By putting employees on top of the pyramid, an organization can hold on to talent while strengthening relationships with customers.
When I became president of global IT services firm HCL Technologies in 2005, the company was in a perilous situation. We were growing at a brisk pace — as high as 30 percent annual revenue increase — but even so were steadily losing market share to our competitors. Although many employees chose to look at the glass as half full, many of the most talented ones sensed we were headed for trouble and were making tracks for other companies. This combination of slowing growth and accelerating employee attrition worried me, as well as members of the management team, and I knew that something had to be done.
That something evolved into two initiatives. First, a revised and radical business strategy, providing end-to-end IT solutions to create partnerships with global customers, rather than discrete solutions on a short-term contract basis. Second, a management approach that came to be called Employees First, Customers Second. The central tenet is that management’s main responsibility is to do everything they can to maximize the efforts of employees who work in the value zone — the interface between employee and customer where genuine value is created.
Over a period of five years, the combination of our changed strategy and management approach produced results. We increased revenues even during the recession. We stemmed the outward flow of good employees. We increased the size of our typical contract and strengthened relationships with customers. We increased employee satisfaction scores. This article offers an overview of how we accomplished this transformation.
First, a word about strategy. In our knowledge-based economy, traditional paths to corporate growth such as product and service innovations are no longer as reliable as they once were. Few companies are able to produce a steady stream of product improvements, let alone real breakthroughs, to fuel significant growth and achieve or maintain market leadership. Few of us can achieve the sustained innovation and marketing genius of an Apple or a Google. Although new for us, the strategy of providing end-to-end IT services to create long-term partnerships with customers was the way the industry was going. We would still have to differentiate ourselves and gain a competitive advantage. The obvious solution was to focus on the “how” of our service offering: execution.
It became equally obvious that the organization was not set up to optimize execution. It was a traditional hierarchy with a posse of executives at the top doing their best to preserve their own power — controlling knowledge and other resources and demanding accountability from all those working below them. The front-line employees, especially those who worked directly with customers, were the ones responsible for creating value, but the organization did its best to limit their ability to do so. They were accountable upward, and they spent far too much of their time explaining their actions and reporting their results, time which could have and should have been spent delivering on the promise of our services. The hierarchical structure was actually getting in the way of the employees who worked in the value zone. No wonder we were not growing as fast as we could. No wonder employees on the front lines were leaving.
How could we empower the people on the front line? How could we maximize the value created in the value zone? And how could we convince management throughout the company that putting employees first was the right and best thing to do?
We neither answered these questions nor found solutions overnight. The process of transformation took five years and proceeded in a series of four major phases: Mirror, Mirror: Confronting the Truth; Using Transparency to Build Trust; Inverting the Management Pyramid; and Recasting the Office of the CEO.
Each phase produced significant changes in the way HCL operated, and their combined effect was a complete change in approach to managing the company. But the individual initiatives that comprised each phase were not the disruptive, exhaustive changes you might imagine. We relied instead on minor catalysts that depended on rethinking and communication. The steps were small; the results were huge. I call these catalysts “blue ocean” droplets, after the book Blue Ocean Strategy by W. Chan Kim and Ren’e Mauborgne. These small ideas created an ocean of change within HCL.
Mirror, Mirror: Confronting the Truth
The first step to creating change was to get as many people as possible to see the reality of the situation and accept that change was needed. We needed to establish point A, the place we were, before we could travel toward point B, the place we wanted to end up.
We did not have a clear idea of where we stood. Some people had a rosier perception of the situation than others, while many realized the need to change but didn’t see how changing one area of the company could affect the others. So I set off on a journey of discovery and discussion that extended over a period of months and involved visits with groups of employees at all levels in offices around the world. I engaged in dialogues, group discussions and one-on-one conversations. I said what I thought, bluntly and without sugarcoating, and asked them to evaluate with equal honesty and candor the status of the company.
We called this exercise Mirror, Mirror because it involved intensively scrutinizing ourselves in what amounted to a comprehensive, companywide self-assessment. By the end of this process, enough people had come to a consensus about our point A — and the realization that point A was not a safe place to stay — that we believed we could start moving toward our already-defined point B: the total IT solutions company differentiated by superior value creation by employees on the front line.
Trust Through Transparency
The Mirror, Mirror exercise created a good deal of unity and purpose. But making the decision that change is needed, even getting excited about where it might lead, does not actually create change. In fact, at the end of the Mirror, Mirror process, as we began to discuss how we would go about implementing the new strategy and what we could do to strengthen the value zone, we got stuck. For some reason, we could not move forward. The problem? A lack of trust.
We simply did not have enough trust in one another that we could make the changes we were talking about happen. It’s not that there was any mistrust; it was simply that trust had never really been an issue in this way. We were making fundamental changes to the structure and operations of the company, but many people had never worked in a collaborative way before — that old hierarchy runs on simple transactions and the execution of well-defined tasks — and had certainly never worked on something so daunting and unpredictable as transforming a whole company.
We decided the best way to build trust was by increasing the transparency of our processes. We started with a simple catalyst. We made an unprecedented amount of financial information available to a much larger number of employees. People in different departments and in different countries were for the first time able to gain a clear and accurate idea of how the company was doing.
They could see how their own unit’s performance compared to that of others in the same discipline as well as those in other departments. The results were remarkable. Because management showed that they trusted employees with important company information, employees felt greater trust in return. That catalyst was followed with several others designed to open up processes, share information and make the company a more open place. With each one, the level of trust rose.
Inverting the Pyramid: Reciprocal Accountability
Next, we began to think about organizational structure. How could we enable and empower employees in the value zone? As long as there was one-way accountability upward only, front-line employees would be frustrated in their effort to create maximum value. Managers needed to be just as accountable to front-line employees.
We settled on a catalyst we called the Smart Service Desk. It’s an online portal that enables any employee to open a ticket to cite a problem or request information. The ticket is directed to the department best suited to resolving the issue, and the manager in that department becomes responsible for the ticket. These tickets are visible to everyone in the company, and only the employee who opened a ticket can close it once he or she approves the manager’s solution. Everyone involved is invested in solving the problem or answering the question, and the manager who is working the ticket is essentially accountable to the employee who opened it. This droplet had the desired effect and was followed by other catalyst actions designed to further develop two-way accountability.
The term “inverting the pyramid” is a provocative one intended to cause debate. We did not literally upend the hierarchy. We still have managers and executives, and they still shoulder the responsibilities for control and strategy. Our real goal was to make management, enabling functions and employees in the value zone accountable to one another. Picture two pyramids: one upright and one inverted, one that creates control and one that creates value, superimposed on each other. The resulting star is closer to what we are trying to achieve — a company that is both controlled and orderly and also obsessively devoted to maximizing value for customers.
Recasting the Role of the CEO
In a company that puts employees first, operates with two-way mutual accountability and expects managers to empower people in the value zone to find their own answers and create solutions, what is the role of the CEO? To lead effectively in a company that thrives on transparency and shared goals for change, my job function had to change significantly.
The most important thing I could do was to stop thinking of myself as a provider of answers. The initiatives that met with the greatest success were the ones that encouraged everyone in the company to identify problems and come up with solutions. My role was to find ways to fuel this passion of our employees and ultimately transfer the responsibility for change away from the office of the CEO to the employees of the company.
One of the ways we did this was to make a significant shift in the business planning process. Rather than positioning myself as the final arbiter of which business plans were worthy and which were not, I asked managers to create a video describing the plan and post it on a special portal open for all to review. With hundreds of business plans from managers and business units around the world available online, the planning process was transformed. The managers created far more realistic plans that they genuinely wanted to implement, rather than ones they believed I would like.
Do Customers Really Come Second?
This is the top question asked about the Employees First approach. Is this nothing more than a human resources program designed to make employees feel good? And what about customers? What do they think about our approach? The simple answer is they love it because they understand our intention is to put employees first so that they can create maximum value for customers.
I don’t want to say that putting employees first is actually an indirect way of putting customers first because, in fact, we truly believe that the needs of employees on the front lines should be the primary focus of management.
But, just as we learned that a focus on quality ultimately reduces costs — although many executives initially assumed that quality efforts would lead to higher costs — we have shown that paying attention to value-creating employees is the best way to build profitable and sustainable relationships with customers.Filed under: Leadership Development, Performance Management