Ten commandments for CEOs seeking organizational change

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  • Ten Commandments for CEOs Seeking Organizational Change

    James H. Reynierse

    Core values and a focused mission are essential components of these ten rules for implementing change in the organization.

    T n our ever -

    I changing, fast- paced world, competitive relation- ships can shift quickly when com- panies respond too slowly to increased competition in their industry group. Succeeding in such a competitive and changing environ- ment demands that

    CEOs reshape their organization to meet today's challenges and competitive realities.

    But responding to change remains highly elusive because there is a natural resistance to change at all levels within the organization, in- cluding at the top. CEOs and other members of the executive suite need to take a hard look at their existing organization and culture, ask tough questions about its appropriateness for the cur- rent competitive environment, and take concrete, implemental steps to forge a preferred culture and drive it downward throughout tile entire organization.

    But therein lies the challenge, for few man- agement teams both establish a comprehensive strategy for remaining competitive and take a hands-on approach to implement change inter- nally. By not getting involved, they signal to em- ployees that the change really isn't very impor- tant.

    A key premise of this article is that cultural change or any organizational transformation is essentially a top-down activity. It cannot be del- egated. If the CEO perceives the need for change, makes it a top priority, and gives it a great deal of time and attention, the organization will change. By the same token, if the CEO offers only limited lip service, needed changes just

    won't happen. This article outlines how the CEO can be an enthusiastic sponsor of change by paying enough attention to implementation to make the transformation take place. Reynierse and Leyden (1992) provide a case study incorpo- rating these steps.

    1. Strategy-Dr iven

    The process I am advocating will be relatively ineffective without a strategic framework to pro- vide competitive advantage. This process is not a substitute for such a strategy. Rather, the strategy is the starting point that establishes the context for all other steps. However, strategies will be relatively ineffective when management pays insufficient attention to their impact on the work force--for ultimately it is the work force who will implement the strategy and make it succeed or fail. The point is that unless such a strategic plan is implemented and executed effectively, it will not be fully realized in the competitive market- place. An overview of this process is depicted in Figure 1.

    A company's business strategies, plans, and goals are the starting point--not the end- -o f this exercise. They formalize the CEO's vision, setting the tone and establishing direction for the com- pany in both the long and short terms. They pro- vide a context for all other activities and deci- sions, establishing the limits for making many choices along the way. In addition, they deter- mine the direction and boundaries for building the new organizational culture, including molding employee expectations.

    Resources are scarce in every organization, and management must accept the fact that it can't do everything. Strategic choices reflect judgments about where companies think they have market- place competitive advantage so that plans imple- mented here enable them to grow faster and earn more than their competitors in these market seg-

    40 Business Horizons / January-February 1994

  • ments. Similarly, the resources dedicated to build- ing the organization are determined by this strate- gic focus.

    2. Top-Down Involvement

    If something is important, a good rule of thumb is to have a top-down approach to getting it done. Ideally, then, the CEO must get involved. If the CEO attends to the organization, it will im- prove and gain competitive advantage. Con- versely, if the CEO gives it scant time and atten- tion, little organizational growth will occur. In short, the CEO who enthusiastically sponsors a broadly conceived program for building the com- pany is more likely to succeed and reap the ben- efits down the road. A company-wide initiative needs an enthusiastic and supportive CEO who does not hesitate to play a continuing role during the change process.

    But where is the top? And who is the CEO? Building organizations is often better served by dealing with chunk-sized bites rather than the whole company. Particularly for large companies, it often makes better sense to deal with natural strategic business units (SBUs) rather than the entire company. At one level, there are often unique problems or opportunities in a unit or company division. At another level, it is most meaningful for those involved to deal with issues that directly concern them and their business unit.

    The approach I am advocating includes de- termining the firm's core values and mission. It is unlikely that every SBU or company division will share the same core values or mission. Individual business units often have unique customers, com- petitors, product maturity, strategies, and objec- tives. These units need the autonomy to develop their own focus. For such cases the division ex- ecutive is functionally the CEO for that unit and can provide the vision, enthusiasm, and driving force for success.

    Throughout, however, the CEO must remain interested and provide broad support for what is taking place. Even when the primary leadership role resides elsewhere, the CEO must be an ad- vocate for change and reinforce actions taken at these lower levels.

    3. Organizational Assessment

    Periodically it is valuable to take an objective snapshot of the broader organization. This not only provides information about the company's strengths and limitations but can also identify how those strengths and limitations measure up to the mission and the core values. Effective or- ganizations have employees who share these values, and a carefully conceived organizational

    assessment will identify pockets of agreement and resistance.

    Several techniques, in- cluding surveys, interviews, and focus groups, are used for these organizational as- sessments. The organiza- tional dynamics survey (Reynierse and Harker 1986) has been particularly effec- tive, because it provides an objective measure of the underlying values that mold organizations. For example, the survey's broad customer orientation category taps a cultural value related to making customers a priority and satisfying their needs.

    Surveys are particularly important because they get every employee involved; everyone has the chance to be heard. Surveys also pro- vide an opportunity for man- agement to pay attention to employees' concerns and to build their trust. This is achieved when management openly communicates with employees regarding key issues and responds to prob- lems by taking timely, corrective action. At the same time, establishing trust is the first step in getting employees to "buy in" to management's broader vision.

    Figure 1 Overview of the Change Process

    Strategy- Driven

    I Top-Down Involvement

    I Organizational


    I Clarify

    Core Values

    I Work Force Participation

    Downstream to Work Force

    4. Clarify Core Values

    Peters & Waterman (1982) have "one all-purpose bit of advice for management . . , figure out your value system. Decide what your company stands for." Today many frequently echo this manage- ment theme. Identifying and clarifying core val- ues are central to this approach as well. When they are integrated with a company's business strategies, core values help provide a focused mission. All too often, companies or their natural business units lack focus; their employees are confused about what the company stands for and what it is trying to achieve. However, when the focus and the mission are clear, they can drive the entire organization or SBU.

    Mission statements ideally should be brief, concise, and to the point. They should identify primary business activities, integrate key strate- gies, and reflect the firm's core values. When we speak about core values we are dealing with many attractive virtues--McLaughlin, McLaughlin

    Ten Commandments for CEOs Seeking Organizational Change 41

  • & Lischick (1992), for example, identified more than 100--and it is tempting to include as many as possible. In nay experience, however, an orga- nization can give proper attention to only a few--say, three to five--clearly stated core val- ues. Anything more will be too diffuse and will only confuse employees and dilute management's efforts. In other words, management has to make some hard choices, and established strategies provide the context for focus.

    There are no shortcuts; there is no generic mission statement. To build a focused organiza- tion, the management team has to participate in the process. We use a value clarification exercise when working with top and senior management. This exercise consists of 30 corporate values that are relevant (and credible) for business and in- dustry. Each is defined and serves as an effective probe, placing key issues on the table for discus- sion. Some representative examples are shown in Figure 2. Because many are presented with a different thrust or emphasis, they can generate a provocative and lively discussion.

    This value-clarification process gains agree- ment for key priorities and direction, and fosters team-building through shared values and mission. Similarly, it lays the groundwork for resolving internal differences between functional groups that may have varied goals or priorities. Finally, it sets the stage for driving the process downward through the entire work force so other employees can "buy in" and share the focused mission as well.

    Figure 2 Representative Corporate Values

    Shareholder Creating increasing value and benefits t?dtw for shareholders and safeguarding their


    Business Restdts: Maximizing financial results Rel t t rn/Prfi t

    Commitment Cultivating the desire and energy of people to identil:y v,,ith and buy into the success of the organization

    Competettl Attracting and keeping knowledgeable, People technically skilled, experienced, and

    capable people

    Cttstomer Providing products and services of Focus superior value to satisfy ct, stomers' needs

    Technological Developing and using the most advanced Leae&t.xbip "state-of-the-art" technologies available

    The risk in all this, says Peters (1992), is that management does such a good job that these values become fixed, even though they no longer are appropriate. The necessary caveat here is to return to strategy and competitive marketplace reality. Very simply, if the strategy is no longer appropriate and requires changes, the core val- ues and focused mission probably need to be changed as well. They must therefore be revisited and modified as necessary to be congruent with any new strategies.

    A case can be made that because clarifying core values is so central to this approach, it should occur earlier in the process. There are benefits, however, of having it follow the organi- zational assessment step because this gives man- agement another opportunity to respond to the input and reactions of the work force. Their per- ceptions of what the company really values are important and may indicate that changes are needed.

    5. Work Force Involvement and Participation

    One of the advantages of the employee survey approach to assessing an organization is that all employees have tile opportunity to participate and express their opinion. In other words, at an early stage in the process they have the chance to level with management, provide an employee perspective, and establish an agenda for later stages.

    While we begin the more intensive activities at the top with senior management, we involve lower-level employees, particularly lower levels of management, as quickly as possible. Although every situation will be different and will require different solutions, management should be vigi- lant for opportunities to involve new participants. A valuable tool is the use of focused task forces to address any priority issues that may have emerged from the organizational assessments or team-building sessions. This permits additional employee involvement at the problem-solving and solution-generating stages of the exercise.

    A fundamental assumption is that a focused organization requires a work force that shares this focus. The key to successful implementation, then, is the steps that are taken to drive the pro- cess downward--to downstream--so that all employees feel they are a part of this focused mission, hnplementing management's vision de- mands paying attention to employees, managing their expectations, and responding to their con- cerns.

    Building the firm requires taking action steps that promote the core values and focused mis- sion. I call these steps the "culture carriers." It is through them that senior management can rein- force values consistently and frequently. Put an-

    42 Business Horizons /January-Fel)rt, ary 1994

  • Figure 3 Downstreamtng the Work Force Through the Culture Carriers

    I I Communication Inspirational [ Leadership

    Culture Carriers

    IL I Financial Personal Focus Recognition I Training other way, the "culture carriers" provide direction for marketing the core values and mission with all employees. The five "culture carriers" we have identified are summarized in Figure 3 and will be discussed separately.

    6. Insp i ra t iona l Leadersh ip

    Our studies of corporate culture indicate that there are two ways management stays in touch with what is going on in the company:

    1. By visiting work areas and being visible to their employees. This is inspirational leadership at its best and is similar to the idea of "Managing by Walking Around" (MBWA), as developed by Peters & Waterman (1982) and Peters and Austin (1985).

    2. Through the balance sheet and financial focus. In general, however, many top executives emphasize financial performance and focus to the extent that they neglect their leadership roles.

    The broad process for organizational change outlined here provides structure for MBWA and for being a "cheerleader." Although executives tend to underestimate their leadership effective- ness, they in fact exert considerable power by virtue of their leadership positions. As DePree (1989) observed, "Leaders need to be concerned with the institutional value system." Each time they go out to a work area and talk to an em- ployee or group of employees represents an opportunity to exercise influence and reinforce the company's mission and core values. This clearly communicates to employees what is im- portant to the organization and what is expected of them. When the CEO or division head is lead- ing the charge, everyone quickly picks up on it, and any ambiguity regarding what is taking place is quickly removed. The results are...