Ни одно производство не может обойтись без привлечения ресурсов из внешней среды предприятия. Организация такого привлечения ресурсов носит обобщающее название — материально-техническое снабжение. Оно является начальным звеном производственного процесса. От организации снабжения, своевременности поставок материальных ресурсов на производство в необходимых ассортименте, количестве и соответствующего качества в значительной мере зависят равномерный и ритмичный выпуск готовой продукции, ее качество и как результат — уровень прибыли и рентабельности предприятия.
Материально-техническое снабжение предприятия — это процесс поставки на склады предприятия или сразу на рабочие места требуемых в соответствии с планами производства материально-технических ресурсов. В состав таких ресурсов входят сырье, материалы, комплектующие изделия, покупное технологическое оборудование и технологическая оснастка (приспособления, режущий и мерительный инструмент), вычислительная техника и другое оборудование, топливо, энергия, вода, т. е. все, что поступает на предприятие в вещественной форме и в виде энергии, относится к элементам материально-технического снабжения.
Материально-техническими ресурсами предприятия обеспечиваются службами материально-технического снабжения. Их главная цель — своевременно обеспечить подразделения предприятия необходимыми видами ресурсов требуемого количества и качества с минимальной их стоимостью при минимальных затратах на транспортирование и хранение на складах.
Организационное построение таких служб отличается большим разнообразием. В каждом конкретном случае оно варьируется в зависимости от размера и типа производства, объема и номенклатуры потребляемых сырья, материалов и изделий, уровня специализации и кооперации, наличия транспортных путей и сети снабженческо-сбы-товых баз в данном районе, территориального размещения предприятий и других факторов.
В практике работы предприятий различают в основном две формы снабжения: транзитную и складскую.
Транзитная форма снабжения сырьем и материалами применяется тогда, когда предприятие получает их непосредственно от производителей этих ресурсов. Такая форма наиболее экономична (без посредников) и применяется всегда, когда потребное количество сырья и материалов на данный отрезок времени равно транзитной норме поставок. Транзитная форма осуществляется по прямым связям, через товарно-сырьевые биржи и др. Эта форма наиболее предпочтительна при массовом потреблении материалов; она обусловливает наиболее низкие издержки производства.
Использование транзитной формы снабжения при небольших объемах потребления неизбежно приводит к образованию излишних запасов товарно-материальных ценностей.
Складская форма снабжения применяется тогда, когда потребные ресурсы меньше транзитной нормы и предприятие получает их необходимые объемы с баз и складов организаций оптово-розничной торговли.
Конкретную форму (метод) обеспечения материально-техническими ресурсами предприятие выбирает исходя из особенностей ресурса, продолжительности его получения, количества предложений, качества, цены ресурса и других факторов.
Функции служб снабжения на небольших предприятиях выполняют, как правило, отдельные работники, на средних предприятиях — структурные подразделения — отделы (бюро), а на крупных — управления материально-технического снабжения.
One of the best know frameworks – probably on everybody’s top ten list: the BCG growth / market share matrix. The tool was developed by the Boston Consulting Group in the 70s. The objective is to identify priorities of specific products within a business unit, or priorities of different business unit in a larger corporate setting. The fundamental assumption is that an enterprise should have a portfolio of products that contains both high-growth products in need of cash and low-growth products that generate cash. The BCG matrix has two dimensions: market share and market growth.
The matrix results in four quadrants: Stars (high growth, high market share): Stars are leaders in the business. They are frequently roughly in balance on net cash flow. The goal is to hold or expand market share. Cash Cows (low growth, high market share): Cows are often the stars of yesterday and they are the foundation of a company. Because of the low growth, investments needed should be low. Dogs (low growth, low market share): Avoid and minimize the number of Dogs in a company. Watch out for expensive ‘rescue plans’. Dogs must deliver cash, otherwise they should be liquidated. Question Marks (high growth, low market share): Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. Either invest heavily, or sell off, or invest nothing and generate any cash that you can.
The BCG matrix has a number of advantages. It highlight, for example, that generic targets (in terms of growth, or return on capital), can be very misleading in a portfolio of business units. The matrix was developed in the context of an overall understanding of product life cycles: A new business may start as a small star, will grow over time, becomes one of the cash cows of the company, and may end up as a dog towards the end of its life cycle. But the concept also has a number of limitations: It neglects the effects of synergy between business units. High market share is not the only success factor, and doesn’t necessarily always lead to high profitability. Market growth is not the only indicator for attractiveness of a market. Sometimes Dogs can earn even more cash as Cash Cows. There are also basic problems in terms of defining what is a “market,” getting the right data on market share and growth, etc.
But overall, it’s definitely a good model to know and keep in the back of your mind.
David Gardner’s Proven Formula for Consistently Profitable Growth Investing
Forget what you’ve heard. Consistent, reliable, repeated success as a growth investor is possible. With a proven formula, picking winning growth stocks can be a predictable – and very profitable – investing strategy.
David Gardner is walking proof.
Check this out: As of March 14, 2016, of the 206 active buy recommendations David has made since 2002, a shocking 73.8% are winners! And the gains of those FAR exceed any loses. And that’s though some of the most turbulent times in stock market history!
It’s remarkable. There is probably not another investor on Earth who can claim to outperform the market with the same kind of “Old Faithful” consistency.
If you’ve been scared of making growth investments because you’ve been told they’re “too risky”… “too volatile”… or you simply just don’t know what to look for, this special report is what you’ve been waiting for.
Today, you’re doing to discover David’s “secret sauce.” Enjoy!
Why This System Works
When we talk about growth, we’re essentially talking about a company selling more goods and services this year than it did last year — and expecting to sell even more the following year.
Yet you shouldn’t just search out hot companies or high growth rates in isolation.
David’s investing style is about identifying companies that are he thinks are likely to turn a high growth rate — or an anticipated high growth rate — into a sustainable force that drive cash flow for a very long time to come.
With the right principles and a little discipline, you can be a successful growth-stock investor too — and the payoff can be huge.
Rapid growth can lead you to some of the biggest returns you’ll ever find as an investor. Yet at the same time, chasing growth by itself is a ticket to mediocre performance … or worse. So how can you find the companies that will lead to superior returns and avoid the mistakes that will drag down your performance?
Here’s a deeper look at six criteria David uses to help identify a winning growth stock. Not every great growth investment has all these traits, but the companies that exhibit all these characteristics deserve special attention. He’s found they’re most likely to be the ones that sustain extraordinary growth over a long period of time.
1. Top Dog and First Mover in an Important, Emerging Industry
A top dog holds the dominant market share in its industry; usually it’s the largest by market capitalization. The first mover is the innovator that first exploits a niche — essentially creating its market. And finally, that niche must actually be worth dominating.
Who has put all of this together? Think of Microsoft in software, Starbucks in coffee, Whole Foods in natural and organic groceries. Starbucks didn’t invent the coffee shop, and Whole Foods wasn’t the first natural food store. But these companies were the first to conceive of these businesses on a national and ultimately international scale, when others didn’t see growth opportunities.
Winners aren’t hidden; they’re right there before our eyes, bringing disruptive technology, clever and effective marketing, or a brand-new business model.
2. Sustainable Advantage Gained Through Business Momentum, Patent Protection, Visionary Leadership, or Inept Competitors
Successful businesses attract competition. The critical question is how well a company can fend off that competition.
In some businesses, like the pharmaceutical industry, patents can enforce a lasting competitive advantage. On the other hand, patent protection can be problematic in the software industry, where protected inventions can often be worked around.
Luckily, there are other ways of protecting a competitive advantage. Companies have trade secrets (the formula for Coke isn’t patented; it’s a well-guarded secret known to only a few employees), and they can build expertise that others find hard to duplicate. Some businesses require daunting levels of capital investment to establish, while others invest in their reputations and brand names. Sometimes a company’s leaders are just smarter than the competition — and sometimes competitors find they just can’t adapt to a changing world.
The key is to find what we call a company’s moat — its bulwark against inevitable competitors — and figure out how many alligators are in it.
3. Strong Past Price Appreciation
Consider an investor’s take on Newton’s law of inertia: A stock on the rise tends to remain on the rise unless an outside force disrupts its path.
The best growth stocks continue rising, because their advantages allow them to sustain remarkable earnings and cash flow growth and to continuously win new converts among the ranks of both customers and investors. Don’t count on momentum to save your bacon in the absence of other strong fundamentals. But a strong company firing on all cylinders can sustain a remarkably extended run.
4. Good Management and Smart Backing
Good management trumps almost all other concerns. Think of a company like Target: At its core, it’s just another discount retailer with few structural advantages over its rivals. Yet by dint of good management, it’s been very successful and returned a lot of value to shareholders. Better a mediocre business with great management than a great business with mediocre management. Over time, those latter guys will screw up a free lunch.
Now imagine adding great management to a great company — it’s a powerful force.
Judging the quality of a management team is a bit subjective, but that’s because it’s human beings who head these companies. Luckily, we’re human beings, too, and most of us are equipped with skills to assess the more subjective aspects. Listen to conference calls and investor presentations. Even if you can’t talk to management directly, the Internet makes it easy to hear how the top brass thinks and how they interact with investors. Are they smart? Visionary? Inspiring? The heads of the best growth companies are often career entrepreneurs with a track record of business formation you can look to. Even if you can’t put a number on it, you can certainly get some idea of whom you’re dealing with.
5. Strong Consumer Appeal
It’s almost impossible to overstate the power of a strong brand. If a business has mass consumer appeal, sustaining extraordinary growth is that much easier. A brand eventually reinforces itself — that’s why a company like Starbucks has never really had to advertise. A brand also becomes associated with an experience. We’re creatures of habit, and when we have to think less, it makes our lives seem easier. The habit that comes from a strong brand — knowing where your next cup of coffee is coming from — immeasurably strengthens a company against its competitors. It also gives a company pricing power over rivals — you expect to pay more for a brand name, right?
Of course, some great companies work in specialty businesses that simply don’t have mass consumer appeal. That’s OK, but we want to know that the company’s product, name, and reputation constitute a brand among the people who matter. If you’re looking at an esoteric software business, ask yourself this question: Could this company price its product 5% or 10% higher than its competitors and still maintain market share because of its reputation and loyal customers?
6. Grossly Overvalued According to the Financial Media
This might sound like an odd factor. Who wants to buy a stock that those wise financial commentators say is too expensive and poised for a tumble?
In fact, being derided as overvalued is a trait shared by many of David’s most famous stock recommendations that supposedly smart investors avoid … stocks that go on to double, triple, quintuple, and more over the years. The “too expensive” label comes from underestimating how a long-term winner can disrupt its industry, displace competitors, and grow over a relatively short time. Investors’ fears leave many on the sidelines, only to come in later and drive the stock up further as the writing on the wall becomes more apparent.
These six criteria aren’t guaranteed to weed out every dog or to point you to every winner. But they offer a framework for evaluating fast-growing companies. David thinks they can focus your attention on the characteristics most likely to be shared by companies that turn growth into extraordinary performance over a long period.
The Foolish Bottom Line
In closing, remember this: David’s investing style isn’t about taking giant gambles on unproven, blue-sky ideas. It’s about recognizing the companies that are already succeeding in creating a new niche — and identifying the ones that are going to keep succeeding tomorrow.
It’s a proven approach that has led his readers to winning big and often - making profitable investments on 4 out of every 5 picks.
In other words, it’s the ultimate in growth investing.
You can join them today when you invest in a subscription to Motley Fool Rule Breakers, which is David’s growth investing newsletter (ranked as the best growth investing service in the world by the Wall Street Journal).
Normally, Rule Breakers is $299/year but today, in order to encourage my readers to get out ahead of the Third Wave, I’ve arranged for a special, limited-time discount. Join today, and you save a full $200 off the regular price – paying just $99 for a full year of Da
This classic guide to organizational change management best practices has been updated for the current business environment. To read the newest article, click here. Or, to watch a related video, click on the play button above.
Way back when (pick your date), senior executives in large companies had a simple goal for themselves and their organizations: stability. Shareholders wanted little more than predictable earnings growth. Because so many markets were either closed or undeveloped, leaders could deliver on those expectations through annual exercises that offered only modest modifications to the strategic plan. Prices stayed in check; people stayed in their jobs; life was good.
Market transparency, labor mobility, global capital flows, and instantaneous communications have blown that comfortable scenario to smithereens. In most industries — and in almost all companies, from giants on down — heightened global competition has concentrated management’s collective mind on something that, in the past, it happily avoided: change. Successful companies, as Harvard Business School professor Rosabeth Moss Kanter told s+b in 1999, develop “a culture that just keeps moving all the time.”
This presents most senior executives with an unfamiliar challenge. In major transformations of large enterprises, they and their advisors conventionally focus their attention on devising the best strategic and tactical plans. But to succeed, they also must have an intimate understanding of the human side of change management — the alignment of the company’s culture, values, people, and behaviors — to encourage the desired results. Plans themselves do not capture value; value is realized only through the sustained, collective actions of the thousands — perhaps the tens of thousands — of employees who are responsible for designing, executing, and living with the changed environment.
Long-term structural transformation has four characteristics: scale (the change affects all or most of the organization), magnitude (it involves significant alterations of the status quo), duration (it lasts for months, if not years), and strategic importance. Yet companies will reap the rewards only when change occurs at the level of the individual employee.
Many senior executives know this and worry about it. When asked what keeps them up at night, CEOs involved in transformation often say they are concerned about how the work force will react, how they can get their team to work together, and how they will be able to lead their people. They also worry about retaining their company’s unique values and sense of identity and about creating a culture of commitment and performance. Leadership teams that fail to plan for the human side of change often find themselves wondering why their best-laid plans have gone awry.
No single methodology fits every company, but there is a set of practices, tools, and techniques that can be adapted to a variety of situations. What follows is a “Top 10” list of guiding principles for change management. Using these as a systematic, comprehensive framework, executives can understand what to expect, how to manage their own personal change, and how to engage the entire organization in the process.
1. Address the “human side” systematically. Any significant transformation creates “people issues.” New leaders will be asked to step up, jobs will be changed, new skills and capabilities must be developed, and employees will be uncertain and resistant. Dealing with these issues on a reactive, case-by-case basis puts speed, morale, and results at risk. A formal approach for managing change — beginning with the leadership team and then engaging key stakeholders and leaders — should be developed early, and adapted often as change moves through the organization. This demands as much data collection and analysis, planning, and implementation discipline as does a redesign of strategy, systems, or processes. The change-management approach should be fully integrated into program design and decision making, both informing and enabling strategic direction. It should be based on a realistic assessment of the organization’s history, readiness, and capacity to change.
2. Start at the top. Because change is inherently unsettling for people at all levels of an organization, when it is on the horizon, all eyes will turn to the CEO and the leadership team for strength, support, and direction. The leaders themselves must embrace the new approaches first, both to challenge and to motivate the rest of the institution. They must speak with one voice and model the desired behaviors. The executive team also needs to understand that, although its public face may be one of unity, it, too, is composed of individuals who are going through stressful times and need to be supported.
Executive teams that work well together are best positioned for success. They are aligned and committed to the direction of change, understand the culture and behaviors the changes intend to introduce, and can model those changes themselves. At one large transportation company, the senior team rolled out an initiative to improve the efficiency and performance of its corporate and field staff before addressing change issues at the officer level. The initiative realized initial cost savings but stalled as employees began to question the leadership team’s vision and commitment. Only after the leadership team went through the process of aligning and committing to the change initiative was the work force able to deliver downstream results.
3. Involve every layer. As transformation programs progress from defining strategy and setting targets to design and implementation, they affect different levels of the organization. Change efforts must include plans for identifying leaders throughout the company and pushing responsibility for design and implementation down, so that change “cascades” through the organization. At each layer of the organization, the leaders who are identified and trained must be aligned to the company’s vision, equipped to execute their specific mission, and motivated to make change happen.
A major multiline insurer with consistently flat earnings decided to change performance and behavior in preparation for going public. The company followed this “cascading leadership” methodology, training and supporting teams at each stage. First, 10 officers set the strategy, vision, and targets. Next, more than 60 senior executives and managers designed the core of the change initiative. Then 500 leaders from the field drove implementation. The structure remained in place throughout the change program, which doubled the company’s earnings far ahead of schedule. This approach is also a superb way for a company to identify its next generation of leadership.
4. Make the formal case. Individuals are inherently rational and will question to what extent change is needed, whether the company is headed in the right direction, and whether they want to commit personally to making change happen. They will look to the leadership for answers. The articulation of a formal case for change and the creation of a written vision statement are invaluable opportunities to create or compel leadership-team alignment.
Three steps should be followed in developing the case: First, confront reality and articulate a convincing need for change. Second, demonstrate faith that the company has a viable future and the leadership to get there. Finally, provide a road map to guide behavior and decision making. Leaders must then customize this message for various internal audiences, describing the pending change in terms that matter to the individuals.
A consumer packaged-goods company experiencing years of steadily declining earnings determined that it needed to significantly restructure its operations — instituting, among other things, a 30 percent work force reduction — to remain competitive. In a series of offsite meetings, the executive team built a brutally honest business case that downsizing was the only way to keep the business viable, and drew on the company’s proud heritage to craft a compelling vision to lead the company forward. By confronting reality and helping employees understand the necessity for change, leaders were able to motivate the organization to follow the new direction in the midst of the largest downsizing in the company’s history. Instead of being shell-shocked and demoralized, those who stayed felt a renewed resolve to help the enterprise advance.
5. Create ownership. Leaders of large change programs must overperform during the transformation and be the zealots who create a critical mass among the work force in favor of change. This requires more than mere buy-in or passive agreement that the direction of change is acceptable. It demands ownership by leaders willing to accept responsibility for making change happen in all of the areas they influence or control. Ownership is often best created by involving people in identifying problems and crafting solutions. It is reinforced by incentives and rewards. These can be tangible (for example, financial compensation) or psychological (for example, camaraderie and a sense of shared destiny).
At a large health-care organization that was moving to a shared-services model for administrative support, the first department to create detailed designs for the new organization was human resources. Its personnel worked with advisors in cross-functional teams for more than six months. But as the designs were being finalized, top departmental executives began to resist the move to implementation. While agreeing that the work was top-notch, the executives realized they hadn’t invested enough individual time in the design process to feel the ownership required to begin implementation. On the basis of their feedback, the process was modified to include a “deep dive.” The departmental executives worked with the design teams to learn more, and get further exposure to changes that would occur. This was the turning point; the transition then happened quickly. It also created a forum for top executives to work as a team, creating a sense of alignment and unity that the group hadn’t felt before.
6. Communicate the message. Too often, change leaders make the mistake of believing that others understand the issues, feel the need to change, and see the new direction as clearly as they do. The best change programs reinforce core messages through regular, timely advice that is both inspirational and practicable. Communications flow in from the bottom and out from the top, and are targeted to provide employees the right information at the right time and to solicit their input and feedback. Often this will require overcommunication through multiple, redundant channels.
In the late 1990s, the commissioner of the Internal Revenue Service, Charles O. Rossotti, had a vision: The IRS could treat taxpayers as customers and turn a feared bureaucracy into a world-class service organization. Getting more than 100,000 employees to think and act differently required more than just systems redesign and process change. IRS leadership designed and executed an ambitious communications program including daily voice mails from the commissioner and his top staff, training sessions, videotapes, newsletters, and town hall meetings that continued through the transformation. Timely, constant, practical communication was at the heart of the program, which brought the IRS’s customer ratings from the lowest in various surveys to its current ranking above the likes of McDonald’s and most airlines.
7. Assess the cultural landscape. Successful change programs pick up speed and intensity as they cascade down, making it critically important that leaders understand and account for culture and behaviors at each level of the organization. Companies often make the mistake of assessing culture either too late or not at all. Thorough cultural diagnostics can assess organizational readiness to change, bring major problems to the surface, identify conflicts, and define factors that can recognize and influence sources of leadership and resistance. These diagnostics identify the core values, beliefs, behaviors, and perceptions that must be taken into account for successful change to occur. They serve as the common baseline for designing essential change elements, such as the new corporate vision, and building the infrastructure and programs needed to drive change.
8. Address culture explicitly. Once the culture is understood, it should be addressed as thoroughly as any other area in a change program. Leaders should be explicit about the culture and underlying behaviors that will best support the new way of doing business, and find opportunities to model and reward those behaviors. This requires developing a baseline, defining an explicit end-state or desired culture, and devising detailed plans to make the transition.
Company culture is an amalgam of shared history, explicit values and beliefs, and common attitudes and behaviors. Change programs can involve creating a culture (in new companies or those built through multiple acquisitions), combining cultures (in mergers or acquisitions of large companies), or reinforcing cultures (in, say, long-established consumer goods or manufacturing companies). Understanding that all companies have a cultural center — the locus of thought, activity, influence, or personal identification — is often an effective way to jump-start culture change.
A consumer goods company with a suite of premium brands determined that business realities demanded a greater focus on profitability and bottom-line accountability. In addition to redesigning metrics and incentives, it developed a plan to systematically change the company’s culture, beginning with marketing, the company’s historical center. It brought the marketing staff into the process early to create enthusiasts for the new philosophy who adapted marketing campaigns, spending plans, and incentive programs to be more accountable. Seeing these culture leaders grab onto the new program, the rest of the company quickly fell in line.
9. Prepare for the unexpected. No change program goes completely according to plan. People react in unexpected ways; areas of anticipated resistance fall away; and the external environment shifts. Effectively managing change requires continual reassessment of its impact and the organization’s willingness and ability to adopt the next wave of transformation. Fed by real data from the field and supported by information and solid decision-making processes, change leaders can then make the adjustments necessary to maintain momentum and drive results.
A leading U.S. health-care company was facing competitive and financial pressures from its inability to react to changes in the marketplace. A diagnosis revealed shortcomings in its organizational structure and governance, and the company decided to implement a new operating model. In the midst of detailed design, a new CEO and leadership team took over. The new team was initially skeptical, but was ultimately convinced that a solid case for change, grounded in facts and supported by the organization at large, existed. Some adjustments were made to the speed and sequence of implementation, but the fundamentals of the new operating model remained unchanged.
10. Speak to the individual. Change is both an institutional journey and a very personal one. People spend many hours each week at work; many think of their colleagues as a second family. Individuals (or teams of individuals) need to know how their work will change, what is expected of them during and after the change program, how they will be measured, and what success or failure will mean for them and those around them. Team leaders should be as honest and explicit as possible. People will react to what they see and hear around them, and need to be involved in the change process. Highly visible rewards, such as promotion, recognition, and bonuses, should be provided as dramatic reinforcement for embracing change. Sanction or removal of people standing in the way of change will reinforce the institution’s commitment.
Most leaders contemplating change know that people matter. It is all too tempting, however, to dwell on the plans and processes, which don’t talk back and don’t respond emotionally, rather than face up to the more difficult and more critical human issues. But mastering the “soft” side of change management needn’t be a mystery.
Companies can tap their natural advantage when they focus on changing a few important behaviors, enlist informal leaders, and harness the power of employees’ emotions.
How often have you heard somebody — a new CEO, a journalist, a management consultant, a leadership guru, a fellow employee — talk about the urgent need to change the culture? They want to make it world-class. To dispense with all the nonsense and negativity that annoys employees and stops good intentions from growing into progress. To bring about an entirely different approach, starting immediately.
These culture critiques are as common as complaints about the weather — and about as effective. How frequently have you seen high-minded aspirations to “change the culture” actually manage to modify the way that people behave and the way in which they work? And how often have you seen noticeable long-term improvements?
What Is Corporate Culture?
At its worst, culture can be a drag on productivity. At its best, it is an emotional energizer. Here's how companies can use it to gain a competitive advantage.
If the answer to these last two questions is “rarely,” it wouldn’t surprise us. We don’t believe that swift, wholesale culture change is possible — or even desirable. After all, a company’s culture is its basic personality, the essence of how its people interact and work. However, it is an elusively complex entity that survives and evolves mostly through gradual shifts in leadership, strategy, and other circumstances. We find the most useful definition is also the simplest: Culture is the self-sustaining pattern of behavior that determines how things are done.
Made of instinctive, repetitive habits and emotional responses, culture can’t be copied or easily pinned down. Corporate cultures are constantly self-renewing and slowly evolving: What people feel, think, and believe is reflected and shaped by the way they go about their business. Formal efforts to change a culture (to replace it with something entirely new and different) seldom manage to get to the heart of what motivates people, what makes them tick. Strongly worded memos from on high are deleted within hours. You can plaster the walls with large banners proclaiming new values, but people will go about their days, right beneath those signs, continuing with the habits that are familiar and comfortable.
But this inherent complexity shouldn’t deter leaders from trying to use culture as a lever. If you cannot simply replace the entire machine, work on realigning some of the more useful cogs. The name of the game is making use of what you cannot change by using some of the emotional forces within your current culture differently.
Three dimensions of corporate culture affect its alignment: symbolic reminders (artifacts that are entirely visible), keystone behaviors (recurring acts that trigger other behaviors and that are both visible and invisible), and mind-sets (attitudes and beliefs that are widely shared but exclusively invisible). Of these, behaviors are the most powerful determinant of real change. What people actually do matters more than what they say or believe. And so to obtain more positive influences from your cultural situation, you should start working on changing the most critical behaviors — the mind-sets will follow. Over time, altered behavior patterns and habits can produce better results.
You may be asking: If it is so hard to change culture, why should we even bother to try? Because an organization’s current culture contains several reservoirs of emotional energy and influence. Executives who work with them can greatly accelerate strategic and operating imperatives. When positive culture forces and strategic priorities are in sync, companies can draw energy from the way people feel. This accelerates a company’s movement to gain competitive advantage, or regain advantages that have been lost.
Research shows that companies that use a few specific cultural catalysts — that is to say, those that use informal emotional approaches to influencing behavior — are significantly more likely to experience change that lasts. Of the companies that reported consciously using elements of their culture in Strategy&’s 2013 Global Culture & Change Management Survey, 70 percent said their firms achieved sustainable improvement in organizational pride and emotional commitment. That compares with 35 percent for firms that didn’t use culture as a lever. Although there is no magic formula, no brilliant algorithm, no numerical equation that will guarantee results, we have gleaned some valuable insights through decades of research and observation at dozens of enterprises, including some of the most successful companies in the world. By adopting the following principles, your organization can learn to deploy and improve its culture in a manner that will increase the odds of financial and operational success.
1. Work with and within your current cultural situations. Deeply embedded cultures cannot be replaced with simple upgrades, or even with major overhaul efforts. Nor can your culture be swapped out for a new one as though it were an operating system or a CPU. To a degree, your current cultural situation just is what it is — and it contains components that provide natural advantages to companies as well as components that may act as brakes. We’ve never seen a culture that is all bad, or one that is all good. To work with your culture effectively, therefore, you must understand it, recognize which traits are preeminent and consistent, and discern under what types of conditions these traits are likely to be a help or a hindrance. Put another way, there’s both a yin and a yang to cultural traits.
For example, a European pharmaceutical company with a solid product development pipeline had a tendency to be inward-looking. It had great execution capabilities and an excellent record of compliance with regulators around the world. However, when new products were ready to be launched, the company had a hard time marketing them to physicians and healthcare providers. Rather than bemoaning the company’s ingrained insularity — for example, its collective tendency to value the opinions of internal colleagues more than those of outside experts — the leaders decided to use this feature of its culture to its advantage. They set up a program through which employees were acknowledged and rewarded by colleagues for “going the extra mile” to support customers. By recognizing a new kind of internal authoritativeness, the company tapped a powerful emotional trigger already in place, and engendered a new (and strategically important) behavior in its sales force.
2. Change behaviors, and mind-sets will follow. It is a commonly held view that behavioral change follows mental shifts, as surely as night follows day. This is why organizations often try to change mind-sets (and ultimately behavior) by communicating values and putting them in glossy brochures. This technique didn’t work well for Enron, where accounting fraud and scandal were part of everyday practice, even as the company’s espoused values of excellence, respect, integrity, and communication were carved into the marble floor of the atrium of its global headquarters in Houston. In reality, culture is much more a matter of doing than of saying. Trying to change a culture purely through top-down messaging, training and development programs, and identifiable cues seldom changes people’s beliefs or behaviors. In fact, neuroscience research suggests that people act their way into believing rather than thinking their way into acting. Changes to key behaviors — changes that are tangible, actionable, repeatable, observable, and measurable — are thus a good place to start. Some good examples of behavior change, which we’ve observed at a number of companies, relate to empowerment (reducing the number of approvals needed for decisions), collaboration (setting up easy ways to convene joint projects), and interpersonal relations (devising mutually respectful practices for raising contentious issues or grievances).
A telecommunications company was seeking to improve its customer service. Rather than trying to influence mind-sets by, for example, posting signs urging employees to be polite to disgruntled customers, or having employees undergo empathy training, the company focused on what psychologists call a “precursor behavior” — a seemingly innocuous behavior that reliably precedes the occurrence of problem behavior. Leaders had noticed that poor teaming led to poor customer service, so the company rolled out a plan to encourage better and more effective teaming within call centers. To accomplish this, they set up regular design sessions for improving practices. When employees felt they were part of a happy team, and sensed a greater level of support from colleagues, they began treating their customers better.
In another example, a resources company in the Middle East was seeking to make its workplace safer. Rather than erect placards threatening workers with consequences, the company focused on a relatively basic precursor behavior: housekeeping. It organized a litter drive. Picking up trash as a team helped employees take greater pride in the workplace, which engendered a greater sense of care for fellow employees and made them more likely to speak up when they noticed an unsafe situation. Changed behavior, changed mind-set.
3. Focus on a critical few behaviors. Conventional wisdom advocates a comprehensive approach — everybody should change everything that’s not perfect! But companies must be rigorously selective when it comes to picking behaviors. The key is to focus on what we call “the critical few,” a small number of important behaviors that would have great impact if put into practice by a significant number of people. Discern a few things people do throughout the company that positively affect business performance — for example, ways of starting meetings or talking with customers. Make sure those are aligned with the company’s overall strategy. Also check that people feel good about doing these things, so that you tap into emotional commitment. Then codify them: Translate those critical behaviors into simple, practical steps that people can take every day. Next, select groups of employees who are primed for these few behaviors, those who will respond strongly to the new behaviors and who are likely to implement and spread them.
At an Asian banking company, rapid inorganic growth had led to diverse ways of working across different units and geographies. To focus on improving teaming, customer outcomes, and the ability to realize synergies, the CEO and leadership embarked on a culture-led evolution program. They targeted just three critical behaviors: taking extra steps to delight customers, valuing performance over seniority, and backing up and supporting one another. They then converted these three general behaviors into specifics for each part of the company. Delighting customers, for instance, was translated into frontline staff collaborating with other colleagues to solve client problems and prioritizing the implementation of process improvements that affected customer outcomes. For all three behaviors, leadership recognized and celebrated examples in which people made an extraordinary effort. Senior leaders acted as role models, explicitly modeling these three new behaviors. The company also identified influential frontline, client-facing employees who could demonstrate these new behaviors in action.
4. Deploy your authentic informal leaders. Authority, which is conferred by a formal position, should not be confused with leadership. Leadership is a natural attribute, exercised and displayed informally without regard to title or position in the organizational chart. Because authentic informal leaders, who are found in every organization, are often not recognized as such, they are frequently overlooked and underused when it comes to driving culture. It is possible to identify such leaders through interviews, surveys, and tools such as organizational network analysis, which allow companies to construct maps of complex internal social relations by analyzing email statistics and meeting records. Once identified, these leaders can become powerful allies who can influence behavior through “showing by doing.” In fact, when companies map out their organizations, they can identify leaders who exhibit different core leadership strengths (see “Four Types of Authentic Informal Leaders”).
Four Types of Authentic Informal Leaders
Every organization has people who influence and energize others without relying on their title or formal position in the hierarchy to do so. We call them “authentic informal leaders.” They are a powerful resource in spreading a critical few behaviors from the bottom up. Among the many types of informal leaders present in organizations, the following are seen most frequently.
Pride builders are master motivators of other people, and catalysts for improvement around them. Often found in the role of line manager, they understand the motivations of those with whom they work. They know how to foster a sense of excellence among others. They can be found at every level of a hierarchy; some of the most effective pride builders are close to the front line, where they can interact directly with customers as well as employees. Pride builders often have powerful insights about the culture and about what behaviors are likely to lead to improvement.
Exemplars are role models. They bring vital behaviors or skills to life, and others pay attention to them. They are well respected and are effective peer influencers in the middle and senior management cohorts.
Networkers are hubs of personal communication within the organization. They know many people, and communicate freely and openly with them. They serve as links among people who might not otherwise share information or ideas. If you want to see an idea travel virally through an enterprise, enlist your networkers.
Early adopters enthusiastically latch onto and experiment with new technologies, processes, and ways of working. Involve them in your performance pilots, or whenever you are trying to demonstrate impact quickly.
At one major oil company, an informal leader named Osama became known as the “turbo-collaborator.” His role gave him very little formal influence. But when he began working at the refinery, he walked the plant with the engineers, maintenance technicians, and operators, and took copious notes. As a result, he knew everyone and developed relationships across disciplines. Whenever somebody wanted to know how the place really worked, they would speak to Osama — who would either have the answer in his notebook or know precisely the right person to ask. When the company formed a buddy program between operations and maintenance aimed at using greater collaboration to improve plant reliability, it knew it needed Osama at the heart of it. He connected people, defined templates to encourage collaboration, and captured success stories. Identifying, engaging, and nurturing such informal leaders allows companies to harness their talents and further the company’s transformation efforts.
5. Don’t let your formal leaders off the hook. Most organizations tend to shunt culture into the silo of human resources professionals. But leaders in all parts of the company are critical in safeguarding and championing desired behaviors, energizing personal feelings, and reinforcing cultural alignment. The signaling of emotional commitment sets the tone for others to follow. If staff members see a disconnect between the culture an organization promulgates and the one its formal leadership follows, they’ll disengage quickly from the advertised culture and simply mimic their seniors’ behavior. The people at the top have to demonstrate the change they want to see. Here, too, the critical few come into play. A handful of the right kind of leaders have to be on board to start the process.
When Jim Rogers was CEO of GE Motors in Fort Wayne, Ind., he became frustrated because his senior leadership group of more than 15 leaders seldom functioned together as a “real team.” As described by Jon Katzenbach and Douglas K. Smith in The Wisdom of Teams: Creating the High-Performance Organization (Harvard Business School Press, 1993), a real team is one with a high level of emotional commitment; the leadership role shifts easily among the members depending on their skills and experience and the challenges of the moment, rather than on any hierarchical positions. Team members hold one another accountable for the quality of their collective work. Interestingly, at GE Motors the senior leadership group members often demonstrated real team capabilities in running their individual business units and functions. So Rogers decided to find ways to break them into subteams of three or four members to address specific cross-organizational issues facing the larger group. Over time, he mixed the subgroupings to match emerging issues. By working in different subgroup settings, the executives developed camaraderie, which in turn improved the effectiveness of the group as a whole.
6. Link behaviors to business objectives. When people talk about feelings, motivations, and values — all of which are vital elements of strong cultures — the conversation can often veer into abstractions. It may then range far afield of what it takes to succeed in the market. Too many employees walk away from culture-focused town halls or values discussions wondering how the advice on how to be a better person actually translates into the work they do. To avoid this disconnect, offer tangible, well-defined examples of how cultural interventions lead to improved performance and financial outcomes. Select behaviors that are aimed specifically at improving business performance and can be measured over time.
An oil company’s drive to reduce maintenance costs at an industrial installation highlights the importance of such an approach. The critical few behaviors included empowerment and good decision making. One of the company’s exemplars (employees who lead by example) decided it would be a smart move to make costs visible to workers. So he placed price tags on various pieces of machinery. These cues inspired behavioral changes related to decisions about whether to repair or replace equipment. Workers and managers began to recommend fixing expensive equipment rather than replacing it. The company celebrated and publicized cost savings identified by employees. The behaviors led to a change in focus and mind-set. When an employee noticed that fans were cooling the machinery during the winter, he felt empowered to call it out, and ask whether it was necessary to do so. It turned out that it wasn’t — and the company saved US$750,000 annually in power costs as a result.
7. Demonstrate impact quickly. We live in an age of notoriously short attention spans. That applies as much to organizational culture as it does to people’s media consumption habits. When people hear about new high-profile initiatives and efforts, and then don’t see any activity related to them for several months, they’ll disengage and grow cynical. That’s why it is extremely important to showcase the impact of cultural efforts on business results as quickly as possible. One effective method of doing so is to stage performance pilots — that is, high-profile demonstration projects. Pilots are relatively low-risk efforts that introduce specific behaviors that can then be evaluated and assessed. They often rely on a dashboard that defines desired impacts, the tactics used, and the specific metrics to be employed.
When Bell Canada first explored using new behaviors at the front line to improve its customer service and profitability, there were many more skeptics than believers within the leadership ranks. There simply wasn’t any numerical proof that the tactics would work. So CEO Michael Sabia decided to set up a pilot test in a sales unit near Toronto. The sponsors of the test blocked out a tight time frame of eight months, and developed realistic ways of measuring behavior change, customer reactions, and actual sales and margin performance. Armed with positive results in these areas — a 29 percent increase in customer satisfaction in retail stores, a 31 percent increase in revenue per call at call centers — the company went on to accelerate the expansion of these efforts across the front line in different geographies, functions, and businesses.
8. Use cross-organizational methods to go viral. Ideas can spread virally across organizational departments and functions, as well as from the top down and from the bottom up. One powerful way to spread ideas is through social media: blogs, Facebook or LinkedIn posts, and tweets — not from senior management, but from some of the authentic informal leaders mentioned in Principle 4.
By now it is well established that social media can be more effective at spreading information, news, and music than traditional modes of distribution. The same holds with critical behaviors. People are often more receptive to changes in “the way we do things around here” when those changes are recommended or shared by friends, colleagues, and other associates. This kind of credible social proof is more compelling than similar testimonials from someone whose job it is to sell something.
Just as there is an art to making content go viral, there’s a craft to making behavior go viral. For example, in a model that we have tested successfully in several situations, a company starts with a few carefully chosen groups of 12 to 15 informal leaders in three or four different parts of the business. After several weeks, an additional 10 to 15 groups of informal leaders are set up in every business unit. After about three months, the existing groups are encouraged to expand and bring in new people. After another three to six months have passed, the groups become more autonomous, allowed to control their own expansion. Meanwhile, the company facilitates connections among groups to share learning and insights. As behavior spreads, company leaders see increased performance as well as peer and leadership recognition.
9. Align programmatic efforts with behaviors. We’ve emphasized the role that informal leaders can play in helping ideas go viral. But it’s also important to match the new cultural direction with existing ways of doing business. Informal mechanisms and cultural interventions must complement and integrate with the more common formal organization components, not work at cross-purposes. By providing the structure in which people work — through disciplines such as organization design, analytics, human resources, and lean process improvement — the formal organization provides a rational motivation for employee actions, while the informal organization enables the emotional commitment that characterizes peak performance.
The U.S. Marine Corps provides a classic example of integrating formal and informal leadership efforts. The “rule of three” dictates how the Marines design their organizations and projects and how they execute in a hierarchy. (Three squads form into one of three divisions, which form one of three battalions.) The formal leaders of those units are expected to know the intent of the officer two levels above them — and to call out any order or situation they perceive to be incoherent or in conflict with that intent. But there are also informal leaders: Each of the four members of a frontline rifle team is prepared (and expected) to take the lead whenever the formal leader is disabled or loses the high-ground position. This means that the informal leaders also need to know the intent of that officer two levels above. Integrating informal norms with the formal structures helps enable the timely battlefield adjustments that have served the Marine Corps well for more than 200 years.
10. Actively manage your cultural situation over time. Companies that have had great success working with culture — we call them “culture superstars” — actively monitor, manage, care for, and update their cultural forces. Why? As we noted at the outset, when aligned with strategic and operating priorities, culture can provide hidden sources of energy and motivation that can accelerate changes faster than formal processes and programs. Even if you have a highly effective culture today, it may not be good enough for tomorrow.
Southwest Airlines stands as an example of a battle-tested company in which culture has been managed over time. Famous for its long-term success in an industry where even the largest players routinely fail, Southwest for 40 years has been energized by a deep sense of pride among all employees. Southwest has found that constructing an environment that puts its employees first — above customers and owners — fosters a sense of emotional commitment and pride that delivers excellent customer service. But at Southwest, the work on culture is never completed. Just as the airline’s strategy, tactics, and technologies have evolved to cope with a changing external environment, specific HR practices, including informal behaviors, have shifted over time.
Living in Your Culture
Although challenging, multidimensional, and often difficult to deal with, a company’s cultural situation constitutes a powerful set of emotional resources. As is the case with other resources — human, technological, financial — it is incumbent upon leaders to strive to get the most value out of it.
To a degree, culture can be compared to natural forces such as winds and tides. These elements are there in the background, sometimes unnoticed, sometimes obvious. Endowed with immense power, they can waylay plans and inhibit progress. They can’t really be tamed or fundamentally altered. But if you respect them and understand how to make the most of them, if you work with them and tap into their hidden power, they can become a source of energy and provide powerful assistance.
The best way to start is to ask yourself a series of questions. What are the most important emotional forces that determine what your people do? What few behavior changes would matter most in meeting strategic and operational imperatives? Who are the authentic informal leaders you can enlist? And what can you and your fellow senior leaders do differently to signal and reinforce those critical behaviors?
Of course, you shouldn’t plan for dramatic results overnight. Expect an evolution, not a revolution. One of the challenges of working with culture is that, as we’ve noted, it changes gradually — often too slowly for leaders facing fast-moving competitors. That’s the bad news. The good news? If you approach culture with respect and intelligence, as a milieu in which you and your enterprise live, you can use it to accelerate your competitive momentum. There’s no better time than the present to start.
