Practise what you preach

HR has an important role to play if culture changes in the workplace is to
take hold, new research has discovered

Human resources policies and procedures have a significant part to play in
aligning employee behaviour to a new cultural ethos, says a new report, Driving
Corporate Culture for Business Success, from Business Intelligence. Put simply,
recruitment, appraisal, recognition, development, promotion and compensation
affect the way people operate and any culture change effort that ignores these
aspects will almost certainly fail to take hold.

The reason is straightforward: employees naturally heighten and hone the
attitudes and behaviours that make them successful. But organisations should
not underestimate the importance of these effects. Dr George Labovitz, chairman
of the US performance measurement and change consultancy Organisational
Dynamics, believes aligning HR policies with new cultural goals is fundamental.
"If you don’t align career development, remuneration and promotion, for
example, with what you want the culture to be then you are in trouble," he
says. "You almost certainly won’t like the culture change you will get, as
people recognise the hypocrisy of theory espoused versus theory
practised."

Having spoken to the HR heads of Federal Express, Xerox and Motorola shortly
after each had won the annual US-based Malcolm Baldrige National Quality Award,
Labovitz found each company regretted that when moving towards a total quality
culture, they had not focused on aligning their performance management systems
earlier. Had they done so, they would have created the intended culture much
quicker.

Labovitz describes the alignment of HR policies and procedures with cultural
goals as a hard-soft dynamic. "The hard stuff are the HR systems, policies
and procedures and performance measurement," he says. "The soft parts
are the values, strategic direction and so on. If you can successfully align
hard and soft you will get cultural change."

While the role of HR practices in driving culture change is clear, giving
overall responsibility for the change programme to the HR function does not
necessarily lead to a successful outcome. Indeed, Julian Stainton, chief
executive officer of specialist health insurer Western Provident Association
(WPA), questions the need for the HR function at all, arguing that
organisations can have an effective HR methodology without supporting a
specific function to put it into practice.

Devolving responsibility

He accuses the function of getting "involved in things that are nothing
to do with them, while at the same time washing their hands of any
responsibility for serving customers". WPA has only two people in
personnel-type roles; responsibility for the main HR functions such as training
and recruitment is fully devolved to the people who run the business units and
serve the customers.

Hyundai Car (UK) has a converse approach. When Sue Stoneman was appointed as
HR director, she was the only full-time HR person; today there is a 12-strong
team. One reason for this transformation was that a key strategic thrust of the
company was to mobilise human resources in the organisation itself and its dealer
network. A well-staffed HR function was seen as vital to driving this strategy
network-wide since it would be impossible to hand such responsibility to
individual franchisees.

HR has also played a pivotal role in driving cultural change in other companies.
At Continental Airlines, senior HR staff played a key role in enabling change
and oversaw some innovative HR approaches, while at DSM Resins, the HR function
was central to supporting business units for developing staff in accordance
with new cultural behaviours.

What these HR functions have in common is that they have become clearly
customer-focused. In essence, by focusing on meeting the HR needs of
"internal" customers they are helping to focus organisational
attention on the needs of external customers. Rather than build empires for the
sake of it, these HR functions have focused on enabling the development of
employee capabilities that support the change objectives.

Recruitment practice

One area where HR can have a major impact on supporting organisational
change is through recruitment practice. On the one hand, organisations can
ensure new staff have the requisite behavioural traits for the new culture. At
the same time, it is an important moment for the employee since exposure to the
organisation’s culture occurs as soon as they walk through the door.

Restructuring the recruitment process was fundamental to the change
programme at Continental Airlines. Director of HR development Michelle Meissner
recalls a time when securing employment with the company amounted to
"fogging the mirror" – "If you could breathe and fog the mirror
you were eligible for a job at Continental," she explains.

Today, however, the recruitment process is different. "We now look for
a motivational fit, meaning people who enjoy team working, who are willing to
treat everyone with dignity and respect, can grow in their position, can add
new ability to the organisation and are imbued with a service ethic,"
explains Meissner.

At Hyundai, changes to recruitment have played a key role in ensuring a fit
between the culture and the people. New recruits to the organisation’s customer
service staff used to be chosen from a selection of candidates forwarded by an
agency, and would receive a traditional face-to-face interview.

Knowing that they will spend most of their time dealing with customers over
the telephone, however, candidates are now subjected to a 10-minute telephone
"chat" to get a feel for how their personalities come across and so
how they are likely to interact with customers.

Stoneman echoes Meissner’s call for recruits who can contribute positively
to the organisation. She is particularly inspired by a quote from Tom
Peters,"Recruit passion, hire passion, protect passion. I will trade you
an ounce of passion for a page of vision and a pound of business plans any day
– especially tomorrow."

Lasting cultural change

What comes across strongly from the above examples is that changing
recruitment practices can prove a powerful lever for creating lasting culture
change. If culturally aligned people are first recruited, then developed and
promoted, people with the "right stuff" will soon populate the
various levels in an organisation. If managed correctly this will lead to the
removal of negative cultural characteristics that could otherwise remain,
causing untold damage in the company.

The report highlights the concern that too often in a culture change
programme the employee question, "What’s in it for me?" is not
addressed. Luca Mortara, managing director of ASI (UK), notes, "When in
the acceptance stage of any change effort, staff need to see something matching
their goals and aspirations."

It is in this area that the HR function can have greatest impact, not simply
by aligning recruitment practices to the new culture but ensuring appraisal
mechanisms are focused on and also recognise new cultural values and that
promotion and career development drive the new organisation forward. Handled
insensitively, HR changes can destroy a culture change effort. Handled correctly,
they provide the glue that aligns behaviour and performance to the new ethos
and lead the company to achieving strategic goals.

The Business Intelligence report makes clear that the HR function has an
enabling role to play in driving culture change, but that it should not lead
the change effort. That role must be left to senior management.

To be effective, HR must look closely at the value it delivers to the
organisation and how it supports the strategy and new cultural ethos of the
organisation. If it doesn’t, the function – as with other functions such as IT
– may prove more of a hindrance than a help.

By Simon Kent

• Driving Corporate Culture for Business Success by James Creelman is
published by Business Intelligence. Price £695. Contact 0208-879 3300

New responsibilities bring change

A 1998 research survey by Business Intelligence of 236 large international
organisations found "new roles and responsibilities" was the top
ranked mechanism out of six for bringing about change in the way an
organisation operates. The bottom two were "retraining" and
"reward system redesign".

Of the companies which had tried to change their corporate culture, just
over 57 per cent stated that action taken had included the "redesign of
reward systems" while 52 per cent cited "the introduction of new
skills".

In just over 19 per cent of companies the HR function held responsibility
for corporate culture. In organisations with "extremely well defined"
cultures this fell to 12 per cent, but jumped to 50 per cent in companies with
"very poorly defined" cultures.

In 1992, Harvard Business School professors John Kotter and James Heskett
found a correlation between companies valuing employees and business success.
The authors asked industry analysts a series of questions about the culture of
22 companies which the interviewees had to rate from one (definitely not) to
seven (absolutely, yes). To the question: "How highly does [a specified
organisation] value its employees?", the 12 better performing firms
averaged a score of 5.8 while the lower 10 averaged 4.1.

Hyundai

Getting back on the right road

Hyundai experienced a dramatic turnaround in profitability in the mid- to
late 1990s, turning a £7m deficit in 1995 into a £9m profit by 1998. The
company recognised that its internal structure was not geared to creating value
in the customer chain and sought to create a new culture focused on achieving
competitive advantage through service leadership.

One of the six steps identified for effecting this change was the
mobilisation of human resources, an initiative which would ensure HR policies
and processes, and the skills of the workforce, were aligned to the company’s
strategic aim. "It is about having good processes for hiring, training,
compensating and managing performance – something the motor trade has
historically not been renowned for," says former HR director Sue Stoneman.

Recruitment is conducted according to the skills requirements dictated by
the service that staff are expected to deliver. The company has altered its
bonus system to reflect the new cultural goals, introducing a company-wide scheme
based on performance criteria including customer and internal dimensions.
Training has been revolutionised, rising to seven days a year in 1998 compared
with two days in 1994. The training budget across Hyundai staff and the dealer
network has risen from £100,000 in 1994 to £1.5m in 1999.

Another aspect of mobilising HR has been the involvement of staff in company
decision-making processes. Mechanisms include an employee steering group with
representatives from all parts of the business which now meets with the
managing director and HR team to discuss specific issues.

Stoneman believes that for Hyundai to gain competitive advantage through
service leadership, the company must nurture passion in its staff. "We and
our competitors all use similar technologies, methodologies, processes and
systems," she says. "The performance dimensions that will set us
apart is the passion and the type of service we are delivering to our
customers."

Transco

Inspiring search for solutions

Gas supply company Transco has developed an approach to career development
which is not just about climbing the organisational hierarchy but includes job
rotations and secondments to other functions, countries or projects. One aspect
of project working has been the creation of Change Laboratories, a concept
developed with consultant Richard Pascalle.

According to managing director Phil Nolan, the laboratories have proved
invaluable in developing and supporting a high-performance culture. "What
we do is take a big issue facing the company and get a group of people together
who have the expertise required to make real progress, who want to be part of
the solution and can be spared from their operations for a specified
time," he explains. "We give them a brief and open access to everyone
in the organisation and they come back with recommendations for solving the
original challenge."

It is an intense experience which specifically develops the leadership
skills required by the company – people with drive, ambition and sensitivity.
Nolan says one valuable outcome of this exercise is that when people return to
their workplace they behave differently. They no longer complain about problems
but seek solutions. "This is infectious and puts pressure on managers who
have to lead people who now have their own leadership skills. The managers have
to learn a more interactive set of skills."

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