“Do not declare victory too soon”
John Kotter, Harvard Business School
A number of years ago, Larry Marsiello, then President of a division of CIT, a major lender headquartered in the United States, announced that he wanted to drive some important changes in the organization over the next three years. Marsiello, Marisa Harris, the Vice President of Human Resources at CIT, and our Metrus team then went to work developing and putting in place a transformational strategy.
We first focused on retesting and then clarifying the division’s strategy. Next, we helped the division align its talent behind the new strategy. We decided that lasting change would not occur without commitment. We identified the division’s thought leaders — those whose influence span covered 80 percent of the employees — and involved them in the process from day one. The result: In only three months this division of CIT began to take on the appearance of a different organization. We had captured the minds and hearts of key executives.
But many employees were initially skeptical, despite the early signs of change. A few leaders had seen other change efforts in the past that had failed. One member of the leadership team later described his own behavior as “keeping low and waiting for this effort to pass.” Regional field members thought the effort was just another corporate program, which while intriguing in the short term, was certainly not going to last. Credit managers were skeptical because they had seen other lofty attempts at change die. In any change effort, such reactions are not uncommon. Skeptics abound.
But the transformational process at CIT was different, due in large part to the untiring efforts of Marsiello and Harris in communicating the strategy and in backing up talk with noticeable changes that positively influenced Alignment, Capabilities, and Engagement.
On the Alignment front, the strategy was translated into a balanced scorecard and then cascaded to every unit in the division. That process helped clarify roles and goals, and connectedness to the whole. It forced leaders to see the links to customers and business results. It also caused them to rethink their talent strategy so it was more in line with business differentiators and imperatives. The primary question became: How do we help people better understand what the customers are telling us?
On the Capabilities front, Marsiello and his team tackled structural changes to address entrenched silos. For example, they moved resource and decision authority from functional silos such as credit and sales to regions where regional managers could better execute the strategy by balancing credit versus revenue decisions. They also redesigned and streamlined many processes to eliminate or reduce costs while being more responsive to customers. And they increased information transparency, so everyone was better equipped to understand customer and business challenges.
Regarding Engagement, the CIT executive team tackled values, leadership, and cultural issues. For example, to counter the legacy culture of waiting to be told what to do, division and department leaders were given scorecard goals and asked to describe the “how.” They encouraged new ideas; at first they got few, but as confidence increased among the workforce, ideas grew. “Fairness” was redefined to mean what one did to support the customer rather than just to please the boss. Most importantly, says Harris, “was building a relationship architecture — how people relate to each other, to customers, to suppliers and to the community — that was a key driver of our overall success.”
Our small transformation team knew that stress could well induce a return to old habits. To prevent this occurrence, we put in place a number of mechanisms to embed the changes into the division’s culture:
These are a few of the actions the transformation team took to embed the new ways of working into the cultural fabric of the organization. This process led to dramatic improvements in employee and department Alignment, employee Engagement, and several drivers of Capabilities. These in turn led to a 50 percent reduction in customer defections and to increased productivity that included a 30 percent increase in speed and quality, all culminating in an impressive boost in financial performance.
If ACE is to have a meaningful impact in your organization over the long run, it needs to become part of the management system and processes. It is not a passing fad or one-time Band-Aid®, but rather a continuous effort to optimize talent investments. Becoming a high ACE organization is serious business. It requires a great talent strategy that differentiates your company from the competition, support from key stakeholders, realignment of talent processes, and exceptional measurement.
Becoming a high ACE organization is a major transformation for most organizations, whether large or small. And change has its challenges, not the least of which is sustaining change as it begins to occur. As many years of research have taught us, it is easy to fall back into old habits. One of Harvard Professor John Kotter’s most important lessons for driving successful change is “not declaring victory too soon.” To truly institutionalize change, it must be embedded in the culture of the organization. In an earlier book, Bullseye!: Hitting Your Strategic Targets Through High-Impact Measurement1 my colleague John Lingle and I devoted one of the four major stages of using strategic scorecards to drive performance to embedding the effective use of strategic measures into the culture to create a measurement-managed organization. As Lingle observed, “You can’t call yourself a measurement-managed organization if you only do it once.”
Sadly, as we learned over the years this fourth stage often gets forgotten because change agents move on or ACE teams are reassigned to other projects. I strongly caution against moving on before the “cement has hardened,” as one of our clients used to say. With ACE, when you fail to keep an eye on the target, it costs a lot and takes a long time to recover.
This chapter offers some tips and tools for imbuing ACE in the culture that will help your organization continue to optimize your talent for years to come. But we also want to keep it simple. Small or large, organizations that do it best embed education, decisions, and processes related to ACE into the fabric of how they do business.
The following are some practical actions for maintaining momentum and embedding ACE thinking into the day-to-day operation of a business or a team.
Consider Reporting ACE Scores to Your Board of Directors
Although this might seem intimidating, a number of CEOs report their ACE scores to their board, and it has worked quite well at accomplishing three objectives:
One of our client CEOs from a major oil company lamented that before he gave the board the ACE Scorecard™, he frequently got questions such as: What is the headcount? How productive are our exploration people? How fast do we fill management slots? How are we measuring productivity? Are we hiring enough scientists? Boards can easily go down a hundred different paths if they do not have more strategic information to focus their attention. Presentation of ACE numbers leads to productive discussions about more strategic issues such as the following:
Make ACE Part of the CEO’s or Owner’s Scorecard
Many organizations now make ACE a centerpiece in the People component of their balanced scorecard. As we discussed in the talent scorecard chapter, strategic scorecards are both an important tool to help leadership teams clarify their strategic thinking and a way to keep everyone focused on implementing the business or talent strategy. Novartis’ global oncology business, for example, has a business strategy called One3. “People” is one of the three core elements in this strategy. The HR leadership team has placed ACE in the center of the “people” element of this strategy as a way to accelerate its overall execution. By embedding ACE within a balanced scorecard, together with financial, customer, operational, supplier, and environmental issues, Novartis’ oncology unit recognized how critical people are to realizing their strategic vision and success.
Regular reviews foster accountability. If the scorecard is used properly, it will be reviewed quarterly or more often and used to adjust priorities, update initiatives, and refine resource allocations. Scheduled reviews hold leaders accountable for achieving a balanced set of targets. By having ACE on the scorecard, it now becomes one of the main objectives for managers throughout the organization. Initially, it will provide a baseline for them, but as time goes on smart organizations will hold managers accountable for either improving ACE or maintaining it at high levels.
Note that quarterly reviews of the scorecard also imply the need to update ACE measures more frequently than annually. An increasing numbers of organizations conduct ACE pulse surveys two or three times a year to detect, investigate, and correct problems early on. One restaurant group used frequent pulse surveys to target approximately 100 restaurants that were “in the red” on their ACE scores. By measuring frequently, the company was able to move 90 of the 100 restaurants out of the red in less than six months. Why wait a year to see if targeted improvements work or fail?
Cascade ACE Information throughout the Organization
ACE is fundamental to every unit’s success. Having ACE on the scorecard alone is not enough. Senior leadership and HR need to look at systemic issues that cross functional boundaries, set priorities, and provide resources to address them. At the unit level, with ACE information in hand, local and functional leaders can address the one or two gaps that will provide the most improvement to their ACE scores. In this way, ACE becomes part of an ongoing talent intelligence system.
Institute a Regular Process for Evaluating the Impact
of Decisions Made as a Result of ACE Information
Did units with low ACE scores improve? Do more employees understand the business strategy? Are customers more satisfied? Are there fewer customer or employee complaints as a result of improving ACE in targeted units or locations? Are high ACE units doing a better job at hitting their operational numbers? Did productivity improve? Did turnover decrease? Such results represent expected outcomes from improved ACE. Unfortunately, too few organizations follow through after they launch initiatives to see if the action actually improved ACE scores together with leading business outcomes.
Have an ACE Day
Organizations such as Johnson & Johnson have numerous processes across their 200 operating companies to help ensure they are living the Credo values that unite their talent worldwide (see Chapter 5). They dedicate time in Credo challenge and Credo survey follow-up action sessions to focus attention on how well they are living their Credo. CEO and author Vineet Nayar of HCL Technologies points out that we must take time to examine our own house. Here are a few ideas for your ACE Day:
Give ACE Awards and Recognition
Recognition is a powerful motivator. Are your high ACE managers being recognized and rewarded for their outstanding performance in optimizing one of the most important organizational resources — people? Has the organization tackled and celebrated a recent ACE improvement? PJM Interconnection, a regional transmission organization near Philadelphia, dedicated an entire year to Alignment by challenging teams to improve three of the drivers of low Alignment. Such focus increased the company’s Alignment scores by over 15 percentage points — a huge gain for a single year. Throughout the year CEO Terry Boston and the leadership team thanked the managers and employees publicly for all their hard work to make the company hum and buzz more effectively. Here are a few other ideas for recognizing ACE achievements:
Public recognition should never be underestimated, whether at the local or organization level. There are many actions and accomplishments that can be tied to ACE by such programs. Be creative!
Annual Reviews
In order to keep ACE vibrant and to make sure it adds continuous value, conduct annual reviews. These could be done in conjunction with an ACE Day or as part of an annual strategic planning process. The annual reviews should be designed to allow you to step back and determine where your organization stands on ACE. Has your overall ACE profile improved? Have you moved units out of the “red” where they had sub-optimal ACE scores? Have you tackled systemic issues that hinder A, C, or E? An annual review goes a step beyond quarterly reviews by allowing the organization to tie in talent investments to its budgeting and planning, as well as making sure ACE efforts continue to produce business results over time.
Action Tips
Many action tips have already been covered throughout this chapter. Here are a few additional ones to consider: