Part 2: Individual Behaviour and Processes
BOSS Magazine article
The McKinsey Rapport
Source: H. Trinca, “The McKinsey Rapport,” Boss Magazine, March 9, 2001, p. 34.
It's time to put the personal back into business, says consultant Michael Rennie.
It's time to recognise emotion. Which is a new direction for the hard heads of the industry.
As songlines go, Michael Rennie's is a ripper. A bright boy from a not-so-privileged family who studies philosophy, languages and economics, he wins a Rhodes scholarship, becomes a lawyer and then a staffer at McKinsey & Company. Hit with cancer at age 31, he beats the rap with chemotherapy and a passionate belief in the power of the mind to manufacture white blood cells. Back at McKinsey, he's more in love with life than ever, a voracious reader of philosophy and religion. But this time around, Rennie is ready for a different way of working. Within a couple of years, he is carving out a new service line for clients - one where values, spirit, cultural capital and meaning are as important as the bottom line, cost-containment and corporate strategy.
"For a long time," says Rennie, now a McKinsey director in Sydney, "there were two people within me - one was the person who loved the excitement and the stimulation of the material world. I love the world and life. I love business and I don't have much fear about it, I just enjoy the game. And there was another part of me that was increasingly reflective. My friends joked that I would either run the country or go to Nimbin, and for a long while I grappled with that. There was a struggle between the two me's; they weren't integrated, and for a long time I thought it was a choice - at some stage I would make the choice and the other me would die out. After the cancer I came to realise that it wasn't a choice: it was about integration, and I came to know that if I didn't integrate the two, I would get sick again."
Though it contains neither a prime ministership nor rural escape, Rennie's story about integrating body, mind and the spirit is potentially as influential in business as anything he might have done in mainstream - or counter-culture -politics. The work on "cultural capital", which he and others have been rolling out at energy giant Woodside Energy Ltd during the past 18 months, focuses on building a high-performance organisation by liberating the personal - in a corporate world where the personal is increasingly almost always cause for scepticism.
Then again, it's easy to be sceptical about hard-edged McKinsey types promoting the idea you are nothing without the hearts and minds of your workers. Since its establishment in the 1920s, the firm has been hauled in by the top end of town to "fix" problems, whether a falling share price or a stultified strategy. The McKinsey "diagnostic" in which a project team bunkers down for a review, delivers the solutions and leaves implementation to senior managers has given it a public image built around numbers and systems, not people. While the company has always advised on leadership, the work at Woodside is a departure because of its focus on the importance of building "intangible" assets such as values to develop a high-performing culture. Which requires a different approach.
"In the simplest terms it is about enabling people to be themselves at work," says Rod Griffiths, a Perth consultant with his own company, Systema, who has worked closely with McKinsey in the Woodside program. "You can go to a much simpler and productive way of working if people don't have to remember what role they should be playing.
"It's about developing a management model that moves away from being built around role, authority and position to one based more on working with others through who you are, working through a much greater sense of yourself and how you are with other people, and therefore through relationships rather than formal authority."
Michael Rennie's belief in the need to allow people to be themselves at work was hastened by his being diagnosed in 1990 with Hodgkin's disease. He spent months in chemotherapy and working with Melbourne-based Ian Gawler, whose "alternative" approach to healing cancer includes meditation and positive-thinking techniques. Rennie emerged cured of the cancer, and with a new appreciation of the need to integrate mind and body - personally and in the workplace.
It had a synergy with the times and the increasing questioning of the industrial model of work. "Business is the most powerful institution on earth today - it is more powerful than politics," Rennie says. "Business serves us very well in some ways, but it doesn't serve us as fully as it could; it doesn't serve us fully as people. We put on masks when we come into the workplace and that doesn't serve us.
"We have had an industrial paradigm: you turned up and you did something and you were replaceable. But now, to be really successful, companies know that people have to bring their creativity and their passion to work."
Which is what hundreds of consultants around the country, many of whom have a background in human resources and the public sector, have been plugging away at for decades. There have been some excellent examples of developing different cultures, most notably the work at Lend Lease under Professor Bill Ford (an AFR BOSS mentor). Westpac, Kraft, BP and Macquarie Bank are also addressing these challenges in different ways.
The McKinsey program has been influenced by the likes of Daniel Goleman, Peter Senge and Richard Barrett. Rennie himself has been influenced by Carl Jung and Joseph Campbell (see box).
Putting "creativity and passion" back into the workforce is a fine idea - but implementing it has been difficult when power has been based on retaining hierarchical "command and control" systems rather than around the motivation and fulfilment of workers.
Which is where the McKinsey adoption of these ideas is potentially useful: its change program comes with the grunt that corporates understand. With a track record in cost containment - often at the cost of people - McKinsey can talk about things like "cultural capital" without frightening the horses.
Viv Read, director of consulting firm Crosstech and a former president of the Australian Human Resources Institute, says integration is crucial in such work. She refers to W. Edwards Deming, the American management expert whose ideas revolutionised Japanese industry after the war, who said there were 14 points to improving quality. "Seven of them were about the rational, and seven were about the non-rational," says Read. "We have been very good at implementing the ones above the rational line but we have largely ignored the seven below the line. Whether it is yin or yang, rational or non-rational, we have always known that you need both sides of the coin.
"Part of the difficulty is that we either teach people to hug trees, or we teach them to be strong business people. What we really need is integration."
Read says that in the past, most organisations have used consultants like McKinsey for the big strategic analysis, and smaller consultants for the "people" work, with this work often driven by human resource managers and departmental or team leaders without the sign-off of the board or the CEO.
Rennie acknowledges it is the combination of economics and psychology which is powerful when it comes to convincing CEOs to take the new path. The Woodside performance leadership program uses the phrase "... and ..." to show it is about both sides of the equation - systems and individual behaviour.
Says Rennie: "We still do a formal diagnostic and the program has traditional aspects to it. We don't do any of the work on mind-sets and behaviour separately from the other [formal processes of accountability or performance measures]."
It was Woodside's CEO, John Akehurst, who became convinced of the "cultural capital" program after being briefed at a McKinsey forum. As a highly technical, process-oriented oil and gas company, Woodside has had a long commitment to being a "best practice" company. But Akehurst wanted to go further on the people level.
In a recent company newsletter he told his 2,400 employees: "I personally recognised that, despite my best intentions, the way I behaved in the pursuit of business success was often creating stress in the workplace rather than building trust and empowerment."
Enter McKinsey with fresh content, a new style. Notoriously "hit and run" in approach - delivering a report for the board and senior executives to implement - this time McKinsey consultants are on the ground for a two-and-a-half year exercise.
The work at Woodside began in 1999 and included a "diagnostic" involving surveys and interviews. The aim has been to align the firm's procedures on accountability, reward and performance with various principles related to the value of cultural capital. A core element is an extensive change program which includes each employee taking part in an off-site workshop on trust, self-awareness and communication. The sessions, which last between two and four-and-a-half days, involve about 25 people each.
The sessions are led by two trainers with psychology backgrounds and a Woodside staffer who covers the business side. They take the group through an experience of change, using Daniel Goleman's EQ work and other techniques. Each employee is taken through the results of a 360-degree performance review done before the group session.
When the workshops are finished at the end of this month, Woodside will "put the rubber on the road" according to its performance manager, David Rowell, by developing more management skills at the team level and helping people reorganise their work. McKinsey will stay involved for 12 months and there will be coaching, mentoring and peer group support provided. Rowell says he is optimistic that the program will continue regardless of Shell's bid to take over the company, because the Dutch-based oil giant itself is working extensively on cultural issues at a global level.
Rennie and his team first trialled some of the ideas in a call-centre change program about four years ago. The work attracted global attention at McKinsey and led to a major research effort involving colleagues in the US and in Vienna, where senior partner Dr Michael Jung (no relation to Carl) has done a lot of theoretical work in the area. Jung says the Australian work was quite different "but complementary" to the work he has begun in the past few months with 25 European and US companies - a program based on diagnosis and change programs delivered online (see box on page 36).
McKinsey's managing partner in Australia, John Stuckey, says he is impressed by the way local executives "get it" compared with their overseas colleagues. At McKinsey for 20 years, Stuckey admits he was initially nervous about the idea, believing it was too soft. Now he is "increasingly optimistic that it will become a quite significant part" of the Australian practice. It is changing McKinsey's staffing structure, with more psychologists being hired, and is likely to affect the fee structure because few companies could afford the higher cost of the far longer duration required for this work. Stuckey says he is reviewing the fees so that clients get "value for money".
Critics argue that McKinsey is simply jumping on to a faddish bandwagon in a bid to retain market share as clients become more demanding about implementation. Other consulting firms, such as Booz Allen & Hamilton, are also moving in this direction in response to increasing interest in the people factor. But the McKinsey brand is such that the results at Woodside will be closely watched.
The virtue of the virtual
McKinsey & CO is working with 25 corporations in Europe and the United States in a bid to deliver cultural change programs, like that used at Woodside, via the internet.
The radical method of diagnosing companies and then taking workers through a change process in cyberspace is being driven by Dr Michael Jung, a McKinsey partner in Vienna, who has worked closely with the Australian practice in developing the local work. For the past two years, Jung has focused on turning his research - conducted with academics from institutions such as Harvard - into a technology-based program for delivery through the internet.
It is in sharp contrast to the labour-intensive coaching work at Woodside, but Jung denies it is being driven by cost factors. "We are using technology not primarily as a cost-cutting exercise but also to enhance value and increase the scale, speed and the depth of change."
The work remains largely confidential, but Jung says the net-based change programs, which he hopes will be completed this year, will be tools for helping staff experience change in a "virtual" rather than "real" context.
"Change is about the quality of the information transmitted, not necessarily the type of information," he says. "If you're reading a novel and you are really thrilled by it, you will have an experience. If you're seeing a movie, you cry even if it isn't your drama. Experiences are not necessarily purely real interactions."
He says the programs are based on the idea that you can intervene to change people's experiences of reality - and that can be done by virtual means as well. Nine months ago, the first of his clients went online, using the net-based diagnostic program to run cultural "audits". Now about 25 clients are using it.
With a certain level of understanding of the processes of social reality transformation, according to Jung, it is possible to design "interventions which are meticulously crafted" to achieve change. He argues that leadership in corporations is about making decisions, but not all decisions can influence the reality of workers.
"I can't decide that you must trust me," he says. "I can decide to build a plant but I can't decide that you will be excited, I can't decide that you are committed and aligned. "I have to find ways to influence the ways that you have constructed reality, and influence that - and that can be done by virtual means."
Richard Barrett builds on psychologist Abraham Maslow's hierarchy of human needs on four main levels: security, relationship, self-esteem and self-actualisation. Barrett defines levels of consciousness enjoyed by organisations in their journey to maturity.
Peter Senge says we should look at the way systems operate - in non-linear, non-hierarchical, organic ways - to develop new ways of building organisations that can collectively learn and retain knowledge.
Daniel Goleman says we need emotional intelligence - or EQ - not just IQ, at work. EQ comes from maturity, self-awareness, self-confidence and social adeptness.
Joseph Campbell wrote extensively on the power of myth, especially the universal myths of the hero, that shapes the way we live our lives.
Carl Jung developed a school of analytical psychology based primarily on the notion that we share in - and are driven by - the collective unconscious.
How it works at Woodside
At WOODSIDE'S offices scattered up and down Perth's Adelaide and St Georges Terraces, staff at all levels now practise "clearing" before meetings.
"Clearing" is simply taking a few minutes to give each person the chance to say what is on their mind before beginning the agenda.
According to performance manager David Rowell, the program has "surpassed our expectations. Everyone has been a bit blown out by what we have achieved. It was a real leap of faith ... but if we go back 12 months, it was a different place to work.
"People seem to feel a bit more open in communicating about things. There is a general feeling of involvement. A lot of people talk about the way they are working better in teams, they are relating better to each other and there is less conflict. And the conflict is constructive ... it's more about directing the energy in the group to productive outcomes rather than nitpicking."
Shell's takeover bid had caused concern about Woodside's future, but the people in the team directly involved had talked about their improved ability to handle the pressure
It's not all roses. There was feedback last year that people were disillusioned about people development issues. And staff have left after going through the program and realising they wanted more creative or different work.
Others have been so sensitised by the experience, that their families have felt left out. Woodside has run modified family workshops for spouses and adult children so they too can be exposed to the ideas and the experience.
Reading list
- Leadership and the New Science: Discovering order in a chaotic world
- Margaret J. Wheatley, Berrett-Koehler Publishers, 1999
- Emotional Intelligence, Daniel Goleman, Bantam Books, 1997
- The Dance of Change: The challenges to sustaining momentum in learning organisations, Peter Senge, et al, Doubleday, 1999
- Liberating the Corporate Soul: Building a visionary organisation, Richard Barrett, Butterworth-Heinemann, 1998
The McKinsey Rapport1