Welcome back to Agility Update. Our first issue in 2019 focuses on people and culture, leadership and the approaching metamorphoses of the corporate headquarters. All three incorporate a sizable “soft” component backed up by hard numbers, and all require a fair amount of introspection followed by tough decisions. There are no quick fixes, and successful leaders will be those who challenge assumptions, re-tool their organisations and lead their people through the changes.
An in-depth survey of the concept of culture from a “hard numbers people” perspective i.e. CEOs and CFOs comptrollers, treasurers, and others related to the financial function revealed that financial executives see corporate culture as vitally important to organisations, but it takes a lot of hard work to get it right. The survey of more than 1,300 senior executives in major North American firms found:
Unfortunately, only 16 percent of senior executives within the firms said that their culture was where it should be. To turn this dismal statistic around, companies need to evaluate how culture is defined.
Whereas the study of corporate culture often focuses on the formal policies that define the culture e.g. corporate governance; hiring, firing and promotion policies; and incentive compensation, respondents say the heart of culture is in the informal elements that are not written down or codified: specifically, the company’s values and norms.
In order for a culture to be effective, the respondents agreed, the company’s formal institutions have to align with and support these informal elements. In many firms, however, there is an apparent disconnect between informal values and norms and formal practices and policies. Respondents also consistently complained that their companies were not implementing their stated values in practice. To illustrate with a real-world example: You have a star employee who is incredibly productive. This employee is also difficult to manage, de-motivates others, and has trouble collaborating. How do you evaluate this person at the end of the year? Do you look to promote or “manage out” this person?
The survey leaders say more theoretical and empirical work is needed to identify factors that contribute to successful cultural change as well as what tools investors and executives can use to gauge the effectiveness of a firm’s culture. However, for leaders reading Agility Update, this article is a good start. The research paper is available here.
Today, the world’s ten most valuable public companies by market capitalisation are either in the US or China. All are tech companies. Barely ten years ago, when the 2010s began, the top ten were based in five countries, with only two of them in the tech sector.
Given the relentless change in multiple dimensions, winning in the next decade will require leaders to question their current assumptions and retool their companies for the coming decade. Leaders will need to:
Read more of the Boston Consulting Group article here.
Digital advances such as robotic process automation (RPA) and artificial intelligence (AI) together with the increasingly influential millennial mind-set will force a significant change in the corporate centre. The millennial mind-set – sported by older generations and not only by millennials – want their work to be “meaningful”, supported by simple, fast work processes, robust tools and technology; they also value flexibility, collaboration, and the ability to work anywhere.
In short, the economies of scale associated with centralising strategic services at corporate headquarters (HQ) and functional services at shared service centres (SSC) in lower cost locations have eroded. Strategy+Business estimates next generation corporate centres could shrink by 25 to 40 percent in the next five years as more work is outsourced and automated. HQ’s scope of work will also shrink to just five roles focused on truly strategic work to:
This will create a major shift in the recruitment, development, and deployment of functional talent with companies increasingly look for “special forces”-style units of highly skilled functional expertise with a keen understanding of the business issues as well as relevant digital technologies. HQs which tend to be located in places with a relatively high cost of living and difficult commutes, will need to offer more flexible and diverse employment structures to attract people. Or, move to where the talent is. Amazon’s decision to locate its new headquarters in New York and near Washington, D.C., despite receiving sweeter financial incentives from competing locations, is one of many examples. HQ office design will also need to change to focus on creating a sense of community and common culture e.g. only the CEO and CHRO at LinkedIn’s San Francisco HQ have closed-door offices.
Read more about the changes in store and how to develop your HQ 2.0 strategy here. For an example of complementary RPA and AI, read Powering Up Smart Machines in Media to see how it is used at YouTube and Netflix.
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