The quiet crusade.

When they agreed to be part of the process revolution, many top executives didn't bargain on having to change themselves. But the revolution is nor going away. Executives who can't adapt may find themselves adrift.

In the late 1980s, as the British banking industry was deregulated, competition quickly heated up with banks, insurance companies, and brokerages moving into each other's territories. To keep up, the National & Provincial Building Society, a financial-services firm with hundreds of branches across the U.K., expanded its product lines and brought in new technology to streamline its offices. but N&P's real competitive response took place deeper inside the company. N&P had decided that superior customer service was the key to survival in a rapidly changing market. Rather than simply pay lip service to the virtues of the customer, executives redesigned the bank's organizational structure around the core processes that identify, understand, and reach customers - processes such as "customer requirements" and "relationship building." The goal: allow management to work across the company in interdisciplinary teams, with the customer constantly in view, rather than through vertical departments charged solely with narrowly defined tasks such as marketing and accounting.

The company's process orientation "enables us to take the customer perspective much deeper into the organization," says Paul Chapman, director of organizational design and development at N&P. "We can actually get everyone - secretaries, switchboard operators, Visa card processing people - much more involved in a customer perspective." One result: Since 1991, profits have risen from [pounds]66.7 million to [pounds]124 million - $101.4 million to $188.5 million - despite continuing competitive pressure.

N&P grasped what is becoming a basic business tenet: Well-honed processes can do far more than boost internal efficiency; when managed properly, they can be a competitive weapon.

But managing processes and keeping them on the leading edge requires a powerful cultural shift - one that reaches into the top tiers of the organization. As companies hurry to recast their organizational structures around processes, executives find themselves having to change right along with the rank and file - and a lot of them don't like it. At N&P, estimates Chapman, perhaps a third of top management did not remain on after the move to process management, and a study, "Building Process Excellence: Lessons From the Leaders," conducted by the Economist Intelligence Unit, found several instances where senior management had difficulty adjusting. "The adjustment for traditional managers is not an easy one," says William Millar, the EIU study's editor.

Indeed, in building a process-based organization, senior management "is where you come to the biggest challenge," says Chapman. "Some find it difficult to adapt. But the saying is, you can't make an omelet without breaking eggs. That's very true. You have to accept that there will be some breakage."

"Today, more and more companies are working to compete on the basis of what we call process excellence," says Barry Patmore, worldwide managing partner of Andersen Consulting's process competency practice. This trend, he explains, is based on a broad view of processes that extends well beyond programs such as re-engineering and Total Quality Management. For example, rather than examining finite tasks, companies are addressing enterprisewide "megaprocesses" - such as generating demand or developing products and services - that cut across functional departments. Instead of just focusing on cost-cutting and downsizing, they're also focusing on revenue and market-share growth. And rather than a one-time re-engineering project, they are creating the systems, organizational structures, and company culture needed to drive the ongoing rapid improvement of processes.

The basic concept: Excellent processes will proffer a more lasting advantage than fast-changing products and technologies - in part because processes are more difficult to duplicate, and in part because well-managed processes can help a company keep up with those changing products and technologies.

The key term here is "well-managed." That's because traditional management structures based on functional departments and rigid hierarchies conflict with the smooth operation of dynamic, fluid processes. By definition, core processes cut horizontally across traditional vertical functions, such as marketing, manufacturing, and accounting. But people organized into those functions tend to see only their portion of the process. As a result, time-consuming handoffs of work and differing departmental goals slow progress. What's more, functional managers tend to have only a fragmented picture of the overall process - making it difficult to keep improving it in a steady, orderly way.

As a result, companies ranging from Xerox and American Express Financial Advisors to Chrysler and Lever Brothers have been embracing process management - that is, creating new management structures that are organized around processes and that let executives work across functional boundaries. Their aim - like N&P's - is to give management an integrated, end-to-end view of each process extending all the way to the customer. This view allows the company to gauge accurately how well the process is working and to keep improving it in a planned and manageable fashion. "It's kind of institutionalizing the idea of always getting better at what you do," says Thomas Davenport, a consultant and director of the Information Management Program at the Graduate School of Business, University of Texas at Austin.

The theory may be straightforward enough, but putting it into practice can be difficult. Process management is still an emerging discipline, and there isn't any one-size-fits-all formula for success. It's also no quick fix; establishing a process orientation typically entails new reporting structures and flattened hierarchies, comprehensive communications programs, extensive change-management efforts, redesigned computer systems, and, especially, new ways of thinking about management responsibilities.

As difficult as it is, getting the machinery of process management in place is only half the battle. It's the cultural issues - the people issues - that can be "either the killer of the effort or the thing that makes it happen," says N&P's Paul Chapman. And this is more than a fight for the hearts and minds of the troops; it s a fight for the hearts and minds of senior managers.

Managing across an organization, rather than through traditional functions, puts many executives on unfamiliar terrain. For one thing, flatter hierarchies make the route to the top less clear and whittle away at functional kingdoms. Executive compensation usually changes as well, with incentives tied to the performance of a process and the learning of new skills.

At N&P, says Chapman, "our rewards are based on the same criteria for everyone." The levels of required skill and amount of pay differ for various positions, of course, but the basic categories for evaluating people are the same up and down the company. "It creates a sense of fairness," he says.

"But there some managers who will not accept that," Chapman continues. "They don't like it when you change from a reward system based on status and how many people you have working for you to one that says you get judged the same way as everybody else, which is based on your performance, the role you play, and developing your competencies."

For many executives, these changes are "very scary. You take the bureaucratic trappings away from some people, and they fall on their face," says Noel Tichy, professor of organizational behavior and director of the Global Leadership Program at the University of Michigan's business school.

It's not just a lack of titles and empires that knocks executives off balance, however. It's also the need for more fundamental and, yes, personal, change. In shifting to a process organization, Xerox CEO Paul Allaire pointed out, "The hardest stuff is the soft stuff - values, personal style, ways of interacting."

By nature, process management entails a higher level of ambiguity that can be unsettling to senior managers accustomed to focus, clarity, and direct action. For example, an executive often will have responsibility for both a functional area and a core process. "They have to be able to have two sets of objectives in their mind, and those objectives may conflict," says William Stoddard, a partner at Andersen Consulting. "For example, a marketing vice president may have to settle for less than his usual high level of performance in the marketing function in order to achieve the overall goals of the demand-generation process he owns. That gets fuzzy, but you have to make it all fit."

What's more, a senior manager may well have responsibility for a process, but no direct authority over the majority of the people who perform it. Simply barking orders won't work; instead, executives have to convince others to do their bidding, which makes the soft stuff skills in facilitating, coaching, persuasion - more useful than traditional authoritarian behavior. Among senior managers, says the EIU's Millar, "there's sometimes a feeling that the skills that got them to the top just don't work anymore."

Above all, process management requires senior managers to work as a real team - and in spite of the years they've spent calling for it, most executives are not especially good at teamwork. The shared decision making and openness to criticism that are at the heart of teamwork simply go against traditional executive virtues such as individual strength and autonomy. "Interdependence was not part of the Darwinian selection of senior executives," says Claire Kolmodin, vice president of quality at American Express Financial Advisors in Minneapolis.

"If you are assessing teamwork, our best teams are actually in the branches and individual operations," says N&P's Chapman. "And the top team is probably the worst team."

Working in a team "means giving up a little control in the service of a group task," says David Berg, an organizational psychologist and associate clinical professor of psychiatry at the Yale School of Medicine. But executives tend to believe "some version of 'cream rises to the top' - that they're the best. But best is an individual term, so how can you really believe in the importance of teams when your underlying, personally developed story is that it's really an individualistic world and that's how people distinguish themselves?"

For example, Berg explains, in a process-oriented team, leadership typically moves from member to member, depending on who's best suited to lead the task at hand. The group must select leaders - a chore that gives executives "a lot of trouble. They have to authorize somebody else, but they are very much in a position of wanting to be authorized. And if you have eight people sitting around wanting to be authorized and nobody willing to authorize anybody else, you have a problem."

The team approach also violates some unwritten rules about turf, Chapman says. "Senior managers have to become comfortable talking about and to each other's areas. They have to be prepared to own all of the company's direction, not just the bit that applies to their function. A treasury director, for example, has to be comfortable challenging the marketing guy and saying, 'Why are we doing this?' That's difficult because of the old suspicion that if I attack him, he is going to attack me. A suspension of distrust is needed, and that's a constant difficulty. It doesn't go away."

Yale's Berg recommends training executives in team skills and new behaviors, rather than expecting them to learn from books and corporate presentations. "Even though managers understand and embrace new roles, they may have a hard time putting that into action. They may be convinced and intellectually believe in it. But they have no experiential or emotional conviction about it." Through workshops and seminars, however, they can develop a gut-level appreciation of their new roles.

At American Express Financial Advisors, consultants were brought in to train top managers in various process-management skills, from teamwork to developing horizontal measurement systems. That effort, says Kolmodin, has helped managers immensely. "I think it's key to give your senior people time to learn something about this new skill set and this new behavior in relative privacy. Senior people often learn painfully in public. I think some sort of conscious attempt to have them learn in private lessens the resistance people have over time."

Ultimately, the chief executive must play an active role in helping senior managers find their way in this new environment. "It's clearly the CEO who has to figure out the relationships between these contending ways of looking at the business and figure out exactly what power process managers have versus functional managers," says the University of Texas' Davenport. "It sounds nice in the abstract, but it really means settling arguments. People are going to come to the CEO and squawk."

The CEO can help limit the pain levels by screening the process owners and process champions - those executives who are put in charge of the process. Again, that means keeping an eye out for candidates with the right soft stuff - communication and persuasion skills, the ability to work across the company, managers who are "people people."

"The key to all this is leadership, leadership, leadership," says Michigan's Tichy. "The minute you really start running a process-oriented organization, you are much more into having to energize people with ideas and values, which puts a higher premium on good leadership. When these efforts have failed, it's often because you have a bunch of bureaucrats thinking they can run the stuff that requires more teamwork, more constructive conflict, openness, speed, self-confidence."

As the CEO weeds out candidates, he or she may well find that longtime, trusted colleagues don't make the cut. "Often, the executives who got you into your present form are incapable of getting you out of that form," says Andersen Consulting's Stoddard. "So the chief executive has to look at his direct reports and ask, 'Are these the right people to change direction?'"

The CEO also needs to provide solid feedback to executives about what behaviors and skills need improvement - and make them understand that these changes are not part of a program of the month. "You have to make it very clear to those who want to continue to run things on a very hierarchical basis or who don't believe they should be part of the team, that their future is probably limited," says Chapman.

As a starting point, executive skills and behaviors can be assessed using tests and 360-degree reviews that provide feedback from subordinates, peers, and superiors. "An assessment will help them understand how well they're doing in terms of specific team skills, like a willingness to ask for help or to delegate decision making," says Pamela Corbett, a psychologist and human resources consultant in Winston-Salem, NC. Armed with that information, executives can perform a sort of triage to focus skill-improvement efforts. That way, says Corbett, "you're not trying to tackle a whole set of skills at once, some of which don't need attention, and some of which need desperate attention."

By all indications, more and more companies will be facing such issues as the trend toward process management continues to pick up steam. "The emphasis on process excellence and process management is not going to go away," says Andersen Consulting's Patmore. "Over the next 10 years, the ability to keep improving core processes - the ability to institutionalize change - will separate the winners from the losers." And as companies grapple with these new ways of managing, senior executives - and especially the CEO - must be prepared to provide the leadership and perseverance to see the effort through.

"You're changing a culture, which is undoubtedly one of the hardest things any company ever does," says Chrysler CEO Robert Eaton. "You have to be tenacious and patient. It will never happen as fast as you like, and you have to keep pushing."

In the end, the CEO's leadership will be critical to finding the way forward through what is, after all, largely uncharted territory. Process management is an area "where there is no book on the topic on the best-seller list," says Davenport. "It's the kind of quiet crusade that can really differentiate the good leaders from the bad."