HHS 497 Health & Human Services WK4-D2

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CHAPTER 5

Reshaping Organizations Through Culture and Strategy

Kathleen O’Brien, Ellen Katz, Shannon Starkey-Taylor, Timothy Johnstone, Richard Cohen, Tine Hansen-Turton, Anne Callan,

Nancy Bradberry, and Richard Benoit

CULTURE EATS STRATEGY FOR LUNCH

This chapter gives the reader an insight into how organizations use different approaches to change their cultures to successfully deploy strategy. Included in here are perspectives from Great Circle, The Children’s Home of Cincinnati, Hopelink, and Public Health Management Corporation.

Authors of this chapter were asked to consider the phrase “culture eats strategy for lunch,” which is widely attributed to Dr. Peter Drucker, often referred to as the father of modern management. This phrase is a popu- lar topic among business leaders today and is the subject of various arti- cles, many blog posts and comments, and a forthcoming book, Culture Eats Strategy for Lunch by Curt W. Coffman, coauthor of First, Break All the Rules, and leadership expert Dr. Kathleen Sorenson.

Workplace Culture: People and Relationships

Workplace culture is the collective behavior of people within an organization, including individual and collective values, norms, systems, processes, sym- bols, and habits. It reinforces the organization’s mission, vision, goals—its

Making Strategy Count in the Health and Human Services Sector : Lessons Learned from 20 Organizations and Chief Strategy Officers, edited by Tine, MGA, JD, FCPP, FAAN Hansen-Turton, and Michael Mortell, Springer Publishing Company, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=1572950. Created from ashford-ebooks on 2018-11-20 05:32:33.

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72 Making strategy Count in the health and huMan serviCes seCtor

overall strategy. The culture influences the brand image of an organization. Although each workplace culture is unique, culture is based on the following elements:

• How the work gets done • How decisions are made • Communication within, between, and among work units

In First, Break all the Rules, Buckingham and Coffman differentiate between two types of office culture: the “big C,” referring to mission, vision, core values, and strategy, and the “little c,” the day-to-day work unit, team, or department. They suggest that a strong predictor for growing, high-performing organiza- tions is the alignment of these two cultures (Buckingham & Coffman, 1999).

Cultures within organizations evolve and change over time. The behav- iors of the senior leadership, primarily the CEO, largely shape the culture of an organization. Changing the culture of an organization must be a con- scious decision by the senior leadership, demonstrated by changing and modeling desired behavior in words and actions.

Strategy: Articulating the Big Picture Direction

Strategy involves determining the direction of the organization by defin- ing the mission or purpose, the vision or aspiration, and the goal measures for achievement. It is an ongoing, iterative process that evaluates the core business model of an organization and includes assessing a changing envi- ronment or industry, outlining core competencies, leveraging competitive advantages, and responding to social, economic, and political forces that determine long-term performance mission impact.

The organization’s leadership is responsible for clearly articulating the vision and direction, which involves identifying strategies for responding to industry changes, defining accountability for results, clarifying work pro- cesses and systems, allocating resources for priorities, communicating within and among the workforce, and decision-making within the organization. The ways that work gets done and decisions are made and communicated par- allel how culture is created, thus reinforcing that culture and strategy are intertwined. In effective, high-performing organizations, strategy drives the execution of the operational day-to-day activities measuring performance targets that link strategies to outcomes and results. Decisions across the organization are focused on strategy implementation, and resources are allo- cated per defined strategic direction and initiatives.

Culture Eats Strategy; When There Is a Disconnect

Business experts, including Michael Porter of Harvard University, suggest that if there is a conflict or misalignment between culture and strategy, cul- ture will win every time. A frequently cited example of misalignment is when

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Chapter 5 reshaPing organizations through Culture and strategy 73

an organization’s strategy is to aspire to growth through innovation and crea- tivity, yet the culture is highly autocratic and hierarchical and bureaucratic systems require that all decision-making be controlled from the top—the CEO and senior leadership. Hierarchical management requires that sugges- tions or decisions travel up and then down the chain of command, taking time and reducing an organization’s agility. A stall in strategy performance may indicate a disconnect or misalignment between the culture and the strat- egy. It may be time for a “culture assessment,” including evaluations of sys- tems, procedures, attitudes, behaviors, and incentive rewards. Senior leaders may not have a solid understanding of the real culture and may be out of touch with the existing cultural norms and behaviors of the organization’s workforce. Even though there may be stated core values, frequently those val- ues may be vague and meaningless to the entire workforce. Values are based on a person’s biases, beliefs, personal experience, and perceptions, and no two people experience an organization’s culture the same way. Thus it falls on the shoulders of the CEO and senior-level leadership to embrace and demonstrate any expected and desired behaviors. A large part of changing a culture to ensure greater alignment with strategy starts with building trust and effec- tive two-way communication and walking the talk of the stated core values— that is, linking them with the direction and strategies of the organization.

Research over the years has clearly demonstrated that people frequently depart their workplaces because of the poor or negative quality of relation- ships at work, particularly those with their managers or supervisors. People leave organizations by (1) being terminated or dismissed, (2) departing vol- untarily, or (3) remaining with the organization but disengaging from the cul- ture, working with less motivation and inspiration to accomplish the mission strategies. All three groups can negatively affect the culture. Buckingham and Coffman suggest that the “little c” cultures, the work unit relationships between managers and employees, are critical catalysts for high performance (1999). Jim Collins, author of Good to Great, exemplifies the tension between culture and strategy in his famous “bus” metaphor: Get the right people on the bus and the wrong people off the bus, then decide where to go.

Even though there is no “right” culture, whether there’s top-down, hier- archical senior leadership, cross-department collaboration, or some balanced combination, culture drives performance. Culture is difficult to measure and cannot be purchased, imported, or demanded. Changing the culture within an organization is a slow, long-term process and will not happen in a month, or 6 months, or a year. Change can be even more troubling, difficult, and slow if there is a long history of silos with little integration or inter- departmental collaboration on short- or long-term strategies and directions. Change doesn’t happen just because top leadership declares that things have changed. Change is about developing good processes and procedures and solid, effective communication with feedback loops from the workforce, cus- tomers/clients, and critical stakeholders.

Notably, there are some situations in which a culture change may occur more quickly or in which the current state is disrupted—for example, during

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74 Making strategy Count in the health and huMan serviCes seCtor

a CEO transition, whether through an abrupt dismissal or through the hiring of someone from outside the organization or industry. A new CEO with a clear directive from the board of directors to make significant changes should develop specific strategies to change the culture or direction of the organiza- tion. There is less likelihood of culture change when there is a long-term CEO succession plan, including an internal candidate, a clear strategic direction, and plan priorities and effective work processes already in place.

Another situation likely to result in culture disruption is after the merger of two organizations. Although on paper and in the decision-making process the joining together may make a lot of sense and appear to be a win–win, there can be a natural divide based on each entity’s unique history, traditions, values, and ways of operating—its culture. Often when a merger is followed by rev- enue loss or the departure of leadership or other key workforce, the disruptions stem from a culture clash between the merging organizations, and the “us” vs. “them” blame game begins. Inevitably, time is needed for the board of directors, the remaining workforce, and other key stakeholders, possibly from organiza- tions that were previously competitors, to join as one with a common culture, shared goals, and a strategic direction that aligns with those goals. The correct approach by the new senior leadership in aligning the strategy and merging the two cultures will minimize the time needed for a successful integration.

Another factor that can greatly impact the culture of any organization is the fast pace of changing technology, particularly around communication now with email, texts, and Facebook, Twitter, and other social networks. And some industries and organizations have been affected by this century’s globalization, which can also influence culture and strategic direction.

In addition, there is a potential disconnect between culture and strategy in the generational differences, both in workplace attitudes and behaviors, among mixed workforces (e.g., baby boomers, Generation X, Generation Y [the so-called millennials]). As noted in numerous articles, these groups differ significantly in their approaches to work, attitudes toward authority, work style preferences, and need and/or desire for feedback and supervi- sion. These differences can greatly influence the culture of an organization. If marshaled in a positive direction, the blend of these differences can pro- vide the energy and momentum for a highly engaged culture aligned with the strategy direction of the organization.

Culture and Strategy Aligned = High-Performing Organization

The current reality is that all organizations face demands for constant change to meet ever-changing needs and industry trends. Thus organizations, par- ticularly senior leaders, must create a culture that is agile, innovative, and able to adapt and improve. Developing effective strategies to meet or adapt to those changes is not about an occasional senior-level retreat to develop a future plan. It is about engaging and involving all key stakeholders in establishing the strategic direction by revisiting and clarifying the mission

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Chapter 5 reshaPing organizations through Culture and strategy 75

(purpose), the vision (future), and the goals (achievable priorities). High- performing organizations have well-aligned business models that leverage their workforce cultures as catalysts for change. Alignment will determine the direction and pace of change. It includes a clear direction with measur- able goals, accountability for getting the work completed, progress checks on accomplishments, adjustments as warranted to the goals per the strategic direction, and clarity on the roles, procedures, processes, and allocation of human and dollar resources needed to accomplish the strategic direction.

Mario Morino, author of Leap of Reason: Managing to Outcomes in an Era of Scarcity, states, “there’s one common denominator among organizations that manage outcomes successfully: courageous leaders who foster a per- formance culture” (2011, p. 22). Morino underscores Collins’s tenet that it is about having the right talent and leadership to execute a mission. It is critical to recruit leaders who exemplify the performance culture that the company hopes to instill in the workplace. Expectations must be defined, clarified, and measured. Organizations need a balance between strategic leaders who drive the vision, direction, or change and leader-managers focused on the day-to-day operations with disciplined execution. An imbalance may result in chaos, resulting in an organization’s inability to sustain long-term high performance. When a performance culture is aligned with the strategy direc- tion, all stakeholders (e.g., workforce, board of directors, customers) will be moving in the same direction and heading for the same destination, and thus the organization will leverage its unique advantage with value-added ser- vices, achieving strategic goals and ensuring sustainability.

One method that has become more widely deployed is the use of score- cards that channel performance achievement measures from the strategic plan to the annual operating plan to a department or work unit and then to indi- vidual employee performance (see Figure 5.1). Such scorecards should include not only program and financial results but also human resource measures

Departmental Plan

Annual Plan

Strategic Plan

Goal

Individual Action Plan

High Performance

AlignmentCultureStrategy + = =

Goal

FIGURE 5.1 Aligning strategic initiatives with individual performance goals.

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76 Making strategy Count in the health and huMan serviCes seCtor

such as retention, engagement, work systems satisfaction, effectiveness of the board of directors, marketing awareness/public relations, advocacy, customer satisfaction and engagement, and internal operations and systems. Defining such measures is an iterative process and will take time—time that will be well spent toward demonstrating key results and high performance. Adopting and adapting this type of measurement is outside the scope of this chapter, but numerous resources and samples are available for various sectors.

Warning Signs of a Disconnect or Misalignment

There are a number of cues that can let an organization know there’s been a disconnect between culture and strategy:

• Not having a clear strategic plan or direction • Having a plan that is not consistently deployed across the entire organi-

zation, as exemplified by independent, silo-type work units rather than a team-based, integrated work culture

• Having a CEO who is mired in day-to-day operations and who doesn’t have the capacity to stay focused on the more external, strategic issues (which is not intended to suggest that the CEO should not be well informed)

• Lack of role clarity between the CEO and the COO; lack of trust and confidence that the COO and/or senior leadership will manage the day- to-day operations

• High turnover, whether throughout the organization or in individual work units

• Lack of clear processes and procedures • Lack of clear, measurable expectations and outcome results • Senior leaders who think they’re thinking strategically but who are actu-

ally narrowly focused on a particular business unit • Lack of strategy direction alignment from the board of directors to the

direct, on-the-ground staff • Having a “crisis of the moment” or “crisis of the week” culture in which

constant adrenaline rushes result in varying degrees of chaos or mis- trust. (This can be a risk for some social services agencies that have a mission to help people at risk or help them meet their basic needs.)

• Senior leaders who feel they don’t have time to pursue strategy–culture alignment because they are too busy/overwhelmed or are out of touch with the real culture of the company

Hallmarks of an Organization With Strategy and Culture Aligned

There are also ways to tell when an organization’s strategy and culture have been effectively aligned:

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Chapter 5 reshaPing organizations through Culture and strategy 77

• Clear mission, vision, and core values • A workforce culture built on

– trust and respect – performance, continuous improvement, innovation, and cycles of

learning – collaboration rather than silos and integrated planning and plan

execution • Clear, measurable short- and long-term goals that flow from the strategic

plan to individual employee performance • Well-defined programs, services, or products, including expected out-

comes, integrated into and throughout the organization • Effective two-way communication up, down, and across work units;

clear direction and progress • Ongoing market research for new programs, services, or product

development – Use of a business product development model to test the proposed

new programs, services, or products

Effective alignment between strategy and culture promotes increased engagement, both staff and customers, to build emotional loyalty to the brand.

GREAT CIRCLE’S APPROACH TO ALIGNING STRATEGY AND CULTURE

In Missouri, Boys and Girls Town and Edgewood Children’s Center merged in 2009, creating an organization—Great Circle—with a budget of close to $50 million and over 780 staff serving about 11,000 children and families through a continuum of services. In Great Circle’s inaugural strategic plan, a high-priority strategic direction was to establish a continuous, consistent model for quality improvement. The agency decided to embrace the Baldrige performance excellence model as its transformational initiative with the support of The Kresge Foundation through the Alliance for Children and Families.

Initial first steps included (1) performing a Baldrige Organizational Self-Assessment, the Show Me Challenge, which surfaced opportunities for improvement (OFIs) that were incorporated into the 2013 annual plan, (2) identifying senior leaders to participate in Baldrige Examiner Training, (3) distributing a comprehensive staff survey called “Are We Making Progress?” (based on Baldrige Criteria for performance excellence) to deter- mine a baseline for comparison every 6 months, and (4) establishing the Great Circle Strategy Council.

The strategy council met for the first time in mid-March, 2013. Members, selected by senior leadership, represent all departments, all regions, and all

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78 Making strategy Count in the health and huMan serviCes seCtor

levels of staff from department and program directors to direct care and maintenance staff. The council will meet monthly. The council’s role is to do the following:

• Help promote a culture change within Great Circle. • Learn to apply the Baldrige Model and Principles of Performance

Excellence. • Increase the alignment of goal priorities between senior leadership and

direct staff.

The council reviewed the “Are We Making Progress?” survey results and identified four OFIs that needed to be addressed to strengthen the alignment between strategy and culture at Great Circle:

1. Clarifying the understanding of Great Circle’s vision for the future and how individual staff roles fit into that vision

2. Improving internal communication and interdepartmental teamwork 3. Improving understanding of the financial status of Great Circle 4. Aligning individual performance evaluation goals with the 2013 annual

plan and overall strategic plan

Great Circle’s Baldrige journey continues as the agency strives to increase the alignment between its strategy and its culture.

CREATING AN “ALLOY” OF STRATEGY AND CULTURE AT THE CHILDREN’S HOME OF CINCINNATI

Many of us have heard the saying “culture eats strategy for lunch.” A natural conclusion to draw from this assertion may be that culture matters more than strategy, but that is not the case. Many leaders consciously or uncon- sciously separate the two. Culture influences strategy, but it cannot achieve the strategy. Similarly, strategy can impact culture, but it cannot create or maintain it. Strategy and culture are different, yet both matter equally. What is most important is how they meld together.

At The Children’s Home of Cincinnati, we believe that strategy and cul- ture are like oars in a boat: You can’t get where you are going (vision achieve- ment) by rowing with just one oar; you will of course just go around in a circle, because you need both to move forward. As with rowing, emphasis on either strategy or culture alone will impede progress, and neither alone will enable winning versus competitors. The key is creating what we call an “alloy” of strategy and culture.

An alloy, by definition, is a new, stronger metal formed from a com- bination of elements. For example, iron and five or six other elements are mixed in an alloy to form a stronger metal: steel. The same concept applies to organizations. The combination of both culture and strategy makes an

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Chapter 5 reshaPing organizations through Culture and strategy 79

organization stronger in its capacity to deliver superior products and ser- vices, demonstrate results, and excel beyond its competitors’ capacity to do the same.

The key catalyst in creating the alloy is leadership. Napoleon once said, “There are no bad regiments [organizations]; there are only bad colonels [leaders].” All organizations are a reflection of their leaders. The key to build- ing the alloy is focused, involved, committed leadership that promotes both strategy and culture. Leaders must be clear and specific in “what,” “why,” and “how” by providing solid rationales and clear plans. Leaders must be visible and interacting (leading) with all levels in the organization daily to ensure results. Leadership means not merely observing but engaging in hands-on activity and ensuring that the troops are involved.

The creation of the alloy of strategy and culture requires a framework for understanding. We start with simple definitions. Strategy can be defined as best positioning your organization’s services, versus those of your competi- tors, to meet the needs of your customers. Strategy is about choices—whom to focus on, where to play, and how to win (what customers in what markets, and how to meet their needs). Strategy considers the four Cs: deeply under- standing the “voices” of the consumer (the end user of the service), the customer (who helps you reach or deliver the product or service), the competition (those who compete against your organization), and the company (your own agency’s capacity, capabilities, strengths, and weaknesses) (Hickman & Silva, 1986).

Culture can best be defined as the attributes that reflect the organiza- tion (values and beliefs, practices, rituals, skills, and behaviors). Culture defines the capacity and capability of an organization to organize or mobi- lize effectively to deliver the strategy of the business: It is the spirit of your organization. Culture can also be expressed in terms of the three Cs: the business’s characteristics (its competence in achieving its goals and strategies), commitment (to the staff’s and leadership’s understanding of their “stake” in winning, motivated by the Adult Business Deal we describe below), and con- sistency (its ability to develop individuals, teams, and an overall organization with a common understanding and point of view as a basis for delivering strategy) (Hickman & Silva, 1986).

The entire framework for creating the new alloy must be structured around what we call an “Adult Business Deal.” This “deal” between employ- ees and the organization is the cornerstone of culture and answers the ques- tion affectionately known as WIIFM: What’s in it for me?

The Adult Business Deal supports the reality that an organization’s entire staff, whether they think it or not, are not only contributors to business but also part “owners” because of their stakes in the organization. The inter- ests of the employees and the interests of the business are truly inseparable.

The deal is that each of us comes to work seeking certain basic funda- mental needs: Employees are looking for pay and benefits so they can pro- vide for their families, job security so they don’t have to fear unemployment, a safe working environment where they don’t have to worry about injury or illness, and professional development opportunities to support their growth

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80 Making strategy Count in the health and huMan serviCes seCtor

and natural drive toward self-actualization. In turn, businesses seek people who are committed and competent in delivering services to ensure competi- tiveness and the long-term ability to stay in business.

Employees must embrace the reality that if the organization is not suc- cessful or does not achieve its goals, they will not benefit or achieve their goals. It’s only when the business is successful that both the needs of employ- ees and the needs of the business are achieved. And the business can only be successful if its employees clearly understand the integral roles their par- ticular functions play in creating overall business success. At The Children’s Home, we love to tell the story of the consultant who paid a visit to NASA. As he was leaving the building after a long day of talking to its leaders about their objectives and the way they involve their employees, he came upon a custodian in the stairwell who was sweeping the floor. The consultant asked the custodian what he was employed to do at NASA. His response? “I’m put- ting a man on the moon.”

We want our employees to embrace the notion that The Children’s Home is a place where we contribute our time, skills, and effort to help the organi- zation achieve its vision. As a result, we as an organization are then able to satisfy our own needs. This makes us feel that we are truly owners of the business, and so we treat it as if we own it. And we are more apt to recognize the importance of teamwork required to support our culture, which in turn supports the achievement of our strategic goals—the ones that ensure the success of consumers, the organization, and employees.

Returning to the four C’s of strategy and the three C’s of culture: These can be modeled into a framework useful for creating and developing this alloy. Figure 5.2 presents the Hickman and Silva model for creating the alloy:

and Michael A. Silva. Used by permission of Dutton Signet, a division of Penguin Group (USA) LLC.

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A key element of winning in the marketplace is creating an “alloy” of strategy and culture in your business...

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Chapter 5 reshaPing organizations through Culture and strategy 81

The key task for leadership in creating this alloy is matching the strategic and cultural elements and creating a framework of structures, actions, and interventions that focus on constancy of purpose (delivery of direction) and continual improvement (in delivery of service). First, the organization must have a system focused on creating long- and short-term direction that incor- porates a deep understanding of the voices of the four Cs. This system should include an assessment of the competition (who they are, what they are doing, and their skills and capabilities as best as the organization can understand them), the consumer (understanding the voices of clients and stakeholders as well as the voice of the organization’s own capabilities and strengths), the cus- tomer (individuals or organizations that supply the organization and serve as the channels through which clients and stakeholders reach it), and finally the company (looking closely at how the company itself performs and inter- acts with the other Cs). This information informs the organization’s strategic plan. Development and deployment of the plan must be rigorous: Plan, plan, plan, and then execute with precision and a high level of accountability. At The Children’s Home, we employ a quarterly audit process to ensure that all ele- ments of our strategy are on track; those that are not are retooled with support to get target measures back on track for the next quarter.

In addition to effective strategy deployment, it is also critical to build- ing the alloy to have a system that supports delivery of the strategy and captures deep understanding of the voices of the three Cs. Employees are a key aspect of this system. At the Children’s Home, we look for employees who are competent (in their work), committed (to the agency as well as to continually finding ways to make better contributions), and consistent (stay- ing long-term, understanding the four Cs, and consistently making their best contributions). This system operates by principles rather than rules. The Children’s Home has built its culture around three sets of cultural plat- forms: values (what we believe), standards of behavior (how we act), and core competencies (what we’re really good at). These platforms build the com- mitment, competence, and consistency of our workforce. Most organizations have a set of values, which should be limited in number (we have six) and clearly defined. Our standards of behavior define in specific statements what it looks like to live our values. Our core competencies are the abilities that each individual (and therefore the organization) must have to ensure flex- ibility, responsiveness, and speed in managing the changes required for the organization to achieve our vision.

To ensure that the desired culture and its strategic competencies are fully integrated into the organization, work processes must be in place that sup- port the system and allow for speed, strength, and innovation (hallmarks of a higher-performing organization) to meet consumers’ needs better than the competition does. Some examples of these processes are found within the employee life cycle system: recruitment and selection of staff, performance evaluation, and staff development. Each must have embedded within it the strategic and cultural aims of the organization to ensure accountability to the entire system.

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82 Making strategy Count in the health and huMan serviCes seCtor

The system and supporting processes that operationalize the alloy of strategy and culture must also be driven by a system of measures. Nothing should be left to chance or opinion—all must be verified by data and held accountable to measures. Our motto at the Children’s Home is “In God we trust—all others bring data.” Aligning data-based strategic deci- sions with cultural principles ensures constancy of purpose and continual improvement.

The new alloy will require consistent testing, assessment, care, and feed- ing. Data, data, data is the key. Assessments of inputs, the system, and its outputs are critical. Ask yourself the following questions:

• Are the four Cs changing? • How should we adjust or renew the system? • Are the three Cs fit, robust, and working in sync? • Is the lodestar (a satisfied customer) always the focus? • Do we understand the voice (needs) of our consumers? • Are our products and services best meeting or exceeding their needs?

There is an old adage that says that if you’re not meeting your consum- ers’ needs, it’s you who has lost touch, not the consumer. Employees and teams feeling like owners and making individual and team contributions keep the focus, the processes, and the system operating. The system must regularly be evaluated and assessed for efficiency and effectiveness in meet- ing consumer needs.

Again, making the alloy work is the role of the leaders. The experts in the alloy are the top leaders in the organization. Lapses or inconsistency in lead- ership cost the agency results. Everyone has a role and responsibility, and leaders need to hold themselves and each other accountable. Leadership is action-oriented and face-to-face. Each top leader should be visible, engaged, and interacting daily. Good leaders use a common theme or platform mes- sage to ensure competence, consistency, and commitment to the culture via routine reinforcement.

To recap: The fit between strategy and culture is the key to forming the new alloy, which is the key to winning. Strategy is critical but is insuffi- cient by itself to win—yet some focus on it to the exclusion of anything else. Strategic thinking aims at getting and keeping consumers. On the other hand, a strong culture builds, develops, unifies, and motivates employees— but consumers need to perceive better services or the culture is wasted. We are reminded of the boat rowing with two oars rather than one: Winning (i.e., satisfying the consumer) requires that both elements be designed in tan- dem, perfectly matched and melded together. Strategy and culture should complement each other, responding individually and together to drive for- ward progress with the ultimate aim of winning in the marketplace with the consumer. Without this alloy, an agency can never achieve sustainable

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Chapter 5 reshaPing organizations through Culture and strategy 83

results, including constancy of purpose (the role of strategy) and continuing improvement (the role of culture).

We live and work in a competitive marketplace, whether we recognize this or not. Understanding culture and its winning attributes is important for all employees at every level in the organization. When employees recognize that all the work we do with our clients is about winning (i.e., helping clients achieve the goals that are meaningful to them), it changes the old perception of a focus on “winning” as being too competitive or too much like a busi- ness. Winning in the marketplace requires an effective, competitive strategy and an efficient culture. Both are necessary and need adequate attention and resources to ensure success. A handful of brilliant leaders leading an organi- zation are not enough. The entire organization must work as a team and in harmony with a clear focus and a clear framework in which to operate in order to win the consumer.

HOPELINK’S STRATEGY AND CULTURE

With his famous quote that “culture eats strategy for breakfast” (later changed to “lunch” by Dick Clark at Merck (@drkellypage, 2013) and many others), Peter Drucker started what turned out to be a fierce debate about whether culture or strategy is more important to organizational success. There has since been no shortage of smart people chiming in to support one side or the other, and plenty more voting for a tie. But given the volume of the debate over the past decade or so, it is impressive how many current nonprofit thought leaders are silent on the subject of culture as it relates to strategies featuring collaborative social impact.

The current wisdom in the nonprofit world is that the only way to really make a profound and lasting difference for clients and in the community is by working outside the organization’s borders through broad collabora- tions (Crutchfield & Grant, 2008, p. 19). Yet the major “how-to” works in this area do not appear to consider the tremendous stresses that the prescribed levels of institutional and systems change might have on the cultures of the participants. More importantly, and with a nod to Peter Drucker, there is no mention of the impact organizational culture might have on the desired systems change.

Culture in the Nonprofit World

There is plenty of material written on nonprofit organizational culture, but for many it remains an elusive concept. The general agreement is that culture is mostly invisible (Merchant, 2011), is often misunderstood and therefore

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discounted (Parr, 2012), and generally operates at an emotional level rather than a cerebral one (McLaughlin, 2011). A favorite description comes from Shawn Parr: “Culture is a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum, or miserable stagnation” (2012).

Regardless of how it is defined, culture is built slowly in the nonprofit world and is therefore particularly deep-seated. The nature of the work non- profits do inspires, and often requires, a high level of passion; employees and volunteers choose this work because helping others resonates on a personal level. Their beliefs in and about the organization’s mission are therefore often much more foundational than are the beliefs of their counterparts in the for-profit world. This strong emotional commitment to mission provides a basis for organizational culture that is rock-solid and magnificent yet that can be highly resistant to change.

The complex elements of culture that overlay this emotional foundation include how decisions are made, how people are treated, and “how things are done,” both internally and with clients. The amount of trust people have in senior leaders and their styles of leadership, as well as the levels of inclusion, are also important components of organizational culture. Over time, these and other elements combine to form the habits and norms that enable people to cooperate by assumption rather than by negotiation (Merchant, 2011).

Contrast this with the environment in which nonprofits must operate today. The external environment for the nonprofit industry has never been in as great a state of flux—particularly for those organizations with a mis- sion to deal with tough social problems that are difficult to measure quan- titatively. Funding is highly volatile, and scarce dollars are coming with ever greater demands for demonstrated success in the form of increased and measurable impacts on clients and the communities the organizations serve.

This level of intense scrutiny will only increase as governments, foun- dations, and individual supporters continue to wrestle with tighter budgets in the face of sharply increased demand for services and an economy that is still in recovery. These forces have inspired some nonprofit pioneers to explore new ways of delivering services in better, more collaborative, and more cost-effective ways.

Studies of early collaborative successes are highly encouraging, and point to even more promising results. It is clear that agency success will no longer be measured only by how well agencies manage their programs but also by how they manage programs and mobilize all sectors of society to attack social problems collaboratively (Crutchfield & Grant, 2008, p. 19).

As a result of these environmental forces, new approaches to service delivery, and the need to collaborate closely with organizations that are quite different, agencies and their cultures are being battered on all sides and are in danger of being ripped out of the ground by their roots. Let’s examine why.

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Cultural Stress

First, nonprofit cultures were mostly built upon the passion all constituents had for delivering personal services one-to-one with clients through isolated interventions. Now, both because of things learned from new data and also to position themselves for better funding opportunities, organizations are shifting rapidly to cross-sector, multiservice coordination. This shift will often require nonprofits to change the way they deliver services so that they will fit into the collective, holistic approach to client service. Change of any kind is a source of cultural stress, but because nonprofit programs often are foundational, these types of changes can be particularly stressful.

Second, everything is in motion. Not only is the funding environment in flux, but results from cross-sector collaborations are still coming in, and pay-for-performance funding models are being developed. Though the sea change to collaborative service delivery is itself an assault on long-standing cultures, nonprofits are further stressed by the need to be ready to change course flexibly and quickly (Burns, 2007, pg. 39) as more data becomes avail- able and funding restrictions sort themselves out. Most organizations do not respond well to change, so the very need to be prepared to shift on a moment’s notice creates an additional source of cultural stress.

Third, in an effort to build processes that are both holistic and collabo- rative, organizations may find themselves in situations in which compet- ing theories of change and approaches to service delivery and policies may contradict each other. These contradictions make it very hard for leaders to decide what to do to move their agencies and collaborative processes for- ward. The resulting compromises can further stress organizational culture (US DOJ, 1999).

Fourth, in an attempt to rapidly increase both their efficiency and their program effectiveness, nonprofits are more often looking to for-profit mod- els for help. Unfortunately, for-profit models are difficult to apply in a world in which outcomes and impacts resist measurement (Collins, 2001, p. 5). Attempting to force-fit for-profit methods and tools can drastically under- mine a nonprofit’s culture, mission, and public image (Landsberg, 2004), and even efforts that by and large are successful can be a source of stress on organizational cultures.

It is clear that all these stresses on culture can cause nonprofit employees and volunteers to reject the strategy and thus “eat the strategy for break- fast.” The manifestations of this rejection will vary and can range from the passive-aggressive behaviors of ignoring it or subtly undermining it to the extremes of outright sabotage. Paying attention to the early warning signs of these behaviors can prevent many of these potential difficulties.

But there are other possible outcomes as well, as represented by the flip side to the Drucker paradigm. One possibility is the opposite of “culture eats strategy”—namely, one in which the “strategy crushes the culture.” The likely outcome of this scenario is that the talented people the organization

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has recruited, hired, and developed over time start leaving. Seldom do departing employees state “cultural stress” as their reason for leaving, but when their passion has been snuffed out, they will leave to seek re-inspiration elsewhere.

Another, more subtle possibility is that rather than make internal changes, employees and volunteers will react to the stresses described above by forcing most of the change and imposing their organization’s culture on that of their collaborative partners, overwhelming them. Despite agree- ments, memorandums of understanding, and apparently aligned missions, collaborations then fail to achieve the expected results and may break apart.

What Peter Drucker’s quote means for nonprofits is that leaders who impose on their organizations the kind of strategic changes that most non- profits are developing right now, without considering the cultural impact, do so at their peril. Culture is a lot like oxygen—you can’t see it, smell it, or taste it, and we often take it for granted, but if you ever find yourself underwater you appreciate its importance and, often too late, wish you’d paid it more attention.

How Culture Becomes a Positive Force for Strategic Change

So what does this mean for strategy development? Very little. But it means everything for the execution of strategy. Execution is all about how well man- agers, employees, and volunteers understand the organization’s strategy, appreciate how it reinforces and lifts up their core values and beliefs, and realize how what they do each day makes a difference in achieving organi- zational goals and positively affecting clients’ lives as well as the community.

A nonprofit’s culture can be a powerful ally and force for change, and some believe that it is actually the most powerful driver of organizational success available to nonprofit leaders (Schneider & Schneider, 2007). For example, in a recent Bridgespan study of 130 nonprofit management teams, culture rated as one of the top two organizational assets across the board (Kramer & Matthews, 2012, p. 1). Smart leaders are harnessing this power to dramatically increase their odds of success.

To tap into this power, three things must happen when organizational strategy needs to change. First, leaders need to ensure that as they make stra- tegic choices for the organization, those choices fit and are aligned with and informed by the current culture—and that necessary changes are within rea- sonable reach from the existing culture (Katzenbach, Leinwand, & Kleiner, 2011). Understanding the degree to which a new strategy must move the exist- ing culture should highly influence the execution plan. If a significant change is necessary, a wise leader will guide changes incrementally over time.

Second, to ensure that strategic decisions support organizational culture and nurture and grow the underlying passions of the organiza- tion, leaders should involve more people in the decision-making process

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(McLaughlin, 2011). This way, staff and volunteers can help the organiza- tion make changes that build on their shared commitment to the organi- zation’s mission and can articulate the aspirational elements of strategy (Venture Philanthropy Partners, 2001). Because they helped create it, the staff are also more likely to support and champion it.

Third, personal communication and visible leadership from the CEO are critical. The organization must be led through changes of this magnitude, not managed through them. A well-developed and well-understood strat- egy is a powerful tool for change (McLaughlin, 2011), and it is the role of the leader to communicate the aspirational nature of the new strategy, how it will positively affect clients in compelling new ways, and how it fits with and appeals to employees’ and volunteers’ passion for their work (Kramer & Matthews, 2012).

Organizational effectiveness in the face of the impending metamorpho- sis in the nonprofit world depends on how well the organization can balance and align its culture, its leadership, and its strategy (Schneider & Schneider, 2007). Marshaling the forces of culture through visible leadership and a well- articulated strategy can yield transformative results even in the most volatile of times.

Bill and Kristine Schneider go a step further and talk about how organ- izational effectiveness can be maximized only when an organization’s approaches to strategy, culture, and leadership align. Figure 5.3 depicts this graphically (Schneider & Schneider, 2007).

An understanding of how these three forces balance can help leaders make better decisions about strategy development and execution. When all three are aligned, organizations can not only handle change but also lead it to the benefit of their communities.

FIGURE 5.3 When strategy, culture, and leadership align.

Strategy

Culture Leadership

Alignment

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People are highly resilient, and cultures are as well. Because of the com- plexity of nonprofit organizations, it is very difficult to “nail” a strategy development and execution plan perfectly every time. The key to success is for leaders to be intentional about the creation and development of culture in their organizations and then to pay attention to early warning signs of trouble and make course corrections as quickly as possible.

A Nonprofit Case Study

Consider the case of a medium-sized nonprofit that had been working for several years on developing and executing strategic plans, creating dash- boards, and improving its processes. At the encouragement of its board, the agency decided it was time to take this work to the next level and hired a chief strategy officer from outside the sector.

There immediately ensued a flurry of activity, including very deep dives into strategy, success measurements, and results with the senior leadership team. The work was spectacular. There was clear direction capped by a new 10-year vision and strategic plan, as well as an execution plan complete with delineated goals and initiatives that both directly tied to the strategic plan and had direct accountability assigned to individual members of senior manage- ment. The board was happy. The CEO was happy. The managers were miserable!

Nothing as exciting as a coup attempt ensued, and most of the staff went about business as usual. But realizing that things were not right was a seis- mic event for the CEO. As part of the ensuing diagnosis and intervention, the CEO discovered that even after 6 years with the agency, there were some parts of the organization’s culture that were well disguised. It turned out that as the organization was evolving and its culture was changing, not eve- ryone was on board. What the CEO uncovered during the diagnosis and then did about it is illuminating.

The CEO began noticing two seemingly conflicting things happening. The first was that people were reporting that they and their staffs were burning out. Because historical strategic plans had no associated work, division heads were used to running their own ships and loading up themselves and their teams with local-level initiatives and attendant tasks. Initiatives that came from the agency as a result of the new strategic planning effort included additional work that was layered onto this already overfull workload. While most worked hard to accomplish both, when one had to be chosen over the other, senior leaders were most often prioritizing their own initiatives over agency initiatives. As resentment over agencywide initiatives grew, and “rounding down” of scope also occurred, further diminishing the effectiveness of agencywide initiatives. Together, these actions formed a clear case of “culture eating strategy.”

In addition to, and in part as a result of, this workload stress phenom- enon, people were losing their passion for their work as well. Because of her vision and enthusiasm, the CEO was pushing people hard to accom- plish agency goals, which included some of the external, cross-sector, and

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collaborative initiatives described here and elsewhere in this book. The changes these initiatives were causing resulted in increased lateral stress and were causing employees and volunteers, particularly in the service delivery divisions, to lose their enthusiasm for their work. Reports of disgruntlement began surfacing through the ongoing performance review process and regu- lar meetings between employees and managers. These were clear symptoms of “strategy crushing culture.” Enough was enough.

As both “Drucker symptoms” were occurring, they both had the same causes: While there was a history of inclusion in the organization, the direc- tion and pace of change had overrun the normal level of inclusion and pushed people into a state of mistrust. Even if the historical level of inclusion had been ample for the situation, the managers clearly felt that the addition of a CSO was a new barrier to inclusion in decision making and in fact actu- ally diminished it.

Further, the focus on evaluation and measurement was viewed as both diminishing the value of the work being done and an indication of a lack of respect for the expertise and experience of program staff. The combination of growing staff mistrust and resentment over the perceived exclusion from the decision-making process, the perceived diminished value of their work, and the higher workloads combined to create unrest.

Finally, as a part of agency strategy, the CEO was spending more and more time on external advocacy and collaboration initiatives. These efforts had the unintended consequence of reducing internal communication at a time when greater clarity and reassurance were needed.

All was not lost, however. The leadership team was solid, and the CEO and CSO were able to slow things down, work on repairing and rebuilding rela- tionships among senior leaders, and revisit the visioning and planning process to help senior managers reengage. A key component of the reengagement was a new focus on the plan for executing agency strategy. As is the case with many organizations, the CEO recognized that there was a disconnect at the point where strategy and its attendant long-term initiatives met short-term opera- tional needs. Care was taken to incorporate short-term, division-level initia- tives into the prioritization process with the agency-level strategic initiatives.

The senior leadership team spent additional time refining the strategic 10-year vision and the agency’s theory of change to create a clearer message around how broader initiatives were more effective in creating positive cli- ent outcomes and adding social value to the community. This served the dual purpose of increasing the overall level of inclusion and improving the ability of senior managers to communicate roles and tasks to their teams.

Lessons

While the transition was a difficult one, the end result was transformational for the organization. The experience brought the senior leadership team closer together as a group and led to more clarity around the organization’s

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theory of change and its long-term vision. It also resulted in a more collabo- rative internal process for informing decisions that led to better decision- making and that better prepared the organization for external collaboration as well.

This was intentional. The CEO knew she needed to repair and strengthen the culture if the organization was to be successful in the long term. She took great pains to improve communication and engage a broader cross section of managers in the visioning and planning processes, and she particularly focused on demonstrating listening skills.

The broader lesson, and one for the smart people who debate the mean- ing of Peter Drucker’s famous saying, is that it isn’t always strategy or cul- ture that wins out in a fair fight. People, and the organizations that unite them, are highly complex, and dysfunction can occur in both directions simultaneously.

The big lesson is that with the amount of stress being placed on non- profit culture and the need for broad-scale change, nonprofit CEOs must be on the lookout for the symptoms of cultural bruising. Intentionally design- ing, building, and nurturing organizational culture must be a cornerstone of any strategy and execution plan. Higher levels of communication, a pace of change informed and dictated by the effects on culture, and an under- standing of the unique effects on individual team members will dramati- cally improve the odds of success.

DEPLOYING STRATEGY TO CHANGE CULTURE: THE PUBLIC HEALTH MANAGEMENT STORY

For Public Health Management Corporation (PHMC), the Alliance’s Strategy Counts initiative in 2011 came at a particularly critical and opportune time for the organization. PHMC was teetering on turning 40 years old, and although it was known to be entrepreneurial because of its serial social entrepreneur CEO, in many ways PHMC looked like the health and human services organization of the past. PHMC had grown organically for four decades and had a relatively flat organizational leadership structure. Although PHMC was considered a high-performing nonprofit and had enjoyed tremendous growth, with a current budget above $170 million, its management structure had remained decentralized and thus had created a silo mentality among its leaders, many of whom had spent their full careers in the organization.

For background, PHMC is a Philadelphia-based 501(c)(3) nonprofit cor- poration and long-standing Alliance member. Founded in 1972, PHMC now operates 70 sites and serves over 200,000 clients annually in more than 350 programs that include behavioral health/recovery, nurse-managed health care, health promotion, early intervention, parenting supports for families, and emergency preparedness for southeastern Pennsylvania, and that are augmented by research and evaluation to assess and target health issues effectively. Services are provided in health centers, homes, shelters, and

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agencies, on the street, and in other sites by diverse, highly qualified staff members who understand and reflect the racial, ethnic, cultural, and linguis- tic characteristics of the communities they serve. Nine out of 10 PHMC clients are low-income and at higher risk for health and social problems because of issues related to socioeconomic status and discrimination based on gender, sexual identity, race/ethnicity, language, and culture. PHMC has a record of delivering high-quality services and serves as a convener, bringing together multiple stakeholders to understand and solve the complex issues facing vul- nerable communities. To advance public health, PHMC also serves as a fis- cal and management entity for local government, foundations, and nonprofit affiliate organizations. The five southeastern Pennsylvania counties make up PHMC’s main service area, but other parts of Pennsylvania, Delaware, and New Jersey are also served, and some initiatives have a national scope.

In late 2010, senior managers recognized and agreed that for PHMC to better compete in a troubled economy amid a changing health and human services industry, corporationwide structural changes were going to be nec- essary to grow and scale programs. Thus, the organization and its leadership over the previous 18 months underwent its first corporationwide strategic positioning process, involving all levels from front-line staff, the next genera- tion of leaders, to executive staff and the board of directors. As a result of this process, PHMC decided to restructure in early 2011, starting with top-line management, to realign business across the organization. In the process, the need also became apparent for the creation of a chief strategy officer (CSO) position to assist the president/CEO in the preparation and implementation of the restructuring, the achievement of strategic plan results, and the facili- tation of ongoing strategy development across PHMC.

In January 2012, PHMC appointed a CSO to work with a new team of leaders including a chief operating officer (COO), a chief financial officer (CFO), and a chief human resources officer (CHRO), who would work together with the president/CEO and the CSO to carry out the strategic plan and the new structure.

SWOT Analysis

As part of its first corporationwide strategic positioning process, conducted over an 18-month period, PHMC conducted a SWOT (strengths, weaknesses, opportunities, threats) analysis that included all levels of staff, management, and board and that revealed consensus across the organization and key infor- mation regarding opportunities and needs. The analysis found that PHMC was recognized for strong management expertise, excellence in fiscal manage- ment, sustained partnerships with government and foundations, a “can- do” approach to emerging issues, and a research/evaluation capacity that positioned it to support public health and social services programming based on science, along with high-quality programs and services. There was agreement that growth opportunities existed for PHMC to expand its

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direct services as well as its intermediary and supporting role with govern- ment and other nonprofits. However, there was also agreement on barriers to growth, such as limited funding owing to the economy; federal, state, and local budget reductions; and insufficient philanthropic funding, which restricted investments in programs and facilities.

As a result of the strategic positioning process, PHMC broadened its mission. It is now a nonprofit public health institute that creates and sustains healthier communities beyond the immediate region and has committed to the following values:

• PHMC works to ensure access for all to the full array of public health services.

• PHMC provides high-quality services. • PHMC works with government, foundations, academic institutions,

businesses, and community-based organizations to meet public health challenges.

• PHMC supports growth and fiscal responsibility. • PHMC values its employees and their contributions and maintains an

inclusive environment where all are treated with dignity and respect. • PHMC recognizes strong governance and ethics as the foundation for

success.

PHMC’s new strategic priority goals and objectives are:

• Goal 1: Public Health Issues: Lead in the identification of and response to existing and emerging public health issues.

• Goal 2: Service to People and Communities: Initiate, expand, and maintain programs and services that are aligned with the needs of the people and communities served and that are always inclusive of the underserved and those hardest to reach.

• Goal 3: Quality of Service: Identify and implement metrics to assess the quality, safety, and effectiveness of programs and services provided, to ensure accountability.

• Goal 4: Infrastructure: Create and maintain the organizational and operational infrastructure needed to support programs, services, and growth.

• Goal 5: Financial Viability and Growth: Promote financial viability and growth through existing and new programs, services, and affiliations.

• Goal 6: Organizational Vitality: Support and recognize staff contributions with career pathways across the organization; ensure future leadership and governance through succession planning; ensure and promote a positive public image and reputation for the organization.

In the SWOT process, there was broad agreement that PHMC was an organization where a flat hierarchy had fostered a silo environment and created an unmanageable platform for the central service functions. To be fully effective, it

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was necessary for PHMC to rethink its organizational structure and service strategies and improve communication, consultation, and learning across the organization, including management, direct programs, and affiliates. All levels of the organization recognized that for PHMC to continue its success and pursue growth opportunities, its structure needed to change and the role of strategy needed to be elevated and owned by a leader who could support the president/CEO in this effort. A further opportunity was the stra- tegically planned retirement of several management staff, which made the restruc- turing possible.

The Right Moment for a Strategy Role

Participation in the Strategy Counts pilot initiative immediately accelerated the integration and success of the CSO role within the organization.

PHMC focused on a three-pronged approach to the chief strategy officer:

• Structural realignment and building internal capacity • Strategic support to grow existing business • Strategic support to grow new business

The focus on structural realignment and building internal capacity was to operationalize the new infrastructure to support PHMC’s strategy and val- ues. Realignment was guided by PHMC’s strategic plan and new organiza- tional structure, and the CSO would have an important role in the cultural transformation that would allow the leadership to more effectively support not only their operating components but also one another. A close partner- ship with the chief operating officer, the next level of component leaders (termed managing directors), and the affiliate directors helped create the right balance of new strategy while maintaining successful service outputs.

In order to provide central strategy support to grow existing business, the CSO utilized systems and tools for maintaining oversight for the broad range of service areas that often overlapped but could also be quite dispa- rate. Early on, the focus was on creating strategic partnerships between the previously siloed programs and services to foster communication, consulta- tion, and learning across the organization. Multiple funding types and sources, various programmatic targets and objectives, and a range of revenue levels made this responsibility particularly complex and reliant on information technology.

Leading the strategic vision for growing new business through tech- nical assistance, business incubation, and new mergers and affiliations was the third key function of the CSO. As a science-driven public health institute, PHMC bases its objectives on data, and its nationally respected Community Health Data Base (CHDB) will be an important tool in the strat- egy for impact and sustainability. (The central component of the CHDB is the Household Health Survey, which is administered every 2 years across

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the five Philadelphia-area counties. It provides timely information, at mul- tiple levels, about health status and needs, personal health behaviors, and access to and utilization of area health services. Since 1983, CHDB data has greatly enhanced the capacity of PHMC and local health and social service organizations to plan and design health programs to address the needs of local residents and communities.) PHMC used CHDB data to identify com- munity needs, determine new lines of business, and collaborate with other public and community organizations and potential affiliates. The incubator function in the new organizational structure is the space where new busi- ness lines can build capacity, begin collaborations with PHMC partners, and focus their purpose within the institutional network. This is where strategy meets infrastructure, and the strategy officer will be accountable for ensur- ing the successful integration of new business into a niche that complements PHMC’s existing business and organizational culture while fostering growth and innovation.

Results and Impact

The Strategy Counts initiative, as expected, has had a significant impact on PHMC’s ability to implement its new strategic plan by accelerating the pro- cess of integrating the CSO. In the first year of the rollout of the role, more cli- ents were served and enhanced services were provided to the community as the organization grew and expanded. As an example, in the first year, PHMC absorbed a treatment facility that served children and youth with behavioral programs and it affiliated with a children and families agency to work with foster care children. The CSO monitored and evaluated programs and ser- vices corporationwide against the strategic plan and goals and reported pro- gress to the president/CEO, the board of directors, the other PHMC chiefs, and the managers of all business lines, functions, and programs. The impact of the Strategy Counts initiative was felt across the goals of the strategic plan as noted below.

Impact on Organizational Capacity

The CSO worked in partnership with the chiefs, managing directors, and affiliate directors to build PHMC’s organizational capacity and focused on the following strategic goals and tasks in this area:

• Quality of Service Identify and implement best business and service practices, organization - wide electronic medical/client record systems, and quality assurance processes, as well as consumer and employee satisfaction systems.

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• Infrastructure Implement systems to enhance organizationwide coordination and information systems, communication, database systems, and inte- grated operations; enhance educational offerings and measure impact across staff skills; and develop centralized operational support services.

• Financial Viability Identify for replication successful internal programs and other models; build on PHMC’s long-term strength in financial management; initiate organizationwide fundraising and development activities; identify cost savings, including consolidation of functions; and explore new models of funding.

• Growth and Organizational Vitality Expand efforts to retain and develop staff through training, education, and development; create “career ladders”; design a competitive compen- sation program, including performance-based incentives; implement organizationwide succession planning; and highlight expertise and suc- cesses with internal and external audiences.

Community impact was to be measured by growth in quality services to cli- ents. With the implementation of the strategic plan and growth strategies, PHMC expected to see growth and improvements in all direct services, and had the goal of an additional 20,000 clients over the next 3 years, which it reached in the first year. To impact clients and the community, the new COO and CSO worked closely together with service-managing directors, who oversaw the health (behavioral health and primary care), health promotion, and social services and who focussed on the following strategic goals and tasks in this area:

• Public Health Issues Promote intraprogram data collection and analysis to identify public health issues and trends; create strategic alliances/partnerships with researchers, practitioners, and organizations, and work with CHDB to identify existing and emerging public health issues; promote increased collaboration among PHMC programs and affiliates; explore develop- ment of additional services/centers to address public health issues; increase public awareness of public health issues; and centralize track- ing systems to identify trends and issues. A key tool in meeting this goal was the recently created Project Connect, PHMC’s new data warehouse integration project, through which PHMC client program databases can develop connections to help identify geographic/demographic groups served and develop crosscutting performance indicators, including cli- ent satisfaction. Through Project Connect, client data was available for decision making and to show client impact.

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• Service to People and Communities Expand public awareness of and trust in PHMC services and operations; identify and engage community partner agencies and government agen- cies at all levels; integrate services internally to provide the best services possible; and utilize data and other resources to identify new service areas.

PHMC Board- and Executive-Level Buy-in

PHMC’s new corporationwide strategic plan and reorganization were owned and supported by all levels of its leadership, including the president/CEO and the board of directors. The board believed that the appointment of the CSO would lead to better organizational performance, enhanced revenues, and a sustainable future for PHMC and believed that the Strategy Counts project would accelerate the integration and success of the CSO role within the organization.

Early Results

PHMC’s taking charge of its future as a health and human services agency has shown results early on. In terms of structural realignment and build- ing internal capacity, within an 18-month period of the implementation of the initiative, PHMC determined that its internal financial management and human resources information systems needed overhauling. It invested in two new systems that would enable the organization to grow and scale. Simultaneously, PHMC’s CEO set out with the CSO and senior leadership to identify a new home for PHMC and create a new open office environment. The move, which is detailed in the next segment of this chapter, is expected to create ultimate culture change as the open space architecture allows for better collaboration among different entities.

In terms of strategic growth for existing and new business, PHMC’s part- nership affiliation model was accelerated with the focused effort of the CSO working in close partnership with the CEO to execute partnership deals. Whereas PHMC would usually do one affiliation a year, in the first year of the Strategy Counts initiative it was able to complete three. The future is still being built, but there is a general feeling that the silos have been broken and that PHMC has a bright future ahead of it.

Vision–Strategy–Space–Design–Culture: The New Paradigm

In early 2010, as the not-for-profit field faced a time of increasing complexity, PHMC began forging a direction to take its mission and its programs into the next decade. PHMC, begun in 1972, had enjoyed significant growth and

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success over the previous 10 years. Its budget and staff had doubled and its impact, measured by the number of programs run and clients and commu- nities served, had increased in scope by an even larger percentage. PHMC’s work in mergers and acquisitions, serving as a governance and back-office resource to programs strong on services but needing administrative support, was increasing in recognized value, and the number of new affiliates was growing each year.

At the same time, the board and executive leadership recognized the impending challenges not only facing PHMC and its affiliates but rapidly looming over the sector. Funding mechanisms were changing, and govern- ments looked increasingly at their not-for-profit partners as vendors. With the emergence of for-profit entities competing in the sector, impact and outcomes were nonprofits’ only stated metrics of success, and there were no clear definitions; in addition, talent was increasingly difficult to recruit and maintain, and myriad factors were increasing the management and financing challenges faced by the boards and staffs of high-functioning nonprofits.

The board and management of PHMC did an environmental scan of the field and fully realized that past success and a level of outstanding service were not enough to ensure the organization’s ability to serve and succeed in these new realities. They recognized that change would be necessary at multiple levels—strategy, governance, management, talent, facility, and culture—and created a process to identify, evaluate, and execute a set of responses that would help ensure the continuation of PHMC’s and its affili- ates’ strong missions for years to come.

As a first step in this work, the executive management of PHMC, work- ing closely with the board leadership and using an outside consultant to facilitate and staff resources to manage the process, entered into a focused review of its strategy aimed at the creation of a succinct and practical strate- gic direction for the enterprise. This development phase included a review of past strategic plans, town hall meetings with staff of all levels, board dis- cussions, and discussions with community stakeholders, all leading to the board-led approval of a new strategic direction for the organization. The process culminated in establishing a practical action-driven set of brief state- ments reflecting the refined principles as the categories of vision, mission, approach, values, and goals.

This new strategic direction for the corporation required a more dynamic governance structure that could support and drive change while offering flexibility in movement with strong oversight capacity. The board of direc- tors of PHMC actively engaged in this change process, using a board bylaws committee with members who understood that 40 years of past success with little modification in governance structure during that time did not guar- antee an ability to adapt and succeed in a new environment. Members put personal biases and needs aside, focusing only on creating the best govern- ance framework for PHMC while never losing focus on the crucial oversight role of a board. For the first time in PHMC’s corporate history, stringent term

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limits were put into place. Board seats were realigned with more meaning- ful representation. Committees were updated based on the needs of a high- functioning corporation facing new challenges. After a robust process, new bylaws were unanimously approved by the PHMC board.

With a new strategic direction and an updated governance structure and rules of engagement in hand, senior management looked closely at the organizational structure in place and assessed the ability of this staff- ing alignment, as well as the incumbent talent and capacity base, in order to determine whether what existed would allow for maximum delivery on the new strategic direction. After a thorough review both internally and with assistance by outside consultants, it was determined by management and supported by the board that a new organizational structure would be needed. Again working with the strategy consultant and including full input from the board and staff, the team worked together to craft a structure that would allow for the best delivery of service and output on the new strategic vision of the enterprise. Beginning with a “C suite” of five chiefs, it was clear that a chief strategy officer position would be essential in driving the organ- ization to its new level of delivery and achievement. Also proposed were chiefs for finance, human resources, and communications, all working under the chief executive officer. Each “book of business” (major program area) was identified with a managing director (MD) who would oversee and guide that area toward success in terms of growth, revenue, service excellence, client outcomes, and a positive bottom line. After a thorough review and vetting process, there was full support for the new structure at the board, executive, management, and service levels of the corporations.

The new structure required an assessment of the current talent as well as the alignment of available managers and executives. Much of the success of PHMC over its 40-year history had related to the consistency of its staff and leadership team, as well as to its rich set of relationships with funders, com- munity leaders, service experts, stakeholders, and friends. Because there was a new set of realities, defined by the need for flexibility and change, as well as required new relationships and partnerships, it was important to assess the role of incumbents as change agents. In order to provide options, the executive leadership, working with senior members of the board, sought and engaged an outside HR consultant to construct an early retirement option for long-term employees who might prefer retirement to engagement in a process by which to be considered for a position in the new structure. In researching the early retirement option, it was discovered that there was little to no precedent for this kind of option in the not-for-profit public health and human services fields. After a careful development process, the option was rolled out and, with full and open choice for the long-term employees, was implemented with incumbent management staff with more than 20 years of service. Six of these staff chose to accept the option and leave at a specified time, receiving transition pay and benefits. With this new structure and a number of key positions available, executive leadership at PHMC recruited a

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dynamic, diverse innovation-focused team prepared to implement the new strategic direction and structure and committed to driving the enterprise to mission and business success.

• PHMC, with strategy, structure, and leadership staff in place and begin- ning to engage in the challenges ahead, focused its next change man- agement initiative on the working space, design, and culture of the corporation, beginning with a review of the literature and discussions with experts in the field. Strategic innovation through the use of spa- tial workspace design driving cultural change was the goal, with a com- mitment to using the same kind of energy focus on this area that had been placed on governance, strategy, structure, and talent leading up to this phase of the corporate change initiative. PHMC looked to a global business context for perspective on the highest standards in workspace design. Current realities include the following:

∘ The rapid pace of technology evolution, facilitating unprecedented access to information and knowledge while altering people’s values and behaviors across departmental and international boundaries

∘ A globalized economy in which an increasingly aware and diverse workforce demands respect and the provision of its social, psycho- logical, cognitive, and physical needs

∘ The recognition that wealth creation centers on social, intellectual, and knowledge capital, demanding a humancentric approach to strategic management

∘ The geometric growth of complexity and available information in a competitive innovation landscape, requiring organizations to encourage collaboration across distinct and specialized disciplines to remain competitive

∘ Devising means to shift from a task-oriented to a results-oriented corporate culture in which the emotional and social aspects of work, largely hidden in social network bonds, are as important as hierarchy and direct compensation were to traditional work (Steelcase, 2011)

Utilizing theory espoused by Steelcase, a global leader in the office fur- niture industry and the contractor eventually selected to help direct this new initiative, PHMC was eager to adopt many of the values that were con- tributing to sustainability and workforce strength throughout the world. Acknowledging that organizations succeed through reinvention and that technology is disrupting our traditional methods of gathering, comprehend- ing, and sharing information was a key value in PHMC’s initiative toward physical transformation.

As the issues faced at work increase in complexity, so do potential solutions. The paradigms for workplaces today were developed 40 years

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ago. Many of the jobs we do today didn’t even exist back then, let alone the tools used to do them. Yet workplaces are sometimes designed with a one-size-fits-all approach that disregards individual work styles and pref- erences. Lifestyles have evolved as people juggle competing demands and priorities from all directions, and the modern challenge is managing a bal- ance between work and personal lives. How work gets done reflects these changes. Productive work is all about new ways to solve problems, not pro- cessing yesterday’s activities. Individuals can create value with new ideas alone, but giving them access to each other, to the leaders, and to information and processes, can foster latent skills that many workplaces currently don’t have access to. An ideal workspace allows people to spend time getting to know their colleagues, learning from them, sharing personal experiences, and building trust. In the new ideology for successful work environments, “the office” provides a variety of settings that support the work being done, not necessarily the position on the organizational chart.

The contemporary workplace provides choice. Providing spaces where people can work by themselves without distraction, spontaneously connect with others for a quick update on a project, or conduct a team meeting in a space where others are free to drop in can break down many of the typical barriers that exist in older offices. But removing the physical borders is just a start. Generating continuous and appropriate innovation often requires more flexible work processes, different structural relationships, the forg- ing of new trust relationships between staff and management, cultural evolution, and staff ownership of the decisions and financial well-being of the company (Klein, 1998). Many organizations think of themselves as strictly businesses, but people are the wheels in motion that operate that business. Human beings are social creatures, and they want to be part of a community, not a business strategy. Thinking of the work environ- ments and technologies more broadly as active tools in the organizational change process makes the discussion richer and potentially more valuable (Steelcase, 2011).

The opportunity to redefine the boundaries so that a new engagement model can support higher-order processes such as innovation and informed decision making was one that PHMC could not afford to miss. Understanding how to use the workplace as a tool to uncover and leverage behavior and cul- ture change allowed for aligning workspace design with strategy and goals beyond cost. The basic paradigm shift was to design with and from an engaged employee and executive point of view rather than by designing simply “for” staff. Techniques to do this without lengthening the design process have been developed and used by Steelcase’s Applied Research and Consulting group, in concert with leading design thinkers, for organizations globally (Steelcase, 2011).

The models used acknowledge and act as though organizations are made up of both formal structures and informal social networks. It is this

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deep and dynamic relationship that is culturally embedded in the accom- plishment of knowledge work. Staff are first engaged in thinking about how value can be created in an organizational future state, and through these discussions they help frame a new mix of tools that are active elements in “becoming the change.” Staff involvement in needs definition helps bridge the often disparate languages of business and design, linking design mean- ingfully to business needs through human engagement (Steelcase, 2011).

In developing its own plans for a reenvisioned workspace, PHMC was extremely fortunate to have the assistance of the architectural design firm Bradberry and Kheradi (B&K) in the design of its facilities for almost two decades. The B&K team knew the work of PHMC and its team. They had worked closely with the leadership and understood the mission, personali- ties, needs, and cultural drivers central to the corporation and its objectives in this change management process. They shared its vision, style sensibili- ties, and drive for disruptive innovation in the work. Most important, B&K brought the industry knowledge that design drives culture and change and became the lead partner in this essential component of the PHMC drive towards a strategic future. B&K’s projects are always a collaborative effort, combining good design with efficient plans and meeting the optimal opera- tional needs of its clients. The process to get to a great design and the most efficient space is a very involved one, and when working with PHMC, B&K knew that direction from the executive team would be critical with regard not only to design but also to the function of the space.

As with any change-driving process, first steps included extensive dis- cussions, research, and in-field activities. Over a period of months, visits to identified “forward designed” office facilities were made, continually refin- ing the vision of an office space most aligned with PHMC and its work. Early outreach was made with the cutting-edge office furniture companies. B&K principals joined with PHMC executive leadership in reviewing furniture options, understanding competing value propositions, and using the rich experience of the furniture companies that are among the leaders in under- standing worksite and employee behavior in an extensive process of field review of workspaces. As the work continued, the full PHMC leadership team engaged in these discussions and processes, with several field visits by the full team.

In this series of visits and meetings, it was clear that one of the office furniture providers stood out as the most closely aligned with the PHMC vision for workplace and cultural change. After an extensive set of discus- sions and negotiations with full engagement, input, and assistance from the B&K partners, the aforementioned Steelcase was selected as the furniture partner for this project. From the outset, there was clear and close align- ment between PHMC, B&K, and Steelcase. In addition, Corporate Interiors, the local Steelcase franchise, worked closely as a key player in this partner- ship. B&K, as the architectural design professionals, led the process, serving

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as the central point of contact, the vision leaders, and the project managers in moving this concept and mission to the reality of the newly envisioned PHMC corporate headquarters.

At about this time, the actual office space was identified. After a wide- reaching search throughout Philadelphia, undertaken while working closely with B&K and without the use of a real estate broker for strategic as well as financial reasons, PHMC identified an outstanding building with the full array of class A facilities in the central core of the city. A lease was negoti- ated and actual office planning was initiated quickly, and B&K continued to serve as the leaders in this activity, calling on each of the partners but taking responsibility for getting to the actual construction in a timely fashion. With the actual space selected, the time and activity pressure to move the process from search and decision to execution was heightened.

When preparing to begin the exploration and visioning process, B&K knew that thinking through the overall design itself needed to be an effort involving all members of the staff, not just the executive team. PHMC took the information gathering to a new level on this project, to give a range of individuals the chance to help visualize what type of space might help them best perform their work. Staff were enlisted to help through surveys, ques- tionnaires, and tours of office spaces and similar relocation projects. The response was overwhelmingly positive, with tremendous ideas emerging from these discussion sessions and interviews, including how best to use technology in meeting spaces, the importance of collaborative work, and the need for specific types of space that nurtured staff well-being in both design and function. Much of the vision of upper management was echoed in the staff’s voices, and all of it was then translated into the plans for the new building.

Many visions were presented to B&K, all of which would influence the size and quality of PHMC’s new office space. Among the key values commu- nicated by PHMC staff were the following:

• Designing a space that would inspire everyone • Affording staff more ways to communicate with one another for better

collaboration • Enjoying brighter personal workspaces with more daylight • Creating a casual central gathering place where staff could socialize • Promoting healthy lifestyles by providing a fitness center and nutritious

meals/snacks for staff • Building in abundant meeting places with the right support technology

in place and abundant private spaces for staff who need to focus on indi- vidual tasks or take private calls

All involved were clear that the new space would include significant shared space. Offices would be at a minimum, more open space would be available, and there would be shared window spaces and access to natu- ral light, opportunities for collaboration and discussion, private spaces, and

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a number of innovative space concepts that would serve the needs of staff and visitors. On behalf of PHMC, B&K drove these ideas throughout the concept and design phases. An emerging theme that was central to plan- ning was the idea of a “town square,” an office area to which staff would be drawn for practical as well as enjoyment and personal purposes. B&K and the wider design team envisioned a fitness facility, a cafe, and a “help room” as key components of this town square. The square would be open and invit- ing, contiguous to conference rooms and meeting space. While these ideas were being calibrated, the data gathering process was taking place. B&K interviewed key PHMC personnel to obtain specs regarding staff quanti- ties, growth projections, and departmental, program, and staff adjacencies. Meeting space size and frequency needs were qualified; storage and file areas were assessed; and procedures on how much to store and archive were chal- lenged so that organizational standards and protocols could be revisited.

The next step for B&K was to give staff a way to understand how these ideas could be executed, in the form of a pilot or test space that would incorporate all of the above. The combined vision has resulted in an effi- cient, attractive, brightly lit space that occupies a full quadrant of an entire floor of PHMC’s current building. Varied private and collaborative spaces make the office a better place to carry out the functions of everyday work, as do comfortable and inviting meeting spaces with amenities, as all had envisioned. Constructing this test space allowed staff to be immersed in the simulated environment so that they could work with the team to modify and perfect the space and suggest improvements. The first of the teams to take up residency in the pilot has been truly pleased, with one of the program directors commenting, “Staff really enjoy the space. They want to be in the office more now. They talk to each other during the day, sharing resources and problem solving how to work with families through each other’s experi- ences.” Reflecting the information gathered in this way has been particularly rewarding for all involved and certainly establishes a best practice in ensur- ing that the new building will ultimately embody the best design possible.

A significant milestone in this project was the launch of the pilot space, which featured informal presentations from PHMC’s president, B&K, and Steelcase cycled repeatedly over the course of 2 days. Hundreds of staff attended to hear about the process that had unfolded in the previous year based on PHMC’s goals and values, while learning more about the world- view and changing workforce dynamics that pointed to an open floor plan. Each session concluded with a tour of the space led by B&K, who described the thought process behind the layout and functionality of the furniture. Team members created a celebratory tone for the launch with decorative touches around the space, a whiteboard wall where staff were encouraged to leave messages and first reactions, and a taste-testing station provided by a potential food vendor for the new building. This celebratory opportunity was utilized to its fullest in informing staff about updates and reinforcing the background and history inherent in the present, a type of messaging critical in a large organization in which channels of communications can be

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difficult to manage. Explaining the vision that went into the design provided clarity and context for staff who had not been central to the planning con- versations. Staff feedback was extremely positive, with Steelcase consultants commenting that it was one of the more successful events of the kind that they had seen.

Another important element of the pilot launch was a “Spring Cleaning Day” held at the end of that week. On the heels of seeing the new workspace model, staff had a better understanding of the level of reduction of paper and materials that would be necessary for them to be comfortable in the new space. Facilities and administrative services staff accommodated the dis- posal of close to six tons of recycled paper and almost as much trash across the roughly 700 staff in the building that day. Going paperless has been a major area of focus throughout PHMC’s change management process, and not solely because the new building will not be able to accommodate current levels of paper usage—both in individual workspaces and storage as a whole. Nor is it primarily an issue of ecological consciousness, although both the environment and the new space restrictions are compelling and pertinent motivators. What was most important was that the many transitions inher- ent in an organization of PHMC’s size make going paperless a tremendous business decision that ultimately impacts infrastructure and technological systems across all central and administrative units of the organization.

An example of a tool in this transition is the multifunction device, or MFD, which combines printing, scanning, faxing, and photocopying in one device. On a surface level, the major area of change in the new space is that instead of printers in individual workspaces, all staff will be networked to just a few central MFDs shared across the entire floor; plans estimate roughly four to six MFDs and approximately 150 staff per floor. More fun- damentally, however, this shift marks a transformation of how back-office systems are structured and utilized every day, most notably in the HR, fiscal, and information systems areas, as paper-and-pen forms and carbon copy materials become obsolete. In tandem with these revisions is a movement toward document imaging, which will employ scanners to feed paperwork into these electronic systems, ultimately resulting in a comprehensive filing system comprising internal documents, along with electronic file storage for the over 150,000 individuals whom PHMC serves.

Throughout these types of change decisions, more questions have emerged that reveal a need for additional changes in PHMC’s operational systems and infrastructure. Targeting key elements of organizational cul- ture, such as technology, central support roles, and policies, has put PHMC on track for true strategic change. Everything from how internal mail is distributed to establishing a universal standard for personal conduct in the workplace points to a true investment in and commitment to strategic cul- ture change. A primary area of focus for carrying out PHMC’s change man- agement process, through which workflow and infrastructure and culture can be truly transformed, is communications with staff. Through emails, surveys, meetings, focus groups, decentralized communication chains, and

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events such as the pilot launch, PHMC has been able to successfully commu- nicate with its 1,500 staff and, in particular, the 700 staff who will be mov- ing in 2014. The main goals associated with these communications were and continue to be to inform staff, to collect staff input, to answer questions and clarify rumors, to prepare staff for upcoming changes, and, when possible, to begin to implement changes in the current space.

The first all-staff communication was an email that linked to a survey provided by Steelcase. Exemplifying the strong partnership between the two organizations, PHMC was able to create custom questions and develop a free response section of the survey that Steelcase integrated into the existing for- mat. Staff answered questions about space, including how they worked at the time, the environmental factors that contributed to an ideal workspace, and what PHMC could do to enhance the health and well-being of staff through space. Shortly thereafter, a change management advisory group (CMAG) was created to develop an opportunity for open communication within a network of leaders and key stakeholders at PHMC, including the executive team/C-suite, managing directors, deputy-level and key future leaders, and staff involved in daily PHMC facility activities or administrative decision making. The first CMAG meeting was led by Steelcase, who painted a broad picture of where PHMC fell in the grand scheme of today’s workforce, and the research and data that led PHMC to its reenvisioned space philosophy. Two other key workgroups were also formed: the change agents, a diverse group of program staff with strong relationships and peer networks through- out the organization, and the administrative assistants and office managers, who provide critical input on day-to-day workflow issues, including mail, purchasing, supplies, room reservations, and other administrative areas.

Regular all-staff communications mainly comprise a series of biweekly emails branded “On the Move” that cover a range of issues related to the relocation and that have helped give structure to the pace of the change man- agement process. Additional forms of reinforcement and, likely, the more effective means of disseminating messages are through staff workgroups. The executive team meets with the managing directors who oversee PHMC’s 11 divisions every two to three weeks, and the MDs then disseminate updates and information to their staff while bringing questions to the execu- tive team as well. Throughout these practices, a critical dynamic among staff has emerged in which individuals have adopted organizational messages as their own and now help facilitate understanding among friends and peers in a way that management never could. Because they were empowered from the beginning of the process through regular opportunities for discussion and input, staff at all levels throughout the organization have become per- haps the most important leaders in changing the culture.

With the extensive involvement of partners in a complex change process, management, direction, and staff tactical efforts are essential, as exempli- fied throughout this process for PHMC. In addition, leadership and detailed project management are essential to a positive outcome. As PHMC began to explore the real estate portion of the project, the relocation discussion

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was included in existing weekly real estate meetings in which multiple con- struction and space discussions were reviewed for all of PHMC’s 70 loca- tions throughout southeastern Pennsylvania. Each discussion included an extensive update on the various metrics critical for project completion. This continues to be done on each of the PHMC real estate projects, but as the relo- cation process has developed, the space discussions have become the high- est-priority subject at each meeting, and the PHMC team of staff assigned to manage the work has increased accordingly. A key member of the strategy team was enlisted to manage many of the internal processes, in particular the staff-focused change management strategy. An outside consultant, an expert in facilities management, was recruited to play a key role in the facil- ity development planning. Throughout these steps, B&K has strongly man- aged the process, pushing all team members to consistent movement toward the targets and task completion that will keep the project aligned with an aggressive schedule. Throughout this process, various staff teams have con- tinued to meet and provide input, within the context of a relevant worldview from B&K and Steelcase.

Thus, PHMC is moving this process forward to the key point for true change. The governance, strategy, structure, and talent are in place. These will all help drive the corporation and its affiliates toward delivery of the strategic direction outlined at the beginning of this process. The new home for the organization comes with a vision to create a physical facility that sup- ports communication, collaboration, interaction, excitement, and change. PHMC’s physical transformation will drive a new culture of disruptive inno- vation toward the creation of robust and forward-thinking public health and social services for the communities we serve. That is PHMC’s vision, respon- sibility, and mission.

RESOURCES

For more information, see the following websites: Public Health Management Corporation: www.phmc.org Steelcase: www.steelcase.com Bradberry and Kheradi: www.bradberrykheradi.com

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http://www.booz.com/global/home/what-we-think/katzenbach_center/kc_webinars

http://www.thenonprofittimes.com/news-articles/work-is-a-battlefield/

http://blogs.hbr.org/cs/2011/03/culture_trumps_strategy_every.html

http://www.fastcompany.com/1810674/culture-eats-strategy-lunch

http://www.ccitoolsforfeds.org/systems_change.asp

http://www.vppartners.org/learning/reports/capacity/assessment.pdf

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