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Culture 117 common reference point for navigating the changes required to achieve true customer calibration and a high level of conductivity. Workshops held through the company asked employees to validate identified values based on their perception of behavior: Do I live the values? Does my department live the values? And, does the management live the values? In addition, people were asked their opinions on what could be done at the individual, department, and management levels to deepen the values in the organization. Clarica’s values initiative began in 1997 and was intended to coincide with the organization’s demutualization, a significant change in literally everything relating to the company, including its name. Shifting from The Mutual Group to Clarica and from a customerowned to a shareholder-owned organization had potentially massive cultural implications, with the added requirement of being shareholder-focused as well as customer-focused. Many employees feared that the organization would become “lean and nasty” overnight—a predictable response to a new corporate mandate to create shareholder value. However, Clarica’s senior executive team strongly believed that what had enabled the organization to enjoy sustainable financial success historically had to be understood and contextualized for a new era. It was felt that if the values of The Mutual Group were lost or seriously compromised in the dash to the stock market, then shareholder value would eventually be destroyed rather than created as employees and customers became increasingly alienated. At the outset both Armstrong and Clarica decided that to infuse a high level of ownership and thereby increase the likelihood of identifying core values that would support their new strategic directions, they would involve as many people as possible in defining the core values. Concerted efforts were made to understand both the past and the present in order to inform the culture that the organizations wished to establish for the future. This future culture was guided by the strategic vision of the organization (see Figure 7.2). This approach diverges substantially from the more common method of values identification. Typically, values are debated and ar- 118 The Conductive Organization employees’ currently held values culture principles current practice core values vision historical analysis leadership principles customer values Figure 7.2 Evolving Culture Based on Values ticulated by a small group of senior leaders and then communicated organization-wide as the “new” way of working. At best, the values are deployed throughout the organization through a series of workshops explaining to teams and individuals what the new values mean. The values work at Clarica started with a survey of all employees to understand how their individual values compounded into strands that formed corporate values. At the same time, employees were asked to what extent the organization was actually living these values based on their experience. As a result, the survey identified not only the aggregate values of individual employees, but also measured the extent to which they perceived the organization applying these values in everyday work. A comprehensive review of Clarica’s history was also undertaken to identify how corporate values have been manifested. Values were also identified in focus groups conducted with customers. Culture 119 This extensive research provided a clear picture of the corporate value of the company, clearly delineating espoused values from those displayed in the way the organization actually functioned. Based on the aggregation of the corporate values, a vision of the ideal culture was developed and the leadership principles that would lead to the actualization of such a culture were formulated. Historical Analysis To understand its cultural history, Clarica reviewed documents dating back to the formation of the Mutual Group in the 1870s and interviewed a number of retired employees. The historical analysis showed that caring for and being of service to its customers and having its employees be supportive of their peers were values that had always been important. Armstrong also interviewed retirees and systematically mapped the evolution of their culture and values, beginning with the presentation of a set of service values by the founder, Samuel Armstrong, to the company’s sales force in 1929 (see Table 7.1). Samuel Armstrong committed his organization to create and maintain the highest quality product and to provide almost unheard-of levels of customer service. Through two changes of family leadership and the coming and going of many employees, this commitment became much more than corporate folklore. It became the understood “way we do things around here,” a cultural underpinning that transcended personnel changes at any level. By making visible its cultural history, the present leadership was able to see how deeply entrenched the organization’s originally espoused service values had become. At both Armstrong and Clarica, subsequent values work with employees, customers, and partners confirmed that the core values that had historically directed organizational actions were still as powerful as they had been and just as relevant a source of competitive advantage. The values initiative became a process of rearticulating the values for today’s market demands. 120 The Conductive Organization Table 7.1 Armstrong’s Culture Timeline Date Actions 1929 Service values presented to sales force in Niagara Falls meetings 1934 S.A. Armstrong Limited incorporated. First use of “industrial landscape logo” 1940–1945 Wartime munitions work 1949 New plant built on O’Connor Drive to house 125 employees to better service customers and increase innovation 1950 S.A. Armstrong dies suddenly. J.A.C. Armstrong takes over family business 1965 Company starts global expansion. Armstrong Pumps Limited (APL) is incorporated in the UK 1966 Global expansion continues with incorporation of Armstrong Pumps Inc. (API) in the US 1988 Move to state-of-the-art plant on Bertrand Avenue in Toronto. Building wins architectural design awards 1990 C.A. Armstrong and J.C. Armstrong are appointed to chief operating positions. Focused factories introduced to all plants 1992 Incorporation of Armstrong Darling Inc. (ADI) in Quebec 1993 Triton ERP implemented 1994 Northwest Switchgear (UK) is purchased Purpose and values rearticulated and published 1997 Six S introduced and process improvements made 1999 Triton upgraded to Baan IV across the organization. Corporate website developed 2000 Values surveys conducted with all Armstrong employees in the UK, Canada, and US 2001 Reaffirmation of original values at Simcoe XX meeting Values surveys conducted with suppliers and customers Partnership agreement with Konverge Digital Solutions Inc. completed Alliance agreement with supplier completed I2 supply chain software implemented 2003 Brand articulation Armstrong: Experience Building . . . Culture 121 Rather than presenting employees with an artificially developed set of new values, both organizations first identified the values that had always been of historical importance. The values that had been intrinsic to past success became the bedrock on which further cultural evolution would be based. Deploying Values at Clarica The senior management team concurred that the values initiative could be an effective way to clearly define what the new organization stood for and to provide its employees with a strong central image around which to coalesce. And with the financial services industry experiencing unprecedented change, there was an urgent need to highlight the organization’s capabilities to cope with change and to foster employee commitment to change. The leadership team believed that this could only be achieved within a high-trust environment and that this trust could be achieved through values work. They contended that establishing core values creates a high level of trust and a foundation for commitment to partnering by both the organization and its employees. Most important, the initiative was launched as a way to place the customer at the center of the business. Focus groups and surveys were used to capture what customers required in terms of valueadded services. The values initiative was seen as a mechanism by which the organization could respond to these value-added dimensions. Values Survey In partnership with the US-based Values Technology (1), Clarica developed a survey to identify employee values. Distributed to 5,500 people (including all Canadian and US employees and all Canadian agents), the survey contained 125 questions. Using a multiple-choice format, employees were asked to indicate the statement that most accurately reflected their feelings at the time. 122 The Conductive Organization The responses were mapped against a values framework. As the questionnaires were completed, aggregate value priorities began to emerge. This information, along with the historical analysis, data from customers, and findings from workshops with the senior leaders on the values they believed the organization needed to succeed, led to the collating of three core organizational values that would be used to steer the future behavior and actions of the organization: Partnership: building and maintaining high-quality relationships of mutual accountability based on dignity, understanding, and respect. Stewardship: acting with integrity and accountability to maximize value, using our time, money, resources, and talent toward the understanding and service of the customer. Innovation: sharing information and creating knowledge to constantly find new ways to deliver relevant high-quality solutions. These core values would become the way the organization was managed on a day-to-day basis and would serve as the foundation of Clarica’s partnering stewardship culture model (see Figure 7.3). With the use of terms such as self-initiation, partnering, learning from customers, and developing capabilities, we see how culture and values coalesce to identify customer-centric behaviors and mindsets required by a conductive organization. Learning knowledge Innovation Customer Stewardship Team Partnership Figure 7.3 Clarica’s Partnering Stewardship Model Culture 123 Values and Self-Development The values instrument also became a powerful tool for selfdevelopment. Each employee received a personal values statement, based on their survey responses that mapped their values against the core value streams. The entire process was confidential and results were electronically communicated. This confidentiality is important for two key reasons. First, values are internalized and highly personal. They go to the core of who we are as individuals. Therefore opening up these values can be an unnerving process for the individual. It may be the first time employees have been exposed to the innermost drivers of their personalities. Very few people would be willing to do this in a public arena. Second, employees will be naturally reluctant to do this exercise if they feel that having different values from those identified as core values might exclude them from future activities or even lead to termination. With their values identified, the employees can then create action plans to strengthen the alignment between their capabilities and required core value behaviors. At Clarica, employees were provided with the opportunity to create partnership, stewardship, and innovation action plans. For example, a behavior associated with partnership is “dialogue, listen, understand,” which has corresponding values of “sharing, listening, trust,” “rights, respect,” and “empathy.” Through an online mechanism employees at Clarica could access learning objects to help them develop these capabilities. These action plans create organizational capabilities in that they steer employees toward living the core values. Of course, they also build individual capabilities, since skills in listening and understanding, for example, are clearly transportable and valuable in the marketplace. Teamwork A compelling reason for individuals to develop such skills is that, in a values-based conductive organization, the core values underpin all 124 The Conductive Organization activities, decisions, and conversations. For example, Armstrong has a core value of community, the description of which includes the statement “we encourage trust through integrity.” Consequently, trust and integrity underpin all that the organization does. Trust and integrity must not be compromised—something that all employees know. With core values made explicit, it is much easier to assemble effective multidisciplinary teams. Each employee will already know the behavioral expectations of the team. Moreover, the sharing of the common values-based language will help ensure that meaningful connections within the team can be forged. Behavior and language congruity go a long way to creating the trusting relationships required for effective partnerships and interdependence. Values Recap Adherence to well-defined corporate values allows the organization to accelerate change without losing the trust of its employees. It gives the organization greater agility, which alone would be a major contribution to the effectiveness of an organization at a time when most markets are compelled by the technological innovations that surround us to move at warp speed. Placing change in the context of commitment to evolving values diminishes the friction or energy leakage inherent in change. The identification of values creates an objective framework within which individuals and groups can test actions. Values become a lens that allows individuals within the organization to see themselves from the outside as well as from the inside. The way that values connect with each other and the discussions and debates needed to interpret and act on these connections seem to create fresh angles from which to examine the solutions to familiar problems. With a foundation in the importance of values to the conductive organization, we move to the next level of exploring culture as a key capability in the conductive organization. Culture 125 Defining Culture We introduced the chapter by saying that culture reflected the collective mindsets of the individual employees. We expand that definition to: the sum of the individual opinions, shared mindsets, values, and norms. Culture is a key enabler of business performance. It can make or break strategies. Employees are the ones who must implement strategies, and they will fail (or unconsciously refuse) to do so if the strategies of the corporation, no matter how sound from a business perspective, are incongruent with the organization’s culture. For example, a strategy based on customer-centricity and partnerships will be difficult to implement if the culture is task-focused and based on the power of functional silos. Edgar Schein, Professor Emeritus at the MIT Sloan School of Management, suggests that culture consists of three components: artefacts, values and behavioral norms, and beliefs and assumptions. (2) Artefacts: The visible, tangible, and audible characteristics of an organization that can be divided into three categories: physical, behavioral, and verbal manifestations. Physical manifestations may include the buildings and offices, internal layout, design and logos, and material objects of the organization. Behavioral manifestations can be identified by traditions and customs, ceremonies and rituals, and the communication pattern of the organization. Verbal manifestations can be found in stories, myths, jokes, anecdotes, heroes, metaphors, and jargon bandied throughout the organization. Values and behavioral norms: The social principles, goals, and standards within a culture that define what an organization cares about form the basis for making judgements and can be referred to as an ethical or moral code. Behavioral norms are associated with values and are defined as unwritten rules that are recognized by employees of a particular group in both social and corporate cultures. Norms set boundaries and establish what behavior can 126 The Conductive Organization be expected, or what is considered common and acceptable to employees. Beliefs and assumptions: The core of the organization’s culture, assumptions represent what employees believe to be reality and therefore influence what is perceived. They are invisible and taken for granted, existing outside of everyday awareness. Employees believe that their assumptions are the truth and are not open to question, and that they affect experiences within their cultural life. We recognize that different employees of an organization may have divergent assumptions about how their organization works, which may result in a variety of beliefs within one company. For this reason we place significant emphasis on the identification of a shared set of core values around which individuals can coalesce. Limitations of Cultural Change Programs intended to change culture have been widely deployed within corporations in recent years. A 1999 survey of 236 organizations from throughout the world conducted by the UK-based Business Intelligence found that almost 60% of (mainly large) organizations had recently attempted to change their corporate culture, while almost 20% had plans to do so. (3) Organizations are clearly investing substantial resources in attempts to change their cultures. Although we recognize the business imperatives that impel culture change initiatives, we’ve observed that organizations typically fail to extract lasting benefits from such efforts. Cultural change initiatives presuppose that it is possible to take an existing culture and transform it into something different by following a set program. What these approaches fail to recognize is that organizational cultures have very deep roots that have been spreading out, unseen yet pervasively, throughout the history of that organization. Much that represents a corporate culture has been in place for longer than anyone within the organization can recall.