Goodman, P. y Rousseau, D. (agosto,2004).

Organizational change that produces results :

the linkage approach . Academy of Management Executive, 18 ( 3 ) pp. 7-19. (AR18243)

姝 Academy of Management Executive, 2004, Vol. 18, No. 3

........................................................................................................................................................................

Organizational change that

produces results: The linkage
approach
Paul S. Goodman and Denise M. Rousseau

Executive Overview
This article provides a tool for creating change that produces observable results in
complex organizations. Linkage analysis helps managers map, evaluate, and overcome
barriers that underlie the organizational improvement paradox. In this paradox,
organizational changes are expected to lead to performance benefits for a unit as well as
for the firm as a whole, but benefits occur only for the unit. The organizational
improvement paradox frustrates change efforts and is the norm in organizational change
where the firm has multiple units and levels. Linkage analysis permits managers and
change agents to visualize the complex process of change. It details critical change
pathways that otherwise go unrecognized and unmanaged. Through two cases, the
reader can practice using linkage tools. Linkage analysis primes managers to take
critical and widely overlooked steps to produce visible firm-level results.
........................................................................................................................................................................

People have difficulty integrating events and
relationships over time . . . tend(ing) to mis-
perceive feedback and focus attention on the
wrong things.
—J. S. Carroll, J. D. Sterman, & A. A. Marcus,
1998
Achieving organizational change that produces
results is not just a managerial challenge; it is a
cognitive challenge, too. Managers, like people
generally, find it difficult to think about dynamic
events like feedback loops and time delays. It is
easier to pay attention to immediate effects and
visible changes. The outcome is a focus on the
short-term and local not the longer-term and
global results from change, a problem that organ-
izational incentives amplify. Thus, local improve-
ments in cost reduction or efficiency are assumed
to benefit the firm as whole, while little attention is
given to actually ensuring results for the firm.
The Organizational Improvement Paradox
Since managers cannot manage what they give
little attention to, a paradox is widespread across
all forms of organizational change: changes that
successfully improve performance in one part of
7
the firm often fail to translate into gains in firm-
level performance. The roots of what we refer to as
the “organizational improvement paradox” (see
Table 1) are the feedback loops, time delays, and
other change dynamics that are difficult for man-
agers to recognize and act upon in translating lo-
cal changes into broader gains.1
Changes that successfully improve
performance in one part of the firm often
fail to translate into gains in firm-level
performance.
The goal of this article is to make the dynamic
complexity of organizations more accessible to
managers and other change agents who seek to
turn unit-level performance improvements into
overall gains for the firm. We offer a conceptual
tool kit, which we refer to as “linkage analysis,” to
help managers conceptualize, assess, and over-
come the barriers underlying the organizational
improvement paradox. It is almost an article of
faith that improving performance of one business
unit is good for the business in general. Many have
argued along the lines of a famous change article
8 Academy of Management Executive
Table 1
Key Features of the Organizational Improvement
Paradox
(1) A change has been successfully introduced in part of an
organization
(2) The change produces positive performance results for one
department or for an entire set of subunits
(3) Change agents anticipate that this change will improve
firm performance
(4) But the firm doesn’t benefit from the change
by R. Schaffer and H. L. Thomson, “Successful
Change Programs Begin with Results,” that suc-
cessful implementation in a local unit or organiza-
tional level, where it produces a local outcome, can
be presumed to generate improved firm-level per-
formance, too.2 All too often, though, this is not
what really happens. Many otherwise successful
local changes have no real payoff for the organi-
zation.
The organizational improvement paradox is
widespread in organizational change. Analyses of
information technology (IT) investments for many
years indicate little or no impact on firm-level per-
formance. Similarly, assessments of organiza-
tional downsizing reveal that relatively few firms
have realized the cost savings or productivity in-
creases they anticipated.3 In both instances,
changes that had some benefit in terms of local
efficiencies or cost reductions failed to achieve
their expected results for the firm.
Assessments of organizational
downsizing reveal that relatively few
firms have realized the cost savings or
productivity increases they anticipated.
Specifying Pathways for Change
A new frontier in understanding organizational
change is to translate successfully implemented
changes into real organizational benefits—and we
can do so through systematic analyses of “cross-
level linkages,” that is, connections between de-
partments or business units and the organization
as a whole. To manage change in a way that pro-
duces tangible organizational benefits, action
must be taken to map the flow of changes in activ-
ities and outcomes from local levels where
changes occur to results visible at higher levels.
When managers fail to explicate and promote
these change pathways, from work groups to de-
partments, from departments to the firm, the organ-
izational improvement paradox results. A “change
August
pathway” is a causal model that specifies the prac-
tices needed to build linkages between successful
local changes and firm-level results.
Two examples show why it is important to spec-
ify the change pathway (and the consequences of
failing to do so). The retailer Sears, after substan-
tial financial losses, began a major transformation
led by CEO Arthur Martinez.4 The company devel-
oped a new measurement system that mapped the
causal chain from individual employee actions
and customer behavior to firm-level results. Aligned
with a broad set of changes at Sears, the mapping
provided managers and change agents with a way
to link employee-level interventions (e.g., training in
business literacy) with changes in customer percep-
tions and, ultimately, store revenue. A broad-based
management team participated in developing a re-
alistic change pathway, which they referred to as
“the employee-customer profit chain.” This mapping
was periodically checked against feedback from
constituents regarding the change process. As part of
the feedback process, the team recognized that a
five-unit improvement in employee attitudes toward
service was tied to a 0.5 per cent increase in store
revenue, while other changes had relatively little
impact on results. Based on this feedback, the
change pathway was redrawn and resources allo-
cated toward promoting more effective customer ser-
vice behavior within the stores. Although the partic-
ular model Sears used is unique to that type of
organization, it highlights the possibilities that map-
ping tools can unlock. Linkage analysis as we de-
scribe it below takes this mapping a step further,
enabled by knowledge regarding organizational
linkages.
COMO, a large public utility, also undertook a
major organizational change with the goal of im-
proving firm productivity— but unlike Sears it did
so without mapping the change pathway. It intro-
duced a more efficient computer-based work envi-
ronment for its customer service representatives.
The implementation was successful to the extent
that unit productivity increased. But the firm’s an-
ticipated productivity gains were not realized. If
COMO had mapped the change pathway, the com-
pany would have learned that substantial over-
haul in other areas would have to be done in order
to absorb and capitalize upon the increases in
customer service productivity.
What’s New: Linkage Analysis Focuses on
Changes Required Between Levels
Our contribution is to present ways in which man-
agers, consultants, and organizational researchers
can directly map and support the linkages needed
2004 Goodman and Rousseau
to turn local improvements into broader organiza-
tional results. We begin with the premise that a
successful and sustainable change has been im-
plemented and ask the question, “What can be
done to ensure that local change leads to payoff for
the firm?” Our focus is inherently cross-level; that
is, we want to understand how changes at the
individual, group, or subunit level impact organi-
zational results. Linkage analysis reveals gaps in
the relationship between the lower and higher lev-
els of a firm, obstacles in the translation of local
gains into firm results that might otherwise go
unrecognized and unmanaged without the explicit
attention that linkage analysis gives them. The
classic example of linkage obstacles is bottlenecks
where local changes can only create gains for the
broader organization when faster production in
one local unit is coordinated with faster processing
in another, resulting in a net gain for the firm as a
whole. The image of car bodies coming off the
assembly line and piling up at the door of the paint
department comes to mind. But less obvious link-
age obstacles exist where the performance metrics
of local units are not clearly tied to those metrics
which the larger firm values. An academic depart-
ment’s improved teaching ratings don’t help the
larger university manage its budget, if that is what
its key concern is, unless those teaching ratings
are used to attract new tuition-paying students.
Linkage analysis calls attention to ways of trans-
lating local gains into broader organizational
benefits.
Linkage analysis calls attention to ways
of translating local gains into broader
organizational benefits.
Managers face considerable ambiguity in antic-
ipating how changes in a work group will affect
department performance or how a department’s
changes will affect the organization’s performance.
By giving managers and change agents a way to
think about connections between levels, linkage
analysis differs from other approaches to promoting
successful organizational change. It focuses explic-
itly on turning local unit gains into global firm re-
sults. It takes successful change as a given—at least
in the place within the firm where it was imple-
mented (e.g., its customer service center, shipping
and receiving department, or North American sales
territory). A scan of current organizational change
textbooks reveals well-documented knowledge re-
garding how to get change started, manage transi-
tions, and make change last.5 Linkage analysis takes
9
the next step: It informs managerial action after suc-
cessfully implemented change has occurred to cap-
ture its potential benefits for the firm more broadly.
This approach to change management is based upon
Paul S. Goodman’s 2000 book Missing Organizational
Linkages, which specifies how connections between
work units (horizontal linkages) and between hierar-
chical levels (vertical linkages) facilitate or impede
firm performance.6
Linkage analysis goes beyond traditional no-
tions of organizational systems and alignments to
incorporate dynamic organizational processes.
One of the authors worked on a large-scale change
effort with Eric Trist, a founder of socio-technical
analysis and systems theory. Its basic idea is that
creating change which aligns with the organiza-
tion’s social and technological systems enhances
performance. In the study with Trist, alignment of
socio-technical systems did indeed predict im-
provements in productivity and cost reduction in
the firm’s production systems. Nevertheless, the
alignment perspective did not trace how changes
in production impacted the firm’s overall effective-
ness. Similarly, proponents of the big-picture sys-
tems view of change have done a good job of spec-
ifying the parts that matter in implementing
successful change and why alignment is needed,
but they are more oblique on the pathways from
department or unit improvement to firm-level
gains. The linkage approach we present helps
managers and change agents directly map and
support the connections needed to turn local im-
provements into broader organizational results.
Linkage analysis is related to but goes beyond
the mapping approach at Sears as discussed
above. Sears mapped the linkages between organ-
izational practices that enhance employee service
capability, this capability’s impact on customer
ratings of service, and the resulting impact of
these ratings on actual sales. Its approach, by pay-
ing attention to outcomes occurring over time,
gave Sears’ managers a methodology for tracing
and estimating the quantitative effects of local
changes on store performance. However, although
both perspectives help managers visualize the
complex pathway inherent in any organizational
change, the Sears’ approach created a model
unique to Sears.
In contrast, our approach identifies linkage
gaps, bridges, and mechanisms valid for all or-
ganizations seeking to resolve the organizational
improvement paradox. Linkage analysis does not
require longitudinal data to identify linkage op-
portunities and can be used to anticipate as well
as react to linkage problems. Moreover, it builds
managerial capability to think longitudinally re-
10 Academy of Management Executive
garding time lags and feedback cycles. Though the
approach Sears used is linear, linkage analysis
pays attention to feedback loops and time delays,
thereby capturing the more dynamic elements of
the change-performance relationship.
Applying Linkage Analysis: Two Case Studies
Linkage analysis is a three-step process. First, the
basic features of the organization are mapped to
anticipate likely linkage problems. Second, spe-
cific linkage obstacles are identified. The third
step is to design linkage-building processes,
whose introduction can offset linkage obstacles.
Let us start with two examples of the organiza-
tional improvement paradox to explain how link-
age analysis works.
BIG 6, a large international consulting firm, in-
troduced a multimillion-dollar information system
to facilitate knowledge sharing. Although BIG 6’s
offices were relatively independent of each other,
they worked on a common class of problems. The
information system was designed to permit solu-
tions discovered in one office to be used in other
offices. If consultants were able to use a good ex-
isting solution, then they would need to spend less
time on discovering solutions themselves. The in-
formation system should reduce the time to com-
plete an engagement. If the team then were able to
produce more engagements, the revenue per team
should increase, and the office and firm should
benefit. This information system was successfully
implemented, and a variety of metrics showed that
the system was actively used by the consultants
across offices. However, there were no observable
increases in revenue/labor hours at the firm level.
TELECO, a high-tech firm, implemented a com-
pany-wide change program to improve costs, qual-
ity, customer satisfaction, and overall profitability.
This program included extensive worker training,
development of problem-solving teams using inno-
vative methodologies for quality improvement,
Table 2
Classifying the Change’s Linkage Environment
Dimensions Simple
Interdependence Low
Performance Metrics Same
Functional Contribution Direct, estimable
Time Lag Short (months or less)
Obstacles Fewer
Implications for Linkage Analysis Easier to trace and manage linkages
August
new recognition and reward systems, and other
activities. Changes were introduced across TELE-
CO’s many units including product development,
manufacturing, sales, and other administrative ar-
eas. Two years into the change, despite significant
reductions in manufacturing’s product defects and
costs, the firm’s profitability actually declined.
This decline was not attributable to any industry or
environmental changes. Now let’s use linkage
analysis to figure out what happened in each case.
Step 1: Linkage Identification
The first step in linkage analysis is identifying the
critical organization features or dimensions that
bear on understanding the organizational im-
provement paradox. Four organizational features
are critical to identifying linkage obstacles (see
Table 2).
1. How is the firm organized?
When units in an organization (e.g., departments
or work groups) are relatively independent, it is
easier for the benefits from change in any one unit
to translate into broader organizational gains.
Sales gains for a retail chain translate directly into
increased sales for the firm as a whole when the
chain’s stores operate independently. In such
cases, unit changes are more likely to impact firm
outcomes directly. On the other hand, where the
activities of units are interdependent, negative
consequences and bottlenecks are more likely to
arise as a result of the change. While any organi-
zation with distinct subunits and levels has mem-
bers who possess information that differs from that
of others with different vantage points, linkage
analysis can identify where greater attention to
information sharing is needed in solving coordina-
tion problems. As the number or degree of interde-
pendent activities increases, it becomes more dif-
ficult to align changes in one unit or level with
Environment
Complex
High
Different
Indirect, difficult to estimate
Long (year or more)
Greater
More difficult to trace and manage linkages
2004 Goodman and Rousseau
those in another. In highly interdependent work
settings where complex coordination is required,
many obstacles must be overcome before benefits
from a change at one unit are realized by the firm.
In such conditions, mapping the change pathway
reveals potential obstacles and ways to overcome
them.
BIG 6, as a consulting firm structured around
geographically distributed offices, fits our descrip-
tion of an organization with relatively independent
units. Team-level changes that increase revenue
should be directly translatable into increased rev-
enue for both the office and the firm. TELECO, on
the other hand, provides a more complicated set of
arrangements. Improving quality in manufactur-
ing may or may not lead to increases in sales,
since firm-level gains depend on increased de-
mand for the greater capacity manufacturing has
now created. At TELECO, linkage analysis calls
attention to the downstream implications of im-
proving manufacturing’s production capacity.
2. Are the performance metrics similar?
Tracing outcomes from local to higher levels is
easier when their performance metrics are the
same. In BIG 6, the metrics (e.g., revenue/billable
hours) are the same across the team, office, and
firm. In TELECO, the metrics for product design
(e.g., time to design) are different from those of the
sales organization or the broader firm’s own per-
formance metrics. The more different the metrics,
the more difficult it is to trace effects across levels
and units. At BIG 6, as in the case of Sears’ stores,
all offices are evaluated on the same performance
metrics. Tracing cross-level effects is straightfor-
ward— changes in a consulting firm’s office reve-
nue can be directly mapped to changes in firm-
level revenue. However, different metrics across
levels raise concern regarding reliability, consis-
tency in measurement intervals, and the possibil-
ity that their underlying causes aren’t the same. At
TELECO, changes in manufacturing depend on re-
ciprocal adjustments in other functional areas in-
cluding product development before firm-level
gains in revenue are realized. Removing the link-
age obstacles here requires considerable support
activity, as we will describe in Step 3, to translate
gains in one unit for the benefit of the broader firm.
3. What is a unit’s functional contribution to
overall firm performance?
How much do changes in a local unit’s perfor-
mance indicators contribute to changes in the
firm’s performance indicators? It is natural to focus
11
attention on units with larger staffing, expenses, or
revenues— but these indicators are not the best
guide to evaluating functional contribution. If we
assume that BIG 6 has twenty offices of equal size,
a local unit’s functional contribution to the firm’s
overall performance is 5 per cent. At TELECO, the
functional contribution of each unit is more diffi-
cult to identify. Linkage analysis reveals that prod-
uct development’s functional contribution rests in
the relationship between reduced product-cycle
time and overall sales. Estimating the product de-
velopment unit’s functional contribution to the firm
is a complicated task. While the rate of new prod-
uct creation contributes to changes in sales, so do
many other factors. Though it is possible to esti-
mate the functional contribution of the changes in
product development, any estimate needs to ac-
count for numerous interdependent activities, in-
cluding the perceived market value of the prod-
ucts, how new products are launched, which other
units are involved in successfully producing and
marketing these products, and the linkages among
the various units.
The challenge for managers and consultants is
to be explicit about the functional contribution of a
particular unit to the firm. Without doing this, it is
difficult to evaluate the performance improvement
that results from an intervention in that unit on
firm-level indices. Knowing each unit’s functional
contribution makes it easier to allocate appropri-
ate levels of support for those local changes criti-
cal to achieving firm results.
4. What are the time lags between the change
and observable results?
Time is a key but neglected factor in organiza-
tional change. Many managers and change agents
do not have a realistic understanding of the time
lags between local performance change and high-
er-level results. A thorough linkage analysis pays
careful attention to time lags. The first concern
following a successful implementation is what ac-
tivities must transpire between a change in unit-
level performance and firm-level performance
(e.g., what will higher levels do with greater local
efficiencies, cost reductions, or improved quality?).
Managers and change agents can begin to under-
stand the lag between change and results by pay-
ing attention to feedback cycles. Because manu-
facturing at TELECO is a short-time-frame/high-
volume activity, production-related changes became
apparent relatively quickly. When manufacturing
took the lead in implementing changes, not surpris-
ingly it demonstrated visible results. These suc-
cesses encouraged more participants, who gener-
12 Academy of Management Executive
ated other successes. Initial visible successes drove
more participation, which generated more results,
which accelerated manufacturing’s participation.
Once this cycle began (six months into the change),
manufacturing demonstrated positive trends in visi-
ble results.
The second concern is how much time will
elapse before changes in local results have an
effect at the firm level. Managers and change
agents often have untested assumptions regarding
the time lags that change involves, including the
belief that if a change is successful, results should
be evident in the next scheduled quarterly report
or annual review. In fact, in the case of BIG 6, the
time lag between changes in office revenue and
firm-level revenue is relatively short, constrained
only by the speed of the accounting system. There
are no intermediate activities delaying the trans-
lation of office revenues into firm revenues. In the
TELECO case, however, there are much longer and
more complex lags between reducing costs in
manufacturing and increased profitability at the
firm level. The longer the lags, the more other
factors (e.g., distractions, resource allocation deci-
sions, competing demands) can influence the rela-
tionship between unit changes and performance.
Linkage analysis can help managers and change
agents develop a realistic understanding of how
much time and effort are required to turn local
changes into firm gains.
Implications
It will be easier to translate successful changes at
one level into gains at another if forms of organiz-
ing are independent, metrics are the same, the
functional contribution is strong and discernable,
and the lags between changes and results and
between results at one level and those at another
are short and identifiable. In such situations, the
organizational improvement paradox is less likely.
In contrast, where forms of organizing are com-
plex, metrics are different, and so on, the opposite
should be true. However, in either case, linkage
obstacles can occur. Step 1 tells us how compli-
cated the linkages are between the firm’s levels
and helps us chart the amount of effort required to
overcome linkage obstacles. The next step is to
identify the obstacles in the causal pathway.
Step 2: Mapping the Change
Pathway—Identifying Obstacles
Mapping the change pathway requires the analyst
to explicitly map out the major linkages and iden-
tify critical obstacles. For BIG 6, Figure 1 shows the
August
basic flow diagram illustrating the change path-
way. The change intervention was designed to in-
crease knowledge sharing in an effort to increase
the revenue flow per team. The basic linkages are
(a) the team engages in knowledge sharing, (b)
knowledge sharing reduces time for a given en-
gagement, (c) the team has slack capacity to do
additional engagements, (d) the team takes on a
new engagement, which generates additional rev-
enue, and (e) the knowledge-sharing cycle begins
again. As we have pointed out above, the team’s
additional revenue directly passes to the office’s
revenue, which in turn leads directly to the firm’s
revenue. There are no time delays. The size of the
incremental revenue depends on the functional
contribution measured in dollars per engagement.
There may be obstacles even in BIG 6’s simple
pathway. Assuming that the knowledge system is
widely used, sharing can have multiple beneficial
functions, of which reduced time per engagement
is only one. Knowledge sharing could provide a
better-quality final product, although the time to
complete the project remains the same. Knowledge
sharing might lead to changes that affect customer
satisfaction, but there may be no connection to
faster engagement completion. Second, if the sys-
tem provides solutions that reduce engagement
time, the immediate consequence is slack re-
sources for the team and office since some workers
may now be idle. If the knowledge system simply
helps the team to be done earlier than expected,
there is no incremental benefit to the team, office,
and the firm— unless there are other engagements
to pick up the slack. Third, the incremental revenue
benefits must be mirrored across the majority of
teams in an office. If a few teams increase their
revenues, while others experience additional slack
time or no change in revenue, the impact of team-
level changes on the office or firm will remain
negligible. Lastly, if there are office-level perfor-
mance improvements, these must also lead to per-
formance improvements for the firm, based on the
functional contribution of the office to the whole. If
small-office changes contribute positively to net
billing, while changes in larger offices contribute
negatively, there may be no observable benefits at
the firm level.
Using this change pathway, we can visualize a
positive feedback system where knowledge shar-
ing improves engagement performance, which
leads to more knowledge sharing, which, in turn,
accelerates knowledge sharing and the subse-
quent cycle. However, the linkage obstacles have
to be removed before this positive feedback cycle
can occur. Consultants at BIG 6 continually used
the knowledge-sharing system, but usage did not
2004 Goodman and Rousseau
FIGURE 1
Mapping the Change Pathway at BIG 6
reduce time per engagement. Knowledge sharing
provided valuable information on where to search,
the quality of information sources, new tools, and
so on, which improved the quality of work but not
the work processing time. For those teams that did
reduce engagement time, some had new engage-
ments to start while others experienced slack time.
Given these two obstacles, there was a lot of vari-
ance among the teams in contributing to new rev-
enue for the office. Similarly, there was a lot of
variation among offices in whether they contrib-
uted at all to the firm’s additional revenue.
This case exemplifies a common pattern follow-
ing the adoption of a knowledge-sharing system.
An appropriate system was selected and success-
fully implemented, but the managers of this well-
known company did not map out the change path-
ways, identify obstacles, or resolve them. There
were some benefits but not the anticipated gains
in firm performance. Step 3 will describe what BIG
6 might have done to better capture local benefits
from the knowledge-sharing system for the firm.
At TELECO, mapping the linkage pathway is
inherently more complex. There are three major
work units—product development, manufacturing,
and sales—plus a corporate administrative unit.
These units are highly interdependent and use
13
different metrics for performance. The time lags
between product development and sales are
known and measured in months. The time lags
between change practices and observable results
are ill-defined.
The change included system-wide training, in-
creased team problem-solving skills, and new re-
ward and recognition systems. It was expected to
generate faster and more effective new product
design, which would be manufactured at a lower
cost and with higher quality, which would be
passed on to a higher-level-capacity sales force,
which would sell more products at a lower cost,
and the final result would be greater firm profit-
ability. Several feedback processes were antici-
pated to accelerate the change’s impact: Increased
quality in manufacturing would reduce costs,
which, in turn, would put more resources into de-
signing defect-free processes, which, in turn,
would reduce costs. Another anticipated feedback
loop centered on increased sales, expected to cre-
ate more economies of scale in manufacturing,
which would reduce costs, and, in turn, would in-
crease sales and profitability. Linkage analysis
demonstrates that lack of coordination in the prod-
uct development-manufacturing-sales cycle repre-
14 Academy of Management Executive
sented an obstacle keeping local improvements
from yielding potential firm-level results.
Most TELECO units initially showed little inter-
est in the change. The manufacturing department
took the early lead, demonstrating successes that
captured additional participants in manufactur-
ing, who, in turn, contributed to new successes.
Manufacturing’s implementation successes led to
increasing participation among its members, and
with its further successes, a positive feedback cy-
cle had begun. In manufacturing, success was
measured in terms of better quality (fewer defects)
and lower costs. These two indicators were mutu-
ally reinforcing and added to the visibility of man-
ufacturing success. However, the change that took
hold in manufacturing failed to do so in product
development. Manufacturing had tangible, con-
crete problems, and solutions were evaluated via a
fast feedback cycle that produced immediately
identifiable, tangible results. Product develop-
ment’s work was less concrete, with a longer lag
time between solving a problem and seeing re-
sults. Results of the change were therefore more
visible more quickly in manufacturing than in
product development, and as a result the TELECO
management refocused their attention—and re-
sources— on manufacturing, shifting these away
from product development. It is natural to focus on
more visible units producing immediate results,
thus ignoring the more intangible contributions of
product development. Though costly in terms of the
change’s ultimate failure to produce results, ignor-
ing product development was easy to do without
an explicit analysis of the linkages along the
change pathway at TELECO.
TELECO reflects the classic organizational im-
provement paradox where a gain in some indica-
tors (or for some units) creates challenges for oth-
ers. Quality and costs improved but created excess
capacity that the company did not use appropri-
ately. Because the results of change took longer to
see in product development, and management had
redirected development resources toward manu-
facturing, few, if any, new or improved products
were generated to fill the excess capacity. At the
same time, TELECO’s competitors also were im-
proving their quality and cost indicators, so it re-
alized no comparative advantage. Moreover, under-
utilized capacity and indirect costs, which had not
changed, contributed to the firm’s declining profits.
TELECO is an exemplar of a complex change
situation (e.g., interdependent units with different
metrics and different time lags between change
and results). Its failure to yield positive results for
the firm should come as no surprise. It did not map
the pathways across levels or identify obstacles in
August
establishing the critical linkages that improve-
ments in manufacturing matched improvements in
product development (Figure 2). Successful change
at TELECO requires coordinated changes in prod-
uct development, manufacturing, and sales to
achieve firm-level benefits (Figure 3).
Implications
Mapping the change pathway forces change
agents to make explicit the intervening outcomes
that must occur for performance indicators to show
improvement. It surfaces the assumptions being
made about the likely effects of the change effort
and permits them to be evaluated and revised if
needed. It can reveal barriers that exist between
changes in one unit or level and the requisite re-
sponses from interdependent others needed to
make the change successful. These barriers can be
political as well structural. Change agents such as
middle-level managers may lack the requisite
clout to overcome linkage obstacles. Mapping the
change pathway permits identification of areas
where critical support may be needed from higher-
level management. This mapping identifies key
connections that must be reinforced to make local
performance gains organization-wide. It helps
change agents anticipate linkage obstacles and
begin building the mechanisms critical to over-
coming them.
Step 3: Building Stronger Linkages
The third step in linkage analysis is to introduce
mechanisms that will remove obstacles and en-
hance the firm’s ability to capture local perfor-
mance gains. Once obstacles are identified, or-
ganizations must offset them to ensure positive
results from change across multiple levels. Three
critical linkage-building processes can help change
agents and managers translate positive results from
changes at one level into benefits for the firm as a
whole.
1. Creating Multilevel Motivation Systems. One
critical mechanism to offset obstacles identified in
a linkage analysis is creating shared multi-level
motivational systems. In these systems the energy
of people is focused not only on their jobs but also
on the team or unit to which they belong as well as
on the larger organization. For example, in a firm-
wide change at Champion International Paper,
shared motivational systems were reinforced from
executives to front-line staff and from the produc-
tion to marketing departments.7 Workers and man-
agers were each rewarded for individual, group,
2004 Goodman and Rousseau 15

FIGURE 2
Critical Feedback Processes at TELECO

plant, and corporate performance. One conse-
quence of shared multilevel motivation was collec-
tive energy allocated to solving problems across
units within each paper plant. In addition, the fo-
cus on firm-level performance led to higher levels
of collaboration across plants and between plants
and staff functions such as human resources and
planning.
In TELECO, narrowing the focus of the change to
manufacturing was dysfunctional, reflecting man-
agement’s failure to understand the longer time
lags required before changes in product develop-
ment could yield visible benefits. A linkage anal-
ysis prior to the change at TELECO should have
indicated that core resources and rewards needed
to be allocated to support product development’s
involvement in the change— or improvement in
manufacturing capacity could not yield gains for
the firm.
Multi-level rewards tend to be dynamic. What
and whom the organization rewards often need to
shift over time as the change process progresses.
To initiate changes at TELECO or other similar
firms, initial rewards should likely focus on indi-
viduals or teams, to get the change off the ground.
Once the change starts to capture people’s atten-
tion, the rewards should then shift to reinforce the
critical linkages across levels (e.g., rewards for
new product ideas or cost reduction across all lev-
els). At TELECO, such a shift could have fostered
closer ties between manufacturing and product de-
velopment in order to stimulate new ideas for prod-
ucts and to connect changes in the manufacturing
process to potential product innovations, and vice
versa.
2. Creating Problem-Solving Mechanisms Be-
tween Units. A mapping of the change pathway is
critical to anticipating linkage obstacles. However,
no change effort is perfect from its inception. All
changes generate linkage obstacles and poten-
16 Academy of Management Executive
FIGURE 3
Supporting Linkages at TELECO
tially negative consequences that must be man-
aged to capture benefits from the change for the
organization as a whole. These difficulties can
only be addressed once a change is in place. In
effect, there is need for ongoing redesign of how
units relate to each other. This is particularly true
when the change itself impacts how one depart-
ment or work unit relates to another or to the larger
organization. Bottlenecks, misalignments, and con-
straints require a constant process of evaluation,
feedback, and problem solving to smooth the way
for improved performance outcomes.
Two particular problem-solving processes, reac-
tive and proactive, are critical to removing obstacles
and preventing performance-outcome changes in
one level from negatively impacting another level’s
performance outcomes. Reactive problem solving
deals with solving existing problems. It stems from
the recognition that failure of any part or unit might
ultimately bring down the whole system. The most
effective team production systems contain highly
trained, fast-response, problem-solving teams. The
other vital form of problem solving is proactive. Here,
the focus is on improving the system to minimize
August
problems that would otherwise require reactive
problem solving. Reactive and proactive problem-
solving processes tend to be embedded in teams. It is
important that both of these problem-solving pro-
cesses function and that neither dominates the other.
In BIG 6, neither problem-solving process was
activated. An effective reactive problem-solving
system would have identified the gap between
expected revenue increases and actual increases.
When the change created slack time because no
other new engagements were available, an effec-
tive reactive problem-solving system would have
generated solutions such as expanded marketing
efforts to increase new engagements. (Had the ob-
stacle been failure of information sharing to occur,
using a very different perspective, the proactive
problem-solving process might have focused on
new ways to share knowledge, such as knowledge
centers with help desks organized by customer
sectors or topics.)
The work of proactive teams is both independent
of and interdependent with the duties of reactive
problem-solving teams. For example, in the case of
an organization-wide change at Champion Paper,
2004 Goodman and Rousseau
proactive teams reduced the number of problems
that occurred while reactive teams were better
able to respond to the breakdowns that did occur.
Over time, the operation of these two types of
teams can change the mix of problems which the
firm faces. That is, as the proactive teams reduce
the variance in the total system, the reactive teams
should have fewer problems to confront and thus
should be able to work more quickly and more
effectively. Over time, as system failures decrease
and the reactive teams have less work, reactive
team members may be able to shift toward proac-
tive problem-solving to further facilitate changes
system-wide. Through this cycle, effective linkages
can be created to help changes at one level trans-
late to others.
3. Coordinating Both Vertically and Horizontally.
Successful coordination requires processes that
link interdependent activities in order to achieve a
common goal. If changes are made in one unit of a
production system, for example, some type of coor-
dination mechanism is necessary to ensure that
these changes are passed along the value chain to
other production units, the sales department, and
so on—a key issue in the TELECO case.
Effective coordination processes share several
key characteristics. First, a firm needs multiple,
overlapping linkage mechanisms. Traditionally,
coordination is accomplished through the use of
advance planning and/or real-time feedback. How-
ever, because not all aspects of coordination can
be anticipated, discrepancies between desired
and actual results must be monitored to establish
improved coordination mechanisms. Second, coor-
dination mechanisms should focus on the individ-
ual and group levels as well as the organization as
a whole. In our discussion of motivation, we
pointed out the need to motivate across the various
levels of an organization. The same holds true for
coordination processes. Furthermore, coordination
mechanisms should serve to create a shared cul-
ture, with common beliefs and values which em-
ployees hold firm-wide. Common performance
metrics across managers at all levels such as
those found in firms such as Citibank and Xerox
(e.g., market share, return on assets, customer sat-
isfaction, and employee satisfaction) promote
shared multi-level motivation and coordination
across levels. Information systems that provide
system-wide information and/or decentralized
decision support can also enable and enhance
coordination.
We can see the effects of using multiple coordi-
nation processes and the consequences of not do-
ing so in our examples. At TELECO, where change
was less successful, only a senior management
17
team coordinated the change process. In contrast,
Champion Paper International successfully used
multiple coordination mechanisms, including a
transition team, a consulting team that repre-
sented various units across the company, a knowl-
edge-sharing system, and so on. Together, these
mechanisms involving people with different van-
tage points from different parts of Champion helped
the company to coordinate the change and, when
necessary, to redesign the process as it progressed.
Linkage analysis can help to inform the process
of coordinating change across levels. Mapping
how coordination mechanisms are distributed
throughout the organization, both vertically and
horizontally, will identify unattended-to gaps that
require additional coordination efforts. This map-
ping can be used to incorporate new forms of mul-
tilevel motivation, problem solving, and coordina-
tion that can function synergistically. Shared
multilevel motivation facilitates both problem
solving and coordination. For example, employees
who direct their energies simultaneously toward
their own work, their group, and their organization
should enhance coordination processes. Effective
problem solving should enhance the shared moti-
vation of all organizational members and facilitate
coordination. Effective coordination should reduce
the need for problem solving and enhance shared
motivation across units. Changes in any one pro-
cess may enhance a second process and third pro-
cess, which then feed back to improve the first.
Implications
The mechanisms we describe create linkages in
the change pathway that translate gains within
work groups or departments into benefits for the
larger firm. Such mechanisms neutralize the obsta-
cles that are inherent in complex settings with
high interdependence, dissimilar metrics, indirect
functional contributious, and long time lags.
In effect, they remove the obstacles that linkage
problems generate and enhance the relationship
between improvements in one part of the organi-
zation and the performance of the organization as
a whole. Moreover, these mechanisms are syner-
gistic. The magnitude and timing of change
throughout the organization are improved because
of the combined effects of linkage mechanisms
promoting multi-level motivation, problem solving,
and coordination.
Linkage Analysis Enhances Important
Managerial Competencies
The ever growing pressure for high performance
in complex organizations means that the organi-
18 Academy of Management Executive
zational improvement paradox often must be
overcome on a regular basis. Doing so is both a
cognitive and an organizational challenge. Organ-
izations are inherently complex, and individual
human beings have limited information process-
ing capabilities. Linkage analysis permits manag-
ers to visualize the complex processes of change
and specify critical change pathways that other-
wise might go unrecognized and unmanaged.
The advantage of creating visual maps is per-
haps best expressed by the title of a book on cre-
ative design: Things That Make Us Smart.8 Its au-
thor makes the key point that visual cues need to
be informed by the way people process informa-
tion. Developing the capability to design mapping
tools used to make organizational decisions can
help overcome the cognitive and organizational
challenges inherent in managing complex organi-
zational change.
When change pathways are mapped out, de-
monstrable results more readily occur because ap-
propriate support is more likely to be provided.
Consider how Dupont, a large chemical manufac-
turer, built its own change pathway model.9 A
benchmarking study revealed that Dupont had
spent more on maintenance than other industry
leaders but realized much lower benefits. Mainte-
nance is a complex activity because of the
tradeoffs between preventive and corrective main-
tenance. For example, cost-cutting programs
slowed equipment replacement programs and
spare parts inventories. In consequence, equip-
ment broke down frequently, which in this setting
required more people working on corrective main-
tenance, which pulled people away from preven-
tive maintenance, which, in turn, accelerated the
down time on equipment and the need for more
corrective maintenance. A positive (accelerating)
feedback cycle operated, driving out preventive
maintenance and exacerbating maintenance
costs.
Dupont initiated a new change program to re-
duce and control costs but discontinued it after a
short time for lack of observable results. After an-
other series of false starts, those responsible for
the change concluded that they needed to help
managers build better “mental maps” of various
maintenance models. That is, they wanted to help
the people responsible for any changes to be better
able to visualize the tradeoffs between preventive
and corrective maintenance and between mainte-
nance and operations. Some of the tradeoffs in-
volved technical issues, such as machine reliabil-
ity, while others centered around social issues
such as the loss of overtime which commonly oc-
curs when there is a lot of corrective maintenance.
August
Dupont helped managers refine their maps by
engaging in a simulation game to better under-
stand the tradeoffs they faced, building a more
explicit model of the change pathways, unex-
pected consequences, and potential obstacles.
From this learning experience, teams at the plant
level built implementation plans to improve spe-
cific maintenance functions. The results were en-
couraging. The mean time between repairs im-
proved by an average of 17 per cent, and costs fell
21 per cent. These results were significantly better
than those at comparison plants, which had not
participated in the simulation game.
Undoubtedly there is a learning curve in imple-
menting linkage analysis as managers develop
better articulated, more realistic models of how
activities and outcomes at one level impact those
at others. Understanding time lags, for instance, is
an important part of managing change effectively,
and yet for the most part these lags are not well
understood—at least not until more careful atten-
tion is paid to dynamic performance patterns. The
problem is exacerbated by the short-term evalua-
tion systems prevalent in many industries. Simi-
larly, feedback loops are also important in under-
standing linkages, but again, it can be difficult to
identify which of many possible cycles might be
operating in an organization. The tendency in such
cases is to rely upon simpler models, expecting
positive impacts across levels without specifying
how to achieve them. However, as the Champion
case illustrates, linkage analyses can help the firm
along a learning curve by involving not only top
managers and change agents but people from dif-
ferent levels and functions in sharing information
about organizational dynamics from their own
vantage points. A good deal of the ambiguity that
decision-makers face in organizations comes from
asymmetries in information, where people in dif-
ferent units or levels possess different knowledge
and understandings regarding how the organiza-
tion operates. Bringing in different vantage points
promotes more comprehensive mapping of critical
linkages along the change pathway.
The understandings that managers and change
agents have of the change pathway often reflect
the organization’s culture, career paths, and phys-
ical layout. Using linkage analysis to map the
change pathway is an important step both in cre-
ating change that produces organizational results
and in creating more realistic understandings of
how the organization actually operates on the part
of those responsible for its performance.
The current frontier of change management is
how to resolve the organizational improvement par-
adox created by complex intra-firm relationships.
2004 Goodman and Rousseau
Addressing this paradox effectively demands more
than highly motivated employees or visionary man-
agers. It requires a realistic mapping of change path-
ways to identify where linkages are needed to cap-
ture the benefits of change. As Albert Einstein said,
“Everything should be made as simple as possible,
but not simpler.”
Acknowledgments
We thank Mike Beer, Ellen Fagenson, Bob Ford, and Robert
McKersie for helpful comments on an earlier version of this
article, Cathy Senderling for editing, and Bernadette Leppold
and Carole McCoy for word processing.
Endnotes
1
Nobel Prize winner Herbert Simon first identified some of
the problems that managers face in understanding linkages
across levels. He described the phenomenon of loose coupling
or, in his words, “near decomposability,” a feature of hierarchi-
cal organization that promotes robustness in the face of internal
variations in performance and from environmental fluctuation.
See H. A. Simon, The organizational complex systems, in H.
Pattee (Ed.). 1973. Hierarchy theory: The challenge of complex
systems. New York: Braziller: 3–27. Karl Weick has linked loose
coupling and the problem of managing linkages between levels
in organizational change to limitations from bounded rational-
ity in his chapter “Management of organizational change
among loosely coupled elements,” in P. S. Goodman. 1982.
Change in organizations. San Francisco: Jossey-Bass: 375– 408.
As Weick says, linkage problems arise in change “not simply
because people have different perceptions, but also because
they act and modify [only] the environments they perceive”
(p. 384). See also Keating, E. K., et al. 1999. Overcoming the
improvement paradox. European Management Journal, 17 (2):
120 –124.
2
Schaffer, R., & Thomson, H. A. 1992. Successful change pro-
grams begin with results. Harvard Business Review, January–
February: 80 – 89; Jick, T. 2003. Managing organizational change.
Cambridge, MA: Harvard Business School Press; Beer, M., &
Nohria, N. 2000. Cracking the code of change. Cambridge, MA:
Paul S. Goodman holds the
Richard M. Cyert Professorship
and is professor of organiza-
tional psychology at Carnegie
Mellon University. He was edu-
cated at Trinity College (BA),
the Amos Tuck School at Dart-
mouth College (MBA), and has
a Ph.D. from Cornell University
in organizational psychology.
His research interests focus on
designing effective work groups,
learning in distributed work
groups, and organizational
change and effectiveness. Con-
tact: pg14@andrew.cmu.edu.
19
Harvard Business School Press; Nadler, D. A., & Tuschman, M. L.
1992. Designing organizations that have good fit: A framework
for understanding new architectures. In D. A. Nadler, M. S.
Gerstein, R. B. Shaw & Associates (Eds.), Organizational archi-
tecture: Designs for changing organizations. San Francisco, CA:
Jossey-Bass: 39 –59; Tichy, N. M. 1983. Managing strategic
change: Technical, political, and cultural dynamics. New York:
John Wiley & Sons.
3
Harris, D. 1993. Organizational linkages: Understanding the
productivity paradox. Washington, DC: National Research
Council; Cascio, W. F. 2002. Responsible restructuring: Creative
and profitable alternatives to layoffs. San Francisco: Berret-
Koehler.
4
Rucci, A. J., Kirn, S. P., & Quinn, R. T. 2001. The employee-
customer profit chain at Sears. Harvard Business Review,
January–February: 82–97.
5
See Endnote 2.
6
The linkage framework presented here is described in de-
tail in P. S. Goodman. 2000. Missing organizational linkages.
Newbury Park, CA: Sage. The interested reader might find cer-
tain scholarly work on multi-level processes useful, including
R. J. House, D. M. Rousseau, & M. Thomas-Hunt. 1995. The meso
paradigm: A framework for the integration of micro and macro
organizational behavior. In B. M. Staw, & L. L. Cummings. (Eds.),
Research in organizational behavior, 17: 71–114; and K. J. Klein,
& S. W. J. Kozlowski (Eds.). 2001. Multi-level theory, research, and
methods in organizations. San Francisco: Jossey-Bass.
7
In an example of an effective planned change, the Champion
case captures a large-scale change at a major paper company,
described by R. Ault, R. Walton & M. Childers. 1998. What works: A
decade of change at Champion International. San Francisco:
Jossey-Bass. It provides a remarkable description of change at
multiple levels of analysis—within multiple plants, across plants
and staff units—and over a relatively long period of time.
8
Norman, D. A. 1993. Things that make us smart: Defending
human attributes in the age of the machine. Reading, MA:
Addison-Wesley.
9
For a description of Dupont’s mapping processes, see J. S.
Carroll, J. Sterman, & A. A. Marcus. 1998. Playing the mainte-
nance game: How mental models drive organizational deci-
sions. In J. J. Halpern & R. N. Stern (Eds.). 1998. Debating ratio-
nality: Non-rational aspects of organizational decision making.
Ithaca: Cornell University Press: 99 –124.
Denise M. Rousseau is the H. J.
Heinz II Professor of Organiza-
tional Behavior at Carnegie Mel-
lon University. Her research ad-
dresses organizational change
with an emphasis on the employ-
ment relationship and worker
contributions to flexibility in
contemporary firms. She is edi-
tor-in-chief of the Journal of Or-
ganizational Behavior and is the
2004 –2005 president of the Acad-
emy of Management. Contact:
rousseau@andrew.cmu.edu.