White Paper
Executing Strategy: The Critical Role of Culture
Part II: Creating a Performance-Based Culture
James Creelman, Jade Evans & Sebastian
Rubens y Rojo
In Part One of this two-part white paper, we
explained how to build a strategy-aligned
organisation and the importance of leadership
and corporate values in making that happen.
In Part Two of the white paper we outline the
key ingredients of a performance-based culture and the critical role of employee engagement and sense of meaning. A case study on
Palladium client du demonstrates good practice.
Copyright © 2015 Palladium
The Elephant in the Room
Organisational culture is the Elephant in the room. Big, powerful
and capable of trampling under its feet anything that it doesn’t
like, it is rarely addressed because despite its size it is virtually
invisible. The extent of its influence, however, is not: untamed,
dysfunctional and unethical behaviour, bickering between coworkers, poor customer service and employee disengagement
from the goals of the organisation are plain for all to see. By
making the Elephant visible, organisations have opportunities to
shape behaviours and attitudes that support the strategic and
operational aims of the enterprise. The mighty Elephant will be
tamed.
One measure of whether the Elephant is tamed and encouraging the appropriate behaviours required to implement strategy
and deliver operationally is “employee engagement.” Simply
put, do employees enjoy working
for the organisation and are they
“Engaged”
willing to do all that they can to
Employees
ensure its success?
13%
24%
“Actively Disengaged”
Employees
Employee Engagement
Just 13% of employees are
engaged at work, according to
the market research giant Gallup’s
State of the Global Workforce study
of employees from 142 countries.1 The Gallup study describes
these “engaged” employees as
involved in, enthusiastic about
“Not Engaged” and committed to their work.
63%
Employees
However, the bulk of employees worldwide (63%) are “not
engaged,” meaning that they lack motivation and are basically
sleepwalking through their workday, putting time — but not
energy or passion — into their work. Even more alarming, 24%
of employees in this study are “actively disengaged,” indicating
they are unhappy and unproductive at work. Indeed, according to Gallup these employees aren’t just unhappy at work
— they’re busy acting out their unhappiness. Every day, they
undermine what their few engaged coworkers accomplish. They
become the invisible Elephant that tramples anything positive
that might be in its way. Worryingly, actively disengaged workers
outnumber engaged employees by two to one (Figure 1).
Engagement and Financial Success
Engagement affects the bottom line. Compared to bottomquartile performers, Gallup finds that top quartile companies
achieved 21% higher productivity and 22% higher profitability,
as well as a host of other benefits, such as 37% lower absenteeism. Consider the cost of “active disengagement”: Gallup
estimates, for example, that for the USA alone, active disengagement costs between $450 billion and $550 billion per year.
Imbuing Engagement
Hiring and developing great managers and building up and
leveraging the strengths of every employee are the two keys to
employee engagement, according to Gallup. Great managers
work to ensure that employees have enough latitude in how
they do their jobs to develop a sense of ownership over and
pride in their work, which at Palladium we call a sense of meaning. The best managers do this by clearly defining the outcomes
for which employees are responsible, then letting them find their
own route toward those results.
Figure 1: Employee engagement levels, 2012, Gallup Inc.
1The State of the Global Workplace: Employee Engagement Insights for Business Leaders Worldwide, Gallup Inc 2013
2 | Executing Strategy: The Critical Role of Culture
Copyright © 2015 Palladium
A Performance-Based Culture
Sense of Meaning
It can be reasonably argued that great managers releasing the
energy and capabilities of staff is the essence of a performancebased culture. A performance-based culture is one in which employees are committed and enabled to finding ways to do things
better and find new solutions for customers (and note that,
according to Gallup, organisations with engaged employees and
engaged customers experience a 240% boost in performancerelated business outcomes). It is a culture in which day-to-day
performance improvement is expected, rewarded and hardwired
to the strategic and operational goals of the organisation. It is
a culture in which performance standards and behaviours are
set by the top and where employees are allowed to flourish and
find meaning in their work. Whichever way you look at it, culture
is about people, and in any setting, be it at familial, social or
organisational, the culture is more successful when the people
within the specified group feel a positive connection to that
group and when the individual feels that what they do personally
and with others has a substantive impact on what the group is
aiming to achieve. In short, finding a sense of meaning in what
they do enriches both the employee and the group.
Palladium’s own ongoing multi-year research supports the
assertion that sense of meaning is a critical aspect of creating
a strategy-aligned and performance-based culture. Our proprietary Leadership for the Execution of Strategy Framework,
in which culture and sense of meaning play a prominent role,
is explained in Palladium’s 2014 Global State of Strategy and
Leadership Survey Report.2 In this paper we emphasize the critical importance of culture and of leaders being able to engage
employees (and the financial and other benefits of being able to
do so). Parallel and aligned research has focused on “sense of
meaning”: that is, the degree to which employees believe that
they have a positive role to play in delivering organisational and
team outcomes.
Global Research
Our research (which included a global research project with the
Australian Research Council, Monash University and the University of Queensland, as well as the cited survey) focused on how
sense of meaning can affect an organisation’s ability to successfully execute their strategy and particularly its influence on how
organisations perceive the barriers they face in executing. We
found that sense of meaning directly impacts not only organisational performance but also, importantly, the perception of the
manageability of these barriers and therefore the success of the
strategy itself.
22014 Global State of Leadership and Strategy Report, James Creelman, Jade
Evans, Caroline Lamaison, Matt Tice, the Palladium Group, 2014
Executing Strategy: The Critical Role of Culture | 3
Copyright © 2015 Palladium
Building the Foundations
The research showed that developing a positive sense of meaning in an organisation is much more complex than empowering
employees and fulfilling their immediate expectations. There
must first be a foundation on which to build. In order to foster a
positive sense of meaning, employees need to understand the
vision for the organisation: Where is it going? What does it look like?
Then they need to understand how the organisation is going
to get there: What is the strategy? They then need to understand
how they contribute to the strategy and what their role is within
the organisation’s success. Last, but by no means least, they
need to understand how all of this affects them personally: How
will it help them fulfill their personal and team aspirations? Once this
foundation is in place, positive sense of meaning can follow.
Employees who are experiencing a real sense of meaning feel
they are key players in the execution of strategy.
Meaning can be broadly defined into three key areas: workplace
meaning, team meaning and personal meaning.
•
Workplace meaning: The culture of the organisation and its
link to strategy
Our research shows that organisations that provide a clear
strategy, strengthened by active support from the C-suite,
are 6.1 times more likely to have a high sense of meaning
than organisations without a clear strategy. However, these
organisations are few and far between. The vast majority
of organisations significantly underperform in this key area,
with leaders failing to provide a consistent and meaningful
4 | Executing Strategy: The Critical Role of Culture
Copyright © 2015 Palladium
workplace. More than 75% of organisations reported that
the strategies and directions of their organisation have not
been stable and consistent over time; nearly four out of five
do not believe that their managers are passionate at work;
and 77% confess that they are not granted opportunities to
develop unique skills and attributes. In organisations with
high sense of meaning these figures drop dramatically to
53%, 31% and 35% respectively. This instability and lack
of engagement leads to employees feeling disenfranchised
within their organisations.
•
Team Meaning: How the team interacts with the organisation,
other teams and the individual, and how the enterprise engages
team members in the execution of the strategy
An overwhelming majority of organisations that we studied
are not satisfied with the level of cooperation among their
teams. 87% reported that people within their organisation
fail to cooperate, support and care for one another. Moreover, almost three out of four experience feelings of anxiety
or distress that do not subside rapidly after work problems
or disputes are resolved. This is alarming in many ways but
particularly in light of the fact that, according to Palladium’s
research, cooperative teams make organisations 3.7 times
more likely to be among the top performers of their industry.
It also confirms Gallup’s finding that actively disengaged
employees experience high levels of anger and anxiety
while completing their daily work. Anger and anxiety are the
staple diet of the invisible Elephant.
•
Personal Meaning: The engagement between the organisation
and the individual’s vision for their own future
Just as Gallup finds a high level of disengaged employees
who simply go through the motions each day, Palladium
finds that the vast majority of executives show a palpable
lack of connection to or even interest in their work. In fact,
a startling 81% are not content in their role, nor do they feel
that their work enables them to fulfill their aspirations and
ambitions. The number of executives who do not feel their
work enables them to fulfill their aspirations and ambitions
drops by a massive 33% in organisations that are outperforming their competitors.
The research indicates that fears about the job market
rather than a genuine sense of meaning keep many executives in their current position, possibly driven by the fact
three quarters of executives we questioned believe there is
little demand for jobs in their industry.
In organisations where the executives are actively disengaged, it is virtually impossible to foster a strong sense of
meaning. Leadership must live and drive the desired culture
in the organisation.
Lack of Trust
In a performance-based culture, employees want to get things
done and the structure and decision rights of the organisation
ensure that things can get done. Unfortunately, such a situation
is very much the exception rather than the rule. Only 32% of
survey respondents state that employees are granted autonomy
over how they should fulfill their goals. Just one in three respondents believe that their leaders prefer employees who challenge them. This startling lack of trust that leaders display has
a significant impact on morale and performance. Our research
shows those organisations that do value “unconventional” approaches in their teams are 3.9 times more likely to outperform
their competitors in terms of organisational performance.
Opportunities
While this research may seem to paint a bleak picture of sense
of meaning within organisations around the globe and, by
implication, of the scarcity of performance-based cultures (only
16% of organisations believe they are genuinely able to sustain
a positive culture), it also provides an exciting opportunity for organisations. In this highly volatile business environment, leaders
need to instill a culture that is performance-based, with people
at their sides and on their side who are dynamic, responsive,
innovative and committed to organisational success. Leaders
must find and enable people who are prepared to put in the
all-important discretionary effort and find a sense of meaning in
their work.
Executing Strategy: The Critical Role of Culture | 5
Copyright © 2015 Palladium
Case Study: du
Founded in 2005, du is a UAE-based integrated telecommunications provider. By this time, the UAE telecommunications
market had a very high penetration rate of approximately 130%
(on average, in the UAE, each person had more than one mobile
device). To establish and maintain a viable position in what
was a very competitive marketplace, du adopted the Balanced
Scorecard to support its focus on strategy, with the aim of creating a performance-based organisation and culture.
The Balanced Scorecard was used to establish two key enablers of future progress: the commitment of the leadership
team and the creation of a best-in-class reward system to align
the behavior of the workforce with the strategy. Du’s Strategy
Map and scorecard reflect the importance of employee engagement.
In 2006, the strategy was to launch mobile services with nationwide coverage, and du attracted bright talent from over 70
nationalities to launch the operations. To ensure that all the employees had a common understanding of company objectives,
the CEO organised town hall meetings with all the employees
on a quarterly basis. The CEO used the Balanced Scorecard to
communicate the company’s strategic objectives and progress
against these objectives.
Since the time of the company’s incorporation, du has cultivated a culture of rewarding performance by linking employees’
variable pay to performance as per the Balanced Scorecard,
thereby ensuring focus on achieving strategic objectives. The
CEO believed that strong leadership commitment and a robust
rewarding system are ingredients to effective strategy execution.
As a best practice, Performance-Based Variable Pay (PBVP) is
the foundation of du’s employee performance management and
6 | Executing Strategy: The Critical Role of Culture
Copyright © 2015 Palladium
compensation. The variable pay scheme is designed to encourage and motivate higher performance by linking compensation
to performance. The higher the position in the company, the
higher percentage of the PBVP is linked to company performance. This encourages the executive management to ensure
that the company’s strategic objectives are met through a successful strategy execution process.
To increase individual alignment, each employee is able to align
his or her individual objectives with the company’s strategic
themes and strategic objectives. This feature allows everyone in
the company to better understand how they contribute towards
corporate objectives and strengthen accountability.
Du also has other reward schemes. For example, a Brand Value
Award is presented to employees who display the company’s
values — Honest, Confident, Friendly and Surprising — in the
most profound manner. The nominees for this award are chosen
by their peers and the employees with highest number of nominations are presented this award at the CEO event.
So are du employees engaged, and has this driven superior
financial performance? Du is a global top quartile performer according to Gallup’s employee engagement survey, and engagement results are aligned to a manager’s bonus system. Since
2007 the company has witnessed a significant revenue growth
from AED 1.5 billion to AED 8.8 billion in 2011, with a compound annual growth rate of 55% in five years of operations.
The company also experienced significant growth in EBITDA in
2010 and 2011, with increases of 90% and 45%, respectively.
Finally, average Revenue per User (ARPU) has increased from
AED 97 in 2010 to AED 105 in 2011. Du was inducted into the
Palladium Hall of Fame for Executing Strategy® in 2012.
Human Capital Development to
Execute Strategy
In recognition of the importance of culture and employee
engagement, Palladium, with the thought leadership of Dr.
David Norton, has developed a “Human Capital Development
to Execute Strategy” framework. This framework is based on
the pillars of Engagement (employees understanding the strategy), Alignment (personal goals linked to the strategy), Readiness
(strategic job families have the necessary skills and competencies), and Culture (the organisation adopts the set of values
required by the strategy). Supported by compelling research by
Palladium and others, this program plots the causal relationship
between these four human capital pillars and ultimate financial
or mission success (Figure 2).
The framework emphasises the importance of leadership development and of employees understanding the strategy. Organisations with strong performance-based cultures have leaders
who understand how to execute strategy. They ensure that their
employees understand the vision for the organisation and their
personal role in delivering that vision and therefore the strategy’s
success. These organisations are reaping the rewards in organisational performance and strategy execution. These organisations have, in the words of change author Dr. James Belasco,
“taught the Elephant how to dance.”3
Financial
Perspective
Financial/Mission
Objectives
Customer
Perspective
Customer Objectives
Internal Process
Perspective
Strategic
Measures
Human Capital
Development
Programs
Internal Processes
Operations | Customer Management | Innovation | Social & Regulatory
Engagement
Alignment
Readiness
Culture
% of employees
who understand
the strategy
% of employees
with personal goals
linked to strategy
% of Strategic Job
Families with
necessary
competence in
place
% of strategic
change agenda
accomplished
Strategic Job
Families
Strategic
Communications
Personal Goals
Competence
Testing &
Certification
Strategic
Change Agenda
Leadership
Development
Incentive
Compensation
Figure 2: The causal relationship between the four human capital pillars and ultimate financial or mission success.
3Teaching The Elephant To Dance: Empowering Change in Your Organization,
James Belasco, Crown Publishers, 1990.
Executing Strategy: The Critical Role of Culture | 7
Copyright © 2015 Palladium
About the Authors
James Creelman is the Director of Research for Palladium.
Based in Dubai, James has more than 20 years of experience
as a consultant/trainer in enterprise performance management. James is the author or co-author of 24 books and major
reports, including the books Doing More with Less: Measuring,
Analyzing, and Improving Performance in the Government and Not-ForProfit Sector (2014), Risk-Based Performance Management: Integrating Strategy and Risk Management (2013) and Creating a Balanced
Scorecard for a Financial Services Organisation (2011).
Jade Evans is an engagement manager for Palladium’s strategy execution consulting arm. In over a decade of experience
across public and private sectors in Australia, Asia Pacific, the
Middle East and the US, Jade has developed and managed
more than 1,000 comprehensive leadership consulting projects,
combining strategic thinking with practicality, innovation and
leadership to deliver pragmatic solutions to complex issues.
Jade is also a recognized expert in leadership development, organisational change and organisational culture and is a member
of the Palladium Leadership and Change Management Practice.
8 | Executing Strategy: The Critical Role of Culture
Copyright © 2015 Palladium
Sebastian Rubens y Rojo is a member of Palladium’s strategy
execution consulting arm. Based in Dubai but born and raised
in Argentina, Sebastian recently joined Palladium after five years
in the Abu Dhabi government, initially working at the Executive
Council’s PMO and then heading the Strategic Planning and
Special Projects division at the Abu Dhabi Education Council,
where he also led an HR transformation project as an Advisor
to the Director General. His work experience includes human
capital and strategy consulting, teaching and clinical psychology.
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