Organization Development and Change - 10th ed - part 2

["692 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT OD practitioners can contribute to the intentional creation and maintenance of such cultures. In addition, with the advent of new technological advances, such as EHRs, and innovative care delivery methods, new roles are being created every day to support the influx of data (e.g., informatics analysts) and higher coordination of care (e.g., hospital- ists). Organizations that adapt to changing roles, data systems, and new reward struc- tures will be notably more successful in creating competitive advantage. Moreover, OD practitioners can share process improvement and work redesign insights and methodol- ogies, such as lean performance improvement or Six Sigma. Operating in a more effi- cient, connected manner can help ensure that the entire system reduces costs and achieves highest quality outcomes for patients. Delivering Comprehensive Learning Programs Building a variety of skills and competencies deeper within health care provider systems will be another imperative in the new environment. OD can build on its traditional role of supporting training and develop- ment functions by addressing organizational learning needs related to customer service, clinical and technical skills, change management, lean performance improvement, and lead- ership training. First, as the incentive\/reward system changes to focus on a value-based model, where patient satisfaction and quality metrics drive reimbursements to providers, all employees of health care organizations\u2014from the front-line to the C-suite\u2014must become increasingly adept at serving their customer\/patient\/partner needs or face dire con- sequences. Second, education programs will also need to develop employees\u2019 knowledge and skills to support new processes and roles, especially around new clinical practices and tech- nologies. Third, organizations that teach and enforce process improvement methods throughout all levels will be well-served as they attempt to meet mandates to reduce cost while improving overall care quality. Fourth, the emerging health care environment requires the adoption of both management and leadership best practices to ensure that all health care organization members are applying effective management processes and emotionally intelligent leadership behaviors. Dr. J.D. Fitz of Sound Physicians reiterates the importance of leadership education within the physician population: \u201cTraining doctors around leader- ship is a huge need. Most doctors can talk to patients, but not each other to improve performance. It\u2019s about optimization of physician leadership.\u201d Creating Engaged Employees The massive transformation of the industry in terms of operational design, cultural and leadership requirements, skill and role expectations, and a rapidly aging workforce, will challenge employee retention in the years to come. Sally Haslett, Global Head of Human Resources, Oncology Translational Medicine at Novartis, explains: \u201c[Health care] is a competitive space with a war on talent.\u201d Recent OD research underscores the pertinent value in measuring and nurturing employee engagement, which can be defined to include \u201cinvolvement and a heightened ownership of work, consisting of pride, identity, and connection to a work role in which the employee is energized, dedicated, and engrossed in their job.\u201d37 It also involves \u201cpassion for work, in which an employee actively contributes to the improvement of the organization (activation).\u201d During times of significant change, employee engagement is more critical than ever in long-term performance. Paul Craig explains: \u201cThe tendency during times of great change is for leaders to put their heads down and work harder. I\u2019ve seen a fair num- ber of health care leaders get tense and adopt narrow views, reducing their \u2018heart and soul\u2019 engagement. I sense a lot of people pulling back, getting disengaged, and overwhelmed.\u201d Health care leaders can find tremendous value in partnering with OD practitioners with expertise in this arena to ensure they are cultivating an organizational environment in which their employees, physicians, and other partners feel connected, highly","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 693 supported, and eager to shape the future of their companies for the next generation. An engaged workforce will be the competitive advantage for organizations looking to lead the reshaping of this uncertain, yet fundamental landscape. 22-1d Conclusions The health care industry offers unprecedented challenges and opportunities. OD practi- tioners can influence growth and development by linking their efforts to the strategies of the organization, demonstrating competence and integrity, and being able to facilitate the integration of people and processes across traditional departmental and organizational boundaries. This opportunity comes with a challenge. At a time when each dollar and every resource in health care is being closely scrutinized, the inherent value of the OD approach is being tested for validity. Clients, under increasing pressure to demonstrate the added-value of key activities will, in turn, subject OD practitioners and their change interventions to the same testing. The practitioner must seek a balance between respon- siveness and relevance while maintaining a commitment to the core values that have defined OD, namely the equal importance of human needs and the creation of a work environment that allows growth, fulfillment, and performance.38 22-2 Organization Development in Public School Systems** At the present time, public education is in peril. Efforts to reform public education are, ironically, diminishing its quality and endangering its survival. We must turn our attention to improving the schools, infusing them with the substance of genuine learning and reviving the conditions that make learning possible.39 This section frames the complexity and evolutionary changes taking place in U.S. public schools, identifies the forces pushing for changes in the traditional models of schooling, and discusses the causes of failed large-scale reform efforts. It also describes the emerging concept of professional learning communities (PLCs) as a model for schools and suggests that OD practitioners are in a unique position to support this reform. 22-2a A Complex, Diverse, and Evolving K-12 Educational System Great debate continues as to which purposes should be prioritized in modern education. A number of change forces are stressing the current system and many educational insti- tutions in the United States are being criticized for continuing to serve purposes that no longer exist in ways that are no longer relevant. Rooted in the industrial age, assembly-line concepts of education are still deeply embedded in many schools even though the circum- stances upon which these concepts were based have disappeared or changed dramatically. In fact, educational delivery systems and their related outcomes are undergoing tremen- dous societal scrutiny. Dissatisfaction with the status quo has resulted in unprecedented competition, such as charter schools, private schools, and home schooling. In response to the stress of changing circumstances and increased competition, \u201cthe system has turned up the speed on the assembly line\u2014doing what it has always done only faster and harder. **Written by Dr. Linda Purrington and Dr. Paul Sparks from Pepperdine University\u2019s Graduate School of Education and Psychology.","694 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT While this might produce a bit more output, all of us\u2014students, teachers, and parents\u2014 should be asking whether or not it produces more learning.\u201d40 The United States does not have a national school system. Each state\u2019s own laws regulate education, and standards and curriculum are determined at the state and local levels. The federal government provides guidance and funding for federal educational programs in which public and private schools participate and the U.S. Department of Education oversees these programs. U.S. schools rank high globally in expenditures per student, but low in percentage of GDP. Almost 90% of K-12 American students attend public elementary and secondary schools that receive 92% of their funding from state and local taxes. Students who do not attend public elementary and secondary schools typically attend tuition-funded private schools and four out of five private schools are run by religious groups. In these schools, traditional academic courses as well as reli- gious instruction are part of the curriculum. In addition, a growing number of parents homeschool their children themselves.41 This means of governance and finance makes for a very complex system of Ameri- can education. Individual schools can draw upon a number of resources from different public and private institutions and must be accountable to multiple agencies. For exam- ple, a student may attend a public or private school whose curriculum must meet stan- dards set by the state, some of whose programs or specific courses may be financed by federal funds or local foundation monies, and whose sports teams may play on local, publicly owned fields.42 Public schools are monitored for quality by local school boards and by state accred- iting agencies. Charter schools are public but have fewer restrictions than traditional schools. Private schools are not subject to the same controls as public schools. For exam- ple, not all private schools have credential requirements for their teachers and adminis- trators. Student performance is typically the most important measure of school quality and is determined by state and local formulas and assessments. In addition to norm- referenced, criterion-referenced, and locally developed assessments, school systems utilize other accountability data for determining student performance, including but not limited to college promotion rates, high school graduation and retention rates, suspension and expulsion rates, grades and grade point averages, and English Learner proficiency and re-classification rates. School systems thus present a uniquely challenging environment for the application of OD. Schools differ in their structure, purpose, and process from most other organiza- tions. Schools cannot be characterized simply as organizations or communities. They have characteristics of both. The degree to which one or the other of these characteriza- tions dominates has been influenced by societal transformations and shifting purposes and values. Pink drew on three metaphors to describe societal progression in the United States from the 18th to the 21st centuries: \u201cWe have moved from an economy built on people\u2019s backs to an economy built on people\u2019s left brains to what is emerging today: an economy and society built more and more on people\u2019s right brains.\u201d43 Butts categorized the purposes of education that have \u201cbeen in play\u201d throughout the progression as: aca- demic discipline, social efficiency, individual development, vocational competence, free- dom, equality, and community. He further described these purposes as \u201cintersecting, competing, overlapping, fuzzy around the edges, if not in the center ...\u201d44 22-2b Change Forces A number of forces are challenging traditional models of schooling, including the chang- ing nature of communication and learning, the evolution of the workplace and required skills, increased diversity, increased competition, and tough economic times.","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 695 The Changing Nature of Communication and Learning Internet scholar Clay Shirky suggests that changes in communication equate to changes in society itself. The explosion of communication technology at the end of the 20th century has forced a rethinking of teaching and student competencies.45 Global access to information, collab- orative virtual spaces, mobile technologies, participatory media, and multiplayer online games offer rich new learning opportunities independent of traditional school settings. Students have as much access to information as their parents and teachers. New educa- tional technologies provide a mix of fun and learning in ways that schoolrooms are unable to match. Moreover, these learning technologies are student-centric. They can access them when they are ready and allow them to interact with their peers in mutually interesting ways. Innovative educators now work with students online. Emailed homework, discussion topics in newsgroups, dialogue using chat or IM, posting group work on blogs, and sharing video in real time are a few examples. Homeschooling is another fast growing, nontraditional educational option that is greatly facilitated by new technology.46 Evolution of the Workplace and Required Skills Global competition for jobs is a pressing national issue and new skills will be required for the future, not all of which are entirely known. In 2003, the Partnership for 21st Century Skills, in collaboration with business leaders, proposed a new set of competencies necessary for the success of students.47 These competencies reflect the complexities of today\u2019s workplace and include Global Awareness, Creativity and Innovation Skills, Media Literacy, and Leadership\/ Responsibility. While these 21st Century Skills have been widely praised, they have still not been adopted nationally. Also, the assumption of a captive female labor market for teachers has disappeared as women have pursued a broader range of careers. Expectations for teacher certification have increased, teaching conditions have become more demanding (particularly in urban settings), and pay has not kept pace with other professions\u2014circumstances that have resulted in more than half of new teachers leaving the profession within their first three years and raising serious concerns about teacher quality. Increased Diversity Today\u2019s students are more diverse ethnically, culturally, and linguistically than ever before. Their learning needs, interests, and well-being require cul- turally responsive instructional practices and outreach to parents. Educators need to be sophisticated in their understanding of how culture and language influence identity and learning, well-versed in first and second language acquisition pedagogy, and equitable in their beliefs and actions in order to promote high levels of achievement for all students. Increased Competition The weakened traditional educational system is manifested in discontentment on the part of students, administrators, and parents and has resulted in unprecedented competition. Strong political, economic, and religious forces have given rise to a plethora of options. Public schools, private schools, charter schools, and home schooling each has its own unique ideology, curriculum, and practices. Some options are not available to families who lack resources. Indeed learning has moved out of schools and classrooms altogether into cyberspace aided by new collaborative communication tools. New formats including serious games, online museums, and global learning com- munities are challenging the status quo. Tough Economic Times The economic divide between students with resources and those without is widening. Children represent a disproportionate share of the poor in the United States; they are 24% of the total population, but 36% of the poor population. In 2010, 16.4 million children, or 22%, were poor.48","696 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Poverty can impede children\u2019s ability to learn and contribute to social, emotional, and behavioral problems. Poverty also can contribute to poor health and mental health. Risks are greatest for children who experience poverty when they are young and\/or expe- rience deep and persistent poverty. Students in poverty are at great risk of failing and dropping out of school when they do not receive the additional resources they need to succeed academically.49 Many public school districts are very challenged in the current economic times to provide the resources that these students need. 22-2c Disappointing Reform Efforts In response to the stress of changing circumstances and increased competition, three large-scale school reform efforts have been launched over the past 30 years: the Excel- lence Movement; the Restructuring Movement; and the High Standards, Testing, and Accountability Movement. All three have been criticized for focusing on issues marginal to teaching and learning, and producing few if any positive outcomes. Each of these efforts are described and the reasons for their failure considered. Understanding these movements can inform better OD practice and intervention design. The Excellence Movement The Excellence Movement was a response to the April 1983 National Commission on Excellence in Education\u2019s assessment of education report, A Nation at Risk. The Commission linked concerns over national security to substandard education in American public schools and generated considerable debate. In response to the report, hundreds of state and national task forces sprang into action to investigate the condition of U.S. public education. However, the Excellence Movement offered no new direction. Initiatives associated with this movement were described as \u201cmore of the same,\u201d including longer school days and longer school years. Roland Barth aptly described some of these efforts as nothing more than moving the same furniture around in the same room.50 Within five years, the Excellence Movement had come and gone. The Restructuring Movement In 1989, President George H.W. Bush convened the nation\u2019s governors for a summit meeting on education. Governors had convened only three times before in the nation\u2019s history to consider a single topic. A two-part strategy emerged from the summit: (1) a call for national educational goals and standards and (2) a national exam system. The result of the summit was the identification of national edu- cational goals, Goals 2000, and a new emphasis on site-based reform. Ensuing efforts came to be known as the Restructuring Movement and included some common features: site-based management with meaningful authority over staffing, program, and budget; shared decision making; staff teams with frequent, shared planning time and shared responsibility for student instruction; multiyear instructional or advisory groups; and heterogeneous grouping in core subjects. Great optimism was associated with the Restructuring Movement. The term sug- gested a comprehensive redesign and systemic transformation of the schools. Simplistic, more-of-the-same approaches were replaced by the mindset that fundamental changes were necessary if schools were to develop the capacity to successfully address the signifi- cant challenges with which they were presented. Roland Barth wrote, \u201cThe advent of the restructuring movement brought a sudden confidence that teachers and principals, with the help of parents and students, can get their own schoolhouse in order.\u201d51 However, research on the Restructuring Movement suggested that most schools focused on nonac- ademic issues, such as student discipline and parent involvement, rather than on core issues of teaching and learning. This left the teaching and learning process largely","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 697 unchanged.52 Newmann and Wehlage suggested that the term restructuring was used so widely and ambiguously that it soon lost any specific, universally understood meaning.53 The High Standards, Testing, and Accountability Movement: NCLB and Race to the Top President George W. Bush signed the No Child Left Behind (NCLB) Act in January 2002, prompting what has been dubbed as the High Standards, Testing, and Accountability Movement. The purpose of NCLB was to improve public schools across the United States. NCLB reauthorized the Elementary and Secondary Education Act of 1965 (ESEA) to provide all students with a fair and equal opportunity to have a high-quality education. NCLB required annual testing in grades three through eight and imposed sanctions on schools that failed to make Adequate Yearly Progress (AYP). Under NCLB, every state was required to set grade-level standards and create a system to determine how students are meeting those standards. The system had to be based on chal- lenging benchmarks in English language arts and mathematics. The intent of NCLB was to hold schools and school districts accountable for results and to ensure that all students were learning. School districts and schools that failed to meet AYP were required to undergo improvement, corrective action, and restructuring procedures designed to get them back on track and meet standards. The remedies and sanctions imposed by NCLB were ineffective and did not result in high standards or high accomplishment.54 The NCLB legislation proved to be punitive and based on flawed assumptions about how to improve schools. For example, it assumed that higher test scores on standardized tests of basic skills were synonymous with good education. As one evaluation stated, \u201cTesting is not a substitute for curriculum and instruction. Good education cannot be achieved by a strategy of testing children, shaming educators, and closing schools.\u201d55 More recently, the Race to the Top reform initiative is being implemented. Race to the Top is a $4.35 billion United States Department of Education contest created to spur innovation and reforms in state and local district K-12 education. It is funded by the ED Recovery Act as part of the American Recovery and Reinvestment Act of 2009 and was announced by President Barack Obama and Secretary of Education Arnie Duncan in July 2009. To be eligible, states had to use value-added assessment measures, including student test scores in teacher evaluations. States were awarded points for satisfying certain educational policies, such as implementing performance- based standards (often referred to as an annual professional performance review) for teachers and principals, complying with nationwide standards, promoting charter schools and privatization of education, and computerizing the curriculum. In addition, the White House announced a $350 million federal grant funding the development of assessments aligned to the common standards. The common standards were developed by the National Governors Association and the Council of Chief State School Officers with funds from the Bill and Melinda Gates Foundation, the Charles Steward Mott Foundation, and others. Forty-eight states have since adopted these standards.56 Although many states have competed to win the grants, politicians, policy analysts, thought leaders, and educators have criticized Race to the Top as highly politicized. Teachers\u2019 unions and educators have complained that the tests are an inaccurate way to measure teachers, and have not worked in the past. Conservatives have complained that it imposes federal control on state schools. Critics say that high-stakes testing is unreli- able, that charter schools weaken public education, or that the federal government should not influence local schools. Critics further contend that the reforms being promoted are unproven or have been unsuccessful in the past.57 However, there are no definitive evaluative results on this initiative at the present time.","698 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Reasons for Failed Reform Dufour and Eaker offer five reasons why these large-scale reform efforts have failed to produce meaningful change in schools: (1) the complexity of the task, (2) misplaced focus, (3) lack of clarity on intended results, (4) failure to appreciate and attend to the change process, and (5) lack of perseverance. Change is difficult in any organization, but changing something as complex as the fragmented system of education in the United States is an especially challenging task.58 Fifty states operate over thousands of relatively autonomous school districts. These districts serve millions of students and are governed by local school board members. Constituents may agree that education is a national problem, but disagree about the quality of schools in their communities. While some teachers, students, and parents are disenchanted with their local schools, others staunchly defend their schools as serving their neighborhoods well. Prior reform efforts have not directly addressed the quality of student learning. They have instead focused on peripheral issues outside of the classroom. Although there seems to be general agreement that the educational system needs improvement, there is little consensus around goals for improvement, what constitutes success, and how success should be measured. A need exists to shift the focus of reform efforts from marginal changes to core issues of teaching and learning and strategies that have proven to be effective. Subsequently, a need exists to clarify and articulate desired results in meaning- ful terms. Failure to appreciate and attend to the change processes associated with organiza- tional and system reform has resulted in superficial, short-lived, and failed efforts. As this text has explained, the change process requires skillful planning from beginning efforts to \u201csustaining\u201d desired outcomes. Top down and bottom up initiated changes are likely to meet with resistance when not fully supported. Practitioners in schools who experience an endless array of reform \u201cdu jour\u201d initiated one moment and aban- doned the next are reluctant to persevere and devote the time and energy to what may be perceived as yet another fad. \u201cThis too will pass\u201d becomes the pervasive thinking and teachers close their doors and go about their business as usual. Even changes that are believed to be important by a majority of persons are likely to be \u201cstopped in their tracks\u201d if they are not carefully supported with guidance, time, resources, opportunity to collaborate, opportunity to problem-solve, encouragement, celebration, and a plan for sustaining the change over time. In addition to the five reasons for failure identified by Dufour and Eaker, inattention to the features that distinguish schools from other businesses has also contributed to failed reform efforts. Business in the schoolhouse is different than business elsewhere.59 Education is a more purely industrial-age institution than is business. Although business borrowed and implemented industrial-age ideas, it was not created with these ideas. The modern school, on the other hand was conceived with the factory model in mind and has evolved into the school system we know today. School systems are far more tightly embedded in larger social systems than are businesses. Individual schools are nested within local districts, which in turn are nested within state departments that set policy and standards. As a result, schools are directly and immediately affected by changes in policy. Schools are part of communities in different ways than are businesses. Parents play an important role in school governance. They not only have goals for what and how their children learn, but they also influence school operations as a whole. Senge suggests that the degree to which the industrial-age school lives in each of us can be a sobering realization from a standpoint of innovation and adaptation. He sug- gests that we begin by challenging industrial-age assumptions about learning such as: children are deficient and schools fix them; learning takes place in the head, not in the body as a whole; everyone learns or should learn in the same way; learning takes place in","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 699 the classroom, not in the world; and there are smart kids and dumb kids. Senge also recommends that we challenge the following industrial-age assumptions about schooling in order to create conditions and foundations for change: schools are run by specialists who maintain control, knowledge is inherently fragmented, schools communicate the truth, learning is primarily individualistic, and competition accelerates learning.60 22-2d Considerations for OD Practitioners Change forces and emerging models of schooling, such as PLCs, suggest challenges and opportunities for OD practitioners to consider. These challenges demand thoughtful and strategic application of OD principles. School transformation is a difficult and evolving process. Growing authentic learner-centric communities requires deep changes in theory and culture for traditional schools. Embracing the concept of school as a center for inquiry in which children and adults construct their own understand- ings of the world in which they live, calls for a significant shift in mindscape.61 OD principles can inspire the most promising of school improvement practices\u2014those that place emphasis on the teacher, the classroom, and the patterns of interaction that exist among teachers and between administrators in the school.62 Several of the most promising applications follow. Developing Professional Learning Communities PLCs provide a promising opportunity for OD practitioners. PLCs have been replacing the old model of schools as knowledge factories or organizations. The concept of schools as a learner-centered communities emerged in the 1990s and has continued to evolve. Peter Senge described schools as learning organizations in his book, The Fifth Discipline, and the term made its way from business literature to educational literature. In 1992, Sergiovanni translated one of Senge\u2019s five principles\u2014team learning\u2014to an educational context: the idea of school as a learning community, suggesting a family-like, close-knit connectedness among mem- bers.63 A variety of authors have proposed characteristics and practices that reflect a learn- ing community, including action and results-oriented focus; continuous improvement; supportive and shared leadership; shared purpose, mission, vision, values and goals; reflec- tive dialogue and collective inquiry; and shared responsibility for students\u2019 learning.64 Rather than emphasizing externally imposed rules, regulations, monitoring, supervi- sion, and evaluation systems to maintain control over teachers, PLCs are built around relationships and shared ideas. Relationships in communities are close, informal, cooper- ative, and trusting\u2014similar to relationships found in families and other groups of people with close ties. Shared values, sentiments, and beliefs unite people in communities around common causes. Leadership in communities emerges from moral roots and is servant in nature. Leadership is initiated from \u201cmany different chairs,\u201d including leadership on the part of students, parents, and community members.65 This in turn builds the leadership capacity of the school as a whole. Teams are formed with community needs and individual talents and strengths in mind. Efforts are made to distribute the work among those who are best suited. Building strength-based communities is a mindscape that replaces the defi- cit notion of fixing individuals and weaknesses. Learning communities are regularly engaged in learning and inquiry with a focus on results and continuous improvement. Cultivating Trust and Learning Relationships An important first step in schools becoming authentic learning communities is the building of relational trust. A ten-year study of achievement in math and literacy in 12 Chicago public schools by the Center for School Improvement at the University of Chicago revealed that schools reporting strong","700 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT positive trust levels were three times more likely to improve in reading and math than those with poor trust reports. OD values (respect, inclusion, collaboration, authenticity, self-awareness, and empowerment) are aligned with four components of relational trust associated with PLCs: respect for the importance of person\u2019s role and viewpoint, compe- tence to administer one\u2019s role, personal regard for others, and integrity in words, actions, and ethics.66 OD practitioners can help schools identify, acknowledge, and support learn- ing relationships between peers, family members, and the community by promoting the values of self-awareness and empowerment. Family and community involvement are fundamental to student achievement in schools. OD practices can assist schools in gaining active engagement from family and community through the building of positive family and community relationships, effectively involving families in the school, and reaching out to family and community members. The National Parent Teacher Associa- tion offers six national standards for family involvement programs, along with practices that can provide a framework for OD support.67 Standard areas include communication, parenting, student learning, volunteering, school decision making and advocacy, and col- laborating with community. These are useful resources under most circumstances, but assume the local community and school district can provide family and community engagement. If the local socioeconomic conditions are inadequate to support the forma- tion of a PTA or other outreach organizations, OD practitioners may need to consider alternative interventions, such as developing social change organizations as described in Chapter 21. Creating a Collaborative Vision Four building blocks form the foundations of PLCs: mission, vision, values, and goals.68 OD practices can support schools in the development of effective mission and vision statements. OD practices can also guide school efforts with regard to clarifying values and goal setting. Eaker, DuFour, and Burnette recommend that four critical questions be addressed in professional learning community mission state- ments: (1) If we expect students to learn, what is it we expect them to learn? (2) How will we know if they are learning it? (3) What will we do when they don\u2019t? and (4) How will we engage students in their own learning?69 OD practices can also help PLCs develop effective vision statements through collaborative processes that promote ownership and unity. These processes can ensure that vision statements are based on relevant background information and research and that they clarify direction and priorities. OD supported vision development can result in statements that are desirable, feasi- ble, credible, and easy to communicate. OD practices can challenge members of the pro- fessional learning community to identify the specific attitudes, behaviors, and commitments they must demonstrate to translate vision into reality. They can also help communities to set goals, determine which steps need to be taken first, establish time- lines, and identify measures of success. Interestingly, a common feature of these emerg- ing learning strategies is the OD principle of community involvement. David Cavallo, director of the Center for the Future of Learning at MIT, has pushed for a new learning model called \u201cemergent design.\u201d The design requires community development of learn- ing goals similar to building design. He says, \u201cthe design and implementation of technology-enabled organizational change has not played a significant role in guiding educational thinking.\u201d70 Perhaps it is time. Improving Teaching Practice with Action Research A founding practice of OD, action research, has recently become an emergent practice among teachers seeking to improve their professional practice. The overarching goals of action research are to increase practitioner and community knowledge about the topic under study and to","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 701 show results through improvements in education that have resulted from study. Method- ological outcomes of action research for educators are to build professional capacity through critical reflection, promote focus and long-term engagement with issues that \u201cmatter most,\u201d develop local expertise, and leave practitioners more motivated and ener- gized about their work. Participatory Action Research is based on five principles: (a) belief in human capacity, (b) unyielding commitment to social justice and equity, (c) value of collaborative work to individual educators and to their schools, (d) norms of professional and public accountability, and (e) mutual inquiry as a means to honor others, empower ourselves, and adapt to a changing educational environment.71 Whereas the effectiveness of traditional professional development practices are shown to be nominal, action research is growing as a strategy for honing skills and solving chal- lenging learning problems. Teachers engaging in action research report greater control and satisfaction in their practices. Action researchers Jean McNiff and Jack Whitehead encour- age educators to use the practice as a more effective approach to professional develop- ment.72 Ravitch asks, \u201cCan teachers successfully educate children to think for themselves if teachers are not treated as professionals who think for themselves?\u201d73 Grounding Practice in Theory Theory should drive practice and specific methodolo- gies used in the classroom. However, outdated and unsupported methods are still practiced in many classrooms. Social constructivism is the current most widely accepted learning theory. It suggests that students learn best by constructing meaning in social settings where ideas can be discussed. Social constructivism puts students at the center of learning. Each student is responsible for constructing their model of the world in community with peers and led by an inspired teacher. OD professionals adept at applying theory to practice can guide educators in the same process. Action research provides a powerful tool for helping teachers transform their practice and explore new methods grounded in the the- ory. Additionally, PLCs provide the motivation and the support to update methods. Growing Leaders and Leadership Locally Traditional leadership models have largely failed public schools because they have ignored or marginalized the leaders already in the schools. Growing sustainable leadership capacity requires robust learning communities. In PLCs, common purpose, commitment, and action bonds members together in trusting and caring relationships and binds them to important values, pur- poses, and responsibilities. Leadership is a group activity linked to a practice rather than an individual activity linked to a person. Wenger\u2019s ongoing study of various com- munities of practice shows that communities naturally grow their own experts and lea- ders and internally negotiate responsibility in dynamic ways.74 Consideration for situation and ability determines who assumes leadership for which responsibilities.75 This approach is very different from imposed top down leadership styles of past. Lambert convincingly draws a parallel between the development of leadership and learning theory and sees leadership more organically. She observes and champions \u201cacts of leader- ship\u201d among teachers and parents who have been overlooked as leaders which amount to simple conversations.76 OD practitioners should seek to discover, honor, and empower the local leaders of the learning community who are far more aware of the issues and solutions but have softer voices. In addition, they should seek to discover methods for developing that nascent leadership for the future good of the school and community. Utilizing Technology as Catalyst for Innovation In Disrupting Class, innovation expert, Clayton Christensen, observes, \u201cschools have done what all organizations are inclined to do when instituting a new technology. They have \u2018crammed\u2019 the new","702 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT technologies into their existing structure, rather than allowing the disruptive technology to take root in a new model.\u201d He suggests a different focus on empowering students and teachers by providing a rich set of learner-centric tools to empower and access to a global content network to engage communities of learners.77 Mimi Ito, a cultural anthropologist, has discovered another approach in research done for the MacArthur Foundation. She observed how students use social media inde- pendent of school and found that new technologies have altered the way young people learn and interact. Her findings show how students actively and successfully use these new spaces for a new kind of self-directed, peer-based learning and that educators need to be encouraged to be more open to these spaces and platforms for learning.78 The story of Khan Academy is another great example of outside innovation. Video explanations intended for a family member now assist the understanding of a half a mil- lion online subscribers becoming a powerful social learning platform. Other popular media such as Twitter and Facebook support global social networks independent of schools where learning is shared. Games are another innovation with implications for education. It has been suggested that games are good for learning because they inher- ently teach many 21st century skills such as, systems thinking, leadership, accountability, adaptability, interpersonal skills, self-direction, and social responsibility.79 Game systems can track interactions and deliver real time data on progress toward personal learning goals and even provide appropriate support information.80 These tools and innovations provide new opportunities to measure what matters, shifting from basic literacy to real-time assessment of 21st century skills called for in the National Educational Technology Plan.81 OD practitioners can assist by applying the recent outside innovations and envisioning new platforms that will support learners rather than enforce teaching and testing. 22-2e Conclusions Education in the United States is a complex, diverse, and continually evolving system. Schools differ in their structure, mission, and process from most other organizations and the purpose of education and best practices continue to be hotly debated. A number of forces, including changes in communication and learning, changes in the workplace and required new skills, increased diversity, increased competition, and tough economic times, are stressing traditional models of education and prompting change. Large-scale efforts to reform the system have been disappointing and criticized as focusing on issues marginal to teaching and learning and producing few if any results. Failed large-scale reform efforts have given rise to a new strategy for school improvement\u2014PLCs. Considerations for OD practitioners with regards to supporting the transformation of schools to becoming PLCs include: developing trust and learning relationships, creating a collaborative vision, improving teaching practice through action research, grounding practice in research, grow- ing leaders and leadership locally, and utilizing technology as a catalyst for innovation. PLCs, however promising on a local level, may only result in pockets of success. Christensen suggests, \u201cIf we persist in believing that the problems of our schools can be solved by simply improving schools, we will never succeed.\u201d82 He portrays education as a much larger ecosystem in which learning occurs as much and maybe even more outside of the schoolhouse than inside the schoolhouse. Based on his work with school districts and systems in the United States, United Kingdom, and Canada, Michael Fullan proposes a framework for what he describes as \u201cwhole system\u201d and reform involving reciprocal partner- ships across and within schools and communities, districts, and states. \u201cIndividual capacity is part of the development, but at the end of the day only collective capacity counts.","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 703 Coordination, focus, easy access to best ideas, the press of collaborative competitions and ultimately win\u2013win outcomes are the drivers. There is simply and flatly no other way to get whole-system reform.\u201d83 Christensen, Fullan, and others suggest a major paradigm shift in terms of understanding where and how learning occurs and how to improve learning through change efforts, adding to the complexities that educators and OD practitioners need to consider in order to be effective and relevant.84 22-3 Organization Development in the Public Sector*** Public-sector organizations in the United States, such as federal, state, and local govern- ments, operate in a complex environment of competing political, social, and economic forces. Calls for the government to operate more efficiently, effectively, and accountably and to become more responsive and citizen focused are common. Legislation and pro- grams aimed at improving government accountability, quality, and effectiveness are being introduced and adopted at all levels of government.85 For example, Congress passed and President Obama signed the Government Performance and Results Moderni- zation Act of 2010, updating the original Government Performance and Results Act that required federal agencies to create multiyear strategic plans, annual performance plans, and annual performance reports.86 The new legislation creates a more defined perfor- mance framework and institutes quarterly reporting and reviews instead of annual ones.87 In addition, states across the land are adopting legislation to reduce the cost of government and make it operate more effectively. For example, California Governor Brown signed public employee pension roll-back legislation aimed at reducing pension costs and discontinuing abuses such as \u201cspiking.\u201d88 The reform legislation intends to make the state\u2019s retirement system economically sustainable. Colorado is another exam- ple of more effective government. The state\u2019s new human resource system increases flex- ibility in hiring, improves the employee compensation structure, and better rewards employees through performance and tenure. Cast as the \u201cTalent Agenda,\u201d a goal of the legislation is to attract top talent to its workforce.89 In addition, public-sector organizations face increasingly complex challenges in responding to citizens, crafting public policy, and providing public services. Conflicting public policy at the federal, state, and local level, coupled with unfunded mandates and restricted revenue further complicate their environment. Government\u2019s record of success- fully responding has been spotty at best, with trust in government falling dramatically. In 2002, 60% of Americans said that they trust the government in Washington to do what is right \u201cjust about always\u201d or \u201cmost of the time.\u201d By 2010, that percentage had dropped to 19%.90 The Gallup organization has conducted similar polls about trust and satisfaction in government since 1972. In a recent poll, Gallup found that dissatisfaction rose from 39% in 2002 to 81% in 2011.91 Less than half of Americans, 43%, down from 65% in 2001, now have a \u201cgreat deal\u201d or a \u201cfair amount\u201d of trust in the federal government to handle domes- tic problems.92 Tragically, and at a time when political leadership is most needed, trust and confidence in the people who either hold or are running for public office is at historic lows.93 In contrast, 2011 polling finds that 57% of Americans have a \u201cgreat deal\u201d or a \u201cfair amount\u201d of trust and confidence in state government to handle problems and just over two-thirds (68%) express even greater trust in their local governments.\u201d94 ***Written by Raymond R. Patchett, city manager, City of Carlsbad, California, and Val Brown, Communications Department, City of Carlsbad.","704 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT In the face of the lingering Great Recession, terrorism, war, and social turbulence, these numbers at the federal level are unlikely to improve. Public participation, once the hallmark of the American democratic process, is suffering. Voter turnout in presidential elections has dropped from more than 62.77% in 1960 to 57.48% in 2008.95 Nonpresiden- tial elections find voter turnout dropping down to 38.5% in 2010 and similar low-levels for the prior nine elections.96 As a result, public-sector organizations are engaging in a variety of efforts to increase citizen participation and involvement in hopes of developing greater public trust and confidence, making government more effective, and cutting the costs of government as they move further into the 21st century. For example, on his first day in office, President Obama signed the Memorandum on Transparency and Open Government to build public trust and promote transparency, pub- lic participation, and collaboration.97 To operationalize the initiative, he issued the Open Government Directive. It directed agencies to formulate an Open Government Plan, includ- ing the development of a strategic action plan for transparency, the creation of more oppor- tunities for the public to collaborate and participate throughout the decision-making process, and the establishment of at least one specific, new initiative for implementation.98 At the local level, governments are supporting community building and neighborhood involvement initiatives such as the Connecting Community, Place & Spirit learning confer- ence in Carlsbad, California, and the Block by Block neighborhood engagement program in Clearwater, Florida. At the same time, they are attempting to be more productive, effi- cient, and effective by downsizing and privatizing public services and introducing technol- ogy to increase effectiveness and productivity.99 For example, the demand for certain public services on a 7\/24 basis is making it necessary for government agencies to adapt and innovate. A report issued by the National Performance Management Advisory Commission proposed a Performance Management Framework to help governments mea- sure results within resource constraints.100 Similarly, The Alliance for Innovation (www. transformgov.org) has introduced nationwide initiatives to foster innovation at all levels of local government that also results in a culture of continuous improvement and learning. City governments, such as Phoenix, Arizona, and San Diego, California, are competing with the private sector through managed competition programs. Other cities, such as Carlsbad and Irvine, California, implemented performance management compensation systems that reward employees based on selected core competencies and the achievement of goals. All of these changes are being introduced to translate legislative mandates into measurable results and outcomes, such as citizen satisfaction and service quality. These types of changes suggest a vital and important OD role in the public sector. Planned organization change efforts in this context can be as successful as those in pri- vate organizations,101 and OD interventions are becoming more common and accepted in government. For example, the Great Recession is requiring that governments cut costs and find alternative methods to provide public services. As a result, state and local gov- ernments are outsourcing and privatizing the provision of many programs and services. At the same time, they are downsizing operations, implementing hiring freezes, pay freezes, and furloughs, and laying off employees to stem the rising cost of government.102 Yet others are conducting community-visioning processes to engage citizens with their government; technology and social media has become an indispensable foundation for helping governments connect with citizens and operate more effectively; team building is being conducted for elected officials and staff at all levels of the organization; and perfor- mance management and compensation programs are being updated and implemented. Culture change initiatives are also finding their way into public-sector programs as a means to strengthen a shared knowledge of the values, mission, and vision of the organi- zation. These OD interventions, and others included in this book, are helping public-sector","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 705 organizations respond to the citizenry and transform themselves into citizen-focused, customer-driven, and results-oriented public-sector organizations. Although public-sector OD applications are becoming more common, they face a unique set of circumstances, including a complex political and operational environment. Interventions often are conducted in the public arena among a number of stakeholders, each of whom has legitimate standing in the policy-making process\u2014and often in the decision-making process. The climate and support for OD is complicated further by the structure of public-sector organizations. Although the legislative and political arena is interdependent with the administrative and staff domain, it is highly unlikely that both will be involved in the same OD intervention. If they are, each domain has a different role and operates based on different and sometimes competing values. To conduct planned change initiatives effectively, OD practitioners must recognize and appreciate these differences. This section highlights some key differences between the public and private sectors and discusses some of the implications for applying OD in public-sector organizations. 22-3a Comparing Public- and Private-Sector Organizations Public- and private-sector organizations differ along four key dimensions: values and structure, the multiplicity of decision makers, stakeholder diversity and access, and the extent of intergovernmental relationships. Each of these differences is discussed along with its implications for OD practice. The discussion draws on the writing and research of John Nalbandian, H. George Frederickson, Bob Golembiewski, and John Bryson.103 Values and Structures Public- and private-sector organizations differ in important ways with respect to their values and structures. In private-sector companies, the key values are profitability and the creation of competitive advantage. The board of directors, who represent the shareholders, and the management team, who are tasked with imple- menting a strategy, share these values. Although public-sector organizations share a sim- ilar structural arrangement of representation and implementation, there are crucial differences in purpose and role that hold important implications for OD practice. In contrast to the private sector, the overarching purpose of public-sector organiza- tions is to govern toward greater public good and demonstrate responsiveness to public wants and needs. The public good is addressed through the adoption of laws and policies and the establishment of public services and programs that support a broad array of citi- zen needs that must, by law, be discussed and adopted in an open public meeting. Responsiveness is reflected in demands for representation, efficiency, individual rights, and social equity.104 In service of these values and purposes, public-sector organizations also adopt a representation\u2013implementation structural form. The representative function is known as the political or legislative domain, and the implementation function is known as the administrative domain. The public sector political\u2013administrative structure reflects the values and roles inherent in government organizations. In the classic theory of public administration, the political domain is led by elected representatives who pass legislation and enabling statutes in service of the public good. In turn, they delegate implementation of programs and statutes to administrative agencies.105 The political domain includes both elected and politically appointed officials, and the administrative group includes the merit-based civil service and certain executives, such as city managers, who are appointed on the basis of professional rather than political criteria.106 This structure mirrors the private sector\u2019s distinction between a board of directors and management.","706 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Unlike private-sector organizations, however, the purposes and values within public- sector organizations are not shared necessarily by the political and administrative func- tions. For example, politicians serve at the pleasure of the public. Although private-sector board members are elected representatives of the shareholders, their elections are not as open and public as are those of political officeholders. Politicians must compete to get elected and continue to posture and compete to get reelected. As a result, political values of responsiveness, representation, social equity, and efficiency, and the ever present politi- cal survival value are reflected in an open and public process where the particular interests and values of a diverse set of constituencies are brought together to produce a common view of the public good. Clearly, politics is the art and science of government.107 Moreover, the political function is responsible for the establishment and oversight of an administrative organization that is designed to implement the outcomes of the legisla- tive process. Generally, the mission of the administrative function is implementation and enforcement of the laws and delivery of public services or goods. The legislative mandates, rules, and procedures established to address public wants and needs make public-sector organizations less flexible than most private-sector organizations and constrain their ability to act outside of their legislative framework. Thus, the administrative function values par- tisan neutrality; selection and promotion on the basis of merit, specialization, and exper- tise; the use of information for analyzing public policy issues; recordkeeping for purposes of continuity; application of the work ethic; and the justification of decisions based on effi- ciency (achieving the most productivity for the money available) or economy (achieving a given level of productivity for as little money as possible) or both.108 When elected officials are responding to the citizenry or setting policy, the political domain\u2019s values of respon- siveness and representation may override the administrative values of functional expertise and economy. When such value conflicts occur, administrators are often caught in the ten- sion between politics and their mandate to run an efficient organization. These value differences, along with government\u2019s regulatory and taxation role, have contributed to the perception of government as a bureaucracy, which simply refers to the administration of a government through bureaus staffed with nonelected officials. Per- ceptions of bureaucracy are often negative, however, and include indifferent people exercising power through strict adherence to inflexible policies, rules, and procedures. In addition, government appetite for risk is extremely low, resulting in a plethora of rules and regulations fostered to minimize any possibility of something going wrong. Although public- and private-sector organizations can take on the characteristics of a bureaucracy, such as departmentalization, vertical decision-making processes, and many formal rules and procedures, the characteristics are more pronounced in government orga- nizations. A critical reason for this phenomenon is that government organizations are leg- islated into existence, giving the organization or agency life until it is legislated out of existence. As a result, the organization receives funding that sustains its existence regard- less of performance. Although budgets at all levels of government are reviewed and adopted annually, the complete elimination of a public-sector agency or organization is rare. The effect is that public-sector organizations, despite their purpose, can be much less responsive to citizens and customers than private-sector organizations because they aren\u2019t directly reliant on the customer for funding to sustain their existence. The political nature of the legislative and representation process and the functional expert and efficiency orientation of the administrative process produce important tensions in a public-sector organization. OD practitioners must be aware of these tensions and of the implications they have for OD practice. First, OD practitioners must understand that a public-sector organization\u2019s primary mission, unlike private-sector organizations, is set by law, and major changes can only occur through additional legislative action. Even so,","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 707 appointed officials and staff have much flexibility and discretion on how to implement government services and programs. The implication for OD is that many of the interven- tions used to help private-sector organizations, such as strategic goal setting, performance management, succession planning, staff development and organization learning, culture change, and team building, can be used successfully in the public sector. Second, public-sector interventions often require approval and funding from an elected board. This increases the probability that the design, especially one for citizen- and neighborhood-focused initiatives, will be scrutinized and challenged to ensure its efficacy. OD practitioners need to be ready to provide evidence of success for particular interventions in public-sector organizations. Third, OD processes that support elected officials in citizen-focused initiatives or in enacting policy must consider the public environment in which they are being conducted. Public-sector organizations are subject to greater direct public access, media coverage, and a much broader array of responsibilities and more distributed power than are most private- sector organizations. As a result, most policy-level OD and citizen-focused applications will be conducted in public. OD practitioners must select processes that create a constructive environment on the one hand and allow for public participation and review on the other. In addition, OD interventions must account for the vulnerability that elected officials, and sometimes public administrators, experience. For example, the results of a community- visioning process may serve as the political platform for candidates seeking the same public office that the incumbents leading the visioning process currently hold. OD practitioners need to be aware of this possibility as interventions are designed and implemented. Fourth, the values of the political domain may differ from traditional OD values. The win\u2013lose dynamics associated with passing legislation, mediating competing inter- ests and political trade-offs, and balancing scarce resources can conflict with OD values of collaboration, teamwork, and efficiency. Improving organization effectiveness is an OD value often at odds with the political process. Last, administrative values and OD values are more likely to be aligned than with the political domain. To be effective, an OD practitioner must appreciate the tensions found in these differences. Multiplicity of Decision Makers The public sector operates in an environment of largely unlimited access to multiple authoritative decision makers, a phenomenon designed to ensure that \u201cpublic business gets looked at from a variety of perspectives.\u201d109 The public expectation of government is full and legitimate access to all decision makers at every level. As a result, access to the decision-making process is broader and accountability is more dispersed than in private-sector organizations, where such access is uncommon and responsibility is more clear-cut.110 Further, government fragmentation complicates the public-sector decision-making process where it is common for different public agencies or even different departments within the same agency to be responsible for different steps in governmental processes. Such fragmentation often makes it confusing and difficult for citizens, clients, customers, and even public officials and staff to understand who is respon- sible for what decision and accountable for what service or product. In addition, Golembiewski noted that decision making by public officials, \u201ctends to favor patterns of delegation that maximize their sources of information and minimize the control exercised by subordinates.\u201d111 Specifically, the goal was to have all decisions brought to their level for action and review. While this may have been the case in the past, most public-sector organizations today are just as embroiled as the private sector in the task of evolving from a command-and-control decision-making structure to one of empowered workers. Within the constraints of the legal mandates and regulations governing the orga- nization, public officials can delegate decision-making responsibility and accountability to","708 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT the public worker closest to the citizen and customer if they want to and if it is in align- ment with their leadership philosophy. The implication is that OD values that seek to expand worker self-direction and move decision making closest to the point of service are consistent with many government transformation efforts currently underway. This multiplicity of decision makers and government fragmentation results in addi- tional implications for OD interventions. First, multiple decision makers make it difficult to determine the identity of the client and the expected results. For example, a legislative body may adopt a policy, such as pay-for-performance, and direct staff to design and implement the program. In this example, both the legislative body and the staff are accountable and responsible for different parts of the intervention. Because the policy and administrative decision-making process are interdependent, the OD practitioner may be unable to gain the same level of clarity about who is the client, their authority, and an understanding of their responsibilities that is possible in the private sector. Second, support and funding approval for OD interventions may be more difficult to obtain than in the private sector. The implication for OD practitioners, when operat- ing across multiple departmental lines within the same organization, is most direct when entering and contracting. The project may require staff support for the intervention and legislative approval and funding for the project. As a result of the public approval pro- cess, OD practitioners must be able to explain the process and outcomes that will result and must expect that the public or politicians resisting the project may challenge the effi- cacy of the intervention(s). Stakeholder Access As described earlier, a stakeholder is any group or individual who is affected by or who can affect the policies and operations of the public-sector organization\u2014citizens, customers, political parties, corporations, employees, other gov- ernments, interest groups, critics, and so forth.112 In contrast to private industry, the public sector conducts business in open public meetings and involves a \u201cgreater variety of individuals and groups with different and often mutually exclusive sets of interests, reward structures, and values.\u201d113 In addition, citizens and interest groups have full access to public reports, documents, plans, and other background information via public records, public notices, all of which are archived and can be easily accessed on the Inter- net. OD practitioners must recognize that all stakeholders, most of whom bring different values, goals, or proposed solutions to public issues, have legitimate entry into the public policy and administrative processes. For example, stakeholders supporting the goals inherent in the Americans with Disabilities Act must compete for funding with stake- holders supporting the objectives inherent in the Endangered Species Act and its pro- grams. Such conflicting interests and access creates a broad array of challenges for OD. Foremost among the challenges is helping diverse groups of people with different and competing interests to collaborate with each other in developing a common goal, or set of goals, to meet their respective interests that may represent an unpopular compromise to the demands of any individual group. Anyone who wants to, citizens and even nonresidents (legal or not), may influence the policy-making process. Such broad access may exist in the private sector with respect to certain types of information, but the ability to influence corporate decisions and activ- ities is much more restricted. What this level of public access does to the policy-making process is complicate and politicize the roles and responsibilities of politicians and administrators. Thus, the role demands of an elected official are much broader than the role demands of a private-sector board member. In addition, public-sector administra- tors, who are responsible for implementing public policy, have a duty to respond to the citizens, elected officials, and the staff that work for them. Everyone must be listened to and no one can be ignored. The implications of this network of roles and responsibilities","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 709 for OD practitioners is that, in reality, anybody can make a demand for full disclosure about the OD initiative and in some instances ask to be involved in the process at virtu- ally any level of a public organization. The likelihood is high that the individual or group will have legitimate standing to do so. In addition, public-sector employees are stakeholders as a result of their legal right to form unions to represent them on matters concerning wages, hours, and working condi- tions. Because collective bargaining laws are structured for managing disagreement, a chal- lenge for OD practitioners, if involved, is to help facilitate the process in a way where all parties perceive their interests have been considered and they feel heard. A poor labor rela- tions environment and poor employee morale will make it difficult, if not impossible, to implement OD interventions successfully. It also becomes especially difficult because most public-sector unions get involved politically in supporting or opposing the reelection or election of a candidate. This involvement can create a \u201cshadow effect\u201d on the intervention, sometimes helpful and at other times negative, depending on whether or not the union supported the candidate who was elected. Importantly, OD practitioners must understand that, in contrast to the private sector, it is difficult to arrange stakeholder interests and expectations behind a common goal. Even so, practitioners must appreciate that \u201cattention to stakeholder concerns is crucial because the key to success in public and nonprofit orga- nizations is the satisfaction of key stakeholders.\u201d114 Intergovernmental Relations Governments are designed to both focus functions and power, and paradoxically, to disperse power and functions so that no one govern- ment or agency is all powerful. As a result, \u201cgovernment\u201d comprises a latticework of independent agencies or departments providing different public services to the same citi- zens and customers. The result is an intergovernmental relations environment where fed- eral, state, and local government share power, responsibility and, in some cases, resources.115 These intergovernmental relationships, amplified by the multitude of special purpose public agencies and districts, such as water and sewer districts, raise several con- siderations for public-sector OD applications. First, issues of coordination and power may emerge out of the sharing of responsibil- ity across public-sector organizations in the provision of public services. Although the ser- vices may appear to be provided by \u201cthe government,\u201d the reality is that a number of public organizations often are responsible for different aspects of the same public service. For example, providing an integrated transportation system requires federal, state, special district, private developer, and local government participation. The federal government and special districts work together to provide train and bus service. The state works with fed- eral and local governments to provide interstate and state highways. Local governments provide the local road system with financial assistance from development, federal, and state agencies. OD practitioners working on intergovernmental relations projects must utilize a network perspective that makes explicit these differences with the intention of reaching agreement about overarching outcomes, responsibility, and shared resources. Second, local governments must implement federal and state laws and policies that often conflict with each other. In such cases, it is common to find that federal policies, such as the Clean Water Act and the Endangered Species Act, set goals and objectives for state and local government organizations, the federal policy objectives of which are in direct conflict with each other. As a result, it often falls to local government to balance out the competing policies to comply with all of the mandates. The resulting questions about which agency has the most power, who is responsible for what services or pro- grams, and what level of government pays for those services or programs have important OD implications. For example, a network development intervention would recognize the existing transorganizational system and help all agencies, each with a different degree of","710 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT power, achieve reasonable agreement in addressing legislative goals and implementation issues. As with the private sector, however, reaching agreement often involves conten- tious negotiations where differing positions are addressed, acceptable tradeoffs are found, and conflict is managed and resolved. Since different levels of government have different degrees of power, the OD practitioner could facilitate a positive result to the process by getting early agreement between the organizations on the overarching desired outcomes, and how decision making and conflict will be managed. Such an intervention is complex, however, because government agencies tend to preserve their power and pro- tect their interests at virtually all costs while limiting their financial and resource respon- sibility. Appreciation for the mission and power relationships among agencies is critical in designing effective network development interventions. Clearly, there are important differences between public and private organizations, and in many instances, the public-sector organization is more complex. In addition, one must appreciate the distinctions between the political domain and the administrative domain to consult or work in public organizations. With this understanding and an appreciation of the political arena in which public organizations operate, application of OD programs and techniques can be successful. 22-3b Recent Research and Innovations in Public-Sector Organization Development The comparisons between the public and private sectors described above suggest that OD has a role in government and not-for-profit organizations. OD practitioners need to appreciate the inherent differences and understand that OD applications in the public sector are conducted in a complex political and organizational environment. Moreover, the unique features of public organizations\u2014the values and structures, the multiplicity of decision makers, stakeholder diversity, and the intergovernmental relations environment\u2014 make OD applications challenging but not impossible. Despite these challenges to OD practice in the public sector, there is growing evi- dence that OD interventions in government are successful, even when compared with change efforts in private industry. One review of 574 OD applications across the two sectors showed a similar pattern of predominantly positive results in both government and private industry.116 Another study of 154 quality circle interventions in public and private organizations concluded that, although the highest levels of success occurred in pri- vate firms, overall success rates were substantial in both sectors.117 A particularly rigorous review of 52 OD interventions in government and industry confirmed these conclusions. The findings suggested that OD interventions were similarly successful in the two sectors, and led the researchers to conclude that the results \u201cserve to contradict the common notion that planned change is likely to be less successful in the public sector.\u201d118 Finally, a recent review of the impact, over a 30-year period, of a four-year OD intervention in the Metro County Sheriff\u2019s Department concluded results improved organization climate and leader effectiveness; decreased employee turnover, jail breaks, and citizen complaints; increased resources allocated to the organization; and improved organizational effectiveness.119 These results have been achieved through a variety of OD interventions, including strategic change organization learning programs (Chapter 19), high-involvement approaches (Chapter 13), and restructuring processes often brought on by outsourcing and reengineering projects aimed at streamlining work flows and response times (Chap- ter 12). They also have been achieved by perhaps the most difficult of all processes in government, performance management and human resource interventions to change the civil service system so that the workforce is more flexible, development-oriented, and","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 711 performance-driven. For example, a national survey of 987 state agencies found that 60% of them were using some type of strategic planning.120 Another national survey found that all but three states have performance-based budgeting requirements,121 and almost every state has enacted quality awards based on the Hammer Award and Malcolm Bal- drige National Quality Award criteria.122 In addition, local governments have conducted a variety of OD activities, such as team building, leadership development, large-group interventions, and total quality management programs, to become more effective.123 Many local governments, like Carlsbad, California, are conducting Citizens Academies to \u201ctell their story\u201d and help citizens become more involved in their community. Finally, nongovernmental organizations are working to help improve government. The National Innovations in American Government Awards, cosponsored by the Ford Foundation, the John F. Kennedy School of Government at Harvard University, and the Council for Excellence in Government, recognize examples of creative problem solving in the public sector. The National Civic League\u2019s All-America City Award recognizes exem- plary community problem solving and is given to communities that cooperatively tackle challenges and achieve results. The recently announced Mayor\u2019s Challenge, sponsored by New York City Mayor Michael Bloomberg will award a $5M prize and four $1M second- ary prizes to innovative ideas that improve urban life across the country.124 The Alliance for Redesigning Government of the National Academy of Public Administration is a national network for all levels of government that advocate performance-based, results- driven governance. The Alliance for Innovation is a national network and clearinghouse of local government organizations with the mission of innovation in the provision of pub- lic services, sustaining meaningful connections, and renewing passion for public service. 22-3c Conclusions OD applications have proven to be effective in public-sector organizations. Faced with many of the same pressures as private industry and some that are unique to government, public organizations will continue to use OD applications and interventions to transform them- selves into citizen- and customer-driven, more effective and responsive, results-oriented organizations. But to be effective, practitioners helping government must appreciate the differences incumbent in public-sector values and organization structure; the differences in public and private organizations; and the mindsets of elected officials and government workers. OD practitioners need to understand public-sector organizations and tailor interventions to fit highly diverse, politicized situations where elected officials and bureaucrats struggle with moving toward a greater emphasis on reorganizing and outsourcing, continuous improvement, teamwork, customer focus, employee develop- ment, and learning. Although public-sector OD is difficult and challenging, the successes cited in this chapter illustrate that OD is an invaluable tool in helping public-sector organizations provide top-quality services. 22-4 Organization Development in Family-Owned Businesses**** Family businesses, such as Levi Strauss, Cargill, and Kikkoman (founded in 1630), are at once the most common and least understood types of business organizations. Often thought of as \u201cmom and pop\u201d operations, more than one-third of the Fortune 500 ****Written by Dr. Otis W. Baskin, professor of management, Pepperdine University\u2019s Graziadio School of Business and Management.","712 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT companies are owned or controlled by families. Moreover, family businesses comprise the single largest demographic segment (between 65% and 80% of all worldwide busi- nesses), generate half of the U.S. domestic product, employ 50% of the workforce.125 One recent study showed that one-third of S&P 500 firms are family controlled and that they outperform the publicly controlled companies.126 While professional advisors, such as accountants, lawyers, and financial planners, have been serving this market for years, they are frequently puzzled by the complexity of relationships in these organizations. OD practitioners have recently begun to recog- nize that their ability to understand the dynamics of human and family relationships can address many needs within this context. This section explores the definition and model of the family business system, outlines critical issues facing family firms, and describes a typical planned change process. 22-4a The Family Business System The most common definition of a family business is an organization where ownership and\/or management control rests with a family (or families).127 This definition covers a wide range from small owner-managed businesses to the Ford Motor Company where the Ford family owns a minority of the stock but retains voting control through a com- plex system of voting shares. Some families retain 100% of the ownership while employ- ing \u201cprofessional management\u201d to run their business. Cargill, for example, is a globally dominant agri-business with more than $133 billion in annual sales and employing about 142,000 people in 65 countries according to its 2012 annual report. Its ownership is held by some 80 family members.128 Even when founding families no longer have managerial or voting control they may still be a significant force in the decision making process of the firm. Many believe that the principal reason the board of Hewlett-Packard failed to ultimately support CEO Carly Fiorina in her strategy for the HP\u2013Compaq merger was because she did not recognize the influence of the Hewlett and Packard fam- ilies beyond their votes on the board. Finally, even in companies that have long since lost all current family involvement, values and vision from founding families can be powerful forces. The ability of Johnson & Johnson to survive the poisoning of Tylenol capsules is generally attributed to the application of the company\u2019s \u201cCREDO\u201d originally written when it was family-owned. OD practitioners can help firms understand these \u201csoft\u201d deci- sion factors in governance and management decision processes. Generally, family firms are understood to have several potential competitive advan- tages that public- or private-equity-owned organizations do not (see Table 22.1). These include higher employee loyalty (family and nonfamily), the ability to quickly move in and out of market niches due to their flexible form of organization, their long-term (versus short-term) orientation and the ability to keep information about the business out of view of the public and their competitors. A comparison of the ways Ford, General Motors, and Chrysler survived the 2008\u20132009 recession illustrates this point. With the Ford family still owning controlling interest, Alan Mullaly, an industry outsider, was able to bring transformative change while being the only \u201cBig 3\u201d CEO not to accept fed- eral bail-out funds.129 Such unity between owners and management in support of sweep- ing change is virtually impossible in a purely public company. When a controlling family owns a business, even if family members are not active in management, their \u201cpatient capital,\u201d interest in their communities, and unity of purpose can result in distinctive capabilities that competitors are unable to match.130 A family business system model is shown in Figure 22.1 that defines the three basic components of family business organizations. It helps to understand the differences","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 713 TABLE 22.1 Comparing the Uniqueness of Resources and Attributes of Family Firms Resource Definition Positive Negative Nonfamily Firms Human capital Acquired Extraordinary Difficult to attract Not characterized by Social capital knowledge, commitment; warm, and retain the positives but skills, and friendly, and intimate highly qualified have fewer Patient capabilities of relationships; potential managers; path limitations financial a person for deep firm-specific dependencies capital tacit knowledge Resources Limited number Networks can be Survivability embedded in Components of networks more diverse; may capital a network, embedded in family; accessed; often be opportunistic in accessed legitimacy with excluded from accessing and Governance through constituencies elite networks leveraging; structure relationships enhanced; develop- (i.e., Fortune sometimes used for and costs ment of human capital 500 CEOs) managers\u2019 benefit \u2013 agency costs Invested financial Generational outlook; not Nonfamily investors Largely do not have capital without accountable to strict excluded; limited the benefits or threat of short-term results; to availability of limitations liquidation effective management family\u2019s financial of capital; allows capital pursuit of creative and innovative strategies Pooled personal Helps sustain the Not all family firms Do not enjoy due resources family business during poor have it to lack of members loan, economic times or commitment by contribute, and redevelopment of the employees and share with business; safety net stakeholders business Costs associated Family-owned and oper- Some family firms Professional with control of ated firms\u2019 may not have management firm: examples structures, trust, an effective and capital include and family bonds structure, trust, diversification incentives, reduce governance and strong family often increase monitoring, costs bonds, thereby governance costs and controls producing greater governance costs SOURCE: D. Simon and M. Hitt, \u201cManaging Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms,\u201d Entrepreneurship Theory and Practice 27 (2003): 339\u2013358. between family firms and traditional businesses, and how OD practice must be modified. The family business system is composed of three different subsystems: the business, the owners, and the family with varying boundary strengths.131 For each subsystem, there is an implicit understanding and, in the best practices, an explicit plan that determines how","714 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT FIGURE 22.1 Three Systems in Family Business SOURCE: Adapted from Tagiuri and Davis, 1196. R. Tagiuri and J. Davis, \u201cBivalent Attributions of the Family Firm.\u201d Working Paper, Harvard Business School, Cambridge, MA. Reprinted Family Business Review, 9 (Summer, 1196): 49. the objectives will be achieved with a governance structure that represents the people in that system. In the case of the founding generation of an owner-managed business, all three of these systems may completely overlap with a married couple both working in the business and sharing ownership. As the business and the family grow and owner- ship extends to subsequent generations these systems continue to move apart allowing for more variation in roles and creating more complexity in the system. 22-4b Business, Ownership, and Family Systems One of the principal advantages of family businesses is the increased potential for unity of purpose and action between owners and management as described in the Ford example above.132 The lack of this unity in publicly owned businesses is termed \u201cagency cost\u201d and was first described by Adam Smith in The Wealth of Nations: \u201c(B)eing the managers of other people\u2019s money than of their own, it cannot well be expected that (the managers of public corporations) should watch over (public investors\u2019 wealth) with the same anxious vigilance with which partners in a private co-partnery frequently watch over their own.\u201d133 The business system may consist (depending upon the stage of development) of family and nonfamily managers, the strategic business plan, and a governance structure that included a board of directors and sometimes nonfamily directors or an advisory board. The strategic plan should outline the business goals, objectives, strategies, and organization design. The board of directors and advisors counsel the business\u2019s leader(s) on strategy implementation, organization form, and other key business policy decisions. There are potentially many reasons a family business may lack what is gener- ally perceived as \u201cprofessional\u201d business systems.134 It is not unusual to find family busi- nesses with nonfunctioning boards made up of the founder and spouse and sometimes including a trusted attorney and accountant. These \u201cnominal\u201d boards often do not have meetings and only sign the required legal documents. One recent study of family firms found that only 54% of respondents rated their board as effective when only family","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 715 members served as directors. However, when at least two independent directors served on a board where family members were in the majority, the effectiveness rating improved to 83%, and where independent directors were a majority board effectiveness was rated at 96%.135 When siblings or cousins own a business where some owners are managers and others do not work in the business, a more functional and independent board of directors can help to preserve unity between management and owners. Inde- pendent directors can serve as objective observers and representatives of all owners through leadership of key board functions, such as succession planning, along with key roles on audit and compensation committees. The ownership system consists of the business\u2019s owners (family and nonfamily), a shareholder\u2019s agreement (preferably a legal document), and a governance structure that may be represented in a formal shareholder meeting. The shareholder agreement should outline the owners\u2019 business goals and objectives, including risk tolerance, expected return on investment, liquidity goals, and a buy\u2013sell mechanism. A shareholder meeting can provide a structure for owners to meet to develop and oversee their mutual interests in the business. Shareholder assumptions, including the buy\u2013sell agreement, ownership succession, dividend policies, and investment options for business proceeds are relevant topics for this forum. Shareholders are responsible for reviewing the family enterprise plan (discussed below) and determining the relevant goals and policies to communi- cate to the board of directors\/advisors. This is a critical step that sets family businesses apart from public companies: the ability of owners, directors, and management to be aligned in a vision for the business. It must be understood that more than equity is at stake in a family business; an unmistakable emotional component must be taken into account.136 Finally, the family system may consist of all family members (including those who have married into the family), their enterprise plan, and often a governance structure frequently referred to as the Family Council. The family enterprise plan outlines the family\u2019s philosophy, goals, and objectives for the business as well as other related family functions, such as community service, family gatherings, and philanthropy. The Family Council is often the body that represents the relevant groups of family members (those who work in the business and those who do not) and plans for discussions on such topics as educating family members on responsible ownership, developing policies on family participation in the business, communications and conflict resolution, and the financial education necessary to understand the performance of the business. Depending upon size and generation of ownership, business-owning families may have various degrees of structure. A \u201cFamily Assembly\u201d consisting of the business founders, their direct descendants, and spouses may suffice in early transition planning for a first to sec- ond generation of ownership family. As the family and its business grows and becomes more complex it may form a \u201cFamily Association\u201d consisting of family members who meet certain qualifications to vote on matters affecting the family. Large families with geographical diversity often move to a representative \u201cFamily Council\u201d to serve as an executive decision-making body for issues that impact the family as a whole.137 While this type of formal structure may seem overly complex in the context of family relation- ships, it can be a strong force in holding together a family with significant mutual assets. 22-4c Family Business Developmental Stages The conventional wisdom of family business around the world is often summarized as \u201cWealth doesn\u2019t go beyond the third generation.\u201d This can be demonstrated with research that shows fewer than one-third of family businesses are able to make the","716 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT transition of ownership into the second generation and only 12% of all family businesses survive into the third generation of ownership.138 While some have pointed to these sta- tistics as proof of the dangers of family business, they need to be understood in the broader context of business in general. For example, the expected life of a company on the S&P 500 list is only 10 years.139 In fact, the survival rate of companies listed on the Dow Jones Industrial Average from its founding in 1886 through 1996 is about the same as the statistics for family businesses with one-third of the original firms disappearing every 25 years.140 However, it cannot be denied that family businesses face some unique challenges as the business and the family change over time. The challenge of generational transition in family business is complicated by the sepa- ration of the principal roles of business, ownership, and family. In the founding generation where one or both parents own and manage the business, these roles are embodied in the same people. However, as parents begin to make plans to retire and do estate planning, they often leave their children equal ownership of the business they have created. Usually one of the siblings (traditionally the oldest male) will be selected to become the next CEO. In such cases, the expectation often is that the successor will run the business \u201clike dad\u201d because that has been a successful model. If in fact the ownership of the business has tran- sitioned from the founder(s) to their children, conflict can arise if the next generation attempts to lead the way the founder did. Siblings can be very quick to let a brother or sister know that they do not have the same rights their parents did. Second generation CEOs must learn that they have something mom and dad never had\u2014shareholders. When a sibling group owns a business together, they need decision-making and gov- ernance processes that the founders would have only found cumbersome and wasteful. This is especially true when the business does not employ all of the owners. Issues will arise about the amount of voice an owner who is not managing the business should have in the way their assets are being deployed. Also, questions of return on investment (ROI), shareholders dividends, or distributions versus bonuses to management and rein- vestment in the business may become heated topics. When a business attempts to transi- tion to a third generation of ownership (cousins), the issues of representation and voice in decision making can become even more explosive without well-designed governance processes in place.141 The potential for conflict about the business can also create lasting divisions in a family unless sufficient planning takes place to maintain and build upon the trust relationships inherent in the family system. 22-4d A Parallel Planning Process When a family owns a valuable asset, such as a business, their relationships can become much more complex. Deliberate planning is required to preserve the natural bond that exists in families and to make it possible for them to develop a shared vision for their mutual enterprise. Carlock and Ward describe a parallel planning process where \u201cviable business strategy is still the outcome, but it is an outcome shaped by the concerns of the family.\u201d142 Figure 22.2 illustrates the parallel processes leading to the simultaneous devel- opment of a family enterprise plan and a business strategy plan. 22-4e Values At the center of the family business system model is a set of core values held by the family. Research shows that family members internalize family values, such as long-term recipro- city, filial obligation, and hard work for one\u2019s family.143 They represent a key integration point for aligning the three subsystems listed above. However, values also best illustrate the","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 717 FIGURE 22.2 The Parallel Planning Processes SOURCE: Carlock, Randel, S., and John I. Ward, Strategic Planning for the Family Business, Palgrave, 2001. differences between family and nonfamily firms.144 The complexity of the family business is a function of not only the interplay among the family, business, and shareholder sys- tems, but the different (and often opposing) values that lie at the core of each system. For example, family and business system values are shown in Table 22.2. Based upon the values a family employs in making decisions about the business and the family they can be classified as either \u201cFamily First\u201d or \u201cBusiness First.\u201d145 A family-first value system will place family above the business and may suboptimize business opportunity to benefit the family. A business-first value system is based upon the belief that a well-managed business will produce the most benefit for the family now and in the future. Values of security and equality dominate the family-first approach. There is a strong inward focus on the family\u2019s dynamics, strong goals of keeping the system in equilibrium (even if it is an unhealthy equilibrium), and strong interest in maintaining unity and support. The family\u2019s continuity, even if the business does not prosper, produces a pref- erence for stability and risk aversion. Relationships are most important, there is a great deal of emotion built into decisions, and one can only be born into (or married into) this system. Businesses typically hire the person that best fits the organization\u2019s needs based on knowledge, skills, and abilities; however, there is no job description to be a good fam- ily member. The family system places high import on family and business privacy. Fam- ilies tend to hold very close financial information, family dynamics, and business information; often they do not want business and financial information shared even","718 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT TABLE 22.2 Family versus Business System Values Family Business \u00a9 Cengage Learning Security Risk Equality Equitability Inward orientation Outward orientation Status quo\/equilibrium Change Unity and support Competitive Relationship based Results based Emotion based Rationally based Born into Hired into Secrecy Transparency within the family. However, a lack of transparency among current and intended owners of a family business can breakdown the fundamental bonds of trust that are the founda- tion of family business. On the other hand, the business-first value system is interested in risk and equitabil- ity in the organization. Change, competition, results, transparency, and an outward ori- entation characterize business system values. Ideally, decisions are made rationally and objectively, and the system is composed of an often-changing mix of people who are hired into (or severed from) the organization. While 85% of those family firms who have identified a successor say they want it to be a family member,146 the number of those family successors who would objectively fit the profile of the kind of leader the company needs based on its goals and strategy may be very different. Thus, value dilemmas lie at the heart of how family businesses work. A family involved in a business can pursue its own objectives even when these are at odds with generally accepted business practices. Compensation, dividends, treatment of family and business expenses, performance evaluation and promotion, and the budget process are practices that can be influenced by family factors. Similarly, tensions in the business can be the result of the emotional relations in the family. Family relations are personal, often complex, and the result of a lifetime of positive and negative experiences. These relations influence business decisions overtly and covertly, as every family member is, in part, defined by their relationship to the business. Moreover, families often structure their business relationships in ways that fill a void in their family relationship outside of the business.147 OD practitioners often have to consider such issues as: \u2022 Should the chronic underperforming son or daughter be kept on in their business role and for how long? \u2022 How much conflict should the family (and nonfamily) business members have to endure between two siblings in rivalry? \u2022 When the business is suffering, will the family member\u2019s significantly higher com- pensation be addressed?","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 719 In sum, the family business system model provides an effective diagnostic tool and helps to explain some of the reasons why OD in family firms can be difficult. 22-4f Critical Issues in Family Business The interaction of the family, ownership, and business subsystems, particularly at gener- ational transition points, can be problematic.148 Where these systems overlap as family members come together as owners both inside and outside of the business, there are potential interface issues, potential conflicts, and always dilemmas to be faced. Transitions, particularly those from first to second generation and second to third generation can present even the most successful families and businesses with monumen- tal changes. The change from an owner-managed business to a small group of sibling owners to a larger group of cousins can challenge the basic assumptions that have been the basis of trust and unity in decision making. It is instructive to consider each of these major inflection points from the perspective of three states of change:149 \u2022 The present or current state\u2014identify the key elements of the organization and fam- ily that will be impacted by the change. \u2022 The transition state\u2014make the decision about where to begin the change process in each subsystem (family, business, ownership) from the present state to the desired state. \u2022 The future state\u2014a specific statement of the goal of the change process within a mid-range horizon of one to three years. Some of the critical change triggers common to family businesses as they grow and develop are the following. Entering or Leaving the Business as a Family Member Family members often report choosing the family business as a place to work with comments like \u201cIt just hap- pened\u201d or \u201cI fell into it.\u201d Family members are a convenient workforce and may be the only option in the start-up phase of the founding generation but businesses that success- fully integrate family members over the long-run do not base selection practices only on genetics. Policies on entering the family business, options for career paths, and multiple points of exposure to the family firm are a few of the best practices.150 There must be clear roles, recruiting processes, training, and development to give every family member who chooses to be part of the business a clear sense that they have earned their place. Moreover, the business strategy and organization structure should influence selection, although only 37% of family firms report having a written strategic plan.151 Most importantly, every family member should feel they have the opportunity to \u201copt out\u201d of the family business, without the risk of losing the uncondi- tional love of the family. To that point, many founders find it impossible to leave;152 close to 88% of family business respondents said that the family will continue to control the firm in five years.153 Too often a founder\u2019s identity is largely derived from the family business they began, and many strive to keep the status quo at all costs instead of wel- coming change, a values dilemma for an entrepreneurial business. Conflicts and Rivalry in the Business Conflicts and rivalries are common in fam- ily firms and are often the result of values dilemmas.154 If a family is relationship based and a business is results based, how is the family member to be evaluated? If equality is valued in the family system, how do you choose a business successor? Family member compensation, roles and responsibilities, authority, and opportunity are some of the critical issues that ignite conflict between family members. The family system is an","720 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT emotional one, and when placed together in a business setting, family members often revert back to the family roles they played growing up. Another source of conflict lies in the secret nature of families. Substance abuse problems, for example, are much more likely to be kept quiet in the family business155 and only 62% of significant shareholders report knowing the senior generation\u2019s share transfer intentions.156 The complexity of the family business system requires additional structures, practices, and processes to ensure open communications, conflict resolution, and business performance. Ownership Transfer and Estate Planning In addition to distinguishing between family and business roles, members of the family system may have a third role to play, that of \u201cowner\u201d or \u201cshareholder.\u201d Owners\u2019 rights and responsibilities are different from family and business ones. Ownership rights typically include electing directors, creating bylaws, voting on specified major business decisions, and realizing a fair return on investment. Typical responsibilities include making informed decisions, creating and keeping agreements, respecting limits of authority, and developing business competencies to adequately fulfill their role as a shareholder.157 One value dilemma evidenced in the owner arena has to do with \u201cequal vs. equitable.\u201d When ownership transfer issues arise, members of the shareholder group often struggle between transferring family business stock to members of the entire family versus only those family members who are active in the business. The former option can create challenges between inside-owners who work in the business and outside-owners who do not. Owners who earn their living from the business and are responsible for the success of the business often feel that outside-owners do not deserve any return for their investment because they inherited their shares. Sometimes families attempt to resolve this dilemma by \u201cequalizing\u201d the total estate. For example, a family with two active and two inactive business members of the next generation all receive an equal share of the total estate, yet the two active members receive 100% of the business assets and the estate is \u201cequalized\u201d by transfer- ring more of the nonbusiness assets to the inactive siblings. While this may seem equal at the time of the transfer, it can lead to future disputes if either the business or the other assets significantly outperform the other. Moreover, most business founders tend to reinvest everything in their business and may not be able to match the value of the business with other assets. Others attempt to avoid conflict over the business by establishing two classes of stock and leaving voting shares only to heirs who are working in the business. However, the long-term prospects for a family business where owners of a significant portion of the business have no voice in how their assets are utilized are not good. No amount of planning by the previous generation can replace the need for the cur- rent owners to develop trust through a common vision for their business and an appre- ciation of the interest and needs of each other. Selecting a New Leader The vast majority of family firms (85% according to one survey) choose successors that are family members.158 However, a 2007\u20132008 survey conducted by PriceWaterhouseCoopers found that 25% of the family businesses surveyed were expecting a transition within the next five years but only about half of them had a succession plan in place.159 Many families avoid the topic altogether due to its emotional intensity.160 Some of the key reasons include a founder\/owner who won\u2019t \u201clet go\u201d of the business, a reluctance to discuss the mortality of the current generation, the lack of com- petency in the next generation, rivalry among siblings for key leadership positions,","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 721 succession timing, incongruent business visions of the current and successor generation, and pressures from various family branches. Forward-thinking family business leaders spend the time to identify the optimum type of leader needed to take the business into the future. This can only happen after creating a shared business vision and strategy and then identifying the best leadership candidates. Once the current leaders have accepted the need for change, decisions can to be made as to where the potential candidates will come from. Will the next leader be a family or nonfamily member? If the choice is the former (and it typically is), what mentoring and development will ensure the family candidate is successful? Business is about risk and change, yet family is about stability and status quo, which explains part of the reason why choosing a new leader creates difficulties. Succession is marked by a shift of power and influence, followed by a period of shared power161 and for many lea- ders, the proposed transition is met with great resistance. Business Growth and Family Wealth As noted earlier, most family businesses struggle to transition the generations. Absence of successors, family assets too concen- trated in the business, family conflict, passive versus active owners, empire building, lack of professional management, or the absence of a shared vision and sustainable busi- ness model can all contribute to a family business\u2019s demise. When the business fails, there is little chance for the family\u2019s wealth to grow. To grow the business and the family\u2019s wealth requires careful thought and strategic planning.162 The company must move from an entrepreneurial business to a profes- sionally managed firm, develop governance structures, formalize systems and processes, and recruit talent (from inside and outside of the family). Owners must continually develop assets independent of the business. As the business grows, so do liquidity options such as venture capital, debt or equity financing, internal stock sale, sale of the company, or employee stock ownership plans (ESOPs).163 OD Interventions in Family Business System While research shows that advisors play a key role working with family businesses, complexity is the norm, a result of the interconnectedness of the family, business, and shareholder systems.164 Necessarily addressing the entire family business system is a key difference from the work of a nonfamily business practitioner. The skill set required for a family business advisor is comprehensive and includes OD competencies (e.g., behavioral sciences, systems think- ing, strategy, and organization design), family systems knowledge (e.g., life cycle develop- ment, birth order issues, family dynamics), conflict resolution skills, and family meeting facilitation. In addition, the family business consultant should acquire working knowl- edge in the areas of estate and financial planning, legal forms of organization, exit strategies, family philanthropy, family offices, financial analysis, and multidisciplinary (professional) teaming. Perhaps the key to the success of a family business consultant is the ability to establish a trusting, caring relationship with the client system, to accurately surface the issues and dynamics at the heart of the family business dilemmas, and to effect positive, sustainable change. Consultants must know their own values, ethics, goals, and personal development areas, including their beliefs about families and families in business and insight into their own family system issues and dynamics. Such awareness increases the family business OD practitioner\u2019s ability to handle issues that arise in a family firm engagement. In addition, given the many demands and diversity of the family business system, it can be beneficial to use a team consulting approach in certain cases. For example, a 60-year-old founder may relate best to a senior advisor perceived as an \u201cequal,\u201d while","722 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT younger next-generation leaders may connect better with someone closer to their age who has worked with other clients with similar experiences. If significant conflicts exist in the family, including an advisor with expertise and qualifications in individual and family therapy may be a valuable asset to the team. Entering and Contracting The special entry and contracting issues involved in fam- ily businesses include the need to create quickly a safe emotional environment, to ask sensitive questions related to the family systems early in the engagement, to get permis- sion to re-contract as issues emerge, to get permission to work with other family mem- bers, and to be clear about the requirements of collaboration. Unlike nonfamily firms, the \u201cclient\u201d in a family business is the entire family business system. The mission of an OD practitioner dictates a systems approach, so any relationships begun in this phase must integrate family issues around the business issues. The contract will typically be with the major shareholders of the family firm; therefore, additional efforts are required up front to ensure buy-in and collaboration in the process. Establishing trust early increases the chance of moving forward successfully. Diagnosing the Organization Diagnosing the family-run organization requires the particular tasks and skills necessary to understand the family system in addition to the business system. \u201cPresenting\u201d issues and problems that appear to be business related often require careful probing and unbundling to get an accurate picture of \u201cwhat is.\u201d Trust building, begun in the entry phase, continues in the diagnosis stage by bringing the family together for an orientation meeting. This meeting, often the first time the family has congregated around business issues, helps them to understand they are not alone in the dilemmas they face, affords time for establishing trust within the family and between family members and the OD practitioner, and builds communications skills. Tools to help gather data include confidential interviews of a range of stakeholders, individual and business profiles, and a genogram, which is a visual representation of the family history, similar to an organization chart.165 The genogram enables the practitioner to understand the intergenerational dynamics and to analyze how the family came to be who they are by identifying the patterns and issues that have been passed down. The individual, confidential interview is perhaps the most powerful tool for gathering data and intervening in the system. It is critical to assess not only the pressing business issues, but those that are in the family system and the shareholder arena, as well as determining what boundaries exist between the subsystems, including how communications flow. Key questions for understanding the family business system include: 1. Describe what long-term \u201cpersonal success\u201d means to you and your own personal vision of the future. 2. What is most important to your family? 3. Tell me about the best time that you\u2019ve had with the family. Looking at the entire experience, recall a time when you felt most alive, most involved, most excited. What made it a great experience? Describe the event in detail. 4. Describe what \u201cbusiness success\u201d for your company means to you. For example, what would your company look like if it was operating at its very best? What is get- ting in the way of that success? What is your role? 5. As a shareholder in this business, what do you want most from your investment? 6. How much agreement (alignment) exists between the family, the business leaders, and the shareholders about the vision, values, policies, goals, and strategy for the family business?","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 723 Feedback and Planning Providing feedback to family business members often includes a one- to two-day offsite session to review a \u201cdiscussion guide\u201d (as opposed to a completed document) that summarizes key issues, priorities, and recommendations. This session should be the second time the group has come together and can be viewed as an opportunity to facilitate the practices of good communications, group decision making, and conflict resolution. The more the practitioner can help those in the system build competency in these areas, the stronger and more sustainable the family business system will be. Among the typical issues found in diagnostic results and the discussion guides are lack of role clarity; lack of shared vision for the family, the shareholders, and the business; a dearth of communications; conflict between family members; and sys- tems, processes, and structure deficiencies. The goal for the meeting is for the family to identify and agree on key issues, priorities, and next steps. Building good communication practices (e.g., regular family meetings) and resolving conflict are two common starting points for work with family firms. These interventions are good places to begin to \u201cname\u201d the particular value dilemmas inherent in the particular system. Table 22.3 iden- tifies the most common interventions in family business systems today. 1. Strategic. Strategic interventions, including mission and vision development, capa- bility identification, and goal setting, are an appropriate place to begin work with a family business system as many family business issues stem from a lack of alignment around shared vision and values. Members of each subsystem\u2014the business, family, and shareholders\u2014need to dialogue and create a shared view of the future and an appropriate set of goals. In reality, there is a good amount of overlap between mem- bers of each subsystem so the family business OD practitioner must continually clar- ify roles, responsibilities, and boundaries. Strategic business planning is appropriate only after the family and shareholder subsystems have aligned on a set of values, goals, and shared vision for the family business. In addition, the process should be an iterative one with open communications between the appropriate family and shareholder governance structures. 2. Systems. System interventions include traditional OD approaches in the business, such as human resource policies and procedures, technical operations, information\/ management systems, and organization culture. Many family firms can benefit from formalizing their business systems, including performance management, succession planning, leadership development, rewards, core process improvement, information technology implementation, and recruiting. Family and shareholder systems tend to be less formal. Interventions in the family subsystem can focus on communications, education, family succession, compensation, and philanthropy while shareholder agreements, estate planning, ownership succession, and communications are appro- priate in the shareholder subsystem. 3. Structure. Governance structures are necessary for all three subsystems so that effec- tive communications and coordination can occur among these complex systems. The business system benefits from a professional management team, led by a quali- fied CEO who reports to a board of advisors or board of directors. Outside board members should be roughly balanced with inside board members; the former should be skilled at earning the trust of the family and working with members of the both the senior and junior generation.166 The shareholders\u2019 subsystem requires its own governance structure\u2014a shareholders\u2019 forum. Here, active and inactive shareholders can meet to develop their goals, review the performance of their investment and make important decisions about family ownership. Finally, the governance structure for the family\u2014the Family Council\u2014is a place for the family to plan for their future,","724 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT TABLE 22.3 Typical Family Business Intervention Areas Type of Business Family Shareholder Intervention Vision, mission, values Strategy Goals and strategic initiatives Mission, values, goals Values, goals Organization capabilities Policies Policies regarding Systems Activities Risk tolerance Human resource Dividends Structure Technical Communications Exit strategies Process Information\/management Education Investment and ROI Culture Social Liquidity Succession \u00a9 Cengage Learning Management team Compensation Shareholder agreement Board of advisors or directors Philanthropy Estate plan Coaching founder\/current leader Ownership succession Coaching next generation Family council Communications leaders\/leadership teams Conflict resolution Shareholder forum Management team building Communication planning Conflict resolution Family business Family policies Role clarity Forum development Board development education Forum policies Board policies Family\/business roles, Communication planning Shareholders\u2019 roles, responsibilities, and boundaries responsibilities, and Meeting management boundaries Family charter Conflict resolution to nurture and develop its members, and to continually determine to what extent the business will be able to fulfill their needs. 4. Process. Process interventions can be very effective with family firms. This is espe- cially true if the source or resolution of the client\u2019s problem is unknown and the nature of the problem is such that the client would benefit from involvement in its diagnosis.167 Process interventions in the business system include coaching both the founder\/current leader and the next generation leader, team building, conflict resolution, and board development. Typical family process interventions include conflict resolution, communi- cations and family meeting facilitation, and family charter development. The share- holder subsystem requires process interventions in the areas of forum development, communications\/boundary management, and conflict resolution. Implementing and Evaluating Change There are various levels of consultant involvement in implementation. It is important to understand where involvement will support intervention success, where organization members can be \u201ccoached,\u201d and where","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 725 members can take primary responsibility for implementation. High involvement is almost always needed in the first stages of implementation, where activities typically include establishing goals and milestones, creating a shared vision, establishing bound- aries for family and business roles, and facilitating productive communications. Also in the early stages, the OD practitioner can communicate the importance of establishing and keeping to an implementation timetable and meeting regularly to resolve the many family business\u2013interface issues that arise. Once the implementation phase is well under- way, a six-month or annual retreat can help to assess change process and effectiveness, reconnect with the family, and create plans around new family, business, and\/or owner- ship transitions. The continual transitions that occur in a family business provide a unique opportunity for an OD practitioner to become a long-term, trusted advisor. SUMMARY Traditionally, the published material in OD has focused recent failed attempts at reform, a variety of OD pro- on applications in industrial organizations. This chap- grams hold great promise to shift the focus of educa- ter presented broad applications of OD in nonindus- tion to the development of learning communities. trial organizations, such as health care, schools, government agencies, and family firms. The results of Ray Patchett\u2019s section suggested that the public sec- these change programs to date suggest that OD is being tor is more bureaucratic and adheres more strongly to applied successfully but also needs a greater range of bureaucratic norms than does the private sector. Thus, customized diagnostic methods and interventions, and differences between the two sectors stem largely from it must be clear about the values in use when it is differences in underlying value structures that encourage applied to nonindustrial settings. people to behave in different ways. He indicated that many of the differences between the public and the pri- Foster Mobley and his colleagues pointed out how vate sectors may be a matter of degree, rather than kind. dramatic changes in the health care industry are affect- Further, the public sector has multiple access by multiple ing the practice of OD in that setting. They noted how decision makers, which can make it difficult to know changes in the nature of the health care product and who is really at the top of the organization. Thus, OD the way it is delivered, how technology is being interventions in the public sector focus more on tech- adapted, and how health care is paid for are altering nostructural interventions, such as workflow design and fundamentally the industry\u2019s structure and making it structure, than on process-oriented interventions, such more difficult to identify the target of change. To be as team building or performance management. Despite effective under these new conditions, OD practitioners these differences, OD interventions in the public sector will be under considerable pressure to demonstrate have an admirable track record of success, nearly equal their competence in areas, such as culture, alliances to the success rate in industrial settings. and networks, and organization design. Change pro- jects likely will be focused on integrating a diverse set Otis Baskin presented a family business system of previously uncoordinated stakeholders. They will be model to underscore the important differences between more reactive than proactive; more solution-oriented traditional organizations and family businesses. The than people-oriented. family, business, and ownership subsystems hold dis- tinct and often conflicting values that make diagnosis Linda Purrington and Paul Sparks described the and intervention in family businesses complex. The decline of the traditional model of education, one that model also served as a diagnostic framework to guide had been based on principles of industrial organization. inquiry into a family business. Effective OD interven- They suggested that close public scrutiny from multiple tions must account for these three subsystems, the rela- stakeholders and shifts in technology and society are tionships among them, and be sensitive to the family demanding a new model, one that leverages technology interpersonal dynamics that are likely to pervade the and shifts the goals of the system to learning. Despite entire effort.","726 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT NOTES accessed from http:\/\/www.pwc.com\/us\/en\/health-industries \/health-research-institute on September 19, 2012. 1. American Hospital Association, \u201cTrends in the Overall 17. K. Kaufman and M. E. Grube, \u201cHealth Care Reform: Health Care Market,\u201d chap. 1 in TrendWatch Chart- The Transformation of America\u2019s Hospitals: Economics book (2012), Chart 1.4, accessed from http:\/\/www Drives a New Business Model,\u201d in FutureScan 2012 .aha.org on September 19, 2012. Health Care Trends and Implications, 2012\u20132017 (Soci- ety for Health Care Strategy and Market Development, 2. Center for Health Transformation, 2\/2010 American 2012), 8. People\u2019s Online Health Summit, accessed from http:\/\/ 18. Ibid., 9. cht.typepad.com\/hbhr\/cost on April 4, 2013. 19. N. Fabrizio, \u201cEmploying Physicians: The Future Is Now,\u201d in FutureScan 2012 Health Care Trends and 3. American Hospital Association, \u201cTrends in the Overall Implications, 2012\u20132017 (Society for Health Care Strat- Health Care Market,\u201d Chart 1.3. egy and Market Development, 2012), 43. 20. PwC Health Research Institute, \u201cTop Health Industry 4. Ibid., Chart 1.2. Issues: Connecting in Uncertainty.\u201d 5. U.S. Census Bureau, accessed from http:\/\/www.census 21. Ibid. 22. American Hospital Association, 2013 AHA Environ- .gov\/hhes\/www\/hlthins\/data\/incpovhlth\/2010\/fig07.pdf mental Scan, 2013, accessed from http:\/\/www.ama- on April 10, 2013. assn.org on October 9, 2012. 6. Kaiser Family Foundation, The Uninsured: A Primer- 23. Ibid. Key Facts About Americans Without Health Insurance 24. Ibid. (October 2012), accessed from http:\/\/www.kff.org 25. U.S. Census Bureau, Statistical Abstract of the United \/uninsured\/upload\/7451-08.pdf on April 4, 2013. States, 2012, accessed from http:\/\/www.census.gov 7. American Hospital Association, \u201cTrends in the Overall \/compendia\/statab on October 17, 2012. Health Care Market,\u201d Chart 1.9. 26. American Hospital Association, \u201cThe Cost of Caring.\u201d 8. Ibid., Chart 1.13. 27. U.S. Census Bureau, Statistical Abstract of the United 9. American Hospital Association, \u201cThe Cost of Caring: States. Drivers of Spending on Hospital Care,\u201d AHA Trend- 28. U.S. Department of Health and Human Services, Watch (March 2012), accessed from http:\/\/www.aha Health Resources and Services Administration, Bureau .org on October 5, 2012. of Health Professions, 2006. 10. Kaiser Family Foundation, Focus on Health Reform: 29. Merritt Hawkins & Associates, 2004 Survey of Physi- Summary of New Health Reform Law, April 15, 2011, cians 50\u201365 Years Old. accessed from http:\/\/www.kff.org\/healthreform\/upload 30. American Hospital Association, \u201cThe Cost of Caring.\u201d \/8061.pdf on April 10, 2013. 31. J. Lavelle, \u201cNursing Needs Teachers,\u201d San Diego Union 11. American Hospital Association, \u201cThe Cost of Caring.\u201d Tribune, September 12, 2012. 12. Institute of Medicine, Better Care at Lower Cost: 32. Ibid. The Path to Continuously Learning in Health Care in 33. D. Goleman, Working with Emotional Intelligence (New America, September 2012, accessed from http:\/\/www York: Bantam 1998). .iom.edu\/Reports\/2012\/Best-Care-at-Lower-Cost-The-Path- 34. D. Goleman, R. Boyatzis, and A. McKee, Primal Lead- to-Continuously-Learning-Health-Care-in-America.aspx ership: Learning to Lead with Emotional Intelligence on April 14, 2013. (Cambridge, MA: Harvard Business School Press, 2002). 13. Tripp Umbach Research, The Negative Employment Impacts of the Budget Cuts in the Budget Control Act 35. Ibid. of 2011, September 2012, accessed from http:\/\/www .ama-assn.org on October 9, 2012. 36. Ibid. 14. N. Schlichting, \u201cHospitals Challenged to Lead with Qual- 37. The Foster Mobley Group, Inc., 2012. ity to Reduce Cost,\u201d in FutureScan 2012 Health Care Trends and Implications, 2012\u20132017 (Society for Health 38. The authors of the OD in Healthcare section would like Care Strategy and Market Development, 2012), 33. to extend our deep gratitude to the numerous health 15. American Hospital Association, 2013 AHA Environ- care leaders and OD practitioners whose perspectives mental Scan, 2013, accessed from http:\/\/www.hhnmag .com on October 5, 2012. 16. PwC Health Research Institute, \u201cTop Health Industry Issues: Connecting in Uncertainty,\u201d November 2011,","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 727 provided us significant direction for this chapter. They 51. Ibid., 126. include: Matthew Auron, Director of Wisdom DVU, 52. J. Murphy, C. Evertson, and M. Radnofsky, \u201cRestruc- DaVita; Paul Craig, Assistant Vice Chancellor of Human Resources & Risk Management, UCSD Health turing Schools: Fourteen Elementary and Secondary System; J. D. Fitz, M.D., Senior Vice President of Phy- Teachers\u2019 Perspectives on School Reform,\u201d Elementary sician Development, Sound Physicians; Josh Golomb, School Journal 92, no. 2 (1991): 135\u201348. President & General Manager, DaVita Rx; Sally Haslett, 53. F. M. Newmann and G. Wehlage, Successful School Global Head of Human Resources, Oncology Transla- Restructuring (Madison: Center on Organization and tional Medicine, Novartis; Andrew Hayek, Chief Exec- Restructuring of Schools, School of Education, Univer- utive Officer, Surgical Care Affiliates; David Hoerman, sity of Wisconsin-Madison, 1995). Director of Leadership Development, DaVita; Debra 54. R. Rothstein, \u201cA Bet Over No Child Left Behind\u201d Krupa, Vice President of Client Solutions, Morehead (September 2011), The Economic Policy Institute Blog, Associates; Linda Lansing, Senior Vice President of accessed from http:\/\/www.epi.org\/blog\/rothstein- Clinical Services & Training, Surgical Care Affiliates; ravitch-no-child-left-behind on December 3, 2012. Kim Martinez, Vice President of New Market Opera- 55. D. Ravitch, \u201cThe Big Idea\u2014It\u2019s Bad Education Pol- tions, DaVita Rx; Deb Rodriguez, Senior Vice President icy,\u201d Los Angeles Times, March 14, 2010, accessed of Human Resources, Alliance Health Care Services; from http:\/\/articles.latimes.com\/2010\/mar\/14\/opin- Chris Rucker, President, DaVita Clinical Research & ion\/la-oe-ravitch14-2010mar14 on November 15, Central Labs; Rich Statuto, Chief Executive Officer, 2012. Bon Secours Health System; Cindra Syverson, Senior 56. \u201cRace to the Top Fund,\u201d U.S. Department of Eduction, Vice President of Human Resources, Providence Health accessed from http:\/\/www2.ed.gov\/programs\/racetothe System; Ed Tyson, Vice President of Process Improve- top\/index.html on October 25, 2012. ment, Sun Health Care Group. 57. D. Ravitch, The Death and Life of the Great American School System: How Testing and Choice Are Undermin- 39. D. Ravitch, The Death and Life of the Great American ing Education (New York: Basic Books, 2010). School System: How Testing and Choice Are Undermin- 58. R. DuFour and R. Eaker, Professional Learning Com- ing Education (New York, NY: Basic Books, 2010). munities at Work: Best Practices for Enhancing Student Achievement (Bloomington, IN: National Educational 40. P. Senge, Schools That Learn (New York, NY: Double- Service, 1998). day, 2000), 32. 59. Senge, Schools That Learn. 60. Ibid. 41. 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Shirky, Here Comes Everybody: The Power of Orga- nization and Restructuring of Schools, 1994); F. M. New- mann and G. Wehlage, Successful School Restructuring nizing Without Organizations (New York: Penguin (Madison, WI: Center on Organization and Restructuring Group USA, 2009). of Schools, School of Education, University of Wisconsin- 46. P. Basham, J. Merrifield, and C. Hepburn, Home Madison, 1995); S. M. Hord, Professional Learning Com- Schooling: From the Extreme to the Mainstream, 2nd munities: Communities of Continuous Inquiry and ed. (Vancouver, BC: Fraser Institute, 2007). Improvement (Austin, TX: Southwest Educational Devel- 47. Partnership for 21st Century Skills, Learning for the 21st opment Library, 1997); R. DuFour and R. Eaker, Profes- Century 2003 (Washington, DC), accessed from http:\/\/ sional Learning Communities at Work: Best Practices for www.21centuryskills.org\/default.asp on November 1, 2012. Enhancing Student Achievement (Bloomington, IN: National Educational Service, 1998). 48. U.S. Bureau of the Census, Income, Poverty, and Health Insurance Coverage in the United States: 2010, Report P60: 68\u201373. 49. Child Poverty data accessed from http:\/\/www.nccp.org \/topics\/childpoverty.html on December 3, 2012. 50. R. Barth, Improving Schools from Within (San Francisco: Jossey-Bass, 1990).","728 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT 65. R. Zander and B. Zander, The Art of Possibility (Cam- 85. M. G. Popovich, Creating High-Performance Govern- bridge, MA: Harvard Business School Press, 2000). ment Organizations (San Francisco: Jossey-Bass, 1998). 66. A. S. Bryk and B. Schneider, Trust in Schools: A Core 86. Public Law 111-352\u2014January 4, 2011, GPRA Moderni- Resource for Improvement (New York: Russell Sage zation Act of 2010. Foundation, 2002). 87. The Business of Government, accessed from http:\/\/ 67. National Parent Teacher Association, accessed from www.businessofgovernment.org on November 3, http:\/\/www.pta.org on June 18, 2003. 2012. 68. DuFour and Eaker, Professional Learning Communities 88. California Faculty Association, accessed from http:\/\/ at Work. www.calfac.org\/headline-special-edition\/gov-brown-signs- pernsion-roll-back-legislation on November 3, 2012. 69. R. Eaker, R. DuFour, and R. Burnette, Getting Started: Reculturing Schools to Become Professional Learning 89. The Business of Government, accessed from http:\/\/ Communities (Bloomington, IN: National Educational www.businessofgovernment.org on November 3, 2012; Service, 2002). \u201cGov. Hickenlooper signs legislation to improve the state personnel system,\u201d June 6, 2012, accessed from 70. D. Cavallo, \u201cLeveraging Learning Through Technologi- http:\/\/www.colorado.gov on November 3, 2012. cal Fluency\u201d (master\u2019s thesis, MIT, 1996). 90. 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Christensen and Horn, Disrupting Class; Fullan, All Sys- tems Go; Kruse et al., Building Professional Communities in Schools; Hord, Professional Learning Communities.","CHAPTER 22 ORGANIZATION DEVELOPMENT IN NONINDUSTRIAL SETTINGS 729 Meta-Analytic Comparison to the Private Sector,\u201d Pub- Score for a Decade, More or Less,\u201d Public Administra- lic Administration Review 55 (1995): 547\u201358. tion Review 41 (1981): 679\u201382; R. Golembiewski, 102. Center for State and Local Government Excellence, C. Proehl, and D. Sink, \u201cEstimating the Success of OD \u201cSurvey Findings: The Great Recession and the State Applications,\u201d Training and Development Journal 72 and Local Government Workforce\u201d (January 2010). (April 1982): 86\u201395. 103. John Nalbandian introduces the legislative- 117. S. Park, \u201cEstimating Success Rates of Quality Circle administrative values and roles conflicts inherent in Programs: Public and Private Experiences,\u201d Public government; H. George Frederickson emphasizes that Administration Quarterly 15 (1991): 133\u201346. political and administrative values differ significantly 118. P. J. Robertson and S. J. Seneviratne, \u201cOutcomes of and highlights that politics is the art and science of Planned Organizational Change in the Public Sector: government; Bob Golembiewski notes that access to a A Meta-Analytic Comparison to the Private Sector,\u201d multiplicity of decision makers looking at the public\u2019s Public Administration Review 55 (1995): 547\u201358. business from a variety of perspectives is broad and 119. R. Boss, B. Dunford, A. Boss, and L. McConkie, \u201cSus- accountability is dispersed; John Bryson emphasizes tainable Change in the Public Sector: The Longitudinal that stakeholder access, whether an individual or Benefits of Organization Development,\u201d Journal of group, is broad and attention to and care to stakeholder Applied Behavioral Science (2010): 436\u201372. concerns must be exercised. 104. J. Nalbandian, \u201cCity Council\u2013City Manager Partner- 120. F. Berry and B. Wechsler, \u201cState Agencies\u2019 Experience ships\u201d (presentation to the California City Managers with Strategic Planning: Findings from a National Sur- Conference, 1998). vey,\u201d Public Administration Review 55 (1995): 159\u201368. 105. H. G. Frederickson, The Spirit of Public Administration (San Francisco: Jossey-Bass, 1997). 121. J. Melkers and K. Willoughby, \u201cThe State of the States: 106. Ibid., 164. Performance-Based Budgeting Requirements in 47 out 107. Frederickson, The Spirit of Public Administration; of 50,\u201d Public Administration Review 58 (1998): 66\u201373. W. Morris, The American Heritage Dictionary of the English Language (Boston: Houghton-Mifflin, 1981); 122. H. Hill and K. Shook, \u201cVirginia\u2019s Results Manager,\u201d P. Appleby, \u201cGovernment Is Different,\u201d in Classics of New Public Innovator (1998): 30\u201333. Public Administration, ed. J. 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Golembiewski, \u201cOrganization Development in Public tem\u2019 in the Public Sector,\u201d Journal of Organizational Agencies.\u201d Change Management 13 (2000): 162\u201378. 112. Bryson, Strategic Planning; T. Cummings and C. Worley, Organization Development and Change, 6th ed. 124. Mayors Challenge, accessed from http:\/\/mayors (Cincinnati, OH: South-Western College Publishing, challenge.bloomberg.org on November 17, 2012. 1997), 163; Golembiewski, \u201cOrganization Develop- ment,\u201d 370. 125. K. Gersick, J. Davis, M. Hampton, and I. Lansberg, 113. Golembiewski, \u201cOrganization Development,\u201d 370. Generation to Generation (Cambridge: Harvard Busi- 114. J. Bryson, Strategic Planning for Public and Nonprofit ness School Press, 1997). organizations: A Guide to Strengthening and Sustaining Organizational Achievement (San Francisco, CA: Jossey 126. R. Anderson and D. Reeb, \u201cFounding-Family Owner- Bass, 1995). ship and Firm Performance: Evidence from the S&P 115. 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Ward, \u201cStrategic Planning Starts with the Family,\u201d in www.raymondinstitute.org. Unconventional Wisdom: Counterintuitive Insights for Family Business Success, ed. J. Ward (New York: 147. I. Lansberg, Succeeding Generations: Realizing the Wiley, 2005), 35\u201355. Dream of Families in Business (Cambridge, MA: Harvard Business School Press, 1999). 131. B. J. Distelberg and A. Blow, \u201cVariations in Family System Boundaries,\u201d Family Business Review (March 148. E. Poza, S. Hanlon, and R. Kishida \u201cDoes the Family- 2011): 28\u201346. Business Interaction Factor Represent a Resource or a Cost?\u201d Family Business Review 17 (2004): 99\u2013118. 132. R. Schulz, M. Lubatkin, R. Dino, and A. Buchholtz, \u201cAgency Relationships in Family Firms: Theory and 149. R. Beckhard and W. Pritchard, Changing the Essence: Evidence,\u201d Organization Science 12 (2001): 99\u2013116. The Art of Creating and Leading Fundamental Change in Organizations (San Francisco: Jossey-Bass, 1992). 133. Quoted in R. Morck and B. Yeung, \u201cAgency Problems in Large Family Business Groups,\u201d Entrepreneurship 150. Lansberg, Succeeding Generations. Theory and Practice 27 (2003): 367\u201382. 151. Raymond Institute, \u201cAmerican Family Business Survey.\u201d 152. M. Gagne, C. Wrosch, and S. Brun de Pontet, \u201cRetiring 134. A. Stewart and M. A. Hitt, \u201cWhy Can\u2019t a Family Busi- ness Be More Like a Nonfamily Business?\u201d Family Busi- From the Family Business: The Role of Goal Adjust- ness Review (March 2012): 58\u201386. ment Capacities,\u201d Family Business Review (December 2011): 292\u2013304. 135. J. M. Pendergast, J. L. Ward, and S. Brun de Pontet, 153. Raymond Institute, \u201cAmerican Family Business Survey.\u201d Building a Successful Family Business Board: A Guide 154. J. Ward, Keeping the Family Business Healthy: How to for Leaders, Directors, and Families (New York: Plan for Continuing Growth, Profitability, and Family Palgrave Macmillan, 2011). Leadership (San Francisco: Jossey-Bass, 1987). 155. D. Bork, D. Jaffe, S. Lane, L. Dashew, and Q. Heisler, 136. A. Bjornberg and N. Nicholson \u201cEmotional Ownership: Working with Family Businesses (San Francisco: Jossey- The Next Generation\u2019s Relationship with the Family Bass, 1996). Firm,\u201d Family Business Review (December 2012): 374\u201390. 156. Raymond Report, \u201cAmerican Family Business Survey.\u201d 157. E. Doud Jr. and L. Hausner, Hats Off to You: Balancing 137. C. J. Eckrich and S. L. McClure, The Family Council Roles and Creating Success in Family Business (Los Handbook: How to Create, Run, and Maintain a Suc- Angeles: DHV Family Business Advisors, 2000). cessful Family Business Council (New York: Palgrave 158. Raymond Report, \u201cAmerican Family Business Survey.\u201d Macmillan, 2012). 159. Pendergast et al., Building a Successful Family Business Board. 138. J. Hilburt-Davis and W. G. Dyer Jr., Consulting to Family Business: A Practical Guide to Contracting, 160. Ward, Keeping the Family Business Healthy. Assessment, and Implementation (San Francisco: 161. Bork et al., Working with Family Businesses. Jossey-Bass\/Pfeiffer, 2003). 162. R. Mickelson and C. Worley, \u201cM&As: A Strategic 139. R. Foster and S. Kaplan, Creative Destruction Choice for Family-Owned Firms,\u201d Family Business (New York: Currency\/Doubleday, 2001). Journal 16 (2003): 251\u201368. 140. C. E. Aronoff, \u201cFamily Business Survival: Understand- 163. E. Doud Jr., Evolution of Family Business and Wealth ing the Statistics,\u201d Family Business Advisor (1999), (Los Angeles: DHV Family Business Advisors, 2003). accessed from http:\/\/www.efamilybusiness.com\/fep_ articles_view.php on December 10, 2007. 164. V. M. Strike, \u201cAdvising the Family Firm: Reviewing the Past to Build the Future,\u201d Family Business Review (June 141. C. E. Aronoff and O. W. Baskin, Effective Leadership in 2012): 156\u201377. the Family Business (New York: Palgrave Macmillan, 2011). 165. Bork et al., Working with Family Businesses. 166. Lansberg, Succeeding Generations. 142. R. Carlock and J. Ward, Strategic Planning for the Fam- ily Business (London: Palgrave, 2001), 12. 167. E. Schein, Process Consultation Revisited (Reading, MA: Addison-Wesley, 1999); T. Cummings and 143. A. Steward, \u201cHelp One Another, Use One Another: C. Worley, Organization Development and Change, Toward an Anthropology of Family Business,\u201d Entre- 7th ed. (Cincinnati, OH: South-Western College Pub- preneurship Theory and Practice 27 (2003): 383\u201396. lishing, 2001). 144. C. Aronoff and J. Ward, Family Business Values: How to Assure a Legacy of Continuity and Success (Marietta, GA: Family Enterprise Publisher, 2001). 145. Carlock and Ward, Strategic Planning for the Family Business.","\u00a9 Pixmann\/Imagezoo\/ 23 Getty Images Future Directions in Organization Development learning Explore the trends occurring within organization development (OD) and objectives the different futures they suggest for the field\u2019s progress. Explore the trends occurring in the larger context within which OD operates and how they are likely to influence future OD practice. Many OD practitioners, including internal being applied, more complex and rigorous and external consultants, executives, research is being conducted, and organizations and researchers, believe OD faces from diverse countries and cultures are becoming important crossroads in its evolution. On the one involved, there are some challenges to the field\u2019s hand, OD is growing rapidly on a global basis. coherence and relevance. In this final chapter, we Organizations within emerging countries and will step back and explore where organization economies are becoming more complex and seek- development is headed. ing methods to adapt and grow. Most of these organizations initially applied Western bureaucratic Because so much change has occurred in a models that helped them be efficient but now relatively brief period, predicting the future of OD must address whether such models align with is risky, if not foolhardy. The field is maturing and their cultural values. This is driving demand for it is useful to look at the forces influencing how OD OD services in a variety of economies, and OD is likely to evolve. This knowledge can enable OD conferences in Asia, Africa, and South America practitioners, researchers, and managers to more are increasingly popular and well attended. On readily affect a relevant OD future. This chapter the other hand, U.S. organization development first identifies the primary internal trends pushing conferences are less popular and the founding the field toward different futures and discusses professional associations of the field, such as their implications. The chapter then describes the National Training Laboratories and the Organi- trends in the larger context within which OD zation Development Network, are struggling to operates, including economic, workforce, maintain memberships and financial viability. technology, and organization trends. It concludes Although new methods and interventions are with a discussion of how these trends are likely to influence future OD practice. 731","732 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT 23-1 Trends Within Organization Development Researchers note that many of the recent writings in OD have focused more on the status of the field than on evaluations of practice or improvements in the processes of change.1 In support of that observation, reviews of the literature and the diversity in OD education and training opportunities suggest three trends within OD\u2014traditional, pragmatic, and scholarly.2 While they all agree on some issues, such as the increasing likelihood of international practice, each trend has a different vision of what OD can and should be. Moreover, although the trends are presented separately, they are not mutually exclusive or independent. On the contrary, the future of OD will no doubt emerge from their integration. Figure 23.1 summarizes the trends and their likely implications. 23-1a Traditional Trend The first trend calls for a return to OD\u2019s traditional values and practices. OD practitioners from such organizations as the National Training Laboratories (NTL) and others argue that OD should be driven by long-established values of human potential, equality, trust, and collaboration. The major objective of OD should be to promulgate these root values through interventions that humanize work, organizations, and society; help employees balance work and family life; promote diversity and spirituality at the workplace; and champion the self-actualization of organization members.3 Thus, traditionalists propose FIGURE 23.1 Trends Within OD and Their Impacts on OD\u2019s Future \u00a9 Cengage Learning","CHAPTER 23 FUTURE DIRECTIONS IN ORGANIZATION DEVELOPMENT 733 that OD should do what is \u201cright\u201d by assuring that organizations promote positive social change and corporate citizenship. A strong focus on process interventions characterizes the traditional trend. OD\u2019s key purpose, according to this view, is to ensure that organizational processes are transpar- ent, possess integrity, treat people with dignity, and serve diverse stakeholders. OD\u2019s primary goal should be to help organizations create such processes. By implication, these processes should lead to greater organization effectiveness. 23-1b Pragmatic Trend The second trend within OD calls for increasing attention to professionalization of the field and an emphasis on relevance. Championed by the change-management practices at large consulting firms and some OD professional associations, pragmatists argue that OD practitioners should be certified like most other professionals.4 This drive to profes- sionalize OD is in response to a growing number of people marketing themselves as OD practitioners without any formal training or education in the field, as well as a lack of consistency in applying OD\u2019s core theories, skills, and interventions. As a result, distin- guishing between qualified and unqualified OD practitioners can be a difficult challenge for organizations, and professionalization of the field can help to remedy that problem.5 To become a profession, according to pragmatists, OD should require certification of members, create a common body of knowledge, define minimum levels of competencies, and institute other regulatory infrastructure. Certification would create boundaries between who is (and is not) an OD professional and what is (and is not) good OD practice. The pragmatic trend is distinguished by an emphasis on change technologies, typi- cally under the banner of \u201cchange management.\u201d In contrast to OD\u2019s \u201csoft\u201d reputation, change management is viewed as a highly relevant and applied practice, much like med- icine, engineering, or accounting.6 It focuses on helping organizations implement change and adapt to turbulent environments. Relevance, a minor chord among traditionalists, is a major theme among pragmatists, who value the performance outcomes of OD work. Thus, process interventions are not seen as ends in themselves but as means for imple- menting change and achieving the desired results. 23-1c Scholarly Trend The third trend is connected with the increasing number of people making research con- tributions to our understanding of change and development. Championed by universities and applied research centers, such as USC\u2019s Center for Effective Organizations (http:\/\/ ceo.usc.edu), MIT\u2019s Society of Organization Learning (www.solonline.org), the Tavistock Institute (www.tavinstitute.org), and the Institut de Socio-Economie des Enterprises et des Organizations (Institute for Socio-Economic Enterprises and Organizations [ISEOR], www.iseor.com), scholars propose a \u201cresearch agenda\u201d for OD that includes (1) the inclusion of time, history, process, and action in theories of change; (2) the link between change processes and organization performance; (3) the comparative analysis of international and cross-cultural OD interventions; (4) the relational and social effects of networks on change; (5) the study of episodic versus continuous change processes; (6) the role of individual and organizational identity in change; and (7) the applications of complexity theory concepts to OD.7 The scholarly perspective focuses on understand- ing, predicting, and controlling change. It is less concerned about how OD is defined, what its values are, how it is practiced, or whether an OD practitioner is involved except as potential explanations for change success. OD is just one of several ways organizations","734 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT can be changed. Unlike traditionalists and pragmatists, scholars are concerned with creating valid knowledge, and with generalizing conclusions about how change occurs, how it is triggered, under what conditions it works well, and so on. In fact, the preferred method among OD scholars, action research, is thriving.8 23-1d Implications for OD\u2019s Future Those three trends are likely to affect OD\u2019s future. In the short term, advocates of each view will likely continue on their separate paths with periodic and perhaps intense con- flicts among them. In the longer term, however, there should be increasing attempts at reconciling these differences and generating a more integrative view of OD. OD Will Continue to Experience Internal Conflicts in the Short Term Current views and debates about OD values and professionalization are likely to continue at least in the near term. The traditional and pragmatic trends hold different and often conflict- ing views of how the field should evolve. Traditionalists fear that OD is becoming too corporate and may unwittingly collude with powerful stakeholders to promote goals that are inconsistent with OD\u2019s social responsibility and humanistic values. For example, corporate strategies can concentrate wealth and ignore cultural diversity. Technology can isolate people and alienate them. The traditionalists, therefore, advocate for a stronger focus on the central values of the field. Pragmatists, on the other hand, worry that rely- ing too heavily on traditional values will reinforce OD\u2019s \u201ctouchy-feely\u201d reputation. They argue that focusing on human potential exclusively will doom OD to irrelevance in today\u2019s highly competitive organizations. Thus, in the short term, the battle over values within the field is likely to continue. Symbolic of the struggle, in 2008, no fewer than three formal projects were under way at the same time to clarify OD\u2019s values. Each effort was championed by a different institutional sponsor, relied on a different set of OD practitioners, and argued that their results would clarify this important issue for the field. Today, each of the professional associations list the values under which their members practice and, despite some over- lap, they do not have the same focus. NTL focuses more on diversity and social change; the OD Network focuses more on practice. The ongoing conflict in the field is therefore likely to continue and may become even more intense as additional values, such as eco- logical sustainability and economic equality, enter the debate.9 OD is also likely to face more disagreement over professionalization. The debate over values discussed above demonstrates how difficult it will be to gain agreement about standards, competencies, enforcement mechanisms, and oversight. Unless a groundswell of support for a common set of OD values emerges, judgments about qualifications will likely become caught up in conflicts between the traditional and the pragmatic perspectives. Several prior attempts to professionalize the field or to accredit practitioners have had limited success, and provide ample evidence of the difficulty of resolving such differences. OD Will Become More Integrated in the Long Term Despite the conflicts likely to continue in the short run, there is considerable common ground among the diverse trends within OD, and the emergence of a more integrated view of the field seems likely in the long term. For example, both the traditional and the pragmatic trends agree that applying behavioral science to organizations can improve effectiveness, increase member satisfaction, and build capability. Both trends believe that knowledge and skill should be transferred to a client system, and all three trends believe that a body of theory and practice underlie the process of change in organizations.","CHAPTER 23 FUTURE DIRECTIONS IN ORGANIZATION DEVELOPMENT 735 Given OD\u2019s history, its long-term future is likely to be some blend of practitioner values-in-use (traditional trend), professional change practice (pragmatic trend), and change theory (scholarly trend). The field is not likely to be completely pragmatic and ignore its values base: There is little sense in a purely process-oriented approach that has low relevance to business outcomes, and the subject of change is too important and personal to be left to research alone. A more limited integration is also problematic. A pragmatic and research-driven OD would be cold and impersonal; a traditional and research-driven field would be na\u00efve and irrelevant to economic realities; and a tradi- tional and pragmatic-driven OD would be intuitive and noncumulative. An integration of the three trends, on the other hand, will assure that OD has moral purpose, drives sustainable bottom lines, and represents a healthy balance of art and science. A set of integrated values, including participation and effectiveness but recognizing the tension between them, will drive the traditional and pragmatic trends to exploit the common ground in theory and practice. For example, the theories of change underlying traditional action research; positive scholarship and practice; contemporary approaches to change, such as network models, complexity, and chaos theories; and the evolution of underorganized systems can be integrated. The practical benefits of traditional objec- tive approaches and the traditional values reflected in a social constructionist view hold promise for a new view of OD. This integrated view will challenge the field to redefine existing views of work, com- petition, culture, and organizations. OD cannot view systems only as objects with inertia, structure, resistance, and permanence, but as social processes produced, maintained, and changed through conversations that are flexible, aspirational, and changeable.10 A posi- tive view of organizations and their members\u2019 potential aligns well with the traditional trend, and it supports values of basic human rights, social responsibility, democracy, and ecological sustainability. This view of organizations also supports the pragmatic trend; it recognizes the importance of economic viability, the time value of activity, and the opportunities that growth conveys. If carefully applied, an integrated objective and socially constructed perspective can be an influential voice in OD\u2019s future. 23-2 Trends in the Context of Organization Development The field of OD is evolving, but so too is the context within which OD is applied. As summarized in Figure 23.2, several interrelated trends are affecting the context within which OD will be applied in the near future. They concern various aspects of the econ- omy, the workforce, technology, and organizations. In some cases, the trends will directly affect OD practice. Technology trends, such as voice-over-Internet protocols (VoIP), videoconferencing, mobile technology and wireless networks, and three-dimensional video will no doubt influence how OD practitioners communicate with organization members, facilitate teams, and manage change. Other trends, such as the increasing concentration of wealth, represent important contextual forces that will indirectly affect OD through their interaction with other trends.11 23-2a The Economy Researchers and futurists have described a variety of economic scenarios, and there is substantial agreement that the world\u2019s economy is in the midst of a transition from the industrial age that characterized much of the twentieth century.12 Although these","736 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT FIGURE 23.2 Contextual Trends and Their Effects on OD\u2019s Future \u00a9 Cengage Learning scenarios differ in their particulars, they all fit under the rubric of globalization, and many of the same trends are identified as drivers, including technology, workforce, and organization, which will be discussed separately. The \u201cArab Spring,\u201d orchestrated bailouts of U.S. and European governments and organizations that are \u201ctoo big to fail,\u201d an extended drug war in Mexico, the Occupy movement, and the closely watched leadership transition in China are the latest signals to the emergence of a complex and global economy. Organizations from around the world that increasingly shifted their manufacturing low-labor-cost countries are rethink- ing that strategy as wage rates increase relative to quality. Today, almost any product or service can be designed, made, transported, and bought anywhere in the world. The emergence of a global economy may well be under way, but its promise and rationalization is far from complete.13 The initial steps toward globalization have fueled real price decreases in many consumer products, provided employment for people in less-developed nations, and driven revenue growth in a variety of industries. However, the transition to a global economy is for the most part unmanaged, and there is increasing concern over its social and ecological consequences.14 This raises troublesome questions about three key issues: cultural diversity, income distribution, and ecological sustainability. First, globalization is a complex and daunting process that involves organizations, technology, people, and governments. There are few generally accepted principles to","CHAPTER 23 FUTURE DIRECTIONS IN ORGANIZATION DEVELOPMENT 737 follow, and the role and function of these actors and their influence on cultural diversity is not well understood. Some economists argue that globalization is good for countries and cultures.15 They cite numerous examples of how music, art, political thought, technology, and other artifacts of culture have crossed boundaries and enriched people\u2019s experiences. Others argue that governments must balance the difficult choice of cultural preser- vation at the expense of participation in the global economy or economic success that sacrifices cultural values.16 For example, the Chinese government is trying diligently to preserve its cultural and political underpinnings while facing a rapid influx of capitalist goods and services,17 and many other developing nations face pressures to move to a Western capitalism model despite questions as to whether it is appropriate for their cultures.18 Organizations implementing worldwide strategies (Chapter 18), for example, often prefer the standardized approaches of a global orientation because the economic logic of this strategy admits to little practical incentive to account for cultural or govern- mental differences. Pursuing both cultural preservation and economic participation is possible, but it is a complex task. The short-term financial benefits often appear much larger than the long-term social consequences and the required leadership and manage- ment capabilities are not widely available. The decisions governments make to resolve this dilemma will dramatically shape the character of the global economy. Second, globalization of the economy is closely related to an increasing concentra- tion of income and wealth in relatively few individuals, corporations, and nations. In the years following World War II and into the 1970s, incomes for the U.S. population grew at about the same rate for all income classes. However, since the early 1970s, income growth for the top end of the distribution has been significantly higher.19 Today, the upper 1% of Americans account for 25% of the nation\u2019s income and 40% of the wealth, up from 12% and 33% a quarter century ago.20 A study by the Economic Policy Institute estimates that CEO pay has increased 725% between 1978 and 2011 compared to an increase of 5.7% for workers, or 127 times faster.21 The pattern is the same when viewed on a global basis. Of the 1,210 billionaires in 2011 (up from 793 in 2006), there are 413 in the United States (34%). However, the 115 (9.5%) billionaires from China is up from 64 in 2010, and measured on the basis of the \u201cgini\u201d index, China and South Africa are among highest income inequality countries in the world.22 The CIA\u2019s report, Global Trends, 2015, concluded that globalization is creating \u201can even wider gap between regional winners and losers than exists today. [Its] evolution will be rocky, marked by chronic volatility and a widening economic divide \u2026 deepening economic stagnation, political instability, and cultural alienation. [It] will fos- ter political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.\u201d23 The concentration of wealth may be a natural outcome of fast growth in emerging economies or capitalism facing imperfectly competitive markets, but it can contribute to misallocation of resources, environmental degradation, and short-term thinking.24 For example, the financial markets\u2019 focus (and the executives that work in them) on short- term results were the proximate cause of the 2009\u20132010 recession.25 Similarly, Toyota\u2019s drive to become the biggest automaker and BP\u2019s aggressive profit objectives resulted in embarrassing lawsuits, substantial fines, and damaged reputations. The Occupy Movement\u2019s demonstrations also confirm that the concentration of wealth can contrib- ute to social conflict driven by fears that the wealthy will act in their own self-interest at the expense of those who are financially less fortunate. As Joseph Stiglitz writes, \u201cThe more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs.\u201d26","738 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT Third, there are increasingly clear warnings that the ecosystem can no longer be treated as a factor of production, and that success cannot be defined as the accumulation of wealth and material goods at the expense of the environment. There are strong pres- sures to fuel economic growth and create jobs in the United States, for example, by building the Keystone pipeline from Canada to Texas even as environmental reports warn against this project. By holding off on the enforcement of environmental reform, much of China\u2019s water and air continue to be polluted in service of maintaining growth rates. Electronic waste\u2014mostly mobile phones\u2014piles up in landfills so we can enjoy the status and benefits of possessing the latest technology. These concerns arise in part from the proliferation of short-term capitalism, but also from the growing realization that free and open markets can have negative unintended consequences for the global ecosystem. The conclusions from the Intergovernmental Panel on Climate Change and several follow-on studies suggest that industrialization is not a controversial but a probable cause of global warming.27 Several traditional organizations, such as Interface Carpet, BHP Billiton, and Royal Dutch\/Shell, reversed long-held opinions about their contribution to environmental decay and set aggressive goals to reduce greenhouse gases.28 Unfortunately, many developing economies, including China, the Philippines, and Mexico, continue to operate with loose environmental controls. As a result, there are more calls for change in the values underlying capitalism\u2014from consumption to investment, from open to mindful markets, and from wealth accumulation as an end in itself to an examination of the return on living capital.29 Some observers note that such value shifts are already under way in many nations and organizations. For example, traditional business models that assume labor scarcity and natural resource abundance are being tempered by models that emphasize the abundance of knowledge and the scarcity of natural resources. A handful of companies, including Ikea, Interface, Honda, Gap Inc., Unilever, and Suzuki, have altered their opera- tions and practices radically to reduce emissions, waste, and environmental degradation and to increase sustainability, profits, and customer satisfaction. 23-2b The Workforce The workforce is becoming more diverse, educated, and contingent. Chapter 17 documen- ted the diversity trend and suggested that organizations, whether they operate primarily in their home country or abroad, will need to develop policies and operating styles that embrace the changing cultural, ethnic, gender, and age diversity of the workforce. The workforce is also becoming more educated. The 2011 U.S. Census data, for exam- ple, report that 87.8% of adults over 25 years of age have completed high school and that 30% have a bachelor\u2019s or higher degree.30 Both numbers represent a 2\u20133% increase over 2006 but significant increases compared to 2000. A more educated workforce is likely to demand higher wages, more involvement in the decision-making process, and continued investment in knowledge and skills. For example, the rate of change in information systems technology requires IT professionals to continually update their knowledge and skills to remain competent. In response, organizations are increasing their training and management development budgets significantly.31 Many organizations, such as Motorola, Capital One, Boeing, and Harley-Davidson, have invested in corporate universities and corporate\u2013university partnerships, and many others have policies outlining the minimum hours of technical and managerial training that each employee will receive yearly. Finally, the continued high rate of downsizings, reengineering efforts, and mergers and acquisitions described in Chapters 12 and 20 is forcing the workforce to become more contingent and less loyal. The Bureau of Labor Statistics reports that contingent and \u201calternative arrangement\u201d workers, including temporary and contract employees,","CHAPTER 23 FUTURE DIRECTIONS IN ORGANIZATION DEVELOPMENT 739 freelancers, independent professionals, and consultants, made up about 11% of the workforce in 2005.32 That number has no doubt shifted upwards since the 2009\u20132010 recession. In addition, much of the economic recovery in 2011 and 2012 is fueled by temporary workers, part of a risk management strategy by organizations that are uncertain about the future economy.33 The increasing dependence on contingent workers may be part of a long-coming trend. However, the implicit psychological contract that governs relationships between employers and contingent employees likely is being rewritten with new assumptions about long-term employment and rewards in exchange for commitment and loyalty. For example, it is estimated that 90% of companies use temporary help and that the per- sonnel supply services industry, about 90% of which is involved in providing contingent employees, will be among the top five fastest-growing industries.34 23-2c Technology By almost any measure, information technology is a significant and increasingly perva- sive fact of life. There were 5.98 billion mobile\/smartphone subscriptions in 2011, up from 4.7 billion in 2009, and projected to grow to 8 billion by 2016.35 An estimated 360.9 million worldwide Internet users in 2000 grew to 2.4 billion in 2012.36 The growth rates continue to boggle the mind, with Africa\u2019s usage growing 3,607% between 2000 and 2012 and an overall growth rate of 566% over the same time period. The Internet is the backbone of a global economy, and mobile use is expected to outpace desktop use over the next couple of years. At the core of information technology is e-commerce, an economy that knows no boundaries.37 The business-to-consumer market garners much attention and awareness because it is how the public participates in e-commerce. This market, which includes e-tailers such as Amazon.com, eBay.com, and Fandango.com, is expected to grow in the United States from $165.4 billion in 2010 to over $269.8 billion by 2015.38 In these businesses, OD must help to create and implement novel business models. Dell Computer and Hewlett-Packard, for instance, are the leading sellers of desktop and laptop computers and rely on the Internet for much of their consumer business. However, both companies started out in different business\u2014Dell as a mail-order company and HP as a small instru- ments business\u2014and had to transform their business models. Today, they are again facing radical challenges to their business models as consumers opt for tablets and smartphones. The complexity of the transformation required to shift into a business that heavily depends on e-commerce represents the kind of change that many organizations will face and the challenges OD practitioners must meet. The organizational issues in the business-to-business market are even more complex. A good example of the implications and OD challenges in this market is the evolution of Covisint. The global automobile industry created Covisint in 2000 as an online parts and supply store to jointly address the escalating costs and gross inefficiencies of their supply chains. Covisint leveraged the power and potential of the Internet to solve industry- specific business problems in real time. By 2007, Covisint not only supported more than 30,000 organizations in over 96 countries in the global automotive industry, it had moved into the health care industry to help more than 450 North American health sys- tems, commercial payers, physician groups\/practices, home health agencies, third-party administrators, extended care facilities, and home medical equipment providers. Covisint helped to migrate an entire industry\u2019s supply chain onto the Internet and radically reen- gineered the way businesses interact with each other. Web-based transactions are repla- cing the phone, mail, and face-to-face sales call processes that dominated these","740 PART 7 SPECIAL APPLICATIONS OF ORGANIZATION DEVELOPMENT industries. Today, Covisint has moved their business model into \u201ccloud\u201d computing and serves the automotive, health care, and employee services industries to provide energy efficient, low-cost services. In addition to providing the infrastructure for e-commerce, technology is also changing and enabling a variety of organizational processes. Enterprise resource planning technologies, such as SAP or PeopleSoft, are changing how information and work processes are coordi- nated and managed. They also require modification in the way productivity is measured. For example, UPS works with organizations to integrate their logistics and supply-chain technologies and capabilities with existing work processes and the competencies of organiza- tion members. UPS provides customers the metrics and measures of supply-chain efficiency using its own processes. This investment in technology is expected to have a bottom-line impact. The relationship between technology and productivity, however, has proven difficult to measure. The available evidence suggests that productivity improvements are a function of both the technology itself but also the organization adjustments to work skills and the entire sociotechnical system.39 For example, UK bookmaker William Hill\u2019s investment in new elec- tronic point-of-sale technologies didn\u2019t pay off until it addressed the retail managers and customer-service advisors work processes in its 1,630 betting offices.40 23-2d Organizations The final trend likely to shape OD\u2019s future involves the increasingly networked and knowledge-based nature of organizations. The interventions described in this book help organizations become more streamlined and flexible, more capable of improving them- selves continuously in response to economic and other trends, and more effective. A large proportion of organizations are not aware of these practices, however, and still others resist applying them.41 Despite the attention to them in the business press, only a small percentage of organizations use self-managed work teams, are organized into net- works, successfully manage strategic alliances, or have organization learning programs. But these organizations are harbingers of the future, and they will invent entirely new, entrepreneurial structures capable of exploiting new ideas and technologies quickly. Clearly, organizations are becoming more networked. As explained in Chapters 12 and 20, network structures rely on collaborative strategies and allow single organizations to partner with other organizations to develop, manufacture, and distribute goods and services.42 More than any other organization form, networks hold the promise of realiz- ing the economic opportunities presented by globalization without the negative social consequences of large multinational corporations.43 Large organizations that gain econo- mies of scale in manufacturing, distribution, and marketing can become rigid and slow, and indifferent to unintended social and ecological consequences.44 These latter out- comes can be disastrous in today\u2019s rapidly changing environments and cannot be easily remedied in the future. Networks, on the other hand, enable small organizations to access the advantages of scale and scope traditionally reserved for large firms. Small, focused firms that perform particular tasks with excellence can align with organizations that have complementary resources and expertise. These networks are highly adaptable and can disband and reform along different task or market lines as the circumstances demand. To succeed, organizations are learning how to assess quickly whether they are compatible with network partners and whether the joint product\/service is successful. They are gaining competence to form and end networks swiftly, thus enabling them to exploit product\/market opportunities rapidly and to \u201cfail fast\u201d when the network is unproductive. Because each network node (organization) is small and local, resident cul- tures and ecosystems are more likely to be preserved.","CHAPTER 23 FUTURE DIRECTIONS IN ORGANIZATION DEVELOPMENT 741 Finally, in an organizational world that is technically enabled, fast-paced, and net- worked, there will be a premium placed on learning and knowledge management. This increasingly important source of organizational capability and competitive advantage will require unprecedented amounts of innovation and coordination. Multiple stakeholders representing a diversity of interests will come together to envision a shared future and to learn how to enact it. Because this process typically leads into uncharted waters, both organizational members and OD practitioners will be joint learners, exploring new territory together. Moreover, implementing new organizational innovations will require significant amounts of experimentation as members try out new ways of operating, assess progress, and make necessary adjustments. In essence, they will learn from their actions how to create a new strategy, organization, or product\/service. Such collaborative learning is capable of implementing radically new possibilities and ways of functioning that could not be envi- sioned beforehand. It is a process of innovation, not of detection and correction of errors. In turn, the new structures and systems will increase feedback and information flow to the organization, thereby improving its capacity to learn and adapt to a rapidly changing environment. They will transcend both internal and external organizational boundaries, remove barriers to learning, and facilitate how employees acquire, organize, and disseminate knowledge assets. 23-2e Implications for OD\u2019s Future The definition and practice of OD in the future will depend on the forces within OD as well as the economic, workforce, technology, and organization trends outlined above. Although a variety of scenarios is possible, the future alternative presented below is based on the powerful role OD played in organization and social change in the 1960s and 1970s. A set of widely-shared values, including involvement and participation, and a complementary set of practices, such as team building and survey feedback, shaped the way leaders and managers designed and operated organizations. Together, these inte- grated values and practices had a significant influence on both human and economic outcomes.45 Figure 23.2 summarized this positive view.46 OD in the future will support a policy of \u201cresponsible progress.\u201d47 Responsible prog- ress begins with an economist\u2019s definition of an effective system, integrates traditional OD and more recent effectiveness values, and promotes a set of practices to actualize those values. Economists traditionally define progress and economic health in terms of the development of products and services that make society better off, the ability to put scarce resources to their most efficient use, the capacity to support full employment, and the equitable distribution of rewards in relation to the risks people take in productive enterprise. Although few people would argue with these criteria, the trends discussed above suggest that there have been important unintended consequences of promoting those goals. For example, global warming and the concentration of wealth cannot be the metrics by which society is judged as \u201cbetter off.\u201d The traditional criteria of progress either ignore the ecology and cultural diversity or make untenable assumptions about the market\u2019s ability to account for them. Responsible progress addresses that gap by defining a policy that supports economic success and innovation, promotes efficiency and progress, but incorporates cultural diversity and ecological sustainability to produce a more balanced view of effectiveness. It supports a set of traditional and effectiveness-related values as well as practices that reflect today\u2019s and tomorrow\u2019s organizations. The responsible progress policy asserts that individuals, organizations, and countries can pursue economic and personal success"]