Webinar lc ps e culturetransformationmay2010

A Strong Market Culture is the DNA of Profitable Businesses
(800) 817-8582 ● Monterey ● Boston ● Sydney ● www.MarketCulture.com
© MarketCulture Strategies. All Rights Reserved. 2010
TELSTRA CASE STUDY
The CFO leads cultural transformation and acts as a guiding light for
the whole organization.
“I set out to transform the Finance Group into a support group that would
create new value, provide top service and be seen to be valuable by its
customers…..and deliver millions of dollars to the bottom line.”
John V. Stanhope
Chief Financial Officer and Group Managing Director, Finance and
Administration, Telstra Corporation
THE CONTEXT
Telstra is a $25 billion Australian telecommunications and media services company. It ranks as
11th
largest Telco worldwide in terms of market capitalization. It provides fixed line, mobile and
broadband Internet services. Its cable TV, online directory and Yellow Pages books form the
basis of its media services.
Telstra’s cultural legacy is one of a government owned monopoly that has progressively
adapted to an increasingly deregulated, commercial and competitive environment. The Finance
and Administration (F&A) Group, a corporate support function of more than 2400 people has
operated in a company that has always held strong market positions in all of its Australian
markets. The company has undergone many changes over the years to become more
customer-focused, but it is still known in several market segments for its poor customer service.
The Chief Financial Officer (CFO) wanted to change this, starting within his own group. A
“customer service” focused cultural change, known as value service culture (VSC) was initiated
in June 2008. This case traces the value service cultural change over its first 24 months to June
2010.1
1

The
CFO
and
members
of
the
senior
leadership
team
were
interviewed
by
MarketCulture
several
times
over
the

course
of
the
2
year
journey.
Ongoing
discussions
took
place
with
the
CFO
throughout
the
period.
Internal

documents
were
used
to
identify
the
sequence
of
initiatives
undertaken.
Members
of
the
MarketCulture
team

were
engaged
at
the
start
and
participated
in
many
of
the
major
events
along
the
way.

WHAT WAS THE PROCESS?
A summary of the culture enhancement and change process is summarized in Figure 1.
Figure 1: The Culture Change Process
The Telstra culture change process moved through the four phases, each having specific steps.
1. Planning for Success: Included a culture assessment and a Culture Change Roadmap
2. Culture Transformation: Involved upskilling, process reviews, short term wins and forums for
sharing of best practices
3. Embedded Culture: Making it Stick with best practice workshops and new performance
review systems and processes
4. Continuous Monitoring and Revitalization: Culture measurement and profit gains
PHASE 1: PLANNING FOR SUCCESS
A culture audit is an essential first step to planning the cultural change effort. The advantage of
this is to gain more in-depth insight into the culture, build relationships and additional buy-in,
reduce the risk of resistance to skill development and culture change, identify leaders that can
be change champions and provide key input into an Assessment and Implementation Plan. This
is also a time for the executive leader to craft and refine the vision, goals, strategy and priorities.
This needs to have within it a sense of urgency which can be easily communicated and

understood by everyone in the organization. These elements are inputs to a culture change
plan.
The first step was for the CFO to articulate his vision and the sense of urgency. A culture audit
was undertaken involving interviews across all levels of the F&A Group and in the main lines of
business. This reported an internally focused, siloed and hierarchical culture with little
understanding of the real needs of stakeholder groups serviced by F&A. It reflected a lack of
urgency in its attitude to making changes. A plan for change was developed starting with the
launch of the vision and goals.
PHASE 2: CULTURE TRANSFORMATION
Launch of a culture change requires a memorable event and ongoing communication and
activities that demonstrate what the new culture is to look like. A powerful guiding coalition is
needed to coordinate and lead the changed behaviors. New skills may be required and methods
for sharing learnings and experiences need to be put in place.
The Launch of Value Service Culture
At an offsite conference with his top 80 people, John Stanhope
reviewed his tenure as CFO starting in 2004 and asked the
question: “Are we there yet?” He was referring to F&A as an
effective, valuable service organization to the rest of the
business.
Answering this question with a resounding “no” the CFO
posed the challenge of developing a strong service culture in
order to actively understand the needs of its customers and
deliver what is of most value to them. He called this a “value
service culture” which soon took the mantle of “VSC”. The key
goal was defined:
“To understand our customers’ needs and behaviors better
than ever, and deliver what is of most value to them.”
Creating the Relevance and Tangibility of VSC
A “guiding coalition”, of several, but not all the senior
leadership team, was formed to steer the culture change and
report to the full senior leadership team. This included the
CFO, executive HR representation and a marketing
communications specialist who reported direct to the CFO.
This group was able to focus on VSC initiatives with emphasis
on communications and planning for training.
Heads of lines of business held their own offsite meetings to
communicate the VSC initiative and set tasks to identify their
internal customers.
Tackling culture change
needs a memorable
watershed event where the
vision is clear, the stakes
are raised, the leader leads,
and the experience is
emblazoned in peoples’
minds. The “Are we There
Yet” offsite conference was
that event.
The desired new culture
needs to be made real.
People need to see it,
“feel” it and emotionally
connect to it. They have to
see it will benefit them and
they need to have the skills
and confidence to enact the
new behaviors.

As this occurred a two-day workshop was designed. This covered the VSC mindset and
practical “how to” tools to help people understand customer needs, monitor satisfaction,
recognize value and non-value adding activities, along with tools to assist collaboration. It was
conducted with mixed groups across functions and levels. The first set of workshops covered
200 people. The CFO’s attendance and participation reinforced his commitment to the culture
change.
Making it Real: Passing on the VSC Experience
Four months after the first wave of training, a VSC Summit was
conducted. Here, groups of past VSC workshop participants
and their teams presented to a wider audience the results of
their experience applying the VSC tools. These experiences
occurred at all levels in the F&A structure. They reported on
gains made from stopping non-value activities such as the
provision of 250 large reports which were subsequently found
to be of little value to their intended users. Another reported
increasing accuracy and speed of delivery of internal mail.
This occurred through a better understanding of “customer”
needs by simplifying the receipt and collection process and
educating customers on the process. These presentations
created a sense of fun and heightened the collaboration of the
teams doing them.
Stories circulated about how VSC thinking had brought about positive results. One story was of
the manager who noticed a worn carpet leading to a storeroom and asked the question as to
why it was so worn. The answer eventually led to discovering the storage of physical information
records that were being delivered on a regular basis with no record of their retrieval for intended
users. This led to digitization and complete elimination of the physical records and their physical
storage.
WHAT’S THE IMPACT SO FAR?
After the launch and implementation of communication and
change activities a major review of progress should be
undertaken. What’s working and what’s stopping change
should be assessed. This may be at the 9 to 12 months mark.
First Year Anniversary of VSC
At the Telstra offsite conference, heads of F&A lines of
business presented their plans for the 2009-2010 year and
how the VSC was embedded in them. These all contained
initiatives designed to weave VSC into the fabric of daily
activities.
Cross-functional workshop groups were formed at the
conference to address a hypothetical question: “It is 2014 and
What people see and hear
needs to create a sense of
fun and excitement for them
to connect with the new
cultural expectations.
Stories are the
conversations that create
shared experiences and
produce a common cultural
bond between people.
It had reached the time
when managers at all levels
needed to take
responsibility for the
embedding of the value
service culture. Blocking
behavior needed to be
addressed and a renewed
commitment and urgency
was required to achieve the
customer satisfaction
targets that had been set.

the VSC has failed – why?” The answers revealed two key risks. The first and strongest was; “It
is John’s VSC – and he left the business”. The second referred to lack of momentum and
urgency in embedding VSC behaviors deep into all parts of F&A and inability to overcome
blocking behaviour.
The CFO asked all 100 attendees to provide him with a written one page commitment to VSC
with actions they would personally take to embed it in their areas. Also he threw out the
challenge to all lines of business to achieve the customer satisfaction benchmark identified by
customers in the research study just completed.
PHASE 3: EMBEDDING THE NEW CULTURE.
During the culture transformation process (Phase 2) new attitudes, skills and shared learnings
are experienced. Usually the systems and processes lag. This is for good reason because
learning best practices is still occurring. But the time comes in the embedding phase when
orientation and performance evaluation systems and processes require redesign. These should
include desired culture behaviors and targets to support the embedding process.
Building Momentum of VSC
At this time in Telstra, emphasis shifted from focus on short term “wins” to systematized
performance evaluation and reward systems. The HR Group worked with line of business
managers to incorporate VSC behavior descriptions and quantitative customer satisfaction
targets in the performance review system. These became “hard-wired” into everyone’s
performance goals.
Workshops continued and another summit was conducted. While the previous summits had
been driven by HR, this one was planned by a small multi-function, multi-level group from
across F&A. This summit took the form of a workshop in which examples of best practice were
shared and reward and recognition approaches discussed. Also an external company speaker
provided experience of another company’s cultural change. This was designed to provide
another perspective on the challenges of embedding a new culture. The issue of blocking
behavior was addressed and how to overcome it through coaching, communicating, motivating
and rewarding. The summit was regarded as successful by the 200 who attended in signaling
that it is “our VSC” and it is becoming embedded.
In 2010 various groups moved to actively create a more open and innovative environment. This
included cross-function communication forums, more frequently held discussion groups with
customers, and coaching.
PHASE 4: PERFORMANCE MONITORING AND REVITALIZATION
Performance should be measured in terms of customer satisfaction and cultural behaviors. Both
should be benchmarked so that targets for improvement can be set.
Getting the F&A Customer View
During this period the CFO commissioned the development of a rigorous new method of
customer satisfaction research focused on measuring the value perception of internal
customers. A world “first” customized version of the Customer Value Analysis (CVA)

methodology was developed and implemented having
relevance to a Support function servicing internal customers.
The results showed that F&A’s internal customers perceived
improvements had been made in the understanding of their
needs and delivery of service. However, 7 of the 10 F&A lines
of business did not yet reach the “satisfied” level and all were
short of the “perfect world” expectation on the numeric scale.
The results of the customer satisfaction survey was a defining
moment in the journey and helped demonstrate that VSC was
not a fad. It demonstrated the seriousness of measuring
satisfaction and enabled targets to be set for the next year.
Benchmarking F&A’s Culture against High Performance
Business Cultures
In December 2009 a sample of F&A employees2
completed a
culture survey, called the Customer Responsiveness Index
(CRI). It was used to measure seven behavioral factors
exhibited by F&A with reference to their internal customers.
These factors are highly correlated with business
performance. The results, reported in March 2010, showed
average to above average scores relative to a database of
other organizations on all factors except “empowerment”3
This
was consistently low across almost all sub-groups sampled.
Lack of empowerment inhibits the ability of employees to
propose new ideas and act on new ways of solving customers’
problems.
When investigated further it was found that many employees
did not feel empowered because of their own lack of
confidence in approaching customers. This lack of empowerment from “within” was overcome
by teaming them with an experienced “buddy” to gain confidence in customer interaction.
Profit Impact and Business Value
Culture has a profit impact. The benefits of culture enhancement should be measured in dollars.
There have been significant monetary benefits from the VSC change. An investigation by F&A
of estimated gains and savings revealed:
• Annualized gains and cost savings of $15 million were estimated for 2009. These were
expected to continue in future years with an erosion of these gains over time assumed if no
further investment occurs.
2

Details
of
the
CRI
methodology
can
be
found
at
www.marketculture.com.
The
seven
behavioral
factors

measured
by
this
tool
are
customer
insight,
customer
anticipation,
customer
alternatives,
peripheral
vision,

strategic
alignment,
cross-‐functional
collaboration
and
empowerment.

3

Empowerment
is
defined
as
the
extent
to
which
employees
are
empowered
to
make
decisions,
propose
ideas
and

control
how
work
is
performed.

Measuring how well we are
doing ultimately depends on
the perceptions of our
customers. Objective
measurement provides
benchmarks of where we
stand and how much we
need to do to achieve future
customer satisfaction
targets.
Research indicates that
culture has a substantial
impact on business
performance. The CRI
survey measures those
cultural factors that have
been shown to have the
strongest predictive
correlation with business
performance.

• Added value to the business of $55 million4
These gains were derived from analysis of specific initiatives by:
a) Credit Management acting to collaborate with Telstra’s customers to reduce bad debts
and achieve cost savings from less follow-up calls and longer customer retention
periods.
b) Risk Management & Assurance collaborating with internal customers through an
education initiative clarifying compliance requirements and streamlined processes for
reducing work for both parties. Cost savings resulted from labour savings.
c) Corporate Security and Investigations working with Telstra retail shops to provide better
processes, follow-up and liaison with those shops most targeted by fraud. Reduction of
fraud yielded measurable cost savings.
Care was taken to attribute only those gains and savings that could be aligned with VSC
initiatives to do with understanding customer needs, providing greater value for customers,
monitoring customer feedback and collaborating with customers to deliver the Group’s fiduciary
responsibilities more efficiently.
WHAT CAN WE CONCLUDE?
To lead a successful transformation, you have to capture the hearts and minds of the entire
group. Then you must provide tools that are relevant to every function and level and provide a
common framework and way of thinking and doing.
Measurement is key. If it is not measured, it “doesn’t exist”. This is particularly true of culture –
something that is abstract in the minds of most people. Periodic in-process benchmarking
measurement of culture tracks the progress of the change initiatives undertaken and provides
opportunities for corrective actions to be implemented. It makes culture real. Similarly,
systematic measurement of customer satisfaction and perceived value makes customers “real”
and represents the outcome of culture improvements. These outcomes can also be measured in
terms of dollar gains. Culture improvement can and should be measured as an asset that adds
value to the business.
Finally, the passion, leadership and support of the C-level executive sponsor and the executive
team are crucial to success. The last word, as with the first word, is left to John Stanhope:
“Culture change is simply a behavioural change. Simply said, not easy to do. The
change in behaviour must come from within each and every one of my staff. The
behaviour that always tests “Am I meeting the customer’s need and being valuable”.
This testing must just become a natural behaviour. When this is the case we are truly
there.”
MarketCulture Strategies, Inc
www.marketculture.com
June 2010
4

This
was
calculated
by
projecting
the
annualized
gains
forward
for
10
years,
allowing
for
erosion
of
these
gains

over
time,
and
discounting
them
back
at
Telstra’s
pre-‐tax
weighted
average
cost
of
capital.

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