How to Maintain Focus in the Midst of Change

Concluding my theme on change management and rewards begun on Monday, Knowledge@Wharton published another article in which DuPont’s CEO Ellen Kullman dissected the need for change in her organization to maintain its success as an innovation powerhouse, even during the recession. But the main difficulty in the process lay, in Kullman’s words, in “understanding the dynamic relationship between what should not change and what has to change – and having absolute clarity about that.”

Isn’t that the struggle of every business leader as it fights to gain market share or maintain its position, or change direction in the face of a changing world and customer needs to avoid becoming obsolete?

But once you figure this out, as DuPont did, what do you do to make the change real? Kullman implemented four leadership principles:

1) Focus on what you can control
2) Adopt a new trajectory by rethinking your business model
3) Communicate
4) Maintain pride around the company’s mission

These four principles reinforce her point of knowing what should change and what should not. The economy is out of your control, but this recession may be forcing you to acknowledge truths in your organization, your industry or your market that will require a new business model. What steps are you taking to chart that model, communicate it to employees and follow though on the change to achieve success? In the midst of that change, how are you helping employees maintain pride in the company and its mission so they will remain engaged in their work and committed to their role?

Are You a Change Addict?

Building on the theme of change management and rewards from my last post, Knowledge@Wharton has been running a series on business leader reaction to change and the recession. In one article, BP executive Fiona MacLeod called the corporate world out for its “addiction to serial change management programs that consume massive resources but ultimately fail to solve the problems they aim to address.”

Why does this addiction develop? Because new leaders often want the “big splash” of the initiative, but have no plan for the follow-through, employees do not understand why the change is needed, and ownership of the process is given to external consultants and not internal leaders.

MacLeod’s steps to overcome this “addiction to change and fully engage leaders and employees in the process of creating change and sustaining it over time” are:

• Tell a good story so employees understand the case for change, including what the future will look like after the change is complete and why that is better than today
• Set clear steps to implement the change, follow through on each and measure the results
• Get leaders committed and involved by putting written contracts in performance reviews – KPIs or MBOs
• Change the company culture to reward the desired behavior

It’s this last point that is most critical for true, long-term change. As MacLeod notes:

“Changing the culture to reward the desired behavior is critical to success. Make heroes of day-to-day deliverers, not those who make the biggest splash. You reward people on how they treat the customer, how they make decisions, how they simplify the business..... And crucially, all of this has to be done in the spirit of open communication and respect.... If [people are] uncertain and they don't feel respected, the change will never stick. Celebrating success, recognizing achievement and making people feel good about the business were important tools for sustaining momentum. Importantly, it's as much -- if not more -- about the recognition of your peers than it is about financial rewards."

I offered these five steps to effective positive behavioral and culture change. What have you tried in change management that has worked for you? Or are you a “change addict” in love with the big slash but without the wherewithal to own the process and follow through on the steps to success?

Measuring Reward Systems * Driving Change through Recognition

I am recently enamored of Steve Kerr’s new book Reward Systems: Does Yours Measure Up? Steve is currently the Chief Learning Officer at Goldman Sachs and served previously in the same position at General Electric under Jack Welch. You may be more familiar with his oft-cited article on recognition rewards: “The Folly of Rewarding A While Hoping for B.”

Steve’s “definition-measurement-reward” process is based on the principle that “effective reward systems induce organization members to pursue organizational goals for that most reliable of reasons: each person’s conviction that he or she will benefit by doing so.”

The process is simple – define your goal, find a way to measure it, then reward successful performance against that metric. Measurement is essential because:

“If something isn’t measured, you can’t give people feedback about it, so they can’t improve. You can’t reward the people who are doing it well, and you can’t improve or admonish people who do it poorly. Measurement also signals that something is important; if no one is tracking it, it will take a backseat to things that are being scrutinized. … Things that aren’t measured can’t be rewarded and they very likely won’t get done.”

If there is no metric for recognition, employees will believe that you don’t care about it and don’t value it. This builds into the irony of scarcity. The funds for benefits and compensation, for example, are scarce and so are doled out carefully. Recognition, however, is not scare. The irony is, because recognition is not scarce, it gets ignored.

Aligning rewards strategy with desired operational performance goals (as defined by your values, mission and strategies) will ensure you achieve your goals. Different types of rewards include compensation and incentives, prestige awards (special, infrequent awards such as a President’s Club that are limited to a few), and content awards such as recognition, feedback, and management attention.

Which system is best for your needs? Steve offers this test of a good rewards system (all of which are achieved through content awards):
• Everyone is eligible to participate – “When you make people ineligible for a reward, you take away their motivation to strive for it.”
• High visibility – to encourage others to want to achieve
• Performance contingent – and not on seniority, titles, etc.
• Timely – soon after the action being rewarded occurs
• Reversible – doesn’t build up entitlement

Take a look at your own organization. Have you defined a metric to measure every behavior you need to succeed? Have you then rewarded successful achievement of those metrics? If not, you are leaving cash on the table in the form of lost employee productivity and engagement.

Self-Esteem, Sabotage and Psychic Income

As I wrote the title to this post, I knew many of my readers would dismiss it as nothing more than psychobabble. Recent research out of Singapore Management University (SMU), however, shows “deviant behaviours, or behaviours initiated by employees that contravene organisational norms, can collectively cost organisations billions of dollars per year.” Think Enron or, at the industry level, the recent mortgage debacle that sparked this latest recession.

Why do some choose such deviant behavior that can ultimately destroy their own livelihood? I would suggest extreme self interest, corruptibility and a lack of concern the company and all it supports (other employees, customers, partners, shareholders, etc.). The SMU research suggests another reason – a person’s self-esteem. The gist of the research is:

“If an individual’s self-esteem is contingent upon being a competent employee – what they refer to as having workplace-contingent self-esteem – then regardless of whether self-esteem is low or high, they will be less likely to engage in deviant behaviours. But when an employee’s self-esteem was low on its own and not contingent on the workplace, more deviance was reported. However, there may be special conditions where workplace-contingent self-esteem might bring about a different kind of deviance. Accounting fraud, polluting the environment to cut costs and cheating customers to close a sale, for instance, represent forms of workplace deviance which can be construed to benefit the organisation.”

What does all this mean? Some employees – those with low self-esteem not contingent on the workplace – must be rooted out and helped to find a new situation before their behavior can significantly impact productivity, morale and even workplace culture. For the others whose self-esteem is contingent on the company, feed their psychic income needs for social acceptance, self-esteem and self realization through strategic recognition.

Please do not misunderstand. This is where the “strategic” component of recognition becomes critical or you could end up with the “different kind of deviance” described above. You must positively reinforce employees only for those actions that reflect the company values while achieving the strategic objectives. This approach ensures employees who, for example, increase productivity but do so by harming the environment will not be rewarded for their efforts. Values-based recognition is the key to ensuring employees display the right behaviors in achieving the company goals.

Are your psychic income needs met at work? Too many companies only focus on meeting compensation needs (and even less on that in today’s economy). The recession provides only greater reason to bridge the gap in employee needs through strategic recognition.