Organization Development and Change - 10th ed - part 2

["642 PART 6 STRATEGIC CHANGE INTERVENTIONS disputes and making excuses to waiting custo- more cooperative generally. They always mers. She pointed a finger toward her desk: seem to say, \u201cIt\u2019s my bat and my ball, and we\u2019re playing by my rules.\u201d People are afraid You see that telephone? I\u2019m actually afraid now- to make production mad; there\u2019s a lot of power adays to hear it ring. Three times out of five, it in there. will be a customer who\u2019s hurting because we\u2019ve failed to deliver on schedule. The other But you\u2019ve got to understand that produc- two calls will be from production or ESD, telling tion has its own set of problems. And nobody me some schedule has slipped again. in Global Mobile is working any harder than Tyson Wang to try to straighten things out. The Nonphixhun is typical. Absolutely typ- ical. We padded the delivery date by six weeks PRODUCTION DEPARTMENT to allow for contingencies. Within two months, the slack had evaporated. Now it looks like Wang had joined Global Mobile just after the Iraq we\u2019ll be lucky to ship it before Christmas. (It War where he had seen some combat and worked was now November 28.) We\u2019re ruining our a stint in the intelligence organization. Both experi- reputation in the market. Why, just last week ences had been useful in his first year of civilian one of our best customers\u2014people we\u2019ve employment at Global Mobile. The former factory worked with for 15 years\u2014tried to hang a pen- superintendent and several middle managers had alty clause on their latest order. apparently been engaging in highly questionable side deals with Global Mobile\u2019s suppliers. Wang We shouldn\u2019t have to be after the engi- gathered the evidence, revealed the situation to neers all the time. They should be able to Hoover, and stood by the president as the accusa- see what problems they create without our tions and terminations ensued. Seven months after telling them. joining the company, Wang was named factory manager. Phil Klein, head of mobile phone sales under Price, noted that many sales decisions were Wang\u2019s first move had been to rebuild the fac- made by top management. He thought that sales tory team with new people from outside the corpo- was understaffed and had never really been able to ration. This group did not share the traditional get on top of the job. Global Mobile emphasis on informality and friendly personal relationships and had worked long and We have grown further and further away from hard to install systematic manufacturing methods engineering. The director of engineering does and procedures. Before the reorganization, produc- not pass on the information that we give him. tion had controlled purchasing, stock control, and We need better relationships there. It is very final quality control. Because of the scandal, man- difficult for us to talk to customers about agement decided on a check-and-balance system development problems without technical of organization and moved these three depart- help. We need each other. The whole of engi- ments from production to ESD. The new produc- neering is now too isolated from the outside tion managers felt they had been unjustly world. The morale of ESD is very low. They\u2019re penalized by this reorganization, particularly since in a bad spot\u2014they\u2019re not well-organized. they had uncovered the behavior that was detri- mental to the company in the first place. People don\u2019t take much to outsiders here. Much of this is because the expectation is built By 2007, the production department had by top management that jobs will be filled grown to 500 employees, of whom 60% worked from the bottom. So it\u2019s really tough when an in the assembly area\u2014an unusually pleasant envi- outsider like Charlie comes in. ronment that had been commended by Factory magazine for its colorful decoration, cleanliness, Eric Norman, order and pricing coordinator for and low noise level. Another 30% of the work smart phones, talked about his relationships with force, mostly skilled technicians, staffed various the production department: production support departments. The remaining employees performed scheduling, supervisory, Actually, I get along with them fairly well. Oh, things could be better, of course, if they were","SELECTED CASES 643 and maintenance duties. Production workers were and documentation wouldn\u2019t let us ship the not union members, were paid by the hour, and order any quicker. We\u2019d only make a lot of participated in both the liberal profit-sharing pro- junk that had to be reworked. And that would gram and the stock purchase plan. Morale in pro- take even longer. duction was traditionally high and turnover was extremely low. This way, I get to be known as the bad guy, but I guess that\u2019s just part of the job. Wang commented: [Wang paused and smiled wryly.] Of course, what really gets them is that I don\u2019t even To be efficient, production has to be a self- have a degree. contained department. We have to control what comes into the department and what goes out. Wang had fewer bones to pick with the sales That\u2019s why purchasing, inventory control, and department, because he said that they trusted him. quality ought to run out of this office. We\u2019d elimi- nate a lot of problems with better control there. When we give Marianne Price a shipping date, Why, even Taylor Flores of QC would rather work she knows the equipment will be shipped for me than for ESD; he\u2019s said so himself. We then. understand his problems better. You\u2019ve got to recognize, though, that all of The other departments should be self- our new product problems stem from sales contained, too. That\u2019s why I always avoid the making absurd commitments on equipment underlings, and go straight to the department that hasn\u2019t been fully developed. That always heads with any questions. I always go down means trouble. Unfortunately, Hoover always the line. backs sales up, even when they\u2019re wrong. She always favors them over us. I have to protect my people from outside disturbances. Look what would happen if I let Ralph Simon, executive vice-president of the unfinished half-baked designs in here\u2014there\u2019d company, had direct responsibility for Global Mobile\u2019s be chaos. The bugs have to be found before production department. He said: the designs go to parts manufacturers and into assembly, and it seems I\u2019m the one who has There shouldn\u2019t really be a dividing of depart- to find them. Look at the Nonphixhun, for ments among top management in the com- example. [Tyson had spent most of Thanksgiv- pany. The president should be czar over all. ing Day (it was now November 28) reviewing The production people ask me to do some- the latest set of specifications from the thing for them, and I really can\u2019t do it. It creates system.] ESD should have found every one bad feelings between engineering and produc- of those discrepancies. They just don\u2019t check tion, this special attention that they [R&D] get the files properly. They change most of the from Hannah. But then Hoover likes to dabble things I flag, but then they fail to trace through in design. Wang feels that production is trea- the impact of those changes on the rest of the ted like a poor relation. design. I shouldn\u2019t have to do that. PRODUCT RELEASE And those engineers are tolerance crazy. They want everything manufactured and At the executive committee meeting of December 6, assembled to a thousandth of an inch. I\u2019m it was duly recorded that Wang had accepted the the only one in the company who\u2019s had any prints and specifications for the Nonphixhun smart experience at that level. We make sure that phone and had set December 29 as the shipping the things that engineers say on their drawings date for the first 100 phones. Hoover, as chairperson, actually have to be that way and whether shook her head and changed the subject quickly they\u2019re obtainable from the kind of raw materi- when Newburg tried to initiate a discussion of inter- als and parts we use. departmental coordination. That shouldn\u2019t be production\u2019s responsibil- About a week later, Hoover called Newburg ity, but I have to do it. Accepting bad designs into her office.","644 PART 6 STRATEGIC CHANGE INTERVENTIONS Charlie, I didn\u2019t know whether to tell you now, house was playing a Christmas carol. Charlie or after the holiday. But I figured you\u2019d work thought again of Hoover\u2019s rationale: conflict still right through Christmas Day if we didn\u2019t have plagued Global Mobile\u2014and Charlie had this talk, and that just wouldn\u2019t have been fair to not made it go away. Maybe somebody else you. I can\u2019t understand why we have such poor could do it. luck in the engineering director\u2019s job lately. And I don\u2019t think it\u2019s entirely your fault. But\u2026. Questions Charlie only heard half of Hoover\u2019s words, and 1. What is your diagnosis of the strategy and said nothing in response. He\u2019d be paid through organization design at Global Mobile? How June 30\u2026. He should use the time for search- well does Global Mobile\u2019s strategic intent fit ing\u2026. Hoover would help all she could\u2026. Jim with its external environment? Brady was supposed to be doing well at his own new job, and might need more help. 2. How would you work with Hannah Hoover and the executive committee to bring about Charlie cleaned out his desk and numbly strategic change at Global Mobile? started home. The electronic carillon near his","SELECTED CASES 645 Selected Cases LEADING STRATEGIC CHANGE AT DAVITA: THE INTEGRATION OF THE GAMBRO ACQUISITION In the summer of 2005, Kent Thiry, a 49-year-old Harvard MBA, ex-Bain consul- creating a strong and positive values-based tant, and now the CEO of DaVita, thought organization where all levels of the organization had an emotional commitment to its success. about how he and his management team The foundation was the Mission and Values, should address a set of emerging and impor- first created by 700 of the company\u2019s man- tant challenges. DaVita (publicly traded on the agers in 2000 and now widely practiced New York Stock Exchange under the symbol throughout the company. To the management DVA) was a $2.2 billion annual revenue opera- team, the company\u2019s rebirth strategy was tor of free-standing and in-hospital kidney dialy- based on the belief that they had to create sis centers. something larger than themselves in order to Thiry and his senior team were meeting to be successful. Thiry commented: discuss the next steps the company should At Vivra [another kidney dialysis company take to continue its organizational development where many of DaVita\u2019s senior leaders had and strategic evolution. They were especially worked together], we implemented many focused on how to manage several looming people, team, and culture-friendly policies. challenges. DaVita was just in the process of They were consistent with my basic values, completing a $3.1 billion purchase of Gambro, but the extra energy I brought to them was a large competitor. The acquisition would because they were a means to the end of nearly double its size, from 700 to more than having a successful company. This time it is 1,200 dialysis centers and from 13,000 to different. This time the building of a suc- 25,000 people. As such, it would cement its cessful company is a means to the end of position as the second largest operator of kid- building a healthy community. Because ney dialysis centers in the United States. humans spend more waking hours at work than anywhere else, if you are a leader who When Thiry came to lead the company in purports to care about your team, it makes October 1999, the organization had been beset no sense to create a paradigm which con- with financial, operational, regulatory, and cedes all that time needs to be spent in [a] morale difficulties. \u201cThe company was techni- relatively vanilla values or sterile emotional cally bankrupt,\u201d he said. \u201cIt was being investi- commitment environment.2 gated by the SEC, sued by shareholders, had turnover at over twice our current levels, was almost out of cash, and, in general, wasn\u2019t the Because of this, Thiry and his team flagged happiest of places.\u201d1 By 2005, the new man- several important challenges they believed agement team had achieved a complete turn- needed to be addressed if DaVita was to con- around. The company\u2019s market capitalization tinue its successful evolution of both opera- had grown from $200 million to more than tions and culture. The question was, How $5 billion, the clinical outcomes had become could they use the culture to achieve even the best in the industry, the company\u2019s organic greater operational excellence? growth was the highest in the industry, and employee retention had improved dramatically, THE GAMBRO INTEGRATION with a 50% reduction in turnover. One immediate task entailed integrating Gam- However, this had not been a typical turn- bro into the DaVita way of managing and its around. Instead, a closer look at DaVita\u2019s cul- culture. Gambro was significantly more hierar- ture and leadership showed that the DaVita chical and formal than DaVita, and did not have management team\u2019s focus had been on a strong people-oriented culture. Prior to the 1http:\/\/www.redcoatpublishing.com. 2Kent Thiry, email, November 27, 2005.","646 PART 6 STRATEGIC CHANGE INTERVENTIONS merger, DaVita had been disparaged inside Gam- reimbursement rate did not cover the cost of bro, with Thiry described as \u201ca compliance maver- treatment. ick, reckless, and egotistical.\u201d Ironically, Gambro had itself purchased Vivra in 1997, then a smaller, Because of financial constraints, dialysis provi- publicly traded dialysis company led and trans- ders could not afford to pay high overtime rates. As formed by Thiry during the 1990s. As the leader a result, many of DaVita\u2019s patient care technicians, of the combined organization, Thiry\u2019s goal was to who typically earned between $11 and $14 per be respectful of Gambro, its people, and its capa- hour, worked two jobs in order to generate suffi- bilities, while maintaining DaVita\u2019s unique culture cient income. One manifestation of the pay chal- and way of management. lenge was the barrage of questions that Thiry and Mello would get as they traveled the country con- PERSONAL TOUCH IN A GROWING ducting \u201ctown hall meetings.\u201d Town hall meetings ORGANIZATION were an opportunity for teammates to ask ques- tions of senior leadership, in person. It was quite Prior to the Gambro integration, DaVita operated in common for teammates to ask why their wages 37 states. Its growth, size, and diverse locations were not higher and why productivity expectations made it increasingly difficult for Thiry to personally were so high and always rising. Moreover, DaVita touch the many teammates on a regular basis. This competed for nurses in labor markets with nursing presented a key challenge: How to personally shortages. Many other organizations had chosen to impact teammates as he had during his first five just throw money at the problem of attracting and years at the helm? Affectionately called \u201cKT\u201d by keeping nurses, something DaVita could not afford many teammates in the company, Thiry was, by to do. everyone\u2019s estimation, extremely charismatic and energetic. More than that, Thiry was the primary OPERATIONAL EFFICIENCIES AND architect of and cheerleader for DaVita\u2019s unique PRODUCTIVITY IMPROVEMENT culture and values. The company reflected the vision shared by Thiry, Joe Mello, and a few others The fifth challenge was to continue to drive produc- such as Doug Vlchek. Mello, DaVita\u2019s COO, and tivity improvement and to think about ways to funda- Vlchek, DaVita\u2019s chief wisdom officer, had worked mentally reengineer the business. As Mello noted, with Thiry before and had joined DaVita in 1999 to the company had made great strides in enhancing help drive the organizational change initiative. labor productivity over the past several years. But there was always the looming threat of reduced TEAMMATE MORALE AND COMPENSATION reimbursement from the government for dialysis ser- vices. This revenue stream represented approxi- Maintaining the culture and sense of community mately 60% of total company revenue.4 Mello within DaVita was not easy, even before the acqui- talked about the challenge of doing things that sition of Gambro. Taking care of dialysis patients is would materially and fundamentally enhance the a difficult job. One out of every five dialysis company\u2019s cost structure so DaVita could be largely patients dies each year, creating not only a difficult impervious to what might happen in its environment. work environment but also a lot of emotional strain. With the company\u2019s turnaround receding As Thiry prepared for the meeting with his into the past, numerous employees\u2014or \u201cteam- executive team, he thought about what the com- mates\u201d as all are called at DaVita\u2014had rising pany should do about these challenges and main- expectations for wages and working conditions. taining the culture his senior team had worked so The company\u2019s ability to raise salaries was con- hard to build. He wanted the team to come up with strained by the high volume of patients\u2014about some ideas about how to address the challenges 79%3\u2014who were covered by government pro- facing the company, and of course, to do so in a grams such as Medicare and Medicaid but whose way that was consistent with its values and culture. 3From 2004 DaVita Annual Report, p. 4. 4From 2004 DaVita Annual Report, p. 4.","SELECTED CASES 647 A BRIEF HISTORY OF DAVITA (1994\u20131999) friends among the health care practitioners who worked hard in the field to deliver quality care. DaVita was the new name given in 2000 to Total Renal Care (TRC), a company originally founded by In 1999, Total Renal Care ran into severe financial Victor Chaltiel. Chaltiel had sold a former company difficulties, having just recently merged with another for a good profit, with the business model of large competitor that had also been built in a rapid leveraging cost savings obtained through large- fashion. The board of directors turned to Thiry, who scale purchasing and distribution systems for was in the process of leaving a private-equity\u2013funded drugs in the Medicare reimbursement program. managed care company where he had been for two Based on his success, he planned to do the same years post-Vivra in 1997. He was eagerly anticipating thing in the domain of kidney dialysis centers time off with his family. When headhunters called through roll-ups of smaller chains and individual cen- to see if he wanted to interview for another CEO ters. One of Chaltiel\u2019s strategies was to apply strict position, he always replied, \u201cNo.\u201d Thiry was within business principles and reap their rewards upon 90 days of his \u201cretirement\u201d when TRC called: entering the traditionally not-for-profit domain of kid- ney dialysis centers (run by hospitals and physician I still remember the call. After my assistant told specialists). He focused on growth through acquisi- me who was on the phone, I picked it up with tion through the 1990s. The Internet bubble focused the intention of giving the same \u2018no\u2019 answer. As many analysts on top-line revenue growth, which I started to listen, all the positive memories of provided TRC with a high stock price that allowed my first time in dialysis, at Vivra, came flooding it to continue making acquisitions at a fast pace. back. It had been the most powerfully positive time of my professional life. I have no idea what Unfortunately, Chaltiel and his team failed to I said in that phone conversation. All I know is I integrate their acquisitions, leading to some opera- went home that night and asked my wife tional incoherence in TRC. One example noted by Denise if it was okay to interview. She was Harlan Cleaver, DaVita\u2019s chief information officer, livid. What about my alleged interest in more was that there was no uniformity in a critical patient time with the family? What about the fact that data form used to record and monitor patient care this was a turnaround located in another city during dialysis, and little standardization in reporting [Thiry lived near San Francisco and TRC was and work methods across centers. This absence of headquartered in the Los Angeles area]? The standardization made routine management activities, difficulty of the decision felt like a terrible bur- such as transferring personnel and patients across den at the time. It turned out to be a gift. Never centers, much more difficult if not impossible. before did I have to think so deeply about why I wanted to do something. After agonizing for a Cash flow issues created serious problems. few weeks, we decided I would give it a try. Mello commented that another operational weakness There is a saying I love\u2014we use it at DaVita of TRC was insurance reimburse-ment\u2014a critical all the time: \u2018Begin with the end in mind.\u2019 problem for a company whose revenue was entirely I started at DaVita with more of an end in mind dependent on it. Insurers and the government would than any other beginning in my professional life. frequently question charges and demand additional documentation. They would occasionally unilaterally Before accepting the job offer, Thiry reached out reduce the reimbursement amount, and delay pay- to a set of people who had been with him in his ment until they received answers to queries and previous dialysis venture, people whom he trusted, requested documentation. Medical service providers liked, and respected. He recruited Harlan Cleaver, such as DaVita needed to pay close attention to bill- who was now living in Denver, to be the chief tech- ing and collections to avoid a cash crunch. nology officer and David Barry to be COO. He reached out to Doug Vlchek, whom he had hired Finally, senior executives paid scant attention to into Vivra, to lead the organizational change and the dialysis centers themselves, which were seen culture-building efforts. Thiry recalled, in reference more as an avenue of corporate growth where to the musketeer imagery he loves, asking them patients and caregivers were economic units in a something like, \u201cWill you ride again?\u201d They all bigger financial structure. This head-quarter-centric, financially oriented operating culture did not win","648 PART 6 STRATEGIC CHANGE INTERVENTIONS accepted. When Barry left in the first year for per- equaled one-third to one-half of the treatment cost. sonal reasons, Thiry brought in Joe Mello, who had As Mello pointed out, in 2005 DaVita would do also been with him at Vivra. about 7,000,000 dialysis treatments. Each 0.01 savings in labor hours per treatment achieved When Thiry arrived at TRC in October 1999, across the company was worth about $1.8 million; the company was a mess. It could barely make this savings went directly to the bottom line. payroll, was in default on its loan covenants, and was paying penalties to the banks. Highly lever- Achieving Good Clinical Outcomes aged from its many acquisitions, it was essentially on the verge of bankruptcy. The stock had fallen Attention to detail during the dialysis visit and strong from nearly $50 to $2 a share. Systems were non- personal relationships among the DaVita staff and existent or in chaos, and the organization\u2019s employ- patients drove the achievement of good clinical out- ees were dispirited and unhappy. It was not at all comes. First, attention to detail also mattered a lot for clear that financial survival was possible. obtaining good clinical outcomes. For example, it was important to take care while putting the patient on the KEY SUCCESS FACTORS FOR A DIALYSIS machine, monitoring the treatment as it was occurring, COMPANY LIKE DAVITA and taking the patient off the machine at the end of the session. It was also critical to monitor the patient\u2019s There were four critical factors for organizational health status generally so that treatment issues could success along both financial and clinical outcome be foreseen and addressed. Good clinical outcomes dimensions. also enabled DaVita teammates to take pride in work- ing in a company that provided the best care in the Attention to Detail industry, an advantage in recruiting and retention. The first factor was painstaking attention to opera- Second, achieving good clinical outcomes tional details and compliance with government regula- depended not only on the patient\u2019s commitment to tions. For instance, a company that charged the treatment but on the emotional tone and bond government, through the Medicare program, for ser- between the center\u2019s teammates and the patients. vices that were not actually delivered and\/or were not Patients sometimes missed their dialysis appoint- documented could face accusations of fraud and suf- ments because they found the treatment unpleasant, fer financial penalties as well as delays in payment. the logistics of setting up appointments too difficult, Legal problems could also arise from actually deliver- or they became depressed by the likelihood of suc- ing care or medicines that patients did not need, as cess. However, according to various DaVita clinic well as for improper relationships with drug compa- teammates, one important factor affecting patient nies or physicians that might entail kickbacks for compliance was the extent to which patients trusted patient referrals or purchases of pharmaceutical sup- and felt comfortable with the dialysis center and its plies. Proper record keeping and ethical behavior were staff. Emotions are contagious, and to the extent vital to the ongoing success of dialysis companies. that DaVita could create positive, genuine emotions on the part of its workforce, those positive emotions Managing Financial Outcomes might influence the attitude of patients. This could thereby improve the patients\u2019 survival, not only The opportunity to make a financial difference in through their positive mental attitudes but also by operational results rested largely on small but affecting their compliance with the difficult regimen important behaviors and decisions. One such activ- of living with late-stage kidney disease. As one admin- ity was carefully using supplies to avoid waste and istrator said, \u201cIt\u2019s important that the teammates like maintaining appropriate stock levels so that inven- their jobs and smile and relate in a compassionate tory costs were not unnecessarily high, yet avoid- way to patients, because that makes the patients ing emergency ordering. Another activity was the feel better about being here.\u201d reuse of dialysis filters and maintenance of the dial- ysis machines to ensure both long life of the equip- Employee Attraction and Retention ment and lower cost per treatment. The final critical success factor was the attraction Possibly even more important was the activity and retention of teammates. DaVita competed for of efficient labor-hour management, given that the proportion of labor costs in the total cost structure","SELECTED CASES 649 nurses with hospitals, doctors\u2019 offices, other health officer, described the process of bringing order to care providers, and, of course, with other dialysis the system and establishing common practices, companies, and the chronic nursing shortage in the measures, and information systems across the cen- United States meant there were always unfilled ters. His first step was to standardize the paper- positions. Hospitals typically paid more per hour based system used to keep track of patient care in than DaVita or its competitors. the various centers. As he pointed out, it made sense to start with that patient record system Patient care technicians (PCTs), the largest cat- because the issues were of standardization, com- egory of employees, typically earned less than $15 mon practices, and alignment, without the added an hour. Many worked two jobs, with their second complication of computers on top of everything job often being for another provider of dialysis ser- else. vices. PCTs were often tempted to leave for better- paying opportunities, either with other health care The second order of business was getting the providers or to find different occupations. philosophy right. Thiry and his colleagues recog- nized that what they said and did in those first Retention of teammates was important months would set the tone for the ensuing years because turnover was costly, entailing finding and at the company, so close attention to building the training replacement people, and possibly paying kind of culture and organization they wanted pro- overtime labor rates if a center was temporarily ceeded in parallel with the business turnaround short-staffed. High turnover could also impair clini- efforts. Thiry described early meetings of the exec- cal outcomes, because a nurse\u2019s or PCT\u2019s experi- utive team in which they would spend time dis- ence in doing dialysis and working in a team cussing basic issues, such as whether they could enhanced patient care outcomes. Being an make payroll and their ongoing negotiations with employer of choice was not just part of DaVita\u2019s the banks, and then they would turn to talk about mission, but was also important for business suc- the core values, culture, and operating philosophy cess and better patient care. they wanted to instill. When Thiry and Vlchek would start talking about Mission and Values, THE TURNAROUND (1999\u20132005) many of the executives were very skeptical about the value and intent of this activity when the com- With an acute awareness of these critical success pany was in such dire straits. Thiry believed that factors, Thiry and his colleagues set about the task without a clear statement of Mission and Values, of turning the organization around. The first order of the operational turnaround could not be sustained. business was the business itself. Over the next four years, the organization worked to fix billing and cash A big part of the new philosophy was to recognize flow problems, restructure outstanding debt, bring that the centers, where patient care was delivered and the information systems up to speed, hire people where most DaVita teammates worked, were key to who could \u201cget stuff done\u201d (\u201cGSD\u201d remained a the company\u2019s success. To emphasize the impor- popular acronym in the company, and being \u201cgood tance of the centers, Thiry had all senior managers, at GSD\u201d was a high compliment), and invest in con- himself included, \u201cadopt\u201d a center and drop by occa- tinuous improvement projects and training. sionally. Thiry\u2019s center was in Hayward, California, and long after his last visit, people in the center were still It was a difficult time for the company. For a commenting on his attention to them. time, the government stopped paying DaVita for laboratory tests because of issues in record mainte- The company later replaced the adopt-a-center nance and documentation. The company had to program with the practice of having everyone hired decide what to do with the patients whose lab in or promoted to the vice president level or above tests were not being reimbursed. The team decided go through \u201cReality 101,\u201d which entailed spending a to continue performing tests that it felt were essen- week in a center helping to do the day-to-day work. tial in delivery of care and to appeal the decision to Executives participated in activities such as machine an administrative law judge to attempt to obtain the set-up prior to dialysis, machine teardown and disin- denied funds. Four years later, after winning six suc- fection post treatment, helping with blood pressure cessive judgments, the government paid DaVita over monitoring, or whatever tasks they felt comfortable $90 million. Harlan Cleaver, the chief information","650 PART 6 STRATEGIC CHANGE INTERVENTIONS FIGURE 1 DaVita\u2019s Mission Statement and Core Values in actually performing. As Thiry explained, it was management, collectively assembled at this off- important not to push people to do things they felt site, who voted on and thereby chose the new uncomfortable or unskilled at doing, but it was also name, DaVita, which is an approximate translation important for people to experience what it was like of the Italian phrases \u201cto give life\u201d or \u201che\/she gives to get up at 4 A.M. to get to a center at 5 A.M. so it life.\u201d5 Also at that meeting, groups discussed, could be open for the first patients at 6 A.M., and to debated, and voted on proposals for the core values. see what life in a center was about. Figure 1 shows the mission statement that Thiry presented at the meeting and the core values Thiry and the senior management group under- decided upon by the Phoenix delegation. Over the stood they needed the involvement, cooperation, years, the seventh value, \u201cfun,\u201d was added by energy, and ideas of the clinic managers, the front- another election. line supervisors who make the centers work. In May of 2000, more than 400 clinic managers, plus people For much of the first 18 months, Thiry and from corporate headquarters assembled in Phoenix, Mello would hold frequent conference calls with Arizona, for the first of what has now become the top 800 or so people in the company to update annual corporate-wide meetings. The choice of loca- them on progress. As part of each call, Thiry would tion, Phoenix, was intentional, as the phoenix is a say, \u201cWhat is the incremental evidence that we bird that rose from the ashes, just as the company are serious about our Mission and Values?\u201d And was seeking to rise from its precarious condition. At then he would provide an answer to that question. this first meeting, suggestions for a new name for the company were presented. It was the company\u2019s 5\u201dTotal Renal Care Announces New Company Name,\u201d teammates, not the board or just the senior Investor Relations\u2013DaVita, June 5, 2000.","SELECTED CASES 651 Thiry commented, \u201cThere were many periods consistent, year-over-year improvements in clinical where, absent the pressure of knowing I had to outcomes and reductions in turnover. ask and answer that simple question out loud in front of 800 people, in many instances I would THE DAVITA WAY: VALUES AND not have launched another program, or policy, or ORGANIZATIONAL CULTURE communication. They would have been squeezed out by the harsh realities of normal business\u2014like DaVita did not develop its culture by accident. The they normally are.\u201d culture was a result of what Thiry calls \u201cpurposeful actions\u201d that \u201carticulated and demonstrated\u201d what a With increased focus and attention to opera- company could be. First, Thiry created a clear, con- tional details, the commitment of the company\u2019s cise, easy-to-remember mission that was quickly teammates, and the bank negotiations behind it, turned into a song still sung today. Then, he asked DaVita embarked on a remarkable transformation 700 colleagues to come to a consensus on the core in its performance, achieving not only great values. They also used the following question as a financial results, as shown in Figure 2, but also benchmark for their own development: What did FIGURE 2 DaVita Financial Results 1999 2000 2001 2002 2003 2004 1,650.8 1,854.6 2,016.4 2,298.6 Revenues ($millions) 1,445.4 1,486.3 Operating margin 25.6% 24.6% 28.3% 27.8% Net profit ($millions) 13.0% 19.6% 98.1 147.8 163.2 217.3 Earnings per share Cash flow per share ,56.4. 17.0 0.76 1.23 1.69 2.11 1.59 2.33 2.46 3.08 ,0.46. 0.13 0.46 1.06 SOURCE: Value Line Investment Survey. DaVita Split-Adjusted Stock Price","652 PART 6 STRATEGIC CHANGE INTERVENTIONS other great companies do to cultivate cultures\u2014 \u201cWhat is this company? Whose company is it? companies like Southwest and Disney? What could it be?\u201d The answers, literally shouted back, were \u201cNew,\u201d \u201cOurs,\u201d and \u201cSpecial.\u201d The idea Employees became teammates, and, if they of \u201cnew\u201d was not just that DaVita was a different \u201ccrossed the bridge\u201d of believing the company organization after the 2000 turnaround, but with its could be special, they became \u201ccitizens\u201d of the ongoing acquisitions and new business ventures it \u201cvillage\u201d (not a company), with Thiry as \u201cmayor.\u201d was always a new place reinventing itself. \u201cOurs\u201d Hugs were common, as were high-fives and laugh- means that the company is the responsibility and ter, even among the intense ex-consultants and under the control of the teammates who work for it, MBAs who populated the business offices. who have the opportunity to make the company what Through what are called \u201ctradi tions and symbols,\u201d they would like it to be. This leads to the last question. DaVita executives brought organizational change Note that the executives do not ask what \u201cis\u201d the concepts to life and made them real. company, but rather, \u201cWhat could it be?\u201d The answer, \u201cspecial,\u201d captures in a word the aspirations Cathy Gelb, who ran the DaVita Academies as for building an organization that is truly unique in its part of DaVita University and who had been with the culture and its results for its patients, while \u201ccould\u201d company since 2001, commented that one of the reflects the fact that the deve lopment of the organi- things that distinguished DaVita from the Fortune zation is a journey, and although it has achieved great 1000 companies where she had worked as a free- things, its aspirations are for more, and that being spe- lance training consultant was the tremendous cial is something yet to be fully achieved. amount of strategic thought and intentionality that went into every single action and decision. She We Said, We Did noted that, for instance, all meetings were carefully planned, even to thinking about the particular music Accountability is an important value at DaVita. So that would be used, the sequencing of materials, is measurement\u2014the company measured not seating arrangements (for instance, at Academies, just clinical outcomes, costs, and labor utilization, should guests be put in the back?), and the specific but almost everything that was related to dimen- words and terms that would be employed during sions of performance. In addition, there is an presentations. All of this planning was an effort to emphasis on systematic, planned thinking and create the right message and feelings and provide actions. All of this came together in the idea of an optimal experience for those in attendance. follow-up, something that began at the very top of the organization. As Richard Fontaine, one of Evaluation data were collected about every- the directors on the com pany\u2019s board, explained, thing, including every meeting and class, and used at virtually every board meeting Thiry would pres- to make educational activities and meetings more ent a list of issues and questions from the pre- effective over time. Gelb also commented that ceding meeting, and then go through them one Thiry did not like the word \u201cculture\u201d because of its at a time and explain what the company and he association with the word \u201ccult,\u201d and there was had done about each. This included, for instance, already some joking about \u201cdrinking the Kool Aid\u201d progress on building a succession planning pro- because of DaVita\u2019s very strong, carefully managed, cess and preparing back-up people ready for and inclusive set of management practices. senior-level positions. Similarly, at DaVita Acade- mies, if the company had made assurances or The DaVita Way of Managing was captured in a pro mises to the workforce\u2014to get an answer set of phrases\u2014short and easily remembered\u2014that to some question, to address some concern or encapsulated many of the values and operating prin- problem\u2014Thiry would explain what had been ciples of the company. These values, and the associ- done and end with, \u201cWe said, we did.\u201d ated behaviors, were also incorporated into interview schedules used to select new teammates, into all The implication was that the company and performance appraisals, and into the company each person in it was accountable for meeting its employee attitude and satisfaction surveys. commitments\u2014for addressing issues and explain- ing how another important value, continuous New, Ours, Special improvement, was occurring. As several people At DaVita meetings, executives always asked the assembled people to respond to three questions:","SELECTED CASES 653 noted, if someone was in a position of often having \u201ccitizens\u201d and, consistent with the village imagery, to say, \u201cWe said, but we didn\u2019t do,\u201d that person language that evoked the idea of \u201ccitizenship\u201d and would probably not last long at an organization that the mutual obligations of citizens and their commu- stressed accountability and getting stuff done. nity was emphasized. In the words of Gina Ran- dolph, a group vice president, \u201cWe think of One for All, All for One ourselves as a village where each facility is a neighborhood.\u201d When pressed on how important This idea, from the Three Musketeers books and these distinctions were, she responded, \u201cFrom movies, was a prominent theme in the company. the viewpoint of a career that spans several dec- Thiry\u2019s office at corporate headquarters in El ades, this is the first time I have had the privilege Segundo, California, near the Los Angeles airport, of working for a company whose Mission and had a movie poster from The Man with the Iron Values are so completely alive and not hanging on Mask, and has hanging in it the sword that Thiry the wall.\u201d6 brandishes\u2014in full Musketeer uniform\u2014at DaVita Academies and other meetings. The phrase repre- No Brag, Just Facts sents one way of understanding the idea of commu- nity and shared obligations and responsibility. \u201cOne DaVita was committed to a fact-based approach to for all\u201d means that it is the obligation of every management and decision making, to talking to peo- DaVita teammate to contribute what they can to ple about the facts, and to using facts and evidence the whole, to expend their best efforts on behalf as much as possible for every decision and state- of the collective, and to take responsibility for the ment. So, when Thiry stood up at a DaVita Academy company and each of its members. \u201cAll for one\u201d meeting and stated that DaVita provides the best care means that just as the individual should devote him- for dialysis patients in the industry\u2014a statement that, self or herself to the group, the group has a respon- on its surface, was not unlike the typical corporate sibility to help that individual develop and succeed claim about its quality, service, or leading edge and surmount difficult setbacks and transitions. technology\u2014he then provided quantitative data showing how DaVita was doing on specific clinical An example of this care and community was a outcome measures, ending with the phrase, \u201cNo fund called the DaVita Village Network, to which brag, just facts.\u201d It was a way of cementing the idea DaVita teammates contributed to help others out that people at the company should attempt to anchor with, for example, unexpected medical expenses or their judgments, their statements, and their claims in other financial needs. Teammate contributions to the quantitative data, not in hyperbole or wishes. DaVita Village Network were matched by contribu- tions made by the company out of its profits. Fact-based decision making was reinforced in the company\u2019s measurement system. Clinic man- The Village\u2014Not Just a Company, agers received monthly, multipage reports showing But a Community how their performance compared to goals or bud- gets, to their own prior results, and to other facilities Related to the idea of \u201cone for all, all for one\u201d was in their region, in their division, and in DaVita as a the idea of DaVita as a community\u2014represented in whole. Annual surveys of employees provided infor- the word \u201cvillage.\u201d Corporate headquarters in El mation on satisfaction and engagement, as well as Segundo was referred to as \u201cCasa DaVita\u201d (the perceptions about the extent to which people felt the house of DaVita), and village language and imagery company was living up to its Mission and Values. were used in many ways. Joe Mello would tell a story from one of his favorite books about a man But what was most interesting, and what living on a hillside who sees other members of his really reinforced the commitment to a fact-based, village below in danger from an onrushing flood, and measurement-rich culture, was what happened sets his own house on fire, so that when the people when the company was unable to measure some- rush up the hill to put out the fire, they are saved thing of importance. Patients who did not show up from the flood. The word \u201cworker\u201d was never used for dialysis because they were in the hospital or on and seldom was the word \u201cemployee\u201d\u2014instead, people were referred to as \u201cteammates\u201d or 6David Robbins, http:\/\/srarchitects.com\/health%20care.htm.","654 PART 6 STRATEGIC CHANGE INTERVENTIONS vacation made scheduling labor more difficult and DAVITA MANAGEMENT PRACTICES affected labor productivity. But this indicator could not be captured systematically given current man- Values and beliefs, ways of being, and the organi- agement information systems. Therefore, the mea- zational culture had to be produced and reproduced sure was included in the monthly reports as a blank every day to be real and meaningful. DaVita did a graph with the notation, \u201cNot Available.\u201d As Joe number of things to ensure that its Mission and Mello explained, if there were some important crit- Values would infuse the day-to-day behavior of its ical data that could not yet be assessed, the com- teammates and to help ensure that it operated in pany included them anyway on the reports, ways consistent with its aspirations. Many of its showing they were not available. This presentation management practices seemed (and were) like of a missing measure, month after month, encour- common sense. All were products of extensive aged people to figure out ways to measure what discussion by people inside the company, and all might have first been viewed and dismissed as were talked about regularly, practiced, and were \u201cunmeasurable,\u201d and therefore the availability of embedded in everything the company did. data useful for making decisions kept improving. The DaVita Way and the DaVita We Are Here Way of Managing DaVita wanted to encourage its teammates to be DaVita thought that it was beliefs that drove beha- fully involved and present in the company, not just viors that, in turn, produced performance. As Thiry physically but also emotionally. There were \u201cWe explained it, the \u201cDaVita Way\u201d was \u201cwhat (who) Are Here Awards,\u201d which were $1,000 in vacation we are: our Beliefs (which have been introduced expenses given to randomly selected nonexempt and articulated over the past few years), as well as (hourly paid) teammates who had perfect atten- the consistently practiced Behaviors (which are dance (no unplanned absences) during a 90-day derived from those beliefs).\u201d The company articu- period. At DaVita meetings, teams would be lated and lived its beliefs through talking about its asked if they were here, and would respond with history, its symbols and traditions, the idea of the a cheer, or chant, or yell, or some combination that village, communication, talking about the future, indicated not only physical presence but also and caring and sharing for members of the commu- involvement and commitment. In Thiry\u2019s office, nity. The DaVita Way of Managing defined a set of painted on the wall was the saying, \u201cThis is not a behaviors and competencies that the company dress rehearsal, this is my Life.\u201d There was an sought to promote and produce, and which formed emphasis on having people fully engaged in their the basis of all of its selection and performance work and with the company, so they could find management practices, and were reinforced in meaning and fulfillment in their jobs and in their its educational activities. There were four beha- associations with teammates. viors critical to the DaVita Way of Managing: It (1) gets the right stuff done, (2) fosters team, (3) The Shining Star stewards resources, and (4) builds relationships. The \u201ci\u201d in DaVita was dotted as a star, referred to as There was one other aspect to the DaVita man- a \u201cshining star.\u201d Thiry would say that the star lived agement approach\u2014an emphasis on execution. in a lush green valley and only came out to sit on top When the leadership, including Mello, Vlchek, and of the \u201ci\u201d when a DaVita teammate did something Thiry, had been together at Vivra, they had noticed special for a patient or a fellow teammate. Because that even though they had an extremely talented at any given moment there was always someone executive team of about nine people who were all doing something special in the company, the star working hard, things were not happening. They was always \u201cout.\u201d At the national awards cere- went to an off-site meeting and concluded that there mony, the highest awards were called \u201cShining were four elements critical for effective execution: (1) Star Awards,\u201d for people who not only performed absolute clarity of purpose, (2) absolute accountability, their jobs with exceptional proficiency, but who (3) relentless follow-up, and (4) celebrating successes. also exemplified the DaVita values and who contrib- These principles and practices helped build opera- uted to the well-being of the team. tional excellence and an ability to get things done at","SELECTED CASES 655 DaVita, where they were very much a part of the meeting with Thiry or Mello so that participants fabric of the management approach. could express their opinions, ask questions, and interact in an informal way with senior executives. DaVita University The course also consisted of specific technical knowledge and skills necessary for administrators DaVita had many employees in a large number of of dialysis centers. Evenings were, with one excep- centers, and although turnover had been reduced, it tion, devoted to organized social interaction, including was still high enough that\u2014coupled with corporate group dinners and bowling, to help build friendships growth\u2014a large number of new people were enter- and a feeling of team spirit among the 25 to 30 peo- ing the company each year. The Gambro acquisition ple who typically took this class together. would bring 12,000 new people into the organization. To achieve a higher level of uniformity in understand- DaVita Academy. DaVita Academy was a two-day ing, communication, and management practice, a lot program for all front-line teammates (for instance, of the DaVita way of managing was transmitted patient care technicians, nurses, social workers, and through DaVita University. This activity was started the people who serviced the dialysis machines). Orig- within a year of Thiry\u2019s arrival in the company, even inally offered on a voluntary basis to people who were as the financial recovery was proceeding, and the interested in attending, the Academy was evolving to programming has expanded significantly over time. become an activity that facility administrators were encouraged to send new teammates to, preferably DaVita University was run out of the Wisdom within the first 90 days of joining DaVita. Data showed Department, and the head of the department, who that people who attended an Academy had a turnover had been Doug Vlchek until mid-2005, was called rate of about 12% compared to 28% for those who the chief wisdom officer. Vlchek\u2019s nickname was had not, so attending an Academy was critical for both \u201cYoda,\u201d after the Star Wars character, an appellation retention and also for engaging people fully in the he had been given by Thiry shortly after they first met DaVita spirit and way of relating to each other. almost 12 years previously. The name for the depart- ment came from Joe Mello. At Vivra, they had a chief A typical Academy session consisted of a knowledge officer, but that was too conventional a combination of lecture and experiential sessions name for the department and its head at DaVita. Wis- on subjects such as communications, team dynam- dom seemed to be what the company was trying to ics, and conflict resolution. The evening activity impart to its teammates and to continually develop. between the first and second day was always the DaVita Olympics, where teams competed with each DaVita University offered programs in continuous other in various indoor light physical activities and quality improvement (a two-day program required for performed skits with songs and music that they newly hired facility administrators, managers, and developed. This informal social interaction, singing vice presidents who had not taken the class previ- together, acting silly together, and working together ously), presentation skills, leadership development, to compete against other teams, helped break team skills, and programs for vice presidents. There down barriers and build energy and spirit. were also numerous courses on clinical subjects. But two of the most important programs that reached the Academy II most people either directly or indirectly were the DaVita Academy (and more recently, a program called Academy II was a newer program attended by all Academy II) and a program called FAST, which stood teammates from a specific region, designed to for Facility Administrator Survival Training. \u201ctake facility performance to the next level by fos- tering mutual accountability amongst the team.\u201d7 FAST. FAST was a five-day program taken by all Because the program involved all teammates from new clinic managers. The program consisted of train- a region, centers were completely closed on that ing in managerial skills such as time management, day, requiring that dialysis treatments be resched- communication, providing coaching and feedback to uled. By emphasizing how to hold difficult and team members, and interviewing, as well as material on the DaVita culture (the DaVita Way and One for 7DVU Course Catalog, p. 3. All). On Thursday afternoons there was a town-hall","656 PART 6 STRATEGIC CHANGE INTERVENTIONS honest conversations among the teammates to In 2001, my husband was doing consulting with resolve interpersonal issues, the course fostered DaVita and he would come home and just rave better and more productive interactions. The course about this company and they were so unique also contained numerous activities designed to and the different things they were doing. I said, impart skills for team building and joint planning for \u201cWell find out if they need any trainers.\u201d Lo and operational improvement at the facilities. behold, they were running this two-day program called The Academy that they had just started in There was every indication that the commitment 2001 and they were looking for someone to run to training and development at DaVita was increasing it for them. So, in November of 2001 I joined in scope and reach. Evaluation of all DaVita University DaVita to be associate dean of the Academy. activities was taken very seriously and the programs and materials were constantly being tweaked to make Many, although not all, of the regional directors them better. In June 2005, Training (now Training & and the vice presidents (the people the regional Coaching Today) awarded DaVita the \u201cTraining Top directors reported to) had been nurses and then 100 Award,\u201d which recognized the company\u2019s com- nurse administrators\u2014they had worked their way mitment to learning and performance improvement. up in administration. Of course, people in finance and some of the other staff functions had MBAs Recognition and Communications and other backgrounds. Recently, DaVita had expanded its recruiting efforts at business schools, Another way in which people learned about the including Harvard and Stanford. The intention was to DaVita way, felt attached to the company, and hire people with MBAs who would go fairly quickly learned what was going on was through communica- into general manager roles such as regional direc- tions and recognition. There were bimonthly confer- tors, overseeing a number of facilities. Thiry noted ence calls with all of the facility administrators; more that it was important to get general management than ten different newsletters including DaVita News talent into the company from numerous sources. and Views, the overall company publication; an intra- net and email system, and voice mails and emails to Benefits and Pay celebrate special events and company milestones. Thiry personally answered every email he received DaVita offered a comprehensive benefits and pay from anyone in the company, and he received a package that was somewhat unusual for a company number of them, particularly following his appear- that had a reasonably large number of relatively ance at an Academy or training program or a visit low-paid, hourly employees. Pay was pegged against to a facility. Facility administrators were encouraged competitive benchmarks. At each Academy, Thiry to hold informal meetings with their teams on a reg- would say, \u201cWith respect to wages and healthcare ular basis to check in with each other, engage in joint benefits, we intend to be fair and competitive. We problem solving, and to share information about the must be consistent with the market. With respect facility and the company. It was a company-wide pol- to everything else, we want to be superior.\u201d There icy that a \u201ctown-hall meeting\u201d had to be held when- was a broad-based profit-sharing program that cov- ever an executive at the level of vice president or ered virtually all team members, based on the idea director or higher visited with a group of teammates of sharing the village\u2019s good times and success with at a facility or business office. These meetings gave all of its citizens. These cash bonuses meant a lot to teammates the opportunity to interact informally with those receiving them. One email to Thiry is reflective the executive and to ask questions about whatever of the sentiments expressed: was on their mind about the company. Good Morning and Happy Holidays! I would like Recruitment and Career Development to say THANK YOU for the check I received this morning in homeroom. This was an unexpected Although there were obviously a number of people gift from the Village. This will help with Christ- who had been with the company prior to late 1999, mas for my family. We have many to help and at least some of those who had joined since its feed that day. I am almost in tears right now \u201crebirth\u201d in Phoenix had been attracted by its rep- writing this to you thinking of the extra things utation and unique style. For example, Cathy Gelb recalled,","SELECTED CASES 657 that I will be able to get for my daughter and NEXT STEPS husband and the extended family that is living with me. This thank you comes from the heart Thiry was a person incapable of being complacent. and [I] wanted to express my gratitude for it. If you talked to him about what DaVita was doing right, he seemed almost disengaged. There were also benefits that provided people an opportunity to invest in professional and personal It was only when you brought out problems that growth. The brochure listing the benefits for team- he seemed really interested in the conversation. mates was called \u201cBecause We Care: Davita Although DaVita had enjoyed a remarkable transfor- Teammate Benefits.\u201d Inside it said, \u201cThe strength mation and success along multiple dimensions since of our team is the foundation of our company\u2026. In he and his colleagues had arrived in late 1999, he won- our quest to be the Employer of Choice in the dered what else he and the company could be doing to healthcare industry, we have developed a compre- make it even more successful and special. For hensive program of benefits that are focused on instance, the team\u2019s goal had been to make DaVita your health and welfare, investing in your future \u201cThe Greatest Dialysis Company the World Has Ever and special programs that are unique to the DaVita Seen,\u201d an objective that it mentioned on its Website Village.\u201d In describing this investment, Thiry noted and repeated in virtually every gathering of DaVita that \u201cit is not only in education for their jobs, but people, whether executives or front-line caregivers. also in helping everyone advance their leadership skills and their own sense of self.\u201d8 It was clear that DaVita had gone a long way toward that goal in six years and was a unique Health and welfare benefits included a com- organization with a distinct style and approach. prehensive package of medical, dental, and vision DaVita had been largely successful in a quest to, benefits, extended illness leave, both short-term at least for a time, eliminate the apparent conflicts and long-term disability insurance, life insurance, between the interests of shareholders, team- and a flexible spending account to set aside pre- mates, and patients. The company had created a tax dollars for health or child-care expenses, and management system in which the interests of an employee assistance program. Investing in the each were coincident. Led by Thiry, Mello, Vlceck, teammates\u2019 future included a 401(k) retirement and others, the company\u2019s deliberate culture- program, a teammate stock purchase program, building efforts had paid dividends in terms of profit sharing, the internal training the company reduced turnover and improved performance. provided, and various forms of educational assis- tance, including tuition reimbursement up to However, challenges remained, including inte- $3,000 per year, and an RN scholarship program grating Gambro teammates, continuing to improve that permitted people to work for DaVita while operating performance, ensuring continuity and attending nursing school, with all tuition and fees growth into the future, managing governmental paid up to a maximum of $5,000 per year. relations, and maintaining the commitment and passion of teammates doing difficult work in a Unique to the village were also two programs very competitive labor market. At the top of Thiry\u2019s that provided tuition assistance for the children and \u201cto do\u201d list was the integration of Gambro\u2019s 500 grandchildren of teammates. The DaVita Children\u2019s centers and 12,000 people. Foundation provided some college scholarships for children and grandchildren of teammates, selected Questions on a competitive basis. And the KT Family Founda- tion, funded by Thiry and others, provided money 1. How would you characterize DaVita\u2019s strategy? to be used for educational expenses for the chil- dren and grandchildren of DaVita teammates 2. What advice would you give Kent Thiry in attending grades 6 to 11, again selected on a com- terms of leading and managing the integration petitive basis. of the Gambro organization? 8http:\/\/redcoatpublishing.com\/spotlights\/sl. 3. What would be included in your \u201cfirst 100 days\u201d action plan? 4. How could you preserve DaVita\u2019s culture in the face of an acquisition that includes Thiry\u2019s former organization, Vivra.","PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT 21 Organization Development for Economic, Ecological, and Social Outcomes 22 Organization Development in Nonindustrial Settings: Health Care, School Systems, the Public Sector, and Family-Owned 23 Future Directions in Organization Development INTEGRATIVE CASES B.R. Richardson Timber Products Corporation Building the Cuyahoga River Valley Organization The Transformation of MECK Insurance 658 \u00a9 Pixmann\/Imagezoo\/Getty Images","\u00a9 Pixmann\/Imagezoo\/ 21 Getty Images Organization Development for Economic, Ecological, and Social Outcomes learning Describe organization development (OD) interventions that help objectives organizations balance economic, social, and environmental objectives. Describe sustainable management organizations (SMOs) and how OD can assist in their design and development. Describe global social change organizations and how to adopt OD practices to develop them. This chapter describes two relatively new inter- design and implementation guidelines for building ventions in organization development (OD) these capabilities into the structures, processes, and aimed at enabling organizations to pursue behaviors of the organization. \u201csustainable effectiveness.\u201d1 They are still being developed and refined but are intended for the Global social change organizations engage in growing number of organizations seeking balance activities that increase the social and environmental in the achievement of economic, social, and envi- outcomes of predominantly economically oriented ronmental outcomes. organizations. OD practitioners are using this intervention to facilitate the development of evolving The first intervention\u2014sustainable management countries, to change the practices of for-profit entities, organizations (SMOs)\u2014proposes that the central to provide a voice to underrepresented social classes, purpose of human systems should be sustainable and to bridge the gap between cultures facing similar effectiveness. These organizations are built to change social issues. The application of planned change and adapt in the service of positive economic, social, processes in these settings requires a new set of and environmental results. This intervention describes OD practitioner skills. the elements of a sustainable strategy and provides 21-1 Sustainable Management Organizations A recent, global survey found that 93% of CEOs believe sustainability issues are critical to the future success of their firms,2 and there is evidence they are acting on this belief. The second annual Sustainability and Innovation Global Executive study found that, despite the economic downturn in 2010, 59% of companies increased their investments in sustainability.3 Sustainability initiatives focus on the environmental impact of business operations, including travel reductions, two-sided printing, more environmentally 659","660 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT sensitive product packaging, and recycling programs. Corporate social responsibility pro- grams also are increasingly common. More and more, however, firms are recognizing that these positive actions are relatively short sighted; they are taking bigger steps to build financial, social, and environmental performance into their organization.4 Loblaws, Canada\u2019s largest grocery chain, not only has packaging initiatives and energy-saving programs, they are also developing policies, including a sustainable seafood policy, that extend their organization into supply chain relationships, coordinate with environmentally-concerned nongovernmental organizations, educate consumers, and contribute to financial performance. A variety of OD-related approaches that promote sustainability are being developed, including the Coalition for Environmentally Responsible Economics principles, the Natural Step, ISO 14000, and natural and climate capitalism.5 These frameworks represent opportu- nities to make sustainability, especially ecological sustainability, a more deliberate and inten- tional value of OD. The SMO intervention asks a fundamentally different question about how to develop organizations compared to the strategic change interventions in Chapters 18\u201320. Those change programs asked, how can we develop organizations to improve their economic effectiveness\u2014domestically or globally? SMO interventions ask, how can we develop organizations to achieve sustainable effectiveness? Based on action research at the University of Southern California\u2019s Center for Effective Organizations, Mohrman, Lawler, and Worley have developed the features and processes for creating SMOs.6 SMOs are designed to achieve sustainable effectiveness. They can perform in three areas\u2014people, planet, and profit\u2014and are agile enough to remain effective over time. This capability follows closely from the United Nations World Commission on Environ- ment and Development\u2019s description of sustainability: \u201cmeeting the needs of the present without compromising the ability of future generations to meet their own needs.\u201d7 There are two important implications of this definition: \u2022 First, the organization should generate sustainable outcomes. This means achieving a triple-bottom-line objective\u2014positive economic, social, and ecological results.8 The organization must be clear about its purpose and consider the needs of all stakeholders\u2014shareholders, customers, employees, business partners, governments, the ecology, local communities, and the public. The triple-bottom-line objective is also a normative value that guides how organizations should go about minimizing harm or maximizing benefits through their decisions and actions. This value is man- ifest in the day-to-day decisions that give social and ecological outcomes equal standing with economic concerns. SMOs are designed to do consistently well in all three of these areas. \u2022 Second, SMOs should be able to sustain effectiveness over time. They must be adaptable, innovative, and agile. Traditional organizations equate stability and reli- ability with effectiveness9 and, in a world that is changing rapidly, they often find it difficult to maintain adequate levels of performance. SMOs assume that little about their environment will be stable even in the midterm. They are committed to having execution, innovation, and implementation capabilities that support change. 21-1a Design Guidelines Consistent with the definition of sustainable effectiveness, the design of SMOs follows broad guidelines that are still being developed and refined. These guides have to do with setting strategies that support sustainability, determining sustainable objectives, establishing an organization identity that is sustainability-friendly, and creating an agile organization.","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 661 Strategies That Support Sustainable Effectiveness Sustainable effectiveness\u2014 being effective along financial, social, and environmental dimensions over a long period of time\u2014requires an appropriately defined strategic intent. As described in Chapters 5, a stra- tegic intent consists of resource allocations that reflect choices of breadth, aggressiveness, and differentiation. Each of these dimensions can support sustainable effectiveness. \u2022 Breadth. Participation in multiple countries, markets, technologies, or products and services increases the complexity of an organization\u2019s carbon footprint and social impact. It makes it difficult to understand the impact of the organization on ecological and social outcomes. Over the years, Starbucks\u2019 scope of domestic and international operations, its product mix, and ancillary services (e.g., music, Internet hot spots, food) have broadened dramatically. As it grew, the complexity of its operations required responses in its fair trade, water conservation, energy, and recycling policies and systems to maintain an appropriate balance. On the other hand, some breadth and diversification makes it easier to make strategic changes that insure reasonable profits over a long time frame. SMOs think hard about this balance. \u2022 Aggressiveness. In fast-changing markets, there are many appropriate opportunities to pursue objectives aggressively, but in general SMOs are wary of too much aggres- siveness too often. While SMOs are effective competitors, their growth objectives are reasonable and reasoned. Tartan Yachts, a high-quality manufacturer of sailboats, faced this dilemma in the early 2000s. Its success resulted in more orders than its single plant could produce in a timely fashion, and the growing overall economy provided a tempting opportunity to support the increased demand with increased production capacity. In the end, Tartan Yachts decided not to increase capacity. The organization realized that a key differentiator was the special relationships it had built with customers and that quality was partly a function of keeping capacity sized appropriately. The wisdom of its conservative growth approach paid off hand- somely during the 2008\u20132010 economic downturn. Tartan Yachts did not have to go through the painful and disruptive downsizing that many of its competitors did, and it maintained its reputation for quality. \u2022 Differentiation. Understanding why customers make purchasing decisions and how the organization\u2019s product and service features align with those choices is critical to success. SMOs build features into their offerings that reflect all three outcomes. For example, Microsoft\u2019s Windows 7 made big improvements over the ill-fated Vista operating system that were important for economic objectives, but its sustainability-friendly identity encouraged the firm to also incorporate a variety of power-saving features that contributed to energy conservation. Objectives That Support Sustainable Effectiveness In SMOs, social and ecologi- cal outcomes have equal standing with economic results. This is easier said than done. Greenpeace revealed that Nestl\u00e9, a well-respected and responsible company, was pur- chasing large quantities of low-priced palm oil from firms that were destroying rain for- ests to build even larger palm plantations. The news that Nestl\u00e9 may have favored economic over environmental objectives damaged its reputation and provoked a boycott of its products. SMOs deliberately integrate economic, social, and ecological objectives. First, SMOs must create positive economic outcomes to survive. Organizations that cannot operate in a way that leads to revenues meeting or exceeding expenses cannot survive, let alone create other types of valued outcomes. The difference between SMOs and traditional organizations is how much profit they make, how they make a profit, and toward what end that profit is used.","662 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT SMOs reject the goal of maximizing profit or shareholder returns and set sustainable goals for profitability and growth. Achieving social and environmental goals requires investment dollars that are unavailable under a profit maximizing philosophy. Former Johnson & Johnson CEO, William Weldon, argued that the firm had responsibilities to patients, customers, staff, and the community that may prevent it from providing the best possible return, at least in the short term. Organizations are increasingly realizing that maximizing profits by leveraging debt, incenting sales forces and executives to achieve \u201cbig hairy audacious goals,\u201d or pursuing acquisitions to \u201cgain important syner- gies\u201d that rarely materialize is a distraction from sustainable effectiveness. As suggested above, SMOs take a less aggressive approach to growth.10 Business strategies, in general, try to grow the organization along some dimension, including size, profits, revenues, market share, or influence. Aggressiveness that takes advantage of a short-term market opportunity is different from aggressiveness that consistently pursues organizational growth rates that greatly exceed the rate of market growth, the market\u2019s capacity to sustain growth, or the organization\u2019s capacity to support growth. Align Technologies, for example, is the maker of Invisalign orthodontics, a series of customized mouthpieces that achieve the same results as metallic braces without the wires. Its technology challenges existing orthodontic suppliers as well as the skill sets and status of orthodontists. For Align Technologies to be successful, it must move aggressively to establish its position and technology as the incumbents defend their fran- chises. Nevertheless, Align Technologies must be careful to ensure that an aggressive growth strategy does not become its corporate identity. Expecting the firm to grow at the same rates after it has established its position in the market may not be reasonable. Reasonable and sustainable profit and growth expectations mean that SMOs may never be the best performers in their industries at any particular point in time. Setting high, difficult-to-achieve economic goals requires dedicated resources and focus that can distract employees\u2019 attention from other goals and the creation of other kinds of value. SMOs recognize that the cost of sustainable profit and growth is a lower return on immediate financial performance but a more stable, long-term profitability with the ability to pursue social and environmental objectives. Second, SMOs create positive ecological outcomes. They are keenly aware of their carbon footprint and their overall contribution to the planet\u2019s ecology. SMOs accept the logic of the Natural Step, i.e., that current economic models of growth cannot reconcile the increasing demand for and decreasing supply of finite and fundamental natural resources.11 This incompatibility is a central source of SMO strategies; how the organiza- tion generates economic and social value without compromising the natural environment differentiates SMO strategies from those of other organizations. Creating ecological value suggests that business strategies built around the productive use of natural resources can solve environmental problems at a profit. Most organizations pursuing sustainable effectiveness start by setting an initial goal of not destroying the environment. When profit maximizing and growth-oriented world- wide organizations attempt to lower costs by placing activities in geographic areas with the lowest wage rates, such as Asia, large, complex sourcing and distribution supply chains are created. By some estimates, each of the largest tanker ships used in these sup- ply chains can emit as much as 5,000 tons of sulfur a year, the equivalent of 50 million typical automobiles.12 As regulatory changes are being sought by environmental groups, these operating costs will likely increase. Thus, when the cost of pollution is factored into the cost of manufacturing and supply chain activities, SMOs begin to rethink the low wage rate decision. Instead, they seek ways to not only lower overall costs but to reduce environmental damage as well.","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 663 Third, SMOs create positive social outcomes. This goal mandates that organizations contribute to human and cultural well-being and recognizes the role social issues play in innovation and long-term adaptability. Social value includes the way an organization treats its workforce and the communities, cultures, governments, and countries in which it operates. Organizations without a clear perspective on social issues are vulnerable to the profit maximization motive. McDonalds noted the growing numbers of automobiles in Beijing, the attendant increase in driving times and stresses on family life, and concluded that opening drive-thru restaurants would be a good idea. The initial drive-thru\u2019s struggled because the concept was unfamiliar to the Chinese. If someone actually found the drive-thru lane, they didn\u2019t know what to do at the ordering station, didn\u2019t know they had to drive up to the next window to pay, and didn\u2019t know they needed to drive to the next window to pick up their food. After they picked up their food, they usually drove to a parking space, got out of the car, and went into the restaurant to have their meal. In response, McDonalds made it easier to find the drive-thru lane and trained the workers to point cars to the next window, including holding the bag of food out of the last window to encourage drivers to move forward to get their meal. When profit maximization overrides the creation\u2014or even the maintenance\u2014of social and cultural values, organizations can unwittingly contribute to cultural homoge- nization. McDonalds\u2019 pursuit of economic growth may come at the expense of Chinese behaviors and culture. Does teaching them to behave like Westerners enhance cultural diversity? Identities That Are Sustainability-Friendly SMOs\u2019 long-term success derives from their organizational identity.13 Identity represents the \u201ccentral and enduring attributes of an organization that distinguish it from other organizations\u201d and answers the question, \u201cWho are we as an organization?\u201d14 SMO identities are closely aligned with sustainable effectiveness, with balancing economic, ecological, and social outcomes. As shown in Figure 21.1, identity both flows from and helps to create an organiza- tion\u2019s culture. Identity emerges from the values in use that define an organization\u2019s cul- ture, and in turn identity gives meaning to culture through the stories told to members. Figure 21.1 also suggests that identity flows from and helps to create an organization\u2019s brand, image, and reputation. Identity drives the brand promises and messages that organizations make to customers and the market. Because all organizations must com- pete for resources, they must proactively communicate their mission and brand\u2014what they offer, what markets they serve, and what they stand for\u2014to the marketplace. For example, Philips\u2019 tag line in all of its media content, \u201cSense and Simplicity,\u201d reflects a commitment to products that are easy to use and designed well for the task. FIGURE 21.1 The Components of Organization Identity SOURCE: Adapted from Hatch and Schultz, 2002.","664 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT However, the image and reputation that external stakeholders hold about the orga- nization also influence identity. Customers and other stakeholders get to experience whether the organization generally lives up to its brand promises. Experiences using the product or service, encounters with after-sales support services, stories from the business press or websites, and other sources of information provide feedback about the align- ment between message and behaviors. For example, Citibank displayed advertisements in its offices that it was proud to be a part of programs that created jobs in America\u2014 and then announced it would cut 11,000 jobs. Over time, the organization builds up a reputation as reliable or unreliable, aggressive and litigious or relatively passive, a defender of human rights or a polluter, or a firm that stands behind its products or avoids publicity. Analysts, for example, have been skeptical about Philips\u2019 ability to man- age its complex business portfolio. It dropped from #5 to #7 among the world\u2019s most admired electronics firms (and did not make the Top 350 overall), but generally has a positive image among consumers (#41 among best global brands). An SMO\u2019s identity should meet the standard of \u201csustainability friendly.\u201d A sustainability-friendly identity embraces the continuous pursuit of financial, social, and environmental values as a core part of who the organization believes it is. Thus, environ- mental initiatives and corporate social responsibility programs would not be \u201cin addition to,\u201d but rather central to strategic and operational decisions. When decisions and actions are oriented toward integrating financial, social, and environmental outcomes without the use of special incentives or projects, the organization makes important contributions to sustainable effectiveness as a matter of course. For example, Nokia and Unilever do not emphasize efforts to market and produce a particular \u201csustainable\u201d product; rather they are developing product portfolios that are financially successful, environmentally friendly, and socially beneficial. Agile Organization Designs That Support Sustainable Effectiveness The final design guideline for SMOs is the need to create an organization that can change and adapt routinely\u2014an organization that is \u201cbuilt to change\u201d (Chapter 19).15 Agility repre- sents a dynamic capability16 that enables timely and effective responses to changing environments and multiple stakeholder demands. Here we discuss the features of an agile organization, including work systems, structures, management processes, and human resource systems. \u2022 Work systems. An SMO\u2019s sustainability-friendly strategy and triple-bottom-line objectives are manifest in its work systems and processes. These work processes directly account for a large percentage of the organization\u2019s economic, social, and environmental impact. To achieve current and long-term economic performance, the organization must design two types of work: (1) core and exploitive and (2) cre- ative and exploratory.17 Core work in SMOs supports the current strategic intent and must be reliable, predictable, and as efficient as practicable. Since the organization\u2019s strategic intent can be subject to change, SMO core work may never be 100% efficient, but it must be reliable enough to support the differentiators, meet demand, and generate profit. It must also be designed to meet social and environmental objectives. For example, DaVita is a Fortune 500 kidney care and dialysis company. Its core work\u2014delivering dialysis treatments to patients with kidney disease\u2014is designed primarily for clinical quality and reliability. DaVita\u2019s \u201cwe\u2019re a village first and a company second\u201d identity drives it to address the quality of its core work first because it believes that will gen- erate the best economic and social outcomes. Thus, work efficiency is not at the expense of workforce, customer, or community outcomes. Work processes are","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 665 designed to generate positive work experiences for organization members and DaVita\u2019s organization identity encourages members to build strong personal relationships with patients and the local community through its \u201cwall of fame.\u201d Moreover, a well-understood continuous improvement process works to increase efficiency and reduce the negative environmental by-products of dialysis. Creative work in SMOs is designed to generate new projects, services, and other disruptive innovations; it can obsolete the current strategic intent and is fundamen- tally different than core work. Creative work is temporary and iterative; it is based on initiatives and activities not jobs, driven by shared goals, and performed by cross- functional teams. In addition to its core work, DaVita must also build future leaders, understand the likely changes and implications of health care reform, identify poten- tial acquisitions or perform due diligence activities, develop new business opportu- nities, and other nonroutine and innovative activities. For any activity that warrants attention, DaVita leaders create teams consisting of multiple functions and often including external stakeholders, such as regulators, legislators, customers, physicians, and community representatives. These teams have clear goals and appropriate decision authority. Early in the team\u2019s work, mem- bers are expected to report out frequently on progress or obstacles. This creative work system enables DaVita to develop its members, to gather and charter resources quickly, and to make resources available for other projects when a project is over. Both core and creative work involve innovation. Core work must innovate to improve efficiency and effectiveness; creative work must innovate to develop future opportunities. Moreover, to achieve social and environmental outcomes, both types of work processes must carefully consider and adapt their input and throughput processes to insure appropriate output characteristics. \u2022 Structures. Structures focus member attention and organization resources on the most important aspects of getting core and creative work accomplished. The unique feature of SMO structures is their external focus and \u201cmaximum surface area.\u201d18 As described in Chapter 19, maximum surface area structures support core and creative work with roles that are directly connected to some aspect of the external environ- ment. To the extent possible, every role in an SMO should be a \u201cboundary span- ning\u201d role.19 Externally focused roles enable organization members to experience what is happening in professional, business, competitive, and regulatory environ- ments as well as community and environmental sectors and bring that information into the organization as meaningful inputs to strategy and operations. The surface area of almost any structure can be increased. For example, IBM and Cisco have different structures but both have good external focus and surface area. In IBM\u2019s case, a \u201cfront-back\u201d structure puts cross-functional solution teams into direct contact with customers, and the back office groups must stay current in their technical expertise to support the requested solutions. Both the front and back of the organiza- tion work to support IBM\u2019s \u201csmarter planet\u201d strategic intent. Cisco increases the sur- face area of its functional structure by creating cross-functional \u201ccouncils and boards\u201d that address specific segments. Organization members must stay connected to their own professional communities in addition to working with other functions to build and implement strategies for enterprise customers, emerging markets, or some other important business segment. For example, Cisco created its \u201ceco-board\u201d to achieve the \u201cif it can be connected, it can be green\u201d objective across the organization. \u2022 Management processes. SMOs use flexible decision-making and resource allocation processes to leverage information gathered by the externally focused roles. An important feature here is transparency. In SMOs, information is transparent and","666 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT moved throughout the organization to wherever it is needed and decision-making rights are assigned to the appropriate level and role in the organization. This ensures that the right information is available and provides a clear picture of how the organization is performing relative to triple-bottom-line objectives. It enables organizations to make timely and relevant decisions to keep pace with changing conditions. \u2022 Human resource systems. SMOs rethink the way that people are attracted, retained, developed, motivated, and led. To attract the right kind of diverse workforce for the right period of time, SMOs use multiple employment deals and offer a wide variety of work arrangements, including contract labor, outsourcing, and longer term com- mitments to create the ability to treat employees as individuals. Individual treatment is necessary to match the skills, motives, and lifestyles of individuals with the work that needs to be done. Accenture and Deloitte have career customization programs that attract employees who want to choose and shape their own career tracks, life- styles, work hours, and work locations. Such systems mean that not everyone in the organization is a career employee, has job security, and can expect the organization to provide them with stable employment. While stable employment might seem like a reasonable social sustainability practice, it may not be cost effective or even desired by individuals who prefer the flexibility of contract employment. SMOs assess the skills and competencies that individuals have, develop particu- lar skills in employees, and pay for the effective deployment of those skills in the service of triple-bottom-line objectives. IBM has developed a corporation-wide talent information system that helps make this possible. It provides information on open positions, career paths, and on the skills and competencies of employees. When IBM launched its \u201csmarter planet\u201d strategy, the talent information system helped to iden- tify who had the skills and experiences that would support the strategy and assisted in reallocating important talent. Aligning financial and nonfinancial reward systems to support sustainable effec- tiveness is critical. In general, financial and nonfinancial rewards should be given based on the individual\u2019s triple-bottom-line performance. Executives, for example, need to be rewarded and recognized for achieving reasonable profit levels, corporate social responsibility targets, lower carbon footprints, and healthy relationships with the communities and countries in which they operate. In many cases, it makes sense to stress group or team performance because of the interdependencies that exist in organizations committed to sustainable effectiveness. For organization members, SMOs shift the basis of rewards from jobs to people. Members are rewarded for what they can do with regard to sustainable effectiveness, not for the particular job they perform. Because jobs and tasks are continually changing, people are motivated to learn new skills and knowledge, thus keeping pace with change and enhancing their long-term value to the organization. Rewards also play a role in motivating and reinforcing change in SMOs. Individ- ual or team bonuses are tied directly to change goals, learning new things, and performing new tasks well. This establishes a clear line of sight between rewards and change activities. Bonuses can include one-time rewards given at the end of a par- ticular change effort, or rewards targeted to different phases of the change process. Finally, development and reward systems support the importance of a shared leadership philosophy; leadership in SMOs does not rest with jobs and is not restricted to executives. Rather than relying on centralized sources of power and control, SMOs spread leadership across multiple levels of the organization. This approach speeds decision making and response rates because those lower in the","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 667 organization need not have to wait for top\u2013down direction. It provides 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. 21-1b Application Stages Sustainable management design principles are being implemented in a growing number of organizations. Patagonia, The Body Shop, and Ben & Jerry\u2019s are good examples of companies that were built from the ground up using SMO principles. UPS, Unilever, Gap Inc., GE, PepsiCo, and P&G are in the midst of making sustainable management an integral part of their identities. These companies are challenging long-held assump- tions and making significant changes in their strategies and organization designs. Like other strategic change interventions, SMO applications tend to involve systemic and rev- olutionary change processes driven by senior executives. Because these changes tend to be radical\u2014they generally alter every feature of the organization\u2019s design and challenge many of its long-held assumptions\u2014they usually proceed at a quick pace, taking at least three years to implement. The following SMO application stages are broadly described; as OD practitioners gain more experience with this OD intervention, we can expect more detailed knowledge of how it works and produces results. Identifying and Redefining Organization Identity Probably the biggest distinction between an SMO intervention and other strategic changes is the development of a new organization identity. Change initiatives are directed at redefining or changing the orga- nization\u2019s identity to support sustainable effectiveness and agility. Identity change is both an outcome of the transformation process and a key measure of the change\u2019s effective- ness. It indicates that the organization is applying new strategies and organization prin- ciples to achieving triple-bottom-line results. Once identity redefinition is underway, continuous change interventions, such as those described in Chapter 19, can facilitate the change process. Redefining organization identity typically starts from a diagnosis of the organiza- tion\u2019s existing identity. This involves assessing how well the organization\u2019s values-in-use and brand promise and reputation support sustainable effectiveness and agility. OD practitioners can help organization members conduct a cultural diagnosis (Chapter 18) along with an analysis of the firm\u2019s brand promises and reputation in the market. Then, change processes are directed at leveraging organization values and reputational elements that already support sustained effectiveness rather than trying to \u201cfix\u201d those values and brand images that are not aligned with it. Repurposing the Board of Directors In contrast to boards of directors in tradi- tional organizations, SMO boards face more demanding roles, more complicated deci- sion making, and more intense discussions. Most U.S. and European boards are designed and staffed to serve investors, and this leads to a singular focus on economic performance. This also tends to be the case for nonprofit boards that are dominated by fundraising interests. OD practitioners can help boards address key issues that invariably arise when moving toward sustainable effectiveness.20 \u2022 The board may need to assess whether its membership reflects the most important sta- keholders, including investors and representatives of the community, workforce, and environment. This stakeholder approach to board membership differs significantly","668 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT from the classic financial accountability-driven membership model. For example, less than 10% of large U.S. corporate boards have someone with an HR background,21 and it is unreasonable to expect boards to pursue sustainable effectiveness if they lack expertise with respect to the social and environmental impact of their business model. Membership diversity enables decisions that balance financial, social, and environmen- tal outcomes. \u2022 The board also may need to consider changing its committee structure. In addition to traditional audit and compensation committees, the board may need to establish com- mittees for human capital, social responsibility, and environmental impact. Developing effective strategies and addressing the right set of decisions requires a committee structure that reflects the organization\u2019s sustainable effectiveness objectives. \u2022 Board members may need to create new goal-setting processes. These might include addressing how social and ecological goals can be integrated with economic objec- tives. It may involve adopting the Global Reporting Initiative (GRI), an effort to improve the measurement of the environmental impact of organizations that is sup- ported by Shell, Kimberly-Clark, and Cemex among others.22 The board may choose to highlight such traditional indicators as turnover rates and employee attitude data, and other measures such as job creation and charitable contributions, to increase awareness of social and human capital performance. In some cases, the board may explore reregistering the organization as a \u201cbenefit corporation,\u201d which would allow the firm to pursue other objectives without fear of legal action by shareholders look- ing for a maximized return.23 Patagonia\u2019s board pursued this approach to enable the company to set integrated triple-bottom-line goals. \u2022 The board of directors needs to have effective decision-making skills and clear guidelines to make tough choices about sustainability, such as taking actions that may have a significant negative impact on financial performance but a significant positive impact on social and environmental outcomes, or holding executives accountable for triple-bottom-line achievements. For example, boards face problems promoting sustainable effectiveness when they consistently reward executives for financial performance at the expense of environmental and social performance. Human process interventions, such as team building and process consultation, can help boards become effective decision makers. Building Capabilities Becoming an SMO involves identifying which existing organi- zation capabilities support sustainable effectiveness and determining which new abilities need to be built. Most organizations do not have sufficient resources to create all the necessary capabilities at once, so tough choices need to be made. These decisions are symbolically important; they signal to employees, owners, communities, and NGOs how much the organization actually supports a sustainability-friendly identity. Two capabili- ties that are essential to sustainability involve multistakeholder decision making and change management. SMOs need to be good at multistakeholder decision making and take into account diverse perspectives in making choices.24 Organizations like Gap, Inc., GE, Social Accountability International, Loblaw\u2019s, Unilever, and the World Wildlife Fund are work- ing hard to develop this capability. It may require making changes in both the organiza- tion and its external alliances and partnerships. First, training and development interventions can help organization members learn collaborative decision making and \u201csystems thinking\u201d skills that acknowledge the interdependencies and trade-offs neces- sary to meet triple-bottom-line objectives. Next, decision-making processes may need to be expanded to include nontraditional stakeholders, such as community and","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 669 environmentally related NGOs. Team-building processes for developing trust, exploring alternatives, and integrating perspectives among diverse participants can be helpful.25 Lastly, organizational learning interventions can help the organization apply its new skills and decision processes. Early experiences in trying to apply multistakeholder deci- sion skills and systems are likely to be awkward and inefficient.26 Organization learning interventions can help members learn how to improve their multistakeholder decision- making capabilities. SMOs also need to develop a change capability, which involves three related activi- ties.27 First, change management skills can be developed widely in the organization by hiring people with those skills and by training existing managers and employees to acquire them. Most organization members have a good understanding of technical and operational issues but are less familiar with managing change. Second, an organization effectiveness function can be designed with competencies in strategic planning, organiza- tion design, and change management. Some SMOs have created a center of excellence staffed by professionals from the strategic planning and human resources functions; they provide advice and facilitation for planning and executing change in the organiza- tion. Third, organization members can 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 a change capability. It provides members with the hands-on experience and reflective learning necessary to hone their change skills in action. Developing these change capabilities is likely to involve a significant investment in training and development.28 Sequencing the Changes Repurposing boards and building capabilities to support a sustainability-friendly identity are extensive and complex changes. The change to an SMO has to account for this complexity to positively move the organization\u2019s identity. This involves a particular sequence of changes, starting with work system redesign. Then the strategy needs to be clarified and the organization redesigned to promote agil- ity. Large-group intervention (LGI) techniques, described in Chapter 11, are particularly helpful to accelerate the transformation process because they can support the organiza- tion\u2019s development of multistakeholder and change capabilities. Work Systems Redesign. Work is the primary driver of an organization\u2019s carbon foot- print; it directly affects the workforce\u2019s well-being and is most connected to the creation of economic value. Thus, redesigning work systems can have the most payoff to an SMO. Assessing how both standard and creative work get done and designing them for sustain- able effectiveness will likely make the biggest advance toward becoming an SMO. Rede- signing work to add economic value in environmentally and socially acceptable ways can provide a solid foundation for further change. Focusing on work redesign first ensures that the organization\u2019s future aspirations are aligned with its past and current behaviors. It shows concretely that the organiza- tion\u2019s commitment to sustainability is real not just window-dressing. In many organi- zations today, there is growing pressure to \u201cdo something\u201d about sustainability. Organizations that develop marketing campaigns proclaiming support for green issues and social concerns before thinking through how their work processes affect those outcomes run a serious risk. If intentions of sustainable effectiveness are announced too early and with too much fanfare, an organization\u2019s reputation can be damaged if marketing promises are not backed up by tangible actions. The organization\u2019s efforts will be seen as \u201cgreenwashing,\u201d and its ability to change identity is set back, perhaps permanently. It may take the firm a long time to rebuild trust in corporate sustainability promises.","670 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Clarifying the Strategy. Early in the change process, the organization needs to meet with key stakeholders to clarify goals and to explore the implications of becoming an SMO on its capabilities and resources. This can be accomplished through a series of large-group interventions (LGIs) with key stakeholders. LGIs are well suited for this part of the SMO change process. They enable organization members to interact with multiple stakeholders, to learn new ways of behaving and deciding, and to gain clarity and commitment to becoming an SMO. The first LGI, typically led by the board and the executive team, is concerned with fleshing out the organization\u2019s sustainability strat- egy and future state. The focus is on gaining stakeholder support, determining how the different stakeholders will work together, and clarifying the organization\u2019s vision, mis- sion, and values. Subsequent LGIs address the design and implementation of particular aspects of strategy and organization design. Building an Agile Design. To move further toward being an SMO, an organization needs to build an agile organization design that supports and reinforces the new sustainable-friendly work processes. Agile organization designs have a \u201cmaximum sur- face area\u201d to support an external focus, strong collaboration capabilities, flexible resource allocation systems, and transparent decision-making processes. They also include a talent management system with goals, performance appraisals, and rewards that promote flexi- bility and sustainable effectiveness outcomes. In particular, people are retained or hired for their compatibility with an SMO; they are appraised and rewarded for sustainable behaviors. Performance management interventions (Chapter 15), talent management changes (Chapter 16), and organization design interventions (Chapter 18) can help the organization build an agile design. Application 21.1 describes Interface Carpets, one of the most referenced cases of a transformation to an SMO. 21-2 Global Social Change Organization development applied to global social change is one of the boldest and most exciting developments in the field.29 This form of OD is generally practiced in global social change organizations (GSCOs), not-for-profit and nongovernmental entities that are created at the grassroots level to help communities and societies address such important problems as unemployment, race relations, sustainable development, homelessness, hunger, disease, water quality and conservation, and political instability. Globally, GSCOs are heavily involved in the developing nations. Examples include the World Conservation Union (IUCN), the Kids Global Outreach Foundation (United States\u2013Africa), the Society of Entre- preneurs and Ecology (China), the Nature Conservancy (International), the Mountain Forum (Peru), International Physicians for the Prevention of Nuclear War, and the Asian Coalition for Agrarian Reform and Rural Development (ANGOC-Philippines). Many prac- titioners who help create and develop GSCOs come from OD backgrounds and have adapted their expertise to fit highly complex, political situations. This section describes GSCOs and how OD is used for social change. 21-2a Global Social Change Organizations GSCOs are part of a social innovation movement to foster the emergence of a global civilization.30 They exist under a variety of names, including development organizations (DOs), nongovernmental organizations (NGOs), social movement organizations, interna- tional private voluntary organizations, and bridging organizations. They address complex","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 671 application 21 1 INTERFACE CARPET\u2019S TRANSFORMATION TO SUSTAINABILITY I nterface Flooring Systems was founded In January 1995, Interface convened a by Ray Anderson as a joint venture with \u201cgreen supply chain\u201d conference with its sup- Britain\u2019s Carpets International in 1973 to pliers to discuss its goals and to gain commit- make carpet tiles. Carpet tiles, an alternative ments from its business partners. The eventual to long rolls of carpet, can be replaced piece by sustainability strategy outlined seven goals, piece rather than all at once. Between 1978 including eliminate waste (any measureable and 1983, revenues grew from $11 million to input that did not create value), limit toxic emis- $80 million as a result of building close relation- sions from manufacturing plants, switch to ships with commercial customers. Interface renewable sources of energy, \u201cclose the went public in 1983 and through 2008 grew loop\u201d which meant using any waste or dis- revenues at an average annual rate of 11.5%. carded carpet as inputs to new products, achieve resource-efficient transportation, and Interface\u2019s transformation to sustainable educate customers, suppliers, and even com- management began in 1994 when Anderson petitors. The seventh goal, to redesign com- received a memo from a research division task merce, eventually resulted in what was called force to speak about Interface\u2019s environmental the \u201cevergreen service agreement.\u201d It was a vision. The group had been formed in response radical innovation that attempted to shift Inter- to questions from customers, architects, and inte- face\u2019s business model from \u201cselling carpet\u201d to rior designers about Interface\u2019s environmental \u201crenting flooring systems.\u201d efforts. The task force\u2019s operational review sug- gested that, in fact, Interface had very few environ- In 1996, Interface held its first \u201cEco Dream mental initiatives and was not doing much to be Team\u201d conference of outside environmental environmentally friendly. The memo made experts and organization members to explore Anderson anxious over what he would say since the strategy and organizational requirements there was no environmental policy other than necessary to achieve its sustainability goals. \u201ccomply, comply, comply.\u201d At the same time, The conference recommendations led to Anderson received Paul Hawkin\u2019s book, The changes in Interface\u2019s product design and Ecology of Commerce. The book\u2019s message con- manufacturing, supply chain, and operations. fronted his sense of responsibility and changed his Implementing the changes required the organi- attitudes about what a business should achieve. zation to address a variety of issues. In his speech to the task force, he declared First, as the new strategy was communi- that Interface would become a company that cated, organization members expressed a vari- \u201ccould grow and prosper without doing harm ety of concerns and resistance, including to the earth.\u201d He later said that he didn\u2019t want questions about what sustainability meant his legacy to be that he dug up the earth, and how the organization was going to change. turned petroleum and other materials into pol- The depth of misunderstanding was particu- luting products, and dumped them in landfills. larly troublesome. After hearing about the sus- At the time, Interface was part of an industry tainability goal, one employee asked \u201cHow that extracted and processed 1.2 billion pounds many sheep are we planning to have, and of material from the earth to produce $802 bil- where are they going to graze?\u201d In particular, lion worth of products. Of the 1.2 billion few people in the organization understood how pounds, 800 million pounds was petroleum ecologically unfriendly existing operations based and two-thirds of that was burned to were. As a result, a large commitment to convert the remaining third into product. As employee training about the environment and an industry, carpeting firms were depositing operations led to Interface being named one 4.5 billion pounds of material into landfills that of the Best 100 Companies to Work for by would degrade over 20,000 years. Fortune magazine in 1997.","672 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Second, figuring out where to eliminate waste By 2000, a variety of market and economy and toxicity or to use clean technology was a changes, including the Y2K threat, the dot.com straightforward process of total quality management bust, and other changes that reduced customer that was implemented under the acronym QUEST budgets, were hurting the industry. In January (Quality Utilizing Employee Suggestions and Team- 2001, Interface held a leaders conference to work). However, figuring out how to do these things address a 30% workforce reduction and other was a giant technical problem. The organization\u2019s organization changes in response to business research group and its engineers had to redesign declines. At the conference, managers affirmed (or reinvent) almost every production process and their commitment to sustainability saying that it product, including how to recycle nylon and how to was part of the organization\u2019s DNA. make carpet using less petroleum. Interface\u2019s transformation to sustainability is Third, creating the evergreen services agree- both remarkable and cautionary. The organization ment required Interface to develop a leasing con- clearly made a radical change in its carbon foot- tract that would make financial sense in the print, established clear benchmark and best prac- context of existing rules and regulations. The idea tice standards, and redefined the business model of moving funds from capital expense (sale of car- in carpet manufacturing, distribution, and sales. pet) to operating expense (lease of carpet) was an Economically, however, its stock price and profit- easy sell, but getting a lease agreement written ability have varied considerably since the transfor- that met current tax and accounting standards mation, although its annual growth rate is was a lot more difficult. In addition, Interface had impressive. Socially, it has not been a stable to work with customers because the price of the employer, meeting most economic challenges lease seemed very high to customers. Few custo- with layoffs. Nonetheless, its tremendous accom- mers actually knew the full cost of their flooring plishments in environmental matters represent an because the amounts associated with carpet pur- important social benefit. These highs and lows of chase, maintenance, and other services were sep- effectiveness vis-\u00e0-vis the triple bottom line testify arated into different accounts. to the difficulties of the transformation to an SMO. social problems, including overpopulation, ecological degradation, the increasing concen- tration of wealth and power, the lack of management infrastructures to facilitate growth, and the lack of fundamental human rights. The early efforts of many GSCOs to raise awareness and mobilize resources toward solving these problems culminated in the United Nations\u2019 Conference on Environment and Development in Rio de Janeiro in June 1992, where leaders from both industrialized and less-developed countries met to discuss sustainable development.31 Since then, a number of conferences and agreements have occurred. The most notable are the 1997 Kyoto Protocol that attempted to gain commitment from countries around the world to reduce greenhouse gas emissions and the Global Compact, a strategic policy initiative that asks businesses to align their opera- tions with ten universally accepted principles related to human rights, labor, environ- ment, and corruption. The Doha Climate Conference in December 2012 successfully extended the Kyoto protocol agreements to 2020 despite continued debates. The work of GSCO\u2019s can be aided or constrained by these larger, governmental accords. GSCOs have the following characteristics:32 \u2022 They assert, as their primary task, a commitment to serve as an agent of change in creating environmentally and socially sustainable world futures; their transforma- tional missions are articulated around the real needs of people and the earth.","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 673 \u2022 They have discovered and mobilized innovative social-organizational architectures that make possible human cooperation across previously polarizing or arbitrarily constraining boundaries. \u2022 They hold values of empowerment, or people-centered forms of action, in the accomplishment of their global change mission, emphasizing the central role of peo- ple as both means and ends in any development process. \u2022 They are globally and locally linked in structure, membership, or partnership and thereby exist, at least in identity and practice (maybe not yet legally), as entities beyond the nation-state. \u2022 They are multiorganizational and often cross-sectorial. They can be business, gov- ernment, or not-for-profit organizations. Indeed, many of the most significant global change entities involve multiorganization partnerships bridging sectorial boundaries in new hybrid forms of business, government, and volunteerism. GSCOs therefore differ from traditional for-profit firms on six dimensions.33 First, they typically advocate a mission of social change\u2014the formation and development of better societies and communities. \u201cBetter\u201d typically means more just (Amnesty Interna- tional, the Hunger Project, World Vision), peaceful (Peace Direct, International Physi- cians for the Prevention of Nuclear War), or ecologically conscious (Nature Conservancy, the Global Village of Beijing, the Mountain Forum, IUCN, World Wildlife Fund, Friends of the Earth). Second, the mission is supported by a network structure. Most GSCO activity occurs at the boundary or periphery between two or more organizations.34 Unlike most indus- trial firms that focus on internal effectiveness, GSCOs are directed at changing their environmental context. For example, World Vision (www.worldvision.org) operates microfinance institutions in 43 countries to boost the economic status of entrepreneurs, create jobs, and develop local economies. Third, GSCOs generally have strong values and ideologies that justify and motivate organization behavior. These \u201ccauses\u201d provide intrinsic rewards to GSCO members and a blueprint for action.35 For example, the ideological position that basic human rights include shelter has directed Habitat for Humanity to erect low-cost homes in a wide variety of underdeveloped communities. Fourth, GSCOs interact with a broad range of external and often conflicting consti- tuencies. To help the poor, GSCOs often must work with the rich; to save the ecology, they must work with the polluters; and to empower the masses, they must work with the powerful few. This places a great deal of pressure on GSCOs to reconcile pursuit of a noble cause with the political reality of power and wealth. Fifth, managing these diverse external constituencies often creates significant organi- zational conflict. On the one hand, GSCOs often need to be organized into departments to serve and represent particular stakeholders; on the other, they are strongly averse to bureaucracy and desire collegial and consensus-seeking cultures. The conflicting perspec- tives of the stakeholders, the differentiated departments, and the ideological basis of the organization\u2019s mission can produce a contentious internal environment. For example, the International Relief and Development Agency promotes grassroots development projects in developing countries using resources donated from developed countries. As the agency grew, departments were created to represent different stakeholders: a fundraising group handled donors, a projects department worked in the local offices, a public relations department directed media exposure, and a policy information department lobbied the government. Each department adapted to fit its role. Fundraisers and lobbyists dressed more formally, took more moderate political positions, and managed less participatively","674 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT than did the projects departments. These differences were often interpreted in political and ideological terms, creating considerable internal conflict. OD practitioners designed a series of feedback meetings to increase the understanding and relevance of the different groups36 Finally, GSCO membership often is transitory. Many people are volunteers, and the extent and depth of their involvement varies over time and by issue. Turnover can be quite high. 21-2b Application Stages GSCOs are concerned with creating sustainable change in communities and societies. This requires a form of planned change in which the practitioner is heavily involved, many stakeholders are encouraged and expected to participate, and \u201ctechnologies of empowerment\u201d are used. Often referred to as \u201cparticipatory action research,\u201d37 planned change in GSCOs typically involves three types of activities: building local organization effectiveness, creating bridges and linkages with other relevant organizations, and devel- oping vertical linkages with policymakers. Building the Local Organization Although GSCOs are concerned primarily with changing their environments, a critical issue in development projects is recognizing the potential problems inherent in the GSCO itself. Because the focus of change is their envi- ronment, members of GSCOs are often oblivious to the need for internal development. Moreover, the complex organizational arrangements of a network make planned change in GSCOs particularly challenging. OD practitioners focus on three activities in helping GSCOs build themselves into viable organizations: using values to create the vision, recognizing that internal conflict is often a function of external conditions, and understanding the problems of success. \u2022 Values to create vision. For leadership to function effectively, the broad purposes of the GSCO must be clear and closely aligned with the ideologies of its members. Sin- gleness of purpose can be gained from tapping into the compelling aspects of the values and principles that the GSCO represents. For example, the Latin American Division of the Nature Conservancy held annual two-day retreats. Each participant prepared a white paper concerning his or her area of responsibility: the issues, chal- lenges, major dilemmas or problems, and ideas for directions the division could take. Over the course of the retreat, participants actively discussed each paper. They had broad freedom to challenge the status quo and to question previous deci- sions. By the end of the retreat, discussions produced a clear statement about the course that the division would take for the following year. People left with increased clarity about and commitment to the purpose and vision of the division.38 Developing a shared vision can align individual and organizational values. Because most activities occur at the boundary of the organization, members are often spread out geographically and are not in communication with each other. A clearly crafted vision allows people in disparate regions and positions to coordinate their activities. For example, ACDI\/VOCA (www.acdivoca.org) is a \u201cnonprofit that means business.\u201d The organization provides sustainable solutions that integrate approaches from agribusiness, community and enterprise development, financial services, and food security perspectives. Its vision, \u201cA world in which people are empowered to suc- ceed in the global economy,\u201d helps to coordinate the work of the people throughout the organization. \u201cOur mission and a vision grow out of the farmer cooperative move- ment in the U.S. going back 45 years. We know something about how you bring food","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 675 from the farm to the table.\u201d As one member put it, \u201cI\u2019m part of helping a small farmer in a small village somewhere in the world be able to put food on their table and send their kids to school or to buy a net to protect themselves from malaria. I don\u2019t know how that couldn\u2019t impact you.\u201d Another staff member noted, \u201cIt\u2019s a privilege to have a job that is making a difference, and as a mom you feel that more. When I hear a story of a woman who\u2019s saying, \u2018I couldn\u2019t feed my children,\u2019 I think, oh my goodness. And now, because they got a loan, they got their business going, and they\u2019re connected with people who wanted to buy their stuff, you can just see it in their eyes and their voices. They have hope for the future. It\u2019s a fantastic thing.\u201d \u2022 Recognizing conflict. Because of the diverse perspectives of the different stake- holders, GSCOs often face multiple conflicts. In working through them, the organi- zational vision can be used as an important rallying point for discovering how each person\u2019s role contributes to the GSCO\u2019s purpose. The affective component of a GSCO vision gives purpose to members\u2019 lives and work. Another way to manage conflict is to prevent its occurrence. At the Hunger Project, the \u201ccommitted listener\u201d and \u201cbreakthrough\u201d processes give GSCO members an opportunity to seek help before conflict becomes dysfunctional. Every member of the organization has a des- ignated person who acts as a committed listener. When things are not going well, or someone is feeling frustrated in their ability to accomplish a goal, they can talk it out with this colleague. The role of the committed listener is to listen intently, to help the individual understand the issues, and to think about framing or approaching the problem in new ways. This new perspective is called a \u201cbreakthrough\u201d\u2014a crea- tive solution to a potentially conflictual situation.39 \u2022 Problem of success. Finally, a GSCO\u2019s success can create a number of problems. The very accomplishment of its mission can take away its reason for existence, thus causing an identity crisis. For example, a GSCO that succeeds in creating jobs for underprivi- leged youth can be dissolved because its funding is redirected toward organizations that have not yet met their goals, because its goals change, or simply because it has accom- plished its purpose. During these times, the vital social role that these organizations play needs to be emphasized. GSCOs often represent bridges between the powerful and powerless, between the rich and poor, and between the elite and oppressed, and as such may need to be maintained as legitimate parts of the community. Another problem can occur when GSCO success produces additional demands for greater formalization. New people must be hired and acculturated; greater control over income and expenditures has to be developed; new skills and behaviors have to be learned. The need for more formal systems often runs counter to ideological prin- ciples of autonomy and freedom and can produce a profound resistance to change. Employees\u2019 participation during diagnosis and implementation can help them commit to the new systems. In addition, new employment opportunities, increased job respon- sibilities, and improved capabilities to carry out the GSCO\u2019s mission can be used to encourage commitment and reduce resistance to the changes. Supported by sponsors in industrialized countries, the International Child Spon- sorship Agency (ICSA) delivers services that enhance children\u2019s welfare in developing countries. For many years, entrepreneurial leadership in the field led to growth in the number of programs and activities that were difficult to coordinate and monitor. The organization brought in a new \u201cbusiness-oriented\u201d CEO to improve resource and pro- gram efficiencies. While everyone agreed that better coordination was necessary, they also believed that the new CEO\u2019s implementation of new accounting and information systems was too top-down. Tensions between headquarters and the field increased and turnover among key staff members led to an OD intervention. It started with a","676 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT diagnosis that showed that the focus on control and efficiency conflicted with ICSA\u2019s traditional, entrepreneurial values. Changes were implemented to increase the involve- ment of the field in strategic planning, to increase and clarify the decisions that could be made in the field, and to reinforce the leadership and cultural styles that best repre- sented the vision. The changes were viewed as a rebalancing of the organization\u2019s pri- orities, giving fundraising and program development relatively equal influence over strategy and operations.40 Alternatively, a GSCO can maintain its autonomy through structural arrange- ments. The Savings Development Movement (SDM) of Zimbabwe was a grassroots effort to organize savings clubs, the proceeds of which helped farmers buy seed in volume. Its success in creating clubs and helping farmers lower their costs caused the organization to grow very rapidly. Leaders chose to expand SDM not by add- ing staff but by working with the Ministry of Agriculture to provide technical sup- port to the clubs and with the Ministry of Community Development and Women\u2019s Affairs to provide training. The savings clubs remained autonomous and locally managed. This reduced the need for formal systems to coordinate the clubs with government agencies. The SDM office staff did not grow, but the organization remained a catalyst, committed to expanding participation rather than providing direct services.41 Creating Horizontal Linkages Successful social change projects often require a net- work of local organizations with similar views and objectives. Such projects as creating a civil society in China, turning responsibility for maintenance and control over small irri- gation systems to local water users in Indonesia, or teaching leadership skills in South Africa require that multiple organizations interact. Consequently, an important planned change activity in GSCOs is creating strong horizontal linkages to organizations in the community or society where the development project is taking place. The formation of \u201csupport\u201d organizations\u2014value-added agencies that provide services to NGOs for their development\u2014are an important part of these linkages.42 For example, CANGO, the China Association for NGOs (www.cango.org), is a government-sponsored NGO that provides capacity-building and project-execution services to support the emergence of a civil society in China. CANGO sponsors conferences and programs where like-minded NGOs can connect with each other and support common interests. Similarly, GSCOs aimed at job development not only must recruit, train, and market potential job appli- cants but also must develop relationships with local job providers and government authorities. The GSCO must help these organizations commit to the GSCO\u2019s vision, mobilize resources, and create policies to support development efforts. The ability of GSCOs to sustain themselves depends on establishing linkages with other organizations whose cooperation is essential to preserving and expanding their efforts. Unfortunately, members of GSCOs often view local government officials, com- munity leaders, or for-profit organizations as part of the problem. Rather than interact- ing with these stakeholders, GSCOs often \u201cprotect\u201d themselves and their ideologies from contamination by these outsiders. Planned change efforts to overcome this myopia are similar to the transorganizational development interventions discussed in Chapter 20. GSCO members are helped to identify, convene, and organize these key external organi- zations. For example, hurricane Katrina in 2005 devastated many of New Orleans\u2019 oldest, poorest, and culturally rich neighborhoods. The rebuilding of neighborhoods, such as Trem\u00e9 or Holycross, was usually overseen by local NGOs, such as Esplanade Ridge\/Trem\u00e9 Neighborhood Association or Holy Cross Neighborhood Association. These groups connected with other NGOs, local and state government departments","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 677 (other than Federal Emergency Management Agency [FEMA], which had lost credibility during the initial response), funding agencies, and volunteers. Local coordination of the NGO activities allowed each neighborhood to pursue locally relevant strategies for reha- bilitation, to bring the right resources to the right places, and to maintain local cultural and historical traditions.43 Developing Vertical Linkages GSCOs also must create channels of communication and influence upward to governmental and policy-level decision-making processes. These higher-level decisions often affect the creation and eventual success of GSCO activities. For example, the Global Village of Beijing (GVB) is a nongovernmental organization that raises the environmental consciousness of people in China. GVB leveraged its relationships with journalists and the government to produce a weekly television series on government channels to discuss and promote environmentally friendly practices, such as recycling, and to expose the Chinese people to environmental projects in different countries. When the Chinese government proposed new environmental regulations and policies as part of the World Trade Organization admission process, GVB helped assess the proposals.44 GVB\u2019s success and visibility also contributed to its founder, Liao Xiaoyi, being invited to partici- pate in Beijing\u2019s successful 2008 summer Olympics bid and the inclusion of a \u201cgreen Olympics movement\u201d proposal that addressed concerns about Beijing\u2019s pollution. Vertical linkages also can be developed by building on a strong record of success. The Institute of Cultural Affairs (ICA) is concerned with the \u201capplication of methods of human development to communities and organizations all around the world.\u201d With more than 100 offices in 39 nations, ICA trains and consults with small groups, commu- nities, organizations, and voluntary associations, in addition to providing leadership training for village leaders, conducting community education programs, and running ecological preservation projects. Its reputation has led to recognition and credibility. It was given consultative status by the United Nations in 1985, and it has category II status with the Food and Agriculture Organization, working relation status with the World Health Organization, and consultative status with UNICEF. For decades in Mali, a centralized one-party government that neglected teachers, schools, books, and materials, especially in the rural areas, had dominated the country\u2019s educational system. When a new reformist government took control, a variety of GSCOs helped to organize grassroots groups to improve the schools. Supported by the GSCOs, local parent-teacher associations (PTAs) were organized, local members were elected, and the groups were given training on how to manage the school. Although there was local improvement, the overall educational system remained fragmented. In response, GSCO-organized conferences brought PTAs from different villages together for dialogue and decision making. As regional PTA federations were formed, the GSCOs provided policy analysis and advocacy training to help them speak with one voice in negotiations over policy formulation with the Ministry of Education. These collective efforts have resulted in increased attention, influence, and expenditures to rural schools.45 Application 21.2 describes how OD has contributed to the work of LDI Africa.46 The opening of its program provides important clues about the development of vertical and horizontal linkages and how GSCOs work within a clear vision. 21-2c Change-Agent Roles and Skills Planned global social change is a relatively new application of organization development. The number of practitioners is small but growing, and the skills and knowledge neces- sary to carry out OD in these situations are being developed. The grassroots, political,","678 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT SOCIAL AND ENVIRONMENTAL CHANGE AT LDI AFRICA application 21 2 L andmark Development Initiative Africa (LDI marketing, and management. When the 3 to Africa) is a nonprofit social enterprise based 12 month fellowship ends, LDI Africa also in the United States. It builds the capacity offers recruitment services for host organiza- of African corporations, small businesses, tions interested in hiring fellows. Thus, what and nonprofits to compete in the global market- separates LDI Africa from other nonprofits is place by recruiting skilled volunteers, especially the fundamental goal of altering a status quo young African professionals from outside of where African youth and organizations are the continent. Through LDI Africa\u2019s partner- struggling to obtain the capabilities needed to ships with the Foundation Center in Nigeria effectively compete in a global marketplace. and investors in five countries, African nonpro- fits and businesses can access funding and The organization development process at business development services. LDI Africa LDI Africa started with a chance meeting also plans to send young professionals in Africa between Gbenga and an OD practitioner, to the United States and around the world for Kimberley Jutze. Kimberley, a graduate of overseas fellowships with nonprofits and busi- Pepperdine University\u2019s Master of Science in nesses seeking an international perspective on Organization Development Program, was the challenges they face. working to establish a consulting practice that addressed the resource and organization devel- As a young professional in Nigeria, Gbenga opment needs of social enterprises. After Ogunjimi, LDI Africa\u2019s founder and CEO, had exchanging contact information, Gbenga and limited access to international management Kimberley met to discuss opportunities to principles and professional development oppor- work together on securing start-up capital, set- tunities. Gbenga saw an opportunity to address ting up an office in Washington, DC, and devel- development challenges facing his country and oping partnerships with organizations involved other parts of the African continent while work- in work abroad programs. ing in the Washington, DC, headquarters of Atlas Corps, a nonprofit organization that spon- Once the consulting relationship was for- sors international fellowships. He believed that malized, Kimberley conducted an informal by matching organizational needs for globally assessment, which revealed that the planning competitive expertise with a rapidly growing documents in place were insufficiently detailed local workforce, he could create a virtuous to prepare LDI Africa for a successful launch. cycle of social and economic development. He Thus, before any of the initial requests for sup- was motivated to establish a social enterprise port could be addressed, LDI Africa needed a based on his own experiences and developed strategic plan to clearly define its mission, pro- the initial concept for LDI Africa. grams, and operations. A business planning approach pioneered by the nonprofit consulting Through volunteer placement services firm Root Cause guided the development of a administered by LDI Africa, young profes- three-year strategy for launching and expand- sionals gain hands-on international experience ing LDI Africa. The plan described the social helping African organizations launch and and financial returns that social impact inves- expand their operations. The youth fellows tors could expect. are able to hone their skills in a challenging work environment characterized by resource Over the next five months, Kimberley worked constraints, limited infrastructure, and uncer- closely with Gbenga to facilitate the development tain policies. The African organizations benefit of a social impact strategy. The strategy develop- from access to international business practices ment process consisted of a series of meetings and skills, such as business planning, finance, where each section of the social impact strategy outline (Need and Opportunity, Social Impact","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 679 Model, Implementation Strategy, and Action Plan) operating budget, Kimberley used a strengths- was reviewed and ideas were discussed. In between based approach to assess LDI Africa\u2019s fundraising meetings, Gbenga prepared drafts of the social impact assets. She worked closely with Gbenga to deter- strategy. mine which sources of funding the organization was best prepared to cultivate as well as best Despite having a mutually agreed upon scope and worst case scenarios for the amount of fund- of work, differences in communication styles ing that LDI Africa could anticipate receiving from between Kimberley and Gbenga and expectations each source. A contingency plan was also devel- that were not clearly defined upfront posed chal- oped that explained how LDI Africa would continue lenges to the consulting relationship. For example, to operate in the event that the funding target was both parties had different assumptions about what not fully reached during its first year of operation. level of detail was sufficient for addressing each The strategy also included an action plan with spe- section of the social impact strategy. Gbenga, cific tasks, timeline, and targets. Gbenga\u2019s active who wanted to make the most of his limited time participation in the strategic planning process led in the United States to launch LDI Africa as soon as him to appreciate the importance of thinking possible, preferred a moderately detailed plan through different options to obtain funding and where he could address questions from social deploy LDI Africa\u2019s resources expediently rather impact investors as they came up. In contrast, than just pursuing whatever opportunities hap- Kimberley believed that investing more time up pened to come along. With an action plan in front in addressing anticipated questions in the place, Gbenga was also better prepared to begin plan itself would facilitate smoother implementation seeking start-up capital. later on. A final agreement was reached through ongoing feedback on drafts of the plan and open Most recently, Gbenga began forming a board discussions about the quality and quantity of infor- of directors for LDI Africa and invited Kimberley to mation needed to complete it. Attention also was join as an advisor for resource and organization given to establishing a collaborative relationship development. Recognizing the importance of an characterized by open and honest communication effective board, Kimberley coached Gbenga on between Kimberley and Gbenga. This greatly board development issues, such as defining mem- improved communication between them as well ber roles and responsibilities, enlisting their sup- as their working relationship. port for fundraising activities, and facilitating board meetings. Through this informal consultation By the time the social impact strategy was process, Gbenga is learning how to provide overall completed, Gbenga gained greater insight into the direction to the board and to obtain its support for essential steps needed to transition LDI Africa LDI Africa\u2019s work. He is also addressing the chal- from a concept to an operational organization. He lenge of board member engagement by managing was better prepared to meet with prospective expectations around each board member\u2019s role financial supporters and refer to details captured and time commitments. in the social impact strategy to fully explain LDI Africa\u2019s model. As LDI Africa prepares to launch its pilot fel- lowship program in June 2013, it has recognized After the social impact strategy was com- the need to develop partnerships with African pleted and LDI Africa was registered as a nonprofit organizations that have expressed interest in organization, Gbenga asked Kimberley to help hosting young professionals, but are unable to obtain seed funding. As a first step, they agreed cover fellowship costs, such as housing, trans- to prepare a strategy to guide LDI Africa\u2019s resource portation, and insurance. Gbenga and Kimberley development efforts. This consisted of meetings to worked together to prepare a teaming agreement review each section of the strategy outline and dis- with an African foundation that provides micro cuss ideas. Gbenga also drafted the strategy with investments and mentorship to start-up enter- support from Kimberley. After agreeing upon a prises. Their initial conversations with the African funding target based on the organization\u2019s annual","680 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT foundation involved explaining how the teaming an observer in meetings so that he was consis- process would work for preparing consortium tently seen as leading LDI Africa\u2019s partnership grant applications to foundations, examining the and resource development efforts. Over the past pros and cons of joint fundraising before entering 18 months, LDI Africa has made tremendous into an agreement, and drafting a teaming agree- strides in its internal development. It has grown ment for both parties to sign. As a result, Gbenga from a concept to a registered nonprofit, hired was better prepared to lead the partnership nego- four people to staff positions in Nigeria and the tiation process. If LDI Africa is successful in United States, and established an international obtaining grants for its pilot fellowship program, board of directors. LDI Africa has also succeeded both organizations will benefit from the opportu- in obtaining an initial round of start-up capital that nity to contribute to the professional develop- can help position the social enterprise to attract ment of fellows and to the sustainability of additional funding for its pilot program. Gbenga\u2019s newly formed African companies. strong personal commitment to LDI Africa and his dedication to developing it in a systematic way has Throughout the process, Kimberley \u201cled from poised the organization for success within Nigeria behind\u201d by working one-on-one with Gbenga to and across Africa. enhance his leadership capabilities and serving as and ideological natures of many GSCOs require change-agent roles and skills that are quite different from those in more formal, for-profit settings.47 GSCO change agents typ- ically occupy stewardship and bridging roles. The steward role derives from the ideological and grassroots activities associated with GSCOs. It asks the change agent to be a colearner or coparticipant in achieving global social change. This type of change is \u201csustainable,\u201d or ecologically, politically, culturally, and economically balanced. Change agents must, there- fore, work from an explicit value base that is aligned with GSCO activities. For example, change agents are not usually asked, \u201cWhat are your credentials to carry out this project?\u201d Instead, practitioners are asked, \u201cDo you share our values?\u201d or \u201cWhat do you think of the plight of the people we are serving?\u201d Stewardship implies an orientation toward the devel- opment of sustainable solutions to local and global problems. The second role, bridging, derives from the grassroots and political activities of many GSCOs. Bridging is an appropriate title for this role because it metaphorically reflects the core activities of GSCOs and the change agents who work with them. Both are mainly concerned with connecting and integrating diverse elements of societies and communi- ties toward sustainable change, and with transferring ideas among individuals, groups, organizations, and societies. Carrying out the steward and the bridging roles requires communication, negotia- tion, and networking skills. Communication and negotiation skills are essential for GSCO change agents because of the asymmetrical power bases that exist in grassroots development efforts. GSCOs are relatively powerless compared with governments, wealthy upper classes, and formal organizations. Given the diverse social systems involved, there often is only a loose consensus about a GSCO\u2019s objectives. Moreover, dif- ferent constituencies may have different interests, and there may be histories of antago- nism among groups that make promulgation of the development project difficult. The steward and the bridging roles require persuasive articulation of the GSCO\u2019s ideology and purpose at all times, under many conditions, and to everyone involved.","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 681 The change agent must also be adept at political compromise and negotiation.48 Asymmetrical power contexts represent strong challenges for stewardship and bridging. To accomplish sustainable change, important trade-offs often are necessary. The effective change agent needs to understand the elements of the ideology that can and cannot be sacrificed and when to fight or walk away from a situation. Networking skills represent a significant part of the action research process as applied in GSCO settings. Networking takes place at two levels. First, in the steward role, practitioners bring to the GSCO specific knowledge of problem solving, technolo- gies of empowerment using processes that socially construct and make sense of the sur- rounding conditions, and organization design.49 The participants bring local knowledge of political players, history, culture, and ecology. A \u201ccogenerative dialogue\u201d or \u201ccollective reflection\u201d process emerges when these two frames of reference interact to produce new ideas, possibilities, and insights.50 When both the practitioner and the participants con- tribute to sustainable solutions, the stewardship role is satisfied. Second, in the bridging role, networking skills create conditions that enable diverse stakeholders to interact and solve common problems or address common issues. Change agents must be able to find common ground so that different constituencies can work together. Networking requires the capability to tap multiple sources of information and perspective, often located in very different constituencies. Action becomes possible through these networks. But bridging also implies making linkages among individual, group, GSCO, and social levels of thought. Ideas are powerful fuel in global grassroots development projects. Breakthrough thinking by individuals to see things in new ways can provide the impetus for change at the group, GSCO, social, and global levels. This was demonstrated by U2\u2019s Bono and U.S. Treasury secretary Paul O\u2019Neill during their 2002 visit to understand and develop solutions to poverty in Africa. The change agent in international GSCO settings must play a variety of roles and use many skills. Clearly, stewardship and bridging roles are important in facilitating GSCO accomplishment. Other roles and skills will likely emerge over time. Change agents, for example, are finding it increasingly important to develop \u201cimaginal literacy\u201d skills\u2014the ability to see the possibilities, rather than the con- straints, and the ability to develop sustainable solutions by going outside the boxes to create new ideas.51 SUMMARY In this chapter, we presented two interventions relies on design guidelines that promote capabilities designed to help organizations generate positive social, in change and multistakeholder decision making. environmental, and economic outcomes. These change The organization\u2019s strategy must be realigned and processes are fundamentally different from other OD clarified to support sustainability and the work interventions that focus primarily on the achievement systems, structure, management and information sys- of economic objectives. tems, and human resource systems must be oriented appropriately. Sustainable management organization interven- tions are intended to achieve sustainable effectiveness. Finally, applications of OD to global social Organizations must be agile enough to sustain high change were discussed. Typically carried out in global levels of economic, social, and environmental perfor- social change organizations, these interventions pro- mance. Achieving these triple-bottom-line objectives mote the establishment of a global civilization. Strong","682 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT ideological positions regarding the fair and just dis- policy-making organizations, a change agent can tribution of wealth, resources, and power fuel this help GSCOs become more effective and alter their movement. By strengthening local organizations, external context. To support roles of stewardship building horizontal linkages with other like-minded and bridging, change agents need communication, GSCOs, and developing vertical linkages with negotiation, and networking skills. NOTES 1. S. Mohrman and A. Shani, \u201cOrganizing for Sustainable 8. J. Elkington, \u201cTowards the Sustainable Corporation: Win- Effectiveness: Taking Stock and Moving Forward,\u201d in Win-Win Business Strategies for Sustainable Development,\u201d Organizing for Sustainability, vol. 1, ed. S. Mohrman California Management Review 36, no. 2 (1994): 90\u2013100. and A. Shani (Bingley, UK: Emerald Group Publishing, 2011): 1\u201340. 9. D. Katz and R. Kahn. The Social Psychology of Organiza- tions (San Francisco: Wiley, 1978); M. Weber, The 2. P. Lacy, T. Cooper, R. Hayward, and L. Neuberger, \u201cA New Theory of Social and Economic Organization, trans. Era of Sustainability: UN Global Compact-Accenture CEO A. M. Henderson and T. Parsons (London: Collier Study 2010,\u201d accessed from http:\/\/www.unglobalcompact Macmillan Publishers, 1947). .org\/news\/42-06-22-2010, on October 4, 2012. 10. A. De Geus, The Living Company (Cambridge, MA: 3. K. Haanaes, B. Balagopal, D. Arthur, M. T. Kong, I. Velken, Harvard Business School Press, 1997). N. Kruschwitz, and M. Hopkins, \u201cFirst Look: The Second Annual Sustainability and Innovation Survey,\u201d MIT Sloan 11. Bradbury and Clair, \u201cPromoting Sustainable Organiza- Management Review 52, no. 2 (2010): 77\u201383. tions with Sweden\u2019s Natural Step.\u201d 4. E. Lawler and C. Worley, Management Reset (San Francisco: 12. Data accessed from http:\/\/www.viewzone.com\/sixteenships. Jossey-Bass, 2011), J. Ludema, C. Laszlo, and K. Lynch, html on January 10, 2013; International Maritime Organi- \u201cEmbedding Sustainability: How the Field of Organization zation, http:\/\/www.imo.org, accessed on January 10, 2013. Development and Change Can Help Companies Harness the Next Big Competitive Advantage,\u201d in Research in Orga- 13. M. Hatch and S. Majken, \u201cThe Dynamics of Organiza- nizational Change and Development, vol. 20, ed. A. Shani, tional Identity,\u201d Human Relations 55 (2002): 989\u20131018; W. Pasmore, and R. Woodman (Bingley, UK: Emerald J. Dutton and J. Dukerich, \u201cKeeping an Eye on the Group Publishing, 2012), 265\u201399. Mirror: Image and Identity in Organizational Adapta- tion,\u201d Academy of Management Journal 34 (1991): 5. A. Lovins, L. Lovins, and P. Hawken, \u201cA Road Map for 517\u201354; D. Whetten, \u201cAlbert and Whetten Revisited: Natural Capitalism,\u201d Harvard Business Review (May\u2013 Strengthening the Concept of Organizational Identity,\u201d June, 1999): 145\u201358; L. Lovins and B. Cohen, Climate Journal of Management Inquiry 15 (2006): 219\u201334. Capitalism (New York: Farrar, Straus, and Giroux, 2011); information on the Natural Step can be found at 14. Whetten, \u201cAlbert and Whetten Revisited.\u201d http:\/\/www.naturalstep.org and in H. Bradbury and 15. Lawler and Worley, Built to Change. J. Clair, \u201cPromoting Sustainable Organizations with 16. K. Eisenhardt and J. Martin. \u201cDynamic Capabilities: What Sweden\u2019s Natural Step,\u201d Academy of Management Execu- tive 13 (1999): 63\u201374; information on CERES principles Are They?\u201d Strategic Management Journal 21 (2000): can be found at http:\/\/www.ceres.org. 1105\u201321; S. Winter, \u201cUnderstanding Dynamic Capabilities,\u201d Strategic Management Journal 24 (2003): 991\u201396. 6. Lawler and Worley, Management Reset; E. Lawler and 17. C. O\u2019Reilly and M. Tushman, \u201cOrganizational Ambidex- C. Worley, Built to Change: How to Achieve Sustained terity in Action: How Managers Explore and Exploit,\u201d Organizational Effectiveness (San Francisco: Jossey-Bass, California Management Review 53 (2011): 5\u201322. 2006); C. Worley and E. Lawler, \u201cDesigning Organiza- 18. Lawler and Worley, Built to Change. tions That Are Built to Change,\u201d Sloan Management 19. H. Aldrich and D. Herker, \u201cBoundary Spanning Roles Review 48 (2006): 19\u201323; Mohrman and Shani, \u201cOrganiz- and Organization Structure,\u201d Academy of Management ing for Sustainable Effectiveness.\u201d Review 2 (1977): 217\u201330. 20. E. Lawler and C. Worley, \u201cWhy Boards Need to Change,\u201d 7. G. Brundtland, ed., Our Common Future: The World Sloan Management Review 54 (2012): 10\u201312. Commission on Environment and Development (Oxford: 21. E. Lawler, \u201cCHROs and Boards: A Missing Link,\u201d in The Oxford University Press, 1987). Chief HR Officer: Defining the New Role of Human","CHAPTER 21 ORGANIZATION DEVELOPMENT FOR ECONOMIC, ECOLOGICAL, AND SOCIAL OUTCOMES 683 Resource Leaders, ed. P. Wright, P. Boudreau, D. Pace, the Global Civic Culture: Making Our Lives Count,\u201d in E. Sartain, P. McKinnon, and R. Antoine (San Francisco: Sorensen et al., eds., Global and International Organization Jossey-Bass, 2011), 183\u201392. Development, 282\u2013306. 22. Information about the Global Reporting Initiative can be 31. E. Smith, \u201cGrowth vs. Environment,\u201d BusinessWeek, May found at http:\/\/www.globalreporting.org. 11, 1992, 66\u201375. 23. J. Raskin, \u201cThe Rise of Benefit Corporations,\u201d Nation, June 32. D. Cooperrider and J. Dutton, eds., Organizational 8, 2011, accessed from http:\/\/www.thenation.com\/article Dimensions of Global Change (Newbury Park, CA: Sage \/161261\/rise-benefit-corporations on October 4, 2012. Publications, 1999), 12. 24. C. Worley, A. Feyerherm, and D. Knudsen, \u201cBuilding a 33. L. Brown, \u201cBridging Organizations and Sustainable Collaboration Capability for Sustainability,\u201d Organiza- Development,\u201d Human Relations 44 (1991): 807\u201331; tional Dynamics 39 (2010): 325\u201334. Johnson and Cooperrider, \u201cFinding a Path\u201d; Cooperrider 25. Ibid. and Thachankary, \u201cBuilding the Global Civil Culture\u201d; 26. P. Kale and H. Singh, \u201cManaging Strategic Alliances: L. D. Brown, M. Leach, and J. Covey, \u201cOrganization What Do We Know Now and Where Do We Go from Development for Social Change,\u201d in Handbook of Orga- Here?\u201d Academy of Management Perspectives (August nization Development, ed. T. Cummings (Thousand 2009): 45\u201362. Oaks, CA: Sage Publications, 2008). 27. C. Worley and E. Lawler, \u201cBuilding a Change Capability at Capital One Financial,\u201d Organizational Dynamics 38 34. L. D. Brown and D. Ashman, \u201cSocial Capital, Mutual Influ- (2009): 245\u201351. ence, and Social Learning in Intersectoral Problem Solving 28. A. Hoffman, \u201cClimate Change as a Cultural and Behavioral in Africa and Asia,\u201d in Organizational Dimensions of Issue: Addressing Barriers and Implementing Solutions,\u201d Global Change, ed. Cooperrider and Dutton, 139\u201367. Organizational Dynamics 39 (2010): 295\u2013305. 29. P. McMichael, Development and Social Change: A Global 35. F. Westley, \u201cNot on Our Watch,\u201d in Organizational Perspective (Thousand Oaks, CA: Pine Forge Press, 2007); Dimensions of Global Change, ed. Cooperrider and Dut- L. Brown and J. Covey, \u201cDevelopment Organizations and ton, 88\u2013113. Organization Development: Toward an Expanded Para- digm for Organization Development,\u201d in Research in 36. Brown and Covey, \u201cDevelopment Organizations\u201d; Brown, Organizational Change and Development, vol. 1, ed. Leach, and Covey, \u201cOrganization Development for Social R. Woodman and W. Pasmore (Greenwich, CT: JAI Change.\u201d Press, 1987), 59\u201388. 30. P. Freire, Pedagogy of the Oppressed (Harmondsworth, 37. P. Reason and H. Bradbury, eds., The SAGE Handbook of England: Penguin, 1972); D. Bornstein, How to Change Action Research, 2nd ed. (Newbury Park, CA: Sage the World: Social Entrepreneurs and the Power of New Publications, 2007). Ideas (New York: Oxford, 2004); T. Kidder, Mountains Beyond Mountains (New York: Random House, 2003); 38. Johnson and Cooperrider, \u201cFinding a Path,\u201d 240\u201341. H. Perlmutter and E. Trist, \u201cParadigms for Societal Transition,\u201d Human Relations 39 (1986): 1\u201327; F. Westley, 39. Ibid, 237. \u201cBob Geldof and Live Aid: The Affective Side of Global 40. Brown, Leach, and Covey, \u201cOrganization Development Social Innovation,\u201d Human Relations 44 (1991): 1011\u201336; D. Cooperrider and W. Pasmore, \u201cGlobal Social Change: for Social Change.\u201d A New Agenda for Social Science,\u201d Human Relations 41. M. Bratton, \u201cNon-Governmental Organizations in Africa: 44 (1991): 1037\u201355; H. Perlmutter, \u201cOn the Rocky Road to the First Global Civilization,\u201d Human Relations 44 Can They Influence Public Policy?\u201d Development and (1991): 897\u2013920; E. Boulding, \u201cThe Old and New Transna- Change 21 (1989): 81\u2013118. tionalism: An Evolutionary Perspective,\u201d Human Relations 42. L. D. Brown and A. Kalegaonkar, \u201cSupport Organizations 44 (1991): 789\u2013805; P. Johnson and D. Cooperrider, and the Evolution of the NGO Sector,\u201d Nonprofit and \u201cFinding a Path with a Heart: Global Social Change Voluntary Sector Quarterly 31 (2002): 231\u201358. Organizations and Their Challenge for the Field of 43. R. Beech and B. Allen, Dynamics of Disaster (New York: Organizational Development,\u201d in Research in Organiza- Routledge, 2011). tional Change and Development, vol. 5, ed. R. Woodman 44. Personal communication with members of the Global and W. Pasmore (Greenwich, CT: JAI Press, 1991), Village of Beijing, March 28, 2000. 223\u201384; D. Cooperrider and T. Thachankary, \u201cBuilding 45. Brown, Leach, and Covey, \u201cOrganization Development for Social Change.\u201d 46. This application was developed with the kind assistance of Kimberley Jutze. Her contribution is gratefully acknowledged. 47. Bornstein, Change the World; L. Brown and J. Covey, \u201cAction Research for Grassroots Development: Collective","684 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Reflection and Development NGOS in Asia\u201d (presenta- Cooperrider and Dutton, Organizational Dimensions of tion at the Academy of Management, Miami, 1990). Global Change. 48. R. Saner and L. Yiu, \u201cPorous Boundary and Power 50. Brown and Covey, \u201cAction Research\u201d; M. Elden and Politics: Contextual Constraints of Organization M. Levin, \u201cCogenerative Learning: Bringing Participation Development Change Projects in the United Nations into Action Research,\u201d in Participatory Action Research, Organizations,\u201d Gestalt Review 6 (2002): 84\u201394. ed. W. Whyte (Newbury Park, CA: Sage Publications, 49. D. Cooperrider and S. Srivastva, \u201cAppreciative Inquiry in 1991), 127\u201342. Organizational Life,\u201d in Research in Organizational 51. E. Boulding, Building a Global Civic Culture: Education Change and Development, vol. 1, ed. R. Woodman and for an Interdependent World (Syracuse, NY: Syracuse W. Pasmore (Greenwich, CT: JAI Press, 1987), 129\u201369; University Press, 1988).","\u00a9 Pixmann\/Imagezoo\/ 22 Getty Images Organization Development in Nonindustrial Settings: Health Care, School Systems, the Public Sector, and Family\u2013Owned learning Understand how organization development (OD) in nonindustrial settings objectives (health care, school systems, the public sector, and family-owned businesses) differs from traditional practice contexts. Describe the changes in the health care industry and how OD is practiced in this industry. Understand how OD can support educational reform. Explain the role of OD in government organizations. Discuss the components of family firms and how to apply OD in those settings. Organization development is practiced in pri- Perry from The Foster Mobley Group to examine OD vate and public organizations, service and in health care. Linda Purrington and Paul Sparks from manufacturing firms, and in domestic and Pepperdine University\u2019s Graduate School of Education international settings. Historically, however, most and Psychology agreed to describe how educational published material on organization development (OD) systems are changing and the role OD can play in this focused on applications in industrial and manufactur- transformation. Ray Patchett, the retired City Manager ing organizations. As OD practitioners have applied of Carlsbad, California, discusses OD applications in processes of planned change outside of this narrow the public sector, and Otis Baskin, professor of industrial model, they have modified and extended management at Pepperdine University\u2019s Graziadio the traditional interventions to better fit the unique School of Business and Management, reports on organizational setting or situation. OD in family businesses. Each author stresses the similarities and differences between traditional OD in This chapter presents broad applications of OD in industrial organizations and its application in these nonindustrial settings. As in previous editions of this nonindustrial settings. Their conclusions suggest the text, a person with knowledge and experience in OD need for a greater diversity of diagnostic methods, in a particular kind of organization was asked to interventions, and values when using OD in contribute a section for this chapter. For this edition, nonindustrial environments. we asked Foster Mobley, Erin Mobley, and Jennifer 685","686 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT 22-1 Organization Development in Health Care* Health care is a dynamic and complex industry facing significant growth, regulatory demands, and change. As such, significant opportunities exist for OD. This section highlights the current state of the health care industry, outlines the important trends driving change, and presents OD practices that are most likely to support the industry\u2019s transformation. 22-1a The Health Care Industry\u2014A Snapshot In 2010, health care expenditures accounted for 17.9% of the gross domestic product (GDP) in the United States, up from 13.8% in the year 2000.1 In fact, the United States spends more on health care than the GDP of more than 170 nations.2 This places annual national health expenditures at approximately $8,200 per person.3 Although the rate of increase has been dropping since 2002, expenditures still grew at a rate of 4% in 2010.4 At the same time, the number of uninsured people rose to 49.9 million, or 16.3% of the U.S. population5 with more than three-quarters of uninsured in working families.6 The amount of health care costs shouldered by the individual is also growing. Out of pocket payments for national health care expenditures grew from just under $200 billion in 2000 to $280 billion in 2010.7 The financial platform on which U.S. health care rests is unsustainable. These trends cited above, along with the need to reduce the federal budget deficit, will drive the transfor- mation of America\u2019s health care system. Indeed, the debate over the delivery, financing, structure, and access to care continues vigorously in the halls of Congress, the boardrooms of large and small employers, and in the countless daily interactions between care providers (hospitals, physicians, and others who provide health care) and those they serve. The inten- sity of these debates has increased since the passage of the Patient Protection and Afford- able Care Act (ACA) in 2012, which is intended to reduce costs, improve quality and access, and bring over 40 million previously uninsured people into the health care system. Regardless of current trends, the health care industry represents a challenging con- text within which to practice OD. Compared to other industries, such as software devel- opment, manufacturing, or retail, health care differs along several dimensions. Though it is beginning to change, consumers are often insulated from the economic consequences of their major health care decisions, including lifestyle choices, health habits, which hospital to go to, and where to get outpatient services. Access to the health care system and the cost of care are mostly determined by insurance provided through Medicare (a federally funded program for the elderly and disabled), Medicaid (a com- bined federal\/state-funded program for the poor), or private insurance, typically provided through employers with some cost-sharing. The key providers of care are not connected through an employment agreement. The hospital or other setting where care is delivered does not typically employ the phy- sician. Rather, most physicians, with the exception of certain specialties, such as radiol- ogy, clinical pathology, or emergency medicine, have to apply for \u201cprivileges\u201d to work at a hospital or other care setting. A single episode of care can involve multiple providers and health care settings, including hospitals, physicians, skilled nursing\/rehabilitation centers, or home health agencies, many of them independent from one another. Hospitals, a key component of the health care system, are primarily not-for-profit and face several challenges related to their ability to create sustainable revenue to support *Written by Foster Mobley, Erin Mobley, and Jennifer Perry from The Foster Mobley Group in Southern California.","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 687 operations. For example, the government heavily regulates operations and influences much of a hospital\u2019s revenue base. Medicare accounts for an average of 39% of hospital revenues, while Medicaid accounts for an additional 16%, more than half of total revenues.8 In addition, the law requires hospitals to care for all patients regardless of their abil- ity to pay, prompting the need to grow revenue in other areas. Hospitals are subject to fines if they do not serve these patients, and are either paid nothing or a set fee, if the patient qualifies for government funding, regardless of the costs incurred in treating the patients. Hospital uncompensated care costs rose from $21.5 billion in 2001 to $34 bil- lion in 2007, likely due to the rising number of uninsured and underinsured.9 These factors have resulted in a fragmented industry focused on curing illness and providing more services to cover the costs, rather than creating efficiency or promoting wellness. This has created ethical dilemmas and increased complexity. 22-1b Trends in Health Care Health care practitioners and leaders acknowledge several important trends in the indus- try. These trends include changes in the incentives and reimbursement models of health care reform; quality and cost as strategic and regulatory imperatives; a blurring of tradi- tional industry segment lines and integration across different segments of health care; the rise of informatics and e-health; and an aging workforce and changing demographics of patients. Providers and leaders within the industry are scrambling to position themselves to respond to these trends and the resulting implications, many of which are uncertain and require significant human and capital investments, as well as fundamental restruc- turing. A more detailed description of each of these trends follows. Responding to Health Care Reform, Changing Incentives, and Reimburse- ment Models The ACA\u2019s passage in 2012 served as the \u201cshot over the bow\u201d in terms of changing health care\u2019s historical business model. The ACA represents the most signif- icant of many regulatory acts that have been enacted to control costs, and improve qual- ity and connectivity within the complex and fragmented health care delivery system. The ACA legislation, which goes into effect over several years, shifts Medicare reimbursement from an activity-based model to a value-based model. Providers will be paid based on performance metrics, including quality outcomes and patient experience ratings, rather than the number of tests or number of visits. Further, providers will be paid a fixed rate or \u201cbundled payment\u201d for an episode of care, regardless of the services provided. The purpose is to encourage the coordination and delivery of appropriate, cost-effective care, risk sharing, and reimbursement across the full range of services and care providers. Different types of health care organizations, including hospitals, medical groups, or con- sortiums of different providers, may apply to set up an Accountable Care Organization (ACO), which will be paid a set amount per person and be responsible for providing all of the health care for those people who are assigned to or select that ACO.10 In addition, the American Recovery and Reinvestment Act of 2009 (ARRA) requires all health care providers to implement electronic health records (EHR) and transition from paper-based to electronic medical record systems by 2014 or incur Medicare payment penalties.11 Quality and Cost as Strategic and Regulatory Imperatives The confluence of economic pressures, consumer and business demands, unsustainable cost structures, and looming regulatory requirements have led to the dual imperative to improve quality and reduce costs. Many leading health care organizations are employing approaches used for decades in other industries to standardize care and reduce costs, such as Lean performance improvement. The National Academy of Sciences\u2019 Institute of Medicine (IOM), known for","688 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT its galvanizing reports on quality (e.g., Crossing the Quality Chasm) and safety (e.g., To Err is Human), recently published a report on how best to impact the cost curve in health care. The IOM\u2019s report, Best Care at Lower Cost, asserts that \u201cachieving higher quality care at lower cost will require fundamental commitments to the incentives, culture, and leadership that foster continuous \u2018learning\u2019 and translating that into reliable care.\u201d12 The need to control costs is also being driven by the Budget Control Act of 2011 (BCA), which mandates a 2% reduction of Medicare spending between 2013 and 2021 to help reduce the deficit. Based on the Congressional Budget Office\u2019s (CBO) Medicare baseline analysis, the Medicare cuts that will occur from this reduction will grow from an estimated $10.7 billion in 2013 to $16.4 billion in 2021.13 This reduction comes on top of the reductions in rate increases to Medicare that are included in the ACA, estimated to remove $550 billion in federal support for Medicaid and Medicare. To prepare for lower reimbursement and the transformation required, leading health systems have established goals and initiatives to take anywhere from 10% to 20% out of their cost structures. The belief that improving quality, in the form of reduced waste and improved effi- ciency and coordination, also reduces costs is a driving factor in the Center for Medicare & Medicaid Services\u2019s (CMS) inclusion of 12 clinical process measures and mandatory patient experience survey scores in the reimbursement model of the ACA.14 Beginning in 2015, when these metrics will be published online, a 300-bed hospital with poor qual- ity metrics could be penalized by more than $1.3 million per year and suffer reputational damage.15 As a result of these trends, hospitals are spending significant time and resources on programs and training around quality improvement and service excellence, in hopes of improving these areas. Blurring of Traditional Industry Segment Lines and Integration Across Different Segments of Health Care A wave of consolidation is occurring across the health care industry in response to economic pressures, the need for capital, and attempts to compete through size and scale. More creative and different partnerships can be expected, as organizations strive to build broader networks of services to better manage care and risk for value-based payments. This includes consolidation within the hospital sector, but also a further blurring of the boundaries between insurers, hospitals and physicians, and between for-profit and nonprofit organizations. In the last year, health insurers have committed more than $2 billion to acquire or align with physician groups, clinics, and hospitals according to PwC Health Research estimates.16 Recent examples include the 2011 acquisition of West Penn Allegheny Health System by Highmark\/Blue Cross Plan; UnitedHealth Group\u2019s acquisition of Monarch Health care, a 2,300-member physician group in Southern California; DaVita\u2019s (a medical dialysis com- pany) purchase of a major medical group (HealthPartners); the for-profit Catholic health care venture created in 2011 by Ascension Health; and the private equity firm Oak Hill Partners.17 Despite this consolidation, the ten largest hospitals and health systems only control 22% of all beds, in contrast to consolidation in other industries, like airlines where the ten largest airlines control 84% of all passenger seats or the ten largest retail pharmacy companies that control 68% of all prescriptions.18 There is clearly more room for consolidation, which is expected to continue given the forces impacting the industry. Health systems are also employing physicians, in all specialties, more than any time in history. Some estimates indicate that hospitals now employ more than 50% of the country\u2019s total practicing physicians.19 Many physicians and groups are joining hospitals to gain access to capital for expensive information technology and care management tools, to reduce private practice overhead, and to use these expanded care management tools. Hospitals are looking to better integrate care, ensure access to a primary care phy- sician base, and align financial incentives.","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 689 In the past, the view of \u201cbigger is bad\u201d prevailed and many organizational attempts at integrated models to manage a population\u2019s health failed in the 1990s. The landscape has changed with the advent of electronic medical records, physician alignment, and new Medicare reimbursement models. In a recent survey of individuals by the PwC Health Research Institute, nearly 75% of respondents indicated a preference for health care orga- nizations that encompass a wide range of integrated health-related activities and services.20 The Rise of Informatics and E-Health Data is becoming increasingly important and available in managing health care, driven by both regulatory requirements for the use of EHRs and the advancement of computer and mobile technology. Investments in health informatics, the practice of identifying and translating valuable data into information to improve patient care, are growing across all segments of health care. Kaiser, Aetna, Humana, and UnitedHealthcare recently formed the Health Care Cost Institute, which will make data in more than 5 billion anonymous claims available to researchers.21 McKinsey & Co. estimates that making data more transparent, usable, and connected for patient care could create $300 billion in value by reducing health care spending by 8%.22 Mobile health has also been shown to reduce the need for hospital admissions and physician visits. Forty percent of physicians surveyed said they could eliminate 11% to 30% of office visits through the use of mobile health technologies, like remote monitor- ing, email, or text messages with patients.23 Smartphones and tablet computers are now in use in 80% of health care organizations.24 The introduction and use of EHRs and other mobile and e-devices have major implications for organizations, including the training and process of integrating these tools into the culture. An Aging Workforce and Changing Demographics of Patients Demographic changes and technological advances are leading to increased health care use. The baby boomer wave is reaching age 65, with the number of people over age 65 expecting to more than double from 40 million in 2010 to more than 88 million in 2050.25 This seg- ment of the population utilizes three times more health care in terms of cost. Nearly half of Medicare beneficiaries have three or more chronic conditions, which are growing in prevalence across all age groups.26 The rising incidence of obesity will likely lead to a further increase in chronic conditions as well. The diversity of population across the United States also continues to rise. The Hispanic population is projected to more than double between 2000 and 2050, while the size of the Asian population is projected to increase by 79%.27 These trends imply that the prevalence of certain diseases, which vary by ethnic background, will increase and that the cultural needs of diverse populations will have to be accounted for in service delivery. At the same time that the number of elderly and diverse populations grow, so do the health care professionals working within the industry. The current U.S. health care sys- tem is powered by baby boomers. The average age of registered nurses in the United States is 4728 and 38% of physicians are over 50.29 The entire senior management cadre of most hospitals and health systems are older boomers. A 2008 Institute of Medicine report projects a shortage of 868,000 registered nurses and 284,000 physicians in 2030, given the needs of the aging population.30 A nationwide shortage of faculty will only exacerbate these projections, as the aver- age age of nursing faculty is about 57.31 More than 75% of nursing schools in one survey identified lack of faculty as a main barrier to admitting more nursing students.32 Shortages will only serve to drive up salary costs and force employers to bring more cre- ative approaches to job roles and work environments.","690 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT 22-1c Opportunities for Organization Development Practice Despite the uncertainty and difficult trends facing the industry today, OD practitioners can significantly influence the process and outcomes of change in the health care envi- ronment. Such an influence will require two critical competencies that have not necessar- ily been required in the past. Effective OD practitioners in health care will need to possess robust expertise in managing large-scale change and maintain a keen awareness of the environmental and industry trends affecting their client organizations. In combi- nation with traditional OD practices, such as visioning and goal setting, future search conferences, small- and large-group facilitation, process improvement, team develop- ment, and conflict mediation, practitioners should support their clients\u2019 needs for com- prehensive approaches that strategically align people, systems, and cultures. There are five primary areas of opportunity for OD practitioners. These include: developing leaders and teams\u2019 strategic and emotional intelligence; shifting organizational systems to a new paradigm; designing aligned cultures; delivering comprehensive learning programs; and finally, creating engaged employees. Developing Strategic, Emotionally Intelligent Leaders and Teams In an industry fraught with uncertainty, health care leaders will need to develop competencies that fall under the banner of emotional intelligence (EI).33 This behavioral science model embraces four key domains: self-awareness, self-management, social awareness, and rela- tionship management. EI is described as \u201chow leaders handle themselves and their relationships.\u201d34 Said another way, \u201cleaders\u2019 emotional states and actions do affect how the people they lead will feel and therefore perform. How well leaders manage their moods and affect everyone else\u2019s moods, then, become not just a private matter, but a factor in how well a business will do.\u201d35 Thus, this ability allows leaders to expand their capacity to adapt to change, maintain calm in a constant state of ambiguity, all the while maintaining their core values, sense of purpose, and vision. EI also enables leaders to relate to their partners and stakeholders with intentionality, candor, and transparency so that they can more consistently meet their needs. Not only will future leaders need to know how to bring forth their best under these challenging conditions of change and high stakes, they will also need to bring out the best of those around them. This new environment inherently demands more awareness of self and others than ever before. In terms of transparency, leaders must be emphatic about truth-telling. Paul Craig, Assistant Vice Chancellor of Human Resources & Risk Management for University of California, San Diego Health System, underscores that the system will require more accountability than in the past: \u201cTen years ago, hospitals could keep their outcome data fairly private. Now, the public recording of outcome data is being used by payers and employers to make choices about which providers to select.\u201d Thus, leaders who proac- tively share information with patients and partners will go far in building the public\u2019s confidence in this vital industry. Moreover, emotionally intelligent leaders and teams tend to be higher functioning: \u201cWhen people feel good, they work at their best. Feeling good lubricates mental effi- ciency, making people better at understanding information and using decision rules in complex judgments, as well as more flexible in their thinking.\u201d36 Leaders and groups that embody this self and social awareness manage themselves more effectively through challenge, leaving them with more energy to spend on broader, strategic needs of the business, another key requirement of leaders in this shifting landscape. No longer is tac- tical execution the sole differentiator between good leaders and great ones. Leaders must be self-aware, knowledgeable of environmental trends, and strategically oriented to ensure their organization is at the forefront of change, not reacting to it. Cindra Syverson, Senior","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 691 Vice President of Human Resources for Providence Health System, emphasizes this growing leadership need: \u201cGiven the nature of the acute care environment, it is often difficult for leaders to focus their time externally. Given the future environment, it will be essential for leaders to scan the horizon in order to link their strategies to the scenar- ios playing out with competitors, insurers, consumers, employers and in the political environment.\u201d OD practitioners\u2019 expertise in executive leader and team development, and strategic change has a vital role to play in transforming organizational health. OD practitioners can also add value by sharing best practices from industries outside health care that leverage successful change management and development practices. Shifting Organizational Systems to a New Paradigm Recent legislation man- dates a new paradigm of partnership and adaptability across all ends of the care spec- trum, creating a substantial opportunity for OD practitioners to thoughtfully codesign organizational structures, management systems, and industry relationships that reflect this focus on collaboration. Unlike other sectors of the marketplace, health care has tra- ditionally been slower to adopt cutting-edge management processes. Instead, silos, divi- sion, and hierarchy characterize the sector and make innovation and\/or communication difficult to initiate and sustain. Now, management processes and delivery of care meth- ods between providers will need to be much more coordinated and open, suggesting that how organizations are designed and operated needs to reflect a similar degree of open- ness and flexibility. One example may include shifting to a decentralized corporate sup- port structure, reducing waste and increasing consistency in standards across an organization. Another example might include a greater role for OD in supporting mer- gers, acquisitions, and partnerships so that systems are organized to maximize the speed of learning and are aligned on mutual, strategic goals of coordinated patient care. Ed Tyson, former VP of Process Improvement for Sun Health care Group, emphasizes: \u201cHealth care needs to stop fundamentally treating itself as isolated from the business world at-large in terms of recruitment, selection, and retention; leadership and manage- ment; education and training; workplace and workflow design; organizational structure; etc. We need to know, understand, and deploy what is possible given today\u2019s human and industrial technologies, regardless of service, sector, or continent.\u201d Supporting Aligned Cultures With a new paradigm for how the health care system manages and delivers patient care, the need to create effective cultures that align the new incentive\/reward systems, new roles, and more efficient work processes with this evolved strategic focus is greater than ever. These new incentive structures will emphasize customer service, collaboration, and adaptability, so health care organizations whose cultures match those characteristics will likely see more positive returns in terms of talent attraction, retention, and performance. In addition, organizations that can effectively cultivate a cul- ture of openness and learning, as opposed to hierarchy and control, will be most proficient at addressing the shift in focus to integrated patient care. Kim Martinez, VP of New Mar- ket Operations for DaVita Rx, suggests: \u201cThere is this concept emerging in the medical field of \u2018team sport.\u2019 Physicians have traditionally been seen as all-knowing, having all of the information they need and generally working autonomously. The world is changing. There is much more information available now, making it unrealistic to expect a physician to know everything all of the time. Bringing in a more collaborative, cross-functional approach will be critical for the medical field going forward. However, making this transi- tion may be difficult. It will require physicians and other caregivers to work in new ways, embracing the concept of \u2018team sport\u2019 vs. autonomous \u2018all-knowing physicians\u2019 who are expected to know everything all of the time.\u201d"]