CULTURAL RESISTANCE TO CHANGE

Chapter 2 stated:

A major obstacle to adopting or successfully implementing performance improvement initiatives is cultural resistance to change. Another significant obstacle is that internal departments do not share information or collaborate. Combined, these two obstacles imply fear of being held accountable for results. A third obstacle is the executive team's policies and strategy are insufficiently communicated to their managers and employees.

GREAT LEADERSHIP VERSUS GOOD MANAGEMENT

As was described in Chapter 15, VBM requires information technology to deliver timely, valid, and reliable data on performance, costs, and risks to decision makers balancing considerations of results sought, resources allocated, and risks accepted. Data, technology, and the resulting management decision process thus all work together to deliver maximum stakeholder value. These methods and systems also enable good managers to become world-class leaders by ensuring that their organizations are focusing on the right things. As author Peter Drucker said, “Management is doing things right; leadership is doing the right things.”

A result of not understanding the distinction between management and leadership is that most organizations are overmanaged and underled. Distinguishing between leadership and management is essential to successfully implementing VBM. What is the distinction? Management's role is to cope with the complexity of a government environment, so they become experts in mastering “red tape,” organization charts, tools, and planning exercises. In contrast, leadership copes with constantly accelerating change. The leadership role is to set direction and answer: “Where do we want to go?” After this is answered, the leaders' skills are used to provide a vision, inspire employees, and empower. This facilitates the subordinate managers to answer the follow-up: “How will we get there?” Without leadership, especially in government, the full vision of VBM will not be realized.

Leaders should not be risk-adverse but rather must be risk managers. Leaders do not view organizational power and influence of change as being hierarchical in the organization chart but rather more on who can get things done. Leaders rely on vision and inspiring people. Both leaders and their subordinate managers are necessary for any government organization.

The role of a leader in the private sector is to define the organization's mission and strategy. In the public sector, the mission may be clear but the strategy and measurements of achievement often are not. The problem is that even when leaders have the ability to formulate a good strategy and policies, they are often frustrated by the failure to implement them successfully. In fact, for all the strategic plans written that promise to modernize government and make it more efficient, the majority of strategies are rarely realized. One reason may be the lack of a clear linkage between strategy and goal attainment. Another reason may be in communicating that strategy downward into the organization for execution by management. (This was discussed in Chapters 3 and 4.)

VBM is about organizational value management – strategically managing and improving an organization to accomplish its goals and objectives. The purpose of VBM is to make attaining the leadership team's strategy and policies everyone's job. As previously described earlier in this book, VBM balances the three scales in Figure 2.1: results (performance), resources (costs and capacity), and risk.

A driving force behind the value in VBM is that managers and employees are stymied in their decision-making. They are asked to increase service levels, improve process efficiencies, and achieve performance targets – all in an environment of flat or shrinking budgets and uncertain risks. Internal tension and conflict are natural in any organization because there will always be competing goals, but managers need the capabilities to evaluate trade-offs and analyze more deeply. VBM provides these capabilities.

VBM encompasses the processes, metrics, software tools, and systems that help manage and improve an organization's delivery of stakeholder value. As it relates to government, VBM involves improving the performance of an entire agency or unit within an agency. By leveraging EPM methods VBM then increases value, including managing the performance of contractors, programs, and functional areas such as IT, finance/budget, personnel, supply chain, and procurement.

HOW TO ACCELERATE THE ADOPTION RATE OF VBM

Technology is not an impediment to adopting VBM, as software capabilities are proven. The barriers involve resistance to change and unfamiliarity. These are social, behavioral, and cultural issues, and few managers are trained in behavioral change management. What is involved with these barriers, and how can managers overcome resistance and get organizational buy-in? Organizations that achieve competency with VBM are able to sustain their long-term viability.

What the authors have learned through observation during their careers is that passion along with curiosity drives discovery. Passion is the mysterious force behind nearly every step-change in a process or introduction of a new idea.

THE QUEST TO GET BUY-IN FOR IDEAS

It is not sufficient for this book to explain only the “how-to” for implementing VBM. What is needed beyond explaining the “how-to” is to also explain the “why” of VBM implementation, including the benefits from VBM.

Numerous studies have consistently shown that the majority of major change initiatives fail to fully achieve their intended objectives. There is nothing to suggest an implementation of VBM will be any more likely to succeed if the challenges of organizational behavioral change are not considered and addressed.

WHAT ARE BARRIERS THAT SLOW THE ADOPTION OF NEW IDEAS LIKE VBM?

Barriers that impede the adoption rate of new ideas, like VBM, are removable. As mentioned in Chapter 15, technical barriers such as disparate data sources or “dirty” data now have software solutions like extraction, transform, and load (ETL). With a little effort, problems like insufficient data are also not insurmountable. We also now realize that modeling design deficiency barriers, such as not selecting good key performance indicators (KPIs), can be knocked down with experienced consultants or better training courses. Other barriers are misperceptions that VBM is too complex or initial failures with prior pilot projects. But these are not showstoppers, and they, too, can be overcome.

What type of barrier continues to primarily obstruct the adoption rate of VBM? That barrier category is social, behavioral, and cultural. These obstacles include people's natural resistance to change; fear of knowing the truth (or others knowing the truth); reluctance to share data or information; and “we don't do that here.” Never underestimate the magnitude of resistance to change. Only babies like change – of their diapers! It is natural for people to love the status quo.

An example of this social and arguably political barrier is a conflict between the IT function and managers – a brick wall. There will need to be a shift from face-to-face adversarial confrontation to a side-by-side collaborative relationship to remove this wall. Part of the problem is how IT and managers view each other.

Managers often view IT as an obstructionist and uncooperative gatekeeper of data without the skills to convert that data into useful information. Experienced managers want easy and flexible access to the data and the ability to manipulate it. They want a set of capabilities for investigation and discovery. IT typically tries to prevent this. Managers view IT as bureaucrats who manage a set of technologies and whose main goal is to keep the lights on.

In contrast, IT increasingly views managers as competitors who may solve problems but don't have to operate and maintain the IT systems. And IT sees managers as a risky group that has low regard for data governance and security.

Managers need speed and agility to be reactive and proactive, which requires them to be closer to the data for analysis and better decision-making. Both IT and the managers that they support will need to collaborate and compromise by better understanding and appreciating each other's changing roles.

REMOVAL OF THE BARRIERS

A problem with removing behavioral barriers to deploy VBM is that few managers have training or experience as organizational change management specialists. They are not sociologists or psychologists. However, effective managers are learning to become like them. The need for the “why-to” and its motivating effects on organizations should ideally be an obsession for advocates of VBM. The challenge is how to alter people's attitudes.

EARLY ADOPTERS AND LAGGARDS

Another barrier involves organizations that are too distracted with problems and prefer to search for quick fixes. The urgent crowds out the important. They do not take the time to solve problems with a better way. In our personal lives, many of us have no problem making everyday decisions, such as whether to purchase a smart phone or join a social network. How can we as individuals make decisions so quickly while organizations often struggle and are slow to react?

The field of marketing scientifically examines influences on the rate of adoption of products, services, and technology. Everett Rogers, a business researcher, developed his diffusion of innovations model with five categories of adoption: innovators, early adopters, early majority, late majority, and laggards. Which category best describes many organizations with respect to implementing VBM? This book's authors believe that most fall in the laggards' category.

Innovators and early adopters quickly move forward because either they are having financial difficulties needing new solutions or they are very progressive and driven to continuously seek a competitive edge. On the other hand, the late majority and laggard organizations are either risk averse with the resistance to change previously mentioned, or they have weak leadership with little vision.

This book's authors believe there is another possible explanation for the laggards: they are too distracted. There is no doubt that increasing volatility is part of the problem. Examples include changes in political ideologies, geopolitics, the internet, global communications, and social networks. VBM can be adopted by late majority and laggard organizations, regardless of volatility with proven methods and techniques, such as with pilot projects and rapid prototyping models for a proof of concept.

Organizations that want to move beyond the laggard category must take on the mentality of the early adopters, who understand the importance of VBM to enhance decision-making and align employee behavior and priorities to execute the executive team's strategy. They must be proactive, not just reactive. Most importantly, remember that it's never too late to go from being in the middle of the pack to taking a commanding lead.

WHERE TO BEGIN?

In 2000, a Harvard Business Review article titled “Cracking the Code of Change”¹ by Nitin Nohria and Michael Beer proposed two theories of change, which they named Theory E and Theory O. Theory E was change based on economic value, which they defined as focused on providing greatest shareholder value. Theory O was focused on increasing organizational capability. They asserted that both theories were valid models for achieving at least some of management's goals, but they imposed costs that were often unrecognized. They went on to state:

Theory E change strategies are the ones that make all the headlines. In this “hard” approach to change, shareholder value is the only legitimate measure of corporate success. Change usually involves heavy use of economic incentives, drastic layoffs, downsizing, and restructuring.

In contrast, Theory O change revolves around the capability of the organization to learn and change the organizational culture, both as individuals and as a group. This contrasts with Theory E in which the human aspect is not greatly considered. It was noted that “E change strategies are more common than O change strategies among companies in the United States, where financial markets push corporate boards for rapid turnarounds.” They similarly noted that O change strategies are more common in European and Asian companies. As the authors previously proposed in Chapter 2, the goal of any organization should not be exclusively focused on achieving intended results while ignoring growth in capabilities, or focused on growing capabilities while ignoring end results. Both are required for ultimate success in maximizing opportunities for increased value, and alignment of organizational capability with maximizing overall stakeholder value is a core tenant of VBM. This is why in Chapter 3 we discussed the need to interactively engage between organizational levels during the planning process so that stakeholder requirements could inform organizational capability requirements, and organizational capabilities could help establish reasonable stakeholder expectation. As a result, an approach to organization change management that incorporates this top-down, bottom-up alignment process is essential.

HOW TO MOVE FORWARD?

In 1997, one of the authors – Doug Webster – created a model for change management, referred to as UMTI, that was based on the following four steps:

• Step1. Understanding. Seeking to change an organization – and the individuals that make up that organization – begins with developing understanding of the need for change. This is a logical, problem-based analysis of why the current mode of operations or actions is not adequately meeting the needs of the current or future organization.
• Step 2. Motivation. Once individuals intellectually understand the organization's need for change, they must be motivated to engage in the change. This begins to get to the proverbial challenge of “What's in it for me?” (WIIFM). Besides understanding why the overall organization may need to change, successful change always requires a critical mass of individuals who are motivated to support the needed change.
• Step 3. Tools. This refers to enabling a motivated individual to actively support the change. This could, for example, include training or other actions or activities to enable a motivated individual actually to participate in and contribute to the needed change.
• Step 4. Incentives. If the change is to be sustained, new desired behaviors must be rewarded, and old undesired behaviors must be discouraged. Without changing organizational incentives, continued acceptance of old practices may well lead to the organization as a whole defaulting back to old, undesired practices.

As a means of more easily remembering these four critical steps of organizational change management, the creator began referring to them as the “Head” (understanding), “Heart” (motivation), “Hands” (tools), and “Feet” (incentives to sustain the journey) of organization behavioral change.

In 2003, Jeff Hiatt – founder of Prosci – introduced an almost identical change management model known by the acronym ADKAR. The similarity to the author's change management model is evident from this table.

Regardless whether you use one of these or another model of change management – and many exist in the literature – it is important that you carefully consider your organizational behavioral change management program.

In 2009 the book Chasing Change,² co-authored by Doug Webster, offered the process flow roadmap shown in Figure 16.1 to illustrate a high-level project plan for the organizational behavioral change process. It is important to understand that, while this process flow is depicted as linear, it does not necessarily have to be. Depending upon the demands put on the organization by internal and external environmental factors, some of the activities may need to be revisited, or executed in parallel. The overriding characteristic of this process flow should be its dynamic flexibility, and it should not be viewed purely as a set of prescriptive steps to follow. It should be customized and viewed in light of the needs of the organization.

It should be noted that the organizational areas and behaviors most in need of cultural change can vary from organization to organization, and from change initiative to change initiative. It is thus important to understand the nature of the change needed. To understand where the organization needs to change to be successful in the future is the purpose of the “Complete Gap Analysis” step in the preceding flow diagram. Once the organization understands where it needs to head for future success and the implications for organizational behavioral change that may be required, change initiators need to “create a case for change.” While this need for change may be obvious to those who initiated the proposal, that need may not be so obvious to those on whom success for the change will depend. Establishing such a need for change is thus critical for Doug Webster's “Understanding” and “Motivation” steps, or for Jeff Hiatt's “Awareness” and “Understanding” steps.

The book Chasing Change also made the case for targeting organizational behavioral change efforts to where they will make the most important contributions. This is the purpose of the “Assess Capabilities” step. The authors of Chasing Change argued that organizations should tailor their change initiatives to their particular organization by understanding the gaps between existing behavior and needed behavior. While that book offered a framework with 13 different dimensions of change, the point for the reader is that careful thought should be given to the specific types of behavioral change required for success. Is there greater need for collaboration, transparency, accountability, trust, forward thinking, and so on? All organizations seek not to face the same gaps in required organizational behavior, so thought must be given to where such change should be specifically targeted.

One of the best-known experts in organizational change management is John Kotter, who offers a somewhat different perspective on change management. That perspective is not incompatible with the above, but is simply another way of considering the challenge of change. His eight-step model is:

1. Create a sense of urgency.
2. Build a guiding coalition.
3. Form a strategic vision and initiatives.
4. Enlist a volunteer army.
5. Enable action by removing barriers.
6. Generate short-term wins.
7. Sustain acceleration.
8. Institute change.

Both the Kotter and Webster/Hiatt models are valid and valuable, and should not be viewed as replacements for one another. Whichever model or models are used, the important point is that organizational change management is a critical element for success. Numerous studies have shown that up to 70 percent of change initiatives fail to meet expectations, and the single most important contributor to such failure is a lack of adequate organizational change management. The technical aspects of understanding and implementing value-based management are much more straightforward than the organizational change challenges that are likely to result. An organization that is prepared to recognize and overcome these challenges as they arise will be far more likely to achieve success with VBM.

MOVING FORWARD

The authors have sought to make the case for a broader perspective on what defines a successful organization, and how to achieve and maximize that success. Success as envisioned in this book is not about simply improving performance, reducing cost, minimizing risk, or even having the happiest workforce. It is instead about how to integrate these and other considerations in a manner that maximizes overall value in the eyes of the various stakeholders. Recognizing that different stakeholders can seek different outcomes from the same organization, such a statement is on its face challenging. However, considering the variety of stakeholder interests as a portfolio of interests, and seeking to maximize the overall value of that portfolio, is the intent of VBM.

This chapter has sought to introduce the role of the “soft side” of that change in terms of the organizational culture. Let us now literally turn the page to consider what the future may hold in VBM, particularly for the public sector, in the next and final chapter.