Leadership development that pays for itself (Case study)

At Royal Bank Financial Group, managers developed into leaders.
By David Brown
|Canadian HR Reporter|Last Updated: 06/14/2002

Late last decade, John Cleghorn, CEO of Royal Bank Financial Group (RBFG) presented his organization with a difficult challenge: cut $400 million out of operations while improving customer service and satisfaction.

At the same time, the introduction of new business models brought a dramatic culture change and called for a new style of leadership.

There was some talk of modifying the old leadership development programs, but others felt it was time for an entirely new program. The problem was getting the executives to agree to spend money on a new program at a time when they were supposed to be cutting spending.

The answer was the development of a program that simultaneously upgraded the management competencies identified as crucial to success while actually saving the company money.

The challenge

Canada’s banking industry underwent a transformation in the ’90s. The conservative, command-and-control culture that typified banking in the past was out of date. Royal Bank determined that customer satisfaction, innovation and empowerment were the new keys to success.

Organizational changes were being made accordingly, and consequently managers were being asked to change as well.

It was clear managers had to be much better prepared to handle change, says Per Scott, manager of design and development with the Royal Learning Network. They didn’t want to just help managers cope with the change that was being dropped on them as passive participants. Rather, they needed people managers who would lead the change, and who would take ownership of programs and policies that would give RBFG an edge over competitors. They wanted leaders not managers.

“Managing is making sure things don’t go wrong. But in leadership less is known and there are more variables,” says Scott. A less rigid environment meant managers were free to act independently and to focus more on customer service.

The problem was some managers were having difficulty making the adjustment.

Internal surveys of new managers revealed more than 50 per cent of new managers felt uncertain about their roles, 67 per cent felt uncomfortable dealing with poor performance and 45 per cent said they felt incapable of preparing staff to meet new work requirements.

A needs assessment came up with the five strengths that distinguished RBFG’s top managers: change leadership, achievement motivation, impact and influence, developing others, and teamwork and co-operation.

Once they knew what they wanted to develop, the question was how to do it.

Getting buy-in

Realizing they would have to validate the results to senior management to get support, the Royal Leaning Network teamed up with the training and development firm Gilmore to create a program that would provide a tangible return on investment.

To graduate, participants in the Developing People Management Competencies Program had to demonstrate their new abilities in those five competencies by completing a project that could be applied in the workplace. The project has to at least return the cost of the training, but in most cases it ends up saving even more.

There is no question that having that ROI was very useful in catching the attention of the execs, says Scott.

“Because you get a lot of leadership development programs that seem nice to do but at the end of the day what is it going to do?” Not only did it help them to get approval to go ahead with the program, obtaining high-level support contributes to the success of the program.

Anyone can be sent on a program but nothing happens because the everyday pressures of work keep them from applying what they learned. When you have the senior level interested the changes that should come from a program get supported through routines and business changes, Scott says.

The pilot for the program was launched in January 2000 with two groups of 25 people each. They were placed in teams of three and began the course. The entire program takes about six months and is divided into five sessions; the first and third are done independently with team members, the second and fourth are in class and the fifth is the final project.

In the first phase, they are introduced to the competencies they will be working on, explains Graham Crawford, executive vice-president with Gilmore. “There is work that you do in phase one that introduces you and gets you to start thinking about it (the competencies). It is more reflective than anything else,” he says.

In the second phase, they go into a classroom with a facilitator and start practising some of the skills and tools needed to develop the competency. They also start to show the linkages between the competencies. The objective is to have students integrate all five of the competencies in one unified approach to leadership: what does change management have to do with impact and influence, how does developing others connect to teamwork and co-operation?

Many leadership development models are based on antiquated learning models, says Crawford.

Most companies have leadership development models but do it on a competency by competency basis, he says. Typically, if a 360-degree evaluation reveals a manager needs communication training, the manager is sent to a communication workshop to sit in a classroom with other people who need communication development. “That is criminal, because it is streaming,” says Crawford. Instead of putting those people with other people with good communication skills they are put in a classroom. “That is just one of the dumbest things I’ve ever heard of but we do it everyday.”

In phase three, students again work on assignments away from class and by phase four students combine all of the competencies into a unified approach. Then they take that approach into the workplace to solve real-life problems.

ROI comes to fruition

The managers’ development projects are critical, says Scott not only for the ROI, but also because it allows the leaders-in-training to apply theories in the workplace.

In the pilot program, a manager from the corporate library worked with her team to develop a process of usage tracking. Little-used journals were dropped, saving $15,000 per year.

In another case, an assistant manager of the student loan call centre, worked with her team to analyze traffic. They then redesigned the schedule to eliminate a full-time position for a saving of $26,000 per year.

Ultimately, the program should graduate people who act more like leaders and less like managers. They will approach their jobs differently because they’ve gained a theoretical foundation for making changes in their workplace, and then gone out and actually done it.

Ideally, people managers will no longer wait to be told what to do. If they see an opportunity they should do something about it, explains Scott. They wanted to tap into the potential of those front-line people who are up against the processes, to improve the processes.

In the end, the senior executives will make the decisions that will save the company tens of millions of dollars, says Scott. But by creating a true leadership culture, they can have hundreds of people who will lead the changes that will save the company $20,000 at a time.

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