Adopting Analytics Culture: 3. How Does Change Management Work? (3 of 7)

PART 3 OF 7 IN A SERIES ON ADOPTING ANALYTICS CULTURE

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3.  How does change management work?

At the core, change management sees the organization as a network of interconnected interests, both shared and conflicting. An organization can be viewed as being composed of actors who populate both formal and informal coalitions.  While superficial change can be easily realized by changing the ‘official’ organizational structure (i.e. the ‘org chart’), the ‘deep culture’ of an organization is more difficult to shift. Composing motivation, identity, drive, sympathies, social contracts, and tacit cooperation, ‘deep culture’ is the core of change and where initiatives succeed or flop.

Change can be implemented at the formal level by altering ‘org chart’ groups and roles.  This is the stereotypical ‘chess game’ expected in most reorganizations. Senior leadership announces changes are underway, managers enter into tense and cloistered negotiations, rapid ‘horse trading’ ensues, and a tense period of waiting follows, after which senior leadership descends from the mountain with a new covenant, specifying new groups and reporting relationships.

Lost Horizon I by Antony Gormley

Following the reorganization some benefit and ascend, at least on paper, with more reports and top-line power, while others descend, losing status, or are ‘downsized’ outright.  A lexicon of buzzwords surrounds the process to make those involved more comfortable, but the simple truth is that some are promoted, some demoted, and others are fired. A literal change has taken place in that the formal relationships in the organization have been shaken up.

However, lasting change requires ‘hearts and minds’, reconfiguring people’s basic motivations and identification with various informal coalitions.  This implies shifting the internal contract employees perceive having with their organization and management.  The much cited work The Heart of Change, by change management guru John Kotter, recognizes that change initiatives succeed or fail largely depending on the emotional and attitudinal disposition of key actors in the change process. Whereas the org chart can be reconfgured, people’s attitudes and dispositions are not so quickly or easily shifted.  The risk in reorganization is of achieving a ‘Frankenstein department’, a reconfigured chimera that lives anew, but which otherwise ignores the point and goals of the change.  Such recomposed groups shamble forward in an undead state, largely oblivious to the outside world, mixed and damaged.

To avoid a stillborn reorganization, Kotter proposes digging deep to change the underlying social connections and perceptions.  ‘Hearts and minds’ change management contains a notion of a guiding or leading coalition, key thought leaders who are assembled to publicize and motivate the change program.  Likewise, there are terms and categories for those involved: change advocates, early adopters, resistors, and passive resistors.

These actors inhabit varying positions of importance in the organizational network.  That is, a resistor who controls key processes and/or is a heavy influencer of others is considered a central target for change, either via intense negotiation or more harshly, if viewed as an intransigent ‘counterrevolutionary’. A change or resistance leader is not necessarily an agent of formal power: they may embody key information or expertise which is difficult to transfer, or may overtly or covertly control a step in a key process, or have undue influence over others in the organizational network due to some combination of seniority, expertise, knowledge, ethical standing, or charisma/respect.

The Kotter-driven change program initially seeks to ‘unfreeze’ the organization, breaking both formal and informal ties in the organizational network.  After this, change leaders communicate and clarify the change goals and steps.  Once explicit and implicit ‘buy-in’ is demonstrated, the change managers re-freeze, or re-structure the organizational network in a new configuration.  Both formal and informal structures are thus targeted to drive the new processes and procedures forward.

Kotter thus espouses having a dramatic start to the change process, highlighting the driving need for change and the dire consequences of not changing.  Once ‘shaken-up’, expectations surrounding the changed organization are communicated.  This includes expecting key participants to voice their commitment and ‘buy-in’.  After it is felt that an alteration of the basic compact between participants and leaders has been altered, the organization is ‘re-frozen’, or recomposed into a steady state to proceed forward.

This basic framework guides most change management initiatives, often driven as a concerted, structured effort managed by a collaboration of senior management, an indoctrinated ‘guiding coalition’ (often emerging middle managers and key experts who buy into the goals of the change initiative).  Typically, a team of consultants specialized in change programs is centrally involved.  Particularly where ‘downsizing’ is expected, the involvement of consultants offers a convenient third-party to deal with the stickier issues of who goes and who stays.

The positive aspect of the Kotter-associated change initiative is that it addresses and attempts to deal with the underlying socio-structural factors involved in a change program.  Recognizing that the organizational structure is only part of the story, ‘hearts and minds’ change seeks to become involved in social engineering.  In particular, there is an attempt to consciously reframe the perceived compact, the set of social agreements (both tacit and explicit), between employees and the organization.

However, Kotter-driven change has not been a panacea, and typically reorganizations still struggle despite such deeper intervention.  The author was involved in a large corporate reorganization where Kotter was involved, and the results ultimately were quite disappointing on most quantitative measures (cost overruns, decline in employee productivity, lower retention rates, costly failed projects, etc.).

Since authoring ‘The Heart of Change’, Kotter has addressed shortcomings and ‘misperceptions’ in a mea culpa Harvard Business Review (HBR) article entitles ‘Leading change: why transformation efforts fail’ (http://hbr.org/2007/01/leading-change-why-transformation-efforts-fail/ar/).  The article also admits that a change program is not a one-size-fits-all gambit.  While such admissions and retrenchment is instructive, it also reveals cracks and fissures in the change management industry.  There is a larger admission that organizational change is inherently difficult and that even the best laid plans often go astray.

Beyond this, critics have emerged to take aim at the traditional principles and processes of reorganization itself.  Some question, cynically, the logic of continually reconfiguring the organizational structure, commenting that at best the results are to shake up the organization, but at worst it is an opportunity to constantly prevent any type of effective coalition to develop effectiveness.

A recent HBR article by Marcia Blenko of Bain & Company, ‘The decision-driven organization’, takes square aim at the penchant for shifting organizational structures while ignoring central factors associated with effectiveness (http://hbr.org/2010/06/the-decision-driven-organization).  Blenko states: “we believe that this failure is rooted in a profound misunderstanding about the link between structure and performance. Contrary to popular belief, performance is not determined solely by the nature, scale, and disposition of resources, important though they may be… A corporation’s structure, similarly, will produce better performance if and only if it improves the organization’s ability to make and execute key decisions better and faster than competitors.”

The proposal from Blenko is that traditional change management often focuses on the wrong things, fetishizing the ‘toy soldier’ mentality of shifting boxes and lines around an org chart.  Rather, it is proposed that an organization should focus foremost on decision effectiveness, a process which may be connected to the org structure, but has more to do with organizational architectural attributes:  the location of decision making in the organization, access to data, information, and knowledge, incentives which propose to reward decision effectiveness, and assessment systems which specify how results will be measured.

Such a purview has more to do with Management Control Systems (Merchant & Stede, 2003) and organizational architecture, the HR discipline of aligning interests with roles.  It is thus conceivable to undertake an organization in which no formal reporting relationships change, but in which the organizational architecture shifts radically in order to reconfigure decision making and incentives.  This is perhaps the true ‘heart of change’ in that it attempts to shift behavior based on targeting rights, roles, and incentives, rather than ‘toy soldier’ empire building and management egos.

Here we get much closer to the topic of ‘analytics culture’ as this is concerned centrally with decision effectiveness.  It is proposed this adopting analytics culture is a type of organizational change, but that traditional ‘org chart’ reorganization misses the point.  Adopting organizational culture should attempt to improve decision effectiveness by co-locating decision making power with access to analytical insight.  This realigning of decision making can be ‘super-charged’  by clarifying the assessment scheme (metrics) and rewards for achieving specific benchmarks (as associated with and attached to the recomposed decision making rights).

We are then left with the notion that change management should be focused on decision processes more than organizational structure.  As well, we acknowledge that decision processes may be staged in both formal and informal networks within the organization, that a decision is not a simple linear path, but a circular process which involves coalitions of stakeholders.  It is this topic we will investigate in greater detail in following articles.  Firstly, however, the next article will take a deeper look at why reorganizations typically fail, and how an understanding of social networks can prevent such shortfalls.

REFERENCES

Blenko, M. W., Mankins, M. C., & Rogers, P. (June 2010). The decision-driven organization. Harvard Business Review, June 2010, p 54 – 62. Last retrieved May 5th, 2013 from http://hbr.org/2010/06/the-decision-driven-organization

Kotter, J. P., & Cohen, D. S. (2002). The Heart of Change. Boston, MA, USA: Harvard Business School Press.

Kotter, J. (January 2007). Leading change: why transformation efforts fail. Harvard Business Review. January 2007. Last retrieved June 2^nd, 2013 from http://hbr.org/2007/01/leading-change-why-transformation-efforts-fail/ar/

Kotter, J., & Schlesinger, L. (2008). Choosing strategies for change. Harvard Business Review. July – August 2008.

Merchant, K. A., & Stede, W. A. V. d. (2003). Management Control Systems: Performance Measurement, Evaluation and Incentives. London: Prentice Hall.

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