culture rx - oliver wyman

AUTHORSBrian Prentice Philippe Gouel

As continuous improvement (CI) matures in non-traditional environments

such as support services, corporate centers, and white collar functions, new

challenges are being faced. Many companies are starting to realize why their

CI initiatives aren’t working: Communication is lacking, leadership teams

aren’t taking action, and incentives have employees focused on different

goals. However, actually making changes can feel like a monumental

task. In this paper, we help you visualize your organization’s strengths

and weaknesses by introducing the CI Culture Matrix, and offer practical

solutions for shifting your efforts to amplify CI results.

Enterprise Transformation

CULTURE RxCULTURAL MALAISE MAY BE STIFLING YOUR CONTINUOUS IMPROVEMENT PROGRAMS – WE’VE GOT THE REMEDY

Long before the term “lean” was coined by researchers at MIT in the 1980s, Toyota spent

many years perfecting what is now known as “The Toyota Way.” While the tools got most of

the attention, what made Toyota successful were the leadership principles and employee

behaviors—the company’s culture—that stood behind the famed production system. Heavily

influenced by the philosophies of its founding family, The Toyota Way empowered front-line

workers and rewarded them for their hard work with the promise of lifetime employment. In

return, they were motivated to constantly help improve the business.

That may not sound like many corporate cultures today. Lifetime employment has gone

the way of the company car. Employee engagement has suffered amid a brutal recession

that has slashed jobs, slowed career advancement, and in some cases, stripped workers

of decision-making power. And while a few major corporations remain influenced by their

founding families, far more lose touch with those roots as they grow bigger, merge with

other firms, and change strategies in a globally competitive business world.

But no matter how different your company may seem from Toyota’s iconic culture, there

are ways to shift it so that continuous improvement programs can be more effective.

Management may focus on tools such as lean production systems or Six Sigma process

improvements, but our research shows that it is culture that actually makes the difference

between success and failure. Companies that lack basic cultural competencies will struggle

to see results, while those that embody an engaged, empowered workforce with good

leadership, communication, and execution will witness a far better outcome.

In the paper “Culture Clash: Diagnosing the Strengths and Weaknesses of Your Most

Important Element for Change,” we described five cultural elements (energy of execution,

commitment to teamwork, communication and knowledge flow, leadership, and motivation)

that can help leaders determine how prepared their companies might be. We also offered a

diagnostic tool to help you assess which of those elements were strengths or weaknesses,

and determine how ready your culture is overall to embrace continuous improvement.

Now that you’ve taken that test, this paper will help you recognize how consistent your

organization is and how fast you can see results. It also offers ideas for moving your company

toward a culture that’s primed to get the most out of CI.

Copyright © 2012 Oliver Wyman 2

VISUALIZING CORPORATE CULTURE

Once you understand how ready your company is for CI, the next step is to think about how

to improve it. To do so, it’s helpful to first envision what kind of culture you have in order to

focus on where it needs improving. We’ve done this by plotting the five cultural elements on

a matrix, dividing them into two types of indicators.

Energy of execution and commitment to teamwork are both measures of speed; they reflect

how quickly an organization can produce results and how much it believes in change.

Meanwhile, leadership, motivation, and communication and knowledge flow are all

measures of alignment. They illustrate the consistency of a company’s messaging, actions,

and rewards and its underlying commitment to a common business vision. By using these

two indicators, we can now visualize four distinct cultures:

ExHIBIT 1: CI CULTURE MATRIx

COMMUNE THE CULTURE CLUB

AVERAGE COMPANY

THE FIRE STATION

LIMITED ALIGNMENT

FULL ORGANIZATIONAL ALIGNMENT

SLOW TO ACHIEVE RESULTS

QUICK TO ACHIEVE RESULTS 1 10

1

15

Organization is open, creative, and committed.

There is good communication but

little energy or urgency for execution.

Orchestrated and accelerated solutions

are common. CI has become a part

of cultural DNA .

Emergency tactics and heroic e�orts are needed

to overcome hurdles. Long hours

are unsustainable.


WHAT KIND OF CULTURE DO YOU HAVE?

The CI Culture Matrix is meant to be a simple tool that can help you visualize how ready

your company is for CI. Clearly, the ideal path is to move toward the upper right quadrant.

To find out where your business falls, look back at your scores from the CI Maturity Model.

Add up your points from the first two columns (execution and teamwork) to find where your

organization falls on the horizontal access. Then, add up your points from the other three

columns (communication, leadership, and motivation) to see where you are on the vertical

access. By plotting these two numbers on the matrix, you can visualize what kind of work

needs to be done, and what kind of culture you have:

The Average Company – Most organizations, if their leaders have been honest with

themselves, fall into this quadrant. In these companies, employees and executives perceive

CI as having limited benefit and requiring too much change. For some companies, it’s

possible to remain there: Those with little to no competition can still be successful. But for

most, survival demands that they adapt. Start by taking incremental steps and working to

improve no more than two to three cultural elements at one time.

The Commune – These companies believe in moving together with a common vision.

However, they find change to be cumbersome and often consider it only after many slow

rounds of discussion in an effort to reach consensus. They tend to be creative and value the

ideas of their employees, but this creativity is difficult to harness and wrestle into action.

To move into the upper-right quadrant, commune organizations need to move gradually, as

drastic moves could challenge core values. Focus on developing team capabilities first. With

more power, they’ll be able to make faster decisions.

The Fire Station – In these companies, the dominant belief is that change is necessary

to get anything done. They are very good at achieving quick wins, but they’ve learned to

do so through working long hours and taking emergency measures to overcome a lack of

organizational alignment. As a result, they struggle to sustain their successes and have

trouble with long-term opportunities. Moving into the upper right quadrant typically

requires a focus on leadership and motivation to improve consistency.

The Culture Club – Finally, in the upper right quadrant is the ideal state, represented by

companies such as Toyota or Apple. What makes them stand apart is balance. That said,

many of them haven’t always been ideal: They often had a crisis or defining event that

pushed them into this state.

Once you have placed your organization within the CI Culture Matrix you can identify

the gaps you need to work on. Exhibit 2 offers a few tactical solutions for improving your

weakest elements or enhancing your strengths.


ExHIBIT 2: POTENTIAL SOLUTIONS FOR FIxING CULTURAL ROADBLOCKS

CI CULTURAL ELEMENT POSSIBLE SOLUTIONS

Energy of execution • Create a clear structure with measurements of success, charters, and objectives so that teams can move quickly.

• Early on, knock out something big that’s not working to demonstrate action, and then broadcast the news widely.

• Have key executives champion projects or review updates to maintain momentum.

• Survey teams for resource constraints, obstacles to progress, and bottlenecks in the organization that need fixing. Then, show that top management is taking immediate action on those complaints.

Commitment to teamwork • Be inclusive when forming teams. Balance skills, expertise, and competencies at all levels.

• Address the issues that get in the way of teamwork, such as labor relations or friction between siloed business units or functions.

• Consider coaching for management teams if needed.

• Invest in team selection and team building efforts, including training and outside facilitation.

Communication and knowledge flow • Use the four rule policy: no secrets, no surprises, no hype, and no empty promises.

• Have an open book policy wherever possible with consistent communication.

• Build an environment where collaboration and the exchange of ideas are rewarded.

• Host quarterly “town hall” events for all employees that showcase CI results, having team members talk about how CI has impacted them personally. Create a presence on internal web sites to share progress and good news.

Leadership • Carefully select and train leaders who are not micromanagers but are willing to push responsibility down into the organization. Empowered front-line workers are the engines of a successful continuous improvement program.

• Leadership in a CI culture generally means being a coach, a cheerleader, and an active participant. Executive sponsors should attend training, clear their calendars to be present at updates, and involve themselves personally whenever possible.

• Tie financial incentives to CI so that it gets priority status.

• Work to diagnose the roots of conflict on senior management teams that could slow decision making.

Motivation • Include CI program goals in performance management systems and rewards.

• Don't trivialize projects or accomplishments. Give small wins recognition, even if it is only a poster in the cafeteria or a video on the company’s internal web site.

• Make sure all teams receive senior management attention or recognition from time to time.

• Give employees a voice in the process. Continuous improvement depends on an engaged workforce that feels as if their ideas are put to work. Once they see their ideas in action and feel they are empowered to come up with solutions, they are more likely to engage with the program.


CONCLUSION

Continuous improvement has proven to be more than a management fad. However, many

companies have seen momentum in their programs fade as the tools fail to overcome

limitations in corporate culture. The commitment to CI is really a commitment to changing

corporate culture. That requires an investment of both time and energy. Though change is

never easy, using the CI Maturity Model and the CI Culture Matrix will help you identify your

weaknesses and work on the most effective solutions.

* * *

For more information about cultural change and its role in continuous improvement efforts,

please see the companion piece “Culture Clash: Diagnosing the Strengths and Weaknesses of

Your Most Important Change Element.”


www.oliverwyman.com

Copyright © 2012 Oliver Wyman. All rights reserved. This report may not be reproduced or redistributed, in whole or in part, without the written permission of Oliver Wyman and Oliver Wyman accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions in this report were prepared by Oliver Wyman. This report may not be sold without the written consent of Oliver Wyman.

ABOUT OLIVER WYMAN

Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across 25 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm’s 3,000 professionals help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC], a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in risk and reinsurance intermediary services; and Mercer, a global leader in human resource consulting and related services. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.

Oliver Wyman’s Enterprise Transformation services have enabled clients to significantly improve their operating performance and capacity, service levels, quality, and organizational capabilities through the strategic application of transformation principles and methodologies. For more information and other related articles, please go to: www.oliverwyman.com.

For more information about Oliver Wyman’s perspectives on Enterprise Transformation, please contact your account representative or one of the following partners:

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culture rx - oliver wyman

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