Contents
How to efficiently manage
organizational change?
The only genuine competitive advantage is the ability
for an organization to change efficiently. It is a proven fact, that for companies to succeed in
todays’ competitive market they need to be innovative, customer centric, competitive
and blah blah blah! But what does it all boils down to? If we think a bit
critically it is quite obvious that we need to change to deal with the changing
challenges. The only thing constant is change itself. For instance, customer
preferences will change, products will be commoditized, industry growth will decline
etc. The need for change is inevitable; organizations that don’t change will
eventually lose the battle. So for a company to be successful it needs to
change itself to deal with the new challenges. In other words, the real deal or the genuine competitive
advantage is the ability for an organization to change efficiently.
Is just
managing change enough? No! Of-course Not! We need to efficiently manage change. This
is what this paper is about “How to
efficiently manage organizational change?” in other words, managing change
cost efficiently & effectively.
The
frameworks and research, shared in this paper, is based on research of
individuals that are considered “Rock
Stars” in the academia as well as in the industry. Research is based on
decades of tedious work and experiments in organizations.
Best part is
that by the end of this paper you will realize, that achieving your goal
(growth & profit) can be as easy as telling a story.
Even though I
am sure we are all convinced that there are plenty of reasons for change. But
still it is worthwhile to list some important ones. I came across one of the
most important reason for change in an article “How to Kill Creativity”, by
Teresa M. Amabile (professor at Harvard Business School). The article states
that for creativity to prosper in an
organization we need a conscious cultural
change. Other reasons for change are mentioned in an extraordinary book
“Organizational Behavior” by Michael A. Hitt. These are summarized below.
Reasons for
organizational change can be divided into two parts, internal & external
pressures for change.
1.
Aspiration-performance
discrepancies, the differences between desired and actual performance of an
organization.
2.
Organization
life-cycle, in the beginning the organization is in entrepreneurial stage then
it moves to collectivity, then to formalization and in the last to elaboration
stage. Each stage calls for change in the organization; if an organization
fails to change it will not be able to move forward. For instance an
organization in the collectivity stage will have to incorporate formal
processes to resolve and prevent coordination and control problems. Then the
organization will move into the next stage of formalization.
3.
Changes
in the top management, specifically when new people are brought in the company
they have their own vision and perspective. Implementation of new strategy
calls for change in the organization.
1.
Technological
advances forces companies to adapt new technological advances or they will
become outdated and ineffective.
2.
Changes
in government regulations can affect the whole economy as well as only a single
organization. In any case the organization affected will have to respond
appropriately that will usually require change.
3.
Changes
in societal values can have a significant impact on consumers, employees and
investors. In each case organizations have to respond appropriately.
4.
Shifting
political dynamics can have impact on different industries and thus companies
have to react accordingly.
5.
Changes
in demographics can have an impact on consumer demand or it could also have an
impact on workforce composition.
6.
Growing
international interdependence, companies cannot ignore the benefits of
expanding internationally. Thus organizations have to remain flexible in order
to adapt to new international markets.
Thus, there
are many practical reasons for organizational change. But before I explain the solution,
we must have a clear understanding of the key hurdles for organizational change. The book “Blue Ocean Strategy” by “W. Chan
Kim & Renee Mauborgne” (both professors and co-directors of the INSEAD Blue
Ocean Strategy Institute) identifies the key hurdles for organizational change.
This book
also mentions a shockingly simple and efficient method to overcome these key
hurdles. As you recall our goal is not only change management, rather it is efficient change management.
There are
basically four key hurdles for organizational change
1.
Cognitive
Hurdle
2.
Resource
Hurdle
3.
Motivational
Hurdle
4.
Political
Hurdle
The key to
tackling these hurdles efficiently is “tipping
point leadership”. As mentioned in the book “Blue Ocean Strategy”
“Conventional wisdom asserts that
the greater the change, the greater the resources and time you will need to
bring about results. Instead, you need to flip conventional wisdom on its head
using what we call tipping point
leadership.”[1]
Tipping point
leadership is described as
“Tipping point leadership hinges on
the insight that in any organization, fundamental changes can happen quickly when
the beliefs and energies of a critical mass of people create an epidemic
movement towards an idea. Key to unlocking an epidemic movement is
concentration, not diffusion.”[2]
“Tipping point leadership builds on
the rarely exploited corporate reality that in every organization, there are people, acts and activities that exercise a disproportionate
influence on performance. Hence, contrary to conventional wisdom, mounting
a massive challenge is not about putting forth an equally massive response
where performance gains are achieved by proportional investments in time and
resources. Rather, it is about conserving resources and cutting time by
focusing on identifying and then leveraging the factors of disproportionate
influence in an organization.”[3]
In simple
words it is not necessary that for a large change in an organization we need
equally large investment in time and resources, rather we need to identify and
leverage on factors that may be people,
acts and activities that make a big difference. Basically, getting the maximum bang for the buck.
Now let us
discuss each hurdle in detail and also how tipping point leadership can be used
to overcome these hurdles.
What is cognitive hurdle? Employees in an organization wedded to the
status quo. Due to cognitive hurdle employees are unable to see the need for a
change in the organization. Conventionally, CEOs use numbers/data to show the
need for change to employees. But this approach is not credible enough, as
numbers can be manipulated and misleading. Moreover, the messages communicated
through numbers do not stick with employees and are abstract for line managers.
In other words this is not an effective method. On the other hand as proven by
research in neuroscience and cognitive science, people remember and respond
most effectively to what they see and experience. So tipping point leadership
does not rely on numbers rather they make people experience the need for change
first hand by two ways.
First, Employees should see the worst operational problems first hand.
They must see and experience the reality themselves. For example, I will share
one of my personal experiences. While working at PTCL I really could not
understand why our customers complained about the billing department until I
experienced the problems first hand. After my direct experience I could see
clearly that PTCL was losing revenue and customer satisfaction due to billing
discrepancies. The need for improvement (change) in the billing system was
urgently required. I was convinced to do something about the problem. Thus,
employees must see and experience the worst problems themselves.
Second,
Managers should listen to the complaints of most dissatisfied customers first
hand. Management should observe the market first hand and should not rely on
market surveys conducted by someone else. The top management should actively communicate
and engage with customers directly.
No organization has abundance of resources and usually, when leaders are
faced with limited resources “Either they trim their ambitions and demoralize
their work force all over again, or they fight for more resources from their
bankers and shareholders…..acquiring more resources is often a long,
politically charged process”[4]
So both of these approaches are not the most efficient methods to deal with the
limited resources.
What we should do is,
“Instead of focusing on getting more resources, tipping point
leaders concentrate on multiplying the value of the resources they have”[5]
How do we multiply the value for the resources? The author gives us the
concept of hot spots, cold spots, and horse
trading.
“Hot spots are activities that have low resource input but high
potential performance gains. In contrast, cold
spots are activities that have high resource input but low performance
impact. In every organization, hot spots and cold spots typically abound. Horse trading involves trading your
unit’s excess resources in one area for another unit’s excess resources to fill
remaining resource gaps.”[6]
The basic
idea is to use available resources more efficiently, but going through this
framework organization can identify inefficiency in usage of their current resources.
Identify hot and cold spots, concentrate resources on hot shots and engage in
horse trading to remove any remaining resources gaps.
In order for employees to act they need to be motivated. So how do we
quickly and efficiently motivate employees? As mentioned in “Blue Ocean
Strategy” the tipping point leaders focus on three factors kingpins, fishbowl management and atomization. Kingpins are the key influencers in the organization.
They are natural leaders and very persuasive. Tipping point leaders concentrate
their efforts on “Kingpins”. When the kingpins are convinced and motivated the
rest of the employees naturally follow. Next, Kingpins actions or inactions are
made transparent to everyone, like a fish is transparent in a fishbowl. By
placing Kingpins in a fishbowl, intense performance culture is encouraged. But
for fishbowl management to work it must be based on “fair process”. By “fair process” the author means
“engaging all the affected people in the process, explaining
to them the basis of decisions and the reasons people will be promoted or side
stepped in the future, and setting clear expectations of what that means to
employees’ performance.” [7]
The last step is atomization,
in this step the whole challenge is broken into smaller challenges. That is, the responsibilities and goals for
everyone are clear and doable. This prevents employees from thinking that the
change is “beyond them”.
Additional to
these three factors, it is also worthwhile to know that organizations can
easily and quickly motivate their employees through intrinsic motivation. Research has shown intrinsic motivation can
be increased considerable even by subtle changes in the work environment. [8]
Changes in
the organization may be beneficial for some employees, and it can also have a
negative impact on some employees. Thus, these individual will resist change.
Political hurdles can fail any strategy, thus it is very important to deal with
this hurdle effectively.
“To overcome
these political forces, tipping point leaders focus on three disproportionate
influence factors: leveraging angels, silencing
devils, and getting a consigliere
on their top management team. Angels
are those who have the most to gain from the strategic shift. Devils are those who have the most to
lose from it. And a consigliere is a
politically adept but highly respected insider who knows in advance all the
land mines, including who will fight you and who will support you.” [9]
Thus, in short we should leverage from people who will benefit from the
change, prepare responses for attacks from people who will be against the
change. Moreover, find a consigliere in the organization, who can help to
identify these angels and devils and can also identify potential hurdles in
implementing the change.
So now we
know the reasons, the hurdles of
organizational change and their solutions.
But one last piece of the puzzle is still missing, communication. For implementing the solutions mentioned we need outstanding
communication strategy. Fortunately it’s not that difficult. So ladies and
gentlemen here it is the magnificent and mystical last piece of the puzzle that
will make this paper whole.
The beautiful
concept of “sticky communication” from the book “Made to Stick” by Chip Heath
& Dan Heath.
So to make
ideas stick (memorable with lasting impact on people) there are two basic
steps.
First, find the core of
the idea.
Second, communicate the core message based on the six principles,
1.
Message
should be simple.
2.
Crafted
in an unexpected manner
3.
Concrete
without abstraction
4.
Credible
5.
Emotional
6.
Communicated
as a story.
Let us
examine each in some detail.
Conventionally
we have been told that while communicating we must stand up straight, make eye
contact, blah blah blah. Then we are also told to use structure such as
“Tell’em what you’re going to tell’em. Tell’em, then tell’em what you told’em.”[10]
Or we are told to use repetition to communicate. All these make sense except repetition. We do not want to
communicate the same message again and again, we need the message to be simple
and engaging enough that it sticks the first time it is communicated. So how do
we make our big idea of change stick
with our employees?
We must strip
down the big idea down to its core. The goal is to create something like a
proverb that is simple as well as profound. We must force ourselves to
prioritize and reach to the most important part of the big idea. The purpose of
the core is to guide the coordination
of the organization towards a single objective.
Let us
consider two examples.
First example
shows a great core message and how it works. Once upon a time in a land not too
far away, Herb Kelleher (CEO of Southwest airlines) told someone that the
secret to running Southwest airlines is just “We are THE low-fare airline”. To show how it works Herb gave an
example. He said “Tracy from marketing comes into your office. She says her
surveys indicate that the passengers might enjoy a light entr’ee on the Houston
to Las Vegas flight. All we offer is peanuts, and she thinks a nice chicken
Caesar salad would be popular. What do you say?” and then Kelleher added “You
say, ‘Tracy, will adding that chicken Caesar salad make us THE low-fare airline from Houston to Las Vegas? Because if it
doesn’t help us become the unchallenged low-fare airline, we’re not serving any
damn chicken salad’.” [11]
Thus, a
simple and concrete message free from abstraction can guide all company
activities towards the most important objective.
Now in the
second example we see a not so great core message. PTCL (Pakistan
Telecommunication Company Limited) in the past few years has been trying to
implement change. The core message “Feel the Difference”. What does that tell
me as a manager in PTCL. Does it tell me to feel something different? Or does
it tell me to do things differently? Or Do I have to make my customers feel the
difference in my organization? Obviously, the message is abstract and does a
pretty bad job in guiding me in any direction. The message is left to the
perception of the employees and customers. For instance, one marketing
executive might perceive it that we are aiming at diversification in product
portfolio so that PTCL customers feel the difference. On the other hand,
another executive might perceive it that we are trying to be leaders in
specific products, so that our shareholders feel the difference in profits. This
is same as a soccer game where the players do not know where the goal is. Thus
the players end up cancelling out effects of work done by other employees in
the same team. Similarly in case of a company its stakeholders (shareholders,
customers, suppliers etc.) all are just as confused and frustrated as the core
message itself.
Now the
easier part of communication, once we have the core message we need to
communicate it in a manner that it sticks.
It makes
perfect sense that the message should be in simple (non-abstract) language
because we want the receiver to understand the message, rather to dig in
dictionaries and encyclopedias to come up with non-conclusive meanings.
Communicate
the message in an unexpected manner
to gain attention of the people and
to keep them interested engage their curiosity.
In simple words we want to craft a
message that is not common. It should surprise people. Thus gaining attention,
but to maintain their interest and attention we need them to be curious about
our message. For instance, many times we hate a movie but we stick around till
the end just to see “How it turns out?” Curiosity can be a powerful tool if
used properly.
Concreteness makes our message memorable. We must explain ideas in terms of
human actions and sensory information. Moreover, abstract language should be
avoided.
First example, the story of “The fox and the grapes”, when the fox was
unable to get the grapes it walked away saying “I am sure they are sour”. The
moral of the story “It is easy to despise what you can’t get”. So something
about human nature which is intangible and abstract is encoded into a concrete
story. This story has stood the test of time. It was written by Aesop (a slave)
in ancient Greece more than 2,500 years ago.
Second
example, saying that “our company provides world-class customer service” is
abstract and in-effective, but saying something like “our customer service is
available 24/7” is concrete.
To make an
idea believable it has to be credible.
Messages from higher authority may be accepted as credible. For instance,
within an organization, if the CFO (Chief Financial Officer) says that the
profits are decreasing, employees will trust him. The CFO draws credibility due
to his authority.
When we don’t enjoy authority we need a message that carries its own
credentials. We want people to test our idea themselves, the same philosophy as
“try before you buy”. [12]
For example, the popular commercial by Wendy’s “Where’s the beef?” showed that
beef patty Whopper or in the Big Mac is smaller than the beef patty in Wendy’s
single burger. So the commercial highlighted something that was true and people
could actually test it themselves if they compare Wendy’s burger with Big Mac
or Whopper.
To make
people care for our idea we need to
stimulate their emotions. We need to make them feel something. First, we do not
want them thinking about statistics or numbers, because research has shown that
the act of calculation hinder our
ability to feel. [13]
Second, we show them that our idea of change is associated to things they
already care about. For instance, we might show them that the changes in the
organization will help them leave offices on time and to spend more quality
time with their families.
To make
people to act on our ideas we need
the right stories that reflect our core message. Stories have tendency to stick
as they naturally inherent the stated ideas such as unexpectedness,
concreteness and emotional appeal. For example, at Nordstrom there are numerous
stories of how employees delighted their customers with their exceptional
customer service. A story of an employee who spent three hours on Easter Sunday
finding a customer’s house so he could deliver a stuffed rabbit to the
customer’s wife in person[14],
and similarly many other stories that communicate the core message of customer service to its employees in an
unexpected and memorable way. In other words the core message sticks. Compare these
stories to an email from the top management something like “we will provide
great customer service to customers”, which will probably not even gain any
attention, let alone be memorable.
The ability
to efficiently change and implement a
strategy is the only competitive advantage that is truly long lasting for
any company. To efficiently manage change we should follow the principles of “Tipping point leadership”, which
suggests that in every organization there are factors that have disproportionate influence on performance.
Companies can use these factors to effectively deal with hurdles of
implementing change. Moreover, by “fair
process”, that is by engaging, explaining and clarifying the need for
change to employees, management can create a culture of trust and commitment
that motivates employees to implement the change willingly.
Furthermore, we
need a communication strategy that will effectively communicate our idea to
everyone in the organization. To make our ideas stick (memorable with lasting impact
on people) there are two basic steps. First, find the core of the idea. Second,
communicate the core message based on the six principles, i.e., the message
should be simple, crafted in an unexpected manner, concrete without
abstraction, credible, emotional and communicated as a story. The test of a successful communication strategy is
that it will make our ideas stick with the front line associates of the
organization.
The
strategies/tactics listed in this paper are also subject to change, thus managers
and leaders should continue to improve and adapt to new strategies to
efficiently manage change. But one thing is for sure that stories stick around and using stories for effective communication
would probably won’t change.
[1]
W.Chan Kim & Rene’e Mauborgne, Blue Ocean Strategy (Boston: Harvard
Business School Press, 2005), 148.
[2]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 150.
[3]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 151.
[4]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 156.
[5]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 156.
[6]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 156.
[7]
W.Chan Kim & Rene’e Mauborgne, Blue Ocean
Strategy (Boston: Harvard Business School Press, 2005), 164.
[8]
Teresa M. Amabile, How to Kill Creativity
(Harvard Business Review, 1998).
[9]
W.Chan Kim & Rene’e Mauborgne, Blue
Ocean Strategy (Boston: Harvard Business School Press, 2005), 166.
[10]
Chip Heath & Dan Heath, Made to Stick (New York: Random House, 2008), 9.
[11]
Chip Heath & Dan Heath, Made to Stick (New York: Random House, 2008), 29.
[12]
Chip Heath & Dan Heath, Made to Stick (New York: Random House, 2008), 17.
[13]
Chip Heath & Dan Heath, Made to Stick (New York: Random House, 2008), 167.
[14]
Paul F. Buller Randall S. Schuler, Managing Organizations and People (Mason:
Thomson Learning, 2003), 250.
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