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This chapter discusses how the test drive method alleviates the disruptions that arise when businesses implement critical decisions that produce major internal changes. Section 13.1 offers a primer on organizational change. Section 13.2 presents a static conceptual model for responding effectively to imminent change. Section 13.3 describes our solution for test driving decisions to enable smooth change, which extends and animates the static model. Section 13.4 reviews test drive results from a pilot project to craft a change strategy for a highly disruptive decision to switch compensation methods. Section 13.5 summarizes the benefits of using a test drive model to help design, test, and execute change strategies. A video is available that explains and demonstrates this test drive solution.
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The “right” metric for judging “failure” is controversial: failure to achieve stated goals (e.g., profits, savings, growth, return on investment [ROI]) vs. preserving shareholder value vs achieving returns commensurate with risk vs. market reception. Bruner [ 2]. That said, failure rates are dismaying high by most of these measures.
Generally, the smaller firm adopts the acquiring company’s ways of doing business unless the smaller firm’s processes, systems, technologies or even culture are perceived to be superior.
In extreme cases of cultural misfits, incompatibilities can lead to cascading departures, negating the very rationale for the transaction. See, for example, https://www.nytimes.com/1996/12/16/business/re-engineering-firm-tries-some-of-its-own-medicine.html.
The term “change management,” while established in the literature, is an oxymoron; the complexity of social and psychological behaviors renders the notion of “controlling” them during turbulent times unrealistic or self-delusive. A more achievable objective is to guide and enable change to occur smoothly. See, for example, http://blog.readytomanage.com/top-20-best-books-on-managing-change/.
Pascale et al. [ 10] The authors estimate $50B is spent annually in fees for change consulting in the US, while total outlays for CM amount to $150B if write-offs, severance costs, and IT costs are included.
A review of a plan (e.g., by someone other than the designer) can question assumptions, check for logical consistency, and try to imagine outcomes. In contrast, testing a plan (from this book’s perspective) involves dynamically simulating the plan’s execution via algorithms that operate in a uniform, repeatable manner that is independent of the plan designers.
We once presented our methodology to a Department of Defense group responsible for transforming operations. Their response was that CM is unnecessary in a military organization operating under a “command and control” ethos: units and their commanders do what they are told. However, they estimated a 70% failure rate, identical to the statistic based on business surveys. Providing methods and tools to help units enable the changes they are commanded to perform is necessary to reduce failure rates. Competence in CM is rarely innate; it must be taught and cultivated explicitly.
Kotter [ 7].
Employee surveys hint at the underlying causes of CM intervention failures: Only 15% of employees felt they worked in a high trust environment. Only 17% felt that their organization fosters open communication that is respectful of differing opinions and that results in new and better ideas. Only 10% felt their organizations holds people accountable for results. Only 20% fully trusted the organization they work for. Only 13% have high trust, highly cooperative working relationships with other groups/departments. Covey [ 4]. Until these underlying factors are addressed, CM will continue to achieve dismal results, but improvements will not take place over night or in response to transient tactical measures; they require genuine and persistent efforts to take root.
Adler and Koehn [ 1]. Dr. David Koehn is an organizational psychologist with expertise in organizational design, leadership, learning, and enabling change.
Traditional CM consultants also employ three dimensions in their methods, typically people, process, and technology. The dimension that receives the least attention is people, because it is the least clear what to measure and how to measure it. It is also the most critical dimension for assessing and enabling change. The CALM decision model collapses the technology and process categories into a single Infrastructure axis, and breaks out the crucial people dimension into Organizational (social) and Personal (psychological) axes. The CALM model also encompasses a Business Performance dimension, which is omitted here for simplicity’s sake. Metrics in this dimension allow companies to analyze the impact of change on tangible company performance via conventional metrics such as growth and profit.
Goleman [ 6].
CALM’s collaborative test drive process is necessitated by its requirements for organizational education and alignment. Test drives for most other types of critical decisions are conducted with individual decision-makers or their analysts.
CALM models a business in terms of a hierarchy. This is important because different business units face different kinds of change challenges and require different actions to improve readiness. For example, in an acquisition, the acquired company often has to switch over to the acquirer’s IT systems. The change challenges facing the parent company (i.e., headquarters) are minimal, while they are probably substantial for the new business unit. This hierarchical approach allows an enterprise view of enabling change, rolling up the change initiatives from whatever level they are required.
Recognizing that “one size does not fit all,” CALM software has the flexibility to: (1) adjust the relative weights of these factors in calculating the overall dimensional value; and (2) add custom readiness metrics to any dimension tailored to the company’s market sector, type of business, or disruptive change.
Once CALM has been applied using the workshop team judgments about metric values, businesses can choose to collect more accurate data by conducting worker surveys and collecting industry benchmarks. Such decisions depend on a cost-benefit analysis of the initial CALM results.
As part of this process, group facilitators record the justifications or rationales, examples, and caveats for all value assignments along with the estimates themselves. The resulting record, maintained by the CALM software, paints a vivid (and archival) picture of organizational status and mindset.
This avoids the problem of over-correction. If you attempt to control each and every variation in a process too tightly, you will intervene too much and assuredly drive the process out of its goal range (i.e., the upper and lower bounds of its control chart). Oakland [ 9].
Our goal is to populate a library with pre-defined change initiatives. Each such component provides a pre-validated best practice program that can be adapted or tuned to specific organizations and change contexts as required, rather than having to be created from scratch for every change. The library enables a “Lego™ building block” approach to building Transformation Plans that exploits best practices expert knowledge about change strategies and their likely impacts on organizational readiness over time.
Another goal for CALM is to develop an ROI metric for change plans as a function of cumulative increases in readiness metric values and total strategy costs. Obviously, this would be a coarse estimate, but it would provide a uniform basis for comparing the efficacy of alternate plans.
In classical mechanics, a stable orbit is one which balances the gravitational attraction between the central body and the satellite and the satellite’s tangential (critical) velocity. If the satellite’s velocity exceeds this threshold, it flies off into space. A change plan that never reaches escape velocity fails outright; one that does not achieve critical velocity fails to remain in (stable) orbit decays and “crashes.”
This analogy is admittedly imperfect. Designing rocket engines and launch trajectories is a well-established engineering discipline. Newtonian laws of motion strictly determine the mechanical interactions of a handful of key parameters and forces and solutions can be derived from software programs or textbooks. The same equations apply uniformly to all launch situations and never change. Organizational change is clearly a more complex and open-ended phenomenon. It is not obvious what parameters to measure, much less what, if any “universal laws” govern situational dynamics. As a result, models such as CALM are more exploratory than deterministic and predictive.
This scheme, called the National Security Personnel System (NSPS), was legislated in FY04 in the George W. Bush administration with Donald Rumsfeld as the Secretary of Defense. https://en.wikipedia.org/wiki/National_Security_Personnel_System. Accessed 05 Jul, 2019.
The pilot exercise had limited funding and time commitment from the client. The 1 week schedule was a necessity, and proved to be intense. Time only allowed development and analysis of a single Transformation Plan and Environmental Scan. A more thorough test drive with alternative plans, varied “what-if” assumptions, tradeoff studies, and a sensitivity analysis of the impacts of plan element could be completely comfortably in a few weeks of consultant time and a few more days of the business team’s time. This effort would be less time consuming and costly than conventional CM projects.
We were unable to verify the simulated results of the NSPS change plan against implementation. First, the unions for Defense agencies sued, tying up NSPS in court for several years. Following the 2008 election, the Obama administration and Congressional Democrats forced abandonment of NSPS in FY2010, before our client was mandated to adopt it. NSPS was subsequently rolled back in DOD organizations where it had been adopted.
Shapiro [ 12] uses informal SD models to understand “tipping points” for creating “contagious commitment” to sustainable change, but this represents an educational model rather than a complete enablement plan that is simulated for a specific organizational change.
Contrast this with a conventional CM project, where consultants assess the change challenge by meeting with company leaders (and workers) individually, and then craft and present a change plan to leaders. Such plans are static and one-off, tailored to a specific change rather than building the company’s competency to change organically. And there is no test drive to validate and refine the plan at the point of decision, much less to monitor execution and make mid-course adjustments.
Transformation Plans also map each change activity to Kotter’s eight stage model, helping to assure adequate coverage against that framework as well as relative to the dimensions of change readiness.
The test drive method alleviates the disruptions that arise when businesses implement critical decisions that produce major internal changes (MP4 27843 kb)
Bruner, Robert F. 2004. Applied Mergers and Acquisitions. Hoboken, NJ: John Wiley & Sons.
___. 2005. Deals from hell: M&A Lessons that rise above the Ashes. Hoboken, NJ: John Wiley & Sons.
Covey, Stephen R. 2004. The 8 th Habit: From Effectiveness to Greatness. New York: Free Press.
Gallagher, Brian P, Mike Phillips, Karen J. Richer, and Sandra L. Shrum. 2011. CMMI for Acquisition: Guidelines for Improving the Acquisition of Products and Services. Boston, MA: Addison-Wesley.
Goleman, Daniel. 1996. Emotional Intelligence: Why It Can Matter More than IQ. New York: Bantam Books.
Kotter, John P. 1995. Leading Change: Eight Ways Organizational Transformations Fail. Harvard Business Review 73(2): 59–67.
Oakland, John S. 1996. Statistical process control. Boston: Butterworth-Heinemann.
Pascale, Richard T., Mark Millemann, and Linda Gioja. 2000. Surfing at the Edge of Chaos: The Laws of Nature and the New Laws of Business. New York: Random House.
Radhakrishnan, R. and S. Balasubramanian. 2010. Business Process Reengineering: Text and Cases. New Delhi: PHI Learning Private Limited.
Shapiro, Andrea. 2010. Creating Contagious Commitment: Applying the Tipping Point to Organizational Change. Hillsborough, NC: Strategy Perspective.
Harvard Business Review on Mergers and Acquisitions. 2001. Boston, MA: Harvard Business School Press.
- Enabling Organizational Change
Richard M. Adler
- Chapter 13
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