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Leading Change: Integrating Theory and Practice
Robin TeiglandCenter for Strategy and
CompetitivenessStockholm School of Economics
robin.teigland@hhs.sewww.knowledgenetworking.org
February 2009
2
Competitive advantage is increasingly based on an organization’s ability to change
Of original Forbes 100 in 191761 companies ceased to exist by 1987Of remaining 39, only 18 stayed in top 100 and their return was 20% less than overall market (1917 & 1987)
Of companies in original S&P 500 in 1957Only 74 remained in 1997Of these only 12 outperformed S&P 500 in 1957-1998 period
Beer 2002
Jack Welch…
3
"...when the rate of change outside an organization is greater than the change inside, the end is near...."
4
Numerous tools for change
Globalization. Information Technology. Total Quality. Benchmarking. Best Practices.Customer Focused. Micromarketing. Outsourcing. Flexible Manufacturing. Value Creation. Core Competence. Partnering. Competitive Advantage. Networks. Strategic Alliances. Delaying. Information. Revitalization. Computer-aided Design. Concurrent Engineering. Computer-aided Engineering Mission.Cross-functional Teams. The New Organization. Diversity. Empowerment. The Information Organization. The Hybrid Organization. Knowledge. The Shamrock Organization. Restructuring. Strategic Stretch and Leverage. The Post-Modern Organization. The Cyclical Organization. The Spider-Web Organization. The Post-Industrial Organization. The Turbulent Organization. The Chaotic Organization……..
Beer 2002
5
Average number of tools used by an organization during 2004
Bain 2007
Survey of 1221 international executives
Top 10 tools
6Bain 2007* Added 1996, ** Added 1998, *** Added 2000
But do these initiatives work?
60% of companies implementing TQM dissatisfied
Over 80% of anticipated value from M&A fails to materialize
75% of JVs fall apart after “honeymoon”
7
A high number of change initiatives are unsuccessful!
Beer 2002, Gratton 2007
8
10,5
4,2
0
2
4
6
8
10
12
1990 2002
Average CEO tenure is falling
Beer 2002
60% drop
Number of years as CEO(In USA)
Could this partly be due to the CEO’s inability to handle change in an increasingly turbulent
environment??
9
Many change programs result from a tacit collusion among senior executives, staff, and external consultants who avoid undiscussible issues
For Executives: Appearance of quick, painless,
measurable results
For Consultants: A steady income
stream
For Internal Staff: Increased
responsibility & visibility
Short-termbenefits
•Lost time, energy, revenues, employees
•Increased cynicism
•Increased resistance to change
•Learning about wrong aspects
Long-term costs
Beer 2002
10
If change is the only true constant in business, how do managers deal with an ever changing business landscape?
- Adapted from The Hartford
Without change, there is no leadership; but without leadership, there is no change.
- Adapted from Prof. John Adair
11
Leading Change objectives
To expose participants to some Change concepts, frameworks, and tools
To develop Change techniques and skills through developing and discussing a live change project
To provide participants with an interactive and reflective team experience in which everyone (participants and faculty) learns together
12
Agenda
Afternoon1. Live Project Groupwork
2. Some Change Tools
Morning1. What is Change
2. Kotter’s 8 Stages
3. Groupwork
Going Forward
13
What is change?
In pairs, Think of a significant organizational change
that has impacted you in the past. Discuss the following:
What were the reasons behind the change? What was the purpose/goal of the change? What actually happened? And why? What was your role in the change? How did the change impact you and how did
you feel? What would you have done differently?
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What triggers change?
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PESTEL – External pressures for change
Johnson & Scholes 1997
Political
Environmental Technological
Legal Social
Economic
Organization
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1. What factors are affecting the industry?2. Which of these are the most important at the present time?3. Which of these are the most important in the next few years?
Political Global, regional, and national
political development (administration, political parties)
Taxation policy Foreign trade regulations Labour market politics Government stability
Socio-cultural Population demographics Income distribution Social mobility Lifestyle changes Attitudes to work and leisure Attitudes to consumerism Levels of education Changes in values/attitudes Education conditions Work environment conditions Health conditions
Environmental Ecology Pollution conditions ”Green” energy Energy conservation Waste handling
Economic Business cycles GNP trends Interest rates & Exchange rates Money supply Inflation Unemployment Wage level Private consumption and
disposable income Public finances Energy availability and cost
Technological Government spending on research Government and industry focus of
technological effort New discoveries/development Speed of technology transfer Rates of obsolescence New patents and products
Legal Development in price and
competitive legislation Labour market legislation Product safety and approvals
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Labor shortage
Source: Team aMBAssadors, SSE MBA Eurostat 2005, Global Insight 2007, McKinseyPopulation includes EU-27, excluding Slovenia, Slovakia, Czech Republic, and including Iceland
Employers need to change tactics to win the talent war
• Data is based on birth rates and age profiles of the EU.
• Different regions have similar trends.
Labor Supply: Worst case is if nothing changes
EU Labor Pool Supply and Demand
Millions of people
Labor Demand: Assumes 0.5% annual growth
“Baby Boom” generation retires.
Labor Supply: Best case is reaching 50/50 gender balance
Labor shortage
A new workforce is appearing…
18Mahaley 2008, Merrill Lynch 1999, Beck and Wade, PrenskyMahaley 2008, Merrill Lynch 1999, Beck and Wade, Prensky
““Digital Immigrants”Digital Immigrants”““Digital Natives”Digital Natives”
Company loyaltyWork ≠ PersonalCompany loyaltyWork ≠ Personal
Professional loyaltyWork = Personal
Professional loyaltyWork = Personal
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Technical knowledge becomes quickly outdated
50%knowledge
relevant
50%knowledgeoutdated
First year of technical-based
education Third yearof education
20
Organizational forces: Internal pressures
Need for improved performance In current or new markets
Need for integration and collaboration E.g., alliances, synergies, economies of scale
Power and politics E.g., changes at top management and board
level Changes in surrounding organizations
E.g., key customers, suppliers, partners
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Pressures from one area can affect the entire organization
Political
Environmental
TechnicalLegal
Social
Economic
Culture Systems
VisionStrategy
Structure People
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A new opportunity???
But every challenge is…..
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What are the critical success factors for
change?
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Helping stakeholders go through a transformation
Currentsituation
Future situation
Transformatio
n
Organization•Historical heritage, tradition•Culture•Selective perception•Follow old patterns•Return to “the way it was”
Shock
Denial
Realism
Acceptance
The Change Process
Reaction
Individuals•Resistance to change something that is familiar and feels safe•Difficult to 'say goodbye’ to old patterns and habits•Insecurity around what future will bring
Resistance reactio
ns
Sven Hultín, IBM
25
Getting through the valley of despair
High
Uninformedoptimism(Security)
Informed pessimism
(Doubt)
Hopefulrealism(Hope)
Productivity
Time
Low
Optimism(Decision
PowerCommitment)
Successful ending
(Satisfaction)
Hultín, IBM
26
Say the color, not the word
YELLOW BLUE ORANGE BLACKBLACK
GREEN PURPLE YELLOW RED
ORANGEORANGE GREEN BLACK BLUE
Stroop
27
The challenge of change
ChangeLeadership
ChangeManagement
The WHATThe ‘hard’ edge:
Systems, processes, structures, and business
strategy
The HOWThe ‘soft’ side:
Culture, behaviors, values,
and people
Zwanenberg
28
Kotter’s eight-stage process for change
Kotter 1996
2. Form a powerful guiding coalition
1. Establish a sense of urgency
3. Create a vision
8. Anchor new approaches
4. Communicate the vision
5. Empower others to act on the vision
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change
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1. Establish a sense of urgency
Forces for
change
Forces for
stability
The status quo
Burnes 2004
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1. How to create a sense of urgency?
Create a crisis/rivalry Benchmark within and outside industry
Find/develop a “red hot” burning issue Align with a powerful sponsor
Revise existing or develop new standards Income, profitability, effectiveness, efficiency, customer
satisfaction
Get an outside opinion Bring in consultants, customers, shareholders
Adapted from Kotter 1996
32
2. Form a powerful coalition
Ensure shared understanding & right attitude Ability to share vision Trustworthy Commitment to means and end
Has access to necessary resources Formal position power Expertise Reputation Leadership Informal network position
But look out for people
with big egos or “snakes”
Beer 2002, Kotter 1996
The small team that will lead
the change
33
Who has informal power in the organization?
Teigland 2003
34
3. Create (and operationalize) a vision
Create the vision To direct the change effort To coordinate across and outside
the organization
Develop a strategy to achieve the vision (operationalize) To engage people through
participation To find their “passion” To overcome forces for stability
Adapted from Kotter 1996
35
4. Communicate the vision
How? Use multiple channels Regularly to reconfirm
What? Keep it simple Use metaphors and
success stories Who?
Walk the talk Identify key opinion
leaders
But listen as well!!
Adapted from Kotter 1996
36
When do people support the vision?
Relate to the vision Expect personal gain (make their world
a better place) Can give input Respect the leader Believe the time is right
“Coming together is a beginning, staying together is progress, and
working together is success.”-Henry Ford
37
5. Empower others to act on the vision
1. Does the organizational culture encourage individuals to act?
2.Do people have the
necessary resources to
act?
3.Do people have the appropriate skills and training to act?
4.Do people have the authority to
act?
5.Are the organizational structure & systems aligned with the vision?
Adapted from Kotter 1996
38
6. Plan for and create short-term wins
1. Create obtainable
targets
2. Encourage & convince people that targets can be reached
3. Recognize and reward “winners”
Communicatethe wins
Adapted from Kotter 1996
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Broadcast heroes and their success stories!
40
7. Consolidate improvements and produce more change
Change Project 1
Change Project 2
Change Project 3
Time
Scope of
change
Adapted from Kotter 1996
41
8. Anchor new approaches
Company culture
Physical artifacts
activities and routines
Underlying values,assumptions,
beliefs, and expectations
Intangible
Adapted from Kotter 1996
42
Kotter’s eight-stage process for change
Kotter 1996
2. Form a powerful guiding coalition
1. Establish a sense of urgency
3. Create a vision
8. Anchor new approaches
4. Communicate the vision
5. Empower others to act on the vision
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change
4343
Tata Motors
4444
Tata Motors
India’s largest commercial vehicle maker for decades World’s fifth largest manufacturer of medium
and heavy trucks India’s largest automobile company (#1 in
commercial and #2 in passenger) Building global presence (e.g.,
partnership/acquisition with Fiat, acquisition of Jaguar/Land Rover)
Major turnaround 2001 to 2007 March 2001 - $110 mln loss for fiscal year,
corporate India’s biggest loss 3Q 2007 - $132 mln profit
http://www.youtube.com/watch?v=rOnQpP5haUQ
45
Groupwork - In your groups
Discuss how change was implemented at Tata Motors What triggered the change? What is the real change? How does the change process map onto Kotter’s
eight stages? What are the lessons learned from the case?
Prepare a maximum 10 minute presentation Present groupwork
One group will be chosen to present its workand another group will comment
Discussion
http://www.mckinseyquarterly.com/Leading_change_An_interview_with_the_managing_director_of_Tata_Motors_1908
46
Adapting Kotter to your organization
Change at IBM A vision with clear objectives Compelling reason to act – burning platform Holistic approach Broad participation Measurable targets Effective project management Consistent executive ownership and
participation
Hultín, IBM
47
Kotter’s eight-stage process for change
Kotter 1996
2. Form a powerful guiding coalition
1. Establish a sense of urgency
3. Create a vision
8. Anchor new approaches
4. Communicate the vision
5. Empower others to act on the vision
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change
1. Prepare
2. Implement
3. Manage
48
Agenda
Morning1. What is Change?
2. Kotter’s 8 Stages
3. Groupwork
Going Forward
Afternoon1. Live Project Groupwork
2. Some Change Tools
49
Overview
Purpose● Concepts: To develop change management
techniques and skills through developing and discussing a real change project
● Competence: To apply change management frameworks and tools
● Capital: To strengthen your personal networks Groups
● You will work in your groups Topic
● Your group will decide together on one topic for the change project
50
Kotter’s eight-stage process for change
Kotter 1996
2. Form a powerful guiding coalition
1. Establish a sense of urgency
3. Create a vision
8. Anchor new approaches
4. Communicate the vision
5. Empower others to act on the vision
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change
52
The Change Project TimelineModule 1 Choosing the Change ProjectStructuring future work
Working in virtual teamsIdentifying stakeholders & powerful coalitionCreating a vision
Module 2Developing an implementation planDefining impact measurement
Working in virtual teamsDeveloping a communication planPerforming a risk analysis
Module 3Final Presentation
53
In your groups …..
Choosing the Change Project
54
Develop a Change Project
Criteria It should involve a real organizational issue
or challenge that at least one group member is currently experiencing at your organization.
It should lead to a real change in your organization.
The change should lead to improved business performance that is both identifiable and measurable.”This is something we would like to do!!”
56
Better to choose a more
narrow, specific focus!
57
You will present your projects in Module 3
58
Discuss in your groups today
What are the current and future pressures for the change? Internal External (PESTEL)
What is the sense of urgency for the change? For whom? How urgent? What can be done to strengthen the sense of urgency?
What is the vision or real change that your project will lead to?
How will the change improve business performance? Identifiable? Measurable?
59
Organizational forces: Internal pressures
Need for improved performance ● In current or new markets
Need for integration and collaboration ● E.g., alliances, synergies, economies of scale
Power and politics● E.g., changes at top management and board
level Changes in surrounding organizations
● E.g., key customers, suppliers, partners
60
PESTEL – External pressures for change
Johnson & Scholes 1997
Political
Environmental Technical
Legal Social
Economic
Organization
62
The Change Project StatementName of Change Project
Names of Change Project team members
What are the drivers for your Change Project?
What will be the change resulting from your Change Project?
How will you measure the impact of your Change Project?
When do you expect to see results from your Change Project?
…if you can´t s
ay it in a few words,
then keep discussing!
63
Today’s Coaching Session
Each Group will present its Change Project to the others, max 10 minute presentation
One Review Group will be appointed to lead the following discussion, max 5 minutes: How well does the Project fulfill the Change
Project criteria? What challenges are foreseen for the Project? How could these challenges be overcome?
Promote learning through “Assess, Challenge, Support”!
64
Agenda
Morning1. What is Change?
2. Kotter’s 8 Stages
3. Groupwork
Going Forward
Afternoon1. Live Project Groupwork
2. Some Change Tools
65
Leading is looking in all directions
Sponsor or Steering Group
Project Team
Project Leader
Stakeholders
Downwards
Outwards
Forwards
Inwards
Upwards
Backwards
Briner et al 2004
66
Tools to achieve the “transformation”
1. Conduct stakeholder analysis2. Develop clear project charter and roll out
plan3. Develop communication plan4. Conduct risk analysis5. Develop measurement plan
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Reducing complexity to
something manageable
Identifying priorities and importance, sequence of
activities
Highlighting interdependen
cebetween actors
and tasks
Creating a common language
My view….
Making views explicit
Why use tools?
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1. Identify internal and external stakeholders
Political
Environmental
TechnicalLegal
Social
Economic
Culture Systems
VisionStrategy
Structure People
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Prioritize stakeholders
Low High
Low
HighLevel of interest•Visibility•Importance•Priority
Scholes 1998
Power•Formal•Informal
Keepinformed
Keyplayers
Minimaleffort
Keepsatisfied
70
Stakeholder analysis
Stakeholder Bloc
kHelp Let Mak
eDiagnosis of stakeholder position
Recommended action to move to desired position
Adapted from Nader, NTL
Current (C) & Desired (D) position regarding the Change
71
Helping stakeholders go through a transformation
Currentsituation
Future situation
Transformatio
n
Organization•Historical heritage, tradition•Culture•Selective perception•Follow old patterns•Return to “the way it was”
Shock
Denial
Realism
Acceptance
The Change Process
Reaction
Individuals•Resistance to change something that is familiar and feels safe•Difficult to 'say goodbye’ to old patterns and habits•Insecurity around what future will bring
Resistance reactio
ns
Hultín, IBM
72
2. Develop clear project charter and roll out plan
Spend sufficient time specifying What are the vision and goals/objectives? How are resources to be supplied? What are the importance and priorities of tasks? What training is necessary? What roles need to be updated? What union contacts, if any, need to be developed
before? What and when are the short term wins?
73
Successful change requires attention to all relationships
Political
Environmental
TechnicalLegal
Social
Economic
Culture Systems
VisionStrategy
Structure People
74
3. Develop communication plan
Who? What? Why? How? When?
Remember to communicate even to those who are not impacted
Do for each group of
stakeholders
Around 20% of your project activity!
75
Ensure continuous communicationof big picture
Balance and respect all stakeholder interests All interests important
Link “big picture” with “little picture” Balance long-term vision
with everyday operations Avoid parochialism resulting
from stakeholders receiving different information due to division of labor
Communicate timely and continuously
Sponsor or Steering Group
Project Team
Project Leader
Stakeholders
76
Create trust through open communication
Provide open forum for discussion between stakeholders, e.g., virtual project space
77
Engage and ensure interaction!
Involve stakeholders in joint tasks from very beginning of project Example: Development of project objectives
Use boundary objects to facilitate understanding
78
Communication Plan, phase 1: Before the start of a project (Decision making)
Change must be done Lose customer No new business
What can be done ? Competitors Customer demands
Walk to talk What do others think?
Trends Customer Business owner
Understanding need of change But what does this mean?
Star model
Project def Project plan
Clear picture Who What Why How WhenPilot
Meetings Webcast Mail
Project idea
No change without pain
Testing idea Finding proof
Commitment
Decision
Communication
Formal Document
From BETE 16
79
Communication Plan, phase 2: Project implementation
Target setting for project, individuals
and teams Virtual (video) Meeting
Virtual Project space Stakeholders Public forum Project members Scorecard Common language Common terminology Risk analysis
Business owner Customer
Plans are sent for internal
auditStatus,
Result achieved
Follow up reaching of targets Report
Sharing of Best practice
Project start
Tools
Quality
Stakeholder statement Status Project FINISHED
Information to Stakeholders & Public information
From BETE 16
80
4. Continuously manage risk
Low High
Low
High
Probability of occurring
Impactof change
MonitorWork onreducing
Minimaleffort
Manage
81
Risk analysis
RiskNo.
Description Proba-bility
Project impact
Priority Potential consequences
Proposed/ implemented actions
Status Respon-sible
1
2
3
4
From BETE 16
82
5. Measuring impact
What are the key milestones of the operational part of the change?
How will the overarching effects of the Change Project on the organization’s performance be measured?
When do you expect to see an impact on the organization’s performance?
83
Match the measures to the impact of the change
Culture Systems
VisionStrategy
Structure People
84
Developing appropriate measures and timing
Measures Are there any existing measures that can be
used? Balanced scorecard?
What new ones, if any, should be developed? Internal vs external?
Maximum of three measures
Timing When should the baseline measure be done? How often should measures be taken? When do existing measures occur in relation
to these?What gets measured, gets done!
85
Measurement plan
Measure no.
Measure Description How directly impacted by
change project
Baseline measure
Measuring
frequency
1.
2.
3.
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The Change Project StatementName of Change Project
Names of Change Project team members
What are the drivers for your Change Project?
What will be the change resulting from your Change Project?
How will you measure the impact of your Change Project?
When do you expect to see results from your Change Project?
…if you can´t s
ay it in a few words,
then keep discussing!
88
Morning1. What is Change?
2. Kotter’s 8 Stages
3. GroupworkAfternoon
1. Live Project Groupwork 2. Some Change Tools
Agenda
Going Forward
89
The Change Project TimelineModule 1Choosing the Change ProjectStructuring future work
Working in virtual groupsIdentifying stakeholders & powerful coalitionCreating a vision
Module 2Developing an implementation planDefining impact measurement
Working in virtual groupsDeveloping a communication planPerforming a risk analysis
Module 3Final Presentation
90
Module 2
Scheduled working time during Module 2 Each team submits its presentation
● By email to Robin
91
Module 3 - Final Presentation Each team has 20 minutes maximum to present its
Change Project, including the following (in ppt):● Purpose and rationale for change● Use of tools, eg stakeholder analysis, risk analysis, etc.● Measuring impact and preliminary results● Plan for moving forward● Lessons learned
One team will then lead feedback to the Presenting Team for 10 minutes maximum
● The purpose of this feedback is to spur lively debate and help advance each Change Project as much as possible
Faculty will provide further comments Each team submits its presentation
● By email to Robin
92
Leadership and learning are indispensable to
each other.”
- John F. Kennedy
Leadership, teaching, and learning are
inextricably interlinked.
- Jack Welch
Leading and learning
93
See you in Module 3!!
Good luck with your projects!!