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Speaker A Peter Edwards is the Vice President of Human Resources at Canadian Pacific. Peter came into Canadian Pacific partway through the project. So in fact, he came into the project at the point that the assessment report had actually been written and he then was accountable for the implementation. So Bob McIntyre initially reported to him directly and subsequently mary Ellen. So Peter is a key person in terms of the whole implementation process. So what I'm going to do is in Bob's absence and this is why the importance of introducing the third person. Bob was actually the only one of those three that was there for the early part of the project. And normally Bob would have presented this part of it. Unfortunately, from my perspective, bob and his wife have a one month vacation trip to Asia. And for some reason, which I can't understand, bob wasn't prepared to change that. So he could be here. So anyway, we're going to carry on as best we can without Bob. And that means that I'm going to be doing some initial commentary that normally Bob would have done. So there are two parts that I'd like to introduce. One is just an overview of the approach to organization design. The things I'm going to be talking about here are identical to the presentation we're going to have right after lunch with Capital Power. So the methodology for both of those projects was identical. The projects are very different. I'm going to point out what some of the uniquenesses are. But in both cases the methodology is there's an assessment and there's an implementation. And in the assessment we would come in, we would gather documents, gather employee information, we would interview all managers, we would do a comprehensive analysis, write a report with detailed recommendations, meet with the executives to assist with their decision making. What we usually find is that 80% to 90% of the recommendations get accepted because it's a pretty robust methodology. And at that point in time then one moves into implementation an organization can implement on their own. Our view is the best value comes from an internal external team. So the external team brings in the methods, materials, so on and so forth, works with the internal team who knows the organization better than the external team to adapt the materials to the organization, develop the skills of the internal team, train and qualify the internal team and then work through with the internal team on the implementation. And that's the methodology that was used in both places. And basically it's a cascading implementation where people work in their natural teams, have some education, do some work, make changes and it's around aligning positions and so on. So that's one piece. The second piece is in terms of this case study. You'll get these pieces out of it. But I think I'd like to highlight what's different about this or what's unique about this. One of the pieces that's unique about it is that this organization design change involved 16,000 people. So the assessment was 16,000 people, the implementation was 16,000 people. So it was a very big change process. And the implementation was done over about a twelve month period. So this organization was prepared to move very fast in terms of the implementation. The other piece that was different in terms of the implementation is that they chose to implement operations first. It's a railway. They wanted to get as much of that done as possible before the winter set in. Normally we'll go across a whole organization in an implementation. In this case, for very good business reasons, they chose to do operations first and then the rest of the organization later. And I'm going to be asking Mary Ellen in particular to talk about the implementation in a few minutes. And also with Peter with the overview. Canadian Pacific, by the way, is a class one railway. There are what, six or seven? I forget what the number is. Five. Okay, it shrunk five class one railways in North America. Canadian Pacific operates in Canada and the US. So it's international in terms of its scope, in terms of the history and how this happened. So one of the questions is, well, how does an organization decide to do this? In this particular case, the person who was the vice president of Human Resources, Andrew Shields, saw a presentation that Peter Arnold and I did, and Peter is going to be presenting on Capital Power this afternoon. Decided this was useful. Invited me in to talk to the executive group. The executive group liked it. The Executive group decided they didn't want to bite off the whole thing. To start, they decided they'd do two pilot projects. One was in locomotive reliability centers, the other was in information technology. They liked the results of those two, and at that point they made a decision to move ahead with the whole organization review. So in terms of the report, I'll make a few comments about it and then this is where Peter comes in. In terms of the report, one of the interesting things is that when you're designing an organization, one of the keys is you have to understand what the starting point is. There's always some entry point in a design and it will vary from organization to organization. For Canadian Pacific, it was a physical infrastructure. So it was the tracks, the terminals, the moving stock, the engines and the cars. The actual movement of those that was the prime part of the organization on which the organization needed to be designed. If you're designing a bank, it's a bank branch. One of the most interesting ones was working in Fisheries and Oceans canada federal Government department. One of the key design factors was the migratory pattern of salmon because you wanted someone accountable for that whole flow. That understanding of what the entry point for the design was was critical. The other part, the first presentation was around strategy is, in terms of this business, if you got 16,000 employees, you kind of think, well, let's divide it into strategic business units. Let's break it down. But in terms of this business, it needs to be one business, needs to be one integrated business. So that was a significant strategic piece that became a significant design factor. So in terms of the review decision was the recommendation, and subsequent decisions were that it be a stratum seven organization, that there were opportunities to improve the vertical alignment, improve the functional organization, improve managerial practices, improve titling, improve job evaluation. And Mary Ellen's going to talk about how job evaluation can be a significant sustaining factor in terms of organization design, improve spans of control. In a process like this, there were also significant cost savings, which is not surprising. So those were some of the overviews. And then Andrew Shields, who initiated this whole thing, decided he was going to. So Peter was appointed to take over from him as vice president of Human Resources. And Peter and I first met in late December, and he had a copy of the draft report, and he was coming from Canadian National Railway, which is a competitor railway, which historically has had better performance. So Peter comes in and he gets introduced to this report. So, Peter, maybe I could turn it over to you for a few comments at this point. One would be in terms of coming in from another railway and knowing a bit about CP and seeing the report. What was your impression of that? And then the other is, as you moved into the organization, one of the other changes, and the earlier presentations commented that there are always changes you can't anticipate. One of the other changes was that there was a change in terms of the person accountable for the whole operations area of the company, and they brought in a person from Canadian National Railway. So at that point in time, I was thinking, oh, no, we finally got agreement for this whole implementation, and then this other person comes in from this other railway. And of course, the risk is not invented here. I didn't create this, so I'm not interested. So, Peter, maybe if you could talk about kind of your impression. And then also in terms of the new person running operations and how that worked out.
Speaker B Ron always asks me to answer these questions, and then I just do what I want anyway. But it's nice of him to ask. Dr. Frankenstein could never kill the monster because he loved it. He created it. He selected every piece very carefully, sewed it together. He breathed life into it. He loved it, which is exactly what organizations are like over time. We take these disparate parts, we sew them together, and we create a monster, and we can't kill it because we created it. We love it. We think it's right. It's beautiful. To us. You ever had anybody with an ugly kid. My kid's so beautiful. Your kid is ugly. I'm not going to tell you that because you love your kid. Organizations are like that. We create ugly organizations and we can't change them. So we need somebody to organize the villagers, somebody to get the pitchforks, to get the torches and get us up and go and kill this damn thing. Because you'll never do it if you just think if you've lived there all life, it's really, really hard to change. Few people can do it. Not a lot. Those are special people. So you get some help. And you know why? Because sometimes he can tell you exactly what you already know. But how many people have found that? If you get a really smart consultant and he says, the sun comes up in the morning, your bosses nod and say, sage, right. We all experience that. So you need that. And that's not a bad thing. Sometimes you need it. Somebody's got to give you that second opinion. And ron gave us the second opinion, but he also gave us a lot of really good ideas about how to redo the structure. He gave us the authority to break the structure. Until then, if you'd gone in and know even I walked know I'm from CN. We were the best railway in north america. There was no doubt about that. Nobody debates it. They're still the best railway in north america. I came to the worst railway in north america. There's no debate about that. We're still the worst railway in north america. But if I'd come in and know I just came from the best railway, I got a real idea on structure. We should break this. Break this, break this, pull this together. Do that. What are you smoking? That's what they would have said. Bring in ron. He says the same thing. He's so wise. You should listen to him, peter. That's okay. We can do that. So I come in and I read this report and a lot of it resonates with me. A lot of it are some of the ron independently comes up with some of the design ideas that we'd implemented at CN and some of the agony we had already gone through. Because CN wasn't always the best railway in north america. When I joined it, it was the worst railway in north america. And we weren't even close to the second worst. And they became the best. And part of that important part of that well, there's a couple of important parts. One was getting the right structure. Next part was getting the right people. The next part was telling everybody what they're supposed to do, being clear on that. The next part of that was holding people accountable for doing with that. And the next part after that was delivering consequences. Positive and negative. People couldn't do that, which is probably the toughest part to do. So structure, ron said, you know, you should do this, do this or this. We didn't agree on everything. Some of the things is he said you need an internal external team because he had some really good ideas. But Ron, you don't understand this part, and you couldn't do that. So we didn't do some of the things he said, and he'd agree. No, now that I understand that, that makes sense. But you got to be really careful there because once again, you're in love with the monster. So you got to really listen to him and say, am I just still in love with the monster? Or is there really something there? Or is there nothing there? You really got to do that sort of thing. And after that, we define what the job should know, the job evaluation, which drives me nuts. I hate it. I can't sit through it. That's why I got Mary Ellen. She's tolerant, patient, polite, kind. I ain't got none of those attributes. So she goes in and talks to people and says, who should do what? How should we organize? Who's accountable for what? Everybody at CP was accountable for everything. Therefore, nobody was accountable for anything. We've all heard that. But we've mastered it, guys, right? I was in negotiations, and I'm getting emails from Finance. You got to respond to this capital plan. Got to respond to this capital plan. I open it up. Basic capital for the A list shop. You've got to approve that today. They're out of money. Why? I know nothing about it? Because that's the way we're set up. We got a committee, and the committee approves these things. Ron said you should gun some committees. We should we should have gunned more. I'm going to tell you something today. I'm not going to tell you everything. I'm going to leave all sorts of landmines out there for you to step on. Not because I want to, but because you're filming it. And I would advise in the future never to do that, because if you're doing that, you inhibit honesty, guys. So, I mean, you may think it's a good idea. It ain't. So once you define what you want to do, you define the structure, you define the accountabilities. That's a hard process. You do that integration. And Ron was very good at doing that. Mary Ellen was extraordinary doing that. Bob, the patience, the time. And they talked about why did we do two fingers? That was a conversation we had. It's actually based on a theory that was developed by McKinsey Stole, but so McKinsey said that it was theirs a long time ago, which talks about fingers of an organization. Right. There's usually about five fingers to an organization, and only two, generally speaking, matter. Yeah, it's hard for the other parts of the other fingers to figure that out. But it's true in ours, it's operations because we move stuff. That's what we do. Ron says, Why do we start with operations? Our whole job is to take stuff from A, put it to B in a safe fashion, in one piece, on time, in a cost effective manner. So we have to do that and then have people that understand that's what they're selling and sell that and nothing else. Sounds pretty simple. So everything else is just support. I'm support. Finance is support. You could interchange finance. You can take the finance group out, buy another finance group, plug it in pretty much the same. It's how you do those other two things that really is important. So we started and we knew if we got that right, then we'd know what we needed to do. I couldn't really understand what I needed to do as an HR person until I was trying to understand what they're trying to accomplish. And since it's not what I'm trying to accomplish, it's what they're trying to accomplish. So for me to understand what I'm supposed to do to be able to align with their business, understand what my accountabilities are, we had to let them go first. So that was kind of how we got to that part. Then after that, we talked about that whole accountability. As I said before, I commented on everything. Whether I wanted to or not, I had to. It was part of the process. We had teamwork, which is a phrase that drives me nuts. How many people have young children? Anybody have a kid play soccer? Right? Anybody? Okay, your kid plays soccer. What age? Boy? Girl? This would have been a couple of.
Speaker C Years ago, but he was quarantined at the time.
Speaker B Okay. You know, when they're really young, there's a difference between my kids started playing when they're three and four. Three and four year olds play soccer the falling way. The ball goes over here, both teams are over there. Ball goes over there, both teams are over there. That's how we managed our organization. We all chase the same ball. And that's not teamwork, that's a team. Oh, I got two teams. They're doing teamwork. No, it isn't. That's a bunch of people chasing a ball around. An effective team, an efficient team, is a team that says, I play this position, I stand over here, the ball's over there. I know that, but that's not my job to be over there. My job is to be here. I'll kick from here to there. When it comes over here, I'll kick it to you. That's what Ron was trying to help us do, is say, okay, what's your job? Don't go following that ball. Stay over here, you can kick it, and that's my job. Or you're in the goal. So that sort of defined the job. That's what the job evaluation did, in my view. The accountabilities, who gets to make decisions? Too many people involved in decisions. And it's really important to look at minimizing the number of people getting involved in a decision. I know that doesn't sound teamy. But if we had to go for lunch today and I said group decide, we would be at it for a long time. I like Chinese, I like sushi, I like this, I like that, I'm allergic, blah, blah, blah, blah. But if we said, you two figure it out, give us two options and we'll vote on it, it would take us about 10 minutes and you got 10 minutes, you could do it. Bang. And we're in, we're efficient, we're out. And that velocity of decision making is one of the most important things for companies these days velocity to decision making and execution. So what we tried to do by doing that and defining accountability was improve our velocity to decision making. We took a long time to make decisions. And I think that by when you define the structure and you define the accountability, you improve your velocity to decision making. So that's my kind of long winded intro.
Speaker A Thank you. Thank you very much. Peter, your passion and enthusiasm is quite catching and you've got an interesting way of framing it. What I'd like to do is to shift from that overview to talk more specifically about the implementation and to have Mary Ellen take the lead on that. And in terms of the implementation, the basic idea of the implementation is that there is an internal external team. In this particular case, the core team was quite small the core internal team was quite small at CP, but there was a broader team that was developed. So Mary Ellen, in her role as the general manager of human resources, was accountable for the field human resources people. And they were absolutely integral in this whole implementation. In talking about doing this in a year with 16,000 people. There's no way one could do that without a highly committed and capable team. And also highly committed and capable executives who are prepared to work evenings and weekends to get this done in a quality way over and above their day job. So it's kind of cascading and iterative the main dimensions were around aligning accountabilities and authorities and also around matching people to positions. Mary Ellen's going to be talking as part of a panel this afternoon on the talent pool part, the matching of people to positions. So we won't get into that as deeply at this point. But Mary Ellen, if I could turn it over to you then to give us an overview of the implementation process, please.
Speaker C Thanks, Ron. It's interesting, it sounds like I'm the only one who survived this implementation from beginning to end and didn't retire in the midst of it. But it is you know, Peter talked about accountability and I think that is very true. And so one of the first things that we really focused on in the implementation is making sure that we got accountabilities really clear. Peter's talked about it as everybody sort of decided on everything together. And I think that was very much a part of CP culture. We called it consensus decision making. We had a lot of committees to keep each other informed. But I think the bottom line is it wasn't clear who was accountable for decisions, and it ended up taking a tremendous amount of time. So I think when we went in and started in the operations organization, that's a big part of the reason. This work immediately resonated with people. It was really talking about who's accountable for what, who's making the decision, and in fact, you don't need to consult with five other people around your decisions. So I think that was a really key part of it. I think Ron said we talk about talent pool a little bit later this afternoon. But I think when I look at part of this implementation and what's really been sustainable in the organization, I think the whole concept of IPC and how we matched people to jobs was a real breakthrough concept for CP. It's a business where people have long service, people tend to be developed from within the organization. And as Peter was talking about with his Frankenstein monster, we're not particularly good at looking at our own talent always and really determining who are the right people for jobs. Sometimes our criteria in the past was more about, well, this guy knows the operation, and he's been here for 20 years, and he happens to live in that town, so that sounds good for a promotion. So I think the talent pool process really helped us with the whole business of matching candidates to jobs in a more objective way. I think another highlight for me is having the Human Resources Business Partner team. It really was an internal external implementation from a sustainability perspective. My team was left with a lot of education, partly because they went through formal education on organizational design and organizational design principles. Some of these people had been doing HR work for 1520 years. I don't think they'd ever had any formal education on organizational design before, necessarily. So I think that was a big part of it. The other part of it is they actually led a whole bunch of sessions all over North America. So it was very much live learning for, you know, my team walked away with a tremendous amount of knowledge from this whole internal external implementation. And I think, Peter, I would say it goes beyond my team into the total compensation group and other parts of.
Speaker B HR, even the operations.
Speaker C Absolutely. The other part of it, of course, is the whole education piece that it left with our operations leadership. And I was thinking last night, I can't imagine, Ron, how many sessions we had the number, but it must have been in the hundreds, because we said we did this implementation for 16,000 people over the course of a year, and it was led by this pretty small internal external team. So there was a lot of education going on a lot of different levels in the organization. I think the other piece of this is Ron talked about CP as being one business. So the importance of understanding cross functional work is extremely important in our organization. So this provided people with an excellent framework for thinking about cross functional work. And someone this morning talked about, I think it was Grant talking about a matrix organization. We're set up very similar. We have areas that we call goodness of function. And then we have all of our groups who are out there doing execution work. I'm getting the timeout sign here. I think I was talking about sort of a matrix organization and how this really helped us to understand goodness of function work versus execution work. And we would define I don't know if that's a term you've talked about over the last couple of days, but we would refer to goodness of function as the people in the company who are responsible for setting the process and the standards. So if I was to put that in our engineering world, for example, we have people who are in the goodness of function who would set all the standards for the type of work that needs to be done, right? And then we'd have the guys who are out there on the track who are actually executing the work to those standards. So for our operations people, that was a very helpful distinction and it's something that they have carried forward into subsequent rethinks of the work that they've done before they had this concept of goodness of function. They used to talk about process owners and I think get fairly confused because everybody wanted to say they were the process owner, right. Until accountability came and we had meetings where we would get all the process owners together, right? And so everybody felt they had a clear piece of this process. So I think by distinguishing who's actually accountable for the policy, the standards, who's actually accountable for doing the work, that was a very helpful piece for us. It's almost 24 months now, I think, since we finished the implementation and the operations group. And some reflections on that we are restructuring again, right? Actually this week I spent two days in meetings with the operations group as they are doing some changing around of some functions. But one of the things I've observed is that the learning that they had from almost two years ago now has really carried forward. So when they talk about making some changes now, it's almost pretty easy for them because they go back to this concept and the common language that a couple of people talked about this morning and say, okay, well, goodness a function is going to do this and these are the execution people. I heard a comment from one of our engineers on Monday of this week where he said in the midst of some meetings around reorganization, he said no you know what? We thought this work through fundamentally two years ago, so we don't have to redo that now. So I think that's a real legacy two years later of the kind of work that was done. So that's very encouraging. Ron, is there anything else you'd like me to chat about now?
Speaker A Maybe the SAP cross functional stuff?
Speaker C Yes, I was very interested this morning with the Graham Group talking about the level of projects as well, because that's something that we took a look at in terms of internal projects in the company that were cross functional in nature and making sure that we were matching the right level of people to these projects. So, for example, we're doing a large scale SAP implementation right now that touches all parts of the organization. And you all know how projects are typically staffed in organizations. It's often who's available to be doing this. But this required us to put a lot more thought into matching the right people to these large scale projects in the company.
Speaker A And maybe job evaluation.
Speaker C Okay, the other thing that this impacted the work that was impacted I talked about influencing the HR group. We did also go through and change a number of our HR systems, probably most notably how we looked at job evaluation. So we had some help from Mercers as an external compensation consultant. But once we'd put these concepts in place about stratums, then we started doing job evaluation the same way and looking at the same criteria. Someone mentioned this morning, Hay Group, or maybe it was on the video, someone was talking about sort of the old way of looking at job evaluation around points and everything else. Well, we don't do that now. We use much more a requisite organization approach to job evaluation. Peter mentioned that he hates job evaluation. I think that makes him like everybody else in an organization who hates job evaluation. No one ever necessarily likes the results of it, but I think it's given us a very different way of looking at job evaluation. The other thing we did now that I say some of this, I think we must have been crazy, right? Because the other thing we did during that period of time is we changed our compensation structure to make sure that it aligned with requisite organizations. And the Adams, who we were setting up.