Interesting Reading about Change

On my way to Paris I stopped at the bookstore inside the San Francisco International Airport and bought several magazines including the June 2010 issue of the Harvard Business Review.

What caught my eye was the cover page lead MANAGING CHANGE - How to Do It, When to Do It. Ther authors Marcia Blenko, Michael Mankins, and Paul Rogers are members of the Global Organization Practice at the Bain & Company, a well known and reputable consultancy.

I approached the article with much skepticism. After all, what else can be said about change? What captured my interest is the conclusion of the article: "Ultimately, a company's value is just the sum of the decisions it makes and executes." Hmm! Never thought about it that way.

The article goes on to review important lessons learned from reorganizations in 57 companies between 2000 and 2006. After much fanfare, most, if not all, such changes fall flat. The authors believe that these failure are rooted in a profound misunderstanding about the link between structure and performance. They conclude that performance is not determined solely by the nature, scale, and disposition of resources, however important that may be. A company's structure will produce better results if and only if it improves the organization's ability to make and execute key decisions better and faster than competitors.

The article advances a six-step approach to creating a decision-driven reorganization:

1. Identify your organization's key decisions.

2. Determine where in the organization those decisions should be made.

3. Organize the macrostructure around sources of value.

4. Figure out what level of authority decison makers need.

5. Align other elements of the organizational system, such as incentives, information flow, and processes, with those related to decision making.

6. Help managers develop the skills to make and execute decisions quickly and well.

Decision effectiveness and financial results correletated at the 95% confidence level or higher for every country, industry, and company size. The study pointed out that it is the quality of decision-making rather than the structure that should be the primary focus of the reorganization. No strong correlation was found between structure and performance.

To really appreciate the lessons learned from this article, it is important to read it in its entirety.

As I was reading the article my mind began to remind me of a classical failure that I recently observed in a multi-national company. The decision making process was totally misaligned with the intent of the structural transformation the organization embarked on.

For example, a senior officer at the corporate level was given the authority to approve major decisions regarding strategies and direction while the operating executives were made responsible for the success of the strategies they did not create, did not own, or fully understood.

The incentive system was not fully aligned with the change goals. As implementers realized that the likelihood to achieve their targets were beyond their reach, motivation began to decline and job pressure skyrocket.

The notion that the strategy had worked elsewhere (although many disagreed with this claim) and therefore should work everywhere was not only false but foolhardy. It ignored the important notion that no two organizations are alike and that there is no one best way. Size, history, national culture, market dynamics, and skill set matter a lot.

A proper decision audit would have revealed that the course of action was not just what important activities needed centralization to achieve economies of scale, but how these decisions were reached and by whom. Sad, but the entire intervention was a monumental fiasco, albeit well intentioned. The intervention was successful but the patient died.

How about you? Have you seen successful reorganizations? How would you say they might have differed from the unsuccessful ones? Lessons learned? For me, beware of of the one best way... it worked elsewhere so it should work here ... trust me, it will work.

Tsunami Change

We all know that change is a fact of life. Nothing seems to remain constant. Yet the Scriptures remind us that "... there is nothing new under the sun" in the first chapter of Ecclesiastes. What seems to change is the packaging and the intensity.

In my understanding of organization behavior, there are three kinds of change: (1) Evolutionary, (2) Revolutionary, and (3) Planned Change. The first is associated with continuous improvement and the third with transformational initiatives. The second is associated with structural change (albeit it might very well be planned).

Why? Structural changes more often than not can have an immediate impact on the status quo. By structural change I do not mean "bird-cage" reorganizations where all the "birds" fly up and settle in different perches. They change who is on top and who is not, but often do not change performance. They change who is on the giving and who is on the receiving side.

The tactics we use for each type of change are varied. Some are power-coersive while others rational-empirical. This subject is for another blog.

A professional friend, Victor Pineiro, wrote a book several years ago on the tsunami type of change he experienced as a consultant-participant in his native Caribean country Curacao. Victor revised his book a few years ago after the tsunami triggered tragedy in South East Asia. A worthwhile reading! I learned much from his book and from his insights.

Recently, I have been tracking and observing a tsunami-type of change in a multi-national organization. A tsunami has a way of surprising you. There is little or no advance warning when it might strike.

In this case study, the tsunami was triggered by the lack of alignment between the CEO and two major shareholders. The CEO was keen on growing the company aggressively to global status while the major shareholders were more keen on squeezing shareholders' value. So when an opportunity surfaced to sell some of the company operations at a very handsome profit, the difference could not be resolved. Shoving became pushing, and soon the CEO was out.

This started a major tsunami.

Several executives were summarily dismissed. New executives were brought in with ideas more closely aligned with the major shareholders' vision. The short-term profit motive trumped the long-term growth potential. The squabble also surfaced many issues with the aggressive growth strategy of the previous regime. Many executives had reached their Peters' Principle (their position exceeded their level of competence). Under the guise of a family culture, many interpersonal scores were unsettled. People were selected for promotion based on nationality, friendships, culture alignment, seniority, etc. rather than competence or results. Growth had generated excess by some of the top folks too. Profitability, it seems, often hides many managerial weaknesses. The Emperor has no clothes!

Needless to say, the toll was high. Many individuals in lower level positions lost their job as fat was eliminated and/or as a more decentralized style of management began to emerge.

Organizational tsunamis can be deadly.

If you are in a corporate job, you are the most vulnerable. High ground (operations) is a safer place. Like animals in the wild, some individuals can sense it coming before it strikes, and they immediately proceed to higher ground (operations) or leave the company altogether (resign).

It takes years for the employee relations climate to recover. The very fiber of the organization is shaken to its roots. Established relationships collapse. A sense of vulnerability permeates the corporate community. The focus is survival -- the ability to survive another day, the hope for a good "package", the longing for the good old days. The organization goes into shock. Depending on its size, it might take years to recover. Some never do. A few use the experience to their advantage, and do not repeat their mistakes.

How about you? Have you have seen or experienced such a change? What did you do? What did you learn?

I am one of those animals that, more often than not, can smell it coming and I have always left the island before the tsunami strikes. How do I smell it? Hard to say. But I start to pick up changes in the language and behavior of the CEO, and his/her shift from the long to the short term. I start to listen to the major constituencies as they start to murmur.

Murmuring is an early warning system, I have learned. Murmuring is a special way of communicating disagreement, admiration, contempt, or other feeling we are afraid to verbalize. Often, it is not a postive sign.

Tsunami often seems to be triggered by internal forces -- infighting, politics, lack of a common vision, arrogance, intrigue. It can also be triggered by market forces.

I would love to hear your reactions to this subject.

The Fallacy of Transformation

As a student of organizations, I have noticed the penchant for sexy terminology. Consultants are in particular experts at generating terms that connote better methods or unique know-how. Transformational change rather than incremental change is an example. Who in the world wants to be a change plumber? Fixing leaks here or there in the organization's plumbing. Transformation is more sexy since it denotes morphing into something better, more powerful, more vibrant.

Transformation is not a uni-directional term. You have three ways out of a transformational change: better, worse, or the same. Transformation that does not improve an organization positively is an illusion. Transformation that does not result in improvement at best is a wash, and at its worst is a rip-off.

Questions to ponder are: has the change effort resulted in increased margins, higher revenues, better employee engagement, more loyal customer base, more robust market share, etc.? If not, it is time to find out why.

Have you been sold snake-oil? In the wild west of yesteryear, it was the medicine salesmen sold from town to town to cure any and all human ills. Today we are awash with slick folks who pretend to have the magic bullet, the better idea, the smarter tools to overcome all organizational challenges. Buyers must beware!

When we confront the snake-oil salesman, we will hear interesting excuses. Not enough time has passed yet, let's be patient. We did not execute the change properly, the way we should have. Right now we are playing defense e.g., we are cutting the fat. The market has gone south. Etc.

How can you spot snake-oil peddlers?

They have the same medicine for everybody regardless of the unique organizational situation. They will tell you that it worked fantastically elsewhere (usually a name company with a great reputation like GE, IBM, Sony, etc.) The problem is that your company is not like any other in either size, scope, history, geography, culture or capability. It is one of a kind. Sure, something might have worked elsewhere but you are not elsewhere, you are somewhere? For example, the medicine you give a baby (start-up) is usually different than what you give an older person (declining or mature organization). Different in dose. Forbidden to one or the other.

Plumbing is not a sexy job but it is still a noble one. It does not make it more glamorous by calling it transformation. Sure, in some situations incremental change is not good enough. If we choose to make radical changes, then we must be sure that the methods fit the situation on the ground.

During my career, I have witnessed very few arch-type transformations: GE, Apple, IBM, to name a few. The landscape, however, is full of organizational carcasses that did not survive the transformational change. I will not give you a long list. I know you have your own.

Enjoy the trip along the learning curve!

The Problem with Management Fads

I was startled by a handout I received during a seminar that I attended last year. It was a graph plotting all the management fads of the past 60 years. They all promised to be the answer to the pressing problems of the day, but in hindsight none of them were. That does not mean that we should junk all of them.

In my view they all serve a purpose at one time or another, buyers beware! Students of the systems approach know that there is really no one best way to solve complex organizational problems, that it all depends on a number of factors. We also have been taught that no two methods are alike or yield the same benefits ... some are faster, others are longer lasting, etc.

In the mid 1980's I read the abstract of a doctoral dissertation -- "What's new in OD." I have forgot the author's name but not his findings. The Ph.D. student spent a good part of three years tracking and documenting the evolution of the organization development field, dating back to the pre WWII experiment at Western Electric. His conclusion was startling for me. He found nothing was really new except better packaging.

As I reflect on the last 25 years, I regrettably have come to the similar conclusion.

The Western Electric experiments opened our eyes. The increase in employee productivity was not as a result of better lighting (a recommendation by the consultants) but as a result of the attention employees where receiving. This breakthrough finding gave birth to what scientists refer to as the Hawthorne Effect (HE). The HE does not last, however. Like the rubber band, once you forget to pay attention to the employees, the rubber band will snap back to its earlier position (status quo).

Fast forward to the 21st century.

I have observed the Hawthorne Effect during the initial phases of change programs. You form a task force, cross-functional team, a "skunk" group, you name it, and unleash it on problem solving, and by golly, things begin to change. You think you are a genius, that you have arrived. Well, you had something, but not a lot to do with it, you simply unleashed the Hawthorne Effect. The rubber-band effect? Sustainability is the issue.

Many change efforts die or lose their impetus over time because the HE is exhausted. Change fatigue sets in. People get tired. Over the long haul, the overall impact is hard to discern. Skepticism sets in. It is time for renewal ... it is time to re-seed the situation.

It has been said that people are good at criticing the work of others but not their own. They think that everybody is screwing up but not themselves. Well, I am not one of those people. I have experienced many failures -- failures in the proper use of change methods and failures in the change goals. How about you?