Leading Organizational Change
A paradox of organization change is that we plan in a linear fashion—step 1, 2, 3 or stage A, B, followed by C, etc.—but in the implementation of the change we discover that the process is anything but linear. As I have stated elsewhere, organization change in reality is a nonlinear process.[19] The change never occurs quite the way it was planned. As interventions are made, organizational members react in ways that are not entirely predictable. In other words, unanticipated consequences arise from the planned initiatives and interventions that then have to be addressed and managed. Resistance to the change is what we usually call these consequences, but organization change is not resisted by everyone. And resistance that does occur rarely takes the same form in different people.[20] In any case, most of leading and managing organization change is a process of dealing with unanticipated, unpredictable consequences.
But we do need to plan. We also need to be clear, however, that things will not go precisely according to the plan. So, how do we proceed?
Imperative is having a vision for the future that generates clear goals. With goal clarity and a broad phased way of planning the change process we can deal with and manage unanticipated consequences.
With the aforementioned caveat stated, we will now proceed with a phased way of thinking about organizational change that emphasizes the change leader's role within each phase. The broad phases of organizational change can be considered in terms of (a) prelaunch, (b) launch, (c) postlaunch or further implementation, and (d) sustaining the change effort.
Prelaunch Phase
As stated earlier, leadership is personal. It is about the use of oneself to be influential, be persuasive, and embody the organizational vision. During the prelaunch, the leader works more alone than with others, although from time to time he or she will want to seek guidance and opinions from trusted others. There are at least four elements that comprise the prelaunch phase—self-examination, assessing the organization's external environment, establishing the need for change, and providing clarity of vision and direction.
Self-examination: This element consists of three parts (self-awareness, motives, and values) and is the loneliest aspect of leadership. It requires introspection to (a) be aware of one's strengths and limitations as a leader; (b) examine one's motives, especially regarding the desire to bring about change that will be disruptive and affect organizational members' (and their families') lives, particularly their emotional lives; and (c) be clear about one's values and how congruent they are with the desired culture of the organization.
Self-awareness— Arguing that this self-examination is an important early step in the organizational change process is grounded in recent research findings that increased self-awareness is significantly related to performance. For example, high-performing executives and managers tend to have greater congruence between how they view themselves and how others perceive them than do moderate- and low-performing executives and managers.[21],[22]
Motives— As noted earlier, O'Toole believes that ambition is the motive of importance for leadership. To elaborate on O'Toole's argument, let us briefly examine the work of David McClelland.[23],[24] O'Toole's point and McClelland's research together suggest that ambition and need for power are not necessarily deplorable motives. The three primary needs that McClelland studied were need for achievement, need for affiliation, and need for power. Need for achievement is critical to task accomplishment, but a need too high militates against effective leadership. High achievers “can't find good help.” They tend to want to do the job(s) themselves to make sure that it's done right. In other words, delegation is practically impossible for high achievers. Having a high need for affiliation does not foster effective leadership either. In positions of leadership, having a need for affiliation means that decisions are often made impulsively owing primarily to a desire to please the last person to whom the leader talked and to assure a relationship rather than to decide according to more objective criteria. That leaves high need for power, which is the one most relevant for effective leadership. The important question here is something like, “having a need for power to do what?” The classic study by McClelland and Burnham provides an answer to this question.[25] These researchers used subordinates' ratings of their organizational unit's degree of clarity and amount of team spirit as measures of effective management and leadership. Their study results showed that if a manager/leader had an above-average need for power, had a low need for affiliation, and was high in inhibition—that is, his or her need for power was mature, socialized, under control, and not for the purpose of self-aggrandizement—the organizational unit's degree of clarity was higher (subordinates were clear about what was expected of them and what the unit's goals were) and the team spirit was also higher. In summary, the change leader would do well to examine his or her motives to make sure one's ambition is sufficient to serve the organization's change goals, that is, to have the necessary energy to accomplish all four of the phases for organizational change that are required for success. Furthermore, the change leader should be certain that he or she has a power need that is strong enough yet under control—clearly in the service of the greater cause, and not for self-glory.
Values— The greater the alignment of individual needs and values with the organization's culture (norms and values), the more likely motivation and performance will be high.[26] All the more important is that change leaders, especially the CEO, have alignment of their personal values with those of the organization. Achieving this alignment is, of course, imperative for successful organizational change, particularly regarding the culture. In the merger of SmithKline Beecham (which joined two pharmaceutical firms, the American SmithKline and the British Beecham Group), values were developed to help establish the newly merged culture. Robert P. Bauman, CEO and president of the new company at the time, described the value generation this way:
So the executive committee and I went away again, this time to define the values that would make up that culture. Obviously, there were certain values that were critical to our company. Innovation, for example, was critical. We didn't have much trouble getting people to agree on that. …There was no disagreement that customers were critical and that our customer base was changing. …HMOs were coming in, which brought up the question, “Who's the buyer now, the HMO or the doctor?” and “How do we bridge this gap?” So we had to start thinking more about customers and had to do a better job—not just in providing good drugs but also in how we managed and serviced our customers.
We extended our discussion of customers incidentally to include not just the outside world but also our own organization. Because we thought it important to say that everyone in the company has a customer. …Another value we believed in was winning. We wanted to create a winning attitude inside the company, so we thought performance was important. And there was some feeling in our early discussions that we weren't driving as hard in the area of performance as we needed to. …We agreed we wanted to be winners and perform better than our competitors. …Another value that was clearly agreed to but harder to articulate was people. We knew we had to have the best people we could find and that they were key to our competitive advantage. So as part of articulating this value, we emphasized that people needed to contribute to the goals of the organization; we wanted to give everyone a chance to influence and participate in how work was done and how it got measured. And we wanted people to feel ownership for continuously improving the ways they worked on the job.
Finally we agreed to the value of integrity. It's something we felt we possessed and that was important to the nature of our industry.
We felt five values was the right number. We believed that if we got too many it would be very hard to drive them all through the organization.[27]
This quote provides an example of how one change leader of a highly significant corporate merger dealt with the element of values with his top team. For more about the successful SmithKline Beecham merger, see Bauman, Jackson, and Lawrence.[28]
External environment: This element of the prelaunch phase concerns monitoring the organization's external environment; in particular, for the purpose of change, to gather as much data as possible about current and future trends. It is the change leader's responsibility to see that this data gathering occurs. Moreover, the need for this element of the prelaunch phase is based on open-system theory, that is, the reality that an organization's survival is dependent on its external environment. How well an organization assesses and analyzes its environment has a direct bearing on its degree of success and ultimately its survival. With respect to organizational change, the content and process of such change is typically a reaction to change in the external environment—the entry of some new technology, changing customer desires, new competitors, or perhaps change in government regulations. For example, in the case of the SmithKline Beecham merger, a transformational level of change for these two companies, the decision to merge made jointly by the respective CEOs was the desire to compete on a global level and to counter a shrinking market share problem for both organizations. In other words, within their industry it was clear that competition was becoming more global and that acquisition and merger were likely to be a major form of responding. This judgment by the two CEOs in 1988–1989 has been supported unequivocally since that time. The purposes of the prelaunch activity, therefore, are to ensure that the change effort will be directly in response to changing environmental factors, to establish the groundwork for making the case for change during the launch phase, and to gather relevant change content to incorporate into the vision and into a clear change direction.
Establishing the need for change: Richard Beckhard used to say, “No pain, no change.” What he meant was that if people in the organization feel no need for change they are not likely to embrace it. So a case has to be made. This is a change leader's responsibility during the prelaunch phase. Beginning with information about changing trends in the external environment, the change leader creates a scenario about how the organization is going to be affected by these environmental factors. Whether the CEO delivers the message or someone he or she designates, the case must be made—and convincingly. A case example is provided by the recent large-scale change of British Aerospace (BAe). CEO Richard Evans (now Sir Richard) saw the need for organizational change, but could not seem to convince his top 100 executives. Part of the reason was the fact that Evans rose to the top via sales and marketing and was not an engineer, like most of his top 100. He lacked a certain amount of technical credibility. In his own words, here is what he did:
In the eyes of many of BAe's top managers, the lack of a “burning platform” weakened my argument that change was urgently needed. How could I make them see that the present good times were not symptomatic of the way things would be five years hence? The easier way was to present them with scenarios of likely futures. For this job I turned to one of our top line executives, John Weston (an engineer), then managing director of military aircraft, now my successor as chief executive. I seconded him from his regular duties and gave him carte blanche to analyze the company from end to end and then report his findings.
With characteristic thoroughness, John documented “The Case for Change.” His report probed every single part of the business, its macroeconomic environment, its competitive structure, the state of technology, and so forth. Time and again he documented a stark conclusion: Our business units' rate of progress and future prospects of performance gains were inadequate, given the emergent threats in the external environment. What's more, even if we took a whip to them to urge them to improve sales and profits and squeeze the cash flow, any conceivable improvement would not change the analysis substantially. At the end of the day BAe would be trailing and not setting the industry tempo.
Because John Weston was the divisional head of our largest and most profitable business unit, his call to action could not easily be dismissed. If he saw the writing on the wall, so might everyone else. “We wanted to give them the macroeconomic and geopolitical picture right between the eyes. The paradigm for defense and aerospace markets was changing dramatically, and we had to learn superior skills and way of reacting,” says Weston.[29]
The top 100 executives were convinced and the culture change proceeded forthwith. Establishing the need and preparing the case, the message is the third element in the prelaunch phase.
Providing clarity of vision and direction: Preferably the vision and directional goals should be delivered by the CEO or the head of the unit targeted for significant change. Since he has provided an excellent statement of what a vision and its purpose are, we return once again to O'Toole:
A robust vision mobilizes appropriate behavior. It uses memorable, simple concepts that make clear what needs to be different about tomorrow. It describes the distinctive competencies needed to deliver on the desired end state (for example, “Here's what we have to do differently in order to succeed”). Often, a vision will make choices clear by making the case for change as either an opportunity or a burning platform (for example, “If we don't change in this way, the company won't survive”). That's not asking much, is it?
Leaders don't even have to create visions themselves (although many do). But, at a minimum, they must initiate a process for developing a vision and then engage themselves fully in generating buy-in. Shared commitment to a vision can be built either through wide-scale participation in the act of its creation or through involvement immediately thereafter in its dissemination.
…We're not talking quantum mechanics here. This is simple stuff—so simple that many leaders gloss over the basics. For example, by definition, vision has to do with “seeing, sight, and sensing with the eyes.” Recognizing that simple fact, effective leaders make their visions, well, visual. Remember Ronald Reagan's budget message when he explained that a trillion dollars amounts to a stack of dough as high as the Empire State Building? By using that visual reference he got Americans to see that federal spending amounts to real money! In doing so, he changed the terms of the national debate and, for the first time, created a majority in support of lower taxes. It was his most effective moment as a leader.[30]
As O'Toole noted, the CEO may not personally craft the vision, but the responsibility to see that it gets done is definitely the head person's job. Without clear direction about the future, and the organization's place and role in that future, the desired organizational change simply does not occur.
Launch Phase
The launch phase has three elements—communicating the need, initial activities, and dealing with resistance. The primary purpose of this phase is to begin the process of organizational change.
Communicating the Need
The case for change that was developed in the prelaunch phase is now communicated. Careful attention needs to be paid to both the content of the need and how it is communicated. As stated earlier regarding the content of leadership, providing a vision and communicating this vision and the new direction in the form of a story that incorporates the notion of identity—who we are as an organization and who we want to be in the future—is highly useful for getting the message across.[31] With respect to how the message is communicated, by far the best way is face to face. Sending out a video of the CEO as a “talking head” is not likely to be effective regardless of how professionally done. Organizational members want a chance to ask questions and have a dialog about the significance of the change. As a part of launching their merger, Robert Bauman and Henry Wendt (CEO and chairman of the board, respectively) traveled around the world meeting with groups at each SmithKline Beecham location to deliver the change message.[32]
Initial Activities
Starting the change effort in earnest can take a variety of forms. The primary purpose, regardless of form, is to launch an activity—an event that will provide focus, capture attention, and create the reality that the change effort is not just an exercise or yet another initiative that will soon pass. Change was launched at the British Broadcasting Corporation during the early 1990s with John Birt, the director general, authorizing a one-day workshop on “Extending Choice”—a label for the change that focused on the new vision and mission for the organization. The workshop, for 100 organizational members at a time, was conducted again and again over many months to ensure that most everyone had a chance to participate in the launch. Another example from the United Kingdom was the launch of change at British Airways (BA) by the CEO, Colin Marshall (now Lord Colin). BA in the 1980s began the transition from a government-sponsored organization to a private enterprise. The following quote from CEO Marshall provides his rationale for the change, followed by an example of the initial activity for change at BA:
But to get people to work in new ways, we needed a major change in the company's culture. That meant refocusing everyone on the customer, on the marketplace, and away from the exclusively engineering and operations focus we'd had. That had to be done, of course, without sacrificing safety, technical, or maintenance standards. And that proved tricky. People had difficulty understanding why I kept hammering away at the need to focus on customers while also saying, “We've got to fly these aircraft at a very high technical standard too.” The focus before had always been on the technical side alone, but I made the point repeatedly that we had to do both. It was at this point that we saw the explicit need for a culture-change program. …The first thing we did was to launch a program called “Putting People First,” …a two-day seminar. We took roughly 150 employees at a time and drew people from various departments within BA and from various geographical areas. The program focused on how one creates better relationships with people, with one's fellow employees, with customers, even with members of one's own family.[33]
Dealing with Resistance
The most important point to remember is that organizational members do not always resist change. What they are more likely to resist is the imposition of change. Imposing change tends to cause people to feel a loss of control. The prudent change leader will therefore work hard to find ways to involve organizational members in the change process. The change leader can more easily be directive about the change goals than be directive regarding the ways to reach the goals. For every given goal there are myriad ways to reach the goal, thus in the implementation process there are many more opportunities for disagreement and consequent resistance. The change leader needs to be as participative as possible in the ways to achieve change goals. In a sense the change leader should care far more about the goal per se than the way to accomplish the goal.
Postlaunch: Further Implementation
Once the launch has occurred and the change is underway, the change leader begins to realize that he or she cannot control much of the process. The feeling is analogous to launching children into the world by parents. As a parent you hope that the life directions you have suggested will be followed, at least to some extent, and that the values you have espoused and lived will have been noticed by your children, but once they leave the nest you as a parent have no control. In fact, during the teen years you didn't have much control either. Launching organizational change is much the same. You as change leader hope that the direction remains clear and that the values are beginning to be adopted and lived, but now it is largely up to others to make the change work.
But there are things to consider and to do. While not exhaustive, the following five actions will help the change leader to continue to lead. These five are (a) multiple leverage, (b) taking the heat, (c) consistency, (d) perseverance, and (e) repeating the message.
Multiple Leverage
To rely on one intervention or one lever to implement organizational change, especially large-scale change, is doomed to failure.[34] Coverage of seven different case studies that represented successful organizational change revealed that multiple leverage was key. Two relevant summary points regarding these cases are as follows:
Time and again, these cases illustrate the absolute necessity of strong leadership for change to occur. We see change leaders in living color here. There is no substitute for visionary leadership in times of change. By definition, if there is leadership there are followers.
In addition to demonstrating how the phases of organizational change work, all these cases show the deployment of multiple interventions. True organizational change is too complicated for one intervention. Multiple sources of influence are required.[35]
Examples of interventions from these case studies included crafting mission statements, process engineering, training and development, crafting corporate values and new leadership behaviors, developing a new process of supply chain management, installing a new pay-for-performance system, team building, and establishing self-directed work groups.
Taking the Heat
Organizational change unleashes all kinds of feelings. Some people didn't want the change in the first place; others bought the idea, tried to make things work out, but ran into one roadblock or another; and, in general, having to deal with unanticipated consequences of change interventions can be frustrating. The change leader(s) is the likely target to blame regarding the aforementioned. The change leader must take the heat. Richard Evans of BAe described the process this way:
I got a lot of pushback from people. People asked, “Why do we need to do this? We're operating perfectly well. We all have big change programs to deal with in our own businesses. Why the hell do we need to do all this other stuff?” Many seriously thought and believed that I had some sort of hidden agenda and simply wanted to be told what to do so they could go away and do it.
Taking the heat means that the change leader must use considerable self-control and work hard to listen, not to show defensiveness, and to be as patient as possible.
Consistency
Now a cliché, “walking the talk” is nevertheless what is meant here. During times of significant change the leader's behavior is watched like a hawk. Looking for inconsistencies in the leader's behavior seems to be everyone's job. Do these guys at the top really mean it? Will this initiative fall by the wayside like all the rest? Of course these questions are all about trust, and trust is not only built on openness and telling the truth, but on consistency between what one says and what one actually does as well.
Perseverance
When things get tough as they inevitably will during the implementation of a transformation, it is imperative that the change leader “stay the course.” When all may look bleak and the change does not seem to be working, organizational members look to the change leader to see if he or she is still holding on to the vision and is remaining at the helm. Perhaps the premier example of perseverance was Colin Marshall of BA. In his own words, perseverance is obvious:
I made a particular point of attending every one of these “Managing People First” sessions. I spent two to three hours with each group. I talked with people about our goals, our thoughts for the future. I got people's input about what we needed to do to improve our services and operations. The whole thing proved to be a very useful and productive dialogue. We found it so valuable in fact, that in cases when I was away, we offered people the opportunity to come back and have a follow-up session with me. So I really did talk to all 110 groups in the five-year period.
Repeating the Message
As a coach to change leaders, I have heard their frustration many times about “the troops not seeming to get the message.” The change leader will say something like, “But I told them as clearly as I knew how!” My question is always, “How many times have you told them?” It's hard to repeat the vision, new mission, and our story too many times. As noted in the previous section, repeating the message demonstrates perseverance. The most important point here is that during the chaos of change, organizational members need to be constantly reminded of not only the goal itself but why we are taking this journey as well.
As stated at the outset of this section on the postlaunch phase, these five actions are not the only things the change leader needs to pay attention to during the chaotic process of trying to make the change work but they do represent perhaps the primary activities of the change leader.
Sustaining the Change
Concluding an article about the successful organizational changes at BA, the authors stated:
It may be that BA's biggest problem now is not so much to manage further change as it is to manage the change that has already occurred. In other words, the people of BA have achieved significant change and success; now they must maintain what has been achieved while concentrating on continuing to be adaptable to changes in their external environment—the further deregulation of Europe, for example. Managing momentum may be more difficult than managing change.[36]
Sustaining the change is the most difficult of the four phases of leading organizational change. The following four thoughts and suggestions may help: countering equilibrium, dealing with unanticipated consequences, choosing successors, and launching yet again new initiatives.
Countering Equilibrium
Seeking equilibrium is the natural process of organizational behavior. Countering this natural process is key to sustaining the change effort. Pascale and his colleagues have addressed this quandary by relying on complexity theory and the life sciences. They consider the application of what they call “four bedrock principles” to be key:
Equilibrium is a precursor to death. When a living system is in a state of equilibrium, it is less responsive to changes occurring around it. This places it at maximum risk.
In the face of threat, or when galvanized by a compelling opportunity, living things move toward the edge of chaos. This condition evokes higher levels of mutation and experimentation and fresh new solutions are more likely to be found.
When this excitation takes place, the components of living systems self-organize and new forms and repertoires emerge from the turmoil.
Living systems cannot be directed along a linear path. Unforeseen consequences are inevitable. The challenge is to disturb them in a manner that approximates the desired outcome.[37]
The point that Pascale et al. made was that since equilibrium seeking is such a natural process, actively managing events (“disturbing unforeseen consequences”) to counter the trend is absolutely necessary to sustain change. But so is having patience, which may sound paradoxical. Patience is required on the part of change leaders during chaotic times to allow creativity and innovation to emerge.
Dealing with Unanticipated Consequences
What is meant by unanticipated consequences? Examples are (a) expecting that certain people will resist change and they actually embrace it, and the negative, expecting others to “buy in” but in the end do not; (b) different organizational units interpreting the overall organization's change goals differently and therefore causing a lack of concerted effort; and (c) expecting a certain intervention like a new software package to work but it doesn't. So-called change management, which in this context is almost an oxymoron, is therefore the process of reacting to and attempting to correct actions that work against the change effort.
Choosing Successors
Another way to counter equilibrium is to infuse “new blood” into certain units of the organization—to recompose an ongoing task force or to choose new leaders for units that are critical to the change effort, but for some reason have bogged down. Choosing a successor for an important change leader position is a complex process. At the CEO level especially it is best not to select “a clone” so that new thinking and energy will be brought to sustaining the change effort. Colin Marshall's successor at BA failed at sustaining the change. It will be interesting to see how Immelt works out as Welch's successor at General Electric. For more about these succession issues, see Levinson's article.[38]
Launching Yet Again New Initiatives
Rarely does any initiative continue to work for many years. The external environment continues to change and new responses are required. Moreover, new initiatives can engender new energy, generate innovative thinking, and help to propel the organization continuously toward its vision. This latter point is highly important, that is, new initiatives must be in the service of the original change goals. Examples of new initiatives include (a) starting a different program to help improve quality and reduce costs, (b) acquiring another organization, (c) establishing a new joint venture or strategic alliance, and (d) creating a new business line based on different products or services.