Digital Transformations Fail Differently

Digital Transformations Fail Differently

In a recent Harvard Business Review article, Thomas H. Davenport and George Westerman, researchers with the MIT Initiative on the Digital Economy, consider several recent cases in which high-profile companies like GE, Ford, and Procter & Gamble made massive investments in digital transformations that ultimately failed to achieve their goals. “What can we learn from these examples of digital dreams deferred?” they ask. “How did these smart, experienced leaders make decisions that don’t look so smart in hindsight?”

The issue, the authors posit, is fundamental to the adoption of transformative business technologies. Very similar high-profile change failures happened with the rise of e-commerce and big data, they note. There’s something about digitalization that leads businesses to slip up in specific ways:

Several key lessons emerge when heavy commitments to digital capability development meet basic financial performance problems. A clear one is that there are many factors, such as the economy or the desirability of your products, that can affect a company’s success as much or more than its digital capabilities. Therefore, no managers should view digital — or any other major technological innovation — as their sure salvation.

Second, digital is not just a thing that you can you can buy and plug into the organization. It is multi-faceted and diffuse, and doesn’t just involve technology. Digital transformation is an ongoing process of changing the way you do business. It requires foundational investments in skills, projects, infrastructure, and, often, in cleaning up IT systems. It requires mixing people, machines, and business processes, with all of the messiness that entails. It also requires continuous monitoring and intervention, from the top, to ensure that both digital leaders and non-digital leaders are making good decisions about their transformation efforts.

From our research at CEB, now Gartner, we know that enterprise change is hard. Most change efforts fail either partly or completely, and in today’s business environment, change is happening faster than ever before. The CEB Corporate Leadership Council’s ongoing research on Creating a Talent Strategy for the Digital Age also points to the unique challenges Davenport and Westerman identify with digital transformations.

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Director Survey: Boards Lack Visibility into Culture

Director Survey: Boards Lack Visibility into Culture

The National Association of Corporate Directors’ 2017-2018 Public Company Governance Survey, which came out this week, identifies several issues that directors say are matters of concern for them, as well as what they are not getting enough information about from management and want to spend more time discussing in board meetings. Among these issues are cybersecurity threats, which only 37 percent of respondents said they felt confident that their company was prepared to defend against; and business strategy, with 71 percent saying their boards needed to improve their understanding of and contribution to management’s strategic decisions.

The third item on the list is corporate culture, which directors say they are hearing plenty about from upper management, but are not getting enough insight into what culture actually looks like further down the org chart, as Vincent Ryan notes at CFO:

Eighty-seven percent of directors said they had a good understanding of their companies’ tone at the top, but only 35% of directors said they had a good understanding of “the mood in the middle,” and just 18% of them indicated they had a good grasp of the health of the culture at lower levels of the organization.

While directors generally were confident that management could “sustain a healthy corporate culture during a period of performance challenges,” 92% of directors said they relied totally on reporting from the CEO about the health of organizational culture. According to the survey, it was rare for a director to get a direct take on corporate culture from functions such as internal audit (39%), compliance and ethics (30% ), and enterprise risk management (20%)[.]

These takeaways are largely consistent with our own latest research at CEB, now Gartner. One reason why boards are talking more about culture because shareholders are: our Investor Talent Monitor (which CEB Corporate Leadership Council members can check out here) shows that questions about talent topics, including company culture, are coming up more often on CEO calls with investors. Another reason why culture is on boards’ radar is that so many recent scandals have revolved around allegations of toxic company cultures: Boards today need a better view of culture because its impact on the bottom line has never been more apparent.

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To Drive Culture Change, Balance Shared Vision with Autonomous Execution

To Drive Culture Change, Balance Shared Vision with Autonomous Execution

Researchers at Stanford University and the University of California–Berkeley found in a recent study that companies can increase their profitability and innovation outcomes by creating a workplace that balances cultural agreement and diversity in the company culture. The researchers used text analytics to analyze cultural differences based on Glassdoor employee reviews, then measured these differences against business outcomes. In their analysis, they identified two distinct forces at work:

  1. Compositional Diversity: When employees disagree with each other what makes up a company’s culture.
  2. Content-Based Diversity: When company culture is made up of a diverse set of topics, which may sometimes conflict with one another.

After considering how compositional and content-based diversity impact organizations’ business outcomes, the researchers found that organizations with higher levels of compositional diversity are associated with negative business outcomes, while organizations with higher levels of content-based diversity are associated with positive business outcomes. From what we uncovered at CEB, now Gartner, in our latest research on organizational culture, both of these findings make perfect sense.

Aligning the workforce to a common vision of culture drives business performance…

Our research finds that organizations have better business and talent outcomes when they have a high level of what we call Workforce-Culture Alignment or WCA for short. Organizations with high WCA have a common set of core cultural expectations that are consistent across the enterprise, ensuring a lower level of what the Stanford-UCB scholars refer to as compositional diversity. Congruent with the findings from their study, we find that without a shared understanding of the desired culture, it is impossible for the workforce to engage in a concerted effort to put that culture into practice. When WCA is low, progress toward the desired culture is slowed and both business and talent outcomes suffer as a result.

…as does empowering employees to translate the culture independently.

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Google’s People-Oriented Approach to People Analytics

In this half-hour talk posted last week at re:Work, Google’s VP of People Operations Prasad Setty discusses his experience leading the development of the search giant’s talent analytics program, and about the key difference he discovered between having data make decisions for people, and using data to improve the way people make decisions:

When Prasad Setty joined Google ten years ago to build its People Analytics team, he envisioned a workplace where all people-related decisions would be made by data and analytics. If algorithms were spitting out search terms, why couldn’t we use them to make decisions for and about our people?

Setty soon discovered that this was the wrong approach. Despite the ability of analytics to objectively predict outcomes with high accuracy, people were reluctant to rely solely on formulas when it came to making important decisions — especially decisions that involved people, such as a promotion. And so, Setty shifted his vision for the People Analytics team. Rather than using data and analytics to make all decisions at Google, the team’s mission would be to educate Googlers on how they were making decisions and to help them make better decisions over time.

What really stands out about Google’s approach here is that they chose not to use a quantitative focus, even though they had the analytic sophistication necessary to do so. At one point, Setty mentions how HR was able to create a logistic predictive model that was able to accurately predict promotion decisions with an error rate of only 10 percent based on a few easily measurable attributes. Despite this, the engineers involved in the hiring process made it very clear that they did not want to outsource such an important task away to an algorithm.

This is an important lesson in how organizations can effectively use data in managing talent issues, particularly culture change.

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All Employees Are Asking Is for a Little Respect

All Employees Are Asking Is for a Little Respect

Writing at Quartz, Christine Porath, a professor at the McDonough School of Business at Georgetown University, points to a lack of civility and respect as the silent killer of workplace productivity today:

What are the costs of employees feeling disrespected? Over the past 20 years, I have researched this question. I’ve polled tens of thousands of workers worldwide about how they’re treated at work. Nearly half of those surveyed in 1998 reported they were treated rudely at least once a month, which rose to 55% in 2011 and 62% in 2016. Though the toll is sometimes hidden, the costs of incivility are tremendous.

Of the nearly 800 managers and employees across 17 industries Christine Pearson of the Thunderbird School of Global Management and I polled, those who didn’t feel respected performed worse. Forty-seven percent of those who were treated poorly intentionally decreased the time spent at work, and 38% said they deliberately decreased the quality of their work. Sixty-six percent reported their performance declined and 78% said their commitment to the organization had declined.

Incivility and disrespect affect performance in various ways, Porath elaborates, increasing stress and harming employees’ mental and even physical health. Even employees who are not themselves the victims of disrespectful behavior, they can lose time and energy to worrying about how to respond or whether they will become targets. Many of these employees leave their jobs, often without telling their managers why. Finally, an uncivil environment is toxic to collaboration.

Porath’s argument about the importance of respect is consistent with the findings of the latest Global Talent Monitor from CEB, now Gartner. This quarterly report provides workforce insights on global and country-level changes about what attracts, engages, and retains employees, based on data from more than 22,000 employees in over 40 countries. (CEB Corporate Leadership Council members can peruse the full set of insights from Global Talent Monitor.)

As part of our survey, we asked employees for the most important elements of the Employee Value Proposition (EVP) that influenced their decision to accept their most recent job.

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Integrity, Accountability, and Trust Are Key to Volkswagen’s Culture Change Effort

Integrity, Accountability, and Trust Are Key to Volkswagen’s Culture Change Effort

Volkswagen has been undergoing a massive process of cultural change since the 2015 emissions cheating scandal that cost the German automaker billions of dollars and severely damaged its reputation. Changing the culture of a huge company is no small feat, of course, and CEO Matthias Müller has spoken candidly about the challenges the company has faced in that process. In a recent interview with the Wall Street Journal’s William Boston, Müller touches on how the change is going.

The company now holds its board responsible for legal compliance and integrity, he tells the Journal, and has changed many of its processes. New board members are subject to compliance checks to ensure they are above suspicion, and the leadership is to engage more people in dialogue to build trust throughout the organization. Some of the changes involved in Volkswagen’s transformation have included replacing German with English as the language of business at large-scale management conferences and increasing the number of women in leadership positions.

A key challenge is repairing Volkswagen’s reputation, Müller explains, as parts of the company did indeed engage in criminal behavior, which casts a pall over the entire organization. That kind of damage can’t be repaired overnight. Large enterprises like his also have a tendency to move slowly, he acknowledges, but he would like to accelerate the pace of change as much as possible.

Volkswagen’s experience at carrying out a major culture overhaul in response to a crisis carries some lessons for other organizations, which overlap with some of the insights we at CEB (now Gartner) have uncovered in our research into the multifaceted challenge of culture change.

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When a Job Is ‘Just a Job,’ Are Employees More Likely to Quit?

When a Job Is ‘Just a Job,’ Are Employees More Likely to Quit?

A new survey from CareerBuilder claims that a 55-percent majority of US employees feel that they have just a job, not a career, and that 38 percent of these workers are likely to change jobs in the second half of 2017:

Almost three in 10 workers (28 percent) tolerate or hate their job. Of those who tolerate or hate their job, some of the top reasons for staying in a current position are the need to pay the bills (74 percent), its proximity to home (41 percent), needing the insurance (35 percent), it pays well (30 percent), or the job market is too tough (27 percent).

This survey picks up on something that we at CEB (now Gartner) have seen in our latest Global Talent Monitor data: Most US employees across a number of industries cite their future career opportunities as a leading reason for leaving their organization. Given this fact, it is easy to assume that this is a reflection that there is simply a lack of career opportunities available to employees, leading to disengagement and attrition. However, our data shows that this is not the case. We find that 12 percent of US employees we surveyed were actively dissatisfied with future career opportunities at their organizations and only 31 percent reported they were satisfied. The remaining 58 percent are somewhere in the middle—that is, neither satisfied nor dissatisfied, but rather neutral or ambivalent.

This finding suggests that while future career opportunities are a key part of employees seeking a new job, the claim that lack of future career opportunities is driving attrition at organizations is overstated. When we look at how an employee’s satisfaction with future career opportunities at their current organization affected their engagement levels, we do not see nearly as strong as a connection as CareerBuilder reports in their survey.

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