INSTRUCTOR’S MANUAL

CHAPTER 1: Organizational Change

Main Teaching Point Organizations engage in a process of strategic renewal in order to respond to changes in their competitive environment. But in order to make strategic renewal work, leaders must find ways to alter the behavioral patterns of their employees through involvement and participation.

Learning Objectives 1. Identify the role of strategic renewal in propelling change. 2. Focus on the behavioral aspect of organizational change. 3. Analyze the dynamics of motivating employees to alter their behaviors. 4. Differentiate the three faces of change. 5. Understand the source of both employee resistance to and support for change.

Opening Case—Tales of Woe at Concord Bookshop Theory to practice of case: Effective strategic change requires not only recognition of the need for change but also a successful implementation process. Case Summary: Concord Bookshop is a 64-year-old independent bookstore in New England with a national reputation for sound bookselling and a local reputation for customer service and interesting programming. The owners want to hire a new general manager to reconsider policies and programming. Three top managers and five more long-time employees are resigning, and local authors and customers have expressed outrage. Analyzing the Case 1. From whose point of view is the case told? The case is told mostly from the perspective of former employees and managers as well as concerned customers.

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2. What is Concord’s change project? Concord is experiencing major competition from national bookstores. President Sannounced that a new general manager will be hired who will examine some of the store’s programs and policies in order to remedy the dire financial situation of the company. 3. Why is Concord doing this? Profit margins for independent bookstores like Concord have gotten very tight over the past few years, due to extensive competition from Barnes & Noble, Borders and Amazon.com. 4. What behaviors will need to be changed? Concord will need to find a way to get all of the people involved on board in the change process. Since all of them seem to really care about the survival of the organization, the major issue might be one of communication, involvement and persuasion. 5. How should Concord executives go about creating the change? This question is key to the entire text. Owners, employees, customers and suppliers all wanted to support the organization’s viability. However, Smith’s approach to change created resistance, conflict and resentment. Organizations need to respond to external changes but they need to do so in a way that also effectively manages internal dynamics.

Lecture Outline I. Strategic Responsiveness Theory to practice: • • Strategic responsiveness to a dynamic external environment demands organizational change. To implement a renewed strategy, organizational leaders need to engage in a change process.

A. Strategic renewal is a change in an organization’s strategy with the intent of regaining sustainable competitive advantage (company examples in exhibit 1-1, p. 4). B. Strategic renewal requires organizational change (exhibit 1-2, p. 4). Leaders need to align internal processes, structures and systems with the demands of Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 2

that strategy. New organizational capabilities – employee talents and skills – need to be developed to support the strategic renewal. II. Strategic Renewal through a New Business Model Key Learning Points: • • It is possible to gain competitive advantage through the creation of a new business model, but changing your existing model will create specific change challenges. Adaptation of a new business model within a corporation will require organizational change.

A. A company’s business model is its approach to generating revenue and profit: the nature and configuration of the linkages between its operations. As environments and technologies change, business models also need to change. E.g., Apple Computer faces the challenge of changing its secretive culture to one that actively involves its customers – a major change in business models. B. Start-up companies often gain competitive advantages by offering novel business models, e.g. Amazon, Starbucks, YouTube, Dell and Southwest Airlines all revolutionized existing businesses. They could do so more easily because they started from scratch (“greenfield”) and could harmonize internal processes and employee competencies with external demands. C. Existing companies find it much harder to change business models. IBM, Lufthansa and Nissan provide successful examples, but AT&T and Enron show that failure is also possible (p. 6). D. Effective business model innovation requires effective organizational change and effective change leaders – people that can guide new linkages, new competencies and new behaviors. . III. Behavioral Change Theory to practice: • • • If change interventions are to achieve significant and sustainable impact on performance, they must focus on altering patterns of employee behavior. Organizational change seeks to create long-term, sustainable alterations in employee behavior. The way employees behave impacts the bottom-line performance of the company.

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A. p. publishing as Prentice Hall 4 . Behavioral change efforts target the patterns of employee behavior. Behavior is the enactment of roles. it also presents an opportunity to learn.and the resulting behaviors . 10). IV. sustainable and adaptive to environmental changes. responsibilities and relationships by employees within the organization. A. New behaviors need to be long term. The organizational context affects individual behavior and the way they enact their role and relationships in powerful ways through culture. Effective strategic renewal requires behavioral change that aligns employee actions with company strategy in order to achieve high performance.are key to a company’s competitive advantage. Employee responses to change can range from “commitment” on one end to “aggressive resistance” on the other (see exhibit 1-3. Google’s strategy is one of continuous innovation and making mistakes is seen as part of the learning needed to get there. The company culture at Google. B. Inc. Commitment to the goals of the organization and the change effort (commitment) Copyright © 2010 Pearson Education. actively encourages employee learning and risk taking so employees are not afraid to openly admit mistakes. D. Employee motivation – the commitment of employees to high personal and high company performance . Try to understand the reasons behind employee resistance to change. leadership. Organizations depend on their employees for high company performance. Employee resistance is not just a negative force to be overcome. values. C. A. Employee Participation and Resistance to Change Theory to practice: • • • Employees do not naturally resist change but they often resist change because of the way change is implemented. 1. Resistance is overt or covert action to maintain the status quo. rules and procedures. V. for example. Sources of Behavior Theory to practice: • Behavior comes from both the individual and the organizational context.

the change process may be mishandled . 7. Employees make efforts to impede change or undermine the goals of the organization (active resistance).they may believe the change effort will not succeed C. B. employee resistance must be addressed and overcome. VI. but it is no guarantee. 6. There are many causes for individual resistance: .2. managers may fuel resistance by not including employees in the assessment process. Going back to the causes listed above. A willing involvement in the called-for new behaviors (involvement) 3. by not showing them the Copyright © 2010 Pearson Education. publishing as Prentice Hall 5 . A. Employees sabotage and subvert the change effort (aggressive resistance). B. Often managers see resistance as negative but it may present a positive opportunity to learn.they may see the change as a threat . Inc. 5. Employees speak out in support of change effort without taking any explicit actions (support). How Managers Inadvertently Fuel Resistance during Implementation Theory to practice: • • • Participation in the change process is the best way to build support and overcome resistance to change. Employees may voice reservation about change effort or may even threaten to quit (passive resistance). 4.people may be satisfied with things the way they are . Employees know about change effort but take no action either for or against (apathy). Employee resistance can help leaders to learn – what are the sources of resistance? At some point in the change process.they may feel that the costs of change outweigh the benefits . Individual differences may affect employee acceptance of or resistance to change but the major factors are the way the process is managed and the degree to which employees are involved.

employee participation means inviting the union into the decision-making process. they resist being changed. When employees resist. Sometimes. while participation invites commitment. C. Inc. VIII. Turnaround may be necessary but it is not sufficient to ensure long-term effective change. In the early stages of change. though. A participative process can help build support for change efforts. The Three Faces of Change Theory into practice: • • • Not all change is behavioral. 11). coerce or trick them into changing. Ohio Vega plant led to resistance and rebellion. not to force. psychological ownership and motivation for implementation. Behavioral change seeks to motivate employees to change their behaviors.opportunities and benefits. In a unionized environment. People don’t resist change. Employee Participation Builds Support for Change Theory to practice: • • • • Imposing change from above can lead to employee resistance. The organizational context must be shaped to encourage and support employees’ desire for individual and company change. employee participation in problem definition and solution design builds commitment. A contrasting example is provided within the same company. General Motors. Imposed change creates resistance. This cannot be created through manipulation or coercion. or by not giving them a voice in the implementation process (p. they give managers a valuable chance to learn about perceptions. Imposed changes at their Lordstown. C. resistance simply has to be overcome. publishing as Prentice Hall 6 . 2. Participatory changes at their Livonia Cadillac plant led to support and improved effectiveness. Outsourcing is a change technique with important turnaround and transformational behavior change implications. A. concerns and underlying problems. 1. Sustainable change requires motivation on the part of employees for the change. VII. B. Copyright © 2010 Pearson Education.

-Outsourcing. a change in technology or a shift in consumer demands. Transformation – behavioral change on the part of employees with the goal of enhancing human capabilities. Companies must make sure that employee behaviors are aligned with the company strategy and customer expectations. cost saving) implications. D. and transformational behavioral change. they will not succeed. layoffs. B. C. Organizational change is initiated in response to a trigger event – some shift that precipitates the need for a change in company strategy and employee behavior. is one of these techniques. External trigger events can be increased competition. otherwise. 18). Tools and Techniques – changes in organizational processes. These changes are often central for strategic renewal. IX. Internal trigger events can be new leadership in the company or employee dissent.e. and the like. Turnaround strategies must be paired with process and behavioral strategies. plant closings. Turnaround – an attempt to improve the immediate financial position of the organization through cost cutting. but unless they are supported by changes in employee behavior. tools and techniques. C. tools and techniques. Turnaround may be very necessary but it is painful and costly in areas of morale and motivation. they may result in temporary gain and long-term loss. Effective strategic renewal efforts combine aspects of turnaround. p. Effective organizational change combines the 3 faces of change: turnaround.• • Outsourcing can be a helpful change tool but it can also undermine motivation and disrupt essential linkages and relationships. Inc. publishing as Prentice Hall 7 . A. -Unless it is carefully managed. Trigger Events and Change Theory to practice: • Trigger events precipitate the need to alter behavioral patterns of employees. the farming out of certain value chain activities to external specialists or strategic allies. and transformation (exhibit 1. Copyright © 2010 Pearson Education. outsourcing can have negative effects. technologies and interactions.4. aligned with the company strategy and structure. B. A. -Outsourcing has important turnaround (i.

Conclusion A. think about how patterns of employee behavior will have to change. Employee involvement can reduce resistance and increase motivation. technology change. • • • Chapter Discussion Questions 1. Review Exhibit 1-1. Select one of the companies. Strategic responsiveness to a dynamic environment requires organizational change.” Organizational Dynamics 21 (Summer 1992). Collins and Jerry I. and behavioral change. GE—high value-added products and services require employees with high knowledge base and customer responsiveness. Strategic Renewal: Becoming a High-Performance Organization (New Jersey: Prentice Hall.” Business Horizons 35 (September-October 1992). Additional Suggested Reading • • James C.” Academy of Management Executive (1989). Change implementation may cause resistance. Porras. Lynn A. Isabella. Schuler. “Strategic Human Resource Management: Linking the People with the Strategic Needs of the Business. Effective change requires that leaders combine the 3 faces of change: turnaround. Michael A. Built to Last: Successful Habits of Visionary Companies (New York: HarperBusiness. Nadler and Michael L. D. Tushman. “Organizational Frame Bending: Principles for Managing Reorientation. Enron—would have to hire employees with high skills in sophisticated financial deals (and also make a legitimate profit!). Based on the brief statement of their renewed strategy (or research the company for further details). Change can be triggered internally or externally. pp. Copyright © 2010 Pearson Education. pp. 2001). Inc. B. 18–33. publishing as Prentice Hall 8 . 194–204. Mische. “Managing the Challenges of Trigger Events: The Mindsets Governing Adaptation to Change. Randall S. 1994). David A. C.X.

seriously affected people’s sense of the mission and culture of the organization. Explore the challenges that faced Morgan Smith at Concord Bookshop. the same as GE: service and consulting require more knowledge. Turnaround tends to be short term while behavioral change tends to be long term. downsizing. Facebook – have a more diverse employee population. combined with a unilateral decision about changes in leadership. 2. publishing as Prentice Hall 9 . willing and able to travel. What explanations can you offer for the high level of employee resistance that emerged from the changes? It seems that employees. work in other cultures (most notably Asian). Behavioral change involves motivating employees to alter their behaviors in order to achieve new strategies. Renault—no more French-centric employees. attuned to and responsive to different customer populations and their varying needs. Inc. probably multi-lingual. 3. Walgreens—greater risk takers. and maximizing return on shareholder investment. Marks and Spencer—more focused employees who were willing to alter past supply-chain relationships. Technology involves redoing processes—often by adding new equipment—to make workers more efficient and productive.IBM—really. the uncertainty surrounding the announcement. Employees lost faith and thereby. What are the three approaches to organizational change? In what ways are they different and in what ways do they overlap? Turnaround emphasizes cost-savings. interests and skill levels. While no employees were laid off. which would trigger all of the causes of resistance. Technology can have an enhanced impact on organizational performance if patterns of behavior also change. customers and other stakeholders were not at all informed about or involved in the change process. motivation and connectedness. more customer responsiveness and higher levels of collaboration across organizational boundaries (Jack Welch called it “boundarylessness”). Copyright © 2010 Pearson Education. more innovative thinkers.

5. Introducing the Case The case illustrates the different faces of change and how they interact through two different stories of change. Increasing diversity requires greater flexibility. those employees are likely to revert back to their old behavioral patterns over time. Final Case—Read “Two Stories of Outsourcing” and answer 2 questions. that is. using coercion and manipulation would be unethical. Pick three and discuss how they might necessitate behavioral change on the part of organizational employees. adaptability. Why is motivation important to behavioral change? How might leaders approach change differently if they are trying to motivate employees to change rather than force them to change? Using coercion or manipulation to create behavioral change will work against the long-term interests of change leaders. and ability to work together. Finally. Mergers and acquisitions require the ability to work effectively in different organizational cultures. and ability to work together. publishing as Prentice Hall 10 . Coerced or manipulated behaviors are not likely to be long lasting. an engineer from Auratek. Changing labor markets requires greater attention to attracting and retaining the “right” employee. and ability to work together. Also. Identify the main external forces triggering the requirement for organizational change today. even if leaders can force employees to change their behaviors. coercion and manipulation lead to compliant behavior. Rise of the Internet requires greater flexibility. but they drive out creativity—the source of innovation.4. adaptability. an industry-leading data storage device. Regulation and deregulation requires greater adaptability. The first story is told by John Hearst. adaptability. Increasing salience of stakeholders requires greater attention on growth opportunities. Globalization requires greater flexibility. Auratek had Copyright © 2010 Pearson Education. manufacturer of DataSafe. and ability to work efficiently. Inc.

1. In the meantime. quality and communication. verification and fabrication process. At the same time. the entire task of translation was outsourced. the company made a very unilateral decision to intervene in an otherwise very effective process and one that had been created through a lot of employee motivation. In the case of K-PUB. What is the nature of the changes sought by Auratek and K-PUB? Are they turnaround. the process itself took longer but they realized a substantial cost savings. CHAPTER 2: Theories of Effective Change Implementation Main Teaching Point Copyright © 2010 Pearson Education. tools and techniques. In order to save costs. She is an engineer working for K-PUB. Making this change had no real benefits to the employees who were not even properly involved. The company was doing well. How do you account for the apparent differences in effectiveness in the use of outsourcing by these two companies? In the case of Auratek. Their process required transformation also but this was severely neglected. they were relying on the few remaining engineers to make the process work – something which was doomed to failure. The second story is told by Caroline Matthews. with disastrous results for morale. they were after cost savings only – there were no other problems that necessitated the change. the ongoing nature of the problem was clear and the company remained interested in eventually taking the process back. publishing as Prentice Hall 11 .a very successful history of quality control through cooperative efforts between groups of engineers in the design. once the automation efforts were fully implemented. K-PUB had a real operational problem involving a need to change tools and techniques as well as a need to contain costs. transformation or some combination? Auratek was turnaround. not requiring additional participation in the work from existing employees. Internal efforts to improve the process using software and automation were only partially effective. commitment and involvement. When K-PUB outsourced the process to India. Inc. their product was an industry leader and they were managing quality very well. 2. the company decided to outsource the bulk of the verification process to India. an electronic publishing company targeting IT professionals with printed and online materials. often subjective process requiring a lot of quality assurance to ensure acceptable results. K-PUB decided to outsource what was called the “translation process” – converting desktop publishing formats into XML – a difficult. The company hopes to take back the process once it is completely automated.

” 3. From whose point of view is the case told? The case is told from the point of view of Jon Meliones. Copyright © 2010 Pearson Education. Explain an approach to change management that emphasizes task requirements and performance results. 2. Analyzing the Case 1.The teaching point to be made by Chapter 2 is to introduce students to key theories of effective change implementation and change resistance. such as process-driven change and task alignment. and patient and staff satisfaction are “at an all-time low. Delineate the key insights to effective implementation offered by the field of Organizational Development. What is leading the Children’s Hospital to alter their strategy? Changes in insurance reimbursement for patients have put tremendous pressure on net margins. the chief medical director of the Duke University Children’s Hospital. Inc. Learning Objectives • • • • • Present the three phases of the planned change theory of Kurt Lewin. publishing as Prentice Hall 12 . Opening Case—Turnaround and Transformation at Duke University Children’s Hospital Key Learning Point of Case: The case illustrates an effective change implementation at a university hospital using key concepts in this chapter. revenues are declining. Differentiate between content-driven and process-driven change. Offer a framework for change implementation that encompasses multiple theories. What steps has Meliones taken? (1) Led staff through a shared diagnosis of root causes of financial problems.

E) with B = behavior. measurement systems . • Theory into Practice Telling employees why they need to change will not build motivation to change. 5. What behaviors will need to be changed? Need to eliminate “fiefdoms” of people focusing on individual goals and develop a shared commitment to improving margins and serving patients. balanced scorecard (BSC) was used to reinforce behaviors.(2) Created cross-functional team with the goal of figuring out how to provide both excellent patient care and excellent financial performance. Inc. • Theory into Practice Don’t assume that poor organizational performance will create an urgent need to change within a company. Theories of Change Implementation To understand effective change implementation requires understanding what levers can be applied . P = person and E = environmental context Copyright © 2010 Pearson Education. How effective was the effort? The hospital returned to profitability in three years.” (3) Piloted change in a single unit: pediatric intensive care. cross-functional teams. 1. 6. responsibilities and relationships within the unit were redesigned to serve the new strategy. but not sufficient. • Theory into Practice Effective change involves both content—what is being changed—and process—how the changes are being implemented.diagnosis.and in what sequence. articulated in strategic renewal motto: “No margin. Lecture Outline I. Context plays a key role in shaping individual behaviors: B = f(P. no mission. 4. How did he drive change within the pilot unit? Roles. Kurt Lewin’s Field Theory in Social Science a. publishing as Prentice Hall 13 . it is necessary.

open communications perspective 9. and discomfort. exhibit 2-1 c. alignment perspective 3. focus first on changing group norms. multiple stakeholder perspective 7. b. participation perspective 4. social capital perspective 5. disequilibrium and discomfort. To create change. Organization Development and Change Implementation 1. Inc. then individual behaviors • Theory into Practice To break the “social habits” that support existing patterns of behaviors. Social habits only change when there is dissatisfaction with status quo. publishing as Prentice Hall 14 . 30. evolution/revolution perspective 10. people must go through 3 phases: • unfreezing: dissatisfaction or frustration with the way things are • moving: altering patterns of behavior • refreezing: institutionalizing the new patterns of behavior • See examples on p. target group norms first and then focus on individual behaviors. disequilibrium. effective implementation needs to start with dissatisfaction. Organization Development is an approach to organizational effectiveness that calls on the fields of behavioral and social sciences to provide guidance to planned change efforts.• • • • Behavior is shaped by group norms . To create change. start with creating dissatisfaction. teamwork perspective 6. systems perspective 2. • Ten key insights from OD are shown in table 2-2 on page 31: 1. II. • Theory into Practice In order to implement change. Group norms keep old habits in place.shared expectations of how group members ought to behave. To break the “social habits” that support current patterns of behaviors. problem-solving perspective 8. process facilitation perspective Copyright © 2010 Pearson Education.

openness and trust. including the internal context.• Three are particularly important: a. and between units. • Theory into Practice If leaders are successful at aligning the interests of multiple stakeholders—shareholders. Open Communications Perspective: Conflict must be approached with an attitude of problem solving. between tasks. Multiple Stakeholder Perspective (MSP): Stakeholders are individuals or groups who lay legitimate claim to the performance of the organization. b. employees. Inc. Open Systems Perspective (OSP): OS is an organism or entity that exists in a constant interactive state with its external environment. • Theory into Practice Don’t shy away from conflict. suppliers. the host community and so forth—they can contribute to outstanding performance open communications c. An MSP argues that stakeholders should be seen as citizens of the organization and their concerns and interests must be addressed. • III. between functions. As individuals articulate and analyze differences. Also. Process-Driven Change Interventions A. the external environment and patterns of employee behavior. these are the problems to be targeted first for change. Copyright © 2010 Pearson Education. An OSP presents a relational view on organizations and stresses the importance of alignment: congruence or compatibility between and among various elements of a system. publishing as Prentice Hall 15 . they can improve organizational effectiveness. Theory into Practice Be sure to create an inclusive change process—one that builds ownership of and commitment to the desired improvements. Change interventions can be content-driven or process-driven. try to create a sense of ownership and inclusion. • Theory into Practice Performance problems often reside in the hand-offs between employees. customers.

2. Are imposed by top management Do not proceed from shared diagnosis. introducing and institutionalizing new behaviors and uses content as a reinforcer rather than a driver of new behaviors. Inc. publishing as Prentice Hall 16 . participation and task alignment. Repeated failure to implement change effectively can build cynicism in an organization. balanced scorecard and lean enterprise. Content driven changes: • • • • • • Serve as the initial centerpiece for launching and driving transformation throughout the company or unit. • Content-driven changes are very popular in organizations because they are quick. “inoculating” it against future change efforts. Content-driven change often fails because of inadequate attention to the process of change. 38. Process-Driven interventions create a collaborative approach to change. Task alignment is an approach to behavioral change that starts with the identification of the key strategic tasks of an organization or unit and then asks employees to redefine their roles. Process-driven change: an approach to change implementation that emphasizes the methods of conceiving. off-the-shelf solutions. 1. Rely on standardized.• Content-driven change: programmatic change in which specific programs—customer relationship management. Are imposed uniformly across the organization Long list of examples on p. exhibit 2. Content-driven change is both tangible and measurable—but that doesn’t make it effective. B. using involvement. for example—are used as the driver and centerpiece of implementation. Copyright © 2010 Pearson Education. simple and trendy but they are rarely successful because they do not build motivation for change. Just because top leaders believe in the need for change doesn’t mean that all employees share that conclusion. responsibilities.5 Theory into Practice • • • • • There are no one-size-fits-all solutions to performance problems in your organization. and relationships in order to perform those tasks. Task alignment focuses behavioral change on the requirement to improve the manner in which employees perform the strategic tasks of the organization.

Theory into Practice • • • Process-driven change seeks to create an organizational climate in which employees will be motivated to adopt new behaviors consistent with the strategic direction of the organization. 1. A task-aligned approach to change implementation can help create motivation to adopt new behaviors by focusing on real. C. Task alignment builds commitment by focusing on real and immediate performance problems and producing tangible results. process-driven change and task alignment. supported by 2 key concepts: shared diagnosis and mutual engagement. immediate business problems and producing tangible results. Shared diagnosis is a process that creates widespread agreements about the requirements for change – the dissatisfaction needed for “unfreezing. Tangible performance results that accrue from task-aligned change interventions reinforce the efficacy of such efforts. 7. 5. By focusing on solving real business problems. Line managers have far greater ability to diagnose business and performance problems than to engage in psychological or therapeutic analysis of individuals. task alignment takes advantage of the knowledge and expertise in the organization.” Copyright © 2010 Pearson Education. Inc. These create a sequential 4-step process model. 6. in turn. Task alignment combines the insights of organizational development with a bottom-line focus on performance.3. creates momentum for renewed change intervention. OD. which. 4. publishing as Prentice Hall 17 . Task alignment increases not only the motivation of employees to change their behavior but also managers to support organizational change.6 on page 42 shows the 4 key components to effective change implementation: Lewin’s field theory. Building a Theory of Change Implementation Exhibit 2. as shown on page 43. Task-aligned change implementation starts with the goal of improving performance and implementing strategy and then seeks appropriate supportive behavioral change.

Mutual engagement at every stage of the implementation process helps assure learning and builds commitment. Mutual engagement at the core is necessary to ensure learning and commitment at every stage. Inc. IV. Step 2: Organizations can and should offer employees help in enacting new behaviors. 6. Step 3: Shared diagnosis and task alignment should be followed by people alignment.2. publishing as Prentice Hall 18 . Effective change implementation requires new skills and competencies on the part of the organization’s employees. 4. performance outcomes and task alignment. responsibilities and relationships—can be supported by organizational help in learning new skills. 3. as shown in exhibit 2-9 on p. Altering formal organizational systems and structures can come at the back end of a change implementation in order to refreeze new patterns of behavior. Finally. avoid implementation traps. Asking employees to enact new behaviors—roles. Step 1: Moving to redesign requires a focus on strategy. Step 4: New behaviors must be reinforced through establishing systems and structures – the refreezing stage. This requires 4 things: mutuality: all parties accept the belief that the other party has the capacity and willingness to learn and change reciprocity: all parties accept the belief that each side can learn from the other side advocacy: willingness and ability of all parties to be open about their own positions and assumptions inquiry: willingness and ability to allow others to question and challenge their positions 7. especially those associated with skipping steps and ignoring key principles. Conclusion Copyright © 2010 Pearson Education. Theory into Practice • • • • • Kicking off change implementation with shared diagnosis builds both dissatisfaction with the status quo and a commitment to enact new behaviors. 5. 48.

publishing as Prentice Hall 19 . Additional Suggested Reading Copyright © 2010 Pearson Education. Inc. Most of the approaches have been content-driven and disconnected with the key processes. How might Blue Cloud general manager Shel Skinner have handled his attempt to introduce more efficient software development differently? Skinner should have involved his engineers in a process of shared diagnosis and task alignment. 2. it is also doomed to failure. According to Kurt Lewin. tasks. While this is usually a quick and easy approach. Discuss the various ways in which change theorists have attempted to introduce performance and results into the implementation process. a systematic process-driven change intervention would have worked more effectively. 4. why is it so difficult to motivate employees to alter their patterns of behavior? Lewin pointed out that people’s behavior exists within an equilibrium of forces that keep it in place. What were the sources of resistance at the Concord bookshop in chapter 1? Most of those sources were social in nature and had to do with a satisfaction with the status quo. Involving employees in the diagnostic process would have helped to generate motivation for change. It also ensures a collaborative process that involves people. changing the social context is key to the process of changing behavior. Rather than simply superimposing the Agile methodology on the work structure. Because people respond positively to the social norms in their environment. A process driven approach and in particular one that emphasizes task alignment ensures that the focus in the change process remains on the goals and tasks of the organization.The sequential model of effective change implementation represents an integration of key theories of organizational change. 3. structures and tasks. The only way to change that behavior is by creating a disequilibrium – some sense of imbalance or dissatisfaction that generates the motivation to change. Chapter Discussion Questions 1. structures and relations in the organization.

1980). or somewhere in between? Once you read all three cases in the sequence. Vol. Here are some of the points that may come up. CA: Goodyear Publishing. CT: JAI Press. publishing as Prentice Hall 20 . eds. students can ask: is he off to a good start. Russell A. pp. 261–297. and anticipates moving change into the stores. Leon Coetsee. Michael Beer and Bert Spector. a bad start. and Bert Spector. Michael Beer. • • Case—The Asda Way of Working (A) Introducing the Case Asda is a struggling grocery store chain in need of transformational strategic renewal (Chapter 1). Eisenstat. Research in Personnel and Human Resources Management: A Research Annual. Based on your understanding of the theories of effective change implementation.. how would you evaluate the change leadership of Archie Norman and his top executives during their first six months at Asda? Remember. 204–222. Still. you will realize that this has been a remarkable success.” in Kendrith M. The Critical Path to Corporate Renewal (Boston: Harvard Business School Press. pp. Rowland and Gerald R. However. Inc. Ferris. you are likely to get a lively debate. at this stage. The board imports a new CEO—Archie Norman— and the case follows Norman for the first six months as he hires a new top management team. 1990). Copyright © 2010 Pearson Education. 1951). Field Theory in Social Science: Selected Theoretical Papers (New York: Harper and Row. Key Learning Point Effective strategic renewal requires change at all organizational levels and a leader who can orchestrate that change. 1984). 2 (Greenwich. Kurt Lewin. “From Resistance to Commitment. this is still early in the process. Assignment Questions for Students: 1. articulates a new strategy and set of values.” Public Affairs Quarterly (Summer 1999).• • • Michael Beer. “Human Resource Management: The Integration of Industrial Relations and Organization Development. Organization Change and Development: A Systems View (Santa Monica.

He has spent a lot of time in three stores gathering data from store employees about the operation. however. performance outcomes and task alignment. publishing as Prentice Hall 21 . He accomplished a great deal in his first six months: a new strategy. the articulation of company values and the blueprint for the Asda Way of Working. He recruited a new team. Some students will wonder if he and his top team are spending too much time on their own coming up with a new strategy. Others will see this as quite a bit for six months (don’t overlook the closing of non-food operations. and a pay freeze!). Step 2: Organizations can and should offer employees help in enacting new behaviors –Norman needs to be very conscious of the kinds of help that corporate and store level managers might need to put this new approach in place. what specific steps would you recommend be undertaken over the next 18 months? Shared diagnosis – make sure that everyone is on board as much as possible with the analysis on what is wrong and what is right. headcount reduction. Based on your understanding of effective change implementation. Should he have fired the CFO before coming into Asda? Some will say no. • • • • 2. Step 3: Shared diagnosis and task alignment should be followed by people alignment. it was too quick. shared diagnosis is designed to create widespread agreements about the requirements for change – the dissatisfaction needed for “unfreezing. Inc. These strategies too will need to be worked out. It will take a lot of work to get everyone to understand the detailed implications of this at the task alignment level.” Step 1: Moving to redesign requires a focus on strategy. Some will say he hasn’t done enough because nothing has changed in the stores. Some students will note the lack of retail experience the team has (he did keep one manager from the past). Some students will wonder. Copyright © 2010 Pearson Education. Remember. the first key steps in this direction have already been taken through the formulation of the renewal strategy: the statement of corporate strategy. Just announcing it is not enough. whether he is prematurely negative when he says everything must change. and a diagnosis of the situation. This is a key requirement if Asda as a whole is going to move forward. Others will say the CFO should be fired for allowing the company to get into this mess.• He has done well at building dissatisfaction with the status quo in order to create the required disequilibrium. an articulated set of values.

Learning Objectives Describe the role of diagnosis in assessing behaviors and values and in creating dissatisfaction with the status quo. publishing as Prentice Hall 22 . Define the role played by after-action reviews in creating quick learning and improvement. Discuss the use of a systemic framework for guiding diagnosis. not with solutions. Norman needs to be conscious of the necessary impact of these changes on rewards systems and other structures. Opening Case—Bringing GE’s “Magic” to Home Depot Key Learning Point of Case: Effective change starts with diagnosis. CHAPTER 3: Organizational Diagnosis Main Teaching Point To initiate behavioral change. meetings and the principle of equality. as evidenced in his emphasis on empowerment. reciprocity. Provide the key ingredients of a diagnostic intervention. advocacy and inquiry. leaders need to unfreeze “social habits” by creating a sense of dissatisfaction with the status quo. that is. He needs to be careful to avoid implementation traps. Explore ways to overcome the “climate of silence” that blocks open. especially those associated with skipping steps and ignoring key principles.Step 4: New behaviors must be reinforced through establishing systems and structures – the refreezing stage. effective organizational change implementation starts with diagnosis. involvement. Inc. Copyright © 2010 Pearson Education. To do that. Norman needs to remember the importance of mutual engagement at the core which is necessary to ensure learning and commitment at every stage. The management team’s perception of Norman as “controlling” is potentially problematic. 48. candid dialogue. On the other hand. he seems to have embraced principles of mutuality. as shown in exhibit 2-9 on p. a dialogue about the need for change in response to how best to achieve strategic renewal and the requirements for effective implementation.

focusing centralization and standardization to accomplish operating efficiencies and discipline. The results were negative. Diagnosis is the process of learning about the dynamics of the organization in order to take action intended to improve performance. (HD) 2. It seems that managers. but not with solutions. There was no involvement of any of the parties in the change process. What was Nardelli’s approach to change? The case suggests that Nardelli brought a formula with him based on his experience at GE. What type of change is Nardelli attempting to implement? Nardelli implemented a transformational change. Was the change accepted? No. What did Lowe’s do that was different from Home Depot? Lowe’s focused on customer satisfaction and relied on full-time employees. many long-term managers left and customer satisfaction declined significantly. autonomous store structure. 6. What has precipitated the requirement for change (trigger events)? Nardelli was hired to lead Home Depot to a new generation of growth. Nardelli is trying to implement a major change. Inc. Nardelli resigned only to be hired by Chrysler. balancing the advantages of size with a culture that promoted responsiveness to local customers. In response. In 2007. There was also a major increase in part-time employees. Previously. 4. There was no diagnosis and no participation. employees and customers all rejected the change. HD stock declined from $37 to $23 while Lowe’s – HD’s main competitor – gained both market share and a 210% increase in stock price. From whose point of view is the case told? Robert Nardelli. Lecture Outline I. A. While there was expansive growth (from $42 billion in revenue in 2000 to $81 billion in 2005). Home Depot used a decentralized. 3. publishing as Prentice Hall 23 . 5.Analyzing the Case 1. newly appointed CEO of Home Depot. That’s the lesson of the HD case! B. Effective change starts with actions. Copyright © 2010 Pearson Education.

• Use diagnosis as the preliminary stage in implementing change. The framework should be: 1. Only when the same diagnosis is shared by many people. explicit – all elements and connections should be clear 2. II. Inc. misleading and dysfunctional. Diagnosis also needs to build consensus around how things need to be changed. operationally defined – focus on measurable concepts and criteria 3. F. D. E. diagnosis can do more than target specific elements of the organization. The sequential implementation model starts with shared diagnosis to provide the basis for unfreezing. C. Diagnosis can occur on the individual. Diagnostic framework is a roadmap for analyzing alignments that makes explicit both the key elements of an organization that need to be aligned and the interconnections and interdependencies among those elements. focus changed from battling criminals to preventing attacks. empirically validated – backed up by knowledge and data 4. why and how by offering a general model.C. Theory into Practice • Don’t expect formulas—solutions that have worked in the past and are imposed on the current situation—to work for your organization. This framework should help the organization understand what needs to be changed. Framework should be complemented by open dialogue about what needs to happen. B. Diagnosis is about learning what needs to be changed and why. G. Diagnosis should be guided by a framework. group and organizational levels and create a shared dialogue about how the organization can meet the demands of its renewed strategy. can the change process move forward effectively. Example: FBI – after 9/11. Copyright © 2010 Pearson Education. • The most effective change implementation starts with a diagnosis that is shared by many employees at multiple organizational levels. This was a whole new model of thinking about the organization. The framework should lead people to systemic thinking and identifying disjunctions. acceptable through face validity – must make sense to organizational members 5. it can focus on the entire organization. publishing as Prentice Hall 24 . Requirement for a Systemic Framework A. E. D. That approach to change can be overly simple. generalizable – applicable to different organizations and settings Theory into Practice • In order to set the stage for effective implementation.

collective discussion among two or more parties without a predetermined outcome. or both. C. III. between functions and departments. Decentralizing—pushing down decision making to close the gap between decision makers and “doers. Example of Carleton Fiorina at HP: Fiorina set about creating a major change. Hierarchy creates power distance. E. The process of participation in dialogue builds commitment. various functions). managers can take these steps to equalize power: a. e. both vertical (managers. b. into dialogue. D.• Use a common organizational framework to shape mutual engagement and shared diagnosis. and discourages dialogue.” c. B. Egalitarianism—removing external “artifacts” of status differentials. Executives failed to speak up about her reorganization plan even though they did not fully understand or necessarily agree with the plan. Theory into Practice • Creating a dialogue offers the opportunity for an open and honest conversation among employees. Teamwork—building shared purpose and mutual responsibility to ensure equal participation and influence by all members in dialogue. Delayering—removing hierarchical barriers that create distance and distort communications. IV. F. shop-floor employees) and horizontal (union and management. d. The goal of dialogue is learning. this in turn encourages silence and compliance. Dialogue is risky business. Representation—inserting voices from multiple levels. Starting with Mutual Engagement A. Organizational Enablers of Dialogue A. Dialogue involves a structured. f. publishing as Prentice Hall 25 . Power distance most often exists in vertical relationships but it can also exist horizontally. Third-party facilitation—structuring effective “rules-of-engagement” around feedback and dialogue. B. This is an example of organizational silence. Inc. Copyright © 2010 Pearson Education. Because power distance and power inequities can hinder the open exchange of ideas and information in a dialogue. Organizational silence is the lack of truthful dialogue in organizations caused by the widespread assumption on the part of employees that candid feedback and the open exchange of ideas will have either no positive impact or negative consequences to the individual.

G. Mutual engagement and dialogue need to exist in a context of psychological safety – a belief on the part of employees that the organizational climate is conducive to taking personal risks, especially in dialogue. Theory into Practice • Don’t confuse passive acceptance with agreement. • Leaders can ask themselves – has their organization bred a “climate of silence that discourages subordinates from speaking up and discourages bosses from seeking feedback”? • A large power distance between parties in a dialogue inhibits openness and risk taking while distorting communications. V. The Consultant Role A. Consultant refers to any individual possessing a broad range of diagnostic and developmental skills who contracts with the organization’s leaders to facilitate an intervention. B. Consultants can come from outside the firm or they can be internal to the company. Theory into Practice: • Leaders can call on a consultant to introduce and teach new dialogue skills to organizational employees. VI. Getting started with organizational diagnosis A. Diagnosis consists of 4 steps: 1. collecting data on the organization and the environment 2. Entering into a dialogue of discovery 3. Receiving and providing feedback on what has been learned 4. Institutionalizing dialogue and diagnosis B. Diagnosis should follow 6 principles (see exhibit 3-2, p. 68): 1. Systemic focus 2. Consultant facilitated 3. Client-oriented 4. Data-based 5. Honest conversation 6. Psychological safety VII. Data Collection A. Effective diagnosis is data-driven. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 26

B. There are 3 basic forms of data collection; they are not mutually exclusive. The three forms and their advantages and disadvantages are summarized in exhibit 3-4 on p. 72. 1. Questionnaires are self-administered paper-and-pencil data-collection forms, often stressing areas of behavioral interaction such as communications, goals and coordination (see example in exhibit 3-3 on p. 70). They are easy to use, cheap and can cover many people in a short time, but they are not good at generating rich data nor do they create engagement. 2. Diagnostic interviews are a form of data collection in which a trained diagnostician meets with an employee, or small groups of employees, to solicit information pertaining to the performance of the organization. They generate rich data. Consultants or trained employees can conduct these interviews. Results may be hard to quantify and they lack anonymity. 3. Behavioral observation is a form of data collection in which a trained diagnostician can watch actual behaviors of employees. Observers can observe from a distance or they can become participant observers. Good observation requires training and is time consuming. Theory into Practice: • Make sure that diagnosis flows from valid data about the organization. • The process of collecting data can help build motivation and commitment to altering patterns of behavior. • Be careful about the overuse of questionnaires in collecting data about organizational effectiveness. They do not create mutual engagement. • Use diagnostic interviews and behavior observation to collect rich and valid data about how employees behave and how the organization functions. VIII. Creating a Dialogue of Discovery A. Discovery is the process of analyzing and making sense of data that has been collected as part of an organizational diagnosis. B. The first requirement is determining who to engage. Involving a blend of people and functions will help ensure a systemic perspective. It will create what Senge calls an exploration of “complex difficult issues from many points of

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

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view”—in order to move beyond the insight and understanding of any one individual. C. To ensure the systemic nature of the process, use a framework such as was presented earlier in exhibit 2-3 on p. 32. D. The discovery phase of diagnosis involves a dialogue among employees concerning the validity and meaning of the data that has been collected. Theory into Practice: • Mutual engagement in the discovery stage will help both to assure the validity of the conclusions and build commitment to corrective action.

IX. Closing the Loop A. Feedback is the process of receiving information focused on the effectiveness of one’s actions and performance B. Feedback takes place during the discovery phase. It can also occur later when results are communicated back and employees react to the reports. This allows the feedback loop to become continuous and ongoing. C. Closing the loop here means making feedback an ongoing process. D. Two mechanisms advance the feedback process: 1. Feedback from top management can occur in face-to-face groups to promote rich and open dialogue 2. The learnings and the change plans should be presented as tentative rather than final, inviting additional dialogue and discovery. Theory into Practice: • Mutual engagement can be enhanced when top management feeds back to employees what it has learned from the diagnostic process and uses that feedback as an opportunity to generate more learning. X. After Action Reviews A. After Action Review (AAR) is an organized, disciplined approach to shared diagnosis and mutual dialogue in the immediate aftermath of a specific action or event. B. AARs were originally developed by the U.S. Army as a way to promote learning. C. Example of Wall and Somerset company – a large corporate contract was fumbled. Using an AAR, they were able to learn what went wrong and develop an action plan to correct it. D. AARs involve 8 components: 1. Review takes place during or immediately after event under study. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 28

1980). Backfire: Carly Fiorina’s High-Stakes Battle for the Soul of Hewlett-Packard (New York: John Wiley & Sons. Nadler. and Cortlandt Cammann. Review starts with a shared understanding of the goal of the event.” Journal of Counseling and Development 71 (JulyAugust 1993). 6. Edward E. 4. Michael Beer and Bert Spector. 3. Theory into Practice: • After-action reviews provide an opportunity for a sharply focused and timely mutual engagement that can lead to quick corrections. Key learning point: client-centered consultants can build commitment to learning. On the other hand. Copyright © 2010 Pearson Education. Lessons of the review become part of future training. David A. XI. Lawler III. motivation and commitment. feedback and review help to generate data. 8. Organizational Assessment: Perspectives on the Measurement of Organizational Behavior and the Quality of Work Life (New York: John Wiley & Sons. Review leads to new actions. Flawed Advice and the Management Trap: How Managers Can Know When They’re Getting Good Advice and When They’re Not (New York: Oxford University Press. Review focuses on overall performance of the group. “Organizational Diagnosis: Its Role in Organizational Learning. Additional Suggested Reading Chris Argyris. mutual engagement in dialogue. executives may be tempted to rush toward a solution. 2000). The review is governed by open-ended questions Review identifies strengths and weaknesses. organizational silence may appear as agreement and the change effort will fail. An organization’s ability to do this successfully will depend on its culture – this will be explored in the next chapter. diagnosis. 5. Because of power distance. motivation to change and competency on the part of employees to implement diagnosis in the future. Review is conducted by participants in the event. 642–650. Conclusion If the need for change is urgent. Peter Burrows. 7. publishing as Prentice Hall 29 . Inc. pp. 2003).2.

publishing as Prentice Hall 30 . Nadler. Instead of saying. empirically validated. 1977). pp. “Organizational Silence: A Barrier to Change and Development in a Pluralistic World.The framework identifies the key components of the organization and suggests relationships and interdependences among those elements. Milliken. Lawrence and Jay Lorsch. 1969). He needed to involve upper management and employees at all levels in dialogue and diagnosis. Interpersonal Peacemaking: Confrontations and Third Party Consultation (Reading. 706–725.Having a common framework for the entire organization facilitates communication that can help those involved in a diagnosis “to approach their task with a common set of terms and frame of reference. 62: explicit. “Let’s look at what has been working. 2. Feedback and Organization Development: Using Data-Based Methods (Reading. “Here’s what we’re going to do. Elizabeth Wolfe Morrison and Frances J. have face validity and be generalizable. .” he could have said. What are the potential advantages of relying on a systemic framework for guiding diagnosis? Are there any potential disadvantages? In order for a framework to be effective. MA: Addison-Wesley. Richard E. operationally defined. MA: Addison-Wesley. Data collection from employees. what will continue to work and what could/should be changed. David A. most probably through diagnostic interviews and also focus groups.Paul E. could have provided important insight to guide top executives to figure out how to achieve outstanding performance at HD. 1969). The advantages of relying on such a system would be: .” Copyright © 2010 Pearson Education. Chapter Discussion Questions 1. Developing Organizations: Diagnosis and Action (Reading. Walton.” Academy of Management Review 25 (October 2000). MA: Addison-Wesley. How might Bob Nardelli have structured his early efforts at Home Depot? Pay particular attention to how he might have used the principles of mutual engagement and shared diagnosis. it must meet the criteria listed on p. Inc.

they can hire professionals to help employees learn how to collect data. Finally. Inc. They can reward managers for engaging in dialogue.A framework makes clear the factors and relationships that are of interest in a diagnosis. . In what specific ways can an executive actively promote a sense of psychological safety among employees to engage them in an honest conversation about performance? They can take steps to equalize power. How might the three forms of data collection be used together in the opening stages of a change process? Diagnostic interviews are a good way to start the diagnostic process because they allow for open-ended dialogue about performance. Also. Why is open dialogue so difficult to achieve in many organizations? Large power distances within hierarchies create reluctance to engage in open dialogue. They can focus on data collections of issues of strategic performance to avoid personal clashes. might be: . they can participate in honest dialogue themselves.The framework is too narrow and doesn’t include all the vital elements. Questionnaires can be used at a later stage to create comparative benchmarks and chart improvement. as listed in Exhibit 3-1 on page 66. When applying the framework. there are often simply no mechanisms created that might allow a dialogue to occur. 4. if there are any. disagreement and debate. publishing as Prentice Hall 31 .Employees may not be able to process the amount of information generated by a framework-guided diagnosis. make sure to keep in mind the diagnostic principles listed in exhibit 3-2 on page 68. 5. At the same time.. Finally. Final Case—Managing Transformation at National Computer Operations Copyright © 2010 Pearson Education. Disadvantages. Organizational cultures often lead executives to avoid criticism. 3. behavioral observation can focus on work teams to help with behavioral issues.

In doing so. distribute the specifics of the bids to all NCO employees. Inc. 2. Redo the performance appraisal form to include “customer responsiveness” as a criterion for performance evaluation. Ask the Chairman to invite bids from external computer operation suppliers to outsource all services now provided by NCO. Redo the compensation system to tie a larger portion of an individual’s pay to an assessment of that employee’s performance. 4. publishing as Prentice Hall 32 .Note: As a way of getting at those specific questions. 3. b. Have Finnvold and the Management Committee adjourn to an off-site meeting to develop a vision and strategy for NCO. Involve employees in discussions with senior management about what’s wrong with NCO. 5. Urge the Chairman to reconsider allowing National Bank units to outsource computer services. within the first week). what they would do in the longer term. Create a core group of employees from all functions and levels to develop a vision statement for NCO’s future. they should be able to suggest what they would do immediately (say. Then debrief the groups to look for areas of agreement and disagreement. 6. Review the list of possible interventions below as you develop an implementation plan for NCO. I like to use a group exercise. 10. 11. 9. 1. Managing Transformation at National Computer Operations Assignment Questions for Students: a. Prepare an implementation plan for change that would enable Gar Finnvold to create a fully competitive computer service within two years. How could Finnvold conduct an organizational diagnosis that would lead off his implementation? Be specific about how he could ensure mutual engagement. 8. Allay fears by assuring employees that no further layoffs will occur. Survey current customers to determine their level of satisfaction with NCO services. Evaluate all middle managers to determine whether they possess the requisite skills—redeploy those who don’t elsewhere in the bank. Divide the class into groups of five or six students. Distribute copies of the 12 potential interventions listed below and ask them to devise an action plan for Finnvold. 12. Copyright © 2010 Pearson Education. and what—if anything—they would not do at all. 7. Introduce a bonus system that ties a portion of employees’ salary to overall performance of NCO. Have Finnvold and the Management Committee conduct an industry analysis to understand the dynamics of the computer service business and marketplace.

Although I wouldn’t do this immediately. This is the beginning of dialogue and diagnosis. They will probably need an external facilitator to help ease the dialogue. of course. distribute the specifics of the bids to all NCO employees. Possible Answers: Remember. the last thing this organization needs is less performance pressure. I will argue later in the text that compensation should be a lag rather than a lead variable to motivate behavioral change. there are no right or wrong answers. It is far too early in the change process to be thinking about redoing the compensation system. 6. at best. and I like it. This is a topic that will be dealt with more fully in Chapter 6 (Human Resource Development). Allay fears by assuring employees that no further layoffs will occur.a. No—don’t do this! Finnvold. NCO employees all need to learn how out of line they have become with external competitors because they will have to be facing those competitors soon. After new behaviors have been identified and training has been offered. 3. Evaluate all middle managers to determine whether they possess the requisite skills—redeploy those who don’t elsewhere in the bank. Copyright © 2010 Pearson Education. publishing as Prentice Hall 33 . a longer-term intervention. This is. Great idea! Do this right away. Plus. 2. This idea was suggested by a student in one of my classes. Redo the compensation system to tie a larger portion of an individual’s pay to an assessment of that employee’s performance. emphasizing individual performance may hurt Finnvold’s ability to create collaboration. it will have to be done at some point. So why not do this right away? 4. Ask the Chairman to invite bids from external computer operation suppliers to outsource all services now provided by NCO. I will provide you with my ideas below—feel free to disagree with me! 1. it may be necessary to move out some employees. Plus. Involve employees in discussions with senior management about what’s wrong with NCO. 5. Task alignment theory says employees will be motivated to improve performance. Inc. Have Finnvold and the Management Committee adjourn to an off-site meeting to develop a vision and strategy for NCO. It meets Lewin’s requirement to build dissatisfaction with the status quo in order to motivate change. cannot really make that promise anyway.

Introduce a bonus system that ties a portion of employees’ salary to overall performance of NCO. Students may complain that it contradicts number 6: isn’t this top management’s job? Well. Urge the Chairman to reconsider allowing National Bank units to outsource computer services. Copyright © 2010 Pearson Education. Chapter 6 talks about how and when to position human resource development interventions. 9. So there has to be agreement on what the renewed strategy is! 7. They might also consider how to involve employees in their discussion. changing the compensation system may have to occur. On the other hand. but in reality it can be done quite quickly. Part of diagnosis must be to learn from customers. Have Finnvold and the Management Committee conduct an industry analysis to understand the dynamics of the computer service business and marketplace. it raises an interesting discussion of how and when to involve employees in discussions about the organization’s future. This could be an interesting debate. “Don’t they already know what their customers think about them?” Maybe. Sure. Other students will ask. yes. Create a core group of employees from all functions and levels to develop a vision statement for NCO’s future. but not now. but there’s nothing as powerful (or powerfully motivating) as getting an earful from your best customers. As I said earlier. but it probably should be put off. Inc. 10. Redo the performance appraisal form to include “customer responsiveness” as a criterion for performance evaluation. Another one of those ideas that is probably useful. In Chapter 1. No—the last thing you need to do is eliminate performance pressure from the organization. I like this idea as an immediate intervention. an organization-level bonus sends a symbolic message: we’re all in this together. especially with lead customers. 8. 12. 11.They better do this. we said strategic renewal drives required change. publishing as Prentice Hall 34 . Survey current customers to determine their level of satisfaction with NCO services. Some students may argue that this will take too long. but why not make the process of envisioning the future more inclusive? Anyway. and do this fast.

Inc. Analyze the requirements for building coordination and teamwork in an organization. From whose point of view is the case told? Copyright © 2010 Pearson Education. b.Again. After diagnosis. Learning Objectives 1. using as many levels and as many tools as possible. Discuss the dynamics of changing the design of an organization in order to impact patterns of behavior. Key factors include: integration and differentiation. Explore the main challenges posed by organizational redesign. the first step of change implementation is organizational redesign. control and creativity. something that should be done right way. Analyzing the Case 1. CHAPTER 4: Organizational Redesign Main Teaching Point Diagnosis provides the motivation for and target of change. 2. 4. Opening Case—Cross-border Integration at Airbus Key learning point of case: The case is designed to introduce students to the challenges of accomplishing integration across the 4 national manufacturing and design centers that existed within Airbus. NCO needs to create a culture of dialogue and involvement that includes continuous data collection. Define organizational design and differentiate between formal and informal design elements. These design choices will have to be reinforced with formal structures and systems – these will be addressed at a later stage (Chapter 6). decision-making rights. publishing as Prentice Hall 35 . high commitment. and teamwork. Key in the entire process is systematic mutual engagement. 3. discovery and feedback. This chapter analyzes the complexities of design choices made to support change efforts.

Inc. including the formation of transnational teams to create a well-integrated. that an organization calls upon in order to shape employee behavior (se exhibit 4-1. single company. For instance. 5. Copyright © 2010 Pearson Education. cabin design and installation in Germany. wing manufacturing in the UK and tail section manufacturing in Spain. the computer modeling software used in Germany was incompatible with that used in France. p. What did Gallois do to resolve the problem? He focused on coordination between the centers through a number of steps. both formal and informal.The case is told from the perspective of Louis Gallois. What was Airbus’ approach to production. The failure to coordinate and integrate created delays. 82). 3. publishing as Prentice Hall 36 . Each center focused on technological excellence and national price. This was not possible. What was the problem with this approach? The production of the A380 required extensive coordination across the national centers. Vocabulary—organization design refers to the arrangements. costing Airbus an estimated $65 billion in profits. Organizational Redesign A.an interconnected set of activities that converts inputs to outputs . 4. What problem did Airbus face? Airbus was facing major delays in the production of its A380 super jumbo jet – the largest passenger jet ever built with 50% more interior floor space than the nearest competitor.was based on 4 different national “centers of excellence” – avionics in France. CEO of Airbus in 2006. 2. its business process? Airbus’ business process . Introduction 1. Lecture Outline I.

later they were reinforced with formal structures. Definitions of relationships inside and outside the organization B. Compensation and performance measurement 2. Piloting Redesign 1. C. pay system changes and the like. 1. responsibilities. 2. Definitions of roles. The same thing was done with Airbus – first. targeting the entire organization and aligning multiple design elements with the new firm strategy. Formal design refers to structures and systems. Inc. Theory into Practice • Effective change implementation starts first with informal redesign in order to shape new behaviors. Changing Informal Design First 1. 3. Change pilots are a way out of this dilemma – they are change laboratories of sorts: small units or specific processes which can be Copyright © 2010 Pearson Education. Organizational redesign should occur in a systemic way. Looking back to the Asda case in chapter 2 illustrates the difference between formal and informal design. Reporting structures b.2. Supervisors were asked to stop being supervisors and become strategic leaders. formal design changes can follow as a way of reinforcing new patterns of behaviors. The difference between formal design and informal design: a. Organizational redesign is the process of changing an organization’s design in response to shifting dynamics in the organization’s environment. Only later was this change reinforced with performance measures. 1. Such a comprehensive approach is often intimidating and uncomfortable. publishing as Prentice Hall 37 . The transformation began with changing the informal design. and relationships 2. coordination and collaboration relationships were created. This is a change in how the job is defined. Informal design refers to the way people perform their tasks and how they work with others. 3.

Change pilots can focus on one business process: an interconnected set of activities that converts inputs to outputs. MDS traced service delivery from start to finish which led to making the process seamless. select units where the change is most likely to be successful. Inc. publishing as Prentice Hall 38 . • • When implementing change. experiment and learn before diffusing change throughout the larger organization. 4.targeted at the early stage of change implementation to experiment and learn. Understanding Design Challenges A. In selecting change pilots. 6. Change pilots offer an opportunity to focus attention. 5. seek early wins through pilot project. All organizations face common design challenges: -they all require some level of differentiated activity -they all need some amount of integration -they all require some type of control mechanism -they must decide how and where to locate decision making Copyright © 2010 Pearson Education. This change was later leveraged into other MDS units. an administrative support organization that was suffering from service quality problems. • II. early success builds credibility and momentum. Be careful in selecting the change pilots: early success builds credibility and momentum. Example of Midwest Data Services. Good selection criteria include: -self-contained unit or process with clear customer and measurable outcomes -unit or process of strategic company importance -unit or process that exemplifies future company state -unit or process where success is most likely Theory into Practice • The most effective way to change organizational design is to be systemic and strategic rather than piecemeal and haphazard. Major changes in business process were implemented in a pilot project with one customer.

Differentiation is necessary but not sufficient to achieve outstanding performance – it must be matched by integration. Inc. Differentiation and integration 1. and units in an organization to develop their own responses to their particular goals and unique competitive environments. Differentiation is the degree to which different functions. publishing as Prentice Hall 39 . SAP America is given as an example of a company that has grown with an emphasis on differentiation and now needs to emphasize integration as part of its strategic renewal. SAP America example 1. The challenge for companies such as SAP America is to achieve high integration without sacrificing differentiation.Three challenges are key: balancing differentiation and integration. regional operations. and units in an organization are allowed to develop their own approaches in response to their particular goals and unique competitive environments. departments. • Theory into Practice: use integration to enable the organization to achieve efficient operations among different functions. and allocating decision-making rights. 4. and division. 3. market-based. Theory into Practice: • Levels of differentiation must be matched by appropriate levels of integration. 3. Copyright © 2010 Pearson Education. departments. Theory into Practice: high differentiation enables different functions. each of which had its own processes for selling SAP software. C. interpersonal style and formality. balancing control and creativity. Lawrence & Lorsch identified 4 distinct dimensions of differentiation within organizations: goals. and units. time orientation. departments. 2. units. Integration is the required level of coordination across differentiated functions. 2. B. SAP structure was characterized by high levels of differentiation: highly autonomous. New president Coote worked on developing integration links between regions and consultants to optimize learning and service.

Environmental dynamism is the rate of change that is occurring in a firm’s external environment. combined with unified commitment to core values and business strategy -common. e.global teams . Environmental complexity is the number of external factors that impact how the organization operates. High levels of environmental complexity require high levels of differentiation. a. Lawrence and Lorsch note that the demands of differentiation and integration are inversely related. Integration can be achieved in various ways: -cross-functional teams .5. Two factors are critical: environmental complexity and environmental dynamism. A number of companies try to achieve control—mechanisms used to shape employee behavior—without sacrificing creativity. Inc. See Summary table in exhibit 4-3 on page 90. c. b. Theory into Practice: organizations operating in a complex and dynamic competitive environment will have to develop increasingly sophisticated mechanisms for integration to match the requirement for high differentiation. 6. 2. g. 1. Control refers to design choices called upon to shape employee behavior in alignment with the requirements of outstanding performance.strong sense of common purpose and direction. Creativity and control. The challenge for organizations in a high complexity/high dynamic environment is to achieve high levels of both differentiation and integration. publishing as Prentice Hall 40 . d. Copyright © 2010 Pearson Education. The organization’s environment determines the appropriate levels of differentiation and integration. well-understood values applied across business units D. High levels of environmental dynamism require high levels of integration. f.

3. Inc. F. Multidivisional organizations want to promote an “entrepreneurial zeal” among their units while simultaneously allowing for collaboration and exploitation of corporate-wide synergies. and overall organizational performance. Sun Hydraulics is highlighted as a company that uses organic-type controls. a common understanding of strategy. 2. Theory into Practice: allowing front-line employees to make autonomous decisions is intended to unleash motivation and creativity among those organizational members with the “best information” to make decisions. Robert McDermott. Multidivisional organizations such as Cisco Systems face a special challenge of achieving corporate coordination while allowing for divisional autonomy. United Services Automotive Association (USAA) is given as an example of a company whose president. Gore. flexibility. E. Allocation of decision-making rights 1. 4. rely on shared values and clarity about overall strategy and performance expectations. Synergies are the advantages of efficiency and effectiveness conferred by the combined effect of interaction and collaboration among multiple units. Also mentioned are: Southwest Airlines. United Services Automotive Association. Theory into Practice: • Traditional mechanistic control tools can create predictability and standardization but can undermine creativity. The special case of multidivisional organizations 1. and W. loosely defined roles and responsibilities. believed in pushing decision making down to front-line employees. which are intended to increase employee flexibility and creativity. Copyright © 2010 Pearson Education. 2. The ideal design is one that grants decision-making rights to “those who have the best information relevant to the decision” (Nohria) 3. Decision-making rights involve the determination of who should make what decisions in organizations. Organic controls involve an approach to shaping employee behavior that emphasizes shared values. publishing as Prentice Hall 41 . and collaboration. Nordstrom. • Organic controls.3. L.

SAS—are designed for higher employee commitment. Southwest Airlines. 3. publishing as Prentice Hall 42 . d. Employee commitment—the internalized desire of employees to expend energy and discretionary effort on behalf of the goals of the organization. information on competitors and feedback from customers. Copyright © 2010 Pearson Education. Measurement and reward systems for divisional executives tied to corporate performance. B. Clarity of organizational goals—employees at all levels and in all units are provided with an understanding of the goals and values of the organization as well as its strategic choices. costs. 2. Regular meetings among corporate and divisional executives. Shared information—employees kept informed about how the organization is performing. 95): 1. b. including the dissemination of data such as financial performance. Teamwork—teams designated to perform interdependent tasks. and the willingness to change. Task forces. Inc. Planning and budget systems. C. creativity. Theory into Practice: the challenge for multidivisional organizations is to allocate a high level of autonomy to separate divisions as a way of achieving marketplace responsiveness while simultaneously making corporate-level decisions that allow the exploitation of synergies across the divisions. Nordstrom. c. Creating high commitment involves a number of common design elements (see exhibit 4-4 on p. collaboration. III.4. profitability. Multidivisional organizations call on a number of mechanisms to achieve coordination without stifling autonomy: a. A. Building high commitment Theory into Practice: high employee commitment can improve organizational performance by enhancing productivity. Steak n Shake. Companies in almost every industry—Lincoln Electric.

4. Job redesign is an approach to building greater employee commitment. task significance. and formal training—to develop competencies consistent with their own needs and those of the organization. task variety. Theory into Practice: by enriching jobs along any or all of five characteristics—skill variety. that is. Skill variety—the degree to which a job requires a variety of different activities in carrying out the work. and/or to society as a whole. Task significance—the degree to which the performance of the task has a substantial impact on outcomes that are deemed to be important to employees. to the organization. c. Hackman and Oldman devised a model for job enrichments that uses 5 characteristics (see exhibit 4-5. Feedback—the degree to which carrying out work activities required by the job results in the individual acquiring direct and clear information about the effectiveness of his or her performance. publishing as Prentice Hall 43 . Job design refers to organizational expectations for how tasks will be performed in order to meet both individual task requirements and the overall performance requirements of the organization. task identity. b. Organic controls—control exerted through peer pressure. organizational culture. e. doing a job from beginning to end with a tangible outcome. facultative supervision. d. Autonomy—the degree to which the job provides substantial discretion to the individual in scheduling work and determining procedures for carrying it out. and expectations of outstanding performance reinforced through performance feedback. Copyright © 2010 Pearson Education. 1. 2. 97): a. 5. p. involving the use of a number of different skills and talents. Job enrichment is an especially powerful way of increased employee commitment. Inc. Task identity—the degree to which the job requires completion of a “whole” and identifiable piece of work. Individual developmental opportunities—employees provided an opportunity through a combination of mechanisms—job mobility. D.

Work team—by sharing responsibilities. page 99): a. Texas Instruments. speed-to-market and innovation are enhanced while costs associated with rework are diminished. 2. IV. well-integrated processes. Inc. 1. publishing as Prentice Hall 44 . Problem-solving team—by bringing together individuals from multiple functions. C. developing multiple skills. Project management team—the multiple functions and tasks of the value chain are linked in order to enhance quality and customer responsiveness. Cross-functional teams are teams made up from representatives of multiple organization functions typically intended to achieve required coordination along a chain of inter-related activities and processes. Product development team—through concurrent rather than sequential development activities. Organizations are increasingly relying on teams: Pacific-Bell. problems associated with hand-offs and crossfunctional interactions can be creatively addressed. and performing varied tasks. motivation and quality are enhanced. Teams are interdependent groups with shared responsibility for an outcome. General Mills. Different team types (exhibit 4-6.autonomy and feedback—organizations can increase the motivation and commitment of employees performing those tasks. Pratt and Whitney. Building teamwork A. 4. 3. Creating Effective Teamwork. Effective teamwork derives from four design factors (exhibit 4-7. B. Shared purpose—effective teamwork starts with the need to create a central purpose focused on company-wide goals and equally accepted by all members. D. page 98) 1. . Theory into Practice: Use cross-functional teams to help create seamless. E. Copyright © 2010 Pearson Education.

Formal and informal design elements are different. Theory into Practice: • Don’t just place employees on teams and expect the performance benefits of teamwork. effective implementation targets informal design elements first. they take full responsibility for and joint ownership over every aspect. Team empowerment—unless affirmative actions are taken to equalize power. • When members of a team feel equally responsible for the outcome of their efforts. organizations can take care to ensure that team members have the appropriate skills to perform the task effectively. • Creating effective teamwork requires providing a group of individuals with shared purpose and responsibility. organizations need to create the context required for teamwork. Inc. Copyright © 2010 Pearson Education. organizations need to make sure teams are buffered from traditional hierarchical power and are allowed to work across functions. c. Effective change implementation addresses informal design matters at the early stages and formal design elements later in the process. empowering those individuals to make shared decisions.b. and making sure they have the competencies and resources required to be effective as a team. • At least in the early stages of change. every input and every outcome of the team’s task. Conclusion A. the functional organization will likely overwhelm. members evolve beyond seeing themselves as individuals with narrowly defined and measured outcomes. B. Theory into Practice: organizational design involves both formal and informal elements. V. d. Instead. Team enablement—providing team members with the required skills and resources. Shared responsibility—on effective teams. • In order to encourage teamwork. publishing as Prentice Hall 45 . teamwork is enhanced. and then addresses more formal elements like structure and systems later in the process. every contribution.

1990). Competing By Design: The Power of Organizational Architecture (New York: Oxford University Press. J. “From Control to Commitment in the Workplace. Richard Hackman and Greg R. Richard E. 1997). Robert Kanigel.Additional Suggested Reading • • • • • Allan Afuah. Oldham. Lorsch. 1980). Taking Charge and Letting Go: A Breakthrough Strategy for Creating and Managing the Horizontal Company (New York: Free Press. 1995). Copyright © 2010 Pearson Education. Designing Team-Based Organizations: New Forms for Knowledge Work (San Francisco: Jossey-Bass. Michael Goold and Andrew Campbell. Organization and Environment: Managing Differentiation and Integration (Boston: Harvard Graduate School of Business Administration Division of Research.. Nadler and Michael L. Differentiation emphasizes autonomy and independence. Susan Albers Mohrman. Tushman with Mark B. while integration emphasizes collaboration and interdependence. Why do organizations find it so difficult to address the requirements of differentiation and integration simultaneously? Differentiation and integration work at cross-purposes and seem to be contradictory. “Do You Have a Well-Designed Organization?” Harvard Business Review (March 2002). Nadler. Lawrence and Jay W. Mohrman. publishing as Prentice Hall 46 .” Harvard Business Review (March-April 1985). Work Redesign (Reading. MA: Addison-Wesley. The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (New York: Viking. Danny Miller. Cohen. Susan G. • • • • • Chapter Discussion Questions 1. and Allan M. The Icarus Paradox: How Exceptional Companies Bring About Their Own Downfall (New York: Harper Business. 2004). Paul R. Jr. 1997). 1995). Walton. Bert Spector. To do both simultaneously is quite difficult. 1967). Business Models: A Strategic Management Approach (Boston: McGraw-Hill Irwin. Inc. David A.

frequent turnover. autonomy allows faster decision making at the divisional level. goals and strategy 3. Disadvantages are that divisions may end up working against each other and undermining the efficiencies of the entire corporation. But today’s managers must seek to build such commitment in an environment which has replaced loyalty and seniority with free agency. coordinated response will rely far more on high levels of employee commitment than it will on hierarchy and top-down control. Inc. and employment insecurity. Plus. Do you agree or disagree? Explain. The chapter lists a number of coordinating mechanisms: • • • • • Planning and budget systems Regular meetings among corporate and divisional executives Task forces and various teams Measurement and reward systems for divisional executives tied to corporate performance Common purpose. There is plenty of evidence that creativity is generated not just by individuals but also by working in collaboration with others. publishing as Prentice Hall 47 . The increasing importance of financial analysts and investors puts greater pressure on short-term results which can lead organizations to sacrifice long-term effectiveness. values. Some people have argued that there is far too much emphasis on “teamwork” in today’s business world and that the danger is that individual creativity and initiative is being sacrificed. What are the advantages and disadvantages of allowing for high levels of autonomy within divisions of multidivisional organizations? What are some effective means of coordinating efforts among divisions? Autonomous divisions have the ability to be highly responsive to their customers and their competitive environments. In addition. 4. organizations are not simply seeking creativity. they need to bring Copyright © 2010 Pearson Education. Those contextual changes do not make commitment any less vital. Why is it so difficult to achieve high levels of employee commitment within today’s business organizations? List the factors that are working against commitment and the potential benefits to be achieved through high commitment. they do make the achievement of commitment more challenging. A competitive environment where advantage depends on rapid.2.

Finally. their teams can fail to unleash the creativity of individuals. social loafing and groupthink can work against creativity. Inc. managed by Steve Cook. Copyright © 2010 Pearson Education. The case focuses on the Book Publishing Division. textbooks and auxiliary materials. a century-old developer and manufacturer of specialty papers. why not attack the issue right upfront? Case Discussion – Performance Plus Introducing the Case Maine Papers (MP). Plus. You are going to have to change them eventually. As part of this effort. At this point. if team members are not given the appropriate skills. On the other side. it might be argued that employees need to have a degree of certainty about structures and systems. headed by a cross-functional PP team. a product that enhances the durability of book binding – to the products. On the other hand. This is why he launched Performance Plus (PP). Do you agree with that theory? Explain your thinking. forces like conformity. the team is behind schedule and working on a May deadline. The BPD is subdivided into 3 units: trade books. The chapter makes the argument that informal design change allows for experimentation and learning. Cook believes that the publishing industry has changed drastically. Different team members bring different perspectives and concerns. a full-service program to meet the needs of all markets. publishing as Prentice Hall 48 . The PP team has been functioning for a year and meets once a week. it intends to double the percentage of revenue generated by new products. blurring the traditional distinctions between book markets. has been engaged in strategic renewal. The chapter argues that change efforts should address informal design before addressing formal design.creative ideas (new products and services) to market. Formal design change cements new responsibilities and can lead to resistance and the requirement to redraw the lines again. Part of the issue deals with the inclusion of a new feature – Strong Bond. That commercialization of creativity (what can be labeled organizational innovation) requires collaborative effort. 5. it would be fair to say that many organizations overuse teams.

Because the PP team is the pilot project within BDS. In this case. Cook does need to make sure that the team meets the 4 different effectiveness criteria (p. What steps should Steve Cook. in addition. integration. while integration requires collaboration and interdependence. and decision making. a strong sense of common purpose and direction. Cook may want to consider if there are incentives and rewards for the PP team to work together effectively. and has access to all necessary information pertaining to its project functioning. In order to effectively accomplish integration. 91). or if members are rewarded instead for retaining their unit focus. it is important that MP and BPD consider the business process. Cook needs to ensure that it is successful. because the old structures are still in place.This case brings together many of the key elements of this chapter and serves as an effective review and integration device. However. The unit members seem to be retaining their differentiated perspective. this would be an appropriate change (p. In addition. has been properly trained. and possibly style and formality (p. PP seems to be designed as a way to informally redesign the organizational structure. 1. as a general manager. 88). take to ensure that the Performance Plus team delivers a high quality product on time? When creating strategic renewal. Shifting from mechanistic to organic controls would help here (p. 99). time orientation. PP creates integration between 3 differentiated functions. Differentiation requires autonomy and independence. This does not yet seem to be in place in the team. focusing on client service – this is good. 90). Inc. each bringing with them a different view of goals. combined with a unified commitment to core values and business strategy is needed (p. What have been the main causes of the difficulties being experienced by PP team members? Differentiation and integration require very different kinds of approaches. publishing as Prentice Hall 49 . Finally. Copyright © 2010 Pearson Education. 91) as well as a clarification of decision-making rights. one should ask if the team has been properly trained in team process. a cross-functional team is a good move. In light of the complexity and dynamism of the environment. 2.

4. Analyze how an organization can help employees gain the new skills required for the change effort. In Step 2 of effective change implementation. Inc. Assuming that the team has worked through the key issues of shared purpose. followed by Step 3. publishing as Prentice Hall 50 . informal organizational redesign creates demands for new patterns of behavior. Now. the organization begins by establishing a strategic renewal direction for using shared diagnosis. Chapter 5: Developing Human Resources Main Teaching Point Using the sequential model of change implementation. attitudes and behaviors of employees with the strategic requirements of performance. decision making and then team commitment to the decision. Understand how to match selection and recruitment with the shifting requirements of behavioral change. not everyone seems to understand the questions pertaining to deadlines. 2. skills. Looking particularly at the Strong Bond question. which involves the aligning of the talents. enablement and empowerment.3. not knowing if Strong Bond is important to the client or not would be a real concern. Present the particular choices available to organizations as they seek to align employee competencies with the requirements of the organization as part of their change effort. Learning Objectives 1. Analyze the role and usage of removal and replacement in implementing change. Similarly. Copyright © 2010 Pearson Education. production schedules and other logistics. how would you suggest that the issue be resolved? A key question to ask here is if the team is getting the necessary performance information. the organization focuses on employee development. 5. organizational leaders need to find ways of developing the human resource capabilities of their employees. shared responsibility. and in Step 1. For instance. 3. Define human resource development and its role in implementing strategic renewal and organizational change. the question here would come down to information gathering.

This requires new competencies: employees need to become customer focused. 2. Students can at least raise questions about time and costs. What behaviors will need to be changed? Grand Union’s human resource VP has identified the need for behavioral change to support the new strategy. Copyright © 2010 Pearson Education. along with training. students can look at the make/buy option. 5. Analyzing the Case 1. responsive and knowledgeable about the store and managers need to learn how to motivate and support employees in their new behaviors. 3. they will differentiate their chain with higher-end goods and customer responsiveness. 4. rather than compete with the likes of WalMart. as well as the degree to which all employees can alter behaviors as required by the renewed strategy. What is Grand Union’s new strategy? To move “up-market” and offer high-end products and services (with.Opening Case—Changing Employee Behavior at Grand Union Key learning point of case: To identify the interdependence between strategic renewal and behavioral change. At this stage. higher profit margins) to wealthier customers. From whose point of view is the case told? The case is told from the point of view of Bill Reffett. Make means developing employees with the required skills among the current work force. publishing as Prentice Hall 51 . Inc. Buy means hiring new employees that can fit into the new system. senior vice president of human resources. How should Grand Union executives go about creating this behavioral change? Recruitment and selection will have to change. Why is Grand Union changing its strategy? Executives have decided that. presumably.

development. skills. executives face a make/buy decision. 111 shows the steps and dis/advantages for Make/Buy Options for Changing Human Resources. Human resource development and change. publishing as Prentice Hall 52 . Copyright © 2010 Pearson Education. under the right circumstances. Developing skills Theory into Practice: • Training can help convey to employees how their competitive environment is changing and why their own behaviors need to be altered. Training 1. and attitudes within an organization to enable the effective implementation of shifting goals and objectives. Exhibit 5-1. organizational leaders need to align the selection. This is not an either/or choice and most change efforts will require both. A. 3. Make means training and developing within current employees’ required new competencies and behaviors. • Training can. help employees gain new behavioral competencies. Two components of training: a. p. Inc. B. 2. II. Building knowledge b. training. Developing competencies to support change.Lecture Outline I. 4. Human resource development—the creation of required knowledge. In developing required competencies. Buy means recruiting and selecting new employees who fit with the desired change. and removal of employees with the behavioral requirements of the desired change. Theory to Practice: in order to develop required human resource competencies. 1. A.

Feedback is a key element in developing new skills and competencies. provide feedback. B. inadequate resources and/or unchanged responsibilities? Theory into Practice: • Watch out for fade-out – whatever is learned in a training opportunity can lose its impact over time. c. d. (1) Supervisory/managerial support—does the employee’s supervisor/manager endorse. a. and encourage. Training fade-out refers to the failure of behaviors learned as part of a training exercise to transfer to on-the-job experience or to disappear over time. Development 1. and reward new behaviors or does that supervisor/manager discourage or oppose the application of new skills and behaviors? (2) Peer support—do the employee’s peers support the application of new skills and behaviors. or do they ignore. Inc. a. Make sure that feedback maximizes its impact on behavior.2. a. General Motors’ Livonia plant used experiential training to help deliver not just new knowledge but also new behaviors (Chapter 1). b. Copyright © 2010 Pearson Education. Training fade-out will erase the benefits of training programs unless certain conditions are met. Experiential training can encounter the problem of fade-out. inquire about that learning. Experiential training focuses on behaviors and allows employees to “try out” new behaviors and receive feedback. Organizations can use experiential training in order to develop skills and instill new behaviors. discourage and even attempt to prevent the application of new skills and behaviors? (3) Work conditions—does the employee have the opportunity to use new skills and behaviors when back on the job or are new skills and behaviors overtly or covertly discouraged by time pressures. provide feedback. publishing as Prentice Hall 53 . encourage.

Key reasons are a perceived lack of validity and accuracy. Inc. it helps to identify gaps between current and needed skills c. it identifies poor performers and potential future leaders d. Developing new competencies in organizational executives is a key component of strategic renewal and change. formal performance appraisals: a formal. Make sure that feedback moves employees toward new behaviors. subordinates. it targets required T&D efforts 3. organizations can use: .b. Subordinate performance often deteriorates as a result of performance appraisal. To combat this problem. publishing as Prentice Hall 54 . Employees see the appraisal as subjective and unrelated to the real demands of the job.The 360◦ feedback system which uses performance feedback gathered from peers. supervisors and customers -Self-appraisal which actively involves the employee in the appraisal process Theory into Practice: • • Formal performance appraisals often fail to bring about the desired behavioral change. Performance feedback is valuable because: a. Copyright © 2010 Pearson Education. regularly scheduled mechanism designed to provide employees with performance feedback. Top Management Development 1. C. ongoing feedback b. it allows an assessment of the current state of performance b. Performance evaluation takes place simultaneously in two forms: a. 4. 2. Most performance appraisal systems are highly ineffective. 5. Self-appraisal and data from multiple sources can help increase the validity and effectiveness of performance feedback. typically resulting in a performance rating. informal.

Both behavioral and cognitive interventions are useful but on-the-job experience is essential. or horizontal structures—all of these work to develop generalists far earlier in their careers and place a greater premium on interpersonal competencies. 117): a. Consider the buy/make options – there are advantages and disadvantages to each. Organizations can take specific steps to develop leaders capable of leading change (see exhibit 5-2. The implementation of succession planning is often flawed by inadequate—even non-existent—follow up. increased span of control. looking at both performance and potential. p. d. Career mazes—explicit lateral movements replace rapid upward functional mobility with a far broader set of experiences. Internal candidates can be developed through succession planning: a formal process in which top executives regularly review all managers at or above a certain hierarchical level. Slower velocity to allow greater learning—so-called fast track managers often fail to stay in one position long enough to deal with the consequences of their actions (and the reactions of employees). Theory into Practice: • Behavioral change requires attention to the behavioral pattern of those at the top of the organization as well as lower-level employees. 2.a. People Alignment: Selection Copyright © 2010 Pearson Education. c. Learning about and dealing with the consequence of actions requires greater length of tenure in a position. d. Explicit international movement—assigning managers to work in a non-native culture and environment for a significant period of time develops cross-cultural awareness and skills that can be vital in a culturally diverse environment. and commitment to the organization as a whole is enlarged. c. matrix. III. b. Functional blinders are removed. and devising developmental plans for their most promising individuals. general management skills are enhanced. Inc. Structural and design changes—delayering. publishing as Prentice Hall 55 . b. • Companies can manage the careers of executives in order to create a continuous stream of leaders from inside the organization capable of overseeing and leading effective change.

2. looks for recruits with the right personality.” Personality. 4. Must be able to blend well with Richards’ playing.” This section deals with the processes of selection and removal that are key to step 3 in the change process: people alignment. See Case example of the Rolling Stones’ search for a new lead guitar player to replace Mick Taylor. Selecting the “right” employees 1. Inc. 5. figuring that it can train the appropriate skills after the hire. 3. Not only are the Stones still going strong. Organizations need to think about attracting and hiring the “right” employee. Disney World. Individuals are attracted to organizations in part because of their perception that they will fit in. Had he been doing so. It’s as close as that. behavioral. Theory into Practice: Copyright © 2010 Pearson Education. he would have hired Jeff Beck. Richards says explicitly that he was not looking for the best guitarist (person-task fit). for examples.” says Richards. but Wood remains their lead guitarist. that their individual personality matches the perceived personality of the organization. Employees that were a good fit in the past may not be a good fit in the future. Must be somebody band members could “live with” on the road. “Fit” means that the employee meets organizational needs requirements: technical. ‘and we don’t know who played the last lick. “This is an English rock and roll band.Successful transformation depends on “getting the right people on the bus” and “getting the wrong people off the bus. A. he was looking for someone who will fit into the Stones (person-organization fit) based on the following criteria: • • • Must be British.” Selection based on person-organization fit can create long-term. “Woody [Ron Wood] and I can start playing together. Instead. adaptive organizations. attitudinal or some combination. that is. after all. publishing as Prentice Hall 56 .

2. Inc. 4. Looking for the “right” person involves some combination of person-task and person-organization fit. employees who possess the values and competencies required of the change—will reduce time. Person-organization fit—screening and selecting employees based on congruence between patterns of organizational values and patterns of individual values. Criteria for Selection 1. Screening for Fit Theory into Practice: • Selecting the “right” employees—that is. B. publishing as Prentice Hall 57 . and other revenues required in later developmental interventions. reproduction and “cloning” tendencies on the part of supervisors. b.• Employees attracted to and selected by the organization in an earlier phase are not necessarily the right employees for the newly defined strategies and goals of the changing organization. (2) Patagonia’s CEO says that it is easier to teach skills than to alter personality. 3. Person-task fit—screening and selecting individual employees based on their ability to perform certain tasks and fill specific jobs. a. Copyright © 2010 Pearson Education. The definition of “right” employee is likely to change as an organization’s competitive environment and strategy changes. Return to Putting the Customer First at Grant Union (Chapter 1) to see how the “right” employees from the past are the “wrong” employees for the future. cost. (1) Disney World’s focus on “personality” suggests an emphasis on person-organization fit. (3) Microsoft considers creative problem solving the cornerstone of the culture. C. the selection process should focus on attracting and hiring individuals who already possess the desired traits that are both critical to performance success and that are most difficult to develop. • To support strategic renewal. An explicit and shared understanding of the new behaviors required can help to overcome the dangers of selective perception.

a. 1. Exhibit 5-3. Minuses: (1) Produce homogeneous work force (2) May be resisted/resented by applicants b. Pluses (1) Can focus on specific behaviors (2) Valid supplement to other screen mechanisms (3) Validity increases when multiple interviewers score results c. publishing as Prentice Hall 58 . Minuses (1) Deal with recounted rather than actual behaviors (2) Can be slow and expensive to administer c. selection. Behaviorally-anchored interviews. p. a. Selection Techniques: In order to screen for person-organization fit. Exhibit 5-5 on page 124 summarizes three of them. organizations have a number of techniques available to them. Behavioral simulation. Pluses: (1) Easy to administer and score (2) Inexpensive to use on large scales (3) Simple to compare (4) Valid job success predictors when used in combination with other mechanisms c.• It is far easier to teach new skills than to develop new values. a. 122 shows examples of BAI questions. Copyright © 2010 Pearson Education. Inc. b. or assessment process. Paper-and-pencil tests are standardized. selfadministered and quantifiable tests used as part of a screening. Paper-and-pencil tests. b. Behaviorally-anchored interviews in which potential hires are asked to recount specific examples from their past experience to illustrate how they have responded to challenges and opportunities.

b. Workforce reductions and employee layoffs may be effective in improving short-term performance but will not by themselves produce the human resource competencies required to support strategic renewal and sustain outstanding performance. 3. Fair Process: Managers need to be sure that the process of removal and replacement is viewed as “fair and just. 1.” Copyright © 2010 Pearson Education. usually in a structured role play exercise with external observers. Exhibit 5-4 on page 123 shows components of a behavioral simulation. companies will have to engage in some degree of removal and replacement.a. 2. Current employees viewed the behaviors of the applicants and used that to make hiring decisions. c. Behavioral simulation asks potential hires to demonstrate behaviors. IV. d. Effective change requires “getting the wrong people off the bus” as well as “getting the right people on the bus” by removing and replacing employees who have not made the required behavioral change. Inc. publishing as Prentice Hall 59 . Minuses—can be slow and expensive to administer. People Alignment: Removal and Replacement During a process of strategic renewal. Asda is offered as an example of using removal and replacement effectively. Pluses—focus on actual rather than recounted behaviors. Removal and replacement is a change tool that targets individuals who cannot or will not adopt behaviors required of the redesigned organization. Other examples mentioned: Rubbermaid. A. Cummins Engine asked job applicants to go through team-based role-play exercises. B. Theory into Practice: • Don’t count on workforce reductions and employee layoffs to produce the human resource competencies required to support strategic renewal and sustain outstanding performance.

Fair process is a widely shared perception that decisions are being made on the basis of valid criteria. In the redesign phase. 2. Step 1. Unless removal and replacement decisions are viewed by employees as being fair in process. Part of the model is the identification of new behaviors. Explanation: making transparent the thinking that underlies decisions c. and on selection of new Copyright © 2010 Pearson Education. employees are offered the opportunity to develop these new competencies in Step 2. publishing as Prentice Hall 60 . the decisions can undermine commitment to change implementation.Validity: are decisions being made according to personal biases and beliefs of individual supervisors (low fairness) or in alignment with the clear requirements of outstanding performance (high fairness)? . and training and development. Engagement: involving individuals in decisions that impact them b. skills and competencies. Inc. employees create a behavioral model for responding to these realities. and appropriate in sequence.1. Perceived fairness will be enhanced if decisions are preceded by shared diagnosis. V. Fair process derives from three factors: a. pointing to the need for strategic renewal. the process of people alignment focuses on removal and replacement for those who cannot or will not develop. valid in content. Conclusion A. Diagnosis surfaced a misfit between current behaviors and competitive realities. Through a process of mutual engagement. Some other factors to consider: . D. C. B. organizational redesign. In Step 3. Expectation clarity: making the decision criteria clear 3.Due process: are decisions seen as final and arbitrary (low fairness) or are employees able to voice their opinions and appeal what they consider to be invalid conclusions (high fairness)? .Sequencing—are decisions made before an employee is given an opportunity to acquire the required skills (low fairness) or are employees given an opportunity to develop and display the desired new behaviors (high fairness)? 4.

The Competent Manager: A Model for Effective Performance (New York: Wiley. and Clifford E. Jr. Wayne F.” Personnel Psychology 48 (1995). Jennifer Chatman. Leonard A. Harold W. 1992). Noe. • • • • • • • • Chapter Discussion Questions Copyright © 2010 Pearson Education. Douglas T.” Personnel Psychology 40 (1987). 1998). and B. and D. Benjamin Schneider. Goldstein. is the reinforcement of new behavior patterns – this is the focus of the next chapter. Gerald E.. “Hiring for the Organization. James R. Slocum. Hall. Maintaining fairness is key in this process. Ledford. Heskett. Employee Training and Development (Boston: McGrawHill Irwin. “The Service-Driven Service Company. Benjamin Schneider. Morris. CA: Sage Publications. “The ASA Framework: An Update.” Harvard Business Review (September-October 1991). John W. Step 4. Nathan. Cascio.” Academy of Management Executive 5 (1991). Brent Smith. “Dilemmas in Linking Succession Planning to Individual Learning.” Administrative Science Quarterly 36 (1991). Young. publishing as Prentice Hall 61 . Raymond A. “Downsizing After All These Years” Organizational Dynamics 27 (Winter 1999). Organizational Justice and Human Resource Management (Thousand Oaks. The final stage. E. 2002). Robert Folger and Russell Cropanzano. “Matching People and Organizations: Selection and Socialization in Public Accounting Firms. Additional Suggested Reading • • Richard E. Schlesinger and James L. Boyatzis.employees who fit with the strategic requirements. Not the Job. “The People Make the Place. Inc." Human Resource Management 25 (Summer 1986).

opinion. points of view. do they understand what changes are needed in their everyday behavior? The second step is training and development. Employee-owned assessment of the implementation of the new learnings is phase 2 and a 360-degree feedback program will be helpful here. health status. All of the employees and all of the managers should be invited to participate in an extensive training program that focuses on customer service and product/store knowledge. selection for fit with the strategy of customer service. cultural values. Training should include employees and managers. The last thing an executive would want is a workforce that is devoid of diversity of experience. All new hires should be selected with the new performance criteria in mind. Have the employees been involved in the diagnostic process? Is the list Refett’s list or does it belong to everyone? If employees were involved. The change process will be enhanced by such diversity. At the same time. 2. The goal of any effective change implementation is to increase required collaboration while allowing for required independence and differentiation. Successful completion of the program is phase 1. but now with more stringent performance expectations. employees and managers are not necessarily prepared for or skilled at dealing with diversity and this may be part of the T&D agenda. 3. publishing as Prentice Hall 62 .1. etc. Inc. talent. Diversity should be viewed as a positive. Is the increasing diversity of the workforce—in terms of race. Hiring for organizational Copyright © 2010 Pearson Education. Any employees and managers who do not show sufficient change within a generally agreed upon time period should be given the option to resign or be retrained. What specific suggestions would you have made to Bill Refett at Grand Union in order to develop the required human resource competencies to support the firm’s new strategy? Refett needs to begin with a process of mutual engagement that connect the existing employees with the strategic change. and so on—a positive or negative in terms of helping organizations make successful transformations? Explain your answer. gender. national origins. What are the main differences between hiring for task and hiring for organizational fit? Why is hiring for organizational fit so difficult to do? What techniques might an organization use? Hiring for task involves identifying specific technical requirements and making sure new applicants possess those skills.

encourage. publishing as Prentice Hall . 4. The process of screening for person-organization fit is costly and resource demanding. to get employees to see removal and replacement as a fair and equitable process. if not impossible. provide feedback. Inc. making people more risk averse and less likely to change. and reward new behaviors. managers. The author sees removal and replacement as a key element of devolving human resource competencies. It may be difficult. Managers may get impatient and remove employees who could learn new behaviors. it is not easy to do for five reasons: 1. What specific recommendations would you make to an organization seeking to avoid training fade-out? • • Supervisors.fit attempts to find individuals who will fit into the desired future direction of the company. 63 • • Copyright © 2010 Pearson Education. 2. Even when hiring for organizational fit. companies may make the mistake of finding employees who fit with the past and not with the future. Although hiring for organizational fit may make sense. 3. 5. Employees should have the opportunity to use new skills and behaviors when back on the job. Organizations have to beware of using the person-organization fit approach in ways that screen out diversity. thereby undermining trust and commitment. 4. The techniques for screening are not as easily applied and interpreted. 5. Do you agree or disagree? Why? Let’s start with potential disagreements: • Removal and replacement may be seen as a threat to the workforce. and executives should publicly and visibly endorse. The organization has to be able to identify the desired culture and specify the individual attributes that will fit into that culture.

employees will become cynical about the true intentions of management or the ability of management to implement change effectively. is trying to make a shift from its 25-year focus on IT hardware to software and infrastructure services. not in the past.” President Vineet Nayar wants to implement a transformational change designed to have the company focus on “high valueadded integrated service consulting and outsourcing. Nayar’s strategy involved the following aspects: • • • Pay more attention to internal operations and emphasize innovation. Employees rather than leaders would be the source of improvement and innovation. “working with clients in areas that impact and redefine the core of their business.• Removal and replacement may remove valuable skills and loyal individuals from the organization. but look at skills needed for success in the future. Although these points raise real concerns. Invert the organizational pyramid. by following an appropriate sequence. 64 Copyright © 2010 Pearson Education. Removal and replacement must carefully consider skills. • • • Case—“Employee First. managers will give employees time to learn and utilize new skills before making replacement and removal decisions. Introducing the Case HCL Technologies. Explain how – or if – Vineet Nayar’s new strategy for the company and his approach to human resource development (HRD) reinforce each other. an international organization headquartered in India. Customer Second”: Vineet Nayar Transforms HCL Technologies. effective management of the process can deal with those concerns: • If managers leave resisters in place far too long. By following processes of fairness and validity—which will be helped by appropriate sequencing of removal and replacement in the implementation process—employees are more likely to see the intervention as fair. Again.” 1. publishing as Prentice Hall . Inc.

Inc. were the strategy and the approach developed through mutual engagement and shared diagnosis? It seems. HCL needs a strategic change and unless the change happens.To accomplish this. Do you see potential problems implementing Nayar’s human resource initiatives within India? The initiatives are contrary to traditional cultural relations in India. and “trust pay. Specific steps included 360-degree performance evaluations for top managers. it is important that behaviors be reinforced through changes in the formal structure and reward system.e. Often described under the heading of “learning organizations. open communication channels. This may be demanding quite a bit. publishing as Prentice Hall 65 . e. Students will probably mention that these kinds of structures run counter to tradition – this is true and that also means that they need to be supported with not only T&D.” selected organizations across the globe are finding many benefits of open and inverted organizations. Copyright © 2010 Pearson Education. transparent. At the same time. accountable. particularly those related to status. 2. Nayar developed his “Employees first. Are Nayar’s ideas about HRD transferable to other industries and countries? Nayar’s ideas about the kinds of changes that are needed in organizations are already being implemented in other industries and cultures. form and face saving. that even his top managers were startled by publicly posting the results of the evaluations. but also with selection/removal. Nayar is expecting his managers and his employees to be able to step away from these traditions to follow the strategic plan for HCL. Customers second” initiative. i. 3. position. training programs. Opening up communication channels. the company may not survive.. Strategic selection and removal may need to be considered in order to further implement the change. It appears that many employees are satisfied enough to stay – turnover has reduced somewhat. What is not clear from the description is if the right process was followed. The new strategy for the company would require increased integration and enhanced training in order to produce effective service consulting. with publicly posted results. The focus was on employee development and producing bottom-line results.” The result was a high level of organic growth and improved retention. designed to create a culture that was unique. Finally. value-driven and hierarchically inverted. inverting the pyramid and training would all help with this. Also.g.

This is an example of moving from a multinational to a global organization—one that allows seamless responsiveness to global customers. From whose point of view is the case told? Lou Gerstner. Copyright © 2010 Pearson Education. systems and technologies. What renewed strategy is Gerstner trying to pursue? He is trying to position IBM as a truly global organization in response to global customers such as American Express. organizational leaders reinforce the new behaviors through what might be thought of as the “hardwiring” of the organization: structures. publishing as Prentice Hall 66 . CEO of IBM. Opening Case—Global Structure at IBM Key learning point of case: The case discusses Lou Gerstner and IBM. Gerstner’s change implementation created resistance when he started with structural change. Students can begin to appreciate why structural change is most effective when it follows and reinforces rather than leads and forces new behaviors. Identify the major structural choices faced by organizational leaders and the behavioral implications of those choices. 2. Inc. Learning Objectives 1. 3. Analyze the role of information technology in impacting employee behaviors. Appreciate the role of compensation in shaping desired behaviors. Consider the requirement of aligning financial measures with the strategic goals of the firm. 4. Analyzing the Case 1.CHAPTER 6: Reinforcing New Behaviors Main Teaching Point At the final stage of implementation. 2.

2. Two questions must be answered: What structures do we use? How and when do we change structures? 3. Gerstner admits. not all) could have been avoided if country managers had been involved in the diagnosis and the redesign effort. 5. How effective has the change implementation been? Ultimately. Organizational Structure is the manner in which employees are subdivided into units and divisions as a way of focusing effort on the required tasks of the company. however. the country managers resisted and even rebelled. Predictably.” Some of that pain and tumult (although. What behavioral changes will be required? Gerstner has targeted the behaviors of IBM’s country managers. or b. it did work but it took three years. In the past. Choices of organizational structures 1. IBM has emphasized and benefited from high levels of autonomy within each country. Now.3. Inc. Lecture Outline I. Structures are often thought of as boxes and lines. undoubtedly. working with customer groups. Responsiveness to the external marketplace Copyright © 2010 Pearson Education. was “painful and sometimes tumultuous. How has he approached change implementation? Gerstner has taken his past experience at McKinsey & Co. The process. 4. and imposed their structure—globally-focused customer groups—on IBM. but the real structural question is what the organization focuses on: a. publishing as Prentice Hall 67 . Functional or technical activities. Selecting the Appropriate Organizational Focus A. Gerstner wants country managers to act as part of a highly interdependent team.

4. Organizations must focus on both, but typically prioritize their focus through different structures. Theory into Practice: • Organization structure is more than just boxes and lines; it is a way to focus the activities of the employees. B. Focus on Functional Excellence: 1. Functional structures focus on functional and technical tasks – example is given in exhibit 6-1 on p. 139. 2. Functional structure—an organizational design choice that groups people together in units based on common tasks and specialized skills. a. Open Markets, Inc. is given as an example of a start-up that moved to functional organization because, “as we get larger, we need a little more structure.” b. Functional structures lead to certain desirable behaviors. (1) Development of in-depth technical expertise (2) Clear career paths for employees (3) Discipline and efficiency c. Not all resulting behaviors are positive. (1) Employees focused on efficiencies and incremental improvements in existing processes are less likely to be creative, thus stifling innovation. (2) May evolve into low coordination among functional groups Theory into Practice: • Use functional structures to shape the development of technical skills and expert knowledge on the part of employees. • Organizations seeking to create seamless coordination across functions may find that the silos erected through functional structures get in the way.

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C. Focus on Marketplace Responsiveness 1. Divisional structure—an organizational design choice that groups people together in units based on common products, services, or customers – example is given in exhibit 6-2 on p. 141. 2. General Motors is an example of a product divisional structure: Chevrolet, Buick, Cadillac, Hummer, Opel, Pontiac, Saturn, Saab and Vauxhall. 3. Siemens is an example of an organization that uses multiple strategic business units – power, transportation, and lighting – each with its own set of autonomous divisions. 4. McDonald’s non-U.S. operations is an example of geographic divisional organization: United States, Asia/Pacific/Middle East/Africa, Canada, Europe, and Latin America, as was IBM prior to Gerstner (opening case). 5. Cisco Systems is as an example of a hybrid—three business-line divisions (enterprise, small/medium businesses, service provided) and several centralized functional areas (manufacturing, customer support, information technology, sales and human resources). 6. Positive behaviors—employees focused on particular customers or regions allows for marketplace responsiveness. 7. Negative behavior—potentially low coordination across divisions; costly duplication of functions. Theory into Practice: • Divisional structures enhance coordinated focus on the marketplace, but make integration across highly autonomous divisional units difficult to achieve. • Centralizing some functions, such as finance or marketing, may make sense economically, but organizations need to be careful that centralizing does not interfere with the goal of marketplace responsiveness. • Functional silos can exist within divisional structures. D. Dual Focus 1. Matrix structure—an organizational design choice that groups people by both function and product or product and geographical region example is provided in exhibit 6-3 on page 143.

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2. ABB is given as an example of a matrix structure with overlapping regional and market segment structure. 3. The most difficult part of a matrix structure is the dual reporting relationship – this violates the common assumption about the need for a clear and direct chain of command. 4. Matrix structures help support dual focus—on technical expertise and marketplace responsiveness—but will only be successful in organizations that can manage ambiguity, tension, and conflict effectively. Theory into Practice: • Organizations can move to a matrix structure to help support dual focus – on technical expertise and marketplace responsiveness. • Matrix structures will be most effective in organizations that can manage ambiguity, tension and conflict well. E. Focus on the Value Chain 1. Value chains are the separate activities that are performed in delivering and supporting a product or service. 2. Horizontally linked structure—an organizational design choice that groups people along the value chain activities and processes that produce, market, deliver, and service the firm’s offerings. 3. Horizontal structures often supplement rather than replace functional or divisional structures. 4. Company examples: a. Zara is given as an example of a company that uses teams to link together elements of the value chain in a way intended to provide competitive value. Exhibit 6-4 on p. 145 shows the Zara structure and the process by which it can bring a new product to market in 3 to 15 days. b. Companies that have been successful typically started out with unique value chain linkages: Dell, Southwest Airlines, and WalMart. c. Examples of organizations that have had difficultly changing their structure to adopt value chain linkages: Delta, Marks and Spencer, Kmart, Compaq, and HP.

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By blurring the distinction between value-added and non-valueadded costs. and unwilling—or unable—to make appropriate alterations in behavioral patterns. The key is support and reinforcement of the linkages Theory into Practice: Organizations can use cross-functional teams to achieve linkages across the various and interdependent activities of an organization’s value chain. Traditional accounting systems can work against the goals of change because they are typically built around annual budgets and operating plans. Adherence to plan is rewarded. 1. they should be used to reinforce new patterns of behavior that have been created in the earlier intervention steps. Copyright © 2010 Pearson Education. Structural interventions should not drive the change. A. not in terms of unfreezing. GE is given as an example of focusing employee attention internally rather than externally through emphasis on budget adherence. unsure of what new competencies are being required. F. it will not be seen as a unilateral imposition.5. • When structural change occurs early in a change process. 2. publishing as Prentice Hall 71 . rather. for that reason. Gerstner and IBM were an example of trying to lead change through structural change: it was difficult and painful because managers had not been part of the diagnosis and redesign. The Role of Structural Intervention in Implementing Change 1. If structural change takes place late in the change process. a. structural change often works better as a reinforcer of behavioral change. nor had they received training in the new structure being imposed. Inc. Horizontally linked structures do not guarantee coordinated value chain activities. variance from plan is discouraged. 2. People don’t resist change – they resist being changed. II. Theory into Practice: • Think of structural change in terms of Lewin’s refreezing. Aligning financial measures with required behaviors. employees can be confused by its purpose. b. By focusing employee attention inward rather than outward. 3.

internal process excellence. Activity-based management (ABM) is a financial tool that helps managers make decisions by separating the costs of activities that add value to a product or service line from those costs that do not add value. customer satisfaction. At the core of the BSC lies a clearly stated and widely understood vision and strategy for the organization. b. MiCRUS is given as an example. Balanced scorecard (BSC) is a tool for measuring multiple outcomes—financial performance. Theory into Practice: • In the later stages of change implementation. Copyright © 2010 Pearson Education. Balanced scorecard (BSC) a.3. Accounting systems must reinforce. and employee learning and growth—and the connection of those outcomes to the vision and strategy of the organization – see exhibit 6-5. such as market share. Inc. B. p. a. b. publishing as Prentice Hall 72 . 2. 150. Alternative Financial Control Systems: 1. not undermine strategic goals. Activity-based management (ABM). Consider using marketplace-based performance goals. BSC balances four metrics: (1) Financial performance (2) Customer satisfaction (3) Efficient internal business processes (4) Allows change and improvement c. organizations can develop a set of measurements that place financial performance within a broader strategic context that looks at outcomes from the perspective of multiple stakeholders and takes into account long-term outstanding performance. speed-to-market or customer satisfaction. Theory into Practice: • Organizations can use ABM to help insure decisions that are made as part of the change process are based on an accurate financial picture of their operations.

iii. III. Copyright © 2010 Pearson Education. i. Commission—sales person earns all or part of a wage based on number of units sold. Pay for individual performance plans have many potential pitfalls. Individuals do not always have control over the outcomes that are being measured and rewarded. 3. Merit pay—employee earns raise to base wage based on performance evaluation. – see exhibit 6-6. p. • Use financial controls to reinforce and assess desired change rather than to drive change. Pay for performance. ii. 1. Organizations expend a huge amount of resources on pay. Key question deals with level of aggregation: should PP incentive be targeted at individuals. Organizations need to look for a mix of rewards to ensure alignment between employee behaviors and strategic goals.Theory into Practice: • BSC is a tool for measuring the effectiveness of change efforts on multiple dimensions. publishing as Prentice Hall 73 . Bonus—employee earns extra payment based on performance evaluation. teams. 2. Inc. Pay for individual performance is the most popular form in the U. How successful are monetary incentives in shaping and altering employee behaviors? A. 153.S. i. or the organization? a. Pay for performance—pay that is tied to the performance in the form of either a merit raise to base pay or an incentive bonus that does not increase base pay. iv. b. Piece rate—employee earns all or part of a wage based on number of units produced. Using incentives to support new behaviors. Many different options are available.

. Incentive systems do not always target appropriate measures of performance. iv. To be effective. . not subjective assessment.Pay differentials between performance levels tend to be relatively small and therefore of questionable behavioral value.Merit pay raises become an annuity on which employees continue to draw regardless of future performance.Many of today’s jobs cannot be individually isolated and precisely measured without taking into account complex interdependencies. .Encourage a short-term orientation (the performance period being evaluated) at the expense of long-term goals. with supervisors evaluating subordinates according to their own preconceived biases.Emphasize individual rather than group goals that may lead to dysfunction conflict in the organization.Performance appraisals on which raises are often based are inherently subjective. The pay increments for outstanding performance must be perceived as significant in order to be motivating. Pay for performance must be based on valid judgment. .ii. v. Copyright © 2010 Pearson Education. raises should be accompanied by public recognition and praise.Actual payout of program often determined by organizational factors beyond the control of individual employees and only indirectly related to actual performance. publishing as Prentice Hall 74 . iii. . but this is often hampered by secrecy and concern over confidentiality. . Team-based bonus plans are becoming more popular.The often lengthy time lag between actual performance and reward undermines perceived connection between the two. c. In addition. exhibit 6-7 on p. 154 shows the following problems: . Inc. .

Part of Asda’s strategic renewal was to offer an organization-level performance bonus to all employees. • Bonuses based on the overall performance of the organization make a symbolic statement recognizing the shared purpose and responsibility of all employees and organizational units.) provided by the organization to employees. and when the difference between rewards for high and low performance are significant. Extrinsic rewards are rewards (pay. when the evaluation of an employee’s contribution are perceived as being valid. Team-level bonuses can hurt collaboration among and between teams. Copyright © 2010 Pearson Education. ii. when the outcomes are tied to improved performance. Inc. iii. publishing as Prentice Hall 75 . i.1. • Organizations call upon team-based performance bonuses to enhance the effectiveness of teams. Distinguish between intrinsic and extrinsic rewards. praise. but the bonus may undermine collaboration between teams. although the effect is relatively weak. a. 1. i. B. Team-based bonuses enhance team performance. Teams can share a performance bonus equally or allocate to individual members based on an evaluation of their contribution. Because strategic renewal focuses on organizational performance. Actual effectiveness of organization-level bonuses is unclear – does the performance bonus result in or from outstanding performance? Theory into practice: • Individual incentives will be most effective in shaping behavior when the individual controls the outcomes being measured and rewarded. etc. promotion. ii. organization-level incentives often supplement or replace individual bonuses. Pay and motivation. d. Stock options are intended to tie the total compensation package to the overall performance of the firm. encouraging everyone to keep focus on the same measures of overall effectiveness.

autonomy and performance feedback are good strategies. Overreliance on extrinsic rewards may dampen internal motivation. Theory into Practice: • By relying heavily on extrinsic rewards to shape employee behavior. satisfaction. Unless rewards are perceived to be equitable. At what level of performance will incentives be set? b. Inc. Copyright © 2010 Pearson Education. Pay equity is a perception by employees that their pay is fair and equitable in relationship to others—peers inside the organization and out. d. 1. and problem-solving behaviors may be lessened. C. and self-esteem) that accrue to the individual based on the performance of a task. How large will potential incentive earnings be in relationship to base salary? c. c. as well as subordinates and superiors in the hierarchy. employees will not be motivated to support the goals of organizational change. Organizations need to use a combination of intrinsic and extrinsic rewards. Sequencing the introduction of incentives. curiosity. organizations risk driving out the intrinsic rewards that might be associated with the work. How far up and down the hierarchy will incentives be offered? 2. as a result. To what extent will the incentives emphasize short-term or longterm performance or some blend of the two? d. Change leaders make choices about incentive design based in part on what behaviors they wish to impact. Intrinsic rewards are rewards (feelings of pride. Change leaders also have to decide when in the implementation process to introduce redesigned incentives. creativity. e. • Organizations will not be able to call on intrinsic motivation unless employees feel that they are being paid equitably. publishing as Prentice Hall 76 .b. f. a. Providing employees with development opportunities.

• New technologies can be introduced as a way to support desired behavioral changes. systems. Change leaders find interventions designed to alter the hardwiring of their organization—structures. not only the what question is important. V. but also the how and when questions. A. and unintended consequences. 1. C. mechanics. A. compliance rather than commitment. Apply technology in a way that automates existing processes. Make sure technology fits with the strategy and reinforced desired behaviors. Choices about how to use technology: 1. When dealing with new technology. B. Copyright © 2010 Pearson Education. organizational leaders face a choice: to use that technology to automate existing processes or to use new technology to support transformed behaviors. and technologies—especially appealing and often use them to try to drive the change. and interactions of human behavior required to convert raw material into finished offerings. B. Structural change can occur more effectively at the end of implementation process to reinforce new patterns of behavior. Structural interventions often end up in disappointment. provoking resistance. Technology is the processes. Inc. Theory into Practice: • When introducing new technology. 2. Conclusion. IV. publishing as Prentice Hall 77 .Theory into Practice: • Introducing new incentives early in a change implementation process risks several negative consequences: over focus on pay rather than on new strategies. Technology and behavioral change. Apply technology in a way that transforms these processes. Sequencing technology change. C.

Kaplan and David P. Raymond E. 2001).” Human Relations 35 (1982). Fit. 1994). Failure. Gary Cokins. Miles and Charles C. Galbraith. III. responsibilities and relationships. Amabile. Lawler. Copyright © 2010 Pearson Education. 1984). Snow. replacing a small number of country general managers who could not work well in the new environment. Inc.Additional Suggested Reading • • • • • • Teresa M. Jay R. Competing with Flexible Lateral Organizations.” New Yorker. Robert S. what options did Lou Gerstner have other than restructuring? Students can use the steps previously discussed to construct an alternative scenario: a participative diagnostic process including country general managers and product executives. Norton.” Compensation and Benefits Review 32 (January-February 2000). possibly training for required new skills.” Harvard Business Review (JanuaryFebruary 1996). 2nd edition (Reading. “Pay Strategy: New Thinking for the New Millennium. Dan Baum. Shoshona Zuboff. a redesign of roles. and the Hall of Fame: How Companies Succeed and Fail (New York: Free Press. Richard E. In realigning IBM’s global organization with his new strategy. MA: Addison-Wesley. “Social Choice in the Development of Advanced Information Technology. “Battle Lessons. 1996). publishing as Prentice Hall 78 . “Using the Balanced Scorecard as a Strategic Management System. Creativity in Context (Boulder. January 27. Edward E. Relevance Regained: From Top-Down Control to Bottom-Up Empowerment (New York: Free Press. Thomas Johnson. 1994). Walton. Activity-Based Cost Management: An Executive’s Guide (San Francisco: John Wiley. • • • • Chapter Discussion Questions 1. and finally a restructuring to reinforce new behaviors. 1992). 2005. In the Age of the Smart Machine: The Future of Work and Power (New York: Basic Books. H. CO: Westview Press.

Arguments for the proposition hold that in an increasingly global and dynamic competitive environment. e. dysfunctional. and— ultimately—don’t work. pilot teams. is that the new behaviors that occur in reaction to new incentives may be temporary. I would actually get hurt financially if I were to share some of my investment models with my colleagues. It has been said that.” b. hybrid and horizontal structures that may also allow for the kind of integration needed in today’s complex and dynamic environments.S. What is it about incentive systems that make them so attractive to leaders attempting to oversee an organization transformation? Can you think of examples when it would be useful to create new incentives early in a transformation process? Changing an incentive plan can alter behaviors almost immediately. 4. publishing as Prentice Hall 79 . given the growing complexity and dynamism of the world of business. Arguments against (and there are many executives who adamantly refuse to use matrix structures) are that they are too complex. That’s what makes incentives so attractive. Do you agree or disagree with that argument? Explain. 3. all organizations will have to adopt some type of a matrix structure. or transformational training. The pitfall. dilute responsibility and accountability. Complex General Hospital implemented the Computerized Physician Order Entry (CPOE) Copyright © 2010 Pearson Education.2. Can you think of examples from your own experience—at work or in the classroom—where the manner in which your performance was being measured worked against the goals you were trying to achieve? I can tell you two examples I just heard in my class: a. Also. “I’m a financial trader. “Professors have us work in groups to learn teamwork and then give us individual grades.” Case Discussion – Making the Problem Worse Introducing the Case Medication mistakes – also called. One example of a possible good use of early incentives is to incentivize participation in diagnosis. Inc. adverse drug events – are a major problem in U. The most common error is handwriting identification.g. hospitals. organizations simply need to focus on many different areas at the same time. there are other alternatives. of course. or both.

but some cultures are both strong and adaptive. A robust culture may actually inhibit change. would new technology have been helpful? New technology might have been helpful but it should have been a part of the process described above. As it stands. The chapter will examine the elements of an adaptive culture and the impact that founders and leaders have on culture. a process of redesign should have taken place. the technology should have been tested in a pilot project and doctors and staff should have been trained in the proper usage of the technology. Also. publishing as Prentice Hall 80 . this was a good example of technology applied prematurely in a change process that actually hurt performance. without double checking it. What went wrong? How can you explain how the technology actually led to more rather than fewer mistakes? It seems that the technology may have made staff less careful.system as a way to fix the problem. the system information does not seem to be provided in a form that facilitates effective usage. 3. They relied on information in the system. the technology was used to drive the change rather than to reinforce an existing awareness of the problem and behaviors selected to address the problem. 1. How might you have gone about solving the problem at Complex General? To what extent. The result was an increase in adverse drug events. Inc. 2. Also. Learning Objectives Copyright © 2010 Pearson Education. The choice of technology should have been a part of this process. as technology often does. Following that. Here. CHAPTER 7: Organizational Culture and Change Main Teaching Point The chapter emphasizes the role that culture plays in implementing organizational change. e. the use of warehousing criteria rather than clinical guidelines and the manner of grouping patients. What theories of change implementation would have helped the administrators at the Complex General Hospital solve the problem of medication mistakes? CGH should have started with mutual engagement of doctors and staff in a shared diagnosis of the problem. along with training and people alignment.g. if any.

Delineate the six cultural traits most associated with organizational adaptation and change. What was their renewed strategy? Xerox wanted to move from producing copying machines to “providing allpurpose document management for the office space. It became susceptible to competition. Lecture Outline I. and was not customer oriented. B.1. Analyze the relationship between culture and organizational change. Many companies like Xerox and GM struggle against entrenched cultures while others have adaptable cultures and sustained performance. 4. 3. publishing as Prentice Hall 81 . Inc. Opening Case—Culture and Change at Xerox Key learning point of case: The case can be used to discuss how a strong organizational culture can inhibit a company’s ability to change. Analyzing the Case 1. Copyright © 2010 Pearson Education. Define organizational culture as an emergent phenomenon in organizations. 5. particularly from Canon and Hewlett-Packard. Organizational culture refers to the common and shared values and assumptions that help shape employee behavior and are typically passed down from current to future employees. Culture and behavior A. Discuss actions that organizational leaders can take to reshape culture.” Multiple leaders failed to overcome the culture. Suggest how organizations can go about assessing their culture. What was the culture at Xerox? Xerox developed a culture that was intolerant of initiative and experimentation. 2. 2.

C. Kmart. Culture is an emergent phenomenon: it cannot be imposed. if you would like to have your students research them. p. publishing as Prentice Hall 82 . commitment and meaning • enhancing coordination by focusing on strategic priorities without imposing unnecessary controls • can help change implementation 3. the role of work in one’s life and the appropriateness and utility of control mechanisms. 167). would be: General Motors. Theory into Practice: • An organization’s culture is composed of the shared values of its members and the resulting patterns of employee behavior. Culture and Change A. II. Culture is the glue that binds organizations together. E. Other excellent examples. Robust organizational cultures often provide a competitive advantage. Sears and United Airlines. Values are the deeply held beliefs concerning such fundamental matters as the nature of people and relationships. Examples of robust cultures: Nucor Steel. 1. Google B. “the way we do things around here”. Inc. Microsoft. Copyright © 2010 Pearson Education. Nordstrom. Robust cultures enhance organizational performance by: • appealing to values. 2. Strong organizational cultures such as that at Xerox can also impede change. creating energy. 1.” Culture consists of interaction between behavior and values.C. cultures must be both robust and adaptive. identity. To be effective in the long term. the relative importance of multiple stakeholders. Adaptive cultures are cultures that encourage responsiveness and change as part of their core values. Southwest Airlines. D. The values and beliefs of past founders and future leaders affect organizational design and management practices. “the software of the mind. Robust cultures are cultures in which a common set of values and assumptions are deeply and widely held. the shared DNA. orientations toward time and space. which in turn create culture – shared patterns of behavior and values (see exhibit 7-1.

most people must be coerced. and creativity in the solution of organizational problems is widely. not only to accept but to seek responsibility. McGregor’s Theory X/Theory Y are useful in understanding contrasting values concerning people (see exhibit 7-2. Theory Y managers believe: • • • People will exercise self-direction and self-control in the service of objectives to which they are committed. The average person prefers to be directed. the motivation and development potential of people. 176 for a summary). and wants security above all. The adaptiveness of a culture resides in 7 separate but interrelated sets of values and assumptions concerning the legitimacy of multiple stakeholders. diversity and a global mindset (see exhibit 7-5 on p. has relatively little ambition. employee participation. and/or threatened with punishment to get them to put forward adequate effort toward the achievement of organizational objectives. and customers are legitimate stakeholders in organizational outcomes leads management to adapt to shifts in customer exceptions and employees’ needs while aligning their actions with outstanding performance.2. 170). ingenuity. Inc. b. learning. under the proper conditions. Copyright © 2010 Pearson Education. The capacity to exercise a relatively high degree of imagination. • ii. directed. p. wishes to avoid responsibility. employees. i. Because of this inherent dislike of work. controlled. The average person learns. a. publishing as Prentice Hall 83 . Theory X managers believe: • • The average person has an inherent dislike for work and will avoid it if he can. The legitimacy of multiple stakeholders: assuming that shareholders. distributed. performance expectations. The motivation and development potential of people: assuming that employees are internally motivated to contribute to outstanding performance and to adapt and change as required leads management to create conditions that motivate altered behaviors. not narrowly.

Valuing outstanding performance – assuming that high performance goals motivate and energize keeps change efforts aligned with requirements of outstanding performance. Managers come to believe that their values are “correct. Some managers avoid employee participation in decision making because they hold contrary values. Employee participation supports change for many reasons: (1) Participation can improve decision-making quality by involving lowerlevel employees who have access to important information and by encouraging diverse opinions. in turn reinforce the original values held by managers (see exhibit 7-3. Competency. (4) Participation opens avenues of communication and builds coordination among involved employees. (7) Participation allows employees to learn and use new skills while enabling an organization to identify individuals with leadership potential. concerning Control. publishing as Prentice Hall 84 . (2) Participation enhances the commitment of participants to the chosen course of action. lead to responsive behaviors on the part of employees that. p. Inc. A self-sealing value loop is a self-fulfilling prophecy in which values lead to behaviors on the part of managers that. they tend to be reinforced. 171).” c. such as those expressed in exhibit 7-4. p. Participation refers to the ability of employees at all levels to influence decisions concerning the planning and execution of key tasks. Copyright © 2010 Pearson Education. (5) Participation encourages employees to become self-supervising. Motivation and Responsibility. d. • • • Managers behave in ways that reflect their values. in turn. Valuing employee participation – understanding the positive performance effects of employee participation. (3) Participation enhances motivation to achieve performance goals. Employees respond in ways that reflect the values of their managers. When attitudes become pervasive in a culture.iii. Knowledge. (6) Participation can improve employee-management relations. 173.

Managers who are uncomfortable giving up control and responsibility or who do not believe employees have adequate levels of knowledge or motivation will resist allowing for widespread participation in decision making. encourage. Learning is the process by which individuals receive data from the external environment. Valuing learning – realizing that learning at all levels is key to effective change. internally consistent cultures may resist change. Inc. and transfer knowledge. the organization’s culture will be more welcoming to the implementation of behavioral change. and adjust their thinking and behaviors based on that analysis. it will be able to move beyond parochialism without abandoning local responsiveness. not modest or incremental performance improvements. analyze that data. f. A learning organization is an organization that develops in its employees the competency to create. and enable change implementation. Values tend to be self-reinforcing: managers create an environment where employees behave in ways that confirm those managers’ beliefs. Valuing a global mindset – realizing that the complexities of a diversified world offer positive opportunities for learning and opens the organization to cross-national collaboration. publishing as Prentice Hall 85 • • • . Motorola to illustrate the importance of a global mindset in today’s challenging environment. When the pervasive values of an organization hold that most employees will exercise self-direction and self-control in the service of objectives to which they are committed. Example of Nokia vs. experimentation. Global mindset can be defined as a positive openness of the complexities and opportunities of multiple environments. g. acquire.e. and outstanding performance makes employees feel valued while encouraging learning. adaptive cultures will embrace. The most effective change leaders seek to produce outstanding results. and adaptation. and at modifying their behavior to reflect new knowledge and insights. Diversity refers to a multiplicity of perspectives that comes when individuals from varied backgrounds and different experiences collaborate. Copyright © 2010 Pearson Education. Theory into Practice: • • Strong. Valuing diversity—understanding that diversity of opinions and insights are required for innovation. If an organization values a global mindset.

Understand the difference between espoused and enacted values. Leaders Shape Culture A. III. 1. Aligning enacted with espoused values means aligning behavior with words. does not mean that those values are actually practiced – see e. publishing as Prentice Hall 86 .g. Assessing Culture A. Espoused values are the set of values called upon by individuals to explain or justify their course of action or pattern of behavior. Theory into Practice: • Culture is determined by enacted rather than espoused values. and reward. Copyright © 2010 Pearson Education. Assessment can help to determine alignment by asking questions such as: • • Do our current values and principles align with the requirements of our renewed strategy? Are the behaviors of employees at all levels consistent with our stated values and principles? C. measure.• • Individuals and organizations learn by receiving and analyzing valid information. B. cynicism and frustration will drain energy away from outstanding performance. IV. Organizational leaders powerfully influence the culture of their companies. 3. Inc. Use a cultural audit that examines actual patterns of behavior and explores the underlying values and principles that shaped the behavior. Enacted values are the set of values that are implicit in that course of action or pattern of behavior. then alter thinking and acting as appropriate. Valuing diversity offers the opportunity for creativity within an organization by encouraging collaboration among people with different perspectives derived from varied backgrounds and experiences. 1. Just because an organization says it has certain values. but when those two are out of alignment. Leaders make choices about what to pay attention to. 4. the difference between espoused and enacted values in Enron CEO Ken Lay. 2.

1992). “Building a Learning Organization. MA: Addison-Wesley.2. Leaders use certain criteria in recruitment. Daniel R. What leaders say matters. 1998). Eugen Pusic. Method. Corporate Cultures: The Rites and Rituals of Corporate Life (Reading. Corporate Culture and Performance (New York: Free Press. 4. and promotion of future leaders. publishing as Prentice Hall 87 • • . B. what leaders do matters even more. Conclusion. Jr. Practice (Reading. Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround (New York: HarperBusiness. Cultures and Organizations: Software of the Mind (New York: McGraw-Hill. Geert Hofstede. 3. To create a culture that supports organizational change—an adaptive culture—leaders need to support and promote a specific set of values. Kennedy. Additional Suggested Reading • • • • • • Chris Argyris and Donald A. Schon. John P.. MA: Addison-Wesley. B. Garvin. 1990). 1982). V. A. Organizational Learning II: Theory. David A. Frank Heller. Corporate Culture and Organizational Effectiveness (New York: John Wiley & Sons. 1996). Denison. Louis V. Leaders use certain observed criteria to allocate scarce resources. Deal and Allan A. 2002). Inc. and Bernhard Wilpert. Heskett. Leaders react in certain ways to critical incidents and crises. Copyright © 2010 Pearson Education. George Strauss.” Harvard Business Review (July-August 1993). A strong organizational culture can either help or hinder the implementation of change. selection. 1991). Terrence E. Kotter and James L. Gerstner. Organizational Participation: Myth and Reality (New York: Oxford University Press.

and many other companies). as we saw in the case of Xerox (also General Motors. Bert Spector. Smith and Robert C. Ely.” Organizational Dynamics 32 (May 2003). Kmart. Otherwise. (New York: McGrawHill. Inc. The reason a strong—or “robust”—culture is a necessary component of outstanding performance is that it provides a common. The Corporate Culture Survival Guide: Sense and Nonsense About Culture Change (San Francisco: Jossey-Bass Publishers. pp. David A. Sears. Edgar H. • • • Chapter Discussion Questions 1. The Awakening Giant: Continuity and Change in Imperial Chemical Industries (Oxford: Blackwell. it will Copyright © 2010 Pearson Education. However. How can a culture like the one at Xerox be so successful in supporting outstanding performance and at the same time be so resistant to adaptation and change? Xerox demonstrates that a culture that fits well in a certain competitive environment may not work nearly as well as the environment changed.• • • Douglas McGregor. 1999). Alexander. Fumbling the Future: How Xerox Invented. The culture resisted change as competitors entered the marketplace and customers demanded greater flexibility and responsiveness. publishing as Prentice Hall 88 . Do you agree? Explain your position. it is not sufficient. Andrew Pettigrew. Schein. Douglas K. 2. 1960).” Harvard Business Review (SeptemberOctober 1996). “HRM at Enron: The Unindicted Co-conspirator. the First Personal Computer (New York: Morrow. 1988). 207–220. 1985). Then Ignored. a robust culture must also be adaptive. shared purpose and allows for collaboration across the organization. Xerox’s culture supported the company when it had a virtual monopoly on the technology and did not have to worry so much about responding to customers. “Making Differences Matter: A New Paradigm for Managing Diversity. It has been argued that although a strong organizational culture is a necessary component of outstanding performance. The Human Side of Enterprise. Thomas and Robin J.

hires supervisors who will facilitate employee effort and relies heavily on intrinsic rewards.  “See. I was right. to offer their own insight into how to innovate or improve. the manager allows workers to help participate in the design of the work. Why are organizations that value multiple stakeholders likely to be more adaptive than organizations that value just one stakeholder? Three stakeholders—shareholders. my own experience proves Copyright © 2010 Pearson Education. how might the self-sealing value loop work for a manager who holds Theory Y values? Let’s recreate the loop for Theory Y: Self-Sealing Value Loop A manager believes that most employees work and will work hard to be successful. 4. employees. 3. and customers—are vital to an adaptive organization. By working to satisfy all of their interests. Referring to Exhibit 7-3. employees are enabled to perform at high levels.  Seeing the energy and creativity that employees bring to their job. the manager becomes even more trusting and supportive of employees. publishing as Prentice Hall 89 .  Because of that belief.resist an organization’s effort to respond to a changing competitive environment.  With high trust and autonomy coming from the manager. Inc. organizations can make sure they never substitute the short term for the long term (or vice versa).

and so on—required to make valid decisions? Knowledge—do employees know enough—about the organization. In 2005.” 5. cities and into many countries. Starbucks sales and stocks plummeted in 2007 and 2009. why is it that managers might still resist the idea? Managers who resist allowing participation may make one or more of the following assumptions: • • Control—What if employees make decisions with which I am uncomfortable/in disagreement? Competency—do employees have the competencies—analytic. with an extensive growth agenda that included expansion into smaller U. Jim Donald became CEO of Starbucks. and the competitive environment—to make informed decisions? Motivation—do employees really want to be involved in decision making. Copyright © 2010 Pearson Education. If the value of employee participation in creating motivation for change is so widely recognized. products. its strategy. or would they prefer to cede that responsibility to management? Responsibility—even if employees want to be involved in decision making and are capable of doing just that. isn’t decision making my job? • • • Case Discussion: Balancing Culture and Growth at Starbucks Introducing the case This case discusses the expansive growth of Starbucks. services. Inc. strategic. Growth was slowed dramatically and a major training session was conducted simultaneously in all stores. initially under the leadership of Howard Schultz who bought the company in the mid-1980s and transformed it into an international phenomenon. leading Schultz to remove Donald and placing himself back into the CEO role.it.S. publishing as Prentice Hall 90 . communicative.

by focusing on taste. What steps can Starbucks take to maintain its culture while achieving desirable levels of growth? Starbucks is facing a tremendous challenge in the current economic crisis – stocks and sales are continuing to fall. this concern was expressed in the 2007 memo from Howard Schultz to Jim Donald regarding the “commoditization” of the Starbucks experience. in which Starbucks offers a home environment. and the cookie cutter feel of the stores. Copyright © 2010 Pearson Education. The 2008 training session was designed to accomplish this. texture and customer experience. Inc. Rapid growth often threatens the meaningful integration of new employees into an established company culture. moving from nine stores in 1987 to 10. with stock prices rising 5. the emphasis on unrelated merchandise. making it feel like a chain rather than a trusted environment. Schultz describes the value system of Starbucks as one that values self-esteem.000 stores in 30 countries by 2006. and while they are still expanding.000 % from 1992 to 2007. Does rapid growth inevitably undermine a company’s culture? Did it at Starbucks? Culture has to be not only espoused but enacted. Keeping employees motivated and involved will be a key challenge. reflected in the lack of coffee bean smells. growth may need to be slowed even more dramatically. Schultz advocated getting back to the core. they are also closing many underperforming stores.1. high-end coffee experience. At this point. Involving them directly in planning and lay-off decisions as well as in strategies to regain the unique Starbucks culture and identity would be a good way to do this. At Starbucks. Employees – who are called “partners” – participate in a Partner View survey designed to assess the maintenance of Starbucks culture. publishing as Prentice Hall 91 . The culture is seen as one that creates a partnership between employees and customers. 2. How does the culture of Starbucks support its strategy? Starbucks’ Howard Schultz had a strong vision for the company that included branded coffee and a unique. Starbucks became the fastest growing retail store of all time. 3. which is coffee. self-respect and appreciation.

leaders intervene to oversee and orchestrate implementation. Implementation depends not just on oversight and orchestration by individual leaders. 4. Learning Objectives 1. 2. Effective change demands the coordinated efforts of multiple leaders. 2. Analyze the requirements for developing future change leaders in an organization. Delineate the tasks associated with effective change leadership. and therein lies a big part of the problem. publishing as Prentice Hall 92 . What is the renewed strategy? It isn’t clear from the case exactly what Horton was trying to do with BP’s strategy. Define effective leadership. From whose point of view is the case told? Robert Horton. Continue the assessment and involve customers as well as employees in the assessment process. Chapter 8: Leading Change Main Teaching Point At every stage of organizational change. but also for leaders throughout the organization. He tended to talk more about culture than about strategy. Analyzing the Case 1. That reliance on the effective orchestration by leaders in a change process is true not just for top executives. He wanted to change the culture from a Copyright © 2010 Pearson Education. Explore the difficulty of enacting effective leadership. 3. Opening Case—Robert Horton at BP Key learning point of case: The case demonstrates the disastrous consequences of poor leadership and unilaterally imposed change by recounting the nature and effects of BP CEO Robert Horton’s change strategy.Clarifying Starbucks values and instituting or renewing a program to reinforce those values would also help. CEO of British Petroleum (BP). Inc.

That undoubtedly was part of it. This illustrates once again the importance of mutual engagement in all stages of strategic renewal. Leadership involves actions that mobilize adaptive behavior within an organization. usually based on hierarchical position. Leadership effectiveness has less to do with personalities and traits. 4. publishing as Prentice Hall 93 .“civil service” one to an organization with “open thinking. 2. because he was smarter than most other people.” Is that a strategy? 3. 1. profits continued to plunge. Formal leader is an individual who is granted authority. 3. resource allocators and company symbols. in an organization. Lecture Outline I. he was impatient with power sharing and involvement. he took some specific steps: • • • Slashing corporate headcount by 50% Eliminating operating committees Demanding that employees attend problem-solving and change management workshops Despite all that. and more with the impact of actions and behaviors. Not all formal leaders exercise effective leadership. and he vowed to “make this organization a damned sight quicker and smarter than the opposition. Formal leaders play important roles as decision makers. Copyright © 2010 Pearson Education. empowering and networking. Understanding leadership A. Inc. But the fact remains that employees simply had little idea what he was trying to accomplish and performance continued to deteriorate. What did Horton do to implement his change? Other than giving talks about the new culture. To be a leader is not the same thing as exercising leadership. Why was Horton fired after less than two years as CEO? Students will probably pick up on the gap between Horton’s calls for empowerment and an open culture and his stated views that.

II. Theory into Practice: • Formal leaders have important roles to play as decision makers. demanding leaders don’t always succeed at leading change. The tasks of leadership. 4. resource allocators. with disappointing and frustrating results. Adaptive behavior suggests effectiveness is determined by the degree to which leadership moves people in a direction that is in the long-term best interests of employees and the organization. Theory into Practice: • Strong. • Leadership can be exercised at all levels of an organization. Copyright © 2010 Pearson Education. centralized structure as a way of overcoming what she saw as the company’s inertia and slow responsiveness. Effective change leadership affects the behaviors of others in the organization. A. 3. publishing as Prentice Hall 94 . 2. and occasionally even company symbols. 1. Effective leadership can be found in three separate but interrelated notions. • Think of leadership as an intervention into the organization designed to impact the behavior of others. Morgan Smith (president of the Concord Bookshop) imposed a new management structure as a way of reducing costs and meeting competitive pressures from online booksellers. 3. 2. Robert Horton told BP employees that concepts like “open thinking” and “empowerment” would drive a needed cultural transformation. • Effective change leadership mobilizes adaptive behavior on the part of organizational members. Louis Gerstner created a global matrix in order to integrate IBM’s highly autonomous national operations. Unsuccessful leaders: Text has provided examples of leaders who tried to impose change. Carly Fiorina arrived at Hewlett-Packard and almost immediately announced a new. The term mobilize implies that the mechanism used to help shape behavior will be internalized motivation. Inc.B. 1.

(2) Supporting enhanced autonomy—employees at all levels understand the purpose and goals and can respond quickly and effectively to dynamic environment. . (4) Leaders at operational levels can formulate strategy to help advance the common purpose and adapt to environment as needed. p. e. Enable upward communication. Task 2: Establish demanding performance goals. Articulating a clear purpose enhances change by (see exhibit 8-2. Theory into Practice: • A widespread and common understanding of organizational purpose allows employees to exercise greater autonomy in moving the change effort in its desired direction.David Letterman’s company Worldwide Pants: whatever makes Dave laugh . p. Develop and articulate clear and consistent sense of purpose and direction for the organization.B. C. D. Task 1: Develop and articulate clear and consistent sense of purpose and direction for the organization. Copyright © 2010 Pearson Education. 2. 3. (3) Supporting coordination—employees working toward a common goal are better able to coordinate their efforts.g. Organizational purpose is a clearly articulated and well defined ambition for the organization. 191): (1) Supporting decentralized decision making—Common sense of direction and goals allows employees at multiple levels to make decisions that further overall purpose of organization. 4. Develop future change leaders. Forge an emotional bond between employees and the organization.for MySpace: linking with cool people. promoting cool projects 2. Inc. 5. Core Leadership Tasks: Five core tasks lie at the heart of effective change leadership (exhibit 8-1. 190): 1. publishing as Prentice Hall 95 . 1. Establish demanding performance expectations.

Task 3: Enable upward communication a. Theory into Practice: • Effective change efforts are built on a drive to achieve outstanding performance. engaging. Inc. Leaders can take steps to enable upward communication: (1) Acknowledge and recognize that they need to learn from lowerlevel employees.1. b. Asda is given as an example of leaders not learning that their new strategy was failing. as well as communicating. (2) Create channels for information to flow upward in an uncluttered and unfiltered way. Stretch goals are performance expectations that are clearly articulated and challenging. Through acknowledging the need to learn from lower organizational levels. b. By setting demanding performance goals that drive change. effective change leadership responds to a dynamic competitive environment and gains valuable insight into the effectiveness of that response. allowing employees to exert authority and take responsibility. a. and learning. even though their store managers could have warned the top executives. Theory into Practice: • Effective leadership involves listening. formal leaders need to learn about how their effects are proceeding through a process of mutual engagement with employees at all different organizational levels. (3) Push decision-making authority down to lower levels. d. c. leadership enhances employee commitment to adopt the new behaviors required of outstanding performance. creating channels for upward communication. Upward communication is the flow of information from lower to higher hierarchical levels in an organization. • Particularly in situations of strategic renewal and change. . Jack Welch at GE is given as an example. publishing as Prentice Hall 96 . and pushing down decision making. Copyright © 2010 Pearson Education. E.

G. (4) The need to bond. Southwest Airlines’ CEO for nearly three decades. is given as an example. to be part of mutually reinforcing relationships is a basic human drive. they are more likely to engage in required behavioral changes. a. leaders create a deep and robust sense of commitment to the goals of the organization and to changes required to achieve a renewed strategy and sustain outstanding performance. to act in ways that are informed by the organization’s core values and renewed strategies. Inc. publishing as Prentice Hall 97 . c. and to alter behaviors in ways that enhance the company’s performance. Herb Kelleher. GE became the major supplier of CEOs to other companies. Benefits of an emotional bond: (1) Encourages employees to coordinate their efforts. (2) Enables employees to manage conflicts in ways that benefit the organization. communicate more honestly and freely. and take the risks required of creativity. Theory into Practice: • If employees are committed to their organization emotionally as well as instrumentally. (3) Employees are more willing to make sacrifices on behalf of the organization. GE’s Jack Welch spent more of his time on senior executive development than any other matter. F. b. a. An emotional bond is a relationship between individuals and their organizations based on a deeply felt commitment to the organization’s purpose and goals. Task 4: Forge an emotional bond between employees and the organization. b.• Take specific steps to ensure that communications move both upward and downward. By forging an emotional bond between employees and the organization. His direct interactions and close involvement with employees created bonds described as “love.” d. to form networks. Can leaders be developed? Copyright © 2010 Pearson Education. Task 5: Developing future change leaders.

Failure to address the requirements for effective change leadership can prove disastrous – example of U. (2) Movement within a single function—individuals never gain knowledge of total organization. Inc. Traditional approaches to leadership development emphasize depth of functional and technical expertise. publishing as Prentice Hall 98 . (3) Short-term performance pressures—individuals get better at tactical and operational management than at long-term strategic and visionary leadership. c. rather than issuing reports and policies Thinking in long-term rather than immediate terms Working with culture rather than formal structure • • • • • Theory into Practice: • Inadequate attention to leadership development can ruin a company. even an industry. steel industry is case in point. In order to remedy these problems. training. and on-the-job learning provides the basis for the effective exercise of learning. • Rapid upward movement of personnel through the hierarchy can work to hurt an organization’s ability to develop effective leadership. Copyright © 2010 Pearson Education. e.S. (1) Rapid upward mobility—prevents individuals from having to live with consequences of their actions and learning from their successes and failures. and short-term performance. (2) “Leaders are made” is an approach to leadership that assumes that some combination of experience. rapid upward mobility. particularly of how subunits fit together.(1) “Leaders are born” is an approach to leadership that assumes innate predispositions to lead are a vital trait of successful leaders. (4) Recruitment for specific technical skills—internal employee pool is thin on individuals with real leadership potential. 196). p. all of which undermine an organization’s ability to develop change leaders (see exhibit 8-3. d. Kotter suggests that future leaders experience: Working through coalitions rather than hierarchies Formulating vision/strategy rather than plans and budgets Communicating purpose and building commitment.

IV. High levels of dependency can displace individual and group initiative. 4. B. E. Be open to diversity of opinion. debate and conflict. C. Effective change leadership will be exercised by multiple individuals at different levels and in different units of the organization. Model shared leadership by inviting involvement from different levels in the decision-making process. in turn. They need to: 1. The challenge of “walking the talk. 3. particularly one who sees the exercise of leadership on the part of others as a direct threat.” Copyright © 2010 Pearson Education. might be unable to build the sense of teamwork and shared responsibility required to sustain coordinated effort. Inc. Example of Robert Horton at BP D. Theory into Practice: • Dominating individual leaders can actually hurt an organization’s ability to change. A dominant leader. Dominant individual leaders can create organizational dysfunctions. 2. Changing an organization requires distributed rather than individual leadership exercised horizontally and vertically. That dependency. 2. tobe-avoided venture. See themselves in terms of interdependent rather than independent roles. Providing the candid feedback required of learning and adaptation to any leader in possession of such singular power can become a risky. Beyond individual leadership. 1. can slow decision making. Top executives play a key role in modeling this. A. publishing as Prentice Hall 99 . 3.III.

MA: Belknap Press. 1994). D. J. (2) Establish demanding performance expectations. “How Top Management Teams Can Have a Good Fight. “Top management is highly visible. Jean L.” Harvard Business Review (July-August 1997). The intervention of leaders is critical in determining the effectiveness of an organization’s change implementation. C. Kathleen M. Conclusion. and what we do must be the same. Additional Suggested Reading • Christopher A. “Changing the Role of Top Management: Beyond Strategy to Purpose. Robert Horton at BP did not walk the talk. Stayer at Johnsonville Sausage took two years before realizing that he needed to align his actions with his goals if he was to be successful in creating organizational change. B. Ronald A. Kahwajy. 2001). Leadership Without Easy Answers (Cambridge.” Harvard Business Review (November-December 1994). (1) Develop and articulate clear and consistent sense of purpose and direction for the organization. Jim Collins. A. and Others Don’t (New York: Harper Business. 82. Good to Great: Why Some Companies Make the Leap . Copyright © 2010 Pearson Education. . B. Effective change leadership requires a collaborative partnership in which formal leaders share authority.A. “What we think. Inc. and L.” he noted. In order to mobilize adaptive behavior on the part of organizational members. Heifetz. V. D. what we say.” C. Eisenhardt. Bourgeois III. Renault’s Carlos Ghosn talked about the importance of aligning leaders’ actions with words. (5) Develop future change leaders. (3) Enable upward communication. . Bartlett and Sumantra Ghoshal. p. publishing as Prentice Hall 100 • • • . Leadership needs to model the changes it wants to see. Effective leadership requires alignment of words and deeds (“walking the talk”). (4) Forge an emotional bond between employees and the organization. leaders engage in five core tasks.

” 2. 1988). it will fail to adapt to the dynamic competitive environment. Joseph A. How would you account for Robert Horton’s early exit as CEO of British Petroleum? Horton came into BP from the States with his own analysis—that the culture of the company needed to change. Chapter Discussion Questions 1. Kotter. Bert Spector. His arrogant statement in the press was simply “the last straw. Do you agree or disagree with that statement? Explain. and creating certainty. Ralph Stayer. John P. Inc. Kotter. Perhaps most troubling. 1998). but if an organization just has managers. “How I Learned to Let My Workers Lead. driving new behaviors to achieve improved performance. Perhaps it did. Leaders are always creating dissatisfaction with the status quo. 1996).• • • • • • John P. Why is upward communication so difficult to achieve in organizations? Copyright © 2010 Pearson Education. Leading Change (Boston: Harvard Business School Press. imposed change kind of actions. most employees said they did not even know the company’s strategy. High Flyers: Developing the Next Generation of Leaders (Boston: Harvard Business School Press.” Harvard Business Review (November-December 1990). you are not leading. Management is about asserting control. publishing as Prentice Hall 101 . but there is little evidence that many others joined him in his diagnosis. and demanding innovation. It is said that if you are not leading change.” Sloan Management Review 30 (Summer 1989). and created a significant gap between his words about “open thinking” and his top-down. 3. Morgan McCall. Creating Leaderful Organizations: How to Bring Out Leadership in Everyone (San Francisco: Berrett-Koehler. The Leadership Factor (New York: Free Press. 2003). reducing risk. That’s fine. He imposed new structures. “From Bogged Down to Fired Up: Inspiring Organizational Change. Raelin. demanded employees attend training sessions (hardly a way to build commitment to learning new behavior).

Students can refer to discussions of organizational silence in Chapter 3. from handing out on-board peanuts to dropping in on maintenance workers at 3 a. By locating a sense of purpose and meaning within the organization’s mission and goals. and to alter behaviors in ways that enhance the company’s performance. and manage conflicts in ways that benefit the organization. 2. An emotional bond encourages employees to coordinate their efforts. in Southwest hangers with coffee and donuts. 5. Push decision-making authority down to lower levels. He involved himself in virtually every aspect of the business. Inc. Why is a strong emotional bond with the company especially important in times of change? What specific steps can leaders take to create such a bond? A deep emotional bond provides a robust source of support for change when a company enters a transformational period. Copyright © 2010 Pearson Education. publishing as Prentice Hall 102 . Hierarchy can stifle honest upward communication. Acknowledge and recognize that they need to learn from lowerlevel employees. to act in ways that are informed by the organization’s core values and renewed strategies. Do you agree that traditional approaches to leadership development can hurt a company’s effort to develop effective change leaders? Explain. The chapter offers three actions that executives can take to overcome the hierarchical barriers to upward communication: 1. Create channels for information to flow upward in an uncluttered and unfiltered way. Employees may either fear the consequence of honesty or simply feel there is little hope of their ideas being acted upon. allowing employees to exert authority and take responsibility. We can turn to Herb Kelleher at Southwest Airlines to look at what he did to build an emotional bond. That involvement had both a symbolic and operational aspect to it: providing employees with direct access to a CEO with whom they were on a first-name basis while simultaneously offering employees an up-closeand-personal opportunity to see and experience Kelleher as the human embodiment of the company’s values and principles. communicate more honestly and freely. employees are ready and willing to make sacrifices on behalf of the organization.m. 6. Managers may also signal their discomfort with honest upward communication. take the risks required of creativity. Explain the barriers that exist and how leaders might overcome them. 4. 3.

Exhibit 8-3 connects certain organizational practices to poor leadership development. And he seemed to work best in a crisis situation. Copyright © 2010 Pearson Education. Using the core tasks of leadership (Exhibit 8-1. Final Case—Leading Change—Carlos Ghosn at Michelin. In all of his assignments. you’re not leading. and Nissan Motors Introducing the Case The case introduces students to the long and—up to now. Develop and articulate clear and consistent sense of purpose and direction for the organization. Ghosn did this at every stop on his career. Assignment questions for students: 1. What were his weaknesses? Well. Same—he was always putting forward new plans that articulated just how much growth he expected. at least—highly successful career of Carlos Ghosn. and the organization. publishing as Prentice Hall . Students may wonder whether those traits might eventually get him into trouble at Renault.” He has led by leading change. Students can look for some common characteristics in his approach to change. culminating at this point in his return to Paris to serve as dual CEO of Renault and Nissan. others. Those that are especially good at it—most famously. Inc. evaluate Ghosn’s change leadership at Nissan. We do see 103 Enable upward communication. Establish demanding performance expectations. 2. What are the strengths and weaknesses of Carlos Ghosn’s approach to change leadership at Nissan? To what extent has he succeeded in mobilizing adaptive behavior on the part of employees? Ghosn certainly demanded outstanding performance: out of himself. it may also serve as a good concluding case for the entire course. “If you’re not leading change. he could be brutal about shutting down non-performing operations. This is less clear. p. Ghosn has demonstrated the saying. General Electric—enjoy a great advantage. 190). Renault. Most organizations are weak when it comes to leadership development. Since this is a long case and can also be supplemented with a video of one of his talks (listed at the end of the case questions).

Build unity and common purpose. Note: Because this is a complex case. but there isn’t really much on his style. Learn before acting. He seems to be demanding and top-down. he does promote Toshiyuku Shiga to COO of Nissan. At the end of the case. What are the beliefs and values of Ghosn concerning leadership and change? Show how those beliefs and values have been enacted at his various leadership positions.him listening to dealers about Nissan’s poor design. Develop future change leaders. Still. Not much evidence. it might be useful to present this chronology of Ghosn’s career: 1952 1976 Born in Brazil Hired by Michelin and moved to Brazil 104 Copyright © 2010 Pearson Education. especially his hope of building up Nissan around “exciting” new designs. Forge an emotional bond between employees and the organization. Is that something of a contradiction? On the other hand. Inc. it’s a question for students to debate. because they performed quite well. Listen and learn but insist on performance improvement. We’ll never know. Use cross-functional teams to drive change. 3. Ghosn seemed to have a number of principles that served him well in his different leadership roles: • • • • • Be clear about strategy and performance expectations. Probably. he says he and his top executives will quit if they don’t perform up to expectations. Has Ghosn “walked the talk” on his leadership style—that is. 4. aligned his actions with his words? This could raise an interesting discussion. publishing as Prentice Hall .

edu/news/headlines/Ghosn07. announces diagnosis in “all hands” meeting.gsb. publishing as Prentice Hall 105 . announces new plan Announces 2001 plan has been a success Ghosn named to take over all of Renault 2001 2004 2005 A free video of Ghosn speaking at the Stanford Graduate School of Business is available at: http://www. Ghosn tours Nissan.1985 1988 1996 1997 1999 Named COO of Michelin-South America Named CEO of Michelin North America Hired as number two man at Renault After cost cutting. Inc.html Copyright © 2010 Pearson Education. Renault returned to profitability Renault-Nissan forge alliance.stanford. Ghosn sent to Japan to run Nissan. Nissan Revival Plan is announced to the press With previous plan a success.

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