Failed Transplants
Transplanting a Change Solution from Another Company
It is common for companies embarking on change to bring in new management from the outside. When this happens, the new leadership may tend to do “what comes natural.” This usually involves carrying out the policies that were used in a previous company. Sometimes the policy “transplants” work, but often they do not. Consider the case of a telecommunications company bringing in a new executive to turn around the company and foster a more performance-driven culture. It was noted by the board that the company lacked an incentive plan that focused the energies of all employees to consistently deliver projects on time. The lack of an incentive plan was perceived to be the cause of the ongoing poor project schedule performance. The new executive knows exactly what to do, and that is to implement the bonus plan used in the previous company. The company from which the executive came implemented a bonus structure that was also said to have been taken from GE by the executive who joined the previous company from GE. The bonus structure used in the previous company was tiered so that the bonus percentage increased based on the rank of the employee. Rank and file employees received 5 to 10 percent, and the percentage increased to approximately 40 percent for the most senior executive. The company that used this bonus scheme was a rapidly growing publicly traded company, and all employees were aware of the overall bonus percentages awarded. It was understood by those who sought out higher bonus levels that the path to bonus prosperity involved promotion to management (Figure 5.1).
Figure 5.1 Failed transplants
The bonus plan was introduced by the executive to the new company in an all-hands meeting. It was expected that the employees would be overjoyed to have a bonus plan given that they had never had one before. The response to the plan was instantaneous, and highly negative. In fact, at least one employee engaged in a red-faced angry screaming session in the office of the executive. Why the negative result? The new executive presenting the plan failed to understand the collectivist culture of the company associated with its long history as a satellite operation of a company with roots in Japan. The negative reaction was not related to the bonus per se, but rather that the bonus levels were tiered by rank. This was a bonus scheme that worked well in a Western high-tech growth company, but not in a company with a long history of immersion in an egalitarian culture that exalted the role of teamwork and the philosophy of “we are all in this together.”
Bonus schemes are not the only “transplants” that fail to achieve what is promised in a change management effort. New executives tend to also be familiar with the organizational structure of their previous home. Such a structure may or may not be compatible with the objectives and the business operation of the new company, yet new executives sometimes implement a new structure without a deep understanding of what is or is not likely to work well in the new environment. A typical example is of an executive who makes a comment such as “We never had these management levels in the previous company—so I am going to eliminate the one management level we did not use where I worked before.” A comment such as this may seem reasonable on the surface, but it does depend on what the work of the new organization really is. Also, this comment should lead to reflection upon management levels used within organizations and why they are needed in the first place. Senior managers are observed to focus on strategic matters, for example, determining what businesses the company should be as well as what actions the company should carry out in order to achieve financial and market-share goals. Lower level managers and individual contributors tend to focus on executing the strategy that emanates from the top of the organization. The lower the level of the organization, the more the focus on performing work and addressing day-to-day issues. In contrast, the higher the level in the organization, the more that the focus is on “where we are going and why.” In the case of the “we don’t need this management level” executive, flattening the organization to make senior managers “do it all” produced unintended consequences. The senior managers who once sought to lead and direct their respective groups, now, on losing a lower level of management, began to get dragged down into the day-to-day issues of the organization. The new leader failed to recognize the difference in context as well as the workload differences between the previous company and the new company. Cost savings were apparent in the removal of a management level, with the consequence that groups formerly led by senior managers who focused on decision-making and direction-setting were now led by senior managers who “did a little bit of everything” except set direction. The result was rather like a car going on a trip without a map, compass, or destination, while achieving excellent fuel economy in the process.
Another case of a transplant involves executives who adopt a process or methodology originally adopted in a completely different operational context. The executive may have used the methodology in previous engagements and understand how to use it perfectly in the old operational environment. However, when transplanted to the new context, the implementation is unclear, and the result is not successful. It is not the case that the transplanted idea could never work, but it could only work with an appropriate understanding of how to use it in the new context. Some examples include:
Statistical process control. A methodology associated with manufacturing that involves tracking long runs of data to assess whether the process is in or out of control. When transplanted into a context that does not produce long runs of data and the process to be controlled is unclear, the transplanted methodology breaks down (e.g., the application of statistical process control in a project environment or other one-time-only activity).
Assembly lines. A successful methodology that produces continuous output with consistent quality that is ideal for repetitive component placement and specification setting. When transplanted to an environment where every assigned job is unique and challenging, the methodology breaks down (e.g., the application of the assembly-line methodology to a repair depot where every repair requires extensive troubleshooting and a variety of different solutions).
Self-managed teams. Self-managed teams are ideal in cell manufacturing settings where the nature of the work is unambiguous and the context is highly structured. Implementing this scheme in an ambiguous and unstructured setting may lead to teams that tend to veer from the strategic alignment of the company. On the other hand, implementing self-managed teams within a framework such as Agile may work given that Agile management guidelines foster team self-management. In the absence of a well-thought-out management scheme, transplanted self-management teams may founder (Figure 5.2).
Figure 5.2 More failed transplants
Pointers for how to fail:
- Introduce a compensation scheme from a company operating in a different context, culture, industry, or all of the above.
- Eliminate management layers to emulate a previous company operating in a different context, culture, industry, or all of the above.
- Insist that senior managers keep busy with operational tasks rather than strategic decision-making.
- Transplant a process or methodology from a familiar to an alien context.