Creating A Culture Of Innovation In Axa Ireland Management Essay
Innovation is a term that is now a buzzword in AXA Ireland. Ten years ago, the term would have been found only in consultants’ power point presentations and researchers’ works. Providentially, it was also found in the thoughts of John O’Neil, newly appointed chief executive officer of AXA Ireland at that time.
John O’Neil was mandated to stir the company through stiff competition and amidst a down economy onto a strong financial repositioning. He felt he could only achieve the turnaround by implementing a major program of change, where all the employees were involved in the business transformation. He decided then to initiate the development of a culture of innovation within the company, and signaled this initiative by appointing an innovation manager in the person of Catherine Whelan. That appointment saw the progressive emergence of a number of innovation programs that proved very successful despite the hurdles that these programs underwent.
After six years since the innovation idea was hatched, financial reports, particularly for years 2001-2004, showed dramatic improvements. In addition, innovation initiatives have moved the customer satisfaction index by 20 points, got 80% of AXA employees to directly participate in innovation activities or programs, and generated 5000 creative suggestions 3000 of which were already implemented.
It would seem evident that the change program was achieving a considerable measure of success. It would be interesting to know how it was done, what problems were encountered, and given the chance to do it all over again, how it could have been done better. It would even be more interesting for scholars and researchers and professional managers to know if the programs followed any pattern or patterns at all in relation to theories and concepts in management science, particularly organizational development and human resource management. Finally, if any successes or patterns were exhibited, could these be sustained continuously?
The main objective of this paper is to critically analyze the developments that transpired in AXA Ireland from the time it started implementing its innovation program in 1999 up to the end period of this study. The analysis will particularly dwell on the initiatives taken by the company to create and maintain a culture of innovation, and the results of these initiatives in relation to relevant theories and concepts in organizational development and human resource management.
The analysis will attempt to answer the questions as to whether the initiatives brought about the desired results, and if not, why these did not come about and how things could have been done better. Consequently, as culture and innovation are two critical issues that impact substantially on human resources and the entire organization, the analysis will attempt to establish a linkage if any, between the initiatives taken for organizational change and the challenges they brought upon human resource management.
Creating a New Culture from Ground Zero
Innovation is not like a chocolate candy that children, or for that matter employees, will run after. In fact, its own loose definition, that of change, is the very reason people resist it. That is why, when John O’Neil decided to introduce it as a major item of change, the idea presented an enormous challenge to Catherine: AXA Ireland had almost none of it in place, employees were skeptical about it, there was no substantial precedent to serve as a model or springboard, and it was not the best of time economically.
Yet given the mandate they carried on their shoulders which was to achieve a competitive advantage, it would seem that innovation was the very item they needed to put the company back on stream. It would seem like they ran to an end wall where it was written: Innovate or Perish, to borrow a phrase from Morrissy (2010).
Sifting through the different programs and activities that the company pursued in the name of innovation throughout the period up to 2006, the following were implemented:
The AXA MadHouse – a team-based fun-learning program for stimulating creativity and generating business ideas. The program was introduced in late 1999, partly simulating Edward de Bono’s six colored hats, a metaphor-based critical thinking process.
The AXA Quadrant – create, eliminate, reuse and improve – an innovation awareness program introduced to make the employees understand the meaning of innovation in AXA. The Quadrant became a symbol that was adopted into the mouse pads and screen savers of computers within the company, and assisted the employees to calculate the financial value of each creative idea they would generate.
TaskMasters – a MadHouse idea on innovation involving internal procedures. The program aimed to put the innovative thinking habit as part of the employees’ daily mental frame and work activities. It involved checking that what the employees were doing was adding value to the customer relationship and addressed even the smallest issues that needed quick resolution.
The Innovation Corridor – another MadHouse idea that was quickly implemented. The Corridor referred to the hallway leading to the staff restaurant that was converted to become a facility and venue for announcing news and developments on innovation within the company. It sought to reinforce the importance of innovation as a means of achieving business objectives.
The AXA Broker Partner program – a competition involving the generation of ideas for improving service delivery among AXA’s brokers. The competition was an attempt to expand the innovation mentality from the employees to the distribution across boundaries.
Going the Extra Mile (GEM) – a program to improve customer satisfaction, loyalty and retention, replacing TaskMasters and MadHouse. GEM was an idea that was sourced from outside the company and allowed AXA to tap into internal and external resources. As a marketing strategy, AXA promoted and encouraged, as part of GEM, five brand behaviors – professionalism, integrity, pragmatism, innovation and team spirit – using five cartoon super heroes. To make sure that the message was delivered clearly to its audience, the company set up a PIPITS daily newsletter during the customer service week.
GEM was a customer-based idea generation program. The key idea was to encourage the staff to implement one innovative idea to improve customer service (meaning faster and less expensive), and that idea should come from the customers. Idea authors were rewarded and recognized.
The Qualitas Program – another customer service innovation focused on promoting service quality, using the Jigsaw globe as the symbol of AXA’s commitment to get everybody involved. With the intranet as the vehicle, the Qualitas was promoted daily to drive home the message of service quality. By this time, recognition was made via a monthly quality day, monthly awards, an annual innovation award and exceptional performance awards.
The New Deal Program – a three-year new change program to create an AXA differentiation based on service quality, using innovation at a product, process, service and people level. “It is about providing a new deal for AXA customers through the quality of service delivery, innovation and cost efficiency.” Initially, corresponding awards and recognition were given. These incentives were later incorporated into the compensation and linked to the performance management system.
The Global AXA Way – a six-year program using Six Sigma methodology to make the voice of the customer a core business process element. Six Sigma is a business strategy that focuses on improving process quality by removing the causes of defects or errors using a six-level rating system indicating the defect level in the process (Adams et al, 2003).
High hopes had been pinned on the Six Sigma program, that it would lead AXA to double its revenues and triple its profits by 2012. As of time of analysis, no financial data are available for AXA Ireland to serve as basis for a comparative result analysis. An update, however, was published on March 30, 2010 regarding AXA Ireland’s credit standing on Standard & Poor’s: Moved from negative to stable and a BBB+ affirmed financial strength rating.
Looking at the steps pursued by the company over the six-year period, as spelled out by John O’Neil in his key reflections, it would appear that AXA, early on, already recognized the difficulty of implementing a program of change due to the employees’ resistance. The approach used by O’Neil and Whelan in dealing with the situation has been to communicate clearly, involve the employees in the change process and encourage them to think innovatively, which are traditional strategies of dealing with resistance (Lawrence, 1969).
It would also seem that the two executives adopted the Lewin’s 3-phase model maintaining change as a process of unfreezing, moving and refreezing in order for change to be effective (Anderson, 2010). Lewin postulates in his model that when unfrozen, employees may be moved to the direction of change only if the change forces are stronger than the resisting forces. The model suggests that employees will resist change while frozen and hence must be unfrozen from their old practices (Anderson, 2010). John and Catherine used the forces of low cost, customer demand, and constant communication to counter the initial employee resistance caused by training, insufficient resources and employee settlement.
In the course of their implementation of the innovation programs, John and Catherine might have unconsciously adapted to the Nadler-Tushman Congruence Model, as they looked for a “fit” or congruence among the model’s four elements of tasks, people, formal structures and informal structures (Anderson, 2010).
The change initiatives seemed also to have taken reference from Peters and Waterman’s McKinsey 7S Framework describing organizational effectiveness as a network of seven key elements: strategy, structure, systems, style, staff and skills, with shared values at the network’s center (Peters and Waterman, 1982).
But it would seem that the change pattern that had all the elements considered was the Weisbord’s Six-Box Model which looked at organizational effectiveness as resembling a radar screen reflecting the interrelationships of purposes, structure, rewards, relationships, helpful mechanisms and leadership (Anderson, 2010). In the AXA innovation case study, the interplay of these elements grew progressively with MadHouse and was seen to be collectively pronounced at the implementation of the GEM program and onwards till the Global AXA Way.
The approach to innovation used by John and Catherine took cognizance of the four steps required for innovation to occur. These steps are generation of ideas, evaluation or filtering of ideas, development of ideas and conversion of selected ideas into commercial or useful applications (Luecke, 2003). John would also have taken the right path by starting with the MadHouse, because the beginning of the process leading to innovation was via creativity (Luecke, 2003).
In another vein, what AXA went through in its effort to install a culture of innovation was its transformation of itself into a learning organization. Cook (1998) defined a learning organization as one that constantly tries new and better ways of doing business to gain a competitive edge.
As programs were implemented in AXA to have the innovation culture in place, it would seem, by reading through the case study and being transported from one program after another, that the programs were being put in place on a piece-meal basis. It was only later in the period that the strategies took on a 3-year period and then a 6-year period. On hindsight, from the analyst’s vantage point, the strategies would have been more manageable and better-coordinated if the different programs were laid out well in advance. If they were, it was a well orchestrated change program and credits should belong to the two orchestra leaders. Even if they were not, even if the programs were laid down piece by piece, as long as they were proceeding from a model and the elements are observed, the resultant ending would have also been calculated.
Human Resource Management (HRM) Analysis
John and Catherine would have known that for an organization to embrace a culture of innovation, the change should emanate and be modeled from the top. Luecke (2003) suggests leadership identification as one of the key steps in implementing change effectively. AXA’s leadership demonstrated its attitude and commitment to innovation by encouraging, even initiating, an environment of tolerance towards creative work (See MadHouse, Innovation Corridor).
Any organizational change will certainly affect people, and all the organizational development models have people as either at the center or a key or critical element. Especially, if the contemplated change is innovation itself, where innovation means useful creativity, then the organization has to become organizationally creative at the base. Kouzes and Posner (1991) cited research findings to show that the most useful innovation ideas came from the customers or staff members who observed them from customers.
Innovation efforts of the organization therefore impact human resource. Lewin’s 3-Phase Model, while focused on the unfreezing, moving and refreezing processes, involves people and a wide range of people issues as the processes are undertaken (Anderson, 2010). Nadler-Tushman’s Congruence Model seeks to match the tasks and the structure to the people who work on them, indicating that without congruence, no organizational effectiveness is attained (Anderson, 2010). Congruence would certainly require an understanding of human motivation.
Weisbord’s Six-Box Model goes beyond naming people. It identifies rewards and relationships as the people parts in the radar screen that have to receive substantial treatment and attention. Rewards and relationships are all about human behavior and motivation.
All the innovation programs in AXA seemed to have considered the element of human resource to some degree. The MadHouse was a creativity exercise and its fun-filled structure and facility served its idea-generating role. But it did not sustain itself.
The AXA Quadrant was an attitude-changing program using its own set of communication systems. It was successful but was not self-sustaining like MadHouse. These were followed by TaskMasters, Innovation Corridor and the AXA Broker Partner Programs that were likewise successful up to a certain time or resource limit. Something else seemed missing.
It was only with the introduction of the GEM, the Qualitas, the New Deal and the AXA Way that the programs were elaborately “structured” into the system wherein the participating employees were formally recognized and rewarded. In fact, it was only at the New Deal that the program’s rewards and recognition systems were incorporated into the company’s performance management system.
The Harvard Model of HRM proposes treating employees as human resources, as stakeholders who need to be accorded with mutuality. The model suggests setting up mechanisms to “reconcile the tension between employee expectations and management objectives” (Price, 2007). It suggests further not only a reward system, but a system of flow of people into, through and out of the organization (Price, 2007).
The HRM issues cited in the implementation of the Six Sigma methodology brought to fore the human resource aspect of the organizational change. As focus shifted to developing the “blackbelts” who would implement the AXA Way, so did the need to attend to the human resource concerns of these experts – their remunerations, their career paths, their retention and other work issues.
Moreover, while the company attends to these experts’ needs, would someone tag the decision makers at the rim of their coats. How about the rest of the employees, the “non-experts” who comprise the bigger number while the Six Sigma is not yet at six sigma? Would their HRM concerns be lesser in importance?
Any major change in an organization will surely affect the people in it – the officers, the employees, the shareholders, the suppliers, the distributors, the customers. As large a change as installing an innovation culture in AXA Ireland will definitely impact on employees who compose the people element in that culture. The employees are the carriers, the torchbearers of the image that the organization will project to its customers and to the world.
AXA Ireland has successfully reached the midpoint of its desired change in the AXA culture. Despite the hurdles that it went through, the results at halfway would indicate that the programs were living up to the expectations of their initiators. It is at this point that the question is asked: Can AXA continue with its success in innovation?
The answers can be partly derived from the organization as these are embedded in the culture that is now in place. Firstly, for as long as the leadership does not unleash itself from its commitment to innovation, innovation will continue as a source of competitive advantage (Luecke, 2003; Kouzes and Posner, 1991). Leadership must always keep the initiative.
Secondly, any new programs that will be introduced must not only stimulate but sustain or improve the present environment. The Six Sigma methodology is a process-based program with its own rules of engagement. It has to be realigned to create room for further innovation down the line.
Thirdly, as creativity is the source of all innovations, the base must continually be cultivated as well as enriched. It means that the organization must continue to be a learning organization because only a learning organization constantly tries new and better approaches to work, learns from its past experiences, listens to internal and external sources and makes effective use of such learnings (Garvin, 2008).
Finally, the issues in AXA can be summarized using Lewin’s 3-phase model. The first phase of unfreezing had been hurdled via the MadHouse, the Quadrant and the Corridor. The employees had been melted from their old thinking hats and had embraced innovation at the second phase: The GEM, the Qualitas, the New Deal, the AXA Way. At this phase, they are ready to be frozen again (third phase) under the new culture so that they may not slide back.
All the while, as the employees unfreeze, as they embrace and as they refreeze in a continuing and endless loop of innovation exercises, would their needs and concerns be looked into?
Innovation is change and change is not static. The organization has to continually be innovative and there should be no end to the unfreezing, the moving, and the refreezing, as there should be no end to the creativity, the idea generation, filtering and development, because the organization wants to keep itself above competition.
It all boils down to the learning organization and innovation at the base.
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