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Learning Objectives:

• Discuss the importance of simplifying change processes.
• Provide examples of ways to implement organizational assessment programs.
• Evaluate how people management strategies support change.

Week Seven Learning Objectives

Class,

This week, our learning objectives are:

Discuss the importance of simplifying change processes.

Provide examples of ways to implement organizational assessment programs.

Evaluate how people management strategies support change

For an organization to develop change capability into a true competitive advantage, it must move beyond the change tools covered in earlier modules. Companies need to support this capability through a wide range of structures, processes, and systems. Here we focus on simplification, de-layering, and spans of control. In the next lecture, we’ll cover performance assessment and rewards as well as training and development. Just as you increase strength through going to the gym regularly, you must build true change capability steadily as you work through challenging issues. It is not a one-time, build-it-and-forget-it kind of thing.

Complexity Stifles Change

Complexity is an enemy of change. It makes it harder and slower to get things done. There are too many steps, too many meetings, too many rules, too many stakeholders, too many layers, too many products. It takes too long to get decisions made. Simple requests require a campaign of phone calls to get some action. Of course, in large, multinational, multiproduct organizations with thousands of employees, a certain amount of complexity is necessary. But we make it much worse than it needs to be. Let’s look at four major sources of complexity in organizations.

Dysfunctional structures. We create structures that have too many levels, redundant functions, and unclear roles. We add positions, levels, and departments in response to environmental shifts, organizational events like acquisitions, and the professional and ego needs of key employees.

Product and service proliferation. We add products, features, and services without reducing the overall portfolio of offerings or streamlining support requirements.

Unplanned process evolution. We build processes with too many steps, loops, approvals, and missing metrics then don’t manage them as they evolve and grow.

Unproductive managerial behavior. We compound complexity by giving vague assignments, not holding people accountable, miscommunicating, and choosing conflict avoidance over candor.

Complexity is exacerbated by the rise of organizational interdependence. Fifty years ago, different parts of an organization could operate quite independently of each other, thanks to slower communications, functional silos, and large inventories. But as these factors have been greatly reduced through technological and managerial innovation, businesses are becoming increasingly interdependent. Kotter (1996) described interdependencies as the “interconnections that make it difficult to change anything without changing everything” (p. 133). Simplification is often a matter of eliminating unnecessary interdependencies.

I look forward to reading your responses!

Dr. Stephen Onu, Faculty, Chancellor University

Reading, Podcast and Video Assignments:

• Simply Effective, Ch. 1, 2
• Leading Change, Ch. 9
• Ron Ashkenas Blog, Beware Self-Inflicted Complexity
• Ron Ashkenas Blog, Are Your Acquisitions Creating Complexity?
• Jack Welch Column, Lay Off the Layers
• Jack Welch Column, What Change Agents Are Made Of
• Jack Welch Video, Change Leadership and Resisters
• Lecture 1: Simplifying the Organizational Structure
• Lecture 2: How People Management Supports Change

Discussion Questions:

 

 

DQ 13:

What has been your personal experience of the effect of multiple organizational layers on communication and change? Provide an example to support your answer.

Post your initial response in a substantial paragraph (minimum 3-4 sentences) and respond to at least two other classmates by the due date. Initial responses should incorporate concepts, terms, and theories from the learning material. Your responses to your classmates should also be substantial. If you agree, expand on their points; if you disagree, say why. Postings should always advance the discussion. Also respond to comments posted by your peers in response to your submission(s).

Due Date:    Midnight in the student’s time zone on Day 3

DQ 14:

Which of the change leadership skills or behaviors have you personally found to be most challenging to-date? Why? Where do you see your most immediate area for growth?

Post your initial response in a substantial paragraph (minimum 3-4 sentences) and respond to at least two other classmates by the due date. Initial responses should incorporate concepts, terms, and theories from the learning material. Your responses to your classmates should also be substantial. If you agree, expand on their points; if you disagree, say why. Postings should always advance the discussion. Also respond to comments posted by your peers in response to your submission(s).

Due Date:    Midnight in the student’s time zone on Day 5

Chancellor Online Library:

Click the link below to access the Chancellor Online Library

Chancellor Online Library

Assignments/Assessments:

None.

For an organization to develop change capability into a true competitive advantage, it must move beyond the change tools covered in earlier modules. Companies need to support this capability through a wide range of structures, processes, and systems.

Here we focus on simplification, de-layering, and spans of control. In the next lecture, we’ll cover performance assessment and rewards as well as training and development.

Just as you increase strength through going to the gym regularly, you must build true change capability steadily as you work through challenging issues. It is not a one-time, build-it-and-forget-it kind of thing.

Complexity Stifles Change

Complexity is an enemy of change. It makes it harder and slower to get things done. There are too many steps, too many meetings, too many rules, too many stakeholders, too many layers, too many products. It takes too long to get decisions made. Simple requests require a campaign of phone calls to get some action.

Of course, in large, multinational, multiproduct organizations with thousands of employees, a certain amount of complexity is necessary. But we make it much worse than it needs to be. Let’s look at four major sources of complexity in organizations.

Dysfunctional structures. We create structures that have too many levels, redundant functions, and unclear roles. We add positions, levels, and departments in response to environmental shifts, organizational events like acquisitions, and the professional and ego needs of key employees.

Product and service proliferation. We add products, features, and services without reducing the overall portfolio of offerings or streamlining support requirements.

Unplanned process evolution. We build processes with too many steps, loops, approvals, and missing metrics then don’t manage them as they evolve and grow.

Unproductive managerial behavior. We compound complexity by giving vague assignments, not holding people accountable, miscommunicating, and choosing conflict avoidance over candor.

Complexity is exacerbated by the rise of organizational interdependence. Fifty years ago, different parts of an organization could operate quite independently of each other, thanks to slower communications, functional silos, and large inventories. But as these factors have been greatly reduced through technological and managerial innovation, businesses are becoming increasingly interdependent. Kotter (1996) described interdependencies as the “interconnections that make it difficult to change anything without changing everything” (p. 133). Simplification is often a matter of eliminating unnecessary interdependencies.

How to Simplify

The table below is adapted from the book Simply Effective, which describes each element in much more detail (Ashkenas, 2010). The table summarizes the causes of the four kinds of complexity and how to increase simplicity along each dimension (see Table 1.

Table 1

Source of Complexity and Ways to Simplify

You can see that we have already covered many of these approaches to simplification in earlier lectures: (a) a customer-oriented perspective, (b) the five change tools, (c) communication, and (d) results-focused demand making. However, it is important to be familiar with their use in the context of simplification as well as change. In the remainder of the lecture, we will focus on de-layering as a powerful means to simplify structures, increase accountability, and drive a more participative culture. Get this strategy right and you are prepared for the inevitable changes ahead.

De-layering the Organization

De-layering involves reducing the number of hierarchical levels in the organization. With that comes increasing the number of people who report to one manager, which is referred to as the span of control. Span of control was a favorite topic of management researchers throughout much of the 20th century. They wondered how many direct reports would provide managers with the optimal levels of interaction, attention, and control. Answers converged in the range of five to eight. The result was organizations with many managers arranged in multiple layers.

As related in more detail in Simply Effective, when Jeff Kindler became CEO of Pfizer in 2006, he found that as many as 14 layers of management separated him from frontline people in some parts of the company. In addition to being extremely costly, these layers slowed and distorted the flow of information to where it was needed.

The assumption behind limited spans of control, consistent with the worldview underpinning the traditional hierarchical organization, is that the function of managers is to control and aggregate the work of their subordinates. But as organizations become more dynamic and managerial focus shifts from control to adding value, the number of layers must decrease and direct reports can increase. GE discovered this in the early 1990s when Jack Welch increased spans of control in many businesses from the traditional five to six to closer to 10. Kindler, who started his career at GE, required his senior managers at Pfizer to de-layer so that no more than 10, and preferably no more than eight, layers separated him from the front line.

Welch is a passionate proponent of de-layering. He would often make the point when talking with groups of managers that “if you put on six sweaters and go outside, you can’t even tell if it’s cold out. Every time you take off a layer of clothing, you get more in touch with your environment. It’s the same with organizational layers.”  He would advise the managers to

design the org chart to be as flat as possible, with blindingly clear reporting relationships and responsibilities . . . . The inexorable pull toward layers is why I suggest you make your company 50 percent flatter than you’d normally feel comfortable with. Managers should have 10 direct reports at a minimum and 30 to 50 percent more if they are experienced. (Welch, 2005, p. 114, 116)

So what happens when an organization is de-layered and spans of control are widened?

Managers no longer have time to micromanage employees and must relinquish control. They allow subordinates to be more empowered and look for other, more useful ways to add value. These include strategy development, increased customer contact, process improvement, and coaching. Managers also have to develop the skills we discussed in Module 2, including demand making and communication to clarify and manage more distributed accountability.

And in turn, their direct reports must step up. No longer able to hide behind a controlling manager, they take on greater accountability, show more initiative, and make more of their own decisions. All these changes add up to faster, more flexible, and more empowered organizations—organizations that are able to change.

References

Ashkenas, R. (2010). Simply effective. Boston, MA: Harvard Business School Press.

Kotter, J. (1996). Leading change. Boston, MA: Harvard Business School Press.

Welch, J. (2005). Winning. New York: Harper Collins.

When Jack Welch talks about leading change, much of what he says focuses on the management of people—who to hire and fire, who to promote and why, and how to develop the talent you have.

People management is important for all the reasons you learned about in the People Management course, plus one more. It has a direct correlation with your ability to implement a successful change effort.

Performance Assessment and Rewards That Drive Change

We cover two dimensions of performance assessment in this lecture. The first is how to identify a change leader in the first place. The second deals with assessing and rewarding people’s performance during an organizational transformation.

At the heart of Welch’s (2005) change philosophy is to “hire and promote only true believers and get-on-with-it types” (p. 138). He makes an important distinction between change leaders (no more than 10% of business people) and good change followers who may never lead but, once convinced, are happy to get on with it. So in an environment where everyone claims to be a change agent, how do you recognize the real thing?

Luckily, change agents usually make themselves known. They’re typically brash, high-energy, and more than a little bit paranoid about the future. Very often, they invent change initiatives on their own or ask to lead them. Invariably, they are curious and forward-looking. They ask a lot of questions that start with the phrase “Why don’t we . . . . ?” These people have courage—a certain fearlessness about the unknown . . . . They’re thick-skinned about risk, which allows them to make bold decisions without a lot of data. (Welch, 2005, p. 139)

People do what they are measured on and continue to do what they are rewarded for. For a change initiative to be successful—and for an organization to build a real change capability—desired new behaviors must be publicly identified and rewarded. Conversely, the change leader must also “ferret out and remove resisters, even if their performance is satisfactory” (Welch, 2005, p. 141). GE provides a good illustration of this principle.

When Welch first introduced his mantra of speed, simplicity, and self-confidence, many people wondered what this really meant and how seriously to treat it. Over time, businesses developed lists of managerial attributes, 360-degree feedback questionnaires and the like, and HR created the official list of GE leadership behaviors. But these behaviors didn’t become real drivers of change until they were publicly used as the basis for high-level promotion decisions. At an annual officers’ meeting, Welch announced that he had asked two of his business leaders to leave the company despite the fact that they had achieved their financial targets. He explained straightforwardly that these managers did not measure up to the company’s standards of leadership behavior. He then explained his thinking using the following matrix (see Table 1).

Table 1
GE Performance Matrix

		Results Achieved?
		Yes	No
Good Leadership Behavior and Values	Yes	Promoted and rewarded	Provide leadership development and give a second chance
	No	Tough calls—need to be fired if cannot change	Easy calls—no future with GE

The central message was that achieving financial results was no longer enough—managers were now expected to exhibit the GE values and achieve their results with speed, simplicity, and self-confidence. Do both at the same time and you would get a promotion. Demonstrate the right behaviors but miss your financial targets, and you would be given a second chance. If you did not have the values and demonstrate the behaviors, you were in trouble.

This was a huge change for a company that had, until then, placed the greatest emphasis on achieving results. Suddenly, the demand for speed, simplicity, and self-confidence—and the leadership values they implied—were part of the official way people were managed, promoted, and rewarded.

Firing people who achieved their results while resisting change is a hard but necessary call. As Welch (2005) explained,

[It] is particularly difficult to fire people who are not actually screwing up and may in fact be doing quite well. But in any organization . . . . there is a core of people who absolutely will not accept change, no matter how good your case. Either their personalities just can’t take it, or they are so entrenched—emotionally, intellectually, or politically—in the way things are, they cannot see a way to make them better. These people usually have to go. Maybe that sounds harsh, but you are doing no one a favor by keeping resisters in your organization. They foster an underground resistance and lower the morale of people who support change. (pp. 141-142)

So how do you reward the people who achieve results in a way that is consistent with the organization’s vision for change? For Welch (2005), the most effective goodies are money, recognition, and training. “The better you do, the more you get—and you get it in both the soul and the wallet” (p. 107), he said. Money and recognition are about getting differentiated rewards for great work done and are crucial for both motivation and retention. Training recognizes that good people want to grow. They love to learn and stretch. “Training motivates people by showing them a way to grow, that the company cares, and that they have a future” (p. 108), Welch added.

And the great thing about training good people to drive change is that it creates a virtuous cycle of increased capability, confidence, ambition, and achievement. You’ll need every bit of that as you implement a change initiative.

Training and Development That Drive Change

In this course so far, we have talked about a number of skills and behaviors that are essential to driving change and to building the change capability of an organization. These include

• Looking forward to where change will be most urgently needed;
• Creating and communicating the vision for change;
• Mobilizing support for the change effort;
• Making clear demands for results to be achieved and giving honest performance feedback;
• Organizing and directing people in ways that they can make change happen;
• Communicating openly and honestly across organizational levels and boundaries:
• Mastering at least one change methodology and using it widely enough to generate the best results; and
• Overcoming barriers and resistance.

To develop the kind of organization wide change capability that will provide a competitive advantage over time, you need a common framework and language for change. And as many people as possible need to be trained in it. As well as getting everyone on the same page, this training helps create a widespread capacity for action. It actually multiplies results. The best large-scale efforts to train people in how to drive change have a number of features in common.

They are orchestrated from the center. While they may be tailored to accommodate differences in business or local needs, they all emphasize the same basic principles and tools.

They propel people into action to produce real results. They contain some conceptual or classroom material, but by far the bulk of the learning comes