Forever changing

The pressure on organisations to keep reinventing themselves is relentless. The insecurity this wreaks is bad for the health of both company and staff. How should the corporate leopard change its spots, asks Stefan Stern.

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Last Updated: 31 Aug 2010

On a cold, sunny morning in January 1993, the newly inaugurated President Bill Clinton spoke these words to the assembled great and good in Washington DC: 'When our founders boldly declared America's independence to the world, and our purposes to the Almighty, they knew that America, to endure, would have to change. Not change for change's sake, but change to preserve America's ideals: life, liberty, the pursuit of happiness...

'Each generation of Americans must define what it means to be an American... Profound and powerful forces are shaking and remaking our world, and the urgent question of our time is whether we can make change our friend and not our enemy.'

Truly, this was the speech that launched a thousand PowerPoint presentations. If MT readers had £1 for every platform speaker who had told them that, today, 'the only constant is change', they would already be enjoying a comfortable retirement. Perhaps that phrase should be adapted: 'The only constant is portentous pronouncements on change.'

And yet cliches stick, because there is some truth in them. It is a fact of management life that there seems to be more and more change to deal with: changes in market conditions and changes in technology. And, appropriately enough, the language used to describe these management challenges has evolved too - even change changes.

'You don't hear the strategy consultancies talk so much in terms of "change management" any more - certainly not as they did 10 years ago,' says John Knell, director of ideas consultancy the Intelligence Agency. 'They prefer to talk about transformation. Change has become a more everyday, tactical matter.' The very omnipresence of change has made it in a sense less remarkable, but no less problematic.

People have grown cynical after too many failed change initiatives. 'Charismatic' leadership has not delivered. 'Successful businesses build their culture over time,' says Knell. 'The stop/start of culture change, the freezing and unfreezing of a business, has not worked. That approach fails, given the unforgiving character of competition and customer demand.'

These sentiments are echoed in Jim Collins' 2001 best-seller Good To Great. This author's research into the success of 11 great companies revealed that their transition from 'good to great' did not take place suddenly, or through the intervention of a single change initiative. Lasting, meaningful change took time, imagination, determination and flexibility.

'The good-to-great companies paid scant attention to managing change, motivating people or creating alignment,' says Collins. 'Under the right conditions, the problems of commitment, alignment, motivation and change largely melt away. The good-to-great companies had no name, tagline, launch event or programme to signify their transformations. Indeed, some reported being unaware of the magnitude of the transformation at the time; only later, in retrospect, did it become clear. Yes, they produced a truly revolutionary leap in results, but not by a revolutionary process.'

The problem is that some response to a changing trading environment is necessary. As John Redwood once said of the Conservative party: 'No change means no chance.' (At least he was right on that one.) Successful companies, as Harvard Business School professor Rosabeth Moss Kanter says, develop 'a culture that just keeps moving all the time'.

When Carlos Ghosn arrived at Nissan in 1999 from Renault, charged with turning around the fortunes of the Japanese carmaker, he realised that substantial and uncomfortable changes would be required. Some were dramatic, including the closure of five factories, and the directness of the Ghosn approach was out of keeping with Japanese consensualism. But more important was identifying the future leaders of the company, who would be able to deliver change and be accountable for the execution of company strategy. That has been a gradual five-year process, which has seen Renault's original $5.4 billion investment in Nissan triple in value.

When companies don't change, they struggle and even die. Marks & Spencer may have thought the good times were bound to last as they passed the £1 billion profit mark for the first time in 1997. But the seeds of future disappointment were already being sown. A TV documentary of that time, showing chairman Sir Richard Greenbury testing prototype puddings and inspecting lingerie, suggested a complacent culture where too much power lay in the hands of one person. M&S lacked the agility and responsiveness to satisfy changing customer demand in a rapidly changing market. This story seems unlikely to end happily.

The same is true for former number one grocer Sainsbury's. Mocking the once-trashy Tesco and its loyalty card, the family-controlled business seemed unaware of the changes in customer behaviour and expectations. When it did try to change, its efforts were muddled and half-hearted. The successful transformation of Tesco, on the other hand, has been a 20-year story of ruthlessly managed change - a textbook good-to-great business (in truth, a shabby to good to great business).

The high street is lined with successful changers and unsuccessful no-changers - the 'fast fashion' of Philip Green next to the 'who cares?' retailing of WH Smith. McDonald's new focus on health and Boots' new focus on basics may have come just in time for them.

For all the highfalutin talk of culture and strategy, however, making change happen successfully comes down to practical action. It is about the execution of strategy and the accountability of those charged with making decisions. Just because you know what your company's strategy is - and even mediocre management teams may be able to remember that - it does not mean you have the right people in place to deliver it.

'Managers like to say that they welcome change, that they are not resistant to it,' says Steve Newhall, managing director of management development consultancy DDI. 'But that does not mean they truly have the ability to drive through change, to execute it.

'Getting the right people into the right jobs means finding leaders who can energise the workforce and win some commitment to change,' he adds. 'Employee engagement is a useful lead indicator of how an organisation will respond to the challenge of change.'

Honesty about the competencies of managers is another important factor. One DDI client, a large international trading business, seeks to identify two different types of manager: those who are better suited to the vital task of maintaining the core business, and those who can develop the business in new areas.

The Intelligence Agency's Knell agrees that this human factor is crucial. 'The execution of strategy has effectively migrated down the line - they are now the change managers, responsible for delivering change,' he says. 'The trouble is, sometimes you suspect no-one has told them that.'

Our leaders have always tried to persuade us that change, like Guinness or eating your greens, is good for us. Benjamin Disraeli declared in 1867: 'Change is inevitable in a progressive society. Change is constant.' President Franklin D Roosevelt spoke of the need for 'bold, persistent experimentation'.

Twelve years after Bill Clinton's inauguration, political and business leaders have not stopped talking about change. Tony Blair was still laying on the schtick just before Christmas. Politicians, he said, had to be 'unafraid to change in the face of a changing world'.

But while business leaders try to make change more palatable and more fruitful, perhaps a little more modesty and realism in the face of this changing world would not go amiss. 'Managers don't change businesses - customers do,' says the Intelligence Agency's Knell. 'Customers are in the driving seat.'

The really important challenge is to understand what your customers are telling you, and to respond quickly and appropriately. And you probably don't have that much time in which to do this. For, as any baby boomer, ageing-hippie manager could tell you: 'You'd better start swimming or you'll sink like a stone, For the times, they are a-changing.'

SEVEN MYTHS OF CHANGE MANAGEMENT

In an article for Business Strategy Review, London Business School's Professor Michael Jarrett identified what he called the seven myths of change management...

1. Organisational change management creates value

The ugly truth is that organisational change is exceedingly difficult, says Jarrett. Expected benefits are rarely realised. According to academic research, 70% of change management programmes fail. 'Transformational change' occurs only about 30% of the time.

2. Resistance can be overcome

'The roots of resistance can be found in fear and survival,' suggests Jarrett, 'and it operates at several levels to protect social systems from painful experiences of loss, distress, chaos and the emotions associated with change... Resistance first needs to be understood and reinterpreted. It is the "shadow" side of the organisation that cannot be ignored or easily overcome.'

3. Change is constant

There is a difference between transformational change and incremental change (or continuous improvement). Large-scale change is rare, not constant. Change is more likely to take place through a process of 'punctuated equilibrium' - stability followed by a short period of radical change.

4. Change can be managed

Change produces unexpected and uncertain outcomes. 'The proponents of change can stimulate the change or even steer through it,' says Jarrett. 'But it cannot be managed.'

5. The change agent knows best

'The proponents of change must accept that they are not omniscient,' he argues. Change agents may provoke and stimulate change, but an organisation will find its own ways of responding to that change.

6. Accepted wisdom is to follow the steps

A checklist of predictable steps does not necessarily take account of the flexibility, responsiveness and adjustments that are required during rapid change. It is chaos out there - a more resilient approach will be required.

7. Big changes require big changes

Small interventions can build a critical mass for change, or help reach a tipping point. 'You do not need to change everything all at once, or on a big scale," Jarrett says. "Start small and focus.'

THE CHANGE AGENDA

How to build greater resilience among employees

'We're not experts at managing change,' says Dr Chris Roythorne, vice-president in charge of health at oil giant BP, 'but we're getting better through practice.' Change has meant mostly good news for BP in recent times. The firm has doubled in size over the past five years. A bold acquisition strategy has brought rapid growth, but has also presented a management challenge. 'Change is a way of life for us now, a factor in everything we do,' he continues. 'But wherever you have people, you also have people's health to consider.'

BP is well aware of the pressures that a fast-moving global business can exert on its staff. More than five years ago it started providing training in stress management techniques, trade-marked as Heart Math, delivered in the UK by HunterKane, a training company. 'You can't switch off the physiological reaction to pressure,' says Dr Roythorne, 'but the results we've seen using these techniques have been very impressive. We have built in greater resilience.'

Humans are hard-wired to react to stressful and unsettling situations with a fight-or-flight response, in which the hormones adrenalin and cortisol are produced. Over-production of these two hormones can do long-term damage to health. The Heart Math technique involves reducing the negative hormonal response with a combination of breathing and relaxation.

There is increasing awareness of the harm that dramatic, turbulent change can do to employees. Research into the biochemistry of the heart and brain is pointing to its serious consequences for people's health. As The Lancet said last April: 'The apparent price workers pay is an undercurrent of anxiety and diminished loyalty and commitment, their morale eroded by a chaotic and often dysfunctional work environment in which individuals are devalued or discounted altogether... Such work conditions must exact a physical and mental toll on employees... A recent study showed that workers who kept their jobs during major downsizing were twice as likely to die from cardiovascular disease, perhaps triggered by work stress.'

The late Swiss psychiatrist Elisabeth Kubler-Ross published her research into bereavement over 30 years ago, and her analysis of the human response to sudden and overwhelming shock is pertinent. Humans go through a cycle of responses after traumatic or tumultuous events. First, there is the initial shock, then resistance and even denial. But then worry intensifies, leading to a loss of control and depression. In business, it is at this stage - the bottom of the emotional cycle - that many people choose to leave the organisation.

Eventual adjustment may be possible if the new circumstances can be understood and placed in a meaningful context, but damage will have been done. And it is precisely at this point, after a merger, acquisition or restructuring, that senior managers often favour a 'big bang' approach, calling for further rapid change - stretch targets and 'big hairy audacious goals' - from an already exhausted workforce.

Back on the shop-floor, the workforce may well be disillusioned and cynical. They have been through change programmes, re-engineering, relocations and rebranding. And, as The Lancet maintains, inevitably their health will suffer.

Change cannot be forced through, or demanded, without some negative consequences. High-performance businesses recognise this and are doing what they can to make change tolerable at worst and energising at best. 'We don't have people who can work non-stop for 24 hours - I think they're called robots,' says Roythorne. 'We can't make people infinitely resilient to pressure, but we can help people learn to deal with pressure.'

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