a website enabling staff to ask questions directly and get a response back from the top team. The website has been a huge success and has become a very important communication channel

The executive sponsor, understanding that staff are most motivated when they understand how they can contribute in their own role to achieving corporate goals, took ownership to design a bi-lingual booklet enabling even the most junior staff to identify how they could contribute. Everyone got a personal copy. In 4Q 2002, the CEO launched a bank-wide Employee Attitude Survey which was managed by external consultants. The results are extremely successful and show a significant improvement in overall scores, when compared with the previous study conducted in 2000, just before the culture change programme was implemented.

This major feat was achieved in a fiercely challenging banking environment where - industry-wide – redundancies, pay freezes, outsourcing, cost-cutting and an increasing workload all became the norm in the face of deregulation and other major environmental challenges. CEO support for a bankwide programme to manage corporate culture, a carefully selected change team, a good strategy, leadership and ownership at all levels, workplace action planning, and personal responsibility for results are some of the variables which made success with this logistical and emotional feat a reality.

Maturing markets mean that we will see even more industry consolidation as financial institutions and other organizations seek to maximize on synergies and save costs, so the ability to negotiate the people side of change management will continue to have increasing value. The CEO has a very important strategic role and has the power and influence to drive a culture change programme through to success and results.

Below are some pointers on executive sponsorship.

• The CEO must be the visible sponsor of the programme with other key executives taking up a supporting role to drive the programme in the different functional areas; a Steering Committee of business heads should oversee the strategic direction and refine it as the environment changes.
• Your implementation champion must have drive, passion and tenacity with the ability to communicate with all levels, having a strong orientation towards change and innovation. Discretion will be required for this sensitive post.
• Your implementation champion must be positioned to deliver, reporting into the executive sponsor.
• Your programme team must be diverse, to maximize problem-solving ability. Again, the KAI tool is helpful. Size doesn’t matter - a small team with the right make-up can be a major catalyst for change.
• Culture is the values and constants which underpin how we do things around here. Have your current culture and desired culture measured to enable you to monitor progress. Measurement tools abound in the marketplace.
• Implement your programme organization-wide to align all staff with strategy and create a common language to discuss change issues, leaving workplace action planning open ended to allow staff the flexibility to address local issues.
• Communicate your support for the programme regularly, using internal bulletins and magazines to reinforce the principles and reward the right behaviours.
• You want your Change Agents to deliver business results, not win popularity contests; those using "smoke and mirrors" tactics to deflect from subversive activities should be hung out to dry if they do so. Personal responsibility

Investing in managing your corporate culture transformation is not optional – it’s a matter of survival. Whether you are responding to current challenges or paving the way for the future, your ability to balance the strategic equation – policy, processes and people – and lead your workforce will profoundly affect your market position tomorrow. Given that policy and process changes require a shift in your prevailing culture as the workforce incorporates a new way of thinking, managing this shift is critical to maximizing your ability to deliver on strategic objectives. It impacts execution and is a key driver to strengthening organizational performance and enhancing shareholder value.

In Hong Kong, consolidation will continue in the financial industry putting pressure on the workforce to find new ways of doing things so the ability to navigate the emotional dynamics of culture change will become an increasingly important executive skill. Your ability to deliver on your promises to shareholders, customers and your workforce will be determined by the degree of ownership you take for corporate culture management. Ignore the issue, or delegate it to HR, and you run the risk of losing out to more savvy business competitors.

Your entire workforce must have a common vision and language, with your top team espousing the desired behaviours, championing the holistic culture change programme in the workplace. You will need Change Agents to drive the vision.

Many will rise to the challenge and work with passion, rising beyond your wildest expectations because it is a myth that people are resistant to change per se. Change is natural and a fact of life and we each manage it in our everyday lives. Rather, people are resistant to change which is imposed on them and change which they perceive will cause them to lose out.

Your leadership can give out the right messages and align your workforce with business goals, channelling energies outwards to customers.

It can be done. It has been done. And you can do it!

^{1. High Performance Culture in Asia, Hewitt Quarterly Asia Pacific Volume 2 Issue 3}

Copyright Gabrielle O'Donovan