ABOUT THE CONTRIBUTORS Andrew Starr is the director of clinical operations for St. Luke’s Hospital. His primary responsibilities are managing the clinical and business aspects for mul- tiple departments in the perioperative service line. Prior to his present position, Andrew was a performance management engineer for Premier, Inc. His respon- sibilities included department based projects that have resulted in cost savings, revenue enhancement, and productivity enhancement in both clinical and non- clinical areas. Andrew also worked in the health/managed care/life sciences practice of Cap Gemini Ernst & Young. During his two years at CGEY, Andrew was involved with projects associated with business transformation and health care package implementation. Andrew also has prior clinical experience as a dialysis technician. His educational repertoire includes both a master’s degree in business administration and master’s degree in health services administra- tion from Xavier University. He also has a bachelor’s degree in biology from the State University of New York (SUNY) at Oswego. Robert Zimmel is the senior vice president for human resources for St. Luke’s Hospital and Health Network. He is responsible for all the human resource func- tions for the network. Bob has been with St. Luke’s for nineteen years and has served in various HR roles throughout his career. He is currently a member of the President’s Council and serves as the chairperson of the leadership steering com- mittee for the leadership initiative for the network. Bob received his B.S. in busi- ness from the Indiana University of Pennsylvania and an M.A. in personnel services and higher education from the Indiana University of Pennsylvania as well. Janice Bauer is the assistant vice president of patient care services. Over the past two years, Jan has served as a leader to multiple units, including the Emer- gency Department, CCU, ICU, and Trauma Department. Jan has been part of the organization since 1979 and has served in a variety of positions. Jan’s suc- cessful growth has included achievement in past positions such as nursing supervisor, nurse manager, administrative director of emergency services, and administrative director of trauma. Margaret Hayn is the assistant vice president of acute care and maternal child health. Prior to taking on this role, Margaret was the director of woman’s and children’s service line and continence management program. Prior to these roles, Margaret also served in a variety of leadership roles during a fifteen-year tenure at St. Luke’s Hospital. Margaret has been involved in nursing for nearly thirty years. Her distinguished academic record includes a master’s degree in nursing and in family practice. She also holds a bachelor’s of nursing from 400 BEST PRACTICES INLEADERSHIPDEVELOPMENT AND ORGANIZATIONCHANGE cart_14399_ch16.qxd 10/19/04 1:19 PM Page 400 Columbia University. Margaret is published in numerous journals and has served as a guest speaker and lecturer in many academic and hospital forums. Carol Kuplen is the vice president, senior nurse executive for St. Luke’s Hos- pital and Health Network. Carol’s primary responsibility includes providing administrative oversight of nursing services for a five-hospital, nonprofit, inte- grated health care network. Other responsibilities include developing and imple- menting nursing leadership philosophy, identifying outcome expectations, leading recruitment and retention initiatives, and facilitating the redesign of nursing care delivery systems. Prior to her present position, Carol successfully served in other capacities within St. Luke’s, including director of the Cancer Network. Mrs. Kuplen has also worked in various positions at other prestigious hospitals, including Georgetown University Medical Center and Geisinger Wyoming Valley Medical Center. Her educational repertoire includes M.S. in nursing from the University of Pennsylvania and a B.S in nursing from Georgetown University. Bob Weigand is the director of management training and development for St. Luke’s Hospital and Health Network. He is responsible for designing, devel- oping, implementing, and evaluating leadershipdevelopment programs through- out the network. Weigand incorporates experiential learning into his training curriculum. He has published articles and contributed to three books on the topic of training evaluation. Weigand is certified in the Myers Briggs Type Inven- tory. He currently is on the faculty of several local colleges, where he teaches part time. Weigand was previously employed at the Reading Hospital, where his work included working with family practice residents on communication skills. He received his B.A. in psychology from Ricker College in Houlton, Maine, and a master’s in psychology from Assumption College in Worcester, Massachusetts. Debra Klepeiss currently functions in the role of senior hospital director, oper- ations and service management at St. Luke’s Allentown Campus. She has been employed by St. Luke’s Hospital and Health Network for twenty-eight years. Over that time span Debra has been in many different roles, encompassing staff nursing, nursing management, human resources management, performance improvement, accreditation and compliance, organizational development, edu- cation, leadership development, service improvement, and patient satisfaction. Klepeiss is a RN and has a human resources certificate, and a B.A. in business management. Lisa Dutterer has been the vice president for ambulatory and ancillary services for St. Luke’s Hospital Allentown Campus since January 2001. Lisa is responsi- ble for all the outpatient services at the campus in addition to the allied health services that support the care of the inpatient. Prior to her current position, she ST. LUKE’S HOSPITAL AND HEALTH NETWORK 401 cart_14399_ch16.qxd 10/19/04 1:19 PM Page 401 was administrative director for the inpatient and outpatient rehabilitation services at the hospital of the University of Pennsylvania Medical Center and Presbyterian Medical Center. Lisa’s career in health care started as a licensed physical therapist at Germantown Hospital in Philadelphia. She received her B.A. in biology from Bridgewater College in 1988 and an M.S. in physical therapy from Arcadia University in 1991. Sherry Rex is the director of human resources at St. Luke’s Quakertown Hos- pital. Prior to joining St. Luke’s, she served as the manager of benefits and com- pensation at The Morning Call, a subsidiary of Tribune Publishing. She was also the payroll manager for the CoOpportunity Center, a shared services center for Times Mirror, the prior parent company of The Morning Call. Sherry also served as the human resources and operations manager for the Bon-Ton Department Stores. Following her graduation from college, she completed the executive train- ing program for Boscov’s Department Stores. Sherry is a graduate of Widener University, where she earned a bachelor’s degree in arts and sciences. John Hrubenek is director of property management, St. Luke’s Hospital and Health Network. Prior to that position he was the director of support services. He holds a bachelor’s degree in economics and business from Lafayette College and a master’s in business administration from Lehigh University. Donna Sabol is the assistant vice president of network performance improve- ment for St. Luke’s Hospital and Health Network. Prior to her present position, Donna served in various positions within the health network, including direc- tor of organizational development. Donna has been associated with St. Luke’s for twenty years. She is an RN and holds an M.S. in nursing from DeSales University and a B.S. in nursing from Wilkes University. Additional thanks to Francine Botek, Gary Guidetti, Ellen Novatnack, Steven Schweon, Charlotte Becker, Howard Cook, and Joe Pinto. 402 BEST PRACTICES INLEADERSHIPDEVELOPMENT AND ORGANIZATIONCHANGE cart_14399_ch16.qxd 10/19/04 1:19 PM Page 402 CHAPTER SEVENTEEN StorageTek Aiming for a high-performance culture led StorageTek to develop a transformation plan that balanced traditional operational management with the innovation required to be competitive in the information technology industry. A key element of the plan is successfully coordinating initiatives already embedded in the organization and supplementing those initiatives with new thinking. OVERVIEW 404 INTRODUCTION 404 A New Chairman Confronts the Issues 406 DEFINE THE CHALLENGE 406 Figure 17.1: Phases of Transformation 407 Define the Goal 408 Figure 17.2: Definition of High-Performance Culture 408 Figure 17.3: Alignment to Build a High-Performance Culture 409 Create a Sense of Urgency 410 Lessons Learned 411 WORK THROUGH CHANGE 411 Focus on Results and Defining Expectations 412 Table 17.1: Performance Measurement (Spring 2002) 413 Improve Management Competency 414 Grow Organizational Capabilities 415 Figure 17.4: Transforming on Three Levels 416 Lessons Learned 417 ATTAIN AND SUSTAIN IMPROVEMENT 418 Figure 17.5: StorageTek Timeline of Organization Transformation 419 STORAGETEK: THE HIGH-PERFORMANCE ORGANIZATION 420 Exhibit 17.1: Summary of Lessons Learned 421 403 S S cart_14399_ch17.qxd 10/19/04 1:18 PM Page 403 REFERENCES 422 ABOUT THE CONTRIBUTOR 422 OVERVIEW This change management case study describes the approach used by StorageTek to develop and implement a transformational plan to establish the company as a high-performance leader in the information technology (IT) industry. After a series of ups and downs in its thirty-four year history, StorageTek® (Storage Technology Corp., NYSE:STK), during the later years of the 1990s and into the early years of 2000, was once again in a state of unbalance between operational management and the innovation required to be competitive. Steps were taken to turn the company around, but there was little improvement. StorageTek lead- ership recognized the need for a systematic plan to transform the company into a high-performance organization. The transformation plan outlined the steps to be taken in three stages. Using best-practices research, StorageTek defined the high-performance organization and the leadership model required to implement the plan. Both focused on results in a competent and open, trusting environment. The second stage required working through the change by creating a focus on results, defining individual expectations, improving management competencies, and growing organizational capabilities. Specific to this stage were improvements to perfor- mance management systems, communications, customer relationships, and many other areas. The third stage of attaining and sustaining improvement is under way. In light of the economic downturn worldwide, the challenge was to continue to follow the transformation plan. Lessons learned are applicable to other orga- nizations beginning a major transformation or analyzing and implementing corrections to the current path. INTRODUCTION Four IBM engineers with a dream of building better and less expensive tape dri- ves for data storage founded StorageTek in Boulder, Colorado, in 1969. Today, StorageTek is a $2 billion worldwide company with headquarters in Louisville, Colorado, and an innovator and global leader in virtual storage solutions for tape automation, disk storage systems, and storage networking. The StorageTek head- quarters is about halfway between Denver and Boulder, Colorado, on a 450-acre campus in the shadow of the Rocky Mountains. Of the approximately 404 BEST PRACTICES INLEADERSHIPDEVELOPMENT AND ORGANIZATIONCHANGE cart_14399_ch17.qxd 10/19/04 1:18 PM Page 404 7,200 employees worldwide, about 2,200 are based in Colorado. Among other benefits available to headquarters employees, there is on-site daycare, a med- ical center and pharmacy, and a wellness center, including a three-mile outdoor jogging trail. “Jesse Aweida, founder of StorageTechnology [now StorageTek] [1969] and CEO until 1984, was convinced that a high level of operational management and ‘just enough’ innovation would keep the company ahead of IBM” (Richard Foster and Sarah Kaplan, Creative Destruction, Doubleday, 2001, p. 90). From 1969 to 1981, the company experienced great success and rapid growth with the first product shipped in 1970, just fourteen months after start-up. That was fol- lowed by the introduction of magnetic disk in 1973. By 1981, the company had grown to 13,000 employees and $603 million in revenue. The balance between operational management and innovation was difficult to maintain, and StorageTek filed for Chapter 11 bankruptcy protection in 1984. Emerging from bankruptcy in 1987, StorageTek once again had a keen sense of its customer value proposition and business focus. By 1990, the company reached $1 billion in revenue, and in 1992 the stock reached a record high of $78 per share. In the mid-1990s, the cultural focus was on creating a founda- tion for a company that was built to last. StorageTek formalized its core purpose and core values (see sidebar). Unfortunately, by 2001, StorageTek was once again struggling. There was no revenue growth in 2000 and 2001 and market share was eroding—StorageTek was left behind during the technology boom of the late 1990s and early 2000. Once again, the balance between operational management and “just enough” innovation had been lost. STORAGETEK 405 Core Purpose To expand the world’s access to information and knowledge. Core Values Share ownership for the relentless pursuit of results Provide superior customer partnerships Innovate and renew Operate with honesty and integrity Above all else, value self and others Over thirty-five years, StorageTek developed a unique corporate culture. Like all corporate cultures, there were aspects that were very healthy and others that clearly got in the way of the goals of innovation, competitiveness, and balance. In the community, in the industry, and within the employee population, the company had a legacy of uneven performance and of hiring employees in good times and firing them in bad. The company was known for starting lots and cart_14399_ch17.qxd 10/19/04 1:18 PM Page 405 finishing little, and for rewarding “fire fighting” rather than permanent fixes. A consensus and relationship-driven culture meant that decision making was slow and, even when decisions were made, they could be appealed and reversed. One executive labeled it “the right of infinite appeal!” There was much to be proud of, however. In employee satisfaction surveys, employees reported that they felt valued and respected, and respected their colleagues. Employees believed their work added value to the company. Finally, employees said they had the flexibility to manage work-life balance. A New Chairman Confronts the Issues Patrick J. Martin joined StorageTek in July 2000 as chairman, president, and CEO. Pat was patient as he listened to customers, stockholders, and employees and learned about StorageTek and the storage industry in which the company competed. He studied the strategy of the company. He met talented employees and loyal customers. Still, employee turnover approached 25 percent in 2000 as employees took their skills to more successful competitors. The research and development budget was among the highest in the industry but generated few new products or technological innovations. The company had an infrastructure that was too large, products that were consistently late to market, and arduous processes that made the company slow and difficult with which to do business. As true as during its earlier times, StorageTek needed to return to a balance between operational management and innovation. Several interventions were tried. The executive team turned over twelve of its fourteen key members in 2001. The CEO “taught” basic ROI (return on investment) via all-employee worldwide briefings using satellite downlinks. Managers had too many goals, tasks, and initiatives upon which to focus, making achievement impossible. A period of “blaming” occurred. A “surprise” mid-year performance review was handled poorly in an environment in which performance management turned out to be “optional.” There was little improvement. DEFINE THE CHALLENGE Transforming StorageTek into an industry leader where employees could grow their careers, confident customers could solve their IT challenges, and share- holders could receive a premium for their investment required a long-term plan. For a company with a reputation for starting a lot and finishing little, it was important to set a transformation plan that could be sustained over time with as little bureaucracy as possible. A scan of the company identified myriad different initiatives—all thoughtful, but disconnected from each other. The desire for a high-performance culture was evident, yet the components and disciplines of such a culture had not been defined for StorageTek. The first two components of transformation—strategic 406 BEST PRACTICES INLEADERSHIPDEVELOPMENT AND ORGANIZATIONCHANGE cart_14399_ch17.qxd 10/19/04 1:18 PM Page 406 clarity and leadership alignment—were lacking. Several foundation pieces were in place—core values defined by employees in 1996, a change model that bal- anced the quality of the technical strategy with the quality of the cultural strat- egy, and a fledgling quality system built as a first step toward Six Sigma. It was important to build on those existing foundation pieces to avoid the perception of another “flavor of the month,” so prevalent within the StorageTek culture. The arrival of a new CEO had offered the opportunity for change. Three months of planning by the organizationdevelopment team (OD team) led to the development of a long-term transformation plan. STORAGETEK 407 Figure 17.1 Phases of Transformation. Stage Define the challenge Work through change Attain and sustain improve- ment Goals Create a sense of urgency Define the goal Create a foundation of results—focus Define individual expectations Improve manage- ment competency Grow organization capabilities Sustain results— focus Build sustainable future Actions Leadership conference Executive team building Defined high- performance organization Worldwide employee kick-offs Executive team building Performance and development goals for all employees Review HR practices for consistency Succession planning Founded affinity groups Add workforce planning process Include “people strategy” in strategic planning Tools and Techniques Learning Map 1 BMS model and training One Vision, One Voice publication Performance management Goal alignment tools Leadership required courses and curriculum Learning Map 2– strategy update Closer to the customer Employee survey Engineering excel- lence curriculum Technical talent pool development cart_14399_ch17.qxd 10/19/04 1:18 PM Page 407 The first phase of the transformation plan was to define the challenge. There were two goals: • Define the goal • Create a sense of urgency Define the Goal The first step was to define the high-performance culture that StorageTek intended to build. The OD team conducted a review of literature and the trans- formations of other companies, both successful and not. “War for Talent,” The McKinsey Quarterly, 1998, Number 3, and “The War for Talent 2000,” revised July 2001 along with a number of other sources, were particularly useful. Con- currently, the OD team defined a leadership model based on a review of current practice and literature. Results-Based Leadership by David Ulrich, Jack Zenger and Norm Smallwood was selected because of the focus on achieving results as well as possessing the competencies of leadership. The desired StorageTek high-performance culture was defined in three parts: 1. “Performance ethic is the relentless desire to satisfy customers and earn their loyalty, allowing us to out-perform our competitors. A com- pelling core purpose, vision, and values; ambitious stretch goals focused on results; and performance feedback based on clear expecta- tions support a performance ethic.” This is measured by achievement of annual goals. 408 BEST PRACTICES INLEADERSHIPDEVELOPMENT AND ORGANIZATIONCHANGE High- performance culture Performance ethic 3- and 5-yr. total returns to shareholders— top 20% of all companies Open and trusting environment Effective growing organization Achievement of annual goals Employee survey Customer loyalty and key business metrics Figure 17.2 Definition of High-Performance Culture. cart_14399_ch17.qxd 10/19/04 1:18 PM Page 408 2. “An open, trusting environment enjoys open and candid communica- tion within the company; it requires everyone at every level of the organization to do what we say we will do; and provides growth for individuals and the organization through learning, knowledge sharing, and experience.” Open and trusting environment is measured by the annual worldwide employee satisfaction survey. 3. “An effective and growing organization practices six capabilities of shared mindset, speed, accountability, collaboration, learning and tal- ent” (from Results-Based Leadership by Ulrich, Zenger, and Smallwood, 1999, p. 40). An effective and growing organization is measured by metrics, such as customer loyalty, revenue growth, market share improvement, and employee turnover rates. Measures already in place were selected to indicate progress in each of the three parts of the StorageTek high-performance culture. Total shareholder return was selected to measure overall achievement; for StorageTek, share- holder return was characteristically below the industry average. STORAGETEK 409 Market-driven product development and distribution Strategic planning Collaborative learning organization Performance management Excellence in customer service and relationships Business management system External stakeholder management Diversity and inclusion Employee communication Figure 17.3 Alignment to Build a High-Performance Culture. cart_14399_ch17.qxd 10/19/04 1:18 PM Page 409 . responsibilities include developing and imple- menting nursing leadership philosophy, identifying outcome expectations, leading recruitment and retention initiatives,. management training and development for St. Luke’s Hospital and Health Network. He is responsible for designing, devel- oping, implementing, and evaluating leadership