Why good companies go bad When business conditions change, the most successful companies are often the slowest to adapt. (Donald N. Sull 1999)

Session 7 Managing Organizational Change: Strategies Revisited

Topics for Today Reflections on EIS simulation Strategies for change –The implementation process –Balanced scoreboard Why good companies go bad? –Structural inertia –Growth and strategic changes Conclusions

The implementation process A series of issues: –Top-down vs. bottom-up –Cultural vs. structural –Intrinsic vs. extrinsic motivation A systematic change program The importance of implementation

Problems in implementation Examples –The Smithers example –Police in New York state Why? –Interests and interpretation –Past experience and interpretation –Competition for attention –Multiple pulling/pushing forces in different directions –Implementation as a continuation of decision making

Balanced scorecard What is balanced scorecard –Beyond single measure –Generate balanced attention to important aspects Video But the experience at a large consumer bank…

Balanced Scorecard at a large consumer bank The context –The CEO’s intension –The implementation: HRM – regional office – branches –The academic conference Problems in implementation –Complex system of multiple indicators –Implementation through bureaucracies –Subjective versus objective measures Lessons –

Implementation with results (Schaffer and Thomson 2000) Why results-driven, not activity centered? –Keep the eyes on the ball –Discourage symbolic compliance –Push out of the comfort zone –Establish early wins Provide clear goals and mobilize resources to carry out the change program –Get resources/support ready –Get employees involved –Insert deadlines and demand measurable outcomes

Case study: Lincoln Electric in China

Background Lincoln Electric as a model of pay for performance –Measurable goals –Intensity of incentive plan –Remarkable results Does this model work for other industries or other lines of work? What are the implications for international management?

Questions for discussion How does LE’s management style and incentive design fit the Chinese context? What is your view of LE’s efforts in its setup process in China? Would you do anything differently? Why? What is your recommendation for the next step?

Summary and Conclusion

Question revisited: Why do large, successful companies fail?

The case of Intel Background: Industry dominance The changing environment –Multimedia beyond computing chips Why failure? –Confined to expertise within own company The change of strategies –From speed to new markets –Challenges from competitors: A.M.D., Microsoft.

Overview of the course Leadership Agents Recipients

Sharing experience: What is your main lesson about managing organizational change?

Why good companies go bad? (Donald N. Sull 1999) It is not paralysis, not unawareness, not inaction. The inability to take appropriate action Active inertia – tendency to follow established patterns of behavior, even when environment changes. Example: the Firestone Tire and Rubber Co. –Dominant position in the early 1970s –Response to Michelin’s radial tire – old standards –Delay in phasing out bias tires –Lost market shares and dominance in the industry

Sources of active inertia Structure and interests –Ford’s T-model Organizational filtering and interpretation –The pooling of experience Competence trap In the time of change, past success can become obstacle: –Strategic frames  blinders –Processes  routines –Relationships  Shackles –Values  Dogmas

For mid-level managers Be clear what role you want to play –Change agent? –Entrepreneurial managers, early adopter, catalyst? –Imitator, follower? Invest in your social capital –Different networks for different purposes –Mobilize resources Protect your interests –Build coalitions –Be adaptive Happiness belongs to optimists!

About final examination Format of examination: –Essay questions (choose three of four) Discussion on business scenarios discussion on key issues/lessons in organizational change Contents to be examined: –Cases discussed in class –Key readings assigned for reading –Issues discussed in class

Thank you and enjoy the final exam!