Organizational Change Whether the result of a merger, or just the demands of a tough marketplace, significant organizational change is one

of the most difficult strategies to implement. Here's a collection of our best articles on making real, sustainable organizational change a reality. Think for a Change What can executives learn from a women`s liberal-arts college in Milwaukee? The most important lesson: how to turn their companies into learning organizations. Curtis Sittenfeld Can Philips Learn to Walk the Talk? Gerard Kleisterlee's turnaround program for Royal Philips Electronics is a high-stakes bet on a simple, catalytic idea: strategic conversations. Ian Wylie (Not) the Same Old Story Eden Alternative is a change-minded organization determined to save a critically ill patient: long-term care for the elderly. The nursing-home industry should be about living, argues founder Bill Thomas, not about dying. Here`s his prescription -- and lessons for changing any industry. Chuck Salter 7 Lessons From WaMu`s Playbook Mergers and acquisitions are, once again, shaking up all kinds of industries. The big question: How do you do them right? Here`s the playbook according to Washington Mutual, one of the best in the business. George Anders Survival Is Not Enough Hey, it's a jungle out there! So if you want to win, do more than embrace change -- learn how to evolve. Seth Godin Beyond Reengineering From our first issue forward, Fast Company has tackled the ideas of reengineering, restructuring, and rethinking how business works. Here are some of our best stories about big-business change. Fast Company A Change Will Do You Good The guardians of big business are defending their fortress against an army of interlopers whose needs and opinions clash with tradition. Two new books examine what this intrusion means to corporate insiders -- and outsiders. Keith H. Hammonds BMW: Driven by Design Chris Bangle and his design gurus are the creative engine inside the hottest car company in the world. But BMW`s most breathtaking design may well be its strategy for growth. Bill Breen Free to Innovate Fallon Worldwide couldn`t thrive on its own. Nor could it lose the creative fire that first fueled its growth. An up-start ad agency learns to love its big-company patron. Christine Canabou How Will Your Company Adapt? Charles Darwin wrote the book on natural selection: Survival of the fittest is about adaptability to a changing environment and new competitive realities. That`s just what companies face today. Paul C. Judge

Begin at the beginning in organizational change

David Chaudron, PhD Perhaps the most asked but least answered question in business today is What can we do to make our business survive and grow? The world is rapidly changing into something too hard to easily predict, with a hundred opportunities and pitfalls passing by every moment. To add to this confusion, there are hundreds, if not thousands of techniques, solutions and methods that claim to help business improve productivity, quality and customer satisfaction. A company President, CEO or business owner has so many choices in these buzzwords, whether they be called Total Quality Management, Customer Satisfaction, Re-engineering or Teambuilding. They are like new shoppers in a giant grocery store: They are hungry, but there are so many brands, sizes and varieties you dont know what to buy. In response to this confusion, many do nothing, often afraid of making the wrong choices. Others change the techniques they use every few months, using the program dujeur method of organizational change, otherwise known as MBS (Management by Best Seller). Neither of these responses help the organization in the long run. Changing nothing will produce nothing. Implementing a different buzzword (Total Quality, Just in Time, Reengineering, etc.) every few months often creates a whipsaw effect that causes mass confusion among your employees. These buzzwords are often a hammer in search of a nail, techniques applied with no clear focus as to the why, expected results or return on investment. One of the organizations we consulted with started on this path. Senior management proclaimed in a memo that Total Quality should be a way of life. One senior vice president declared that he wanted 25% of his organization using Total Quality tools within a year. This caused tremendous excitement in the organization, However, the follow-through was delayed, occasionally inappropriate and sometimes not there. Many employee became discouraged with the process and considered it just another management fad. With the next business downturn, virtually all training had stopped and little enthusiasm was left. Other organizations clearly focus on technical problems and on improving what they had. They are initially successful, but become victims of their own success. I call this an improved, planned incremental approach. Their initial quality improvement teams may be so successful they rapidly create more teams, without the qualitative organization-wide changes (re-engineering) necessary to sustain a permanent effort. One organization we worked with had over 70 quality improvement teams in a plan with only 300 employees. They had shown little results after their first successes, and asked us what their next steps should be. We suggested the

unions leadership in their efforts, look at restructuring their organization along more product-focused lines, and possibly start profit sharing. They were not interested in taking any of these actions. A few months later, its parent company shut down the site, partly because of its poor productivity. Organizations need to move beyond the buzzwords into deciding what actions they need to perform that will help them grow and develop. In response to this problem, this article will provide you a framework for coping with organizational change independent of buzzwords or the latest management fad. Organizations must first decide on the framework their organizational change long before they choose a buzzword to implement. The major decisions Instead of grasping for the latest technique, I suggest instead that organizations should go through a formal decision-making process that has four major components: Levels, goals and strategies Measurement system Sequence of steps Implementation and organizational change

The levels of organizational change

Perhaps the most difficult decision to make is at what "level" to start. There are four levels of organizational change: shaping and anticipating the future (level 1) defining what business(es) to be in and their "core competencies (level 2) reengineering processes (level 3) incrementally improving processes (level 4) First let's describe these levels, and then under what circumstances a business should use them.

Level 1- shaping and anticipating the future

At this level, organizations start out with few assumptions about the business itself, what it is "good" at, and what the future will be like. Management generates alternate "scenarios" of the future, defines opportunities based on these possible futures, assesses its strengths and weaknesses in these scenarios changes its mission, measurement system etc. More information on this is in the next article, "Moving from the Future to your Strategy."

Level 2 - defining what business(es) to be in and their "Core Competencies

Many attempts at strategic planning start at this level, either assuming that 1) the future will be like the past or at least predictable; 2) the future is embodied in the CEO's "vision for the future"; or 3) management doesn't know where else to start; 4) management is too afraid to start at level 1 because of

the changes needed to really meet future requirements; or 5) the only mandate they have is to refine what mission already exists. After a mission has been defined and a SWOT (strengths, weaknesses, opportunities and threats) analysis is completed, an organization can then define its measures, goals, strategies, etc. More information on this is in the next article, "Moving from the Future to your Strategy."

Level 3 - Reengineering (Structurally Changing) Your Processes

Either as an aftermath or consequence of level one or two work or as an independent action, level three work focuses on fundamentally changing how work is accomplished. Rather than focus on modest improvements, reengineering focuses on making major structural changes to everyday with the goal of substantially improving productivity, efficiency, quality or customer satisfaction. To read more about level 3 organizational changes, please see "A Tale of Three Villages."

Level 4 - Incrementally Changing your Processes

Level 4 organizational changes are focusing in making many small changes to existing work processes. Oftentimes organizations put in considerable effort into getting every employee focused on making these small changes, often with considerable effect. Unfortunately, making improvements on how a buggy whip for horse-drawn carriages is made will rarely come up with the idea that buggy whips are no longer necessary because cars have been invented. To read more about level 4 organizational changes and how it compares to level 3, please see "A Tale of Three Villages." One organization we consulted with has had a more positive experience with the incremental approach. We trained an internal facilitator, helped them deliver training in a just-in-time fashion, and had them focus on specific technical problems. The teams management formed reduced initial quality defects by 48%. The disadvantages of such an incremental approach include avoiding structural, system-wide problems, and assumes existing processes need modest improvement. In addition, using incremental approaches can be frustrating to employees and management if (pick a buzzword) does not catch on in the organization. As a result of these disadvantages, many organizations experience a high risk of failure in the long run.

What level do I choose?

These levels have much of the same goals: increasing customer satisfaction, doing things right the first time, greater employee productivity, etc. Despite these similarities, they differ substantially in the methods they use to achieve these goals. Levels one through three, on one hand, focuses on "big picture" elements such as analysis of the marketplace, out-sourcing, purchase/sale of subsidiaries,

truly out-of-the box" thinking and substantial change in the management and support systems of the company . In my experience, companies that use these methods tend to have a high need for change, risk-tolerant management, relatively few constraints and have substantial consensus among its management on what to do. Types of industries include those whose environment requires rapid adaptation to fast-moving events: electronics, information systems and telecommunication industries, for example. Companies using mostly incremental tools (level 4) have management that perceives only a modest need for change, is relatively risk-avoidant, has many constraints on its actions and only has a modest consensus among themselves on what to do. Instead of focusing on new opportunities, they wish to hone and clarify what they already do. Types of industries that often use these methods include the military, aerospace, and until recently, health care organizations. Those organizations whose strategic planning solely focuses on refining an existing mission statement and communicating the paragraph also fall into using incremental (level 4) methods. When discussing the continuum of structural vs. incremental change, its important to realize that what labels companies use are not important here. One must carefully observe their actions. Many companies have slogans, "glitter" recognition programs and large budgets to provide "awareness" training in the buzzword they are attempting to implement. The key, however, is to note what changes they are really making. If management is mostly filling training slots with disinterested workers and forming a few process improvement teams, they are using level three methods. If they are considering changes in business lines, re-organizing by customer instead of by function, or making major changes in how the everyday employee is being paid, they are using level 3 methods. Unfortunately, all of this discussion hinges in management's belief about how much change is necessary. This belief often hinges on their often unassessed beliefs of 1) how well the organization performs compared to other organizations (a lack of benchmarking); and 2) what the future will be. As a result, my recommendation is that organizations conduct scenario/strategic planning exercises (level 1) anyway, even if they have already decided that level 4 (incremental) methods will suffice to solve their problems. This way management can be aware of the limitations of the lowerlevel methods they are using and realize when it is best to abandon these lower-level methods for something more substantive. Based on this exercise, comparison of existing internal processes with worldclass examples (benchmarking) and market analysis, management may come to realize how much change is necessary. The greater the gap between what the organization needs to be and how it currently operations and what businesses it is in, the more it suggests that greater change is necessary, and greater restructuring is necessary. This decision is very important. IBM in the mid 1980s felt that the future would be much like the past and a result didn't have to change much. They did not realize how much microcomputers would replace the functions of their

bread-and-butter business, the mainframe. The net result was tens of thousands of people were laid off, with the company suffering the first losses in its history.

Goals
Based on whatever level work you are doing, the opportunities that are found need to be evaluated to determine which of them best suit the existing and future capabilities of the organization and provide the most "bang for the buck" in terms of improvement in your measures of success. In addition, goals need to have the resources and management determination to see to their success. Goals also need to be SMART, that is: Specific - concrete action, step-by-step actions needed to make the goal succeed Measurable - observable results from the goal's accomplishment Attainable - The goal is both possible and is done at the right time with sufficient attention and resources Realistic- The probability of success is good, given the resources and attention given it. Time-bound- The goal is achieved within a specified period of time in a way that takes advantage of the opportunity before it passes you by. Some examples include: We will expand into the polystyrene market within the next five years and achieve 20% market share We will decrease the time from research to customer delivery by 50% within two years We will increase the quality of our largest product by 20% in three years.

Strategies
Where goals focus on what, strategies focus on how. Some examples include: We will re-engineer our research and development process We will evaluate and improve our sales and marketing department We will conduct a SWOT analysis and then define our core competencies Additional examples of strategies are included in the "Moving from the Future to your Strategy" chapter. Wait a second. Aren't goals and strategies really the same. They are in one sense as they both need to be SMART. As what you might guess, the goals of a level are achieved by creating strategies at the lower levels.

The Measurement System

Without measures of success, the organization does not know if it has succeeded in its efforts. Someone once said, What gets measured gets improved. Someone else said, If you dont know where you are going, any road will get you there.

For more information on measurement systems and their place in organizational change, please see the "Balanced Scorecard" article, along with a number of articles where employee surveys are used.

Implementation and Organizational Change

The success of any organizational change effort can be summed into an equation: Success = Measurement X Method X Control X Focused Persistence X Consensus Like any equation with multiplication, a high value of one variable can compensate for lower levels on other variables. Also like any equation with multiplication, if one variable equals 0, the result is zero.

On employee involvement
Some organizations involve employees right from the start, where they have significant influence in the strategic plan of the organization. This kind of involvement tends to reduce employees resistance, which is always a very important factor in the success of any organizational change. Such organizations as Eaton, Eastman Chemical and Rohm and Haas have used such an approach. Such employee involvement, however, might also be threatening to managements traditional power. Some organizations decide employee involvement will be limited to implementing the strategic decisions management makes, or further limit involvement to purely task-focused teams working on technical problems. Many aerospace organizations have used this approach.

Focused persistence, good project management and the sequence of implementation

The sequence of implementation is also an important factor. There are four basic options, with many variations of them. The first involves the entire organization from the start, with the whole organization intensively working at once on making the change. Ford Motor Company is currently restructuring its entire organization, moving from planning to implementation in nine months. Another option is a more relaxed approach, in which divisions or business units of the organization go at their own pace. This option can often become an incremental approach like the first or second village. Many conglomerates or other companies with diverse operations try this approach. A third option is similar to the previous one, with the focus being on individual business units doing the implementation. In this case, however, business units implement roughly the same things in roughly the same time schedule. Unisys, the computer company, is using this method on some of its organizational change efforts. A fourth option is to create a pilot project in one division or business unit, learn from its mistakes, and then apply those lessons to the rest of the

organization. Examples of this option include the Saturn car facility at General Motors and the Enfield plant of Digital Equipment Corporation. Its important to note here that creating pilot projects is a high-risk business. In both cases, the lessons learned from these pilot projects have not gained widespread acceptance in their parent companies due to their heavily ingrained cultures