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TRUST: The Foundation for Reputation and High Performance

December 9, 2013 - In Featured, Strategic Change and Organisational Effectiveness - No comments yet

‘An organisation that trusts itself is more likely to show trust to others’ 

In October 2013 a conference was held in London to consider how business can restore its reputation in an atmosphere of public concern about ethical behaviour.  The context, heavily influenced by the aftermath of the 2007/2008 financial crisis is sharpened by more recent events such as the mis-selling of retail financial products PPI etc, the rigging of the Libor interest rate and the concern over energy prices.

The conference included executives from major companies, fund managers and representatives from the Church and its purpose was to debate the Blueprint for Better Business initiative.  Practical principles are being drawn up to be applied to business situations and training programmes.  The draft principles include, among others, that a person is a ‘someone, not a something’ and that managers should ‘show respect for the dignity of each person and for the whole person…’

That this event was held at all seems to suggest that business can learn from the experience of the recent past and should also refocus on what can build sustainable success.  Some involved may think short-term thinking has overly influenced recent business decision making.  Indeed, the Financial Times Columnist John Kay spoke at the conference; John wrote a report for the government on short-termism in finance.

The conference was a laudable event.  A positive reputation is likely to command trust and respect which are powerful means of attracting and retaining business and demonstrating social utility.  At the conference, Sir David Walker, Chairman of Barclays identified two points that will contribute to enduring success: the concept of stewardship; for executive leaders to leave things in a better condition than they found them, and for a focus on how things are done as well as what is achieved.

Organisational Design

This article considers how organisational design can build a strong positive reputation and embed the capabilities to sustain success over time.  To build an organisation with a reputation that attracts and retains business and is respected in the wider community, three things need to be working in alignment:

It begins with leadership because the route to achieving a sustainable positive reputation has to be initiated.  It has to be part of the desire and sense of purpose of the leader and leading executives that reputation is important and is part of the vision of what the organisation wants to be.

If a positive reputation is to be part of the purpose and integral to the vision of what the organisation wants to be, then the rest is about how to achieve and sustain it.  Defining or re-defining the purpose and vision is the beginning of re-designing the organisation.  Essentially, this is about defining ‘what the organisation is here for’ with a view on the future business horizon.  The purpose and vision need to provide for organisational effectiveness so that results are maximised in the external competitive environment.  For success to be sustained, the purpose and vision need to include building and maintaining effective capabilities.  This implies that learning will be enabled and encouraged.

How the organisation relates to its stakeholders: communities in which it operates, customers, employees, regulators, shareholders and suppliers should be a critical part of developing a purpose and vision as the people involved need/want to know how the organisation will relate to them.  If a positive reputation is desired then great care and thought needs to be applied to how the relationships with stakeholders will be cultivated.

For the organisation to be successful then the people in the organisational team need to be motivated and engaged by the purpose and vision.  Indeed the main difference between engagement and simple motivation is the degree to which an employee is ‘engaged’/ committed to the purpose and vision of the organisation.  Employees are potentially powerful advocates provided they are led and supported. The most important employee group in building the capability to sustain a trusted reputation are managers.  They set the standards by which others will act.  Managers’ attitudes to customers will be noticed by other employees as will their attitudes and behaviour to less senior employees.  Managers’ impact on employees is one of the most important things that encourage or discourage employee engagement.

Douglas McGregor identified that the assumptions held by managers about controlling people determined the atmosphere of the organisation.  He illuminated the potential spectrum of managers’ attitudes in 1960 when he put forward Theory X and Theory Y1.  He observed that the traditional concept is based on direction and control which reflected a set of assumptions about human motivation; this is Theory X.  Broadly summarised this says the average human dislikes work and will try to avoid it and because of this, people need to be coerced  and possibly threatened with punishment to put sufficient effort into achieving tasks.

Theory Y, based on the work of social scientists and a view that people can learn and change, puts forward a different set of assumptions.  People can find work a source of satisfaction as natural as play and rest providing the conditions are supportive.  Individuals can exert self-control and self-direction in achieving objectives to which they are committed.  This commitment is a function of rewards associated with success; these being primarily about a sense of achievement, ego affirmation and self-actualisation.

The implications for leadership are considerable; getting the right people around you as a leader is critical.  As Jim Collins says in ‘Good To Great’2, the first thing ‘good-to-great’ leaders do is get the ‘right people on the bus’.  Managers that understand the benefits of applying the assumptions of Theory Y are likely to develop staff in a way that will get them committed to the organisation’s purpose and vision.  This will encourage and focus staff on developing similar relations with customers, suppliers and other stakeholders and generate respect for the business.  When customers experience consistent positive relations with an organisations’ employees, trust starts to develop. Making this happen in practice depends on fostering a culture that will stimulate and sustain the right attitudes to people.

However, organisational culture does not exist in isolation; it is to a great extent the result of other things.  The purpose and vision, the structure, processes and systems and the people involved will influence the culture.  Hence the importance of organisation design in building a reputation which is respected and trusted.

Getting Started

Much has been said over the last few decades about how a leader of an organisation cannot alone create and deliver everything for the organisation to be excellent.  It has to be done through others and this is where the how gets really important.  Peter Senge in the ‘The Leader’s New Work: Building Learning Organisations ’3 argues that the leader needs to be highly involved in the design process, especially with the purpose, vision and core values which guide peoples’ behaviour.  We agree.  However, we again emphasise how the leader does this.  In our view the leader must have the basis of a personal vision for the organisation; he/she must be able to articulate the essence of purpose and vision to initiate the discussion and debate with executive colleagues.

The contribution of other executives will enrich the ideas of the leader and their participation will create ownership of the outcome of the discussions.  They are more likely to be committed to and engaged by something they have been involved with creating and so likely to engage their managers in a similar manner.  This next level discussion should not be reinventing the purpose, vision and values agreed by the executives but testing its credibility in case some vital point has been missed, and adding valuable contributions.  The main purpose of the next level discussions is to gain commitment by exploring the issues around implementation and necessary change.

Clearly such issues are the concern of the executive leadership and they will have to consider this change scenario themselves, but not alone as their managers can be involved to help.  Such involvement will build commitment.  Analysing the nature and scale of the need for change can take place once the purpose, vision and values are sufficiently developed to provide clarity.  It is strongly recommended that an objective analysis is undertaken of the organisation’s current reality in relation to the desired position which is described by the purpose, vision and values.

This analysis needs to consider how the organisation structure, processes and systems, people and culture are aligned to the purpose, vision and values that are being designed to guide the organisation.  The analysis will need to involve sufficient managers and possibly some representatives from key staff positions that interact with other stakeholders such as customers, suppliers and shareholders.  Stakeholder research can be included in the analysis.  The analysis needs to identify what needs to change and in particular those things that may resist the implementation of change.

The analysis will highlight the current culture of the organisation and provide information about the beliefs and assumptions held by managers and employees. It will also give insights into the levels of trust and mutual respect between management levels, different functions, business units and people generally.  An organisation that trusts itself is more likely to show trust to others; its external stakeholders.

Embedding Design   

Embedding organisational design is an ongoing leadership activity.  Leading executives must show that they are genuine; it is vital that they project complete belief in what they are communicating and be prepared to explain and explain again the purpose, vision and values.  They need to answer the question many employees will want answering; ’what does this mean for me?’  Objections should be respected and dealt with if people are to be convinced.

Most importantly, they need to be able to clearly explain where they want the organisation to be, as articulated by the purpose, vision and values and to have real credibility, they need to tell the truth about where the organisation is now.  The organisational analysis gives a clear understanding of current reality and this can be used to explain the present position.  The purpose, vision and values need to be communicated in a way that seems possible to realise in relation to the current reality.  The actions to make necessary change can also be outlined to show the route ahead, and explain to people how they can be involved to contribute to implementing change.

Making connections is important in the early stages of embedding new organisational design.  Aligning strategic goals and critical metrics with the purpose, vision and values will build the basis of a Strategic and Cultural Framework.  This can be used for strategic planning, including managing necessary change and will help explain how the organisation will deliver value to its customers and build trust and respect among its stakeholders.  Identifying the behaviours that demonstrate and complement the values that support trust and respect should be part of completing the Strategic and Cultural framework.

Such behaviours need to be aligned to commercial, professional and technical competencies otherwise managers and staff will potentially experience conflict between how the organisation is expecting them to operate and behave and the way they may have done things in the past.

Leading the involvement of managers and staff from the top down in developing the Strategic and Cultural Framework is essential.  Its key elements of purpose, vision, values, strategic goals, critical metrics and behaviours will give the guidance about what and how things need to be achieved for a reputation of trust and respect to be built and sustained.  The Strategic and Cultural Framework will enable everyone to contribute to the organisation’s success.  As James Collins and Jerry Porras said in ‘Built To Last’4 the best leaders are ‘clock builders’ not ‘time tellers’.

References

1. Douglas McGregor – ‘The Human Side of Enterprise’.

2. Jim Collins – ‘Good to Great’.

3. Peter M Senge – ‘The Leaders New Work – Building Learning Organisations’.

4. James C Collins and Jerry I Porras – ‘Built to Last’.



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