12 Principles of Organizational Transformation

12 Principles of Organizational Transformation
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by Bill Trahant, W. Warner Burke and Richard Koonce

BRIEFCASE

By diagnosing your company's health according to the 12 guiding tenets of "leadershift," you can decide whether or not it needs a face-lift or simple touch-up. In any case, change is a coming.

Change. It's the one constant in business today. Yet many companies do a less-than-spectacular job of managing in-house change initiatives, or responding to changes in the external business environment. Numerous studies indicate that as many as two-thirds of all restructuring and reengineering efforts fail in some way, including living up to expectations. And we all know companies that have grown complacent in light of longtime marketplace dominance, responding slowly to changing customer tastes or failing to see their competitors' ability to manufacture products at lower costs offshore.

How can you make sure your company stays alert to the need to change? Equally important, how do you ensure that your organization develops the capacity for continuous change and renewal in an age of globalization, accelerating development and deployment of new technologies, and the rapid, sometimes-overnight emergence of new competitors, products and markets?

For years, companies have used downsizing to cut costs, streamline their structures and ostensibly improve operating effectiveness. And for years, there's been mounting evidence that downsizing alone does little to improve organizational performance or profitability, but can, and often does, dampen employee morale and productivity.

In other cases, CEOs have often believed that changing their organization for the better involved nothing more than redrawing the organization chart, realigning reporting relationships at the senior level, for example, or redesigning how different divisions and lines of business report up the chain of command. But as with downsizing, toying with change in this way doesn't give you sufficient leverage to really make a difference, whether your goal is to improve operating efficiency, move in new market directions, respond to new customer demands or tighten up operating costs.

Understanding Change Factors

How do you know what is most important for your company to think about, as you ponder ways to become more responsive to customers or more innovative in your production? How can you tell which of these factors will potentially facilitate large-gauge transformation efforts, or conversely, stop you dead in your tracks? Most importantly, how do you create a climate of organizational alignment in your organization that results in optimal productivity and performance?

One way to answer all these questions is to conduct a change-readiness
assessment. Doing so enables you to look at your organization as an organic "system" made up of interdependent parts. The data you collect about each part of your organization as the result of an employee assessment can then be used to plan and successfully manage change initiatives.

To be successful, broad-gauge organizational change must be implemented at two distinct levels in an organization: the transformational and transactional. Transformational gives you insight into how much employees know about the external environment of the firm. Who are the customers and competitors? How well does the company understand and respond to the requirements of its customers?

An assessment must also give you an insider's view of how well employees understand the firm's mission and strategy. Further, what are the employees' perception of management? Do they trust them? Do they consider them successful motivators? And what do employees think about the firm's culture? Is it oppressive or empowering? Answers to questions such as these provide grist for the mill.

From a transactional standpoint, the focus is on the organization' s
internal structure. How do reporting relationships and lines of business
affect organizational effectiveness? Does the firm promote autonomy or
teamwork? Next, what do people think about systems, such as technology, policies and procedures that support how people get their jobs done? Does current office technology support people in new ways emphasized by top management, or not? Determine what employees think about management practices, work climate and performance issues: Does management support the firm's new emphasis on individual accountability and job ownership? Do employees' skills match their jobs? Is the company profitable and productive?

After the survey, tally and score the responses. Assigning weightings to
different variables is useful since it prioritizes organizational issues.
Using a diagnostic survey allows you to plan and initiate change efforts
based on research.

Guiding the Change

While assessments are a critical part of planning successful transformation efforts, they are only a starting point for actually doing the work. You also need a set of operating guidelines with which to manage your change plans and help you stay on track. In essence, these form a philosophical and methodological framework for the change work you are doing.

In that spirit, there are 12 guiding principles that a company should keep in mind as it plans, designs and implements transformation efforts. These are also referred to as the 12 principles of "leadershift," because they require business leaders to think about change in new, multi-dimensional ways that they may never have considered before.

1. Understand the external environment in which your company operates, and you will never be blindsided by your customers or your competitors again.

As a CEO or change agent in your organization, you probably know the story of the boiled frog. If a frog is put into a pan of water that is slowly and imperceptibly heated to the boiling point, the frog stays in the pan. It is lulled into a false sense of security, fails to notice the change in water temperature and ultimately dies. By contrast, a frog put directly into a pan of boiling water will quickly jump out and save itself.

Unfortunately, many companies today become "boiled frogs" because they fail to notice micro-changes in the business environment, a fact that often leads to their demise, or at least to dwindling market share and lost profits.

For example, General Motors saw the evidence from California in the 1970s that there was a swing away from U.S.-produced cars, but dismissed it as unimportant and not the precursor of the consumer's growing preference for foreign cars, which in fact it was. It took years of declining sales and eroding market share before the company finally realized that its traditional customers were deserting it in droves for foreign manufacturers whose cars were more reliable and less expensive.

In today's rapidly changing business environment, you must keep abreast of what is happening in the external environment if you hope to retain customers, build market share, outpace your competitors or capitalize on new business opportunities. That means anticipating trends or changes in the political environment that can impact the business climate, even new technologies and scientific discoveries that can change the nature of business overnight.

2. Enlist people's passion and energy to support your company's mission and strategy.

Do this, and you will never lack the arms and legs necessary to achieve
what you set out to do. Lou Gerstner, CEO of IBM, was right when he said, "Change isn't something you do by memo. You've got to involve people's bodies and souls if you want your change efforts to work." This is something that smart companies know how to do, even when you might imagine it would be difficult.

Can your company say that it elicits passion on the part of employees in
ways that support your company's mission and strategy? You might not expect a lot of passion from the division of a worldwide pharmaceutical company that makes colostomy bags, yet people in this division believe passionately in what they do, and in servicing their customers. So it doesn't really matter what your company makes--chemicals, computer software or colostomy bags-- strive to create an emotional bond between your people and your company's mission. If you do, you'll find that people will cross rivers for you.

3. Remember that while charismatic leadership may grab the headlines, it is steady and consistent leadership that actually results in changes to the bottom line.

There's a popular myth in management circles today that the only kind of leadership which really counts is charismatic leadership. But while
charismatic leadership (ˆ la Chrysler's Lee Iacocca) can be effective,
grabbing headlines and adding points to your company's share price, it
isn't always essential to the success of a change effort. Sometimes it's
not even what you really want. Why? Because change efforts launched by high-profile CEOs sometimes fail to achieve the momentum they need to succeed. They may be announced with great fanfare one month, only to be shoved to the back burner of business concerns the next. This has given rise to much of the cynicism that circulates today about change management initiatives and what has led, in some cases, to them being described as nothing more than "flavor-of-the-month" corporate faddism.

What you really need in your CEO is someone who provides clear and
consistent leadership to people, a leader who can "tell the story" of his
company and where it's going in a compelling way that grabs the interest and lights the passion of people from the boardroom to the mailroom. This kind of leader is effective at a transformational level in the organization--an individual's ability to set the stage for change at a high level--and can also spark people's commitment to change at a transactional level--the level of core processes, work teams and individuals' jobs.

4. To change an organization's culture, you must first change people' s
behavior.

Too many change reports flounder today because a company tries to change its employees' beliefs, values and work schedules rather than change people's everyday behavior on the job. Stress new ways of working in your organization, communicate with people frequently and reinforce work expectations with the right kinds of policies and procedures. Ultimately, a new corporate culture will emerge.

5. Let service to customers drive your company's structure.

Too many companies fall into the trap of tinkering with their organization's structure--who reports to whom, which lines of business report where, for example--in an effort to bring about large-gauge organizational change. Ultimately, however, such efforts fail, because they don't significantly impact employees' methods of working or the design of key work processes.

Experience teaches us that the structure of an organization should be
developed in response to and not as a precursor to the nature of the
corporate mission and strategy. It should support where you decide to go, not be the first thing you change in your organization when you reengineer or restructure.

6. If you implement the right systems to support people in their work, that
will help create the "climate of alignment" you need for success.

To be successful, change efforts must impact an organization not only at the large-gauge transformational level--the level of culture and leadership--but also at the transactional level. If you want an organization to change the way it gets work done, upgrade the workstation technology that enables people to do their jobs. To motivate people to work in new ways, overhaul old-style reward-and-performance appraisal systems, and find other ways to create an environment that reflects new business goals and a new corporate mission and strategy.

7. Managers must give employees what they need to succeed or, in some
cases, get out of the way.

Managers must be tuned into the best ways to manage and motivate people in times of change. This may require you to do away with outmoded management practices that reinforce individual performance, for example, when you're trying to move to team-based work. Or, it may mean educating managers about the best ways to be team leaders of work groups, as opposed to top-down delegates of work for others.

8. Teamwork may be un-American, but it's essential to your success.

Teamwork is critical to success with any change effort. And while there's been much talk about teams in American workplaces, it doesn' t mean they are a cinch to implement or easy to maintain. Indeed, "teamwork" runs counter to the American tradition of independence and self-reliance. Yet, in today's workplaces, collaboration and interdependence are the values that count most.

Teams are a high-maintenance work approach to implement. They require trust and the commitment on the part of everyone in your company to make a reality--from the CEO to the folks on the loading dock. They must be effectively integrated as a core element in your company's work climate, if they are to help drive change initiatives.

9. A productive employee is a happy employee--not the other way around.

More hot air has been exhaled on the mystery of employee motivation than on just about any other managerial issue. It is more important to give people modems than to give them motivational speakers; more essential to success that they have the tools and technology to complete work tasks than trite slogans, smile buttons and "feel-good" corporate events to buck up their spirits. Give people what they need to succeed: Stress the important link between what they do each day and the health of the company, and they'll be motivated to perform at their best.

10. Strive for a good fit between the skills people have and the everyday
jobs they do.

There's strong evidence that recruiting, selecting and matching people
carefully to the jobs they do has a major impact on performance. Hire a
person who is overqualified for a position, and he is likely to grow
restless and discontent in that job. Hire a person who is underqualified, and your organization's performance may suffer due to poor work habits and even incompetence. Paying attention to this detail as part of managing change efforts can make all the difference between achieving breakthrough business success and realizing only lackluster organizational performance.

11. Remember, employees are people, too.

In an age of mergers and acquisitions, downsizings and restructurings,
creating a new kind of partnership with employees is clearly important to business success. As companies have moved away from providing people with lifelong (or even long-term) job security, they have created anxiety and insecurity in the very people they want to make more productive. That's why career development, employee coaching and mentoring and other kinds of assistance provided to people can send the message that the company cares about them, even as it is communicating new work expectations and realitiesto them.

12. Beware the false indicators of success. Recognize that a broad and
balanced approach is the only way to successfully sustain organizational performance.

Just as it is easy to impact short-term productivity through downsizing
(You can always report an increase in the next quarter's profits if you've
just laid off a lot of people, right?), it's easy to get initial or short-term indicators of success with change efforts, which may, in some cases, mask problems or imbalances in your reengineering approach.

For example, strong leadership that clearly articulates to people where the organization is going may conceal the fact that you still lack the
appropriate systems and management practices to reinforce new ways of working.

To truly assess the success of any change initiative, you need to take a
broad and balanced approach to grading your success. In other words,
dynamics in each of the 11 organizational domains identified the
organization's initial need to promote teamwork for real change to be
realized and sustained over time.

As you proceed with change efforts, how do you determine how well you're doing? It is critically important that you regularly monitor the climate of alignment emerging in your organization. So, it's vital to periodically conduct new change-readiness assessments. These can give you a bead on the factors that are enhancing or impeding your change plans. They can thus help you determine whether a change initiative is on track, has lost momentum or has derailed completely.

Managing complex change efforts requires a sophisticated awareness of the myriad factors that can impact an organization's vitality, profitability and operating effectiveness. Using a diagnostic assessment tool and a robust methodology to understand and analyze organizational dynamics provides a cornerstone approach not just for managing change initiatives, but for ensuring that they are successfully sustained over the long term.

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MR Bill Trahant is a partner with the Arlington, Va., offices of Coopers & Lybrand LLP and director of the firm's International Center of Excellence for Change Management. W. Warner Burke, Ph.D., is professor of psychology and education, and chair of the department of organization and leadership at Teachers College, Columbia University. Richard Koonce is an organizational consultant, radio commentator and author.

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Management Review is published by the American Management Association as an independent forum for authoritative views on the issues of business and management. The opinions expressed by editors, other contributors and advertisers may vary from the official positions of the AMA.

Copyright © 1997 American Management Association, All Rights Reserved.

Bill Trahant, W. Warner Burke, Richard Koonce, 12 Principles of
Organizational Transformation., Vol. 86, Management Review, 09-01-1997.
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Copyright © 1997 Infonautics Corporation. All rights reserved.