Managing Organizational Change By Putting People First

Most companies say their most important assets are their people, but few behave as if this were true. Many, if not most, important organizational endeavors today devote the majority of their budgets to technology and processes, not staff development. There is a general bias that focusing on tangible assets will impact the bottom line more than the intangible assets, which primarily involve people. Ask organizational leadership what they are spending on their human assets and what return are they getting and you will likely receive a blank look in response. In the evolving world where knowledgable human assets will be increasingly at the center of any organization's competitive abilities, failing to recognize the need to place human considerations first in all strategic, operational and cultural thinking will result in dire consequences.

Evidence suggests that staff management issues have a direct effect on the bottom line. According to a Watson Wyatt study, three-year total returns to shareholders are three times higher at companies where employees understand corporate objectives and the ways in which their jobs contribute to achieving them. In a study of change management strategies by McKinsey, the 11 most successful companies gained an average of 143% of the returns they expected. In these, effective change management clicked at every level: Senior and middle managers and front-line employees were all involved, responsibilities were clear, and the reasons for the change were understood throughout the organization. Conversely, companies that had problems at all three levels captured, on average, only 35% of the value they expected.

As in any business endeavor, consistent quality leadership and communications are essential. Recognizing change as a continuous process means change management is an ongoing feature of a leader’s job. A frequently overlooked component, however, is the integration of the realities of change and its impact on humans. People management is commonly regarded as an administrative concern, rather than strategic, and is rarely involved in any change project’s leadership thinking. Yet offering the right incentives to link corporate goals to individual career objectives is a critical success factor. What motivates people is an individual matter and needs to be addressed at this level.

A recent survey by training specialists Discovery Learning shows that people react differently to change, and can be classified in four broad categories. Originators welcome dramatic change; conservers prefer gradual change; pragmatists are most enthusiastic about change that will address current problems; and resisters dislike all change. Americans are typically attracted to innovation, so we believe being an originator is best. But it takes all of these personality types to build a successful business. Conservers at Enron tried to warn of problems, but the leadership culture was apparently skewed so much toward originators charged with ‘reinventing business’ that conservers were viewed as resisters and were either silenced or ignored.

The way people learn new things is also individualistic. Training programs that require speedy results need to be designed to accommodate the human need for context and relevance. The usual approach to rapid training, taking employees off-site for intensive training, is in fact misguided. Such courses tend to work against human nature, since they are typically an attempt to impart all the knowledge needed to all staff in one fell swoop, with little attempt to tailor it to a specific individual’s job or learning style. Further to this point, most jobs are rarely as technically demanding as the technicians who develop the course content assume. A person may need to learn 10 new things to do the job effectively, but may only encounter five in a normal work day, three over the next year, and two in exceptional circumstances, by which time the training will have been forgotten. On-the-job training coupled with self-paced e-learning and online help to deliver personalized assistance as required is in fact a more effective way of ensuring staff get training that is relevant to their jobs.

When integrated with proper incentives and performance criteria, effective training can be a powerful driver for change. Work-force flexibility, developing multifunctional workers who can adapt to a range of job requirements, is the centerpiece of many businesses that are trying to transform themselves to survive in the real economy. Few business leaders are daunted by the idea of changing their organization’s technology or processes, but many wring their hands in despair at the prospect of changing their people’s behavior. But changing human behavior is in fact more science than art. An increasing body of evidence shows that the process of organizational change has defined parameters that suggest what works and what doesn’t.

The overall process may be defined, but the elements needed to motivate a specific person are variable. A one-size-fits-all solution won’t work when the fundamental issue to be addressed is that people have individual needs, wants and concerns. Human behavior can be pushed and pulled in the right direction with an effective combination of incentives and disincentives – if the desire for change is created in the individual. Constant upheavals in the business environment mean that leaders must learn to master the process of implementing change, just as their employees must learn to accommodate change.

Organizational Design: Hierarchy, Hyperarchy and Facing Business Reality

A business cannot be competitive selling a product for $2 that cost $200 to make. Amazingly many organizations today are operating with this type of knowledge yet continue to avoid making tough choices to address unprofitable financial dynamics in order to survive and possibly even prosper. Many of these organizations delay making tough choices until the consequences of their denials are so dire that their options evaporate and opportunities to rebound vanish; a self fulfilling demise. Why does this situation exist? It is the nature of traditional organizations and the very manner of their operation that greatly contribute to the circumstance. The power centric hierarchy of the old business model is at the center of many of these failings. This form of organization is typically unable to cope with fundamental change because of how it is designed and how it functions. If you fail to design your organization to be effective at grasping and navigating change, you will likely succumb to the same influences as others have.

A good example is Britannica, the former producer of encyclopedias. The organization realized it could not sell its product for more than it cost to make. Britannica was aware that its sales force, unnecessary as the result of technological change, was the company's major cost. The company also knew people bought Britannica to provide their children a quality reference resource that is now achieved by purchasing a PC which offers access to a huge sea of data via search engines. Despite Britannica having these facts, it refused to accept the need to restructure its business, and disaster resulted. The organization failed to deal with the brutal facts despite the obviousness of their circumstance.

The revolution in information technology is similar to the management revolution itself. What works for other organizations is apparent. The challenge is sluggish response, a consequence of hierarchy. Information moves up and down in gaps in hierarchical pyramids and each gap requires delay and effort. The World Wide Web is an example of “hyperarchy” a more appropriate and responsive system. It is based on the notion of network centric methodology and results in more rapid and digestible change. Decentralized design enables more rapid adoption. Old organizational designs that rely on a top down centralized hierarchy cannot cope with the new business age and dynamic. Speed and adoption are at the core of this new era and that is where the old design fails.

Within a completely flat structure, all information on the Web is available to everybody who has access. Hyperarchical is 'the pattern of amorphous and permeable corporate boundaries characteristic of the companies in Silicon Valley ' - the pattern described above. More conservative models offer no real alternative to the Brave New Web World, even in the medium term. Not only can $200 not compete with $1.50: old 'legacy systems' in management are as disadvantaged as they are in IT. The options are expiring fast. Quite soon, the choice will lie between the new model or nothing.

Power Centric vs. Network Centric Institutions : Schools, the Workplace & the Revolution

Organizations are evolving from a power centric linear relationship wherein those with means and access direct the production of those without, to a network centric exchange that encompasses shared risks and rewards among participants. The access to technology and communication at very low costs is a primary driver of this shift. Many of our institutions fail to adopt the new methodology because they were founded in the power centric mode. Shifting to the new paradigm would essentially remove power from those who in the past benefited from the power centric base. This is the central reason behind our major institutions present failings and ultimate demise. Two institutions that are common to most people’s experiences in “Western” society are schools and the workplace. Few better examples exists of institutions that are failing because their mode of operation has not departed from past and ineffective practices. However, successful groups and associations who adopt the network centric approach have emerged.

Our learning institutions, among others, are for the most part steeped in past tensed power centric and linear designs. These broken systems do not allow our children to learn using the new tools of the revolution. Ironically chalk boards, text books and bells signaling the industrial revolutions methods of work process, are very much the norm. Ivan Illych, whose ideas have gained widespread acceptance beyond fierce libertarians, opines on “schooling,” “deschooling” and democracy, eloquently addresses the point about what old method schools truly represent :

“The pupil is thereby “schooled” to confuse teaching with learning, grade advancement with education, a diploma with competence, and fluency with the ability to say something new. His imagination is “schooled” to accept service in place of value. Medical treatment is mistaken for health care, social work for the improvement of community life, police protection for safety, military poise for national security, the rat race for productive work. Health, learning, dignity, independence, and creative endeavor are defined as little more than the performance of the institutions which claim to serve these ends, and their improvement is made to depend on allocating more resources to the management of hospitals, schools, and other agencies in question.”

In new age learning institutions, democratic school s , students choose what they want to study, when they want to study it and how (see http://www.sudval.org). The structure of the school exists to facilitate the child’s choices and support them; using the tools of the knowledge age. Self-directed learning, based on utilization of the latest technologies, and equal say in governance, regardless of age, or position of authority is at the core of the philosophy. The institution is establishing a true network reflective of the manner in which the revolution will evolve both in our society and in our lives.

Similarly, the traditional workplace remains wrought with challenges. Some companies are beginning to understand the implications of the revolution on its people. Semco is a Brazilian company that was floundering 25 years ago with annual sales of $4 million U.S. Through his revolutionary approach; using methods where employees choose their own days of work, and set their own salaries. Semco now enjoys annual sales of $212 million and is growing at a rate of 20 to 30 percent a year.

Semler, who taught at MIT and Harvard Business School said: “If you wake up in a bad mood on Monday morning, you don’t have to come to work. We don’t even want you to come because you simply don’t feel like it and will therefore not make a contribution. We want employees who are ready and willing to work. If that means they only come twice a week, that’s okay. It’s about results.”

Shared risks and shared rewards; the basis of the new productive paradigm of network relationships. Failing to adopt networked approaches will result in failed organizational efforts.

The Global City, Cultural Assimilation and Sassen

Travel to any major international city and you will see an increasing commonality. The world is truly becoming global. Cultures are assimilating and evidence of tremedous change is becoming more obvious each day. This is but an initial phase of a rapidly expanding process whereby our globe is becoming one world without borders and one culture without limits.

Saskia Sassen, the noted Ralph Lewis Professor of Sociology at the University of Chicago, and Centennial Visiting Professor of Political Economy in the Department of Sociology at the London School of Economics, has written extensively on globalization and international human migration ( http://en.wikipedia.org/wiki/Saskia_Sassen ). In her paper, Global City: The Strategic Site/New Frontier, Sassen makes a number of important observations that relate to Globalization. One of her most notable is the definition of “Global Cities”. It is in this writing that Sassen defines the cities of the business and global revolution and why place and centrality are still a necessity to its end. Sassen also reflects on the dichotomy that is represented by these global cities, centers for the elite who benefit from readily available global capital while relying on the necessary services and inexpensive undervalued labor resources constituted by an underclass that migrates reterritorializes and assimilates. While her precepts are undeniable and intriguing, Sassen in later research will likely address and embrace both the necessity of the conditions she describes and the idea that place and centrality represents organizations clinging to old methods that ultimately will secede from the practice of the adoption of the new paradigm. As with past historical shifts in economics and society, we do not reach the idyllic without a transformation that entails some pain and therefore while describing the present state of the world becoming global, we should keep in mind the opportunity this future represents.

Sassen opines that globalization requires centers or places, leading into her definition of global cities, “A focus on practices draws the categories of place and production process into the analysis of economic globalization. These are two categories easily overlooked in accounts centered on the hyper mobility of capital and the power of transnationals. Developing categories such as place and production process does not negate the centrality of hyper mobility and power. Rather, it foregrounds the fact that many of the resources necessary for global economic activities are not hyper mobile and are, indeed, deeply embedded in place, notably places such as global cities and export processing zones.”

Sassen defines global cities as, “new geographies of centrality at the global level that binds the major international financial and business centers: New York, London, Tokyo, Paris, Frankfurt, Zurich, Amsterdam, Los Angeles, Sydney, Hong Kong, among others. But this geography now also includes cities such as Bangkok, Taipei, Sao Paulo and Mexico City (Sassen 2000b)”.

Of great interest is Sassen’s reference to the commonality of numerous aspects of the new geographies cultures. She refers to reterritorialized; “The large western city of today concentrates diversity. Its spaces are inscribed with the dominant corporate culture but also with a multiplicity of other cultures and identities. The slippage is evident: the dominant culture can encompass only part of the city. While corporate power inscribes these cultures and identities with ‘otherness’ thereby devaluing them, they are present everywhere. For instance, through immigration a proliferation of originally highly localized cultures now have become presences in many large cities, cities whose elites think of themselves as cosmopolitan, that is transcending any locality. An immense array of cultures from around the world, each rooted in a particular country or village, now are reterritorialized in a few single places, places such as New York, Los Angeles, Paris, London, and most recently Tokyo.” Here Sassen expresses the essence of a new global world in the global city. The assimilation of cultures is occurring each day as the result of the business revolution. However, ultimately this assimilation and the forms that they are taking at present will not be limited by space. They will each every place and touch every facet of each community on the planet.

Sassen further addresses the issue of assimilation of cultures as a result of globalization when she writes, “Immigration and ethnicity are too often constituted as ‘otherness’. Understanding them as a set of processes whereby global elements are localized, international labor markets are constituted, and cultures from all over the world are deterritorialized, puts them right there at the centre of the stage along with the internationalization of capital as a fundamental aspect of globalization today.”

The shift in population and cultural assimilations, according to Sassen, will not likely be met with resistance that will end the process; “The linkage of people to territory as constituted in global cities is far less likely to be intermediated by the national state or ‘national culture’. We are seeing a loosening of identities from what have been traditional sources of identity, such as the nation or the village (Yaeger 1996). This unmooring in the process of identity formation engenders new notions of community of membership and of entitlement.”