McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Chapter 18 Creating and Managing Change

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Becoming World Class Becoming world class is a goal that is essential to survival and success today It requires: applying the best and latest knowledge and ideas having the ability to operate at the highest standards becoming one of the very best in the world at what you do World-class companies create high-value products and earn superior profits over the long run

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Becoming World Class Sustainable, great futures essential characteristics of enduringly great companies strong core values driven by stretch goals change continuously drive for progress via adaptability, experimentation, trial and error, opportunistic thinking, and fast action focus primarily on beating themselves in sum, great companies have core values, know what they are and what they mean, and live by them

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Becoming World Class (cont.) The tyranny of the ‘or” the belief that things must be either A or B, and cannot be both belief that only one goal but not another can be attained often is invalid always is constraining The genius of the “and” ability to pursue multiple goals at once deliver multiple competitive values to customers perform all management functions reconcile hard-nosed business logic with ethics lead and empower

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change Organizational change is managed effectively when: the organization is moved from its current state to a planned future state the change works as planned the transition is accomplished without excessive costs to the organization or to individual organizational members People are the key to successful change people must take an interest and active role in helping the organization as a whole permanent rekindling of individual creativity and responsibility should be a consequence of change

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Motivating people to change people must be motivated to change people often resist change general reasons for resistance - arise regardless of the content of the change inertia - people don’t want to disturb the status quo timing - managers should introduce change when people are receptive surprise - resistance is likely when change is sudden, unexpected, or extreme peer pressure - work teams may band together in opposition to change

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Motivating people to change (cont.) change-specific reasons for resistance - arise from the specific nature of a proposed change self-interest - fear that something of value will be lost misunderstanding - people may resist because they don’t fully understand the purpose of the change different assessments - employees receive different - and usually less - information than management receives such discrepancies in knowledge cause people to develop different assessments of proposed changes management tactics - many fail to commit employees to change force the change on employees do not provide the necessary resources, knowledge, or leadership

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Reasons For Resistance To Change Resistance to Change General Reasons For Resistance Change-specific Reasons for Resistance Self-Interest Misunderstanding Different assessments InertiaTimingSurprise Peer pressure Management tactics

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Implementing Change Unfreezing (breaking from the old ways of doing things) Moving (instituting the changes) Refreezing (reinforcing and supporting the new ways)

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Motivating people to change (cont.) general model for managing resistance - three basic stages unfreezing - realizing that current practices are inappropriate and the new behavior must be enacted performance gap - important contributor to unfreezing the difference between actual performance and the performance that should or could exist can apply to the organization as a whole or to departments, groups, or individuals moving - instituting the change begins with a vision of where the company is heading refreezing - strengthening new behaviors that support change implementing controls and rewards that support the change

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Motivating people to change (cont.) specific approaches to enlist cooperation education and communication - communicate not only the nature of the change but its logic participation and involvement - listen to the people who are affected by the change should be involved in the change’s design and implementation facilitation and support - make the change as easy as possible provide resources and training needed to carry out the change listen patiently to problems

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Motivating people to change (cont.) specific approaches to enlist cooperation (cont.) negotiation and rewards - change may be resisted until management agrees to one or more concessions rewards should be restructured to reinforce the change change is facilitated by demonstrating its benefits manipulation and cooptation - resisting individual is given a desirable role in the change process coercion - apply punishment or the threat of punishment to those who resist change each approach has advantages and disadvantages change leaders need to build in stability throughout the process

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Harmonizing multiple changes total organization change - introducing and sustaining multiple policies, practices, and procedures across multiple units and levels such change affects the thinking and behavior of everyone change efforts usually are simultaneous but not coordinated companies introduce new changes constantly many are perceived to be fads change efforts helped by avoiding fads management needs to “connect the dots” integrate the various efforts into a coherent picture that people can see, understand, and get behind

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Leading Change 5. Empowering broad-based action 6. Generating short-term wins 4. Communicating the change vision 1. Establishing a sense of urgency 2. Creating the guiding coalition 3. Developing a vision and strategy 7. Consolidating gains and producing more change 8. Anchoring new approaches in the culture

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Leading change establish a sense of urgency - examine current realities and pressures in the marketplace identify both crises and opportunities be frank and honest about them urgency is driven by compelling business reasons for change change is a business necessity

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Sources Of Complacency The absence of a major and visible crisis Too much happy talk from senior management Too many visible resources Human nature, with its capacity for denial, especially if people are already busy or stressed Low overall performance standards A kill-the-messenger-of- bad-news, low candor, low-confrontation culture Organizational structures that focus employees on narrow functional goals A lack of sufficient performance feedback from external sources Internal measurement systems that focus on the wrong performance indexes Complacency

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Leading change (cont.) create a guiding coalition - put together a group with enough power to lead the change over time, support must expand outward and downward developing a vision and strategy - determine the idealized, expected state of affairs after the change is implemented image will be a target that can clarify expectations, dispel rumors, and mobilize people’s energies communicate how the transition will occur communicate how people will be affected by the change communicating the change vision - use every possible channel and opportunity to reinforce the vision

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Managing Change (cont.) Leading change (cont.) empowering broad-based action - get rid of obstacles to success encourage risk taking empower people by providing information, knowledge, authority, and rewards generate short-term wins - plan for and create small victories to demonstrate progress consolidate gains and produce more change - keep changing things in ways that support the vision anchor new approaches in the culture - highlight positive results and develop new change agents

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Shaping The Future Reactive change response that occurs when events in the environment have already affected the firm’s performance problem-driven change Proactive change response that is initiated before a performance gap occurs creating the future you want Exercising foresight impossible to know the future with certainty create core competencies that will allow the firm to respond to changing customer demands and improve continuously

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Shaping The Future (cont.) Learning continuously a vital route to renewable competitive advantage that requires: a clear, strategic goal to learn new capabilities a commitment to constant experimentation relentless drive to be better in every way everyone engages in exploration, discovery, and action process generates learning on a more individual level leads to personal growth and development try new things in the spirit of continuous improvement invest in research and long-term development projects encourage risks and tolerate failures

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Learning Cycle: Explore, Discover, Act Discover Explore Act Explore Act Discover As reality becomes clearer, issues and choices become clearer. People see with new eyes. Explore Explore current reality. The aim is to be open and honest about what is happening at present Act Test solutions, implement a plan, evaluate results, celebrate success, recognize problems.

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Creating advantage ultimate form of proactive change is to create new markets and transform industries create new competitive arenas, transform your industry, and imagine a future that others don’t see Learning Cycle: Explore, Discover, Act (cont.) fitting the firm to the environment preserving old advantages locking in old markets investing in fixed assets change the environment to fit the firm create new advantages create new markets invest in evolving/emerging opportunities Instead of... Why not...?

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Learning Cycle: Explore, Discover, Act (cont.) Creating the future there are two different strategic postures to prepare to compete in an uncertain future adapters - take the current industry structure, and its future evolution, as givens choose where and how to compete posture taken by most companies within given environments shapers - try to change the structure of their industries create a future competitive landscape of their own design requires high-stake bets

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Vast Opportunity Unexploited opportunities Unarticulated Articulated Needs Customer types UnservedServed

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Adding Value, Personally Go beyond your job description: volunteer for projects; identify problems; initiate solutions. Seek out others and share ideas and advice. Offer your opinions and respect those of others. Take an inventory of your skills every few months. Learn something new every week. Discover new ways to make a contribution. Engage in active thought and deliberate action. Take risks based on what you know and believe. Recognize, research, and pursue opportunity. Differentiate yourself.

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Learning Cycle: Explore, Discover, Act (cont.) Shaping your own future into the future commit to lifelong learning requires occasionally taking risks moving outside of your “comfort zone” requires being open to new ideas success in the future will come from: shaping the future and adapting to the world being clear about what you want to change and being responsive to others’ perspectives pursuing your vision and understanding current realities leading and learning

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Leaning Into The Future Top-down programs Leader as hero Vision Drive They are the problem Training ORGANIZATIONS AS MACHINES Leading Learning Bottom-up approach Leader as facilitator Awareness Release We need to change Reflection ORGANIZATIONS AS LIVING SYSTEMS Forthright and listening leadership Seeing clearly Working with the grain All change Learning while doing COMPLEMENTARY OPPOSITES and