Tuesday, October 11, 2005

You Can't "Train" Merit

I was privy to an interesting breakthrough last week. I was sitting in a planning discussion with seven executives of a major U.S. corporation. We had developed a pretty bold turnaround strategy which everyone felt good about. The major concern about the plan had nothing to do with external competition. It had to do with the company’s internal culture. As one executive put it: “Our culture rewards longevity and reliability more than performance and contribution. We’ll never achieve our new goals if we don’t change the culture.” Trouble is, they’d been trying to change the culture for years, with frustratingly slow progress.

After listening to the “cultural change is hard” litanies around the table, I said “yes, it’s hard, but why has it been so hard in this organization?” With some obnoxious prodding on my part, we finally got down to the nitty gritty reason: The executive team had been giving lip service to the issue of performance merit. They’d send out memo’s about it, they’d invite speakers to discuss it, and they subsidized leadership training programs for mid- and director-level managers about why and how to develop a merit-based culture. These were good steps, but they were not built on a good foundation. Without a solid foundation, a house remains fragile. So does a culture, except in companies, the foundation is at the top, not the bottom. If high-ranking executives don’t live and breathe the message of merit in their decisions and actions, all the memos and books and training in the world will have only marginal impact.

As the President concluded: “We seven will have to role-model entirely different behaviors.” Bingo. Breakthrough. The executives agreed that individually and as a team, they would adopt a new discipline: Hire only the most talented people—and pay more for them if necessary. Clearly articulate the new merit-based cultural and competitive expectations to everyone, explain the strategic rationale for those expectations, and identify the kinds of criteria, standards, values and behaviors that will be judged as “high performance.” Reward people—whether compensation, promotion, project assignment, recognition, etc.—based primarily on their performance and contribution. That means that a high-performance manager with two years’ tenure will get the promotion before a mediocre-performing manager with ten years’ tenure. That means that a manager or employee who “meets expectations” and no more will get little if any year-end bonus, while the high performers will get a fat one along with a fat set of public accolades. You get the idea.

We agreed that the executives would not promote a punitive Darwinian culture. You can’t build a high-performance culture if people are intimidated and scared. In the spirit of “servant leadership”, the executives agreed to make sure that people got the kinds of support (personal care, information technology, training, and such) to help them succeed. But ultimately, they agreed they'd have to walk the talk on this stuff. They would have to follow through and hold people accountable. They’d have to suffer the consequence of having some people upset and angry with the outcomes.

The executives understood that if they did these things, the memos and training sessions would have payoff. If they didn’t do these things, there’d be no foundation for the change—just a lot of wasted training dollars and a lot of cynicism, along with a perpetuation of the old culture. A particularly poignant “aha!” came when the executives looked at each other and realized that it was precisely the second scenario that had been occurring in their company over the past few years.


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