Question
Based on the essay below, answer these questions 1: Is resistance to change really the norm? 2: What is the 'congruence trap' and how can
Based on the essay below, answer these questions
1: Is resistance to change really the norm?
2: What is the 'congruence trap' and how can it be avoided?
Hello, this is David Lewin. My talk today is on Change Management. An appropriate starting point for this topic is to ask why change management is so pervasive. In other words, why so many organizations, large and small, public and private, located in North America, Europe, Asia, Central America are so heavily involved in trying to cope with change and the management of change. And I think the basic answer to this question has to do with three factors that have evolved over the last 30 years, which have impacted virtually all organizations around the world. Those three factors are global economic competition, de-regulation, and rapid technological change. And these factors together combined have spurred in all nations and regions of the world greater market capitalism, which in turn reduces concentrated market power such as in the form of monopoly or oligopoly and it reduces organizational stability. It therefore increases decision making uncertainty and this is fundamentally why change management is such a pervasive issue and topic on the contemporary scene. If the management of organizational change is as pervasive a phenomenon as I have previously described so too is a related one, which is resistance to change. The basics about resistance go as follows. Organizations come into being to produce goods and/or services on a large scale and more efficiently than could be done otherwise. And in the process, these organizations provide order, control, coordination, routines, and norms, which support these stabilizing characteristics. An organization is all about stability, being able to repeat processes and practices over time to generate goods and services. And everything about these organizations emphasizes this particular set of stabilizing characteristics. Therefore, when an organization is threatened by changes in the external environment, by such things as increasing global competition and/or de-regulation and/or rapid technological change, these forces will be disruptive to the existing order, the existing control, the existing coordination, the existing routines, and the existing norms of that organization. This is why the common situation is for people in organizations to resist change. They fear the unknown and don't like to see or have to cope with the disruption that is caused by moving away from the stable or known situation. A very good analysis of resistance to change was provided long ago, specifically in 1948 by Lester Coch and John R.P. French in an article titled Overcoming Resistance to Change that appeared in volume I of the British Journal Human Relations. It's well-worth a read on resistance to change. To more fully pursue the topic of change management in this talk, I'm going to emphasize two analytical frameworks. The first is ambidextrous organizations and the second is leading change or why transformation efforts fail. The idea of ambidextrous organizations comes from the area of organizational ecology that is the study of why some organizations survive and prosper despite many changes in the environment around it, why other organizations muddle through and perform mediocre, and why still other organizations fail. This is known as the area of organizational ecology. And people who specialize in it focus on the evolution of particular organizations. And the emphasis in the ambidextrous organization framework is on periods, sometimes quite long periods, in which organizations evolve and face a whole variety of modest or incremental change requirements, raising or lowering a product price here or there, opening up an office in a new location, deciding on a new information technology system. These and many more incremental types of changes are one component of the ambidextrous organization's framework. The other component which refers to change that occurs much more infrequently is revolutionary change, a change that requires a fundamental redirection of an organization, a fundamental change in strategy, a fundamental change in vision, in operating systems and processes. That type of change can be seen as punctuating the equilibrium that has been established previously as an organization responds to a whole variety of incremental changes. That is to say, for most organizations, incremental or modest change occurs very often, revolutionary change occurs very rarely, and when it happens, it punctuates the prior equilibrium that was established through a series of incremental changes. Stated another way, over time, the fittest organizations survive and the non-fittest go out of existence. This is a Darwinian view of organizations, but one supported by a great deal of evidence and examples. Continuing with the organizational evolution theme, as organizations grow, develop and evolve, they make all sorts of changes in, for example, their strategy, their structure, the formality of the organization, the work that needs to be done, the way that tasks and jobs are designed, the skills and competencies required of the workforce and even changes in organization culture, which is formally defined as the shared norms, beliefs, values, and expectations among organizational members. And it's quite common when making incremental or modest changes to have a change in structure one time, or a change in people capabilities one time or a change in the way work gets done one time and so on. And these changes are typically driven by competitive requirements in the market place or by changes in technology or in some cases both. While short-term incremental changes require a change in one or another internal organizational element of the type just described, a major change, a transformational change, a revolutionary change requires changing the key organizational elements simultaneously. In other words, when faced with extremely challenging competition, de-regulation, rapid technological change, or other factors, it's not sufficient to make an incremental change in a strategy or in people skills or in the way work is designed, instead what is required is a simultaneous shift in the key elements of internal organizational alignment, strategy, structure, the work, the people, and the culture, And this is what is meant by a discontinuous change, moving from a prior era to a new era by changing all of the major elements at once and attempting to have these new elements very closely aligned. So organizational alignment is particularly difficult to accomplish when the change is major, transformational, and long-term rather than marginal or incremental and short-term. The ambidextrous organization's framework also calls our attention specifically towards drivers of change and traps around change. Drivers of change often take the form of changes in and cycles of technology requiring, for example, product and process innovation in which old dominant designs are replaced with new ones. One can think of the music recording industry in this regard. Early in the 20th century, certain companies produced the first long-playing musical albums, 33 configuration degrees, 78 degrees, dominated the music industry in terms of home recording technology. Later, these were replaced by smaller discs of 45-degree discs. Later, the use of plastic discs was replaced by audio tapes, circa late 1970s, early 1980s, and audio tapes became a rage and recorded music on plastic discs went out of existence. New companies came in that specialized in audio tapes. But relatively quickly, they were supplanted by the technology of a compact disc. Compact indeed, able to record large amounts, and new companies came along that prospered on the basis of producing and distributing blank discs, and then later recorded discs. But the compact disc became supplanted late in the 20th century and on into the beginnings of the 21st century by audio streaming, by direct access to musical sources. And new companies arose that were able to take advantage of this new technology. This is but one example of many in which technology, cycles of technological change, have driven some companies out of existence and brought new ones into existence and have imposed major requirements for organizational change. A related example, IBM which was the dominant computer manufacturer in the world for about 45 years, but which wound up missing the computer revolution of the 1980s, which had all about miniaturization, the development of the mouse, the development of the desktop, the ultimate development of the laptop, and the notebook computer. And IBM was faced with a major challenge to its very existence because as a financial performer, it declined rapidly during the 1980s and indeed in the early 1990s brought in a new non-IBM CEO, Lou Gerstner to head this company who then transformed it from a computer manufacturer into a service providing solutions company. Many other similar examples could be cited but they are examples of where technology drives organizational change. The trap to which I referred previously, however, has to do again with resistance to change, structural arrangements, reporting requirements, management responsibilities, subordinant reporting relationships, cross dependencies among business units, all of these aspects of an organization structure are fundamentally challenged by change requirements, as are the existing cultural norms of an organization, the dominant beliefs, values, and expectations. And in a typical situation, the existing structure and the existing culture will resist change. So the trap refers to the fact that technology and changes in it often drive change requirements, but existing structures and cultures stand as barriers to the achievement of those changes. When it comes to a formal definition of organizational ambidexterity, here it is. To master revolutionary change, this is the big ticket change, leaders and managers must periodically destroy what was created and aligned in the short run to reconstruct a new organization better suited to the next wave of competition or technology. How many organizations have done this well? One can think about Walmart, CISCO, General Electric, Siemens, many organizations that have basically had to destroy what got them there in the first place in responding to new competition, new de-regulation, new technology, and technological change. And so this distinction between the old and the new, between supporting what was and seeking actively, revolutionarily speaking what is, this captures the definition of organizational ambidexterity and there are many organizations that have not been able to achieve this dexterity and have actually failed and gone out of existence, experienced organizational death. Two examples that come to mind are Polaroid and Digital Equipment Corporation, a once revolutionary manufacturer and advancer of technology in the computer industry. This particular analysis of change management leads to a small set of guidelines for achieving successful organizational change. The first of these guidelines deals with organizational architecture, which refers to the balance of centralization and decentralization in an organization, and here the objective, often difficult to achieve, is striking the right balance. Every organization needs some centralization in order to achieve the classical purposes of coordination and control, planning, and delegation and so on. But increasingly, to respond to the particular demands of customers, specialized customers, and even mass market customers, organizations need decentralization or a measure of it, they need autonomy. Balancing the requirements for centralization versus decentralization is therefore a critical challenge in achieving an ambidextrous organization that can cope both with short-term incremental change and long-term revolutionary change well. It is a balancing act between centralization and decentralization. It's not a "one should dominate the other" despite what often occurs in both management thinking and management practice where we go through eras in which a centralized high-control approach is advocated and other eras in which a decentralized autonomous approach is advocated. Rather the trick here, the objective here, is finding a balance between the two. The second guide to achieving successful organizational change has to do with multiple cultures in an organization. And by this I am referring to, on the one hand, the need for a certain tightness of social control in an organization, the ability to rely on people to get things done in an accepted, oftentimes routine and repetitive way because that is the way that our organization generates its outputs, its goods, its services, or both. Therefore, tight social control, behavior within a fairly narrow band is required, but also required is a certain looseness, a certain autonomy, a certain amount of innovation, openness, and risk-taking. This is a long-standing dilemma in organizations. We want to ensure that people behave in predictable ways but we also want to have some unpredictability so that we can innovate, so that we can potentially get ahead of the competition, so that we can anticipate customer demands. And this takes a certain amount of letting go, a certain, if you like, lack of control, a certain willingness to have autonomy, and to tolerate mistakes that will be inevitably occurring when such freedom and anatomy is present. A wise senior management will focus strongly on balancing the tight social control with looser social control and there by achieving what is hopefully an optimum balance between the two multiple cultures. The third and final guide to successful organizational change focuses not a single senior executive, the CEO, the COO, the CFO or another, but instead on the senior executive team or the senior management team. And here the objective is to have that senior team be cohesive and strongly in support of the core values of the organization rather than being arrogant or complacent. And perhaps especially in the United States, the 1970s and early 1980s were a period of time in which many companies became very complacent about competition, about product quality, about whether employees were key resources or simply recipients of another benefit. In the 1990s, a rather striking contrast developed when the imperial CEO emerged on the scene, the head of a company who was so key or critical to that company's success and future success, that should that CEO quit or be removed or die unexpectedly on the job, the organization would suffer very hard times and that was known as the period of the imperial CEO. Interestingly, in the first decade of the 21st century, we've seen a movement away from the complacency of the '70s and '80s and the arrogance of the '90s to an emphasis among so many senior executive teams on teamwork, on innovation, on communicating those values to employees, and to customers, and to suppliers, and to other constituencies, and further, an emphasis amongst the senior management team on creating a legacy, meaning people coming along in the organization who can succeed and replace the existing top management and perform at least as well or better. This is a matter, this last guide to achieving successful organizational change based on the ambidextrous organization framework that is another balancing act. The senior management team coalescing around core values, supporting those values, communicating them, and trying to avoid the opposite pole, so to speak, of arrogance on the one hand and complacency on the other. The guidelines for a successful organizational change that I have just mentioned which are derived from the ambidextrous organization's way of thinking provide a natural lead-in to the second and final framework that I want to share with you today, which is leading change or why transformational efforts fail. Many organizations around the world have attempted to remake themselves using programs or slogans or banners like total quality management, TQM, Six Sigma, reengineering, rightsizing, restructuring, culture change, and perhaps the most pervasive, turnaround. And interestingly, when one looks at these efforts, either on an empirical basis using systematic data with large samples or on a case study basis, one finds a whole range of outcomes that is to say some change efforts have been very successful, a Krogers, for example, many have been somewhere between successful and unsuccessful, a Hewlett-Packard for example, and many have failed, AT&T has had a long history of failure as but one example. Therefore, in examining the evidence and the case examples about what makes for more or less successful organizational change, we find that there are a series of steps that must be undertaken in advance of a change effort, especially a major change effort, which if absent or if any one of them is absent will undermine the chances of a successful organizational change. Pursuing this theme of skipped phases in organizational change more fully, let's think of them as errors, big errors in organizational change. The first four of these errors are shown on the current slide and the second set of four will be shown on the subsequent slide. The first set of errors begins with the failure to establish a sufficiently strong sense of urgency, why, many people in an organization will ask, is the change needed, what makes it so urgent. Leaders of organizations therefore must be able to articulate the key reasons why a change is urgent and what some other consequences of not proceeding urgently to make that change will be. A second error, a very common one is for an individual in an organization, it could be the CEO or it could be another official, an individual who tries to communicate a sense of urgency and maybe even a vision about a new organization but is operating alone, and while sometimes a CEO can order or command a change, generally speaking, an organization needs a sufficiently powerful guiding coalition of people to be in charge, so to speak, of the change. Proceeding alone is difficult, risky, and unlikely to produce successful change, having a sufficiently powerful guiding coalition, however, can be more likely to result in successful organizational change. Sometimes that coalition can include outsiders, a customer, a supplier, a shareholder. It need not be only internal executives or employees. A third error in organizational change is the lack of a vision, it's one thing to say we have to move away from what we're doing now and here are the reasons for it. That's diagnostic, that's analytical. It's a different thing to say here is a vision of where we should be going and how we're going to achieve the vision. This is an envisioning, E-N-visioning quality, which some people have and others have but tend to under emphasize when it comes to major organizational change. So many organizational change efforts have failed due to a lack of a vision and others have failed not due to a lack of a vision but to the fourth error which is failing to sufficiently, strongly, and frequently communicate that vision. It's great to have a vision but if you don't communicate that vision to organizational members and organizational constituencies, if that isn't done sufficiently deeply and sufficiently continuously, then one runs the risk of under-communicating a vision and it's very well-known through empirical study and case examples that under-communicating a vision is responsible in part for unsuccessful organizational change, or in other words, organizational change failures. The second set of four errors in making organizational change begins with the failure to remove obstacles to the new vision. Those obstacles could be existing business units that have been perfectly satisfied doing things the same way for many years, if not decades. Those obstacles could include board members who believe that a company should continue to do what it's doing and not move in a different direction. Those obstacles could include some customers and some suppliers and some shareholders, it's one of the jobs of leadership and management to identify obstacles to the new vision, forces of resistance to changing to the new vision, and attempt to mange and when necessary remove those obstacles. Failure to do so is virtually certain to prevent successful organizational change. Having a vision which implies something about a long-term perspective should not be taken as a substitute for thinking about and having short-term benchmarks, which if achieved can create wins for an organization. One benchmark might be, "We want to increase our sales revenue by double the percentage next quarter from this quarter." That's a relatively short-term objective and one that could create a short-term win. "We want to increase our throughput time on a manufactured product between now and next month at this time," an example of a potential short-term win, "We want to raise market share by 2% points over the next six weeks," a potential short-term win. "We want to cut the ratio of our labor cost to operating cost by 2.5% over the next seven weeks," a potential short-term win. So not systematically planning for measuring and creating new short term wins is the sixth on our error list of unsuccessful organizational change. The seventh on this list is somewhat the opposite of the sixth, declaring victory or a win too soon, declaring success too soon. Suppose we're able to increase our ROI by 50% over the next six months, suppose we move from a net operating loss last fiscal year to a net operating profit this fiscal year, are we satisfied with just that? Are we stopping after six months or a year or two years or sometimes three years? Stopping can be too soon. Think about the turnarounds of companies which have been successful in the short-term, victory is declared, but long-term problems prevail, A Sotheby's or a Christie's auction houses are cases in point on this score. Mattel is an interesting example on this score having had a successful turnaround in the short-term but more difficulties meeting competitive threats in the longer term over the last six to seven years. And the last of these errors is making changes at the surface without embedding them in the organization's culture, and this might seem like a rather ironic error but it's all too true and all too common. Earlier, you may recall in the ambidextrous organization's discussion, we pointed to organization culture as a key element of organizations and indeed it is. That culture can be a strong resistor to organizational change, those norms, those values, those beliefs, those expectations, but if we have a new vision, we implement a new vision, we undertake revolutionary change, we've changed our norms, values, beliefs, and expectations, we need to anchor the change in those new values, those new norms, those new beliefs, those new expectations. This is what is meant by anchoring changes in an organization's culture. The previous analysis of errors in organizational change brings us quite naturally to a point at which we can recommend certain actions or steps for achieving successful organization change. The first of these is to establish a sense of urgency. This isn't surprising because the first error that we identified previously was the failure to develop this particular sense. When, for example, Lou Gerstner took over as the CEO of IBM in the early 1990s, he made it a point to create a dominate sense of urgency, emphasizing how critical it was for IBM to turn itself around and to move away from an old strategy of manufacturing large computing systems and some small ones into becoming a solutions company. He brought that sense of urgency to the table which wound up being critical to IBM's subsequent transformation. The second step for achieving successful organizational change is to form a powerful guiding coalition rather than to try to go it alone and so when Pierre Omidyar, the founder of eBay decided after just two and a half years from the company's founding in 1995, that the company needed a professional CEO, he wanted to go out and hire one and did eventually wind up hiring Meg Whitman who was then CEO for a decade, and the company prospered greatly under her leadership, but to bring this about Pierre created a coalition of some financial analysts who tracked eBay, of board members who were in charge of the stewardship of eBay, and some of his own senior executives. He formed a powerful guiding coalition, in other words, rather than trying to go it alone. The third step is to create a vision for change. When Sam Walton, a few years after starting up what became the famous Walmart company wanted to expand greatly, that company from operating just in one state, the state of Arkansas, he envisioned a national company, and perhaps even an international one, and he created a vision for change and then proceeded to implement the fourth step which was to communicate that vision widely and deeply. The idea that a small company based in the south of the United States could become a national and international force to be reckoned with in retail was a vision that he developed and that he wound up communicating widely and deeply. The vision that Bill Hewlett and David Packard had upon forming in their garage the Hewlett-Packard company in 1939 and proceeding to envision a worldwide producer of high caliber computing equipment and communicating that vision provides another example of the third and fourth points in the eight steps to successful organization change. The fifth step here is empowering others to act on the vision, and by others, this typically means employees. A leading example in this regard of empowerment is Southwest. The Southwest story is now well-known, but bear us repeating the devolving of decision-making responsibility to reservation agents, baggage handlers, pilots and others to make key decisions and to decide who should be hired as new employees and who should help decide what to do in a downturn, the idea of employment continuity, in what is otherwise a rapid churn, layoff and recall industry, tells a great story about a company in a difficult industry in which empowerment, the empowerment of others to act on the vision is shown graphically and shows how an organization can change successfully. Planning for and creating short-term wins, absolutely critical to the effective implementation of organizational change. Without such short-term victories, a company, a non-profit organization, a public agency, will be so dependent on achieving a long-term goal that people will lose sight of where the organization is going. All of the risk will be on that one far flung objective and this creates resistance to change. The seventh step is to try to consolidate improvements and produce still more change. Successful examples of TQM and Six Sigma in action are provided at scores of companies from 3M to Kodak to Johnson & Johnson, which have consolidated those improvements and attempted to produce, using those improvements, still more improvements with strong success records. And finally, institutionalizing new approaches, making sure they endure, they outlast those who led the new approaches. This is what real leadership is about after all, isn't it? Not having an organization solely rise or fall on the basis of the current leaders but being able to develop strengths, the vision, the execution, the enduring culture, the institutionalized processes that will enable an organization to be what we long have thought of it being a going concern that will outlive those who pass through it. Two important articles I urge you to read with regard to the coverage of these last two components of this talk are as follows, one, on Ambidextrous Organizations is by Michael Tushman and Charles O'Reilly, the second by John Kotter is titled Leading Change: Why Transformational Efforts Fail, finally, let me point out that forecasting winners and losers in the organizational change business, so to speak, is risky and perhaps the best example of that might be offered by the US automobile industry which until about 1980 featured three companies, General Motors, Ford, and Chrysler that accounted for upwards of 95% of the revenue from the sale of automobiles in the United States. They run oligopoly, their biggest problem was trying to figure out how not to produce too much to avoid antitrust prosecution, especially in the case of General Motors. Look at the American automobile industry today, those three companies are having more success in the last few months than they had in the last several years, on the brink of bankruptcy and two of the three having to be bailed out by the federal government of the United States. The key big names in automobile production in the United States include Toyota, Honda, Nissan, Mitsubishi, Hyundai, BMW, Mercedes and others. This particular industry example indicates how risky organizational change can be and how often even the dominant organizations cannot make successful organization change.
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