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GLC Transformation – Shock & Awe

19 Jun

I watch the GLC transformation with shock and awe. Shocked at how gullible we can be and in awe of how much money we are prepared to throw down the drain.

I say gullible because we believe that there is some magical dust that consultants can come and sprinkle over us and we become world class over night. Okay, I may be exaggerating the point but if anything that I keep hearing is how well the consulting houses in town are doing since the start of the GLC transformation. With this I don’t have to explain the awe part I guess.

Anyway, as a former consultant I will tell you that we have no magic formula. We are darn good at hearing your problems and packaging a solution that plays to your insecurities such that you believe we have the answer. We look at ICONIC companies in the west and we spew to you what GE, IBM, Microsoft, Shell, Deutsche Telekom , BA etc. all do and if you do it you will be like them.

As consultants, we make money by selling hope – just like the cosmetic / beauty / fitness industry. Channel No5 will make you the sexiest person on earth if you use it, but should you not become the sexiest person, then its your fault!

Well the good news is that yes these ICONIC companies are all doing what consultants say they are doing. The BAD NEWS is that these companies did not get consulted to where they are. They leaned, evolved, made mistakes, adjusted etc. etc. As much as they were on a journey, of discovery, so were the consultants who were working with them. If you want to know how wrong consultants can be, just look up the number of books and people who were idolising ENRON – including Charles Handy in The New Alchemist.

As they say, the proof of the pudding is in the eating… no one will dispute the turnaround at MAS , yes there are still cynics and skeptics but as a whole people see MAS as an example. So lets ask IDRIS JALA – who are his consultants. He will probably say he uses a few, but very selectively and very specifically. He will say the way to fix your problems is to get your people to fix it.

Then we have Proton. TM, and the whole bunch of other GLC’s… what’s happening there? My stomach cringes when I hear GLC’s say “the consultants have said that “broadbanding the salary scales will solve all problems” or “a new performance management system will solve all the problems” or “a balanced score card is what you need”, or “you lack a leadership pipeline”and “you must have a blue ocean strategy..”

Notice how all consultants prescriptions are titles of books….

Guess what, if the book sells, so will the work. But will it fix the problem?

Let see – Telekom for a long time has been a big balanced score card organization, Proton did lots of broad banding, Maybank – leadership pipeline, somebody must have done – blue ocean strategy….

Lets be serious….. look at what the Harvard Business review is discussing today…. Linking Pay and Performance. While we are gulping out what the consultants are dishing us, the Harvard Business Review is questioning the very essence of transformation. Let me reproduce the HBR Article here:

How Should Pay Be Linked to Performance?

Executive Summary:

Two news items caught my eye recently. The first was the report from the Home Depot annual meeting contrasting this year’s investor-friendlier tone set by the company’s new CEO, Frank Blake, with last year’s, led by then-CEO Robert Nardelli. It’s hard to tell how much of the investor-friendlier tone was created by the fact that Blake is earning about 70 percent less in base pay than Nardelli, totally aside from the fact that the latter also took home a nine-figure package in incentives. Home Depot’s stock has had lackluster performance under both CEOs. But there are those who say that Nardelli’s task of leading a transition from a highly decentralized, founder-led organization to one more reliant on shared services and central direction was enormous and that he was making good progress. How much is that worth?

The second item was a report of the decision by Moody’s Investors Service to begin taking into account the spread in pay packages between the top two executives in the organizations whose bonds it rates. Presumably, the larger the spread, the lower the bond rating, reflecting the higher implied risk associated with a large spread. As Mark Watson from Moody’s put it, “We are rating the company, not the person. A bus might come by and knock the (top) person over.”

There are several assumptions implicit in these two items. First, there are limits within which pay can elicit performance. Above a certain amount of incentive, does pay provide an incentive for or even influence performance? The Moody’s decision might suggest the assumption that pay reflects value to an organization, and possibly also potential performance. In other words, one’s pay in relation to the leader reflects one’s value (or even likelihood of being promoted) if the leader were to get hit by a bus today. A third assumption is that good leaders are very hard to find and are worth every penny they are paid, regardless of structural imperfections in the ways that compensation packages are negotiated and determined.

There are a number of reasons why pay may not reflect performance. First, many of the larger pay packages are negotiated by those being hired from outside the organization. Most often, an outside hire is prompted by poor performance by insiders. So in a sense, the bargaining power of the outsider is increased, regardless of the performance that may be delivered later. It is one of several reasons for the careful planning of executive succession. Further, many pay packages are determined on the basis of what others in comparable jobs, regardless of performance, are being paid. This creates a natural disconnect between pay and performance. Third, current pay often reflects past performance, not current or expected performance.

And to what extent does substantial pay for performance elicit short-term decision making that can even exacerbate management turnover? Does it encourage playing the “roller coaster” earnings game, in which executives in an organization can make enormous performance-based incentives in the odd years and none in the even years (ironically, when the large performance-based pay is reported to the public), thus netting a substantial performance bonus while producing little long-term benefits for owners? Is it even fair to ask those lower in the organization, who may be less able to afford it, to put part of their pay package on the line?

If pay is linked to performance, should it be to past, present, or expected performance? Or should pay be linked more closely to past, present, or expected value to the organization? Or are these differences academic? Do cross-company comparisons confuse the matter even further? Just how should pay be linked to performance?

At the end of the day, you have to design what works for you. You need consultants to train you and share with you design rules – be it for organization structure, pay structure, bonus plans, kpi’s , whatever it is. But you and your people have to do the work. It is the only way that you will have buy in, understand the logic and get alignment. Unlike Neil Armstrong, you can’t take one giant leap for mankind, your challenge in transformation is to take many small leaps, quickly.

 
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Posted by on June 19, 2007 in Business, Leadership, Transformation

 

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