1. Leading Change
Case study

2. 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

3. 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

4. Case Study: The Changing Hospital
Read the Case

5. 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.

6. 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

7. 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.

8. 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

9. Create A Guiding Coalition
Stage 2:
Create A Guiding Coalition

10. 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

11. 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

12. Case Study: The Changing Hospital
Stage 1 & 2 Analysis

13. 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?

14. 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

15. Leadership
Creates
Management
Vision
Strategies
Plans
Budgets

16. 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

17. 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.

18. 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. = = .58% of their communication!!!!!!

19. 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

20. Case Study: The Changing Hospital
Stage 3 & 4 Analysis

21. 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?

22. 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

23. 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

24. 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

25. 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)

26. 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”

27. 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

28. Case Study: The Changing Hospital
Stage 5 & 6 Analysis

29. 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?

30. 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):

31. 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

32. 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.

33. 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.

34. Case Study: The Changing Hospital
Stage 7 & 8 Analysis

35. 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?

36. 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