Leading change teigland

Leading Change: Integrating Theory and Practice Robin Teigland Center for Strategy and Competitiveness Stockholm School of Economics [email_address] Twitter: RobinTeigland www.knowledgenetworking.org Jan – May 2011

Leading Change objectives To expose participants to some Change concepts, frameworks, and tools To develop Change techniques and skills through developing and discussing a live change project To deliver real business benefits for your organization To provide participants with an interactive and reflective team experience in which everyone (participants and faculty) learns together

Agenda Afternoon Live Project Groupwork Some Change Tools Morning What is Change Kotter’s 8 Stages Groupwork Going Forward

Jack Welch… "...when the rate of change outside an organization is greater than the change inside, the end is near...."

Competitive advantage is increasingly based on an organization’s ability to change Of original Forbes 100 in 1917 61 companies ceased to exist by 1987 Of remaining 39, only 18 stayed in top 100 and their return was 20% less than overall market (1917 & 1987) Of companies in original S&P 500 in 1957 Only 74 remained in 1997 Of these only 12 outperformed S&P 500 in 1957-1998 period Beer 2002

Only 20-30% of all change projects achieve full value Over 80% of anticipated value from M&A fails to materialize 75% of JVs fall apart after “honeymoon” Less than 50% of quality-improvement efforts make satisfactory progress Only 9% of all major software development applications in large organizations worth cost 31% of software implementation projects cancelled before completion Irrespective success or failure, 53% software implementations result in cost overruns by up to 189% High number of change initiatives unsuccessful! But do change initiatives work? Beer 2002, Gratton 2007, Maurer and Co

Many change programs result from tacit collusion among senior executives, staff, and external consultants who avoid undiscussible issues For Executives : Appearance of quick, painless, measurable results For Consultants : A steady income stream For Internal Staff : Increased responsibility & visibility Short-term benefits Lost time, energy, revenues, employees Increased cynicism Increased resistance to change Learning about wrong aspects Long-term costs Beer 2002

If change is the only true constant in business, how do managers deal with an ever changing business landscape? - Adapted from The Hartford Without change, there is no leadership; but without leadership, there is no change. - Adapted from Prof. John Adair

What is change? In pairs, Think of a significant organizational change that has impacted you in the past. Discuss the following: What were the reasons behind the change? What was the purpose/goal of the change? What actually happened? And why? What were the factors for success/failure? How did the change impact you and how did you feel? What would you have done differently?

Change focus Burnes 2004 Small-scale change Large-scale change Rapid change Slow change Level: The organization Focus: Structures & processes Level: The organization Focus: Culture Level: Individual/group Focus: Tasks & procedures Level: Individual/group Focus: Attitudes/behavior

PESTEL – External pressures for change Johnson & Scholes 1997 Political Environmental Technological Legal Social Economic Organization

1. What factors are affecting the industry? 2. Which of these are the most important at the present time? 3. Which of these are the most important in the next few years? Political Global, regional, and national political development (administration, political parties) Taxation policy Foreign trade regulations Labour market politics Government stability Socio-cultural Population demographics Income distribution Social mobility Lifestyle changes Attitudes to work and leisure Attitudes to consumerism Levels of education Changes in values/attitudes Education conditions Work environment conditions Health conditions Environmental Ecology Pollution conditions ” Green” energy Energy conservation Waste handling Economic Business cycles GNP trends Interest rates & Exchange rates Money supply Inflation Unemployment Wage level Private consumption and disposable income Public finances Energy availability and cost Technological Government spending on research Government and industry focus of technological effort New discoveries/development Speed of technology transfer Rates of obsolescence New patents and products Legal Development in price and competitive legislation Labour market legislation Product safety and approvals

A new workforce is appearing… Prensky 2001, Beck and Wade 2004, Mahaley 2008 “ Digital Immigrants” “ Digital Natives” Company loyalty Work ≠ Personal Learning=Behind the desk Professional loyalty Work = Personal Learning=Fun and games

Technical knowledge quickly outdated 50% knowledge relevant 50% knowledge outdated First year of technical-based education Third year of education

Organizational forces: Internal pressures Need for improved performance In current or new markets Need for integration and collaboration E.g., alliances, synergies, economies of scale Power and politics E.g., changes at top management and board level Changes in surrounding organizations E.g., key customers, suppliers, partners

Pressures from one area can affect entire organization Political Environmental Technical Legal Social Economic Culture Systems Vision Strategy Structure People

But every challenge is….. A new opportunity???

What are the critical success factors for change?

Only 20-30% of all change projects achieve full value Over 80% of anticipated value from M&A fails to materialize 75% of JVs fall apart after “honeymoon” Less than 50% of quality-improvement efforts make satisfactory progress Only 9% of all major software development applications in large organizations worth cost 31% of software implementation projects cancelled before completion Irrespective of success or failure, 53% software implementations result in cost overruns by up to 189% Remember…. do change initiatives work? Beer 2002, Gratton 2007, Maurer and Co Why? According to Fortune 500 executives, resistance/people not accepting changes

Extent people more or less resistant, indifferent, or likely to lend support to change affected by how change perceived to affect them Reasons for resisting change: loss of control too much uncertainty surprise confusion loss of face concerns about competence in new context increased workload change fatigue view that costs outweigh benefits past resentments real threats Why do people resist change? Managers need to take affirmative action to minimize these effects! Iles & Southerland, 2001, p.56-57

People react differently... Rogers, 1983, 1995 Innovators Leap with enthusiasm at change proposal and strongly support. Expect others to be active in pursuing change. Early Adopters Rapidly persuaded, especially by early success. Likely to want to adapt change proposals to own circumstances. Early Majority Want to see tangible outcomes to change proposals. Not convinced merely by idea or principle. Late Majority Follow powerful person when agree and support change ideas. Commitment centered on political calculation. Resistors (Laggards) Predictable, Need considerable evidence – more vivid and directly observable, the better – before they can be mobilized. Relatively risk adverse.

Reactions to change distribution Rogers, 1983, 1995

Helping stakeholders go through transformation Current situation Future situation Transformation Organization Historical heritage, tradition Culture Selective perception Follow old patterns Return to “the way it was” Individuals Resistance to change something that is familiar and feels safe Difficult to 'say goodbye’ to old patterns and habits Insecurity around what future will bring Resistance reactions Sven Hultín, IBM Shock Denial Realism Acceptance The Change Process Reaction

Getting through valley of despair High Uninformed optimism (Security) Informed pessimism (Doubt) Hopeful realism (Hope) Productivity Time Low Optimism (Decision Power Commitment) Successful ending (Satisfaction) Hultín, IBM

Say the color, not the word YELLOW BLUE ORANGE BLACK GREEN PURPLE YELLOW RED ORANGE GREEN BLACK BLUE Stroop

The challenge of change Change Leadership Change Management The WHAT The ‘hard’ edge: Systems, processes, structures, and business strategy The HOW The ‘soft’ side: Culture, behaviors, values, and people Zwanenberg

Kotter’s eight-stage process for change Kotter 1996 2. Form a powerful guiding coalition 1. Establish a sense of urgency 3. Create a vision 8. Anchor new approaches 4. Communicate the vision 5. Empower others to act on the vision 6. Plan for and create short-term wins 7. Consolidate improvements and produce more change

1. Establish sense of urgency Forces for change Forces for stability The status quo Burnes 2004 http://www.youtube.com/watch?v=U5802FBaMSI

Force field model Who and What Can Change Lewin 1947, 1951; Iles & Southerland, 2001

1. How to create a sense of urgency? Create a crisis/rivalry Benchmark within and outside industry Find/develop a “red hot” burning issue Align with a powerful sponsor Revise existing or develop new standards Income, profitability, effectiveness, efficiency, customer satisfaction Get an outside opinion Bring in consultants, customers, shareholders Adapted from Kotter 1996

2. Form a powerful coalition Ensure shared understanding & right attitude Ability to share vision Trustworthy Commitment to means and end Has access to necessary resources Formal position power Expertise Reputation Leadership Informal network position But look out for people with big egos or “snakes” Beer 2002, Kotter 1996 The small team that will lead the change

Who has informal power in the organization? Teigland 2003

3. Create (and operationalize) a vision Create the vision To direct the change effort To coordinate across and outside the organization Develop a strategy to achieve the vision (operationalize) To engage people through participation To find their “passion” To overcome forces for stability Adapted from Kotter 1996

4. Communicate the vision How? Use multiple channels Regularly to reconfirm What? Keep it simple Use metaphors and success stories Who? Walk the talk Identify key opinion leaders But listen as well!! Adapted from Kotter 1996

When do people support the vision? Relate to the vision Expect personal gain (make their world a better place) Can give input Respect the leader Believe the time is right “ Coming together is a beginning, staying together is progress, and working together is success.” -Henry Ford

Information + Involvement to build commitment & change Increasing Commitment Awareness of desired change Understanding of change direction Translation to the work setting Commitment to personal change Internalization of new behavior “ Yeah, I saw the memo.” “ I understand where we need to go.” “ I know how we need to do our jobs differently.” “ OK, I’m ready to do it the new way.” “ This is the way we do things here.” Stages of Individual Behavior Change Information with some involvement sufficient here Significant involvement needed Schreiber

5. Empower others to act on the vision 1. Does the organizational culture encourage individuals to act? 2.Do people have the necessary resources to act? 3.Do people have the appropriate skills and training to act? 4.Do people have the authority to act? 5.Are the organizational structure & systems aligned with the vision? Adapted from Kotter 1996

6. Plan for and create short-term wins 1. Create obtainable targets 2. Encourage & convince people that targets can be reached 3. Recognize and reward “winners” Communicate the wins Adapted from Kotter 1996

Broadcast heroes and their success stories!

7. Consolidate improvements and produce more change Change Project 1 Change Project 2 Change Project 3 Time Scope of change Adapted from Kotter 1996

8. Anchor new approaches Company culture Physical artifacts activities and routines Underlying values, assumptions, beliefs, and expectations Intangible Adapted from Kotter 1996

Tata Motors India’s largest commercial vehicle maker for decades World’s fifth largest manufacturer of medium and heavy trucks India’s largest automobile company (#1 in commercial and #2 in passenger) Building global presence (e.g., partnership/acquisition with Fiat, acquisition of Jaguar/Land Rover) Major turnaround 2001 to 2007 March 2001 - $110 mln loss for fiscal year, corporate India’s biggest loss 3Q 2007 - $132 mln profit http://www.youtube.com/watch?v=rOnQpP5haUQ

Groupwork - In your groups Discuss how change was implemented at Tata Motors What triggered the change? How does the change process map onto Kotter’s eight stages? What is the real change? What are the lessons learned from the case? Prepare a maximum 10 minute presentation Present groupwork Discussion http://www.mckinseyquarterly.com/Leading_change_An_interview_with_the_managing_director_of_Tata_Motors_1908

Adapting Kotter to your organization Change at IBM A vision with clear objectives Compelling reason to act – burning platform Holistic approach Broad participation M easurable targets Effective project management Consistent executive ownership and participation Hultín, IBM

Kotter’s eight-stage process for change Kotter 1996 2. Form a powerful guiding coalition 1. Establish a sense of urgency 3. Create a vision 8. Anchor new approaches 4. Communicate the vision 5. Empower others to act on the vision 6. Plan for and create short-term wins 7. Consolidate improvements and produce more change 1. Prepare 2. Implement 3. Manage

Agenda Morning What is Change? Kotter’s 8 Stages Groupwork Going Forward Afternoon Live Project Groupwork Some Change Tools

Overview Purpose Concepts: To develop change management techniques and skills through developing and discussing a real change project Competence: To apply change management frameworks and tools Capital: To strengthen your personal networks Change : To create real business benefits at your organization Groups You will work in your groups Topic Your group will decide together on one topic for the change project

In your groups ….. Choosing the Change Project

Criteria for the Change Project It should involve a real organizational issue or challenge that at least one group member is currently facing in his/her part of organization. It should lead to a real change in your organization. The change should lead to improved business performance that is both identifiable and measurable. The project should have a sponsor . ” This is something we would like to do!!”

Better to choose a more narrow, specific focus!

You will present your projects at end of program

Discuss in your groups today What are the current & future pressures for the change? Internal External (PESTEL) What is the sense of urgency for the change? For whom? How urgent? What can be done to strengthen the sense of urgency? What is the vision or real change that your project will lead to? How will the change improve business performance? Identifiable? Measurable? How will you organize your work during the program? How will your coordinate with your Sponsor?

PESTEL – External pressures for change Johnson & Scholes 1997 Political Environmental Technical Legal Social Economic Organization

Pressures from one area can affect the entire organization Political Environmental Technical Legal Social Economic Culture Systems Vision Strategy Structure People

Identify internal and external stakeholders Political Environmental Technical Legal Social Economic Culture Systems Vision Strategy Structure People

Prioritize stakeholders Low High Low High Level of interest Visibility Importance Priority Scholes 1998 Power Formal Informal Keep informed Key players Minimal effort Keep satisfied

Stakeholder analysis Adapted from Nader, NTL Current (C) & Desired (D) position regarding the Change Stakeholder Block Let Help Make Diagnosis of stakeholder position Recommended action to move to desired position

The Change Project Statement … if you can ´t say it in a few words, then keep discussing! Name of Change Project and Business Names of Change Project team members Name of Sponsor What are the drivers for your Change Project? What will be the change resulting from your Change Project? How will you measure the impact of your Change Project? When do you expect to see results from your Change Project?

Today’s Coaching Session Each Group will present its Change Project to the others, max 10 minute presentation One Review Group will be appointed to lead the following discussion, max 5 minutes : How well does the Project fulfill the Change Project criteria? What challenges are foreseen for the Project? How could these challenges be overcome? Promote learning through “Assess, Challenge, Support” !

Leading is looking in all directions Sponsor or Steering Group Project Team Project Leader Stakeholders Downwards Outwards Forwards Inwards Upwards Backwards Briner et al 2004

Tools to achieve the “transformation” Conduct stakeholder analysis Develop clear project charter and roll out plan Develop communication plan Conduct risk analysis Develop measurement plan

Why use tools? Reducing complexity to something manageable Identifying priorities and importance, sequence of activities Highlighting interdependence between actors and tasks Creating a common language My view…. Making views explicit

1. Identify internal and external stakeholders Political Environmental Technical Legal Social Economic Culture Systems Vision Strategy Structure People

Stakeholder analysis Adapted from Nader, NTL Current (C) & Desired (D) position regarding the Change Stakeholder Block Help Let Make Diagnosis of stakeholder position Recommended action to move to desired position

Helping stakeholders go through a transformation Current situation Future situation Transformation Organization Historical heritage, tradition Culture Selective perception Follow old patterns Return to “the way it was” Individuals Resistance to change something that is familiar and feels safe Difficult to 'say goodbye’ to old patterns and habits Insecurity around what future will bring Resistance reactions Hultín, IBM Shock Denial Realism Acceptance The Change Process Reaction

2. Develop clear project charter and roll out plan Spend sufficient time specifying What are the vision and goals/objectives ? How are resources to be supplied? What are the importance and priorities of tasks ? What training is necessary? What roles need to be updated? What union contacts, if any, need to be developed before? What and when are the short term wins?

Successful change requires attention to all relationships Political Environmental Technical Legal Social Economic Culture Systems Vision Strategy Structure People

3. Develop communication plan Who? What? Why? How? When? Remember to communicate even to those who are not impacted Do for each group of stakeholders Around 20% of your project activity!

Ensure continuous communication of big picture Balance and respect all stakeholder interests All interests important Link “big picture” with “little picture” Balance long-term vision with everyday operations Avoid parochialism resulting from stakeholders receiving different information due to division of labor Communicate timely and continuously Sponsor or Steering Group Project Team Project Leader Stakeholders

Create trust through open communication Provide open forum for discussion between stakeholders, e.g., virtual project space

Ralph Stacey’s Decision matrix

Engage and ensure interaction ! Involve stakeholders in joint tasks from very beginning of project Example: Development of project objectives Use boundary objects to facilitate understanding

Communication Plan, phase 1: Before the start of a project (Decision making) Change must be done Lose customer No new business What can be done ? Competitors Customer demands Walk to talk What do others think? Trends Customer Business owner Understanding need of change But what does this mean? Star model Project def Project plan Clear picture Who What Why How When Pilot Meetings Webcast Mail Project idea No change without pain Testing idea Finding proof Commitment Decision Communication Formal Document

Communication Plan, phase 2: Project implementation Target setting for project, individuals and teams Virtual (video) Meeting Virtual Project space Stakeholders Public forum Project members Scorecard Common language Common terminology Risk analysis Business owner Customer Plans are sent for internal audit Status, Result achieved Follow up reaching of targets Report Sharing of Best practice Project start Tools Quality Stakeholder statement Status Project FINISHED Information to Stakeholders & Public information

4. Continuously manage risk Low High Low High Probability of occurring Impact of change Monitor Work on reducing Minimal effort Manage

Risk analysis Risk No. Description Proba-bility Project impact Priority Potential consequences Proposed/ implemented actions Status Respon-sible 1 2 3 4

5. Measuring impact What are the key milestones of the operational part of the change? How will the overarching effects of the Change Project on the organization’s performance be measured ? When do you expect to see an impact on the organization’s performance ?

Match the measures to the impact of the change Culture Systems Vision Strategy Structure People

Developing appropriate measures and timing Measures Are there any existing measures that can be used? Balanced scorecard? What new ones, if any, should be developed? Internal vs external? Maximum of three measures Timing When should the baseline measure be done? How often should measures be taken? When do existing measures occur in relation to these? What gets measured, gets done!

Measurement plan Measure no. Measure Description How directly impacted by change project Baseline measure Measuring frequency 1. 2. 3.

The Change Project Timeline Module 1 Choosing the Change Project Structuring future work Working in virtual groups Identifying stakeholders & powerful coalition Creating a vision Module 2 Developing an implementation plan Defining impact measurement Working in virtual groups Developing a communication plan Performing a risk analysis Module 3 Final Presentation

Agenda Morning What is Change? Kotter’s 8 Stages Groupwork Afternoon Live Project Groupwork Some Change Tools Going Forward

Final Presentation Each team has 20 minutes maximum to present its Change Project, including the following (in ppt): Purpose and rationale for change Use of tools, eg stakeholder analysis, risk analysis, etc. Measuring impact and preliminary results Plan for moving forward Lessons learned One team will then lead feedback to the Presenting Team for 10 minutes maximum The purpose of this feedback is to spur lively debate and help advance each Change Project as much as possible Faculty will provide further comments Each team submits its presentation

Leading and learning Leadership and learning are indispensable to each other.” - John F. Kennedy Leadership, teaching, and learning are inextricably interlinked. - Jack Welch

Good luck with your projects!!

Leading change teigland

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