“When the rate of change outside exceeds the rate of change inside, the end is near.” – Jack Welch
If slow change is evolution, and rapid change is revolution, where are we on the change continuum as we begin the second decade of the 21st century? No matter where you think we are on the continuum, you cannot deny change’s inevitability, and the current uneasy sense of acceleration in the rate of change. The impact of change, both personally and organizationally, can be either subtle or dramatic, with the latter more commonplace today.
Consider the demographic shifts resulting from longer lifespans, lower birth rates and global population movements; the world-wide reshuffling of centres of production, services and investment flows, and the rising dominance of Asia (relative to the decline of the West); the renaissance of innovation created by technological advances; and the instantaneous access to information (and products/markets) for a significant and growing portion of the world’s population.
In the business world, there are forces aplenty influencing and demanding change – including globalization, technology and geopolitical stratagems related to finite resources, and more recently, climate change. The types of changes organizations initiate as a result of these forces include process re-engineering, acquisitions, mergers, recast corporate strategies and organizational structural retooling.
Veteran CAs will recall the spate of mergers and alliances that dominated the CA profession in the late ’80s and early ’90s. Reacting to the implosion occurring in the financial services industry with deregulation (remember trust companies?) and the early stages of globalization, the dominant firms in the CA profession went from the ‘Big 8’ to the ‘Big 6’ to the ‘Big 4’. For many CAs during this time, change was up close and personal.
The process of implementing change in an organization is traditionally called Change Management. Jim Murray, an accomplished change architect with a track record of leading change initiatives in both the public and private sectors, suggests the term is no longer relevant. He states “You don’t manage change itself, rather you create and manage the environment so that change can be focused and the organization can thrive.” While this may sound simple enough, failure rates are high – at nearly 70 per cent. Often referred to as ‘turning the battleship’, organizations have much riding on successful implementation.
We asked Murray why so many change implementations fail. He said, “They fail for a host of reasons, all of them preventable. Often, it’s a failure to deal effectively with resistance and a failure to communicate.” He identifies the major reasons as:
- The echo chamber: when people share the same point of view, they don’t challenge arguments or assumptions
- Selective hearing: arrogance borne of success
- Wishful thinking: assuming things will work out, for a host of delusional reasons
- Emotional overinvestment: too much already invested to do something else
- Unrealistic performance expectations: this one is major
Murray points the finger at failure for reasons related to the ‘people’ side of change – both those orchestrating it and those affected by it. Change consultant Stephen Warrilow echoes Murray’s position and asks us to consider what Michael Hammer, co-author of Re-engineering
the Corporation and a recognized authority on the subject, has said about the people issues: “… the human side is much harder than the technology side and harder than the process side. It’s the overwhelming issue.”
Closely allied to that issue are the lack of both leadership and process to directly address the human aspects of change. Successful implementation of change is nothing less than survival. And you rarely, if ever, get a second chance if you get it wrong the first time. Its critical importance has led to applying scientific methods into understanding organizational behaviour.
For example, Chaos Theory and Complexity Theory have been used to understand the interconnectivities of the organization’s parts and their effect on the whole. You may be familiar with the proverb ‘For want of a nail’, where a kingdom was lost because a nail for a horseshoe was lost. Similar to this is the Butterfly Effect in Chaos Theory, where a butterfly flapping its wings leads to changes in the location of a hurricane.
Dr. Christopher Worley, Associate Professor of Organization and Management at the Graziadio School of Business and Management (Pepperdine University), offers these basic principles of good change management:
- Do no harm: poor implementation poisons attitudes toward change and creates problems in the future.
- All change involves personal choice: individuals must believe that it is in their own best interest to do things differently.
- The relationship between change and performance is not instantaneous: change involves time and the opportunity to learn, and learning is often inefficient.
- Connect change to business strategy: change should only be pursued in the context of a clear goal, be it personal, group, organizational or societal.
- Involvement breeds commitment: involving people in change decisions provides improved estimates of timetables, expectations and commitment.
- Any good change effort results in increased capacity to face change in the future.
Jim Murray argues, “The work of leaders at all levels is to determine the path forward, to continually refocus the organization to achieve clarity of purpose. Understanding how to use unpredictable, disruptive change as the vehicle for becoming more agile, efficient, innovative and growth oriented is where leaders should be focusing.”
While it may seem obvious, is Change Management simply Management in the 21st century? Is it a specific set of skills to take off the shelf for those unique events which occasionally rear their heads, or is it a core competency in a world constantly evolving and full of change, challenge and opportunity? Is there anything in the above list that should not be practised by managers and their organizations in their day-to-day business?
What is called the Change Imperative is actually the Survival Imperative. Change, reinvent, recreate, innovate or you’ll be a footnote. The Dow Jones Composite Index continually monitors the 30 companies which comprise its Index. The Index reflects the ebb and flow of changes in the underlying economic trends and conditions, which industry segment is growing, and which is declining. In its debut in 1896, the Index contained 12 ‘smokestack’ companies.
Ten years ago, Microsoft, Intel, SBC Communications and Home Depot replaced Chevron, Goodyear, Union Carbide and Sears, Roebuck. Last year, Cisco Systems replaced General Motors. While it may be a lagging indicator, it is reflective of the impact of change, and the necessity of management embracing the change imperative.
Interestingly, there is one company that has been in the Dow Jones Index since its inception and that is General Electric. Jack Welch, its former CEO, perhaps revealed the reason for its longevity when he said, “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”
Robert Gagnon, CA, Associate Director, Professional Development, oversees the Institute’s Executive Programs. For those interested in learning more about this topic, the Refocusing the Organization program is offered July 11-14, 2010.
Article appeared in The Institute of Chartered Accountants of Ontario’s CHECKMARK magazine Spring 2010.