Review all articles and this chapter, need 2 dis/talks from each. Due in 24 hours or less. I will only pay what I have stated. If you want more do not reply.
Pease answer question below also.
Which decisions do you think are better: decisions made by a group or decisions made by an individual? Why? Provide examples.
LEARNING OBJECTIVES
After studying Chapter 18, you will be able to:
Discuss what it takes to be world class.
Describe how to manage and lead change effectively.
List tactics for creating a successful future.
CHAPTER OUTLINE
Becoming World Class
Sustainable, Great Futures
The Tyranny of the Or
The Genius of the And
Organization Development
Achieving Greatness
Managing Change
Motivating People to Change
A General Model for Managing Resistance
Specific Approaches to Enlist Cooperation
Harmonizing Multiple Changes
Leading Change
Shaping the Future
Thinking about the Future
Creating the Future
Shaping Your Own Future
Learning and Leading
Page 641 The world hates change, yet that is the only thing that has brought progress.
—CHARLES KETTERING
My interest is in the future because I am going to spend the rest of my life there.
—CHARLES KETTERING
Management Connection
HOW DR. PRONOVOST IS MAKING HOSPITALS SAFER FOR PATIENTS
The problem, as Dr. Peter Pronovost saw it, was obvious—and appalling. Patients are dying needlessly in U.S. hospitals. The numbers tell a disturbing story: almost 100,000 deaths per year from medical errors and a continuing decline in safety measures over the past decade. One of the leading causes of death in the United States is health care–associated infections—that is, infections acquired while in a hospital, nursing home, or other health care facility. These facts were worse than numbers to Dr. Pronovost, who serves as professor of anesthesiology and critical care medicine at Johns Hopkins University School of Medicine and leads the school’s Center for Innovation in Quality Patient Care. The facts represent the suffering of real patients and their families. Years ago Dr. Pronovost witnessed a toddler die as a result of hospital error after the baby had been brought to the hospital for treatment of burns. He became determined to prevent such tragedies from happening to more patients.
Dr. Pronovost decided to find out what must change in order for hospitals to become safer places. What he learned was surprisingly simple. Many infections occur because the people working in health care facilities don’t take simple precautions that are known to prevent the spread of infections. To improve, hospitals didn’t need new technologies. They needed to change people’s behaviors.
Under Dr. Pronovost, Johns Hopkins partnered with the Michigan Health and Hospital Association to try implementing changes that could bring down infection rates in intensive care units (ICUs). The effort, known as the Michigan Keystone ICU Project, targeted a particular kind of infection known as catheter-related bloodstream infections. Central-line catheters are inserted into a patient’s neck, chest, or groin to deliver medications and fluids. Treating a patient who acquires this type of infection adds about $18,000 to the cost of the patient’s care, and the treatment sometimes fails: tens of thousands of patients die from these infections every year. However, the infections are rare when care providers keep their hands and the catheters clean. The Centers for Disease Control and Prevention (CDC) has published guidelines for preventing the infections. These guidelines are 120 pages long, which may help to explain why so many ICUs seem not to follow them.
The Keystone Project implemented in Michigan a set of changes Dr. Pronovost had used at Johns Hopkins to reduce the infection rate from 19 per 1,000 catheter days (one of the worst in the nation) to almost zero. The project boiled down the CDC’s extensive guidelines for inserting central-line catheters into ICU patients into a five-item checklist:
1. Wash hands with soap and water or an alcohol cleanser.
2. Wear sterile clothing (mask, gloves, hair covering), and cover the patient with a sterile drape.
3. Clean the patient’s skin with antiseptic soap when the line is inserted.
Page 6424. Avoid placing catheters in the groin, where infection rates are higher.
5. Remove the line when it is no longer needed.
In addition, the ICUs participating in the project measured infection rates so they could see how they were performing before and after the use of the checklist.
In the first year and a half of the Keystone Project, the Michigan hospitals cut the rate of infections by 66 percent to nearly zero infections. That decrease translated into a savings of more than 1,500 lives and $200 million—about $200 for every dollar invested in the project. Changing the way medical teams behave can literally save lives.1
Changes such as the ones brought about by the Michigan Keystone Project are not easy, do not happen automatically, and often require that managers overcome a host of obstacles. As you study this chapter, think about why the ability to change is both challenging and essential.
Change happens—constantly and unpredictably. Whatever competitive advantage you may have depends on particular circumstances at a particular time, but circumstances change.2 The economic environment shifts; competitors pop up everywhere; markets emerge and disappear. The challenge for organizations is not just to produce innovative new products but to balance a culture that is innovative and that builds a sustainable business. And for individuals, the ability to cope with change is related to their job performance, the rewards they receive,3 and their career success.
But coping with change isn’t enough. Managers and their organizations need to create change and improve constantly to achieve world-class excellence and competitive advantage for the future. From his post at Johns Hopkins, Dr. Peter Pronovost sees certain changes in hospitals as literally matters of life and death. In other cases, change is something in the environment that organizations must respond to with their own changes.
Becoming World Class
Managers today want, or should want, their organizations to become world class.4 Being world class requires applying the best and latest knowledge and ideas and having the ability to operate at the highest standards of any place anywhere.5 Thus becoming world class does not mean merely improving. It means becoming one of the very best in the world at what you do. To some people, striving for world-class excellence seems a lofty, impossible, unnecessary goal. But it is a goal that helps one survive and succeed in today’s intensely competitive business world.
World-class companies create high-value products and earn superior profits over the long run. They demolish the obsolete methods, systems, and cultures of the past that impeded their competitive progress and apply more effective and competitive organizational strategies, structures, processes, and management of human resources. The result is an organization capable of competing successfully on a global basis.6
Bottom Line
It’s a worthy aspiration: becoming world class at every one of your competitive goals.
What does it mean to be “world class” at a goal such as quality or sustainability?
Sustainable, Great Futures
Two Stanford professors, James Collins and Jerry Porras, studied 18 corporations that had achieved and maintained greatness for half a century or more.7 The companies included Sony, American Express, Motorola, Marriott, Johnson & Johnson, Disney, 3M, Hewlett-Packard, Citicorp, and Walmart. Over the years, these companies have been widely admired, been considered the premier institutions in their industries, and made a real impact on the world. Although every company goes through periodic Page 643downturns—and these firms are no exceptions over their long histories—these companies have consistently prevailed across the decades. They turn in extraordinary performance over the long run, rather than fleeting greatness.
The researchers sought to identify the essential characteristics of enduringly great companies. These great companies have strong core values in which they believe deeply, and they express and live the values consistently. They are driven by goals—not just incremental improvements or business-as-usual goals, but stretch goals (recall Chapter 13). They change continuously, driving for progress via adaptability, experimentation, trial and error, entrepreneurial thinking, and fast action. And they do not focus on beating the competition; they focus primarily on beating themselves. They continually ask, “How can we improve ourselves to do better tomorrow than we did today?”
American Express has been considered a highly acclaimed company for over 50 years.
But underneath the action and the changes, the core values and vision remain steadfast and uncompromised. Table 18.1 displays the core values of several companies that were “built to last.” Note that the values are not all the same. In fact, no set of common values consistently predicted success. Instead the critical factor is that great companies have core values, know what they are and what they mean, and live by them—year after year.
They turn in extraordinary performance over the long run, rather than fleeting greatness.
The Tyranny of the Or
Many companies, and individuals, are plagued by the tyranny of the or. This refers to the belief that things must be either A or B and cannot be both. The authors of Built to Last provide many common examples: beliefs that you must choose either change or stability; be conservative or bold; have control and consistency or creative freedom; do well in the short term or invest for the future; plan methodically or be opportunistic; create shareholder wealth or do good for the world; be pragmatic or idealistic.8 Such beliefs, that only one goal but not another can be attained, often are invalid and certainly are constraining—unnecessarily so.
tyranny of the or
The belief that things must be either A or B and cannot be both; that only one goal and not another can be attained.
The Genius of the And
In contrast to the tyranny of the or, the genius of the and—more academically, organizational ambidexterity—refers to being able to achieve multiple objectives at the same time.9 It develops via the actions of many individuals throughout the organization. We discussed earlier in the book the importance of delivering multiple competitive values to customers, performing all the management functions, reconciling hard-nosed business logic with ethics, leading and empowering, and others. Authors Collins and Porras have their own list:10
genius of the and; organizational ambidexterity
Ability to achieve multiple objectives simultaneously.
• Purpose beyond profit and pragmatic pursuit of profit.
• Relatively fixed core values and vigorous change and movement.
• Conservatism with the core values and bold business moves.
• Clear vision and direction and experimentation.
Page 644TABLE 18.1
Core Ideologies in Built-to-Last Companies
SOURCE: From Built to Last by James C. Collins and Jerry I. Porras, Copyright © 1997 by James C. Collins and Jerry I. Porras. Reprinted by permission of the authors, HarperCollins Publishers, Inc. and Random House Group Limited.
• Stretch goals and incremental progress.
• Control based on values and operational freedom.
• Long-term thinking and investment and demand for short-term results.
• Visionary, futuristic thinking and daily, nuts-and-bolts execution.
You have learned about all of these concepts throughout this course and should not lose sight of any of them—either in your mind or in your actions. To achieve them requires the continuous and effective management of change.
Organization Development
How do organizations become more ambidextrous and move in the other positive directions described throughout this book? This chapter discusses several general approaches that will create positive change. We begin here with an umbrella concept called organization development.
Organization development (OD) is a systemwide application of behavioral science knowledge to develop, improve, and reinforce the strategies, structures, and Page 645processes that lead to organization effectiveness.11 Throughout this course, you have acquired knowledge about behavioral science and the strategies, structures, and processes that help organizations become more effective. The “systemwide” component of the definition means that OD is not a narrow improvement in technology or operations but a broader approach to changing organizations, units, or people. The “behavioral science” component means that OD is not directly concerned with economic, financial, or technical aspects of the organization—although they may benefit through changes in the behavior of the people in the organization. The other key part of the definition—to develop, improve, and reinforce—refers to the actual process of changing for the better and for the long term.
organization development (OD)
The systemwide application of behavioral science knowledge to develop, improve, and reinforce the strategies, structures, and processes that lead to organizational effectiveness.
The strategy of Cirque du Soleil is one of constant innovation: combining circus and theater, and studying other industries like car design, fashion, and restaurants to get ideas for new shows.
Two features of organization development are important to note.12 First, it aims to increase organizational effectiveness—improving the organization’s ability to deal with customers, stockholders, governments, employees, and other stakeholders, which results in better-quality products, higher financial returns, and high quality of work life. Second, OD has an important underlying value orientation: it supports human potential, development, and participation in addition to performance and competitive advantage.
Many specific OD techniques fit under this philosophical umbrella.13 The basic types are strategic interventions, including helping organizations conduct mergers and acquisitions, change their strategies, and develop alliances; technostructural interventions relating to organization structure and design, employee involvement, and work design; human resources management interventions, including attracting good people, setting goals, and appraising and rewarding performance; and human process interventions, including conflict resolution, team building, communication, and leadership. As you can see, you learned about these topics throughout your management course. You also will learn more about the process of creating change in the rest of this chapter.
Achieving Greatness
A study of 200 management techniques employed by 160 companies over 10 years identified the specific management practices that lead to sustained, superior performance.14 The authors boiled their findings down to four key factors:
1. Strategy—focused on customers, continually fine-tuned based on marketplace changes, and clearly communicated to employees.
2. Execution—good people, with decision-making authority on the front lines, doing quality work and cutting costs.
3. Culture—one that motivates, empowers people to innovate, rewards people appropriately (psychologically as well as economically), entails strong values, challenges people, and provides a satisfying work environment.
4. Structure—making the organization easy to work in and easy to work with, characterized by cooperation and the exchange of information and knowledge throughout the organization.
Page 646You have been learning about these concepts throughout this course.
Becoming world class doesn’t apply only to the private sector. People worry about globalization’s negative effects on local communities as plants shut down and people lose their jobs to overseas workers. But local communities do have options—not easy ones, but doable. A locality can strive to become a world-class center of thinkers, makers, or traders.15 Thus Boston creates new ideas and technologies that often dominate world markets; Spartanville–Greenville, South Carolina, is a world-class manufacturing region that is home to more than 80 international firms representing 18 countries; and Miami, Florida, connects Latino and Anglo cultures the way Hong Kong and Singapore have historically bridged Chinese and British cultures. The keys to creating world-class local communities include visionary leadership, a climate friendly to business, a commitment to training workers, and collaboration among businesses and between business and local government.16
Becoming world class doesn’t apply only to the private sector.
People are the key to successful change.17 For an organization to be great, or even just to survive, people have to care about its fate and know how they can contribute. But typically leadership lies with only a few people at the top. Too few take on the burden of change; the number of people who care deeply, and who make innovative contributions, is too small. People throughout the organization need to take a greater interest and a more active role in helping the business as a whole. They have to identify with the entire organization, not just with their unit and close colleagues.
Managing Change
Shared leadership is crucial to the success of most change efforts—people must be not just supporters of change but also implementers.18
This shared responsibility for change is not unusual in start-ups and very small organizations. But too often it is lost with growth and over time. In large, traditional corporations, it is all too rare. Organizations need to permanently rekindle individual creativity and responsibility, instituting a true change in the behavior of people throughout the ranks. The essential task is to motivate people fully to keep changing in response to new business challenges.
Motivating People to Change
People must be motivated to change. But often they resist changing. Some people resist change more than others, but managers tend to underestimate the amount of resistance they will encounter.19
People at all levels of their organizations, from entry-level workers to top executives, resist change. When Foremost Farms USA asked workers to switch goals—instead of making American cheese as fast as they could, they had to aim for getting each block to weigh precisely 640 pounds—the workers complied only as long as managers kept checking. When management’s attention turned elsewhere, they reverted to the more familiar emphasis on speed.20 At IBM executives learned that lower-level managers were getting bogged down because they had to invest so much time and effort in obtaining approval from higher-ups. CEO Sam Palmisano announced that he would give first-level managers authority to spend $5,000 without prior approval—a daring move, considering that the authority applied to 30,000 managers. However, the managers felt uncomfortable with their new authority, and in the first year of the new program, they spent only $100,000 of the $150 million Palmisano had entrusted to them.21 In other words, they were reluctant to change the way they worked, even though it stood to make their job easier.
Page 647Many people settle for mediocrity rather than aspire to excellence. They resist the idea of striving mightily for excellence. When told by their managers, “We have to become world class,” their reactions resemble the following statements:
According to human resources leaders surveyed by the Ken Blanchard Companies, some of the toughest challenges in managing change entail getting everyone on board so employees care about and work hard for success.22
• “Those world-class performance numbers are ridiculous! I don’t believe them, they are impossible! Maybe in some industries, some companies . . . but ours is unique . . .”
• “Sure, maybe some companies achieve those numbers, but there’s no hurry . . . We’re doing all right. Sales were up 5 percent this year, costs were down 2 percent. And we’ve got to keep cutting corners . . .”
• “We can’t afford to be world class like those big global companies; we don’t have the money or staff . . .”
• “We don’t need to expand internationally. One of our local competitors tried that a few years ago and lost its shirt.”
• “It’s not a level playing field . . . the others have unfair advantages . . .”
To deal with such reactions and successfully implement positive change, managers must understand why people often resist change. Figure 18.1 shows the common reasons for resistance. Some reasons are general and arise in most change efforts. Other reasons for resistance relate to the specific nature of a particular change.
FIGURE 18.1
Reasons for Resistance to Change
Page 648General Reasons for Resistance Several reasons for resistance arise regardless of the actual content of the change:23
• Inertia. Usually people don’t want to disturb the status quo. The old ways of doing things are comfortable and easy, so people don’t want to shake things up and try something new. For example, it is easier to keep living in the same apartment or house than to move to another.
• Timing. People often resist change because of poor timing. Maybe you would like to move to a different place to live, but do you want to move this week? Even if a place were available, you probably couldn’t take the time. If managers or employees are unusually busy or under stress, or if relations between management and workers are strained, the timing is wrong for introducing new proposals. Where possible, managers should introduce change when people are receptive.
• Surprise. One key aspect of timing and receptivity is surprise. If the change is sudden, unexpected, or extreme, resistance may be the initial—almost reflexive—reaction. Suppose your school announced an increase in tuition, effective at the beginning of next term. Wouldn’t you at least want more warning so you might be prepared? Managers or others initiating a change often forget that others haven’t given the matter much thought; the change leaders need to allow time for others to prepare for the change.
• Peer pressure. Sometimes work teams resist new ideas. Even if individual members do not strongly oppose a change suggested by management, the team may band together in opposition. Peer pressure will cause individuals to resist even reasonable changes, especially if a group is highly cohesive and has antimanagement norms (recall Chapter 14). Of course peer pressure can be a positive force, too. Change leaders who invite—and listen to—ideas from team members may find that peer pressure becomes a driving force behind the change’s success.
Change-Specific Reasons for Resistance Other causes of resistance arise from the specific nature of a proposed change. Change-specific reasons for resistance include24
• Self-interest. Most people care less about the organization’s best interest than they do about their own best interests. They will resist a change if they think it will cause them to lose something of value. What could people fear to lose? At worst, their jobs, if management is considering closing down a plant. A merger, reorganization, or technological change could create the same fear. Other possible fears include loss of the feeling of being competent in a familiar job, expectations that the job will become more difficult or time-consuming, and concerns about the organization’s future, given that management wasn’t satisfied with the status quo.
• Misunderstanding. Even when management proposes a change that will benefit everyone, people may resist because they don’t fully understand it. People may not see how the change fits with the firm’s strategy, or they simply may not see the change’s advantage over current practices.25 One company met resistance to the idea of introducing flexible working hours, a system in which workers have some say regarding the hours they work. This system can benefit employees, but a false rumor circulated among plant employees that people would have to work evenings, weekends, or whenever their supervisors wanted. The employees’ union demanded that management drop the flexible hours idea. The president was caught completely off guard by this unexpected resistance and complied with the union’s demand.
• Different assessments. Employees receive different—and usually less—information than management receives. Even within top management Page 649ranks, some executives know more than others do. Such discrepancies cause people to develop different assessments of proposed changes. Some may be aware that the benefits outweigh the costs, while others may see only the costs and not the advantages. This is a common problem when management announces a change, say, in work procedures, and doesn’t explain to employees why the change is needed. Management expects advantages in terms of increased efficiency, but workers may see the change as another arbitrary, ill-informed management rule that causes headaches for those who must carry it out.
• Management tactics. Management may attempt to force the change and may fail to address concerns in order to develop employee commitment. Or it may fail to provide the necessary resources, knowledge, or leadership to help the change succeed. Sometimes a change receives so much exposure and glorification that employees resent it and resist. Managers who overpromise what they, or the change, can deliver may discover that the next time they want to introduce a change, they have lost credibility, so employees resist.
It is important to recognize that employees’ assessments can be more accurate than management’s; employees may know a change won’t work even if management doesn’t. In this case, resistance to change is beneficial for the organization. Thus, even though management typically considers resistance a challenge to be overcome, it may actually represent an important signal that a proposed change requires further, more open-minded scrutiny.26
A General Model for Managing Resistance
Motivating people to change often requires three basic stages, shown in Figure 18.2: unfreezing, moving to institute the change, and refreezing.27
Unfreezing In the unfreezing stage, management realizes that its current practices are no longer appropriate and the company must break out of (unfreeze) its present mold by doing things differently. People must come to recognize that some of the past ways of thinking, feeling, and doing things are obsolete.28 A direct and sometimes effective way to do this is to communicate the negative consequences of the old ways by comparing the organization’s performance with that of its competitors. As discussed in Chapter 15, management can share with employees data about costs, quality, and profits.29 Sometimes employees just need to understand the rationale for changing. In the earlier example of Foremost Farms, big competitors had made it impossible to win with a strategy of working efficiently and selling cheese at a low price. Management had decided to sell more profitable customized products, such as the 640-pound blocks of cheese that one customer planned to repackage in smaller sizes. After Foremost managers took the time to explain the situation to employees, the workers understood the new requirements and began performing as requested.30
unfreezing
Realizing that current practices are inappropriate and that new behavior is necessary.
When managers communicate a problem, they need to take care not to arouse people’s defensiveness. Instead of unfreezing resistance, managers are likely to place Page 650employees on the defensive when they pin the blame for shortcomings directly and entirely on the workers.31 Similarly, bombarding employees with facts aimed at inducing fear may only add to their resistance. When a problem seems huge, people often decide it is hopeless and don’t face it. In Change or Die, journalist Alan Deutschman uses that pattern of behavior to explain why heart attack victims often fail to follow diet and exercise plans, even though doctors tell them they will literally die if they don’t take care of themselves.32 Deutschman sees a similar pattern playing out in companies where executives rely on threats of layoffs and corporate bankruptcy to motivate employees to adopt new work practices. In these difficult situations, leaders more effectively unfreeze negative behavior with a message of hope and a commitment to collaborate so that they can accomplish successful change together.
FIGURE 18.2
Motivating People to Change
When change is needed, managers should not add to employees’ problems any more than necessary. Better yet, they should work together to find ways to reduce the difficulties.
The gap is between what is and what could be.
An important contributor to unfreezing is the recognition of a performance gap, which can be a precipitator of major change. A performance gap is the difference between actual performance and the performance that should or could exist.33 As an impetus for change, a performance gap can apply to the organization as a whole; it also can apply to departments, groups, and individuals.
performance gap
The difference between actual performance and desired performance.
A gap typically implies poor performance; for example, sales, profits, stock price, or other financial indicators are down. This situation attracts management’s attention, and management introduces changes to try to correct things. But another, very important form of performance gap can exist. This type of gap can occur when performance is good but someone realizes that it could be better. Thus the gap is between what is and what could be. Important changes can and should be made even when performance is good.34
Lawrence Ellison, CEO of Oracle, is well-versed in what it takes to convey a vision of change within his organization. Oracle has often acquired other companies, bringing tumultuous change for individual employees and managers within both organizations.
In the realm of change management, employees are mostly motivated by situations that combine the sense of urgency that comes from identifying a problem with the sense of excitement that comes from identifying an opportunity. Furthermore, managers communicating a performance gap should keep in mind that employees care about more than market share and revenues. Employees want to know how making a change can help them have a positive impact on their work group, their customers, their company, their community, and themselves. For example, a financial services company met resistance when it tried to persuade employees that a change would enhance the company’s competitive position. Employees got on board only after the change leaders also started talking about how the change would help employees reduce errors, enable teams to avoid duplication of effort, make jobs more interesting, and help the organization fulfill its mission to deliver affordable housing.35
Page 651Moving The next step, moving to institute the change, begins with establishing a vision of where the company is heading. You learned about vision in the leadership chapter. The vision can be realized through strategic, structural, cultural, and individual change. Strategic ideas are discussed throughout the book. Changes in structure may involve moving to the divisional, matrix, or some other appropriate form (discussed in Chapters 8 and 9). Cultural changes (Chapter 2) are institutionalized through effective leadership (Chapters 12 through 15). Individuals will change as new people join the company (Chapters 10 and 11) and as people throughout the organization adopt the leader’s new vision for the future.
moving
Instituting the change.
Bottom Line
A useful tactic for innovating toward a positive future is to imagine the difference between what is and what could be
One technique that helps to manage the change process, force-field analysis, involves identifying the specific forces that prevent people from changing and the specific forces that will drive people toward change.36 Managers operating under this concept investigate forces acting in opposite directions. Eliminating the restraining forces helps people unfreeze, and increasing the driving forces helps and motivates them to move forward.
force-field analysis
An approach to implementing the unfreezing/moving/refreezing model by identifying the forces that prevent people from changing and those that will drive people toward change.
The great social psychologist Kurt Lewin developed force-field analysis (and the unfreezing/moving/refreezing model). Lewin theorized that although driving forces may be more easily affected, shifting them may increase opposition (tension and/or conflict) within the organization and add restraining forces. Therefore, to create change, it is crucial to remove restraining forces. An exercise at the end of the chapter provides an example and takes you through this process.
refreezing
Strengthening the new behaviors that support the change.
Refreezing Finally, refreezing means strengthening the new behaviors that support the change. Refreezing involves implementing control systems that support the change (Chapter 16), applying corrective action when necessary, and reinforcing behaviors and performance (Chapter 13) that support the agenda. Management should consistently support and reward evidence of movement in the right direction.37
The ideal new culture is one of continuous change.
In today’s organizations, refreezing is not always the best third step if it creates new behaviors that are as rigid as the old ones. The ideal new culture is one of continuous change. Refreezing is appropriate when it permanently installs behaviors that focus on important business results and maintain essential core values. But refreezing should not create new rigidities that might become dysfunctional as the business environment continues to change.38 The behaviors that should be refrozen are those that promote continued adaptability, flexibility, experimentation, assessment of results, and continuous improvement—in other words, lock in key values, capabilities, and strategic mission, but not necessarily specific practices and procedures.
Specific Approaches to Enlist Cooperation
You can try to command people to change, but the key to long-term success is to use other approaches.39 Developing true support is better than “driving” a program forward.40 How, specifically, can managers motivate people to change?
Most managers underestimate the variety of ways they can influence people during a period of change.41 Several effective approaches to managing resistance and enlisting cooperation are available, as described in Table 18.2 and expanded here.
Education and Communication Management should educate people about upcoming changes before they occur. It should communicate not only the nature of the change but its logic. This process can include one-on-one discussions, presentations to groups, and reports and memos. As we discussed in Chapter 15, effective communication includes feedback and listening. That provides an environment in which management can explain the rationale for the change—and perhaps improve it.
Page 652TABLE 18.2
Methods for Managing Resistance to Change
SOURCE: Reprinted by permission of the Harvard Business Review. An exhibit from “Choosing Strategies for Change” by John P. Kotter and Leonard A. Schlesinger (March–April 1979). Copyright © 1979 by the Harvard Business School Publishing Corporation; all rights reserved.
Participation and Involvement The people who are affected by the change should be involved in the change’s design and implementation. For major, organizationwide change, participation in the process can extend from the top to the very bottom of the organization.42 When feasible, management should use the advice of people throughout the organization.
As you learned in Chapter 3, people who are involved in decisions understand them more fully and are more committed to them. People’s understanding and commitment are important ingredients in the successful implementation of a change. Participation also provides an excellent opportunity for education and communication.
Facilitation and Support Management should make the change as easy as possible for employees and support their efforts. Facilitation involves providing the Page 653training and other resources people need to carry out the change and perform their jobs under the new circumstances. This step often includes decentralizing authority and empowering people—that is, giving them the power to make the decisions and changes needed to improve their performance.
Offering support involves listening patiently to problems, being understanding if performance drops temporarily or the change is not perfected immediately, and generally being on the employees’ side and showing consideration during a difficult period.
Negotiation and Rewards When necessary and appropriate, management can offer concrete incentives for cooperation with the change. Perhaps job enrichment is acceptable only with a higher wage rate, or a work rule change is resisted until management agrees to a concession on some other rule (say, regarding taking breaks). Even among higher-level managers, one executive might agree to another’s idea for a policy change only in return for support on some other issue of more personal importance. Rewards such as bonuses, wages and salaries, recognition, job assignments, and perks can be examined and perhaps restructured to reinforce the direction of the change.43
When people trust one another, change is easier. But change is further facilitated by demonstrating its benefits to people.44 When a pharmaceutical company was trying to make improvements in the way it managed its supply chain, the vice president in charge set a positive tone by calling a meeting at which participants would start by sharing stories of their successes in carrying out their roles within the supply chain. Although suspicious at first, the participants gained enthusiasm and commitment before turning their energy toward making changes. The company was able to measure the improvement: 20 days shaved off the product lead time, saving the company more than $250,000.45 The participants not only saw themselves as effective problem solvers but also had a dramatic measure of the improvement they could initiate in one meeting.
Manipulation and Cooptation Sometimes managers use more subtle, covert tactics to implement change. One form of manipulation is cooptation, which involves giving a resisting individual a desirable role in the change process. The leader of a resisting group often is coopted. For example, management might invite a union leader to be a member of an executive committee or ask a key member of an outside organization to join the company’s board of directors. As a person becomes involved in the change, he or she may become less resistant to the actions of the coopting group or organization.
Explicit and Implicit Coercion Some managers apply punishment or the threat of punishment to those who resist change. With this approach, managers use force to make people comply with their wishes. For example, a manager might insist that subordinates cooperate with the change and threaten them with job loss, denial of a promotion, or an unattractive work assignment. Sometimes you just have to lay down the law.
Each approach to managing resistance has advantages and drawbacks and, like many of the other situational management approaches described in this book, each is useful in different situations. Look back at Table 18.2, which summarizes the advantages, drawbacks, and appropriate circumstances for these approaches to managing resistance to change. As the table implies, managers should not use just one or two general approaches, regardless of the circumstances. Effective change managers are familiar with the various approaches and know how to apply them according to the situation.
Effective change managers are familiar with the various approaches and know how to apply them according to the situation.
Throughout the process, change leaders need to build in stability. Recall from the companies that were “built to last” that they all have essential core characteristics of which they don’t lose sight. In the midst of change, Page 654turmoil, and uncertainty, people need anchors onto which they can latch.46 Making an organization’s values and mission constant and visible can often serve this stabilizing function. In addition, strategic principles can be important anchors during change.47 Maintaining the visibility of key people, continuing key assignments and projects, and making announcements about which organizational components will not change can also promote stability. Such anchors will reduce anxiety and help overcome resistance. As you read ”Management Connection: Progress Report,” consider how Dr. Peter Pronovost applied these methods to the Keystone Project.
Management Connection
HOW DR. PRONOVOST’S CHANGES WERE PUT TO THE TEST
Getting the members of a health care team to follow a simple checklist that will prevent dangerous infections and save lives (and save, not cost, money) sounds like the easiest kind of change to introduce to an organization. After all, who could be against saving lives, especially in a hospital? But resistance to change occurs everywhere, and some of the sources of resistance to the Michigan Keystone ICU Project were especially tricky.
Dr. Peter Pronovost learned that preparing a simple five-item checklist for preventing catheter-related bloodstream infections was the easy part of the change process. The hard part was changing the culture of the institutions where he introduced the checklist.
Of course hospitals value preventing illnesses and saving lives. So when Dr. Pronovost introduced his plans, first at Johns Hopkins and then at the Michigan ICUs, everyone agreed to use the checklists. Members of the medical teams were expected to remind one another about any steps that were forgotten or done incorrectly. But in practice, people forgot steps.
Hospital teams tend to have a strong hierarchy, with doctors at the top and registered nurses, then other staff members having less status and power. The hierarchy preserves a culture in which patients and others trust the expertise of their caregivers, especially their doctors. In the case of the change effort to reduce infection rates, that culture was standing in the way of progress because lower-status team members were afraid to enforce the checklist. For the change effort to succeed, it would have to include changing attitudes about upward communication. Everyone would have to feel empowered to speak up for patient safety.
Changing that culture is tricky because hospitals have complicated organizational structures. Typically a hospital’s nurses and pharmacists are employees of the hospital, so they are directly subject to its policies, rewards, training, and other means of development and control. In contrast, the doctors who use a hospital are often self-employed; they have a contractual relationship with the hospital. Hospitals want to keep those relationships positive because it is often the doctor’s choice to admit a particular patient to a particular hospital. Furthermore, doctors’ training tends to emphasize technical skills rather than management skills such as teamwork and communication, so they may not see successful outcomes as the result of empowering the whole team.
In this context, nurses and other staff members are understandably reluctant to speak up when a doctor doesn’t follow a step on a checklist. Not only might they be criticized and ignored by the doctor, but the hospital may be reluctant to back them up in ways that could disturb a valued doctor–hospital relationship.
One way that Dr. Pronovost and the Keystone Project addressed this cultural problem was by ensuring that everyone in the ICU could see the data. Measuring infection rates and publishing the data show doctors and staff members the undeniable need for improvement. Continuing to track the infection rates shows how patient safety improves when the checklist is followed. Surprising as it may seem, hospitals have not routinely collected such data, so this one change makes it harder for hospitals and their people to forget, deny, or ignore the problem.
In addition, Dr. Pronovost has addressed the culture head-on by highlighting the value of speaking up to protect patients’ safety. Speaking as a doctor himself, he urges his colleagues to accept the idea that everyone is fallible, no matter how well trained and experienced. Again and again, he urges nurses and other hospital staff to speak up on behalf of their patients.
The efforts paid off. Among the hospitals participating in the Keystone Project, the median rate of central-line infections was about 3 per 1,000 catheter-hours before the change. Eighteen months later, most hospitals were reporting no infections at all.
Page 655Three years after the start of the Keystone Project, the ICUs have maintained the change. The combination of culture change, a checklist of procedures, and measurement of results is holding bloodstream infections to near zero in the Michigan ICUs. Pronovost sees the changes as more than a three-year improvement in safety at one state’s hospitals. He sees it as a new mind-set: these infections were once seen as inevitable, but “Now we know they are universally preventable. We’ve reset the benchmark.”48
• Of the methods for managing resistance to change (Table 18.2), which would be most relevant to the Keystone Project?
• According to the information given, how did Dr. Pronovost carry out the essential activities for leading change (Figure 18.3)?
Page 656Harmonizing Multiple Changes
There are no “silver bullets” or single-shot methods of changing organizations successfully. Single shots rarely hit a challenging target. Usually many issues need simultaneous attention, and any single, small change will be absorbed by the prevailing culture and disappear.Total organization change involves introducing and sustaining multiple policies, practices, and procedures across multiple units and levels.49 Such change affects the thinking and behavior of everyone in the organization, can enhance the organization’s culture and success, and can be sustained over time.
total organization change
Introducing and sustaining multiple policies, practices, and procedures across multiple units and levels.
A survey at a Harvard Business School conference found that the average attendee’s company had five major change efforts going on at once.50 The most common change programs were practices you have studied in this course: continuous improvement; quality programs; time-based competition; and creation of a learning organization, a team-based organization, a network organization, core capabilities, and strategic alliances. The problem is, these efforts usually are simultaneous but not coordinated. As a result, changes get muddled; people lose focus.51 The people involved suffer from confusion, frustration, low morale, and low motivation.
Because companies introduce new changes constantly, many people complain about their companies’ “flavor of the month” approach to change. That is, employees often see many change efforts as just the company’s jumping on the latest bandwagon or fad. The more these change fads come and go, the more cynical people become, and the more difficult it is to get them committed to making the change a success.52
Many people complain about their companies’ “flavor of the month” approach to change.
So an important question is, Which change efforts are really worth undertaking? Here are some specific questions to ask before embarking on a change project:53
• What is the evidence that the approach really can produce positive results?
• Is the approach relevant to your company’s strategies and priorities?
• Can you assess the costs and potential benefits?
• Does it really help people add value through their work?
• Does it help the company focus better on customers and the things they value?
• Can you go through the decision-making process described in Chapter 3, understand what you’re facing, and feel that you are taking the right approach?
Management also needs to connect the dots—that is, integrate the various efforts into a coherent picture that people can see, understand, and get behind.54 You connect the dots by understanding each change program and its goals, by identifying similarities among the programs and also their differences, and by dropping programs that don’t meet priority goals or demonstrate clear results. Most important, you do it by communicating to everyone concerned the common themes among the various programs: their common rationales, objectives, and methods. You show them how the various parts fit the strategic big picture and how the changes will make things better for the company and its people. You must communicate these benefits thoroughly, honestly, and frequently.55
Leading Change
Successful change requires managers to actively lead it. The essential activities of leading change are summarized in Figure 18.3.
The companies that lead change most effectively establish a sense of urgency.56 To do so, managers must examine current realities and pressures in the marketplace and the competitive arena, identify both crises and opportunities, and be frank and honest about them. In this sense, urgency is a reality-based sense of determination, not just fear-based busyness. The immediacy of the need for change is an important component, in part because so many large companies grow complacent.
When looking to implement change, managers should speak candidly to their employees about the poor state of the company. This gives the employees an opportunity to understand how and why important changes need to take place.
Figure 18.4 shows some common reasons for complacency. To stop complacency and create urgency, a manager can talk candidly about the organization’s weaknesses compared with competitors, making a point to back up statements with data. Other tactics include setting stretch goals, putting employees in direct contact with unhappy customers and shareholders, distributing worrisome information to all employees instead of merely engaging in management “happy talk,” eliminating excessive perks, and highlighting to everyone the future opportunities that exist but that the organization so far has failed to pursue.
Ultimately, urgency is driven by compelling business reasons for change. Survival, competition, and winning in the marketplace are compelling; they provide a sense of direction and energy around change. Change becomes not a hobby, a luxury, or something nice to do, but a business necessity.57
Urgency is a reality-based sense of determination, not just fear-based busyness.
To create a guiding coalition means putting together a group with enough power to lead the change. Change efforts fail when a sufficiently powerful coalition is not formed.58 Major organization change requires leadership from top management, working as a team. But over time, the support must gradually expand outward and downward throughout the organization. Middle managers and supervisors are essential. Groups at all levels are the glue that can hold change efforts together, the medium for communicating about the changes, and the means for enacting new behaviors.59
Developing a vision and strategy, as discussed in earlier chapters, directs the change effort. This process involves determining the idealized, expected state of affairs after the change is implemented. Because confusion is common during major organizational change, the clearest possible image of the future state must be developed and conveyed to everyone.60 This image, or vision, is a target or guideline that can clarify expectations, dispel rumors, and mobilize people’s energies. The portrait of the future also should communicate how the transition will occur, why the change is being implemented, and how people will be affected by the change. The power of a compelling vision is one of the most important aspects of change and should not be underestimated or underutilized.
Communicating the change vision requires using every possible channel and opportunity to talk up and reinforce the vision and required new behaviors. It is said that aspiring change leaders undercommunicate the vision by a factor of 10, or even 100 or 1,000, seriously undermining the chances of success.61 In delivering more messages, however, do not forget that communication is a two-way street. When consultant Steve Schumacher was hired to improve the performance of a division in which quality, productivity, and customer service had been declining, he started by setting up meetings in which employees described what they saw as the underlying problems. His message to them was simply that the company cared about their views and wouldn’t make changes until they had been heard. Schumacher and his team then compiled a list of all the issues and shared it with every employee. Only then did he ask for volunteers to participate in planning solutions. The consulting team was flooded with volunteers. Not only were employees willing to change, but they were excited to be included in planning, and they hungered for a better understanding of where the company wanted to go and how they could contribute to that vision. Before long, as a result of this team effort, performance measures began to rise across the board.62
Page 657
FIGURE 18.3
Leading Change
SOURCE: Reprinted by permission of Harvard Business School Press. Exhibit from Leading Change by John P. Kotter, 1996. Copyright 1996 by the Harvard Business School Publishing Corporation; all rights reserved.
FIGURE 18.4
Sources of Complacency
SOURCE: Reprinted by permission of Harvard Business School Press. Exhibit from Leading Change by John P. Kotter, 1996. Copyright 1996 by the Harvard Business School Publishing Corporation; all rights reserved.
Page 658Empowering broad-based action means getting rid of obstacles to success, including systems and structures that constrain rather than facilitate. Encourage risk taking and experimentation, and empower people by providing information, knowledge, authority, and rewards, as described in Chapter 13.
Generate short-term wins. Don’t wait for the ultimate grand realization of the vision. You need results. As small victories accumulate, you make the transition from an isolated initiative to an integral part of the business.63 Plan for and create small victories that indicate to everyone that progress is being made. Recognize and reward the people who made the wins possible, doing it visibly so that people notice and the positive message permeates the organization.
Make sure you consolidate gains and produce more change. With the well-earned credibility of previous successes, keep changing things in ways that support the vision. Hire, promote, and develop people who will further the vision. Reinvigorate the organization and your change efforts with new projects and change agents.
“Change is a verb.”
—Mimi Silbert, founder, Delancey Street Foundation64
Finally, anchor new approaches in the culture.65 Highlight positive results, communicate the connections between the new behaviors and the improved results, and keep developing new change agents and leaders. Continually increase the number of people joining you in taking responsibility for change.66
Shaping the Future
Most change is reactive. A better way to change is to be proactive. Reactive change means responding to pressure after a problem has arisen. It also implies being a follower. Proactive change means anticipating and preparing for an uncertain future. It implies being a leader andcreating the future you want.
reactive change
A change effort that occurs under pressure; problem-driven change.
proactive change
A change effort that is initiated before a performance gap has occurred.
The road to the future includes drivers, passengers, and road kill. Put another way: on the road to the future, who will be the windshield, and who will be the bug?67 Needless to say, it’s best to be a driver.68 How do you become a driver? By being proactive more than merely reactive, by really thinking about the future, and by creating futures.
Thinking about the Future
If you think only about the present or wallow in the uncertainties of the future, your future is just a roll of the dice. It is far better to exercise foresight, set an agenda for the future, and pursue it with everything you’ve got. So contemplate and envision the future.
Before the 20th century, people lived without antibiotics, automobiles, airplanes, tractors, and air conditioning. Imagine how this combination of inventions has revolutionized where and how well people live. And in just the last few decades, we have seen the invention and spread of personal Page 659computers, the World Wide Web, cell phones, and the mapping of the human genome. These innovations are still shaping how we learn, communicate, and treat disease.
On the road to the future, who will be the windshield, and who will be the bug?
Will the 21st century bring transformations that are just as dramatic? Some people think the potential for innovation and growth is unprecedented in areas such as information technology, the biological sciences, agriculture, water supply, and clean energy technologies.69 Futurist Richard Watson sees the cell phone as the device that will most transform how we live in the 21st century. He foresees a cashless society in which consumers use signals from their phones to make payments as well as send messages. Futurist Cynthia Wagner sees career opportunities stemming from researchers’ growing knowledge of processes in the human brain. In the future, Wagner surmises, this knowledge will help bioengineers develop microelectrodes to translate paralyzed patients’ brain signals into words and movements, and computer scientists will apply the knowledge to make advances in artificial intelligence.70 Just as technologies change, so do additional trends rise and fall, recently including a (temporary, most likely) damper on globalization, rising distrust of business, a growing role of government, strains on natural resources, and changing patterns of global consumption.71 Authors Shoshana Zuboff and Jim Maxim claim that vast new markets exist, new kinds of companies are ready to be created, and the new business model hasn’t yet emerged.72 All offer prime opportunity to those who create the future.
Don’t think taking risks and being fearless is only for companies; think of your own quest for personal competitive advantage in the same way. Ultimately where you go, what you do, who you become, all are up to you. So be fearless.
Creating the Future
Companies can try different strategic postures to prepare to compete in an uncertain future. Adapters take the current industry structure and its future evolution as givens. They choose where to compete. This posture is taken by most companies by conducting standard strategic analysis and choosing how to compete within given environments. In contrast, shapers try to change the structure of their industries, creating a future competitive landscape of their own design.73
adapters
Companies that take the current industry structure and its evolution as givens, and choose where to compete.
shapers
Companies that try to change the structure of their industries, creating a future competitive landscape of their own design.
Researchers studying corporate performance over a 10-year period found that 17 companies in the Fortune 1000 grew total shareholder return by 35 percent or more per year.74 How did they do it? They completely reinvented industries. Harley-Davidson turned around by selling not just motorcycles, but nostalgia. Amgen broke the rules of the biotech industry by focusing not on what customers wanted, but on great science. Starbucks took a commodity and began selling it in trendy stores. CarMax and other companies reinvented the auto industry.
You need to create advantages. The challenge is not to maintain your position in the current competitive arena, but to create new competitive arenas, transform your industry, and imagine a future that others don’t see. Creating advantage is better than playing catch-up. At best, doing things to catch up buys time; it cannot get you out ahead of the pack or buy world-class excellence.75 To create new markets or transform industries—these are perhaps the ultimate forms of proactive change.76
Create new competitive arenas, transform your industry, and imagine a future that others don’t see.
Figure 18.5 illustrates the vast opportunity to create new markets. Articulated needs are those that customers acknowledge and try to satisfy. Unarticulated needs are those that customers have not yet experienced. Served customers are those to whom your company is now selling, and unserved customers are untapped markets.
Business-as-usual concentrates on the lower-left quadrant. The leaders who re-create the game are constantly trying to create new opportunities in the other three quadrants.77 For example, as a middle class emerges in populous and fast-developing nations such as India, China, and Brazil, some see problems in the strain this puts on the planet’s resources. Others see unexploited opportunities to serve new customers with new kinds of products that are made more sustainably or enable consumers to live a more sustainable lifestyle.78
Page 660
FIGURE 18.5
Vast Opportunity
SOURCE: Reprinted by permission of Harvard Business School Press. Exhibit from Competing for the Future by Gary Hamel and C. K. Prahalad, 1994. Copyright 1994 by the Harvard Business School Publishing Corporation; all rights reserved.
Other companies hope to meet unarticulated needs by developing and exploiting cutting-edge technology. The nanometer—one-billionth of a meter, 1/100,000 the width of a human hair, or about the size of 10 hydrogen atoms in a row—is the building block of a new industry, nanotechnology. The nanometer is so important because matter at this scale often behaves differently—speeding electrons through circuits faster, conducting heat better, or offering qualities such as greater strength, durability, or reactivity.79 Large and small companies are beginning to rush nano-based products into the marketplace. Current applications include nanotech silver (which has antimicrobial properties) in grooming products and odor-resistant socks, nanoscale features in semiconductors, and the use of nanoparticles as catalysts in making chemicals for use in coatings, paints, sunscreens, and other products.80 Applications under development include high-performance rechargeable batteries that can store hydrogen and other high-energy gases, “nano-biochips” that can detect cancer in a patient within minutes, and a nanotechnology material called graphene that can be used to produce a computer touchscreen one atom thick.81
Is nanotech—for that matter, are most “industries of the future”—being over-hyped? By some estimates, products using nanotech materials could achieve sales of $1 trillion or more by 2015; others say $26 billion would be a more realistic figure. Either way, the expansion of this technology has been impressive, given that it is still under development. Sales of products applying nanotechnology have grown by 7 to 10 times over the past few years.82 However, there are concerns that the technology is untested and perhaps risky.83 The particles are so small that they can pass through most filters, and their ability to react at the atomic level could cause unforeseen chemical and biological consequences. At the heart of the problem is a lack of experience with these materials, coupled with the very fact that their properties are different from the same materials at a larger scale. We know that alumina is highly explosive at the nanoscale, but how about carbon’s greater conductivity at nanoscale? That doesn’t sound so dangerous, but we don’t know how this material would affect people if it got into their lungs or skin. Thus industry is challenged to apply this exciting new technology while protecting its workers and customers against the possibility of risks that Page 661aren’t yet known.84 Who can best meet such a challenge? As you’ve read, technological change is a central part of the changing landscape, and competition often arises between newcomers and established companies.
All things considered, which should you and your firm do?
Preserve old advantages or create new advantages?
• Lock in old markets or create new markets?
• Take the path of greatest familiarity or the path of greatest opportunity?
• Be only a benchmarker or a pathbreaker?
• Place priority on short-term financial returns or on making a real, long-term impact?
• Do only what seems doable or what is difficult and worthwhile?
• Change what is or create what isn’t?
• Look to the past or live for the future?85
Shaping Your Own Future
If you are an organizational leader and your organization operates in traditional ways, your key goal should be to create a revolution, genetically reengineering your company before it becomes a dinosaur of the modern era.86 What should be the goals of the revolution? You’ve been learning about them throughout this course.
But
Maybe you are not going to lead a revolution. Maybe you just want a successful career and a good life.
You still must be able to deal with an economic environment that is increasingly competitive and fast-moving.87 Creating the future you want for yourself requires setting high personal standards. Don’t settle for mediocrity; don’t assume that “good” is necessarily good enough—for yourself or for your employer. Think about how not just to meet expectations but to exceed them; to not merely “live with” apparent constraints but break free of the unimportant, arbitrary, or imagined ones; and to seize opportunities instead of letting them pass by.88
The most successful individuals take charge of their own development the way an entrepreneur takes charge of a business.89 More specific advice from the leading authors on career management:90 consciously and actively manage your own career. Develop marketable skills, and keep developing more. Make career choices based on personal growth, development, and learning opportunities. Look for positions that stretch you, and for bosses who develop their protégés. Seek environments that provide training and the opportunity to experiment and innovate. And know yourself: assess your strengths and weaknesses, your true interests, and ethical standards. If you are not already thinking in these terms and taking commensurate action, you should start now.
Look for positions that stretch you, and for bosses who develop their protégés.
Additionally, become indispensable to your organization. Be enthusiastic in your job and committed to doing great work, but don’t be blindly loyal to one company. Be prepared to leave, if necessary. View your job as an opportunity to prove what you can do and increase what you can do, not as a comfortable niche for the long term.92 Go out on your own if it meets your skills and temperament.
Although the Bureau of Labor Statistics finds no support for the oft-stated claim that workers will have seven careers in a lifetime, you can expect to change jobs often. In a long-term study of 10,000 U.S. workers, the BLS found that the average worker held 10.8 jobs between the ages of 18 and 42. Separate research shows that few workers stay with the same employer for decades.91
Page 662This points out the need to maintain your options. More and more, contemporary careers can involve leaving behind a large organization and going entrepreneurial, becoming self-employed in the “postcorporate world.”93 In such a career, independent individuals are free to make their own choices. They can flexibly and quickly respond to demands and opportunities. Developing start-up ventures, consulting, accepting temporary employment, doing project work for one organization and then another, working in professional partnerships, being a constant deal maker—these can be the elements of a successful career. Ideally, this self-employed model can help provide a balanced approach to working and to living life at home and with family, because people have more control over their work activities and schedules.
This go-it-alone approach can sound ideal, but it also has downsides. Independence can be frightening, the future unpredictable. It can isolate “road warriors” who are always on the go, working from their cars and airports, and interfere with social and family life.94 Effective self-management is needed to keep career and family obligations in perspective and in control.
Independence can be frightening, the future unpredictable.
Coping with uncertainty and change is easier if you develop resilience. To become more resilient, practice thinking of the world as complex but full of opportunities; expect change, but see it as interesting and potentially rewarding, even if changing is difficult. Also, keep a sense of purpose, set priorities for your time, be flexible when facing uncertainty or a need to change, and take an active role in the face of change rather than waiting for change to happen to you.95
IN PRACTICE
An active shaper of her future is Jacqueline F. Woods, whose executive career was a rarity for women in the 1960s, when she studied psychology and communications at Ohio’s Muskingum University. Upon graduation, she began working as a customer service training instructor at Ohio Bell, the local phone company. She married Jack Woods and expected she would soon leave the labor force to be a homemaker.
Instead, the first major change occurred. The army drafted Jack to serve in Vietnam, and Jacqueline Woods suddenly was the sole breadwinner. Her dedication to her work helped her land a promotion to director of government affairs, and she enrolled in Ohio Bell’s management training program. When her husband returned from military service and was transferred by his employer to Philadelphia, Woods lined up a job with Bell of Pennsylvania, continuing in government affairs, a field she loved.
The next big change came from government. In an antitrust lawsuit, AT&T’s Bell System was carved into regional companies. That change opened new horizons. In the regulated monopoly, the best opportunities went to scientists and engineers, but now a business in a newly competitive marketplace required Wood’s teamwork skills. She worked her way up to president of Ohio Bell Communications, which sold equipment to businesses.
Later the company offered to make Woods chief financial officer of Ameritch Services. She worried that her financial background was weak, but company executives pointed out that she would need financial skills to be on track for the top jobs. Woods took the CFO post and signed up to study finance on the weekends. A few years later, when AT&T Ohio needed a chief executive, Woods was ready.
Even following retirement, Woods shapes her future. She serves on the boards of foundations involved in a variety of community projects, such as improving local schools and installing wind turbines in Lake Erie.96
• What events in Woods’s life required her to be flexible? How did she show flexibility?
Page 663Learning and Leading
Continuous learning is a vital route to renewable competitive advantage.97 People in your organization—and you, personally—should constantly explore, discover, and take action, as illustrated in Figure 18.6. With this approach, you can learn what is effective and what is not and adjust and improve accordingly. The philosophy of continuous learning helps your company achieve lower cost, higher quality, better service, superior innovation, greater sustainability, and greater speed—and helps you grow and develop on a personal level.
Bottom Line
Continuous learning provides a fundamental competitive advantage by helping you and your organization achieve difficult goals
What are the three phases in the process of continuous learning?
Commit to lifelong learning.
Commit to lifelong learning. Lifelong learning requires occasionally taking risks, moving outside your “comfort zone,” honestly assessing the reasons behind your successes and failures, asking for and listening to other people’s information and opinions, and being open to new ideas.98
Through a career, a person can “inhabit” and grow through the hierarchy of stages illustrated in Figure 18.7 from Jim Collins’s book Good to Great. The descriptions in the hierarchy suggest not only that you should do these things, but that you should do them well. Your first job may not include managerial responsibilities, but it will require you to be an individual contributor and probably to be part of a team. Level 3 is where managerial capabilities are required, while Level 4 distinguishes true leadership from competent management. Level 5 represents a leadership style that you read about briefly in Chapter 12, which combines strong will and determination with personal humility. The figure shows that Level 5 leadership represents a peak achievement: it is the ultimate contribution of a leader who can turn a good company into a great one.99 You might ask yourself, What is my level now (or where will I be after graduation)? What do I aspire to? What have I learned to this point that can help me progress, and what do I need to learn to develop myself further?
FIGURE 18.6
Learning Cycle: Explore, Discover, Act
SOURCE: From Leaning into the Future: Changing the Way People Change Organizations by George Binney and Collin Williams; published by Nicholas Brealey Publishing Ltd., 1997. Reprinted by permission.
Page 664
FIGURE 18.7
Level 5 Hierarchy
SOURCE: From Good to Great. Copyright © 2001 by Jim Collins. Reprinted from Jim Collins.
A leader—and this could include you—should be able to create an environment in which “others are willing to learn and change so their organizations can adapt and innovate [and] inspire diverse others to embark on a collective journey of continual learning and leading.”100Learning leaders exchange knowledge freely; commit to their own continuous learning as well as to others’; are committed to examining their own behaviors and defensiveness that may inhibit their learning; devote time to their colleagues, suspending their own beliefs while they listen thoughtfully; and develop a broad perspective, recognizing that organizations are an integrated system of relationships.101
Honored as one of the best management books of the year in Europe, Leaning into the Future gets its title from a combination of the words leading and learning.102
The two perspectives, on the surface, appear very different. But they are powerful and synergistic when pursued in complementary ways.
A successful future derives from adapting to the world and shaping the future; being responsive to others’ perspectives and being clear about what you want to change; encouraging others to change while recognizing what you need to change about yourself; understanding current realities and passionately pursuing your vision; learning and leading.
This is another example of an important concept from the beginning of the chapter. For yourself, as well as for your organization, be ambidextrous. As you read “Management Connection: Onward,” think about how ambidextrous Dr. Peter Pronovost has been in his efforts to improve the safety of hospital patients.
Page 665Management Connection
CHALLENGES OF SPREADING DR. PRONOVOST’S CHANGES TO MORE HOSPITALS
After the Michigan Keystone ICU Project demonstrated how using a five-point checklist could nearly eliminate catheter-related bloodstream infections, Dr. Peter Pronovost and others were eager to improve patient safety elsewhere. Pronovost’s work in patient safety dovetailed with a federal government push to improve health care in the United States. The government backed a voluntary nationwide rollout of the checklist to support a Department of Health and Human Services goal of reducing central-line bloodstream infections by 75 percent over three years. Pronovost and his colleagues at the Johns Hopkins Quality and Safety Research Group joined with state health departments and hospital associations to bring this change effort to hospitals in every state.
As more hospitals enroll in the change effort, Pronovost sees a familiar pattern of resistance to change. At the core is the cultural conflict: staff members are so conscious of the hospital hierarchy that they burst into laughter when Pronovost says nurses should point out doctors’ mistakes. He perseveres with his message that everyone is fallible, and everyone makes a mistake occasionally. Pronovost is blunt in expressing the problem—for example, posing this rhetorical question: “Could you imagine any other industry [besides health care] tolerating the violation of an evidence-based standard that kills 31,000 people a year?” Coming from a physician at a prestigious institution, this argument against what Pronovost calls “arrogance” is hard to ignore.
Besides the issues of organizational culture, Pronovost sees shortcomings in hospitals’ processes. Many hospitals are not in the habit of collecting and publishing performance data related to patient safety. A hospital might agree that its intensive care unit (ICU) will use the checklist, but the hospital doesn’t get around to measuring infection rates. Doctors and staff members don’t realize when rates are high or receive feedback showing that following the checklist is preventing illnesses and saving lives.
Some ideas for improving processes can help safety-conscious employees work around cultural barriers to change. In hospitals where nurses can’t enforce safety procedures by reminding doctors of the guidelines, Pronovost suggests that nurses carry pagers they can use to call hospital executives if they see a safety threat. Some hospitals have set up websites where employees can report problems anonymously. A notable success story is Tennessee, where the change effort is coordinated by the Tennessee Center for Patient Safety, a quality improvement organization. The center helped hospitals develop a culture of teamwork by organizing networking meetings at which staff members share experiences and by helping hospitals set up safety teams of nurses, physicians, and hospital executives concerned about promoting patient safety.
As Pronovost pressures doctors, hospital administrators, and staff members to measure and report progress in bringing down infection rates, he sees a role for public policy in promoting and consolidating change. Pronovost would like more states to require their hospitals to collect and report data on bloodstream infections so patients, health care advocates, and other interested people can identify institutions that are poor performers and pressure them to change. By his recent count, 28 states require hospitals to collect data on bloodstream infections, and 14 require public reporting of the data. Pronovost also recommends that hospitals face fines or other sanctions if they fail to meet standards for preventing these readily avoidable infections. State-level sanctions on hospitals could provide pressure otherwise lacking in a system where penalties on doctors have traditionally been handled by a peer review process and hospitals are reluctant to alienate the physicians who send them patients.
Without such requirements, the rollout of the safety effort is slow. About 700 hospitals in 44 states and the District of Columbia have begun participating or agreed to participate. In some states, fewer than one-fifth of the hospitals have signed on. Even among hospitals that agreed to use the checklist, many are slow to adopt the record-keeping part of the change effort, and many others seem comfortable with aiming for an average infection rate rather than the achievable rate of nearly zero infections.
In spite of these challenges, the nationwide rollout has some progress to celebrate. The federal government’s Agency for Healthcare Research and Quality (AHRQ) recently assessed the performance of participating hospitals. After 12 to 15 months, these hospitals had reduced their rate of central-line associated bloodstream infections by 35 percent to 1.17 infections per thousand days of central-line use. That was a smaller percentage decrease than in the Michigan pilot study, but it also is a big step toward the ultimate goal of less than 1 infection per thousand days. In Tennessee, where the Tennessee Center for Page 666Patient Safety is pushing the teamwork approach, the change effort has succeeded so well that the Tennessee Hospital Association is now targeting zero infections as its three-year goal.103
• Based on the information given, what future does Dr. Pronovost envision for hospitals?
• At what level of the Level 5 hierarchy would you place Dr. Pronovost? Why?
KEY TERMS
adapters
force-field analysis
genius of the and
moving
organization development (OD)
organizational ambidexterity
performance gap
proactive change
reactive change
refreezing
shapers
total organization change
tyranny of the or
unfreezing
SUMMARY OF LEARNING OBJECTIVES
Now that you have studied Chapter 18, you should be able to:
Discuss what it takes to be world class.
You should strive for world-class excellence, which means using the very best and latest knowledge and ideas to operate at the highest standards of any place anywhere. Sustainable greatness comes from, among other things, having strong core values, living those values constantly, striving for continuous improvement, experimenting, and always trying to do better tomorrow than today. It is essential to not fall prey to the tyranny of the or—that is, the belief that one important goal can be attained only at the expense of another. The genius of the and is that multiple important goals can be achieved simultaneously and synergistically.
Describe how to manage and lead change effectively.
Effective change management occurs when the organization moves from its current state to a desired future state without excessive cost to the organization or its people. People resist change for a variety of reasons, including inertia, poor timing, surprise, peer pressure, self-interest, misunderstanding, different information about (and assessments of) the change, and management’s tactics.
Motivating people to change requires a general process of unfreezing, moving, and refreezing, with the caveat that appropriate and not inappropriate behaviors be “refrozen.” More specific techniques to motivate people to change include education and communication, participation and involvement, facilitation and support, negotiation and rewards, manipulation and coop-tation, and coercion. Each approach has strengths, weaknesses, and appropriate uses, and multiple approaches can be used. It is important to harmonize the multiple changes that are occurring throughout the organization.
Effective change requires active leadership, including creating a sense of urgency, forming a guiding coalition, developing a vision and strategy, communicating the change vision, empowering broad-based action, generating short-term wins, consolidating gains and producing more change, and anchoring the new approaches in the culture.
List tactics for creating a successful future.
Preparing for an uncertain future requires a proactive approach. You can proactively forge the future by being a shaper more than an adapter, creating new competitive advantages, actively managing your career and your personal development, and becoming an active leader and a lifelong learner.
DISCUSSION QUESTIONS
1. Why do some people resist the goal of becoming world class? How can this resistance be overcome?
2. Generate specific examples of world-class business that you have seen as a consumer. Also, generate examples of poor business practice. Why and how do some companies inspire world-class practices, while others do not?
3. How might blogging and other social forms of communication via social media affect the process of managing change? What are the professional and career implications of blogging for you?
4. Generate and discuss examples of problems and opportunities that have inspired change, both in businesses and in you, personally.
5. Review the methods for dealing with resistance to change. Generate specific examples of each that you have seen, and analyze the reasons why they worked or failed to work.
6. Choose some specific types of changes you would like to see happen in groups or organizations with which you are familiar. Imagine that you were to try to bring about these changes. What sources of resistance should you anticipate? How would you manage the resistance?
Page 6677. Develop a specific plan for becoming a “continuous learner.”
8. In your own words, what does the idea of “creating the future” mean to you? How can you put this concept to good use? Again, generate some specific ideas that you can really use.
9. In what ways do you think the manager’s job will be different in 20 years than it is today? How can you prepare for that future?
EXPERIENTIAL EXERCISES
18.1 A FORCE-FIELD ANALYSIS
OBJECTIVE
To introduce you to force-field analysis for managing organizational change.
INSTRUCTIONS
Read the following force-field analysis, and come up with an organizational problem of your own to analyze.
FORCE-FIELD ANALYSIS
As described in the chapter, a force-field analysis is one way to assess change in an organization. The change leader identifies the driving and restraining forces at work at a particular time, assesses organizational strengths, and selects forces to add or remove in order to create change. Using force-field analysis demonstrates the range of forces pressing on an organization at a particular time and can increase optimism that change is possible.
Example—trying to increase student participation in student government.
Force-Field Analysis Worksheet
1. Choose an organizational change in process, complete the Problem Analysis section, and fill in the model. (10–15 min.)
2. In groups of three or four, discuss the driving and restraining forces in each person’s problem. (20 min.)
3. Class discussion: (10 min.)
a. Why is it useful to break up a problem situation into driving and restraining forces?
b. Would the model be applied any differently to an individual or organizational problem?
PROBLEM ANALYSIS
1. Describe the problem in a few words.
Page 6682. A list of forces driving toward change would include these:
3. A list of forces restraining change would include these:
4. Put the driving and restraining forces of the problem on this force-field analysis, according to their degree of impact on change.
SOURCE: Dorothy Hai Marcic, Organizational Behavior: Experiences and Cases, 1E. Copyright © 1986. South-Western, a part of Cengage Learning, Inc. Reproduced by permission. www.cengage.com/permissions
18.2 NET WORKING SCENARIOS
1. Working on your own, develop a networking strategy for the following three scenarios. (10 min.)
2. Working with your partner or small group, collaborate on identifying the best strategy for dealing with each of the three scenarios. Each group should develop one best strategy for each scenario. (20 min.)
3. Each group reports, sharing its best strategies for each of the three scenarios (or at least one if not enough time is available). (2–3 min. per group per strategy)
4. The large group or class engages in discussion, using the questions at the end. (10 min.)
SCENARIOS
I. You are running for student government president. What steps would you take to make your candidacy a success?
Page 669II. You are in an internship and are interested in becoming a permanent full-time employee at the organization. What people would you approach and what steps could you take to obtain an offer?
III. You just moved to a new community, and your company’s business growth relies heavily on referrals. How do you make contacts in a place where you don’t know anyone? How can you build a client base?
QUESTIONS
1. What was difficult about this exercise?
2. What creative means were devised to build networks of contacts in these scenarios?
3. Which of these ideas would be easy to implement? Which would be difficult? What makes some strategies easier to do than others?
4. What personal qualities are needed to actually use these strategies?
5. How can someone who is shy about approaching new people use (some or all of) these strategies successfully?
6. What did you learn about yourself and others from this exercise?
SOURCE: Suzanne C. de Janasz, Karen O’Dowd, and Beth Z. Schneider, Interpersonal Skills in Organizations, McGraw-Hill/Irwin, 2002, p. 212. © 2002 The McGraw-Hill Companies. Reprinted with permission.
CONCLUDING CASE
BARBARA’S WORLD OF WINDOWS, FABRICS, AND ACCESSORIES—HOME CON SULTANT DIVISION
BUSINESS OVERVIEW AND PERSPECTIVE
Shortly after World War II, Barbara and Jerry Klein opened a small retail store in the northern New Jersey metropolitan area. Their major product lines included cotton, wool, and other fabrics that Jerry was able to buy from a few of his old war buddies who worked in mills located throughout the southeastern United States. The fabrics were purchased by an almost exclusively female clientele from the local area for use in making clothing, curtains, slipcovers, pillows, and other related home furnishings. The store also sold curtain rods, hardware, zippers, sewing supplies, and related accessories.
The store was a great success throughout the 1950s, 1960s, and 1970s. During that time, sales grew from $150,000 to more than $2,500,000 annually. The store employed 30 people, mostly homemakers from the local area who were sewers and clothing makers themselves. The warm, cozy, and friendly atmosphere made the store a favorite of the local and surrounding townspeople. Several competitors came and went over the years—those that survived were very small, posing little threat to Barbara and Jerry, who essentially enjoyed the fruits of a monopoly.
Barbara’s (comfortable) world came crashing down during the 1980s, as sales steadily declined to less than $1,800,000 by the decade’s end. Their original clientele had gradually retired, moved away, or passed on by that time. The modern-day women from the area were now going to college and establishing professional careers rather than staying at home sewing Page 670curtains or making clothes. At the same time, a number of new and more diversified competitors had come onto the scene, capturing more and more market share.
Those new stores carried a much wider range of products, including bridal wear; tablecloths and napkins; miniblinds and assorted shades; quilts; blankets; and limited lines of furniture, lamps, candles, and complementary products.
Barbara and Jerry’s daughter Sandy, a recent business school graduate who grew up working part-time in the business, came on board as assistant manager of operations. Sandy was being trained and groomed to eventually take over the business. Given her many years of direct work experience and her newly acquired business management skills, Sandy was given some freedom and encouragement to effect change and turn things around.
A NEW ERA
The store’s entire merchandise inventory was counted, assessed, and reorganized. Sandy got rid of slow-moving and stagnant inventory. High-turnover, high-profit merchandise was given more and better shelf space. A number of new products were added to challenge the competition and better reflect the buying trends and needs of the modern-day consumer.
The most significant change was the addition of a new Home Consultant Division. Recognizing the needs and characteristics of today’s professional woman shopper, Sandy proceeded to bring the business to the customer in the comfort of her own home. During evening and weekend hours, sales associates visited the homes of working women. Offered a variety of full-color catalogs and fabric samples, customers could simply select the blinds, shades, draperies, wall coverings, slipcovers, and so on of their choosing and write a check for one-half of the total invoice as a deposit. The sales associate took the necessary measurements while on site. The finished products were delivered and installed in approximately two to four weeks. The remaining balance was paid at the time of delivery and installation.
The Home Consultant Division was a huge start-up success. Sales reached $1,000,000 during the first year of operation and $1,500,000 during year 2. As the division grew, so did a number of problems and inefficiencies. A shortage of qualified installers caused the lag time between orders and installations to grow to as much as 6 to 12 weeks. On the home appointment side, where a customer could once expect to have a sales associate visit within a week or two of inquiring, the wait for an appointment had grown to average about one month. On top of all of this, Sandy knew that there was a lot more business out there to capture.
Customers became impatient and unhappy, as Sandy now faced her first serious problem that needed to be fixed fast. The complacency and lack of marketing savvy of her parents had allowed a number of able competitors to come onto the scene, two of which were gearing up to offer their own home shopping divisions.
Sandy asked Barbara Johnson, one of the sales associates, to document the complete and exact process that takes place from the time an inquiry is received to the time that an installation is completed, in the hope of identifying specific inefficiencies and production bottlenecks. Johnson’s report can be summarized as follows:
• The process begins with a phone call from people responding to newspaper ads or from in-store shoppers. No programs are currently in place to actively solicit prospective customers.
• The secretary or whoever happens to answer the phone records the information (name, address, phone number, nature of inquiry) and places a note in the sales associate’s mailbox.
• A sales associate (currently two full-time, one part-time) places a phone call to set up an appointment in the order in which the inquiry was received. Most clients are within a 25-mile radius of the store.
• A typical day for a sales associate might include a 4:00 p.m. appointment in one town followed by a 7:30 p.m. appointment in another town. On Saturdays, the sales associate typically has a 9:00 a.m. appointment in one town followed by a 12:00 p.m. appointment in another town.
• The associate then meets with the client, equipped with catalogs and samples, order forms, and measuring equipment. Most appointments result in a sale. The sales associate takes the necessary measurements (window sizes, sofa dimensions, and so on), and leaves with a check for an estimated 50 percent deposit.
• The sales associates spend about one day per week processing orders (calculating the yardage and best source of material, locating the appropriate curtain rods, tabulating the exact invoice total, and so on).
• When all of the materials arrive at the store for a particular order, the sales associate is notified and then proceeds to contact and schedule an installer; this also includes a scheduling call to the client.
• The installer completes the delivery and installation and collects the final payment for the store.
Johnson also provided the following breakdown of each sales associate’s average distribution of time spent on the job:
• 40 percent of the time is spent selling at the client’s home.
• 30 percent of the time is spent processing orders.
• 30 percent of the time is spent traveling between appointments.
Barbara’s report concluded with a summary from the installation side of the division: “Most deliveries and installations are made by two independent subcontractors that have been with the company since the start-up of the division. They have a reputation for doing good work. Several others have come and gone—this due to either poor workmanship or lack of availability or reliability.
“Several customers have complained about the appearance and presentation of the installers and their equipment. Many of the clients are women who live in suburban neighborhoods. These women are often home alone when the deliveries and installations are made. They are apprehensive and fearful when they see unshaven young men with old clothes pull up to their home in a battered old van. A few customers have actually refused to let the installer into their homes without first speaking with someone at the store.
“The two primary installers are working hard and are steadily falling further and further behind the order file.”
As for the many untapped markets and additional new business that is out there, Sandy wants her staff to become more Page 671proactive—to go after orders rather than just waiting for the phone to ring or for a shopper to inquire while in the store.
Sandy feels that the company is making a big mistake by completely ignoring the local industrial and governmental markets. For example, on the industrial side, hotels, restaurants, banks, offices, and many other establishments regularly purchase and update their furniture, window coverings, and other interior decor. The same is true for prospective governmental customers such as schools, city and town offices, and federal buildings. Sandy also notes that the customers, both in the store and in the home, continue to be almost exclusively women.
QUESTIONS
1. You have inherited a company that must make several internal changes to survive and thrive. How would you plan for and manage each of the changes that must occur? Be sure to address both strategic and tactical aspects of your plan.
2. The text lists and describes a number of operational aspects and components; select each of those that are relevant to this case, and provide a specific example of a technique that you would incorporate into the new operation.
3. In general, what interpersonal skills and management techniques will you use to successfully effect change?
PART FIVE SUPPORTING CASE
Technology Helps Dollar General Pinch Pennies
More and more consumers determined to save money are winding up at deep-discount retailers popularly known as “dollar stores.” These relatively small stores—including Dollar General, Family Dollar, and Dollar Tree—offer food, clothing, and household items at deep discounts. Discounters like Target and Walmart offer a wider selection, but more consumers are trading down to find the best possible prices.
Competing with Walmart on price is hardly an easy strategy. When Kathleen Guion took charge of store operations and store development for Dollar General, she got to work initiating a whole host of changes. Many of these were aimed at controlling costs and helping the stores run more efficiently, and many of the changes involved improving the technology used by store employees, bringing it more in line with industry standards.
Guion found that Dollar General used some truly low-tech approaches to activities involved in running the stores. When trucks pulled up with deliveries, for example, store employees pulled cartons out of the truck one by one and carried them into the store for stocking the shelves. And whenever items languished on shelves too long, the same employees would repack them in boxes and carry them into the back room for storage. Not only were these methods slow, but employees hated lugging the boxes around. Calling her change program EZ Store, Guion simplified those jobs. She bought large wheeled bins called “rolltainers,” which employees use to move products from the trucks to back rooms to the sales floor. And when products don’t sell as expected, the EZ Store plan calls for marking down the price low enough that the products do get sold. Not only does EZ Store make working for Dollar General more enjoyable by eliminating undesirable chores, but the greater efficiency gives employees more time to serve customers.
Under Guion’s direction, Dollar General also upgraded its computer systems to deliver better information faster. The company introduced handheld scanners connected to an inventory management system so employees can quickly and accurately see which items need to be replenished and when. Computers linked to headquarters have been installed in the back rooms of all the stores (surprising as it may sound, until 2009, headquarters sent messages to stores via postal mail). The company introduced computer-based training programs to improve employees’ skills, as well as software for screening job candidates to identify which of them have qualities associated with success. And to reduce thefts in the stores, the company installed closed-circuit television systems.
Managers also have been given better technology. Dollar General bought district managers personal computers with software that monitors performance and flags exceptions to standards. It also gave them BlackBerry handheld devices so they can keep in touch with their people and keep up-to-date on store performance while they travel. The technology has enabled Dollar General to widen the district managers’ span of control because fewer managers can keep up with more stores. More efficient management, in turn, has supported the company’s program of rapidly opening new stores (it now has more than 9,500 in 35 states).
These efficiency improvements are essential in the difficult retailing industry because Walmart and Target as well as other dollar stores recognize that consumers will move elsewhere if one store doesn’t remain competitive. All low-price retailers are constantly looking for ways to improve efficiency. Furthermore, in recent months, costs of transportation and basic goods such as food have been rising, which limits the amount by which retailers can mark up their prices and still offer the best deal. Dollar General CEO Richard Dreiling recently noted that the stores were carrying more than 220 items priced at $1, and that raising the price by even 15 cents would discourage some of the Page 672company’s regular customers. As Dollar General tries to maintain profitability, it will keep looking for ways to change how it does business, and technology will continue to play a role in the solutions. So far, it’s a strategy that has fueled tremendous growth at Dollar General even as other retailers are struggling to maintain sales volume.
QUESTIONS
1. What types of control are important at Dollar General? Why are these important?
2. What technological innovations did Kathleen Guion introduce at Dollar General? How did these innovations support the company’s strategy?
3. What challenges would you have expected Guion to face in introducing these changes? What principles of managing change would you have suggested she apply?
SOURCES: Based on “Operational Improvements Benefit Employees, Customers,” MMR, May 17, 2010, Business & Company Resource Center, http://galenet.galegroup.com; J. Jannarone, “Will Dollar General Lead Retailers into Battle?” The Wall Street Journal, June 6, 2011, http://online.wsj.com; A. Zimmerman, “Dollar Stores Find Splurges Drying Up,” The Wall Street Journal, July 11, 2011, http://online.wsj.com; C. Burritt, “Dollar Stores: More Brands, More Customers,” Bloomberg Businessweek, July 29, 2010, http://www.businessweek.com; M. Jarzemsky, “Dollar General’s Earnings Gain 15%,” The Wall Street Journal, June 1, 2011, http://online.wsj.com; Dollar General, “About Us,”http://dollargeneral.com; and Dollar General, “Dollar General Announces Kathleen Guion, Division President of Store Operations and Store Development, Will Transition to Retirement,” news release, July 25, 2011, http://newscenter.dollargeneral.com.
CASE INCIDENTS
Robot Repercussion
Victor Principal, vice president of industrial relations for General Manufacturing, Inc., sat in his office reviewing the list of benefits the company expected to realize from increasing its use of industrial robots. In a few minutes, he would walk down to the labor management conference room for a meeting with Ralph McIntosh, president of the labor union local representing most of the company’s industrial employees. The purpose of this meeting would be to informally exchange views and positions preliminary to the opening for formal contract negotiations later in the month, which would focus on the use of computer-integrated robotics systems and the resulting impact on employment, workers, and jobs.
Both Principal and McIntosh had access to similar information flows relevant to industrial robots, including the following. Unlike single-task machines, installed in earlier stages of automation, robots can be programmed to do one job and then reprogrammed to do another one. The pioneering generation of robots was programmed mainly to load machines, weld, forge, spray paint, handle materials, and inspect auto bodies. The latest generation of robots includes vision-controlled robots, which can approximate the human ability to recognize and size up objects by using laser beam patterns recorded by television cameras and transmitted to “smart” computers. The computer software interprets and manipulates the images relayed by the camera in a “smart” or artificially intelligent way.
Experts concluded that the impact of robot installation on employment would be profound, although the extent of the worker replacement was not clear. The inescapable conclusion was that robot usage had the capacity to increase manufacturing performance and to decrease manufacturing employment.
Principal walked down to the conference room. Finding McIntosh already there, Principal stated the company’s position regarding installation of industrial robots: “The company needs the cooperation of the union and our workers. We don’t wish to be perceived as callously exchanging human workers for robots.” Then Principal listed the major advantages associated with robots: (1) improved quality of product as a result of the accuracy of robots; (2) reduced operating costs because the per-hour operational cost of robots was about one-third of the per-hour cost of wages and benefits paid to an average employee; (3) reliability improvements because robots work tirelessly and don’t require behavioral support; and (4) greater manufacturing flexibility because robots are readily reprogrammable for different jobs. Principal concluded that these advantages would make the company more competitive, which would allow it to grow and increase its workforce.
McIntosh’s response was direct and strong: “We aren’t Luddites racing around ruining machines. We know it’s necessary to increase productivity and that robotic technology is here. But we can’t give the company a blank check. We need safeguards and protection.” McIntosh continued, “We intend to bargain for the following contract provisions:
1. Establishment of labor–management committees to negotiate in advance about the labor impact of robotics technology and, of equal importance, to have a voice in deciding how and whether it should be used.
2. Rights to advance notice about installation of new technology.
3. Retraining rights for workers displaced, to include retraining for new positions in the plant, the community, or other company plants.
4. Spreading the work among workers by use of a four-day workweek or other acceptable plan as an alternative to reducing the workforce.”
McIntosh’s final sentence summed up the union’s position: “We in the union believe the company is giving our jobs to robots to reduce the labor force.”
Their meeting ended amiably, but Principal and McIntosh each knew that much hard bargaining lay ahead. As Principal returned to his office, the two opposing positions were obvious. On his yellow tablet, Principal listed the requirements as he saw them: (1) a clearly stated overall policy was needed to guide negotiation decisions and actions; (2) it was critical to decide on a company position regarding each of the union’s announced demands and concerns; and (3) a plan had to be developed.
As Principal considered these challenges, he idly contemplated a robot possessing artificial intelligence and vision capability that could help him in his work. Immediately a danger Page 673alarm sounded in his mind. A robot so constructed might be more than helpful and might take over this and other important aspects of his job. Slightly chagrined, Principal returned to his task. He needed help—but not from any “smart” robot.
SOURCE: J. Champion and J. James, Critical Incidents in Management: Decision and Policy Issues, 6th ed. McGraw-Hill/Irwin, 1989. © 1989 The McGraw-Hill Companies.
Implementing Strategic Change
James Fulmer, chief executive officer of Allied Industries, reviewed three notes he had exchanged with Frank Curtis, director of fiscal affairs, now president of a company owned by Allied. The two executives were going to meet in a few minutes to discuss problems that had recently surfaced. During the past decade, Allied had aggressively pursued a growth objective based on a conglomerate strategy of acquiring companies in distress. CEO Fulmer’s policy was to appoint a new chief operating officer for each acquisition with instructions to facilitate a turnaround. Fulmer reviewed two of the notes he had written to Curtis.
Date: January 15, 2011
Memorandum
To: Frank Curtis, Director of Fiscal Affairs, Allied Industries
From: James Fulmer, Chairman, Allied Industries
Subject: Your Appointment as President, Lee Medical Supplies
You are aware that Allied Industries recently acquired Lee Medical Supplies. Mr. John Lee, founder and president of the company, has agreed to retire, and I am appointing you to replace him. Our acquisitions group will brief you on the company, but I want to warn you that Lee Medical Supplies has a history of mismanagement. As a distributor of medical items, the company’s sales last year totaled approximately $300 million, with net earnings of only $12 million. Your job is to make company sales and profits compatible with Allied standards. You are reminded that it is my policy to call for an independent evaluation of company progress and your performance as president after 18 months.
Date: September 10, 2011
Memorandum
To: Frank Curtis, President, Lee Medical Supplies
From: James Fulmer, Chairman, Allied Industries
Subject: Serious Problems at Lee Medical Supplies
In accord with corporate policy, consultants recently conducted an evaluation of Lee Medical Supplies. In a relatively short period of time, you have increased sales and profits to meet Allied’s standards, but I am alarmed at other aspects of your performance. I am told that during the past 18 months, three of your nine vice presidents have resigned and that you have terminated four others. An opinion survey conducted by the consultants indicates that a low state of morale exists and that your managerial appointees are regarded by their subordinates as hard-nosed perfectionists obsessed with quotas and profits. Employees report that ruthless competition now exists between divisions, regions, and districts. They also note that the collegial, family-oriented atmosphere fostered by Mr. Lee has been replaced by a dog-eat-dog situation characterized by negative management attitudes toward employee feelings and needs. After you have studied the enclosed report from the consultants, we will meet to discuss their findings. I am particularly concerned with their final conclusion that “a form of corporate cancer seems to be spreading throughout Lee Medical Supplies.”
As Fulmer prepared to read the third note, written by Frank Curtis, he reflected on his interview with the consultants. While Fulmer considered Curtis a financial expert and a turnaround specialist, his subordinates characterized Curtis as an autocrat and better suited to be a marine boot camp commander.
Date: September 28, 2011
Memorandum
To: James Fulmer
From: Frank Curtis
Subject: The So-Called Serious Problems at Lee Medical Supplies
I have received your memorandum dated September 10, and reviewed the consultants’ report. When you appointed me to my present position, I was instructed to take over an unprofitable company and make it profitable. I have done so in 18 months, although I inherited a family-owned business that by your own admission had been mismanaged for years. I found a group of managers and salespeople with an average company tenure of 22 years. Mr. Lee had centralized all personnel decisions so that only he could terminate an employee. He tolerated mediocre performance. All employees were paid on a straight salary basis, with seniority the sole criterion for advancement. Some emphasis was given to increasing sales each year, but none was given to reducing costs and increasing profits. Employees did indeed find the company a fun place to work, and the feeling of being a part of a family did permeate the company. Such attitudes were, however, accompanied by mediocrity, incompetence, and poor performance.
I found it necessary to implement immediate strategic changes in five areas: the organization’s structure, employee rewards and incentives, management information systems, allocation of resources, and managerial leadership style. As a result, sales areas were reorganized into divisions, regions, and districts. Managers who I felt were incompetent and/or lacking in commitment to my objectives and methods were replaced. Unproductive and mediocre employees were encouraged to find jobs elsewhere. Authority for staffing and compensation decisions was decentralized to units at the division, region, and district levels. Managers of those units were informed that along with their authority went responsibility for reducing costs and for increasing sales and profits. Each unit was established as a profit center. A new departmentPage 674was established and charged with reviewing performance of those units. Improved accounting and control systems were implemented. A management by objectives program was developed to establish standards and monitor performance. Performance appraisals are now required for all employees. To encourage more aggressive action, bonuses and incentives are offered to managers of units showing increased profits. A commission plan based on measurable sales and profit performances has replaced straight salaries. Resources are allocated to units based on their performance.
My own leadership style has probably represented the most traumatic change for employees. Internal competition is a formally mandated policy throughout the company. It has been responsible for much of the progress achieved to date. Progress, however, is never made without costs, and I recognize that employees are not having as much fun as in the past. I was employed to achieve results and not to ensure that employees remain secure and happy in their work. Don’t let a few crybabies unable to adjust to changes lead you to believe that problems take precedence over profits. Does it mean that I am not people oriented if I believe it is unlikely that a spirit of aggressiveness and competitiveness can coexist with an atmosphere of cooperativeness and family orientation? Do you feel that we are obligated to employees because of past practices? Frankly, I thought I had your support to do whatever was necessary to get this company turned around. In our meeting, tell me if you think my approaches have been wrong and, if so, tell me what I should have done differently.
Just as Fulmer finished reviewing the third memorandum, his secretary informed him that Curtis had arrived for their scheduled meeting. He realized he was undecided about how to communicate to Curtis his ideas and beliefs regarding how changes in an organization can best be implemented. One thing he did know: He didn’t appreciate how Curtis had expressed his views in his memorandum, but he recognized that he probably should set aside emotions and respond to the questions Curtis posed.
SOURCE: J. Champion and J. James, Critical Incidents in Management: Decision and Policy Issues, 6th ed. McGraw-Hill/Irwin, 1989. © 1989 Th
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