Why it works to put customers second

One the biggest challenges facing CEOs in the 21st Century is how to best transform an organisation in decline while satisfying the often conflicting demands of investors, customers and employees.

For Vineet Nayar, Vice Chairman and Joint Managing Director of global IT services firm HCL Technologies, the starting point for organisation transformation is building an environment of trust and transparency. These values, he says, permeate all high performance organisations.

Nayar is the author of the management bestseller Employees First, Customers Second: Turning Conventional Management Upside Down  – a book that sprang from his experience leading HCL’s transformation into one of the fastest growing and most profitable IT services firms in the world.

Nayar’s defiance of conventional leadership wisdom has grown HCL into a company with annual turnover of $6.3 billion employing more than 90,000 staff in 31 countries. An acknowledged management expert, Nayar was recognised in 2011 by Fortune magazine in its global “Executive Dream Team”.

Why do you assume that employees get excited by how great the company is?

Vineet Nayar

Trust, he told me in a recent interview, is developed by being as transparent as possible, sharing both positive and negative information and allowing staff access to company data.  Through this process of sharing inefficiencies and inadequacies, as well as strengths, employees feel that they are part of an organisation where management values openness.

As openness develops, staff become more comfortable in suggesting improvements rather than hiding errors, which in turn speeds up the process of growth.

“Why do you assume that employees get excited by how great the company is?” Nayar asked in our interview. “They get excited by how bad it is, because then they get an option to have a go at fixing it.”

Coloured thinking

vineetbookHe believes that managers tend to typically resist transparency with their own workforce. Part of the reason lies in the sensitivity of competitive information and their desire to protect intellectual property, which then colours management thinking causing them to treat employees in a similar guarded manner to that of a competitor.

This lack of information from senior management, combined with increasingly easy access to data, particularly over the past decade, has enabled disenfranchised and information-hungry Gen Y junior management to utilise the Internet as their source of company information.

The rise of social networks extended their information sources as employees began sharing information about their companies and at times their own managers.

Against this background, senior management have found themselves no longer the guardians of all company knowledge they once were. Worse still, if past deceptions to staff were discovered, relationships became irreparably damaged.

In this damaged environment Nayar believes there to be no difference in Western or Asian organisations either in the cause or remedy. He sees the basic human values of trust, transparency and integrity as universal. Likewise he sees the need for people to be given opportunities and the encouragement to succeed as agnostic to cultural background.

What Nayar believes to be the way of achieving trust is through appropriate communication channels, which does differ among cultures. He cites an example of the “typical Indian”, as one who would place greater trust in verbal communication, while other cultures with more legalistic natures would tend to value written communication more highly.

‘Inverting the pyramid’

One of the approaches he suggests for achieving better organisational communication, trust, and transparency is through what Nayar refers to as “inverting the pyramid”. This refers to an organisation structure whereby supporting functions and management report to employees, allowing for faster growth by creating differentiated value for the customer, compared to that which competitors can create. This differentiated value being created at the interface of the employees and the customer Nayar refers to as the value zone.

The core business of managers and management in any company, he says, is “to enthuse, encourage and enable those employees in the value zone to create the differentiated value so that you can grow faster.”

“If you transfer the control of change to your employees and say ‘we have a problem and you’re the only guys who can fix it’, you will suddenly get a very excited workforce,” Nayar told me.

vineet280“Transferring this change and the ownership of change to employees is a logical step to be able to increase the energy level of the organisation and run faster.”

The benefits to business of developing trust within their company are obvious.  A more interesting exercise is to consider how cultural differences between Singapore and India, where Nayar’s company is based, impact the way in which trust is developed.

One way of measuring the propensity to trust can be by using Geerte Hofstede’s cultural dimension of “uncertainty avoidance”. Those countries with low uncertainty avoidance tend to be able to rely on the rule of law and believe business dealings to be predictable and can therefore trust in the outcome of exchanges.

At the other end of the scale, countries with high uncertainty avoidance tend to use established relationships as the basis for trusting others.

On this dimension, Singapore scores a low 8 and India a fairly high 40.  By way of comparison China scores 30 and USA 46.  Nayar’s work would certainly be cut out in the highest scoring country, Greece, at 112.

Cross cultural comparison measures are enormously complex and typically controversial, but if Hofstede’s findings hold true, Singapore’s managers have a better starting point than many to create trust and transparency in their companies.

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