Personal Experiences: Think of an organizational change that you experienced. Describe how you were impacted by the change. What could the leadership have done to make the transition more successful? Cite one or more change models to support your assertion. Your initial post should be at least 250 words in length. Support your claims with examples from required material and properly cite any references. 4 Shaping and Sustaining Change Ryan McVay/Photodisc/Thinkstock Learning Objectives After reading this chapter, you should be able to do the following: 1. Describe the major reasons why organizational change programs fail and succeed. 2. Evaluate how to recruit and empower employees. 3. Analyze the five pillars of successful, sustainable change. 4. Explain the characteristics of built-to-change organizations that position themselves to successfully sustain change. 5. Examine useful principles and practices in sustaining change. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 155 12/15/15 9:44 AM Introduction  Nothing is easier than saying words. Nothing is harder than living them day after day. —Arthur Gordon Pretest Questions 1. True/False: Because speed and efficiency are hallmarks of the American business system, a short–term fix approach to organizational change is often successful. 2. True/False: Recruiting experienced individuals to a company that is planning transformational change is risky because such people tend to resist change. 3. True/False: Knowledge management is a system in which organizations sustain change by making intellectual capital available to employees so they can continuously learn. 4. True/False: Built-to-change organizations prioritize temporary competitive advantage over long-term stability by continuously implementing important changes. 5. True/False: A self-designed organization is one in which stakeholders choose the direction of the company. 6. True/False: A common mistake in implementing change strategy is to reject a “blockbuster” innovation in favor of small, unexciting changes. In Chapter 3 we discussed three companies that underwent significant planned organizational changes. They are summarized here to illustrate two successful overall outcomes (Ford and AlliedSignal/Honeywell) and one unsuccessful change (Avon). Ford After working at Ford for 25 years, Alan Mulally retired as CEO on July 1, 2014—8 years after leading Ford’s transformation. Chair Bill Ford said, “Alan deservedly will be long remembered for engineering one of the most successful business turnarounds in history. Under Alan’s leadership, Ford not only survived the global economic crisis, it emerged as one of the world’s strongest auto companies” (as cited in Media.Ford.com, 2014, para. 4). Mulally’s change strategy, “One Ford,” worked. In 2006 Ford lost $12.7 billion, its worst performance ever. In 2010, however, the company had net income of $6.6 billion, its highest profit in a decade. The stock price was $1.25 a share in 2006 when Mulally came on board; it closed at $17.21 on the day he retired. In 2011 he was awarded stock bonuses worth $56.5 million (Henry, 2011). After careful research, Mulally targeted major problems at Ford as “inefficiencies in production, bad relationships with suppliers, unrealistic delivery dates—and management that deflected blame” (as cited in Henry, 2011, “One World, One Plan,” para. 2). With the One Ford strategy, he reorganized the company’s operations and global managers to focus on the same agenda. Mulally’s overall success factors were that he had a compelling vision for Ford as a mobility company. He focused on technological innovation (for example, MyFord Touch entertainment) © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 156 12/15/15 9:44 AM Introduction  across vehicles and led product development with partnerships in the consumer electronics industry. This allowed Ford cars and trucks to transform into mobile centers of entertainment and communication that grew in concert with smartphones and social media. Now all major automakers focus on personal technologies to make cars mobile entertainment and information centers (Caldicott, 2014). Mulally promoted accountability and collaboration across leadership structures. He also carved a path for outstanding execution. Ford moved forward with new product vehicle development, redesigning the Taurus, Focus, and Fiesta models. Mulally then streamlined Ford’s products, removing 97 weak auto products and concentrating on 20. This resulted in a simpler, leaner product line that allowed Mulally to focus on and showcase manufacturing, product development, and customer service excellence (Caldicott, 2014). AlliedSignal/Honeywell During Larry Bossidy’s term as CEO, Honeywell emerged from a disastrous merger with AlliedSignal in 1999, when the latter purchased Honeywell for $14.4 billion. Honeywell operated in the controls and aerospace business; AlliedSignal was at the time an aerospace, automotive, and engineering firm. There was a clash of cultures. AlliedSignal was overwhelmed with cost control, which caused it to neglect its long-term investments and strategic planning. By contrast, the original Honeywell was known for being customer-centric and creative, but not for execution. Bossidy was asked to find a successor who could handle the challenge of merging the two warring cultures. In 2002 he took a chance on David Cote, who had worked under Jack Welch at GE. Cote’s first step toward a turnaround was to terminate a long-standing aggressive accounting policy used by AlliedSignal and Honeywell and adopt a conservative approach that put both firms on a more level playing field. Secondly, Cote introduced a new collaborative strategy for dealing with Honeywell’s difficult legacy and litigious approach to solving asbestos lawsuits and environmental liabilities. Honeywell established a trust for the claims, making expenses predictable. Cote also introduced principles of best practices in all businesses to stop the conflicts between the companies. He focused attention on manufacturing practices in particular, sending 70 managers to a Toyota plant to master output production methods. The rewards were described as spectacular. Since 2002 the company’s sales have grown by 72%, while its head count only increased by 21% (Tully, 2012). By keeping fixed costs like labor relatively flat, Cote generated “operating leverage” that magnified brisk revenue growth into outsize earnings. Since 2003 Honeywell has increased sales by 7% each year, and operating profits have grown by 12% (Tully, 2012). Cote also excelled at company acquisitions. Honeywell acquired 70 companies. These moves tripled Honeywell’s profits. In effect, Cote’s collaborative, detailed, and big-picture approach, along with his relentless focus on integration, has made him a change champion at Honeywell and within its industry. Avon Avon Products’ ex-CEO Andrea Jung stepped down in 2011 and was succeeded by Sherilyn McCoy. Several large change efforts had faltered and failed under Jung since 2005 (Martin, 2012), and Avon’s profits had declined every year since 2008. McCoy said in 2012: © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 157 12/15/15 9:44 AM Introduction   Avon’s products and pricing were “off target.” Technology and service “did not keep pace.” Senior managers were moved so often they couldn’t gain traction. Avon doesn’t need yet another new strategy. We need to focus on the core of Avon’s business: representatives, consumers and our people. The challenge we’re facing didn’t materialize overnight. They developed over years, and our solutions will take time as well. (as cited in Martin, 2012, paras. 23–25) What went wrong with Jung’s transformation efforts? What led to her eventual downfall? Himsel (2014) answered this question by identifying five “traps.” Trap 1: Jung failed to develop the agility to factor global scale and local requirements into decisions. Avon attempted to manage economies of scale and local customization requirements with erratic business moves. First it decentralized the system; then the following year it did the opposite and went back to centralized control. This led to the company being unable to meet customer demands and being perceived as overly reactive. Trap 2: Jung did not align organization culture with strategy. She may have underestimated the power of culture, which can and did undermine even the strongest strategy. She failed to evolve the culture with the strategy. Trap 3: Jung occasionally refused to hold leaders, including herself, accountable for controversial changes and performance-related decisions. When leaders do not send clear, certain, and consistent messages and follow-up actions, employees lose confidence in them. Trap 4: Jung failed to understand the demands of officers and leaders when globally integrating the company. During this transition, Avon needed a CFO who could improve and consolidate its financial systems, create consistent financial controls and processes, and increase margins while decreasing inventory. Instead, the company hired a CFO generalist and “deal maker.” These skills did not match the demands of a company expanding and integrating into emerging markets. Trap 5: Jung failed at due diligence and vigilance in having employees work in “at-risk” global, emerging markets. The result: Avon paid a $135 million settlement with the U.S. Securities Exchange Commission and the U.S. Department of Justice for allegedly bribing Chinese government officials. CEOs and their staff must screen and train new hires to follow corporate values and codes of law and ethics both at home and abroad (Kowitt, 2012). When McCoy took over from Jung in 2011, Avon’s revenue was $10.7 billion. The loss from continuing operations was $38 million. In 2014 revenue was $8.9 billion, and the net loss from continuing operations was $385 million. Avon’s numbers have continued to decrease with McCoy as CEO. Critical-Thinking Questions 1. What went wrong at Avon, according to this brief case scenario? 2. As a student of organizational change, identify a few key concepts you have studied that would have helped diagnose Avon when its sales began to decline. 3. Identify a few actions that Mulally took at Ford that helped turn Ford around at that time. 4. Identify and briefly state your opinion on a strategic action that Cote implemented that helped changed the direction of AlliedSignal and Honeywell at that time. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 158 12/15/15 9:44 AM Failing and Succeeding at Change Section 4.1 Introduction: Back to the Future Sustaining major organizational changes—that is, ensuring that planned changes endure—does not involve “one-shot” or quick-fix solutions. Embedding change in organizations requires continuous top-down, bottom-up leadership and process improvements— including supportive and innovative actions throughout the enterprise. The CEO and toplevel team generally define and lead the change, but everyone must be involved in managing, re-creating, and rejuvenating the ongoing renewal processes. The transformational change programs at Ford, AlliedSignal, and Avon required years to plan and complete. Looking back at their successes and problems informs us about the people and processes used to implement change goals and the initiatives undertaken in response to different environments. 4.1 Failing and Succeeding at Change Although some transformational changes may start with a “big bang,” embedding and sustaining them takes time, talent, and effort. Rosabeth Moss Kanter (2002), Harvard professor and change expert, noted that effective change is sustained by “long marches” not “bold strokes.” In order to revitalize and sustain large-scale changes, it is important to know some of the major reasons why changes fail and also what makes them succeed. Why Change Programs Fail There are more than enough reasons why organizational change programs fail. We previously discussed some in this text and have selected some of the more notable ones to discuss here. Understanding and learning from each of these can prevent failure and help facilitate strategies and efforts to sustain change. Fletcher and Taplin (2002) list these reasons why organizational change programs fail: • • • • • • • • Opposition to change Failure to recognize the need for change Superficial recognition of the need for change Failure to systematically implement change Short-term fix approach Structural impediments to change Cultural impediments to change Failure to sustain change Large-scale, planned organizational changes are generally complex processes that require expertise and systematic methods that take the entire enterprise into consideration. Just as important, the people involved in and affected by the change must not be excluded. Failing to communicate with and involve professionals and employees who are affected by such changes often creates opposition and resistance. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 159 12/15/15 9:44 AM Failing and Succeeding at Change Section 4.1 Opposition to Change Change programs are often destined to fail because of the top-down imposed nature of the process (Nohria & Beer, 2000). The following scenario is all too common: a CEO or top-level team member gets some new ideas from either talking to friends, witnessing a change in a competitor, attending a seminar, reading current business trends, or following a current management fad. He or she then decides to try something new with a division or the entire company. When change is arbitrarily imposed, poorly explained, and hastily announced from the top, managers and employees can become disillusioned, lose motivation, and become increasingly resentful and resistant to the change. Their work often changes and increases, while resources and attention to quality decreases. Managers in particular are thrown into confusion when they are asked to implement and guide changes that are not adequately explained and for which they have few or no blueprints or models. Also, when managers are given little strategic direction or rationale for implementing change, they typically revert to emphasizing what they know best: operational detail that is activity (not goal) driven (Fletcher & Taplin, 2002). For example, Friendly’s restaurant chain filed for bankruptcy in October 2011 (Reuters, 2011). Although many reasons explain this chain’s failure—including the slumping economy and the chain’s debt and financial situation—the lack of a clear strategic direction was also an issue. One author described Friendly’s in the following way: The restaurant smells like a bus station. Food takes a long time to arrive at the table, no matter how painfully empty the dining room is. The salad looks like it was assembled a few weeks before I ordered it. Only the nostalgia keeps me coming back. (Baab-Muguira, 2011, “Times Have Changed,” para. 3) Restaurants like Friendly’s, which was founded in 1935, must continually differentiate themselves from similar establishments in order to remain competitive in the marketplace. They must be sure that the public knows what makes them unique. In 2009 Friendly’s former CEO, Ned Lidvall, stated that the restaurant’s differentiator was ice cream and that the lines and definitions of brands in the industry were starting to blur (O’Brien, 2009). Friendly’s attempts at competitiveness by emphasizing ice cream and other piecemeal marketing ideas proved unsuccessful. Failure can also occur when the purpose of the change is not shared by the people and is, in turn, separated from the organizational processes required for implementation. When an affiliate of the private equity firm Sun Capital Partners took over Friendly’s restaurant chain and filed for Chapter 11 bankruptcy protection in 2011, 1,260 workers, or more than 12% of that chain’s 10,300 member workforce, were told one evening they would lose their jobs the following day. A spokesperson for Friendly’s at that time AP Images/Charles Krupa Unfavorable economic circumstances, competition, and unsuccessful change to differentiate Friendly’s from other restaurants contributed to restaurant closures and bankruptcy. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 160 12/15/15 9:44 AM Failing and Succeeding at Change Section 4.1 stated, “We’re not trying to put people out of jobs. We’re trying to ensure the future of the company” (as cited in Hines, 2011). That spokesperson noted that closed locations were unprofitable and that closing those locations would help the company and its parent, Sun Capital, gain control over $296 million in outstanding debt (Hines, 2011). The company survived the painful downsizing and emerged from bankruptcy, then in 2012 hired John Maguire, who helped reinvent the chain (Pohle, 2015). Failure to Recognize the Need for Change In the 1970s and 1980s, CEOs of some of the largest, most innovative world-class U.S.-based international firms were entering a period they did not anticipate, one featuring fierce global competition and new ways of streamlining operations. IBM, Digital Equipment Corporation, Polaroid, and General Motors were still resting on their past successes, because they believed they could continue to dominate their industries with bulky hierarchies, unrealistic overhead costs, and outdated operations. As a result, Digital Equipment Corporation and Polaroid did not survive. Japanese auto and electronics companies entered the scene with the first wave of new and competitively priced products that were made with higher efficiency operational methods. The result was 2 decades of radically induced change for all U.S. industries: total quality management, just in time, reengineering, and the introduction of information technology into the assembly line process. Failing to recognize the need for change is not relegated to the past. In 2014 the Huffington Post published a list titled “9 iconic brands that could soon be dead” (Jacques, 2014) because of failure to adjust to contemporary markets, customers, and business models. These included Quiznos, JCPenney, Zynga, Red Lobster, BlackBerry, the Women’s National Basketball Association, Volvo, Martha Stewart Living magazine, and Abercrombie & Fitch (Jacques, 2014). The inability to recognize the need for change continues to be a major cause of failed change programs. Other causes for failure include changes that are initiated too late to regain competitiveness; are initiated poorly, without proper attention to how change processes should be planned; or are not initiated at all. Superficial Recognition of the Need for Change Some CEOs and organizations move forward with a change without the necessary commitment to allot the resources and harness the energy of the entire enterprise. They believe that targeting a certain division, business unit, department, program, or management practice for change will be enough to solve the problem and generate new opportunities throughout the entire organization. In such instances concern for cost, in terms of time and money, is the prohibitive factor. In other instances such shortsightedness may be due to a top-level individual, team, or dominant coalition’s lack of political or business acumen or some other limiting capacity. Whatever the specific reasons for not understanding or taking action on the need for total change, this general type of thinking has been characterized as myopic or nearsighted (Colea & Coltea, 2013)—that is, top-level leaders are trapped into thinking in terms of the status quo: “If it isn’t broken, don’t fix it.” Moreover, leaders do not direct enough attention to frontline managers, and they do not focus these managers on specific actions needed to achieve stated business outcomes. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 161 12/15/15 9:44 AM Failing and Succeeding at Change Section 4.1 When incremental, piecemeal, or selected organizational targets for limited change are adopted in place of needed enterprise-wide and transformational changes, the result is often loss of resources, time, effort, and competitiveness. For example, a department in a large university organization needs laptops replaced every 4 years on a revolving basis for eligible members who sign up for the program well in advance. This is a change that is not large in scope and that does not need a complicated plan. At the entire university level for all departments, a change plan may be needed. An example of a successful organizational change that followed a plan is the United Arab Emirates’ du Telecom. The firm was started in 2006 and offers mobile and fixed telephony, broadband connectivity, and Internet Protocol television to consumers and businesses. The company acquired almost 40% of the region’s market share by 2010 and has sustained a 32% growth rate since. The company’s strategic capability, planning, and leadership are factors that contribute to its success. For example, the firm expanded by joining China’s Huawei Technologies Co. Ltd. in 2013. Huawei is a multinational networking and telecommunications equipment and services provider. This partnership and du Telecom’s strategic and tactical expertise and vigilance have enabled the firm to (a) reduce project failures; (b) reduce the number of employees needed per project; (c) lower costs and tighten up time frames and projects, which cost less than predicted; and (d) create a single point of contact to manage projects (Wang, 2015). Failure to Systematically Implement Change Failing to systematically lay out a complete change program and implement that plan can lead to catastrophe. Productivity and financial gains are more likely to be obtained when implemented with a systematic approach (Kaydos, 2015). Companies that attempt to change one system without coordinating and aligning complementary related systems to facilitate the change generally fail to achieve their original goals. Examples abound and include airlines that attempt to improve customer relations by training flight attendants but not check-in agents; firms that attempt to decrease time between pointof-sale and collection of payment by improving sales professionals’ strategies but do not change the internal processing of payments; companies that move marketing content online to extend their product’s reach to potential customers but do not create systems to process online purchases; and so on. When organizations do not study all the core processes in their business from the perspective of their new vision and change goals and do not decide on an implementation plan that aligns all the major systems, failure is on the horizon. Short-Term Fixes The American capitalist business and financial system is based on short-term time horizons. U.S. corporations operate on a quarterly basis and are valued on both short- and long-term information. Financial analysts evaluate, predict, and recommend buys, holds, and sells on stocks from quarterly reports using past and future trends. Although speed, efficiency, and innovation are hallmarks of the American capitalist business system, the short-term perspective also can and does contribute to myopic decision making and short-term fixes (Tanden & Effron, 2015). © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 162 12/15/15 9:44 AM Section 4.1 Failing and Succeeding at Change CEOs and executive teams that rush environmental scanning, planning, and problem/opportunity diagnosis may run the risk of targeting the wrong problems and opportunities. Then, the rush to hasty implementation compounds problems that can create further failure, including being left with poorly coordinated and ill-prepared implementation teams that sacrifice the quality of implementation; suboptimizing goals (selecting less than desirable goals so as to meet time and task completion pressures); and preparing the change effort for increased costs, wasted effort, and lack of goal attainment. Diagnoses and implementation plans that impose a short-term fix mentality and framework on a large-scale change program usually suffer the symptoms described here, as well as other unintentional consequences that eventually lead to unnecessary costs and delays, if not failed goals and wasted time and effort. Structural Impediments to Change Jirsak/iStock/Thinkstock The traditional business hierarchy holds many organizations back. Companies are beginning to move away from this structure for greater efficiency. Large corporations’ bureaucratic structures and hierarchies have posed major obstacles to implementing large-scale change. In fact, the methods of business process engineering and reengineering were revolutionary in that they eliminated unnecessary barriers in all business processes and were designed to decrease time, effort, and costs while increasing speed and effectiveness in moving a task from start to finish. Organizations that begin with structure over strategy and purpose risk not being able to transform a company’s vision to a new state. Corporations are generally moving toward less structure to achieve more economies of scale and effectiveness. As we will discuss in the following section, alternative solutions to traditional vertical structures are being used as a result of change initiatives. Among these alternative solutions are outsourcing, streamlining business processes, and experimenting with new forms of networked structures and communities of shared competencies. Cultural Impediments to Change Resistance to change usually stems from an old culture in which employees refuse to give up leaders’ dominant values, assumptions, and norms. The previous state of the organization may have worked well in a past environment or era but is no longer as efficient as it needs to be. With a new vision and fresh values—and perhaps leaders—new cultural meanings, languages, symbols, and experiences must be embedded. When the change champions and leaders do not pave the way for a shift in the alignment of the organization’s dimensions and systems, previous cultural values tend to prevail with some groups and managers; the status quo is often the default position, even if it is to the detriment of the organization. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 163 12/15/15 9:44 AM Section 4.1 Failing and Succeeding at Change Failure to Sustain Change It has been estimated that 70% of large-scale change initiatives in companies fail (Colea & Coltea, 2013). This is due to any one or a combination of the factors discussed here. Generally, people settle back into the status quo if they do not have to change. Change cannot be sustained if people in an organization maintain a bureaucratic and functional mind-set and refuse to adopt new attitudes, beliefs, and behaviors. Sustaining change requires strong, committed, and informed leaders who involve others in the alignment of all an organization’s systems around the new vision. Organizing to Succeed at Change Maintaining an organization’s alignment to a new vision and future state requires leaders and followers to keep the organization’s big picture in mind. The model shown in Figure 4.1 and discussed in Chapters 1 and 2 provides a useful reminder that leaders are an integral force at the outset in guiding the alignment of organizational dimensions to the new vision and future state. Figure 4.1: Strategic alignment model This model offers a way to understand organizational actions through a process of taking resources into a system, processing them, and producing outcomes. Current to Future State Inputs Customer Requirements Transformation Customer Partnership • Leadership • Environment • History • Resources Vision and Strategy People Structure Technology Nature of Work Organizational Level • Competitiveness • Market share • Product and service quality • Responsibility (environment and community) Group Level • Synergy • Performance • Effectiveness • Satisfaction Culture Measurement Systems Outputs Customer Satisfaction Individual Level • Performance • Satisfaction • Development and growth Source: Based on Weisbord, M. (1987). Productive workplaces. San Francisco: Jossey-Bass; and Burke in Howard, A. (Ed.). (1994). Diagnosis for organizational change. New York: Guilford Press. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 164 12/15/15 9:44 AM Attracting Talent and Empowering Employees Section 4.2 We provide examples of how leaders in different organizations and industries use interventions to sustain change to compete in their external environments while internally empowering their organization’s people and culture. Check Your Understanding 1. 2. Of all the reasons why change programs fail, which do you think is the most common? Explain your reasoning. Choose one of the reasons why change programs fail and discuss how this knowledge can be used to help sustain change. 4.2 Attracting Talent and Empowering Employees A critical task of sustaining change involves continually attracting, involving, and empowering the right talent. Because people are an organization’s most important asset, and leaders can only get things done through people, revitalizing organizations requires developing strategies for leading and managing human capital. Human capital refers to the skills, knowledge, and experience of a workforce with regard to people’s value and cost as invested in and incurred by an organization (Fitz-enz, 2000). Managing human capital is a process in which senior executives spend as much time and energy on acquiring, allocating, developing, and keeping their employees (human capital) as they do on other types of capital (Lawler & Worley, 2006). Recruiting Talent Contemporary organizations face a “new world of work” that challenges and necessitates dramatic strategy changes for HR and company leaders (Deloitte University Press, 2015). HR departments are particularly challenged by how to recruit, evaluate, and manage talent. They must also determine how best to engage, develop, and retain new professionals and teams, which is not easy. HR groups are continually rethinking methods for measuring and monitoring the larger organizational culture to attract and interest professionals. Organizational change in this regard has become an ongoing process. Recruiting Through Branding Hiring the right talent to fit the organization’s new vision, strategy, and business process can be challenging. Organizations generally use branding—their image, reputation, and identity, or what they are generally known for—to attract new hires. Highly visible, successful organizations like Google, Microsoft, and Facebook do not worry about their branding as a recruiting method because they are so well known. However, smaller, less visible companies need to make more deliberate attempts to promote their brand to potential employees, yet few companies seem to succeed at this strategy. Consequently, it has been recommended that organizations view their employees or potential employees as customers. Companies should spend time conducting marketing analyses to identify which corporate attributes are most important to the employees they wish to recruit and how best to reach those recruits (Hieronimus, Schaefer, & Schröder, 2005). © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 165 12/15/15 9:44 AM Attracting Talent and Empowering Employees Section 4.2 Two McKinsey surveys showed that traditional recruiting methods focused on job security, opportunities for creativity and individual growth, and compensation but that a hiring company’s intangible and emotional associations appeared to be strong motivators for potential recruits (Hieronimus et al., 2005). Whatever techniques are used to attract and recruit promising new talent, the McKinsey study concluded that they should be strongly aligned to the company’s brand strategy (Hieronimus et al., 2005). Recruiting Using Social Media Another recent recruiting method is to use social media. LinkedIn, Facebook, Twitter, and YouTube are popular recruiting sources. For example, the large online retailer Zappos uses social media for branding and recruiting. Talent acquisition experts observe that large employers are using online job boards and social media combined with traditional recruiting methods to post new listings (Drew, 2014). Recruiting Using a Talent Mind-Set AP Images/Chris Radburn/Press Association Social media sites such as LinkedIn are changing the ways companies recruit new talent. Organizations look for talent that can help them ramp up operations quickly, start new business models, and create new roles by acquiring and/or merging with other companies. Although companies like General Electric, PepsiCo, and Colgate–Palmolive are renowned for their ability to develop top-notch employees and emerging leaders in their industries, they are also dedicated to external recruiting (Beeson, 2011). Part of these firms’ success at external recruiting is their ability to integrate newcomers into their established high-performing cultures. Firms that combine external talent recruiting with internal integration practices are called “talent mind-set companies” (Beeson, 2011). These companies seamlessly combine talent acquisition with talent development. Firms that recruit individuals to fill job positions generally focus on their job-specific experience. Talent mind-set companies also pay attention to candidates’ leadership ability and prospective career growth. These companies are particularly interested in the following characteristics: • abstract, conceptual thinking ability and ease in handling ambiguity, which are needed in strategic thinking; • risk taking and feeling comfortable taking independent positions and not going along with what everyone else in the company thinks; these are building blocks of innovation and leading change, even if these characteristics mean moving an organization out of its comfort zone in order to implement effective change; • empathy and organization knowledge/savvy, which embody the ability to read people and situations and to influence peers and coworkers so that projects and initiatives can be implemented across organizational boundaries; and © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 166 12/15/15 9:44 AM Attracting Talent and Empowering Employees Section 4.2 • the ability to set high standards, let go of certain detailed work, and avoid getting mired in too much detail or micromanaging, all of which are important elements of managing implementation (Beeson, 2011). Organizational change is generally not an episodic event; it is a process that involves managing change on an as-needed basis. Since talent and human expertise is perhaps an organization’s most valued asset, recruiting, engaging, and retaining the right people is an intricate part of change. Managing Change Recruiting Talent in the 21st Century Suppose you are the HR director at a growing e-commerce company. The company must stay dynamic to keep up with changing technology and evolving social attitudes, as well as to be agile so as to respond to customer demand. Your company has a good reputation, but the sales and marketing teams are working to spread the word about your service. Leaders can’t change and grow companies on their own—human capital is among a company’s most important assets. Organizations need talent to rebound from a recession and revamp productivity, start new lines of business, and acquire or merge with other companies. Your task is to make sure you have the right people in place for the job. Your department starts to look for those with e-commerce, programming, and general Internet experience. You need employees who can keep up with the pace of technological change and know what role the Internet plays in popular culture. Naturally, your HR team turns to social media to find web-savvy candidates. However, you must pay attention to your company’s mission and values and understand how they relate to recruiting. Discussion Questions 1. 2. 3. 4. How do you stay on top of the hiring game in your industry? How do you use social media to recruit talent? What does it mean to have a talent mind-set? What is a company with a talent mind-set looking for in its new hires? (See the end of the chapter for possible answers.) Empowering Employees for Change Recruiting the right talent also involves integrating new employees into the company by providing opportunities for them to meaningfully participate in achieving the organization’s objectives. Cameron Kauffman (2010), a certified public accountant, suggests five areas of employee involvement that she used in her San Francisco–based firm. We have adapted these for general business: personal, organizational, customer, professional, and community. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 167 12/15/15 9:44 AM Attracting Talent and Empowering Employees Section 4.2 Personal employee involvement is achieved through training, mentoring, and career-development programs. Organizational involvement includes efforts that enable employees to participate in organization-wide visioning, planning, and addressing generational differences. Employee customer involvement will differ, depending on the type of business, but may include meetings or events with customers and direct interaction, such as having employees sit in on planning and focus groups. Professional development refers to providing employees with opportunities for personal and professional growth. This may mean becoming involved with professional organizations or associations. Finally, community involvement is achieved by providing volunteering opportunities and is often linked to the organization’s corporate social responsibility initiative (Kauffman, 2010), which is discussed later in this chapter. Fortune magazine’s 100 Best Companies to Work For list provides abundant examples of personal and professional development available to employees. The list is published annually and organizes companies by industry. Companies rigorously compete for placement on the list because being selected improves their reputation and makes their name more recognizable. There are also extensive marketing benefits for being recognized for recruiting top talent. Based on the Trust Index, organizations that submit their proposals are meticulously evaluated on criteria such as evidence of credibility, respect, fairness, pride, and camaraderie. Methods used to evaluate companies include extensive surveys from employees and managers and analyses of employee engagement using criteria from the Trust Index (Zappe, 2011). The North Carolina software giant SAS has been on the list for 14 years and was ranked number one in 2010 and 2011. The company provides many employee benefits, including on-site child care, health care, and an employee gym (Zappe, 2011). SAS ranked number two on the 2014 Top 25 World’s Best Multinational Workplaces list from the Great Place to Work Institute. It was also number two on Fortune’s 2014 Best Companies list and number four on its 2015 list (SAS, 2015). Finding and involving the right employees is only one aspect of developing a workforce built to change. Once the right employees are hired, management must retain them by creating an engaging and empowering environment in which to work (Lawler & Worley, 2006). Right Management Inc. publishes a global survey each year to evaluate workplace engagement. A 2015 survey from Deloitte showed that organizational culture and engagement is a top challenge for 87% of organizations surveyed, and 50% feel that this issue is “very important” (Deloitte University Press, 2015). Surveys by Right Management, Deloitte, and others suggest that empowerment (providing employees with the necessary motivation and autonomy to achieve great things toward the organization’s objectives) is achieved through clear reporting structures, meaningful opportunities for employees to share their opinions, clear and understood career opportunities, and autonomy (Deloitte University Press, 2015). The purpose of empowerment is to reduce sources of powerlessness (Styhre, 2004). Powerlessness is often a trademark of continuous change if an organization is not prepared. Good structures for attracting, involving, and retaining the right talent hedge against this powerlessness and give an organization tools to sustain and even shape change. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 168 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 Check Your Understanding 1. 2. 3. Explain why talent recruiting and management is an important part of organizational change. What do you look for in a company as a potential employee? What qualities must it have to make you stay long term? Explain your reasoning. What are the similarities and differences in the way you answered question 1 versus question 2? 4.3 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems For a company to shape and sustain growth, it must continually revitalize the principal elements that made it strong. Organizations that can survive, innovate, and compete in changing environments have leadership teams that must decide whether and how to continuously adapt, shape, deconstruct, and/or recreate strategies to match structure, cultures, technologies, and the right people. The case study of Alibaba in Chapter 1 presents a road map for many larger companies going forward. This section focuses on five principal components that are integral to any successful company: leadership, strategy, culture, structure, and systems. What appears to be changing with regard to these basic organizational dimensions is not the dimensions themselves but the flexibility, speed, and continuous improvements required by leaders and teams to adjust to complex, unstable external environments. We discuss these dynamics in this section. Lessons From the Great Companies Although the next generation of “great” companies may be Google, The five pillars to sustain change—leadership, strat- Facebook, Amazon, Alibaba, and some of the sharing economy companies like egy, culture, structure, and systems—should be at Uber and Airbnb, it is still important to the core of every successful company. understand lessons from the classic firms that Jim Collins, author of the best-selling books Built to Last (Collins & Porras, 1994) and Good to Great (Collins, 2001), spent 5 years researching. Alexander Hassenstein/DigitalVision/Thinkstock Collins studied companies that sustained market competitiveness over 15-year periods. His findings are relevant to our discussion of how organizations can sustain change programs to reach higher levels of competitiveness. Not all organizations that pursue large-scale change can or will become great. However, it is worth noting the principles and practices that underlie the number of companies that reached and maintained market dominance for long periods. The dominant messages regarding how good companies become great are relevant to sustaining effective leadership, strategy, culture, structure, and systems: © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 169 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 • Level 5 Leadership: The leaders led and worked not with highly observable charismatic, loud, or dramatic styles but calmly, quietly, humbly—even shyly—in strong-willed ways. • First Who, Then What: The leaders found and placed the right people in the right places and let the wrong people go before setting a new vision and strategy. • Confronting Brutal Facts: The great companies and their leaders confronted harsh, unflattering truths about the organization, while never losing faith that they would prevail in the face of adversity. • Hedgehog Concept: When a hedgehog faces a predator, it rolls into a ball. Unlike the clever fox, the hedgehog’s strategy is surprisingly easy, repetitive, and effective. Great companies and their leaders learned and followed their strengths by understanding and implementing their (1) passion, (2) what they could do best, and (3) what drove their economic engine. • Culture of Discipline: They developed a culture of discipline that made hierarchies excessive and unnecessary. • Technology Accelerators: They carefully applied selected technologies to ignite and accelerate their transformation—not to define their change. • The Flywheel: They used the “flywheel” approach to change, that is, not seeking a grand, single defining moment or killer application but relentlessly pushing a large, heavy flywheel in one direction, turn after turn, until momentum built to a point of breakthrough after breakthrough. (Collins, 2001, pp. 13–14) Although not all of the great companies Collins wrote about represent exciting or glamorous industries, their evolutionary journeys and transitions to greatness are based on combinations of these principles and practices. Table 4.1 shows the good-to-great companies (which must be placed in historical context) along with their respective 15-year cumulative stock market results. Data include the multiple times the companies beat the Dow Jones average for that time period. Table 4.1: Good-to-great companies in the stock market Company Times the market Years Abbott 3.98 1974–1989 Circuit City Fannie Mae Gillette Kimberly–Clark Kroger Nucor Philip Morris Pitney Bowes Walgreens Wells Fargo 18.50 7.56 7.39 3.41 4.17 5.16 7.06 7.16 7.34 3.99 1982–1997 1984–1999 1980–1995 1972–1987 1973–1988 1975–1990 1964–1979 1973–1988 1975–1990 1983–1998 Source: Collins, J. Good to Great. New York: HarperBusiness, p. 7. Copyright © 2001. Reprinted by permission of Curtis Brown, Ltd. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 170 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 In Table 4.2 the comparison companies of each of the good-to-great firms are shown in italics. They are interesting to note because these companies did not make the leap to greatness. You may not recognize the comparison firms or even some of the historically great companies unless you do a quick Internet search. Table 4.2: Comparison companies Good to great Comparison Abbot Upjohn Fannie Mae Great Western Kimberly–Clark Scott Paper Nucor Bethlehem Steel Pitney Bowes Addressograph Wells Fargo Bank of America Circuit City Silo Gillette Warner–Lambert Kroger A&P Philip Morris R. J. Reynolds Walgreens Eckerd Source: Collins, J. Good to Great. New York: HarperBusiness, p. 8. Copyright © 2001. Reprinted by permission of Curtis Brown, Ltd. Interestingly, Wells Fargo survived the financial meltdown in 2008 and its aftermath and is prospering. Although great firms cannot maintain superior stock market returns indefinitely, there is an important and interesting set of leadership and management principles relevant to sustaining best practices and change mandates across industries (Gandel, 2015). There are other important elements that great companies employ during times of nearly unprecedented global economic and political turmoil (Collins, 2001). Their response is relevant to leadership and management seeking to identify and sustain organizational change in real time. In uncertain times it is crucial that companies have core values, which need to be timeless and consistently preserved to retain their meaning. The more challenges a company faces, the more important it is to rely on core values—the reasons the company exists. Companies like Proctor & Gamble (P&G), GE, Johnson & Johnson, and IBM have strong core values. In addition, these organizations understand that the caliber of their employees can get them through any challenge, including the Great Recession. They know that when problems arise, people are more important than the plan (Rheingold, 1993). Revitalizing Leadership We have seen that leaders must first guide the design and diagnosis and then implement change within their organizations. Then they must sustain it. As integrators, orchestrators, © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 171 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 and strategists, leaders have a primary role in keeping the strategy, culture, structure, and systems of the organization in alignment. As Porter (1996) writes, a leader is primarily a strategist who must choose which customer demands and industry shifts the company responds to, while simultaneously maintaining the company’s unique traits and avoiding any organizational distractions. The leader is responsible for teaching those in the organization about strategy and for setting limits (Porter, 1996). Leaders as Change Integrators and Orchestrators Leaders are not only strategists but integrators. They integrate the organization’s new vision, mission, and values with its changed strategy, culture, structure, and systems. A 2010 IBM leadership report acknowledged that leaders should remove the silos within their organization and replace them with integrated, cross-functional capabilities (IBM Global Business Services, 2010). Take Shelley Nandkeolyar, for example. Nandkeolyar was an e-commerce group manager at the kitchen retailer Williams–Sonoma who brought technological savvy and organizational integrative understanding to his role. He created a new position within the company specifically to improve connections and communication among operations groups. This change and others that he led were intended to enhance the speed and content between groups, which was achieved. With continuous change a reality in the current marketplace, leaders must carefully and creatively orchestrate the facets of the organization, which includes different cultures, intergenerational dynamics, and communication styles (IBM Global Business Services, 2010). The kind of creative leadership needed today is not a one-person show. It requires collective input and output across the organization. The leader must integrate the organization to create collectivity through frequent, clear, consistent communication and then orchestrate its functionality around the organization’s vision, mission, and values. Leadership requires the ability to set limits (Porter, 1996), which should be informed by the organization’s vision, mission, and values. Take Seagate Technology as an example. Seagate is a large manufacturer of hard drives and other storage solutions for personal computers. In the 1990s the lack of integration from Seagate’s leadership created a fragmented organization, and communication was poor. This led to seven separate research and development (R&D) groups and a lot of internal competition. Seagate employees did not communicate or exercise any common vision or mission. Then, in 1998 new management was brought in. CEO Steve Luczo and COO Bill Watkins worked as partners and integrators. They brought Seagate together under one vision. They defined expected performance AP Images/Paul Sakuma COO Bill Watkins is pictured with a Seagate product. Together with CEO Steve Luczo, he worked to transform Seagate Technology from a fragmented organization to one that was united under one vision. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 172 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 behaviors and integrated organizational goals. They formed cross-functional teams and led training that was the same for all employees across the organization. This integrated approach allowed Seagate to become a market leader equipped for change (Clark, 2009). Leaders of especially large global companies must also decide how to create a strategy for their firms (Reeves, Love, & Tillmanns, 2012). A Boston Consulting Group survey of 120 international companies across 10 major industry sectors found that executives knew they needed to match their strategic processes to the demands of their competitive environments, but many still relied on strategic methods that fit more predictable, stable environments, even though their environments were highly unstable (Reeves et al., 2012). There are calculated decisions executives can make to create strategies that match their external environments: These strategies include classical, adaptive, shaping, and visioning (Reeves et al., 2012). The shaping type of strategy is more adapted to volatile environments than the other three, since shaping strategies embrace shorter planning cycles. Being flexible is of the utmost importance, since the strategy is often implemented as a series of experiments, with few predictors used. Leaders must explore different strategies that match their competitive environments. Leaders as Interpersonal Communicators and Motivators As we consider the difficulty many leaders have with change, Gilley, McMillan, and Gilley (2009) suggest a model based on interpersonal skills. They suggest that a leader’s success with change may be improved through his or her ability to build teams, motivate, and communicate within the organization. The Gilley et al. (2009) study noted that leaders’ ability to communicate, motivate, coach, build teams, reward, and involve others has been associated with the successful implementation of change. The skills of motivation, effective communication, and team building are ranked by the study as most important to the rate of success (Burke & Litwin, 1992; Conner, 1992; Sims, 2002). More recently, studies show that design-oriented approaches may be more motivating than topdown prescribed changes. Companies such IDEO, Innova, and Intercorp in Peru exemplify this contemporary thinking in change management. For example, Brown and Martin (2015) discuss the logic and process of design thinking and organizational change. They state that constant interaction and discussion with the decision maker is more effective than top-down decisions. In this type of interaction, the individuals interested in making a change would approach the responsible executive early on, stating that they believe there is a problem that must be solved. They would ask whether their viewpoint matches that of the executive (Brown & Martin, 2015). Following this conversation, strategy designers would return to present the possibilities that could be explored, given the definition of the problem that was previously discussed with the executive. They would ask to what extent the possibilities match what the executive imagined and if any are missing or are nonstarters. Finally, designers would approach the executive again with a plan for analyses to be conducted on the possibilities on which they all agreed. They would ask if the executive would like to see the analyses run and if any are missing. IDEO uses this process for product innovation and other organizational changes. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 173 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 Leaders as Resource and Change Support Champions Leaders must provide resources, build a support system for change agents, reinforce the ­development of new skills and behaviors, and stay on course to sustain implemented changes (Cummings & Worley, 2015). Financial support for large-scale change must be administered and approved from the top, otherwise potential feuds over who gets which resources can occur at lower levels. For example, a company that changes its vision by adding an e-business dimension to its marketing and product operations must ensure that clear communication and ­structural and skill changes are sustained and supported with adequate budgets. When such a dramatic change occurs without the required investment, conflict and confusion are likely to ensue. Similarly, sustaining organizational changes also requires leaders to help key managers build a support system. Such a system would help followers learn and develop new skills and behaviors to keep the changes on course. As with the example of an organization starting a new e-business, leaders and managers must ensure that some employees are trained and skilled in e-commerce tools and business practices to succeed both in the e-market and to integrate the new business with the existing one. Managing Change The Qualities of a Change Leader Suppose you are leading a pet food company that has made major transformational changes. You have paid attention to building capability and made sure the right leaders are in place to support the change. The infrastructure and processes have been altered to execute the change. Company values include a commitment to quality, which means better scrutiny of the suppliers and supply chain management. The strategy includes a modernized rebranding and a focus on organic ingredients to support company values. Financial backing has been secured to see the organization through the new changes. Feedback and input from staff and stakeholders has been sought and incorporated into the plan. The organization’s culture and the functions of its various units have been aligned to the common goal. There are open lines of communication, and as a leader at the top-tier management level, you have strong relationships with your management team and new vendors. It may seem like everything has been covered, but organizations must continue to evolve and adapt to the business environment. Profits are up, but change is an ongoing process. It is important to recognize business achievements and reward those who contributed to them. The leader’s task at this point is to sustain the positive change. Discussion Questions 1. 2. 3. 4. Identify a few key roles a leader must take, specifically, in sustaining change. What must the leader integrate to successfully implement change? What kinds of capabilities should a leader possess to increase the likelihood of success? What additional responsibilities, in general, does the leader have? (See the end of the chapter for possible answers.) © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 174 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 Revitalizing Strategy Enterprise or corporate strategies define a purpose and mission for an organization to satisfy stockholder and stakeholder expectations. They also set a course to meet the demands of rapidly changing external environments while accommodating the needs of internal systems (Johnson & Scholes, 1993; Reeves et al., 2012). Business-level strategies define the reasons why organizations take certain actions to gain a competitive advantage using their competencies in a specific business. Operational and functional-level strategies define ways each part of the business or functional area (marketing, production, sales, R&D) is organized to deliver corporate and business unit–level strategic direction (Johnson & Scholes, 1993). Strategies for continuous change may also differ from those employed in traditional and other types of environments. Different functions within a company may operate in environments that require various approaches to their planning (Reeves et al., 2012). For example, in some functions, optimizing production might work for that unit, but not for a marketing and sales department where digital analytics may be needed to shape strategy to meet those environmental requirements. Enterprise strategists, then, would need to manage different strategic styles and strategies within the organization. Kanter (2006) observed several mistakes made in relation to implementing strategy, especially at the corporate and/or business levels: • Rejecting what appear to be small innovations to go after a “blockbuster” • Focusing only on new product development, rather than on new services or improved processes • Confusing customers and increasing “internal complexity” with too many minor product changes. (pp. 76, 79) With effective leaders as head strategists, organizations should broaden their scope and widen their search when it comes to strategy (Kanter, 2006). An innovation pyramid approach would be best; that is, a few large strategies at the top with clear direction and investment, many midrange ideas with promise in test stages, and a large foundation of ideas in developmental stages (Kanter, 2006). Another important consideration with regard to strategy and sustaining change is strategic positioning, or the way in which the organization’s vision and values align with the strategy. A company using strategic positioning should gain a competitive advantage by focusing on its unique qualities. It should engage in different activities than its rivals, or if similar activities must be used, the way of going about them should be different (Porter, 1996). Porter (1996), a strategy expert, describes three different sources of strategic position: • Variety-based positioning: This type of positioning provides a small number and specific type of product or service to a large number of customers. The strategy is chosen based on the product or service, rather than by a customer group. For example, Jiffy Lube International offers oil changes and other automotive services. Before it began providing repair services, the company was a perfect example of variety-based positioning as it specialized in one thing: oil changes. The company based its strategy on this single service. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 175 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 • Needs-based positioning: This type of positioning fulfills a large number of needs for a small number of customers. The strategy is chosen based on the demographics of customers rather than the type of product or service offered. For instance, IKEA based its strategy on its target customers and offers them a large number of home décor products around a certain price point that meet all of their needs, including furniture, kitchenware, decorations, and more. • Access-based positioning: Finally, this type of positioning fulfills many needs of many customers in a narrow market. The strategy is based on customer accessibility. For example, Carmike Cinemas, based in Georgia, only focuses on small- to mid-size markets when finding locations for their theaters. The company bases its strategy on small-town populations. Kanter (2006) warns against adopting a strategic focus based solely on new product development. Good ideas may come from any level of the organization, which is why it is critical for the leader, as integrator and strategist, to create a fruitful environment for these ideas to flourish (Kanter, 2006). One motivation underlying market positioning is to gain customers’ attention and make emotional contact with them. A classic example was Avis Rent a Car’s proud claim: “We’re No. 2, We Try Harder.” It caught the attention of customers and hurt Hertz’s position as first in the industry at that time. Avis was near bankruptcy when the company came up with this strategy. It succeeded not as a gimmick or slick marketing slogan, but rather allowed Avis to shift time, interactions, perceptions, and structures to generate new possibilities with customers, transform the nature of the competitive game with Hertz, and even change consumers’ behavior toward Avis (Monger, 2012). The strategy led the way for the company to change its way of doing business; Avis did in fact try harder, and it paid off. Revitalizing Culture Deloitte research has found that more than half of all business leaders view culture, engagement, and employee retention as their most urgent challenges (Bersin, 2015). Culture counts if an organization is to retain high-quality talent. For example, Zappos has one of the most desired value- and innovation-focused cultures in the online retail industry. The company has 10 core values, including “embrace and drive change” and “create fun and a little weirdness” (Zappos, n.d.). Netflix has a manifesto, “freedom with responsibility” (as cited in Zandlicious, 2015). Quicken Loans employs colorful ideals to guide values (such as calling back every client the same day). Google uses its 10 things that outline what it believes (including focusing on users and the idea that great isn’t good enough). Salesforce promotes community. These are not just clichés. Talented employees who have options in a rising economy do not stay with companies where the culture does not match their needs and aspirations. Organizational cultures may be the most critical yet challenging factor in successfully navigating change. Cultures need to accommodate and match the strategies of the organization and at the departmental levels. Strong cultures exist when there is unified understanding and perspective on what the organization is, what it stands for, and how it functions. Changing it is often easier said than done. There are numerous aspects of culture that can affect an organization’s ability to handle change, as Senior and Fleming (2006b) show in Figure 4.2. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 176 12/15/15 9:44 AM Section 4.3 Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Figure 4.2: Capacities for change and culture The interrelation of organizational leadership, strategy, culture, structure, and systems must be managed when revitalizing transformational changes. Attitudes to criticism Degree of management’s openness to new ideas— especially from below Attitudes to sharing information Attitudes to experimentation in processes and products ORGANIZATION’S CAPACITY TO CHANGE Degree of willingness to give people authority and support them in their actions Attitudes to conflict Degree of willingness to discuss sensitive issues openly Degree to which the organization’s structure facilitates change Source: Senior, B., & J. Fleming, J. (2006b). Organizational change (3rd ed.). Essex, UK: Prentice Hall, Figure 4.9, p. 173. Reprinted by permission of Pearson Education, Inc., New York, New York. Attitude, willingness, and communication are key factors in successfully navigating change. ­Figure 4.2 shows that attitudes toward experimentation and the willingness to provide autonomy and support are most related to the organization’s ability to change. When information sharing is encouraged and experimentation is rewarded (even if it leads to failure), the organization will be more flexible and innovative in dealing with change. Good communication among all levels of the organization is also a critical success factor. Employees at all levels should be willing to discuss sensitive issues without fearing negative repercussions. Management must be open to new ideas, and all employees must adopt a positive attitude toward conflict and criticism. In the case of a change organization, conflict and criticism are fruitful tools that help continuously mold the organization. The attitudes, willingness, and communication within the organization work together to facilitate—or resist—change. An organization seeking to successfully navigate change should be careful to evaluate these factors internally. Take Google, for example, whose bottom-up culture is one of open communication and collaboration. “Googlers” (Google employees) take part in Thank Goodness It’s Friday forums nearly every © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 177 12/15/15 9:44 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 week to ask company founders questions and keep an open dialogue. Google also holds Fixit forums to discuss company challenges and potential solutions. This perpetuates a culture of communication, collaboration, and openness to change. Attitudes at all levels of the organization are receptive, rather than resistant (Corporate Executive Board, 2009). A collaborative effort from top to bottom is needed to create a culture conducive to change. Organizations that support change, creativity, and innovation are more natural and integrative and are perpetually forward looking and competitive (Senior & Fleming, 2006a). Kanter (2006) suggests that innovations succeed in collaborative cultures because of connectors, or individuals who know how to find partners and work effectively with others. As in any business function, risk assessment is a valuable tool to increase efficiency and improve operations. Cultural risk is the idea that strategy and culture will be incompatible, creating a resistance to change. Management should assess cultural risk to determine the specific areas of incompatibility and articulate the best course of action. In some cases culture may be changed to fit the new strategy, whereas in other cases the strategy should be changed to fit the culture (Senior & Fleming, 2006a). Organizations like IBM and P&G handle change well because they have created change cultures. Both companies have high levels of employee autonomy but strong, open channels of communication. Good ideas are rewarded, whether successfully implemented or not. IBM, for example, creates intercontinental teams as needed to address problems or new opportunities. These teams are often temporary and make use of virtual communication technologies. Change is considered normal and is encouraged in the attitudes and communication from both the top down and the bottom up. Collaborative efforts and openness to new ideas, coupled with a flatter, more responsive structure, allow these organizations to maintain a competitive advantage and respond quickly and smoothly to change. Revitalizing Structure IBM’s top leaders have stated that sharing organizational knowledge and experience is vital to a workforce that is open and responsive to change. All employees should be self-reliant and equipped to solve problems across the company, and leaders must know how to apply employees’ talent and ideas. However, many companies do not have the structures or resources to create an environment conducive to knowledge sharing and collaboration. As such, they remain in cultural and organizational silos (IBM Global Business Services, 2010), a term that describes specific processes or departments that work independently of each other without strong communication between or among them. Rawpixel Ltd/iStock/Thinkstock Integrated structure and communication are key. Organizations must It is important to create an environment conducive to openness and collaboration to stimulate growth. © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 178 12/15/15 9:45 AM Revitalizing the Five Pillars: Leadership, Strategy, Culture, Structure, and Systems Section 4.3 avoid the temptation to work in silos. Instead, companies should encourage mutual learning through frequent communication and strong interpersonal connections (Kanter, 2006). When a company’s departments are too isolated from each other, they risk losing valuable opportunities. In the 1990s, for example, while personal care giant Gillette had success with the Oral B toothbrush, its appliance unit Braun, and its Duracell battery unit, it was slow to introduce a battery-powered toothbrush (Kanter, 2006). In environments of continuous change, organizations cannot afford to have segregated operations. Integrated communication and shared knowledge within the structure increases operational efficiencies and helps the organization manage change. Processes and systems also need to be flexible and integrated. Budgets, planning, reviews, and other processes should be adaptable. Tight processes discourage and often punish flexibility. BBC, a television network in the United Kingdom, implemented greater flexibility in its processes and systems by creating a special reserve fund for new business ideas. A new recruit used funds that were designated for a new training film to create a pilot episode for a new series, The Office. The show was a phenomenal hit and was the inspiration for NBC’s The Office, which premiered in the United States in 2005. The flexibility of BBC’s processes allowed new ideas from any level of the organization to be implemented (Kanter, 2006). Revitalizing Systems and Processes The availability of accurate, timely data often makes or breaks an organization’s capacity for change. Organizations use IT to assist strategic and operational decision making to support and sustain organizational changes. Increasingly large amounts of complex data are analyzed for reporting and decision making. Data warehousing and business intelligence software provide solutions to the evolving need not only to locate and store data but also to strategically apply it to marketing, sales, and competitive analysis opportunities and issues in the marketplace, especially in support of new organizational changes. Data warehousing refers to the use of databases that store all company data, which users access to create reports and generate answers to what-if questions (Daft, 2013). Business intelligence, or data mining, is the process of analyzing data to make sound strategic decisions (Daft, 2013). Systems that allow for data warehousing and data mining help organizations manage large amounts of data and facilitate both horizontal and vertical communication. For example, organizational restructuring uses IT systems to integrate departments within and across other functional and expertise areas (like production, R&D, marketing, and sales). Because each expertise area can easily share data, the quality and efficiency of decision making increases. This is particularly important when an organization is facing continually changing environments. Systems should be designed to facilitate effective control and decision making. Several types of systems have been developed for this purpose. For example, a management information system is a computer-based system that provides information and support for managerial decision making. An executive information system is a higher level application that facilitates decision making at upper levels of management using software. It provides © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 179 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 tailored, automatically updated signals and performance information to management through executive dashboards, which are easy-to-read digital information system user interfaces. The system displays like an automobile’s dashboard and continuously updates information about key organizational processes (Sorenson, 2002). With many industries continually changing, these software and systems capabilities provide management the information that is needed to make informed, timely decisions. Many companies also practice knowledge management, and some even dedicate whole departments to this task. Knowledge management refers to efforts to obtain, categorize, and make intellectual capital available within a company. It also describes attempts to create a culture that promotes continuous learning and knowledge sharing. This information then becomes a foundation that organizational activities can build on (Holzer & Seok-Hwan, 2004). (For further reference, also see Data, 1999, pp. 46–52; Mayo, 1998, pp. 34–38; and Miller, 1999, pp. 42–45.) Check Your Understanding 1. 2. Which dimensions do you think are more difficult to revitalize in organizations that need largescale change: leadership, strategy, culture, structure, or systems? Explain your reasoning. Identify an organization recently in the media or business news that is failing to revitalize the dimensions listed in question 1. What issues prevent the organization from doing so? 4.4 Sustaining Change: Built-to-Change Organizations As we’ve discussed, change is a continuous reality that successful organizations learn to sustain. In 1942 economist Joseph Schumpeter coined the term creative destruction, which describes the industrial transformation that accompanies radical innovations introduced by entrepreneurs. These forces sustain long-term economic growth, even if they destroy established companies that had monopoly power (Hughes, 1986). Richard Foster and Sarah Kaplan (2001) extended this argument in their book on organiza­ arket— tions, Creative Destruction, Why Companies That Are Built to Last Underperform the M and How to Successfully Transform Them. They studied more than 1,000 corporations in 15 industries over 36 years. The companies included old-economy industries, such as paper and chemicals, and new-economy industries, like semiconductors and software. They found that old-school corporations used management philosophies rooted in the assumption of continuity—which meant that they could not change or create value at the speed and scale of markets. The technology and processes that enabled their long-term survival endangered them in the new economy’s constant need for change. Foster and Kaplan argued that restructuring corporations to change at the speed and scale of capital markets, rather than focusing on changing controls, required more than simple adjustments. The authors claimed that companies like Johnson & Johnson, Corning, and GE prevailed over cultural lock-in (becoming insular and closed) by transforming their companies, not just slowly improving them. They argue for radical change strategies such as creating new businesses; © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 180 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 selling, spinning off, or closing businesses and divisions with slow growth; shutting down outdated, ingrown structures and procedures; and creating new processes, controls, and ways of thinking. Foster and Kaplan (2001) state that organizations must be as dynamic and responsive as the markets in order to sustain superior performance and long-term success. Less sweeping in their analysis and views on organizational change, authors Edward E. Lawler III and Christopher G. Worley (2006) also evaluated contemporary organizational effectiveness and developed key practices for creating organizations that are self-sustaining change. In their book, Built to Change: How to Achieve Sustained Organizational Effectiveness, they define b2change organizations as those that are built with practices in place to encourage change, rather than obstruct it. Here we explore several of those practices in order to identify ways to sustain and invigorate organizations undergoing change. Those practices include seeking competitive advantages by embracing continuous, sustainable change—based in part on Fowler’s (2000) concept of a virtuous spiral—as well as creating structures without jobs, implementing downward decision making, and leading as a team. Seeking Temporary Competitive Advantages Historically, best practices mandated that in order to be successful, organizations had to exhibit stability through strong values, structures, and strategies (Lawler & Worley, 2006). Organizations were encouraged to endure and were designed for alignment and equilibrium rather than alteration and uncertainty. This led to clearly defined but inflexible organizations. They were not equipped to navigate change, let alone grow in the process. Stability has a place, and it is useful in developing long-term competitive advantages (unique products, ideas, and/or practices that distinguish the organization within the market). Lawler and Worley (2006), however, suggest that organizations should continuously review the short term and implement temporary competitive advantages one after another. The basic assumption here is that if change is to be expected, stability will always be disrupted, so organizations should focus on short-term strategies. This requires a unique support system. Human capital, knowledge, and organization are critical to the success of temporary competitive advantages (Lawler & Worley, 2006). Human and social capital have become critical sources of competitive advantage as intangible assets (nonphysical assets that are often not found in the organization’s accounting records, such as goodwill, patents, and a skilled workforce) and now make up more of a firm’s market value. In 1982 tangible assets, like the facility and equipment, represented 62% of the value of a typical New York Stock Exchange company, but in 2000 tangible assets represented only 15% of a company’s value (Lawler & Worley, 2006). Knowledge and technology are growing rapidly, increasing the need for human capital and knowledge within organizations. Moreover, the very nature of work is being redefined. Individual work is now primarily knowledge-oriented and is no longer task-oriented, as the founder of modern management, Peter Drucker (1999), stated in the late 1950s. Consider the significant outsourcing that takes place today. Many outsourced jobs require advanced technical knowledge and expertise. Many manual jobs are now performed by machines, which require human capital to © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 181 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 develop and maintain. As our knowledge grows, it must be used differently by organizations to develop new competitive advantages (Lawler & Worley, 2006). Organizational structure itself can now be a competitive advantage. Traditional departments—sales, accounting, and others—are no longer sufficient. New departments like total quality management, knowledge management, and talent management play a significant role in differentiating an organization and sustaining change (Lawler, Mohrman, & Benson, 2001; Lawler & Worley, 2006). Many of these new departments seem to focus on the importance of human capital within the organization— managing talent and knowledge, engaging employees, and improving the workplace environment. Kuzihar/iStock/Thinkstock As manual labor becomes more automated, the workplace’s human element is becoming more knowledge-based. Organizations with these structures understand that the ability to sustain change starts with its human capital. Knowledgeable employees must be engaged, well-managed, and rewarded properly if the organization is to retain them. Organizations compete through involving people as well as products. Think about the computer technology industry. Most people would say that Apple has a competitive advantage over Microsoft—but why is this the case? Apple’s human capital has for many years been a significant factor in its success. Former CEO Steve Jobs was instrumental in developing new products, strategies, and vision, often creating the change in the market (Lawler & Worley, 2006). Sustaining organizational change was traditionally determined by a company’s ability to unfreeze, freeze, and refreeze (Lawler & Worley, 2006; Lewin, 1997). Unfreezing dissolves the normalcy of the organization, allowing it to then refreeze new structures and practices. It disrupts one period of stability so the organization can create a different one. It is a singular event, which is not the practice of built-to-change organizations (Lawler & Worley, 2006). These organizations are successful at sustaining change because they are designed for continuous change— by seeking temporary competitive advantages through structures, strategies, and leadership. Continuous Change and the Virtuous Spiral An organization’s ability to strategize well and sustain change depends on its identity. As the continuous change model in Figure 4.3 illustrates, a company’s identity functions as the core, providing a platform for designing, strategizing, and creating value. Identity—or who the organization is and what it stands for—is traditionally viewed as being very stable. Here stability is not a hindrance to change, but rather a prerequisite. An organization cannot sustain change without first establishing a strong identity. Identity is most clearly seen in the organization’s culture and how it is viewed by the outside world (Hatch & Schultz, 2002; Lawler & Worley, 2006). Just as your peers, coworkers, friends, and family © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 182 12/15/15 9:45 AM Section 4.4 Sustaining Change: Built-to-Change Organizations Figure 4.3: Continuous change model An organization’s identity is interrelated to its ability to add value by creating designs and formulating effective strategies that lead to desired change. Formulating Strategies Creating Design Organizational Identity Adding Value Source: Adapted from Worley, C. G., & Lawler, E. E., III. (2010). Agility and organization design: A diagnostic framework. Organizational Dynamics, 39(2), 194–204. can distinguish your identity based on your priorities and choices, an organization’s identity can be gleaned by how it manages conflict and prioritizes its stakeholders and environment. Organizations that make their external environment and ability to make strategic adjustments part of their identity will be able to sustain change (Lawler & Worley, 2006). Once identity is established and communicated, strategic intent is the next step in managing continuous change. Strategic intent refers to the ways in which the organization develops its temporary competitive advantages. Good strategic intent is characterized by five elements: breadth, aggressiveness, differentiation, logic, and orchestration. Breadth refers to the broadness of a strategy. For example, P&G has a broad, global strategy involving multiple markets and consumer products. The WD-40 company, on the other hand, has a very narrow strategy and makes only a single type of lubricant. Aggressiveness is how an organization grows, interacts with competitors, and creates new products. Consider the Coca-Cola versus Pepsi feud for market share, or Apple versus Microsoft. The Mac versus PC commercials struck such a chord in highlighting these products’ consumer rivalries that many are posted online and are watched by hundreds of thousands of viewers from around the world. Differentiation is the degree to which an organization’s products and services vary from the competition. We see this daily in the automotive industry. Each manufacturer offers unique vehicle features in an attempt to capture more of the market and distinguish itself from competitors. Logic refers to the core business model behind the organization’s revenue, costs, and profits. Some companies, like Walmart, choose a high-volume, low-cost model. Others, like Ferrari, choose a low-volume, high-cost model. Logic affects the way a company markets its products and how it interacts with the consumer. Finally, orchestration is the process of planning and sequencing different strategies. It is the way in which the organization predicts and responds to environmental changes through the breadth, aggressiveness, and differentiation of its strategies (Lawler & Worley, 2006). For example, Southwest Airlines has long relied on a keep-it-simple strategy: it keeps costs low, bags fly free, and it has a well-known corporate culture—promulgated by legendary CEO © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 183 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 Gary Kelly. This has given the airline a unique strategic position and allowed it to manage continuous change. In 2010 it announced its acquisition of AirTran to create “the most expansive network of any low-cost carrier in the U.S.” (Reed & Jones, 2010, para. 1). The strategic shift maintained the company’s identity as a low-cost airline and gave it a new competitive advantage. It expanded its network to new cities and began to offer international flights—a first for Southwest. Kelly acknowledged that this strategic shift allowed Southwest to grow its presence in markets that it was not yet serving and placed the company in a good position to expand further (Reed & Jones, 2010). Southwest is approaching strategy with flexibility and vision, allowing it to sustain change. Organizations built to change think about strategy continuously. They also constantly evaluate their identity and strategic intent in relation to the changing environment. Those that are successful in this endeavor are able to create virtuous spirals, upward patterns of increasing performance that are created when an organization can match its strategy, value creation, and design to the changes in its environment. Companies like IBM, Intel, GE, MicroAP Images/Ric Francis soft, and P&G have successfully created and recreated virtuous spirals over Southwest Airlines is approaching strategy with decades as built-to-change organiza- flexibility and vision, allowing it to sustain change. tions. In the 1980s Intel was an established manufacturer of dynamic random-access memory chips but was suffering in competition with its low-cost Asian competitors. The company adapted to its new environment and began to manufacture microprocessors. Its identity and adaptable strategic intent allowed it to create a new virtuous spiral, and it is still doing well today. Organizations that are built to change, like Intel, think about the current environment but also imagine potential future environments and react accordingly (Lawler & Worley, 2006). Creating Job Structures Without Job Titles Traditional job descriptions and titles are now stagnant and high-cost hindrances to organizational change. If not kept up-to-date, they become irrelevant to the organization. Built-tochange organizations instead create job structures without job titles. They focus on creating a dynamic employee experience through changing work relationships and assignments. Similar to many professional services like accounting or consulting firms, employees are assigned responsibility for a set of tasks on a temporary basis. As change occurs, tasks are adjusted to fit the new needs of the organization and the customer. Although this approach expects much from employees and management in terms of frequent job redesign, it has significant advantages for sustaining change. Such a structure allows employees to be defined not by a title, but by their unique skill set and current tasks. Their work is always relevant to the organization, and learning opportunities increase as different teams are created (Lawler & Worley, 2006). © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 184 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 For example, GE, a successful and long-standing built-to-change organization, encourages a dynamic work environment. Its entry-level rotational programs allow new employees to spend several months in different divisions over several years. This provides exposure to the various operations in the organization and instills the GE culture of adaptation and teamwork. Whereas other companies view training as expensive and time-consuming, GE makes it a priority, spending approximately $1 billion each year on employee training and devoting weeks or months to evaluating talent (Brady, 2010). The focus is not on the job title, but on what employees can do. GE’s method of frequently changing teams establishes change as the norm and encourages horizontal and vertical communication and knowledge sharing. Another aspect of this structure is business process outsourcing (BPO). BPO involves outsourcing certain functions like accounting or human resources to firms dedicated to those services. These firms have the most current knowledge in their respective fields and can more easily handle change. BPO reduces the stresses on the organization and the resources needed to change. It can also represent a significant cost savings. New jobless structures and outsourcing put built-to-change organizations in a position for different communication and decision making (Lawler & Worley, 2006). Implementing Downward Decision Making Sustaining change requires good communication and involvement from top to bottom. IBM is a company that understands the importance of vertical communication (top–bottom or formal communication) and horizontal communication (interdepartmental communication). IBM holds “jam sessions” through its intranet (internal company Internet site) to gather ideas and communicate about current and future company issues. One such session involved 10,000 comments and more than 50,000 employees. CEO Sam Palmisano understands that a good idea can come from anywhere and that good feedback does not come just from superiors (Brady, 2010). For communication and downward decision making to occur, an organization must have a good information system. The seven most important characteristics of a good information system are: 1. 2. 3. 4. 5. 6. 7. Provide comprehensive data on key processes Integrate data across departmental boundaries Monitor capabilities as well as performance Link to goal setting and rewards Include information on competitors Provide trend data on the business environment Make measurements visible throughout the organization. (Lawler & Worley, 2006, p. 126) This kind of system allows the organization to frequently set goals, have a customer focus, and be transparent regarding its goals. Decision making related to those goals should then take place at the corresponding level. Built-to-change organizations understand that employee input can improve the quality of decisions and make change easier. Leading as a Team Leadership is the common thread in built-to-change organizations. Leaders in this context have a unique combination of leadership and managerial skills. Individuals who are both © 2015 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. wei82650_04_c04_155-206.indd 185 12/15/15 9:45 AM Sustaining Change: Built-to-Change Organizations Section 4.4 leaders and managers react to the external environment and practice shared leadership. Shared leadership involves developing an entire organization of leaders, at all levels, to distribute decision making and uncertainty among knowledgeable leaders. To do this requires that organizations either hire managers with flexible styles or replace those whose styles are inconsistent with the organization’s strategy and identity (Lawler & Worley, 2006). The CEO of HP describes leadership as a “team sport” (Lawler & Worley, 2006, p. 217; Tam, 2005, p. B1). The best teams are designed for organic growth—individuals are thoughtfully placed with the intention of maximizing innovative output and flexibility. Leadership development should occur at all levels. The organization’s attitude inspires all employees to gain the knowledge and skills to lead and makes those resources readily available (Lawler & Worley, 2006). For example, P&G, led by CEO A. G. Lafley, places special emphasis on leadership development within the organization. The company strengthens leadership and management from the executive team down to the line employees and recognizes that leadership development and training is the most important requirement to maintaining a healthy company for the long term. During Lafley’s first term as CEO, he doubled the company’s revenue and market value and outperformed the market with his acquisitions. He retired in 2015 (Byron, Ng, & Lublin, 2015). Lafley (2011) understood that leadership was not the responsibility of a single person; rather, the more leaders he could help create within the organization, the better P&G could sustain change: It was my responsibility to develop as many potential CEOs as we could—­ leaders who would be ready and able at any time to lead P&G under any circumstances.… My objective was to groom more horses for the race. I wanted horses that could run in all kinds of conditions and on all kinds of tracks. (p. 70) P&G works as a team, allowing it to successfully sustain change through improved communication and knowledge sharing. Not only should organizations develop leaders at all levels, they should reward employees for being leaders. Many reward systems are designed around stability, but consistent, stable performance is not the goal for built-to-change organizations (Lafley, 2011). Employees often need an incentive to change. Incentives should be given for both successes and failures. In a continuously changing organization, failure cannot be avoided and is not necessarily something to avoid. Good failure, as Lawler and Worley (2006) describe, should be rewarded and included in the organization’s learning process. A Duke University and University of Southern California survey of 549 successful company founders found that they primarily attributed their success to their ability to learn from mistakes (Kauffman Foundation, 2009; Newlands, 2014). Basketball...
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