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Change as Strategy

January 20, 2016 • Business Process, Editors' Pick, Global Business, OPERATION, Strategic Spotlight, STRATEGY & MANAGEMENT, Transformation

By Walter McFarland

This article suggests that some traditional approaches to organisational change are obsolete – and recommends a new approach focused on creating new types of organisations optimised for change and changing. These ‘change-focused’ organisations view change mastery as a source for sustainable competitive advantage.

 

What if organisations didn’t fear change? What if the mastery of organisational change was actively pursued – viewed as a source of real competitive advantage?

The above questions, and others, were asked to a group of executives from Fortune Global 500 companies as part of research for the book Choosing Change1. The executives uniformly reported that learning how to perform organisational change efforts faster, better, and with fewer resources than competitors would be a source of real competitive advantage. The purpose of this article is to explore how organisations create competitive advantage by pursuing a strategy focused on change mastery.

A first step in performing change better is thinking about it differently.

 

Thinking Differently About Change

The executives uniformly reported that learning how to perform organisational change efforts faster, better, and with fewer resources than competitors would be a source of real competitive advantage.

How should 21st century organisations think about and perform organisational change? Is change best viewed as a process outside of normal business operations that is periodically performed by external ‘change experts’ – or is it better viewed as something integral to business operations that is continuously performed by everyone?

The former perspective dates back to the 1940s and the work of Kurt Lewin. Lewin’s2 depiction of organisational change as a 3 stage process (unfreezing, moving, and refreezing) to be applied periodically by external experts caught the imagination of the world and focused scholarly attention on the topic of organisational change. Further, Lewin’s perspective on the ‘change process’ as linear, sequential, and periodic heavily influenced thinking for years to come. Writing in the early 1990s, Kanter observed that some form of this approach dominated the thinking and practice of organisational change for the second half of the 20th century3. This ‘process-based’ perspective continues today as evidenced by the websites of many leading management consultancies offering ‘change management’ services. Their continued reliance on some form of a linear and sequential change process can be clearly seen.

From this perspective, successful organisational change is about applying the same process in every change effort. The problem is that this approach to organisational change usually fails – and has for decades4-7. One potential reason is the global business environment and its growing level of competition. Change has become increasingly complex and nearly continuous. Disruptive changes are surprising whole industries and different parts of the same organisation can experience change differently. A linear, sequential solution to these kinds of problems doesn’t stand a chance.

The latter perspective is more recent and is influenced by the growing emphasis on systems theory that views organisations as highly complex, open systems in which every piece affects every other8. This perspective views constant change as a critical and necessary element in high performing systems. From this perspective, successful organisational change is about continuously aligning all pieces of an organisation: structures, processes, systems and culture with an overall strategy of change. This approach integrates change into every aspect of business operations and actively involves everyone.

The problem with this approach is that very little is known about how to apply it in today’s organisations. This article will discuss how to create new types of organisations optimised for change and changing. These organisations are referred to here as ‘change-focused’ ones.

 

Defining the Change-focused Organisation

The central idea behind a change-focused organisation (CFO) is this: The volume and complexity of environmental changes now overwhelm some traditional approaches to organisational change. Because these changes affect all parts of the organisation – and each part differently – the entire organisation must constantly respond as a system.

The change-focused organisation views performing change better as source of sustainable competitive advantage and seeks to focus the full power of the organisation on achieving it. Said another way, in the CFO, change is strategy – and all parts of the organisation are aligned with and constantly reinforce it.

The idea of aligning all parts of an organisation with a particular business strategy is not new. Organisations have risen in prominence based on their abilities to align themselves with strategies such as least cost, customer service, innovation, speed, etc. In each case, the organisations’ structures, processes, systems and perhaps even their cultures were aligned to continuously support and reinforce the strategy.

Over time – and this is important – the CFO ‘learns’ how to perform change better – with each new change effort further refining its capabilities across the entire system. Change stops being seen as a threat and starts being seen as fuel for continuous performance improvement. Regardless of whether a market change is major or minor the change-focused organisation consistently responds faster, better, and with fewer resources than its competitors – generating real competitive advantage.

The next section discusses ideas for transforming an organisation into a change-focused one.

 

Becoming a Change-focused Organisation

The executives interviewed had several ideas about how to transform an organisation into a change-focused one. Here are four:

1. Make change strategic

2. Create/Brand a cadre of change leaders

3. Build a change-enabled workforce

4. Ensure organisation-wide learning

Each idea is discussed below.

 

Make Change Strategic

Making change strategic is the central idea underpinning the notion of a change-focused organisation because strategy addresses the organisation as a system. By formally making change a part of strategy, the organisation is declaring that the ability to perform change more effectively than its competitors is viewed as a source of competitive advantage – and will be pursued. In the CFO change is no longer merely important: it is strategic. Making change strategic has several advantages:

• It makes the priority of change clear to everyone. By making change a formal part of strategy, top management is making the priority of organisational change clear to everyone. This makes it easier for the workforce to understand and support organisational change efforts – particularly when the CEO and senior leadership team are out front.

• It builds clarity and consensus among the leadership team. A common understanding of “what change means to us and how we conduct it here” is very important in uniting leadership – and the whole organisation – behind the strategy. When leaders have developed this consensus, any confusion and/or disagreements about future change effort are more easily resolved. The organisation stays constantly focused on improving its capabilities to perform change.

• It reduces fear of change and builds engagement. Making change a part of strategy signals an important shift in the organisation’s stance regarding change. The organisation signals that it is moving from being reactive to proactive. The organisation is no longer passively waiting for and dreading, the next market shift. It is developing new capabilities to help predict market shifts and even to proactively shape them. As importantly, it is involving members of the workforce in developing these new capabilities. The organisation is no longer merely reacting to change. It is meeting change head on.

• It improves performance on change efforts. Participating in a change effort is no longer just ‘one more thing to do’. It is the opportunity to work side-by-side with top leaders on something important to the organisation.

 

Create/Brand a Cadre of Change Leaders

The executives interviewed uniformly cited great leadership as the key ingredient in successful organisational change. In fact, they often shared examples of how a great leader made all the difference during a critical change effort – sometimes even ‘saving’ the organisation. However, they noted that the quality of change leadership was often inconsistent across the change effort. The executives saw real value in developing an organisation-specific ‘brand’ for leading change – and in training a cadre of high performing change leaders over time. They recommended these activities:

• Define organisation-specific change leadership competencies. This means identifying a set of change leadership competencies unique to the organisation and consistent with its core values. Competencies can be informed by the change literature – that is – ones that address recurring problem areas for large-scale change efforts. For example, one recurring problem is the ability to actively engage the workforce in the effort. A related competency might be the ability to do two things as change leader: demonstrate high-level project management competence and high-level talent development competence. The first addresses such things as cost, schedule, and performance of the change effort. The second addresses the ability to use change efforts to accelerate the development of the workforce. In this way, change leaders are equipped to effectively lead a current change effort while also building more ‘change capacity’ for the future.

• Apply the new competencies to all leadership levels. The roles of change leaders vary among leadership levels. For example, senior executives may focus on identifying and leading the largest and most significant change efforts – things that offer the organisation the ‘game changing’ opportunities. Similarly, middle managers and first line supervisors might focus on leading smaller change efforts and on integrating change leadership into all levels of the workplace. As suggested by Tushman and O’Reilly9, their continuous attention to change activities enables senior executives to focus on the game changing opportunities.

• Integrate the new competencies into the overall leadership development program and formally assess leaders on them. In this way, change leadership becomes an essential element of how an organisation defines overall leadership and fosters a culture of change leadership over time.

By taking the above steps, the CFO is able to create a high performing cadre of change leaders and use them for best effect. Decisions on leading high priority change activities are informed by a leader’s preparation and proven performance – rather than by his/her availability. The quality of change leadership improves over time.

 

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Build a Change-Enabled Workforce

Building a change-enabled workforce means training – and empowering – everyone over time. Just as the CFO creates a leadership brand, it creates a special kind of workforce – one optimised for high performance in organisational change. Several activities are particularly important in building a change-enabled workforce:

• Use change efforts to accelerate workforce development. Change efforts provide many opportunities for an organisation to improve its performance, but a key one is the opportunity to develop people. Adult learning theory notes that because change efforts are viewed as significant, high-priority, and unfamiliar events, people are particularly open to learning during them10-11. As noted earlier, the CFO uses change efforts to build important new capabilities in the workforce.

• Integrate change activities into day-to-day business operations. The change literature notes that the failure to engage the workforce is a key reason why change efforts fail. One way the CFO addresses this is to integrate change activities into day-to-day work activities and by empowering the workforce to proactively engage in making changes that improve performance. Although some organisations emphasise compliance in their workforce, the CFO emphasises, seeks, and expects everyone to actively address change.

• Formally assess performance on change. Ultimately, the CFO formally alters its performance management system to include assessment of change performance. This action helps build a culture focused on change.

 

Ensure Organisation-Wide Learning

What sets the CFO apart isn’t just that it does different things – but that it remembers lessons learned about organisational change and constantly applies them to the organisational system. Each change effort is more than a reaction to a market shift – it is the next opportunity to refine strategies, structures, processes, systems and culture. These activities enhance the learning process:

• Create change plans that include metrics for performance and learning. Change efforts are assessed on their ability to quickly respond to a market shift – and their ability to generate and use new knowledge about change. Each change effort improves the change effectiveness of the organisational system.

• Require change leaders to create, share, and use new knowledge about change. Change leaders are boundary-spanners and role models – each focused on assuring the whole organisation gets maximum benefit for every change.

• Employ communications programs (including robust social media) to constantly share new learning about change. New learning is used to update all relevant parts of the organisation to further optimise it for change and changing.

• Create new processes for ‘remembering’ what change activities worked best and why. These ‘change repertoires’ become the starting point for the next change effort and are constantly updated.

 

Conclusion

For several decades, change efforts of every kind have under-performed, failed or made things worse. Even more disturbingly, this trend does not seem to be improving – which argues for a fundamental shift in how organisations think about and perform organisational change.

Although there are myriad approaches to change, evidence suggests that one approach – the process-based approach – may be negatively influencing our thinking and performance on organisational change. This approach views change as a linear and sequential process best performed periodically by external change agents. The rise of the global economy – with its unprecedented competition and ever increasing complexity has made this ‘solution’ to organisational change obsolete.

Today’s environment affects the organisation in a system-wide manner calling for a system-wide response. This response demands the creation of new types of organisations optimised for continuous change.

The organisational environment of the 21st century affects every part of an organisation simultaneously and often in different, and surprising, ways. Said simply, today’s environment affects the organisation in a system-wide manner calling for a system-wide response. This response demands the creation of new types of organisations optimised for continuous change. These ‘change-focused’ organisations view performing organisational change better, faster, and with fewer resources as a source of competitive advantage – and a focus of their strategies. These organisations use every change effort as an opportunity to continuously improve all parts of the organisational system for change. Today’s change efforts build the capabilities needed to better address tomorrow’s.

Rather than fear change, the change-focused organisation meets change head on.

About the Author

Walter-McFarland-webWalter McFarland is the founder of Windmill Human Performance, LLC, and an Associate Fellow at Oxford University, Said Business School. He is co-author of Choosing Change, selected as a Soundview Best Business Book of 2014 and as an Axiom Silver Medalist.

 

References

1. McFarland, W. and S. Goldsworthy, Choosing Change. 2013, New York: McGraw Hill. 238.

2. Lewin, K., Frontiers in group dynamics, part 2: channels of group life: social planning and action research. Human Relations, 1947. Vol. 1: p. 143-153.

3. Kanter, R.M., B.A. Stein, and T.D. Jick, The challenge of organizational change. 1992, New York: The Free Press.

4. Beer, M., R.A. Eisenstat, and B. Spector, Why change programs don’t produce change. Harvard Business Review, 1990. 68(6): p. 158-166.

5. LaClair, J. and R. Rao, Helping employees embrace change. McKinsey Quarterly, 2002.

6. Cope, M., The seven C’s of consulting. 2nd ed. 2003, London: Financial Times/Prentice Hall.

7. Raps, A., Implementing strategy. Strategic Finance, 2004. 85(12): p. 49-53.

8. Morgan, G., Images of the organization: Executive Edition. 3rd ed. 2007, Thousand Oaks: Sage.

9. Tushman, M.L. and C.A. O’Reilly. Leading change and organizational renewal. 2010. Harvard Business School: Harvard Business School Press.

10. Knowles, M.S., Everything you wanted to know from Malcolm Knowles (and weren’t afraid to ask). Training, 1989. 26(8): p. 45-50.

11. Mezirow, J., Transformative dimensions of adult learning. 1991, San Francisco: Jossey-Bass.

 

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