Chapter 5: Diagnosis for Change
Learning Objectives
On completion of this chapter you should be able to
• Understand the role of diagnostic models.
• Apply a range of diagnostic instruments relevant to various aspects of the process of managing.
• Form a view on which instruments you find most attractive/helpful.
This chapter introduces a range of diagnostic instruments that can be applied to the management of change. Some are designed to highlight a particular aspect of the change process (e.g., the readiness of an organization for change), some deal with one aspect of an organization (e.g., its strategy or its structure), while others—“diagnostic models”—refer to the operation of the organization as a whole.
How a diagnostic device is used also relates to what sort of manager of change you are (in terms of the change manager images discussed in Chapter 2). One option consistent with the change manager as director is to use diagnostic tools to build up your own knowledge base and confidence about what needs to change by using models that specify relationships among variables and pinpoint where change is needed when things are not going well. This chapter provides a number of such models that depict the connections between organizational variables (through the use of boxes, lines, and arrows, etc.). These models may be seen to engender a level of confidence about the desired outputs that will be produced following change interventions that focus on the identified variables and their interrelationships (see, e.g., Nadler and Tushman’s congruence model).
The change manager as navigator also will find the diagnostic tools attractive; models are ways of “mapping” the environment they describe. The change manager as caretaker will be less convinced of the capacity of the diagnostic tools to support radical change, but several of the tools (see, e.g., PESTEL and scenario analysis) provide insights into the trends in the external environment that they will have to take into account.
The change manager as coach will focus on the diagnostic tools that highlight the goals being sought and the competencies needed to attain them (see, e.g., Table 5.6, “Testing the Quality of Your Strategy”), while the change manager as interpreter will be attracted to the diagnostic tools that emphasize images, framing, and cognitive maps (see, e.g., Table 5.3, “Diagnosis by Image”). However, the nurturer with an interest in emergent strategy may remain unconvinced as to the value of such diagnostic tools.
The issue of who does the diagnosing is also of relevance in the management of change. There are a range of views as to who is most appropriate. This will become clearer after Chapters 7 and 8, which deal with different “schools of thought” on how change should be managed. For example, in “change management,” (see Chapter 8), the task of diagnosis is part of senior management and/or consultants employed as subject experts and advisers. In “organizational development,” (see Chapter 7), consultants use diagnostic tools as part of their focus on helping the client by managing process (more than content). Organizational development and related approaches stress the importance of those who are to be affected by the change being involved in the diagnosis. The rationale is usually that such involvement produces greater commitment to the change process and, as a result, enhances prospects of success. Those organizational development consultants who subscribe to a future search approach (see Chapter 7) take a hard line on this, explicitly rejecting pressure to be thrust into the role of diagnostician.1
Directly connected to the “who diagnoses” is what Harrison calls “the political implications of diagnosis.”2 Diagnosis may be seen as “the thin edge of the wedge” for those fearing a particular change. No matter how nonaligned and objective the wielder of the diagnostic tools tries to be, it is almost impossible to avoid the situation where some party will see the “diagnostician” as firmly implicated in determining, or at least legitimating, a course of action that is not their preferred option.
Models: Why Bother?
This discussion of models is based on some fundamental propositions:
• As managers—indeed as members of organizations in any capacity—we carry around in our heads our own views as to “how things work,” “what causes what,” and so forth, within our organizations. In this sense, diagnosis exists whether or not explicit diagnostic models are used.
• Although these views may not be explicitly stated, as implicit models they still have a powerful capacity to guide how we think about situations that we face in our organizations, how we talk about those situations, and what we deem to be appropriate courses of action.
• The apparent option of not using a model is not a real option; the choice is whether we use one that is explicit (such as those discussed in this section) or one that is implicit.
• While implicit models may provide valuable insights based on accumulated experience, they do have limitations. First, they are likely to be based on the limited experience of one or a few individuals; thus, their generalizability may be uncertain. Second, because they are implicit, it is difficult for other individuals to be aware of the framework/assumptions within which decisions are being made.
Burke identifies five ways in which organizational models can be useful:3
1. By making the complexity of a situation where thousands of different things are “going on” more manageable by reducing that situation to a manageable number of categories.
2. By helping identify which aspects of an organization’s activities or properties are those most needing attention.
3. By highlighting the interconnectedness of various organizational properties (e.g., strategy and structure).
4. By providing a common “language” with which to discuss organizational characteristics.
5. By providing a guide to the sequence of actions to take in a change situation. Whether or not a specific model can do this depends on whether or not it includes differential weighting of its various component factors, as does, for example, the Burke-Litwin model.
A wide range of models is available. Several are described in this chapter. No one model is “the truth”; each is simply a way of “getting a handle on” the complex reality that is an organization. The most important thing is to use (or even develop) a model that works for the specific situation that an organization confronts; that is, one that assists thought, discussion, and action in regard to the issue(s) affecting the organization. In some situations, this will involve identifying the aspect of an organization that is most in need of remedial action. In others, the model will assist in highlighting the systemic (flow-on) effect of a change in one part of the organization’s operations.
Modeling Organizations
In this section, we provide a number of diagnostic models that can be applied to the functioning of organizations. Typically, these models seek to focus attention on one or more of the determinants of organizational performance. Each model represents the particular “angle”/nuance provided by its designer/author. We have intentionally provided many models, rather than focusing on just a few, in order to both (1) illustrate the range of available models and (2) give you a broad range from which to select that or those that best suit your purposes/interests.
The Six-Box Organizational Model
Marvin Weisbord proposed one of the earliest diagnostic models, one that he describes as the result of “my efforts to combine bits of data, theories, research, and hunches into a working tool that anyone can use.”5 His model is based on six variables (see Figure 5.1):
1. Purposes: What business are we in?
2. Structure: How do we divide up the work?
3. Rewards: Do all tasks have incentives?
4. Helpful mechanisms: Have we adequate coordinating technologies?
5. Relationships: How do we manage conflict among people? With technologies?
6. Leadership: Does someone keep the boxes in balance?
FIGURE 5.1: The Six-Box Organizational Model
He presents his visual representation of the model as akin to a radar screen: “Just as air controllers use radar to chart the course of aircraft—height, speed, distance apart and weather—those seeking to improve an organization must observe relationships among the boxes and not focus on any particular blip.”6 That is, while one variable might be identified as the site requiring the greatest attention, the systemic effect of any change must be noted.
The 7-S Framework
The 7-S Framework was developed by the McKinsey & Company consultants Robert Waterman Jr., Tom Peters, and Julien Phillips.7 It is based on the propositions that (1) organizational effectiveness comes from the interaction of multiple factors and (2) successful change requires attention to the interconnectedness of the variables. They characterize the factors into seven categories: structure, strategy, systems, style, staff, skills, and superordi-nate goals (see Figure 5.2).
FIGURE 5.2: The 7-S Framework
Structure refers to the formal organizational design. Strategy refers to “the company’s chosen route to competitive success.”8 Systems are the various procedures in areas such as IT whereby an organization operates on a day-to-day basis. Style is a reference to patterns in the actions of managers and others in the organization; that is, how they actually behave (consultative? decisive?) when faced with the need to act. Staff refers to the processes for development of the human resources of the organization. Skills are described as the “crucial attributes”—the “dominating capabilities”—in areas such as customer service, quality control, and innovation that differentiate it from its competitors.9 Superordinate goals refer to the organization’s “vision” (see Chapter 9).
Waterman, Peters, and Phillips stress that the visual representation of the model is intended to emphasize the interconnectedness of the variables. This aspect is central to their intention, which is to emphasize that those factors “that have been considered soft, informal, or beneath the purview of top management interest [e.g., style] … can be at least as important as strategy and structure in orchestrating major change.”10 (See Table 5.1.)
The Star Model
Jay Galbraith argues that an organization is at its most effective when what he labels “the five major components of organization design” are in alignment.11 In this model, the five components are strategy, structure, processes and lateral capability, reward systems, and people practices (see Figure 5.3).
FIGURE 5.3: The Star Model
A preeminent role is given to strategy —“the cornerstone”—on the grounds that “if the strategy is not clear, … there are no criteria on which to base other design decisions.”12 Structure is defined as the formal authority relationships and grouping of activities as represented on an organization chart; processes and lateral capability refer to the processes, either formal or informal, that coordinate activities throughout the organization. Reward systems seek to align individual actions to organizational objectives, while people practices are the combined human resource practices (e.g., selection, development, performance management) of the organization. Misalignment of any of these five factors is considered to produce suboptimal performance (see Figure 5.4).
FIGURE 5.4: The Star Model: Effects of Misalignment
The Congruence Model
David Nadler and Michael Tushman have developed an open systems model of organizations based on the proposition that the effectiveness of an organization is determined by the consistency (“congruence”) between the various elements that comprise the organization (see Figure 5.5).13
FIGURE 5.5: Nadler and Tushman’s Congruence Model
This model sees organizations as comprising four components: task (the specific work activities that have to be carried out), individuals (the knowledge, skills, needs, and expectations of the people in the organization), formal organizational arrangements (structure, processes, and methods), and informal organization (implicit, unstated values, beliefs, and behaviors).
The model is based on the conceptualization of the organization as a transformation process. At the “front end” of the process is the context, comprised of the environment, resources, and history. Environment refers to factors outside the organization such as the economic, social, and technological conditions. Resources are the assets, tangible and intangible, internal to the organization. History refers to the organization’s own history, which leaves an imprint on how the organization currently operates. Within this context, strategy is formulated. The organization then becomes the means for the attainment of strategy. The output of the transformation process is primarily the performance of the organization, but this is mediated via the performance of both groups and individuals.
Based on their experience using the congruence model in organizational problem solving, Nadler and Tushman have identified a process for this activity (see Table 5.2).
TABLE 5.2: Applying the Congruence Model to Organizational Problem
The Burke-Litwin Model
The main contribution of the 12-factor model developed by Warner Burke and George Litwin is that it differentiates between those elements of the model that are seen as likely to be the source of major (“transformational”) change and those that are more likely to be the source of change that is experienced as incremental (“transactional”). The four transformational factors are external environment, mission and strategy, leadership, and organizational culture. These are intentionally located at the top of the diagram that represents the model (see Figure 5.6).
FIGURE 5.6: The Burke-Litwin Model
The fundamental premise of the model is that planned change should flow from the top of the diagram (environment) to the bottom (performance).14 However, as indicated by the arrows, the feedback loops go in both directions, indicating that internal organizational factors can impact the environment and not just be on the receiving end of a one-way environmental determinism.
The Four-Frame Model
Lee Bolman and Terry Deal argue that managers benefit from being able to analyze organizations from the perspective of four different “frames” or “lenses,” each of which provides a different “angle” on how organizations operate15 Without the capacity to use multiple frames, managers may become locked into their one favored way of seeing the world. Bolman and Deal comment:
Organizations are filled with people who have their own interpretations of what is and what should be happening. Each version contains a glimmer of truth, but each is a product of the prejudices and blind spots of its maker.16
The four frames discussed by Bolman and Deal are the structural frame, the human resource frame, the political frame, and the symbolic frame. The structural frame presents organizations as akin to machines that are designed to efficiently turn inputs into outputs. From this perspective, the focus is on getting the correct formal design as one would find on an organization chart and rules and procedures manuals. The mantra for action is, “If there’s a problem, restructure.”
The human resource frame directs attention to the relationship between the organization and the people that comprise it. It is based on the proposition that a good fit between the needs of the organization and what people want out of work benefits both parties, and the reverse (where fit is lacking, both suffer).
The political frame suggests that we see organizations as sites where participants interact in pursuit of a range of objectives, some in common, some that differ; some that complement, some that conflict. One of the most important aspects of the political frame is that it does not present “political” as necessarily equating to “bad” or “underhand.” Even where superordinate goals, such as the organization’s mission, are shared, the means whereby that mission is to be operationalized may be fiercely contested between various individuals, each of whom may sincerely believe that his or her action is in the best interests of the organization.
The symbolic frame proposes that the essence of an organization may lie not in its formal structure and processes but in its culture—the realm of symbols, beliefs, values, rituals, and meanings. In Bolman and Deal’s terms, “what is most important is not what happens but what it means.”17
Diagnosis by Image
In many change situations, the initial diagnosis is enhanced by getting the perspective of various staff of the organization as to the current (as-is) situation. However, even where people are not intentionally “holding back,” they will often find it difficult to encapsulate, in words, their sense of the current situation.
One technique that can often “cut through” this blockage—and that builds on the body of work of Gareth Morgan on the application of the notion of “images” to organizational analysis18—is to ask people to describe their organization and how it operates by providing an image in the form of either a simile (“my organization is like a well-oiled machine”) or a metaphor (“my organization is a dinosaur”) (see Table 5.3).
TABLE 5.3: Diagnosis by Image
Our experience using this approach shows that most people, when requested, can very quickly and very succinctly produce such an image. The images then become the focal point for discussion. Indeed, they generate discussion because a natural follow-on from the production of an image is that the producer is asked to “flesh out” the image; that is, to describe in more detail the situation that the image was intended to convey.
Component Analysis
The approaches to diagnosis described in the previous section dealt with the organization as a whole in its relationship with the context/environment in which it operates. The approaches to diagnosis in this section deal with specific components within these models. Particular attention is given to the strategic context on the basis that this is a major—although, as noted in Chapter 3, by no means exclusive—driver of change.
The PESTEL Framework19
PESTEL characterizes the organizational environment in terms of six factors: political (e.g., the threat of terrorism), economic (e.g., unemployment levels), social (e.g., demographic changes), technological (e.g., development of new/substitute products), environmental (e.g., antipollution policies), and legal (e.g., antitrust law). Although this is a very broad-ranging framework, it can be a useful starting point for an organization that has not given much attention to the broad trends that might impact on the future operation of the business. To be able to assist in this role, it is important that the PESTEL framework incorporate trends—with the extrapolation into the future that this implies—rather than rigidly documenting the status quo. Applied in this way, it can form the basis for coarse-grained identification of necessary or desirable change initiatives.
Scenario Analysis
The pilots for major airlines routinely spend time in flight simulators as part of their training. One of the advantages of such simulators is that the pilots can be exposed to a range of different situations from the routine to the unexpected. While the pilots must become completely familiar with the former, as they constitute the everyday reality with which they will have to deal, the simulations extend to events that in all probability they will not encounter even once throughout their career. The rationale for exposure to the latter is clear enough: Although they are highly unlikely to be encountered, the consequences should they occur could be disastrous (literally) unless handled correctly and speedily.
Scenario analysis offers the same opportunity in the context of strategic change in organizations.20 It has received attention in the business world primarily through its extensive use by Royal Dutch Shell, who for over three decades have used it as a tool for addressing their possible futures. A scenario is a description of some future state based on a set of assumptions about what is likely to happen in regard to a number of key factors believed to be key drivers of that future state. Scenarios may be constructed through the application of a specific methodology (see Table 5.4 and Exercise 5.1).21
Gap Analysis
Gap analysis is a very basic tool for reviewing an organization’s position. It is based on three questions:22
1. Where are we now?
2. Where do we want to get to?
3. How can we get there?
Although basic, these questions can be useful on a number of levels. First, their very generality means that most managers should be able to venture an opinion of some sort—at least in regard to the first two questions—which is likely to serve as a good basis for subsequent discussion.
Second, regardless of whether the responses indicate low or high degree of consensus, this can be put to good use. High consensus can generate two different courses of action. One option is to act immediately to close the gap, either by revising the objective or by taking the necessary action to meet the set objective. A second option is to suspend taking action until a direct challenge to the high consensus view can be arranged. The rationale for the second option is that—as long as immediate action to close the gap is not required—such a challenge can lead to either reinforcement of the wisdom of the preferred position or a timely revision of certain “taken-for-granted” positions.
Low consensus provides the perfect platform for further attention to the objectives and strategies of the organization on the grounds that commitment to specific courses of action should be based on a reasonably high degree of consensus on the answers to at least the first two questions. Agreement on the answer to the third question may be desirable, but it is not necessary as long as there is commitment to support the formal decision on the course of action to be taken.
The Elements of Strategy
Strategy is often conceived of as being at the heart of change in that it is about the most basic of issues with which an organization has to deal: what it is seeking to achieve and how it intends to do so. Strategy and change intersect because both strategies may change (“change of strategy”) and change may be deemed necessary in order to realize a set strategy (“change for strategy”).
Donald Hambrick and James Fredrickson have developed a framework that characterizes the strategy of an organization in terms of five elements that should be mutually reinforcing (see Table 5.5). Any misalignment between elements identifies a need for action/change.
TABLE 5.5: The Elements of Strategy
From this perspective, it is only after all five strategic elements have been determined that it is possible to appropriately assess the desirable characteristics of the various organizational structures and systems that facilitate the achievement of the strategy.23 However, before moving to this stage, it is important to test the quality of the proposed strategy. Hambrick and Fredrickson provide a list of “key evaluation criteria” to do this (see Table 5.6).
The Strategic Inventory
Strategy is about the future—committing resources to various activities based on “assumptions, premises and beliefs about an organization’s environment (society and its structure, the market, the customer, and the competition), its mission, and the core competencies needed to accomplish that mission.”24 These assumptions, premises, and beliefs, often formed over time through experience, become a “mental grid” through which new information is sifted and interpreted. To the extent that this grid comprises assumptions, and so forth, that are an accurate reflection of the environment, it enhances the quality of strategic decision making. However, where assumptions fail to reflect accurately key elements of the business environment, they can lead to the adoption of inappropriate strategies (see Table 5.7), a phenomenon that has been labeled “strategic drift.”25
TABLE 5.7: The Impact of Assumptions on Strategy: The Beech Starship Story
Identifying the strategic assumptions of managers, and validating their accuracy, can be a useful way of assessing whether current strategy seems to be consistent with key elements of the business environment. It also assists in identifying whether the strategy of the organization may be a priority focal point for change.
Picken and Dess have developed a “Strategic Inventory” as a diagnostic tool for this purpose (see Table 5.8). Any given application of this tool may, or may not, reveal consensus on assumptions. Where consensus is found, the emphasis should move to its independent validation. Where significant divergence exists, attention should be directed to both which/whose assumptions are currently enshrined in strategy and which/whose assumptions can be independently validated.
TABLE 5.8: The Strategic Inventory
The Strategic Inventory involves a much more sophisticated analysis than that provided by the ubiquitous SWOT analysis (strengths, weaknesses, opportunities, threats). The danger with SWOT analysis is that it very easily becomes a listing not of strengths but “believed strengths,” not of weaknesses but “believed weaknesses,” and so forth. That is, it captures existing beliefs—the current orthodoxy—which sometimes are precisely what need to be challenged if an organization is to improve its performance.
Newsflash Exercise
Sometimes it is important to tackle the diagnostic issue by getting the management of an organization to focus in very specific terms on exactly what they are seeking to achieve. In such a situation, some diagnostic models can be too abstract; something that makes the issues very concrete achieves a clearer outcome. The Newsflash exercise is designed to meet this need (see Table 5.9).
TABLE 5.9: Newsflash
Cultural Web
Organizational culture appears as a component in several of the diagnostic models covered in this chapter (see, e.g., the Burke-Litwin model). There are also numerous typologies and tools that provide a characterization of organizational culture, including Robert Quinn’s “competing values model”26 and the Organizational Culture Inventory (OCI) developed by Robert Cooke and Clayton Lafferty.27
Gerry Johnson describes the culture of an organization using the concept of the “cultural web” (see Figure 5.7).
FIGURE 5.7: The Cultural Web
The web comprises seven elements:28
• The paradigm (the set of assumptions commonly held throughout the organization in regard to basic elements of the business such as what business we’re in, how we compete, who our competitors are, etc.).
• The rituals and routines (in regard to how organizational members treat each other and, perhaps even more importantly, associated beliefs as to what is right and proper and valued in this regard).
• The stories told by organization members that, as a form of oral history, communicate and reinforce core elements of the culture.
• Symbols such as logos, office design, dress style, and language use that convey aspects of the culture.
• Control systems, which, through what they measure and reward, communicate what is valued by the organization.
• Power structures, which refer to the most influential management groupings in the organization.
• Organizational structure, which refers to the nature of the formal and informal differentiation and integration of tasks within the organization.
The specific value of “mapping” the culture of an organization is described by Gerry Johnson:29
1. Surfacing that which is taken for granted can be a useful way of questioning what is normally rarely questioned. If no one ever questions what is taken for granted then, inevitably, change will be difficult.
2. By mapping aspects of organizational culture it may be possible to see where barriers to change exist.
3. It may also be possible to see where there are linkages in the aspects of organizational culture which are especially resistant to change.
4. A map of organizational culture can also provide a basis for examining the changes that need to occur to deliver a new strategy.
5. This in turn can be used to consider whether such changes can be managed. In this way practical ideas for implementing strategic change can be developed.30
Structural Dilemmas
Many organizational change programs involve the organization’s structure either directly or indirectly. One reason for this is that “getting the structure right” is a difficult challenge because managers “confront enduring structural dilemmas, tough trade-offs without easy answers.”31 Bolman and Deal identify six such dilemmas.32
1. Differentiation versus integration. As organizations grow or as tasks become more complex, there is value in specialization, but with each act of differentiation comes the need at some point to integrate the various parts into the coherent whole that is the product or service experienced by the customer.
2. Gap versus overlap. If all necessary tasks are not assigned to some position or department, key tasks may go undone to the detriment of the whole organization. However, if a task is assigned to more than one position or department, whether specifically or by default through ambiguity in instructions, the situation can easily become one where there is wasted effort and/or conflict.
3. Underuse versus overload. If staff have too little work, they are likely to be bored and/or get in the way in their efforts to find something to do. If staff are overloaded with work, their capacity to service fellow staff or customers/clients is impaired.
4. Lack of clarity versus lack of creativity. If the responsibilities of a position are left too vague, it is easy for the employee to undertake work that the employer did not intend or wish to be done (and perhaps at the expense of organizational performance). However, if job descriptions are very specific and either rigidly enforced or rigidly followed, a major source of organizational flexibility is lost and service is likely to suffer.
5. Excessive autonomy versus excessive interdependence. A high degree of autonomy can lead to a sense of isolation, but a high level of interdependence can stifle quick reaction to market opportunities.
6. Too loose versus too tight. Lack of accountability can lead to control failures, but so can attempts at very close monitoring as it may be demotivating and/or encourage people to find ways to beat the system.
Table 5.10 provides a diagnostic instrument designed to address these issues.
TABLE 5.10: Diagnosing Structural Dilemmas
The Boundaryless Organization
Ashkenas et al. have argued that organizations facing increasingly competitive environments will have to make significant shifts in key structural aspects if they wish themselves to remain competitive.33 Specifically, they argue that organizations need to take into account a “shifting paradigm for organizational success” that positions speed, flexibility, integration, and innovation as the “new success factors.”34 Speed refers to speed in bringing products to market and in changing strategies; flexibility refers to the use of ad hoc teams and malleable job descriptions; integration refers to greater collaboration between specialists; and innovation refers to the encouragement of creativity.
The next step in their argument is that these new success factors will only be achieved if organizations reduce four types of organization boundary: vertical, horizontal, external, and international. Vertical boundaries are the layers in the internal vertical hierarchies of organizations; horizontal boundaries exist between organizational units (e.g., departments); external boundaries are those between the organization and the “outside world” (e.g., customers and suppliers); and geographic boundaries are those between different countries.
Table 5.11 provides a diagnostic instrument for testing the current state of “boundary-lessness” of an organization across all four boundaries, while Table 5.12 looks specifically at the characteristics of an organization’s vertical structure.
TABLE 5.11: How Boundaryless Is Your Organization?
TABLE 5.12: How Healthy Is Your Organization’s Hierarchy?
Diagnosing Readiness to Change
Knowing what needs changing is only part of the story. The degree of attention to the process of managing change is a reflection of the fraught nature of the process. Change initiatives often fail. In this regard, readiness for change is a mediating variable between change management strategies and the outcomes of those strategies (the desired outcome usually being successful implementation). As a result, a prechange audit of the readiness of an organization for change can provide an indication of the likely outcome of a change initiative at a particular point in time. It also may identify key areas where further action could significantly enhance the prospects of success. The instrument provided in Table 5.13 is an adapted version of one designed by Andrea Sodano as published in Fortune.35
TABLE 5.13: Readiness for Change
An alternative means for assessing change readiness, the Support for Change instrument, designed by Rick Maurer, focuses on eight factors: values and vision, history of change, cooperation and trust, culture, resilience, rewards, respect and face, and status quo (see Tables 5.14 and 5.15).3
TABLE 5.15: Working with the Support for Change Questionnaire
Galbraith, Downey, and Kates provide a diagnostic tool for change readiness but couch it in terms of an organization’s “reconfigurability” (see Table 5.16).37
TABLE 5.16: How Reconfigurable Is Your Organization?
Recent research by Holt et al. into the determinants of an individual’s readiness for organizational change has suggested that the individual’s beliefs in regard to four factors are central: (1) their own capability to implement the proposed change, (2) the appropriateness of the proposed change (for the given circumstances), (3) senior management support for the change, and (4) the personally beneficial nature of the change.38
Stakeholder Analysis
Stakeholder analysis focuses on one specific aspect of change readiness: the position of key stakeholders in regard to the proposed change. In the context of a planned change, stakeholders are those individuals or groups, inside or outside the organization, who have the capacity to influence, directly or indirectly, the success or otherwise of the change. It is usually helpful to add some reference to “interest in the issue” to the definition to make it clear that bodies with the capacity to influence such as the armed forces or police need not be included.
Stakeholder analysis involves the following process:39
1. Identify stakeholders, who may comprise both groups with a formal connection to the organization (e.g., owners, suppliers, customers, employees) and other groups who can exert influence over the organization.
2. Assess each stakeholder’s capacity to influence the particular change being proposed (e.g., rate as high, medium, low).
3. Check each stakeholder’s “track record,” particularly in regard to comparable issues.
4. Assess each stakeholder’s interest in the particular change being proposed (e.g., rate as high, medium, low).
5. On the basis of the above, identify the stakeholders most likely to be interested and able to be influential in regard to the change in question.
6. Try to find out what position, if any, each of these stakeholders is taking on the change. Be cautious if only attitudes, not actions, are reported. While attitudes are worth knowing—and may alert the change team to a potential problem—those expressing support may not “come through” if the going gets tough, just as those expressing opposition may “fall into line” if they believe that the change is going to happen.
One approach involves plotting level of stakeholder interest against stakeholder power (see Figure 5.8). In this model, specific action is advocated based on the categorization of specific stakeholders.
FIGURE 5.8: The Power-Interest Matrix
LEVEL OF INTEREST Low High Low A B Minimal effort Keep informed C D Keep satisfied Key players POWER
Grundy suggests that the following questions be addressed:40
• Can new stakeholders be added to the situation to change the balance?
• Can any oppositional stakeholders be encouraged to leave?
• Can the influence of pro-change stakeholders be increased?
• Can the influence of antagonistic stakeholders be decreased?
• Can the change be modified in a way that meets concerns without undermining the change?
• If the stakeholder resistance is strong, should the proposal be revisited?
Stakeholder analysis allows the change manager to be much better informed as to the likely reception to the change among key stakeholders and, on this basis, steps can be taken to try to improve the prospects of the change initiative receiving a good reception.
Force-Field Analysis
Force-field analysis is another model for looking at the factors that can assist or hinder the implementation of change. The forces pushing for change are driving forces; those working against the change are restraining forces.
To do a force-field analysis:41
1. Define the problem. Get individuals to do this first, then share these definitions. Write the problem in the center of the main force-field arrow on a force-field figure (see Figure 5.9).
2. Determine the restraining forces and add them to the figure (one arrow per force). Put all the restraining factors on one side of the central stem. Indicate the relative strength of each factor by using a consistent format (e.g., numbers, as in Figure 5.9, or thickness of the arrow).
3. Repeat step 2, except this time for driving forces.
4. If the identity and strength of the restraining and driving forces have been accurately assessed, this will clarify both the likely outcome (will the change be able to be successfully implemented?) and the sources of greatest restraint (useful to know if on balance the change looks like it is not succeeding). It also suggests change actions that can be taken such as decreasing restraining forces and increasing or adding to the driving forces. This enables disruption of the status quo, resulting in change.
FIGURE 5.9: Force-Field Diagram
Conclusion
In this chapter we introduced a range of diagnostic instruments that can contribute to the management of change by providing a perspective on a range of organizational situations. Explicit models of “how organizations work” provide a complement to the implicit models that managers and others have in their heads. No one model is “the truth,” but each offers its user the opportunity to view the operation of an organization from a particular perspective. It is up to those who use a diagnostic tool to determine the value of the perspective and to make decisions accordingly. As suggested at the start of this chapter, this assessment will be influenced by the image(s) of managing change that are adopted.
TABLE 5.17: Chapter Reflections for the Practicing Change Manager
Case Study: Boeing 42
The long list of Boeing’s woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inappropriate behavior and the loss of documents by Boeing officials. After his seven-year reign at the head of the organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh of relief at the news. The problems at Boeing were reportedly endless. From a stock price that had decreased by 6.5 percent while the company was under his leadership to increasing competitive pressures, the future for Boeing was in doubt and changes were needed.
For many years Boeing graced American corporate news for their prowess as the leading manufacturer of aircraft. However, in 1994 Airbus—their main rival—booked more orders. This shocked the management executives and began a series of changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed little since World War II.
THE BEGINNING OF CHANGE AT BOEING
In 1997 market demand increased dramatically and Boeing attempted to meet this surplus of orders by doubling their production capabilities instantaneously. A manufacturing crisis ensued and Boeing’s reputation took a dramatic turn for the worse when they were required to halt production of the 747 aircraft for 20 days. The company had “stubbed its toe,” according to the then-president of the Commercial Airplane Group, Ron Woodward, who was dismissed not long after the crisis. The “win at all costs” approach that Boeing supposedly had to its business dealings and a lack of communication within the organization appeared to have been the source of this problem.
After experiencing these manufacturing difficulties, an attempt was made to revitalize Boeing’s operations by streamlining aircraft assembly and increasing the efficiency of the company. This was to be done by focusing on production and costs, not on “airy vision statements.”43 Their overall strategy was to update their technology systems, downsize their operations, and reestablish relationships with their suppliers—the only feasible way costs could be cut.
Perhaps the first step in recognizing that the cycle of demand for their products caused massive fluctuations in revenue each year and the company needed more stability occurred when Boeing acquired McDonnell Douglas in 1997 to increase its defense contracts. This merger, however, brought with it difficulties in the way of cultural synthesis. McDonnell Douglas had a very strong culture that focused on their dealings with government officials for defense contracts. Combined with Boeing’s family-orientated culture, the merger was not without integration issues. The merger also had financial implications when investors accused the organization of trickery in regard to the merger with McDonnell Douglas and a payout of $92.5 million was made to shareholders.
WHEN TECHNOLOGY BECAME AN ISSUE
In 2001 Boeing adopted the principles of lean manufacturing and aimed to rejuvenate their reputation by making their production more efficient. The object of the project was to implement an automated system of assembly lines. They also hoped to coordinate and facilitate easier channels of communication between Boeing staff and suppliers. They implemented a Web-based procurement system that allowed suppliers to monitor stock levels and replenish supplies when they dipped below a predetermined minimum.
The process of automating the production line was a struggle for Boeing. Information technology within the organization was decentralized and over 400 systems were being used to meet the needs of various departments. The lack of collaboration in regard to product procurement meant that the same product could be manufactured by Boeing for one aircraft but subcontracted for another. Boeing had recently chosen to implement a technological platform to regulate product life cycles. This was hoped to cut costs and facilitate the more rapid production of the 7E7. It would do this by standardizing the “use of specifications, engineering rules, operational parameters and simulation results across its extended enterprise.”44 It was hoped that this new system would “improve collaboration, innovation, product quality, time-to-market and return-on-investment.”45
THE CULTURAL IMPLICATIONS OF DIVERSIFICATION
The decision was made to diversify from the traditional commercial airline industry and the many acquisitions that were made created integration issues for the company. The aim again was to add more stability to the business by diversifying into information services and the space industry—providing services with elevated margins that would reflect on Boeing’s bottom line. Condit later admitted that entry into the space industry was an erroneous move. According to the CEO of Airbus, Noel Forgeard, the process of diversification was “extremely demoralizing for Boeing employees,” but Boeing’s vice president of marketing, Randy Baseler, claimed that “what affects morale right now is that we are in a down cycle.”46 Regardless of the reasoning behind it, Boeing’s employee morale was at a low and this issue needed to be addressed.
According to a BusinessWeek reporter, Boeing was in dire need of “a strong board and a rejuvenated corporate culture based on innovation and competitiveness, not crony capitalism.”47 Boeing’s past had left its culture in pieces. After the merger with McDonnell Douglas and many other organizations, the decision was made in 2001 to move the headquarters of their operations from their historical home in Seattle to Chicago. The relocation was said to be the factor that most significantly disturbed the culture of Boeing. The move was instigated to provide a neutral location for the diversified Boeing. Having acquired many different organizations, the past connections to the Seattle site were to be severed. The strategic reason for this move was to help refocus attention on international growth prospects.
Harry Stonecipher, the past head of McDonnell Douglas who had come in as the new chief operating officer of Boeing after the company was acquired, was announced as the new CEO after Condit’s resignation. His first important decision was regarding the new 7E7 planes, which would be Boeing’s first new plane in a decade. On December 16, 2003, Stonecipher announced that Boeing was to go ahead with the production of the 7E7 jets. Stonecipher promised to work closely with unions to see that the low morale is reversed and that the planes are produced at a quicker pace and for less money. Despite Stonecipher’s best efforts, critics are calling for an outside leader to come in and take Boeing back to basics.
A researcher of a shareholding firm claimed that Boeing’s problems lay in the fact that they had “overpromised and underdelivered.”48 The past has shown that Boeing’s inability to react to external pressures has increased their demise. The future of the industry will now depend on the ability of either Airbus or Boeing to predict the way the market will go. Boeing has bet its future on the market developing a partiality for smaller aircraft, like their new 7E7. Airbus, on the other hand, projects that the airlines will purchase larger aircrafts in the future.
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