Those who pretend that the same kind of change medicine can be applied no matter what the context are either naive or charlatans.
Different situations demand different change paths. The kind of situation in which restructuring makes sense is quite different from that in which experimentation might be appropriate. Thus, change leaders cannot afford the risk of blindly applying a standard change recipe and hoping that it will work. Successful change takes place on a path that is appropriate to the specific situation.
Where successful change paths are similar is in the three broad phases they go through: unfreezing the organisation, that is, drawing people's attention to the need for change and identifying the value-creating idea; making change happen, that is, winning over people and dealing with resistance; and integrating the change, that is, following up the process and preparing for the next change.
The right approach to these steps, however, depends on the strength of the mainly external forces of change and the mainly internal forces of resistance.
For example, managing a crisis in the face of strong forces of change is completely different from trying to stimulate change when everything is still going well. Moreover, stimulating change in an organisation with low resistance is not the same as trying to do so in the face of high resistance. Let us look at how the forces of change and resistance, in turn, shape the appropriate change path and use the framework to contrast different types of change.
Change forces
The strength of a change force, such as the emergence of a new technology, a shift in the behaviour of competitors or a swing in the economic cycle, is determined by its impact on the business' performance (most frequently measured by market share, sales or profits).
A strong change force is one causing a substantial decline in the perfomance of a business under threat or promising a substantial improvement in the performance of a business.
It is useful to distinguish between the broad levels of change-force intensity: weak change forces whose nature and direction are difficult to discern; moderately strong forces whose direction can be seen but with only a minor impact on performance; and strong change forces with a substantial impact on performance.
Weak change forces imply proactive change. Proactive change occurs while the change force is still weak, before it can be identified clearly. The first big hurdle in proactive change is to get people's attention and establish the need for change.
Business performance, though no longer growing, is still strong. Thus, communication is unlikely to be effective; there is little to communicate, except the deep conviction that change is needed. This almost certainly will fall flat, given the mindset and cultural resistance to proactive change.
If the change leader has some idea what the change force is, he or she may be able to shock others into recognising it too. More probably, he will not know what shock treatment to use because the change force is too vague. The effective way of getting attention is to challenge people to become change agents, to go out and expose themselves to the potential change forces and see what is involved. For this, the organisation must be potentially open to change.
The second big hurdle is to identify the value-creating idea. In most proactive situations, a one-man-show or a single team effort is not enough to deal with the uncertainty about what should be done. On the other hand, change agents exploring the change forces can be asked, and will be eager, to come up with value-creating solutions.
Time is available. It should be used for experimentation. Experimentation by as many teams of change agents as the business and circumstances can support is the key to identifying a strong value-creating idea during the first phase of proactive change.
Moderate change forces require reactive change. Reactive change is called for when the forces of change have begun to affect performance but not so severely that survival, or the possibility of exploiting an opportunity, is threatened.
Getting people's attention is easier than in the case of proactive change because the change force can be identified by those willing to open their minds to the environment. Yet, in very closed organisations, shock treatment may still be necessary to open things up. Relying on communication alone may not be enough - people tend to nod their heads and continue as before. The most effective approach is still to expose people to the change force as directly as possible.
Once people's attention has been drawn to the need for change, value-creating ideas have to be developed. Since the change force is known, there is not the same need for exploration as in the case of proactive change. Nor is the same time available. Unleashing widespread bottom-up experimentation could be dangerous.
On the other hand, the company does not have to respond immediately, so there is room for creativity. A one-man show would miss the opportunity to get input from others and bring them on board. The most appropriate way of developing the value-creating idea is through multidisciplinary teams.
Strong change forces demand rapid change. Rapid crisis change is inevitable if managers wait until the business is on the edge of the performance precipice, where a threatening force confronts strong resistance. If nothing is done in time, the external stakeholders will force the business through a discontinuity that is out of management's control.
Unfortunately, this happens all too often, especially in industries in transition and in companies with strong power and role cultures that are blinded by political, structural and mindset problems. When the crisis takes hold, the threat to the survival of the business undermines the support of the stakeholders. They withdraw or hedge their commitment, and the political infighting over the remaining resources intensifies. The time for managed change shrinks rapidly.
One advantage of crisis change is that the change leader has the full attention of all the players. When the crisis hits, the shock opens up previously closed minds. People quickly become aware of the forces and need for change. They are waiting for the change leader to take charge.
Another advantage is that the direction of the change is clear. To save the business in the limited time available, only a few value-creating ideas are relevant: cut costs, regroup around the strong points, adapt the tactics of successful competitors. The more urgent the situation, the less the time for elaborate consultation or teamwork. It is important that the change objectives be put together quickly by one person with a small support group.
In the event of a strong positive force of change, such as a new product breakthrough, management also will want to capitalise on the opportunity as rapidly as possible. Getting people's attention should not be a problem if the opportunity is attractive enough. The value-creating idea is to commit the business to the new opportunity as quickly as possible. The best way of doing so will depend on whether the organisation is open or closed to change.
Resistance to change
The strength of the resistance to a change force depends on what people have to gain and lose by changing, and on how the culture of the organisation shapes the way they respond to change. An organisation that is open to change, with a significant number of change agents and people who are willing to try new things, is said to have low resistance; an organisation that is partially open to change, with at least some change agents, is moderately resistant; while a closed organisation, with very few change agents, has high resistance.
These levels of resistance can be combined with the levels of change force intensity to provide a simple way of contrasting change paths, making it easier to pick one appropriate to a particular context (see Figure 1).
We shall classify some of the more widely discussed change paths into three groups corresponding to the levels of resistance: discontinuous paths appropriate for closed organisations mixed paths appropriate for organisations that can be opened continuous paths appropriate for open organisations.
For each level of resistance to change, we start on the left of the exhibit and classify the change paths in order of increasing strength of the change force. Remember that as the pressure for change increases there is less and less time to get people's attention and experiment with the value-creating idea.
Discontinuous paths appropriate for closed organisations
In organisations that are closed to change, a radical approach is required to break the dominant culture of resistance and give the other players a more supportive environment in which to commit to the change effort.
This process should start with the resistors at the top. They have to be confronted with moments of truth: either they buy in or out. Once the resistors have been cleared out, the support group of change agents can be put together and others invited to join the effort. Such discontinuous change can be very effective at changing mindsets and structure, but more follow-up time is required to change values, skills and behaviour.
Radical leadership. Occasionally, headstrong leaders have a hunch that a closed organisation must be shaken up, even though no identifiable change force is on the horizon.
For this to work, the hunch must turn out to be right and the leader must have enough power to drive the change through. Otherwise it is invariably a disastrous ego trip. It makes much more sense to try to open up the organisation with limited experimentation or, alternatively, to wait until the forces of change emerge more clearly.
Organisational realignment. Some form of reorganisation, either external via an acquisition or alliance, or internal in the form of a new structure, is employed to draw attention to the visible need for change, line people up in the direction of the identifiable change force, and confront resistors with a new reality.
Helmut Maucher of Nestle saw the emergence of global product lines in the food industry but was unable to get the regional Nestle organisation to adopt the approach, until he had Nestle take over Rowntree with its global product lines. The acquisition quickly led to the formation of two global strategic product groups encompassing most of Nestle's potentially global product lines.
Downsizing and restructuring. When the change force reaches crisis proportions threatening the survival of the business, rapid radical restructuring is the only alternative for an organisation closed to change. Operation Centurion at Philips exhibited all the typical characteristics of such a restructuring process.
One man, Jan Timmer, was at the centre, focusing people's attention on Philips' financial crisis and working out the value-creating idea around lower operating costs and a 10 per cent reduction in headcount. In one dramatic meeting, he confronted all the senior managers with the need for change. They had little choice other than to say how they could contribute to cutting operating costs in their business or plan their departure from the company.
Mixed paths appropriate for organisations that can be opened
Organisations that can be opened to change already contain pockets of change agents and team-oriented cultures. This makes it possible to initiate experimentation and get the change agents to convert others to the change effort. However, the influence of the change agents is limited by resistors.
Since it cannot be assumed that the change agents will be able to convert the resistors, management has to assist the change agents by dealing with the resistors directly. It can then accelerate the process by rolling out the change through the organisation.
Top-down experimentation. In the absence of a clearly identifiable change force, the change leader must take advantage of the change agents that are present and the time available to initiate experimentation, while at the same time opening up the organisation as much as possible. Once the new direction becomes clear, the rest of the organisation can be asked to buy in.
At Sony, Akia Morita believed that there was a market for a small portable cassette player but only a few of his managers agreed with him. He set up task forces with these change agents to explore the possibilities of the concept. Their experimentation soon converged on a prototype. After the first mixed feedback from market tests, Morita decided to push the project through the organisation to commercialisation despite the misgivings of some of his senior managers. The resulting "Walkman" turned out to be a run-away success that positioned Sony as leading player on the global scene.
Process re-engineering. Since both the reason for change and the value-creating idea can be more easily identified, there is less need for experimentation. The organisation is open enough to permit the formation of a few multidisciplinary teams to work out the details of the idea and its implementation. Once the teams have fleshed out the new streamlined processes, the change can be implemented.
In a typical re-engineering programme, for example, at the Banco d'America e d'Italia, teams of specialists from diverse functions redesigned the front-office procedures and back-office information systems and then used intensive communication and training to put the new processes in place in the branches.
Autonomous restructuring. This is restructuring led by change agents in middle management facing a strong change force. The pressure and required direction for change are so strong that before top management engages them in a dialogue, middle managers open to change begin to adapt spontaneously on their own.
If top management is alert, it can use the change introduced by these players as a model for driving rapid change through the rest of the organisation.
Although not frequent, a number of examples have been documented. At Chrysler, when Bob Eaton took over, he soon recognised the pioneering re-engineering work being done by some middle managers and insisted that the rest of the organisation follow in their footsteps. This has been so effective that Chrysler's new products have been used as models of economic design by its Japanese competitors.
Continuous paths appropriate for open organisations
In organisations that are open to change, the dominant change agents can be invited to do extensive frontline experimentation, as well as bring others on board.
There is usually little risk in leaving the resistors to last, because in an open organisation, the change effort often builds up organically inside the existing organisation, gradually invading it before taking it over entirely. The resistors are reduced to a shrinking group in the face of an accelerating change bandwagon. Although this may take longer to initiate than the top-down change appropriate in more closed organisations, the ownership of the change is more complete and the follow-up to the change effort much smoother.
Bottom-up experimentation. When the change force is unclear and the organisation is open, the frontliners can be asked to do extensive experimentation, look for new value-creating ideas and implement them.
This was the approach adopted by Haruo Naito at Eisai, the Japanese pharmaceutical company. To test out his vision that the company could be redirected towards geriatric care, he invited his people to become innovation managers by exploring customer needs in the field and proposing new business projects to satisfy those needs. The Eisai organisation was so open that within three years, some 20 per cent of the employees were working on integrated health care projects.
Goal cascading. When the forces of change are better known, there is not as much need to experiment. Rather the change leader can take advantage of the open organisation by asking the people to work out the implementation of the value creating idea on their own level, in a cascading process of implementation from the top down through to the frontline.
When Seiko's planning department issued their report on market saturation and the increasing weakness in watch prices, Ichiro Hattori, the CEO, felt that the company should do something. After top management opted for diversification into electronic equipment, he cascaded the implementation down through the senior managers, junior managers and finally into a Total Quality Control programme to "ensure the highest level of corporate-wide implementation".
Within four years Seiko had developed a new line of sophisticated graphics devices that accounted for 50 per cent of sales.
Rapid adaptation. Organisations that have been opened up by change provide fertile ground for nurturing on-going change. The ability to nurture on-going change is also a good test of whether the latest change effort has taken root. The need for this kind of follow-up is especially important after restructuring, which otherwise might remain quite superficial.
The two fundamental types of continuing change are continuous process improvement, or kaizen, and spontaneous managerial initiative, or "intrapreneurship". Unfortunately, in today's world, kaizen is often too inward-looking and not rapid enough to respond to strong forces of change. Intrapreneurship, on the other hand, involves bottom-up entrepreneurial activity in a direct response to market opportunities, which has been turned into a fine art by some American companies, among the most renowned being 3M and Hewlett Packard.
In choosing a change path, managers must remember that change is too uncertain to be predictable. Once an organisation starts out on a path, the forces of change and resistance may respond in unexpected ways, making continual adaptation a necessity. Many change journeys involve more than one path. For example, downsizing, followed by re-engineering, and then implementation of rapid adaptation. By keeping an eye on the evolving interplay between the forces and altering the change path accordingly, change leaders can optimise their chances of success.
Books
Further suggested reading:
Paul Strebel
Part II of Breakpoints: How Managers Exploit Radical Business Change,
Harvard Business School Press (1992).
J.N. Fry and J.P. Killing
Strategic Analysis and Action,
Prentice Hall (1989.
Summary
Different situations demand different change recipes. But all change paths go through three broad phases: unfreezing the organisation, making change happen, and following up and preparing for the next one. It is useful to distinguish between the different levels of "change-force" intensity. Weak change forces are difficult to discern and require skill in communications and in identifying the value creating idea - but there is time for experimentation. Moderate change forces are those which have started to affect performance but do not threaten survival: getting people's attention is easier and multi-disciplinary teams should be employed.
Those organisations with high resistance have very few "change agents" and require a radical approach to break the dominant culture. The process should start with resistors at the top, can benefit from headstrong leadership (though can equally end in a disastrous ego trip), and requires some form of reorganisation. In organisations that can be opened to change, management has to help the change agents, and top down experimentation is desirable. In organisations that are already open to change there is usually little risk in leaving the resistors until last. Bottom up experimentation and goal cascading should be possible.
Signpost
Managing Change
The Module begins with a section on how to choosing the right change path. It will continue in Parts 17,18 and 19. Topics will include anticipating and creating the "industry breakpoints" that lead to change, and the impact of IT.
Paul Strebel
Paul Strebel is professor of strategy and change management at IMD, Lausanne. His research interests include change management, turning points and discontinuities
