Summary: Trust is truly a key to success. But it is almost impossible to work on trust within an organization directly. Trust has to be earned. The article explains how we achieved to increase the successful collaboration of country, regional and global management teams of DHL Logistics and thus systematically built up trust within and between them. As a matter of fact this improvement resulted finally in leaner decision processes, quicker implementation of measures and the open exchange of ideas which again fostered innovations.
A business case for trust – trust cannot be mandated but has to be earned
Trust between members of an organization is truly one of the key principles necessary to succeed in a highly dynamic and competitive environment. But as in private relationships trust cannot be mandated or bought. It has to be earned and earning it takes time.
Therefore trust as a key factor of success in the 21st century is not in question. People who trust each other exchange ideas, listen to each other and collaborate. If this is the case for the management of an organization, it usually results in quicker decision processes (e.g. less time-consuming alignment to have coverage for potential failures) and the willingness to take action and risk “out of the box thinking” (often the first step for innovations). But the critical question is: how can you establish an environment that facilitates confidence building?
How the Advanced Navigator initiative of DHL Logistics lead indirectly to more trust
In 2007, DP DHL (at that time DPWN) developed a new role for its CFOs. The so-called Advanced Navigator should be the new role-model for CFOs and people in finance and accounting functions of all management levels. The idea was that CFOs should develop into strong business partners of the CEOs who know finance and the business. In that function CFOs should become more result focused, action oriented and should challenge CEOs and operational managers based on their own analyses. At that time nobody realized that trust would be one of the most critical aspects for the successful implementation of this concept.
In principle, almost everybody agreed with the concept but the difficulty was to transfer the theory from powerpoint into concrete terms of day to day business. In order to do this, the Logistics division set up a dedicated initiative called “Advanced Navigator”. The objective was to identify the prerequisites of a successful implementation and drive the change process.
Together with regional and country CEOs and CFOs, the initiative first analysed the current situation and compared the actual roles of CFOs with the Advanced Navigator blueprint. One of the results was that the current roles of CFOs and their collaboration with operational management varied significantly between countries. In some countries, CEO and CFO (and other CXOs) worked closely together and discussed the hot topics on a regular basis. In other areas, a strong functional separation and focus dominated. CEOs took care of the local business and CFOs focused on accounting and financial reporting.
The question was what enabled some CFOs to act already almost as Advanced Navigators and what impeded others?
First it seemed that various reasons were responsible. But a closer look revealed that basically all of these reasons were somehow related to trust, or the lack thereof.
CFOs who acted (almost) as Advanced Navigators trusted in
- their interpretation of the roles and constructive collaboration between CEO and CFO and they were convinced that the management team of their country or region shared this understanding.
- the reported data, analysis and commentaries which they received, and in return used them as a basis to challenge results and measures of the operational management.
- their own competence to assess business performance and to identify risks and opportunities.
- their believe and experience that speaking up and taking action brought their careers forward.
Based on these findings, the prerequisite for a successful implementation of the Advanced Navigator model became clear.
- Prerequisite 1: The management has to have a common understanding of the operating model and the individual roles and responsibilities.
- Prerequisite 2: Reporting processes, data, analyses and commentaries have to be focused, comprehensive and reliable.
- Prerequisite 3: CFOs have to have the skills and business experience to be able to assess the information on their own.
- Prerequisite 4: Incentive schemes have to incorporate the objective to implement the collaborative operating model of the Advanced Navigator and to promote taking action and innovations.
The Advanced Navigator initiative set up by the Logistics division developed and implemented specific measures to fulfil the four prerequisites.
Clarification of roles and expectation: In a first step, the initiative clarified together with the divisional management the roles and responsibilities within country and regional management teams. Then, as a second step, this operating model was presented and discussed at the regional meetings of country managers. Emphasis was put on the fact that although the CEO has a “primus inter pares” status and might in the end be the one who decides, all members of a country or regional management team are responsible to reach the targets. In practice, this means that everybody is obliged to speak up, address issues and take action if the performance is at risk. CFOs have the additional task to make sure that relevant information is available and considered in decision processes.
Establishment of a comprehensive, but focused and reliable reporting: In cooperation with selected pilot countries, the initiative developed and implemented the Advanced Navigator business cockpit and underlying reporting processes. The standardized cockpit and reporting processes ensured that each country and regional management team assessed its own performance on a monthly basis (financial and operational results, cash flow, capital employed, risks and opportunities, sales pipeline, status of planned and implemented actions, etc.). The clear focus of the business cockpit on critical issues and actions allowed to concentrate on the hot topics and initiate the required measures quickly.
Expanding opportunities for finance people to gain business experience: As a short-term measure, days of the open house for finance people at operational sites were initiated to refresh business know-how. As a mid- to long-term measure, people development schemes were revised so that they integrated assignments within operations for finance managers and assignments within finance for operational managers.
Adaptation of incentive schemes: The targets of CFOs were overhauled. In addition to the existing performance targets, all CFOs got individual objectives to implement the Advanced Navigator approach, identify risks and opportunities, drive action and promote innovation.
It is impossible to work on trust within an organization directly. But it is possible to create an environment which allows managers and employees to earn trust. The key is to identify the individual reasons within an organization why people trust each other or not. In the case of the Advanced Navigator initiative of DHL Logistics, specific prerequisites had to be fulfilled for regional and country CFOs so that they started to change their behaviour.
They had to be sure that the divisional management expects from them to speak up and challenge CEOs based on their own analysis. In addition, they had to trust the data and information they got and they had to trust their own business experience to draw the right conclusions. Finally, they had to see that taking action and risking out of the box thinking brings the business and their careers forward.
The success of the Advanced Navigator initiative was that the indirect strengthening of trust lead to leaner decision processes and quicker implementation of measures, an open exchange of ideas and innovative solutions. From a management view point, this environment of increased trust was one of the reasons why DHL Logistics mastered the financial crisis so well.
Martin Leopold and Joachim Ritzer are principals at CTcon, an international management consultancy based in Germany. Both work as senior project managers for leading corporations and organizations worldwide, especially within CTcon’s focus areas, such as corporate management, process optimization as well as performance and change management. They supported DPWN to adapt and implement the Advanced Navigator approach to the needs of the individual business units of the LOGISTICS division and conducted the worldwide rollout.
Prof. Dr. Hartmut Reinhard teaches Management with a focus on management accounting at the university of applied sciences in Cologne, Germany. Until June 2008 he was Director Strategy LOGISTICS and Director Global Controlling LOGISTICS at Deutsche Post World Net (DPWN) and responsible for the programs Next Generation Controlling, IMPACT and NAVIGATE. He co-developed the concept of the Advanced Navigator and managed the worldwide rollout for LOGISTICS.