please check word doc.
1.5-2 pages answer
Case 19.3 Page 594
Dialogue and Organization Learning at DMT
Request:
1. Describe and critique the transformation of this organization.
2. What value did the methodology of a “change leadership team” bring to this action?
3. What other implementation process might have you considered?
Article on P.594, please check pdf for reference only!
Don’t just answer the questions by using the information from the case on textbook. Each response must reflect the criteria and lessons in the text. Also show the number of the page from which you sourced your answer.
Example: on your answer, if you talk about “Design Guidelines-From Strategy to Strategizing” you should put page 596 after the answer.
**again, you can’t just answer those questions from the case information. You must use the chapter information from the whole chapter.
Thanks!!!!
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19
Continuous Change
learni
ng
objectives
Compare and contrast four continuous change organization development
(OD) interventions.
Describe the elements and processes associated with the dynamic
strategy-making intervention.
Define the demands of turbulent environments and describe the self-
design intervention.
Outline the definition and application of organization learning
interventions.
Explain the logic and process of developing built-to-change organizations.
This chapter describes interventions that enableorganizations to change themselves contin-ually. These change processes are increas-
ingly common in organizations, but are still being
developed and refined. They are aimed at the
growing number of organizations facing highly
turbulent environments, such as firms in high-
technology, entertainment and fashion, and bio-
technology industries, where timing is critical,
technological change is rapid, and competitive
pressures are unrelenting and difficult to predict.
In these situations, standard sources of competi-
tive advantage—strategic positioning and core
competencies—erode quickly and provide only
temporary advantage.1 What is needed are
dynamic capabilities2 built into the organization
that enable it to renew forms of competitive
advantage constantly to adapt to a rapidly shift-
ing environment.
Continuous change interventions extend trans-
formational change into a nonstop process of
strategizing, designing, and implementing.3 Rather
than focus on creating and implementing a particular
strategy and organization design, continuous change
addresses the underlying structures, processes, and
activities for generating new forms of competitive
advantage. Thus, the focus is on learning, changing,
and adapting—on how to produce a constant flow of
new strategies and designs and not just on how to
transform existing ones.
Dynamic strategy making uses a process
of “guided involvement” to help organizations
implement a strategic system.4 A statement of
strategic direction—the organization’s competitive
logic, goals, organization design, and action plan—
and a repeatable strategic process define the
strategic system. OD practitioners work with
managers and key stakeholders to build a system
that continually adapts. Dynamic strategy making
addresses both the content (the “what”) of
strategy formulation and the process (the “how”
and “who”) of strategy implementation.
569
Self-designing organizations have the capability to
alter themselves fundamentally and continuously.
Creating them is a highly participative process
in which multiple stakeholders set strategic direc-
tion, design appropriate structures and processes,
and implement them. This intervention includes
considerable innovation and learning as organizations
gain the capacity to design and implement significant
changes continually.
Learning organizations are those with the ability
to learn how to change and improve themselves
constantly. Distinct from individual learning, this
intervention helps organizations move beyond
solving existing problems to gain the capability to
improve constantly. It results in the development of
a learning organization where empowered members
take responsibility for changing the organization and
learning how to do this better and better.
Built-to-change organizations include strategizing
processes, design elements, and managerial
practices that support change as the primary driver
of effectiveness. This intervention provides design
and implementation guidelines for building change
capabilities into the structures, processes, and
behaviors of the organization so that it can respond
continually to a rapidly changing environment.
19-1 Dynamic Strategy Making
Dynamic strategy making represents a new type of OD intervention that combines OD’s
traditional human process focus on relationships among organization members with strate-
gic management’s customary emphasis on strategy and organization design to help organi-
zations manage strategic change. Similar to integrated strategic change (ISC) (Chapter 18),
dynamic strategy making is a deliberate, coordinated process that leads to continuous
realignments between an organization and its environment. Whereas ISC focuses on mak-
ing a systemic and revolutionary change, dynamic strategy making creates a continuous
strategic change process intended to improve performance and effectiveness over time.5
Greiner and Cummings developed the dynamic strategy-making process based on their
research and practice in strategy implementation.6 They found that managers consistently
underestimated the impact of change and human process issues during strategy execution.7
Greiner and Cummings’ analysis of the history and practice of strategy formulation and
implementation, along with the increasing pace of change in complex environments, led
them to propose several criteria for an effective strategic change process:8
• Speed over delay. New opportunities and threats need immediate strategic action,
but organizations are often slow to react, gathering more information and assessing
more solutions instead of acting.
• Breadth over narrowness. Unpredictable and complex conditions require expansive
thinking and openness to innovative ideas, but organizations tend to be discipline
focused and take input from select stakeholders.
• Flexibility over rigidity. Organizations must discover new solutions, adjust priori-
ties, and reallocate resources constantly, but they are often ruled by rigid policies
and annual budgets.
• Empowerment over autocracy. Strategy making must permeate the entire organiza-
tion and give members the freedom to respond to local changes; it cannot remain
the sole domain of top management.
• Simplicity over complexity. Complexity threatens to overwhelm organization mem-
bers; strategy needs to be concrete and specific enough to be acted on but not so
detailed that members cannot respond and improvise as situations change.
• Unity over fragmentation. Strategy must promote consistent and integrated action,
because organizations spread out across countries, markets, and businesses tend to
fragment, lose coordination, and deviate from the intended strategy.
570
19-1a Conceptual Framework
Dynamic strategy making is a comprehensive and pragmatic approach to strategic
change. It views strategy as a central concept that permeates the organization rather
than being another element to align with other parts. It treats the process of creating
and implementing strategy and the content of strategy interactively and seeks strategies
that are executable and flexible. Figure 19.1 broadly outlines the framework. The strategic
system is the core of dynamic strategy making. It includes strategy content in the form of
a statement of strategic direction and a strategic process for developing and executing the
strategy. When designed effectively, the strategic system continually matches the firm’s
resources and capabilities to changing environmental opportunities and demands.
The specific issues addressed in the strategic system come from senior managers’
situational assessments about the organization and its environment. The organization is
examined to identify core capabilities, resources, know-how, and all potential strengths
needed to succeed in the marketplace. Because neither the organization nor its environ-
ment is static, this assessment is not a one-shot event and so the strategic process
is ongoing and built into the organization. In fast-moving environments, the results of
strategic analysis have a short shelf life, so data collection and assessment need to be
continuous and keep pace with change.
Statement of Strategic Direction A written statement of strategic direction is the
primary outcome from the situational assessment—it makes strategic information about
the organization and environment concrete and permits revision over time. It provides
a way to record, communicate, and implement the strategy. A written statement
avoids misunderstandings in the future and provides a clearer way to articulate the con-
tent with organization members and other stakeholders about the journey ahead.9
FIGURE 19.1
A Dynamic Strategy System
SOURCE: Adapted from Greiner and Cummings, 2009.
CHAPTER 19 CONTINUOUS CHANGE 571
The statement of strategic direction includes four elements: (1) the competitive logic that
describes the organization’s market position and customer tiebreakers, or the business
model for gaining competitive advantage; (2) the financial and rallying goals that will
direct and motivate members’ behavior; (3) the organization design that will structure
and link members to work activities, each other, and company values; and (4) the action
plan that includes strategic initiatives and specific steps for implementing the strategic
system. The four elements are described below:
1. Competitive logic. An effective strategy centers on a value proposition that connects
the firm’s capabilities to market opportunities. This value proposition is the compet-
itive logic, or how the firm will compete in the marketplace, and includes statements
about the organization’s market position and customer tiebreakers. The best market
position is one where the organization has the capabilities to deliver value to specific
customers in ways that competitors cannot easily match. Finding and describing this
position is more creative than deductive, but is assisted by such traditional strategy
tools as strengths, weaknesses, opportunities, and threats (SWOT) analyses or
Porter’s competitive strategy model.10 More recent methods, such as value migration
techniques, the resource-based view of strategy, or “blue ocean” models, can also be
used.11 The organization’s customer tiebreakers are the differentiators that attract
and retain customers. Tiebreakers are the product, service, after-sales support, or
brand characteristics that customers use to make purchase decisions. The organiza-
tion’s capabilities must be able to deliver on these tiebreakers for a competitive logic
to be effective.
2. Goals. Greiner and Cummings suggest that goals represent the unifying target for
achievement, and should be separated into financial goals and a single rallying
goal. Financial goals direct effort and measure progress. Research suggests that
when top management teams agree on the financial goals and their importance,
the firm’s performance is higher than it would have been otherwise.12 A few specific
and clear goals help to unify and motivate employees to make the strategy happen.
Unfortunately, too many organizations set too many goals that diffuse and dilute the
energy and focus of organization members.
A single rallying goal motivates the workforce to embrace the strategy, espe-
cially for those who find abstract financial goals less exciting. For example, the
use of “big, hairy, audacious goals” (BHAGs) has been associated with short-term
success.13 Once goals are accomplished, old goals can be dropped, and new ones
can be set and added to the statement.
3. Organization. This element describes the formal organization design that aligns
work, structure, human resource practices, and management processes to the com-
petitive logic and goals. As with all strategic change interventions, a strategy can eas-
ily remain abstract and become the latest management fad unless its intent is
manifest in the organization’s design. The most important design features to change
are the ones that will realize the competitive logic. They can be structural changes,
such as placing the right people in the right jobs or creating new departments, or
changes in the reward system that encourage new behaviors. For organizations in
dynamic and complex environments, the challenge is to build organizations that
are both agile and reliable. Many traditional firms may have to transform their
entire organization to align with the new strategy and to direct employees to move
in a new strategic direction.
4. Action plan. This element describes the initiatives and specific steps required to
implement the strategy and to ensure that everyone’s daily behavior reflects the
572 PART 6 STRATEGIC CHANGE INTERVENTIONS
strategy. The action plan sets priorities and spells out what things need to happen
over a specific time frame to move forward. Action plans are generally organized
around four to six broad initiatives that take their cue directly from the other three
elements of the statement of strategic direction. Each initiative usually requires three
or four specific steps to cause implementation. These steps should specify responsi-
bilities, accountabilities, and deadlines and include a realistic evaluation of the costs,
benefits, and feasibility of moving the competitive logic forward. Managers revise the
action plan continuously, when initiatives are accomplished, or when real-time
events make changes necessary. Initiatives that divert energy from key goals or orga-
nization design changes, make accountability vague, or cause employees to lose focus
should be eliminated.
The four elements of the statement of strategic direction are straightforward and
easy for organization members to understand and remember. In a world that frequently
requires spontaneous responses, this simplicity is important. It makes it easier for people
to make adjustments in line with the strategic direction.
Strategic Process While the statement of strategic direction captures the content of
an organization’s strategy and design, Greiner and Cummings suggest that the second
part of the strategic system shown in Figure 19.1, strategic process, is equally important
to successful strategy making. Strategic process has to do with the “who” and “how” of
developing the statement and subsequently implementing it. It involves identifying the
relevant stakeholders who should be involved directly in the strategy-making process
and engaging them in a highly interactive set of conversations and debates about the
organization’s strategic direction and how to move forward. As described below in the
application stages, strategic process is informed by the philosophy of “guided involve-
ment,”14 which includes a repeatable series of retreats and activities for developing and
executing strategic direction. Guided involvement speaks to the nature of the dialogue
expected among organization members and to the role OD practitioners can play in
building the required organization capabilities. It bridges the learning and applied behav-
ioral science aspects of OD with the technical aspects of strategic management and orga-
nization design by holding organization participants to a high standard of direct, open,
and concrete engagement.
In uncertain environments, a strategic process must promote both quickness and
participation. Guided involvement helps participants rapidly assess the organization and
its environment, share their knowledge and experience, and agree on strategic direction.
As a result, politics—the way power and influence are managed in organizations—is
made more constructive through guided involvement. It reaches out to all organization
members to encourage their relevant participation in strategy making and facilitates their
understanding and commitment to the strategic direction.
19-1b Application Stages
Making the statement of strategic direction actionable requires integrated content and a
supporting process. Dynamic strategy making helps organizations construct content and
process together into a strategic system. The following tools and concepts in the form of
building blocks support this construction process.
1. Choosing relevant stakeholders. The dynamic strategy-making process is kicked off
by identifying and recruiting the relevant stakeholders. Getting the right stake-
holders involved from the start ensures that the strategic system results in a more
CHAPTER 19 CONTINUOUS CHANGE 573
realistic formulation of the strategy and has the commitment necessary to support
its implementation. The process is driven by senior executives or the top manage-
ment team and they can employ a variety of techniques, including open system
planning or stakeholder mapping processes (Chapter 11), to systematically identify
stakeholders. Typical stakeholders include the board of directors, union officials,
customers, managers and organization members, regulators, and community repre-
sentatives, among others. The balance of the application stages describe how the sta-
keholders are organized for meaningful interaction and decision making.
2. Holding the first retreat. The purpose of the first retreat is to create an initial draft
of the statement of strategic direction, especially the competitive logic and goal ele-
ments. Before the session, participants provide information about their perceptions
of strengths, weaknesses, opportunities, and threats through personal interviews or
other methods. These interviews are important because they will be the primary
input to conversations about strategy. Although many organizations are full of data
about customers, regulations, competitor actions, and market forces—and these
should be available to the group—much of dynamic strategy making is about gain-
ing consensus regarding the implications of these data and about the actions to be
taken. Interview summaries must not ignore data points only mentioned by one or a
few members. OD practitioners should be careful to present all the data and not
over-consolidate it; “small noises” often can turn into a “big signal.”
Based on these data, three primary discussions define the first retreat: under-
standing the data, formulating competitive logic and goals, and preparing for
broader organizational involvement. Following introductions, agenda setting, and
any educational inputs, the group discusses the prework data. This is best done as
a total group where everyone can hear about all of the data. The philosophy of
guided involvement suggests that inquiry—understanding what is known and what
it means—is the most appropriate behavior during this discussion.
The second conversation is the most difficult. After hearing and discussing the
data, the total group is then split into smaller breakout groups to develop a compet-
itive logic for the organization. This creative assignment asks small groups to
explore the organization and its environment and to discover or invent the best
match between existing market opportunities and internal strengths. It allows parti-
cipants to use their common knowledge and individual experiences to create content
and develop a consensus strategy.
This small group dialogue is likely to be complex and uncertain; it represents an
opportunity for guided involvement by the OD practitioner. Finding the right fit
between the organization and its environment is a creative act. Companies have
many internal strengths and external opportunities to consider, not all of which
will match up. Participants should be encouraged to be broad enough in their think-
ing to see a variety of possibilities, but focused enough to come to some agreement
about the best opportunities.
Initial ideas for a rough draft of the competitive logic and goals from the
small groups are reviewed in the total group and depending on the length of
time available, a second round of small group discussions can be conducted.
While desirable, it is not necessary to come to consensus. Some teams are able
to complete a draft of the entire strategy statement at the first retreat, but this is
rare, and the remaining elements, organization and action plans, are typically
addressed in the second retreat.
The last discussion involves establishing procedures and timelines for gathering
feedback on the draft logic and goals before the next retreat.
574 PART 6 STRATEGIC CHANGE INTERVENTIONS
3. Engaging stakeholders between the first and second retreats. Between the first and
second retreats, senior managers reflect on their work and perform reality tests on
the validity of assumptions in the statement. The primary method for this testing is
through feedback on the draft statement from other stakeholders. During interim
meetings, senior executives from the first retreat lead reviews of the draft on com-
petitive logic and goals. Middle managers, frontline employees, and other relevant
stakeholders provide feedback and comments. These meetings can be in person or
virtual and extend the strategy-making process out to the larger workforce. In gen-
eral, the meetings address four questions:
• Is the draft statement sufficiently realistic in its assumptions about the market?
• Do we have the capabilities to pull it off?
• Is it sufficiently inspirational, and will it win commitment?
• What suggestions would improve it?
The reactions from these meetings are fed back to a designated member of the
retreat team, who incorporates them into a redraft of the competitive logic and goals
statement. These are presented at the second off-site retreat.
4. Holding the second retreat. The purpose of the second retreat is to review the feed-
back, finalize the competitive logic and goal statements, and complete the statement
of strategic direction. Initially, the total group reviews and discusses the input from
stakeholders and builds consensus regarding the competitive logic and goals.
Then, subgroups are asked to identify alternative organization designs with pros
and cons for each, keeping in mind the need to ensure a close fit between the pro-
posed design and the competitive logic and goals. This involves specifying the design
components at a high level first, and then describing specifics of the design through
participation and involvement of organization members. Politics is inherent in any
organization design discussion, especially if names are attached to positions, and OD
practitioners must be careful that discussions do not derail. Best practice here sug-
gests defining the design logic and recommending preferred alternatives to the CEO
or senior manager. Following the second retreat or during a third retreat, the final
organization design can be discussed.
The outcome of the second retreat is an outline and action plan for implement-
ing the new strategy. At this time, only the key strategic initiatives are outlined;
specific steps are postponed until a team is charted to own the initiative or a third
off-site retreat is convened. Initiatives appear rather logically after reflecting back on
the logic, goals, and high level design. They typically answer the following questions:
• What are the few priorities stemming from the competitive logic that will help
us to move forward?
• What resources are needed for what goals?
• Who will do what, when, and where?
5. Implementing actions. Following the second retreat, organizations have several
options for moving forward. All of them involve putting effort into pursuing the state-
ment of strategic direction. For example, a third retreat could finalize organization
design changes, or provide details about initiative resources and action steps. Alterna-
tively, the organization could establish task forces with charters to develop action
plans and implement the initiatives and to report progress to the senior team.
In any case, it is important for the senior team to arrange for the statement of stra-
tegic direction to be communicated and to be built into the organization’s performance
management system. Dynamic strategy making requires exceptional leadership from all
managers (not just senior executives). Strategic leaders must step forward and support
the creation, execution, and refinement of the organization’s strategy. They must model
CHAPTER 19 CONTINUOUS CHANGE 575
the behaviors implied by the strategic statement and hold themselves accountable for it.
It is also important to create systems to hold other managers accountable for results.
This takes a good deal of vision, personal insight, and social acumen. Strategic leader-
ship must ensure that strategy is enacted effectively at all levels on a daily basis. This
often requires change, leaving behind traditional habits and replacing them with new
strategy-oriented behavior.15 A good leader must assure that the dynamic strategy mak-
ing process continues over time by periodically reassessing the statement of strategic
direction and making changes in the statement and organization as needed. This
might involve recycling through the application stages at periodic intervals to keep
pace with a changing environment.
Application 19.1 describes a dynamic strategy-making intervention at Whitbread
PLC. The organization leveraged a written statement of strategic intent to gather feed-
back from the larger organization and to clarify and focus its strategy and organization.
In using a deliberate, guided process, it also built a process for continuing to make
strategic changes over time.16
19-2 Self-Designing Organizations
A growing number of researchers and practitioners have called for organizations with a
built-in capacity to transform continually and to achieve high levels of performance in
today’s competitive and changing environments.17 Mohrman and Cummings developed
the self-design intervention in response to a number of demands facing organizations in
turbulent environments. It involves cycles of diagnosing, designing, and implementing
activities that managers and employees at all levels of the firm can carry out.18 This sec-
tion begins with a discussion of the demands of a turbulent environment and then
describes the application stages of self-design.
19-2a The Demands of Turbulent Environments
Turbulent environments are both complex and changing rapidly. To be effective in these
situations requires a coordinated organization response. As a result, large-scale change
needs to occur at multiple levels of the organization if new strategies are to result in
changed behaviors throughout the system. Top executives must formulate a strategy
and clarify a vision of what the organization needs to look like to support it. Middle
and lower levels of the organization need to put those broad parameters into operation
by creating structures, procedures, and behaviors to implement the strategy.19 Self-design
processes help members change the organization systemically.
In turbulent environments, change is constant. Therefore, organization change is
never totally finished, as new structures and processes will continually have to be modi-
fied to fit new conditions. Thus, the change process needs to be dynamic and iterative,
with organizations continually changing themselves.
In turbulent environments, the direction of change is unclear. Organizations need
to learn how to translate general prescriptions of change, such as “be more nimble”
and “go global,” into specific structures, processes, and behaviors appropriate to their
situations. This generally requires considerable on-site innovation and learning by
doing—trying out new structures and behaviors, assessing their effectiveness, and
modifying them if necessary. Large-scale change in turbulent environments calls for
constant organizational learning.20
576 PART 6 STRATEGIC CHANGE INTERVENTIONS
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1 DYNAMIC STRATEGY MAKING AT WHITBREAD PLC
W
hitbread PLC is one of Britain’s leading
organizations, a member of the FTSE 100
with a strong brand presence in hotels
(Premier Hotels) and restaurants (Costa
Coffee, Beefeater Grill). It also has a long his-
tory of change and transformation, starting out
in 1742 as a brewer and pub owner/operator. In
1800, it was arguably the largest brewer in
Britain, and for most of its history operated as
a vertically integrated brewer, owning the
brewery, transportation, and retail outlets. But reg-
ulatory changes in the early 1990s—specifically
the “Beer Orders”—restricted pub ownership by
brewers and greatly changed the industry’s
dynamics. Whitbread diversified by entering into
restaurants, hotels, and health clubs.
In June 1997, David Thomas was named
CEO largely because of his success in building
and growing these new ventures and he
wanted to accelerate Whitbread’s changes.
But in 1999, a large and public failure to acquire
a number of pubs destroyed confidence in the
company both internally and externally. The
proposed acquisition painted a confusing pic-
ture of corporate strategy. Was brewing a
core part of the portfolio or not? The expansion
into hotels, restaurants, and health clubs fol-
lowed by the failed pub acquisitions left people
wondering, “What is the strategy at Whit-
bread?” Stock price plummeted and Whitbread
fell out of the FTSE 100.
The company thought long and hard about
this issue, and Thomas wondered if he had
been clear enough or done enough to build
an organization that could sustain the growth
he thought was possible. In October 2000, he
announced the “Future Whitbread” strategy,
clarifying that the organization would focus on
“lodging, eating out, and active leisure,” areas
that were forecasted to grow more than 30%
between 2001 and 2006. His group executive
team had decided that brewing could no longer
be its core business and Whitbread sold the
beer operations, representing almost half of
the workforce, in 2000.
At this time, Whitbread was best described
as a multibrand, multidivisional organization.
Reporting to the CEO were the managing direc-
tors of the different brands and divisions
(e.g., hotels, restaurants, health clubs) and cor-
porate functional heads (e.g., finance, human
resources, legal counsel). To encourage organic
growth and operational efficiency, traditional
hallmarks of the Whitbread organization, each
division had a full complement of functions
reporting directly to the managing directors,
and only “dotted line” responsibility to the cor-
porate function. Corporate functions were
expected to formulate and implement cross-
business initiatives that would bring synergies
to the brands and make Whitbread more than
the sum of its parts. In reality, the managing
directors acted like and were referred to as
“barons.” There was little room for collabora-
tion. Career paths and loyalty were clearly asso-
ciated with a particular division; there were few
stories of cross-division transfers. As a result,
Whitbread found it difficult to balance brand
building and brand identity with corporate iden-
tity and coordination, and a “nice” culture
emerged. Reflecting to some extent the larger
British culture, there was little confronting of
people or holding them accountable for results.
This description applied well to Thomas. He was
seen generally as easy and good to work for.
The “Future Whitbread” strategy challenged
this organization. It clearly implied that correct
executive behavior involved putting shareholders
ahead of management empire building, shifted
the organization from an operations-driven to a
brand-driven orientation, and would hold execu-
tives more accountable for their performance. To
this last point, Thomas announced increased
transparency of Whitbread’s results to the finan-
cial community. No longer could a managing
director hide from scrutiny in results that were
buried in corporate statements.
To back up these commitments, Thomas
held a series of workshops with his executive
team. The hotel group managing director had
read Collins’ Good to Great and suggested it
would be good basis for discussions about
how to change and manage Whitbread. Initial
meetings among the executive team, facilitated
CHAPTER 19 CONTINUOUS CHANGE 577
by OD practitioners, were later expanded to include
the top 40 managers. They discussed and debated
their core purpose and values, the things the organi-
zation was passionate about, the economic engine
of the corporation, and how success should be
measured. At the end of the process, the hotel
group managing director thought it would be impor-
tant to get feedback from the rest of the organi-
zation: “What do other people at Whitbread think
of our work?”
Despite some resistance from the executives,
including Thomas himself, the idea was eventually
endorsed. To get the process started, Thomas and
Whitbread’s corporate human resources officer
drafted a “statement of strategic and organizational
intent.” It was a two-page summary of the Good to
Great sessions and listed out Whitbread’s intended
core and enduring purpose, passions, ambitions,
values, measures, and economic engine. The
group executive team also commissioned a “strate-
gic fitness” task force that consisted of eight upper
level managers. With the OD consultant’s support,
the task force’s mandate was to interview 100 man-
agers from different functions, businesses, and
levels around three questions: “What do you think
of the statement of strategic intent?” and “What
are the organizational strengths and weaknesses
with respect to implementing this intent?”
Prior to a two-day meeting of Thomas’ group
executive team, the task force members gathered
to prepare their feedback and presentation. The
members were generally struck by the level of dis-
appointment in the data. Most managers
expressed a great amount of loyalty to the organi-
zation but were concerned that it was not achiev-
ing everything that it could. The task force
members tried to figure out how to convey that
feeling. Ultimately, they decided to present the
data along five themes:
• Why Whitbread? Managers were confused
about the overall purpose of the organization.
Why, for example, were they better off as one
organization rather than independent busi-
nesses? What was the role of the corporate
functions? Why were executives not pursuing
obvious synergies, such as selling Costa Coffee
in Whitbread hotels or locating Whitbread
health clubs in Whitbread hotels?
• Brand management. If Whitbread was going
to focus on brands, then a lot of attention
needed to be paid to building brand manage-
ment skills and processes into the organization.
• Culture. The task force members captured
this category by describing Whitbread’s cul-
ture as “institutionalized underperformance.”
• Leadership. The interviews suggested that
many people talked about the “New Whitbread,
Old Executives.” Nearly every executive had
been with the company more than ten years.
To a person, and despite large and obvious mis-
takes, they were never held accountable. They
received a sizeable bonus, visibly announced
every year in the annual report. Moreover, the
team noted consistent agreement among the
interviewees that the group executive team
did not work well together, did not speak with
one voice, and could not articulate a consistent
corporate direction.
• Statement of intent. The overall feeling was
that the statement, as written, was “mother-
hood and apple pie.”
The task force presented its findings to the
group executive team. Although anxious about
the content of the feedback, the task force
described the meeting as direct, professional, and
businesslike. The day after the feedback, the group
executive team discussed and reflected on the
data, discussed and debated the organization’s
business and corporate strategy, and addressed
the role of the corporate center in response to
the feedback about “Why Whitbread.”
In the weeks following the feedback meeting,
Thomas and the human resources officer, sup-
ported by input from other members of the group
executive team, developed an action plan to
address the feedback. They also called the task
force back to a meeting to present their plan.
During the combined group executive/task force
meeting, Thomas presented the plan. Following the
presentation, the group executives left and the task
force prepared a response. The task force members
believed that the executives had not heard them and
failed to grasp the depth of the problems facing the
organization. They debated whether it was because
the executives weren’t listening, whether they had
sugarcoated the information, and what they were
578 PART 6 STRATEGIC CHANGE INTERVENTIONS
These demands strongly suggest the need for a self-design process. In contrast, more
traditional and programmed approaches to large-scale change emphasize rigid timelines,
see change as a periodic event, and rely on consulting expertise. That is, traditional change
management practices are often guided by the values of control and certainty and do not
emphasize the OD values of learning and participation. The self-design process suggests
that the way the organization thinks about and prepares for change determines, to a large
extent, whether the change will be implemented expediently and successfully.
19-2b Application Stages
The self-design intervention focuses on all features of the organization (for example,
structure, human resources practices, and work design) and designs them to support
the strategy. It is a dynamic and an iterative process aimed at providing organizations
with the built-in capacity to change and redesign themselves continually as the circum-
stances demand. The approach promotes organizational learning among multiple stake-
holders at all levels of the firm, providing them with the knowledge and skills needed to
continuously change and improve the organization.
going to do about it. They decided to confront the
very culture they were trying to change.
When the two groups reconvened, the task
force made a short but powerful statement. After
restating the themes of their findings, they made
several bold recommendations for inclusion in the
action plan, including reorganization of the divisions
into brands with a direct reporting relationship to the
CEO, a radical overhaul of the leadership group by
identifying who was “on the bus” and who wasn’t,
and the need to invest in the capabilities required to
build and manage brands. The task force went so
far as to say they wondered whether the group
executives were the able to lead the change.
Although the group executive response was
polite at the time, Thomas later reflected what
was obvious to everyone: The plan and the strate-
gic intent it was built on was “crap.” The task force
was clearly saying that they were not being bold
and not taking risks. It was clear that just being
more transparent to the financial market was not
leadership.
Thomas and his group executive team were
finally feeling the urgency and met numerous
times to develop a new plan. Eventually dubbed the
“11-point plan,” it spelled out specific initiatives and
the executive who would be responsible and
accountable for its execution. The 11-point plan
included significant commitments to restructuring
the organization, in particular the restaurant and
hotel divisions; the development of a “master
class” in brand management and the commitment
to build brand skills; and a personal development
program for the top 100 leaders in the organization.
The 11-point plan received a positive response
from the task force and was presented to the orga-
nization. By 2004, much of the 11-point plan had
been implemented. An outside firm had implemen-
ted a rigorous personal development program and
helped the organization manage a radical change in
its talent management policies. Following the
implementation of the program, it was announced
that the top 100 managers were to be “owned” by
the CEO and not the brands. Their development
and assignments were to be handled by the
group executive team. Similarly, the brand man-
agement capability building initiatives had begun.
Finally, there was some movement in reorganizing
the brands, but the process was less than com-
plete. The hotel division successfully split into
two groups with each director reporting to the
president. The restaurant division, however, had
not reorganized even though the managing director
was seen as a potential successor to Thomas.
Eventually, the hotel managing director was
named CEO.
CHAPTER 19 CONTINUOUS CHANGE 579
Figure 19.2 outlines the self-design approach. In the typical case, a “design team”
(Chapter 10, microcosm groups) guides the intervention. It can be the top management
team or a cross-functional or cross-level group made up of formal and informal leaders,
high-potential managers, or selected employees and staff. Experience suggests that if the
top management team is not the design team, then at least one to two members from the
top management team should be on the design team, represent senior management’s
perspectives, and serve as liaisons between the two groups.
Although the process is described in five stages, in practice the stages merge and
interact iteratively over time. Each stage is described below:
1. Clarifying the strategy. This initial stage involves making the organization’s strategy
clear. Most organizations have a strategy but often do not share or write it in ways
that are clear to members. This stage clarifies the organization’s strategic objectives,
translates the strategy into descriptions of breadth, aggressiveness, and differentia-
tion, and explains how they are changing. The self-design process assumes that an
unclear strategy will result in an unfocused organization design. As one OD practi-
tioner put it, “if the strategy is unclear, then any organization design will work.”
2. Laying the foundation. This stage provides the design team with the basic know-
ledge and information needed to get large-scale change started. It involves three
kinds of activities. The first activity involves valuing—determining the beliefs and
values that will guide the change process. These values represent those performance
outcomes and organizational conditions that will be needed to implement the strat-
egy. They are typically written in a values statement that is discussed and negotiated
among multiple stakeholders at all levels of the organization. For example, the
valuing process might result in statements that emphasize “delivering value to the
customer,” “employee engagement,” or “maintaining gross margins.”
FIGURE 19.2
The Self-Design Change Process
SOURCE: Adapted from Mohrman and Cummings, 1989.
580 PART 6 STRATEGIC CHANGE INTERVENTIONS
The second activity is acquiring knowledge about how organizations function,
about organizing principles for achieving high performance, and about the self-
design process. This information is generally gained through reading relevant material,
attending in-house workshops, and visiting other organizations with a history of suc-
cessful continuous change. This learning typically starts with senior executives or with
the design team but can cascade to lower organizational levels as the change process
unfolds. The third activity is diagnosing the current organization to determine what
needs to be changed to enact the strategy and values. The design team generally
assesses the different features of the organization’s design, describes the organization’s
culture, and draws linkages to the current levels of performance. They look for incon-
gruities between its functioning and its valued performances and conditions.
3. Creating design criteria. In this stage, the design team develops the principles and
standards that will guide the new organization design. While the valuing process in
the laying the foundation stage specifies what is important to the organization, the
design criteria are more concrete. They describe any new organization capabilities
required by the strategy, what the new organization will need to be able to do to
support the strategy, and how the organization is expected to operate. Organization
design criteria do not specify particular features or solutions, however. Design crite-
ria would not specify that the organization needed to implement a matrix structure
or suggest that 5% of the workforce needed to be laid off. Rather, design criteria are
action oriented, specific and measureable, future oriented, and linked to creating a
strategic advantage. Examples of design criteria include the following:
• Facilitate fast reaction to market changes.
• Increase coordination across the organization around key customers.
• Move decision making out to those interfacing with customers.
• Enable and encourage process efficiencies and repeatable processes.
• Optimize resource leverage and utilization—people and systems.
• Eliminate redundant work.
Design criteria are an important milestone in the self-design process. As the
process moves to the designing stage, design criteria are an effective and objective
standard for evaluating alternative design options. Moreover, clearly stated and
agreed to design criteria reduce the likelihood of covert political processes derailing
the change.
4. Designing. In this fourth stage of self-design, the design team generates alternative
organization designs and innovations to reflect the strategy, values, and design crite-
ria. Members of the design team describe the work design, structures, HR practices,
and management processes that will support the strategy. This process usually starts
with a broad outline of how the organization should be designed at the highest level
and how the design components should fit together. Senior executives responsible
for the overall direction of the organization typically participate in creating this
overarching design.
Only the broad parameters of the new organization are specified. This enables
the design team to assess the extent to which alternative designs meet the strategy
and design criteria, to test the design criteria for completeness, and to build commit-
ment to a design approach before getting into specifics. This also allows other
groups and levels in the organization to detail and tailor the design according to
local conditions. This process recognizes that designs need to be refined and modi-
fied as they are implemented throughout the firm.
Next, the design process addresses the specific details of the organization design
components, which involve generating alternatives and making specific design
CHAPTER 19 CONTINUOUS CHANGE 581
choices. A broader set of organizational members often participates in these deci-
sions, relying on its own as well as experts’ experience and know-how, knowledge
of best practices, and information gained from visits to other organizations willing
to share design experience. This stage results in an overall design for the organiza-
tion, detailed designs for the components, and preliminary implementation plans for
how everything will fit together.
5. Implementing and assessing. This last stage involves making the new design hap-
pen by putting into place the new structures, practices, and systems. It draws heavily
on the methods for leading and managing change discussed in Chapter 8 and
applies them to the entire organization or subunit, and not just limited parts. It
also includes an ongoing cycle of action learning: changing structures and behaviors,
assessing progress, and making necessary modifications. Information about how well
implementation is progressing and how well the new organizational design is work-
ing is collected and used to clarify design and implementation issues and to make
necessary adjustments. This learning process continues not only during implementa-
tion but also indefinitely as members periodically assess and improve the design and
alter it to fit changing conditions. The feedback loops shown in Figure 19.2 suggest
that the implementing and assessing activities may lead back to affect subsequent
activities of designing, diagnosing, valuing, and acquiring knowledge. This iterative
sequence of activities provides organizations with the capacity to transform and
improve continually.
The self-design intervention has been applied successfully to whole organizations or
major subunits in a wide variety of situations. Experience suggests that organizations
may not always work through the process as described above but that attending to all
of the parts and stages increases the effectiveness of the change and the quality of the
learning. The self-design approach is quite flexible and can be used in both evolutionary
and revolutionary change contexts. For example, the process can be accelerated with the
use of large-group interventions at any stage of the process or by dedicating a design
team to work on the project full time. Application 19.2 describes how Healthways used
the self-design process to design and implement a new structure.
19-3 Learning Organizations
The third continuous change intervention is aimed at helping organizations develop and
use knowledge to change and improve themselves constantly. Like self-design, organiza-
tion learning (OL) enhances an organization’s capability to acquire and develop new
knowledge. It differs from self-design in its attention to the cognitive aspects of learning
and how members can become more effective learners. Whereas self-design changes
behaviors by changing organization design, OL focuses on changing behaviors by chang-
ing the way people solve problems and address opportunities.
OL is crucial in today’s complex, rapidly changing environments. It can be a source
of strategic renewal, and it can enable organizations to acquire and apply knowledge
more quickly and effectively than competitors, thus establishing a potentially long-term
competitive advantage.21 Moreover, when learning and knowledge are translated into
new products and services, they can become a key source of wealth creation for organi-
zations.22 OL remains one of the most widespread interventions in OD. It is the focus of
an expanding body of research and practice, and has been applied in such diverse firms
as McKinsey, L.L. Bean, Saudi Aramco, Shell, the Canadian Broadcasting Corporation,
Wells Fargo, Telefonica, Boeing, Microsoft, and the U.S. Army.
582 PART 6 STRATEGIC CHANGE INTERVENTIONS
a
p
p
li
ca
ti
o
n
1
9
2 SELF-DESIGN AT HEALTHWAYS CORPORATION
T
he senior leaders at Healthways (HMC)
clearly sensed a need to look at the organi-
zation’s design in the context of the
expected rapid growth of its health plan
business. HMC had identified an important
and growing niche (proactive disease manage-
ment) in the growing health care industry. They
had crafted an impressive strategy but recog-
nized that the current structure was insufficient
to the task.
A university-based OD practitioner initially
recommended a task force and a series of work-
shops to choose an appropriate organization
design for the company. The task force and
workshop idea was guided by a self-design phi-
losophy. The organization knew its structure
was inadequate and that it needed a new way
of operating, but it did not have a broad range of
skills or experience in operating a large organiza-
tion. This led the OD practitioner to believe that
the self-design model would be the best
approach. As the organization considered what
structure to implement, it also needed to learn
and build the capacity to change itself.
Three organization design and develop-
ment (ODD) task forces were guided by the
self-design strategy. The first ODD task force
was dedicated to laying the foundation; their
output was the recommendation to pursue a
process-based structure. The second ODD
task force was responsible for designing; they
were charged with putting “meat on the
bones” of the approved structure. The third
ODD task force began implementing the new
design as well as developing more sophisti-
cated long-term implementation templates.
“Laying the foundation” activities domi-
nated the first ODD task force. Members of
the task force, representing most of the organi-
zation’s key functional areas, read extensively
on organization design, interviewed other orga-
nizations who had adopted different structures,
and studied alternative change processes. As a
result of the knowledge acquired through this
process, the task force became aware that the
organization lacked a clear vision and “big hairy
audacious goal” (BHAG) that most change
management frameworks listed as a key suc-
cess factor. This insight led the task force to
instigate a vision and strategy effort to clarify
the organization’s purpose, to forecast reven-
ues, and to understand the organization’s stra-
tegic intent. Within the context of a clearer
strategy, the task force was able to examine
the pros and cons of alternative structures and
to ground their recommendation in business
terms. The first ODD task force also engaged
in diagnostic activities. This process allowed the
group to better understand the current organiza-
tion’s strengths and weaknesses, to test the
initial draft of the BHAG, to alert the organization
to the task force’s activities, and to ensure that
the new organization aligned with the organiza-
tion’s culture. Finally, the task force spent a con-
siderable amount of time discussing and
debating the values that would guide the new
organization. A culture initiative was proceeding
concomitantly with the ODD task force and the
outputs of their work were an important input to
these discussions.
The first ODD task force used the knowl-
edge and information generated in the laying-
the-foundation phase to design three alternative
structures that they believed would meet the
needs of the future organization. Each of the
alternative structures was formalized with
high-level charts, pros and cons, and a business
case rationale. The group discussed the struc-
tures and debated their relative strengths and
weaknesses in the context of the diagnostic
information, values, and strategy of the organi-
zation. The design phase concluded with a rec-
ommendation to senior management to adopt
the process-based structure. The recommenda-
tion of the first ODD task force was debated
and approved by members of HMC’s senior
management team, several of whom had
been on the task force. The senior team recom-
mended that another task force be created to
expand on the recommended structure.
Design phase activities dominated the
second ODD task force. In addition to a few
original task force members, the second task
force consisted of organization members
CHAPTER 19 CONTINUOUS CHANGE 583
19-3a Conceptual Framework
Like many new interventions in OD, there is some ambiguity about the concepts under-
lying OL.23 For example, practitioners often use the term “organization learning” synon-
ymously with “knowledge management” to describe the broad set of activities through
which organizations learn and organize knowledge. Other times, they are used separately
to emphasize different aspects of learning and managing knowledge. This confusion
representing a broader range of functions and
levels in the organization. This ensured that knowl-
edge and understanding of the process-based
structure generated in the first task force would
be passed along to a larger set of managers in
the organization. More importantly, the second
task force was expected to model the type of
cross-functional team that would be the center-
piece of the new structure. As a result, the
laying-the-foundation phase of the second task
force included acquiring knowledge about cross-
functional and self-managed teams and continuous
improvement processes. The team reviewed the
rationale for the process-based structure and dis-
cussed the values guiding the structural choice.
However, the primary work of the second ODD
task force was to add detail to each of the core
processes, conceptualize and define the corporate
office organization, create design principles to aid
managers in understanding why functions and pro-
cesses were assigned in certain ways, create
financial statements reflecting expected operating
expenses in the new design, and create additional
timelines and implementation templates to guide
execution of the new structure. The second task
force ended with a presentation of roles, reporting
relationships, metrics, and control and reward
mechanisms to the senior management team.
The organization applied what they learned
from the first two task forces as they debated
how to implement the structure. That is, both
groups had developed important insights about the
operation of a process-based organization and
recommended that the next group to manage the
change process had to be the senior management
team itself. As a result, the COO appointed the
senior management team to be the third ODD
task force. The primary focus of this group would
be implementation, the third phase of the self-
design strategy. Despite several senior managers’
participation on the first two task forces, the entire
senior management team was not intimately famil-
iar with the logic and operation of the process-based
organization, nor had this group operated as a cross-
functional team. By having the COO’s direct reports
operate as a cross-functional team, ownership for
the new structure would be placed squarely on
the shoulders of those who would guide its imple-
mentation and an important symbol of the new
organization structure would be established. Early
in the life of the third task force, and based on its
recommendation, the COO and CEO renamed and
replaced the old senior management team with the
executive leadership group structure that would be
responsible for operating the new organization. In
addition, several key process owners were named
to begin the implementation. The third ODD task
force also developed more detailed implementation
guidelines, including a variety of measures to moni-
tor the success of the structure’s implementation
and methods to keep the organization’s focus on
meeting customer needs during the transition.
The logic of the self-design intervention drove
the development and implementation of the
process-based structure at HMC. It produced
important insights and changes in the way man-
agers at the organization viewed its strategy, cul-
ture, and operations. Most importantly, the
process itself built capacity and knowledge into
the system. A variety of managers in different
organizational functions and levels gained a deeper
understanding of the structure’s rationale and valu-
able experience working on cross-functional
teams. This knowledge and experience served
the organization well as it implemented the
process-based structure.
584 PART 6 STRATEGIC CHANGE INTERVENTIONS
derives in part from the different disciplines and applications traditionally associated
with OL and knowledge management.24
OL interventions emphasize the organizational structures and social processes that
enable organization members and teams to learn and to share knowledge. They draw
heavily on the social sciences for conceptual grounding and on OD interventions, such
as team building, structural design, and employee involvement, for practical guidance. In
organizations, OL change processes are typically associated with the human resources
function and may be assigned to a special leadership role, such as chief learning officer.
Knowledge management, on the other hand, focuses on the tools and techniques
that enable organizations to collect, organize, and translate information into useful
knowledge. They are rooted conceptually in the information and computer sciences
and, in practice, emphasize electronic forms of knowledge storage and transmission,
such as intranets, data warehousing, and knowledge repositories. As a result, knowledge
management applications often are located in the information systems function, may be
under the direction of a chief information or technology officer, and are rightly seen as a
part of the management processes component of organization design. Nevertheless,
knowledge management is an important part of OL.
There is also confusion about the concept of organization learning itself, about
whether it is an individual- or organization-level process. Some researchers and practi-
tioners describe OL as individual learning that occurs within an organization context;
thus, it is the aggregate of individual learning processes occurring within an organiza-
tion.25 Others characterize it in terms of organization processes and structures; they
emphasize how learning is embedded in structures, routines, policies, and organization
cultures.26 Snyder has proposed an integration of the two perspectives that treats organi-
zation learning as a relative concept.27 Individuals do learn in organizations but that
learning may or may not contribute to OL. Learning is organizational to the extent that
• It is done to achieve organization purposes.
• It is shared or distributed among members of the organization.
• Learning outcomes are embedded in the organization’s systems, structures, and
culture.
To the extent that these criteria are met, organization learning is distinct from indi-
vidual learning. It is possible for individual members to learn while the organization does
not. For example, a member may learn to serve the customer better without ever sharing
such learning with other members. Conversely, it is possible for the organization to learn
without individual members learning. Improvements in equipment design or work pro-
cedures, for example, reflect OL, even if these changes are not understood by individual
members. Moreover, because OL serves the organization’s purposes and is embedded in
its structures, it stays with the organization, even if members leave.
A key premise underlying much of the literature on OL is that such interventions
will lead to higher organization performance, and there is some evidence to support
that view.28 However, the mechanisms through which OL and knowledge management
translate into performance improvements are rarely identified or explained. Successfully
applying OD interventions in organizations requires a better understanding of those
mechanisms.
Based on existing research and practice, Figure 19.3 provides an integrative frame-
work for understanding OL and knowledge management interventions,29 summarizing
the elements of these change processes and showing how they combine to affect organi-
zation performance. This framework suggests that specific organization characteristics,
such as structure and human resources systems, influence how well organization learning
CHAPTER 19 CONTINUOUS CHANGE 585
processes are carried out. These learning processes affect the amount and kind of knowl-
edge that an organization possesses; that knowledge, in turn, directly influences perfor-
mance outcomes, such as product quality and customer service. As depicted in
Figure 19.3, the linkage between organization knowledge and performance depends on
the organization’s competitive strategy. Organization knowledge will lead to high perfor-
mance to the extent that it is both relevant and applied effectively to the strategy. For
example, customer-driven organizations require timely and relevant information about
customer needs. Their success relies heavily on members having that knowledge and
applying it effectively in their work with customers.
Figure 19.3 also shows how OL and knowledge management are interrelated. OL
interventions address how organizations can be designed to promote effective learning
processes, and how those learning processes themselves can be improved. Knowledge
management practices operate on the outcomes of learning processes; on how strategi-
cally relevant knowledge can be effectively organized and used throughout the organiza-
tion. Each of the key elements of OL—organization characteristics and organization
learning processes—are described below along with the interventions typically associated
with them.
19-3b Organization Learning Interventions
As shown in Figure 19.3, OL interventions consist of change programs designed to
alter organization design features and OL processes. Changes in organization design are
intended to create a learning organization that promotes effective OL processes. In turn,
these processes can affect the organization’s knowledge management and performance.
Learning Organizations The designs of most traditional organizations are ineffective
at learning and may even intensify errors. Referred to as Model I learning, it includes
structures and management processes as well as values and norms that emphasize uni-
lateral control of environments and tasks, and protection of oneself and others from
FIGURE 19.3
How Organization Learning Affects Performance
SOURCE: Reprinted with permission of Sage Publications Ltd. From W. Snyder and T. Cummings, “Organization Learning Disor-
ders: Conceptual Model and Intervention Hypotheses,” Human Relations 51 (1998): 873–95. © The Tavistock Institute, 1998.
586 PART 6 STRATEGIC CHANGE INTERVENTIONS
information that may be hurtful.30 These structures and norms result in a variety of
defensive routines that inhibit learning, such as withholding information and feelings,
competition and rivalry, and little public testing of norms and the assumptions underly-
ing them. Model I is limited to learning that improves the status quo.
A more effective approach to learning, called Model II learning, is based on values
promoting valid information, free and informed choice, internal commitment and own-
ership to courses of action, and continuous improvement of learning processes.31 These
values provide the underlying social support needed for successful learning. They result
in an organization characterized by minimal defensiveness, greater openness to informa-
tion and feedback, personal mastery and collaboration with others, and public testing of
norms. Model II learning enables organizations to significantly change themselves and to
improve the learning process itself. It encourages members to acquire, process, and share
information, to nurture innovation and provide the freedom to try new things, and to
risk failure and learn from mistakes.
OL practitioners have linked the characteristics of Model II learning to the features
of organization design. The “learning organization” is “skilled at creating, acquiring,
interpreting, transferring, and retaining knowledge, and at purposefully modifying its
behavior to reflect new knowledge and insights.”32 Much of the literature on the learning
organization is prescriptive and proposes how organizations should be designed and
managed to promote effective learning. Although relatively little systematic research sup-
ports these premises, there is growing consensus among researchers and practitioners
about specific organizational features that characterize the learning organization.33
These qualities are mutually reinforcing and fall into the four categories of organization
design:
• Structure. Organization structures emphasize teamwork, fewer layers, strong lateral
relations, and networking across organizational boundaries both internal and exter-
nal to the firm.
• Work design. Learning organizations tend to favor enriched jobs and self-managed
teams. These work designs support the sharing of information and the continuous
development of new skills, knowledge, and competencies.
• Human resources practices. Recruitment practices in learning organizations favor
people with high needs for achievement, expectations for change, and relative com-
fort with ambiguity. Performance appraisal, rewards, and training are designed to
account for long-term performance and knowledge development; they reinforce the
acquisition and sharing of new skills and knowledge. Finally, like most large-scale
change interventions, the leaders of learning organizations must actively model the
openness, risk taking, and reflection necessary for learning. They must communicate
a compelling vision of the learning organization and provide the empathy, support,
and personal advocacy needed to lead others in that direction.
• Management processes. Organization learning involves gathering and processing
information, and consequently, the information systems of learning organizations
provide an infrastructure for OL. These systems facilitate rapid acquisition, proces-
sing, and sharing of rich, complex information and enable people to manage knowl-
edge for competitive advantage. Together, these organization design features
promote information sharing, involvement in decision making, systems thinking,
and empowerment.
Learning organizations generally are designed and implemented using organization
design interventions like those described in Chapter 18. OD practitioners help members
diagnose how well their organization’s current design promotes learning. Then, necessary
CHAPTER 19 CONTINUOUS CHANGE 587
changes are made to bring the organization’s design components more in line with those
just described.
Organization Learning Processes Figure 19.3 suggests that OL processes consist of
four interrelated activities: discovery, invention, production, and generalization.34 Learn-
ing starts with discovery when errors or gaps between desired and actual conditions are
detected. For example, sales managers may discover that revenues are falling below pro-
jected levels and set out to solve the problem. Invention is aimed at devising solutions to
close the gap between desired and current conditions; it includes diagnosing the causes
of the gap and creating appropriate solutions to reduce it. The sales managers may learn
that poor advertising is contributing to the revenue problem and may devise a new cam-
paign to improve sales. Production processes involve implementing solutions, and gener-
alization includes drawing conclusions about the effects of the solutions and extending
that knowledge to other relevant situations. For instance, if the new advertising program
is implemented and successful, the managers might use variations of it with other prod-
uct lines. Thus, these four learning processes enable members to generate the knowledge
necessary to change and improve the organization.
Organizations can apply the learning processes described above to three types of
learning.35 First, single-loop learning or adaptive learning is focused on improving the
status quo. Consistent with Model I learning, it is the most prevalent learning process
in organizations and enables members to reduce errors or gaps between desired and
existing conditions. It can produce incremental change in how organizations function.
The sales managers described above engaged in single-loop learning when they looked
for ways to reduce the difference between current and desired levels of sales.
Second, double-loop learning or generative learning is aimed at changing the status
quo. More in line with Model II learning, it operates at a more abstract level than
single-loop learning because members learn how to change the existing assumptions
and conditions within which single-loop learning operates. This level of learning can
lead to transformational change, where the status quo itself is radically altered. For
example, the sales managers may learn that sales projections are based on faulty assump-
tions and models about future market conditions. This knowledge may result in an
entirely new conception of future markets, with corresponding changes in sales projec-
tions and product development plans. It may lead the managers to drop some products
that had previously appeared promising, develop new ones that were not considered
before, and alter advertising and promotional campaigns to fit the new conditions.
The third type of learning is called deutero-learning, which involves learning how to
learn. It is the highest form of Model II learning; it is directed at the learning process
itself and seeks to improve how organizations perform single- and double-loop learning.
For example, the sales managers might periodically examine how well they perform the
processes of discovery, invention, production, and generalization. This could lead to
improvements and efficiencies in how learning is conducted throughout the organiza-
tion. Most OL interventions are intended to initiate this type of learning.
OD practitioners have developed interventions specifically for organization learning
processes. In describing these change strategies, we draw heavily on the work of Argyris
and Schön and of Senge and his colleagues because it is the most developed and articu-
lated work in OL practice.36
From this perspective, organization learning is not concerned with the organization
as a static entity but as an active process of sense making and organizing. Based on the
interpretive model of change (Chapter 2), members socially construct the organization as
they continually act and interact with each other and learn from those actions how to
588 PART 6 STRATEGIC CHANGE INTERVENTIONS
organize themselves for productive achievement. This active learning process enables
members to develop, test, and modify mental models or maps of organizational reality.
Called theories in use, these cognitive maps inform member behavior and organizing.37
They guide how members make decisions, perform work, and organize themselves.
Unfortunately, members’ theories in use can be faulty, resulting in ineffective behaviors
and organizing efforts. They can be too narrow and fail to account for important aspects
of the environment; they can include erroneous assumptions that lead to unexpected
negative consequences. Effective OL can help members resolve these problems. It can
provide them with the skills and tools to detect and correct errors in their mental
maps, and thus promote more effective organizing efforts.
OL interventions help organization members change from Model I to Model II learn-
ing and become more capable of single-loop learning, double-loop learning, and deutero-
learning. Like all learning, this change approach includes discovery, invention, production,
and generalization processes. Although the application phases are described linearly below,
in practice they form a recurrent cycle of four overlapping learning activities:
1. Discover theories in use and their consequences. This first step involves uncover-
ing members’ mental models or theories in use and the consequences that follow
from behaving and organizing according to them. Depending on the size of the cli-
ent system, this may involve the executive team, a microcosm group that includes
representatives from the system, or all members through a large-group intervention
(Chapter 10).
OL practitioners have developed a variety of techniques to help members iden-
tify their theories in use. Similar to the deep assumptions of organization culture,
these theories generally are taken for granted and rarely examined; members need
to generate and analyze data to infer the theories’ underlying assumptions. One
approach is called dialogue, a variant of the human process interventions described
in Chapter 10.38 It involves members in exchanges about how they currently address
problems, make decisions, and interact with each other and relevant stakeholders,
such as suppliers, customers, and competitors. By asking members to suspend
assumptions about what is “right,” OD practitioners encourage participants to
inquire into their own and others’ ways of thinking, to advocate for certain beliefs,
and to reflect on the assumptions that lead to those beliefs. Dialogue can result in a
clearer understanding of existing theories in use and their behavioral consequences
and enable members to uncover faulty assumptions that lead to ineffective behaviors
and organizing efforts.
A second method of identifying theories in use involves the application of sys-
tems thinking.39 It is a set of concepts and tools for detecting subtle but powerful
structures that underlie complex situations. Learning to see such structures can
help members understand previously unknown forces operating in the organization
and their behavioral consequences.40 This information is essential for developing
effective theories for organizing, particularly in today’s complex, changing world.
OL practitioners typically interview members about recurrent problems in the orga-
nization, why they are occurring, actions that are taken to resolve them, and out-
comes of those behaviors. Based on this information, a map is constructed showing
interrelationships among the values underlying theories in use, the action strategies
that follow from them, and the results of those actions. Such information is fed back
to members so that they can test the validity of the map, assess the effectiveness of
their theories in use, and identify factors that contribute to functional and dysfunc-
tional learning in the organization.41 Systems thinking helps members make radical
CHAPTER 19 CONTINUOUS CHANGE 589
shifts in their view of the world: from seeing parts to seeing wholes; from seeing lin-
ear cause–effect chains to seeing interrelationships; and from seeing static entities to
seeing processes of change.
A third technique for identifying theories in use and revealing assumptions is
called the left-hand, right-hand column.42 It starts with a member selecting a specific
situation where he or she was interacting with others in a way that produced inef-
fective results. The situation is described in the form of a screenplay or movie script
and is written on the right side of a page. For instance, the story might begin with a
statement such as, “I told Joyce that I was offering her a special assignment.” Then
the rest of the conversation would be written down: “Joyce said to me that she did
not want to take the assignment because her workload was too heavy,” and “I
responded that it was a real chance to get some extra and useful skills,” and so on.
After the example is finished, the left-hand side of the page is used to write down
what he or she was thinking but not saying at each phase of the exchange. For
example, “When I told Joyce about the assignment, what I was really thinking is
that she is always taking long lunch breaks and seems overly concerned with busy
work. I thought she should help out the group by pitching in more.” “When Joyce
said she didn’t want to take the assignment because her workload is too heavy, that
just proved my suspicion.” This simple yet powerful exercise reveals hidden assump-
tions that guide behavior and can make members aware of how erroneous or
untested assumptions can undermine work relationships.
A fourth method that helps members discover their mental models and theories
in use is called the ladder of inference, as shown in Figure 19.4.43 It is a tool that aids
in understanding how concrete experiences are connected to the assumptions and
beliefs that guide behavior. The ladder shows vividly how members’ theories in use
can be faulty and lead to ineffective actions. People may draw invalid conclusions
from limited experience; their cultural and personal biases may distort meaning
attributed to selected data. The ladder of inference can help members understand
why their theories in use may be invalid and why their behaviors and organizing
efforts are ineffective. Members can start with descriptions of actions that are not
producing intended results and then work back down the ladder to discover the rea-
sons underlying those ineffective behaviors. For example, a service technician might
withhold from management valuable yet negative customer feedback about product
quality, resulting in eventual loss of business. Backing down the ladder, the techni-
cian could discover an untested belief that upper management does not react favor-
ably to negative information and may even “shoot the messenger.” This belief may
have resulted from assumptions and conclusions that the technician drew from
observing periodic layoffs and from hearing widespread rumors that the company
is out to get troublemakers and people who speak up too much. The ladder of infer-
ence can help members understand the underlying reasons for their behaviors and
help them confront the possibility that erroneous assumptions are contributing to
ineffective actions.
2. Invent and produce more effective theories in use. Based on what is discovered in
the first step of the change process, members invent and produce theories in use
that lead to more effective actions and that are more closely aligned with Model II
learning. Many of the interventions described in this book can help to support more
effective learning capabilities. Human resource management interventions—
performance appraisal, reward systems, and career planning and development—can
reinforce members’ motivation to gain new skills and knowledge. Technostructural
interventions, such as process-based and network structures, self-managing work
590 PART 6 STRATEGIC CHANGE INTERVENTIONS
teams, and reengineering, can provide the kinds of lateral linkages and teamwork
needed to process, develop, and share diverse information and knowledge. Human
process changes, including team building, search conferences, and intergroup rela-
tions interventions, can help members develop the kinds of healthy interpersonal
relationships that underlie effective OL. Strategic interventions, such as dynamic
strategy making and alliances, can help organizations gain knowledge about their
environments and develop values and norms that promote OL.
Making changes in organization learning processes involves double-loop learn-
ing as members try to create and enact new theories in use. In essence, members
learn by doing; they learn from their invention and production actions how to
invent and produce more effective theories in use. As might be expected, learning
how to change theories in use can be extremely difficult. There is a strong tendency
for members to revert to habitual behaviors and modes of learning. They may have
trouble breaking out of existing mindsets and seeing new realities and possibilities.
OD practitioners can help members apply the values underlying Model II
learning—valid information, free choice, and internal commitment—to question
their experience of trying to behave more consistently with Model II.44 They can
encourage members to confront and talk openly about how habitual actions and
learning methods prevent them from creating and enacting more effective theories.
FIGURE 19.4
The Ladder of Inference
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Once these barriers to change are discussed openly, members typically discover that
they are changeable. This shared insight often leads to the invention of more effec-
tive theories for behaving, organizing, and learning. Subsequent experimentation
with trying to enact those theories in the workplace is likely to produce more effec-
tive change because the errors that invariably occur when trying new things now can
be discussed and hence corrected.
3. Attend to the knowledge management practices that support learning. Because
organization knowledge plays a crucial role in linking organization learning pro-
cesses to organization performance, an effective OL application process must
attend to the systems for generating, organizing, and distributing knowledge.
Knowledge includes what members know about organizational processes, pro-
ducts, customers, and competitive environments. Such knowledge may be explicit
and exist in codified forms, such as documents, manuals, and databases, or it may
be tacit and reside mainly in members’ skills, memories, and intuitions.45 In any
form, these knowledge assets can represent important contributions to perfor-
mance.46 Because tacit knowledge is difficult if not impossible to codify, OD prac-
titioners direct attention to how members can share such knowledge among
themselves and between organizational units.
Generating knowledge starts from an understanding of the organization’s strat-
egy and then identifies the kinds of knowledge that will create the most value for the
organization and creates mechanisms for increasing that stock of knowledge. For
example, corporate strategies that emphasize customer service, such as those found
at Booz & Co. and Nordstrom, place a premium on knowledge about customer
needs, preferences, and behavior. Strategies favoring product development, like
those at Apple and Bristol-Myers-Squibb, benefit from knowledge about technology
and research and development.
Once the knowledge required for organization strategy is identified, mechan-
isms for acquiring or creating that knowledge need to be created. Externally, organi-
zations can acquire other companies that possess the needed knowledge, or they can
rent it from knowledge sources, such as consultants and university researchers.47
Internally, organizations can facilitate communities of practice—informal networks
among employees performing similar work to share expertise and to solve problems
together.48 They can also create more formal groups for knowledge generation, such
as R&D departments, corporate universities, and centers of excellence. Organizations
can bring together people with different skills, ideas, and values to generate new pro-
ducts or services.
Organizing knowledge involves putting it into a form that organizational mem-
bers can use readily. Two broad strategies for organizing knowledge include codifi-
cation and personalization.49 Codification relies on information technology and the
development of databases where knowledge can be accessed and used by appropriate
members. This strategy works best for explicit forms of knowledge that can be
extracted from people, reports, and other data sources, and then organized into
meaningful categories called “knowledge objects” that can be reused for various pur-
poses. Personalization strategies for organizing knowledge focus on the people who
develop knowledge and on how they can share it person-to-person. Tacit knowledge
is typically accessed through personal conversations, direct contact, and ongoing
dialogue with the people who possess it. For example, most professional service
firms foster networking among their employees by transferring people across offices,
encouraging the prompt return of phone calls from colleagues, and using cross-
functional project teams.
592 PART 6 STRATEGIC CHANGE INTERVENTIONS
Distributing knowledge involves developing mechanisms that enable members to
gain access to needed knowledge. It overlaps with the previous phase of knowledge
management and involves making knowledge easy for people to find and encourag-
ing its use and reuse. For example, organizations can develop databases for storing
articles, reports, customer data, best practices, or other knowledge as well as locator
systems for helping members find what they want. Databases can include such
diverse information as articles, analytical reports, customer data, and best practices.
Organizations can also create knowledge services (e.g., help desks or specific organi-
zation units) and networks (e.g., intranet portals, informal “brown bag” presenta-
tions) to promote knowledge transfer. Finally, organizations can create specific
roles to facilitate the transfer of organization knowledge and encourage knowledge
distribution. For example, Britain’s Collaboration for Leadership in Applied Health
Research and Care for Nottinghamshire, Derbyshire, and Lincolnshire (CLAHRC-
NDL) uses “Diffusion Fellows,” senior managers, and clinicians assigned from the
National Health Service to provide best-practice, evidence-based clinical practice to
physicians and nurses in the system.50
4. Continuously monitor and improve the learning process. This final stage involves
deutero-learning—learning how to learn. It includes assessing OL strategies and the
organizational structures and processes that contribute to them. Members assess
periodically how well these elements facilitate single- and double-loop learning.
They generalize positive findings to new or changing situations and make appropri-
ate modifications to improve OL. Because these activities reflect the highest and
most difficult level of OL, they depend heavily on members’ willingness to question
openly their theories in use about OL and to test publicly the effectiveness of both
their learning strategies and those of the wider organization.
Application 19.3 describes a long-term, comprehensive organization learning inter-
vention.51 The initial intervention was primarily a dialogue process among senior man-
agers but was extended to the larger organizational community. The application also
demonstrates how systemic many OL and strategic change interventions can be.
19-4 Built-to-Change Organizations
One of the newest continuous change interventions involves intentionally designing an
entire organization for change and not stability. Lawler and Worley’s built-to-change
(B2C) approach to designing organizations is based on the simple fact that most organi-
zations are designed for stability and dependable operations.52 Traditional organization
design components and managerial practices aim to reinforce predictable behaviors for
sustaining a particular competitive advantage. Lawler and Worley argue that many
change efforts are unsuccessful, not because of human resistance or lack of visionary
leadership, but because most organization design features assume that stability leads to
effectiveness. Such built-in assumptions can be a recipe for failure in rapidly changing
environments, where the ability to change constantly is the best sustainable source of
competitive advantage. The B2C intervention helps organizations design themselves for
change.
19-4a Design Guidelines
As shown in Table 19.1, the B2C intervention includes the following design guidelines
and challenges the assumption of stability in the specification of design components.
CHAPTER 19 CONTINUOUS CHANGE 593
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DIALOGUE AND ORGANIZATION LEARNING AT DMT
D
MT is a small but global business that
designs, builds, and installs sophisticated
food processing systems. It has a global
market share of over 50% and employs
about 800 people. Roughly two-thirds of the
employees are in the primary office and
manufacturing plant in the Netherlands while
the other third, consisting of sales and engi-
neering, works in the field to market and install
the systems.
In the late 1980s, DMT adopted a socio-
technical systems philosophy and introduced
self-managing teams and other empowering
structures into most of the operations function.
After ten years, and despite continued success
in both market share and profitability, the
socio-tech initiatives had lost focus.
The heir apparent to the founder of DMT
had been reading and thinking about the con-
cepts of complexity and learning. He asked an
OD consultant familiar with these ideas for help
in translating them into action. The future CEO
and consultant handpicked a set of managers in
the company to be on a change leadership team
and the initial intervention focused on the trans-
formation of DMT’s leaders through dialogue.
Facilitated by the OD consultant, the
change leadership team spent significant time
over an 18-month period in heavy dialogue ses-
sions. Early sessions were spent learning
about the dialogue process while later ses-
sions explored assumptions about the market,
DMT’s current and future strategies, and most
importantly, the predominant styles of commu-
nicating, leading, and operating.
The result was a close-knit team that had
explored and confronted their theories of action.
However, none of the rest of the organization
knew what was happening. The OD consultant
described a variety of emergent “water cooler”
conversations among organization members
with respect to: “What’s happened to them?”
and “Why are they acting so strange?”
The change leadership team and the OD
consultant worked together to craft a series of
organization learning interventions that would
involve a broader and broader segment of the
population. These interventions, like the overall
change strategy, sound more complete and
thought out than they were. In general, the orga-
nization tried some things out and if they worked,
they were refined. If they didn’t work, they
moved onto another idea. Eventually, however,
nearly two-thirds of the organization members
participated in the following learning activities:
Complexity Concepts Workshop. This
intensive one-day workshop represented
an introduction to the concepts and organiz-
ing principles associated with complexity,
learning, and dialogue. It offered the partici-
pant an opportunity to look at themselves,
their organization, and their world. The work-
shop compared the assumptions of a “sci-
entific” worldview with the assumptions of
complexity. The session ended with an
introduction to dialogue and a facilitated con-
versation to help participants apply the con-
cepts in their work. Overall, the session was
designed to help members become aware
of an alternative way of organizing that held
the possibility of changing the entire organi-
zation by an order of magnitude.
Dialogue Training. After completing the
Complexity workshop, groups of 10 to
15
people were introduced to dialogue as a
communication process that supported
the principles of complexity and the prac-
tice of organization learning. Through
mostly applied experiences in dialogue, par-
ticipants were shown how this form of
communication differed from hierarchically
constrained and competitive discussion. In
contrast, dialogue allowed meaning and
influence to flow freely and emerge. The
workshop also tried to integrate concepts
from the complexity workshop and to pre-
pare participants for “dolphin training.”
“Dolphin” Training. A leadership meta-
phor based on the “strategy of the dolphin”
(e.g., do what works and forget the rest)
was introduced as a set of empowerment
594 PART 6 STRATEGIC CHANGE INTERVENTIONS
guidelines for action and decision making. The
goal of this workshop was to enable every
member of DMT to step forward and assume
responsibility for the greater whole. That is,
when the situation demands it, DMTers are to
be ready.
The Visioning Conference. The final interven-
tion was the visioning conference and involved
as many as 50 people at a time. Building on the
principles of a learning organization and personal
mastery, a one-day dialogue-based workshop
suggested that a company’s true “vision” incor-
porates the personal visions of each member.
This approach was contrasted with the standard
visioning process where senior leaders formu-
late and then impose a vision on the system.
The workshop asked individuals to elaborate
on their personal visions through statements,
actions, or drawings and to specify what they
needed from the organization and their fellow
participants. As a result of the visioning confer-
ences, groups of DMT members representing a
cross-section of the company spent entire days
engaged in deep dialogue around the question:
“How must DMT be in order to realize the col-
lective vision of all its members?”
In addition to these formal workshops, DMT’s
transformation also involved a great many “hallway
dialogues” about the meaning and/or applicability of
a complexity principle and “retreats” to think about
the implications of the emerging culture. Moreover,
the change leadership team that had catalyzed the
entire process continued to meet and dialogue on
the transformation. The researchers found the DMT
process interesting because its essential activities
were more likely to emerge from the interaction of
its members than to be planned or organized for
them. Although the change leadership team had a
vested interest in this process, the transformation
of DMT was never “owned” by them exclusively
but by every member of the firm—the essence of
emergent leadership.
As the transformation progressed, the change
leadership team recognized that the internal
changes in communicating, thinking, and leading
would need to be reflected in and embedded in
the structure of the system. An evaluation of
DMT’s design suggested that its long history of
success had resulted in structures, systems, and
processes that were increasingly fixed and resistant
to change. Managers who had been receptive to, if
not enthusiastic about, the effort to bring about
change in the culture suddenly balked at the notion
of design changes. The change leadership team,
however, remained resolute in seeing the change
through.
More than two years into the change process,
the change leadership team issued a call for people
to participate in a “blank slate” design process; a
whole-system architecture capable of realizing the
visions of all its members and for thriving, not merely
surviving, in the company’s increasingly complex and
turbulent marketplace. Interesting, the change leader-
ship team excluded managers and supervisors from
the call. Even so, more than 50 individuals stepped
forward to self-organize into an active network
intent on producing the “New DMT.”
Only three constraints were placed on the
newly formed design team: (1) the design had to
follow the principles of complexity, learning, and
dialogue, (2) each design team member had to
act as a representative of every one of their collea-
gues, and (3) the resulting design had to enable the
personal visions of every member of the organiza-
tion. The design team was supported with time,
financial resources, the OD consultant, and any
other expertise they needed.
The OD consultant kicked off the “New DMT”
process with a workshop on organization design
and whole system transformation. Following the
training, the group, recognizing the scope and com-
plexity of their task, self-organized into a configura-
tion they dubbed the Design Network (DN). The
DN revolved around a “hub” of nine people who
were responsible for creating an architectural
model for the New DMT based on “intelligence”
relayed to it by the remaining members. These
would comprise the “network” whose job it was
to reach out into the system and involve more and
more people as time passed. They were to convey
information to and from the hub.
After nearly a year of effort, the DN announced
its D(esign)-Day and invited the entire company, all
600-plus people, to join them for the “unveiling” of
the architecture for the New DMT. Following the
presentation, the team organized a process to
allow people to translate the multiple dimensions
CHAPTER 19 CONTINUOUS CHANGE 595
From Strategy to Strategizing The stability assumption first shows up in the way
organizations formulate strategy. Most strategy processes rely on relatively static and
short-term views of the environment. Most environmental scanning tools, such as
SWOT and industry attractiveness models, implicitly assume that the forces operating
today will operate tomorrow and reinforce the pursuit of a single sustainable competitive
advantage. Although most managers and organizations describe the environment as
changing, they act and decide as if it is not. As a result, strategies are formulated, budgets
and goals are set, and any successful competitive advantage is expected to last.
B2C organizations move from static to dynamic views of strategy, using interventions
like dynamic strategy making described previously in this chapter. Instead of believing that
any competitive advantage will last, they recognize that any particular advantage is fleeting.
The development and reliance on strong and robust “futuring” processes supports this
dynamic view of strategy.53 Managers in B2C organizations spend a lot of time thinking
about alternative future environments and scenarios. Using these scenarios to sharpen
their strategic thinking, they explore options, think about the capabilities that might be
needed, and formulate the next likely competitive advantage they will have to pursue.
Importantly, senior managers spend less time worrying about the execution of the current
strategy; they see their role as worrying about the future strategy.
of its design into reality. DMT’s transformation is
well on its way.
The organization learning process and each of
the interventions represented a significant departure
from the way DMT had operated in the past. The
consistency and persistence of the interventions
over a two-year period of time and the inclusiveness
with which the interventions involved people in the
organization led to important behavioral changes. In
particular, members began to see the organization in
more systemic and complex terms rather than hier-
archical and linear; dialogue replaced discussion as
the primary communication process in the organiza-
tion; and members engaged in emergent, shared
leadership rather than viewing leadership as some-
thing only senior managers did.
TABLE 19.1
Design Guidelines for B2C Organizations
From Traditional Principles… To Dynamic Principles
Strategy
Short-term, static environmental scans
and industry analyses
Pursuit of a sustainable competitive
advantage
Strategizing
Long-term, alternative scenarios and
contingency planning
Pursuit of a series of momentary
advantages
Design
Focus on efficiency over effectiveness
What do we do well?
Alignment as the key to performance
Designing
Focus on effectiveness over efficiency
What do we need to learn?
Change as the key to performance
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596 PART 6 STRATEGIC CHANGE INTERVENTIONS
From Design to Designing Traditional organizations view organization design as a
set of relatively stable features that only get better through continuous improvement.
Rather than thinking about how structure, work, management processes, and HR
systems need to change to increase effectiveness, traditional organizations become enam-
ored with short-term efficiency and reliability initiatives. Such a focus tends to lock the
organization into a way of operating that is very difficult to change.
B2C organizations recognize that change is never over and so focus more on effec-
tiveness than efficiency. B2C organizations do work to improve existing systems and
processes, but using change processes like self-designing organizations, they allocate
significant resources to thinking about how organization design elements need to be
changed. In fact, B2C organizations are wary of too much alignment that can result in
rigidity. Instead, they focus on being able to change as the key to long-term performance.
B2C organizations shift the conversation from “what do we do well?” to “what do we
need to learn?” This orientation and mindset always keeps them open to changing
organization design features as described below.
19-4b Application Stages
Lawler and Worley stress that not all organizations should be built to change, though
most could benefit from applying some B2C principles. This intervention is mainly for
organizations having problems adapting to complex and rapidly changing environments.
They require a change capability for success in the future. For them, and following a
thorough diagnosis,54 the following three initiatives can help the transition to a B2C
organization:
1. Reframe culture as a facilitator of change. This first stage addresses the organiza-
tion’s culture—the established set of core values, norms, and beliefs shared by
organization members. Culture is the most stable part of an organization—it is
deep-seated, taken for granted, and guides decisions and behaviors like an invisible
hand—but it does not need to be a constraint to changing. As described in Chapter
18, organization culture can promote or hinder organization change depending on
whether it supports change or stability.55 In many traditionally designed organiza-
tions, values and norms reinforce stability and predictability, thus making change
difficult. To move toward a change-friendly culture requires surfacing existing values
and norms, assessing their relevance to change, and making appropriate adjust-
ments. This typically involves highly interactive sessions where relevant stakeholders
openly discuss and debate questions about the organization’s culture and how it
can be “reframed” to be more change friendly. Attention is directed at creating or
redefining values and norms that focus behavior on the organization’s environment
and help members see change as necessary and natural. To enhance member
commitment to a new change-friendly culture, these new or reframed values and
norms are placed in the context of important external pressures facing the organiza-
tion and what these mean for its effectiveness. The organization’s existing design is
also assessed in relation to the culture, and plans are made for changing specific
components using the B2C guidelines outlined above.
2. Redefine organization design components for flexibility. Each feature of an
organization’s design can be created under an assumption of stability or flexibility.
The second step in moving to a B2C organization is to design and implement these
components with flexibility in mind.
B2C designs emphasize a flat, lean, and flexible organization structure, such as pro-
cess, matrix, and network designs. These structures can be reconfigured quickly when
CHAPTER 19 CONTINUOUS CHANGE 597
the circumstances demand. The key objective in most B2C structures is establishing
what Lawler and Worley call “maximum surface area.”56 That is, as many roles in the
organization as possible should be defined to include interaction with the external envi-
ronment. Organization members are more likely to support change if they are in direct
contact with customers, regulators, markets, and the community.
B2C human resource practices are geared to selecting, developing, and managing
the right talent for change. Selection practices seek quick learners who want to take
initiative, desire professional growth, and thrive on change. Employment contracts
specify clearly that change is to be expected and support for change is a condition
of employment and a path to success. Rather than specific job descriptions, mem-
bers are encouraged to discover what needs to be done by frequent goal-setting
reviews where tasks are constantly assessed and revised. Training and development
are continuous and aimed at supporting change and gaining value-added skills and
knowledge.
Because rewards play a key role in motivating and reinforcing change in B2C
organizations, individual or team bonuses are tied directly to change goals, learning
new things, and performing new tasks well.57 This establishes a clear line of sight
between rewards and change activities. Bonuses can include one-time rewards
given at the end of a particular change effort, or rewards targeted to different phases
of the change process. B2C designs also shift the basis of rewards from jobs to peo-
ple. Members are rewarded for what they can do, not for the particular job they per-
form. Jobs and tasks are continually changing, and rewards can motivate people to
learn new skills and knowledge, thus keeping pace with change and enhancing their
long-term value to the organization.
In B2C organizations, management processes are moved throughout the organi-
zation to wherever they are needed. This ensures that information is transparent and
current and provides a clear picture of how the organization is performing relative
to its competitors. It enables organizations to make timely and relevant decisions to
keep pace with changing conditions.
3. Build an orchestration capability. This stage helps the organization leverage the
flexibility built into the organization’s strategy and design. An orchestration capabil-
ity enables the organization to implement changes in strategy and to execute design
changes effectively over and over again.58 It first specifies the events and decisions
necessary to make the strategy happen, including how new competencies will be
developed, if necessary. Then, based on the B2C belief that the ability to change is
the key to competitive advantage, attention is directed at building this change capa-
bility into the organization. This involves three related activities. First, change man-
agement skills are developed widely in the organization by hiring people with those
skills and by training existing managers and employees to acquire those skills. Sec-
ond, an organization effectiveness function is created with competencies in strategic
planning, organization design, and change management. This center of excellence is
usually staffed by professionals from the strategic planning and human resources
functions; they provide advice and facilitation for planning and executing change
in the organization. Third, organization members learn how to apply their change
capability by engaging in organizational changes and reflecting on that experience.
This so-called “learning by doing” is essential for building an orchestration capabil-
ity. It provides members with the hands-on experience and reflective learning neces-
sary to hone their change skills in action.
An important part of the orchestration capability is a redefinition of leadership.
B2C designs stress the importance of shared leadership throughout the organization.
598 PART 6 STRATEGIC CHANGE INTERVENTIONS
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4 CREATING A BUILT-TO-CHANGE ORGANIZATION ATCAPITAL ONE FINANCIAL
C
apital One, a leading financial services firm
and a top issuer of credit cards in the
United States, has built an organization
that does not view change as an unwanted
intruder or as an afterthought to get resistors
to buy into a new initiative. Rather, change
capability is integrated into every aspect of
Capital One’s strategy, structure, and culture.
This enables the firm to execute change
routinely.
Capital One treats strategic planning as a
continuous process of exploring alternative
futures and gaining momentary advantages
in a fast-paced competitive environment.
According to Mike McDermott, former Direc-
tor of Organization Effectiveness, “Strategic
thinking goes pretty deep on two levels. On
one level, the strategic planning department
runs a variety of scenarios that look several
years out.” As described by CEO and
Founder Rich Fairbank, “Eighty percent of
strategy is figuring out where the world is
going, and 20% is figuring out what you are
going to do in response. If you can figure out
where the world is going, what you need to
do usually becomes obvious.” For example,
Capital One might explore the broader forces
affecting interest rates or the impact of
changes in China’s monetary policy. Each
business line, in turn, would consider how
these future trends might affect its particular
business. “On another level,” notes McDermott,
“the executive committee meets regularly to
discuss and debate a set of annual ‘impera-
tives’ or bold challenges. The imperatives
are just that … they are things that must be
done if we are to achieve our long-term
vision.” They are intended to provide Capital
One with a series of temporary competitive
advantages.
This robust strategizing enables Capital
One to “test and learn” how best to compete
in a constantly changing environment. It
combines educated guesses about how
the environment is changing with rigorous
analysis of consumer behaviors to produce
testable propositions about what credit ser-
vices to offer specific consumer groups.
When a consumer group and its associated
service reach a certain threshold of business,
a potential competitive advantage exists. The
service is then broadened to a larger
customer base. Because consumer profiles,
competitor behaviors, and other market
forces are constantly changing, however,
any current advantage is fleeting and new
ones must be identified to grow revenues.
Moreover, to monetize a competitive advan-
tage even in the short run, Capital One must
often modify its human capital, resources,
systems, and structures. Thus, it constantly
renews itself as it moves from one competi-
tive advantage to the next.
To adapt quickly to gain new competitive
advantages, Capital One has developed a
highly agile organization design. It begins
with hiring people who have a passion for
excellence, collaborate well with others, and
thrive in a changing environment. Once hired,
associates are given challenging work assign-
ments and opportunities to develop new
skills as business needs change. Compli-
menting the selection process is a decentra-
lized and fluid organization structure, with few
layers of management and decision making
pushed downward in the organization.
Associates are allowed to take on a variety
of tasks without having to worry about job
descriptions and pay grades. An adaptable
performance management system com-
pletes Capital One’s flexible design. It
focuses on both performance and develop-
ment. Rewards are tied directly to current
results as well as to developing competen-
cies the organization believes are important
for its future.
The final feature of Capital One’s built-
to-change organization involves change capability.
CHAPTER 19 CONTINUOUS CHANGE 599
In the past, the firm’s aggressive growth often left
associates feeling overwhelmed by the rapidly
changing product/service offerings. Adding to the
stress were frequent updates in associates’ knowl-
edge base, reorganizations that tested their ability
to remain flexible and to take on new assignments,
and modifications in work processes and methods
to maintain customer satisfaction. To make change
manageable and even routine, Capital One charged
McDermott with developing the firm’s change
capability. With the help of a design team com-
posed of HR generalists and line managers, he cre-
ated a unique approach to change management.
Most organizations develop change capability
by deploying HR generalists to facilitate change in
business units or by creating a center of excel-
lence in change management staffed mainly by
OD professionals. Capital One created a more
embedded strategy. It rooted change skills and
responsibilities directly into the roles of line man-
agers. This promised to radically shorten the cycle
time of change because managers would have
the expertise needed to carry out most changes
on their own. But tasking managers with change
management responsibilities raised important
questions about Capital One’s commitment to
change capability as a source of competitive
advantage. Critics argued, “Shouldn’t the focus
of line managers be on getting business results?”
The design team answered affirmatively, of
course, but then added that in fast changing envir-
onments, this was not enough to succeed. Man-
agers needed to be able to combine their
business expertise with knowledge about change
so that strategies to acquire new competitive
advantages could be implemented faster and
their benefits gained sooner.
Capital One’s embedded approach was
based on a standardized change methodology
that everyone shared and learned. Called
ADKAR, it proposed that successful change fol-
lowed a process of (1) creating awareness of
the need for change, (2) having the desire to
change, (3) possessing the knowledge to change,
(4) having the ability to change, and (5) being rein-
forced for change. The change model included a
common language and mindset for thinking and
communicating about organizational change; it
afforded Capital One a highly efficient approach
to change management. For example, service
changes often required cooperation among the
credit card business, IT services, and the regula-
tory compliance and HR departments. Because
all parties were familiar and comfortable with
the same change model, coordination costs and
change cycle times were significantly reduced.
This contrasted to earlier times when Capital
One employed over 17 different change models
and more than 160 different change tools
throughout the firm.
To implement the new change method,
McDermott’s team applied three action levers:
knowledge/skill acquisition, visible demonstra-
tions, and alignment with performance manage-
ment. First, Capital One’s corporate university
offered two courses to build people’s change
knowledge and skill. One course, attended by
both managers and staff, went deep into the
change methodology and provided the opportu-
nity to apply it to existing change projects. This
helped participants learn by doing, while driving
change in the organization. The second course
was a one-day program designed for line man-
agers. It provided an overview of the methodology
and linked it to the organization’s values and lead-
ership competencies. This helped managers see
the connection between change capability and
performance management.
Second, McDermott’s team targeted several
large-scale change projects as visible demonstra-
tions of the change model. This created an internal
“buzz” for the methodology and encouraged
people to learn how to apply it. For example,
McDermott’s team highlighted change initiatives
coming out of a strategic imperative called ACE
(Achieving Corporate Excellence): a large-scale
systems conversion project, an HR reengineering
effort, and a workplace redesign process called
the Future of Work.
Third, McDermott’s team worked closely
with a group revising Capital One’s performance
management system to ensure that it measured
and rewarded change management competen-
cies. Together, the two groups increased the
number of change-related behaviors that were
rated, assessed, and rewarded. This sent a clear
600 PART 6 STRATEGIC CHANGE INTERVENTIONS
Rather than having the organization rely on individuals and centralized sources of
power and control, these designs spread leadership across multiple levels of the
organization. Leadership shifts from an individual trait to an organization capacity.
This speeds decision making and response rates because those lower in the organi-
zation understand how to change and need not wait for top-down direction. It pro-
vides leadership experience and skills to a broad array of members, thus developing
a strong cadre of leadership talent. Shared leadership supports continuous change by
spreading change expertise and commitment across the organization. It increases the
chances that competent leaders will be there to keep the change process moving
forward.
Application 19.4 describes how Capital One Financial created a B2C organization.59
It shows how change capability is built into the firm’s strategy, design features, and
culture.
SUMMARY
In this chapter, we presented increasingly sophisticated
interventions for helping organizations conduct strate-
gic change. These change processes are particularly
applicable for organizations facing turbulent environ-
ments where traditional sources of competitive advan-
tage erode quickly. Building change capabilities directly
into the organization is essential to constantly renew
forms of competitive advantage to keep pace with a
rapidly shifting environment.
Dynamic strategy making involves specifying and
implementing the four elements that comprise the
backbone of a new strategic system, thereby charting
an organization’s direction forward. It begins with
defining a competitive logic, which derives from an
analysis about how fitting the firm’s capabilities can
be used to exploit environmental opportunities. Then
the other three elements—goals, organization, and
action plan—are aligned closely with the competitive
logic so as to support its implementation. They spell
out exactly what is to be achieved, how the organiza-
tion will be structured to accomplish it, and what
steps are needed to make it happen. The combined
effect is to position the firm in the market and tightly
link its objectives, structure, and action to that
strategy.
A self-design change strategy helps a firm gain the
capacity to design and implement its own continuous
change. Self-design involves multiple levels of the firm
and multiple stakeholders and includes an iterative
series of activities: acquiring knowledge, valuing, diag-
nosing, designing, implementing, and assessing.
Organization learning interventions help organiza-
tions develop and use knowledge to change and
improve themselves continually. Organization learning
message about the importance of these beha-
viors for the future.
Capital One’s built-to-change organization is
widely accepted and firmly entrenched in the
firm’s culture. Change capability is treated like a
muscle that gets better with exercise. Not surpris-
ingly, Capital One engages in lots of change and is
getting better and better at it. Its change capability
is a key source of sustained competitive advantage.
As one executive put it, “We can take on more
change because with this new muscle, it doesn’t
seem like we are changing all that much. It feels
like we are changing less because we are capable
of handling more change than our competitors.”
CHAPTER 19 CONTINUOUS CHANGE 601
