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Booze Allen & Hamilton --TREVI
Booz Allen & Hamilton aims to maximize innovation and client value. Currently, employees value creative problem solving over financial rewards, and investors seek full extraction of value rather than just return on investment. To achieve a desired future state where everyone champions new offerings, the company must undergo challenging cultural change through performance management reform that clearly defines, measures and incentivizes the innovative behaviors sought, while quickly addressing resisters.
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Booze Allen & Hamilton --TREVI
- 1. Booz Allen &Hamilton: Maximizing the Value of Innovation The Trevi Group January 21, 2012
- 2. Customer Value Proposition Assist clients in improving their company’s performance by any means necessary. The internal mission formally states this as “…helping the top management of the world’s major companies to shape their agents and drive strategic change”
- 3. Stakeholders & Expectations .” •Stakeholders – Met • Stakeholders – Unmet Expectations Expectations • Employees – Financial • Employees – Creative and personal rewards problem solving. • Partners – Ability to • Partners – Ability to build a legacy build a legacy • Investors – Return on • Investors – Full investment extraction of value
- 4. Key Processes • TargetClient Paradigm • Internal Free Market of – Triple Crown Service Teams Ideas • Knowledge-On-Line – Campaign Selling failures. – 70% adoption • Special Interest Groups • Formalized Innovation & – Partners failed to gain Commercialization traction – Best Practices a • New Client Acquisition – More eggs, different basket
- 5. Current Process System People Structure • Artist Colony • Reinvention of • Creative the wheel • Innovative Culture • Artist Colony
- 6. Desired Future State: “Weneed a learning machine which continually captures innovations on the front line and transforms them into powerful new offerings to our clients.” - Varasano
- 7. Key Processes New incentive structure Establish new cultural norms Everyone is a champion
- 8. How To AchieveDesired Future State Culture Change Desired Future State Real and Lasting Cultural Change Challenging Cultures are difficult define and measure Cultures are collective Cultures grow roots Cultures strongly resist change
- 9. Performance Management System •Performance Goals ≈ Desired Future State • Define and Measure Performance • “How do we define ‘being innovative’? • Communication and frequent feedback • Commending vs. Rewarding vs. “You’re Fired” • Identify resisters early and manage them quickly • Exceptions to the new performance standards are a threat to achieving desired future state
Editor's Notes
- #3 * Employees of Booz –Allen & Hamilton expect to be rewarded for creative, innovative problem solving when creating solutions for clients through personal and professional freedom, as well as financial rewards and internal advancement. However; with the push towards “crass commercialization”, employees are receiving fewer opportunities to exercise their personal and professional freedom. Instead they were merely iterating on the work of previous projects. There is still some room for creativity, but the potential to reduce the actual work needed to implement some projects after working on similar projects for other clients was reduced significantly through the creation of Special Interest Groups (which identified and collated knowledge on particular subjects). With this reduction in freedom, naturally, comes a reduction in the recognition and reward due to the team who created the framework (like Toledo Motor) initially. * Partners of BAH expect that they will be able to create a legacy which they will leave to their successors. Some partners, however, have seen their ability to create a legacy diminish. If a partner was distracted from pioneering new business methods or solutions and instead was recruited to oversee teams of associates implementing a framework built by another team, there is little opportunity to “leave a mark” in the pages of BAH history. Alternately, a partner who creates a remarkable new business product or process, but fails to effectively implement it due to the downfalls of “campaign selling” would also lose out on the opportunity to build a legacy at BAH. * Investors in BAH expect that the managers at BAH will do everything they can to extract as much value from the consulting market as possible. Unfortunately, even though Booz-Allen & Hamilton was growing at a 25% annual rate, because of the lingering issues surrounding time-to-market with new ideas and the cultural issues surrounding iteration vs. innovation, investors were not receiving the full potential on their investments.
- #4 Employees:* Employees of Booz –Allen & Hamilton expect to be rewarded for creative, innovative problem solving when creating solutions for clients through personal and professional freedom, as well as financial rewards and internal advancement. -- However; with the push towards “crass commercialization”, employees are receiving fewer opportunities to exercise their personal and professional freedom. Instead they were merely iterating on the work of previous projects.Partners: * Partners of BAH expect that they will be able to create a legacy which they will leave to their successors. -- If a partner was distracted from pioneering new business methods or solutions and instead was recruited to oversee teams of associates implementing a framework built by another team, there is little opportunity to “leave a mark” in the pages of BAH history. Alternately, a partner who creates a remarkable new business product or process, but fails to effectively implement it due to the downfalls of “campaign selling” would also lose out on the opportunity to build a legacy at BAH. Investors -- * Investors in BAH expect that the managers at BAH will do everything they can to extract as much value from the consulting market as possible. -- even though Booz-Allen & Hamilton was growing at a 25% annual rate, because of the lingering issues surrounding time-to-market with new ideas and the cultural issues surrounding iteration vs. innovation, investors were not receiving the full potential on their investments.
- #5 Target Client Paradigm-- They have winnowed down their client list to 200 clients and they are focused on providing highly customized solutions to the remaining clients. This focus has increased revenue per client relationship by tenfold over the previous decade.Knowledge-On-Line –BAH created a knowledge repository which contained over 4,000 documents and was routinely used by 70% of staff world-wide. Formalized Process of Innovation and Commercialization -- Develop best practices program that is not prescriptive, but a living document that can be changed as needs evolve and designate (a) champion(s) to roll out and maintain the process.Focus on New Client Acquisition -- A drawback of the Target Client Paradigm is the risk that if one client leaves or a major contract is completed, there will be a very significant drop in revenue. \\Special Interest Groups – In practice, these SIGs were often relegated to the lowest priority for the parties involved. They were not as effective in generating interest in or sharing specialties as hoped. BA tried to turn senior partners into champions, but got little traction.Internal Free Market of Ideas -- Ideas were often overlooked unless the employee had immediate experience with the idea or it had taken place within the realm of the employees awareness (in the office, or utilized by a friend).
- #6 Booz-Allen & Hamilton evolved from an “Artist’s Colony”. The entrenched culture of BAH is one in which partners serviced their own clients with little to no collaboration outside of a shared administrative infrastructure. Further, the culture rewarded the ability to create (regardless of previous experiences) new and creative solutions in response to client problems. Even though both the financial reward structure had been changed and a knowledge platform had been built to focus on company successes rather than partner successes, there were decades of history built on the previous culture.
- #7 Future State: The desired future state is one that bridges the gap between management’s desire to capitalize on innovations through the commercialization of standardized offerings, and the frontline staff’s motivation to pursue new, interesting and innovative work that is not simply copying past successes. Our team believes that in order to achieve a future state that embraces both perspectives, three things need to happen:
- #8 New incentive structure. Drive growth and sales opportunities through a new incentive structure that rewards cross-selling and up-selling to existing clients or tangential industry players. BAH management needs to clarify the risk to the company’s future from competitors who leverage BAH knowledge into successful commercialization across industries. From the customer’s perspective, BAH competitors stand out because they are perceived as specialists rather than generalists. A new incentive structure will reward employees for achieving certain cross-selling goals. Incentives need to address intrinsic and extrinsic motivators of individuals. While money is a common motivator, it is not the only one. A new incentive structure would address cultural issues by rewarding employees who not only produce new work but also creatively leverage successes into adjacent consulting opportunities.Establish new cultural norms. While the recommendation above addresses structural changes, a new future state would also address cultural changes. A simple way to balance the motivation of management and employee is to create a target ratio of new projects to the reapplication of commercialized projects for individual employees. For example, over a period of time, say a year, an employee may work on 10 projects. With a 60/40 ratio, employees would have 6 projects that are new and innovative, and 4 projects that are the application of commercialized past successes. The more senior an employee the more favorable the ratio is skewed towards the application of new work; that does not absolve the individual from performance sales goals established in the new incentive structure. Since employees favor doing new, innovative projects over the reapplication of old ones, this new culture would reward those whoEveryone is a champion. Past attempts at creating champions throughout the organization that evangelize opportunities to reapply past successes have had limited success. We suggest that a training or a coaching program be put in place in conjunction with the recommendations above to help employees become champions themselves. The coaching would help employees identify competitive opportunities to leverage existing knowledge within BAH into the application of new consulting opportunities. The coaching would be more than just sales training, but encompass establishing a mandatory, weekly company-wide video conference, where recently completed projects would be summarized into a 5-minute summaries of lesson’s learn and best practices. Doing so would help surface innovation throughout the company and help disperse knowledge for the cross pollination of ideas and reapplication of innovations to adjacent opportunities.We believe that management should not be prescriptive in applying these changes, rather they should engage with their employees to develop a system that embodies their feedback and that will lead to a smoother transition (Brocker).
- #9 Culture is a soft concept. If there's no concrete way of defining or measuring culture, then how can you change it? (2) culture represents collective norms and behaviors. It's hard enough to change one person's behavior — how can you change the behavior of an entire organization?(3) BAH is 100 year old company.
- #10 To create cultural change, BAH needs a performance management system that rewards behavior which helps achieve BAH’s desired future state and change behavior that does not. Some behaviors are often difficult to define and subsequently measure, such as ‘being innovative’. The delivery of innovative solutions to customer problems is what BAH sees as essential to their future growth, so the system will need to find a way to define and measure ‘innovation’ as it relates to employee performance. Another challenge they will face once they create an accurate program to measure innovation will be to balance the importance of innovation with solving the customer’s problems, regardless of how innovative or traditional the approach. It won’t matter how many innovative ideas BAH brings to their clients if the client’s problems are not solved. At the same time, consistently providing clients with solutions that work but never taking an approach that may produce more superior results is not someone who should become a partner. It is essential for BAH to reward employees who produce high quality results and innovative ideas, along with embracing innovation in general. BAH must quickly identify employees that are not adapting to the new culture and then quickly implement a time-bound and well-defined plan to improve their performance or fire as soon as possible.