WI555 ORGANIZATIONAL CHANGE AND CULTURE WEEK 10: CHANGE AS THE NEW NORMAL WEEK 10 CHANGE AS A NEW NORMAL WHAT IT MEANS The ultimate test of the success of a change model is to see if the new systems or behaviors it ushered in become entrenched in the operations and procedures of the organization. Effective change agents leave their legacy when the improvements remain intact or continue to evolve long after the project or initiative was launched. They and their teams recognize that change is never done and that EVERYONE must play a role in helping the organization to continue to get stronger. WHY IT MATTERS • Leveraging the strengths and diversities of others brings fresh new ideas and perspectives • Teams that embrace change are more open to new ideas regardless of where those ideas come from • Being the change leader of a successful initiative brings positive visibility and opportunities to share your best practices. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 2 JACK QUOTE PAGE “If you’re going to win, and keep on winning, you have to recognize that change is continuous and is never done.” Jack Welch WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 3 JWI555-WEEK 10 LECTURE WK10 SIMPLIFYING THE ORGANIZATION STRUCTURE For an organization to develop change capability into a competitive advantage, it must move beyond the change tools we have covered. Companies need to support this capability through a wide range of structures, processes, and systems. Here we focus on simplification, de-layering, and spans of control. The next lecture will cover performance assessment, rewards, as well as training and development. Just as you increase strength through going to the gym regularly, you must build true change capability steadily as you work through challenging issues. It is not a one-time, build-it-and-forget-it kind of thing. COMPLEXITY STIFLES CHANGE Complexity is an enemy of change. It makes it harder and slower to get things done. There are too many steps, too many meetings, too many rules, too many stakeholders, too many layers, too many products. It takes too long to get decisions made. Simple requests require a campaign of phone calls to get some action. Of course, in large, multinational, multiproduct organizations with thousands of employees, a certain amount of complexity is necessary. But we make it worse than it needs to be. Let’s look at four major sources of complexity in organizations. Dysfunctional structures. We create structures that have too many levels, redundant functions, and unclear roles. We add positions, levels, and departments in response to environmental shifts, organizational events like acquisitions, and the professional and ego needs of key employees. Product and service proliferation. We add products, features, and services without reducing the overall portfolio of offerings or streamlining support requirements. Unplanned process evolution. We build processes with too many steps, loops, approvals, and missing metrics then don’t manage them as they evolve and grow. Unproductive managerial behavior. We compound complexity by giving vague assignments, not holding people accountable, miscommunicating, and choosing conflict avoidance over candor. Complexity is exacerbated by the rise of organizational interdependence. Fifty years ago, different parts of an organization could operate quite independently of each other, thanks to slower communications, functional silos, and large inventories. But as these factors have been greatly reduced through technological and managerial innovation, businesses are becoming increasingly interdependent. Kotter (1996) described interdependencies as the “interconnections that make it difficult WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 4 JWI555-WEEK 10 LECTURE WK10 (CONTINUED) to change anything without changing everything” (p. 133). Simplification is often a matter of eliminating unnecessary interdependencies. HOW TO SIMPLIFY The table below is adapted from the book Simply Effective, which describes each element in much more detail (Ashkenas, 2010). The table summarizes the causes of the four kinds of complexity and how to increase simplicity along each dimension. TABLE 1 SOURCE OF COMPLEXITY AND WAYS TO SIMPLIFY CAUSING OF COMPLEXITY SIMPLIFICATION APPROACHES Dysfunctional Structures • Focusing on structure before strategy • Designing based on people and personalities • Building mechanical rather than organic organizations Product and Service Proliferation • Adding products without • Analyze portfolios subtracting • Reduce and rationalize number • Creating products without of SKUs adequately planning how to • Partner with customers in designing support them products • Selling products that don’t integrate with other products in the customer’s environment • Designing products that are difficult to put together or use Unplanned Process Evolution Unproductive Managerial Behavior • Local differences • Multiplication of steps and loops • Informality of process • Lack of cross-functional or cross-unit transparency • Making vague assignments • Not holding people accountable • Miscommunicating • Avoiding candor • Doing what worked in the last job • Overdoing strengths and/or avoiding areas of discomfort WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 5 • Differential between core and context • Take a customer perspective • Consolidation Similar functions and tasks • Prune layers, and increase spans of control • Identify best practices • Map and redesigning processes • Utilize Six Sigma, Rapid Results, and/or Work-Out • Asking for feedback on where you may be unintentionally creating complexity • Get a coach or mentor to help you create a simplified managing approach • Practice and test communications before communicating • Be aware of discomfort zones that may generate complexitycausing behaviors JWI555-WEEK 10 LECTURE WK10 (CONTINUED) DE-LAYERING THE ORGANIZATION De-layering involves reducing the number of hierarchical levels in the organization. With that comes increasing the number of people who report to one manager, which is referred to as the span of control. Span of control was a favorite topic of management researchers throughout much of the 20th century. They wondered how many direct reports would provide managers with the optimal levels of interaction, attention, and control. Answers converged in the range of five to eight. The result was organizations with many managers arranged in multiple layers. As related in more detail in Simply Effective, when Jeff Kindler became CEO of Pfizer in 2006, he found that as many as 14 layers of management separated him from frontline people in some parts of the company. In addition to being costly, these layers slowed and distorted the flow of information to where it was needed. The assumption behind limited spans of control, consistent with the worldview underpinning the traditional hierarchical organization, is that the function of managers is to control and aggregate the work of their subordinates. But as organizations become more dynamic and managerial focus shifts from control to adding value, the number of layers must decrease and direct reports can increase. GE discovered this in the early 1990s when Jack Welch increased spans of control in many businesses from the traditional five to six to closer to 10. Kindler, who started his career at GE, required his senior managers at Pfizer to de-layer so that no more than 10, and preferably no more than eight, layers separated him from the front line. Welch is a passionate proponent of de-layering. He would often make the point when talking with groups of managers that “if you put on six sweaters and go outside, you can’t even tell if it’s cold out. Every time you take off a layer of clothing, you get more in touch with your environment. It’s the same with organizational layers.” He would advise the managers to design the org chart to be as flat as possible, with blindingly clear reporting relationships and responsibilities. The inexorable pull toward layers is why I suggest you make your compa
ny 50 percent flatter than you’d normally feel comfortable with. Managers should have 10 direct reports at a minimum and 30 to 50 percent more if they are experienced. (Welch, 2005, p. 114, 116) So what happens when an organization de-layers and spans of control widen? Managers no longer have time to micromanage employees and must relinquish control. They allow subordinates to be more empowered and look for other, more useful ways to add value. These include strategy development, increased customer contact, process improvement, and coaching. Managers also have to develop skills for demand-making and communication in order to clarify and manage more distributed accountability. And in turn, their direct reports must step up. No longer able to hide behind a controlling manager, they take on greater accountability, show more initiative, and make more of their own decisions. All these changes add up to faster, more flexible, and more empowered organizations—organizations that are able to change. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 6 JWI555-WEEK 10 LECTURE WK10 (CONTINUED) HOW PEOPLE MANAGEMENT SUPPORTS CHANGE When Jack Welch talks about leading change, much of what he says focuses on the management of people—who to hire and fire, who to promote and why, and how to develop the talent you have. People management is important for all the reasons you learned about in the People Management course, plus one more. It has a direct correlation with your ability to implement a successful change effort. PERFROMANCE ASSESSMENT AND REWARDS THAT DRIVE CHANGE We cover two dimensions of performance assessment in this lecture. The first is how to identify a change leader in the first place. The second deals with assessing and rewarding people’s performance during an organizational transformation. At the heart of Welch’s (2005) change philosophy is to “hire and promote only true believers and get-on-with-it types” (p. 138). He makes an important distinction between change leaders (no more than 10% of business people) and good change followers who may never lead but, once convinced, are happy to get on with it. So in an environment where everyone claims to be a change agent, how do you recognize the real thing? Luckily, change agents usually make themselves known. They’re typically brash, high-energy, and more than a little bit paranoid about the future. Very often, they invent change initiatives on their own or ask to lead them. Invariably, they are curious and forward-looking. They ask a lot of questions that start with the phrase “Why don’t we…?” These people have courage–a certain fearlessness about the unknown. They’re thick-skinned about risk, which allows them to make bold decisions without a lot of data. (Welch, 2005, p. 139) People do what they are measured on and continue to do what they are rewarded for. For a change initiative to be successful—and for an organization to build a real change capability—desired new behaviors must be publicly identified and rewarded. Conversely, the change leader must also “ferret out and remove resisters, even if their performance is satisfactory” (Welch, 2005, p. 141). GE provides a good illustration of this principle. When Welch first introduced his mantra of speed, simplicity, and self-confidence, many people wondered what this really meant and how seriously to treat it. Over time, businesses developed lists of managerial attributes, 360-degree feedback questionnaires and the like, and HR created the official list of GE leadership behaviors. But these behaviors didn’t become real drivers of change until they were publicly used as the basis for high-level promotion decisions. At an annual officers’ meeting, Welch announced that he had asked two of his business leaders to leave the company despite the fact that they had achieved their financial targets. He explained straightforwardly that these managers did not measure up to the company’s standards of leadership behavior. He then explained his thinking using the following matrix. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 7 JWI555-WEEK 10 LECTURE WK10 (CONTINUED) TABLE 1 GE PERFORMANCE MATRIX RESULTS ACHIEVED GOOD LEADERSHIP BEHAVIOR and VALUES YES NO YES Promoted and rewarded NO Provide leadership development and give a second chance Tough calls – need to be fired if Easy calls – No future with GE cannot change The central message was that achieving financial results was no longer enough—managers were now expected to exhibit the GE values and achieve their results with speed, simplicity, and self-confidence. Do both at the same time and you would get a promotion. Demonstrate the right behaviors but miss your financial targets, and you would be given a second chance. If you did not have the values and demonstrate the behaviors, you were in trouble. This was a huge change for a company that had, until then, placed the greatest emphasis on achieving results. Suddenly, the demand for speed, simplicity, and self-confidence—and the leadership values they implied—were part of the official way people were managed, promoted, and rewarded. Firing people who achieved their results while resisting change is a hard but necessary call. As Welch (2005) explained, “[It] is particularly difficult to fire people who are not actually screwing up and may in fact be doing quite well. But in any organization[…], there is a core of people who absolutely will not accept change, no matter how good your case. Either their personalities just can’t take it, or they are so entrenched—emotionally, intellectually, or politically—in the way things are, they cannot see a way to make them better. These people usually have to go. Maybe that sounds harsh, but you are doing no one a favor by keeping resisters in your organization. They foster an underground resistance and lower the morale of people who support change. (pp. 141-142) So how do you reward the people who achieve results in a way that is consistent with the organization’s vision for change? For Welch (2005), the most effective goodies are money, recognition, and training. “The better you do, the more you get—and you get it in both the soul and the wallet” (p. 107), he said. Money and recognition are about getting differentiated rewards for great work and are crucial for both motivation and retention. Training recognizes that good people want to grow, to learn, and stretch. “Training motivates people by showing them a way to grow, that the company cares, and that they have a future” (p. 108), Welch added. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 8 JWI555-WEEK 10 LECTURE WK10 (CONTINUED) And the great thing about training good people to drive change is that it creates a virtuous cycle of increased capability, confidence, ambition, and achievement. You’ll need every bit of that as you implement a change initiative. TRAINING AND DEVELOPMENT THAT DRIVE CHANGE In this course so far, we have talked about a number of skills and behaviors that are essential to driving change and to building the change capability of an organization. These include: • • • • • • • Looking forward to where change will be most urgently needed Creating and communicating the vision for change Mobilizing support for the change effort Making clear demands for results to be achieved and giving honest performance feedback Organizing and directing people in ways that they can make change happen Communicating openly and honestly across organizational levels and boundaries Mastering at least one change methodology and using it widely enough to generate the best results • Overcoming barriers and resistance To develop the kind of organization-wide change capability that will provide a competitive advantage over time, you need a common framework and language for change. And as many people as possible need to be trained in it. As well as getting everyone on the same page, this training helps create a widespread capacity for action. It actually multiplies results. The best large-scale efforts to train people in how to drive change have a number of features in common. They are orchestrated from the
center. While they may be tailored to accommodate differences in business or local needs, they all emphasize the same basic principles and tools. They propel people into action to produce real results. They contain some conceptual or classroom material, but by far the bulk of the learning comes from putting the concepts into action and producing results. Learning to drive change is like learning to ski—it comes from practice. Change is not a theoretical exercise. They deliberately aim at producing measurable change in a few months or less. In this way, people can move rapidly through an entire change cycle, albeit on a bite-size scale, and learn from every part. They are rolled out quickly across the entire company and are run largely by in-house people. External consultants or experts may be used in the design of initiatives and in developing early offerings, but it is important that the organization take ownership as soon as possible to make clear this is the new way we do things. They are so interactive as to be mind-bending. Change training can’t just convey information; it also needs to influence behavior. So it must stimulate real dialogue, spur people to question their assumptions, and encourage employees to experiment with and learn from their own change experiments. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 9 JWI555-WEEK 10 LECTURE WK10 (CONTINUED) The other important development strategy involves placing high-potential people in leadership roles that will force them to stretch and grow. A large change initiative provides many such opportunities. Depending on their level of experience, selected people can be given responsibility for driving key results, leading Work-Outs or project teams, or managing an acquisition integration. GE is famous for sending bright young people with relatively little experience to run businesses as part of their development. The stretch may be huge, but so is the learning. And learning is what drives change. REFERENCES Ashkenas, R. (2010). Simply effective. Boston, MA: Harvard Business School Press. Kotter, J. (1996). Leading change. Boston, MA: Harvard Business School Press. Welch, J. (2005). Winning. New York: Harper Collins. WEEK 10 | CHANGE AS THE NEW NORMAL PAGE 10 REPRINT H02R9L PUBLISHED ON HBR.ORG MARCH 31, 2016 ARTICLE INNOVATION Great Innovators Create the Future, Manage the Present, and Selectively Forget the Past by Vijay Govindarajan This document is authorized for use only by Alexey Maleka in Organizational Chg and Culture at Strayer University, 2019. INNOVATION Great Innovators Create the Future, Manage the Present, and Selectively Forget the Past by Vijay Govindarajan MARCH 31, 2016 For a long time, I have been troubled to see how often organizations fail to invest wisely in their futures while instead placing dominant emphasis on the present. To be sure, the present is vitally important. Your current business is the performance engine. It both funds day-to-day operations and generates profits for the future. Where problems arise is when the present crowds out other strategic COPYRIGHT © 2016 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. This document is authorized for use only by Alexey Maleka in Organizational Chg and Culture at Strayer University, 2019. 2 priorities—for example, when the only skills brought into a business are those that serve today’s core. That is shortsighted in every sense of the word. What’s missing from the managerial toolkit is a way for managers to allocate their—and their organization� ..