Mature organisations, particularly large ones, often reach a point in their lives where they want to make a step change in some dimension of performance. Such initiatives can include: mergers, acquisitions, business process change, relocation, multi-site consolidation, outsourcing and a lot else in between.
These types of changes are challenging because their success, to a large degree, depends on changes of behaviour.
And in an increasingly interdependent world, those behaviour changes are no longer restricted within departmental or organisational boundaries. Employees, customers, suppliers, partners and regulators, now constitute a rich ecosystem that is a modern organisation.
To deal with this complexity, our approach to organisational change needs to change.
How change used to be
A hundred years ago, if Henry Ford wanted to change his organisation, he could simply tell people what he wanted and it would happen. But by the time I was directing my first major change programmes, in the mid-nineties, the language of change was about, “getting buy-in”, “winning hearts and minds” and “overcoming barriers to change”.
The role of people and their behaviour was recognised but change was still seen as being top down. The hero CEO breezed into town and told everyone what needed to change. He would then hire his favoured management consultants and set about establishing a team to make the change happen.
And those consultants probably leaned heavily on a hugely influential article by Harvard Business School professor, John Kotter. The article, Leading Change: Why Transformation Efforts Fail, was published in spring 1995’s Harvard Business Review.
Kotter wrote that he had studied “more than 100 companies”, over 10 years and concluded that:
“A few of these corporate change efforts have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale.”
Based on “the more successful cases”, he proposed “eight [sequential] steps for transforming your organisation”.
1. Form a guiding coalition
2. Establish a sense of urgency
3. Create a vision
4. Communicate the vision
5. Empower others to act
6. Plan for and create short-term wins
7. Institutionalise new approaches
8. Consolidate improvements
Top tier consultancies immediately put in their back-pockets and others put it straight on PowerPoint slides, perhaps losing a few key words along the way.
Kotter’s eight step programme has been prevailing wisdom for the last two decades.
The world has changed
The programmes I directed the mid to late nineties, were during the heyday of Business Process Reengineering. I was working in retail banking, which was a very hierarchical environment, and Kotter’s model served us well...most of the time.
Consultants would facilitate groups of front-line staff to come up with radical ideas that were then piloted, to validate benefits. That done, they were then rolled out, cookie cutter style, to a few thousand people. Luckily for us, most of the changes made obvious common sense, so there was limited resistance to change and the changes stuck.
But I can think of at least one really important change that failed because we tried to impose something that people didn’t see as practical. Tens of millions of pounds of cost savings went begging. We were just not able to get staff to make the behavioural changes needed to exploit the expensive technical changes that we had made.
Effective organisational change has always been, to some extent, dependent upon behavioural changes. But I believe, however, that the extent of this dependence has increased massively since Kotter’s article.
Three key changes have changed the playing-field, particularly over the last decade.
1. Organisations are more interdependent than ever before.
What started out as the outsourcing of unglamorous activities, has lead to the redrawing of organisational boundaries. Activities previously carried out within organisations are now often done by partners and suppliers...often sitting in the same premises, using the same technology.
2. Digital technology has made organisations transparent.
he power of customers, suppliers, partners and competitors has increased massively because it’s so easy to build a comprehensive picture of an organisation. Strategy, people, pricing, customer reviews, gossip, pretty much anything else one would like to know, are all just a click away.
3. Individual commitment needs to be earned
With job security no longer the norm, commitment to challenging organisational goals needs to be earned in different ways, such as opportunities for intellectual and professional development, or a sense of purpose. Additionally, critical contributors to change may not even be directly on the payroll.
The upshot is that today’s organisations are less like machines and more like ecosystems.
Constituent parts linked together, in large part, by behaviour and just like an ecosystem, small changes in one part can have large and unexpected consequences elsewhere.
Change needs to change
A motorcar is complicated. It has lots of parts but the outputs can be predicted from the inputs. Change can be designed and controlled. This is still the mindset most organisations have towards organisational change.
Today’s organisations are, however, increasingly complex. Interventions can be designed but outcomes cannot. What happens as consequence of an intervention is not entirely predictable nor can it be fully controlled. To understand a complex organisation, we need to think in terms of systems of interconnected, largely autonomous parts.
Most changes are usually a mix of technological and behavioural change. The more the change depends on behaviour, the more likely that the change needs to be understood as a complex system.
Lessons from foreign aid
In his book, Aid on the Edge of Chaos, Ben Ramalingam examines the repeated failure of large-scale foreign aid interventions. Perhaps counter-intuitively, the arrival of outside money and expertise often makes matters worse, not better. Complex problems do not always have simple, elegant solutions. Networks of relationships and interactions can be fragile if an intervention ignores how different parts interact.
Ramalingam tells us how a thousand-year-old system of terraced rice farming in Bali was
brought to the brink of collapse by a disastrous outside intervention to improve yields, hubristically named Massive Guidance. It took ten years of falling yields, to get the aid agencies to recognise that a different approach was needed.
Unfortunately, the tightly integrated social and decision making structures, particularly around water-sharing, that made the system work, prior to Massive Guidance, had been side-lined for a decade. But eventually, after much work, the previous status quo was restored, thanks to the systems thinking experts from the Sante Fe Institute. Today it is a World Heritage site.
Alongside the failures, Ramalingam highlights the successes and identifies some common themes in those successes:
understanding the system within which an intervention sits
small-scale, low risk experiments in the face of uncertainty
propagation of “best practice” from within
What thrives is these complex contexts is that which best fits that context. In an ecosystem, it’s survival of the fittest.
No-change organisational change
Soon after reading Ben Ramalingam book, I heard a talk by one of my colleagues. He described a current assignment, to improve the effectiveness and efficiency of delivering IT-based change in a major utility. The approach he described resonated strongly with the advice from Ramalingam for foreign aid projects.
The team set out to propagate change from within, coaching client teams to adopt a handful of different practices but keeping everything else the same. Kenny described it as “no-change organisational change.” A later conversation with Kenny validated that this was a conscious decision to use a systems thinking approach that treated the organisation as an ecosystem not a machine.
Interestingly, John Kotter returned to the pages of Harvard Business Review in November 2012, to update his much-followed advice for organisational change. In an article entitled Accelerate! he argued that a linear, sequential approach was too slow for today’s fast-paced, interconnected world. He reworded his eight steps, describing them as “eight accelerators”, acting simultaneously, in concert.
But actually, most of the article majored on his advocacy of an informal change leadership structure, operating in parallel to the formal leadership structure. He described an “inside-out” systems approach to change, very much in line with what my colleague has described with his “no-change organisational change.”
How change needs to be
So what advice should we give to executives, under pressure to deliver a step change in performance?
1. Think of the organisation as a system
Creating false boundaries limits both our understanding of change and our capacity to effect change. An intervention in one place can cause unforeseen consequences elsewhere. Make a serious attempt to map and understand connections and feedback loops.
2. Replace predicting and controlling with sensing and responding
Change is less like a sprint relay and more like a rugby match. There is a game-plan but success depends on awareness of (“sensing”) emerging situations and adapting appropriately. Fail quickly and learn.
3. Change needs to be co-created and come from within...to be inside-out
Work with not against the organisation’s immune system. The executive team may have a handle on the performance attributes that need to change but the people who know how to achieve that change are the people who do the work, including partners, suppliers and customers.
Gardeners not mechanics
Leaders of change need to be more like gardeners and less like omnipotent mechanics. A successful gardener takes time to understand the complexity of their unique environment and how the different parts interact. They work together with the environment, not against it. Success depends on experimentation and nurturing.