Change: Getting to there from here

By Gerry Keim Professor, Management  

As business environments change with new technologies, new competitors and new consumer preferences, many previously successful businesses falter. Determining how to compete in a changing environment is the job of business leaders, who must transition processes and outcomes from what is currently done to what is desired.

Begin by understanding the current operational process and outcomes.

That is, get good baseline measures of current practices. For example, how are customers attracted to the business? What is the customer experience like? How many customers are repeaters? Processes for interacting with key stakeholders in the value chain — from customers and employees to suppliers, investors or creditors and community leaders — should be measured.

Next, examine the links between what is measured and what is rewarded in the business.

Employees quickly figure out what counts and what doesn’t in any organization. Employees do what is measured and rewarded — not what is hoped for by leaders or exhorted by outside consultants. As a consultant, leaders who wanted to change processes in their organization often reached out to me. My first question was, can we change what is currently measured and rewarded? If not, the new ideas and suggestions offered by consultants only lead to frustration within the organization on top of the money wasted hiring the consultants.

Leaders of a large conglomerate recognized that many of their separate operating companies had developed processes and knowledge that could be applied in other units of the firm. How did they encourage this knowledge sharing and transfer? The first step was to change what was measured and rewarded at all levels of leadership. This company used a combination of objective measures like quarterly sales, production and cost data, as well as subjective measures of leaders’ behavior gathered from 360-degree reviews by all those who worked with each leader. The subjective measures were changed to gather input on the leader’s willingness to seek new ideas from managers in other units and willingness to share information on processes and improvements with other managers.

Align the measures and rewards with the changes sought.

In this case, that meant sharing of processes and knowledge across operating units. The next step was to change the mindsets of leaders so they understood why these changes were desirable. Internal education is often used to develop new skill sets among those in an organization. The opportunity to use education to change mindsets is equally important if employees are to be engaged in the continuing success of the organization.

Create continuing conversations.

Facilitating discussions with leaders and managers from different units where examples of success can be shared and opportunities for future sharing and collaboration can be discovered is a key part of the change process. In fact, these discussions can be a continuing source of improvements to meet changing environmental conditions. They also demonstrate that there are opportunities for engaged employees at all levels of the organization to contribute their knowledge and ideas for organizational improvements. This is essential for continuous organizational improvement.

So if a leader wants to bring about change in processes in his or her organization, a few simple steps will help.

  1. First, get good baseline measures of the existing processes so efforts to improve can be measured and evaluated.
  2. Second, identify exactly what behaviors and attributes affecting these processes are currently measured and rewarded in the organization.
  3. Next, change the measures and rewards to encourage the implementation of the new processes.
  4. Finally, engage leaders, managers and employees in discussions of the changes sought and the rationale for doing so. Make sure these sessions are discussions, not one-way presentations. Change is itself a process. Gathering input and reactions from those charged with implementing the changes is essential to continuous organizational improvement.

This is a bad news and good news story. The bad news is that some leaders will not be able to follow these steps — especially the last one. Their arrogance will prevent them from involving others in improving the change process. The good news is those leaders who can will lead organizations that outperform the others.

Gerry Keim is a professor of management at the W. P. Carey School of Business at Arizona State University. His research interests include organizational entrepreneurship and why some firms respond better than others to opportunities and threats.

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