Organization Development and Change - 10th ed - part 2

["592 PART 6 STRATEGIC CHANGE INTERVENTIONS Once these barriers to change are discussed openly, members typically discover that they are changeable. This shared insight often leads to the invention of more effec- tive theories for behaving, organizing, and learning. Subsequent experimentation with trying to enact those theories in the workplace is likely to produce more effec- tive change because the errors that invariably occur when trying new things now can be discussed and hence corrected. 3. Attend to the knowledge management practices that support learning. Because organization knowledge plays a crucial role in linking organization learning pro- cesses to organization performance, an effective OL application process must attend to the systems for generating, organizing, and distributing knowledge. Knowledge includes what members know about organizational processes, pro- ducts, customers, and competitive environments. Such knowledge may be explicit and exist in codified forms, such as documents, manuals, and databases, or it may be tacit and reside mainly in members\u2019 skills, memories, and intuitions.45 In any form, these knowledge assets can represent important contributions to perfor- mance.46 Because tacit knowledge is difficult if not impossible to codify, OD prac- titioners direct attention to how members can share such knowledge among themselves and between organizational units. Generating knowledge starts from an understanding of the organization\u2019s strat- egy and then identifies the kinds of knowledge that will create the most value for the organization and creates mechanisms for increasing that stock of knowledge. For example, corporate strategies that emphasize customer service, such as those found at Booz & Co. and Nordstrom, place a premium on knowledge about customer needs, preferences, and behavior. Strategies favoring product development, like those at Apple and Bristol-Myers-Squibb, benefit from knowledge about technology and research and development. Once the knowledge required for organization strategy is identified, mechan- isms for acquiring or creating that knowledge need to be created. Externally, organi- zations can acquire other companies that possess the needed knowledge, or they can rent it from knowledge sources, such as consultants and university researchers.47 Internally, organizations can facilitate communities of practice\u2014informal networks among employees performing similar work to share expertise and to solve problems together.48 They can also create more formal groups for knowledge generation, such as R&D departments, corporate universities, and centers of excellence. Organizations can bring together people with different skills, ideas, and values to generate new pro- ducts or services. Organizing knowledge involves putting it into a form that organizational mem- bers can use readily. Two broad strategies for organizing knowledge include codifi- cation and personalization.49 Codification relies on information technology and the development of databases where knowledge can be accessed and used by appropriate members. This strategy works best for explicit forms of knowledge that can be extracted from people, reports, and other data sources, and then organized into meaningful categories called \u201cknowledge objects\u201d that can be reused for various pur- poses. Personalization strategies for organizing knowledge focus on the people who develop knowledge and on how they can share it person-to-person. Tacit knowledge is typically accessed through personal conversations, direct contact, and ongoing dialogue with the people who possess it. For example, most professional service firms foster networking among their employees by transferring people across offices, encouraging the prompt return of phone calls from colleagues, and using cross- functional project teams.","CHAPTER 19 CONTINUOUS CHANGE 593 Distributing knowledge involves developing mechanisms that enable members to gain access to needed knowledge. It overlaps with the previous phase of knowledge management and involves making knowledge easy for people to find and encourag- ing its use and reuse. For example, organizations can develop databases for storing articles, reports, customer data, best practices, or other knowledge as well as locator systems for helping members find what they want. Databases can include such diverse information as articles, analytical reports, customer data, and best practices. Organizations can also create knowledge services (e.g., help desks or specific organi- zation units) and networks (e.g., intranet portals, informal \u201cbrown bag\u201d presenta- tions) to promote knowledge transfer. Finally, organizations can create specific roles to facilitate the transfer of organization knowledge and encourage knowledge distribution. For example, Britain\u2019s Collaboration for Leadership in Applied Health Research and Care for Nottinghamshire, Derbyshire, and Lincolnshire (CLAHRC- NDL) uses \u201cDiffusion Fellows,\u201d senior managers, and clinicians assigned from the National Health Service to provide best-practice, evidence-based clinical practice to physicians and nurses in the system.50 4. Continuously monitor and improve the learning process. This final stage involves deutero-learning\u2014learning how to learn. It includes assessing OL strategies and the organizational structures and processes that contribute to them. Members assess periodically how well these elements facilitate single- and double-loop learning. They generalize positive findings to new or changing situations and make appropri- ate modifications to improve OL. Because these activities reflect the highest and most difficult level of OL, they depend heavily on members\u2019 willingness to question openly their theories in use about OL and to test publicly the effectiveness of both their learning strategies and those of the wider organization. Application 19.3 describes a long-term, comprehensive organization learning inter- vention.51 The initial intervention was primarily a dialogue process among senior man- agers but was extended to the larger organizational community. The application also demonstrates how systemic many OL and strategic change interventions can be. 19-4 Built-to-Change Organizations One of the newest continuous change interventions involves intentionally designing an entire organization for change and not stability. Lawler and Worley\u2019s built-to-change (B2C) approach to designing organizations is based on the simple fact that most organi- zations are designed for stability and dependable operations.52 Traditional organization design components and managerial practices aim to reinforce predictable behaviors for sustaining a particular competitive advantage. Lawler and Worley argue that many change efforts are unsuccessful, not because of human resistance or lack of visionary leadership, but because most organization design features assume that stability leads to effectiveness. Such built-in assumptions can be a recipe for failure in rapidly changing environments, where the ability to change constantly is the best sustainable source of competitive advantage. The B2C intervention helps organizations design themselves for change. 19-4a Design Guidelines As shown in Table 19.1, the B2C intervention includes the following design guidelines and challenges the assumption of stability in the specification of design components.","594 PART 6 STRATEGIC CHANGE INTERVENTIONS DIALOGUE AND ORGANIZATION LEARNING AT DMT application 19 3 D MT is a small but global business that involve a broader and broader segment of the designs, builds, and installs sophisticated population. These interventions, like the overall food processing systems. It has a global change strategy, sound more complete and market share of over 50% and employs thought out than they were. In general, the orga- about 800 people. Roughly two-thirds of the nization tried some things out and if they worked, employees are in the primary office and they were refined. If they didn\u2019t work, they manufacturing plant in the Netherlands while moved onto another idea. Eventually, however, the other third, consisting of sales and engi- nearly two-thirds of the organization members neering, works in the field to market and install participated in the following learning activities: the systems. Complexity Concepts Workshop. This In the late 1980s, DMT adopted a socio- intensive one-day workshop represented technical systems philosophy and introduced an introduction to the concepts and organiz- self-managing teams and other empowering ing principles associated with complexity, structures into most of the operations function. learning, and dialogue. It offered the partici- After ten years, and despite continued success pant an opportunity to look at themselves, in both market share and profitability, the their organization, and their world. The work- socio-tech initiatives had lost focus. shop compared the assumptions of a \u201csci- entific\u201d worldview with the assumptions of The heir apparent to the founder of DMT complexity. The session ended with an had been reading and thinking about the con- introduction to dialogue and a facilitated con- cepts of complexity and learning. He asked an versation to help participants apply the con- OD consultant familiar with these ideas for help cepts in their work. Overall, the session was in translating them into action. The future CEO designed to help members become aware and consultant handpicked a set of managers in of an alternative way of organizing that held the company to be on a change leadership team the possibility of changing the entire organi- and the initial intervention focused on the trans- zation by an order of magnitude. formation of DMT\u2019s leaders through dialogue. Dialogue Training. After completing the Facilitated by the OD consultant, the Complexity workshop, groups of 10 to 15 change leadership team spent significant time people were introduced to dialogue as a over an 18-month period in heavy dialogue ses- communication process that supported sions. Early sessions were spent learning the principles of complexity and the prac- about the dialogue process while later ses- tice of organization learning. Through sions explored assumptions about the market, mostly applied experiences in dialogue, par- DMT\u2019s current and future strategies, and most ticipants were shown how this form of importantly, the predominant styles of commu- communication differed from hierarchically nicating, leading, and operating. constrained and competitive discussion. In contrast, dialogue allowed meaning and The result was a close-knit team that had influence to flow freely and emerge. The explored and confronted their theories of action. workshop also tried to integrate concepts However, none of the rest of the organization from the complexity workshop and to pre- knew what was happening. The OD consultant pare participants for \u201cdolphin training.\u201d described a variety of emergent \u201cwater cooler\u201d conversations among organization members \u201cDolphin\u201d Training. A leadership meta- with respect to: \u201cWhat\u2019s happened to them?\u201d phor based on the \u201cstrategy of the dolphin\u201d and \u201cWhy are they acting so strange?\u201d (e.g., do what works and forget the rest) was introduced as a set of empowerment The change leadership team and the OD consultant worked together to craft a series of organization learning interventions that would","CHAPTER 19 CONTINUOUS CHANGE 595 guidelines for action and decision making. The success had resulted in structures, systems, and goal of this workshop was to enable every processes that were increasingly fixed and resistant member of DMT to step forward and assume to change. Managers who had been receptive to, if responsibility for the greater whole. That is, not enthusiastic about, the effort to bring about when the situation demands it, DMTers are to change in the culture suddenly balked at the notion be ready. of design changes. The change leadership team, however, remained resolute in seeing the change The Visioning Conference. The final interven- through. tion was the visioning conference and involved as many as 50 people at a time. Building on the More than two years into the change process, principles of a learning organization and personal the change leadership team issued a call for people mastery, a one-day dialogue-based workshop to participate in a \u201cblank slate\u201d design process; a suggested that a company\u2019s true \u201cvision\u201d incor- whole-system architecture capable of realizing the porates the personal visions of each member. visions of all its members and for thriving, not merely This approach was contrasted with the standard surviving, in the company\u2019s increasingly complex and visioning process where senior leaders formu- turbulent marketplace. Interesting, the change leader- late and then impose a vision on the system. ship team excluded managers and supervisors from The workshop asked individuals to elaborate the call. Even so, more than 50 individuals stepped on their personal visions through statements, forward to self-organize into an active network actions, or drawings and to specify what they intent on producing the \u201cNew DMT.\u201d needed from the organization and their fellow participants. As a result of the visioning confer- Only three constraints were placed on the ences, groups of DMT members representing a newly formed design team: (1) the design had to cross-section of the company spent entire days follow the principles of complexity, learning, and engaged in deep dialogue around the question: dialogue, (2) each design team member had to \u201cHow must DMT be in order to realize the col- act as a representative of every one of their collea- lective vision of all its members?\u201d gues, and (3) the resulting design had to enable the personal visions of every member of the organiza- In addition to these formal workshops, DMT\u2019s tion. The design team was supported with time, transformation also involved a great many \u201challway financial resources, the OD consultant, and any dialogues\u201d about the meaning and\/or applicability of other expertise they needed. a complexity principle and \u201cretreats\u201d to think about the implications of the emerging culture. Moreover, The OD consultant kicked off the \u201cNew DMT\u201d the change leadership team that had catalyzed the process with a workshop on organization design entire process continued to meet and dialogue on and whole system transformation. Following the the transformation. The researchers found the DMT training, the group, recognizing the scope and com- process interesting because its essential activities plexity of their task, self-organized into a configura- were more likely to emerge from the interaction of tion they dubbed the Design Network (DN). The its members than to be planned or organized for DN revolved around a \u201chub\u201d of nine people who them. Although the change leadership team had a were responsible for creating an architectural vested interest in this process, the transformation model for the New DMT based on \u201cintelligence\u201d of DMT was never \u201cowned\u201d by them exclusively relayed to it by the remaining members. These but by every member of the firm\u2014the essence of would comprise the \u201cnetwork\u201d whose job it was emergent leadership. to reach out into the system and involve more and more people as time passed. They were to convey As the transformation progressed, the change information to and from the hub. leadership team recognized that the internal changes in communicating, thinking, and leading After nearly a year of effort, the DN announced would need to be reflected in and embedded in its D(esign)-Day and invited the entire company, all the structure of the system. An evaluation of 600-plus people, to join them for the \u201cunveiling\u201d of DMT\u2019s design suggested that its long history of the architecture for the New DMT. Following the presentation, the team organized a process to allow people to translate the multiple dimensions","596 PART 6 STRATEGIC CHANGE INTERVENTIONS of its design into reality. DMT\u2019s transformation is organization led to important behavioral changes. In well on its way. particular, members began to see the organization in more systemic and complex terms rather than hier- The organization learning process and each of archical and linear; dialogue replaced discussion as the interventions represented a significant departure the primary communication process in the organiza- from the way DMT had operated in the past. The tion; and members engaged in emergent, shared consistency and persistence of the interventions leadership rather than viewing leadership as some- over a two-year period of time and the inclusiveness thing only senior managers did. with which the interventions involved people in the TABLE 19.1 Design Guidelines for B2C Organizations From Traditional Principles\u2026 To Dynamic Principles \u00a9 Cengage Learning 2015 Strategy Strategizing Short-term, static environmental scans Long-term, alternative scenarios and and industry analyses contingency planning Pursuit of a sustainable competitive Pursuit of a series of momentary advantage advantages Design Designing Focus on efficiency over effectiveness Focus on effectiveness over efficiency What do we do well? What do we need to learn? Alignment as the key to performance Change as the key to performance From Strategy to Strategizing The stability assumption first shows up in the way organizations formulate strategy. Most strategy processes rely on relatively static and short-term views of the environment. Most environmental scanning tools, such as SWOT and industry attractiveness models, implicitly assume that the forces operating today will operate tomorrow and reinforce the pursuit of a single sustainable competitive advantage. Although most managers and organizations describe the environment as changing, they act and decide as if it is not. As a result, strategies are formulated, budgets and goals are set, and any successful competitive advantage is expected to last. B2C organizations move from static to dynamic views of strategy, using interventions like dynamic strategy making described previously in this chapter. Instead of believing that any competitive advantage will last, they recognize that any particular advantage is fleeting. The development and reliance on strong and robust \u201cfuturing\u201d processes supports this dynamic view of strategy.53 Managers in B2C organizations spend a lot of time thinking about alternative future environments and scenarios. Using these scenarios to sharpen their strategic thinking, they explore options, think about the capabilities that might be needed, and formulate the next likely competitive advantage they will have to pursue. Importantly, senior managers spend less time worrying about the execution of the current strategy; they see their role as worrying about the future strategy.","CHAPTER 19 CONTINUOUS CHANGE 597 From Design to Designing Traditional organizations view organization design as a set of relatively stable features that only get better through continuous improvement. Rather than thinking about how structure, work, management processes, and HR systems need to change to increase effectiveness, traditional organizations become enam- ored with short-term efficiency and reliability initiatives. Such a focus tends to lock the organization into a way of operating that is very difficult to change. B2C organizations recognize that change is never over and so focus more on effec- tiveness than efficiency. B2C organizations do work to improve existing systems and processes, but using change processes like self-designing organizations, they allocate significant resources to thinking about how organization design elements need to be changed. In fact, B2C organizations are wary of too much alignment that can result in rigidity. Instead, they focus on being able to change as the key to long-term performance. B2C organizations shift the conversation from \u201cwhat do we do well?\u201d to \u201cwhat do we need to learn?\u201d This orientation and mindset always keeps them open to changing organization design features as described below. 19-4b Application Stages Lawler and Worley stress that not all organizations should be built to change, though most could benefit from applying some B2C principles. This intervention is mainly for organizations having problems adapting to complex and rapidly changing environments. They require a change capability for success in the future. For them, and following a thorough diagnosis,54 the following three initiatives can help the transition to a B2C organization: 1. Reframe culture as a facilitator of change. This first stage addresses the organiza- tion\u2019s culture\u2014the established set of core values, norms, and beliefs shared by organization members. Culture is the most stable part of an organization\u2014it is deep-seated, taken for granted, and guides decisions and behaviors like an invisible hand\u2014but it does not need to be a constraint to changing. As described in Chapter 18, organization culture can promote or hinder organization change depending on whether it supports change or stability.55 In many traditionally designed organiza- tions, values and norms reinforce stability and predictability, thus making change difficult. To move toward a change-friendly culture requires surfacing existing values and norms, assessing their relevance to change, and making appropriate adjust- ments. This typically involves highly interactive sessions where relevant stakeholders openly discuss and debate questions about the organization\u2019s culture and how it can be \u201creframed\u201d to be more change friendly. Attention is directed at creating or redefining values and norms that focus behavior on the organization\u2019s environment and help members see change as necessary and natural. To enhance member commitment to a new change-friendly culture, these new or reframed values and norms are placed in the context of important external pressures facing the organiza- tion and what these mean for its effectiveness. The organization\u2019s existing design is also assessed in relation to the culture, and plans are made for changing specific components using the B2C guidelines outlined above. 2. Redefine organization design components for flexibility. Each feature of an organization\u2019s design can be created under an assumption of stability or flexibility. The second step in moving to a B2C organization is to design and implement these components with flexibility in mind. B2C designs emphasize a flat, lean, and flexible organization structure, such as pro- cess, matrix, and network designs. These structures can be reconfigured quickly when","598 PART 6 STRATEGIC CHANGE INTERVENTIONS the circumstances demand. The key objective in most B2C structures is establishing what Lawler and Worley call \u201cmaximum surface area.\u201d56 That is, as many roles in the organization as possible should be defined to include interaction with the external envi- ronment. Organization members are more likely to support change if they are in direct contact with customers, regulators, markets, and the community. B2C human resource practices are geared to selecting, developing, and managing the right talent for change. Selection practices seek quick learners who want to take initiative, desire professional growth, and thrive on change. Employment contracts specify clearly that change is to be expected and support for change is a condition of employment and a path to success. Rather than specific job descriptions, mem- bers are encouraged to discover what needs to be done by frequent goal-setting reviews where tasks are constantly assessed and revised. Training and development are continuous and aimed at supporting change and gaining value-added skills and knowledge. Because rewards play a key role in motivating and reinforcing change in B2C organizations, individual or team bonuses are tied directly to change goals, learning new things, and performing new tasks well.57 This establishes a clear line of sight between rewards and change activities. Bonuses can include one-time rewards given at the end of a particular change effort, or rewards targeted to different phases of the change process. B2C designs also shift the basis of rewards from jobs to peo- ple. Members are rewarded for what they can do, not for the particular job they per- form. Jobs and tasks are continually changing, and rewards can motivate people to learn new skills and knowledge, thus keeping pace with change and enhancing their long-term value to the organization. In B2C organizations, management processes are moved throughout the organi- zation to wherever they are needed. This ensures that information is transparent and current and provides a clear picture of how the organization is performing relative to its competitors. It enables organizations to make timely and relevant decisions to keep pace with changing conditions. 3. Build an orchestration capability. This stage helps the organization leverage the flexibility built into the organization\u2019s strategy and design. An orchestration capabil- ity enables the organization to implement changes in strategy and to execute design changes effectively over and over again.58 It first specifies the events and decisions necessary to make the strategy happen, including how new competencies will be developed, if necessary. Then, based on the B2C belief that the ability to change is the key to competitive advantage, attention is directed at building this change capa- bility into the organization. This involves three related activities. First, change man- agement skills are developed widely in the organization by hiring people with those skills and by training existing managers and employees to acquire those skills. Sec- ond, an organization effectiveness function is created with competencies in strategic planning, organization design, and change management. This center of excellence is usually staffed by professionals from the strategic planning and human resources functions; they provide advice and facilitation for planning and executing change in the organization. Third, organization members learn how to apply their change capability by engaging in organizational changes and reflecting on that experience. This so-called \u201clearning by doing\u201d is essential for building an orchestration capabil- ity. It provides members with the hands-on experience and reflective learning neces- sary to hone their change skills in action. An important part of the orchestration capability is a redefinition of leadership. B2C designs stress the importance of shared leadership throughout the organization.","CHAPTER 19 CONTINUOUS CHANGE 599 application 19 4 CREATING A BUILT-TO-CHANGE ORGANIZATION AT CAPITAL ONE FINANCIAL C apital One, a leading financial services firm the environment is changing with rigorous and a top issuer of credit cards in the analysis of consumer behaviors to produce United States, has built an organization testable propositions about what credit ser- that does not view change as an unwanted vices to offer specific consumer groups. intruder or as an afterthought to get resistors When a consumer group and its associated to buy into a new initiative. Rather, change service reach a certain threshold of business, capability is integrated into every aspect of a potential competitive advantage exists. The Capital One\u2019s strategy, structure, and culture. service is then broadened to a larger This enables the firm to execute change customer base. Because consumer profiles, routinely. competitor behaviors, and other market forces are constantly changing, however, Capital One treats strategic planning as a any current advantage is fleeting and new continuous process of exploring alternative ones must be identified to grow revenues. futures and gaining momentary advantages Moreover, to monetize a competitive advan- in a fast-paced competitive environment. tage even in the short run, Capital One must According to Mike McDermott, former Direc- often modify its human capital, resources, tor of Organization Effectiveness, \u201cStrategic systems, and structures. Thus, it constantly thinking goes pretty deep on two levels. On renews itself as it moves from one competi- one level, the strategic planning department tive advantage to the next. runs a variety of scenarios that look several years out.\u201d As described by CEO and To adapt quickly to gain new competitive Founder Rich Fairbank, \u201cEighty percent of advantages, Capital One has developed a strategy is figuring out where the world is highly agile organization design. It begins going, and 20% is figuring out what you are with hiring people who have a passion for going to do in response. If you can figure out excellence, collaborate well with others, and where the world is going, what you need to thrive in a changing environment. Once hired, do usually becomes obvious.\u201d For example, associates are given challenging work assign- Capital One might explore the broader forces ments and opportunities to develop new affecting interest rates or the impact of skills as business needs change. Compli- changes in China\u2019s monetary policy. Each menting the selection process is a decentra- business line, in turn, would consider how lized and fluid organization structure, with few these future trends might affect its particular layers of management and decision making business. \u201cOn another level,\u201d notes McDermott, pushed downward in the organization. \u201cthe executive committee meets regularly to Associates are allowed to take on a variety discuss and debate a set of annual \u2018impera- of tasks without having to worry about job tives\u2019 or bold challenges. The imperatives descriptions and pay grades. An adaptable are just that \u2026 they are things that must be performance management system com- done if we are to achieve our long-term pletes Capital One\u2019s flexible design. It vision.\u201d They are intended to provide Capital focuses on both performance and develop- One with a series of temporary competitive ment. Rewards are tied directly to current advantages. results as well as to developing competen- cies the organization believes are important This robust strategizing enables Capital for its future. One to \u201ctest and learn\u201d how best to compete in a constantly changing environment. It The final feature of Capital One\u2019s built- combines educated guesses about how to-change organization involves change capability.","600 PART 6 STRATEGIC CHANGE INTERVENTIONS In the past, the firm\u2019s aggressive growth often left afforded Capital One a highly efficient approach associates feeling overwhelmed by the rapidly to change management. For example, service changing product\/service offerings. Adding to the changes often required cooperation among the stress were frequent updates in associates\u2019 knowl- credit card business, IT services, and the regula- edge base, reorganizations that tested their ability tory compliance and HR departments. Because to remain flexible and to take on new assignments, all parties were familiar and comfortable with and modifications in work processes and methods the same change model, coordination costs and to maintain customer satisfaction. To make change change cycle times were significantly reduced. manageable and even routine, Capital One charged This contrasted to earlier times when Capital McDermott with developing the firm\u2019s change One employed over 17 different change models capability. With the help of a design team com- and more than 160 different change tools posed of HR generalists and line managers, he cre- throughout the firm. ated a unique approach to change management. To implement the new change method, Most organizations develop change capability McDermott\u2019s team applied three action levers: by deploying HR generalists to facilitate change in knowledge\/skill acquisition, visible demonstra- business units or by creating a center of excel- tions, and alignment with performance manage- lence in change management staffed mainly by ment. First, Capital One\u2019s corporate university OD professionals. Capital One created a more offered two courses to build people\u2019s change embedded strategy. It rooted change skills and knowledge and skill. One course, attended by responsibilities directly into the roles of line man- both managers and staff, went deep into the agers. This promised to radically shorten the cycle change methodology and provided the opportu- time of change because managers would have nity to apply it to existing change projects. This the expertise needed to carry out most changes helped participants learn by doing, while driving on their own. But tasking managers with change change in the organization. The second course management responsibilities raised important was a one-day program designed for line man- questions about Capital One\u2019s commitment to agers. It provided an overview of the methodology change capability as a source of competitive and linked it to the organization\u2019s values and lead- advantage. Critics argued, \u201cShouldn\u2019t the focus ership competencies. This helped managers see of line managers be on getting business results?\u201d the connection between change capability and The design team answered affirmatively, of performance management. course, but then added that in fast changing envir- onments, this was not enough to succeed. Man- Second, McDermott\u2019s team targeted several agers needed to be able to combine their large-scale change projects as visible demonstra- business expertise with knowledge about change tions of the change model. This created an internal so that strategies to acquire new competitive \u201cbuzz\u201d for the methodology and encouraged advantages could be implemented faster and people to learn how to apply it. For example, their benefits gained sooner. McDermott\u2019s team highlighted change initiatives coming out of a strategic imperative called ACE Capital One\u2019s embedded approach was (Achieving Corporate Excellence): a large-scale based on a standardized change methodology systems conversion project, an HR reengineering that everyone shared and learned. Called effort, and a workplace redesign process called ADKAR, it proposed that successful change fol- the Future of Work. lowed a process of (1) creating awareness of the need for change, (2) having the desire to Third, McDermott\u2019s team worked closely change, (3) possessing the knowledge to change, with a group revising Capital One\u2019s performance (4) having the ability to change, and (5) being rein- management system to ensure that it measured forced for change. The change model included a and rewarded change management competen- common language and mindset for thinking and cies. Together, the two groups increased the communicating about organizational change; it number of change-related behaviors that were rated, assessed, and rewarded. This sent a clear","CHAPTER 19 CONTINUOUS CHANGE 601 message about the importance of these beha- getting better and better at it. Its change capability viors for the future. is a key source of sustained competitive advantage. As one executive put it, \u201cWe can take on more Capital One\u2019s built-to-change organization is change because with this new muscle, it doesn\u2019t widely accepted and firmly entrenched in the seem like we are changing all that much. It feels firm\u2019s culture. Change capability is treated like a like we are changing less because we are capable muscle that gets better with exercise. Not surpris- of handling more change than our competitors.\u201d ingly, Capital One engages in lots of change and is Rather than having the organization rely on individuals and centralized sources of power and control, these designs spread leadership across multiple levels of the organization. Leadership shifts from an individual trait to an organization capacity. This speeds decision making and response rates because those lower in the organi- zation understand how to change and need not wait for top-down direction. It pro- vides leadership experience and skills to a broad array of members, thus developing a strong cadre of leadership talent. Shared leadership supports continuous change by spreading change expertise and commitment across the organization. It increases the chances that competent leaders will be there to keep the change process moving forward. Application 19.4 describes how Capital One Financial created a B2C organization.59 It shows how change capability is built into the firm\u2019s strategy, design features, and culture. SUMMARY In this chapter, we presented increasingly sophisticated action plan\u2014are aligned closely with the competitive interventions for helping organizations conduct strate- logic so as to support its implementation. They spell gic change. These change processes are particularly out exactly what is to be achieved, how the organiza- applicable for organizations facing turbulent environ- tion will be structured to accomplish it, and what ments where traditional sources of competitive advan- steps are needed to make it happen. The combined tage erode quickly. Building change capabilities directly effect is to position the firm in the market and tightly into the organization is essential to constantly renew link its objectives, structure, and action to that forms of competitive advantage to keep pace with a strategy. rapidly shifting environment. A self-design change strategy helps a firm gain the Dynamic strategy making involves specifying and capacity to design and implement its own continuous implementing the four elements that comprise the change. Self-design involves multiple levels of the firm backbone of a new strategic system, thereby charting and multiple stakeholders and includes an iterative an organization\u2019s direction forward. It begins with series of activities: acquiring knowledge, valuing, diag- defining a competitive logic, which derives from an nosing, designing, implementing, and assessing. analysis about how fitting the firm\u2019s capabilities can be used to exploit environmental opportunities. Then Organization learning interventions help organiza- the other three elements\u2014goals, organization, and tions develop and use knowledge to change and improve themselves continually. Organization learning","602 PART 6 STRATEGIC CHANGE INTERVENTIONS interventions address how organizations can be designed Built-to-change organizations are designed for to promote effective learning processes and how those change, not stability. They are based on design guide- learning processes themselves can be improved. An lines that promote change capability in the firm\u2019s strat- organization designed to promote learning can create a egy, design, and leadership. In a rapidly changing continuous stream of valuable knowledge. Knowledge environment, this change capability can help the orga- management focuses on how that knowledge can be orga- nization transition from one competitive advantage to nized and used to improve organization performance. another. NOTES 1. R. Wiggins and T. Ruefli, \u201cSchumpeter\u2019s Ghost: Is Hyper- 9. D. Collis and M. Rukstad, \u201cCan You Say What Your competition Making the Best of Times Shorter?\u201d Strategic Strategy Is?\u201d Harvard Business Review (April 2008): 1\u201311. Management Journal 26 (2005): 887\u2013911. 10. M. Porter, Competitive Strategy (New York: The Free 2. I. Barreto, \u201cDynamic Capabilities: A Review of Past Press, 1980). Research and an Agenda for the Future,\u201d Journal of Man- agement 36 (2010): 256\u201380; D. Teece, G. Pisano, and 11. A. Slywotsky, Value Migration: How to Think Several Moves A. Shuen, \u201cDynamic Capabilities and Strategic Manage- Ahead of the Competition (Cambridge, MA: Harvard Busi- ment,\u201d Strategic Management Journal 18 (1997): 509\u201333. ness School Press, 1995); J. Barney, Gaining and Sustaining Competitive Advantage, 4th ed. (New York: Prentice Hall, 3. T. Lawrence, B. Dyck, S. Maitlis, and M. Mauws, \u201cThe 2010); W. Kim and R. Mauborgne, Blue Ocean Strategy Underlying Structure of Continuous Change,\u201d Sloan (Cambridge, MA: Harvard Business School Press, 2005). Management Review 47 (2006): 59\u201366; E. Lawler and C. Worley, Built to Change (San Francisco: Jossey-Bass, 12. A. Colbert, A. Kirstof-Brown, B. Bradley, and M. Barrick, 2006). \u201cCEO Transformational Leadership: The Role of Goal Importance Congruence in Top Management Teams,\u201d 4. L. Greiner and T. Cummings, Dynamic Strategy Making: Academy of Management Journal 51 (2008): 81\u201396. A Real-Time Approach for the 21st Century Leader (San Francisco: Jossey-Bass, 2009). 13. J. Collins and J. Porras, Built to Last (New York: Harper- Collins, 1996). 5. L. Greiner and A. Bhambri, \u201cNew CEO Intervention and the Dynamics of Strategic Change,\u201d Strategic Management 14. Greiner and Cummings, Dynamic Strategy Making. Journal 10 (1989): 67\u201387; M. Beer, \u201cTransforming Organi- 15. D. Ready and J. Conger, \u201cMake Your Company a Talent zations: Embrace the Paradox of E and O,\u201d in Handbook of Organization Development, ed. T. Cummings (Thousand Factory,\u201d Harvard Business Review (June 2007): 1\u201312. Oaks, CA: Sage Publications, 2008); M. Beer, \u201cDeveloping 16. This application was adapted from material found in an Effective Organization: Intervention Method, Empirical Evidence, and Theory,\u201d in Research in Organizational M. Beer and J. Weber, \u201cWhitbread PLC (A),\u201d Case Change and Development, vol. 19, ed. W. Pasmore, 9-406-007, Harvard Business School, 2005; M. Beer A. Shani, and R. Woodman (Bingley, UK: Emerald and J. Weber, \u201cWhitbread PLC (B),\u201d Case 9-406-008, Group Publishing, 2011), 1\u201354. Harvard Business School, 2005; Whitbread\u2019s corporate website, http:\/\/www.whitbread.co.uk\/whitbread\/aboutus 6. Greiner and Cummings, Dynamic Strategy Making. .html. 7. C. Worley, D. Hitchin, and W. Ross, Integrated Strategic 17. B. Hedberg, P. Nystrom, and W. Starbuck, \u201cCamping on Seesaws: Prescriptions for a Self-Designing Organi- Change: How Organization Development Builds Competi- zation,\u201d Administrative Science Quarterly 21 (1976): tive Advantage (Reading, MA: Addison-Wesley, 1996); 41\u201365; K. Weick, \u201cOrganization Design: Organizations as M. Jelinek and J. Litterer, \u201cWhy OD Must Become Stra- Self-Designing Systems,\u201d Organizational Dynamics 6 tegic,\u201d Organizational Change and Development, vol. 2, (1977): 30\u201346. ed. W. Pasmore and R. Woodman (Greenwich, CT: JAI 18. S. Mohrman and T. Cummings, Self-Designing Organiza- Press, 1988), 135\u201362; A. Bhambri and L. Pate, tions: Learning How to Create High Performance (Read- \u201cIntroduction\u2014The Strategic Change Agenda: Stimuli, ing, MA: Addison-Wesley, 1989); T. Cummings and Processes, and Outcomes,\u201d Journal of Organization S. Mohrman, \u201cSelf-Designing Organizations: Towards Change Management 4 (1991): 4\u20136. Implementing Quality-of-Work-Life Innovations,\u201d in 8. Greiner and Cummings, Dynamic Strategy Making. Research in Organizational Change and Development,","CHAPTER 19 CONTINUOUS CHANGE 603 vol. 1, ed. R. Woodman and W. Pasmore (Greenwich, Learning, Knowledge, and Performance\u201d (unpublished CT: JAI Press, 1987), 275\u2013310. Ph.D. diss., University of Southern California, Los Angeles, 19. D. Miller and P. Friesen, Organizations: A Quantum 1996). View (Englewood Cliffs, NJ: Prentice Hall, 1984). 28. A. B. Shani and P. Docherty, Learning by Design: Building 20. C. Argyris, R. Putnam, and D. Smith, Action Science Sustainable Organizations (London: Blackwell, 2003); (San Francisco: Jossey-Bass, 1985); C. Lundberg, \u201cOn A. B. Shani and P. Docherty, \u201cLearning by Design: Key Organizational Learning: Implications and Opportunities Mechanisms in Organization Development,\u201d in Hand- for Expanding Organizational Development,\u201d in Research book of Organization Development, ed. T. Cummings on Organizational Change and Development, vol. 3, ed. (Thousand Oaks, CA: Sage Publications, 2008), R. Woodman and W. Pasmore (Greenwich, CT: JAI 499\u2013518; S. Hauschild, T. Licht, and W. Stein, \u201cCreating Press, 1989), 61\u201382; P. Senge, The Fifth Discipline (New a Knowledge Culture,\u201d McKinsey Quarterly 1 (2001): York: Doubleday, 1990). 74\u201381; B. Choi, S. Poon, and J. Davis, \u201cEffects of Knowl- 21. T. Lant, \u201cOrganization Learning: Creating, Retaining, and edge Management Strategy on Organizational Perfor- Transferring Knowledge,\u201d Administrative Science Quar- mance: A Complementarity Theory-Based Approach,\u201d terly (Winter, 2000): 622\u201343; M. Crossan, H. Lane, and Omega 36 (2008): 235\u201351; B. Ya-Hui Lien, R. Hung, and R. White, \u201cAn Organizational Learning Framework: G. McLean, \u201cOrganizational Learning as an Organization From Intuition to Institution,\u201d Academy of Management Development Intervention in Six High-Technology Firms Review 24 (1999): 522\u201337; J. C. Spender, \u201cMaking Knowl- in Taiwan: An Exploratory Case Study,\u201d Human Resource edge the Basis of a Dynamic Theory of the Firm,\u201d Strate- Development Quarterly 18 (2007): 211\u201328. gic Management Journal 17 (1996): 45\u201362; R. Strata, 29. This framework draws heavily on the work of W. Snyder \u201cOrganizational Learning: The Key to Management Inno- and T. Cummings, \u201cOrganization Learning Disorders: vation,\u201d Sloan Management Review 30 (1989): 63\u201374. Conceptual Model and Intervention Hypotheses,\u201d 22. D. Teece, \u201cCapturing Value from Knowledge Assets: The Human Relations 51 (1998): 873\u201395. New Economy, Market for Know-How, and Intangible 30. Argyris and Schon, Organizational Learning II. Assets,\u201d California Management Review 40 (Spring 1998): 31. Argyris and Schon, Organizational Learning II; 55\u201379. C. Argyris, Intervention Theory and Method (Reading, 23. G. Roth, \u201cThe Order and Chaos of the Learning Orga- MA: Addison-Wesley, 1970). nization,\u201d in Handbook of Organization Development, 32. D. Garvin, Learning in Action (Cambridge, MA: Harvard ed. T. Cummings (Thousand Oaks, CA: Sage Publica- Business School Press, 2000). tions, 2008), 475\u201397; B. Sugarman, \u201cOrganizational 33. M. McGill, J. Slocum, and D. Lei, \u201cManagement Practices Learning\u2013Dynamic, Integrative: A Concept Returns, in Learning Organizations,\u201d Organizational Dynamics Older and Wiser,\u201d in Research in Organizational (Autumn 1993): 5\u201317; E. Nevis, A. DiBella, and J. Gould, Change and Development, vol. 20, ed. W. Pasmore, \u201cUnderstanding Organizations as Learning Systems,\u201d Sloan A. Shani, and R. Woodman (Bingley, UK: Emerald Management Review (Winter 1995): 73\u201385. Group Publishing, 2012), 91\u2013143. 34. J. Dewey, How We Think (Boston: D.C. Heath, 1933). 24. D. Bray, \u201cLiterature Review\u2014Knowledge Management 35. Argyris and Schon, Organizational Learning; Argyris and Research at the Organizational Level\u201d (May 2007), Schon, Organizational Learning II; Senge, Fifth Discipline. accessed from http:\/\/ssrn.com\/abstract=991169. 36. Argyris and Schon, Organizational Learning II; Senge, Fifth Discipline; P. Senge, C. Roberts, R. Ross, B. Smith, 25. C. Argyris and D. Schon, Organizational Learning: A and A. Kleiner, The Fifth Discipline Fieldbook: Strategies Theory of Action Perspective (Reading, MA: Addison- for Building a Learning Organization (New York: Wesley, 1978); C. Argyris and D. Schon, Organizational Doubleday, 1995). Learning II: Theory, Method, and Practice (Reading, MA: 37. Argyris and Schon, Organizational Learning II. Addison-Wesley, 1996); Senge, Fifth Discipline. 38. Senge, Fifth Discipline. 39. Ibid. 26. P. Adler and R. Cole, \u201cDesigned for Learning: A Tale of 40. Argyris and Schon, Organizational Learning II. Two Auto Plants,\u201d Sloan Management Review 34 (1993): 41. Senge, Fifth Discipline. 85\u201394; S. Cook and D. Yanow, \u201cCulture and Organiza- 42. Argyris and Schon, Organizational Learning II; Senge tional Learning,\u201d Journal of Management Inquiry 2 et al., Fifth Discipline Fieldbook; B. Dumaine, \u201cMr. Learning (1993): 373\u201390; G. Huber, \u201cThe Nontraditional Quality Organization,\u201d Fortune, October 17, 1994, 147\u201357. of Organizational Learning,\u201d Organization Science 2 43. Senge et al., Fifth Discipline Fieldbook. (1991): 88\u2013115. 27. W. Snyder, \u201cOrganization Learning and Performance: An Exploration of the Linkages Between Organizational","604 PART 6 STRATEGIC CHANGE INTERVENTIONS 44. Argyris and Schon, Organizational Learning II; Argyris, 51. This application was adapted from the case study and Intervention Theory and Method. evaluation of dialogue and organization learning pre- sented in F. van Eijnatten, M. van Galen, and L. Fitzgerald, 45. M. Polanyi, The Tacit Dimension (New York: Doubleday, \u201cLearning Dialogically: The Art of Chaos-Informed 1966); I. Nonaka and H. Takeuchi, The Knowledge- Transformation,\u201d Learning Organization 10 (2003): Creating Company: How Japanese Companies Foster 36\u2013367. Creativity and Innovation for Competitive Advantage (New York: Oxford University Press, 1995). 52. E. Lawler and C. Worley, Built to Change: How to Achieve Sustained Organizational Effectiveness (San Francisco: 46. D. Leonard-Barton, Wellsprings of Knowledge: Building Jossey-Bass, 2006); C. Worley and E. Lawler, \u201cDesigning and Sustaining the Sources of Innovation (Boston: Harvard Organizations That Are Built to Change,\u201d Sloane Manage- Business School Press, 1995); Nonaka and Takeuchi, ment Review 48 (2006): 19\u201323. Knowledge Creating; C. Prahalad and G. Hamel, \u201cThe Core Competencies of the Corporation,\u201d Harvard Busi- 53. K. van der Heijden, Scenarios: The Art of Strategic ness Review 68 (1990): 79\u201391; H. Itami, Mobilizing for Conversation (New York: Wiley, 2007); M. Lindgren Invisible Assets (Cambridge, MA: Harvard University and H. Bandhold, Scenario Planning (New York: Palgrave Press, 1987); L. Edvinsson and M. Malone, Intellectual Macmillan, 2009); M. Weisbord, Productive Workplaces Capital: Realizing Your Company\u2019s True Value by Finding (San Francisco: Jossey-Bass, 1987). Its Hidden Brainpower (New York: Harper Business, 1997); T. Stewart, Intellectual Capital: The New Wealth of Organi- 54. C. Worley and E. Lawler, \u201cAgility and Organization zations (New York: Doubleday, 1997); J. Nahapiet and Design: A Diagnostic Framework,\u201d Organizational S. Ghoshal, \u201cSocial Capital, Intellectual Capital, and the Dynamics 39 (2010): 194\u2013204. Organizational Advantage,\u201d Academy of Management Review 23 (1998): 242\u201366. 55. J. Kotter and J. Heskett, Corporate Culture and Perfor- mance (New York: Free Press, 1992); J. Amis, T. Slack, 47. V. Anand, C. Manz, and W. Glick, \u201cAn Organizational and C. Hinings, \u201cValues and Organizational Change,\u201d Memory Approach to Information Management,\u201d Acad- Journal of Applied Behavioral Science 38 (2002): 436\u2013465. emy of Management Review 23 (1998): 796\u2013809. 56. Lawler and Worley, Built to Change. 48. E. Wenger, Communities of Practice: Learning, Meaning, 57. E. Lawler and C. Worley, \u201cWinning Support for Organi- and Identity (Cambridge: Cambridge University Press, 1999); J. Brown and P. Duguid, \u201cOrganizational Learning zational Change: Designing Employee Reward Systems and Communities of Practice: Towards a Unified View of That Keep on Working,\u201d Ivey Business Journal (March\u2013 Working, Learning, and Innovation,\u201d Organization Sci- April 2006): 1\u20135. ence 2 (1991): 40\u201357. 58. C. Worley and E. Lawler, \u201cBuilding a Change Capability at Capital One Financial,\u201d Organizational Dynamics 38 49. M. Hansen, N. Nohria, and T. Tierney, \u201cWhat\u2019s Your (2009): 245\u201351; T. Fredberg, F. Norrgren, and A. Shani, Strategy for Managing Knowledge?\u201d Harvard Business \u201cDeveloping and Sustaining Change Capability via Learn- Review (March\u2013April 1999): 106\u201316; C. O\u2019Dell and ing Mechanisms: A Longitudinal Perspective on Trans- C. Grayson, If Only We Knew What We Know formation,\u201d in Research in Organizational Change and (New York: Free Press, 1998). Development, vol. 19, ed. W. Pasmore, A. Shani, and R. Woodman (Bingley, UK: Emerald Group Publishing, 50. L. Thomson, J. Schneider, and N. Wright, \u201cDeveloping 2011), 117\u201361; M. Beer and R. Eisenstat, \u201cDeveloping an Communities of Practice to Support the Implementation Organization Capable of Implementing Strategy and of Research into Clinical Practice,\u201d Leadership in Health Learning,\u201d Human Relations 49 (1996): 597\u2013619. Services 26 (2013), date online September 29, 2012, 59. Worley and Lawler, \u201cBuilding a Change Capability.\u201d accessed December 5, 2012.","\u00a9 Pixmann\/Imagezoo\/ 20 Getty Images Transorganizational Change learning Explain the rationale and logic behind organization collaboration. objectives Describe and apply organization development (OD) interventions that enable mergers and acquisitions. Discuss and apply the OD process to alliance formation and development. Describe the process of network formation and transorganizational development as well as how networks change. The focus of this chapter is OD interventions interdependent and must be coordinated and aligned. that move beyond the single organization to This raises the scope and complexity of change include merging, allying, or networking with processes; it increases the chances that conflicts and other organizations. These multiorganizational change misunderstandings will occur. Multiorganizational programs are becoming more prevalent in OD as change calls for OD practitioners to move to a higher organizations extend their boundaries to keep pace diagnostic and intervention level to straddle the with highly complex and rapidly changing environ- boundaries of different organizations, attend to their ments. Under these conditions, organizations may unique and often conflicting needs, and bring merge with or acquire other firms to gain essential structure to what is frequently an underorganized and capabilities and resources, to operate at a larger highly uncertain process. Practitioners must develop scale, and to enter new markets. They may form stra- new concepts, skills, and expertise for implementing tegic alliances with other organizations to share costs these change interventions. and expertise and to manage their exchanges more efficiently. They may join with other organizations to Because transorganizational change is relatively tackle complex problems and projects that single new to OD, this chapter starts with an explanation organizations cannot accomplish. of the rationale underlying multiorganizational arrangements. Then, three kinds of interventions are Mergers, alliances, and transorganizational described: mergers and acquisitions (M&As), strategic change helps organizations create and sustain such alliances, and networks. multiorganizational linkages. It helps them transcend the perspective of a single organization and address M&As leverage the strengths (or shore up the the needs and concerns of all involved stakeholders. weaknesses) of one organization by combining with This represents a fundamental shift in strategic another organization. This transorganizational change orientation because the strategies, goals, structures, involves integrating many of the interventions and processes of two or more organizations become previously discussed in this text, including human process, technostructural, and human resources 605","606 PART 6 STRATEGIC CHANGE INTERVENTIONS management interventions. Research and practice helping a group or system of organizations to engage in M&As strongly suggest that OD practices can in relationships that perform tasks or solve problems contribute to implementation success. that are too complex and multifaceted for a single organization to resolve. These multiorganizational Alliance interventions, including joint ventures, systems abound in today\u2019s environment and include franchising, and long-term contracts, help to develop research and development consortia, public\u2013private the relationship between two organizations that partnerships, nonprofit coalitions, and constellations of believe the benefits of cooperation outweigh the profit-seeking organizations. They tend to be loosely costs of lowered autonomy and control. These coupled and nonhierarchical, and consequently they increasingly common arrangements require each require methods different from most traditional OD organization to understand its goals and strategy in interventions that are geared to single organizations. the relationship, build and leverage trust, and ensure These methods help organizations recognize the that it is receiving the expected benefits. need for transorganizational partnerships and develop coordinating structures to support their networks. Finally\u2014and building on the knowledge of alliances\u2014network interventions are concerned with 20-1 Transorganizational Rationale More and more, organizations are linking with other organizations to achieve their objectives. These transorganizational strategies can provide additional resources for large-scale research and development; spread the risks of innovation; apply diverse expertise to complex problems and tasks; make information or technology available to learn and develop new capabilities; position the organization to achieve economies of scale or scope; build collaborative relationships to advance social or environmental issues; and gain access to new, especially international, marketplaces.1 For example, pharmaceutical firms form strategic alliances to distribute noncompeting medications and to avoid the high costs of establishing sales organizations; firms from different coun- tries form joint ventures to overcome restrictive trade barriers; and high-technology firms form research consortia to undertake significant and costly research and develop- ment for their industries. More generally, however, transorganizational strategies allow organizations to per- form tasks that are too costly and complicated for single organizations to perform.2 These tasks include the full range of organizational activities, including purchasing raw materials, hiring and compensating organization members, manufacturing and service delivery, obtaining investment capital, marketing and distribution, and strategic plan- ning. The key to understanding transorganizational strategies is recognizing that these individual tasks must be coordinated with each other. Whenever a good or service from one of these tasks is exchanged between two units (individuals, departments, or organi- zations), a transaction occurs. Transactions can be designed and managed internally within the organization\u2019s structure, or externally between organizations. For example, organizations can acquire a raw materials provider and operate these tasks as part of internal operations or they can collaborate with a raw material supplier through long- term contracts in an alliance. Economists and organization theorists have spent considerable effort investigating when transorganizational strategies work best. They have developed frameworks, primar- ily transaction cost theory and agency theory, that are useful for understanding these interventions.3 As a rule, transorganizational strategies work well when transactions occur frequently and are well understood. Many organizations, for example, outsource their payroll tasks because the inputs, such as hours worked, pay rates, and employment status; the throughputs, such as tax rates and withholdings; and the outputs, such as","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 607 issuing paychecks, occur regularly and are governed by well-known laws and regulations. Moreover, if transactions involve people, equipment, or other assets that are unique to the task, then transorganizational linkage is the preferred approach. For example, Micro- soft works with a variety of value-added resellers, independent software vendors, and small and large consulting businesses to bring their products to customers ranging in size from individual consumers to the largest business enterprises in the world. An inter- nal sales and service department to handle the unique demands of each customer seg- ment would be much more expensive to implement and would not deliver the same level of quality as the partner organizations. In general, relationships between and among organizations become more formalized as the frequency of interaction increases, the type of information and other resources that are exchanged become more proprie- tary, and the number of different types of exchanges increases.4 Cummings has referred to groups of organizations that have joined together for a common purpose as transorganizational systems (TSs).5 TSs are functional social systems existing intermediately between single organizations on the one hand and societal sys- tems on the other. These multiorganizational systems can make decisions and perform tasks on behalf of their member organizations, although members maintain their sepa- rate organizational identities and goals. This separation distinguishes TSs from M&As. In contrast to most organizational systems, TSs tend to be underorganized. Relation- ships among member organizations are loosely coupled; leadership and power are dis- persed among autonomous organizations, rather than hierarchically centralized; and commitment and membership are constantly being assessed as member organizations act to maintain their autonomy while jointly performing. These characteristics make cre- ating and managing TSs difficult.6 Potential member organizations may not perceive the need to join with other organizations. They may be concerned with maintaining their autonomy or have trouble identifying potential partners. U.S. firms, for example, are tra- ditionally \u201crugged individualists\u201d preferring to work alone rather than to join with other organizations. Even if organizations decide to join together, they may have problems managing their relationships and controlling joint operations and decisions. Because members typically are accustomed to hierarchical forms of control, they may have diffi- culty managing lateral relations among independent organizations. They also may have difficulty managing different levels of commitment and motivation among members and sustaining membership over time. The network interventions described in this chapter can help TSs understand and address these problems. 20-2 Mergers and Acquisitions M&As involve the combination of two organizations. The term merger refers to the inte- gration of two previously independent organizations into a completely new organization; acquisition involves the purchase of one organization by another for integration into the acquiring organization. M&As are distinct from the interventions described later in this chapter because at least one of the organizations ceases to exist. The stressful dynamics associated with M&As led one researcher to call them the \u201cultimate change management challenge.\u201d7 Organizations have a number of reasons for wanting to acquire or merge with other firms, including diversification or vertical integration; gaining access to global markets, tech- nology, or other resources; and achieving operational efficiencies, improved innovation, or resource sharing.8 As a result, M&As have become a preferred method for rapid growth and strategic change. In 2011, for example, the announced value of M&As worldwide","608 PART 6 STRATEGIC CHANGE INTERVENTIONS reached $3.1 trillion, a 7% increase over 2010 but far below the all-time high of $6.4 trillion in 2007.9 Recent large transactions include financial integrations resulting from the eco- nomic crisis in 2008 (e.g., Wells Fargo and Wachovia, Bank of America and Countrywide Financial) and other industries (e.g., Microsoft-Skype, United-Continental, Sanofi-Genzyme, Southwest-AirTran, and Oracle and Sun Microsystems). There have been more than a few failed announcements as well, including AT&T and T-Mobile, Microsoft and Yahoo, and BEA and EADs. Despite the popularity of M&As, they have a questionable record of success.10 Among the reasons commonly cited for merger failure are inadequate due diligence pro- cesses, lack of a compelling strategic rationale, unrealistic expectations of synergy, paying too much for the transaction, conflicting corporate cultures, and failure to move quickly. M&A interventions typically are preceded by an examination of the organization\u2019s strategy. Executives must decide whether their strategic goals should be achieved by either an internal change or a multiorganizational arrangement, such as an M&A, strate- gic alliance, or network. M&As are preferred when internal development is considered too slow or when strategic alliances or networks do not offer sufficient control over key resources to meet the firm\u2019s objectives. In addition to the OD issues described here, M&As are complex changes that involve legal and financial knowledge beyond the scope of this text. OD practitioners are encouraged to seek out and work with specialists in these other relevant disciplines. The focus here is on how OD can contribute to M&A success. 20-2a Application Stages M&As involve three major phases as shown in Table 20.1: precombination, legal combina- tion, and operational combination.11 OD practitioners can make substantive contributions to the precombination and operational combination phases as described below. Precombination Phase This first phase consists of planning activities designed to ensure the success of the combined organization. Organizations pursuing the M&A option must identify a candidate organization, gather and reveal information about each other, and plan the implementation and integration activities. Research shows that precombination activities are critical to M&A success.12 These include the following: 1. Search for and select candidate. This involves developing screening criteria to assess and narrow the field of candidate organizations, agreeing on a first-choice candidate, assessing regulatory compliance, establishing initial contacts, and formu- lating a letter of intent. Criteria for choosing an M&A partner can include leadership and management characteristics, market access resources, technical or financial capabilities, physical facilities, and so on. OD practitioners can add value at this stage of the process by encouraging screening criteria that include managerial, orga- nizational, and cultural components as well as technical and financial aspects. In practice, financial issues tend to receive greater attention at this stage, with the goal of maximizing shareholder value. Failure to attend to cultural and organizational issues, however, can result in diminished shareholder value during the operational combination phase.13 Identifying potential candidates, narrowing the field, agreeing on a first choice, and checking regulatory compliance are relatively straightforward activities. They generally involve investment brokers and other outside parties who have access to databases of organizational, financial, and technical information. The final two","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 609 TABLE 20.1 Major Phases and Activities in Mergers and Acquisitions Major M&A Key Steps OD and Change Management Issues Phases \u2022 Search for and select candidate Precombination \u2022 Create M&A team \u2022 Ensure that candidates are screened for \u2022 Establish business case cultural as well as financial, technical, Legal \u2022 Perform due diligence assessment and physical asset criteria combination \u2022 Develop merger integration plans \u2022 Define a clear leadership structure Operational \u2022 Complete financial negotiations \u2022 Establish a clear strategic vision, combination \u2022 Close the deal \u2022 Announce the combination competitive strategy, and systems \u2022 Day 1 activities integration potential \u00a9 Cengage Learning \u2022 Organizational and technical \u2022 Specify the desirable organization design features integration activities \u2022 Specify an integration action plan \u2022 Cultural integration activities \u2022 Implement changes quickly \u2022 Communicate \u2022 Solve problems together and focus on the customer \u2022 Conduct an evaluation to learn and identify further areas of integration planning activities, making initial contacts and creating a letter of intent, are aimed at deter- mining the candidate\u2019s interest in the proposed merger or acquisition. 2. Create an M&A team. Once there is initial agreement between the two organiza- tions to pursue a merger or acquisition, senior leaders from the respective organiza- tions appoint an M&A team to establish the business case, to oversee the due diligence process, and to develop a merger integration plan.14 This team typically comprises senior executives and experts in such areas as business valuation, technol- ogy, organization, and marketing. OD practitioners can facilitate formation of this team through human process interventions, such as team building and process con- sultation, and help the team establish clear goals and action strategies. They can also help members define a leadership structure, apply relevant skills and knowledge, and ensure that both organizations are represented appropriately. The group\u2019s leadership structure, or who will be accountable for the team\u2019s accomplishments, is especially critical. In an acquisition, an executive from the acquiring firm is typically the team\u2019s leader. In a merger of equals, the choice of a single individual to lead the team is more difficult, but essential. The outcome of this decision and the process used to make it are the first outward symbols of how this transorganizational change will be conducted. 3. Establish the business case. The purpose of this activity is to develop a prima facie case that combining the two organizations will result in a competitive advantage that exceeds their separate advantages.15 It includes specifying the strategic vision,","610 PART 6 STRATEGIC CHANGE INTERVENTIONS competitive strategy, and systems integration potential for the M&A. OD practitioners can facilitate this discussion to ensure that each issue is fully explored. If the business case cannot be justified on strategic, financial, or operational grounds, the M&A should be revisited, terminated, or another candidate should be considered. A strategic vision or goal represents a description of the organizations\u2019 combined capabilities. It synthesizes the strengths of the two organizations into a viable new organization. For example, AT&T had a clear picture of its intentions in acquiring T-Mobile. They believed that their common network equipment provider and Global Mobile System (GSM) operating system and the difficulty in acquiring additional spec- trum would bring better coverage, better quality, and better functionality to its more than 250 million customers. Competitive strategy describes how the combined organization will add value in a particular product market or segment of the value chain, how the value proposi- tion is best performed by the combined organization (compared with competitors), and how it will be difficult to imitate. The purpose of this activity is to force the two organizations to go beyond the rhetoric of \u201cthese two organizations should merge because it\u2019s a good fit.\u201d AT&T\u2019s acquisition of T-Mobile eventually failed, in part, because their competitive strategy arguments could not dispel regulatory concerns of monopoly power. Systems integration specifies how the two organizations will be combined. It addresses how and if they can work together. It includes such key questions as: Will one firm be acquired and operated as a wholly owned subsidiary? Does the transaction imply a merger of equals? Are layoffs implied, and if so, where? On what basis can promised synergies or cost savings be achieved? 4. Perform a due diligence assessment. This involves evaluating whether the two organizations actually have the managerial, technical, and financial resources that each assumes the other possesses. It includes a comprehensive review of each orga- nization\u2019s articles of incorporation, stock option plans, organization charts, and so on. Financial, operational, technical, logistical, and human resources inventories are evaluated along with other legally binding issues. The discovery of previously unknown or unfavorable information can halt the M&A process. Although due diligence assessment traditionally emphasizes the financial aspects of M&As, this focus is increasingly being challenged by evidence that culture clashes between two organizations can ruin expected financial gains.16 Thus, attention to the cultural features of M&As is becoming more prevalent in due diligence assessment. For example, Microsoft\u2019s venture integration team applies cultural and talent screens as part of its due diligence activities along with financial and operational criteria. The process identifies the fit between Microsoft\u2019s values and those of possible merger can- didates. Human resource assessments like these contribute heavily to the success of the merger. OD expertise can contribute significantly to M&A cultural assessment; it can help organizations carry out cultural due diligence systematically and objectively. The scope and detail of due diligence assessment depend on knowledge of the candidate\u2019s business, the complexity of its industry, the relative size and risk of the transaction, and the available resources. Due diligence activities must reflect symbol- ically the vision and values of the combined organizations. An overly zealous assess- ment, for example, can contradict promises of openness and trust made earlier in the transaction. Missteps at this stage can lower or destroy opportunities for synergy, cost savings, and improved shareholder value.17 5. Develop merger integration plans. This stage specifies how the two organizations will be combined. It defines integration objectives; the scope and timing of","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 611 integration activities; organization design criteria; Day 1 requirements; and who does what, where, and when. The scope of these plans depends on how integrated the organizations will be. If the candidate organization will operate as an independent subsidiary with an \u201carm\u2019s-length\u201d relationship to the parent, such as Microsoft\u2019s ini- tial decision with Skype, merger integration planning need only specify those sys- tems that will be common to both organizations. A full integration of the two organizations requires a more extensive plan. Merger integration planning starts with the business case conducted earlier and involves more detailed analyses of the strategic vision, competitive strategy, and sys- tems integration for the M&A. For example, assessment of the organizations\u2019 mar- kets and suppliers can reveal opportunities to serve customers better and to capture purchasing economies of scale. Examination of business processes can identify best operating practices; which physical facilities should be combined, left alone, or shut down; and which systems and procedures are redundant. Capital budgeting pro- cesses can show which investments should be continued or dropped. Typically, the M&A team charters subgroups composed of members from both organizations to perform these analyses. OD practitioners can conduct team-building and process- consultation interventions to improve how those groups function. Next, plans for designing the combined organization are developed. They include the organization\u2019s structure, reporting relationships, human resources policies, infor- mation and control systems, operating logistics, work designs, and customer-focused activities. Applying large-scale change interventions are most appropriate here. The final task of integration planning involves developing an action plan for implementing the M&A. This specifies tasks to be performed, decision-making authority and responsibility, and timelines for achievement. It also includes a pro- cess for addressing conflicts and problems that will invariably arise during the implementation process. Legal Combination Phase This phase of the M&A process involves the legal and financial aspects of the transaction. The two organizations settle on the terms of the deal, register the transaction with and gain approval from appropriate regulatory agen- cies, communicate with and gain approval from shareholders, and file appropriate legal documents. In some cases, an OD practitioner can provide advice on negotiating a fair agreement, but this phase generally requires knowledge and expertise beyond that typi- cally found in OD practice. Operational Combination Phase This final phase involves implementing the merger integration plan. In practice, it begins during due diligence assessment and may continue for months or years following the legal combination phase. M&A implementation includes the three kinds of activities described below. 1. Day 1 activities. These include communications and actions that officially start the implementation process. For example, announcements may be made about key executives of the combined organization, the location of corporate headquarters, the structure of tasks, and areas and functions where layoffs will occur. Special attention is paid to sending important symbolic messages to organization members, investors, and regulators about the soundness of the merger plans and the changes that are critical to accomplishing strategic and operational objectives.18 2. Operational and technical integration activities. These involve the physical moves, structural changes, work designs, and procedures that will be implemented to","612 PART 6 STRATEGIC CHANGE INTERVENTIONS accomplish the strategic objectives and expected cost savings of the M&A. The merger integration plan lists these activities, which can be large in number and range in scope from seemingly trivial to quite critical. For example, United Airlines\u2019s acquisition of Continental involved changing employee uniforms, the signage at all airports, marketing and public relations campaigns, repainting airplanes, and inte- grating the route structures, among others. When these integration activities are not executed properly, the M&A process can be set back. Application 20.1 describes some of the operational, technical, and cultural inte- gration activities associated with the United\u2013Continental merger.19 3. Cultural integration activities. These tasks are aimed at building new values and norms in the combined organization. Successful implementation melds both the technical and cultural aspects of the combined organization. For example, members from both organizations can be encouraged to solve business problems together, thus addressing operational and cultural integration issues simultaneously.20 The M&A literature contains several practical suggestions for managing the operational combination phase.21 First, the merger integration plan should be imple- mented sooner rather than later, and quickly rather than slowly. Integration of two organizations generally involves aggressive financial targets, short timelines, and intense public scrutiny. Moreover, the change process is often plagued by culture clashes and political fighting. Consequently, organizations need to make as many changes as possible in the first hundred days following the legal combination phase. Quick movement in key areas has several advantages. It preempts unantici- pated organization changes that might thwart momentum in the desired direction; it reduces organization members\u2019 uncertainty about when things will happen; and it lessens members\u2019 anxiety about the M&A\u2019s impact on their personal situation. All three of these conditions work against desired collaboration and other benefits. Second, integration activities must be communicated clearly and promptly to a variety of stakeholders, including shareholders, regulators, customers, and organiza- tion members. M&As can increase uncertainty and anxiety about the future, espe- cially for members of the involved organizations who often inquire: Will I have a job? Will my job change? Will I have a new boss? These kinds of questions can dominate conversations, reduce productive work, and spoil opportunities for collab- oration. To reduce ambiguity, organizations can provide concrete answers through a variety of channels including company newsletters, email and intranet postings, press releases, video, podcasts, and in-person presentations, one-on-one interaction with managers, and so on. Third, members from both organizations need to work together to solve imple- mentation problems and to address customer needs. Such coordinated tasks can clarify work roles and relationships and contribute to member commitment and motivation. Moreover, when coordinated activity is directed at customer service, it can assure customers that their interests will be considered and satisfied during the merger. Fourth, organizations need to assess the implementation process continually to identify integration problems and needs. The following questions can guide the assessment process:22 \u2022 Have savings estimated during precombination planning been confirmed or exceeded? \u2022 Has the new entity identified and implemented shared strategies or opportunities? \u2022 Has the new organization been implemented without loss of key personnel? \u2022 Was the merger and integration process seen as fair and objective? \u2022 Is the combined company operating efficiently?","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 613 application 20 1 PLANNING THE UNITED\u2013CONTINENTAL MERGER U nited Airlines is one of the oldest and most aisle seat process); baggage and loading poli- recognized brands in the world. But like cies (should all dog crates be loaded back- most of the older airlines, it has struggled wards into the cargo hold so frightened dogs over the years. Beset by a weak industry don\u2019t tip the crate off the conveyor belt); uni- structure\u2014overcapacity, easy entry, and a per- forms (male Continental employees could ishable product (empty seats can never be choose from three different shirts and a few resold)\u2014few airlines make money. Financial ties, United only has the one); how to identify analysts have, for years, called on the airlines unaccompanied minors (bracelet or a button); to restructure, lower costs, and consolidate. and whether to serve nuts in a bag or a heated Following the widespread bankruptcies in the dish in first class. wake of 9\/11, consolidation has slowly set in, leading to the mergers of US Airways and The planning and integration efforts utilized America West; Delta and Northwest; South- \u201cfunctional integration teams\u201d\u2014Continental west and AirTran; and, most recently, United employees working alongside United employ- and Continental. With consolidation comes an ees in months of meetings\u2014to make things opportunity for organization development. happen. For example, 33 functional integration teams in the fourth quarter of 2011 spent $170 The announcement of the United and Con- million on everything from technology training tinental merger in May 2010 was the ultimate and severance to repainting airplanes in an event in a long string of strategic decisions by attempt to balance safety, cost, space, style, both organizations. Before actually coming reliability, convenience, speed, and comfort. together as merger partners, United and Conti- nental had discussed the possibility of a formal Simple choices could become incredibly merger. But United\u2019s merger talks with US Air- complicated. For example, a 14-member func- ways, United\u2019s and Continental\u2019s own journeys tional integration beverage team composed of through bankruptcies, their \u201cvirtual\u201d merger members from procurement, flight operations, through the Star Alliance, and Continental\u2019s finance, food services, and marketing was equity relationship with Northwest prevented chartered with, among other things, choosing consummation of the deal. a coffee supplier. Continental and United had different coffee providers, and it made no When the path to a merger opened up, the sense to have two contracts. Buying from rationale for the deal went beyond simple eco- one source offered the possibility of bigger vol- nomics. Important organizational reasons ume discounts and the kinds of savings Wall included Continental\u2019s superior management Street was expecting. The taste test winner capabilities and reputation as well as United\u2019s was cheaper and it was approved by collea- scale and scope. These issues were apparent gues outside the beverage committee, the even as the deal was announced: Former new CEO, and company officers at a general Continental head, Jeff Smisek, was named meeting. Just to be sure, the new blend was CEO of the new company and many if not tested on flight attendants in Washington most top management positions were to be Dulles, Chicago O\u2019Hare, Denver, Los Angeles, filled with former Continental executives, but and San Francisco. Out of the 1,100 who did, the company would be called United and its all but eight approved. headquarters would be in Chicago. On July 1, the new United introduced its Combining two airlines is tremendously new coffee, and the protests came flying in. difficult, largely because of the number of Flight attendants reported a barrage of com- things they can do differently. For example, plaints, and the beverage committee and the choices have to be made on boarding pro- CEO received angry emails from customers. cesses (Continental\u2019s traditional back to front The coffee was \u201cwatery.\u201d When the beverage process or United\u2019s window, middle, then committee looked into it, they discovered that it","614 PART 6 STRATEGIC CHANGE INTERVENTIONS wasn\u2019t the coffee: The coffee makers on United air- had an extra 24 hours added to their arrival times. craft were different from Continental\u2019s, and the The FAA awarded the new United a single operat- differences\u2014the height of the brew basket above ing certificate on November 30, 2011. the pot\u2014determined whether excess water flowed into the pot (watering down the coffee) or not. The second technical integration challenge, the passenger information system, proved more One of the biggest challenges was planning the troublesome. The system hosts the website and integration of the flight information and passenger reservation system, tracks schedules and schedule information systems. As CEO Smisek put it, \u201cIt\u2019s changes, records frequent flyer information, con- akin to changing the engine while the airplane\u2019s in nects ticket counters to airport kiosks to gates, flight.\u201d The flight information system tracks every- and prints boarding passes. Until the passenger thing related to a particular flight, including the type information system is integrated, the organization of plane, departure and arrival times, flight number, looks to customers and really acts like separate air- air speed, altitude, and current location. The system lines, with separate websites, gates, ticketing pro- is monitored by employees in the network opera- cesses, and so on. United customers who want tions center. Merging Continental\u2019s and United\u2019s help from a Continental agent cannot get it. operations centers was handled by the operations center\u2019s functional integration team and took more As with the flight system integration, there are than 18 months. The team had to determine the technical issues to address but the real layer of hardware and software platforms that would best complexity is that this system is used by customers handle the volume and complexity of activity as and employees alike. The new United adopted Con- well as the system\u2019s operation. For example, tinental\u2019s passenger services system, a Hewlett- every airline has a set of rules to determine when Packard program called Shares that is more flexible a plane will go faster to make up for a late departure than United\u2019s old Apollo system. Although it pro- and when it will not\u2014the so-called \u201cspeedup- vides a more customizable customer experience, it slowdown calculation.\u201d Flying faster is costly is also less intuitive and therefore required a lot of because more fuel is used, but being late costs training. There was some fear among the agents. money in terms of missed connections, rebooking \u201cIt\u2019s a little challenging at the moment. We just costs, putting stranded customers up in hotels, and get this on-the-job training a couple hours here and paying extra time for flight crews and ground crews. there,\u201d said a 20-year United employee. United\u2019s and Continental\u2019s calculations didn\u2019t always agree and the functional integration team Although United began planning this inte- had to marry the best of both. gration early on, the complexity of the data interactions\u2014and an independent and unrelated Moreover, the functional integration team had decision to change a few of the elements of the to plan the exhaustive list of tests and contingency frequent flyer programs at the same time\u2014was plans to ensure that the data could be combined too much to handle. The lack of training, the inevi- without breaking the system. When the team table technical glitches, and the increased call thought it had an integration solution in place, they loads from frequent flyers asking questions over- tested the system by flying an empty Continental whelmed the system and employees. Initially, the 737 from Houston to El Paso and back just to system operated poorly and there were loud com- make sure the operations center could track it. plaints from both customers and employees. Then they had the pilots pretend to have a mechan- ical problem and return to the gate, and then they Integrating labor practices, talent, and culture had the pilots change the flight number and reroute is one of the biggest issues in most mergers, and the plane to Austin to see if that showed up. integrating United\u2019s and Continental\u2019s human capi- tal practices and culture was expected to be a par- Integrating the flight information system ticular challenge. Continental had a strong involved more than 500 employees reducing reputation as an employee- and customer-focused 440 manuals down to 260. When the new system organization. Like other carriers, it had to deal with came online, the only glitch was that the few high fuel prices, natural disasters (such as the planes that had crossed the international dateline volcanic eruption in Iceland), and the recession, but it had managed to retain its positive culture.","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 615 Continental was consistently at the top of cus- do run the risk in any integration of ending up with tomer satisfaction surveys and the country\u2019s 100 mediocrity.\u201d best employers. Labor relations and customer ser- vice reputations at United, however, were just the In the first days after the merger was closed, opposite. Its 2002\u20132006 bankruptcy involved lay- Smisek did 16 \u201cCEO exchanges\u201d in the United offs and salary cuts, increased customer com- States. Standing up in front of employees, he plaints, and pilot \u201csick outs.\u201d Although these answered any question they wanted. This was were the most proximate causes of mistrust, something the Continental employees under- there was a legacy of hostility. stood, but the United workers had never seen. The tough questions came quickly. \\\"When are Like the technical processes, United adopted you going to snap me back to the wages I had in the functional integration team idea to address its the year 2000?\\\" The answer was \u201cnever,\u201d and human capital and culture strategies. All of them Smisek had to explain that today\u2019s airline industry had to work together to build a coordinated work- was different than it was in 2000; that the force. For example, getting alignment among the business had changed because low-cost carriers labor agreements was as much a social issue as were now an important part of the way business a financial one. Looking like one airline to consu- was done. The exchanges were continued in mers means that employees have to feel like one Europe, Asia, and Latin America before more airline. Integrating contracts meant reconciling were conducted in the United States rules regarding schedules, routes, seniority, and pay. Despite its importance, this was a difficult pro- The new management team was also hoping cess because United and Continental had similar to use the new strategy to align people to the busi- groups of employees that were represented by dif- ness. The new United adopted the \u201cGo Forward ferent collective bargaining agreements, as well as Plan\u201d process from Continental. Once a year, the employee groups that were covered by a union in Go Forward Plan was a short, simple, and easy to one organization that were not covered by a union understand statement, no more than one-page in the other. Sequencing union votes, talent selec- long, of marketing, finance, operations, and tion processes, and HR systems integration were a employee objectives. As a pilot, ticket agent, or big part of the HR functional integration of team\u2019s operations person, it focused everybody on the responsibilities. things that mattered most. Smisek tells people that \u201cif you\u2019re doing something and you can\u2019t Fortunately, the team had a lot of help from trace it back to the Go Forward Plan, stop what the top. The new United management saw the you\u2019re doing and do something else.\u201d merger as a rare opportunity to get things right. CEO Smisek noted, \u201cMy management team and I Although there were some bumps along the are spending a lot of time on developing the new way and the culture and labor integration pro- culture. It won\u2019t be precisely Continental\u2019s culture, cesses continue, the use of functional integration and it sure won\u2019t be United\u2019s old culture. It\u2019ll be teams to address the important operational chal- something that takes what I hope to be the best lenges and senior management\u2019s visible commit- of both. We\u2019re very focused on that because you ment to the merger have helped United manage the change. \u2022 Have major problems with stakeholders been avoided? \u2022 Did the process proceed according to schedule? \u2022 Were substantive integration issues resolved? \u2022 Are people highly motivated (more so than before)? M&As are among the most complex and challenging interventions facing organiza- tions and OD practitioners.","616 PART 6 STRATEGIC CHANGE INTERVENTIONS 20-3 Strategic Alliance Interventions A strategic alliance is a formal agreement between two or more organizations to pursue a set of private and common goals through the sharing, exchange, or codevelopment of resources, including intellectual property, people, capital, technology, capabilities, or physical assets.23 It is an important strategy for such organizations as Microsoft, Eli Lilly, Corning Glass, DOW, Federal Express, IBM, Starbucks, Cisco Systems, and Oracle. The term strategic alliance generally refers to any collaborative effort between two or more organizations, including licensing agreements, franchises, long-term contracts, and joint ventures. Franchising is a common collaborative strategy.24 Companies such as McDonald\u2019s, Subway, or Holiday Inn license their name and know-how to independent organizations that deliver the service and leverage the brand name for marketing. A joint venture is a special type of strategic alliance where a third organization, jointly owned and operated by two (or more) organizations, is created.25 Joint ventures between domestic and foreign firms, such as Equate, a joint venture between DOW and Petrochemical Industries Companies KSC to produce value-added che- micals and plastics, or Fuji\u2013Xerox, a long-term collaboration that began with Fuji selling Xerox copying machines in Japan, can help overcome trade barriers and facilitate technology transfer across nations. The New United Motor Manufacturing, Inc., in Fremont, California, for example, was a successful, long-term joint venture between General Motors and Toyota to produce automobiles using Japanese teamwork methods that was just recently dissolved. 20-3a Application Stages The development of effective strategic alliances generally follows a process of strategy formulation, partner selection, alliance structuring and start-up, and alliance operation and adjustment. 1. Alliance strategy formulation. The first step in developing strategic alliances is to clarify the business strategy and understand why an alliance is an appropriate method to implement it. About one-half to two-thirds of alliances fail to meet their financial objectives, and the number one reason for that failure is the lack of a clear strategy.26 For example, Collins found that alliance success was heavily influenced by the alignment of the partner to the company\u2019s \u201chedgehog concept\u201d or what it is best at doing.27 If the organization understood its passion, distinctive capabilities, and economic drivers, it was more likely to develop alliances that supported its strategy. Thus, it is important to pur- sue alliances according to a \u201ccollaboration logic.\u201d28 The alliance must be seen as a more effective way of organizing and operating than developing new capabilities to perform the work in-house; acquiring or merging with another organization; or buying the capabilities from another organization in a transactional relationship. 2. Partner selection. Once the reasons for a strategic alliance are clear, the search for an appropriate partner or partners begins. Alliances always involve a cost\u2013benefit trade- off; while the organization typically gains access to new markets or new capabilities, it does so at the cost of yielding some autonomy and control over its activities. Similar to identifying merger and acquisition candidates discussed previously, this step involves developing screening criteria, agreeing on candidates, establishing initial contacts, and formulating a letter of intent. A good alliance partnership will leverage both similarities and differences to create competitive advantage. Compatible commit- ment levels, management styles, cultures, goals, information technologies, or operations are important similarities that can smooth alliance formation and implementation.29 However, different perspectives, technologies, capabilities, and other resources can complement existing ones and be good sources of learning and value in the part- nership. These differences can also be a source of frustration for the alliance.","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 617 OD practitioners can add value at this stage of the process by helping potential alliance partners explore and understand their similarities and differences. In addition, the way the alliance begins and proceeds is an important ingredient in building trust, a charac- teristic of successful alliances explored more fully in the next step. 3. Alliance structuring and start-up. Following agreement to enter into an alliance, the focus shifts to how to structure the partnership and build and leverage trust in the relationship. First, an appropriate governance structure must be chosen and can include medium- to long-term contracts, minority equity investments, equal equity partnerships, or majority equity investments. As the proportion of equity investment increases, the costs, risk, and amount of required management attention also increase.30 In general, partners need to know how expenses, profits, risk, and knowl- edge will be shared. Second, research increasingly points to \u201crelational quality\u201d as a key success fac- tor of long-term alliances.31 Strategic alliances shift the nature of the relationship from the simple exchange of goods, services, or resources with no necessary expec- tation of a future relationship to one where there is a clear expectation of future exchange. The organizations in the relationship must act in good faith to ensure the future. This requires trust, \u201ca psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior\u201d of another firm or individual representing the organization. It implies an expectation that the organization will subordinate its self-interest to the \u201cjoint interest\u201d of the alliance under most conditions.32 Trust can increase or decrease over the life of the alliance. Early in the alliance formation process, it can serve as an initial reservoir of comfort and confidence based on perceptions of the organizations\u2019 reputation, prior success, and other sources. These same factors can also contribute to a lack of initial trust. Trust can be increased or decreased by new assessments of the others\u2019 capabilities, compe- tence, and ethical behavior. OD practitioners can assist in this initial start-up phase by making implicit perceptions of trust explicit and getting the involved parties to set appropriate expectations.33 During the structuring and start-up phase, trust can increase through direct activities as a function of the number, frequency, and impor- tance of interactions; differences between expectations and reality; the nature of mis- takes and how they are resolved; and attributions made about partners\u2019 behavior. 4. Alliance operation and adjustment. Once the strategic alliance is functioning, the full range of OD interventions described in this text can be applied. Team building, conflict resolution, large-group interventions, work design, employee involvement, dynamic strategy making, and culture change efforts have all been reported in alliance work.34 OD practitioners should pay particular attention to helping each partner in the alliance clarify the capabilities contributed, the lessons learned, and the benefits received. Diagnosing the state of the strategic alliance and making the appropriate adjust- ments is a function of understanding whether the environment has changed in ways that make transorganizational linkage unnecessary, whether partner goals and capa- bilities have changed the nature of the relationship and interdependence, and whether the alliance is successfully generating outcomes. The long-term success of the Fuji-Xerox joint venture, for example, has been due to the willingness and ability of the two organizations to adjust the relationship in terms of ownership, profit sharing, new product development responsibilities, and market access.35 Application 20.2 describes an alliance-building intervention between two firms in India.36 It shows how, despite good intentions, OD projects can encounter vexing problems, especially in cross-cultural alliance contexts.","618 PART 6 STRATEGIC CHANGE INTERVENTIONS BUILDING ALLIANCE RELATIONSHIPS application 20 2 M aharashtra Hybrid Seeds Company Lim- that their complementary resources and cap- ited (MAHYCO), the leading producer and abilities could be leveraged to develop competi- marketer of hybrid seeds in India, formed tive advantage for the alliance. For example, a strategic alliance with Monsanto to MAHYCO could apply Monsanto\u2019s biotechnolog- expand and extend its business. Founded in ical know-how to its vast germ plasma inventory 1964 by B. R. Barwale, the father of the to create plants that would support the food Green Revolution in India, MAHYCO was fam- production and fiber needs of South Asia. Even ily owned and run. Mr. Barwale\u2019s son was the with Monsanto\u2019s long-term presence in India, firm\u2019s managing director (MD) and several fam- MAHYCO could provide it with better access ily members played critical roles in its daily to India\u2019s markets, government officials, and management. In 1998, the company opened a regulatory agencies. state-of-the-art research and development complex, the same year that B. R. Barwale In moving the alliance forward, however, received the World Food Prize for his work on both firms recognized that their different cor- hybrid seed development. porate cultures posed a special challenge. MAHYCO\u2019s culture was characterized by high In the early 1990s, MAHYCO first made levels of loyalty and commitment, owing to its contact with Monsanto India Private Limited family background and close connection to the as a potential business partner with comple- noble effort of bringing biotechnology to India. mentary capabilities. Monsanto India was part The firm\u2019s management\u2013employee relationship of the Monsanto Company, a publicly held mul- was highly formal, with little employee involve- tinational corporation based in the United ment in decisions and low comfort with change. States, and a leading global developer of trans- Monsanto, on the other hand, was nearly oppo- genic plants using biotechnology. Monsanto\u2019s site on all of these dimensions. It was a large focus on biotechnology, part of the firm\u2019s fast-paced organization undergoing consider- larger transformation from chemicals to bio- able change. Its people were in constant flux technology, gave it the lead in introducing as its business models and plans were chang- insect- and herbicide-resistant genetic traits in ing. Many were new to the organization and just plants. With a presence in India since 1947, learning their positions, while the experienced Monsanto India had a sales and marketing people were leading the company\u2019s conversion organization with a research facility and formu- from chemicals to biotechnology. lation plant. Given these organizational differences During the next few years, the two compa- and the fact that neither partner could know nies explored a strategic alliance primarily through in advance how long the alliance would personal relationships among MAHYCO\u2019s MD last, MAHYCO employees were fearful that and two key executives from Monsanto India, Monsanto would buy out or consume MAHYCO an Indian operations manager and an expatri- and thereby threaten their careers. Adding to ate from the United States. The MD had strong the ambiguity and stress, MAHYCO\u2019s MD interest in progressive business practices; the openly expressed hope that the alliance Monsanto operations manager possessed a would help the firm become more profes- keen business savvy and local knowledge; sionally managed and malleable, and less and the expatriate had tremendous technical patriarchal and rigid. knowledge and cultural sensitivity. These qual- ities helped the three executives forge a strong Building on the strong personal bond personal bond based on respect, friendship, between the three executives at the top of the and trust. two firms, an alliance-building intervention was considered to develop trust and collaboration at In 1998, Monsanto made an equity invest- lower organizational levels. In preparing for ment in MAHYCO. The two companies believed the change program, an OD team interviewed","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 619 44 people from Monsanto India and MAHYCO. subsequent management education session was Numerous opportunities and obstacles to alliance modified to include it. The AI session then moved success were identified. Members of both organiza- from learning to envisioning. Participants were tions wanted to learn more about their partner\u2019s asked to imagine how the alliance would be publicly business and culture. They expressed excitement recognized by the year 2005. They imagined an alli- about combining their resources in the alliance and ance that would increase the nutrient content of cited the importance of collaboration and mutual pulse crops, create nitrogen-fixating plants, develop understanding to make it work. Four critical success new insect-resistant crops, and spawn a \u201cgene revo- factors emerged from the interviews: clear vision lution\u201d (a playful allusion to the Green Revolution). and mission for the alliance, key initiatives and Moreover, the alliance would create plants that pro- goals, mutual trust and operating norms, and sup- duce hydrocarbons and new color fibers and ensure port for each firm\u2019s internal change plans. the Asian food supply. Many participants experi- enced the envisioning process as energizing; others, The OD team then met with the top leaders at mostly from the Cotton team, however, were skep- MAHYCO and Monsanto India and proposed an tical and viewed it as \u201cwaste of our time.\u201d Despite appreciative inquiry (AI) process for the alliance- this criticism, the subsequent dialogue revealed pro- building program. It would involve multiple organi- ductive ways to address the alliance vision and to zational levels and include all relevant alliance create action plans. For example, one R&D team stakeholders. AI would help participants create that had not met prior to the session developed sev- common ground, discover each other\u2019s capabili- eral recommendations on how to improve informa- ties, and envision the alliance\u2019s future. The pro- tion sharing between the two companies. posed intervention was approved by Monsanto India but surprisingly rejected by MAHYCO, which The management education session was con- was uncomfortable with the AI process. Specifically, ducted in a more traditional presentation format than MAHYCO\u2019s leaders believed they did not know the AI session and included MAHYCO\u2019s top-30 man- enough about Monsanto India to engage in an agers and Monsanto India\u2019s top 10. It was geared to open, loosely structured process for developing rela- providing participants with better understanding of tionships and setting alliance direction and strategy. the alliance partners\u2014their history, current business, Moreover, they felt that AI would give too much future opportunities, and expectations for the alliance. decision-making power to middle managers, take After formal introductions, the session involved pre- too much time, and be seen as too childish for sentations on alliance management and Monsanto\u2019s grown men with many years of experience. As a biotechnology strategy. The latter was mainly for compromise, MAHYCO agreed that its R&D people the benefit of MAHYCO\u2019s executives. Then, partici- would engage in AI with their Monsanto India coun- pants learned about each firm\u2019s core competencies terparts, but the MAHYCO executive team would and how they translated into alliance benefits. only participate in a more formal management edu- Interestingly, this part of the session evolved into a cation session to learn more about the alliance and somewhat awkward discussion about \u201cprofessional- their partner. Thus, two different alliance-building ism\u201d in the MAHYCO organization. The ensuing interventions were conducted in late 1998. dialogue about changing from a family business to a more professional firm raised issues of trust, loyalty, The AI session was attended by 32 participants respect, and so on, all topics difficult to address in this representing four cross-alliance R&D teams. One of formal setting. those teams\u2014the Cotton team\u2014had already been formed and was actively working on a joint project. With facilitation from the OD team, the edu- An opening exercise encouraged participants to cation session shifted to question-and-answer build relationships that go beyond name tags. It discussions geared to increase cross-firm communi- was followed by an information session where par- cation and understanding. The session ended with ticipants learned about the alliance partners and the discussion of the top executives\u2019 role in making the purpose for the alliance. They gained insight about alliance successful. Participants generated ideas for each firm\u2019s core strengths and the synergies that the next steps in developing the alliance and posi- could be derived from the alliance. In fact, this exer- tioning it and biotechnology in India. They assumed cise had such a strong impact that the design of the no further responsibility, however, for implementing","620 PART 6 STRATEGIC CHANGE INTERVENTIONS them, leaving it up to the Director of Monsanto India own future and success. The inherent differences and the MAHYCO MD to determine the next steps between the two partner organizations continued and to make them happen. to challenge alliance leadership. In sum, the AI and ME alliance-building inter- On reflection, members of the OD team ventions differed considerably in their respective learned from their alliance experience. They real- purposes, participants, processes, and outcomes. ized that their original views about the AI and edu- The AI session encouraged learning, relationship cation interventions were overly optimistic, even building, and cocreation of future alliance plans, naive. What they observed during the AI session whereas the management education session was was only surface-level dialogue, the result of a intended to convey information about the alliance design that minimized tension and fostered collab- and its partner organizations. To assess interven- oration. They concluded that alliance partners as tion results, the OD team administered question- well as OD professionals need to enhance their naires to all participants at the beginning and end business and cultural knowledge prior to participat- of both sessions. In addition, a follow-up survey ing in a cross-cultural alliance intervention. From a was administered to all participants via email four business perspective, for example, it would be months later to explore any longitudinal effects of helpful for participants to diagnose their own orga- the interventions. Seventy-two percent of AI parti- nization prior to the alliance-building activities. This cipants returned the email survey, while only half would provide valuable insight into the firm\u2019s col- of the management education participants did. Par- laborative orientation and alliance capability, provid- ticipants in the AI session reported significantly ing a realistic basis for determining how best to greater levels of relationship building, collaboration, create and develop the alliance. From a cultural and follow-through in alliance project development perspective, it would be helpful to appreciate the than did the education session participants. Man- diverse ways in which people from different cul- agement education participants indicated that they tures are likely to react to alliance interventions missed the opportunity to build relationships. Parti- such as AI and management education. In inter- cipants in both sessions reported increased levels group encounters, for example, people from more of mutual understanding, thereby laying the foun- implicit cultures (such as India) tend to share only a dation for future alliance development. shade of what they believe and feel. In contrast, people from more explicit cultures (such as the Over the next six years, many of the same United States) tend to be more open and forward issues that showed up in the alliance-building ses- in such interactions. Such understanding would be sions still persisted, to the dismay of the OD team. invaluable in designing how best to build alliance These included concerns over trust and collabora- relationships. Finally, the OD team concluded that tion, unwillingness to change, and inequalities in alliance building is not a one-time event but an compensation and available equipment between ongoing process. It needs continuous organiza- the two partners. People who were roadblocks in tional support and attention to the structures and 1998 were still roadblocks in 2003. Aspects of cor- processes that sustain optimal levels of collabora- porate control and decision making were still frus- tion and trust among alliance partners. trating the alliance, making it difficult to chart its 20-4 Network Interventions Network interventions help organizations join together for a common purpose; their use is growing rapidly in today\u2019s highly competitive, global environment.37 In the private sector, research and development consortia, for example, allow companies to share resources and risks associated with large-scale research efforts. Networks among airlines with regional specializations combine to provide worldwide coverage; Japanese keiretsu, Korean chaeobols, or Mexican grupos enable different organizations to take advantage of","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 621 complementary capabilities among them. In the public sector, partnerships between gov- ernment and business provide the resources and initiative to undertake complex urban renewal projects, such as Cleveland\u2019s Cuyahoga River, Baltimore\u2019s Inner Harbor Project, and Lyon\u2019s zones de redynamisation urbaines (urban renewal zones), or improve health care, including Sweden\u2019s \u201cBring a Friend\u201d program that increases cancer screenings or Britain\u2019s National Health Service (NHS) sustainability project. Other networks of business, labor, government, education, finance, community organizations, and economic develop- ment agencies, such as China\u2019s Low Carbon City Initiative, are helping to identify exem- plary efforts related to building and energy efficiency, public awareness, and low carbon development that can help coordinate services and promote more responsible growth.38 Managing the development of multiorganizational networks involves two types of change: (1) creating the initial network and (2) managing change within an established network. Both change processes are complex and not well understood. First, the initial cre- ation of networks recognizes their underorganized nature. Forming them into a more coherent, operating whole involves understanding the relationships among the participat- ing organizations and their roles in the system, as well as the implications and conse- quences of organizations leaving the network, changing roles, or increasing their influence. Second, change within existing networks must account for the relationships among member organizations as a whole system.39 The multiple and complex relationships involved in networks produce emergent phenomena that cannot be fully explained by sim- ply knowing the parts. Each organization in the network has goals that are partly related to the good of the network and partly focused on self-interest. How the network reacts over time is even more difficult to capture and is part of the emerging science of complexity.40 20-4a Creating the Network OD practitioners have evolved a unique form of planned change aimed at creating net- works and improving their effectiveness.41 In laying out the conceptual boundaries of network development, also known as transorganizational development, Cummings described the practice as following the phases of planned change appropriate for underor- ganized systems (Chapter 2).42 The four stages are shown in Figure 20.1 along with key issues that need to be addressed at each stage. The stages and issues are described below. 1. Identification stage. This initial stage of network development involves identifying exist- ing and potential member organizations best suited to achieving their collective objectives. Identifying potential members can be difficult because organizations may not perceive the need to join together or may not know enough about each other to make membership choices. These problems are typical when trying to create a new network. Relationships among potential members may be loosely coupled or nonexistent; thus, even if organiza- tions see the need to form a network, they may be unsure about who should be included. The identification stage is generally carried out by one or a few organizations interested in exploring the possibility of creating a network. OD practitioners work with these initiating organizations to clarify their own goals, such as product or technology exchange, learning, or market access, and to understand the trade-off between the loss of autonomy and the value of collaboration. Change agents also help specify criteria for network membership and identify organizations meeting those standards. Because networks are intended to address particular problems or opportunities, a practical criterion for membership is how much organizations can contribute to this work. Potential members can be identified and judged in terms of the skills, knowledge, and resources that they bring to bear on the network task. Practitioners warn, however, that identifying potential members also should take","622 PART 6 STRATEGIC CHANGE INTERVENTIONS FIGURE 20.1 Application Stages for Transorganizational Development \u00a9 Cengage Learning into account the political realities of the situation.43 Consequently, key stakeholders who can affect the creation and subsequent performance of the network are identi- fied as possible members. An important difficulty at this stage can be insufficient leadership and cohesion among participants to choose potential members. In these situations, OD practi- tioners may need to play a more activist role in creating the network.44 They may need to bring structure to a group of autonomous organizations that do not see the need to join together or may not know how to form relationships. In several cases of network development, change agents helped members create a special leadership group that could make decisions on behalf of the participating organizations.45 This leadership group comprised a small cadre of committed members and was able to develop enough cohesion among members to carry out the identification stage. The OD activist role requires a good deal of leadership and direction. For example, change agents may need to educate potential network members about the benefits of joining together. They may need to structure face-to-face encounters aimed at sharing information and exploring interaction possibilities. 2. Convention stage. Once potential network members are identified, the convention stage is concerned with bringing them together to assess whether formalizing the network is desirable and feasible. This face-to-face meeting enables potential mem- bers to explore mutually their motivations for joining and their perceptions of the activities they might have to perform together. They work to establish sufficient levels of motivation and task consensus to form the network. Like the identification stage, this phase of network creation generally requires considerable direction and facilitation by OD practitioners. Existing stakeholders may not have the legitimacy or skills to perform the convening function, and practi- tioners can serve as conveners if they are perceived as legitimate and credible by the attending organizations. This necessitates that change agents maintain a neutral role, treating all members alike.46 They need to be seen by members as working on behalf of the total system, rather than as being aligned with particular organizations or views. When practitioners are perceived as neutral, network members are more likely to share information with them and to listen to their inputs. Such neutrality","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 623 can enhance change agents\u2019 ability to mediate conflicts among members. It can help them uncover diverse views and interests and forge agreements among stakeholders. OD practitioners, for example, can act as mediators, ensuring that members\u2019 views receive a fair hearing and that disputes are equitably resolved. They can help to bridge the different views and interests and achieve integrative solutions. In many cases, practitioners come from research centers or universities with reputations for neutrality and expertise in networks. Because participating organizations tend to have diverse motives and views and limited means for resolving differences, change agents may need to structure and manage interactions to facilitate airing of differ- ences and arriving at consensus about forming the network. They may need to help organizations work through differences and reconcile self-interests with those of the larger network. Research and practice suggest that the movement from convention into organi- zation is facilitated by agreement among TS members as to the problem\/opportunity to be address, the interdependence of network members required to address the issue, and the likelihood that concerted effort will result in positive outcomes.47 Known as a \u201cnegotiated order,\u201d TS members\u2019 realization of the potential power of a network is key to the network moving forward. Nathan and Mitroff demonstrated how a negotiated order among business, government, and nonprofit organizations concerned with crisis management emerged and facilitated action.48 Worley and Parker\u2019s study of the Cuyahoga River Valley\u2019s government-led initiative showed how the lack of a clear negotiated order can hinder network development.49 3. Organization stage. When the convention stage results in a decision to create a network, members then begin to organize themselves for task performance. This involves develop- ing the structures and mechanisms that promote communication and interaction among members and that direct joint efforts on the activities required to achieve TS objectives.50 It includes the organizations to be involved in the network and the roles each will play; the communication and relationships among them; and the control system that will guide decision making and provide a mechanism for monitoring performance. For example, members may create a coordinating council to manage the network and a powerful leader to head it.51 They might choose to formalize exchanges among members by developing rules, policies, and formal operating procedures. When members are required to invest large amounts of resources in the network, such as might occur in an industry-based research consortium, the organizing stage typically includes voluminous contracting and negotiating about members\u2019 contributions and returns. Here, corporate lawyers and financial analysts play key roles in specifying the network structure. They determine how costs and benefits will be allocated among member organizations as well as the legal obligations, decision-making responsibilities, and contractual rights of members. OD practitioners can help members define competitive advantage for the network as well as the structural requirements necessary to support achievement of its goals. 4. Evaluation stage. This final stage of creating a network involves assessing how the network is performing. Members need feedback so they can identify problems and begin to resolve them. This generally includes information about performance out- comes and member satisfaction, as well as indicators of how well members are inter- acting jointly. Change agents can periodically interview or survey member organizations about various outcomes and features of the network and feed that data back to network leaders. Such information enables network leaders to make necessary operational modifications and adjustments. It may signal the need to return to previous stages in the process to make necessary corrections, as shown by the feedback arrows in Figure 20.1.","624 PART 6 STRATEGIC CHANGE INTERVENTIONS 20-4b Managing Network Change In addition to developing new networks, OD practitioners may need to facilitate change within established networks. Planned change in existing networks derives from an under- standing of the \u201cnew sciences,\u201d including complexity, nonlinear systems, catastrophe, and chaos theories. From these perspectives, organization networks are viewed as com- plex systems displaying the following properties:52 1. The behavior of a network is sensitive to small differences in its initial conditions. How the network was established and formed\u2014the depth and nature of trust among the partners, who was selected (and not selected) to be in the network, and how the network was organized\u2014play a key role in its willingness and ability to change. 2. Networks display \u201cemergent\u201d properties or characteristics that cannot be explained through an analysis of the parts: \u201cGiven the properties of the parts and the laws of their interaction, it is not a trivial matter to infer the properties of the whole.\u201d53 The tools of systems thinking and the understanding of emergence in complex systems are still being developed and applied.54 3. A variety of network behaviors and patterns, both expected and unexpected, can emerge from members performing tasks and making decisions according to simple rules to which everyone agreed. This is amply demonstrated in Senge\u2019s \u201cbeer game\u201d simulation where a retailer, a wholesaler, and a brewery each acts according to the simple rule of maximizing its own profit. Participants in the simulation routinely end up with enormous inventories of poor-selling beer, delayed deliveries, excess capacity, and other problems. Without an understanding of the \u201cwhole\u201d system, the nature of interdependencies within the system, and timely and complete information, each part, acting in its own self-interest, destroys itself.55 Apparently random changes in networks may simply be chaotic patterns that are not understood. These patterns cannot be known in advance but represent potential paths of change that are the result of the complex interactions among members in the network. The process of change in complex systems such as networks involves creating instabil- ity, managing the tipping point, and relying on self-organization. These phases roughly fol- low Lewin\u2019s model of planned change described in Chapter 2. Change in a network requires an unfreezing process where the system becomes unstable. Movement in the sys- tem is described by the metaphor of a \u201ctipping point\u201d where changes occur rapidly as a result of information processing. Finally, refreezing involves self-organization. The descrip- tions below represent rudimentary applications of these concepts to networks; research and practice in changing networks are still in a formative stage. 1. Create instability in the network. Before change in a network can occur, relation- ships among member organizations must become unstable. A network\u2019s susceptibil- ity to instability is a function of members\u2019 motivations for structure versus agency.56 Structure refers to the organization\u2019s expected role in the network and represents a source of stability. All things being equal, network members tend to behave and perform according to their agreed-upon roles. For example, most routine communi- cations among the network members are geared toward increasing stability and working together. A manufacturing plant in Nike\u2019s network is expected to produce a certain number of shoes at a certain cost with certain features. Nike headquarters in Beaverton, Oregon, plans on the plant behaving this way. On the other hand, agency involves self-interest which can create instability in the network. Each mem- ber of the network is trying to maximize its own performance in the context of the network. Changes in member goals and strategies, the ratio of costs and benefits in network membership, and so on, can affect the willingness and ability of members to contribute to network performance. When a plant in Nike\u2019s network grows to","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 625 a sufficient size or develops a sufficient range of capabilities, it may consider altering its role in the network to perform a broader set of activities or dedicate capacity to its own products. As the ratio of agency to structure increases, the instability of the network rises, thus enabling change to occur. OD practitioners can facilitate instability in a network by changing the pattern of communication among members. They can, for example, encourage organizations to share information. Technology breakthroughs, new product introductions, changes in net- work membership, or changes in the strategy or capability of a network member all repre- sent fluctuations that can increase the susceptibility of the network to change. Another important aspect of changing the pattern of information is to ask who should get the information. Understanding and creating instability is difficult because the nature of members\u2019 connectedness also influences the system\u2019s susceptibility. Some organizations are more connected than others; most organizations are closely connected to several others, but relatively unconnected to many. This makes creating a sense of urgency for change difficult. Diagnosis of the relationships among member organizations can provide important information about organizations that are central to network communications.57 2. Manage the tipping point. Although instability provides the impetus and opportu- nity for change, the direction, type, and process of change are yet to be determined. An unstable network can move to a new state of organization and performance, return to its old condition, or simply cease to exist. At this point, network members, individually and collectively, make choices about what to do. OD practitioners can help them through this change period. Recent studies suggest the following guides for facilitating network change:58 a. The law of the few. A new idea, practice, or other change spreads because of a relatively few but important roles in the network. Connectors, mavens, and salespeople help an innovation achieve sufficient awareness and credibility throughout the network to be considered viable. Connectors are individuals who occupy central positions in the network and are able to tap into many dif- ferent network audiences. They have \u201cRolodex\u201d power; they are quickly able to alert and connect with a wide variety of people in many organizations. Mavens are \u201cinformation sinks.\u201d They passionately pursue knowledge about a particular subject and are altruistically willing to tell anyone who is interested everything they know about it. The key to the maven\u2019s role is trust. People who speak to mavens know that they are getting unbiased information\u2014that there is no \u201chid- den agenda,\u201d just good data. Finally, salespeople are the champions of change and are able to influence others to try new ideas, do new things, or consider new options. Thus, the first key factor in changing a network is the presence of communication channels occupied by connectors, mavens, and salespeople. OD practitioners can fill any of these roles. They can, if appropriate, be mavens on a particular subject and act as a source of unbiased information about a new network practice, aspects of interpersonal relationships that network members agree is slowing network response, or ideas about information systems that can speed communication. Less frequently, OD practitioners can be connec- tors, ensuring that any given message is seeded throughout the network. This is especially true if the change agent was part of the network\u2019s formation. In this case, the practitioner might have extensive relationships with organizations in the network. Thus, networking skills, such as the ability to manage lateral rela- tions among autonomous organizations in the relative absence of hierarchical control, are indispensable to practitioners of network change. Change agents must be able to span the boundaries of diverse organizations, link them together, and facilitate exchanges among them.59 OD practitioners can also play the role of","626 PART 6 STRATEGIC CHANGE INTERVENTIONS salesperson. Although it is in line with the \u201cactivist\u201d role described earlier in the practice of network creation, it is not a traditional aspect of OD practice. The wis- dom of having a change agent as the champion of an idea rather than a key player in the organization network is debatable. The change agent and network members must understand the trade-offs in sacrificing the OD practitioner\u2019s neu- trality for influence. If that trade-off is made, the change agent will need the polit- ical competence to understand and resolve the conflicts of interest and value dilemmas inherent in systems made up of multiple organizations, each seeking to maintain autonomy while jointly interacting. Political savvy can help change agents manage their own roles and values in respect to those power dynamics. b. Stickiness. The second ingredient in network change is stickiness. For a new idea or practice to take hold, the message communicated by the connectors, mavens, and salespeople must be memorable. A memorable or sticky message is not a function of typical communication variables, such as frequency of the message, loudness, or saliency. Stickiness is often a function of small and seemingly insignif- icant characteristics of the message, such as its structure, format, and syntax, as well as its emotional content, practicality, or sequencing with other messages. OD practitioners can help network members develop sticky messages for communicat- ing about network change. Brainstorming alternative phrases, using metaphors to symbolize meaning, or enlisting the help of marketing and communications spe- cialists can increase the chance of developing a sticky message. Since the ingredi- ents of stickiness are often not obvious, several iterations of a message\u2019s structure may be necessary to create memorable communication about network change. c. The power of context. Finally, a message must be meaningful and relevant to network members. Meaning derives from the context of the network. When network members are feeling pressure to innovate or move quickly in response to external demands, for example, messages about new cost-cutting initiatives or a new financial reporting system may be uninteresting and easily neglected. On the other hand, a message link- ing these changes to expected improvements in network performance may be seen as relevant. OD practitioners can help members understand the network\u2019s current climate or \u201cconversation\u201d; they can help members determine the appropriate timing and relevance of proposed communications about network change.60 When the right people communicate a network change, present and pack- age it appropriately, and distribute it in a timely fashion, implementation is likely to move forward swiftly. When there is insufficient information, interest, or relevance, network change is likely to stall. 3. Rely on self-organization. Networks tend to exhibit \u201cself-organizing\u201d behavior. Network members seek to reduce uncertainty in their environment, while the network as a whole drives to establish more order in how it functions. OD practitioners can rely on this self-organizing feature to refreeze change. Once change has occurred in the network, a variety of controls can be leveraged to institutionalize it. For example, communication systems can spread stories about how the change is affecting different members, diffusing throughout the network, or contributing to network effectiveness. This increases the forces for stability in the network. Individual organizations can communicate their commitment to the change in an effort to lower agency forces that can contribute to instability. Each of these messages signifies constraint and shows that the different parts of the network are not independent of each other. Application 20.3 describes the formation of the Alaskan Workforce Coalition.61 The shortage of adequate health care workers in Alaska became a critical issue that only a network of organizations could address. The case reflects the complex issues of identify- ing, convening, and organizing a TS.","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 627 application 20 3 THE ALASKA WORKFORCE COALITION T he low supply of health care workers in emerged among three public sector entities Alaska was constraining the industry\u2019s abil- to build a behavioral health workforce, how- ity to deliver care. In addition to the usual ever no one had ever developed an industry forces driving change in the industry, wide projection with occupational priorities including health care reform, aging workforces, that would enable greater focus of efforts. rapidly changing technologies, and new deliv- Absent a collective effort, policy makers and ery models, Alaska\u2019s remoteness, harsh cli- funders lacked a complete understanding of mates, vast geography, and small population health care workforce issues, resulting in lim- complicated the challenges of developing, ited investment and influence. recruiting, and retaining an adequate and quali- fied health care workforce. One catalyst for change occurred in 2009 with the passage of the American Recovery As an industry, health care accounted for and Reinvestment Act (ARRA). This federal 8% of total employment and around 16% of program included funding opportunities to the state\u2019s economy. Moreover, health and states for workforce development in high- social service jobs in Alaska were projected to demand industries. However, without a state- increase 31% between 2010 and 2020, driven in wide plan, a coordinated set of priorities, and large part by a projected 89% increase for the an appropriate entity to guide the work, access population age 65 and older over the same time to such funds was unlikely. The ARRA funding period. But the lack of health care workers left opportunity served as a trigger that brought many rural communities without access to individual groups together quickly. health care services and resulted in health care costs that were among the highest in the nation. At the same time, the Alaska Workforce Investment Board (AWIB) had long recognized Most health care organizations felt the health care as an important and growing indus- pinch of too few workers, but had limited expe- try, and they called for a statewide health care rience working in a coordinated manner to workforce plan. The AWIB\u2019s call was motivated address them. For more than a decade, individ- by its prior involvement with industry coalitions. ual health care organizations worked on solu- For example, the oil, gas, and mining industry\u2019s tions they could advance on their own. Some Alaska Process Industry Careers Consortium of these efforts worked, such as the University (APICC) had addressed a variety cross-industry of Alaska\u2019s initiative to double the number of needs and attracted new investments. A work- nurses educated in state; but the breadth and force plan specifically for the development of a depth of health care industry demands vastly natural gas pipeline was an important comple- outpaced such efforts. While other industries, ment to their work. The construction industry such as construction, were gaining statewide also formed a nonprofit foundation, implemen- visibility and investments, the health care ted new programs, and attracted additional industry was making only incremental gains. resources from the state. These industries modeled the value of partnering to define Individual solutions might have helped industry workforce priorities, identifying skill individual firms, but it did little to help the standards, and attracting targeted investments state\u2019s problems. Although various surveys in selected workforce development programs had provided episodic data describing point in and strategies to meet their needs. Similarly, a time needs, sometimes for a subset of health joint effort by public sector partners had been care workers, data sources were typically used established to build a qualified behavioral health in isolation and were difficult to assess holisti- workforce, led by the Alaska Mental Health cally due to inconsistent terminology. Inte- Trust Authority (AMHTA), the Alaska Depart- grated and accurate health care workforce ment of Health and Social Services (DHSS), data was not available to focus industry efforts. and the University of Alaska. In the early 2000s, a promising coalition","628 PART 6 STRATEGIC CHANGE INTERVENTIONS The Alaska Health Workforce Coalition level of commitment by shifting from teleconfer- (AHWC) was formed in 2009 to ensure an ade- ences to face-to-face meetings every month or quate and qualified health care workforce for hos- two. This required partners to travel at their own pitals, nursing homes, clinics, and public health expense and commit to full days of work to guide service throughout Alaska. development of the plan and proposal. THE COALITION\u2019S BEGINNINGS Early meetings benefited from good cross- sector attendance and rich, respectful conversa- In response to these triggers, a leader at Provi- tions that deepened collective understandings of dence, the state\u2019s largest health care system, current issues as well as specific opportunities who had previous experience leading Alaska\u2019s that interested individual partners. However, with workforce development through roles in both so many needs in the industry, there were too industry and key state agencies, invited several many options and it was clear the participants key stakeholders to exploratory conversations had to prioritize to gain traction. They elected to about collaboration. Her experience suggested focus on strategies and actions that could be best that industry needed to take a lead role and she achieved because a coalition existed versus had existing relationships with many of the stake- actions that individual entities could accomplish holders. Thanks to corporate support, personal under the status quo. The term \u201cnet new\u201d experience, and reputation, initial meeting invita- emerged in the dialogue to distinguish new or tions were well received. expanded value-added strategies and actions that were unlikely to be achieved without a collabora- She targeted these invitations at the formal tive effort and which benefited multiple partners. organizational leaders representing health care employers, educators, policy makers, and funders. Still, some topics were inherently more difficult They included the Alaska State Hospital and Nursing to advance due to the innate competitive issues Home Association (ASHNHA), representing the among employers. Collaboration on statewide state\u2019s largest private sector health employers; recruiting was seen as an opportunity, but had AWIB, through its private sector chair who happened been a challenge to implement. Each employer to also be the Chief Financial Officer for Fairbanks invested a great deal to attract potential employees Memorial Hospital; the University of Alaska as the from outside Alaska to fill critical vacancies, but state\u2019s leading health educator; and Alaska\u2019s DHSS, large employers with more resources could lever- which served a dual role as a significant public sector age their relative advantage in recruiting. However, health employer and a key player in shaping state partners knew from the success of the Alaska Sea- health policy. Each of these organizations had food Marketing Institute and the Alaska tourism worked together in the past. In the relatively small industry that they could be more effective and effi- population of Alaska, individuals can readily identify cient in marketing a concept versus a company. For the key partners required to move quickly into action. example, the Alaskan quality of life is appealing to many medical professionals and the coalition saw The initial meetings and conversations the merits of a statewide, coordinated campaign explored the opportunity and confirmed interest in that could be more impactful than what individual creating a statewide health care workforce plan. firms could achieve. This approach is gradually The concept of an organization to sustain the gaining momentum with a shared website, www. work was acknowledged, but the general feeling alaskaphysicianjobs.net. In addition, one of the coa- was that the first priorities should be to use the lition\u2019s key successes in the first two years was the existing people and resources to develop a plan funding of a new loan reimbursement and incentive and to submit a proposal for funding to an ARRA program that benefited multiple employers in their grant opportunity. most critical shortages. Additional partners were soon engaged based FORMATION on their ability to enhance the plan\u2019s development. New partners included the AMHTA, the Alaska To guide, reflect, and reinforce the positive group Native Tribal Health Consortium, and the Alaska Pri- norms that began to emerge, an organizational mary Care Association. The group also increased its","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 629 charter was developed to ensure clarity for its the plan\u2019s framework and initial data about work- diverse members on the purpose, principles, and force gaps. Participants contributed to the develop- intended outcomes of the coalition. For example, ment of initial strategies through small group and the group\u2019s operating style did not involve formal round table discussions. Core group members leadership roles, such as a chair or officers. At the aligned the topics with the framework and then heart of the coalition\u2019s success was an adaptive used a modified Open Space approach that process guided by six principles: inclusive, coordi- allowed people to refine ideas in strategies about nated, cooperative, strategic, adaptive, and results which they were most passionate. Core team focused. members facilitated each table, gathered informa- tion and insights, and presented the results in a A core team emerged consisting of roughly plenary session using simple planning templates. 15 people from nine organizations. This group The overall feedback from the summit was very developed an overarching four-part framework to positive and supported the idea of continuing the organize and develop the workforce plan: engage, effort to develop a statewide plan and a new cor- train, recruit, and retain. For each theme, a set of responding entity\/organization to guide the efforts. potential strategies was identified, although they lacked specificity in the early stages. Occupa- Following the summit, the core team worked tional priorities were also developed with avail- diligently on outreach. Over several months, they able data. They were organized into three tiers engaged as many stakeholders as possible from representing the relative priorities. The upper the health care industry, policy makers, and fun- tier included more than 15 occupations, and the ders as well as education and training providers. coalition worked to define the top six occupa- Nearly a dozen presentations were made, always tional priorities. They included primary care provi- by at least two members from the core team to ders, nurses, direct care workers, behavioral demonstrate shared ownership. A subteam led by health clinicians, physical therapists, and pharma- the University of Alaska worked closely with the cists. The occupations were both highly needed Research & Analysis Section of the Department and there were pertinent strategies that the of Labor and Workforce Development to refine coalition could advance. occupational priorities through presentations with diverse audiences and with an online survey. The BUILDING THE COALITION core team created a website and a contact list to communicate with the wider coalition of interested A significant opportunity to engage more stake- stakeholders. holders in prioritizing and organizing the plan was offered by ASHNHA. They had begun to In parallel with the outreach process, core plan a workforce summit for their hospital and team members continued to meet monthly. They nursing home members. With the plan frame- discussed and integrated what they were learning work and high-level set of strategies and priorities from stakeholders, and strengthened their resolve established, the summit was an ideal time and to produce a well-written strategic plan summariz- place for the core group to share information ing the compelling and complex workforce needs and gather input from a much wider audience. It of the health care industry focusing not only on was also a good place to begin discussions about occupational priorities but also on systems change the kind of organization needed to sustain efforts and capacity-building strategies. Funding offered in the future. by three of the larger partners was pooled to hire contract resources to assist with writing and print- More than 60 participants at the summit heard ing the plan. The AWIB endorsed the Health Work- plenary presentations about similar efforts and force Plan in early 2010\u2014making it the first entities working on health care workforce issues significant product from the AHWC. in others states, and from other industries in Alaska. They provided tangible evidence of what The plan was well received and helped to was possible. The core group members shared achieve significant visibility for health care industry issues, priorities, and possible actions. However, it","630 PART 6 STRATEGIC CHANGE INTERVENTIONS was not specific enough to drive collective action. A number of models were identified and explored The group\u2019s logical next step was to follow up the using the principles from the initial charter to guide plan with a targeted, four-year Action Agenda. the process. The core group determined that con- They also recognized the need to address organiza- tinuing their loose collaboration without formally tion development and sustainability issues. The establishing a new nonprofit entity was preferred. founding individuals and organizations had devel- The individual who provided support to the Work- oped the initial plan through informal processes force Focus Area on behalf of the AMTHA, DHSS, and volunteer contributions of time and resources. and the University, had her scope of work To sustain the effort and reap the benefits of the extended to include AHWC activities in late 2011, plan would require a more formal approach and bridging the staff needs from the planning grant to organization. full operations. Organization development consult- ing support has continued to provide additional CONTINUED COALITION DEVELOPMENT resource and continuity with coalition and core meetings and activities. Over the next year, the AHWC became larger and more formal. In part, this was enabled by a plan- EVALUATION ning grant from the Health Resources and Services Administration (HRSA). This grant provided one The creation of the Alaska Health Workforce Coali- year\u2019s worth of funding to support the research tion has resulted in several benefits to its members and development of a four-year Action Agenda, and to the Alaskan health care system as a whole. greater alignment of health care workforce data, These include: and contractual support for staff, organization development, and sustainability efforts. During \u2022 An industry-led workforce plan with tangible ac- this time, the AHWC welcomed the opportunity tions, accountabilities, and committed resources to join forces with related groups where their goals were aligned and they could support one \u2022 The use and integration of data to establish another\u2019s efforts to go further together than either occupational priorities might achieve alone. For example, the Alaska Health Care Commission (HCC) recognized work- \u2022 Actions focused on occupational and systems force shortages as a priority when they were change priorities that drive health care work- initially formed, and rather than conducting inde- force activities and investments by members pendent research and developing their own recom- and other stakeholders mendations, the HCC aligned their direction with the AHWC, endorsing the work of the coalition as \u2022 A unified approach to advocacy for policy their own. Similarly, the AMHTA had several years changes and funding opportunities of experience advancing their Workforce Focus Area focused on home and community based \u2022 Increased resource commitments, actions, behavioral health services. They realized that and emerging results that all serve to build sustaining their efforts and participation in the the Alaska health care workforce AHWC could be aligned with the Focus Area to create a single, unified approach. As a result, the In 2012, the coalition documented a retrospec- two efforts merged in 2011 to unite health care tive of early achievements by AHWC in response workforce planning and action for Alaska, inclusive to requests by other industry groups. The coalition of the distinct needs of the AMHTA and its also elected to undergo a \u201cstrategic refresh\u201d pro- beneficiaries. cess in recognition of the completion of several Action Agenda objectives and the actual or planned The coalition researched alternative approaches transition of several leaders. The AHWC coordina- to forming a sustainable organization to advance tor and OD consultant interviewed each core team their goals around health care workforce issues. member to gather feedback on the greatest achievements to date, alignment with each organi- zation\u2019s priorities, update to occupational and sys- tems change priorities given the changes to the health care industry, and suggestions that would","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 631 enhance the effectiveness, relevance, and impact agreed to begin exploring the merits of common- of the coalition going forward. goals and collaborative action. The processes have been thoughtfully guided and intentionally The data suggested that success has been nurtured throughout the first three years to build achieved through the attention and balance of respect and strengthen relationships across the two equally important aspects: organizations and individual leaders. \u2022 Content, action, and results. The coalition The results also helped the core team to update convened on the premise of shared need and the Action Agenda priorities as well as refine their the desire to take collective action. This was processes of engaging with one another. The pro- achieved through a strategic plan that defined cess of evaluation and continuous improvement the workforce goals to engage, train, recruit, confirmed the need to retain and nurture strong rela- and retain a qualified health care workforce for tionships among key partners\u2014particularly when Alaska. The coalition developed a correspond- decisions and direction are needed. It also con- ing Action Agenda with objectives to drive firmed the need for dynamic strategy and priority action in six occupational priorities and six sys- setting processes given the uncertainty faced by tems change and capacity-building efforts. the health care industry and the resulting changes in care models that lead to new demands for the \u2022 Process, relationships, and respect. The health care workforce of the future. coalition emerged through relationships and shared need. Individuals with loose relationships SUMMARY In this chapter, we describe merger, alliance, and trans- by financial and technical concerns, but experience organizational change interventions that move beyond and research strongly support the contribution that the single organization. These multiorganizational OD practitioners can make to M&A success. change programs enable organizations to extend their boundaries to keep pace with highly complex and rapidly Strategic alliance interventions help organizations changing environments. They help organizations create create partnerships with other organizations to share and sustain multiorganizational linkages. Because resources and capabilities for competitive advantage. transorganizational interventions transcend a single orga- They include licensing agreements, franchises, long- nization, attention is directed at the strategies, objectives, term contracts, and joint ventures. The development structures, and processes of two or more interdependent of strategic alliances generally follows a process of organizations. This raises the scope and complexity of strategy formulation, partner selection, alliance struc- change and requires OD practitioners to develop new turing and start-up, and alliance operation and concepts, skills, and expertise. adjustment. M&As interventions involve combining two or Network interventions must address two types of more organizations to achieve strategic and financial change. First, because multiorganizational systems tend objectives. They generally involve three phases: pre- to be underorganized, the initial development of the combination, legal combination, and operational network follows the stages of planned change relevant combination. The M&A process has been dominated to underorganized systems: identification, convention, organization, and evaluation. Second, the management","632 PART 6 STRATEGIC CHANGE INTERVENTIONS of change within a network also must acknowledge the change that rely on the Law of the Few, the power of distributed nature of influence and adopt methods of context, and the stickiness factor. NOTES 8. M. Marks and P. Mirvis, Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions, and 1. R. Gulati, D. Lavie, and R. Madhavan, \u201cHow Do Net- Alliances, 2nd ed. (San Francisco: Jossey-Bass, 2010); works Matter? The Performanace Effects of Interorgani- A. Sherman and M. Hart, Mergers and Acquisitions zational Networks,\u201d in Research in Organizational from A to Z, 2nd ed. (New York: Amacom, 2006). Behavior, vol. 31, ed. B. Staw and A. Brief (Kidlington, Oxford, UK: Elsevier, 2011), 207\u201324; A. Inkpen and 9. Data on M&A value accessed from http:\/\/www.imaa- E. Tsang, \u201cSocial Capital, Networks, and Knowledge institute.org\/statistics-mergers-acquisitions.html#Mergers Transfer,\u201d Academy of Management Review 30 (2005): Acquisitions_Worldwide on October 22, 2012. 146\u201365; B. Teng, \u201cCorporate Entrepreneurship Activities Through Strategic Alliances: A Resource-Based Approach 10. A variety of studies have questioned whether merger and Toward Competitive Advantage,\u201d Journal of Management acquisition activity actually generates benefits to the orga- Studies 44 (2007): 119\u201342; F. Kuglin with J. Hook, Build- nization or its shareholders, including M. Porter, \u201cFrom ing, Leading, and Managing Strategic Alliances (New York: Competitive Advantage to Corporate Strategy,\u201d Harvard Amacom, 2006). Business Review (May\u2013June 1978): 43\u201359; T. Brush, \u201cPredicted Change in Operational Synergy and Post- 2. H. Aldrich, Organizations and Environments (New York: Acquisition Performance of Acquired Businesses,\u201d Strate- Prentice-Hall, 1979). gic Management Journal 17 (1996): 1\u201324; P. Zweig with J.Perlman, S. Anderson, and K. Gudridge, \u201cThe Case 3. O. Williamson, Markets and Hierarchies (New York: Free Against Mergers,\u201d BusinessWeek, October 30, 1995, Press, 1975); M. Jensen and W. Meckling, \u201cA Theory of 122\u201330. The research includes an A. T. Kearney study Firm: Managerial Behavior, Agency Costs and Ownership of 115 multibillion-dollar global mergers between 1993 Structure,\u201d Journal of Financial Economics 3 (1976): and 1996 where 58% failed to create \u201csubstantial returns 305\u201360; O. Williamson, The Economic Institutions of for shareholders,\u201d measured by tangible returns in the Capitalism (New York: Free Press, 1985); J. Barney and form of dividends and stock price appreciation; a Mercer W. Ouchi, Organizational Economics (San Francisco: Management Consulting study of all mergers from 1990 Jossey-Bass, 1986); K. Eisenhardt, \u201cAgency Theory: An to 1996 where nearly half \u201cdestroyed\u201d shareholder value; Assessment and Review,\u201d Academy of Management a PriceWaterhouseCoopers study of 97 acquirers that Review 14 (1989): 57\u201374. completed deals worth $500 million or more from 1994 to 1997 and where two-thirds of the buyer\u2019s stocks 4. P. Kenis and D. Knoke, \u201cHow Organizational Field Net- dropped on announcement of the transaction and \u201ca works Shape Interorganizational Tie-Formation Rates,\u201d year later\u201d a third of the losers still were lagging the Academy of Management Review 27 (2002): 275\u201393. levels of peer-company shares or the stock market in general; and a European study of 300 companies that 5. T. Cummings, \u201cTransorganizational Development,\u201d in found that planning for restructuring was poorly Research in Organizational Behavior, vol. 6, ed. B. Staw and thought out and underfunded. Similarly, despite the L. Cummings (Greenwich, CT: JAI Press, 1984), 367\u2013422. large amount of writing on the subject, a large propor- tion of firms involved in mergers have not gotten the 6. B. Gray, \u201cConditions Facilitating Interorganizational message that postmerger integration is the key to suc- Collaboration,\u201d Human Relations 38 (1985): 911\u201336; cess. For example, in the A. T. Kearny study, only 39% K. Harrigan and W. Newman, \u201cBases of Interorgani- of the cases had set up a management team in the first zation Co-operation: Propensity, Power, Persistence,\u201d hundred days and only 28% had a clear vision of corpo- Journal of Management Studies 27 (1990): 417\u201334; rate goals when the acquisition began. Cummings, \u201cTransorganizational Development\u201d; R. Chisholm, Developing Network Organizations: Learning 11. T. Galpin and M. Herndon, The Complete Guide to Mergers from Practice and Theory (Reading, MA: Addison- and Acquisitions: Process Tools to Support M&A Integration Wesley, 1998). 7. T. Galpin and D. Robinson, \u201cMerger Integration: The Ultimate Change Management Challenge,\u201d Mergers and Acquisitions 31 (1997): 24\u201329.","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 633 at Every Level (San Francisco: Jossey-Bass, 2007); Sherman Outlook Journal (February 2005): 1\u20134; D. Harding, and Hart, Mergers and Acquisitions; Marks and Mirvis, S. Romit, and A. Corbett, \u201cAvoid Merger Meltdown: Les- Joining Forces; R. Ashkenas, L. DeMonaco, and S. Francis, sons from Mergers and Acquisitions Leaders,\u201d Strategy \u201cMaking the Deal Real: How GE Capital Integrates Acqui- and Innovation (2004): 3\u20135; A. Burt, T. MacDonald, sitions,\u201d Harvard Business Review (January\u2013February and T. Herd, \u201cTwo Merger Integration Imperatives: 1998); D. Jemison and S. Sitkin, \u201cCorporate Acquisitions: Urgency and Execution,\u201d Strategy and Leadership 31 A Process Perspective,\u201d Academy of Management Review (2003): 42\u201349; Galpin and Robinson, \u201cMerger Integra- 11 (1986): 145\u201363. tion\u201d; Galpin and Herndon, The Complete Guide; Sher- 12. R. Palter and D. Srinivasan, \u201cHabits of the Busiest man and Hart, Mergers and Acquisitions; Vantrappan Acquirers,\u201d McKinsey on Finance 20 (Summer 2006): and Kilefors, \u201cA Users Guide\u201d; Ashkenas, DeMonaco, 8\u201313; Ashkenas, DeMonaco, and Francis, \u201cMaking the and Francis, \u201cMaking the Deal Real\u201d; K. Kostuch, Deal Real.\u201d R. Malchione, and I. Marten, \u201cPost-Merger Integration: 13. M. Epstein, \u201cThe Drivers of Success in Post-merger Creating or Destroying Value?\u201d Corporate Board 19 Integration,\u201d Organizational Dynamics 33 (2004): (1998): 7\u201311. 174\u201389; J. Perry and T. Herd, \u201cMergers and Acquisitions: 22. Kostuch, Malchione, and Marten, \u201cPost-Merger Integration.\u201d Reducing M&A Risk Through Improved Due Diligence,\u201d 23. J. Child, D. Faulkner, and S. Tallman, Strategies of Cooper- Strategy and Leadership 32 (2004): 12\u201319; A. Buono, ation: Managing Alliances, Networks, and Joint Ventures, J. Bowditch, and J. Lewis, \u201cWhen Cultures Collide: The 2nd ed. (New York: Oxford University Press, 2005); Anatomy of a Merger,\u201d Human Relations 38 (1985): O. Shenkar and J. Reuer, eds., Handbook of Strategic 477\u2013500; D. Tipton, \u201cUnderstanding Employee Views Alliances (Thousand Oaks, CA: Sage Publications, 2005); Regarding Impending Mergers to Minimize Integration J. Reuer, ed., Strategic Alliances: Theory and Evidence Turmoil\u201d (unpublished master\u2019s thesis, Pepperdine Uni- (New York: Oxford University Press, 2004); A. Arino, versity, 1998). J. de la Torre, and P. Ring, \u201cRelational Quality: Managing 14. Palter and Srinivasan, \u201cHabits of the Busiest Acquirers\u201d; Trust in Corporate Alliances,\u201d California Management Marks and Mirvis, Joining Forces; Ashkenas, DeMonaco, Review 44 (2001): 109\u201331; M. Hitt, R. Ireland, and and Francis, \u201cMaking the Deal Real.\u201d R. Hoskisson, Strategic Management (Cincinnati, OH: 15. D. Harding and S. Rovit, \u201cBuilding Deal on Bedrock,\u201d South-Western College Publishing, 1999). Harvard Business Review (September 2004): 1\u20138; B. Brunsman, S. Sanderson, and M. Van de Voorde, 24. R. Blair and F. Lafontaine, The Economics of Franchising \u201cHow to Achieve Value Behind the Deal During Merger (New York: Oxford University Press, 2005). Integration,\u201d Oil and Gas Journal 96 (1998): 21\u201330; M. Sirower, \u201cConstructing a Synergistic Base for Premier 25. K. Harrigan, Joint Ventures, Alliances, and Corporate Deals,\u201d Mergers and Acquisitions 32 (1998): 42\u201350. Strategy (New York: Beard Books, 2003). 16. Perry and Herd, \u201cMergers and Acquisitions.\u201d 17. S. Elias, \u201cDue Diligence,\u201d 1998. 26. J. Bamford, B. Gomes-Casseres, and M. Robinson, 18. Ashkenas, DeMonaco, and Francis, \u201cMaking the Deal Mastering Alliance Strategy (New York: John Wiley and Real\u201d; Brunsman, Sanderson, and Van de Voorde, \u201cHow Sons, 2002). to Achieve Value.\u201d 19. This application was developed from information 27. J. Collins, Good to Great (New York: Harper-Collins, found in G. Colvin, \u201cJeff Smisek: United-Continental\u2019s 2001). King of the Skies,\u201d Fortune, April 21, 2011; D. Bennett, \u201cMaking the World\u2019s Largest Airline Fly,\u201d BusinessWeek, 28. B. Gomes-Casseres, Managing International Alliances: February 2, 2012; \u201cUnited Airlines Merger Integration: Conceptual Framework, Case 9-793-133 (Harvard Business 10 Questions,\u201d June 2012, accessed from http:\/\/www. School, 1993); J. Child and D. Faulkner, Strategies of Coop- towerswatson.com\/en\/Insights\/Newsletters\/Global\/strategy- eration: Managing Alliances, Networks, and Joint Ventures at-work\/2012\/10-questions-for-doug-rose-vice-president- (New York: Oxford University Press, 1998). human-resources-united-airlines on October 24, 2012; United and Continental\u2019s website, http:\/\/www.united.com. 29. R. Shah and V. Swaminathan, \u201cFactors Influencing Part- 20. Galpin and Robinson, \u201cMerger Integration.\u201d ner Selection in Strategic Alliances: The Moderating Role 21. R. Chanmugam, W. Schill, and D. Mann, \u201cMastering the of Alliance Context,\u201d Strategic Management Journal 42 Art of Value-Capture in Mergers and Acquisitions,\u201d (2008): 471\u201394. 30. Bamford, Gomes-Casseres, and Robinson, Mastering Alliance Strategy. 31. Arino, de la Torre, and Ring, \u201cRelational Quality\u201d; Y. Zhang and C. Huxham, \u201cIdentity Construction and Trust Building in Developing International Collaborations,\u201d Journal of Applied Behavioral Science 45 (2009): 186\u2013211.","634 PART 6 STRATEGIC CHANGE INTERVENTIONS 32. C. Rousseau, S. Sitkin, R. Burt, and C. Camerer, \u201cNot So 43. T. Williams, \u201cThe Search Conference in Active Adaptive Different After All: A Cross-Discipline View of Trust,\u201d Planning,\u201d Journal of Applied Behavioral Science 16 Academy of Management Review 23 (1998): 395; P. Kale (1980): 470\u201383; B. Gray and T. Hay, \u201cPolitical Limits to and H. Singh, \u201cManaging Strategic Alliances: What Do Interorganizational Consensus and Change,\u201d Journal of We Know Now and Where Do We Go from Here?\u201d Applied Behavioral Science 22 (1986): 95\u2013112. Academy of Management Perspectives 23 (2009): 45\u201362. 44. Cummings, \u201cTransorganizational Development.\u201d 33. M. Hutt, E. Stafford, B. Walker, and P. Reingen, \u201cCase 45. E. Trist, \u201cReferent Organizations and the Development of Study Defining the Social Network of a Strategic Alliance,\u201d Sloan Management Review 41 (Winter 2000): Inter-organizational Domains,\u201d Human Relations, 36 51\u201362. (1983): 269\u201385. 46. Cummings, \u201cTransorganizational Development.\u201d 34. Marks and Mirvis, Joining Forces; Child and Faulkner, 47. M. Nathan and I. Mitroff, \u201cThe Use of Negotiated Order Strategies of Cooperation. Theory as a Tool for Analysis and Development of an Inter-organizational Field,\u201d Journal of Applied Behav- 35. K. McQuade and B. Gomes-Casseres, \u201cXerox and Fuji- ioral Science 27 (1991): 163\u201380; H. Bradbury, B. Lich- Xerox,\u201d Case 9-391-156 (Harvard Business School, 1991). tenstein, J. Carroll, and P. Senge, \u201cRelational Space and Learning Experiments: The Heart of Sustainability Col- 36. This application was adapted from M. Miller, S. Fitzgerald, laborations,\u201d in Research in Organizational Change and K. Murrell, J. Preston, and R. Ambekar, \u201cAppreciative Development, vol. 18, ed. W. Pasmore, A. Shani, and Inquiry in Building a Transcultural Strategic Alliance: R. Woodman (Bingley, UK: Emerald Group Publishing, The Case of a Biotech Alliance Between a U.S. Multi- 2010), 109\u201348. national and an Indian Family Business,\u201d Journal of 48. Nathan and Mitroff, \u201cThe Use of Negotiated Order Applied Behavioral Science 41 (2005): 91\u2013111. Theory.\u201d 49. C. Worley and S. Parker, \u201cBuilding Multi-stakeholder 37. C. Huxham and S. Vangen, Managing to Collaborate: The Sustainability Networks: The Cuyahoga River Valley Ini- Theory and Practice of Collaborative Advantage (London: tiative,\u201d Organizing for Sustainable Effectiveness, vol. 1., Routledge, 2005); R. Chisholm, \u201cDeveloping Interorganiza- ed. S. Mohrman, A. Shani, and P. Docherty (East Sussex, tional Networks,\u201d in Handbook of Organization Develop- UK: Emerald Group Publishing, 2011), 187\u2013214. ment, ed. T. Cummings (Thousand Oaks, CA: Sage 50. Raben, \u201cBuilding Strategic Partnerships\u201d; C. Baldwin and Publication, 2008), 629\u201350; S. Klein and A. Poulymenakou, K. Clark, \u201cManaging in an Age of Modularity,\u201d in Manag- eds., Managing Dynamic Networks: Organizational Perspec- ing in the Modular Age, ed. R. Garud, A. Kumaraswamy, tives of Technology Enabled Inter-Firm Collaboration (New and R. Langlois (Malden, MA: Blackwell Publishing Ltd., York: Springer, 2006). 2003), 149\u201360. 51. Trist, \u201cReferent Organizations.\u201d 38. Information on the Low Carbon City Initiative accessed from http:\/\/en.wwfchina.org\/en\/what_we_do\/climate___ 52. P. Anderson, \u201cComplexity Theory and Organization energy\/mitigation\/lcci. Science,\u201d Organization Science 10 (1999): 216\u201332. 39. D. Watts, Six Degrees (New York: W. W. Norton and Co., 53. H. Simon, \u201cThe Architecture of Complexity,\u201d in Manag- 2003). ing in the Modular Age, ed. R. Garud, A. Kumaraswamy, and R. Langlois (Malden, MA: Blackwell Publishing Ltd., 40. S. Strogatz, \u201cExploring Complex Networks,\u201d Nature 410 2003), 15\u201337. (March 2001): 268\u201376. 54. P. Senge, The Fifth Discipline (New York: Doubleday, 41. Cummings, \u201cTransorganizational Development\u201d; C. Raben, 1990); B. Lichtenstein, \u201cEmergence as a Process of Self- \u201cBuilding Strategic Partnerships: Creating and Managing Organizing: New Assumptions and Insights from the Effective Joint Ventures,\u201d in Organizational Architecture, Study of Non-Linear Dynamic Systems,\u201d Journal of Orga- ed. Nadler et al. (San Francisco: Jossey-Bass, 1992), nizational Change Management 13 (2000): 526\u201346. 81\u2013109; B. Gray, Collaborating: Finding Common Ground for Multiparty Problems (San Francisco: Jossey-Bass, 1989); 55. Senge, The Fifth Discipline. Harrigan and Newman, \u201cBases of Interorganization Co- 56. Watts, Six Degrees. operation\u201d; P. Lorange and J. Roos, \u201cAnalytical Steps in the 57. P. Monge and N. Contractor, Theories of Communication Formation of Strategic Alliances,\u201d Journal of Organizational Change Management 4 (1991): 60\u201372; Gomes-Casseres, Networks (New York: Oxford University Press, 2003). \u201cManaging International Alliances\u201d; D. Boje and M. Hillon, 58. This section relies on information in M. Gladwell, The \u201cTransorganizational Development,\u201d in Handbook of Orga- nization Development, ed. T. Cummings (Thousand Oaks, Tipping Point (Boston: Little, Brown, 2000). CA: Sage Publication, 2008), 651\u201363. 42. Cummings, \u201cTransorganizational Development.\u201d","CHAPTER 20 TRANSORGANIZATIONAL CHANGE 635 59. B. Gricar and D. Brown, \u201cConflict, Power, and Organiza- 61. This application was developed and written by Kitty tion in a Changing Community,\u201d Human Relations 34 Farnham, Owner, Catalyst Consulting in Fairbanks, (1981): 877\u201393. Alaska. Her contribution to this chapter and to the state of Alaska is greatly appreciated. 60. P. Shaw, Changing Conversations in Organizations: A Complexity Approach to Change (London: Routledge, 2002).","636 PART 6 STRATEGIC CHANGE INTERVENTIONS GLOBAL MOBILE CORPORATION* Selected Cases \u201cDamn it, he\u2019s done it again!\u201d spoken with our circuit board and other Charlie Newburg had to get up and walk parts suppliers and scheduled assembly capacity, and we\u2019ll be ready. If the design around his office, he was so frustrated. He had goes over schedule, though, I\u2019ll have to fill been reviewing the most recent design, parts, in with other runs, and it will cost us a bun- and assembly specifications for Global Mobile\u2019s dle to break in for the Nonphixhun. How latest smart phone (code named: Nonphixhun) does it look in engineering, Charlie?\u201d that had been released for production the previ- ous Thursday. The files had just come back to \u201cI\u2019ve just reviewed the design for the Charlie\u2019s engineering services department with second time,\u201d Charlie replied. \u201cIf Marianne a caustic note that began, \u201cThis one can\u2019t be Price can keep the salespeople out of our produced, either\u2026\u201d It was the fourth time pro- hair, and avoid any more last minute duction had returned the design. changes, we\u2019ve got a shot. I\u2019ve pulled my technical support people off of three other Newburg, director of engineering for the overdue jobs to get this one out. But, Global Mobile Corporation, was normally a Tyson, that means we can\u2019t spring engi- quiet person. But the Nonphixhun project was neers loose to confer with your production stretching his patience; it was beginning to people on other manufacturing problems.\u201d appear like several other new products that had hit delays and problems in the transition from \u201cWell Charlie, most of those problems design to production during the eight months are caused by the engineers, and we need Charlie had worked for Global Mobile. These pro- them to resolve the difficulties. We\u2019ve all blems were nothing new at Global Mobile\u2019s agreed that production problems come from Asian factory; Charlie\u2019s predecessor in the engi- both of us bowing to sales pressure, and put- neering job had run afoul of them, too, and had ting equipment into production before the finally been fired for protesting too vehemently designs are really ready. That\u2019s just what about the other departments. But the Nonphix- we\u2019re trying to avoid on the Nonphixhun. But hun phone should have been different. Charlie I can\u2019t have 500 people sitting on their hands and the firm\u2019s president, Hannah Hoover, had waiting for an answer from your people. We\u2019ll video-conferenced two months earlier (on July have to have some engineering support.\u201d 3, 2006) with the factory superintendent, Tyson Wang, to smooth the way for the new phone\u2019s Hannah Hoover broke in, \u201cSo long as design. He thought back to the meeting \u2026 you two can talk calmly about the problem I\u2019m confident you can resolve it. What a \u201cNow, we all know there\u2019s a tight deadline relief it is, Charlie, to hear the way you\u2019re on the Nonphixhun,\u201d Hannah Hoover said, approaching this. With Brady (the previous \u201cand Charlie\u2019s done well to ask us to talk director of engineering), this conversation about its introduction. I\u2019m counting on both would have been a shouting match. Right, of you to find any snags in the system, and Tyson?\u201d Tyson nodded and smiled. to work together to get that first production run out by October 2. Can you do it?\u201d \u201cNow there\u2019s one other thing you should both be aware of,\u201d Hoover contin- \u201cWe can do it in production if we get a ued. \u201cDoc Brown and I talked last night clean design two weeks from now, as about a new battery-charging technique, scheduled,\u201d answered Tyson Wang, the one that might reduce the charging time of factory manager. \u201cCharlie and I have the Nonphixhun by 25%. There\u2019s a chance already talked about that, of course. I\u2019ve Doc can come up with it before the Nonphix- hun reaches production, and if it\u2019s possible, *This case is an adaptation and revision of Rondell Data I\u2019d like to use the new process. That would Corporation, by John A. Seeger, Professor of Manage- give us a real jump on the competition and ment at Bentley College, Waltham, MA, 1981. quiet the environmentalists.\u201d","SELECTED CASES 637 Four days after that meeting, Charlie found that he had invented as an engineering faculty member two of his key people on the Nonphixhun project at a large university. The firm entered communica- had been called to an emergency video consultation tions equipment in 1980. A well-established corps about a problem in final assembly: The two halves of of direct sales representatives, mostly engineers, the new smartphone interface wouldn\u2019t fit together called on industrial, scientific, and government because recent changes in the face required a differ- accounts but concentrated heavily on original ent chassis design for the rear end. equipment manufacturers. Using their technical know-how, they entered the mobile phone market One week later, Doc Brown proudly walked in the mid-to-late 1980s and changed their name to into Charlie\u2019s office with the new battery casing. Global Mobile Corporation. In this market, Global \u201cThis won\u2019t affect the other modules of the Non- Mobile had developed a reputation as a source of phixhun much,\u201d Doc had said. \u201cLook, it takes three high-quality, innovative designs. The firm\u2019s sales- new pins, a new connector, and some new shield- people fed a continual stream of challenging pro- ing, and that\u2019s all.\u201d blems into the engineering department, where the creative genius of Doc Brown and several Charlie had tried to resist the last-minute dozen other engineers \u201cconverted problems to design changes, but Hannah Hoover had stood solutions\u201d (as the sales brochure bragged). Product firm. With considerable overtime by the engineers design, especially hardware and structural design, and technical support staff, engineering services formed the spearhead of Global Mobile\u2019s growth. should still be able to finish documenting the parts and specifications in time. By 2010, Global Mobile offered a wide range of products in two major lines. Mobile phone sales Two hardware engineers and three support had benefited from the phenomenal growth of cell staff went into 12-hour days to get the Nonphixhun phones. However, the shift from analog to digital ready, but the specifications were still five days technology and the emergence of smart phones late reaching Tyson Wang. Two days later, the mean that mobile phones only accounted for files came back to Charlie, heavily commented in 35% of company sales. Smart phone sales, on red. Wang worked all day Saturday to review the the other hand, had blossomed and, with the job and found more than a dozen discrepancies in rapid technological changes and Global Mobile\u2019s the specifications\u2014most of them caused by the reputation, there was an increasing demand for new battery-charging process and insufficient phones with unique features, ranging from special- checking time before release. Correction of these ized screen displays, functions, applications, and design faults gave rise to a new generation of dis- novel form factors. crepancies: Wang\u2019s cover note on the second return of the prints indicated that he had had to The company had grown from 100 employees release the assembly capacity reserved for the in 1980 to more than 2,000 in 2010. (Figure 1 Nonphixhun. On the third iteration, Wang commit- shows the current organization chart.) Hannah ted other production capacity to another rush job. Hoover, who had been a student of the company\u2019s The Nonphixhun would be at least one month late founder, had presided over most of that growth getting into production. Marianne Price, the vice- and took great pride in preserving the family spirit president for sales, was furious. Her customer of the old organization. Informal relationships needed units now. Global Mobile was the custo- between Global Mobile\u2019s veteran employees mer\u2019s only supplier not to come out with a new formed the backbone of the firm\u2019s day-to-day model this quarter. operations; all managers relied on personal con- tact, and Hoover often insisted that the absence \u201cHere we go again,\u201d thought Newburg. of bureaucratic red tape was a key factor in recruit- ing outstanding engineering talent. This personal COMPANY HISTORY approach to management extended throughout the organization. All exempt employees were paid Global Mobile Corporation traced its lineage a straight salary and a share of the profits. Global through several generations of electronics technol- Mobile boasted an extremely loyal group of senior ogy. Its original founder, Bob Murray, launched the firm in 1960 as Global Electronics & Equipment Co. to manufacture several electronic testing devices","638 PART 6 STRATEGIC CHANGE INTERVENTIONS FIGURE 1 Global Mobil Corporation\u2014Organizational Chart (Partial), 2006 employees, and very low turnover in nearly all the problem of new-product introduction. Quarrels areas of the company. between departments became more numerous under Swanson, Brady, and Newburg. Some The highest turnover job in the firm was direc- managers associated these disputes with the tor of engineering services. Newburg had joined company\u2019s recent decline in profitability\u2014a Global Mobile in January 2010, replacing Jim decline that, despite higher sales and gross Brady, who had lasted only ten months. Brady, in revenues, was beginning to bother people. Hoover turn, had replaced Tom Swanson, a talented engi- commented: neer who had made a promising start but had taken to drinking after a year in the job. Swanson\u2019s Better cooperation, I\u2019m sure, could increase predecessor had been a genial old-timer, who our output by 5 to 10%. I\u2019d hoped Brady retired at 70 after 25 years in charge of engineer- could solve the problems, but pretty obviously ing. (Doc Brown had refused the directorship in he was too young\u2014too arrogant. People like each of the recent changes, saying, \u201cHell, that\u2019s him\u2014that conflict type of personality\u2014bother no promotion for a bench man like me. I\u2019m no me. I don\u2019t like strife, and with him it seemed I administrator.\u201d) spent all my time smoothing out arguments. Brady tried to tell everyone else how to run For several years, the firm had experienced a their departments, without having his own steadily increasing number of disputes between house in order. That approach just wouldn\u2019t product development, engineering, sales, and production people that generally centered on","SELECTED CASES 639 work, here at Global Mobile. Charlie Newburg, work that goes into all our basic mobile phone now, seems much more in tune with our style products. of organization. I\u2019m really hopeful now. This is a fantastic place to work. I have a Still, we have just as many problems now great crew and they can really deliver when as we did last year. Maybe even more. I hope the chips are down. Why, Hannah Hoover and Charlie can get a handle on engineering ser- I (he gestured toward the neighboring cubicle, vices soon. where the president\u2019s name hung over the door) are likely to find as many people here at ENGINEERING DEPARTMENT: PRODUCT work at 10 P.M. as at 3 P.M. The important thing DEVELOPMENT here is the relationships between people; they\u2019re based on mutual respect, not on policies According to the organization chart Newburg was in and procedures. Administrative red tape is a charge of both product development (the applied pain. It takes away from development time. research and design function) and engineering ser- vices (engineering support). To Newburg, however, Problems? Sure, there are problems now the relationship with design was not so clear-cut: and then. There are power interests in produc- tion, where they sometimes resist change. But Doc Brown is one of the world\u2019s unique people, I\u2019m not a fighting man you know. I suppose if I and none of us would have it any other way. were, I might go in there and push my weight He\u2019s a creative genius. Sure, the chart says he around a little. But I\u2019m an engineer, and can do works for me, but we all know Doc does his more for Global Mobile sitting right here, or own thing. He\u2019s not the least bit interested in working with my own people. That\u2019s what management routines, and I can\u2019t count on him brings results. to take any responsibility in scheduling projects, or checking budgets, or what-have you. But as Other members of the product development long as Doc is director of product development, department echoed these views and added addi- you can bet this company will keep on leading tional sources of satisfaction from their work. the field. He has more ideas per hour than most They were proud of the personal contacts built people have per year, and he keeps the whole with customers\u2019 technical staffs\u2014contacts that engineering staff fired up. Everybody loves increasingly involved project work as expert advi- Doc\u2014and you can count me in on that, too. In sors in thinking through operational problems like a way, he works for me, sure. But that\u2019s not international compatibility, interoperability issues what\u2019s important. between carriers, next generation technologies, and so on. The engineers were also delighted Doc Brown\u2014unhurried, contemplative, casual, with the department\u2019s encouragement of their per- and candid\u2014tipped his stool back against the wall sonal development, continuing education, and of his research cubicle and talked about what was independence on the job. important: But there were problems, too. Shawn Reynolds, Hardware and structural design engineering. of the structural design group, noted: That\u2019s where the company\u2019s future rests. Either we have it there, or we don\u2019t have it. In the old days I really enjoyed the work\u2014and the people I worked with. But now there\u2019s a lot There\u2019s no kidding ourselves that we\u2019re of irritation. I don\u2019t like someone breathing anything but a bunch of Rube Goldbergs down my neck. You can be hurried into jeopar- here. But that\u2019s where the biggest kicks come dizing the design. from\u2014from solving development problems and dreaming up new ways of doing things. Philip Sanchez, head of the hardware design That\u2019s why I so look forward to the new section, was another designer with definite views: designs we get involved in. We accept them not for the revenue they represent but Production engineering is almost nonexistent because they subsidize the basic development in this company. Very little is done by the pre- production section in engineering services.","640 PART 6 STRATEGIC CHANGE INTERVENTIONS Charlie Newburg has been trying to get prepro- The remaining ESD personnel were assigned to duction into the picture, but he won\u2019t succeed leftover nooks and crannies near the engineering because you can\u2019t start from such an ambigu- sections. Newburg described his position: ous position. There have been three directors of engineering in three years. Charlie can\u2019t My biggest problem is getting acceptance hold his own against the others in the com- from the people I work with. I\u2019ve moved pany. Brady was too aggressive. Perhaps no slowly rather than risk antagonism. I saw amount of tact would have succeeded. what happened to Brady, and I want to avoid that. But although his decisiveness had won Paul Hodgetts was head of special compo- over a few of the younger R&D people, he cer- nents in the R&D department. Like the rest of the tainly didn\u2019t have the department\u2019s backing. Of department, he valued engineering design work. course, it was the resentment of other depart- But he complained of engineering services: ments that eventually caused his discharge. People have been slow accepting me here. The services don\u2019t do things we want them to There\u2019s nothing really overt, but I get a nega- do. Instead, they tell us what they\u2019re going to tive reaction to my ideas. do. I should probably go to Charlie, but I don\u2019t get any decisions there. I know I should go My role in the company has never been through Charlie, but this holds things up, so I well-defined, really. It\u2019s complicated by Doc\u2019s often go direct. unique position, of course, and also by the fact that ESD sort of grew by itself over the years, as ENGINEERING SERVICES DEPARTMENT the design engineers concentrated more and more on the creative parts of product develop- The engineering services department (ESD) pro- ment. I wish I could be more involved in the vided ancillary and support services to R&D and technical side. That\u2019s been my training, and it\u2019s served as liaison between engineering and the a lot of fun. But in our setup, the technical side other Global Mobile departments. Among its main is the least necessary for me to be involved in. functions were the maintenance of the design sys- tems, simple and advanced prototyping, manage- Wang is hard to get along with. Before I ment of the central technicians\u2019 pool, scheduling came and after Brady left, there were six and expediting engineering products, documenta- months when no one was really doing any tion and publication of parts lists and engineering scheduling. No work loads were figured, and orders, preproduction engineering (consisting of unrealistic promises were made about the final integration of individual design compo- releases. This puts us in an awkward position. nents into mechanically compatible packages), We\u2019ve been scheduling way beyond our and quality control (including inspection of incom- capacity to manufacture or engineer. ing parts and materials, and final inspection of sub- assemblies and finished equipment). The original Certain people within R&D, for instance description of the department included the line, Philip Sanchez, understand scheduling well \u201cESD is responsible for maintaining cooperation and meet project deadlines, but this is not gen- with other departments, providing services to the erally true of the rest of the R&D department, design engineers, and freeing the more valuable especially the design engineers, who won\u2019t people in R&D from essential activities that are commit themselves. Most of the complaints diversions from their main focus.\u201d come from sales and production department heads because new products, such as the Many of the 75 ESD employees were located Nonphixhun, are going to production before in other departments and locations. Quality control they are fully developed, under pressure from people, for example, were scattered through the sales to get out the unit, and this snags the manufacturing and receiving areas of the Asian whole process. Somehow, engineering ser- plant, and technicians worked primarily in the vices should be able to intervene and resolve research area or the prototype fabrication room. these complaints, but I haven\u2019t made much headway so far.","SELECTED CASES 641 I should be able to go to Hoover for help, see them as best qualified to solve the prob- but she\u2019s too busy most of the time, and her lem. There\u2019s a real barrier for a newcomer major interest is the design side of engineer- here. Gaining people\u2019s confidence is hard. ing, where she got her own start. Sometimes More and more, I\u2019m wondering whether she talks as though she\u2019s the engineering there really is a job for me here. [Walsh left director as well as president. I have to put Global Mobile a month later.] my foot down; there are problems here that the front office just doesn\u2019t understand. Another subordinate of Newburg gave his view: Salespeople were often observed taking their problems directly to designers, while production If Doc gets a new product idea, you can\u2019t argue. frequently threw designs back at R&D, claiming But he\u2019s too optimistic. He judges that others they could not be produced and demanding the can do what he does\u2014but there\u2019s only one Doc prompt attention of particular design engineers. Brown. We\u2019ve had over 500 production change The latter were frequently observed in video con- orders this year\u2014they changed 2,500 docu- ference with production supervisors from the ments. If I were in Charlie\u2019s shoes, I\u2019d put my assembly floor. Charlie continued: foot down on all this new development. I\u2019d look at the reworking we\u2019re doing and get produc- The designers seem to feel they\u2019re losing some- tion set up the way I wanted it. Brady was thing when one of us tries to help. They feel it\u2019s fired when he was doing a good job. He was a reflection on them to have someone take over getting some system in the company\u2019s opera- what they\u2019ve been doing. They seem to want to tions. Of course, it hurt some people. There is carry a project right through to the final stages. no denying that Doc is the most important per- Consequently, engineering services people are son in the company. What gets overlooked is used below their capacity to contribute, and our that Hoover is a close second, not just politically department is denied functions it should be per- but in terms of what she contributes technically forming. There\u2019s not as much use made of engi- and in customer relations. neering services as there should be. Production personnel said that Brady had failed An ESD technician supervisor added his to show respect for old-timers and was always med- comments: dling in other departments\u2019 business. This was the reason for his being fired, they contended. Taylor Production picks out the engineer who\u2019ll be the Flores, in charge of quality control, commented: \u201cbum of the month.\u201d They pick on every little detail instead of using their heads and making I am now much more concerned with adminis- the minor changes that have to be made. The tration and less with work. It is one of the evils people with 15 to 20 years of experience you get into. There is tremendous detail in this shouldn\u2019t have to prove their ability any more, job. I listen to everyone\u2019s opinion. Everybody is but they spend four hours defending them- important. There shouldn\u2019t be distinctions\u2014 selves and four hours getting the job done. I distinctions between people. I\u2019m not sure have no one to go to when I need help. Charlie whether Charlie has to be a fireball like Newburg is afraid. I\u2019m trying to help him but he Brady. I think the real question is whether can\u2019t help me at this time. I\u2019m responsible for Charlie is getting the job done. I know my job 25 people and I\u2019ve got to support them. is essential, I want to supply service to the more talented people and give them informa- Roxanne Walsh, who Newburg had brought tion so they can do their jobs better. with him to the company as an assistant, gave another view of the situation: SALES DEPARTMENT I try to get our people in preproduction to take Marianne Price was angry. Her job was supposed responsibility but they\u2019re not used to it, and to be selling, but instead it had turned into settling people in other departments don\u2019t usually"]