Corporate Culture Institute

The official BLOG of the corporate culture institute in Vienna.

2017-09-29

Who's going to wake up Human Resources?


I just came across a contribution of Andrew Fox Group Head of HR Retail Banking and Wealth Management at HSBC Bank Plc., raising the vital question: “Why are organisations not keeping up with the changing world of work?” Good question - Andrew Fox certainly voices true words. This is especially remarkable as he represents HR in HSBC, one of the world’s largest banking corporations.

Reality however more often than not looks quite different. Here the department which unequivocally and pronouncedly treat humans as resources is often experienced as a stumbling block for digital transformation programs. The excuse often heard, is the high degree of regulation in many countries and the diversity of rules between nations. But there is more to it, why the typical HR department is often perceived as the conservative factor, or to be more precise, the innovation blocker, when it comes to cross corporate processes.

HR stands for Human Resources. Even if we would agree that humans are to be considered as factors of production triad of land, labour and capital, HR doesn’t live up to its own claim in breadth and in depth: It does not deal with all humans – just with employees.

The total workforce today is much larger than the number of hard core of employees. Even those show less static behaviour today. They change jobs more often, they need or want more flexibility in their employment terms, have to change job functions more often within a corporation. The increasingly important contractors, interim managers, intern, collaborators, … are often not well supported – or even not considered at all.

Not only their scope is limited, they tend to restrict themselves in coverage of the total talent value chain. In many cases they just restrict themselves to administrative tasks, paying only lip service to personnel development, playing only a supportive role in the hiring process and neglecting the strategic component of talent management.

When some 15 years ago the Management of the relations of the corporation with all its human stakeholders was recognised as a vital organisational infrastructure and coined the term identity management, HR was reluctant to grab this opportunity. Quite often they regarded it an IT topic, as the demand was raised by management of access to computer systems, by IT security or by Compliance issues. Also their clock cycle had months as the standard unit. In Identity Management it was days. Today, in a digitized world, it ought to be real time.

So in the majority of cases end-to-end automation of business process with some involvement of digital identities hit an invisible wall, when HR simply refused to be part of the game. I intend to hold back on speculation about its reasons. In some cases, however, I have seen the position of the HR manager being used as the final stop for managers, who did not make it to the top range.

Against this background, it seems particularly questionable why the HR department in many companies claims ownership of the corporate culture.

Maybe the most important shift to take place before we can seriously address a digital transformation of whole companies, is to abandon the traditional business School approach, that management’s first and most noble role is “doing the numbers” but putting the spotlight on the humans, which in the end have to “be” the change.

2015-09-20

Do employees matter – or not?

I just right now - hence with some decent delay - finished reading Russ Elliots Blog post from Sep 2, 2015 “Are employees important in defining Company culture?” Elliot is SVP Human Resources Director at Bridge Bank. He argues, that employees, who feel working at a great work place feel better, are more productive and hence result in a competitive advantage for the corporation itself.

While I agree that you might be more productive if you enjoy your work - and there is indeed plenty of evidence for that, drawing the conclusion for the competitive advantage might be right or might be wrong.

The question goes a bit deeper too. Once I followed a dispute about “What is a good organisational culture?” Whereas the majority agreed that you cannot answer this question that simply and it may differ from case to case, I let the chance of participating in this conversation passing by that day in favour of digging a bit deeper.

A good culture certainly, and I hope most of you can agree to it, is a culture, which helps the organisation to thrive as desired. In most cases, unless explicitly intended differently, this means long-term success.

But this just leads to the next question: Which are the traits that make a corporation thrive for long? Earlier already (2010-09-13,  Structure follows market – and so does culture and 2010-10-03,  Corporate culture & market)  I published some thoughts on whether a certain culture is helpful or not.

Here I came to the conclusion, that the shape of the market, a corporation is in, demands a certain culture. So the way we are doing business influences, or even determines the way we interact with our customers and with each others – hence our culture.  E.g. for an unsaturated mass production market a culture characterized by a hierarchy is most effective – and hence a good culture, although this might not necessarily be a feel-good-culture.

This is the Henry Ford and Fredrick Winslow Taylor approach. However in an innovation driven market, where success is bound to highly skilled personnel, some different form might be more appropriate, like a clan type of culture or even the start-up type.

One of my favourite authors of management literature, Gary Hamel has put it brilliantly in his book “What Matters Now: How to win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation”:

  • Today’s organizations were built for discipline and efficiency, enforced through hierarchy and routinization. They were simply never designed to change proactively and deeply.
  • As a result, there’s a mismatch between the pace of change in the external environment and the fastest possible pace of change at most organizations. If it were otherwise, we wouldn’t see so many incumbents struggling to intercept the future.

You might even need to have both types – the efficiency driven and the innovation driven culture - in one corporation. And not surprisingly in a large banking corporation I encountered the interesting 3-letter Acronyms RTB & CTB, translating to ‘run-the-bank’ and ‘change-the-bank’ – meaning two distinct and considerably different worlds (and their resulting cultures) under one common roof.

Elliot is from the banking sector. I too had the opportunity to gain some experience in the banking sector with a considerable number of rather different institutions.

During an assessment of a banking merger (see 2010-09-16, Banking cultures – a case study) I found, that not accepting the need to maintain  two very different cultures in parallel, as they were likely to result from the merger, may cause serious difficulties and may even threaten the envisioned ‘synergies’.

Let me quickly insert a personal story here. I once was called to deliver some IT-Consulting to an old and highly regarded private bank in Cologne, Germany – which does not exist any longer. While entering through the entrance portal I was deeply impressed by the sophisticated atmosphere of the venerable grand building and the gentility of the staff at reception. This grandeur however was not meant for me, as I quickly had to learn. Although I was dressed the finest business attire that I could factor in to my consulting fees, the trained view of the receptionist instantaneously categorise me as neither ‘old money’, nor ‘new money’ but ‘working for money’ – which translates to ‘not a customer’.

With a faint look of disgust and expressing his deepest regret, he taught me that here was not the appropriate entrance for me. Servants, employees, advisers and other personnel would have to enter the building through a side entrance in a dark back street. Obviously employees did not matter here – but neither did efficiency. So what did matter? Well, it was reputation. Maybe this was not sufficient, as this company does not exist anymore - maybe it was just false pretences.

So the conclusion is: people may matter more – or may matter less for the corporate success, depending of, how it is doing business.


2014-11-11

Of sheep and wolves


Throughout the winded course of my professional life I immersed into several distinctively different corporate ecosystems. On the surface there shouldn't have been much of a difference. Don’t we all have to go for a job after all, to earn some money, to make our living? However, when digging deeper, more arcane individual life concepts were revealed. This insight still might not appear to be very surprising but rather in line with the experience of many of us. 

At first sight many of your cohabitants in the open space offices don’t really draw much of your attention: Just uninteresting, average office people with rather mundane, earthly desires for cars, holiday trips or detached houses in some remote suburbs (and they're all made out of ticky tacky; and they all look just the same).

But I should better have been prepared for surprise. On some dull occasion, when forced into a travel companionship with one of these allegedly unremarkable colleagues, perhaps while waiting for the bus to take us both to a mandatory compliance seminar, I accepted my fate and started some small talk to maintain an easy flowing conversation, meant to wrap the day into a gentle packing. Then something unexpected happened: the ‘average colleague’ granted me some insight into his secret inner life, a rich world of personal interests, carefully cultivated passions or private studies on side topics, which could well fill the major subject.

What a contrast! During office hours they unresistingly accept their fate, ducking away, completing their assigned tasks. During their free time they switch the context completely, beaming themselves out of their current space-time continuum to their preferred parallel universe. They are studying old Egyptian hieroglyphs, are deeply involved in social care projects or combine their several years’ vacations to traverse deserts or jungles by foot or bicycle. How can they at the same time work in such a dumb job and maintain such a rich inner life? Well, it’s not is spite but because of the uninspiring day time job. Take it as compensation.

It might look like a strange passion, to dig such deeply into the individuals’ very personal matters. But I didn't do it on purpose. It just happened. When in my early years I once was on a consulting assignment for a large chartered accountant firm at a huge Insurance corporation, my team mate pointed me to an apparently strange phenomenon: “The employees here all have such a happy expression in their eyes. What is so special on this environment? What is the real reason?”
 
“Well they simply feel no pressing need. There’s nothing to complain about. Everything is organised and predetermined. It is like in Socialism: The flock of sheep is well herded.” I responded. This was a bit unfair and even not completely correct. Not everyone behaved like that: there were some wolves hidden among the sheep.

Once aware of the situation they were easy to spot. The fast dynamic body movements, the tall and slender appearance, the flickering glance, the carefully dosed aggressiveness of their approach. They were mountain climbers or marathon runners. Their career was on the fast track. Of course, they were working extra hours – when worthwhile.

Carefully they avoided the trap of becoming a domain matter expert. There were sufficient sheep around, who were – in some cases – highly knowledgeable in their small specialized niche. And those were happy to get involved and receive at least some acknowledgement for their otherwise unnoticed efforts. No, wolves see themselves as leaders. They excel in tactics although pretending to think strategically. Decisions were happily taken, but from their specific career centered opportunistic viewpoint. This approach of course did leave no room for corporate or long-term considerations.

Wolves were looking at sheep with disdain – however they needed them. Sheep lived in fear of wolves or at least viewed them with incomprehension. But sheep in turn also couldn't maintain their sheltered ecosystem without the wolves. They lived in symbiosis.

And if they did not die, they still live today - in banks, insurance companies and other lage corporations.

2014-09-10

Banking cultures - or, why are they so weird?

I have seen several institutions in the financial sector, dwelling in different niches in the same sector, being located in as different countries as Ukraine, Germany, Switzerland, Austria, UK. Also these are not my first musings on this topic.

But they still puzzle me.


Although each has its own characteristic depending on the embedding country culture, the market forces driving a certain behavior or some more individual traits rooted somewhere deep in their history, they also do have something in common: something inanimate, inhumane, somewhere in between a machine and a pack of raiders.

Yes, and at least for a while, I am back in a typical banking culture - and I wonder why banking cultures use to be so weird. By the time three distinct suspicions came to my mind – and refuse to fade away again: reputation, money and product. Ok this needs some explanation. So let me elaborate a bit on this threefold suspicion.

I suspect it is because compared to other industry sectors the single employee's contribution is less important here. Rather the reputation or image (or you may call it false face) of trustworthiness and professional competence of the whole abstract organization drives the success. Such set-up does not require motivated employees. They just have to comply with the rules, the more machine like approach.

Also - as banks traditionally deal with money - employees are distrusted at first hand and are heavily supervised. They might get corrupted by the huge assets; they have to take care of, while themselves they may struggle to pay their rent. They in turn react in their way - just 'work' for the money, turning them to - how NNT would call them - corporate captives.

Maybe banking culture is influenced by the fact, that banks don't have real products to sell to their customers, at least no tangible ones, and most often even not a conceptually defined and implemented ones. They, more or less, go straight for the numbers. The bottom line however doesn’t stimulate the member’s imagination. Of course there are so called ‘banking products’. And if you take investment banking, they may become so complex and sophisticated, that even the more simple minded individuals among the bankers, and there are some of those around, don’t understand them – but happily sell them. But, take retail banking: a simple current account is not enough a product, which can be attributed customer value to, to safely isolate even benevolent individuals from the cruel forces of the bottom line.

After having said that, it may not surprise you, that several banks invest some serious effort to deliberately change their culture (e.g.:  here) – giving me the impression, that they consider their culture like a broken washing machine, which just needs fixing. To take an – dated – example, according to the above mentioned source: “Citi’s new CEO Michael Corbat is trying to change the culture to bring more accountability and discipline through the use of score cards for top executives based on a set of weighted goals from five categories: capital, clients, costs, culture and controls.” However, to cite the voice of a non-disclosed British regulator: “The cultural change that we hoped for never actually happened”.

Deliberate culture change is not impossible per se. But it has to be done firmly founded on truthfulness of the underlying intentions. Corporate culture cannot be cheated. It will otherwise strike back and possibly eventually honor Bertold Brecht view “What is the robbing of a bank compared to the founding of a bank?

And - as always - comments are very welcome!

2014-08-27

The rude manners expert – fire or keep?

Recently I received the following request for advice:

Hi Horst, I have a colleague who is very efficient, hard working but she is very rude and insensitive. She shouted at me until now 4 times, even when all people can hear that. Besides, she has conflicts with all senior colleagues here. I think I will cancel her working contract. But I am afraid that means I cancel the working contract with the hardest working person in this office. What do you think?

Yes, I know this problem. I was confronted with this kind of conflict before too – more than once.

During my past I mostly decided in favour of continuation of working with that person. It mostly meant the continuation of the tense situation.

Today I would most probably decide differently and terminate cooperation.

It is because - very much like a tree - success has many roots; more than just the single person's good and hard work. In the end the team has to succeed. You all have to thrive as a group, as a collective with mutually accepted positions. As more manual and routine work will be automated, companies will undergo a shift towards knowledge based and communication bound working processes. And the way we interact – if among each others or to the outside world – expresses our common corporate values, hence is at the core of our corporate culture.

Therefore, if interaction is disturbed, in the end each one better should follow his / her own way. Enforcing this process means quit the contract, fire the person in focus.

But as this implies a critical change, it needs a clear and careful communication to send the right signals to those whom you want to keep. Also you should keep in mind, that the leaving person will spread some messages about these unpleasant events in the public. So we prudently shouldn’t charge the situation with emotions beyond the damage, which is already done. But rather cool down and take a rational, professional approach by arguing from the enterprise perspective and the cultural alignment.

In any case, regardless how you may decide, it will cause some pain for all of you.

Well, this is my opinion. What is yours?

2013-12-26

What are the main differences between Western and Chinese Business Strategic Thinking?


A question raised by Strategic Management Consultant Muhammad AbuLaban, MBA,B.Eng. in the LinkedIn group: STRATEGY PROFESSIONALS NETWORK  (http://www.linkedin.com/groups?home=&gid=134530&trk=anet_ug_hm):

What are the main differences between Western and Chinese Business Strategic Thinking?
All MBA books that we have studied in graduate school of management in Malaysia were from Western point of view of strategy.
I wonder How Chinese business thinkers differentiate in their strategic thinking..
Do you have any idea?”

Well, good question; and we all know this attribute translates to “hard to answer” - like it seems to be always the case with simple questions. 

Of course nearly all strategy books and most popular management recipes are created with a specific western, US in particular, view in mind. Some US based practices fail already when attempts are made to apply them to “Europeans”. Surprisingly this strange human species turns out to behave different from what the US mainstream culture may predict. And – even worse – they are by no means homogeneous. 

This rift even widens at least tenfold when going further to the east: the differences become more profound as does the heterogeneity. A considerable number of attempts has been made figure out their very nature. However it turned out, that even the dimensions alongside which you could detect different values and attitudes are determined by cultural preconceptions. To put it plainly: To get the right answers we often even ask the wrong questions.

But the good news is that we are not alone. And we are not the first ones to ask these questions. A rather well-known name which is traded in the culture scene in this context is Geert Hofstede, whom I once called the grand old man of inter-cultural research (http://corporate-culture-institute2.blogspot.de/2008/03/what-silly-question.html). Geert devoted a major part of his life to find quantitative evidence that culture between nations differs. 

So there is a simple answer to your question as well - at least when you are willing to accept the underlying statistical research methodology. 

e.g here …
Just look at the high US-value for ‘Individualism’ which is remarkable low in China.  On the other hand ‘Long-Term-Orientation’ is valued low in the US. Here china shows a totally different picture.

Remarkable differences may be found between countries, which might look so similar from some more remote viewpoint, like …
Here Denmark dominates in ‘Long-Term-Orientation’, the Netherlands in ‘Individualism’ and Germany differs in its strong focus on ‘Uncertainty avoidance’ and ‘Masculinity’.
You may go on comparing e.g Japan (high ‘Masculinity’) and India (high ‘Power distance’)
In case of irresistible profound interest, I recommend to work yourself through the 500 pages of Geert Hofstede’s, "Cultures and Organizations".

I did it – and at least for me it was worth the effort.

Comments are welcome

2010-10-03

Corporate culture & market

Is there a good or a bad culture? When people talk about the organisation culture of a particular company and mention that they have an excellent corporate culture they usually want to express, that this culture suits them. Most often they just concentrate of a few aspects of that culture only – their relationship to the superior and the colleagues.

Obviously this gut feeling definition is not very helpful in our context. For any organisation only a successful culture can be a ‘good culture’, a culture which drives success. Success itself depends on the interaction of the corporation with its context – market, first of all, but also society, political set-up and some more environmental factors.

Much dispute is recently going on about corporate agility or flexibility which is declared to be more important today than ever culminating in a – like the Gartner Group called it – real time enterprise (RTE). On the other hand lots of concerns have been raised on the ever growing complexity driven by governmental regulations and other compliance necessities, by some ill-designed legacy IT or simple driven by the forces of saturated markets towards specialisation. And third we share the perception that the more the complexity of an organisation grows the less flexible it can be and vice versa.

How efficient now, how flexible should a corporation be? Well, about 2 posts back I explained that the answer to this question is not so much about free choice but seems to be determined by market forces. What we perceive as our standard organisation for large corporations is based on the scientific management dating back to the early days of last century. Those people – among who was the famous Frederick Winslow Taylor – for the conditions they found themselves being in: unsaturated markets, unlimited supply by – yet unskilled – workers, and still no automation for white collar jobs defined the industrial standard organisation.

To understand that this has not been just done by accident but there were compelling reasons for that specific outcome lets try to imagine what kind of organisation responds best to four different required characteristics: low to high flexibility and low to high complexity like in the portfolio diagram “specialisation versus flexibility”.

Let’s examine the four quadrants:

  1. Quadrant – Generalist in a static environment
    In an environment with low change rate (static environment) and easy conditions (e.g. unsaturated market, low competition …) actors at first don’t need to be very specialized. A relatively simple organisation (low complexity) may serve the needs. The companies may thrive and grow but need not change much beyond that.

    But the longer these good conditions last the more competitors are attracted. Competition increases. Finally, when there is high competition, only the strongest survives: it competes through size (economy of scale).

    Such universal success models are found in nature as well: sharks exist with few changes and low specialisation since 400 million years. Dinosaurs ‘ruled’ the world for more than 160 million years – until conditions changed radically.

  2. Quadrant – Specialist in a static environment
    Those which were less successful in the static environment either left the game or specialized into smaller niches where the big players were not able or did not want to follow.

    For conquering ecological niches highly adapted efficiency specialists were required. In order to outperform the generalists they had to build a higher complexity. This excess complexity well paid off in terms of the survival of the fittest. For organisations this means, that the hierarchy needs to be overlaid by delivery relationships from special purpose groups / experts.

    Niches are defined by high market entry barriers. So – for a while – the new niche dwellers were equally sheltered by these barriers as they were confined to their niches.

    Wildlife offers many examples of such niche dwellers: the polar bear is perfectly adapted to the polar region - and highly endangered as this niche is threatened by global warming. The camel is another example of a highly specialized creature – in this case to deserts.

  3. Quadrant – Generalist in a dynamic environment
    But what if environmental condition tend to change more rapidly not allowing for much specialisation and turning large and complex organisations more into a burden than into an advantage.

    In this cut-throat competition scenarios flexibility turns out to be of major advantage. Flexible process innovators outperform economy of scale; the fast beat the big. Often the first mover advantage counts more than the highest efficiency or the optimal product design.

    For corporations this means to leave well known and understood territory and to explore the unknown. As the right answer to new challenges is not always obvious parallel solution finding streams – aka redundancy – must be tolerated to gain at least one feasible solution within a given time frame. Also hierarchical communication turns out to be less effective. Increasing dynamics require a different organisation, hence a different culture.

    In nature the wolfe is a good example. The wolfe has proven to survive under changing conditions from the arctic to the Indian jungle (remember the ‘jungle book’), from deserts to high mountains. And another new feature helps him in this game: the social system as the wolf most often does not compete as a single individual but as a collectively organized group.

  4. Quadrant – Specialist in a dynamic environment
    And what’s about the 4th quadrant? Can it be populated as well? Are there organisations possible which are at the same time specialized and agile? So can they take advantage of “windows of opportunity” which opens just for a short while?

    This is the least traditional scenario and it is hence still not well understood in terms of corporation organized appropriately to thrive in this environment.

    To my understanding the swarm is the most appropriate organisational metaphor for these agile specialists: highly collectively organized nomads.

    In the wild again migrating animals like migrant birds could be the solution Mother Nature has found to this challenge – after millions of trials.

Each for the four prototypic optimal organisations result in a typical organisational culture. Considering the whole chain of influences we can conclude, that the environmental conditions (market) determine the culture in the organisation.

After laying out this big picture I like to receive some comments on it. And after we have found a widely agreed model it would be the next challenge to build a metric of the corporations’ complexity and its agility. Having these metrics at hand and performing measurements of existing corporations could allow us to position them in the survival portfolio. Perhaps this would give us a diagnosis instrument for the appropriateness of a corporations organisation.

2010-09-16

Banking cultures – a case study

The situation

A small but well regarded German bank specialized on advisory in mergers and acquisitions situations had decided merge with a larger Italy based investment bank. As in these days the banking crisis was looming already it seemed to be a good idea to join forces with a stronger partner.

However during the merger process problems arose when the German IT had to be integrated into the central Italian IT. The overtaken company’s success unlike the advisory operations in Italy and a smaller outpost in France was deeply rooted in its vast and intensive use of information technology. The German advisory experts had reason to fear to become cut-off from the very roots of their success which gave them the competitive edge in the past. Communication about this issue by some unknown reason had come to a grinding halt. The situation looked troublesome.

We were asked to analyse the situation and come up a recommendation how to solve this uneasy situation which threatened to disturb that otherwise very smooth merger process.

Does Advisory need to run its own IT?

We quickly found out that advisory as an experts driven business has specific requirements to the IT-support. These requirements are different from those of the traditional operational banking business:
  • The Advisory operational model is different; hence advisory is best organized as an expert network – not common for a bank.
  • Consequently advisory has different requirements to the IT-support: the operational bank IT looks distinctly different from an advisory IT.
  • German Advisory’s success was deeply rooted in its IT. The operations of the German advisory were characterized by some basic principles being source of their very specific success.
  • Most of the communication flows were contained within Advisory only: by far the most information flows within the advisory group – few outside.
While digging through the IT issues and after visiting the different sites we secondly found out that there was much more about it than just simple IT questions. And indeed the IT people on both sides were brilliant enough to find appropriate answers to any technical questions. But they were inhibited by a kind of culture clash. And as we had found that the local German advisory IT was the straightforward implementation of their business needs, their specific corporate culture mirrored their operational model as well. So in a way IT and culture were siblings.

Find some details in the following table:

Bank IT

  • Regulatory compliance
  • 7 x 24 operation
  • No “service is down” requirement
  • Secure & reliable operation
  • Service release after security audit & formal sign-off
  • Standard processes to support a large corporation
  • Mature IT-systems in place
  • Standard decision cycles
  • Secure & compliant communication
  • Support of paper based processes
  • Supply of secure but rigid standard processes
  • Theory X Management style

Advisory IT

  • Individual business support
  • near-7 x 24 support
  • High but not 100% service is up requirement
  • Releasing new services on demand
  • Due effort & diligence is sufficient.
  • Deep knowledge of specific needs necessary to deliver tailored services.
  • Leading edge IT-environment.
  • Very short decision cycles
  • Barrier free ubiquitous communication
  • Paperless operation
  • Supply of an expert’s tool set for free configurable use.
  • Theory Y Management style
Before coming to any conclusion let’s first dig a bit deeper.

The Advisory operational model is different

To support our finding, that the advisory IT is ‘different’ let’s compare the two models:

Banks are typically organized in a pyramid structure:
  • They follow an industrial model known as Taylorism.
  • This model is best suited for the mass production of uniform products by unskilled workers for an unsaturated market.
  • Value creating processes are split into the operational part and the managerial part creating room for a thick layer of ‘middle managers’.
  • The major focus is on compliance and efficiency not on flexibility.
  • This model is best adapted to a static environment where its organisational complexity does not come to its disadvantage.

Advisory on the other hand is a specialized financial service:
  • It relies on few high volume projects.
  • The tasks need highly professional experts.
  • The very model requires continuous flexible adaptation to the customers’ specific needs.
  • In this case effectiveness outweighs efficiency.
  • Core processes are created, adapted & controlled by the experts themselves.
  • Only few low level operational activities remain.
  • The resulting post-tayloristic organisational structure resembles a diamond.
  • It is best organized as an expert network – not very common for a bank.

In my previous post I had already pointed out, that different ways to do business require different organisational structures – which in turn result in different cultures by the time.

German advisory’s success was deeply rooted in IT

The operations of German advisory were characterized by some basic principles:
  • Confidentiality
    • Dealing with confidential customer information is a key requirement of the advisory business
    • Information leaks may cause the loss of a customer and additionally to compensation claims.
  • Open information policy
    • Internally the working style is characterized by a free flow of information.
    • Transparency has only a few limitations.
  • Massive use of information technology
    • Very specific and possibly critical to the success in the past is the massive use of modern information technology.
    • Major focus is on communication support and knowledge management.
  • Sophisticated controlling
    • IT-based Controlling functions allow for a detailed time tracking and reporting by person and project.
    • Project risks can be controlled this way.
  • Knowledge management
    • The primary work on customer projects relies on IT-functions.
    • Hence all information is originally created electronically already.
    • To maintain this knowledge for later use the storage of huge amounts of data is taken in to account.
  • Paperless office
    • Paperless operation is a remarkable speciality of the German advisory.
    • To enable this procedure incoming paper mail is scanned immediately and forwarded electronically.
    • Even legacy documents have been treated this way after introduction of scanning.
    • As a major (even competitive) advantage all documents are accessible electronically for remote users too.
At first glance it becomes obvious, that of the key success factors like ‘Massive use of information technology’ and ‘Paperless office’ are true IT positions. Others like ‘Confidentiality’ and ‘Open information policy’ refer to the special way to cooperate and perform their tasks – hence culture. And in a third group (‘Sophisticated controlling’ and ‘Knowledge management’) finally both factors contributed to the corporation’s success: a special corporate culture and an aggressive yet adequate IT deployment.

Our findings gave some food for thought already to the Italian headquarters. But the question arose how synergies could be gained in this special situation and what would be the optimal degree of integration of the newly acquired German subsidiary into the whole group.

Most of the communication flows within Advisory only

When looking at the internal communication we found out, that by far the most information flows within the advisory group – few outside. From our observations we concluded, that inside the merged Bank …
  • communication flows will be strongest within a location,
  • less bold lines can be drawn between the locations within the Advisory group, and
  • comparatively tiny flows are expected from the advisory group to other areas of the merged bank.
So, there was a strong indication, that communication structure of the advisory group is merely independent within a merged bank’s structure too.

Conclusion

Our final advice finally boiled down to: stay independent but carefully look for synergies! The Advisory group should therefore maintain an independent European IT. But while staying independent both IT groups were encouraged carefully look for synergies. Those were expected most easily to be found in the lower level s of the infrastructure and less probably in the higher application specific levels:
  • The Advisory group, especially in Germany, must not cut off its roots of success – where IT plays its part.
  • The overall strategic interest is best served by balancing the individual business needs vs. the common group interests.
  • It seems to be wise to keep the flexible advisory IT apart from the highly regulated traditional bank IT.
  • From the position of independence both parties should be encouraged to carefully look for synergies.
  • As business models differ, so does the IT support - but there is common ground too: chances for synergies exist in the lower IT levels.
But the most stunning findings for all participants were, that on one hand the way we work (processes) is firmly rooted in the way those processes are technically supported (IT). But on the other hand this way of working is the result of our values, beliefs and behaviour – in short, our culture:
IT follows processes follows culture.

In order to lead to an exceptional success these three components need to be carefully fine tuned to mutually strengthen each others. But this balance can easily be destroyed by taking the wrong decisions – perhaps haven the best intenstions.

2010-09-13

Structure follows market – and so does culture

Some of you might remember the American historian, Alfred Chandler’s wise words: “structure follows strategy” which Richard P. Rumelt cynically turned into “structure follows fashion” … well different story.

But I recently came to know, that “culture follows market”. How this? Isn’t this a bit far-fetched? Well, let me explain.

When Henry Ford I had the idea to provide the American people with personal cars he approached an empty market, an unsaturated marked with a huge sales potential. This would have stayed just a potential if not a group of economists at the same time had defined the theory of “scientific management”. The probably most well-know member of this movement, Frederick Winslow Taylor, lent his name to this movement Taylorism. It was about high scale mass production according to pre-defined and pre-optimized efficient processes.

Influenced by these people consequently Henry the Ford T Model cars which left Fords assembly lines were sold in every colour as long as it was black (because black at that time was the colour which dried most quickly).

The model worked fine and Ford thrived. America got motorized. A new age was born. And the “scientific management” model became synonymous with management anyway – and it still is today, more than 100 years later.

These early unsaturated markets demanded high numbers of uniform yet affordable products. Unskilled worked had to be hired from the streets to become productive workers overnight. This a whole organisational layer of middle managers had to define and tailor (no, not taylor) their processes, tasks, assign time-slots, the work place and so on and they had to supervise them and manage them to get the best out of them. In short, they invested high efforts to refine and optimize the business.

And the big bosses at the top were thinking about new market, new technologies, new product lines, in short strategies. The classical three-story pyramidal hierarchy was born. Its organisation is highly adapted to efficient mass production with the tendency to become more and more optimized to be come fit for this special purpose. With optimisation came complexity – but it was worth it because it paid off on the long run. Flexibility, change robustness, adaptability or – to use a word which is en-vogue nowadays – agility were non-issues.

But once the markets were saturated the picture turned completely. Now a standard model no longer was sufficient, having a car per se was not the big achievement like before, for the 2nd one the experienced customer turned out to be more demanding: other colours, different from black, open-tops, pick-ups, sports cars, family cars, station wagons, Pullman limousines, and on top model changes every two to three years.
The environment became much more dynamic. And in a dynamic environment multiple complex decisions have to be made. In the Taylor pyramid with its potential information flow bottlenecks at top level this situation easily leads an information overflow. The demand for increased corporate agility put the whole structure under heavy stress. The increased organisation complexity which delivered so excellent result throughout all the years turned into a heavy burden by the time.The natural organisational response to these new challenges is a less hierarchic, more networked organisation – the expert diamond. It offers higher agility at the cost of lower efficiency.

In the experts diamond peers communicate directly. Management functions merge with operational functions to independent self optimising processes. Experts led by principles follow their own autonomous decisions. They make autonomous but visible decisions.
For leadership the consequences were: the „boss“ becomes a coach rather than the „1st clerk“. Mutual respect of personality and competency replace daily order and detailed rules. The culture has to adapt from “feudal” to “team oriented”.
Lets compare how this organisation changes necessarily influences the corresponding best adapted organisational culture: Taylor Pyramid vs. Experts Diamond.

Pyramid culture

  • Lead by orders and rule
  • Tightly managed departments
  • Remuneration on hours works
  • Penalties on failures
  • Secret knowledge
  • Safe jobs through rigid structures
  • Working for money
  • Vertical communication only
  • External control of work
  • Predefined jobs
  • Operation & control are split
  • Distrust

Diamond culture

  • Lead through principles and values
  • Autonomously acting teams.
  • Remuneration based on success
  • Rewarding success
  • Shared knowledge
  • Confidence through cultural integration
  • Self-confidence through visible contribution to success
  • Direct peer-to-peer communication
  • Self controlled work
  • Evolving (self organising) jobs
  • Self optimizing processes
  • Trust

In large organisations however it can be found that areas of different requirements with respect to the efficiency to agility ratios may well coexist. We found such examples in European banks with a retail-LoB which had to be highly optimised towards efficiency, reliability and compliance with regulatory regulations. Additionally there was a corporate advisory LoB where highly skilled experts had to flexibly solve ever new and differently demanding tasks: two organisations, two cultures, two “hearts” within one large corporation.

This means that whereas in a static environment the best adapted specialist wins. In a dynamic market the adaptable generalist is the winner. Only a few corporations are equally well positioned in both environments.

But in fact successful corporations need the power of the two distinct cultures. Highly efficient processes need an industrial organisation. Market driven substructures need an expert’s network organisation.

For those organisations taking advantage of “the power of the two hearts” obviously is key to success.

Lets remember that market forces determined the organisational structure and the structure in turn led to a specific ‚best suited’ corporate culture. Hence Structure follows market – and so does culture.