Life or Death: Building a Corporate Learning Culture

Posted on December 3, 2008. Filed under: Enterprise Learning, Talent Strategy | Tags: , , , , |

Witness the number of companies undergoing a wrenching transformation (read “potential death”) in today’s economy: the US Auto industry (GM, Ford, Chrysler) , the US Newspaper industry (LA Times, NY Times), and many elements of the financial services industry.

A recent global survey of 1100 business leaders by Boston Consulting Group found that one of the top three things keeping CEOs awake at night was their ability to “build a learning organization.”   Our research shows clearly that organizations can be broadly grouped into two types: those that “learn” and those that “don’t.” Those that “learn” have an uncanny ability to evolve: they are what we call “enduring” companies, and they find ways to continuously change their products and services as markets change.

Examples of companies that “learn” include UPS – which started as a horse and buggy delivery company and is now a global logistics company operating in every mode of transportation.   Another is Caterpillar, a company which has evolved its products from steam-driven tractors to a broad array of building equipment and services around the world.

Our High Impact Learning Organization® research demonstrates that companies which have a “learning culture” have much greater financial returns over a 10-20 year period – in fact the HILO 80, the 80 top companies in our 780 company research group, deliver more than 10% greater earnings growth and over 15% revenue growth over a 10 year period than the average in their industry.

Building a Learning Organization is a Matter of Life or Death

Today, with the economy clearly at a low point, an organization’s ability to learn is a matter of life or death.

So what is a “learning culture” and how do you build one?  Well there When we look at companies which endure and prosper over long periods of time, we see that they have an uncanny ability to innovate, reinvent themselves, and adapt to change.   Our research and upcoming Learning Culture assessment discovered that there are nine independent pillars which drive an adaptable learning organization:

  1. Executive Culture.  Do line executives truly support and reinforce the business processes and investments needed to support innovation and learning?  Do they take a personal interest in employee and leadership development?  Do they regularly move business leaders throughout the company to gain new perspectives?  Do they maintain funding for learning and innovation initiatives?  Do they drive and manage change?  Do they take risks and encourage and support new products?
     
  2. Managerial Culture.   Are line managers incented, coached, and directed to build capabilities in their teams?  Are they paid to develop people and innovate?  Are they empowered and motivated to be coaches and not just managers?  Are their a variety of support and development programs for managers to provide feedback and development for their people?  Are they rewarded for experimentation and innovation?  Are they open to “bad news?”
     
  3. Customer Culture.  How close are product, service, and support teams to customer needs?  Are there vigorous and regular processes for customer input?  Do customers have many ways to interact with the company and provide input?  Is customer input considered sacred and valuable?  Are customer facing roles given high priority and respect in the organization?  Is there a free-flowing set of customer needs available to everyone who creates or produces a product or service?
     
  4. Operational Culture and Process.  How are line organizations incented and organized?  Are employees provided with the opportunity to change processes and products when necessary?  Are their programs and systems to monitor and improve quality and customer service?  Are customers intimately involved in process and product development?  Are their processes in place to learn from mistakes or does the team “shoot the messenger?”  
     
  5. HR, L&D, and Leadership Development.  Does the HR and L&D organization have the funding, mandate, and executive support to build organizational and leadership development programs?  Do they support knowledge sharing programs?  What stage of maturity is the company’s leadership development program?  Are their regular opinion surveys and other forms of feedback from employees and customers which drive organizational change?  Is innovation rewarded and incented?
     
  6. Financial Support.  How is employee development, knowledge management, innovation, and training funded?  Does each business unit or operational unit have to find money in their own budget to accomplish such tasks?  Is there budget for skunk works or new ideas?  Is there a corporate funded group which promotes innovative development teams and programs?  Are such programs monitored and supported year after year or do they get cut during bad times?  Does the organization benchmark its spending against its peers?
     
  7. Career Planning and Employee Mobility.  Does the company have a plan, model, or process for career planning?  Is it easy or possible for someone to change roles or move into a new position regularly?  When a reorganization takes place, is there a way for people to move from team to team without penalty?  Are job rotation and developmental assignments regularly offered?  How well do managers understand and participate in the career planning process?
     
  8. Employee Development and Alignment.  How are employees developed and measured?  Do they have an incentive to build new skills, learn new things, and get involved in new projects?  Is development considered a valuable part of an employee’s career?  Is there a widespread goal development process and how does it accomodate the time needed to build new processes and systems?
     
  9. Technology Investment.  Is there an ongoing investment in technology infrastructure to support learning, knowledge sharing, employee connectivity, social networking, e-learning, content management, and other tools.

 

These nine pillars are not easy to build.  In fact, they often take years to build – but we find that high performing, enduring companies do each of these things well.  In the coming months we will be introducing a new set of research and assessment tools to help organizations understand their ability to “learn.”  

While many of these things seem “soft” – in fact they are “hard.”  They demand a focus from business leaders, HR, IT, and line management.  They touch the way a company is managed and the way the company works.  Does this matter today, in the middle of a recession?  You bet it does:  if your company wants to survive during a slowdown, you must be able to adapt quickly and effectively.

Watch for more on this topic in coming months – and a major launch of our research in this area at IMPACT 2009®.

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Are you an Enduring Organization?

Posted on April 20, 2008. Filed under: Enterprise Learning, Learning Programs, Performance Management, Succession Planning, Talent Management | Tags: , , , , , , , |

As we continue to study best practices in the implementation of corporate learning and talent management, we find that high performing organizations fall into two categories:  those who endure and prosper over long periods of time (decades), and those who rapidly rise to prominence, then falter during a major business challenge, and often become acquired (or disappear).

The former are what we call “enduring organizations” – and they typically become iconic brands which provide tremendous returns to shareholders, employees, and customers.  (These are the types of companies that Warren Buffet likes to invest in.)  The latter are exciting companies to read about, but often disappear and become historic roadmarks in the highway of progress (one could call them “roman candles”).   Fast-growing, trend-setting companies (e.g. Google) set trends and create tremendous excitement, but they are not truly tested until they endure broad economic and business cycles.

Characteristics of Enduring Organizations

These enduring organizations have several things in common.  First, they have an uncanny ability to grow and prosper under a wide variety of economic and business conditions, and survive for many decades.  Second, they survive wrenching upheavals in their markets and somehow learn to reinvent themselves over time.  Third, they become iconic brands, which last long beyond their product lifecycles.  And fourth, they provide extraordinary returns to shareholders, employees, and customers.

An excellent example of such a company is IBM. IBM was founded in the early 1900s and originally built IBMrifles for the US military.  It turned into a “tabulating machine” company which developed systems for the US census, and then later developed the first mainframe computer.  IBM dominated the mainframe computing era for more than 20 years, reaching such market monopoly that the US Department of Justice forced the company to unbundle its services from its technologies. 

In the 1980s the computing industry shifted – from one of vertical integration (one company making the chips, computers, operating system, and application software) to one of horizontal integration (many compaines making chips, many companies making computers, many companies making operating systems, and many companies making application software).  IBM helped create this market by launching the IBM PC, the first open systems computer.  But the company suffered a painful transformation in its business as a result, almost being forced to split itself up into seperate companies. 

Demonstrating its ability to deal with change, IBM transformed itself again – and thanks to Lou Gerstner and Sam Palmisano (the current CEO), IBM re-emerged as the most trusted and profitable IT services and consulting company in the technology industry.

During this period of time, many innovative and well-run companies emerged, grew, and disappeared.  Tandem computers, Digital Equipment, Compaq, SiliconGraphics, and many more.  Somehow they never seemed to build the processes and staying power of IBM.

We can think of dozens of examples of companies that have created such enduring brands:  Caterpillar, UPS, GE, Procter and Gamble, Clorox, AIG, McDonald’s, Goldman Sachs, and many more.  If you take a “long term view” of stock market value, you will find that these enduring brands generate far greater returns over the longrun than many “high fliers.”

What makes thes Organizations Endure?

As we have studied these organizations, and their underlying business and talent processes, we have found that one of the most important things these organizations have in common is their ability to manage talent.  In a sense, these organizations have learned over time that they are not really “product” companies or “service companies” but rather they are “talent companies.”  They have built processes, systems, and strategies to hire, develop, manage, and coach people to build an adaptable, accountable, and value-driven organizations.

Enduring Organizations Adapt Well to Change

If you consider the biggest challenge most companies face, it is change.  Once you build a unique and value-oriented product or service, the biggest challenge you run into is the fact that the world never sits still.  Change occurs on a relentless and continuous basis:  competitors copy your product;  customers demand new capabilities;  the economy stalls or goes into a tailspin;  your market segments change and demographics shift;  and sometimes even bigger changes are taking place.  Today, for example, the environment has become a major driver of buyer behavior (more than 40% of US corporations consider the “green movement” as a fundamental threat or opportunity to their business).  Many of these changes are rapid and unpredictable.

The question we consider is not how to adapt to one of these changes in particular, but rather to learn how organizations create enduring strengths which enable them to adapt successfully.  My personal belief is that the ability to understand and adapt to change is one of the biggest strengths in these enduring organizations.  Many companies develop monopoly positions with their products and services, but they often find that these monopolies are attacked quickly. 

Consider Motorola in the cell phone industry.  Motorola invented the mobile phone, and hit a home run withMotorola the RAZR.  But the company has been unable to adapt to the relentless progress in this market, losing market share again and again to Nokia, Apple, Samsung, and other competitors.  Enduring organizations find ways to continuously move “up the value ladder” by changing their products, services, and strategies.

There are dozens of examples of such organizations:  consider UPS, which originally was a company that delivered messages via horseback.  It moved into automotive transportation, then global shipping, and now global business logistics — all with the same focus on business productivity and value.   UPS has a strong, end-to-end focus on hiring, developing, and managing the right talent.  They have well-developed, clear competency model for success and they reinforce it throughout their people processes.

What we find is this:  These companies do not define themselves by their products and services, but rather by their talent.  It is their “talent machine” that enables them to adapt their strategies, move up the value ladder, and execute well in the face of continuous and relentless change in their markets.

The Five Essential Elements

It’s not enough to say that these companies have “good people strategies” or “strong cultures.”  They actually have much more.

When we dissect what makes these companies endure, we have found five keys — each of which requires a strong focus on talent.  We call these five keys the “five essentials” – they are business essentials which are supported by strong talent management.   Your job as an HR professional is to understand how to implement these five essentials in unique and long-lasting ways.

As I prepare to present this information at our upcoming research conference (IMPACT 2008:  The Business of Talent®), let me briefly highlight them here.   We will be publishing more detail and examples in months to come:

  • Strategy:  The first essential is strategy.  Enduring organizations have developed strong and focused value-add strategies for their markets.  They clearly understand how they add value.  There are three core value add strategies in any market:  product innovation, customer intimacy, and low-cost production.  Enduring organizations select a strategy and stick with it – enhancing it over time.  They codify these strategies into their talent management processes:  who they hire, how they manage people, who they promote, and how people grow in the organization. 

    For example, in technology, one could argue that Apple is the product innovator, IBM is the customer intimacy company, and Dell is the low-cost producer.  Each must staff, manage, and incent people differently because of these different value strategies.  

  • Management:  The second essential is management.  Enduring organizations focus on alignment, transparency, accountability, and trust.  Management is all about making sure people know what to do every day — and that they have the tools and support to be successful.  Management must be tied directly to strategy, hiring the right people and incenting people to do things which support the strategy.  HR professionals can and must play a major role in building these management systems, and we have many examples of amazing management processes which drive these enduring organizations. 

    For example, our research shows that organizations which build strong, strategic competencies from which to manage their employees have almost 4X the return on the ability to build a high performance culture.  We also know that high performing companies in different industries manage people very differently (e.g. financial services companies focus much more heavily on service and quality;  technology companies focus much more heavily on innovation and engineering.)Your job in HR is to help the organization craft and implement its management process, and rigorously and extensively train and coach managers to use the process.  

  • Leadership:  Third, and perhaps most importantly today, enduring organizations have an amazing focus on leadership.  (The #1 issue on the minds of corporate leaders today is strengthening their leadership pipeline.)  Enduring organizations understand the core competencies of their leaders, they vigorously identify and build new leaders, and they move leaders throughout the business.  They know that only by hiring and developing excellent leaders can they build and develop excellent employees.  They understand the need for continuous focus on succession management, as both a tool for growth and a way to hedge against business risk.   

    Here our research clearly shows that organizations at level 4 in our leadership maturity model are generating almost 6-fold higher returns on business outcomes and bench-strength.  Unfortunatley fewer than 10% of organizations have reached this level today, but we see tremendous focus on improving this critical area and we are committed to helping others understand best-practices here. 
     

  • Learning:  The fourth essential element is learning.  Enduring organizations realize that organizational learning is a fundamental to success.  These companies spend 1.5-2.5X more on training per employee, and they focus on a wide variety of strategies to build organizational learning:  career development, coaching, mentoring, as well as strong skills development.  Most importantly they implement a “learning culture” which encourages risk-taking, innovation, and continuous improvement.

    An interesting example:  during the 10 years that I worked at IBM I was involved in the rollout of some of the biggest flops of the decade.  There was the IBM PC Junior, the RT-PC, the 9370 Minicomputer, and many more.  These products, often the results of years of R&D, were announced with flourish and fanfare.  When they failed, IBM was clearly disappointed.  But the leaders of these products were not fired or demoted — rather they were forced to “learn from these mistakes” and go on and make them better.  The PC Junior became the IBM Thinkpad.  The RTPC became the IBM RISC System/6000 and the SP2 supercomputer.  And the 9370 eventually re-emerged as a family of high powered mid-sized mainframes which are still in the market today.  This is an example of an organization that really learns.   

  • Systems:  Finally, enduring organizations build systems.  Systems (processes, not software systems) create scale, consistency, and provide information for decision-making.  These systems become the backbone of the organization and they create a focus on quality and continous improvement.My best example here is McDonald’s. One may believe that McDonald’s is a hamburger company, or perhaps a fast-food company.  But actually, if you truly understand how McDonald’s works, you would realize that this company is an amazing combination of systems.   More on this later.

We will be discussing these topics in detail at our upcoming research conference, and giving you examples of how enduring organizations implement these solutions for business value. 

The Role of HR and Talent Management

Today’s “talent management” is all about implementing these five elements.  Talent management is not an “HR strategy” – but rather it is a “business strategy.”   The talent processes and systems which HR managers implement (employment branding, recruiting, competency assessment, performance management, succession management, leadership development, career development, and on) directly support these five elements.  HR leaders are the architects and craftsmen of the systems and processes which create such enduring organizations.  Business leaders should think about “building a talent engine” in support of the organization’s goals, rather than just building products and selling them to customers.

Jack Welch, ex-CEO of GE, put it well.  He stated that the #2 most important person after the CEO is the VP of HR.  Why?  Because the VP of HR identifies and develops the pipeline of leaders which will run GE in a profitable and adaptable way.

Your job as an HR or L&D professional is to take your skills and expertise and apply it in these five areas, remembering that as you craft expert solutions, the implementation of these solutions will be performed by the business leaders, managers, and employees in your organization.  In a sense you are the “master carpenter” who builds a long-lasting house.  The house you are building will be inhabited by executives, managers, and employees – not only you – and you have been entrusted with a large part of its design.  And your role is dynamic:  you must monitor the house to make sure it is continually being enhanced and improved as needed.

This is what we call The Business of Talent®, and it is the focus of our research.  I hope these thoughts are helpful and welcome your feedback.

 

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