Organisational transformation: 3 key stages for managing change
In a Dilbert cartoon the eponymous office hero casts his satirical eye over the process of organisational transformation, concluding it is carried out by non-communicative morons. But are the problems really down to management style and lack of communication or is there a deeper malaise for managers?
A major challenge for managers today is a lack of time to think and do things differently. But with day-to-day operational tasks and a focus on short-term results rather than strategic innovations taking up all their time, what then about securing the future? What do they do when the environment changes?
Understanding the process of organisational transformation and establishing the critical success factors for achieving change is of practical value for managers of any large organisations faced with the need to adapt to radical changes in the environment. Below are the three key stages for managing organisational transformation along with the critical success factors for managing change at each stage.
Stage 1: Break with the past
Bring in outsiders. The Board should introduce entrepreneurial outsiders with targeted expertise onto the top management team.
Break with your administrative heritage. Important mechanisms here can be the removal of blockers, rotation of managers, promotion of young managers untainted by the organisational heritage, the utilisation of project teams, the achievement of early successes and designing a suitable bonus/incentive system.
Use aspects of the administrative heritage that help the change process. Not everything that worked in the past needs to be thrown away. This will vary from company to company. Some may be able to leverage a traditional command-and-control management style to achieve more rapid implementation of change; however, in environments where a more democratic leadership style is the norm, it may be more appropriate to leverage other factors, for example, customer relationships, a strong R&D department, or the latent enthusiasm of organisational members for participating in new initiatives. The crisis is also an important lever for organisational change.
Stage 2: Manage the present
Vary your leadership style as appropriate. The top-down approach of Stage 1 may be still required to break with the past in some parts of the organisation, while other parts may by this stage already have the ability to learn and therefore may be given authority and empowerment to act.
Exploit best practice from your own or other organisations. This will require knowledge acquisition, knowledge internalisation and knowledge dissemination.
Reconfigure, divest and integrate resources. This involves everything from streamlining business systems to removing non-aligned employees to consolidating new acquisitions operationally and culturally.
Stage 3: Invest in the future
Empower the organisation. The top management team should delegate to employees as well as motivating and enable them to act.
Enable the organisation to engage in an exploration of new ideas and business practices. You can achieve this by encouraging innovation, trial and experimentation and by developing a culture which encourages informed risk-taking and facilitates learning from mistakes. Exploration enables the organisation to develop new capabilities fitted to its specific context, rather than just importing systems and routines from other contexts.
Create new paths. This means creating a deliberate change in direction using new capabilities, whether that be in terms of new products, services, processes or business models. The combination of exploration and path creation will lead you to the “disruptive innovation” that will help you secure the sustainable competitive advantage.
By going through these stages, organisations can establish new developmental pathways, enhance their strategic flexibility, and react successfully to changes in the environment.