How anxiety affects CEO decision making

Posted in Aktuellt, Board work / Styrelsearbete, Leadership / Ledarskap on June 29th, 2017 by admin

While top executives tend to be thought of as a confident bunch, they are no less susceptible to anxiety than the rest of us. After all, they routinely have to make important decisions, often under conditions of uncertainty, that affect countless people, organizations, and industries.

It is less clear, though, what this anxiety means for how they do their jobs. Psychology research has shown that anxiety influences decision making—for example, job anxiety can cause people to fixate on potential threats, thus missing big opportunities. This made us wonder whether boards or employees should be worried about anxiety influencing their CEO’s strategic decision making in ways that might hold back their firm.

We interviewed 84 CEOs and other top executives of major corporations to find out. They described some of the toughest decisions they had faced in their roles. Overall we collected data on 174 big decisions, such as those relating to acquisitions, major product launches, new foreign market entries, and complex corporate restructurings. We analyzed transcripts to assess whether executives’ language focused on opportunities or threats. Then we surveyed the people who knew them best – their spouses (mostly wives, but a few husbands), close friends and family, and their chief lieutenants (COOs, general counsels, etc.) – to get more information about their personal lives and how they handled tough decisions. We combined this with archival data about their businesses, competitors, and industries. Finally, we conducted a follow-up survey of employees at the lower levels of these organizations to see how their anxiety levels compared to top executives.

We found that more-anxious leaders (those that were described as experiencing job anxiety “to some extent,” “to a considerable extent,” or “to a great extent”) took fewer strategic risks than their less anxious peers in order to avoid potential losses. Job anxiety reduced the attractiveness of big strategic bets for the company, despite their potential to drive large gains.

This isn’t necessarily a bad thing, as excessive risks can lead companies into ruin. But smart risks are often key to driving corporate growth, and our results suggest that anxious executives may, in their overriding desire to avoid threats, miss out on high-upside strategic opportunities and thus limit growth.

However, context matters. Researchers have shown that executives facing loss contexts (e.g., when the company has recently underperformed relative to peers) are more inclined to make big strategic bets that, if successful, can undo the loss. Conversely, executives facing gain contexts (e.g., when the company has recently performed better than its peers) eschew risky bets in favor of safer alternatives that offer more predictable, albeit lower upside, returns.

This suggests that while anxiety may lead executives to avoid risky strategic initiatives, such tendencies may be counteracted when the executive is facing a loss context that calls for bold action. We found that job anxiety exerts a weaker effect on risk-taking in loss contexts, while gain contexts exacerbate anxious executives’ risk-reducing tendencies.

For example, consider the case of a tech CEO in our sample who was described as experiencing “a considerable extent” of job anxiety by his close friends and family. This CEO was facing an important strategic decision for his firm regarding future growth, and made the decision to sell the firm to a larger rival rather than pursue the potentially much higher upside of independent growth as a standalone business.

Already naturally inclined to play it safe, anxious executives are especially careful not to upset the apple cart when things are going well. While a conservative bias might sound reasonable, or even admirable, markets might very well see this as a serious threat to shareholder interests if it causes a firm to miss out on promising opportunities that would propel growth.

Our results also showed that anxiety drives some executives to stack the deck. Prior research has shown that one of the ways anxious individuals deal with their worries is to lean on trusted others for support and protection, a phenomenon known as “social buffering.” Similarly, we found that anxious executives are more likely to staff their teams with loyal subordinates whom they know and trust. This is especially true in loss contexts, where threats loom large. Anxious executives are particularly driven to close ranks within their teams and stack their inner decision-making circle with loyalists. This effect disappears in gain contexts where anxious executives are presumably less compelled to create a protective shield against perceived threats.

The main takeaway is that top executives are influenced by job anxiety just like the rest of us, but because the impact of their biases can have serious downstream consequences for thousands of employees, shareholders, and stakeholders, leaders should ask:

Maybe the paranoid are more likely to survive, but at what cost? Intel CEO Andy Grove famously noted that paranoia can be a good thing for executives when it compels them to keep a close eye on their environment. Our results suggest, however, that overly anxious (and perhaps paranoid) executives may be less willing to make the big strategic bets that could catapult the company to long-term success. Serious consideration of both potential upside and downside outcomes is necessary for forming a clear-eyed assessment of firm strategy, but anxiety may cause executives to become myopic to such balanced views.

Who is asking the tough questions? One can hardly fault anxious executives for relying upon subordinates that they trust. But this could come with drawbacks if a sense of loyalty prevents subordinates from asking difficult questions or otherwise engaging in healthy debate with leaders. Executives are well-advised to put together teams that are nevertheless unafraid to challenge them when the situation calls for it.

What can boards do? Boards may not have an easy way to assess anxiety in executives, but they should realize that anxiousness plays a meaningful role in the fortunes of their firms. For instance, an anxious executive’s risk-averse outlook may run counter to the board’s (or shareholder’s) vision for bold strategies.

Although a CEO is unlikely to report to their board that they are feeling anxious about their job, boards can be proactive in looking for signs of stress that may bias executive decision-making, perhaps through informal conversations with executives’ close colleagues. They can also offer social support and encouragement to help mute some of the more dysfunctional effects of executive job anxiety. And to avoid anxious leaders surrounding themselves with loyalists, board members can protect the firm by requiring CEOs to present multiple strategic options before making big decisions, or by asking individuals other than the CEO to present opposing options.

Source: Harvard Business Review, July 19, 2016
Authors:Mike Mannor, Adam WowakViva, Ona BartkusLuis and R. Gomez-Mejia
Link

Chefens mest irriterande egenskaper

Posted in Aktuellt, Leadership / Ledarskap on June 27th, 2017 by admin

Favorisering, arrogans och konflikträdsla är några av de egenskaper hos chefer som retar oss mest, enligt en ny undersökning från Yougov. Det bör inte viftas bort, eftersom det påverkar människors hälsa.

Kan påverka arbetsmiljön – rejält
Enligt undersökningen av Yougov retar vi oss allra mest på konflikträdsla, det angav 21 procent som chefens mest irriterande sida. Anna Nyberg, psykolog och forskare i arbetsmiljö, har skrivit en avhandling om hur chefers ledarskap påverkar medarbetarnas hälsa. Hon säger att en chefs oförmåga att ingripa vid konflikter kan få väldigt negativa effekter:
– Det har visat sig påverka arbetsgruppens dynamik negativt, så att det till exempel kan uppstå mer utstötnings- och mobbingprocesser med mer stress och psykisk ohälsa i de här grupperna, säger hon.

Viktigt att människor blir sedda
18 procent av de svarande uppgav att de stör sig på att chefen inte tar tillvara på deras kompetens. Anna Nyberg är inte förvånad över att det hamnar högt upp på listan.
– Att inte ta vara på medarbetares kompetens kan handla om att inte vilja ge dem inflytande, men att ha inflytande i arbetet är en av de mest studerade faktorerna i arbetsmiljöforskning och vi vet att det är viktigt för vår hälsa.

Chefskapet kan vara störande i sin egen rätt
Att chefen favoriserar vissa anställda mer än andra och inte kan ta kritik är andra egenskaper som svenskarna inte gillar hos sina chefer. Men enligt Anna Nyberg kan bara det faktum att en chef har inflytande över medarbetaren vara tillräckligt för att man ska irritera sig.
– En auktoritet aktiverar ofta processer inom oss som kan härstamma från relationen från våra föräldrar eller andra tidigare auktoritetsfigurer.

Topp 5 dåligt chefsbeteende – enligt anställda

• Konflikträdd 21 %
• Tar inte vara på min kompetens 18 %
• Favoriserar vissa anställda över andra 16 %
• Tål inte kritik 13 %
• Allt ska göras på chefens sätt 12 %

Informationsbas: Stressforskningsinstitutet

Källa: HRnytt.se, juni 2017
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Slutfakturerat för styrelearvodet!

Posted in Aktuellt, Board work / Styrelsearbete on June 26th, 2017 by admin

Läs mer här!

Slutfakturerat för börsens styrelseproffs

Posted in Aktuellt, Board work / Styrelsearbete on June 22nd, 2017 by admin

En dom från Högsta förvaltningsdomstolen i tisdags slår fast att styrelseproffs inte längre ska kunna fakturera styrelsearvodet via egna bolag. Det kommer leda till att styrelserummen tappar tungviktare, tror experterna.

Läs mer här.

Källa: SvD.se, 22 juni 2017

Customers’ lives are digital—but is your customer care still analog?

Posted in Aktuellt, Customer care / Kundvård, Digitalisering / Internet, Strategy implementation / Strategiimplementering on June 20th, 2017 by admin

Digital customer care is still new territory for many companies. They can learn a lot from the natives.

Today’s customers expect digital service. More and more are getting it, too, across sectors from telecommunications to banking and from utilities to retail. For example, telco customers conduct roughly 70 percent of their purchases either partly or wholly online—and 90 percent of their service requests as well.

The rapid shift to digital customer care (or e-care) should be good for everyone. Automation and self-service cuts transaction costs for providers. When e-care is done well, customers prefer it, too. Our research among telecommunications customers shows that customers who use digital channels for service transactions are one-third more satisfied, on average, than those who rely on traditional channels. And since companies that excel in customer satisfaction also tend to create more value for their shareholders, there is even more incentive to get e-care right.

Despite e-care’s advantages, however, many companies struggle to give their customers a consistently good digital experience. The same research revealed that while more than two-fifths of service interactions with telecommunications companies begin on an e-care platform, only 15 percent are digital from start to finish. We’ve also found that use of digital service channels lags a long way behind awareness. In Europe, for example, 98 percent of mobile phone users in one survey knew their provider offered a service website, but only 37 percent made use of it. In the United States, meanwhile, only 18 percent of mobile users said they used their providers’ online service platforms.

And e-care is getting more complex to implement. Not only do customers now want access to a fully comprehensive range of online service offerings—they also want to access these offerings using a variety of platforms, including both conventional web browsers and a growing pool of mobile devices and dedicated apps. Customers expect their experience to be continuous and consistent as they migrate from one platform to another, but they also want service options that make sense in the context in which they are asking for help.

Finally, customers are getting harder to impress. The rapid rise of “digital native” companies, such as Spotify or Uber, exposes customers to simple, streamlined user experiences designed from the ground up for digital delivery. Established companies that build their e-care offerings and processes on top of, or alongside, more traditional channels often find it hard to meet the same standards.

That comparison is becoming increasingly important. When customers think about the e-care service they receive from their bank or phone company, they don’t compare it with its competitors in the same industry but with the other digital services they use every day. When the online experience doesn’t meet their expectations, customers go back to the phone. As a result, some telecoms companies have seen call-center volumes—and costs—rise as they attempt to move to a digital service model.

Making e-care work
Companies that have been able to move more customer-care services to online channels and articulate strong e-care offerings excel across seven dimensions:

Simplicity starts with a clean, clear, and intuitive design that requires few mouse clicks or screen touches to achieve the desired task. The main functionalities are easy to find and well explained. The language is concise, simple, and easy to understand. Apple offers a wide range of products aimed at very different customers, for example, but its product information and support websites use the same clean, pared-down design, with key information presented clearly and more detail available with a minimum of clicks. In financial services, companies such as PayPal have dramatically simplified online payments, in many cases requiring only the recipient’s email address or mobile-phone number as identification.

Convenience means customers are offered a wide variety of services and a choice of support channels. User interfaces are easy to navigate and critical information is not hidden within long pages or complex menu hierarchies. Even better are sites that use data intelligence to tailor page content dynamically based on who is accessing it. Similarly, biometric identification techniques using fingerprint or voiceprint technologies accelerate authentication steps and reduce the mental burden on users without comprising security. One telecom company has developed a dynamic FAQ system that suggests possible support articles as soon as a customer begins to type a query and that loads the most relevant content automatically without requiring a page refresh.

Interactivity reflects the fact that customers now expect their online experiences to be dynamic and interactive, with blogs, social-media feeds, user reviews, and customer forums all playing important roles in modern e-care. These are especially important for millennial consumers, who have grown up steeped in social media and online interactions. Accordingly, an active user community is central to UK-mobile-phone-network giffgaff’s strategy. Users receive account credit for helping others with their queries, and individual community members are regularly highlighted on giffgaff’s support website. One of the company’s core product offerings—a bundle of text messages, voice minutes, and data known as a “goodybag”—was introduced as a direct result of suggestions on user forums. Moreover, through interactive games and a cocreation system that lets users build new services for other community members, customers now help set giffgaff’s direction.

Consistency is essential: customers require that the appearance, functionality, and information available in e-care services be consistent regardless of which device or software they use. Amazon, for example, shows customers essentially the same menus, the same links, and the same tone and language across all of its mobile and website channels, giving customers the same experience as they move from one channel to the next. This commitment significantly reduces any need for relearning after each switch—and any attendant digital friction.

Value results only if e-care works for the customer. Services must be designed to reflect the user’s individual needs, rather than the company’s internal processes, and must evolve as those needs change. One insurance company, for example, uses real-time rendering technology to create a customized video presentation of the coverage included in the customer’s quotation. The video combines professionally scripted and presented content with customer-specific data drawn from multiple sources, and its content is adjusted based on the customer’s choices and responses during the presentation.

Desirability is a product not only of a consistently appealing visual design but also of the tone and presentation of the site’s content. Both usually require adaption to suit local tastes, which may require dramatically different choices depending on the specific context. For instance, Chinese websites are typically very crowded, with lots of information available, while sites in the United States and Western Europe tend toward a more streamlined aesthetic.

Brand is not just a label: it is how customers experience a company’s products and services. Given that e-care has become one of the primary ways customers interact with a business, brand reinforcement should be a primary e-care goal rather than an afterthought. The best companies therefore integrate their brand values deeply into the design of their e-care offerings.

To buttress its message of providing exactly the services its customers need, one mobile-phone company has tailored its service experience to support unique “moments of truth” in the customer journey. Once a customer logs in, the website’s navigation changes dynamically based not only on what the customer is doing but also on behavioral insights based on previous interactions with the company.

A customer who’s usually pressed for time may see just three simple plan alternatives, cutting through the clutter, while one who wants to be assured of getting the best deal will see more detail on plan options, so she can feel in control. The site then guides the customer through activation steps, offers clear instructions on how to get the most from the service, and anticipates the most common questions with detailed answers.

Measuring up
To understand how leading players measure up under this harsh scrutiny, we evaluated the e-care offerings of more than 20 major telecommunications companies across the world, covering both online services and dedicated apps. We tested half a dozen common service activities, including access to billing and consumption information, technical-support queries, and sales or upgrade queries.

Our approach looked at the way e-care platforms were designed and presented to the user, the functionalities on offer, and the information available within each of our target service activities. Under each of those three main concepts, we rated the offerings across the seven dimensions described above.

Are you ahead of the pack?
Overall, our analysis should be sobering reading in all sectors for incumbents that are digitizing their customer-service offerings. We found only one area—the presentation of information using simple, jargon-free language—where most of the companies surveyed are demonstrating best practices. Elsewhere, we did find examples of best practices, but they have not been adopted by every company, and they are not always consistently applied even when they have been adopted.

The best websites and apps in our survey sample, for example, offer a wide range of services using a clear, easily understandable architecture that requires few clicks to access relevant content. Several, but by no means all, companies provide a convenient search function to help customers access technical support. Only a few make “search” the core navigation method for technical-support information.

Indeed, not many of the surveyed companies are taking full advantage of digital platforms’ unique capabilities. Interactive features such as support wizards or explanatory videos were rare. Only the very best-performing companies managed to integrate their e-care offerings seamlessly with live channels (such as e-calling or traditional telephone support) to create a truly multichannel experience. And just a handful have deployed the most advanced e-care technologies, such as artificial intelligence or chatbots.

For many of the services we evaluated, customer experience was inconsistent between web and app platforms. Apps sometimes offered less functionality and frequently provided less information than their web counterparts, which companies tended to position as the full-service option. On further examination, differences in look and function between apps and web often arose because of the relatively recent introduction of app offerings, or the use of different design and development teams.

Best practice is not enough
As they move further into the digital world, many incumbents clearly have work to do to give their customers the best e-care experience. But that’s no reason to set their sights too low. Leading companies not only make their digital channels highly useful and consistent at every customer touchpoint—they also make them fun and emotionally appealing. They personalize the experience and keep it relevant across the entire customer life cycle. For these top digital players, e-care doesn’t just work, it builds a brand that engages and delights customers.

That’s the standard, and it’s lifting customer expectations for everyone else. To keep up, traditional companies must measure their own performance against the best of the best of best—and embrace a culture of rapid, continuous evolution and improvement. There’s no time to lose.

Source:McKinsey.com, June 2017
Authors: Jorge Amar and Hyo Yeon
About the authors: Jorge Amar is an associate partner in McKinsey’s Stamford office, and Hyo Yeon is a partner in the New York office.
Link

Fem trender: AI och maskininlärning

Posted in Aktuellt, Digitalisering / Internet on June 16th, 2017 by admin

AI och maskininlärning är på god väg att revolutionera samhället, det menar Fredrik Heintz som är forskare i artificiell intelligens vid Linköpings universitet. Han listar dagens starkaste trender.

1. Mer flexibel industriproduktion
Automatisering har varit avgörande för att industrier i högkostnadsländer ska kunna konkurrera på den globala marknaden. Lägre produktionskostnader genom högre produktivitet säkras nu långsiktigt med hjälp av flexibla robotar som ABB:s YuMi som med samarbets- och inlärningsförmåga ställer om produktionen efter företagets behov.

2. Digitala medarbetare
Sökmotorer och översättningstjänster är digitala stöd som blivit en del av vår vardag. Utvecklingen har nu gått så långt att det till och med går att anställa digitala medarbetare och styrelsemedlemmar. De moderna kognitiva medhjälparna för en dialog med användaren – till exempel kan programmet Watson ställa diagnos på patienter och programmet Amelia ansvara för företags kundtjänst.

3. Självkörande fordon
Tesla och Googles självkörande bilar har inspirerat hela fordonsbranschen med sin samhällsnytta. I en förarlös framtid kan väginfrastrukturen utnyttjas bättre – bilarna kan köra närmare varandra och med högre hastigheter än människor behärskar bakom ratten. Utan trafikljus och avståndsregler skulle trafikflödet bli bättre och spara både energi och pengar. Men säkerheten är fortfarande en utmaning. Hur säkerställer man att bilen fattar rätt beslut och vem bär ansvaret vid olyckor?

4. Datalogiskt tänkande
Automatisering innebär en samhällsomställning och de arbeten som inte försvinner kommer att förändras. Utvecklingen vi sett i fabrikerna sprider sig nu till tjänstemannayrkena och människan behöver anpassa sig till datalogiskt tänkande. I samarbete med intelligenta maskiner blir vi mer produktiva och konkurrenskraftiga.

5. Sociala robotar
Robotarna blir alltmer avancerade och en tydlig trend är att de även används för initiativ med mjuka värden. Sociala robotar som förstår vad som händer, fattar beslut och interagerar med människor visar positiva effekter. Till exempel hjälper de autistiska barn att kommunicera och bidrar med socialt stöd i äldreomsorgen.

Läs också ”5 trender: Social selling – sälj med sociala medier”

Källa: Dustin.se, juni 2017
Text: Moa Thorsell
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The CEO’s role in leading transformation

Posted in Aktuellt, Board work / Styrelsearbete, Executive Coaching, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap on June 9th, 2017 by admin

The CEO helps a transformation succeed by communicating its significance, modeling the desired changes, building a strong top team, and getting personally involved.

In today’s business environment, companies cannot settle for incremental improvement; they must periodically undergo performance transformations to get, and stay, on top. But in the volumes of pages on how to go about implementing a transformation, surprisingly little addresses the role of one important person. What exactly should the CEO be doing, and how different is this role from that of the executive team or the initiative’s sponsors?

Based on a series of interviews we have conducted with nearly a dozen executives over the last couple of years—as well as our own experience working with companies—we believe there is no single model for success. Moreover, the exact nature of the CEO’s role will be influenced by the magnitude, urgency, and nature of the transformation; the capabilities and failings of the organization; and the personal style of the leader.

Despite these variations, our experience with scores of major transformation efforts, combined with research we have undertaken over the past decade, suggests that four key functions collectively define a successful role for the CEO in a transformation:

Making the transformation meaningful. People will go to extraordinary lengths for causes they believe in, and a powerful transformation story will create and reinforce their commitment. The ultimate impact of the story depends on the CEO’s willingness to make the transformation personal, to engage others openly, and to spotlight successes as they emerge.
Role-modeling desired mind-sets and behavior. Successful CEOs typically embark on their own personal transformation journey. Their actions encourage employees to support and practice the new types of behavior.
Building a strong and committed top team. To harness the transformative power of the top team, CEOs must make tough decisions about who has the ability and motivation to make the journey.
Relentlessly pursuing impact. There is no substitute for CEOs rolling up their sleeves and getting personally involved when significant financial and symbolic value is at stake.
Everyone has a role to play in a performance transformation. The role of CEOs is unique in that they stand at the top of the pyramid and all the other members of the organization take cues from them. CEOs who give only lip service to a transformation will find everyone else doing the same. Those who fail to model the desired mind-sets and behavior or who opt out of vital initiatives risk seeing the transformation lose focus. Only the boss of all bosses can ensure that the right people spend the right amount of time driving the necessary changes.

Making the transformation meaningful
Transformations require extraordinary energy: employees must fundamentally rethink and reshape the business while continuing to run it day to day. Where does this energy come from? A powerful transformation story helps employees believe in the effort by answering their big questions, which can range from how the transformation will affect the company down to how it will affect them. The story’s ultimate impact will depend on not just having compelling answers to these questions but also the CEO’s willingness and ability to make things personal, to engage others openly, and to spotlight successes as they emerge.

Adopt a personal approach
CEOs who take time to personalize the story of the transformation can unlock significantly more energy for it than those who dutifully present the PowerPoint slides that their working teams created for them. Personalizing the story forces CEOs to consider and share with others the answers to such questions as “Why are we changing?”; “How will we get there?”; and “How does this relate to me?”

Some leaders include experiences and anecdotes from their own lives to underline their determination and belief—and to demonstrate that obstacles can be overcome. Klaus Zumwinkel, the chairman and CEO of Deutsche Post, talked about his passion for mountain climbing, linking the experience of that sport and the effort it requires to the company’s transformation journey. John Hammergren, the CEO of McKesson, stressed that every employee was or would be a patient in the health care system and that this “larger purpose” made a difference. “Had we been in the ball-bearing business, I’m not sure it would have been as easy to personalize it,” he acknowledges.

Openly engage others
When a CEO’s version of the transformation story is clear, success comes from taking it to employees, encouraging debate about it, reinforcing it, and prompting people to infuse it with their own personal meaning. Most CEOs invest great effort in visibly and vocally presenting the transformation story. Julio Linares, the executive chairman of Telefónica de España, says the most important and hardest part of the transformation was “to convince people of the need for the program.”

Once the story is out, the CEO’s role becomes one of constant reinforcement. As P&G CEO Alan G. Lafley says, in “Leading change: An interview with the CEO of P&G,” “Excruciating repetition and clarity are important—employees have so many things going on in the operation of their daily business that they don’t always take the time to stop, think, and internalize.” Paolo Scaroni, who has led three public companies through various chapters of change, likes to find three or four strategic concepts that sum up the right direction for the company and then to “repeat, repeat, and repeat them throughout the organization.”

Reinforcement should come from outside as well. Passera notes, “If everyone keeps reading in the newspapers that the business is still a poor performer, not contributing to society, or is letting the country down, people will not believe you.”

Spotlight success
As the company’s transformation progresses, a powerful way to reinforce the story is to spotlight the successes. Sharing such stories helps crystallize the meaning of the transformation and gives people confidence that it will actually work. Murthy of Infosys describes how high-performing teams were invited to make presentations to larger audiences drawn from across the company, “to show other people that we value such behavior.”

Ravi Kant, the managing director of the integrated Indian auto business Tata Motors, deliberately identified people who would serve as examples to others. In “Leading change: An interview with the managing director of Tata Motors,” he talks about how he highlighted the achievements of one young man whose success on a risky project and subsequent promotion showed colleagues that talented and determined people can rise through the hierarchy.

Emphasizing the positive, behavioral research shows, is especially important. In 1982, University of Wisconsin researchers who were conducting a study of the adult-learning process videotaped two bowling teams during several games. The members of each team then studied their efforts on video to improve their skills. But the two videos had been edited differently. One team received a video showing only its mistakes; the other team’s video, by contrast, showed only the good performances. After studying the videos, both teams improved their game, but the team that studied its successes improved its score twice as much as the one that studied its mistakes. Evidently, focusing on the errors can generate feelings of fatigue, blame, and resistance. Emphasizing what works well and discussing how to get more out of those strengths taps into creativity, passion, and the desire to succeed.

Role-modeling desired mind-sets and behavior
Whether leaders realize it or not, they seem to be in front of the cameras when they speak or act. “Every move you make, everything you say, is visible to all. Therefore the best approach is to lead by example,” advises Joseph M. Tucci, CEO of EMC, the US-based information storage equipment business. Ultimately, employees will weigh the actions of their CEO to determine whether they believe in the story.

Transform yourself
Employees expect the CEO to live up to Mahatma Gandhi’s famous edict, “For things to change, first I must change.” The CEO is the organization’s chief role model.

Typically, a personal transformation journey involves 360-degree feedback on leadership behavior specific to the program’s objectives, diary analysis to reveal how time is spent on transformation priorities, a commitment to a short list of personal transformation objectives, and professional coaching toward these ends. CEOs generally report that the process is most powerful when all members of an executive team pursue their transformation journeys individually but collectively discuss and reinforce their personal objectives in order to create an environment “of challenge and support.

Murthy’s 2002 decision to take on the job title of chief mentor at Infosys, for example, meant that he had to reinvent himself, because he laid aside his formal managerial (CEO) authority at the same time. He explains, “You have to sacrifice yourself first for a big cause before you can ask others to do the same,” adding, “A good leader knows how to retreat into the background gracefully while encouraging his successor to become more and more successful in the job.”

Take symbolic action
The quickest way to send shock waves through an organization is to conceive and execute a series of symbolic acts signaling to employees that they should behave in ways appropriate to a transformation and support these types of behavior in others. For instance, C. John Wilder, CEO of the Texas energy utility TXU, gave a large bonus to a woman who had taken a clear leadership role in a very important business initiative. “This leader’s contributions generated real economic value to the bottom line,” he explains. “Of course, news of that raced through the whole organization, but it helped employees understand that rewards will be based on contributions and that ‘pay for performance’ could actually be put into practice.”

Building a strong and committed top team
The CEO’s team can and should be a valuable asset in leading any transformation. As Deutsche Post’s Zumwinkel suggests, “You need excellent individual players, but you also need players who are dedicated to playing as a team.” Sharing a meaningful story and modeling the right role will certainly increase the odds of getting the team on board, but it is also vital to invest time in building that team.

Assess and act
Successful CEOs take time to assess the abilities of individual members of the team and act swiftly on the result. In some cases, input from third parties (such as executive search firms) is sought to create a more objective fact base. Many CEOs find it useful to map team members on a matrix, with “business performance” on one axis and “role-modeling the desired behavior” on the other. Those in the top-right box (desired behavior, high performance) are the organization’s stars, and those in the bottom-left box (undesired behavior, low performance) should be motivated, developed, or dismissed. The greatest potential for sending signals involves the employees in the box of “undesired behavior, high performance.” When clear action is taken to improve or remove these managers, the team’s members know that role-modeling and teamwork matter. Banca Intesa’s Passera affirms that, “If necessary, you have to get rid of those individuals, even the talented ones, who quarrel and cannot work together.”

How do CEOs know when to intervene with the strugglers? They can reflect on the following questions:
Do team members clearly understand what is expected of each of them in relation to the transformation?
Is the CEO serving as a positive role model?
Does everyone recognize the downside and upside of getting on board and doing what is required?
Have struggling team members received a chance to build the needed skills?
If the answer to all of these questions is yes, decisive action is justified.

Experienced CEOs attest to the positive impact this can have on the rest of the company. EMC’s Tucci says he had to take “public” action to tackle the “whiff of arrogance” that used to characterize certain parts of the company. TXU’s Wilder recalls that “When we did a cultural audit, we found that the number-one complaint was that management was not dealing with employees that everyone knew weren’t carrying their load.“

Invest team time
Even with the right team in place, it takes time for a group of highly intelligent, ambitious, and independent people to align themselves in a clear direction. Typically, the first order of business is for members to agree on what they can achieve as a team (not as individuals), how often the team should meet, what transformation issues should be discussed, and what behavior the team expects (and won’t tolerate). These agreements are often summarized in a “team charter” for leading the transformation, and the CEO can periodically use the charter to ensure that the team is on the right track.

Intesa’s Passera speaks of how he brought his team together regularly to “share almost everything,” to make it “clear to everyone who is doing what,” and to “keep the transformation initiatives, budgets, and financial targets knitted together.” P&G’s Lafley emphasizes the importance of spending the time together wisely: “You need to understand how to enroll the leadership team.” As a rule of thumb, 80 percent of the team’s time should be devoted to dialogue, with the remaining 20 percent invested in being “presented to.”

Effective dialogue requires a well-structured agenda, which typically ensures that ample time is spent in personal reflection (to ensure that each person forms an independent point of view from the outset), discussion in pairs or small groups (refining the thinking and exploring second- and third-level assumptions), and discussion by the full team before final decisions are made. In this process, little tolerance should be shown for minutiae (losing the forest for the trees) and for any lack of engagement. Face-to-face meetings, as opposed to conference calls, greatly enhance the effectiveness of team dialogue.

Relentlessly pursuing impact
Organizational energy—collective motivation, enthusiasm, and intense commitment—is a crucial ingredient of a successful transformation. There is no substitute for a CEO directing his or her personal energy toward ensuring that the company’s efforts have an impact.

Roll up your sleeves
Initiatives with a significant financial or symbolic value require the CEO’s personal involvement for maximum impact. There may be several beneficial effects, among them ensuring that important decisions are made quickly—without sacrificing the value of collective debate—and sowing the seeds of a culture of candor and decisiveness.

Leaders must be willing to leave the executive suite and help resolve difficult operational issues. Peter Gossas, president of Sandvik Materials Technology and a man with lifelong experience in the steel industry, observes, “If there’s a problem, it can be helpful if I come to the work floor, step up on a crate so that everyone can see me, and hold a discussion with a shift unit that may be negative to change.” He adds, “It’s hard for me to walk into a melt shop and not begin discussing ways to solve operational problems.”

Hold leaders accountable
Successful CEOs never lose sight of their management responsibility to chair review forums. Through these, they compare the results of the transformation program with the original plan, identify the root causes of any deviations, celebrate successes, help fix problems, and hold leaders accountable for keeping the transformation on track, both in activities (are people doing what they said they would?) and impact (will the program create the value we anticipated?). A central role for the CEO during these review forums is to ensure that decision making stays grounded in the facts. As Narayana Murthy wryly observes, “We have embraced the adage ‘In God we trust; everyone else brings data to the table.’”

The CEO also plays a critical role in ensuring an appropriate balance between near-term profit initiatives (those that deliver performance today) and organizational-health initiatives (those that build the capacity to deliver tomorrow’s results). This is a lesson applied by John Varley, CEO of Barclays: “For several years, the focus on initiatives to improve financial performance dramatically crowded out attention on franchise health, leaving us with a set of issues in some businesses that needed urgent attention. We are addressing those issues.” During the transformation, some CEOs even choose to hold separate review meetings for short- and long-term objectives in order to ensure that companies maintain a balance between operational improvement (tactical strategies, wage management, productivity, and asset management) and long-term growth (revenue and volume growth through market share, new products, channels and marketing, M&A, talent, and capability management).

For CEOs leading a transformation, no single model guarantees success. But they can improve the odds by targeting leadership functions: making the transformation meaningful, modeling the desired mind-sets and behavior, building a strong and committed team, and relentlessly pursuing impact. Together, these can powerfully generate the energy needed to achieve a successful performance transformation.

Source: McKinsey.com, June 2017
Authors: Carolyn Aiken and Scott Keller.
About the authors: Carolyn Aiken is a consultant in McKinsey’s Toronto office, and Scott Keller is a principal in the Chicago office.
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