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C-SUITE REPORT

“The Winmark network provides a highly valuable and insightful look at some of the most critical challenges and opportunities that face senior leaders today. Peer learning at its most effective.� QUARTER THREE 2017

Craig Donaldson, CEO, Metro Bank


WE A R E CE LE B R ATIN G WIN M A R K’ S 20TH A N N I V E RSA RY, and we learned through our journey that the best thing about this business is the opportunity to meet and learn from our members. We are slightly unusual – we are quite a small organisation, but we walk with giants: government departments, FTSE 100 companies, major institutions – and our members are the most brilliant leaders across business functions in the UK and globally. To celebrate our anniversary, we are introducing the Winmark Awards, a recognition of our members’ pioneering work, as well as their engagement with Winmark’s networks, effectively contributing to peer learning and leadership development. The three winners were announced at our anniversary event at the Shard on 28th June.

C-SUITE BUSINESS LEADER OF THE YEAR: GRACE STEVENS, C H I E F TA X O F F I C E R , LEGAL & GENERAL

C-S U ITE I N N OVATI V E LE A D E R OF THE YEAR: CRAIG DONALDSON, CHIEF EXECUTIVE OFFICER, METRO BANK

C-SUITE KNOWLEDGE LEADER OF THE YEAR: STEPHEN PIERCE, CHIEF HR OFFICER, H ITAC H I E U R O P E

EDITORS

John Jeffcock, Chief Executive, Winmark john.jeffcock@winmarkglobal.com

Fabio Couto, Content Manager, Winmark fabio.couto@winmarkglobal.com


CO NTE NTS

Includes insights from: Alvarez & Marsal, Bank of England,

THOUGHT LEADERSHIP FROM WINMARK PUBLIC AFFAIRS THE CHAIR’S VIEWPOINT PANOR AMIC C-SUITE VIEW

3 4 5 6 –7

Dyson, Civil Aviation Authority, CDP, Dunnhumby, Financial Reporting Council, Food Standards Agency, GE,

THE C-SUITE REPORT NON-EXECUTIVE DIRECTORS & THE BOARD

8–9

• Pressure from Stakeholders: Employees on the Board and Shareholder Activism CHIEF EXECUTIVE OFFICER & DIVISIONAL CEOS

10–11

• Business Continuity and Brexit C H I E F F I N A N C I A L O F F I C E R & TA X D I R E C TO R

12–13

• Engaging with Stakeholders

GAP, RSA Insurance,

CHIEF LEGAL OFFICER & CHIEF RISK & COMPLIANCE OFFICER

14–15

• The Regulatory Environment

TalTrack, Tomorrow’s Company

CHIEF MARKETING OFFICER & SALES DIRECTOR

16–17

• Leveraging the Power of CRM

and other leading organisations C H I E F I N FO R M ATI O N O F F I C E R & C H I E F D I G ITA L & DATA O F F I C E R

18–19

• IT Governance Model CHIEF PEOPLE OFFICER & LEARNING DIRECTOR

20 –21

• Evolution of Performance Management C H I E F O P E R ATI N G O F F I C E R & S U P P LY & P R O C U R E M E N T D I R E C T O R

22–23

• Supply-Chain and Corporate Climate Action C-SUITE MEMBERSHIP

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W I N M A R K gives business leaders the knowledge and connections to achieve greater impact.

Our professional member networks enable C-suite executives to learn from their peers and engage in the discussions that are transforming their business environment. Our widely acclaimed management research provides leaders with intelligence and perspective, and our education academies update, develop and empower executives across industries and functions. The C - S U I T E R E P O R T gives the board of directors, the chief executive and senior leaders a panoramic view of business, mapping the latest trends across functions, addressing key challenges from the perspective of the world’s most innovative organisations and enabling the C-Suite to stay ahead.

PA RTN E RS With special thanks to the following organisations who partner Winmark Networks, Research & Academies:

BAKER MCKENZIE CANON EUROPE CAPSTICKS CARILLION ADVICE SERVICES CHARTERED INSTITUTE OF PERSONNEL AND DEVELOPMENT CHARTERED INSTITUTE O F TA X AT I O N CHARTERED INSURANCE INSTITUTE CIO CONNECT EVERSHEDS SUTHERLAND GAZING

INSTITUTE OF CHARTERED S E C R E TA R I E S & A D M I N I S T R ATO R S

PENFIDA

INSTITUTE OF PRACTITIONERS IN ADVERTISING

QUEEN MARY UNIVERSITY OF LONDON

INVESTEC ASSET MANAGEMENT IRWIN MITCHELL LANE CLARK & PEACOCK MARKET RESEARCH SOCIETY MHA MACINTYRE HUDSON OMOBONO

PROCUREMENT LEADERS PUNTER SOUTHALL

ROTH E SAY LI FE RSM RUSSELL INVESTMENTS SACKERS SOVEREIGN BUSINESS I N T E G R AT I O N G R O U P TA X AU TO M AT I O N TROWERS & HAMLINS WHITE & CASE

P A C O N S U LT I N G G R O U P

COPYRIGHT © 2017 WINMARK LIMITED All rights reserved. The information in this Report is confidential to Winmark Members, Clients and Partners. It is intended solely for them or the addressee. The views expressed in this Report are summaries of meeting notes from network meetings, and are therefore out of their original context. It is strongly recommended that before taking action on any of the enclosed you consult the Winmark network lead. Any opinions or advice contained in this Report are subject to the terms and conditions expressed in Winmark Terms & Conditions. Access to this Report by anyone else is unauthorised. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without written permission.

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TH O U G HT LE A D E RS H I P FRO M WI N M A RK

Effective Governance – the Art of Balance G OV E R N A N C E P R I O R I T I E S I N C LU D E M A I N S TAY S O F R U N N I N G A P E N S I O N S C H E M E S U C H A S R EG U L A R M E E T I N G S , G O O D G OV E R N A N C E S T R U C T U R E , A N D U N D E R S TA N D I N G O F R O L E S AND RESPONSIBILITIES.

TOP 10 KEY GOVERNANCE ELEMENTS S CO RED 1–5 WHERE 1 STA NDS FOR ‘ N OT IM PORTA NT AT A L L’ AND 5 STANDS FOR ’VERY IM P ORTA N T ’

HR 2020 – Navigating the Future – 2017 Update WA R FO R TA L E N T A N D S K I L L S S H O R TAG E S W I L L B E T H E S O C I A L T R E N D S W I T H T H E M O S T I M PAC T O N T H E WO R K P L AC E , ACCO R D I N G TO H R L E A D E R S .

% OF HR LEADERS WHO EXPECT TRENDS TO HAVE A HIGH OR VERY HIGH IMPACT ON THEIR WORKPLACES

Regular board meetin gs 69% 67%

War for talent

4.9 processes inistrative Good adm

59% 57%

Skills shortages

4.8

Remote working and anywhere/anytime delivery

Good governance str ucture

46% 44% 44%

Demographic changes

4.7

23%

Lagging productivity

Consistent record keeping

4.7

33% 35% 32%

Global workforce mobility

ulture board c orative b a l l o c nd Open a

22%

Pension reforms

30%

4.7

Constructive relation ship between truste es and employer

Corporate campaigns/social action

20% 24%

Rising living wage

24% 24%

4.7

visers external ad ement with Active engag

19% 18%

Equal pay expectations

4.6

Solid investment strateg y

Rise of contingent workers and flexible labour

17%

4.6

age risk res to man d procedu Policies an

Trade union reform

29%

19% 16%

Gender reporting

4.6

55%

11% 10%

Clear and transparent communication

4.6

2015

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2017


PU B LI C A FFA I RS Over the past few months, four ministers of state joined Winmark networks’ meetings, providing first-hand insight into the government’s thinking and evolving public policy. Members had the opportunity to raise their concerns, engaging in a constructive debate between the public and private sectors. The ministers were able to address corporates’ challenges and concerns with clarity and cohesion, actively demonstrating their ability to work in partnership with Winmark’s members.

DA M I A N H I N DS , M I N I STE R O F E M PLOY M E NT Damian Hinds spoke to the Chief People Officer network, discussing the forces that are impacting the labour market and business in the UK. The new apprenticeship levy, Brexit, gender equality and changing working patterns were some of the topics raised, with network members and the minister exchanging perspectives and achieving greater understanding of how the public and private sectors can work together for the benefit of society.

JA N E E LLI SO N , M I N I STE R O F TA X In her role as Financial Secretary to the Treasury, Jane Ellison was responsible for strategic oversight of the UK tax system. Tax directors had one of the first opportunities to hear directly from her in a meeting with the Winmark Tax Director network, discussing topics including the business tax road map and Brexit.

GAV I N BA RWE LL , M I N I STE R O F H O US I N G While serving as Minister of State for Housing and Planning and Minister for London at the Department for Communities and Local Government, Gavin Barwell joined the Winmark Affordable Housing network to discuss how partnership between local authorities, financial institutions and registered providers can resolve the housing crisis.

LO R D B RI DG E S O F H E A D LE Y, B RE XIT LE A D E R , H O US E O F LO RDS During his tenure as Parliamentary Under-Secretary of State for the Department for Exiting the European Union, Lord Bridges spoke to the CEO and NED networks about the challenges posed by Brexit and outlined the government’s strategies as it prepares for negotiations with the remaining 27 EU countries.

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TH E CH A I R ’ S V I E WP O I NT Engaging with stakeholders has never been more vital for businesses. Through the lenses of different business functions, this report examines a number of complex organisational relationships: relations with the public sector in times of political turbulence; relations with customers and how to meet the challenge of transforming habits and expectations; and relations with employees in a completely new era of work. In the current business environment, with all its social and economic pressures, it is paramount for companies to adopt a strategic approach to how they engage with different groups of stakeholders, understanding what drives them and establishing a network of support.

STA KE H O LD E R E N GAG E M E NT STR ATEGY

..E M P L O Y E E S .

As the millennial generation accounts for an ever-increasing share of the workforce, expectations of employers are changing. Companies need to respond to these changes. Having a clear purpose helps to establish a feeling of belonging and motivates teams. People management policies and practices must be updated to address the interests and needs of today’s workforce, as illustrated by the GAP case, outlined in the Chief People Officer section of this report.

..C U S T O M E R S .

Corporations in all sectors are focusing their efforts on building customer-centric organisations. Chairs must understand how their industries are being impacted by the digital revolution, and if their companies are leveraging the power of data to understand their customers. Simultaneously, customers are increasingly concerned with how responsibly businesses operate.

..S H A R E H O L D E R S .

Chairs must be wary of shareholders’ expectations, and find an appropriate balance between delivering immediate returns and building long-term value. Shareholders are increasing pressure on boards through activism, and thorough strategies are required to navigate this.

..T H E G O V E R N M E N T A N D R E G U L A T O R S .

Organisations must engage with transparency. Companies are important social actors, and dialogue about policies and regulation should be encouraged. We should ensure that our organisations have the structure to monitor how legislation and policies impact our operations, as well as achieving a constructive relationship with the public service.

..S U P P L I E R S .

With globalisation, companies have built complex, dispersed supply chains, requiring a strategic approach to resourcing. The relationship with suppliers can impact costs, while their business practices can impact the organisation’s reputation.

..C O M M U N I T I E S .

Companies must engage with the communities where they operate, as a powerful sign of social citizenship. Operations may affect them directly or indirectly, they can be a source of talent, and they are potential allies or enemies in the event of a crisis.

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AMANDA BURTON CHAIRMAN OF B AT TE R S E A D O G S A N D C AT S H O M E , N O N E X EC U TI V E D I R EC TO R O F S K I P TO N B U I LD I N G S O C I E T Y, CO U NTRY S I D E P R O P E R TI E S P LC , M O N ITI S E P LC A N D H S S H I R E G R O U P P LC


TH E C-SU ITE

Five Key Questions about Culture 1. Is your talent strategy rooted in your business strategy? 2. Does your company work as distinctively as it competes? 3. Can you capture what it means to be a member of your organisation? 4. Is your culture built for learning as well as performance? 5. Can your culture maintain its zest for change and renewal, even when the company stumbles? HARVARD BUSINESS REVIEW, 2017

THE

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” B I LL G ATE S

OPERATIONS

PEOPLE

TECHNOLOGY

“By 2030, millennials will represent approximately 75% of the workforce.”

“Artificial intelligence should be thought of as a fundamentally new approach to every problem. Those decisions will be made by humans who want to change and improve the world, and who now can scale their minds to address ever-expanding frontiers.”

TA LT R A C K

WORLD ECONOMIC FORUM 6 W I N M A R K C-S U I T E Q3 2 0 1 7


“European executives are increasingly optimistic about the region’s business outlook. C-Suite leaders expect revenue growth of 2.1% on average in the coming year, with about one in five companies—especially larger, more internationally focused ones—predicting revenue growth above 5%.” MCKINSEY GIOBAL INSTITUTE, 2017

“Digital problem solving is not about developing new or ‘shiny’ tools: it is about understanding customers’ underlying interests, to help provide both the service and the type of engagement they need, digital or not.” H A N A W O L F, H E A D O F EXPERIENCE RESEARCH, AVIVA

BOARD

COMMERCIAL

LEGAL & RISK

FINANCE

“In the service industry, it takes 12 months to close an office and six months to shift people to a new location. Article 50 was signed on 29th March 2017, so from 29th March 2018 employees of service industries for whom passporting is key may be notified of redundancy, and from 29th September 2018 employees (and their families) may be asked to relocate into the EU area.”

“The ready access to low-cost capital should change the way business leaders think about strategy. Strategies that generate faster growth create more value for most companies than those that improve profit margins.” MICHAEL MANKINS, PARTNER, BAIN & COMPANY 7

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PRE SSU RE FRO M STA KE HOLDE RS: E M PLOYE E S O N TH E BOARD AN D S HA RE HOLDE R AC TIV I S M NON-EXECUTIVE DIRECTORS & THE BOARD W I T H S P EC I A L T H A N K S TO J O H A N N A WAT E R O U S , FO R M E R S E N I O R I N D E P E N D E N T D I R EC TO R , R S A I N S U R A N C E ; A N D M A R K G OY D E R , C EO, TO M O R R OW ’ S CO M PA N Y, FO R T H E I R CO N T R I B U T I O N S A N D S U P P O R T.

PR E SSU RE FRO M STA KE H O LD E RS We are experiencing increasing turbulence in social and political agendas, with greater pressure for improving corporate accountability – demands echoed even by the prime minister, Theresa May. Public trust in business is declining, impacted by the following drivers of negative perception: low investment in R&D and fixed assets; record high dividends, leading to £130bn annual corporate saving; low productivity; the ratio of executive to average worker pay has tripled during the last 20 years; stagnating real wage growth; a sIgnificant increase in the regulation of business has affected communications/ media portrayal; and tax evasion by companies, highlighted by the media.

.. .. .. .. .. .. ..

E M PLOY E E S O N TH E B OA R D Establishing a presence for employees on companies’ boards is an increasing trend as a potential strategy to re-establish trust among stakeholders. Employee representation in the boardroom has divided opinion, however, and has raised questions as to what such a model should look like and how it should be implemented. The prime minister – once an advocate of governance position for employees – has back-pedalled from her initial position, given the challenges of enforcing such policies. Her new position is that “some companies may find that these models work best for them, but there are other routes that use existing board structures… it will be a question of finding the model that works”.

“There is still a pressing need to rebuild public trust in big business, to work in the long-term interests of investors and employees, rather than the short-term interests of managers… Now is the time for sensible reforms which increase transparency and draw more engagement from shareholders.” O LI V E R PA R RY, H E A D O F C O R P O R AT E G OV E R N A N C E , IOD

A N A LTE RN ATI V E SO LUTI O N : E M PLOY E E A DV I SO RY PA N E L The alternative to making employees insiders within governance structures is to give them more voice and power as outsiders. Companies could introduce an elected employee advisory panel that meets regularly, has a formal channel of communication to the board and publishes an annual statement with its view on key issues. This option could help to encourage, rather than impose, a greater employee voice. But employees are only one group of stakeholders putting pressure on boards, and today’s context calls for increased engagement with a broad range of stakeholders.

S H A RE H O LD E R AC TI V I S M Pressure from shareholders has also been increasing. There are three categories of activism, all placing different levels of pressure on the board.

..PA S S I V E I N S TIT U TI O N A L I N V E S TO R S , index trackers. These have become more active in recent years. They seek compliance, which can be enforced using their votes.

MARK GOYDER

C EO, TO M O R R OW ’ S CO M PA N Y 8 W I N M A R K C-S U I T E Q3 2 0 1 7


M A N AG I N G S H A RE H O LD E R AC TI V I S M

E M PLOY E E DI R EC TO RS O N U N ITA RY B OA RDS These include employee representatives on the board with the same legal duties and responsibilities as other directors.

Eight steps in managing increasing pressure from shareholders.

..1 . FI X TH E R E M U N E R ATI O N H OT

B U T TO N S . Shareholders have a list of

Pros

Cons

Promotes diversity, and helps the board’s awareness of a wider range of people.

Possible tensions between an employee’s loyalty to colleagues and the legal duty they face as a director.

Can create a sense of co-ownership and trust, enabling board members to engage with employees, leading to improved employee satisfaction and reduced turnover.

Potential loss of confidentiality, and hence restrictions on the scope of discussion in the boardroom.

Can bring new ideas and perspectives, benefiting the shareholders and the company.

Conflicts can escalate, with adverse impact on decision-making processes.

With comprehensive knowledge of day-to-day operations, employee representatives may increase the flow and quality of information, which can improve decision-making.

Choosing the most suitable employees for this process may prove difficult, and an individual may not be able adequately to represent a diverse organisation. Potential lack of relevant skills and experience on the part of the employee director.

things they will vote against if certain factors are not put in place, so the remuneration committee should ensure that these topics/issues are addressed.

..2 . E N GAG E W ITH TH E S H A R E H O LD E R S A LL TH E TI M E , not just when it is time

for them to vote on pay packages or remuneration policies.

..3 . E X P L A I N H OW VA LU E I S B E I N G C R E ATE D , how the business strategy makes sense, and outline the economic levers in the business and how these are tied to remuneration.

..4 . B R I N G A LL TH E N E D S A N D B OA R D M E M B E R S TO G E TH E R , as activists will

go after people.

..5 . B U I LD YO U R OW N S H A R E H O LD E R S U P P O R T G R O U P. Activists need around

18–20% support to have any meaningful influence, so make sure there are 20% of investors who are ambivalent or antiactivist.

..AC TI V E LY M A N AG E D FU N D S . This mixed group of tactical voters constitutes the bulk of activists. They may use their remuneration vote to seek influence, and comment on performance and strategy.

..AC TI V I S T S (with a capital ‘A’). They seek to disrupt the status quo. They tend to have a coherent agenda. Activists are typically associated with challenging executive pay and its lack of correlation with performance. They are often opportunists, using the remuneration issue as a tool for disruption. Typically, activists account for around 5% of shareholders. Their main characteristics are as follows. Activists are very knowledgeable, with considerable access to data (in some cases they are better informed than NEDs about the performance of the business). They have engaged in thorough analysis of the business and have looked in detail at performance, whereas NEDs often focus on governance and do not achieve that kind of clinical penetration into the business. Activists can build support and talk to all the shareholders more easily than the NEDs can, and they exploit this ability to disseminate their investment case.

.. ..

.. J O H A N N A WAT E R O U S

FO R M ER S EN I O R I N D EPEN D ENT D I R EC TO R , R S A I N S U R A N C E 9

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Activists are very knowledgeable, with considerable access to data (in some cases they are better informed than NEDs).

..6 . E N GAG E W ITH TH E AC TI V E I N V E S TO R S O N TH E R E G I S TE R , as they

can be very supportive in difficult times.

..7. E N GAG E W ITH TH E B R O K E R S A N D

A N A LY S T S , as CEOs and CFOs do. There must be a strong focus on the issue of the economic potential of the business, which boards often fail to engage in.

..8 . LI S TE N TO TH E AC TI V I S T S’

I N V E S TM E NT C A S E . The chances are

there is something to be learned.


BUS IN E SS CO NTIN U IT Y AN D B RE XIT CHIEF EXECUTIVE OFFICER & DIVISIONAL CEOs W I T H S P EC I A L T H A N K S TO TA N GY M O R GA N , S E N I O R A DV I S O R , B A N K O F E N G L A N D ; A N D TO M T E I X E I R A , M A N AG I N G D I R EC TO R , A LVA R E Z & M A R S A L , FO R T H E I R CO N T R I B U T I O N S A N D S U P P O R T.

B US I N E SS CO NTI N U IT Y A N D B R E XIT Risk management and business continuity are increasingly pervasive issues for businesses, with disruptive threats and unexpected events creating an environment of unprecedented uncertainty. These threats of business disruption, along with rapidly evolving business models and changing reporting requirements around a company’s viability, are challenging traditional approaches to business resilience.

TH RE ATS O F B US I N E SS D I S RU P TI O N Company viability

New and emerging risks

Recent business disruptions have tested the viability of different business models. Regulators have challenged boards and CEOs to take a stronger stance on the viability of their business model as part of external reporting. Risks are becoming increasingly complex and interconnected. Local events have the potential to lead to disruption on a global scale within days, if not hours. Boards must be prepared to manage and address 'unknown unknowns'.

Risk and strategy

Risk quantification remains a challenge for many companies. In turn, this poses problems with the integration of risks into a company’s business plans, strategy, acquisition valuations and KPIs.

Reputation

Disruptions can have an impact on the reputation of both the company and the CEO.

Performance

FO U R CH A LLE N G E S REQ U I RI N G A PROAC TI V E A PPROACH

..1 . U N D E R S TA N D I N G TH E B U S I N E S S . Identify the elements of the business that are critical to its continued success. What are the main threats to the continuity of these elements? 2 . M E A S U R I N G TH E R I S K . Consider how issues will affect the continuity of the service being provided, including the likelihood of such failures, the business impact they will have, and the projected period of failure the business could sustain. Risk cannot be totally eradicated, so resilience must be built into the operating model to reduce the disruption of a crisis. 3 . H AV I N G A S TR ATE GY. Once risks have been defined and assessed, consider the continuity strategy in terms of both immediate and long-term response.

..

..

Leading companies view uncertainty as a source of competitive advantage that separates them from competition at times of disruption. The cost of managing and retaining risks can have a significant impact on a company’s performance and overall profit.

“We have got self-driving vehicles to deal with in a ten-year timeframe. Brexit is a minor risk in comparison.”

TOM TEIXEIRA

JAGUAR LAND ROVER

M A N AG I N G D I R EC TO R , A LVA R E Z & M A R S A L 1 0 W I N M A R K C-S U I T E Q3 2 0 1 7


..4 . TH I N K I N G A B O U T C U LT U R E .

B RE XIT: S H O RT- A N D LO N G TE RM I M PAC T

Understand that culture has become a critical building-block of business resilience with regard to both risk management and business continuity. Culture needs to be addressed holistically and in a systematic manner, with a particular emphasis on people integration.

Brexit, a significant disruptive event challenging continuity, threatens UK businesses with variable and complex patterns of risk that differ between industries and organisations. Never before has it seemed so important to understand both the challenges and opportunities that these changes could create. Organisations that fail to plan appropriately could have their future value diluted by uncertainty or indecision. Nevertheless, although the potential impact of Brexit should not be overlooked, the most obvious threats are likely to settle down gradually in time.

I NTEG R ATE D RE S I LI E N CE PL A N N I N G An integrated approach to business resilience brings siloed communities, policies, processes and systems together, enabling businesses to respond immediately and communicate effectively. By integrating processes and communication channels – rather than the traditional model of ‘risk management’ as a stand-alone function – businesses can prevent and recover from disruption more efficiently. This should not be a one-off exercise, but a dynamic system, which needs to evolve constantly in response to changing business models and environments, achieving an optimal balance between risk retention, risk mitigation and risk transfer through culture change and incentives. The acronym ‘PESTLE’ can provide a useful framework to analyse and monitor the macro-environmental factors that can have an impact on an organisation. By analysing the Political, Economic, Social, Technological, Legal and Environmental components, threats and weaknesses to a business can be identified and managed.

TA N GY M O R G A N

S EN I O R A DV I S O R , B A N K O F EN G L A N D

BUSINESS IMPACT ASSESSMENT THREAT IDENTIFICATION & QUANTIFICATION RISK IMPROVEMENT PLANNING PLAN WRITING PLAN TESTING PLAN MAINTENANCE

IMMEDIATE RESPONSE CRISIS MANAGEMENT BUSINESS CONTINUITY/RECOVERY

TIMELINE

INCIDENT

RISK MAPPING MODEL IMMEDIATE IMPACT

SHORT-TERM

MEDIUM-TERM

BREXIT Trade Talent supply Foreign investment Regulation International influence

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LONG-TERM


E N GAG IN G WITH STA KE HOLDE RS CHIEF FINANCIAL OFFICER & TAX DIRECTOR W I T H S P EC I A L T H A N K S TO M A R T Y N S M I T H , FO R M E R C FO, DY S O N , FO R H I S CO N T R I B U T I O N A N D S U P P O R T.

E N GAG I N G WITH STA KE H O LD E RS A stakeholder can be defined as a person ‘who has a legitimate interest in an organisation and what it does’. The influential role of the CFO, and the vital importance of a company’s financial performance, puts them in the centre of the relationship between the company and many of these groups. The CFO also has to manage multiple internal stakeholders. The effective management of these relationships can help CFOs to drive their agenda within companies and therefore can have an enormous impact on overall performance.

While highly valuable, IR teams cannot replace the figure and the credibility of CFOs before shareholders.

K EY M ES SAG ES

S H A RE H O LD E RS Externally, shareholders stand out as the most important stakeholder group for CFOs. Engagement with investors enables them properly to value the company’s shares, gain their support for the organisation’s strategy and tactics, and give feedback to the board. The CFO’s relationship with investors (alongside that of the CEO) can have an impact on the company’s share price, the external perception of the company, its ability to raise capital and the cost of doing so, and the extent of management reward. Investor relations (IR) teams are the bridge between the corporation and shareholders. They must be closely aligned with the CFO’s perspective and direction. Although highly valuable, IR teams cannot replace the presence or the credibility of CFOs before shareholders – either directly, for instance on results calls, or indirectly, through media coverage and communications. Similarly, CFOs are the point of contact with the board, and therefore must be the channel through which the investors’ message is conveyed.

MANAGEMENT & EMPLOYEES

BOARD

CEO/ CFO

IR

SELL-SIDE ANALYSTS

BUY-SIDE ANALYSTS

PORTFOLIO MANAGERS

I N VES TO R CO N CER N S

N O N - E XECUTI V E D I REC TO RS A N D B OA RD CO M M IT TE E S Although there are formal channels of communications and forums for engagement with NEDs and board committees (such as those for audit, risk etc), CFOs can benefit from establishing a solid relationship with these directors, communicating openly and frequently, and engaging throughout the year. Constant interaction facilitates dialogue and understanding during formal procedures.

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TH E CEO The relationship between the CFO and the CEO is often the most crucial within a business. Effective communication, clarity and understanding are fundamental for the effective management of the company and its success. Although constructive dialogue will often show that the two are thinking in the same direction, inevitably there can sometimes be divergences of opinion. In those cases, agreeing with the CEO’s perspective can be an option, as turning the relationship into a clash of egos is unlikely to work out well for the CFO. Sometimes,


THE BOARD

CEO

SH A RE H O L D E R S

C FO HMRC, REGULATORS, AUDITORS

C-SUITE MARTYN SMITH

FO R M ER C FO, DYS O N

TEAM

TH E FI N A N CI A L TE A M

however, the answer is to persuade the CEO to change their mind, which requires an understanding of the arguments and motivations that drive the boss.

Although the financial team is naturally more aligned with the CFO’s interests than with those of diverse stakeholders, there are still different interests and priorities that CFOs must understand and manage. As leaders, they must be aware not only of the handling of the finances, but also the people, in terms of performance management, career development and employee engagement. People in all areas of the business engage with the financial team, so CFOs must assure that their entire department is aligned with their principles and messages, promoting understanding across the organisation.

TH E C-SU ITE PE E R G RO U P Other leaders in the organisation are important stakeholders for CFOs, whose work impacts the entire business. Time management is key. CFOs may be tempted to spend more time with friendly people with whom they have most in common, but the most useful outcomes can often be gained by time spent with colleagues who are more challenging, in diverse functions of the organisation. CFOs must be clear when communicating with colleagues, who may not have a financial background, as well as open to incorporating their perspectives of the business. Understanding and alignment between functions can be a key strategic driver for organisations.

H M RC , REG U L ATO RS , AU D ITO RS When appropriate, CFOs should engage with tax and other public authorities, as well as auditors, with professionalism and transparency. Building a relationship of trust with those groups can be of great value in a context of distress or crisis. Following organisations’ codes of conduct is the key to develop the appropriate connections.

CFOs must communicate with clarity when engaging with the rest of the business, while being open to incorporate different perspectives. 13

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TH E REG U L ATO RY E N V IRON M E NT CHIEF LEGAL OFFICER & CHIEF RISK & COMPLIANCE OFFICER W I T H S P EC I A L T H A N K S TO K AT E S TA P L E S , G E N E R A L CO U N S E L & S EC R E TA RY, C I V I L AV I AT I O N AU T H O R I T Y; R O D A I N S WO R T H , D I R EC TO R O F R EG U L ATO RY A N D L EG A L S T R AT EGY, FO O D S TA N DA R D S AG E N C Y; A N D A N N E M C A R T H U R , G E N E R A L CO U N S E L & CO M PA N Y S EC R E TA RY, F I N A N C I A L R E P O R T I N G CO U N C I L , FO R T H E I R CO N T R I B U T I O N S A N D S U P P O R T.

TH E R EG U L ATO RY E N V I RO N M E NT UK regulators are in a significant state of flux as the UK begins to separate itself from the EU and as the organisations they regulate seek to adapt in order to remain competitive in turbulent marketplaces.

M INIS T E R COMMUNICATES THE POLICY/MESSAGE BREXIT TEAM

GENERAL ELECTION LA C L AC K O RIT F DE Y P COA RT M NF EN U S TA ION L

STATE , P O LITI C A L A N D STRU C TU R A L I SSU E S The government’s view is the first instance of public policy and regulation, cascading down from the minister to the relevant government ministry or department. Regulators interface with the ministry or department and align their own messages accordingly. Most UK regulators are currently conducting complete activity reviews because of Brexit, and obtaining clarity from ministries or departments can sometimes be difficult. It appears that these do not know where the Brexit team is heading and have little time to respond to regulators’ enquiries. A further adverse development is that many good civil servants have recently left the service. This has led to a more risk-averse attitude, with less experience within departments and a consequent reduced willingness to make decisions. In addition, the Brexit process will ensure that the legislative timetable will be unusually full, and so departments have even less time to engage. The in-house lawyers within the regulators are limited to talking to policymakers and are not allowed to engage with lawyers who are drafting legislation. There are good political reasons for this, but it can introduce inefficiencies into the legislation creation process.

M INIS TRY/D E PARTM E NT TRANSLATES THE POLICY INTO ACTION

E H U GLO A D RK WO S ENT R T MA C I T Y A P P DE T CA A

MANY GOOD CIVIL SERVANTS HAVE RECENTLY LEFT LOOKING FOR GUIDANCE

REG U L ATORS LEGISLATION CAPACITY FULL

TAL E N T DRAI N

NO OPPORTUNITIES TO EXTEND REACH OR POWERS

ALIGN MESSAGING AND ENFORCE POLICIES

LESS EXPERIENCE, RISK-AVERSE, LIMITED GUIDANCE

R EG ULATO R S CONDUCTING ACTIVITY REVIEWS IN PREPARATION FOR BREXIT REGULATOR IN-HOUSE LAYWERS CAN ONLY ENGAGE WITH POLICYMAKERS, NOT WITH THE LAWYERS DRAFTING THE LEGISLATION

FU N D I N G A N D KPI S The funding of regulators is a perennial issue and impacts their behaviour. Regulators are usually managed by defined output KPIs, such as the number of successful enforcements achieved. Input KPIs, in contrast, may be related to proactivity – for example, a reduction in the number of incidents that require enforcement. Sensible KPI definitions can be very important to demonstrate market changes, as ultimately the regulator should be aiming to ‘work itself out of a job’.

PH I LOSO PH Y Regulators are focused on the protection of consumers, and they expect good businesses to share this focus. Pressure for increased regulation can come from various sources, notably the media and investors. It is important that regulators have clarity of purpose. In particular, those that cover multiple areas need a coherent philosophy of approach, which should take account of the following factors: whether regulation should be principles-based; determining risk principles; ensuring the appropriate extent of the regulator’s powers and disciplinary actions; setting penalty policies (proportional regulation); ensuring an appropriate balance between a guiding approach and a consultative one; and ascertaining the views and requirements of identified stakeholders (government, corporates, consumers and the public).

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K AT E S TA P LE S

ANNE MCARTHUR

G EN ER A L CO U N S EL & S EC R E TA RY, CI V I L AV I ATI O N AU TH O R IT Y

G EN ER A L CO U N S EL & CO M PA N Y S ECR E TA RY, FI N A N CI A L R EP O RTI N G CO U N CI L

TH E R EG U L ATO R M A R KETPL ACE Regulators work with their peers across Europe and the rest of the world, but the harmonisation of standards varies significantly from one regulator to another. Influencing international regulators is important for business, but is an additional drain on already limited resources. Although regulators share MoUs – which can sometimes be accessed by the public – different regulators have different powers, remits and ambitions. The good news is that regulators are comparatively well co-ordinated within the UK, coming together to discuss themes such as marketplace resilience.

REG U L ATO R RI S K S Keeping pace with product and service innovations and market changes is increasingly problematic. This brings an increased risk of unintended consequences arising from policy implementation. Regulators are finding it difficult to pre-empt issues and therefore can find themselves having to respond to incidents that could have been avoided if the risk had been identified in advance. Another significant challenge is ensuring fairness, including related costs, across all organisations and extending into the supply chain.

CO R P O R ATE R E L ATI O N S H I PS The number of organisations being regulated has a substantial impact on regulators’ ability to engage. For example, the Civil Aviation Authority (CAA) has fewer airlines to engage with than the Food Standards Agency (FSA) has food retailers. Regulators are increasingly relying on the businesses’ own assurance systems and reporting. However, if there is limited confidence in an organisation’s senior management, the regulator may choose to subject it to detailed scrutiny. It is important, therefore, for companies to take the steps outlined as follows.

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..A P P O I N T A CO N TAC T P E R S O N . Regulators’ first point of contact is usually the communications director. ..E M P OW E R TH E CO NTAC T P E R S O N . Engagement needs to be at the appropriate level and the people involved must be empowered to implement policy. H AV E A R E G U L ATO R S TA K E H O LD E R P L A N . Companies should build an engagement plan, which includes their risk approach. P O S ITI O N TH E CO M PA N Y. Regulation works best when people and companies engage with the regulator. G O O D G OV E R N A N C E . Regulators look at the top team, the culture they create and the governance of the organisation. R E S P O N D TO CO M M U N I C ATI O N S . Companies should respond to the regulator’s letters to prevent the issues it raises from escalating.

.. .. .. ..

P OWE R , I N FLU E N CE A N D G U I D E LI N E S Transparency is a powerful tool for regulators and is the first phase of regulation. Creating an obligation to publish information – whether diversity statistics or specifying the CEO’s salary as a multiple – can be even more powerful than the ability to punish. A regulator without powers can shine the light of publicity on areas it would like to influence. The best form of guidance from regulators is usually to show organisations what good and bad practice looks like, and why. So, if you have done something well, share this with the regulator. This will enable it to improve the market, to the benefit of all.

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LE VE R AG IN G TH E POWE R OF CRM CHIEF MARKETING OFFICER & SALES DIRECTOR W I T H S P EC I A L T H A N K S TO R E B ECC A C L AY TO N , G LO B A L H E A D O F S A L E S P E R FO R M A N C E A N D M A R K E T I N G , D U N N H U M BY, FO R H E R CO N T R I B U T I O N A N D S U P P O R T.

SKILL-SET AND MIND-SET LEADERSHIP RIGOUR ALIGNED WITH SALES METHODOLOGY

LE V E R AG I N G TH E P OWE R O F CR M When considering customer relationship management (CRM) in the current business environment, IT systems are the first thing sales leaders think about. Salesforce, Oracle, Microsoft Dynamics and others… their functionality and usage… it is easy to become bogged down in the technology aspect of CRM. However, technology is only part of a CRM strategy. In fact, the choice of platform is irrelevant. It is the organisational processes and the people that really leverage the power of CRM systems.

PEOPLE

TECHNOLOGY

PROCESSES

SMARTLY DRESSED CUSTOMER-FOCUSED INTEGRATED INTO WORKFLOW

FOCUS ON BASIC NEEDS BUSINESS TOOLS

A H O LI STI C A PPROACH TO CR M STR ATEGY System users and their managers must have the necessary skill-set and mind-set to engage and make appropriate use of the platform. Sales leaders must embrace the system and its usage as a strategic priority. Training, development and the sales function’s methodologies must be compatible with the CRM structure adopted. When setting processes for the implementation of a platform, the focus should be on keeping things simple and not overcomplicating data input, reporting and sales management – the adoption of the system as a whole is already complex enough. Continuously monitoring and adjusting processes is also key, as organisations are organic and always evolving. Leaders often forget that the structures and processes around a CRM system must be reassessed and adjusted in response to changes in culture, goals and marketplace drivers.

O PP O RTU N ITI E S CRM opens up a number of opportunities for sales functions to drive greater impact in their businesses. The record of client relationships and the ability to forecast results are the obvious goals of the systems, but a more careful examination can identify practices that have the power to reshape how organisations look at and engage with their customers.

CLOSED WON OPPORTUNITY

NEEDS ASSESSMENT MEETINGS

NEW CONTACT

STARTI NG PO I NT

CHANGE OF CONTACT

PROPOSAL SUBMITTED

NEEDS ASSESSMENT MEETINGS

INCUMBENT CONTRACT TIMING

LOST OPPORTUNITY CLOSED WON OPPORTUNITY

PROPOSAL REQUESTED

6 M O NTHS L ATER

BUDGET REALLOCATED

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2 YEARS L ATER

NEEDS ASSESSMENT MEETINGS

CONTACT PROMOTED

NEEDS ASSESSMENT MEETINGS

OPPORTUNITY FOUND

CONTACT IN NEW COMPANY

INTRODUCTION MEETINGS

MEET NEW CONTACTS


E N GAG I N G PEO PLE Sales teams are responsible for inputting the sales data, by far the most relevant influencer of the effectiveness of CRM. Engaging them to use the CRM system is the biggest challenge for their leaders. Sales directors can look at the relationship between users and CRM platforms in different ways, and choose where they target their efforts to assure effective use of the system and good output from it.

..Leaders can admit that a CRM system’s goal is not to benefit its users (sales teams), but to improve the management of the business. Trying to convince teams that the system is in place to facilitate and improve their work can be a wasted effort for organisations. They may benefit more from honestly acknowledging that it simply needs the input of the teams to better manage their sales operations, understand the business strategically and drive growth. From a different perspective, CRM systems do have a direct impact on the work of sales teams. They provide easier access to information and thus assist in the setting of appropriate targets, saving time in reporting. People engage only if they see some personal benefit. However, making the sales team understand what that benefit is, and therefore ensuring that its members use the CRM system effectively, seems to be a challenge.

RE B ECC A CL AY TO N

..

G LO B A L H E A D O F S A LE S PER FO R M A N C E A N D M A R K E TI N G , D U N N H U M BY

One useful method is to observe the company’s activities not as a snapshot, a current map of opportunities, but as a documentary, the history of an evolving collection of relationships. This long-term approach enables value creation through time, as the CRM system keeps track of the development of the engagement with a client and the footprint of individual connections across client companies and prospects. CRM provides the opportunity to look at customers as human beings. This is a big step towards understanding and serving them better. The traditional approach to CRM is entirely focused on data: clients and prospects’ names, sales volumes and turnover probabilities. Nevertheless, at the other end of transactions are real people, facing their own challenges, which your services and products could help them to address. Especially in a B2B context, it is easy to overlook the fact that sales is about people deciding whether (and when) to buy something, factoring in not only their companies’ goals, but also their own personal interests, such as how a purchasing decision can impact their position within their organisations.

It is better to keep salespeople’s compensation focused simply on performance.

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For most companies, the best way to engage sales teams will be based around a perspective somewhere in between these contrasting views. Although teams must perceive a value in CRM in order to feel motivated, leaders must focus their efforts and avoid wasting resources when the workforce is unwilling to engage and the real benefits are for decision-makers at a senior level. Financial incentives may be an effective way to engage teams and promote the use of CRM platforms. However, they should be directed towards sales managers and related to their enforcement of the input of data by their teams. It is better to keep salespeople’s compensation focused simply on performance. Their leaders are in the best position to generate engagement and, if incentivised appropriately, can drive consistency and quality of input. One thing that is universally accepted is that measuring engagement is crucial for the adoption of CRM systems. A company must keep track of how often and how appropriately data is being added by its sales team, which will not use the system unless it knows that its input is being tracked. Engagement measurement also allows for a company to understand gaps in usage not only by individuals and teams, but also by types of data or product lines. This is useful in directing resources, training and initiatives that will help to make the most of the platform.

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IT G OV E RN A N CE M O DE L CHIEF INFORMATION OFFICER & CHIEF DIGITAL & DATA OFFICER W I T H S P EC I A L T H A N K S TO JA M I E K I R K L A N D, F I N A N C E M A N AG E R A N D E D I TO R , A N D N I C K K I R K L A N D, C EO, AT C I O CO N N EC T FO R T H E I R CO N T R I B U T I O N S A N D S U P P O R T.

D I G ITA L G OV E RN A N CE M O D E L

The role of corporate IT is to support organisations towards success by utilising technology and information. That definition has not changed much in the last 50 years, ever since IT has been a viable competitive tool for major corporations. But the answer to how corporate IT should model itself to best perform that function is very different from those of 15, ten or even five years ago. It is now clear, given the huge changes both technologically and in the mind-set of executives and employees, that the way corporate IT is constructed needs to change. It is not possible to come up with a model that works in every situation and in every organisation. However, the chosen IT operating model or framework will strongly influence the behaviour of the CIO and the IT team, so it must be relevant for the specific environment. The development of IT should be a function of all members of the executive team across the organisation, not just those in the IT department.

The digital governance model – illustrated below – moves away from the traditional (and now confused) boundary operation between IT ‘supply’ and IT ‘demand’ in recognition of a need for a new relationship. Although corporate IT should have oversight of technology capabilities and understanding of the organisation’s needs and should remain its ‘guiding mind’ for technology, it should not seek to take all related decisions.

ER

SP ES IN US CB GI AT E

SP AN

AT E

RM

SS

TR

INTEGRATES BEST IN CLASS SOLUTIONS FOR ENTERPRISE AND NICHE DELIVERY

FO CE

SL

ES

AN

IN

TR

US

DELIVERS

SB

BALANCES FREEDOM TO OPERATE WITH CONTROL TO ENSURE DELIVERY

IVE

GOVERNS

DR

RIO

RIT

IES

IT G OV E RN A N CE M O D E L

DESIGNS

SELECTS

ENSURES ORGANISATION-WIDE BREADTH INKED TO PROCESSES

USES RIGHT SYSTEMS, SERVICES, SKILLS, APIS, EMERGING STANDARDS

SHAPES TECHNOLOGY VISION

The development of IT should be a function of all members of the executive team across the organisation, not just those in the IT department.

The three edges of the triangular model represent the interfaces that the CIO needs to manage with the rest of the organisation. They are intended to be bi-directional in that the CIO shapes requirements from the capability of technology and builds capability based on the requirements of the board and business managers. CIOs do not necessarily have decision rights on these matters, but their perspective must be considered, given their experience in maintaining the integration of data, building in a resilience to the systems, preparing for disaster recovery and maintaining business continuity, compliance and data security. When this experience is applied wisely, it will make the new services more robust. However, CIOs must be alert to the risk that corporate IT’s knowledge can spill over into excessive control, which often manifests itself as a slowdown in the pace of adoption of services, ultimately holding back the drive towards business growth.

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T R A N S L AT E S S T R AT E G I C B U S I N E S S P R I O R I T I E S

There are two elements of translation. First, the translation of business priorities into IT priorities and actions for the IT team, and selected supplier organisations. Everyone should have clarity regarding the end goals and priorities. Secondly, translating IT capabilities to support and shape businesses requirements. Budget priorities should be established and continuously reviewed throughout the budget year. DRIVES BUSINESS PERFORMANCE

Driving business performance requires a balance of resources between ‘business as usual’ activities and new development activities. It also necessitates recognition of the agreed priorities. Engagement is therefore needed between business unit and functional heads to ensure that all are working in the agreed direction. SHAPES TECHNOLOGY VISION

Although this area was once the exclusive province of the IT team, it now has to be much more of a board-level discussion, with many executives from across the business qualified to shape its use of technologies. The four inner triangles of the model represent the major areas where the CIO and IT team need to deliver on the technology value proposition. The IT systems of an organisation will never be complete but need to evolve continuously. GOVERNS

The CIO must balance the opposing forces of freedom to execute and control of the process to ensure that delivery is satisfactory across the business. These two ideas will not come into conflict at the extremes but will meet in the middle. Enterprise resource planning (ERP) and back office corporate systems are usually well governed, but personal computing for employees tends to be over-governed and local systems for specific business needs undergoverned. DESIGNS

The enterprise architecture must be more flexible than in the past. There is an increasing need for ‘best of breed’ service selection. ‘Point processes’ are rarely necessary – where they do appear, it is often a sign of overlap or reworking. Elimination of these processes boosts an organisation’s overall efficiency. Corporations must understand where the ultimate focus lies. This may be on customers (which may mean little or no common architecture, depending on the consistency of customer needs) or on efficiency (which may mean little or no flexibility). Neither extreme is entirely sensible. It is worth remembering that flexibility does not automatically mean higher costs, and rigidity does not necessarily mean lower costs. SELECTS

This is a continuing selection of services rather than a one-time activity – choices between suppliers, similar services and people (both in terms of individuals and skill-sets), APIs to support and emerging standards to adopt in the fast-moving and emerging world of digital and cloud technologies. DELIVERS

The focus must be on both delivery of the run operation and creation of a safe environment in which the broad range of computing operations can be carried out by people in the organisation. Achieving the right balance between across-the-board standardisation and point solutions is critical. Integration requires IT to work with systems they do not own to ensure data persistency and service availability.

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CIOs must be alert to the risk that corporate IT’s knowledge can spill over into excessive control, which often manifests itself as a slowdown in the pace of adoption of services.


E VO LUTIO N O F PE RFO RM AN CE M A N AG E M E NT CHIEF PEOPLE OFFICER & LEARNING DIRECTOR W I T H S P EC I A L T H A N K S TO LU C Y K N I G H T, TA L E N T M A N AG E M E N T D I R EC TO R , A N D J I L L FO R D, S E N I O R H R B U S I N E S S PA R T N E R , AT G A P ; A N D TAT I A N A WOJ C I EC H OW S K A , S E N I O R H R B U S I N E S S PA R T N E R , A N D L AU R E N C E I B R A H I M , O R GA N I S AT I O N A N D TA L E N T D E V E LO P M E N T M A N AG E R , AT G E , FO R T H E I R CO N T R I B U T I O N S A N D S U P P O R T.

E VO LUTI O N O F PE RFO R M A N CE M A N AG E M E NT In a context of growing organisational complexity and transforming work patterns, corporations are realising that employee rankings, yearly reviews, appraisals and other traditional performance management processes no longer drive employee engagement or performance. Looking into professional development as a key strategic driver, companies are switching to less bureaucratic, more organic approaches to performance management and tapping into the full potential of their workforces.

TR A N S FO R M ATI O N D RI V E RS W H AT S U CC E S S M E A N S TO DAY. Marketplace changes have impacted the behaviours

and output that companies require from their employees. This brings its own problems: for example, the measurement of a professional’s creativity or collaboration is a complex undertaking. P E R FO R M A N C E M A N AG E M E NT A N D R E S U LT S U N A LI G N E D. Although the main goal of performance management is to drive business results, its processes often fail to align with companies’ strategies. C H A N G I N G E M P LOY E E S’ E X P E C TATI O N S . Workers today, particularly millennials, do not respond well to formal, bureaucratic evaluation, feedback and reward processes. R E S O U R C E S . Performance management is usually costly and time-consuming.

Renewed Performance Management – C-Suite Expectations Raise the bar on performance. Build a culture of honesty. Ensure managers take accountability for assessing, developing and rewarding performance. Provide meaningful reward for exceeding targets and consequences for missing them. Be flexible to support varying businesses. Support a global business model. Be simple. Be cost-neutral.

GA P ’ S WI N N I N G PE RFO RM A N CE CU LTU RE US retailer GAP operates approximately 3,700 stores under five brands globally, with 140,000 employees. In 2012 the company was facing the pressures of switching from a regional to a global business model, which required it to leverage the full potential of its workforce. GAP’s HR leadership saw this as an opportunity to revamp performance management at the company. Working closely with the company’s senior leadership, GAP’s HR leaders rebuilt performance management efforts through a programme called ‘Grow. Perform. Succeed.’ This is based on four pillars: performance standard; goals; touch base; and reward.

P E R FO R M A N C E S TA N DA R D. GAP substituted a four-point grading scale for a single performance standard, a clear definition of the behaviours the company expected from all employees. G OA L S . The common performance standard bases individual goals – six to eight simple priorities focused not on an employee’s tasks, but on the outcomes. Employees and managers revisit their goals monthly to ensure their continued relevance. TO U C H B A S E . Written annual reviews were eliminated and monthly touch bases were reconfigured into feedback and development conversations based on a three-question feedback model. What are you doing well? Where are you getting stuck? And – the key question – what would you do differently next time?

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Do not create any undue business or legal risk. Source: GAP Inc.

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R E WA R D. GAP changed its bonus system to reward the

achievement of goals and employee performance against the performance standard, and increased the weight of business performance over individual performance, decreasing silo behaviour (from 50%/50% to 75%/25%). With the new approach having been in place for more than a year now, GAP is experiencing unprecedented levels of engagement. A survey showed that 90% of employees are having regular ‘touch points’ and are more disposed to receiving feedback from managers. Managers, employers and even HR are more aware of how merit and bonus payments are funded and allocated, and they now clearly see the connection between rewards, individual and business performance.

PE R FO R M A N CE D E V E LO PM E NT AT G E GE used stack ranking to manage the performance of its workforce, but the process was negatively perceived across stakeholder groups. Employees believed that it offered no personal connection to goals, individual development and career aspirations. Managers did not believe that it enabled them to inspire and engage their teams, and the senior leadership did not think that it helped to improve individual or team performance and to develop employees in support of GE’s business aims. The company was restructuring its product development and manufacturing through FastWorks, an agile production framework based on quick deliverables and prompt learning both from engagement with customers and from mistakes that have been made. HR used the model’s principles to simplify roles, make the workforce more agile, and to restructure performance management. GE had been a pioneer in stack ranking, but the system was becoming irrational and intimidating. Managers were forced to fit an exact percentage of their teams into performance categories. The annual assessment process required that employees discussed their objectives with their managers each December. Not only did this generate anxiety and inertia, but the focus of the discussions was on past performance rather than the future. ‘Performance management’ was entirely reconfigured to become ‘performance development’: a cultural switch in workforce assessment from ‘ritual’ to ‘impact’. The annual assessments were substituted for ongoing touch points on expectations, realtime performance insights, frequent coaching and continuous professional development. Ratings were completely eliminated by the new system, leaving it to the manager to create bespoke financial or non-financial rewards for their teams each year, and to incentivise improvement in the case of underperformance.

TAT I A N A WOJ C I E C H OW S K A

S EN I O R H R B U S I N E S S PA RTN ER , G E

TH E P OWE R O F TECH N O LO GY Digital tools have been powerful allies in the revamping of performance management. They allow for new processes to be collaborative and frequent, and for them to take place in real time rather than retrospectively. TalTrack highlights that real-time feedback improves performance by up to 39%. Applications also monitor and keep record of each interaction. These new technologies are transforming performance management and improving organisational performance in the following ways: feedback can be given ‘in the moment’; action points from check-ins are captured and followed up; objectives are set collaboratively, aligned with organisational goals and regularly updated; progress and obstacles are captured as they happen; HR can see how often check-ins are taking place and how frequently feedback is being given; and HR can collate performance and talent data without having to carry out formal appraisals.

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GE had been a pioneer in stack ranking, but the system was becoming irrational and intimidating.

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SU PPLY- CH A IN A N D CORPO R ATE CLIM ATE AC TI O N CHIEF OPERATING OFFICER & SUPPLY & PROCUREMENT DIRECTOR W I T H S P EC I A L T H A N K S TO D E X T E R G A LV I N , H E A D O F S U P P LY C H A I N , C D P, FO R H I S CO N T R I B U T I O N A N D S U P P O R T.

SU PPLY- CH A I N A N D CO RP O R ATE CLI M ATE AC TI O N Supply-chain carbon emissions are on average four times a company’s direct emissions. In 2016 CDP (previously known as Carbon Disclosure Project), revealed emissions savings of 434m tonnes disclosed by suppliers. This exceeds the annual emissions of France, and it shows that the supply chain is a critical component – the missing link – in securing a sustainable, lowcarbon future. CDP runs a global disclosure system for companies, cities and regions to measure and manage their environmental impacts. The data show that supply-chain action is not just about reducing emissions, but that it is also good for the bottom line. Companies with emissions-reduction projects disclosed cost savings of US$12.4bn as a result of their carbon-cutting measures – double the sum reported in 2015. Almost half of the top 100 projects by savings were related to energy efficiency. Moreover, with a payback period of three years or less, the majority of projects had an attractive investment profile too. With a combined procurement spend of US$2.7trn – equivalent to the entire UK economy in 2016 – CDP’s supply-chain members are using their purchasing power to drive better environmental performance from their suppliers and create more sustainable supply chains. Nevertheless, although the savings achieved by suppliers were certainly impressive, around half of the 4,300 companies surveyed did not report any emissions-reduction activities at all. This highlights that the impact could be exponentially greater if they all took action.

“Billions of dollars are waiting to be saved through supply-chain action.” CDP

The data show that supply-chain action is not just about reducing emissions, but that it is also good for the bottom line.

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C A SC A D E E FFEC T More and more organisations are realising the potential of the supply chain to drive down emissions and save money. But many are facing a serious lack of transparency, with almost half of all suppliers – including major brands such as Amazon, Caterpillar and LVMH – not responding to their requests for climate- and water-related information. Others are failing to engage with their suppliers in the first place. Just 20% of companies are currently working with their own suppliers to lower carbon emissions, and only 16% are tackling water use in the supply chain. Although some of these businesses are doing great work to lessen the environmental impact of their own operations, supply chains are where the biggest risks and opportunities lie. With the Paris Agreement on climate change in force, and with investor and consumer pressure on the rise, it will soon no longer be possible to overlook this critical area.


In order to better manage its supplier network and to capitalise on opportunities, BMW Group has integrated its supply-chain approach into a group-wide corporate sustainability strategy, as well as its purchasing strategy.

D E X T E R G A LV I N

H E A D O F S U P P LY C H A I N , CD P

LE A D E RS H I P To improve performance and highlight best practice, for the first time companies have been rated on how they are managing carbon in their supply chain. Of more than 3,300 companies assessed, 29 made CDP’s first supplier engagement leader board – a list that includes car manufacturers, food and beverage companies and financial institutions, from Japan to the Netherlands to Brazil. In the US, Hewlett-Packard has helped its suppliers to avoid 800,000 tonnes of carbon emissions and save more than US$65m through energy-saving action plans targeting local efficiency improvements. Others leading the way include Brazilian petrochemical company Braskem, which runs targeted workshops to help suppliers to identify opportunities to reduce emissions and lower costs, and Dutch company Royal Philips, which has developed a tool to help suppliers with less experience in disclosure quantify their carbon emissions.

As a result of its targeted supplier engagement strategy, BMW Group initiated pilot projects for emission reductions in 2016 in collaboration with key suppliers, while setting bilateral targets for its highest CO2-emitting suppliers.

POTENTIAL INDUSTRY CARBON SAVINGS AND TOTAL POTENTIAL IN THE SUPPLY CHAIN Industry initiatives

Supplier potential

100% 90% 80% 70% 60%

23

50% 40% 30% 20% 10%

W I N M A R K C-S U I T E

Q3 2 0 1 7

Ov er all

Ma te ria ls

0%

Ut ilit ies

BMW Group works with around 13,000 suppliers across 70 countries. This vast, global supplier network therefore represents a major source for value creation, quality and innovation for the group, but also inherent risks if left unaddressed. In order to better manage its supplier network and to capitalise on opportunities, BMW Group has integrated its supply-chain approach into a group-wide corporate sustainability strategy, as well as its purchasing strategy. This integration at a corporate level is supported by annual internal targets and supplier engagement based on KPIs including transparency and CO2 emissions reporting criteria. BMW Group began to assess its suppliers against key indicators, such as emission targets, reduction initiatives and changes in absolute emissions. This allows it to track year-on-year performance, develop competitive benchmarks and inform its future supplier engagement strategy. The company also engages suppliers that do not directly participate in annual performance reviews on a bilateral basis.

Fi na nc ial Co He ns alt um hc ar er e di sc re Te t i lec on om ar y m In u nic fo rm at ion at ion s te ch no Co log ns um y ne rs ta pl es In du st ria ls

B MW G RO U P


C-SU ITE M E M B E RS H IP HENRY BOOT PLC HAS PUT ITS ENTIRE LEADERSHIP INTO WINMARK C-SUITE NETWORKS

Henry Boot has a long history of strong leadership and pioneering in new areas. This decisive action to invest in its leadership team has put each of its executives on a par with the best organisations in the world.

“We are always looking to invest in our team and Winmark is the only company in the world that has the full C-Suite of networks that we needed. This enables our team to learn from their peers in different sectors and puts them at the forefront of modern best practice. The world is moving fast, and being plugged into 5,000 “We are delighted to welcome Henry Boot to business leaders through Winmark enables all our the Winmark C-Suite community. They are executives, including me, to benchmark ourselves, a company with an impressive history and our tap into a wealth of knowledge and connect with role is to help ensure they prosper today and in key people.” decades to come. Great to be working with them and now we need to start the knowledge and John Sutcliffe, Chief Executive Officer, Henry Boot PLC connections transfer.” John Jeffcock, Chief Executive, Winmark

FOR I N FORM ATI ON O N T H E W I N M A R K C - S U I T E M E M B E R S H I P, P L E A S E C O N TA C T W I N M A R K O N + 4 4 (0) 2 0 7 6 0 5 8 0 0 0

2 4 W I N M A R K C-S U I T E Q3 2 0 1 7


EDITORS John Jeffcock, Chief Executive, Winmark john.jeffcock@winmarkglobal.com

Fabio Couto, Content Manager, Winmark fabio.couto@winmarkglobal.com Winmark Global 7 Berghem Mews Blythe Road London W14 0HN United Kingdom


IS SN 2 39 9 -1 1 8 6

Winmark C-Suite Report Q3 2017  
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