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Nadler, “Champions of change,” Ch. 2

Nadler, “Champions of...

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Unformatted text preview: Chapter Two Where to Start Understanding Organizations Your first visit to a new company can be awfully confusing. From the outside you see the front of the headquarters build- ing and the visitor’s entrance—but not much more. Inside you see a maze of offices and work areas—but at first glance they don’t seem to be arranged in any particular pattern. You see people rush- ing busily to and fro, but you have no idea what they’re doing or what, if anything, they’re actually accomplishing. Ifyou’re to have any chance of quickly making sense of what’s going on—of how the company is organized and how it really op- erates—you need a mental template, a systematic way to observe and understand the organization. For executives and managers in- tent on leading change, that kind of template, or model, is essen- tial. Without it you haven’t a clue where to start. Lucent Technologies CEO Henry Schacht, who has led massive change at two very different companies, describes it this way: “The most fundamental issue about managing change, or creating change—whichever is required—is an assessment of where you are. . . . Understanding the topology of where you start is absolutely critical, as opposed to ‘I have a set of things I do to manage . change. Here’s my bag of tricks.’ If a doctor, diagnoses a patient with X, he prescribes one kind of medicine; if he diagnoses the pa- tient withY, he prescribes another kind of medicine. You don’t use penicillin when physical therapy is indicated.” ‘ Throughout this book I’m going to be talking about organiza- tional change in terms of a model my colleagues and l have devel- oped and refined over the past two decades. The purpose of this 21 22 CHAMPIONS or CHANGE chapter is to share with you that model, that basic perspective on organizations, and to provide you with terms and concepts funda— mental to diagnosing and understanding the need for change in any organization. Dynacorp: A Case Study I’m going to start with a case study I’ve used over the years with hundreds of managers (Delta Consulting Group, 1980). All the names have been changed to protect the innocent, but rest assured that the following scenario is based on a very real set of circum- stances that prevailed several years ago at a leading corporation. The Dyna Corporation—better known as Dynacorp—is a major global player in the field of information technology. You are an executive at Dynacorp. You’ve done well with the company; over the past eight years, you’ve held a succession of increasingly responsible positions in its key European markets. N ow, during a troubled and volatile period for this once-dominant organiza- tion, you’ve been told you’re about to become executive vice president for US. Customer Relations. You’re well aware of your company’s recent history. Formed in the 19603 and transformed in the 19795 by high-tech developments, Dynacorp sped into 7‘ the ’805 with strong growth based on its reputation as an innovative provider of high-quality products. But the past decade has been tougher. Smaller companies and Japanese competitors have matched your innovations, and your image as a high-tech ' leader is slipping. Although the trend in your market was shifting heavily to- ward wholly integrated office “solutions”—combined offerings of networked hardware and software, professional support, and special applications—you kept trying to sell updated versions of your old reliable stand—alone machines. And customers who in the past would willingly wait up to a year for your prod- ucts because they were considered the best new are turning to competitors who can give them something just as good, but faster. Faced with slowed growth and decreased earnings, Dynacorp started mov- ing two years ago to address the new competitive realities. Management reor— ganized the company, moving from a functional organization to a set of end-to-end business units responsible for development, manufacturing, and WHERE TO START 23 marketing. But at the same time the managers decided to retain the existing field organizations rather than create multiple salesforces, a move they saw as costly and possibly a barrier for customers who frequently dealt with Dynacorp for a whole range of products. So, back to you. You’ve returned briefly to New York City, mainly to find an apartment. You figure since you have a few extra hours you’ll stop in and see the man you’re replacing, Carl Greystone, who’s about to retire. Greystone, one of the few people aware of your still—unannounced promotion, is more than happy to meet with you in his office on the thirty-fourth floor of the Dy- nacorp building and give you an overview. “Yes,” he says, gazing with a satisfied smile at the landscape of midtown office towers beyond his office window, “we’ve made the big changes—we’ve reorganized into Regional and Customer Teams, and we have our people thinking about the business in new terms. I think we’re beginning to see the light at the end of the tunnel.” Greystone arranges for you to chat with Ben Walker, Vice president of the Northeast Region, “my most experienced general manager.” Walker assures you the new strategy is headed in the right direction; the problem is that the company is trying to meld an army of free-wheeling equipment salespeople into seamless teams to help customers solve complex office and communica— tion problems. “The skills and attitudes on many levels are mismatched with our current needs,” Walker says, and estimates at least 25 percent of the staff will have to be replaced. Then he walks-you down to the fourteenth floor to meet with branch manager Martha Pauley. The details start getting a little grittier. The reorganization has been so hectic, Pauley tells you, that there hasn’t been time for any of that training on how to sell solutions instead of specific products. She keeps meaning to hold off-site sessions but inst can’t find the timeAnd whenever she’s about ready, someone upstairs revises the job guidelines. What’s more, her people are still losing sales to competitors who offer lower prices and swifter technical support, and that new plant in Asia that was supposed to help cut prices has run into all kinds of problems. 7 Then she takes you down the hall to one of the meetings each account team is supposed to have every two weeks. Upon arriving, Pauley is surprised to find that half the team members are missing; they’re attending the introduc- tion of a new product line. Then come the reports—all bad. The competitors 24 CHAMPIONS or CHANGE are offering betterprices, better support, better integration of equipment and software. _ “This situation is getting very depressing,” remarks a member of the sales team. For you too. Returning to Greystone’s office, you look at your watch and see that you have only a few minutes left before you have to leave for the air- port. You desperately want to talk with Greystone and figure out what’s really going on in this operation you’re about to inherit, but you have time to ask him only four questions. What would you ask? Yes, it is a test in a way—one Delta consultants have given to hun- dreds of managers with whom they’ve done the Dynacorp exercise. What’s interesting is the range of different questions people want to ask Greystone: “Show me your strategic plan.” “What do your monthly and quarterly results look like?” “Describe to me how you implemented the reorganization plan.” “Show me your staffing records.” “Explain your plans for tactical support.” It’s a fascinating exercise. Everyone who participates in it is con— strained by the same knowledge—it’s all contained in a twelve- ' minute videotape—but somehow, everyone comes away with different, and sometimes radically different, ideas of what’s going wrong. 7 Why is that? Let’s step back into character once again and give this a little more thought. You’re going to succeed Greystone, and soon. So what is it you really want to do? You want to take action, of course. Before you can do that, you need an action plan with clearly defined and carefully staged ac— tion steps. Those steps in turn convert solutions into action—so first, you have to arrive at solutions. Clearly, you can’t identify so- lutions unless you fully understand the problems, and that under— standing is impossible until you’ve analyzed the available data. So WHERE TO START 25 the first crucial step in sizing up Dynacorp—or any new or chang- ing situation in which you find yourself—is to collect data. The problem is, the moment you walk in the door of Dyna- corp—or virtually any organization you can think of—you are im- mersed in information of every imaginable kind. It’s not just the hard data contained in research and reports and financials; every- where you turn, people want to give you their version of Dynacorp reality. Years ago in a graduate program at Harvard Business School I took part in a research project headed by Harry Levinson in which five of us were assigned to perform a full-scale diagnosis of a three-hundred—bed hospital in Cambridge, Massachusetts. We each spent fifteen hours a week for eight months just doing diag- nosis, and at the end of those eight months we had a pretty good idea of what was going on inside that hospital. But you don’t have that kind of time. In the business world no one does. So either consciously or subconsciously, you’re going to make some discriminating decisions about what data to collect. That is, you are always going to pick up on some things and ignore others—just as everyone who goes through the Dynacorp exercise zeros in on some things and pays little or no attention to others. Everyone sees the gap between Greystone’s glowing appraisal and the sense of despair that pervaded the team meeting; beyond that, each participant seizes on different symptoms, problems, conflicts, outcomes—different data. Why? Because we all have prior notions of how business systems should work. Anyone stepping into Greystone’s job—in fact, almost anyone with the business experience to have become a manager— has formed some deeply held ideas of how an organization should be structured and how it should operate. Though few of us would describe these notions as an organizational model, that is in fact exactly what they are—a set of assumptions, rarely explicit or all en— compassing but very real to each of us nonetheless. This set of as— sumptions constitutes the ideal against which we match any unfamiliar situation in which we find ourselves. Here’s the problem. Your model—that prism through which you view every organizational situation you’re likely to encounter— is the product of your own experience. Therefore the validity of that model, its capacity to help you understand and predict what’s going to happen in any organizational setting, is based on the ~— 26 CHAMPIONS or CHANGE assumption that what you’ll deal with in the future is what you’ve dealt with in the past. Now think back to Chapter One and the notion that practically everything in the business environment is changing—and chang- ing faster all the time. Where does that leave you if your percep— tual guidebook for sizing up a new situation is obsolete the moment you walk in the door? These aren’t abstract theories. Remember how we got here: I was discussing how every manager’s personal organizational model largely determines what data he or she thinks is important to col— lect. In fact, the model shapes not only what data managers collect but how they collect it—in what form, and from whom—and how they analyze it, what they perceive as problems, what they conceive of as solutions, and how they go about putting those solutions into action. The Congruenee Model Given how crucial organizational models are to each manager’s ability to analyze and act upon a situation involving fundamental change, my colleagues and I have devoted much of our work to refining a model that is profoundly useful. I’m not suggesting that it is the only model available” or even the best one; what I can tell you is that it has been developed over nearly twenty years of hands— on work with practically every kind of organization and that it has worked for literally tens of thousands of managers who have used it It is not heavily biased toward any particular kind of solution; it is, above all else, a helpful tool, one that performs the true func- tion of a model—to take something complex and make it simpler. This model guides managers to an understanding of the con— cept of organizationalfit. It helps them answer the basic question, How do we Understand and predict the patterns of organizational behavior and performance? Because if managers can’t do that, they don’t stand a chance of understanding and managing change throughout the enterprise. When I ask people to draw an organization, the vast majority come up with a traditional table of organization, with columns of boxes connected by straight lines. To be sure, that’s one organiza- tional model; it has enjoyed great popularity for close to two thou- , : Hmlwwv: WHERE TO START Z7 sand years, starting with armies and the Roman Catholic Church. But as a way of looking at organizations, it’s terribly limited and in- credibly static; it leaves you without the essential tools to figure out what’s actually going on along those lines and between those boxes. You could easily draw a table of organization for Dynacorp’s U.S. Customer Relations operation, but you’d still be a long way from diagnosing the problems. Instead, as I’ve worked with CEOs to help them understand how their organizations have to change in order to compete suc- cessfullyrin a constantly changing environment, I’ve employed a much more dynamic way of looking at an organization and orga— nizational fit—what my colleagues and I have come to describe as the congruence model. Some History The congruence model rests on thinking first formalized in the late 19405 when people in the physical sciences developed the concept of a system as a set of elements that took input from the environ- ment, subjected it to some form of transformation, and produced an output (see Figure 2.1 later in this section). Think of this in very simple business terms: a company takes the input of capital, mate- rials, and technology, subjects it to a transformation process, and the result is an output of products, services, earnings, and em— ployment. Moreover, these early theorists believed a true system had the capacity to alter its input and transformation processes based on how the output was received or responded to; it pro— duced and used feedback, in other words. But this systems theory generated little interest. In the mid— 19605, Harvard and University of Michigan researchers looked fur— ther at the common characteristics of systems and organizations: both take input, produce output, are influenced by feedback, and are interdependent—if you change one piece, another piece changes. The work was interesting and insightful—but it still met with a collective shrug. Then in 1975, when Michael Tushman and I were both teaching at Columbia University, we came to believe it was important to develop and teach a unified theory of organiza- tions; that is, we saw applications for systems theory in examining businesses as systems. Building upon the work of others (Katz and 28 CHAMPIONS or CHANGE Kahn, 1966; Lorsch and Sheldon, 1972; Seiler, 1967), we tried to develop a simple, pragmatic approach to the problem. Other peo- ple—in particular Harold Leavitt at Stanford and Jay Galbraith at MIT—were doing the same thing at the same time. The resulting convergence of thought helped me and my colleagues develop and refine the approach that became the congruence model. Some Basic Organizational Components As you’ll see, the model provides a simple, straightforward way to understand not only how an organization looks as a system but also how it works—or doesn’t. Let’s begin by examining the elements that constitute the basic components of every organization. These are among the components we have to analyzerto diagnose orga- nizational fit. Input At any particular time, each organization operates with the fol— lowing set of givens. Taken together, these three factors constitute the input component of the organizational system. The environment. This includes. all of the forces, conditions, and players operating outside the boundaries of the organization. They can be customers, labor unions, competitors, suppliers, techno- logical developments, regulatory restrictions, communitieS—the list goes on. The environment exerts powerful demands that the organization must successfully respond to or die. It exerts con- straints on the organization, and it provides opportunities to capi- talize on organizational competencies. An important note: this model applies equally to organizations and to discrete units within larger organizations; in the latter case, the parent organization be- comes a huge factor in a unit’s external environment. In terms of organizational change remember this: virtually all large—scale change originates in the external environment. It does not bubble up from within the organization through some myste- rious process of spontaneous generation. Something is happening “out there” that is causing so much anxiety that change is un— avoidable. A case in point: back in the early 197 Os, when I was on the staff of the Institute for Social Research at the University of WHERE TO START 29 Michigan, some of my colleagues and I got federal research money to investigate the relationship between quality and worker in- volvement. One day we headed out to One American Road in Dearborn, the worldwide headquarters of Ford Motor Company, to offer Ford executives the chance to participate in our ground— breaking project, at no cost to them. They listened incredulously to our research subject and then asked, “Why would we want to do that?” About ten years later, Ford got interested. Why? Because the explosion in japanese auto sales was sending shockwaves through Detroit, forcing U.S. carmakers to take a close look atjapanese management techniques—including quality and worker involve- ment. Faced with a threat of historic proportions, Ford launched a massive and fairly successful quality initiative of its own, captured in the ubiquitous advertising slogan, “At Ford, Quality is Job One.” But quality didn’t climb to the top of Ford’s chart by itself; it took a lot of help from Toyota and Nissan and Honda. And that’s the way major change almost always starts—from the outside. Resources. These are the organizational assets that have poten- tial value in light of the demands, opportunities, and constraints of the environment. Resources can be tangible assets such as capital, plant, facilities, and numbers of people, or they can-be intangible ones like customer relations or the creativity of key employees. And of Course there’s money. Keep in mind that current assets don’t necessarily hold their value. AT&T, for example, viewed The Net— work—its nationwide system of in—ground copper wire—as one of its most valuable assets. As fiber optics made copper wire obsolete, however, AT8cT found itself forced in 1990 to write off billions of dollars for that very same network. Histmy. This comprises the past events, activities, and crises that continue to influence the way the organization works today. Like people, organizations are massively influenced by their experience, perhaps more than they realize. In the late 19805, I was trying to help Xerox figure out why it was having so little success with joint ventures and alliances. As it turned out, history was a major factor. Xerox, founded as the Haloid Corporation, had initially spent nearly fifteen years developing the process it was to call xerogra- phy. When it designed its revolutionary new copier in the late 1950s and sought a larger partner to assist with production, sales, 50 CHAMPIONS or CHANGE and distribution, it contacted such major corporations as IBM, GE, and RCA—...
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