Jeff Sacht: Publisher-Editor

Equity Skills News & Views

Many fundamental changes are at work in the world's economy. Sweeping developments are affecting most, if not all, industries in both developed and developing economies. As a result, business leaders no longer have the luxury of maintaining a business as usual stance.

The HILL School for Business conducted an exploratory study to determine the degree to which South African business is making the shift from a business as usual (Old Economy) paradigm to a New Economy style of managing organisational and people performance.

According to the Beehive Model of organisational renewal, developed by The HILL School for Business, seven critical workplace practices must be implemented and entrenched for companies to have a competitive edge.

The HILL surveyed 249 current and past MBA students drawn from various business schools. Respondents were asked to rate the degree to which their companies implemented seven workplace practices: strategy; structures; business disciplines and processes; talent creation; seeking commitment from all stakeholders; pay and incentives; and change leadership.

The bottom line message that emerges from the current research is that South African business is still far from capable of entrenching the critical strategic leadership and workplace practices required to create a high performance and change hardy business culture capable of rapidly transforming itself to compete in the global arena. The 2 key drivers of business transformation as predicted by the Beehive Model are Strategy and Change Leadership, which are rated the lowest out of the 7 Beehive dimensions.

Businesses seem to be wavering between what are regarded as New Economy practices, such as flat structures and cultivating empowered, participative employees who have access to information, and Old Economy practices, such as mechanistic and bureaucratic workplace practices.

CEO’s most frequently turn to examining the balance sheet when seeking to improve business performance. The balance sheet provides crucial information about key financial measures such as margins, return on equity (or assets), revenue, general and administrative expenses, etc. Often, the balance sheet can provide specific clues as to how to improve profitability through more careful management of operations on either the cost, or the revenue side of the business. Since a CEO’s job can be boiled down to one simple statement which is "To create value for customers and stakeholders through managing all of the company’s resources", understanding and managing the company’s financial resources is a critical competency that most CEO’s learn to do well!

Although the balance sheet provides a wealth of information regarding how well company resources are being managed, it provides little to no information about: 

• How well people are organized around and within the company’s core business processes to efficiently and effectively produce its goods and services

• How leadership practices may be influencing (adversely or positively) employees’ ability to effectively execute their day-to-day work responsibilities

• How key human resource management systems and practices such as performance management and strategic compensation are used to reinforce a climate of high performance

• How well managers and employees at all levels of the organisation are able to respond quickly to change, whether that change be driven by customers, new technology, market dynamics, economic forces, regulatory trends, or other internal dynamics

How much would it be worth to a CEO and his/her executive staff to have information about how these various elements in the organisation could be affecting overall profitability? Quite a lot, particularly so, if the information provides some clues about how to re-align some of these areas to improve operational and organisational performance.

An important consideration for managers and change agents, who wish to better understand organisations, is to find or develop a model that represents how an organisation functions as a system. Models symbolise organisations from various levels. We often hear about taking a helicopter view that describes the very high strategic level including the mission, vision, strategic goals, and so on.

A simple organisational chart represents how the various functions are supposed to relate to each other and show reporting relationships and lines of authority. Some models may actually take a deeper view of the organisation and represent the day-to-day operations at a process level. Some of these may not be particularly effective at showing how an organisation really functions or how the work actually is done.

There are a number of existing models available to managers and change agents that help conceptualise and build their own diagnostic process. W. Warner Burke and George Litwin authored a model that many find helpful entitled "The Burke-Litwin Model of Individual and Organisational Performance." Geary Rummler and Alan Brache have a very workable organisational model that addresses levels of performance from the organisation, processes and the individual job/performer perspective.

The HILL School for Business has developed the "Beehive Model" and the related "Beehive Survey" based on the work of Christo Nel and his colleagues at the University of Stellenbosch Business School in South Africa. This model identifies seven sets of critical workplace practices that need to be integrated to entrench high performance and drive sustainable competitiveness within an organisation.

Ideally, any practice model should be:

• Simple
• Performance-focused
• Usable (easily understood by management)
• Comprehensive
• Systems-based

The Beehive Model and Survey has been found to be a robust and practical model, useful across a number of organisational settings, including a major banking group, a poultry producer, and a multinational brewing company, to name but a few.

3. The Beehive Survey of Organisational Functioning

Unlike most surveys, which gather employee opinions and ratings of "climate" issues (management and supervisory practices, communication practices, work-life balance, company values, work relationships, etc.), a Beehive Survey targets specific areas that have been shown by sound management theory and research to have a direct relationship with high organisational performance.

Climate surveys have a place in providing useful data to management, but often that data is not actionable. In other words, either because management is unable or unwilling to take action in response to employee opinion about a given issue, or because the data itself fails to provide clues as to the appropriate action to take, nothing gets changed. The result is that employees’ expectations for change fail to be met, and they become less motivated to pour their hearts and minds into their work.

In a paper delivered at the 2003 Global Conference on Business and Economics, Denton and Bouwer state "the Beehive Model’s structure …and the associated (survey) questionnaire indicators are soundly supported by recent academic theory as well as the limited available empirical research on related topics. It is therefore possible to conclude with a reasonably high level of confidence, as viewed against the backdrop of trends in theoretical literature and empirical research on related topics, that compliance with an holistic application of best practice is likely to result in the entrenchment of change and high performance within an organisation’s culture" (Denton, M, & Bouwer, E, 2003, p 2).

The information obtained from a Beehive Survey provides managers and change agents with a profile of an organisation’s performance that can be compared to current best practices. The Beehive assessment gives an organisation, department or business unit the opportunity the re-think it’s workplace practices that research has shown to be strongly related to superior performance in The New Economy. The survey produces a snapshot of the following seven areas shown in figure 1 below.

• Strategy: The ways in which strategy is formulated and utilised as a primary driver of performance within the organisation

• Structures: The extent to which structures are designed to reinforce and drive performance by optimising the organisation’s supply chain and the fulfilment of accountability at all levels

• Talent Creation: Workplace practices and disciplines that ensure the optimum development and utilisation of people and their ability to contribute to performance

• Business Disciplines: The adoption and widespread use of a set of integrated business disciplines that reinforce and cause high performance

• Stakeholder Commitment: Developing the alignment of all stakeholders so that they operate as active contributors to the competitiveness of the organisation

• Pay and Incentives: The alignment of pay and incentive systems that attract, retain, and enhance the commitment of people across all levels

• Change Leadership: The use of proven leadership and processes for implementing change and turning strategy into operational action that delivers competitive performance.

A Beehive Survey is designed to achieve whole systems improvement. For one organisation, that may simply require a re-alignment or redesign of one or more of its human resource management systems. For another company, there may be a more extensive change programme required that could involve changes to structure, changes in the design of key jobs, changes in management decision practices, or even a re-engineering initiative to improve the efficiency and output of its core processes.

The results of a Beehive Survey are used in concert with other operational, financial, and organisational data to provide a more complete or holistic, view of what needs to change. Survey data is used to plan a systematic change programme designed to deliver a measurable return on any costs required to implement the change. Improvement targets are established based on current financial and operational performance measures, and upon reasonable estimates of the amount of improvement that might be achieved over time.

Many fundamental changes are at work in the world's economy. Sweeping developments are affecting most, if not all, industries in both developed and developing economies. As a result, business leaders no longer have the luxury of maintaining a business-as-usual stance. The phenomena at work here include:

• Rapid advance of information technology: The past decade has brought significant gains in computer hardware and telecommunications capabilities. Processing speeds and computing power has increased dramatically, while the costs of computers and data storage have plummeted.
• E-engineering: Many organisations are applying Information Technology as a way to radically redefine work processes and to transform relationships with both suppliers and customers. This e-Engineering is resulting in increasing rates of productivity growth and lower operating costs for many organisations.
• Deregulation: The pace of deregulation around the globe has been accelerating across the past decade. As government restrictions to free trade fall, competition intensifies. For some organisations, deregulation translates into new business opportunities. For others, the move to free trade results in new competitive threats.
• Globalisation: As transaction costs decline, and as regulatory barriers fall to the pressure of market economics, the potential market for any one company's goods or services increases substantially. Again, the result is a general increase in the level of competition.
• Rise of the Internet and e-Commerce: By any estimation, the Internet and e-Commerce are taking the world by storm. The Internet is already forcing many organisations to re-examine their business models and their company’s place within their industry's value chain.

For some companies, these factors appear to be working together. However, there also appears to be some trouble in paradise. Many companies are now beginning to experience the most challenging aspect of the new economy: rapid and unpredictable change.

Some of the changes that organisations are now experiencing as a result of the new economy (and the rise of e-Commerce in particular) include:

• Redefinition of sales channels: The Internet and e-Commerce are making it easier for organisations that are "upstream" in an industry value chain (e.g., manufacturers and suppliers) to sell directly to those further "downstream" (e.g., end-users), as opposed to selling through middlemen. The Internet is also facilitating the emergence of a myriad "virtual" competitors now competing directly against "real world" incumbents. Both retail and business-to-business sales channels are being affected.
• Unbundling and rebundling: Products, services and information are being ‘repackaged’ at a rapid rate. The Internet is leading to the wholesale redefinition of many value chains and industries. In some cases (for example, the stock brokering industry), the information that was once considered integral to the traditional service offering is being cleaved off as a separate product offering. In other cases, the ability to aggregate information is giving rise to new services (for example, on-line mortgage brokers). Nearly every industry will be affected in some way by the enhanced availability of information that the Internet brings.
• Increased buyer power: The Internet leads to lower "search costs" for buyers in developed and developing economies alike. It is becoming far easier to identify potential suppliers and then to compare their prices. As a result, suppliers' profit margins will likely decline. Given that nearly all organisations will be a buyer in some transactions and a seller in others, the net effect of enhanced buyer power to a corporation's bottom line will depend on a number of factors. Based on these changing buyer-seller dynamics, most organisations now face the need to redefine their relationships with both their suppliers and their customers.
• Increased employee power: ln much the same way that the Internet results in increased buyer power for purchasers of products or services, employees are gaining greater power in the employment relationship as a result of increased availability of information about employment opportunities. Employees now have instant access to nearly unlimited job openings from everywhere around the globe. Employees can also easily make themselves "visible" to potential employers through web-based resources - hence the notion of the "effortless job search."

The broad changes in the competitive landscape are leading many business leaders to define a new set of strategic priorities for their organisations. There are at least six imperatives that should be on the agenda of any organisation’s senior executive team:

• Redefining the company’s business model: In order to adapt to an e-commerce business environment, many organisations will have to completely rethink and redesign the way they do just about everything.
• Reducing cycle time: As product and industry cycle times become shorter, organisations must be able to move more quickly to take advantage of emerging opportunities. The goal here should be faster decisions and faster time-to-market for new products and services.
• Fostering innovation: The challenge here is to create a culture that encourages risk-taking and embraces (the learning from) failure as a way to become a market leader. As technology continues to evolve rapidly, the winners will be those organisations that can quickly test large numbers of new products or services, and then learn from and build on each individual experience.
• Securing talent: While the competition for talent has intensified generally (in an EE and AA context), a new challenge has emerged: attracting and retaining those individuals required to lead new e-Commerce initiatives. For at least the next several years, the demand will significantly outstrip the supply. An additional related challenge for many organisations is to simultaneously manage both new e-commerce ventures and traditional operations within the same corporation.
• Strategic partnering: As the pace of change accelerates, it becomes more difficult for individual organisations to adapt organically to this change. Thus, a company that cannot build a critical new capability will instead have to buy, or partner with, a company that already possesses that capability.
• Redefining the role of corporate headquarters: The emergence of the Internet and e-Commerce raises a new set of questions as to what the proper role of the corporate centre should be. For many companies, the corporate centre will have to lead the identification and pursuit of new business opportunities that do not neatly correspond with traditional industry and business unit definitions. Other principled roles for the corporate centre in the new economy include coordinating e-business investments, stewarding channel migration and brand management.

The HILL School for Business has initiated exploratory research to determine the degree to which South African business is making the shift from a business as usual (Old Economy) paradigm to a New Economy style of managing organisational and people performance.

The survey results will provide business leaders and practitioners with important base-line information about where change is urgently required if South Africa is to remain globally competitive and not be sidelined as a business backwater not worth investing capital in. Over time, industry specific profiles for the 25 industry sectors or SETAS (as defined in The Employment Equity and Skills Development Acts 1998) will provide context specific road maps for change.

A survey was conducted with past and present MBA students based on the assumptions that MBA students have a greater exposure to senior management thinking and action, and may have access to information not readily available to people at more operational levels.

Anecdotal evidence suggests that operational management and staff tend to have a more negative perception of leadership and workplace practices than people in more senior levels. One would assume that employed MBA students are generally not operating at operational levels. This would suggest that the MBA group’s perceptions might be more optimistic than the average employees’ views. If this is the case, the extent to which sustainable high performance is being entrenched through appropriate leadership and workplace practices is cause for concern as demonstrated by the survey findings.

A sample of two thousand one hundred and nineteen (2,119) participants were contacted, and asked to complete either an online questionnaire, or a paper based Beehive Questionnaire. Two hundred and forty nine (249) completed questionnaires were retrieved for analysis.

Respondents were asked to assess their organisation on seven sets of workplace practices corresponding to the seven dimensions of the Beehive Model. Each set contains eight pairs of indicators. The pairs of items describe behaviours or ways in which their organisation may be operating.

The participants were asked to consider the two opposing pairs and decide the extent (on a 4-point scale) to which either the one or the other statement is true for the department or business unit within which they work. Below is an example of the bi-polar questionnaire.

The answers on the left of the mid point (-4 to -1) are called "Old Economy", and those on the right of the mid point (+1 to +4) are called "New Economy". The "Old Economy" answers are counted for each question, and percentaged out of the total number of possible answers including 0 for each question. The "New Economy" answers are counted for each question and percentaged out of the total number of possible answers including 0 for each question.

A graph is constructed using the percentages of Old Economy / New Economy answers. Because answers that are 0 or on the mid point are not reported, but are included in the totals on which the percentages are calculated, the percentages of Old and New Economy answers will not add up to 100%

Table 1 shows that when the findings were split in terms of company size by head count it was found that small organisations with up to 50 employees perceive themselves to be relatively further along the road towards New Economy workplace practices compared to medium and large companies. This relative difference can possibly be accounted for by the entrepreneurial organisational style required by small companies to adapt rapidly to signals from a dynamic marketplace that rewards change and high performance with growth and development.

Table 1

Beehive Scores (%’s) for Small, Medium & Large

South African Companies

Prior research using the Beehive Survey has shown that globally competitive organisations score 70% and higher on all 7 dimensions of organisational functioning (see table 2). In contrast to this the pattern of scores from the current research indicates that the South African companies score on average 27% lower on New Economy workplace practices compared to globally competitive players.

Key findings from the current research for each of the Beehive dimensions are presented below.

7.1 Strategy: Employees need to feel they are influencing strategy and perceive that there is a single interpretation of strategy. There must also be a common view of what the strategic challenges are. The survey examined strategy from two perspectives i.e. the process by which strategy is formulated and used as a primary driver of performance.

Respondents rated this dimension in the middle with an average score of 51%, which is well below (30% lower) that of South Africa’s globally competitive counterparts.

The lowest scoring items show that more than half of the sample feel disconnected from the strategy formulation process and do not have a cohesive view of the strategic challenges of their organisations. This finding, coupled with low ratings on how to translate strategy into tactics at the operational levels of the organisation does not auger well for entrenching a high performance and change resilient culture capable of competing in a globally competitive business arena.

7.2 Structures: Companies need to make the most of their supply chains, and make individuals accountable. This is achieved by having flat and easy communication, clarity of roles and empowerment of people. Senior management has to be involved in strategic activities and must make the company strategy operational.

The overall score of 52% indicates that South African organisational life is not geared to senior management ‘walking the talk’ and facilitating, or helping their management teams to translate strategy into day-to-day tactics. The two lowest scoring items reveal that South African organisations are viewed as having a traditional top-down management with little room for people at more operational levels to contribute to strategy implementation.

7.3 Talent creation: Companies need workplace practices that develop employees to their full potential and ensure they contribute the maximum to the company. One of the more positive findings of the survey is the fact that compared to the other dimensions in the survey, talent creation is being actively pursued. The average score of 56% is the 2^nd highest scoring dimension in the survey. However, this score is still close to 30% lower than those of globally competitive organisations.

In the light of the findings from the strategy and structure dimensions (see 7.1 & 7.2 above) these modestly ‘optimistic’ scores may mask the fact that talent creation may well not be as relevant or as connected to what are already seen as poorly defined, understood and communicated strategic priorities that would be used by management and Human Resources to inform or guide the talent creation process. This coupled with inadequately defined and aligned performance standards and targets may well provide an explanation of why South Africa as a country scores so low on the various competitiveness indexes published annually (as measured by the Global Competitive Survey).

7.4 Business disciplines: Less than half of the companies have a commonly understood strategy process that ensures that the necessary information is delivered to employees in a way that is user-friendly and structured to facilitate the setting of stretch goals, and the solving of problems. The low ratings noted here for business disciplines also serve to reinforce the ratings noted above for strategic practices.

The overall picture that emerges from the ratings for both Strategy (see 7.1) and Business Disciplines (see 7.4) indicates that the management of performance (as a formal business discipline) that links what individuals and teams do on a daily basis with the larger goals, values and cultural practices of the organisation and the needs of its customers is sub-optimised. Again, this may account for the overall low competitive nature of South African companies.

7.5 Stakeholder commitment: This requires all stakeholders to work actively towards making the organisation competitive. The survey found this to be the highest ranked New Economy practice. Around 60% of respondents believed this principle is actively cultivated by their organisations. This includes a clear process of trying to meet stakeholder interests, the elimination of racial and gender discrimination, and making diverse groups feel valued and respected.

7.6 Pay and Incentives: The survey sought to assess the degree of alignment of pay and incentive systems that attract, retain, and enhance the commitment of people across all levels. Whilst over 60% of the companies recognised that pay is just one way to motivate employees, less than 43% create long-term incentives across all levels, and co-ordinate this with short-term incentives.

Again, the pattern of low scores for 4 out of 8 of the pay and incentive questions paints a gloomy picture of how these performance levers are under-utilised when it comes to the strategic management of individual and/or organisational performance. This coupled with the overall low scores mentioned in 7.1 and 7.4 above reinforces the fact that South African companies may well be a long way off from adopting the 7 ‘habits’ that account for the long-term success of New Economy organisations.

7.7 Change leadership: The survey assessed the degree to which South African companies use proven leadership practices for implementing change, and turning strategy into operational reality that delivers competitive performance. Change leadership involves excelling in the implementation of performance planning processes; communicating the rationale behind changes; adequately developing new skills across all levels of the organisation; a continuous evaluation of any resistance to change; assessing and responding to any problems; and an awareness of the consequences of non-delivery.

The fact that South African companies rate themselves only half as good as their global competitors when it comes to embedding a change hardy culture makes for a high risk of business failure in the face of relentless competition from both developed and developing economies. Change leadership fared the lowest among respondents, suggesting a lack of good leaders able to implement change and put strategy into effect.

The added pressure on organisations to accommodate new, unfamiliar challenges and opportunities can be gauged by the degree to which leaders are able and willing to undertake large amounts of transformational change, rather than incremental ‘piece meal’ change. And the jolts will occur more frequently. In the midst of this competitive commotion, there is a growing feeling among leaders that they are simply not able to keep up with the shifting nature of their markets and the ever-evolving requirements for remaining competitive.

The bottom line message that emerges from the current research is that South African business is still far from capable of entrenching the critical strategic leadership and workplace practices required to create a high performance and change hardy business culture capable of rapidly transforming itself to compete in the global arena. The 2 key drivers of business transformation as predicted by the Beehive Model are Strategy and Change Leadership, which are rated the lowest out of the 7 Beehive dimensions.

South African businesses seem to be wavering between what are regarded as New Economy practices, such as flat structures and cultivating empowered, participative employees who have access to information, and Old Economy practices, such as bureaucratic processes.

New Economy leadership calls for a different approach to orchestrating change and instilling a culture characterised by high performance workplace practices than was necessary during an earlier, more stable period. Leaders need to build nimble organisations capable of responding to the chaotic conditions produced by constant change. If global competition is threatening, or new technology is remoulding your market's landscape, or customers are expressing different interests, or your industry is consolidating itself, then South African organisation must be able to alter its formula to meet those challenges.

In direct contrast to nimble operations, are those companies that are unable to carry out decisions intended to deal with shifting demands for success; these are called "Old Economy organisations". Despite their intention to sometimes do otherwise, these companies rigidly adhere to the status quo. Even after a concerted effort to embed change and high performance practices, most Old Economy organisations gravitate back to operations that are similar in nature, if not in form, to the way things were before challenges and opportunities surfaced.

Leaders of Old Economy organisations usually try to maintain their organisation's equilibrium by directing and predicting events. In contrast, nimble leaders invest their resources into directly influencing what they can, and then relying on responsive processes for meeting the rest of their organisation's security needs. Instead of trying to predict events, New Economy companies focus on developing processes that will allow quick, effective responses to events as they unfold.

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Denton, Mario & Bouwer, Ernst. 2003. Entrenching Change and High Performance Through the Beehive Model of Organisational Renewal. University of Stellenbosch.

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