“If today were the last day of my life, would I want to do what I’m about to do today?”

Sunday, October 2, 2016

Why Leadership Training Fails And What To Do About It - Part 4

Developing the Organization Unit by Unit

Part of creating a favorable context for learning is making sure that every area of the business provides fertile ground. Soil conditions will inevitably vary within an organization, because each region, function, and operating group has its own needs and challenges. In our studies of corporate transformations and our work with clients, unit leaders have told us that their companies’ education programs were not wrong in substance but failed to align with their local priorities and stage of business and organizational development. In other words, their groups were not ready for the training they got.

So companies should invest in capability development unit by unit. The corporate-level unit links everyone at the top—the CEO, her senior team, and key business unit, regional, and functional leaders and their key people. Individual units must consider their needs and capabilities in the context of their own strategy and goals.

Each unit’s leadership team should periodically go through the six steps we’ve described to discover the silent killers that undermine real change, and each team should have a hand in setting its own change agenda (within the context of corporate strategy and values). Those who follow this approach will avoid the low return on investment that results from top-down programs. Common capability-development needs that emerge from unit-by-unit change can, of course, be addressed through a companywide program.

Cardo, a Swedish industrial company composed of two major independent divisions, provides a powerful example of why a unit-by-unit change strategy is important. To support its corporate transformation into an integrated global group, Cardo’s CEO and his leadership team commissioned an education program to teach the top 80 managers how to lead change. 

The program, which integrated individual education and organizational development, featured four modules of classroom training. Between modules, participating managers were charged with implementing changeand improving performance in their respective departments. They received consultation and coaching from program faculty members and peers and were invited to speak to the CEO during each module about organizational barriers to effectiveness and performance.

 Evaluation of the program revealed significant behavioral changes in one of the divisions. Alignment between strategy and execution improved, as did teamwork across functions and borders, and management became more participative. The CEO estimated a tenfold return on the cost of the program by looking at the financial effect of the learning-intensive projects that managers led in their own departments and, when appropriate, in collaboration with peers in other parts of the division.

However, the other division did not experience comparable improvements. Its leaders, in contrast to those of the first group, failed to see the program’s value—perhaps because they were not under the same pressure to change. Their short-term performance was good, after all. The CEO and his senior team had not assessed each division’s receptiveness to the new vision and readiness to carry it out, nor had they made clear the type of organizational transformation they expected. As a result, the two divisions responded quite differently to the same program.

Contrast Cardo’s experience with how ASDA, a grocery chain in the UK, approached its transformation in the 1990s. (One of us wrote a case study about the chain; it’s an example worth revisiting here.) Archie Norman, the CEO at the time, led a turnaround of the company and its 200 stores by avoiding the fallacy of programmatic change—that is, the common impulse to roll out sweeping, companywide initiatives without gauging local readiness. ASDA began by creating a few model stores that demonstrated the leadership and organizational capabilities needed to build a more employee- and customer-centric culture. 

The company then devised a “driving test” to assess the remaining stores’ capacity to implement what came to be known as the ASDA Way of Working. A store would receive corporate funds to invest in needed physical changes only if it passed the driving test. Stores that did not pass received consulting support from a corporate transformation team and then retook the test. If a store failed the test again, its manager was replaced.

At the time, ASDA’s transformation was widely hailed as the most successful in the UK. In about a decade the company improved its market capitalization tenfold, thanks largely to its disciplined, unit-by-unit approach to change and development.

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