This is the fourth article in a 6-part series focusing on how CEOs adjust to their disruptive business environments and what they learned from their efforts that might be helpful to other CEOs. To answer these questions, we interviewed six CEOs/Chairman/Presidents from a variety of industries: Joe DePinto (CEO, 7-Eleven); Mike Fucci (Chairman, Deloitte); Tony Guzzi (CEO, EMCOR), Margaret Keane (President and CEO, Synchrony Financial), Bob Leduc (President, Pratt & Whitney), and Bob Weidner (President and CEO, MSCI). We asked each to describe their business environment and discuss how they are leading their companies to thrive in the face of massive disruptions.
In his book, “The Fifth Discipline,” Peter Senge popularized the concept of a learning organization, where individuals and teams challenge the established mindsets, learn from experience, and develop greater personal and collective competence to achieve better performance. This article will illustrate how the CEOs are transforming their companies into learning organizations to adapt to their dynamic business environments.
It was clear from our conversations that the CEOs based their approaches to organizational learning on being able to meet the challenges they faced in their markets. Corporate culture, values, mission and strategy provide the foundation for learning, out of which emerge a shared vision and purpose that drives actions. We see similarity with the Army’s concept of the commander’s intent, which flows from the leader’s analysis of the mission and communicates to all members of the organization the what (vision) and why (purpose) of the mission. The how is left to subordinate leaders and staff members who are closer to the action and can adjust specific actions as the situation unfolds. Organizational learning, then, is grounded in the mission.
Two strategies for organizational learning emerged from our interviews: experimentation and learning from experience. Woven throughout these strategies is the importance of communicating lessons learned across the organization, a challenge that exists in most organizations but is acute for large global companies.
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Experimentation. It will come as no surprise that industrial companies employed prototyping and experimentation as part of the R&D function. MSCI is the industrial metals trade organization, which has member companies representing production mills and service centers. Bob Weidner, president/CEO, described how innovation through experimentation is taking place both in terms of product development and process innovations. He noted the companies in the industrial metals sector that are the most adaptive are “blurring the lines” between product and process innovation, seeing both production and operational processes as part of a larger strategy for rapid response to market demands.
7-Eleven uses “fast-fail method prototyping” to develop innovative technologies in response to new competitors in its market space. Before rolling out its “click-and-pick” technology, where customers order and pay for products online for pickup at the nearest store, CEO Joe DePinto explained that the company experimented with a small number of stores and refined their processes based on these pilot studies. 7-Eleven learned which technologies worked best and how to train store employees to implement the new system.
In financial services, Synchrony Financial CEO Margaret Keane created four innovation stations with cross-functional teams that work together to accelerate change in the company. The teams include IT, operations, compliance, and legal, all working on innovative ideas to deliver capability as quickly as possible. Team members are trained in agile thinking; they are learning to work cross-functionally to accelerate change across the company. Additional examples from Synchrony include two pilot programs—one to assist military veterans transitioning to the firm and the other to support employees with disabilities. These experiments result in best practices that are shared throughout the company.
Learning from Experience. All the CEOs emphasized the importance of learning by doing the work of the company. Many employed after-action-reviews (AARs) on a routine basis, where work groups take stock of their collective performance following major events or tasks, looking at what worked, what went wrong, and what needs to be improved. For example, to facilitate organizational learning, Mike Fucci at Deloitte engages the firm’s partners in change management conversations about specific events. Several important innovations have resulted from this process.
The after-action review is a technique developed by the Army as a tool for organizational and individual learning from experience. Across the Army—from platoons to senior staffs—work groups and teams meet after operational actions and training events to review what worked, what didn’t work, what they learned and how they can perform more effectively and efficiently next time. Individual and collective reflection is based on the mission and leader’s intent, with the focus on enhancing organizational performance on subsequent events. All team members participate, and leaders often start the discussion with a self-critique to model openness to learning. Honesty and trust are the bedrocks of the review and hallmarks of a learning organization.
At Pratt & Whitney, Bob Leduc has instituted after-action reviews throughout the company. He recently brought together his executive leadership team to review the actions they had taken in the past 9 months to implement culture change and align organizational systems. He emphasizes accountability, empowerment and transparency, especially in times of challenge. Bob recognizes there will be times when things don’t go as planned, and that it is important to own your mistakes and learn from them, just as you do with your successes.
“We are now using regular after-action reviews and allowing people to make mistakes and learn. In virtually every meeting we have now, we have a conversation around what went well, what could have gone better, and what we have learned from this. We had a disappointing incident where a project did not turn out as planned, so I had [the manager] come see me. He took me through his assessment. It was very well done, very well thought out and he actually found some improvement opportunities in relevant policies and procedures. And so, we probably spent a half hour talking about it and in the end, I said ‘Listen…, the important thing is to understand the root cause and to learn from this and make sure it never happens again’.”
Tony Guzzi, CEO at EMCOR, told a similar story about how the CEO’s reaction to failure can build trust and reinforce the company’s values.
“When you’re at the top of an organization, bad news needs to travel relatively fast, right? And really bad news has to travel exceptionally fast,” Guzzi says. “And the only way that really bad news is going to travel exceptionally fast is if you build a culture of trust—that when someone gives you that bad news, and they’ve been a good performer and they’ve made good decisions—even if they haven’t—that you’re going to react appropriately. If they think you’re immediately going to fly off the handle or that everybody around goes into cover-up mode, then that’s not going to be a good outcome.”
“We had a job in the last couple years that was a real problem. I mean, it was not only a problem for us, it was a problem for a lot of people. It was a high-profile job; many different political factions got involved, which is pretty unusual, quite frankly. Our CEO on the ground had to know that…we weren’t going to fire him because this thing was going bad. It was outside of his control; we were going to actively engage in the solution, because the solution was going to be beyond him.”
Scaling the after-action review process across a large company presents some unique challenges. At Pratt & Whitney, Bob Leduc gathers all executives at least annually to review strategy and operations. At EMCOR, an international construction services corporation, Guzzi uses functional peer groups to enhance organizational learning within the company.
“We have a very extensive set of peer learning and job learning strategies. We have peer groups around building information modeling…The CEOs have peer groups around different construction techniques. We have peer groups around safety. And then, we reinforce those peer groups all the time…We have a lot of communication that goes around those peer groups. When they get together, it’s usually around a learning event like a peer group…We’ve taken that down multiple levels. So, we have a superintendents’ peer group once a year for Mechanical; Electrical; service manager; and different kinds of estimating. Now, some will say, ‘Hey, we see this need,’ and we’ll start connecting to different people in the organization, and, then, we’ll develop a peer group around that. So, there’s an extensive group of peer learning that goes on here.”
Joe DePinto at 7-Eleven uses video technology to connect employees across the company in a bi-weekly conversation to review corporate strategy implementation.
“We do a national video call with all of our field operators every 2 weeks. It’s about a 2-hour call. There are probably 4,000 or so people on the call. They are all linked in. We zero in on a part of the strategy that we want to talk about. They all understand the overall strategy, but we constantly reinforce the importance of executing the strategy this way. We also share case studies of how others across the organization have been successful, or have tried different ways to improve different parts of our strategy and have either been successful or failed. They actually get up there and teach their peers, and go through their case study in a national forum.”
In this article, we have explored how companies in different business sectors respond to their dynamic environment by becoming learning organizations. Experimentation and learning from experience emerged as strategies for these companies. In the next article, we will describe what the CEOs are doing to foster individual learning, so all employees are better able to perform in a dynamic environment.