I was reading Bjoern Negelman’s piece on starting Digital Transformation initiatives in the lead up to the Paris Enterprise 2.0 Conference, and thought I’d add some of our research in advance. One of the things we have been spending quite a bit of time on lately is to think about how to effect change on existing organisations that have not “grown up” with the digitally enabled ways of working that social business tools enable. The issue is this – can these Elephants be taught to dance (and if so, how) or are they so mired in their ways that – to quote Dorothy Parker – “you can’t teach an old dogma new tricks” and the few success stories are complete outliers?
It is no secret that we Elephants have been around awhile, so have seen other “Great Transformations/Process Re-Engineerings/Paradigm Shift ideas come and go. It is therefore quite helpful to look at what past experience has shown about what works, and what doesn’t. To quote Machiavelli:
“Everyone who wants to know what will happen ought to examine what has happened: everything in this world in any epoch has their replicas in antiquity!”
And to a large extent, everything that needs be said about the difficulties of change was said by Machiavelli in c 1500:
And let it be noted that there is no more delicate matter to take in hand, nor more dangerous to conduct, nor more doubtful in its success, than to set up as a leader in the introduction of changes. For he who innovates will have for his enemies all those who are well off under the existing order of things, and only the lukewarm supporters in those who might be better off under the new. This lukewarm temper arises partly from the fear of adversaries who have the laws on their side and partly from the incredulity of mankind, who will never admit the merit of anything new, until they have seen it proved by the event.
The problem with looking at the past in this space is it is littered with post-event rationalisation and justification, ideological re-interpretation, bad luck events that collapse a good strategy, fortunate events that save a disastrous policy and just pure random events that muddy the waters etc. Nonetheless, this review of experience in Harvard Business Review is a good summary of what has gone before:
Many have come to understand that the key to competitive success is to transform the way they function. They are reducing reliance on managerial authority, formal rules and procedures, and narrow divisions of work. And they are creating teams, sharing information, and delegating responsibility and accountability far down the hierarchy. In effect, companies are moving from the hierarchical and bureaucratic model of organization that has characterized corporations since World War II to … …an organization where what has to be done governs who works with whom and who leads.
Now I’m sure everyone reading this is nodding their heads and thinking this is a pretty good summary for 2015 – but this was written in 1990, a generation ago! Written before the Internet got going, never mind the “2.0” and Social technologies of today. The problems are still very pertinent, so clearly execution is still a problem. While people have understoodthe necessity of change to cope with new competitive realities for some time, understanding what it takes to bring it about is still a huge problem. This HBR case study of 1990 noted two wring assumptions that people still tend to make today:
– that promulgating companywide programs—mission statements, “corporate culture” programs, training courses, quality circles, and new pay-for-performance systems—will transform organizations, and
– that employee behavior is changed by altering a company’s formal structure and systems.
The HBR piece then goes on to summarise what they saw in a four-year study of organizational change at six large corporations and found that exactly the opposite is true: the greatest obstacle to revitalization is the idea that it comes about through companywide change programs, particularly when a corporate staff group such as human resources sponsors them. They also found formal organization structure and systems cannot lead a corporate renewal process. They found you had to get a large number of people involved – here is a summary of their view of “What worked”
1. Mobilize commitment to change through joint diagnosis of business problems. As the term task alignment suggests, the starting point of any effective change effort is a clearly defined business problem.
2. Develop a shared vision of how to organize and manage for competitiveness. Once a core group of people is committed to a particular analysis of the problem, the general manager can lead employees toward a task-aligned vision of the organization that defines new roles and responsibilities.
3. Foster consensus for the new vision, competence to enact it, and cohesion to move it along. Simply letting employees help develop a new vision is not enough to overcome resistance to change—or to foster the skills needed to make the new organization work. This is the point that a new core team is formed with new skills imported, and potentially some strong resistors being replaced.
4. Spread revitalization to all departments without pushing it from the top. With the new ad hoc organization for the unit in place, it is time to turn to the functional and staff departments that must interact with it. Members of teams cannot be effective unless the department from which they come is organized and managed in a way that supports their roles as full-fledged participants in team decisions. What this often means is that these departments will have to rethink their roles and authority in the organization.
5. Institutionalize revitalization through formal policies, systems, and structures. There comes a point where general managers have to consider how to institutionalize change so that the process continues even after they’ve moved on to other responsibilities. Step five is the time: the new approach has become entrenched, the right people are in place, and the team organization is up and running. Enacting changes in structures and systems any earlier tends to backfire.
6. Monitor and adjust strategies in response to problems in the revitalization process. The purpose of change is to create an asset that did not exist before—a learning organization capable of adapting to a changing competitive environment. The organization has to know how to continually monitor its behavior—in effect, to learn how to learn. Some might say that this is the general manager’s responsibility. But monitoring the change process needs to be shared, just as analyzing the organization’s key business problem does.
Fast forward to 2011, and this summary from the Wharton Review shows not much has changed in what seems to work, and what seems to go wrong. The structure is different, the issues largely the same:
1. Structure and Process. Large retail stores….might ask corporate and regional managers to …leave [individual] stores alone and allow store managers to do their own thing. Interference with the stores, it is hoped, will decrease if managers are asked to butt out and let local decisions and actions prevail. But what happens when the next major problem arises? Corporate or regional managers swoop down on the stores, bringing centralized solutions. As an alternative, they could change structure instead. Increasing the span of control for corporate or regional managers, for example, would militate against involvement in the stores. Large spans foster decentralization and autonomy at lower levels by making it more difficult to actively meddle in a larger number of stores’ strategy and operations. Behavioral change of top managers can foster behavioral and culture change in the stores.
2. People. Bring in fresh blood and thinking. Rotate managers with different views of competitive conditions or operations. Supply different, needed skills or capabilities from the outside. New people, ideas, and strategies can lead to behavioral and performance changes that, in turn, can affect new ways of thinking and culture change.
3. Incentives. Randy Tobias once remarked that the culture of the old AT&T rewarded “getting older.” The culture, over time, became stifling and bureaucratic. Appeals to managers to change and team-building exercises didn’t work. But CEO Tobias and others after him changed incentives to reward performance, not getting older. New people were attracted by the new incentives and the opportunities presented (see previous point) and the culture began to change. The same emphasis on incentives can be seen over the years at J&J, GE, and other companies. Incentives affect behavior and performance and attract new resources and capabilities, which can lead to culture change.
4. Changing and Enforcing Controls. It’s important for companies to increase feedback, evaluate performance, and take remedial action. Emphasis should be on tweaking strategy implementation activities to achieve desired results. It’s vital to learn from performance, including mistakes, and use the lessons learned to change incentives, resources, people, methods and processes, and other factors to foster strategic and operating goals. It’s also necessary to hold managers accountable for performance results, a formal mantra of Robert Wood Johnson, Jack Welch, and many others. These actions or emphases will help to shape new behaviors, task interactions, and ways of thinking that will create or define a culture of learning and achievement.
So the issue remains – these observations are a generation apart, and to all intents and purposes not a lot changed and we are not a lot farther in knowing what to do to drive change in 2015. Clearly it is very difficult, as Machiavelli warned us.
Part 2 (to follow) will look at lessons from non-business areas for insights