Leadership and the Art of Change

A Practical Guide to Organizational Transformation

Lee Roy Beach

• Publisher: SAGE Publications, Inc
• Year: 2005
• ISBN:
  9781544320397
• Edition: 1
• Topic: Business
• Subtopic: Organisational Behaviour
• Index: Business

Leadership and the Art of Change is a unique book in that it focuses on a leader's central and most daunting task—achieving organizational change that successfully addresses external and internal threats and opportunities. Author Lee R. Beach uses six prime responsibilities as the framework for discussing change leadership: external and internal environmental assessment to identify required changes, organizational culture as a constraint on change, vision for motivating change; plans as a map for change, implementation to produce change, and follow-through for institutionalizing achieved changes and making ongoing change a part of the culture.

One

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Assessment: Specifying Change

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Prime Responsibility #1: Leaders must work with others in the organization to assess the organization’s external and internal environments and specify needed changes in each.

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Leadership is about change but not arbitrary change. Change can exact a huge price. Aside from resources tied up implementing functional and structural changes—in new systems, equipment, training, or personnel—there is an enormous cost in extra effort and disruption of routines. If nothing else, the organization is almost always less efficient while it undergoes change. Unless it has sufficient excess capacity to compensate, this inefficiency can adversely affect production of goods or services with a resulting loss of customers and compromised relations with suppliers and other stakeholders. Moreover, change is hard on the members of organizations; emotions run high, people work long hours, things seldom go strictly according to plan. Change is not to be undertaken lightly, certainly not for any but the most compelling reasons.

Although change for its own sake clearly is foolish, it is equally clear that an organization can be in trouble if it does not change in response to the dynamics of its internal and external environments. Therefore, it is a prime responsibility of a leader to work with others in the organization to assess the organization’s external and internal environments, where assess means acquiring and interpreting information about the environments. This usually consists of information about the current status of the external and internal environments, forecasts of future status of the environments, and indications of the present and future intentions and desires of stakeholders (customers or potential customers, suppliers, shareholders, employees, the community, and to some extent, competitors). The goal is to create a picture of how the organization, with its unique internal environment, functions within its unique external environment. This in turn permits identification of existing and potential opportunities and threats and dictates the changes, external and internal to the organization, that must be made in order to address them.

Assessing the External Environment

Assessment of the external environment, often called environmental scanning, is the process of acquiring information about the presence and nature of external demands and constraints on the organization’s actions. One might think of an organization as involved in a game with its competitors. The playing field for this game is the organization’s external environment, defined by the ever changing rules imposed by the forces at work within that environment (e.g., industry practices; the local, national, and world economy; government regulations; resource availability; and social trends and customer preferences). Assessment of this environment is aimed at understanding the structure of the playing field and the rules of the game, its existing and potential opportunities and threats. Within the bounds of this understanding, the strategies used by the organization in its attempt to win (or at least stay in the game) depend on its internal environment: its structure and how it operates, the nature of its culture, its vision for its future, and its ability to focus its efforts on achievement of its vision. The leader’s job is to make the organization a viable participant in this game by fostering an understanding of its external and internal environments and by promoting changes in both of them that enhance its ability react to or anticipate opportunities and threats, with the goal of surviving and prospering.

Environmental assessment is done at every level of the organization. On the “shop floor” (in whatever way that is defined for a particular organization), supervisors strive to be informed about what is going on and what part they and their subordinates play in the overall endeavor. At the next levels, managers strive to be informed, about both events within the organization and, to some degree, events external to the organization. At the highest levels, the organization’s leaders strive to be informed as broadly as possible about events internal to the organization as well as events in the external environment.

Every successful leader I know is almost as well informed about the world in general as he or she is about his or her own organization. Most of these people are well educated, well traveled, and well connected. They know what is going on in the world and have a pretty good idea about how it will affect their organizations now and in the future. Their skill as leaders turns heavily on their ability to convince the members of their organizations to follow them on paths that are based on this fund of knowledge. Their workdays typically revolve around two activities: learning more about the organization’s external and internal environments and translating what they learn into a steadily evolving vision, a coherent, reasonable story about the future that the members of their organizations can understand and willingly pursue.

Buying Information

Information about the external environment often is harder to obtain than information about the internal environment. Moreover, although all information is expensive, external information frequently is very expensive, so users must decide what they want and how much they are willing to invest in obtaining it. It is convenient to think of four levels of investment in information procurement and the sources typically linked with each. A low level of investment buys information from such sources as one’s own knowledge and hunches, others’ knowledge and hunches, or easily obtained data such as changes in monthly sales of one’s products, number of customer complaints, or a competitor’s exit from or entry into one’s markets. Payment for this information usually is in the form of buying lunch in exchange for knowledge, hunches, opinions or advice, asking employees to do a little more work to tabulate demand or complaint data, or watching the newspapers for competitors’ advertisements or articles about them in the business pages.

A medium-low level of investment buys all of the above plus generally available information from industry or government sources. Some industry sources are trade magazines, trade association information services, and the Internet, either free or from subscription services that compile industry- and product-specific data, informed analysis, and forecasts. Some government sources are the Census Bureau (www.census.gov), the Department of Commerce (www.commerce.gov), and the Small Business Administration (www.sba.gov). Payment is in the form of acquiring computer literacy and, in some cases, a subscription fee. Sometimes the problem is that there is so much available, of every possible description and reliability, it’s difficult to find the specific information you need, and it’s worse when you aren’t really sure what you need. You can obtain more targeted information, cheaply, from your public library or local college or university libraries. Seek out the business librarian, a vastly underappreciated resource, who can help you find information in the library’s collection, suggest sources you never dreamed existed, and direct you to relevant Web sites.

A medium-high level of investment buys even more information, this time from empirical tests. Here your product (a term that includes both goods and services) is introduced to a potential new market, or a new or retooled product is introduced to an existing market. Often this is done in a few representative sites just to test customer acceptance. If acceptance is there, the experiment is expanded; if not, the product is dropped. Payment is in the form of the cost of the experiment, such as an advertising campaign and distribution expenses. A manufacturer of ketchup, for example, might be considering adding a chili flavored variety to its product line and wants to know if people will buy it. Test markets could be set up in Albuquerque, Milwaukee, Philadelphia, and Sacramento, with an advertising blitz in each city. If everybody loves the new flavor, the manufacturer can consider marketing the new product across the country. If it is liked only in Albuquerque, the manufacturer might consider distributing the new product only in the Southwest. If it turns out that nobody likes the new flavor, the manufacturer can quietly drop the whole idea and be glad that an expensive and ill-fated product launch was avoided.

A high level of investment buys consultants or an in-house research group that can monitor all the other lower-cost sources of information, can perform surveys and other forms of market research, and can tap expert opinion about national and world trends and their implications for opportunities and threats for the organization.

Organizations do not devote the same amount of effort and money to assessment of every sector of their external environments. Common sense dictates that investment be heavier in sectors of particular interest to the organization and in sectors about which there is greater uncertainty and volatility. A pharmaceutical company, for example, might invest heavily in information about public opinion about the retail cost of drugs and about the views of legislators about how to reduce such costs because both public opinion and legislators’ views are volatile. The same organization might invest less heavily in information about, say, regional real estate prices or labor costs in Third World nations because, at the moment, neither has a direct impact on their business interests.

In fact, most businesses spend their external assessment budgets rather narrowly, primarily on market research to acquire information about their customers’ needs in relation to the business’s products. Appendix A contains an example of a market research tool that a colleague and I developed for a large hospital that faced falling revenues due to an increase in competition from other regional hospitals. Administrators wanted to know which of the many services the hospital provided were regarded by its customers (which, surprisingly, are physicians rather than patients) as falling short of, equaling, or exceeding their needs. The information allowed the hospital to optimize its expenditures by cutting back on overprovided services, leaving acceptable services as they were, and expanding underprovided services to better meet customer needs. This resulted in increased physician willingness to send patients to the hospital.

This kind of research is expensive because it requires a trained survey staff that can ensure that the sample of customers is representative so the results will be valid. Moreover, they must analyze the data and interpret the results for top managers, who usually lack research skills. Most organizations employ market research organizations or college/university consultants to conduct their more complicated information procurement.

A relatively new profession has developed as librarians and information specialists have opened shop to provide secondary research for businesses and other organizations. These people, informally, call themselves “information brokers,” and they search out data that are available on the Internet and in other archival sources. The information they provide is called secondary because it is amassed by other people, like survey companies, government agencies, or trade organizations. But unlike most of us, information brokers know where to look for specific answers to their clients’ specific questions, and they have access to databases that most of us do not. They work on a client-by-client basis for negotiated fees.

Descriptions of services offered by information brokers, as well as contact information that will help in selecting a broker, can be found on the Association of Independent Information Professionals (AIIP) Web site (www.aiip.org). Among the diverse services offered are summaries of information about competitors or statistics about product demand, government and public policy documents, data mining or warehousing, patent searches, lists of upcoming trade shows, and copies of papers presented at scientific meetings. AIIP’s contact information allows you to pick a broker that specializes in the kind(s) of work you need done. For example, one company on the AIIP contact list, Bancroft Information Services (www.bancroftinfo.com), offers to provide client and customer leads for specific services and products; the history, personnel, news stories, and other information about competitors; fact checking; industry trends and statistics; and consulting services related to effective design of your own in-house information management and research systems. To better explain its services, Bancroft’s site provides descriptions of some of its projects. For example, “A publisher was planning to launch a very specific health care–related publication to a small segment of the health care market. Research was performed to determine the current market for such a niche periodical, including information on current competing products and buying habits of the potential audience.”

Walk Around

Most of the assessment methods described above involve secondary sources or special research tools. But we must not overlook the importance of face-to-face discussions about the external environment with people both inside the organization and outside. Longtime employees probably know a great deal about your customers and suppliers, about recent market trends and innovations that have yet to emerge. Retired employees, particularly those who have been in leadership positions, can fill you in on the history of the organization: how it came to be what it is and how it has dealt with previous opportunities and threats. Industry consultants can help you understand the environment and provide informed forecasts of future developments. Industry colleagues like to talk shop, and conventions and industry meetings provide opportunities to learn from them.

Further afield, state and local leaders can provide information about current issues that face organizations such as yours, as well as predictions about what the future will bring. Local legislation often has a greater than anticipated impact on organizations, even those whose customers are elsewhere (tax policy, for example).

Finally, get to know the faculty at the nearest college or university. If your organization is a business, the business faculty is a source of thoughtful analysis and information about new management techniques. If your organization isn’t a business, you should get to know faculty in fields related to your organization’s activities, but knowing the business faculty is still a good idea. Faculty members often are willing to help with specific problems, either by consulting or by having their classes undertake projects that address the problems. Volunteer to be on the advisory board for the program(s) of interest; you can use your expertise to help them, and they’ll use theirs to help you. Don’t overlook the economics department. Every organization should have access to an economist, if only to decode the analyses you come across in newspapers and magazines.

Where to Look

So much is available about an organization’s external environment that tools are helpful in structuring the search for relevant information and guiding its assessment. One such tool is the search matrix (Fig. 1.1). The parts of the search matrix that are relevant will differ from one organization to another, but it is easy to customize the matrix to any particular organization.

The matrix has two dimensions: sectors and participants.

Sectors. Most organizations’ external environments can be divided into five sectors, each of which can affect them and over which they have only limited control:

1. The economy at the local, national, and global levels affects the demand for products, the demand for shares, the availability of funds, and the size of the labor pool.
2. Government at the local, national, and global levels affects the ease of carrying out an organization’s mission through regulation, taxation, and the provision of trained workforce through education and training programs.
3. Society at the local, national, and global levels affects an organization through attitudes toward its industry or its specific mission and by the demographic characteristics of the customers and labor force.
4. The industry of which an organization is a member affects it by imposing codes of behavior and by the directions in which the industry develops.
5. Research enterprises affect an organization by developing new technologies or adapting existing technologies for new problems.

Participants. There are six categories of people and organizations that have a stake in the organization’s success:

1. Customers receive the organization’s products. A business’s customers are the individuals and organizations that purchase its products. Government agencies’ and nonprofit organizations’ customers are the people and organizations that receive products because they are entitled to them.
2. Owners are the people and other or...