Forster N. - Maximum performance (2005)(en)

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protect their own backs. Cynicism can spread rapidly, and there is a body of research that has demonstrated that this too is a major obstacle to change (for example, Wanous, 2000). Absenteeism, attrition rates and labour turnover may also increase. All of these are responses to environments that employees find intolerable, and in this sort of climate no one is going to listen to their leaders or their plans for the future. Of equal importance, if people have previously had bad experiences of change, they will become even more resistant to any subsequent changes that come their way. Much change over the last decade has involved reactive downsizing, rationalization, cost cutting, cutbacks and mergers. These have invariably led to redundancies and major morale problems amongst those staff that have survived such changes. In turn, this can lead to the well-known BOHICA syndrome (‘Bend over – here it comes again’). Hence, if the learning/unlearning process is not managed effectively, the chances are that you will end up with cynical, demotivated, disloyal and underperforming employees.

Never assume that employees will understand the need or rationale for change. It is much safer to start with the opposite assumption: that they will neither understand nor accept the need for change – at first. All human beings are psychologically conservative, because they have developed cognitive, behavioural and attitudinal maps of a complex world that work for them. If these are questioned, they will feel threatened and will resist change. The key is to lessen these feelings of threat, by offering them a vision of a better future, equipping them with the skills and resources they need to achieve this, identifying a way, road or path to travel along, providing some incentives to change, and rewarding them when they have embraced these changes. Learning is not the real problem – unlearning is. People are continually learning at work, even in stable, slow-moving or bureaucratic organizations (more accurately, this is often closed-loop reinforcement, rather than genuine learning/unlearning). Hence the real challenge is to provide employees with the motivation and incentives to give up those things that have become, literally, part of their personalities.

There are two old sayings that are relevant in the context of learning and unlearning. The first is ‘People do not resist change, but they do resist being changed’; the second is ‘When it comes to change, people only like changes they’ve made themselves.’ In practical terms, this means that empowered change is always easier to introduce, and more effective, than enforced change. Employees have to be given as much ownership over the change management process as possible. The more they believe they are driving the change, the more they will embrace it. The less they are told (or ‘taught’) to change, and the more they are shown how to learn to change, the more rapidly they will embrace this.

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This is one reason why public sector bureaucracies are so resistant to change. They rarely create their own internal impetus for change because politicians and/or central government agencies often impose this on them from the outside, meaning that they have only ever learnt how to react to change, not how to initiate it themselves. Hence changing people’s behaviour and shifting their learning cycles requires ten times the time, effort and commitment that most change leaders think it will, particularly from a standing start. However, once the initial impetus is set up, change can often accelerate quickly. A basic principle of physics that can be translated into both employee and organizational (un)learning is the principle of inertia. When a large body is at rest, it takes a tremendous amount of energy to get it moving. However, once set in motion, it requires much less force to maintain its momentum and just subtle nudges to alter its direction of travel. In the context of organizational change, this means that steady, incremental change and unlearning is much easier to manage than fast, radical, discontinuous, stop–start change and unlearning.

Integrating strategic macro change with the organization’s operational culture and employees’ working practices

A succinct summary of organizational culture might be, ‘the way people work when they think nobody is looking’. In a bad culture, they’re probably looting the stationery cabinet, forging expenses chits and downloading porn, like the miserable galley slaves in the Slough Branch of Wernham Hogg on television’s The Office. In a good culture, they may be checking a consignment, streamlining a process or consulting a customer about their needs, like the perky folk of Wal-Mart with their company songs and corny stunts. Most corporations feature a bit of both; informal homeostatic mechanisms counter one with another.

(Gideon Haigh, Bad company: the cult of the CEO, 2003)

There are as many descriptions of organizational culture as there are writers on the subject, and there is no universally accepted definition of this concept. As long ago as 1952, Kroeber and Kluckhohn identified 164 different definitions of culture. Ott has listed 73 different words or phrases that have been used to define organizational culture in 58 different published sources (cited by Schein, 1996a). Despite the lack of agreement on definitions of organizational culture, it can be broadly described as a shared, common frame of reference, comprising a collection of deeply buried values and assumptions. This is largely taken for granted and is shared by a significant number of an organization’s employees. It is learned and retransmitted by organizational members and provides them with rules for appropriate organizational behaviour and conduct. It provides a common psychology and defines the organization’s uniqueness and personal identity. This endures over

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time and can be found in any organization of a reasonable size. Culture is symbolic, and is manifested in the language, rhetoric, behaviour and attitudes of organizational members. In one sense, it can be regarded as the DNA of an organization, something that can be passed on to new members and replicated as the organization grows in size or spreads geographically. Once established, an organizational culture can be changed, but often with great difficulty.1

William McKnight, the founder of 3m, first coined the expression ‘organizational culture’, in the context of the management of organizations back in 1914, but it was not until the 1980s that ‘culture’ became both a management buzzword and a popular topic in management and organizational studies. In fact, this decade was characterized by an explosion of interest in the concept of culture by both academics and practitioners. The main cause of this was the crisis of US business and the success of Japan and other Asian countries in beating American companies at their own game, but played with different management rules. There was an explosion of special journal editions dealing with organizational culture at this time: Administrative Science Quarterly (September 1983), Organizational Dynamics (Autumn 1983) and The Journal of Management Studies (May 1986). Several best-selling books, including In Search of Excellence, Corporate Cultures, Theory Z and The Art of Japanese Management, appeared in the 1980s, extolling the virtues of organizations with strong, flexible, adaptable cultures.

Advocates of the culture school argued that only strong corporate cultures were effective in securing ever-improving flexibility, motivation and commitment from employees. Major productivity and quality improvements could be expected to stem from the rewards and recognition provided for employees within such cultures. Indeed, it was confidently asserted at the time that companies with such cultures were invariably amongst the most profitable and successful in the world, with success stories being cited from companies like Volvo, 3m, Hewlett-Packard and Disney, amongst others. It was also suggested that companies aiming to improve their organizational performance (in the pursuit of ‘excellence’) had to understand and radically change their corporate cultures. For example, Peters and Waterman’s (1982) survey of 36 American companies that displayed sustained high performance between 1961 and 1980 identified a number of features of their corporate cultures that could be regarded as the building blocks of excellent organizations. These included closeness to the customer; staff autonomy and intrapreneurship; enhanced levels of performance and productivity driven by high levels of affective well-being and motivation amongst employees; a strong, benevolent corporate culture; deeply shared corporate values amongst staff; and, critically, a

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widely shared vision of the company’s future at all levels of the organization. For these authors organizational culture was not just another piece of the puzzle of understanding how organizations changed and developed, it was the puzzle. From their point of view, culture is not something an organization ‘has’; culture is something an organization

‘is’.

As with many organizational and management fads of the last two decades, the idea of creating high-performing ‘excellent’ companies through culture has fallen into some disrepute. The work of Peters and Waterman was criticized, in part, because many of the exemplar companies they identified ran into difficulties in the 1980s and early 1990s. Some no longer exist, either having gone out of business or having been taken over by other companies. Retrospectively, we can now see that they had – at best – identified some of the characteristics of consistently successful companies (and the search for these continues today). Furthermore, the concept of corporate culture remains a complex and confusing concept, both theoretically and in its utility as a practical change management tool in organizations. Nevertheless, it still has relevance because many of the world’s most successful companies do appear to have highly charged, inclusive and adaptable corporate cultures. This serves to illustrate one of the main reasons for the continuing popularity of the concept of organizational culture for managers and practitioners in industry: the persistent belief that there must be some relationship between organizational culture, business performance and the ability of companies to change and evolve over time.

The advantage of strong, people-centred organizational cultures is that they can make everybody pull in the same direction, create a strong sense of belonging and involvement (‘us and them’), maintain continuity in the induction and socialization of new recruits, promote widely recognized standards of managerial behaviour, develop clear and unambiguous performance criteria, encourage innovation, learning and change, and promote an enhanced ability to internationalize while maintaining a global corporate culture (Collins and Porras, 1996). The main disadvantages of strong task-focused organizational cultures are that they can legitimate unethical and illegal behaviour, can be highly resistant to change and can allow companies to become ‘cut-off’ from the outside world and potential competitive threats, phenomena that have afflicted many companies in recent years. A complete transformation of an organization with this kind of culture can take up to five years, particularly in large bureaucratic ones. We also saw in Chapter 3 that culture has a major influence on the behaviour and attitudes of individuals, because a person’s perceptions, attitudes, motivations,

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values, learning experiences and personality are all, to a large extent, shaped by culture. Consequently, organizational cultures can also have a powerful influence on the beliefs, attitudes, behaviours, motivation and performance levels and learning capabilities of an organization’s employees.

In this sense, culture has never mattered more to business performance and, because change is the only constant in organizations these days, all organizational cultures need to have an inbuilt evolutionary or change capability (Collins, 2001; Collins and Porras, 1996; Drenna, 1992). Furthermore, real change only happens when this becomes ingrained in the cultural mind-sets of organizations and the day-to-day working practices of their employees. This means that change leaders have to demonstrate where things have changed and how they have improved at the operational level – right down at the coalface. For example, if product quality has improved, employees need to see that they or their team have benefited, by receiving a bonus or profit-share payment. If customer service has improved, they need to see the customer retention numbers and loyalty percentages. This information should be disseminated at team and departmental meetings and reinforced in company newsletters, emails and videos. Change must be ingrained in the culture of the organization because, until new behaviours and attitudes are embedded in ‘the way we do things around here’, they are always subject to rapid degradation. We will look at how this can be achieved in practice in the Continental Airlines case study.

I came to see in my time at IBM that culture isn’t just one aspect of the game; it is the game.

(Lou Gerstner, 2003, in his autobiography, Who Says Elephants Can’t Dance?, written after ten years of changing IBM’s culture)

Creating a sense of urgency, and getting the right people on the bus

Inertia and complacency are enemies of change. Without high levels of commitment and motivation, at all levels of an organization, change management programmes fail. To achieve this there has to be a critical mass of people on board: at least 80 per cent of an organization’s workforce (echoing the old Buddhist saying, ‘Four out of five is perfect’). Anything less than this ratio will create problems during the change process. Initially, this means creating a sense of urgency amongst senior management, because it is they who will have the primary responsibility for selling the vision and driving changes throughout the organization. As noted earlier, this may also mean bringing in people from outside the organization and taking the new change team

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off-site for retreats to brainstorm new ideas and map out the strategic change process. This stage is important because, without strong, energetic and committed leadership at the top, opposition to change further down the organization will not be overcome. To get this level of involvement requires change leaders to spend a lot of time with their senior employees, explaining the need for change and what the anticipated benefits will be. It also means being completely honest about both the negative and the positive effects of the proposed changes.

Even with the best will in the world, there will be times when staff who stand in the way of needed and necessary change have to be removed. All the organizations we looked at between 1997 and 2004 did this to some extent. In a talk in March 1989 to Harvard MBA students, after five years of restructuring and downsizing at General Electric, Jack Welch observed, ‘Trying to change any bureaucratic organization slowly or incrementally is pointless. If you try to do it bit by it, resistance will inevitably build up. Fast, radical change is the only way – be it at Harvard, IBM or General Electric. If need be, you must sack people who stand in the way of necessary change.’ You can give people three chances to come on board. If they don’t accept this opportunity, then you must ask them to move on. However, this is also an opportunity to bring in new people from the outside who will share your passion and enthusiasm for the direction you want to take the organization in. Jim Collins describes this process as ‘getting the right people on the bus’, before deciding which direction to take the bus in (Collins, 2001: 41).

Developing straightforward, realistic and workable strategies to drive change initiatives throughout the organization

A vision without a plan of action is a recipe for failure, and the formulation of the change strategy is where the hard nuts-and-bolts work really begins. A strategy (from the Greek strategos) can be described as a plan for interacting with the competitive environment in order to achieve organizational goals. Goals define where the organization wants to go and strategies describe how the organization will get there. This does not mean that change strategies have to be complex. One characteristic of all organizations that successfully manage organizational and cultural change is the clarity and simplicity of their strategies. This doesn’t mean that they were simplistic, but they showed with clarity how their visions were to be operationalized in practice. They were also sufficiently concise and well articulated for all their employees to understand and buy into. A good change strategy explains key roles and responsibilities, establishes deadlines, assigns resources and

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establishes priorities to work towards. It must also identify a sequence of specific, measurable goals for the organization’s employees. In metaphorical terms, we can think of strategy as a sequence of identifiable and clearly mapped destinations on a long journey. However, strategic change planning alone will not guarantee success. As we will see in the upcoming company cases, implementation and evaluation are also critical.

Extensive two-way communication with all employees during times of change

One of the jobs of a leader is to have a vision. But sometimes, top management sees an apple.

When it gets to middle management it’s an orange. By the time it gets to us, it’s a lemon.

(Kouzes and Posner, The Leadership Challenge, 1997)

During periods of change, upheaval and uncertainty, it is impossible to communicate too much. Organizations that fail to manage change always underestimate how much they need to communicate with their employees, by a factor of about 20. Furthermore, one of the most frustrating outcomes of being a leader who has a clear vision of a better future is that initially you may well find yourself in a minority of one and almost all of the people who work for you will probably need convincing that you do indeed have a compelling vision. So, once you’ve created a vision, how do you ‘sell’ it? To communicate a vision effectively, four sets of questions have to be addressed.

1What do we need to communicate to our employees? What are our priorities? What time scales do we need to work to?

2Whom do we need to communicate with, internally and externally? Do we understand their interests and concerns? What can we learn from our employees, customers and clients about the changes we are proposing to initiate?

3Which messages do we need to put across? Do they address the problems our organization faces? Are they compelling and will the disparate groups and individuals in our organization understand them? Do our messages appeal to the different learning styles of our employees and, thereby, their hearts and minds?

4How are we going to get our messages across? What channels and media should we use to communicate these? Are they appropriate for our audiences? Do they allow for effective two-way communication? How comprehensive should our programme of communication be? How do we evaluate the success of our communication strategies?

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An organization’s vision needs to be shaped into the form of messages that can be communicated to all employees. As we saw earlier, an effective message has to be accurate, relevant, truthful, authoritative, credible and distinctive. It should also be short, simple and jargon-free and, wherever possible, tailored to the needs and interests of those receiving it. An effective message encourages a response and leads to action. Communicating a vision or a change management programme does not mean ‘talking down’ to an audience. The message should carry conviction and be backed by commitment and determination. A contrived or manufactured message will not convince and no amount of packaging can make up for a lack of honesty, integrity and purpose. This message must be presented in such a way as to achieve rapport and aid understanding with a whole variety of people. It must be also delivered from the heart: if you don’t believe in it, no one else will.

This means that communication during times of change and upheaval has to be done face-to-face. Glossy videos, brochures, mission statements, newsletters and emails may be able to transmit the dry bones of a vision or mission, but they will never engage people’s imaginations. Successful transformational leaders make full use of the motivational, visceral and connective oratory and public speaking skills we reviewed in Chapter 3, in particular the ancient art of storytelling. These leaders physically embody the changes they want to initiate, or as the Indian independence leader Mahatma Gandhi once put it, ‘We must become the change we want to see in others.’ They become highly visible symbols of the new organizational culture they are trying to create and want their employees to buy into.

Involving employees by giving them ownership over change management initiatives and processes

Another message that comes across loud and clear from research on organizations that successfully manage change is that this process can only succeed if it is a collective and shared effort. In Chapters 1, 4 and 7, we saw how effective empowered and collaborative leadership can be, and during times of change this becomes even more important. This is because empowered change, involving a majority of an organization’s employees, always has a far better chance of success than enforced change that alienates a majority of employees. If people are not involved from the outset, they will very quickly become at least apathetic about the process and, within a short period of time, antagonistic to it. In effect, a critical mass of employees have to be persuaded through engagement that it makes good sense for them to become

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involved in this process, and the only way to do that is to give them as much ownership as possible over the process.

Celebrating successes and short-term wins, and rewarding employees when they make changes to their working practices

This is essential. Successful change strategists break big steps down into smaller, doable ones. This enables people to maintain a sense of control over the change process and encourages the belief that they are achieving new goals and objectives. People need feedback on the progress they are making towards new organizational practices and mind-sets. Most employees will start to get anxious or frustrated if they are not seeing tangible benefits after six to 12 months. If people can’t see any positive results, they may start resisting further changes. Celebrating short-term wins can help to maintain levels of confidence and re-energize commitment to the change management programme. Small wins also build into bigger wins, thus adding further impetus to the change process.

Involving customers and clients in change management initiatives and processes

Increasingly, changing customer needs and preferences are driving organizational change. One survey, of 300 senior executives in the USA, revealed that customers were the fourth-biggest source of pressure for change, behind competition, profitability and new technologies. ‘Improving customer satisfaction’ was the second most significant driver of change reported by these executives. In the early 1990s, customer satisfaction and retention would not have made it into the top ten (KPMG, cited by Cornell, 1998b). Maintaining close relationships with customers and clients is not only important for retaining their loyalty and business; they too are involved in environmental scanning and may see opportunities for, and threats to, your business before you do. Furthermore, while the results of change management programmes should be visible to one’s customers and clients, the processes should be invisible.

Developing an ongoing commitment to continuous change, improvement and learning

Let our advance worrying become our advance planning.

(Winston Churchill’s advice to his cabinet during World War II, just after the mass evacuation of British troops from Dunkirk in 1940 and an expected invasion of Britain by Germany)

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The preceding sections may have implied that leading organizational and cultural change is a relatively smooth, sequential process. It isn’t, and the data we presented in the introduction to this chapter on the failure rates of change management programmes show how difficult this process can be. ‘Managing change’ is extremely difficult, because it is, by definition, a reactive, catch-up process and often characterized by employee resistance. It is actually much easier to create and initiate change for others to follow or imitate. The world’s cutting-edge companies are able to do this consistently, over long periods of time. This means that, as soon as the impetus for change has been created, organizations have to turn their attention to building innovation, learning organization principles and the ability to manage knowledge and intellectual capital into the culture, mind-sets and working practices of their employees. These components of organizational change and evolution will be addressed in Chapters 9 and 10.

Leading organizational and cultural change: the practice

The 11 components described above featured in all the successful change management programmes reviewed between 1997 and 2004. Naturally, the weighting given to each one of these varied from organization to organization, depending on the environments in which these businesses were operating, and the nature of the changes they were going through. This reinforces the view expressed earlier that all change management programmes are contingent, and there is no one ‘best way’ to manage change. Nevertheless, as we continued to refine and reapply this template to organizations that had experienced change, the better it worked. It is, at the very least, a useful tool for checking which elements and components need to be considered when initiating a change management programme. To illustrate the efficacy of this template, two real life examples of organizational and cultural change are presented below, Continental Airlines and the Australian Broadcasting Corporation.

Successful Organizational Change:

Continental Airlines

I was recently on a cross country flight with Continental Airlines (suggested slogan: Not Quite The Worst) and, goodness knows why, I was reading that ‘Letter from the President’ you get at the front of every airline magazine – the one that explains how they are constantly striving to improve services, evidently by making everyone change planes at Newark. Well, this one was about how they had just conducted a survey of their customers to find out