Change Management

The change being seen in markets, technologies and business structures is a permanent feature of life.  Some of the best and most successful organisations have created new competitive strengths through their ability to transform themselves and their industries.  Many companies have worked out what to change, but the real winners - companies such as British Airways, Thames Water and BP and so on - are those that have executed that change efficiently.  They question and reformulate their strategies; they challenge old business processes; they push technology to its practical limits; they motivate their people and equip them with new skills - and they make it all happen quickly. 

They also never stop.  They see change as a journey, as a way of life, and they build enthusiasm for it throughout their organisations, together with the resilience and flexibility to cope with it.  In other words, they manage change, first through people, who form their must sustainable competitive advantage; and second, through a rigorous procedure for handling the process.  Change management is thus turned into a science which can maximise the chance of success and minimise costly mistakes. 

Some of the most respected change masters - General Electric's Jack Welch in the USA, British Airways' Sir Colin Marshall, Coats Viyella's Neville Bain - achieved their change objectives by recognising that their people were the main source of competitive advantage.  They also knew that their most likely source of failure was a lack of employee support.  In some cases, management has done a good job of communicating its strategy and the reasons for change, but has failed to think through what each individual needs to do, and to ensure that the new methods are practical.  In other cases, staff are given detailed new procedures, but no convincing reason for changing.  They do not see the point, either for themselves or for the organisation. 

Getting both right is hard.  Even the giant ABB has not been perfect in this regard.  As deputy chief executive, Tom Gasser, found soon after the merger of the Swedish and the Swiss interests: "When in doubt, over-communicate is the credo that every manager is encouraged to practice.  And to be honest - if we failed in one aspect of our merger process, it was in our internal communications efforts".  Ricardo Semler, author of Maverick, a description of his now famous engineering business in Sao Paulo, Brazil, approaches this problem with what he calls an extreme form of common sense.  He says he is guided by three principles: participation, profit-sharing, and information.  And it is participation - giving people control over their work -which sets Semler and his firm apart.  His factory workers do more than just brainstorm solutions to problems, they take control of them.  So, in a drive to cut costs, they have taken on more and more of their own contract work - security, cleaning, catering, driving.  They run the business as though they own it, and no expense goes unchallenged, says Semler. 

When employees feel a powerful emotional link to their organisation's clearly expressed values and purpose, high performance can follow, but as one French CEO puts it, change "is a door that can only be opened from the inside". 

Change can be revolutionary - chaotic and dangerous - or evolutionary.  Gary Hamel, professor of strategic management at the London Business School, maintains that change that is "revolutionary in result" can actually be "evolutionary in execution" - provided that managements foresee and act on opportunities to redefine markets ahead of their competitors.  In other words, spot the trends in good time and the company can quietly manoeuvre into position ready to take advantage of them. That may sound like a counsel of perfection.  If everybody knew which way the world was going, everybody would be a lot richer.  Foresight may not be enough.  But that does not invalidate the principle.  An organisation should be able to attain orderly change regardless of whether it leads the field with the accuracy of its predictions, or whether it is simply catching up with rivals. 

First, change is rarely a single, isolated event.  It can be plotted.  As observed earlier, companies make a continuous journey of change that must be navigated, for ever.  Each organisation chooses a course according to its own culture, competition and needs.  Second, successful change requires an organisation to focus on both the "supply" - the ability, skills, and support needed for change, and the "demand" - creating a common will to change among all employees.  Finally, when the strategic big picture is presented, it is already broken down into actions that individuals are willing and able to take. 

There are four critical elements in successful change management.  The first is navigation - whether to change?  Ambitious change requires the vital business processes to be identified first, taking stock of current and planned change projects.  "Death by a thousand initiatives" is all too common, when the overall picture and priorities have not been considered.  The competitive environment, business cycles and cash-flow constraints all need to be understood. 

Rather than leaving matters to chance, managers need to equip themselves with a range of guidelines, assessment tools and frameworks, from investment appraisal to risk management strategies, from baseline reports to benefit-delivery plans.  They will be needed to guide complex change initiatives through each phase of implementation.  Managers need to understand that the change journey does not end.  There is no final destination - just ports of call along the way.  Maps and compasses need to be both durable and up-to-date, offering lasting guidance while keeping pace with changing conditions. 

Second, is the issue of leadership - who to change?  Leading by example is in danger of becoming a cliché, but effective leaders know that they can no longer expect to dictate.  A few inspiring words from the top are not good enough to induce change.  Change can be painful and divisive, and is all consuming.  Successful leaders know they need to involve all personnel in the change itself.  Communication and participation are key.  A vision and a strategy are critical; but they are only useful if they elicit an emotional response across an organisation.  No one changes for rational reasons alone.  To effect change, leaders must engage their employees' pride, ambition - and fear.  They must create the big picture. 

Successful change is not necessarily a happy experience.  Breaking and rebuilding parts of the business can be painful and stressful.   "Pain management", and the remedies for it, are crucial but change cannot be sustained by remedies alone.  Leaders must continually articulate the cost of failure to each stakeholder.  The best insurance against running out of steam and falling back into old habits is to make plain that the "price of failure is greater than the price of moving forward".  Jack Welch recalls some of the pain incurred in transforming the bureaucratic rigidities of US General Electric: "My biggest mistake was agonising too long over difficult decisions.  I didn't want to break this company." 

The third issue is ownership - how to change?  Resistance to change is inevitable, and it is not all bad.  But the result is an understandable tendency to present change initiatives to employees as good news - "the benevolent censorship of painful truths", says Harvard business professor, Chris Argyris.  Treating everyone below the top as a delicate flower is unrealistic, even unhealthy.  Argyris claims that real breakthroughs in performance come only when workers realise, and admit, that they have some responsibility for the problems that make the change initiative necessary. 

Bring the company with you.

It is not just management that can solve problems or bring about change.  The trick is to encourage workers to take ownership, identify problems and pursue change themselves.  In organisations that transform themselves most successfully, it is conspicuous that employees understand early on how they have helped to create the most pressing problems - and how they can solve them.  Local action teams, tools for assessing benefits and implementation frameworks for change all enable companies to build demand-side "pull" for change among employees.  And, of course, continuous, open communications are vital. 

Fourth is enablement - what to change?  If employees are to improve their performance, they must be supplied with the necessary tools, training, information and support systems that will enable them to deliver.  Work flow and process design, job and organisation design, human resource planning, training and learning - all will need fundamental analysis, review, and possibly change. 

A feature of the new change management discipline is its focus not just on employees' knowledge, but on individual performance.  Training programmes using computer and multimedia programs, as well as classroom instruction, can reduce the time needed to reach proficiency in the new procedures by 30 per cent or more.  Costs are cut, and the stress on staff is reduced, thereby cutting labour turnover.  In this era of continuous change, where winning demands faster, better execution, and the willingness to try, try and try again, leaders need proven methods and tools for managing the process.  They need a comprehensive, holistic view of stakeholders' interests at micro and macro levels, the need to build employee demand for change, and to supply the necessary tools and training. 

In the past, radical change was seen as a brief, unpleasant spasm; it produced chaotic, short-term responses from managers, employees and suppliers.  Organisations were interested in results, but not necessarily in developing a lasting approach to change.  Turbulence, battles among stakeholders and expensive mistakes were expected and accepted.  Employees just had to put up with it.  But if change is a permanent condition, manager and employees alike need to settle in for the long haul.  In this state, people are the primary source of competitive advantage, and change management becomes a central discipline.  The risks will be lower, the mistakes fewer, the pain reduced.  Shareholders as well as employees, suppliers and society will benefit.