CSR Pat Gnazzo Must Decide

CSR

Pat Gnazzo must decide the best way to implement United Technologies' highly success ethics program into its new acquisition, Chubb. The English company is the first firm to be acquired since UTC implemented its current ethics program, and represents a major challenge due to that fact that it is so spread out, has a weak corporate culture, enjoys only limited access to the Internet or head office, and has little tenure.

United Technologies must evaluate Chubb from a strategic perspective. UTC wanted Chubb to get into the security market, but mainly for the systems. The security guards they inherited were not necessary where the value in Chubb lay. Thus, UTC may wish to consider resolving much of the problem by selling the security division, hiring outside security firms if need be and instilling their guards as part of an orientation program.

However, should United decided to retain the Chubb security guards, they have several barriers to overcome. Gnazzo is somewhat overwhelmed in large part because there are so many different problems. Placing the problems in sequential order is necessary -- Chubb will not be integrated overnight. The first step is to determine a communication mechanism. At present, Chubb employees are spread far and wide, and often work remotely from any central office. This must be considered a major contributor to the lack of strong corporate culture at Chubb. United needs to build a strong culture at Chubb in order to instill its ethical values in the newly acquired company. This requires stronger communication links.

United should invest in connecting Chubb employees to the head office. This can be through increased use of the Internet, but potentially also through wireless devices. The use of the new communications tools will only work, however, if their use becomes habitual. For example, if all corporate communications including the very important ones come through a given channel, even the most remote employees will become accustomed to the new channel.

One potential means to bring all Chubb employees into the channel is to mandate an online ethics training course. This can be combined with other online courses designed to introduce UTC and the UTC way of doing business. If these courses are mandatory for all employees, they will be compelled to check in with a head office at some point in order to complete the training. The security guards are particular will need to have it enforced upon them that they will not have the same degree of independence as they had before.

A carrot and stick approach can be used -- in addition to mandated training there can be incentives for performance on the training, or early training. Incentives can also work at the managerial level. Remember that the current UTC system relies heavily online managers to convey the message. This should hold true with Chubb as well. Chubb managers are often new, so they need some guidance at building culture. Along with the guidelines, they may need some incentives to motivate their workforces to complete the training.

It is also worth considering the degree of value in sending existing UTC employees into Chubb in order to instill the parent company's values. With a roster of untested mangers, Chubb would benefit from the injection of managerial expertise anyway, and if UTC sends its most ardent champions of ethics over to Chubb, this will help spread the ethical culture faster.

The UTC managers should also bring with them the cultural artifacts of the UTC program. These include the OMBUDs program, the DAILOG program and the Business Practice Officers (BPOs). These structures are part of what has made the UTC program so successful. To not replicate them at Chubb would encourage failure. High level support was also needed to get these programs built into the UTC culture. This will be required at Chubb as well. A VP of ethics position would also contribute to the fostering of an ethical environment.

For their part, the employees at Chubb are likely to view this organizational change effort as either fleeting or half-hearted. They may see the effort as being fleeting because the company has just been taken over. They understand that the new bosses want to make an impression, but may feel that once the company has integrated a bit the new bosses will lose interest and things will get back to normal. The change effort could be perceived as half-hearted if it is only conducted remotely and with no change in leadership or organizational structure. Putting a UTC executive into Chubb would discourage that line of thinking.

To address the issue of the ethics program being fleeting, UTC needs to illustrate in its message the importance of the ethical culture. The message should begin with the scandals that the firm has suffered, which provide the underlying rationale for the ethics program. The message should -- briefly -- outline the history of the program. More important is the next phase, which should be an explanation of the value of the program today. A subtle dig at Chubb's lack of ethics contributing to its low valuation that allowed the takeover would be good, if it could be done tactfully. The final component of the message should be the current structure of the ethics program.

Because Chubb is a new acquisition, the culture cannot be expected to take either quickly or easily. It will take considerable reinforcement efforts to ensure that the culture of ethics is instilled in Chubb. This reinforcement should be in the form of supplementary communications and meetings over the course of the first year at least. Given the remoteness and independence of many of the Chubb employees, the culture is less likely to be self-supporting quickly. As a result, UTC may need to be a bit more aggressive than they otherwise would be at pushing their culture on Chubb employees.

The plan to instill the UTC code of ethics at Chubb can only be effective if it is measured. Measurement allows UTC management to gauge the effectiveness of different tactics and the overall strategy. They can adjust their tactics as needed, and identify roadblocks to implementation. The metrics used for measurement should include perceptions of the importance of ethics and the UTC ethical code. Other measures should include knowledge of the code, its underlying motivations and its antecedents. The degree to which employees value the code and are aware of its contents will determine the degree of the training's effectiveness well in advance of proxies such as ethical breaches, which may not be revealed for years.

One last recommended strategy for Gnazzo is that he should take from the lessons learned within his own organization. He views the geographic and cultural diversity of Chubb as a challenge, yet UTC faces the same challenges every day. Gnazzo has already identified that people all over the world, of all culture, recognize certain statements as fundamental truths: "don't lie; don't cheat; don't steal." Chubb employees will see these statements as truths, too. A more important lesson from this simply fact is that Gnazzo needs to approach the change process as though it will not be a challenge. The message, in both words and actions, from UTC headquarters to Chubb and all of its employees, should be that the new ethics policy is something they already do. That may not be true, but if UTC shows faith in the Chubb employees' good ethics, they are more likely to be responsive. If UTC views the lack of an ethics program at Chubb as a sign that Chubb employees are thieves and crooks, that will come across in communications and the message will meet resistance.