Evolving organizations

Transcription

1 Evolving organizations Leonardo Caporarello Organization and HR Dept.

2 Why many change initiatives do not succeed? Most significant obstacles to change Organizational resistance to change Inadequate sponsorship Unrealistic expectations Poor project management Case for change not compelling Project team lacked skills Scope expansion No change management program No horizontal process view Lack of required investments in technology % of respondents

3 Why many change initiatives do not succeed? Most significant obstacles to change % of respondents Organizational resistance to change 82 Inadequate sponsorship 72 Unrealistic expectations 65 Poor project management 54 Case for change not compelling 46 Project team lacked skills 44 Scope expansion 44 No change management program 43 No horizontal process view 41 Lack of required investments in technology 41

4 Change: a definition Change is an individual and group sensemaking process taking place in social context that is a product of constant and ongoing human production and interaction in organizational settings George, J.M., and Jones, G.R. (2001). Towards a process model of individual change in organizations. Human Relations, 54

5 Phases of change

6 How many change initiative do succeed? Michael Hammer and James Champ estimate that as many as 50 to 70% of the organizations that undertake a reengineering effort do not achieve the dramatic results they intended. A review of the research literature on change suggests that a large percentage of change efforts end in discouraging results. Experts suggest that the figure may be as high as 70 percent. So, why is introducing change so difficult?

7 Characteristics of effective change programs The 13 factors are: 1. There was visible support from the sponsor throughout the change project 2. People understood what they had to do in order to make the change work 3. The effort was adequately staffed and funded 4. The project team was dedicated and capable 5. There was a strong project manager 6. Other organizational priorities did not get in the way 7. Progress toward the goals was tracked and publicized 8. The change was explained to everyone 9. There was continued support from the sponsor throughout the project 10. The change was kept small and manageable 11. Employees were treated fairly 12. The sponsor had the support of other key executives 13. There was a detailed plan

8 Barriers to organizational change Changes usually mean: losses of power as responsibility and accountability are shifted, losses in relationships as new patterns of interaction are demanded by new approaches to management, losses in rewards, particularly status, and money, as power shifts.

9 Two basic approaches to change Based on over 40 years of study and research in the change field, Beer and Nohria suggest there are two fundamental approaches that drive change initiatives: Theory E and Theory O.

10 Two basic approaches to change Theory E is considered the hard side of change and is focused on creating economic value by increasing shareholder value (e.g. cash flow and stock price). This approach to change is often related to addressing a financial crisis of some kind. Strategies to improved shareholder value may involve use of performance incentives and bonuses, layoffs, downsizing, and restructuring. Theory E change is driven from the top. Where short-term performance results tend to be paramount, the Theory E approach to change is used more than Theory O.

11 Two basic approaches to change Theory O is characterized as a softer approach to change. The focus here is on building organizational capability by capitalizing on its human capital, building employee commitment, and creating a learning culture that can respond, adapt, and change in the face of the driving forces in its environment. Leaders of the Theory O approach to change recognize that they can t manage change by themselves or issuing an edict from the top. Leaders rely on bringing out the hidden talent in their workforce by involving them in the process and reinforcing behaviors and attitudes that will help ensure success.

12 Managing the change: dimensions The following dimensions provide a useful way to think about creating and implementing organization-wide change: Driving forces Change assessment Change/project leader Planning change Implementing change Evaluation

13 Managing the change: driving forces The more important of these forces include: Human capital Economic and Global Technological Political-Legal Competitive Dynamics Environmental

14 Managing the change: driving forces Force Examples Human Capital Changing demographics Diversity Competency deficit Labor crisis Employment disputes New CEO, boss or leader Economic and Global Change in interest rates Economic downturn Industry meltdown (e.g. tech sector, dot-coms) Deregulation Regulatory changes Technological Automation Information technology Political-Legal Sarbanes-Oxley Act Basel II, Basel III

15 Managing the change: driving forces Force Examples Competitive Dynamics Mergers and acquisitions Turnaround Downsizing Bankruptcy Competitive moves of rivals Cost trends/inefficiencies Improve work processes Change in ownership Environmental Natural disaster Increased security threats

16 Managing the change: change assessment If management is slow to respond to the human capital, competitive, economic, global and other forces, the organization will most likely fall behind rival firms and possibly impair overall organizational performance. Sound analysis of the firm s driving forces is therefore a prerequisite to good change strategy.

17 Managing the change: change agent One of the key success factors in any change initiative is ensuring you have a visible project manager or champion who takes ownership and can muster the resources and provide the expertise and operational know-how necessary to guide the change to success.

18 Managing the change: planning change Planning change relates to all the activities that must be covered and in alignment before a change is actually implemented. Thus, effectively managing change requires a good alignment or fit beginning with a good strategy and then appropriately aligning the remaining elements to support that strategy.

19 Managing the change: implementing change Implementing change is the most challenging aspect of any change effort. Among the others, a useful framework for managing any change implementation effort is Lewin s classic three-stage sequence of unfreezing-change/movement-refreezing.

20 Managing the change: evaluation This dimension of the change process focuses on determining what progress is being made with the change effort. However, change plans don t always turn out the way they are intended. Knowing how to lead and manage a change initiative is, in itself, a key core competence.

21 What to ask before launching a major organizational change The big question Probing for the right answer Is the practice better than what you are doing right now? Is the change really worth the time, disruption, and money? Is it best to make only symbolic changes instead of core changes? Are you already doing it under another banner? How often does it succeed elsewhere? Can you test it in your organization first? Are your time line and budget realistic given what actually happens to other companies? Do the people who are selling you the solution have incentives for underestimating the costs? Is this a core change that will actually hurt the organization s performance? Are powerful groups inside or outside the organization clamoring for this change anyway? If you fail to make any changes, will it damage your organization s reputation and key relationships?

22 What to ask before launching a major organizational change The big question Probing for the right answer Do you have enough power to make the change happen? Are people already overwhelmed by too many changes? Do you have enough internal support and resources? Are your current allies powerful enough? Do you have a strategy for strengthening supporters and weakening opponents? Do people believe that this change will actually stick, or is it just a flavor of the month? Are people still trying to recover from the last major change? Are they still implementing it, or still so exhausted that they are not ready for the new change? Are so many other things being changed at once that people couldn t possibly do everything well?

23 What to ask before launching a major organizational change The big question Will people be able to learn and update as the change unfolds? Will you be able to pull the plug? Probing for the right answer Is the team showing that they can learn and improve the planned change in response to resistance, criticisms, and suggestions - or do they simply dismiss all concerns as stupid ideas from stupid people? How will you know it is failing? How will you know when it is time to quit? Who will judge it a failure and pull the plug? Is doing the change good for you, but bad for the company? Will doing it increase your fame, prestige, or pay? Will doing it mean that someone powerful owes you a favor? Will it make your job easier and everyone else s harder?

24 Influence and attitude to change: four profiles Attitude to Change High Influence, power Low Resistance Resistors (neutralize early) Bandwagon (mobilized using bandwagon effect) Champions (get early support) Innovation Followers (mobilized by champions)

25 Main elements to mitigate/overcome resistance to change D x V x P(F) > R

26 Preferred communication mean according to the information transmitted 3.00$ Perceived(importance( 2.50$ 2.00$ 1.50$ Communica1on(tools( Mee*ng$ Tele/Video$conferencing$ $ Internet$based$tools$ Evolved$tools$ 1.00$ Visionon strategy goals Roles & responsi bilities Work progress Relevant informat ion Bocconi, work-in-progress

27 Error 1: Not Establishing a Great Enough Sense of Urgency This first step is essential because just getting a transformation program started requires the aggressive cooperation of many individuals. Without motivation, people won t help, and the effort goes nowhere. When is the urgency rate high enough? The answer is when about 75% of a company s management is honestly convinced that business as usual is totally unacceptable. Anything less can produce very serious problems later on in the process.

28 Error 2: Not Creating a Powerful Enough Guiding Coalition A high sense of urgency within the managerial ranks helps enormously in putting a guiding coalition together. But more is usually required. Someone needs to get these people together, help them develop a shared assessment of their company s problems and opportunities, and create a minimum level of trust and communication. Groups without strong line leadership never achieve the power that is required.

29 Error 3: Lacking a Vision In every successful transformation effort, the guiding coalition develops a picture of the future that is relatively easy to communicate and appeals to customers, stockholders, and employees. A vision always goes beyond the numbers that are typically found in five-year plans. A vision says something that helps clarify the direction in which an organization needs to move. In failed transformations, you often find plenty of plans, directives, and programs but no vision.

30 Error 4: Undercommunicating the Vision by a Factor of Ten Three patterns with respect to communication. In the first, a group actually does develop a pretty good transformation vision and then proceeds to communicate it by holding a single meeting or sending out a single communication. In the second pattern, the head of the organization spends a considerable amount of time making speeches to employee groups, but most people still don t get it. In the third pattern, much more effort goes into newsletters and speeches, but some very visible senior executives still behave in ways that are antithetical to the vision. The net result is that cynicism among the troops goes up, while belief in the communication goes down.

31 Error 5: Not Removing Obstacles to the New Vision The more people involved, the better the outcome. Communication is never sufficient by itself. Renewal also requires the removal of obstacles. Sometimes compensation or performance-appraisal systems make people choose between the new vision and their own self-interest. Perhaps worst of all are bosses who refuse to change and who make demands that are inconsistent with the overall effort.

32 Error 6: Not Systematically Planning for, and Creating, Short-Term Wins Real transformation takes time, and a renewal effort risks losing momentum if there are no short-term goals to meet and celebrate. Most people won t go on the long march unless they see compelling evidence in 12 to 24 months that the journey is producing expected results. Creating short-term wins is different from hoping for short-term wins. The latter is passive, the former active. Commitments to produce short-term wins help keep the urgency level up and force detailed analytical thinking that can clarify or revise visions.

33 Error 7: Declaring Victory Too Soon Until changes sink deeply into a company s culture, a process that can take five to ten years, new approaches are fragile and subject to regression. Typically, the problems start early in the process: The urgency level is not intense enough, the guiding coalition is not powerful enough, and the vision is not clear enough. But it is the premature victory celebration that kills momentum. And then the powerful forces associated with tradition take over. Instead of declaring victory, leaders of successful efforts use the credibility afforded by short-term wins to tackle even bigger problems.

34 Error 8: Not Anchoring Changes in the Corporation s Culture Change sticks when it becomes the way we do things around here. Until new behaviors are rooted in social norms and shared values, they are subject to degradation as soon as the pressure for change is removed. Poor succession decisions are possible when boards of directors are not an integral part of the renewal effort.

35 The need for changing organization design and structure: case analysis

36 The need for changing organization design and structure: case analysis Q1: Based on the described situation, would you suggest to the company to adopt a radical change or a gradual one? 1=radical change, 2=gradual change Gradual'change' 47%' Radical'change' 53%'

37 The need for changing organization design and structure: case analysis Q2: Was there any sense of urgency for change? 1=yes, 2=no No$ 6%$ Yes$ 94%$

38 The need for changing organization design and structure: case analysis Q3: Davesh s proposal was: Basically, we have to develop a detailed communication plan for designing and implementing the changes. In general, according to you, is a communication plan important for the success of a change initiative? 1=not important at all, 5=very important 90%# 80%# 70%# 60%# 50%# 40%# 30%# 20%# 10%# 0%# 1# 2# 3# 4# 5#

39 The need for changing organization design and structure: case analysis Q3b: Moreover, is it true that a communication plan should be defined since the very beginning of a change initiative? 1=yes, in most of the cases, 2=yes, in some cases, 3=yes, in a few cases, 4=no, it s better to give communication once the change has been launched, 5=no, it s better to keep it as confidential 80%# 70%# 60%# 50%# 40%# 30%# 20%# 10%# 0%# Yes,#in#most#of#the#cases# Yes,#in#some#cases# Yes,#in#a#few#cases# No,#it s#be=er#to#give# communicabon#once# the#change#has#been# launched# No,#it s#be=er#to#keep#it# as#confidenbal#

40 The need for changing organization design and structure: case analysis Q4: Pankaj was pushing Devesh to implement the change program as soon as possible. According to you, was this request consistent with the type of change the company needed to adopt? 1=not at all 5=definitely yes 40%# 35%# 30%# 25%# 20%# 15%# 10%# 5%# 0%# 1# 2# 3# 4# 5#

41 The need for changing organization design and structure: case analysis Q5: Considering the situation as described in the case, do you agree with the following Davesh s statement? Initially, the changes should be limited to our critical requirements. 1=yes, 2=no No$ 12%$ Yes$ 88%$

42 Does Change management matter? Second round

43 Change initiative: some management tips Start with the analysis of individuals involved in the process Change process is not linear and has a curvilinear shape If you do not commit people at the beginning it s too late Change process has a rhythm You should guarantee coherence (internal; external) Don t try to convince everybody in a single shot; do not start from high power-high resistance people Use the power of the network for getting people on board

44 Your mandate

45 Your mandate 1. Module evaluation will be based on a final individual written assignment 2. The assignment is about a real organizational challenge you are experiencing or have experienced in the past, to be analyzed through the approaches and frameworks presented and discussed during the module 3. The format of your final output is a.doc document, that should contain no more than 8000 characters spaces included (+ 5% allowed). 4. The assignment will be evaluated according to the following three criteria: 1. Structure and format of the document 2. Clarity and linearity of the content 3. Appropriate use of the references, framework, and recommendations presented during the module 5. Your output has to be uploaded on the Learning Environment, within the Organization Module, by Nov , 10pm (CET)