1. © Penn State Management Development Leading in Turbulent Times Trends in business, the implications for Leaders, and opportunities for CE Professionals Eric J. Bergstrom Penn State Management Development Programs and Services

2. © Penn State Management Development Overview During this session we will explore….  Trends in Business (Where have we’ve been----where are we now?)  What Challenges do our customers face in their business environment?  What opportunities exist for organizations to address these challenges? The Right People: Develop Great Leaders The Right Culture: Empowerment & Collaboration The Right Strategies: Hard on Problems, Soft on People The Right Results: Metrics-Driven  Action Planning: Where do we go from here?

3. © Penn State Management Development High Performance Culture Leadership Honed Processes Empowered People Metric- Driven Organization

4. © Penn State Management Development Where We’ve Been & Our Roles Early 1980’s:  Change or Disappear  Culture Shock….workforce reductions  Quality Circles…getting folks involved Late 1980’s:  Build Capacity  Streamline  Self-Directed Work Teams / Lean Enterprises & Six Sigma organizations are born 1990’s:  Reengineering / Flattening the Organization  Organization Redesign; Six Sigma / Lean  International / World Scope 2000’s  Mergers and Acquisitions; Value / Competitive Advantage

5. © Penn State Management Development The Economy: “Been There” Previous Global Recessions: The 1980 Crisis (1980-1982) The 1990 Slowdown (1990-1992) The 2000 Bust (2000-2002) The 2007 Great Recession (2007-????) Study of 47,000 public companies: 17% didn’t survive the recession (bankrupt, were acquired, went private) 80% of survivors had not yet regained their pre- recession sales/profits three years after the recession 9% flourished after a slowdown Source: Gulati, Nohria, Wohlgezogen (2010). Roaring out of Recession (HBR Reprint R1003C)

6. © Penn State Management Development WHAT ARE YOUR CRITICAL CHALLENGES? What Changes Have You Experienced in Your Field? In Your Organization?

7. © Penn State Management Development How do we address these challenges? Many believe through leveraging the interrelationships among………… Developing The Right People Creating The Right Culture Applying The Right Strategies Targeting The Right Results

8. © Penn State Management Development Developing The Right People Leaders & Members What competencies, skills, and behaviors do leaders and members of successful organizations possess?

9. © Penn State Management Development Who: Developing Human Capital Most companies tout their employees as “their most important resource”--- their way for creating competitive advantage for their organization. However, in lean times, the people-development and the people-engagement activities often are delayed, postponed, or eliminated---sending mixed messages to employees. Lean times often provide Leaders with the greatest sense of urgency and opportunity for assessing our business but also the opportunity for leaders to shine by engage employees in implementing improvement processes

10. © Penn State Management Development  Talent Management  Training / Development  Ability to Integrate Acquisitions Quickly  Creating a High Performance Culture  Leadership Development and Pipeline  Compensation, Benefits and Pension Planning and Management  Complying with Regulatory Questions  Anticipating and Responding to Business Critical Events Source: Aligned at the Top, Deloitte Touche Tohmatsu, 2007 Alignment at the Top Which Develop People Management Issues are Most Critical to Your Organization’s Success?

11. © Penn State Management Development Leadership Development and Pipeline  Executives rank this issue as #1  Each leader needs to identify 2-3 individuals who are able to move within the organization Talent Management  Find the right people  Talent strategy = business strategy  Retain strong performers Training & Development  Survey shows the most effective way to create talent is to home grow talent  One of the few competitive factors we can actually control  Training is every leader’s job  Training must be continuous Source: Aligned at the Top, Deloitte Touche Tohmatsu, 2007 Alignment at the Top Develop People Management Issues that are Most Critical to the Organization’s Success

12. © Penn State Management Development Developing Good Leaders Great Leaders are skilled in four building blocks of Leadership: Vision Interpersonal Style  People Skills  Teamwork Communications Problem Solving / Decision Making  Tactical Execution  Strategic Thinking Source: CPP White Paper “Developing Great Leaders”

13. © Penn State Management Development Leader competencies that are developed to support organizational success include:  Strategic Thinking:  Talent Management  Operations Knowledge  Business Acumen  Technology/Technical Skills  International/Global Perspectives  Finance capability  Flexibility/adaptability  Change management  Innovation and creativity Which Critical Competencies Impact An Organization’s Success?

14. © Penn State Management Development Closer to Home----Our Research: The Leadership Competency Inventory (LCI) 32 items, keyed to competencies shown to be critical to successful performance in supervisory or managerial roles Research-based, drawing on extensive studies by the Federal OPM, which drew on the original large scale studies by AT&T; appended with basic, core competencies (SCANS & Work Keys) Self and Manager parallel versions Group-based results (but can be used for individual development planning)

15. © Penn State Management Development

16. (LCI) Results – Summary Industries Represented: Manufacturing: Metal, food, printing, rubber, Wholesale / Retail Health Care Long-Term Care Retirement Communities Transportation & Logistics Technology: R&D, Internet, Education Government Professional Services: CPA, Medical Transport Banking / Financial Utilities

17. © Penn State Management Development Overall Results: LCI Top 10 Competencies with the highest Importance / Development Values in both the Target and Manager Groups:  Leadership & Coaching  Communications (Oral and Written)  Conflict Management  Relationship Building  Teamwork  Problem Solving  Flexibility & Resilience  Customer Focus  Planning & Evaluation  Financial Management

18. © Penn State Management Development Understanding Results: LCI When reviewing the selections of specific organizations and industry clusters, the selected competencies were influenced by:  Positions of leaders within the organization  Type of industry (health care, manufacturing, Logistics, etc.)  The level of empowerment of the organization  The age of the organization  The culture of the organization (autocratic, participative, level of hierarchy, etc.)  Financial status

19. © Penn State Management Development What Lessons Have We Learned about People? What is Our Call to Action? The Right Leaders demonstrate critical competencies that lead to organizational excellence Leaders find members with and develop organizational members in the competencies that support organizational goals Critical Work: What critical competencies lead to organization success & how do we find / develop individuals with those competencies?

20. © Penn State Management Development The Right Culture

21. © Penn State Management Development The Right Culture Successful Organizations have a culture that….  Address Crisis (demonstrate flexibility, resiliency, efficiency)---a sense of urgency AND Operate for the long term (effective at planning)  is Hard on problems, Soft on people  Provides High Levels of Communication: give people the information they need to help the organization succeed  Share responsibility and accountability for problem solving and decision making  Align structures: Hiring processes, Performance management, Engagement / participation, Reward systems, Talent management

22. © Penn State Management Development Attributes of a High Performance Culture  Collaboration / teamwork  Problem-Solving  Decision Making  Internal / external partnerships  Shared Leadership  Empowerment of Members  Metric –Driven  Customer-Focus  Quality / Excellence  Technical Competence  Change agility  Business Acumen / Financial Management

23. © Penn State Management Development Sense of Urgency Exists in the Culture to Address Today’s Critical Business Challenges 1. Does a Sense of Urgency exist? 2. Are the corresponding Actions appropriate for the conditions to reduce complacency and confusion?

24. © Penn State Management Development Tomorrow’s Opportunity Starts with Today’s Urgent Behavior Your Checklist:  Do a sufficient number of members feel a true sense of urgency?  Are teams created to guide ambitious change?  Are visions and strategies developed to deal with key issues?  Have we communicated visions / strategies to allow others and to receive & to buy-in?  Have we empowered others to act?  Have we achieved & communicated short-term wins? Does that lead to expanded efforts?  Have we institutionalized desired change? Modeled from: “A Sense of Urgency”, Kotter, 2008

25. © Penn State Management Development What are the Consequences of Little or No Urgency Mistake Activity for Productivity Miss Need for Internal Change due to External Change Pursue Pet Projects of Little Significance Engage in Irrelevant Business as Usual Activities Stay Stuck In Old Process & Old Ideas Lack Vision for Immediate or Long Term Change

26. © Penn State Management Development What are the Consequences of Rash or Unfocused Action? According to David Rhodes and Daniel Stelter (Harvard Business Review, February 2009), the wrong action can be nearly as damaging as inaction: Quick action can create anxiety and panic among organizational members Uncoordinated moves address the wrong problem or overshoot the right one Lack of proper focus distracts members from seizing obscure opportunities Source: “Seize Advantage in a Downturn”, Rhodes & Stetler, HBR Reprint R0902C

27. © Penn State Management Development What Action Must We Make to Our Culture?  Develop an Innovation / Creativity Environment  Organizations that Think Nationally & Globally  Have Visions Internally & Externally  See Opportunities & Hazards  Are Alert, Move & Lead---- NOW  Do Better (Honed Processes w/ a Constant Push for Improvement)  Create a culture of people who have shared values, clear responsibilities, and a passion for performance (Collins, 2009 Inc Magazine Interview)  Partner with (vs Integrate) Acquisitions? (HBR December 2009)  Identify & Tap What Really Motivates Workers

28. © Penn State Management Development How Do We Make Changes to the Culture? Paradigm Shifts: Leaders / Entrepreneurs---Know the risk, learn to work in ambiguity; work in a ferocious, volatile, turbulent, uncertain world; be able to deal with whatever is thrown at us (Collins, 2009 Inc Magazine Interview) Support Innovation within the Organization (HBR December 2009)  Support outside of the box thinking (association), support questioning, directly observing to see (Toyota), experimenting to broaden perspectives, and networking with others outside the norm  Develop actual career paths for innovators  Connect workforce initiatives / innovates

29. © Penn State Management Development What Questions Should We Ask About Our Culture? Do We Need to Use New Metrics: (Rethinking Marketing HBR January / February 2010) Product Profitability vs. Customer Profitability Current Sales vs. Customer Lifetime Value Brand Equity vs. Customer Equity Market Share vs. Customer Equity Share Do we place our shareholders’ interests ahead of our customers’ interests? Do we place our customers’ interests ahead of our employees’ interests?

30. © Penn State Management Development The Right Strategies What Strategies Lead to Success in Organizational Transformation?

31. © Penn State Management Development What Six Problems Can Slow Organizational Transformation? Robert Miles, in his article “Accelerating Corporate Transformations (Don’t lose Your Nerve)” identifies…. 1. Cautious Management Culture 2. A Business-As-Usual Management Process 3. Initiative Gridlock 4. Recalcitrant Executives 5. Disengaged Employees 6. Loss of Focus During Execution HBR Reprint R1001C

32. © Penn State Management Development What Specific Actions Can Leaders Take? Rhodes and Stelter suggest balancing defensive and offensive actions: Stabilize the business to mitigate downside risk and provide liquidity:  Systematically assess organizational vulnerabilities  SWOT Analysis  Scenario Planning (severe, modest, best) & quantify how scenarios impact the business finances  Assess rivals vulnerabilities  Reduce exposure  Protect financial fundamentals (maximize cash position by cost control and increasing cash in-flow) Source: “Seize Advantage in a Downturn”, Rhodes & Stetler, HBR Reprint R0902C

33. © Penn State Management Development What Specific Actions Can Leaders Take? Stabilize the business to mitigate downside risk and provide liquidity (continued):  Manage customer credit risk  Reduce working capital (manage the difference between the current assets and liabilities)  Protect existing business  Reduce costs, including in the supply chain  Increase efficiencies (streamlining the organization / lean processes to eliminate low-value activities)  Protect existing revenue / generate additional revenue  Divest in non-core business, watch capacity investments, communicate strength vs. rivals Source: “Seize Advantage in a Downturn”, Rhodes & Stetler, HBR Reprint R0902C

34. © Penn State Management Development What Specific Actions Can Leaders Take? Rhodes and Stelter suggest balancing defensive and offensive actions: Capitalize on the downturn long term by exploiting the mistakes of others: Invest in the future---priority to long term, major impact projects & top people  Product development  Information technology  Production technology  People—upgrade management teams Pursue Mergers and Acquisitions Rethink & rework your business models Source: “Seize Advantage in a Downturn”, Rhodes & Stetler, HBR Reprint R0902C

35. © Penn State Management Development The Right Results Who has done it right?  How have they achieved long-term success?  What are the common themes among the organizational approaches?

36. © Penn State Management Development Some high-profile organizations that have fostered the interrelationships among people, culture, process and results:  Toyota  Springfield Remanufacturing Division  Pikes Fish Market  Baptist Hospital Alignment of Efforts

37. © Penn State Management Development A people-development company that just happens to build cars---”we see beyond cars” Built Around… Respect for People Continuous Improvement Process---The Toyota Way People----Toyota Talent Culture---Toyota Culture Toyota (toyota.com)

38. © Penn State Management Development What is Open Book Management? “Open Book Management is a way of running a company that gets EVERYONE to focus on helping the business make money. Nothing more, nothing less.” John Case, “The Open Book Revolution” Inc. June, 1995

39. © Penn State Management Development Where did Open Book Management Originate? Open Book Management was started by Jack Stack at an International Harvester subsidiary called Springfield Remanufacturing (SRC) The Company avoided a Plant Closure by “playing” the “Great Game of Business” The results of the transformation have been recognized in numerous magazine articles, books, and television programs SRC has maintained constant growth & expansion since 1982

40. © Penn State Management Development The Open-Book Management Methodology Education “Teach the Rules” Communication “Follow the Action” Compensation “Stake in the Outcome” # Key Business Drivers Business Education Small Games Financial Meetings Huddling Scoreboards Quarterly Talks Performance Reward Plan - (Gainsharing) Small Game Payouts As the model suggests, the components of the model are synergistically connected

41. © Penn State Management Development OBM Definitions Business Literacy Training  Income Statements  Balance Sheets  Expense Control Reports  Budgets Huddles  Weekly or Monthly  Rollup of numbers  Current state and forecasting  Goal Setting (action by end of month / quarter)

42. © Penn State Management Development It’s more than fish; it’s the commitment to having fun while working and making a difference in the world It’s about being truly great with people---giving each person the experience of being served and appreciated Improving the quality of life for everyone What causes employees to tattoo the business concept on their arms? Pikes Place Fish Market (pikeplacefish.com)

43. © Penn State Management Development Five Pillars: 1. People 2. Service 3. Quality 4. Finance 5. Growth Hardwiring Excellence, Studer (2003) Baptist Hospital (studergroup.com)

44. © Penn State Management Development Nine Principles: 1. Commit to Excellence 2. Measure the Important Things 3. Build a Culture Around Service 4. Create and Develop Leaders 5. Focus on Employee Satisfaction 6. Build Individual Accountability 7. Align Behaviors with Goals and Values 8. Communicate at All Levels 9. Recognize and Reward Success Baptist Hospital Hardwiring Excellence, Studer (2003)

45. © Penn State Management Development Wrap Up / Action Planning At the End of the Day…. The critical question to ask is… What are you, as a leader, going to do differently as a result of participating in this session? What is your Action Plan