MQ10+Strategy

STRATEGY

MANAGEMENT QUARTERLY PART 10 JANUARY 2001 FACULTY OF FINANCE AND MANAGEMENT2

STRATEGIC CHANGE

Julia BalogunLecturer in StrategicManagement, CranfieldSchool of [email protected]

2001 Julia Balogun

Strategic changeThere is no easy way to manage strategic change, and no simple formula

that will work in all cases; this article simplifies a very complex subject.

It is emphasised that change must be context sensitive. The culture web

framework is introduced as a means of addressing the softer issues, which is

a critical first step, as barriers to change must be identified. The change

kaleidoscope will help managers to understand the change context and

plan for transition.

Introduction

All organisations are currently undergoingsome type of change. Many of these changeprogrammes arise from management fadssuch as culture change, business processengineering, empowerment and totalquality. Other change initiatives are drivenby the need for organisations to repositionthemselves in the face of changingcompetitive conditions.

A good example of this is the change processcurrently under way at Marks & Spencer. Theterm strategic change is usually reserved forsuch initiatives. These often involve radicaltransitions within an organisation thatencompass strategy, structure, systems,processes and culture.

The track record of success in bringing aboutstrategic change within organisations ispoor. Many simply fail to grasp that it isimplementation (that is, actually turningplans into reality) rather than formulationthat is the hard part. For strategic intent tobecome reality, it is necessary to changethe way in which individuals within anorganisation behave. This requires more thanrestructuring and new systems.

There are three issues that managers leadingchange need to address :

n Major change requires a shift in theunderlying culture of the organisationand therefore the attitudes andbehaviours of the employees. Manychange initiatives stumble because theyfail to deliver this shift by addressingthe cultural and political reality of

organisations. This occurs because there isa misunderstanding about

l the nature of culture in organisations;l how difficult it is to change culture;l the wide range of interventions that

are required if a cultural shift is to beachieved.

n If change implementation efforts are tobe successful, they need to be designed tofit the organisational context, that is,they need to be context sensitive. All toooften, because of the complex nature ofchange, organisations attempt to pulldown off the shelf solutions or recipeswhich they have seen work in othercontexts, but which are inappropriate totheir context of operation.

n Change is about changing people, notorganisations. Organisations changewhen the managers and employeeschange their way of doing business. Itneeds to be recognised that employees arean intrinsic part of the change process.

The article briefly addresses the followingissues :

1. Various types of change, and the routesthat can be taken to deliver strategicchange and the link between change andculture, are discussed. A framework, theculture web, is introduced. This can beused to audit an organisations existingculture, identify the barriers to change,and build a picture of the desired futurestate of the organisation.

2. A second framework, the change kaleido-scope, is then described. This can beemployed to develop context sensitiveapproaches to change.

STRATEGY

STRATEGIC CHANGE

FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 3

Figure 1 Implementation steps

3. Finally, some of the people related aspectsof change are considered.

A flowchart of the steps that managers needto take when implementing change in anorganisation is shown in Figure 1.

Paths of change : deliveringstrategic change

The four main types of change are shown inTable 1 (overleaf).

Change can be classified by the extent of thechange required, and the speed with whichthe change is to be achieved :

n The speed of change is about the way thatchange is implemented. It ranges across acontinuum from an all-at-once, big bangtype of change to a step-by-step, stage-by-stage incremental kind of change.

n The extent of the change required rangesacross a spectrum from transformation torealignment :

l Transformation entails changing anorganisations culture. Culture is to dowith the shared and taken-for-grantedassumptions and beliefs within anorganisation (the paradigm) thatshape the way of doing thingsaround here. More specifically, atransformation is a fundamentalchange within an organisation thatcannot be handled within the existingorganisational paradigm. For example,the retail banks in the UK have beenattempting such a shift for the lastten years. They have attempted tomove from being internally focusedorganisations that are concerned withsafe, secure lending to more customerfocused retail organisations.

l A realignment, on the other hand,does not involve a fundamentalreappraisal of the central assumptionsand beliefs within an organisation.

Why and whatof change

Analyse competitive position: changes needed

Identify desired future state and barriers to change

How of change

Identify change approach: design choices

Manage transition: leadership issues

Evaluate change outcomes

Analyse change context: critical change features

Design transition process: phasing of change interventions

STRATEGY


STRATEGIC CHANGE

The change, for example a majorrestructuring, can still be substantialthough.

Culture web

A good way of assessing the extent of changerequired is to use a framework such as theculture web (see Figure 2).

A culture web represents culture as aninterlinked set of organisational subsystemsin which the paradigm drives the visiblemanifestations of culture, such as theorganisational symbols, routines and rituals,stories, control systems and structures.

The web can be completed for the currentorganisational culture, and then redrawn torepresent the type of culture that is necessaryif the proposed changes are to be successful.If the changes require alteration to some ofthe central assumptions and beliefs sittingin the paradigm, then the changes willbe transformational. The use of such aframework can prevent overestimation ofthe extent of change required, theannouncement of wholesale culture change,and subsequent disillusionment when thisdoes not materialise because it is notnecessary.

Transformational change

It is important to not be naive about theamount of effort required to implementtransformational change. Organisationalchange requires individual change. To

change the culture of an organisation, it isnecessary to change the way in whichindividuals both behave and think abouttheir work, and individuals take time tochange.

Unless there is a very high degree ofreadiness for change among its employees,an organisation is unlikely to be able todeliver a revolution. If it needs to changevery quickly, it may have to change its staff,that is, recruit new workers.

Organisations do sometimes do this.Midland Bank, the then owners of FirstDirect, the first telephone banking operationin the UK, set out to staff its new venturewith non-banking people. It believed thatbanking staff did not have the rightcustomer service mindset, and would taketoo long to change their ways.

Changing individuals requires considerableinvestment, for example in communication,education, training and support. That iswhy this article talks of paths of change.An organisation may want to deliver atransformational change in a revolutionarymanner, but may be restricted in doing sobecause of the enormity and expense of thetransition task.

An organisation in crisis is unlikely tohave the time or the money to deliver atransformation. A more feasible route is toeffect a turnaround by restructuring thebusiness, cutting costs, and selling off loss-making business. Then once the business isin a more financially sound situation, it caninvest in a longer term evolution. British

Table 1 Types of change

Extent of change

Speed ofchange

Incremental

Big bang

Transformation Realignment

Evolution: Transformationalchange implemented graduallythrough interrelated initiatives;likely to be proactive changeundertaken in anticipation ofthe need for future change

Adaptation: Change undertakento realign the way in which theorganisation operates,implemented in a series of steps

Revolution: Transformationalchange that occurs viasimultaneous initiatives onmany fronts; more likely to beforced and reactive because ofthe changing competitiveconditions that theorganisation is facing

Reconstruction: Changeundertaken to realign the wayin which the organisationoperates, with many initiativesimplemented simultaneously;often forced and reactivebecause of a changingcompetitive context

STRATEGY

STRATEGIC CHANGE


Airways used this approach in the early1980s, as did GE under the management ofJack Welch in the late 1980s and 1990s.

Alternatively, an organisation may beundertaking proactive change, but lack thecapability (see below) to implement atransformation. In this case, the organisationcan first effect an adaptation or reconstruc-tion to do with building capability among itsstaff, and maybe raising levels of readinessfor change. This can then be followed by anevolution.

Choosing the change path :devising context sensitiveapproaches to change

Change kaleidoscope

The change kaleidoscope (see Figure 3overleaf) was created to help managersdesign a context sensitive approach tochange within their organisation.

The kaleidoscope contains

n an outer ring that relates to the widerorganisational strategic change context;

n a middle ring that represents the morespecific contextual features of the changesituation;

n an inner ring that correlates with themenu of design choices open to changeagents when implementation of change isattempted.

The contextual features are aspects of theorganisation that relate to its culture,competencies and current situation. Thesecan be extracted from the broader strategiccontext.

These are the definitions of the contextualfeatures.

n Time : This is the time that an organisa-tion has to achieve change. Organisationsin crisis have little time, and they need tochange reactively. Those concerned with

Figure 2 Culture web[Source : Adapted from Johnson and Scholes (1998).]

SymbolsStatus symbols, language,

terminology, logos andanything else that is a

representation of what sitsin the organisations

paradigm

RoutinesThe way we do things

around here; these can bethe written or unwrittenrules of the game within

the organisation

ParadigmTaken for granted and

shared assumptions andbeliefs about the

organisation

Power structuresFormal or informal poweror influence by virtue of

position, control ofresources, who the person

knows, or history

ControlsThe measurement andreward systems used to

monitor what is importantto the organisation, andto reward those who do

as required

Organisation structureThe structure of the

organisation, formal andinformal roles,

responsibilities, andrelationships

StoriesStories employees tell

one another and othersabout the organisation,

its history and personalities;used to communicate

traditions, standards androle models

STRATEGY


STRATEGIC CHANGE

longer term strategic developmentnormally have more time to change.

n Scope : The scope is the degree of changerequired in terms of realignment ortransformation. It is also necessary toconsider how much of the organisation isaffected. Is the change restricted to aparticular division or department, or is itorganisation-wide ?

n Preservation : Preservation relates to theextent to which it is necessary to

l maintain certain ways of working andcertain aspects of culture;

l retain particular groups of staff;l preserve specific organisational

competencies.

n Diversity : This is the degree of diversityamong the staff groups who need toundertake change. Divisions and depart-ments, for example sales and R&D, may

have different subcultures. Divisionalcultures may also be affected by nationalcultures.

n Capability : There are three levels ofcapability :

l individual : the abilities ofindividuals to cope with the transitionthat they will have to undertake;

l managerial : the ability of managersto help their staff through thetransition process;

l organisational : the existence oforganisational resources with theknowledge and ability to managechange of the type(s) required.

n Capacity : This relates to the resourcesthat are available for investment in theproposed change. There are three types :

l the amount of money that is availablefor investment;

Figure 3 Change kaleidoscope[Source : Adapted from Balogun and Hope Hailey (1999).]

Design choicesChange path

Change start pointChange style

Change interventionsChange roles

Power Time

Scope

Preservation

DiversityCapability

Capacity

Readiness

Context

Orga

nisat

ional Change

STRATEGY

STRATEGIC CHANGE


l the time that managers have to devoteto the change process;

l the number of people with anadequate change capability.

n Readiness : This is the extent to whichstaff are

l aware of the need for change;l committed to making the personal

changes required of them.

n Power : This is the amount of power, orautonomy, that the key change agentshave to implement change as they wish.

These features should be considered before achange approach is selected from the menuof design choices.

These are the definitions of the designchoices :

n Change path : This consists of the typesof change, in terms of the extent ofchange and the speed of change, thatneed to be undertaken for the requiredchange outcome to be delivered.

n Change start point : This is where thechange is initiated and developed. Forexample a change can be top-down orbottom-up, or some combination of thetwo. Other choices include pilot sites andpockets of good practice.

n Change style : This is the managementstyle of the implementation. There is acontinuum of styles, from highlycollaborative to participative, directive,and then coercive. There are noprescriptions. Top-down change can stillbe collaborative or participative.

n Change interventions : These are thelevers and mechanisms to be deployed.They include

l technical interventions (structures andsystems);

l political interventions;l cultural interventions (symbols,

stories, rituals, routines);

l interpersonal interventions(education, communication, training,personal development).

n Change roles : These determine who is totake responsibility for leading andimplementing the changes. These roles,which are not mutually exclusive, include

l leadership (responsibility resides withan individual such as the MD orCEO);

l outside facilitation from consultants;l the involvement of a change action

team;

l delegation to a functional head.

The kaleidoscope does not give contextualconfigurations that can in turn be used toprescribe formulaic design choices forparticular contexts. Just as a real kaleido-scope continuously rearranges the samepieces of coloured glass to produce differentimages, the eight contextual features areconstantly reconfigured to produce differentpictures for each organisational changesituation. As a result, the change designsalso vary.

There are a number of frameworks that canbe used to help assess the contextual featuresfor an organisation.

n The scope of change maps directly ontothe choice of change path, and so it canbe assessed using a framework such as theculture web. However, the spread ofchange within the organisation, forexample in terms of whether the changesare organisation-wide or restricted to onedivision such as sales or R&D, also needsto be considered.

n With respect to diversity, the web can beused to help identify cultural featuresthat should be preserved and variousorganisational subcultures.

n When considering preservation, one mustdecide whether certain organisationalcompetencies must be retained, or ifthere are particular groups of staff thatthe organisation cannot afford to lose.These can be identified through the useof, for example, a resource audit, whichis an assessment of the physical, human,financial and intangible resources withinan organisation that underpin itscompetitive position.

n Diversity may be affected not only bydifferent organisational, national,regional, divisional and departmentalsubcultures, but also by professionalcultures. One example is the differentprofessional cultures of clinicians, nursesand managers in hospitals.

n Power issues can be assessed by usingframeworks such as stakeholder analysis,in which the various organisationalstakeholders are plotted on a grid on thebasis of their attitude to change and theirdegree of influence. This enables therelative power position of the changeagent to be established. Not all changeagents wield position power. In manypartnership organisations undergoingchange, the partner leading the initiativemay formally have a position equivalentto that of managing director. However,

STRATEGY


STRATEGIC CHANGE

because of the decision making structurein a partnership, in which all partnershave some say in what happens, he orshe will not be in a position to imposechange and change decisions. Thereaction of external stakeholders can alsorestrict the decision making power oforganisations. In 1995, Shell wanted todump its Brent Spar oil platform in theAtlantic Ocean. Greenpeace, the environ-mental lobbyists, campaigned to preventthis. The campaign led to a consumerboycott of Shell in Europe. As someEuropean governments also opposedShells proposal, Shell was forced toabandon its plans.

n The degree of readiness for change can begauged through attitude surveys andinterviews.

n There are no particular frameworks forassessing change capacity and capability.

Change capacity may be affected bywider organisational stakeholders. Anorganisation may be a subsidiary of aparent organisation that is reluctant toallow it to spend money on its chosenchange programme, perhaps because ofthe financial situation of the parentholding company. Change capability isalso affected by the sophistication of theorganisations performance managementand human resources systems. Rewards(formal and informal, financial andother), appraisal criteria, promotioncriteria, types of people recruited,performance measures and so on can beused to encourage staff to adopt new waysof behaving. Organisations that alreadyhave such systems and mechanisms inplace have a higher change capability, asthese systems act like strings runningthrough the organisation that can be usedto help achieve the desired changes.

Figure 4 Key contextual features of Glaxo[Positive features facilitate change. Negative features hinder change.Source : Adapted from Balogun and Hope Hailey (1999).]

Time (positive)Several years

Power (positive)Directors have power toimpose, but cannot ascould alienate sales force

Scope (positive)Initial realignment togenerate readiness

Preservation (neutral)Sales force

Diversity (positive)Low, due tohomogeneoussales force

Capability (neutral)No experience of changewithin sales force; limitedorganisational resources (but cash to bring in consultants)

Capacity (positive)Cash and time available

Readiness (negative)Directors high,sales force very low Reconstruction (to evolution)

Top-down and participativeManagement developmentinitiatives to help individualsidentify new behavioursrequired, and many symbolicgestures such as move to newopen-plan officeLeadership and externalfacilitation

l

l

l

l

Design choices

STRATEGY

STRATEGIC CHANGE


Contextual features and designchoices

What matters is not the individual impact ofeach contextual feature on the designchoices, but the impact of all of themtogether.

Figure 4 shows the contextual features anddesign choices for a change process under-taken by Glaxo Pharmaceuticals in 1988prior to its merger with Wellcome in theearly 1990s.

Glaxo was undertaking a proactive changeinitiative with time on its side. The initialscope was only realignment, as the aim wasto generate readiness in its complacent salesdivision for the transformational changesthat were to come to match the changingcustomer requirements of the NationalHealth Service and the reduced income thatwould result from one of Glaxos major drugscoming off patent in the mid1990s.

Glaxos main advantage was that it wascurrently very profitable, and had thecapacity to invest in the change process.However, it wanted to ensure that thechange process did not antagonise its salesforce and cause them to leave and joincompetitors.

The timescales and the two phases ofthe scope allowed it to follow a path ofreconstruction to generate the required levelsof readiness, followed by a longer termevolution. Its capacity and time enabled it toinvest in participative personal developmentinitiatives and other symbolic interventionsas part of the reconstruction, which wouldhave been out of reach for a less profitableorganisation.

Change interventions

Which change interventions to use is animportant consideration. Change ultimatelyentails the deployment of a range of leverscovering all the organisational subsystemsshown in the culture web. Given the inter-dependency of these subsystems, it isdifficult to change one part in isolation.Transformational change initiatives inparticular, which require a change in theshared assumptions and beliefs of anorganisation, are more likely to fail if thoseleading change focus on changing juststructures and systems, paying littleattention to softer levers and mechanismssuch as symbols, rituals and routines. Theweb can be used to identify which changelevers to use.

Interventions need to be designed to removethe barriers to change in the existing web,and to create the new structures, systems,routines, rituals, symbols, and stories shownin the new web. Communication, education,training and personal development initia-tives will also be required to help individualsundertake the changes required of them. Thegreater the extent of change, the more suchinitiatives will be required.

Realignments may still require a change inthe nature of the work that people do andthe outcomes they achieve, such as levels ofproductivity and sales or customer response.An organisation can change rewards andperformance measures to focus employees onthe achievement of different outcomes, and/or it can put in place interventions that areto do with changing individual roles andresponsibilities to alter the way people work.

Such interventions may need to besupported by training and measures to assessthe degree of change occurring. However,mutually supportive changes may still beneeded in other areas to ensure that nocontradictory messages are sent to staff. Ifmanagers talk of innovation, quality andteamwork, but continue to focus on blamingpeople for mistakes, cutting costs andrewarding individual performance, thisbehaviour will undermine the rhetoric ofchange.

Change and individuals :the transition process

To comprehend how individuals experiencechange, it is necessary to understand thetransition curve (see Figure 5 overleaf).

The transition curve shows that changeis a gradual process in which recipientsexperience self-doubt about their abilityto cope, which results in decreases inconfidence and performance. Change canbe likened to bereavement; it usuallyinvolves a loss of the familiar, uncertaintyand ambiguity.

Different individuals pass through the curveat different speeds, and employees have tobe helped through the process by theirmanagers. It is easy to forget that thepurpose of employing the selected range oflevers and mechanisms discussed above is tohelp individuals to change. It is necessary todeploy a range of interventions to do withcommunication, education and training,coaching and counselling, and also to use a

STRATEGY


STRATEGIC CHANGE

number of symbolic gestures and newsystems and processes as appropriate to helppeople

n let go of the past;n come to an understanding of what is

expected of them in the future;

n take on board their new roles, responsi-bilities and relationships.

Middle managers

The transition process can create manyproblems for middle managers. Althoughthese people are often accused of resistingchange and derailing the change efforts oftheir seniors, the middle managers also fulfila very important role. They are the linkingpin between the senior management teamand the rest of the organisation. They haveresponsibility for helping their staff throughthe change process while simultaneouslyundertaking change themselves.

They have four roles to perform. They needto

n undertake personal change;n help their teams through change;n implement the necessary changes in their

parts of the business;

n keep the business going in the interim.

Most middle managers have already experi-enced an intensification of their workloadsbecause of the downsizing of the 1990s.Change creates an additional workload.

Middle managers can help themselves byforming peer support groups and networkswithin which they can

n exchange ideas and learning aboutthe change process that they areexperiencing;

n share ideas on how to progress changewithin their areas and overcome theobstacles they are encountering.

Organisations also need to support middlemanagers by providing them with trainingin change management and the inter-personal skills that they will need tofacilitate change within their teams.

Summary

The one thing that is certain in theorganisations of today is that there will bemore, not less, change. All managers need tohave an ability to manage such change.

Help individuals to let go ofthe past and accept change.Communicate intentions asearly as possible to buildreadiness.Resistance to loss of theknown is natural.

Help individuals to change. Offer emotionalsupport and encouragement. Also put in place education, training, personaldevelopment, new working practices andsystems.

Continue to supportindividuals in new ways ofworking.Encourage reflection onchange and learning.Celebrate success. Reinforcenew ways of behaving.

Shock

Denial

Awareness

Acceptance

Testing

Search

Integration

Figure 5 Transition curve

STRATEGY

STRATEGIC CHANGE


The solution for managers does not lie inlearning a series of change recipes orformulas. They need to have

n analysis skills so that they can understandtheir context of operation;

n judgement skills so that they can use thisknowledge to determine what is keyabout their context and the implicationsof this for their change design;

n influencing and interpersonal skills sothat they can sell their change ideas toothers.

Finally, they need to be able to put theirthinking into practice.

References

n Exploring Strategic ChangeBalogun, J and Hope Hailey, V (1999)Prentice Hall

n Exploring Corporate StrategyJohnson, G and Scholes, K (1998)Pearson Education (5th edn.)

Further reading

n Creating successful organizationalchange

Goodstein, L and Burke, W OrganisationalDynamics No 4 Vol 19 (1991)

Discusses the transformation of BritishAirways in the 1980s.

n Strategic choiceGrundy, T Management Quarterly Part 8(July 2000) pp 210

Includes a section on stakeholder mapping.

n Control Your Destiny or Someone ElseWill

Tichy, N and Sherman, S (1993)Doubleday

An account of how Jack Welch led changeat GE.

MQ10+Strategy

Documents

Transcript of MQ10+Strategy