The last century’s changed market situation has shaped the development of leadership so that it is now directed towards the specific issues that have been the most current. It is of upmost value that the challenges facing the companies can be met in a successful way. The traditional leadership concepts are, according to what we have witnessed, designed to deal with the most prominent challenges during the era they were constructed, and are no longer sufficiently effective.
A leader’s job is not only to find the best solution, but the most determining factor is to implement it in practice. What good do interesting and high class solutions do, if you don’t have a robust and practical method to achieve the desired improvements implemented on an individual basis?
In our field of work we have had the honour of working with different companies in many different countries. Naturally, there are a lot of variations when it comes to these companies’ markets and organisations, but many problems are at the same time astoundingly similar. With consideration it is perhaps not so surprising, since markets and trends become increasingly more global. We can see that the leaders of most companies face new challenges that need to be dealt with as soon as possible. Some of the largest and most important challenges are:
Today many companies try to counteract variety and independence, which is the result of the decentralisation management by objectives has signified. Since management wished for the targets to be clearly defined but the way of reaching them was up to each unit, a number of parallel solutions and decisions emerged. Usually, this meant that the separate decisions were favourable to the people who made the decisions, but on the whole it was not optimal. On the one hand it resulted in higher costs when it came to coming up with different solutions to the same needs in different parts of one and the same company. On the other hand there were more costs for the non-utilised resources, as the best possible solution was not used throughout the whole business. Moreover, it was impossible to learn from each other in order to spread knowledge and clever solutions, which is the foundation for all sorts of constant improvement concepts. To counteract the negative effects almost every company seeks different paths in order to make sure that Best Practice works in reality; that is making the co-workers re-use existing good solutions from other sectors in the company.
The companies can make great profits if they manage to create and implement these common solutions. There is great potential for improvement if the most effective method in production or service can be identified and be made available to everyone within the organisation. This, coupled with a disciplined approach of using the solutions that are brought forward, are fundamental to increased purchasing power for the company. Purchases can be synchronised and volumes can be bundled together, so that higher cost savings and quality improvement can happen. This has been a big focus for many companies for a long time. The difficulties lie not in finding a good, or good enough, choice of product or process, but in getting all the co-workers to want to use the suggested standards. Sometimes they have their own solutions that take care of the same situation, process or product. This fact normally makes the implementation incredibly more difficult and Not Invented Here is a very expensive luxury. Besides, local understanding of the good value of the standards in question is often lacking, which leads to a quick dismissal as they are judged too expensive, complicated, heavy, and of low value to the customers.
It is easy to understand the difficulty in finding KPIs to stimulate and create cooperation or an exchange of experiences and successful solutions. To be fair, it has been tried again and again without any major success. It is not particularly strange that the exchange of ideas, and the readiness to utilise other people’s solutions, work better if there is a good and respectful relationship between parties. If the relationship between individuals or teams is similar to the one you have between good colleagues or friends, it is natural to both give and receive support. When companies create forums where friction, conflict, criticism, and aggressiveness are replaced by respectful work, sensitivity, and a search for common solutions, it is natural for everyone to realise that it is very advantageous to borrow good solutions from each other. Best Practice is not a technical question, a gigantic database or process descriptions, but a question of approach, interaction, openness, and trust. It is a company culture where the co-workers see the chance of learning from others as a support to their own work in driving their development process.
How should you as a leader implement general readiness in your organisation so as to create and implement a common solution?
The focus on results gave the units a lot of freedom to process the implementations necessary, and an equal amount of freedom to create solutions for the unique needs every unit thought that they had. The consequence was a number of parallel solutions that were supposed to solve similar problems, and with the defective coordination between them, the resources in the company were utilised very poorly.
Many companies develop and drive central solutions to coordinate their complex organisations. These solutions or processes are designed by different expert teams that do their upmost to find an optimal solution for all the units in the company. Such a solution has seldom been developed with enough insight to look into the differences that exist in different parts of the organisation in different circumstances. It is more or less impossible for a work team to have knowledge about the unique conditions that apply in all the different countries, regions, departments, or product groups. Often, the central work teams feel that co-workers and leaders in the company are not open-minded and that they do not want to implement these initiatives. Throughout the organisation everyone has been informed about the things that are to be implemented, but despite that nothing seems to happen in operations. No one offers an imposing opinion or refuses to perform the tasks coming from the central team; everything seems to continue as before. Unfortunately, there is a great possibility that this will be the case in most attempts, as the co-workers will simply wait and outlive the initiatives. On the one hand, because they do not see the purpose or understand what it will lead to, on the other hand, because they don’t know exactly what to do in order to use the solutions to create value for the business. Many expensive investments thus never reach their full potential. They sometimes disappear in an unclear way.
To improve the possibilities for creating acceptance, and a high quality solution, many initiatives have decided to appoint work teams with representatives from the different departments touched by the desired solution. With the help of the different established viewpoints often the quality is better, but the acceptance in, for example, a factory with hundreds of operators is not guaranteed just because one or two colleagues have taken part in the work. Those people who have taken part in such a work team are generally positive towards the result, which has a lot to do with the fact that they have, in comparison to their work colleagues, a superior understanding of the issue and, moreover, they have been genuinely involved in working with the solution. It is reasonable to assume that if a person gives his contribution to a solution, that person automatically receives a high level of both understanding and acceptance. Even if it would be very advantageous if each and every one were involved in all the issues to secure implementation, in practice, it is difficult in most organisations. In particular, those who have more employees than they can fit into a normal-sized conference room, have to find a different route, a route that is pragmatic and effective, and which gives the organisation stability and safety so that they can implement the decisions.
How should central initiatives be driven to guarantee the best possible result?
Most companies are forced to seek innovative routes to avoid a direct price comparison in the struggle against low cost competition. In market situations, where the products or services are considered to be the same, the price is the determining factor, which gives companies with the lowest production and sales costs large advantages. In today’s market the general level of quality and performance has become so high that even former low quality suppliers are starting to be able to offer products that are good enough, and these products are very competitive for a large part of the customers. If you cannot find innovative ways of giving the customers added value, which will make the comparison pointless, your prospects are bleak if your competitors have an advantage when it comes to cost.
Today many companies have a clear product-out or service- out culture. In most cases there is great focus on improving performance, reducing the dead weight, and increasing variants. Why not achieve faster response times, smarter financing, and higher service levels, etc., to create competitive advantages and be ahead of the competition? The added value, which is decisive in providing a unique market position, can naturally be a technological lead, quality, unique products, or common solutions, but also support, competence, simplicity, or safety, can be values that the customer is ready to pay a higher price for. The windows of opportunity that are open to companies so that they can use their possible advantages of added value become smaller and smaller as, above all, a technological lead is quickly copied by competitors. There is less and less time to penetrate the market before a competitor has managed to produce a similar product. In that context it is apparent that the speed of development offered by the type of leadership, which is based on orders or KPIs, is not enough to get the co- workers to change their work methods and priorities during the short space of time that the advantage is on the market. It quite simply takes far too much time to get the organisation to use the situation, and develop the business in the time frame where you are unique, if the work method is only based on the usual belief in using pressure and demands. The explanation is simple, a focus on demanding a specific result gives no or insufficient support for the co-workers to find the new solutions necessary to deal with the new possibilities. It may very well be that some people or units find solutions that are good enough to reach their respected targets and that those particular solutions are implemented in a fast enough process of change, but that would have to be characterised as the fruit of separate individual efforts rather than there having been a stable, predictable, systematic, and successful work method in all units.
With tougher competition the issues and problems for the unit in the organisation also become more and more challenging, and it becomes more and more difficult to find solutions. In addition, there is often an existing deep-rooted work method and thought process that needs to change, which in itself requires significant effort. There is a big difference between, for example, selling products as a technical sales person using technical knowledge and product sheets where performance is the defining argument, and having a strong internal network, and fully understand your own application, and the customer’s production process, in order to be able to offer more common solutions to optimise the production capacity of the customer.
Moreover, the result of such a change is that the organisation needs to change its way of interacting. A common scenario is that the larger company does not have the resources and finances to create expertise for the particular demands of an industry, or for a unique special application in the different geographical units. The company, instead, has to create a regional hub responsible for backing up several regions or countries. If you compare the demands for cooperation in such a global organisation, which needs to be able to deal with interfaces and understand the big picture, with an organisation that has chosen to focus on factories where the sales people buy the products from the factory and redistribute them onwards in their region, it is not an understatement to say that the demands put on the co- workers by these different approaches are worlds apart.
How should you develop your co-workers’ ability to provide added value to your customers?
Almost all companies are divided into functions, departments, or other groupings. It provides a clear focus and a will to optimise the result for your own team. But customers and other parties involved are truly uninterested in which department handled its task in the best way or who caused errors. The result is always measured on the undertakings of the whole company and not–as indicated by the measurements –on the level of achievement of every KPI. Many KPIs even strongly contribute to counteracting successful cooperation. Some units’ achievement of objectives result in other units having a much more difficult time reaching their targets, for example, a hefty price increase in a section of the aftersales deal may signify that new sales of the product is made more difficult. Another example is that the purchasers in the company swap a component to lower the costs with a few per cent, while at the same time causing large added costs for the production team. Many leaders constantly try to make sure that different costs are distributed to other units, and very often the efforts to count the revenues in your own unit border on what is allowed.
However, there is not always an awareness of the actions that lead to this loss of value in the transition between units. Cross- functional cooperation becomes precarious when the viewpoints of every team are based on discussions with the team members themselves who, more than likely, share a similar education, experience, logic, and perception. They have a hard time liberating themselves from their viewpoints and understanding the conditions and challenges of other teams. This creates silos, which leads to different ways of prioritising and performing tasks, which in turn emanates into a lot of friction and disagreement in the organisation. Sometimes such earlier clusters of conflict have irritated these interfaces so badly that the work situation between teams becomes unsustainable in principle.
As the organisation, structures, and management by objectives give these unwanted and destructive effects, problems will not be solved by using a structure like, for example, a framework that clarifies how to deal with interface problems, or by setting sophisticated targets to increase internal cooperation.
The challenge is to create a work method, or a culture, that neutralises the involuntary loss of value in all the interfaces caused by the internal value chain of result units. We can take for granted that a large part of the result-oriented way of working will remain in the foreseeable future, and it is also probably the case that the negative aspect will not be solved by refining or increasing the number of targets. However, good relationships, an understanding of each other’s situations, common solutions or parameters that are completely different to the usual control mechanisms would be effective for finding wise judgments between necessary checks and balances and common sense. Many co-workers that have been raised in the conventional systems need a new and credible way of working and interacting. We can only guess that what is needed are reliable concepts and endurance in order to get a change when it comes to this cultural issue, which today results in massive costs in our organisations.
How do you lead your co-workers so that you can turn cross- functional cooperation to your competitive advantage?
Culture as a Competitive Advantage
Most companies operate on a market that is heavily competitive. To create an advantage these companies have always looked for something unique that the competition cannot deliver. It has always been the case, and it is possibly still the case, that there has been a lot of focus on the performance or price of products or services. As suppliers have merged into big companies, and the outsourcing trend has resulted in the fact that it is no longer easy to find advantages through purchasing quality at a lower cost, price and performance in the different competing products or services have become more and more equal. Ground-breaking technological innovations might provide a temporary advantage that the company has to utilise skilfully and above all quickly. Products, sales concepts, and many other things that have required vast resources to develop, are quickly copied by a competitor that does not need to take on all the costs of the research and the development the innovative corporation has invested in.
It is becoming more and more apparent that in a market where the products or the services in reality are equal or comparable, company culture is completely decisive. Some companies have amazing characteristics embedded in their genetic code while others unfortunately are not very promising. For example, one culture may be focused on customer benefit, another may be intent on keeping prices up, another has a focus on quality awareness, and others are innovative or committed. Regardless, culture is a powerful way of getting out of the quicksand of comparability and creating something that is difficult to copy.
The great challenge is to influence people to take a direction leading to the desired culture; a culture in the sense of a system of norms and values, which develops a common ground on what is right and wrong behaviour and attitude. There is always an existing culture and it is the fruit of many years of influence. If the goal is to create or develop a specific culture, a decisive factor is if there is a credible solution to how this is supposed to happen in practice. It is highly likely that if you try to instruct, describe, or use control to bring about change, then this will be completely useless. The key to change is always to use a different approach when interacting with the people in the organisation. If the goal is that everyone should be skilled in cooperation, a work method needs to be developed, which results in improved capacity and a will to work across the boundaries of the organisation. If the goal is that everyone should understand market demands, a work method needs to be developed, which results in customer proximity and new customer solutions. This will require training, endurance, and will. The old culture will, undoubtedly, be heavily present in approaches, processes, and, above all, leadership. The new work method needs to gradually phase out the old habits before it is possible to talk about real change. If the company does not have, and implements, a rational plan on how to influence their co-workers to adopt the characteristics of the desired culture, it will become a paper tiger. It would be unfortunate if that were the case, as a great culture is by far the best competitive advantage of any corporation.
How do you make sure that your organisation develops the culture that you are striving for?