5 pillars of sustainable change

Learning Objectives

After reading this chapter, you should be able to do the following:

1. Describe the major reasons why change programs fail in organizations. 2. Identify the role of leaders in shaping and sustaining change. 3. List the five pillars of successful, sustainable change and describe the relationship among the pillars. 4. Recognize useful principles and practices in sustaining change. 5. Describe the different levels of strategies involved when planning a change. 6. Describe the importance of attracting and retaining the right talent in sustaining change. 7. Identify the characteristics of “built-to-change organizations” that position them to successfully

sustain change. 8. Describe self-designing organizations and the practice of creating a learning and continuous change

environment in organizations.

Shaping and Sustaining Change4

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CHAPTER 4Section 4.1 Introduction: Back to the Future

4.1 Introduction: Back to the Future

Sustaining major organizational changes does not involve “one-shot” or quick-fix solu-tions to problems. Embedding change in organizations requires continuous top-down, bottom-up leadership and process improvements—including supportive and innovative actions throughout the enterprise. The CEO and top-level team generally define and lead the change, but everyone must get involved in managing, recreating, and rejuvenating the ongoing renewal processes.

Chapter 4 Outline

4.1 Introduction: Back to the Future Long Marches, Not Bold Strokes Why Change Programs Fail Organizing to Succeed at Change:

The Big Picture

4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

Lessons from the Great Companies Revitalizing Leadership Revitalizing Strategy Revitalizing Culture Revitalizing Structure Revitalizing Systems and Processes

4.3 Attracting Talent and Empowering Employees

Recruiting through Branding Using Social Media to Recruit Seeking Recruits Using a Talent Mindset Empowering Employees for Change

4.4 Sustaining Change: Built-to-Change Organizations

Seeking Temporary Competitive Advantages Continuous Change and the Virtuous Spiral Creating Job Structures without Job Titles Implementing Downward Decision Making Leading As a Team

4.5 Future Change Challenges and Best Practices

Self-Designing Organizations Corporate Social Responsibility (CSR) Core Competencies Sustainability Analytics Capability Meeting the Challenges of Globalization Meeting the Challenges of Disruptive

Change Developing EI (Emotional Intelligence)

“Nothing is easier than saying words. Nothing is harder

than living them day after day.” —Arthur Gordon

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CHAPTER 4Section 4.1 Introduction: Back to the Future

Long Marches Not Bold Strokes

While some transformational changes may start with a “big bang,” embedding and sus- taining them takes time, talent, and effort. Rosabeth Moss Kanter, Harvard professor and change expert, says,

Years of study and experience show that the things that sustain change are not bold strokes but long marches—the independent, discretionary, and ongoing efforts of people to adjust their behavior, and that behavior is often beyond the control of top management. Yes, as a senior executive, you can allocate resources for new product development or reorganize a unit, but you cannot order people to use their imaginations or to work col- laboratively. That’s why, in difficult situations, leaders who have neglected the long march often fall back on the bold stroke. (Kanter, 2002, p. 48)

In order to know how to revitalize and sustain large-scale changes, it is important to know some of the major reasons why changes fail in the first place.

Why Change Programs Fail

There are more than enough reasons attributed to and describing why organizational change programs fail. We previously discussed reasons in this text and have selected some of the more notable reasons from different studies to discuss here. Understanding and learning from each of these causes can possibly prevent failure and help facilitate strategies and efforts to sustain change. Fletcher and Taplan (2002) list these reasons:

• Opposition to change • Failure to recognize the need for change • Superficial recognition of the need for change • Failure to systematically implement change • Short-term fix approach • Structural impediments to change • Cultural impediments to change • Failure to sustain change

Opposition to Change Change programs are often destined to fail because of the top-down imposed nature of the process. The scenario is familiar: a CEO or top-level team member has some new ideas from talking to friends, witnessing a change from a competitor, attending a seminar, or reading current business trends; and from impulse or a revelation, decides to move for- ward and try something new with a division or the company. Following a current man- agement fad is another frequently observed reason to initiate a change. Fletcher and Tap- lin quote an electronics plant manager:

Over the years, we’ve tried quality circles, management by objectives, TQM [total quality management], and JIT [just in time]. We’ve reengi- neered twice in the last decade. We’ve tried teamwork twice, and we’ve

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CHAPTER 4Section 4.1 Introduction: Back to the Future

had more initiatives than I care to remember. Every time there’s something new, the CEO is calling meetings to tell us what to do. There is so much change going on that no wonder we’re not efficient anymore. We just keep playing around with new ideas. (Fletcher & Taplin, 2002, p. 180)

When change is arbitrarily imposed, poorly explained, and hastily announced from the top, managers and employees can become disillusioned, lose motivation, and become increasingly resentful and resistant to the change. Their work often changes and increases while resources and time for quality decreases. Managers in particular are thrown into confusion when they are asked to implement and guide changes that are not adequately explained and for which they have few or no blueprints or models to guide the implemen- tation. Also, when managers are given little strategic direction or rationale for implement- ing changes, they typically revert to emphasizing what they know best: operational detail that is activity (not goal) driven. For example, Friendly’s restaurant chain recently filed for bankruptcy (Lehman, 2011). While many reasons explain this chain’s failure—including the slumping economy, the chain’s debt and financial situation—the lack of a clear strate- gic direction was also an issue. O’Brien wrote in 2009,

To compete—and potentially thrive—in this environment, restaurants like Friendly’s, founded nearly 75 years ago by Curtis and S. Prestley Blake, must find ways to differentiate themselves, and then continually drive home to the consuming public what makes them different, said Lid- vall [Friendly’s President and CEO], adding that, with Friendly’s, that differentiator is ice cream. . . . As the industry has continued to segment, the lines and the definitions of brands have blurred somewhat, I believe. (O’Brien, 2009)

Unfortunately Friendly’s attempts at competitiveness, including placing the emphasis on ice cream and other piecemeal marketing ideas, proved unsuccessful. Failure can also occur when the purpose of the change is not shared by the people and is, in turn, sepa- rated from the organizational processes required for implementation.

Failure to Recognize the Need for Change In the 1970s and 1980s, CEOs of some of the largest, most innovative world-class U.S.- based international firms were entering a period they did not anticipate, one featuring fierce global competition and new ways of streamlining operations. IBM, Digital Equip- ment Corporation, Polaroid, General Motors—to name a few—were still resting on their past successes. Digital and Polaroid were not able to survive. They had the arrogance to believe they could continue to dominate their industries with bulky hierarchies, unreal- istic overhead costs, and outdated operations. Japanese auto and electronics companies entered with the first wave of new and competitively priced products that were made with higher efficiency operational methods. The result was two decades of radically induced change for all U.S. industries: TQM, JIT, reengineering, and the introduction of IT (infor- mation technology) into the assembly-line process.

The failure to recognize the need for change continues to be a major cause of change pro- grams that are initiated too late to regain competitiveness; are initiated poorly, without proper attention to how change processes should be planned; or are still not initiated at all.

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CHAPTER 4Section 4.1 Introduction: Back to the Future

Superficial Recognition of the Need for Change Some CEOs and organizations decide to go forward with a change, but without the nec- essary commitment to allot the resources and the energy of the entire enterprise. They believe that targeting for change a certain division, business unit, department, program, or management practice will, itself, solve the problem and generate new opportunities throughout the entire organization. In reality, a comprehensive plan is typically called for. In such instances, concern for cost, in terms of time and money, is the prohibitive factor. In other instances, such short-sightedness may be due to a top-level individual, team, or dominant coalition’s lack of political or business acumen, or some other limiting capacity. Whatever the specific reasons for not understanding and taking action on the need for total change, this general type of thinking has been characterized as “myopic” (Morgan, 1997, p. 3)—that is, top-level leaders are trapped into thinking in terms of the status quo or “If it isn’t broken, don’t fix it.” When incremental, piecemeal, or selected organizational targets for limited change are adopted in place of needed enterprise-wide and transfor- mational changes, the result is often loss of resources, time, effort, and competitiveness.

Failure to Systematically Implement Change Failure to systematically lay out a complete change program and then implement accord- ing to that plan, leads to the failure of intended results. A U.S. Department of Labor study concluded that productivity and financial gains are more likely to be obtained when implemented from a systematic approach (U.S Dept. of Labor, 1993; also see Matthews, 2009). Companies that attempt to change one system without coordinating and align- ing complementary related systems to facilitate the change, generally fail to achieve their original goals. For examples, airlines that attempt to improve customer relations by train- ing flight attendants but not check-in agents; firms that attempt to decrease time between point-of-sale and collection of payment by improving sales professional’s strategies, but not changing the internal processing of payments; companies that move marketing con- tent online to extend their products’ reach to potential customers, but do not create sys- tems to process online purchases; and the list goes on. When organizations do not study all the core processes in their business from the perspective of their new vision and change goals, and then decide on an implementation plan that aligns all the major systems, failure is on the horizon.

Short-Term Fixes The American capitalist business and financial system is based on short-term time hori- zons. U.S. corporations operate on a quarterly basis and are valued on both short- and long-term information. Financial analysts evaluate, predict, and recommend “buys, holds, and sells” on stocks from quarterly reports—using past and future trends. While speed, efficiency, and innovation are hallmarks of the American capitalist business sys- tem, the short-term perspective also can and does contribute to myopic decision making and short-term fixes.

This logic also holds true for change programs. CEOs and executive teams that unnecessar- ily rush the environmental scanning, planning, and diagnosis of identifying the problems and opportunities for change, risk making the mistake of identifying the wrong problems and opportunities to be targeted. Then, the rush to hasty and ill-prepared implementation

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CHAPTER 4Section 4.1 Introduction: Back to the Future

compounds the problems of building in further failure: poorly coordinated and prepared teams to implement, forcing a sacrifice in quality of implementation, sub-optimizing goals (selecting less than desirable goals in order to meet time and task completion pressures), and then preparing the change effort for failure in costs, wasted effort, and lack of goal attainment. A study by Weiss and Datta (2002) of three large global firms’ change pro- grams that moved marketing content to the Web found that:

. . . technology objectives tended to continually overwhelm enterprise and business strategies. The subordination of enterprise strategy resulted in dysfunctional organizational conflict and unnecessary project delays. Also, unanticipated, disruptive consequences of the changes resulted in con- fused organizational roles and work practices, which were not adequately addressed. This study recommends: (1) Enterprise and information tech- nology (IT) strategy should be jointly planned before the content change process begins. Project sponsors representing top-down and bottom-up organizational levels should be assigned to coordinate IT and business goals throughout the project life cycle. The primary role of the project spon- sors would be to anticipate and solve team and individual work-related needs during the project. (2) Change management interventions should also be incorporated into the enterprise method to commit, involve, and train those affected by the change. (Weiss & Datta, 2002, p. 39)

Diagnoses and implementation plans that impose a “short-term fix mentality” and frame- work on a large-scale change program usually suffer the symptoms described here as well as other unintentional consequences that eventually lead to unnecessary resource costs and delays, if not failed goals, time, and effort.

Structural Impediments to Change Bureaucratic structures and hierarchies in large corporations have presented a major obstacle for implementing large-scale change. In fact, the methods of BPE (business process engineering) and reengineering were revolutionary in that these approaches cut through and eliminated unneces- sary barriers and blockages in all business pro- cesses, and were designed to decrease time, effort, and costs while increasing speed and effectiveness in moving a task from start to completion. Orga- nizations that continue to start with structure over strategy and purpose risk failure in transforming a company’s vision toward a new state.

Corporations are generally moving toward less structure to achieve more economies of scale and effectiveness. As we will discuss in the following section, alternative solutions to traditional verti- cal structures are being used as a result of change

Sometimes there are structural impedi- ments to change. Bureaucratic structures and hierarchies in large corporations, for example, can present a major obsta- cle for implementing large-scale change.

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CHAPTER 4Section 4.1 Introduction: Back to the Future

initiatives. Among these alternative solutions are outsourcing, streamlining business pro- cesses, and experimenting with new forms of networked structures and communities of shared competencies.

Cultural Impediments to Change Resistance to change usually stems from an old culture whose leaders’ dominant values, assumptions, and norms refuse to be given up by people in the organization. The past state of the organization may have worked well in a past environment or era, but is no longer as efficient as it needs to be. With a new vision and values—and perhaps leaders— new cultural meanings, languages, symbols, and experiences must be embedded. When the change champions and leaders do not pave the way for the shift in the alignment of all the organization’s dimensions and systems, previous cultural values tend to prevail with some groups and managers; the status quo is often the default position, even if it’s to the detriment of the organization.

Failure to Sustain Change Gareth Morgan estimated that 70 percent of companies abandoned new and innovative work practices that were adopted through some form of change—such as reengineering, restructuring, quality and/or productivity improvement, or customer service (Morgan, 1997). Companies fail in their large-scale change efforts due to any one or combination of the factors discussed. Generally, people settle back into a status quo position if they do not have to change. Change cannot be sustained if people in an organization main- tain a bureaucratic and functional mindset that refuses to adopt new attitudes, beliefs, and behaviors. Sustaining change requires strong, committed, and informed leaders who involve others in the alignment of all an organization’s systems around the new vision.

Organizing to Succeed at Change: The Big Picture

Maintaining alignment of an organization to a new vision and future state requires lead- ers and followers to keep the “big picture” of the organization in mind. The model, shown in Figure 4.1 and discussed in Chapters 1 and 2, provides a useful reminder that leaders are an integral force at the outset in guiding the alignment of organizational dimensions to the new vision and future state.

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CHAPTER 4Section 4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

Figure 4.1: Strategic alignment model

Customer Partnership

Transformation

Current to Future State

Customer Satisfaction

Outputs

Customer Requirements

Inputs

Vision and Strategy

Culture

Nature of Work

Structure

Technology

People

• Leadership • Environment • History • Resources

Organizational Level • Competitiveness • Market share • Product and service quality • Responsibility (environment and community)

Group Level • Synergy • Performance • Effectiveness • Satisfaction

Individual Level • Performance • Satisfaction • Development and growth

Measurement Systems

Source: Joseph W. Weiss (2001) based on Weisbord (1987), Productive Workplaces. San Francisco: Jossey-Bass and W. Burke in Ann Howard (ed.)

Diagnosis for Organizational Change, Guilford Press, 1994.

We provide examples of how leaders in different organizations and industries use inter- ventions to sustain change in an effort to compete in their external environments while empowering people and culture in the internal organization.

4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

For a company to shape and sustain growth, it must continually work to revitalize the principle elements that made it strong in the first place. This section focuses on five principle components that are integral to any successful company: leadership, strategy, culture, structure, and systems.

Lessons from the Great Companies

Jim Collins, author of the best-selling books Built to Last (Collins & Porras, 1994) and Good to Great (Collins, 2001), spent five years during his research for Good to Great identifying

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CHAPTER 4Section 4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

and studying companies that sustained market competitiveness over 15-year periods. His findings are relevant to our topic on how organizations can sustain change programs to reach higher levels of competitiveness. Not all organizations that pursue large-scale change can or will become great. However, the principles and practices that underlie how many companies reached and maintained mar- ket dominance for long time periods— while their comparable competitors did not—are noteworthy. The dominant mes- sages and themes regarding the principles on how good companies become great are relevant to sustaining effective leadership, strategy, culture, structure, and systems:

• Level 5 Leadership: The leaders led and worked not flamboyantly or with highly observable charismatic, loud, or dramatic styles; but calmly, quietly, humbly—even shyly—in strong-willed ways.

• First Who, Then What: The leaders found and placed the right people in the right places and let the wrong people go first, before setting a new vision and strategy.

• Confronting Brutal Facts: The great companies and their leaders confronted harsh, unflattering truths about the organization, while never losing faith that they could and would prevail in the face of adversity.

• Hedgehog Concept: When a hedgehog faces a predator, it simply rolls up into a ball. Unlike the clever fox, the hedgehog’s strategy is surprisingly easy, repetitive, and effective. Great companies and their leaders learned and fol- lowed what they did best by understanding and implementing their (1) pas- sion, (2) what they could do best, and (3) what drove their economic engine.

• Culture of Discipline: They developed a culture of discipline that made hier- archies excessive and unnecessary.

• Technology Accelerators: They carefully applied selected technologies to ignite and accelerate their transformation—not to define their change.

• The Flywheel: They used the “flywheel” approach to change, i.e., not seeking a grand, single defining moment, or killer application, but relent- lessly pushing a large, heavy flywheel in one direction, turn after turn, until momentum built to a point of breakthrough after breakthrough. (Collins, 2001, pp. 13–14)

While the great companies Collins wrote about did not all represent exciting or glamor- ous industries, their evolutionary journeys and transitions to greatness are based on com- binations of the principles and practices summarized above.

The good-to-great companies, which must be seen in historical context, along with their respective 15-year cumulative stock market results are shown in Table 4.1. Data includes the multiple times the great companies beat the Dow Jones average for that time period.

Leadership, strategy, culture, structure, and systems serve as foundational elements of suc- cessful companies and successful change proj- ects. They act as pillars upon which everything else can be built and developed.

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CHAPTER 4Section 4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

Table 4.1: Good-to-great companies in the stock market

Company Times the Market Years

Abbott 3.98 1974–1989

Circuit City 18.50 1982–1997

Fannie Mae 7.56 1984–1999

Gillette 7.39 1980–1995

Kimberly Clark 3.41 1972–1987

Kroger 4.17 1973–1988

Nucor 5.16 1975–1990

Philip Morris 7.06 1964–1979

Pitney Bowes 7.16 1973–1988

Walgreen’s 7.34 1975–1990

Wells Fargo 3.99 1983–1998

Collins, J. (2001). Good to great. New York: HarperBusiness, p. 7.

In Table 4.2, the comparison companies of each of the good-to-great firms are shown in italics and are interesting to note because these companies did not make the leap to great- ness. You may not recognize the comparison firms, or even some of the historically great companies, unless you do a quick search.

Table 4.2: Comparison companies

Good-to-Great Comparison

Abbot Upjohn

Circuit City Silo

Fannie Mae Great Western

Gillette Warner-Lambert

Kimberly-Clark Scott Paper

Kroger A&P

Nucor Bethlehem Steel

Philip Morris R.J. Reynolds

Pitney Bowes Addressograph

Walgreen’s Eckerd

Wells Fargo Bank of America

Collins, J. (2001). Good to great. New York: HarperBusiness, p. 8.

Interestingly, Bank of America and Wells Fargo have survived the more recent financial meltdown among banks and some other financial institutions, and are prospering. While even great firms cannot maintain superior stock market returns indefinitely, Collins has

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CHAPTER 4Section 4.2 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems

presented an important and interesting set of leadership and management principles rel- evant to sustaining best practices and change mandates across industries.

Collins recently reflected on other important elements that great companies continue to use currently, during times with nearly unprecedented global economic and political tur- moil. His response is relevant to leadership and management seeking to identify and sus- tain organizational change in real time:

. . . in times of great duress, tumult, and uncertainty, you have to have moor- ings. Companies like P&G (PG, Fortune 500), GE (GE, Fortune 500), J&J (JNJ, Fortune 500), and IBM (IBM, Fortune 500) had an incredible fabric of values. . . . One of the things that was very distinctive about P&G, for exam- ple, was that they said a customer will always be able to depend on the fact that a product is what we say it is—we will always build our reputation on quality. . . . What we have found is that what really matters is that you actu- ally have core values. . . . The more challenged you are, the more you have to have your values. (Reingold, 2009)

Revitalizing Leadership

We have seen that leaders must first guide the design, diagnosis, and then implementa- tion of change within their organizations. They must then sustain it. Leaders, as integra- tors, orchestrators, and strategists, have a primary role in keeping the strategy, culture, structure, and systems of the organization in alignment. As Michael Porter writes, a leader is primarily a strategist. “The leader must provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company’s distinctiveness” (Porter, 1996, p. 77). The leader, as strategist, is responsible for teaching those in the organization about strategy and setting limits (Porter, 1996).

Leader as Change Integrator and Orchestrator Leaders are not only strategists but are also integrators. They integrate the new vision, mission, and values of the organization with its changed strategy, culture, structure, and systems. A 2010 IBM leadership report acknowledges that leaders “must create within their organizations integrated, cross-functional capabilities and tear down the institutional silos that inhibit creativity and speed” (IBM Global Business Services, 2010, p. 26). Take Shelley Nandkeolyar, for example. Nandkeolyar was an e-commerce group manager at the kitchen retailer Williams-Sonoma. He created a new position within the company spe- cifically for improving connection and communication among operations groups. Patricia Skerritt was hired as the new integrator (Kanter, 2006). Leggatt (2011) reported that “With

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an average response time of 11.58 seconds and an impressive 99.98% availability, the home and kitchen furnishing store (Williams-Sonoma) took top place in AlertSite’s recent rank- ings.” AlertSite is a respected ranking group that measures effectiveness of retail online businesses in terms of Website performance, which indicates customer focus and concern. Online shoppers expect to wait fewer than two seconds for a company’s page to load; 40 percent reportedly wait no longer than three seconds before leaving a site (Leggat, 2011).

With continuous change a present reality in the marketplace, leaders must carefully and creatively orchestrate the facets of the organization. “Building an organization with flexibil- ity and dexterity requires leadership with the creativity to adapt to a constantly changing environment. These leaders must be able to negotiate through a maze of differing cultures, complex inter-generational dynamics and varied communication styles” (IBM Global Busi- ness Services, 2010, p. 24). The kind of creative leadership needed today is not a one-person show. It requires collective input and output across the organization. The leader must inte- grate the organization to create collectivity through frequent, clear, consistent communica- tion and then orchestrate its functionality around the vision, mission, and values of the organization. As Porter observes, a key function of leadership is the ability to set limits (Porter, 1996). Limits should be informed by the organization’s vision, mission, and values.

Take Seagate Technology as an example. Seagate is a large manufacturer of hard drives and other storage solutions for personal computers. In the 1990s, the lack of integration from Seagate’s leadership created a fragmented organization. The culture, vision, and mission were not integrated, and communication was poor. This led to seven separate R&D groups and internal competition. Employees were given awards for the worst conduct in execu- tive meetings. Seagate had no common vision or mission communicated and exercised by its employees. New management—CEO Steve Luczo and COO Bill Watkins—worked as partners and integrators. They brought Seagate together under one vision. They set limits on behavior and integrated organizational goals. They formed cross-functional teams and performed common training for employees. This integrated approach allowed Seagate to become a market leader equipped for change (Kanter, 2006).