Porter Novelli Case Study

CHAPTER 12

PORTER NOVELLI

GREG WALDRON

Applying the Drotter “results-based” Leadership Pipeline approach to create a performance management system in a professional service firm.

• Introduction

• Business Diagnosis and Assessment

• Feedback

• Program Design Considerations

• Program Implementation

• Design Considerations

• Chosen Approach, Format Development, and Introduction

• Performance Management System Development

• Tailored Leadership Pipeline Development

• Evaluation

• Business Results

• Employee Climate Survey Results

• Turnover Results

• Anecdotal Evidence

INTRODUCTION

The Drotter results-based approach is tailored to a professional services firm structure and applied in the development of a performance management system aligned with the business’s strategy. Drotter’s Leadership Pipeline approach is implemented, with the full performance definitions for each leadership level in the tailored pipeline becoming the basis for a new organization-wide performance management application. The Drotter full performance definitions subsequently become the “source code” for selection, talent management, and training planning applications. The focus of this paper is the first application, performance management.

Business Diagnosis and Assessment

In 2004, Porter Novelli, a leading global marketing communications firm, undertook a fundamental strategic assessment and visioning process to guide it through the next five years. The firm’s CEO, president, and chief strategy officer led this process. The vision focused on a new approach to client account planning, a more client-centric structure, and a greater emphasis on operating interdependence between the globally dispersed offices in the service of multinational clients. It was felt that these three initiatives would dramatically increase the firm’s capacity to win and grow large, complex, and geographically dispersed client accounts—the firm’s strategic market target.

The senior management group identified the need to upgrade and align human resources management processes to successfully communicate and implement the new business strategy. The firm proceeded to hire a chief talent officer (CTO) to assist in the strategy implementation effort by designing and installing a more systematic, business-focused human resources management process.

In the CTO’s opinion, the vision implementation challenge centered on creating the highest possible level of employee engagement with the vision in the short term—by providing people throughout the firm with a clear, specific understanding of what the business strategy meant for them.

His metaphor for engagement was specifying the “four entitlements of all employees.” The CTO’s experience with corporate change efforts had led him to the conclusion that specific answers to four fundamental questions were a reasonable baseline expectation for every employee, regardless of level or function:

1. What specifically do you expect of me?

2. How will you define success (and measure me)?

3. What’s in it for me if I deliver the results you expect?

4. Will you provide me the resources I need/eliminate the barriers I face to achieve these results?

Individual role clarity and clear performance expectations are absolute requirements for these questions to be addressed. It was clear that the firm’s current approaches, although based on current practice and invested with significant effort, were not meeting these requirements.

The CTO had previously become familiar with Stephen Drotter’s Leadership Pipeline work, both as a client and as a consultant working with Drotter Human Resources. Drotter’s primary focus has been executive succession and the related processes: executive assessment; organization and job design; succession planning; and tailored individual development plans. However, his core concepts add significant value in broader application, particularly for performance management, selection, and development planning at all levels. The emphasis on specific results required, as well as the positioning of management and leadership results as measurable business outcomes, aligned well with the needs of the firm.

Performance management practice was spotty at best, as the firm’s current system—based on generic competencies—was complex and process-heavy. A leadership competency model upon which to base the system was missing. Professional development was considered important, and a full curriculum of professional training was offered. In the absence of a common “source code,” the various HR processes did not align well, and therefore opportunities for mutual reinforcement were being missed.

Clearly, there were opportunities for human resources to make a business impact through better practice application.

Management Interviews Discussions with the CEO, president, chief strategy officer, and other senior managers both before and after the CTO commenced employment confirmed the need for a set of management processes that strongly reinforced individual accountability as well as the increasingly interconnected nature of the company’s operations. Senior managers in all offices around the world would be asked to place global priorities over individual office considerations as multi-office and multi-region client accounts became the strategic imperative for growth.

The “Vision” Process “Vision 2004” was a combined business planning and senior management team-building exercise that involved detailed reviews of internal and competitive analysis, discussion of strategic alternatives, and development of the new client account planning approach for the company. A small internal team facilitated the process, which involved a global management meeting outside New York City, as well as a number of regional follow-up sessions. It provided the starting point for the strategy implementation effort. There were several significant outputs:

• Agreement on a new core client account planning perspective—that is, a new method for assessing a client’s business situation and challenges and for developing solutions for the client;

• Management training in this new methodology;

• Confirmation of an emphasis on acquiring and growing large, complex client relationships;

• Commitment to a closely coordinated “interdependent” operating approach across the global network; and

• A project management structure to move these initiatives forward.

This set the stage for the communication and implementation effort. The chief talent officer joined the organization shortly after the first implementation projects had begun and moved quickly to review and recast the talent management portion of the overall plan.

Business Results A key assumption underlying the visioning logic was robust business growth over the strategic plan period. The company was solidly profitable, and the business was growing. The senior management group was confident that the enhanced focus on larger, more complex client relationships would take revenue and margin growth to new, sustainable levels. The bar was set higher.

Climate Measurement The company administers a biannual staff climate survey that measures operating culture along thirteen dimensions: teamwork; organizational culture; strategic planning; leadership; long-term focus; stake in the outcome; quality; client satisfaction; learning orientation; empowerment; communication; morale and loyalty; and survey results implementation. Scores in 2004 were on track with parent organization averages, but management wished to improve these scores on both a trend and relative basis. This would be an important metric for the effectiveness of the leadership and human resource management interventions being developed.

Feedback

As a member of the senior leadership team, the chief talent officer had abundant access to the other members of the group—the CEO, president, and the chief financial officer—to discuss his ongoing findings and developing recommendations. After the first ninety days, he had effectively presented his findings and made overall recommendations regarding priority areas to address and an agenda for the HR and knowledge development and learning functions.

The group’s frequent and informal open discussion format facilitated processing of the feedback and gaining consensus on how to move forward. The feedback and recommendations were

• The business strategy was timely and sound, but it required better aligned human resources processes to successfully implement.

• Important requirements of the business strategy—higher levels of sustained collaboration between senior managers across offices and geographies; a greater emphasis on leadership and management work; more explicit definition of role expectations and required performance at all levels; and stronger link between individual performance and reward outcomes—would be best achieved through revised role and performance definitions.

• The revised role and performance definitions could be best defined and delivered through an application of the Leadership Pipeline approach to work definition and performance standards development.

• Pipeline-based definitions of senior roles would more explicitly define management and leadership accountabilities for reinforcement with coaching, performance management, and revised incentive compensation plans. This would be effectively the first application of the Pipeline approach.

• The second application of the Pipeline approach would be a complete revision of the firm’s performance management system. This was required to buttress reinforcement of individual accountability as well as support the updated performance-based pay and reward programs to be installed.

• The third Pipeline application would be selection practice, as an opportunity would be created with the new work definitions to introduce a more structured and consistent interviewing process.

• Another opportunity for Pipeline application would be to better organize and align the substantial existing training offerings with the company’s career structure, as well as guide the prioritization of investments in new and revised offerings.

The general findings and recommendations were also communicated and discussed with the senior manager group over a number of regularly scheduled conference calls. There was broad acceptance of the conclusions and proposed direction, so program work was commenced.

Program Design Considerations

The appeal of the Pipeline model as the foundation for the new human resources systems was based on several opinions shaped by the chief talent officer’s experience:

• Drotter’s thinking takes us first to work, role, and organization analysis before classic human resource applications such as assessment/performance management, selection, development planning, and training are considered—moving from the “supply side” to the “demand side” for talent. People are ultimately treated better and more engaged if these role definition and organization design issues are addressed first. The approach constituted an ideal basis for specifying and communicating the new personal accountabilities required by the new strategy.

• The Pipeline model does not rely on competencies, but rather required work results by level for its core “source code.” These required work results are actually the first element of a classic competency model development; the key notion is that focus is maintained on actual work results rather than abstracting one level to the associated knowledge, skills, and personal values/attributes. The CTO felt this was fundamentally sounder for specific role and full performance definition purposes. Performance management and selection applications would be built on foundation of work results definitions.

• The model focuses on the vertical distribution of work in the organization. Vertical organization and process considerations have frequently been overlooked as organizations have “flattened.” The process of de-layering actually places a greater requirement on thoughtful vertical task distribution, communication, and coordination across the enterprise. While recent organization design thinking has been around selecting the optimal horizontal structure (organizing by product, customer set, geography, process, function, or matrix), vertical considerations have been overlooked.

• Drotter requires the same explicit definitions of management and leadership results by level as financial and customer results, making these accountabilities far more specific, measurable, and therefore understandable to employees. The down-to-earth, application-based approach demystifies leadership in particular and facilitates the introduction of simple models to describe and explain both activities.

• The core Leadership Pipeline concept of a job is well suited to the fluid, fast-changing business environment of a professional services firm. A job is considered a collection of results to be delivered, many of which are shared with other employees and therefore requiring cooperation and collaboration to achieve. Required results change as business conditions change, giving the model great dynamism and flexibility. It is a particularly relevant approach for reinforcing an internal collaboration-based strategy.

• Core Leadership Pipeline level, performance dimension, and full performance definitions can be used as the core work architecture—the “source code”—upon which all talent management and development applications are based. As a result of this common basis, the various programs would better align and mutually reinforce each other.

These last two points are contrary to the belief held by some that the Leadership Pipeline model is inflexible and geared primarily to large industrial company applications. The thinking has universal applicability, and the model is actually quite flexible. Frustration has resulted in some cases in which practitioners have attempted to literally apply the generic large company examples in The Leadership Pipeline (Charan, Drotter, & Noel, 2001). Drotter has actually been quite explicit in requiring that tailored pipeline level, performance dimension, and full performance definitions be developed for every company application. This development involves structured work content interviewing, analysis, and comparison with a large database of work results definitions across scores of companies.

Therefore, the chief talent officer committed to building a tailored leadership pipeline and installing it by creating results-based role definitions, performance management process, selection and training structure based on its “source code.”

PROGRAM IMPLEMENTATION

Tailored leadership pipelines are based on the specific work requirements of the company. Typically, an implementation project plan includes the creation of a trained team of human resource professionals and line managers who conduct structured work content interviews with a sample of full performing employees at different levels across all functions in the organization.

Tailored Leadership Pipeline Development

The generic work content interview format must be reviewed and customized as needed to fit the individual company’s operating culture and language—the goal being to make the questions as understandable and familiar as possible to employees unaccustomed to this type of information-gathering method. The customized work interview format was tested with several staff members before being used for project team training and actual information gathering. Several small language adjustments were recommended by the test subjects and subsequently implemented.

A core project team of two senior human resource managers and a senior line operating manager was trained in conducting structured work interviews and recording and analyzing the input data. This training took the form of a session explaining the interview format, question by question, and covering important interviewing techniques. The workshop was followed by two two-on-one interviews per team member with the CTO to practice interviewing and data recording skills and to receive coaching.

As the firm’s history was the combination of acquired offices and companies, it was felt important to get a work interview sampling that ensured geography and legacy firm representation as well as level and work function coverage. This resulted in the completion of seventy-five interviews in ten of the firm’s twenty-three offices across North America and Europe, with staff members ranging from entry-level professionals and administrative support people to senior partners. Every major legacy company location was covered.

An interesting and quite positive side-effect of the work interview process was the new insight gained by a number of staff members concerning the purpose of their work. When facilitated to first describe the actual results they were responsible for delivering, rather than work activities, tasks, or required competencies, interviewees gained a clearer understanding of their roles’ key business purpose. For a number of managers, this produced not only a better understanding of their own work requirements, but also a clearer basis for determining account team capacity requirements by level.

Upon the completion of the interviews, the resulting data was analyzed and integrated by the project in a series of meetings facilitated by the CTO. The CTO then developed a draft work architecture for the firm, specifying both leadership levels and company-specific contribution dimensions that aligned with the business strategy and operating process. Full performance standards were created for each contribution dimension at each leadership level. The first determination was that the tailored leadership pipeline structure for the firm was constituted of five leadership levels, shown in Figure 12.1.

This structure appears to be typical of professional services firms, with the manager of managers level populated by the critically important client account directors who manage the firm’s revenue-producing activities on an ongoing basis. The business manager level incorporates functional managers as well as classic P&L owners, and there are no true group managers in what is essentially a one-business model.

This structure works well in capturing both the client service and the support functions of professional services businesses. The client-facing function is supported by the specialty and support functions (research; planning; marketing; finance; human resources; information technology), and this simple two-function structure is represented by this architecture.

The work content analysis involved in the development of the essential pipeline “skeleton” provides the analyst with many rich opportunities for organizational diagnosis and enhancement. The first such opportunity occurred for the CTO when populating the new leadership levels with job titles. An operating complication for the various offices when attempting to create cross-office, cross-geography client teams was understanding and integrating the various title structures that existed in each country and in different legacy firm offices in the United States. The mapping of titles onto the enterprise-wide leadership layer architecture created a title rationalization grid that was distributed to all offices providing a global organization translation for team managers, as shown in Table 12.1.