check doc
Onlyuse the pdf which I provided for reference!!!!
You answers must related to the textbook lessons. answers are easy to find under each chapter (pdf), just use some of your word and explanations from textbook. Also you must write the page number (where is this topic come from) after your answer.
Please keep the questions and number on the answer and answer the questions one by one separate.
Part one: 1-1.5pages answer
CH. 19 Continuous Change (use pdf page592-624 to answer)
1. Compare and contrast four continuous change organization development (OD) interventions.
2. Describe the elements and processes associated with the dynamic strategy-making intervention.
3. Define the demands of turbulent environments and describe the self-design intervention.
4. Outline the definition and application of organization learning interventions.
5. Explain the logic and process of developing built-to-change organizations.
CH. 20 Transorganizational Change
1. Explain the rationale and logic behind organization collaboration.
2. Describe and apply organization development (OD) interventions that enable mergers and acquisitions.
3. Discuss and apply the OD process to alliance formation and development.
4. Describe the process of network formation and transorganizational development as well as how networks change.
CH. 21 Organization Development for Economic, Ecological, and Social Outcomes
1. Describe organization development (OD) interventions that help organizations balance economic, social, and environmental objectives.
2. Describe sustainable management organizations (SMOs) and how OD can assist in their design and development.
3. Describe global social change organizations and how to adopt OD practices to develop them.
Part 2: CH19-21：0.5-1 page answer for this discuss question
Discuss the importance of implementing Continuous Change in an organization.
Please only use textbook information’s (pdf I provided) for reference.
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19
Continuous Change
learning
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 PART 6 STRATEGIC CHANGE INTERVENTIONS
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
interventions address how organizations can be designed
to promote effective learning processes and how those
learning processes themselves can be improved. An
organization designed to promote learning can create a
continuous stream of valuable knowledge. Knowledge
management focuses on how that knowledge can be orga-
nized and used to improve organization performance.
Built-to-change organizations are designed for
change, not stability. They are based on design guide-
lines that promote change capability in the firm’s strat-
egy, design, and leadership. In a rapidly changing
environment, this change capability can help the orga-
nization transition from one competitive advantage to
another.
NOTES
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CHAPTER 19 CONTINUOUS CHANGE 603
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604 PART 6 STRATEGIC CHANGE INTERVENTIONS
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20
Transorganizational Change
learning
objectives
Explain the rationale and logic behind organization collaboration.
Describe and apply organization development (OD) interventions that
enable mergers and acquisitions.
Discuss and apply the OD process to alliance formation and development.
Describe the process of network formation and transorganizational
development as well as how networks change.
T
he focus of this chapter is OD interventions
that move beyond the single organization to
include merging, allying, or networking with
other organizations. These multiorganizational change
programs are becoming more prevalent in OD as
organizations extend their boundaries to keep pace
with highly complex and rapidly changing environ-
ments. Under these conditions, organizations may
merge with or acquire other firms to gain essential
capabilities and resources, to operate at a larger
scale, and to enter new markets. They may form stra-
tegic alliances with other organizations to share costs
and expertise and to manage their exchanges more
efficiently. They may join with other organizations to
tackle complex problems and projects that single
organizations cannot accomplish.
Mergers, alliances, and transorganizational
change helps organizations create and sustain such
multiorganizational linkages. It helps them transcend
the perspective of a single organization and address
the needs and concerns of all involved stakeholders.
This represents a fundamental shift in strategic
orientation because the strategies, goals, structures,
and processes of two or more organizations become
interdependent and must be coordinated and aligned.
This raises the scope and complexity of change
processes; it increases the chances that conflicts and
misunderstandings will occur. Multiorganizational
change calls for OD practitioners to move to a higher
diagnostic and intervention level to straddle the
boundaries of different organizations, attend to their
unique and often conflicting needs, and bring
structure to what is frequently an underorganized and
highly uncertain process. Practitioners must develop
new concepts, skills, and expertise for implementing
these change interventions.
Because transorganizational change is relatively
new to OD, this chapter starts with an explanation
of the rationale underlying multiorganizational
arrangements. Then, three kinds of interventions are
described: mergers and acquisitions (M&As), strategic
alliances, and networks.
M&As leverage the strengths (or shore up the
weaknesses) of one organization by combining with
another organization. This transorganizational change
involves integrating many of the interventions
previously discussed in this text, including human
process, technostructural, and human resources
605
management interventions. Research and practice
in M&As strongly suggest that OD practices can
contribute to implementation success.
Alliance interventions, including joint ventures,
franchising, and long-term contracts, help to develop
the relationship between two organizations that
believe the benefits of cooperation outweigh the
costs of lowered autonomy and control. These
increasingly common arrangements require each
organization to understand its goals and strategy in
the relationship, build and leverage trust, and ensure
that it is receiving the expected benefits.
Finally—and building on the knowledge of
alliances—network interventions are concerned with
helping a group or system of organizations to engage
in relationships that perform tasks or solve problems
that are too complex and multifaceted for a single
organization to resolve. These multiorganizational
systems abound in today’s environment and include
research and development consortia, public–private
partnerships, nonprofit coalitions, and constellations of
profit-seeking organizations. They tend to be loosely
coupled and nonhierarchical, and consequently they
require methods different from most traditional OD
interventions that are geared to single organizations.
These methods help organizations recognize the
need for transorganizational partnerships and develop
coordinating structures to support their networks.
20-1 Transorganizational Rationale
More and more, organizations are linking with other organizations to achieve their
objectives. These transorganizational strategies can provide additional resources for
large-scale research and development; spread the risks of innovation; apply diverse
expertise to complex problems and tasks; make information or technology available to
learn and develop new capabilities; position the organization to achieve economies of
scale or scope; build collaborative relationships to advance social or environmental
issues; and gain access to new, especially international, marketplaces.1 For example,
pharmaceutical firms form strategic alliances to distribute noncompeting medications
and to avoid the high costs of establishing sales organizations; firms from different coun-
tries form joint ventures to overcome restrictive trade barriers; and high-technology
firms form research consortia to undertake significant and costly research and develop-
ment for their industries.
More generally, however, transorganizational strategies allow organizations to per-
form tasks that are too costly and complicated for single organizations to perform.2
These tasks include the full range of organizational activities, including purchasing raw
materials, hiring and compensating organization members, manufacturing and service
delivery, obtaining investment capital, marketing and distribution, and strategic plan-
ning. The key to understanding transorganizational strategies is recognizing that these
individual tasks must be coordinated with each other. Whenever a good or service from
one of these tasks is exchanged between two units (individuals, departments, or organi-
zations), a transaction occurs. Transactions can be designed and managed internally
within the organization’s structure, or externally between organizations. For example,
organizations can acquire a raw materials provider and operate these tasks as part of
internal operations or they can collaborate with a raw material supplier through long-
term contracts in an alliance.
Economists and organization theorists have spent considerable effort investigating
when transorganizational strategies work best. They have developed frameworks, primar-
ily transaction cost theory and agency theory, that are useful for understanding these
interventions.3 As a rule, transorganizational strategies work well when transactions
occur frequently and are well understood. Many organizations, for example, outsource
their payroll tasks because the inputs, such as hours worked, pay rates, and employment
status; the throughputs, such as tax rates and withholdings; and the outputs, such as
606 PART 6 STRATEGIC CHANGE INTERVENTIONS
issuing paychecks, occur regularly and are governed by well-known laws and regulations.
Moreover, if transactions involve people, equipment, or other assets that are unique to
the task, then transorganizational linkage is the preferred approach. For example, Micro-
soft works with a variety of value-added resellers, independent software vendors, and
small and large consulting businesses to bring their products to customers ranging in
size from individual consumers to the largest business enterprises in the world. An inter-
nal sales and service department to handle the unique demands of each customer seg-
ment would be much more expensive to implement and would not deliver the same
level of quality as the partner organizations. In general, relationships between and
among organizations become more formalized as the frequency of interaction increases,
the type of information and other resources that are exchanged become more proprie-
tary, and the number of different types of exchanges increases.4
Cummings has referred to groups of organizations that have joined together for a
common purpose as transorganizational systems (TSs).5 TSs are functional social systems
existing intermediately between single organizations on the one hand and societal sys-
tems on the other. These multiorganizational systems can make decisions and perform
tasks on behalf of their member organizations, although members maintain their sepa-
rate organizational identities and goals. This separation distinguishes TSs from M&As.
In contrast to most organizational systems, TSs tend to be underorganized. Relation-
ships among member organizations are loosely coupled; leadership and power are dis-
persed among autonomous organizations, rather than hierarchically centralized; and
commitment and membership are constantly being assessed as member organizations
act to maintain their autonomy while jointly performing. These characteristics make cre-
ating and managing TSs difficult.6 Potential member organizations may not perceive the
need to join with other organizations. They may be concerned with maintaining their
autonomy or have trouble identifying potential partners. U.S. firms, for example, are tra-
ditionally “rugged individualists” preferring to work alone rather than to join with other
organizations. Even if organizations decide to join together, they may have problems
managing their relationships and controlling joint operations and decisions. Because
members typically are accustomed to hierarchical forms of control, they may have diffi-
culty managing lateral relations among independent organizations. They also may have
difficulty managing different levels of commitment and motivation among members and
sustaining membership over time. The network interventions described in this chapter
can help TSs understand and address these problems.
20-2 Mergers and Acquisitions
M&As involve the combination of two organizations. The term merger refers to the inte-
gration of two previously independent organizations into a completely new organization;
acquisition involves the purchase of one organization by another for integration into the
acquiring organization. M&As are distinct from the interventions described later in this
chapter because at least one of the organizations ceases to exist. The stressful dynamics
associated with M&As led one researcher to call them the “ultimate change management
challenge.”7
Organizations have a number of reasons for wanting to acquire or merge with other
firms, including diversification or vertical integration; gaining access to global markets, tech-
nology, or other resources; and achieving operational efficiencies, improved innovation, or
resource sharing.8 As a result, M&As have become a preferred method for rapid growth
and strategic change. In 2011, for example, the announced value of M&As worldwide
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 607
reached $3.1 trillion, a 7% increase over 2010 but far below the all-time high of $6.4 trillion
in 2007.9 Recent large transactions include financial integrations resulting from the eco-
nomic crisis in 2008 (e.g., Wells Fargo and Wachovia, Bank of America and Countrywide
Financial) and other industries (e.g., Microsoft-Skype, United-Continental, Sanofi-Genzyme,
Southwest-AirTran, and Oracle and Sun Microsystems). There have been more than a few
failed announcements as well, including AT&T and T-Mobile, Microsoft and Yahoo, and
BEA and EADs.
Despite the popularity of M&As, they have a questionable record of success.10
Among the reasons commonly cited for merger failure are inadequate due diligence pro-
cesses, lack of a compelling strategic rationale, unrealistic expectations of synergy, paying
too much for the transaction, conflicting corporate cultures, and failure to move quickly.
M&A interventions typically are preceded by an examination of the organization’s
strategy. Executives must decide whether their strategic goals should be achieved by
either an internal change or a multiorganizational arrangement, such as an M&A, strate-
gic alliance, or network. M&As are preferred when internal development is considered
too slow or when strategic alliances or networks do not offer sufficient control over key
resources to meet the firm’s objectives.
In addition to the OD issues described here, M&As are complex changes that
involve legal and financial knowledge beyond the scope of this text. OD practitioners
are encouraged to seek out and work with specialists in these other relevant disciplines.
The focus here is on how OD can contribute to M&A success.
20-2a Application Stages
M&As involve three major phases as shown in Table 20.1: precombination, legal combina-
tion, and operational combination.11 OD practitioners can make substantive contributions
to the precombination and operational combination phases as described below.
Precombination Phase This first phase consists of planning activities designed to
ensure the success of the combined organization. Organizations pursuing the M&A
option must identify a candidate organization, gather and reveal information about
each other, and plan the implementation and integration activities. Research shows that
precombination activities are critical to M&A success.12 These include the following:
1. Search for and select candidate. This involves developing screening criteria to
assess and narrow the field of candidate organizations, agreeing on a first-choice
candidate, assessing regulatory compliance, establishing initial contacts, and formu-
lating a letter of intent. Criteria for choosing an M&A partner can include leadership
and management characteristics, market access resources, technical or financial
capabilities, physical facilities, and so on. OD practitioners can add value at this
stage of the process by encouraging screening criteria that include managerial, orga-
nizational, and cultural components as well as technical and financial aspects. In
practice, financial issues tend to receive greater attention at this stage, with the goal
of maximizing shareholder value. Failure to attend to cultural and organizational
issues, however, can result in diminished shareholder value during the operational
combination phase.13
Identifying potential candidates, narrowing the field, agreeing on a first choice,
and checking regulatory compliance are relatively straightforward activities. They
generally involve investment brokers and other outside parties who have access to
databases of organizational, financial, and technical information. The final two
608 PART 6 STRATEGIC CHANGE INTERVENTIONS
activities, making initial contacts and creating a letter of intent, are aimed at deter-
mining the candidate’s interest in the proposed merger or acquisition.
2. Create an M&A team. Once there is initial agreement between the two organiza-
tions to pursue a merger or acquisition, senior leaders from the respective organiza-
tions appoint an M&A team to establish the business case, to oversee the due
diligence process, and to develop a merger integration plan.14 This team typically
comprises senior executives and experts in such areas as business valuation, technol-
ogy, organization, and marketing. OD practitioners can facilitate formation of this
team through human process interventions, such as team building and process con-
sultation, and help the team establish clear goals and action strategies. They can also
help members define a leadership structure, apply relevant skills and knowledge, and
ensure that both organizations are represented appropriately. The group’s leadership
structure, or who will be accountable for the team’s accomplishments, is especially
critical. In an acquisition, an executive from the acquiring firm is typically the
team’s leader. In a merger of equals, the choice of a single individual to lead the
team is more difficult, but essential. The outcome of this decision and the process
used to make it are the first outward symbols of how this transorganizational change
will be conducted.
3. Establish the business case. The purpose of this activity is to develop a prima facie
case that combining the two organizations will result in a competitive advantage that
exceeds their separate advantages.15 It includes specifying the strategic vision,
TABLE 20.1
Major Phases and Activities in Mergers and Acquisitions
Major M&A
Phases Key Steps OD and Change Management Issues
Precombination • Search for and select candidate
• Create M&A team
• Establish business case
• Perform due diligence assessment
• Develop merger integration plans
• Ensure that candidates are screened for
cultural as well as financial, technical,
and physical asset criteria
• Define a clear leadership structure
• Establish a clear strategic vision,
competitive strategy, and systems
integration potential
• Specify the desirable organization design
features
• Specify an integration action plan
Legal
combination
• Complete financial negotiations
• Close the deal
• Announce the combination
Operational
combination
• Day 1 activities
• Organizational and technical
integration activities
• Cultural integration activities
• Implement changes quickly
• Communicate
• Solve problems together and focus on
the customer
• Conduct an evaluation to learn and identify
further areas of integration planning
©
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CHAPTER 20 TRANSORGANIZATIONAL CHANGE 609
competitive strategy, and systems integration potential for the M&A. OD practitioners
can facilitate this discussion to ensure that each issue is fully explored. If the business
case cannot be justified on strategic, financial, or operational grounds, the M&A
should be revisited, terminated, or another candidate should be considered.
A strategic vision or goal represents a description of the organizations’ combined
capabilities. It synthesizes the strengths of the two organizations into a viable new
organization. For example, AT&T had a clear picture of its intentions in acquiring
T-Mobile. They believed that their common network equipment provider and Global
Mobile System (GSM) operating system and the difficulty in acquiring additional spec-
trum would bring better coverage, better quality, and better functionality to its more
than 250 million customers.
Competitive strategy describes how the combined organization will add value in
a particular product market or segment of the value chain, how the value proposi-
tion is best performed by the combined organization (compared with competitors),
and how it will be difficult to imitate. The purpose of this activity is to force the two
organizations to go beyond the rhetoric of “these two organizations should merge
because it’s a good fit.” AT&T’s acquisition of T-Mobile eventually failed, in part,
because their competitive strategy arguments could not dispel regulatory concerns
of monopoly power.
Systems integration specifies how the two organizations will be combined. It
addresses how and if they can work together. It includes such key questions as:
Will one firm be acquired and operated as a wholly owned subsidiary? Does the
transaction imply a merger of equals? Are layoffs implied, and if so, where? On
what basis can promised synergies or cost savings be achieved?
4. Perform a due diligence assessment. This involves evaluating whether the two
organizations actually have the managerial, technical, and financial resources that
each assumes the other possesses. It includes a comprehensive review of each orga-
nization’s articles of incorporation, stock option plans, organization charts, and so
on. Financial, operational, technical, logistical, and human resources inventories are
evaluated along with other legally binding issues. The discovery of previously
unknown or unfavorable information can halt the M&A process.
Although due diligence assessment traditionally emphasizes the financial aspects
of M&As, this focus is increasingly being challenged by evidence that culture clashes
between two organizations can ruin expected financial gains.16 Thus, attention to the
cultural features of M&As is becoming more prevalent in due diligence assessment.
For example, Microsoft’s venture integration team applies cultural and talent screens
as part of its due diligence activities along with financial and operational criteria. The
process identifies the fit between Microsoft’s values and those of possible merger can-
didates. Human resource assessments like these contribute heavily to the success of
the merger. OD expertise can contribute significantly to M&A cultural assessment; it
can help organizations carry out cultural due diligence systematically and objectively.
The scope and detail of due diligence assessment depend on knowledge of the
candidate’s business, the complexity of its industry, the relative size and risk of the
transaction, and the available resources. Due diligence activities must reflect symbol-
ically the vision and values of the combined organizations. An overly zealous assess-
ment, for example, can contradict promises of openness and trust made earlier in
the transaction. Missteps at this stage can lower or destroy opportunities for synergy,
cost savings, and improved shareholder value.17
5. Develop merger integration plans. This stage specifies how the two organizations
will be combined. It defines integration objectives; the scope and timing of
610 PART 6 STRATEGIC CHANGE INTERVENTIONS
integration activities; organization design criteria; Day 1 requirements; and who does
what, where, and when. The scope of these plans depends on how integrated the
organizations will be. If the candidate organization will operate as an independent
subsidiary with an “arm’s-length” relationship to the parent, such as Microsoft’s ini-
tial decision with Skype, merger integration planning need only specify those sys-
tems that will be common to both organizations. A full integration of the two
organizations requires a more extensive plan.
Merger integration planning starts with the business case conducted earlier and
involves more detailed analyses of the strategic vision, competitive strategy, and sys-
tems integration for the M&A. For example, assessment of the organizations’ mar-
kets and suppliers can reveal opportunities to serve customers better and to capture
purchasing economies of scale. Examination of business processes can identify best
operating practices; which physical facilities should be combined, left alone, or shut
down; and which systems and procedures are redundant. Capital budgeting pro-
cesses can show which investments should be continued or dropped. Typically, the
M&A team charters subgroups composed of members from both organizations to
perform these analyses. OD practitioners can conduct team-building and process-
consultation interventions to improve how those groups function.
Next, plans for designing the combined organization are developed. They include
the organization’s structure, reporting relationships, human resources policies, infor-
mation and control systems, operating logistics, work designs, and customer-focused
activities. Applying large-scale change interventions are most appropriate here.
The final task of integration planning involves developing an action plan for
implementing the M&A. This specifies tasks to be performed, decision-making
authority and responsibility, and timelines for achievement. It also includes a pro-
cess for addressing conflicts and problems that will invariably arise during the
implementation process.
Legal Combination Phase This phase of the M&A process involves the legal and
financial aspects of the transaction. The two organizations settle on the terms of the
deal, register the transaction with and gain approval from appropriate regulatory agen-
cies, communicate with and gain approval from shareholders, and file appropriate legal
documents. In some cases, an OD practitioner can provide advice on negotiating a fair
agreement, but this phase generally requires knowledge and expertise beyond that typi-
cally found in OD practice.
Operational Combination Phase This final phase involves implementing the merger
integration plan. In practice, it begins during due diligence assessment and may continue
for months or years following the legal combination phase. M&A implementation
includes the three kinds of activities described below.
1. Day 1 activities. These include communications and actions that officially start the
implementation process. For example, announcements may be made about key
executives of the combined organization, the location of corporate headquarters,
the structure of tasks, and areas and functions where layoffs will occur. Special
attention is paid to sending important symbolic messages to organization members,
investors, and regulators about the soundness of the merger plans and the changes
that are critical to accomplishing strategic and operational objectives.18
2. Operational and technical integration activities. These involve the physical moves,
structural changes, work designs, and procedures that will be implemented to
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 611
accomplish the strategic objectives and expected cost savings of the M&A. The
merger integration plan lists these activities, which can be large in number and
range in scope from seemingly trivial to quite critical. For example, United Airlines’s
acquisition of Continental involved changing employee uniforms, the signage at all
airports, marketing and public relations campaigns, repainting airplanes, and inte-
grating the route structures, among others. When these integration activities are
not executed properly, the M&A process can be set back.
Application 20.1 describes some of the operational, technical, and cultural inte-
gration activities associated with the United–Continental merger.19
3. Cultural integration activities. These tasks are aimed at building new values and
norms in the combined organization. Successful implementation melds both the
technical and cultural aspects of the combined organization. For example, members
from both organizations can be encouraged to solve business problems together,
thus addressing operational and cultural integration issues simultaneously.20
The M&A literature contains several practical suggestions for managing the
operational combination phase.21 First, the merger integration plan should be imple-
mented sooner rather than later, and quickly rather than slowly. Integration of two
organizations generally involves aggressive financial targets, short timelines, and
intense public scrutiny. Moreover, the change process is often plagued by culture
clashes and political fighting. Consequently, organizations need to make as many
changes as possible in the first hundred days following the legal combination
phase. Quick movement in key areas has several advantages. It preempts unantici-
pated organization changes that might thwart momentum in the desired direction;
it reduces organization members’ uncertainty about when things will happen; and
it lessens members’ anxiety about the M&A’s impact on their personal situation.
All three of these conditions work against desired collaboration and other benefits.
Second, integration activities must be communicated clearly and promptly to a
variety of stakeholders, including shareholders, regulators, customers, and organiza-
tion members. M&As can increase uncertainty and anxiety about the future, espe-
cially for members of the involved organizations who often inquire: Will I have a
job? Will my job change? Will I have a new boss? These kinds of questions can
dominate conversations, reduce productive work, and spoil opportunities for collab-
oration. To reduce ambiguity, organizations can provide concrete answers through a
variety of channels including company newsletters, email and intranet postings,
press releases, video, podcasts, and in-person presentations, one-on-one interaction
with managers, and so on.
Third, members from both organizations need to work together to solve imple-
mentation problems and to address customer needs. Such coordinated tasks can clarify
work roles and relationships and contribute to member commitment and motivation.
Moreover, when coordinated activity is directed at customer service, it can assure
customers that their interests will be considered and satisfied during the merger.
Fourth, organizations need to assess the implementation process continually to
identify integration problems and needs. The following questions can guide the
assessment process:22
• Have savings estimated during precombination planning been confirmed or
exceeded?
• Has the new entity identified and implemented shared strategies or opportunities?
• Has the new organization been implemented without loss of key personnel?
• Was the merger and integration process seen as fair and objective?
• Is the combined company operating efficiently?
612 PART 6 STRATEGIC CHANGE INTERVENTIONS
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1 PLANNING THE UNITED–CONTINENTAL MERGER
U
nited Airlines is one of the oldest and most
recognized brands in the world. But like
most of the older airlines, it has struggled
over the years. Beset by a weak industry
structure—overcapacity, easy entry, and a per-
ishable product (empty seats can never be
resold)—few airlines make money. Financial
analysts have, for years, called on the airlines
to restructure, lower costs, and consolidate.
Following the widespread bankruptcies in the
wake of 9/11, consolidation has slowly set in,
leading to the mergers of US Airways and
America West; Delta and Northwest; South-
west and AirTran; and, most recently, United
and Continental. With consolidation comes an
opportunity for organization development.
The announcement of the United and Con-
tinental merger in May 2010 was the ultimate
event in a long string of strategic decisions by
both organizations. Before actually coming
together as merger partners, United and Conti-
nental had discussed the possibility of a formal
merger. But United’s merger talks with US Air-
ways, United’s and Continental’s own journeys
through bankruptcies, their “virtual” merger
through the Star Alliance, and Continental’s
equity relationship with Northwest prevented
consummation of the deal.
When the path to a merger opened up, the
rationale for the deal went beyond simple eco-
nomics. Important organizational reasons
included Continental’s superior management
capabilities and reputation as well as United’s
scale and scope. These issues were apparent
even as the deal was announced: Former
Continental head, Jeff Smisek, was named
CEO of the new company and many if not
most top management positions were to be
filled with former Continental executives, but
the company would be called United and its
headquarters would be in Chicago.
Combining two airlines is tremendously
difficult, largely because of the number of
things they can do differently. For example,
choices have to be made on boarding pro-
cesses (Continental’s traditional back to front
process or United’s window, middle, then
aisle seat process); baggage and loading poli-
cies (should all dog crates be loaded back-
wards into the cargo hold so frightened dogs
don’t tip the crate off the conveyor belt); uni-
forms (male Continental employees could
choose from three different shirts and a few
ties, United only has the one); how to identify
unaccompanied minors (bracelet or a button);
and whether to serve nuts in a bag or a heated
dish in first class.
The planning and integration efforts utilized
“functional integration teams”—Continental
employees working alongside United employ-
ees in months of meetings—to make things
happen. For example, 33 functional integration
teams in the fourth quarter of 2011 spent $170
million on everything from technology training
and severance to repainting airplanes in an
attempt to balance safety, cost, space, style,
reliability, convenience, speed, and comfort.
Simple choices could become incredibly
complicated. For example, a 14-member func-
tional integration beverage team composed of
members from procurement, flight operations,
finance, food services, and marketing was
chartered with, among other things, choosing
a coffee supplier. Continental and United had
different coffee providers, and it made no
sense to have two contracts. Buying from
one source offered the possibility of bigger vol-
ume discounts and the kinds of savings Wall
Street was expecting. The taste test winner
was cheaper and it was approved by collea-
gues outside the beverage committee, the
new CEO, and company officers at a general
meeting. Just to be sure, the new blend was
tested on flight attendants in Washington
Dulles, Chicago O’Hare, Denver, Los Angeles,
and San Francisco. Out of the 1,100 who did,
all but eight approved.
On July 1, the new United introduced its
new coffee, and the protests came flying in.
Flight attendants reported a barrage of com-
plaints, and the beverage committee and the
CEO received angry emails from customers.
The coffee was “watery.” When the beverage
committee looked into it, they discovered that it
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 613
wasn’t the coffee: The coffee makers on United air-
craft were different from Continental’s, and the
differences—the height of the brew basket above
the pot—determined whether excess water flowed
into the pot (watering down the coffee) or not.
One of the biggest challenges was planning the
integration of the flight information and passenger
information systems. As CEO Smisek put it, “It’s
akin to changing the engine while the airplane’s in
flight.” The flight information system tracks every-
thing related to a particular flight, including the type
of plane, departure and arrival times, flight number,
air speed, altitude, and current location. The system
is monitored by employees in the network opera-
tions center. Merging Continental’s and United’s
operations centers was handled by the operations
center’s functional integration team and took more
than 18 months. The team had to determine the
hardware and software platforms that would best
handle the volume and complexity of activity as
well as the system’s operation. For example,
every airline has a set of rules to determine when
a plane will go faster to make up for a late departure
and when it will not—the so-called “speedup-
slowdown calculation.” Flying faster is costly
because more fuel is used, but being late costs
money in terms of missed connections, rebooking
costs, putting stranded customers up in hotels, and
paying extra time for flight crews and ground crews.
United’s and Continental’s calculations didn’t
always agree and the functional integration team
had to marry the best of both.
Moreover, the functional integration team had
to plan the exhaustive list of tests and contingency
plans to ensure that the data could be combined
without breaking the system. When the team
thought it had an integration solution in place, they
tested the system by flying an empty Continental
737 from Houston to El Paso and back just to
make sure the operations center could track it.
Then they had the pilots pretend to have a mechan-
ical problem and return to the gate, and then they
had the pilots change the flight number and reroute
the plane to Austin to see if that showed up.
Integrating the flight information system
involved more than 500 employees reducing
440 manuals down to 260. When the new system
came online, the only glitch was that the few
planes that had crossed the international dateline
had an extra 24 hours added to their arrival times.
The FAA awarded the new United a single operat-
ing certificate on November 30, 2011.
The second technical integration challenge,
the passenger information system, proved more
troublesome. The system hosts the website and
reservation system, tracks schedules and schedule
changes, records frequent flyer information, con-
nects ticket counters to airport kiosks to gates,
and prints boarding passes. Until the passenger
information system is integrated, the organization
looks to customers and really acts like separate air-
lines, with separate websites, gates, ticketing pro-
cesses, and so on. United customers who want
help from a Continental agent cannot get it.
As with the flight system integration, there are
technical issues to address but the real layer of
complexity is that this system is used by customers
and employees alike. The new United adopted Con-
tinental’s passenger services system, a Hewlett-
Packard program called Shares that is more flexible
than United’s old Apollo system. Although it pro-
vides a more customizable customer experience, it
is also less intuitive and therefore required a lot of
training. There was some fear among the agents.
“It’s a little challenging at the moment. We just
get this on-the-job training a couple hours here and
there,” said a 20-year United employee.
Although United began planning this inte-
gration early on, the complexity of the data
interactions—and an independent and unrelated
decision to change a few of the elements of the
frequent flyer programs at the same time—was
too much to handle. The lack of training, the inevi-
table technical glitches, and the increased call
loads from frequent flyers asking questions over-
whelmed the system and employees. Initially, the
system operated poorly and there were loud com-
plaints from both customers and employees.
Integrating labor practices, talent, and culture
is one of the biggest issues in most mergers, and
integrating United’s and Continental’s human capi-
tal practices and culture was expected to be a par-
ticular challenge. Continental had a strong
reputation as an employee- and customer-focused
organization. Like other carriers, it had to deal with
high fuel prices, natural disasters (such as the
volcanic eruption in Iceland), and the recession,
but it had managed to retain its positive culture.
614 PART 6 STRATEGIC CHANGE INTERVENTIONS
• Have major problems with stakeholders been avoided?
• Did the process proceed according to schedule?
• Were substantive integration issues resolved?
• Are people highly motivated (more so than before)?
M&As are among the most complex and challenging interventions facing organiza-
tions and OD practitioners.
Continental was consistently at the top of cus-
tomer satisfaction surveys and the country’s 100
best employers. Labor relations and customer ser-
vice reputations at United, however, were just the
opposite. Its 2002–2006 bankruptcy involved lay-
offs and salary cuts, increased customer com-
plaints, and pilot “sick outs.” Although these
were the most proximate causes of mistrust,
there was a legacy of hostility.
Like the technical processes, United adopted
the functional integration team idea to address its
human capital and culture strategies. All of them
had to work together to build a coordinated work-
force. For example, getting alignment among the
labor agreements was as much a social issue as
a financial one. Looking like one airline to consu-
mers means that employees have to feel like one
airline. Integrating contracts meant reconciling
rules regarding schedules, routes, seniority, and
pay. Despite its importance, this was a difficult pro-
cess because United and Continental had similar
groups of employees that were represented by dif-
ferent collective bargaining agreements, as well as
employee groups that were covered by a union in
one organization that were not covered by a union
in the other. Sequencing union votes, talent selec-
tion processes, and HR systems integration were a
big part of the HR functional integration of team’s
responsibilities.
Fortunately, the team had a lot of help from
the top. The new United management saw the
merger as a rare opportunity to get things right.
CEO Smisek noted, “My management team and I
are spending a lot of time on developing the new
culture. It won’t be precisely Continental’s culture,
and it sure won’t be United’s old culture. It’ll be
something that takes what I hope to be the best
of both. We’re very focused on that because you
do run the risk in any integration of ending up with
mediocrity.”
In the first days after the merger was closed,
Smisek did 16 “CEO exchanges” in the United
States. Standing up in front of employees, he
answered any question they wanted. This was
something the Continental employees under-
stood, but the United workers had never seen.
The tough questions came quickly. “When are
you going to snap me back to the wages I had in
the year 2000?” The answer was “never,” and
Smisek had to explain that today’s airline industry
was different than it was in 2000; that the
business had changed because low-cost carriers
were now an important part of the way business
was done. The exchanges were continued in
Europe, Asia, and Latin America before more
were conducted in the United States
The new management team was also hoping
to use the new strategy to align people to the busi-
ness. The new United adopted the “Go Forward
Plan” process from Continental. Once a year, the
Go Forward Plan was a short, simple, and easy to
understand statement, no more than one-page
long, of marketing, finance, operations, and
employee objectives. As a pilot, ticket agent, or
operations person, it focused everybody on the
things that mattered most. Smisek tells people
that “if you’re doing something and you can’t
trace it back to the Go Forward Plan, stop what
you’re doing and do something else.”
Although there were some bumps along the
way and the culture and labor integration pro-
cesses continue, the use of functional integration
teams to address the important operational chal-
lenges and senior management’s visible commit-
ment to the merger have helped United manage
the change.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 615
20-3 Strategic Alliance Interventions
A strategic alliance is a formal agreement between two or more organizations to pursue a set
of private and common goals through the sharing, exchange, or codevelopment of resources,
including intellectual property, people, capital, technology, capabilities, or physical assets.23 It
is an important strategy for such organizations as Microsoft, Eli Lilly, Corning Glass, DOW,
Federal Express, IBM, Starbucks, Cisco Systems, and Oracle. The term strategic alliance
generally refers to any collaborative effort between two or more organizations, including
licensing agreements, franchises, long-term contracts, and joint ventures. Franchising is a
common collaborative strategy.24 Companies such as McDonald’s, Subway, or Holiday Inn
license their name and know-how to independent organizations that deliver the service and
leverage the brand name for marketing. A joint venture is a special type of strategic alliance
where a third organization, jointly owned and operated by two (or more) organizations, is
created.25 Joint ventures between domestic and foreign firms, such as Equate, a joint venture
between DOW and Petrochemical Industries Companies KSC to produce value-added che-
micals and plastics, or Fuji–Xerox, a long-term collaboration that began with Fuji selling
Xerox copying machines in Japan, can help overcome trade barriers and facilitate technology
transfer across nations. The New United Motor Manufacturing, Inc., in Fremont, California,
for example, was a successful, long-term joint venture between General Motors and Toyota
to produce automobiles using Japanese teamwork methods that was just recently dissolved.
20-3a Application Stages
The development of effective strategic alliances generally follows a process of strategy
formulation, partner selection, alliance structuring and start-up, and alliance operation
and adjustment.
1. Alliance strategy formulation. The first step in developing strategic alliances is to
clarify the business strategy and understand why an alliance is an appropriate method
to implement it. About one-half to two-thirds of alliances fail to meet their financial
objectives, and the number one reason for that failure is the lack of a clear strategy.26
For example, Collins found that alliance success was heavily influenced by the alignment
of the partner to the company’s “hedgehog concept” or what it is best at doing.27 If the
organization understood its passion, distinctive capabilities, and economic drivers, it was
more likely to develop alliances that supported its strategy. Thus, it is important to pur-
sue alliances according to a “collaboration logic.”28 The alliance must be seen as a more
effective way of organizing and operating than developing new capabilities to perform
the work in-house; acquiring or merging with another organization; or buying the
capabilities from another organization in a transactional relationship.
2. Partner selection. Once the reasons for a strategic alliance are clear, the search for an
appropriate partner or partners begins. Alliances always involve a cost–benefit trade-
off; while the organization typically gains access to new markets or new capabilities, it
does so at the cost of yielding some autonomy and control over its activities.
Similar to identifying merger and acquisition candidates discussed previously, this
step involves developing screening criteria, agreeing on candidates, establishing initial
contacts, and formulating a letter of intent. A good alliance partnership will leverage
both similarities and differences to create competitive advantage. Compatible commit-
ment levels, management styles, cultures, goals, information technologies, or operations
are important similarities that can smooth alliance formation and implementation.29
However, different perspectives, technologies, capabilities, and other resources can
complement existing ones and be good sources of learning and value in the part-
nership. These differences can also be a source of frustration for the alliance.
616 PART 6 STRATEGIC CHANGE INTERVENTIONS
OD practitioners can add value at this stage of the process by helping potential alliance
partners explore and understand their similarities and differences. In addition, the way
the alliance begins and proceeds is an important ingredient in building trust, a charac-
teristic of successful alliances explored more fully in the next step.
3. Alliance structuring and start-up. Following agreement to enter into an alliance,
the focus shifts to how to structure the partnership and build and leverage trust in
the relationship. First, an appropriate governance structure must be chosen and can
include medium- to long-term contracts, minority equity investments, equal equity
partnerships, or majority equity investments. As the proportion of equity investment
increases, the costs, risk, and amount of required management attention also
increase.30 In general, partners need to know how expenses, profits, risk, and knowl-
edge will be shared.
Second, research increasingly points to “relational quality” as a key success fac-
tor of long-term alliances.31 Strategic alliances shift the nature of the relationship
from the simple exchange of goods, services, or resources with no necessary expec-
tation of a future relationship to one where there is a clear expectation of future
exchange. The organizations in the relationship must act in good faith to ensure
the future. This requires trust, “a psychological state comprising the intention to
accept vulnerability based upon positive expectations of the intentions or behavior”
of another firm or individual representing the organization. It implies an expectation
that the organization will subordinate its self-interest to the “joint interest” of the
alliance under most conditions.32
Trust can increase or decrease over the life of the alliance. Early in the alliance
formation process, it can serve as an initial reservoir of comfort and confidence
based on perceptions of the organizations’ reputation, prior success, and other
sources. These same factors can also contribute to a lack of initial trust. Trust can
be increased or decreased by new assessments of the others’ capabilities, compe-
tence, and ethical behavior. OD practitioners can assist in this initial start-up phase
by making implicit perceptions of trust explicit and getting the involved parties to
set appropriate expectations.33 During the structuring and start-up phase, trust can
increase through direct activities as a function of the number, frequency, and impor-
tance of interactions; differences between expectations and reality; the nature of mis-
takes and how they are resolved; and attributions made about partners’ behavior.
4. Alliance operation and adjustment. Once the strategic alliance is functioning, the full
range of OD interventions described in this text can be applied. Team building, conflict
resolution, large-group interventions, work design, employee involvement, dynamic
strategy making, and culture change efforts have all been reported in alliance work.34
OD practitioners should pay particular attention to helping each partner in the alliance
clarify the capabilities contributed, the lessons learned, and the benefits received.
Diagnosing the state of the strategic alliance and making the appropriate adjust-
ments is a function of understanding whether the environment has changed in ways
that make transorganizational linkage unnecessary, whether partner goals and capa-
bilities have changed the nature of the relationship and interdependence, and
whether the alliance is successfully generating outcomes. The long-term success of
the Fuji-Xerox joint venture, for example, has been due to the willingness and ability
of the two organizations to adjust the relationship in terms of ownership, profit
sharing, new product development responsibilities, and market access.35
Application 20.2 describes an alliance-building intervention between two firms in
India.36 It shows how, despite good intentions, OD projects can encounter vexing
problems, especially in cross-cultural alliance contexts.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 617
a
p
p
lica
tio
n
2
0
2
BUILDING ALLIANCE RELATIONSHIPS
M
aharashtra Hybrid Seeds Company Lim-
ited (MAHYCO), the leading producer and
marketer of hybrid seeds in India, formed
a strategic alliance with Monsanto to
expand and extend its business. Founded in
1964 by B. R. Barwale, the father of the
Green Revolution in India, MAHYCO was fam-
ily owned and run. Mr. Barwale’s son was the
firm’s managing director (MD) and several fam-
ily members played critical roles in its daily
management. In 1998, the company opened a
state-of-the-art research and development
complex, the same year that B. R. Barwale
received the World Food Prize for his work on
hybrid seed development.
In the early 1990s, MAHYCO first made
contact with Monsanto India Private Limited
as a potential business partner with comple-
mentary capabilities. Monsanto India was part
of the Monsanto Company, a publicly held mul-
tinational corporation based in the United
States, and a leading global developer of trans-
genic plants using biotechnology. Monsanto’s
focus on biotechnology, part of the firm’s
larger transformation from chemicals to bio-
technology, gave it the lead in introducing
insect- and herbicide-resistant genetic traits in
plants. With a presence in India since 1947,
Monsanto India had a sales and marketing
organization with a research facility and formu-
lation plant.
During the next few years, the two compa-
nies explored a strategic alliance primarily through
personal relationships among MAHYCO’s MD
and two key executives from Monsanto India,
an Indian operations manager and an expatri-
ate from the United States. The MD had strong
interest in progressive business practices; the
Monsanto operations manager possessed a
keen business savvy and local knowledge;
and the expatriate had tremendous technical
knowledge and cultural sensitivity. These qual-
ities helped the three executives forge a strong
personal bond based on respect, friendship,
and trust.
In 1998, Monsanto made an equity invest-
ment in MAHYCO. The two companies believed
that their complementary resources and cap-
abilities could be leveraged to develop competi-
tive advantage for the alliance. For example,
MAHYCO could apply Monsanto’s biotechnolog-
ical know-how to its vast germ plasma inventory
to create plants that would support the food
production and fiber needs of South Asia. Even
with Monsanto’s long-term presence in India,
MAHYCO could provide it with better access
to India’s markets, government officials, and
regulatory agencies.
In moving the alliance forward, however,
both firms recognized that their different cor-
porate cultures posed a special challenge.
MAHYCO’s culture was characterized by high
levels of loyalty and commitment, owing to its
family background and close connection to the
noble effort of bringing biotechnology to India.
The firm’s management–employee relationship
was highly formal, with little employee involve-
ment in decisions and low comfort with change.
Monsanto, on the other hand, was nearly oppo-
site on all of these dimensions. It was a large
fast-paced organization undergoing consider-
able change. Its people were in constant flux
as its business models and plans were chang-
ing. Many were new to the organization and just
learning their positions, while the experienced
people were leading the company’s conversion
from chemicals to biotechnology.
Given these organizational differences
and the fact that neither partner could know
in advance how long the alliance would
last, MAHYCO employees were fearful that
Monsanto would buy out or consume MAHYCO
and thereby threaten their careers. Adding to
the ambiguity and stress, MAHYCO’s MD
openly expressed hope that the alliance
would help the firm become more profes-
sionally managed and malleable, and less
patriarchal and rigid.
Building on the strong personal bond
between the three executives at the top of the
two firms, an alliance-building intervention was
considered to develop trust and collaboration at
lower organizational levels. In preparing for
the change program, an OD team interviewed
618 PART 6 STRATEGIC CHANGE INTERVENTIONS
44 people from Monsanto India and MAHYCO.
Numerous opportunities and obstacles to alliance
success were identified. Members of both organiza-
tions wanted to learn more about their partner’s
business and culture. They expressed excitement
about combining their resources in the alliance and
cited the importance of collaboration and mutual
understanding to make it work. Four critical success
factors emerged from the interviews: clear vision
and mission for the alliance, key initiatives and
goals, mutual trust and operating norms, and sup-
port for each firm’s internal change plans.
The OD team then met with the top leaders at
MAHYCO and Monsanto India and proposed an
appreciative inquiry (AI) process for the alliance-
building program. It would involve multiple organi-
zational levels and include all relevant alliance
stakeholders. AI would help participants create
common ground, discover each other’s capabili-
ties, and envision the alliance’s future. The pro-
posed intervention was approved by Monsanto
India but surprisingly rejected by MAHYCO, which
was uncomfortable with the AI process. Specifically,
MAHYCO’s leaders believed they did not know
enough about Monsanto India to engage in an
open, loosely structured process for developing rela-
tionships and setting alliance direction and strategy.
Moreover, they felt that AI would give too much
decision-making power to middle managers, take
too much time, and be seen as too childish for
grown men with many years of experience. As a
compromise, MAHYCO agreed that its R&D people
would engage in AI with their Monsanto India coun-
terparts, but the MAHYCO executive team would
only participate in a more formal management edu-
cation session to learn more about the alliance and
their partner. Thus, two different alliance-building
interventions were conducted in late 1998.
The AI session was attended by 32 participants
representing four cross-alliance R&D teams. One of
those teams—the Cotton team—had already been
formed and was actively working on a joint project.
An opening exercise encouraged participants to
build relationships that go beyond name tags. It
was followed by an information session where par-
ticipants learned about the alliance partners and the
purpose for the alliance. They gained insight about
each firm’s core strengths and the synergies that
could be derived from the alliance. In fact, this exer-
cise had such a strong impact that the design of the
subsequent management education session was
modified to include it. The AI session then moved
from learning to envisioning. Participants were
asked to imagine how the alliance would be publicly
recognized by the year 2005. They imagined an alli-
ance that would increase the nutrient content of
pulse crops, create nitrogen-fixating plants, develop
new insect-resistant crops, and spawn a “gene revo-
lution” (a playful allusion to the Green Revolution).
Moreover, the alliance would create plants that pro-
duce hydrocarbons and new color fibers and ensure
the Asian food supply. Many participants experi-
enced the envisioning process as energizing; others,
mostly from the Cotton team, however, were skep-
tical and viewed it as “waste of our time.” Despite
this criticism, the subsequent dialogue revealed pro-
ductive ways to address the alliance vision and to
create action plans. For example, one R&D team
that had not met prior to the session developed sev-
eral recommendations on how to improve informa-
tion sharing between the two companies.
The management education session was con-
ducted in a more traditional presentation format than
the AI session and included MAHYCO’s top-30 man-
agers and Monsanto India’s top 10. It was geared to
providing participants with better understanding of
the alliance partners—their history, current business,
future opportunities, and expectations for the alliance.
After formal introductions, the session involved pre-
sentations on alliance management and Monsanto’s
biotechnology strategy. The latter was mainly for
the benefit of MAHYCO’s executives. Then, partici-
pants learned about each firm’s core competencies
and how they translated into alliance benefits.
Interestingly, this part of the session evolved into a
somewhat awkward discussion about “professional-
ism” in the MAHYCO organization. The ensuing
dialogue about changing from a family business to a
more professional firm raised issues of trust, loyalty,
respect, and so on, all topics difficult to address in this
formal setting.
With facilitation from the OD team, the edu-
cation session shifted to question-and-answer
discussions geared to increase cross-firm communi-
cation and understanding. The session ended with
discussion of the top executives’ role in making the
alliance successful. Participants generated ideas for
the next steps in developing the alliance and posi-
tioning it and biotechnology in India. They assumed
no further responsibility, however, for implementing
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 619
20-4 Network Interventions
Network interventions help organizations join together for a common purpose; their use is
growing rapidly in today’s highly competitive, global environment.37 In the private sector,
research and development consortia, for example, allow companies to share resources and
risks associated with large-scale research efforts. Networks among airlines with regional
specializations combine to provide worldwide coverage; Japanese keiretsu, Korean
chaeobols, or Mexican grupos enable different organizations to take advantage of
them, leaving it up to the Director of Monsanto India
and the MAHYCO MD to determine the next steps
and to make them happen.
In sum, the AI and ME alliance-building inter-
ventions differed considerably in their respective
purposes, participants, processes, and outcomes.
The AI session encouraged learning, relationship
building, and cocreation of future alliance plans,
whereas the management education session was
intended to convey information about the alliance
and its partner organizations. To assess interven-
tion results, the OD team administered question-
naires to all participants at the beginning and end
of both sessions. In addition, a follow-up survey
was administered to all participants via email four
months later to explore any longitudinal effects of
the interventions. Seventy-two percent of AI parti-
cipants returned the email survey, while only half
of the management education participants did. Par-
ticipants in the AI session reported significantly
greater levels of relationship building, collaboration,
and follow-through in alliance project development
than did the education session participants. Man-
agement education participants indicated that they
missed the opportunity to build relationships. Parti-
cipants in both sessions reported increased levels
of mutual understanding, thereby laying the foun-
dation for future alliance development.
Over the next six years, many of the same
issues that showed up in the alliance-building ses-
sions still persisted, to the dismay of the OD team.
These included concerns over trust and collabora-
tion, unwillingness to change, and inequalities in
compensation and available equipment between
the two partners. People who were roadblocks in
1998 were still roadblocks in 2003. Aspects of cor-
porate control and decision making were still frus-
trating the alliance, making it difficult to chart its
own future and success. The inherent differences
between the two partner organizations continued
to challenge alliance leadership.
On reflection, members of the OD team
learned from their alliance experience. They real-
ized that their original views about the AI and edu-
cation interventions were overly optimistic, even
naive. What they observed during the AI session
was only surface-level dialogue, the result of a
design that minimized tension and fostered collab-
oration. They concluded that alliance partners as
well as OD professionals need to enhance their
business and cultural knowledge prior to participat-
ing in a cross-cultural alliance intervention. From a
business perspective, for example, it would be
helpful for participants to diagnose their own orga-
nization prior to the alliance-building activities. This
would provide valuable insight into the firm’s col-
laborative orientation and alliance capability, provid-
ing a realistic basis for determining how best to
create and develop the alliance. From a cultural
perspective, it would be helpful to appreciate the
diverse ways in which people from different cul-
tures are likely to react to alliance interventions
such as AI and management education. In inter-
group encounters, for example, people from more
implicit cultures (such as India) tend to share only a
shade of what they believe and feel. In contrast,
people from more explicit cultures (such as the
United States) tend to be more open and forward
in such interactions. Such understanding would be
invaluable in designing how best to build alliance
relationships. Finally, the OD team concluded that
alliance building is not a one-time event but an
ongoing process. It needs continuous organiza-
tional support and attention to the structures and
processes that sustain optimal levels of collabora-
tion and trust among alliance partners.
620 PART 6 STRATEGIC CHANGE INTERVENTIONS
complementary capabilities among them. In the public sector, partnerships between gov-
ernment and business provide the resources and initiative to undertake complex urban
renewal projects, such as Cleveland’s Cuyahoga River, Baltimore’s Inner Harbor Project,
and Lyon’s zones de redynamisation urbaines (urban renewal zones), or improve health
care, including Sweden’s “Bring a Friend” program that increases cancer screenings or
Britain’s National Health Service (NHS) sustainability project. Other networks of business,
labor, government, education, finance, community organizations, and economic develop-
ment agencies, such as China’s Low Carbon City Initiative, are helping to identify exem-
plary efforts related to building and energy efficiency, public awareness, and low carbon
development that can help coordinate services and promote more responsible growth.38
Managing the development of multiorganizational networks involves two types of
change: (1) creating the initial network and (2) managing change within an established
network. Both change processes are complex and not well understood. First, the initial cre-
ation of networks recognizes their underorganized nature. Forming them into a more
coherent, operating whole involves understanding the relationships among the participat-
ing organizations and their roles in the system, as well as the implications and conse-
quences of organizations leaving the network, changing roles, or increasing their
influence. Second, change within existing networks must account for the relationships
among member organizations as a whole system.39 The multiple and complex relationships
involved in networks produce emergent phenomena that cannot be fully explained by sim-
ply knowing the parts. Each organization in the network has goals that are partly related to
the good of the network and partly focused on self-interest. How the network reacts over
time is even more difficult to capture and is part of the emerging science of complexity.40
20-4a Creating the Network
OD practitioners have evolved a unique form of planned change aimed at creating net-
works and improving their effectiveness.41 In laying out the conceptual boundaries of
network development, also known as transorganizational development, Cummings
described the practice as following the phases of planned change appropriate for underor-
ganized systems (Chapter 2).42 The four stages are shown in Figure 20.1 along with key
issues that need to be addressed at each stage. The stages and issues are described below.
1. Identification stage. This initial stage of network development involves identifying exist-
ing and potential member organizations best suited to achieving their collective objectives.
Identifying potential members can be difficult because organizations may not perceive the
need to join together or may not know enough about each other to make membership
choices. These problems are typical when trying to create a new network. Relationships
among potential members may be loosely coupled or nonexistent; thus, even if organiza-
tions see the need to form a network, they may be unsure about who should be included.
The identification stage is generally carried out by one or a few organizations
interested in exploring the possibility of creating a network. OD practitioners work
with these initiating organizations to clarify their own goals, such as product or
technology exchange, learning, or market access, and to understand the trade-off
between the loss of autonomy and the value of collaboration. Change agents also
help specify criteria for network membership and identify organizations meeting
those standards. Because networks are intended to address particular problems or
opportunities, a practical criterion for membership is how much organizations can
contribute to this work. Potential members can be identified and judged in terms
of the skills, knowledge, and resources that they bring to bear on the network task.
Practitioners warn, however, that identifying potential members also should take
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 621
into account the political realities of the situation.43 Consequently, key stakeholders
who can affect the creation and subsequent performance of the network are identi-
fied as possible members.
An important difficulty at this stage can be insufficient leadership and cohesion
among participants to choose potential members. In these situations, OD practi-
tioners may need to play a more activist role in creating the network.44 They may
need to bring structure to a group of autonomous organizations that do not see the
need to join together or may not know how to form relationships. In several cases of
network development, change agents helped members create a special leadership
group that could make decisions on behalf of the participating organizations.45
This leadership group comprised a small cadre of committed members and was
able to develop enough cohesion among members to carry out the identification
stage. The OD activist role requires a good deal of leadership and direction. For
example, change agents may need to educate potential network members about the
benefits of joining together. They may need to structure face-to-face encounters
aimed at sharing information and exploring interaction possibilities.
2. Convention stage. Once potential network members are identified, the convention
stage is concerned with bringing them together to assess whether formalizing the
network is desirable and feasible. This face-to-face meeting enables potential mem-
bers to explore mutually their motivations for joining and their perceptions of the
activities they might have to perform together. They work to establish sufficient
levels of motivation and task consensus to form the network.
Like the identification stage, this phase of network creation generally requires
considerable direction and facilitation by OD practitioners. Existing stakeholders
may not have the legitimacy or skills to perform the convening function, and practi-
tioners can serve as conveners if they are perceived as legitimate and credible by the
attending organizations. This necessitates that change agents maintain a neutral role,
treating all members alike.46 They need to be seen by members as working on behalf
of the total system, rather than as being aligned with particular organizations or
views. When practitioners are perceived as neutral, network members are more
likely to share information with them and to listen to their inputs. Such neutrality
FIGURE 20.1
Application Stages for Transorganizational Development
©
Ce
ng
ag
e
Le
ar
ni
ng
622 PART 6 STRATEGIC CHANGE INTERVENTIONS
can enhance change agents’ ability to mediate conflicts among members. It can help
them uncover diverse views and interests and forge agreements among stakeholders.
OD practitioners, for example, can act as mediators, ensuring that members’ views
receive a fair hearing and that disputes are equitably resolved. They can help to
bridge the different views and interests and achieve integrative solutions. In many
cases, practitioners come from research centers or universities with reputations for
neutrality and expertise in networks. Because participating organizations tend to
have diverse motives and views and limited means for resolving differences, change
agents may need to structure and manage interactions to facilitate airing of differ-
ences and arriving at consensus about forming the network. They may need to
help organizations work through differences and reconcile self-interests with those
of the larger network.
Research and practice suggest that the movement from convention into organi-
zation is facilitated by agreement among TS members as to the problem/opportunity
to be address, the interdependence of network members required to address the
issue, and the likelihood that concerted effort will result in positive outcomes.47
Known as a “negotiated order,” TS members’ realization of the potential power of
a network is key to the network moving forward. Nathan and Mitroff demonstrated
how a negotiated order among business, government, and nonprofit organizations
concerned with crisis management emerged and facilitated action.48 Worley and
Parker’s study of the Cuyahoga River Valley’s government-led initiative showed
how the lack of a clear negotiated order can hinder network development.49
3. Organization stage. When the convention stage results in a decision to create a network,
members then begin to organize themselves for task performance. This involves develop-
ing the structures and mechanisms that promote communication and interaction among
members and that direct joint efforts on the activities required to achieve TS objectives.50
It includes the organizations to be involved in the network and the roles each will play;
the communication and relationships among them; and the control system that will guide
decision making and provide a mechanism for monitoring performance. For example,
members may create a coordinating council to manage the network and a powerful leader
to head it.51 They might choose to formalize exchanges among members by developing
rules, policies, and formal operating procedures. When members are required to invest
large amounts of resources in the network, such as might occur in an industry-based
research consortium, the organizing stage typically includes voluminous contracting and
negotiating about members’ contributions and returns. Here, corporate lawyers and
financial analysts play key roles in specifying the network structure. They determine
how costs and benefits will be allocated among member organizations as well as the
legal obligations, decision-making responsibilities, and contractual rights of members.
OD practitioners can help members define competitive advantage for the network as
well as the structural requirements necessary to support achievement of its goals.
4. Evaluation stage. This final stage of creating a network involves assessing how the
network is performing. Members need feedback so they can identify problems and
begin to resolve them. This generally includes information about performance out-
comes and member satisfaction, as well as indicators of how well members are inter-
acting jointly. Change agents can periodically interview or survey member
organizations about various outcomes and features of the network and feed that
data back to network leaders. Such information enables network leaders to make
necessary operational modifications and adjustments. It may signal the need to
return to previous stages in the process to make necessary corrections, as shown by
the feedback arrows in Figure 20.1.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 623
20-4b Managing Network Change
In addition to developing new networks, OD practitioners may need to facilitate change
within established networks. Planned change in existing networks derives from an under-
standing of the “new sciences,” including complexity, nonlinear systems, catastrophe,
and chaos theories. From these perspectives, organization networks are viewed as com-
plex systems displaying the following properties:52
1. The behavior of a network is sensitive to small differences in its initial conditions.
How the network was established and formed—the depth and nature of trust among
the partners, who was selected (and not selected) to be in the network, and how the
network was organized—play a key role in its willingness and ability to change.
2. Networks display “emergent” properties or characteristics that cannot be explained
through an analysis of the parts: “Given the properties of the parts and the laws of
their interaction, it is not a trivial matter to infer the properties of the whole.”53 The
tools of systems thinking and the understanding of emergence in complex systems
are still being developed and applied.54
3. A variety of network behaviors and patterns, both expected and unexpected, can emerge
from members performing tasks and making decisions according to simple rules to which
everyone agreed. This is amply demonstrated in Senge’s “beer game” simulation where a
retailer, a wholesaler, and a brewery each acts according to the simple rule of maximizing
its own profit. Participants in the simulation routinely end up with enormous inventories
of poor-selling beer, delayed deliveries, excess capacity, and other problems. Without an
understanding of the “whole” system, the nature of interdependencies within the system,
and timely and complete information, each part, acting in its own self-interest, destroys
itself.55 Apparently random changes in networks may simply be chaotic patterns that are
not understood. These patterns cannot be known in advance but represent potential paths
of change that are the result of the complex interactions among members in the network.
The process of change in complex systems such as networks involves creating instabil-
ity, managing the tipping point, and relying on self-organization. These phases roughly fol-
low Lewin’s model of planned change described in Chapter 2. Change in a network
requires an unfreezing process where the system becomes unstable. Movement in the sys-
tem is described by the metaphor of a “tipping point” where changes occur rapidly as a
result of information processing. Finally, refreezing involves self-organization. The descrip-
tions below represent rudimentary applications of these concepts to networks; research and
practice in changing networks are still in a formative stage.
1. Create instability in the network. Before change in a network can occur, relation-
ships among member organizations must become unstable. A network’s susceptibil-
ity to instability is a function of members’ motivations for structure versus agency.56
Structure refers to the organization’s expected role in the network and represents
a source of stability. All things being equal, network members tend to behave and
perform according to their agreed-upon roles. For example, most routine communi-
cations among the network members are geared toward increasing stability and
working together. A manufacturing plant in Nike’s network is expected to produce
a certain number of shoes at a certain cost with certain features. Nike headquarters
in Beaverton, Oregon, plans on the plant behaving this way. On the other hand,
agency involves self-interest which can create instability in the network. Each mem-
ber of the network is trying to maximize its own performance in the context of the
network. Changes in member goals and strategies, the ratio of costs and benefits in
network membership, and so on, can affect the willingness and ability of members
to contribute to network performance. When a plant in Nike’s network grows to
624 PART 6 STRATEGIC CHANGE INTERVENTIONS
a sufficient size or develops a sufficient range of capabilities, it may consider altering
its role in the network to perform a broader set of activities or dedicate capacity to
its own products. As the ratio of agency to structure increases, the instability of the
network rises, thus enabling change to occur.
OD practitioners can facilitate instability in a network by changing the pattern of
communication among members. They can, for example, encourage organizations to
share information. Technology breakthroughs, new product introductions, changes in net-
work membership, or changes in the strategy or capability of a network member all repre-
sent fluctuations that can increase the susceptibility of the network to change. Another
important aspect of changing the pattern of information is to ask who should get the
information. Understanding and creating instability is difficult because the nature of
members’ connectedness also influences the system’s susceptibility. Some organizations
are more connected than others; most organizations are closely connected to several
others, but relatively unconnected to many. This makes creating a sense of urgency for
change difficult. Diagnosis of the relationships among member organizations can provide
important information about organizations that are central to network communications.57
2. Manage the tipping point. Although instability provides the impetus and opportu-
nity for change, the direction, type, and process of change are yet to be determined.
An unstable network can move to a new state of organization and performance,
return to its old condition, or simply cease to exist. At this point, network members,
individually and collectively, make choices about what to do. OD practitioners can
help them through this change period. Recent studies suggest the following guides
for facilitating network change:58
a. The law of the few. A new idea, practice, or other change spreads because of a
relatively few but important roles in the network. Connectors, mavens, and
salespeople help an innovation achieve sufficient awareness and credibility
throughout the network to be considered viable. Connectors are individuals
who occupy central positions in the network and are able to tap into many dif-
ferent network audiences. They have “Rolodex” power; they are quickly able to
alert and connect with a wide variety of people in many organizations. Mavens
are “information sinks.” They passionately pursue knowledge about a particular
subject and are altruistically willing to tell anyone who is interested everything
they know about it. The key to the maven’s role is trust. People who speak to
mavens know that they are getting unbiased information—that there is no “hid-
den agenda,” just good data. Finally, salespeople are the champions of change
and are able to influence others to try new ideas, do new things, or consider
new options. Thus, the first key factor in changing a network is the presence
of communication channels occupied by connectors, mavens, and salespeople.
OD practitioners can fill any of these roles. They can, if appropriate, be
mavens on a particular subject and act as a source of unbiased information
about a new network practice, aspects of interpersonal relationships that network
members agree is slowing network response, or ideas about information systems
that can speed communication. Less frequently, OD practitioners can be connec-
tors, ensuring that any given message is seeded throughout the network. This is
especially true if the change agent was part of the network’s formation. In this
case, the practitioner might have extensive relationships with organizations in
the network. Thus, networking skills, such as the ability to manage lateral rela-
tions among autonomous organizations in the relative absence of hierarchical
control, are indispensable to practitioners of network change. Change agents
must be able to span the boundaries of diverse organizations, link them together,
and facilitate exchanges among them.59 OD practitioners can also play the role of
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 625
salesperson. Although it is in line with the “activist” role described earlier in the
practice of network creation, it is not a traditional aspect of OD practice. The wis-
dom of having a change agent as the champion of an idea rather than a key
player in the organization network is debatable. The change agent and network
members must understand the trade-offs in sacrificing the OD practitioner’s neu-
trality for influence. If that trade-off is made, the change agent will need the polit-
ical competence to understand and resolve the conflicts of interest and value
dilemmas inherent in systems made up of multiple organizations, each seeking
to maintain autonomy while jointly interacting. Political savvy can help change
agents manage their own roles and values in respect to those power dynamics.
b. Stickiness. The second ingredient in network change is stickiness. For a new idea
or practice to take hold, the message communicated by the connectors, mavens,
and salespeople must be memorable. A memorable or sticky message is not a
function of typical communication variables, such as frequency of the message,
loudness, or saliency. Stickiness is often a function of small and seemingly insignif-
icant characteristics of the message, such as its structure, format, and syntax, as
well as its emotional content, practicality, or sequencing with other messages. OD
practitioners can help network members develop sticky messages for communicat-
ing about network change. Brainstorming alternative phrases, using metaphors to
symbolize meaning, or enlisting the help of marketing and communications spe-
cialists can increase the chance of developing a sticky message. Since the ingredi-
ents of stickiness are often not obvious, several iterations of a message’s structure
may be necessary to create memorable communication about network change.
c. The power of context. Finally, a message must be meaningful and relevant to network
members. Meaning derives from the context of the network. When network members
are feeling pressure to innovate or move quickly in response to external demands, for
example, messages about new cost-cutting initiatives or a new financial reporting
system may be uninteresting and easily neglected. On the other hand, a message link-
ing these changes to expected improvements in network performance may be seen
as relevant. OD practitioners can help members understand the network’s current
climate or “conversation”; they can help members determine the appropriate timing
and relevance of proposed communications about network change.60
When the right people communicate a network change, present and pack-
age it appropriately, and distribute it in a timely fashion, implementation is
likely to move forward swiftly. When there is insufficient information, interest,
or relevance, network change is likely to stall.
3. Rely on self-organization. Networks tend to exhibit “self-organizing” behavior.
Network members seek to reduce uncertainty in their environment, while the network
as a whole drives to establish more order in how it functions. OD practitioners can
rely on this self-organizing feature to refreeze change. Once change has occurred in
the network, a variety of controls can be leveraged to institutionalize it. For example,
communication systems can spread stories about how the change is affecting different
members, diffusing throughout the network, or contributing to network effectiveness.
This increases the forces for stability in the network. Individual organizations can
communicate their commitment to the change in an effort to lower agency forces
that can contribute to instability. Each of these messages signifies constraint and
shows that the different parts of the network are not independent of each other.
Application 20.3 describes the formation of the Alaskan Workforce Coalition.61 The
shortage of adequate health care workers in Alaska became a critical issue that only a
network of organizations could address. The case reflects the complex issues of identify-
ing, convening, and organizing a TS.
626 PART 6 STRATEGIC CHANGE INTERVENTIONS
a
p
p
li
ca
ti
o
n
2
0
3 THE ALASKA WORKFORCE COALITION
T
he low supply of health care workers in
Alaska was constraining the industry’s abil-
ity to deliver care. In addition to the usual
forces driving change in the industry,
including health care reform, aging workforces,
rapidly changing technologies, and new deliv-
ery models, Alaska’s remoteness, harsh cli-
mates, vast geography, and small population
complicated the challenges of developing,
recruiting, and retaining an adequate and quali-
fied health care workforce.
As an industry, health care accounted for
8% of total employment and around 16% of
the state’s economy. Moreover, health and
social service jobs in Alaska were projected to
increase 31% between 2010 and 2020, driven in
large part by a projected 89% increase for the
population age 65 and older over the same time
period. But the lack of health care workers left
many rural communities without access to
health care services and resulted in health care
costs that were among the highest in the nation.
Most health care organizations felt the
pinch of too few workers, but had limited expe-
rience working in a coordinated manner to
address them. For more than a decade, individ-
ual health care organizations worked on solu-
tions they could advance on their own. Some
of these efforts worked, such as the University
of Alaska’s initiative to double the number of
nurses educated in state; but the breadth and
depth of health care industry demands vastly
outpaced such efforts. While other industries,
such as construction, were gaining statewide
visibility and investments, the health care
industry was making only incremental gains.
Individual solutions might have helped
individual firms, but it did little to help the
state’s problems. Although various surveys
had provided episodic data describing point in
time needs, sometimes for a subset of health
care workers, data sources were typically used
in isolation and were difficult to assess holisti-
cally due to inconsistent terminology. Inte-
grated and accurate health care workforce
data was not available to focus industry efforts.
In the early 2000s, a promising coalition
emerged among three public sector entities
to build a behavioral health workforce, how-
ever no one had ever developed an industry
wide projection with occupational priorities
that would enable greater focus of efforts.
Absent a collective effort, policy makers and
funders lacked a complete understanding of
health care workforce issues, resulting in lim-
ited investment and influence.
One catalyst for change occurred in 2009
with the passage of the American Recovery
and Reinvestment Act (ARRA). This federal
program included funding opportunities to
states for workforce development in high-
demand industries. However, without a state-
wide plan, a coordinated set of priorities, and
an appropriate entity to guide the work, access
to such funds was unlikely. The ARRA funding
opportunity served as a trigger that brought
individual groups together quickly.
At the same time, the Alaska Workforce
Investment Board (AWIB) had long recognized
health care as an important and growing indus-
try, and they called for a statewide health care
workforce plan. The AWIB’s call was motivated
by its prior involvement with industry coalitions.
For example, the oil, gas, and mining industry’s
Alaska Process Industry Careers Consortium
(APICC) had addressed a variety cross-industry
needs and attracted new investments. A work-
force plan specifically for the development of a
natural gas pipeline was an important comple-
ment to their work. The construction industry
also formed a nonprofit foundation, implemen-
ted new programs, and attracted additional
resources from the state. These industries
modeled the value of partnering to define
industry workforce priorities, identifying skill
standards, and attracting targeted investments
in selected workforce development programs
and strategies to meet their needs. Similarly, a
joint effort by public sector partners had been
established to build a qualified behavioral health
workforce, led by the Alaska Mental Health
Trust Authority (AMHTA), the Alaska Depart-
ment of Health and Social Services (DHSS),
and the University of Alaska.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 627
The Alaska Health Workforce Coalition
(AHWC) was formed in 2009 to ensure an ade-
quate and qualified health care workforce for hos-
pitals, nursing homes, clinics, and public health
service throughout Alaska.
THE COALITION’S BEGINNINGS
In response to these triggers, a leader at Provi-
dence, the state’s largest health care system,
who had previous experience leading Alaska’s
workforce development through roles in both
industry and key state agencies, invited several
key stakeholders to exploratory conversations
about collaboration. Her experience suggested
that industry needed to take a lead role and she
had existing relationships with many of the stake-
holders. Thanks to corporate support, personal
experience, and reputation, initial meeting invita-
tions were well received.
She targeted these invitations at the formal
organizational leaders representing health care
employers, educators, policy makers, and funders.
They included the Alaska State Hospital and Nursing
Home Association (ASHNHA), representing the
state’s largest private sector health employers;
AWIB, through its private sector chair who happened
to also be the Chief Financial Officer for Fairbanks
Memorial Hospital; the University of Alaska as the
state’s leading health educator; and Alaska’s DHSS,
which served a dual role as a significant public sector
health employer and a key player in shaping state
health policy. Each of these organizations had
worked together in the past. In the relatively small
population of Alaska, individuals can readily identify
the key partners required to move quickly into action.
The initial meetings and conversations
explored the opportunity and confirmed interest in
creating a statewide health care workforce plan.
The concept of an organization to sustain the
work was acknowledged, but the general feeling
was that the first priorities should be to use the
existing people and resources to develop a plan
and to submit a proposal for funding to an ARRA
grant opportunity.
Additional partners were soon engaged based
on their ability to enhance the plan’s development.
New partners included the AMHTA, the Alaska
Native Tribal Health Consortium, and the Alaska Pri-
mary Care Association. The group also increased its
level of commitment by shifting from teleconfer-
ences to face-to-face meetings every month or
two. This required partners to travel at their own
expense and commit to full days of work to guide
development of the plan and proposal.
Early meetings benefited from good cross-
sector attendance and rich, respectful conversa-
tions that deepened collective understandings of
current issues as well as specific opportunities
that interested individual partners. However, with
so many needs in the industry, there were too
many options and it was clear the participants
had to prioritize to gain traction. They elected to
focus on strategies and actions that could be best
achieved because a coalition existed versus
actions that individual entities could accomplish
under the status quo. The term “net new”
emerged in the dialogue to distinguish new or
expanded value-added strategies and actions that
were unlikely to be achieved without a collabora-
tive effort and which benefited multiple partners.
Still, some topics were inherently more difficult
to advance due to the innate competitive issues
among employers. Collaboration on statewide
recruiting was seen as an opportunity, but had
been a challenge to implement. Each employer
invested a great deal to attract potential employees
from outside Alaska to fill critical vacancies, but
large employers with more resources could lever-
age their relative advantage in recruiting. However,
partners knew from the success of the Alaska Sea-
food Marketing Institute and the Alaska tourism
industry that they could be more effective and effi-
cient in marketing a concept versus a company. For
example, the Alaskan quality of life is appealing to
many medical professionals and the coalition saw
the merits of a statewide, coordinated campaign
that could be more impactful than what individual
firms could achieve. This approach is gradually
gaining momentum with a shared website, www.
alaskaphysicianjobs.net. In addition, one of the coa-
lition’s key successes in the first two years was the
funding of a new loan reimbursement and incentive
program that benefited multiple employers in their
most critical shortages.
FORMATION
To guide, reflect, and reinforce the positive group
norms that began to emerge, an organizational
628 PART 6 STRATEGIC CHANGE INTERVENTIONS
charter was developed to ensure clarity for its
diverse members on the purpose, principles, and
intended outcomes of the coalition. For example,
the group’s operating style did not involve formal
leadership roles, such as a chair or officers. At the
heart of the coalition’s success was an adaptive
process guided by six principles: inclusive, coordi-
nated, cooperative, strategic, adaptive, and results
focused.
A core team emerged consisting of roughly
15 people from nine organizations. This group
developed an overarching four-part framework to
organize and develop the workforce plan: engage,
train, recruit, and retain. For each theme, a set of
potential strategies was identified, although they
lacked specificity in the early stages. Occupa-
tional priorities were also developed with avail-
able data. They were organized into three tiers
representing the relative priorities. The upper
tier included more than 15 occupations, and the
coalition worked to define the top six occupa-
tional priorities. They included primary care provi-
ders, nurses, direct care workers, behavioral
health clinicians, physical therapists, and pharma-
cists. The occupations were both highly needed
and there were pertinent strategies that the
coalition could advance.
BUILDING THE COALITION
A significant opportunity to engage more stake-
holders in prioritizing and organizing the plan
was offered by ASHNHA. They had begun to
plan a workforce summit for their hospital and
nursing home members. With the plan frame-
work and high-level set of strategies and priorities
established, the summit was an ideal time and
place for the core group to share information
and gather input from a much wider audience. It
was also a good place to begin discussions about
the kind of organization needed to sustain efforts
in the future.
More than 60 participants at the summit heard
plenary presentations about similar efforts and
entities working on health care workforce issues
in others states, and from other industries in
Alaska. They provided tangible evidence of what
was possible. The core group members shared
the plan’s framework and initial data about work-
force gaps. Participants contributed to the develop-
ment of initial strategies through small group and
round table discussions. Core group members
aligned the topics with the framework and then
used a modified Open Space approach that
allowed people to refine ideas in strategies about
which they were most passionate. Core team
members facilitated each table, gathered informa-
tion and insights, and presented the results in a
plenary session using simple planning templates.
The overall feedback from the summit was very
positive and supported the idea of continuing the
effort to develop a statewide plan and a new cor-
responding entity/organization to guide the efforts.
Following the summit, the core team worked
diligently on outreach. Over several months, they
engaged as many stakeholders as possible from
the health care industry, policy makers, and fun-
ders as well as education and training providers.
Nearly a dozen presentations were made, always
by at least two members from the core team to
demonstrate shared ownership. A subteam led by
the University of Alaska worked closely with the
Research & Analysis Section of the Department
of Labor and Workforce Development to refine
occupational priorities through presentations with
diverse audiences and with an online survey. The
core team created a website and a contact list to
communicate with the wider coalition of interested
stakeholders.
In parallel with the outreach process, core
team members continued to meet monthly. They
discussed and integrated what they were learning
from stakeholders, and strengthened their resolve
to produce a well-written strategic plan summariz-
ing the compelling and complex workforce needs
of the health care industry focusing not only on
occupational priorities but also on systems change
and capacity-building strategies. Funding offered
by three of the larger partners was pooled to hire
contract resources to assist with writing and print-
ing the plan. The AWIB endorsed the Health Work-
force Plan in early 2010—making it the first
significant product from the AHWC.
The plan was well received and helped to
achieve significant visibility for health care industry
issues, priorities, and possible actions. However, it
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 629
was not specific enough to drive collective action.
The group’s logical next step was to follow up the
plan with a targeted, four-year Action Agenda.
They also recognized the need to address organiza-
tion development and sustainability issues. The
founding individuals and organizations had devel-
oped the initial plan through informal processes
and volunteer contributions of time and resources.
To sustain the effort and reap the benefits of the
plan would require a more formal approach and
organization.
CONTINUED COALITION DEVELOPMENT
Over the next year, the AHWC became larger and
more formal. In part, this was enabled by a plan-
ning grant from the Health Resources and Services
Administration (HRSA). This grant provided one
year’s worth of funding to support the research
and development of a four-year Action Agenda,
greater alignment of health care workforce data,
and contractual support for staff, organization
development, and sustainability efforts. During
this time, the AHWC welcomed the opportunity
to join forces with related groups where their
goals were aligned and they could support one
another’s efforts to go further together than either
might achieve alone. For example, the Alaska
Health Care Commission (HCC) recognized work-
force shortages as a priority when they were
initially formed, and rather than conducting inde-
pendent research and developing their own recom-
mendations, the HCC aligned their direction with
the AHWC, endorsing the work of the coalition as
their own. Similarly, the AMHTA had several years
of experience advancing their Workforce Focus
Area focused on home and community based
behavioral health services. They realized that
sustaining their efforts and participation in the
AHWC could be aligned with the Focus Area to
create a single, unified approach. As a result, the
two efforts merged in 2011 to unite health care
workforce planning and action for Alaska, inclusive
of the distinct needs of the AMHTA and its
beneficiaries.
The coalition researched alternative approaches
to forming a sustainable organization to advance
their goals around health care workforce issues.
A number of models were identified and explored
using the principles from the initial charter to guide
the process. The core group determined that con-
tinuing their loose collaboration without formally
establishing a new nonprofit entity was preferred.
The individual who provided support to the Work-
force Focus Area on behalf of the AMTHA, DHSS,
and the University, had her scope of work
extended to include AHWC activities in late 2011,
bridging the staff needs from the planning grant to
full operations. Organization development consult-
ing support has continued to provide additional
resource and continuity with coalition and core
meetings and activities.
EVALUATION
The creation of the Alaska Health Workforce Coali-
tion has resulted in several benefits to its members
and to the Alaskan health care system as a whole.
These include:
• An industry-led workforce plan with tangible ac-
tions, accountabilities, and committed resources
• The use and integration of data to establish
occupational priorities
• Actions focused on occupational and systems
change priorities that drive health care work-
force activities and investments by members
and other stakeholders
• A unified approach to advocacy for policy
changes and funding opportunities
• Increased resource commitments, actions,
and emerging results that all serve to build
the Alaska health care workforce
In 2012, the coalition documented a retrospec-
tive of early achievements by AHWC in response
to requests by other industry groups. The coalition
also elected to undergo a “strategic refresh” pro-
cess in recognition of the completion of several
Action Agenda objectives and the actual or planned
transition of several leaders. The AHWC coordina-
tor and OD consultant interviewed each core team
member to gather feedback on the greatest
achievements to date, alignment with each organi-
zation’s priorities, update to occupational and sys-
tems change priorities given the changes to the
health care industry, and suggestions that would
630 PART 6 STRATEGIC CHANGE INTERVENTIONS
SUMMARY
In this chapter, we describe merger, alliance, and trans-
organizational change interventions that move beyond
the single organization. These multiorganizational
change programs enable organizations to extend their
boundaries to keep pace with highly complex and rapidly
changing environments. They help organizations create
and sustain multiorganizational linkages. Because
transorganizational interventions transcend a single orga-
nization, attention is directed at the strategies, objectives,
structures, and processes of two or more interdependent
organizations. This raises the scope and complexity of
change and requires OD practitioners to develop new
concepts, skills, and expertise.
M&As interventions involve combining two or
more organizations to achieve strategic and financial
objectives. They generally involve three phases: pre-
combination, legal combination, and operational
combination. The M&A process has been dominated
by financial and technical concerns, but experience
and research strongly support the contribution that
OD practitioners can make to M&A success.
Strategic alliance interventions help organizations
create partnerships with other organizations to share
resources and capabilities for competitive advantage.
They include licensing agreements, franchises, long-
term contracts, and joint ventures. The development
of strategic alliances generally follows a process of
strategy formulation, partner selection, alliance struc-
turing and start-up, and alliance operation and
adjustment.
Network interventions must address two types of
change. First, because multiorganizational systems tend
to be underorganized, the initial development of the
network follows the stages of planned change relevant
to underorganized systems: identification, convention,
organization, and evaluation. Second, the management
enhance the effectiveness, relevance, and impact
of the coalition going forward.
The data suggested that success has been
achieved through the attention and balance of
two equally important aspects:
• Content, action, and results. The coalition
convened on the premise of shared need and
the desire to take collective action. This was
achieved through a strategic plan that defined
the workforce goals to engage, train, recruit,
and retain a qualified health care workforce for
Alaska. The coalition developed a correspond-
ing Action Agenda with objectives to drive
action in six occupational priorities and six sys-
tems change and capacity-building efforts.
• Process, relationships, and respect. The
coalition emerged through relationships and
shared need. Individuals with loose relationships
agreed to begin exploring the merits of common-
goals and collaborative action. The processes
have been thoughtfully guided and intentionally
nurtured throughout the first three years to build
respect and strengthen relationships across the
organizations and individual leaders.
The results also helped the core team to update
the Action Agenda priorities as well as refine their
processes of engaging with one another. The pro-
cess of evaluation and continuous improvement
confirmed the need to retain and nurture strong rela-
tionships among key partners—particularly when
decisions and direction are needed. It also con-
firmed the need for dynamic strategy and priority
setting processes given the uncertainty faced by
the health care industry and the resulting changes
in care models that lead to new demands for the
health care workforce of the future.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 631
of change within a network also must acknowledge the
distributed nature of influence and adopt methods of
change that rely on the Law of the Few, the power of
context, and the stickiness factor.
NOTES
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Through Strategic Alliances: A Resource-Based Approach
Toward Competitive Advantage,” Journal of Management
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ing, Leading, and Managing Strategic Alliances (New York:
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2. H. Aldrich, Organizations and Environments (New York:
Prentice-Hall, 1979).
3. O. Williamson, Markets and Hierarchies (New York: Free
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Structure,” Journal of Financial Economics 3 (1976):
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4. P. Kenis and D. Knoke, “How Organizational Field Net-
works Shape Interorganizational Tie-Formation Rates,”
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5. T. Cummings, “Transorganizational Development,” in
Research in Organizational Behavior, vol. 6, ed. B. Staw and
L. Cummings (Greenwich, CT: JAI Press, 1984), 367–422.
6. B. Gray, “Conditions Facilitating Interorganizational
Collaboration,” Human Relations 38 (1985): 911–36;
K. Harrigan and W. Newman, “Bases of Interorgani-
zation Co-operation: Propensity, Power, Persistence,”
Journal of Management Studies 27 (1990): 417–34;
Cummings, “Transorganizational Development”;
R. Chisholm, Developing Network Organizations: Learning
from Practice and Theory (Reading, MA: Addison-
Wesley, 1998).
7. T. Galpin and D. Robinson, “Merger Integration: The
Ultimate Change Management Challenge,” Mergers and
Acquisitions 31 (1997): 24–29.
8. M. Marks and P. Mirvis, Joining Forces: Making One
Plus One Equal Three in Mergers, Acquisitions, and
Alliances, 2nd ed. (San Francisco: Jossey-Bass, 2010);
A. Sherman and M. Hart, Mergers and Acquisitions
from A to Z, 2nd ed. (New York: Amacom, 2006).
9. Data on M&A value accessed from http://www.imaa-
institute.org/statistics-mergers-acquisitions.html#Mergers
Acquisitions_Worldwide on October 22, 2012.
10. A variety of studies have questioned whether merger and
acquisition activity actually generates benefits to the orga-
nization or its shareholders, including M. Porter, “From
Competitive Advantage to Corporate Strategy,” Harvard
Business Review (May–June 1978): 43–59; T. Brush,
“Predicted Change in Operational Synergy and Post-
Acquisition Performance of Acquired Businesses,” Strate-
gic Management Journal 17 (1996): 1–24; P. Zweig with
J.Perlman, S. Anderson, and K. Gudridge, “The Case
Against Mergers,” BusinessWeek, October 30, 1995,
122–30. The research includes an A. T. Kearney study
of 115 multibillion-dollar global mergers between 1993
and 1996 where 58% failed to create “substantial returns
for shareholders,” measured by tangible returns in the
form of dividends and stock price appreciation; a Mercer
Management Consulting study of all mergers from 1990
to 1996 where nearly half “destroyed” shareholder value;
a PriceWaterhouseCoopers study of 97 acquirers that
completed deals worth $500 million or more from
1994 to 1997 and where two-thirds of the buyer’s stocks
dropped on announcement of the transaction and “a
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632 PART 6 STRATEGIC CHANGE INTERVENTIONS
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CHAPTER 20 TRANSORGANIZATIONAL CHANGE 633
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58. This section relies on information in M. Gladwell, The
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634 PART 6 STRATEGIC CHANGE INTERVENTIONS
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61. This application was developed and written by Kitty
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Alaska. Her contribution to this chapter and to the state
of Alaska is greatly appreciated.
CHAPTER 20 TRANSORGANIZATIONAL CHANGE 635
S
elected
C
a
s
e
s
GLOBAL MOBILE CORPORATION*
“Damn it, he’s done it again!”
Charlie Newburg had to get up and walk
around his office, he was so frustrated. He had
been reviewing the most recent design, parts,
and assembly specifications for Global Mobile’s
latest smart phone (code named: Nonphixhun)
that had been released for production the previ-
ous Thursday. The files had just come back to
Charlie’s engineering services department with
a caustic note that began, “This one can’t be
produced, either…” It was the fourth time pro-
duction had returned the design.
Newburg, director of engineering for the
Global Mobile Corporation, was normally a
quiet person. But the Nonphixhun project was
stretching his patience; it was beginning to
appear like several other new products that had
hit delays and problems in the transition from
design to production during the eight months
Charlie had worked for Global Mobile. These pro-
blems were nothing new at Global Mobile’s
Asian factory; Charlie’s predecessor in the engi-
neering job had run afoul of them, too, and had
finally been fired for protesting too vehemently
about the other departments. But the Nonphix-
hun phone should have been different. Charlie
and the firm’s president, Hannah Hoover, had
video-conferenced two months earlier (on July
3, 2006) with the factory superintendent, Tyson
Wang, to smooth the way for the new phone’s
design. He thought back to the meeting …
“Now, we all know there’s a tight deadline
on the Nonphixhun,” Hannah Hoover said,
“and Charlie’s done well to ask us to talk
about its introduction. I’m counting on both
of you to find any snags in the system, and
to work together to get that first production
run out by October 2. Can you do it?”
“We can do it in production if we get a
clean design two weeks from now, as
scheduled,” answered Tyson Wang, the
factory manager. “Charlie and I have
already talked about that, of course. I’ve
spoken with our circuit board and other
parts suppliers and scheduled assembly
capacity, and we’ll be ready. If the design
goes over schedule, though, I’ll have to fill
in with other runs, and it will cost us a bun-
dle to break in for the Nonphixhun. How
does it look in engineering, Charlie?”
“I’ve just reviewed the design for the
second time,” Charlie replied. “If Marianne
Price can keep the salespeople out of our
hair, and avoid any more last minute
changes, we’ve got a shot. I’ve pulled my
technical support people off of three other
overdue jobs to get this one out. But,
Tyson, that means we can’t spring engi-
neers loose to confer with your production
people on other manufacturing problems.”
“Well Charlie, most of those problems
are caused by the engineers, and we need
them to resolve the difficulties. We’ve all
agreed that production problems come from
both of us bowing to sales pressure, and put-
ting equipment into production before the
designs are really ready. That’s just what
we’re trying to avoid on the Nonphixhun. But
I can’t have 500 people sitting on their hands
waiting for an answer from your people. We’ll
have to have some engineering support.”
Hannah Hoover broke in, “So long as
you two can talk calmly about the problem
I’m confident you can resolve it. What a
relief it is, Charlie, to hear the way you’re
approaching this. With Brady (the previous
director of engineering), this conversation
would have been a shouting match. Right,
Tyson?” Tyson nodded and smiled.
“Now there’s one other thing you
should both be aware of,” Hoover contin-
ued. “Doc Brown and I talked last night
about a new battery-charging technique,
one that might reduce the charging time of
the Nonphixhun by 25%. There’s a chance
Doc can come up with it before the Nonphix-
hun reaches production, and if it’s possible,
I’d like to use the new process. That would
give us a real jump on the competition and
quiet the environmentalists.”
*This case is an adaptation and revision of Rondell Data
Corporation, by John A. Seeger, Professor of Manage-
ment at Bentley College, Waltham, MA, 1981.
636 PART 6 STRATEGIC CHANGE INTERVENTIONS
Four days after that meeting, Charlie found that
two of his key people on the Nonphixhun project
had been called to an emergency video consultation
about a problem in final assembly: The two halves of
the new smartphone interface wouldn’t fit together
because recent changes in the face required a differ-
ent chassis design for the rear end.
One week later, Doc Brown proudly walked
into Charlie’s office with the new battery casing.
“This won’t affect the other modules of the Non-
phixhun much,” Doc had said. “Look, it takes three
new pins, a new connector, and some new shield-
ing, and that’s all.”
Charlie had tried to resist the last-minute
design changes, but Hannah Hoover had stood
firm. With considerable overtime by the engineers
and technical support staff, engineering services
should still be able to finish documenting the
parts and specifications in time.
Two hardware engineers and three support
staff went into 12-hour days to get the Nonphixhun
ready, but the specifications were still five days
late reaching Tyson Wang. Two days later, the
files came back to Charlie, heavily commented in
red. Wang worked all day Saturday to review the
job and found more than a dozen discrepancies in
the specifications—most of them caused by the
new battery-charging process and insufficient
checking time before release. Correction of these
design faults gave rise to a new generation of dis-
crepancies: Wang’s cover note on the second
return of the prints indicated that he had had to
release the assembly capacity reserved for the
Nonphixhun. On the third iteration, Wang commit-
ted other production capacity to another rush job.
The Nonphixhun would be at least one month late
getting into production. Marianne Price, the vice-
president for sales, was furious. Her customer
needed units now. Global Mobile was the custo-
mer’s only supplier not to come out with a new
model this quarter.
“Here we go again,” thought Newburg.
COMPANY HISTORY
Global Mobile Corporation traced its lineage
through several generations of electronics technol-
ogy. Its original founder, Bob Murray, launched the
firm in 1960 as Global Electronics & Equipment Co.
to manufacture several electronic testing devices
he had invented as an engineering faculty member
at a large university. The firm entered communica-
tions equipment in 1980. A well-established corps
of direct sales representatives, mostly engineers,
called on industrial, scientific, and government
accounts but concentrated heavily on original
equipment manufacturers. Using their technical
know-how, they entered the mobile phone market
in the mid-to-late 1980s and changed their name to
Global Mobile Corporation. In this market, Global
Mobile had developed a reputation as a source of
high-quality, innovative designs. The firm’s sales-
people fed a continual stream of challenging pro-
blems into the engineering department, where
the creative genius of Doc Brown and several
dozen other engineers “converted problems to
solutions” (as the sales brochure bragged). Product
design, especially hardware and structural design,
formed the spearhead of Global Mobile’s growth.
By 2010, Global Mobile offered a wide range
of products in two major lines. Mobile phone sales
had benefited from the phenomenal growth of cell
phones. However, the shift from analog to digital
technology and the emergence of smart phones
mean that mobile phones only accounted for
35% of company sales. Smart phone sales, on
the other hand, had blossomed and, with the
rapid technological changes and Global Mobile’s
reputation, there was an increasing demand for
phones with unique features, ranging from special-
ized screen displays, functions, applications, and
novel form factors.
The company had grown from 100 employees
in 1980 to more than 2,000 in 2010. (Figure 1
shows the current organization chart.) Hannah
Hoover, who had been a student of the company’s
founder, had presided over most of that growth
and took great pride in preserving the family spirit
of the old organization. Informal relationships
between Global Mobile’s veteran employees
formed the backbone of the firm’s day-to-day
operations; all managers relied on personal con-
tact, and Hoover often insisted that the absence
of bureaucratic red tape was a key factor in recruit-
ing outstanding engineering talent. This personal
approach to management extended throughout
the organization. All exempt employees were paid
a straight salary and a share of the profits. Global
Mobile boasted an extremely loyal group of senior
SELECTED CASES 637
employees, and very low turnover in nearly all
areas of the company.
The highest turnover job in the firm was direc-
tor of engineering services. Newburg had joined
Global Mobile in January 2010, replacing Jim
Brady, who had lasted only ten months. Brady, in
turn, had replaced Tom Swanson, a talented engi-
neer who had made a promising start but had
taken to drinking after a year in the job. Swanson’s
predecessor had been a genial old-timer, who
retired at 70 after 25 years in charge of engineer-
ing. (Doc Brown had refused the directorship in
each of the recent changes, saying, “Hell, that’s
no promotion for a bench man like me. I’m no
administrator.”)
For several years, the firm had experienced a
steadily increasing number of disputes between
product development, engineering, sales, and
production people that generally centered on
the problem of new-product introduction. Quarrels
between departments became more numerous
under Swanson, Brady, and Newburg. Some
managers associated these disputes with the
company’s recent decline in profitability—a
decline that, despite higher sales and gross
revenues, was beginning to bother people. Hoover
commented:
Better cooperation, I’m sure, could increase
our output by 5 to 10%. I’d hoped Brady
could solve the problems, but pretty obviously
he was too young—too arrogant. People like
him—that conflict type of personality—bother
me. I don’t like strife, and with him it seemed I
spent all my time smoothing out arguments.
Brady tried to tell everyone else how to run
their departments, without having his own
house in order. That approach just wouldn’t
FIGURE 1
Global Mobil Corporation—Organizational Chart (Partial), 2006
638 PART 6 STRATEGIC CHANGE INTERVENTIONS
work, here at Global Mobile. Charlie Newburg,
now, seems much more in tune with our style
of organization. I’m really hopeful now.
Still, we have just as many problems now
as we did last year. Maybe even more. I hope
Charlie can get a handle on engineering ser-
vices soon.
ENGINEERING DEPARTMENT: PRODUCT
DEVELOPMENT
According to the organization chart Newburg was in
charge of both product development (the applied
research and design function) and engineering ser-
vices (engineering support). To Newburg, however,
the relationship with design was not so clear-cut:
Doc Brown is one of the world’s unique people,
and none of us would have it any other way.
He’s a creative genius. Sure, the chart says he
works for me, but we all know Doc does his
own thing. He’s not the least bit interested in
management routines, and I can’t count on him
to take any responsibility in scheduling projects,
or checking budgets, or what-have you. But as
long as Doc is director of product development,
you can bet this company will keep on leading
the field. He has more ideas per hour than most
people have per year, and he keeps the whole
engineering staff fired up. Everybody loves
Doc—and you can count me in on that, too. In
a way, he works for me, sure. But that’s not
what’s important.
Doc Brown—unhurried, contemplative, casual,
and candid—tipped his stool back against the wall
of his research cubicle and talked about what was
important:
Hardware and structural design engineering.
That’s where the company’s future rests.
Either we have it there, or we don’t have it.
There’s no kidding ourselves that we’re
anything but a bunch of Rube Goldbergs
here. But that’s where the biggest kicks come
from—from solving development problems
and dreaming up new ways of doing things.
That’s why I so look forward to the new
designs we get involved in. We accept them
not for the revenue they represent but
because they subsidize the basic development
work that goes into all our basic mobile phone
products.
This is a fantastic place to work. I have a
great crew and they can really deliver when
the chips are down. Why, Hannah Hoover and
I (he gestured toward the neighboring cubicle,
where the president’s name hung over the
door) are likely to find as many people here at
work at 10 P.M. as at 3 P.M. The important thing
here is the relationships between people;
they’re based on mutual respect, not on policies
and procedures. Administrative red tape is a
pain. It takes away from development time.
Problems? Sure, there are problems now
and then. There are power interests in produc-
tion, where they sometimes resist change. But
I’m not a fighting man you know. I suppose if I
were, I might go in there and push my weight
around a little. But I’m an engineer, and can do
more for Global Mobile sitting right here, or
working with my own people. That’s what
brings results.
Other members of the product development
department echoed these views and added addi-
tional sources of satisfaction from their work.
They were proud of the personal contacts built
with customers’ technical staffs—contacts that
increasingly involved project work as expert advi-
sors in thinking through operational problems like
international compatibility, interoperability issues
between carriers, next generation technologies,
and so on. The engineers were also delighted
with the department’s encouragement of their per-
sonal development, continuing education, and
independence on the job.
But there were problems, too. Shawn Reynolds,
of the structural design group, noted:
In the old days I really enjoyed the work—and
the people I worked with. But now there’s a lot
of irritation. I don’t like someone breathing
down my neck. You can be hurried into jeopar-
dizing the design.
Philip Sanchez, head of the hardware design
section, was another designer with definite views:
Production engineering is almost nonexistent
in this company. Very little is done by the pre-
production section in engineering services.
SELECTED CASES 639
Charlie Newburg has been trying to get prepro-
duction into the picture, but he won’t succeed
because you can’t start from such an ambigu-
ous position. There have been three directors
of engineering in three years. Charlie can’t
hold his own against the others in the com-
pany. Brady was too aggressive. Perhaps no
amount of tact would have succeeded.
Paul Hodgetts was head of special compo-
nents in the R&D department. Like the rest of the
department, he valued engineering design work.
But he complained of engineering services:
The services don’t do things we want them to
do. Instead, they tell us what they’re going to
do. I should probably go to Charlie, but I don’t
get any decisions there. I know I should go
through Charlie, but this holds things up, so I
often go direct.
ENGINEERING SERVICES DEPARTMENT
The engineering services department (ESD) pro-
vided ancillary and support services to R&D and
served as liaison between engineering and the
other Global Mobile departments. Among its main
functions were the maintenance of the design sys-
tems, simple and advanced prototyping, manage-
ment of the central technicians’ pool, scheduling
and expediting engineering products, documenta-
tion and publication of parts lists and engineering
orders, preproduction engineering (consisting of
the final integration of individual design compo-
nents into mechanically compatible packages),
and quality control (including inspection of incom-
ing parts and materials, and final inspection of sub-
assemblies and finished equipment). The original
description of the department included the line,
“ESD is responsible for maintaining cooperation
with other departments, providing services to the
design engineers, and freeing the more valuable
people in R&D from essential activities that are
diversions from their main focus.”
Many of the 75 ESD employees were located
in other departments and locations. Quality control
people, for example, were scattered through the
manufacturing and receiving areas of the Asian
plant, and technicians worked primarily in the
research area or the prototype fabrication room.
The remaining ESD personnel were assigned to
leftover nooks and crannies near the engineering
sections. Newburg described his position:
My biggest problem is getting acceptance
from the people I work with. I’ve moved
slowly rather than risk antagonism. I saw
what happened to Brady, and I want to avoid
that. But although his decisiveness had won
over a few of the younger R&D people, he cer-
tainly didn’t have the department’s backing. Of
course, it was the resentment of other depart-
ments that eventually caused his discharge.
People have been slow accepting me here.
There’s nothing really overt, but I get a nega-
tive reaction to my ideas.
My role in the company has never been
well-defined, really. It’s complicated by Doc’s
unique position, of course, and also by the fact
that ESD sort of grew by itself over the years, as
the design engineers concentrated more and
more on the creative parts of product develop-
ment. I wish I could be more involved in the
technical side. That’s been my training, and it’s
a lot of fun. But in our setup, the technical side
is the least necessary for me to be involved in.
Wang is hard to get along with. Before I
came and after Brady left, there were six
months when no one was really doing any
scheduling. No work loads were figured, and
unrealistic promises were made about
releases. This puts us in an awkward position.
We’ve been scheduling way beyond our
capacity to manufacture or engineer.
Certain people within R&D, for instance
Philip Sanchez, understand scheduling well
and meet project deadlines, but this is not gen-
erally true of the rest of the R&D department,
especially the design engineers, who won’t
commit themselves. Most of the complaints
come from sales and production department
heads because new products, such as the
Nonphixhun, are going to production before
they are fully developed, under pressure from
sales to get out the unit, and this snags the
whole process. Somehow, engineering ser-
vices should be able to intervene and resolve
these complaints, but I haven’t made much
headway so far.
640 PART 6 STRATEGIC CHANGE INTERVENTIONS
I should be able to go to Hoover for help,
but she’s too busy most of the time, and her
major interest is the design side of engineer-
ing, where she got her own start. Sometimes
she talks as though she’s the engineering
director as well as president. I have to put
my foot down; there are problems here that
the front office just doesn’t understand.
Salespeople were often observed taking their
problems directly to designers, while production
frequently threw designs back at R&D, claiming
they could not be produced and demanding the
prompt attention of particular design engineers.
The latter were frequently observed in video con-
ference with production supervisors from the
assembly floor. Charlie continued:
The designers seem to feel they’re losing some-
thing when one of us tries to help. They feel it’s
a reflection on them to have someone take over
what they’ve been doing. They seem to want to
carry a project right through to the final stages.
Consequently, engineering services people are
used below their capacity to contribute, and our
department is denied functions it should be per-
forming. There’s not as much use made of engi-
neering services as there should be.
An ESD technician supervisor added his
comments:
Production picks out the engineer who’ll be the
“bum of the month.” They pick on every little
detail instead of using their heads and making
the minor changes that have to be made. The
people with 15 to 20 years of experience
shouldn’t have to prove their ability any more,
but they spend four hours defending them-
selves and four hours getting the job done. I
have no one to go to when I need help. Charlie
Newburg is afraid. I’m trying to help him but he
can’t help me at this time. I’m responsible for
25 people and I’ve got to support them.
Roxanne Walsh, who Newburg had brought
with him to the company as an assistant, gave
another view of the situation:
I try to get our people in preproduction to take
responsibility but they’re not used to it, and
people in other departments don’t usually
see them as best qualified to solve the prob-
lem. There’s a real barrier for a newcomer
here. Gaining people’s confidence is hard.
More and more, I’m wondering whether
there really is a job for me here. [Walsh left
Global Mobile a month later.]
Another subordinate of Newburg gave his
view:
If Doc gets a new product idea, you can’t argue.
But he’s too optimistic. He judges that others
can do what he does—but there’s only one Doc
Brown. We’ve had over 500 production change
orders this year—they changed 2,500 docu-
ments. If I were in Charlie’s shoes, I’d put my
foot down on all this new development. I’d look
at the reworking we’re doing and get produc-
tion set up the way I wanted it. Brady was
fired when he was doing a good job. He was
getting some system in the company’s opera-
tions. Of course, it hurt some people. There is
no denying that Doc is the most important per-
son in the company. What gets overlooked is
that Hoover is a close second, not just politically
but in terms of what she contributes technically
and in customer relations.
Production personnel said that Brady had failed
to show respect for old-timers and was always med-
dling in other departments’ business. This was the
reason for his being fired, they contended. Taylor
Flores, in charge of quality control, commented:
I am now much more concerned with adminis-
tration and less with work. It is one of the evils
you get into. There is tremendous detail in this
job. I listen to everyone’s opinion. Everybody is
important. There shouldn’t be distinctions—
distinctions between people. I’m not sure
whether Charlie has to be a fireball like
Brady. I think the real question is whether
Charlie is getting the job done. I know my job
is essential, I want to supply service to the
more talented people and give them informa-
tion so they can do their jobs better.
SALES DEPARTMENT
Marianne Price was angry. Her job was supposed
to be selling, but instead it had turned into settling
SELECTED CASES 641
disputes and making excuses to waiting custo-
mers. She pointed a finger toward her desk:
You see that telephone? I’m actually afraid now-
adays to hear it ring. Three times out of five, it
will be a customer who’s hurting because
we’ve failed to deliver on schedule. The other
two calls will be from production or ESD, telling
me some schedule has slipped again.
The Nonphixhun is typical. Absolutely typ-
ical. We padded the delivery date by six weeks
to allow for contingencies. Within two months,
the slack had evaporated. Now it looks like
we’ll be lucky to ship it before Christmas. (It
was now November 28.) We’re ruining our
reputation in the market. Why, just last week
one of our best customers—people we’ve
worked with for 15 years—tried to hang a pen-
alty clause on their latest order.
We shouldn’t have to be after the engi-
neers all the time. They should be able to
see what problems they create without our
telling them.
Phil Klein, head of mobile phone sales under
Price, noted that many sales decisions were
made by top management. He thought that sales
was understaffed and had never really been able to
get on top of the job.
We have grown further and further away from
engineering. The director of engineering does
not pass on the information that we give him.
We need better relationships there. It is very
difficult for us to talk to customers about
development problems without technical
help. We need each other. The whole of engi-
neering is now too isolated from the outside
world. The morale of ESD is very low. They’re
in a bad spot—they’re not well-organized.
People don’t take much to outsiders here.
Much of this is because the expectation is built
by top management that jobs will be filled
from the bottom. So it’s really tough when an
outsider like Charlie comes in.
Eric Norman, order and pricing coordinator for
smart phones, talked about his relationships with
the production department:
Actually, I get along with them fairly well. Oh,
things could be better, of course, if they were
more cooperative generally. They always
seem to say, “It’s my bat and my ball, and
we’re playing by my rules.” People are afraid
to make production mad; there’s a lot of power
in there.
But you’ve got to understand that produc-
tion has its own set of problems. And nobody
in Global Mobile is working any harder than
Tyson Wang to try to straighten things out.
PRODUCTION DEPARTMENT
Wang had joined Global Mobile just after the Iraq
War where he had seen some combat and worked
a stint in the intelligence organization. Both experi-
ences had been useful in his first year of civilian
employment at Global Mobile. The former factory
superintendent and several middle managers had
apparently been engaging in highly questionable
side deals with Global Mobile’s suppliers. Wang
gathered the evidence, revealed the situation to
Hoover, and stood by the president as the accusa-
tions and terminations ensued. Seven months after
joining the company, Wang was named factory
manager.
Wang’s first move had been to rebuild the fac-
tory team with new people from outside the corpo-
ration. This group did not share the traditional
Global Mobile emphasis on informality and friendly
personal relationships and had worked long and
hard to install systematic manufacturing methods
and procedures. Before the reorganization, produc-
tion had controlled purchasing, stock control, and
final quality control. Because of the scandal, man-
agement decided on a check-and-balance system
of organization and moved these three depart-
ments from production to ESD. The new produc-
tion managers felt they had been unjustly
penalized by this reorganization, particularly since
they had uncovered the behavior that was detri-
mental to the company in the first place.
By 2007, the production department had
grown to 500 employees, of whom 60% worked
in the assembly area—an unusually pleasant envi-
ronment that had been commended by Factory
magazine for its colorful decoration, cleanliness,
and low noise level. Another 30% of the work
force, mostly skilled technicians, staffed various
production support departments. The remaining
employees performed scheduling, supervisory,
642 PART 6 STRATEGIC CHANGE INTERVENTIONS
and maintenance duties. Production workers were
not union members, were paid by the hour, and
participated in both the liberal profit-sharing pro-
gram and the stock purchase plan. Morale in pro-
duction was traditionally high and turnover was
extremely low.
Wang commented:
To be efficient, production has to be a self-
contained department. We have to control what
comes into the department and what goes out.
That’s why purchasing, inventory control, and
quality ought to run out of this office. We’d elimi-
nate a lot of problems with better control there.
Why, even Taylor Flores of QC would rather work
for me than for ESD; he’s said so himself. We
understand his problems better.
The other departments should be self-
contained, too. That’s why I always avoid the
underlings, and go straight to the department
heads with any questions. I always go down
the line.
I have to protect my people from outside
disturbances. Look what would happen if I let
unfinished half-baked designs in here—there’d
be chaos. The bugs have to be found before
the designs go to parts manufacturers and into
assembly, and it seems I’m the one who has
to find them. Look at the Nonphixhun, for
example. [Tyson had spent most of Thanksgiv-
ing Day (it was now November 28) reviewing
the latest set of specifications from the
system.] ESD should have found every one
of those discrepancies. They just don’t check
the files properly. They change most of the
things I flag, but then they fail to trace through
the impact of those changes on the rest of the
design. I shouldn’t have to do that.
And those engineers are tolerance crazy.
They want everything manufactured and
assembled to a thousandth of an inch. I’m
the only one in the company who’s had any
experience at that level. We make sure that
the things that engineers say on their drawings
actually have to be that way and whether
they’re obtainable from the kind of raw materi-
als and parts we use.
That shouldn’t be production’s responsibil-
ity, but I have to do it. Accepting bad designs
and documentation wouldn’t let us ship the
order any quicker. We’d only make a lot of
junk that had to be reworked. And that would
take even longer.
This way, I get to be known as the bad
guy, but I guess that’s just part of the job.
[Wang paused and smiled wryly.] Of course,
what really gets them is that I don’t even
have a degree.
Wang had fewer bones to pick with the sales
department, because he said that they trusted him.
When we give Marianne Price a shipping date,
she knows the equipment will be shipped
then.
You’ve got to recognize, though, that all of
our new product problems stem from sales
making absurd commitments on equipment
that hasn’t been fully developed. That always
means trouble. Unfortunately, Hoover always
backs sales up, even when they’re wrong.
She always favors them over us.
Ralph Simon, executive vice-president of the
company, had direct responsibility for Global Mobile’s
production department. He said:
There shouldn’t really be a dividing of depart-
ments among top management in the com-
pany. The president should be czar over all.
The production people ask me to do some-
thing for them, and I really can’t do it. It creates
bad feelings between engineering and produc-
tion, this special attention that they [R&D] get
from Hannah. But then Hoover likes to dabble
in design. Wang feels that production is trea-
ted like a poor relation.
PRODUCT RELEASE
At the executive committee meeting of December 6,
it was duly recorded that Wang had accepted the
prints and specifications for the Nonphixhun smart
phone and had set December 29 as the shipping
date for the first 100 phones. Hoover, as chairperson,
shook her head and changed the subject quickly
when Newburg tried to initiate a discussion of inter-
departmental coordination.
About a week later, Hoover called Newburg
into her office.
SELECTED CASES 643
Charlie, I didn’t know whether to tell you now,
or after the holiday. But I figured you’d work
right through Christmas Day if we didn’t have
this talk, and that just wouldn’t have been fair to
you. I can’t understand why we have such poor
luck in the engineering director’s job lately. And
I don’t think it’s entirely your fault. But….
Charlie only heard half of Hoover’s words, and
said nothing in response. He’d be paid through
June 30…. He should use the time for search-
ing…. Hoover would help all she could…. Jim
Brady was supposed to be doing well at his own
new job, and might need more help.
Charlie cleaned out his desk and numbly
started home. The electronic carillon near his
house was playing a Christmas carol. Charlie
thought again of Hoover’s rationale: conflict still
plagued Global Mobile—and Charlie had
not made it go away. Maybe somebody else
could do it.
Questions
1. What is your diagnosis of the strategy and
organization design at Global Mobile? How
well does Global Mobile’s strategic intent fit
with its external environment?
2. How would you work with Hannah Hoover and
the executive committee to bring about
strategic change at Global Mobile?
644 PART 6 STRATEGIC CHANGE INTERVENTIONS
S
el
ec
te
d
C
a
s
e
s LEADING STRATEGIC CHANGE AT DAVITA: THE
INTEGRATION OF THE GAMBRO ACQUISITION
I
n the summer of 2005, Kent Thiry, a
49-year-old Harvard MBA, ex-Bain consul-
tant, and now the CEO of DaVita, thought
about how he and his management team
should address a set of emerging and impor-
tant challenges. DaVita (publicly traded on the
New York Stock Exchange under the symbol
DVA) was a $2.2 billion annual revenue opera-
tor of free-standing and in-hospital kidney dialy-
sis centers.
Thiry and his senior team were meeting to
discuss the next steps the company should
take to continue its organizational development
and strategic evolution. They were especially
focused on how to manage several looming
challenges. DaVita was just in the process of
completing a $3.1 billion purchase of Gambro,
a large competitor. The acquisition would
nearly double its size, from 700 to more than
1,200 dialysis centers and from 13,000 to
25,000 people. As such, it would cement its
position as the second largest operator of kid-
ney dialysis centers in the United States.
When Thiry came to lead the company in
October 1999, the organization had been beset
with financial, operational, regulatory, and
morale difficulties. “The company was techni-
cally bankrupt,” he said. “It was being investi-
gated by the SEC, sued by shareholders, had
turnover at over twice our current levels, was
almost out of cash, and, in general, wasn’t the
happiest of places.”1 By 2005, the new man-
agement team had achieved a complete turn-
around. The company’s market capitalization
had grown from $200 million to more than
$5 billion, the clinical outcomes had become
the best in the industry, the company’s organic
growth was the highest in the industry, and
employee retention had improved dramatically,
with a 50% reduction in turnover.
However, this had not been a typical turn-
around. Instead, a closer look at DaVita’s cul-
ture and leadership showed that the DaVita
management team’s focus had been on
creating a strong and positive values-based
organization where all levels of the organization
had an emotional commitment to its success.
The foundation was the Mission and Values,
first created by 700 of the company’s man-
agers in 2000 and now widely practiced
throughout the company. To the management
team, the company’s rebirth strategy was
based on the belief that they had to create
something larger than themselves in order to
be successful. Thiry commented:
At Vivra [another kidney dialysis company
where many of DaVita’s senior leaders had
worked together], we implemented many
people, team, and culture-friendly policies.
They were consistent with my basic values,
but the extra energy I brought to them was
because they were a means to the end of
having a successful company. This time it is
different. This time the building of a suc-
cessful company is a means to the end of
building a healthy community. Because
humans spend more waking hours at work
than anywhere else, if you are a leader who
purports to care about your team, it makes
no sense to create a paradigm which con-
cedes all that time needs to be spent in [a]
relatively vanilla values or sterile emotional
commitment environment.2
Because of this, Thiry and his team flagged
several important challenges they believed
needed to be addressed if DaVita was to con-
tinue its successful evolution of both opera-
tions and culture. The question was, How
could they use the culture to achieve even
greater operational excellence?
THE GAMBRO INTEGRATION
One immediate task entailed integrating Gam-
bro into the DaVita way of managing and its
culture. Gambro was significantly more hierar-
chical and formal than DaVita, and did not have
a strong people-oriented culture. Prior to the
1http://www.redcoatpublishing.com. 2Kent Thiry, email, November 27, 2005.
SELECTED CASES 645
merger, DaVita had been disparaged inside Gam-
bro, with Thiry described as “a compliance maver-
ick, reckless, and egotistical.” Ironically, Gambro
had itself purchased Vivra in 1997, then a smaller,
publicly traded dialysis company led and trans-
formed by Thiry during the 1990s. As the leader
of the combined organization, Thiry’s goal was to
be respectful of Gambro, its people, and its capa-
bilities, while maintaining DaVita’s unique culture
and way of management.
PERSONAL TOUCH IN A GROWING
ORGANIZATION
Prior to the Gambro integration, DaVita operated in
37 states. Its growth, size, and diverse locations
made it increasingly difficult for Thiry to personally
touch the many teammates on a regular basis. This
presented a key challenge: How to personally
impact teammates as he had during his first five
years at the helm? Affectionately called “KT” by
many teammates in the company, Thiry was, by
everyone’s estimation, extremely charismatic and
energetic. More than that, Thiry was the primary
architect of and cheerleader for DaVita’s unique
culture and values. The company reflected the
vision shared by Thiry, Joe Mello, and a few others
such as Doug Vlchek. Mello, DaVita’s COO, and
Vlchek, DaVita’s chief wisdom officer, had worked
with Thiry before and had joined DaVita in 1999 to
help drive the organizational change initiative.
TEAMMATE MORALE AND COMPENSATION
Maintaining the culture and sense of community
within DaVita was not easy, even before the acqui-
sition of Gambro. Taking care of dialysis patients is
a difficult job. One out of every five dialysis
patients dies each year, creating not only a difficult
work environment but also a lot of emotional
strain. With the company’s turnaround receding
into the past, numerous employees—or “team-
mates” as all are called at DaVita—had rising
expectations for wages and working conditions.
The company’s ability to raise salaries was con-
strained by the high volume of patients—about
79%3—who were covered by government pro-
grams such as Medicare and Medicaid but whose
reimbursement rate did not cover the cost of
treatment.
Because of financial constraints, dialysis provi-
ders could not afford to pay high overtime rates. As
a result, many of DaVita’s patient care technicians,
who typically earned between $11 and $14 per
hour, worked two jobs in order to generate suffi-
cient income. One manifestation of the pay chal-
lenge was the barrage of questions that Thiry and
Mello would get as they traveled the country con-
ducting “town hall meetings.” Town hall meetings
were an opportunity for teammates to ask ques-
tions of senior leadership, in person. It was quite
common for teammates to ask why their wages
were not higher and why productivity expectations
were so high and always rising. Moreover, DaVita
competed for nurses in labor markets with nursing
shortages. Many other organizations had chosen to
just throw money at the problem of attracting and
keeping nurses, something DaVita could not afford
to do.
OPERATIONAL EFFICIENCIES AND
PRODUCTIVITY IMPROVEMENT
The fifth challenge was to continue to drive produc-
tivity improvement and to think about ways to funda-
mentally reengineer the business. As Mello noted,
the company had made great strides in enhancing
labor productivity over the past several years. But
there was always the looming threat of reduced
reimbursement from the government for dialysis ser-
vices. This revenue stream represented approxi-
mately 60% of total company revenue.4 Mello
talked about the challenge of doing things that
would materially and fundamentally enhance the
company’s cost structure so DaVita could be largely
impervious to what might happen in its environment.
As Thiry prepared for the meeting with his
executive team, he thought about what the com-
pany should do about these challenges and main-
taining the culture his senior team had worked so
hard to build. He wanted the team to come up with
some ideas about how to address the challenges
facing the company, and of course, to do so in a
way that was consistent with its values and
culture.
3From 2004 DaVita Annual Report, p. 4. 4From 2004 DaVita Annual Report, p. 4.
646 PART 6 STRATEGIC CHANGE INTERVENTIONS
A BRIEF HISTORY OF DAVITA (1994–1999)
DaVita was the new name given in 2000 to Total
Renal Care (TRC), a company originally founded by
Victor Chaltiel. Chaltiel had sold a former company
for a good profit, with the business model of
leveraging cost savings obtained through large-
scale purchasing and distribution systems for
drugs in the Medicare reimbursement program.
Based on his success, he planned to do the same
thing in the domain of kidney dialysis centers
through roll-ups of smaller chains and individual cen-
ters. One of Chaltiel’s strategies was to apply strict
business principles and reap their rewards upon
entering the traditionally not-for-profit domain of kid-
ney dialysis centers (run by hospitals and physician
specialists). He focused on growth through acquisi-
tion through the 1990s. The Internet bubble focused
many analysts on top-line revenue growth, which
provided TRC with a high stock price that allowed
it to continue making acquisitions at a fast pace.
Unfortunately, Chaltiel and his team failed to
integrate their acquisitions, leading to some opera-
tional incoherence in TRC. One example noted by
Harlan Cleaver, DaVita’s chief information officer,
was that there was no uniformity in a critical patient
data form used to record and monitor patient care
during dialysis, and little standardization in reporting
and work methods across centers. This absence of
standardization made routine management activities,
such as transferring personnel and patients across
centers, much more difficult if not impossible.
Cash flow issues created serious problems.
Mello commented that another operational weakness
of TRC was insurance reimburse-ment—a critical
problem for a company whose revenue was entirely
dependent on it. Insurers and the government would
frequently question charges and demand additional
documentation. They would occasionally unilaterally
reduce the reimbursement amount, and delay pay-
ment until they received answers to queries and
requested documentation. Medical service providers
such as DaVita needed to pay close attention to bill-
ing and collections to avoid a cash crunch.
Finally, senior executives paid scant attention to
the dialysis centers themselves, which were seen
more as an avenue of corporate growth where
patients and caregivers were economic units in a
bigger financial structure. This head-quarter-centric,
financially oriented operating culture did not win
friends among the health care practitioners who
worked hard in the field to deliver quality care.
In 1999, Total Renal Care ran into severe financial
difficulties, having just recently merged with another
large competitor that had also been built in a rapid
fashion. The board of directors turned to Thiry, who
was in the process of leaving a private-equity–funded
managed care company where he had been for two
years post-Vivra in 1997. He was eagerly anticipating
time off with his family. When headhunters called
to see if he wanted to interview for another CEO
position, he always replied, “No.” Thiry was within
90 days of his “retirement” when TRC called:
I still remember the call. After my assistant told
me who was on the phone, I picked it up with
the intention of giving the same ‘no’ answer. As
I started to listen, all the positive memories of
my first time in dialysis, at Vivra, came flooding
back. It had been the most powerfully positive
time of my professional life. I have no idea what
I said in that phone conversation. All I know is I
went home that night and asked my wife
Denise if it was okay to interview. She was
livid. What about my alleged interest in more
time with the family? What about the fact that
this was a turnaround located in another city
[Thiry lived near San Francisco and TRC was
headquartered in the Los Angeles area]? The
difficulty of the decision felt like a terrible bur-
den at the time. It turned out to be a gift. Never
before did I have to think so deeply about why I
wanted to do something. After agonizing for a
few weeks, we decided I would give it a try.
There is a saying I love—we use it at DaVita
all the time: ‘Begin with the end in mind.’
I started at DaVita with more of an end in mind
than any other beginning in my professional life.
Before accepting the job offer, Thiry reached out
to a set of people who had been with him in his
previous dialysis venture, people whom he trusted,
liked, and respected. He recruited Harlan Cleaver,
who was now living in Denver, to be the chief tech-
nology officer and David Barry to be COO. He
reached out to Doug Vlchek, whom he had hired
into Vivra, to lead the organizational change and
culture-building efforts. Thiry recalled, in reference
to the musketeer imagery he loves, asking them
something like, “Will you ride again?” They all
SELECTED CASES 647
accepted. When Barry left in the first year for per-
sonal reasons, Thiry brought in Joe Mello, who had
also been with him at Vivra.
When Thiry arrived at TRC in October 1999,
the company was a mess. It could barely make
payroll, was in default on its loan covenants, and
was paying penalties to the banks. Highly lever-
aged from its many acquisitions, it was essentially
on the verge of bankruptcy. The stock had fallen
from nearly $50 to $2 a share. Systems were non-
existent or in chaos, and the organization’s employ-
ees were dispirited and unhappy. It was not at all
clear that financial survival was possible.
KEY SUCCESS FACTORS FOR A DIALYSIS
COMPANY LIKE DAVITA
There were four critical factors for organizational
success along both financial and clinical outcome
dimensions.
Attention to Detail
The first factor was painstaking attention to opera-
tional details and compliance with government regula-
tions. For instance, a company that charged the
government, through the Medicare program, for ser-
vices that were not actually delivered and/or were not
documented could face accusations of fraud and suf-
fer financial penalties as well as delays in payment.
Legal problems could also arise from actually deliver-
ing care or medicines that patients did not need, as
well as for improper relationships with drug compa-
nies or physicians that might entail kickbacks for
patient referrals or purchases of pharmaceutical sup-
plies. Proper record keeping and ethical behavior were
vital to the ongoing success of dialysis companies.
Managing Financial Outcomes
The opportunity to make a financial difference in
operational results rested largely on small but
important behaviors and decisions. One such activ-
ity was carefully using supplies to avoid waste and
maintaining appropriate stock levels so that inven-
tory costs were not unnecessarily high, yet avoid-
ing emergency ordering. Another activity was the
reuse of dialysis filters and maintenance of the dial-
ysis machines to ensure both long life of the equip-
ment and lower cost per treatment.
Possibly even more important was the activity
of efficient labor-hour management, given that the
proportion of labor costs in the total cost structure
equaled one-third to one-half of the treatment cost.
As Mello pointed out, in 2005 DaVita would do
about 7,000,000 dialysis treatments. Each 0.01
savings in labor hours per treatment achieved
across the company was worth about $1.8 million;
this savings went directly to the bottom line.
Achieving Good Clinical Outcomes
Attention to detail during the dialysis visit and strong
personal relationships among the DaVita staff and
patients drove the achievement of good clinical out-
comes. First, attention to detail also mattered a lot for
obtaining good clinical outcomes. For example, it was
important to take care while putting the patient on the
machine, monitoring the treatment as it was occurring,
and taking the patient off the machine at the end of the
session. It was also critical to monitor the patient’s
health status generally so that treatment issues could
be foreseen and addressed. Good clinical outcomes
also enabled DaVita teammates to take pride in work-
ing in a company that provided the best care in the
industry, an advantage in recruiting and retention.
Second, achieving good clinical outcomes
depended not only on the patient’s commitment to
treatment but on the emotional tone and bond
between the center’s teammates and the patients.
Patients sometimes missed their dialysis appoint-
ments because they found the treatment unpleasant,
the logistics of setting up appointments too difficult,
or they became depressed by the likelihood of suc-
cess. However, according to various DaVita clinic
teammates, one important factor affecting patient
compliance was the extent to which patients trusted
and felt comfortable with the dialysis center and its
staff. Emotions are contagious, and to the extent
that DaVita could create positive, genuine emotions
on the part of its workforce, those positive emotions
might influence the attitude of patients. This could
thereby improve the patients’ survival, not only
through their positive mental attitudes but also by
affecting their compliance with the difficult regimen
of living with late-stage kidney disease. As one admin-
istrator said, “It’s important that the teammates like
their jobs and smile and relate in a compassionate
way to patients, because that makes the patients
feel better about being here.”
Employee Attraction and Retention
The final critical success factor was the attraction
and retention of teammates. DaVita competed for
648 PART 6 STRATEGIC CHANGE INTERVENTIONS
nurses with hospitals, doctors’ offices, other health
care providers, and, of course, with other dialysis
companies, and the chronic nursing shortage in the
United States meant there were always unfilled
positions. Hospitals typically paid more per hour
than DaVita or its competitors.
Patient care technicians (PCTs), the largest cat-
egory of employees, typically earned less than $15
an hour. Many worked two jobs, with their second
job often being for another provider of dialysis ser-
vices. PCTs were often tempted to leave for better-
paying opportunities, either with other health care
providers or to find different occupations.
Retention of teammates was important
because turnover was costly, entailing finding and
training replacement people, and possibly paying
overtime labor rates if a center was temporarily
short-staffed. High turnover could also impair clini-
cal outcomes, because a nurse’s or PCT’s experi-
ence in doing dialysis and working in a team
enhanced patient care outcomes. Being an
employer of choice was not just part of DaVita’s
mission, but was also important for business suc-
cess and better patient care.
THE TURNAROUND (1999–2005)
With an acute awareness of these critical success
factors, Thiry and his colleagues set about the task
of turning the organization around. The first order of
business was the business itself. Over the next four
years, the organization worked to fix billing and cash
flow problems, restructure outstanding debt, bring
the information systems up to speed, hire people
who could “get stuff done” (“GSD” remained a
popular acronym in the company, and being “good
at GSD” was a high compliment), and invest in con-
tinuous improvement projects and training.
It was a difficult time for the company. For a
time, the government stopped paying DaVita for
laboratory tests because of issues in record mainte-
nance and documentation. The company had to
decide what to do with the patients whose lab
tests were not being reimbursed. The team decided
to continue performing tests that it felt were essen-
tial in delivery of care and to appeal the decision to
an administrative law judge to attempt to obtain the
denied funds. Four years later, after winning six suc-
cessive judgments, the government paid DaVita over
$90 million. Harlan Cleaver, the chief information
officer, described the process of bringing order to
the system and establishing common practices,
measures, and information systems across the cen-
ters. His first step was to standardize the paper-
based system used to keep track of patient care in
the various centers. As he pointed out, it made
sense to start with that patient record system
because the issues were of standardization, com-
mon practices, and alignment, without the added
complication of computers on top of everything
else.
The second order of business was getting the
philosophy right. Thiry and his colleagues recog-
nized that what they said and did in those first
months would set the tone for the ensuing years
at the company, so close attention to building the
kind of culture and organization they wanted pro-
ceeded in parallel with the business turnaround
efforts. Thiry described early meetings of the exec-
utive team in which they would spend time dis-
cussing basic issues, such as whether they could
make payroll and their ongoing negotiations with
the banks, and then they would turn to talk about
the core values, culture, and operating philosophy
they wanted to instill. When Thiry and Vlchek
would start talking about Mission and Values,
many of the executives were very skeptical about
the value and intent of this activity when the com-
pany was in such dire straits. Thiry believed that
without a clear statement of Mission and Values,
the operational turnaround could not be sustained.
A big part of the new philosophy was to recognize
that the centers, where patient care was delivered and
where most DaVita teammates worked, were key to
the company’s success. To emphasize the impor-
tance of the centers, Thiry had all senior managers,
himself included, “adopt” a center and drop by occa-
sionally. Thiry’s center was in Hayward, California, and
long after his last visit, people in the center were still
commenting on his attention to them.
The company later replaced the adopt-a-center
program with the practice of having everyone hired
in or promoted to the vice president level or above
go through “Reality 101,” which entailed spending a
week in a center helping to do the day-to-day work.
Executives participated in activities such as machine
set-up prior to dialysis, machine teardown and disin-
fection post treatment, helping with blood pressure
monitoring, or whatever tasks they felt comfortable
SELECTED CASES 649
in actually performing. As Thiry explained, it was
important not to push people to do things they felt
uncomfortable or unskilled at doing, but it was also
important for people to experience what it was like
to get up at 4 A.M. to get to a center at 5 A.M. so it
could be open for the first patients at 6 A.M., and to
see what life in a center was about.
Thiry and the senior management group under-
stood they needed the involvement, cooperation,
energy, and ideas of the clinic managers, the front-
line supervisors who make the centers work. In May
of 2000, more than 400 clinic managers, plus people
from corporate headquarters assembled in Phoenix,
Arizona, for the first of what has now become
annual corporate-wide meetings. The choice of loca-
tion, Phoenix, was intentional, as the phoenix is a
bird that rose from the ashes, just as the company
was seeking to rise from its precarious condition. At
this first meeting, suggestions for a new name for
the company were presented. It was the company’s
teammates, not the board or just the senior
management, collectively assembled at this off-
site, who voted on and thereby chose the new
name, DaVita, which is an approximate translation
of the Italian phrases “to give life” or “he/she gives
life.”5 Also at that meeting, groups discussed,
debated, and voted on proposals for the core values.
Figure 1 shows the mission statement that Thiry
presented at the meeting and the core values
decided upon by the Phoenix delegation. Over the
years, the seventh value, “fun,” was added by
another election.
For much of the first 18 months, Thiry and
Mello would hold frequent conference calls with
the top 800 or so people in the company to update
them on progress. As part of each call, Thiry would
say, “What is the incremental evidence that we
are serious about our Mission and Values?” And
then he would provide an answer to that question.
FIGURE 1
DaVita’s Mission Statement and Core Values
5”Total Renal Care Announces New Company Name,”
Investor Relations–DaVita, June 5, 2000.
650 PART 6 STRATEGIC CHANGE INTERVENTIONS
Thiry commented, “There were many periods
where, absent the pressure of knowing I had to
ask and answer that simple question out loud in
front of 800 people, in many instances I would
not have launched another program, or policy, or
communication. They would have been squeezed
out by the harsh realities of normal business—like
they normally are.”
With increased focus and attention to opera-
tional details, the commitment of the company’s
teammates, and the bank negotiations behind it,
DaVita embarked on a remarkable transformation
in its performance, achieving not only great
financial results, as shown in Figure 2, but also
consistent, year-over-year improvements in clinical
outcomes and reductions in turnover.
THE DAVITA WAY: VALUES AND
ORGANIZATIONAL CULTURE
DaVita did not develop its culture by accident. The
culture was a result of what Thiry calls “purposeful
actions” that “articulated and demonstrated” what a
company could be. First, Thiry created a clear, con-
cise, easy-to-remember mission that was quickly
turned into a song still sung today. Then, he asked
700 colleagues to come to a consensus on the core
values. They also used the following question as a
benchmark for their own development: What did
FIGURE 2
DaVita Financial Results
1999 2000 2001 2002 2003 2004
Revenues ($millions) 1,445.4 1,486.3 1,650.8 1,854.6 2,016.4 2,298.6
Operating margin 13.0% 19.6% 25.6% 24.6% 28.3% 27.8%
Net profit ($millions) ,56.4. 17.0 98.1 147.8 163.2 217.3
Earnings per share ,0.46. 0.13 0.76 1.23 1.69 2.11
Cash flow per share 0.46 1.06 1.59 2.33 2.46 3.08
SOURCE: Value Line Investment Survey.
DaVita Split-Adjusted Stock Price
SELECTED CASES 651
other great companies do to cultivate cultures—
companies like Southwest and Disney?
Employees became teammates, and, if they
“crossed the bridge” of believing the company
could be special, they became “citizens” of the
“village” (not a company), with Thiry as “mayor.”
Hugs were common, as were high-fives and laugh-
ter, even among the intense ex-consultants and
MBAs who populated the business offices.
Through what are called “tradi tions and symbols,”
DaVita executives brought organizational change
concepts to life and made them real.
Cathy Gelb, who ran the DaVita Academies as
part of DaVita University and who had been with the
company since 2001, commented that one of the
things that distinguished DaVita from the Fortune
1000 companies where she had worked as a free-
lance training consultant was the tremendous
amount of strategic thought and intentionality that
went into every single action and decision. She
noted that, for instance, all meetings were carefully
planned, even to thinking about the particular music
that would be used, the sequencing of materials,
seating arrangements (for instance, at Academies,
should guests be put in the back?), and the specific
words and terms that would be employed during
presentations. All of this planning was an effort to
create the right message and feelings and provide
an optimal experience for those in attendance.
Evaluation data were collected about every-
thing, including every meeting and class, and used
to make educational activities and meetings more
effective over time. Gelb also commented that
Thiry did not like the word “culture” because of its
association with the word “cult,” and there was
already some joking about “drinking the Kool Aid”
because of DaVita’s very strong, carefully managed,
and inclusive set of management practices.
The DaVita Way of Managing was captured in a
set of phrases—short and easily remembered—that
encapsulated many of the values and operating prin-
ciples of the company. These values, and the associ-
ated behaviors, were also incorporated into interview
schedules used to select new teammates, into all
performance appraisals, and into the company
employee attitude and satisfaction surveys.
New, Ours, Special
At DaVita meetings, executives always asked the
assembled people to respond to three questions:
“What is this company? Whose company is it?
What could it be?” The answers, literally shouted
back, were “New,” “Ours,” and “Special.” The idea
of “new” was not just that DaVita was a different
organization after the 2000 turnaround, but with its
ongoing acquisitions and new business ventures it
was always a new place reinventing itself. “Ours”
means that the company is the responsibility and
under the control of the teammates who work for it,
who have the opportunity to make the company what
they would like it to be. This leads to the last question.
Note that the executives do not ask what “is” the
company, but rather, “What could it be?” The
answer, “special,” captures in a word the aspirations
for building an organization that is truly unique in its
culture and its results for its patients, while “could”
reflects the fact that the deve lopment of the organi-
zation is a journey, and although it has achieved great
things, its aspirations are for more, and that being spe-
cial is something yet to be fully achieved.
We Said, We Did
Accountability is an important value at DaVita. So
is measurement—the company measured not
just clinical outcomes, costs, and labor utilization,
but almost everything that was related to dimen-
sions of performance. In addition, there is an
emphasis on systematic, planned thinking and
actions. All of this came together in the idea of
follow-up, something that began at the very top
of the organization. As Richard Fontaine, one of
the directors on the com pany’s board, explained,
at virtually every board meeting Thiry would pres-
ent a list of issues and questions from the pre-
ceding meeting, and then go through them one
at a time and explain what the company and he
had done about each. This included, for instance,
progress on building a succession planning pro-
cess and preparing back-up people ready for
senior-level positions. Similarly, at DaVita Acade-
mies, if the company had made assurances or
pro mises to the workforce—to get an answer
to some question, to address some concern or
problem—Thiry would explain what had been
done and end with, “We said, we did.”
The implication was that the company and
each person in it was accountable for meeting its
commitments—for addressing issues and explain-
ing how another important value, continuous
improvement, was occurring. As several people
652 PART 6 STRATEGIC CHANGE INTERVENTIONS
noted, if someone was in a position of often having
to say, “We said, but we didn’t do,” that person
would probably not last long at an organization that
stressed accountability and getting stuff done.
One for All, All for One
This idea, from the Three Musketeers books and
movies, was a prominent theme in the company.
Thiry’s office at corporate headquarters in El
Segundo, California, near the Los Angeles airport,
had a movie poster from The Man with the Iron
Mask, and has hanging in it the sword that Thiry
brandishes—in full Musketeer uniform—at DaVita
Academies and other meetings. The phrase repre-
sents one way of understanding the idea of commu-
nity and shared obligations and responsibility. “One
for all” means that it is the obligation of every
DaVita teammate to contribute what they can to
the whole, to expend their best efforts on behalf
of the collective, and to take responsibility for the
company and each of its members. “All for one”
means that just as the individual should devote him-
self or herself to the group, the group has a respon-
sibility to help that individual develop and succeed
and surmount difficult setbacks and transitions.
An example of this care and community was a
fund called the DaVita Village Network, to which
DaVita teammates contributed to help others out
with, for example, unexpected medical expenses or
other financial needs. Teammate contributions to the
DaVita Village Network were matched by contribu-
tions made by the company out of its profits.
The Village—Not Just a Company,
But a Community
Related to the idea of “one for all, all for one” was
the idea of DaVita as a community—represented in
the word “village.” Corporate headquarters in El
Segundo was referred to as “Casa DaVita” (the
house of DaVita), and village language and imagery
were used in many ways. Joe Mello would tell a
story from one of his favorite books about a man
living on a hillside who sees other members of his
village below in danger from an onrushing flood, and
sets his own house on fire, so that when the people
rush up the hill to put out the fire, they are saved
from the flood. The word “worker” was never used
and seldom was the word “employee”—instead,
people were referred to as “teammates” or
“citizens” and, consistent with the village imagery,
language that evoked the idea of “citizenship” and
the mutual obligations of citizens and their commu-
nity was emphasized. In the words of Gina Ran-
dolph, a group vice president, “We think of
ourselves as a village where each facility is a
neighborhood.” When pressed on how important
these distinctions were, she responded, “From
the viewpoint of a career that spans several dec-
ades, this is the first time I have had the privilege
of working for a company whose Mission and
Values are so completely alive and not hanging on
the wall.”6
No Brag, Just Facts
DaVita was committed to a fact-based approach to
management and decision making, to talking to peo-
ple about the facts, and to using facts and evidence
as much as possible for every decision and state-
ment. So, when Thiry stood up at a DaVita Academy
meeting and stated that DaVita provides the best care
for dialysis patients in the industry—a statement that,
on its surface, was not unlike the typical corporate
claim about its quality, service, or leading edge
technology—he then provided quantitative data
showing how DaVita was doing on specific clinical
outcome measures, ending with the phrase, “No
brag, just facts.” It was a way of cementing the idea
that people at the company should attempt to anchor
their judgments, their statements, and their claims in
quantitative data, not in hyperbole or wishes.
Fact-based decision making was reinforced in
the company’s measurement system. Clinic man-
agers received monthly, multipage reports showing
how their performance compared to goals or bud-
gets, to their own prior results, and to other facilities
in their region, in their division, and in DaVita as a
whole. Annual surveys of employees provided infor-
mation on satisfaction and engagement, as well as
perceptions about the extent to which people felt the
company was living up to its Mission and Values.
But what was most interesting, and what
really reinforced the commitment to a fact-based,
measurement-rich culture, was what happened
when the company was unable to measure some-
thing of importance. Patients who did not show up
for dialysis because they were in the hospital or on
6David Robbins, http://srarchitects.com/health%20care.htm.
SELECTED CASES 653
vacation made scheduling labor more difficult and
affected labor productivity. But this indicator could
not be captured systematically given current man-
agement information systems. Therefore, the mea-
sure was included in the monthly reports as a blank
graph with the notation, “Not Available.” As Joe
Mello explained, if there were some important crit-
ical data that could not yet be assessed, the com-
pany included them anyway on the reports,
showing they were not available. This presentation
of a missing measure, month after month, encour-
aged people to figure out ways to measure what
might have first been viewed and dismissed as
“unmeasurable,” and therefore the availability of
data useful for making decisions kept improving.
We Are Here
DaVita wanted to encourage its teammates to be
fully involved and present in the company, not just
physically but also emotionally. There were “We
Are Here Awards,” which were $1,000 in vacation
expenses given to randomly selected nonexempt
(hourly paid) teammates who had perfect atten-
dance (no unplanned absences) during a 90-day
period. At DaVita meetings, teams would be
asked if they were here, and would respond with
a cheer, or chant, or yell, or some combination that
indicated not only physical presence but also
involvement and commitment. In Thiry’s office,
painted on the wall was the saying, “This is not a
dress rehearsal, this is my Life.” There was an
emphasis on having people fully engaged in their
work and with the company, so they could find
meaning and fulfillment in their jobs and in their
associations with teammates.
The Shining Star
The “i” in DaVita was dotted as a star, referred to as
a “shining star.” Thiry would say that the star lived
in a lush green valley and only came out to sit on top
of the “i” when a DaVita teammate did something
special for a patient or a fellow teammate. Because
at any given moment there was always someone
doing something special in the company, the star
was always “out.” At the national awards cere-
mony, the highest awards were called “Shining
Star Awards,” for people who not only performed
their jobs with exceptional proficiency, but who
also exemplified the DaVita values and who contrib-
uted to the well-being of the team.
DAVITA MANAGEMENT PRACTICES
Values and beliefs, ways of being, and the organi-
zational culture had to be produced and reproduced
every day to be real and meaningful. DaVita did a
number of things to ensure that its Mission and
Values would infuse the day-to-day behavior of its
teammates and to help ensure that it operated in
ways consistent with its aspirations. Many of its
management practices seemed (and were) like
common sense. All were products of extensive
discussion by people inside the company, and all
were talked about regularly, practiced, and were
embedded in everything the company did.
The DaVita Way and the DaVita
Way of Managing
DaVita thought that it was beliefs that drove beha-
viors that, in turn, produced performance. As Thiry
explained it, the “DaVita Way” was “what (who)
we are: our Beliefs (which have been introduced
and articulated over the past few years), as well as
the consistently practiced Behaviors (which are
derived from those beliefs).” The company articu-
lated and lived its beliefs through talking about its
history, its symbols and traditions, the idea of the
village, communication, talking about the future,
and caring and sharing for members of the commu-
nity. The DaVita Way of Managing defined a set of
behaviors and competencies that the company
sought to promote and produce, and which formed
the basis of all of its selection and performance
management practices, and were reinforced in
its educational activities. There were four beha-
viors critical to the DaVita Way of Managing: It
(1) gets the right stuff done, (2) fosters team, (3)
stewards resources, and (4) builds relationships.
There was one other aspect to the DaVita man-
agement approach—an emphasis on execution.
When the leadership, including Mello, Vlchek, and
Thiry, had been together at Vivra, they had noticed
that even though they had an extremely talented
executive team of about nine people who were all
working hard, things were not happening. They
went to an off-site meeting and concluded that there
were four elements critical for effective execution: (1)
absolute clarity of purpose, (2) absolute accountability,
(3) relentless follow-up, and (4) celebrating successes.
These principles and practices helped build opera-
tional excellence and an ability to get things done at
654 PART 6 STRATEGIC CHANGE INTERVENTIONS
DaVita, where they were very much a part of the
fabric of the management approach.
DaVita University
DaVita had many employees in a large number of
centers, and although turnover had been reduced, it
was still high enough that—coupled with corporate
growth—a large number of new people were enter-
ing the company each year. The Gambro acquisition
would bring 12,000 new people into the organization.
To achieve a higher level of uniformity in understand-
ing, communication, and management practice, a lot
of the DaVita way of managing was transmitted
through DaVita University. This activity was started
within a year of Thiry’s arrival in the company, even
as the financial recovery was proceeding, and the
programming has expanded significantly over time.
DaVita University was run out of the Wisdom
Department, and the head of the department, who
had been Doug Vlchek until mid-2005, was called
the chief wisdom officer. Vlchek’s nickname was
“Yoda,” after the Star Wars character, an appellation
he had been given by Thiry shortly after they first met
almost 12 years previously. The name for the depart-
ment came from Joe Mello. At Vivra, they had a chief
knowledge officer, but that was too conventional a
name for the department and its head at DaVita. Wis-
dom seemed to be what the company was trying to
impart to its teammates and to continually develop.
DaVita University offered programs in continuous
quality improvement (a two-day program required for
newly hired facility administrators, managers, and
vice presidents who had not taken the class previ-
ously), presentation skills, leadership development,
team skills, and programs for vice presidents. There
were also numerous courses on clinical subjects. But
two of the most important programs that reached the
most people either directly or indirectly were the
DaVita Academy (and more recently, a program called
Academy II) and a program called FAST, which stood
for Facility Administrator Survival Training.
FAST. FAST was a five-day program taken by all
new clinic managers. The program consisted of train-
ing in managerial skills such as time management,
communication, providing coaching and feedback to
team members, and interviewing, as well as material
on the DaVita culture (the DaVita Way and One for
All). On Thursday afternoons there was a town-hall
meeting with Thiry or Mello so that participants
could express their opinions, ask questions, and
interact in an informal way with senior executives.
The course also consisted of specific technical
knowledge and skills necessary for administrators
of dialysis centers. Evenings were, with one excep-
tion, devoted to organized social interaction, including
group dinners and bowling, to help build friendships
and a feeling of team spirit among the 25 to 30 peo-
ple who typically took this class together.
DaVita Academy. DaVita Academy was a two-day
program for all front-line teammates (for instance,
patient care technicians, nurses, social workers, and
the people who serviced the dialysis machines). Orig-
inally offered on a voluntary basis to people who were
interested in attending, the Academy was evolving to
become an activity that facility administrators were
encouraged to send new teammates to, preferably
within the first 90 days of joining DaVita. Data showed
that people who attended an Academy had a turnover
rate of about 12% compared to 28% for those who
had not, so attending an Academy was critical for both
retention and also for engaging people fully in the
DaVita spirit and way of relating to each other.
A typical Academy session consisted of a
combination of lecture and experiential sessions
on subjects such as communications, team dynam-
ics, and conflict resolution. The evening activity
between the first and second day was always the
DaVita Olympics, where teams competed with each
other in various indoor light physical activities and
performed skits with songs and music that they
developed. This informal social interaction, singing
together, acting silly together, and working together
to compete against other teams, helped break
down barriers and build energy and spirit.
Academy II
Academy II was a newer program attended by all
teammates from a specific region, designed to
“take facility performance to the next level by fos-
tering mutual accountability amongst the team.”7
Because the program involved all teammates from
a region, centers were completely closed on that
day, requiring that dialysis treatments be resched-
uled. By emphasizing how to hold difficult and
7DVU Course Catalog, p. 3.
SELECTED CASES 655
honest conversations among the teammates to
resolve interpersonal issues, the course fostered
better and more productive interactions. The course
also contained numerous activities designed to
impart skills for team building and joint planning for
operational improvement at the facilities.
There was every indication that the commitment
to training and development at DaVita was increasing
in scope and reach. Evaluation of all DaVita University
activities was taken very seriously and the programs
and materials were constantly being tweaked to make
them better. In June 2005, Training (now Training &
Coaching Today) awarded DaVita the “Training Top
100 Award,” which recognized the company’s com-
mitment to learning and performance improvement.
Recognition and Communications
Another way in which people learned about the
DaVita way, felt attached to the company, and
learned what was going on was through communica-
tions and recognition. There were bimonthly confer-
ence calls with all of the facility administrators; more
than ten different newsletters including DaVita News
and Views, the overall company publication; an intra-
net and email system, and voice mails and emails to
celebrate special events and company milestones.
Thiry personally answered every email he received
from anyone in the company, and he received a
number of them, particularly following his appear-
ance at an Academy or training program or a visit
to a facility. Facility administrators were encouraged
to hold informal meetings with their teams on a reg-
ular basis to check in with each other, engage in joint
problem solving, and to share information about the
facility and the company. It was a company-wide pol-
icy that a “town-hall meeting” had to be held when-
ever an executive at the level of vice president or
director or higher visited with a group of teammates
at a facility or business office. These meetings gave
teammates the opportunity to interact informally with
the executive and to ask questions about whatever
was on their mind about the company.
Recruitment and Career Development
Although there were obviously a number of people
who had been with the company prior to late 1999,
at least some of those who had joined since its
“rebirth” in Phoenix had been attracted by its rep-
utation and unique style. For example, Cathy Gelb
recalled,
In 2001, my husband was doing consulting with
DaVita and he would come home and just rave
about this company and they were so unique
and the different things they were doing. I said,
“Well find out if they need any trainers.” Lo and
behold, they were running this two-day program
called The Academy that they had just started in
2001 and they were looking for someone to run
it for them. So, in November of 2001 I joined
DaVita to be associate dean of the Academy.
Many, although not all, of the regional directors
and the vice presidents (the people the regional
directors reported to) had been nurses and then
nurse administrators—they had worked their way
up in administration. Of course, people in finance
and some of the other staff functions had MBAs
and other backgrounds. Recently, DaVita had
expanded its recruiting efforts at business schools,
including Harvard and Stanford. The intention was to
hire people with MBAs who would go fairly quickly
into general manager roles such as regional direc-
tors, overseeing a number of facilities. Thiry noted
that it was important to get general management
talent into the company from numerous sources.
Benefits and Pay
DaVita offered a comprehensive benefits and pay
package that was somewhat unusual for a company
that had a reasonably large number of relatively
low-paid, hourly employees. Pay was pegged against
competitive benchmarks. At each Academy, Thiry
would say, “With respect to wages and healthcare
benefits, we intend to be fair and competitive. We
must be consistent with the market. With respect
to everything else, we want to be superior.” There
was a broad-based profit-sharing program that cov-
ered virtually all team members, based on the idea
of sharing the village’s good times and success with
all of its citizens. These cash bonuses meant a lot to
those receiving them. One email to Thiry is reflective
of the sentiments expressed:
Good Morning and Happy Holidays! I would like
to say THANK YOU for the check I received this
morning in homeroom. This was an unexpected
gift from the Village. This will help with Christ-
mas for my family. We have many to help and
feed that day. I am almost in tears right now
writing this to you thinking of the extra things
656 PART 6 STRATEGIC CHANGE INTERVENTIONS
that I will be able to get for my daughter and
husband and the extended family that is living
with me. This thank you comes from the heart
and [I] wanted to express my gratitude for it.
There were also benefits that provided people
an opportunity to invest in professional and personal
growth. The brochure listing the benefits for team-
mates was called “Because We Care: Davita
Teammate Benefits.” Inside it said, “The strength
of our team is the foundation of our company…. In
our quest to be the Employer of Choice in the
healthcare industry, we have developed a compre-
hensive program of benefits that are focused on
your health and welfare, investing in your future
and special programs that are unique to the DaVita
Village.” In describing this investment, Thiry noted
that “it is not only in education for their jobs, but
also in helping everyone advance their leadership
skills and their own sense of self.”8
Health and welfare benefits included a com-
prehensive package of medical, dental, and vision
benefits, extended illness leave, both short-term
and long-term disability insurance, life insurance,
and a flexible spending account to set aside pre-
tax dollars for health or child-care expenses, and
an employee assistance program. Investing in the
teammates’ future included a 401(k) retirement
program, a teammate stock purchase program,
profit sharing, the internal training the company
provided, and various forms of educational assis-
tance, including tuition reimbursement up to
$3,000 per year, and an RN scholarship program
that permitted people to work for DaVita while
attending nursing school, with all tuition and fees
paid up to a maximum of $5,000 per year.
Unique to the village were also two programs
that provided tuition assistance for the children and
grandchildren of teammates. The DaVita Children’s
Foundation provided some college scholarships for
children and grandchildren of teammates, selected
on a competitive basis. And the KT Family Founda-
tion, funded by Thiry and others, provided money
to be used for educational expenses for the chil-
dren and grandchildren of DaVita teammates
attending grades 6 to 11, again selected on a com-
petitive basis.
NEXT STEPS
Thiry was a person incapable of being complacent.
If you talked to him about what DaVita was doing
right, he seemed almost disengaged.
It was only when you brought out problems that
he seemed really interested in the conversation.
Although DaVita had enjoyed a remarkable transfor-
mation and success along multiple dimensions since
he and his colleagues had arrived in late 1999, he won-
dered what else he and the company could be doing to
make it even more successful and special. For
instance, the team’s goal had been to make DaVita
“The Greatest Dialysis Company the World Has Ever
Seen,” an objective that it mentioned on its Website
and repeated in virtually every gathering of DaVita
people, whether executives or front-line caregivers.
It was clear that DaVita had gone a long way
toward that goal in six years and was a unique
organization with a distinct style and approach.
DaVita had been largely successful in a quest to,
at least for a time, eliminate the apparent conflicts
between the interests of shareholders, team-
mates, and patients. The company had created a
management system in which the interests of
each were coincident. Led by Thiry, Mello, Vlceck,
and others, the company’s deliberate culture-
building efforts had paid dividends in terms of
reduced turnover and improved performance.
However, challenges remained, including inte-
grating Gambro teammates, continuing to improve
operating performance, ensuring continuity and
growth into the future, managing governmental
relations, and maintaining the commitment and
passion of teammates doing difficult work in a
very competitive labor market. At the top of Thiry’s
“to do” list was the integration of Gambro’s 500
centers and 12,000 people.
Questions
1. How would you characterize DaVita’s strategy?
2. What advice would you give Kent Thiry in
terms of leading and managing the integration
of the Gambro organization?
3. What would be included in your “first
100 days” action plan?
4. How could you preserve DaVita’s culture in the
face of an acquisition that includes Thiry’s
former organization, Vivra.8http://redcoatpublishing.com/spotlights/sl.
SELECTED CASES 657
INTEGRATIVE CASES
© Pixmann/Imagezoo/Getty Images
PART 7
SPECIAL
APPLICATIONS OF
ORGANIZATION
DEVELOPMENT
21
Organization Development for Economic, Ecological,
and Social Outcomes
22
Organization Development in Nonindustrial Settings: Health Care,
School Systems, the Public Sector, and Family-Owned
23 Future Directions in Organization Development
B.R. Richardson Timber Products Corporation
Building the Cuyahoga River Valley Organization
The Transformation of MECK Insurance
658
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21
Organization Development for Economic,
Ecological, and Social Outcomes
learning
objectives
Describe organization development (OD) interventions that help
organizations balance economic, social, and environmental objectives.
Describe sustainable management organizations (SMOs) and how OD can
assist in their design and development.
Describe global social change organizations and how to adopt OD
practices to develop them.
This chapter describes two relatively new inter-ventions in organization development (OD)aimed at enabling organizations to pursue
“sustainable effectiveness.”1 They are still being
developed and refined but are intended for the
growing number of organizations seeking balance
in the achievement of economic, social, and envi-
ronmental outcomes.
The first intervention—sustainable management
organizations (SMOs)—proposes that the central
purpose of human systems should be sustainable
effectiveness. These organizations are built to change
and adapt in the service of positive economic, social,
and environmental results. This intervention describes
the elements of a sustainable strategy and provides
design and implementation guidelines for building
these capabilities into the structures, processes, and
behaviors of the organization.
Global social change organizations engage in
activities that increase the social and environmental
outcomes of predominantly economically oriented
organizations. OD practitioners are using this
intervention to facilitate the development of evolving
countries, to change the practices of for-profit entities,
to provide a voice to underrepresented social classes,
and to bridge the gap between cultures facing similar
social issues. The application of planned change
processes in these settings requires a new set of
OD practitioner skills.
21-1 Sustainable Management Organizations
A recent, global survey found that 93% of CEOs believe sustainability issues are critical
to the future success of their firms,2 and there is evidence they are acting on this belief.
The second annual Sustainability and Innovation Global Executive study found that,
despite the economic downturn in 2010, 59% of companies increased their investments
in sustainability.3 Sustainability initiatives focus on the environmental impact of business
operations, including travel reductions, two-sided printing, more environmentally
659
sensitive product packaging, and recycling programs. Corporate social responsibility pro-
grams also are increasingly common. More and more, however, firms are recognizing
that these positive actions are relatively short sighted; they are taking bigger steps to
build financial, social, and environmental performance into their organization.4 Loblaws,
Canada’s largest grocery chain, not only has packaging initiatives and energy-saving
programs, they are also developing policies, including a sustainable seafood policy,
that extend their organization into supply chain relationships, coordinate with
environmentally-concerned nongovernmental organizations, educate consumers, and
contribute to financial performance.
A variety of OD-related approaches that promote sustainability are being developed,
including the Coalition for Environmentally Responsible Economics principles, the Natural
Step, ISO 14000, and natural and climate capitalism.5 These frameworks represent opportu-
nities to make sustainability, especially ecological sustainability, a more deliberate and inten-
tional value of OD. The SMO intervention asks a fundamentally different question about
how to develop organizations compared to the strategic change interventions in Chapters
18–20. Those change programs asked, how can we develop organizations to improve their
economic effectiveness—domestically or globally? SMO interventions ask, how can we
develop organizations to achieve sustainable effectiveness? Based on action research at
the University of Southern California’s Center for Effective Organizations, Mohrman,
Lawler, and Worley have developed the features and processes for creating SMOs.6
SMOs are designed to achieve sustainable effectiveness. They can perform in three
areas—people, planet, and profit—and are agile enough to remain effective over time.
This capability follows closely from the United Nations World Commission on Environ-
ment and Development’s description of sustainability: “meeting the needs of the present
without compromising the ability of future generations to meet their own needs.”7 There
are two important implications of this definition:
• First, the organization should generate sustainable outcomes. This means achieving a
triple-bottom-line objective—positive economic, social, and ecological results.8 The
organization must be clear about its purpose and consider the needs of all
stakeholders—shareholders, customers, employees, business partners, governments,
the ecology, local communities, and the public. The triple-bottom-line objective is
also a normative value that guides how organizations should go about minimizing
harm or maximizing benefits through their decisions and actions. This value is man-
ifest in the day-to-day decisions that give social and ecological outcomes equal
standing with economic concerns. SMOs are designed to do consistently well in all
three of these areas.
• Second, SMOs should be able to sustain effectiveness over time. They must be
adaptable, innovative, and agile. Traditional organizations equate stability and reli-
ability with effectiveness9 and, in a world that is changing rapidly, they often find
it difficult to maintain adequate levels of performance. SMOs assume that little
about their environment will be stable even in the midterm. They are committed to
having execution, innovation, and implementation capabilities that support change.
21-1a Design Guidelines
Consistent with the definition of sustainable effectiveness, the design of SMOs follows
broad guidelines that are still being developed and refined. These guides have to do with
setting strategies that support sustainability, determining sustainable objectives, establishing
an organization identity that is sustainability-friendly, and creating an agile organization.
660 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
Strategies That Support Sustainable Effectiveness Sustainable effectiveness—
being effective along financial, social, and environmental dimensions over a long period of
time—requires an appropriately defined strategic intent. As described in Chapters 5, a stra-
tegic intent consists of resource allocations that reflect choices of breadth, aggressiveness,
and differentiation. Each of these dimensions can support sustainable effectiveness.
• Breadth. Participation in multiple countries, markets, technologies, or products and
services increases the complexity of an organization’s carbon footprint and social
impact. It makes it difficult to understand the impact of the organization on ecological
and social outcomes. Over the years, Starbucks’ scope of domestic and international
operations, its product mix, and ancillary services (e.g., music, Internet hot spots,
food) have broadened dramatically. As it grew, the complexity of its operations
required responses in its fair trade, water conservation, energy, and recycling policies
and systems to maintain an appropriate balance. On the other hand, some breadth
and diversification makes it easier to make strategic changes that insure reasonable
profits over a long time frame. SMOs think hard about this balance.
• Aggressiveness. In fast-changing markets, there are many appropriate opportunities
to pursue objectives aggressively, but in general SMOs are wary of too much aggres-
siveness too often. While SMOs are effective competitors, their growth objectives are
reasonable and reasoned. Tartan Yachts, a high-quality manufacturer of sailboats,
faced this dilemma in the early 2000s. Its success resulted in more orders than its
single plant could produce in a timely fashion, and the growing overall economy
provided a tempting opportunity to support the increased demand with increased
production capacity. In the end, Tartan Yachts decided not to increase capacity.
The organization realized that a key differentiator was the special relationships it
had built with customers and that quality was partly a function of keeping capacity
sized appropriately. The wisdom of its conservative growth approach paid off hand-
somely during the 2008–2010 economic downturn. Tartan Yachts did not have to go
through the painful and disruptive downsizing that many of its competitors did, and
it maintained its reputation for quality.
• Differentiation. Understanding why customers make purchasing decisions and how
the organization’s product and service features align with those choices is critical to
success. SMOs build features into their offerings that reflect all three outcomes.
For example, Microsoft’s Windows 7 made big improvements over the ill-fated
Vista operating system that were important for economic objectives, but its
sustainability-friendly identity encouraged the firm to also incorporate a variety of
power-saving features that contributed to energy conservation.
Objectives That Support Sustainable Effectiveness In SMOs, social and ecologi-
cal outcomes have equal standing with economic results. This is easier said than done.
Greenpeace revealed that Nestlé, a well-respected and responsible company, was pur-
chasing large quantities of low-priced palm oil from firms that were destroying rain for-
ests to build even larger palm plantations. The news that Nestlé may have favored
economic over environmental objectives damaged its reputation and provoked a boycott
of its products. SMOs deliberately integrate economic, social, and ecological objectives.
First, SMOs must create positive economic outcomes to survive. Organizations that
cannot operate in a way that leads to revenues meeting or exceeding expenses cannot
survive, let alone create other types of valued outcomes. The difference between SMOs
and traditional organizations is how much profit they make, how they make a profit,
and toward what end that profit is used.
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 661
SMOs reject the goal of maximizing profit or shareholder returns and set sustainable
goals for profitability and growth. Achieving social and environmental goals requires
investment dollars that are unavailable under a profit maximizing philosophy. Former
Johnson & Johnson CEO, William Weldon, argued that the firm had responsibilities to
patients, customers, staff, and the community that may prevent it from providing the
best possible return, at least in the short term. Organizations are increasingly realizing
that maximizing profits by leveraging debt, incenting sales forces and executives to
achieve “big hairy audacious goals,” or pursuing acquisitions to “gain important syner-
gies” that rarely materialize is a distraction from sustainable effectiveness.
As suggested above, SMOs take a less aggressive approach to growth.10 Business
strategies, in general, try to grow the organization along some dimension, including
size, profits, revenues, market share, or influence. Aggressiveness that takes advantage
of a short-term market opportunity is different from aggressiveness that consistently
pursues organizational growth rates that greatly exceed the rate of market growth, the
market’s capacity to sustain growth, or the organization’s capacity to support growth.
Align Technologies, for example, is the maker of Invisalign orthodontics, a series of
customized mouthpieces that achieve the same results as metallic braces without the
wires. Its technology challenges existing orthodontic suppliers as well as the skill sets
and status of orthodontists. For Align Technologies to be successful, it must move
aggressively to establish its position and technology as the incumbents defend their fran-
chises. Nevertheless, Align Technologies must be careful to ensure that an aggressive
growth strategy does not become its corporate identity. Expecting the firm to grow at
the same rates after it has established its position in the market may not be reasonable.
Reasonable and sustainable profit and growth expectations mean that SMOs may
never be the best performers in their industries at any particular point in time. Setting
high, difficult-to-achieve economic goals requires dedicated resources and focus that
can distract employees’ attention from other goals and the creation of other kinds of
value. SMOs recognize that the cost of sustainable profit and growth is a lower return
on immediate financial performance but a more stable, long-term profitability with the
ability to pursue social and environmental objectives.
Second, SMOs create positive ecological outcomes. They are keenly aware of their
carbon footprint and their overall contribution to the planet’s ecology. SMOs accept the
logic of the Natural Step, i.e., that current economic models of growth cannot reconcile
the increasing demand for and decreasing supply of finite and fundamental natural
resources.11 This incompatibility is a central source of SMO strategies; how the organiza-
tion generates economic and social value without compromising the natural environment
differentiates SMO strategies from those of other organizations. Creating ecological value
suggests that business strategies built around the productive use of natural resources can
solve environmental problems at a profit.
Most organizations pursuing sustainable effectiveness start by setting an initial goal
of not destroying the environment. When profit maximizing and growth-oriented world-
wide organizations attempt to lower costs by placing activities in geographic areas with
the lowest wage rates, such as Asia, large, complex sourcing and distribution supply
chains are created. By some estimates, each of the largest tanker ships used in these sup-
ply chains can emit as much as 5,000 tons of sulfur a year, the equivalent of 50 million
typical automobiles.12 As regulatory changes are being sought by environmental groups,
these operating costs will likely increase. Thus, when the cost of pollution is factored into
the cost of manufacturing and supply chain activities, SMOs begin to rethink the low
wage rate decision. Instead, they seek ways to not only lower overall costs but to reduce
environmental damage as well.
662 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
Third, SMOs create positive social outcomes. This goal mandates that organizations
contribute to human and cultural well-being and recognizes the role social issues play in
innovation and long-term adaptability. Social value includes the way an organization
treats its workforce and the communities, cultures, governments, and countries in
which it operates.
Organizations without a clear perspective on social issues are vulnerable to the profit
maximization motive. McDonalds noted the growing numbers of automobiles in Beijing,
the attendant increase in driving times and stresses on family life, and concluded that
opening drive-thru restaurants would be a good idea. The initial drive-thru’s struggled
because the concept was unfamiliar to the Chinese. If someone actually found the
drive-thru lane, they didn’t know what to do at the ordering station, didn’t know they
had to drive up to the next window to pay, and didn’t know they needed to drive to
the next window to pick up their food. After they picked up their food, they usually
drove to a parking space, got out of the car, and went into the restaurant to have their
meal. In response, McDonalds made it easier to find the drive-thru lane and trained the
workers to point cars to the next window, including holding the bag of food out of the
last window to encourage drivers to move forward to get their meal.
When profit maximization overrides the creation—or even the maintenance—of
social and cultural values, organizations can unwittingly contribute to cultural homoge-
nization. McDonalds’ pursuit of economic growth may come at the expense of Chinese
behaviors and culture. Does teaching them to behave like Westerners enhance cultural
diversity?
Identities That Are Sustainability-Friendly SMOs’ long-term success derives from
their organizational identity.13 Identity represents the “central and enduring attributes of
an organization that distinguish it from other organizations” and answers the question,
“Who are we as an organization?”14 SMO identities are closely aligned with sustainable
effectiveness, with balancing economic, ecological, and social outcomes.
As shown in Figure 21.1, identity both flows from and helps to create an organiza-
tion’s culture. Identity emerges from the values in use that define an organization’s cul-
ture, and in turn identity gives meaning to culture through the stories told to members.
Figure 21.1 also suggests that identity flows from and helps to create an organization’s
brand, image, and reputation. Identity drives the brand promises and messages that
organizations make to customers and the market. Because all organizations must com-
pete for resources, they must proactively communicate their mission and brand—what
they offer, what markets they serve, and what they stand for—to the marketplace. For
example, Philips’ tag line in all of its media content, “Sense and Simplicity,” reflects a
commitment to products that are easy to use and designed well for the task.
FIGURE 21.1
The Components of Organization Identity
SOURCE: Adapted from Hatch and Schultz, 2002.
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 663
However, the image and reputation that external stakeholders hold about the orga-
nization also influence identity. Customers and other stakeholders get to experience
whether the organization generally lives up to its brand promises. Experiences using the
product or service, encounters with after-sales support services, stories from the business
press or websites, and other sources of information provide feedback about the align-
ment between message and behaviors. For example, Citibank displayed advertisements
in its offices that it was proud to be a part of programs that created jobs in America—
and then announced it would cut 11,000 jobs. Over time, the organization builds up a
reputation as reliable or unreliable, aggressive and litigious or relatively passive, a
defender of human rights or a polluter, or a firm that stands behind its products or
avoids publicity. Analysts, for example, have been skeptical about Philips’ ability to man-
age its complex business portfolio. It dropped from #5 to #7 among the world’s most
admired electronics firms (and did not make the Top 350 overall), but generally has a
positive image among consumers (#41 among best global brands).
An SMO’s identity should meet the standard of “sustainability friendly.” A
sustainability-friendly identity embraces the continuous pursuit of financial, social, and
environmental values as a core part of who the organization believes it is. Thus, environ-
mental initiatives and corporate social responsibility programs would not be “in addition
to,” but rather central to strategic and operational decisions. When decisions and actions
are oriented toward integrating financial, social, and environmental outcomes without
the use of special incentives or projects, the organization makes important contributions
to sustainable effectiveness as a matter of course. For example, Nokia and Unilever do
not emphasize efforts to market and produce a particular “sustainable” product; rather
they are developing product portfolios that are financially successful, environmentally
friendly, and socially beneficial.
Agile Organization Designs That Support Sustainable Effectiveness The final
design guideline for SMOs is the need to create an organization that can change and
adapt routinely—an organization that is “built to change” (Chapter 19).15 Agility repre-
sents a dynamic capability16 that enables timely and effective responses to changing
environments and multiple stakeholder demands. Here we discuss the features of an
agile organization, including work systems, structures, management processes, and
human resource systems.
• Work systems. An SMO’s sustainability-friendly strategy and triple-bottom-line
objectives are manifest in its work systems and processes. These work processes
directly account for a large percentage of the organization’s economic, social, and
environmental impact. To achieve current and long-term economic performance,
the organization must design two types of work: (1) core and exploitive and (2) cre-
ative and exploratory.17
Core work in SMOs supports the current strategic intent and must be reliable,
predictable, and as efficient as practicable. Since the organization’s strategic intent
can be subject to change, SMO core work may never be 100% efficient, but it must
be reliable enough to support the differentiators, meet demand, and generate profit.
It must also be designed to meet social and environmental objectives. For example,
DaVita is a Fortune 500 kidney care and dialysis company. Its core work—delivering
dialysis treatments to patients with kidney disease—is designed primarily for clinical
quality and reliability. DaVita’s “we’re a village first and a company second” identity
drives it to address the quality of its core work first because it believes that will gen-
erate the best economic and social outcomes. Thus, work efficiency is not at the
expense of workforce, customer, or community outcomes. Work processes are
664 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
designed to generate positive work experiences for organization members and
DaVita’s organization identity encourages members to build strong personal
relationships with patients and the local community through its “wall of fame.”
Moreover, a well-understood continuous improvement process works to increase
efficiency and reduce the negative environmental by-products of dialysis.
Creative work in SMOs is designed to generate new projects, services, and other
disruptive innovations; it can obsolete the current strategic intent and is fundamen-
tally different than core work. Creative work is temporary and iterative; it is based
on initiatives and activities not jobs, driven by shared goals, and performed by cross-
functional teams. In addition to its core work, DaVita must also build future leaders,
understand the likely changes and implications of health care reform, identify poten-
tial acquisitions or perform due diligence activities, develop new business opportu-
nities, and other nonroutine and innovative activities.
For any activity that warrants attention, DaVita leaders create teams consisting
of multiple functions and often including external stakeholders, such as regulators,
legislators, customers, physicians, and community representatives. These teams
have clear goals and appropriate decision authority. Early in the team’s work, mem-
bers are expected to report out frequently on progress or obstacles. This creative
work system enables DaVita to develop its members, to gather and charter resources
quickly, and to make resources available for other projects when a project is over.
Both core and creative work involve innovation. Core work must innovate to
improve efficiency and effectiveness; creative work must innovate to develop future
opportunities. Moreover, to achieve social and environmental outcomes, both types
of work processes must carefully consider and adapt their input and throughput
processes to insure appropriate output characteristics.
• Structures. Structures focus member attention and organization resources on the
most important aspects of getting core and creative work accomplished. The unique
feature of SMO structures is their external focus and “maximum surface area.”18 As
described in Chapter 19, maximum surface area structures support core and creative
work with roles that are directly connected to some aspect of the external environ-
ment. To the extent possible, every role in an SMO should be a “boundary span-
ning” role.19 Externally focused roles enable organization members to experience
what is happening in professional, business, competitive, and regulatory environ-
ments as well as community and environmental sectors and bring that information
into the organization as meaningful inputs to strategy and operations.
The surface area of almost any structure can be increased. For example, IBM and
Cisco have different structures but both have good external focus and surface area. In
IBM’s case, a “front-back” structure puts cross-functional solution teams into direct
contact with customers, and the back office groups must stay current in their technical
expertise to support the requested solutions. Both the front and back of the organiza-
tion work to support IBM’s “smarter planet” strategic intent. Cisco increases the sur-
face area of its functional structure by creating cross-functional “councils and boards”
that address specific segments. Organization members must stay connected to their
own professional communities in addition to working with other functions to build
and implement strategies for enterprise customers, emerging markets, or some other
important business segment. For example, Cisco created its “eco-board” to achieve
the “if it can be connected, it can be green” objective across the organization.
• Management processes. SMOs use flexible decision-making and resource allocation
processes to leverage information gathered by the externally focused roles. An
important feature here is transparency. In SMOs, information is transparent and
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 665
moved throughout the organization to wherever it is needed and decision-making
rights are assigned to the appropriate level and role in the organization. This
ensures that the right information is available and provides a clear picture of how
the organization is performing relative to triple-bottom-line objectives. It enables
organizations to make timely and relevant decisions to keep pace with changing
conditions.
• Human resource systems. SMOs rethink the way that people are attracted, retained,
developed, motivated, and led. To attract the right kind of diverse workforce for the
right period of time, SMOs use multiple employment deals and offer a wide variety
of work arrangements, including contract labor, outsourcing, and longer term com-
mitments to create the ability to treat employees as individuals. Individual treatment
is necessary to match the skills, motives, and lifestyles of individuals with the work
that needs to be done. Accenture and Deloitte have career customization programs
that attract employees who want to choose and shape their own career tracks, life-
styles, work hours, and work locations. Such systems mean that not everyone in the
organization is a career employee, has job security, and can expect the organization
to provide them with stable employment. While stable employment might seem like
a reasonable social sustainability practice, it may not be cost effective or even desired
by individuals who prefer the flexibility of contract employment.
SMOs assess the skills and competencies that individuals have, develop particu-
lar skills in employees, and pay for the effective deployment of those skills in the
service of triple-bottom-line objectives. IBM has developed a corporation-wide talent
information system that helps make this possible. It provides information on open
positions, career paths, and on the skills and competencies of employees. When IBM
launched its “smarter planet” strategy, the talent information system helped to iden-
tify who had the skills and experiences that would support the strategy and assisted
in reallocating important talent.
Aligning financial and nonfinancial reward systems to support sustainable effec-
tiveness is critical. In general, financial and nonfinancial rewards should be given
based on the individual’s triple-bottom-line performance. Executives, for example,
need to be rewarded and recognized for achieving reasonable profit levels, corporate
social responsibility targets, lower carbon footprints, and healthy relationships with
the communities and countries in which they operate. In many cases, it makes sense
to stress group or team performance because of the interdependencies that exist in
organizations committed to sustainable effectiveness. For organization members,
SMOs shift the basis of rewards from jobs to people. Members are rewarded for
what they can do with regard to sustainable effectiveness, not for the particular job
they perform. Because jobs and tasks are continually changing, people are motivated
to learn new skills and knowledge, thus keeping pace with change and enhancing
their long-term value to the organization.
Rewards also play a role in motivating and reinforcing change in SMOs. Individ-
ual or team bonuses are tied directly to change goals, learning new things, and
performing new tasks well. This establishes a clear line of sight between rewards
and change activities. Bonuses can include one-time rewards given at the end of a par-
ticular change effort, or rewards targeted to different phases of the change process.
Finally, development and reward systems support the importance of a shared
leadership philosophy; leadership in SMOs does not rest with jobs and is not
restricted to executives. Rather than relying on centralized sources of power and
control, SMOs spread leadership across multiple levels of the organization. This
approach speeds decision making and response rates because those lower in the
666 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
organization need not have to wait for top–down direction. It provides 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.
21-1b Application Stages
Sustainable management design principles are being implemented in a growing number
of organizations. Patagonia, The Body Shop, and Ben & Jerry’s are good examples of
companies that were built from the ground up using SMO principles. UPS, Unilever,
Gap Inc., GE, PepsiCo, and P&G are in the midst of making sustainable management
an integral part of their identities. These companies are challenging long-held assump-
tions and making significant changes in their strategies and organization designs. Like
other strategic change interventions, SMO applications tend to involve systemic and rev-
olutionary change processes driven by senior executives. Because these changes tend to
be radical—they generally alter every feature of the organization’s design and challenge
many of its long-held assumptions—they usually proceed at a quick pace, taking at least
three years to implement. The following SMO application stages are broadly described;
as OD practitioners gain more experience with this OD intervention, we can expect more
detailed knowledge of how it works and produces results.
Identifying and Redefining Organization Identity Probably the biggest distinction
between an SMO intervention and other strategic changes is the development of a new
organization identity. Change initiatives are directed at redefining or changing the orga-
nization’s identity to support sustainable effectiveness and agility. Identity change is both
an outcome of the transformation process and a key measure of the change’s effective-
ness. It indicates that the organization is applying new strategies and organization prin-
ciples to achieving triple-bottom-line results. Once identity redefinition is underway,
continuous change interventions, such as those described in Chapter 19, can facilitate
the change process.
Redefining organization identity typically starts from a diagnosis of the organiza-
tion’s existing identity. This involves assessing how well the organization’s values-in-use
and brand promise and reputation support sustainable effectiveness and agility. OD
practitioners can help organization members conduct a cultural diagnosis (Chapter 18)
along with an analysis of the firm’s brand promises and reputation in the market.
Then, change processes are directed at leveraging organization values and reputational
elements that already support sustained effectiveness rather than trying to “fix” those
values and brand images that are not aligned with it.
Repurposing the Board of Directors In contrast to boards of directors in tradi-
tional organizations, SMO boards face more demanding roles, more complicated deci-
sion making, and more intense discussions. Most U.S. and European boards are
designed and staffed to serve investors, and this leads to a singular focus on economic
performance. This also tends to be the case for nonprofit boards that are dominated by
fundraising interests. OD practitioners can help boards address key issues that invariably
arise when moving toward sustainable effectiveness.20
• The board may need to assess whether its membership reflects the most important sta-
keholders, including investors and representatives of the community, workforce, and
environment. This stakeholder approach to board membership differs significantly
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 667
from the classic financial accountability-driven membership model. For example, less
than 10% of large U.S. corporate boards have someone with an HR background,21
and it is unreasonable to expect boards to pursue sustainable effectiveness if they lack
expertise with respect to the social and environmental impact of their business model.
Membership diversity enables decisions that balance financial, social, and environmen-
tal outcomes.
• The board also may need to consider changing its committee structure. In addition to
traditional audit and compensation committees, the board may need to establish com-
mittees for human capital, social responsibility, and environmental impact. Developing
effective strategies and addressing the right set of decisions requires a committee
structure that reflects the organization’s sustainable effectiveness objectives.
• Board members may need to create new goal-setting processes. These might include
addressing how social and ecological goals can be integrated with economic objec-
tives. It may involve adopting the Global Reporting Initiative (GRI), an effort to
improve the measurement of the environmental impact of organizations that is sup-
ported by Shell, Kimberly-Clark, and Cemex among others.22 The board may choose
to highlight such traditional indicators as turnover rates and employee attitude data,
and other measures such as job creation and charitable contributions, to increase
awareness of social and human capital performance. In some cases, the board may
explore reregistering the organization as a “benefit corporation,” which would allow
the firm to pursue other objectives without fear of legal action by shareholders look-
ing for a maximized return.23 Patagonia’s board pursued this approach to enable the
company to set integrated triple-bottom-line goals.
• The board of directors needs to have effective decision-making skills and clear
guidelines to make tough choices about sustainability, such as taking actions that
may have a significant negative impact on financial performance but a significant
positive impact on social and environmental outcomes, or holding executives
accountable for triple-bottom-line achievements. For example, boards face problems
promoting sustainable effectiveness when they consistently reward executives for
financial performance at the expense of environmental and social performance.
Human process interventions, such as team building and process consultation, can
help boards become effective decision makers.
Building Capabilities Becoming an SMO involves identifying which existing organi-
zation capabilities support sustainable effectiveness and determining which new abilities
need to be built. Most organizations do not have sufficient resources to create all the
necessary capabilities at once, so tough choices need to be made. These decisions are
symbolically important; they signal to employees, owners, communities, and NGOs how
much the organization actually supports a sustainability-friendly identity. Two capabili-
ties that are essential to sustainability involve multistakeholder decision making and
change management.
SMOs need to be good at multistakeholder decision making and take into account
diverse perspectives in making choices.24 Organizations like Gap, Inc., GE, Social
Accountability International, Loblaw’s, Unilever, and the World Wildlife Fund are work-
ing hard to develop this capability. It may require making changes in both the organiza-
tion and its external alliances and partnerships. First, training and development
interventions can help organization members learn collaborative decision making and
“systems thinking” skills that acknowledge the interdependencies and trade-offs neces-
sary to meet triple-bottom-line objectives. Next, decision-making processes may need
to be expanded to include nontraditional stakeholders, such as community and
668 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
environmentally related NGOs. Team-building processes for developing trust, exploring
alternatives, and integrating perspectives among diverse participants can be helpful.25
Lastly, organizational learning interventions can help the organization apply its new
skills and decision processes. Early experiences in trying to apply multistakeholder deci-
sion skills and systems are likely to be awkward and inefficient.26 Organization learning
interventions can help members learn how to improve their multistakeholder decision-
making capabilities.
SMOs also need to develop a change capability, which involves three related activi-
ties.27 First, change management skills can be developed widely in the organization by
hiring people with those skills and by training existing managers and employees to
acquire them. Most organization members have a good understanding of technical and
operational issues but are less familiar with managing change. Second, an organization
effectiveness function can be designed with competencies in strategic planning, organiza-
tion design, and change management. Some SMOs have created a center of excellence
staffed by professionals from the strategic planning and human resources functions;
they provide advice and facilitation for planning and executing change in the organiza-
tion. Third, organization members can 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 a change capability. It provides members
with the hands-on experience and reflective learning necessary to hone their change
skills in action. Developing these change capabilities is likely to involve a significant
investment in training and development.28
Sequencing the Changes Repurposing boards and building capabilities to support a
sustainability-friendly identity are extensive and complex changes. The change to an
SMO has to account for this complexity to positively move the organization’s identity.
This involves a particular sequence of changes, starting with work system redesign.
Then the strategy needs to be clarified and the organization redesigned to promote agil-
ity. Large-group intervention (LGI) techniques, described in Chapter 11, are particularly
helpful to accelerate the transformation process because they can support the organiza-
tion’s development of multistakeholder and change capabilities.
Work Systems Redesign. Work is the primary driver of an organization’s carbon foot-
print; it directly affects the workforce’s well-being and is most connected to the creation
of economic value. Thus, redesigning work systems can have the most payoff to an SMO.
Assessing how both standard and creative work get done and designing them for sustain-
able effectiveness will likely make the biggest advance toward becoming an SMO. Rede-
signing work to add economic value in environmentally and socially acceptable ways can
provide a solid foundation for further change.
Focusing on work redesign first ensures that the organization’s future aspirations
are aligned with its past and current behaviors. It shows concretely that the organiza-
tion’s commitment to sustainability is real not just window-dressing. In many organi-
zations today, there is growing pressure to “do something” about sustainability.
Organizations that develop marketing campaigns proclaiming support for green issues
and social concerns before thinking through how their work processes affect those
outcomes run a serious risk. If intentions of sustainable effectiveness are announced
too early and with too much fanfare, an organization’s reputation can be damaged if
marketing promises are not backed up by tangible actions. The organization’s efforts
will be seen as “greenwashing,” and its ability to change identity is set back, perhaps
permanently. It may take the firm a long time to rebuild trust in corporate sustainability
promises.
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 669
Clarifying the Strategy. Early in the change process, the organization needs to meet
with key stakeholders to clarify goals and to explore the implications of becoming an
SMO on its capabilities and resources. This can be accomplished through a series of
large-group interventions (LGIs) with key stakeholders. LGIs are well suited for this
part of the SMO change process. They enable organization members to interact with
multiple stakeholders, to learn new ways of behaving and deciding, and to gain clarity
and commitment to becoming an SMO. The first LGI, typically led by the board and
the executive team, is concerned with fleshing out the organization’s sustainability strat-
egy and future state. The focus is on gaining stakeholder support, determining how the
different stakeholders will work together, and clarifying the organization’s vision, mis-
sion, and values. Subsequent LGIs address the design and implementation of particular
aspects of strategy and organization design.
Building an Agile Design. To move further toward being an SMO, an organization
needs to build an agile organization design that supports and reinforces the new
sustainable-friendly work processes. Agile organization designs have a “maximum sur-
face area” to support an external focus, strong collaboration capabilities, flexible resource
allocation systems, and transparent decision-making processes. They also include a talent
management system with goals, performance appraisals, and rewards that promote flexi-
bility and sustainable effectiveness outcomes. In particular, people are retained or hired
for their compatibility with an SMO; they are appraised and rewarded for sustainable
behaviors. Performance management interventions (Chapter 15), talent management
changes (Chapter 16), and organization design interventions (Chapter 18) can help the
organization build an agile design.
Application 21.1 describes Interface Carpets, one of the most referenced cases of a
transformation to an SMO.
21-2 Global Social Change
Organization development applied to global social change is one of the boldest and most
exciting developments in the field.29 This form of OD is generally practiced in global social
change organizations (GSCOs), not-for-profit and nongovernmental entities that are created
at the grassroots level to help communities and societies address such important problems
as unemployment, race relations, sustainable development, homelessness, hunger, disease,
water quality and conservation, and political instability. Globally, GSCOs are heavily
involved in the developing nations. Examples include the World Conservation Union
(IUCN), the Kids Global Outreach Foundation (United States–Africa), the Society of Entre-
preneurs and Ecology (China), the Nature Conservancy (International), the Mountain
Forum (Peru), International Physicians for the Prevention of Nuclear War, and the Asian
Coalition for Agrarian Reform and Rural Development (ANGOC-Philippines). Many prac-
titioners who help create and develop GSCOs come from OD backgrounds and have
adapted their expertise to fit highly complex, political situations. This section describes
GSCOs and how OD is used for social change.
21-2a Global Social Change Organizations
GSCOs are part of a social innovation movement to foster the emergence of a global
civilization.30 They exist under a variety of names, including development organizations
(DOs), nongovernmental organizations (NGOs), social movement organizations, interna-
tional private voluntary organizations, and bridging organizations. They address complex
670 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
a
p
p
li
ca
ti
o
n
2
1
1 INTERFACE CARPET’S TRANSFORMATION TOSUSTAINABILITY
I
nterface Flooring Systems was founded
by Ray Anderson as a joint venture with
Britain’s Carpets International in 1973 to
make carpet tiles. Carpet tiles, an alternative
to long rolls of carpet, can be replaced piece by
piece rather than all at once. Between 1978
and 1983, revenues grew from $11 million to
$80 million as a result of building close relation-
ships with commercial customers. Interface
went public in 1983 and through 2008 grew
revenues at an average annual rate of 11.5%.
Interface’s transformation to sustainable
management began in 1994 when Anderson
received a memo from a research division task
force to speak about Interface’s environmental
vision. The group had been formed in response
to questions from customers, architects, and inte-
rior designers about Interface’s environmental
efforts. The task force’s operational review sug-
gested that, in fact, Interface had very few environ-
mental initiatives and was not doing much to be
environmentally friendly. The memo made
Anderson anxious over what he would say since
there was no environmental policy other than
“comply, comply, comply.” At the same time,
Anderson received Paul Hawkin’s book, The
Ecology of Commerce. The book’s message con-
fronted his sense of responsibility and changed his
attitudes about what a business should achieve.
In his speech to the task force, he declared
that Interface would become a company that
“could grow and prosper without doing harm
to the earth.” He later said that he didn’t want
his legacy to be that he dug up the earth,
turned petroleum and other materials into pol-
luting products, and dumped them in landfills.
At the time, Interface was part of an industry
that extracted and processed 1.2 billion pounds
of material from the earth to produce $802 bil-
lion worth of products. Of the 1.2 billion
pounds, 800 million pounds was petroleum
based and two-thirds of that was burned to
convert the remaining third into product. As
an industry, carpeting firms were depositing
4.5 billion pounds of material into landfills that
would degrade over 20,000 years.
In January 1995, Interface convened a
“green supply chain” conference with its sup-
pliers to discuss its goals and to gain commit-
ments from its business partners. The eventual
sustainability strategy outlined seven goals,
including eliminate waste (any measureable
input that did not create value), limit toxic emis-
sions from manufacturing plants, switch to
renewable sources of energy, “close the
loop” which meant using any waste or dis-
carded carpet as inputs to new products,
achieve resource-efficient transportation, and
educate customers, suppliers, and even com-
petitors. The seventh goal, to redesign com-
merce, eventually resulted in what was called
the “evergreen service agreement.” It was a
radical innovation that attempted to shift Inter-
face’s business model from “selling carpet” to
“renting flooring systems.”
In 1996, Interface held its first “Eco Dream
Team” conference of outside environmental
experts and organization members to explore
the strategy and organizational requirements
necessary to achieve its sustainability goals.
The conference recommendations led to
changes in Interface’s product design and
manufacturing, supply chain, and operations.
Implementing the changes required the organi-
zation to address a variety of issues.
First, as the new strategy was communi-
cated, organization members expressed a vari-
ety of concerns and resistance, including
questions about what sustainability meant
and how the organization was going to change.
The depth of misunderstanding was particu-
larly troublesome. After hearing about the sus-
tainability goal, one employee asked “How
many sheep are we planning to have, and
where are they going to graze?” In particular,
few people in the organization understood how
ecologically unfriendly existing operations
were. As a result, a large commitment to
employee training about the environment and
operations led to Interface being named one
of the Best 100 Companies to Work for by
Fortune magazine in 1997.
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 671
social problems, including overpopulation, ecological degradation, the increasing concen-
tration of wealth and power, the lack of management infrastructures to facilitate growth,
and the lack of fundamental human rights. The early efforts of many GSCOs to raise
awareness and mobilize resources toward solving these problems culminated in the
United Nations’ Conference on Environment and Development in Rio de Janeiro in
June 1992, where leaders from both industrialized and less-developed countries met to
discuss sustainable development.31 Since then, a number of conferences and agreements
have occurred. The most notable are the 1997 Kyoto Protocol that attempted to gain
commitment from countries around the world to reduce greenhouse gas emissions and
the Global Compact, a strategic policy initiative that asks businesses to align their opera-
tions with ten universally accepted principles related to human rights, labor, environ-
ment, and corruption. The Doha Climate Conference in December 2012 successfully
extended the Kyoto protocol agreements to 2020 despite continued debates. The work
of GSCO’s can be aided or constrained by these larger, governmental accords.
GSCOs have the following characteristics:32
• They assert, as their primary task, a commitment to serve as an agent of change in
creating environmentally and socially sustainable world futures; their transforma-
tional missions are articulated around the real needs of people and the earth.
Second, figuring out where to eliminate waste
and toxicity or to use clean technology was a
straightforward process of total quality management
that was implemented under the acronym QUEST
(Quality Utilizing Employee Suggestions and Team-
work). However, figuring out how to do these things
was a giant technical problem. The organization’s
research group and its engineers had to redesign
(or reinvent) almost every production process and
product, including how to recycle nylon and how to
make carpet using less petroleum.
Third, creating the evergreen services agree-
ment required Interface to develop a leasing con-
tract that would make financial sense in the
context of existing rules and regulations. The idea
of moving funds from capital expense (sale of car-
pet) to operating expense (lease of carpet) was an
easy sell, but getting a lease agreement written
that met current tax and accounting standards
was a lot more difficult. In addition, Interface had
to work with customers because the price of the
lease seemed very high to customers. Few custo-
mers actually knew the full cost of their flooring
because the amounts associated with carpet pur-
chase, maintenance, and other services were sep-
arated into different accounts.
By 2000, a variety of market and economy
changes, including the Y2K threat, the dot.com
bust, and other changes that reduced customer
budgets, were hurting the industry. In January
2001, Interface held a leaders conference to
address a 30% workforce reduction and other
organization changes in response to business
declines. At the conference, managers affirmed
their commitment to sustainability saying that it
was part of the organization’s DNA.
Interface’s transformation to sustainability is
both remarkable and cautionary. The organization
clearly made a radical change in its carbon foot-
print, established clear benchmark and best prac-
tice standards, and redefined the business model
in carpet manufacturing, distribution, and sales.
Economically, however, its stock price and profit-
ability have varied considerably since the transfor-
mation, although its annual growth rate is
impressive. Socially, it has not been a stable
employer, meeting most economic challenges
with layoffs. Nonetheless, its tremendous accom-
plishments in environmental matters represent an
important social benefit. These highs and lows of
effectiveness vis-à-vis the triple bottom line testify
to the difficulties of the transformation to an SMO.
672 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
• They have discovered and mobilized innovative social-organizational architectures
that make possible human cooperation across previously polarizing or arbitrarily
constraining boundaries.
• They hold values of empowerment, or people-centered forms of action, in the
accomplishment of their global change mission, emphasizing the central role of peo-
ple as both means and ends in any development process.
• They are globally and locally linked in structure, membership, or partnership and
thereby exist, at least in identity and practice (maybe not yet legally), as entities
beyond the nation-state.
• They are multiorganizational and often cross-sectorial. They can be business, gov-
ernment, or not-for-profit organizations. Indeed, many of the most significant global
change entities involve multiorganization partnerships bridging sectorial boundaries
in new hybrid forms of business, government, and volunteerism.
GSCOs therefore differ from traditional for-profit firms on six dimensions.33 First,
they typically advocate a mission of social change—the formation and development of
better societies and communities. “Better” typically means more just (Amnesty Interna-
tional, the Hunger Project, World Vision), peaceful (Peace Direct, International Physi-
cians for the Prevention of Nuclear War), or ecologically conscious (Nature
Conservancy, the Global Village of Beijing, the Mountain Forum, IUCN, World Wildlife
Fund, Friends of the Earth).
Second, the mission is supported by a network structure. Most GSCO activity occurs
at the boundary or periphery between two or more organizations.34 Unlike most indus-
trial firms that focus on internal effectiveness, GSCOs are directed at changing their
environmental context. For example, World Vision (www.worldvision.org) operates
microfinance institutions in 43 countries to boost the economic status of entrepreneurs,
create jobs, and develop local economies.
Third, GSCOs generally have strong values and ideologies that justify and motivate
organization behavior. These “causes” provide intrinsic rewards to GSCO members and a
blueprint for action.35 For example, the ideological position that basic human rights
include shelter has directed Habitat for Humanity to erect low-cost homes in a wide
variety of underdeveloped communities.
Fourth, GSCOs interact with a broad range of external and often conflicting consti-
tuencies. To help the poor, GSCOs often must work with the rich; to save the ecology,
they must work with the polluters; and to empower the masses, they must work with the
powerful few. This places a great deal of pressure on GSCOs to reconcile pursuit of a
noble cause with the political reality of power and wealth.
Fifth, managing these diverse external constituencies often creates significant organi-
zational conflict. On the one hand, GSCOs often need to be organized into departments
to serve and represent particular stakeholders; on the other, they are strongly averse to
bureaucracy and desire collegial and consensus-seeking cultures. The conflicting perspec-
tives of the stakeholders, the differentiated departments, and the ideological basis of the
organization’s mission can produce a contentious internal environment. For example, the
International Relief and Development Agency promotes grassroots development projects
in developing countries using resources donated from developed countries. As the agency
grew, departments were created to represent different stakeholders: a fundraising group
handled donors, a projects department worked in the local offices, a public relations
department directed media exposure, and a policy information department lobbied the
government. Each department adapted to fit its role. Fundraisers and lobbyists dressed
more formally, took more moderate political positions, and managed less participatively
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 673
than did the projects departments. These differences were often interpreted in political
and ideological terms, creating considerable internal conflict. OD practitioners designed
a series of feedback meetings to increase the understanding and relevance of the different
groups36 Finally, GSCO membership often is transitory. Many people are volunteers, and
the extent and depth of their involvement varies over time and by issue. Turnover can be
quite high.
21-2b Application Stages
GSCOs are concerned with creating sustainable change in communities and societies.
This requires a form of planned change in which the practitioner is heavily involved,
many stakeholders are encouraged and expected to participate, and “technologies of
empowerment” are used. Often referred to as “participatory action research,”37 planned
change in GSCOs typically involves three types of activities: building local organization
effectiveness, creating bridges and linkages with other relevant organizations, and devel-
oping vertical linkages with policymakers.
Building the Local Organization Although GSCOs are concerned primarily with
changing their environments, a critical issue in development projects is recognizing the
potential problems inherent in the GSCO itself. Because the focus of change is their envi-
ronment, members of GSCOs are often oblivious to the need for internal development.
Moreover, the complex organizational arrangements of a network make planned change
in GSCOs particularly challenging.
OD practitioners focus on three activities in helping GSCOs build themselves into
viable organizations: using values to create the vision, recognizing that internal conflict
is often a function of external conditions, and understanding the problems of success.
• Values to create vision. For leadership to function effectively, the broad purposes of
the GSCO must be clear and closely aligned with the ideologies of its members. Sin-
gleness of purpose can be gained from tapping into the compelling aspects of the
values and principles that the GSCO represents. For example, the Latin American
Division of the Nature Conservancy held annual two-day retreats. Each participant
prepared a white paper concerning his or her area of responsibility: the issues, chal-
lenges, major dilemmas or problems, and ideas for directions the division could
take. Over the course of the retreat, participants actively discussed each paper.
They had broad freedom to challenge the status quo and to question previous deci-
sions. By the end of the retreat, discussions produced a clear statement about the
course that the division would take for the following year. People left with increased
clarity about and commitment to the purpose and vision of the division.38
Developing a shared vision can align individual and organizational values.
Because most activities occur at the boundary of the organization, members are often
spread out geographically and are not in communication with each other. A clearly
crafted vision allows people in disparate regions and positions to coordinate their
activities. For example, ACDI/VOCA (www.acdivoca.org) is a “nonprofit that means
business.” The organization provides sustainable solutions that integrate approaches
from agribusiness, community and enterprise development, financial services, and
food security perspectives. Its vision, “A world in which people are empowered to suc-
ceed in the global economy,” helps to coordinate the work of the people throughout
the organization. “Our mission and a vision grow out of the farmer cooperative move-
ment in the U.S. going back 45 years. We know something about how you bring food
674 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
from the farm to the table.” As one member put it, “I’m part of helping a small farmer
in a small village somewhere in the world be able to put food on their table and send
their kids to school or to buy a net to protect themselves from malaria. I don’t know
how that couldn’t impact you.” Another staff member noted, “It’s a privilege to have a
job that is making a difference, and as a mom you feel that more. When I hear a story
of a woman who’s saying, ‘I couldn’t feed my children,’ I think, oh my goodness. And
now, because they got a loan, they got their business going, and they’re connected
with people who wanted to buy their stuff, you can just see it in their eyes and their
voices. They have hope for the future. It’s a fantastic thing.”
• Recognizing conflict. Because of the diverse perspectives of the different stake-
holders, GSCOs often face multiple conflicts. In working through them, the organi-
zational vision can be used as an important rallying point for discovering how each
person’s role contributes to the GSCO’s purpose. The affective component of a
GSCO vision gives purpose to members’ lives and work. Another way to manage
conflict is to prevent its occurrence. At the Hunger Project, the “committed listener”
and “breakthrough” processes give GSCO members an opportunity to seek help
before conflict becomes dysfunctional. Every member of the organization has a des-
ignated person who acts as a committed listener. When things are not going well, or
someone is feeling frustrated in their ability to accomplish a goal, they can talk it out
with this colleague. The role of the committed listener is to listen intently, to help
the individual understand the issues, and to think about framing or approaching
the problem in new ways. This new perspective is called a “breakthrough”—a crea-
tive solution to a potentially conflictual situation.39
• Problem of success. Finally, a GSCO’s success can create a number of problems. The
very accomplishment of its mission can take away its reason for existence, thus causing
an identity crisis. For example, a GSCO that succeeds in creating jobs for underprivi-
leged youth can be dissolved because its funding is redirected toward organizations that
have not yet met their goals, because its goals change, or simply because it has accom-
plished its purpose. During these times, the vital social role that these organizations
play needs to be emphasized. GSCOs often represent bridges between the powerful
and powerless, between the rich and poor, and between the elite and oppressed, and
as such may need to be maintained as legitimate parts of the community.
Another problem can occur when GSCO success produces additional demands
for greater formalization. New people must be hired and acculturated; greater control
over income and expenditures has to be developed; new skills and behaviors have to
be learned. The need for more formal systems often runs counter to ideological prin-
ciples of autonomy and freedom and can produce a profound resistance to change.
Employees’ participation during diagnosis and implementation can help them commit
to the new systems. In addition, new employment opportunities, increased job respon-
sibilities, and improved capabilities to carry out the GSCO’s mission can be used to
encourage commitment and reduce resistance to the changes.
Supported by sponsors in industrialized countries, the International Child Spon-
sorship Agency (ICSA) delivers services that enhance children’s welfare in developing
countries. For many years, entrepreneurial leadership in the field led to growth in the
number of programs and activities that were difficult to coordinate and monitor. The
organization brought in a new “business-oriented” CEO to improve resource and pro-
gram efficiencies. While everyone agreed that better coordination was necessary, they
also believed that the new CEO’s implementation of new accounting and information
systems was too top-down. Tensions between headquarters and the field increased and
turnover among key staff members led to an OD intervention. It started with a
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 675
diagnosis that showed that the focus on control and efficiency conflicted with ICSA’s
traditional, entrepreneurial values. Changes were implemented to increase the involve-
ment of the field in strategic planning, to increase and clarify the decisions that could
be made in the field, and to reinforce the leadership and cultural styles that best repre-
sented the vision. The changes were viewed as a rebalancing of the organization’s pri-
orities, giving fundraising and program development relatively equal influence over
strategy and operations.40
Alternatively, a GSCO can maintain its autonomy through structural arrange-
ments. The Savings Development Movement (SDM) of Zimbabwe was a grassroots
effort to organize savings clubs, the proceeds of which helped farmers buy seed in
volume. Its success in creating clubs and helping farmers lower their costs caused
the organization to grow very rapidly. Leaders chose to expand SDM not by add-
ing staff but by working with the Ministry of Agriculture to provide technical sup-
port to the clubs and with the Ministry of Community Development and Women’s
Affairs to provide training. The savings clubs remained autonomous and locally
managed. This reduced the need for formal systems to coordinate the clubs with
government agencies. The SDM office staff did not grow, but the organization
remained a catalyst, committed to expanding participation rather than providing
direct services.41
Creating Horizontal Linkages Successful social change projects often require a net-
work of local organizations with similar views and objectives. Such projects as creating a
civil society in China, turning responsibility for maintenance and control over small irri-
gation systems to local water users in Indonesia, or teaching leadership skills in South
Africa require that multiple organizations interact. Consequently, an important planned
change activity in GSCOs is creating strong horizontal linkages to organizations in the
community or society where the development project is taking place. The formation of
“support” organizations—value-added agencies that provide services to NGOs for their
development—are an important part of these linkages.42 For example, CANGO, the
China Association for NGOs (www.cango.org), is a government-sponsored NGO that
provides capacity-building and project-execution services to support the emergence of a
civil society in China. CANGO sponsors conferences and programs where like-minded
NGOs can connect with each other and support common interests. Similarly, GSCOs
aimed at job development not only must recruit, train, and market potential job appli-
cants but also must develop relationships with local job providers and government
authorities. The GSCO must help these organizations commit to the GSCO’s vision,
mobilize resources, and create policies to support development efforts.
The ability of GSCOs to sustain themselves depends on establishing linkages with
other organizations whose cooperation is essential to preserving and expanding their
efforts. Unfortunately, members of GSCOs often view local government officials, com-
munity leaders, or for-profit organizations as part of the problem. Rather than interact-
ing with these stakeholders, GSCOs often “protect” themselves and their ideologies from
contamination by these outsiders. Planned change efforts to overcome this myopia are
similar to the transorganizational development interventions discussed in Chapter 20.
GSCO members are helped to identify, convene, and organize these key external organi-
zations. For example, hurricane Katrina in 2005 devastated many of New Orleans’ oldest,
poorest, and culturally rich neighborhoods. The rebuilding of neighborhoods, such
as Tremé or Holycross, was usually overseen by local NGOs, such as Esplanade
Ridge/Tremé Neighborhood Association or Holy Cross Neighborhood Association.
These groups connected with other NGOs, local and state government departments
676 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
(other than Federal Emergency Management Agency [FEMA], which had lost credibility
during the initial response), funding agencies, and volunteers. Local coordination of the
NGO activities allowed each neighborhood to pursue locally relevant strategies for reha-
bilitation, to bring the right resources to the right places, and to maintain local cultural
and historical traditions.43
Developing Vertical Linkages GSCOs also must create channels of communication
and influence upward to governmental and policy-level decision-making processes. These
higher-level decisions often affect the creation and eventual success of GSCO activities. For
example, the Global Village of Beijing (GVB) is a nongovernmental organization that
raises the environmental consciousness of people in China. GVB leveraged its relationships
with journalists and the government to produce a weekly television series on government
channels to discuss and promote environmentally friendly practices, such as recycling, and
to expose the Chinese people to environmental projects in different countries. When the
Chinese government proposed new environmental regulations and policies as part of the
World Trade Organization admission process, GVB helped assess the proposals.44 GVB’s
success and visibility also contributed to its founder, Liao Xiaoyi, being invited to partici-
pate in Beijing’s successful 2008 summer Olympics bid and the inclusion of a “green
Olympics movement” proposal that addressed concerns about Beijing’s pollution.
Vertical linkages also can be developed by building on a strong record of success.
The Institute of Cultural Affairs (ICA) is concerned with the “application of methods
of human development to communities and organizations all around the world.” With
more than 100 offices in 39 nations, ICA trains and consults with small groups, commu-
nities, organizations, and voluntary associations, in addition to providing leadership
training for village leaders, conducting community education programs, and running
ecological preservation projects. Its reputation has led to recognition and credibility. It
was given consultative status by the United Nations in 1985, and it has category II status
with the Food and Agriculture Organization, working relation status with the World
Health Organization, and consultative status with UNICEF.
For decades in Mali, a centralized one-party government that neglected teachers,
schools, books, and materials, especially in the rural areas, had dominated the country’s
educational system. When a new reformist government took control, a variety of GSCOs
helped to organize grassroots groups to improve the schools. Supported by the GSCOs,
local parent-teacher associations (PTAs) were organized, local members were elected,
and the groups were given training on how to manage the school. Although there was
local improvement, the overall educational system remained fragmented. In response,
GSCO-organized conferences brought PTAs from different villages together for dialogue
and decision making. As regional PTA federations were formed, the GSCOs provided
policy analysis and advocacy training to help them speak with one voice in negotiations
over policy formulation with the Ministry of Education. These collective efforts have
resulted in increased attention, influence, and expenditures to rural schools.45
Application 21.2 describes how OD has contributed to the work of LDI Africa.46
The opening of its program provides important clues about the development of vertical
and horizontal linkages and how GSCOs work within a clear vision.
21-2c Change-Agent Roles and Skills
Planned global social change is a relatively new application of organization development.
The number of practitioners is small but growing, and the skills and knowledge neces-
sary to carry out OD in these situations are being developed. The grassroots, political,
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 677
a
p
p
lica
tio
n
2
1
2
SOCIAL AND ENVIRONMENTAL CHANGE AT LDI AFRICA
L
andmark Development Initiative Africa (LDI
Africa) is a nonprofit social enterprise based
in the United States. It builds the capacity
of African corporations, small businesses,
and nonprofits to compete in the global market-
place by recruiting skilled volunteers, especially
young African professionals from outside of
the continent. Through LDI Africa’s partner-
ships with the Foundation Center in Nigeria
and investors in five countries, African nonpro-
fits and businesses can access funding and
business development services. LDI Africa
also plans to send young professionals in Africa
to the United States and around the world for
overseas fellowships with nonprofits and busi-
nesses seeking an international perspective on
the challenges they face.
As a young professional in Nigeria, Gbenga
Ogunjimi, LDI Africa’s founder and CEO, had
limited access to international management
principles and professional development oppor-
tunities. Gbenga saw an opportunity to address
development challenges facing his country and
other parts of the African continent while work-
ing in the Washington, DC, headquarters of
Atlas Corps, a nonprofit organization that spon-
sors international fellowships. He believed that
by matching organizational needs for globally
competitive expertise with a rapidly growing
local workforce, he could create a virtuous
cycle of social and economic development. He
was motivated to establish a social enterprise
based on his own experiences and developed
the initial concept for LDI Africa.
Through volunteer placement services
administered by LDI Africa, young profes-
sionals gain hands-on international experience
helping African organizations launch and
expand their operations. The youth fellows
are able to hone their skills in a challenging
work environment characterized by resource
constraints, limited infrastructure, and uncer-
tain policies. The African organizations benefit
from access to international business practices
and skills, such as business planning, finance,
marketing, and management. When the 3 to
12 month fellowship ends, LDI Africa also
offers recruitment services for host organiza-
tions interested in hiring fellows. Thus, what
separates LDI Africa from other nonprofits is
the fundamental goal of altering a status quo
where African youth and organizations are
struggling to obtain the capabilities needed to
effectively compete in a global marketplace.
The organization development process at
LDI Africa started with a chance meeting
between Gbenga and an OD practitioner,
Kimberley Jutze. Kimberley, a graduate of
Pepperdine University’s Master of Science in
Organization Development Program, was
working to establish a consulting practice that
addressed the resource and organization devel-
opment needs of social enterprises. After
exchanging contact information, Gbenga and
Kimberley met to discuss opportunities to
work together on securing start-up capital, set-
ting up an office in Washington, DC, and devel-
oping partnerships with organizations involved
in work abroad programs.
Once the consulting relationship was for-
malized, Kimberley conducted an informal
assessment, which revealed that the planning
documents in place were insufficiently detailed
to prepare LDI Africa for a successful launch.
Thus, before any of the initial requests for sup-
port could be addressed, LDI Africa needed a
strategic plan to clearly define its mission, pro-
grams, and operations. A business planning
approach pioneered by the nonprofit consulting
firm Root Cause guided the development of a
three-year strategy for launching and expand-
ing LDI Africa. The plan described the social
and financial returns that social impact inves-
tors could expect.
Over the next five months, Kimberley worked
closely with Gbenga to facilitate the development
of a social impact strategy. The strategy develop-
ment process consisted of a series of meetings
where each section of the social impact strategy
outline (Need and Opportunity, Social Impact
678 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
Model, Implementation Strategy, and Action Plan)
was reviewed and ideas were discussed. In between
meetings, Gbenga prepared drafts of the social impact
strategy.
Despite having a mutually agreed upon scope
of work, differences in communication styles
between Kimberley and Gbenga and expectations
that were not clearly defined upfront posed chal-
lenges to the consulting relationship. For example,
both parties had different assumptions about what
level of detail was sufficient for addressing each
section of the social impact strategy. Gbenga,
who wanted to make the most of his limited time
in the United States to launch LDI Africa as soon as
possible, preferred a moderately detailed plan
where he could address questions from social
impact investors as they came up. In contrast,
Kimberley believed that investing more time up
front in addressing anticipated questions in the
plan itself would facilitate smoother implementation
later on. A final agreement was reached through
ongoing feedback on drafts of the plan and open
discussions about the quality and quantity of infor-
mation needed to complete it. Attention also was
given to establishing a collaborative relationship
characterized by open and honest communication
between Kimberley and Gbenga. This greatly
improved communication between them as well
as their working relationship.
By the time the social impact strategy was
completed, Gbenga gained greater insight into the
essential steps needed to transition LDI Africa
from a concept to an operational organization. He
was better prepared to meet with prospective
financial supporters and refer to details captured
in the social impact strategy to fully explain LDI
Africa’s model.
After the social impact strategy was com-
pleted and LDI Africa was registered as a nonprofit
organization, Gbenga asked Kimberley to help
obtain seed funding. As a first step, they agreed
to prepare a strategy to guide LDI Africa’s resource
development efforts. This consisted of meetings to
review each section of the strategy outline and dis-
cuss ideas. Gbenga also drafted the strategy with
support from Kimberley. After agreeing upon a
funding target based on the organization’s annual
operating budget, Kimberley used a strengths-
based approach to assess LDI Africa’s fundraising
assets. She worked closely with Gbenga to deter-
mine which sources of funding the organization
was best prepared to cultivate as well as best
and worst case scenarios for the amount of fund-
ing that LDI Africa could anticipate receiving from
each source. A contingency plan was also devel-
oped that explained how LDI Africa would continue
to operate in the event that the funding target was
not fully reached during its first year of operation.
The strategy also included an action plan with spe-
cific tasks, timeline, and targets. Gbenga’s active
participation in the strategic planning process led
him to appreciate the importance of thinking
through different options to obtain funding and
deploy LDI Africa’s resources expediently rather
than just pursuing whatever opportunities hap-
pened to come along. With an action plan in
place, Gbenga was also better prepared to begin
seeking start-up capital.
Most recently, Gbenga began forming a board
of directors for LDI Africa and invited Kimberley to
join as an advisor for resource and organization
development. Recognizing the importance of an
effective board, Kimberley coached Gbenga on
board development issues, such as defining mem-
ber roles and responsibilities, enlisting their sup-
port for fundraising activities, and facilitating
board meetings. Through this informal consultation
process, Gbenga is learning how to provide overall
direction to the board and to obtain its support for
LDI Africa’s work. He is also addressing the chal-
lenge of board member engagement by managing
expectations around each board member’s role
and time commitments.
As LDI Africa prepares to launch its pilot fel-
lowship program in June 2013, it has recognized
the need to develop partnerships with African
organizations that have expressed interest in
hosting young professionals, but are unable to
cover fellowship costs, such as housing, trans-
portation, and insurance. Gbenga and Kimberley
worked together to prepare a teaming agreement
with an African foundation that provides micro
investments and mentorship to start-up enter-
prises. Their initial conversations with the African
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 679
and ideological natures of many GSCOs require change-agent roles and skills that are
quite different from those in more formal, for-profit settings.47 GSCO change agents typ-
ically occupy stewardship and bridging roles. The steward role derives from the ideological
and grassroots activities associated with GSCOs. It asks the change agent to be a colearner
or coparticipant in achieving global social change. This type of change is “sustainable,” or
ecologically, politically, culturally, and economically balanced. Change agents must, there-
fore, work from an explicit value base that is aligned with GSCO activities. For example,
change agents are not usually asked, “What are your credentials to carry out this project?”
Instead, practitioners are asked, “Do you share our values?” or “What do you think of the
plight of the people we are serving?” Stewardship implies an orientation toward the devel-
opment of sustainable solutions to local and global problems.
The second role, bridging, derives from the grassroots and political activities of many
GSCOs. Bridging is an appropriate title for this role because it metaphorically reflects the
core activities of GSCOs and the change agents who work with them. Both are mainly
concerned with connecting and integrating diverse elements of societies and communi-
ties toward sustainable change, and with transferring ideas among individuals, groups,
organizations, and societies.
Carrying out the steward and the bridging roles requires communication, negotia-
tion, and networking skills. Communication and negotiation skills are essential for
GSCO change agents because of the asymmetrical power bases that exist in grassroots
development efforts. GSCOs are relatively powerless compared with governments,
wealthy upper classes, and formal organizations. Given the diverse social systems
involved, there often is only a loose consensus about a GSCO’s objectives. Moreover, dif-
ferent constituencies may have different interests, and there may be histories of antago-
nism among groups that make promulgation of the development project difficult. The
steward and the bridging roles require persuasive articulation of the GSCO’s ideology
and purpose at all times, under many conditions, and to everyone involved.
foundation involved explaining how the teaming
process would work for preparing consortium
grant applications to foundations, examining the
pros and cons of joint fundraising before entering
into an agreement, and drafting a teaming agree-
ment for both parties to sign. As a result, Gbenga
was better prepared to lead the partnership nego-
tiation process. If LDI Africa is successful in
obtaining grants for its pilot fellowship program,
both organizations will benefit from the opportu-
nity to contribute to the professional develop-
ment of fellows and to the sustainability of
newly formed African companies.
Throughout the process, Kimberley “led from
behind” by working one-on-one with Gbenga to
enhance his leadership capabilities and serving as
an observer in meetings so that he was consis-
tently seen as leading LDI Africa’s partnership
and resource development efforts. Over the past
18 months, LDI Africa has made tremendous
strides in its internal development. It has grown
from a concept to a registered nonprofit, hired
four people to staff positions in Nigeria and the
United States, and established an international
board of directors. LDI Africa has also succeeded
in obtaining an initial round of start-up capital that
can help position the social enterprise to attract
additional funding for its pilot program. Gbenga’s
strong personal commitment to LDI Africa and his
dedication to developing it in a systematic way has
poised the organization for success within Nigeria
and across Africa.
680 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
The change agent must also be adept at political compromise and negotiation.48
Asymmetrical power contexts represent strong challenges for stewardship and bridging.
To accomplish sustainable change, important trade-offs often are necessary. The effective
change agent needs to understand the elements of the ideology that can and cannot be
sacrificed and when to fight or walk away from a situation.
Networking skills represent a significant part of the action research process as
applied in GSCO settings. Networking takes place at two levels. First, in the steward
role, practitioners bring to the GSCO specific knowledge of problem solving, technolo-
gies of empowerment using processes that socially construct and make sense of the sur-
rounding conditions, and organization design.49 The participants bring local knowledge
of political players, history, culture, and ecology. A “cogenerative dialogue” or “collective
reflection” process emerges when these two frames of reference interact to produce new
ideas, possibilities, and insights.50 When both the practitioner and the participants con-
tribute to sustainable solutions, the stewardship role is satisfied.
Second, in the bridging role, networking skills create conditions that enable diverse
stakeholders to interact and solve common problems or address common issues. Change
agents must be able to find common ground so that different constituencies can work
together. Networking requires the capability to tap multiple sources of information and
perspective, often located in very different constituencies. Action becomes possible
through these networks.
But bridging also implies making linkages among individual, group, GSCO, and
social levels of thought. Ideas are powerful fuel in global grassroots development projects.
Breakthrough thinking by individuals to see things in new ways can provide the impetus
for change at the group, GSCO, social, and global levels. This was demonstrated by U2’s
Bono and U.S. Treasury secretary Paul O’Neill during their 2002 visit to understand and
develop solutions to poverty in Africa. The change agent in international GSCO settings
must play a variety of roles and use many skills. Clearly, stewardship and bridging roles
are important in facilitating GSCO accomplishment. Other roles and skills will likely
emerge over time. Change agents, for example, are finding it increasingly important to
develop “imaginal literacy” skills—the ability to see the possibilities, rather than the con-
straints, and the ability to develop sustainable solutions by going outside the boxes to
create new ideas.51
SUMMARY
In this chapter, we presented two interventions
designed to help organizations generate positive social,
environmental, and economic outcomes. These change
processes are fundamentally different from other OD
interventions that focus primarily on the achievement
of economic objectives.
Sustainable management organization interven-
tions are intended to achieve sustainable effectiveness.
Organizations must be agile enough to sustain high
levels of economic, social, and environmental perfor-
mance. Achieving these triple-bottom-line objectives
relies on design guidelines that promote capabilities
in change and multistakeholder decision making.
The organization’s strategy must be realigned and
clarified to support sustainability and the work
systems, structure, management and information sys-
tems, and human resource systems must be oriented
appropriately.
Finally, applications of OD to global social
change were discussed. Typically carried out in global
social change organizations, these interventions pro-
mote the establishment of a global civilization. Strong
CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 681
PART 6 STRATEGIC CHANGE INTERVENTIONS
19 Continuous Change
20 Transorganizational Change
PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT
21 Organization Development for Economic, Ecological, and Social Outcomes
