How to transform a decadent organization into a competitive one

In my opinion one of the current hardest HR challenges is to support an organization in its transformation process from a declining condition into a competitive one.

During a macro-economic crisis period, the following declining company models may be observed:

-          Former market leader

It’s not unusual to meet declining firms which were leaders before. It often happens that something changed dramatically in the market and they were not able to re-invent their competitive advantage.

-          Lack of leadership in the Management team

In a critical situation Management may not have enough leadership to move out of the crisis. This usually happens because when you’re part of a problem it’s really hard to be able to find the solution.

-          Low  level of people engagement

Engagement level in a crisis is usually very low. Although it’s difficult to understand the relationship between low performance and low engagement, a lot of scientific researches demonstrate the connection.

-          Employees are afraid of losing their jobs

Employees’ highest worry is to lose their job. This creates a vicious circle since worries about job produce low engagement, which finally results in a performance decrease, reinforcing the crisis.

-          High level of unionization

In a crisis situation or in a static firm the unionization level tends to grow. This is another vicious circle because unions are typically focused on protecting employment instead than creating the basis to move out of the crisis. In addition unions prefer to negotiate contract clauses for all the employees, thus neglecting the individual efforts.

-          Low level of meritocracy

The level of meritocracy in a declining firm is usually low. You can find different causes to this phenomenon: first of all the HR budget shortage; furthermore you can see that when cost reduction actions are implemented, it is impossible to provide incentives to individuals by means of promotions or special rewards.

-          Low empowerment

In this situation, people are only focused on their tasks with no interest for functional processes or common targets. This is explained by a corporate culture that avoids individual initiatives instead of stimulating personal efforts.

-          Company targets unknown to employees

In many unsuccessful companies it's common to find a lack of communication about company strategy and targets. Employees are not able to align themselves to any strategy or assumption simply because they don’t know anything. In many firms the strategy is well known and shared within Management team, but the drill down process is absent or does not work properly.

-          Inadequate compensation system

The compensation systems is based on variables which are not connected to results, depending only on the role and on contract type. Performance management is absent or not very significant.  

For a HR manager who wants to face a static or a crisis situation I suggest he/she starts from a methodology which was originally developed by Tushman and O’Reilly and described in the book Winning Through Innovation [1].

In my experience this methodology helps HR directors and managing directors to identify the most important actions in order to transform an organization. In their book, Tushman and O’Reilly introduce the so called “congruence model”, aimed at aligning people, culture and formal organization to the tasks required by the strategic goals which have been set.

In many cases an organization is not able to achieve its strategic goals because congruence between the goals and the HR dimensions does not work properly. The HR manager mission is to identify and consequently to implement the corrective actions aiming at re-establishing the new congruence.

The methodology I suggest is based on four fundamental drivers:

·         Critical Tasks and workflows to be accomplished;

·         Culture (policies, values, informal communication networks);

·         Formal Organization (structure, system, rewards);

·         People (competencies, motivation, compensation and commitment).

The alignment or congruence between these items must be successful in the short term, while incongruence between them is a likely cause of performance gaps.

The first step is to identify the incongruence between corporate strategy and critical tasks on the one hand, and the other dimensions (people, culture, organization) on the other hand.

The second step is to set the corrective actions to change culture, organization and people and to create a congruent system.

The final step is planning and implementing these actions.

The methodology is simple but not ordinary. It’s not easy to implement the identified actions because they concern the deep organization characteristics. It is important to communicate the sense of urgency and to be persistent.

[1]. Tushman, Michael, and Charles A. O'Reilly. Winning through Innovation: a Practical Guide to Leading Organizational Change and Renewal. Boston, MA: Harvard Business School, 2002