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Why new thinking?
Both risks and opportunities are growing exponentially today in most business sectors. Company directors and business leaders now have to deal with situations they had previously considered improbable or even impossible. This requires new thinking in all key areas including governance, leadership development and employee engagement.
The semantics of the topic ‘A New Governance Culture for Architecting Winning Organisations’ yield important insights into the challenging task of developing one to suit future conditions that are almost impossible to predict. ‘New’ implies that the old model and culture no longer meet today’s needs. ‘Governance’ is the model or way used to control an organisation, while ‘Governance Culture’ reflects the managerial outlook and collective consciousness. ‘Architecting’ means fail-safe designing for likely worst-case scenarios, while ‘Winning’ involves overcoming threats, managing risks and exploiting opportunities better than competitors. ‘Organisation’ is any public or private sector entity formed to achieve a particular aim using available resources, all of which appear to use an almost identical governance model.
Origins of the present
governance model
As Prof. Sugata Mitra explained in a TED talk, the Victorians set up a bureaucratic administrative machinery to manage the worldwide British Empire at a time when there were no telephones, and information was handwritten and carried by ships. This long delay between any improper deed and corrective action justified bureaucratic controls, which demanded prior permission for overstepping predefined administrative rules and regulations.
Despite modern information systems operating in real time, this old governance model is still used in most governmental, public and private sector organisations. It manifests as a hierarchical organisational structure, comprising of top and middle management, and supervisors and workers with clearly demarcated responsibility levels.
For example, problem-solving typically takes place at the lower levels, which involves analysing a problem and recommending a technically viable remedy. However, the decision-making process for its implementation takes place at the higher levels, which involves balancing the proposed remedy with other overarching business considerations.
In a conventional hierarchical organisation, the greater the perceived complexity of a problem, the greater the time lag between decision-making and problem-solving. This delay may have been acceptable during stable times, but, it can cause havoc in today’s rapidly changing business conditions.
Need for a new model
Survival requires the rate of organisational adaptation to be faster than the rate of change of operating conditions. In today’s turbulent commercial world, organisations cannot wait for slow higher-level decision-making on fast-changing ground-level realities that the decision makers are not directly aware of.
For example, the failure of many corporate giants during the global financial meltdown in 2008 stemmed from their inability to adapt quickly to drastic change, despite forewarnings by astute rating agencies. Japan’s renowned electronics manufacturers, once the titans of consumer electronics, are now struggling to survive against nimbler foreign rivals. Several major European economies are currently tottering on the brink of collapse.
Such situations are caused by stagnant business models, outmoded management practices, and reporting mechanisms that cover what has happened instead of what is going to happen (similar to driving a vehicle by looking in the rear-view mirror). Moreover, stagnant HRD (human resource development) models have failed to keep up with evolving organisational needs dictated by fast changing operating environments.
The old governance model with many such weaknesses was reactive, and lagged behind changing conditions. It needs to be replaced by a new governance model that is proactively and continuously outpacing changing conditions.
Consolidating the present
while creating the future
The new model has to consolidate the present while creating the future. This is difficult since these two objectives require different mindsets, talents and teams. Consolidating the present should ideally be handled by the CEO and the management team, while creating the future should be guided by the Chairman and the Board comprising of experts from diverse fields. The overlap between these two diverse objectives determines the future of any organisation – the smaller the overlap, the greater the sustainability under changing conditions.
Consolidating the present is about maintaining the status quo using gap analysis. It is similar to negative feedback used in engineering systems (such as the cruise control in a vehicle which maintains a predetermined speed). In contrast, creating the future requires positive feedback to accelerate favourable changes. Organisations typically take immediate managerial action when things go wrong (negative feedback). But, they rarely pay much attention to analysing and accelerating things that are going well.
Organisational survival and growth thus require diverse competencies that depend on the level of development of hard skills and soft skills available.
Balancing hard skills and soft skills
Hard skills are work-related knowledge, skills, tools and processes. HRD programs mostly focus on hard skills, because they are an extension of the educational and certification system. Hard skills may be sufficient for driving corporate success under stable conditions. But, as conditions become more turbulent, attitudinal and behavioural soft skills assume increasing importance. These include abstract thinking, emotional intelligence, leadership, creativity, etc that enable people to sense significant trends via intuitional insight or through interaction with others. A competency model for HR developed by SHRM in 2012 summarised this elegantly: Knowledge (hard skills) + Behaviour (soft skills) = Success.
Since soft skills are difficult to gauge and quantify, they are mostly underdeveloped and their value underestimated. Another major weakness in the current governance model is the isolation of hard and soft skills. Employees are therefore unable to detect significant trends and integrate new thinking and methods into their day-to-day work. Consequently, they function within their existing mental and operational frameworks, with no innovation, opportunity-seeking or risk-evaluation underlying their daily focus on problem-solving.
Feedback mechanism underlying the new governance model
The new governance model requires a close link between hard and soft skills, as shown in the diagram. In this new model, intuitive insights sensed by empowered employees from changes observed in the operating environment, combined with relational insights gained through their interactions with customers, suppliers, etc., will guide the acquisition, modification and deployment of hard skills. This provides a powerful and ongoing employee-based feedback mechanism for quickly adapting to rapidly changing conditions in operating environments.
This simple mechanism makes the concept of a ‘learning organisation’ an everyday reality. It requires decentralised problem-solving, opportunity-seeking and decision-making. It also requires the empowerment of employees at all levels to harness the full potential lying mostly dormant within each person.
Human potential development
The current focus on human resource development is too limiting in today’s turbulent conditions. This is because resources are like commodities that can be used to help achieve an aim. As operating conditions change, currently developed resources quickly become obsolete. But, human potential development has no such limitation since its aim is to develop the vast human competencies sleeping within every person.
This requires totally new concepts such as the development of the power centres (chakras) in the body identified by the Himalayan spiritual masters, which govern the abilities of each individual. Practical methods to activate all these chakras include eight simple exercises developed by Master Del Pe, and Chi-Kung breathing meditation developed by Chinese Taoist monks for rejuvenation. Furthermore, simple whole brain integration exercises that balance the left and right halves of the brain produce a huge five to tenfold increase in the brain power of any individual. All such empowerment methods pave the way for individual and corporate success.
The Five Dimensions of Success
The Five Dimensions of Success provide a new energy-based model for HRD via the development of five key attributes symbolised by Heart, Mind, Passion, Focus and Health. The five dimensions that appear to govern the success of individuals and enterprises even under unfavourable conditions are: Heart (emotional intelligence for empathising with and influencing employees, customers, suppliers, media, etc.); Mind (creative intelligence and critical thinking in employees’ minds, alongside their daily focus on problem-solving); Passion (what fuels the achievement of even difficult goals by aligning hearts, minds, beliefs and efforts); Focus (convergence of beliefs, resources and effort until goals are reached despite setbacks); Health (analogous to a healthy person with a strong immune system, as determined by profitable growth, net asset value, liquidity, return on capital employed, etc). Developing all five dimensions of success produces human potential development, which is essential for nurturing leaders.
Intrinsic leadership
Leadership is seen as the magic formula for achieving and sustaining organisational success. Can we really produce leaders, or identify them only after the fact? Though hard skill related parts of leadership can be modelled and taught, soft skill related parts are outside the scope of most leadership development programs. Furthermore, leadership development is limited to selected members of higher management levels. This stems from the conventional governance model with centralised control.
As conditions undergo rapid change, there is the need to develop the leadership qualities inherent in each person at every level. The objective is to produce Energised, Empowered, Engaged Employees (the 4 Es of success) right across the organisation by developing their Five Dimensions of Success. The new governance model presented earlier is founded on this new concept of intrinsic leadership, which enhances employee engagement.
Sustainable employee engagement
Traditional employee engagement, defined as the willingness to invest discretionary effort on the job, is not sufficient to give employers the sustained performance lift they need in today’s high-pressure work environment. What is needed is ‘sustainable employee engagement’. This requires the creation of an energising work environment embedded in an empowering culture that focuses on workers’ physical and emotional wellbeing.
The Towers Watson 2012 Global Workforce Study, covering over 32,000 employees in large and midsized organisations across a range of industries in 29 markets, makes the most powerful case yet for the connection between higher organisational operating margins and this new and more robust definition of sustainable employee engagement.
In its analysis of 50 global companies, those with low traditional employee engagement scores had an average one-year operating margin just under 10%; those with high traditional employee engagement had a slightly higher margin of 14%; but, those with the highest sustainable engagement scores had an average one-year operating margin almost three times higher at 27%.
Conclusions
Research shows no clear logical link to prove that good governance improves organisational performance. Managerial autonomy in decision-making has improved the performance of large companies such as Maruti Udhyog in India. The proposed new governance model gets rid of complicated structures, sets basic ground rules and result monitoring mechanisms with action thresholds, and basically gets out of the way.
Designed to ensure corporate success even under difficult conditions, it uses distributed control based on the development of intrinsic leadership of employees at every level, achieved by improving their Five Dimensions of Success. The resulting sustainable employee engagement has been shown to improve average one-year operating margins by an astonishing 27%.
Dr. Jinadasa encouraged the audience members to look outside their existing paradigms of hierarchical governance cultures. He went on to demonstrate a few mental and physical energising techniques he teaches in his workshops to show the ease with which personal empowerment can be achieved with anyone at any level. He also mentioned one well-known company that has embraced this new concept, where he is currently empowering a workforce of over 500 employees ranging from gardeners to senior executives.
The session was wrapped up by SLID CEO Lilani Perera, who thanked the guest speaker. Dr. Jinadasa holds an American PhD in Corporate Strategy, and has been a Chartered Engineer (UK) and a Fellow of the British Computer Society and the Institution of Electrical Engineers (UK). Apart from his highest academic and professional qualifications, he is an award-winning filmmaker, media advertiser and a brand marketer. He is also a Master of the Chinese martial art, Tai Chi Chuan, and an internationally acknowledged expert in the new field of Human Potential Development using a blend of behavioural psychology, Neuro Linguistic Programming (NLP), Chinese breathing meditation (Chi Kung) and Himalayan human energy science.
Details of the presentation can be obtained from Dr. Asoka Jinadasa at [email protected]. The event was sponsored by Allianz Insurance Lanka Ltd., whilst the Electronic Media Partners were Yes FM, Legends FM and MTV Sports.
The institute’s next event, the CEO Forum, will take place in September this year. More information on its activities can be obtained from its website www.slid.lk or by its CEO at [email protected].
