How a Unique Culture Proposition Became a USP

It started simply enough. On a Tuesday in June 2007, Chris Bayliss, BNZ’s general

manager for retail banking was visiting the bank’s city centre store in Christchurch.

(Within BNZ’s retail-oriented culture, branch banks are known as “stores”.) It was just

after nine in the morning and the bank wasn’t open yet, but a long line of customers

was already forming on the sidewalk. On most days, BNZ’s stores opened at 9 am, but

today was Tuesday, and on Tuesdays and Wednesdays, staff training sessions kept the

doors locked until 9.30 – hence the waiting customers. At BNZ, corporate policy dictated

opening hours, and all of the bank’s 180 stores, from Invercargill in the south to Kaitaia in

the north, adhered to the same schedule.

Time is moreIf you’re a banker, time is money, quite literally: the longer the term of a loan or deposit, the greater the interest due. But for the Bank of New Zealand (BNZ), the 148-year old subsidiary of National Australia Bank, time is more than just money; it’s also a potent symbol of trust and empowerment, and a testament to the power of management innovation. Gary Hamel and Amy Blitz report on an impromptu experiment at BNZ.

In this issueTime is more than money Gary Hamel and Amy Blitz report on an impromptu experiment at the Bank of New Zealand. > p1

Going underground Thanks to a reality TV programme, Stephen Martin, a CEO, went undercover to discover the corporate truth. He emerged to tell Julian Birkinshaw and Stuart Crainer the story. > p6

How a Unique Culture Proposition became a USP Zurich Insurance has created a Unique Culture Proposition which may well be its USP. Adam Kingl tells the story. > p10

The David and Elaine Potter Charitable Foundation

Issue 13 | October 2009Labnotes

Insights, ideas and inspiration from MLab

Management 2.0

www.managementlab.org

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than money

The corruption of management Management needs to be reinvented if it is to take its rightful place as a profession and as a means of delivering economic recovery. Julian Birkinshaw tells how. > p13

Why good companies go bad Mortality is an often overlooked fact of corporate life. But what are the warning signs? Gary Hamel examines why good companies hit the buffers. > p14

Why tortoises are faster than hares In the new world order, say Jeremy Hope and Franz Röösli, it may well be preferable – and more profitable – to be a tortoise rather than a hare. > p17

Out and about with MLab Recent award and forthcoming MLab events. > p20

www.london.edu


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Accelerating the evolution of management

Time is more than money continued...

As the line of impatient customers continued to grow, Chris became concerned. He turned

to Sue Eden, the store manager, and asked, “If you owned this store, would you open earlier

and reschedule the training for another time?” “Of course,” replied Sue, “look at the queue

outside!” Chris frowned. Here was a store manager eager to serve her customers, and

bank policy was tripping her up. “OK then,” Chris challenged, “you choose when to open

and close – but don’t expect any extra money from me for staffing and training.” The store

manager readily agreed, and Chris walked out of the store scarcely aware that he had just

launched a mini-revolution in workplace freedom.

Viral openingWithin days, news of the unprecedented policy break had started to spread across BNZ’s

store network. “There was no memo, and no policy mandating this change,” recalls Chris,

“the new policy spread by verbal virus.” Soon Chris was fielding requests from managers

throughout New Zealand, all of whom, it seemed, were eager for the same prerogatives that

had just been granted to the Christchurch store. With emails flooding in, Chris reached out

to his colleague, Blair Vernon, general manager of marketing.

Within the bank, opening hours were considered a

“brand and customer experience issue,” and that

was Blair’s bailiwick. As a teenager, Blair had

flipped burgers at McDonald’s and knew that the

company let its franchisees decide when to open

and close. The logic for this flexibility made sense to

Blair, since the optimal trading hours for a business

could well be different depending on the locale and

the season. Reckoning that what worked for McDonald’s

would probably work for BNZ as well, Blair quickly agreed that

the petitioners should be allowed to set their own hours.

Robyn Casey, a store manager in rural Leeston, 25 miles southwest of

Christchurch, was one of the first to take advantage of the unexpected

policy shift – she extended her store’s closing time from 4.30 pm to 5. The

enthusiastic response of her customers was captured in a story on the front

page of The Ellsmere Echo: “Leeston Bank Leads the Way!” In Takapuna,

a tiny Auckland suburb, BNZ became the first bank to open on Sunday

mornings. This allowed the local store to serve the thousands of customers

who flocked in to the weekly farmers’ market. In South Island ski towns, store

managers opted to stay open until late in the evening, for the benefit of weary

skiers coming in off the slopes. Within city centres, many store managers

chose to synchronise their schedules with nearby retailers, rather than to keep

bankers’ hours. Within 6 months, nearly 95 per cent of BNZ’s 180 stores had

altered their opening hours in some way.

Not so fast...While store managers were quick to advantage of their new found freedom, there were many

at head office who fretted about the loss of control. Chris and Blair soon found themselves

fighting a rearguard action with head office staff who regarded the policy change as rushed,

if not reckless. Typically, a policy change of this magnitude would have gone through a

detailed risk assessment that gave every function the chance to weigh in. Chris and Blair did

their best to defend their hurried decision. They hadn’t set out to bypass the usual decision-

making process, but had simply been overwhelmed by the horde of frontline managers who

were eager to extend the scope of their prerogatives.

“ There was no memo and no policy mandating this change The new policy spread by verbal virus.”

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Within the bank’s HR function, (known internally as the “People and Culture” unit), there

was a concern that the New Zealand bankers union, Finsec, would make a “ruckus” and

object to any changes that extended the work day or compelled employees to come in on

weekends. Others worried that store managers might choose to cut opening hours – a move

that would jeopardise customer satisfaction and the brand. BNZ’s risk management experts

had their own issues. There were detailed policies that governed how a store was supposed

to be opened (at least two employees had to be present). Not only that, cash pick-ups from

armored vans had to be scheduled at precise times. How, then, could managers be allowed

to open up “any old time they felt like it?” IT was another sticking point. The bank’s central

IT department would often schedule system upgrades and maintenance during times when

the stores were closed. What would happen if a store opened at an odd hour and the IT

system was down?

Then there was corporate marketing. Charged with protecting the brand, senior staffers

worried that a hodge-podge of opening times might damage the bank’s carefully-built

reputation for consistency and reliability. And what about all those hand-lettered signs that

were being used by the stores to announce new opening hours? Most of them looked tacky.

When confronting the doubters, Blair and Chris would patiently

remind them of McDonald’s policy on store hours. You could have

a great brand and still be flexible. Some of the concerns, though,

were well-grounded, and led to policy adjustments. A software

template was developed that allowed store managers to print out a

simple sign displaying local opening hours. Team members were

reminded they still had to abide by the bank’s security policies

and couldn’t do anything that would jeopardise employee safety.

Furthermore, store managers were expected to consult with team

members before making any changes to staff schedules – new

opening hours required the agreement of every store employee. This

caveat also helped to neutralise objections from BNZ’s union. How

could it demure when the new work schedules had been set by the

employees themselves, rather than imposed from above.

In Chris’ view, “80 per cent of the resistance at head office

came from the fear of losing control and only 20 per cent

was about genuine policy issues.” Adds Blair, “What everyone

learned was that when you treat people like adults, they act

like adults.”

A day at the beach...Though he never really feared an operational Armageddon, Chris acknowledges that the

recent changes are irreversible. Says he, “The empowerment horse is really out of the

stable now.” Store managers understand that the new policy was the product of an ad-lib

experiment and a grass roots movement, rather than a group-level task force and carefully

scripted roll-out. This fact, as well as the oft-expressed enthusiasm of Chris and Blair for a

bottom-up approach to innovation, has encouraged store teams to take the initiative in testing

other off-beat ideas. One of the zaniest so far is a “trailer” bank. Explains Blair: “It’s a bank

that’s kind of like an ice cream cart. It’s been shrunken so it can be pulled behind a vehicle.

It’s the next step in flexible opening hours – a mobile bank.” While the concept had been in

development for several months, a local store caused a splash when they towed the trailer

bank onto a beach during New Year’s Day celebrations. Clad in BNZ t-shirts, local staffers

blew up balloons. Soon children were circling with their parents in tow. As a crowd gathered,

store employees fired up a barbecue and were soon passing out sausages and chatting with

potential customers about the latest BNZ products.


“ What everyone learned was that when you treat people like adults, they act like adults.”

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While People and Culture worried that some might think the bank was exploiting its

employees by making them work on New Years Day, or breaching Health and Safety

regulations by cooking sausages, Chris and Blair were more sanguine. Their view of the

bank-on-the-beach: A great example of how a little bit of freedom allows a few charged-up

employees to connect with customers in a new way and have a bit of fun. Says Chris, “If we’d

told them to do this, it never would have happened. But it was their idea.” And no one had

even bothered to ask permission.

Why it works...Chris and Blair know that executives often oppose attempts to cede power to the front lines.

After all, managers get paid to monitor and control. If there’s less controlling to do, fewer

supervisors will be required. For a manager in head office, decentralisation is a job threat.

Of course savvy managers will never admit to being driven by such parochial instincts,

so instead they’ll throw up a wall of practical objections: Standards will slip; discipline

will suffer; time will get wasted; customers will be vexed; and alignment will splinter. The

unstated assumption is that only head office can keep things in check. Control must be

imposed; it can’t be “baked into the system.”

So how has BNZ been able to expand the scope of employee freedom, and continue to run

a disciplined and profitable business?

The answer starts with incentives. A typical BNZ store has four to seven team members: the

store manager, a few tellers and a couple of salespeople, aka “advisors.” A large store might

have as many as twenty-five staff members. Each store manager receives a salary plus a

bonus for meeting the store’s financial goals – usually 10 per cent of base pay. In addition,

the manager receives 10 per cent of any profits earned in excess of the plan. Advisors

receive bonuses based on the products they sell, such as credit cards and life insurance

policies. Store employees also participate in a team-based incentive scheme that is linked to

sales performance and customer satisfaction metrics.

In defending the move to flexible hours, Chris often argued that “there’s nothing more

frustrating for staff than being open when the town is dead, or closed when it’s packed.” In

reality, though, team members are only going to be frustrated if they’re incentivised to bring

more customers into the store and serve them better once they’re there – and at BNZ, those

incentives are in place.

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The second component of BNZ’s decentralised control system is data – lots of it. Says Blair,

“If you empower people but don’t give them information, they just fumble in the dark.” To

address this, an initiative was launched in 2004 that gave every store employee a clear

window into the financial performance of the bank. Today, daily P&L statements go out to

each store providing detailed information on costs, revenues, and profits – all of it broken

down by product and service.

Nothing remarkable about this, except that in most banks branch managers don’t get a real

P&L. Instead they get a set of synthetic management accounts that provide only a rough

indication of their store’s profitability – and they seldom get detailed information on the

performance of other branches. These contrived performance measures allow head

office executives to tweak incentive structures at will and exhort even high performing

branches to do better.

By contrast, BNZ provides its store managers with a high definition picture of branch

profitability. Remarkably, store managers even know the bank’s wholesale cost of funds, a

number that bears heavily on local P&Ls. Having been richly endowed with information,

store managers are given lots of latitude in making business decisions – and are held

accountable for results. For example, a store manager might choose to discount a profitable

loan to win a new customer – but that loan would stay on the store’s books, contributing

profits or losses, until it was paid off.

Here again, the move to share more information was initially resisted – by head office folks.

While key finance staff were instrumental in helping build the transparent P&Ls, others were

concerned that lower level employees might find the data too complex, or that a disgruntled

employee might share sensitive information with a competitor.

The first concern was addressed with a comprehensive training programme

that familiarised every team member with the new metrics. As for the danger of

data leakage, experience with the new reporting system has convinced even the

doubters that the benefits of greater transparency outweigh the downside risks.

And what about deciding when to open? “It’s amazing,” says Blair. “If you

get head office out of the way, and give people accurate data about their

performance, they quickly figure out that its good to be open when there’s

money to be made!”

At BNZ, store employees have the incentives, the data, and the freedom that are

typical of a small business owner. As a result, most regard themselves as more

than mere clock-punchers; they’re folks who have a real stake in a real business

– and they care about it and run it as if it was their own.

Blair summarises the changes at BNZ with a telling anecdote. “I was walking by

one of our stores on a Sunday morning with my kids, and my son said, “Dad,

the doors on the bank are open.” And I thought, crap, someone forget to close

the doors. But then I looked in, and saw that the entire store was open. No

one is forced to roster on Sunday, but team members had come in from other

branches in order to swap their hours. One mom was there working on Sunday

because she wanted to take a day off on Wednesday. And it hit me: no one at

head office even knows when the stores are open.”

Adds Chris, “The freedom to open when you want may not be the biggest thing

we’ve done, but it’s the most symbolic in terms of telling our people, ‘we trust

you, and we’re serious about empowering you.’”

Gary Hamel is the co-founder of MLab. His most recent book is The Future of

Management. Amy Blitz is strategy and change leader at the IBM Institute

for Business Value.

NEXT ARTICLE: GOING UNDERGROUND

“ The freedom to open when you want may not be the biggest thing we’ve done, but it’s the most symbolic.”

6 | Labnotes

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Executive offices tend to be distanced from the frontline of the organisation – no matter what the

company’s business. Indeed, in most office tower blocks, the CEO’s office can be found on the

top floor, far from the nitty gritty of actually making things or delivering a service.

But, this begs a simple question: how do business leaders stay in touch with the day-to-day

reality of what the business actually makes or delivers? Most leaders agree that this is important.

Ideas such as Management By Walking Around and scrapping the executive dining room became

popular in the 1980s, as leaders sought to get closer to the action. But experience shows that

these sorts of policies have limited value – they require a lot of work and can be deceptive.

You may have an open door and spend every Tuesday morning walking the factory floor, but

people tend to behave differently when they know there is a boss in the vicinity. Its just another

manifestation of the Hawthorne Principle – that people act differently, and typically appear more

motivated, when they know they are being observed. Keeping tabs on reality is harder the higher

you rise up the corporate hierarchy.

As CEO of the Clugston Group, these thoughts were on the radar of Stephen Martin. Armed

with an MBA from London Business School and extensive experience, he knew the business

inside out. Previously he had turned round an ailing construction company. He arrived at the

£155 million turnover, Clugston, in December 2006. With over 700 employees and an equal

number of sub-contractors and suppliers, Clugston works in construction, waste energy, property

development, has a specialist logistics arm handling the distribution of steel, a tanker fleet, and a

commercial vehicle maintenance branch.

“I came in as the new broom. During the first week I was walking around the building just to meet

people and was told that people would think there was something wrong if I continued doing

that. It was very much a them-and-us sort of culture. I was at one end of the building protected

to stop anyone getting anywhere near me,” Stephen Martin recalls. “There’s lots of things I’ve

done already in the time I’ve been here; I’ve changed the structure, I’ve changed the strategy, I’ve

changed even things like the logo and I’ve also pushed our promotion and publicity.”

In productionIt was this final element which pushed the Clugston CEO into the unlikely arms of a TV production

company. An article about Clugston appeared in the trade journal, Construction News. At the

same time, a production team from Channel Four were trying to find a construction company

to do a programme called Undercover Boss. The programme built on an already successful

formula, Secret Millionaire, where millionaires go undercover and seek out people who would

really benefit from their financial backing.

Channel Four was in negotiations with the biggest construction companies in the UK, but

couldn’t get commitment to go ahead from the CEOs. Then the producer, Jenny Crowther, read

the article about Clugston and got in touch with Stephen Martin. “I wanted to be clear upfront

that we weren’t interested in doing this for the greater good. We needed to raise our profile and

win work and also, I wanted to learn as much as I could about the company; and this seemed a

fantastic way of doing it,” Martin recalls. At first he suggested a number of his colleagues as likely

candidates to go undercover. He reasoned that two weeks out of his busy schedule would be

unworkable. Channel Four thought otherwise and he was recruited.

Going underground What really happens in your organisation? What does it and the people who run it look like from the factory floor? Few executives ever find out. Thanks to an innovative new reality TV programme, Stephen Martin, a CEO, went undercover to discover the corporate truth. He emerged to tell Julian Birkinshaw and Stuart Crainer the story.

Stephen Martin – CEO of the Clugston Group

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“They said it would be an opportunity for a boss who’s removed from the action to go back

and see how tough it is at the coalface. They wanted to see the personal, emotional stories and

how I would react to dealing with people who were losing their jobs, had a gripe against the

company or didn’t like their work. They thought that would make good TV, which I appreciated,

but I genuinely wanted to find out how people did feel about the company, what they really did

think and what were the things I didn’t know about, because I’m too protected.”

The one flaw in this plan was that Martin was actually a regular visitor at most of the company’s

sites. To get round this, Channel Four sent in a research team which spent two months going

around all of Clugston’s construction sites, meeting project managers, the workforce, engineers,

surveyors, and administrators. People in the know signed confidentiality agreements and Martin

was unsure where he was going to work until he was picked up every morning.

“People were told it was a programme about somebody who

worked in an office, coming to see what it’s like working on

construction sites, but they didn’t know who it was. I was worried

that, with the TV cameras in their faces, people wouldn’t act

normally. There was one guy in particular who was a bricklayer

and so friendly and down to earth that I suspected he knew who I

was. Then the director told me that this was the way he behaved

with everybody and had been during two weeks of research.”

For his period undercover, Martin wasn’t allowed a mobile phone

or, obviously enough, any business cards. He was given a daily

allowance, as he wasn’t allowed a wallet, and billeted in a cheap

hotel. “As a chief executive, you have to make decisions, you’re

giving presentations to shareholders, you’re leading strategy

meetings and you’ve got your suit and tie - you’re in charge.”

Martin reflects. “I had to go out on site and not be in charge, take

instructions, from 17-year old apprentices or from 20-year old

general operatives who would tell me that you’ve got to do this

and you’ve got to do that. And when I saw things that I wasn’t

quite sure and happy about, I couldn’t say, well, we need to do

that, because I had to stay in the role.”

During two weeks of hard labour, Stephen Martin escaped detection as the company’s

CEO even though one joiner did think he bore a striking resemblance to the boss. Some

suspected he was actually filming the Secret Millionaire programme until he pointed out that a

construction company was an unlikely outlet for a wealthy benefactor.

Undercover lessonsBut what did Stephen Martin learn as an undercover CEO?

The team’s the thing: “The camaraderie on all sites I visited was just absolutely amazing. I sit

in boardrooms in health and safety management meetings and you wonder, are our people as

committed, dedicated and as passionate about it as we are sitting around this table? And at

the site I found out, yes, they were. I’ve seen lots of examples of everybody looking out for each

other. I was lifting lengths of timber, and after five minutes a young guy of about 18 came over

to me and said, you have to stop doing that, you’re lifting that all wrong, you need to bend your

knees and lift like that. They just look out for each other. Everybody took advice and guidance

from each other, it didn’t matter what age they were, from a 17- year old apprentice to a 64-

year old about to retire. If somebody had a better way of doing something they would describe

and explain it and help, support and question. You don’t get that in an office. The teamwork

was amazing to see firsthand.”

Going underground continued...

“ The camaraderie on all sites was just absolutely amazing.”

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What gets read: The second lesson for Stephen Martin concerned communication. Working

on Clugston sites he quickly realised that no-one read the regular stream of emails, bulletins,

and newsletters the company used to communicate. “They don’t read it on site, they haven’t

got time. They just want to know, have they got a job, are they getting paid, what’s their bonus,

when’s the next tea break?”

Being up front: As the Clugston CEO was being filmed the company was laying off some of

its people. Stephen Martin was surprised at the source of the workforce’s frustration and

annoyance. “I knew that there was going to be a lot of hostility, upset and anger, but I found

it wasn’t directed at the company, it was directed at the lack of communication. Everybody

knows it’s tough out there. They see the news, they read the papers, they know what’s going

on. What they wanted was honesty and communication and being straight with them.”

It really is about people: For Stephen Martin the experience of working on the frontline was

a re-affirmation that every business is fundamentally a people business. “I’d think, why do

people want to work outside in all weathers instead of working in an environment where it’s

safe and protected? The reason is they love it, it’s what they want to do. Everyone’s different.

They’ve all got different skills and capabilities; things they like doing and things they don’t like

doing. I was shocked to find that some of our younger people were effectively going to be laid

off after a job finished because we didn’t have the next job for them to go to. It seemed such a

waste to invest all that time, training and effort, and then to let them go because there’s a delay

in a site starting.”

Preserving knowledge: How can you ensure that the knowledge of one generation of workers

is captured and passed down to the next? With knowledge management high on the corporate

agenda this is a surprisingly neglected area. Martin encountered people who were soon

to retire without passing on their skills to the next generation of workers. “I thought, that’s

ridiculous, we need to capture the enthusiasm and passion and pass it down.” As a direct

result of his undercover experience, Martin has now introduced what he calls the ‘wets’ –

worker engagement teams, where people can share their knowledge with management. Martin

is also a firm supporter of coaching activities and Clugston now offers people approaching

retirement the opportunity to provide new knowledge and skills to young people starting off

their careers.

Virtual motivation: As with many other companies, particularly in the construction industry,

Clugston employs a variety of subcontractors and temporary employees. “It opened my eyes to

the issue of how do you manage, motivate, encourage and get the best out of subcontractors

who work with us one week and then the next week they’re off to another site,” says Martin.

His conclusion was that Clugston needed to simplify its procedures and to work with fewer

“ I’ve used it as a catalyst for major changes.”

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subcontractors so that they can genuinely be fully integrated into the Clugston site teams.

Revealing allAnd then came the moment of revelation. The plan was for Martin’s identity to be revealed

on camera to a selection of the people he had worked with. One was a Clugston diehard who

had spent over thirty years with the company. For dramatic effect, he was called to head office

where his workmate’s real identity was to be revealed. Having only been invited to head office

once previously in his lengthy service, he detected imminent bad news and refused. Another

candidate was in a labour ward with his partner having their first child – undeterred, the secret

boss arrived with a camera crew.

Great TV, but what of the business benefits Stephen Martin had in mind when he said yes to

this unlikely adventure? “I’ve used it as a catalyst for major changes,” he says. In particular,

the company’s communication methods have been totally revamped. Clugston no longer

solely relies on notice boards, emails, or bulletins. Instead, it has two weekly meetings where

supervisors meet with each team in the company for ten or 15 minutes to give them an update

on what’s happening, and to give an opportunity to ask questions. Short monthly newsletters go

to everyone with their payslips to ensure they are received.

Another innovation has been what Clugston calls “skip level meetings”, where people can

have a meeting with their boss’s boss to discuss things that are

worrying and concerning them.

For Stephen Martin the dynamics of his communication with

employees has totally changed. “One of the people I worked

with said, a few weeks after the cameras had gone, you’ve seen

where we work, but we’ve never seen where you work. I said,

you’re very welcome. Now, I invite people over to my office to

have lunch with me. We just have sandwiches, no agenda, a

general chat, sitting round the table. They treat me more as a

friend now than as the CEO. Last week, one of them said they

weren’t happy with the boots provided on this site. They had

steel toecaps, but not steel soles so there’s danger if you stand

on a nail. The manager said, I didn’t know that; we should have

those. Right, we’ll get that changed. And someone else said the

overalls at one site aren’t flame-retardant.”

“One of the managers said, that’s the best meeting I ever had

with them. They were very open and relaxed, told me what they

thought. Why don’t they do that whenever I meet with them? He

asked. And that’s because there’s no formal agenda. It’s sitting around a table having a chat.

People speak their minds.”

Perhaps the most startling lesson from this experience for Stephen Martin is that people are

more comfortable around a camera crew than they are with someone from their own company

wearing a suit and a tie. “The frightening thing is I had been round every construction site

we’ve got; I had met all the managers, I had sat in meetings with them, I had walked round the

sites, and had tours round seeing people working. But as the workforce told me afterwards, I

wasn’t talking to them as people; I wasn’t talking to them on their terms; I wasn’t giving them

the opportunity to ask me lots of questions. They were inhibited because if they see anybody

with a tie they won’t speak to them. Now it’s far more open, and I want that culture to pervade

throughout the whole organisation. Some of the managers and supervisors are finding it difficult

to adapt and to change. But I insist on regular meetings, obtaining feedback and going around

the sites to check for myself that it’s happening, to see it’s real, and it’s not just lip service.”

Julian Birkinshaw ([email protected]) is co-founder of MLab and Stuart Crainer

([email protected]) is the editor of Business Strategy Review.


NEXT ARTICLE: HOW A UNIQUE CULTURE PROPOSITION BECAME A USP

“ They were inhibited because if they see anybody with a tie they won’t speak to them.”

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How a Unique Culture Proposition became a USP

How can you transform the way you do things into a compelling sales proposition? Zurich Insurance has created a Unique Culture Proposition which may well be its USP. Adam Kingl tells the story.

Every day dozens of Zurich Insurance risk engineers visit customer sites. This adds up

to thousands of direct customer interactions and reams of risk insights fed back to the

customers’ risk managers. In addition, Zurich’s global relationship leaders (GRLs) utilise their

own meetings with corporate customers to make recommendations for risk management for

the following year, always hungry to understand their customer’s risk exposures better than

the customer.

Examining these activities in 2007, a compelling message emerged: both customer and

insurer benefit from a relationship based not on the transaction alone but on valuable

knowledge-sharing.

Here was an opportunity – to develop a genuine point of differentiation in the market by

emphasising risk insight – and a challenge – to change the culture of the organisation so that

time-pressured GRLs would incorporate even more the contribution of the risk engineers in

their conversations with risk managers.

The potential benefits were clear: the ability to put a premium price on certain products and

services; greater customer loyalty; cross-selling of products and services; and an enhanced

reputation for customer insight and innovation

Unique Culture PropositionIn essence, Zurich was not envisioning a Unique Selling Point (USP) but a Unique Culture

Proposition (UCP), or how the company culture – “the way things are done around here”

– would stand out as a point of competitive differentiation. A UCP can be defined as a

simple, direct message that governs all your people’s actions at all times and carves out your

own space in the market for customers and/or talent.

To explore the implications of this definition, a UCP concerns what governs behaviour within

an organisation while a classic USP focuses on the nature of the product or service. Most

of us are familiar with the 4 Ps of marketing (Price, Product, Place, Promotion) and how

differentiating any one of these building blocks can carve out a USP. Like a USP and its 4 Ps,

a UCP is built on a handful of building blocks: values, mindsets or assumptions, processes or

systems, incentives, and stories.

��

��

Adam Kingl – London Business School

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The UCP that Zurich pursued was clear. Aligning mindsets and behaviours around that goal

was the challenge, and the anticipated result was serving customer needs not only better

but uniquely. The means to that end was to make explicit the value of Zurich’s own people,

particularly risk engineers, to the customer via the customer’s primary contacts, the GRLs.

This initiative aimed to create real economic value for the company because its aim was for

the GRLs and risk engineers to work differently together and to appear differently to their

customers. That is a true UCP.

Storytelling changeIn Spring 2007, the risk engineering team met with a senior group of GRLs to turn their

vision of a UCP into reality. In their first design meeting, the team conceived a workshop

that would be run in several key cities in Europe and North America for the local GRL

communities.

One of the first points agreed by the group was that the workshop should prompt stories

among the audience in order to lend credibility and to provide examples of how the

suggested way of working has succeeded in the past. There were also many more general

reasons why storytelling would be a powerful tool: stories are easy to remember by everyone

in a community; they create a shared context; they have emotional resonance; and they

provide a touchstone for how things were, are, or should be.

The team concluded that a hypothetical customer story

would be a valuable vehicle for delivering their story. But this

would not be a case study in the classic sense, more of a

Choose Your Own Adventure type of customer story that can

encompass all variety of risk challenges. Each workshop group

would be divided into smaller groups to solve the challenges

important to them. In that manner, the workshop designers

would also put a risk engineer with each group to collaborate.

The emphasis in the workshop was on sharing new ways of

working, and starting to practice them in a safe environment;

storytelling to suggest practical ways of working in closer

collaboration with risk engineers; using an experiential,

interactive approach; leaving the GRLs with tools to facilitate

this new way of working and a forum to share success stories

and suggestions; and overall the onus was on the delegates

themselves coming up with ideas and solutions rather than

them being taught.

The workshopFast forward three months to the first workshop in London. The facilitator began the day:

“Today is going to be about stories and about sharing experiences with one another. I

encourage you to volunteer any stories from your own experience that are relevant to what

we’re talking about. Now we’d like to tell you a story about a hypothetical customer called

North Star Corporation.”

As the facilitator painted the picture of this customer, their risk challenges and Zurich’s own

challenges in offering added value and fending off competitors, the GRLs started whispering

to one another. As the facilitator continued the customer scenario, questions started

popping up from all over the room. When the facilitator wrapped up and asked for solutions

related to one specific line of the customer’s business requiring risk engineering insight, the

murmuring in the room swiftly evolved to raucous debate. To a very senior audience, having

the lessons come from one’s own colleagues was an extremely powerful method of earning

buy-in and credibility.

How a Unique Culture Proposition became a USP continued...

“ They’re one of our top customers and we let them know it.”

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How a Unique Culture Proposition became a USP continued...

For example, one GRL told of his experience with a customer in the bottled water industry:

“When the account came up for renewal, we proved that the customer could rely on our

portfolio of risk engineering services as a key differentiator in order for us to fend off a

competitor whose bid for their business was $80,000 less than ours. I’m sure the competitor

looked at the customer’s loss results and saw a prime candidate for cherry-picking. The

customer really relied on us to justify their recommendation to their board.

“We helped this customer in a number of bespoke ways based on the feedback and reports

from risk engineering’s industrial hygienists. When it came time for the customer to decide,

we brought along a list of risk engineering’s accomplishments for this customer as part of

our pitch. Our service record made their decision easy. When things pop up out of the blue,

we are flexible enough to address it. They appreciate the fact we’re responsive, treat them

professionally and go above and beyond. They’re one of our top customers, and we let them

know it.”

As the customer scenario’s details were revealed and new questions posed, the audience were

effectively practicing what it meant to live the UCP that the workshop was suggesting. The

energy, engagement and nature of conversations during and after the workshops gave the risk

engineering team great hope that their story had cut through, and their UCP was beginning to

take shape.

The story continuesA year on, it was clear that, for Zurich, storytelling is a better driver of cultural change than

power point, memos, posters, or chalk and talk. How Zurich’s value proposition and strategy

are communicated and behaviours aligned had changed.

Insiders witnessed a shift in customer relationship teams with deeper communication between

risk engineers and GRLs. New customer and internal dynamics were immediately apparent.

“All are beginning to understand the value, contribution and potential of risk engineering

engagement,” said one workshop participant. “The workshop has triggered many activities in

France. From my point of view, it went from being aware of what risk engineering is capable of

to actually using their services. We will be customising a risk engineering service strategy for all

our global customers,” said another.

One and onlyThere is no one approach which serves all when it comes to developing a Unique Culture

Proposition. The uniqueness really is the thing. But, Zurich’s example proves that a tailored

and thoughtful response that recognises the importance of connecting to one another

through the emotional and visceral power of stories can be hugely effective – even in the most

traditional of industries.

Within Zurich, stories continue to pour in about accounts won, new lines of business

opened for current customers, and customer loyalty deepened. Fortune has favoured those

brave individuals and the business leaders who dared stick their necks out and offer a new

proposition. There will undoubtedly be more to this story as Zurich’s UCP unfolds, but the first

chapter of our tale is done.

Adam Kingl ([email protected]) is director of the Emerging Leaders Programme at London

Business School.

NEXT ARTICLE: THE CORRUPTION OF MANAGEMENT

“ They’re one of our top customers and we let them know it.”

13 | Labnotes

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The corruption of management Management needs to be

reinvented if it is to take its rightful place as a profession and as a means of delivering

economic recovery. Julian Birkinshaw tells how.

While the economic crisis has been explained as a failure of governance, a failure of regulation, and

even a failure of our free-market system, the prosaic truth is that it was a failure of management – a

story of awful risk management decisions, perverse incentives systems, and amoral behaviour.

But the failure of the big investment banks is only the tip of the iceberg. Surveys show decreasing

levels of trust in business leaders. Fewer than 20 per cent of employees are truly “engaged” in

the workplace. Managers are portrayed as aloof, vain, or just plain stupid by Scott Adams, Lucy

Kellaway and Ricky Gervais.

But, while the credibility of “management” as a profession sinks deeper into the mire, its

importance as the driver of economic recovery and long-term prosperity is as great as ever.

Management needs to be reinvented; but first we need to understand how we got into this mess in

the first place.

I believe we need to go back to the origins of the term “manager” because a large part of the

problem is that its meaning has been corrupted.

First, the emergence of the large, bureaucratic, industrialised firm a century ago, and its increasing

hegemony in society, led many to equate the term manager with a narrow, hierarchical, formalised

way of functioning. But management simply means “getting work done through others”. A

community organiser, a scout leader, and an entrepreneur are all managers as well, but the way

they get work done doesn’t feature in our business school textbooks.

The second blow to the credibility of management came from the leadership movement. In order

to build up “leadership” as an art, gurus such as Warren Bennis and John Kotter put management

into a small box. Managers, they suggested, were concerned with efficiency and the status quo;

leaders were concerned with effectiveness and change. Managers supervised and coordinated;

leaders motivated and inspired people.

I am all in favour of effective leadership, but let’s not create artificial distinctions. Leadership is

about influencing others – it is about the characteristics of a person that makes them worthy of

being followed. Management is about getting work done through others – which includes making

decisions, coordinating activities, motivating people, and setting direction. Barack Obama was

elected in large part through his vision and his charisma, that is, his qualities as a leader. His ability

to deliver will now come down in large to his qualities as a manager. Leadership and management

are simply two sides of the same coin: effective executives need to be able to do both.

So what is the future of management? The first essential step is to get management back on the

same footing as leadership – as an essential, value-adding, and productive activity. The second

step is to rethink our narrow assumptions about the nature of effective management. Management

can be done through traditional hierarchical, bureaucratic mechanisms, but it can also be done in

a more spontaneous and bottom-up way. Look at online social communities, open-source software

organisations, and voluntary-sectory firms: these are all managed, but through a completely

different set of principles to the ones we are accustomed to in large bureaucracies.

I don’t believe we need to completely reinvent management. Yes, there are changes afoot, made

possible in part by the emergence of Web 2.0 technologies. But a lot of these putative changes

–towards empowered, flat, emergent, and virtual structures – have been promised for decades.

Rather than reinventing management in toto, we need at least to rethink the choices we make about

how we manage. Every organisation has an implicit management model – a set of choices about

how direction is set, how workers are motivated, how decisions are made, and how activities are

coordinated. Sometimes the traditional top-down approach works fine, sometimes a more organic,

community-based model is more appropriate. The best managed companies – the ones that can

potentially derive competitive advantage from their management model – will in the future be the

ones that make conscious choices that suit their circumstances, rather than falling back on the

default model invented by Taylor and Sloan in the 1920s and 1930s.

NEXT ARTICLE: WHY GOOD COMPANIES GO BAD

“ The first essential step is to get management back on the same footing as leadership.”

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Why good companies go bad Mortality is an often overlooked fact of corporate life. But what are the warning signs? Gary Hamel examines why good companies hit the buffers.

I grew up in Michigan, so the bankruptcy filing of General Motors strikes close to home. There

was a time when GM made more than half the cars sold in the United States. But now, what

was for decades the world’s largest industrial company, is a ward of the state. GM’s failure isn’t

the result of one spectacularly ill-conceived decision – the company didn’t jump off a cliff.

Instead, it meandered into mediocrity, one small short-sighted step at a time. Like a two-pack

a day smoker, GM committed suicide in degrees.

Dodgy quality, a toxic labour environment, incoherent brand identities, clunky power-trains,

adversarial supplier relations, and subterranean resale values – these were the chronic

symptoms of a management model that regarded profits as the game rather than the

scoreboard, that valued financial finagling over inspired engineering, and elevated MBA-types

to rule over car guys.

A scant eight months ago, GM’s then-chairman, Rick Wagoner boasted that his company

was “ready to lead for 100 years to come” – a comment that could only have been made by

someone who was either naively optimistic or hopelessly delusional.

Ever since I can remember, GM’s defenders have been arguing that the company was making

progress; and they were right. GM has been getting better for a very long time – but it’s been

forty years since it was the best. The Chevrolet Malibu and Corvette ZR1, the Buick Enclave

and Cadillac CTS-V are exceptional cars by anyone’s standards. Problem is, they are even

more exceptional when judged against the persistent ordinariness of GM’s other products. For

years, excellence at GM has been an aberration, rather than an all-consuming passion.

Coast-to-coastA company can coast for a long time when it starts with a dominant share of an enormous and

hard-to-penetrate market in the world’s largest economy – but given enough time, and enough

incrementally myopic decisions, it will eventually run out of momentum.

GM is not the only company that’s sputtering right now. Motorola, Citi, Nascar, Starbucks,

Sony, United Airlines, EMI, Kodak, Alitalia, Sprint Nextel, the New York Times, Unilever, AOL,

and Chrysler – these are just a few of the businesses that seem to have lost their mojo. Truth

is, every organisation is successful until it’s not – and today, there are a lot that are not.

How does this happen? How do yesterday’s icons become today’s also-rans? How does

excellence degrade? What are the causes of corporate dysphoria? These are important

questions. When an organisation stumbles badly everyone loses: shareholders, employees

and customers. Through the years, I’ve seen a lot of companies lose their way. Here’s how it

happens.

First, gravity wins. There are three physical laws that tend to flatten the arc of success. The

first is the law of large numbers. We all know that it’s a lot harder to grow a big company than

a small one. To grow a $40 billion company by 25 per cent requires the creation of ten new

billion-dollar businesses. To grow a $40 million company by the same percentage requires

only one new $10 million business. In business as in biology, big things grow slower.

Then there’s the law of averages. No company can outperform the mean indefinitely. During

the last five years of Jack Welch’s tenure at GE, the company’s market value grew from just

under $140 billion to more than $400 billion. To maintain that torrid pace, Jeff Immelt, who

took over from Welch in September 2001, would have had to grow GE’s value to more than

“ When an organisation stumbles badly everyone loses: shareholders, employees and customers.”

15 | Labnotes

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$1.2 trillion dollars by mid-2006 – and that was never going to happen. As you lengthen the

relevant timeframe from one year to five and then to ten, the probability of out-performing the

average rapidly approaches zero. In the long-run there are no growth companies.

Lastly, there’s the law of diminishing returns. The pay-off to any programme focused on revenue

growth or margin enhancement tends to shrink over time. Top line growth slows as markets

mature, and productivity growth slows as the knife scrapes closer to the bone. Over time, it

takes more and more effort to produce less and less in the way of incremental returns. While

these three laws aren’t as unyielding as gravity, they’re tough to overcome – and few companies

manage it.

Second, strategies die. Like human beings, strategies start to die the moment they’re born.

While death can be delayed, it can’t be avoided. Autopsies reveal three primary causes of death.

Clever strategies get replicated. Hewlett Packard ultimately learned how to make computers as

cheaply as Dell. JetBlue took a chapter out of Southwest Airline’s playbook. Cialis and Levitra

intruded on Viagra’s turf. And Facebook built on the social networking model pioneered by

MySpace. While some strategies are harder to imitate than others (particularly those that yield

network effects), most can be decoded by dedicated rivals.

Venerable strategies get supplanted. Digital cameras made film obsolete. Downloadable music

deflated the market for CDs. Skype allowed its users to sidestep expensive tariffs. And online

news aggregators hollowed out newspaper profits. Sometimes newcomers improve on an

existing strategy, but occasionally they shoot it out of the sky.

Profitable strategies get eviscerated. The Internet has produced a dramatic shift in bargaining

power – from producers to consumers. Armed with near perfect information, customers are able

to batter down prices on just about everything. For many companies, well-informed customers

are now a bigger threat to margins than well-armed competitors.

In life, death can come as a shock. In business, it never should. With the right metrics, strategy

decay is largely predictable, though few companies bother to track it. And while a doddering

granddad can’t abandon his decrepit body for a young and vital one, a company can – at least

in theory. Companies die when they can’t escape the grasp of a dying strategy.

Third, change happens. Think of the number of things that have been changing at an

exponential pace: the number of genes sequenced, the number of devices connected to the

Internet, the number of mobile phones in the world, CO2 emissions, the amount of bandwidth

available globally, and the production of knowledge itself. In the past, there were many things

that protected incumbents from the gale-force winds of creative destruction, including regulatory

barriers, technology hurdles, distribution monopolies, and capital constraints. But in most

industries these bulwarks have been crumbling. Discontinuities undermine old business models

and create opportunities for newcomers. So not only do strategies die, they die quicker than

they used to – and that’s a fact. Over the past few decades, product- and technology-based

advantages have become more fleeting. (This point is elaborated in Richard D’Aveni’s work on

hypercompetition.)

At the same time, the correlation between current and future earnings performance has become

progressively weaker. Using more than three decades of data, my MLab colleagues calculated

the year-to-year correlation in earnings performance (using a moving seven-year band) for

every company in the S&P 500. Over a thirty-two year span, the average correlation in annual

earnings dropped from 75 to 46 per cent.

Fact is, most businesses were never built to change – they were built to do one thing

exceedingly well and highly efficiently – forever. That’s why entire industries can get caught out

by change – industries like big pharma, publishing, recorded music, and the major US airlines.

Why good companies go bad continued...

“ So not only do strategies die, they die quicker than they used to – and that’s a fact.”

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Why good companies go bad continued...

In a world where change is shaken rather than stirred, the only way a company can renew its

lease on success is by reinventing itself root and branch, before it has to – a feat that even

the smartest companies have trouble pulling off.

Fourth, success corrupts. The seeds of failure are usually sown at the heights of greatness

– that’s why success is so often a self-correcting phenomenon. The dynamics work like this:

Once a company becomes an industry leader, its employees, from top to bottom, start

thinking defensively. Suddenly, people feel they have more to lose from challenging the status

quo than upending it. As a result, one-time revolutionaries turn into reactionaries. Proof of

this about face comes when senior executives troop off to Washington or Brussels to lobby

against changes that would make life easier for the new up and comers.

Years of continuous improvement produce an ultra-efficient business system – one that’s

highly optimised, and also highly inflexible. Successful businesses are usually really good at

doing one thing, and pretty much crap at everything else. Over-specialisation kills adaptability

– but this is a tough to trap to avoid, since the defenders of the status quo will always argue

that eking out another increment of efficiency is a safer bet than striking out in a new direction.

Long-tenured executives develop a deep base of industry experience and find it hard to

question cherished beliefs. In successful companies, managers usually have a fine-grained

view of “how the industry works,” and tend to discount data that would challenge their

assumptions. Over time, mental models become hard-wired – a fact that makes industry

stalwarts vulnerable to new rules. This risk is magnified when senior executives dominate

internal conversations about future strategy and direction.

With success comes bulk – more employees, more cash, and more market power. Trouble is,

a resource advantage tends to make executives intellectually lazy – they start believing that

success comes from outspending one’s rivals rather than from out thinking them. In practice,

superior resources seldom defeat a superior strategy. So when resources start substituting for

creativity, it’s time to short the shares.

Finally, success breeds arrogance. Caretaker executives who’ve never been entrepreneurs

and have never built something out of nothing, are prone to view success as an entitlement,

rather than the result of innovation, gut-wrenching decisions, and perseverance. Isolated from

the bleeding edge of change by subservient minions, they start believing their own speeches.

Unlike Andy Grove, Intel’s former CEO, they aren’t perpetually paranoid. Instead, they’re naively

confident, and therefore prone to under-estimate threats and discount new competitors.

Back to the car business. Many years ago I had the opportunity to sit in on a meeting

between W. Edwards Deming, the revered quality guru, and a group of US auto executives.

Already in his 80s, Deming supported himself on a podium while he unleashed a stinging

attack on what he saw as Detroit’s septic management practices. Deming argued that

contrary to the prevailing views in Detroit, Toyota and Honda weren’t gaining ground because

they were state-sponsored and disinterested in profits. Rather, their success was the product

of a single-minded devotion to product quality and a well-trained and highly motivated

workforce. At the end of the censorious lecture, a timid manager raised his hand. When, he

wondered, would his company catch Toyota? Deming grunted with distain, lowered his chain,

and shot back, “What, you think they’re standing still? You may never catch up.” His point:

In a world filled with hungry new competitors, leadership, once lost, might never be regained.

Dr. Deming died in 1993. In the years since, the penalties that must be paid for denial,

nostalgia and arrogance have climbed ever higher – a fact that GM’s managers, employees

and shareholders have learned to their sorrow.

Gary Hamel is co-founder of MLab, the author of The Future of Management and co-

author of Competing for the Future.

NEXT ARTICLE: WHY TORTOISES ARE FASTER THAN HARES

“ The seeds of failure are usually sown at the heights of greatness – that’s why success is so often a self-correcting phenomenon.”

17 | Labnotes

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Why tortoises are faster than hares Companies throughout the world have spent decades trying to run faster. But, in the new world order, it may well be preferable – and more profitable – to be a tortoise rather than a hare. Jeremy Hope and Franz Röösli are at the starting line.

In Aesop’s fable the tortoise and the hare decide to have a race. The self-confident hare thinks

he has won before the race begins and takes a nap under a tree half way through. To his

surprise, when he awakes the tortoise is already at the finishing line.

Many business leaders think and act like the hare. They think they can increase shareholder

value at unrealistic rates by setting aggressive targets and creating incentives which cascade

hierarchically down the organisation. Like the hare they think they know the ideal speed to win

the race, assuming they can predict and control the future.

Managers applying the tortoise approach do not make such promises, predictions or

assumptions. Instead they keep their eye on the path ahead and continuously improve their

performance. Their aim is to adapt to changing conditions, beat their competitors and endure

over long periods of time.

Hare todayLike latter-day hares, some of the most venerated names in the world of finance did not reach

the finishing line. A number, including Lehman Brothers (1850), Merrill Lynch (1914) and

Washington Mutual (1889), survived two world wars as well as the great crash of 1929, but not

the present-day financial crisis. In the meantime, the economic crisis has affected economic,

political and social systems around the globe.

On one hand, technical things such as securitisation, complexity, leverage effects and

illiquidity may be blamed for the crisis. Human weaknesses, such as arrogance, short-

sightedness, deception, denial and greed are also worth mentioning. The technical side

certainly favoured human weaknesses, but the latter have been more decisive in allowing the

crisis to emerge so powerfully.

There is another element. We believe that the underlying cause of the crisis is our

predominant understanding of leadership and management. The traditional understanding of

management hardly supports independence, self-control and the decentralised networking of

human knowledge. In other words, the roots of today’s crisis lie in a management model which

fuels greed and short-term thinking instead of furthering human strengths and virtues.

Performance contracts with little basis in realityThink about it. How does the typical management system operate? After many “negotiations”

involving multiple recurring loops across hierarchy levels, every manager receives a

performance contract for the coming financial year fixing targets, bonuses linked to them,

budgeted resources and liabilities towards other teams within the organisation.

The problem is that this political management game has little to do with reality. Decisions are

taken in ivory towers, but have to be implemented in the everyday reality of customer contact.

So, how do executives react when they realise their unrealistic targets cannot be achieved?

A recently conducted survey by CFO Magazine concluded that it is alarmingly normal for

chief executives to “exert pressure” on the finance department “to ensure that their figures

really are correct”. Almost half of the respondents said they were pressured by their superiors

to perform aggressive bookkeeping to make the figures look better. Managers will stick to

this behaviour as long as the main focus is on negotiated end-of-year and end-of-quarter

performance targets. As long as managers are focused only on budgets, front-line employees

will also focus first on the figures and then on their clients.

Franz RöösliJeremy Hope

18 | Labnotes


The predominant, mechanistic management theory is the root of the problem and thus can

not be the solution to it. The danger exists of remaining in the same, trusted way of thinking

and applying it anew. This means using the causes of problems to solve them: more control,

“better” incentive systems.

There is a need to tear down existing traditional patterns. Traditional management was

designed about one hundred years ago when the main management problem was to raise

efficiency. Today the main management problem is complexity. What is needed is management

that supports and furthers the virtues and strengths of people; management that supports

dynamic self-control, so that organisations are well able to adapt to a fast changing and

complex environment.

Many people have seen enough of the short-sightedness, manipulation and greed that have

become an accepted practice in many companies. Instead, they want to trust other people

and be a member of a team. They would like to be able to identify with their superiors, know

for what values their company stands and in which direction it is heading. They want to play

their part in achieving targets and have a share in common success. But most importantly

people want to know that their professional life makes sense. Enterprises whose corporate

managements act as sustainable, credible and far-sighted as tortoises can make these wishes

come true.

Many questions show the way to an adaptive and consistent organisation: What are the

management’s views of employees? What commitment does the management think the

employees are capable of? Which competence and responsibilities do they get? How are

employees appreciated and remunerated, how are targets set, how are resources shared out

and in what way is performance measured? Management has to change the whole system.

They have to leave behind the concept of centralised management based on hierarchical

control and targets negotiated solely with the short term in mind.

Develop from a hare to a faster tortoiseTransforming hares into tortoises requires a more organic approach with decentralised

leadership and adaptive management processes as the two pivotal and interconnected

dimensions (see Fig.1).

Why tortoises are faster than hares continued...

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FixedPerformance

Contract

“Fixed Management Processes”

“Centralized hierarchy”

Strategy

Control

“Devolved network”

“Adaptive Management Processes”

Traditional Mechanistic Management Model to cope with Efficiency (Hare)

MAN

AG

EM

EN

T-PR

OCESSES

LEAD

ERSH

IP O

RG

ANIS

EATI

ON

Organic Management Model to cope with Complexitiy (Tortoise)

Decentralisation of DecisionsParadigm Shift towards:Empowerment and Servant Leadership

Adaptive Management ProcessesParadigm Shift towards: DecouplingPlan and Goal

TRANSFORMATION

Relative Goals

Fig.1 Transforming from mechanistic to organic

management

19 | Labnotes

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Why tortoises are faster than hares continued...

Enterprises applying the organic management approach aim to grow organically and exist

over a longer period of time. The leaders of these companies define success by passing onto

the next generation stronger and healthier companies than those they took over. Shareholder

value is to them a long-term goal instead of a short-term target. They see their company

as a merging of small teams which are all responsible for increasing customer satisfaction.

Management is a marathon based on continuous relative improvement, with the aim of

being the best team or the best company in the respective peer group. Passion, pride and

healthy competition as positive peer pressure are factors that lead towards success – and not

ordered targets and financial incentives. Continuous planning is used to improve products,

processes, and staff. Teams only need the minimum resources necessary to achieve a goal.

And access to information is transparent and open to all.

This organic system does not have inert multi-layer hierarchies with centralised decision-

making and hardly any central staff functions. No set targets exist, compensation is not fixed

in advance with bonuses attached, there are no yearly budgets, no fixed resource allocation

and no costly reports on discrepancies of past performance against the budget. The

necessity for playing and juggling with figures disappears. The focus lies on the comparison

with the market or internal peer group.

The moral of the storyIn the long run it is better to act like a tortoise rather than a hare. You

can’t win a marathon through a series of hundred metre sprints.

Steady organic growth can be achieved by satisfying and pleasing

customers with great products and processes at lowest possible

cost. Such a strategy trumps dramatic bursts of short-term

boom and bust based on mega-mergers and acquisitions,

share buy-backs and aggressive targets and incentives,

by far.

We believe truth, transparency and trust will become

prerequisites for attracting the right staff, customers

and investors. Organisations and their leaders are

scrutinized as never before by employees, customers,

environmentalists, regulators, the media and investors.

The Internet delivers instant information to anyone at

any time. Leaders will be left with no other option than

to align their company with this environment. How to

transform their organisations will be the challenge. It is

pivotal to realise that truth, transparency and trust cannot

be mandated from above. Trust is gained by action. There is

an urgent need to rethink the concept of human nature and the

management structures and mechanisms that even today are used

without questioning them. The chance to develop and implement a new

understanding of management is never better than during a crisis.

Jeremy Hope ([email protected]) is founder and director of the Beyond

Budgeting Round Table (www.bbrt.org). He is the co-author of Beyond Budgeting together

with Robin Fraser and is the author of a number of books on management.

Franz Röösli ([email protected]) is a professor at the University of Northwestern

Switzerland (FHNW), a management trainer and director of the Beyond Budgeting Round

Table an international, membership-based research collaborative.

NEXT ARTICLE: OUT AND ABOUT WITH MLAB


Out and about with MLab

Annual Conference of the Academy of ManagementAt the 2009 Annual Conference of the Academy of Management in Chicago, Julian Birkinshaw, Gary Hamel and Michael Mol were awarded the prize for the best paper published in the Academy of Management Review in 2008, for their paper Management Innovation. The Academy of Management Review is the most influential management journal in the world.

Awards

Find out more about MLab’s upcoming or recent events.

Visit the website for regular updates at:


If you would like to know more or have general enquiries about any MLab events please contact:

Rosie Robertson ([email protected]) or

Julian Birkinshaw ([email protected])

20 | Labnotes


NEXT PAGE: THE MLAB CONNECTION

Future MLab events

The Art of Engagement: Getting the most out of your employees 2 October 2009 – 3.30pm to 6.30pm – London Business School

MLab will be hosting this half-day conference. Further details can be found on the MLab

website at www.managementlab.org/events or you can contact Rosie Robertson for inquiries.

“Beyond Budgeting Round Table” 6 October 2009 – London

Julian Birkinshaw will speak at the “Beyond Budgeting Round Table” London meeting.

HSM World Business Forum 6-7 October 2009 – New York City / 28 October – Milan

Gary Hamel will be speaking at the HSM World Business Forum event in New York City

and delivering a post-forum seminar, “Fit for the future: Building an exceptional

company for exceptional times”. Gary will also speak at the HSM World Business

Forum event in Milan on 28 October. For further details on these conferences,

please contact Grace Reim at ([email protected]).

IIR Middle East Leaders conference 25 October 2009 – Riyadh, Saudi Arabia

Gary Hamel will also speak at the IIR Middle East Leaders conference. For further details on

this conference, please contact Grace Reim ([email protected]).

Danish Academy of Management 7 December – Odense, Copenhagen

Julian Birkinshaw will be keynote speaker at the Danish Academy of Management conference.

Contact MLabE [email protected]

T 1-650-851-2095

Mailing Address: PO Box 620955 Woodside CA 94062

Professor Gary Hamel Co-founder and Executive Director

E [email protected]


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Professor Julian Birkinshaw Co-founder and Research Director

M +44 (0)7966 908 718E [email protected]

© Management Lab® (MLab) 2009.

MLab is unique. It brings together some of the world’s leading business thinkers, academics,

executives, institutions and organisations.

“There are a number of ways in which organisations or individuals can become engaged with

MLab,” says research director Julian Birkinshaw.

Founding status is open to corporations and individuals who are passionate about realising

MLab’s mission. Support through a seed money grant or a gift-in-kind allows us to publicly

acknowledge your commitment and provide you access to leading edge management thinking

and practice.

Participating partners work intimately with MLab’s internationally renowned faculty and staff in

generating a number of bold management innovations relevant to your organisation’s goals. If

the bottleneck to sustainable competitive advantage is a lack of management innovation then

investing in MLab’s unique JAM workshop process help address these issues.

MLab also includes research partners. As well as action research with participating partners,

MLab undertakes more traditional academic-based research projects around a number of pre-

defined challenges directly linked to management practices. These range from how to unleash

human capability by making organisations fit for human beings through to making innovation

everyone’s job. Sponsorship of a research topic will provide direct access to leading edge

management practice in your chosen field.

MLab also involves individual thought-leaders as partners. If you are an inspired

management innovator working in academia or in industry join the debate on

Gary Hamel’s blog at http://discussionleader.hbsp.com/hamel.

The connection How to become engaged with MLab

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