Managerial Psychology Organizational Change

Organizational Change “Change would be easy if it were not for all the damned people” - Senior Executive from Xerox Corp., 1992 What Is The “New” Organization? • Flat - fewer layers or less hierarchy • Flexible - learning and adaptive • Networked internally - linkages between individuals, between sub-units • Networked externally - among strategic partners, value chain, stakeholders • Diverse - develops and learns from differences • Global - not just international Flatter Hierarchies 1986-2003 • # managers reporting to the CEO increased from 4 in 1986 to 7 in 2003 • # division heads reporting directly to CEO increased 300% • # levels between division heads and CEO decreased by 25% • # firms with COOs decreased by 20% • In flatter organizations, division managers paid more in stock & options relative to salary [Rajan & Wulf (NBER WP 9633) study of 300 US companies averaging 50,000 employees] performance Change as a Linear Process after change 3. Innovating and implementing: How will we get there? before 1. Sensing the current state: Where are we? 2. Visioning the future state: Where are we going? time Organizational Change Model Unfreezing Changing Refreezing Disconfirmation Identify role models Test fit to self Anxiety or guilt Scan for information Personal safety Restructure, reframe Test fit to key relationships Resistance 4. Emotions and relationships Habit, fear, time, vested interests, shared meanings Force Field Analysis Forces Inhibiting Change •Habit •Fear •Lack of time •Lack of resources •Entitlements/power •Shared assumptions How to move Æ Forces Enabling Change •Burning platform •Role models •Incentives •Values/identity •Vision/reframing •External pressure What Kind of Change? • Technical change – Problem well-defined, solutions available, authorities can be trusted, expertise can be identified – Although possibly complex, this is “technical work” – Authority maintains order (“manage change”) • Adaptive change – Problem not well-defined, technical fixes not available – People must change their values, attitudes, or habits; this is “adaptive work” – Authority enables challenges to norms, roles and keeps the heat on without destroying the “container” of conversation or dialogue (“lead change”) Heifetz, R. (1994) Leadership Without Easy Answers Preparing the Soil for Change “Leaders instigating change are often like gardeners standing over their plants, imploring them: ‘Grow! Try harder! You can do it!’ [But] if the seed does not have the potential to grow, there’s nothing anyone can do to make a difference….” Senge et al. (1999). The Dance of Change, p. 8 and seeds need water, air, sunlight, food, drainage, weeding… Sloan Leadership Model Action contingent on context and leadership style • Sensemaking – diagnosing, framing, understanding • Relating – developing relationships • Visioning – encouraging new hopes, goals, values • Inventing/Implementing – building new ways of working together Relating Visioning Sensemaking Inventing/ Implementing Change as Nonlinear R V R V R V S S S I I I Millstone Nuclear Power Plant • Northeast Utilities (NU) an industry leader in 1980s; NU subsidiaries own and operate Millstone • Change of leadership and shift to cost-cutting • Backlogs, design issues, employee complaints, intimidation of those who raise concerns • Time March, 1996, cover story on Millstone • NRC issues unprecedented Order in 1996 requiring a safety conscious work environment (SCWE) and independent third-party oversight • SCWE is worker rights to raise safety issues without harassment, intimidation, retaliation, or discrimination Change Strategies (Beer & Nohria, 2000) • • • • • • Theory E Maximize $ value Top-down Focus on structure/systems Programmatic, planned Incentives lead change Consultants offer expert solutions Theory O • Max org capabilities • Participative • Focus on culture • Emergent • Incentives support/lag change • Consultants facilitate process Initial Millstone Response • • • • • New CNO New values, two-way communication Change of management team Strengthen Employee Concerns Program SCWE initiative created under VP Millstone Force Field Analysis Inhibiting factors Enabling factors •Complacency, hubris •Regulatory pressure •Command & control style •Commitment to reopen to save jobs, money, etc. •Lack of respect for workers •Mistrust of management •Lack of resources •Competition with other utilities •Poor relations across units, among departments •Intervener groups generate negative publicity •Willingness of industry to provide help •Availability of models to benchmark •New management •Training of all managers •Creation of forums for problem solving and learning Leadership of Change • Little diagnosis – accept problem frame as given by others (sensemaking weak, visioning incomplete) • Delegation of responsibility (relating minimal, inventing little) • Start with strategic design – clarify values and job requirements, create a program with procedures for employees to raise issues, track management response (inventing little) Watershed Events • E.g., improper termination of MOV contractors • Energize senior management – demand for new sensemaking, etc. • Create Executive Review Board (innovating, later relating) • Train all managers (more relating skills) • People Team meetings and process redesign (relating and innovating) • Develop criteria and measurement tools (innovating) Stakeholder Analysis • Who cares or should care about this? Who can help or hinder the change? Who are the stakeholders? – Executives, managers, employees, plant, HQ, … – Regulators, consultants, suppliers, contractors, public, … • Urgency – Does the stakeholder think there is an urgent, immediate need to change or to resist change? • Capabilities – Is the stakeholder able to change? Able to support change? – Can the stakeholder prevent change? – What does the change effort need from the stakeholder? Millstone Stakeholder Analysis Person / Group Lead CNO XO VP Ops X Dir ECP O Support X X Workers X Public O Oppose O Unit Mangrs US NRC Bystand O O X X O Issue Issue Issue #1 #2 #3 Strategy That Wouldn’t Travel • For Monday, read the case (Beer, 1996) • What worked in Wichita? Why? • Use the three lenses, Sloan Leadership Model, and other course concepts to analyze what happened in Wichita • For Wednesday, re-read the case • What went wrong in Lubbock? Why? • This is an opportunity to apply what you have learned! • I will be cold-calling both days, so be prepared! Outline of Day 1 (Wichita) • • • • Introduction: What is the case about? Who is the case protagonist? What is the Acme Co.? What is the specific goal/problem in Wichita? • What are the underlying causes? By lens? • What steps did Karen and her team take? • What made this work? Outline of Day 2 (Lubbock) • What is the specific problem at Lubbock? • What’s going wrong with the change initiative? • What are the reasons for this? • Given these problems, what can Karen do now? • Why will this work? • What have we learned about change?