Leading Change Case study

Why Firms Fail at Change Allowing too much complacency Having no powerful guiding coalition Underestimating the power of a vision Undercommunicating the vision Permitting obstacles to block the vision Failing to create short-term wins Declaring victory too soon Neglecting to anchor changes in the new culture

Leading Change By John P. Kotter Create a Sense of Urgency Create a Guiding Coalition Develop a Vision and a Strategy Communicate the Change Vision Empower Employees for Broad-based Change Generate Short-term Wins Consolidate Gains and Produce More Change Anchor New Approaches in the Culture

Case Study: The Changing Hospital Read the Case

Create a Sense of Urgency Stage 1: Create a Sense of Urgency - we often underestimate the enormity of the task - change requires a great deal of cooperation, initiative and sacrifice - Kotter estimates that in an organization of 100, about a third must go far beyond the normal call of duty (JJMI = = ; J&J =89,000=29,000) - with complacency high, transformations go nowhere because few people are interested in working on the change problem. With urgency low, it’s difficult to put together a group with enough power and credibility to guide the efforts - case example: major pharm company - no growth, layoffs, bad press and no sense of urgency. No sense of enemy or competition breathing down their neck, no compelling mission, lots of excuses (whole industry, making some progress, it’s that dept. with the problem), status quo isn’t so bad.

Sources of Complacency The absence of a major and visible crisis Too much happy talk from management Too many visible resources Human nature capacity for denial Low overall performance standards Complacency A “kill the messenger” or low confrontation culture Org. Structures that focus employees on narrow functional goals A lack of sufficient performance feedback from external sources Internal measurement systems that focus on the wrong indexes

Ways to Raise Urgency Level create a crisis eliminate obvious examples of excess set goals so high that they can’t be reached by business as usual stop measuring sub-unit performance. Measure broader indices of performance send more information about customer satisfaction and financial performance to more employees 1. don’t discount reality - go full force 2. invest people in the changes 3. mid and lower lever mgmt are key players as well 4. find champions and cultivate their enthusiasm 5. to sustain the change process, you will probably need the commitment and majority of employees, 75% of mgmt, and virtually all of the top executives.

Ways to Raise Urgency Level (cont.) use consultants to force more relevant and honest discussions into management meetings put more honest discussions of company problems in newsletters and speeches bombard people with the upside opportunity of change (i.e., reward, future opportunities, etc..) insist that people talk regularly to unhappy customers, suppliers and shareholders

Create A Guiding Coalition Stage 2: Create A Guiding Coalition

Effective guiding coalitions have 4 key characteristics: Position power Expertise Credibility Leadership - balance of Leadership and Mgmt. If you are missing the leadership, you can find it a)outside the firm - consultants, b)promote someone who has the leadership, and c) find someone who has it, but has been reluctant to get involved and get them to accept the challenge - watch out for EGOS, SNAKES, and RELUCTANT PLAYERS

Building a Coalition Find the Right People Create trust power, expertise, and credibility leadership and management skills Create trust through planned off-site meetings With lots of dialogue and joint activity Develop a common goal sensible to the head appealing to the heart

Case Study: The Changing Hospital Stage 1 & 2 Analysis

Case Study: The Changing Hospital Stage 1 and 2 Analysis What was done to create a sense of urgency for change? What could have been done? Stage 2 What was done to form a group of people who would drive the change? what could have been done?

Develop a Vision and a Strategy Stage 3: Develop a Vision and a Strategy a vision is a critical part of the change process for many reasons: 1) it clarified the direction of the change - people will be confused, disagree or question whether change is necessary. Vision helps to resolve these issues. - with clarity of direction, the inability to make decisions can disappear - a good vision can clear off the expensive and time-consuming clutter 2) it motivates action - forces people out of their reluctant of people - helps to overcome natural reluctance of people 3) helps to align people - with clarity, it can aid mgrs/EEs in figuring out for themselves what to do without constant checking with the boss - when dealing with large numbers of people it helps to control the costs of coordination

Leadership Creates Management Vision Strategies Plans Budgets

Six Characteristics of an Effective Vision Imaginable Desirable Feasible Focused Flexible Communicable 1. conveys picture of what future will look like 2. appeals to LT interests of employees, customers, stockholders and others 3. realistic, attainable 4. clear enough to provide guidance in decision making 5. allows indiv initiative and alternatives in changing conditions 6. easy to communicate - 5 minute rule

Creating an Effective Vision initial first draft by an individual modified & clarified by guiding coalition effective teamwork is essential process can be messy, difficult, and charged with emotion takes months or even years to formulate appeals to head and heart ends with direction that is desirable, feasible, focused, flexible and conveyed in 5 minutes or less Reason creating a vision may take so long is that the guiding coalition must answer for themselves all the questions that they anticipate will be asked by reluctant or resistant individuals.

Communicate the Change Vision Stage 4: Communicate the Change Vision - real power of vision is when communicating to all those involved in the enterprise - If the vision is not communicated properly, it can stall the transformation - reality check further down in the organization - mgmt must now be consistent with the message (can’t promote a jerk) - reasons for reluctance to communicate the vision down: - limited intell capability of lower level employees - human resistance to the concept of change - real problem: it takes 100s of hours developing a complicated vision and 100s more trying to simplify it and convey it. - the message often gets lost: total comm to employee in 3 mths = 2,300,000 words,data total change comm. in 3 mths = 13,400 words, data (1 30 min speech, 1 hr meeting, 600 word article) 13,400/2.3 mil. = .0058 = .58% of their communication!!!!!!

Key Elements in Effective Communication of Vision simplicity metaphor, analogy, example multiple forums repetition leadership by example explanation of inconsistencies two-way communication 1. no jargon or technobabble 2. verbal picture is worth 1000 words 3. 4. ideas sink in deeply after 3 or 4 times 5. actions must match words 6. be upfront about things or risk losing credibility 7. give and take means listening too

Case Study: The Changing Hospital Stage 3 & 4 Analysis

Case Study: The Changing Hospital Stage 3 and 4 Analysis What was done to develop a vision and strategy for change? What could have been done differently? Stage 4 What was done to communicate the vision? What could have been done differently?

Stage 5: Empower Employees for Broad-based Change empowerment. What a buzz word with baggage! (letting go, delegating, provide authority, encourage, etc.) - major transformations rarely happens w/o the assistance of many people. Yet people can’t help if they feel powerless. That’s why empowerment (like it or not) is important - Kotter highlights four areas that make people feel powerless and that you can have an impact on

Barriers to Empowerment Formal structures make it difficult to act Bosses discourage actions aimed at implementing new vision Employees understand vision and want to assist, but are boxed in A lack of needed skills undermines action STRUCTURE - fragmented resources, layers of second-guessing mgmt, huge and expensive corporate staffs, silos, etc. - if structural barriers are not removed in timely manner, the risk is employees become frustrated and sour on the whole transformation effort. Even if reorg. then happens, you have lost energy needed TRAINING - new skills may be needed - we don’t think thru the new beh, skill, attitudes needed - we know what’s needed, but it is costly SYSTEMS - systems, esp. HR systems, get in the way far too often - MIS, financial, distribution, etc. systems can also get in way SUPERVISORS - you dread the reluctant nay-sayers they are a product of their history they rationalize - been there, done that - willingness to confront then with honest dialogue Personnel and information systems make it difficult to act

Empowering People to Effect Change Communicate a sensible vision to employees Make structures compatible with the vision Provide the training employees need Align information and personnel systems to the vision Confront supervisors who undercut the needed change

Generate Short-Term Wins Stage 6: Generate Short-Term Wins - this is where some change efforts derail - there is too much focus on LT while forgetting about the ST financials. You start to lose credibility - some people will be “believers” , but for the “non believers”, they need to see evidence, data, clear relationships - conducting a transformation without serious attention to ST wins is risky - (diagram)

Characteristics of Effective ST Wins It’s Visible people can see for themselves It’s Unambiguous there is little argument over the call It’s clearly related to the Change Effort they can see the relationship - in small companies or units, first results are often needed in half a year. In big organizations, some unambiguous wins are needed in about 18 mths - Kotter also points out that we are talking real ST wins as compared to “creative accounting”

The Role of ST Wins provide evidence that sacrifices are worth it reward change agents with a pat on back help fine-tune vision and strategies undermine cynics and self-serving resisters keep bosses on board build momentum

Case Study: The Changing Hospital Stage 5 & 6 Analysis

Case Study: The Changing Hospital Stage 5 and 6 Analysis How were people empowered to make the changes? What could have been done differently? Stage 6: What possibilities for short-term successes were set-up? What could have been done differently?

Consolidate Gains and Produce More Change Stage 7: Consolidate Gains and Produce More Change - tendency to let up and slow down “on course” - resistance is always ready to reassert itself - maintain the urgency, celebrating too much can give the resisters an opportunity to reassert. Problems of change in interdependent systems office furniture example today’s org has worked to create interdependence (this is the tricky side of that interdependence) (diagrams):

Successful Stage 7 Change more change, not less. Use credibility more help is solicited and developed leadership from senior management project management and leadership from below reduction of unnecessary interdependencies

Anchor New Approaches in the Culture Stage 8: Anchor New Approaches in the Culture - example of successful company that reverted back (divisional revenue up 62%, net income up 77%, GM retires, after 2 years incrementally slide back) - culture is powerful for 3 reasons: 1. because individuals are selected and indoctrinated so well 2. bec. the culture exerts itself thru 100s or 1000s of people 3. bec. this happens w/o conscious intent and is thus difficult to change - (diagram) - roots analogy: short lived gains in change are like shallow roots and need constant watering. Culture, like longer roots, is heartier and can hold out and take over.

Anchoring Change in the Culture culture change comes last, not first new approaches sink in only after it’s clear they work requires a lot of talk about the validity of the new practices may involve turnover make succession decisions that are culture-compatible 1. most alterations in norms and values come at the end of the transformation process 2. 3. 4. sometimes the only way to change a culture is to change the key people 5.

Case Study: The Changing Hospital Stage 7 & 8 Analysis

Case Study: The Changing Hospital Stage 7 and 8 Analysis What was done to consolidate the successes and produce more change? What could have been done differently? Stage 8: What was done to formalize and institutionalize the change? What could have been done differently?

Leading Change BY John P. Kotter Create a Sense of Urgency Create a Guiding Coalition Develop a Vision and a Strategy Communicate the Change Vision Empower Employees for Broad-based Change Generate Short-term Wins Consolidate Gains and Produce More Change Anchor New Approaches in the Culture