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 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.

® 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 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. Crisis is also an important lever for organisational change.

® 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.

® Empower the organisation. The top management team should delegate to employees as well as motivating and enabling them to act.

® Enable the organisation to engage in 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 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.

Where is your business? Still rooted in its past and needing to change, or already engaged in exploiting best practice and exploring for new ideas to create new business pathways?

Denise Howard says: March 10, 2011 at 5:14 pm

Sarah in my experience, if transformation is not led from the top it will not happen. If you are in the middle of the organisation, you can have some influence ‘where you are’ but it is hard to change the status quo top to bottom from where you sit if you are not at the top.

It needs the CEO/MD as the key driver and visionary to desire, create and manage the transformation. And in many cases, it is hard for the CEO to acknowledge that such transformation is necessary because of an implied criticism that their best efforts have not been enough. I think that is why so many examples of organisational transformation come during a time of crisis for the organisation. I think Darwin’s quote sums up the challenge nicely “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Are our leaders adaptable enough to a fast-changing world?

Rakesh Anand says: March 18, 2011 at 3:56 pm

Very well elaborated roadmap for implementing change. My 2 cents to the discussion. I believe the key areas of focus should be the leadership focus and drive, holistic communication framework to ensure the organisational buy-in to the change, the capability assessment of where the organisation is and where it intends to go in the future, early benefit realisation, performance management system to ensure that the organisation is on track to realise the change benefits.

Sarah Dixon says: March 22, 2011 at 8:10 am

Denise and Rakesh,
Thank you very much for your helpful comments. I agree with you Denise – change has to come from the top in the first instance. This was the result of my research into organisational transformation in the Russian oil industry. I had wanted to focus my research just on dynamic capabilities and organisational learning – but lo and behold my data was telling me that I would have to include an analysis of the top management team if I were to gain any proper understanding of the process of transformation. So transformation does indeed start at the top with a break with the past – my article on breaking with administrative heritage published in the Leadership and Organization Development Journal describes this process in more detail (See reference below). But you have rightly identified the key problem here – as you say: ‘how hard iit is for the CEO to acknowledge that transformation is necessary because of an implied criticism that their best efforts have not been enough.’ Indeed the CEO is part of that restrictive administrative heritage which has built up so much organisational inertia over time.

Of course there are companies that succeed in constantly reinventing themselves, without the need for the catalyst of a crisis. Many of the technology companies are examples of this – take Intel, Apple, IBM etc. So the key is to create an organisational culture where adaptation can thrive – that it is the third stage in my model above.

I agree with you, Rakesh, about the way to manage change – you mentioned the key points:
- Strong leadership
- Shared vision within the organisation
- Identification of capability gaps and how to address them
- Quick wins
- Strong performance management
– Monitoring of implementation

It sounds so easy, yet in reality it presents all organisations with huge challenges.

Dixon, Sarah E.A. and Day, Marc, (2007) ‘Leadership, Administrative Heritage and Absorptive Capacity’, Leadership and Organisational Development Journal, 28:8, pp. 727-748

See more at: http://blogs.brad.ac.uk/management/experts/2011/03/organisational-transformation-3-key-stages-for-managing-change/#sthash.Lhsl2SHg.dpuf

We are grateful to Dr Dixon for her unreserved agreement to our re-publishing her article. The original sources are accessible via the links provided in the body of the text.

At this time of publication, Dr Dixon is still Dean of the International Business School Suzhou (IBSS), and has said: “China is on the cusp of change, moving from the position of manufacturing hub of the world to one of growing innovation. As such, China is vitally important to the world economy. Our students experience this transition in real time, gaining a UK/Chinese degree from both XJTLU and the University of Liverpool.”