Leading Change Feb09

Leading Change: Integrating Theory and Practice

Robin TeiglandCenter for Strategy and

CompetitivenessStockholm School of Economics

[email protected]

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…

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"...when the rate of change outside an organization is greater than the change inside, the end is near...."

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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

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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”

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A high number of change initiatives are unsuccessful!

Beer 2002, Gratton 2007

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10,5

4,2

0

2

4

6

8

10

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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??

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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

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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

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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

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Agenda

Afternoon1. Live Project Groupwork

2. Some Change Tools

Morning1. What is Change

2. Kotter’s 8 Stages

3. Groupwork

Going Forward

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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

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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

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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

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Say the color, not the word

YELLOW BLUE ORANGE BLACKBLACK

GREEN PURPLE YELLOW RED

ORANGEORANGE GREEN BLACK BLUE

Stroop

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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

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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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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

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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

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Who has informal power in the organization?

Teigland 2003

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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


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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!!


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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

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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?


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1. Create obtainable

targets

2. Encourage & convince people that targets can be reached

3. Recognize and reward “winners”

Communicatethe wins


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Broadcast heroes and their success stories!

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Change Project 1

Change Project 2

Change Project 3

Time

Scope of

change


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Company culture

Physical artifacts

activities and routines

Underlying values,assumptions,

beliefs, and expectations

Intangible


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Kotter 1996



3. Create a vision






4343

Tata Motors

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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

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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

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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

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Kotter 1996



3. Create a vision






1. Prepare

2. Implement

3. Manage

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Agenda

Morning1. What is Change?


3. Groupwork

Going Forward



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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

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Kotter 1996



3. Create a vision






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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

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In your groups …..

Choosing the Change Project

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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!!”

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Better to choose a more

narrow, specific focus!

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You will present your projects in Module 3

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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?

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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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PESTEL – External pressures for change

Johnson & Scholes 1997

Political

Environmental Technical

Legal Social

Economic

Organization

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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!

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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”!

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Agenda



3. Groupwork

Going Forward



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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

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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

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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

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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

Hultín, IBM

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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?

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Successful change requires attention to all relationships

Political

Environmental

TechnicalLegal

Social

Economic

Culture Systems

VisionStrategy

Structure People

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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!

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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

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Create trust through open communication

Provide open forum for discussion between stakeholders, e.g., virtual project space

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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

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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

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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

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4. Continuously manage risk

Low High

Low

High

Probability of occurring

Impactof change

MonitorWork onreducing

Minimaleffort

Manage

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Risk analysis

RiskNo.

Description Proba-bility

Project impact

Priority Potential consequences

Proposed/ implemented actions

Status Respon-sible

1

2

3

4

From BETE 16

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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?

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Match the measures to the impact of the change

Culture Systems

VisionStrategy

Structure People

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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!

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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!

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3. GroupworkAfternoon

1. Live Project Groupwork 2. Some Change Tools

Agenda

Going Forward

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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

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Module 2

Scheduled working time during Module 2 Each team submits its presentation

● By email to Robin

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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

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Leadership and learning are indispensable to

each other.”

- John F. Kennedy

Leadership, teaching, and learning are

inextricably interlinked.

- Jack Welch

Leading and learning

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See you in Module 3!!

Good luck with your projects!!

Leading Change Feb09

Business

Transcript of Leading Change Feb09