Welcome To The Denison Consulting Certification Workshop

1. Welcome To TheDenison Consulting Certification Workshop

2. Dan Denison Chairman & Founder, Denison Consulting ddenison@denisonculture.com Dave Croci Director of Client Management, Denison Consulting dcroci@denisonculture.com Your Facilitators Bryan Adkins CEO, Denison Consulting badkins@denisonculture.com Stevie Collini Client Account Manager, Denison Consulting scolinni@denisonculture.com Lindsey Kotrba President, Denison Consulting lkotrba@denisonculture.com Ari Black Business Development Manager, Denison Consulting ablack@denisonculture.com

3. Workshop Agenda

4. Building a High Performance Business Culture

5. What Is Culture? Why Is It Important?

6. Mindset is the Foundation Norms, Behaviors and Artifacts. Visible, tangible. Personal Values and Attitudes. Less visible, but can be talked about. Cultural Values and Assumptions. Usually not visible at all, often held subconsciously, rarely (if ever) questioned in everyday life. Image by R.A. Clevenger

7. 0 Culture Reflects the Lessons Learned Over Time Visible Symbols Culture Lessons Survival Underlying Principles Image by R.A. Clevenger http://www.youtube.com/watch?v=6_WAmt3cMdk

8. Rituals, Habits, & Routines Wemust  make  automatic  and habitual  ... as many useful actions as we can. The more of the details of our daily life we can hand over to the effortless custody of automation, the more our higher powers of mind will be set free for their proper work. William James

9. Hold Your Horses! Morrison’s essay opens with a story of a young time & motion expert trying to find a way to speed up artillery crews during WWI, just after the fall of France. He watched one of the five- man gun crews practicing in the field with their guns mounted on trailers, towed behind their trucks. Puzzled by certain aspects of their procedures, he took some slow-motion pictures of the soldiers performing the loading, aiming, and firing routines. When he ran these pictures over once or twice, he noticed something that appeared odd to him. A moment before the firing, two members of the gun crew ceased all activity and came to attention for a three-second interval extending throughout the discharge of the gun. Since this seemed like quite a waste of time, and the young time & motion expert really couldn’t  make any sense of it, he asked an old artillery colonel to look at the films to see if he could explain this strange behavior. The colonel, too, was puzzled. He asked to see the pictures again. "Ah," he said when the performance was over, "I have it. They are holding the horses.” Elting Morrison, Gunfire at Sea

10. Paul O’Neill at Alcoa:Identifying Keystone Habits • It got so bad they would bring dummies to the parking lots, dress them like managers, and burn them in effigy. “Alcoa was not a happy family. It was like the Charles Manson family, but with the addition of molten metal.” • O’Neill picked safety as one thing that unions and executives could agree on. Zero injuries. Injuries must be reported to the CEO within 24 hours. • “We killed this man. It’s my failure of leadership. I caused his death. And it is the failure of all of you in the chain of command.” • Once you see everything as a bunch of habits, it’s like someone gave you a flashlight and a crowbar and you can get to work.

11. Changing CultureBy Changing Rituals, Habits & Routines Good Bad Old New

12. The Denison Model

13. What Counts… MissionDirection, Purpose, & Blueprint Adaptability Pattern, Trends, & Market Translating the demands of the business environment into action “Are we listening to the marketplace?” Defining a meaningful long-term direction for the Company “Do we know where we are going?” InvolvementCommitment, Ownership, & Responsibility ConsistencySystems, Structures, & Processes Building human capability, ownership, and responsibility “Are our people aligned and engaged?” Defining the values & systems that are the basis of a strong culture “Does our system create leverage?”

14. MISSION Creating Shared Vision: creating a clear and compelling vision of a future state Defining Strategic Direction & Intent: understanding, developing and executing strategy Defining Goals & Objectives: setting clear goals and tracking progress against those goals

15. INVOLVEMENT Developing Organizational Capability: developing employees to meet current and future organizational needs Building Team Orientation: developing successful, effective teams Empowering People: sharing information and communicating so that employees have the information they need to make informed decisions – the ability to make a difference

16. ADAPTABILITY Creating Change: encouraging change and continuous improvement Emphasizing Customer Focus: understanding customer needs - developing responsive, effective working relationships with customers Promoting Organizational Learning: seeing continuous learning and innovation as critical to adapting and leading in a dynamic environment

17. CONSISTENCY Managing Coordination & Integration: building effective working relationships with a range of colleagues & stakeholders across the organization Working to Reach Agreement: engaging in effective problem solving and decision making Defining Core Values:aligning the behavior of self and others in accordance with the Core Values

18. Beliefs and Assumptions:The ‘GREY’ Area in the Middle of the Model • At the heart of every culture are a set of beliefs and assumptions – about the organization and its people; the leaders; the customers; competitors; the sector; etc. • Resolving cultural issues and making progress in the development of a high-performance culture often requires a thoughtful exploration of the underlying beliefs and assumptions. Beliefs and Assumptions

19. Dynamic Tensions Effective leaders and organizations are Externally AND Internally focused Effective leaders and organizations focus on Flexibility AND Stability

20. Dynamic Tensions Effective leaders and organizations offer strong leadership AND involve their employees Effective leaders and organizations balance ‘External Adaptation’AND‘Internal Integration’

21. A Culture Profile:The100 Year Old Manufacturing Company

22. One Hundred Year Old Manufacturing Company

23. 68 29 12 11 9 18 12 55 8 66 63 82 One Hundred Year Old Manufacturing Company • First in industry, but declining • Trying to hold on to the past • 1st time in 20 years failed to meet targets • Targeted by competitors • President operationally focused • “We’re a team going down together

24. How Culture Links to Business Performance

25. Culture Links to Business Performance · Growth · Stable Performance Over Time · Profitability ROI, ROS, ROE · Innovation · Customer Satisfaction · Operating Performance · Quality · Employee Satisfaction

26. Impact on Performance The higher the culture scores, the greater profitability, sales growth, & market value (based on a study of 130 firms; 2000-2010) Bottom 25% Top 25% Return-on-Assets 2.3% 3.2% Sales Growth 1.4% 23.1% Market-to-Book Ratio 2.6 4 26

27. Satisfying Your Customers Below 50% Highly Satisfied Above 80% Highly Satisfied • Study of Automotive Service Centers in the USA • Total of 338 dealerships and over 12,000 employees • Compares organizational culture and customer satisfaction

28. Organizational Culture and Employee Engagement Bottom 10 DOCS OVERALL Top 10 11thPercentileENGAGEMENT FACTOR 83rdPercentile

29. Culture Causes Performance 2 Years 1 Year In summary, culture comes first and serves as a driver of subsequent performance levels.

30. When Is High Consistency Bad? • When Involvement is low, high Consistency will likely lower an organization’s performance.

31. 2011 Denison Global Benchmark • 931 companies in 48 Countries • 50% of the respondents in the last 5 years are from outside the US • Headquarter Distribution • 28% are Multi-Nationals • 75% North American, 14% Europe, 5% Asia/Pacific, 2% Africa/Middle East, 2% Central & South America, 2% Australia/Oceania • Wide classification of industries using the North American Industry Classification System (NAICS)

32. Why We Use Percentiles Survey Item Mean % Favorable Percentile Score (4s & 5s) Score Most employees are highly involved in their work There is an ethical code that guides our behaviour and tells us right from wrong Customer input directly influences our decisions People work like they are part of a team There is good alignment of goals across levels Our vision creates excitement and motivation for our employees It is easy to coordinate across different parts of the organization 3.94 3.78 3.59 3.46 3.21 3.04 2.81 86% 82% 86% 64% 57% 41% 40% 50 50 50 50 50 50 50

33. Our Research Is Ongoing European Journal of Work and Psychology Reliability and Validity of the DOCS and other measures of Culture Looking Across the World Other exciting research Financial implications of manager / non-manager alignment Effects of Executive coaching interventions Unionization and organizational culture

34. Application

35. The Language of Culture

36. Culture Data Should Do 3 things: • drive honest conversations among the collective about ‘the way we do things around here’ that… • lead to thoughtful actions and… • results in higher performance

37. Honest conversations that lead to thoughtful action… and higher performance Step IAssessment of the Current State Goal: To assess the current culture to surface strengths and weaknesses (and identify possible sub-cultures/areas of opportunity) Step IICreating Understanding Goal: To engage in dialogue to create a common understanding of the data and discuss the implicationsof the current culture for the business Step III Choosing to Shift the Culture? Goal: To establish agreement regarding the need for culture change/ development AND to focus efforts on areas of business impact Step IV Action Planning Goal: To generate ideas for moving the culture forward; prioritizing and developing specific action plans Step V Implementation & Evaluation Goal: To execute against the action plans and measure progress – with a link back to organizational and/or group performance

38. Are our people happy? Is our culture…good or bad? strong or weak? Culture Are we clear and aligned?

39. High level of clarity & alignment Higher levels of performance Mix of clarity & confusion Average levels of performance Confusion & uncertainty reigns Lower levels of performance

40. What you might hear…

41. “Purpose.” “There’s a clear line-of-sight.” “The vision is inspiring and exciting” “We do a good job of Connecting the Dots” “The focus on short term and long term goals makes the company reach high levels of achievement.” “We all have the same vision which keeps us focused on what really matters.” “One-on-ones and 360 reviews provide individuals with constant reminders of our goals.” “Flying blind” “My priorities are whatever my boss says they are that day.” “We’re fire fighters” “Frustrating” “Uncertainty is the best word to describe working here.” “We’re not sure what the future holds.”

42. “Communication efforts across departments have allowed broader perspectives and better decisions.” “We have a Moral Compass” “My manager lives the core values and regularly addresses them on conference calls – impressive!” “Alignment” “We engage in Constructive Conflict.” “We solve problems and we move forward together.” “All the team members believe in doing the right thing and creating win-win situations.” “Issues remain unresolved and the team stays in flux.” “Silos” “It’s all about winners and losers.” “Stove pipes” “Self-serving” “The end justifies the means” “The leaders don’t walk the talk.”

43. “There is a high level of transparency in this organization.” “We band together to work as a single unit to achieve our daily goals.” “We've learned to play towards each other's strengths and we work together to improve our weaknesses.” “I don't feel like I work for this great company - I feel a sense of ownership.” “We value highly capable people. The talent level here is very high.” “I feel that I am using my skills and intelligence rather than being micro-managed.” “We have trouble retaining our best talent.” “This is a Compliance Culture.” “Check your brain at the door.” “Internal competition is valued over cooperation.” “Leaders believe they always know best.” “Information is power.”

44. “Forgive and remember” “Change is NOT a criticism of the past.” “Hiding mistakes is more detrimental than making them.” “We do project post-mortems and lessons learned events.” “We ask ourselves what does the customer want and need when we are looking at our processes.” “A customer mind-set permeates the organization.” “Change is not a program…it is a matter of survival.” “Fear is prevalent throughout the organization.” “This is how we’ve always done it.” “Change happens to us, not with us.” “We can be arrogant…we don’t always listen to our customers.” “Finger pointing.” “Our philosophy is Naming - Blaming – Shaming.”

45. Restructuring Mergers & acquisitions Internal and External Forces that have the ‘potential’ to create more uncertainty and ambiguity Leadership changes Competition Economy Regulatory changes New technologies

46. The Denison Solutions Strategic Alignment Mergers & Acquisitions Turnaround & Transformation Building a High Performance Business Culture Leadership Development Leadership Transitions

47. A Solutions Scenario… A Merger & Acquisition Example

48. Culture in Mergers & Acquisitions

49. What is the level of integration and change required? Absorption Transformation High Degree of Change in Acquired Company Best of Both Reverse Acquisition Stand Alone Low High Low Degree of Change in Acquiring Company From Marks & Mirvis, Managing the Merger

50. The focus (stated intent) of most M&A’s • External Focus • Move into new markets • Acquire new technologies • Increase scale • Access to lower cost operations