Diagnosing the effects of change

Feature

posted 17 Nov 2000 in Volume 4 Issue 3

Diagnosing the effects of change

Organisational change is often undertaken as an act of faith; little consideration is given to the impact it will have on the bottom line performance of a business. Keith Bedingham discusses how to identify the impact of change in relation to what an organisation is looking to achieve.

‘How will changing the culture be good for the business?’ might be a typical question from the chief executive who thinks that there is enough pressure already from the various stakeholders, like shareholders or investors, from customers who want more for less cost, from staff unions and so on. Responding to any of these pressures demands change. Not to change means to move backwards. Standing still is no longer an option because you can be sure that even if you don’t move forward, your competitors will.

Organisational culture

But does all change mean culture change? If culture is defined as ‘how things are done around here’, all change by definition equates to culture change, as any change results in doing things differently. Doing things differently will inevitably result in producing different results or producing the same results, but differently.

Various studies have looked at the relationship between certain cultural styles and organisational results (in financial terms). Although these studies have tended to be the qualitative in nature, they have shown a direct link between the two. Some people have been surprised that this is the case. But generally the surprise has come from those who see organisational culture either as an ‘independent variable’ or those who thought that organisational culture was too amorphous a phenomenon to describe or measure.

At an intellectual or philosophical level, the relationship between inputs and outputs and the typical ‘processes’ that are used to connect one to the other becomes easily understood. However, at a practical, down-to-earth, operational level, knowing what works and what doesn’t and how the interrelationship impacts business performance is something else. Hence the need for a good diagnostic tool which will show at a glance what is happening that is effective and what is happening that has a negative impact on performance.

Diagnostics

To make best use of a diagnostic tool, such as Organisational Transitions, the senior management need to have first decided what the organisation needs to achieve (strategically), what kind of organisation it wants to be, and what it stands for (i.e. be clear about its mission, values and strategic goals). These can then be expressed as the ‘desired state’ using the diagnostic tool.

Getting to that point may well involve a debate about how fast the organisation needs to move, or how quickly it needs to get new products to market, how responsive it needs to be, and so on. There may well be a discussion about the relative importance of relationship strengthening, for example with shareholders, customers and staff, in order to get the people/task balance right. These debates will start to define the desired behaviour patterns from employees. However, at this point, we need to recognise that no behaviour pattern is perfect. Strengths overused, or used inappropriately, can become weaknesses. Most organisations want to maximise strengths, and minimise weaknesses. Therefore, the ways these behaviour patterns are shaped by the ‘processes’ becomes very important.

With the desired state defined and in place, data collection from employees, using similar questions, defines the actual state. The difference between the desired and actual states, expressed as a gap analysis, gives a clear pointer to the things that need to be changed, so that the organisation achieves the business results it wants to achieve, with the most appropriate culture (way of doing things) that minimises pain, and maximises efficiency and effectiveness.

Act of faith

One other advantage of using such a diagnostic tool is that organisational change no longer has to be an act of faith.

No one would invest a sum of money and not keep track of the return on investment they were receiving. Indeed, the likelihood of investing money without having considered what return was wanted in the first place might seem bizarre. So you start with an idea of what sort of return you need, and then you expect to get regular information, which tells you how your investment is performing, so that you can make some decisions about what to do to achieve your investment objective (leave it alone, move your capital etc.).

Interestingly, we often see major change programmes embarked upon (and that requires a sizeable investment), without any clear idea of where it should end, without a real understanding of where things are right now, and without any means of tracking or monitoring progress. Talk about an act of faith!

However, Organisational Transitions will provide all three functions – its ‘desired state’ defines where the organisation wants to be; the ‘actual shows clearly where it is starting from (often different parts of the organisation are starting from different points). Regular re-measures quantify the extent and direction of change so that the organisation knows how well its change plans are going and what might need tweaking, modifying, and so on.

Case Studies

The following exemplify a couple of organisations (both coincidentally retailers) that have successfully managed the change process using diagnostics to help guide their change programme with precision.

In the first case, we were looking at an organisation that was preparing for a stock market floatation.

Peacock Stores

Peacock Stores has far outstripped other clothing retailers in a tough trading environment, recently posting growth of 10 per cent - compared to an industry average of 1 per cent. Some of the growth is attributed to a regime of competitive pricing and strong focus on value. The rest is put down to a major overhaul of the corporate culture, with an emphasis on customer service and staff development, as chief executive Richard Kirk explains below.

The change programme is centred on a new corporate vision, which was established by the board, senior management and a focus group drawn from staff at the company headquarters in Cardiff. The over-riding point that all parties made was the need to introduce a customer-focused culture

The programme was introduced by culture change specialist Adept Training & Development Consultants, who use specialist culture measurement tools from Verax. Between them, these companies played an influential role at Peacock Stores; first, in helping to identify what needed changing, and, secondly, in ensuring that all changes proceeded and met the chosen corporate ideal culture.

A full change programme was implemented and it included measurement followed by change and re-measures. Two measurement tools from Verax were used: An organisational change measure, which gives an accurate assessment of what a corporate culture is like; if it is too competitive, aggressive and negative, or overly relaxed, sloppy and too quick to blame others. It also demonstrates the strengths of an organisation; also, a personal effectiveness diagnostics tool, which shows the strengths and weaknesses of individuals, as they see themselves and as their peers see them. The tools also highlight what people have to do to change and therefore support the new target culture.

One culture measure focused on the current culture, another on the target culture (which was based on the mission statement and the newly established ‘Peacock values’). When the results were compared, the large gap between the two was obvious.

In a series of workshops with the board, using personal effectiveness materials, members of the board were asked to be good role models for the rest of the organisation. They developed action plans to introduce specific changes in their behaviour, inluding recognising the impact of their behaviour and the messages they could be sending out. Changes included ‘less telling, more selling’.

General managers and area managers were put through the personal effectiveness questionnaires, and team-building exercises introduced, which the board also had to complete. The culture programme was also rolled out through all branch and departmental managers.

“The results give us a perspective from which to develop,” says Colin Thomas, Peacock’s head of training and management development. “We have been driving the change programme through the business since 1997 and the turnaround in our whole culture has been quite dramatic.”

Linking change to increase in business

Richard Kirk sees a definite link between an improved culture and corporate performance. “In my view, a customer-focused culture can contribute to profitability and growth. I saw this at Iceland Foods and now it is being repeated here.”

He says: “Empowering the staff and the customer is good for business. There is no doubt about it. To be able to achieve good culture and business results over a short period does mean a lot of commitment - and reliance on external advice and assistance in some areas.”

After touring the USA and listening to what is happening to corporate culture over there, he seems to have successfully transplanted it in the UK. “At the same time, we looked at what is the best in British retailing, with the focus on customer satisfaction and colleague satisfaction, and emulated it. The marriage of American ideas and the best of practices in Britain is working for us.”

Ingredients of success

Kirk explains what he sees as the primary ingredients of success in the change programme: “I put it down to our complete change of culture, including empowering of staff, allied to our refocusing the business on a credible value for money message. The new culture has enabled us to define and carry through this message. At the same time, we are pushing on with our change programme, and measuring ourselves against the best practice benchmarks supplied by Verax. People do want to change, to make a success of their careers and the business they work for if they are given the opportunity,” says Richard Kirk. “We have given them that opportunity. Establishing what needs to be changed in an organisation, and ensuring the change is properly managed and measured, is a great help to staff.”

Kirk concludes: “For Peacock Stores, our new culture means that people now have the courage to stand up and make suggestions that can help us to move forward, work better together and with our customers - and be more profitable.”

The second case study is a major retailer that several years ago decided it needed to significantly change the way it did things, to change its image in the market place, broaden its customer appeal and become number one in its field in this country and expand overseas.

Tesco

In this case study we look at some of the key factors behind the rise of Tesco to become Britain’s most successful food retailer. It was not just a question of building bigger and better stores and inviting in the customers; the ‘store culture’ and management attitudes had to be reviewed and enhanced, and customer service given a higher priority. More recently, there has been a company-wide initiative, involving all departments.

The year things really began to happen was 1987, when Coca-Cola initiated research into the performance of a number of retailers. The research was carried out by Verax. When Verax had finished, we proposed to Coca-Cola that it would be to everybody’s advantage - including Coca-Cola’s - if they made their retail customers aware of the findings.

Coincidentally, Tesco was starting its own initiative to make their store managers more professional. As a result of Coca-Cola making its results available to Tesco, Verax was asked by Tesco to see if we could help to measure how their store managers compared with managers from other retailers.”

A pilot programme revealed that the stores and store managers were performing at a lower level than their competitors; the store managers’ performance, for example, was 75 per cent below that of other retail managers. Between them, Tesco and Verax designed a development programme for all store managers and departmental managers in the stores. Included in the programme was a measure of their performance and the stores’ performance.

The measure covered five areas: managers’ attitudes; managers’ management skills; retail-specific skills, including customer service; the rewards system used (e.g. praise and recognition or pay/bonus); and the store culture.

A major project was the Store Management Development Programme. This had two levels - MDP (Management Development Programme) and SMDP (Senior Management Development Programme) and was carried out to evaluate and change behaviour. Over a four-year period Tesco moved from being in the bottom 25 per cent of store manager performance to being better on average than 60 per cent of retail managers.

Next phase

When the Store Management Development Project had achieved the results that Tesco management originally intended to achieve, the company initiated a new, broader-based ‘culture measure’, assisted by Verax. This was to help implement the new professional and customer service oriented culture throughout Tesco.

Christine Cross, a Tesco trading director who has been heavily involved in its implementation, takes up the story: “The first Tesco initiatives were about recognising the need to change and ensuring change happened within a relatively quick timescale. The culture survey gave an objective measure of where we were and where we wanted to be; that is, a focus to enhance what is essentially a continuous change programme.”

She adds: “We have moved on from need-driven change. The new glue that holds the organisation and its objectives together is a set of values which management and staff have developed."

As part of the change programme, Verax carried out a survey of 1,200 staff, of all grades, from in-store trading managers and distribution managers to the main board, to evaluate their views and help us see where further improvements could be made. Since then, a total of 3,500 staff have been surveyed. After the initial survey we refined things further by producing a report on ‘where Tesco was with service culture’. This report was based on a survey involving several departments and some main board members and focused on what their vision, or target, was for the company.

Importance of measuring

Christine Cross emphasises the importance of asking questions and measuring: “It is important to set up the programme as a continuous monitoring process. This approach has allowed us to track movement and close the gap between our ideal and our current position. Being able to see that the gap is narrowing is highly motivating.”

Other key benefits of the programmes include: Helping staff give a better service to the business; more interchange between departments as people make better use of their individual skills and either help other departments or move to where their skills are best optimised; and helping staff to realise what other skills they have.

Conclusion

The cultural change and measurement programme has swept throughout the organisation and helped to move Tesco into the number one slot among supermarket chains. The perception by some staff of the programme has changed. “Initially some people saw it as a slightly odd ‘nice thing to have’, but now it is generally realised that it is a management tool and will drive changes in working style. Staff acknowledge it will deliver real commercial benefits,” says Cross.

It is important to stress that the changes have not started in isolation. “All the initiatives in Tesco revolve around the values and the new way of doing things and top management have been involved in the process,” says Christine Cross. “There has been a complete turnaround to become number one in the market,” she adds. “The values we have instilled in the company since 1993, and which came from staff and management themselves, have been instrumental in this success. Continuous improvement and customer service are key parts of these values; the values won’t change – but they are flexible and represent a good ideal to pursue.”

In summary, it can be said that measuring and diagnosis on its own will not produce effective organisational change. Change needs resources, time and effort. On the other hand, good diagnostics will ensure that the effort and resources are channelled with pinpoint accuracy and so increase the likelihood of success. After all, you cannot manage what you don’t measure.

Keith Bedingham is chairman of Verax. He can be contacted at: info@verax.co.uk