Bussines Strategy Series

bss cover (i) no 5_ human.
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ISSN 1751-5637
Volume 8 Number 5 2007
Business Strategy
Series
2007
formerly Handbook of Business Strategy
Focus on human resource

development
www.emeraldinsight.com
Table of contents
Focus on human resource development
Volume 8 Number 5 2007
Feature articles
Access this journal online 327 Understanding success: economics and human nature 330
Julie Verity
List of contributors 328 The article raises issues about rational approaches to strategic thinking and the associated
dangers if aspects of human nature are sidelined or ignored. Drawing on her experience and
research, the author presents a case study of a successful company that took heed of these
issues and thrived in an increasingly competitive market.
Placing organizational learning in the context of strategic management 335

Peter Trim and Yang-Im Lee
By adopting the organizational learning approach, top management can put in place a
number of management systems and structures that facilitate the strategic decision-making
process. Internal weaknesses can be identified and eradicated, and external opportunities can
be taken advantage of. As a result, the organization will develop a sustainable competitive
advantage and further improve its competitive position by remaining customer focused.
Developing emerging leaders: a new solution to an old problem 343

Stephen Xavier
With the baby boomer retirement bubble about to burst, leaders must take action now to plan
for succession and create bench strength for the future success of the organization. No one
is better qualified to develop a company’s future leaders than its current leaders. This article
argues that current approaches to leadership development are ineffective and proposes a
new model for developing both individuals and future leadership teams concurrently.
Driving cultural change through behavioral differentiation at

Westinghouse 350
Terry R. Bacon
In 2003, Westinghouse Electric Company, the world’s pioneering nuclear power company,
was in a very strong position in its markets but had feedback from customers indicating that
the company was difficult to work with and not customer focused. To remedy this,
Westinghouse embarked on a comprehensive cultural transformation initiative that focused
largely on behavioral change. Although this change effort is ongoing, the early results, which
are discussed in this article, are both powerful and encouraging.
The five essential practices of a talent multiplier 358

Susan Cantrell and James M. Benton
Companies that create a ‘‘talent multiplier’’ generate superior results from their workforces.
This article details five human-capital activities that are strongly related to financial success,
and explains the obstacles that frequently prevent them from being practised.
VOL. 8 NO. 5 2007, # Emerald Group Publishing Limited, ISSN 1751-5637

| BUSINESS STRATEGY SERIES
| PAGE 325
Is your sales force a barrier to more profitable pricing . . . or is it you? 365
Tom Nagle and John Hogan
Consistent pricing policies are key to growing and maintaining profit margins and avoiding
price erosion, but many managers fear that their sales force won’t accept such an approach
to closing business. The authors of this article contend that if the appropriate incentives are in
place to encourage salespeople to sell on value instead of just price, sales will begin to focus
more on driving profitability and less on volume – an approach that benefits both buyers and
sellers.
How ‘‘winning’’ boards contribute to corporate growth 369

Colin Coulson-Thomas
Some companies prosper and grow while others in similar situations and circumstances
stagnate or decline. What do the directors and boards of successful or winning companies
do differently? This article outlines behaviors and approaches adopted by winning boards, the
mindsets that can lead to ascent or decline, and what boards need to do to provide strategic
leadership.
PAGE 326
| BUSINESS STRATEGY SERIES
| VOL. 8 NO. 5 2007
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List of contributors
Terry R. Bacon
Terry R. Bacon is President and CEO of Lore International Institute, a global executive
development firm headquartered in Durango, Colorado, and Zurich, Switzerland. In nearly
30 years of consulting and teaching, he has served many Fortune 100 firms and coached
thousands of executives. He has authored or co-authored more than 90 books, articles, and
related publications including Winning Behavior, The Behavioral Advantage, Leadership
through Influence, Effective People Skills, and High-Impact Facilitation. His latest book,
What People Want: A Manager’s Guide to Building Relationships that Work, will be published
in Fall 2006. He is a frequent speaker on subjects related to leadership, organizational
effectiveness, and behavioral differentiation. He can be reached at bacon@lorenet.com
James M. Benton
James M. Benton is an Associate Partner in the Accenture human performance service line.
He can be reached at james.m.benton@accenture.com
Susan Cantrell
Susan Cantrell is a Senior Manager at the Accenture Institute for High Performance Business
in Wellesley, MA. Her work has appeared in MIT Sloan Management Review,
Strategy þ Leadership, Strategic HR Review, and workforce.com. She can be reached at
susan.cantrell@accenture.com
Colin Coulson-Thomas, an experienced chairman of award-winning companies and
Professor of Direction and Leadership at the University of Lincoln, has advised over 100
boards on director, board and business development. The author of over 40 books and
reports, including Winning Companies, Winning People, The Knowledge Entrepreneur,
Shaping Things to Come, Individuals and Enterprise, and forthcoming new editions of his
classics Creating Excellence in the Boardroom and Developing Directors, Colin has spoken
at over 200 national and international conferences and corporate events in over 25 countries.
He is also a member of the Board of Examiners and the Professional Accreditation
Committee of the Institute of Directors. He can be reached at colinct@tiscali.co.uk
John Hogan
John Hogan is a group leader at Strategic Pricing Group, a member of Monitor Group, and
serves in the role of pricing strategy expert and thought leader for emerging pricing
challenges. Dr Hogan has published numerous articles on pricing, customer value, and
managing B2B relationships, and is co-author of the fourth edition of The Strategy and
Tactics of Pricing with Dr Tom Nagle. Dr Hogan has taught pricing strategy at the Boston
College Carroll School of Management, University of Chicago, Columbia University, and the
University of North Carolina. He is based in Monitor’s office in Cambridge, MA.
Yang-Im Lee
Yang-Im Lee is a Lecturer in marketing at the School of Management, Royal Holloway,
University of London. She is fluent in Korean and Japanese and has taught various
PAGE 328 j BUSINESS STRATEGY SERIES j VOL. 8 NO. 5 2007, pp. 328-329, Q Emerald Group Publishing Limited, ISSN 1751-5637
undergraduate and postgraduate marketing courses. She is at present undertaking
research in the area of international business, comparative management and marketing
strategy. She can be reached at Yang-im.lee@rhul.ac.uk
Tom Nagle
Tom Nagle is the founder of Strategic Pricing Group, a member of Monitor Group. He has
been consulting on pricing for more than two decades and has personally developed many
of the tools used in SPG’s consulting practice. Dr Nagle is the author of The Strategy and
Tactics of Pricing, currently in its fourth edition, which is the largest selling and most widely
used book on pricing strategy in MBA programs. He is based in Monitor’s office in
Cambridge, MA.
Peter Trim
Peter Trim is a Senior Lecturer in Management and Director of the Centre for Advanced
Management and Interdisciplinary Studies at Birkbeck College, University of London. He
teaches various marketing courses including marketing strategy and international
marketing, and is undertaking research into various aspects of corporate intelligence and
strategic marketing. He can be reached at p.trim@bbk.ac.uk
Julie Verity
Julie Verity is an Independent Consultant whose primary interest is business strategy. She is
also a Research Associate at Ashridge and a Visiting Lecturer at CASS Business School,
London. She can be reached at julie.verity@ashridge.org.uk
Stephen Xavier
Stephen Xavier, America’s Top Coache, is President/CEO of Cornerstone Executive
Development Group, Inc., a global firm specializing in executive coaching and related
leadership development. He can be reached at Xavier@cedg.com
j j
VOL. 8 NO. 5 2007 BUSINESS STRATEGY SERIES PAGE 329
Understanding success: economics and
human nature
Julie Verity
Julie Verity is an his is the story of Metax, a Danish petrol retailing company. It was founded over a
Independent Consultant
whose primary interest is
business strategy. She is
T hundred years ago as a coal importing/butter exporting business operating from
Aalborg, a town in the Northwest of Denmark. Over the years the company evolved
through coal importing into an oil and gasoline trading business. In 1970 the company was
also a Research Associate
bought by Meta and Axel Petersen and renamed Metax. In 1979, the company was acquired
at Ashridge, Berkhamsted,
and became a wholly owned subsidiary of Dansk Shell, and hence part of the Shell Group (a
UK, and a Visiting Lecturer
at CASS Business School,
global oil and gas business).
London. She can be The main focus of the business is now petrol retailing. Since Shell acquired Metax its leaders
reached at julie.verity@ have had complete autonomy, working under the mutually agreed arrangement with Shell
ashridge.org.uk that so long as they delivered against Metax’s financial targets they were free to pursue their
own ideas and strategic direction.
I first visited Metax in 1997. My purpose was to find out why this company was successful. At
that time, selling petrol in most of the mature markets in Europe did not generate good
returns, but Metax was profitable and performed consistently well. Over the next eight years,
I continued my research of the market and Metax. Despite a hostile market environment and
losing the two leaders of the organization (who had worked there for close to 35 years each),
Metax continued to deliver profit and/or growth. (In one year, during a very aggressive price
war, profits were virtually nil but market share increased). The research was turned into a
case study that focused on competitive strategy and was used to teach MBA classes and
managers attending executive development programs.
Over the years, the case has been updated and classes have explored how the market and
Metax have developed.
Rational concepts
Managers and students read the Metax case and come to the class prepared for a debate
about the company’s success. Success in this instance is defined as competitive advantage
as the case does not show the relative profitability of competitors in the market. The lists of
advantages that students prepare are long and, after more discussion and synthesis about
the sources of competitive advantage, there is agreement that Metax has strong, positive
The article raises issues about
differentiators over what competitors have and that these are sustainable, at least for the
rational approaches to strategic next five years.
thinking and the associated
dangers if aspects of human However, this analysis is generally not enough to change the preconceived ideas held by the
nature are sidelined or ignored.
Drawing on her experience and
majority in the classroom that the international competitor brands would be more profitable
research, the author presents a than Metax.
case study of a successful
company that took heed of When the figures are reviewed it is clear that Metax does deliver superior profits over rivals,
these issues and thrived in an
increasingly competitive
but students find it genuinely difficult to believe that this relatively small company (with less
market. than 10 per cent of the market) out-performs the international brands. Their preconceived
PAGE 330 j BUSINESS STRATEGY SERIES j VOL. 8 NO. 5 2007, pp. 330-334, Q Emerald Group Publishing Limited, ISSN 1751-5637 DOI 10.1108/17515630710684439
‘‘ Relatively simple economic concepts are appealing to
managers, but it is not wise to trust rationality alone. ’’
beliefs remain intact: that big companies have economies of scale, economies of scope,
economies of learning, greater capital resources – which, by implication, allow access to
superior talent markets, superior system providers, superior advice, superior training and so
forth. All of these, they argue, are highly rational, logical and economically sound reasons
why the big international players should be better at this business than a company that has
never strayed outside of Denmark.
They have a seemingly hard time understanding that these perceived economic descriptors
of success have been outweighed by Metax’s competitive advantages: leaders who are
passionate about introducing new technology ideas into the business; clear about the focus
of the company; very knowledgeable about their customers, spend a lot of time researching
the market and who were almost obsessive about delivering the annual plan because they
valued being allowed to pursue their own ideas free from ‘‘shareholder control’’.
In the minds of the students, the Metax advantages formed the sources of success which
translated into tangible competitive advantages such as, unique, fully integrated
accounting, IT and customer relationship management systems which delivered inimitable
customer value. As one example, customers receive text messages with cut price offers on
car washes, enabled by real-time information from all Metax service stations and a customer
base with Metax credit cards and online accounts.
The students are told that just because powerful, rationally persuasive concepts like
economies of scale exist does not necessarily mean they translate, or are translated into
practice. But the arguments about scale, scope and access to capital and other resources
still appear to them more credible than declaring that human passion and motivation are the
drivers of economic and competitive advantages. Why are students so keen to hold on to
their sense of reasoning in light of evidence that challenges the basis of their rationality?
More complex, intangible notions

This inclination to trust relatively simple economic ideas instead of more complex, intangible
notions of success that involve people and the contribution they can make is not limited to
students or classroom participants. It is also pervasive in the real world of industry, despite
case histories of companies such as Metax.
While economies of scale in the petrol retailing business can, and are, realized daily by some
successful companies in other geographic markets, at this time in Denmark, Metax shared
the lowest cost position with one other relatively small, low-cost player. Metax’s volume was
less than a quarter that of the major international brands. Hence they were low volume and
low cost.
Their low cost position was partly realized through a unique combination of automation and
empowered tanker drivers who serviced their own territories within the Metax network. With
this arrangement, schedulers (people who plan deliveries against orders and issue routes to
drivers) are not required. The driver can plan his own schedule of work and because each
truck has a computer on board, the driver can do the associated paperwork and order
administration.
Working the same territory, drivers and station managers got to know each other and made
mutually acceptable times for deliveries, reducing the time spent on each delivery. This,
coupled with automated information about the level of product in the tanks at service
stations, meant that between five and seven fewer deliveries to each station were made
annually, resulting in big cost savings.
Metax tanker drivers were paid slightly more than drivers in the industry generally. Turnover
of Metax drivers was very low, and most had been working with Metax for about 20 years.
j j
Low turnover was attributed to the extra interest drivers had in the work and because of the
control and responsibility they were given over their territory. This also resulted in drivers
making very few mistakes during deliveries and stock-outs were rare. The leaders at Metax
talked about their drivers being proud of their trucks and it was Metax policy to renew trucks
frequently because drivers take more care of new trucks.
The leaders at Metax also believed it was important to find ways to instil pride into employees
about their work. This was one reason why they invested in IT – to take the drudge out of
boring work and give their staff more interesting things to do. Motivated people, working with
unique automated systems, made Metax’s distribution costs up to 50 per cent less than
competitors who had four times the scale advantage.
Despite these successes, in 2004, in an exercise that was designed to lower costs,
distribution to Metax service stations was merged into Shell’s. The cost savings
demonstrated on paper – due to increased scale – were persuasive and difficult to resist
during a year of aggressive price competition in the market. One year later, however, Metax
management was not recouping the cost savings that had been promised on paper and,
stock-outs were now a reality. Service quality had fallen and drivers did not feel the same
level of ownership they had under the old Metax system.
The current leader at Metax reflected back on how easy it was to demonstrate savings on a
spreadsheet but that such cost-savings were harder to realize in practice. In fact, the
implementation of the new system was de-motivating for the people in the company as they
worked hard to effect the change that showed no positive outcomes. There was little
optimism that the new merged operation would ever perform as well for Metax as the
dedicated one had in the past.
Technology’s place
Success at Metax is underpinned by the technology the company has invented and
deployed throughout its activities. The company was the first in Europe to put automated
payment systems on its service station forecourts – in 1971. (At that time, there were no
ATMs, no electronic card reading systems and no-one even dreaming about automated
payment.) One of the then leaders in Metax had a mind to pursue this idea and after more
conventional routes to turning his dream into reality failed, he decided to approach a friend
who worked at Lego. He enlisted his help and made the first prototype card reader to trial on
Metax forecourts – constructed by Lego.
This eccentric story is written in the case study, but is rarely, if ever, mentioned by business
students in their analysis of Metax’s success. Instead they focus on the company’s low costs
and describe this as the primary motivator of finding innovative new technology
applications. Hence they make the assumption that the strategy is to be low cost, and
therefore Metax invents clever new automation ideas. Actually the people in the company
with long memories tell a different story. They suggest their goals have never been as rational
or logical as my students would surmise.
In reality, the leaders in Metax were fascinated by technology and brought this passion for
experimentation with automation and IT into their business. It just so happened that the ideas
they had about using technology allowed them to price lower than rivals. Throughout the
case there are no references to the leaders talking about technology as their deliberate route
to lower cost. Instead, the leaders talk about using technology to give customers a better
(faster) experience at their stations, or using technology to enhance their own employees’
jobs.
Another motivation for the leaders of Metax was the need to prove to other players in the
market and especially their owners (Shell) that ‘‘small’’ could be just as successful as ‘‘big’’.
Perceiving themselves to be in a relatively vulnerable position meant they were constantly
looking for innovations that could be brought into the business to help them work smarter or
provide something distinctively clever for their customers. An example of this is the way the
company embraced the possibilities of the internet well ahead of other petrol retailers.
j j
PAGE 332 BUSINESS STRATEGY SERIES VOL. 8 NO. 5 2007
At a fully automated Metax service station, for example, customers with Metax credit
accounts no longer have to put their credit cards into card readers at the forecourt to pay for
their petrol. Instead, they drive onto the forecourt and before getting out of the car, call the
Metax number from their mobile phone. They can activate the pump where they are parked,
and their credit account by entering their pin number into the phone followed by the four-digit
identifier that is clearly marked on the petrol pump. After filling the car with petrol, they simply
drive off, knowing that a receipt will be e-mailed as a JPEG file to their e-mail address a few
minutes later.
A full record of the account is available online, with details of purchase dates, quantities and
locations where petrol was bought. If the customer chooses to record mileage, the online
account also calculates kilometres per litre or per kroner. Online accounts and paperless
receipts are lower cost to Metax and offer customers service advantages.
The important insight is that the company has not got a rational, deliberate strategy to be low
cost – which is often how the case is analyzed and the company viewed by competitors – it
is that at the heart of this company, reflected in its culture, is a passion for technology and
applying new ideas in clever ways to benefit the customer and the people who work for them.
The people working in Metax and its leaders are not motivated to be ‘‘low cost’’ – this is
something that is quite hard, as human beings, to be motivated by.
Metax recruits people to work for and lead the company who are motivated to apply the
latest technology to benefit customers builds competitive advantages, one of which
happens to be that it is low cost. Hence, low cost is an outcome of the culture shared among
the people in Metax – a culture which values finding new ways to use technology in the
business to benefit customers or out-smart competitors.
The dangers of rationality

In 1996, the leaders at Metax recruited a new graduate onto the staff. He was recruited
specifically to succeed as leader when the two incumbents retired in approximately ten
years’ time. Two things about this story surprise students of the case study. One is that the
new man has a degree in computer technology (his final year project was studying mobile
telephony), and the second is that ten years is viewed by the current leaders as the time
needed for a future leader to fully appreciate the Metax culture.
Those managers in my class who understand the essence of Metax – that its core
competence is technology application – immediately understand why this person has been
selected as the potential successor. However, most do not appreciate this, which
demonstrates the potentially fragile nature of success and competitive advantage. If any of
these students were given the job of recruiting a new leader for Metax they would be inclined
to search for a person skilled in leading a low-cost organization and not a technically
innovative one. Giving over control of Metax to such a leader would doubtless destroy its
long-term competitiveness, as they would view the company’s love for playing with new
ideas as an expense rather than an investment in future value.
Ten years, to most of the managers engaged with the Metax case, is an excessive time for a
prospective leader to work in one place and imbibe the culture so that its values and
behaviors become intuitive. Many surmise that the incumbent leaders simply cannot
entertain the idea of relinquishing their power and hence their insistence on such a long stay
of apprenticeship. There is no doubt some truth in this emotional explanation of the leaders’
‘‘ Ignoring human nature is dangerous. Generally, people do not

get passionate about ‘being low cost’ but can achieve very low
cost outcomes because they are passionate about something
else. ’’
j j
behavior, which the students prefer to believe over the seemingly rational idea that it takes
time to command all the skills of leadership. The Metax leaders know something else about
human nature. They know, intuitively, that it is a well established fact that individuals are
generally overly confident about our own capabilities and especially our ability to take
control of events and situations. This is not rational, but it is a behavior that helps humans
survive in testing environments, and hence has become ingrained in human nature.
The question remains, however, as to how long it does actually take to learn an organization’s
culture and philosophy. Into the sixth year of the apprenticeship, the managing director of
Metax became ill with cancer. He died six months later. During this time he accelerated the
transfer of learning and responsibility to his successor and implemented his ideas with
urgency so that the company and its new leader were in a position of renewed strategic
strength. He ceded control a few weeks before he died in 2002.
Since then Metax has continued to thrive and continued to introduce clever, new technology
solutions for customers and staff. The organization is leaner and more efficient than before,
but most of these outcomes are because of the store of ideas and new initiatives the
company built during the former leader’s era. The merger of Metax’s distribution with that of
Shell was the first sign of rational thinking overcoming the passion for independence and
belief in their own systems that dominated the Metax culture in 1997. The new managing
director at Metax does believe in the superiority of Metax’s systems but he is not as
motivated as his predecessor to preserve independence. This may be for reasons of
personality, or because he had not shared the history of Metax for long enough – we will
never know. He is therefore inclined to co-operate and believes that working more closely
with Shell will allow the two companies to exploit the market as two brands with separate
customer identities, while finding opportunities to share and create efficiencies in
operations.
However, the first step in this direction has not been a good experience, but to reverse the
decision is not an option. Perhaps the previous leaders of Metax were right – ten years is the
right length of time to build strength of belief gained from a diversity of experiences leaders
will encounter and ensure that sound decisions are made that do not destroy competitive
advantage. It might also be the length of time necessary to fully understand how to get the
most from people working in organizations. This will happen when managers, like those
studying this case study, know that economic concepts alone are very often a poor guide to
realising competitive advantage and success.
Key learning from the experience of Metax – the case and the classroom
B Rationality is appealing to managers, but it is not wise to trust in basic economic theory
alone. The theory and the practice might not equate.
B Ignoring human nature is dangerous. Generally, people do not get passionate about
‘‘being low cost’’ but can achieve very low cost outcomes because they are passionate
about something else, such as the potential in applying technology.
B Sustainable competitive advantage is created from a complex mix of tangible and
intangible assets, the most sustainable of which are human motivations and passions.
Keywords: Simple economic concepts do not describe such systems.
Human capital, B The ability to ‘‘absorb’’ the culture, philosophy and history of an organization and
Human nature, recognize what is important about it could take a significant period of time and without
Economics, that learning, the longer-term success of the company could be at risk as competitive
Strategic management advantage is destroyed, often unknowingly.
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j j
Placing organizational learning in the
context of strategic management
Peter Trim and Yang-Im Lee
Peter Trim is a Senior enior managers within organizations are confronted with various recurring issues
Lecturer in Management
and Director of the Centre
for Advanced Management
S relating to training and staff development. They range from the actual cost of the
programs needed to how much time an employee spends away from the workplace
in order to update their skill base. Viewed from a different perspective, it is possible to say
and Interdisciplinary
that the word ‘‘cost’’ can be replaced by ‘‘investment’’, and time away from the office should
Studies at Birkbeck
be considered as time spent developing the knowledge base that is advantageous to the
College, University of
London, London, UK. He
organization achieving its objectives.
can be reached at What is important is that senior managers understand that the term ‘‘organizational learning’’
p.trim@bbk.ac.uk. Yang-Im is all-embracing and refers to the context within which knowledge is generated, stored,
Lee is a Lecturer in transferred from one employee to another, used to devise and implement new work
Marketing at the School of practices, and is ultimately transformational in the sense that direction is forthcoming that
Management, Royal
positions the organization in the industry within which it competes.
Holloway, University of
London, London, UK The organizational learning concept is focused on providing managers with appropriate
technical and interpersonal skills, but is has a psychological dimension as well. For example,
various staff development programs can be devised that include role pay activities that are
aimed at confidence building. By assuming responsibility for their actions, junior managers
will gain respect from their peers and make themselves known to senior managers, who then
provide them with leadership positions.
The concept of organizational learning

Periods of growth provide organizations with opportunities to build on past successes and
senior managers can develop further the organization’s sustainable competitive advantage.
McGahan (2004, p. 92) has indicated that during periods of change, senior managers need
to be aware of how the organization’s core activities are linked to the organization’s core
assets, and this means establishing if the core assets and activities are likely to become
obsolete.
Managing change requires that managers work closely with staff and spend time
By adopting the organizational
learning approach, top communicating what is to be done and how it is to be done. Setting targets and monitoring
management can put in place a progress is important and action plans and programs need to be time tabled accordingly. It
number of management
systems and structures that
is essential that this is understood during periods of growth, because new management
facilitate the strategic systems and structures need to be put in place to ensure continuity (viewed from the stance
decision-making process. of product-service provision).
Internal weaknesses can be
identified and eradicated, and
external opportunities can be
Senior managers need to be aware that the concept of organizational learning can be used
taken advantage of. As a result, to bring about change and that the change process needs to be managed in an incremental
the organization will develop a and proactive manner.
sustainable competitive
advantage and further improve
its competitive position by
One way in which to bring about organizational change is to institutionalize the learning
remaining customer focused. process and to empower people to take responsibility for their personal development. The
DOI 10.1108/17515630710684448 VOL. 8 NO. 5 2007, pp. 335-342, Q Emerald Group Publishing Limited, ISSN 1751-5637 j BUSINESS STRATEGY SERIES j PAGE 335
‘‘ Organizational learning is influential with respect to
facilitating the development of an organization’s value
system and ultimately its culture. ’’
process of institutionalizing organizational learning is complex; however, an international

project group approach can be used to facilitate the transformation process, especially
when it is necessary to devise new forms of market entry. What is evident is that senior
managers need to think in terms of motivating junior managers to want to achieve something
higher than their immediate expectations. One way that this can be done is to encourage
staff to undertake continuing professional development and to adopt an entrepreneurial
approach to decision-making.
Placing organizational learning in context

By embracing the concept of organizational learning, senior managers can encourage staff
lower down the hierarchy to improve their knowledge and skill base through time, and thus
acquire skills that ensure that they remain employable. This is important because during
periods of growth, new demands are placed on staff. Increased levels of responsibility result
in people needing to co-operate more with staff outside their immediate department.
Staff also need to remain more receptive to ideas put forward by staff based outside the
organization. The learning process is not just about acquiring knowledge and skills, it is also
about developing a vision that is based on understanding the organization’s value system.
Bearing this in mind, it is important that staff at various levels throughout the organization
identify with the organizational value system, embrace incremental change and participate
in staff development workshops. This should ensure that an organization is able to develop
the skill base that it needs in order to adapt to a changing and more competitive international
business environment.
In order that transformational change produces the desired outcome(s), managers
throughout the organization need to draw upon the skills and knowledge of junior managers.
Human resource management specialists need to be consulted on a regular basis in order
that the recruitment policies of the organization are appropriate for selecting potential
candidates. Managers need to have knowledge of the historical and socio-cultural factors
that shape national and organizational culture, and form international project groups that
bring together individuals that can devise and implement marketing plans and strategies. As
well as having knowledge about how well the company is performing in the marketplace, it is
necessary for staff to have expertise that relates to organization to organization
co-operation, organization to government co-operation, and government to government
co-operation.
Innovation and change during periods of growth

The process of change forces senior managers to find ways to innovate. Managers
throughout the organization are required to put a lot of time and effort into managing
day-to-day activities and need to be aware of the key success factors that govern the
industry within which the organization competes. It is essential, therefore, that managers
think in terms of developing a sustainable competitive advantage that can be maintained in
the future (Aaker, 1995). By doing this, the various managers throughout the organization will
be able to devise, integrate and implement a range of strategic plans and strategies.
It is essential that during times of rapid growth, senior managers scan the horizon in order to
identify future threats and also, if the organization is unable to sustain its competitive
advantage, identify possible partner organizations that the organization can form an alliance
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with in order to sustain itself. A proactive approach to partner selection means that various
analysts and strategists within the organization can be engaged in marketing intelligence
activities and can identify which potential partner organizations can be approached with
respect to alliance development.
An alliance can utilize the resources and expertise within the partnership arrangement;
however, entering into a partnership arrangement is not without risk. For example, Barki and
Pinsonneault (2005, p. 171) have indicated that although the sharing of resources is a key
consideration with respect to partnership development, attention needs to be given to
resulting power struggles. It has been noted that power relationships can lead to conflicts as
a result of problems not being aired openly (Dawson, 1996, p. 171).
In order to avoid conflict, senior managers need to promote an open and transparent
communication process that results in trustworthy behaviour. Opportunistic behaviour does
need to be avoided because it can result in people distrusting each other and conflicts can
and do distract managers from their normal day-to-day routines.
The importance of international project groups

Becerra and Gupta (2003, p. 33) have highlighted the link between communication and
trustworthiness and it is important to bear in mind that in a global business environment,
cross-cultural decision-making is a necessary element of day-to-day activities. This
suggests that international project groups can be used for a number of purposes (design,
production and marketing) and should this be the case, it is worth noting that a number of
outcomes can be achieved.
For example, an international project group can be assembled in order to link the
functionality of a product with its design, the application of automated production in areas of
skilled labour shortage, and the negotiation of franchise operations in order to facilitate
market penetration and coverage.
Building trust-based relationships is time consuming and requires constant work, but is
essential with respect to partnership development. In order for the transformation process to
be effective, senior managers need to understand how the concept of trust is linked with
control and learning (Inkpen and Currall, 2004, p. 587).
It is also possible to suggest that senior managers think in terms of making a link between
learning and competition in the sense that when an organization improves its performance,
usually at the detriment of other organizations in the industry, the level of competition
intensifies as other organizations find ways to improve their performance (Barnett and
McKendrick, 2004, pp. 540-1).
The main purpose of the international project group

The main purpose of the international project group approach is to work on ‘‘secret’’ projects
that are deemed essential to the future survival of the organization. One can think in terms of
new products for existing markets, new technology for an evolving market, new
technological processes that improve manufacturing capability, and new distribution
arrangements that enable the organization to provide a high level of customer service
(after-sales service) on entry to the market.
The senior manager(s) responsible for the functioning of an international project group need
to ensure that those given the responsibility to discuss matters in an open and frank manner,
and reach the deadlines set, are able to do so. It is because of this that the concept of
organizational learning needs to be thought of as a tool for facilitating the management of
change, and providing future leaders.
Organizational learning and international project group development: case

examples
When British Petroleum (BP), the oil and chemical company, restructured its international
operations a number of years ago, senior management undertook a thorough analysis of the
company’s global business operations in order to establish how they fitted into the existing
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and future strategy of the company. Organizational experts used various strategic
management models in order to appraise the level of strategic fit.
They then carried out a restructuring process that involved how information systems and
technology were to be used to integrate the functioning of the reduced number of business
units. Hence internal computer and information systems technologists played an influential
role in the restructuring process, and this is evidence of the transformation process being
based upon the company’s skill and knowledge base.
By utilizing the skills and knowledge of internal employees, senior management were able to
devise a workable structure that facilitated information and knowledge transfer among and
between the various business units. This example shows that senior managers at BP were in
possession of both company and industry knowledge and were able to adapt management
theory and devise and deploy marketing strategies.
Samsung, the integrated South Korean conglomerate, has a well-crafted human resource
management strategy that identifies the most able and gifted candidates, and provides
them with early responsibility. By integrating junior staff into the organization’s culture it is
possible to maintain the company’s community-oriented focus. Samsung’s management
development programmes are highly specific and are part of a well-defined continuing
professional development strategy. By utilizing the organizational learning concept, senior
company staff ensures that staff based in suppliers and retailers understand and embrace
the company’s set of corporate values.
As a result, Samsung is able to reinforce the fact that the company is a leader in the
industries in which it competes. The company’s skilled and internationally experienced
managers are able to deal with both private sector and public sector organizations, and as a
result the company is close to its customers and has links with government officials. The
community focus ensures that designated staff within the company is engaged in a number
of research projects with academics and their researchers, based at various universities.
This has proved beneficial to the community and is evidence that international project
groups are managed in a structured manner.
McLaren and Mercedes-Benz have formed a close working partnership that is based on
mutuality, and this has proved valuable with respect to innovation. The partnership
arrangement has produced a hybrid and creatively based organizational culture.
Design work is based around the concept of functionality, and it is this that has provided a
creative and innovatory approach to problem solving. As a consequence, a number of
high-quality, durable, upmarket products have been produced. McLaren and Mercedes-Benz
have a market focus that is based on brand leadership, and this accounts for their international
reputation. Staff from various areas – technology, production and marketing, for example –
work on a number of projects that require new solutions to be found. The result is a highly
specialized and motivated design team, a highly creative and inspirational workforce, and a
supply chain management strategy that incorporates continual improvement.
Mitsubishi Electric is a well-known and internationally spread organization that delivers
products and services to high specifications. Junior managers based at different locations
throughout the world, are brought together in order to facilitate networking and this has
resulted in a sophisticated marketing intelligence operation being established. Senior
managers at Mitsubishi Electric are of the view that the employees are part owners of the
organization, and because of this the organization’s culture is highly integrative.
‘‘ During periods of growth, the internal organizational

pressures need to be kept in balance with the pressures
exerted by external market forces. ’’
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Philips, the technology group based in The Netherlands, has established a number of
corporate databases that can be accessed by various managers throughout the world. The
databases contain confidential and sensitive information that can be used to award
contracts to suppliers, for example, and the people that have access to these databases are
employees that have been with the organization a number of years, and are known and
trusted.
What distinguishes Philips from many other companies is that it has an inclusive
organizational culture that is ingrained in its history. The organizational learning concept is
fully embraced, and this ensures that employees have a strong sense of belonging to the
company.
A number of years ago, it was necessary to revitalize the company, and senior management
decided to close down a number of factories worldwide and reduce the reliance on in-house
manufacturing. Philips successfully refocused its efforts on health care and lifestyle, and
reasserted itself in consumer electronics. This suggests that marketing strategists utilized
marketing intelligence and were able to forecast accurately how key markets would perform.
International project groups were able to identify issues such as the technological and
marketing capability of rival companies. Key success factors identified included speed to
market and the ability to deliver high levels of product quality.
Unilever competes in a variety of consumer markets and remains focused on growth. The
company is well known for having a defined organizational culture that is results-oriented.
The company competes aggressively in a number of related and unrelated markets, and this
suggests that managers have a clear product-market focus.
It also indicates that the marketing staff practise relationship marketing that is underpinned
by the concept of strategic marketing. One can deduce from this that staff are highly
specialized and that companies that are added to the Unilever portfolio operate as
self-sustaining independent units. Although there is an all embracing organizational culture
in place, there is some variation in organizational culture throughout the company as
individual business units compete in different markets. Managers are given a lot of
responsibility at an early stage in their careers, and are judged on their ability to set and
achieve realistic targets. The way in which the company is structured makes it necessary for
international project groups to be very well organized and influential.
In industries that are growth-oriented but subject to volatility, it is usual for lead companies to
invite external experts to attend workshops and conferences in order to explain the latest
theoretical thinking. This allows insights into how theory and practice are related. Saatchi
and Saatchi, the international advertising agency, has adopted this approach in order to
stimulate thinking internally, and this has proved useful with respect to identifying creative
solutions to unique problems. Brainstorming sessions are used in order to stimulate the
creative thinking process, and this requires active participation and high levels of teamwork.
Avon, the global cosmetics company, has established an international reputation and has
achieved a competitive advantage through selling direct to the customer. However, senior
management are aware that Avon’s success encourages competition and because of this
staff cannot become complacent. The emphasis is to identify new markets and new product
opportunities. Senior management is also aware that they have to continually improve the
products on offer and this has resulted in an investment in research and development
facilities, and the development of a knowledge base that keeps the company at the forefront
of developments in beauty and health care for example. Avon employees are focused on
their work, are highly motivated and rewarded well for their achievements.
The marketing team at Avon have adopted the strategic marketing concept and have linked
the concept successfully with providing customer choice that is based on meeting customer
expectations. The key has been mapping and monitoring customer requirement evolution,
and this has allowed the company to provide a range of products that meet the requirements
based upon lifestyle and age for example. In other words, company staff know what
customers want and promote the product to the appropriate market segments. This
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‘‘ As well as managing change in an incremental and planned
form, it is necessary for managers to pay attention to detail. ’’
suggests that Avon have an all-embracing customer service policy in place that is
underpinned by marketing intelligence.
Strategy formulation and implementation

As regards strategy formulation and implementation, McGahan (2004, p. 87) has noted that
although senior managers need to understand change and how it affects the industry, ‘‘such
knowledge is not always easy to come by’’. Understanding what causes change and how
change is to be managed are crucial elements of strategy formulation and implementation.
McGahan (2004, p. 88) has made a useful observation: ‘‘No innovation strategy works for
every company in every industry. But if you understand the nature of change in your industry,
you can determine which strategies are likely to succeed and which will backfire’’.
According to Spear (2004, p. 80), ‘‘the Toyota Production System (TPS) is a system of nested
experiments through which operations are constantly improved’’. But any continual
improvement program can only work if people remain committed to it and individual
managers engage in open communication. They also need to be held accountable for their
actions and need to identify people lower down the chain of command that can assume
responsibility for aspects of the continual development program.
If market conditions are strong and two competitor companies form an alliance, senior
managers within the organization not involved in the alliance may become indecisive
because of impending uncertainty. A culture of indecision may materialize and as a
consequence, frustration and conflict may result. This may have a harmful outcome in the
sense that some well-qualified managers become disillusioned and leave the organization.
At this point it would be necessary for top management to look within the organization’s value
system (especially the decision-making process and the style of doing business) and
identify future leaders ‘‘who can engender intellectual honesty and trust in the connections
between people’’ (Charan, 2001, p. 76). If the organization has been through a difficult time
(staff have been made redundant and some plants and offices closed down), then some
staff may appear disillusioned and might start making negative comments about the
company.
Acknowledging employee’s feelings is crucial, especially if they are worried about the future
and what the future has to offer (Garvin and Roberto, 2005, p. 110), because it is necessary
to deal with emotional issues before they cause conflict.
Charan (2001, p. 82) has indicated that in order to transform a culture of indecision, a leader
needs to be a good listener, needs business acumen, and needs to have operational
experience. Operational experience is necessary because it provides a basis for
questioning certain assumptions and decisions, it allows a single business decision to be
placed in a wider context (the ramifications of which could have a social, cultural, legal and
political effect), and it provides credibility (subordinates will identify with the person and will
offer their support).
The issue of performance integrity is something that needs to be taken into consideration
because, as Sirkin et al. (2005, p. 111) have pointed out, the organization needs teams of
managers and supervisors, and various other staff in place to carry out change projects in a
successful way. Again, this is an essential requirement during periods of growth when
decisions need to be made and implemented quickly.
j j
Rooke and Torbert (2005) have indicated that a leader develops through time. It is common
knowledge that background, education and personality all act to shape the characteristics
of a leader. It is also common knowledge that people perform differently in different settings.
Some strive on the unknown and risk taking and some like certainty and uniformity.
During periods of growth, it is important that senior managers select people for positions of
responsibility according to set criteria. In other words, internal fit can only be achieved if the
right people (with knowledge, skills and experience) are given appropriate leadership
positions, and are held accountable for their actions. Internal fit is achieved when the
organizational learning concept is applied and results in a commitment to continual
improvement. The reader will note from Figure 1 that organizational learning underpins the
strategic management process in various ways. For example, resources are made available
for training; however, junior managers undergo staff development and those that are
perceived as above average and recognized as future leaders are provided with continuing
professional development.
The continuing professional development program, which is based on an individual’s needs,
also takes into account the organization’s value system. Those that excel are seconded to an
international project group and work with experienced managers on a specific project. As an
individual manager progresses through the organization and reaches a senior position, they
in turn will be proactive and able to manage change. This means that they will be able to
handle risk and uncertainty, and be able to communicate in an open and appropriate
manner with staff both inside and outside the organization.
Conclusion
By embracing the organizational learning concept, managers throughout the organization
will be able to put in place a number of programs that focus on both immediate strategic
needs and future strategic needs. As well as ensuring that managers recognize the key
success factors, it is also important that managers have the confidence to manage change
by innovating when necessary.
Figure 1 A conceptual model outlining how organizational learning underpins the strategic
management process
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Keywords: Furthermore, during periods of growth, it is important that managers pay attention to
Organizational development, recurring issues related to corporate governance and corporate social responsibility. This
Strategic management, means that they will also need to understand the complexities associated with regulation and
Training be skilled at managing relationships with government officials.
References
Aaker, D.A. (1995), Strategic Market Management, Wiley, Chichester.
Barki, H. and Pinsonneault, A. (2005), ‘‘A model of organizational integration, implementation effort, and
performance’’, Organization Science, Vol. 16 No. 2, pp. 165-79.
Barnett, W.P. and McKendrick, D.G. (2004), ‘‘Why are some organizations more competitive than others?
Evidence from a changing global market’’, Administrative Science Quarterly, Vol. 49, December,
pp. 535-71.
Becerra, M. and Gupta, A.K. (2003), ‘‘Perceived trustworthiness within the organization: the moderating
impact of communication frequency on trustor and trustee effects’’, Organization Science, Vol. 14 No. 1,
pp. 32-44.
Charan, R. (2001), ‘‘Conquering a culture of indecision’’, Harvard Business Review, Vol. 79 No. 4,
pp. 75-82.
Dawson, S. (1996), Analysing Organisations, Palgrave, Basingstoke.
Garvin, D.A. and Roberto, M.A. (2005), ‘‘Change through persuasion’’, Harvard Business Review, Vol. 83
No. 2, pp. 104-12.
Inkpen, A. and Currall, S. (2004), ‘‘The evolution of trust, control and learning in joint ventures’’,
Organization Science, Vol. 15 No. 5, pp. 586-99.
McGahan, A.M. (2004), ‘‘How industries change’’, Harvard Business Review, Vol. 82 No. 10, pp. 87-94.
Rooke, D. and Torbert, R. (2005), ‘‘Seven transformations of leadership’’, Harvard Business Review,
Vol. 83 No. 4, pp. 67-76.
Sirkin, H.L., Keenan, P. and Jackson, A. (2005), ‘‘The hard side of change management’’, Harvard
Business Review, Vol. 83 No. 10, pp. 109-18.
Spear, S.J. (2004), ‘‘Learning to lead at Toyota’’, Harvard Business Review, Vol. 82 No. 5, pp. 78-86.

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Developing emerging leaders: a new
solution to an old problem
Stephen Xavier
here are two traditional approaches to developing the next generation of leaders.
T Both have proven to be only marginally successful, at best. The first is the B-school
model, which produces graduates chock-full of theory, but devoid of practical
knowledge. Companies continue to rely on higher education for the preparation of future
leaders, even though those same institutions have given the corporate world much bad
advice in the form of brainstorms like right-sizing, downsizing and re-engineering, all of
which have proven to be abysmal failures in real-world application.
Stephen Xavier, America’s
Top Coache, is The proof of their failure is the short length of time these plans lived beyond implementation;
President/CEO of their ‘‘collateral effects,’’ typically mass layoffs, organizational flattening and/or the complete
Cornerstone Executive dismantling of previously successful entities; and finally, when the true ROI is measured,
Development Group, Inc., these programs rarely pass muster and therefore are deemed failures.
Ventura, California, USA.
He can be contacted at: The second method of preparing future leaders is the ‘‘seat of the pants’’ approach to
Xavier@cedg.com executive development. People proceed through their entire careers, learning as they go,
without any focus or structure to their advancement. More often than not, through sheer
serendipity, some employees manage to learn from experience and go on to become decent
managers or leaders. But a greater number are not so fortunate. They make the same
mistakes repeatedly or continue to rely on a few strengths that served them in the past. This
approach may get them ahead in the short term, but in the long term, it usually leads to
derailment – or worse, complete failure. Then, the ‘‘Peter Principle’’ takes hold, and personal
and organizational distress is the unfortunate result.
In short, traditional models of developing emerging leaders are just not effective.
Making time for leadership development

In most companies, development plans for employees are based on annual performance
reviews. Superiors set out two or three specific goals that individuals will work to achieve
during the course of the year until the next review. It’s a good start, but the model is
incomplete. Developing the next generation of leaders demands that executives create
With the baby boomer
retirement bubble about to long-term development plans for their people and then work with them on a far more frequent
burst, leaders must take action basis than annually – at least quarterly, if not monthly.
now to plan for succession and
create bench strength for the Unfortunately, leaders rarely take the time to focus on the long-term development of their
future success of the
organization. No one is better successors because they are driven by short-term results. Constantly changing markets and
qualified to develop a customer expectations, the globalization of the economy and commerce and rapidly
company’s future leaders than
its current leaders. This article
evolving technology all create a culture that demands immediate response. Shareholders
argues that current approaches today, too, expect fast returns on investment and are, in fact, controlling companies, forcing
to leadership development are them to be operated quarter-by-quarter rather than year-by-year.
ineffective and proposes a new
model for developing both
individuals and future
As a result, executives are constantly running to put out fires and are unable to keep up. This,
leadership teams concurrently. of course, leaves no time to reflect on longer-term needs such as succession planning. One
executive recently described it as follows: ‘‘It’s like being up in the bleachers watching a
soccer match. The ball is the problem of the moment. Wherever it goes, everyone chases it.
They drop whatever they are doing and rally behind whoever is chasing the ball to solve that
problem.’’
While this may be an effective way to solve a problem in the short term, in the long term, it
falls short of the goal. It does not permit a balanced approach to tackling issues strategically
or to effective resource utilization. Resources are simply squandered on solving the problem
of the moment.
The first challenge, then, is to make leadership development a very high priority. As a
starting point, let’s look at where most managers spend 60 þ percent of their time – in
meetings. In many cases, managers are even in meetings to plan for meetings followed by
meetings to debrief previous meetings. The cycle is vicious and endless. First, rethink
meeting schedules. If everyone is in meetings five to six hours a day, nothing will be
accomplished, least of all leadership development. Before calling a meeting or attending
one, a good place to start is to ask: ‘‘Is this meeting really necessary?’’ If the response is
anything but an absolute ‘‘Yes’’, then take a pass and find a better use of the time.
Once unnecessary meetings are eliminated, make the best possible use of the remaining
meetings – both one-on-one and in groups – to articulate strategy, vision, plans and
expectations, rather than focusing on the problem of the moment. This serves two purposes:
1. teams will be clear on leadership’s goals and expectations; and
2. it encourages a longer-term perspective.
If this really appears to be impossible because everyone is too busy with tactical initiatives to
focus on the strategic, consider bringing in outside consultants to help structure more
effective meetings and develop constructive communication models for teams and
individuals that save time and energy.
A new model for developing emerging leaders

In business today, there is an alarming trend. It’s apparent more and more emerging leaders
are lacking the fundamental skills to manage people effectively. Part of the reason is that they
are not taught these skills in business school or even in their early work experience. Another
reason is that people are often promoted to leadership positions based on technical
expertise in a specific discipline, because they have closed a big deal, helped develop the
next widget or demonstrated an ability to ‘‘manage up.’’
For a more strategic approach to leadership development to develop long-term, sustainable
success, follow this five-step model as part of a comprehensive succession planning
process.
Step 1: perform a GAPS-style analysis

A gap analysis model identifies and closes the gap between an organization’s shortcomings
and goals. The same model also works for leadership development. It is really quite simple:
ascertain a promising individual’s current skill level, determine the position into which he or
she can be reasonably expected to grow and find ways of closing the gap in between.
Specifically, gap analysis may be broken down into G-A-P-S to ask the following questions:
B G – Goals: What are the talented individual’s short- and long-range career goals? What
does he or she need to do in order to reach the next level? What results does he or she
need to achieve?
B A – Abilities: What abilities does the individual have that are the most crucial? What
results is he or she already getting? What abilities does he or she need to develop in order
to move to the next level? Use the list shown in Appendix 1 as an aid in identifying core
competencies the individual will need upon promotion. It is a fairly broad, and typical,
core competency list that includes visionary leadership, business and technical expertise
and interpersonal skills.
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‘‘ In most companies, development plans for employees are
based on annual performance reviews. It’s a good start, but
the model is incomplete. ’’
B P – Perceptions: It is critical for emerging leaders to understand how their superiors and
others see them and what they expect of them. For example: ‘‘I see you as needing to
develop . . . because . . . ’’ or, ‘‘Your customers want you to . . . because . . . ’’ or, ‘‘You seem
most effective at . . . and the results are . . . ’’.
B S – Standards: Set standards for development. For example: ‘‘In order to truly excel, you
must . . . ’’ or, ‘‘The company is looking for . . . so we can . . . ’’ or, ‘‘To move to the next level,
you would have to . . . ’’.
Use tools such as a 360-degree feedback instrument, the Myers-Briggs Type Indicator
(MBTI), DiSC or an Emotional Intelligence assessment tool to assess leadership talent in an
objective, dispassionate manner that identifies both strengths and opportunities for
development. In the 360-degree instrument, the individual to be assessed identifies 12-25
people at all levels (boss, peers, colleagues, direct reports) with whom he or she has
frequent contact. These people are surveyed, anonymously (listing only their reporting
relationship) and usually online. They are asked to rate the individual on a scale of 1 to 5 on
about 75 questions which cover from eight to 12 competencies that the employer has
identified as being core for anyone who manages people in the company (e.g.
communication, project planning, execution, delegation, conflict management, etc.).
Every aspect of the individual’s performance and behavior is evaluated. Respondents also
rank the level of importance of particular skills and competencies for the individual’s position.
Step 2: develop individual talent

Identifying goals for development, as is done in the standard annual performance review
model, is only half of the equation. The more important task is for leaders to help emerging
talent achieve these goals. Once opportunities for skill building have been identified, have
the individual commit to a plan for long-term professional development. Such a plan might
include the following components:
B Formal coursework – When critical subject area expertise (financial acumen, marketing
principles, project planning, etc.) is missing, these deficiencies are easily remedied with
formal classroom study.
B Executive education – Short-term university programs are excellent preparation, but
don’t forget to put learning into practice by giving individuals new assignments that force
them to leave their comfort zone to take on incrementally tougher tasks to apply what they
learned in class.
B Stretch assignments and test roles – Give high-potential individuals the opportunity to
stretch in advance of promotion. For example, have them manage an unprofitable
department where they can learn to make tough decisions before promoting them up the
ranks to turn around a failing division.
B Coaching – One-on-one coaching is a particularly valuable tool in developing vital people
skills and other competencies unique to executive positions. If senior leadership cannot
find the time to personally serve as coaches, consider hiring executive coaches who can
provide intensive, customized one-on-one support to help emerging talent with specific
development needs.
B Mentoring – Unlike coaching, which can be effectively accomplished by outside
consultants, mentoring is better implemented as an internal learning process appropriate
only for more mature organizations. A mature organization is one that is very flat or, if
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hierarchical, has open communication channels across all levels. It is an environment that
encourages innovative ideas, where employees need not fear retaliation and where
management proactively develops itself and those below. Mature organizations are also
very fluid, encouraging people to move across business unit lines and to cross-train so
that everyone understands everyone else’s contribution toward the common goal of
serving the customer. In addition to a mature organization, successful mentoring can only
take place when stellar communication models and a solid assessment infrastructure
exist.
As future executives embark on development programs, make no promises of a specific
executive position. Instead, assure them their efforts will be rewarded, but caution them that
there are no guarantees of the desired big promotion. Finally, keep the advancement
process competitive by identifying and developing all similarly talented individuals, not just
one who happens to stand out. The goal is to promote the most highly qualified person, not
the most popular one.
Step 3: develop future leadership teams

Senior executives are usually perceptive about recognizing high-potential people at the
lower levels, but most often neglect seeing them as part of a future leadership team. In fact,
there is a pervasive problem in organizations where people in the lower ranks see their
competition as their peers, rather than the competitors in their industry – the true
competition. Senior executives unconsciously support this undesirable behavior by
rewarding young people for good individual performance, while discounting or
disregarding their collaboration skills.
Then, as peers advance in the organization, they eventually become peers at a senior
executive level where they need to be team-mates rather than opponents. That’s why
building peer relationships is a critical skill for talent at any level. It’s also the reason why it’s
essential for executives to stop taking a ‘‘pick one – promote one’’ approach to leadership
development. This limited view has numerous ramifications that are never seen until it is too
late. Remember, a peer today is a peer tomorrow. The higher up the corporate pyramid
up-and-comers go, the higher the stakes. It is at these highest levels where they will need
‘‘friends’’ to get things done.
It takes true vision to see talented individuals horizontally across the organization as future
leadership teams and develop them toward that goal. This new model of team development
can be accomplished by providing opportunities for emerging talent to interact with peers
and grow concurrently, such as:
B participating on committees, boards, roundtable discussions and interdepartmental
programs;
B taking on stretch assignments and testing roles in pairs or trios to develop skills in
teamwork, delegating, relationship building and conflict management; and
B focusing on special problem-solving assignments, such as developing a new solution to a
manufacturing bottleneck, re-engineering a process, increasing efficiency in the supply
chain or getting to the bottom of customer dissatisfaction.
After a team has developed a creative, uncommon solution collectively or collaboratively,
assess how the participants functioned both individually and as a team. Look for those who
recognize and understand the goal of a team assignment is to get a problem solved
together, not to be the star of the group.
It is equally important for emerging leaders to learn to build positive relationships with their
direct reports. They need to understand true success is built on a foundation of
accomplishments of the people below. Championing one’s team members’ successes and
highlighting their accomplishments create undying loyalty and build trust. Doing so helps
remove the ‘‘Judas Factor’’ (an environment with little or no trust) where direct reports
undermine or even sabotage their boss’s success.
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Step 4: give effective feedback
Research indicates that an estimated 50 percent of all performance problems occur
because of lack of feedback. However, not any feedback will do. It must be sensitively
delivered to increase motivation and success. Provide emerging leaders with information
about performance in a way that is non-judgmental and non-defensive. The idea is simply to
share data with the goal of moving people toward action and improvement. Also,
consistency is extremely important in the delivery of feedback. Make sure it is delivered in
private and cites specific examples of the behavior to be discussed rather than generalities.
Follow these seven steps:
1. clearly state the purpose of the feedback;
2. describe specifically what action or behavior has been observed;
3. describe the observer’s reaction;
4. give the employee an opportunity to respond;
5. offer specific suggestions for improvement;
6. summarize the conversation; and
7. plan for a follow-up meeting to revisit the issue in 30, 60 or 90 days.
Use feedback throughout the development process to give praise for jobs well done,
for tasks accomplished and to provide meaningful direction when needed to reset
course. Good feedback supports effective behavior, guides and puts individuals back
on track, serves as a barometer to show where individuals stand, and recognizes
progress.
Step 5: measure success

Assessing whether a leadership development program is working is as easy as looking at
retention and recruiting data. Do talented people want to stay with the organization, or are
they jumping ship for better opportunities? Does the company attract highly talented
people? Also work with HR to develop models or benchmarks that measure and assess
people’s increasing levels of effectiveness. There is an old adage that says ‘‘What gets
measured, gets done.’’ This is not only true for projects and goals, but also for leadership
development. In fact, it is best to include leadership development for individual departments
and the organization as a whole in the strategic plan, complete with milestones and
measurements. Then, because it is measured, it will get done.
In addition to these key strategies, leaders also have an obligation to communicate their
vision and expectations with clarity, frequency and consistency. Everyone, not just future
leaders, needs to stay informed of where the organization is headed so they can stay on
track and ahead of the curve in achieving goals. Although the primary focus here is on
emerging leaders, remember that not everyone on the ship is a captain. Someone has to
row. Be certain all team members are supported in their respective positions so that all can
work towards achieving desired goals and outcomes.
Old problem – new solution

The problem of leadership development and succession is as old as leadership itself.
Today’s solution, however, must be new. The baby boomer retirement bubble is about to
‘‘ It’s apparent more and more emerging leaders are lacking the
fundamental skills to manage people effectively. ’’
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burst, creating a leadership vacuum like none before in modern business history. The typical
solutions are few. For far too long organizations have been locked into traditional and only
marginally successful paradigms of growing new leaders.
The basis for the new model is simple: pick the best and the brightest, use the GAPS
analysis to identify development needs, invest effort and resources in developing the best
talent individually, and – most importantly – don’t neglect to develop several individuals
together as a future leadership team. And finally, do it now!
The development of future leaders is not the job of HR, but of the current executive
leadership, whether they are in charge of a business unit or the entire organization. Although
driven by corporate goals and the bottom line, leaders also have a responsibility to plan for
succession and create bench strength for the future success of the organization. No one is
better qualified to develop a company’s future leaders than its current leaders.
Appendix 1: core competences for leaders

The core competencies for leaders fall into three categories: visionary leadership,
business/technical expertise and interpersonal skills. They are comprised of the following
areas.
1. Visionary leadership includes:
B Strategic thinking/planning – Assesses a broad range of internal and external factors
when solving problems and making decisions; identifies high payoff strategies and
prioritizes team efforts accordingly; uses information about the market and
competitors in making decisions; develops short- and long-range plans that are
appropriately comprehensive, realistic and effective in meeting goals; adjust actions
and decisions for focus on critical strategies (e.g. customers, competition and quality);
integrates planning efforts across work units.
B Motivation/influence – Demonstrated ability to articulate and foster a common vision
and motivate others to achieve business goals and objectives. Uses reasoning, logical
arguments and data to influence others and gain their commitment. Possesses the
ability to coordinate work efforts and achieve challenging goals by delegating to and
empowering others.
B Adaptability/change management – Demonstrated ability to proactively lead change
and mitigate its impacts; demonstrates the ability to anticipate and plan for needed
changes to strategy and processes. Ability to adjust his/her style or approach in order
to handle sudden changes in priorities or demands.
B Creativity and innovation – Demonstrated ability to generate new ideas and seek new
business opportunities; goes beyond the status quo; recognizes the need for new or
modified approaches; fosters creativity and innovation in the work environment.
2. Business/technical expertise includes:
B Cross-functional business knowledge – Demonstrates the ability to function effectively
within/across businesses, organizations and work cultures. Possesses an
understanding of various structures, politics and business practices. Serves as a
source of cross-functional business information to others.
B Technology/management – Demonstrated ability to apply state-of-the-art techniques,
methods, systems, media and/or technologies towards achieving business results.
Possesses the ability to apply theoretical and practical techniques to solve new/unique
problems in a creative way.
B Business acumen/finance – Demonstrates an understanding of issues relevant to the
broad organization and business. Understands the role of different functional areas
and how they relate to the success of the business including the application of
financial metrics to the achievement of business goals. Understands the industry,
including its key success factors, competition and expected future
developments/challenges.
B Customer focus – Recognizes the importance of customer service to the achievement
of corporate goals. Assesses and anticipates internal and external customer needs;
builds relationships and takes action to meet customer needs; continually searches for
ways to increase customer satisfaction.
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‘‘ Senior executives are usually perceptive about recognizing
high-potential people at the lower levels, but most often
neglect seeing them as part of a future leadership team. ’’
3. Interpersonal skills include:

B Integrity and ethics – Builds trust with others through own authenticity and honest
communication, follows through on commitments, shows consistency among
principles, demonstrates sound business ethics.
B Coaching and mentoring – Demonstrated ability to assess others’ strengths and
developmental needs; ability to coach others and provide constructive feedback to
enhance individual development.
B Relationship building/conflict management – Demonstrated ability to build and
maintain effective relationships with others. Brings conflicts and disagreements into
the open and attempts to resolve them collaboratively. Promotes open communication
through solicitation of feedback and is responsive to the needs/concerns of others.
B Build and manage a diverse workforce – Demonstrated ability to appreciate others’
styles, opinions and viewpoints when promoting teamwork and solving business
problems. Demonstrated commitment to build effective teams working towards
organizational goals.
Appendix 2: coaching the new generations

Devon Scheef, Co-founder of The Learning Café, a Westlake Village, CA based leadership
development company that specializes in helping emerging leaders be successful, has
conducted extensive research on generational gaps in organizations and the unique
coaching and mentoring needs of the different generations. ‘‘The 51 million members of
Generation X (born 1965-1976) are very independent, resilient and adaptable,’’ says Scheef.
‘‘They feel strongly that they don’t need someone to look over their shoulder. They dislike
authority and rigid work requirements. An effective coaching relationship with them must
provide them with respect and autonomy. Providing feedback on their performance should
play a big part, as should encouraging their creativity and initiative to find new ways to get
tasks done.
‘‘As a coach, you’ll want Gen Xers to work with you, not for you. Start by informing them of
your expectations and how you’ll measure their progress – and assure them that you’re
committed to helping them learn new skills because they want to stay employable,’’ Scheef
recommends.
The 75 million members of the Millennial Generation (born 1977-1998), on the other hand,
seem to expect structure in the workplace. ‘‘They acknowledge and respect positions and
titles and want a relationship with their boss,’’ says Scheef. ‘‘This doesn’t always mesh with
Generation X’s love of independence and hands-off style. Since Millennials are new to the
professional workplace, they are definitely in need of coaching, no matter how smart and
confident they are. And they’ll respond well to personal attention. Because they appreciate
structure and stability, mentoring and coaching these employees should be more formal,
with set meetings and a more authoritative attitude. Provide lots of challenges, but also
provide the structure to back it up,’’ Scheef recommends.
‘‘This means breaking down goals into steps, as well as offering any necessary resources
and information they’ll need to meet the challenge. You might consider coaching Millennials
in groups, because they work so well in team situations. That way they can act as each
other’s resources or peer mentors,’’ Scheef suggests.

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Driving cultural change through behavioral
differentiation at Westinghouse
Terry R. Bacon
n 2003, Westinghouse Electric Company, the world’s pioneering nuclear power
I company, was in a very strong position in its markets. In the USA, nearly 60 percent of
the then 103 operating nuclear power plants were based on Westinghouse technology
(globally, the figure was nearly 50 percent). Most of the company’s customer base
considered Westinghouse’s technology to be not only excellent but also essential.
However, Westinghouse commissioned a customer satisfaction survey and also received
Terry R. Bacon is President verbal feedback, which revealed that customers found the company difficult to work with
and CEO of Lore and not customer-focused. Westinghouse was a traditional industrial company with an
International Institute, engineering-oriented culture. As in most firms of its type, the engineers were more
Durango, Colorado, USA, task-focused than people-focused and were more at home with the technology, products,
and Zurich, Switzerland. He systems, and processes that resulted in operational excellence than they were with the
can be reached at attitudes, behaviors, and skills of good customer relationship management. Although
bacon@lorenet.com Westinghouse dominated its markets, President and CEO Steve Tritch and other senior
executives were concerned that, in an increasingly competitive marketplace, they could not
afford to rest on their laurels. What Westinghouse needed was a cultural transformation, and
this goal became an important element of their corporate strategy.
Issues in competitiveness and customer satisfaction

To help them understand the customer survey results, Westinghouse embarked on an
ambitious benchmarking study entitled ‘‘Ease of Doing Business.’’ This study included an
employee engagement survey designed to determine the level of workforce engagement
and alignment with business objectives and two surveys administered by Lore International
Institute that were part of a behavioral differentiation audit: Lore’s Behavioral Differentiation
Survey, which helped identify behavioral strengths, weaknesses, and barriers to behaving in
positively differentiating ways, and the Denison Cultural Survey, which helped identify the
cultural and organizational factors that affected Westinghouse’s performance.
In 2003, Westinghouse Electric To gain additional insights and provide supporting information, the benchmarking team also
Company, the world’s
pioneering nuclear power did structured interviews with scores of Westinghouse project managers, engineers, and
company, was in a very strong others with customer-facing roles, as well as selected customers from around the world, and
position in its markets but had
feedback from customers they reviewed post-project data from 2000 through 2002. The study uncovered some
indicating that the company specific issues around the timeliness of engineering support, delay charges for field
was difficult to work with and
not customer focused. To
services, pricing, and fuel product reliability, along with the following themes in customer
remedy this, Westinghouse dissatisfaction that Westinghouse attributed to its culture:
embarked on a comprehensive
cultural transformation initiative B the company did not consistently bring the benefit of its industry experience to each job in
that focused largely on
behavioral change. Although
ways that benefited customers;
this change effort is ongoing,
the early results, which are
B employees did not always exhibit a strong enough interest in their customers’ success;
discussed in this article, are
both powerful and
B they were not always sensitive to the impact on their customers of actions or omissions
encouraging. that they took which were internally focused;
B they did not appear to be continually driven to improve their costs, products, or services;
B they did not seem proactive on emergent issues; and
B there was, at times, too much focus on profit at the expense of customer focus.
These cultural issues manifested themselves in seven specific areas where customers were
less satisfied than the company expected:
1. Customer interface – Customers did not always know whom to talk to at Westinghouse.
Moreover, when the work involved multiple business units or subsidiaries or
subcontractors, the company’s teams did not seem well aligned.
2. Invoicing – Customers felt that Westinghouse’s invoices were routinely late, wrong, or
unclear and therefore not actionable.
3. Proposals – Customers said Westinghouse had a reputation for long lead-time on
proposals, for often not being clear on scope and deliverables, and for having
complicated and legalistic proposals.
4. Lead times – In one service area, customers felt that quote lead times, delivery lead
times, and the time to resolve technical issues were too long.
5. Technically proactive – Customers felt that the company was inconsistently proactive on
technical issues.
6. Project management – Similarly, Westinghouse was not viewed as being proactive in
responding to or resolving emerging issues (e.g. not continually suggesting
improvements to customers and not always becoming involved on emergent issues
even though some issues may have been problematic for years).
7. Intellectual property – Some customers felt that the company was excessively
conservative about intellectual property, sometimes using decades-old information to
justify sole-source bids.
To address these problems, the company sought a comprehensive, culture-changing
solution rather than quick fixes. They initiated Six Sigma programs to address a number of
the work process and reliability issues that surfaced during the benchmarking study, but
they also embarked on one of the most comprehensive behavioral differentiation programs
ever undertaken in the corporate world.
Why focus on behavior?

In our book Winning Behavior: What the Smartest, Most Successful Companies Do
Differently, David G. Pugh and I described how industry leaders like Ritz-Carlton,
Harley-Davidson, EMC, Men’s Wearhouse, and Southwest Airlines use behavior toward
customers (and employees) as a means of differentiating themselves from their industry
rivals (Bacon and Pugh, 2003). Behavior is especially useful as a differentiation strategy
when a company’s marketplace is becoming increasingly commoditized, which was the
case with Westinghouse. They recognized that the ‘‘ease of doing business’’ with them was
a function of their behavior toward customers and that if their behavior was negative in
customers’ eyes, they would lose business if those customers had viable alternatives.
Conversely, if they could learn to behave in more positively differentiating ways, they would
gain business in situations where other competitive factors were relatively equal. In short,
Westinghouse leaders recognized that their behavior toward customers was having either
an attractive effect (positive differentiation) or a repulsive effect (negative differentiation) and
that they had it within their power to reverse the impact of behavior on competitiveness if they
focused on their customer-facing behaviors as a corporation and made it an element of their
business strategy. They articulated their understanding of the impact of behavior by citing
these principles:
B Our behavior – everything that we do individually and collectively – has consequences in
terms of how our customers experience doing business with us.
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‘‘ Behavior is especially useful as a differentiation strategy
when a company’s marketplace is becoming increasingly
commoditized, which was the case with Westinghouse. ’’
B How we do things is as important as what we do.

B What we actually do is more important than what we say.
B Focusing on behavior makes the whole Westinghouse family part of the solution to
increasing customer satisfaction.
Moreover, they saw a strong correlation between behavioral differentiation and their
concomitant drive to improve quality of execution through Six Sigma and lean manufacturing
programs. Both require a common culture and, in fact, can be seen as two sides of the same
coin. They are both focused on customer-defined value creation. Six Sigma and lean
manufacturing are aimed at process improvements that meet or exceed customer
expectations, whereas behavioral differentiation is aimed at process improvements in
customer engagements that also meet or exceed expectations. A common approach to both
is crucial to achieving greater customer centrism.
The behavioral changes needed

One of the most insightful findings from the benchmarking study was a comparison of
behavioral ratings by employees and ratings by customers. For example, the highest-rated
behaviors from Westinghouse employees were as follows:
1. aligning goals, plans, and priorities*;
2. spending more time listening and asking than telling*;
3. systematically building relationships with individuals;
4. communicating in the customer’s style; and
5. being intolerant of errors*.
These were the areas in which Westinghouse employees perceived that they were behaving
in the most positively differentiating ways. However, customers had dissenting feedback on
the three items with asterisks, so there were significant opposing views on three of the five
behaviors where employees felt they behaved best. The five areas where employees rated
their behaviors lowest were these:
1. creating cost transparency;
2. aligning structure and systems;
3. sharing valuable knowledge;
4. customizing marketing and sales literature; and
5. being generous with face time.
Perhaps not surprisingly, the first item, cost transparency, was one of the behaviors that
customers said they valued most from suppliers. They also valued suppliers who exceeded
their expectations, communicated proactively and effectively, helped them compete, were
intolerant of errors, and owned and proactively solved problems. When customers were
asked to rate Westinghouse’s behaviors, these were the five lowest-rated areas:
1. exceeding customer expectations;
2. spending more time listening and asking than telling;
3. being intolerant of errors;
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4. preventing mistakes and misunderstandings; and
5. working with suppliers who provide exceptional service.
It’s important to note that customers also had considerable positive feedback. They felt that the
company’s product development was very collaborative. They also felt that the company was
making tremendous progress in identifying and addressing problems, that they were open
about sharing difficulties and growing pains, that they were far more open and listened better
than they had in the recent past, and that they were far more customer focused than previously.
Nonetheless, the company felt that the bottom line from the benchmarking was clear: they
were difficult to do business with, they needed to do a better job of preventing problems and
anticipating customer needs, they were too tolerant of errors, they needed to share
information across business units to create a common knowledge base, and they needed
‘‘to get it right the first time’’ by listening more and calibrating customer expectations.
Implementing behavioral change

Westinghouse recognized that some behavioral changes would apply throughout the
organization and would reflect general cultural change while others would apply only to
certain business units and perhaps certain customer relationships. Furthermore, they felt
that the business units needed to identify the behaviors that, for them, would have the
greatest impact in the short term, consistent with their business plans and customers. So
while some behavioral change would be driven throughout the organization, the business
units would be largely responsible for identifying and implementing local changes.
For changes that would occur throughout the organization, Westinghouse created a
Behavior Change Team that was responsible for:
B defining overall behavioral change implementation objectives, time frames, and metrics;
B interacting with all business units to support organization-wide behavioral change;
B developing a common behavioral change methodology and toolkit; and
B implementing a behavioral change communication plan.
They were aware that large-scale organizational change is challenging at best, so they paid
particular attention to the typical reasons why change initiatives fail and what they needed to
do to ensure successful implementation, notably ensuring top management sponsorship,
involving employees, ensuring high-quality communication throughout the process, having
clear performance measures, and providing sufficient training.
The business units were expected to establish a business case for behavioral change,
identify the highest-value customer targets, identify solution team leaders and members,
sponsor and support those teams, and monitor change progress. Most of all, they expected
the solution teams to recognize the importance of Westinghouse employees as keys to
success. Behavioral change is only partly systemic – derived from procedures and
processes the organization puts in place. Individual employees who, at every ‘‘touch point’’
with customers, behave in ways that create a more positive experience for customers largely
drive behavioral change. So it was essential that this behavioral change program become a
personal commitment on each employee’s part.
The six behavioral improvement areas

To provide focus for behavioral change implementation, Westinghouse identified six key
areas requiring behavioral improvement, the top three of which were considered the highest
priorities:
1. customer relationship management;
2. effective communication;
3. execution-related behaviors;
4. information sharing with customers;
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5. customer success; and
6. organizational alignment.
The challenges in implementing behavioral change programs are:
B identifying the specific, new customer-facing behaviors that will actually make a
difference; and
B ensuring that employees at the appropriate customer touch points consistently behave in
these new ways.
Effective implementation requires a combination of new employee behaviors and
management support of these new behaviors (in the face of conflicting priorities) to
ensure that the changed behaviors occur consistently enough to make a difference in how
customers perceive working with the organization.
It’s not easy to change behavior, particularly behavior that is culturally embedded and
behavior that is being ‘‘forced’’ by other organizational priorities, such as the need to
achieve high margins, the need to protect intellectual property, and the need to be efficient in
applying resources to serve customers and resolve problems. As we all know, these internal
priorities often conflict with the priorities inherent in customer centrism. If you are going to be
more customer-centric, you must appreciate the trade-offs you have to make, and
employees need to understand that you are serious about making those trade-offs, even at
the cost of some margin, some risk, and some efficiency.
Westinghouse understood these challenges and committed to implementing behavioral
change in the following ways for each of the six focus areas identified above.
Customer relationship management

First, they recognized that they had to be more generous with face time. They couldn’t build
trust-based customer relationships unless they devoted a certain amount of time to meeting
with customers face-to-face – in their environment, at their locations where they used
Westinghouse products or services, dealing with issues that are relevant and timely to them.
Next, they needed to build better interpersonal chemistry. Face time is essential for that, but
it also requires people with excellent interpersonal skills. The goal was to make every contact
a pleasant experience for the customer. Finally, they knew it was crucial to engage their
senior executives. It’s senior face time – with senior counterparts in customer organizations
– that most demonstrated the company’s commitment to behavioral change and made it
easier for customers to work with Westinghouse.
Implementing improved customer relationship management was obviously complicated and
required more than good interpersonal chemistry. They realized that they also had to redefine
the customer-facing competencies of their people at all levels, hire people with better
customer-facing skills, and include these expectations in their new-hire orientations. Mostly, they
needed to gain the commitment from their senior leaders for significant customer face time.
Effective communication
Communicating more effectively is one of those core skills that is easy to articulate but often
difficult to do. They recognized that their people needed to spend more time listening and
asking rather than telling, but though people readily understand the concept it is hard to
change this behavior while you are standing in front of customers in moment-by-moment
‘‘ Individual employees who, at every ‘touch point’ with

customers, behave in ways that create a more positive
experience for customers largely drive behavioral change. ’’
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interactions where your natural communication style tends to emerge. So Westinghouse
realized that they had to train employees for improved customer-facing skills and model and
reinforce consultative behavior.
They also needed to eliminate mixed or conflicting messages and be more proactive about
communicating with customers. To accomplish the latter, they felt they needed to establish
specific roles for everyone in client-facing activities and their senior leaders needed to be
more proactive about visiting customers’ locations. Effective communication is not a
one-time fix; it is an ongoing effort whose success depends on good training, monitoring,
and continual reinforcement.
Execution-related behaviors
As the name suggests, these behaviors included actions customers expected during the
execution of work:
B exceeding customer expectations;
B being intolerant of errors;
B owning and proactively solving problems;
B providing exceptional service; and
B preventing mistakes and misunderstandings.
These general behaviors obviously include numerous related specific behaviors, and the
company’s Six Sigma programs were intended to help identify concretely what project
executors were to do differently.
However, Westinghouse also knew that to improve these execution-related behaviors they
had to develop and use effective communication skills, align their reward systems with
implementation objectives (so the people executing work were motivated to do the right
things), ensure excellence in resource planning, partner with suppliers, and empower their
execution teams to make swift implementation-critical decisions.
It’s important to note here that the company’s execution of work was already high quality, but
to differentiate themselves from their competitors it was essential to raise the bar even
further. Customers expect high quality and zero tolerance for errors, so when any lapse in
quality occurs they tend to pay more attention to it (for obvious reasons) than when things are
running smoothly. As is typical in all human endeavors, customers don’t notice what’s going
well as much as they notice what isn’t. So raising the bar is partly an exercise in ensuring that
your employees don’t tolerate mistakes but also an exercise in communication with
customers. You have to do things well, and you have to communicate clearly and
continuously with customers, especially when mistakes do happen. Then you must act
swiftly and communicate clearly so customers know you’ve noticed, know you care, and
know you are resolving the problems quickly.
Information sharing with customers

The information-sharing behaviors the company focused on were sharing valuable
knowledge and seamless sharing of intellectual property. The difference is that intellectual
property is usually protected and may be considered a critical competitive advantage. So it
was crucial for senior leaders to decide what information could be shared with customers
and what couldn’t.
They also needed to integrate greater information sharing into their existing knowledge
management strategy, which meant, for instance, establishing processes and guidelines for
information sharing, educating employees and customers on what is acceptable and what
isn’t, and empowering employees to make the right decisions about information sharing. The
goal was to eliminate customers’ complaints that Westinghouse used decades-old information
to try to solicit sole-source contracts and to educate customers without giving away the most
sensitive intellectual property that, if it fell into competitors’ hands, could create a competitive
disadvantage for the company. It’s a dilemma that all technology companies have.
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‘‘ Unless you want to compete on price alone, and be driven
down to the point of very low margins, you need to seek a
competitive advantage in one of the final frontiers of
competition: behavior. ’’
Customer success
Creating customer success meant helping customers navigate barriers, customizing
products and services for them, and challenging customers’ thinking. This meant that
Westinghouse professionals needed to think strategically on behalf of customers, help their
customers compete, and invest in the customer. This is a tall order, and its success depends
on educating employees to think differently than they normally have. Beyond an ongoing
educational effort, the company needed account teams that acted, in essence, as their
customer’s advocate and professionals who knew how to put themselves in the customer’s
shoes and look at problems and opportunities from the customer’s perspective.
It also meant adjusting their team’s financial objectives and reward systems (again, because
people will do what they are rewarded to do), striving to understand their customers’
businesses, and conducting business planning with customers’ input. More profoundly, it
meant eliminating the transactional treatment of customers. Other companies have made
this shift, but for Westinghouse it was a new way of thinking, and they recognized that the
transition would take some time. It’s difficult to get people to think differently, especially if
they’ve been moderately successful doing what they’ve been doing, but it’s even more
difficult to transform how groups of people think and work.
Organizational alignment
Finally, to build greater organizational alignment around customer centricity, the company
needed to build strong collaborative networks at all levels and ensure that they had
alignment of their systems and structures as well as their goals, priorities, and plans. In
particular, they needed to use their customers’ concerns as the organizing principles in how
they did their work. This doesn’t sound easy, and it isn’t. It requires a profound shift in how
people think as well as extraordinary insight into what customers need and what and how
they view your part in their supply chain.
Implementing these behavioral changes means improving teamwork across organizational
boundaries to eliminate siloed work teams, simplifying some complex systems and
procedures, adopting the customer’s metrics where feasible, and, most importantly,
establishing customer-driven operations.
Clearly, the changes Westinghouse undertook were organization-changing in profound
ways. The effort was driven from the top but required that implementation be driven down to
the smallest work and task levels. Changing how you interact with customers means not only
changing work processes; you also have to change the culture. Two of the three drivers of
behavioral differentiation are culture and process. The third is leadership, and Westinghouse
recognized that they had to provide both top-level leadership of the initiative, starting with
the CEO, and also leaders at the business-unit level who would own the changes and
provide the impetus and management oversight to ensure that the change effort was
sustained long enough and concretely enough to result in permanent changes to how
people at Westinghouse worked with customers.
The results so far

Although this effort is several years in the making, it is still too early to determine how
successful the cultural change effort has been. Indeed, the company is still determining how
to measure success most effectively. However, the anecdotal feedback from customers is
powerful and encouraging where they have been able to implement the changes. Bob
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Pearce, who led the behavioral change team from the start, said that where they haven’t
been able to implement behavioral changes, customers are saying, ‘‘It’s the same old
Westinghouse.’’ However, where they have implemented the changes, customers are
saying, ‘‘I’m seeing a difference in the way you treat me. In the past, you’ve said, ‘We have
this to sell. Do you want it, yes or no?’ It’s now moving more in the direction of, ‘Can you tell
me more about what you need, and let’s see if we have some value to offer’.’’
Pearce adds that they recently were awarded a contract not because they had the lowest
price or the best terms and conditions but simply because the customer knew them and
liked them and felt that they were going to deliver in a way that made sense to the customer.
It was a relationship-driven decision, which would have been rare in the old Westinghouse.
In another recent case, Pearce said, ‘‘We were awarded an alliance with a customer that will
be worth over $100 million based on relationship factors, and this was in direct competition
with our principal adversary.’’
‘‘The approach we took on that selling effort was not to do traditional push selling but rather
to go in and say, ‘We know we need to change. We know you’re looking for change as well.
Let’s work together on what that change looks like and see if we can come up with a way of
doing business going forward that will meet your needs.’ Based on that approach, at the end
of a recent four-hour meeting with the customer, the customer stood up and applauded us.
That’s unheard of. Nobody could ever remember being applauded.’’
Pearce said that he recently facilitated an alliance kick-off meeting between Westinghouse
senior management and the customer’s senior management, and during that meeting they
talked about the behaviors of both parties in the past. They looked at the list of behaviors
identified in the behavioral audit and jointly selected the four behaviors that would make the
alliance work. This process helped give the customer a sense of ownership of the outcome
and made them feel that Westinghouse was being proactive on their behalf. The key lesson
learned is that it often pays to make the behaviors of both parties explicit and to set joint
expectations about how the company and the customer will work together. This, in itself, is a
behavioral differentiator because it is so rarely done.
Progress comes slowly, especially in large organizations, and Westinghouse operates in
over 30 locations around the world and has more than 9,000 people. Change begins with
awareness and has to be driven not only from above but also at the account team level,
where people interact with customers daily. At Westinghouse, the account teams are
beginning to play a more substantive role. They are the front-line leaders in how the
company behaves toward customers and hence how the organization changes.
The ultimate goal is to change the way the company thinks and behaves, and that’s not easy.
Keywords: However, to remain the same is not an option. In today’s hypercompetitive, global
Organizational culture, marketplace, smart companies are recognizing that how they treat customers is as
Behaviour, important as the quality and functionality of their products and services. Competing on
Change management, product difference alone will not suffice because it’s too easy for hungry competitors to copy
Customer relations, what you make and how you provide it. Unless you want to compete on price alone, and be
Information exchange, driven down to the point of very low margins, you need to seek a competitive advantage in
Strategic alignment one of the final frontiers of competition: behavior.
Reference
Bacon, T.R. and Pugh, D.G. (2003), Winning Behavior: What the Smartest, Most Successful Companies
Do Differently, Amacom, New York, NY.

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The five essential practices of a talent
multiplier
Susan Cantrell and James M. Benton
Susan Cantrell is a Senior t seems as if every week a new management fad or human resources practice is
Manager at the Accenture
Institute for High
Performance Business in
I grabbing headlines and clamoring for managers’ attention. And yet – as many suspect
but are afraid to suggest – companies with the best financial performance achieve
those results not by chasing fads but by adhering to sound people management practices
Wellesley, Massachusetts,
that are as old as business itself. These practices enable leading companies to create a
USA. She can be reached
‘‘talent multiplier’’ – that is, they enable companies to generate superior results from their
at susan.cantrell@
accenture.com
workforces. The concept of the talent multiplier is central to a company’s performance
James M. Benton is an anatomy, which is one of the three building blocks of a high-performance business.
Associate Partner in the But even though managers have long recognized these practices as both successful and
Accenture human fundamental, many do not implement them. This report looks at the specific activities that
performance service line, constitute the practices strongly related to financial success, and addresses why they are
New York, New York, USA
not more widespread.
The five fundamental practices can be distilled into the following simple directives:
1. align people practices with business needs;
2. implement the practices with superior execution;
3. enlist line managers in human capital management;
4. make policies clear, fair, and consistent; and
5. create an information-sharing environment.
The power of these practices may not strike you immediately; they may seem unassuming or
understated. Where are the vision statements? Where are the online cross-functional
team-based brainstorming sessions? But looks can be deceiving. These practices make
possible great improvements in organizational performance, as many leading companies
have discovered.
Align people practices with business needs

It is easy to lose sight of this fundamental truth, but upon reflection it should be obvious that
for a company to flourish, its human capital practices must support its business needs. The
financially successful companies in our study report that they ensure alignment in part by
Companies that create a ‘‘talent having senior executives and HR leaders work together to establish the organization’s
multiplier’’ generate superior human capital objectives and measures of success. Surprisingly, in nearly half of the
results from their workforces.
This article details five
companies we surveyed, this joint goal setting seldom or never occurs; in only 17 percent of
human-capital activities that are the companies we surveyed did executives report that it occurs frequently.
strongly related to financial
success, and explains the When choosing training courses or job aids for their employees, executives at leading
obstacles that frequently
prevent them from being
companies also make decisions based on the expected business impact of the course or
practised. aid. For example, before any training program gets funded at Capital One, one of the
‘‘ The more involved line managers are in employee
development, learning and performance appraisals, the better
the financial performance of the organization. ’’
fastest-growing credit card institutions in the world, a team of analysts looks at a wide range
of critical data to ensure the proposed program supports the company’s goals.
Likewise, pharmaceutical giant Merck has in the past analyzed return on investment offered
by specific training programs and optimizes investment in the programs whose returns are
largest. And at Avaya, a leading business communications solutions and services provider,
decision makers choose training initiatives that support the company’s strategy of
introducing products to market faster than competitors.
Yet, although the payoffs from this approach to training can be substantial, only 22 percent of
the organizations we surveyed regularly select learning services based on their expected
business impact, and the remainder report that they do so only to a slight or a moderate
extent.
Finally, HR executives at the best performing companies in our study work closely with senior
line managers to forecast the number of employees and types of skills that will be needed in
the future based on the organization’s strategy and business projections.
According to Jeff Mahloch, vice president of human resources at Briggs & Stratton, a
leading manufacturer of engines and power generators, this is one of the most useful things
human resources can do to help generate superior results from a workforce. He explains,
‘‘We are changing our business model from focusing solely on component manufacturing to
also manufacturing end products; it is very important that we thus work closely with the
business to identify the new skills that will be required for our workforce and assist in
determining where the product should be made, based on the type of labor markets in
different locations.’’
Implement the practices with superior execution

Having made sure that human capital management practices are in sync with the
organization’s needs, the next step is to follow through and execute. One way to achieve
superior execution is by making sure that there are means for assessing how well processes
such as learning management, employee relations, and knowledge management are being
implemented. With the feedback from those metrics, employees can work on improvements.
Although there was a strong correlation between measurement and improvement on the one
hand and beneficial financial results on the other for the organizations in our study, we found
that few organizations regularly undertake measurement and feedback-based
improvement; indeed, executives at about half the organizations we surveyed reported
that they never or seldom did. Only 15 percent report that their HR programs are
quantitatively linked to workforce performance metrics such as time to competency or
workforce proficiency. Indeed, fully 78 percent of the organizations in our study have no tools
to track and report specific workforce metrics at all.
A few companies, however, are leading the way. The professional services firm Sinclair
Knight Merz, for example, used the Accenture Human Capital Development Framework to
assess the effectiveness of its people management processes and then took action to
improve them. After the framework revealed that employees in non-managerial roles were
less informed about human capital programs than was expected, the HR department
immediately increased its communication, launching a learning and development intranet
site to increase awareness of HR services and to make them more accessible.
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Other companies, such as Procter & Gamble and Intel, also regularly measure and improve
human capital processes. Procter & Gamble has a staff of eight dedicated to HR
measurement, and, according to Keith Lawrence, P&G’s leader of HR solutions, ‘‘Procter &
Gamble collects and analyzes every kind of HR data you can imagine; we develop
hypotheses regarding what drives performance and regularly test our hypotheses so that we
can continually work to improve overall business results.’’
Effective execution also means ensuring that all who carry out a given human capital
management activity – whether they are in human resources or line managers – have the
relevant skills and training. Many business executives we interviewed explained that HR staff
in their organizations often lack the skills and training needed to design and execute human
capital management programs effectively because, as one executive put it, ‘‘People that are
liked but who are not good enough to get promoted go into [human resources] as kind of a
last resort.’’ Organizations in our study with the best financial results either hire skilled HR
professionals or train the ones they have.
Likewise, the most successful organizations make sure that when they ask line managers to
undertake human capital management activities such as performance appraisals or
mentoring, they arm those managers with the tools and skills they need to succeed. In the
words of one chief operating officer of a consumer products company, ‘‘Most people
become managers because they are good at their functional jobs.
A lot of people rise to the occasion of being good people developers, but many don’t. In
most organizations, we are never given training in how to effectively do the soft side of
management. Even at high levels, executives typically do not know how to give constructive
feedback, for example, to their people.’’ To address this problem, companies such as Nike
have started requiring that all US managers be trained in how to mentor, develop, manage,
and appraise their employees effectively.
Enlist line managers in human capital management

Research published in HR journals indicates that line managers are increasingly involved in
traditional HR tasks such as selecting, appraising, and developing their employees. And for
good reason: line managers are in the best position to identify the unique needs both of their
group (when it comes to employee selection) and of each of the employees they manage
(when it comes to appraisal and development). Our research shows that the more involved
managers are in employee development, learning, and performance appraisals, the better
the financial performance of the organization.
Many of the employees in our study reported that their managers were not actively involved
with their development, however. At 62 percent of the organizations in our study, the average
response from employees was that they seldom or never meet with a career counselor
(typically a functional manager).
But the situation was different at the most financially successful companies, where the
majority of employees regularly meet with career counselors. The counselors assess how
realistic career goals are and what progress employees are making toward meeting them,
noting development activities and timelines.
Likewise, in the financially successful companies in our study, managers help employees
identify their learning and training needs and then help employees draw up individual
learning plans. Unfortunately, as was the case with career counseling, surprisingly few
organizations have managers who perform these activities: the average response from
employees in nearly half the organizations in our study was that managers never or rarely
offer such guidance.
Managers can also help boost the performance of their organization’s workforce by acting as
mentors. Although our research shows that mentoring is particularly important for
succession candidates, HR executives in 76 percent of the organizations in our study
report that succession candidates receive little or no formal mentoring.
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A traditional responsibility of managers that ties in to the others we have mentioned is
establishing the criteria they will use to judge an employee’s performance. At the best
performing companies in our study, managers do not make this determination on their own;
rather, they consult with the employee, so the resulting criteria are appropriate and
individualized. And this pays off: one employee we interviewed observed, ‘‘I am much more
likely to perform well if I have goals that are relevant to my work, are ones I agree to, and are
ones I feel like I can realistically meet. I’ve had jobs before where people set unrealistic goals
for me; this only demotivated me and had a negative impact on my performance.’’
Make policies clear, fair, and consistent

To engage the hearts and minds of employees, an organization needs to establish trust, and
fair and consistent policies and processes, as many have noted, foster trust. Instituting clear,
consistent, and fair people policies for all employees may have the greatest impact on
financial success of all the practices we tested, accounting for the most variance (an
average of 49 percent) in financial performance.
The presence of clear, consistent policies has also been established as a success factor in
other domains as well; it is one of the measurable attributes in both total quality management
(TQM, used to improve manufacturing processes) and the capability maturity model (a
model created by the Software Engineering Institute at Carnegie Mellon to improve and
refine software development processes).
Organizations in our study are better at implementing this practice than they are at
implementing the others; 77 percent of organizations report that they have established clear
and consistent HR policies. But that still leaves 23 percent that do not have clear and
consistent policies, and many others have not documented the policies they do have. This
can lead employees to question the basic fairness of the organization. One executive at a
company with relatively low financial performance observed, ‘‘Similar jobs in different
business units have different career paths and are compensated differently. People thus
move freely between business units so that they can make more money for the same position
elsewhere. This feels unfair.’’
The financially successful companies in our study also check to see how their policies
compare with those of others in the industry. Our research shows, for example, that these
companies benchmark their rewards against industry standards and best practices.
Although countless studies have shown that money alone does not drive engagement or
performance, if employees’ compensation is not comparable to that found in other
organizations, they may feel the company is not being fair and harbor resentment or look for
work elsewhere. Increasingly, companies must evaluate not only salary, benefits, and
financial incentives such as bonuses and stock options, but also such intangibles as the
physical work environment, a caring and open culture, and other factors that create a
desirable place to work. Many successful companies, such as the SAS Institute, a business
analytics software company, pay salaries that are slightly lower than market rates; it may be
that employees in such companies feel it is fair to give up a level of financial reward in
exchange for working at a company whose culture and environment they value.
Create an information-sharing environment

Finally, the companies we studied that had superior results promoted the easy and open
sharing of information and knowledge. Perhaps acting on the knowledge that employees are
‘‘ Increasingly, companies must evaluate such intangibles as

the physical work environment, a caring and open culture and
other factors that create a desirable place to work. ’’
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more likely to be productive and effective if they can reuse information or lessons learned
from others, financially successful companies encourage information sharing by regularly
updating databases that contain such information. Surprisingly, only 35 percent of the
organizations in our study report achieving even moderate success in maintaining
knowledge repositories; the remaining 65 percent report that they never or seldom update
their knowledge management systems.
An open information environment can also complement the practice of making policies clear,
fair, and consistent by creating trust and a sense of organizational fairness, with consequent
increased employee engagement and better workforce performance. If, for example,
employees can view all the job listings that they are eligible to apply for – and if they are free
to apply for those jobs – they will be reassured that there is equal opportunity for all.
The financially successfully companies in our study also build a fair and open culture by
communicating the impacts of major organizational changes such as mergers or downsizing
and by establishing programs to mitigate any negative effects on morale and productivity. At
the software supplier SAP America, one of the study’s top scorers in employee engagement,
managers are encouraged to ‘‘over-communicate’’ about any changes in the business that
could affect employees. SAP executives also share business changes in quarterly TV
broadcasts and frequent town hall-style meetings. Despite the strong linkage between
communication and financial results, only 31 percent of organizations in our study report that
they feel that they communicate and manage change well.
Building trust and openness can be as simple as having staff available to answer
employees’ questions about work and personal issues, or creating websites where
employees can look up policies and procedures, find answers to frequently asked
questions, and access information on employee assistance programs (such as access to a
financial adviser). Fifty-four percent of organizations in our study report they have provided
employees with such websites, and 69 percent report that they have staff who can effectively
answer employee questions.
Obstacles to implementation
For decades, management writers have told us about the importance of these five HR
practices, and our research confirms their importance. And yet, as our data show, despite
the value of these practices, few organizations have mastered them. Interviews with more
than 80 leaders in business and human resources reveal five primary challenges to effective
implementation.
Companies treat investments in people as a cost to be minimized rather than as an asset that
can demonstrably impact the bottom line
Under current accounting methods, people costs such as training, development, and other
expenses required to implement many of the practices described in this report are treated
as undifferentiated costs on a company’s balance sheet.
Because Wall Street analysts typically reward companies for minimizing costs, company
executives are discouraged from investing in their people – even when they know intuitively
that such investments can pay off over the long run. Although many in the accounting
community have argued that companies should be required to report people costs
separately and in a uniform manner, little progress has been made to date. Those companies
that do invest in their people argue that such investments support the long-term financial
health of their organization; those companies also work to persuade the analyst community
of the merit of that perspective.
Companies tend to think that they have to master all people practices because they have
difficulty discerning which ones matter most
Without some way to judge which people practices most impact business results,
executives sometimes spread their investment dollars too thin across a wide variety of HR
initiatives. This may result in under-investment in some of the basic, fundamental practices
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‘‘ Companies have been fighting the ‘war for talent’ so hard that
they have forgotten to nurture the talent they already have. ’’
that matter most. New research such as that provided in this report should help companies
make better investment decisions.
Companies tend to adopt practices that are more visible and easy to implement and to avoid
those that are less visible and more difficult to implement
Some organizations we studied prefer to skip the fundamentals in favor of whatever flashy
people management fad happens to be in favor, such as stock option rewards, flexible work
arrangements, or e-learning initiatives. Because of the latest fad’s novelty value and its
coverage in the business press, many organizations are more interested in it than they are in
the more basic practices described in this article, and a company that adopts the newest hot
practice may well be rewarded in the business community as a ‘‘Best Place to Work.’’
In addition, trendy practices are often easier to implement than the fundamental practices
that distinguish the financially successful companies in our study. It is simpler and easier, for
example, to set up an e-learning program or to dole out stock options than it is to get every
manager to take an active role in employee development. This is not to say that popular
people management practices are not worthwhile – many of them are – but our research
indicates that they should not replace the fundamentals.
Companies have been fighting the ‘‘war for talent’’ so hard that they have forgotten to nurture
the talent they already have
One people management practice that was particularly popular during the economic boom
of the late 1990s was fighting the war for talent; that is, competing with other companies to
recruit and retain the best and brightest set of employees possible. Although this makes
logical sense, especially during times when employees are in high demand and companies
are expanding, many organizations became so caught up in recruiting that they neglected
the more fundamental people management practices for the employees they already had.
The vice president of human resources at one company we spoke with explained, ‘‘For ten
years, our entire focus has been on building the capacity required to meet our growing
demand; this has meant that [human resources] has focused almost solely on recruiting. To
our own detriment, we have neglected some basic developmental practices such as
performance reviews or succession planning. We think this has been a contributing factor to
the lower levels of engagement we are now experiencing in our company.’’
The managers responsible for implementing many people practices are faced with so much
short-term pressure to ‘‘make the numbers’’ that they tend to neglect their people
management responsibilities
Even when companies do establish many of the people management practices described in
this report, they are often not very successful. Managers often are not trained in how to use
the practices effectively, and a results-oriented culture that doesn’t reward people
development activities may also prevent managers from effectively using the resources
available to them.
One manager at a high-technology company well known for its focus on people
development observed, ‘‘There is a real tension between our results-oriented culture on the
one hand and the HR department on the other screaming that we have poor employee
development and unhappy people. We are bombarded with programs from [human
resources] that are supposed to help us be better people developers, and we are told that
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management success is 50 percent individual contribution and 50 percent people
development.
‘‘However, in reality, this is just not the case. In the end, the only thing that gets rewarded is
individual performance, like meeting your sales targets or developing a product on time and
on budget – not managing other people effectively to improve their performance. Therefore
none of the programs [human resources] tries so hard to push on us ever get used much.’’
Organizations that have successfully overcome this hurdle have done so by backing their
statements about the importance of people with actions that truly reward managers for
Keywords:
people development activities.
Human resource
management, Because these challenges to effective implementation of the five fundamental HR practices
Human capital, are so daunting, there is a real opportunity for companies that are willing to tackle them to
Employee development, achieve a competitive edge over those competitors that are not yet willing or able to do so.
Retention, Our research suggests that companies that master the fundamentals will be rewarded
Line managers financially for their efforts.
Appendix: about the research

To arrive at the conclusions provided in this report, we surveyed more than 3,500 employees
and more than 150 HR executives in 26 organizations that implemented a new human capital
measurement tool, the Accenture Human Capital Development Framework, in 2003-2004.
We used this data to calculate the extent to which organizations employ the practices
described in this report. To determine the specific practices most strongly related to financial
performance, we pared the 26 organizations down to the 19 that had provided us with
accurate financial data. We then examined the impact of 113 specific people management
activities on two measures of company financial success: two-year average capital
efficiency and two-year average operating-margin performance relative to a company’s
industry.
(Capital efficiency is defined as revenue divided by invested capital. This metric is an
indicator of an organization’s ability to drive greater revenue from a fixed capital base.
Operating margin is defined as EBIT divided by revenue. This metric is an indicator of an
organization’s effectiveness at converting revenues into profits through operating efficiency
or pricing strategy, or both.)
Based on this analysis, we identified 18 specific human-capital management activities that
are significantly correlated (p , 0:5) with financial results for the organizations in our study.
Each of these activities is related to one of the five fundamental practices described in this
report.
In addition to collecting and analyzing survey and financial performance data, we
interviewed more than 80 business and human resources leaders in the companies that
implemented the framework. Insights from these interviews were used to formulate the
conclusions concerning the barriers to implementing the practices described in this report.

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Is your sales force a barrier to more
profitable pricing . . . or is it you?
Tom Nagle and John Hogan
ne of the most difficult pricing challenges facing marketers is how to maintain
O consistent, value-based street prices in highly competitive markets where every

deal is seemingly at risk. For many, the temptation to maintain flexible pricing
policies in order to negotiate customer-specific deals is too much to resist.
Like a dieter trying to lose weight, these marketers try to ‘‘cheat’’ by treating themselves to a
one-time price discount to close a particular deal. However, just like the dieter who must face
Tom Nagle is the founder of the reality of the scale at the end of the week, price cheaters must face the reality of their
Strategic Pricing Group, a bottom line. Unfortunately, increasing price erosion and decreasing margins all too often
member of Monitor Group, characterize that reality.
Cambridge,
Massachusetts, USA. Companies that do not manage their pricing by policy will, in most markets, lose control of it.
John Hogan is a Group In the process, they risk alienating their best customers, slowing the sales process and
Leader at Strategic Pricing eroding profitability. It happens because customers’ willingness to pay for a product or
Group, a member of service depends not only on their perceived value of it, but also on the expectations
Monitor Group, Cambridge, customers form about the need to pay for the value they receive. Sound policies create
Massachusetts, USA expectations on the part of each customer that the price they are asked to pay is determined
objectively and has some relationship to the value received and/or the cost to serve.
Unsound or non-existent policies lead buyers to expect that they can manipulate information
or their own behavior to win discounts without giving anything of value in return.
A common fear for managers who are replacing ad hoc discounting with transparent and
consistent pricing policies is that sales reps will not accept the change. While a minority
might not make the transition, most will accept the change if it is implemented well. Sales
reps don’t like being beaten up over price, don’t like the long sales cycles that reactive price
negotiations cause, and don’t like having to spend their time making the case for discounts
internally.
Sales reps are motivated when management stands with them in resisting bad deals, and
empowers them with the authority to cut good deals consistent with pre-approved policies.
Consistent pricing policies are Interestingly, neither do most customers enjoy manipulative, drawn out price negotiations.
key to growing and maintaining
profit margins and avoiding
They do it to survive suppliers whom they believe will exploit open, loyal customers.
price erosion, but many
managers fear that their sales When companies fully define pricing policies, their sales reps can have full authority to offer
force won’t accept such an even the deepest discounts, subject to rigid constraints based on the customer
approach to closing business.
The authors of this article
characteristics and behaviors allowing a customer to qualify for them. For example, when
contend that if the appropriate confronted by a customer demanding a lower price to meet competition from an Asian
incentives are in place to
encourage salespeople to sell
supplier, the policy-empowered sales rep would not need to appeal to a higher level of
on value instead of just price, management to authorize a lower price, thus delaying the sales process and risking the
sales will begin to focus more deal.
on driving profitability and less
on volume – an approach that
benefits both buyers and
Instead, the rep could say, for example, that the company would grant a discount of 20
sellers. percent if the customer committed to volumes months in advance, just as the Asian supplier
‘‘ They key to inducing the sales force to sell value and maintain
price discipline is to measure their performance and
compensate them not just for sales volume, but also for profit
contribution. ’’
would require. Perhaps the customer might still decide to fill most of his needs from Asia, but
would want a contract with the company to cover just the amounts that might be required to
meet short-term variations in demand. In that case, the sales rep would inform the customer
of his company’s policy to supply product in those situations only at spot prices,
sympathizing with the customer but assuring him that price commitments require
corresponding volume commitments.
The effects of pricing by policy are almost universally desirable. Customers learn that there
is no reward for simply beating on the supplier, and that there is no need to fear that a
competitor is getting a better deal. Consequently, customers lose the incentive to keep
sellers in the dark about their true needs and the value of them.
They also learn that there are trade-offs between the prices they pay and what they get. This
process of ‘‘give-get negotiation’’ forces customers, even purchasing agents, to learn what
their organizations really value. If policies are designed well, they drive changes in customer
behavior that reduce your cost to serve them.
Good policies will make it easier for sales reps to resist pure price negotiation and to align
price paid with value received. Sales reps, however, need to believe that those are
necessary and valuable objectives for them, not just for their company. The first step in that
direction, even before policies are in place, is to measure and reward salespeople for driving
profitability, not just revenue. Many companies reward salespeople for making larger and
more frequent sales, not for making more profitable sales. Unfortunately, giving salespeople
revenue-based incentives and empowering them to negotiate prices is a toxic combination
that poisons their motivation to sell value.
Consider the dilemma facing sales representatives who are compensated as a percentage
of sales. Say that the company’s margin is 10 percent on high-volume deals. A sales rep who
invests a great deal of time with the account, selling value and/or getting the customer to
change behaviors that drive up costs, might at best be able to increase the profit earned on
the deal by an additional 10 percent of sales, doubling the profitability. Even if all that
increase is in price, however, his revenue-based commission increases by, at most, 10
percent.
In contrast, instead of trying to sell value, one of his colleagues spends the same amount of
time selling two deals of equal size with only a 10 percent margin. As a result, the colleague’s
effort increases the company’s profit contribution by the same amount, but he earns twice as
much commission for doing so. Even if the colleague has to cut the price by 5 percent to win
the deal, reducing the profit by half, he gets a bigger commission than the first sales rep who
spent time selling value rather than volume, and as a result has to hear about his failure to
keep pace!
Until you fix these perverse incentives associated with revenue-based measurement and
compensation – driving revenue at the expense of profit – it will be difficult to get sales reps
to do the right thing. The key to aligning sales incentives with those of the company is to link
compensation to profitability using a contribution margin-based profitability factor. More
than just theory, paying for profitability provides mutually beneficial sales incentives, and it
encourages salespeople to pay more attention to value drivers beyond price such as
innovative product features, quality defects and delivery speed.
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Once the company aligns sales incentives, salespeople will begin clamoring for the other
things they need to succeed. At one company, for example, sales reps traded in their
company sedans for vehicles in which they could transport product to new customers with
an urgent need.
Creating a sales incentive to drive profit

The key to inducing the sales force to sell value and maintain price discipline is to measure
their performance and compensate them not just for sales volume, but also for profit
contribution. Although some companies have achieved this by adding Rube Goldberg-like
complexity to their compensation scheme, there is a fairly simple, intuitive way to accomplish
the same objective. Give salespeople sales goals as before, but tell them that the sales
goals are set at ‘‘target’’ prices. If they sell at prices below or above the ‘‘target,’’ the sales
credit they earn will be adjusted by the profitability of the sale.
The key to determining the sales credit that someone would earn for making a sale is
calculating the profitability factor for each class of product. To encourage salespeople to
maximize their contribution to the firm, actual sales revenue should be adjusted by that
profitability factor (called the sales ‘‘kicker’’) to determine the sales credit. Here is the
formula:
Sales credit ¼ ½target price 2 k ðtarget price 2 actual priceÞ £ units sold;
where k is the profitability factor (or ‘‘kicker’’).

The profitability factor should equal 1 divided by the product’s percentage contribution
margin at the target price, in order to calculate sales credits varying proportionally to the
product’s profitability. For example, when the contribution margin is 20 percent, the
profitability factor equals 5 (1.0/0.20). When a salesperson grants a 15 percent price
discount, the discount is multiplied by the profitability factor of 5, reducing the sales credit by
75 percent rather than by 15 percent had there been no profitability adjustment.
Consequently, when $1,000 worth of product is sold for $850, it produces only $250 of sales
credit. But when $500 worth of product is sold for $550 (a 10 percent price premium), the
salesperson earns $750 of sales credit ($500 þ ð5 £ $50Þ). Obviously, the importance of this
adjustment is directly related the variable contribution margin. The larger the margin and,
presumably, the greater the product’s importance to the firm, the greater the profitability
factor’s ability to align what is good for the salesperson with what is good for the company.
Conclusion
Profit-based sales incentives are not merely theory. As companies have moved toward more
negotiated pricing, many have adopted this scheme in markets as diverse as office
equipment, market research services, and door-to-door sales.
Although a small percentage of salespeople cannot make the transition to value selling and
profit-based compensation, most embrace it with enthusiasm. However, senior managers
must lead this change; sales will not do it on their own.
Company leaders must develop the appropriate polices, metrics and incentives that align
the sales force to measures of profitability. In making this change, however, managers
should also be prepared for some unexpected consequences as salespeople begin to focus
more on profits and less on volume.
‘‘ Sound policies create expectations on the part of each

customer that the price they are asked to pay is determined
objectively and has some relationship to the value received
and/or the cost to serve. ’’
j j
‘‘ Companies that do not manage their pricing by policy will, in
most markets, lose control of it. In the process, they risk
alienating their best customers, slowing the sales process
and eroding profitability. ’’
Now, salespeople who previously fretted about the company’s high prices will begin
complaining about slow deliveries, quality defects, lack of innovative product features, and
the need for better sales support to demonstrate value. The sales force’s attention will move
from reflexive complaints about price to legitimate concerns about value drivers the
company does or (does not) provide to customers. It will be a change so conspicuous you’ll
know you’re on the right track.
Appendix: case study

A Fortune 500 multimedia company under competitive attack and struggling with the impact
of new technology sought help in developing a pricing strategy to help reverse its failing
financial performance. Facing considerable downward price pressure (between 20 and 30
percent) and massive cost reductions, the company enlisted the services of Strategic
Pricing Group, a member of Monitor Group, to develop a pricing strategy to maximize its
revenue and profit potential.
After aggressively investigating industry dynamics and the company’s value proposition, it
was determined that the company committed the common mistake of thinking that its
business had become commoditized. There were many aspects of its service and fulfillment
capabilities that actually created a competitive advantage, yet it failed to charge for these
services.
The company was advised to increase its profit potential by aligning its most valued
products and services with the needs of its highest contributing customers. Segmenting the
customer base and restructuring the products achieved this objective and services to better
align with value for which different customer segments were willing to pay.
High-end and low-end product offerings were developed that mapped to the specific needs
of this segmented marketplace, and the sales force was trained to communicate this new
value-based selling approach. This resulted in the company achieving a $6 million (10
percent) increase in net revenue during the first six months of the project, with another 10
percent increase realized during customers’ annual contract renewals. By reducing the
service demands for low-end products and services, the company also found that average
costs were reduced by 10 percent.

j j
How ‘‘winning’’ boards contribute to
corporate growth
as the attention given to corporate governance in recent years re-energized
H boards? Or are too many boardrooms still like chapels of rest, the only signs of new
life being the ticking of corporate governance checklists? If boards are to add more
value, make a greater contribution to corporate growth and create a better tomorrow, they
may need to challenge conventional thinking and question current practices. Striking a
different balance between certain factors may be the key to success.
Colin Coulson-Thomas is an Despite codes of governance best practice, the boards of many companies still miss
experienced chairman of opportunities, cripple corporate prospects and destroy shareholder wealth. Corporate
award-winning companies scandals continue to attract the media. Enron was advised by leading professionals, used
and Professor of Direction
fashionable approaches and invested in the latest technologies. Yet the checks and
and Leadership at the
balances were inadequate. While attention is devoted to preventing such debacles are
University of Lincoln,
boards overlooking positive things they could do to help build businesses? Among
Lincoln, UK. He can be
companies in general what do the boards of successful companies do differently?
reached at
colinct@tiscali.co.uk
The research program

For over 15 years the leading performance improvement and transformation research
program has examined why some companies grow while others with similar offerings,
systems, processes and advisers – and recruiting from the same business schools and
adopting the same management fads – stagnate. The experience of over 2,000 enterprises
– some of whom have participated in several of the studies – suggests much of the
responsibility for wide gaps between potential and achievement, and between intentions
and outcomes, lies in the boardroom.
To date over 40 books and research reports based upon the program’s findings have been
published. Early summaries of findings concentrated upon the work of the board (e.g.
Coulson-Thomas, 1993a, b), while more recently the emphasis has been upon the
approaches of directors and boards in such areas as developing a corporate learning
strategy (Coulson-Thomas, 1999a), exploiting intellectual capital (Perrin, 2000;
Coulson-Thomas, 2003), creating an entrepreneurial culture (Coulson-Thomas, 1999b)
Some companies prosper and
grow while others in similar and winning new business (Coulson-Thomas et al., 2003). Areas covered have been as
situations and circumstances specific as pricing (Coulson-Thomas, 2002a) or purchasing (FitzGerald, 2000), and as
stagnate or decline. What do
the directors and boards of
general as shaping things to come (Coulson-Thomas, 2001).
successful or winning
companies do differently? This There are various ways of evaluating the performance of directors and boards (e.g. Kiel et al.,
article outlines behaviors and 2005). Each of the program’s research projects ranks corporate attainments from the most to
approaches adopted by
winning boards, the mindsets the least successful and compares those at the top and bottom of the listing (e.g. top and
that can lead to ascent or bottom quartiles) to isolate the factors that make a difference. Most of the critical success
decline, and what boards need
to do to provide strategic
factors that emerge are behavioral or indicate differences of approach. The directors and
leadership. boards of the most successful companies ‘‘do it differently’’.
‘‘ If boards are to add more value, make a greater contribution to
corporate growth and create a better tomorrow they may need
to challenge conventional thinking and question current
practices. ’’
The essence of the difference in attitude, approach and behavior between effective and
ineffective boards, and the critical success factors for competing and winning, have been
summarized (Coulson-Thomas, 2002b). The findings suggest the corporate governance
debate may have done little to improve the contribution of many boards in the specific areas
that have been studied. Corporate governance arrangements often appear to be a symptom
rather than a cause of board effectiveness. Intriguingly, most companies’ achievements fall
below the mid point in the range of attainments – and well-known companies perform badly
in many of the areas examined. Those that excel in some fields generally under-perform in
others.
Corporate performance would appear to depend primarily upon what boards actually do
and how their members behave rather than formal governance considerations such as a
board’s committee structure. The boards of the more successful companies (or winning
boards) are distinguished by the attitudes and conduct of their members. Those who chair
boards and have particular responsibility for their performance (Cadbury, 2002; Harper,
2005) should assess whether or not boardroom colleagues are exhibiting ‘‘winner’’ or ‘‘loser’’
behaviors.
Differing approaches in the boardroom

Let us examine a brief overview of recent findings in relation to managing change,
competing and winning (Coulson-Thomas, 2002b) and begin by revisiting a statement that
grew out of an initial wave of findings, namely:
The board should be the heart and soul of a company, the source of its ambition and drive.
Whether or not a company competes and wins, sustains success and remains relevant usually
depends upon its board. Without a sense of purpose, a sound strategy and the will to achieve,
even well-endowed corporations wither and die (Coulson-Thomas, 1993a).
Compared with the boards of the least successful companies, winning boards display the
will to win and are driven to succeed. Their actions demonstrate they care. They understand
better what is happening in the business environment and marketplace. They tend to
anticipate events. They are more willing to confront realities, take a longer-term view and
endeavor to provide strategic leadership.
Directors of winning boards are also more willing to assume personal and collective
accountability for their actions. They appear to better understand the distinction between
direction and management, and their directorial duties and responsibilities.
Winning boards are more likely to concentrate upon the external, strategic and business
development aspects of corporate governance. They strive to benefit shareholders by
delivering additional value to customers. They seek to provide and communicate clear
direction, a distinctive vision, a compelling purpose, achievable goals and clear objectives.
Winners focus more upon the critical success factors for competing and winning. They are
more likely to develop additional income streams, new capabilities and fresh intellectual
capital. They are more prepared to invest in director development and the professional
selection, appointment and induction of new directors. Their chairmen are more inclined to
consciously build effective boards of competent directors.
In comparison, ‘‘loser’’ boards lack will, drive and heart. Their members mouth
generalizations and appear easily distracted by pleasantries and trivia. They are more
j j
likely to avoid responsibility and blame others for disappointing results. In many cases,
particularly with stagnant companies, their perspective appears essentially defensive and
short-term.
The directors of many losing companies appear to be more preoccupied with the
implications of developments for their own status and remuneration. They sometimes seem
to confuse the roles of director, manager and shareholder. They are also more likely to
concentrate on internal, policing and stewardship aspects of corporate governance, and to
engage in spin and damage limitation exercises to protect their reputations.
Many ‘‘loser’’ directors appear to confuse operational and strategic issues, and some
muddy personal and corporate interests. Many charming and confident individuals were
encountered who seem to effortlessly assemble portfolios of independent directorships and
instinctively know when to look the other way. It may be that because such individuals are
perceived as ‘‘safe’’ – and can be relied upon not to rock the boat – insecure chief
executives seek out their services.
Board members of most of the loser companies fail to engage, excite or motivate people to
the same degree as their more successful peers. They invariably respond to developments
rather than influence events. Many of them appear to focus almost exclusively upon financial
measures of performance and the control of costs. They seem to make little if any effort to
review and improve their own effectiveness. If anything, the winners are more humble in
respect of their own achievements.
The boards of both winner and loser companies appear to attract articulate and highly paid
people. However, the two groups distinguish themselves particularly in their respective
approaches to managing change, leading transformation and creating future opportunities
(Coulson-Thomas, 2002b). In comparison with the losers, winning boards inspire, energize
and motivate. They tend to avoid rhetoric, blather and hype and prefer to address specific
issues. They are more determined, pragmatic and positive. They strive for success rather
than survival. Instead of rationalizing disappointment, they are more likely to learn from it.
Winners are also more proactive. They approach those they would like to do business with.
They are more likely to set out to become business partners rather than commodity
suppliers. They are also more selective. They focus more upon areas that make a difference.
They better understand that change can disrupt valued relationships, and are more
prepared to only change what needs to be changed.
Winners better support and enable the achievements of others. They are more willing to trust
reliable people, take calculated risks and encourage entrepreneurship. They delegate more
responsibly. In comparison, losers are noticeably more suspicious, wary and self-interested
and they tend to fear the unknown. They often play it safe and may avoid commitments.
‘‘Losers’’ are more likely to mouth platitudes, spread themselves thinly, and bark up the
wrong trees. They also tend to react, imitate and copy. They often adopt me-too approaches.
They also duck issues, fall for fads, embrace panaceas and search for single solutions to a
greater extent than more successful peers.
Winners are more willing to think for themselves and prefer to reflect before they act. They
attempt to read the road ahead and endeavor to assemble what they need to succeed. They
also more inclined to adopt simple solutions and differentiate their companies’ approaches,
products and services. They are more likely to shape the future by probing prevailing
assumptions, creating bespoke offerings, providing additional choices and establishing
new markets (Coulson-Thomas, 2001).
Winning boards are also more self-aware and critical. They are more open and willing to
monitor their own performance. In comparison with losers, they welcome questions and
invite feedback. They may critique themselves and encourage external and independent
challenge. They devote more effort to choosing pragmatic colleagues and competent
advisers.
j j
Encouraging challenge
In comparison with what could be achieved if more ‘‘winning approaches’’ were adopted
many boards are failing to deliver and could do much better. Many appear to be
rubber-stamping rather than shaping things to come, picking over the past rather than
creating the future (Coulson-Thomas, 2001). Debates focus upon details and trappings
within the rules of an existing game. Assumptions are not challenged. Efforts are not made to
create a new game that might deliver more value to customers and shareholders and greater
satisfaction to employees.
In the context of benchmarking and preoccupation with prevailing fashions and fads certain
behaviors, approaches and practices appear to be assumed by many boards. People with
similar backgrounds to their peers seem to go with the flow. They look over their shoulders at
others and imitate and copy them. They often use the same or similar tools, techniques,
systems and processes. Not surprisingly they come to similar conclusions as their
equivalents in the boardrooms of their competitors.
In many of the sectors in which companies studied operate different suppliers appear to
produce very similar offerings aimed at the same and largest customer segment their
analyses identify, even though the many smaller and ignored segments of the market may
collectively constitute an overwhelming majority of people whose requirements might be
better addressed by alternatives. Cozy consensus, inertia and intellectual laziness appear
to be preventing many companies from providing new and better options. Fundamental
questions need to be asked in many boardrooms.
Among the outputs of the investigation that has been undertaken of the differing approaches
of successful companies (winners) and their unsuccessful competitors (losers) are sets of
questions that individual directors (presented in individual research reports) and boards
collectively (Coulson-Thomas, 2001, 2003) can use to challenge prevailing assumptions and
create new offerings that provide greater choice for consumers and local communities. More
creative thinking is required in many boardrooms.
Striking a balance
Many boards operate in a complex environment and face a number of dilemmas (Carter and
Lorsch, 2004; Dunne, 2005). The research findings suggest a key element of good corporate
governance is to achieve an appropriate balance between a number of critical factors, for
example performance today and the capability to compete and win in the future
(Coulson-Thomas, 2001). The investigation of how directors actually behave suggests the
practices and unchallenged assumptions of many boards may well result in them presiding
over a losing company.
Striking a different balance, for example between activity and reflection or between action
and reaction may well be the key to greater boardroom effectiveness and marketplace
success. Thus, whereas many losers appear to value activity for its own sake, reflection was
much more evident among the members of successful boards. Often losers are so busy that
they simply do not appear to have time to think.
The concern of many losers to be seen to be active and to be ‘‘doing things’’ is evident in
their approach to change. They often exhibit an unquestioning and naı̈ve faith in the benefits
of change. Very often changes appear to be made for changes sake, as if they fear that the
‘‘ Despite codes of governance best practice the boards of many

companies still miss opportunities, cripple corporate
prospects and destroy shareholder wealth. ’’
j j
lack of a restructuring or re-organization might be taken as an indication that they are
‘‘asleep on the job’’.
Winners are more likely to strive to achieve a balance between change and continuity. In
comparison with losers they recognize that while some change may be desirable, indeed
inevitable, it can also be stressful and disruptive of valued relationships. Continuity can be
important in areas such as purpose and service. Customers who are unsure of what to
expect may become unsettled, and they might take their custom elsewhere.
Looking at the balance different groups in the marketplace strike, for example between
change and continuity or complexity and simplicity can also be the key to creating new
offerings. Thus many consumers – from members of re-enactment groups to purchasers of
classic brands and houses with Georgian features in conservation villages – may favor
continuity and prefer aspects of the past. Others might desire products with fewer features
that are easier to understand and use.
Losers are also noticeably more preoccupied with reacting to the competitive moves of
others, following fashions and jumping upon bandwagons. In comparison, winners – as
mentioned above – are more likely to be proactive, for example when seeking ways of
helping their customers and delivering more value to them. They often take the initiative,
approach prospects and work with them and business partners to explore new possibilities.
They are more willing to venture out in front, explore and discover.
Whereas losers often appear preoccupied with their own agendas and the achievement of
corporate objectives, winners are more likely to be concerned with achieving a balance
between individual, corporate and business partner interests. If changes have to be
introduced they may well strive to ensure they benefit the people concerned and customers
as well as help achieve corporate goals. They better appreciate that relationships that are
mutually beneficial to all parties involved are more likely to last.
Many directors, particularly independent directors, should more actively question, probe
and challenge. Is the right balance being struck in the above and other areas examined? Is
there too much focus upon fads, while insufficient attention is paid to the fundamentals – the
core building blocks of corporate success, the critical success factors for competing and
winning? Is the board addressing surface symptoms or the underlying substance?
Losing boards of many struggling companies engage in spin to explain and rationalize
events – an area we will return to in a moment – where winners would more probably identify
and address root causes. A balance has also to be achieved between packaging and
assembling the elements that make up the package. Within the mix that makes some
directors competent and certain boards effective, the willingness to pose critical questions
that others overlook or are reluctant to ask can be a crucial ingredient.
To increase the likelihood of becoming a winning company, a chairman should consciously
build an effective board of competent and questioning directors. Lessons from the
investigation are to avoid the distractions of trappings, invest in director and board
development, and be professional when selecting, appointing and inducting new directors
– perhaps going for those who are likely to ‘‘shake the cage’’.
The investigation also suggests that within many boardrooms some individuals add value,
while others are parasitic or distractions. When selecting new directors, aspiring winners
should chose practical and competent contributors whose qualities complement and
strengthen an existing team, and who instinctively and knowingly do what is right and strike a
fair and appropriate balance between contending considerations.
Corporate communications
Modern corporations are networks of relationships based upon trust. When a reputation for
fair dealing and accurate reporting is compromised – as happened at Enron – the
consequences can be dramatic. Directors and boards need to communicate with various
groups that have an interest in their enterprises – from investors and employees to
customers and suppliers. They should endeavor to achieve a rapport with each of these
j j
‘‘ Corporate performance would appear to depend primarily
upon what boards actually do and how their members behave
rather than formal governance considerations such as a
board’s committee structure. ’’
groups that is based upon trust and mutual respect, and strike a balance between their
sometimes conflicting interests.
A distinctive vision, stretching goals and clear objectives can inspire, excite and energize
people. However, many companies fall short of these ideals. Their people seem to be
drowning in irrelevant information, overloaded, overworked and insecure (Coulson-Thomas,
2003). With little time to think, they may not see the wood for the trees.
The research program has also examined the communications practices of companies in
fields such as winning business, building relationships and managing change. As with other
areas examined, comparing the approaches of ‘‘winners’’, directors of companies that cope
with changing circumstances, and ‘‘losers’’, their peers in businesses that struggle or fail,
suggest clear differences of corporate communications attitudes and behavior
(Coulson-Thomas, 2002b, Coulson-Thomas et al., 2003).
Let’s start with the practices of losers. Their communications are more likely to be largely
top-down and one-way. Communicators are more prepared to just pass on whatever
messages a boss or CEO wishes to communicate. They are less likely to question a brief or
ask whether information they are handed is accurate or fair.
Many losers only communicate when they feel they need to. They then become preoccupied
with messages they would like to put across. Recipients are regarded as just targets. Some
communicators in floundering companies seem to pride themselves on their ability to
distract, exaggerate or keep a situation under wraps. They may avoid speaking to people
directly and prefer to hide behind technology. Sanitized summaries may be posted on
corporate intranets.
The communications of struggling companies are often bland and non-committal. They give
little away. Practices encountered include hiding bad news under the carpet, and slick
packaging designed to encourage passive acceptance. Communicators in failing
companies were observed to mouth generalizations and repeat slogans. Their work is
sometimes of a high technical standard, because in comparison with winners they focus
more upon look, form and style rather than veracity, relevance and impact.
Communicators in some stagnant and dying companies appear emotionally detached. They
seem to display little personal commitment to corporate messages. Their communications
can sometimes be cold, clinical and bland. Among their ranks sophists and cynics were
encountered who appear to view communications as a game to be played, with scoring
points or ‘‘impressing’’ regarded as more important than helping others to understand.
In many ailing companies corporate communications is a distinct activity undertaken by
dedicated specialists. Communicators often appear to work mechanically and struggle to
highlight what is different, special or unique about their employer. Not surprisingly they fail to
connect with key stakeholder groups and seem to spend much of their time rationalizing
failure. When they stumble few around them appear to help or care.
In comparison, communicators in successful businesses are usually more confident and
have less to hide. They often behave very differently from losers. They are more likely to
share information, knowledge and understanding with people whose cooperation is required
to achieve corporate aspirations. They engage in more two-way communication. As
mentioned above, they are more willing to encourage, welcome and react to feedback.
j j
The more effective communicators appear less preoccupied with themselves. They focus
more on the people they would like to establish, build and sustain relationships with. They
put more effort into trying to understand, empathize with and reflect their aspirations, hopes
and fears. They are more willing to make direct and personal contact. They may also feel
deeply about issues. They may sometimes stumble over the words, but it is more evident that
they care.
Communicators in winning companies were observed to consciously build mutually
beneficial relationships. They are more likely to forge longer-term partnerships. They are
both more sensitive and more flexible. In comparison with losers they appear better
listeners. They monitor reactions and are more alert to changing requirements. Their
communications activities are more likely to evolve, as changes are made to ensure greater
relevance.
The most effective communicators identify unmet needs, analyze communications problems
and address barriers to understanding. They recognize the importance of symbols and are
visibly committed. They appreciate that they and their colleagues will be judged by their
actions and conduct. They therefore endeavor to match words with deeds.
In the successful companies communication is more likely to be an integral element of
management. It may well be built into work processes and the roles of managers.
Communicators are more likely to be encouraged to think for themselves. They may question
motivations, probe sources and assess likely implications. They may take steps to ensure
the veracity of corporate messages. They are more prepared to assume responsibility for
what they communicate.
Winners are better able to explain with conviction the essence of what they and their
enterprises are about. Their communications are more likely to celebrate and sustain
success. They devote more effort to engendering allegiance and fostering relationships that
withstand market shocks and survive the traumas of economic downturn. People are more
likely to trust them and may well put themselves out for them.
Investors, employees, customers, suppliers and independent directors should never take
corporate communications and other areas examined for granted. A wide spectrum of
attainment has been reported by survey participants and observed by the investigation. The
intelligence, standing and bravado of corporate leaders and their professional advisers are
no guarantee the full story is being told or that desirable outcomes will be achieved.
Stakeholders need to be alert to tell tale signs of whether the approaches and practices of
directors and boards indicate likely failure or may herald future success.
Keywords:
Boards,
Directors, Further information
Corporate governance, A list of outputs from the leading performance improvement and transformation research
Performance levels, program can be obtained from Professor Colin Coulson-Thomas at colinct@tiscali.co.uk or
Behaviour from www.coulson-thomas.com
References
Cadbury, A. (2002), Corporate Governance and Chairmanship: A Personal View, Oxford University
Press, Oxford.
Carter, C. and Lorsch, J. (2004), Back to the Drawing Board: Designing Corporate Boards for a Complex
World, Harvard Business School Press, Boston, MA.
Coulson-Thomas, C. (1993a), Creating Excellence in the Boardroom, McGraw-Hill, London.
Coulson-Thomas, C. (1993b), Developing Directors: Building an Effective Boardroom Team,
McGraw-Hill, London.
Coulson-Thomas, C. (1999a), Developing a Corporate Learning Strategy, Policy Publications, Bedford.

Coulson-Thomas, C. (1999b), Individuals and Enterprise: Creating Entrepreneurs for the New
Millennium through Personal Transformation, Blackhall Publishing, Dublin.
j j
Coulson-Thomas, C. (2001), Shaping Things to Come: Strategies for Creating Alternative Enterprises,
Blackhall Publishing, Dublin.
Coulson-Thomas, C. (2002a), Pricing for Profit: The Critical Success Factors, Policy Publications,
Bedford.
Coulson-Thomas, C. (2002b), Transforming the Company: Manage Change, Compete and Win, Kogan
Page, London.
Coulson-Thomas, C. (2003), The Knowledge Entrepreneur: How Your Business Can Create, Manage
and Profit from Intellectual Capital, Kogan Page, London and Sterling, VA.
Coulson-Thomas, C., Kennedy, C. and O’Connor, M. (2003), Winning New Business: The Critical
Success Factors, Policy Publications, Bedford.
Dunne, P. (2005), Directors’ Dilemmas: Tales from the Frontline, 2nd ed., Kogan Page, London.
FitzGerald, P. (2000), Effective Purchasing: The Critical Success Factors, Policy Publications, Bedford.
Harper, J. (2005), Chairing the Board: A Practical Guide to Activities & Responsibilities, revised ed.,
Kogan Page, London.
Kiel, G., Nicholson, G. and Barclay, M.A. (2005), Board, Director and CEO Evaluation, McGraw-Hill,
North Ryde.
Perrin, S. (2000), Managing Intellectual Capital to Grow Shareholder Value, Policy Publications, Bedford.

j j

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bss cover (i) no 5_ human.

qxd 19/07/2007 14:39 Page 1

Focus on human resource

Volume 8 Number 5 2007

Placing organizational learning in the context of strategic management 335

Developing emerging leaders: a new solution to an old problem 343

Driving cultural change through behavioral differentiation at

The five essential practices of a talent multiplier 358

VOL. 8 NO. 5 2007, # Emerald Group Publishing Limited, ISSN 1751-5637

How ‘‘winning’’ boards contribute to corporate growth 369

More complex, intangible notions

The dangers of rationality

‘‘ Ignoring human nature is dangerous. Generally, people do not

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

The concept of organizational learning

process of institutionalizing organizational learning is complex; however, an international

Placing organizational learning in context

Innovation and change during periods of growth

The importance of international project groups

The main purpose of the international project group

Organizational learning and international project group development: case

‘‘ During periods of growth, the internal organizational

Strategy formulation and implementation

Dawson, S. (1996), Analysing Organisations, Palgrave, Basingstoke.

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Making time for leadership development

A new model for developing emerging leaders

Step 1: perform a GAPS-style analysis

Step 2: develop individual talent

Step 3: develop future leadership teams

Step 5: measure success

Old problem – new solution

Appendix 1: core competences for leaders

3. Interpersonal skills include:

Appendix 2: coaching the new generations

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n 2003, Westinghouse Electric Company, the world’s pioneering nuclear power

Issues in competitiveness and customer satisfaction

Why focus on behavior?

B How we do things is as important as what we do.

The behavioral changes needed

Implementing behavioral change

The six behavioral improvement areas

Customer relationship management

‘‘ Individual employees who, at every ‘touch point’ with

Information sharing with customers

The results so far

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Align people practices with business needs

Implement the practices with superior execution

Enlist line managers in human capital management

Make policies clear, fair, and consistent

Create an information-sharing environment

‘‘ Increasingly, companies must evaluate such intangibles as

Appendix: about the research

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ne of the most difficult pricing challenges facing marketers is how to maintain

O consistent, value-based street prices in highly competitive markets where every

Creating a sales incentive to drive profit

where k is the profitability factor (or ‘‘kicker’’).

‘‘ Sound policies create expectations on the part of each

Appendix: case study

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as the attention given to corporate governance in recent years re-energized