Cultural transformation with Total Alignment
by Riaz & Linda Khadem
Many case studies are written expressing concepts aimed at boosting growth, increasing profits, reducing costs, gaining market share, etc. While these topics are important and worthy of exploration, the present paper is not about growth, profits, or other similar objectives. It is about how a company can operate wisely and intelligently in a state of alignment such that all employees move together as one.
With this approach, the desired results such as growth, profits, and the like become the byproducts of alignment, not its principal aim. The advantage of this approach is that emphasis is placed on processes, not on results, and the effective operation of the processes culminates in sustainable and outstanding results.
The tools and tactics for creating the state of alignment in organizations have already been explained in our book, Total Alignment. Our intention here is not to repeat what has already been stated but to provide a high-level summary of the interacting processes that create and sustain the state of alignment in an organization, and to share the thinking behind them.
To create a state of alignment in a company, we must go back to the basics of why an organization exists and what it aims to accomplish. If we consider the organization as a collection of people who come together to fulfil a need in the market, then each organization has a unique way of fulfilling the need it perceives, and thus pursues a unique mission.
In many companies, mission was articulated at some point in the past and the workforce might or might not be aware of it. In either case, not much attention is usually paid to it. Here, we put great emphasis on assuring that mission is articulated through the participation of the workforce, that it is clear, that it is a true motivator for action, and is understood by all. The closer the organization’s mission serves to better the world, the greater is its intrinsic value in motivating the employees with a meaningful purpose besides receiving a paycheck every month.
With the mission well defined and accepted by all, a vision of where the organization intends to be in five or ten years becomes essential. Vision must also be shared by all, not just by the CEO or top team. It must be crystal clear and inspiring. We say this because the keenness of vision causes the keenness of understanding, which is a powerful motivator for action. The picture of success in the future that makes up vision is like seeing the end in the beginning. * When the end is clearly visualized by all, it causes actions to occur by everyone that sooner or later coalesce into a force that produces the desired effect. Vision engenders creativity that turns into seemingly impossible outcomes.
The third element that together with mission and vision serves as the foundation of Total Alignment is the core values that guide the organization’s progress through time. Values are the guidelines for behavior for all. They are never compromised. The organization would rather lose a desirable customer or employee than compromise its values.
In summary, an organization, no matter how small or large, is a collection of people who work together to fulfill a worthy mission, with a vision of success in mind, and they follow a set of core values. What we have just stated is not new. All readers are familiar with these three foundational concepts. Almost all organizations have some statements of mission, vision, and values artfully displayed in the corridors of their companies and on their websites. What is new in Total Alignment is that these three are placed at the very center of everything the company does. Stated in another way, everything the company does is aligned with mission, vision, and values.
The three generate the Key Performance Indicators (KPIs) that measure the success of the organization. They create the end-to-end processes from sales and order entry to order delivery and after sales support. They cause the formulation of strategies necessary to achieve vision. They serve as guidelines for clarifying the expectation of all jobs in measurable terms and the value-add of every job through individual scorecards. They provide the standard for measuring the health of the business in business scorecards. They necessitate the establishment of cross functional accountability that erases silos. They call for a continuous flow of information to track progress towards vision. They mandate the establishment of fair compensation that rewards teams and individuals for their contribution toward the achievement of vision.
Total Alignment serves as the umbrella for everything that happens in a company. It has the methodology for all processes that flow from the three foundational concepts, mission, vision, and values. The implementation of Total Alignment follows four basic pillars: Vision & Strategy, Accountability, Information and Culture.
Vision & Strategy
The key to the implementation of the vision & strategy as the foundational pillar of Total Alignment is the Alignment Map, a simple yet powerful construct that serves as the framework for action in the company. It is a map that connects the present with the future of the company and becomes the dynamic living instrument of alignment.
The mission, vision and values of the company are placed at its center. They illumine the company’s present operation as well as inspire strategies for the future. The left side of the map contains a tree of indicators of success or KPIs that measure the outcome of processes that exist or need to be created to deliver the vision. The right side of the map contains a tree of strategies with three main branches: market strategies for the business units or segments, support strategies and closing gap strategies required to build the future. Strategies formulated on the right side through a strategic planning process are converted into specific initiatives with project plans, milestones, and deadlines. The indicators of the success of the initiatives on the right side are designated by a measurable index we call INX that stands for initiative index.
When constructed, the Alignment Map tells the story of where the company is at the present and how it will advance in time toward its vision. The map stands apart and is independent of the organizational chart of the company. It is a document that is always kept up to date. When a new process aligned with vision is created, the KPI associated with it is added to the left side. When a new strategic initiative called for by the vision is initiated, it is added to the right side of the map.
We offer a word of caution to companies devising market strategies on the right side of this map. To be aligned with the values that often include trustworthiness, excellence, and contribution to the betterment of the world, care must be exercised to not include strategies that violate the values. For example, a strategy of increasing market share is acceptable if it encourages the company to be more innovative, more cost efficient, and more conscious of continuous improvement. It is not acceptable if it tries to misuse the company’s financial strength to initiate a price war to eliminate rivals or to pay employees less than what their contributions are worth to increase profits, or to misrepresent the company’s products or services through misleading advertising. Such strategies do not belong to Total Alignment as they demonstrate a compromise of values in favor of a short-term positive bottom line.
Accountability
The implementation of the accountability pillar of Total Alignment assumes that the right organizational structure is in place. Depending on the size of the workforce and the type of business, the organizational chart could be two to several levels deep. Connecting the Alignment Map with the organizational structure involves the distribution of each KPI from the left side and each INX from the right side of the map among the many jobholders of the company. Someone must be accountable for each of the indicators and initiatives.
The methodology for this pillar requires delegating the KPIs from the left side of the map to the lowest appropriate levels of the organization while assigning the INXs from the right side to the highest appropriate levels. This is meant to empower the lower levels who are closer to the frontline and encourage upper levels to be more strategic and future oriented. As the success of most KPIs or initiatives is dependent on the collaboration of several functions, the accountability for collaboration is also included in the process of delegation and assignment. The outcome of the accountability process is the creation of individual scorecards for each jobholder containing a mix of KPIs and INXs with primary accountability or cross-functional accountability.
The construction of individual scorecards that emerges from the Alignment map is what we call top-down accountability. To this process must be added a bottom-up approach where each jobholder adds to the content of his or her scorecard important KPIs or initiatives that might have escaped the top-down process. The scorecard that emerges will have the benefit of including the priorities at the frontline together with the requirements of the vision of the organization. The example of scorecards thus created can be found in our book, Total Alignment.
A scorecard that is produced through this process should ideally have five to seven KPIs and INXs with weights of importance. The purpose in keeping the numbers low is to focus each person on the vital few factors that have huge impact on the success of the organization following the Pareto principle. The jobholders close to the frontline would have responsibility for mainly KPIs and those at higher levels will have responsibility for mainly INXs.
Information
The information pillar is supported by an alignment software that connects to the data warehouse of the company and displays information needed by all jobholders on the performance of their scorecards as well as the scorecards of collaborators in their pyramid of responsibility. The software connects the individuals accountable for a KPI or an INX with their horizontal or vertical influencers and gives feedback to each jobholder on his or her contribution to turning vision into reality. The system that supports this pillar is TOPS – the One Page Software, a state-of-the-art proprietarysoftware that has grown in its capability throughout many implementations. Its key reports are three – The Focus Report, Feedback Report and Management Report.
The Focus Report is the report of the performance of the jobholder’s scorecard. It contains each of the KPIs or INXs along with the status of performance for the current month, and three goal levels – minimum, satisfactory, outstanding – that determine the extent of advance that has been made in performance. The Feedback Report lists the positive and negative exceptions from the Focus Report. The positive exceptions are those KPIs that have reached or exceeded the satisfactory level stated in the Focus Report. Negative exceptions are those KPIs that have performed worse than the minimum goal level. This report also provides information on how many periods in a row the exception has occurred and to how many upper levels it has escalated. The Management Report is an escalation report that displays all positive and negative exceptions up the line in the organizational hierarchy. It serves to inform a manager on what is taking place in his pyramid of responsibility down the layers of the organization. A simple, adjustable escalation scheme is embedded in the software that reports exceptions to levels above the jobholder depending on the number of consecutive positive or negative exceptions.
Beyond serving as the information provider, the TOPS software supports the fourth pillar of Total Alignment, Culture.
Culture
Companies that have experienced the implementation of the first three pillars described above have already noticed a significant culture change. Their workforce has appreciated the transparency of the process. They have been involved in articulating their company mission, vision and values and have taken ownership for them. They have had access to the framework for action in the alignment map. And above all, they have gained a laser-clear understanding of the relationship of their scorecard to the vision of the organization, the line of sight that is truly meaningful. Yet, the cultural advance associated with all this is just the beginning of a more profound cultural change through the fourth pillar, Culture.
There are a few principles that guide the culture of Total Alignment. Among them are two: the oneness of humankind and cooperation & reciprocity. * The first has implications for the way everyone in the organization views and treats others. It implies that the treatment of others is not stained by the lens of otherness, us and them, white collar and blue collar, managers and workers, old and young, bosses and subordinates, regular workers and temporary workers. All are equal and one, although each person has a different contribution to make based on levels of education, skills, etc. All contributions are valued, respected and their diversity is a true competitive advantage. The application of this principle stands in sharp contrast to the culture that exists in many organizations where the organizational hierarchy gives permission to managers to feel superior to those reporting to them and to feel obligated to continually issue orders and directives.
The second principle, cooperation & reciprocity, has the implication of turning self-interest into the interest of the organization in pursuit of its vision. There is an investment of time and energy in cooperation and reciprocity that comes with the sacrifice of self-interest. The application of this principle also stands in sharp contrast to the culture that exists in many organizations, where climbing to the top often follows the path of individual advancement and putting down rivals.
Bringing about the new culture of Total Alignment is not easy, especially when there are structures already in place in the organization that encourage the wrong habits developed through time. We believe you cannot build alignment upon the status quo. Some existing processes must change and be replaced with new ones.
One such structure is the performance appraisal system that involves managers meeting once or twice a year with their direct reports to evaluate them and to determine the objectives to be pursued for the coming year. Often employees reporting to different managers receive totally different objectives more aligned with the boss than with the vision and strategy of the organization. In Total Alignment, we have eliminated this practice. The scorecards already define the jobholders’ focus, and the evaluation of performance is transparent in the performance of scorecards. When Total Alignment is implemented, the traditional performance appraisal practice that feeds the ego of the manager can be counterproductive, with little value to the employer or the employee is replaced.
We have replaced this practice with what we call vertical review, a process that begins with one-on-one monthly or weekly meetings of a manager with his direct report, not for evaluation, but for assistance and empowerment. The meeting is followed by action and then reflection on action in the subsequent meeting. This practice also affords the opportunity of the two individuals to spend time sharing insights on the core values of the company and to consult on plans to improve competencies needed to excel. Other topics important to each person are also discussed.
The takeaway from a vertical review meeting for the collaborator is that he leaves the meeting with sharper focus on action plans to improve his competency and the performance of his scorecard than when he entered. He also leaves with learning gained through reflection and with higher motivation than when he entered the conversation. The takeaway for the manager is that he becomes aligned with the direct report in their common aim to advance the company, gains confidence that the collaborator has clarity on what he needs to succeed and feels more in control of what will take place in his area of responsibility. The systematic nature of vertical review allows him to increase his span of control by working with more collaborators.
Where Total Alignment is implemented, the performance appraisal system is not abruptly taken out. However, as the vertical review process is implemented and demonstrates its value, the necessity for performance appraisal diminishes in time and the practice discontinues naturally.
A second structure that we felt the need to eliminate is the staff meeting of a manager with direct reports to review results. It is often a downward focused meeting where the result of each area is presented. The meeting takes a considerable amount of time especially when there are many presenters. Besides the fact that much of what is presented by one person is irrelevant to the others, it feeds the feeling of superiority of the boss who sits in a position of judgement of the presenters. This type of meeting is not aligned with the principle of oneness discussed above. While it has the potential of supporting the principle of cooperation and reciprocity, usually this opportunity is not explored.
We have eliminated such downward focused meetings in Total Alignment and replaced them with an upward focused paradigm, the team reviews. In a team review we require the same group to focus on the performance scorecard of the manager instead of the scorecard of the direct reports. This is a shorter meeting, more productive, and future oriented. With this flipped paradigm change, the manager and collaborators become focused on improving performance. Each collaborator is equally invited to contribute to the improvement of the manager’s scorecard. This meeting unites the group in a common purpose. Here, again, we are not suggesting an abrupt action of elimination of the current result meetings, but a gradual phasing out of the practice as the new process of team review takes hold.
A space is created in the team review to reflect on the meaning of the core values of the organization and to assure alignment of everyone with the desired behaviors. Additionally, team reviews spend most of the time on performance of the scorecard of the manager. The team spends time thinking about how each indicator or initiative serves to advance the vision of the company, why its performance status has been above or below the satisfactory level, and how it can improve.
Prior to the meeting, the manager selects one KPI from his scorecard as the main topic of conversation and invites jobholders not reporting to him, with indispensable influence on the indicator. This brings the cross-functional influencers together with the entire natural team to the team review meeting. Together they apply in-depth problem-solving tools to arrive at a strategy to improve the performance of the KPI. They assign tasks required by the strategy along with deadlines assigned to appropriate individuals.
The execution of the action plan takes place after the meeting and throughout the month. When the same group comes together in a subsequent meeting, reflection on action and learning takes place and the action plan is modified as needed for another cycle.
Action plans are constructed at the lowest appropriate levels to improve the performance of a KPI. For those who have management influence on the KPI, their action plans become delta action plans in the sense that their effort is directed to the delta influence they exert on areas out of the control of the person who has the primary accountability for the KPI.
In summary, this fourth pillar, powered by the two interconnected management processes of team review and vertical review cascades throughout the organization, strengthens the culture change already initiated and ensures the quality and sustainability of alignment. Each of the conversations in team reviews and vertical reviews follow a unique methodology. A template for action planning accessible to all managers supports the action plans generated in these meetings.
Team reviews and vertical reviews are supported by the TOPS software on computers or mobile devices to obtain timely, relevant, and accurate information needed at any time. The software also facilitates the generation and distribution of meeting agendas, capturing of commitments for action with deadlines, and sending of reminders and notifications.
Conclusion
This note has covered the summary and thinking behind the interacting processes that lead to a state of total alignment in the organization. Where these processes have been fully implemented, the vision of the company has unfolded and gradually turned into reality, and the results show for themselves. Often vision is achieved sooner than expected and the results are obtained beyond the outstanding levels. The results tend to be both tangible and intangible, tangible in the top line and bottom line of the company financials, and intangible in the cultural environment affecting the quality of life of the workforce. There is no single leader who takes the company on a journey to the desired future. There are many acting as one.
The main ideas discussed in this note are the following:
- The paper is not about how to grow your company or maximize profits. It is about creating a state of alignment where many act as one, with the outcome being unity and progress.
- Mission, Vision, and Values are the most important assets of the organization and must be at the center of everything.
- The Alignment Map serves as the framework for action for the organization.
- The structure of the alignment map consists of mission-vision-values at its center, the KPIs that measure the vision on its left side and strategies that carry the company toward vision on its right side.
- Devising strategy must not violate the core values. It must avoid practices such as price wars that affect competitors, false advertising, taking advantage of employees by paying them less than their contribution is worth, damaging the environment, etc.
- Vying with rivals is a good thing if it encourages the company and its competitor to both excel in creativity and excellence thus contributing to the betterment of the world.
- Accountability for all jobholders emerges from the alignment map. Each KPI and Strategic initiative is assigned to one individual as the main person responsible as well as to others who have indispensable influence on the KPI or strategic initiative.
- The Total Alignment concept of accountability encourages cross-functional collaboration and eliminates silos.
- Individual Scorecards are created through a top-down assignment using the alignment map as well as bottom-up complement to add the main measurable responsibility of the job.
- Goals for each KPI and strategic initiative are assigned and listed in the individual scorecard.
- The software TOPS links with the company data warehouse and displays the performance status of each KPI or strategic initiative.
- Twin management processes of team review and vertical review serve to boost performance, sustain the state of alignment, and create knowledge through experience.
- Vertical review is a one-on-one process that begins with a meeting followed by action and then reflection in a subsequent meeting. The learning model of consultation-action-reflection on action is embedded in this process.
- The vertical review process also focuses on the necessity of aligning with values and development of the competency of the collaborator.
- Team review is a team process where the natural team aims to improve the scorecard of the team leader. It begins with a meeting followed by action and then reflection in a subsequent meeting. The learning model of consultation-action-reflection on action is embedded in this process also.
- Team reviews and vertical reviews are cascaded at all the levels beginning with the CEO down to the supervisor levels in organizations. They sustain alignment through time, both horizontally and vertically.
* [Bahá’í Writings]
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