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This chapter is from the book

Tools Available to Managers

Top-Down Culture Change

The signals that people receive from those who are above them in an organization influence their behaviors and their attitudes. This means that enterprise leaders must send very clear, consistent signals that integration is a business imperative and that everyone must behave in this way. In any enterprise, the C-suite executives—CEO, Chief Demand Officer (whether that be the head of sales, the head of marketing, or both), Chief Supply Officer (which might be a combination of head of supply chain and head of manufacturing), and the CFO—must say, and more importantly do, everything possible to communicate that integrative behavior is expected.

The most important piece of top-down culture change is what senior leaders do, not what senior leaders say (although what they say is important, too). They have to be willing to expend resources to get the right tools and people in place to support the integrative business processes. They have to be willing to look at measurement and incentive systems that are in place, to be sure that integrative behaviors are in fact rewarded. And they have to model those behaviors; they have to regularly attend and engage in the executive S&OP meetings and show willingness to sometimes sacrifice their own functional objectives to reach common objectives.

Importantly, the one individual that must play this leadership role is the Chief Demand Officer. Consistent with our previous comments, one of the most common causes of S&OP failure is lack of engagement from the demand side of the enterprise—sales, marketing, or both. Several companies have described their S&OP processes as being “&OP—sales is nowhere to be found.” The Chief Supply Officer is usually the driver of these integrative processes, so he or she is usually a believer. So the greatest challenge to creating this top-down culture change is to convince both the CEO and the Chief Demand Officer that these integrative processes must be put in place and supported with committed behaviors from those involved.

Bottom-Up Culture Change

Although the impetus for the culture change needed to achieve true business integration must start at the top of the organization, integration is unlikely to occur just because the CEO wants it to happen. So what can be done to drive these integrative behaviors on the part of the people actually doing the work? Focus should be placed in two areas: incentive and measurement strategies and education and training.

A useful piece of folk wisdom can be found in the phrase “what gets measured gets rewarded, and what gets rewarded gets done.” In this context, this folk wisdom suggests that if you want individuals to engage in integrative behaviors, encourage such behaviors though their compensation structures or their performance plans. For example, most organizations benefit from receiving demand-forecasting input from their sales teams. This would be an example of a valuable integrative behavior. However, in many companies this behavior is neither measured nor rewarded. Without measuring this contribution, and acknowledging that contribution in either the compensation structure or individual performance plans, it is not surprising if salespeople either spend very little time on the task, or even worse, if they intentionally provide bad information in order to advance a different agenda. Thus, the measurement and reward strategy can incentivize integrative behaviors. So bottom-up cultural change can be initiated and reinforced by closely examining the way all people are measured and rewarded. Senior leaders need to look carefully at what drives individual decision making, and finding ways to measure and reward integrative action must be a priority.

The second way that culture change can take place is through education and training. The training that is most impactful for driving organizational change is when individuals from multiple functional silos sit in a classroom together to learn about the benefits of integration, and how they can individually contribute to that integration. Many times, “aha” moments take place when individuals from sales first hear what happens to the forecasts that they submit. “I had no idea that my forecast had that impact,” they say. “I thought I was just gaming my future quota numbers. You mean you actually take that forecast and make supply chain decisions based on those numbers? Are you kidding me?” Extremely useful classroom experiences can occur when people from sales, marketing, logistics, procurement, operations, finance, and demand planning are all in the same training class. One useful mechanism is to run a simulation and assign salespeople to logistics roles, or procurement people to marketing roles, or finance people to sales roles. Real moments of insight occur when people experience the effects that their nonintegrative behaviors have on the company.

Clearly, bottom-up culture change must be planned and managed. It doesn’t happen on its own.

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