CHANG
12Principlesof
Organizational
Transformation
BY BILL TRAB ANT, W. WARNER BURKE AND
RICHARD KOONCE
'hinge. It's the one constant in business
today. Yet many companies do a less-
than-spectacular job of managing in-
house change initiatives, or responding
to changes in the external business en-
vironment. Numerous studies indicate
that as many as two-thirds of all re-
structuring and reengineering efforts
fail in some way, including living up to
expectations. And we all know companies that ,
have grown complacent in light of longtime
marketplace dominance, responding slowly to
changing customer tastes or tailing to see their
competitors' ability to manufacture products at
lower costs offShore.
How can you make sure your company
stays alert to the need to change? Equally im-
portant, how do you ensure that your organi-
zation develops the capacity for continuous
.
change and renewal in an age of globalization,
accelerating development and deployment of
new technologies, and the rapid, sometimes-
Overnight emergence of new competitors,
products and markets?
For years, companies have used down-
MANAGEMENTREVIEW/ SEPTEMBER 1997 17
 CHANGE
sizing to cut costs, streamline their structures
and ostensibly improve operating effectiveness.
And for years, there's been mounting evidence
that downsizing alone does little to improve or-
ganizational performance or profitability, but
can, and often does, dampen employee morale
and productivity.
In other cases, CEOs have often believed
that changing their organization for the better
involved nothing more than redrawing the or-
ganization chart, realigning reporting relation-
ships at the senior level, for example, or re-
designing how different divisions and tines of
business report up the chain of command. But
as with downsizing, toying with change in this
way doesn't give you sufficient leverage to real-
ly make a difference, whether your goal is to
improve operating efficiency, move in new
market directions, respond to new customer
demands or tighten-up operating costs.
Understanding
Change Factors
How do you know what is most important for
your company to think about, as you ponder
ways to became more responsive to customers
or more innovative in your production? How
can you tell which of these factors will poten-
tially facilitate large-gauge transformation ef-
forts, or conversely, stop you dead in your
tracks? Most importantly, how do you create a
climate of organizational alignment in your or-
ganization that results in optimal productivity
and performance?
One way to answer all these questions is to
conduct a change-readiness assessment. Doing
so enables you to look at your organization as
an organic "system" made up of interdepen-
dent parts. The data you collect about each part
of your organization as the result of an employ-
ee assessment can then be used to plan and suc-
cessfully manage change initiatives.
To be successful, broad-gauge organiza-
tional change must be implemented at two dis-
tinct levels in an organization: the
transformational and transaction-
BRIEFCASE al. Transformational gives you in-
sight into how much employees
By diagnosing your compa- know about the external environ-
ny's health according to the ment of the firm. Who are the cus-
12 guiding tenets of "leader- tomers and competitors? How well
does the company understand and
shift," you can decide whether
respond to the requirements of its
or not it needs a face-lift or customers?
simple touch-up. In any case, An assessment must also give
change is a comin'. you an insider's view of how well
employees understand the firm's
18 AMERICAN MANAGEMENT ASSOCIATION/ SEPTEMBER 1997
mission and strategy. Further, what are the em-
ployees' perception of management? Do they
trust them? Do they consider them successful
motivators? And what do employees think
about the firm's culture? Is it oppressive or em-
powering? Answers to questions such as these
provide grist for the mill.
From a transactional standpoint, the focus
is on the organization's internal structure. How
do reporting relationships and lines of business
affect organizational effectiveness? Does the
firm promote autonomy or teamwork? Next,
what do people think about systems, such as
technology, policies and procedures that sup-
port how people get their jobs done? Does cur-
rent office technology support people in new
ways emphasized by top management, or not?
Determine what employees think about man-
agement practices, work climate and perfor-
mance issues: Does management support the
firm's new emphasis on individual accountabil-
ity and job ownership? Do employees' skills
match their jobs? Is the company profitable and
productive?
After the survey, tally and score the
responses. Assigning weightings to different
variables is useful since it prioritizes organiza-
tional issues. Using a diagnostic survey allows
you to plan and initiate change efforts based on
research.
Guiding the Change
While assessments are a critical part of plan-
ning successful transformation efforts, they are
only a starting point for actually doing the
work. You also need a set of operating guide-
lines with which to manage your change plans
and help you stay on track. In essence, these
form a philosophical and methodological
framework for the change work you are doing.
In that spirit, there are 12 guiding principles
that -a company should keep in mind as it plans,
designs and implements transformation efforts.
These are also referred to as the 12 principles of
"leadershift," because they require business lead-
ers to think about change in new, multi-
dimensional ways that they may never have con-
sidered before.
Understand the external environment
ILLUSTRATIONS: JANETHAMLIN
in which your company operates, and
you will never be blindsided by your
customers or your competitors again.
As a CEO or change agent in your organization,
you probably know the story of the boiled frog.
If a frog is put into a pan of water that is slowly
and imperceptibly heated to the boiling point,

the frog stays in the pan. It is lulled into a false
sense of security, fails to notice the change in
water temperature and ultimately dies. By con-
trast, a frog put directly into a pan of boiling
water will quickly jump out and save itself.
Unfortunately, many companies today be-
come "boiled frogs" because they fail to notice
micro-changes in the business environment, a
fact that often leads to their demise, or at least
to dwindling market share and lost profits.
For example, General Motors saw the evi-
dence from California in the 1970s that there
was a swing away from U.S.-produced cars, but
dismissed it as unimportant and not the pre-
cursor of the consumer's growing preference
for foreign cars, which in fact it was. It took
years of declining sales and eroding market
share before the company finally realized that
its traditional customers were deserting it in
droves for foreign manufacturers whose cars
were more reliable and less expensive.
In today's rapidly changing business envi-
ronment, you must keep abreast of what is hap-
pening in the external environment if you hope
to retain customers, build market share, out-
pace your competitors or capitalize on new
business opportunities. That means anticipat-
ing trends or changes in the political environ-
ment that can impact the business climate, even
new technologies and scientific discoveries that
can change the nature of business overnight.
CHANGE
Remember that while charismatic
leadership may grab the headlines, it
is steady and consistent leadership
that actually results in changes to the
bottom line.
There's a popular myth in management circles
today that the only kind of leadership which
really counts is charismatic leadership. But
while charismatic leadership (a la Chrysler's
Lee Iacocca) can be effective, grabbing head-
lines and adding points to your company's
share price, it isn't always essential to the suc-
cess of a change effort. Sometimes it's not even
what you really want. Why? Because change ef-
forts launched by high-profile CEOs some-
times fail to achieve the momentum they need
to succeed. They may be announced with great
fanfare one month, only to be shoved to the
back burner of business concerns the next.
This has given rise to much of the cynicism
that circulates today about change manage-
ment initiatives and what has led, in some
cases, to them being described as nothing
more than "flavor-of-the-month" corporate
faddism.
What you really need in your CEO is
someone who provides clear and consistent
leadership to people, a leader who can "tell the
story" of his company and where it's going in a
compelling way that grabs the interest and
lights the passion of people from the board-

Enlist people's passion and energy to

UNDERSTANDING THE DYNAMICS OF ORGANIZATIONAL CHANGE
support your company's mission and
strategy.
Do this, and you will never lack the arms and
legs necessary to achieve what you set out to do.
Lou Gerstner, CEO of IBM, was right when he
said, "Change isn't something you do by
memo. You've got to involve people's bodies
and souls if you want your change efforts to
wore This is something that smart companies
know how to do, even when you might imagine
it would be difficult. Structure
Management
Practices
Can your company say that it elicits pas-
sion on the part of employees in ways that sup-
port your company's mission and strategy? You
might not expect a lot of passion from the divi-
sion of a worldwide pharmaceutical company
CHART ILLUSTRATIONS; ELIOTBERGAMAN

that makes colostomy bags, yet people in this

division believe passionately in what they do,
and in servicing their customers. So it doesn't
really matter what your company makes
chemicals, computer software or colostomy
bags strive to create an emotional bond be-
tween your people and your company's mis-
sion. If you do, you'll find that people will cross
rivers for you.
MANAGEMENT REVIEW/ SEPTEMBER 1997 19
 CHANGE
11
-"141111 Managers must be tuned into the best ways to
manage and motivate people in times of change.
room to the mailroom. This kind of leader is
effective at a transformational level in the orga-
nizationan individual's ability to set the stage
for change at a high leveland can also spark
people's commitment to change at a transac-
tional levelthe level of core processes, work
teams and individuals' jobs.
To change an organization's culture, you
4 must first change people's behavior.
Too many change reports flounder today
because a company tries to change its employ-
ees' beliefs, values and work schedules rather
than change people's everyday behavior on the
job. Stress new ways of working in your organi-
zation, communicate with people frequently
and reinforce work expectations with the right
kinds of policies and procedures. Ultimately, a
new corporate culture will emerge.
ci Let service to customers drive your
company's structure.
Too many companies fall into the trap of
tinkering with their organization's structure
who reports to whom, which lines of business
report where, for examplein an effort to
bring about large-gauge organizational change.
Ultimately, however, such efforts fail, because
they don't significantly impact employees'
methods of working or the design of key work
processes. Experience teaches us that the struc-
ture of an organization should be developed in
response to and not as a precursor to the nature
of the corporate mission and strategy. It should
support where you decide to go, not be the first
20 AMERICAN MANAGEMENT ASSOCIATION/ SEPTEMBER 1997
thing you change in your organization when
you reengineer or restructure.
If you implement the right systems to
6 support people in their work, that will
help create the "climate of alignment"
you need for success.
To be successful, change efforts must impact an
organization not only at the large-gauge trans-
formational levelthe level of culture and lead-
ershipbut also at the transactional level. If
you want an organization to change the way it
gets work done, upgrade the workstation tech-
nology that enables people to do their jobs. To
motivate people to work in new ways, overhaul
old-style reward-and-performance appraisal
systems, and find other ways to create an envi-
ronment that reflects new business goals and a
new corporate mission and strategy.
Managers must give employees what
El they need to succeed or, in some cases,
get out of the way.
Managers must be tuned into the best ways to
manage and motivate people in times of
change. This may require you to do away with
outmoded management practices that reinforce
individual performance, for example, when
you're trying to move to team-based work. Or, it
may mean educating managers about the best
ways to be team leaders of work groups, as op-
posed to top-down delegates of work for others.
Teamwork may be un-American, but
8 it's essential to your success.
Teamwork is critical to success with any
change effort. And while there's been much talk
about teams in American workplaces, it doesn't
mean they are a cinch to implement or easy to
maintain. Indeed, "teamwork" runs counter to
the American tradition of independence and
self-reliance. Yet, in today's workplaces, collab-
oration and interdependence are the values that
count most.
Teams are a high-maintenance work ap-
proach to implement. They require trust and
the commitment on the part of everyone in
your company to make a realityfrom the
CEO to the folks on the loading dock. They
must be effectively integrated as a core element
in your company's work climate, if they are to
help drive change initiatives.

A productive employee is a happy em-
9 ployeenot the other way around.
More hot air has been exhaled on the
mystery of employee motivation than on just
about any other managerial issue. It is more
important to give people modems than to give
them motivational speakers; more essential to
success that they have the tools and technology
to complete work tasks than trite slogans, smile
buttons and "feel-good" corporate events to
buck up their spirits. Give people what they
need to succeed: Stress the important link be-
tween what they do each day and the health of
the company, and they'll be motivated to per-
form at their best.
Strive for a good fit between the
10 skills people have and the everyday
jobs they do.
There's strong evidence that recruit-
ing, selecting and matching people carefully to
the jobs they do has a major impact on perfor-
mance. Hire a person who is overqualified for a
position, and he is likely to grow restless and
discontent in that job. Hire a person who is un-
derqualified, and your organization's
performance may suffer due to poor work
habits and even incompetence. Paying attention
to this detail as part of managing change efforts
can make all the difference between achieving
breakthrough business success and realizing
only lackluster organizational performance.
Remember, employees are people,
11 too.
In an age of mergers and acquisitions,
downsizings and restructurings, creating a new
kind of partnership with employees is clearly
important to business success. As companies
have moved away from providing people with
lifelong (or even long-term) job security, they
have created anxiety and insecurity in the very
people they want to make more productive.
That's why career development, employee
coaching and mentoring and other kinds of as-
sistance provided to people can send the mes-
sage that the company cares about them, even
as it is communicating new work expectations
and realities to them.
Beware the false indicators of suc-
12 cess. Recognize that a broad and
balanced approach is the only way
to successfully sustain organiza-
tional performance.
Just as it is easy to impact short-term produc-
tivity through downsizing (You can always re-
port an increase in the next quarter's profits if
CHANGE
you've just laid off a lot of people, right?), it's
easy to get initial or short-term indicators of
success with change efforts, which may, in
PF"
some cases, mask problems or imbalances in
your reengineering approach.
For example, strong leadership that clearly
articulates to people where the organization is
going may conceal the fact that you still lack the
appropriate systems and management practices
to reinforce new ways of working.
To truly assess the success of any change
initiative, you need to take a broad and bal-
anced approach to grading your success. In
other words, dynamics in each of the 11 organi-
zational domains identified the organization's
initial need to promote teamwork
for real change to be realized and
sustained over time.
As you proceed with
change efforts, how do
you determine how
well you're doing? It
is critically impor-
tant that you regu-
larly monitor the
climate of align-
ment emerging in
your organization.
So, it's vital to peri-
odically conduct
new change-readiness
assessments. These can
give you a bead on the
factors that are enhancing or
impeding your change plans.
They can thus help you determine
whether a change initiative is on track, has lost
momentum or has derailed completely.
Managing complex change efforts requires
a sophisticated awareness of the myriad factors
that can impact an organization's vitality, prof-
itability and operating effectiveness. Using a di-
agnostic assessment tool and a robust method-
ology to understand and analyze organizational
dynamics provides a cornerstone approach not
just for managing change initiatives, but for en-
suring that they are successfully sustained over
the long term. Mil
Bill Trahant is a partner with the Arlington, Va.,
offices of Coopers el- Lybrand LLP and director of
the firm's International Center of Excellence for
Change Management. W. Warner Burke, Ph.D., is
professor of psychology and education, and chair of
the department of organization and leadership at
Teachers College, Columbia University. Richard
Koonce is an organizational consultant, radio com-
mentator and author.
MANAGEMENT REVIEW / SEPTEMBER 1997 21