Shareholders of publicly traded companies would like to see higher capital gains and dividends. Recognizing this, Verizon set up goals for 2011 to create a leadership culture in the company that would increases shareholder value. In order to achieve this goal, CEO Lowell McAdam established mandatory training programs for company executives. The objective of this program is to identify obstacles preventing Verizon creating more shareholder value than the existing. Except identification of obstacles, senior company executives also prepare Individual Accounting Plan (IAP), which are aligned with the metrics used by analysts, shareholders, and potential investors in evaluating company performance. The company has also established Leadership Development Program (LDP) in order to train new talents. Using competing values framework as a benchmark, we can conclude that the company is following clan, market and hierarchy cultures in leadership area. Clan culture defines mentoring, facilitating, and nurturing character; market culture defines aggressive, and result oriented character; hierarchy culture defines coordinating, organizing, and efficiency oriented culture (An Organizational Culture Assessment).
Desired type of culture
Use of the cultural dimension and competing value framework concept helps establish the company culture needed to meet business goals. Figure 1 demonstrates a graphical model of this concept (The Competing Values Framework; An Organizational Culture Assessment). Cultural dimension can be visualized in two-dimensional intersected axes of Cartesian coordinates. Horizontal dimensions are inward and outward while vertical dimensions are flexibility and control. Horizontal dimensions describe a company’s attention, and vertical dimension defines who make the decision. Inward dimension characterizes attention within the organization and outward characterizes attention towards customers, supplier, and external environment. From the viewpoint of the cultural dimension, Lowel McAdam needs to develop balanced inward and outward dimensions. On the vertical dimension, he should give more employee flexibility, while keeping control on management hand. From the competing value framework viewpoint, Lowel McAdam needs to develop more market culture and less hierarchy culture. Market culture, in fact, executes hierarchy style control but by looking outward. Market culture also views all external and internal dimensions in market terms. Lowel McAdams can also imply some of the aspects of clan culture like shared goals, outputs and outcomes. Telecommunication industry is highly competitive and market driven. It is essential for a telecommunication company to have workforce driven by loyalty that is ready to share the common goal. Based on the above discussion we can conclude that the best option for Lowel McAdam is to create clan and market oriented cultures to achieve superior shareholder value.
Ways to change culture
Organizational culture is an invisible bond that holds the company’s workforce and shows them the direction. According to the MIT business school, it is a collection of shared pattern, belief, and assumption used in the process of solving problems related to internal integration and external adaptation and opportunities (Thurp). Verizon’s internal integration is to set up workforce as good as its network; external adaptations to become a leader in the industry in shareholder value creation. This is a challenging task and need right combination of company culture. The case describes Verizon’s attempts in changing the company culture in order to achieve the goals. The following section identifies ways that Verizon used in changing organizational culture (How to Change a Work Culture).
Hiring process: The company intends to lead the industry in Shareholder value creation. It requires leadership-oriented mangers at different segments. According to Magda Yrizarry, the Human Resource VP, Verizon is committed to creating new leaders from young generation under Verizon Leadership Development Program. The company is attracting top talents from their affiliated colleges and universities. Moreover, the company has worked out a rigorous training plan for these future leaders.
Balanced scorecard: The company uses CS New Hire Training Scorecard to record new hire performances at 30,60,90, and 120 post-training periods. The scorecards help to assess “Entire performance,» “Quality”, “First Call Resolution”, and “Handle Time” of trainees. Individual results of the balanced scorecard are measured against setup KPI.
Involvement of all leaders: CEO Lowel McAdam introduced executive education program requires that each senior leader submit an IAP, which will be used for company’s performance evaluation. Each Senior Leader selects one or two actions that he or she will commit to as part of driving Shareholder value.
Improvement of communication method: The IAPs are digitized and submitted to the CEO, and other strategic business units’ presidents for review and follow.
Use of technology as an Improvement Catalyst: The case study indicates that, in 2012, Verizon captured the number one position in Training Top 125. Training of the workforce at different levels and segments has become Verizon primary importance. Before introducing to market its 4G LTE Network in December 2010, the company delivered 60,000 plus hours training to its front-line Sales and Service reps. The company has introduced video / audio podcasts as means of learning. The company has introduced its own YouTube site that is called VZTube. Total VZTube members are 83,398; in one year, they watched 1,478,412 videos and listened to 13,084 audio files.
According to Burns & Stalker (2004), organizations need to manage their activities in order to respond to changes and uncertainties in the environment. Telecommunication industry is a volatile sector where profitability depends on the number of customers. These companies operate in dynamic and uncertain environment. These companies need to have organic structure, rather than mechanistic. Burns & Stalker (2004) characterize organic structure through various parameters. We compare Lowell’s approach against these parameters.
High separation of tasks: Lowell’s mandatory executive programs and IAP show use of this parameter.
High integration: The case study describes, “More than 300 senior leaders have SHV IAPs which will be incorporated in 2011andd 2012 performance reviews.” IAPs developed by senior leaders are provided to Lowel and other business units’ presidents for review and follow up.
Decentralization decision-making: Verizon works in a dynamic and uncertain environment. Computing value framework indicates flexible approach adopted by the company in this regard. Company Leadership Development Program is also another indicator of decision-making decentralization strategy.
We can conclude that Mr. Lowel wants to create organic organization.
The important lesson from this case is that the success of a company involved in a competitive market depends on combined effort of leaders, management, and sincere workers. Verizon setup two fundamental goals: to build a business and workforce as good as its net work, and be the leader in the shareholder value creation. Lowel McAdam understands that without a good workforce the company will not be the leader in shareholder value creation. We can consider that a good workforce is the effect of cause and effect relationship between “shareholder value and workforce”. A good workforce does not appear from the sky. One needs to find potential workers, train them and use them. Lowe’s entire program described in the case relates to creating of good workforce, which is a complex task. This complex task requires to develop certain organization culture that would help to create good workforce, and retain them. Shareholder value creation is an aggregate of highly complex management task.