Chapter 4: How to Build A Healthy Corporate Culture And The Drivers Of Engagement

Chapter 4: How to Build A Healthy Corporate Culture And The Drivers Of Engagement

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THIS IS AN INSTALLMENT IN EMPLOYEE ENGAGEMENT IN RUSSIA BY JON HELLEVIG

We now return to the engagement drivers or the different categories of what influences corporate culture. I will present them one by one below.

TRUST, FAIRNESS, RESPECT

A list like this always runs the risk of being treated as presenting the items in order of priority, which is not my purpose. However, I think that trust, fairness, and respect truly deserve to head the list. Trust is a necessary element of any organization. Without sufficient trust between the members of an organization and especially between its leaders and staff members, we would be hard pressed to define the collection of individuals bound together as an organization in the first place. The strength of the trust determines the strength of the organization. And this is especially true when we speak about engagement. Nobody is going to feel and act engaged if he cannot trust the organization and its leaders or the immediate managers.

Fairness and respect in turn are essential building blocks for trust. The executives and managers must continuously reinforce the bond of trust by acting fairly and treating people with necessary respect. A proven track record of keeping promises, communicating candidly and treating people fairly and with respect reinforces the natural tendency to reciprocate the kind of behavior people are subjected to. For engagement to happen people need to feel safe to take action on their own initiative. Nobody will be prepared to take a personal risk for the sake of the firm if he does not feel that he has the trust and backing of the management.

Questions of ethics and values are closely aligned with those of trust and fairness. Trust and respect require that the employee share the values and ethical principles of the company as they are manifest to him most directly through the behavior of the immediate management. (This concerns things like honesty, anti-corruption, loyalty, and so on.) Because we are dealing with employee engagement in a modern business organization that is charged with building shareholder value, the values and ethics naturally need to be transparent and anti-corrupt. I note that it is, of course, possible that people can feel highly engaged also in organizations that represent cultures that most of us would find repulsive such as, for example, strictly sectarian religions led by charismatic leaders by whom the followers are spellbound or, for example, criminal mobs, or radically nationalist political movements. Unfortunately, throughout history, some of the most evil leaders have been successful in engaging their followers.

ALIGNMENT

Alignment refers to the effort to ensure that the employee understands how the job contributes to the organization’s success (strategy, goals) and what his role in that is.

Alignment is about effectively communicating to the staff the company’s purpose, its vision, mission, guiding principles, and strategy. (I note that it is not of the essence what a particular company calls such statements of its fundamental purpose and goals.) In order to engage the staff a company must ensure that the people believe in these fundamental statements of the firm’s purpose and goal, the strategy of the firm, and the purpose of the organization and one’s job. The employee needs to understand the value and purpose of the contribution expected from him. Understanding the bigger picture makes the individual efforts meaningful.

A condition precedent for all efforts of alignment is that the company has properly formulated and published these key corporate statements about vision, mission, guiding principles, and strategy. And then they naturally need to be shared with the staff, for there is no use in having a vision and a strategy if you don’t share them with the people you rely on to actually implement them.

The communication of the strategy has to be adapted to each organizational level (or competence level) so that each employee understands how the job is related to the overall strategy and business goals.

Some consultants identify alignment as the fundamental basis of engagement¹. By alignment, they mean the condition that the employee understands how the job contributes to the organization’s success (strategy, goals) and how her role is related to that. Efforts of alignment are about bringing clarity to the employee of what the job really is and why it matters in the big picture. After alignment come the deeper and more multifaceted layers of engagement. Alignment is about ensuring employees know what to do, while the rest of the engagement efforts are about ensuring they want to do it. Alignment can in principle be reached through effective communication, whereas the next level of engagement requires more complex leadership efforts and a corporate culture that is engaging in every aspect.

COMMUNICATION

Alignment, as described above, is brought about by proper efforts of communicating a vision, mission and strategy and the individual’s role in it. But the importance of communication does not stop here. In fact, the importance of communication does not stop anywhere. We could go as far as to define business as such entirely in terms of communication: Business is all about communicating how to organize production and marketing of goods and services, combined with the financing of said purposes. The more efficient the communication on all levels the better the business result.

For a culture of engagement both external and internal communication are of the essence. External communication affects the company’s brand and reputation as well as customer satisfaction. Brand reputation as such reflects engagement, as the company’s perceived image among the public or key constituencies tends to increase levels of engagement and attract talent. Internal communication is about efforts to stimulate free flow of information. There are many aspects to internal communication starting from the need to create a culture of candid speech in a polite atmosphere. Hand in hand with this objective goes the need to ensure that information flows within the organization unhindered by hierarchical and social boundaries without the imposition of different hierarchical levels requiring different styles of politeness and respect in communication between people of different levels of seniority or perceived social status.
But here we need to make a caveat: a free flow of information does not mean that every piece of information is shared with everybody. On the contrary, questions of confidentiality and business secrecy are crucial for any organization (as well as a self-organization) to work. This aspect of the work is an important manifestation of the need to retain a certain level of hierarchy and especially to differentiate between competence categories in establishing the levels of authorization for data access. A related question is that of the culture of e-mail communication. Most organizations of the world today experience tremendous problems in establishing which people should be recipients of emails, while a lot of people on various competence levels are included in the emails “just in case.” This leads to an information overload which runs the risk of making the whole process of communication meaningless. This is a typical question which can only be resolved with the relevant level of self-organization, for certainly it is not conceivable that anybody would elaborate written rules to capture all the possible scenarios of email communication so as to establish which people are copied on one or another kind of matter.

Although we tend to associate emailing with efficient communication, the system often yields quite the opposite result. It creates a communication overload and reinforces bureaucratic practices when not properly managed. For people that don’t want to take responsibility for their tasks and be accountable for results, emailing offers a magnificent hideaway. Such people easily fire off emails, including tens of people on the copy. Without specifying their message, they vaguely refer (often without stating) to a whole thread of emails, which soon take on all the features of the classic children’s party game of broken telephone. People will, in their comments to the preceding thread, add their own comments on one or another perceived aspect of the discussions. And soon the whole chain of communication becomes outright meaningless and actually harmful to business due to the number of misstatements it contains. People who want to avoid accountability and are not properly engaged to bring results are in the habit of entirely relying on this kind of nonsensical e-speak. When pressed on why they have not communicated important things or missed an email, they refer to the said chain of e-babble.

To oppose this harmful practice, we have at our firm imposed a rule according to which the ownership of an email remains with the sender. That is, the sender, not the receiver (or intended receiver, emails are not always properly delivered), is responsible for the receiver’s reaction to the email. The sender has to await a clear reply from the receiver which acknowledges that the latter has understood the issue in question. The sender is not anymore in a position to say: “I sent you an email” or “You were on copy.” We also stress that people must remember that the telephone (not SMS) is the primary means of communication in urgent and important things. Too many people seem to think that other people have nothing better to do than stare at their laptop (or smartphone) in anticipation of the emails you are sending.

Another aspect of this is that we have forbidden the use of BCC mode in business emails. BCC is when you copy in a person on the email without the other recipients being aware of it. This practice creates a lot of unpleasant situations that do not fit into a culture of trust and respect. Among other things, the BCC-recipient might not realize that he was on the BCC only and will then weigh in the communication with embarrassing consequences.

Considering these communication constraints, it is of the utmost importance to encourage a dynamic, open and effective communication culture. Dynamic communication leads to flexible and fast decision making. It enables an environment in which executives and employees are empowered at their respective levels to make quick decisions on operational issues. It is important, therefore, to encourage all employees to communicate openly and frankly without worrying about hierarchy or title. This enables the free flow of information between all functional departments, from the customer interface to the business leaders, and vice versa.

Today, when all business-relevant data is recorded – or should be recorded – it is increasingly crucial to align the IT systems with the strategic goals of the corporate culture. The management has to ensure that all relevant systems are integrated and to reach an overall functionality whereby no data is entered more than once in the databases
of the company and all subsequent transmission of the data is automated. This has to do with the need to get the customer relationship management system (CRM) right and to implement an enterprise-wide accounting, reporting, and planning system (ERP) that meets the strategic goals.

External communication is also of significance for a culture of engagement and an important part of self-organization. Usually companies experience no significant problems in establishing levels of empowerment for marketing and public communication with shareholders, external stakeholders and the market at large. But it is much more difficult to manage micro-level communication with customers in connection with on-going business activities. An important aspect of this is establishing template documents for proposals, contracts, work reports, and other typical communication situations. It is yet more difficult to make the organization respect the templates while at the same timing ensuring necessary situational flexibility. In fact, this issue affects all kinds of client communication. With the technological means and the democratic communication culture of today, and especially with the influence of social media, the threshold for people to reply to anybody about anything has become very low. Therefore, properly managing the competence levels, or levels of authorization, in client communication has become one of the most demanding challenges of management. You want to encourage flexible communication, but you also want to ensure quality and compliance. The organization has to learn to understand the importance of various kinds of communication with clients and establish the levels of authorizations accordingly. I don’t think it is feasible to resolve this issue by an attempt to establish strict rules in the traditional sense, rather this is again an issue that is best resolved in a self-organization populated by self-disciplined people.

Communication should not only be considered a question of purposeful actions to address somebody; rather it should be thought of as all interactions between people. Therefore, the management has to ensure that these interactions are as free and flexible as possible. It is a question of removing both physical and social barriers that may stand in the way of the free flow of information. This involves issues such as organizing the work environment as much as possible in open space premises and not seating senior management separately from the other staff if it can be avoided. Executives should spend as much time as possible working alongside managers and operational staff to show that they are accessible and flexible.

EMPOWEREMENT

Earlier I brought up the importance of empowerment in connection with engagement. It was established that empowerment is a central element of employee engagement. To a large extent, engagement is about empowering employees. But in contrast to the earlier faddish idea of empowerment, we in the context of engagement stress the need to take a complex and holistic approach to it. We stress the need to create the relevant conditions for enabling empowerment so that each employee will feel that he is backed up by management trust in using his powers and that he, from the other point of view, will clearly understand the limits of his authority, the framework and boundaries of the powers. Empowerment cannot be a free-for-all, and therefore needs the backing of a proper culture of engagement and self-discipline. There needs to be freedom within a framework.

I need to alert against a lapse in thinking which easily occurs when we speak about empowerment. Often the concept is taken to mean only (situational) decision making. And certainly such decision making, for a quick reaction to customer service needs, dangers to security, and other immediate risks, is an important aspect of empowerment. But the other side of empowerment, a more fundamentally meaningful one, is the involvement of staff members in business planning processes at each level of competence and in the immediate working environment. Involving employees at all levels in the planning and decision making processes serves as a fundamental tool of engagement. In a business organization the final decisions have to follow seniority but the planning processes need to involve all relevant people on various levels of business decisions.

Empowerment is closely related to the issues of corporate risk appetite. A proper level of empowerment in a culture of engagement will adapt the corporate risk appetite to the levels foreseen by the strategy. Getting the risk appetite right on all levels of seniority and competence is one of the most fundamental issues of leadership, and one of the most difficult ones. Too often managers, and especially those in charge of control and reporting functions, misunderstand the question of risk and proceed from the premise that risk needs to be minimized. But business is not about avoiding or minimizing risk. Business is about optimizing risk! You have to strike the right balance for your strategic risk appetite and actions.

EFFICIENT PROCESSES

In a culture of engagement all business processes need to be meaningful, maximally non- bureaucratic, transparent, and predictable. This concerns all rules, policies and procedures, as well as control functions.

A business should be directed by principles and guidelines instead of manuals and rulebooks. The former represents the ideas on which a self-organization is built, whereas the latter represents the rigidity of hierarchy and bureaucracy. I do not mean that no rules would be needed, rather that business leaders must constantly re-evaluate procedural requirements to make sure that no rule exists merely for its own sake. Some fixed rules will, naturally, be necessary for the purpose of security (including internal, external, physical and financial), as well as the purpose of compliance with laws and regulatory prescriptions. And they have to be adhered to as long as they are in force, but management needs to continuously challenge the validity of these kinds of rules as well.

All rules and procedures are usually established in response to an organizational (or production) need. The problem is that when the needs change, the executives in most cases ignore the need to change the old rules and procedures which were designed for past conditions which may no longer exist. This residue of old rules creates the backdrop for bureaucracy. Therefore a company should continuously run a program of reviewing (auditing) its rules portfolio and challenge their need. And for this purpose executives must encourage employees to continually question the status quo – to question systems, processes, direction, and management.

Another problem with rules and procedures is that connected with control functions. One of the curses of large multinational corporations is that they require a lot of control reports from their employees, who end up spending a considerable amount of their energy and working time on these often frustrating reports. Very often those kind of reporting requirements serve no other function than satisfying the rule and the controller. (This is also a problem that is aggravated by the procedures that are required by the dominant audit firms and their ever expanding check-lists.) In our opinion a company should do away altogether with all reporting requirements that are designed specifically for control purposes. Instead all the control functions should be integrated in the business processes. All the necessary control reports should be produced automatically, as part of recording the events that are connected with the direct performance of business transactions (processes).

An important aspect of rules and reports is that they have to be enforceable and enforced. If you have a rule you make everybody follow it, and if it cannot be followed you abolish or amend it. If you have a reporting obligation, then you make sure everybody reports, and if you don’t get in those reports, then you have to verify whether the reporting procedures are adequately designed and expedient. It is also necessary to de-bureaucratize the reporting requirements to ensure that these systems and procedures serve a real purpose. All data that is collected through reports must be utilized for steering the business or ensuring compliance.

Feedback is crucial to all of these issues of complying with rules and reporting functions. If the executives or managers, as the case may be, don’t have time or interest in giving feedback on reports or procedural issues, then it is a clear sign that either the rule or the manager (executive) should go. A system for getting feedback from those that collect the reports to those that file them must be established. Reports have to be analyzed between the manager and the subordinate and any other people who are affected.

The design of all business processes and practices should be subordinate to the need to continuously build organizational capital, that is, the value that comes from documenting and learning from past actions. A part of this effort is the need to establish best practices for all business activities, processes and procedures. This accumulated wealth of organizational capital directly bears on efficiency and quality, and therefore the financial results of the company.

In the Soviet Union accounting was a function which was solely performed for the purpose of reporting to the state financial planning committee on fulfillment of the state plans, and for statistical purposes. There was then no culture of reporting to the shareholders, which is only natural because there were no owners except for the state (and in fact, the reports to the state planning committee were actually reports to the one single owner). It is still the case today that Russian reporting practices are greatly informed by the idea of reporting to the state; now it is to the tax authority. But this means that shareholder and management reporting are greatly neglected. The problem is that in a business organization you cannot live without proper reporting. Things will go wrong if you don’t get your reports. In Russia there are, however, many business owners and CEO’s who don’t realize the need for properly organizing the reporting processes. But they certainly want to know what is going on. This is a dilemma that creates a lot of frustration in organizations. In lieu of proper systematic production of reports, the unorganized CEO gets ad hoc impulses to receive a report on one or another aspect of the business. He then issues angry orders with strict deadlines to get the report. To produce the needed reports the organization goes into panic mode and starts to pull the needed information together. Naturally nothing of great value can come out from such reporting practices that are not based on the principle of double entry. The quality of the reports will remain dismal, and the CEO reacts by screaming at his subordinates in the futile hope that such behavior could remedy his failures as a leader.

ORGANIZATIONAL STRUCTURE

Introducing the issue of organizational structure, I am again reminded how interlinked all these drivers of engagement and corporate culture are and how difficult it is to put them in the correct order of priority. This is because a proper culture of engagement is not conceivable without a proper modern organizational structure which rejects the old hierarchical model of organization. Obviously some level of hierarchy is necessary when a large number of people work together but the hierarchy has to be kept to minimal levels.

A modern organization of engagement is based on the principle of self-organization of self-motivated and self-disciplined people. (Admittedly it would be better to speak, instead of a modern organization, about tomorrow’s organization, as so few are still organized according to these principles.) All efforts in organizational design need to go towards developing the most important organizational principle: teamwork. No one individual possesses all the needed knowledge. What is needed is an environment that allows the individuals to merge and utilize their combined competencies. This requires a maximally lean and flat organization which applies the principles of organization by projects. I will also refer to this as project organization, but this may lead people to confuse this idea with the habit of organizing temporary structures to handle important temporary work usually connected with development or a launch or other such special tasks: in other words, a project for which you set up a specific organization beyond the normal organizational framework. This is not strictly speaking what I have in mind. Rather I mean that each (normal) task, big or small, for example, each client assignment, should be considered as a project. In this idea all the employees of an organization are considered to form a competence pool which you tap to put together a team that is most suitable for the given task. One person is appointed to manage the project. His authority is thus derived from the project leadership and not from any hierarchical position in the organization. Another aspect of project organization in the modern world is, of course, to organize the project teams as cross-functional virtual teams, which work dispersed all over the country, or even globally. Some teams are more or less fixed over extended periods while others form spontaneously in a self-organization. Such teams involve not only employees of one organization (legal entity) and are formed globally across organizational boundaries to involve customers, subcontractors and other stakeholders.

Almost all functions of business can be divided into so many projects, and therefore the project organization principle can be extended to cover all the operations. This also has to do with the principle of management by processes (which is not the same as process management). Due to the increasingly unfixed nature of business demands, management must constantly review the work from the point of view of the business processes, as opposed to the traditional approach of viewing the business from the point of view of the various functional departments of a traditional organization. The connection between organization by projects and management by processes is also such that some of the recurring functions, work that is continuously done by the same people in a standardized fashion (such as work on a production line, or service at a cashier desk) would be better conceived in terms of processes rather than projects. A modern organization needs to be a process-focused organization in every aspect.

Virtual teams and project organization represent the latest organizational development stage replacing the increasingly outdated matrix organization. It is interesting to note that the matrix organization is itself a relic of the hierarchical organization². The idea of the matrix was to distribute hierarchy over a more complicated (usually global) business structure with separate lines of responsibilities on the functional level, regional level, and level of the business unit. But now we need to let go of hierarchy altogether.

All this requires a networking style of management as opposed to the traditional hierarchical top-down organization. A networked organization is structured in the form of loose and fluid arrangements of technology and people who work in self-managing teams which function with great autonomy.

Because I prefer to avoid all hierarchical concepts and ideas, I also opt to speak about seniority and competence level instead of hierarchical titles and positions. In a self- organized project, organizational seniority refers to the levels of competence which come with skills and experience and can be put into use in any particular project as the case may be. In self-organization very few positions of seniority need to be enforced by job titles and other hierarchical status boosters. But I do not mean that I would consider that an organization could exist completely without any hierarchy, some differences in formal decision making power are needed. I would rather compare the authority thus given with that of a judge, one who has a final say in a difficult matter and who can weigh in when needed but not be hovering all the time over the organization in an immediate commanding role. Certainly a self-organization needs such anchors of authority to chart the relationships.

It is also important that the necessary level of the decision-making hierarchy does not spill over into a social hierarchy (as it so often unfortunately does) where the executives and managers are extended unwarranted perks and privileges. Throughout history, and in badly run firms of today, there have been attempts to compensate for a lack of natural leadership and authority, which is earned by deeds, by propping up the stature of chiefs and managers through symbolic material and social privileges. But if true engagement is to be achieved, then the leaders and managers have to earn their authority by merit and deeds. The successful ones should be sufficiently compensated for that, but it is important that the compensation comes as a reward for their competence and achievements and not in the form of perks to prop up their ego and status in the eyes of the collective.

The implementation of these principles of modern organization will cause a serious dilemma for employers and employees, that is, the end of promotion. These principles are sounding the death knell to the very factor that keeps it together, the promise of promotion. Most people are invested, based on the social expectations inherent in most cultures of the world, in the ideas that the most important thing at work, or in life, is to achieve organizational promotions and the titles and social recognition which come with them. In this sense we will in fact reach the end of history. Lean and flat organizations don’t have the hierarchy which is necessary for maintaining the culture of promotions. With promotions come titles, social recognition, power, and of course money. But the modern lean and flat self-organization is based on completely different principles. People don’t manage other people based on hierarchical status, but in projects based on competence. There will quite simply not be so many hierarchical management positions around to fill. In fact, in properly organized teamwork there might not necessarily be a manager in terms of traditional power hierarchy. Rather the teamwork requires that self- disciplined people negotiate their interactions. Employers will therefore lose one of their simplest trump cards for employee commitment, tying them to the organization with a position, subordinates and turf to protect, and the social recognition which comes with that. And employees will lose the chance to look forward to promotions to celebrate with a dinner among family and friends. But at the same time we must keep in mind that in a true culture of engagement we employ people who are not motivated by these status issues, or only to a small degree. Fundamentally they are motivated by other things: for example, interesting work; the development of competence seniority; the challenge of moving on to more demanding tasks and serving more knowledgeable customers; the authority they gain as specialists in their field; or perhaps by the very idea of working in a modern organization. We move from power of position to power of knowledge. And of course the engaged people care about their material compensation, as well, and that will grow with the growth of competence and the firm’s success. For this reason employers need to get rid of the practice of tying pay increases to promotions; rather, what is needed is to connect pay and material compensation to continuous monitoring of development and tasks handled by the employee.

I am not advocating a titleless organization here. As I have pointed out quite frequently, some level of hierarchy is needed and there may be titles to reflect that, and there may also be titles to reflect critical job functions, such as, for example, CFO. On the other hand it is also feasible, and in most cases recommended, that people are assigned new responsibilities without a change of title. In a modern organization, I think that the titles are mainly needed for external consumption, as marketing devices to raise the importance of the person that you put in the client interfaces. In fact, we have seen this external use of titles already for decades in the form of the myriad vice-presidents that American firms employ. But it is of greatest importance not to let the external usages confuse the real internal organizational needs. The best people will always be driven by their desire to take on responsibilities, not titles.

The highest level of employee engagement can be reached in a self-sustainable culture of engagement which is built on the pillars of self-organization, self-motivation, and self- discipline. Such an organization is low on hierarchy, low on bureaucracy, low on prodding and control, and low on micromanagement. The paradox is that a lot of ‘self’ makes for a good team.

Stakeholder engagement. In today’s world, business is produced more and more by the joint efforts of a number of companies or independent contractors in processes of networking or outsourcing. This means that the business is performed by extended organizations that go beyond the corporate frontiers. This is also why the efforts of engagement have to extend beyond the limits of the company’s own organization and reach out to the networking and outsourcing partners as well. In this endeavor, the people or each organization involved should follow the principles of engagement also with respect to the people from the other organizations.

Engagement and empowerment are connected with the issue of a democratic workplace. Here it is very important to be clear about what we mean by democratic. To my mind it is completely misleading to confuse democracy of the workplace with the electoral democracy of a political system. All employees cannot have an equal vote in decision making; attempting such a system would lead to disaster. In a corporation it is clear who holds the votes – the shareholders are the ultimate decision makers. They exercise their vote at general meetings of shareholders and appoint a board to oversee the operations of the company, thus delegating their votes between annual meetings to the board. The board in turn delegates the vote to the general director (CEO) between its meetings. There are no other votes in the firm. But I would venture to say that everybody should have an equal say in the matters that concern his own immediate work. By equal say, I mean the opportunity to frankly and candidly voice his opinion. And this should not only be a right but an obligation of the employee and thus an obligation of the superiors to actively solicit those opinions and create the conditions in which they are naturally voiced.

Thus a corporation cannot be democratic in the true sense of one vote for each staff member; but it needs to be liberal in the sense of letting all voices be genuinely heard. And it needs to be fair: an organization where people respect each other, and especially where the executives respect the subordinates in a system of reciprocated contributions. The beauty of a self-organization is that it also works as a self-propelling control function. It automatically rejects the people and the kinds of behavior that do not reflect the values of the organization and its transparent business practices. A properly functioning self-organization encourages transparency and combines inputs across the whole organization. Nobody acts alone with suppliers, customers, banks and stakeholders, and therefore real-time information of all operations is available to a number of actors, and malpractice and/or poor quality is immediately recognized.

SELF-DISCIPLINE

Self-organization is not possible without self-disciplined people. Self-discipline comes from within the individual, while discipline is implanted and maintained from outside. (This is similar to what was said above about intrinsic and external motivation.) The bad style of totalitarian cultures is about discipline, which is externally reinforced by fear. Self- discipline is brought about by engagement, but requires that the company hire and retain the people that manifest the qualities which can be harnessed for self-discipline.

Self-disciplined people display entrepreneurial spirit even in a large organization. Within a defined framework, they are free to take decisions and act to the best of their abilities in the company’s best interests. The framework consists only of guidelines, instructions, pronounced constraints and systems that are necessary and reasonable, whereas rigid rules and narrow job descriptions are reserved for exceptional cases only.

In this connection I am reminded of Jim Collins’ insight on the importance of having the right people on board and the three central elements of culture: disciplined people, disciplined thought, and disciplined action. You bring in the people that you recognize to be self-disciplined and self-motivated and let go of those that don’t cope in an environment of self-organization. Managers should not waste time trying to discipline the wrong people into behaving the right way. Instead you hire self-disciplined and self- motivated people who do not need to be micro-managed. The alarm bells should sound as soon as a manager recognizes that he has to spend time on micromanaging a subordinate (above what is reasonably needed for normal introductory work and coaching.) Few dare to say it out loud, but the fact is that nothing demotivates a team like having to put up with those who are not contributing.

In a culture of self-discipline you don’t need to manage the people all individually; rather, you manage – lead – the system.
Jim Collins, in his Good to Great, extols the virtues of a culture of discipline. He identifies three elements as central to creating this culture:

(i) Disciplined people – the importance of having the right people on the team
(ii) Disciplined thought – understanding the company’s strengths and weaknesses
(iii) Disciplined action – take action based on that understanding

All of these elements are equally important. Where we have disciplined people, we do not need hierarchy. Where we have disciplined thought, we do not need bureaucracy. Where we have disciplined action, we do not need excessive controls.

TOTAL FOCUS ON CUSTOMER SATISFACTION AND QUALITY

Total focus on customer satisfaction needs to serve as the main organizational principle. Every staff member, every manager, every executive, must understand that in the final analysis, the company exists for the sole reason of serving satisfied customers, who generate the revenue needed to keep the company going. The company must be organized for the purpose of meeting this overarching goal of delivering superb customer service. And nobody should be shy about the fact that this purpose requires that the company have a total commitment to sales, a total commitment towards selling its products and services to satisfied customers. This is not only a job for those that interact directly with the customers – the sales people and account managers – but a job for the whole organization. The winning principle must be that the whole organization, whatever the function of the individual, has to take responsibility for satisfying customer needs, whether replying directly or putting the customer in touch with the relevant specialists. The support functions, all the way down to accountants and lawyers, should be designed to directly contribute to satisfying the customers. Ensuring that existing customers are satisfied with products and services, and the continuous effort to attract new customers by sales efforts, are the two most important activities in a business.

It comes as no surprise that a self-organization is best equipped to reach this goal. In such a culture people naturally orient themselves towards what is most important, which is, as everyone knows, the clients. This tendency can be enforced by executives continuously demonstrating the importance of customer satisfaction by actively communicating the results of sales efforts and customer satisfaction, remembering to celebrate sales victories of the team and the sales heroes that have been instrumental in delivering them.

A customer-oriented organization is by definition already quality-oriented. But beyond that, the company needs to commit itself to an ever improving total quality-management system. Quality, here, refers to the level of service delivered as well as the goods produced.

Here it is worth repeating what was said above: that employee surveys focusing on identifying drivers which enforce engagement have shown that employees are naturally concerned about customer satisfaction. Employees tend to be more engaged and satisfied when they experience that the company’s, and their managers’, focus is on customer satisfaction and quality. And from this follows more engagement and yet more focus on customers – a feedback loop that pushes up both employee and customer satisfaction!

BEHAVIORS REQUIRED FROM LEADERS AND MANAGERS

In modern management theory experts want to make a distinction between leaders and managers. The idea seems to stem from Peter Drucker³ and has been influentially advocated by John Kotter⁴.

But although I understand the reasons for why these authors want to make this distinction, I cannot quite agree with them. This distinction fuels the very problem of hierarchy, creates conceptual confusion, and at the end of the analysis is simply wrong. (Let me point out that I very highly value the inspiring books of Kotter and Collins, so I hope that the criticism of this point will not overshadow my esteem for them.)

According to the modern management theory dichotomy (below in Kotter’s words):
– Managers are said to focus on running the operations within the strategic framework that has been staked out by the leaders. Managers focus on planning, budgeting, organizing and staffing, controlling and problem solving.
–Leaders are said to be establishing direction by developing the vision and strategy; aligning people; motivating and inspiring

Similarly the management scholar Warren Bennis in his book On Becoming a Leader delivered a list of the supposed differences between a manager and leader in this vein⁵:
– The manager administers; the leader innovates.
– The manager is a copy; the leader is an original.
– The manager maintains; the leader develops.
– The manager focuses on systems and structure; the leader focuses on people.
– The manager relies on control; the leader inspires trust.
– Etc., etc.

By stressing this supposed distinction between “managers” and “leaders” people may be induced to think that you should appoint either “leaders” or “managers.” However, simultaneously the adherents of this theory of distinguishing between these concepts de facto determine them according to hierarchical considerations where “leaders” hold more senior positions in the organization than “managers.” In this thinking, “managers” are the executives of support functions and the category of people usually referred to as the “middle management.” But the fact is that managers are the future leaders.

With experience and competence a manager may reach the position of leader; she becomes a manger with a larger scope of responsibilities. Obviously not all managers reach leadership positions, but all leaders are former managers. In a good organization, usually those managers who act more like a leader become leaders (that is, an executive) and the best of them may ultimately end up as CEOs. But more properly we should recognize that this is only a question of scope and extent: A manager is also a leader in relation to the people he manages. To be a “leader” then is a quality of a good manager.

So, in fact, the perceived difference between these “managers” and “leaders” are in fact only differences in the level of seniority and scope of organizational responsibility. The higher one moves up in the organization, the more one has to deal with all the general issues crucial to business. And it is in this aspect that Drucker and his followers are right: the need to stress that the executives and especially the CEO need to focus on core issues such as vision, guiding principles and strategy. Each manager has to be concerned with implementing vision, contributing to strategy, aligning and inspiring the team, and similar activities. But what would happen if all the “managers” just dropped their “dull duties” and devoted their time to full-time philosophizing about leadership!

In view of the above, I would propose to bring clarity to this terminology by calling the more junior managers “managers” and calling the members of senior management “executives,” and hope that they would all be good leaders on their proper level of seniority and competence. We need to recognize that both “managers” and “executives” need to demonstrate leadership, the competence of a leader.

And here it would be more correct to make a distinction between managers/leaders and experts (specialists). An expert with special knowledge or skills in a certain function which is crucial for the business is not necessarily competent in management (leadership) functions. And indeed many organizations fall into the trap of appointing a valuable expert devoid of management competence to managerial positions. This is caused by the inability of the relevant executives in charge of the appointments to distinguish between management skills and specialist knowledge; often they do it out of organizational desperation because in their hierarchical mode of thinking, they can’t come up with any means of committing the valuable expert other than by promotions driven by considerations of social status. Often such appointments serve as a recipe for disaster both for the organization and the person in question. And therefore the company should instead make other arrangements for engaging the valuable specialists precisely in accordance with the principles of engagement set out in this essay.

I therefore think that the definitions assigned to “leaders” by Kotter et al. are actually mainly the definition of the role of the CEO.

Increasingly a CEO should recognize that she should include among her most important priorities the quest for creating the desired corporate culture designed to deliver the strategic business behavior. Even in a large corporation the CEO needs to be the standard bearer of the entrepreneurial spirit; he needs to fight against the creeping bureaucratization that always threatens to take over an organization. For this to happen there need to be strong leaders who can break through the resistance to change which is cemented in the managerial status quo.

We can summarize the CEO’s role as that of implementing the chosen strategy of the company. He has to enact the strategy in practice. To do that he has to get all the other executives, managers and staff to understand the strategy and ensure that they all want to give their very best to implement it. In short, he has to engage them. The strategy has to be implemented by engagement.

This is done by implementing all the principles of engagement. But the CEO also has a great personal role to play in this. He has to walk the engagement talk and serve as the prime example of an engaged employee, so as to inspire engagement in the others.

A very special stress has to be made here on the CEO’s communication style. She has to set the tone at the top for the whole corporate communication style. She needs to demonstrate the main organizational principles in action: trust, fairness and respect. And she must lead by example, demonstrating the importance of urgency, feedback, proper delegation, and recognition.

The behavior of executives is monitored within an organization like that of celebrities, and therefore an executive needs to think not only about his intended, conscious, acts of communication but also to pay attention to his total demeanor, such as non-verbal communication. Tone of voice, facial expressions, level of eye contact, and even body movements form the impression of the executive in the eyes of the employees. Did the executive say hello to all the staff members he met on the way to his office? Did he jump the line in the canteen? Does he even visit the canteen? And so on.

It is natural to think that executives are more engaged than employees on average, but the surprise is that studies have shown that the levels of engagement among executives are nothing spectacular either. One study showed that engagement on the level of senior executives was 20%, compared with 9% on the level of non-management⁶. The ultimate leaders of an organization need to tackle this problem. The executives are the role models for the rest of the staff; therefore they need to be engaged before you can expect engagement with the rest of the staff.

Statute of the founder of Moscow Yuri Dolgorukiy, Yuri the Long-Armed, shown leading the people by his arm gestures. Aptly so for a people in whose language the word leader, rukovoditel, originally means driving or leading by hand.

INDIVIDUAL DRIVERS – QUALITY OF LIFE

Above we dealt with issues that may be considered external conditions of the work environment in respect to the individual. Now we shall deal with the individual conditions, or drivers, those that immediate affect the individual employee. (Although we should remember that in a culture of engagement each employee makes his contribution to the culture or the work environment, so these issues can never be divided too sharply into external conditions and individual conditions.)
With the engagement literature the question of quality of life has emerged as a relevant issue directly affecting even productivity. Earlier the idea was more or less to squeeze as much out of the employees as possible for as many hours a day as possible. Only labor laws and unions served as a deterrent. But for executives and managers to whom legal protection is not (de facto) extended, this continues to be the norm. In any case, today some forward-looking leaders and consultants (engagement scholars) have recognized that such kind of exploitation of people is not in the best interest of the firm itself. A multitude of problems follows from such policies: a decreased level of engagement; errors and quality problems caused by fatigue and loss of engagement; loss of productivity due to sickness; etc. The ultimate consequence in many unfortunate cases is the syndrome known as burnout. There are also difficulties in staff retention as the more competent people increasingly in today’s world look for opportunities to work for companies (or as entrepreneurs or freelancers) that offer a better work-life balance. And as there now exist a critical mass of people who have successfully arranged so for themselves, people increasingly know that such a quality of life is attainable. The growth of development of the internet, social media and all connected IT solutions fuels this tendency. People share their life stories and advanced working habits in social media and feature stories, and more and more people want to follow suit.

An early development in this direction has been the regime of working flexible hours, the increasingly popular since the 1980’s, whereby a person could choose to come to the office for a given number of hours but could choose the starting time within certain limits. The next line of development here is only starting to take root. This is total flexibility, when the person is not even asked to report to an office if there is not an actual necessity for it. A person may prefer to work on a project assignment, reading and writing at home, or in a café on the go. Most probably such working practices ensure better productivity. But! There is an important caveat to this: Such flexibility is only feasible in a self- organization of self-disciplined and self-motivated people. A part of the equation is that the managers for such staff have to be focused on the end result and therefore be able to monitor what the person who has been granted this flexibility actually produces.

An additional benefit from the extension of such practices is that companies will need less office space in the future. When you really think about it, it is a quite strange habit to have people travel each morning at a certain time to an office where they have to sit and produce their work. Historically it has been necessary for the sake of communication and management. But thanks to the internet information, advice and instructions travel in a second from one part of the world to another. The office is not needed for that anymore. Interestingly we have noticed, and I am sure most readers can share the same experiences, that people sitting in the same office in any case actually communicate with each other on the most important issues by email (Skype, etc.), even if they sit next to each other. Even within an office people are on the move constantly, so this is only natural, and most often other people working remotely need to be involved in the communication anyway. I predict that the office as it is conceived of today will soon lose its present function of herding people together; rather it will become a central point of focus of the company (of teams) for conducting meetings with clients, external stakeholders and internal meetings, whereas most work will be done out of the office. Following this development and the realization of the added value that outsourcing of business administration functions and techniques such as cloud sourcing give, the office will also consist of increasingly dispersed facilities with various support functions located in various places. Goodbye, corporate tower!

THE JOB ITSELF

We cannot ignore the fact that for the individual, the job itself remains and will always remain the most important driver of engagement. For engagement to happen, the employee must have work that interests him and suits his capabilities.

The job has to be meaningful for the individual and offer him a sufficient challenge to meet his own level of competence expectations. For ordinary employees who are assigned specific job functions (front-line customer service, assembly line, support functions, etc.), it is important to specifically tailor variety in the job functions. But all the issues of a culture of engagement discussed in this essay are equally important for these so-called ordinary employees. It is a special challenge to properly empower these people who usually are the ones that customers most often come into contact with and on whom the implementation of quality depends.

The job cannot be meaningful if the expectations on both sides (manager and employee) are not clear. I purposely spoke about job expectations as opposed to job descriptions. The era of job descriptions has come to an end; they have no place in a self-organization. To be clearer, I would say that job descriptions with narrowly defined functions are outdated and in their stead should come documents that more broadly describe the expectations placed on the employee. Where needed (for example, due to security and compliance reasons), it will still be reasonable to spell out the necessary functions that have to be performed in a strictly prescribed manner. But for most jobs it will be more important to spell out the expectations, goals, and job targets.

We have to keep in mind that engaged employees in a self-organization are by nature multi-tasking and prone to expand their scope of work and responsibilities with the demands of the situation. They even let their job functions evolve in time with the evolution of the business. Self-organizing engagement requires people who are flexible to meet the broadly defined challenges that face them in business.

PAY AND REWARDS

When we speak about rewards, the pay, the salary and bonuses are what first spring to mind to most people. But there is increasing recognition that the opportunities for self- realization and development also represent rewards. Having the opportunity to work for an engaging company is recognized as a reward in itself.

People expect the employer to offer opportunities for personal development and self- realization. These include having the opportunity to learn new skills and practices; make use of individual talent; be offered the ability to take part in training on the job and in training programs offered by external training facilities; and career development. Remarkably, it has been established that engaged people even spend their own time and money for improving their job-related skills.
From times immemorial there has existed a very simple and effective way of rewarding people, but unfortunately few managers and executives use it as actively as they should: recognition. It does not cost anything to say “Thank you!” but the effect of it is enormous – of course, in a setting where it is genuinely given.

Studies have shown that material compensation in form of money (salary, bonuses) and perks is not a decisive factor for engagement as long as that compensation is on a comparably decent level⁷,⁸. In a culture of engagement people usually don’t leave the job, or at least do not actively contemplate doing so, due to reasons of material compensation. As Collins says: the purpose of a compensation and incentive system is not to elicit the right behaviors from wrong people, but rather to entice the right people to join the organization and keep them there.

THE SOFT SIDE OF CORPORATE CULTURE

Earlier in this book I spoke about the “soft side” of corporate cultures. In that connection, I criticized what I regard as the misconceptions about the essence of corporate culture. Considering that and all the other ideas that have been expressed so far, I am not sure anymore that it would even be correct to identify the “soft side” under a special heading, as I had intended when I set out to write this book. In the process of writing I have gained more insight into the essence of engagement and corporate culture, and therefore it seems that all the things that have been traditionally identified as the “soft side” now merge into all the other issues, the “hard side,” if you will. More truly, though, we should recognize that there is no “hard” and “soft” side; there are only wise practices that need to be followed in all human interactions.
Thus the heading for this section will have to stand as a milestone commemorating that insight.

In this connection I would also point out that it is no longer correct either to think that the Human Resources department should be seen in the role of developing the “soft side,” in the sense of trying to be the “nice guys” as opposed to the “tough business people.” This distinction needs to go. In today’s world, and especially in this period of transition to a healthy corporate culture of engagement, HR should increasingly take the role of leading change. In doing so, the role of HR has to be elevated to a more strategic pinnacle in the firm, and the CHRO, chief human resources officer, should realize that his task is that of leading the efforts to align the organization to meet the strategic goals and engage people to do their best. The CEO needs to recognize the importance of HR in this respect. It is said that Jack Welch, the legendary former CEO of General Electric, marked this importance by elevating his HR to the role of main support and taking his HR director rather than the finance director with him on company visits⁹.

HR functions in Russia are burdened by administrative tasks and their functions in policing the organization. Therefore HR functions are usually staffed by people who are knowledgeable in labor law and other HR administration issues. But if you want to modernize the organization you need to start with modernizing the HR function. The HR director and her team really need to take on the role of a true business partner of the operational managers. The easiest step to begin with is to outsource all the administrative service functions so as to let the people concentrate on what really counts: development of talent and a culture of engagement.

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1. Macleod, Brady: The Extra Mile. 2008. Prentice Hall
2. Macleod, Brady: The Extra Mile. 2008. Prentice Hall
3. Drucker, Peter: The Practice of Management. 2007. Butterworth-Heinemann
4. Kottler, John: Leading Change. 1996. Harvard Business School Press
5. Bennis, W. (2009), On Becoming a Leader, New York: Basic Books, p 47-48
6. Macleod, Brady: The Extra Mile. 2008. Prentice Hall
7. Collins, Jim, From Good to Great. 2001
8. Macleod, Brady: The Extra Mile. 2008. Prentice Hall.
9. Macleod, Brady: The Extra Mile. 2008. Prentice Hall