The Invisible Organization

How Informal Networks can Lead Organizational Change

Neil Farmer

• Publisher: Routledge
• Year: 2017
• Print ISBN:
  9780566088773
• eBook ISBN:
  9781351887380
• Topic: Business
• Subtopic: Business General
• Index: Business

Despite valiant efforts and the advent of techniques such as delegation, career development, performance management, key performance indicators, programme and project management, social network analysis, and employee engagement, most organizations struggle to beat the 70 per cent failure rule for profound, people-disruptive business change. Surveys show that most employees are still disengaged from their work. Innovation is sluggish and agility elusive. Harnessing the hidden potential of your workforce can be a slow, often painful process. Neil Farmer's The Invisible Organization explains how to adapt your organization's design to the informal networks that form most of the basis for communication between managers and employees. The book explores five key themes: ¢ Executive leadership - a little autocracy and a lot of collaboration; how senior managers can enable and facilitate change; ¢ Effective first-line management - in most organizations up to 60 per cent need to be replaced and women need to occupy far more significant roles; ¢ HR Managers - a key role, but most don't make the transition from 'command and control' towards the effective use of key influencers and informal network which allows HR people to contribute to the future of their business: ¢ The value of local influencers and those with extensive personal networks - how to identify them and increase their roles across all forms of business change; ¢ Radical changes to white-collar outsourcing - to an in-house outsourcing service. This is an important, if somewhat painful, call to arms for leaders and HR specialists across all organizations.

CHAPTER 1
The Failure of Business Leadership

Over the last three decades, the rule of thumb figure for successful change programmes that involve fundamentally changing the way that people work has stubbornly averaged about 30 per cent. in other words, about 70 per cent of change programmes fail to meet most (or any) of the original business objectives. This basic failure is often compounded by time and cost overruns, some of which are so large as to swamp the initial, often naïve or politically-wishful, estimates.

The yawning gap between strategy and implementation

Figure 1.1 High failure rates in organizational change

The change programme failure rates shown in figure 1.1 have been used by the author as key slides in senior management presentations for over a decade. Over that long period, the latest research updates have oscillated up and down but the underlying trend has been constant. Putting it bluntly, there is something very wrong with the way that almost all senior executives (and their internal – or contracted external – programme managers) are dealing with profound business change.

Although technical problems are sometimes the root cause of failures in major organizational change, they tend to be symptomatic of the wider problems associated with the programme and are rarely the sole or main cause. The biggest single cause of business change failure by far is ‘people problems’.

VIEWS AND CLUES

If, as one (hospital) consultant put it, gaining these benefits for the NHS is ‘about putting together the broken processes’, why is government policy so intent on fragmenting them? Isn’t separating out activities and hiving them off to the private sector (what the Keep Our NHS Public campaign, www.keepournhspublic.com, calls ‘patchwork privatisation’) the very antithesis of Toyota-like flow? Yep, that’s exactly what it is. Since the government is obsessed with traditional economies of scale, most private-sector providers are engaged to optimize activities (building hospitals, offshoring medical secretaries) rather than to create economies of flow. Worse, under the profit motive, they have no incentive to streamline the activity or, God forbid, get rid of it altogether, as Toyota would.

Source: In the drive to save the NHS, I’m choosing a Toyota, The Observer, 14 January 2007

Private equity funds last year went on an unprecedented $725bn (£367bn)globalbuyingspree – a figure outstripping the entire economy of the Netherlands. Figures out next week estimate that buyout funds, which have cut a swathe through global businesses and now employ over a fifth of employees in Britain’s private sector, can draw on a war chest of $2 trillion to fund acquisitions – enough to buy McDonald’s 38 times.

Source: No firm is safe from private equity, The Observer, 20 May 2007

The leaders of 130 000 police officers have drawn up a dossier of ‘lunacy’ on Britain’s streets. They say that children are being arrested for throwing cream buns and bits of cucumber while adults are getting criminal records for offences that merit nothing more than a ticking-off. The pressure to get results (to meet targets) is so bad, they say, that officers are criminalising and alienating their traditional supporters in Middle England and many are so disillusioned that they are considering quitting.

Source: We are making ludicrous arrests just to meet our targets, The Times, 15 May 2007

IT project failures have been the subject of analysis over recent decades and research has shown that direct or indirect ‘people problems’ are the dominant cause of IT project failure. A 2004 CHAOS survey by The Standish Group, outlined below, is reasonably typical. The survey analyzed the top three reasons for success and failure across three IT project outcomes – successful projects, ‘challenged projects’ (where the end result was achieved but problems were experienced, such as time or cost overruns) and failed projects.

Top three reasons for IT project success/failure from the CHAOS survey were:

• Successful projects
  1. User involvement
  2. Executive management support
  3. Clear statement of requirements
• Challenged projects (cost/timescale overruns, and so on)
  1. Lack of user input
  2. Incomplete requirements and specifications
  3. Changing requirements and specifications
• Failed projects
  1. Incomplete requirements
  2. Lack of user involvement
  3. Lack of resources

Research into the underlying causes of failure in other types of major business change initiatives (such as mergers, transformations, outsourcing, and so on) also highlight the dominance of ‘people problems’.

Managers are not good at implementing business change

Despite professional adherence to change methods and a proliferation of increasingly sophisticated technology and process design tools, the success rates for ambitious business change programmes that impact on how people work day-to-day remains depressingly low. One of the most recent surveys, conducted online by McKinsey Quarterly in 2006, showed only 38 per cent of global executives reported recent business transformations with which they were most familiar had a ‘completely’ or ‘mostly’ successful impact on performance.

(There are many different ‘change programme’ models out there that are commonly applied. They all underline the critical importance of ‘communications’, which in practice usually means ‘exhortation’. If this is common to all change programme designs, could that be one of the reasons why so many fail? Exhortation is a classic aspect of top-down-driven change programmes.)

INCREASING PRESSURE TO ACHIEVE SUCCESSFUL, FUNDAMENTAL CHANGE

Given the poor experiences of most senior managers with profound business change initiatives and the growth of IT outsourcing and (more recently) business process outsourcing, many must be tempted to become cynical and concentrate on what they know they can do well.

VIEWS AND CLUES

The study quashes the myth that those in the most senior positions in the workplace are more likely to suffer from stress and other illnesses. Though there was shown to be a strong relationship between health and employment status, it is those in the lower grades of employment who are at far more risk of both physical and mental illness. The more senior you are in the employment hierarchy, the longer you are likely to live. In particular danger are workers who face high demands but have little control over their work, regardless of the ‘type’ of person they are. The study highlights employer and manager support as one way to reduce sickness absence.

Source: Whitehall II study, September 2004

(Author’s Note: A police study demonstrated the absolute truth of this. The only change made in two police divisions (which were broadly similar, apart from high rates of sickness and absenteeism in one and low rates in the other) was to swap the two divisional commanders. The high rate went low and the low rate went high!)

In theory and in practice, hierarchy doesn’t work, and no one put the reason better then GE’s Jack Welch, himself an iconic manager. Hierarchy, he said, defines an organisation in which people have ‘their face towards the CEO and their ass towards the customer’. The more charismatic the executive, and the more centralized the power, the more perverse the effect.

Source: Why fearless leaders are something to dread, The Observer, 6 May 2007

Increasingly though, this ‘easy life’ is not an option. As well as the expected pressures from competitors and from new government directives/initiatives, senior managers – at least in the private sector – are becoming increasingly wary of the growth of private equity funds. Despite the complications intrinsic in tax breaks, credit crunches and leveraging high levels of debt, the real message to established senior executives is simply, ‘We can run your business better than you can ... or better than you dare!’

Similarly, as the track record of failure with public sector reform grows, so will the temptation to replace failing public sector managers with managers from the private sector. In all likelihood, however, these new brooms from a faster-moving, more innovative culture will still not have the key capabilities to bring effective change to the workplace. New ideas certainly ... new enthusiasm and energy probably ... but really new change implementation skills? Unlikely!

THE ‘COVER YOUR BACK’ STRAITJACKET

It is not at all surprising that many senior executives seek to cover their perceived inadequacies with ‘tokens of success’ as well as with more objective performance achievements through higher profits or improved, measurable service levels.

These tokens of success take the form of many acronyms and phrases, ranging from ISO 9000 through EFQM-type awards to customer service excellence charter marks and Investor in People awards. Each of these worthy initiatives doubtless has merit, but the temptation for beleaguered executives to invest them with a greater significance is obvious.

Equally, senior managers experience pressure to ‘have an answer to potential criticisms’. They, in turn, pressurize their subordinates to meet imposed targets of performance, which may lead to false reporting upwards – as the pressure increases so does the temptation to tell your bosses what they want to hear, rather than what is really going on.

Most significantly, the combined pressures to succeed lead to decision inertia – ‘If I can’t be sure of succeeding, it’s not worth attempting the change – I could be vulnerable.’

One of the most profound comments overheard during a discussion between outsourcing professionals was, ‘They would never have got this far without outsourcing – they just do not have the nerve to go through the pain barrier themselves.’

Outsourcing was once seen by executives under pressure as a magic bullet for many of their woes. ‘Let the professional service providers solve our most difficult operational problems, so that we can really focus on running the business and planning for an even more successful future.’ But as questions are raised about the value of the whole outsourcing experience and management publications report a growing trend towards in-sourcing – there are now few hiding places for managers leading failed change programmes.

THE NEED FOR A NEW SOLUTION TO THE CHANGE QUAGMIRE

As the gloss comes off IT and business process outsourcing, the old pressures return once again to haunt senior managers in both public and private sectors. ‘In our heart of hearts we know that we are not good at making fundamental day-to-day changes in the way that our organizations operate – but if outsourcing is more and more problematic, and the pressures on us to deliver results are growing ever stronger, what do we do now?’

Is it possible to improve the outsourcing experience in the future or are we only putting ‘sticking plaster’ over the gaping wounds that will never go away? Perhaps we need a new solution to this change quagmire? Perhaps even a new model of how we can make effective business and organizational change in future? We definitely need to improve ‘leadership’.

VIEWS AND CLUES

‘You can get a lot more done with a kind word and a gun, than with a kind word alone.’

Al Capone

Rob Goffee, Professor of Organizational Behaviour at London Business School, advocates authentic leadership in his book ‘Why Should Anyone Want to be Led by You?’ He says that workplaces are full of cynical, disaffected followers who want leaders who inspire and excite. ‘People are fed up with being worked, they are fed up of management fads and want to be led by real people they can trust.’

Source: How leaders manage, The Times, 31 May 2007

Employee resistance was ranked as the No. 1 obstacle to change initiatives in a recent survey by the Society for Human Resource Management, which received 403 responses from human resources professionals.

Yet the very people leading the change are not always effective at bringing it about. Leadership assessment research has found that executives at the v...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Acknowledgements
• List of Figures
• About the Author
• Reviews for The Invisible Organization
• Preface
• ‘The Invisible Organization’: Highlights of the Book
• 1 The Failure of Business Leadership
• 2 The Importance of Influencers
• 3 The Importance of Informal Employee Networks
• 4 Balancing Formal and Informal Employee Networks
• 5 Throwing Out Those Tired Old HR Models
• 6 Managing Your Business Using Informal Employee Networks
• Appendix 1: Using Informal Networks — Questions and Answers
• Appendix 2: Final Reflections on ‘Leadership and Change’
• Bibliography
• Index