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MIT 15 301 - Organizational Change

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Organizational ChangeStrategy That Wouldn’t TravelOrganizational Change15.301 Managerial PsychologyJohn S. Carroll“Change would be easy if it were not for all the damned people”- Senior Executive from Xerox Corp., 1992What Is The “New” Organization?• Flat - fewer layers or less hierarchy• Flexible - learning and adaptive• Networked internally - linkages between individuals, between sub-units• Networked externally - among strategic partners, value chain, stakeholders• Diverse - develops and learns from differences• Global - not just internationalFlatter Hierarchies 1986-2003• # managers reporting to the CEO increased from 4 in 1986 to 7 in 2003• # division heads reporting directly to CEO increased 300%• # levels between division heads and CEO decreased by 25%• # firms with COOs decreased by 20%• In flatter organizations, division managers paid more in stock & options relative to salary[Rajan & Wulf (NBER WP 9633) study of 300 US companies averaging 50,000 employees]Change as a Linear Processtimebeforeafterchange1. Sensing the current state: Where are we?2. Visioning the future state: Where are we going?3. Innovating and implementing: How will we get there?performanceOrganizational Change ModelUnfreezing Changing RefreezingDisconfirmationAnxiety or guiltPersonal safetyIdentify role modelsScan for informationRestructure, reframeTest fit to selfTest fit to key relationshipsResistanceHabit, fear, time, vested interests, shared meanings4. Emotions and relationshipsForce Field AnalysisForces Enabling Change•Burning platform•Role models•Incentives•Values/identity•Vision/reframing•External pressureForces Inhibiting Change•Habit•Fear•Lack of time•Lack of resources•Entitlements/power•Shared assumptionsHow to move ÆWhat Kind of Change?• Technical change– Problem well-defined, solutions available, authorities can be trusted, expertise can be identified– Although possibly complex, this is “technical work”– Authority maintains order (“manage change”)• Adaptive change– Problem not well-defined, technical fixes not available– People must change their values, attitudes, or habits; this is “adaptive work”– Authority enables challenges to norms, roles and keeps the heat on without destroying the “container” of conversation or dialogue (“lead change”)Heifetz, R. (1994) Leadership Without Easy AnswersPreparing the Soil for Change“Leaders instigating change are often like gardeners standing over their plants, imploring them: ‘Grow! Try harder! You can do it!’ [But] if the seed does not have the potential to grow, there’s nothing anyone can do to make a difference….”Senge et al. (1999). The Dance of Change, p. 8and seeds need water, air, sunlight, food, drainage, weeding…Sloan Leadership Model• Sensemaking –diagnosing, framing, understanding• Relating – developing relationships• Visioning – encouraging new hopes, goals, values• Inventing/Implementing –building new ways of working togetherAction contingent on context and leadership styleRelatingSense-makingVisioningInventing/Imple-mentingChange as NonlinearSRVISRVI SRVIMillstone Nuclear Power Plant• Northeast Utilities (NU) an industry leader in 1980s; NU subsidiaries own and operate Millstone• Change of leadership and shift to cost-cutting• Backlogs, design issues, employee complaints, intimidation of those who raise concerns•TimeMarch, 1996, cover story on Millstone• NRC issues unprecedented Order in 1996 requiring a safety conscious work environment (SCWE) and independent third-party oversight• SCWE is worker rights to raise safety issues without harassment, intimidation, retaliation, or discriminationChange StrategiesTheory E• Maximize $ value• Top-down• Focus on structure/systems• Programmatic, planned• Incentives lead change• Consultants offer expert solutionsTheory O• Max org capabilities• Participative• Focus on culture• Emergent• Incentives support/lag change• Consultants facilitate process(Beer & Nohria, 2000)Initial Millstone Response• New CNO• New values, two-way communication• Change of management team• Strengthen Employee Concerns Program• SCWE initiative created under VPMillstone Force Field AnalysisEnabling factorsInhibiting factors•Complacency, hubris•Command & control style•Lack of respect for workers•Mistrust of management•Lack of resources•Competition with other utilities•Poor relations across units, among departments•Intervener groups generate negative publicity•Regulatory pressure•Commitment to reopen to save jobs, money, etc.•Willingness of industry to provide help•Availability of models to benchmark•New management •Training of all managers•Creation of forums for problem solving and learningLeadership of Change• Little diagnosis – accept problem frame as given by others (sensemaking weak, visioning incomplete)• Delegation of responsibility (relatingminimal, inventing little)• Start with strategic design – clarify values and job requirements, create a program with procedures for employees to raise issues, track management response (inventing little)Watershed Events• E.g., improper termination of MOV contractors• Energize senior management – demand for new sensemaking, etc.• Create Executive Review Board (innovating, later relating)• Train all managers (more relating skills)• People Team meetings and process redesign (relating and innovating)• Develop criteria and measurement tools (innovating)Stakeholder Analysis• Who cares or should care about this? Who can help or hinder the change? Who are the stakeholders?– Executives, managers, employees, plant, HQ, …– Regulators, consultants, suppliers, contractors, public, …• Urgency– Does the stakeholder think there is an urgent, immediate need to change or to resist change?• Capabilities– Is the stakeholder able to change? Able to support change?– Can the stakeholder prevent change?– What does the change effort need from the stakeholder?Millstone Stakeholder AnalysisPerson / GroupLead Support Bystand Oppose Issue#1Issue#2Issue#3CNOXOVP OpsXODir ECPOXUnit MangrsXOWorkersXOUS NRCOXPublicXOStrategy That Wouldn’t Travel• For Monday, read the case (Beer, 1996)• What worked in Wichita? Why?• Use the three lenses, Sloan Leadership Model, and other course concepts to analyze what happened in Wichita• For Wednesday, re-read the case• What


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