Case study: Culture change at PENTAX proves people are key to successSource: IRS Employment ReviewIssue: 894 Date: 04/04/2008 Publisher: IRS AUTHOR: Charlotte Wolff A comprehensive culture change programme designed to empower staff and improve communication at PENTAX UK has helped the company achieve a dramatic turnaround in its financial results; we spoke to those who led the change and found out how it was achieved. On this page:
Key points
When David Moore was appointed managing director of PENTAX UK in July 2005, the company was underperforming and morale among staff was low. Since then, an extensive revitalisation programme based on the principle that people are the key to good performance has resulted in a remarkable turnaround. In 2005 financial results showed that the company was operating at a loss. By 2007 this had been transformed to a £2 million profit. In the 2005 staff survey results, just 10% reported high morale. By 2007, the equivalent figure was 59%. Back to topHow culture change was achievedPENTAX’s culture change was achieved with the help of the Investors in People framework (PDF format, 35K) (external website) and the ideas of change management guru John Kotter (external website). A number of interventions were used, including some open communication initiatives, focused learning and development schemes and an overhaul of people management systems. An integral part of the transformation process was the development and communication of the company’s mission, vision and values (see box 3). A key goal was the transformation of the management system from a hierarchy to one where employees on the “front line” are empowered and supported. Back to topStarting pointWhen Moore was brought in to PENTAX UK, his task was to resolve a difficult issue. Sales of the various products, which include cameras, medical equipment and closed-circuit television lenses, were down and the company had been operating at a loss for three years. “My job was to transform the organisation to make it work again,” Moore says. “But you can change processes, systems and structures, you can change many things, but the thing that creates change really is changing people.” Back to topCulture change neededTaking the findings of the staff survey as a starting point helped Moore to plan the way forward. “The staff survey basically told me exactly the same thing that I was thinking anyway. It said that morale was terrible. There was a lack of confidence in management and we weren’t developing people. “Basically, those were the core issues. So it made it easier to change people because they were actually begging for it, waiting for it at the same time as I thought well, actually, that is the only way to transform the business.” It became clear to Moore that one impediment to success was the fact that the sales and marketing organisation was not sufficiently customer focused, and had become entrenched in outdated processes and systems. Part of the issue was the hierarchical management structure, which reduced efficiency and contributed to the low staff morale. “There were some process changes that we very clearly had to do and there were some structural changes that we had to do in terms of changing the organisation, but the main thing was to change the culture and that was what I set about doing,” Moore explains. Back to topStarting the change programmeInitially, the change programme established an open communication culture. Each month, Moore stood in front of the 78 UK employees to give an update of the financial situation, explaining how the organisation was performing and how it needed to progress. At the heart of this was the recognition that all staff needed to understand that the organisation had to change, and why. The monthly review meetings kept employees updated on how the organisation was progressing against clearly communicated plans, and how far it had got in resolving issues raised by the staff survey. Alongside this, a monthly newsletter was produced to ensure that the messages were easily accessible. After some weeks, Moore was able to stress the positive “wins” that were being accomplished along the way – an important part of increasing positivity, especially where employees had contributed ideas that had then been realised. When financial results improved after the initial six months of change, Moore’s task in this respect was made easier. At an early stage, a new change management team was set up, which replaced the previous hierarchy. This was made up of eight individuals, some of whom had previously held relatively junior management roles in the organisation. Back to topCommunicating with staffMoore communicated closely with individuals at the Slough head office and gained feedback. "Much of my time was spent just talking about what we were doing and building up the momentum of change motivation," he explains. Moore still holds regular coaching sessions with his direct reports and spends 30 minutes on a one-to-one basis with new employees as part of their induction. During the first year, focus groups for all staff were run for the first time at the company, to gather ideas and encourage employees to think about the business needs and how they could contribute to change. Judy Willmott, HR manager at PENTAX UK, who also joined the company in 2005, explains how the focus groups helped change the company culture. “We used focus groups to really get people on the ground floor to think about what the business needed and how we could all move together for change. And I think that helped embed this idea that we really did want to use people to make the change.” Back to topInvesting in peopleSince 2005, WiIlmott has worked on establishing an ongoing and comprehensive programme of reform based on the Investors in People standard. It culminated in the organisation being awarded Investors in People status in 2007 and focuses on management capability, communication, training and development for all staff, and performance management. So far, various initiatives have been implemented as part of this programme, including a wide-ranging management development initiative, a new appraisal system, neuro-linguistic programming (NLP) training for sales and senior staff, and basic skills training in literacy and numeracy. Additionally, around a quarter of the annual training budget is spent on developing individual skills levels to suit job requirements. Around 5% of payroll per year has been invested in staff training and development, and Moore has no qualms about this level of spend. “You buy a piece of equipment and you automatically take out an extended warranty on it, but you could buy a member of staff and not spend any money on keeping them in a good state of repair,” he points out. “So for me there is quite a good internal justification for putting a reasonably high staff development budget in place,” he continues. “Then when you look at the results that we have achieved from it, it is really easy to say yes it pays for itself.” Back to topSetting goals and achieving themThe overall PENTAX UK people development plan is closely aligned to its employee survey results and the company’s visions and values. Going some way to explaining the thinking behind this, Moore says: “The Investors in People plan and survey consequences plan made sure that everybody had clear visibility of what were seen as the issues, and where we were progressing against them.” The company also introduced a “robust” set of competencies, based on the company’s vision and values. These are designed to instil a major cultural change in the way people behave and are used in the appraisal process. Moore has since set out all the company’s aims, values and competencies in one “business framework” document (see box 2). He sees this as playing an important part in ensuring that all managers and teams are clear about what is expected of them and why. Back to topAppraisalsDescribing the newly established performance management system, Willmott says: “We have embedded a thorough system of communication to make sure that managers are constantly talking to people, and so that there is a two-way flow of communication. So it is empowering people to speak up with their ideas, and ensuring they have full and frank, proper, adult-to-adult conversations, rather than the paternalistic type of conversations that used to go on.” Based on each appraisal, employees are rewarded with additional pay if they have performed well against their competencies and objectives. The sessions are also used to ensure that development needs are established and met. To encourage constant dialogue with managers, the review meetings take place quarterly. Willmott says this has become an integral part of the organisation’s culture. Back to topManagement developmentHaving understood from the 2005 staff survey results that employees were disenchanted with management, Moore and Willmott set up a comprehensive programme for management development. This concentrated first on the team of eight managers and was then rolled out to others, down to supervisor level. One aspect of the management training was the regular coaching and mentoring sessions that were conducted by Moore and John Coleman, consultant from the Plover Partnership (external website). Coleman also worked with PENTAX UK to deliver a tailor-made course to develop specific management skills. The manager course consisted of 10 full-day workshops concentrating on performance management, team building, change management, business planning and commercialism. The 12 goals and values (see box 3) that Moore had devised for the business formed the basis for the workshops. Moore explains: “We went right through each of the 12 visions and values. So if you want people to be more commercially aware for growth and profitability, they need to be able to understand the numbers and know what that means; if you want people to be more customer-focused, what does that mean? So the visions and values weren’t just about words put up in reception. They are actually key concepts on how to manage the business going forward, the way to develop the thought processes of the business.” Along with the sales teams, senior managers also received training to enhance communication and other behavioural skills using NLP. This was delivered in a series of eight workshops held off-site by provider Professional Excellence (external website). To ensure that delegates took the learning away with them, they were required to do practical homework between sessions and deliver presentations explaining how they had used the training during their work. Back to topResults of the change programmeApart from the improvement in financial results since 2005, a distinct change in attitude was discernible through the company’s 2007 employee survey. For instance, the proportion of employees who believed they were well managed rose from 43% in 2005 to 70% in 2007. Similarly, in 2005 just over 20% had reported that they could describe the company’s strategy/business plans. In 2007, approximately 90% said that they had a clear understanding of and supported the company’s vision and values. Both Moore and Willmott believe that one of the core outcomes of the culture change is that employees, including Moore and the executive team, now feel more empowered and confident about doing their job. “I actually feel much more capable than I felt when I was appointed,” admits Moore. “And a number of our staff would probably give you a similar reaction, at each level, because of the way that we have tried to develop it through every person rather than just at one level.” Willmott adds: “People genuinely like to be involved and have some say in what they do at work, and I think here we managed to engender a really good atmosphere. People feel that they are involved and empowered. And therefore they work harder.” Back to topNew frameworkMoving on from the focus groups, the company has set up operational groups, through which all staff have the opportunity to communicate at regular “barriers to business” review meetings. The company also has various working committees to oversee areas such as health and safety and the environment, as well as aspects of the business such as management systems. These give individual employees the opportunity to speak out and broaden their involvement in the workplace. Moore says: "I think that we have put the new framework in place now, and that framework ensures that the front line is where the decisions are made. And managers are there more to coach and support, so that people can do their job, rather than managers being the people who make the decisions." Back to topContinuing changeAs Willmott and Moore point out, improvement is a continual process and the next phase is already in its planning stage. Responding to the 2007 survey results, a new plan has been put together to resolve some of the more recent employee issues. One concern that came out loud and clear was that employees did not believe that the business listened and responded well to its customers. To address this, a new training initiative will be rolled out to all staff, to help them build positive relationships with customers. Summing up on the way forward, Moore says: “Once you have got the fundamentals in place, you can use the Investors in People ‘plan, do, review’ framework to keep managing that going forward, and it keeps that momentum going. The most important part is really the communication and continual development.” Back to topOrganisation profilePENTAX UK (external website), which has 78 employees based in the Slough head office, was formed in 1979 and is a subsidiary of the PENTAX Corporation of Japan (external website). PENTAX UK has four divisions - life care, which distributes a range of fibre optic and video endoscopes to the health sector; imaging systems, which distributes cameras, binoculars and similar products to retail outlets; surveying, which distributes to the engineering and construction sectors; and the closed-circuit television division. Globally, PENTAX has around 5,000 employees in 40 countries. This article was written by Charlotte Wolff, researcher/writer, Employment Review. Back to topBox 1: Learning points
Building a business through people:
Box 2: PENTAX UK’s Business Framework and Culture (document extract) “BUSINESS FRAMEWORKMission To become an increasingly major and dominant force in the market sectors in which we operate, increasing our turnover by over 20% per year with sustained and increasing profitability in line with global targets, thus ensuring company stability and positive employee careers. Management and teams Management’s purpose is to achieve the business vision, mission, goals and values through their team, in line with business strategy and standards. This involves leadership, direction, instruction, coaching, support and facilitation. Team members must take full responsibility for their part of the business to maximise their contribution to their managers’ objectives and requirements. This involves completing required tasks in time, unearthing barriers to business, proposing business improvements and implementing them. Teamship Managers and their teams can work effectively only if all parties are willing and able to succeed. The most important element is willingness. People are recruited based on ability and further training will be provided as required. Therefore each team member should: always seek to support and help fulfil the company and divisional vision, mission, goals and values; follow divisional strategy, according to company standards; and support management objectives through your own personal objectives. It is not enough to do your job well; you need to do your job in a manner that allows others to also do their job well. BUSINESS CULTUREVision To bring high-quality optical technology and service to people and organisations; making lives more enjoyable, visually richer, and safer."Box 3: PENTAX UK goals and values
Goals:
Additional resources
With thanks to Xpert HR in allowing PENTAX U.K Limited to publish this case study.
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