Creating a high performance leadership culture · PDF file4 Creating a high performance...

Creating a high performance leadership culture

The case of a leading Australian financial services firm

M.D. Fischer B. HarleyJ.E. Olsen

P. Evans

2 Creating a high performance leadership culture Case Study

Creating a high performance leadership culture Case Study 3

The Centre for Workplace Leadership was invited by a leading Australian financial services firm to conduct research on the firm’s capacity to adapt and innovate in a rapidly changing economic environment.

The research took place between 2014 and 2016. It involved analysis of proprietary documents, surveys, and interviews with employees and managers from frontline business to senior managers, the executive team and board members.

Background


The analysis of the firm’s systems for innovation and decision-making found the following factors were affecting the firm’s ability to innovate. These were:

• Employees’ shared commitment to a strong, values-based culture created a stable and rewarding informal culture;

• However, the firm’s culture was a ‘double-edged sword’: although it was a major strength in building cohesion, it also tended to block innovation and change;

• In particular, ‘bureaucratic brakes’ impeded the spread of internal innovation and development;

• Strong risk aversion tended to be used defensively against the possibility of change;

• Positive examples of innovation highlighted the need to develop better mechanisms for knowledge diffusion and organisational learning.

Each of these findings is described in more detail below, along with quotes from the interviews.1

1 The quotes have been edited and anonymised to protect identities.

Key Findings


Finding 1STRONG COMMITMENT TO A VALUES-BASED CULTURE


Managers and employees shared a common set of values and purpose, focused on the firm’s long tradition of customer and community service. Many staff strongly identified with this aspect of the organisational culture and commented on the importance of it being epitomised by the executive team.

“A lot of people at the executive level and on the board have all come from a long association with the (firm)… who exemplify the passion that we have. But it’s not just about the executive, we’ve got people across our organisation that just exude the passion because that’s who is attracted to our organisation … There’s a large part of our organisation (who) are passionate about customer (service) and you’ve just got to harness and leverage that - that’s what makes up the culture.”

The firm’s externally focused values on customer service and social responsibility were reflected in internal relations and what many managers and staff described as a culture of openness and genuine engagement with employees as valued members of the firm.

“We’ve got a very flat structure, there are only sort of four or five levels maybe, and absolutely open and accessible… the execs wandering around and chatting to people about football. Execs here will walk around the organisation, know everyone’s name, which is incredible. There’s that level of availability and accessibility into the senior leadership that’s really important.”


This sense of shared values and purpose crossed hierarchical levels and formal divisions, creating an experience of community across many (although not all) areas of the firm. It also reflected a relatively stable workforce, with many members having well-established connections with colleagues across different areas of the firm, enabling informal collaboration.

“There’s this beautiful internal culture of mateship (in the firm) where, you know, it’s not about hierarchy or title or position. If you’ve got a relationship with somebody, irrespective of where they sit on the organisation chart, they’ll generally do stuff for you outside of their job if they know how to do it. So that still exists within the organisation, whereas you know in other big (firms) it can’t work like this, I’ve seen it at first hand.”

A significant aspect of the firm culture was the striking degree of coherence and alignment between espoused leadership values and actual organisational practices. Many staff described how the firm’s responsiveness and care to their individual situations had provided them with personal as well as professional support, and meaningful opportunities to develop.

“I’ve spent more than a third of my working life here at the (firm), but I still owe this place more than it owes me… I’ve at times seen what its leadership has done to make (my community) more successful and prosperous.”


“I’ve spent more than a third of my working life here at the (firm), but I still owe this place more

than it owes me… I’ve at times seen what its leadership has done to make (my community)

more successful and prosperous.”


Finding 2BUREAUCRATIC BRAKES BLOCK THE SPREAD OF INNOVATION AND DEVELOPMENT


Although the firm’s values-based culture actively supported informal communication, formal decision-making was hindered by what many described as hierarchical controls that dampened initiative and innovation. Scope for initiative and change was constrained and shaped by the firm’s rather traditional and rule-bound, bureaucratic process.

“There’s this kind of paradox: On the one hand there’s this openness and learning and ambition… But also then these roadblocks and a sense of hierarchy…a sense in which leader-follower lines of communication can just block things from happening.”

A significant aspect of the firm’s decision-making is that formal hierarchy operated by calling for bottom-up engagement and initiative, but then counter-balancing any grass roots initiative through a prevailing pattern of top-down decision making. This decision-making pattern was reflected in what some managers described as a contradiction within the executive team itself, which was then reflected at middle and lower managerial levels.

“The Execs are part of the problem and part of the solution. Like a lot of things, you will follow a leader in what they do rather than what they say. If they’re talking about, ‘I want you guys to be autonomous, I want you make decisions, I want to be in an agile environment…’ But then: ‘I want to sign every purchase order,’ I forget everything they’ve said.”


As a consequence of such hierarchical decision-making, grass roots initiatives tended to remain stuck at lower levels in the hierarchy, rather invisible to senior managers. Instead of initiatives being referred upwards for decision-making (as formally required), they tended to accumulate at the level of front line and middle managers, providing sluggish momentum for innovation and change.

“A lot of it is getting into the hands of people that don’t have the authority to make that change, they’re not pushing it through. It is about this bottleneck that occurs between management and the exec - what needs to go to exec, what doesn’t - they’re grappling with the fact that there’s too much coming through. Some people won’t do anything unless their exec says yes. It came up in a forum: ‘we’ve got 150 (staff) who have voted for this.’ And one of the (executive’s) comments was, ‘but that’s not what we want branches doing’. So why are we asking them?!”

Despite the executive team’s best intentions to stimulate staff innovation and adaptation to a challenging external environment, an overall effect of such formal decision-making is that the firm operated rather rule-bound processes and systems, in which deviations – such as innovation – were seen as necessitating formal sanctioning from an executive. Accordingly, change in the firm tended to be experienced as top-down initiatives, with relatively few incentives for bottom-up innovation.

“Why did it happen? Because it was ‘blessed by God’, and I don’t think that’s right. Let’s put some sort of intervention in place to just see if it works, because that might demonstrate that if authority is given, people will do stuff. It’s this balance between executive wanting to empower, but then on the other hand, they want to see everything.”


“There’s this kind of paradox: On the one hand there’s this openness

and learning and ambition… But also then these roadblocks and a sense of hierarchy…a sense

in which leader-follower lines of communication can just block things from happening.”


Finding 3RISK AVERSION TENDS TO BE USED DEFENSIVELY AGAINST THE POSSIBILITY OF CHANGE


An interesting element of this embedded sense of hierarchy is the reinforcing influence of risk management in shaping the firm’s decision-making pattern. The highly risk-averse context that followed the 2008 Global Financial Crisis may indeed partly explain some of the internal resistance to innovation. Employees with strong loyalty to the firm feel personally committed to its preservation and growth and have developed, accordingly, a strong risk-consciousness.

“Look, if there is an idea that crosses many boundaries…the idea of all the meetings is to de-risk it because that’s really what we’re trying to do. I suppose that’s the conflicting nature of our business - you want to be innovative, you want to drive change, but you constantly want to manage and preserve this thing we have already. It is basically a single de-risking exercise.”

However, this tendency for risk aversion can be used defensively to protect against any potentially disruptive change, including potentially beneficial innovation and development. Well-developed internal systems and processes for handling risks are used not merely as intended but can be powerfully deployed as a means of dampening innovation, along with the potential for continuous improvement and organisational learning.

“APRA1 is used as a weapon. The Execs are used as weapons. ‘You can’t do that because the Exec said’, ‘you can’t do that because APRA says’. Show me the paragraph! And because (we) are normally compliant organisations, people take things on face value. No, APRA actually gives you guidelines to consider, and maybe some recommendations, but ultimately, unless it’s an enforceable instruction, you make your own decision.”

1 Australian Prudential Regulation Authority


Indeed, career advancement in the firm appears to be based (at least, in part) more on future leaders’ abilities to replicate established ways of working than in embracing innovation and potentially disruptive change. Interestingly, in the firm’s recent selection of high potential employees for a leadership development programme, these employees replicated the firm’s traditional leadership patterns, rather than seeking to change them.

“Just on the innovation thing…what I worry is that (we) train the new leaders to the same style of thinking and approach. So we set up this group, about 30 staff … and it was like we had created them in our image. We might as well have had robots because they just emulated our style, our approach to problem solving - which was quite crap because they didn’t feel empowered to introduce new thought processes or ideas.”

An important overall effect is that the firm’s internal processes and practices are experienced as hindering innovation, creating lengthy, uncertain and seemingly unrewarding pathways to surfacing ideas for change.

“People must have sat on this idea for months and months… And it involved just a change in process where the efficiency would have gained them about a day a week. But they were so inhibited to provide that sort of feedback because they didn’t feel empowered to even raise that idea that they never articulated to inform this group. When you ask them, ‘why were you not?’ ‘Well because no one told me I could, or no one empowered us to actually make that decision, I wasn’t invited to that meeting’… I sort of worry that they emulate our style of hierarchy.”


“Look, if there is an idea that crosses many

boundaries…the idea of all the meetings is to de-risk it because that’s

really what we’re trying to do. I suppose that’s the conflicting nature of our business -

you want to be innovative, you want to drive change, but you constantly want to manage and

preserve this thing we have already. It is basically a single de-risking exercise.”


Finding 4EXAMPLES OF INNOVATION REVEAL INADEQUATE MECHANISMS FOR KNOWLEDGE DIFFUSION AND CAPACITY FOR ORGANISATIONAL LEARNING


Even firms with strong cultures such as this demonstrate variations in practice internally, and in this case we found some important differences between divisions. In particular, we compared more traditional divisions of the firm with areas that showed strong patterns of innovation leading to organisational change. The most innovative areas tended to be smaller with flatter hierarchies, and gave stronger delegated authority to local teams. These arrangements drove their ability to adapt more rapidly to external challenges.

“Ok, you give me the resources, give me the authority, the accountability, I’ll actually make that happen. And we’ll make decisions, we’ll fail fast, we’ll adopt new practices, we’ll have a crack at… you know… we’ll hire people, we’ll sack people, we’ll get things moving, we’ll build momentum.”

The ability of certain divisions to rapidly convert innovative ideas into more effective organisational methods and products was impressive. The ideas were generated not just internally, but drew upon research and expertise from leading international think tanks. Based on such advice, one of the divisions instituted a major internal restructure that intensified agile, team-based decision-making.

Despite such impressive examples of local innovation, the firm’s ability to learn from the experience was hampered by the divisions’ tendencies to operate as strongly hierarchical, vertical silos, with few mechanisms for diffusing knowledge and innovation between them.


“I get a lot of my sharing and innovation through dealing with external partners. Perhaps we need to do more of that internally, deliberate sharing of ideas…to find that way of creating that thought process across the organisation. You need to be responsible innovating or it doesn’t evolve. Everyone has that risk mentality, but if everyone started to think that way about innovation as well...”

Such strong examples illustrated not just some of the potential elements necessary for innovation to lead to significant change within the firm, but highlighted barriers to diffusing knowledge and organisational learning internally. In particular, it revealed the inadequacy, to some degree, of internal mechanisms and knowledge flows between, as well as within, the firm’s divisions.

“So I might come up with an idea, that I passionately think we need to do. But I don’t have the power to say, ‘yeah do it’. And so the idea’s out here, and the (firm’s) here [gestures with arms wide apart]. So I’ve got all of this journey to cross to get them over there.”


“So I might come up with an idea, that I passionately think we need to do.

But I don’t have the power to say, ‘yeah do it’. And so the idea’s out here, and the (firm’s) here. So I’ve

got all of this journey to cross to get them over there.”


As a case study of factors affecting the firm’s capacity for innovation and change, these findings have been strategically important for the firm. The findings were discussed in a series of meetings with the managing director, the board, and the executive team, to assess potential strategic interventions.A major finding overall is that certain examples of successful innovation had demonstrated the firm’s ability to powerfully combine internal ideas with external research and expertise. As the study of these ‘positive outliers’ showed, the firm was capable of translating external ideas into highly effective organisational change, overcoming obstacles of strong hierarchical authority and risk aversion. However, mechanisms for diffusing innovation between divisions were inadequate against embedded patterns of hierarchical communications and decision-making (see Figure 1).

To facilitate open discussion of dynamics within the firm, the authors designed and jointly led a 1-day stakeholder workshop with the executive team and all senior managers across the firm. The outcome of the workshop validated findings, but most importantly established a process of organisational change led by the next generation of senior managers and executives: ‘Executive + 1’.

The Executive + 1 created key projects to drive organisational development across the firm, meeting regularly with the executive team. The projects focus on boosting high performance leadership and innovation in the firm through three mechanisms of:

› The role of senior managers in leading strategic change within the firm;

› ‘Designing-in’ effective collaboration and innovation flows between divisions; and

› Empowering staff and delegating authority across levels.

Organisational Intervention


Figure 1: The firm’s system of innovation and change

Diffusion of INTERNAL INNOVATION

Diffusion of EXTERNAL INNOVATION

Values Based Culture

Risk Practices

Vertical Controls


While it is possible to overstate the lessons from one organisation, this research does suggest some lessons for the leadership of companies seeking to build internal capacity to innovate.A culture of openness and engagement needs to be backed by actual empowerment and delegated authority for local decision-making.

Strong organisational cultures need to design-in mechanisms for dissent, openness to criticism, and organisational learning.

The use of bureaucratic processes tends to proliferate within organisations, and their use should be carefully kept in check.

Risks need to be balanced and managed wisely, rather than being avoided.

Examples of where innovation is already taking place should be used to identify potential organisational enablers and blockages.

Organisations need to design-in meaningful opportunities for employees to safely surface key issues and debates.

Possible lessons FOR OTHER ORGANISATIONS

About the Centre for Workplace LeadershipThe Centre for Workplace Leadership was established in 2013 as a joint initiative supported by the Federal Government and the University of Melbourne’s Faculty of Business and Economics. We are dedicated to excellence in leadership research, improving the quality of leadership in Australian workplaces, and developing individual leaders. Our work bridges the gap between research insights and leadership practice.

workplaceleadership.com.au

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