Why do Change programmes often fail?
Productivity through People
Involvement creates ownership which leads to commitment
In June I was invited to attend a Conference in Warsaw run by Global Executive Learning’s Director Dr Yury Boshyk and his team. It was very stimulating to be amongst people who are motivated to achieve and have a clear sense of where they are going. My role was to talk about how we have used Action Learning to develop organizations and deliver organisational change. This led to a number of questions about why ‘change programmes’ often fail.
In my experience Change Programmes that fail do so because they involve some form of participation which ‘challenges’ the culture of traditional organisations where the managing style is Parent / Child (1). We still ‘do it to them rather than through them’ and those in authority don’t want to change. It is not possible to optimise productivity without the involvement which creates the ownership that leads to commitment.
In the 80’s I had the opportunity to work in a number of Eastern European countries and was struck by the ‘sadness’ of the cities, yet in the surrounding countryside I saw beautifully kept cottages with lovely gardens with lawns most English gardeners would die for. My friends explained that people did not own their City dwellings but were allowed to buy cottages. Monday to Friday they worked in the Cities; Friday evening they loaded the family car and left to spend the weekend working on their country homes. People care for what they own or maybe value is a better word.
Organisations are like us, they are born, they live and then they die. They are created by entrepreneurs who bring with them the culture of their birth. There are thousands of ‘organisations’ in the world, they are everywhere in every walk of life. We only tend to use the word ‘organisation’ in the context of commercial business however, in reality, wherever people are ‘organised’ we have organisations. Political Parties, Religions, Armies, School, Health Clubs, Football clubs et al are organisations. All started with an entrepreneur; someone or group to satisfy their needs. Schools were created by people who wanted to educate the next generations, armies by people who wanted to conquer, political parties by people who wanted to rule, and businesses, which are our main interest here, by people who wanted to achieve something. The lifecycle of organisations is dependent on their ability to adapt to changing ‘customer/supporter/user/adherent’ needs; some survive for thousands of years, others are here today and gone tomorrow..
There are three stages in the development of organisations:
- Creation - the formative years which focus on building a successful business; these are challenging and exciting times
- Optimisation – ‘managers‘ optimise the benefits from the asset the entrepreneur has created by ‘adapting’ the product or service to the changes which threaten every business.
- Disintegration - the final years, as the organisation becomes less and less viable it starts to sell of its assets and slowly disappears.
Note. Whilst our focus here is on commercial organisations many of the issues discussed are also relevant to other types of organisation.
Phase one – Creation, the formative years
Organisations are created by entrepreneurs. It’s their idea, they drive it, and they build the organisation in their image. If they are successful they have absolute authority to manage Parent / Child (PC). They make the decisions and others carry them out; it is a natural PC structure with the brains at the top and the workers at the bottom/
A carpenter, who is skilled at making chairs, decides to start a business. He employs others to make chairs under his guidance and sells them. The business grows; the entrepreneur ‘knows what he wants and how to do it, he cares so he ensures it is done properly and he can because he naturally has the authority to manage his people. He is the ‘natural’ leader, the ‘parent’ of his ‘children’. They respect him and the business flourishes. This entrepreneur has created a successful organisation. The entrepreneur has used a ‘directing’ style to manage the business which is accepted because he / she ticks all the authority boxes.
He has Sapiential authority because it’s his product or service, he / she made it happen and people respect them:
- Charismatic, because they are seen as the leader
- Moral, because they have the wisdom to make the ‘right’ decisions
- Organisational, because they know how to get things done
- Contractual because they are the contractor (2).
However, nothing lasts for ever. As time passes two things are inevitable; the organisation will need a new leader or leaders and circumstances will change; the organisation is moving into phase two.
Phase two – Optimisation, managing the asset
Cometh the hour, cometh the man?
Phase two begins when the entrepreneur departs. He or she has created an asset; the next generation has the task of optimising it for the benefit of all concerned and this means protecting it from the competition. If we go back a century or so this was easy, people were in need and the suppliers were happy to satisfy these needs. This was a world of finite supply and infinite demand, a “sellers” market. The problem was making the product or service not really selling it. New management only needed to do more of the same and the tills were ringing.
However by the mid 60’s things were changing. Foreign competition was entering home markets; local suppliers were now in a situation of infinite supply and finite demand – a “buyers” market. It was soon clear that UK industry was not competitive in these new conditions. It was a challenge for management. How could foreign companies ship product halfway around the world and still be competitive? The simple answer for many was ‘cheap labour’ but it was clear that whilst this was a factor, it was not the answer. Then we learned, from “The Machine That Changed the World” by James P. Womack, Daniel T. Jones, and Daniel Roos, that it was more than that. The Japanese’s had developed the simple idea that ‘assembling products’ rather than ‘making parts’ was the goal of enterprise and that ‘participative management] was the way to achieve it. This new world of productivity, the Japanese ‘miracle’, focused on JIT (Just in Time) as opposed to JIC (Just in Case). It used a set of practical ‘tools’ like Kaizen, Quality Circles, 5 Whys et al, which ensured that all employees were involved in optimising performance. The Japanese were happy to share their secrets. Indeed many British companies jumped on the QC bandwagon. The following case explains what happened in one of our client companies who tried it.
The Chairman of company XXX was invited to attend a conference on Quality Circles in London. He came back from the conference convinced that OC’s would be good for his company. Over the next six months QC’s were created in all of the production departments and everyone sat back waiting for the results. The problem, as the HR Director told me later, was that when the results came in, management was not happy. Most of the issues raised by the QC’s were focused on work flow, late changes, broken machinery, poor quality materials etc. Management was unhappy at what it saw as criticism by the workers, senior management didn’t want to get involved, it was not their idea in the first place and the QC programme was abandoned.
Sadly we didn’t like the Japanese miracle because it empowered employees to highlight the weakness of management. The directing style of management as practiced in most UK manufacturing organisations at that time was not prepared to change, and stalled, if not killed, the competitiveness of British Industry.
And now? If you think this example is irrelevant, since it was a long time ago, let me bring you up to date with a recent example. Sadly, as you will see, little has changed.
At the end of August 2017 Provident Financial, a Yorkshire based Payday (Door-Step) lender reported that it had:
- Turned a projected profit for 2017 of 60million £ into a project loss of 120million
- Experienced a fall in its share price of 66% wiping 1.7Bn £ of its share value
- Cancelled its dividends
- Lost its CEO – One of the highest paid of the FTSE 100 Company at £6 Million PA
All of this happened because management decided to restructure its business to appease the gods of ‘technology’. Payday lending is a doorstep business, delivered by one person, the lender to another person, the borrower. Provident had a sales staff of 4.500 self-employed people who looked after its customers arranging loans and collecting debts sitting round the living room fire drinking tea. The plan was, it appears, to get rid on 2,500 of these people, to make the remaining 2,000 permanent employees and divide the work amongst them. They would be provided with Tablets and software so they could manage their customer accounts on line.
It seems that the ‘technical’ part of this project went well but the implementation was a disaster; the majority of the sales force left and many who did volunteer to stay as employees were not computer literate. They have lost the key asset of the business, the interface between the business and its customers.
Whilst management seems to have known what it wanted from the technical aspects of the project it failed to anticipate how their 4,500 customer reps would respond. Could that happen to you? Yes it’s possible. Technology changes fail every day because the people delivering them don’t recognise the need to ‘sell’ the changes they seek. Telling isn’t selling and the silent majority hold the ‘trumps’ when they are together.
We wish the new CEO every success as she tries to put the wheels back on the wagon’ sadly they didn’t need to come off in the first place!
PS We are currently looking at a very similar situation with Ryan Air and its pilots. The pilots want to negotiate their terms and conditions of employment, management, which is still led by the entrepreneur who created Ryan Air, does not wish to negotiate. Note I read yesterday that since the crisis a month ago they have recruited 1000 new pilots and seem to be in the process of making some management changes.
Surviving in changing circumstances
What we don’t plan for, others plan for us
Things change all the time and it seems to me that the rate of change is exponential; the further we move up the curve the faster things change.
For businesses, change takes three main forms. Your product or service;
- Becomes redundant, it’s not needed anymore
- Competition moves in with a better or cheaper alternative
- The rate of change overtakes the organisation
To stay alive in our rapidly changing world business need to be aware of everything. For example at one time all we had for shopping was paper bags, then along came plastic,. Now paper is back because it is more environmentally friendly. In the seventies big super markets were all the rage and the bigger the better. By the nineties small was becoming beautiful again with companies like Lidl and Aldi with their limited choice of quality products, low prices and quick turnaround have become the place to shop and big is no longer beautiful. A few weeks ago we learned that Monarch Airways is in receivership. Monarch was primarily a ‘holiday’ carrier which made its living by flying people on package holidays to destinations in Europe. It failed for four main reasons: competition, terrorism, a plan to replace their fleet with new aircraft from Boeing, and Brexit; Brexit being the final straw… The 12% depreciation of the pound since Brexit encouraged millions, to holiday at home this year. Could this management have done anything to save the company? They certainly knew about all of these things but it’s a crowded market with falling demand, at least for now, so with only one customer it was probably too late. Circumstances change all the time and things which seem irrelevant can, when combined with other factors, suddenly become a major threat to our survival.
Organisations, in my experience, move into phase three when, like old people, they no longer have the ‘energy’ to survive. It seems to me that organisation and particularly commercial organisations reach a peak and then slowly descend. The rate of descent depends on many factors but the key factor is the rate of change and the ability and commitment of management to respond appropriately. There is, it seems a recognisable cycle in the process of decline the beginning of which is signalled by pressure on profits. Apart from looking for something new there are two main approaches to this. One is to keep the price and try to drive sales by promotion. The second is to try to increase sales by reducing price. In both cases; costs increase as a proportion of income. It may be possible to solve this by re-engineering the product or service. But if the competition is really serious it won’t. So the next step is to sell assets and cut costs, which usually means making people redundant. At this stage it’s clear to everyone that the boat is sinking so the good people leave and that’s the beginning of the end. Sad you may say but it’s a natural process and we need it to release talent and assets back into the community where new entrepreneurs can utilise them produce new products or services that people want.
What have we learnt over the last five decades?
For me the message is clear; when organisation move from the ‘entrepreneurial’ stage, the PC style of management, which is essential for the creation of organisations, also needs to change. The new management will not have the ‘natural’ authority’ of the entrepreneur which means that the new leader needs to focus on the other authority bases, particularly ‘charismatic, structural and organisational authority’ if the organisation is to prosper. Unfortunately the culture of the organisation the entrepreneur leaves behind is PC as is the ‘old’ management team. This means that the new CEO will often be chosen because he/she is also PC thus maintaining the inherent managing style but without the inspiration of the entrepreneur. This does not mean that the organisation will fail, not immediately, but it will fail. The answer to the problem is to change the managing style from directing to participative. This will unlock the potential of the ‘brains’ of the many’ to complement the ‘brains’ of the few.
Organisations in transition need management who understand and accept that to be productive they must empower their people through the involvement which creates ownership that leads to commitment. This can only be achieved through cultural change, the best example of which it seems to me are the Globals who employ empowerment in practice.
Management style and the Globals; participation in practice
My first encounter with globalism was in Motorola in the early 80;s. It was a quite different from the traditional organisations that I was used to working with. The first things I noticed was that everyone, no matter what their status was called by their first name even top people from the US were Bob and John. There were systems and procedures everywhere and everyone seemed to know what was expected them and the interfaces they had to satisfy. The finance people closed the books every month and often slept in the office when closure day was near; the figures had to be with the European finance people on closing day. People were happy, HR was involved in the day to day running of the business and they had rules about people which showed they cared. Local management for example could not terminate an employee who had worked at the plant without agreement from Motorola Europe and they had to go the US for permission to terminate a ten year employee.
Globals bring their culture with them. It focuses on outputs and prizes participation and open two way communication. It has a business model that, with a few modifications, like wine being available in the Toulouse plant canteen at lunch time, seems to work everywhere.
The UK lost its car industry in the 80’s because traditional management was unable to compete. Today we have a thriving car industry, at least for now, owned and managed by Globals: indeed 61% of UK industry is owned and managed by Globals. The Japanese alone employ 140,000 people here and it works because the culture of these organisations recognises the need to empower their employees to achieve their business goals. When they create a new organisation in a foreign country they wheel in the culture, adapted as necessary and if they takeover an existing organisation just replace the existing culture as can be seen in the following example.
In 2012 Geely, a Chinese conglomerate which has now also acquired Volvo, took over the London Taxi Company, now called London Electric Vehicle Company. It immediately set about designing and producing a new hybrid taxi, the TX5. This will have a 70 mile battery life and a three cylinder Volvo generator as back up. As part of this programme it has invested £300 million in a new plant in the West Midlands. This plant will create 1000 new jobs and produce 20,000 TX5 a year. The company recently announced its first major international order of 225 vehicles to Dutch taxi firm RMC for delivery in 2018. They were able to achieve this because they have a vision. They knew where they were going, they knew how to get there and they have the courage to travel.
Optimising the productivity of organisations
I started this blog in response to the question raised at the Warsaw conference: “Why do OD Programmes often fail”. in June. In my view change programmes often fail because most organisations are still operating the Parent / Child managing style of the long lost founders. Our Government’s approach to the Brexit negotiation is a case in point. On the one side we have a traditional confrontational negotiating style based on the belief that it’s ‘my way or the highway’. On the other side we have a structured approach setting out the steps we need to go through in order to reach a win/win agreement. The ‘PC’ side believe that in the end something will appear, like a ball out of a Rugby scrum and that will be what we do. The ‘adult’ side however believe that the deal needs to be worked through to ensure that the outcome is beneficial for both sides.
PC behaviour is thousands of years old and deeply entrenched in our psyche. It is very difficult and in some cases, impossible to change, when people are unwilling to recognise the need. However it seems to me that people who advise organisations are given through that relationship a key to the door. We work with organisations to help them with all sorts of projects. However, most of the work that we do has historically been done ‘Parent / Child’ we provide advice and guidance on what to do about X. This is our expertise and it’s what we sell. However, I believe that we can positively influence the culture of organisations by changing our own style of working and using an Action Learning approach based on what call Inplant Action Learning (2) to create learning opportunities for our clients. If we help them to find the solutions they seek by themselves, the solutions will be theirs not ours; something they own and are therefore more likely to be committed to.
We have been doing this since Reg, Alan and I created Action Learning Associates in 1980 and it works. Our approach is simple; we turn all requests for development projects into learning opportunities. For example;
Motorola Semi-Conductors in Scotland was planning to double the size of their UK plant from 400 to 800 people during the next six months and felt that training would help the supervisors to manage the project. We were invited to tender for this work and offered an Action Learning programme starting with a development workshop part of which was dedicated to working with the supervisors to identify the key issues they thought they would face. This was followed by a four month Action Learning programme where they worked in four teams on the specific issues they were concerned about with support from external facilitators. Using this approach we were able to ensure that the additional four hundred employees were trained and in place on time and the production targets were achieved (3).
Note. As a result of the success of the experience the idea of problem solving teams became an integral part of the way the organisation resolved its problems.
The Motorola experience re-enforced our belief that training in our case and advising in general only has real value when it 1) if focused on real problems and 2) leads to action by the receiver. The problem is that whilst I can commit myself to a training routine if I want to go on a walking holiday. It only needs me; I can implement my decision. However organisations have hundreds, some thousands of people. These people need to be involved if change programmes are to succeed and this can only be achieved through two way communication. Those who will be directly affected by any change need to be involved, those who will not, need to be briefed and kept up to date. In the Motorola case it was simple. Everyone knew what was happening before the project started and the teams were made up of the supervisors and representatives from all of the supporting departments. However in a development programme we ran with Marconi Radar for example there were over a thousand people so we started the involvement process with an attitude survey from which we identified eight projects. These were worked on by eight mixed groups representing the different parts of the business which would be affected by any changes. This involvement was reinforced by regular briefings and the final outcome was successful because it really was by the people for the people of the people.
Since the birth of Action Learning Associates in 1980 all of our client offerings have involved some aspect of implementation and facilitation. Some were very successful, others less so because the ‘underground’ PC was still alive and well. Most are like our first Motorola project; management had identified what they felt was a training need and we turned it into a learning opportunity. We have also run a number of programmes starting with the development of the management team. These begin with an agreement on the vision, where the organisation will be in three to five years’ time and how it will get there (4). When the desired outcomes have been agreed teams are created to recommend what should be done and manage the implementation of the agreed actions.
In 1995 we ran a development programme for twelve Czech companies who were seeking to adjust to the changes brought about by the Velvet Revolution. In the case of Machine Tool manufacturer TOS Varnsdorf, they identified their ‘best in class’ competitor as Mazak Machine Tools in Nagoya, Japan. We organised a visit to the plant for TOS Varnsdorf management. As a result of this experience they were able, as part of the project, to develop a modernisation programme for their business which has enabled them to create a modern factory which is today one of Europe’s main producers to mid-range Machine Tools - http://www.tosvarnsdorf.cz/en/
One of the most interesting aspects of these years for me has been the opportunity to work with people from different cultures. We have worked with organisations across the world and two things stand out:
- Those who have participated have all responded positively to the idea that we were helping them to help themselves.
- That management falls into two categories, those who want to know and those who think they know.
Which are you?
Note. I would like to clarify here that my experience with Global Companies is limited to Manufacturing companies whose managing style embraces the Japanese approach to productivity. I am aware however that Globals employing highly automated systems to produce their products or services may not see the need for participation. If a computer can now pick, it will be able to pack tomorrow. Driver less cars will inevitably lead to driver less Lorries and pilot less planes, How capitalism will work under these conditions is a problem for another day.
We hope you have found this response to the question interesting and that it will inspire you to use Action Learning where the opportunity exists to help managements to embrace a more participative style of managing thus empowering the brains of the many to contribute to the success of the organisation (5/6).
George Boulden and Richard de Laat - November 2017
- Thomas A Harris, I’m OK – You’re OK
- In-Plant Action Learning – George Boulden
- Case Study – George Boulden
- Bus-dev 2001 – ALA Programme for Top Team Development
- Fujio Chou, Chairman, Toyota
- See also The Wisdom of Crowds: Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economics, Society and Nations (English) Paperback – 3. maart 2005 - http://amzn.to/2hvMRBt
We can offer a set of OD tools, see examples below, if anyone is interested.
Cultural Assessment Check List
Leadership authority bases and how to evaluate authority