A Market-Path White Paper

________________________________________________________________________________

Transitions – A Look at Organizational Shifts

This White Paper also appeared as an article in Insight Magazine.

By John Karnatz, Partner

“We thought we were increasing the value of the firm. Instead we were unlocking Pandora’s box”, says Managing Partner Clarence Gregg as he reflects on the first anniversary of the merger of VFCS with Holden & Simonelli. “The one thing – the only thing - the Partners can agree on is that things haven’t gone as expected.”

“On paper this merger looked terrific. But after getting started things began to unravel. Within weeks we lost several key people despite increases and bonuses. Combining two operations into one was a nightmare. There were wars over basic administrative procedures. Our internal problems spilled over into client engagements and we lost some of our best clients. It has been a year of endless meetings, continuous conflict and underlying tension. If we knew then what we know now, we would have approached this differently.”

Each year leaders at firms like VFCS or Holden & Simonelli make decisions that bring profound organizational change. They merge, purchase acquisitions, consolidate practices, open new locations, enter new markets, create subsidiaries, forge new ventures and restructure their current operations.

These organizational shifts are usually justified with sound reasoning and convincing business cases. But too often firms experience what organizational behavior experts have long known - change has a downside. The bad news is that organizational change is a risky proposition. Organizational behavior experts estimate that fewer than half of all organizational shifts ever achieve their intended objectives.

However, if the prospect of an organizational shift looms on your firm’s horizon there is good news, too. A growing body of evidence shows that firms can dramatically increase the odds of success by carefully, systematically managing change. Here are some vital starter steps for taking control of the change process.

Respect the Challenges of Culture

Leading an organization through change is not for the faint hearted. Many a leader who is well prepared for the financial, legal and technical aspects of an organizational shift finds that other, unexpected challenges lie in wait.

Simply stated, culture is “the way we do things around here.” Cultures are usually unplanned and undocumented, but nonetheless very powerful. Cultures define how people learn, interact, get along and get ahead – in short, how a firm really functions.

Some elements of culture are easily seen. Facilities, equipment and organization charts all provide visual cultural clues. The most difficult parts of culture, however, are intangible. They are the norms and values that guide the interaction of employees and control how the organization operates.

Organizational shifts confront cultures in fundamental ways: power and prestige are altered, business processes adjusted, measurement systems morphed, priorities become resorted, working relationships changed – even basic skills and experience required for success transformed.

Altering an organization’s culture causes uncertainty for employees at very personal levels. These concerns prompt many different reactions among employees. Some readily adapt while others struggle. Some withdraw while others become resistant. Some can’t survive in a shifting organization; others don’t want to. The consequences of these reactions play a heavy hand in determining the outcome of an organizational shift.

See Through the Employee’s Eyes

Leaders and employees view organizational shifts differently. Leaders evaluate facts and figures; employees focus on fears and frustrations. Leaders think about organizational needs; employees worry about the personal impacts.

When potential changes surface employees face immediate concerns:

Permanence	Do I still have a job? Am I in jeopardy of losing mine?
Power	Has the value of my job increased or decreased?
Prestige	Has the importance of my job grown or changed?
Pay	What will happen to my earnings?
Performance	What will happen to my workload? How will I be measured? Will my performance be appraised fairly?
Procedures	Will I have to learn new ways of doing things?
Priorities	What’s wrong with the way I’m doing things now?
Personalities	What if I don’t like new people I have to work with?
Place	Do I have to move away from my co-workers?

Successful change leaders recognize the value of taking an employee’s viewpoint into consideration. While impossible to detect all areas of concern, these leaders gain an advantage by anticipating, addressing and often alleviating employee concerns.

Arm Yourself With Information

Today’s leaders can benefit from an explosion of information about the ins and outs of managing change. Leading Business Schools now offer training in organizational behavior. Industry associations routinely provide information exchanges. Professional associations participate in useful research. Consulting firms have formed practices devoted to help clients manage organizational change.

Take advantage of these resources to help your organization build awareness, set realistic expectations and increase preparedness for organizational shifts. If you want to increase your knowledge about the challenges of change:

q Browse the website of your favorite on-line bookstore. You’ll find dozens of titles about organizational change management.

q Contact local colleges and universities for organizational change management workshops, seminars and courses. Course instructors can recommend additional reading and resources.

q Network with peer professionals whose organizations have undergone organizational shifts. Comparing notes and networking with others can be very instructive.

Make Communications a Top Priority

Providing strong Internal communication is a vital strategy for firms undergoing organizational shifts. A two-way channel of information helps uncover issues, size concerns and correct misunderstandings that can occur during stressful change. Some proven techniques to help open the channels of communication include,

q Keep communications simple. Traditional e-mails, voicemails and memos inform employees as well as do four-color brochures and fancy slides.

q Regularly schedule communication updates. Even if there is little to communicate, employees will know that they can depend on hearing from you.

q Create special voicemail and email addresses to receive anonymous questions. Publish the answers to everyone. This can provide an additional vehicle for employees to raise sensitive questions and issues.

q Appoint a cross-functional group of employees as a sounding board. Use this group to preview communications and provide reactions and advice.

Involve Employees in the Change Process

Involving employees in the change process provides important benefits. Involvement builds understanding, which can increase support for the change. Participation helps identify overlooked issues that need attention.

q Invite employees from affected departments to advise the management team during the transition.

q Involve affected departments and or groups to review progress at milestone points during the organizational shift. You’ll provide information, gain feedback and be able to look for potential roadblocks.

q Develop a “key list” of employees who are critical to your success. Make sure that you have a plan to maintain contact with them. Listen carefully to concerns and issues that they may have and develop steps to retain each key individual.

q Consider using external consultants who can speak candidly with your people and objectively assess employee concerns.

Conclusion

Wise leaders do not leave change to chance. They understand the difference can mean the difference between experiencing costly disruption and turbulence and enjoying new opportunities for profitable growth.

Sidebar: The RAW Truth

The acronym “RAW” summarizes the three conditions that must be met for people to accept cultural change.

Readiness	I know why the organization is changing.
Ability	I will have the skills and savvy I need to succeed.
Willingness	I can live with the personal impacts necessary to remain in the organization.

Sidebar: Management Myths About Organizational Shifts

The Myth	The Reality
We have smart people; we won’t have the problems that other organizations have.	Reaction to change is logical and emotional. Highly intelligent people still feel the stresses and worries that accompany change.
We bottom-line oriented and don’t waste time on the “soft stuff”	People-related issues are the leading cause of failure in organizational shifts. It turns out that the “soft stuff” is actually the hard stuff.
Young people love change. It’s the older employees I worry about.	Research shows poor correlations between age and willingness to change. Employee reactions are more personal and situational.
The “people issues”? That’s Human Resource’s job.	Organizational shifts require visible, involved leaders. Those who assign responsibility for managing organizational change to HR or other support organizations should expect to fail.
We need to have a bias for action – let’s “just do it”.	Fools rush in. A clearly defined plan that outlines timing, costs, requirements and risks is essential for success.
I’m a popular leader. I can get people to change.	Over-reliance on positive motivation is risky. Many people leave changing organizations despite respect, even affection, for the management team.
“If you can’t stand the heat, get out of the kitchen.”	Leaders who use the “take it or leave it” bit are usually surprised by the number - and quality - of people who exit.

Sidebar: Should Your Firm Get Help From the Outside?

Will you need outside consultants to help you with cultural change? Use this guide to help you make that decision. Score one point for each “yes” answer. The higher you score, the greater your risks of a successful change. If you score 3 or higher your firm should strongly consider outside expertise.

The Organizational Shift Risk Factor	Your Score
1 – Has the firm has unsuccessfully attempted to reorganize one or more times?
2 – Will two or more of the firm’s departments or functions be directly affected by the organizational shift?
3- Doe the total number of personnel affected by the organizational shift add up to a three-digit number (i.e. 100 or more)?
4- Will the transition caused by the organizational shift will require four or more quarters to implement?
5- Does the total amount of hours devoted to implementation of the organizational shift add up to a five-digit number (i.e. 10,000 hours or more)?

Ó 2000, Market-Path Partners