Creating a High-Performance Services Culture: Part Two
by James A. Alexander, Ed.D. and Mark Hordes, Partners/Alexander Consulting

Note: This two-part article is for any services leader looking at improving performance, but is especially valuable to those who have decided to help lead/cajole, prompt, urge, beg their organization that the benefits of transitioning to a services-driven business far outweigh the potential risks of standing still. And managing transition means leading cultural change.

Special Challenges of Blending Cultures

Shortly, we will outline the steps to effectively bringing about culture change. However, a couple considerations need to be mentioned first.

Product-Services Cultural Conflict
As we've tried to point out to this point, product people think and act differently, and this is reflected in their culture. Since this cultural "world view" is so different, for many members of product-centered companies the thought of changing their business strategy and making the cultural shift to a services-driven business can be quite scary. Resistance is natural and must be anticipated. An understanding of the cultural similarities of both the product side and the services side must be done before trying to change the culture to identify critical differences.

The Problem with Mergers and Acquisitions
Business of all types are looking at mergers and acquisitions. For example, non-consulting IT companies across the spectrum are seeking to build up their consulting operations, and M&As are seen as one of the top options. Issues, such as changing laws, concerns over conflict of interest (audit vs. consulting), and the e-flu, have the leaders of high-tech professional services organizations considering any and all options (including M&As) to improve business viability.

Other services organizations of all shapes and sizes are in the same boat: looking for profitable ways to grow. Yet, no matter the business rationale, the thought of blending culture with another organization can be quite disturbing. Often an organization has grown comfortable with the way things are. Perhaps your services business been a profit center for years and the other organization has given away services or routinely provides deep discounts to close deals. Worse yet, their finance people might have established a ceiling on what percentage of the business should be dedicated to services, e.g., No more than 40% of our business should be involved in services! This is not an easy mindset to overcome.

Also, before buying or combining, consider these findings from another study: “55 to 77 percent of such deals (mergers and acquisitions) failed to deliver the organizational and/or financial results that were intended, and more than 50 percent of those failures are attributable to serious cultural incompatibility.”1 Specifically talking about professional services firms, David Maister states that: “Mergers can be successful—it’s just that few of them have been.”2 Sobering information. The first point is that one should seriously question the payoff from combining two or more distinct organizations. “Does the potential value far outweigh the cost, hassle, and risk of the venture?” Management thought leader Gary Hamel espouses that mergers and acquisitions are just desperate actions intended to cover up the mistakes of poor management.3 If two dinosaurs mate, all you end up with is a really big dinosaur.

Nevertheless, if one decides to move along this joining path, then this research points out the need to strongly consider the cultural fit before taking action. No prudent businessperson would consider a takeover or major partnership without first undergoing due diligence. The evidence makes a strong case for organizations to undergo a cultural due diligence as part of the examination process.4 So, as will be pointed out in the next section, it is very important to gain an in depth understanding of both services organizations before attempting any change.

Culture Change--Methodology to the Rescue

Okay, now the tough part. We now know the importance of organization culture, what it is, its key characteristics, dimensions, and their impact on strategy, the dark side, the three core elements, and the special challenges of blending cultures. But how do we change our culture if we need to (which is about all of us)? How do we reinvent our culture if we are making the leap to s-business? Figure 1 shows a proven methodology that we've found successful in working with a variety of services organizations.

Note that we are strong proponents of organizations that are making change of any type having very active involvement of as many individuals from the organization as possible. Involvement brings ownership—an essential catalyst for change. In fact, many change-related activities can be implemented very well without outside consultation. However, culture change is not one of these. Because culture, by definition, is ingrained into the fiber of the organization, it is invisible to anyone who is a member after only a few months. Therefore, it takes capable, outside eyes to view the culture as it really is and assist services leaders in assessing and changing.

Phase One: Establish the Business Case for Culture Change
First understand and build a business case to answer the question, "Why now?" Is our current culture inappropriate for our desired strategy? Will cultural blending take place (M&A) one way or another? Is our organization attempting to make the leap from a product-centered organization to s-business? Or is our culture so out of whack with what we need to do that it is hindering performance today and will probably be a major stumbling block tomorrow? Culture change is challenging, therefore a business case (including the performance impact of not changing), complete with cost-benefit analysis, must be understood and communicated if the necessary efforts are to take place.

Phase Two: Define the "Ideal" S-Business Culture
Once your services strategy is in place, use three inputs (the three core elements, the cultural dimension scale, values of services leaders) to determine what your ideal culture would look like and feel like. First, ground your thinking in the three core elements of adaptive cultures and think through how people can embody these elements. Next, use the culture dimensions as a guide to shape the attributes that best align with the services strategy that you are pursuing. Finally, shape your preferred cultural future based upon the core values of the services leadership team. With this in place, you have a high standard upon which to measure future actions.

Phase Three: Determine the Current Culture
Using document review, surveys, focus groups, interviews, and direct observation, determine what your services culture is today. Using the tools described earlier, you can quantify it according to the three core elements and the Cultural Dimension Scale. If you are making an s-business transition, you will need to also determine the current culture of the rest of the organization. If you are anticipating a merger or acquisition, you should examine that culture as well.

Phase Four: Assess the Gaps
This phase, along with phase five, are best conducted in a facilitated, off-site session. This phase compares the ideal culture with the current culture to determine a realistic culture target for the near future. First, identify areas alignment, as these are critical strengths that must stay the same and are the leverage points for change. Then identify the critical change points, dimension of high importance with large gaps. The strength and importance of your leverage points and your critical change points will help you to determine: (1) how significant is the change, (2) how long it will take, and (3) What resources will be needed.

Phase Five: Develop the Action Plan
Here the services leadership team takes all the facts and determines the path toward change. The services leadership (although they have hopefully been involved through all of the four phases above) must address the business (and social and political and personal) aspects of changing the culture. What are the risks? What are the odds of success? How "visible" should the culture change approach be? What is the leader’s role in the transition? What type of investment will be required? How will we measure success? What milestones will keep us going along the right road? This includes all the “who-what-when” of any good plan.

Phase Six: Implementation--S-Business Leadership Actions
The success factors required for implementing culture change are no different than those necessary for implementing any major change initiative: sponsorship, measurable goals, action steps with ownership and completion dates, tracking, etc. Therefore, we will concentrate on the culture change implementation implications from the perspective of the services leader and outline some suggestions for the champion of the cultural change.

(1) Accept the difficulty of the task.
Research looking at attempted culture change showed that in 22 cases of attempted cultural change, even the managers (who tended to declare victory based on the slimmest of evidence) admitted that they had failed in 16 of the cases.5 Resources, focus, and tenacity are called for.

(2) Do your homework.
As noted earlier, organizations almost always get in trouble when they quit listening to one or more groups of stakeholders. For the organization to even be willing to consider change, it needs a great deal of credible information that it cannot refute. As we've suggested, internally conduct a culture audit. Externally do market research. People can naysay each other, but it is hard to ignore the voice of the customer.

(3) Establish a sense of crisis.
Here, successful leaders demonstrate that if change doesn’t occur, and occur soon, some or all of the existing values of the current culture are at risk. Remember, the more successful the organization has been in the past, the more challenging this assignment is.

(4) Create a new direction.
Culture change is appropriate only as a part of a larger organization change. Therefore, the new organization direction, first of all, must be based on a services strategy that is appropriate to the cold, hard reality of the new marketplace. If successful, this can move the organization out of crisis for the near future. Simultaneously, to build a sustainable culture for the future (and avoid other crises), implementation of the new strategy needs to incorporate the behaviors associated with the three core elements of contribution, candor, and constant learning.

(5) Align support systems.
The new direction means that people are going to have to behave in different (sometimes radically different) ways than they have before. To overcome inertia, all support systems must be changed to expect, encourage, and reward the new behaviors while strongly discouraging operating in business-as-usual mode. The emphasis should be on the creation and nurturing of the elements of contribution, candor, and constant learning. These three should become the central tenets of the new alignment. (By the way, this must be thought through and be ready for implementation before the crisis and the change are announced.)

(6) Inform and involve.
This is the mantra of the services leaders, as they tell and explain and preach the new gospel of the new organization, including the rationale and how the change will positively impact all stakeholders. Furthermore, smart leaders involve as many people as possible in the process to get them to take personal ownership of the change.

(7) Constantly communicate.
Effective leaders know that to truly communicate a new concept, multiple messages delivered in multiple ways are needed. Whatever the format, these elements should be included: why the culture must change, what will stay the same, what will be different, how success will be measured, and what's in it for everybody.

(8) Walk the talk.
Everyone will be watching the top dogs to see if this is just another flavor of the month or serious business. Senior management must walk the talk and even go out of its way to reward new behaviors that align with the desired culture shift, and punish behaviors (particularly of managers) that violate stated principles. Nothing indicates commitment more than firing a few managers that "don't get it."

The Ideal Attributes of S-Business Leaders Embarking on Culture Change

We have studied and worked in the culture change space for many years and finally have come up with the ultimate list for you to carry around with you in your wallet when things get really tough as you focus on culture change. Keep in mind that you will need the following attributes shown in Figure X to be successful.

Well, maybe the above is a little tongue in cheek, however, we believe you get the picture. Hard work, coupled with honing your skills combined with perseverance, are critical components of the s-business champion.

Conclusion

Organization culture is a major contributor to organization success or failure. By its very nature, it can prove to be resilient to needed change. However, well-informed leaders of services organizations with the will to change can help create effective s-business cultures that are strong, adaptive, and sustainable over time. The results of these high-performance cultures are both excellent stakeholder value and exceptional financial performance.

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Sidebar: The Quick and Dirty Guide to Culture Assessment

We have outlined some sound and proven methods to conduct an organizational cultural assessment, including document analysis, focus groups, structured interviews, and expert observations. However, there are some more informal ways to help you make some educated guesses. Every organization has hundreds of "indicators" as to what the organization is all about, whatever vision statements or the annual report might espouse. Here are some straightforward places to look, listen, and question to learn these cultural clues. This information can be used to give you ideas to completing the two diagnostics.

Warning: Remember these are indicators. Just as crossing one’s arms over one’s chest might mean someone is cold rather than defiant, an office lined with big game trophies may mean an executive has borrowed an office and is not a winner-take-all kind of guy. Never, use these tips alone without other analysis.

Look
From the moment you drive up to your facility (global headquarters or local branch) start viewing this world with a fresh perspective and record the impact on your senses. What does the parking lot look like? Reserved spaces or first come first? How about customer and visitor parking; is it up front or around back? How about employee-of-the-month parking? Early or late is the parking lot full or empty?

What do you see in the reception area? How do you sign in? Are you treated like a criminal or an honored guest? Is there a friendly receptionist with a smile offering you coffee, or a phone with a list of vendor rules behind a plexiglass barrier? What is prominently displayed: Professional reprints of the latest PR efforts? History of the founder? What is emphasized?

Are the people you see smiling and in animated conversation? Do they greet you as they pass or offer to help if you have that can't-find-the-restroom look? In conference rooms and working spaces, what is portrayed? The company's values? Quality methods? Slogans?

Do people work at open desks, cubicles, or private offices. Are office doors open or closed? Are people grouped by function or by work team? Is the environment orderly? What are people wearing--business attire or business casual?

What about meetings? Are there formal agendas, polite discussions, and punctual endings or haphazard sessions with roaming dialogues? Are disagreements politely ignored or are free-for-alls encouraged? What is the decision-making criteria? Do people look toward the big dog? Are issues argued on the merits of the facts or are emotions the driver of what will happen? Are decision made quickly or slowly and deliberately?

What tools are people using? Laptops? Whiteboards? Notepads? Is everyone on the same Dell computer with the exact version of Windows, or do you see a few Macs around?

What is celebrated? Beating the competition on a big deal? Winning a quality award? Sit down dinner or Friday afternoon beer bust? Dinner with the president or a donation to the United Way?

Listen
Overall, is there a quiet hush like that found in library stacks, or more like the low level hum of a NASA control room? Or is the main sound more like the pent-up energy and occasional bursts of laughter of a boisterous wedding reception?

What about overheard individual conversations? Are they mainly outside-focused on solving some customer problem? Debating the merits of a new approach? Or inside-focused--griping about the changes in the healthcare plan? Or questioning what will happen as a result of the upcoming merger?

Feel
Close your eyes in different locations of the facility. What emotions come to mind? Comfortable or unfriendly? Warm or cold? Relaxed or stuffy? Formal or informal? Laid-back or frenetic? Do you feel like staying or do you want to get out of there? Would your dog be welcome? Would you feel more at wearing a blue suit or blue jeans?

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REFERENCES

1. Healy, P.M., Krishna, G.P., and Ruback, S.R. 1992. Does corporate
performance improve after mergers? Journal of Financial Economics
31, 135-175.

2. Maister, D.H. 1997. True professionalism. New York: Free Press.

3. Hamel, G. 2000. Leading the revolution. Boston: Harvard Business
School Press.

4. Healy, P.M., Krishna, G.P., and Ruback, S.R. 1992. Does corporate
performance improve after mergers? Journal of Financial Economics
31, 135-175.

5. Wilkins, A.L. 1989. Developing corporate character. San Francisco:
Jossey-Bass.

Note: About 70 percent of this article came from Alexander, J. A. Q4, 2001. Creating a high-performance culture: Leadership roles and responsibilities. Professional Services Leadership Report. AFSM International.

Jim Alexander and Mark Hordes are partners with Alexander Consulting, LLP, a management consultancy that creates and implements strategies for professional services organizations. They also are authors of the new book S-Business: Reinventing the Services Organization. Contact them at 239-283-7400, ac@alexanderconsultingsbiz.com, or visit www.alexanderconsultingsbiz.com.

S-Business: Reinventing the Services Organization
By James A. Alexander and Mark W. Hordes

S-Business: Reinventing the Services Organization offers a focused, cohesive, and comprehensive approach through which decision makers in product, professional services, and support services organizations can embrace services as a strategic weapon.

Click here, to order this extraordinary book at a 25% discount (offered to the SSPA Community).

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