Managing Change
Managing change has become the “silver bullet” in seeking the final component of successfully managing strategy, process, people and culture in most modern organizations. More and more, staying competitive in the face of demographic trends, technological innovations, and globalization requires organizations to change at much higher rates than ever before. Few people will argue with this statement, but fewer still will say their organization does a good job at managing those changes. Managing change well is a continuous and ongoing combination of art and science that assures alignment of an organization’s strategies, structures, and processes.
A growing number of companies are undertaking the kinds of organizational changes needed to survive and prosper in today’s environment. They are streamlining themselves and thereby becoming more nimble and responsive to external demands. They are involving employees in key decisions and paying for performance rather than for time. They are taking initiative in innovating and managing change, rather than simply reacting to what has already happened.
Leading Change
However, in our experience, we have also noticed an unsettling forgetfulness among managers regarding the principles of good change management. Trendy fads designed to produce “quick fixes” are accompanied by decreased awareness of the tools and techniques of change management that have proven effective in the past. Our purpose in this article, the second in a series on the subject of change management [see Sherman article, Vol. 8, Issue 1], is to join the “makeover” trend by revisiting and reinforcing some of these basic principles and freshening them up a bit. We discuss what we consider to be six practical aspects of any change process and describe how three successful companies—JP Morgan Chase’s Global Investor Services Division (GIS), American Healthways, and Microsoft—have applied these principles.
1. Do no harm.
In the medical profession, doctors take the Hippocratic Oath to do no harm to their patients. One of the most important principles in organization change is similar. Implementing change poorly is often worse than not implementing change at all. Poor implementation poisons people’s attitude toward change and creates problems in the future.
The best defense against doing no harm is to take a holistic approach. Too often, and with the best of intentions, managers change one facet of the organization without regard for the whole system. Many organizations need to develop better peripheral vision or whole systems thinking in recognition that all parts of the organization are connected directly or indirectly and that tinkering with one component exerts tension on other parts. Implementing a new information system or restructuring a business without, for example, examining the human implications of such changes increases the likelihood that the change will be unsuccessful, unsupported, and damaging. Such change efforts are incomplete and create tension that consequently drags down the momentum of other systems, processes, and people changes, and so ultimately suppress results.
Moreover, a sense of “judgment” often accompanies the need for change, as if whatever people are doing now is inadequate. One executive we worked with, referring to an upcoming change, said, “Let’s tear apart and deconstruct the organization and everything that went before. Then we can come up with something better to replace it.” This attitude sent an inappropriate signal to the employees that their current way of working was inferior. It cast a veil of negativity across the organization.
JP Morgan Chase’s GIS division is a global currency brokerage that enables its investment firm client base to make international buy/sell transactions at optimum price points. Despite competition from a variety of domestic and international firms, GIS had maintained its pre-eminence through ongoing investments in technology and an increasing emphasis on the delivery of value-added products to its institutional investors. President Richard Fama and his senior management team decided that a “business as usual” attitude in a fast growing market would be a foundation for corporate extinction. Therefore, they decided to develop a new strategy, realizing they would have to invest more time, energy, and resources into implementing and aligning the strategy with their systems, processes, and culture than they had invested in the strategy development. The team also realized they would have to implement the new strategy in a way that would build on past success to meet the challenges of the future. More importantly, they recognized that the way they changed was as important as the change itself. They had to ensure that the change made people and the organization better off.
2. All change involves personal choice.
Any organizational change is preceded by personal change. Senior managers too often spend time at off-site meetings arguing over the need for change, forging new ideas, and creating strategic initiatives. After such meetings, they issue memoranda to the organization and assume that everyone will see the brilliance of their decisions, drop what they are doing, and perform in new ways without so much as a question or concern. However, people don’t work that way, and it is insulting to assume otherwise.
Change is more often resisted than supported in organizations because people rarely are given the chance to understand the reason for the change. No one bothers to explain to them the “why.” And few organizations spend time thinking about “What’s in it for the organization member?” That is, individuals must believe that it is in their own best interest to do things differently.
At American Healthways, rated for the second year as Fortune’s fastest growing small business as a provider of proactive disease management services, the shift from a traditional structure to a process-based structure depended vitally on CEO Ben Leedle’s deep and profound belief that the old way wasn’t going to work for the future. But his own conviction wasn’t enough to transform the business’ structure. With the help of his HR vice president Rita Sailer and internal OD consultant Chris Cigarran, a series of task forces was created involving a variety of people from different functions in the organization. These task forces witnessed Leedle’s personal commitment and were allowed to challenge and address the issues at a deeper level, thus engendering their own commitment to the change.
At JP Morgan Chase GIS, the goal for Richard Fama was a commitment to inspire his senior team to get beyond their own business unit agendas and work toward fulfilling goals and aspirations that were bigger than the goals of each of the units individually. One by one, the senior team committed to the larger task. Through a series of team and individual coaching experiences, they decided their mission was not only to influence the way things happen at GIS, but also to affect the way things happen in the financial services industry. At the same time, Fama began a process of informal skip level meetings with employees in which he could engage them in determining why and how the new strategy would benefit them as well as the company.
3. The relationship between change and performance is not instantaneous.
As far as human beings are concerned, there is no such thing as instantaneous transformation. As a result, asking an organization to change (or telling the people in the organization to change) without giving them resources to do so is a fool’s errand. “Turning the organization on a dime” or “pulling the organization through a knothole” are metaphors that do no justice to the process of change. Worse, such wrenching procedures can create cynical attitudes among employees.
In our respective practices, we have not known of a single person who on one day could drop a set of behaviors that served customers or added value and on the next day could perform perfectly a new set of value-adding behaviors. Change involves time and the opportunity to learn, and learning is often inefficient. So don’t expect performance improvement too quickly.
Morgan McCall, author of High Flyers, maintains that employees, given good guidance, still need to be able to “mess up.” Ken Murrell, a professor of organization change at the University of West Florida, is fond of noting that football teams get to practice six days to prepare for one day of performance, whereas organizations are expected to perform every minute of every day. Where is the opportunity to practice the new behaviors required for organization change?
GIS adopted a series of twelve bold goals that would signify successful strategy implementation. GIS management set a three-year time line for this effort and urged all work teams and individuals, through investment in training and performance coaching, to be clear regarding which of the twelve goals any one of their efforts was impacting. They further encouraged experimentation and trial and error—this for a banking culture that previously had spent much time “re-checking the checker” and “covering bases to relieve blame for error.” To GIS’ surprise, at the two-year mark, Morgan Chase GIS had met or exceeded nine of the twelve goals due to its focus on these goals, tolerance of the varied number of ways to reach them, and investment in adequate resources to prepare employees to reach them.
4. Connect change to business strategy.
Change for change’s sake is a recipe for failure. The notion of “If it’s not ‘broke,’ break it and improve anyway” is a waste of scarce and valuable resources. Change should only be pursued in the context of a clear goal, be it personal, group, organizational, or societal. There is value in consistency, and changing before you have to or changing to be a part of the latest fad lowers morale and increases cynicism in the workplace.
Microsoft routinely changes its structure. Approximately every six months, the organization goes through an exercise aimed at improving the relationships between various operating groups or between sales and marketing subsidiaries and the corporate office. The organization members have come to expect these structural changes and will commit to them only to the extent that the changes yield short-term results. Consequently, ongoing problems remain unsolved, organization commitment is weak, and then the structure is changed again.
Under the guise of “Let’s just try it,” an educational organization evaluated all middle managers and made compensation adjustments according to the size of their programs or organizations without regard to performance, the value added to the school’s purpose or reputation, or the differences in organizational purpose and structure. For managers whose compensation was cut, morale plummeted as they suffered through a year of doing the same work for less money. In the following year, pay cuts were restored by 50 percent with little explanation. The cost of reduced organizational trust resulting from a “let’s just try it” approach is not estimable. Organizations contemplating change must be sure that organization members understand the strategy and that any contemplated change must align with and support that strategy. In addition, change leaders must consistently communicate the proposed change within the context of the business needs so that employees will see a connection between their own personal effort and the impact of their effort on ultimate business results.
5. Involvement breeds commitment.
Few principles in the management of change are as well documented or understood as the idea that involvement breeds commitment, yet organizations continue to ignore this principle. In the U.S., where individualism reigns supreme, managers who do not involve their workers in decisions that affect them run the risk of stalled change efforts. “But it takes too long,” is the most common complaint and source of resistance to the involvement imperative. To that we respond, “And what is the cost of failed implementation because you went too fast?” During our research at Microsoft, we heard one manager get it right when he said, “Managers consistently overestimate how fast they have to move and what needs to be done in the short run and underestimate what can be done in the long run.” The lesson is that involving people in change decisions provides improved estimates of time tables, expectations, and commitment.
At American Healthways, one of the first things CEO Ben Leedle did was commission a task force of people across the organization to study the organization’s existing structure and to recommend alternatives. By involving key people in the analysis, Leedle extended his own personal commitment into the organization. The task force members themselves became convinced of the need for change and evangelized the effort throughout the organization.
At GIS, intact work groups met throughout the company to discuss how implementing the new strategy with its twelve goals would impact the way they did their work. This activity spurred additional conversations between work groups, and the conversations became departmental and global. During our work with GIS, one of the senior officers observed, “There have been a thousand little victories because somebody has reached out to a colleague or work group that they wouldn’t have trusted previously, to work together and to make something happen. It is happening out there on a day-to-day basis, in the most remote corners of the organization. That is awfully powerful.”
6. Any good change effort results in increased capacity to face change in the future.
It is one thing to “install” a change, but it is a quite different notion to implement change in such a way that the organization is more capable of managing change in the future. For example, the road to more information intensive organizations is paved with attempts to deploy enterprise resource planning (ERP) systems. In some cases, the best that can be said about an ERP system is that the organization has a functioning information system. In most cases, however, the CFO is unable to say there was any return on investment (ROI) attached to the deployment. In almost every case, the organization is left no wiser regarding how or why the deployment succeeded or failed. The organization has therefore learned nothing about change management except to call in a consultant for help.
At American Healthways, the task forces that debated, decided, and designed the new organization structure were operated in such a way that each member had a better understanding of the process of change. Periodically, the task forces paused from “doing” the work to reflect on how the work was going, what they had learned about implementing change, and how they would do things differently in the future. As a result, they were able to conduct much of the implementation themselves. Compared to organizations that have made similar changes, American Healthways’ external consulting expense was a fraction of the cost, and their reliance on their own internal resources to implement the change was greater and more effective.
Similarly, by the time Richard Fama retired from JP Morgan GIS, the organization had created a way to work across its boundaries and deal with the continuous cycles of change in the global financial services market. The new head of GIS, Tom Swayne, saw the power of this organization to continuously implement the changes thrust upon it and became an advocate of this organization’s strengths, ultimately leveraging GIS to create a more competitive brand in the financial services industry.
Conclusion
Organization change is a strategic imperative in today’s global and fast-paced environment. There is much that we know about change that is useful. Unfortunately, in the pursuit of change, of trying to be the best, of standing out from the pack, and of seeking higher and higher levels of status and power, managers and leaders in organizations urgently and impatiently clamor for the “latest and greatest ideas.” In their haste, they forget the fundamental and sound principles which are prerequisites for a successful change to occur—and wonder why they are not making progress. Although managing change is difficult, implementing these few tried and true principles can help managers and leaders improve the organization’s success.
Cummings, T. G. and Worley, C. G., Organization Development and Change, (Mason, Ohio: South-Western College Publishing, 2001).
Kouzes, J. M. and Posner, B. Z., The Leadership Challenge: How to Get Extraordinary Things Done in Organizations, (San Francisco: Jossey-Bass Publications, 1990).
McCall, M. W., High Fliers: Developing the Next Generation of Leaders, (Boston: Harvard Business School Press, 1998).
