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Managing
Change
Bernard Burnes




                 fourth edition
Managing Change
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Managing Change
A Strategic Approach to Organisational
Dynamics


Fourth Edition




Bernard Burnes
Pearson Education Limited

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Essex CM20 2JE
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First published under the Pitman imprint 1992
Second edition published under the Pitman imprint 1996
Third edition published 2000
Fourth edition published 2004

© Bernard Burnes 1992, 1996
© Pearson Education Limited 2000, 2004

The right of Bernard Burnes to be identified as author of this work has been asserted
by him in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced, stored in
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ISBN 0 273 68336 5

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To Sue, Duncan, Stuart and Hobbes
1
Contents


Acknowledgements     xi                              4 Critical perspectives on organisation
Introduction 1                                         theory 141
                                                        Postmodernism, realism and complexity      141
Part One                                                Learning objectives 141
The rise and fall of the rational organisation          Introduction 142
                                                        The postmodern perspective 144
1 From trial and error to the science of
                                                        The realist perspective 154
  management 11
                                                        The complexity perspective 157
   The rise of organisation theory   11                 Conclusions 163
   Learning objectives 11                               Test your learning 164
   Introduction 12                                      Suggested further reading 165
   The rise of commerce and the birth of the
   factory 14                                        5 Culture, power, politics and choice       166
   Organisation theory: the Classical                   Learning objectives 166
   approach 33                                          Introduction 167
   Conclusions 47                                       The cultural perspective 169
   Test your learning 51                                The power–politics perspective 183
   Suggested further reading 52                         Managing and changing organisations:
                                                        bringing back choice 193
2 Developments in organisation theory          53       Conclusions 197
   From certainty to contingency     53                 Test your learning 199
                                                        Suggested further reading 199
   Learning objectives 53
   Introduction 54
   The Human Relations approach 55                   Part Two
   The Contingency Theory approach 70                Strategy development and change
   Conclusions 80                                    management: past, present and future
   Test your learning 82
   Suggested further reading 82
                                                     6 Approaches to strategy       203
                                                        Managerial choice and constraints    203
3 In search of new paradigms     83                     Learning objectives 203
   Learning objectives 83                               Introduction 205
   Introduction 84                                      Understanding strategy: origins, definitions
   The Culture–Excellence approach 88                   and approaches 207
   The Japanese approach to management         115      Understanding strategy: choices and
   Organisational learning 126                          constraints 220
   Conclusions 135                                      Conclusions 228
   Test your learning 139                               Test your learning 230
   Suggested further reading 140                        Suggested further reading 231
viii    Contents

7 Applying strategy         232
                                                        Part Three
       Models, levels and tools   232                   Case studies in strategy development and
       Learning objectives 232                          change management
       Introduction 233
       Types of strategies 234                          11 Case studies in strategic change     335
       Levels of strategy 238                              Learning objectives 335
       Strategic planning tools 246                        Introduction 335
       Conclusions 256                                     Case Study 1: The Internet and the P2P
       Test your learning 257                              Revolution in the music industry 337
       Suggested further reading 258                       Case Study 2: The rise and fall of
                                                           Marconi 343
8 Approaches to change management                 259      Case Study 3: Oticon – the disorganised
       Learning objectives 259                             organisation 347
       Introduction 260                                    Case Study 4: Privatisation and the European
       Theoretical foundations 261                         Union: the case of the Public Power
       The Planned approach to organisational              Corporation of Greece 355
       change 267                                          Conclusions 362
       The frequency and magnitude of                      Test your learning 364
       organisational change 281
       Conclusions 284                                  12 Case studies in changing internal
       Test your learning 285                              relationships and attitudes 365
       Suggested further reading 286                       Learning objectives 365
                                                           Introduction 365
9 Developments in change management               287      Case Study 5: Volvo's approach to Job
       The Emergent approach and beyond      287           Design 368
       Learning objectives 287                             Case Study 6: XYZ Construction 377
       Introduction 288                                    Case Study 7: GK Printers Limited – changing
       The case against the Planned approach to            systems and attitudes 383
       organisational change 289                           Conclusions 396
       The Emergent approach to change 291                 Test your learning 397
       Emergent change: summary and
       criticisms 312                                   13 Case studies in changing external
       Conclusions 316                                     relationships 398
       Test your learning 317                              Learning objectives 398
       Suggested further reading 317                       Introduction 398
                                                           Case Study 8: Rover–TRW – operational
10 A framework for change          318                     integration 401
                                                           Case Study 9: Speedy Stationers Ltd and UTL
       Approaches and choices     318
                                                           (Turbines) Ltd – supplier-driven change 407
       Learning objectives 318                             Case Study 10: PoliceCo – outsourcing in the
       Introduction 320                                    public sector 414
       Varieties of change 321                             Conclusions 420
       A framework for change 325                          Test your learning 423
       A framework for choice 328
       Conclusions 329
       Test your learning 332
       Suggested further reading 332
Contents   ix

Part Four                                        Globalisation and the challenge of change 489
Managing choice                                  The manager's role 498
                                                 Management and leadership 503
14 Managing change      427                      Management and leadership in action 514
                                                 Managerial development 519
  Lessons from theory and practice   427
                                                 Management, leadership and change       527
  Learning objectives 427                        Summary and conclusions 530
  Introduction 427                               Test your learning 534
  Lessons from theory and practice 429           Suggested further reading 535
  Employee involvement and organisational
  transformation 444                             Bibliography 537
  Conclusions: merging theory and practice 447   Glossary 595
  Test your learning 450                         Index 607

15 Organisational change and managerial          For Lecturers:
   choice 452
  Learning objectives 452                        ●   A secure, password-protected site with
  Introduction 452                                   teaching material
  The Choice Management–Change                   ●   Complete, downloadable Instructor’s
  Management model 455                               Manual
  Conclusions 484                                ●   PowerPoint slides that can be downloaded
  Test your learning 485                             and used as OHTs

16 Management – roles and
   responsibilities 486
  Learning objectives   486
  Introduction 487
1
Acknowledgements


The fourth edition of this book, like the previous three, would not have been possible
without the generous encouragement and assistance of a large number of people,
especially my colleagues and students at UMIST. Space does not permit me to name
them all, but I am nevertheless extremely grateful to them, one and all. In addition,
Pearson Education deserve many thanks for their encouragement and patience.
However, and mostly, I am irredeemably indebted to my wife, Sue. Her painstaking
reading and editing of draft after draft of this book have improved it beyond recogni-
tion. It is not too much to say that she deserves as much credit as I do for what is
good about this book.
   Nevertheless, despite all the help and assistance I have received, any faults or short-
comings in the final product are mine and mine alone.
Publisher’s Acknowledgements


We are grateful to the Financial Times Limited for permission to reprint the following
material:

The sustainable business: continuous search for improvement, © Financial Times, 19
August 2002; Realism replaces grand visions, © Financial Times, 12 March 2003;
How to preserve the soul of management: The increasing sophistication of measure-
ment techniques threatens to reduce executives to robots, © Financial Times, 19
September 2002; The master strategist: Michael Porter, © Financial Times, 15 August
2003; The great iconoclast: Henry Mintzberg, © Financial Times, 5 August 2003;
Managers resort to old tools in a crisis, © Financial Times, 18 July 2001; Less means
more in engineering, © Financial Times, 17 October 2002; Weill wields his power at
Citigroup: revamp represents ongoing structural changes, © Financial Times, 13 June
2002; Microsoft’s direct connection to the customer, © Financial Times, 31 December
2001; Manage with mother, © Financial Times, 2 March 1998.

We are grateful to the following for permission to use copyright material:

Figure 5.1 from Organization Development and Change, 4th edition, by
Cummings/Huse. © 1989, reprinted with permission of South-Western, a division of
Thomson Learning: www.thomsonrights.com. Fax 800 730-2215 Figure 7.1
reprinted with the permission of The Free Press, a Division of Simon & Schuster
Adult Publishing Group, from Competitive Advantage: Creating and Sustaining
Superior Performance by Michael E. Porter, © 1985, 1998 by Michael E. Porter. All
rights reserved. ‘Why companies have much to learn from charities’ by Keith Leslie,
Vaughan Lindsay, Helen Mullings and Neville Salkeld, reprinted by permission of
McKinsey & Company. Keith Leslie is a consultant and Helen Mullings is a profes-
sional development manager with McKinsey & Company.

In some instances we have been unable to trace the owners of copyright material and
we would appreciate any information that would enable us to do so.
Introduction



    There is nothing so practical as a good theory. (Kurt Lewin)1
    All models are wrong, some models are useful. (George Box)2

It has become the accepted view that, for society at large, the magnitude, speed,
unpredictability and impact of change are greater than ever before. Certainly, over the
last 20 years especially, new products, processes and services have appeared at an
ever-increasing rate. Local markets have become global markets. Protected or semi-
protected markets and industries have been opened up to fierce competition. Public
bureaucracies and monopolies have either been transferred to the private sector or
have themselves adopted much more market-orientated practices. Most commenta-
tors appear to share Hammer and Champy’s (1993: 23) view that ‘… change has
become both pervasive and persistent. It is normality.’
   In the last decade, and perhaps especially since the third edition of this book was
published in 2000, organisations appear to have gone though a whirlwind of change.
In the 1990s, there was a takeover and merger boom of unprecedented proportions
(Burton et al, 1996; The Economist, 1998). Indeed, on a single day in 1997, Western
Europe saw some $130 billion of mergers and acquisitions, whereas the entire total
for the previous year was only $250 billion. In America, Warner (1997: 3) com-
mented that:

    To find a similar period of economic change and merger frenzy, you might need to go back
    all the way to the 1890s … Out of it were born such companies as Standard Oil and
    American Tobacco, the very prototypes of the vertically integrated modern corporation.

This period leading up to the millennium is usually referred to as the dotcom boom. It
is easy to see why this should be so given the rise of the Internet, the publicity given
to dotcom companies and, with hindsight, ridiculously-inflated prices paid for any
business that had the suffix .com. Moreover, as Warner indicated, the boom touched
almost every sector of the global economy, not just Internet-associated businesses. For
example, even in the epitome of the ‘old economy’, the motor industry, merger fever
was rife. The coming together of Daimler-Benz and Chrysler in 1998 created the fifth
largest vehicle company in the world, with a turnover of $130 billion. In the same
year, the takeover of Rolls Royce by Volkswagen was another step in its attempt to
transform itself into a global company, whereas Ford continued to gobble up smaller

1   Lewin (1943/4: 169).
2   Quoted in Norrie (1993).
2   Introduction

                   companies, such as Volvo, in order to maintain its global position. In the financial
                   sector, the $160 billion merger of Citicorp and Travellers in 1998 was just the largest
                   example of a positive frenzy of merger activity. In the UK, the de-mutualisation of
                   building societies and their takeover by larger financial institutions was another exam-
                   ple of the same forces at work. Similarly, in the rest of the European financial services
                   industry, in advance of the Euro, cross-border mergers were especially prevalent. The
                   ‘urge to merge’ seemed present in all industries; Guinness and GrandMet came
                   together to form Diageo, one of the world’s largest food and drink companies, and the
                   on–off merger of Glaxo and SmithKline Beecham, which finally materialised in 2000,
                   showed that the pharmaceutical industry was not immune to the lure of merger.
                      Though led by the dotcom boom, each merger or acquisition had its own rationale.
                   The underlying motives appear to have been a combination of the forces of globalisa-
                   tion, technological advances, trade liberalisation and changes of governments,
                   especially in Eastern Europe, all of which were reshaping entire industries. However,
                   even faster than the dotcom bubble had risen, it burst with devastating consequences.
                   Ironically, what seemed to signal its demise was the merger between the Internet com-
                   pany AOL and the film, TV and publishing company Time Warner. This deal, hailed
                   as the triumph of the new economy over the old, created a company which was ini-
                   tially valued at $327 billon. Within a week of the announcement of the merger in
                   January 2000, AOL’s value fell by $25 billion and continued to fall. By the time the
                   deal was finally closed, the value of the combined company had fallen from $327 bil-
                   lion to $106 billion (Sirower, 2003). The fall of the rest of the dotcom sector was in
                   many cases, especially the WorldCom scandal, even more spectacular, with many
                   companies disappearing altogether. Most commentators now believe that the dotcom
                   boom was really a ‘dotcon’ boom, with the rise in share prices being driven by froth,
                   lies and illegality (Cassidy, 2002; Cellan-Jones, 2003; Kaplan, 2002). It was the col-
                   lapse and exposure of companies in the dotcom and other sectors whose value had
                   risen spectacularly only to fall spectacularly that led the American investment guru,
                   Warren Buffet, to make his now famous remark that ‘It’s only when the tide goes out
                   that you see who has been swimming with their trunks off.’
                      Organisational change is not just limited to companies involved in mergers and
                   acquisitions. In the UK for example, in the 1990s, survey after survey showed that
                   organisations of all sizes and in all sectors were undertaking a wide variety of change
                   initiatives. These included restructuring, delayering, the introduction of new products
                   and services, outsourcing and, especially, culture change programmes (Coulson-
                   Thomas and Coe, 1991; Ezzamel et al, 1994; Industrial Society, 1997; Worrall and
                   Cooper, 1997, 1998).
                      The point of this brief review is not to chronicle the rise and fall of the dotcom
                   boom, but to show that over even short periods of time, organisations have to cope
                   with very different types of challenges. These range from rapid growth, mergers and
                   acquisitions, and the emergence of new technologies and new competitors, to falling
                   markets, depressed economies, de-mergers and consolidations, and the collapse of
                   some customers, suppliers and competitors. However, it would be wrong to portray
                   these events as affecting all organisations equally. Just as the dotcom companies were
                   most affected by the dotcom boom and bust, just so there were organisations and
                   industries who were relatively unaffected by either the boom or the bust, such as agri-
                   culture and mining. Similarly, the public sector tends to be much less affected by the
Introduction   3

pace and magnitude of economic fluctuations than the private sector. In the UK, for
example, whilst the rest of the economy has been relatively stagnant, the public sector
has continued to grow significantly (Turner, 2003).
   So, although many claim we are living through a period of unprecedented and
unpredictable change, not everyone is affected to the same degree. Indeed, as Chapter
1 will show, the history of the past 200 years could well be characterised as successive
periods of unprecedented change. In fact, given that it was the ancient Greeks who
coined the phrase ‘change is the only constant’, we should perhaps remember that the
history of the human race is one of massive change and dislocation. Each generation
seems to yearn for some golden past that has been swept away by progress, and each
generation, building on past knowledge, develops new ways of coping with and man-
aging change. Therefore, perhaps we should be less concerned with the overall level
of change and instead be asking: how can each organisation best cope with the degree
of turbulence it faces?
   Though change management would not be considered particularly important if
products and markets were stable and organisational change was rare, it would be
considered even less of an issue if it were easily managed and success could be guaran-
teed. Alas, there is substantial evidence that this is not the case. The literature abounds
with examples of change projects that have gone wrong, some disastrously so (see
Brindle, 1998a; Burnes and Weekes, 1989; Bywater, 1997; Cummings and Worley,
1997; Howarth, 1988; Kanter et al, 1992; Kelly, 1982a, 1982b; Kotter, 1996; Stace
and Dunphy, 1994; Stickland, 1998). Indeed, two of the most respected commentators
in the field of organisational change, Beer and Nohria (2000), claim that nearly two-
thirds of change efforts fail. Though this seems a staggeringly high failure rate, studies
of particular types of change initiatives do appear to come to similar conclusions.
   Unlike a company’s turnover, an industry’s performance or a nation’s gross
national product, no one gathers statistics on how successful organisations are at
managing change. Nevertheless, over the years, particular types of change initiative
have attracted sufficient attention for it to be possible to gauge the degree of success
achieved in implementing them. There are three types of organisational change which,
because of their perceived importance, have received considerable attention: the intro-
duction of new technology in the 1980s; the adoption of Total Quality Management
(TQM) over the last 20 years; and, in the last 15 years, the application of Business
Process Re-engineering (BPR).
   The micro-electronics revolution of the 1980s, which saw the rapid expansion of
computers and computer-based processes into most areas of organisational life, was
the subject of a great many studies. These found that the failure rate of new technol-
ogy change projects was anywhere between 40 per cent and 70 per cent (AT Kearney,
1989; Bessant and Haywood, 1985; McKracken, 1986; New, 1989; Smith and
Tranfield, 1987; Voss, 1985). Nor do the problems in this area appear to be teething
troubles limited to the 1980s. In 1998, the UK government had to admit that its £170
million programme to replace the computer system that holds the National Insurance
records of everyone in the country was in such a mess that the system had collapsed,
throwing its social security system into turmoil (Brindle, 1998a, 1999).
   The move by European organisations to adopt Total Quality Management began
in the mid-1980s (Dale and Cooper, 1992). Although TQM appears to be central to
the success of Japanese companies, the experience of Western companies has been
4   Introduction

                   that it is difficult to introduce and sustain. Indeed, one of the founders of the TQM
                   movement, Philip Crosby (1979), claimed that over 90 per cent of TQM initiatives by
                   American organisations fail. Though a 90 per cent failure rate seems incredibly high,
                   studies of the adoption of TQM by companies in the UK and other European coun-
                   tries show that they have experienced a failure rate of 80 per cent or more (AT
                   Kearney, 1992; Cruise O’Brien and Voss, 1992; Dale, 1999; Economist Intelligence
                   Unit, 1992; Whyte and Witcher, 1992; Witcher, 1993; Zairi et al, 1994).
                      Business Process Re-Engineering was hailed as ‘the biggest business innovation of the
                   1990s’ (Mill, 1994: 26). Though less well documented than either new technology or
                   TQM, Wastell et al (1994: 37) concluded from the available evidence that ‘BPR initia-
                   tives have typically achieved much less than they promised’. Other studies of BPR have
                   come to similar conclusions (Coombs and Hull, 1994; Lessem, 1998; Short and
                   Venkatraman, 1992). More specifically, Bryant (1998) cites a reported failure rate for
                   BPR initiatives of 80 per cent, Breslin and McGann (1998) put the failure rate at
                   60 per cent, whilst Bywater (1997) puts the figure at 70 per cent. Even the founding
                   father of BPR – Michael Hammer – acknowledges that in up to 70 per cent of cases it
                   leaves organisations worse off rather than better off (Hammer and Champy, 1993).
                   Indeed, such was the perceived failure of BPR that, according to Huczynski and
                   Buchanan (2001: 559), by the mid-1990s, many commentators ‘were claiming that the
                   approach had been discredited’.
                      Therefore, even these three types of well-established change initiatives, for which a
                   great deal of information, advice and assistance is available, are no guarantee of suc-
                   cess. This is perhaps why managers consistently identify the difficulty of managing
                   change as one of the key obstacles to the increased competitiveness of their organisa-
                   tions (Hanson, 1993; Industrial Society, 1997; Worrall and Cooper, 1997).
                      To many, this must seem paradoxical. On the one hand, there is now more advice
                   on how to manage change than ever before. On the other hand, the failure rate of
                   change initiatives is astronomical. The two quotations at the beginning of this
                   Introduction hold the key to this paradox. What almost everyone would like is a clear
                   and practical change theory that explains what changes organisations need to make
                   and how they should make them. Unfortunately, what is available is a wide range of
                   confusing and contradictory theories, approaches and recipes. Many of these are well-
                   thought-out and grounded in both theory and practice; others, unfortunately, seem
                   disconnected from either theory or reality. Also, though change theory requires an
                   interdisciplinary perspective, each of the major approaches tends to view organisa-
                   tions from the disciplinary angle of their originators – whether it be psychology,
                   sociology, economics, or whatever – which can result in an incomplete and biased pic-
                   ture. So, regardless of what their proponents may claim, we do not possess at present
                   an approach to change that is theoretically holistic, universally applicable, and which
                   can be practically applied. Nevertheless, we do know that, to paraphrase George Box,
                   whilst all change theories are partial, some theories are useful. This means that for
                   those wishing to understand or implement change, the prime task is not to seek out
                   an all-embracing theory but to understand the strengths and weaknesses of each
                   approach and the situations in which each can best be applied.
                      There can be few who now doubt the importance to an organisation of the ability
                   to identify where it needs to be in the future, and how to accomplish the changes nec-
                   essary to get there – although there is a great deal of dispute about how difficult or
Introduction     5

possible this is. Some might assume that managers do not need to understand organi-
sation theory, strategy theory, change theory or any other theory in order to manage
and change their organisations, but this would be to underestimate the extent to
which managers and others in organisations are influenced, assisted or potentially
misled by theory. Increasingly, managers are exhorted to adopt the teachings of the
latest management guru. Nevertheless, as Part 1 will demonstrate, and as Mintzberg
and Quinn (1991: xii) observed:

    One can, however, suffer not just from an absence of theories, but also from being domi-
    nated by them without realizing it. To paraphrase the words of John Maynard Keynes, most
    ‘practical men’ are the slaves of some defunct theorist. Whether we realize it or not, our
    behavior is guided by the systems of ideas that we have internalized over the years. Much
    can be learned by bringing these out into the open, examining them more carefully, and
    comparing them with alternative ways to view the world – including ones based on system-
    atic study (that is, research).

These ‘systems of ideas’, or organisation theories as they are more commonly called,
are crucial to change management in two respects. First, they provide models of how
organisations should be structured and managed. Second, they provide guidelines for
judging and prescribing the behaviour and effectiveness of individuals and groups in
an organisation.
    To understand why and how to change organisations, it is first necessary to under-
stand their structures, management and behaviour. As Mintzberg and Quinn indicate,
it is clear that in many organisations there is no clear understanding of these theories.
It follows that choices with regard to the appropriateness of particular structures and
practices, the way they are chosen and implemented, are founded on limited knowl-
edge and perhaps false assumptions. Change cannot hope to be fully successful under
these circumstances. On the contrary, a full understanding of these theories is neces-
sary if informed choices are to be made when instigating and implementing change.
For this reason, these will be examined critically in relation to each other, and also in
comparison with how organisations actually operate, as opposed to how theorists
suppose them to. The aim is not to provide a ‘hands-on’ practical guide to organisa-
tional change – though readers should find this book useful in that respect as well.
Rather the aim is to provide an understanding of the theories and approaches to
change that are on offer, to indicate their usefulness and drawbacks, and to enable the
reader to choose for her- or himself which ‘models are useful’ and when.
    The central purpose of this book, then, is to aid this search for understanding both
by describing and discussing the key approaches to and theories of organisational
change, and by setting these within the broader framework of the development, oper-
ation and behaviour of organisations and those who populate them. The intention is
to allow those who study and carry out organisational change to make their own
judgments about the benefits, applicability and usefulness of the approaches on offer.
Therefore, the key themes underpinning the book are as follows:
■    There is a need to understand the wider theoretical and historical context within
     which organisations operate and the pressures and options they face for change.
■    Organisational change cannot be separated from organisational strategy, and
     vice versa.
6   Introduction

                   ■   Organisations are not rational entities per se, though those who manage
                       them strive to present their deliberations and decisions as being based on logic
                       and rationality.
                   ■   There is a strong tendency to present the various approaches to change as
                       being limited in number and mutually exclusive. However, in practice, the range
                       of approaches is wide, and they can be and often are used either sequentially or
                       in combination.
                   ■   The appropriateness of each of the available approaches is dependent upon the
                       type of change being considered and the constraints under which the organisation
                       operates, although these constraints and objectives can themselves be changed to
                       make them more amenable to an organisation's preferred approach to change or
                       style of management.
                   ■   Organisations and managers can and do exercise a wide degree of choice in what
                       they change, when they change and how they change.
                   The book is organised into four parts.
                   Part 1: The rise and fall of the rational organisation provides a comprehensive review
                   of organisation theory and behaviour. Chapter 1 deals with the development of
                   organisations from the Industrial Revolution through to the early years of the twenti-
                   eth century, when the first fully-fledged organisation theory, the Classical approach,
                   appeared. This is followed in Chapter 2 with reviews of the next two organisation
                   theories to appear: the Human Relations approach and Contingency Theory. Chapter
                   3 examines and compares the three main and most influential contemporary
                   approaches to structuring and managing organisations: the Culture–Excellence and
                   organisational learning approaches, primarily developed in the West, and the
                   Japanese approach. Chapter 4 sets the review of organisational theories in a wider
                   context by reviewing the postmodern, realist and complexity perspectives on organi-
                   sations. Chapter 5 examines the importance and implications of culture, power and
                   politics. Chapter 5, and Part 1, conclude that, by accident and design, organisation
                   theories attempt to remove choice from organisations by specifying what they need to
                   do in order to be successful. However, the review of culture, power and politics,
                   together with evidence from the earlier chapters, shows that managers do have a
                   wider scope for shaping decisions than much of the organisation literature suggests.
                   This theme of managerial choice is continued in Part 2.
                   Part 2: Strategy development and change management: past, present and future com-
                   prises five chapters, examining the literature on strategic management and change
                   management. Chapters 6 and 7 examine the dominant approaches to strategy, and the
                   main tools and techniques available to organisations for its development and imple-
                   mentation. In particular, these two chapters draw attention to the differences between
                   the Prescriptive and Analytical schools of strategy, and they highlight the importance
                   of the relationship between organisational strategy and organisational change.
                   Chapters 8 and 9 review the two dominant approaches to organisational change: the
                   Planned approach and the Emergent approach. These chapters show that both
                   approaches have their strengths and weaknesses, and that neither separately nor in
                   combination do these approaches cover all change situations. Chapter 10 goes
                   beyond the Planned and Emergent approaches to develop a Framework for Change
                   that relates the various change situations organisations face to the range of
Introduction   7

   approaches to managing change on offer. Chapter 10 concludes Part 2 by arguing
   that, though organisations face significant constraints on their freedom of choice,
   these constraints can be influenced and changed in order to allow organisations to
   choose the particular approach to strategy and change that best suits them.
   Part 3: Case studies in strategy development and change management comprises three
   case study chapters. The ten studies they contain are all of real organisations, though
   in some cases their names and some of the details that would identify them have been
   changed to protect confidentiality. Nevertheless, the situations described are drawn
   from real life and show the opportunities, difficulties and constraints faced in devel-
   oping strategy and implementing change.
   Part 4: Managing choice comprises the concluding three chapters of the book.
   Chapter 14 combines the insights and perspectives from Parts 1 and 2 to analyse the
   ten case studies presented in Part 3. From this, the chapter identifies key lessons for
   the theory and practice of organisational change and paves the way for the Choice
   Management–Change Management model of organisational change presented in
   Chapter 15. This model, which comprises three interlinked processes – choice, trajec-
   tory and change – provides an understanding of how managers and organisations can
   and do exercise choice and manage change. Given the importance attached to the role
   of managers in developing strategy and managing change, Chapter 16 reviews what
   managers do and how they do it. In particular, the role of leadership and management
   development is examined and related to approaches to change management. The
   chapter and the book conclude that if, as argued, managers have considerable choice
   over what to change and how to change it, then this lays a considerable responsibility
   on their shoulders. How organisations change and develop has enormous conse-
   quences, not just for their employees and owners but for society at large. In order to
   minimise social fragmentation and exclusion, and the destruction of the natural envi-
   ronment, managers need to act in the broader interests of all their stakeholders –
   employees, shareholders, themselves and the wider community.


■ The fourth edition
   Since the publication of the third edition of this book, I have received many helpful
   comments and suggestions for improving and developing this book both from my own
   students and colleagues at UMIST and from readers and users elsewhere. I am very
   grateful for these and have tried to utilise them in preparing this fourth edition. In par-
   ticular, this edition reflects the growing influence of the Internet and globalisation on
   organisations, includes material on realism and complexity theories to counterbalance
   the postmodernist perspective, the linkage between approaches to change and
   approaches to management has been made more explicit, five new case studies have
   been provided, and there is more practical guidance on managing change. Whilst
   retaining a similar structure and approach to the third edition, this edition has been
   expanded from 14 to 16 chapters, and all the chapters been updated and revised, some
   substantially so. The main changes from the third edition are as follows:
   ■   Part 1 has been expanded from four to five chapters. Chapter 4 now concentrates
       on competing perspectives on organisations, namely the postmodern, realist and
       complexity perspectives. The new Chapter 5 contains an expanded review of cul-
       ture, power, politics and choice.
8   Introduction

                   ■   Part 2 has also been increased four to five chapters. This has enabled the revision
                       and separation of the two chapters on Planned and Emergent change, Chapters 8
                       and 9, from the new Chapter 10 which develops and presents the Framework for
                       Change, which has itself been revised and expanded.
                   ■   Part 3 includes five new case studies: three in Chapter 11, and one each in
                       Chapters 12 and 13.
                   ■   Chapter 15 has been lengthened to provide more practical guidance on managing
                       change.
                   ■   The last chapter, now Chapter 16, has been expanded to incorporate a discussion
                       of globalisation, and a better linkage between management styles and varieties of
                       organisational change.
                   ■   Last but not least, a glossary of terms has been added to the book to explain less
                       familiar words and phrases.
Part One
The rise and fall of the
rational organisation
Managing change burnes
Chapter 1

From trial and error to the science
of management
The rise of organisation theory



  Learning objectives
  After studying this chapter, you should be able to:
  ■   understand the development of work organisation from the Industrial
      Revolution until the end of the nineteenth century;
  ■   appreciate the reasons for the antagonistic relations between labour and
      employers in the nineteenth century;
  ■   discuss the different roles played by technology and people in the
      development of the factory system;
  ■   describe the main features of the Classical approach;
  ■   understand why the Classical approach developed as it did in the USA, France
      and Germany;
  ■   discuss the differences and similarities between the work of Taylor, Fayol
      and Weber;
  ■   list the main advantages and disadvantages of the Classical approach to
      structuring organisations and designing jobs;
  ■   describe the key features of the Classical approach to organisational change.
12   Chapter 1 · From trial and error to the science of management


 Exhibit 1.1         The case of Scientific Management

 Fundamentals of Scientific Management
 The principal object of management should be to            to state this fact should be unnecessary. And yet
 secure the maximum prosperity for the employer, cou-       there is no question that, throughout the industrial
 pled with the maximum prosperity for each employé.         world, a large part of the organization of employers,
     The words ‘maximum prosperity’ are used, in their      as well as employés, is for war rather than for peace,
 broad sense, to mean not only large dividends for the      and that perhaps the majority on either side do not
 company or owner, but the development of every             believe that it is possible so to arrange their mutual
 branch of the business to its highest state of excel-      relations that their interests become identical.
 lence, so that the prosperity may be permanent.                The majority of these men believe that the fun-
     In the same way maximum prosperity for each            damental interests of employés and employers are
 employé means not only higher wages than are usu-          necessarily antagonistic. Scientific management, on
 ally received by men of his class, but, of more            the contrary, has for its very foundation the firm
 importance still, it also means the development of         conviction that the true interests of the two are one
 each man to his state of maximum efficiency, so that       and the same; that prosperity for the employer
 he may be able to do, generally speaking, the high-        cannot exist through a long term of years unless it
 est grade of work for which his natural abilities fit      is accompanied by prosperity for the employé, and
 him, and it further means giving him, when possible,       vice versa; and that it is possible to give the work-
 this class of work to do.                                  man what he most wants – high wages – and the
     It would seem to be so self-evident that maxi-         employer what he wants – a low labor cost – for
 mum prosperity for the employer, coupled with              his manufactures.
 maximum prosperity for the employé, ought to be            Source: Frederick Winslow Taylor, The Principles of Scientific
 the two leading objects of management, that even           Management, 1911, p. 1.




                   Introduction
               In Britain and the rest of the industrial world today, it is almost impossible to imagine
               life without the plethora of organisations that comprise and make possible our every-
               day life. Yet organisations in their modern form – indeed, in almost any form – were
               virtually unknown before the Industrial Revolution, 200 years ago. In the intervening
               period, as Morgan (1986) remarked, we have developed into an ‘organizational soci-
               ety’. However, not only have organisations, in their many shapes, sizes and
               manifestations, come to reach into every facet of our lives, but they have also
               acquired an equally diverse range of theories, nostrums and semi-sacrosanct beliefs
               about how they should be structured, managed and changed.
                   This chapter sets out to explore and discuss the origins of organisations, from the
               Industrial Revolution to the early years of the twentieth century, when the first detailed
               and comprehensive organisation theory emerged. As Exhibit 1.1 shows, two of the
               overarching and complementary characteristics of this period were the conflict between
               workers and managers, and the search for a systematic, scientific, and above all efficient
               approach to running organisations. The key themes of this chapter are as follows:
               ■   Although industrialisation was primarily concerned with the move from a subsis-
                   tence economy to a money-market economy, the main enabling mechanism for this
                   was the creation of the factory system.
Introduction   13

■   The pattern and purpose of industrialisation varied from country to country.
    Whilst in Britain and the USA it was very much driven by individuals seeking profit
    maximisation, in mainland Europe a different approach can be seen. In Germany
    in particular, but also in France, industrialisation was largely state-sponsored, and
    aimed more to further the economic and military objectives of the state than to
    increase the profit-making capacity of individuals.
■   The development of organisation theory was synonymous with the need by man-
    agers to legitimate and enhance their authority to initiate change.
   The chapter begins by showing how the rapid expansion of national and interna-
tional commercial activity created the conditions for the British Industrial Revolution,
from which emerged the factory system, the precursor of all modern organisations. It
is argued that the driving force behind this development was the merchant class. It
will also be stressed that two key features of the early factory system were its ad hoc,
trial-and-error nature, and the antagonistic relationship between owners and employ-
ees, or – to use the terminology of the times – masters and servants.
   The chapter then goes on to show that British industrial practices, methods and
technologies were ‘exported’ to other European countries and the USA, with similar
results in terms of employer–employee relations. As the nineteenth century pro-
gressed, and organisations grew in number and size, trial and error increasingly gave
way to more considered and consistent approaches to work organisation. This devel-
opment was especially pronounced in the USA and continental Europe, as industrial
leadership moved away from Britain and towards these areas.
   What emerged, separately, were three different but complementary attempts by
Frederick Taylor in the USA, Henri Fayol in France and Max Weber in Germany to
replace the ad hoc, rule-of-thumb approach to organisations with a universally appli-
cable blueprint or theory for how they should operate. These three approaches, each
focusing on different organisational aspects, coalesced into what later became known
as the Classical school of organisation theory. This approach to organisations is char-
acterised by the horizontal and hierarchical division of labour, the minimisation of
human skills and discretion, and the attempt to construe organisations as rational-sci-
entific entities. It is argued that one of the key objectives of the Classical school,
especially the Scientific Management component, was to legitimise the managerial
right to plan and implement change by showing that it was the only group able to
analyse the work situation scientifically and rationally, and to devise the most appro-
priate and efficient methods of operation.
   The chapter concludes by arguing that the Classical approach, whilst being a sig-
nificant advance on what went before, was badly flawed. In particular, its view of
human nature and motivation was not only inaccurate, but also alienated workers
from and made them resentful of the organisations that employed them. However, the
precepts of the Classical school were not solely aimed at constraining workers’ ability
to make and block change; in addition, by laying down hard and fast rules of what
was and was not best practice, they constrained management’s freedom of action,
thus alienating many managers as well as workers.
   With hindsight, the attempt by Taylor, Fayol and Weber each in their own way to
formulate a system of reciprocal obligations between managers and workers appears
to be less a decisive break with the past and more an attempt to recast feudalism in a
14   Chapter 1 · From trial and error to the science of management

               more scientific-rational framework. Certainly, in the late nineteenth century, French,
               German and American managers of European descent did share a recent and common
               feudal heritage which might make them well-disposed towards a system that substi-
               tuted a code of joint obligation in place of management–worker conflict. Indeed, in
               Germany the rise of bureaucracy that Weber described was itself a direct product of
               the Prussian feudal tradition. However, though many managers undoubtedly did long
               for and believe in an – albeit mythical – age when workers readily did as they were
               told, this ignored the fact that most American immigrants left Europe to escape just
               such a system, whilst French workers took pride in the belief that their Revolution
               had ended feudal despotism. Only in Germany was it possible to say that the feudal
               tradition remained strong, though not unopposed.


The rise of commerce and the birth of the factory
               The pivotal event that shaped the world into the form we now see around us was the
               British Industrial Revolution, which began in the late eighteenth century. Before it,
               most societies were based on small-scale, self-sufficient agricultural production, with
               the vast majority of the population, some 80–90 per cent, living in the countryside.
               By the end of the nineteenth century, after the Industrial Revolution had run its
               course, the reverse became the case, in the leading industrialised countries at least,
               with most people living in urban centres and depending on industrial and commercial
               activities for their livelihood (Landes, 1969).
                  Britain was the pioneer industrial country; it was the model that other European
               nations and the USA sought to emulate in their attempts to transform traditional
               agrarian economies into urban societies based on science and technology (Kemp,
               1979). The key development of the Industrial Revolution towards this process of soci-
               etal transformation was the creation of the factory system. It was this that gave the
               impetus to and created the model for all that was to follow. As Weber (1928: 302)
               pointed out, the factory’s distinguishing characteristic was ‘... in general … not the
               implements of work applied but the concentration of ownership of workplace, means
               of work, source of power and raw materials in one and the same hand, that of the
               entrepreneur’. Or, to put it another way, it was the way the entrepreneur ‘organised’
               the elements of production that distinguished it from what went before.
                  This tells us what changed, but it does not explain why or how in a few score years
               organisations came to dominate our lives. To answer this, it is necessary to appreciate
               the great surge of economic activity – especially the international trade in textile
               products – that arose in the seventeenth and eighteenth centuries. This trade gave an
               enormous impetus to textile production in Britain, which in turn had a knock-on
               effect in all other spheres of economic activity (Mathias, 1969).
                  Before and during the early part of the British Industrial Revolution, textile produc-
               tion was carried out as an agricultural by-occupation based on family units. However,
               as demand increased in the eighteenth century, some ‘men and women [became] spe-
               cialist spinners or weavers, thinking first of wool, treating work on the land as, at
               most, a by-occupation’ (Ashton, 1948: 23). Allied to this, a new mechanism sprang up
               to link producer and consumer: the ‘putting-out’ system, whereby a large merchant
               would ‘put out’ work to a number of independent domestic producers.
The rise of commerce and the birth of the factory   15

     The advantage to the merchant was threefold: it was cheap – there were few over-
  heads; it was flexible – production could be easily expanded or contracted; and it
  avoided the difficulties involved in directly employing a workforce. However, as
  demand continued to increase in the late eighteenth century, this system became more
  complex and more costly, and eventually it became too cumbersome (Pollard, 1965).
  The chain of intermediaries linking producer to consumer became increasingly diffi-
  cult for the large merchant to control. There were many problems with the
  putting-out mechanism: dishonesty (on both sides) was rife; deliveries were late; and
  quality often poor. Laws attempting to control producers could do nothing to rectify
  the fundamental weaknesses in the system. The incompatibility between the large and
  complex organisation of distribution and the multitude of tiny domestic workshop
  units, unsupervised and unsupervisable, was bound to set up tensions and drive mer-
  chants to seek new ways of production – ways whereby they could establish their
  own managerial control over the production process (Pollard, 1965).
     There was also an incompatibility between different cultures. For the merchant, the
  expansion of markets was a chance to maximise profits in order to live in the grand
  style. For the rural domestic producer, involved in long hours of back-breaking work,
  it created the conditions for increased leisure. As Marglin (1976: 35) commented: ‘...
  wages rose and workers insisted on taking out a portion of their gains in the form of
  greater leisure. However sensible this may have been from their own point of view, it
  is no way for an enterprising capitalist to get ahead.’
     Therefore, it was the merchant who began the move towards the factory system – not
  because the merchant had an innate desire to run factories or exercise direct control
  over labour, but in order to take full advantage of expanding market opportunities to
  reap ever greater rewards.
     Nevertheless, there was no headlong rush to create a new economic order overnight.
  The earliest factories, if that is not too grand a word for them, were small, unpowered
  weaving or spinning sheds that used existing technology and methods. A few very
  large factories – such as Wedgwood’s Etruria Works in Stoke-on-Trent – were estab-
  lished, but these were the rare exceptions. Indeed, in 1780, the investment in fixed
  equipment and stock in the textile industry, which was the leading edge of the
  Industrial Revolution, was only £10 per worker, and the average factory employed no
  more than 10 or 12 people. By 1830, when the textile industry had grown to employ
  100,000 people and the average factory size was 137, the investment in fixed equip-
  ment and stock had only increased to £15 per worker, and 50 per cent of the
  workforce were still home-based (Hobsbawm, 1968; Pollard, 1965; Tillett, 1970).
  Given this situation, it is hardly surprising that capital investment was quickly recov-
  ered and that it was running expenses, mainly wages and raw materials, which formed
  the bulk of manufacturing costs. It is this, and the original motive for moving to the
  factory system in the first place (to have greater control over labour), which explains
  the prevailing attitude of employers towards labour in the nineteenth century.


■ The relationship between employers and employees
  British employers based their attitude towards employees on two basic propositions:
  1 Labour is unreliable, lazy and will only work when tightly controlled and closely
    supervised.
16   Chapter 1 · From trial and error to the science of management

               2 The main controllable business cost is labour; therefore the key to increased profits
                 is to make it cheaper, and/or increase its productivity, by getting employees to work
                 harder, or for longer hours, for the same, or less, money.
               In this respect, as contemporary writers such as Charles Babbage (1835) and
               Andrew Ure (1835) observed, workers’ skill was seen as at best an inconvenience
               and at worst a threat, because it could be scarce, costly and allow workers a strong
               bargaining position.
                 As might be expected, employers’ hostility was reciprocated by labour. Workers
               exhibited a strong dislike for, and reluctance to become part of, the factory system. As
               Pollard (1965) noted, this was for three main reasons:
               1 It involved a wholesale change of culture and environment and the destruction of
                 small, tightly knit communities in which they lived. Hard though the life of cottage
                 industry was, it had given workers a measure of independence and some control
                 over what they did, when they did it and how.
               2 The discipline of the factory was harsh and unremitting with men, women and
                 small children all expected to work long hours, often seven days a week, in
                 appalling conditions.
               3 Given the lack of alternative organisational forms on which to establish factory
                 life, employers often modelled them on workhouses or prisons. Indeed, to square
                 the circle, some workhouses and prisons turned themselves into factories and their
                 inmates into little more than slaves. Thus factories acquired the same stigma as was
                 attached to prisons and workhouses.
               Therefore, the antagonism that existed between owners and workers was based on
               a genuine clash of interests – one which has echoed through the industrial world
               ever since.
                  If this picture of the factory system in the nineteenth century seems bleak to us, it is
               nevertheless accurate, as is shown in the work of its proponents such as Charles
               Babbage and Andrew Ure, social reformers such as Seebohm Rowntree, political
               activists such as Frederick Engels and contemporary novelists such as Charles
               Dickens. Nor was this aspect of industrialisation restricted to Britain. Studies of other
               European countries and the USA have shown similar tensions, sometimes even more
               violent, between the old and the new methods of working, and between employers
               and employees (Bruland, 1989; Chapman and Chassagne, 1981; Mantoux, 1964;
               Pelling, 1960).
                  In defence of the factory owners, who must take responsibility for what emerged, it
               should be said that their own experience was limited and there were no textbooks to
               guide them. That they should ‘copy’ what models existed reflected both the common
               view of labour amongst the owning classes, and a lack of alternative organisational
               forms on which to base the emergent factory system. As other nations industrialised,
               notably Germany, France and the United States, they too adopted similar organisa-
               tional forms and espoused similar attitudes towards labour. Partly this was because
               they were seeking to emulate Britain’s success by copying her approach. It was also
               because these societies, like Great Britain, were riven by hierarchical and horizontal
               divisions that were inevitably reproduced in the workplace.
The rise of commerce and the birth of the factory   17

■ Industrialisation and the organisation of work
   The system of organising work that came to characterise industrial life in Britain and
   most of continental Europe, and even the USA, by the end of the nineteenth century
   was based on the hierarchical and horizontal division of labour. Though this repre-
   sented a significant break with the past in terms of how work had previously been
   organised, it was not out of step with the social stratification of European society nor
   with feudal traditions of obedience. The articulation and propagation of the principle
   of the division of labour owed much to the work of Adam Smith. In his book The
   Wealth of Nations, published in 1776, Smith used the now famous example of pin-
   making to illustrate what he saw as the advantages of the division of labour. He
   pointed out that a pin could be made entirely by one person doing everything, or by a
   number of people each specialising in one aspect of its production. For three reasons,
   he believed the latter was more efficient:
   1 A worker who constantly performs one simple task will quickly acquire greater
     dexterity than one who performs a variety of tasks.
   2 It avoids the loss of time necessitated by one person moving from one task to
     another.
   3 The concentration of attention on one special task leads to the invention of
     machines that aid the productivity of labour and allow one person to do the work
     previously performed by many.
      Smith’s ideas were given flesh and form in Britain by pioneering factory owners
   such as Josiah Wedgwood, and Matthew Boulton and James Watt. At his Etruria pot-
   tery works, Wedgwood developed a production system that split the work process
   down into separate departments, each with its own specialist supervisor. Work was
   organised almost on a flow-line basis with the skill involved in each operation
   reduced to a minimum in order, in Wedgwood’s own words, ‘to make machines of
   men as cannot err’ (quoted in Tillett, 1970: 37). Matthew Boulton and James Watt
   developed a similar approach at their Soho Works in Birmingham in the 1770s. They
   also kept detailed production records, a practice virtually unknown at the time (Roll,
   1930). Wedgwood, Boulton, Watt and a few others were the architects of the factory
   system. By their organisation of work on and off the shopfloor, they created models
   that later managers would copy and adapt to their own needs and circumstances.
      This approach to the organisation and control of work spread outwards from
   Britain. As Bruland (1989: 165) observed:

    There was a fairly direct international diffusion of these changes from Britain, the originat-
    ing economy: British workers, in most parts of Europe, played a significant role in spreading
    the new work systems, in training local workers, and in the adaptation of the work force to
    the new rhythms of work.

   As the nineteenth century progressed, this approach to work organisation became
   more developed and systematised. Charles Babbage (1835) developed a method of
   applying the division of labour principle to the detailed analysis of any job. He
   emphasised the need for and advantage of dividing tasks between and within mental
   and manual labour. He envisaged three ‘classes’ employed in the work process: the
18   Chapter 1 · From trial and error to the science of management

               entrepreneur and his technical specialists who would design machines and plan the
               form of work organisation; operative engineers and managers who would be respon-
               sible for executing such plans and designs, based on only partial knowledge of the
               processes involved; and the mass of employees, needing only a low level of skill, who
               would undertake the actual work. Thus, in Babbage’s (1835: vii) view:

                 ... the master manufacturer, by dividing the work to be executed into different processes,
                 each requiring different degrees of skill or force, can purchase exactly the precise quality of
                 both which is necessary for each process ...


               Though coming from separate traditions, Smith’s work was also in tune with
               the Prussian bureaucratic school, and undoubtedly the efficient organisation of
               German industry in the late nineteenth century owes much to a combination of the
               two approaches.
                  The pioneers of these developments in work organisation, whether in Britain,
               Germany or other European countries, tended to be strict disciplinarians who used
               their personal authority to impose the new working arrangements on a usually reluc-
               tant workforce (Chapman and Chassagne, 1981). Therefore, change tended to be
               managed by imposition and force rather than negotiation and agreement. Nor is it
               surprising that it should be so. In the main these were countries which had been, in
               the recent past, feudal economies dominated by warrior elites. In Germany, this was
               still the case. Even where, as in France, there had been a decisive break with the past,
               this seems merely to have reinforced rather than removed patterns of social rigidity
               and authoritarianism.
                  In such situations, resistance to or questioning of change was unlikely to be met by
               understanding or tolerance. Predictably, there was strong resistance, both active and
               passive, to the introduction of new working patterns and methods (Kriedte et al,
               1981). Though this resistance could and did take the form of physical violence
               against factories and equipment, a more frequent manifestation was high labour
               turnover. One of the largest Manchester cotton spinning firms, McConnell and
               Kennedy, had an average turnover in the early nineteenth century of 100 per cent per
               year, a high but not uncommon rate (Fitton and Wadsworth, 1958; Pollard, 1965). A
               similar situation existed in other European countries. In Germany, for example,
               employers ‘were generally satisfied if they achieved partial success in creating a stable
               core of skilled workers … Turnover was the most persistent labour problem con-
               fronting employers’ (Lee, 1978: 460). This situation clearly gave those workers whose
               skills were most in demand a significant bargaining position, which allowed them to
               raise their wages and determine the pace of work. However, it also acted as a spur to
               employers to seek methods of reducing their reliance on skilled labour (Bruland,
               1989). One of the main ways that entrepreneurs responded was through technologi-
               cal developments aimed at replacing or reducing employers’ reliance on skilled labour.
                  A contemporary observer of the nineteenth century industrial scene, Andrew
               Ure (1836: viii–ix), drew special attention to the role that technology could play in
               this process:

                 By developing machines ... which require only unskilled instead of skilled labour, the cost of
                 labour can be reduced [and] the bargaining position of the worker reduced.
The rise of commerce and the birth of the factory   19

  It becomes clear why workers not only opposed the advent of the factory system but
  also, even when it became established, continued to oppose strongly changes in work
  practices and the introduction of new equipment. Even in the present day, where
  change tends to be preceded by consultation and its beneficial effects are stressed,
  there is still a tendency for those concerned to feel apprehensive of, if not downright
  resistant towards, change (Smith et al, 1982). Therefore, in a harsher and more
  authoritarian age, where organisational and technological change was seen as a
  weapon in the battle for control of the workplace, it is not surprising that change
  management should be achieved by imposition and coercion, and occasion the
  response that it did.
     Nevertheless, despite the increasing opposition of ‘organised’ labour, the work
  practices associated with the factory system gradually permeated every aspect of
  industrial and commercial life, albeit only on a piecemeal basis. Even by the end of
  the nineteenth century, there was no unified or accepted approach that managers
  could apply to organisations in their entirety, though in Germany the application of
  the Prussian bureaucratic model allied to the approach to industrial organisation of
  Adam Smith was proving influential. Yet the developing factory system could not
  shake off the legacy of its origins or ignore the continuing battle between labour and
  management over control, rewards and skill. As the following shows, this was as
  much the case in continental Europe and the USA as it was in Britain.


■ Europe
  The history of Europe since 1800, at least in economic terms, is essentially the history
  of industrialisation, of structural change through which industrial sectors grew and
  non-agricultural sectors came for the first time to dominate economic life. In general,
  for most of the nineteenth century, continental Europe lagged behind Britain in terms
  of industrial development. However, just as Britain was something of a patchwork
  quilt in terms of the pace of development of individual industries and regions, so too
  was the rest of Europe (Davis, 1989). As Pollard (1981) explained, European indus-
  trialisation developed from a few core regions. In Britain, southern Lancashire, the
  West Riding of Yorkshire, and that part of the West Midlands called the Black
  Country were the engines of growth. In northern Europe, the area between the
  Scheldt, the Meuse and the Rhine rivers had a special role to play, whilst to the east,
  Silesia, Bohemia and Moravia became leading centres of industrial progress. In the
  south, it was northern Italy and Catalonia that led the way.
     Nevertheless, though mainland Europe did have its pockets of progress, industriali-
  sation did not spread from these at the same rate nor in the same manner as it had in
  Britain. The most outstanding feature of British industrialisation was its self-
  generating or autonomous nature. Nowhere else could these conditions be exactly
  reproduced. To use an analogy, once the wheel has been invented, others cannot rein-
  vent it. What they can do is adopt it and adapt it to their needs and circumstances.
     Therefore, Britain became a model to be consciously followed. In the same way
  that Japan became a focus for study, discussion and emulation by Westerners in the
  1980s, so Britain was similarly regarded in the early nineteenth century. Regular visits
  were made by foreign governments and private entrepreneurs to discover and copy
  British methods and technologies. In some instances, British investors, entrepreneurs
20   Chapter 1 · From trial and error to the science of management

               and inventors were encouraged by the governments of France, Germany and other
               European states to help develop their economies – all with the aim of reproducing
               and overtaking Britain’s industrial lead.
                  For some, especially Germany and France, the process of industrialisation was less
               a matter of material progress by organisations and individuals pursuing profit max-
               imisation, and more concerned with the maintenance of their position in the world.
               Just as they sought to challenge Britain’s military might, so they sought to emulate her
               industrial power. They could not and would not let Britain dominate the world with-
               out a struggle. Therefore, though the advent of industrial capitalism was in all
               countries characterised by the rise of a class of industrialists who aggressively sought
               to maximise their own wealth, the context in which this occurred varied from country
               to country.
                  In Britain and the USA, the context favoured individual entrepreneurs pursuing their
               own self-interest. In Germany, and to a lesser extent France, industrialisation was
               sponsored by the state and for the state. The prime motive was to build the economic
               and military might of the state rather than the wealth of the individual. Where these
               were compatible, the state was happy to maintain a watching brief. However, where
               free enterprise and competition were seen as counter-productive to the objectives of the
               state, it intervened to reduce competition either through the creation of cartels and
               monopolies, or by state ownership/funding, as was the case with much of the
               European railway system. In Denmark, on the other hand, the operation of the market
               was constrained not by the state but by the creation of cooperatives, which allowed
               small-scale farming and business, and the way of life they represented, to survive
               where in other countries such enterprises were overwhelmed by larger competitors.
                  Therefore, though other countries used Britain as a model and benchmark, the
               actual process of industrialisation in each depended upon the unique political, social
               and economic circumstances that prevailed there. In some cases these gave primacy to
               profit maximisation, in others the interests of the state held sway, whilst in further
               cases sectional interests successfully challenged the power of the market. Consequently,
               influential though the British example was, once the necessary technique, capital and
               enterprise were introduced abroad and any element of conscious emulation had worn
               off, the industrialisation assumed a different character (Kemp, 1979). The continental
               countries did not and could not simply duplicate British experience.
                  There were, however, some fundamental similarities. All European societies, to a
               lesser or greater extent, were structured on a hierarchical basis, with those in posi-
               tions of power strongly influenced in their view of the rest of society by feudal
               traditions of subservience and obedience. This was as much the case in post-revolu-
               tionary France as in Britain, and even more so in Prussia and Russia. It follows that
               the organisational forms and labour relations that characterised the emerging factory
               system in Britain found fertile ground elsewhere in Europe (Cipolla, 1973).
                  Despite this, other countries did not copy Britain unthinkingly or on a wholesale
               basis. As latecomers, they could, especially with the encouragement of the state,
               leapfrog some of the stages of industrialisation, which was one of their principal
               advantages, but they could not close the gap between themselves and Britain
               overnight. Ashworth (1987) commented that even as late as 1850, apart from
               Belgium, Europe had little mechanised industry to speak of; however, 50 years later,
               Germany had overtaken Britain as the leading industrial nation, and other nations
The rise of commerce and the birth of the factory   21

were also poised to do so. The reasons for this are many and complex, involving
social and political as well as economic factors (Mathias and Davis, 1989). A brief
look at industrial development in Germany, France and Scandinavia illustrates this.

Germany
Within the space of a generation in the middle years of the nineteenth century,
Germany was transformed from a collection of economically backward states form-
ing a political patchwork in central Europe into a unified empire, driven forward by a
rapidly expanding, technologically driven industrial base (Kemp, 1979). Germany’s
progress was so rapid that, though it industrialised much later, by the end of the nine-
teenth century it had overtaken Britain as the world’s premier industrial nation. This
transformation, accompanied as it was by the deliberate resort to military force as an
instrument of national policy, and an atmosphere of fierce nationalism, represented
an event of major historical significance (Borchardt, 1973).
   The two key factors that were primarily responsible for the nature and pace of
German industrial development were the geographical and political conditions of the
country, and the fact that German industrialisation was state-promoted rather than
market-driven.
   To look first at geography and politics: not until the late nineteenth century did
Germany possess an integrated territory with an economic and administrative centre.
Up to the nineteenth century, Germany was a collection of feudal fiefdoms that often
warred with each other, rather than a unified nation. In 1789, ‘Germany’ comprised
some 314 independent territories each with their own rulers, internal markets, cus-
toms barriers, currencies and trading monopolies. This internal fragmentation, as
much as anything else, was probably the key obstacle to industrial progress. This did
not change until the Congress of Vienna in 1815, which reduced the number of
German states to 39. Each individual state then began to remove internal customs
barriers and develop better communications systems, which opened the way for
greater economic cooperation with other states.
   However, unlike other countries, economic progress was neither driven nor accom-
panied by a democratisation of society. German society in the nineteenth century
remained dominated by a feudal hierarchy. This was characterised by Prussian
‘Junkerdom’ with its military traditions and ambitions, and its autocratic behaviour.
Unlike their counterparts in other countries, the German nobility were not diminished
by industrial progress; rather they managed to seize the reins of commercial power to
bolster their position. This was due, in many instances, to their retention of regional
monopolies over trade, industry and the supply of labour.
   This leads on to the second key feature of German industrialisation – the fact that
it was state-promoted rather than free-market driven. The drive for industrialisation,
especially in Prussia, which came to dominate the rest of Germany, was not primarily
motivated by economic reasons. Rather, industrialisation was seen as the process of
building a strong and powerful state in which the old nobility continued to dominate.
Therefore, for Germany, the fact that industrialisation was accompanied by the devel-
opment of a strong military machine and the continued dominance of the Prussian
Junkers was not an unfortunate coincidence, but its major objective.
   Industrial progress in Britain exerted a strong influence on Germany. This was
partly because it provided a model to emulate, but mainly because Germany saw
22   Chapter 1 · From trial and error to the science of management

               industrial power and military power as two sides of the same coin. Unless Germany
               could catch up with and overtake Britain’s industrial lead, Germany felt that it would
               be relegated to the status of a second-class state.
                  The transformation of Germany into an industrial superpower owed much to the
               role played by Prussia. From the early nineteenth century onwards, Prussia used its
               economic and military position as the most powerful German state to subdue the other
               German states and exclude possible rivals, especially Austria. The prime weapon in the
               Prussian arsenal was the creation of an all-German customs union (the Zollverein).
               Because of its size, Prussia could determine the rules for the Zollverein and, whenever
               and wherever it was extended, could ensure it was to Prussian advantage.
                  The customs union, because it opened up trade, also gave a boost to the develop-
               ment of better transportation and communication links, especially railway building
               (though the latter really took off once the Prussian military came to appreciate its
               strategic significance for the rapid transit of troops and materials). It seems very clear
               that, more than the emergence of any one industry, it was the creation of a single
               market and the boost to consumption that this brought about which was the key
               factor in Germany’s economic progress in the nineteenth century (Kemp, 1979).
                  By 1834, practically all of Germany was included within the customs union and,
               though it did not come about until 1871, this provided the essential precondition for
               political unification. The fact that both political and economic unification were
               driven by and dominated by Prussia gave German industrialisation its unique charac-
               ter. The new German state that was established in 1871, for all its acceptance of
               universal suffrage and a national parliament, remained an autocracy ruled by the
               Hohenzollern dynasty, which still rested on the support of the traditional landed
               nobility of eastern Germany. It incorporated the bureaucratic and militarist traditions
               of the old Prussia and remained profoundly conservative.
                  Indeed, it was the adoption of the Prussian bureaucratic model by both state and
               industry, combined with close links between both, which gave German industry its
               unique character. Unlike Britain, where the majority of firms remained relatively
               small and business operated in an ad hoc fashion, with each company pursuing its
               own interests, in Germany large, bureaucratically structured organisations became the
               norm. In addition, the state did not hesitate to intervene directly, for example when it
               nationalised the railways, if it believed the private sector could not or would not serve
               the national interest.
                  Given that the state saw German industry as almost an extension of government, it
               is not surprising that it sought to bolster managerial authority and restrict workers’
               rights. This also very much reflected the Prussian autocratic tradition of expecting
               and enforcing obedience from those lower down the social order. Therefore, in most –
               though not all – enterprises, employers took the view that they had a right to treat
               their workers however they pleased. A German employer regarded himself as a patri-
               arch, as the master in his own house in pre-industrial terms, with total responsibility
               for the whole social organism of his enterprise and generally well beyond this. This
               type of self-esteem made German employers particularly unyielding in any situation
               of conflict.
                  One consequence of this was that the industrial and political climate became
               increasingly radical after the political and economic unification of Germany in 1871,
               though to no great effect. This period also saw the rapid development of the German
The rise of commerce and the birth of the factory   23

economy. In 1870, the leading British enterprises were much bigger than their largest
German competitors; by 1900, this position had been reversed. In many cases this
was the result of governmental and banking encouragement to move to vertical inte-
gration. Also, cartels and monopolies, frowned upon elsewhere, received official
endorsement in Germany, which allowed more orderly growth and longer-term
investment decisions than might otherwise have been the case.
   By the end of the nineteenth century the German economy had outstripped its
British counterpart, but had not succeeded in avoiding either the same debilitating con-
flict between employers and employees, or the rise of political groups and parties
which challenged the nature and purpose of capitalism. However, the influence of
the Prussian autocratic tradition, the development of a strong bureaucratic approach
within both private and public sector organisations, and the close relationship between
industry and state, meant that industrial and political resistance was met by a unified
and implacable alliance between employers and government. Though prepared to use
welfare provisions, sickness benefit, old age pensions, etc., to reduce social tensions,
the state was not prepared to cede one iota of industrial or political authority.

France
As in Germany, the process of industrialisation in France was driven by the desire to
emulate Britain, rather than by any form of ‘spontaneous combustion’. However,
despite having the advantage of much earlier state encouragement than Germany,
France’s industrial revolution was late in starting and did not reach maturity until
towards the end of the nineteenth century (Dunham, 1955; Fohlen, 1973). The slow
and late development of industry in France appears to have been caused by two key
factors: political change and agrarian stagnation, both of which were inextricably
linked with the French Revolution of 1789.
   In the eighteenth century, little separated France and Britain in industrial terms.
With much encouragement from the monarchy, French industry adopted British
machines and equipment. British entrepreneurs and inventors were even persuaded to
establish factories in France. During the last years before the French Revolution, the
King paid great attention to the economy. A twin-track approach to industrial devel-
opment was instituted. On the one hand, much state aid and encouragement were
poured into industry; whilst on the other hand, there was the suppression of every
obstacle to individual entrepreneurship, whether they be the privileges of the craft
guilds or the ancient rights of the aristocracy.
   Though these initiatives gave a significant boost to industrialisation, progress was
halted, and even reversed, by the French Revolution in 1789 (Marczewski, 1963). To
an extent this is surprising, given that those who dominated the Revolutionary
Assemblies were men of property and substance, though drawn from the law and
professions rather than the business world. They believed in upholding property
rights, abolishing hereditary privilege and vested interests, and providing a favourable
climate for entrepreneurship. They also introduced laws that placed employees in an
inferior legal position to their employers and which prohibited them from combining
for the purpose of bargaining. Nevertheless, the benefits of these to entrepreneurs
were outweighed by other consequences of the Revolution. Foremost amongst these
was the loss of France’s colonial empire, together with its isolation, by the British
naval blockade, from key markets such as the United States. The result was not only
24   Chapter 1 · From trial and error to the science of management

               that France lost crucial imports and exports, but also that it was cut off from the
               prime source of technical and organisational innovation, Britain.
                  It was not until the final defeat of Napoleon in 1815 that France was once again
               able to concentrate on developing its economy rather than fighting wars. As before, the
               state took a lead in encouraging economic development, notably through the develop-
               ment of roads, canals and, later, railways. It also sought to stimulate the domestic
               economy by introducing import controls. However, this seems only to have allowed
               industry to keep outdated methods and equipment and maintain higher prices longer
               than might have been the case if it had not operated in a protected market. Only after
               1850, with the upsurge in economic activity across Europe and the coming to power of
               Napoleon III, does the French economy really seem to have taken off.
                  The other main factor which held back industrialisation was the backward state of
               agriculture. The peasantry were already developing as an important group even
               before the French Revolution. However, the price they exacted for supporting the
               Revolution, the ownership of the majority of agricultural land, made them a powerful
               but reactionary force to which all sections of the property-owning classes had to pay
               attention. The consequences of this for industrialisation were twofold. First, the agri-
               cultural sector, unlike its counterparts Britain and Germany, remained self-sufficient
               and inefficient for most of the nineteenth century. As such, it was incapable of gener-
               ating either wealth for investing in industry or demand for manufactured goods
               produced by industry. Second, by depressing the rate of population growth, it pre-
               vented the mass population exodus from the countryside to the towns and thus
               starved industry of a ready supply of cheap labour. This situation was further exacer-
               bated by the continuing opportunities for home work which, by supplementing
               agricultural incomes, extended the viability of rural life longer than might otherwise
               be the case.
                  Nevertheless, the continued existence of a large rural population, even up to the
               dawn of the twentieth century, was not just a product of land ownership and the pres-
               ence of home work. It also owed a great deal to the presence of import barriers which
               allowed peasants to maintain, in comparison with their British counterparts, ineffi-
               cient production methods, and reduced the need either to borrow money for new
               equipment or to sell plots that were too small to be viable.
                  Import barriers also produced a strong bond of self-interest between peasants and
               factory owners, both of whom saw free trade as a threat to their way of life. As one
               observer commented, ‘Competition was always possible in France, it simply did not
               happen to be a preferred form of conduct’ (Sheahan, 1969: 25).
                  For industrialists, the result was similar. The absence of foreign competition, allied
               to low levels of domestic demand, allowed the typical business to remain family-
               owned, and also relatively small. Finance for industrial expansion was raised from
               family members rather than financial institutions, which in turn restricted the size of
               the banking sector. Indeed, such was the shortage of domestically generated capital
               and risk-orientated entrepreneurs that the building of railways, so vital to the devel-
               opment of the French economy, could not have taken place without foreign capital
               and state support (Kemp, 1979).
                  Therefore, unlike Britain, industrialisation in France was never driven by, or
               resulted in, individual enterprise or profit maximisation. For the state, the objective
               was a strong France. For the peasant and small entrepreneur, the objective was to
The rise of commerce and the birth of the factory   25

make a reasonable living in the context of the rural and urban cultures they sup-
ported and valued.

Scandinavia
Having looked at how the three largest and most advanced European countries –
Britain, Germany and France – industrialised, we shall now move on to examine how
three of the smaller states – Sweden, Denmark and Norway – responded to the chal-
lenge of industrialisation. In 1800, the total population of these three countries was
just over four million people: Sweden, 2.35 million; Denmark, 0.93 million; and
Norway, 0.88 million. By 1910, it was still less than 11 million: Sweden, 5.5 million;
Denmark, 2.8 million; and Norway, 2.4 million. The historical links between these
countries were very close, and up to the First World War they operated a monetary
union. Although, owing to their seafaring traditions, each had occupied a position of
importance on the international stage, by the mid-nineteenth century the standing of
all three countries had declined. In fact, Norway and Sweden had become two of the
poorest countries in Europe, which was a prime reason for the large-scale emigration
from these countries to the USA in the nineteenth century (Milward and Saul, 1973).
   Despite growing pockets of industrial production, in the nineteenth century their
domestic economies were weak, and all three countries depended heavily on export-
ing the products of their agricultural, mining and forestry industries to their more
industrialised neighbours, especially Britain. That they were able to adapt their export
efforts to the changing demands of the international economy bears witness to the
entrepreneurial skills of these countries.
   However, political, economic and social developments in these three countries in
the nineteenth century, particularly in Denmark, laid the foundations for the creation
of the ‘Nordic model’ of industrial relations, which emerged in the 1930s. This arose
from the so-called ‘historic compromise’ between capital and labour, which extended
cooperation between employers and social democratic governments over national
economic policy into the industrial relations field. At a national level, it was agreed
that the efforts of social democratic governments to bring about economic growth
would not challenge the capitalist nature of production. Trade unions accepted this
approach in exchange for basic trade union rights. This paved the way for an end to
lock-outs and other such tactics by employers, and the creation of government-
backed approaches to industrial democracy and further extensions of workers’ rights
(Dolvik and Stokland, 1992; Ferner and Hyman, 1992; Kjellberg, 1992).
   These developments happened at different times and at a different pace in each
country. Denmark led the way in the late nineteenth century, and Norway and
Sweden followed a decade later, though the ‘Nordic model’ did not really establish
itself fully until the 1930s and 1940s. However, the close ties between these three
countries meant that political and industrial developments in one affected the other
two. Hence the phrase ‘Nordic model’ was coined to describe similarities between the
tripartite approaches adopted by government, employers and trade unions in each
country, and the fact that these were distinct from practices elsewhere in Europe (or
the rest of the world for that matter). However, for the moment, we are more con-
cerned with the process of industrialisation in the nineteenth century and how this
paved the way for these later developments.
26   Chapter 1 · From trial and error to the science of management

                  For Sweden, the nineteenth century brought a rapidly rising population, which was
               matched by an increasingly productive agricultural sector that not only fully met
               domestic needs, but also developed a strong export market in grain, especially to
               Britain. The productivity of agriculture reflected the growing flexibility and commer-
               cialisation of this sector, facilitated by a series of gradual and peaceful rural reforms.
                  The iron trade also occupied an important position in the Swedish economy for
               much of the nineteenth century. This was due in no small part to its ability to adopt
               technological innovations, mainly from Britain, and the ability of Swedish iron-
               masters to seek out new international markets. By the end of the century, this had led
               to fewer but larger units of production, and the industry began to reflect the struc-
               tures and methods of the leading European producers.
                  Despite the growth of agriculture and iron production, the most spectacular ele-
               ment in the growth of the Swedish economy was the boom in timber exports
               (Jorberg, 1973). Up to the 1830s, Swedish exports were only a fraction of those of
               Norway. However, the increasing urbanisation of Britain, and growing demand for
               timber from France and Germany, transformed the pattern of demand and supply. By
               the 1860s, softwood accounted for 40 per cent of all Sweden’s exports, a situation
               that lasted well into the 1880s.
                  With over 20 million hectares of productive forest, Sweden possessed the largest
               such area in Europe, after Russia. The growth in markets was matched by the intro-
               duction of new methods and techniques, especially the use of steam engines and
               fine-bladed saws at the mills. The transfer of land ownership from the state to the pri-
               vate sector, in the early nineteenth century, also aided the development of the timber
               industry by allowing entrepreneurs to obtain timber rights often at ridiculously low
               prices, sometimes for no more than a sack of flour. Such a situation attracted many
               ruthless entrepreneurs whose regard for reforestation and conservation was negligible.
                  This combination of high demand, cheap wood and ruthless entrepreneurs created
               the conditions for a very sharp boom in timber exports, at least in the short term.
               Although after 1875 the state reversed its policy and began to reacquire forests, the
               timber companies also began to buy farmland, with its attendant forest rights.
               Gradually, the industry came to be dominated by a few large companies, some of
               which were foreign-owned. However, this concentration of ownership did make it
               easier for the state to oblige producers to take a more responsible approach to conser-
               vation and reforestation.
                  Given the dominance of the forestry industry, which relied almost exclusively on
               waterways for transportation, it is not perhaps surprising that railways came late to
               Sweden – not until the 1850s. It is also not surprising, given this situation, that it was
               government push rather than demand pull which gave the impetus to the Swedish
               railway system. Remarkably, by 1914, Sweden had 25 km of railway per 1000 inhabi-
               tants, twice that of any other European country. It also had a thriving industry
               producing rolling stock and engines for both the domestic and export markets
               (Jorberg, 1973).
                  Nevertheless, in 1870, industry and handicrafts only employed 15 per cent of the
               population. There were no industrial centres to rival those of Britain, Germany and
               France. Even the iron districts were small separate communities. However, after 1870,
               there was a rapid expansion of the Swedish industrial base, so much so that in the 40
               years up to 1914, the Swedish economy grew faster than any other in Europe. Even
The rise of commerce and the birth of the factory   27

so, to put this picture into perspective, it should be noted that all the workers
involved in Swedish engineering exports in 1912 totalled no more than those to be
found in one large German railway works.
   For a small country, dependent on its natural resources, Sweden’s progress was sig-
nificant. There were a number of reasons for this. First, changes in the eighteenth
century had removed barriers to social mobility and created the conditions for the
emergence of entrepreneurs. Second, these entrepreneurs showed an unrivalled ability
to exploit Sweden’s natural resources and take advantage of developing export mar-
kets. An additional factor was the high quality of the Swedish educational system.
This provided an educated workforce able to adapt to changing industries, technolo-
gies and products. Therefore, though it would be wrong to underestimate the great
asset of Sweden’s natural resources, neither should one forget the contribution made
by human capital. The combination of a less hierarchical society than elsewhere in
Europe and a well-educated and skilled workforce clearly paved the way for the
advent of the social democratic approach to society which became the hallmark of
Sweden in the twentieth century.
   On the other hand, it would be misleading to forget that, as elsewhere in Europe,
industrialisation was a harsh process. Entrepreneurs could be very rapacious, and
much of the technology and many of the methods they employed were imported from
the more advanced nations, especially Britain. Consequently, though the Swedish gov-
ernment tended to be more keen to intervene than was the case in Britain,
industrialisation was accompanied by the same sort of clashes between capital and
labour, and the growing incompatibility between an agricultural economy based on
self-sufficiency and a capitalist economy based on money.
   By the end of the nineteenth century, Sweden had developed a small industrial
base, by comparison with Britain, Germany and France, but one that was flexible and
competitive. However, the organisation of labour and the technology deployed tended
to be imported from the bigger industrial nations. It imported the poor labour rela-
tions that existed elsewhere as well.
   Though Sweden’s industrial base was modest by international standards, it was in
advance of that of Denmark and Norway (Jorberg, 1973). For Denmark, as for
Sweden, it was changes to agricultural production that gave a large boost to the econ-
omy in the nineteenth century.
   Traditionally, Denmark had relied on the export of two commodities, grain and
cattle (though, in the eighteenth and the first half of the nineteenth centuries, its econ-
omy also benefited considerably from its colonial possessions in Asia and the West
Indies, particularly in terms of sugar production and the slave trade). Trade in the
former grew rapidly in the nineteenth century. However, much of the grain was pro-
duced on marginal land, which was no longer economically viable after the collapse of
world grain prices in the 1870s. After the early 1880s, imports outstripped exports.
   On the other hand, the keeping of livestock and dairy produce showed a remarkable
growth throughout the century. By the end of the nineteenth century, Denmark had a
thriving export trade in butter and beef. By 1913, Denmark exported 80 per cent of its
butter production, mainly to Britain where it had 40 per cent of the market; in that
year, only Holland and Argentina exported more live cattle than Denmark. The latter
part of the nineteenth century and the early twentieth century also saw a twelvefold
rise in the production and export of pork (Milward and Saul, 1973).
28   Chapter 1 · From trial and error to the science of management

                  One hindrance to the export of pork was the incompatibility between the large
               scale of the export market and the numerous small producers. However, this was
               overcome in the 1880s with the establishment of the first cooperative bacon factory.
               By 1914, 53 per cent of pig breeders were supplying to cooperatives. The idea of
               cooperatives to buy, process and sell produce had grown up in the dairy industry, and
               was later taken up by egg producers as well as pig breeders. Similar organisations
               were also used to purchase bulk feedstuffs and fertilisers. The impetus behind the
               development of cooperatives was the smaller farmers’ fear of being exploited by their
               larger colleagues, who could afford to purchase the latest technology exclusively for
               their own use (Jorberg, 1973).
                  Therefore, unlike most other European countries, Denmark found a method of
               making small-scale farming production compatible with large-scale international
               demand. Nor were these cooperatives purely economic and technical organisations.
               Though this was their primary purpose, they also had a social and political role, and
               were anti-landowner. The growth of cooperatives along with their attendant ‘folk
               high schools’ was crucial, not only in educating farmers, but also in uniting them as
               an effective political force. Indeed, the party of small farmers, in alliance with the
               social democrats, headed governments from 1909 to 1910 and from 1913 to 1920.
               Not only does this show the political influence and socialist leanings of the coopera-
               tive movement, but it explains the emergence of the ‘Nordic model’ in Denmark some
               20 years earlier than in the other two Scandinavian countries. The development of co-
               operatives was also one of the main reasons why there was no reduction in the
               numbers employed in Danish agriculture in the nineteenth century.
                  Though in some ways Denmark had a relatively thriving economy, its industrial
               base was, even relative to its size, on a more modest scale than in Britain, France or
               Germany. As an example, by 1911, the Danish cotton industry employed only 3,282
               people, no more than one big mill in Britain. In total, there were only 108,000 work-
               ers employed in factories at this time.
                  In contrast, there was a tremendous growth in the service sector, not just in trans-
               port and communications, but also in financial and trading services. These latter
               tended to be concentrated in Copenhagen, where by 1910 half the country’s popula-
               tion lived. By 1911, service activities accounted for 36 per cent of the occupied
               population, as averse to 32 per cent in Norway and 19 per cent in Sweden.
                  One of the remarkable features of Danish industrialisation in the nineteenth cen-
               tury was the degree to which it preserved rather than destroyed the peasant and craft
               traditions. In agriculture, this was mainly due to the rise of cooperatives for process-
               ing and selling produce. In industry, the need to cater mainly for a small and
               discerning home market, allied to a well-educated workforce, kept alive the craft tra-
               dition, and – for most of the nineteenth century – the guild system. Even in 1914, 84
               per cent of Danish workers were still in establishments employing five or less people.
               By contrast, in Sweden in 1912, only 24 per cent of workers were in establishments
               employing 10 or less people.
                  Therefore, if Denmark was less industrially advanced than some bigger European
               countries, it could however claim to have avoided the clash of cultures and the rise of
               industrial conflict that characterised the industrial revolution elsewhere in Europe.
                  Just as the process of industrialisation differed considerably between Sweden and
               Denmark, so was also the case with Norway. Like the other two countries, it was
The rise of commerce and the birth of the factory   29

dependent on exports, but in Norway these were service-based rather than product-
based. Shipping was its chief earner. In 1880, shipping accounted for 45 per cent of
all exports.
   Its links with Sweden and Denmark tended to be political rather than economic.
Up to 1814, it was part of the Kingdom of Denmark, and in that year the King of
Sweden also became the King of Norway. However, Denmark sided with France
during the Napoleonic Wars and as a consequence of Napoleon’s defeat lost the sov-
ereignty of Norway to Sweden. Norway was given its own parliament and
constitution, though its political and economic ties with Sweden were considerable
until it achieved full independence in 1905.
   Of the three Scandinavian countries, Norway was slowest to industrialise and,
unlike the other two, this was neither preceded nor accompanied by the modernisa-
tion of agriculture. Nor was the stimulus to industrialisation generated internally.
Rather, when industry really began to flourish, just before the First World War, it was
brought about by an influx of foreign capital wishing to take advantage of Norway’s
potential for cheap hydroelectricity.
   However, up to this point, Norway had made few steps towards becoming an
industrial economy. In agriculture, Norway was held back by a combination of poor
soils, difficult climate and extremely inefficient internal communications. Indeed, a
marked feature of the Norwegian economy was the very poor contact and bad com-
munications between various regions within the country, no doubt a consequence of
the mountainous terrain, which meant that it was often easier to import goods from
abroad rather than to move them from one part of Norway to another (Jorberg,
1973). This led to a dual economy: the increasingly prosperous urban areas which
grew rich on the export of goods and services, and a subsistence agricultural economy
in the countryside.
   Accordingly, the towns prospered and the countryside stagnated with small peasant
farmers tending to be the agricultural norm into the twentieth century. At the end of
the nineteenth century, such was the low level of productivity of Norwegian agricul-
ture that butter exports, worth 3.3 million Kr, were dwarfed by imports of grain and
animal feedstuffs worth 83 million Kr. Norway had no other food exports of impor-
tance, except for fish (Milward and Saul, 1973).
   On the other hand, Norway was mercifully free of the social rigidity of many other
European countries where the nobility stood at the top of the social pyramid. Instead,
uniquely, merchants and gentlemen farmers formed the top layers of society, serfdom
was rare, and there was a lack of the social injustice that seemed inevitably to accom-
pany industrialisation in the more advanced countries. This may account for the
willingness of employers and trade unions, particularly in the metal industries, to
favour cooperation over conflict from the early 1900s (Dolvik and Stokland, 1992;
Kjellberg, 1992).
   The staple industries of the Norwegian economy in the nineteenth century were
fishing, timber and shipping, along with a shipbuilding industry that was a product of
all three. In the early years of the century, it also exported iron, but this trade was vir-
tually killed by British and Swedish competition after Danish trade protection was
abolished in 1814. The main employers were shipping, where some 33,000 were
employed in the merchant marine in 1860, and fishing, both of which had only weak
links to the rest of the economy. There was also a small, fragmented, engineering
30   Chapter 1 · From trial and error to the science of management

               industry, which in 1850 only comprised 12 factories employing a total of 200 work-
               ers. From the 1840s there was a rapid growth in the textile sector. Even so, in 1860
               this still only accounted for 3,000 workers out of a total of just under 20,000 indus-
               trial workers. The biggest industrial sector was forestry, employing almost one in
               three workers (Jorberg, 1973).
                  Therefore, because of its small population size, the lack of demand from the coun-
               tryside, and the reliance of the towns on exports for their prosperity, Norway’s
               industrial expansion was linked very closely to the export trades. When exports
               boomed, domestic demand increased; when exports fell, so did domestic demand. In
               addition, because its industrial sector was small, Norway found it difficult to generate
               capital domestically. As an example, in 1870, half of the mining industry was foreign-
               owned. However, with the development of closer economic links with Sweden in
               1873, the market for Norwegian industry was expanded considerably.
                  Developing quite separately from the rest of the economy, the real growth industry
               of the nineteenth century was shipping. Shipping emerged during the eighteenth cen-
               tury as a subsidiary of the timber trade, but in the nineteenth century it developed
               entirely independently of Norway’s own transport needs. Instead, it catered to the
               needs of other countries, especially Britain and Denmark and their colonies. It owed
               its existence to the country’s shipbuilding tradition, the availability of local timber
               and the ready supply of cheap labour. From 1850, the industry grew rapidly, growing
               fivefold in the years up to 1880, by which time it was the third largest in the world,
               greater even than that of France and Germany. However, after 1900, the industry
               declined, owing to a fall in freight rates and to the advent of steam-powered vessels.
               The industry was very fragmented, which meant that raising capital was difficult.
               Though this was not a problem with the small, wooden ships that had been the back-
               bone of the industry, it became one with the need for larger, much more expensive,
               steam-powered vessels. Also, Norway lacked both the raw materials, iron and steel,
               and the skills to build steam ships. Indeed, in the immediate pre-war years, only
               20 per cent of the industry’s requirements were met from home production. Even so,
               in 1914, the Norwegian shipping industry was the fourth largest in the world behind
               Britain, the USA and Germany, though there were signs that it was in decline.
                  The advent of hydroelectric power at the end of the nineteenth century did, how-
               ever, make a significant difference to Norway’s industrial development. Once the
               technology had been established, no country in Europe was better placed to exploit it
               than Norway, with its plentiful supply of waterfalls. However, to turn this into a real-
               ity required both capital and a use for the resultant cheap electricity. Both of these
               were to come from abroad. By 1914, hydroelectric power, financed by foreign capital,
               was used to produce synthetic fertiliser and aluminium. The attraction for foreign
               investors was cheap power. Almost all of the output was sold abroad, much of it
               without further processing. These developments had a significant impact in terms of
               increasing Norway’s foreign earnings. The result was that some 14 per cent of the
               industrial labour force was directly employed by foreign firms by 1909, with consid-
               erable numbers being indirectly employed. These workers tended to be concentrated
               in the more capital-intensive industries and larger workplaces. This led to a law being
               passed which limited foreign ownership of Norwegian industry.
                  In many respects, with the stagnation of timber and shipping, the advent of
               modern chemical and metal industries was highly desirable. In another respect,
The rise of commerce and the birth of the factory   31

  though, they also showed the weakness of Norwegian industrialisation. Both these
  industries were heavily dependent on foreign capital; both were capital- as opposed to
  labour-intensive; and neither developed or needed a local supply or distribution net-
  work. Therefore, neither really impacted greatly, at least in the pre-war period, on the
  wider Norwegian economy. For this reason, in relation to its Scandinavian neighbours,
  Norway remained a relatively poor country, which certainly accounted for the large
  waves of emigration it experienced in the nineteenth and early twentieth centuries. In
  relation to political democracy and educational provision, though, particularly for
  women, it was in advance of most other European countries before 1914.
     Considering these three Scandinavian countries as a whole, the picture of industri-
  alisation by the early twentieth century was very mixed. Sweden was probably
  the most advanced, with Denmark not far behind but Norway trailing some-
  what. However, because of population size, natural resources and history, none had
  developed an industrial base capable of competing with those of the leading
  European countries.
     As elsewhere in Europe, all three tended to import methods and technologies from
  the more advanced countries, especially Britain. It would appear that the process of
  industrialisation, where it was reliant on foreign capital and methods, tended to
  reproduce the British experience of poor labour relations. However, particularly in
  Denmark, there were signs that different organisational forms allied to existing
  social structures and expectations, together with the growth of social democracy,
  held out the promise of avoiding the vicious employer–employee clashes experienced
  elsewhere.
     Nevertheless, in Europe as a whole, for the most part, those who created and con-
  trolled the large business organisations that were becoming the norm still had to rely
  on their own experience and judgment, but with growing frustration over their inabil-
  ity to control and organise these bodies fully and effectively. There was also a
  realisation amongst some that, whilst change was inevitable, they lacked an effective
  and, as far as their employees were concerned, acceptable way of managing it.
  Therefore, by the end of the nineteenth century, there was a growing awareness of the
  need to develop an approach to organising work that was more systematic and less
  harsh and arbitrary than what had gone before. Although this was already, to an
  extent, taking place in Germany with the rise of bureaucracy, the USA was the coun-
  try where the most conscious and consistent search was being pursued for a
  comprehensive theory of how to structure and run organisations.


■ The USA
  In the USA, for a number of reasons, the need for a workable, overall approach to
  organisational design and control, which legitimised the authority of managers to ini-
  tiate change, was perhaps more acute than anywhere else. The USA had industrialised
  far more rapidly and on a larger scale than any other nation. Only in the 1860s, after
  the Civil War, did the USA begin to industrialise in earnest, but by 1914 it had
  become the premier industrial nation, with the highest per capita income in the
  world. In the period 1860 to 1914, employment in manufacturing rose from 1.3 mil-
  lion to 6.6 million, and the population as a whole rose from 31 million to 91 million
  (Habakkuk and Postan, 1965). The USA at this time was still very much influenced
32   Chapter 1 · From trial and error to the science of management

               by Europe, and initially at least adopted similar approaches and methods in organis-
               ing and running industry. However, the size of the typical American organisation
               quickly grew much larger than those in Europe. Whilst the average British and French
               business was still the small, family-owned firm, in the USA it was the monopoly,
               which dominated an entire industry, or the conglomerate, which had substantial hold-
               ings in several industries. As an example, in 1900 Dale Carnegie sold his steel
               company for the enormous sum of $419 million to a group of financiers. They
               merged it with other steel concerns to create a monopoly steel producer employing
               200,000 workers and valued at $1.3 billion. This was at a time when the British steel
               industry, which had led the world, comprised 100 blast furnaces owned by 95 sepa-
               rate companies.
                  As might be imagined, the numbers of Americans employed in factories and offices
               grew rapidly – almost tripling between 1880 and 1910 (Levine, 1967; Zinn, 1980).
               The rocketing increase in demand for labour could not be met by the indigenous pop-
               ulation alone and was fuelled by successive waves of immigration. Whilst solving one
               problem – the shortage of labour – this created others. The culture shock of industrial
               work, a foreign language, and problems of housing and social integration created
               enormous pressures in American society. Alongside this was the arbitrary and ruthless
               discipline of the factory system, where workers were treated as so much industrial
               cannon fodder. It was a time of rapid social, technological and organisational change:
               a time where entrepreneurs did not so much expect to manage change as to impose it,
               and those who could not or would not accept this situation were treated harshly.
               Consequently, most industries found themselves sitting on a pressure cooker which
               could, and frequently did, explode in unexpected and violent ways. If
               management–labour relations were poor in most European countries, they were far
               worse in the USA (Pelling, 1960).
                  The American approach to industrial development owed little to government aid or
               encouragement, and much to individual entrepreneurship. For this reason American
               entrepreneurs had much more in common with the free market approach to industrial
               expansion of their British counterparts than to the state-sponsored traditions of
               Germany or France. Therefore, the German approach to industrial organisation,
               bureaucracy, which might seem appropriate given the size of American companies,
               was not attractive. In any case, it tended to operate best in situations where growth
               and demand was stable or predictable, which in Germany the government tried to
               facilitate. However, American growth patterns were volatile and unpredictable.
                  Consequently, there was great pressure to find organisational arrangements that
               would allow employers to control and organise their employees in a manner that
               reduced conflict, was cost-effective, and was applicable to the American environment
               and philosophy. It was also becoming recognised that it was not sufficient just to
               develop a more systematic approach to the organisation of work; there was also a
               need to develop an approach to managing change that would persuade workers to
               accept rather than reject or resist the introduction of new methods, techniques and
               technologies. Therefore, with the spirit of endeavour, determination and confidence
               that seemed so much a part of the American character at this time, managers and
               engineers set out to remedy this situation. Though similar developments were taking
               place in Europe, they lacked the intensity, commitment and scale of events in the
               USA. This is no doubt why one of the earliest and most enduring approaches to
Organisation theory: the Classical approach   33

        organisation theory emerged in the USA, and why the USA has continued to domi-
        nate the development of organisation theory.


Organisation theory: the Classical approach
        As can be seen, at the end of the nineteenth century there was a clear need to replace
        the rule-of-thumb approach to organisational design and management with a more
        consistent and organisation-wide approach. This was not because of an academic
        interest in the functioning of organisations, though this was present, but in order to
        improve their performance, enhance their competitiveness and – an increasing con-
        cern at the time – to sustain and legitimate managerial authority. This was certainly
        the case in the USA, where explosive growth and a workforce suffering from culture
        shock had created dangerous social pressures that questioned the legitimacy of mana-
        gerial power, and even the capitalist system itself. This was also true in Europe:
        although Europe industrialised earlier, it was not only having to come to grips with
        the increase in size and complexity of business life, but it was also facing consider-
        able, and unexpected, competitive pressure from the United States.
           Nevertheless, these difficulties could not quench the innate optimism of the age. It
        was a time, much more than now, when people dealt in certainties and universal
        truths. There was a feeling of confidence that any goal, whether it be taming nature or
        discerning the best way to run business, could be achieved by the twin power of scien-
        tific study and practical experience. All over the industrialised world, groups of
        managers and technical specialists were forming their own learned societies to
        exchange experiences, to discuss common problems, and to seek out in a scientific and
        rational fashion the solution to all organisational ills: to discover ‘the one best way’.
           Out of these endeavours emerged what was later termed the Classical approach to
        organisational design and management. As the name suggests, it was an approach
        that drew heavily on what had gone before; taking from writers such as Adam Smith
        and practitioners such as Josiah Wedgwood and leavening their ideas with contempo-
        rary experience, views and experiments. This approach, reflecting the age in which it
        emerged, portrays organisations as machines, and those in them as mere parts which
        respond to the correct stimulus and whose actions are based on scientific principles.
        The emphasis was on achieving efficiency in internal functions; seeing organisations
        as closed and changeless entities unaffected by the outside world. Though this
        approach first originated in the early part of this century, its influence on managerial
        practices and assumptions is still strong today, but its credibility amongst academics
        has waned (Kelly, 1982a, 1982b; Rose, 1988; Scott, 1987).
           The Classical approach, or the Scientific-Rational approach as it is sometimes
        called, whilst not being homogeneous, is characterised by three common propositions:
        ■   Organisations are rational entities – they are collectivities of individuals focused on
            the achievement of relatively specific goals through their organisation into highly
            formalised, differentiated and efficient structures.
        ■   The design of organisations is a science – through experience, observation and
            experiment, it has been established that there is one best universal organisational
            form for all bodies. This is based on the hierarchical and horizontal division of
            labour and functions, whereby organisations are conceived of as machines which,
34   Chapter 1 · From trial and error to the science of management

                   once set in motion, inexorably and efficiently will pursue and achieve their pre-
                   selected goals.
               ■   People are economic beings – they are solely motivated by money. This instrumental
                   orientation means that they will try to achieve the maximum reward for the mini-
                   mum work, and will use whatever bargaining power their skills or knowledge allow
                   to this end. Therefore, jobs must be designed and structured in such a way as to
                   minimise an individual’s skill and discretion, and to maximise management control.
                  The key figures in the development of the Classical approach were Frederick Taylor
               (1856–1915) and two of his main promoters, the pioneers of motion study, Frank and
               Lillian Gilbreth (1868–1924 and 1878–1972 respectively) in the USA, Henri Fayol
               (1841–1925) in France and Max Weber (1864–1920) in Germany. All were writing in
               the first two decades of the twentieth century, though Weber’s work was not generally
               available in English until the 1940s. Below is an outline of their work.


           ■ Frederick Taylor’s Scientific Management
               Frederick Winslow Taylor was born into a prosperous Quaker-Puritan family in
               Germantown, Pennsylvania in 1856. Although he passed the entrance exam for
               Harvard Law School, instead of becoming a lawyer as his family wished, in 1874 he
               took a manual job in an engineering company and became a skilled pattern maker
               and machinist. In 1878, he joined the Midvale Steel Company as a labourer, but even-
               tually rose to become its Chief Engineer. Having had enough of working for other
               people, in 1893 he set up his own consultancy (Sheldrake, 1996). Taylor was an
               accomplished and talented engineer, and became a leading authority on metal cutting
               and a successful inventor; however, it is for his contribution to work organisation that
               he is most famous (or infamous).
                  Taylor was a highly controversial figure during his lifetime and still remains so
               more than 80 years after his death. This was partly because his theory of management
               was a direct challenge to both workers and managers. However, a large part of the
               hostility he generated during his lifetime was due to his own character. Rose (1988:
               23) stated that ‘Taylor was a notorious neurotic – many would not hesitate to write
               crank; and there is even a case for upgrading the diagnosis to maniac.’ He was cer-
               tainly a zealot when it came to promoting his own ideas, and would brook no
               challenge to them, whether from workers or management. Not surprisingly, though
               he attracted devoted followers, he also engendered fierce dislike.
                  Through his experience as a shopfloor worker, manager and consultant, Taylor
               made a major contribution to the development of managerial theory and practice in
               the twentieth century (Locke, 1982; Rose, 1988). Yet his original attempts to improve
               productivity (or, as he put it, to stamp out ‘soldiering’) were less than successful. Not
               only was his use of sacking, blacklisting and victimisation counter-productive, but
               also the bitterness that this provoked haunted him for the rest of his life. It was his
               failure to achieve change by, as Rose (1988: 37) termed it, ‘managerial thuggery’ that
               led him to seek an alternative method of change management that the workers, and
               management, would accept because they could see that it was rational and fair.
               Thereafter, his prime preoccupation became the pursuit and promotion of a scientific
               approach to management.
Organisation theory: the Classical approach   35

   Drawing on his work at the Midvale Steel Company and the Bethlehem Steel
Company, Taylor constructed a general ideology of efficiency. It was only in 1911,
when a group of his supporters met to discuss how better to promote his work,
that the term ‘Scientific Management’ was first used to describe his approach to
work organisation (Sheldrake, 1996). Though initially sceptical, Taylor embraced the
term and there can be little doubt that the publication, in the same year, of his
Principles of Scientific Management laid the foundation stone for the development of
organisation and management theory. Taylor’s primary focus was on the design and
analysis of individual tasks; this process inevitably led to changes in the overall struc-
ture of organisations. Such was the impact of his work that it created a blueprint for,
and legitimated, the activities of managers and their support staff. In so doing, he
helped to create the plethora of functions and departments which characterise many
modern organisations.
   Before Taylor, the average manager tended to operate in an idiosyncratic and arbi-
trary manner with little or no specialist support. Taylor saw this as being at the root
of much industrial unrest and workers’ mistrust of management. Though criticised
for his anti-labour postures, Taylor was also highly critical of management behaviour,
which may account for this group’s initial lack of enthusiasm for his ideas (Scott,
1987). After Taylor, managers were left with a ‘scientific’ blueprint for analysing
work and applying his ‘one best way’ principle to each job in order to gain ‘a fair
day’s work for a fair day’s pay’.
   These last two phrases sum up Taylor’s basic beliefs:
■    It is possible and desirable to establish, through methodical study and the applica-
     tion of scientific principles, the one best way of carrying out any job. Once
     established, the way must be implemented totally and made to operate consistently.
■    Human beings are predisposed to seek the maximum reward for the minimum
     effort, which Taylor referred to as ‘soldiering’. To overcome this, managers must
     lay down in detail what each worker should do, step by step; ensure through close
     supervision that the instructions are adhered to; and, to give positive motivation,
     link pay to performance.
Taylor incorporated those beliefs into his precepts for Scientific Management, com-
prising three core elements: the systematic collection of knowledge about the work
process by managers; the removal or reduction of workers’ discretion and control
over what they do; and the laying down of standard procedures and times for carry-
ing out each job.
   The starting point is the gathering of knowledge:

    The managers assume ... the burden of gathering together all the traditional knowledge
    which in the past has been possessed by the workman and then of classifying, tabulating and
    reducing this knowledge to rules, laws and formulae ...                 (Taylor, 1911a: 15)

This lays the groundwork for the second stage: increased management control. As long
as workers possess a monopoly of knowledge about the work process, increased con-
trol is impossible. But once the knowledge is also possessed by managers, it becomes
possible not only to establish what workers actually do with their time, but also by
‘reducing this knowledge to rules, laws and formulae’, to decrease the knowledge that
36   Chapter 1 · From trial and error to the science of management

               workers need to carry out a given task. It also, importantly, paves the way for the
               division of labour.
                  The last stage is that ‘All possible brain work should be removed from the shop
               and centred in the planning … department ...’ (Taylor, 1911b: 98–9). The divorce of
               conception from execution removes control from the worker, who no longer has dis-
               cretion as to how tasks are carried out.

                 Perhaps the most prominent single element in modern scientific management is the task
                 idea. The work of every workman is fully planned out by management ... and each man
                 receives in most cases complete written instructions, describing in detail the task which he is
                 to accomplish, as well as the means to be used in doing the work. ... This task specifies not
                 only what is to be done but how it is to be done and the exact time allowed for doing it.
                                                                                             (Taylor, 1911a: 39)


               Allied to this last element was Taylor’s approach to worker selection and motivation.
               Taylor carried out many experiments to identify and reward workers. He believed
               that organisations should only employ ‘first class men’ and they would only get the
               best results if they were paid by results. As he commented on his time as a consultant
               at the Bethlehem Steel Company (Taylor, 1911a: 18–21):

                 The Bethlehem Steel Company had five blast furnaces, the product of which had been han-
                 dled by a pig-iron gang for many years. This gang consisted, at this time, of about 75 men.
                 ... Our first step was the scientific selection of the ... proper workman to begin with. We
                 therefore carefully watched and studied these 75 men for three or four days ... A careful
                 study was then made of each of these men. We looked up their history as far back as practi-
                 cable and thorough inquiries were made as to the character, habits, and ambitions of each of
                 them. Finally, we selected [Schmidt] …] as the most likely man to start with. ... Schmidt
                 started to work, and all day long, and at regular intervals, was told by the man who stood
                 over him with a watch, ‘Now pick up a pig and walk. Now sit down and rest. Now walk –
                 now rest,’ etc. He worked when he was told to work, and rested when he was told to rest ...
                 And throughout this time he averaged a little more than $1.85 per day, whereas before he
                 had never received over $1.15 per day ... One man after another was picked out and trained
                 to handle pig iron ... receiving 60 per cent more wages than other workmen around them.


                  The ‘task idea’ allied to Taylor’s approach to selecting and rewarding workers
               completes the process of gaining control over workers by managers. The workers
               become ‘human machines’, told what to do, when to do it and how long to take. But,
               more than this, it allows new types of work organisation to be developed, and new
               work processes and equipment introduced; thus workers move from having a monop-
               oly of knowledge and control over their work to a position where the knowledge they
               have of the work process is minimal, and their control vastly reduced. The result is
               not only a reduction in the skills required and the wages paid, but also the creation of
               jobs that are so narrow and tightly specified that the period needed to train someone
               to do them is greatly reduced. This removes the last bargaining counter of labour:
               scarcity of skill.
                  According to Taylor, this transforms not only workers’ jobs but also managers’
               jobs:
Organisation theory: the Classical approach   37

 The man at the head of the business under scientific management is governed by rules and
 laws ... just as the workman is, and the standards which have been developed are equitable.
                                                                          (Taylor, 1911b: 189)

Taylor stated that the ‘scientific’ basis and equal applicability of his methods meant
they were neutral between labour and management; therefore they legitimated mana-
gerial action to analyse and change work methods, because managers are merely
applying science to determine the best method of work. As Exhibit 1.1 shows, he
claimed that his approach benefited both the worker and the company. The worker
was enabled and encouraged to work to his maximum performance and be rewarded
with a high rate of pay, whilst the company benefited from a high rate of output:

 It is absolutely necessary, then, when workmen are daily given a task which calls for a high
 rate of speed on their part, that they should also be insured the necessary high rate of pay
 whenever they are successful. This involves not only fixing for each man his daily task, but
 also paying him a large bonus, or premium, each time that he succeeds in doing his task in
 the given time ... . The remarkable and almost uniformly good results from the correct
 application of the task and the bonus must be seen to be appreciated.    (Taylor, 1911a: 63)


   Though seen as something of an anti-trade unionist, which he probably was, as the
above implies, he was also strongly critical of management. He believed that many of
the problems organisations faced in implementing change were due to the arbitrary
and inconsistent approach of managers. In fact, though trade unions were very suspi-
cious of Scientific Management in general and Taylor in particular, managers seemed
even more antagonistic. Indeed, after his death, Taylor’s acolytes spent much time in
the 1920s wooing the American unions with a considerable degree of success; they
never achieved the same success with management (Rose, 1988). The main reason for
this was that, though managers were anxious to find an approach that would curtail
labour resistance to change and improve productivity, they were not prepared to sub-
ject themselves to a similar degree of discipline.
   As Taylor’s biographer, Copley (1923: 146) stated in relation to managerial resist-
ance to Scientific Management at the Bethlehem Steel Company:

 Let us consider what Taylor was contending for. It was essentially this: that the government
 of the Bethlehem Steel Company cease to be capricious, arbitrary and despotic; that every
 man in the establishment, high and low, submit himself to law [i.e. that managers should
 obey the principles of Scientific Management].


Taylor believed passionately in the need to reform managerial authority: to base it on
competence rather than the power to hire and fire. However, it is one thing to ask one’s
subordinates to change their ways and accept new rules and methods; it is another thing
entirely for management to acknowledge that they too need to change, and change radi-
cally. No wonder that Taylor met managerial as well as worker resistance.
   Nevertheless, even though managers resisted the full implementation of Taylorism,
the new and rapidly expanding breed of industrial engineers, charged with developing
and implementing new methods, techniques and technologies, found in Taylor and his
contemporaries’ work a blueprint for transforming the workplace and increasing their
38   Chapter 1 · From trial and error to the science of management

               control and status. One consequence of this, brought about by the use of job cards
               and other forms of work recording and analysis systems, was a massive increase in
               the amount of paperwork that needed to be processed. Managers complained about
               the growth of ‘industrial bureaucracy’, but the benefits it brought by enabling average
               times and costs, etc., to be calculated easily outweighed the increase in clerical costs.
                   Nowhere was this demonstrated more dramatically than at Henry Ford’s Highland
               Park plant – the home of the world’s first mass-produced motor car, the Model T
               Ford. From 1909/10, when 18,664 Model Ts were sold, sales and production doubled
               year-on-year. However, every increase in production required a commensurate
               increase in the plant’s workforce. In 1911/12, the plant produced 78,440 Model Ts
               with 6,867 employees. The next year production doubled and the number of employ-
               ees doubled. Not surprisingly, Ford was desperate for ways of increasing employee
               productivity. The solution he adopted was to redesign the assembly operation around
               Scientific Management principles, and then couple this with the introduction of the
               moving assembly line. This allowed Ford once again to double production, but this
               time the workforce actually decreased (Lacey, 1986). So the 1910s saw the birth of
               the twin, and very much related, neologisms that both dominated and revolutionised
               industrial life for much of the twentieth century – Taylorism and Fordism.
                   Throughout the 1920s, the adoption of Scientific Management grew in America,
               though rarely in the full form laid down by Taylor. It was also introduced on a very
               limited basis into Europe, but met with much scepticism from managers and hostility
               from workers (Rose, 1988). Only in Russia did there seem any great enthusiasm for
               it. Indeed, Lenin saw Scientific Management combined with common ownership as
               the prime basis for Russian industrialisation: ‘We must organize in Russia the study
               and teaching of the Taylor system and systematically try it out and adapt it to our
               own ends’ (Lenin, 1918: 25). Taylor’s work also attracted some interest in Japan.
               However, it was not until after the Second World War, through the auspices of the
               Marshall Plan for rebuilding Europe’s war-torn economies, that Scientific
               Management was promoted and adopted on any significant scale outside America.
               Ironically, the contribution of American trade unions, through their role in the
               Marshall Plan, was crucial in promoting Scientific Management in European enter-
               prises (Carew, 1987).
                   Taylor claimed that his system was innovative and unique, which indeed it was in
               terms of the way he synthesised and systematised a host of previously disparate prac-
               tices and presented them as scientific and neutral (Aitken, 1960; Rose, 1988). Yet in
               reality, it can be seen that Taylor drew on many of the management practices and
               negative attitudes towards labour that were prevalent during the nineteenth century.
               He was also heavily indebted to many contemporaries and associates who helped
               develop the work study techniques necessary to implement Scientific Management,
               especially Henry Gantt and Carl Barth, who worked closely with him (Kempner,
               1970; Sheldrake, 1996). Perhaps his greatest debt was to Frank and Lillian Gilbreth.
               As well as being the pioneers of motion study, they were the driving force in establish-
               ing the Society for the Promotion of Scientific Management, which was later renamed
               the Taylor Society, and did much to promote Taylor’s work both before and after his
               death in 1915 (Rose, 1988; Sheldrake, 1996).
Organisation theory: the Classical approach   39

■ The Gilbreths and motion study
  Much of modern work study (a central element of the Classical approach) owes its ori-
  gins to the methods and techniques of motion study developed in the first quarter of
  the twentieth century by Frank and Lillian Gilbreth (see Gilbreth and Gilbreth, 1914).
  Their work on motion study was initiated by Frank Gilbreth, who was a contempo-
  rary of Taylor’s. In many respects their careers were similar. Taylor, turning his back on
  Harvard Law School, began his career on the shopfloor and later rose to eminence as a
  manager and management consultant. Frank Gilbreth, after passing the entrance exam
  for but declining to enter the Massachusetts Institute of Technology, rose from being a
  bricklayer to running his own construction and consultancy companies. He was also,
  along with his wife, a leading campaigner for Scientific Management.
     Although the development and promotion of motion study was begun by her hus-
  band, there is no doubt that Lillian Moller Gilbreth was an equal partner. Despite
  contemporary prejudices against women and education, she obtained Bachelor’s and
  Master’s degrees in English. She was only denied a doctorate in psychology by the
  University of California because family commitments prevented her, after her thesis
  had been approved, from spending the post-thesis year on campus that the regula-
  tions required (Sheldrake, 1996; Thickett, 1970).
     In justifying their work, Frank Gilbreth stated in his 1909 book on bricklaying that
  motion study:

    ... will cut down production costs and increase the efficiency and wages of the workman ...
    To be pre-eminently successful: (a) a mechanic must know his trade; (b) he must be quick
    motioned; and (c) he must use the fewest possible motions to accomplish the desired results.
                                                                 (Quoted in Sheldrake, 1996: 28)


     The Gilbreths developed a number of procedures for breaking work down into its
  constituent components. Flow process charts were used which split human motion
  into five basic elements: operations, transportation, inspection, storage and delay.
  Arising out of this, they developed a method of minutely analysing tasks which broke
  handwork into 17 basic elements. Examples of these are as follows:
  Grasp Begins when hand or body member touches an object. Consists of gaining con-
  trol of an object.
  Release Begins when hand or body member begins to relax control of object. Consists
  of letting go of an object.
  Plan Begins when hand or body members are idle or making random movements
  while worker decides on course of action. Consists of determining a course of action.
  Ends when course of action is determined.
  The purpose of this microanalysis was not only to establish what was done, but also
  to discover if a better method of performing the task in question could be developed.
  In this respect, they did much original work in establishing the distinction between
  necessary and unnecessary movements. The latter were to be eliminated immediately
  and the former further analysed in more detail to see if they could be improved, com-
  bined or replaced by special equipment.
40   Chapter 1 · From trial and error to the science of management

                  If this sounds remarkably similar to Adam Smith’s observations on pin-making,
               mentioned earlier, this is no accident. The Classical approach is descended from Smith
               through the nineteenth century pioneers of work organisation. Though remarkable in
               the level of minute detail to which they reduced the motions individuals make when
               undertaking manual tasks, the Gilbreths were only, as they saw it, taking Smith’s
               maxims to their logical conclusion. If in the process they give the impression of deal-
               ing more with machines than people, that too is no accident. Like others who
               propounded the Classical approach, they viewed organisations and workers very
               much as machines. The work study methods developed by the Gilbreths and their
               successors are still widely used today, not just in manufacturing industries, but in all
               areas of life from hospitals to computer programming (Grant, 1983).
                  The Gilbreths were also concerned that, having established the best way to carry
               out a task, this should not be undermined by selecting the wrong person to carry it
               out or by creating the wrong environment. Therefore, they set about analysing
               employee selection and establishing environmental criteria with the same determina-
               tion they had applied to analysing work performance. However, in neither case could
               they achieve the same microanalysis that characterised their work study technique;
               what finally emerged were effectively opinions based on their own ‘experience’, rather
               than being the product of experiment and observation.
                  The Gilbreths, like Taylor, were devoted to one objective – to discover the best
               method of doing any job. The difference was that whereas Taylor was concerned with
               reducing the time taken to perform a task, the Gilbreths were more concerned with
               reducing the motions taken to accomplish the task. Though this differing emphasis
               did lead to some friction with Taylor (Nadworthy, 1957), they were, none the less,
               among his main promoters and saw their efforts as complementary to, and aimed at
               enhancing, Scientific Management. The fact that work study is now often labelled
               ‘time and motion’ study perhaps shows this. Like Taylor, they saw themselves as cre-
               ating a neutral system that benefited both labour and management. They felt that any
               increase in boredom or monotony brought about by their methods would be compen-
               sated for by workers’ opportunities to earn more money.
                  While the Gilbreths and Taylor devoted their efforts to improving the productivity
               of individual workers, there were others who took a wider but complementary
               perspective.


           ■ Henri Fayol and the principles of organisation
               Born in 1841 and educated at the lycée in Lyon and the National School of Mines in
               St Etienne, Fayol was promoting his ideas in France at the same time as Taylor was
               propounding his views on Scientific Management in the USA. He began his working
               life as a mining engineer in 1860 and, in 1888, was appointed Managing Director of
               an ailing mining company, which he quickly turned into a much-admired and finan-
               cially strong enterprise. He retired as Managing Director in 1918, though he stayed
               on the Board until his death in 1925. In his ‘retirement’ he founded the Centre
               d’Etudes Administratives, whose role was to propagate Fayol’s ideas through manage-
               ment education. He chaired weekly meetings of prominent industrialists, writers,
               government officials, philosophers and members of the military. This direct contact
               with opinion-formers and decision-makers is undoubtedly one of the main reasons
Organisation theory: the Classical approach   41

why the Centre had such a profound influence on the practice and theory of manage-
ment in both the public and private sectors in France.
   Fayol did not draw his views on organisations solely from his own experience as a
manager. His education at one of the grandes écoles, and his subsequent career as
an executive of a large mining company, placed him among the elite of senior admin-
istrators in business, government and the armed forces. Therefore, though he spent
his working life in the coal mining industry, his practical knowledge of business
was informed by and fits within the intellectual and administrative traditions of
French society.
   His working life, in the late nineteenth and early twentieth centuries, coincided
with a period of rapid industrialisation in France. It was a time when industrial unrest
was rife, with frequent strikes by railway workers, miners and civil servants. As was
the case in the USA, in this period of rapid growth and change, there was an unwrit-
ten consensus that French business and government needed a theory of management,
no matter how basic (Cuthbert, 1970). Unlike Taylor and the Gilbreths, however,
Fayol’s focus was on efficiency at the organisational level rather than the task level:
top down rather than bottom up (Fayol, 1949). Though this clearly reflects Fayol’s
own practical experience, it also shows the combined influence of the French intellec-
tual tradition, with its preference for addressing philosophies rather than
practicalities, and the administrative tradition, which sought to identify and lay down
general rules and restrictions applicable to all situations.
   Given his background, it is not surprising that Fayol was more concerned with
general rather than departmental or supervisory management, and with overall
organisational control as averse to the details of tasks. This does not, however, place
him in opposition to Taylor. Rather the combination of Taylor’s work at the task level
and Fayol’s at the organisational level make their views complementary rather than
contradictory. In addition, both emphasised strongly the need for professionally edu-
cated managers who would ‘follow the rule’ rather than acting in an arbitrary or ad
hoc fashion.
   As the following shows, Fayol (like all the Classical school) was concerned with devel-
oping a universal approach to management that was applicable to any organisation:

 There is no one doctrine of administration for business and another for affairs of state;
 administrative doctrine is universal. Principles and general rules which hold good for busi-
 ness hold good for the state too, and the reverse applies. (Quoted in Cuthbert, 1970: 111)

   Therefore, in business, public administration, or indeed any form of organisation,
the same universal principles apply. According to Fayol, these are as follows (quoted
in Mullins, 1989: 202–3):
 1 Division of work. The object is to produce more and better work from the same
   effort, through the advantages of specialisation.
 2 Authority and responsibility. Wherever authority is exercised, responsibility
   arises. The application of sanctions is needed to encourage useful actions and to
   discourage their opposite.
 3 Discipline. This is essential for the efficient operation of the organisation.
   Discipline is in essence the outward mark of respect for agreements between the
   organisation and its members.
42   Chapter 1 · From trial and error to the science of management

                4 Unity of command. In any action, any employee should receive orders from one
                  superior only; dual command is a perpetual source of conflicts.
                5 Unity of direction. In order to coordinate and focus effort, there should be one
                  leader and one plan for any group of activities with the same objective.
                6 Subordination of individual or group interests. The interest of the organisation
                  should take precedence over individual or group interests.
                7 Remuneration of personnel. Methods of payment should be fair, encourage keen-
                  ness by rewarding well-directed effort, but not lead to over-payment.
                8 Centralisation. The degree of centralisation is a question of proportion and will
                  vary in particular organisations.
                9 Scalar chain. This is the chain of superiors from the ultimate authority to the
                  lowest ranks. Respect for line authority must be reconciled with activities that
                  require urgent action, and with the need to provide for some measure of initiative
                  at all levels of authority.
               10 Order. This includes material order and social order. The object of material order
                  is avoidance of loss. There should be an appointed place for each thing, and each
                  thing should be in its appointed place. Social order requires good organisation
                  and good selection.
               11 Equity. There needs to be fairness in dealing with employees throughout all levels
                  of the scalar chain.
               12 Stability of tenure of personnel. Generally, prosperous organisations have a stable
                  managerial team.
               13 Initiative. This represents a source of strength for the organisation and should be
                  encouraged and developed.
               14 Esprit de corps. This should be fostered, as harmony and unity among members
                  of the organisation are a great strength in the organisation.
                  According to Fayol (1949), it is the prime responsibility of management to enact
               these principles. Consequently, in order to achieve this, he prescribed the main duties
               of management as follows:
               ■   Planning – examining the future, deciding what needs to be done and developing a
                   plan of action.
               ■   Organising – bringing together the resources, human and material, and developing
                   the structure to carry out the activities of the organisation.
               ■   Command – ensuring that all employees perform their jobs well and in the best
                   interests of the organisation.
               ■   Coordination – verifying that the activities of the organisation work harmoniously
                   together to achieve its goals.
               ■   Control – establishing that plans, instructions and commands are correctly carried
                   out.
                  Fayol was a gifted and highly successful businessman who attributed his success to
               the application of his principles rather than personal ability. Certainly, he was one of
               the pioneers of management theory, and many of his principles are still taught and
               practised today. However, part of the success of his work lay in the fact that he was
               writing for a receptive audience, and at a time when management practice and ideas
               were becoming international currency. Just as Taylor’s system arose at the time when
Organisation theory: the Classical approach   43

  a need for a management theory had grown amongst the business community in the
  USA, so Fayol’s was aimed at a similar demand in France, where the business commu-
  nity was developing rapidly but in an unplanned way.
     Unlike Taylor, though, he attempted neither to denigrate trade unions openly nor
  to castigate managers. Nor did he share with Taylor a belief that the interests of man-
  agers and workers were necessarily the same or ultimately reconcilable. He did,
  however, believe that much industrial unrest could be eliminated by fairer, more con-
  sistent, and firmer management, particularly where this reduced the need for trade
  unions or their ability to organise. He also believed in the need to educate and train
  managers. His views were not seen as a direct attack on existing managers; rather,
  they were in harmony with the approach taken by managers in the larger private
  enterprises and those operating in government and the armed services. This is not sur-
  prising because, by and large, they and Fayol were educated in the grandes écoles and
  shared a common intellectual approach. In addition, Fayol did not generally try to
  impose his ideas directly on individual organisations. Instead, he preferred to influ-
  ence managers indirectly through a process of education. In the light of the reaction
  in America to Taylor’s attitude, many would consider this a wise move.
     Though there were attempts in France to promote ‘Fayolisme’ in opposition to
  Taylorism, Fayol rejected this, preferring to see them as complementary (Sheldrake,
  1996). As Urwick (1949: 9–10) commented in the Introduction to the English version
  of Fayol’s book on General and Industrial Management:

   The work of Taylor and Fayol was, of course, essentially complementary. They both realized
   that the problem of personnel and its management at all levels is the key to industrial suc-
   cess. Both applied scientific method to this problem. That Taylor worked primarily at the
   operative level, from the bottom of the industrial hierarchy upwards, while Fayol concen-
   trated on the managing director and worked downwards, was merely a reflection of their
   very different careers.


     The USA and France were not the only countries where developments in manage-
  ment practice and thought were being studied and documented. In Germany, at this
  time, Max Weber was charting the growth and merits of bureaucracy.


■ Max Weber on bureaucracy
  Weber was born in 1864 into a well-to-do Prussian family. He pursued an academic
  career, obtaining a doctorate in 1889. In 1894, he was appointed Professor of
  Political Economy at the University of Freiburg, and in 1896 he accepted the Chair in
  Economics at Heidelberg. Unfortunately, in 1897, he suffered a mental breakdown,
  which plagued him for many years. He resigned from his university post and spent
  much of his time travelling in Europe and the USA. He also moved the focus of his
  academic studies from economics to sociology.
     Weber was an ardent German nationalist, and, at the age of 50, he volunteered for
  military service in the First World War. Until his honourable discharge in 1915, he
  was responsible for establishing and running nine military hospitals. Despite this, he
  was a fierce and open critic of the Kaiser, whom he accused of being a dilettante
  hiding behind the divine right of kings. He believed that Germany’s problems at home
44   Chapter 1 · From trial and error to the science of management

               and abroad could only be solved if the monarchy were replaced with a constitutional
               democracy. After the war, he became a member of the Commission that drew up the
               Constitution for the Weimar Republic, and once again took up university teaching,
               this time in Munich. Unfortunately, when he died in 1920, most of his work was
               unpublished and his papers were in a state of chaos. It was not until the 1930s that
               his work began to be organised and published, and it was the 1940s before his work
               on bureaucracy was published in English (Sheldrake, 1996; Weber, 1948).
                  There is a considerable affinity between Weber’s work on bureaucracy and Fayol’s
               work on the principles of management. Both were concerned with the overall struc-
               turing of organisations, and the principles which guide senior managers in this task.
               Though a contemporary of Fayol and Taylor, it is unlikely that they were aware of his
               work on bureaucracy, though the reverse is possible (that he may have been aware of
               their work).
                  However, unlike Taylor and Fayol, Weber was never a practising manager. His
               observations on administrative structures and organisational effectiveness arose from
               his study of the development of Western civilisation. From this, Weber concluded that
               the rise of civilisation was a story of power and domination. He noted (Weber, 1948)
               that each social epoch was characterised by a different form of political rule, and that
               for a ruling elite to sustain its power and dominance, it was essential for them both to
               gain legitimacy and to develop an administrative apparatus to enforce and support
               their authority.
                  Weber (1947: 328) identified what he called ‘three pure types of legitimate authority’:
               1 Rational-legal – resting on a belief in the ‘legality’ of patterns of normative rule,
                 and the right of those elevated to authority under such rules to issue commands.
               2 Traditional – resting on an established belief in the sanctity of immemorial tradi-
                 tions and the legitimacy of those exercising authority under them.
               3 Charismatic – resting on devotion to the specific and exceptional sanctity, heroism
                 or exemplary character of an individual person, and of the normative patterns or
                 order revealed or ordained by them.
               For Weber, legitimacy is central to almost all systems of authority. He argued that
               there are five concepts on which rational-legal authority is based. According to
               Albrow (1970: 43), these are as follows:
               1 That a legal code can be established which can claim obedience from members of
                 the organisation.
               2 That the law is a system of abstract rules which are applied in particular cases, and
                 that administration looks after the interests of the organisation within the limits of
                 the law.
               3 That the man exercising authority also obeys this impersonal law.
               4 That only qua [in the capacity of] member does the member obey the law.
               5 That obedience is due not to the person who holds authority but to the impersonal
                 order that has granted him his position.
                 Weber argued that, in the context of the rational-legal authority structures which
               prevailed in Western societies in the early twentieth century, the bureaucratic
               approach to organisation was the most appropriate and efficient. Under bureaucracy,
               laws, rules, procedures and predefined routines are dominant and not subject to the
Organisation theory: the Classical approach   45

vagaries and preferences of individuals. They give form to a clearly defined system of
administration – whether it be public administration, such as a government depart-
ment dealing with pensions and social security payments, or private administration,
such as an insurance company – where the execution of routine, pre-programmed
procedures is all-important. Weber considered this approach to be both appropriate,
because it was the ideal tool for a centralised administration where the legitimacy of
those in power was underpinned by the rule of law, and efficient, because the bureau-
cratic approach mechanises the process of administration in the same way that
machines automate the production process in factories.
   Weber frequently asserted that the development of bureaucracy eliminates human
fallibility:

 Its [bureaucracy’s] specific nature, which is welcomed by capitalism, develops the more per-
 fectly the more bureaucracy is ‘dehumanised’, the more completely it succeeds in eliminating
 from official business, love, hatred, and all purely personal, irrational and emotional ele-
 ments which escape calculation.                                       (Weber, 1948: 215–16)


Bureaucracy is characterised by the division of labour, a clear hierarchical authority
structure, formal and unbiased selection procedures, employment decisions based on
merit, career tracks for employees, detailed rules and regulations, impersonal relation-
ships, and a distinct separation of members’ organisational and personal lives. It
must, however, be borne in mind that Weber’s bureaucratic model (or ‘ideal’ organisa-
tion), though inspired by developments in Germany at the time, was a hypothetical
rather than a factual description of how most organisations were structured. It was
his view of the characteristics that organisations should exhibit in modern societies
based on rationality and law. How Weber saw these organisational characteristics
supporting and reproducing rational-legal authority is best seen by contrasting them
with the traditional administrative forms based on patronage (see Table 1.1) (Weber,
1947 and 1948).
   For Weber, therefore, bureaucracy provided a rational-legal form of organisation
which distinguished itself from, and eradicated the faults and unfairness of, previous
administrative forms by its mechanical adherence to set rules, procedures and pat-
terns of authority. It removed the system of patronage and eliminated human
variability, replacing it by the rule of law. In Weber’s view, the principles of bureau-
cracy, especially the legitimation of authority and the subordination of all in the
organisation to the same rules and procedures, were universally applicable to all
organisations, big or small, public or private, industrial or commercial.
   It can be seen that Weber’s belief in the standardisation of, and obedience by all to,
rules and procedures is the counterpart of the standardisation of production tech-
niques advocated by Taylor and akin to the principles of administrative management
prescribed by Fayol. Also, just as the work of Taylor and Fayol can be understood as
representing a combination of their backgrounds and the state of the societies in
which they lived, so is this the case with Weber. The Prussian bureaucratic tradition
dominated both the public, and to a large extent, the private sectors in Germany. It
was seen by the ruling elite as the ideal method for ensuring that the objectives of the
state and the objectives of individual enterprises were adhered to. It also fitted in with
the Prussian militaristic tradition of unquestioning obedience to superiors, which was
46   Chapter 1 · From trial and error to the science of management

Table 1.1 Comparison of Weber’s concept of rational-legal authority with traditional authority
 Characteristics of rational-legal authority                         Characteristics of traditional authority

 Areas of jurisdiction are clearly specified: the regular            The allocation of labour is not defined, but depends
 activities required of personnel are allocated in a fixed way       on assignments made by the leader, which can be
 as official duties.                                                 changed at any time.

 The organisation of offices follows the principle of hierarchy: Authority relations are diffuse, being based on
 each lower office is controlled and supervised by a higher one. personal loyalty, and are not ordered into clear
 However, the scope of authority of superiors over subordinates hierarchies.
 is circumscribed, and lower offices enjoy a right of appeal.

 An intentionally established system of abstract rules governs       General rules of administration either do not exist or
 official decisions and actions. These rules are relatively stable   are vaguely stated, ill-defined, and subject to change
 and exhaustive, and can be learned. Decisions are recorded          at the whim of the leader. No attempt is made to
 in permanent files.                                                 keep permanent records of transactions.

 The ‘means of production or administration’ (e.g. tools and         There is no separation of a ruler’s personal
 equipment or rights and privileges) belong to the office,           household business from the larger ‘public’ business
 not the office-holder, and may not be appropriated. Personal        under their direction.
 property is clearly separated from official property, and
 working space from living quarters.

 Officials are personally free, selected on the basis of technical   Officials are often selected from among those who
 qualifications, appointed to office (not elected), and              are personally dependent on the leader, e.g. slaves,
 recompensed by salary.                                              serfs and relatives. Selection is governed by arbitrary
                                                                     criteria, and remuneration often takes the form of
                                                                     benefices – rights granted to individuals that, for
                                                                     instance, allow them access to the ruler’s stores, or
                                                                     give them grants of land from which they can
                                                                     appropriate the fees or taxes. Benefices, like fiefs in
                                                                     feudalistic systems, may become hereditary and
                                                                     sometimes are bought and sold.

 Employment by the organisation constitutes a career for             Officials serve at the pleasure of the leader, and so
 officials. An official is a full-time employee and looks forward    lack clear expectations about the future and security
 to a lifelong career in the agency. After a trial period, he or     of tenure.
 she gains tenure of position and is protected against arbitrary
 dismissal.


                 a prevalent view in both public and private organisations. It must be remembered, of
                 course, that the state and private enterprises in Germany were not primarily
                 obsessed with profitability or individual aggrandisement. The key objective was to
                 build Germany as the premier military and industrial power in Europe. Competition
                 at the level of the individual or the individual enterprise was a concept that carried
                 much less force in Germany, and even France, than in the USA or Britain. German
                 industry and government were more concerned with ensuring that all sections of the
                 country pulled in the same direction. Where competition threatened this, it was elim-
                 inated by the state, either by direct intervention, such as nationalisation of the
                 railways, or by indirect intervention, through the formation of cartels and monopo-
                 lies. In carrying out this grand plan for German development, bureaucracy was
                 found to be the ideal tool.
Conclusions   47

           In Germany, the advent of the First World War highlighted the incompatibility
       between industrial bureaucracies based on the rule of law, and a government run on
       autocratic lines for militaristic ends. Weber argued that the rule of law applied not
       only to the operation of organisations but also, and more importantly, to the running
       of society. If society was not based on the rule of law, if democratically elected gov-
       ernments did not hold power, then the authority of those who ruled must be called
       into question. This was the basis of Weber’s attacks on the Kaiser and the military
       during the First World War. He believed that, in the modern age, rational-legal
       authority, based on democratically elected governments and laws governing property
       rights, was the best and most effective way for society and organisations to be gov-
       erned. For Weber, the rise of bureaucracy and the rise of liberal democracy went hand
       in hand.
           As can be seen, bureaucracy did not need a Taylor or a Fayol to develop or pro-
       mote it; it already existed, was accepted by management, and was prospering, in
       Germany and other advanced countries, especially in the public sector. What Weber
       did was to give it intellectual respectability by arguing that it was particularly suited
       to the needs of (what he saw as) the rational, secular and increasingly democratic
       societies that were becoming the norm in the Western world.
           The appeal of bureaucracy, to governments and large organisations at least, can be
       seen in the way that bureaucracy is an ever-present and pervasive feature of modern
       life. However, it would be misleading to give the impression that its development in
       Germany, or elsewhere, was uncontentious. In Germany, in the early years of the
       twentieth century, it tended to be the purpose and consequences of bureaucracy rather
       than its principles that were attacked. At an overall political level, the growth of radi-
       cal parties of the left reflected growing concerns over Germany’s military aims and
       the state’s concomitant close links with business, and in particular its perceived pref-
       erence for aiding capital rather than labour. At the level of the individual enterprise,
       the growth of militant trade unions, often linked to the parties of the left, reflected
       the growing frustration of workers who resented the autocratic approach of manage-
       ment and its resistance to collective bargaining.


Conclusions
       It is not an inevitable fact of life that modern societies are characterised by organisa-
       tions, of all shapes and sizes; this is the product of a particular combination of
       circumstances. The rise of capitalism in Britain and other European countries in the
       seventeenth and eighteenth centuries created new opportunities and new problems
       that could not be accommodated under the old order. The result was a move away
       from self-sufficient, autonomous, individual units to collective units of production
       controlled by an entrepreneur. It was entrepreneurs who, in pursuit of ever greater
       profits, created the factory system in Britain which became the basis of modern
       organisational life. The central features of the factory system were autocratic control,
       division of labour, and antagonistic relations between management and labour.
          Though starting at different times and moving at their own pace, most European
       countries, followed by the USA, adopted and adapted the British approach to indus-
       trial organisation. However, as the nineteenth century progressed, the nature of
48   Chapter 1 · From trial and error to the science of management

               industrialisation began to vary from country to country, reflecting the unique circum-
               stances and needs of the host society. In Germany, the objectives of the state
               determined that large-scale public and private bureaucracies became the norm. In
               France, the state also played a role in shaping industrialisation, but in this case it was
               to perpetuate small-scale, inefficient business and agricultural operations. In both
               countries, individual pursuit of profit maximisation was less important than in either
               Britain or the USA. In Scandinavia, especially Denmark, the emergence of a more col-
               lective and less ruthless approach to industrialisation could be discerned.
                  Nevertheless, in the transition from a subsistence economy to a money economy,
               one clear image stands out above all else: the antagonism between employers and
               employees. The factory did not emerge because it was a more efficient means of pro-
               duction per se; it emerged because it offered entrepreneurs a more effective means of
               controlling labour. This meant that the factory was also a battleground, with employ-
               ers seeking to impose new conditions and technologies, and workers – when they
               could – attempting to resist change.
                  As the nineteenth century progressed, managers became increasingly aware of the
               shortcomings of their ad hoc and inconsistent responses to new challenges and oppor-
               tunities, and the counter-productive nature of resistance to change. The need for a
               more coherent approach to structuring and running organisations was required: one
               that legitimated managerial authority, especially to initiate change. This crystallised
               into the Classical approach.
                  Though writing in different countries and from different perspectives, the propo-
               nents of what later came to be known as the Classical approach all adopted a similar
               perspective towards what they saw as one of the main issues for modern societies:
               how to create organisations that efficiently and effectively pursue their objectives.
               Taylor, supported by the work of the Gilbreths and others, concentrated very much
               on the operational level, arguing for his ‘scientific’ method of analysing, designing
               and managing jobs. However, his insistence on the consistent and unbiased applica-
               tion of scientific principles, and the emphasis he placed on all members of an
               organisation obeying rules and procedures, were as much a challenge to managerial
               beliefs and behaviour as they were to the beliefs and behaviour of shopfloor workers.
               Fayol, in contrast, was concerned less with operational issues and more with the over-
               all administration and control of organisations. Therefore, to an extent, his could be
               called a top-down approach, whilst Taylor was working from the bottom up. Weber
               sought to put organisations in a wider historical and societal context, bringing
               together both the detailed tasks to be carried out in organisations and the general
               principles governing them.
                  Though Taylor’s approach required a radical change in managerial behaviour and
               a significant increase in organisational bureaucracy, the objective of his system was to
               improve the productivity and efficiency with which manual workers carried out the
               tasks ordained for them by management. Everything else was, as Taylor would have
               put it, the outcome of pursuing this objective to its logical conclusion. The need to
               provide managers with rules and systems for running the entire enterprise, and not
               just that part of it dealing with manual labour, was a means of achieving his objective
               rather than a prime aim. This is where the work of Fayol and Weber has proved so
               crucial: together with Taylor’s work, it comprises a system for running an entire busi-
               ness in a coherent, standardised and consistent fashion.
Conclusions   49

  Therefore, taken together, their views are, broadly, complementary, and reflect an
approach to organisations and people based upon a number of basic assumptions:
■   There is a ‘one best way’ for all organisations to be structured and operate.
■   This approach is founded on the rule of law and legitimate managerial authority.
■   Organisations are rational entities: collectivities consistently and effectively pursu-
    ing rational goals.
■   People are motivated to work solely by financial reward.
■   Human fallibility and emotions, at all levels in the organisation, should be elimi-
    nated because they threaten the consistent application of the rule of law and the
    efficient pursuit of goals.
■   For this reason, the most appropriate form of job design is achieved through the
    use of the hierarchical and horizontal division of labour to create narrowly focused
    jobs encased in tight standardised procedures and rules, which remove discretion,
    dictate what job-holders do and how they do it, and which allow their work to be
    closely monitored and controlled by their direct superiors.
   Seen in the context of the early twentieth century, when there appeared to be a sub-
stantial questioning of – and challenge to – managerial authority by workers, the
Classical approach had many merits: not least in its attempt to replace arbitrary and
capricious management with rules and procedures that apply equally to everyone in
the organisation.
   Similarly, it is important to see this work in terms of what went before. Weber
explicitly drew on history to support his views; the historical debts of Taylor and
Fayol, though not openly acknowledged in their work, are clearly there. From Smith,
through Wedgwood, Boulton and Watt, Babbage and Ure can be traced key elements
of the Classical approach: the division of labour, the distrust of human variability, the
need for written rules, procedures and records, and the need for rational and consis-
tent management and objectives. Parallel to these are key themes that run through
other aspects of nineteenth century life: the search for the rational, scientific, univer-
sal principles that govern the natural world, the belief in the Protestant work ethic,
the emergence of Social Darwinism, the greater democratisation of societies, and the
gradual reduction of laws favouring one class or group over another.
   All these strands coalesced – not always neatly – in the Classical approach, creating
(in retrospect) the first real and consistent attempt at a theory, a set of guidelines, for
constructing, managing and changing organisations. However, given that it grew out
of and was designed to meet particular circumstances, so its appropriateness began to
be questioned and criticised as these circumstances changed.
   Taylor and his adherents have been criticised both for their lack of scientific rigour
and for their one-dimensional view of human motivation (Burnes, 1989; Kelly, 1982a,
1982b). Indeed, as Rose (1988) argued, Taylor portrayed human beings as ‘greedy
robots’: indifferent to fatigue, boredom, loneliness and pain, driven solely by mone-
tary incentive. For Taylor, material incentives are the only effective incentives to
work. For this reason, he opposed everything else in the workplace that, in his opin-
ion, undermined managers’ attempts to introduce individual incentive systems,
whether it be friendships, group loyalty, trade unions, or whatever. Taylor has also
been attacked for over-emphasising the merits of the division of labour. The critics’
argument is that the creation of jobs which have little intrinsic satisfaction leads to
poor morale, low motivation and alienation. Indeed, such are the forces aligned
50   Chapter 1 · From trial and error to the science of management

               against Scientific Management that it is difficult to find a facet of it that has not been
               attacked (Littler, 1978; Locke, 1982).
                  Fayol has been attacked on three fronts: first, that his principles are mere truisms;
               second, that they are based on questionable premises; and third, that the principles
               occur in pairs or clusters of contradictory statements (Massie, 1965; Simon, 1957). In
               addition, Fayol, like Taylor, can be construed as being against trade unions. Certainly,
               he believed in the pre-eminence of management and its right to make changes how
               and when it wanted, so long as these were based on his general principles. He also
               believed, unlike Taylor, that management and labour were fundamentally in conflict.
               Therefore, his recommendations were partly aimed at eliminating the conditions in
               which trade unions can flourish, in the interests of his overall aim of establishing the
               legitimacy of managers to manage.
                  Weber’s arguments for bureaucracy have also received criticism. For instance, Udy
               (1959) questioned Weber’s assertion that bureaucracies are necessarily rational, whilst
               Parsons (1947) suggested that Weber puts forward contradictory arguments for the
               basis of authority within bureaucracies. Robbins (1987) pointed out that bureaucracy
               is most frequently attacked for encouraging goal displacement:
               ■   Rules become ends in themselves rather than means to the ends they were designed
                   to achieve.
               ■   Specialisation and differentiation create sub-units with different goals which then
                   become primary to the sub-unit members. Not only does this lead to conflict
                   between sub-units, but the accomplishment of sub-unit goals becomes more impor-
                   tant than achieving the organisation’s overall goals.
               ■   Rules and regulations become interpreted as setting minimum standards of per-
                   formance rather than identifying unacceptable behaviour. Staff can become
                   apathetic and merely perform the bare minimum of work.
               ■   The unthinking and rigid application of standardised rules and procedures can lead
                   to their being applied in inappropriate situations, with dysfunctional consequences.
               Robbins (1987) also pointed out that bureaucracy can alienate both employees and
               customers or clients. For the former, being treated as mere cogs in a machine leads to
               a sense of powerlessness and irrelevance. For the latter, being presented with a rigid
               and faceless organisation, which appears to serve its own ends rather than those of its
               customers or clients, can be frustrating and, when the provision of welfare services is
               involved, even heartbreaking. Mullins (1993) also pointed out that bureaucracy is
               often associated with secrecy and attempts to prevent legitimate public access to vital
               information on the performance of government and large organisations. Weber’s
               work on bureaucracy has also received criticism because of his lack of attention to
               informal and social processes, in particular the way that individuals and groups can
               and do struggle to promote their own interests and goals above those of others in the
               organisation (Crozier, 1964).
                  It should also be noted that, though broadly complementary, the approaches of
               Taylor, Fayol and Weber were developed separately and with different objectives in
               mind. There are, consequently, tensions and inconsistencies between them. Fayol
               stresses the importance of esprit de corps and individual initiative. Taylor and Weber
               would find the former irrelevant and the latter dangerous. Likewise, the unchanging
               rigidity of bureaucracy, as portrayed by Weber, leaves little scope for the continuous
Test your learning   51

        search for improvement in methods and productivity advocated by Taylor and Fayol.
        Taylor’s advocacy of functional supervision, which in effect meant a worker being
        responsible to different supervisors for different aspects of his/her job (some four or
        five supervisors in total), would have been viewed as a threat to discipline and good
        order by both Weber and Fayol, who were fierce advocates of unity of command –
        each worker should receive orders from one superior only.
           One of the main criticisms of the Classical approach as a whole is that its view of
        people is negative. Bennis (1959: 263) called the Classical perspective one of ‘organi-
        sations without people’ because it is founded on the belief that people can be reduced
        to the level of cogs in a machine. It can also be argued that, in any case, it is impossi-
        ble to remove the element of human variability from the running of organisations and
        that attempts to do so are counter-productive. Rather than making people work more
        efficiently in pursuit of organisational goals, it alienates them from their work and
        makes them resentful of it (Mayo, 1933). This is a point developed by Argyris (1964),
        who argued that the Classical approach restricts the psychological growth of individ-
        uals and causes feelings of failure, frustration and conflict. Instead, he believes that
        the organisational environment should provide a significant degree of individual
        responsibility and self-control; commitment to the goals of the organisation; produc-
        tiveness and work; and an opportunity for individuals to apply their full abilities.
        These developed as central issues for the proponents of the Human Relations
        approach, which emerged in the 1930s as a reaction to the ‘de-humanised’ Classical
        approach. This, together with Contingency Theory – the third approach to organisa-
        tions to emerge in the twentieth century – will be discussed in the next chapter.


Test your learning

      ■ Short answer questions
        1 What was Adam Smith’s main contribution to the development of work organisation?

        2 What was the putting-out system?

        3 What was the main impetus for the move to the factory system?

        4 What are the key tenets of Scientific Management?

        5 According to Fayol, what are the prime functions of a manager?
        6 What was Weber’s main justification for advocating bureaucracy?

        7 What are the implications for organisational change of the Classical approach?



      ■ Essay questions
        1 To what extent can the move to the factory system be seen as a clash of cultures as
          averse to a clash of economic systems?

        2 Evaluate the case for seeing the work of Taylor, Fayol and Weber as forming a coherent
          school of thought.
52   Chapter 1 · From trial and error to the science of management


                 Suggested further reading
               1 Wilson, JF (1995) British Business History, 1720–1994. Manchester University Press:
                 Manchester.
                 Despite its title, this book neither confines itself to British history nor examines business in a
                 narrow sense. Amongst other things, John Wilson’s book provides an excellent review of the
                 development of management in Britain, Germany, Japan and the USA from the early days of
                 the Industrial Revolution.
               2 Pollard, S (1965) The Genesis of Modern Management. Pelican: Harmondsworth.
                 Though published over 30 years ago, Sydney Pollard’s book still provides one of the best
                 descriptions of the development of management, and the reaction of labour, in the eigh-
                 teenth and nineteenth centuries.
               3 Rose, M (1988) Industrial Behaviour. Penguin: Harmondsworth.
                 Michael Rose’s book provides a well-researched and thorough account of the rise and devel-
                 opment of Scientific Management.
               4 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International
                 Thompson Business Press: London.
                 Michael Sheldrake gives an excellent summary of the lives and contributions of Taylor,
                 Fayol and Weber.
               5 Taylor, FW (1911) The Principles of Scientific Management. Dover (1998 edition): New
                 York, NY, USA.
                 This is perhaps the most cited, if least read, of all management books. However, as it num-
                 bers only 76 pages and is couched in quite accessible language, it is well worth reading.
Chapter 2

Developments in organisation
theory
From certainty to contingency



 Learning objectives
 After studying this chapter, you should be able to:
 ■   understand the reasons for the emergence of the Human Relations approach;
 ■   identify the key features and key proponents of the Human Relations approach;
 ■   list the advantages and disadvantages of the Human Relations approach;
 ■   describe the differences between the Human Relations approach and the
     Classical approach to organisational design;
 ■   discuss the reasons for the emergence and popularity of Contingency Theory;
 ■   identify the key features and key proponents of Contingency Theory;
 ■   state the advantages and disadvantages of Contingency Theory;
 ■   appreciate how Contingency Theory seeks to incorporate both the Classical
     and Human Relations approaches;
 ■   recognise the implications for organisational change of the Human Relations
     approach and Contingency Theory.
54   Chapter 2 · Developments in organisation theory


 Exhibit 2.1        Organisations as cooperative systems

 Functions of organizations
 An organization is a system of cooperative human          organization economy. ... The individual economy ...
 activities the functions of which are (1) the creation,   consists on one side of the power of the individual ...
 (2) the transformation, and (3) the exchange of utili-    to do work (physical acts, attention, thought); and on
 ties. It is able to accomplish these functions by         the other side the utilities ascribed by him to (1)
 creating a cooperative system, of which the organiza-     material satisfactions, (2) other satisfactions which we
 tion is both a nucleus and subsidiary system, which       shall here call social satisfactions.
 has also as components physical systems, personal            The economy of the individual is constantly
 systems (individuals and collections of individuals),     changing, because of (1) physiological needs, (2)
 and social systems (other organizations). Accordingly,    exchanges made with others, (3) the creation of his
 from the viewpoint of creation, transformation, and       own utilities, and (4) other changes in his state of
 exchange of utilities, the cooperative system embraces    mind, that is, his values or appraisal of utilities, physi-
 four different kinds of economies which may be dis-       cal and social.
 tinguished as (a) a material economy; (b) a social        Source: Chester Barnard, The Functions of the Executive, 1938,
 economy; (c) the individual economies; and (d) the        pp. 240–2.




                 Introduction
               The emergence of the Classical approach was one of the most significant events in the
               history of organisation theory and practice. From the 1920s until the 1960s, in the
               public sector, and in large private sector concerns, bureaucracy was unquestionably
               seen as the ‘one best way’. The other key element of the Classical approach, Scientific
               Management, was less well received. In the USA, the death of the irascible Taylor did
               much to overcome the early opposition to Scientific Management, especially among
               trade union leaders. It was enthusiastically taken up by capitalists in Japan and com-
               munists in Russia, though it met with stiff resistance in other European countries. In
               the 1930s, Scientific Management and a streamlined version, the Bedeaux system,
               were rejected by both unions and management in a large number of European coun-
               tries, though after the Second World War, it was heavily promoted as part of the
               Marshall Plan for the rebuilding of Europe (Carew, 1987; Rose, 1988).
                  Despite its growing dominance, from the 1930s, the Classical approach began to
               encounter both intellectual and practical opposition. This is shown clearly in Exhibit
               2.1, which makes three assertions about the nature of organisations and individuals
               which strike at the very heart of the Classical approach:
               1 Organisations are not machines but cooperative systems. To operate effectively and
                 efficiently, they require the active cooperation of workers and not just their passive
                 obedience.
               2 People are motivated by a range of rewards, including social esteem, not just mone-
                 tary ones.
               3 Motivating factors change over time; what motivates a person one day may be
                 ineffectual the next.
The Human Relations approach   55

       To add insult to injury, many of these assertions, including Exhibit 2.1, came from
       practising managers rather than ‘unworldly’ academics.
          Therefore, although the Classical school could claim much success, especially in the
       USA, there was also a rising tide of conflicting evidence. This could have led to the devel-
       opment and strengthening of the Classical approach, and clearly this did happen to an
       extent (see the work of Ralph Davis, 1928, on rational planning). However, as this chap-
       ter will show, what emerged were two new approaches to organisations: the Human
       Relations approach, which originated in the 1930s and in which Chester Barnard was a
       key figure, and the Contingency approach, which was developed in the 1960s.
          The first half of this chapter describes the Human Relations approach. This
       approach was a reaction against the mechanistic view of organisations and the pes-
       simistic view of human nature put forward in the Classical approach. It attempted to
       reintroduce the human element into organisational life, and claim for itself the title of
       the ‘one best way’. In particular, it contended that people have emotional as well as
       economic needs, and that organisations are cooperative systems that comprise infor-
       mal structures and norms as well as formal ones. This left managers with something
       of a dilemma: which ‘one best way’ should they adopt, the Classical or Human
       Relations approach.
          As the second half of this chapter will show, it was in response to this dilemma that
       Contingency Theory developed in the 1960s. Contingency Theory began by question-
       ing and rejecting the idea that there is a ‘one best way’ for all organisations. Instead,
       it argued for a ‘one best way’ for each organisation. It did not, therefore, reject the
       Classical approach and the Human Relations approach; instead it maintained that the
       structures and practices of an organisation are dependent (i.e. contingent) on the cir-
       cumstances it faces. The main contingencies it proposed were environmental
       uncertainty and dependence, technology and organisation size. After discussing the
       merits and drawbacks of the Human Relations approach and Contingency Theory,
       the chapter concludes that neither appears to be the solution to all known organisa-
       tional ills that their proponents claim. In particular, it is argued that both fail to
       reflect and explain the complexities of day-to-day organisational life.


The Human Relations approach
       Even while the Classical approach was still struggling to establish itself, the seeds of a
       new approach to organisational design were already being sown. The origins of what
       later became known as the Human Relations approach can be traced to studies on
       work fatigue carried out in Britain during the First World War and work in the USA,
       at the same time, on employee selection, which gave new insights into employee moti-
       vation (Burnes, 1989). This work was developed and extended in the 1920s by Myers
       (1934) in Britain and Mayo (1933) in the USA, providing new perspectives on organi-
       sational life. These studies gave substance to a growing suspicion that the Classical
       view of organisations as being peopled by human robots motivated by money was
       badly flawed. Indeed, in 1915, the United States Congress took a stand against the
       use of Taylor’s techniques in their establishments – although Scientific Management
       was becoming more accepted in private industry and was beginning to cross national
       boundaries, not always successfully (Rose, 1988). Similarly, though the growth of
56   Chapter 2 · Developments in organisation theory

               bureaucracy was gathering pace, so too was people’s antagonism towards faceless,
               machine-like organisations where employees and customers alike lost their individual-
               ity and became numbers.
                  In addition, as Davis and Canter (1955) argued, it is necessary to recognise that
               jobs and work organisation are social inventions put together to suit the specific
               needs and to reflect the culture, ideology and the governing concept or ethos of the
               time. Therefore, to understand the emergence of the Human Relations movement, it
               is necessary to be aware of the changes taking place in Western society prior to and
               just after the Second World War.
                  In the 1930s, in many countries, there was the emergence of a more collectivist
               ethos than had previously been the case. In the USA, this was brought about by the
               reaction to the Depression of the 1920s and 1930s. The election of FD Roosevelt and
               the advent of his ‘New Deal’ introduced a new element of collective provision and
               concern into a previously highly individualistic nation. It also heralded the advent of
               ‘Big Government’ in the USA. In Europe, this collectivist ethos led to greater social
               concern; collective provision was led by the Scandinavian countries, and reflected the
               election of social democratic governments and a general mood of cooperation rather
               than conflict in industry in these countries. Similar developments also became the cor-
               nerstone of the rebuilding of Western Germany after the end of the Second World
               War. The legacy of the collective effort needed to win the war was also evident in the
               UK with the construction of the Welfare State.
                  It was in the USA in the 1930s and 1940s that substantial evidence first emerged in
               print which challenged the Classical view of organisations and allowed the Human
               Relations approach to stand alongside, if not quite supersede, it. The main precepts of
               the Human Relations approach were almost diametrically opposed to those of the
               Classical approach. In particular, it argued the following points:
               ■   People are emotional rather than economic-rational beings. Human needs are far
                   more diverse and complex than the one-dimensional image that Taylor and his
                   fellow travellers conceded. People’s emotional and social needs can have more
                   influence on their behaviour at work than financial incentives.
               ■   Organisations are cooperative, social systems rather than mechanical ones. People
                   seek to meet their emotional needs through the formation of informal but influen-
                   tial workplace social groups.
               ■   Organisations are composed of informal structures, rules and norms as well as
                   formal practices and procedures. These informal rules, patterns of behaviour and
                   communication, norms and friendships are created by people to meet their own
                   emotional needs. Because of this, they can have more influence on individual
                   behaviour and performance, and ultimately on overall organisational performance,
                   than the formal structure and control mechanisms laid down by management.
               For these reasons, organisations can never be the predictable, well-oiled machines envis-
               aged by the Classical approach. Therefore, in most respects, the Human Relations
               approach represents a distinct break from the ideas of the Classical school. However, in
               two important ways, similarities exist. The first is their shared belief in organisations as
               closed, changeless entities. Once organisations have structured themselves in accordance
               with the correct precepts, then, regardless of external or even internal developments, no
               further changes are necessary or desirable. This leads on to the second similarity: pro-
The Human Relations approach    57

  ponents of both believed they had discovered the ‘one best way’; regardless of the type,
  nature or size of organisation, their precepts were the correct ones.
    With that in mind, we can now begin to examine in detail the case for Human
  Relations. Despite the work of precursors, no one doubts that the Human Relations
  approach began in earnest with the famous Hawthorne Experiments.


■ Elton Mayo (1880–1949) and the Hawthorne Experiments
  Elton Mayo was born in Adelaide, Australia in 1880. He had a somewhat chequered
  career. He failed three times to qualify as a medical doctor, and eventually became a
  lecturer in logic, psychology and ethics at the University of Queensland in 1911. There
  he developed a strong interest in the political problems of industrial society, and a life-
  long commitment to achieving social and industrial harmony. However, he was never
  very happy at Queensland and, in 1922, he emigrated to America. There, Mayo was
  fortunate in that his ideas on resolving industrial conflict attracted the attention of the
  Laura Spelman Rockefeller Memorial Foundation, which funded his entire career at
  the Harvard Business School. In effect, this meant that Mayo could pursue his own
  research without let or hindrance from university authorities. This was a major factor
  in the single-mindedness and success with which he undertook his work.
     Elton Mayo is considered by many as the founder and leading light of the Human
  Relations movement. On his retirement as Professor of Industrial Research at Harvard
  Business School in 1947, Mayo was one of the most celebrated social scientists of the
  age. In praise of his achievements, the business magazine Fortune wrote of him:

   Scientist and practical clinician, Mayo speaks with a rare authority that has commanded
   attention in factories as well as Universities. His erudition extends through psychology, soci-
   ology, physiology, medicine and economics, and his experience comes from a lifelong
   first-hand study of industry.                                     (Quoted in Smith, 1998: 222)


     Much of his fame rested on the ‘Hawthorne Experiments’ carried out at Western
  Electric’s Hawthorne Works in Chicago in the 1920s and 1930s. However, within 10
  years of his departure from Harvard, his reputation was in tatters: his expertise as a
  researcher was seriously questioned, his work was criticised for being too ‘manageri-
  alist’ and, perhaps most importantly, his contribution to the Hawthorne Experiments
  was considered as no more than a public relations exercise for Western Electric (Rose,
  1988; Sheldrake, 1996; Smith, 1998).
     The Hawthorne Experiments, as Gillespie (1991: 1) commented:

   ... are still among the most frequently cited and most controversial experiments in the social
   sciences ... They are acclaimed as a landmark study in both sociology and psychology ...
   Surveys in the key developments in organization and management theory consistently note
   the seminal contribution of the experiments to their field.


  Yet, for most of the 80 years since the Hawthorne Experiments were initiated, it has
  been difficult to identify Mayo’s exact role (Smith, 1987). That the name of Elton
  Mayo is inextricably linked with the Hawthorne Experiments is undeniable. That
  Mayo publicised and was given credit for masterminding these is also undeniable.
  Until recently, though, key questions have remained unanswered: did Mayo design
58   Chapter 2 · Developments in organisation theory

               and implement the experiments himself? What was the role of his colleagues at
               Harvard? How frequently did he visit the Hawthorne Works? Now, with the avail-
               ability of family records and other archival material, Smith (1998) claims to have
               answered Mayo’s detractors and to have re-established him both as the key figure in
               the Hawthorne Experiments and as the dominant figure in the Human Relations
               movement. Nevertheless, given the vehemence of Mayo’s critics (Rose, 1988), one
               suspects that the debate over the ‘Mayo mystique’ is not yet over.
                  Despite the difficulty in separating out the myth from the man, we should not let
               that undermine the significance of the Hawthorne work or what we know of Mayo
               and his colleagues’ contribution, even if we cannot clearly identify who did what. The
               Hawthorne programme was originally devised by Western Electric’s own industrial
               engineers in 1924. Western Electric was the manufacturing division of the American
               Telephone and Telegraph Company. The Hawthorne Works, which at the time
               employed some 30,000 people, was considered a prime example of the application of
               the mass production techniques and work organisation methods advocated by
               Frederick Taylor and Henry Ford. However, this was tempered by the company’s per-
               sonnel and welfare policies which provided pension, sickness and disability benefits, a
               share purchase plan, medical treatment, extensive recreational facilities and a system
               of worker representation. This example of ‘welfare capitalism’ had the twin aims of
               reducing worker dissatisfaction and resisting trade union influence (Sheldrake, 1996).
                  The first phase of the Hawthorne Experiments, which lasted on and off until 1927,
               was the Hawthorne Illumination Tests (HIT), which were designed to examine the
               effects of various levels of lighting on workers’ productivity. The engineers established
               control and experimental groups: the latter were subject to different levels of illumi-
               nation as they carried out their work whilst the lighting of the control group was left
               unchanged. At the outset this looked like a standard Scientific Management experi-
               ment in the mould of Taylor and the Gilbreths. What the engineers were expecting
               was a set of unambiguous results that would allow them to establish the ‘one best’
               level of illumination. This did not happen and, instead, data began to emerge that
               challenged the very basis of Scientific Management.
                  The engineers had expected the performance of the experimental group to vary
               with increases and decreases in illumination and for an optimum level to be estab-
               lished, but as the illumination was varied, so output continued to increase. Indeed,
               output only decreased in the experimental group when the lighting became so dim
               that it was difficult to see. More puzzling still, output in the control group, where no
               changes were made, also increased.
                  In 1927 the company began the second phase of the Hawthorne Experiments.
               Building on the HIT work, the company wanted to establish the effects on productiv-
               ity of increased rest periods, a shorter working day, a reduced working week, free
               refreshments, changes to payment systems, better and friendlier communication, and
               a relaxation in the customary discipline usually imposed by first line supervisors. The
               first group to be involved were six women in the Relay Assembly Test Room (RATR).
               As Gillespie (1991: 59) noted:


                 [Their] privileged status and a modicum of control over work days brought about a strong
                 identification with the test room among the workers ... With the introduction of refresh-
                 ments during the morning rest period, the women’s status soared higher still.
The Human Relations approach   59

By 1929, productivity in the RATR group had increased by some 30 per cent. In the
interim, the company also initiated a further series of experiments in which, from
1928 onwards, Elton Mayo and his colleagues were closely involved. In the years that
followed, successive groups of workers were subjected to changes in hours, payment
systems, rest periods, etc. The subsequent changes in output, and the reasons put for-
ward for these, undermined many of the assumptions regarding organisations and
human behaviour previously perceived as sacrosanct (Mayo, 1933; Roethlisberger
and Dickson, 1938).
   The experiments were monitored continuously; from this work, Mayo and his col-
leagues concluded that it was not the changes in working conditions that affected
output, but the fact that those workers involved had been singled out for special
attention. This acted to increase their morale and make them want to perform better.
It was the very fact that they were being studied which produced the increased per-
formance; this later became known as the ‘Hawthorne Effect’. This accounted for the
improved performance by the original HIT control group, even with no changes to
the lighting in their area: they also felt ‘special’ because they were being studied.
These findings led Mayo and his group to move the focus of their work away from
the reaction of individual workers to changes in their working conditions. Instead,
they began to investigate the role and behaviour of the ‘informal’ groups that workers
themselves established, and the norms and attitudes of these groups.
   As a result of this work, Mayo and his colleagues put forward two major proposi-
tions that came to form the core of the Human Relations approach. The first related
to the importance of informal groups within the formal structure of organisations.
The Western Electric studies demonstrated the need to see the work process as a col-
lective, cooperative activity as opposed to an individual, isolated one. The studies
showed in particular the important effect that the informal, primary work group has
on performance. These groups tend to develop their own norms, values and attitudes
that enable them to exert strong social, peer group pressure on individuals within the
group to conform to group norms, whether this be in relation to the pace of work or
attitudes towards other groups and supervisors. Taylor, years before, had also noted
the pressure that groups of workers could exert over their members to make them
conform; however, he believed that this was abnormal behaviour which could be
remedied by tight managerial control. What the Western Electric studies demon-
strated was that far from being abnormal, such behaviour was perfectly normal.
   The second proposition put forward by Mayo and his colleagues was that humans
have a deep need for recognition, security and belonging. Rather than being purely
economic beings, it was argued that the Hawthorne Experiments demonstrated that
workers’ performance and attitudes could be influenced more by their need for
recognition and security, and also by the feeling of belonging engendered by infor-
mal groups. This latter point in particular reflected, in Mayo’s view, a deep-seated
desire by humans as social beings for intimacy, consistency and predictability. Where
these social certainties were lacking, workers would deliberately seek to manufacture
them by creating their own informal work groups. Therefore, rather than seeking to
eradicate or undermine the workings of these informal groups, as Taylor had advo-
cated, the Western Electric studies showed that management needed to gain the
collaboration and cooperation of such groups if they were to get the best perform-
ance from workers.
60   Chapter 2 · Developments in organisation theory

                  It is generally agreed (Mullins, 1989; Rose, 1988) that the Western Electric studies
               had a dramatic effect on management and organisation theory. The studies ushered in
               an era where the Economic Man of the Classical approach was supplanted by Social
               Man. It was no longer possible for managers to ignore the effects of organisational
               structures and job design on work groups, employee attitudes and management–
               worker relations. The crucial issue became one of social relationships – Human
               Relations – in the workplace. In future, the focus of good management practice
               would shift to the importance of leadership and communication in order to win over
               employees. As the 1930s and 1940s progressed, other work began to emerge which
               both substantiated and broadened those findings.


           ■ Chester Barnard (1886–1961) and cooperative systems
               Chester Barnard was born in Malden, Massachusetts in 1886. On leaving school, he
               became a piano tuner, but later attended Harvard University where he studied econom-
               ics. On leaving university, he went to work for the American Telephone and Telegraph
               Company, in whose subsidiary, Western Electric, the Hawthorne studies were carried
               out. He was initially employed as a statistician, but quickly rose to hold a number of
               senior executive positions including, by the age of 41, becoming President of the New
               Jersey Bell Telephone Company. He also established his credentials as a prolific writer
               and lecturer with strong links to a number of universities, including Harvard. On retir-
               ing in 1948, he became President of the Rockefeller Foundation.
                  Barnard is best known for his book The Functions of the Executive (1938), which
               has a comparable place in the Human Relations literature to that of Fayol’s work in
               the literature of the Classical school. In this work, Barnard put forward the idea of
               organisations as cooperative systems. In so doing, this gave him a double claim to
               fame: not only did he draw attention to the cooperative nature of organisational life,
               but he was also one of the first to treat organisations as systems rather than
               machines. He was in frequent touch with Mayo and his colleagues at Harvard, and
               closely followed their work at Western Electric. Therefore, although The Functions of
               the Executive was a personal and idiosyncratic work, reflecting Barnard’s own dis-
               tinct views and opinions, it was far from being bereft of academic substance. Indeed,
               his book was the first systematic attempt in English (Weber’s work on bureaucracy
               was still not translated into English at this time) to outline a theory of organisations
               as a whole. In this respect, Barnard can claim both to have made a substantial contri-
               bution to the Human Relations approach and to have laid the ground work for
               subsequent writers such as Selznick and Simon (Robbins, 1987; Scott, 1987).
                  Barnard had close links with Harvard Business School and, along with Elton Mayo,
               Talcott Parsons (who first translated Weber’s work into English) and Joseph
               Schumpeter, was a member of the Harvard Pareto Circle. This group was established
               to discuss and promote the work of the Italian sociologist Vilfredo Pareto, whose writ-
               ing placed great emphasis on social systems and social equilibrium (Sheldrake, 1996).
                  The influence of Pareto’s social systems view can be seen in Barnard’s depiction of
               organisations as cooperative systems. An organisation is a cooperative system, he
               argued, because without the willingness of its members to make contributions to and
               to pursue its goals, it cannot operate effectively. Like others who espoused the Human
               Relations approach, he believed cooperation could not be achieved solely by mone-
The Human Relations approach   61

  tary incentives. Instead, he advocated a mixture of monetary and non-monetary
  inducements. Similarly, cooperation by itself would not be effective unless an organi-
  sation also possessed a common purpose: clear and realistic goals and objectives
  that the organisation’s members could understand, relate to and pursue. Establishing
  this common purpose, in Barnard’s opinion, had to be the responsibility of those at
  the top of the organisation, but achieving it required the cooperation of those at
  the bottom, and all levels in between. This leads to another of Barnard’s assertions:
  the flow of authority is not from the top down but from the bottom up. He defined
  authority not as a property of management but as a response by subordinates to supe-
  riors. If subordinates did not respond willingly and appropriately, then no authority
  existed. In this example, as in many others, he both reflected the influence of and sup-
  ported the findings of the Western Electric studies, which drew attention to the ability
  of workers through social groupings to facilitate or frustrate the will of management.
     In order to avoid a negative response from workers, Barnard advocated systematic
  and purposeful communication. He saw communication, through both formal and
  informal structures, as being the key function of the executive. Indeed, he portrayed
  the organisation as a purposeful, coordinated system of communications linking all
  participants in a manner that not only encouraged the pursuit of the organisation’s
  common purpose, but also legitimated the premises on which it was based. However,
  he argued that this does not happen automatically or accidentally; it is the product of
  effective leadership. This is why Barnard stressed the key role of the executive in lead-
  ing the organisation by facilitating communication and motivating subordinates to
  high levels of performance; such developments could only come from the top. He also
  saw the executive as having a role in shaping and reinforcing the organisation’s value
  systems or, as modern writers would put it, its culture.
     Given the emphasis placed by Barnard on the setting and pursuit of clear objec-
  tives, and in his approach in general, there is a degree of overlap with the work of the
  Classical School. However, what significantly distinguishes him from them is his insis-
  tence on the non-rational, informal, interpersonal, and indeed moral basis of
  organisational life. His view of effective leadership also distinguishes him from the
  Classical school. Rather than seeing leadership as dependent on position, Barnard
  argued that successful leadership arose from the interplay between the individual
  leader, the followers and the context.
     Above all, Barnard rejected the idea of material incentives being the only incentives
  to make people work purposefully. Indeed, he saw them as being ‘weak incentives’
  that needed to be supported by other psychological and sociological motivators if
  organisations were to be successful in achieving their common purpose. In thus chal-
  lenging the effectiveness of material incentives, he was to receive substantial support a
  few years later from a more academic source.


■ Abraham Maslow’s (1908–1970) hierarchy of needs
  Abraham Maslow was born in Brooklyn, New York in 1908. He trained as a psy-
  chologist at the University of Wisconsin and, apart from a brief period working in the
  family business, spent his working life in academia. Maslow was one of the first to
  differentiate between and classify different types of human need. For Taylor and his
  adherents, there was only one form of need: material/monetary need. Mayo et al and
62   Chapter 2 · Developments in organisation theory

               Barnard took a different view; they drew a distinction between material and non-material
               needs, but made no distinction within these two categories. Maslow (1943) identified five
               distinct forms of human need which he placed in a hierarchical order. He argued that,
               beginning at the lowest level, a person had to satisfy substantially the needs at one level
               before they could move up the hierarchy and concentrate on ‘higher order’ needs.
                  In ascending order, the five levels in Maslow’s hierarchy of needs are:
               ■   Physiological needs – hunger, thirst, sleep, etc.; only when these basic needs have
                   been satisfied do other needs begin to emerge.
               ■   Safety needs – the desire for security and protection against danger.
               ■   Social needs – the need to belong, to gain love and affection; to be in the company
                   of others, especially friends.
               ■   Esteem needs – these reflect a person’s desire to be respected – esteemed – for their
                   achievements.
               ■   Self-actualisation needs – self-actualisation is the need to achieve one’s full potential.
                   According to Maslow, this will vary from person to person and, indeed, may differ
                   over time, as a person reaches a level of potential previously considered unattainable
                   and so goes on to strive for new heights. For these reasons, self-actualisation is a con-
                   tinuously evolving process throughout a person’s lifetime.
               Maslow (1943: 383) recognised that there were weaknesses in his theory of needs:
               ‘Since, in our society, basically-satisfied people are the exception, we do not know
               much about self-actualisation, either experimentally or clinically.’ He accepted that
               the strength of the hierarchy might differ with individual circumstances – some
               people’s aspirations may be so deadened by their experiences that they would be satis-
               fied by having enough to eat. He also saw that cultural differences between societies
               could have an impact on the extent and order of needs. Nevertheless, he did believe
               that his theory was generally applicable and that where people’s higher aspirations
               were thwarted or unmet, the result was likely to be frustration and de-motivation.
                  Though not designed specifically for organisational analysis, but rather in the con-
               text of life in general, it can be seen why Maslow’s work was so readily accepted by
               proponents of the Human Relations approach. For them, it explained why in some
               situations Tayloristic incentives were effective, whilst in other situations, such as the
               Hawthorne Experiments, other factors proved more important.
                  Applying Maslow’s hierarchy of needs to human behaviour in organisations, it can
               be seen that people will first of all be motivated by the desire to satisfy physiological
               needs through monetary rewards. Once those have been substantially satisfied, how-
               ever, workers will seek to satisfy – be motivated by – their safety needs, such as job
               security and welfare benefits. In a similar fashion, once safety needs are substantially
               met, these will fade into the background and social needs will come to the fore; people
               will want to be accepted as part of a group, to share common intents and aspirations
               with the group, to experience the bonds of friendship and loyalty. Clearly, these social
               needs played an important role in the Hawthorne Experiments, as did esteem needs.
               After social and esteem needs are substantially met, finally self-actualisation needs
               come to the fore. However, as mentioned above, the need for self-actualisation never
               wanes but tends to act as a continuing spur to further achievements.
                  Clearly, Maslow’s work cannot be transferred fully into the organisational setting,
               given that the constraints on freedom of action imposed by most jobs do not allow
The Human Relations approach   63

  individuals to approach, let alone attain, self-actualisation (Rose, 1988). Even very
  basic physiological needs are beyond the reach of many millions of people in the
  world. Nevertheless, in pointing to the negative effects of thwarting an individual’s
  aspirations, and in distinguishing between types of intrinsic (non-material) and extrin-
  sic (material) motivators, and arguing that, at any one time, it is the unmet needs
  which act as positive motivators, Maslow has had an enormous impact on job design
  and research (see Child, 1984; Smith et al, 1982). The influence of Maslow’s theory
  of needs can be seen in the work of other exponents of Human Relations, especially
  Douglas McGregor.


■ Douglas McGregor (1906–1964) and Theory X–Theory Y
  Douglas McGregor was born in 1906. He received his doctorate in psychology from
  Harvard, and spent much of his working life at the Massachusetts Institute of
  Technology where, from 1954 until his death in 1964, he was the first Sloan Fellows
  Professor. McGregor is one of the most widely cited Human Relations writers. He
  developed his views from his personal experience and observations as an academic,
  consultant and university administrator rather than from empirical research.
     In his book The Human Side of Enterprise (1960), McGregor argued that decisions
  taken by top managers on the best way to manage people were based on their
  assumptions about human nature. McGregor maintained that there are basically two
  commonly-held views of human nature: a negative view – Theory X; and a positive
  view – Theory Y. He believed that managers’ behaviour towards their subordinates
  was based upon one or other of these views, both of which consist of a certain group-
  ing of assumptions about human behaviour.
     Theory X, which he believed dominated the literature and practice of management,
  consists of the following assumptions:
  ■   The average person dislikes work and will avoid it wherever possible.
  ■   Employees must be coerced, controlled or threatened with punishment if they are
      to perform as required.
  ■   Most people try to avoid responsibility and will seek formal direction whenever
      possible.
  ■   Workers place security above other factors relating to employment and will display
      little ambition.
  Theory Y, on the other hand, comprises a group of assumptions that give a much
  more positive view of human nature:
  ■   Most people can view work as being as natural as rest or play.
  ■   Workers are capable of exercising self-direction and self-control.
  ■   The average person will accept and even seek responsibility if they are committed
      to the objectives being pursued.
  ■   Ingenuity, imagination, creativity and the ability to make good decisions are widely
      dispersed throughout the population and are not peculiar to managers.
    Theory X and Theory Y are not statements about what people are actually like,
  but rather the general assumptions that managers, and the rest of us, hold about what
  people are like. The fact that such views may not have a base in reality is irrelevant if
64   Chapter 2 · Developments in organisation theory

               managers act as though they are true. Managers who adhere to Theory X will use a
               combination of stick and carrot methods to control their subordinates, and will con-
               struct organisations that restrict the individual’s ability to exercise skill, discretion
               and control over their work. Those managers who adhere to Theory Y will adopt a
               more open and flexible style of management. They will create jobs that encourage
               workers to contribute towards organisational goals and allow them to exercise skill
               and responsibility, and where the emphasis will be on non-material incentives.
                  Obviously, Theory X is akin to the Classical view of human nature and organisa-
               tional design, whereas Theory Y falls more in the Human Relations tradition. Though
               McGregor favoured Theory Y, he recognised that it could not be fully validated.
               Instead, he saw Theory Y as a challenge to the orthodoxy of Theory X and, as he put
               it (McGregor, 1960: 53), as an ‘invitation to innovate’. He argued that there was
               nothing inevitable about which approach to adopt. The choice lies with managers;
               those who adhere to Theory X will create a situation where workers are only able
               and willing to pursue material needs (as Maslow observed). Such workers will be nei-
               ther prepared nor in a position to contribute to the wider aims and objectives of the
               organisation that employs them. Managers who follow Theory Y precepts are likely
               to receive an entirely different response from their employees; workers will identify
               more clearly with the general interests of the organisation, and be more able and
               more willing to contribute to their achievement.
                  Though stressing the element of choice, McGregor, along with other Human
               Relations adherents, believed that changes in the nature of modern societies meant
               that organisations were moving, and should move, more in the direction of Theory Y.


           ■ Warren Bennis (1925–) and the death of bureaucracy
               By the 1950s and 1960s, the Human Relations approach and the values it espoused
               were in the ascendancy. One clear sign of this was the widely-held view in the 1960s
               that bureaucracy was dying and being replaced by more flexible, people-centred
               organisations that allowed and encouraged personal growth and development. One of
               the main exponents of this view is Warren Bennis.
                  Warren Bennis trained as an industrial psychologist and held a number of senior
               academic appointments, including Professor of Management at the University of
               Southern California. He is now best known for his work on leadership, and has acted
               as an adviser to four US presidents. In terms of the Human Relations movement,
               Bennis (1966) is credited with coining the phrase and making the case for ‘the death
               of bureaucracy’. Bennis argued that every age develops an organisational form appro-
               priate to its time. Bureaucracy was, in his view, appropriate for the first two-thirds of
               the twentieth century but not beyond that. He believed that bureaucracy emerged
               because its order, precision and impersonal nature was the correct antidote for the
               personal subjugation, cruelty, nepotism and capriciousness that passed for manage-
               ment during the Industrial Revolution.
                  Bureaucracy, he stated, emerged as a creative and wholesome response to the needs
               and values of the Victorian Age. Up to this point, there is little to distinguish Bennis
               from Weber; however, he then went on to argue that the Victorian Age, and its needs,
               were dead and that new conditions were emerging to which bureaucracy was no
               longer suited. These conditions were:
The Human Relations approach   65

  ■   Rapid and unexpected change – bureaucracy’s strength lies in its ability to manage
      efficiently the routine and predictable; however, its pre-programmed rules and
      inflexibility make it unsuitable for the rapidly changing modern world.
  ■   Growth in size – as organisations become larger, then bureaucratic structures
      become more complex and unwieldy, and less efficient.
  ■   Increasing diversity – rapid growth, quick change and an increase in specialisation
      create the need for people with diverse and highly specialised skills; these specialists
      cannot easily or effectively be fitted within the standardised, pyramid structure of
      bureaucratic organisations.
  ■   Change in managerial behaviour – the increasing adoption of the Human Relations
      approach by managers challenges the simplistic view of human nature put forward
      by the Classical school, which underpins bureaucracy. If coercion and threats
      administered in a depersonalised, mechanistic fashion are counter-productive as a
      way of controlling people in organisations, then the case for bureaucracy is
      severely diminished.
  For Bennis and others such as Daniel Bell (1973), Alvin Toffler (1970) and EF
  Schumacher (1973), bureaucracy was rightly dying and being replaced by more
  diverse, flexible structures which could cope with the needs of the modern world.


■ Job Design: operationalising Human Relations
  Though intellectually strong, the Human Relations school remained operationally
  weak up to the 1950s and 1960s because, unlike the Classical school, it lacked a clear
  set of operational definitions and guidelines that allowed organisations to understand
  and implement it in the same way that they could with Scientific Management or
  bureaucracy. The advent of the Job Design movement in both the USA and Europe
  rectified this.
     In the last 50 years, Job Design, or work humanisation as it has also been called,
  has become a powerful technique for rolling back the worst excesses of the Classical
  school, especially in the area of manual work, where Scientific Management and its
  clones have had such an impact. It was in America in the 1950s that Davis and
  Canter (1955), influenced by the work of the Human Relations school, questioned
  the Tayloristic basis of job design and work organisation. They suggested that it
  would be possible to design jobs that satisfied not only human needs but also organi-
  sational ones as well. They argued that increased job satisfaction and increased
  organisational performance went hand in hand. Since then many other writers, espe-
  cially in Europe, have contributed to the development of Job Design theory (Davis et
  al, 1955; Guest, 1957; Hackman and Oldham, 1980; Likert, 1961; Trist et al, 1963;
  Warr, 1987).
     Job Design is a direct attack on the precepts of the Classical approach. Whereas
  Taylorist tradition seeks to fit people to rigidly defined and controlled jobs, Job
  Design theorists argue that jobs can and should be fitted to human needs. The basic
  tenets of Job Design are relatively straightforward and follow on from the work of
  the proponents of the Human Relations approach, especially Maslow. It is argued
  that the Classical approach to jobs, with its emphasis on fragmenting jobs and reduc-
  ing workers’ autonomy and discretion, is counter-productive to both individual
66   Chapter 2 · Developments in organisation theory

               fulfilment and organisational performance. This is because boring, monotonous and
               meaningless jobs lead to poor mental health and feelings of dissatisfaction. In turn,
               this can result in lack of motivation, absenteeism, labour turnover and even industrial
               unrest (Arnold et al, 1998).
                  The solution to these problems follows from the analysis. If Tayloristic trends in
               job design are counter-productive, then they should be reversed and ‘variety, task
               completeness and, above all, autonomy’ should be built into jobs (Wall et al, 1984:
               15). Such a move would promote workers’ mental health and job satisfaction, bring-
               ing in turn increased motivation and performance. Just as Taylor believed his
               approach would benefit both workers and management, so too do the proponents of
               Job Design; the difference is that the benefit to the worker is personal fulfilment
               rather than increased wages, though in both systems the benefit to management is
               increased productivity (Friedman, 1961; Hackman and Lawler, 1971; Herzberg et al,
               1959; Kelly, 1982a, 1982b).
                  In practice, there are three main variants of Job Design:
               ■   Job enlargement, which concentrates on increasing work variety by combining pre-
                   viously fragmented tasks together, or by rotating people between different types of
                   work (Guest, 1957).
               ■   Job enrichment, which concentrates on increasing workers’ control over what they
                   do by rearranging work so that some of the responsibilities previously borne by
                   supervisors and support staff are given to individuals or, more often, semi-
                   autonomous work groups (Herzberg, 1968).
               ■   Socio-Technical Systems theory, which is a variant on Job Design involving a shift of
                   focus from the individual job to the organisation as a whole. Socio-Technical Systems
                   theory sees organisations as being composed of interdependent social and technical
                   systems. The theory argues that there is little point in reorganising the social system
                   in isolation from the technology being used, and that the level of performance
                   achieved is dependent on the degree of fit between the two. This view sees technol-
                   ogy as acting as a limitation on the scope for redesigning individual jobs (Davis,
                   1979; Dunphy and Griffiths, 1998; Trist et al, 1963). It follows, therefore, that Job
                   Design must go hand-in-hand with technological change if it is to be successful.
                  Job Design emerged and attracted so much attention in the 1950s and 1960s for
               three main reasons:
               1 The first flows from the work of Maslow (1943). As workers have become better
                 educated and more affluent, their higher order needs such as self-actualisation have
                 come to the fore. This means that in order to obtain the best performance from
                 workers, jobs have to be designed to meet their psychological as well as their finan-
                 cial needs (Kelly, 1982b).
               2 As markets have become more global, more competitive and more volatile, organi-
                 sations need to be more responsive to the needs of their customers. This requires
                 workers to be more flexible, possess a greater range of skills, and be able to work
                 as part of a team rather than on an individual basis (Aglietta, 1979; Streeck, 1987).
               3 Low unemployment in the 1950s, 1960s and 1970s led to high rates of labour
                 turnover and absenteeism and endemic industrial unrest in industries and organisa-
                 tions with poor job design (Pruijt, 1997). This was certainly a major reason for
                 Volvo’s adoption of Job Design in the 1970s (see Chapter 12).
The Human Relations approach   67

     Since the 1950s, the USA and most European countries have initiated some form of
  officially sponsored ‘Work Humanisation’ programme. Not surprisingly, Norway and
  Sweden, with their traditions of industrial cooperation and democracy, and what was
  West Germany, with its post-war commitment to industrial consensus and worker
  rights, led the way in terms of financial and legal backing. Norway initiated the
  process with its Industrial Democracy Project (1962–1975). Sweden has probably
  been the most consistent, however, establishing the Work Environment Fund in 1972,
  with a budget of SEK 500 million per year, and creating the New Factories
  Programme at the same time. In 1976 it enacted the Co-determination Act, which
  ensures that trade unions have a right to be consulted on all major changes in work-
  ing conditions. In 1977, the Swedish government created the Centre For Working Life
  (later the Institute For Work Life Research) to initiate and promote work humanisa-
  tion. In the 1980s, it initiated the Swedish Development Programme (1982–1987), the
  Leadership, Organisation and Co-determination Programme (1985–1990), and the
  People, Data, Working Life Programme (1987–1992). Germany has seen a similarly
  consistent approach with the Humanisation of Working Life Programme
  (1974–1989) and the Work and Technology Programme (1989–). Germany also pro-
  vided subsidies (around DM 100 million per year) to encourage the adoption of Job
  Design practices (Pruijt, 1997).
     Some of the Job Design initiatives in these countries were inspired by Norwegian
  researchers such as Einar Thorsrud, who propagated the concept of semi-autonomous
  work groups. Others derived from the work on the socio-technical systems approach
  carried out by the Tavistock Institute in London (Auer and Riegler, 1990). In the UK,
  however, despite the presence of the Tavistock Institute and the establishment of the
  Work Research Unit in 1974, official backing has been noticeably lukewarm. Indeed,
  even the modest expenditure devoted to the Work Research Unit was cut back consid-
  erably in the 1980s, and the Unit has now been disbanded. Successive UK
  governments now seem to share the American view that ‘Quality of Working Life’
  programmes are the purview of individual organisations rather than something to be
  promoted by government.
     To a great degree, the popularity of Job Design seems to have fluctuated with
  employment levels. In the full-employment era of the 1950s and 1960s, governments
  and employers in the West seemed relatively receptive to it. With the recessions of the
  1970s and 1980s, however, interest fell away in most countries. The exceptions were
  Sweden and Germany, both countries where unemployment remained relatively low
  in the 1970s and 1980s. Despite this, there can be little doubt that Job Design pre-
  cepts have permeated Western society on a significant scale, and provide the main
  operational alternative to the Classical approach; as Pruijt (1997) noted, however,
  Tayloristic work practices have proved far more persistent than the proponents of Job
  Design had expected.


■ The Human Relations approach: summary and criticisms
  Though many tend to associate the Human Relations movement exclusively with the
  work of Mayo, the above shows that it is a much more diverse school of thought.
  Indeed, some have argued that to call it a school owes more to academic convenience
  than to reality (Rose, 1988). Nevertheless, there are continuing and overlapping
68   Chapter 2 · Developments in organisation theory

               themes in the work of the writers cited above which strongly bond them together. The
               first, and most obvious, is their almost total rejection of the Classical movement’s
               mechanistic-rational approach towards people and organisation structures. As
               Dunphy and Griffiths (1998: 21) noted:

                   In particular, they attacked the notion of employees as interchangeable parts, stressing that
                   individual employees had different motivations; that the specialisation of labour and
                   deskilling had created widespread alienation and demotivation; and that excessive supervi-
                   sion had crushed employee initiative.


                  The second and more fundamental feature is that whilst approaching the issues
               involved from different perspectives and emphasising separate aspects, they create an
               organisational model that possesses both coherence and plausibility.
                  The Human Relations model stresses three core elements:
               ■    leadership and communication;
               ■    intrinsic job motivation (as well as extrinsic rewards);
               ■    organisation structures and practices which facilitate flexibility and involvement.
               These elements are underpinned by two central propositions:
               ■    Organisations are complex social systems, with both formal and informal social
                    structures, and are not mechanical contrivances. Therefore, they cannot effectively
                    be controlled by close supervision, rigid rules and purely economic incentives.
               ■    Human beings have emotional as well as economic needs. Organisation and job
                    structures need to be designed in such a way as to enable workers to meet both
                    their material and non-material needs. Only in this way will workers perform effi-
                    ciently and effectively in the best interests of the organisation.
                  It is not difficult to see why the Human Relations approach proved popular. In a
               period when many people were becoming increasingly worried about the growth of
               impersonal bureaucracies, it provided an attractive alternative. It is an approach that
               stresses that human beings are not mere cogs in a machine but that they have emo-
               tional needs: humans want to ‘belong’, achieve recognition, and develop and fulfil
               their potential. As mentioned earlier, the Depression of the 1930s and the Second
               World War and its aftermath created, in the USA and Europe, a greater sense of col-
               lectivism and community than had hitherto been the case; another reason why the
               Human Relations doctrine found such a ready audience. Also, implicitly, it offers an
               approach to change management that has a surprisingly modern ring to it. The stress
               on organisations having clear objectives, effective communication systems and pro-
               active leadership, coupled with the need to obtain the willing cooperation of
               employees, are central to many modern approaches to change management.
                  Despite its attractiveness and plausibility, a substantial and often vitriolic body of
               opinion came to be ranged against the Human Relations approach in the 1950s and
               1960s (Rose, 1988). Economists rejected the argument that non-material incentives
               have a potentially stronger motivating influence than material incentives. The empha-
               sis placed by the proponents of Human Relations on people’s need for ‘togetherness’
               and ‘belonging’ was seen by some as a denial of individualism. Others thought that it
               belittled workers and portrayed them as irrational beings who, given the chance,
The Human Relations approach   69

would cling to management as a baby clings to its mother. It was also attacked from
both a management and a trade union viewpoint. Some of the former felt that its sup-
posedly powerful manipulative techniques were either useless or inoperable; whilst
representatives of the latter saw Human Relations as a vehicle for manipulating
labour, and undermining – or attempting to eliminate – trade unions. Sociologists crit-
icised it for attempting a sociological analysis of organisations without taking into
account the larger society within which each organisation exists (Kerr and Fisher,
1957; Landsberger, 1958; Rose, 1988; Whyte, 1960).
   Many of the criticisms were clearly directed at the work of Mayo and his col-
leagues, including inconsistencies between them. Landsberger (1958), for example,
was one of the first to point out the difference between Mayo’s (1933) interpretations
of the Hawthorne Experiments and those of his colleagues, Roethlisberger and
Dickson (1938), though Smith (1998) disputes this and many of the other criticisms
of Mayo. However, by no means were all the criticisms levelled at Mayo and his col-
leagues. Maslow’s work, a key theoretical cornerstone of the Human Relations
approach, was found to lack empirical substance when researchers attempted to vali-
date it, and certainly later theories of motivation seem to adopt a different approach
(Arnold et al, 1998; Hall and Nougaim, 1968; Lawler and Suttle, 1972; Sheldrake,
1996). Similarly, Bennis’s views were attacked. The Aston Studies in the 1960s (Pugh
et al, 1969a, 1969b) showed that bureaucracy was growing rather than declining.
Also, Miewald (1970) argued that Bennis did not understand the nature of bureau-
cracy; in his view, far from being rigid, it could and did adapt to changing and
dynamic environments. Kelly (1982b) also attacked the proposition that increased job
satisfaction leads to increased performance.
   There is one further criticism of the Human Relations approach, one that it shares
with the Classical approach: it claims for itself the title of the ‘one best way’. Yet, the
question was posed, how can any approach claim that there is only one method of
structuring and managing organisations, and that it holds good for all organisations
and for all time? Indeed, the seed of this criticism can be found in Bennis’s (1966)
work, where he argued that organisations in the last third of the twentieth century
would experience rapid and unexpected change, continue to increase in size – with
the problems of complexity which this brings, and become more diverse and spe-
cialised. Clearly, whilst not explicitly advocating it, Bennis was making the case for an
approach to organisations that recognised not only that they face different situations
but also that these are not stable over time. Similarly, Trist et al’s (1963) argument
regarding the need to fit social systems to technical ones can also be seen as making a
case for a situationalist approach to job design. Indeed, the most telling argument
against the ‘one best way’ approach is that presented by Davis and Canter (1955),
mentioned earlier. If jobs and work organisation are social inventions designed to
meet the needs of societies and organisations at particular points in time, then there
can never be a one best way for all organisations and for all times. What is needed,
instead, is an approach that links approaches to work design to the particular context
to which they are best suited. In the 1960s and 1970s, such an approach emerged.
70   Chapter 2 · Developments in organisation theory


The Contingency Theory approach
               Contingency Theory emerged in the 1960s out of a number of now classic studies of
               organisation structure and management (see Child, 1984; Mullins, 1989; Scott,
               1987). Since the 1970s, it has proved – as a theory at least – to be more influential
               than either the Classical or Human Relations approach. In essence, Contingency
               Theory is a rejection of the ‘one best way’ approach previously sought by managers
               and propounded by academics. In its place is substituted the view that the structure
               and operation of an organisation is dependent (‘contingent’) on the situational vari-
               ables it faces – the main ones being environment, technology and size (Burnes, 1989).
               It follows from this that no two organisations will face exactly the same contingen-
               cies; therefore, as their situations are different, so too should their structures and
               operations be different. Consequently the ‘one best way’ for all organisations is
               replaced by the ‘one best way’ for each organisation.
                  One of the clear distinctions between Contingency Theory and its predecessors was
               pointed out by Scott (1987: 23):

                 The previous definitions tend to view the organisation as a closed system, separate from its
                 environment and comprising a set of stable and easily identified participants. However,
                 organisations are not closed systems, sealed off from their environments but are open to and
                 dependent on flows of personnel and resources from outside.


               As Robbins (1987) noted, there is wide agreement that the systems approach offers
               important insights into the working of an organisation. Systems theory is not new: it
               has been used in the natural and physical sciences for years. However, its application
               to business organisation only really emerged in the 1960s. The systems approach
               views the organisation both as a whole, and as part of a larger environment. The idea
               is that any part of an organisation’s activities affects all other parts. Organisations,
               rather than being closed (as previous theories assumed), are viewed as open systems
               operating within a wider environment and having multiple channels of interaction
               (Mullins, 1993). Therefore, organisations are not in complete control of their own
               fate; they can be, and often are, affected by the environment in which they operate,
               and this can and does vary from organisation to organisation.
                  One of the earliest writers to lay the groundwork for Contingency Theorists was
               Herbert Simon. Writing in the 1940s (Simon, 1957), he criticised existing approaches
               as providing managers with nothing more than proverbs or lists of ‘good practice’
               based on scant ideas, many of which contradicted each other. He argued that organi-
               sation theory needed to go beyond superficial and over-simplified precepts, and
               instead study the conditions under which competing principles could be applied.
                  Nevertheless, it was not until the 1960s that a considered approach emerged,
               which broke with the Classical and Human Relations movements’ attempts to estab-
               lish a universal approach suitable to all organisations. The former had concentrated
               on the formal structure and technical requirements of organisations, and had
               attempted to establish sets of general principles. The latter, the Human Relations
               movement, focused on the informal aspects of organisations and the psychological
               and social needs of their employees. As with the Classical approach, this produced
The Contingency Theory approach   71

lists of good practice and desired objectives, but it lacked precise guidance on how
these should be applied.
   Contingency Theorists adopted a different perspective, based on the premise that
organisations are open systems whose internal operation and effectiveness is depend-
ent upon the particular situational variables they face at any one time, and that these
vary from organisation to organisation. This is consistent with evidence that not all
organisations – or even all successful ones – have the same structure, and that even
within organisations, different structural forms can be observed (Mintzberg, 1979).
Though many situational variables, such as the age of the organisation and its history,
have been put forward as influential in determining structure, it is generally agreed
that the three most important contingencies are:
■   Environmental uncertainty and dependence. It is argued that the management of
    any organisation is undertaken in circumstances of uncertainty and dependence,
    both of which change over time. Uncertainty arises because of our inability ever to
    understand and control events fully, especially the actions of others, whether outside
    or inside an organisation. Because of this, forecasting is an inexact and hazardous
    enterprise. Similarly, the dependence of management upon the goodwill and support
    of others, whether they be internal or external groupings, makes an organisation
    vulnerable, and may in some circumstances even threaten its very existence. Levels
    of uncertainty and dependence will vary, but can never be totally eliminated, and
    must therefore be taken into account – treated as a contingency – when designing
    organisational structures and procedures (Burns and Stalker, 1961; Child, 1984;
    Lawrence and Lorsch, 1967; Pugh, 1984; Robbins, 1987; Thompson, 1967).
■   Technology. The argument for technology being a key variable follows similar lines
    to that of environment. Organisations creating and providing different products
    and services use different technologies. Indeed, even those producing similar prod-
    ucts may use differing techniques. Given that these technologies can vary from the
    large and expensive, such as a car assembly line, to the relatively small and cheap,
    such as a personal computer, the form of organisation necessary to ensure their
    efficient operation will also vary. If so, there is a need to treat technology as a con-
    tingent variable when structuring organisations. There are distinct variants of the
    case for technology, however, which reflect the different definitions of technology
    that theorists and researchers have employed. The two best-developed approaches
    are found in Woodward’s (1965, 1970) studies of ‘operations technology’ and
    Perrow’s (1967, 1970) analysis of ‘materials technology’. The former refer to the
    equipping and sequencing of activities in an organisation’s work flow, whilst the
    latter refer to the characteristics of the physical and informational materials used.
    Woodward’s work tends to relate more to manufacturing organisations, whereas
    Perrow’s is more generally applicable (Hickson et al, 1969; Thompson, 1967;
    Zwerman, 1970).
■   Size. Some would argue that this is not just a key variable but the key variable. The
    case for size being a significant variable when designing organisations has a long
    antecedence within organisation theory, being first cited by Weber in the early part
    of the twentieth century when making the case for bureaucracy (Weber, 1947). The
    basic case is quite straightforward. It is argued that the structure and practices nec-
    essary for the efficient and effective operations of small organisations are not
72   Chapter 2 · Developments in organisation theory

                   suitable for larger ones. For small organisations, centralised and personalised forms
                   of control are claimed to be appropriate, but as organisations grow in size, more
                   decentralised and impersonal structures and practices become more relevant (Blau,
                   1970; Mullins, 1989; Pugh et al, 1969a, 1989b; Scott, 1987).
               The main figures in developing and establishing Contingency Theory were academics
               in Britain and the USA, among whom the pioneers were Burns and Stalker.


           ■ Tom Burns and George Macpherson Stalker: the importance
             of environment
               The first major study to establish a relationship between organisations’ environment
               and their structure was carried out by Burns and Stalker (1961) in Britain. They
               examined 20 firms in a variety of industries in order to assess how their structures
               responded to the environment in which they operated. Their findings were to have a
               major impact on organisation theory, and provide concrete evidence for rejecting a
               universal, ‘one best way’ approach to organisational structure and practice. They
               identified five different types of environment, based upon the level of uncertainty that
               was present, ranging from ‘stable’ to ‘least predictable’. They also identified two basic
               or ideal forms of structure: ‘Mechanistic’ and ‘Organic’. Their data showed that
               Mechanistic structures were more effective in stable environments, whilst Organic
               ones were better suited to less stable, less predictable environments.
                  The Mechanistic structure, which is akin to the Classical approach, has the follow-
               ing characteristics:
               ■   the specialisation of tasks;
               ■   closely defined duties, responsibilities and technical methods;
               ■   a clear hierarchical structure with insistence on loyalty to the organisation and obe-
                   dience to superiors.
               In contrast, the Organic form, which has some resemblance to the Human Relations
               approach, is characterised by:
               ■   much greater flexibility;
               ■   adjustment and continual redefinition of tasks;
               ■   a network structure of control, authority and communication;
               ■   lateral consultation based on information and advice rather than instructions
                   and decisions;
               ■   commitment to the work group and its tasks;
               ■   importance and prestige being determined by an individual’s contribution to the
                   tasks of their work group rather than their position in the hierarchy.
                  As can be seen, Burns and Stalker neither reject nor accept what went before. Instead,
               they argued that both the Classical approach and the Human Relations approach can be
               appropriate, but that this depends on the nature of the environment in which the organi-
               sation is operating. In this respect, they not only built on the past rather than rejecting it,
               but also restored some responsibility to managers. Instead of being called on to adopt
               blindly the orthodoxy with regard to structure, managers would in future have to assess
               their organisation and its needs, and then adopt the structure and practices suitable to its
               situation (Child, 1984; Mullins, 1989; Scott, 1987).
The Contingency Theory approach   73

■ Paul Lawrence and Jay Lorsch: the case for environment continued
   Burns and Stalker’s findings on the relationship between organisational environment
   and structure were examined and developed by a number of researchers in Europe
   and the USA. One of the most significant pieces of work was that carried out by
   Lawrence and Lorsch (1967) in the USA. Their work went beyond that of Burns and
   Stalker, in that they were interested not only in the relationship between environment
   and a company’s overall structure, but also how individual departments within com-
   panies responded to, and organised themselves to cope with, aspects of the external
   environment that were of particular significance to them. They undertook a study of
   six firms in the plastics industry, followed by a further study of two firms in the con-
   tainer industry and two in the consumer foods industry. The structure of each of the
   firms was analysed in terms of its degree of ‘differentiation’ and ‘integration’.
      Differentiation refers to the degree to which managers and staff in their own func-
   tional departments see themselves as separate and have distinct practices, procedures
   and structures from others in the organisation. Integration refers to the level and form
   of collaboration that is necessary between departments in order to achieve their indi-
   vidual objectives within the environment in which the firm operates. Therefore,
   differentiation is the degree to which departments are distinct from each other, whilst
   integration refers to the degree to which they have common structures, procedures,
   practices and objectives at the operational level. Generally, the greater the interde-
   pendence among departments, the more integration is needed to coordinate their
   efforts in the best interests of the organisation as a whole; this may not always be
   easy to achieve, however. In a rapidly changing environment, the conditions faced by
   individual departments may differ greatly, and a high degree of differentiation may be
   necessary. In such a situation, the need for integration is also likely to be great, but
   the diversity and volatility of the environment are likely to make this difficult to
   achieve (Cummings and Huse, 1989).
      In their study of the plastics industry, Lawrence and Lorsch (1967) found clear dif-
   ferentiation between key departments such as research, production and sales.
   Research departments were more concerned with long-term issues and were under
   pressure to produce new ideas and innovations. These departments, in Burns and
   Stalker’s terminology, tended to adopt an Organic form of structure. Production
   departments on the other hand were, for obvious reasons, concerned with short-term
   performance targets relating to output, costs, quality and delivery. Such departments
   tended to operate in a fairly stable environment and had Mechanistic structures. Sales
   departments tended to fall in between research and production in terms of environ-
   ment and structure. They operated in a moderately stable environment and were
   concerned more with getting production to meet deliveries than with long-term issues.
      Whilst highlighting the degree of differentiation between key departments, the
   study also found that the degree of integration was critical to a firm’s overall perform-
   ance. Indeed, the two most successful firms in their sample were not only amongst the
   most highly differentiated, but also had the highest degree of integration. These find-
   ings were confirmed by their studies of the container and consumer foods industries,
   which showed that differentiation and integration in successful companies varies with
   the demands of the environment in which they operate. The more diverse and
   dynamic the environment, the more the successful organisation will be differentiated
74   Chapter 2 · Developments in organisation theory

               and highly integrated. In a more stable environment, the pressure for differentiation is
               less, but the need for integration remains. Therefore, Lawrence and Lorsch found that
               the most effective organisations had an appropriate fit between the design and coordi-
               nation of departments and the amount of environmental uncertainty they faced. The
               most successful firms, however, were the ones that, whilst operating in an environ-
               ment that required a high level of differentiation, also managed to achieve a high level
               of integration.
                  Clearly, in a situation where departments have dissimilar structures, practices and
               procedures, achieving integration is not easy or conflict-free. Indeed, in such situa-
               tions, organisational politics can be rife. Lawrence and Lorsch found that the effective
               firms avoided such a situation by openly confronting conflict, and by working prob-
               lems through in the context of the overall needs of the organisation. In addition, in
               firms that dealt successfully with conflict, the success of those responsible for achiev-
               ing integration was based mainly on their knowledge and competence rather than
               their formal position. This was because their colleagues in the different departments
               respected and responded to their perceived understanding of the issues involved. It
               follows that to achieve high levels of integration and differentiation, an organisation
               cannot rely solely on the formal managerial hierarchy. This must be supplemented
               with liaison positions, task forces and teams, and other integrating mechanisms.
                  As with Burns and Stalker, Lawrence and Lorsch did not reject the Classical and
               Human Relations approaches per se, but instead saw them as alternative options,
               depending on the environment in which an organisation operates. In looking at the
               internal operations of organisations in this way, Lawrence and Lorsch raised the issue
               of dependence as well as uncertainty. This was a subject that James Thompson tack-
               led in greater depth.


           ■ James Thompson: environmental uncertainty and dependence
               Thompson’s (1967) influential work took the environmental perspective forward in
               three important ways. The first was to argue that although organisations are not
               rational entities, they strive to be so because it is in the interests of those who design
               and manage the organisation that its work be carried out as effectively and efficiently
               as possible. In order to achieve this, organisations attempt to insulate their productive
               core from the uncertainty of the environment. However, it is not possible to seal off
               all, or perhaps even any, parts of an organisation, given that it must be open to and
               interact with its environment if it is to secure resources and sell its products. This
               leads on to Thompson’s second major contribution: different levels of an organisation
               may exhibit, and need, different structures and operate on a more rational or less
               rational basis. Thompson’s third contribution was to recognise that organisational
               effectiveness was contingent not only on the level of external environmental uncer-
               tainty, but also on the degree of internal dependence present. This echoes Lawrence
               and Lorsch’s argument for integration and differentiation; however, Thompson made
               this point much more explicitly and related it to different structural forms. He formu-
               lated a three-type classification in relation to internal dependence:
               ■   Pooled interdependence – where each part of an organisation operates in a rela-
                   tively autonomous manner, but by fulfilling their individual purposes they enable
                   the organisation as a whole to function effectively.
The Contingency Theory approach   75

  ■   Sequential interdependence – where the outputs from one part of an organisation
      constitute the inputs for other parts of the system.
  ■   Reciprocal interdependence – where overall effectiveness requires direct interaction
      between an organisation’s separate parts.
  Thompson went on to argue that the type of interdependence could be related to the
  degree of complexity present: simple organisations rely on pooled interdependence;
  more complex organisations demonstrate both pooled and sequential interdependence;
  and in the most complex organisations, all three forms of interdependence may be
  present. Thompson envisaged that each form of interdependence would require dis-
  tinct methods for coordinating activities. Pooled interdependence would be
  characterised by standardisation through the use of rules and procedures. Sequential
  interdependence would require the use of detailed plans and written agreements, whilst
  reciprocal interdependence would achieve coordination by means of personal contact
  and informal agreements between members of those parts of the organisation involved.
     Therefore, in a nutshell, Thompson’s main arguments are as follows:
  ■   Different sections of an organisation will be characterised by varying levels of com-
      plexity, rationality and formalisation, depending on the extent to which managers
      can shield them from the level of uncertainty present in the environment.
  ■   The higher both the overall level of uncertainty and that faced by each area of an
      organisation, the greater will be the dependence of one area on another.
  ■   As this interdependence increases, coordination through standardised procedures
      and planning mechanisms will become less effective and the need for more personal
      contact and informal interaction will grow.
  ■   The more that coordination is achieved through mutual reciprocity in this manner,
      the less rational will be the operation of the organisation.
     Thompson’s work is of seminal importance in the development of organisation
  theory, not only because of the case he made for linking external uncertainty to inter-
  nal dependence, but also, as a number of writers have observed (see Robbins, 1987;
  Scott, 1987), because of the attention he drew to the fact that technology can influ-
  ence organisation structures as well as environmental factors. Thompson’s
  contribution in this respect lay in creating a classification scheme for technology, and
  arguing that technology determines the selection of the specific structural arrange-
  ments for reducing the effect of uncertainty on the various functions of an
  organisation. The issue of technology and structure had been raised earlier in a major
  study by Joan Woodward published in 1965.


■ Joan Woodward: the case for technology
  In the 1960s, Joan Woodward carried out a major study of 100 UK manufacturing
  firms in south-east Essex, in order to establish the validity of the claims made by
  advocates of the Classical approach that the adoption of a bureaucratic-mechanistic
  structure was essential for organisational success (Woodward, 1965, 1970). After
  much work, Woodward concluded that no such correlation existed; what she found,
  however, was that the more successful companies adopted an organisational form
  that varied according to their main production technology. By technology, Woodward
76   Chapter 2 · Developments in organisation theory

               meant not only the machinery being used, but also the way it was organised, operated
               and integrated into a distinct production process. From her sample, she identified
               three distinct types of production technology, ranging from least to most complex:
               ■   Small batch (or unit) production – where customers’ requirements were for one-off
                   or small-volume specialist products.
               ■   Large batch (or mass) production – where standardised products were made in
                   large numbers to meet a forecast demand.
               ■   Process production – where production was in a continuous flow, such as an
                   oil refinery.
               When the firms were grouped in this manner, a pattern emerged that showed that
               though they apparently differed considerably in terms of their organisational struc-
               ture, many of the variations for the more successful firms could be explained by
               reference to the technology employed. Among firms engaged in small batch produc-
               tion, the most appropriate structure appeared to be one with relatively few
               hierarchical levels and wide middle management spans of control. Woodward noted
               that technology became more complex as firms moved from small batch to large
               batch and finally process production. In turn, structures became taller and more nar-
               rowly based, with smaller middle management and larger chief executive spans of
               control. Within each category of technology, the best-performing companies were
               those closest to the median in the type of structure adopted. Therefore, Woodward’s
               work clearly established a link between technology, structure and success which ran
               counter to the notion that there was a ‘one best way’ for all organisations.
                  Though qualified by later studies (see Child, 1984; Handy, 1986; Smith et al,
               1982), Woodward’s research remains a milestone in the development of Contingency
               Theory. In particular, she demonstrated the need to take into account technological
               variables in designing organisations, especially in relation to spans of control.
               Nevertheless, a major drawback of her work was the difficulty of applying it to non-
               manufacturing companies. This was remedied by the work of Charles Perrow.


           ■ Charles Perrow: the case for technology continued
               In the USA, Charles Perrow (1967, 1970) extended Joan Woodward’s work on
               technology and organisation structure by drawing attention to two major dimensions
               of technology:
               ■   the extent to which the work being carried out is variable or predictable;
               ■   the extent to which the technology can be analysed and categorised.
               The first, variability, refers to the incidence of exceptional or unpredictable occur-
               rences, and the extent to which these problems are familiar and can be easily dealt
               with, or are unique and difficult to solve. For example, an oil refinery should experi-
               ence few non-routine occurrences, whilst an advertising agency will encounter many
               unpredictable and exceptional occurrences. The second major dimension, analysis
               and categorisation, refers to the extent to which the individual task functions can be
               broken down and tightly specified, and also whether problems can be solved by
               recourse to recognised, routine procedures or if non-routine procedures have to be
               invoked. Bringing these two major dimensions of technology together, Perrow con-
The Contingency Theory approach   77

   structed a technology continuum ranging from routine to non-routine. With the latter,
   there are a large number of exceptional occurrences requiring difficult and varied
   problem-solving techniques to overcome them. Routine technology, on the other
   hand, throws up few problems, which can be dealt with by recourse to standard,
   simple techniques.
      Perrow argued that by classifying organisations according to their technology and
   predictability (routine to non-routine) of work tasks, it is then possible to identify the
   most effective form of structure in any given situation or for any activity. Perrow’s
   routine–non-routine continuum can be equated with Burns and Stalker’s mechanistic
   and organic dimensions for organisation structures. In routine situations, where few
   problems arise and those that do are easily dealt with, a mechanistic structure is more
   effective because of the stable and predictable nature of the situation. In a dynamic
   and unpredictable situation, however, a more flexible, organic form of structure will
   be more effective in dealing with the non-routine and difficult problems that occur. By
   formulating his work in this manner (i.e. by combining technology and predictability)
   it became possible to apply it to non-manufacturing situations. Therefore, Perrow’s
   work both reinforced and extended Woodward’s case for recognising technology as a
   key situational variable to be taken into account when designing organisations.
   Nevertheless, whilst Perrow was developing his ideas, a further group of researchers
   were making the case for yet another ‘key’ contingency – size.


■ The Aston Group: the case for size
   Though there are many proponents of the case for organisational size being a key
   contingency (see Child, 1984; Robbins, 1987), perhaps the earliest and most ardent
   were a group of British researchers based at the University of Aston in Birmingham
   (who became known as the Aston Group). In the 1960s, they carried out a series of
   studies to examine and identify the relationship between different forms of organisa-
   tional structures and their determinants (see Pugh et al, 1969a, 1969b). The Aston
   Group began in the early 1960s by examining a sample of 87 companies, and, as the
   work developed, further samples were added to their eventually very impressive data-
   base. In analysing their results, the Aston Group found that size was the most
   powerful predictor of specialisation, use of procedures and reliance on paperwork. In
   effect, what they found was that the larger the organisation, the more likely it was to
   adopt (and need) a mechanistic (bureaucratic) structure. The reverse was also found:
   the smaller the organisation, the more likely it was to adopt (and need) an organic
   (flexible) structure.
      This was clearly a major finding. Not only did it support (at least in terms of larger
   organisations) Weber’s earlier work on bureaucracy, but it also struck a blow against
   those, such as Bennis, who saw bureaucracy as dysfunctional and dying. The work of
   the Aston Group, along with that of others such as Blau and Schoenherr (1971), who
   also argued that size is the most important condition affecting the structure of organi-
   sations, gave bureaucracy if not a new lease of life then, at least, a new lease of
   respectability. Bureaucracy, according to the Aston results, was both efficient and
   effective, at least for larger organisations; and, given the tendency for the average size
   of private-sector companies and public bodies to increase throughout the twentieth
   century, its applicability would grow.
78   Chapter 2 · Developments in organisation theory

                  There are two explanations for the relationship between size and bureaucracy, both
               of which have similar implications for organisational efficiency and effectiveness. The
               first argues that increased size offers greater opportunities for specialisation – the
               Adam Smith argument, in effect. This will manifest itself in terms of greater structural
               differentiation and a high degree of uniformity amongst sub-units. In the first
               instance, this will make managerial coordination more difficult, especially with the
               emergence of functional autonomy. To counter this, senior managers will move to
               impose a system of impersonal controls through the use of formal procedures, stan-
               dardised reporting and control systems, the written recording of information, etc. The
               second argument reaches similar conclusions, by pointing out that the difficulty of
               directing ever larger numbers of staff makes it highly inefficient to continue to use a
               personalised, centralised style of management. Instead a more decentralised system,
               using impersonal control mechanisms, has to be adopted. The introduction of such a
               system inevitably leads to the expansion of the administrative core (the bureaucracy)
               in organisations (Child, 1984).
                  As with all the Contingency theorists, those who argued for size as the key situational
               variable were not attempting to reinvent the ‘one best way’ approach for all organisa-
               tions. Rather they were rejecting it in favour of an approach that saw organisational
               performance as dependent upon the appropriateness of the organisation’s structure for
               its size. Therefore, like all the Contingency theorists, the Aston school adopted an
               approach which stressed that there is a ‘one best way’ for each organisation.


           ■ Contingency Theory: summary and criticisms
               The Contingency approach can be considered much more a cohesive school of
               thought than either the Classical or Human Relations approaches. It has three unify-
               ing themes:
               ■   organisations are open systems;
               ■   structure, and therefore performance, is dependent upon the particular circum-
                   stances, situational variables, faced by each organisation;
               ■   there is no ‘one best way’ for all organisations.
                  The attractions of Contingency Theory are obvious. First, it was in tune with the
               times in which it emerged – the 1960s and 1970s. This was a period of rapid eco-
               nomic and technological change, with a tendency towards much larger organisations,
               and a significant increase in domestic and international competition. In this situation,
               Contingency Theory offered a plausible explanation of not only why these events
               were causing problems for organisations, but also how to resolve them (Burnes,
               1989). Second, on the surface at least, it was simpler to understand and apply than
               the Human Relations approach. Finally, whilst rejecting the Classical approach, it
               was, in the main, a rational approach, based on matching known structural options
               to identifiable contingencies – size, technology and environment.
                  The approach to change management offered by Contingency Theory was, it fol-
               lows, similar to that of the Classical school. In a rational fashion, managers should
               collect and analyse data on the situational variables the organisation faces and match
               these to the appropriate structural option. The theory then implies that for employ-
               ees, faced with a plan for change based on such a ‘scientific’ approach, the only
               rational course of action is to accept the validity of the situation and cooperate with
The Contingency Theory approach   79

managers to achieve the required structural changes. However, it is at this point – the
attempt to apply Contingency Theory rationally and mechanically – that problems
and drawbacks emerge which give rise to a number of major criticisms of this
approach, the main ones being as follows:
■   Difficulty arises in relating structure to performance. A number of writers have
    pointed out that there is no agreed definition of ‘good performance’, and it therefore
    becomes difficult to show that linking structure to situational variables brings the
    benefits claimed (Hendry, 1979, 1980; Mansfield, 1984; Terry, 1976). Indeed, there
    are a wide range of factors other than structure which can influence performance,
    not least of which is luck. Davis and Star (1993) showed that seven of the twelve
    most profitable firms in the world are pharmaceutical companies, and that three of
    these are producers of anti-ulcer drugs. They conclude that the profitability of the
    pharmaceutical sector is attributable less to the nature of these organisations than to
    governments’ over-generosity – clearly a case of an industry that is in the right place
    at the right time.
■   Despite the length of time that Contingency Theory has been in circulation, there is
    still no agreed or unchallenged definition of the three key situational variables –
    environment, technology and size. The literature gives a wide and conflicting range
    of definitions of these, making it difficult not only to establish a link between them
    and structure, but also to apply the theory (Dastmalchian, 1984; Mullins, 1989;
    Pugh and Hickson, 1976; Robbins, 1987; Warner, 1984; Wood, 1979).
■   Whilst, as argued above, a relationship has been established between size and
    structure, it has proved difficult to show that this relationship has an appreciable
    impact on performance. Some researchers have suggested that the link between size
    and structure relates to preferred systems of control, which may have more to do
    with the political and cultural nature of organisations than any attempt to improve
    performance (Allaire and Firsirotu, 1984; Child, 1984; Mansfield, 1984; Pugh and
    Hickson, 1976; Salaman, 1979).
■   In examining the link between structure and contingencies, researchers use the
    organisation’s formal organisational structure for comparison purposes. Yet, as the
    Hawthorne Experiments showed, the actual operation of an organisation may
    depend more on the informal structures created by workers than the formal ones
    laid down by management. This was a point made by Woodward (1965) in her
    study of technology and structure. She noted that organisation charts failed to
    show important relationships that, taken together, can have a significant impact on
    performance (Argyris, 1973; Burawoy, 1979; Selznick, 1948).
■   Structure and associated practices and policies may be strongly influenced by exter-
    nal forces (Mullins, 1993). In the UK, privatised utilities are subject to regulation
    and face restrictions that have a significant influence on how they are structured
    and operate. Similarly, in the UK, financial service organisations are required to
    establish ‘Chinese walls’ between different parts of their business to avoid market-
    sensitive information being passed from one area to another.
■   Rather than managers being the virtual prisoners of organisational contingencies
    when making decisions regarding structure, the reverse may be the case. Managers
    may have a significant degree of choice and influence over not only structure but
    also the situational variables. Whether this is called ‘strategic choice’ (Child, 1972),
    ‘organisational choice’ (Trist et al, 1963) or ‘design space’ (Bessant, 1983), the
    meaning is the same: those senior managers responsible for such decisions can
80   Chapter 2 · Developments in organisation theory

                   exercise a high degree of freedom in selecting and influencing the technology to be
                   used, the environment in which they operate and even the size of the organisation.
                   Indeed, one of the architects of the technology-structure hypothesis, Charles
                   Perrow, later claimed that technology is chosen and designed to maintain and rein-
                   force existing structures and power relations within organisations rather than the
                   reverse (Perrow, 1983). Other writers made the case for size and environment
                   being manipulated in similar ways (Abell, 1975; Clegg, 1984; Hendry, 1979; Leifer
                   and Huber, 1977; Lorsch, 1970).
               ■   It is assumed that organisations pursue clear-cut, well-thought-out, stable and com-
                   patible objectives that can be fitted into a Contingency perspective. Researchers
                   and practising managers argue that this is not the case, however – in fact, even two
                   of the proponents of Contingency Theory, Lawrence and Lorsch (1967), high-
                   lighted the presence and danger of conflicting objectives. In reality, objectives are
                   often unclear, and organisations may pursue a number of conflicting goals at the
                   same time. Clearly, the objectives of an organisation will impact on its situation
                   and its structure. If these objectives are arbitrary, conflicting or open to managerial
                   whim, it becomes difficult to apply a Contingency approach (Abodaher, 1986;
                   Edwardes, 1983; Hamel and Prahalad, 1989; Mintzberg, 1987; Sloan, 1986).
               ■   The last criticism is that Contingency Theory is too mechanistic and deterministic,
                   and ignores the complexity of organisational life. As argued by the Human
                   Relations school, organisations are by no means the rational entities many would
                   like to believe (a point also made by Thompson (1967) in his support of
                   Contingency Theory). There is a need to see organisations as social systems, with all
                   the cultural and political issues that this raises. In this view, structure is the product
                   of power struggles between individuals and groups within the organisation, each
                   arguing and fighting for their own perspective and position (Allaire and Firsirotu,
                   1984; Buchanan, 1984; Hickson and Butler, 1982; Morgan, 1986; Pfeffer, 1981;
                   Robbins, 1987; Salaman, 1979).
               Therefore, despite its attractiveness, Contingency Theory, like the Classical and
               Human Relations approaches, fails to provide a convincing explanation for the way
               in which organisations do and should operate.


Conclusions
               For organisations, if not for academics, the key purpose of any organisation theory or
               approach is to help them analyse and rectify the weaknesses and problems of their
               current situation, and to assist them in bringing about the changes necessary to
               achieve their future objectives. Over the past 100 years, the design and management
               of organisations has moved from an ad hoc process based on – at best – guesswork,
               to one that is highly complex and informed by a host of practical and theoretical con-
               siderations. To the uninitiated, it might appear that this has made running
               organisations an easier and more certain process; yet a close examination of most
               organisations will reveal that this is far from being the case. Not only are organisa-
               tions, in general, larger and more complex than in the past, but also the practical and
               theoretical reference points on which managers can draw are diverse and give con-
               flicting and confusing signals.
Conclusions   81

   Not surprisingly in such a situation, many managers look for simple, foolproof
solutions: often ones that, as Douglas McGregor noted, appeal to their own basic ori-
entation – whether that be Theory X or Theory Y. This is one of the reasons why the
Classical approach, with its deep roots in the Industrial Revolution and its straight-
forward mechanical approach to organisations and their members, has proved so
enduring – despite strong evidence of its lack of suitability in many situations. This
search for simple, often quick-fix, solutions to the problems of organisational life has
been manifested in many ways in the last two decades, not least the emergence of a
series of ‘panaceas’ such as new technology, human resources management, Total
Quality Management, culture change, etc. This is not to deny the benefits these can
bring but, taken on their own, at best they encourage a fragmented approach, and at
worst they create an atmosphere of resignation within organisations as one ‘flavour
of the month’ is succeeded by yet another, and none is given the time necessary to
prove itself. Clearly, in such situations, without an overall, long-term plan, the result
of these various ‘solutions’ is to make the situation worse rather than better (Burnes,
1991; Burnes and Weekes, 1989).
   Organisations clearly need to reject a short-term piecemeal approach, and instead
see themselves in their totality and adopt a consistent and long-term approach. But
which approach should they choose? We have seen in this and the previous chapter
that well-thought-out and well-supported cases exist for a number of different
approaches, but each has its drawbacks and critics. It may well be that each is capa-
ble of assisting organisations to analyse and understand the strengths and weaknesses
of their present situation. Whether they can provide more effective organisational
arrangements for the future is more debatable, however. Similarly, it is not obvious
how organisations should actually achieve the process of transformation.
   The Human Relations movement offers pertinent advice with regard to having
clear objectives, good communication and leadership, but is less forthcoming on how
change objectives should be set, and the concomitant changes planned and imple-
mented. Contingency Theory though does give a procedure for setting objectives. It
stresses the need to identify and analyse the situational variables an organisation faces
in order to choose the most appropriate structure. However, it is also silent on the
issues of planning and implementation, other than to imply that rational workers will
accept rational propositions for change. In addition, even if organisations do manage
to implement the recommendations of the Human Relations or Contingency advo-
cates, it is not clear what degree of benefit they would derive from this, given the
criticisms of these approaches.
   In short, neither of the approaches discussed in this chapter appears to be the solu-
tion to all known organisational ills that their proponents seem to claim. They fail to
reflect and explain the complexities of day-to-day organisational life that we all expe-
rience. In particular, the issue of organisational culture (Allaire and Firsirotu, 1984)
gets short shrift; yet, over the last two decades, its importance as both a promoter of
and a barrier to organisational competitiveness has become apparent. Nor do they
appear to take account of national differences and preferences, or for that matter pay
regard to many of the wider societal factors that now impact on our lives, such as the
need to show greater social responsibility, whether it be in the area of ‘green’ issues or
equal opportunities. Yet, it is clear that enormous changes are already taking place in
the world, and others may be necessary if some of the worst predictions for the future
82   Chapter 2 · Developments in organisation theory

               are to be avoided. The next chapter describes three new perspectives on organisa-
               tional life that, as the old approaches are perceived as inadequate, have become
               increasingly influential.


Test your learning

           ■ Short answer questions
               1 What were the main findings of the Hawthorne Experiments?

               2 Describe Maslow’s hierarchy of needs.

               3 Briefly discuss Theory X and Theory Y.

               4 State Bennis’ reasons for declaring the ‘Death of Bureaucracy’.

               5 Define the term ‘contingency’ as used by Burns and Stalker.

               6 What are the respective attributes of Mechanistic and Organic structures?

               7 How did Perrow define technology?

               8 According to the Aston Group, size is the key contingency; state their case for this assertion.

               9 For each of the following, briefly state its implications for organisational change: (a)
                 Human Relations and (b) Contingency Theory.



           ■ Essay questions
               1 In what ways can the Human Relations approach be said to be superior to the Classical
                 approach?

               2 In what manner can Contingency Theory be said to incorporate both the Classical and
                 Human Relations approaches?




                 Suggested further reading
               1 Rose, M (1988) Industrial Behaviour. Penguin: Harmondsworth.
                 Michael Rose gives an invaluable account of the development of the Human Relations
                 movement and provides an interesting review of the work of Joan Woodward and the Aston
                 Group.
               2 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International
                 Thompson Business Press: London.
                 Michael Sheldrake also provides an excellent review of the lives and work of the key figures
                 in the Human Relations movement.
               3 Hendry, C (1979) Contingency Theory in practice, I. Personnel Review, 8(4), 39–44.
                 Hendry, C (1980) Contingency Theory in practice, II. Personnel Review, 9(1), 5–11.
                 Wood, S (1979) A reappraisal of the contingency approach to organization. Journal of
                 Management Studies, 16, 334–54.
                 Taken together, these three articles provide an excellent review of Contingency Theory.
Chapter 3

In search of new paradigms



 Learning objectives
 After studying this chapter, you should be able to:
 ■   understand the reasons for the emergence of new organisational paradigms
     in the 1980s and 1990s;
 ■   describe the principal features of the Culture–Excellence approach;
 ■   list the core advantages and disadvantages of the Culture–Excellence
     approach;
 ■   describe the central elements of the Japanese approach to management;
 ■   understand the key advantages and disadvantages of the Japanese approach;
 ■   discuss the main features of organisational learning;
 ■   appreciate the chief advantages and disadvantages of organisational learning;
 ■   compare the similarities and differences between Culture–Excellence,
     organisational learning and Japanese management;
 ■   appreciate the implications for organisational change of these three
     paradigms.
84   Chapter 3 · In search of new paradigms


 Exhibit 3.1        Continuous improvement

 The sustainable business: continuous search for improvement FT
 Kaizen is a Japanese word usually translated as ‘con-      popularised in Japan by the quality guru, Ishikawa
 tinuous improvement’. It is an important component         Kaoru, and were eagerly adopted by many compa-
 of Japanese management techniques such as Total            nies, Toyota among them.
 Quality Management (TQM), and was central to the               Kaizen, as Sakichi said, is about constantly looking
 acclaimed Toyota Production System, developed              for improvement, not just on the shopfloor but
 under the guidance of engineers such as Ohno               across the company. Here an important defect in
 Taiichi and Shingo Shigeo in the three decades fol-        Western understanding of the concept emerges.
 lowing the second world war. In the 1980s the              Many Western managers continue to believe that
 concept was imported (some would say re-                   kaizen and, more generally, TQM, are primarily pro-
 imported) into the US and other Western countries,         duction techniques; they have nothing to do with
 where it remains a widely discussed – if seldom fully      other areas. But TQM as developed at Toyota was
 implemented – philosophy.                                  all-embracing, including every department in the
     Kaizen was probably best expressed by an early         company. Ultimately, as Tom Peters and Robert
 head of Toyota, Toyoda Sakichi (1867–1930), who            Waterman noted in In Search of Excellence, the
 declared that no process could ever be declared per-       quest for continuous improvement should dominate
 fect and there was always room for improvement.            the mindset of managers and workers alike. They
 Sakichi was a deep thinker, influenced not only by
                                                            need to search for improvement everywhere, and to
 Buddhist philosophy but also by Self-Help, the
                                                            do so, they must learn as much as they can about
 manual written by the Victorian entrepreneur,
                                                            their work and the environment in which it is done.
 Samuel Smiles, which was hugely popular around
                                                            So the concept of the ‘learning organisation’ was
 the world. Both these influences suggested to
                                                            born; a decade later, it had been worked out in
 Sakichi that while perfection would always remain
                                                            detail by gurus such as Peter Senge and Arie de
 out of reach, in the process of striving for it, consid-
                                                            Geus. The two concepts, the learning organisation
 erable good would result.
                                                            and kaizen, can thus be seen as closely linked.
     Kaizen was introduced as a driving philosophy
                                                                The learning organisation searches continuously
 behind improvements in both product and process,
                                                            for new knowledge from which value can be cre-
 and ultimately it became embraced within the larger
                                                            ated. Kaizen provides value through constant
 concept of TQM. In the former area, the early 1950s
                                                            improvements in product and process quality,
 saw the introduction of American methods of statisti-
                                                            adding value for the company and its customers.
 cal quality control (SQC), originally developed by
 Walter Shewhart at Bell Laboratories and introduced        Now more than 50 years old, kaizen is coming back
 into Japan by two legendary figures, Joseph Juran          into fashion.
 and W Edwards Deming. SQC techniques were also             Source: Morgen Witzel, Financial Times, 19 August 2002, p. 9.




                 Introduction
               Organisations have come a long way from the days when Henry Ford could famously
               declare: ‘A customer can have a car of any colour he wants, so long as it is black’
               (Witzel, 2003a: 113). Nowadays, the boot is on the other foot; it is a case of con-
               sumers dictating to organisations that they should meet their ever-changing tastes,
               and woe betide the company that fails to meet them. This is why, as Exhibit 3.1 illus-
               trates, so much attention is now paid to continuous improvement. Indeed, such has
               been the change in attitudes in the past two decades that many now speak of organi-
               sations as having gone through a paradigm shift. If this is so, what do we mean by a
Introduction   85

paradigm shift and what brought it about? Although he did not invent the word, it
was the American philosopher of science Thomas Kuhn (1962) who, in his book The
Structure of Scientific Revolutions, gave a new importance to the notion of ‘para-
digms’. He defined a paradigm as a universally-recognised scientific achievement that
over a period of time provides model problems and solutions to a community of prac-
titioners. Kuhn was interested in how new ideas and frameworks for carrying out
scientific work (i.e. paradigms) supplant old ones in the physical sciences. However,
from the late 1960s onwards, a growing body of social scientists adopted the
Kuhnian approach to their own disciplines with great enthusiasm. In the intervening
period, as Burrell (1997) noted, new, varying, competing and controversial definitions
of the term have been put forward. As far as its applicability to organisations is con-
cerned, a paradigm can be defined as a way of looking at and interpreting the world;
a framework of basic assumptions, theories and models that are commonly and
strongly accepted and shared within a particular field of activity at a particular point
in time (Collins, 1998; Mink, 1992; Reed, 1992). However, as situations change and
people’s perceptions change, existing paradigms lose their relevance and new ones
emerge. As Handy (1986: 389) noted:

 When Copernicus suggested that the earth was not at the centre of the universe he was,
 though he knew it not, a paradigm revolutionary. But it was the minds of men that changed,
 not the motions of the planets, and the way in which they now viewed that same universe
 had a profound effect on their beliefs, values and behaviour.

   In the previous two chapters we have discussed the paradigms that, in the West at
least, have emerged and become common currency in the field of management and
organisation theory. Though these paradigms have their adherents as well as critics,
increasingly managers have experienced real difficulties in achieving competitive suc-
cess when applying them in today’s turbulent, complex and diverse business world. In
consequence, especially over the last two decades, both academics and practitioners
have been searching for new recipes for organisational success.
   It was in the USA that the search for new paradigms first became apparent. It was
the rise of Japanese industrial and economic might that forced American businesses to
question what they did and how they did it, as Morgan (1986: 111) observed:

 During the 1960s the confidence and impact of American management and industry seemed
 supreme. Gradually, but with increasing force, through the 1970s the performance of
 Japanese automobile, electronic, and other manufacturing industries began to change all
 this. Japan began to take command of international markets ...


The productivity gap between Japanese and American companies was starkly high-
lighted in a Harvard Business Review article by Johnson and Ouchi (1974). The
authors claimed that Japanese workers, assembling the same product using the same
technology, were some 15 per cent more productive than their American counterparts.

 For an American audience this was a shocking statement, confirming the worst fears of a
 decline in the USA’s competitive edge over the rest of the world. Since the Second World War
 American manufacturers had grown accustomed to out-producing and out-performing every
                                                                                                ▲
86   Chapter 3 · In search of new paradigms


                   foreign competitor. The era of the Cold War had led Americans to believe that the only
                   danger to their general security sprang from communism and specifically the Soviet Union.
                   The notion that their comprehensively vanquished enemies and strategic clients, the
                   Japanese, might be poised to overhaul them technically and even economically was unpalat-
                   able, even unbelievable.                                           (Sheldrake, 1996: 185)

                  It was not only the USA that took fright; in the 1970s and 1980s, all over the
               Western world, businesses and governments too woke up to the Japanese challenge.
               Even West Germany, which prided itself on producing well-engineered and high-qual-
               ity products such as BMW and Mercedes cars, found that the Japanese were
               producing cars such as the Lexus that were not only half the price, but also better-
               engineered and of far superior quality (Williams et al, 1991).
                  Nor was it just the Japanese challenge that frightened the West. The 1970s also
               saw the return of unemployment and inflation, both assumed to have been elimi-
               nated, and the occurrence of the two ‘oil shocks’, which highlighted most Western
               nations’ precarious reliance on imported energy. Therefore, old certainties were being
               challenged and new orthodoxies began to arise. Rather like Copernicus, Japan made
               the West see the world, and its place in it, from a new perspective.
                  Organisations have become increasingly aware that in the last 20 years or so, the
               world has turned on its axis. The days of the mass production of standardised prod-
               ucts appear to be over; the key words for the future are variety, flexibility and
               customisation. As Perez (1983) and Freeman (1988) argued, a new techno-economic
               rationale is emerging. This new rationale has three main features:
               ■    A shift towards information-intensive rather than energy- or materials-intensive
                    products.
               ■    A change from dedicated mass production systems towards more flexible systems
                    that can accommodate a wider range of products, smaller batches and more frequent
                    design changes – ‘economies of scale’ are being replaced by ‘economies of scope’.
               ■    A move towards the greater integration of processes and systems within companies
                    and between suppliers and customers, which permits a more rapid response to
                    market and customer requirements.
                  These developments have been given a variety of names. In the 1970s, Daniel Bell
               (1973) heralded ‘The Coming of Post-Industrial Society’. In the 1980s, other writers
               spoke of the ‘post-Fordist’ or ‘post-Taylorist’ era (Whitaker, 1992). Increasingly, in
               the 1990s, the term ‘postmodernism’ was used to describe the changes taking place in
               the world in general and organisations in particular (Hassard, 1993). These terms,
               particularly the debate around postmodernism and its alternatives, will be discussed
               in Chapter 4. For now, however, what we need to recognise is that it is not necessarily
               that the nature of organisations themselves has changed fundamentally, though signif-
               icant changes in size, technology and complexity have certainly taken place. It is
               rather that, like those who listened to Copernicus, we are seeing their role in the
               established order from a different perspective and beginning to see new possibilities
               and new challenges.
                  It is the emergence of these new possibilities and challenges that has motivated
               Western organisations to undertake a fundamental reassessment of their objectives and
               operations, rather than a mere change in fashion or managerial whim – though this is
Introduction   87

obviously present as well (Huczynski, 1993; Kennedy, 1994). In effect, what we can see
from the beginning of the 1980s is the emergence of a paradigm shift, or, to be more
accurate, the search for new, more appropriate paradigms. It seemed as if the changes
taking place in the business environment were so enormous and rapid that existing par-
adigms, whatever their past merits, were breaking down and new ones emerging.
   In this chapter, we examine the three proto-paradigms that have come to dominate
Western managerial thinking and writing over the last two decades: the
Culture–Excellence approach, the Japanese Management approach and the
Organisational Learning approach. As Exhibit 3.1 shows, there is a tendency to link
them together or treat them as though they are largely the same. As this chapter will
show, however, they are distinct approaches to running organisations with different
origins and differing implications for management. Culture–Excellence arose as an
attempt to counter Japanese competitiveness by drawing on and re-shaping the
American and British traditions of individualism and free market liberalism. It
emerged in the early 1980s, and its principal exponents (Tom Peters and Robert
Waterman, 1982; Rosabeth Moss Kanter, 1989; and Charles Handy, 1989) have
attempted both to predict and to promote the ways in which successful (excellent)
companies will and should operate in the future.
   The Japanese Management paradigm is a very different animal. It has been devel-
oped in Japan over the last 50 years, and not only is it being extensively practised
there, but, at least until recently, its success was not disputed. Because of the success
of the Japanese economy and Japanese companies in the 1960s, 1970s and 1980s, the
Japanese approach attracted much interest in the West – a classic case of ‘if you can’t
beat them, join them’. This was especially the case in the UK, where Japanese inward
investment (by household names such as Honda, Nissan and Toyota) generated a
great deal of debate regarding the impact and merits of ‘Japanisation’ (Ackroyd et al,
1988; Dale and Cooper, 1992; Hannam, 1993; Turnbull, 1986; Whitehill, 1991).
This was also the case in the USA, where Japan and Japanese methods were seen, in
turn, as either a threat or a lifeline to American industrial pre-eminence (Kanter et al,
1992; Pascale and Athos, 1982; Peters, 1993; Schonberger, 1982).
   The third approach, organisational learning, came to the fore in the early 1990s.
Leading management thinkers, in particular Chris Argyris (1992), have been inter-
ested in organisational learning for over 40 years. However, it is only in the last
15 years that the concept has become popularised as an engine for organisational
competitiveness through the work of Senge (1990) in the USA and Pedler, Boydell and
Burgoyne (1989) in the UK. One of the key benefits claimed for organisational learn-
ing is that it is a universal approach which draws on and is consistent with both
Western and Japanese organisational traditions (Hedlund and Nonaka, 1993; Probst
and Buchel, 1997).
   Though the Culture–Excellence and Japanese approaches have some similarities,
for example the resemblance between the Japanese passion for quality and the
Culture–Excellence school’s fervent advocacy of the pursuit of excellence, the two
also have significant differences, as will be shown. Whilst the Japanese approach has
clearly influenced the Culture–Excellence thinkers, the influence of the latter in Japan
has been small. The two may be competing approaches in the West, but certainly not
in Japan. Nevertheless, both are dynamic and developing paradigms, with some
common elements, and consequently a merging or a blending of the two in the West
88   Chapter 3 · In search of new paradigms

               is not beyond all possibilities. The organisational learning approach, though it draws
               on both Western and Japanese organisational traditions, is by no means an attempt to
               fuse or merge the Culture–Excellence and Japanese approaches. Instead, it represents
               yet another attempt to provide Western countries, particularly the USA, with an
               approach to managing organisations that will allow them in the twenty-first century
               to enjoy the sort of dominance they enjoyed for much of the twentieth century.
                  Nevertheless, it will be argued in the conclusion to this chapter that, although these
               three proto-paradigms offer new possibilities, they also raise familiar controversies,
               not least regarding the role and treatment of people. Therefore, as the following dis-
               cussion of the three approaches will show, whilst attempting to become new
               paradigms, they still have to answer old questions.


The Culture–Excellence approach
               Though predominantly a North American perspective, the Culture–Excellence
               approach has also found its adherents in Europe. Therefore, the examination of this
               approach will draw on the work of key writers from both sides of the Atlantic,
               namely Tom Peters and Robert Waterman, Rosabeth Moss Kanter and Charles
               Handy. The writers are all practising and internationally-recognised management con-
               sultants; Handy and Kanter are distinguished academics as well. Consequently,
               though their work is attempting to predict and promote the way firms will or should
               operate in the future, it is firmly based on what they believe the best companies are
               doing now or planning to do in the future.
                 These three perspectives formed the spearhead of the movement that simultane-
               ously charted and created the new organisational forms that have begun to appear
               over the last 20 years. Their work – though both complementary and distinct – is of
               profound influence in shaping our understanding of what the future holds in the field
               of management. This work will now be examined in detail, starting with the
               American perspectives of Peters and Waterman, and Kanter, and concluding with
               Handy’s British perspective.


          ■ Tom Peters and Robert Waterman’s search for excellence
               Tom Peters has been, arguably, the most influential management consultant of the last
               two decades. His books sell in millions, his seminars fill auditoriums, and his newspa-
               per column is syndicated across the world. He is also said to be one of the
               highest-paid management consultants in the world, reputedly charging some
               US$25,000 per seminar back in 1987 (Huczynski, 1993). He catapulted to inter-
               national fame when he co-authored, along with Robert Waterman, In Search of
               Excellence: Lessons from America’s Best-Run Companies (Peters and Waterman,
               1982), which is the best-selling management book of all time. It is difficult to overes-
               timate the impact this book has had. At a time when Western economies were on the
               rocks and Japanese companies appeared to be sweeping all before them, In Search of
               Excellence seemed to offer a way, perhaps the only way, for Western companies to
               regain their competitiveness (Crainer, 1995).
The Culture–Excellence approach   89

    Exhibit 3.2         The 7 S framework

    Strategy: plan or course of action for the allocation of scarce resources in order to achieve
    specified goals.
    Structure: the main features of the organisation chart and how the various parts of an
    organisation are linked.
    Systems: the organisation’s formalised procedures and processes.
    Staff: the composition of the workforce, i.e. engineers, managers, etc.
    Style: the behaviour of key managers and also the cultural style of the organisation.
    Shared values: the guiding concepts and meanings that infuse the organisation’s members.
    Skills: the distinctive capabilities possessed by individuals, groups and the organisation
    as whole.
    Source: Peters and Waterman (1982)




  The origins of the book lie in a major study of the determinants of organisational
excellence, which Peters and Waterman carried out when working for the manage-
ment consultants McKinsey and Company. They used the now-famous McKinsey 7 S
Framework (see Exhibit 3.2), which they had developed jointly with Richard Pascale
and Anthony Athos, to study 62 of America’s most successful companies.
  Peters and Waterman concluded that it was the four ‘soft’ Ss (staff, style, shared
values and skills) that held the key to business success. In stressing the ‘soft’ Ss, they
challenged the rational theories of management described in previous chapters. They
argue that the rational approach is flawed because it leads to the following:
■   Wrong-headed analysis – situation or information analysis that is considered too
    complex and unwieldy to be useful. This is analysis that strives to be precise about
    the inherently unknowable.
■   Paralysis through analysis – the application of the rational model to such an extent
    that action stops and planning runs riot.
■   Irrational rationality – where rational management techniques identify the ‘right’
    answer irrespective of its applicability to the situation in question.
   In the light of these criticisms, Peters and Waterman argue that the analytical tools
that characterise the rational approach should only be used as an aid to, rather than a
substitute for, human judgment. They believe that it is the freedom given to managers
and employees to challenge the orthodox and to experiment with different solutions
which distinguishes the excellent companies from the also-rans. In place of the
rational approach, Peters and Waterman argue that there are eight key attributes that
organisations need to demonstrate if they are to achieve excellence:
1   A bias for action.
2   Close to the customer.
3   Autonomy and entrepreneurship.
4   Productivity through people.
5   Hands-on, value-driven.
6   Stick to the knitting.
90   Chapter 3 · In search of new paradigms

               7 Simple form, lean staff.
               8 Simultaneous loose–tight properties.
               These are discussed in more detail below.

               1 A bias for action
               One of the main identifiable attributes of excellent companies is their bias for action.
               Even though they may be analytical in approach, they also favour methods that
               encourage rapid and appropriate response. One of the methods devised for achieving
               quick action is what Peters and Waterman term ‘chunking’. Chunking is an approach
               whereby a problem that arises in the organisation is first made manageable (i.e.
               broken into ‘chunks’) and then tackled by a small group of staff brought together
               specifically for that purpose. The main reason for the use of such groups, variously
               called project teams, task forces or quality circles, is to facilitate organisational fluid-
               ity and to encourage action. Key characteristics of these groups are as follows:
               ■   They usually comprise no more than ten members.
               ■   They are voluntarily constituted.
               ■   The life of the group is usually between three and six months.
               ■   The reporting level and seniority of the membership is appropriate to the impor-
                   tance of the problem to be dealt with.
               ■   The documentation of the group’s proceedings is scant and very informal.
               ■   These groups take on a limited set of objectives, which are usually determined,
                   monitored, evaluated and reviewed by themselves.
                 Chunking is merely one example of the bias for action that exists in excellent com-
               panies and reflects their willingness to innovate and experiment. These companies’
               philosophy for action is simple: ‘Do it, fix it, try it.’ Therefore, excellent companies
               are characterised by small, ad hoc teams applied to solving designated problems
               which have first been reduced to manageable proportions. Achieving smallness is the
               key, even though the subject or task may be large. Smallness induces manageability
               and a sense of understanding, and allows a feeling of ownership.

               2 Close to the customer
               Excellent companies really do get close to the customer, while others merely talk
               about it. The customer dictates product, quantity, quality and service. The best organ-
               isations are alleged to go to extreme lengths to achieve quality, service and reliability.
               There is no part of the business that is closed to customers. In fact, many of the excel-
               lent companies claim to get their best ideas for new products from listening intently
               and regularly to their customers. The excellent companies are more ‘driven by their
               direct orientation to the customers rather than by technology or by a desire to be the
               low-cost producer. They seem to focus more on the revenue-generation side of their
               services’ (Peters and Waterman, 1982: 197).

               3 Autonomy and entrepreneurship
               Perhaps the most important element of excellent companies is their ‘ability to be big
               and yet to act small at the same time. A concomitant essential apparently is that they
               encourage the entrepreneurial spirit among their people, because they push autonomy
The Culture–Excellence approach   91

markedly far down the line’ (Peters and Waterman, 1982: 201). Product champions
are allowed to come forward, grow and flourish. Such a champion is not a blue-sky
dreamer, or an intellectual giant. The champion might even be an ideal thief. But
above all, the champion is the pragmatist; the one who latches on to someone else’s
idea, and doggedly brings something concrete and tangible out of it.
   In fostering such attitudes, the excellent companies have what they label ‘champi-
oning systems’, consisting of the following:
■   The product champion – a zealot or fanatic who believes in a product.
■   A successful executing champion – one who has been through the process of cham-
    pioning a product before.
■   The godfather – typically, an ageing leader who provides the role model for champions.
The essence of this system is to foster, promote and sustain the budding entrepreneur.
It is claimed that the three elements of the championing system are essential to its
operation and credibility.
   Another key part of this system is that, in some companies, product champions
tend to be allocated their own ‘suboptional divisions’. These are similar to small,
independent businesses and comprise independent new venture teams, run by champi-
ons with the full and total support of senior management. The suboptional division is
independent in that it is responsible for its own accounting, personnel activities, qual-
ity assurance and support for its product in the field. To encourage entrepreneurship
further, teams, groups and divisions are highly encouraged by the companies’ reward
structures to compete amongst themselves for new projects.
   Autonomy and entrepreneurship are also encouraged by the type of no-holds-
barred communications procedures adopted by excellent companies. These exhibit
the following characteristics:
■   Communication is informal – even though there are lots of meetings going on at
    any one time, most meetings are informal and comprise staff from different disci-
    plines gathering to talk about and solve problems.
■   The communication system is given both physical and material support – black-
    boards, flip-charts and small tables that foster informal small group discussions are
    everywhere. The aim is to encourage people to talk about the organisation: what
    needs changing; what is going on; and how to improve things around the place.
    There are also people, variously described as dreamers, heretics, gadflies, mavericks
    or geniuses, whose sole purpose is to spur the system to innovate. Their job is to
    institutionalise innovation by initiating and encouraging experimentation. They
    can also call on staff in other divisions of the organisation to assist them in this
    process, as well as having financial resources at their disposal.
■   Communication is intensive – given the freedom, the encouragement and the sup-
    port (financial, moral and physical) in the organisations, it is no wonder that the
    level of communication between and amongst workers is not only informal and
    spontaneous but also intense. This is borne out by the common occurrence of
    meetings without agendas and minutes. Also, when presentations are made in these
    meetings, questioning of the proposal is unabashed and discussion is free and open.
    Those present are expected to be fully involved in such meetings and there are no
    ‘sacred cows’ that cannot be questioned.
92   Chapter 3 · In search of new paradigms

               This intense communication system also acts as a remarkably tight control system, in
               that people are always checking on each other to see how each is faring. This arises
               out of a genuine desire to keep abreast of developments in the organisation rather
               than any untoward motive. One result of this is that teams are more prudent in their
               financial expenditure on projects. Another is that the sea of inquisitors act as ‘idea
               generators’, thereby ensuring that teams are not dependent entirely on their own
               devices to innovate and solve problems. This usually also ensures that all options are
               considered before a final decision is made. The concomitant result of this fostering of
               creativity is that senior management is more tolerant of failure, knowing full well that
               champions have to make many tries, and consequently suffer some failures, in the
               process of creating successful innovations.

               4 Productivity through people
               A cherished principle of the excellent companies is that they treat their workers with
               respect and dignity; they refer to them as partners. This is because people, rather than
               systems or machines, are seen as the primary source of quality and productivity gains.
               Therefore, there is ‘tough-minded respect for the individual and the willingness to
               train him, to set reasonable and clear expectations for him, and to grant him practical
               autonomy to step out and contribute directly to his job’ (Peters and Waterman, 1982:
               239). There is a closeness and family feeling in such companies; indeed many of the
               ‘partners’ see the organisation as an extended family. The slogans of such companies
               tend to reflect this view of people: ‘respect the individual’, ‘make people winners’, ‘let
               them stand out’, ‘treat people as adults’.

               5 Hands-on, value-driven
               Excellent companies are value-driven; they are clear about what they stand for and
               take the process of value-shaping seriously. There is an implicit belief that everyone in
               the organisation, from the top to the bottom, should be driven by the values of the
               organisation; hence the great effort, time and money spent to inspire people by and
               inculcate them with these values:

                 ... these values are almost always stated in qualitative, rather than quantitative, terms. When
                 financial objectives are mentioned, they are almost always ambitious but never precise.
                 Furthermore, financial and strategic objectives are never stated alone. They are always dis-
                 cussed in the context of the other things the company expects to do well. The idea that
                 profit is a natural by-product of doing something well, and not an end in itself, is almost
                 always universal.                                             (Peters and Waterman, 1982: 284)

                 Implanting these values is a primary responsibility of the individual members of the
               management team. They set the tone by leading from the front. Coherence and homo-
               geneity must, however, first be created among senior management by regular meetings
               (both formal and informal). The outcome of this is that management speak with one
               voice. They are passionate in preaching the organisation’s values. They unleash
               excitement, not in their offices, but mainly on the shopfloor where the workers are.
               Inculcating these values, however, is a laborious process and persistence is vital in
               achieving the desired goal.
The Culture–Excellence approach   93

6 Stick to the knitting
Acquisition or internal diversification for its own sake is not one of the characteristics
of excellent companies. They must stick to the knitting – do what they know best. But
when they do acquire, they do it in an experimental fashion, by first ‘dipping a toe in
the water’. If the water does not feel good, they get out fast. Acquisitions are always
in fields related to their core activities and they never acquire any business that they
do not know how to run. As a general rule, they ‘move out mainly through internally
generated diversification, one manageable step at a time’ (Peters and Waterman,
1982: 279).

7 Simple form, lean staff
A guiding principle in excellent companies is to keep things simple and small.
Structurally, the most common form is the ‘product division’. This form, which is
rarely changed, provides the essential touchstone that everybody understands and
from which the complexities of day-to-day life can be approached. Since the use of
teams, groups and task forces for specific projects is a common stock-in-trade of these
companies, most changes in structure are made at the edges, such as by allocating one
or two people to an ad hoc team. By adopting this approach, the basic structure is left
in place, while all other things revolve and change around it. This gives these organi-
sations great flexibility but still enables them to keep their structures simple,
divisionalised and autonomous.
    Such simple structures only require a small, lean staff at the corporate and middle
management levels. This results in there being fewer administrators and more doers:
‘ ... it is not uncommon to find a corporate staff of fewer than 100 people running a
multi-billion-dollar enterprise’ (Peters and Waterman, 1982: 15). Therefore, in excel-
lent companies, flat structures, with few layers, and slimmed-down bureaucracies –
which together allow flexibility and rapid communication – are the order of the day.

8 Simultaneous loose–tight properties
This is the ‘firm and free’ principle. On the one hand, it allows the excellent companies
to control everything tightly, whilst on the other hand allowing and indeed encourag-
ing individual innovation, autonomy and entrepreneurship. These properties are
jointly achieved through the organisation’s culture – its shared values and beliefs. By
sharing the same values, self-control and self-respect result in each person becoming
their own, and everyone else’s, supervisor. The individual members of the organisation
know they have the freedom, and are encouraged, to experiment and innovate. They
also know that their actions will be scrutinised and judged, however, with the utmost
attention paid to the impact they have on product quality, targets and, above all, the
customer. The focus is on building and expanding the frontiers of the business. The
ultimate goal is to be the best company, and in the final analysis, this is the benchmark
against which the discipline and flexibility of the individual will be measured.
   Therefore, Peters and Waterman maintain that the main attributes of excellent
companies are flat, anti-hierarchical structures; innovation and entrepreneurship;
small corporate and middle management staffs; reward systems based on contribution
rather than position or length of service; brain power rather than muscle power; and
strong, flexible cultures.
94   Chapter 3 · In search of new paradigms

                  Peters and Waterman’s vision of the organisation of the future, based on their
               study of leading American companies, has proved extremely influential, not only in
               the business world but in academia as well. This is not to say (as will be shown later)
               that they are without their critics; however, there is little doubt that they laid the
               groundwork, especially in highlighting the important role played by culture, for other
               leading thinkers whose work draws on and gels with theirs.
                  Their vision of the future has not stood still. Peters formed his own consultancy, The
               Tom Peters Group, and has used this as a vehicle for developing and implementing the
               Culture–Excellence approach. Though not fundamentally changing his view of the
               need for excellent organisations, in Thriving on Chaos (Peters, 1989) he argued that
               none existed in the USA. In Liberation Management (Peters, 1993), he placed more
               emphasis on the need to break organisations into smaller, more independent, more
               flexible units. Only by doing this, he argued, would managers be ‘liberated’, and thus
               able to achieve their – and their organisation’s – full potential. In this book, Peters
               maintains that the age of the large corporations such as IBM and General Motors is
               over. He sees such companies as outmoded and uncompetitive dinosaurs, which are
               doomed to extinction unless they change rapidly and irreversibly. Peters argues that
               only rapid structural change can create the conditions for entrepreneurial cultures to
               emerge that both liberate managers and empower workers. Indeed, this book is noth-
               ing short of an out-and-out attack on the very existence of corporate America.
                  The Circle of Innovation: You Can’t Shrink Your Way to Greatness (Peters, 1997a)
               is perhaps his most iconoclastic book. Even the format of the book is different from
               what has gone before. Indeed, its use of a multitude of different images, font types
               and font sizes and, in some cases, almost surreal page layouts, makes it more like a
               pop video than a traditional book. The message could not be clearer: just as this book
               is innovative in its format, so organisations must be innovative if they are to survive.
               His attack on present and past organisational practices, stability and any sense of per-
               manence is keener and more vitriolic than ever. Professionalism, rules, balance,
               propriety, logic and consensus are all outmoded concepts, he argues. Peters (1997a:
               76) quotes Dee Hock, founder of the Visa Network, who said: ‘The problem is never
               how to get new, innovative thoughts into your mind, but how to get the old ones out.’
               For Peters, organisational forgetting is far more important than organisational learn-
               ing. Future success, he argues, is not related to what an organisation has done in the
               past, nor what is bringing it success now, but how innovative they will be in identify-
               ing new products, services and markets. He makes a strong, almost messianic, plea
               for organisations to centre themselves on innovation. Peters argues that innovation
               demands obsession, tension, being provocative, and having no market peers looking
               over your shoulder. As firms achieve parity in terms of quality and costs, he believes
               that only a constant commitment to being different, to continuous innovation, will
               allow companies to differentiate themselves from their competitors. Just as quality
               was seen as everyone’s job in the 1980s, so Peters maintains that innovation must also
               become everyone’s job now. In terms of structure, organisations must adopt a net-
               work or even a virtual structure, where small groups and even individuals have the
               freedom to self-manage themselves, to make connections and break connections as
               they see fit. Indeed, the subtitle of this book could well be ‘Anarchy Rules!’
                   Whereas in In Search of Excellence, he and Robert Waterman put forward their
               eight attributes of excellence, this book is structured around his 15 points on The
               Circle of Innovation, which are:
The Culture–Excellence approach   95

  ■   Distance is dead.
  ■   Destruction is cool.
  ■   You can’t live without an eraser.
  ■   We are all Michelangelos.
  ■   Welcome to the white-collar revolution.
  ■   All values come from the professional services.
  ■   The intermediary is doomed.
  ■   The system is the solution.
  ■   Create waves of lust.
  ■   Tommy Hilfiger knows.
  ■   Become a connoisseur of talent.
  ■   It’s a woman’s world.
  ■   Little things are the only things.
  ■   Love all, serve all.
  ■   We’re here to live life out loud.
  Trying to follow Peters’ train of thought through his various books is like trying to
  catch mist – just when you think you have got it, it slips through your hands. Indeed,
  Peters (1997a: xv) takes pride in his inconsistency: ‘“They” call me inconsistent. I
  consider that a badge of honor.’ Originally he saw the pursuit of ‘excellence’ as the
  only way to save corporate America from annihilation by its Japanese competitors
  (and thus maintaining the USA as the premier industrial nation). Then, in Liberation
  Management, Peters (1993) argued that corporate America needed to be destroyed in
  order for America to survive. The message from The Circle of Innovation is that, with
  the business world in a permanent state of chaos, the only way for any organisation
  to survive is by constantly reinventing itself through a ceaseless process of innovation
  and change.
     Nevertheless, though he offers some new tools and techniques, and the tone of his
  work has become more strident and zealot-like over the years, in essence he is still
  promoting the concepts first developed in In Search of Excellence. The market is not
  simply the final arbiter of success, but the only arbiter. Meeting the ever-increasing
  appetite for instant gratification is the only way to survive. Innovation, i.e. autonomy
  and entrepreneurship, is now the prime attribute of excellence and the only guarantee
  of success. Peters’ (1997a: 493) view of how organisations should be run is, perhaps,
  best summed up by a quotation he cites from the racing driver Mario Andretti: ‘If
  things seem under control, you’re just not going fast enough.’


■ Rosabeth Moss Kanter’s post-entrepreneurial model
  Kanter is one of America’s leading management thinkers. As well as being a professor
  at the Harvard Business School and a former editor of the Harvard Business Review,
  she is also a leading and influential management consultant with her own company,
  Goodmeasure Inc., reputedly charging some $17,000 per hour for her services in
  1987 (Huczynski, 1993). Her early work concerned Utopian communities, such as
  the Shakers, but she then went on to study business organisations. Kanter first came
  to prominence with her (1977) book, Men and Women of the Corporation. This was
  an intensive examination of corporate America, which she saw as bureaucratic,
96   Chapter 3 · In search of new paradigms

               unimaginative and uninspiring. In her next book, The Change Masters (Kanter,
               1983), she offered her personal recipe for overcoming what she saw as the malaise
               and lack of competitiveness of the USA. The book painted corporate America as
               being in transition; it recognised that the corporatism of the past no longer worked,
               but was not sure where the future lay. Kanter (1983) argued that it lay in American
               and not Japanese ideas, and particularly in unleashing individual dynamism through
               empowerment and greater employee involvement.
                  Though her earlier books were clearly in tune with Peters and Waterman’s work, it
               is Kanter’s (1989) When Giants Learn To Dance: Mastering the Challenges of
               Strategy, Management, and Careers in the 1990s that most complements and develops
               their work by attempting to define what organisations need to be like in the future if
               they are to be successful. Kanter called for a revolution in business management to
               create what she termed post-entrepreneurial organisations. She used this term:

                 ... because it takes entrepreneurship a step further, applying entrepreneurial principles to the
                 traditional corporation, creating a marriage between entrepreneurial creativity and corpo-
                 rate discipline, cooperation, and teamwork.                               (Kanter, 1989: 9–10)

               Kanter maintained that:

                 If the new game of business is indeed like Alice-in-Wonderland croquet, then winning it
                 requires faster action, more creative manoeuvring, more flexibility, and closer partnerships
                 with employees and customers than was typical in the traditional corporate bureaucracy. It
                 requires more agile, limber management that pursues opportunity without being bogged
                 down by cumbersome structures or weighty procedures that impede action. Corporate
                 giants, in short, must learn how to dance.                                (Kanter, 1989: 20)


               She argues that today’s corporate elephants need to learn to dance as nimbly and
               speedily as mice if they are to survive in our increasingly competitive and rapidly-
               changing world. Companies must constantly be alert and on their guard, and keep
               abreast of their competitors’ intentions. By evaluating the response of modern organi-
               sations to the demands placed upon them, Kanter produced her post-entrepreneurial
               model of how the organisation of the future should operate. She sees post-entrepre-
               neurial organisations as pursuing three main strategies:
               1 Restructuring to find synergies.
               2 Opening boundaries to form strategic alliances.
               3 Creating new ventures from within: encouraging innovation and entrepreneurship.
               These are detailed below.

               1 Restructuring to find synergies
               Synergy occurs where the whole adds up to more than the sum of its constituent
               parts. In an age where resources are scarce, one of the priorities of organisations is to
               make every part of the business add value to the whole. The essence of this approach
               is to identify and concentrate on the core business areas and to remove all obstacles
               and impediments to their efficient and effective operation. Therefore, all non-core
               activities are eliminated, and authority is devolved to the appropriate levels of the
The Culture–Excellence approach   97

business: those in the front line. In practice this means selling off a company’s non-
core activities and ensuring that what remains, especially at the corporate and middle
management levels, is lean and efficient. Nevertheless, it is not sufficient merely to
have a strategy of reducing the size of the organisational bureaucracy. Companies
must also ensure that the essential tasks that these people previously carried out are
still undertaken. This can be accomplished in a number of ways, such as the use of
computers to carry out monitoring and information-gathering; devolving greater
responsibility and power down to individual business units; and contracting out serv-
ices and tasks previously carried out in-house.
   The result is to create flatter, more responsive and less complex organisations that
have a greater degree of focus than in the past. Kanter argues that such radical
changes need to be well planned, however, and executed with care and in a way that
ensures that employee motivation is increased, not eliminated.

2 Opening boundaries to form strategic alliances
With the slimming-down of the organisation and the contracting-out of some of its
functions, there arises the need to pool resources with other organisations; to band
together to exploit opportunities and to share ideas and information. These alliances
take three forms: service alliances, opportunistic alliances and stakeholder alliances.
The first, a service alliance, is where two or more organisations form a cross-
company consortium to undertake a special project with a limited lifespan. Such
alliances are usually considered when the resources of the various partners are insuffi-
cient to allow them to undertake the project by themselves. For this reason, and not
surprisingly, many such alliances involve research and development (R&D) projects.
The collaboration between Ford and General Motors on research into the develop-
ment of new materials for making cars is an example of this. This approach allows
organisations to mobilise resources, often on a large scale, whilst limiting their expo-
sure and protecting their independence. It is the limited purpose of the consortium
that makes it possible even for competitors to join together for their mutual benefit.
   The second form, an opportunistic alliance, comprises a joint venture whose aim is
to take advantage of a particular opportunity that has arisen: ‘ ... the two principal
advantages behind this kind of alliance are competence-enhancing ones: technology
transfer or market access or both’ (Kanter, 1989: 126). An example of such an
alliance was the link-up between the Rover Group and Honda Motors; the former
gained access to Japanese know-how, whilst the latter gained greater access to the
European market. However, as Kanter (1989: 126) pointed out, such alliances are not
always equally beneficial: ‘ ... once one of the partners has gained experience with the
competence of the other, the alliance is vulnerable to dissolution – the opportunity
can now be pursued without the partner.’
   The third form, a stakeholder alliance, unlike the previous two, is seen as a continu-
ing, almost permanent partnership between an organisation and its key stakeholders,
generally considered to be its employees, customers and suppliers. There is a growing
awareness among employees, trade unions and management of the need to see each
other as partners in the same enterprise rather than rivals. A similar case is made for
treating customers and suppliers as partners too. The main reason for the organisation
to exist is to serve its customers; therefore, there is a need to keep close to them, not
only to be aware of their present concerns and future needs, but also to gain ideas
98   Chapter 3 · In search of new paradigms

               regarding potential joint product development. In the same way, the organisation relies
               on its suppliers, who will in any case want to get closer to them as their customers.
               Stakeholder alliances have gained a growing band of adherents in Britain in recent years,
               especially, though not exclusively, amongst Japanese companies such as Nissan Motors
               (Partnership Sourcing Ltd, 1991a; Wickens, 1987). As Kanter points out, major innova-
               tions in technology and organisational systems require longer-term investments.
               Companies can only enter into such investments if they are secure in the knowledge that
               their key stakeholders are themselves committed to the same aims and approach.
                  The result of these alliances is that structures and positions within organisations
               will change, sometimes quite dramatically. This is especially the case amongst senior
               and line managers, but even previously protected groups – such as R&D specialists –
               will also see their roles and responsibilities change. They will have to work more
               closely not only with colleagues internally, but also with external groupings.

               3 Creating new ventures from within – encouraging innovation
                  and entrepreneurship
               Traditional organisations face a difficult balancing act between gaining the full bene-
               fits from existing mainstream business, and, at the same time, creating new activities
               that will become the mainstream business of the future. Kanter argues that there is a
               feeling in many traditional companies that opportunities are being missed owing to
               their inability to give staff the flexibility to pursue new ideas and develop new prod-
               ucts. The job of creating new products or ventures used to be the sole domain of the
               strategic planners or the R&D departments. However, in the post-entrepreneurial
               organisation, this will no longer be the case: innovation will move from these spe-
               cialised domains to the centre stage. As the case studies in Part 3 will show, some
               organisations are deliberately forming new, independent units or entirely restructuring
               themselves to nurture innovation and entrepreneurship. New cultures are being cre-
               ated which encourage and aid innovation, and old barriers and restrictions are being
               eradicated. As a result of such changes, the innovative potential of employees is being
               tapped, and a proliferation of new ideas, products and ways of working is emerging.


          ■ The consequences of the post-entrepreneurial model
               There is no doubt that the post-entrepreneurial model carries profound implications
               for both organisations and their employees. However, Kanter, unlike Peters and
               Waterman, does not see these new developments as being an unalloyed blessing, espe-
               cially in the case of employees. In particular, she draws attention to three areas where
               the changes will have a major impact on employees: reward systems; career paths and
               job security; and lifestyle.

               Reward systems
               Employers and employees will increasingly come to look for new and more appropriate
               ways of rewarding and being rewarded. Indeed, with the advent of performance-related
               pay, in both the private and public sectors, there is already a gradual change from deter-
               mining pay on the basis of a person’s position and seniority to basing it on their
               contribution to the organisation. These changes are being driven by four main con-
               cerns: cost, equity, productivity and entrepreneurial pressure (see Exhibit 3.3).
The Culture–Excellence approach   99

  Exhibit 3.3          Drivers for changes to reward systems

  Cost – the concern is that the present system is too expensive for companies that must
  conserve resources to be competitive.
  Equity – organisations are concerned to ensure that employees are fairly rewarded for
  their efforts.
  Productivity – organisations want to adopt reward systems that motivate high performance
  from employees.
  Entrepreneurial pressure – companies are aware that the present system does not always
  adequately reward entrepreneurs for their efforts.
  Source: taken from Kanter (1989)




   These concerns are being approached through the application of three different,
though not necessarily mutually exclusive, payment methods. The first is profit-sharing,
whereby the pay of the employee is pegged to a company’s performance. This means
that salaries are not fixed but instead are related, by the use of a predetermined for-
mula, to the profit of the organisation over a given period of time, usually the previous
financial year. The second method is the use of individual performance bonuses, which
are paid on top of basic salary and are related to a predetermined performance target.
This method has the advantage of enabling individuals to establish a direct correlation
between their personal effort and the bonus payment they receive. Though this method
is not new, the sums involved are – sometimes as much as twice basic salary. The last is
the venture returns method, which represents perhaps the most radical break with the
past. This is a scheme whereby entrepreneurs and inventors within an organisation are
given the opportunity to earn returns based on the performance, in the market place, of
the particular products or services for which they are responsible. Through this mecha-
nism, the entrepreneur or inventor remains within the corporate fold but is paid on a
similar basis to the owner of a small, independent business. The advantage is that they
get the personal satisfaction and reward of running their ‘own’ business, whilst the
larger organisation benefits from having highly-motivated and innovative people in
charge of part of its operations.
   The picture created by new reward systems is not, of course, totally rosy. Where
there are winners, there may also be losers; not everyone will have the opportunity or
drive to be an entrepreneur, or will be in a position that lends itself to some form of
bonus system. Also, many people who currently benefit from reward systems based
on seniority and position may find they lose out. Older workers, established in organ-
isations and well down their chosen career path, could be particularly adversely
affected by such changes. In addition, such payment systems may be divisive and
create conflict. Kanter stresses the need for teamwork, yet a situation where some
members of the team are receiving high bonuses is bound to create tensions which
undermine cooperation and collaboration. It may be that profit-sharing schemes,
which encompass everyone in the organisation, overcome this threat to teamworking,
but if everyone receives the same share of the profits irrespective of their individual
contribution, the motivating effect is likely to be diminished. The result of these vari-
ous approaches to pay could be minimal in terms of motivation, or could even be
demotivating and indeed drive out the most experienced people in the organisation.
100   Chapter 3 · In search of new paradigms


               Careers and job security
               As organisations have become slimmer and more tasks are contracted out, organisa-
               tion structures are becoming flatter as entire layers of hierarchy are dispensed with.
               The resultant effect threatens the demise of traditional forms of career path. Kanter
               argues that the idea of staying with one organisation and climbing the corporate
               career ladder is being replaced by hopping from job to job, not necessarily in the
               same organisation. Therefore, instead of people relying on organisations to give shape
               to their career, in future the onus will be on individuals to map out and pursue their
               own chosen route.
                  This change is also affecting skill development in organisations. It will no longer be
               sufficient just to be skilled in a particular job or specialism, because these will cer-
               tainly change over time or even entirely disappear. Increasingly, individuals are
               finding that the concept of job security is being replaced by ‘employability security’ –
               the ability to adapt and enhance one’s skills so as to be able to perform well in differ-
               ent types of jobs and organisations. Careers, therefore, are being shaped by
               professional and entrepreneurial principles: the ability to develop and market one’s
               own skills and ideas, rather than by the sequence of jobs provided by one company.
               People will join organisations or accept particular jobs not, as in the past, because of
               job security or career progression, but in order to develop their skills, add to their
               knowledge and enhance their future employability.
                  Kanter argues that:

                ... what people are increasingly working to acquire is the capital of their own individual rep-
                utation instead of the organisational capital that comes from learning one system well and
                meeting its idiosyncratic requirements. For many managers, it might be more important, for
                example, to acquire or demonstrate a talent that a future employer or financial investor
                might value than to get to know the right people several layers above in the corporation
                where they currently work.                                                  (Kanter, 1989: 324)


               Having painted this picture, it must also be acknowledged that there are contradic-
               tions and dilemmas that need to be resolved. What is being created are organisations
               and cultures that facilitate innovation and entrepreneurship, and change and flexibil-
               ity. These will be organisations where employability and loyalty are transient concepts
               and what matters, almost exclusively, is the individual’s present performance rather
               than their past or potential future contribution. The two main dilemmas from the
               organisational perspective are, therefore, how to reconcile the above with their stated
               objective of treating employees as long-term partners, and how to motivate employees
               to work in the organisation’s interest rather than their own interest. This is an espe-
               cially pointed dilemma in the case of the champions and entrepreneurs on whom it is
               argued the future of organisations depends. This is because it is this group of highly
               marketable individuals who are most likely to see their careers in terms of many dif-
               ferent jobs and organisations.

               Workers’ lifestyle
               There are now many organisations where people have been given greater freedom to
               innovate and experiment, where there are strong financial rewards for increased per-
               formance levels and where people are given greater control over their area of the
The Culture–Excellence approach   101

business. There is little doubt that in such situations people are expected, and indeed
wish, to work longer hours and centre what social life they have around their work.
Indeed, there is now much evidence that in most developed countries people are
working longer hours then they did a decade ago (Kodz et al, 2003). To encourage
this, many companies now provide key employees with ‘concierge’ services that do
their shopping, find them plumbers, sort out their new car and even find them a new
house and arrange the move. The purpose of this is, of course, to allow staff to focus
more effectively on their job. Nevertheless, where there are benefits to the organisa-
tion, there may also be disbenefits to the individual:

 The workplace as a centre for social life and the workmate as a candidate for marriage mate
 is, on one level, a convenience for overloaded people who have absorbing work that leaves
 little time to pursue a personal life outside. It is also an inevitable consequence of the new
 workforce demographics. But on another level, the idea is profoundly disturbing. What about
 the large number of people whose personal lives are not contained within the corridors of the
 corporation? What about the people with family commitments outside the workplace?
                                                                             (Kanter, 1989: 285)


We already know the adverse cost that such work patterns can have on people’s phys-
ical and mental health and on their family life. Indeed, there is now a growing
tendency among senior managers of both sexes to give up work or move to less well-
paid but less demanding jobs (downshifting) in order to spend more time with their
families (Carvel, 2002; Frith, 2003). One particularly high-profile example of this in
the UK was the decision in 2003 by the Minister of Health, Alan Milburn, to step
down in order to spend more time with his children as they grow up. This ‘downshift-
ing’ phenomenon may be the reason why Kanter believes unmarried or divorced
executives are thought to be preferred to their married counterparts by some compa-
nies because it is assumed they can focus more on their job given their lack of home
life. Therefore, the line between motivation and exploitation may be a narrow one,
and crossing it may benefit neither the individual nor the organisation.
   Much of Kanter’s work supports the view of Peters and Waterman in terms of the
need for and direction of organisational change. Certainly, on the issues of innovation
and entrepreneurship, culture and flexibility, and structure and jobs, there is much
common ground. To an extent we might expect this, given that they are all writing
from an American perspective, and basing their views on the experience and plans of
leading American companies. Where they differ, however, is that Kanter takes a much
more critical view of these developments. In particular, she draws attention to the
contradiction that lies at the heart of the post-entrepreneurial model: are people –
their skills, motivation and loyalty – central to the success of the organisation of the
future, or are they just another commodity to be obtained and dispensed with as cir-
cumstances and their performance require?
   Like Peters, Kanter has developed her earlier work but in a broader context. In The
Challenge of Organizational Change, she and her co-authors (Kanter et al, 1992) turn
their attention to the issue of managing change, and propose ‘Ten Commandments
for Executing Change’ (see Exhibit 3.4).
   Looking at approaches to change, Kanter et al (1992) distinguished between ‘Bold
Strokes’ and ‘Long Marches’. The former relate to major strategic decisions or
102   Chapter 3 · In search of new paradigms


                  Exhibit 3.4          Ten Commandements for Executing Change

                   1. Analyse the organisation and its need for change.
                   2. Create a shared vision and a common direction.
                   3. Separate from the past.
                   4. Create a sense of urgency.
                   5. Support a strong leader role.
                   6. Line up political sponsorship.
                   7. Craft an implementation plan.
                   8. Develop enabling structures.
                   9. Communicate, involve people and be honest.
                  10. Reinforce and institutionalise change.
                  Source: Kanter et al (1992: 382–3)




               economic initiatives. These, they argue, can have a clear and rapid impact on an
               organisation, but they rarely lead to any long-term change in habits or culture. The
               Long March approach, on the other hand, favours relatively small-scale and opera-
               tionally-focused initiatives that are slow to implement and whose full benefits are
               achieved in the long term rather than the short term. However, the Long March
               approach can impact on culture over time. Bold Strokes are initiatives taken by a few
               senior managers, sometimes only one; they do not rely on the support of the rest of
               the organisation for their success. The Long March approach, however, does.
               Without the involvement and commitment of the majority of the workforce, such ini-
               tiatives cannot succeed.
                  Kanter et al argue that these can be complementary, rather than alternative,
               approaches to change, though in practice companies appear to favour one or the
               other. Nevertheless, companies may need both the Bold Stroke and the Long March if
               they are to succeed in transforming themselves.
                  Kanter’s, unlike Peters’, works go far beyond the confines of the individual business
               enterprise to look at the workings of society as a whole. She co-authored a book,
               Creating the Future, with Michael Dukakis, the former Governor of Massachusetts
               (Dukakis and Kanter, 1988) and worked on his failed campaign for the US Presidency.
               The influence of Dukakis and successive Democrat administrations in Massachusetts
               can be seen in Kanter’s more recent book World Class: Thriving Locally in the Global
               Economy (Kanter, 1997). Here she argues that if local communities and regions are to
               achieve economic security, they must see themselves as competing bodies in a merci-
               lessly competitive global economy. Kanter paints a picture of the global economy as
               one where free enterprise reigns supreme and where goods, and many services, can be
               supplied from anywhere in the world. She points out that in the 1980s and 1990s,
               both blue- and white-collar American jobs were exported to whichever part of the
               world offered the lowest labour costs. Though supporting this example of the working
               of the free-enterprise system as being ultimately to everyone’s benefit, Kanter argues
               that if local communities and regions are to survive and prosper in such a fierce cli-
               mate, they must learn how to defend themselves. In particular, she argues for an
The Culture–Excellence approach   103

   interventionist local state which forms alliances with local private enterprises and
   manipulates the local economy. By creating a business-friendly taxation system and
   by the selective use of public expenditure for education and infrastructure projects, it
   can aim to attract and retain employers, especially large corporations.
      In Innovation: Breakthrough Thinking at 3M, DuPont, GE, Pfizer, and Rubbermaid
   (Kanter et al, 1997), Kanter returns to the internal world of the organisation and
   the tried and tested ground of the Culture–Excellence approach. The core arguments
   of the book are neatly summed up on the dust jacket, which states that inside you
   will discover:
   ■   Why it is impossible to approach innovation from a business school mentality.
   ■   Why investigations of any cost or size will fail if tied too tightly to current market-
       place needs.
   ■   Why managers must learn to operate more intuitively.
   ■   Why cross-functional teams are more productive than any other organisational
       configuration.
   ■   How fostering a competitive internal environment results in a healthy, creative ten-
       sion and hungry, entrepreneurial employees.
   These points are fleshed out by drawing upon the practices of the companies in the
   book’s title and the editors’ own, anecdotal, experiences. In a book whose Foreword
   is written by Tom Peters, it is not perhaps surprising that many of the arguments
   mirror those of Peters’ own book on innovation (Peters, 1997a). Indeed, the key
   thrust of the book is succinctly summed up in a phrase from Tom Peters’ (1997b)
   Foreword: ‘Tomorrow’s victories will go to the masters of innovation! Period!’ It
   speaks volumes for the credibility which the Culture–Excellence approach has
   achieved in the business world that, after nearly two decades, its two leading
   American proponents are still in agreement about what it takes to achieve success.
      In the next (and last) section on Culture–Excellence, we will examine the emer-
   gence of new organisational forms from the perspective of a leading British theorist:
   Charles Handy.


■ Charles Handy’s emerging future organisations
   Charles Handy is one of Britain’s leading management thinkers. Indeed, in a 1997
   European league table of global management gurus, he was placed third; all the
   others in the top ten were American (Rogers, 1997). Handy was educated at Oxford
   University and the Sloan School of Management at the Massachusetts Institute of
   Technology. He has been an oil executive, an economist and a professor at the
   London Business School. He has also acted as a consultant to a wide range of organi-
   sations in business, government, the voluntary sector, education and health.
      Handy’s first book, Understanding Organizations, which was published in 1976,
   has become a standard text on management courses and is now in its fourth edition
   (Handy, 1993). However, the book that brought him to public prominence and where
   he first began to articulate his views about the future direction of organisations was
   The Future of Work (Handy, 1984). As with Kanter and Peters, his work was inspired
   by the rise of Japan and the apparent decline of the West. In particular, he was con-
   cerned with the high level of unemployment in the UK at that time. Handy argued that
104   Chapter 3 · In search of new paradigms

               if organisations were to survive and meaningful jobs were to be created for all those
               who wished to work, then both organisations and individuals would have to change
               the way they perceived jobs and careers. It was in his book The Age of Unreason
               (1989) that Handy fully articulated his views on the requirements for organisational
               success. He argued that profound changes were taking place in organisational life:

                The world of work is changing because the organisations of work are changing their ways.
                At the same time, however, the organisations are having to adapt to a changing world of
                work. It’s a chicken and egg situation. One thing, at least, is clear: organisations in both pri-
                vate and public sectors face a tougher world – one in which they are judged more harshly
                than before on their effectiveness and in which there are fewer protective hedges behind
                which to shelter.                                                             (Handy, 1989: 70)


               He asserted that British companies were fast moving away from the labour-intensive
               organisations of yesteryear. In future, new knowledge-based structures, run by a few
               smart people at their core who will control a host of equally smart computerised
               machines, will be the order of the day. Already, he noted, leading British organisations
               were increasingly becoming entities that received their added value from the knowledge
               and the creativity they put in, rather than from the application of muscle power. He
               contended that fewer, better-motivated people, helped by clever machines, could create
               much more added value than large groups of unthinking, demotivated ones ever could.
                  Like Peters and Kanter, Handy believes that the emerging future organisations will
               be smaller, more flexible and less hierarchical. Similarly, he also believes that the new
               organisations will need to treat people as assets to be developed and motivated, rather
               than just so much industrial cannon fodder. However, he does not assume that the
               future will be without diversity in relation to the organisational forms that emerge.
               Unlike Peters and Waterman, and to a lesser extent Kanter, he recognises that compa-
               nies will continue to face differing circumstances and will need to respond in different
               manners. Therefore, instead of trying to re-establish a new ‘one best way’ for all
               organisations, with all the contradictions that arise from such attempts, Handy identi-
               fies three generic types of organisation that he argues will dominate in the future:
               1 The Shamrock organisation.
               2 The Federal organisation.
               3 The Triple I organisation.
               These are detailed below.

               1 The Shamrock organisation
               This form of organisation, like the plant of the same name with three interlocking
               leaves, is composed of three distinct groups of workers who are treated differently
               and have different expectations: a small group of specialist ‘core’ workers; a contrac-
               tual fringe; and a flexible labour force.
                  The core workers are the first leaf, and the main distinguishing feature of the
               Shamrock form of organisation. These are a group of specialists, professional workers
               which form the brain, the hub or what we might call the ‘nerve centre’ of the organi-
               sation. These are people who are seen as being essential to the organisation. It is these
               few intelligent and articulate personnel in whose hands and heads reside the secrets of
The Culture–Excellence approach   105

the organisation. They are both specialists and generalists, in that they run the organi-
sation and control the smart machines and computers that have replaced, to a large
extent, much of the labour force. This ‘ ... all puts pressure on the core, a pressure
which could be summed up by the new equation of half the people, paid twice as
much, working three times as effectively’ (Handy, 1989: 118–19).
   For their well-rewarded jobs, they are expected to be extremely loyal to the organi-
sation, and to live and breathe their work. It is their responsibility to drive the
organisation forward to ever greater success; to be flexible enough to meet the con-
stantly-changing challenge of competitors and the equally changing and sophisticated
needs of customers. Core workers operate as colleagues and partners in the organisa-
tion, as opposed to superiors and subordinates. In a very real sense, it is their
company, and as such they expect to be recognised and rewarded for their roles and
achievements, rather than the position they occupy on the organisation’s ladder. It fol-
lows that they are managed differently – by consent: asked and not told what to do.
   The contractual fringe is the second leaf of the Shamrock. A central feature of
Shamrock organisations is their smallness in relation to their productive capacity. This
is achieved by two methods: firstly, as mentioned above, by the use of machines to
replace people; and secondly, by the contracting-out to individuals and other organisa-
tions of services and tasks previously done in-house. This leads to the creation of a
contractual fringe, who may or may not work exclusively for the company in question.
They are contracted to carry out certain tasks, for which they are paid a fee based on
results, rather than a wage based on time taken. The arguments put forward in favour
of such arrangements are numerous, but tend to boil down to three main ones:
■    It is cheaper – companies only pay for what they get.
■    It makes management easier – why keep the people on the payroll with all the
     attendant human management problems if it is not necessary?
■    Workload balancing – when business is slack, it is the contractor who bears the
     impact of the reduced workload.
The flexible labour force is the third and fastest-growing leaf of the Shamrock and
comprises a pool of part-time workers available for use by organisations. These are
people with relevant skills who are not in need of, or who cannot obtain, full-time
employment, but who are prepared to work on a part-time basis.
   Increasingly, among this group of flexible workers are women who left their skilled
jobs to raise families, but who are willing to return to work on a part-time basis,
while still maintaining their child-rearing commitments. Included in this also is the
growing army of young or retired executives, who prefer to hop from one job to
another, doing bits and pieces of work on a part-time basis. These workers are some-
times referred to as temps (temporaries) or casuals. The growth of this group can be
measured by the proliferation of employment agencies, catering solely for these
groups, which have been established in the United Kingdom since the early 1980s.
However, the flexible workforce never

    ... have the commitment or ambition of the core. Decent pay and decent conditions are what
    they want, ... They have jobs not careers and cannot be expected to rejoice in the organisation’s
    triumphs any more than they can expect to share in the proceeds, nor will they put themselves
    out for the love of it; more work, in their culture, deserves and demands more money.
                                                                               (Handy, 1989: 80–1)
106   Chapter 3 · In search of new paradigms

                  The picture, therefore, of the Shamrock organisation is one where structure and
               employment practices allow it to be big in terms of output, whilst being small in
               terms of the number of direct employees. For the latter reason, it is lean with few
               hierarchical layers and even less bureaucracy. It achieves this by the application of
               smart machines and a combination of part-time staff and subcontractors, whose work
               can be turned on and off as circumstances dictate. However, in a departure from past
               practice, the people involved may be highly skilled and competent. This also has the
               advantage of requiring much less office and factory accommodation than more tradi-
               tionally-organised companies. Other than the core staff, the rest are all scattered in
               different organisations or their own homes, often linked through sophisticated com-
               munication systems.
                  Such organisations, with their flexibility and skills, are well-suited to the provision
               of high-performance products and services to demanding and rapidly-changing mar-
               kets. The beauty of it all, as Handy argues, is that they do not have to employ all of
               the people all of the time or even in the same place to get the work done. According
               to Handy, small is not only beautiful but also increasingly preferable.

               2 The federal organisation
               This is the second type of generic organisation that Handy sees as becoming dominant
               in the future. He defines this type of organisation as a collection or network of individ-
               ual organisations allied together under a common flag with some shaped identity.
               Federations arise for two reasons. The first is that, as Shamrock organisations grow
               bigger, the core workers begin to find the volume of information available to them to
               make decisions increasingly difficult to handle. Secondly, they constitute a response to
               the constantly-changing and competitive environment of the business world. Modern
               organisations need not only to achieve the flexibility that comes from smallness, but
               also to be able to command the resources and power of big corporations.
                  As Handy (1989: 110) puts it:

                It [Federalism] allows individuals to work in organisation villages with the advantages of
                big city facilities. Organisational cities no longer work unless they are broken down into vil-
                lages. In their big city mode they cannot cope with the variety needed in their products, their
                processes, and their people. On the other hand, the villages on their own have not the
                resources nor the imagination to grow. Some villages, of course, will be content to survive,
                happy in their niche, but global markets need global products and large confederations to
                make them or do them.


               Federalism, therefore, implies the granting of autonomy to Shamrocks. Autonomy
               requires that Shamrocks are headed by their own separate chief executives, supported
               by a team of core workers, who take full responsibility for running the company. In
               such situations the Shamrocks become separate, but related entities, under the
               umbrella of the Federal Centre. With the devolving of power to the Shamrocks, who
               still remain in the Federal portfolio, the Federal Centre is left to pursue the business
               of providing a common platform for the integration of the activities of the
               Shamrocks. The Federal Centre has the role of generating and collating ideas from the
               different Shamrocks and making them into concrete, achievable strategic objectives.
               Therefore, the Federal Centre is concerned mainly with the future; with looking
The Culture–Excellence approach   107

forward, generating ideas, and creating scenarios and options of what the future will
look like. All this is done with the ultimate aim of moving the organisation forward
and keeping it ahead not only of its rivals, but also of its time.
   Another feature of the Federal organisation is what Handy refers to as the ‘inverted
do’nut’.

 The do’nut is an American doughnut. It is round with a hole in the middle rather than the
 jam in its British equivalent ... This, however, is an inverted American do’nut, in that it has
 the hole in the middle filled in and the space on the outside; ... The point of the analogy
 begins to emerge if you think of your job, or any job. There will be a part of the job which
 will be clearly defined, and which, if you do not do, you will be seen to have failed. That is
 the heart, the core, the centre of the do’nut ... [but] ... In any job of any significance the
 person holding the job is expected not only to do all that is required but in some way to
 improve on that ... to move into the empty space of the do’nut and begin to fill it up.
                                                                            (Handy, 1989: 102)


Through this approach, the Federal organisation seeks to maximise the innovative
and creative potential of staff members. It does this by specifying the core job, the
target and the quality standard expected of a given product or service. Outside of this
specified domain, within the do’nut’s empty space, however, staff members are given
enough room and latitude to challenge and question existing ideas, to experiment and
to come up with new methods of doing things, and new products or services. The aim
is to encourage enquiry and experimentation that lead to higher standards. It follows
from this that the essence of leadership under a Federal system is to provide a shared
vision for the organisation; one which allows room for those whose lives will be
affected by it – either directly or indirectly – to modify it, ponder over it, expand it,
accept it and then make it a reality. Leadership in such situations is about providing
opportunities for staff to grow and test their potential to the limit.

3 The Triple I organisation
This is the third of Handy’s new organisational forms, although in fact it comprises a
set of principles rather than a structural model. From the above, it is clear that both
Shamrock and Federal organisation types introduce new dimensions into the world of
work. Traditional perspectives are being transformed, and the established criteria for
judging organisational effectiveness are being re-evaluated. Issues such as the defini-
tion of a productive contribution to work, reward systems, managerial skills and
many more are being examined in the light of new management ideas. Indeed,
according to Handy, we appear to be on the verge of a revolution in management
thought and practice.
   An examination of the attributes of the core workers in both Shamrock and Federal
organisations gives an indication of what will constitute the new formula for success
and effectiveness in tomorrow’s companies. The core workers, as seen by Handy, use
their Intelligence to analyse the available Information to generate Ideas for new prod-
ucts and services. Thus we find that Handy’s first two organisational forms contain the
seeds to produce his third form, the Triple I – organisations based on Intelligence,
Information and Ideas. Since the three Is constitute the prime intellectual capital of the
new organisations, clearly the Triple I principle applies most importantly to the core
group of workers who are in a position to possess these attributes.
108   Chapter 3 · In search of new paradigms

                  In future, it is argued, the equation for organisational success will be Triple I = AV,
               where Triple I = Intelligence, Information and Ideas, and AV = Added Value, either in cash
               or kind. This will be an organisation ‘obsessed with the pursuit of truth, or, in business
               language, of quality’ (Handy, 1989: 113). This will not depend solely on human ability
               but will be a combination of smart people and smart machines. Therefore, organisations
               of the future will increasingly have to (a) invest in smart machines to remain competitive
               and effective; (b) recruit skilled and smart people to control the machines; and (c) ensure
               that this group of skilled people is rewarded equitably.
                  For the Triple I organisation to emerge and remain successful, it must keep the
               skills, knowledge and abilities of its staff up to date. This means that it must become
               a learning organisation; one that provides a conducive environment for the develop-
               ment of its intellectual capital. Time and effort must be consciously and officially
               devoted to learning and study, at all levels of the organisation. The core, especially,
               must spend more time than their equivalents in more traditional companies on think-
               ing and study: meeting with other external professionals and experts, going on study
               tours and listening more to ‘partners’ within the organisation, all with the objective of
               improving the organisation’s human capital. The new organisations will be dynamic,
               interactive societies where information is open to all, freely given and freely received.
               In the Triple I organisation, everyone will be expected to think and learn as well as to
               do. Nevertheless, it is the core worker from whom most will be demanded. Such
               people will be increasingly

                ... expected to have not only the expertise appropriate to his or her particular role, but will
                also be required to know and understand business, to have the technical skills of analysis
                and the human skills and the conceptual skills and to keep them up to date.
                                                                                          (Handy, 1989: 124)

               This is one of the key features that make the Triple I organisation unique; it is a
               hotbed of intellectual discourse, where the prevailing culture is one of consent rather
               than instruction. Staff are unsupervised in the traditional sense, and instead are
               trusted to do what is right and given room to experiment with new ideas and con-
               cepts. Finally, the flexibility of such organisations, and the unpredictability of the
               environments in which they operate, mean that careers will become more variegated
               and less permanent.

               As can be seen, therefore, Handy’s view of the future shape of organisations does not
               appear dissimilar to that of Kanter, and Peters and Waterman. However, he does
               depart from their views in at least two crucial respects. Firstly, he explicitly acknowl-
               edges that not all organisations will adopt the same form or move at the same pace.
               His three generic forms indicate that organisations will have to exercise choice and
               judgment in order to match their particular circumstances to the most suitable form.
               Also, it is clear that he views this as an evolutionary as well as a revolutionary
               process: companies cannot immediately become a Triple I type of organisation; they
               have to develop into one over time. Secondly, he explicitly states what is only hinted
               at by the other writers, namely that in the new organisations where everyone is to be
               treated as an equal ‘partner’, some will be more equal than others, i.e. the core work-
               ers will be treated and rewarded in a more preferential manner than the contractual
               fringe or the flexible labour force.
The Culture–Excellence approach   109

   Handy does not give specific guidance as to how existing organisations can adapt
themselves to take on these new forms, although he does indicate that a lack of
empowerment and self-belief amongst individuals in organisations presents a major
obstacle to change. However, in an earlier work (Handy, 1986), he does state very
clearly that fundamental change is a long-term process and that people tend to react
emotionally rather than rationally to change.
   After the publication of The Age of Unreason, Handy appeared to grow increasingly
concerned with the unanticipated consequences of his prescriptions for the world of
work. This is made clear in the first paragraph of his 1994 book, The Empty Raincoat:

 Four years ago, my earlier book, The Age of Unreason, was published. In that book I pre-
 sented a view of the way work was being reshaped and the effects which the reshaping
 might have on all our lives. It was, on the whole, an optimistic view. Since then, the world of
 work has changed very much along the lines which were described in the book. This should
 be comforting to an author, but I have not found it so. Too many people and institutions
 have been unsettled by the changes. Capitalism has not proved as flexible as it was supposed
 to be. Governments have not been all-wise or far-seeing. Life is a struggle for many and a
 puzzle for most.
    What is happening in our mature societies is much more fundamental, confusing and dis-
 tressing than I had expected.                                                 (Handy, 1994: 1)


In The Empty Raincoat, Handy returns to and restates many of the themes of his ear-
lier work, but with two differences. Firstly, he explicitly acknowledges that the types
of careers that these new organisational forms will create will have a severely adverse
effect on the home life of employees, especially senior managers. They will be called
on to be company men and women above all else, including their families.
   Secondly, there is an almost evangelical feel to the book. This is especially notice-
able in the latter section of the book, where Handy argues that the modern world has
taken meaning out of people’s lives and that, whilst the pursuit of profit may moti-
vate senior managers:

 Not many in the lower realms of the organisation can get excited by the thought of enrich-
 ing shareholders. ‘Excellence’ and ‘quality’ are the right sort of words, but they have been
 tarnished by repetition in too many organisations.                        (Handy, 1994: 265)

This more pessimistic view of the future is still there in his 1997 book, The Hungry
Spirit (Handy, 1997: 3):

 Many of us are, I believe, confused by the world we have created for ourselves in the West
 ... the new fashion for turning everything into a business, even our own lives, doesn’t seem
 to be the answer. A hospital, and my life, is more than just a business.
      What good can it possibly do to pile up riches which you cannot conceivably use, and
 what is the point of the efficiency needed to create those riches if one third of the world’s
 workers are now unemployed or under-employed as the ILO calculates? And where will it
 end, this passion for growth? ... I am angered by the waste of so many people’s lives,
 dragged down by poverty in the midst of riches. I am concerned by the absence of a more
 transcendent view of life and the purposes of life, and by the prevalence of the economic
 myth which colours all we do. Money is the means for life and not the point of it.
110   Chapter 3 · In search of new paradigms

                  In the book, Handy argues that, in the West, people’s spiritual needs have been sac-
               rificed to the pursuit of their material needs; and he examines the options, and where
               the responsibility lies, for putting balance back into people’s lives. In particular he is
               concerned with the distribution of wealth, the role that education can play in giving
               everyone a good start in life, and how we can look after ourselves whilst having a
               care for others as well. He even touches on, perhaps, the biggest question of all:
               ‘What, ultimately, is the real purpose of life?’ (Handy, 1997: 5). In addressing these
               issues he ranges widely, looking at markets, organisations and the role of business,
               government and religion. He believes the answer lies in the pursuit of ‘Proper
               Selfishness’. This is a redefinition of individualism; he sees individuals as moving
               away from the pursuit of narrow self-interest, and instead realising that it is in their
               best interests to pursue a fairer society for all. Though he identifies a role for govern-
               ment and business in creating Proper Selfishness, he believes it is individuals
               themselves who bear the main responsibility for its achievement. In particular, he
               draws attention to the role of individual entrepreneurs in changing the world:

                Entrepreneurs, whether social or commercial, often discover aspects of themselves in the
                pursuit of something beyond themselves. Such people are not content to let the status quo be
                the way forward. They itch to make a difference ... Almost accidentally, corporations have
                become the nursery for frustrated entrepreneurs. They should turn this to a positive account
                and do it more deliberately, in the hope that they can retain some of the best for themselves,
                including women, while seeding the community with the others. The workplace has always
                been the real school for life. Perhaps it just needs to change its curriculum a little to tune in
                with the new age of personal initiative.                                    (Handy, 1997: 262)


                  Handy calls for a new sense of purpose for individuals, organisations and society.
               He wants to see a strong ethical approach to business and society, and a recreation of
               the concept that people exist to help and serve each other as well as themselves. These
               are sentiments that many of us would probably share but, unfortunately, he fails to
               show how the unleashing of individual entrepreneurship and the creation of the new
               organisational forms he advocates will aid this search for meaning. Instead, he asks us
               to put our faith in the goodness of people and to be optimistic about the future. A
               recurrent theme in Handy’s work, however, has been the many paradoxes thrown up
               by contemporary society, especially the presence of dire poverty amidst extreme
               wealth, and the potential of technology for creating meaningful work compared with
               the increasing tendency for the quality of life to decline. Therefore, it seems strange
               that the one paradox that Handy appears to ignore is that the forms of organisations
               that he advocates may well be creating the poor jobs and poverty he deprecates.


          ■ Culture–Excellence: summary and criticisms
               That the Culture–Excellence approach has had a major impact on the thinking of
               Western businesses, especially in the UK and USA, is beyond question. In Search of
               Excellence has sold over six million copies, making it the best-selling management
               book of all time. Largely as a result of its success, its authors, especially Tom Peters,
               have become successful and influential consultants. Rosabeth Moss Kanter and
               Charles Handy have likewise achieved the pre-eminence in business circles that they
The Culture–Excellence approach   111

had previously only occupied in academia. A look in the business section of any
bookshop will show that there are also many more authors who have jumped on the
bandwagon. Indeed, barely a day seems to go by without the publication of yet
another blockbuster proclaiming that it has discovered the recipe for success. Some of
these achieve a degree of prominence in business circles, though many seem to dis-
appear without trace. Nevertheless, the fact that publishers keep publishing them, and
that in different ways and shapes they repeat and project the Culture–Excellence mes-
sage, emphasises the thirst by managers for the message.
   Nor is it just a case that managers buy them to leave them on the shelf. Over the
last two decades, on both sides of the Atlantic, managers have been attempting to re-
shape their companies along the Culture–Excellence lines. In 1997, a survey by the
Industrial Society showed that in the UK alone some 94 per cent of respondent organ-
isations either had recently been through or were going through a culture change
programme (Industrial Society, 1997).
   The reason for its emergence, and for its continuing popularity, was that in a world
where old certainties had disappeared, where new and more dangerous competitors
seemed to appear every day, it rejected the communal and corporatist approach of the
Japanese, and offered instead a recipe for success that was in tune with the free
market liberalism, with its stress on individualism, that has dominated much of the
West for the last two decades. Nor was it merely a rehash of what had gone before.
The Culture–Excellence approach to organisations is significantly different from pre-
vious approaches; although we might note that the new forms, especially Handy’s
Shamrock type, bear an interesting resemblance to the first budding of organisational
life during the Industrial Revolution. The entrepreneurial style of management, the
stress on a privileged core of skilled workers, and the contracting-out of whole areas
of organisational activities are all hallmarks of the early industrial organisations.
However, the big differences between then and now relate to the level of sophistica-
tion and complexity of the new organisations that are emerging, the degree of
integration of both internal functions and external relationships, the grade of intelli-
gence and skill required of all staff, whether they be core or periphery – and, of
course, the conditions of employment. For Watson (1986: 66), who coined the term
Culture–Excellence school to describe proponents of this approach, there is one fur-
ther and crucial difference:

 [In these new organisations] what brings the activities of the organisational members to
 focus upon those purposes which lead to effective performance is the existence of a strong
 and clearly articulated culture.                                       (Watson, 1986: 66)

It is this which makes it clear that the Culture–Excellence approach that has been
developing over the last two decades is remarkably different from most of the theory
and practice that has grown up in the last 100 years.
   Peters, Kanter and Handy argue that organisations are entering a new age, where
familiar themes are taking on different meanings and are being expressed in a new lan-
guage. Contrasting the old with the new, they argue that what is important in the new
is not muscle power, but brain power: the ability to make intelligent use of information
to create ideas that add value and sustain competitiveness. The new organisation is
flatter in structure, though it might be more accurate to say that structure is decreasing
112   Chapter 3 · In search of new paradigms

               in importance and that its role as a directing and controlling mechanism is being taken
               over by cultures that stress the need for, and facilitate, flexibility and adaptation
               (though in passing we should note that Peters (1993) also sees the dismembering of
               hierarchical structures as an important step in creating these new cultures). The
               Culture–Excellence approach is sounding the death knell of hierarchical organisations
               and the concept of promotion through the ranks. Careers and skills are taking on new
               meanings, as are established ideas of reward.
                  In future, it is argued, careers are likely to depend on the individual and his/her
               ability to remain employable. In turn, the skills needed for ‘employability’ will tend to
               be generic and broad-based rather than organisation- or function/specialism-specific.
               Likewise, career paths and promotion will no longer be shaped by the particular
               employing organisation and its structures and criteria, but will be driven more by
               individuals creating their own opportunities by taking on new roles and responsibili-
               ties, either in one organisation or, more likely, by moving from company to company.
               As for pay, it seems that this will take the form not so much of a wage related to the
               particular post occupied, but more that of a fee paid for actual performance.
                  On human relations, the message being transmitted is that the new forms of organ-
               isations will treat their employees in a more responsible and humane fashion than has
               been the norm. Employees will be seen and treated as ‘partners’, capable of making a
               substantial contribution to the growth of the organisation. This approach, it is
               argued, will manifest itself in a tough-minded respect for the individual, who will
               receive training, be set reasonable and clear objectives, and be given the autonomy to
               make his/her own contribution to the work of the organisation. The new organisa-
               tions will seek to develop open, flexible and pragmatic cultures, which help to
               maintain a learning environment that promotes creativity and entrepreneurship
               amongst all employees.
                  Another feature of the new organisational forms, it is claimed, will be their ability
               to grant autonomy and encourage flexibility and initiative whilst at the same time
               keeping tight control of their operations. Like so much else, this is to be achieved
               through culture rather than structure, and values rather than rules. Everything is to be
               monitored closely, not by the watching eye of superiors, but by the creation of a
               homogeneous environment in which all take an equal responsibility for, and legiti-
               mate interest in, the work of their colleagues.
                  Clearly, the new organisation forms that are being promoted offer much that is
               admirable and worth supporting. Equally clearly, their adherents and promoters raise
               more questions than they answer. To an extent this is inevitable when dealing with
               something that is emerging rather than an existing and concrete reality. However, as
               this concept has been around for nearly two decades, this is no longer the case.
               Therefore, it would be remiss to ignore or gloss over the questions and dilemmas that
               seem apparent. Many writers have drawn attention to the shortcomings of the
               Culture–Excellence approach. Carroll (1983) and Lawler (1985) were both scathing
               about the methodological shortcomings of the research on which Peters and
               Waterman’s (1982) book was based. Indeed, Peters himself appears to have admitted
               that he and Waterman ‘faked’ some of the data in order to obtain their results
               (Kellaway, 2001). This would seem to give additional support to Wilson’s (1992)
               claim that the book lacks any apparent empirical or theoretical foundations. Though
               Wilson’s criticisms may seem somewhat exaggerated, it is certainly arguable that the
The Culture–Excellence approach   113

Culture–Excellence approach does have serious weaknesses, especially in three areas
that are crucial to the operation of organisations:
1 People. There are serious concerns and contradictions regarding the role and
  behaviour of people in the new organisations. On the one hand, they are pro-
  claimed as the chief asset of the new organisations. On the other hand, there are
  clearly different grades of employee, from core to periphery, and these different
  grades will be treated and rewarded in a markedly dissimilar manner; furthermore,
  none of the different grades can expect any real job security. The new organisations
  will only value employees as long as they and their areas perform to the highest of
  standards. Not only does this pit individual against individual, but also one part of
  the organisation against another. Whilst healthy competition may enhance organi-
  sational competitiveness, from what we know of motivation theory (Arnold et al,
  1998) it is not clear that the Culture–Excellence approach is that healthy. The
  Culture–Excellence approach also encourages teamwork, yet the pursuit of individ-
  ual advancement and reward often leads to conflict rather than cooperation
  (Schein, 1988).
2 Politics. Though Western companies traditionally either deny the existence of inter-
  nal struggles or argue that such behaviour is perverse, it is clear that the struggle
  for resources, power and survival is as great within organisations as it is between
  them (Buchanan and Badham, 1999; Pfeffer, 1981; Robbins, 1986). As stated
  above, the recommendations of the Culture–Excellence school would seem to exac-
  erbate political behaviour by and between individuals and groups, yet in the main
  they ignore this drawback to their approach, even though it is potentially damag-
  ing to both organisational and individual performance.
3 Culture. The proponents of Culture–Excellence are advocating a ‘one best way’
  (one best culture) approach for all organisations, irrespective of their size, environ-
  ment and other circumstances. Also, as Wilson (1992) pointed out, it assumes a
  simple causal relationship between culture and performance. Nevertheless, for the
  proponents of the Culture–Excellence school, culture is the great cure-all – the cre-
  ation of a culture of excellence is seen as answering all questions and solving all
  problems. This assumes that the creation of new cultures will itself be unproblem-
  atic. However, as the Chapter 5 will show, culture and politics appear to be the
  Achilles’ heel of approaches to managing organisations.
   It would also be remiss of us if we ignored the differences between the main propo-
nents of Culture–Excellence. Peters is a free market liberal in the classic American
mould. He believes that individual and organisational competition untrammelled by
government is what makes societies strong. Kanter agrees with most of this, but
believes that local communities, working with big business, have a positive role to
play in attracting and keeping well-paid jobs for their communities. Handy is also
committed to the free market, but has become increasingly concerned with the out-
come of his prescriptions. He appears to be turning his back on pure individualism,
arguing instead for a less rapacious, more caring capitalism, driven by what he terms
‘Proper Selfishness’ and more concerned with the collective good than individual
wealth creation. Though Peters and Kanter may continue to hold to the
Culture–Excellence line, it is difficult to see that the direction which Handy is now
taking is consistent with it.
114   Chapter 3 · In search of new paradigms

                  There is one final concern that is wider than the Culture–Excellence approach per
               se or its impact on organisations, but which is reflected in the differences between
               Peters, Kanter and Handy. The move towards creating segmented workforces of the
               type described by Handy (1989), and the emphasis on the temporary nature of
               employment championed by Peters and Waterman (1982) and Kanter (1989), are part
               of a continuing trend in the West, driven by neo-liberal economic and social policies,
               towards worsening job security and conditions of service, in order to create a vast
               pool of under-employed, especially part-time, labour that can be turned on or off as
               the situation dictates.
                  In the UK in 1993, for example, some 9.7 million workers (38 per cent of all UK
               workers) were either part-time, temporary, self-employed, on a government training
               scheme, or unpaid family workers – an increase of 1.25 million since 1986. Similarly,
               the proportion of men in employment who were part of the flexible workforce rose
               from 18 per cent in 1981 to 27.5 per cent in 1993 (Watson, 1994). This tallies with
               Hutton’s (1995) argument that the UK is now more socially divided than at any time
               since the Industrial Revolution. In particular, he maintains that the UK is a 30/30/40
               society – the marginalised, the newly insecure and the advantaged – and that this not
               only raises the spectre of increased social tensions, but is a positive disadvantage to
               wealth creation. Hutton’s attack on the adverse effects of neo-liberal market policies
               is supported by others, notably Saul (1997), who points out that the income gap
               between the highest- and lowest-paid workers in the UK is greater now than at any
               time since 1880, when records began. Figures published by the UK government
               (Brindle, 1998b) show that since 1979, whilst the richest 10 per cent of the popula-
               tion have seen their incomes grow by 70 per cent in real terms, the bottom 10 per
               cent of the population have suffered a cut in real income of 9 per cent. In the same
               period, poverty in the UK has almost tripled. As White (1999) noted, this increase in
               poverty has had an especially adverse impact on children. In 1979, 1 in 10 children
               lived in poverty. In 1996/7, the figure was 1 in 3. The reason for this increase appears
               to be very clear: 32 per cent of children now live in families without a full-time
               worker. Nor is this bleak picture restricted to the UK. As Dunphy and Griffiths
               (1998) point out, in 1980, the Chief Executive Officers of the 300 largest US compa-
               nies had incomes 29 times that of the average manufacturing worker; ten years later,
               their incomes were 93 times greater. By 2000, the average CEO salary was 531 times
               greater (AFL-CIO, 2003). Indeed, the founder of Microsoft, Bill Gates, has a personal
               fortune that is greater than the combined wealth of the 106 million poorest
               Americans (Elliott and Brittain, 1998). On a world scale, the estimated wealth of the
               11 richest individuals is more than the combined GDP of the 49 least developed coun-
               tries (Trade, 2003). Much of the economic and labour market liberalisation in the
               1980s was justified by ‘trickle-down’ economics – the view that as the rich got richer,
               then some of this wealth would trickle down to the rest of society and, therefore,
               society as a whole would become wealthier. This clearly does not appear to be the
               case. Not surprisingly, if one looks at the poorest nations in the world, the situation is
               much worse, with malnutrition, poverty and disease on the increase (Gittings, 1998).
               In the 1990s, the number of people in sub-Saharan Africa living on less than $1 a day
               increased from 47 to 49 per cent, and in eastern and central Europe it increased from
               7 to 20 per cent (Elliott, 2003). In the USA, Robert Reich, who was Secretary of
               Labor in the first Clinton administration, and other leading figures have warned of
The Japanese approach to management    115

       the dangers of a social chasm opening up between an ever-increasing rich elite, holed
       up in guarded compounds, and a jobless, impoverished majority (Elliott, 1997; Reich,
       1997). Indeed, as a sign of this, there are now more private security guards in the
       USA than there are publicly-employed police (Dunphy and Griffiths, 1998). Contrast
       this with the case of Japan, discussed next, where, traditionally, at government and
       organisation level, full employment has taken precedence over profit and underpinned
       its voracious appetite for economic expansion (Holden and Burgess, 1994).
          Despite these concerns and criticisms, Culture–Excellence has become the most influen-
       tial approach to running organisations in the USA and Europe, as is apparent from the
       many articles on its merits and case studies of its use that appear regularly in management
       journals. However, since the 1950s, the Japanese have been developing an alternative
       approach to structuring and managing organisations that is not only markedly different
       from the Culture–Excellence one but also has a proven track record of success.


The Japanese approach to management
       The last 50 years have seen the rebirth of Japan. Reduced almost to ashes at the end
       of the Second World War, by the 1980s Japan had built an industrial empire second
       to none. Even now, despite its economic ills of the last decade, it is still the second
       largest economy in the world. As Morgan (1986: 111) stated:

        With virtually no natural resources, no energy, and over 110 million people crowded in four
        small mountainous islands, Japan succeeded in achieving the highest growth rate, lowest
        level of unemployment and, at least in some of the larger and more successful organizations,
        one of the best-paid and healthiest working populations in the world.


       Though writers suggested many reasons for Japan’s success, ranging from culture to
       economic institutions, time and again, its approach to managing organisations was
       cited as the key factor (Hunter, 1989; Laage-Hellman, 1997; Sako and Sato, 1997;
       Schonberger, 1982; Smith and Misumi, 1989; Whitehill, 1991).
          Before proceeding to examine what is meant by the Japanese approach to manage-
       ment, it is useful briefly to trace Japan’s development as an industrial nation. Up to the
       middle of the nineteenth century, Japan was an intensely nationalistic society which
       practised a deliberate policy of isolating itself from the outside world. Therefore, for
       most of its inhabitants, Japan was the world. It was a feudal country that laid strong
       emphasis on obligation and deference, and where obedience to authority in general,
       and to the Emperor in particular, was unquestioned (Sheridan, 1993).
          For all its deliberate isolation, Japan was a sophisticated and well-educated country
       with a high degree of literacy. Education was based on a set of Confucian principles
       which stressed unquestioning obedience to the family; total loyalty to one’s superiors;
       and reverence for education and self-development. The abiding influence of these can
       still be seen in Japanese society today, and underpins the strength of Japanese organi-
       sations (Smith and Misumi, 1989). However, from the mid-nineteenth century, Japan
       began to experience internal tensions. The feudal aristocracy experienced escalating
       financial difficulties whilst the merchant class, considered social inferiors, began to
       prosper. At the same time, it became clear that the growing military might of other
116   Chapter 3 · In search of new paradigms

               countries posed a potential threat to Japan. In response to these developments, Japan
               adopted a twin-track policy of economic and military growth, not dissimilar to that
               being developed in Germany at this time (Hunter, 1989).
                   Missions were dispatched abroad to study and bring technologies and practices
               back to Japan. On one such visit in 1911, Yukinori Hoshino, a director of the Kojima
               Bank, became acquainted with the work of Frederick Taylor and obtained permission
               to translate his work into Japanese. Following this, Taylor’s Scientific Management
               principles, and allied approaches to work study and production management, were
               rapidly and enthusiastically adopted by the Japanese (McMillan, 1985). Indeed, such
               was the impact of Taylor’s work that, according to Wren (1994: 205), it ‘ ... led to a
               management revolution, replacing the entrepreneur-dominated age’. By the 1920s,
               Japan had moved from being an agrarian economy to one dominated by industry.
               Like many Western countries, industrialisation was accompanied by considerable
               industrial conflict, sometimes violent (Urabe, 1986). However, unlike most Western
               countries, this was not accompanied by a growing democratisation of society. Instead,
               democratic tendencies were quashed by a growing coalition between industry and the
               military that promoted intense nationalism and led, almost inexorably, to Japan’s
               involvement in the Second World War. After Japan’s defeat, its shattered society was
               occupied by the USA, which stripped the Emperor of his traditional powers and
               established a Western-style democracy (Sheridan, 1993; Whitehill, 1991).
                   Given the state of the Japanese economy after the Second World War, the success of
               its reconstruction is nothing short of miraculous. The Korean War in the 1950s proved
               a stroke of good fortune for Japan, in that the USA used Japan as an important staging
               post for troops and supplies. This injected billions of American dollars into Japan’s
               economy. However, perhaps much more important was America’s contribution to
               management education in Japan. In the immediate post-war years, Japanese companies
               acquired a reputation for bitter industrial disputes, shoddy workmanship and poor
               quality. The main responsibility for tackling these problems lay with American engi-
               neers working for the Civilian Communications Section of the Occupation
               Administration (Sheldrake, 1996). Four men in particular have been credited with
               turning this situation around and creating the basis of Japan’s fearsome reputation for
               the productivity of its workforce and quality of its products: Charles Protzman,
               Homer Sarasohn, Joseph Juran and W Edward Deming. Interestingly, the last three of
               these had all worked at Western Electric’s Hawthorne Works and were, therefore,
               familiar, though not necessarily always in agreement, with the Human Relations
               approach. All of them were far removed from the narrow concept of the engineer.
               They took a wide view of how enterprises should be run and in particular of the need
               for managers to show leadership and gain the commitment of their workforces. Their
               approach, which covered business policy and organisation as well as production meth-
               ods and techniques, was enthusiastically received, adopted and disseminated by the
               senior managers who attended their courses and lectures. As Horsley and Buckley
               (1990: 51) noted, Deming, especially, met with enormous success:

                W E Deming became a legend in Japan. He gave hundreds of lectures ... to eager managers
                on the vital importance of statistical quality control ... Among his pupils were many who
                were to become captains of Japanese industry in the 1960s and 1970s, heading firms like
                Nissan, Sharp and the Nippon Electric Company (NEC). The annual Deming Prize for good
                management was highly coveted in the 1950s, and is still being awarded today.
The Japanese approach to management   117

      Nevertheless, despite the economic and technical assistance of the USA, there is
  little doubt that the main credit for the country’s success can be attributed to the hard
  work, commitment and intelligence of Japanese managers and workers. Under the
  umbrella of a supportive economic and political framework, Japanese enterprises
  overcame their severe industrial relations and quality problems of the 1950s and cre-
  ated the distinctive and hugely successful Japanese approach to developing and
  managing their businesses that allowed them to take the world by storm in the 1970s
  and 1980s (Fruin, 1992; Pascale and Athos, 1982; Sako and Sato, 1997; Sheldrake,
  1996; Smith and Misumi, 1989).


■ What is the Japanese approach to management?
  As one might expect, it is difficult to find an all-embracing definition of the Japanese
  approach to management that satisfies all commentators or can be found in all
  Japanese companies. In particular, there are distinct differences between larger and
  smaller enterprises in Japan, and in the treatment of full-time and part-time, and male
  and female employees in all enterprises (Cole, 1979; Laage-Hellman, 1997; Sako and
  Sato, 1997). Indeed, such are these differences that some argue there is either no such
  thing as a distinctive Japanese approach to management or that, if it does exist, no
  one has been able to capture it accurately (Dale, 1986; Keys and Miller, 1984;
  Sullivan, 1983). Nevertheless, the vast majority of observers do seem to agree that it
  exists and can, broadly, be defined (Abegglen and Stalk, 1984; Ackroyd et al, 1988;
  Hatvany and Pucik, 1981; Holden and Burgess, 1994; Pascale and Athos, 1982;
  Smith and Misumi, 1989).
     Perhaps the most influential work, and still the best-selling book, on Japanese man-
  agement was William Ouchi’s (1981) Theory Z: How American Business Can Meet
  the Japanese Challenge. Drawing on the theoretical insights of Douglas McGregor
  and Chris Argyris, Ouchi argued that Japanese success stemmed from the involve-
  ment and commitment of the entire workforce. In turn, he argued, this was built
  upon a set of internally consistent norms, practices and behaviours based on trust and
  strong personal ties between the individual and the organisation, particularly their
  immediate work group. Ouchi drew particular attention to practices such as lifetime
  employment, slow evaluation and promotion and collective decision-making. Many
  other writers have also tried to capture the essence of Japanese management.
     McKenna (1988) believes that the key elements are lifetime employment, the sen-
  iority principle with regard to pay and promotion, and enterprise unionism (this will
  be explained later). Pang and Oliver (1988) agree with McKenna but also draw atten-
  tion to training and education, company-based welfare schemes, quality circles and
  manufacturing methods such as Just-in-Time production. Keys and Miller (1984)
  point to long-term planning, lifetime employment and collective responsibility as
  being the hallmarks of Japanese management. Laage-Hellman (1997) emphasises the
  presence of a consensus-seeking decision-making process, incremental planning
  through the development of a long-term vision and the use of short-term action plans,
  passive owners who do not usually interfere with managers, strategies that give prior-
  ity to long-term growth and survival, and the effective use of external resources
  through partnerships with suppliers and customers. Other commentators have also
  come up with similar lists.
118   Chapter 3 · In search of new paradigms

                  One of the most quoted of these is by Pascale and Athos (1982) who used the
               McKinsey 7 S Framework (see Exhibit 3.2), which they had developed jointly with
               Tom Peters and Robert Waterman, to analyse Japanese management. Like Peters and
               Waterman’s Culture–Excellence approach, Pascale and Athos stressed the four ‘soft’ Ss
               (staff, style, shared values, and skills). This was not to dismiss the ‘hard’ Ss (strategy,
               structure and systems), but to emphasise that the real difference between Japanese
               companies and their Western counterparts was that the latter tended to concentrate on
               the ‘hard’ Ss and ignore the ‘soft’ Ss. Pascale and Athos argued that, in contrast,
               Japanese companies had developed the ability to combine and blend the ‘soft’ and
               ‘hard’ Ss to their competitive benefit. Their work differed from other studies of
               Japanese management at the time by examining the management style of Japanese
               companies operating in the USA. In a similar vein, Peter Wickens, who was Personnel
               Director of Nissan Motor Manufacturing (UK) Ltd for over 10 years, also commented
               on the transfer of Japanese management to the West. In his 1987 book, The Road To
               Nissan, written when he was still at Nissan, he argued that the Japanese approach can
               be characterised by three factors: teamwork, quality-consciousness and flexibility.
               Interestingly, after he left Nissan, Wickens (1995) commented that Ouchi and others
               tended to miss, or underplay, one very important element of Japanese companies –
               their very strong control culture, especially in relation to shopfloor workers.
                  The factors identified by the above writers can be separated into two categories:
               those relating to personnel/industrial relations issues and those relating to
               business/manufacturing practices.

               Personnel issues
               The dedication, commitment and ability of Japanese workers is seen as a major factor
               in the success of Japanese companies. Though much credit for this has been given to
               the culture of Japanese society, especially its Confucian tradition of obedience and
               loyalty, similar levels of motivation have been reproduced in Japanese companies
               operating in the West (Wickens, 1987), which would imply that other factors are also
               at work. Chief among these is the crucial role played by the personnel policies preva-
               lent in many Japanese enterprises, especially the larger ones. The core of the Japanese
               approach to personnel comprises a combination of practices and policies designed to
               align their behaviour with, and bind employees to, the organisation, and promote
               their long-term development and commitment. The principal practices and policies
               concerned are listed below.
               1 Lifetime employment. Many employees are recruited straight from school or uni-
                 versity, and expect, and are expected, to spend the rest of their working lives with
                 the same organisation. This ‘guarantee’, based as it is on an age-old sense of
                 mutual obligation and belonging, creates an intense sense of loyalty to and depend-
                 ence on the organisation. Indeed, Holden and Burgess (1994) observed that whilst
                 a Japanese worker might survive the loss of his family, the collapse of his employ-
                 ing organisation would be unbearable. Therefore, lifetime employment is a central
                 feature of the Japanese approach and supports so much else, including a willing-
                 ness to change and the maintenance of a stable organisational culture. However,
                 the fact that organisations prefer to recruit school or university leavers also makes
                 it difficult for individuals to move between companies once they have accepted an
The Japanese approach to management   119

    appointment. It follows that if someone is fired, their chances of securing other
    employment are negligible.
2   Internal labour markets. Most positions are filled from inside the company. This is
    a corollary to lifetime employment which demonstrates to the employee that satis-
    factory performance will bring promotion, and it eliminates the potential for
    tension which can be brought about by the recruitment of outsiders.
3   Seniority-based promotion and reward systems. Employees are ranked and
    rewarded primarily, but not exclusively, on their length of service, and independent
    of the precise nature of the job they perform.
4   Teamwork and bonding. Although Japanese employees are made to feel part of the
    organisation and see it as some sort of extended family, they are first and foremost
    a member of a particular workgroup or team. The group is not just a collection of
    individuals; it is constructed and developed in such a way that it comprises a single
    entity which takes collective responsibility for its performance. Japanese companies
    use a variety of techniques, both at work and in a social setting, for bonding team
    members to each other and to the organisation.
5   Enterprise (single company) unions. Unlike the West, Japanese companies tend to
    allow only one union to represent the interests of the workforce. In addition,
    Japanese unions tend to be single company or enterprise unions. Indeed, from a
    Western point of view, they are not so much trade unions as company associations.
    This is illustrated by the practice of senior managers, at some stage in their careers,
    being expected to serve as union officials.
6   Training and education. Extensive and continuous training and education form an
    integral part of Japanese personnel policies. This emphasis on the continuous
    development of employees, to enable them to carry out their work better and to
    prepare them for promotion, represents a significant investment by Japanese com-
    panies in their human capital. Much of the training is done on the job and is
    always geared to the twin aims of improving organisational performance and indi-
    vidual development. Though encouraged by the company, employees are expected
    to take responsibility for their own self-development.
7   Company welfarism. Many Japanese companies provide a wide range of welfare
    benefits for their employees. These can cover medical treatment, education for chil-
    dren and even housing. Some of the larger companies are almost mini welfare
    states in themselves.
Many other practices and policies could be added to the list, but these appear to be at
the core. They are designed to instill the following in employees:
■   loyalty and gratitude to the company and a commitment to its objectives;
■   a sense of security;
■   a strong commitment to hard work and performance improvement;
■   an atmosphere of cooperation and not conflict;
■   a belief in self-development and improvement.
These are the cornerstone of Japanese company life; their presence is the reason why
Japanese national culture is often cited as being at the heart of Japan’s ability to com-
pete in a world market. These operate within organisation structures which, to
Western eyes at least, appear complex, highly formalised and very hierarchical
120   Chapter 3 · In search of new paradigms

               (Whitehill, 1991). However, these personnel issues cannot be seen in isolation from
               the working practices that Japanese companies use or the objectives they pursue. It is
               the combination of the two that makes Japanese companies so effective (Wood,
               1991). Without overall direction and the appropriate work systems, even the best
               skilled and motivated workers are ineffective. This is why Japanese business practices
               and work systems should receive as much attention as personnel issues.

               Business practices and work systems
               The Japanese ability to satisfy customers, and thereby capture markets, by developing
               and producing products to a higher specification and at a lower cost than their com-
               petitors, is staggering considering the state of their industry in the 1940s and 1950s.
               Indeed, even as recently as the 1960s, ‘Made in Japan’ was synonymous with poor
               quality. What has changed, or rather what has come to fruition, has been the methods
               they apply to all aspects of business, but especially to manufacturing (Hannam,
               1993). The fact that some of these methods have, quite naturally, Japanese names
               (such as Hoshin Kanri – policy deployment; Genba Kanri – workshop management;
               Kaizen – continuous improvement; Kanban – a paperless form of scheduling) tends,
               for the Western audience, to cloak and mystify the core principles and systems being
               used, and also to disguise how much of these have been adopted from the West.
               Leaving aside the jargon and terminology, Japanese business practices and work sys-
               tems can be characterised by three interrelated elements: long-term planning,
               timeliness and quality.

               Long-term planning
               This will be discussed further in Chapters 6 and 7, but for now, in brief, let us say
               that the timescale on which Japanese enterprises operate is far longer than many of
               their Western competitors, and their focus on building a strong market position simi-
               larly contrasts with the short-term profit maximisation objectives prevalent in the
               USA and UK in particular (Hamel and Prahalad, 1989). Needless to say, this is an
               enormous advantage when considering investment decisions, whether this be for
               products, processes or people (Smith and Misumi, 1989).

               Timeliness
               The Japanese are seen as having a crucial competitive edge in their ability to develop
               products and bring them to market faster than their competitors. Part of the explana-
               tion for this relates to teamwork. Whilst many Western companies are still designing
               and developing products on a sequential basis (whereby one part of the design is com-
               pleted before another is begun), the Japanese work in teams to undertake these tasks
               simultaneously. This form of teamwork extends to working jointly with customers
               and suppliers as well (Laage-Hellman, 1997). Not only does this cut the overall time
               required, but it also leads to fewer errors and misunderstandings because all the rele-
               vant parties are involved (Womack et al, 1990). Another major contribution to the
               timeliness of the Japanese is a series of practices designed to cut manufacturing lead
               times. The main one is Just-in-Time production. Under Just-in-Time, parts are sup-
               plied and used only as and when required. This method reduces stock and
               work-in-progress and thus reduces cost. However, to achieve this (as proponents of
               lean/agile manufacturing have stressed) requires everything to be ‘right first time’,
The Japanese approach to management    121

otherwise such a system would quickly grind to a halt for lack of usable parts (Kidd
and Karwowski, 1994; Lamming, 1993). Therefore, it is necessary to drive waste and
inefficiency out of the system, and the key mechanism for achieving this is the
Japanese commitment to quality (Dale and Cooper, 1992).

Quality
The Japanese commitment to quality is now legendary. Their approach owes much to
the inspiration of three Americans: MacArthur, Deming and Juran (Wilkinson, 1991).
General MacArthur, who (on behalf of the USA) virtually ruled Japan in the early
post-war years, encouraged Japanese industry to improve production quality as part
of the rebuilding of their shattered industrial base. Deming (1982) showed the
Japanese that statistical process control (SPC), and other such techniques, are power-
ful methods of controlling quality. Juran (1988) showed the Japanese that quality was
determined by all departments in an organisation, and thus set them on the road to
developing Total Quality Management. Though imported, the Japanese developed the
original concepts considerably. In particular, they introduced the concept of continu-
ous improvement – Kaizen. Despite the widespread acceptance of the need for
improved quality in the West, the Japanese appear to be the only nation so far capa-
ble of diffusing successfully the ideas and practices throughout their industry (Dale
and Cooper, 1992; Hannam, 1993; Schonberger, 1982; Womack et al, 1990).

In any investigation of the Japanese approach to long-term planning, timeliness and
quality, it is necessary to recognise the role played by employees in decision-making.
Most discussions of Japanese management emphasise the occurrence of upward influ-
ence, particularly through the ringi system. This is a procedure whereby proposals for
new policies, procedures or expenditure are circulated throughout the firm for com-
ment. The proposal is circulated in written form, and is then sent to all who might be
affected if it were to be implemented, in ascending order of seniority. The proposal is
modified in line with comments, and only when all agree is it implemented. This joint
approach to decision-making is also operated through production councils and qual-
ity circles, and covers the planning and scheduling of production, work allocation,
changes to production methods, problem-solving, etc. (Inagami, 1988). This system
of involving large numbers of people in decision-making is the reason why the
Japanese are notorious for the slowness with which they make decisions, and famous
for their ability to get it right first time (Hannam, 1993; Smith and Misumi, 1989).
Moreover, the ringi system has another equally important benefit, as Morgan (1986:
93) states:

 The ringi is as much a process for exploring and reaffirming values as it is for setting a
 direction ... In the American view objectives should be hard and fast and clearly stated for
 all to see. In the Japanese view they emerge from a more fundamental process of exploring
 and understanding the values through which a firm is or should be operating. A knowledge
 of these values, the limits that are to guide actions, defines a set of possible actions. An
 action chosen from this set may not be the very best, but it will satisfy parameters deemed
 crucial for success.
122   Chapter 3 · In search of new paradigms

                  One factor only mentioned briefly so far is the importance – or not – of culture to the
               Japanese approach to management. Certainly, early studies laid great stress on the rela-
               tionship between Japanese culture and business success (Abegglen, 1958). The argument
               emerged that it was the nature of Japanese society and its impact on individuals and
               companies that gave Japan its competitive edge. For this reason, it was argued, the West
               would never be able to replicate Japanese practices and competitiveness successfully.
               Indeed, one reason why Pascale and Athos (1982) chose to study Japanese companies
               operating in America was that Pascale doubted whether American companies could
               learn much from the Japanese in Japan because their cultures were so different (Crainer,
               1995). Obviously, as Hofstede (1980, 1990) showed, national cultures do impinge on
               organisational practices. However, whether or not this means that such practices cannot
               successfully be adopted in other societies is another question. A number of studies have
               undermined the argument for considering the Japanese approach to management to be
               dependent on Japanese culture. It has been shown that many of the distinctive practices
               of Japanese companies are relatively new and not embedded in Japanese history, that the
               role of culture is less influential than other factors, and that the Japanese approach can
               be successfully replicated outside Japan (Ackroyd et al, 1988; Buckley and Mirza, 1985;
               Cole, 1979; Marsh and Mannari, 1976; Pascale and Athos, 1982; Smith and Misumi,
               1989; Urabe, 1986; Wickens, 1987).


          ■ The future of the Japanese approach
               In discussing the distinctive Japanese approach to management, we must not forget
               the strong reciprocal links between government and business, especially the impor-
               tance of Japanese industrial policy in stimulating and guiding the country’s economic
               progress. This is seen most clearly in the close links between business and the
               Ministry of International Trade and Industry (MITI). As part of its remit to establish
               Japan as a leading industrial nation, MITI played a crucial role in establishing
               national programmes in key industries to encourage joint action, to develop the coun-
               try’s science and technological base, amongst companies and public research
               institutions. The ultimate goal of these programmes has been to create a strong, com-
               petitive and world-class industrial base for Japan. These collaborative programmes
               have not been at the expense of competition between companies; rather they have
               helped to improve the competitiveness of all the companies both in relation to each
               other and, importantly, in relation to international rivals (Laage-Hellman, 1997).
                  Nevertheless, despite the competitiveness of Japanese firms and the active support
               of the Japanese government, the economy has been in decline for the last decade.
               After successfully coping with the second oil crisis of 1979 and the effects of a rap-
               idly-appreciating currency in the mid-1980s, Japan enjoyed sustained economic
               growth until the early 1990s. However, since then the economy has been in pro-
               tracted recession, though it is now showing some signs of recovery. Unemployment, at
               over 5.3 per cent in June 2003, was down 1.9 per cent from the historic high of the
               previous year (Statistics Bureau, 2003). Nevertheless, successive banking and political
               scandals have undermined the stability of the political and financial system on which
               Japan’s industrial might was built (Barrie, 1999; Shirai, 1997). This has led to a flurry
               of political and business reforms, and attempts to introduce Western-style deregula-
               tion in order to foster competition and cut costs.
The Japanese approach to management   123

   Many explanations have been put forward for the decline of the Japanese econ-
omy. One of the most persuasive is that whilst Japan developed a world-class
manufacturing base, this was undermined by a failure to develop the rest of its econ-
omy to similar standards (Pilling, 2003). In particular, the service sector, especially
retailing, is only half as productive as its US counterparts. Similarly, the Japanese
public sector is seen as being far less efficient than its Western equivalents. The bank-
ing sector also did the Japanese economy no favours by making vast loans to property
companies to purchase over-priced land and buildings, which became worth only a
fraction of what they paid for them when the asset bubble burst in the 1990s. This
explanation helps to explain why, despite all its economic problems, even in the worst
years of the 1990s, Japan’s economy, and its leading industrial companies, generally
continued to outperform those of its competitors in the West (Pilling, 2003; Shirai,
1997). Therefore, its economic problems over the last decade do not appear to invali-
date the Japanese approach to management as developed in, and applied to, the
manufacturing sector. However, low growth, domestic recession, increasing inter-
national competition, technological developments that have led to changes in
industrial and job structures, and an ageing population have all created pressures to
change the Japanese approach to management (Harukiyo and Hook, 1998; Sako and
Sato, 1997; Thomas, 2003).
   In the larger Japanese companies, these pressures have led to structural changes
designed to flatten the hierarchy and create greater flexibility (Koji, 1998). In the
motor industry, in particular, there has also been a weakening of the previously strong
supply chain links, with second- and third-tier suppliers being exposed to greater
levels of competition (Masayoshi, 1998). Looking at the Japanese approach to pro-
duction systems, here too there have been changes; but these do not seem to have
radically changed the main characteristic of the Japanese approach, which has been
one of blending mass production with flexibility (Masayuki, 1998).
   Perhaps the area where the pressures for change have been the greatest is in person-
nel practices, especially those relating to lifetime employment, seniority-based
promotion and rewards systems, and the treatment of female workers (Sako and Sato,
1997). As far as lifetime employment is concerned, there is some evidence that the eco-
nomic, industrial and technological changes of the 1980s and 1990s have had an effect
on this (Barrie, 1999). For white-collar workers, especially the older and higher-paid
ones, there is evidence that continuous employment within one enterprise is giving way
to continuous employment within a group of enterprises (Inagami, 1995; Sako, 1997).
In the past, if a worker’s job was eliminated, they would be given another one in the
same workplace. Increasingly, the tendency is now to transfer redundant workers to
another job within the same group or affiliated group of companies but not necessarily
the same workplace. In some cases, this can be hundreds of miles away, and can also
involve a reduction in pay (Watts, 1998). However, for blue-collar male workers,
where the distinctions between East and West were always the most marked, job secu-
rity seems to have improved, if anything. This is because of the falling birth rate, which
has also led to an increase in the retirement age from 55 to 60 or even 65 (Seike,
1997). Research has also shown that whilst the use of part-time (mainly women) and
contract labour may be increasing, job security in this area is also increasing
(Wakisata, 1997). Therefore, overall, it appears that stability of employment may actu-
ally be increasing. In terms of lifetime employment, though there have been some
124   Chapter 3 · In search of new paradigms

               changes to the system, most Japanese managers, as well as workers, do seem to
               believe it is desirable and feasible to maintain it, especially as it is seen as essential to
               manager–worker cooperation (Ohmi, 1997; Sako, 1997; Sugeno and Suwa, 1997). As
               the Finance Director of a large Japanese corporation commented:

                To secure our employees living life in good shape is one of the corporation’s duties ...
                We cannot believe in cutting employees to sustain profitability. It is a kind of failed manage-
                ment philosophy.                                                 (Quoted in Barrie, 1999: 13)


                  In the area of the seniority principle, there does seem to be a greater willingness to
               make changes. There is growing pressure from both employers and unions to consider
               other criteria, such as ability, as well as seniority when determining pay and promo-
               tion (Sugeno and Suwa, 1997). In a 1995 survey, two-thirds of responding managers
               saw the introduction of ability-based reward and promotion systems as a priority in
               order to create greater flexibility, although very few managers seemed prepared to
               abandon the seniority principle totally (Kawakita, 1997; Sako, 1997). Also, it must
               be remembered that though seniority plays an important part in promotion and
               reward, ability has always been taken into account as well. Therefore, what seems to
               be being proposed is fine-tuning of the system rather than its dismantling.
                  Significant changes do, however, seem to be taking place with regard to female
               workers. As in the West, there has been a significant increase in the proportion of
               women in the workforce in Japan in the last 40 years. In 1960, there were 18.1 mil-
               lion working women (40.8 per cent of the adult female population); by 1992, this had
               grown to 26.2 million (75.4 per cent of the adult female population) (Wakisata,
               1997). This growth was accompanied by legal changes to promote equal opportuni-
               ties and practical assistance with child care arrangements. Like men, women have
               also benefited from greater security of employment. The average length of service of
               women workers increased from 4.5 years in 1970 to 7.4 years in 1992; the respective
               figures for men are 8.8 and 12.5 years. In addition, there seems to be a gradual reduc-
               tion in the very significant gap between male and female rates of pay: in 1970,
               women earned on average some 50 per cent of male wage levels; by 1992, this had
               increased to around 60 per cent. However, for female university graduates in their
               20s, the figure was over 90 per cent (Wakisata, 1997).
                  Therefore, there have been and remain significant pressures on the Japanese econ-
               omy, which have led to changes in how companies are structured and run, especially
               their human resource practices, and in their relations with customers and suppliers
               (Thomas, 2003). However, these do not seem designed to undermine or alter signifi-
               cantly the core of the Japanese approach to management (Harukiyo and Hook,
               1998). The strong ties that bind workers and Japanese enterprises together and which
               lie at the heart of the Japanese approach to management have not weakened (Sako
               and Sato, 1997). As Shirai (1997: xv) commented, ‘ ... it appears from all the indica-
               tors that the foundations of stable labour–management relations in Japan remain
               unshaken and intact.’
The Japanese approach to management   125

■ The Japanese approach: summary and criticisms
  It can be seen, therefore, that there are distinctive practices and policies which have a
  coherence and can be described as ‘the Japanese approach to management’. However,
  it is not simply the merits of the individual practices that have given the Japanese
  their competitive edge. Rather it is that they are devised and adopted in such a way
  that they are integrated and mutually supportive of each other; in particular, Japanese
  companies have a unique way of combining hard and soft practices (Laage-Hellman,
  1997; Ouchi, 1981; Pascale and Athos, 1982; Sako and Sato, 1997). This is not to
  say that this approach is universal in Japan or that all elements are present in those
  companies who do practise it. However, there is sufficient evidence available to justify
  stating that it is the dominant approach in Japan at the moment, and has been since
  at least the 1960s.
     This does not imply that it will not change. Indeed, given that most of these prac-
  tices have been evolving over the last 50 years, it would be surprising if they did not
  continue to evolve (Smith and Misumi, 1989; Thomas, 2003; Whitehill, 1991).
  Already, as described above, there is strong evidence to show that changes are taking
  place. Even in large companies, such as Toyota and Honda, policies of lifetime
  employment and the reluctance to recruit staff mid-career are being modified, owing
  to the need to recruit skills that are in short supply, and because of economic and
  social pressures. These include especially the pressures for equal opportunities for
  men and women, the implications of an ageing population, and the need to recruit
  foreigners (Dawkins, 1993, 1994; Thomas, 1993; Wakisata, 1997).
     Nevertheless, although the dynamic and innovative nature of Japanese organisa-
  tions and their passionate devotion to competitiveness are likely to lead to changes in
  the way organisations are run, it is unlikely that these changes will undermine the
  core construct of mutual obligation between organisation and employee that lies at
  the heart of the Japanese system (Ohmi, 1997; Sako, 1997; Sugeno and Suwa, 1997).
  It also seems more than likely that the changes which are taking place and will take
  place in the future will enhance, rather than detract from, Japan’s economic strength.
     The Japanese approach has delivered impressive economic results, but there are
  those who would question the social cost involved. Japanese workers work longer
  hours than their Western counterparts, and in addition are expected to participate in
  many work-related social events (Clark, 1979). There is also considerable evidence to
  show that Japanese workers are less satisfied with their lot than their Western coun-
  terparts, especially in relation to working hours and pay (Kamata, 1982; Lincoln and
  Kalleberg, 1985; Luthans et al, 1985; Naoi and Schooler, 1985; Odaka, 1975).
     In many respects this is not surprising. From a Western standpoint at least,
  Japanese companies appear to operate very oppressive and authoritarian regimes that,
  through the combination of personnel practices and work systems discussed above,
  together with peer group pressure, leave workers little option but to conform and per-
  form to very high standards (Kamata, 1982; Smith and Misumi, 1989). This
  accounts, in part at least, for the common observation that the Japanese are a nation
  of workaholics. However, there are other serious criticisms of the Japanese approach:
  ■   Most companies operate a two-tier labour market, whereby a significant minority of
      the workforce have good conditions and lifetime employment, at the expense of less
      well-paid and less secure jobs for the majority, especially women. However, there is
      now some evidence that this is changing, especially for women (Wakisata, 1997).
126   Chapter 3 · In search of new paradigms

               ■   Even those with lifetime employment are little more than slaves to the corporation
                   because they cannot move to other jobs (Morgan, 1986).
               ■   The merits of teamwork are only gained thanks to the unremitting peer group pres-
                   sure on individuals continually to improve their performance (Kamata, 1982).
               ■   The lack of independent trade unions leaves workers defenceless in the face of
                   managerial pressure to work ever harder (Kazunori, 1998; Yutaka, 1998).
                  Whatever the merits or demerits of the Japanese approach, there is little doubt that
               it has had an enormous impact on organisational performance; consequently, many
               attempts have been made to introduce ‘Japanisation’ into Western companies (Ackroyd
               et al, 1988; Hannam, 1993; Pang and Oliver, 1988; Pascale and Athos, 1982;
               Schonberger, 1982; Thomas, 2003; Turnbull, 1986). Despite some reservations about
               how well the system might travel, Japanese companies have shown that they can trans-
               fer their approach to the West. Nissan’s Sunderland car assembly plant in the UK was
               judged by the Economist Intelligence Unit to be the most productive in Europe for the
               second year running in 1998, whilst in the same year its Smyrna, Tennessee plant was
               cited as the most productive in North America by the Harbour Report.
                  On the other hand, transferring the Japanese approach to indigenous Western com-
               panies appears to have been more problematic. Even the UK car components industry,
               which, owing to the presence of Nissan, Honda and Toyota, has received more sup-
               port and encouragement than probably any industry outside Japan, seems to have
               failed to adopt the Japanese approach successfully (Hines, 1994; Lamming, 1994).
               This may be a major reason why many companies in the West, whilst not rejecting
               the lessons of Japanese management per se, are now turning to other approaches to
               increase their competitiveness, especially organisational learning.


Organisational learning
               Though Culture–Excellence and the Japanese approach continue to exert a powerful
               influence over Western companies, in the 1990s a third approach to organisational
               success came forward to challenge them: organisational learning. Despite its new-
               found popularity in the 1990s, organisational learning was not a new concept. The
               highly-respected American academic Chris Argyris has been writing about organisa-
               tional learning for over 40 years (Argyris, 1992). However, there can be no doubt
               that interest in the concept of organisational learning, or the learning organisation as
               it is sometimes called, grew considerably in the 1990s. As Crossan and Guatto (1996)
               noted, there were as many academic papers published on the topic in 1993 as in the
               whole of the 1980s. Many of these articles are dotted with emotive statements such as
               ‘ ... the rate at which individuals and organizations learn may become the only sus-
               tainable competitive advantage ...’ (Stata, 1989: 4). Though statements like this have
               the power to attract the attention of business leaders, there are really two factors
               which appear to have moved organisational learning from being a subject for serious
               academic study to a hot boardroom topic: the pace of change, and the rise of corpo-
               rate Japan.
                   There is considerable support for the view that the pace of change is accelerating as
               never before, and that organisations have to chart their way through an increasingly
               complex environment. Organisations are having to cope with the pressures of globali-
Organisational learning   127

   sation, changes in technology, the rise of e-commerce, situations where customers and
   suppliers can be both competitors and allies, and a change in emphasis from quantity
   to quality and from products to services. To cope with this growing complexity,
   organisations are recognising the need to acquire and utilise increasing amounts of
   knowledge if they are to make the changes necessary to remain competitive (Chawla
   and Renesch, 1995). As Pautzke (1989) stated:

    Careful cultivation of the capacity to learn in the broadest sense, i.e. the capacity both to
    acquire knowledge and to develop practical abilities, seems to offer a realistic way of tack-
    ling the pressing problems of our time.              (Quoted in Probst and Buchel, 1997: 5)


      The second, and perhaps main, factor that has generated such interest in organisa-
   tional learning is the rise of corporate Japan. In attempting to explain and/or combat
   Japanese penetration of Western markets, many commentators argued that one of the
   main strengths of Japanese companies is the speed with which they gather information
   on markets and competitors, and disseminate and act upon this information internally
   (Nonaka, 1988; Pascale and Athos, 1982). However, Japanese companies’ ability to
   learn, adapt and develop also extended to their commitment to continuous improve-
   ment, in processes as well as products, both internally and jointly with customers and
   suppliers (Laage-Hellman, 1997; Sako and Sato, 1997). The result, as described earlier
   in this chapter, is their fearsome reputation for producing the right product, in the
   right time and at the right price. Underpinning this is an ability to translate a commit-
   ment to individual learning into organisational learning (Hedlund and Nonaka, 1993;
   Nonaka, 1988; Ouchi, 1981; Whitehill, 1991). This idea, that the promotion of collec-
   tive learning is crucial to organisational success, has not only led to the upsurge in
   interest in organisational learning, but it also provides a bridge between Western and
   Eastern approaches to managing organisations. For these reasons, Probst and Buchel
   (1997: 1) argue that ‘Organizational learning offers an alternative paradigm by which
   systems can change, thus permitting us to redefine the economy and society.’


■ What is organisational learning?
   The term ‘organisational learning’ is often used interchangeably with the term ‘learn-
   ing organisation’. The difference, according to Tsang (1997: 74–5), is that:

    Organizational learning is a concept used to describe certain types of activity that take place
    in an organization while the learning organization refers to a particular type of organization
    in and of itself. Nevertheless, there is a simple relationship between the two – a learning
    organization is one which is good at organisational learning.


   In effect, the difference appears to be between ‘becoming’ and ‘being’. Organisational
   learning describes attempts by organisations to become learning organisations by pro-
   moting learning in a conscious, systematic and synergistic fashion that involves
   everyone in the organisation. A learning organisation is the highest state of organisa-
   tional learning, in which an organisation has achieved the ability to transform itself
   continuously through the development and involvement of all its members (Argyris
   and Schon, 1978; Burgoyne et al, 1994; Chawla and Renesch, 1995; West, 1994).
128   Chapter 3 · In search of new paradigms

                  A further, and perhaps more significant, distinction between the two terms relates
               to those who use them. Argyris (1999: 1) asserts:

                We divide the literature that pays attention to organizational learning into two main cate-
                gories: the practice-oriented, prescriptive literature of ‘the learning organization,’
                promulgated mainly by consultants and practitioners, and the predominately skeptical
                scholarly literature of ‘organizational learning’, produced by academics.


                   In fact the term ‘learning organisation’ is used much less now than in the 1980s
               and 1990s. This appears to be because very few organisations, if any, appear to have
               achieved learning organisation status (Easterby-Smith, 1997; Probst and Buchel,
               1997; Tsang, 1997). For this reason, organisational learning now appears to be the
               term of choice for both the sceptical and prescriptive camps.
                   Having said that, one of the problems in coming to grips with organisational learn-
               ing is that its advocates appear to offer a multitude of definitions or models of what it
               is; for example:

                Organizational learning is the process by which the organization’s knowledge and value base
                changes, leading to improved problem-solving ability and capacity for action.
                                                                               (Probst and Buchel, 1997: 15)

                A learning organization is an organization skilled at creating, acquiring and transferring
                knowledge, and at modifying behavior to reflect new knowledge and insights.
                                                                                        (Garvin, 1993: 80)

                Organizational learning means the process of improving actions through better knowledge
                and understanding.                                            (Fiol and Lyles, 1985: 803)

                An entity learns if, through its processing of information, the range of its potential behaviors
                is changed.                                                                   (Huber, 1991: 89)

                Organizational learning occurs through shared insight, knowledge and mental models and
                builds on past knowledge and experience, that is, on memory.           (Stata, 1989: 64)


               These are only a sample of the definitions that have been advanced. Indeed, it is prob-
               ably not an over-exaggeration to say that there are nearly as many definitions of
               organisational learning as there are writers on the topic (Tsang, 1997).
                  Easterby-Smith (1997) attempts to explain this confusion of definitions by identify-
               ing the different disciplinary backgrounds of those writing on organisational learning.
               He argues that most writers come from one of six disciplines: psychology, manage-
               ment science, sociology, organisation theory, production management and cultural
               anthropology. Wang and Ahmed (2003) note that it is not just the different discipli-
               nary backgrounds of the proponents of organisational learning that leads to
               confusion. They identify five different focuses on the concept, and argue that
               researchers tend to centre their attention on only one of these. The ‘five focuses on
               the concept [are]: focus on the collectivity of individual learning; focus on the process
               or system; focus on culture or metaphor; focus on knowledge management; and focus
               on continuous improvement …’ (Wang and Ahmed, 2003: 9).
Organisational learning   129

   Like Argyris (1999), Easterby-Smith (1997) also draws attention to the difference
between the long-established contributors to the field, the academic sceptics, who
have been attempting to analyse, describe and understand learning processes within
organisations, without necessarily wishing to change them (e.g. Argyris, 1992;
Bateson, 1972), and the relatively newer entrants, the practitioners and consultants,
who are attempting to prescribe what an organisation should do to maximise learning
(e.g. Pedler et al, 1989; Senge, 1990). This is a point also made by Tsang (1997), who
notes that, up to the 1980s, it was the analytical writers who dominated the field, but
in the 1990s, with the upsurge in interest in organisational learning, it was the pre-
scriptive writers who came to the fore. Though the variety of disciplinary
backgrounds and perspectives of those writing about organisational learning helps to
explain the plethora of definitions, it does not help to resolve them. For this reason,
as Probst and Buchel (1997) state, there is as yet no comprehensive theory of organi-
sational learning. Nevertheless, there is one area where there is growing clarity and
agreement: ‘In today’s environments … learning is directed increasingly at transfor-
mational change …’ (Cummings and Worley (2001: 520). It is the potential of
organisational learning to enable organisations to reinvent themselves in order to
compete in the changing and increasingly uncertain and competitive environment that
is making it such an attractive proposition for many managers.
   Although many writers have contributed to the concept of the organisational learn-
ing, those who have done most to popularise the concept in the UK are Pedler, Boydell
and Burgoyne (1989). However, perhaps the most influential writer of the 1990s was
Peter Senge in the US, whose book The Fifth Discipline (1990) caught the imagination
of corporate America. Its success motivated a whole host of consultants and academics
to follow suit and produce books and articles extolling the virtues of the learning
organisation, and the steps necessary to become one (Tsang, 1997). Part of the success
of his book lies in the fact that it combines the individualism of the Culture–Excellence
approach with the knowledge-generating ability of the Japanese approach. Senge
argues that there are five interrelated disciplines that organisations need to foster
amongst individuals and groups in order to promote learning and success:
1 Personal mastery – individual growth and learning.
2 Mental models – deeply-ingrained assumptions that affect the way individuals
  think about people, situations and organisations.
3 Shared visions – the development of a common view of the organisation’s future.
4 Team learning – the shift from individual learning to collective learning.
5 Systems thinking – the ‘Fifth Discipline’ that links the others together and which,
  he argues, is missing in most organisations:

 The art of systems thinking lies in being able to recognise increasingly (dynamically) com-
 plex and subtle structures ... amid the wealth of details, pressures and cross-currents that
 attend all real management settings. In fact, the essence of mastering systems thinking as a
 management discipline lies in seeing patterns where others see only events and forces to
 react to.                                                                  (Senge, 1990: 73)
130   Chapter 3 · In search of new paradigms

                 In contrast to Senge, who stresses the attributes an organisation needs to possess in
               order to learn, others stress the learning styles of individuals and organisations.
               Perhaps the most influential in this area are Argyris and Schon (1978) who, building
               on the work of Bateson (1972), proposed a three-level evolutionary model of learning:
               ■    Level I – single-loop learning. This is adaptive learning, which involves detecting and
                    rectifying errors or exceptions within the scope of the organisation’s existing prac-
                    tices, policies and norms of behaviour in order to ensure its objectives are met.
                    Typical examples of this would be the monitoring of quality standards or adherence
                    to sales targets in order to detect and correct variance. However, this would not feed
                    back into the questioning of, or amendment to, the organisation’s original objectives.
               ■    Level II – double-loop learning. This concerns going beyond correcting variance in
                    standards and targets and, instead, involves challenging the appropriateness of the
                    organisation’s basic norms, values, policies and operating procedures that create
                    these standards and targets in the first place. This is reconstructive learning, which
                    involves reconstructing basic aspects of an organisation’s operations. Typically, this
                    might involve questioning whether some functions should be outsourced rather
                    than continuing to be performed in-house or whether the organisation should
                    adopt a flatter, more open structure to remain aligned with its environment. Out of
                    such changes, new practices, policies and norms of behaviour are generated.
               ■    Level III – triple-loop learning. This involves questioning the rationale for the
                    organisation and, in the light of this, radically transforming it. A typical example
                    of this might be a traditional manufacturing organisation attempting to reinvent
                    itself as a service company with all the implications for culture, structure and prac-
                    tices that such a move would require.
                  Burgoyne (1995) suggests that the importance of learning at Level III lies as much in
               its ability to allow an organisation to create and transform its environments as it does
               in allowing it to transform itself. He also considers that this is reflected in the ability of
               the organisation to stabilise the context in which it operates and/or its relationship
               with it. It is at this level that the concept of the learning organisation can fully emerge.
                  Cummings and Worley (2001) argue that there are a number of learning interven-
               tions designed to help an organisation’s members move from adaptive, Level I,
               learning to transformative, Level III, learning. These comprise three phases, but
               Cummings and Worley (2001: 522–4) warn that:

                   Although the phases are described linearly below, in practice they form a recurrent cycle of
                   overlapping learning activities.
                   1 Discover theories in use and their consequences. This first step involves uncovering mem-
                     bers’ mental models or theories in use and the consequences that follow from behaving
                     and organizing according to them. …
                   2 Invent and produce more effective theories in use. Based on what is discovered in the first
                     phase of this change process, members invent and produce theories in use that lead to more
                     effective actions and that are more closely aligned with [Level II and Level III] learning. …
                   3 Continually monitor and improve the learning process. This final phase involves … –
                     learning how to learn. Here learning is directed at the learning process itself and at how
                     well [Level II and Level III] learning characteristics are reflected in it. This includes assess-
                     ing OL strategies and the organizational structures and processes that contribute to them.
Organisational learning   131

Cummings and Worley also identify five organisational characteristics that promote
organisational learning, as follows:
■    Structure – this needs to be flat and teamwork-based in order to promote network-
     ing both internally and externally.
■    Information systems – these need to be geared toward the rapid acquisition, pro-
     cessing and sharing of information.
■    Human resource practices – these need to include appraisal and reward systems
     which promote the acquisition and sharing of new skills and knowledge.
■    Organisational culture – this needs to be based on values and norms which pro-
     mote openness, creativity and experimentation in order to support successful
     learning.
■    Leadership – managers throughout the organisation must lead, promote and be
     involved in organisational learning.
   Therefore, as can be seen, Cummings and Worley identify both the phases that
organisations need to go through to move from adaptive to transformational learn-
ing, and the characteristics which promote organisational learning. Probst and Buchel
(1997: 16), on the other hand, take a very different view, claiming that
‘Organizational learning is unique to an institution.’ That is to say that each organisa-
tion can and should find its own way to become a learning organisation. They argue
that there are at least four different generic approaches:
■    Learning by developing a strategy – shaping the organisation’s future through a
     participative and practical learning exercise.
■    Learning by developing a structure – developing structural forms, such as matrix
     and network structures, that promote learning.
■    Learning by developing a culture – the creation of shared values, norms and atti-
     tudes that promote collective success over individual attainment.
■    Learning by developing human resources – developing staff through participative
     and group-orientated learning.
   Despite the diversity and contradictions evident among those promoting the con-
cept of organisational learning, one thing is clear: they all see the main purpose of
learning as facilitating organisational change. As with the Culture–Excellence and the
Japanese approaches, its popularity owes much to its posited beneficial link to organi-
sation performance. However, unlike them, it is the only organisation theory whose
main purpose is to enable organisations to cope with and promote change. As Probst
and Buchel (1997: xi) comment:

    ... learning is attracting increasing attention both in academic circles and business practice.
    One of the main reasons for this is the increasing pressure of change on companies … The
    rate of change accelerates steadily, and companies must find their bearings in an increasingly
    complex environment. The ability to learn is thus of paramount importance. Companies
    which do not successfully implement organizational changes, and which fail to cultivate
    their potential to develop, may soon find themselves amongst the losers.


As can be seen, there are considerable arguments in favour of the learning approach;
yet, there are also arguments against it.
132   Chapter 3 · In search of new paradigms


          ■ Organisational learning: summary and criticisms
               Though there has been a considerable interest in the concept of organisational learn-
               ing over the past decade, this does not seem to have created the clarity one might
               have wished for. It is, therefore, difficult to summarise a concept that has been
               defined in so many different ways and from so many different perspectives. However,
               there are perhaps five aspects of organisational learning that most writers would
               agree upon:
               ■    An organisation’s survival depends on its ability to learn at the same pace as or
                    faster than changes in its environment.
               ■    Learning must become a collective and not just an individual process.
               ■    There must be a fundamental shift towards systems (or triple-loop) thinking by an
                    organisation’s members.
               ■    By adopting organisational learning, an organisation not only acquires the ability
                    to adapt quickly and appropriately to changing circumstances, but it can also
                    transform itself if necessary.
               ■    As well as the ability to transform itself, an organisation can adapt to, influence
                    and even transform its environment.
               Presented in this way, it is easy to appreciate the attractiveness of organisational
               learning. As Huczynski and Buchanan (2001: 135) assert, however, the positive views
               of organisational learning need to be balanced with the negative ones (see Table 3.1).

               Table 3.1 Learning organisation positives and negatives
                   Learning organisation positives                   Learning organisation negatives


                   A rich, multi-dimensional concept affecting       A complex and difficult set of practices, difficult
                   many aspects of organisational behaviour          to implement systematically

                   An innovative approach to learning, to knowledge    An attempt to use dated concepts from change
                   management and to investing in intellectual capital management and learning theory, repackaged as
                                                                       a management consulting project

                   A new set of challenging concepts focusing        A new vocabulary for encouraging employee
                   attention on the acquisition and development      compliance with management directives in the
                   of individual and corporate knowledge             guise of ‘self development’

                   An innovative approach to organisation,           An innovative approach for strengthening
                   management and employee development               management control

                   Innovative use of technology to manage            A technology-dependent approach that
                   organisational knowledge through databases        ignores how people actually develop and use
                   and the Internet or intranets                     knowledge in organisations

               Source: from Huczynski and Buchanan (2001: 135)



                  Huczynski and Buchanan are not the only ones to draw attention to the more
               problematic aspects of organisational learning. The major criticisms of organisational
               learning can be grouped under six major headings:
Organisational learning   133

1 As is apparent from the above review, there is no agreed definition of organisa-
  tional learning (Burnes et al, 2003; Easterby-Smith, 1997; Probst and Buchel,
  1997; Tsang, 1997; Wang and Ahmed, 2003). Even Tom Peters (1993: 385), who
  might be expected to be attracted to the concept, stated that: ‘Most talk about
  “learning organisations” is maddeningly abstract or vague – and perpetually falls
  short on the specifics.’
2 Despite the volume of publications on the subject, there is a scarcity of rigorous
  empirical research in the area. As Tsang (1997) pointed out, one of the main rea-
  sons for this is that many of those writing on organisational learning are
  practitioners and consultants seeking to prescribe and sell rather than describe or
  analyse. He argues that, as well as promoting the concept, they are also trying to
  promote themselves and the organisations they work for. A similar point was also
  made by Easterby-Smith (1997: 1107):

    Much of the existing research into learning organizations is based on case studies of
    organizations that are said to be successful, and these sometimes seem to rely more on
    public relations than on any rigorous and grounded studies.


  If this is the situation, then much of the research on organisational learning, and
  the recommendations and conclusions that flow from it, have to be treated with a
  degree of scepticism.
3 As Thompson (1995) pointed out, ‘The term organizational learning is actually a
  misnomer. In fact an organization itself doesn’t learn – people learn.’ It follows
  that, in most organisations, the achievement of a high level of organisational learn-
  ing will necessitate a fundamental shift in how individuals learn. This is not just a
  case of collecting and sharing information in new ways but, crucially, of thinking
  in new ways (Argyris and Schon, 1978). This requires individuals to undergo diffi-
  cult and sometimes painful changes involving unlearning old ways of thinking and
  the redrawing of their cognitive maps – the way they perceive and make sense of
  the world around them. Many writers have commented on the serious obstacles to
  achieving such changes (Argyris, 1990; Hedberg, 1981; Probst and Buchel, 1997;
  Wang and Ahmed, 2003). However, above and beyond these difficulties lies a fur-
  ther issue. In engineering such changes in an individual’s thought processes, it is
  not just their perception of the organisation that is being changed, but their percep-
  tion of the world outside work and how they relate to it and to others around
  them. What are being tampered with are deep-rooted personality traits and con-
  structs that are fundamental to an individual’s psychological make-up. In such
  cases, one has to question not only the extent to which such attempts can ever be
  successful, but also whether it is even ethically justifiable to try.
4 Probst and Buchel (1997) maintain that organisational learning requires the gener-
  ation of diversity of opinion and, at the same time, the creation of consensus. They
  argue that these contradictory tasks can be reconciled and achieved through the
  development of a collective view of reality. Their view assumes that it is in every-
  one’s interest to participate in organisational learning and the ensuing changes.
  Although some writers, especially Argyris (1990) and Easterby-Smith et al (2000)
  recognise that there are major barriers to organisational learning, the assumption is
  that these can be overcome. However, as Chapter 1 demonstrated, much of our
134   Chapter 3 · In search of new paradigms

                  organisational experience since the Industrial Revolution has shown that managers
                  view knowledge and control as almost synonymous. To this end, managers have
                  systematically attempted to reduce workers’ knowledge and increase their own
                  (Rose, 1988). As will be discussed further in Chapter 5, organisations are riven by
                  political battles, and the possession and selective use of knowledge is a potent
                  weapon in such situations (Pfeffer, 1981). Beyond that, however, many traditional
                  managers are unlikely to welcome the creation of organisations which encourage
                  openness, and allow subordinates to seek out their own knowledge and question
                  the expertise and authority of their superiors. As Garratt (1999: 205) put it:

                   A few, often senior, people can see the concept as highly challenging and unnerving. They
                   are concerned that existing organisational power balances may be upset by too much
                   ‘transparency’ …

                 Given what we know about resistance to change, given what we know about
                 power and politics in organisations, it is surprising, as Blackler and McDonald
                 (2000) and Coopey and Burgoyne (2000) note, that so little attention has been
                 paid to these issues by those investigating and promoting organisational learning.
               5 Though Japanese companies are often held up as exemplars of organisational
                 learning, most theory and practical advice in this area has been developed in the
                 West, especially the US. The proponents of organisational learning argue that the
                 recipes they have developed are applicable to all organisations and cultures; never-
                 theless, many writers have drawn attention to the problem of transferring theories
                 and practices developed in one culture to another (Deresky, 2000; Hedlund and
                 Nonaka, 1993; Hofstede, 1993; Rosenzweig, 1994; Thomas, 2003; Trompenaars,
                 1993). For example, openness and the encouragement of public debate and criti-
                 cism are seen as an essential part of organisational learning (Chawla and Renesch,
                 1995). Although US managers might not find this too difficult to accept, it is
                 doubtful whether, for example, Japanese or Chinese managers, with their tradition
                 of preserving face, would find it so easy (Deresky, 2000). Face involves both main-
                 taining one’s own dignity and decorum and, at the same time, not undermining or
                 attacking the dignity and decorum of others. Therefore, Japanese and Chinese
                 managers, and managers from other non-Western countries, might find it very dif-
                 ficult openly to challenge and criticise the behaviour and ideas of others or for
                 others to do this to them (Ho, 1976; Jones et al, 2000; Tsang, 1997). Similarly, as
                 was noted in the previous chapter, proponents of Contingency Theory argued
                 against universal approaches to organisational effectiveness and in favour of a con-
                 text-based approach (Burns and Stalker, 1961; Woodward, 1965; Child, 1984). In
                 particular, they maintain that theories and practices developed with one sort of
                 organisation/situation in mind may be much less effective in a different set of cir-
                 cumstances (Burnes, 1991).
               6 Burnes et al (2003) point out that the case for the general adoption of organisational
                 learning is based on the assumption that all organisations operate in a fast-moving
                 and unpredictable environment. In such a situation, the ability to learn and adapt
                 must be possessed by all members of an organisation and not just a few at the top.
                 Burnes et al argue that this may be the case for companies in the IT sector, but other
                 sectors may experience a much lower level of environmental disturbance. Also, they
Conclusions   135

         maintain, even in fast-moving sectors such as IT, there are companies, such as
         Microsoft, whose dominant position allows them a degree of predictability and sta-
         bility (Coupland, 1995; Wallace and Erickson, 1992). In addition, Burnes et al pose
         the question: if an organisation can develop the ability to transform its environment,
         what is to stop it creating an environment where organisational learning is unneces-
         sary? After all, given the many obstacles and barriers to developing and maintaining
         organisational learning, this would appear an attractive proposition.
         In conclusion, we can perhaps agree with Probst and Buchel (1997: xi) who
       warn that:

        We should be wary of dismissing it [organisational learning] as the latest fad, since the topic of
        learning is attracting increasing attention both in academic circles and in business practice.

         However, we can perhaps also agree with Mintzberg et al’s (1998b: 228) double-
       edged compliment that:

        … [organisational learning] is all the rage right now, and mostly for good reasons. But it is
        no panacea for anything. People have to learn, but they also have to get on with doing the
        regular work efficiently. (Horses wear blinders for good reasons). There can be a time to
        learn and a time to exploit previous learning … So learning is wonderful, but there can be
        too much of a wonderful thing!



Conclusions
       This chapter has examined the three main approaches to managing and structuring
       organisations that have dominated Western thinking and practice over the last two
       decades. The proponents of all three approaches claim that theirs is a new paradigm
       that contrasts sharply and favourably with the organisational theories discussed in
       Chapters 1 and 2. This does not mean there are not some similarities with what has
       gone before. For example, the Japanese use the industrial engineering concepts devel-
       oped by Taylor and his contemporaries to study and design jobs. However, the
       context in which they are deployed (the lack of payment by results, the use of team-
       work and worker involvement, and above all else, guaranteed jobs) is markedly
       different. In a similar way, the Culture–Excellence approach can be seen to bear some
       similarities with the Human Relations movement, especially in its emphasis on leader-
       ship and communication. However, the emphasis on culture, individual achievement
       and all-round excellence make it a distinct approach. The same can be said of organi-
       sational learning, which builds on, but develops in a wider context, past practices for
       encouraging individual and group learning.
          There are also points of contact between the three approaches themselves.
       Organisational learning consciously draws on the methods used by the Japanese to gather
       and use information speedily. In addition, it stresses, as with Culture–Excellence, the
       importance of individuals in promoting innovation. However, it also clashes with the
       other two approaches. Advocates of organisational learning stress that it can enable com-
       panies to shape and create their environment, whilst supporters of Culture–Excellence
       stress that organisations have no choice but to adapt to their environment. It is at odds
136   Chapter 3 · In search of new paradigms

               with the Japanese approach in terms of change. The Japanese favour directed continuous
               incremental change, whereas the organisational learning approach encourages continuous
               but often undirected adaptation and also transformational change.
                  There are also points of contact between the Japanese approach and the
               Culture–Excellence approach (the emphasis on excellence, the importance of culture);
               but, again, there are marked differences. Lifetime employment and loyalty to the
               organisation contrast strongly with the stress on the temporary nature of jobs pro-
               posed by the proponents of Culture–Excellence. As an example, contrast the threat to
               thousands of jobs posed by the merger of the Halifax and Leeds building societies in
               the UK (in order to form the UK’s fourth largest bank) with the case of the merger of
               the Mitsubishi Bank and the Bank of Tokyo in Japan (to form the world’s largest
               bank), where it was stated that maintaining all jobs was a matter of honour (Hughes,
               1995; Rafferty, 1995). Likewise, payment by seniority and payment by performance
               are significant points of departure (though there is an increasing, but still small-scale,
               use of performance pay in Japan). It is noticeable as well that neither the
               Culture–Excellence nor the organisational learning approaches really concern them-
               selves with the sort of hard, manufacturing/quality practices so common in Japan.
                  Finally, the Culture–Excellence school seem obsessed with downsizing and arguing
               for smallness. The Japanese, on the other hand, are committed to growth. As Ferguson
               (1988: 57) remarked, in the 1970s and 1980s the USA was not outperformed by small,
               nimble organisations, but by ‘high industrial complexes embedded in stable, strategi-
               cally-co-ordinated alliances often supported by protectionist governments ... ’.
                  On balance, though there are similarities, these three approaches conflict with,
               rather than complement, each other. The Japanese approach, with its combination of
               tried and tested, hard and soft techniques, provides a coherent and comprehensive
               approach to organisations which stresses both innovation and stability. The
               Culture–Excellence approach tends to emphasise soft techniques, innovation,
               dynamism and unpredictability, and, particularly, draws attention to the role of cul-
               ture. Organisational learning, as an attempt to provide a coherent paradigm for
               organisational competitiveness, is the newest and least concrete of the three. At one
               level it has affinities with the other two approaches, but its emphasis on learning as
               the principal source of competitiveness also distinguishes it from them. This does not
               mean that if Western organisations become more adept at adopting Total Quality
               Management and other such techniques, and if Japanese companies broaden their use
               of external labour markets and adopt more flexible structures, the three may not coa-
               lesce, especially given the common emphasis on learning. At the moment, however,
               they remain competitors rather than collaborators.
                  Needless to say, none of the three approaches is without its drawbacks or criti-
               cisms. In particular, there are five concerns that should be highlighted, relating to ‘one
               best way’, people, politics, culture and change management.

               One best way
               The first three chapters of this book have been concerned with approaches to manag-
               ing and structuring organisations. The one clear message that has emerged so far is to
               beware of any theory or proposition which claims that it is the ‘one best way’ for all
               situations and all organisations. Yet all three of the approaches we have discussed in
               this chapter appear to advocate just that.
Conclusions   137

People
The Culture–Excellence and the Japanese approaches also leave much to be desired
with regard to people. Both approaches rely on a workforce split into a privileged
core and a relatively unprivileged periphery. Under both approaches there is a strong
emphasis on commitment to the organisation taking precedence over all else, even
family life. Therefore, long hours and short holidays are the norm under both sys-
tems. The Japanese approach appears to offer more job security, at least for the
privileged core. However, the price of this is that competition for jobs in the better
organisations begins, quite literally, at birth. To get a job with the best companies,
applicants have to have been to the best universities; to enter those, they have to have
been at the best schools; and to enter the best schools, they have to have been at the
best nurseries (Bratton, 1992; Fruin, 1992). The lack of clarity of the organisational
learning concept makes it difficult to be certain what the implications of it are for
people. However, it does project an intensity of work and commitment that aligns it
with the Culture–Excellence approach. Also, its emphasis on restructuring individu-
als’ cognitive processes in order to overcome their resistance to learning is, potentially
at least, very worrying. Therefore, taking all three approaches together, one cannot
escape the conclusion that the social cost of achieving excellence, in either West or
East, is high.

Politics
The issue of organisational power and politics has received extensive attention over the
last 20 years (Buchanan and Badham, 1999; Kotter, 1982; Minett, 1992; Pfeffer, 1981,
1992; Willcocks, 1994) and will be explored in Chapter 5. Given that organisations are
social entities and not machines, power struggles and political infighting are inevitable.
They may not always be prominent, but tend to come to the fore in situations where
resources are scarce or organisations are in transition (Morgan, 1986). It is perhaps
here that Peters and Waterman, with their notion of total openness and trust to the
extent of employees effectively allowing others to monitor their work, could most easily
be accused of being out of touch with reality. There is a tendency in the West to treat
politics and conflict as illegitimate; but, as Pascale (1993) and Thompkins (1990)
argued, conflict is part and parcel of the creative process, and political skills may be a
key competence for managers if they are to be successful leaders and persuaders. To
ignore the presence of conflict or underestimate its tenacity is usually a recipe for disas-
ter (Kanter et al, 1992; McLennan, 1989; Pfeffer, 1992; Robbins, 1986).
   However, in the Japanese, organisational learning and Culture–Excellence
approaches, little is said on the subject of organisational politics and conflict. As far
as the Culture–Excellence and organisational learning perspectives are concerned,
there appears to be an assumption that employees working in smaller business units,
having greater autonomy and more satisfying jobs, will work with each other, pursu-
ing a common purpose. As Chapter 5 will show, this is perhaps an unrealistic
expectation. It may well be that in Japanese organisations, with their consensual and
open approach to decision-making, strong commitment to organisational goals, high
peer group pressure and, for some at least, lifetime employment, conflict is either
minimised or channelled into creative directions; though Ishizuna (1990), Kamata
(1982) and Sakai (1992) have shown that this is not always the case. However, in the
West, with companies reshaping their businesses, where job security is being eroded,
138   Chapter 3 · In search of new paradigms

               where an individual’s current performance outweighs all other considerations, and
               where only the fittest and fleetest of foot can expect to survive, it is foolish to deny or
               underestimate the importance of power and politics or to believe that culture can act
               as a cure-all.

               Culture
               This brings us to the next concern to which these three approaches give rise.
               Proponents of all three approaches treat culture in a rather simplistic fashion. For the
               Culture–Excellence school, all problems are resolved through the creation of strong,
               flexible, pragmatic cultures which promote the values of trust, cooperation and team-
               work. A similar point can also be made with regard to the creation of a learning
               culture. In neither approach is there any real discussion or acknowledgement of the
               difficulties in defining or changing culture, despite much evidence to the contrary
               (Allaire and Firsirotu, 1984; Schein, 1985; Wilson, 1992). Nor do those who seek to
               promote the Japanese approach treat the subject of culture any more thoroughly.
               Either it is portrayed as an immutable feature of Japanese companies which prevents
               the West from adopting the Japanese approach or, more frequently these days, the
               Japanese approach is seen as somehow independent of culture (Sheldrake, 1996;
               Smith and Misumi, 1989). Very few writers acknowledge that Japanese companies,
               like their Western counterparts, can find themselves with apparently inappropriate
               cultures that they wish to change (Ishizuna, 1990). Therefore, all three approaches
               clearly leave themselves open to the accusation that they gloss over the difficulty of
               changing culture. The role of organisational culture will be examined in Chapter 5.

               Change management
               There is one last issue that should be touched on: the management of change.
               Organisation theories are also theories of change. Most organisation theories claim to
               show organisations how to identify where they are and where they should be. They
               also, either explicitly or implicitly, address the issue of change management.
                  For the Classical school, change management is relatively easy: it tells organisa-
               tions what they should be and, because managers and workers are rational beings,
               they should accept any concomitant changes because it’s the logical thing to do! A
               similar approach is adopted by the Contingency Theorists. The Human Relations
               movement, on the other hand, sees change as more problematic. Organisations are
               social systems, change is not a rational process, emotions come into play as well.
               Therefore, persuasion and leadership play a key role in changing organisations.
                  The Culture–Excellence approach has little to say about how change should be
               achieved, despite acknowledging the radical transformation it is advocating. Peters
               (1993) advocated a ‘Big Bang’ approach to change: ‘change radically and do it quickly’
               seems to be his advice. Handy (1986), on the other hand, seemed to adopt a more
               gradualist approach to change – big changes over long periods. Kanter et al (1992)
               advocated a combination of both; they argue that major changes, especially in behav-
               iour, can only be achieved over time. However, they also believe that dramatic gestures
               are also necessary to improve performance in the short term. Therefore, their approach
               to change is a combination of ‘Bold Strokes and Long Marches’. Taken as a whole, the
               message from the Culture–Excellence school is somewhat mixed and the process and
               details are lacking, notwithstanding Kanter et al’s (1992) book on change.
Test your learning   139

           Though organisational learning is explicitly directed at enabling organisations to
        change, its proponents are vague and inconsistent in specifying how one leads to the
        other, and particularly how the ultimate goal, of becoming a learning organisation,
        can be achieved (Probst and Buchel, 1997). Nor is it clear how the plethora of change
        initiatives generated by learning will lead to effective, coordinated and complemen-
        tary overall change (Easterby-Smith, 1997; Tsang, 1997).
           The Japanese approach, however, is more specific. They advocate creating a vision
        of the future and moving towards it in incremental steps (Kaizen) at all levels of the
        organisation. The Japanese are extremely able at this process, which has given them a
        reputation as a nation that makes ambitious long-term plans which are slowly, relent-
        lessly and successfully achieved. However, it is debatable whether this approach could
        work in many Western countries. In the USA and UK in particular, competitive pres-
        sures appear to require radical change over a short timescale, and at the same time
        there appears to be a built-in aversion to long-term thinking, especially amongst the
        financial institutions who play a pivotal role in the life of most firms.
           Therefore, though the organisational learning, Japanese and Culture–Excellence
        approaches have their strong points, they also have their drawbacks, at least as far as
        Western companies are concerned. For this reason, none have achieved the same intel-
        lectual dominance enjoyed by past paradigms, though the Culture–Excellence
        approach has come to exert a powerful influence on managerial attitudes and behav-
        iour over the past two decades. However, this lack of a dominant paradigm is not
        necessarily a cause for despair. Developing paradigms by their very nature will con-
        tain dilemmas and contradictions that can only be resolved with experience and the
        passage of time. This is not a case for ignoring them; rather the reverse. The future is
        not, hopefully, immutable. Managers are not powerless, they do have some freedom
        of choice and action, and the possibility does exist to influence the future shape of
        work by promoting the good and avoiding the bad.
           Parts 2, 3 and 4 of this book will further consider managerial choice and the degree
        to which organisations are free to shape their own future. Before moving on to this,
        however, the final two chapters in Part 1 will round off the review of organisation
        theory by examining, in Chapter 4, the case for and alternatives to the postmodern
        perspective on organisations and, in Chapter 5, the role of culture, power and politics
        in constraining and enabling organisational choice.


Test your learning

      ■ Short answer questions
        1 What is a paradigm?

        2 Why did In Search of Excellence become an instant best-seller when it was first published?

        3 List the main tenets of the Culture–Excellence approach.

        4 What is a Shamrock organisation?

        5 What are the main personnel and business issues that make up Japanese management?
140   Chapter 3 · In search of new paradigms

               6 What are seen as the main benefits of the Japanese approach?

               7 Define organisational learning.

               8 State the key arguments in favour of organisational learning.

               9 For each of the following, briefly state its implications for organisational change:
                 (a) Culture–Excellence, (b) the Japanese approach and (c) organisational learning.



          ■ Essay questions
               1 What are the main similarities and differences between the Culture–Excellence approach
                 and Japanese management?

               2 What are the core tenets of organisational learning and what difficulties might an organi-
                 sation encounter in introducing it?




                Suggested further reading
               1 Peters, TJ and Waterman, RH (1982) In Search of Excellence: Lessons from America’s Best-
                 Run Companies. Harper and Row: London.
                 In order to capture the essence of Culture–Excellence, there is no better book to read than
                 the one that began it all.
               2 Wilson, DC (1992) A Strategy of Change. Routledge: London.
                 David Wilson’s book provides a pithy and critical analysis of the shortcomings of the
                 Culture–Excellence approach.
               3 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International
                 Thompson Business Press: London.
                 Michael Sheldrake provides a brief but good review of the work of Charles Handy and also
                 of the rise of Japanese management.
               4 A more comprehensive and up-to-date review of Japanese management can be found in
                 Sako, M and Sato, H (eds) (1997) Japanese Labour and Management in Transition.
                 Routledge: London.
               5 Probst, G and Buchel, B (1997) Organizational Learning. Prentice Hall: London.
                 For a brief, comprehensive and comprehensible look at organisational learning, this book
                 is excellent.
Chapter 4

Critical perspectives on organisation
theory
Postmodernism, realism and complexity



 Learning objectives
 After studying this chapter, you should be able to:
 ■   discuss the contribution of postmodernism to organisational theory;
 ■   list the strengths and shortcomings of postmodernism with regard to the
     design and management of organisations;
 ■   understand the main tenets of the realist perspective;
 ■   discuss the strengths and weaknesses of the realist perspective for
     organisations;
 ■   describe the influence of complexity theories on our understanding of
     organisations;
 ■   state the main advantages and disadvantages of the complexity approach
     to organisations;
 ■   appreciate the limitations of rational approaches to organisations;
 ■   comprehend how postmodernism, realism and complexity widen the scope
     for organisational choice.
142   Chapter 4 · Critical perspectives on organisation theory


 Exhibit 4.1         Realism replaces grand visions

 Realism replaces grand visions                                                                                                    FT

 Major innovations have had their day in the tele-               ices, and operators must develop strategies now to
 coms sector – at least for the time being. Mobile               capture a share of this market, says Ovum, the IT
 operators have been forced to become more realis-               consultancy. Operators have quickly rethought their
 tic. This will be apparent at CeBIT, where changes              strategies to emphasise the importance of applica-
 will be small and mainly restricted to the refining of          tions over technology; with MMS, they are keen to
 existing services.                                              offer customers far more ways of spending money
     ‘We want to make the benefits of new applica-               than simply sending photos.
 tions clear,’ says Rudolf Groger, head of O Germany,               In recent years, the mobile industry lost sight of
 the country’s smallest mobile operator. ‘Content and            end-users. ‘They showed their imaginative ideas but
 customer advantage will be to the fore.’ Technology             no one could do anything with them,’ says Nikolaus
 – especially UMTS, the long-awaited third-generation            Mohr, a consultant at Accenture. At CeBIT, they will
 mobile technology being deployed in Europe – will               make sure this time that their offerings are money-
 be in the background.                                           making rather than just visionary.
     The collapse in the telecom industry’s fortunes                ‘Operators thought they could sell customers
 after the peak year of 2000 pitched it into a deep              technologies like UMTS or Wap,’ says Nigel
 crisis. Now, cost-saving is the top priority and invest-        Deighton, an analyst at Gartner, the IT consultancy.
 ment budgets have been slashed.                                 ‘They didn’t show people how they could benefit
     In Germany alone, companies have paid out                   from them.’ Now, they are concentrating on practical
 around Euros 50bn for their UMTS licences – but                 products. Whereas they used to plan years ahead,
 the technology, which was supposed to produce big               the focus is now on customer solutions which can
 and rapid profits, has not yet overcome its teething            be introduced in the next six to 12 months.
 troubles. UMTS launches have been postponed until                  Not surprisingly, the need to cut debts has led to
 the middle or end of this year and sales expectations           hugely increased pressure for short-term revenues.
 have been revised sharply downwards.                            ‘Companies now want to make money rather than
     Nevertheless, T-Mobile, Vodafone, E-Plus and O              constantly launch new innovations,’ says Marcus
 are pinning their hopes on new data services, such as           Sander, an analyst with Sal. Oppenheim, the German
 the sending of photos by mobile phone. The small                private bank. ‘They have come down to earth. The
 pictures, of which 3m were sent by camera telephone             level of expectations for UMTS has been reduced.
 in Germany last year, have caught the attention of
                                                                 Everything is taking longer than the operators
 mobile operators. So-called multimedia messaging
                                                                 thought. The big revenues from UMTS are far in the
 services (MMS) are aimed at persuading customers
                                                                 future’. Even at the beginning of last year, companies
 to use their phones more and thus boost turnover.
                                                                 were reluctant to believe this.
     By 2007, mobile phone users are expected to be
 spending about Euros 66bn worldwide on data serv-               Source: Kristina Spiller, Financial Times, 12 March 2003, p. 2.




                 Introduction
               It is now commonly believed that our world is changing significantly and that we are
               entering a new era (Berkeley Thomas, 2003; Cooper and Jackson, 1997; Deresky,
               2000; Giddens, 2002; Handy, 1997; Hardaker and Graham, 2002; Hatch, 1997;
               Kanter et al, 1997; Peters, 1997a). Whether we refer to this development as ‘the
               Information Age’, ‘the Age of the Internet’, ‘the Age of Innovation’, ‘the Age of
               Unreason’, ‘Post Industrial Society’, ‘the Postmodern Age’ or ‘Globalisation’, the mes-
               sage is the same: what worked in the past will not work in the future, and
Introduction   143

organisations, like society at large, will have to change in unprecedented and unantic-
ipated ways if they are to survive. However, despite all this talk of a brave new world,
in the wake of the dotcom collapse, more and more companies are searching for some
form of twenty-first century realism and rejecting the grand visions of the 1990s, as
Spiller’s article, Exhibit 4.1, illustrates. But, of course, there are many who will argue
that their 1990s visions were realistic and that today’s reality is too pedestrian and
lacking in ambition. This chapter will examine three critical perspectives on organisa-
tion theory with a view to understanding how they view ‘reality’ and the implications
of their differing views for organisations.
   The previous three chapters have described the development of organisations and
organisation theory from the Industrial Revolution through to the present day, in
order to show the various approaches to and options for designing and running
organisations so as to meet the challenges they face. What has emerged is a somewhat
confusing picture of theories which claim, each in their own way, to be the answer to
all organisational ills, yet which are all open to potentially damning criticisms. All the
theories we have examined claim to give practical and coherent advice to managers
on how to structure and run their organisations. Yet it is in their limited applicability
to the range and complexity of situations found in everyday organisational life that
these theories are most open to criticism:
■   The tendency to assume a unitary frame of reference, in which the interests of
    workers and managers, blue-collar and white-collar staff, and people of different
    genders, ethnicity and religions either coincide or can be easily reconciled, is a clear
    shortcoming in all these theories.
■   The belief of the Classical school and the Human Relations movement that contex-
    tual factors – the external environment, size, technology, etc. – are either irrelevant
    or easily accommodated is another obvious flaw.
■   The assumption by both the Contingency theorists and the proponents of
    Culture–Excellence that managers are powerless to change the situational variables
    they face, and have no choice but to accept the prevailing recipe for success, is not
    borne out in reality.
■   There is a growing scepticism regarding the ability of rational, objective science to
    provide an explanation for the many and fundamental changes taking place in
    organisations and the wider society.
■   One of the most serious drawbacks is that only the Culture–Excellence school, and
    to a lesser extent the organisational learning and Japanese approaches, give any
    importance to the role of organisational culture – and even then it is treated in a
    simplistic fashion.
■   None of the theories give serious consideration to the role of power and politics in
    influencing decision-making in organisations. Not only does this go against a great
    deal of research that has been produced over the last 20 years, but it also runs
    counter to most people’s own experience of organisational life.
■   Lastly, these theories explicitly or implicitly reject the notion of choice. Their basic
    argument is that organisations need to follow ‘their’ recipe for success or they will
    fail. Yet, if we look at the population of organisations, we can see a vast variety of
    approaches to their design and management. Some, for periods of time at least,
    may seem more successful than others, but most organisations appear capable of
    surviving whether they adopt the current recipe in full, in part or totally reject it.
144   Chapter 4 · Critical perspectives on organisation theory

               This, and the following chapter, which is devoted to an examination of culture, power
               and politics, will address these issues, especially the final three points. This chapter
               examines three important and critical perspectives on organisations: postmodernism;
               realism, and complexity. It begins with the examination of postmodernism. This is a
               loosely-defined philosophical movement which, though originally based in the arts,
               has become increasingly influential in the social sciences over the last 20 years. It is a
               way of looking at the world that rejects rationality. Instead, it concentrates on the
               ways in which human beings attempt to shape reality and invent their world. This is
               followed by a review of the realist perspective on organisations. Like postmodernism,
               realism is a philosophical doctrine that was first applied to the arts but has in recent
               years been taken up by organisation theorists. Also like postmodernists, realists
               believe that reality is socially-constructed. But, unlike the postmodernists, realists
               reject the notion of multiple realities. The essence of realism is that there is only one
               reality and it exists even if we have not yet discovered it. They see both the natural
               and social worlds as consisting of complex structures which exist even if we are not
               aware of them or how they influence our behaviour. For realists, events and patterns
               of events are generated or caused by mechanisms and powers that exist independently
               of the events they generate. Therefore, realists do not deny the ability of human
               beings to shape their world, but they see this ability as being limited by an ensemble
               of real and concrete structures, practices and conventions in society. Contrary to the
               former two perspectives, the third critical perspective on organisations considered in
               this chapter, complexity, arose from the natural sciences before being taken up by
               social scientists. Complexity theories are concerned with how order is created in
               dynamic non-linear systems. In particular, those applying this approach to organisa-
               tions maintain that successful organisations need to operate at the ‘edge of chaos’ and
               can only maintain this position by the presence of appropriate order-generating rules.
                  The chapter concludes by arguing that, whilst these three approaches differ signifi-
               cantly, what they have in common is that they open up the prospect that
               organisations have choices in what they do and how they do it. Rather than being the
               prisoners of organisational theories or contingencies, managers (potentially) have
               considerable, though by no means unconstrained, freedom of choice over the struc-
               ture, policies and practices of their organisations, and even over the environment in
               which they operate. This then leads on, in Chapter 5, to an examination of the role of
               culture, power and politics in the identification, shaping and pursuit of choices.


The postmodern perspective

          ■ From modernism to postmodernism?
               As was described in Chapter 3, a sea-change has taken place over the last 20 years in
               terms of how we view organisations. The Culture–Excellence model, the Japanese
               approach and organisational learning all have links with the past but they also repre-
               sent a break with what has gone before. Running alongside these developments and to
               a large extent giving them a theoretical respectability, albeit mainly an unacknowl-
               edged one, is the view that we have moved from the modern to the postmodern world.
The postmodern perspective   145

  For Alvesson and Deetz (1996: 191–2), it was the changing nature of work and
competition in the 1980s that forced organisation theorists to question existing and
entrenched assumptions about the world:

 The increased size of organizations, rapid implementation of communication/information
 technologies, globalisation, changing nature of work, reduction of the working class, less
 salient class conflicts, professionalization of the workforce, stagnant economies, widespread
 ecological problems and turbulent markets are all part of the contemporary context
 demanding a research response.


Initially, in the 1980s, much of the debate about the changing nature of the modern
world revolved around the posited move from ‘Fordist’ to ‘post-Fordist’ or ‘neo-
Fordist’ forms of work organisation. This debate, over the move from mass
production to flexible specialisation, initially centred on the work of Piore and Sabel
(1984). Their argument was that the age of Taylorism and Fordism, the age of mass
production, was dead. Mass production was concerned with the production of stan-
dardised goods for stable mass markets using a form of work organisation that was
characterised by the intense division of labour, the separation of conception from exe-
cution and the substitution of unskilled for skilled labour (Tomaney, 1990). It was
argued, however, that the market conditions that allowed Fordism to thrive have
passed. The emergence of segmented and highly volatile markets, brought about by
changes in consumer tastes and technological innovation, require organisations to be
highly flexible in order to succeed in these post-Fordist conditions (Laudon and
Starbuck, 1997).
   According to Piore and Sable (1984), in the present day only decentralised, worker-
run firms have the flexibility, skills and commitment to cope with sudden shifts in
consumer demands, volatile input prices and rapid changes in technology. They drew
on the operation of loose alliances of small firms in Italy to substantiate their case.
Though an attractive proposition to some, there does not appear to have been any
great movement to create the decentralised worker cooperatives envisaged by Piore
and Sable, as Williams et al (1987) showed. Instead, other writers began to argue in
favour of the emergence of neo-Taylorist or neo-Fordist organisational forms (Smith,
1994; Whitaker, 1992). Rather than the age of industrial bureaucracy coming to an
end, it was argued that it was going through a two-pronged programme of change. On
the one hand, computerised automation was linking together machines and processes
and thus eliminating labour. On the other hand, where this was not possible, managers
were shifting production to low-wage regions of the world (Froebel et al, 1980).
   As Smith (1994) argues, the problem with this perspective is that though it fits, for
example, General Motors, it does not fit Toyota, which has proved by far the more suc-
cessful company. Sayer (1989) complains that the post-Fordist literature is confused,
riddled with speculation and is selective in its use of evidence. Piore and Sable (1984) in
particular have come in for much criticism, especially in relation to what some see as
their over-optimistic view of the developing nature of work (Amin and Robins, 1990).
Therefore, though their supporters can point to examples of flexible specialisation and
post- and neo-Fordism, the explanations they gave for these and the implications they
drew from them seem both partial and particularistic (Whitaker, 1992). Indeed, given
the breadth and magnitude of the new organisational developments and forms discussed
146   Chapter 4 · Critical perspectives on organisation theory

               in Chapter 3, terms such as flexible specialisation, post-Fordism and neo-Fordism
               seem to have only a limited ability to explain the many changes taking place in organ-
               isational life. Nevertheless, what this debate did was to create a receptivity amongst a
               wider audience for the work of the postmodernists, who provided a more substantial
               and complex explanation for the changes taking place in the world around us.
                  Depending on whom one reads, postmodernism is either a relatively new concept
               or it has been around at least since the 1930s (Appignanesi and Garratt, 1995;
               Featherstone, 1988a). Certainly, the term became fashionable among young writers,
               artists and critics in New York in the 1960s. In the 1970s and 1980s, the term
               became more widely used in architecture, music and the visual and performing arts
               (Hassard, 1993). However, its adoption by organisation theorists stems from the
               work of the poststructuralist movement in French philosophy, which emerged in the
               1960s. The interest in meaning and interpretation by symbolic-interpretive organisa-
               tion theorists, drawing on linguistic, semiotic and literary theory, also served to
               increase interest in postmodernism (Hatch, 1997). In the 1970s and 1980s, it became
               most closely associated with the work of Jean Baudrillard (1983), Jacques Derrida
               (1978), Michel Foucault (1977) and Jean-François Lyotard (1984).
                  Researchers in organisation and management studies came relatively late to post-
               modernism. It was only in the late 1980s, with, for example, the work of Smircich
               and Calás (1987) and Cooper and Burrell (1988) that postmodernism started to
               impact on organisation theory. The interest in postmodernism by many social scien-
               tists and organisation theorists stemmed from their growing belief that existing,
               modernist, theories, such as the Contingency approach, could no longer account for
               the changes taking place in the world of work and society in general. In particular,
               there was an increasing scepticism concerning the ability of rational, objective science
               to provide absolute and unitary knowledge of the world. In its place, postmodernists
               argue for a relativist position that emphasises multiple realities, fragmentation and
               subjectivity (Linstead, 1993).
                  Postmodernism, as the term implies, is something that carries on from, succeeds or
               takes its frame of reference from modernism. Therefore, it is necessary to understand
               how the proponents of postmodernism define modernism in order to appreciate their
               arguments. Modernism is a term used to describe the values, rationale and institu-
               tions that have dominated Western societies since the Age of Enlightenment in the
               eighteenth century. This was the period in which European thought, led by France
               and Great Britain, is seen as making a decisive break with the superstition, ignorance
               and tradition of the Middle Ages. In its place emerged a strong belief in progress, eco-
               nomic and scientific rationality, a search for the fundamental rules and laws that
               govern both the natural world and human nature, and a commitment to a secular,
               rationalist and progressive individualism (Gergen, 1992; Hassard, 1993). As
               Hobsbawm (1979: 34) noted, ‘Liberty, equality and (it followed) the fraternity of all
               men were its slogans.’ Linstead (1993: 99) commented that the Enlightenment:


                 ... produced a commitment to the unfolding of progress through history, the incremental
                 growth of knowledge through science and the resulting inevitable subordination of nature to
                 culture and the control of man.
The postmodern perspective   147

   Also, as Gergen (1992: 211) stated, modernist ‘presumptions remain vital through-
out contemporary culture, and have left an indelible mark on theories of organization
from early in the [twentieth] century to the present.’ Modernists, therefore, assume
that the world, both social and natural, and its structuring principles, are accessible
through the correct (scientific) methods of observation and analysis. In relation to
organisational life, the term modernism is used to describe the form of organisation
that has dominated both the public and private sectors over the past 100 years
(Biberman and Whitty, 1997). In the previous chapters, we have termed this the
Classical or bureaucratic model, though others use terms such as Taylorist, Fordist or
machine-era paradigm (Fox, 1994; Smith, 1994; Tomaney, 1990). It is an organisa-
tional form which, its proponents argue, is based on rationality, logic and the pursuit
of scientific rules and principles. Such organisations are characterised by mechanistic
and hierarchical structures based on the extreme division of labour, and control sys-
tems that suppress people’s emotions and minimise their scope for independent action.

  Exhibit 4.2         Some features of postmodernism

  Fragmentation: the breaking up of established structures into fragments.
  De-differentiation: the blurring or dissolution of established boundaries.
  Hyper-reality: confusion and mixing of the real with artificial/virtual realities.
  Chronology: interest in the past and its imitation alongside/instead of the future.
  Pastiche: the playful mixing of styles of decoration, dress, expression, etc.
  Anti-foundationalism: rejection of all basics, absolutes, fundamentals, universals, etc.
  Pluralism: all of the above happening simultaneously!
  Source: Berkeley Thomas (2003: 214)




    As can be seen from Exhibit 4.2, postmodernism offers a very different view of the
world from that of the modernists. Postmodernism opposes or denies the validity of
the Enlightenment’s emphasis on reason, logic and rationality as the foundation of
scientific method and the basis for the establishment of truth. Postmodernism chal-
lenges the claim of science to establish authoritative or absolute knowledge. Instead,
it argues that scientific knowledge is a social construction by the scientific community,
and that new scientific paradigms are brought about by changes in the community of
scientists rather than scientific discoveries per se (Hassard, 1990).
    Therefore, for postmodernists, knowledge is relative, not absolute. Postmodernism
is, as Watson (1997: 383) states:

 A way of looking at the world which rejects attempts to build systematic explanations of
 history and human activity and which, instead, concentrates on the ways in which human
 beings ‘invent’ their worlds, especially through language and cultural innovations.
148   Chapter 4 · Critical perspectives on organisation theory

                  One of the crucial distinctions between modernists and postmodernists is how they
               view the nature of language:

                 For the modernist, language was simply a tool for the logical representation of the real ... Within
                 the postmodernist view, language ... gains its meaning and significance through its placement
                 within social interchange. Words fail to make sense (they remain nonsense) until there is at least
                 one other person to give assent to their meaningfulness.                 (Gergen, 1992: 213–14)


               Therefore, if language is a social construct, one cannot take the statements, rules and
               practices of particular groups and organisations at face value. Instead, taking their
               cue from Derrida (1978), postmodernists often begin their analysis of a situation or
               event by ‘deconstructing’ the language used. Deconstruction is an approach that seeks
               to reveal and overturn the assumptions underlying an argument, proposition or
               theory. Overturning assumptions opens up space for previously unconsidered alter-
               natives. In the postmodernist approach, alternatives are left open to multiple
               interpretations, and the acceptance of multiple, fragmented realities is seen to displace
               the idea of one unitary transcendent reality (Hatch, 1997). Like many others, the
               postmodernists recognise that the various stakeholders in an organisation each have
               different perceptions of what the organisation should do and whose views and inter-
               ests should be paramount. Where they differ, however, is that they do not believe that
               there is a correct view or that one view has a right to be paramount. Instead, post-
               modern management and organisation theory, beginning with a process of
               deconstruction, ‘ ... seeks to reconstruct organizations by restoring a sense of har-
               mony and balance in our species, our institutions, and our theories’ (Gephart et al,
               1996: 364).
                  This leads on to another prevailing theme within postmodernism: self-reflexivity –
               a critical suspicion of one’s own suppositions. If reality and language are social con-
               structs, then, so the postmodernist argument goes, to avoid the modernist error of
               believing they have discovered a fundamental truth or reality, postmodernists must
               constantly question and be suspicious of their own assumptions, statements and
               actions (Lawson, 1985).
                  Moving on to the links between postmodernism and organisation theory, the con-
               cept of self-reflexivity has similarities to Argyris and Schon’s (1978) notion of double-
               and triple-loop learning, which promotes the questioning and challenging of existing
               organisational assumptions (see Chapter 3). Other aspects of Argyris’ work also show
               postmodernist leanings, particularly his questioning of the inner contradictions of
               research methods (Argyris, 1980). We can also see postmodernist tendencies in
               Morgan’s (1986) Images of Organizations, in which he treats existing organisation
               theories as literary metaphors.
                  Moving into the heartland of organisation theory, Linstead (1993) argues that
               under postmodernism, hierarchies of merit, legitimacy and authority give way to net-
               works, partnerships and organisational structures of a shifting, fluid and social
               nature. These are driven by external forces, such as markets or competition, and are
               ad hoc, short-term, fragmentary and localised. According to Daft (1998), necessity
               will force postmodern organisations to develop more flexible and decentralised
               organisation structures with fuzzy boundaries both internally and externally. In such
               organisations, he believes, leaders will become facilitators who will communicate
The postmodern perspective   149

through informal, oral and symbolic channels, control will be exercised through self-
regulation, planning and decision-making will be inclusive and egalitarian principles
will hold sway. In a similar vein, Clegg (1990) suggests clear distinctions between
modernist and postmodernist organisational forms (see Table 4.1).

Table 4.1 Comparison of modernist and postmodernist organisational forms
                           Modernist organisations              Postmodernist organisations

 Structure                 Rigid bureaucracies                  Flexible networks

 Consumption               Mass markets                         Niche markets

 Technology                Technological determinism            Technological choice

 Jobs                      Differentiated, demarcated           Highly de-differentiated,
                           and deskilled                        de-demarcated and multi-skilled

 Employment relations      Centralised and standardised         Complex and fragmentary


   Clegg acknowledges that postmodern forms of organisation are somewhat ill-
defined. Nevertheless, he argues that they are associated with developments such as
flexible specialisation and post-Fordism, and that examples of postmodern organisa-
tions can be found in Japan, Sweden, East Asia and Italy. However, he does point out
that whilst they can be associated with progressive developments, such as the exten-
sion of industrial democracy in Sweden, they can also be linked to more repressive
and elitist developments, such as the segmented labour force policies adopted by
Handy’s Shamrock organisation (see Chapter 3). In the Shamrock organisation, there
are three classes of employees – core workers, the contractual fringe, and the flexible
labour force. Each of these three segments of the organisation’s workforce has very
different conditions of employment and is treated and valued very differently.
Therefore, for Clegg, and an increasing number of organisation theorists, postmod-
ernism has arrived, it is having a major impact on the nature and functioning of
organisations, and it will continue to do so.
   There are two areas of organisational life to which the postmodernists have paid
particular attention: culture and power. The postmodern approach to organisational
culture rejects both the integrationist perspective, which sees culture as being shared
by all members of an organisation, and the differentiation perspective, which sees
organisational unity as being broken by coherent and stable subcultures. Instead, it
takes a fragmentation perspective, believing that organisational cultures are inconsis-
tent, ambiguous, multiplicitous and in a constant state of flux (Martin, 1992;
Meyerson and Martin, 1987). Hatch (1997: 231) observes of the postmodern per-
spective on culture that:

 In this view, alliances or coalitions can never stabilize into subcultures and certainly not into
 unified cultures because discourse and its focal issues are always changing – hence the image
 of fragmentation.
150   Chapter 4 · Critical perspectives on organisation theory

               Therefore, for postmodernists, organisational culture is important, and indeed is clearly
               linked to their interest in symbols and language. However, postmodernists are sceptical
               of attempts to manipulate and change culture, as Hatch (1997: 235) points out:

                 When you attempt to change organizational culture, while it is true that something will
                 change, generally the changes are unpredictable and sometimes undesirable (e.g., increases
                 in employee cynicism towards cultural change programs) ... Do not think of trying to
                 manage culture. Other people’s meanings and interpretations are highly unmanageable.


                  Where power is concerned, postmodernists take a very different view from most other
               writers on organisations. They are less concerned with the power that individuals or
               groups possess, acquire or deploy. Rather they believe that power resides in the combina-
               tion of linguistic distinctions, ways of reasoning and material practices which make up the
               body of taken-for-granted knowledge that exists in society and organisations (Alvesson
               and Deetz, 1996). Perhaps the most influential postmodernist writer on power has been
               the French philosopher, Michel Foucault (1983). Foucault argues for a strong link
               between knowledge and power. He believes that knowledge, when it becomes socially
               legitimised and institutionalised, exerts control over what we think and do. However,
               there is a power struggle between different bodies of knowledge each fighting for legiti-
               macy and supremacy. For Foucault, though these bodies of knowledge are seeking to
               represent reality, at the same time they socially create it. He argues that power moulds
               everyone, both those who use it and those who are used by it. He maintains that power
               and knowledge depend on each other, so that an extension of a group’s power is depend-
               ent upon and accompanied by an extension of its knowledge, and vice versa (Appignanesi
               and Garratt, 1995). Gergen (1992: 221) takes a similar perspective, arguing that:

                 ... power is inherently a matter of social interdependence, and it is achieved through the
                 social coordination of actions around specified definitions.

                  The postmodernist perspective on power has important implications for how a par-
               ticular view of reality comes to the fore and is maintained in an organisation. Rather
               than being the product of an objective and rational process, it is the product of power
               and politics in an organisation. In some organisations, there does not appear to be a
               settled and generally agreed view of reality; rather what we see are competing inter-
               pretations put forward by competing groups and individuals. In other organisations,
               however, a definite view does appear to be held and does appear to be maintained.
               This is achieved when a coalition of groups and forces is able to wield power and use
               political processes to achieve a dominant position over others in the organisation.
               When this occurs, it is their view of reality which takes shape and comes to be
               accepted. Therefore, not only is power deployed to legitimate their view of the world,
               but, in turn, its legitimacy bolsters their power.


          ■ The implications for organisations
               What we can see from this review of postmodernism is the influence that both mod-
               ernism and postmodernism have had on organisational theory and practice in the
               twentieth century. Clearly, the Classical approach, and especially Weber’s contribution,
The postmodern perspective   151

with its emphasis on rationality and scientific knowledge, is very much within the tradi-
tion of modernism. Indeed, one can also say that much of the Human Relations
literature, with its use of scientific methods to identify the ‘one best way’, and certainly
the literature on Contingency Theory would appear to fall squarely into the modernist
camp. On the other hand, the Culture–Excellence approach seems much more comfort-
able with the rhetoric of postmodernism. Not only does it share a similar view of the
current state of the world, i.e. chaotic and unpredictable, but it also shares some of the
language. For example, Charles Handy (1989) entitled one of his books The Age of
Unreason, whilst Rosabeth Moss Kanter (1989) writes of ‘post-entrepreneurial’ organi-
sations. Though Tom Peters does not necessarily use the language of the postmodernists,
the essence of his message, and often the way it is delivered, sits comfortably with post-
modernism. The same can be said of organisational learning, with its emphasis on
knowledge acquisition, rapid change and, most importantly, the ability of organisations
to create their own realities (Hatch, 1997). The Japanese approach, with its inclusion of
hard and soft elements, on the other hand, seems to contain happily elements of mod-
ernism and postmodernism. Indeed, it may be that one of the main criticisms of
modernism and postmodernism is that both come from a Western, especially European,
intellectual and cultural tradition and, consequently, do not lie easily with other, particu-
larly Eastern and Islamic, intellectual and cultural traditions (Appignanesi and Garratt,
1995). Nevertheless, at least in the West, postmodernism does appear to be having a
powerful impact on both theory and practice in organisations.
    In summary, despite the somewhat impenetrable and contradictory nature of the
literature, the core of postmodernism concerns the nature of reason and reality. For
postmodernists, reason and logic have proved illusory and reality is a social construct.
In organisational terms, an organisation, or rather those individuals and groups who
dominate it, create their own reality – their own view or views of the world. Whether
they see themselves as successful or not, whether they view the world as chaotic,
whether they believe they can shape their own future, is to a large part determined
not by any objective data or what is happening in their environment as such, but by
their own ability to shape their own reality. The extent to which they can impose their
view of reality on others both inside and outside will, to a large degree, determine
whether they and the organisation are seen as successful or not.
    Seen in this light, postmodernism has three important implications for the organi-
sation theories and practices discussed in the previous three chapters. The first
implication concerns the nature of organisational culture. As we saw in Chapter 3,
the Culture–Excellence school has been highly influential in bringing the issue of
organisation culture to the forefront of management thought and practice over the
last two decades. In essence, what they argue is that, in order to achieve excellence,
managers need to create a strong, unified and appropriate culture for their organisa-
tion. A core component of this approach is to manipulate and use language and
symbols to create a new organisational reality. Though acknowledging the impor-
tance of culture, and sharing a concern with symbols and language, postmodernists,
however, view the results of attempts to manipulate and change culture as generally
unpredictable and sometimes undesirable. This is because the outcomes depend upon
the multiplicity of meanings and interpretations that others in the organisation put on
such attempts, which are inherently unmanageable (Hatch, 1997). The second impli-
cation concerns the issue of how a particular view of reality comes to the fore and is
152   Chapter 4 · Critical perspectives on organisation theory

               maintained in an organisation. The answer for postmodernists concerns the role of
               power and politics. In some organisations, there does not appear to be a settled and
               generally agreed view of reality; rather what we see are competing interpretations put
               forward by competing groups and individuals. In other organisations, however, a defi-
               nite view does appear to be held and does appear to be maintained. This is achieved
               when a coalition of groups and forces is able to wield power and use political
               processes to achieve a dominant position over others in the organisation. When this
               occurs, it is their view of reality that takes shape and comes to be accepted. The final
               implication relates to organisational choice. As we saw in the three previous chapters,
               most organisational theorists and practitioners believe that there is a ‘one best way’ to
               run organisations. The postmodernist debate, however, has raised significant questions
               about whether these ‘one best ways’ represent some form of objective knowledge, or
               whether they are socially-constructed realities which pertain to particular times, coun-
               tries, industries and organisations. If organisational reality is socially constructed, then,
               in theory at least, it is open to organisations to construct whatever reality they wish.
               From this perspective, organisations have a wide degree of choice about what they do,
               how they do it and where they do it. Nevertheless, despite the attractions of postmod-
               ernism, and despite its strong impact on organisational theory over the past two
               decades, there are some serious reservations about its validity and usefulness.


          ■ Postmodernism – some reservations
               Perhaps the main reservation and drawback of postmodernism is, as Alvesson and
               Deetz (1996) point out, the difficulty in defining the concept. In the social sciences,
               the term has acquired a wide and often conflicting set of definitions, including a
               social mood, a historical period filled with major social and organisational changes,
               and a set of philosophical approaches to organisational and other studies
               (Featherstone, 1988b; Hassard and Parker, 1993). Hatch (1997: 43) believes post-
               modernism has been defined in so many different ways that:

                 It is impossible to choose a core theory, or a typical set of ideas, to exemplify postmod-
                 ernism – the incredible variety of ideas labelled postmodern defies summarization, and the
                 postmodern value for diversity contradicts the very idea of unifying these different under-
                 standings into a single, all-encompassing explanation.

               As Appignanesi and Garratt (1995: 4) observe:

                 The confusion is advertised by the ‘post’ prefix to ‘modern’. Postmodernism identifies itself
                 by something it isn’t. It isn’t modern anymore. But in what sense exactly is it post ...
                 – as a result of modernism?
                 – the aftermath of modernism?
                 – the afterbirth of modernism?
                 – the development of modernism?
                 – the denial of modernism?
                 – the rejection of modernism?
                 Postmodern has been used in a mix-and-match of all these meanings.
The postmodern perspective   153

    The confusion and variety of postmodernism is best summed up by the following
list of terms used by postmodern theorists, compiled by Featherstone (1988a: 197):
                     modern                       postmodern
                     modernity                    postmodernity
                     modernité                    postmodernité
                     modernisation                postmodernisation
                     modernism                    postmodernism
Not only, as Featherstone shows, do postmodernists attribute different meanings to
each of the above terms, but also they do not share common agreement about what
the individual terms mean either. Indeed, Burrell (1988: 222) remarked of one of the
key influences on the postmodernist debate, Michel Foucault, that:

 ... it is important to note that Foucault’s iconoclasm takes him into positions which are not
 readily defensible and his refusal to retain one position for longer than the period between
 his last book and the next is certainly problematic.

   As well as the difficulty in defining postmodernism, there are also powerful voices who
defend modernism and attack postmodernism as a form of intellectual nihilism or of neo-
conservatism (Aronovitz, 1989; Callinicos, 1989). Hassard (1993: 119) states that:

 The most influential critic of postmodernism, however, is Jürgen Habermas ... [he] argues
 that theories of postmodernism represent critiques of modernity which have their ideologi-
 cal roots in irrationalist and counter-Enlightenment perspectives ... Habermas suggests that
 as many French writers [especially Derrida, Foucault and Lyotard] take their lead from the
 counter-Enlightenment statements of Nietzsche and Heidegger, this can be interpreted as a
 disturbing link with fascist thinking ... Habermas wishes to defend robustly ‘a principle of
 modernism’, which he suggests is an unfinished project that holds great, unfulfilled emanci-
 patory potential.


  Lyon (2000) argues that the critics of postmodernism fall into the following three
camps:
1 Those who claim there has never been a fully modernist era and claim there
  cannot, consequently, be a ‘post’ modernist one.
2 Those who maintain that the current developments in society are merely an exten-
  sion of what has gone before rather than any significant break with the past.
3 Those who accept that the world is entering a new age, but see globalisation (see
  Chapter 16) and not postmodernism as its defining characteristic.
Therefore, a number of serious reservations have been expressed regarding the validity
of postmodernism. These include its lack of consistency and clarity, that its proponents
misread the current state of the world, that it may be correct but it is not important,
and its posited alignment on the far right of the political spectrum. Its proponents
accept that the postmodernist message is not always clear and consistent but, in the
main, they would reject most of the other criticisms, especially that it is an ideology of
the right. On the other hand, there can be little doubt that the postmodernist message
has provided some justification and encouragement for the neo-liberal policies, such as
154   Chapter 4 · Critical perspectives on organisation theory

               privatisation and deregulation, adopted by most Western governments in the last 20
               years. Nevertheless, regardless of the merits or not of postmodernism, there are two
               other non-modernist perspectives on organisations which are also having a significant
               impact on organisation theory: realism and complexity.


The realist perspective

          ■ What is realism?
               As the above showed, there appear to be two dominant philosophical perspectives on
               the social world: the modernist, or positivist, perspective which believes in objective
               reality, logic and reason, and the postmodernist perspective, which see multiple and
               competing realities which are socially constructed. In the field of organisations, over
               the past 20 to 30 years, it is the postmodernist perspective which has come to the
               fore. However, Ackroyd and Fleetwood (2000a) argue that there is an alternative to
               both. They point out that there is much substantive research on organisations that is
               based on neither modernism (positivism) nor postmodernism. This work is based on a
               long-established seam of social science which strongly maintains that, in order to
               understand and explain events, it is necessary to take into account both social struc-
               tures, such as organisations, routines, rules and power, and the meaning that
               individuals and groups apply to these. Underpinning this work are well-developed
               philosophical doctrines that are neither modernist nor postmodernist. One of the
               most important of these is realism, which offers support for a non-modernist and
               non-postmodernist approach to organisations and management (Ackroyd and
               Fleetwood, 2000b). The essence of realism, as Easton (2000: 207) notes ‘ … is that
               there is a reality “out there” waiting to be discovered.’
                  Since the 1970s, realism has been applied to the social sciences by a number of
               writers (Bhaskar, 1979, 1986; Collier, 1994; Harré, 1972; Outhwaite, 1987; Sayer,
               2000). However, though few have explicitly applied it to management, it does appear
               to underpin much work in the field of institutional and regulation theory, and there is
               now a growing interest in its application to the wider issues of management and
               organisations (Ackroyd and Fleetwood, 2000b). As with postmodernism, the term
               realism has influenced many areas such as the arts, literature, philosophy and the
               social sciences, and the term tends to be used differently in each of these areas.
               However, the core belief of realists is that many entities exist independently of us and
               our investigation of them. Therefore, unlike postmodernists, realists assert that social
               entities, such as markets, class relations, gender relations, ethnic groupings, social
               rules, etc., exist, are real and can be discovered, though this does not mean that dis-
               covering them will be easy. As Easton (2000: 207) succinctly puts it, ‘We see through
               a glass darkly but there is something there to see.’


          ■ Realism and organisations
               Tsoukas (2000) states that realist philosophers see both the natural and social worlds
               as consisting of complex structures that exist independently of our knowledge of
               them. For realists, events and patterns of events are generated (are caused to be
The realist perspective   155

brought about) by causal mechanisms and causal powers that operate independently of
the events they generate. Realists seek to identify the generative structures, i.e. the
causal mechanisms that bring about events, and to identify their capabilities, i.e. their
causal powers (Harré and Madden, 1975; Harré and Secord, 1972). However, though
these causal mechanisms possess certain capabilities, causal powers, the actual out-
come of their operation will be dependent, i.e. contingent, on circumstances. For
example, the Japanese approach to management has the potential to engender team-
working and organisational commitment, but whether it will or not depends on a
whole host of situational variables, such as the nature of the society in which the
organisation operates and the expectations of the employees concerned. Organisations
also contain competing and contradictory organising principles, such as class, gender
and ethnicity, and they are composed of different groups with their own distinct priori-
ties and agendas that can undermine the dominant causal mechanisms (Reed, 2000).
Nevertheless, despite the potential of these competing forces and groups to create dis-
order, in many cases the interaction between them occurs in such a way that it
produces organisational integration, a degree of continuity and stability, and sufficient
change to maintain the organisation’s viability (Ackroyd, 2000).
   In terms of organisations and management, a central issue is the extent to which
organisations and their practices are produced by human beings but still exist exter-
nally to them and shape their behaviour. Realists are very clear on this point. They
argue that whilst the social world, including organisations, is a product of human
action, it is not necessarily a product of human design but exists independently of
human beings (Connelly, 2000; Easton, 2000). Realists also argue that social phenom-
ena can exist without those involved having any knowledge of them. For example,
markets only exist in and through human activity, yet there is no necessity that those
people involved should be conscious of the part they play in sustaining them.
   Therefore, realists acknowledge the socially-constructed nature of the world but,
unlike postmodernists, do not see the world as being merely a social construction
(Ackroyd and Fleetwood, 2000b). This can be seen in terms of the structure and oper-
ation of organisations. Realists argue that a structure is a set of simultaneously
enabling and constraining rules and resources which shape the interactions of those
who work in or have to deal with the organisation. That is to say, a structure can be
considered as a causal mechanism which has the potential and capability to act in cer-
tain ways, i.e. it has causal powers (Giddens, 1984; Manicas, 1980; Tsoukas, 2000).
Consequently, as Tsoukas (1992) observes, just because a person may have friendly
relations with a bank manager does not by itself mean that the person will be able to
obtain a loan – the key issues are the lending rules of the bank and the creditworthi-
ness of the borrower. Organisations may give groups and individuals certain powers
but they also prescribe how and when these powers are to be deployed (Whittington,
1989). This does not imply that those concerned know how the rules are generated,
the obvious and less obvious ways in which compliance is ensured, or their role in
maintaining and developing these rules. Therefore, to continue the banking example,
the bank manager knows the lending rules but not necessarily why they are as they
are. Also, though he or she is aware of the penalties for non-compliance, they are less
likely to be aware of the subtle pressures exerted by cultural norms to behave in cer-
tain ways. Yet the lending decision is not a mechanical process. The manager does
have the ability to exert judgment and a degree of discretion in what they do.
156   Chapter 4 · Critical perspectives on organisation theory

               Likewise, the potential borrower can present their case in a more or a less convincing
               fashion. This is why the causal powers possessed by a causal mechanism are seen as
               capabilities and not determinants. Whilst causal powers limit what can be done, and
               whilst they have the potential to bring about (cause) certain actions to occur, whether
               they do occur or not is dependent on a range of other factors as well, not least human
               action or inaction. As a result, when studying management and organisations, realists
               stress the need to give due weight to both people and structure, and the complex
               interplay between them. They argue that human action is shaped by the simultaneous
               constraining and enabling nature of an organisation’s structure, which tends to favour
               certain types of outcome, but that any actual outcome is contingent on the prevailing
               circumstances (Tsoukas, 1989; Whittington, 1994). In addition, as Kumar (1995)
               notes, not only do these constraining and enabling forces lie outside the control of
               those concerned, but those concerned are often unaware of them.
                  Realists seek to understand and explain events by focusing on the mechanisms,
               structures, powers and relations that bring them about. In seeking an explanation in
               this way, realists begin by postulating the existence of a possible mechanism and pro-
               ceed by collecting evidence for or against its existence and evidence of possible
               alternative mechanisms (Outhwaite, 1987; Reed, 2000). In revealing the mechanisms
               which bring about events, realists also seek to engender debates about alternative
               ways of structuring the social world and alternative forms of relationships, be they
               concerned with class, gender or power.
                  The use of realism in the field of management and organisations is most closely
               associated with the work of Bhaskar. His argument, Bhaskar (1989: 36), is that noth-
               ing happens out of nothing:

                 … people do not create society. For it always pre-exists them and is a necessary condition
                 for their activity. Rather society must be regarded as an ensemble of structures, practices
                 and conventions which individuals reproduce and/or transform, but which would not exist
                 unless they did so. Society does not exist independently of human activity … But it is not the
                 product of it …


               Bhaskar (1986) makes a clear distinction between human action and social structure.
               He argues that common propositions which are applied to people assume such a dis-
               tinction: ‘He cashed a cheque’ assumes a banking system, ‘He pleaded guilty’ assumes
               a legal system (Bhaskar, 1979; Connelly, 2000). The two are mutually influential and
               interdependent but can be analysed separately, and are fundamentally different in that
               social structures pre-exist and are sustained and changed through human action, but
               human action is constrained and enabled by social structures. Realists do not deny
               that there are multiple perspectives or competing claims about the nature of the social
               world. They also share with postmodernists a recognition of the role of culture,
               power and politics in shaping organisational choices. However, they reject the possi-
               bility that there are multiple realities. Therefore, unlike the postmodernists, they
               claim that truth exists and what exists can be found, though the finding may be very
               difficult (Easton, 2000). As Stacey (2003: 7) comments:

                 … realists do not see any inherent limitation on human ability to comprehend reality in its
                 entirety. For them, it is only a matter of time before research progressively uncovers more
                 and more of reality.
The complexity perspective   157

           Realism is a riposte to both modernism and postmodernism. It attacks the former
        for placing too much reliance on science, rationality and logic, whilst criticising that
        latter for rejecting reality in favour of multiple and competing realities. Though it
        would be unfair to characterise realism as being a half-way house between mod-
        ernism and postmodernism, it does tend to open itself up to criticism from both
        camps. The modernists object to the social construction side of the realists’ reality,
        whilst the postmodernists object to the realists’ claim that there is only one reality
        and it can be discovered. However, the battle as to which perspective on the world
        will carry most weight with organisation theorists is not just between postmodernists
        and realists; over the last decade, a third perspective, complexity, has entered the fray,
        which, unlike modernism and postmodernism, owes its origins not to philosophy but
        to the natural sciences.


The complexity perspective

     ■ What is complexity?
        Over the last decade, an increasing number of academics and practitioners have come
        to view organisations through the lens of complexity theories, and this is beginning to
        have a profound impact on views of how organisations should be structured and
        changed (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Fitzgerald, 2002a;
        Lewis, 1994; MacIntosh and MacLean, 2001; Morgan, 1997; Stacey, 2003;
        Tetenbaum, 1998; Wheatley, 1992). Complexity serves as an umbrella term for a
        number of theories, ideas and research programmes that are derived from many dif-
        ferent disciplines in the natural sciences (Rescher, 1996; Stacey, 2003; Styhre, 2002).
        To emphasise the diversity of viewpoints amongst complexity researchers, we will
        follow Black’s (2000) lead and use the term complexity theories rather than theory.
           Complexity theories are concerned with the emergence of order in dynamic non-
        linear systems operating at the edge of chaos, such as weather systems, which are
        constantly changing and where the laws of cause and effect appear not to apply
        (Beeson and Davis, 2000; Haigh, 2002; Wheatley, 1992). Order in such systems mani-
        fests itself in a largely unpredictable fashion, in which patterns of behaviour emerge in
        irregular but similar forms through a process of self-organisation, which is governed
        by a small number of simple order-generating rules (Black, 2000; MacIntosh and
        MacLean, 2001; Tetenbaum, 1998). Many writers have argued that organisations are
        also complex systems that, to survive, need to operate at the edge of chaos and have to
        respond continuously to changes in their environments through just such a process of
        spontaneous self-organising change (Hayles, 2000; Lewis, 1994; Macbeth, 2002;
        MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Stickland, 1998).
           Complexity theories stem from attempts by meteorologists, biologists, chemists,
        physicists and other natural scientists to build mathematical models of systems in
        nature (Gleick, 1988; Lorenz, 1993; Styhre, 2002). In the process, a number of differ-
        ent but related theories have emerged, the key ones being chaos theory (Bechtold,
        1997; Haigh, 2002; Lorenz, 1979, 1993), dissipative structures theory (Prigogine and
        Stengers, 1984; Prigogine, 1997), and the theory of complex adaptive systems
        (Goodwin, 1994; Stacey et al, 2002). The main difference between these three theories,
158   Chapter 4 · Critical perspectives on organisation theory

               according to Stacey (2003), is that chaos and dissipative structures theories seek to
               construct mathematical models of systems at the macro level (i.e. whole systems and
               populations), whilst complex adaptive systems theory attempts to model the same phe-
               nomena at the micro level by using an agent-based approach. Instead of formulating
               rules for the whole population, it seeks to formulate rules of interaction for the indi-
               vidual entities making up a system or population. However, all three see natural
               systems as both non-linear and self-organising. There are three central concepts that lie
               at the heart of complexity theories – the nature of chaos and order; the ‘edge of chaos’;
               and order-generating rules.

               Chaos and order
               Chaos is often portrayed as pure randomness, but from the complexity viewpoint, it
               can be seen as a different form of order (Arndt and Bigelow, 2000; Fitzgerald, 2002b;
               Frederick; 1998). Fitzgerald (2002a) states that chaos and order are twin attributes of
               dynamic, non-linear (complex) systems, and, within chaos, a hidden order may be
               concealed beneath what looks completely random. For complexity theorists, chaos
               describes a complex, unpredictable, and orderly disorder in which patterns of behav-
               iour unfold in irregular but similar forms; snowflakes are all different but all have six
               sides (Tetenbaum, 1998). Stacey (2003) identifies three types of order–disorder: stable
               equilibrium; explosive instability; and bounded instability. However, only under the
               last of these, bounded instability, are complex systems seen as having the ability to
               transform themselves in order to survive. If systems become too stable, they ossify
               and die. If they become too unstable, as with cancer, they may get out of control and
               destroy themselves (Frederick, 1998).

               Edge of chaos
               Under conditions of ‘bounded instability’, systems are constantly poised on the brink
               between order and chaos. Elsewhere, Stacey (Stacey et al, 2002) refers to this as a
               ‘far-from-equilibrium’ state, whilst Hock (1999) uses the term ‘chaordic’. However,
               the term most commonly used to describe this condition is the ‘edge of chaos’:

                 … complex systems have large numbers of independent yet interacting actors. Rather than
                 ever reaching a stable equilibrium, the most adaptive of these complex systems (e.g., inter-
                 tidal zones) keep changing continuously by remaining at the poetically termed ‘edge of
                 chaos’ that exists between order and disorder. By staying in this intermediate zone, these sys-
                 tems never quite settle into a stable equilibrium but never quite fall apart. Rather, these
                 systems, which stay constantly poised between order and disorder, exhibit the most prolific,
                 complex and continuous change ...                          (Brown and Eisenhardt, 1997: 29)


                  It is argued that creativity and growth are at their optimal when a complex system
               operates at the edge of chaos (Frederick, 1998; Jenner, 1998; Kauffman, 1993; Lewis,
               1994). It is the presence, or not, of appropriate order-generating rules, which permit
               self-organisation to take place, that allow some systems to remain at the edge of
               chaos, whilst others fall over the edge.
The complexity perspective   159

   Order-generating rules
   In complex systems, the emergence of order is seen as being based on the operation of
   simple order-generating rules which permit limited chaos whilst providing relative
   order (Frederick, 1998; Lewis, 1994; MacIntosh and MacLean, 2001; Reynolds,
   1987; Stacey et al, 2002; Wheatley, 1992). As Gell-Mann (1994: 100) puts it:

    In an astonishing variety of contexts, apparently complex structures or behaviours emerge
    from systems characterized by very simple rules. These systems are said to be self-organized
    and their properties are said to be emergent. The grandest example is the universe itself, the
    full complexity of which emerges from simple rules plus chance.

      Therefore, the concept of order-generating rules explains how complex, non-linear,
   self-organising systems manage to maintain themselves at the edge of chaos even under
   changing environmental conditions. Complex systems have a further trick up their
   sleeve. Under certain conditions they can even generate new, more appropriate order-
   generating rules when the old ones can no longer cope with the changes in the system’s
   environment (Bechtold, 1997; MacIntosh and MacLean, 1999; Wheatley, 1992).


■ The implications for organisations
   A growing number of academics and practitioners maintain that organisations are
   complex, non-linear systems, the behaviour of whose members is characterised by
   spontaneous self-organising underpinned by a set of simple order-generating rules
   (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Fitzgerald, 2002a; Lewis,
   1994; MacIntosh and MacLean, 2001; Morgan, 1997; Stacey, 2003; Tetenbaum,
   1998; Wheatley, 1992).
      Frederick (1998) argues that companies who relentlessly pursue a path of continu-
   ous innovation succeed because they operate at the edge of chaos, and, indeed,
   because they inject so much novelty and change into their normal operations, they
   constantly risk falling over the edge. Brown and Eisenhardt (1997) draw a similar
   conclusion from their research into innovation in the computer industry. They main-
   tain that continuous innovation is necessary for survival and that this is brought
   about by a process that resembles self-organisation in nature.
      Perhaps the most well-known example of a self-organising organisation is Visa.
   Visa has grown by 10,000 per cent since 1970, comprises 20,000 financial institu-
   tions, operates in 200 countries and has over half a billion customers (Hock, 1999).
   However, as Tetenbaum (1998: 26) notes:

    … you don’t know where it’s located, how it’s operated, or who owns it. That’s because
    Visa is decentralised, non-hierarchical, evolving, self-organizing and self-regulating. … it is a
    chaordic system conceived as an organization solely on the basis of purpose and principle.
    Its structure evolved from them.


   If organisations are complex systems, management and change take on a new dimen-
   sion. Beeson and Davis (2000) make the point that whilst it might be fruitful to see
   organisations as non-linear systems, to do so will require a fundamental shift in the role
   of management. Like many others (e.g. Boje, 2000; Stacey et al, 2002; Sullivan, 1998;
160   Chapter 4 · Critical perspectives on organisation theory

               Tetenbaum, 1998; Wheatley, 1992), they point out that self-organising principles
               explicitly reject cause and effect, top-down, command-and-control styles of manage-
               ment. Brodbeck (2002) suggests that the belief by managers that order and control are
               essential to achieve their objectives needs to be redressed. Morgan (1997) maintains
               that complexity will require managers to rethink the nature of hierarchy and control,
               learn the art of managing and changing contexts, promote self-organising processes,
               and learn how to use small changes to create large effects. For Tetenbaum (1998), the
               move to self-organisation will require managers to destabilise their organisations and
               develop the skill of managing order and disorder at the same time. Managers will need
               to encourage experimentation and divergent views, even allow rule-breaking, and
               recognise that ‘… people need the freedom to own their own power, think innovatively,
               and operate in new patterns’ (Bechtold, 1997: 198). For Jenner (1998: 402), the key to
               achieving this is a flexible, de-centralised structure.
                  Brown and Eisenhardt (1997: 29) refer to such flexible structures as ‘semistruc-
               tures’, which they maintain ‘ … are sufficiently rigid so that change can be organized,
               but not so rigid that it cannot occur.’ They claim that organisations can only survive
               in highly competitive environments by continuously innovating and improvising,
               which, they argue, relies on intensive, real-time communication within a structure of
               a few, very specific rules. Beeson and Davis (2000) echo this point and argue that, in
               such situations, change becomes an everyday event undertaken by all in the organisa-
               tion. Brown and Eisenhardt (1997: 28) also claim that in the firms they studied:

                 The rate and scale of innovation … was such that the term ‘incremental’ seemed, in retro-
                 spect, stretched. Yet it was not radical innovation [but] … a third kind of process that is
                 neither incremental nor radical and that does not fit the punctuated equilibrium model …


                  Similarly, Brodbeck (2002) draws attention to studies that cast doubt on the effec-
               tiveness of large-scale change programmes (see Clarke, 1999; Harung et al, 1999).
               For Styhre (2002), the problem is that such programmes assume that it is possible to
               predict the outcomes of change and attempt to plan, control and manage it in a
               rational, top-down, linear fashion.
                  These writers are depicting organisations operating at the edge of chaos and, there-
               fore, needing to respond continuously to changes in their environments through a
               process of spontaneous self-organising change in order to survive. However, as in the
               natural world, this process is driven by order-generating rules that themselves can be
               subject to transformation in certain situations (Lewis, 1994; MacIntosh and
               MacLean, 1999, 2001; Stacey, 2003). When this takes place in nature, it is an auto-
               matic process; in organisations, this is rarely likely to be the case. As Stacey (2003)
               argues, people are not unthinking molecules; they can and do exercise free will, they
               can and do pursue their own objectives, they can and do utilise power and political
               manoeuvring to gain their own ends, and they can and do interpret events in widely-
               differing ways. Therefore, self-organisation may not occur even when appropriate
               order-generating rules are present, nor, if such rules cease to be appropriate, can it be
               assumed that they will automatically be transformed. Instead both will depend on the
               nature of the organisation (Griffin, 2002).
                  MacIntosh and MacLean (2001) provide evidence of the existence and importance
               of order-generating rules, based on a case study of a long-established manufacturing
The complexity perspective     161

company that had been in decline for over 30 years. This decline appeared to be
caused by a combination of inappropriate order-generating rules (such as ‘don’t inno-
vate unless it leads to cost reduction’) and a rigid structure that stifled innovation.
Once this was recognised, the company evolved more appropriate order-generating
rules (such as ‘better, faster, cheaper’) and implemented a new structure that gave
greater freedom for self-organisation to its constituent parts.
   In order for organisations to promote change through self-organisation, a number
of writers have argued that organisations need to operate on democratic principles, i.e.
their members will have to have the freedom to self-organise. For example, Bechtold
(1997) argues that organisations seeking to adopt a complexity approach need a bal-
anced distribution of power, strong customer focus, a strategy of continuous learning
and an orientation towards community service. A further strand in this argument is
provided by Kiel (1994), who argues that because small actions can have large and
unpredictable consequences, individual human activity assumes great importance.
Jenner (1998) claims that for self-organisation to work, authority must be delegated to
those who have access to the broadest channels of information that relate to the issue
concerned. Nevertheless, Stacey (2003: 278) sounds a note of caution:

 This seems to assume that self-organisation is some new form of behaviour rather than a
 different way of understanding how people have always behaved. The question is whether
 such self-organising behaviour produces patterns that block or enable change.


   In considering complexity theories and organisational change, one of the key ques-
tions is to ask: ‘What’s new?’ (Frederick, 1998). If we look at what appears to be
being said about management, structure, behaviour and change, much of it seems
very familiar. Writers from Peters and Waterman (1982) onwards have been arguing
that managers need to abandon top-down, command-and-control styles, that organi-
sational structures need to be flatter and more flexible, and that greater employee
involvement is essential for success (Handy, 1989; Kanter, 1989, 1997; Kanter et al,
1997; Kotter, 1996; Peters, 1989, 1993, 1997). However, as the implications listed in
Exhibit 4.3 show, there are three areas where those seeking to apply complexity theo-
ries to organisations appear to depart from, or significantly extend, the received
wisdom of the last 20 years.

  Exhibit 4.3       Applying complexity theories to organisations

  Implication 1 There will be a need for much greater democracy and power equalisation in
  all aspects of organisational life, instead of just narrow employee participation in change
  (Bechtold, 1997; Jenner, 1998; Kiel, 1994).
  Implication 2 Small-scale incremental change and large-scale radical-transformational
  change will need to be rejected in favour of ‘a third kind’ which lies between these two, and
  which is continuous and based on self-organisation at the team/group level (Brodbeck,
  2002; Brown and Eisenhardt, 1997).
  Implication 3 In achieving effective change, order-generating rules have the potential to
  overcome the limitations of rational, linear, top-down, strategy-driven approaches to change
  (MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Styhre, 2002).
162   Chapter 4 · Critical perspectives on organisation theory

                  The basis for Implication 1 is that unless employees have the freedom to act as they
               see fit, self-organisation will be blocked and organisations will not be able to achieve
               continuous and beneficial innovation. The rationale for Implication 2 is that neither
               small-scale incremental change nor radical transformational change work: instead,
               innovative activity can only be successfully generated through the ‘third kind’ of
               change, such as new product and process development brought about by self-organis-
               ing teams. Implication 3 is based on the argument that because organisations are
               complex systems, which are radically unpredictable and where even small changes
               can have massive and unanticipated effects, top-down change cannot deliver the con-
               tinuous innovation that organisations need in order to survive and prosper. Instead, it
               is argued that organisations can only achieve continuous innovation if they position
               themselves at the edge of chaos. This position can only be achieved and maintained
               through self-organisation, which in turn depends on the possession of appropriate
               order-generating rules. However, should these rules cease to be appropriate for the
               organisation’s environment, the process of self-organisation allows new, more appro-
               priate rules to be generated. Therefore, in a chicken and egg fashion, order-generating
               rules create the conditions for self-organisation, and self-organisation creates the con-
               ditions that enable order-generating rules to be transformed (Bechtold, 1997;
               Hoogerwerf and Poorthuis, 2002; Tetenbaum, 1998).


          ■ Complexity – some reservations
               Like postmodernism and realism, complexity has much to commend it. It offers an
               explanation of the apparent complexity and chaos of modern life and, potentially at
               least, a way of managing this complexity and chaos. Also, for managers, it is an
               approach based on ‘hard’ science and not ‘airy fairy’ philosophy. Nevertheless, writ-
               ers have raised three significant reservations about the application of complexity
               theories to organisations. Firstly, the complexity approach requires a significant shift
               towards greater organisational democracy and power equalisation. This appears to go
               far beyond the more limited, and often failed, attempts to redistribute power through
               empowerment, flatter organisational structures and quality improvement programmes
               which have been called for over the last 20 years (Eccles, 1993; Foegen, 1999; Lawler
               et al, 1998; Lee, 1999; Pfeffer, 1996; Stohl and Cheney, 2001; Wetlaufer, 1999;
               Whyte and Witcher, 1992; Witcher, 1993; Zairi et al, 1994). Therefore, convincing
               organisations that they are complex systems is likely to prove far easier than for
               organisations to achieve the profound internal realignments necessary to implement
               this concept (Beeson and Davis, 2000; Stacey, 2003).
                  Secondly, in applying complexity theories to organisations, it is important to bear in
               mind that, even in the natural sciences, there are variants of these and disputes about
               their implications (Black, 2002; Stacey et al, 2002; Stacey, 2003). As Arndt and
               Bigelow (2000: 36) observe, they have ‘… caused consternation as well as delight’.
               Therefore, one needs to be extremely careful not to treat complexity theories as though
               they are established, unitary, unquestioned and uncontroversial (Stickland, 1998).
                  Lastly, in applying complexity theories to organisations, there appears to be a lack
               of clarity or explicitness regarding how writers are treating them (Arndt and Bigelow,
               2000; Brodbeck, 2002; Hayles, 2000; Morgan, 1997; Stacey et al, 2002; Stacey,
               2003). For example, some see them as a metaphorical device which provides a means
Conclusions   163

       of gaining new insights into organisations, whilst others see them as a way of mathe-
       matically modelling how and why organisations operate as they do (Stickland, 1998).
       If the former, then it could be argued that the complexity perspective is just another
       of the multiple realities so beloved of the postmodernists. If the latter, then its propo-
       nents will have to show how mathematical modelling techniques can be applied to
       complex and dynamic human processes in organisations, though there is no indica-
       tion that anyone has yet attempted to do so (Stacey, 2003).


Conclusions
       In Chapters 1–3, we reviewed the main theories and approaches to structuring and
       running organisations. These three chapters showed that, over the past 100 years,
       organisation theory had moved a long way from the mechanical certainties of the
       Classical school as exemplified by the work of Frederick Taylor. We no longer per-
       ceive organisations as simple machines, nor of people as cogs, or ‘greedy robots’, in
       those machines. We now recognise the convoluted nature of organisations and their
       environments, and the even more convoluted nature of human beings. Contemporary
       approaches to running organisations have attempted to move away from the mechan-
       ical certainties of Frederick Taylor and co. by developing theories that focus on, or
       incorporate, the human–social dimension of organisational life. Consequently, for the
       Culture–Excellence school, the key issue has been organisational culture; for the
       Japanese, the key issue has been to blend together the ‘hard’ and ‘soft’ elements of
       organisational life; whereas for the learning school, the main topic has been to under-
       stand how humans learn, and how this can be translated from individual learning to
       collective, organisational learning. Though there are some common elements between
       all three approaches, there are also major differences. Nevertheless, this has not
       stopped proponents of all three from seeking to promote their approach as the ‘one
       best way’.
          What this chapter has shown is the need to set and understand approaches to run-
       ning and designing organisations into a wider theoretical frame. None of the three
       perspectives on organisations reviewed in this chapter were developed specifically with
       organisations in mind; indeed, their originators might have been somewhat surprised
       to see this development. Two of them, postmodernism and realism, are based on well-
       developed philosophical doctrines, and the other, complexity, comes from a great deal
       of research carried out in a wide variety of disciplines in the natural sciences. All three
       are inspired by the desire to understand the world around us in its widest context,
       whether this be art, history, science or why it always seems to rain in Manchester. All
       three have significant implications for structuring and managing organisations.
          Postmodernism, with its denial of an absolute reality and promotion of competing,
       and socially-constructed, multiple realities, offers enormous scope for the emergence
       of alternative strategies and choices, but it also stresses the importance of culture,
       power and politics in how the strategies are selected and legitimised, and how choices
       are made. The realists reject the concept of multiple realities in favour of just one.
       They do not deny the socially-constructed nature of their reality, though they claim
       that it is no less real for all that. Nor do they deny that this social construction offers
       organisations a great deal more scope for choice and manoeuvre than conventional
164   Chapter 4 · Critical perspectives on organisation theory

               approaches appear to acknowledge. The difference between these two perspectives is
               that while the postmodernists believe that anything is possible, the realists see organi-
               sations’ room for manoeuvre and choice as limited by complex structures in both the
               natural and social worlds which exist even if we are not aware of them.
                  Moving on to the complexity perspective, this sees organisations as complex, self-
               organising systems that, in order to maximise their innovative capacities, need to
               operate at the edge of chaos. In order to remain in this position, rather than falling
               off the edge, they need to develop and maintain appropriate order-generating rules. In
               order to develop and maintain appropriate order-generating rules, organisations are
               required to become far more democratic than they are now and allow ‘… people the
               freedom to own their own power, think innovatively, and operate in new patterns’
               (Bechtold, 1997: 198). In effect, choice moves from the few to the many. Though it
               does appear to be the case that organisations can survive for long periods of time
               without appropriate rules, complexity theorists maintain that this will reduce the
               organisation’s innovative capacity and threaten its long-term survival.
                  As can be seen, all of these three critical perspectives have important but different
               implications for organisational life, and each has fundamental differences with the
               other two. Nevertheless, there is one very important implication which all three per-
               spectives share; this is that organisations do have a wide range of options and choices
               open to them as to how they are structured and operate. This is the case even if one
               concedes that some postmodernist realities are more dominant than others, that ‘real’
               social entities, such as markets, class relations, gender relations, social rules, etc., limit
               choice, or that eventually organisations need to adopt or develop appropriate order-
               generating rules. If choice is far wider than most organisation theories acknowledge,
               this poses questions as to how to identify options, and who will make the decisions as
               to which ones to choose? In Chapter 3, we drew attention to the importance of cul-
               ture in shaping organisations and the actions of those in them. Chapter 3 also drew
               attention to the lack of interest paid to power and politics in running organisations
               and making decisions. In this chapter, especially in considering postmodernism, we
               have also drawn attention to the role of culture, power and politics in shaping deci-
               sions in organisations. In the next chapter, we will return to these issues and show
               how they impact on the choices made by those who run organisations.


Test your learning

          ■ Short answer questions
               1 What is flexible specialisation?

               2 Give three definitions of postmodernism.

               3 Using Clegg’s (1990) distinction between modernist and postmodernist organisation
                 forms, identify the significant differences between job design under a modernist regime
                 and that under a postmodernist regime.

               4 What is realism?
Suggested further reading   165

  5 What do realists mean by the terms ‘causal mechanism’ and ‘causal powers’?

  6 What do complexity theorists mean by the ‘edge of chaos’?

  7 What are the implications of the complexity perspective for organisational democracy?

  8 For each of the following, briefly state their implications for organisational change: (a)
    postmodernism, (b) realism and (c) complexity theories.



■ Essay questions
  1 What are the implications for organisations of differences between postmodernists and
    realists in terms of how they view reality?

  2 What are ‘simple order-generating rules’, and how might an organisation identify and
    modify these?




   Suggested further reading
  1 Hatch, MJ (1997) Organization Theory: Modern, Symbolic and Postmodern Perspectives.
    Oxford University Press: Oxford.
    Stacey, R D (2003) Strategic Management and Organisational Dynamics: The Challenge of
    Complexity. FT/Prentice Hall: Harlow.
    Taken together, these two books provide a good overview of the postmodernist slant on
    organisations.
  2 Ackroyd, S and Fleetwood, S (eds) (2000) Realist Perspectives on Management and
    Organisations. Routledge: London.
    This edited collection of essays provide an excellent introduction to realism and how it can
    be applied to organisations.
  3 Black, JA (2000) Fermenting change: exploring complexity and chaos. Journal of Organizational
    Change Management (Special Edition), 13(6).
    Fitzgerald, LA (2002) Chaos: applications in organizational change. Journal of Organizational
    Change Management (Special Edition), 15(4).
    These two special editions of the Journal of Organizational Change Management offer a
    thought-provoking and informative overview of complexity theories.
Chapter 5

Culture, power, politics
and choice


 Learning objectives
 After studying this chapter, you should be able to:
 ■   understand the main tenets of organisational culture;
 ■   discuss the strengths and weaknesses of the cultural approach to
     organisations;
 ■   describe the role of power and politics in organisations;
 ■   state the main advantages and disadvantages of the power-politics
     perspective on organisations;
 ■   understand the scope, methods and limitations for the exercise of choice in
     terms of organisational design and change.
Introduction    167

Exhibit 5.1       The end of choice?

How to preserve the soul of management: the increasing                                                         FT
sophistication of measurement techniques threatens to
reduce executives to robots
… This week, lulled by the soft-sounding title, I        for celebration. But I fear the long-term conse-
opened a book called Quest for Balance, the Human        quences of this kind of organisation.
Element in Performance Management Systems.                   Isn’t performance management simply a way to
Inside were pages of boxes, tables, diagrams and         control the work of managers? How will people
acronyms constructed around case studies. It is the      respond to such controls? If you stifle individual ini-
kind of book publishers like to describe as a busi-      tiative, character, discrimination and style, you
ness tool: an instruction manual for those attempting    remove qualities critical to job satisfaction, leaving a
to implement Robert Kaplan’s and David Norton’s          mechanical process. How many managers will turn
Balanced Scorecard (BSC). The idea is to identify        their backs on such systems in the belief that there
crucial areas of the business – customer satisfaction,   has to be a better way of living your work?
                                                             Pursuit of efficiency improvements has always
for example – that are described as critical success
                                                         underpinned the development of management and
factors (CSFs) and measure them. In the case of
                                                         the organisation of work. Adam Smith was intrigued by
customer satisfaction, you could canvass customers,
                                                         the division of labour in a pin factory. One workman, he
count repeat purchases or work out the time it takes
                                                         noticed, would find it hard to make one pin a day but a
to deal with complaints. These measures are              group of 10 workmen, dividing the task into separate
described as key performance indicators (KPIs).          and distinct jobs, could between them make 48,000
    It appears that these systems can produce meas-      pins in a day. Later Frederick Taylor, the founder of work
urable improvements in organisational productivity. I    study, believed that his scientific management had dis-
am sure they do. It makes a lot of sense to concen-      covered the ‘one best way’ of working.
trate on the features of a business that create value.       So manufacturing was reduced to its bare bones,
But what of the people engaged in carrying out the       in which a repeated action such as the clockwise turn
measurements and the people expected to respond?         of a screw became a job in itself. Craftsmanship,
If systemisation removes the discretionary powers of     artisanship, individuality – even humanity – were aban-
managers, we may begin to ask why we should have         doned in the search for ever more efficient production.
managers at all.                                         Re-engineering and performance management con-
    When systems and controls are able to measure        tinue this tradition. All these improvements are finding
such critical areas of performance there is no           ‘better ways’ of doing things for the organisation. But
reason why front line employees should not               what about personal fulfilment, the stuff that feeds our
manage themselves and adjust their work habits           soul and spirit?
accordingly. Surely anything that creates more effi-     Source: Richard Donkin, Financial Times, 19 September 2002,
cient and effective organisations should be a cause      p. 12.




               Introduction
              The first three chapters of this book described the main and most influential
              approaches to running organisations that have emerged in the last 100 years. If they
              can be said to have one common feature, it is that each of them claim to have discov-
              ered the ‘one best way’ to run organisations. The result of this ought to be the type of
              development described in Exhibit 5.1, the reduction or elimination of managerial
              choice and discretion. If there is a sure-fire way of running organisations, the main
168   Chapter 5 · Culture, power, politics and choice

               job of senior managers is to see that it is implemented and that no one, especially
               themselves, deviates from it. If there is a sure-fire recipe for success, then we should see
               the elimination, or at the very least the downgrading, of senior managerial posts
               because almost anyone should be capable of implementing the recipe. However, there
               are three counter-arguments to those who see ‘managerial recipes’ replacing ‘manage-
               rial resourcefulness’. The first is that, if this is the case, why have executive salaries
               increased so dramatically on both sides of the Atlantic in the last decade (AFL-CIO,
               2003; Finch and Treanor, 2003)? The second is that, if such sure-fire recipes existed,
               why is there such a wide disparity in organisational success and why do so few, if any,
               companies manage to achieve long-term prosperity? The third counter-argument was
               provided by the discussion of postmodernism, realism and complexity in the previous
               chapter. This is that rather than being the prisoners of circumstances, rather than being
               hemmed in by successful recipes, rather than rational beings unquestioningly following
               rational recipes, managers have a surprisingly wide degree of choice and discretions.
               Even if one rejects the ‘boundless’ view of choice advocated by the postmodernists in
               favour of the ‘bounded’ view of the realists and complexity theorists, managers are still
               far from the ‘executive robots’ perceived by Donkin in Exhibit 5.1. However, if the
               recipes for success are not straitjackets, if managers are not rational beings, if they do
               have scope for choice, on what do they base their choices? In this chapter, it will be
               argued that the answer lies in the areas of culture, power and politics.
                  The chapter begins with a review of organisational culture. It is shown that many
               organisations lack a cohesive culture that bonds them together in a common purpose.
               However, contrary to the arguments of the Culture–Excellence school, even where
               strong cultures exist, they may not always be appropriate; they may also be under-
               mined owing to the absence of clear or uncontested organisational goals. The review
               of culture concludes that, firstly, although organisational culture may have important
               implications for organisational performance, there is little agreement about the nature
               of culture, whether it can be changed or the benefits to be gained from attempting to
               do so. Secondly, instead of culture being seen as an all-important and malleable deter-
               minant of performance, organisational life in many cases is dominated by political
               power battles which may be more influential than culture in shaping key decisions.
               Consequently, the review of culture leads on to an examination of the nature and role
               of power and politics in organisations. This view of organisations maintains that they
               are essentially political entities whose decisions, actions and major developments are
               influenced and determined by shifting coalitions of individuals attempting to protect
               or enhance their own interests.
                  In summing up the implications of chapters 4 and 5 for organisations, it is argued
               that, rather than being the prisoners of organisational theories or contingencies, man-
               agers (potentially) have considerable, though by no means unconstrained, freedom of
               choice over the structure, policies and practices of their organisations, and even over
               the environment in which they operate. In exercising choice, managers are influenced
               by organisational theories and constraints, but they are also influenced by their con-
               cern to ensure that the outcome of decisions favours, or at least does not damage,
               their personal interests. The conclusion to this chapter – and indeed of Part 1 of the
               book – is that, whether illegitimate or useful, political behaviour is an ever-present
               part of organisational life, and that such behaviour is particularly prevalent when
               major change initiatives are being considered or implemented.
The cultural perspective   169


The cultural perspective

      ■ What is organisational culture?
         As can be seen from the discussion in Chapter 3 of the Culture–Excellence school,
         and, to a lesser extent, organisational learning and Japanese management, many writ-
         ers point out that managers and employees do not perform their duties in a value-free
         vacuum. Their work and the way it is done are governed, directed and tempered by
         an organisation’s culture – the particular set of values, beliefs, customs and systems
         that are unique to that organisation. Though Peters and Waterman’s (1982) view that
         organisational culture is the prime determinant of organisational performance has
         been highly influential, other writers stress different, but no less important, aspects of
         culture. Keuning (1998: 46), for example, argues that the two most important func-
         tions of culture are: ‘To provide relatively fixed patterns for handling and solving
         problems … [and to] … reduce uncertainty for members of the organization when
         confronted with new situations.’ Nevertheless, as Wilson (1992) noted, so influential
         has Peters and Waterman’s view become that culture has come to be seen as the great
         ‘cure-all’ for the majority of organisational ills.
            The current fascination of business with organisational culture began in the 1980s
         with the work of writers such as Allen and Kraft (1982), Deal and Kennedy (1982),
         and above all Peters and Waterman (1982). Academics, however, had drawn attention
         to its importance much earlier; as Allaire and Firsirotu (1984) and Albrow (1997)
         have shown, there was already a substantial academic literature on organisational
         culture well before the work of Peters and Waterman (see Eldridge and Crombie,
         1974; Turner, 1971). Blake and Mouton (1969), for example, were arguing that there
         was a link between culture and excellence in the late 1960s. For all this, organisa-
         tional culture remains a highly contentious topic whose implications are far-reaching.
            Turner (1986) traced the ‘culture craze’ of the 1980s to the decline of standards in
         manufacturing quality in the USA, and the challenge to its economic supremacy by
         Japan. He commented that the concept of culture holds out a new way of understand-
         ing organisations, and has been offered by many writers as an explanation for the
         spectacular success of Japanese companies in the 1970s and 1980s. Bowles (1989),
         amongst others, observed that there is an absence of a cohesive culture in advanced
         economies in the West, and that the potential for creating systems of beliefs and myths
         within organisations provides the opportunity for promoting both social and organisa-
         tional cohesion. The case for culture was best summed up by Deal and Kennedy
         (1982), who argued that culture, rather than structure, strategy or politics, is the prime
         mover in organisations.
            Silverman (1970) contended that organisations are societies in miniature and can
         therefore be expected to show evidence of their own cultural characteristics.
         However, culture does not spring up automatically and fully-formed from the whims
         of management. Allaire and Firsirotu (1984) considered it to be the product of a
         number of different influences: the ambient society’s values and characteristics, the
         organisation’s history and past leadership, and factors such as industry and technol-
         ogy. Other writers have constructed similar lists but, as Brown (1995) noted, there
         does seem to be some dispute over what factors shape organisational culture and
170   Chapter 5 · Culture, power, politics and choice

               those which are an integral part of it. Drennan (1992), for example, lists company
               expectations as a factor that shapes culture, but these might just as easily be seen as a
               reflection of an organisation’s values which, as Cummings and Huse (1989) point
               out, are a key component of an organisation’s culture. However, the difficulty in dis-
               tinguishing between the factors that shape culture and those that comprise culture is a
               reflection, as Cummings and Huse (1989: 421) also point out, of the ‘confusion about
               what the term culture really means when applied to organizations’. Brown (1995:
               6–7) estimated that there are literally hundreds of definitions of culture: samples of
               these are shown in Exhibit 5.2.

                  Exhibit 5.2         Definitions of culture

                  The culture of the factory is its customary and traditional way of thinking and doing things, which is
                  shared to a greater or lesser degree by all its members and which new members must learn, and at
                  least partially accept, in order to be accepted into service in the firm.        (Jacques, 1952: 251)

                  Culture ... is a pattern of beliefs and expectations shared by the organization’s members. These beliefs
                  and expectations produce norms and powerfully shape the behaviour of individuals and groups in
                  the organization.                                                         (Schwartz and Davis, 1981: 33)

                  A quality of perceived organizational specialness – that it possesses some unusual quality that distin-
                  guishes it from others in the field.                                            (Gold, 1982: 571–2)

                  By culture I mean the shared beliefs top managers in a company have about how they should manage
                  themselves and other employees, and how they should conduct business(es).       (Lorsch, 1986: 95)

                  Culture represents an interdependent set of values and ways of behaving that are common in a commu-
                  nity and that tend to perpetuate themselves, sometimes over long periods of time.
                                                                                        (Kotter and Hesketh, 1992: 141)

                  Culture is ‘how things are done around here’.                                       (Drennan, 1992: 3)




                  Whilst there is a similarity between the definitions shown in Exhibit 5.2, there are
               also some distinct differences: is culture something an organisation is or something it
               possesses? Does it mainly apply to senior managers or does it embrace everyone in the
               organisation? Is it a weak or a powerful force? Perhaps the most widely accepted defini-
               tion is that offered by Eldridge and Crombie (1974: 78), who stated that culture refers:

                 … to the unique configuration of norms, values, beliefs, ways of behaving and so on, that
                 characterise the manner in which groups and individuals combine to get things done.

               Culture defines how those in the organisation should behave in a given set of circum-
               stances. It affects all, from the most senior manager to the humblest clerk. Their
               actions are judged by themselves and others in relation to expected modes of behav-
               iour. Culture legitimises certain forms of action and proscribes other forms. This view
               is supported by Turner (1971), who observed that cultural systems contain elements
               of ‘ought’ which prescribe forms of behaviour or allow behaviour to be judged
               acceptable or not. Other writers have suggested a wide variety of different aspects of
               culture as being important in shaping behaviour. Martin et al (1983) pointed to the
The cultural perspective   171

role of organisational stories in shaping the actions and expectations of employees.
They identified seven basic types of story prevalent in organisations which provide
answers to seven fundamental questions of behaviour (see Exhibit 5.3).

    Exhibit 5.3        Fundamental questions of behaviour in organisations

    1. Can employees break the rules?
    2. Is the big boss human?
    3. Can the little person rise to the top?
    4. Will I get fired?
    5. Will the organisation help me if I have to move?
    6. How will the boss react to mistakes?
    7. How will the organisation deal with obstacles?



   Alongside stories, much attention has been paid to the role of ceremonies, rites and ritu-
als in reinforcing behaviour. As Trice and Beyer (1984) found, these include the following:
■   Rites of passage – designed to facilitate and signal a change in status and role
    through events such as training and induction programmes.
■   Rites of questioning – to allow the status quo to be challenged through the use of,
    for example, outside consultants.
■   Rites of renewal – to enable the status quo to be updated and renewed through
    participative initiatives including strategy development, vision building and job
    redesign programmes.
   Another common theme in the literature is the role of ‘heroes’. Peters and
Waterman (1982) stressed the importance of corporate heroes in shaping the fortunes
of their ‘excellent’ companies. Deal and Kennedy (1982) likewise saw the corporate
hero as the great motivator, the person everyone looks up to, admires and relies on.
Indeed, there is a tendency, not just in the USA, to attribute much of business success
to the actions and personality of individuals, such as Pierre du Pont, Henry Heinz,
Henry Ford, Alfred Sloan, Toyoda Kiichiro, Matsushita Konosuke, Edward Cadbury
and Sir John Harvey-Jones. Current corporate heroes include Richard Branson at
Virgin, Bill Gates at Microsoft, Chris Gent at Vodafone, Steve Jobs at Apple, Luc
Vandevelde at Marks and Spencer and Jack Welch at General Electric.
   Brown (1995) compiled a long list of 38 key elements of culture that have been
identified by writers in the field, which include organisational climate, metaphors,
attitudes, history and basic assumptions. Identifying these separate elements of cul-
ture helps us to flesh out and better understand how organisational culture manifests
itself and impacts on individual and group behaviour. Nevertheless, as Brown shows,
producing lists of elements or focusing on the role of particular elements tends to
present a confusing and partial picture of culture. It becomes difficult to determine
which are the more and which are the less important elements and, in terms of chang-
ing culture, which elements can be easily altered and which are more immutable.
   To overcome this lack of clarity, there have been a number of attempts to identify
and categorise the constituent elements of culture. Hofstede (1990) developed a four-
172   Chapter 5 · Culture, power, politics and choice

               layered hierarchical model of culture which ranged from values at the deepest level
               through rituals, heroes and, at the surface level, symbols. In a similar way, Schein
               (1985) suggested a three-level model, with basic assumptions being at the deepest
               level, beliefs, values and attitudes at the intermediate level, and artifacts at the surface
               level. Based on an analysis of the different definitions of culture, Cummings and Huse
               (1989) produced a composite model of culture, comprising four major elements exist-
               ing at different levels of awareness (see Figure 5.1).
                  Cummings and Huse (1989: 421) define these four major elements of culture
               as follows:

                 1. Basic assumptions. At the deepest level of cultural awareness are unconscious, taken-
                    for-granted assumptions about how organisational problems should be solved ... They
                    represent nonconfrontable and nondebatable assumptions about relating to the environ-
                    ment, as well as about the nature of human nature, human activity and human
                    relationships. [ ... ]
                 2. Values. The next higher level of awareness includes values about what ought to be in
                    organizations. Values tell members what is important in the organization and what they
                    need to pay attention to. [ ... ]
                 3. Norms. Just below the surface of cultural awareness are norms guiding how members
                    should behave in particular situations. These represent unwritten rules of behavior. [ ... ]
                 4. Artifacts. At the highest level of cultural awareness are the artifacts and creations that are
                    visible manifestations of the other levels of cultural elements. These include observable
                    behaviors of members, as well as the structures, systems, procedures, rules, and physical
                    aspects of the organization.




                                                              Basic
                                                           assumptions



                                                              Values


                                                              Norms


                                                             Artifacts



               Figure 5.1 The major elements of culture
               Source: from Cummings and Huse (1989)
The cultural perspective   173

However, while the various hierarchical models of culture elements are useful, we
should always remember that, as Brown (1995: 8–9) notes, ‘ ... actual organisational
cultures are not as neat and tidy as the models seem to imply’. Where there are cul-
tures, there are also usually subcultures; where there is agreement about cultures,
there can also be disagreements and counter-cultures; and there can also be significant
differences between espoused culture and culture-in-practice.
   This lack of neatness and tidiness has not prevented numerous attempts to define
organisational culture, nor attempts to categorise the various types of culture. Deal
and Kennedy (1982) identified four basic types of culture:
■   The Tough Guy, Macho culture, characterised by individualism and risk-taking,
    e.g. a police force.
■   The Work-Hard/Play-Hard culture, characterised by low risks and quick feedback
    on performance, e.g. McDonald’s.
■   The Bet-Your-Company culture, characterised by high risks and very long feedback
    time, e.g. aircraft companies.
■   The Process culture, characterised by low risks and slow feedback, e.g. insurance
    companies.
Quinn and McGrath (1985) developed their own four types of culture:
■   The Market, characterised by rational decision-making and goal-orientated
    employees, e.g. GEC under Arnold Weinstock.
■   The Adhocracy, characterised by risk-orientated and charismatic leaders and value-
    driven organisations, e.g. Apple and Microsoft in their early days.
■   The Clan, characterised by participation, consensus and concern for others, e.g.
    voluntary organisations.
■   The Hierarchy, characterised by hierarchical, rule-based authority that values sta-
    bility and risk avoidance, e.g. government bureaucracies.
   Perhaps the best-known typology of culture, and the one which has been around
the longest, is that developed by Handy (1979) from Harrison’s (1972) work on
‘organization ideologies’. Handy (1986: 188) observed that ‘There seem to be four
main types of culture ... power, role, task and person’. As shown in Exhibit 5.4, he
relates each of these to a particular form of organisational structure.


    Exhibit 5.4        Handy’s four types of culture

    A power culture, Handy states, is frequently found in small entrepreneurial organisations
    such as some property, trading and finance companies. Such a culture is associated with a
    web structure with one or more powerful figures at the centre, wielding control.
    A role culture is appropriate to bureaucracies, and organisations with mechanistic, rigid
    structures and narrow jobs. Such cultures stress the importance of procedures and rules,
    hierarchical position and authority, security and predictability. In essence, role cultures create
    situations in which those in the organisation stick rigidly to their job description (role), and
    any unforeseen events are referred to the next layer up in the hierarchy.
    A task culture, on the other hand, is job- or project-orientated; the onus is on getting the job
    in hand (the task) done rather than prescribing how it should be done. Such types of culture
                                                                                                         ▲
174   Chapter 5 · Culture, power, politics and choice



                  Exhibit 5.4 continued
                  are appropriate to organically-structured organisations where flexibility and teamworking are
                  encouraged. Task cultures create situations in which speed of reaction, integration and
                  creativity are more important than adherence to particular rules or procedures, and where
                  position and authority are less important than the individual contribution to the task in hand.
                  A person culture is, he argues, rare. The individual and his or her wishes are the central focus
                  of this form of culture. It is associated with a minimalistic structure, the purpose of which is
                  to assist those individuals who choose to work together. Therefore, a person culture can be
                  characterised as a cluster or galaxy of individual stars.
                  Source: Handy (1986)




                  Handy (1986) believes that role and task cultures tend to predominate in Western
               organisations. Relating these two types of culture to Burns and Stalker’s (1961) struc-
               tural continuum, with mechanistic structures at one end and organic at the other, we
               can see that Handy is in effect seeking to construct a parallel and related cultural con-
               tinuum, with role cultures at the mechanistic end and task cultures at the organic end
               (see Figure 5.2).
                  This categorisation certainly accommodates the five Western approaches to organi-
               sation theory discussed in the previous chapters. However, it is difficult to
               accommodate Japanese organisations within this framework, as their cultures contain
               elements of each extreme. As was described in Chapter 3, Japanese companies have
               very tightly-structured jobs, especially at the lower levels; they are very hierarchical
               and deferential, whilst at the same time achieving high levels of motivation, initiative
               and creativity in problem-solving. They tend to be heavily group/team-orientated,
               with such teams having a great deal of autonomy.
                  This difficulty of where to place Japan highlights one of the main criticisms of the
               various attempts to categorise culture, which is that they appear to give insufficient
               weight to the influence of national cultures on the types of organisational culture that
               predominate in particular countries. Increasingly over the last decade, and to an
               extent before, strong reservations have been expressed about the ethnocentric nature
               of organisational theory; the main reservation concerns the generalisability and appli-
               cability of management theories developed in the West, predominately the USA, to



                                                             Structure
                                         Mechanistic                                 Organic



                                            Role                                       Task
                                                              Culture



               Figure 5.2 A structure–culture continuum
The cultural perspective   175

the very different cultures and societies of Asia, the middle East and Africa (Deresky,
2000; Ho, 1976; Rosenzweig, 1994; Sullivan and Nonaka, 1986; Thomas, 2003;
Trompenaars, 1993). Given that the various typologies of organisational culture all
come from a Western, and predominantly North American, perspective, this is an
especially serious criticism.
   One of the most comprehensive and influential studies of the differences between
national cultures was carried out by Hofstede (1980, 1990). He suggested that
national cultures can be clustered along the lines of their similarities across a range of
cultural variables, as follows:
■   the prevailing sense of individualism or collectivity in each country;
■   the power distance accepted in each country (the degree of centralisation, auto-
    cratic leadership and number of levels in the hierarchy);
■   the degree to which uncertainty is tolerated or avoided.
Based on these cultural variables, as Exhibit 5.5 shows, Hofstede classified industri-
alised countries into four broad clusters. However, his findings have to be treated with
some caution as his sample was drawn from just one multi-national company, IBM.

    Exhibit 5.5       Hofstede’s national clusters

    1. Scandinavia (primarily Denmark, Sweden and Norway): these cultures are based upon
       values of collectivity, consensus and decentralisation.
    2. West Germany (prior to unification), Switzerland and Austria: these are grouped together
       largely as valuing efficiency – the well-oiled machine – and seeking to reduce uncertainty.
    3. Great Britain, Canada, the USA, New Zealand, Australia and the Netherlands: these lie
       somewhere between 1 and 2 but cluster on the value they place on strong individuals
       and achievers in society.
    4. Japan, France, Belgium, Spain and Italy: these are clustered on bureaucratic tendencies –
       the pyramid structure – favouring a large power distance.



   Wilson (1992: 90) observed that ‘The similarity of the factors in [Hofstede’s]
national culture study to Handy’s (1986) four organizational forms is striking.’
However, whilst one can see that Scandinavia can be classed as exhibiting task culture
characteristics, and the group containing West Germany can be seen as exhibiting role
culture characteristics, the other two groupings (Great Britain et al and Japan et al)
are more difficult to place. Rather than placing Great Britain and the USA in one cat-
egory, according to where they are positioned on Hofstede’s dimensions, it might be
more accurate to follow Handy’s own lead and say that both task and role cultures
are prevalent. This still leaves us with where to place Japan et al. From the point of
view of Hofstede’s dimensions, Japan appears to exhibit characteristics of Handy’s
role culture. However, as pointed out above, this is only part of the story of Japanese
organisational life.
   The impact of different national cultures on the management of organisations will
be returned to in Chapter 16 when discussing globalisation. However, for now, it is
important to recognise that Handy’s categorisation of types of culture is very useful,
in that it takes us beyond vague generalisations and gives us a picture of differing
176   Chapter 5 · Culture, power, politics and choice

               cultures. Nonetheless, like the other work discussed, it serves to highlight both the
               difficulty of defining cultures clearly, and also the profound implications of the cul-
               tural approach to organisations. These implications fall under four main headings.
                  Firsly, Deal and Kennedy (1982) argued that behaviour, instead of reacting directly
               to intrinsic and extrinsic motivators, is shaped by shared values, beliefs and assump-
               tions about the way an organisation should operate, how rewards should be
               distributed, the conduct of meetings, and even how people should dress.
                  Secondly, if organisations do have their own identities, personalities or cultures, are
               there particular types of cultural attributes that are peculiar to top-performing organi-
               sations? As discussed in Chapter 3, the Culture–Excellence school reply to this
               question with a resounding yes!
                  Thirdly, Sathe (1983) argued that culture guides the actions of an organisation’s
               members without the need for detailed instructions or long meetings to discuss how
               to approach particular issues or problems; it also reduces the level of ambiguity and
               misunderstanding between functions and departments. In effect, it provides a
               common context and a common purpose for those in the organisation. However, this
               is only the case when an organisation possesses a strong culture, and where the mem-
               bers of the organisation have internalised it to the extent that they no longer question
               the legitimacy or appropriateness of the organisation’s values and beliefs.
                  Fourthly, one of the most important implications is that, as Barratt (1990: 23)
               claimed, ‘values, beliefs and attitudes are learnt, can be managed and changed and are
               potentially manipulable by management’. O’Reilly (1989) is one of those who clearly
               believes this is the case. He argued that it is possible to change or manage a culture by
               choosing the attitudes and behaviours that are required, identifying the norms or
               expectations that promote or impede them, and then taking action to create the
               desired effect.
                  This last implication is particularly contentious, with many writers supporting this
               view but others arguing strongly against it.


          ■ Changing organisational culture: the arguments in favour
               That cultures do change is not in question. No organisation’s culture is static: as the
               external and internal factors that influence culture change, so culture will change. But
               given that culture is locked into the beliefs, values and norms of each individual in the
               organisation, and because these are difficult constructs to alter, this type of organic
               cultural change will be slow, unless perhaps there is some major shock to the organi-
               sation (Boddy and Buchanan, 2002; Brown, 1995; Burnes, 1991; Keuning, 1998;
               Schein, 1985). This in itself may not be problematic for organisations, provided that
               other factors change in an equally slow fashion. However, the argument put forward
               by the proponents of Culture–Excellence is that a successful culture is one based on
               values and assumptions appropriate to the environment in which it operates. In addi-
               tion, like Handy (1986), Allaire and Firsirotu (1984) argued that, to operate
               effectively and efficiently, an organisation’s culture needs to match or be appropriate
               to its structure. Looking at Figure 5.2, we can see that organisations with mechanistic
               structures are likely to operate effectively and efficiently if they have role cultures.
               However, given that an organisation’s environment can change rapidly, as can its
               structure, situations will arise where an organisation’s culture may be out of step with
The cultural perspective   177

changes that are taking place in the environment, structure and practices of the
organisation. In such a case, a company that moves quickly to replace a mechanistic
structure with a more organic structure to cope with increasing uncertainty in its
environment, might find that the change does not improve its effectiveness and effi-
ciency because it had been unable to change from a role to a task culture with equal
speed. As Handy (1986: 188) commented:

 Experience suggests that a strong culture makes a strong organisation, but does it matter
 what sort of culture is involved? Yes, it does. Not all cultures suit all purposes or people.
 Cultures are founded and built over the years by the dominant groups in an organisation.
 What suits them and the organisation at one stage is not necessarily appropriate for ever –
 strong though that culture may be.


Flynn (1993) described how, with the introduction of a more market-orientated phi-
losophy, such a situation arose across organisations in the public sector in the UK.
Many similar cases can be found in the private sector (see Boddy, 2002; Brown, 1995;
Cummings and Worley, 2001; Dobson, 1988; Industrial Society, 1997). In such situa-
tions, rather than facilitating the efficient operation of the organisation, its culture
may obstruct it.
   Therefore, for a variety of reasons, organisations may decide that their existing cul-
ture is inappropriate or even detrimental to their competitive needs. In such a
situation, many organisations decide to change their culture. A survey of the UK’s
1,000 largest public and private sector organisations, carried out in 1988 by Dobson
(1988), revealed that more than 250 of them had been involved in culture change
programmes in the preceding five years. A similar survey by the Industrial Society in
1997, covering over 4,000 organisations, found that over 90 per cent of respondents
were either going through or had recently gone through a culture change programme
(Industrial Society, 1997). The survey found that culture change was promoted
through a variety of methods including strategic planning, training, organisation
redesign to promote teamwork, and changes to appraisal systems. Based on his 1988
survey, Dobson states that the organisations involved sought to change culture by
shaping the beliefs, values and attitudes of employees.
   Derived from the actions taken by these companies, Dobson identified a four-step
approach to culture change:
Step 1 – change recruitment, selection and redundancy policies to alter the composi-
tion of the workforce so that promotion and employment prospects are dependent on
those concerned possessing or displaying the beliefs and values the organisation
wishes to promote.
Step 2 – reorganise the workforce to ensure that those employees and managers dis-
playing the required traits occupy positions of influence.
Step 3 – effectively communicate the new values. This is done using a variety of meth-
ods such as one-to-one interviews, briefing groups, quality circles, house journals, etc.
However, the example of senior managers exhibiting the new beliefs and values is
seen as particularly important.
Step 4 – change systems, procedures and personnel policies, especially those con-
cerned with rewards and appraisal.
178   Chapter 5 · Culture, power, politics and choice

                  Drawing on the work of wide range of researchers, Cummings and Worley (2001)
               offered their own six ‘practical’ steps for achieving cultural change (see Exhibit 5.6).
               Though wider in scope in that their approach sets change in a strategic context, the
               actual mechanics are very similar to those adopted by the organisations Dobson studied.


                  Exhibit 5.6         Guidelines for changing culture

                  1. Formulate a clear strategic vision. Effective cultural change should start from a clear
                     vision of the firm’s new strategy and of the shared values and behaviour needed to make
                     it work. This vision provides the purpose and direction for cultural change.
                  2. Display top-management commitment. Cultural change must be managed from the
                     top of the organisation. Senior managers and administrators need to be strongly
                     committed to the new values and the need to create constant pressure for change.
                  3. Model culture change at the highest level. Senior executives must communicate the
                     new culture through their own actions. Their behaviours need to symbolise the kind of
                     values and behaviours being sought.
                  4. Modify the organisation to support organisational changes. Cultural change must be
                     accompanied by supporting modifications in organisational structure, human resource
                     systems, information and control systems, and management style. These organisational
                     features can help to orientate people’s behaviours to the new culture.
                  5. Select and socialise newcomers and terminate deviants. One of the most effective
                     methods for changing culture is to change organisational membership. People can be
                     selected in terms of their fit with the new culture, and provided with an induction clearly
                     indicating desired attitudes and behaviour. Existing staff who cannot adapt to the new
                     ways may have their employment terminated, for example, through early retirement
                     schemes. This is especially important in key leadership positions, where people’s actions
                     can significantly promote or hinder new values and behaviours.
                  6. Develop ethical and legal sensitivity. Most cultural change programmes attempt to
                     promote values that emphasise employee integrity, control, equitable treatment and job
                     security. However, if one of the key steps in pursuing culture change is to replace existing
                     staff with new recruits, not only can this send out the wrong message to newcomers and
                     the remaining staff but, depending how staff are selected for replacement, it could also
                     contravene employment laws. Therefore, organisations need to be especially aware of
                     these potential ethical and legal pitfalls.
                  Source: adapted from Cummings and Worley (2001: 509–11)




                  Many other writers advocating culture change adopt a similar approach. Some of
               these, including Peters and Waterman (1982) with their eight steps to excellence, take
               a very prescriptive line. Others, though, appear to underestimate greatly the difficulty
               involved in changing culture. An example of this is an article in Management Today
               (Egan, 1994) which took just four pages to show how organisations could quickly,
               and with apparent ease, identify and change their cultures. Regardless of how its sup-
               porters interpret or apply it, however, this type of generic approach to culture has
               been criticised as being too simplistic, and putting forward recommendations which
               are far too general to be of use to individual organisations (Brown, 1995; Gordon,
               1985; Hassard and Sharifi, 1989; Nord, 1985; Uttal, 1983).
The cultural perspective   179

   There are other writers who, whilst sharing the belief that culture can be changed,
take a more considered view. Brown (1995) warns that organisations must be sure
that the problems they wish to address through cultural change are actually caused by
the existing culture. He warns that there is a tendency to assume that culture is the
root cause of organisational problems, when in fact they might arise from inappropri-
ate organisational structure. He also points out that senior managers may use the
issue of culture to redirect blame for poor performance away from themselves and
onto the rest of the organisation. In addition, Brown warns against taking an overly
simplistic view of culture by believing that organisations have a single unitary culture,
or by assuming that all employees can be made to share a single purpose or vision.
This was also a point made by Hatch (1997) on behalf of the postmodernists. One of
the most influential writers on the subject of culture, Schein (1985), takes a similarly
cautious view. He warns that before any attempt is made to change an organisation’s
culture, it is first necessary to understand the nature of its existing culture and how
this is sustained. According to Schein, this can be achieved by analysing the values
that govern behaviour, and uncovering the underlying and often unconscious assump-
tions that determine how those in the organisation think, feel and react. Difficult
though he acknowledges this to be, he argues that it can be achieved by:
■    analysing the process of recruitment and induction for new employees;
■    analysing responses to critical incidents in the organisation’s history, as these are
     often translated into unwritten, but nevertheless very strong, rules of behaviour;
■    analysing the beliefs, values and assumptions of those who are seen as the
     guardians and promoters of the organisation’s culture;
■    discussing the findings from the above with staff in the organisation, and paying
     especial attention to anomalies or puzzling features which have been observed.
Schein’s approach, therefore, is to treat the development of culture as an adaptive and
tangible learning process. His approach emphasises the way in which an organisation
communicates its culture to new recruits. It illustrates how assumptions are translated
into values and how values influence behaviour. Schein seeks to understand the mech-
anisms used to propagate culture, and how new values and behaviours are learned.
Once these mechanisms are revealed, he argues, they can then form the basis of a
strategy to change the organisation’s culture.
   In a synthesis of the literature on organisational culture, Hassard and Sharifi
(1989) proposed a similar approach to that advocated by Schein. In particular, they
stress two crucial aspects of culture change:

    Before a major [cultural] change campaign is commenced, senior managers must understand
    the implications of the new system for their own behaviour: and senior management must be
    involved in all the main stages preceding change.
      In change programmes, special attention must be given to the company’s ‘opinion leaders’.
                                                                 (Hassard and Sharifi, 1989: 11)

Schwartz and Davis (1981), on the other hand, adopted a different stance with regard
to culture. They suggest that, when an organisation is considering any form of change,
it should compare the strategic significance (the importance to the organisation’s future)
of the change with the cultural resistance that attempts to make the particular change
will encounter. They term this the ‘cultural risk’ approach. They offer a step-by-step
180   Chapter 5 · Culture, power, politics and choice

               method for identifying the degree of cultural risk involved in any particular change
               project. From this, they argue, it is then possible for an organisation to decide with a
               degree of certainty whether to ignore the culture, manage round it, attempt to change
               the culture to fit the strategy, or change the strategy to fit the culture. Although
               Schwartz and Davis’ method relies heavily on managerial judgement, they maintain that
               it constitutes a methodical approach to identifying, at an early stage, the potential
               impact of strategic change on an organisation’s culture, and vice versa.
                  It should, of course, be pointed out that though Schein’s approach and Schwartz
               and Davis’ approach are different, this does not mean they are in conflict or are not
               compatible. Indeed, both could be considered as different aspects of the same task:
               deciding whether culture needs to be changed, and, if it does, in what way.
                  No one should dispute the difficulty of changing an organisation’s culture. The
               work of Schein (1985), Schwartz and Davis (1981), Cummings and Huse (1989) and
               Dobson (1988) provides organisations with the guidelines and methods for evaluating
               the need for and undertaking cultural change. Schein’s work shows how an organisa-
               tion’s existing culture, and the way it is reinforced, can be revealed. Schwartz and
               Davis’ work shows how the need for cultural change can be evaluated and the neces-
               sary changes identified. Finally, the work of Cummings and Huse (1989) and Dobson
               (1988) shows how cultural change can be implemented.


          ■ Changing organisational culture: some reservations
               One of those who sounds a cautious note regarding the feasibility or advisability of cul-
               ture change is Edgar Schein. Though he believes that culture can be changed, he also
               argues that there is a negative side to creating (or attempting to create) a strong and
               cohesive organisational culture (Schein, 1984, 1985). Such shared values, particularly
               where they have been seen to be consistently successful in the past, make organisations
               resistant to certain types of change or strategic options, regardless of their merit.
                  Schein, in conversation with Luthans (Luthans, 1989), was also critical of the idea that
               culture change can be achieved by a top-down, management-led approach. Schein (1989)
               appears to advocate a contingency or context-specific view of culture. Taking an organi-
               sational life-cycle approach, he argues that an organisation may need a strong culture in
               its formative years to hold it together whilst it grows. However, it may reach a stage
               where it is increasingly differentiated geographically, by function and by division. At this
               stage, managing culture becomes more a question of knitting together the warring fac-
               tions and subcultures. In such a case, a strong culture may outlive its usefulness.
                  Salaman (1979) also pointed out that whilst there may be a strong or dominant cul-
               ture in an organisation, there will also be subcultures, as in society at large. These may
               be peculiar to the organisation or may cut across organisations. Examples of the latter
               are groups such as doctors and lawyers who have their own professional cultures
               which extend beyond the organisations who employ them. Davis (1985) examined the
               culture of white- and blue-collar lower-level employees. He found that not only do
               these groups have their own distinctive cultures, but these can often be in conflict with
               the dominant (managerial) culture of their organisation. Therefore, subcultures exist in
               a complex and potentially conflicting relationship with the dominant culture. If that
               dominant culture is seen by some groups to have lost its appropriateness (and thus
               legitimacy), then potential conflicts can become actual conflicts. The reverse can also
               be the case; cultural values and methods of operation which one group adopts may be
The cultural perspective   181

seen as being out of step with ‘the way we’ve always done things’. This in turn can
lead to an undermining of the authority of managers and specialists – endangering the
efficient operation of the organisation (Morieux and Sutherland, 1988).
   Uttal (1983) is another who expressed caution with regard to the difficulties and
advisability of culture change. In particular, he observed that even where it is success-
ful, the process can take anywhere from 6 to 15 years. Meyer and Zucker (1989)
went further, arguing that whilst managing cultural change may result in short-term
economic benefits, in the longer term it may result in stagnation and demise. Another
difficulty in achieving culture change is that, as Brown (1995: 153) notes:

 ... most employees in an organisation have a high emotional stake in the current culture.
 People who have been steeped in the traditions and values of the organisation and whose
 philosophy of life may well be caught up in the organisation’s cultural assumptions will
 experience considerable uncertainty, anxiety and pain in the process of change ... Even if
 there are personal gains to be made from altering the habits of a lifetime these are likely to
 be seen as potential or theoretical only, as against the certainty of the losses.


Therefore, any attempt to change an organisation’s culture is inevitably going to be
met with resistance. Sometimes this will be open and organised; often it will be covert
and instinctive with people trying to hold on to old ways and protect the old order.
Unlike many other forms of change, the main resistance may well come from middle
and, especially, senior managers who see their status, power and personal beliefs chal-
lenged. This is a point made by Cummings and Worley (2001), who observed that
culture change programmes often result in or require the removal of managers from
key leadership positions.
   As can be seen, there are many writers who draw attention to the difficulties inher-
ent in attempting culture change; however, there are also writers who believe that
culture cannot be changed or managed at all. Meek (1988: 469–70) commented that:

 Culture as a whole cannot be manipulated, turned on or off, although it needs to be recog-
 nised that some [organisations] are in a better position than others to intentionally influence
 aspects of it ... culture should be regarded as something an organisation ‘is’, not something
 it ‘has’: it is not an independent variable nor can it be created, discovered or destroyed by
 the whims of management.

In a similar vein, Filby and Willmott (1988) also questioned the notion that manage-
ment has the capacity to control culture. They point out that this ignores the ways in
which an individual’s values and beliefs are conditioned by experience outside the
workplace – through exposure to the media, through social activities, as well as
through previous occupational activities. Postmodernists, as mentioned in the previ-
ous chapter, take a similar view. Hatch (1997: 235) probably speaks for many of
them when she gives this advice:

 Do not think of trying to manage culture. Other people’s meanings and interpretations are
 highly unmanageable. Think instead of trying to culturally manage your organization, that
 is, manage your organization with cultural awareness of the multiplicity of meanings that
 will be made of you and your efforts.
182   Chapter 5 · Culture, power, politics and choice

                  A further reservation expressed by a number of writers relates to the ethical issues
               raised by attempts to change culture. Van Maanen and Kunda (1989) argued that
               behind the interest in culture is an attempt by managers to control what employees
               feel as well as what they say or do. Their argument is that culture is a mechanism for
               disciplining emotion – a method of guiding the way people are expected to feel. Seen
               in this light, attempts to change culture can be conceived of as Taylorism of the mind.
               Frederick Taylor sought to control behaviour by laying down and enforcing strict
               rules about how work should be carried out. Van Maanen and Kunda in effect argue
               that culture change programmes attempt to achieve the same end through a form of
               mind control. Willmott (1995) expresses similar concerns. He believes that the over-
               riding aim of culture change is to win the ‘hearts and minds’ of employees by
               achieving control over the ‘employee’s soul’. Watson (1997: 278) concludes that:

                 Employers and managers engaging in these ways with issues of employees’ self-identities and
                 the values through which they judge the rights and wrongs of their daily lives must be a
                 matter of serious concern. To attempt to mould cultures – given that culture in its broad
                 sense provides the roots of human morality, social identity and existential security – is
                 indeed to enter ‘deep and dangerous waters’.



          ■ Changing organisational culture: conflicts and choices
               As in so much else to do with organisations, there is no agreement amongst those
               who study culture as to its nature, purpose or malleability. Certainly, few writers
               doubt its importance, but beyond that there is little agreement. The result, to quote
               Brown (1995: 5), is that we are presented with ‘an embarrassment of definitional
               riches’. The Culture–Excellence proponents argue that there is only one form of cul-
               ture that matters in today’s environment – strong and flexible – and that
               organisations should adopt it quickly or face the consequences. The proponents of the
               Japanese approach to management and the Organisational Learning camp adopt a
               similar, though less strident, view. Schein (1984, 1985, 1989) agreed that culture is
               important and that in certain cases a strong culture is desirable. However, in other sit-
               uations, shared values and strong cultures may have a negative effect by stifling
               diversity and preventing alternative strategies arising. He also doubts that managers
               acting in isolation from the rest of an organisation have the ability themselves to
               change the existing culture or impose a new one. Salaman (1979) also drew attention
               to the presence and role of subcultures, particularly their potential for creating con-
               flict. Meek (1988) took the view that culture is not amenable to conscious managerial
               change programmes at all. The postmodernists adopt a similar view. Though they
               consider organisational culture to be important, they are sceptical of attempts to
               manipulate and change culture, believing that the outcomes of such attempts are
               unpredictable and can alienate rather than motivate employees – remember Hatch’s
               (1997: 235) warning not even to ‘think of trying to manage culture’.
                   Despite the lack of consensus amongst writers, there are two main conclusions we
               can draw from the above review of the culture literature. Firstly, in the absence of
               unambiguous guidelines on organisational culture, managers must make their own
               choices based on their own circumstances and perceived options as to whether to
               attempt to change their organisation’s culture.
The power–politics perspective   183

           Secondly, in the absence of strong or appropriate cultures that bind their members
        together in a common purpose and legitimate and guide decision-making, managers
        may find it difficult either to agree amongst themselves or to gain agreement from
        others in the organisation. As Robbins (1987) argued, in such a situation, there is a
        tendency for conflict and power battles to take place.
           Therefore, in understanding how organisations operate and the strengths and
        weaknesses of the theories we have been discussing in the previous chapters, it is nec-
        essary to examine the power–politics perspective on organisations.


The power–politics perspective

     ■ Political behaviour in organisations
        The cultural perspective on organisational life reinforces the argument developed in
        previous chapters that organisations are not rational entities where everyone sub-
        scribes to, and helps to achieve, the organisation’s overarching goals. The
        power–politics perspective puts forward a similar view, arguing that organisations
        often act irrationally, that their goals and objectives emerge through a process of
        negotiation and influence, and that they are composed of competing and shifting
        coalitions of groups and individuals (Brown, 1995; Buchanan and Badham, 1999;
        Mintzberg et al, 1998; Robbins, 1986, 1987). This perspective began to emerge
        strongly in the late 1970s and early 1980s, and is especially associated with Jeffrey
        Pfeffer’s (1981) book Power in Organizations. Before then, as Gandz and Murray
        (1980) discovered when they reviewed the literature on organisational politics, there
        was very little general interest in the topic, and very few publications on it.
           Nevertheless, of the early work in the field, Lindblom’s (1959) work on the ‘science
        of muddling through’ and Cyert and March’s (1963) book, A Behavioral Theory of
        the Firm, can be said to have really laid the basis for the later explosion of interest in
        power and politics in organisations. Writing from the viewpoint of public sector
        organisations, Lindblom argued that political constraints on policy make a rationalist
        approach to decision-making impossible. Cyert and March extensively developed
        Lindblom’s work, showing that private sector firms were no less political entities than
        public sector organisations. The intention behind their work was to provide a better
        understanding of decision-making by supplementing existing theories, which tended
        to focus on market factors, with an examination of the internal operation of the firm.
        Cyert and March characterise firms as competing and shifting coalitions of multiple
        and conflicting interests, whose demands and objectives are constantly, but imper-
        fectly, reconciled and where rationality is limited or bounded by uncertainty over
        what is wanted and how to achieve it. Under such circumstances, managers ‘satisfice’:
        rather than searching for the best solution, they select one that is satisfactory and suf-
        ficient (Simon, 1957).
           Cyert and March’s work on the political dimension of decision-making and the
        nature of organisational life now forms part of the received wisdom on organisational
        behaviour (Mallory, 1997). This is not to refute or marginalise the role of organisa-
        tional culture. As Handy (1993) observed, the extent to which agreement exists about
        the tasks an organisation undertakes, how it undertakes them, and the extent to
184   Chapter 5 · Culture, power, politics and choice

               which members of the organisation are committed to achieving them, will be affected
               by the strength and the perceived legitimacy or suitability of the organisation’s cul-
               ture. Willcocks (1994: 31) took the view that diverse interests are part of
               organisational culture. They include, he argues, ‘for example, the goals, values and
               expectations of the organizational participants and have been described as cognitive
               maps or personal agendas’. The importance of the power–politics perspective is that it
               shows that, even where a strong culture may be present, the cohesiveness, willingness
               and stability of an organisation’s members is unlikely to be uniform either across an
               organisation or over time. Rather the degree of cooperation and commitment they
               exhibit will vary with the degree to which they perceive the goals they are pursuing as
               broadly consistent with their own interests (Mullins, 1993; Rollinson, 2002).
               Therefore, as Pfeffer (1978: 11–12) commented:

                 It is difficult to think of situations in which goals are so congruent, or the facts so clear-cut
                 that judgment and compromise are not involved. What is rational from one point of view is
                 irrational from another. Organizations are political systems, coalitions of interests, and
                 rationality is defined only with respect to unitary and consistent ordering of preferences.


               It might be comforting to believe that individuals and groups within organisations are
               supportive of each other, that they work in a harmonious and cooperative fashion.
               Such a non-political perspective portrays employees as always behaving in a manner
               consistent with the interests of the organisation. In contrast, as Robbins (1986: 283)
               remarked, ‘a political view can explain much of, what may seem to be, irrational
               behaviour in organizations. It can help to explain, for instance, why employees with-
               hold information, restrict output, attempt to “build empires” ... ’.
                  Handy (1986) also observed the tendency for individuals and groups to pursue
               courses of action that promote their interests, regardless of the organisation’s formal
               goals and objectives. He notes that where individuals perceive that the actual or pro-
               posed goals of the organisation or the tasks they are asked to perform are out of step
               with their own interests, they will seek where possible to bring the two into line. In
               some cases, individuals and groups may be persuaded to change their perceptions; in
               others, they may seek to change or influence the goals or tasks. It is this phenomenon
               of individuals and groups, throughout an organisation, pursuing differing interests,
               and battling with each other to shape decisions in their favour, that has led many
               commentators to characterise organisations as political systems (Buchanan and
               Badham, 1999; Dawson, 2003; Mintzberg et al, 1998; Morgan, 1986; Pettigrew,
               1985, 1987; Pfeffer, 1981, 1992).
                  Zaleznik (1970) stated that where there are scarce resources (which is the case in
               most organisations), the psychology of scarcity and comparison take over. In such sit-
               uations, possession of resources becomes the focus for comparisons, the basis for
               self-esteem and, ultimately, the source of power. Such situations will see the emer-
               gence not only of dominant coalitions but also, Zaleznik argues, of unconscious
               collusion based on defensive reaction. Therefore, whilst some individuals will perceive
               their actions as ‘political’ or self-interested, others may act in the same manner, but
               believe they are pursuing the best interests of the organisation.
                  Drory and Romm (1988) argued that those in managerial positions are less likely
               than those in non-managerial positions to define (or recognise) their actions as politi-
The power–politics perspective   185

   cal. This may be explained by the findings from a survey of 428 managers carried out
   by Gandz and Murray (1980). They found that managers are more involved in politi-
   cal behaviour, and therefore tend to see it as a typical part of organisational life. If
   this is the case, it could be argued that the more individuals and groups are involved
   in political behaviour, the more it becomes the norm, and they become blind to its
   political nature and see it merely as standard practice. Those less involved in such
   behaviour, on the other hand, recognise its political nature because it stands out from
   their normal practices. It is also the case that those lower down the organisation,
   whilst affected by resource allocation decisions, are less likely, on a regular basis, to
   be in a position to influence such decisions. For managers, however, arguing for addi-
   tional resources or allocating existing resources is the normal currency of everyday
   life. This is reflected in Gandz and Murray’s survey, where 89 per cent of respondents
   thought that successful executives had to be good politicians. Despite this, over
   50 per cent of respondents also thought that organisations would be happier places if
   they were free of politics, and a similar number thought that political behaviour was
   detrimental to efficiency. As Kanter (1979) and Pfeffer (1992) note, this ambivalent
   attitude, i.e. believing that political behaviour is necessary but deploring its use, is rife
   in organisations.
       As mentioned in Chapter 4, postmodernists take a very different view of power
   and politics to that of most other writers on organisations. They are not greatly con-
   cerned with the way individuals and groups acquire and hold on to power as such.
   Instead, they focus on the relationship between power and knowledge, and on the
   way that power is used to promote particular views of reality and to legitimate partic-
   ular forms of knowledge in organisations.


■ Power and politics: towards a definition
   Though it is relatively easy to provide simple definitions of power (the possession of
   position and/or resources) and politics (the deployment of influence/leverage), it is
   more difficult to distinguish between the two, as was shown by Drory and Romm
   (1988). They argue that the two concepts are often used interchangeably and that the
   difference between the two has never been fully settled. Indeed, a brief examination of
   each shows the difficulty, and perhaps danger, in separating them. First, however, it is
   also necessary to understand the difference between power and authority.
      Robbins (1987: 186) drew an important distinction between them:

    ... we defined authority as the right to act, or command others to act, toward the attainment
    of organizational goals. Its unique characteristic, we said, was that this right had legitimacy
    based on the authority figure’s position in the organization. Authority goes with the job. ...
    When we use the term power we mean an individual’s capacity to influence decisions. ... the
    ability to influence based on an individual’s legitimate position can affect decisions, but one
    does not require authority to have such influence.


   In support of his view, Robbins quotes the example of high-ranking executives’ secre-
   taries, who may have a great deal of power, by virtue of their ability to influence the
   flow of information and people to their bosses, but have very little actual authority.
   Pfeffer (1992), whilst agreeing with this view, points out that power can stem from
186   Chapter 5 · Culture, power, politics and choice

               three sources: control over information; formal authority to act; and control over
               resources. However, he believes this latter source of power is particularly important.
               We must, Pfeffer (1992: 83) argues, recognise the truth of the ‘New Golden Rule: the
               person with the gold makes the rules.’
                  On the other hand, Robbins (1987: 194) defines organisational politics as the:

                 ... efforts of organizational members to mobilize support for or against policies, rules, goals,
                 or other decisions in which the outcome will have some effect on them. Politics, therefore, is
                 essentially the exercise of power.


               Robbins’ argument, then, is that power is the capacity to influence decisions whilst
               politics is the actual process of exerting this influence. This view, that politics is
               merely the enactment of power, is held by many writers. Gibson et al (1988: 44), for
               example, stated that organisational politics comprises ‘those activities used at all
               levels to acquire, develop or use power and other resources to obtain individual
               choices when there is uncertainty or disagreement about choices’. This view is also
               central to Pfeffer’s (1981: 7) widely-accepted definition, that organisational politics:

                 … involves those activities taken within organizations to acquire, develop and use power
                 and other resources to obtain one’s preferred outcome in a situation where there is uncer-
                 tainty or descensus about choices.


                  Pfeffer, like many writers, refers to organisational politics as games. In his major
               work Power in Organizations (Pfeffer, 1981), he took the view that decisions in
               organisations are the result of games among players with different perceptions and
               interests. This was a theme developed by Mintzberg (1983) in his comprehensive
               review of power and politics in organisations. He lists 13 political games that are
               common in organisations, the key ones being games to resist authority, games to
               counter resistance, games to build power bases, games to defeat rivals, and games to
               change the organisation.
                  Like all games, political ones have particular tactics associated with them. Exhibit
               5.7 lists the seven most common ploys used by managers when seeking to influence
               superiors, equals and subordinates.


                  Exhibit 5.7           Political ploys

                  ■   Reason – facts and information are used selectively to mount seemingly logical or
                      rational arguments.
                  ■   Friendliness – the use of flattery, creation of goodwill, etc., prior to making a request.
                  ■   Coalition – joining forces with others so as to increase one’s own influence.
                  ■   Bargaining – exchanging benefits and favours in order to achieve a particular outcome.
                  ■   Assertiveness – being forceful in making requests and demanding compliance.
                  ■   Higher authority – gaining the support of superiors for a particular course of action.
                  ■   Sanctions – using the promise of rewards or the threat of punishment to force compliance.
                  Source: from Kipnis et al (1980, 1984), Schilit and Locke (1982)
The power–politics perspective   187

      Robbins (1986) observed that the most popular tactic or ploy is the selective use of
   reason, regardless of whether the influence was directed upwards or downwards.
   Although cloaked in reason, arguments and data are deployed in such a way that the
   outcome favoured by those using the tactic is presented in a more favourable light
   than the alternatives. Therefore, though reason may be deployed, it is not done so in
   an unbiased or neutral fashion; it is used as a screen to disguise the real objective of
   the exercise. In deciding which tactic to use, Kipnis et al (1984) identified four contin-
   gency variables that affect the manager’s choice: the manager’s relative power; the
   manager’s objectives in seeking to influence others; the manager’s expectations of the
   target person’s/group’s willingness to comply; and the organisation’s culture.
      Having gained a clearer picture of power and politics, we can now move on to
   examine one of the central issues that arises from this: the distinction between the
   legitimate and illegitimate use of power and politics.


■ Power, politics and legitimacy
   Thompkins (1990) firmly believed that the use of politics is a direct contravention of
   or challenge to the legitimate rules of an organisation. Many, however, see organisa-
   tional politics as existing in a grey area between prescribed and illegal behaviour
   (Drory and Romm, 1988). Porter et al (1983) differentiated between three types of
   organisational behaviours: prescribed, discretionary and illegal. They believe that
   political behaviour falls within the discretionary rather than the illegal category. The
   most common view is that the use of politics in organisations can best be described as
   non-sanctioned or informal or discretionary behaviour, rather than behaviour that is
   clearly prohibited or illegal (Farrell and Petersen, 1983; Mayes and Allen, 1977). This
   definition of politics helps to distinguish between the formal and legitimate use of
   officially-sanctioned power by authorised personnel, and power that is exercised
   either in an illegitimate manner by authorised personnel or used by non-authorised
   personnel for their own ends.
      Most organisations and many writers see political behaviour as dysfunctional
   (Drory and Romm, 1988). Batten and Swab (1965), Pettigrew (1973) and Porter
   (1976) believed that political behaviour goes against and undermines formal organi-
   sational goals and interests. Thompkins (1990), though, argued that political
   manoeuvring in organisations is due to a failure by senior managers to set and imple-
   ment coherent and consistent goals and policies in the first place. This results in
   uncertainties, which in turn lead to conflict between groups and individuals. In such a
   situation, Thompkins (1990: 24) argues:

    Management is then left without top level guidance to run company operations. They will,
    then, by their own nature of survival, over a period of time, make decisions that will perpet-
    uate their own safety and security. This is the beginning of political power, where legitimate
    discipline begins to decline and illegitimate discipline begins to strangle the organisation. In
    short, the tail begins to wag the dog. ‘Politics’ in this form is created by the neglect of top
    executive management.


      Pfeffer (1981) took a different view of organisational politics. Rather than political
   behaviour arising from a lack of clear-cut goals and policies, he suggests that the con-
   struction of organisational goals is itself a political process. Nevertheless, this does
188   Chapter 5 · Culture, power, politics and choice

               not always mean that political behaviour is detrimental to organisational effective-
               ness. Mintzberg (1983) maintains that, when used in moderation, political games can
               have a healthy effect by keeping the organisation on its toes. Mayes and Allen (1977)
               took a similar view. Pascale (1993) went further, putting forward the view that con-
               flict and contention are necessary to save an organisation from complacency and
               decline. The argument that the use of politics and power are central to the effective
               running of organisations has been most strongly put by Pfeffer (1992: 337–8) in his
               book Managing with Power, in which he argues that:

                   Computers don’t get built, cities don’t get rebuilt, and diseases don’t get fought unless advo-
                   cates for change learn how to develop and use power effectively. … In corporations, public
                   agencies, universities, and government, the problem is how to get things done, how to move
                   forward, how to solve the many problems facing organizations of all sizes and all types.
                   Developing and exercising power requires both will and skill. It is the will which often
                   seems to be missing.


                  For Pfeffer, will and skill are exercised through the pursuit of a focused and consis-
               tent personal agenda which is implemented through a seven-step programme (see
               Exhibit 5.8). However, Mintzberg (1983) sounds a note of warning. He argues that if
               too many people pursue their own personal agenda, or if the use of power and poli-
               tics becomes too aggressive and pervasive, it can turn the whole organisation into a
               political cauldron and divert it from its main task.

                    Exhibit 5.8           The use of power and politics

                    1. Decide what your goals are, what you are trying to accomplish.
                    2. Diagnose patterns of dependence and interdependence; what individuals are influential
                       and important in your achieving your goal?
                    3. What are their points of view likely to be? How will they feel about what you are trying
                       to do?
                    4. What are their power bases? Which of them is more influential in the decision?
                    5. What are your bases of power and influence? What bases of influence can you develop
                       to gain more control over the situation?
                    6. Which of the various strategies and tactics for exercising power seem most appropriate
                       and are likely to be effective, given the situation you confront?
                    7. Based on the above, choose a course of action to get something done.
                    Source: from Pfeffer (1992: 29)




                  To an extent, the degree to which the balance between positive and negative bene-
               fits is tipped one way or the other in an organisation is dependent on the type of
               power deployed and how it is used. Etzioni (1975) identified three distinct types of
               power used in organisations:
               ■    Coercive power – the threat of negative consequences (including physical sanctions
                    or force) should compliance not be forthcoming.
The power–politics perspective   189

■   Remunerative power – the promise of material rewards as inducements to cooperate.
■   Normative power – the allocation and manipulation of symbolic rewards, such as
    status symbols, as inducements to obey.
Robbins (1986) developed this further by identifying not only types of power but also
the sources of power. To Etzioni’s three types of power, he adds a fourth:
■   Knowledge power – the control of information.

     We can say that when an individual in a group or organization controls unique informa-
     tion, and when that information is needed to make a decision, the individual has
     knowledge-based power.                                           (Robbins, 1986: 273)

Robbins suggests that these four types of power stem from four separate sources: a
person’s position in the organisation; personal characteristics; expertise; and the
opportunity to influence or control the flow of information.
   All four types of power can be and are deployed in organisations. The degree to
which they will be effective is likely to depend upon the source from which they spring.
Coercive power is usually the prerogative of those in senior positions, whilst even quite
junior members of an organisation may, in particular circumstances, control or possess
information that enables them to exert knowledge power. The interesting point to note
is that the use of knowledge power – the selective and biased use of information (often
deployed under the guise of reason) – is shown to be effective in gaining willing compli-
ance and cooperation from those at whom it is directed. According to Huczynski and
Buchanan (2001), however, the favourite influencing strategies are:
■   For influencing up (managers) – the use of reason.
■   For influencing across (co-workers) – the use of friendliness.
■   For influencing down (subordinates) – the use of reason.
This appears to fit in well with the view of many observers that the use of remunera-
tive and coercive power, i.e. the opposite of reason and friendliness, is often
counter-productive because those on the receiving end of such power tend to view it
negatively and resent it (Bachman et al, 1968; Ivancevich, 1970; Robbins, 1986;
Student, 1968).
   This is perhaps why the most detrimental outcomes from the deployment of power
arise when people feel they are being coerced into a particular course of action that
goes against their beliefs or self-interest (Rollinson, 2002). Therefore, irrespective of
the source or type of power, it is perhaps the willingness to use it in situations where
there will be clear winners and losers, and where the covert activities of warring coali-
tions turn into open warfare, that leads to the more dysfunctional and damaging
consequences. Such battles, where groups and individuals fight to influence key deci-
sions and in so doing bolster their own position, especially where the stakes are high,
can end with senior figures either leaving or being forced out of the organisation.
   This was the case with BMW, where the battle over the future of Rover’s
Longbridge plant in the UK led to both Bernd Pischetsrieder, BMW’s Chairman, and
his long-time boardroom rival, Wolfgang Reitzle, BMW’s Marketing Director, being
forced to resign (Gow, 1999a; Gow and Traynor, 1999). A similar situation occurred
with Pehr Gyllenhammar, the man who ran Volvo for more than two decades. His
190   Chapter 5 · Culture, power, politics and choice

               1993 attempt to merge Volvo with Renault, the French state-controlled car company,
               was opposed by a coalition of shareholders and managers, who felt that it was not so
               much a merger of equals as a takeover by Renault. Both shareholders and managers
               felt that in such a situation their interests would be damaged, and a very public power
               struggle ensued, with both sides claiming to act in Volvo’s best interests (Done, 1994).
               Both these cases could be classed as battles between individuals fighting to maintain
               their own power. However, the reality was that in both cases major issues concerning
               the future viability of these organisations were at stake. The irony in Volvo’s case was
               that six years after rejecting a merger with Renault because it was seen as disadvanta-
               geous to the company’s interests, the company sold its car division to Ford Motors,
               whose work practices were seen as the antithesis of all that Volvo held dear. The
               battle for control of the advertising agency Saatchi & Saatchi, which resulted in the
               founders leaving, also shows how a power struggle can leave an organisation dam-
               aged (Barrie, 1995; Donovan, 1995). Another very public example of a power clash
               was the on–off merger of SmithKline Beecham and Glaxo. In 1998, the two compa-
               nies announced that they planned to merge and form the largest pharmaceutical
               company in the world, worth an estimated US$165 billion. However, the merger was
               quickly called off owing to a rumoured clash between SmithKline’s Chief Executive,
               Jan Leschley, and Glaxo’s Chairman, Sir Richard Sykes, over who would run the
               merged company (although given that it later emerged that Mr Leschley’s pay, perks
               and shares package was worth over £90 million, one can understand why he would
               be reluctant to step down in favour of Sir Richard Sykes (Buckingham and Finch,
               1999)). It was only when Leschley and Sykes both announced their retirements that
               the merger proceeded. In some cases, such clashes can become endemic and linger on
               even after the initial cause has long gone. Lonrho is a case in point. After the success-
               ful battle to oust Tiny Rowland from the company he founded and for so long
               dominated, Lonrho was split up and sold off. Yet the political battles for control still
               rumbled on even amongst its demerged parts (Laird, 1998).
                  Clearly, as the above examples show, the deployment of coercive power can be very
               damaging; however, other forms of power can also have adverse effects, though per-
               haps in a more insidious fashion. Thus the use of remunerative power by senior
               managers in the UK is a good example. In the 1990s, executive salaries ran far ahead
               of inflation, the pay of salaried staff and company profits (Business Notebook, 2003).
               This caused much controversy, especially in the now privatised, but once public, utili-
               ties such as gas, electricity and water. In these organisations, executives, the so-called
               ‘fat cats’, used their power to give themselves extremely generous remuneration pack-
               ages; whilst at the same time, they cut jobs and wages for many staff elsewhere in
               their organisations (Smithers, 1995). In general, though, this practice was condoned
               by both shareholders and governments because the UK economy and UK companies
               were doing well and those controlling them could argue that they were being
               rewarded for success. However, the criticisms of fat-cat salaries became more strident
               and widespread after the economy started to falter. Government, shareholders and
               trade unions began to sing with one critical voice that those leading companies were
               being rewarded for failure. Given that amongst FTSE-100 companies the pay of direc-
               tors rose 84 per cent in the three years to 2003 but the stock market value of these
               companies fell by 50 per cent, one can understand the outcry (Finch and Treanor,
               2003). However, this disgruntlement became even more strident when it was realised
The power–politics perspective   191

that some companies were giving big payoffs to executives who appeared to have
failed in their jobs, such as Gerald Corbett, who walked away from Railtrack with a
payoff of £3.7m (Treanor and Finch, 2003). The issue is not so much whether the
way executives distribute rewards in their organisations is fair or not, but the corro-
sive effect such a blatant use of power has on employee morale, shareholder support
and customer loyalty.
   These very public manifestations of power battles in organisations represent merely
the tip of the iceberg. They illustrate the tendency for such battles to be fought under
the banner of ‘the best interests of the organisation’. Political in-fighting, the seeking
of allies, the influencing of decisions, and the protection or promotion of one’s own
or one’s group’s interests are nearly always justified by recourse to the best interests of
the organisation (just as the parties involved in any armed struggle always seem to
justify it on the grounds that they have justice on their side). It is not that the partici-
pants necessarily believe their own propaganda, though often they do; it is that,
without it, they would find it very difficult to justify, to themselves and their allies,
the use of blatantly illegitimate tactics such as challenging, undermining or explicitly
ignoring their organisation’s official goals and policies.
   Therefore, in opposing or promoting a particular decision or development, those
indulging in even a low level of political behaviour rarely openly declare their own
personal interest in the outcome. As Pfeffer (1981) maintained, a major characteristic
accompanying political behaviour is the attempt to conceal its true motive. This can
be seen from Buchanan and Badham’s (1999: 27–9) list of power tactics shown in
Exhibit 5.9. Concealing motives is essential because, as Allen et al (1979), Drory and
Romm (1988) and Frost and Hayes (1979) observed, those involved believe that such
tactics would be judged unacceptable or illegitimate by others in the organisation and
as such resisted. Accordingly, a false but acceptable motive is presented instead.

  Exhibit 5.9        Power tactics

  ■   Image building – action that enhances a person’s standing, such as backing the ‘right’
      causes.
  ■   Selective information – withhold unfavourable information from superiors.
  ■   Scapegoating – blame someone else.
  ■   Formal alliances – form or join a coalition of the strong.
  ■   Networking – make friends with those in power.
  ■   Compromise – be prepared to give in on unimportant issues in order to win on the
      important ones.
  ■   Rule manipulation – interpret rules selectively to favour friends and thwart opponents.
  ■   Other tactics – if all else fails, use dirty tricks such as coercion, undermining the expertise
      of others, playing one group off against another, and get others to ‘fire the bullet’.
  Source: Buchanan and Badham (1999: 27–9)




   The picture of power and politics that emerges from Exhibit 5.9 tends to be a nega-
tive one, portraying individuals and groups as using power and politics purely to pursue
their own selfish interests. However, others take a more positive view. Morgan (1986)
192   Chapter 5 · Culture, power, politics and choice

               offered a model of interests, conflicts and power, accepting that diversity of interests
               can create conflict. In such circumstances, power and influence are, he suggests, the
               major means of resolving conflict. Buchanan and Boddy (1992) argue that the use of
               power and politics is a necessary component in the toolkit of those responsible for man-
               aging change in organisations. Seen in this light, political behaviour can have a positive
               effect on improving the working of organisations by enabling them to manage change
               more effectively. Pfeffer (1992), in a similar vein, maintains that the use of power is an
               important social process that is often required to get things done in interdependent sys-
               tems. In fact, he maintains that a failure to deploy power and politics is harmful:

                 By pretending that power and influence don’t exist, or at least shouldn’t exist, we contribute
                 to what I and others (such as John Gardner) see as the major problem facing many corpora-
                 tions today, particularly in the United States – the almost trained or produced incapacity of
                 anyone except the highest-level managers to take action and get things accomplished.
                                                                                            (Pfeffer (1992: 10)


                  Perhaps Gardner (1990: 57) sums up the issues involved in the power–politics
               debate most succinctly when, in relation to those who possess and deploy power, he
               argues that, ‘The significant questions are: What means do they use to gain it? How
               do they exercise it? To what ends do they exercise it?’
                  We can see from the above why writers have found it difficult to separate power
               from politics. Whilst it is possible to examine the potential for power without also
               examining how power is or might be exercised, for students of organisational life this
               is rather a sterile endeavour. For the purpose of understanding what makes organisa-
               tions tick, how decisions are arrived at, why resources are allocated in a particular
               way and why certain changes are initiated and others not, we have to comprehend
               both the possession and exercise of power, whether it be by official or political means.
                  Though Robbins rightly draws a distinction between formal authority and the pos-
               session/deployment of power, we should not fall into the trap of assuming that there
               is not a close relationship between the two. An examination of the ability to exert
               influence (power) over key decisions and the possession of position (authority) shows
               that these tend to lie within dominant coalitions rather than being spread evenly
               across organisations (see Buchanan and Badham, 1999; Pfeffer, 1978, 1981, 1992;
               Robbins, 1987). The dominant coalition is the one that has the power to affect struc-
               ture. The reason why this is so important is that the choice of structure will
               automatically favour some groups and disadvantage others. A person or group’s posi-
               tion in the structure will determine such factors as their influence on planning, their
               choice of technology, the criteria by which they will be evaluated, allocation of
               rewards, control of information, proximity to senior managers, and their ability to
               exercise influence on a whole range of decisions (Morgan, 1986; Perrow, 1983;
               Pfeffer, 1981, 1992; Robbins, 1987). Though the postmodernists would not disagree
               with this analysis per se, as mentioned earlier, their view of power in organisations is
               a much broader one. For them, power is the mechanism by which groups in organisa-
               tions create and reinforce their view of reality. In turn, postmodernists maintain, it is
               this shaping and construction of reality that, in the main, allows dominant groups in
               organisations to impose their will on others rather than the use of sanctions and other
               control mechanisms (Reed and Hughes, 1992).
Managing and changing organisations: bringing back choice   193


Managing and changing organisations: bringing back choice
        In the previous chapter we examined the postmodernist, realist and complexity per-
        spectives on organisations. The postmodernists argue that reason and logic have had
        their day, and that organisations are social organisms in which individuals and groups
        construct their own views of reality based on their own perceptions of the world and
        their place in it. Realists, whilst accepting the social construction hypothesis, argue
        that reality does exist and that it imposes limits, though sometimes very broad ones,
        to what individuals and organisations can do. The proponents of complexity, for their
        part, see organisations as complex, self-organising systems where, in order to main-
        tain appropriate order-generating rules, choice and decision-making must move from
        the few to the many. What Chapter 4 showed, with its review of these three perspec-
        tives, was that organisations have a great deal more choice and freedom in what they
        can do and how they can do it than the organisation theories discussed in Chapters
        1–3 allowed.
           In this chapter we have sought to develop this argument further by looking at how
        choices are made in organisations and on what basis. The chapter began by examin-
        ing the literature on organisational culture, which revealed that, despite its popularity
        as a promoter of organisational excellence, culture is difficult to define, change and
        manipulate. Strong cultures may have a positive effect on organisations, in that they
        can bond disparate groups together in a common purpose; and weak cultures may
        have a negative impact, in that individuals and groups can pursue separate and con-
        flicting objectives. In some situations, however, especially where there is major
        environmental disruption, the reverse may also be true, with strong cultures being a
        straitjacket on innovation and weak ones allowing new ideas and new leaders to
        come to the fore. In such situations, where the organisation’s dominant coalition is
        split, or is so ossified it cannot entertain change, power and politics come to the fore.
        As Pfeffer (1992: 337) put it:

         Computers don’t get built, cities don’t get rebuilt, and diseases don’t get fought unless advo-
         cates for change learn how to develop and use power effectively.

        As the examination of the literature on power and politics showed, in cases where a
        clash of interests and a clash of perspectives is present, where the status quo is being
        challenged, major decisions about the future direction, structure and operation of an
        organisation are likely to be dominated by issues of power and politics (Buchanan
        and Badham, 1999).
           Murray (1989: 285), reporting on a major study of the introduction and use of
        information technology, commented that:

         ... the use of new technology is subject to processes of organizational decision-making and
         implementation characterized by often conflicting managerial objectives, rationalities and
         strategies developed through the mobilization of organizational power.

        Therefore, as far as Buchanan and Badham (1999), Dawson (1994), Morgan (1986),
        Pfeffer (1992), Robbins (1987) and many others are concerned, the process of organi-
        sational change is inherently a political one.
194   Chapter 5 · Culture, power, politics and choice

                  Though the postmodern, realist, complexity, cultural and power–politics perspec-
               tives on organisational life are very different, there are also strong overlaps. In
               particular, the management of meaning and the creation of legitimacy through the
               construction and manipulation of symbols is an area of common ground. This can be
               seen in Pettigrew’s (1987) work on organisational change. He maintains that the
               process of change is shaped by the interests and commitments of individuals and
               groups, the forces of bureaucratic momentum, significant changes in the environment,
               and the manipulation of the structural context around decisions. In particular,
               Pettigrew (1987: 659) argues:

                 The acts and processes associated with politics as the management of meaning represent
                 conceptually the overlap between a concern with the political and cultural analyses of
                 organizations. A central concept linking political and cultural analyses essential to the
                 understanding of continuity and change is legitimacy. The management of meaning refers to
                 a process of symbol construction and value use designed to create legitimacy for one’s ideas,
                 actions and demands, and to delegitimate the demands of one’s opponents ... [Therefore]
                 structures, cultures and strategies are not just being treated here as neutral, functional con-
                 structs connectable to some system need such as efficiency or adaptability; those constructs
                 are viewed as capable of serving to protect the interests of the dominant groups. ... The con-
                 tent of strategic change is thus ultimately a product of a legitimation process shaped by
                 political/cultural considerations, though often expressed in rational/analytical terms.


               This view that the choice and use of structure, and other key decisions, is the outcome
               of a political process rather than the application of rational analysis and decision-
               making has significant implications for organisation theory. Whilst it does not
               necessarily invalidate the appropriateness or otherwise of particular approaches, it
               does mean that managerial aspirations and interests are seen as more important than
               might otherwise be the case. It also means that, rather than being the prisoners of
               organisation theory (as some might suppose or hope), managers do have significant
               scope for the exercise of choice with regard to structure and other organisational
               characteristics.
                  In his review of the influence of power and politics in organisations, Robbins
               (1987) noted that no more than 50 to 60 per cent of variability in structure can be
               explained by strategy, size, technology and environment. He then went on to argue
               that a substantial portion of the residual variance can be explained by those in posi-
               tions of power choosing a structure that will, as far as possible, maintain and enhance
               their control. He points out that proponents of other determinants of structure, such
               as size, technology, etc., assume that organisations are rational entities: ‘However, for
               rationality to prevail an organisation must have either a single goal or agreement over
               the multiple goals. Neither case exists in most organisations’ (Robbins, 1987: 200).
               Consequently, he argues that structural decisions are not rational. Such decisions arise
               from a power struggle between special-interest groups or coalitions, each arguing for
               a structural arrangement that best suits them. Robbins (1987: 200) believes that
               whilst strategy, size, technology and environment define the minimum level of effec-
               tiveness and set the parameters within which self-serving decision choices will be
               made, ‘both technology and environment are chosen. Thus, those in power will select
               technologies and environments that will facilitate their maintenance of control.’ As
Managing and changing organisations: bringing back choice   195

both the realists and complexity advocates argue, however, the extent to which those
in power can please themselves has limits. Markets do exist, economies can fall as
well as rise and, as the dotcom collapse showed, new technologies do not always
deliver on their promise. The power–politics perspective, therefore, does not totally
undermine the case against the rational view of management.
   There is, though, a strong and significant body of literature and evidence that chal-
lenges the view of management as rational and neutral implementers of decisions
determined by objective data. In particular, the detailed case studies of organisational
decision-making and change at ICI and Cadbury Ltd carried out, respectively, by
Pettigrew (1985, 1987) and Child and Smith (1987) lend a great deal of weight to the
view that management in general, and the management of change in particular, is
inherently a political process. Murray (1989) made the telling point that, given the
insecurity of many managers’ positions, particularly during periods of major upheaval
and change, it is not surprising that managers and other groups attempt to influence
decisions in order to protect, enhance or shore up their position in the organisation.
   Nevertheless, one needs to be wary of ascribing the purpose of all organisational
decisions and actions to self-interest. Politics plays a part but, to view Robbin’s
(1987) finding from another perspective, so too do strategy, size, technology and envi-
ronment. As the realists would argue, these can act as a constraint on the freedom of
action of groups and individuals, as can the need to be seen to act in the organisa-
tion’s best interests, in line with agreed goals and in a rational manner. Therefore,
though the political perspective has become very influential in the last 20 years, it
does not explain all actions and all decisions in organisations. We need to see power
and politics as an important influence on organisations but not the only influence.
Indeed, we need to remember the original objective of Cyert and March’s (1963)
work on organisational politics. They sought to show that external factors were not
the only factors that affected decision-making in organisations. This is not, of course,
the same as saying that external factors do not matter. As Child and Smith (1987)
show with their firm-in-sector perspective (see Chapter 6), the external environment
does matter. In a whole host of concrete and symbolic ways, it constrains and
impinges on organisational decision-making and behaviour. It may well be, as
Robbins (1987) commented, that strategy, size, technology and environment only
define the minimum level of effectiveness and set the parameters within which deci-
sions are taken, but this is still a very important constraint on managers. It is also an
important rejoinder to those management theorists who have become, as Hendry
(1996: 621) notes, ‘ ... overfocused on the political aspects of the change [decision-
making] process’.
   In summary, therefore, power and politics are amongst the most important factors
influencing decision-making in organisations. Indeed, by linking the arguments of
Robbins, Pettigrew and Murray regarding managerial choice of structure to the discus-
sion on culture, two very interesting points arise. Firstly, it was argued by Allaire and
Firsirotu (1984), and others, that culture and structure need to be mutually supportive
if an organisation is to operate efficiently and effectively. If, as the power-politics per-
spective argues, structure is in part at least the outcome of self-interested choice by the
dominant coalition, the degree of congruence between the two may be due more to
accident than design. Secondly, it was also argued earlier that organisational culture is
the product of long-term social learning in which dominant coalitions play a key role.
196   Chapter 5 · Culture, power, politics and choice

               This clearly opens up scope for choices over both structure and culture. However, the
               development of culture and approaches to changing it are long-term processes.
               Dominant coalitions, on the other hand, change their composition and priorities over
               time, sometimes over quite short periods of time. Therefore, although it can be
               argued that the possibility exists for managers to choose both the structure and cul-
               ture that best suit their own self-interests, this is only likely to result in a balanced
               and effective structure–culture nexus if the dominant coalition holds sway and is con-
               sistent in its aims over long periods of time.
                  As many observers have noted, whilst these conditions may exist in some Western
               companies (e.g. News International under Rupert Murdoch, General Electric under
               Jack Welch, Vodafone under Chris Gent), these are the exception. In any case, as the
               departure of Arnold Weinstock from GEC showed (see Chapter 11), such situations
               often rely on dominant individuals to hold coalitions together; when they go, the
               dominant coalition falls apart and a new one emerges with a radically different vision
               for the organisation (Brummer and Cowe, 1998; Brummer, 1999). Sometimes the
               departure of such individuals can even bring an organisation perilously close to col-
               lapse, as was the case with GEC when Weinstock stepped down, Apple Computers
               when Steve Jobs was fired in 1985, and with Tiny Rowland’s forced departure from
               Lonrho in 1995 (Laird, 1998; Morgan, 1986). Indeed, in some companies, so forceful
               and coercive is the personality of a dominant individual that their will cannot be
               questioned, and fundamental problems are only discovered once they depart, as was
               the case with Robert Maxwell and Mirror Group Newspapers (Bower, 1996).
                  The Japanese experience seems at first glance to follow a similar pattern of domi-
               nant coalitions relying on one key person for their legitimacy and direction. In their
               case, however, when such a person departs, the dominant coalition appears to main-
               tain the unity of purpose (Fruin, 1992; Pascale and Athos, 1982; Whitehill, 1991).
               Yet even the Japanese are not immune from problems when changing leaders. For
               example, Nissan’s appointment of a new chief executive in 1985 was followed by an
               attempt to change its culture in order to overcome what were seen as major mistakes
               by the previous incumbent (Ishizuna, 1990). This and other changes failed and, in the
               end, Nissan was, in effect, taken over by the state-owned French car-maker Renault.
                  To sum up, therefore, what we can see is that managers have a degree, arguably a
               wide degree, of choice or influence over major organisational variables such as struc-
               ture, technology, environment and perhaps even culture. Despite the arguments of the
               postmodernists, however, their freedom of action is constrained by a whole host of
               factors such as market conditions, technological development, organisational goals,
               policies and performance, their own and other people’s self-interests, and the need to
               portray their actions as being rational and in the best interests of their organisation.
               In addition, in a reciprocal way, some of the factors over which they have a degree of
               choice, such as structure and culture, can also limit managers’ freedom of manoeuvre.
               These constraints will vary from organisation to organisation at any one time and,
               within and between organisations, over time but will never be fully absent. Strong
               though these constraints may be, however, choice will never be totally absent.
Conclusions   197


Conclusions
       In reviewing the main approaches to and perspectives on organisation theory, Part 1
       of this book has shown that, by succeeding stages, these have moved from the
       mechanical-rational outlook of the Classical school to the, arguably, culture-based
       perspectives of the Culture–Excellence, Japanese and Organisation Learning
       approaches, passing through the social perspective of the Human Relations school
       and the rational perspective of the Contingency theorists. They all argue for a ‘one
       best way’ approach (though the Contingency theorists believed in this for ‘each’
       rather than ‘all’ organisations). Because of this approach they all, in effect, seek to
       remove choice from managers: do as we tell you, or else! Indeed, it was one of the
       main claims of the Classical school that it removed discretion not only from workers,
       but also from managers. As Frederick Taylor (1911b: 189) stated:

        The man at the head of the business under scientific management is governed by rules and
        laws ... just as the workman is, and the standards which have been developed are equitable.

       The role of managers, from these perspectives, is to apply rationally the dictates of
       the particular theory promoted. To do otherwise would be sub-optimal and irrational.
          By building on the discussions of postmodernism, realism and complexity in
       Chapter 4, this chapter has sought to move managerial choice back to centre stage.
       By exploring organisational culture, it was shown that the degree to which culture
       influences behaviour is dependent upon the presence of clear and consistent organisa-
       tional goals. If these are not present, which appears to be the case in many
       companies, conflict and disagreement emerge regardless of the nature of the culture.
       Similarly, if the environment changes to the extent that existing ways of working are
       no longer appropriate, once again, conflict and disagreement may emerge. In such sit-
       uations, it is the political perspective on organisational life that offers the better
       opportunity for understanding how and why decisions are taken, particular courses
       of action are embarked upon, and why some changes to the management and struc-
       ture of the organisation are pursued and others discarded.
          The examination of organisational politics and power added further weight to the
       criticisms of the approaches to organisation theory considered in previous chapters, par-
       ticularly concerning the scope for rational decision-making and choice. To an extent,
       the key issue was raised when discussing Contingency Theory, namely the question as to
       whether managers are the prisoners of the situational variables they face, or whether
       they can influence or change these. Certainly some critics of Contingency Theory argue
       that managers can, partly at least, influence or choose the contingencies they face. This
       casts doubts not only on the deterministic nature of Contingency Theory, but also on all
       organisational theories, because – either openly or implicitly – they are all founded on
       the notion that organisations face certain immutable conditions that they cannot influ-
       ence and to which they must therefore adapt.
          This does not necessarily mean that the various theories and their attendant struc-
       tures and practices we have discussed so far in this book are invalid, unhelpful or
       inapplicable. It does, however, mean that it may be possible, within limits, for organi-
       sations, or rather those who control organisations, to decide upon the structure and
198   Chapter 5 · Culture, power, politics and choice

               behaviours they want to promote, and then shape the conditions and contingencies to
               suit these, rather than vice versa. Indeed, as far as the public sector in the UK is con-
               cerned, this appears to be exactly what governments have done. From 1979 to 1997,
               successive Conservative governments took the view that they wanted managers in the
               public sector to be cost-focused and entrepreneurial, and shaped the conditions in
               which the public sector operates (i.e. its environment) in order to promote those
               attributes (Ferlie et al, 1996; Flynn, 1993). Following its election in 1997, the ‘New
               Labour’ government similarly manipulated the public sector environment to influence
               managerial behaviour. This can be seen in terms of significant alterations to the NHS
               Internal Market, the replacement of Compulsory Competitive Tendering with the
               notion of ‘Best Value’ in local government, and the reversal of the previous govern-
               ment’s policy of contracting out central government activities through the creation of
               semi-autonomous agencies and the Next Steps initiative (Salauroo and Burnes, 1998).
                  If – contrary to the dictates of most management theories – organisations are not
               the prisoners of situational variables, as most organisation theories maintain, if those
               who manage them do have a degree of leeway in what they do, one then has to ask
               what factors do influence the actions of decision-makers. The review of the power-
               politics literature showed organisations as shifting coalitions of groups and
               individuals seeking to promote policies and decisions that enhanced or maintained
               their position in the organisation. From the literature, a persuasive argument is
               mounted for seeing politics and power – usually promoted under the cloak of ration-
               ality, reasonableness and the organisation’s best interests – as a central, though not
               exclusive, determinant of the way organisations operate.
                  In particular, though political behaviour appears to be an ever-present feature of
               organisational life, politics comes to the fore when major issues of structural change
               or resource allocation are concerned. Such decisions have crucial importance for
               achieving and maintaining power or position, or even – when the chips are down –
               for keeping one’s job when all around are losing theirs.
                  Therefore, it is surprising that much of organisation theory, which after all is pri-
               marily concerned with major decisions concerning structure and resource allocation,
               seems to dismiss or gloss over power and politics. Nevertheless, what is clear from
               this chapter is that managers, despite the constraints they face, have a far wider scope
               for shaping decisions than most organisation theories acknowledge, and that the
               scope for choice and the deployment of political influence is likely to be most pro-
               nounced when change, particularly major change, is on the managerial agenda.
                  Having examined the merits and drawbacks of the main organisation theories, and
               in particular having raised the issue of the way in which major decisions are decided
               upon and implemented, we can now turn our attention in the following chapters to
               an in-depth examination of change management.
Suggested further reading   199


Test your learning

      ■ Short answer questions
        1 What are Cummings and Huse’s four elements of culture?

        2 Briefly describe Handy’s four types of culture.

        3 List three implications of Hofstede’s work on national cultures for Western approaches to
          organisation theory.

        4 What does the term ‘satisfice’ mean?

        5 Give three benefits of Robbins’ addition of knowledge power to Etzioni’s three types of
          power.

        6 Define organisational power.

        7 Define organisational politics.

        8 For each of the following, briefly state their implications for organisational change: (a)
          organisational culture and (b) power and politics.



      ■ Essay questions
        1 Discuss the following statement: organisational culture is the prime determinant of
          organisational performance.

        2 Explain the concept of dominant coalitions, and discuss how these can prevent organisa-
          tions dividing into warring factions with individuals and groups pursuing their own
          personal agendas.




         Suggested further reading
        1 Brown, A (1995) Organisational Culture. Pitman: London.
          Andrew Brown’s book gives a useful introduction to the uses and abuses of organisational
          culture.
        2 Pfeffer, J (1992) Managing with Power: Politics and Influence in Organizations. Harvard
          Business School Press: Boston, MA, USA.
          This is an entertaining and very useful guide to the power–politics perspective on organisations.
1
Part Two
Strategy development and
change management: past,
present and future
Managing change burnes
Chapter 6

Approaches to strategy
Managerial choice and constraints




 Learning objectives
 After studying this chapter, you should be able to:
 ■   discuss the origins, development and popularity of organisation strategy;
 ■   describe the main features of the Prescriptive stream of strategy;
 ■   list the strengths and weaknesses of the Prescriptive stream;
 ■   discuss the key elements of the Analytical stream of strategy;
 ■   state the major advantages and shortcomings of the Analytical stream;
 ■   understand the key differences between the Prescriptive and the Analytical
     streams of strategy;
 ■   describe the constraints faced by organisations and whether these can be
     manipulated or overcome;
 ■   appreciate the relationship between strategy and change.
204   Chapter 6 · Approaches to strategy


 Exhibit 6.1        Michael Porter

 The master strategist: Michael Porter                                                                                     FT

 Michael Porter became famous in the 1990s as a                    The strength of each of these forces varies from
 consultant on competitiveness to business and gov-            industry to industry, but taken together they deter-
 ernments. In the 1980s, however, he wrote several             mine long-term profitability. They help to shape the
 popular and respected books on business strategy,             prices companies can charge, the costs they must
 introducing basic tools of strategic thinking such as         pay for resources and the level of investment that
 the ‘five forces’ model and the value chain.                  will be needed to compete.
     It is for this work on strategy that he is likely to be       From the external environment, he turns to the
 remembered, and his ideas have had a wide impact.             company itself. Companies make products and
 In 1999, Fortune called him the single most impor-            deliver them to consumers, but they can also add
 tant strategist working today, and possibly of all time.      value to the basic product in a variety of ways and
     Prof Porter was born in Ann Arbor, Michigan, in           through different functions.
 1947. He studied at Princeton and Harvard and                     Value can be added directly, for example by
 joined the faculty at Harvard in 1973. He has also            giving a product new technology features, or indi-
 become a highly respected consultant, working with            rectly, through measures that allow the company to
 companies such as DuPont and Shell, and the US,               become more efficient. Prof Porter argues that every
 Canadian, New Zealand and Swedish governments.                product follows a critical path through the company,
     Prof Porter views strategy from the standpoint of         from its inception to its delivery as a finished article.
 economics, and his ideas on how strategy should be            At every stage along this path there are opportunities
 implemented are based on an understanding of                  to add value. This path he calls the ‘value chain’.
 competition and other economic forces. Strategy is                The value chain is crucial, he says, because it
 not devised in isolation; a company’s options will            demonstrates that the company is more than just
 always be limited by what is going on around it.              the sum of its parts and activities: all activities are
     His famous ‘five forces’ model shows the con-             connected, and what is done at one stage affects
 straining impact that competition and environment             work at other stages.
 have on strategy.                                                 The company needs to examine its value chain
     The five forces identified by Prof Porter are: the        and decide where it can add value most effectively
 threat of new entrants and the appearance of new              to meet competitive pressures in the industry.
 competitors; the degree of rivalry among existing                 These concepts can be applied to entire sectors
 competitors in the market; the bargaining power of            and national economies as well as individual compa-
 buyers; the bargaining power of suppliers; and the            nies, and Prof Porter went on to develop his theories
 threat of substitute products or services that could          of national competitiveness in great detail.
 shrink the market.                                            Source: Morgen Witzel, Financial Times, 15 August 2003, p. 11.




 Exhibit 6.2        Henry Mintzberg

 The great iconoclast: Henry Mintzberg                                                                                     FT

 Henry Mintzberg had been called ‘the great manage-            ness strategy, where he exposed the gap between
 ment iconoclast’ for his willingness to attack                academic concepts of strategy and reality.
 previously sacred concepts in business and manage-               Born in Montreal in 1939, Mintzberg studied
 ment. But his commonsense approach to                         engineering and worked for Canadian National
 management problems have won him a broad fol-                 Railways before obtaining a doctorate from the
 lowing, particularly among students and working               Massachusetts Institute of Technology in 1968. He
 managers. He is best known for his work on busi-              joined the faculty of management at McGill
Introduction     205


Exhibit 6.2 continued
University, Canada, where he has remained.               its own culture and needs, managers’ responses to
Mintzberg was interested in defining what managers       problems will vary. There may be no one ‘right’ way
really do and how they carry out their tasks. He dis-    to manage a business.
covered a vast body of what he termed ‘managerial            These affect strategy. Academic conceptions of
folklore’: research studies that considered managers     strategy regarded it as the province of top manage-
rational beings who made decisions based on care-        ment, who consider and make strategic decisions
ful analysis of all available information.               with detachment. Again, Mintzberg disagrees. In the
    Experience told Mintzberg that managerial work       real world, strategy-making is ad hoc and instinctive,
was not like that. Not only was it less structured and   not structured and planned. The concept of ‘strategic
ordered than assumed but its true nature was also        planning’ becomes an oxymoron.
hard to define. His observations of managers in              Mintzberg sees this approach to strategy as a
action confirmed this. He found that decisions were      virtue. ‘Emergent strategy’, as he calls it, is strategy
made quickly, often on the move, usually based           that evolves according to need, constantly adjusted
more on intuition and experience than on consid-         and adapted. He also speaks of ‘crafting strategy’, a
ered analysis. Action was more important than            process by which managers develop strategy accord-
reflection. Half the daily management tasks he           ing to the needs of their organisation and
observed took less than 10 minutes each and only         environment. Here, strategy creation and implemen-
10 per cent took more than an hour.                      tation are interdependent. He compares the art of
    The portrait of the manager and his task that        strategy making to pottery and managers to potters
emerges from Mintzberg’s work is a sympathetic           sitting at a wheel moulding the clay and letting the
one. Managers are constantly ‘firefighting’, dealing     shape of the object evolve in their hands.
with problems under pressure. Rather than the best           Successful management is about knowing the busi-
possible solution, they seek the best solution that      ness – in all its aspects and not just in specialist areas
can be implemented given the resources available.        – and an ability to manage through discontinuity.
And, says Mintzberg, because each organisation has       Source: Morgen Witzel, Financial Times, 5 August 2003, p.11.




              Introduction
             In Part 1 of this book, we discussed the options open to organisations in terms of
             their structures, cultures and practices. By examining the development of organisa-
             tional theory in the 200 years since the Industrial Revolution, we saw that, in the
             beginning, management was almost exclusively concerned with strict labour discipline
             and long working hours. The methods used to pursue these were ad hoc, erratic,
             short-term and usually harsh and unfair. As the period progressed, more structured
             and consistent approaches came to the fore. Up to the 1960s, it was the Classical and
             Human Relations approaches that dominated organisational thinking. With the
             advent of these two approaches, the emphasis moved more to the effectiveness and
             efficiency of the entire organisation, rather than focusing purely on discipline and
             hours of work.
                Both these approaches tended to dwell on internal arrangements and to assume
             that organisation structures and practices were in some way insulated from the out-
             side world. The development of Contingency Theory in the 1960s, with its underlying
             Open Systems perspective, changed all this. The nature of the environment (both
             internal and external) in which organisations operate emerged as a central factor in
206   Chapter 6 · Approaches to strategy

               how they should structure themselves. This theme has been continued with the devel-
               opment of new paradigms in the 1980s and 1990s, and the importance of situational
               variables, especially environmental turbulence, which organisations face is seen by
               many as an unchallengeable fact (Kanter et al, 1997; Peters, 1997a).
                  However, as argued in Part 1, the degree to which organisations are the prisoners
               of these situational variables (as averse to being able to exercise influence and choice)
               is certainly open to debate. Similarly, as shown in Chapters 4 and 5, the credibility of
               the rational approach to decision-making has been considerably undermined in the
               last two decades. The increasing appreciation of the complexity of organisational life
               has been paralleled by a growing recognition that organisations cannot cope success-
               fully with the modern world and all its changing aspects purely on an ad hoc and
               piecemeal basis. Whether decision-makers operate on the basis of rationality or are
               influenced by personal considerations or organisational cultures, the received wisdom
               is that for organisations to succeed there must be a consistency and coherence to the
               decisions taken – which is another way of saying that they must have a strategy
               (Johnson and Scholes, 1993). Unfortunately, it is easier to say that an organisation
               needs a strategy than it is to say what that strategy should be or how it should be
               derived. Perhaps the two most influential writers on strategy over the past 25 years
               have been Michael Porter and Henry Mintzberg, yet, as Exhibits 6.1 and 6.2 show,
               their portrayal and understanding of strategy is significantly different.
                  In this chapter, we shall examine the development and shortcomings of the main
               approaches to strategy that have been put forward in the last 50 years. It will be
               shown that, since the end of the Second World War, organisations have begun to take
               a strategic perspective on their activities. They have increasingly sought to take a
               long-term overview in order to plan for and cope with the vagaries of the future. In
               many respects, the development of strategic management has tended to mirror the
               development of organisational theory. In the 1940s and 1950s, the strategy literature
               only considered one aspect of an organisation’s activities – the external environment.
               It tended to seek rational, mathematical approaches to planning. With the passing of
               time, more intuitive and less rational approaches to strategic management have been
               developed which claim to incorporate the totality of organisational life.
                  The chapter concludes by arguing that, rather than managers being the prisoners of
               mathematical models and rational approaches to strategy development, they have
               considerable freedom of action and a wide range of options to choose from. They are
               not totally free agents, however; their freedom of action is seen as being constrained
               or shaped by the unique set of organisational, environmental and societal factors
               faced by their particular organisation. Fortunately, these constraints are not
               immutable. As argued in Part 1, it is possible for managers to manipulate the situa-
               tional variables they face with regard to structure. Similarly, managers can exert some
               influence over strategic constraints and, potentially at least, can select the approach to
               strategy that best suits their preferences.
Understanding strategy: origins, definitions and approaches   207


Understanding strategy: origins, definitions and approaches

     ■ The origins of strategy
        It is commonly believed that our concept of strategy has been passed down to us from
        the ancient Greeks. Bracker (1980: 219) argued that the word strategy comes from
        the Greek stratego, meaning ‘to plan the destruction of one’s enemies through the
        effective use of resources’. However, they developed the concept purely in relation to
        the successful pursuit of victory in war. The concept remained a military one until the
        nineteenth century, when it began to be applied to the business world, though most
        writers believe the actual process by which this took place is untraceable (Bracker,
        1980; Chandler, 1962). Chandler (1962) put forward the view that the emergence of
        strategy in civilian organisational life resulted from an awareness of the opportunities
        and needs – created by changing population, income and technology – to employ
        existing or expanding resources more profitably.
            Hoskin (1990) largely agreed with Chandler’s view of the development of modern
        business strategy since the Industrial Revolution. However, he does take issue with
        both Chandler and Bracker on two crucial points. Firstly, he argues that the modern
        concept of organisational strategy bears little resemblance to military strategy, at least
        as it existed up to the First World War. Secondly, he challenges the view that the ori-
        gins of business strategy are untraceable. When investigating the emergence of
        modern strategy he did find a link with the military world, though it was not quite
        the link that Bracker and Chandler proposed. Like Chandler, Hoskin argues that one
        of the most significant developments in business management in the nineteenth cen-
        tury occurred in the running of the US railways. Unlike Chandler, however, Hoskin
        gives the credit for initiating business strategy to one of the Pennsylvania Railway’s
        executives, Herman Haupt. He states that Haupt:

         ... changes the rules of business discourse: the image in which he reconstructs business, on
         the Pennsylvania Railroad, is that of the proactive, future-oriented organization, which is
         managed by the numbers ... How does he do so? By importing the practices of writing,
         examination and grading ... On the Pennsylvania Railroad we find for the first time the full
         interactive play of grammatocentrism [writing and recording] and calculability [mathemati-
         cal analysis of the recorded data].                                      (Hoskin, 1990: 20)


           This approach created the bedrock on which strategic management grew in the
        United States, especially after the Second World War. It also ensured that strategic
        management became a quantitatively-orientated discipline, whose focus was on the use
        of numerical analysis to forecast market trends in order to plan for the future. Hoskin
        also points out that Haupt was a graduate of the US military academy at West Point,
        which pioneered the techniques of ‘writing, examination and grading’ in the military
        world. From there its graduates, particularly Haupt, took them out into the business
        world – hence the link between military and civilian management techniques.
           Thus it is possible to see why strategic management developed in the way it did –
        as a quantitative, mathematical approach. We can also see that there are links
        between the military and business world, but that they are not as some have claimed.
208   Chapter 6 · Approaches to strategy

               Management strategy has not developed from the approach to military campaigns of
               the ancient Greeks; instead it has adopted and made its own the techniques of record-
               keeping and analysis that were developed at West Point in order to measure the
               performance, and suitability for military life, of the US army’s future officer class.
                  The contribution of the American armed forces to this quantitative approach to
               strategy did not end with West Point or in the nineteenth century. In 1945, with the
               end of the Second World War, America experienced an extraordinary trading boom.
               McKiernan (1992) commented that this forced many American companies to rethink
               their business planning systems. In order to justify and implement the capacity expan-
               sion necessary to cope with the boom, companies began to abandon short-term,
               one-year, budgeting cycles in favour of more long-range planning techniques. The
               development of this strategic approach to planning and investment was given a signif-
               icant impetus when some of the people involved in the USAAF’s wartime strategic
               planning activities returned to civilian life – most notable amongst whom was Robert
               McNamara, who became Chairman of the Ford Motor Company, Secretary of State
               under John F Kennedy and President of the World Bank (Moore, 1992). Their main
               vehicle for influencing business was the Harvard Business School’s approach to busi-
               ness policy teaching, which steadily moved the focus of management away from a
               preoccupation with internal organisational issues (as proposed by the Classical and
               Human Relations schools) towards an external orientation. This was best exemplified
               by the development of two important concepts: marketing, with its emphasis on
               analysing demand and tailoring products to meet it; and systems theory, with its
               emphasis not only on the interconnectedness of different parts of an organisation, but
               also the links between internal and external forces.
                  In the intervening years, first in the USA and later across the Western world, these
               techniques and approaches have become more widely disseminated and used (Bracker,
               1980). Much credit for this must go to three key figures, Kenneth R Andrews, Alfred
               D Chandler and H Igor Ansoff, for their work in developing and fleshing out the con-
               cept of strategic management, and especially for demonstrating the importance of
               product–market mix. Nevertheless, in highlighting the importance of the outside
               world, and thus breaking managers’ Classical school-inspired fixation with internal
               structures and practices, they can be criticised for not making the link between the
               two. So managers moved from believing that internal arrangements alone would
               bring success to believing that an external, market focus was the key.


          ■ The rise and fall of long-range planning
               In order to cope with the new and rapidly-changing technological, economic and
               organisational developments that followed the end of the Second World War,
               American organisations, which were at the forefront of these developments, began to
               adopt long-range planning techniques. This necessitated first defining the organisa-
               tion’s objectives, then establishing plans in order to achieve those objectives, and
               finally, allocating resources, through capital budgeting, in line with the plans. A key
               aim of this process was to reduce the gap that often occurred between the level of
               demand that a firm expected, and planned for, and the level of demand that actually
               occurred (Fox, 1975). Therefore, long-range planning was a mechanism for plotting
               trends and planning the actions required to achieve the identified growth targets, all of
Understanding strategy: origins, definitions and approaches   209

which were heavily biased towards financial targets and budgetary controls. However,
this process proved incapable of accurately forecasting future demand and the problem
of the gap between the level of expected demand and actual demand remained.
   Long-range planning failed for a variety of internal and external reasons
(McKiernan, 1992). Internally, many planning systems involved little more than an
extrapolation of past sales trends. Little attention was paid to wider external eco-
nomic, technological or social changes, or even changes in the behaviour of competitor
firms. Externally, in the 1960s, the relatively comfortable conditions of high market
growth gave way to lower levels of growth, which led to increased competition as
companies tried to increase, or at least maintain, their market share to compensate for
lower growth. One outcome of this was that strategic planners had to adapt to a world
where growth was not steady; it could slow down, increase or be interrupted in an
unpredictable and violent manner. Also, unforeseen opportunities and threats could
and did emerge. Furthermore, it became evident that closing the gap between the plan
and what actually occurred was not necessarily the most critical aspect of strategy for-
mulation. Indeed, since the early 1970s, volatile markets, over-capacity and resource
constraints have taken over as dominant management considerations.
   Long-range planning techniques could not cope with such environmental turbu-
lence which, to say the least, limits forecasting accuracy. In addition, the nature of
American business had begun to change. Slower growth and increased competition
led to a situation where large single-business firms, which in the past might have
dominated a single industry, were being replaced by multinational conglomerates
operating in a wide range of increasingly competitive industries and markets.
Therefore, rather than managing a single, unified enterprise, corporate managers
found themselves managing a diverse portfolio of businesses. In response to the fail-
ure of long-range planning and the emergence of conglomerates, in the late 1960s, the
concept of strategic management began to emerge.
   Unlike long-range planning, strategic management focuses on the environmental
assumptions that underlie market trends and incorporates the possibility that changes
in trends can and do take place, and is not based on the assumption that adequate
growth can be assured (Elliot and Lawrence, 1985; Mintzberg and Quinn, 1991). In
addition, strategic management focuses more closely on winning market share from
competitors, rather than assuming that organisations can rely solely on the expansion
of markets for their own growth (Hax and Majluf, 1996). This concept sought to
take a broader and more sophisticated view of an organisation’s environment and,
initially at least, was closely associated with a number of portfolio planning tech-
niques which also emerged in the late 1960s (Hax and Majluf, 1996; McKiernan,
1992). As will be described in Chapter 7, these were developed to assist managers in
running large, diversified enterprises operating in complex environments. Much of
this work was sponsored and used by large American corporations, such as General
Electric, in order to identify the market position and potential of their strategic busi-
ness units (SBUs) and to decide on whether to develop, sell or close them down. This
‘positioning’ approach to strategic management, the latest variant of which is Porter’s
(1980, 1985) ‘competitive forces model’, dominated the practice of strategic manage-
ment from the 1960s onwards, and to a large extent still does (Galagan, 1997; Rigby
and Gillies, 2000). It has also led many companies to adopt a harsh, and to an extent
unthinking, approach to business success, which is epitomised by the words of Jack
210   Chapter 6 · Approaches to strategy

               Welch when he was CEO of General Electric: ‘We will run only businesses that are
               number one or two in their markets’ (quoted in Kay, 1993: 339). Therefore, if busi-
               nesses are not, or do not have the potential to become, leaders in their field, they are
               sold off or closed down (Koch, 1995).
                  As Kay (1993), and many others, point out, this approach to strategic management
               portrays strategy as a rational process whereby managers gather hard, quantitative data
               on their companies, and from this information come to rational decisions regarding
               their future. However, from the late 1970s onwards, the rational perspective on strategy
               has come under increasing attack, not least by the leading management thinker of his
               generation, Henry Mintzberg (1976, 1978, 1983, 1987, 1994). The main criticisms of
               the rational approach to strategy are threefold: that hard data are no more reliable, and
               in some cases less so, than qualitative data; that organisations and managers are not
               rational entities and do not apply a rational approach to decision-making; and that an
               organisation’s strategy is as likely to emerge from unplanned actions and their unin-
               tended consequences over a period of time as it is from any deliberate process of
               planning and implementation (Child and Smith, 1987; Hatch, 1997; Mintzberg et al,
               1998a; Pettigrew et al, 1992; Stacey, 2003; Whittington, 1993).


          ■ Defining strategy
               As the above shows, like many other concepts in the field of management, there are
               many approaches to strategy but none are universally accepted (Stacey, 2003). Indeed,
               even one of the pioneers of business strategy, Igor Ansoff (1987), warned that strategy
               is an elusive and somewhat abstract concept. This must be expected when dealing
               with an area that is constantly developing. Nor should this inhibit the search for a
               definition, or definitions, because in doing so we can see how the debate on strategy
               is developing and where the main areas of dispute lie.
                  Rather than leading to clarity, the eclipse of long-range planning merely heralded
               the arrival of a range of different perspectives on strategy. As early as the 1960s, two
               schools of thought vied with each other: the Planning school and the Design school
               (Mintzberg et al, 1998a). The Planning school was based on formal procedures,
               formal training, formal analysis and a large dose of quantification. Its underlying
               assumption was that a strategy could be put together and work in the same way as a
               machine. It led to the creation of strategic planning departments in large organisa-
               tions, reporting directly to the chief executive; that person’s role – though notionally
               to be the architect of strategy – was to approve the planners’ plan. The chief propo-
               nent of the Planning school was Igor Ansoff. Ansoff was a Russian–American
               engineer, mathematician, military strategist and operations researcher whose
               Corporate Strategy was published in 1965 to great acclaim (Koch, 1995). In this
               book he assumes that the purpose of a firm is profit maximisation, and he portrays
               strategic management as being primarily concerned with the external, rather than
               internal, concerns of the firm, especially the matching of products to markets (the
               product–market mix). The book provides managers with a plethora of checklists and
               charts to enable them to derive objectives, assess synergy between different parts of
               an organisation, appraise its competence profile and decide how, where and in which
               way to expand. Nevertheless, as Koch (1995) remarked, from today’s viewpoint, the
               book, and indeed the precepts of the Planning school as a whole, have not aged well.
Understanding strategy: origins, definitions and approaches   211

   The Design school, though sharing some common features with the Planning
school, adopted a different, less formal and machine-like approach. It proposed a
model of strategy that emphasises the need to achieve a fit between the internal capa-
bilities of an organisation and the external possibilities it faces. Flowing from this, the
Design school places primary emphasis on the appraisal of an organisation’s external
and internal situations. To facilitate this, Kenneth R Andrews developed the now-
famous SWOT technique – the assessment of the internal Strengths and Weaknesses
of the organisation in the light of the Opportunities and Threats posed by the envi-
ronment in which it operates (Andrews, 1980). One of the main architects of the
Design school was Alfred Chandler. Chandler was one of the most eminent and influ-
ential American economic historians of his generation. His main contribution to the
Design school is encapsulated in his 1962 book, Strategy and Structure, which was
based on a major study of US corporations between 1850 and 1920. In the book,
Chandler defined strategy as the determination of the basic long-term goals and
objectives of an enterprise, and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals. The book also suggested three
important precepts for running organisations which challenged the conventional
wisdom of the time: firstly, that an organisation’s structure should flow from its strat-
egy rather than being determined by some universal ‘one best way’; secondly, that the
‘visible hand of management’ was more important than Adam Smith’s ‘invisible hand
of the market’ in meeting customer needs; and thirdly, that large organisations need
to decentralise and divisionalise in order to remain competitive. Chandler’s work
proved very influential in shaping the strategy debate over the next three decades.
   Nevertheless, like Ansoff, Chandler has attracted his fair share of criticism, espe-
cially with regard to his view that structure should follow strategy. Tom Peters (1993:
148), for example, remarked that, ‘I understand Chandler’s reasoning, but I think he
got it exactly wrong. For it is the structure of the organization that determines, over
time, the choices that it makes about market attacks’ (i.e. its strategy).
   The crucial difference between Ansoff and Chandle, and between the Planning and
Design approaches, is that the former regards strategy as almost exclusively con-
cerned with the relationships between the firm and its environment, whilst Chandler
takes a broader view. His definition includes internal as well as external factors. In
particular, he sees issues such as organisational structures, production processes and
technology as being essentially strategic. The point he makes is that the external and
internal cannot be separated, as the Open Systems theorists would be the first to
point out (see Scott, 1987). The external affects the internal, and vice versa.
Therefore, strategic management must encompass the totality of the organisational
domain and must not be restricted to one aspect, such as determining the
product–market mix (Andrews, 1980).
   This brings us a little nearer a definition but still leaves us with a hazy concept.
Henry Mintzberg argued that it is necessary to recognise explicitly that there are multi-
ple definitions of strategy and that we need to use these to manoeuvre through this
difficult field. According to Mintzberg et al (1998b), there are five main and interrelated
definitions of strategy: plan, ploy, pattern, position and perspective (see Exhibit 6.3).
   In a manner that has a postmodernist feel to it, Mintzberg et al (1998b) do not
argue that one definition should be preferred to the others. In some senses they can be
considered as alternatives or complementary approaches to strategy. Also, they are
useful in adding important elements to the discussion of strategy. They draw our
212   Chapter 6 · Approaches to strategy


                  Exhibit 6.3          Mintzberg’s five definitions of strategy

                  ■   Strategy as a plan. According to this view, strategy is some form of consciously-intended
                      course of action which is created ahead of events. This can be either a general strategy or
                      a specific one. If specific, it may also constitute a ploy.
                  ■   Strategy as a ploy. This is where strategy is a manoeuvre to outwit an opponent. An
                      example of this is when a firm threatens to lower its prices substantially to deter new
                      entrants into its market. It is the threat to lower prices that is the consciously-intended
                      course of action, and not any actual plan to do so.
                  ■   Strategy as a pattern. This is where we observe, after the event, that an organisation has
                      acted in a consistent manner over time; i.e. whether consciously or not, the organisation
                      exhibits a consistent pattern of behaviour. We can say from this that an organisation has
                      pursued a particular strategy. This may not be the strategy it intended to pursue, however,
                      but it is the one that has emerged from the action of the organisation. Therefore, though
                      the organisation’s realised strategy could be the product of a conscious and deliberate
                      plan, this is often not the case.
                  ■   Strategy as a position. From this perspective, strategy is about positioning the organisation in
                      order to achieve or maintain a sustainable competitive advantage. Mintzberg et al argue that
                      most organisations try to avoid head-on competition. What they seek to achieve is a position
                      where their competitors cannot or will not challenge them. In this sense, strategy is also seen
                      as a game: groups of players circling each other, each trying to gain the high ground.
                  ■   Strategy as perspective. This definition sees strategy as a somewhat abstract concept
                      that exists primarily in people’s minds. For members of an organisation, the actual
                      details of its strategy, as such, are irrelevant. What is important is that everyone in the
                      organisation shares a common view of its purpose and direction which, whether people
                      are aware of it or not, informs and guides decision-making and actions. Consequently,
                      without the need for detailed plans, the organisation, through a shared understanding,
                      pursues a consistent strategy/purpose.
                  Source: Mintzberg et al (1998b)




               attention to the distinction between conscious and unconscious strategy, and between
               emergent and planned strategy. They also highlight the role of the organisation’s col-
               lective mind in developing and implementing strategy.
                  In a similar way to Mintzberg et al, Johnson (1987) also distinguishes between differ-
               ent views of the strategic management process. As Exhibit 6.4 shows, he argues that
               there are three basic views that reflect more general distinctions in the social sciences.


                  Exhibit 6.4          Johnson’s three basic views of strategy

                  ■   The rationalistic view – which sees strategy as the outcome of a series of preplanned
                      actions designed to achieve the stated goals of an organisation in an optimal fashion.
                  ■   The adaptive or incremental view – which sees strategy evolving through an accumula-
                      tion of relatively small changes over time.
                  ■   The interpretative view – which sees strategy as the product of individual and collective
                      attempts to make sense of, i.e. interpret, past events.
                  Source: Johnson (1987)
Understanding strategy: origins, definitions and approaches   213

One way of considering these various definitions or views of strategy, following on
from Morgan (1986), is as metaphors. Morgan (1986) identified eight influential
metaphors that are applied to organisations (see Exhibit 6.5).


  Exhibit 6.5         Morgan’s organisational metaphors

  ■   Organisations as machines
  ■   Organisations as organisms
  ■   Organisations as brains
  ■   Organisations as cultures
  ■   Organisations as political systems
  ■   Organisations as psychic prisons
  ■   Organisations as flux and transformations
  ■   Organisations as instruments of domination
  Source: Morgan (1986)




Morgan (1986: 12–13) comments that:

 ... our theories and explanations of organizational life are based on metaphors that lead us
 to see and understand organizations in distinctive yet partial ways. ... By using different
 metaphors to understand the complex and paradoxical character of organizational life, we
 are able to manage and design organizations in ways that we may not have thought possible
 before.


   In a similar way to Morgan’s use of metaphors, the postmodernist viewpoint, as
discussed in Chapter 4, would see the varying definitions of strategy as competing
realities which managers attempt to impose on their organisations. Realists would
acknowledge that these are different perspectives that do influence organisational
strategy, but would also argue that there is a ‘real world out there’ which has to be
addressed if strategies are to be successfully realised. Complexity theorists would take
a similar view, acknowledging that different perspectives do exist and are influential
but claiming that the social world, like the natural world, is governed by order-
generating rules which organisations ignore at their peril. Therefore, whilst most
would see Mintzberg et al’s and Johnson’s definitions of strategy as metaphors or
alternative perspectives, some would also argue that they represent competing reali-
ties, whilst others would argue that there is only one reality (though this can and does
change with circumstances and time).
   Nevertheless, the explicit recognition that there are multiple definitions of strategy
can help us to make sense of the confusion of terms which litter the literature and
which different writers use in different ways. Many writers seem to treat corporate
planning, long-range planning, strategic planning and formal planning as synony-
mous. However, not all would agree. Naylor (1979), for example, defined strategic
planning as long-range planning with a time horizon of three to five years. Litschert
and Nicholson (1974) disagreed: they state that strategic and long-term planning are
214   Chapter 6 · Approaches to strategy

               not synonymous. They argue that strategic planning is a process which involves
               making a sequence of interrelated decisions aimed at achieving a desirable future
               environment for an organisation. Andrews (1998: 51), similarly, defined strategy as a:

                   ... pattern of decisions in a company that determines and reveals its objectives, purposes, or
                   goals, produces the principal policies and plans for achieving those goals, and defines the
                   range of business the company is to pursue, the kind of economic and human organisation it
                   is, or intends to be, and the nature of the economic and non-economic contribution it
                   intends to make to its shareholders, employees, customers and communities.


               What we can see from the above is that, knowingly or not, writers are using different
               definitions of strategy and thus interpreting particular terms or phrases in the light of
               their own implicit or explicit definition. Nevertheless, in the use of these various
               terms, a certain consensus of opinion does emerge with regard to the basic features of
               strategic management and strategic decisions. Most of the writers would agree with
               Johnson and Scholes (1993), who described strategy as:
               ■    concerning the full scope of an organisation’s activities;
               ■    the process of matching the organisation’s activities to its environment;
               ■    the process of matching its activities to its resource capability;
               ■    having major resource implications;
               ■    affecting operational decisions;
               ■    being affected by the values and beliefs of those who have power in an organisation;
               ■    affecting the long-term direction of an organisation.


          ■ Approaches to strategy: the Prescriptive versus the Analytical stream
               In defining strategy, especially bearing in mind Mintzberg et al’s (1998b) and
               Johnson’s (1987) various definitions, there are two further issues which need to be
               considered:
               1 Is strategy a process or the outcome of a process?
               2 Is strategy an economic/rational phenomenon or is it an organisational/social
                 phenomenon?
               Taking these two questions together, it can be seen that there are two parallel, com-
               peting and, to an extent, interacting streams of ideas. The first, the Prescriptive
               stream, sees strategy as a controlled, intentional, prescriptive process, based on a
               rational model of decision-making, which produces complete deliberate strategies
               (Ansoff, 1965; Argenti, 1974; Steiner, 1969). The second, the Analytical stream,
               which is more interested in understanding how organisations actually formulate strat-
               egy rather than prescribing how they should formulate it, argues that it is the
               outcome of the complex social and political processes involved in organisational deci-
               sion-making (Hamel and Prahalad, 1989; Miles and Snow, 1978; Mintzberg, 1987;
               Pettigrew, 1980; Quinn, 1980a).
                  The Prescriptive stream grew out of the long-range planning initiatives of the 1940s
               and 1950s, and is aimed primarily at the practitioners of strategy. Through the work
               of the Planning and Design schools, this stream dominated the practice of strategy in
Understanding strategy: origins, definitions and approaches   215

the 1960s and 1970s. They not only saw strategy as an economic-rational process, but
also considered its options and usefulness as primarily restricted to issues relating to
market share and profit maximisation (Ansoff, 1965; Porter, 1980). However, with
growing disillusionment amongst academics and practitioners over the ability of this
approach to deliver competitiveness, a new variant of this approach came to the fore in
the 1980s: the Positioning school. This school is most closely identified with Michael
Porter (1980, 1985) whose competitive forces framework reinvigorated the
Prescriptive approach and allowed it to maintain its dominance on the practice of
strategy in the 1980s and 1990s (Teece et al, 1997). The main difference between the
Positioning school and the earlier Planning and Design ones was that:

 Both the planning and design schools put no limits on the strategies that were possible in
 any given situation. The positioning school, in contrast, argued that only a few key strate-
 gies – as positions in the economic market place – are desirable in any given industry: ones
 that can be defended against existing and future competitors. Ease of defense means that
 firms which occupy these positions enjoy higher profits ... By thereby dispensing with one
 key premise of the design school – that strategies have to be unique, tailor-made for each
 organization – the positioning school was able to create and hone a set of analytical tools
 dedicated to matching the right strategy to the conditions at hand ...
                                                                  (Mintzberg et al, 1998a: 83)


   The work of Porter and the Positioning school will be discussed in more detail in
Chapter 7. However, for now, the key points to note are that the three schools that
comprise the Prescriptive stream have dominated the practice of strategy within organ-
isations since the 1960s. The reason for this is threefold. Firstly, its proponents set out
deliberately to address the needs of industry and commerce by providing them with a
blueprint for strategy formulation and implementation. Secondly, the Prescriptive
stream interacted closely with a number of leading consultants, notably the Boston
Consultancy Group, and business schools, notably Harvard, to promote their work
and tailor it to the needs of organisations. By reinforcing and promoting each other,
this triple alliance of researchers, consultants and educators created an iron orthodoxy
that organisations, especially large ones, felt they ignored at their peril. Finally, because
all three groups in this triple alliance were in effect engaged in a business activity, sell-
ing strategy as a product, they were able to invest in promoting and developing their
product in a way that others were not. As the following examination of the Analytical
stream of strategy will show, though, this did not mean that other important perspec-
tives on strategy were not developed or did not achieve acceptance by a wide audience.
It did, however, mean that these alternative perspectives have never had the same
impact on practice within organisations as those promoted by the Prescriptive stream.
   The Analytical stream, which began to appear in the 1970s and represents a more
sceptical and more academically-orientated face of strategic management, views strat-
egy not as a process, but as an outcome of a process. Its proponents’ emphasis is not
on the construction of detailed plans, which in any case they believe to be a misdi-
rected approach, but on the organisational and social aspects of strategy formation.
Their argument is that the capabilities of an organisation, in terms of its structure,
systems, technology and management style, restrict the range of strategic options the
organisation can pursue. Consequently, in a very real sense, it is the day-to-day
216   Chapter 6 · Approaches to strategy

               stream of decisions regarding the development of its capabilities that determines an
               organisation’s strategic direction, rather than the reverse (Mintzberg, 1994).
                  One of the oft-cited examples for this view is that of Japanese management.
               Pascale and Athos (1982) and Hamel and Prahalad (1989) argued that Japanese busi-
               ness success is not based on well-thought-out strategies per se, but on strategic intent
               – the commitment of Japanese managers to create and pursue a vision of their desired
               future. The vision is then used to bind an organisation together and give it a common
               purpose to which all can contribute. A key part of this common purpose is the identi-
               fication and development of the core competences and capabilities necessary for the
               achievement of the organisation’s vision.
                  This theme has been taken up by other Western writers on strategy. Kay (1993)
               used the term ‘distinctive capabilities’ rather than ‘core competences’, but is clearly
               describing the same thing. He argues that a firm’s distinctive capabilities fall under
               four headings: reputation, architecture (i.e. internal and external structures and link-
               ages), innovation and strategic assets. Kay believes that an organisation’s
               competitiveness is dependent not upon any strategic plan as such, but upon the
               uniqueness and strength of its capabilities. It is these that allow an organisation to
               take advantage of opportunities and avoid threats, whether foreseeable or not. In a
               similar way, Stalk et al (1992) used the term ‘core capability’ in referring to an organ-
               isation’s practices and business routines; and Grant (1991a) proposed a framework
               for analysing a firm’s competitive advantage in terms of its resources and capabilities.
                  To an extent, the case made by Kay, Stalk et al and Grant is complementary to
               Mintzberg’s (1987) concept of emergent strategy. Based on the many Western compa-
               nies he had studied, Mintzberg argued that successful companies do not start out with
               detailed strategic plans. Instead, their strategies emerge over time from the pattern of
               decisions they take on key aspects of their activities. Mintzberg et al (1998a: 189–90)
               draw a distinction between planned or deliberate strategies and emergent ones:

                Deliberate strategy focuses on control – making sure that managerial intentions are realized
                in action – while emergent strategy emphasizes learning – coming to understand through the
                taking of actions what those intentions should be in the first place. ... The concept of emer-
                gent strategy ... opens the door to strategic learning, because it acknowledges the
                organization’s capacity to experiment. A single action can be taken, feedback can be
                received, and the process can continue until the organization converges on the pattern that
                becomes its strategy.


                  Clearly, there are similarities between the Japanese strategic intent/competence
               approach, Mintzberg’s and that of Kay and co. However, the Japanese consciously
               work out their shared vision and consciously pursue it. The Emergent approach, at
               least in its pure form, lacks the concept of ‘vision’ and doubts the presence of con-
               scious intent. Mintzberg (1994: 25), though, does recognise that in practice some
               organisations pursue:

                ... umbrella strategies: the broad outlines are deliberate while the details are allowed to
                emerge within them. Thus emergent strategies are not bad and deliberate ones good; effec-
                tive strategies mix these characteristics in ways that reflect the conditions at hand, notably
                the ability to predict as well as the need to react to unexpected events.
Understanding strategy: origins, definitions and approaches   217

Kay (1993) took a similar view. Whilst doubting the efficacy of corporate vision per
se, he does stress that the development of capabilities is, or at least can be, a con-
scious and planned process.
   As mentioned in Chapter 4, complexity theories have had an increasing influence
on organisation theorists over the last decade. However, their influence on the strat-
egy literature has been limited by the fact that complexity theorists do not appear to
share a common view of complexity and organisational strategy. For Stacey (2003:
319–20):

 Strategy comes to be understood as the evolving patterns of an organisation’s identity. …
 Strategy as the identity of an organisation is continuously constructed and enacted in the
 interaction of organisational practice.


   For MacIntosh and MacLean (2001), strategy also has an emergent dimension to it
but, for them, a key feature of strategy is to identify and maintain the appropriateness
of the organisation’s order-generating rules. It is the presence of appropriate order-
generating rules that allow a consistent, and beneficial, pattern of action to emerge
which forms the organisation’s strategy. Bechtold (1997) and Brown and Eisenhardt
(1997) stress that the purpose of order-generating rules is to keep an organisation
operating at the edge of chaos. For them, the purpose of strategy is to create an
organisation where self-organisation can take place. It is the ability to self-organise
that they see as being crucial to maintaining/developing appropriate order-generating
rules and thus bringing about beneficial change.
   As with complexity theories, population ecology is borrowed from the physical sci-
ences. It is a Darwinist-type approach that focuses on how organisations adapt and
evolve in order to survive within the general population of organisations to which
they belong (Carroll, 1988; Morgan, 1990). Watson (1997: 273) comments that:

 One way of considering the relationship of organisations to other organisations in the envi-
 ronment is to regard them as involved in a process of natural selection: a fight for survival
 within the ecological system of which they are part. ... They go through both planned and
 unplanned ‘variations’ in their form, and, largely through processes of competition, the
 environment ‘selects’ the form which best suits the organisation. Organisations then ‘retain’
 the form which best suits their particular ‘niche’ or ‘domain’ ...


Population ecologists do not, therefore, challenge the importance of the fit or corre-
spondence between an organisation and its environment. They do, though, question
the extent to which achieving this is a conscious and planned process. In particular, as
Pettigrew et al (1992: 25) maintain: ‘Ecologists are unimpressed by the possibility
that managers can turn their organizations round, and instead stress organizational
inertia.’ This argument echoes Hannan and Freeman’s (1977: 957) assertion that:

 ... for wide classes of organizations there are very strong inertial pressures on structure aris-
 ing from both internal arrangements (for example, internal politics) and from the
 environment (for example, public legitimation of organizational activity). To claim other-
 wise is to ignore the most obvious feature of organizational life.
218   Chapter 6 · Approaches to strategy

                  Population ecologists argue that an organisation’s survival, the extent to which it
               achieves a fit with its environment, depends on a combination of the organisation’s
               own (planned and unplanned) actions, the activities of other organisations in its field
               and a strong element of luck (i.e. being in the right place, with the right combination
               of characteristics and at the right time).
                  The stress on luck or serendipity is also present in the work of writers such as
               Williamson (1991) and Weick (1979). Weick, in particular, views the world as an
               essentially ambiguous place in which it is unrealistic, and indeed impossible, to make
               detailed plans. This is clearly a strong challenge to those who emphasise the need for,
               and ability of, organisations to pursue environmental match or correspondence.
               However, Child’s (1972) concept of equifinality takes this challenge even further.
               Equifinality, as (Sorge, 1997: 13) notes:

                ... quite simply means that different sorts of internal arrangements are perfectly compatible
                with identical contextual or environmental states. The principle goes against the idea of a
                quasi-ideal ‘match’ which is inherent in the principle of correspondence. Whereas corre-
                spondence [i.e. Contingency] theory suggests that rigid and bureaucratic structures are not a
                good match for volatile and shifting product markets, equifinality theorists claim that it may
                very well turn out to be a good match but only if the level and diversity of the workforce is
                large and organization culture produces motivated and flexible actors.


               As Mintzberg et al (1998a) note in relation to equifinality, managers need to recog-
               nise that achieving a successful outcome is more important than imposing the method
               of achieving it.
                  Pettigrew (1985, 1987) and Child and Smith (1987), through their respective stud-
               ies of ICI and Cadbury, also offered important insights and perspectives on
               approaches to strategic management and environmental fit. Pettigrew argues that
               there is a need for a change theory that sees organisations and how they operate in
               their entirety, one that recognises the importance and influence of the wider environ-
               ment and appreciates the dynamic and political nature of strategy development and
               change. He is critical of theories which assume that organisations are rational entities
               pursuing agreed goals that reflect their best interests. Instead, he argues that organisa-
               tions have to be understood in the context of the constraints and possibilities offered
               by the environment in which they operate and in relation to the self-interests of the
               individuals and groups that comprise them.
                  Pettigrew, therefore, sees organisations primarily as political systems in which
               groups and individuals, under the guise of rationality, seek to mobilise support for,
               and legitimate the pursuit of, strategies and actions that promote or sustain their per-
               sonal or sectional interests. Particular groups or individuals may achieve a position of
               dominance, but that dominance is always subject to prevailing intra-organisational
               and environmental conditions. Therefore, Pettigrew rejects the view that strategy is a
               rational process of deliberate calculation and analysis. Instead he believes that organi-
               sational strategy – though often cloaked in rational and analytical terms – is in reality
               the outcome of a combination of internal political struggles, between groups and indi-
               viduals seeking to influence policy in their favour, and external environmental
               pressures and constraints (this argument was examined in more detail in Chapter 5).
Understanding strategy: origins, definitions and approaches   219

   Child and Smith’s (1987) firm-in-sector perspective has some similarities with
Pettigrew’s work; however, they take a more realist perspective, arguing for a stronger
determining link between the individual firm and the sector in which it operates, and a
lesser role for organisational politics. As shown in Exhibit 6.6, they suggest three areas
of firm–sector linkage that shape and constrain the strategies organisations pursue.


  Exhibit 6.6          Child and Smith’s firm-in-sector perspective

  1. The ‘objective conditions’ for success. Though each firm within the sector may pursue
     a different strategy, these will all tend to focus on or be determined by similar success
     factors such as customer satisfaction, quality, profitability, etc.
  2. The prevailing managerial consensus. Within and across a sector, regardless of the
     organisation in which they work, managers are likely to develop a common and
     (implicitly at least) agreed view of how firms should operate, the key factors in their
     industry and the basis on which they compete with one another.
  3. The collaborative networks operating in the sector. These may be with customers,
     suppliers, outside experts or even competitors.
  Source: Child and Smith (1987)




   Child and Smith’s (1987) view draws on economic theories of the firm and suggests
that the sector, particularly when strongly competitive, determines the path a firm
must take for its future success. Though not denying a role for organisational politics,
they claim that, unless the strategic decisions a firm takes are consistent with the con-
ditions prevailing in its sector, success may be jeopardised. Therefore, though falling
in the Analytical stream, Child and Smith appear to exhibit a greater faith in a
rational and linear progression from market sector analysis to strategy formulation
and implementation than Pettigrew and many other writers.
   The Analytical stream also has a number of other variants, most notably those who
see the role and personality of leaders as being the key determinants of successful
strategy (Bennis and Namus, 1985). Leadership will be touched on later in this chap-
ter, and covered more extensively in Chapter 16; nevertheless, merely mentioning here
it serves to emphasise the somewhat disparate nature of the Analytical stream of
strategy. Proponents of this stream are united by a number of factors such as their
attempt to understand rather than prescribe strategy; their orientation, mainly, to an
academic rather than a business audience; and their view of organisations as complex
social entities operating within dangerous, dynamic and unpredictable environments.
On the other hand, the proponents of the elements which make up the Analytical
stream are divided by their emphasis on different aspects of strategy, such as politics,
the industry sector, the general environment, organisational and national cultures,
leadership, etc. They are also divided by their explicit or implicit adherence to post-
modernist, realist or complexity perspectives. So, although it is true to say that
proponents of the Japanese-inspired strategic intent/competence argument came to
the fore in the 1990s, it is also true to say that they are challenged by the proponents
of the other elements in this stream who still exert a powerful influence on the debate
over strategy. It follows that their differences with each other are as important as their
differences with proponents of the Prescriptive stream of strategy.
220   Chapter 6 · Approaches to strategy


Understanding strategy: choices and constraints
               Whilst the above identifies key themes in the debate over organisational strategy, it
               still presents a somewhat confusing picture. Clearly there is a distinction between
               those who adhere to the Prescriptive stream of strategy, which arose from the long-
               range planning approach of the 1940s and 1950s, and the Analytical stream as
               represented by, amongst others, the strategic intent/competences approach of the
               1980s and 1990s. What is not clear, however, is the degree to which a common
               understanding and perspective exists amongst those collected under the Analytical
               umbrella. Certainly, a number of writers have tried to argue that a common perspec-
               tive does exist. Brown and Jopling (1994) believed that the main distinction lies
               between the writers of the 1950s and 1960s who, they argue, saw strategy as basi-
               cally concerned with fitting the organisation to its environment, and the writers of the
               1980s and 1990s who, they argue, see strategy as focusing on internal issues, mainly
               to do with the development of core competences. They base their case on a contin-
               gency perspective. The earlier approach, they argue, was suitable to organisations
               operating in relatively stable and predictable environments, who had a limited prod-
               uct range, and where competition was restricted. With the advent of greater
               competition and more unstable environments, this approach was no longer viable,
               and firms had to look internally at how they could organise themselves to cope with
               the new situation. To an extent, this is an attractive analysis. However, though it is
               true that the earlier writers on strategy – such as Ansoff and company – did concen-
               trate on product–market mix issues, it is also true that later they came to appreciate
               the link between the outside and the inside (Moore, 1992). Also, whilst Mintzberg
               and others have concentrated on internal capabilities, the Japanese approach has been
               to see the internal and external as two sides of the same coin, which is why they
               emphasise the importance of the strategic outward-looking vision driving the develop-
               ment of internal capabilities.
                   Nevertheless, such a simple distinction, based on one dimension of organisational
               life, cannot resolve the complex differences between and within the Prescriptive and
               Analytical streams. As Mintzberg et al (1998a) noted, the strategy field is more eclec-
               tic and more populous, in terms of different approaches, than ever before. In such a
               situation, attempts to fit writers into two camps, whether they be early and late,
               external and internal, are bound to fail. The multiple-definition view of strategy
               argued by Mintzberg et al (1998b), and particularly their proposition that the various
               definitions of strategy are both competing and complementary, offers another per-
               spective. Strategy can be considered as either a process or an outcome. It can also be
               considered as either a rational approach or a political/social phenomenon. The vari-
               ous approaches to strategy do not reflect some underlying truth; rather they are
               different approaches that organisations can choose (consciously or not) to adopt,
               depending on their circumstances, objectives and management.
                   If this is the case, it may be that instead of looking for a theory of or approach to
               strategy that unifies and encompasses all the others, we should turn the argument on
               its head and ask, as we did with organisational theory, whether there is a ‘one best
               way’ for strategy?
                   In approaching this question, it is valuable to return to Child’s (1972) concept of
               equifinality. As stated earlier, by Sorge (1997: 13), equifinality ‘quite simply means
Understanding strategy: choices and constraints   221

that different sorts of internal arrangements are perfectly compatible with identical
contextual or environmental states’. To paraphrase this definition, and to stretch the
concept a little further than Child might have intended, it could be argued that differ-
ent approaches to strategy formulation may be perfectly compatible with positive
outcomes. This may especially be the case if one takes account of the growing opin-
ion, as expressed in this and the previous chapters, that though organisations are
constrained by their circumstances, they do possess the ability to manipulate and
influence these circumstances to their own benefit. If this is the case, then, as
Mintzberg et al (1998a: 365) maintain, ‘the question is not whether there exists
strategic choice, but how much’. To approach this question, we need to attempt to
classify the various approaches to strategy in order to establish the degree to which
they incorporate or exclude choice.
   Though the above review of approaches to strategy cannot claim to be all-embracing,
it does cover the key protagonists in the area. Whilst it separates the main approaches
into two streams, however, it does not provide a classification or taxonomy of the vari-
ous approaches. Whittington (1993) attempted to make sense of the many definitions
and categories of strategy by identifying four generic approaches to strategy: the
Classical, Evolutionary, Processual and Systemic (see Exhibit 6.7).


  Exhibit 6.7        Whittington’s generic approaches to strategy

  ■   The Classical approach. This is the oldest and most influential approach to strategy. It
      portrays strategy as a rational process, based on analysis and quantification, and aimed at
      achieving the maximum level of profit for an organisation. It argues that, through rigorous
      analysis and planning, senior managers can predict future market trends and shape the
      organisation to take advantage of these.
  ■   The Evolutionary approach. As the name implies, this uses the analogy of biological
      evolution to describe strategy development. It believes that organisations are at the mercy
      of the unpredictable and hostile vagaries of the market. Those organisations that survive
      and prosper do so not because of their ability to plan and predict, which is impossible,
      but because they have been lucky enough to hit on a winning formula. From this perspec-
      tive, successful strategies cannot be planned, but emerge from the decisions managers
      take to align and realign their organisations to the changing environmental conditions.
  ■   The Processual approach. This perspective concentrates on the nature of organisational
      and market processes. It views organisations and their members as shifting coalitions of
      individuals and groups with different interests, imperfect knowledge and short attention
      spans. Markets are similarly capricious and imperfect but, because of this, do not require
      organisations to achieve a perfect fit with their environment in order to prosper and sur-
      vive. Strategy under these conditions is portrayed as a pragmatic process of trial and error,
      aimed at achieving a compromise between the needs of the market and the objectives of
      the warring factions within the organisation.
  ■   The Systemic approach. This approach sees strategy as linked to dominant features of
      the local social system within which it takes place. The core argument of this perspective
      is that strategy can be a deliberate process, and planning and predictability are possible,
      but only if the conditions within the host society are favourable. Therefore, to an extent,
      this is a contingency approach to strategy which can accommodate situations where firms
      do not seek to maximise profit or bow to market pressures. If the conditions within the
                                                                                                      ▲
222   Chapter 6 · Approaches to strategy



                   Exhibit 6.7 continued
                      host society are supportive, markets can be manipulated, financial considerations can
                      become a secondary issue, and stability and predictability can be achieved. Also, under
                      such conditions, the objectives managers seek to pursue may be related more to their
                      social background, degree of patriotism or even professional pride, than to profit
                      maximisation. Therefore, from the Systemic perspective, the strategy an organisation
                      adopts and the interests managers pursue reflect the nature of the particular social
                      system within which it operates.
                   Source: Whittington (1993)




                  Whittington’s categorisation of generic approaches to strategy is extremely useful
               in making sense of the plethora of approaches on offer. As one would expect, it is not
               perfect; some writers, such as Mintzberg, could fall under more than one heading,
               whilst others, like Child and Smith, are difficult to locate. Nevertheless, the Classical
               approach, with its modernist leanings, would clearly incorporate the work of the
               Planning, Design and Positioning school and the early Western writers on strategy.
               The Evolutionary approach has links with both the work of the complexity theorists
               and population ecologists; Mintzberg’s (1994) work on emergent strategy might also
               fall under this heading. The Processual approach could also cover Mintzberg’s work,
               certainly includes Pettigrew’s (1985, 1987) work on organisational politics and sits
               reasonably comfortably with the postmodernists. The Systemic perspective, which has
               a realist tinge to it, clearly owes much to the Japanese approach to strategy as
               described by Hamel and Prahalad (1989).
                  Whittington (1993) also categorises these four approaches to strategy in terms of
               how they view outcomes and processes. He argues that the Classical and
               Evolutionary approaches see profit maximisation as the natural outcome of strategy.
               The Systemic and Processual approaches, on the other hand, believe other outcomes
               are both possible and acceptable, such as stability, environmental responsibility or
               maintenance of an organisation’s dominant coalition. With regard to processes, the
               groupings change. Here the Classical and Systemic both agree that strategy can be a
               deliberate process. The Evolutionists and Processualists, though, see strategy as
               emerging from processes governed by chance and confusion.
                  Whittington’s four categories of strategy can be summarised as follows:
               ■   Classicists see strategy as a rational process of long-term planning aimed at max-
                   imising profit.
               ■   Evolutionists also believe that the purpose of strategy is profit maximisation, but
                   regard the future as too volatile and unpredictable to allow effective planning.
                   Instead, they advise organisations to focus on maximising chances of survival
                   today.
               ■   The Processualists are equally sceptical of long-range planning, and see strategy as
                   an emergent process of learning and adaptation.
               ■   The Systemic perspective argues that the nature and aims of strategy are dependent
                   upon the particular social context in which the organisation operates.
Understanding strategy: choices and constraints   223

To an extent, the four approaches to strategy have some similarity to the Western
approaches to organisation theory discussed in Part 1. The Classical, Evolutionary
and Processual approaches are clearly ‘one best way’ or ‘only possible way’
approaches, whereas the Systemic approach offers a Contingency perspective on strat-
egy. They also share some common ground with organisation theory on the issue of
rationality. The Classical and Systemic approaches argue that strategy is or can be
rational and intentional in its development and objectives. The Processualists believe
that it is rational in neither aspect; the Evolutionists take a similar view of process,
but appear to adopt a rational perspective on outcomes, in that profit maximisation is
seen as the only outcome that guarantees survival.
   In their view of the scope for managerial choice and judgment, three of these four
approaches to strategy do appear to be more permissive than organisation theory.
Clearly, the Classical strategy theorists leave little scope for either: their instruction
seems to be to follow the textbook in terms of outcomes and processes or else.
However, both the Evolutionists and the Processualists emphasise the need for man-
agers to be fleet of foot and percipient in making key decisions responding to
opportunities or threats; although the Evolutionists (rather like Napoleon in his view
of generals) appear to believe that, at the end of the day, a lucky manager may be
more desirable than an able one. For advocates of the Systemic approach, choice and
judgment are important, but tend to be constrained by the limits and objectives of the
society in which they are located.
   It would appear, therefore, that managerial choice, preference and judgment, for all
but the Classicists, do have a role to play in determining not just an organisation’s
strategy, but also the particular approach to strategy it adopts. In our examination of
the strategy literature, however, it is clear that choice is constrained and can only be
exercised within limits (from some perspectives, very narrow limits indeed). As Figure
6.1 shows, these limits or constraints, which are suggested by or inferred from the lit-
erature, can be classified under four headings.




                                          Business
                                        environment




                                        Managerial            National
                    Industry/sector
                                         choice             characteristics




                                       Organisational
                                       characteristics


Figure 6.1 Constraints on managerial choice
224   Chapter 6 · Approaches to strategy


               National objectives, practices and cultures
               The case for country-specific constraints very much follows the argument of the
               Systemic perspective on strategy. This view sees the operation of organisations as
               strongly influenced by the social system in which they operate. In some cases, such as
               in Japan and Germany, patriotism, national pride and a collectivist ethos have created
               a business environment that supports the pursuit of long-term national objectives.
               This is reflected in the behaviour of individual firms and financial institutions that
               favour stable growth over the medium to long term, rather than short-term profit
               maximisation. In Britain and the USA, on the other hand, the climate is far more sup-
               portive of individual endeavour and short-term profit maximisation rather than the
               national interest per se.
                  The difference between these two approaches is neatly summed up in the old
               saying that ‘What’s good for General Motors is good for America’. The Japanese
               would, of course, transpose this to read ‘What is good for Japan is good for Toyota’.
               This view also draws support from Hofstede’s (1980, 1990) work on national cul-
               tures discussed in Chapter 5. The implication, therefore, is that organisations ignore
               national norms at their peril: the pursuit of short-term profit maximisation in Japan
               and Germany is likely to be as difficult, and perhaps as counter-productive, as the
               pursuit of a long-term strategy of growing market share, which ignores short-term
               profitability, would be in the UK or the USA. Nevertheless, these constraints are open
               to manipulation and avoidance. The move by many British companies – Dyson,
               GKN, etc. – to manufacture outside the UK and/or to form international alliances is
               an example of this, as is the Japanese trend to establish manufacturing plants in the
               USA and Europe in order to avoid high production costs on the one hand and import
               quotas on the other. Another example is the lobbying of governments and national
               and international bodies for changes in laws and regulations that particular organisa-
               tions or industries see as operating against their interests.

               Industry and sector practices and norms
               This follows from Child and Smith’s (1987) firm-in-sector perspective. As discussed
               earlier, they believe that the objective conditions operating in a sector, managers’
               understanding of the dynamics of the sector, and the nature and degree of inter-firm
               collaboration all combine to determine the path a firm must take for its future suc-
               cess. This is especially the case where the sector is highly competitive. In effect, Child
               and Smith’s argument is that firms must stick to the rules of engagement in their
               sector or perish. However, they do concede that, where competition is less intense,
               then managers have a greater degree of freedom with regard to the selection of strat-
               egy. Indeed, the low level of competition may explain how Japanese companies were
               able to change the rules of engagement to their advantage in many industries in the
               1960s and 1970s (Hamel and Prahalad, 1989); although it is also the case that
               Japanese companies pay less attention to today’s sectoral constraints than to re-
               shaping the rules of the game to create competitive conditions more favourable to
               themselves (Turner, 1990). Another method of overcoming sectoral constraints and
               conditions is, as illustrated by Allaire and Firsirotu (1989), by diversifying into new
               products and different sectors.
Understanding strategy: choices and constraints   225

Business environment
For nearly all the approaches to strategy that we have discussed, their proponents
assume, explicitly or implicitly, that they are operating in a particular type of environ-
ment. The Classical approach to strategy is clearly predicated on the existence of a
relatively stable and predictable environment. If this exists, then predicting the future
and planning accordingly is a much less hazardous exercise than would otherwise be
the case. The Systemic view also seems to assume a degree of environmental stability.
As the history of Japan and Germany show, however, stability needs to be actively
promoted by government–industry cooperation rather than relying on the invisible,
and often volatile, hand of the market. For Processualists, and even more so for
Evolutionists, the environment is a hostile, unpredictable and uncertain place.
Planning is almost impossible, and success comes either from continuously adapting
to changes in the environment, or from being in the right place at the right time.
    For three of these perspectives, the environment is a given, even if they disagree
about exactly what is given. However, for those advocating a Systemic approach, the
environment is not a given: it can be changed. As this chapter and Part 1 have argued,
there is now a considerable body of evidence from a number of different perspectives
to this effect (Hatch, 1997; Morgan, 1986). Shapiro (1989) utilises the tools of game
theory to show how firms influence the behaviour and actions of their competitors,
and in so doing change the environment in which they operate. In a similar way,
Teece et al (1997) argue that investments in production capacity, R&D and advertis-
ing can all be used to alter an organisation’s environment favourably. Weick (1979)
takes a different perspective. He argues that the world is so complex and ambiguous
that an organisation cannot possibly ‘know’ its environment. Instead, organisations
have to ‘enact’ their environment; that is to say, they have to develop and act upon
their own interpretation of their environment. This is very similar to the learning
organisation and postmodernist perspectives, as discussed in Chapters 3 and 4, that
organisations have the ability to ‘invent’ their own reality. The implication from these
different perspectives is that though many companies may have to adjust their strate-
gic approach to environmental conditions, some companies may be able to do the
reverse. The UK National Health Service is a good example of this. As Burnes and
Salauroo (1995) noted, the NHS operated prior to 1990 as a typical government
bureaucracy. The government allocated resources and gave policy direction, whilst the
NHS centrally planned how resources would be allocated and policies operationalised
(i.e. the Classical approach to strategy). This meant that there was considerable sta-
bility and predictability in its environment. However, the government of the day
wanted the NHS to operate in a more cost-conscious and entrepreneurial mode. To
facilitate and encourage this, it changed the way funds were provided and distributed.
Rather than funds being given as of right to service providers (e.g. hospitals), they
were reallocated to service purchasers (e.g. local doctors) who could decide what to
buy and from whom. This creation of a market for the provision of medical services
destabilised the environment and made planning and prediction very hazardous exer-
cises (thus making an Evolutionary or Processual approach to strategy more relevant).
However, with a change of government in 1997, the pendulum began to swing back.
Whilst wishing to retain some of the perceived benefits of a market system, the new
government announced that it would modify the purchaser–provider system to create
greater stability (Salauroo and Burnes, 1998).
226   Chapter 6 · Approaches to strategy

                  Normally, attempts at manipulating the environment aim to reduce uncertainty, or
               at least cope with rather than increase, it. Allaire and Firsirotu (1989) identified three
               ways of coping with uncertainty. The first of these is through predicting and planning
               (the Classical approach). The second is to restructure for flexibility (the Contingency
               approach). The third, however, is to manipulate or control the environment. Allaire
               and Firsirotu cite the examples of Boeing and IBM, who created and subsequently
               dominated their environments. Another major approach they identify is the use of
               cooperative strategies – collusion, market-sharing and other methods of reducing
               competition. An example of this in the UK was the agreement by the main companies
               in the milk industry to ‘carve up the country so they stop competing with each other’
               for doorstep sales (Cowe, 1995: 40). Perhaps the most famous recent example is
               Microsoft’s attempt to dominate the market for Internet products by providing its
               web browser ‘free’ to everyone who bought its Windows operating system. Therefore,
               as can be seen, there is certainly sufficient evidence to show that it is possible to
               change, control or manipulate the environment in which an organisation operates,
               and thus either necessitate or make possible a particular approach to strategy.

               Organisation characteristics
               Obviously, there are many organisation characteristics that act to constrain or facili-
               tate managerial choice. However, there do appear to be four that have particular
               importance: structure, culture, politics and managerial style. Apart from the latter,
               these have been reviewed extensively in Chapters 3 and 4 and can be discussed rela-
               tively briefly. An organisation’s structure and culture have clear implications for
               managerial choice in the area of strategy. Organisations with organic structures and
               task cultures are likely to be resistant to or incapable of operating a Classical form of
               strategy. Similarly, organisations with mechanistic structures and role cultures are
               likely to have a somewhat hostile attitude towards Processual or Evolutionary
               approaches to strategy. Moving on to the issue of organisational politics: where deci-
               sions are heavily influenced by individual and/or group self-interest, as averse to
               organisational objectives, it is unlikely that a Classical or Systemic approach to strat-
               egy would be successful. A Processual or Evolutionary approach, though, would have
               clear applicability.
                  There remains the subject of managerial or leadership style. There has been consid-
               erable interest in recent years in applying Burns’ (1978) pioneering work on political
               leadership to leadership in organisations (Burnes and James, 1995; Beatty and Lee,
               1992; and Gibbons, 1992). Burns identified two basic organisational states: conver-
               gent – a stable state; and divergent – where predictability and stability are absent. For
               each of these states, he argued, there is an appropriate managerial style. Convergent
               states require managers with a transactional style – ones who are good at optimising
               the performance of the organisation within the confines of existing policy. Divergent
               states, however, require managers with a transformational style – ones who challenge
               the status quo and create new visions. It follows from this that transactional man-
               agers will prefer approaches to strategy that stress continuity and predictability (i.e.
               the Classical or, in some circumstances, Systemic approach), whilst transformational
               managers will be more comfortable with a Processual or Evolutionary type of
               approach. Managerial style will be further discussed in Chapter 16.
Understanding strategy: choices and constraints   227

     As was the case with the other three forms of constraint, organisational characteris-
  tics can be amended. The debate on structure and culture has been well covered
  already, but the level of political behaviour is also open to change. As Pfeffer (1981,
  1992) showed, though political behaviour is never absent from organisations, there are
  situations where it is likely to be more prevalent. In particular, political behaviour is
  likely to be most evident where major structural changes are taking place that affect
  the power distribution in organisations. By recognising that this is the case, by taking
  steps to reduce ambiguity and by trying to increase the transparency and openness of
  the decision-making process, the ability of individuals to pursue their own interests can
  be reduced. This is demonstrated by the Japanese ringi system, which promotes exten-
  sive and open debate over decisions in order to ensure that they fit in with the
  company’s objectives rather than those of sectional interests. As far as changing mana-
  gerial styles is concerned, although there is evidence that these are shaped and changed
  by the organisations in which managers work, there is also considerable evidence that
  senior managers tend to change organisations to fit their style (Morgan, 1986).


■ Choices and constraints: summary
  It should be borne in mind that the particular mix of these four forms of constraint
  will vary from organisation to organisation, even where these operate in the same
  country and industry. Also, it needs to be recognised that these constraints are as
  likely to conflict with each other as they are to complement each other: for example,
  car companies operating in the UK may find that the culture of the UK’s financial
  institutions favours short-term profit maximisation, whilst the car industry appears to
  require long-term investment in building market share. This may be one reason why
  the UK motor industry is now mostly foreign-owned. In addition, it should be noted
  that whilst managers are not obliged to take account of the constraints they face, they
  may well pay a price for this in terms of the performance of their organisation.
  Successful firms are likely to be ones whose managers are aware of, and can balance,
  the various constraints they face. This obviously raises the issue of managerial ability
  and competence, an issue we shall explore in some depth in Chapter 16.
     Therefore, the key point to recognise from the above review is that the type of
  strategic approach adopted is a matter of managerial choice, but that choice is con-
  strained by a variety of organisational, environmental, sectoral and national factors,
  as are the outcomes which flow from it. As was argued in Part 1, organisations and
  managers may be able to influence or change the constraints they face. Therefore, by
  recognising, as Figure 6.1 shows, that there are real constraints on managerial choice,
  one is acknowledging that both the realist and complexity perspectives on organisa-
  tions have much to offer. However, by recognising that some constraints can be
  consciously manipulated or influenced and changed, one is also acknowledging that
  the postmodernist’s arguments should not be lightly dismissed.
     Nevertheless, both the case for managerial choice and the argument for manipulat-
  ing constraints need to be taken with a pinch of salt. The fact of the matter is that in
  the West, as noted by many writers, the Classical approach to strategy, latterly through
  the work of the Positioning school, is still dominant (Joyce and Woods, 2001; Rigby
  and Gillies, 2000; Teece et al, 1997; Whittington, 1993). Also, as noted in Chapter 5,
  there is a tendency for decision-makers to ‘satisfice’. That is to say, rather than under-
228   Chapter 6 · Approaches to strategy

               taking an extensive examination of the issues involved and searching for all the possi-
               ble solutions, decision-makers tend to accept the first satisfactory solution to a
               problem (Butler, 1997). This equates to Argyris and Schon’s (1978) concept of single-
               loop learning (see Chapter 3). It is also similar to Cohen et al’s (1972) comment that
               decisions are often not taken but happen. They suggest that decisions occur when four
               independent streams meet: problems, solutions, participants and choice opportunities –
               the so-called Garbage Can model of decision-making. They argue that when a problem
               becomes severe it demands attention. Solutions, on the other hand, are answers look-
               ing for a problem. Participants are the people in the organisation possessing problems
               and/or solutions, while choice opportunities are occasions when organisations are
               required to make a decision. When these four elements come together, decisions occur.
               Seen in this way, decision-making is not conscious, rational or systematic; on the con-
               trary, decisions are haphazard, accidental and unplanned. From a slightly different
               perspective, Nelson and Winter (1982) argue that in many cases decision-making is an
               unconscious and automatic process, based on a repertoire that individuals develop
               over time of responses to particular situations. This is similar to Ashforth and Fried’s
               (1988) observation that there is a tendency in some organisations for behaviour to
               become almost mindless – employees and managers, as a result of organisational
               socialisation and experience, respond automatically to events in a programmed way.
               Consequently, though the potential for choice exists, the reality is that many managers
               appear not to exercise it, preferring instead to stick to tried-and-tested, routine, ortho-
               dox, textbook approaches – regardless of their suitability.
                   Yet, it is important to note that, in the academic world, the weight of the argument
               appears to be shifting from seeing strategy as a rational, mathematical process, to
               seeing it as the outcome of the ability of an organisation’s management to utilise its
               strengths and competencies in the competitive pursuit of success. There are some writ-
               ers, however, who believe the reverse is true of the business world, and that more and
               more firms are opting for rational decision-making approaches to strategy based on
               value-maximising financial techniques and quantitative analysis of market positions
               (Grant, 1991b; Teece et al, 1997). Whatever the truth or otherwise of this view, the
               main strategies favoured by organisations – as the following chapter will show – are
               still, though no longer exclusively, market- and quantitatively-orientated, and certainly
               give greater credence to rational decision-making than to more qualitative approaches.


Conclusions
               Strategic planning or management has moved in and out of fashion over the years
               and is once again firmly back in fashion (Galagan, 1997; Joyce and Woods, 2001;
               Rigby and Gillies, 2000). It has developed considerably since it began to be widely
               used in America in the 1950s and 1960s. No longer is strategy purely about the exter-
               nal world, no longer is it solely seen as a rational, quantitative process. Neither is it
               any longer seen as a process that is geared towards predicting the future, but instead
               it seeks to shape or create the future (Joyce and Woods, 2001). Indeed, writers and
               practitioners from different backgrounds and countries, such as Hamel and Prahalad
               (1994), Mintzberg et al (1998b), Ohmae (1986) and Stacey (2003), have argued that
               it is not a process at all, but the outcome of a process: an outcome that is shaped not
               by mathematical models but by human creativity.
Conclusions   229

   The move towards this new, more emergent, perspective on strategy has been
brought about by the mounting criticisms against the Classical or Prescriptive
approach to strategy. The main criticisms are that it is mechanistic, inflexible, and
reliant on quantitative tools and techniques of dubious validity. The result is that
organisations who attempt to construct strategies using the Classical approach fall
foul of what Peters and Waterman (1982) described as ‘Paralysis Through Analysis’
and ‘Irrational Rationality’. In effect, organisations contort themselves in a vain
attempt to make the real world fit the constraints and limitations of their mathemati-
cal models, rather than vice versa.
   The alternative view, and one that is gaining adherents, is that organisations should
move away from exclusive reliance on mathematical models. Instead, human creativ-
ity should be brought into play. Senior managers should create a vision of the
organisation’s future – establish its strategic intent. This should then be pursued
relentlessly by the organisation. In the process of doing so, the strategy emerges from
the decisions that are taken with regard to resource allocation, organisation structure
and the other key areas of operation. From different perspectives, a number of writers
have come to the same conclusion. For successful companies, strategy does not
appear to be a preconceived and detailed set of steps for achieving a coherent package
of concrete goals within a given timescale. Neither does it seem to be a rational
process that is amenable to mathematical modelling. Rather, it is the outcome of a
process of decision-making and resource allocation that is embarked upon in pursuit
of a vision (though even here there is disagreement about how conscious this process
is). Such an approach is inherently irrational, inherently unplannable – it cannot be
modelled or quantified, though it can and must be pursued with rigour and determi-
nation. Needless to say, just as the rational approach to strategy sat easily with a
modernist perspective, so the irrational approach sits better with the postmodernist
view of the world.
   In this chapter, we have suggested a third approach, one which sides with neither
the quantitative nor qualitative schools of thought. Instead, it has been argued that
the approach to strategy that organisations adopt is or can be the outcome of mana-
gerial choice and preference. However, choice in this respect, as in most others, is
constrained. The key constraints identified were societal, sectoral, environmental and
organisational. Whilst on the face of it this appears to impose severe limitations on
the degree of freedom managers have with regard to the choice of strategy, it was also
argued that managers can influence or manipulate the constraints they face in order
to create their own preferred organisational reality. Therefore, though being very
much in the realist and complexity camps, it does not totally reject the postmodernist
view either.
   This follows on from Part 1, where it was claimed that managers are not the passive
creatures portrayed by much of organisation theory. Instead of having to adapt their
organisations to the circumstances in which they find themselves, they can attempt to
amend or even reinvent the circumstances. So, managers in organisations faced by a
dynamic and unpredictable environment could seek to change markets and/or prod-
ucts, influence the behaviour of competitors, or change customers’ perceptions, in
order to reduce uncertainty and increase predictability. By so doing, an organisation
could still function efficiently at the more mechanistic end of the mechanistic–organic
spectrum, if that was the type of structure preferred by its managers.
230   Chapter 6 · Approaches to strategy

                  This argument would seem equally applicable to the constraints managers face
               when choosing an approach to strategy. Some managers might prefer an Evolutionary
               or Processual approach to strategy, either because it suits their own temperament or
               because they believe that a hostile and turbulent environment suits them better than
               their competitors (the move by Rupert Murdoch’s newspapers in the UK in the 1990s
               to start a price-cutting war was an example of this). On the other hand, constraints
               might be manipulated or changed for ideological reasons, such as the attempt by most
               Western governments to privatise or introduce market forces into the public sector.
               The point is that the possibility does exist for managers to choose not only the
               approach to strategy but also, to an extent at least, the constraints they face.
                  To choose an approach to strategy is one thing; to apply it is an entirely different
               matter. As Mintzberg et al (1998a and b) observe, whether one takes the view that
               strategy drives change or that it emerges from the changes an organisation makes, the
               two are inseparable. Therefore, just as this chapter has reviewed the main arguments
               with regard to strategy, so the remaining chapters in Part 2 will review the strengths
               and weaknesses of the main approaches to applying strategy and implementing change.


Test your learning

          ■ Short answer questions
                1 What does Hoskin (1990) see as being the origins of modern business strategy?

                2 Define long-range planning.

                3 What technique did the Design school develop for assessing an organisation’s potential?

                4 How do Johnson and Scholes (1993) define strategy?

                5 What is the Prescriptive school of strategy?

                6 What is the Analytical school of strategy?

                7 What is emergent strategy?

                8 What is an umbrella strategy?

                9 What are the main constraints on organisational choice?

               10 Describe the relationship between organisational strategy and organisational change.



          ■ Essay questions
               1 How do Whittington’s four generic approaches to strategy relate to the Prescriptive and
                 Analytical schools of strategy?

               2 Discuss the following statement: strategy development and implementation can never
                 be a rational process.
Suggested further reading   231


 Suggested further reading
1 Mintzberg, H, Ahlstrand, B and Lampel, J (1998) Strategy Safari. Prentice Hall: Hemel
  Hempstead.
  Almost anything with Henry Mintzberg’s name on it is worth reading and this book is no
  exception. It provides a succinct and pertinent review of the main perspectives on strategy.
2 Whittington, R (2001) What is Strategy and Does it Matter? (2nd edition). Thomson
  Learning: London.
  In this short and eminently readable book, Richard Whittington challenges much of the
  orthodox thinking on strategy.
Chapter 7

Applying strategy
Models, levels and tools




 Learning objectives
 After studying this chapter, you should be able to:
 ■   describe the three basic approaches to strategy that organisations can adopt;
 ■   discuss the three levels of strategic decision-making in organisations;
 ■   list the main strategic planning tools;
 ■   state the strengths and weaknesses of quantitative tools;
 ■   list the advantages and disadvantages of qualitative tools;
 ■   understand why quantitative tools have tended to be preferred to more
     qualitative ones;
 ■   appreciate the growing interest in vision-building techniques;
 ■   identify the implications for organisational change of both quantitative and
     qualitative tools and techniques.
Introduction     233

Exhibit 7.1       Strategy development tools

Managers resort to old tools in a crisis                                                                                  FT

Many executives around the world have abandoned          valuable clients, was abandoned by 18 per cent of
‘new economy’ management tools such as corporate         users. The figures compared with an average 11 per
venturing in favour of tried-and-tested methods to       cent defection rate from the 25 management tools
navigate the economic downturn, according to a           considered by the survey. Only a third or fewer
survey by Bain & Co, the strategy consultancy. Bain’s    respondents adopted these new economy tools
annual ‘management tools’ survey, involving senior       during the year. Managers reported finding the tools
executives from 451 companies in 22 countries,           difficult to implement. With corporate venturing, they
found dissatisfaction was highest with formerly trendy   said their companies had trouble mastering the
tools that had been seen as offering a path to rapid     required venture capital disciplines, including making
growth. Forty-two per cent of users last year aban-      a quick exit from failing ventures. The most com-
doned corporate venturing – the creation of new          monly used tools last year were strategic planning,
businesses using venture capital methods. Thirty-nine    mission and vision statements … although 77 per
per cent dropped ‘market disruption analysis’, used to
                                                         cent of respondents said most tools promised more
identify where to launch businesses in competition
                                                         than they delivered.
with outside start-ups. Customer relationship man-
agement, using the internet to identify and retain       Source: Alison Maitland, Financial Times, 18 July 2001, p. 10.




               Introduction
              This chapter begins where the previous one ended. Chapter 6 reviewed the main per-
              spectives on strategy. In seeking to understand and define strategy formulation, it
              identified two streams of thought, the Prescriptive and the Analytical. As the name
              implies, the Prescriptive stream comprises approaches that seek to ‘prescribe’ how
              organisations should undertake strategy but, in so doing, tends to ignore or downplay
              the irrational and highly convoluted nature of organisational life. The Analytical
              stream, on the other hand, rather than telling organisations how they should build
              strategy, seeks to analyse – to understand and describe – the complexity and range of
              forces that affect how organisations actually do build strategy. This divergence is
              reflected in their respective views of strategy. The Prescriptive stream, which was the
              first on the scene and is very much practitioner-orientated, sees strategy formulation
              as an economic-rational process based on mathematical models. The Analytical
              stream, which began to appear in the 1970s, represents the more reflexive and more
              academically-orientated face of strategy. It views strategy not as a process, but as an
              outcome of a process. Its proponents’ emphasis is not on the construction of detailed
              plans, which in any case they believe to be an unworkable approach, but on the
              organisational, social and political aspects of strategy formulation.
                 The two streams represent markedly different perspectives on strategy formulation,
              and whilst the Analytical stream has tended to win the academic arguments over the
              last 20 years, the Prescriptive one has had considerably more impact and influence on
              the practice of strategy. Nevertheless, as the survey by Bain & Co (Exhibit 7.1) shows,
              though management tools come and go, the use of mission and vision statements has
              now joined the more quantitatively-orientated strategic planning tools favoured by the
234   Chapter 7 · Applying strategy

               majority of companies, though most managers appear to have a healthy scepticism
               about what can be achieved by either quantitative or qualitative tools.
                  This chapter begins by examining the three basic types or models of strategy that
               organisations can adopt: the Competitive Forces model; the Resource-Based model;
               and the Strategic Conflict model. The chapter then moves on to look at the three
               levels of strategic decision-making in organisations: corporate, business and func-
               tional. This is followed by a review of the main strategic planning tools.
                  The chapter ends by arguing that one of the principal reasons for the dominance of
               prescriptive approaches to strategy has been the alliance between leading consultan-
               cies and business schools in America to develop, market and update these. In so
               doing, the Prescriptive school has established itself as the orthodox, safe and practical
               approach to strategy formulation. Nevertheless, with the take-up of more analyti-
               cally-based types of strategy, this is beginning to change. As Chapter 6 maintained,
               the model or type of strategy an organisation should adopt, and the associated plan-
               ning tools that accompany it, are dependent upon the constraints the organisation
               faces. However, organisations do not have to fit themselves and their strategies to
               these constraints. Rather, they have a choice; they can seek to influence or mould the
               constraints they face in order to make them more amenable to the type or model of
               strategy they wish to pursue. Therefore, the approach to strategy an organisation
               adopts may have less to do with the merits of the different models on offer and more
               to do with the type of organisation it is and the orientation of its managers.


Types of strategies
               As the previous chapter demonstrated, there is a wide, and often confusing, variety of
               approaches to strategy development that organisations can adopt. It follows that the
               same comment can be made with regard to the types of strategy that organisations do
               actually adopt in order to achieve competitive advantage over their rivals (Johnson
               and Scholes, 2002; Joyce and Woods, 2001). However, Teece et al (1997) argue that,
               in the main, there are only three basic types or models of strategy that organisations
               do adopt in practice, which are as follows.


          ■ The Competitive Forces model
               This stems from the Positioning school and, since its inception in the 1980s, has
               become the dominant approach to strategy. The central tenet of this approach is the
               need to align the organisation with its environment, the key aspect of which is the
               industry or industries in which it competes. Proponents of this view believe that
               industry structure strongly influences the competitive rules of the game as well as the
               range of strategies open to the organisation. This model is most closely associated
               with the work of Michael Porter (1980, 1985) and his ‘five forces’ framework (see
               Figure 7.1).
                  Porter argues that it is these five industry-level competitive forces, the bargaining
               power of buyers and sellers, the threat of potential substitute products and new
               entrants, and rivalry among existing competitors, that determine the inherent profit
               potential of an industry. Consequently, he argues, these are the main factors which an
Types of strategies   235


                                      Threat of potential
                                        new entrants




               Threat of substitute   Competition among     Bargaining power
                    products          existing companies        of buyers




                                       Bargaining power
                                         of suppliers



Figure 7.1 Porter’s five competitive forces



organisation needs to take into account when developing its strategy. For Porter
(1985: 47), strategy is concerned with ‘… positioning a business to maximise the
value of the capabilities that distinguish it from its competitors.’ Porter (1980) main-
tains that there are only three basic generic strategies a firm can adopt in order to
outperform competitors: cost leadership, product differentiation and specialisation by
focus (these are discussed in more detail below). Porter believes that a firm’s ability to
increase its profits is dependent on its ability to influence the competitive forces in the
industry or to change its market position in relation to competitors and suppliers.
This approach obviously has links to Contingency Theory (see Chapter 2), given that
it is based on a systematic empirical search for relationships between external condi-
tions and internal strategies. In addition, because of its focus on the importance of
sector and industry factors, it has an affinity with Child and Smith’s (1987) firm-in-
sector perspective discussed in Chapter 6.
    There is little doubt that the Positioning school in general, and Porter’s work in
particular, has had a huge influence on the practice of strategy within organisations
(Hussey and Jenster, 1999; Johnson and Scholes, 2002). However, as one would
expect, it has also attracted considerable criticism. Miller (1992) criticised it as too
narrow and inflexible, and thus likely to leave organisations vulnerable if social, tech-
nological or economic developments lead, as can happen, to rapid changes in the
market place. Mintzberg et al (1998a) noted that the Positioning school’s assumption
of rationality ignores the political nature of organisations; that it is biased towards
big business, where market power is greatest, and therefore has little to say to small
and medium-sized enterprises; and that its dependence on analysis and calculation
impedes both learning and creativity. For Fleisher and Bensoussan (2003), the key
weaknesses of Porter’s approach are its lack of explicit recognition of the importance
of socio-political factors, its lack of a longitudinal focus and that it underestimates
the importance of core competences. A further and telling criticism is that the big
competitive battles of the last 30 years, especially between Japanese and American
firms, tend not to have been won by those who have identified and defended their
236   Chapter 7 · Applying strategy

               market position, but by those, such as Toyota and Cannon, who have used their
               unique resources to change the rules of the game itself (Hamel and Prahalad, 1989,
               1994). For these reasons, the last decade has seen a growing interest in both the
               Resource-Based and Strategic Conflict models of strategy.


          ■ The Resource-Based model
               In terms of achieving competitive advantage, the Resource-Based view sees above-
               average profitability as coming from the effective deployment of superior or unique
               resources that allow firms to have lower costs or better products, rather than from
               tactical manoeuvring or product market positioning (Fahy, 2000). Such resources
               include tangible assets, such as plant and equipment; intangible assets, such as patents
               and brands; and capabilities, such as the skills, knowledge and aptitudes of individu-
               als and groups (Amit and Schoemaker, 1993; Hall, 1993; Wernerfelt, 1995). The
               resource-based perspective grew from the work of economists who, in seeking to
               identify the factors which gave rise to imperfect competition and super-normal prof-
               its, drew attention to differences between firms in terms of technical know-how,
               patents, trademarks, brand awareness and managerial ability (Chamberlin, 1933;
               Learned et al, 1965; Penrose, 1959). Consequently, proponents of the Resource-Based
               view see firms as being heterogeneous in respect of their resources, i.e. no two firms
               possess exactly the same combination of these. However, this view really came to the
               fore in the 1980s and 1990s as an explanation for the rise of corporate Japan. It was
               out of research into the competitiveness of Japanese firms that Prahalad and Hamel
               (1990) produced their article, The Core Competence of the Corporation. In it, they
               argue that real competitive advantage comes from the ability to build at lower cost
               and more speedily than competitors those core competences that spawn unanticipated
               products. They also argue that senior managers should spend a significant proportion
               of their time developing a corporation-wide architecture for establishing objectives
               for competence-building. The influential study of the car industry by Womack et al
               (1990), The Machine That Changed The World, came to a similar view of Japanese
               competitiveness. Support for this perspective has also come from a number of studies
               of Western firms. Cool and Schendel (1988) showed that there are systematic and sig-
               nificant performance differences among firms in the same industry sectors. Rumelt
               (1991) showed that intra-industry profit differentials are greater than inter-industry
               differentials. Kay’s (1993) work on strategy also comes to the conclusion that an
               organisation’s success comes from developing distinctive capabilities.
                  Hax and Majluf (1996: 10) state that:

                 The essence of the resource-based model ... [is] that competitive advantage is created when
                 resources and capabilities that are owned exclusively by the firm are applied to developing
                 unique competencies. Moreover, the resulting advantage can be sustained due to the lack of
                 substitution and imitation capabilities by the firm’s competitors.

               The influence of the resource-based view has grown considerably over the last decade
               (Fahy, 2000). It is now the received wisdom that organisations should, in Peters and
               Waterman’s (1982) phrase, ‘stick to the knitting’ and discard activities that are not
               part of their core business and which do not build on their core competences (Hax
Types of strategies   237

   and Majluf, 1996). Nevertheless, there are criticisms which have been raised against
   this view of strategy, including the lack of empirical support, complex and ambiguous
   definitions of resources and that it is merely a rehash of the SWOT analysis (Fleisher
   and Bensoussan, 2003). In addition, because resources cannot easily or quickly be
   acquired or developed, in the short run, firms are stuck with the ones they possess.
   Therefore, depending on the circumstances, and how they change, these firm-specific
   assets can be either a boon or a curse. Perhaps the main criticism of this approach
   comes from population ecologists who argue that, because these competences take so
   long to develop and environments change so quickly, any beneficial match between an
   organisation’s competences and its environment is more likely to be accidental or for-
   tuitous rather than the result of deliberate or foresightful actions by managers
   (Hannan and Freeman, 1988). This is perhaps why there has also been a growing
   interest in the Strategic Conflict model, that draws attention to the dynamic nature of
   organisational strategy.


■ The Strategic Conflict model
   This model harks back to the military metaphor, and portrays competition as war
   between rival firms. In particular, there is a tendency to draw on the work of military
   strategists such as von Clausewitz (von Clausewitz et al, 2001) and Sun Tzu
   (Michaelson, 2001) and attempt to apply their military aphorisms to modern business
   organisations (Mintzberg et al, 1998a). Sayings such as, ‘No battle plan ever survived
   the first encounter with the enemy’ are used to illustrate not just the dynamic nature
   of strategy but also the need to respond to competitors who do not always behave as
   anticipated. In its current manifestation, it came to prominence with the publication
   of Carl Shapiro’s (1989) article, The Theory of Business Strategy. Central to this
   approach is the view that a firm can achieve increased profits by influencing the
   actions and behaviour of its rivals and thus, in effect, manipulate the market environ-
   ment. This can be done in a number of ways, such as by investment in capacity
   (Dixit, 1980), R&D (Gilbert and Newberry, 1982) and advertising (Schmalensee,
   1983). However, such moves will have little impact if they can be easily undone;
   therefore, to be effective, they require irreversible commitment.
      Also, it is argued, these various manoeuvres are crucially dependent on what one
   firm thinks another firm will do in a particular situation. Therefore, the model incor-
   porates the role of strategic signalling as an important mechanism for influencing or
   intimidating rivals. This includes such practices as predatory pricing (Kreps and
   Wilson, 1982) and limit pricing (Milgrom and Roberts, 1982). In addition, more
   recently, the model has come to embrace issues relating to the role of commitment
   and reputation (Ghemawat, 1991) and the simultaneous use of competition and
   cooperation (Brandenburger and Nalebuff, 1996).
      Therefore, from the strategic conflict perspective, an organisation’s ability to
   increase its profits is dependent on its ability to outwit, out-bluff and out-manoeuvre
   its rivals. This approach also draws on game theory to understand the nature of com-
   petitive interaction between rival firms. Game theory has allowed established intuitive
   arguments concerning various types of business tactics and strategy (e.g. predatory
   pricing) to be explained and formalised. In terms of the Prescriptive and Analytical
   streams of strategy, although Porter (1980) acknowledges the benefits of strategic
238   Chapter 7 · Applying strategy

               manoeuvring, it does not fit in with his or the rest of the Positioning school’s work.
               Instead, its emphasis on quick-wittedness, gut instinct and the more emotional ele-
               ments of decision-making means it sits better with the Analytical stream.
                  Given that conflict-based strategies do not take account of the wide range of external
               and internal factors which also contribute to an organisation’s competitiveness, its use-
               fulness may well be limited. As Teece et al (1997) noted, strategic conflict is likely to be
               more appropriate in situations where there is an even balance between rivals in an
               industry (e.g. Coca-Cola and Pepsi) rather than in situations where one organisation
               has a substantial competitive advantage over its rivals (e.g. Microsoft). In these latter
               situations, it is perhaps the Resource-Based model of strategy that is of most interest.
                  These three types or models of strategy are all currently fashionable, though Porter
               and the Positioning school are the more dominant. They are, however, very different
               in their emphasis and timescales. The Strategic Conflict model is very much about
               out-manoeuvring the opposition, and tends to have a short-term focus, although a
               number of its tactics do have longer-term implications. The Competitive Forces model
               is concerned with identifying and occupying a defensible market position, and thereby
               achieving higher profits than others in the industry. This tends to have a medium-term
               focus. The Resource-Based model has a much longer-term focus than either of the
               other two. Its proponents believe that organisations need to build strategic compe-
               tences that, almost through a process of serendipity, will allow it to meet future and
               unanticipated market needs.


Levels of strategy
               It is easier to see how the three types of strategy above are applied in practice by
               examining the three levels of strategic decision-making in organisations: corporate,
               business and functional (see Exhibit 7.2).


                  Exhibit 7.2         Levels of strategic decision-making

                  ■   The corporate level. Strategy at this level concerns the direction, composition and
                      co-ordination of the various businesses and activities that comprise a large and diversified
                      organisation, such as Rupert Murdoch’s News International or Richard Branson’s
                      Virgin empire.
                  ■   The business level. Strategy at this level relates to the operation and direction of each of
                      the individual businesses within a group of companies, such as Nissan’s car assembly
                      plant at Sunderland.
                  ■   The functional level. Strategy at this level concerns individual business functions and
                      processes such as finance, marketing, manufacturing, technology and human resources.



               Each of these three levels has its own distinct strategic concerns and each can draw on
               a different battery of strategic tools, techniques and approaches to aid them.
               Nevertheless, it is important to remember that they are interrelated. Traditionally, it
               has been assumed that the corporate level sets the direction for each of its constituent
               businesses and, in turn, these set the direction for their various functions. Though this
Levels of strategy   239

is true for some organisations, it is now recognised that these three levels interact in
an iterative and dynamic fashion (Johnson and Scholes, 2002; Lynch, 1997).
Therefore, as Mintzberg (1994) argues, just as business level and functional level
strategy can be seen as being imposed or driven by corporate level decisions, so cor-
porate level strategy can be seen as emerging from, or being shaped by, functional
level and business level decisions and actions. Consequently, it follows that although
there are strategies at the corporate level that have their counterparts at the business
and the functional levels, it would be wrong to assume that this is always a product
of a top-down rather than a bottom-up process.
   Moving on to look at these three levels in more detail: at the corporate level, strat-
egy is said to deal with the ‘game plan’ for managing diversified enterprises whose
activities cut across a number of different areas of business (Fleisher and Bensoussan,
2003). It concerns itself with the questions listed in Exhibit 7.3.


  Exhibit 7.3        Corporate strategy questions

  ■   What is the mission of the organisation?
  ■   What are its unique attributes?
  ■   How should the business portfolio be managed?
  ■   Which existing businesses should be disposed of and which new ones acquired?
  ■   What priority and role should be given to each of the businesses in the current portfolio?
  The central strategic concerns at the individual business level are:

  ■   How should the firm position itself to compete in distinct, identifiable and strategically
      relevant markets?
  ■   Which types of products should it offer to which groups of customers?
  ■   How should the firm structure and manage the internal aspects of the business in support
      of its chosen competitive approach?
  Functional level strategy concerns itself with the following issues:

  ■   How can the strategies formulated at the corporate and business levels be translated into
      concrete operational terms in such a way that the individual organisational functions and
      processes (marketing, R&D, manufacturing, personnel, finance, etc.) can pursue and
      achieve them?
  ■   How should the individual functions and processes of the business organise themselves
      in order not only to achieve their own aims, but also to ensure that they integrate with the
      rest of the business to create synergy?



   Given the different concerns of these three levels, it is easy to appreciate the need to
integrate the strategies and structures at these three levels. Otherwise, for example, the
corporate level may pursue a strategy of diversification whilst the individual businesses
are busy concentrating their efforts on fewer products and markets. However, it is also
easy to appreciate why in practice it is so difficult for large diversified organisations to
identify and pursue a consistent strategy through all areas of their activities (Joyce and
Woods, 2001; Lynch, 1997). As argued in the last chapter, strategy formulation and
240   Chapter 7 · Applying strategy

               implementation is not a mechanical process that begins at the corporate level and
               moves in a linear and logical fashion through to the functional level. Strategy formula-
               tion is inherently iterative, and aims to optimise the operation of the organisation in its
               entirety rather than maximising the product of any one particular part. These issues,
               and the main differences in scope and focus of the individual levels, can clearly be seen
               by a brief examination of the types of strategy that are pursued at the corporate, busi-
               ness and functional levels.


          ■ Corporate level strategy
               Broadly speaking, there are six basic forms of strategy that organisations pursue at
               this level:
               ■   Stability strategy (also known as maintenance strategy). As its name implies, strate-
                   gies under this heading are designed to keep organisations quiet and stable. They are
                   most frequently found in successful organisations, operating in medium-attractive-
                   ness industries, which are faced with unpredictable circumstances outside the range
                   of their normal business experience. Because of their markets and products, such
                   organisations believe they have no need to make sudden changes and have the time
                   and position to allow events to unfold before making any response (Wheelen and
                   Hunger, 1989). A typical example would be an established mortgage lender whose
                   business would both necessitate and allow it to take a longer-term perspective.
               ■   Growth strategy. This is possibly the most common form of all corporate strate-
                   gies, and involves either concentrating on dominating one industry (e.g.Vodafone)
                   or growing by diversification across a number of industries (e.g. Virgin). As a
                   number of writers have suggested (see Argenti, 1974; Byars, 1984), its basic attrac-
                   tion is twofold. Firstly, it is claimed that there is a strong and proportional
                   correlation between increased turnover and increased profit. Secondly, the per-
                   formance of senior managers tends to be measured in terms of the annual increase
                   in turnover and profit. There are those, however, who point out that increases in
                   turnover are not necessarily matched by increases in profits and that, given the
                   need to invest to achieve growth in turnover, growth may actually weaken a com-
                   pany’s financial health (Byars, 1984; Drucker, 1974).
               ■   Portfolio extension. This is another variant of the growth strategy, but is achieved
                   through mergers, joint ventures or acquisitions, rather than through internally-gen-
                   erated organic growth. The first two of these, mergers and joint ventures, allow
                   growth or development to take place, without the organisations involved having to
                   invest the level of resources that would be necessary if they were operating in isola-
                   tion. The latter, acquisition, is usually resource-intensive but brings immediate
                   gains in the form of an established and, hopefully, profitable business (Byars, 1984;
                   Little, 1984; Leontiades, 1986).
               ■   Retrenchment strategy. This strategy is usually only embarked upon when an
                   organisation is in trouble or, because of adverse market conditions, sees trouble
                   ahead. It usually involves a process of downsizing, i.e. cutting back on numbers
                   employed and activities undertaken. In some situations this may lead to selling off
                   the entire enterprise. The general aim, however, is to cut back in order to match
                   expenditure to projected income, and refocus the organisation so as to be able once
                   again to attain prosperity in the future (Bowman and Asch, 1985; Thompson and
                   Strickland, 1983).
Levels of strategy   241

■    Harvesting strategy. This involves reducing investment in a business or area of
     activity in order to reduce costs, improve cashflow and capitalise on whatever
     residual competences or areas of advantage still remain. This approach can be
     implemented at different rates depending on the urgency of the situation. Slow har-
     vesting means to reduce financial support at such a slow rate that it almost appears
     to be a maintenance strategy; at the other extreme, fast harvesting can result in
     budgets being cut at such a rate that it seems almost indistinguishable from liquida-
     tion (Harrigan, 1980; Kotler, 1978; Porter, 1980).
■    Combination strategy. The above strategies are not mutually exclusive, and can be
     linked together in whatever combination seems appropriate given the circum-
     stances of the organisation in question. Combination strategies, however, are
     clearly more appropriate, or at least more necessary, in large multi-divisional
     organisations where the circumstances faced by the different activities are likely to
     vary. Therefore, in such situations, organisations may experience a constant flurry
     of change, where some parts are being run down and/or disposed of whilst new
     units are being acquired and other areas of the business rapidly expanded (Glueck,
     1978; Pearson, 1977).
   The above list is not exhaustive, nor can it be, given that each organisation is free
to develop its own strategic variant in relation to its own circumstances. As argued in
Chapter 6, it is the circumstances of the particular organisation in question that
should dictate the type of strategy adopted by its managers, rather than any attempt
to copy what has been successful elsewhere. Though Porter’s Competitive Forces
model can be applicable to all these forms of strategy, the Strategic Conflict and
Resource-Based models appear to be applicable more to situations where growth is
being pursued or where companies have a strong market position. Nevertheless, it
needs to be remembered that it is the precepts and assumptions of Porter and the
Positioning school which still dominates the practice of strategy. A further point to
note is that all except the first, maintenance strategy, imply fundamental restructuring
of the internal operations of the organisation. In such situations, there are likely to be
winners and losers, and managers may be more concerned with preserving their jobs
and power than choosing the best strategy for the organisation (Mintzberg, 1994).
   Nevertheless, in both America and Europe, over the last 20 years, the tide has been
turning against corporate strategy, or rather against the large corporate centres
responsible for developing corporate strategy and which wielded so much power in
the 1970s and 1980s. The case against them is summed up by Koch (1995: 78) who
maintains that:

    Anything other than a minimal [corporate] Centre can only be justified if the Centre adds
    more value than it costs and subtracts from the business. ... Yet it should be clear that ...
    independent of their cost, most corporate Centres destroy more value than they add.


This negative view of corporate strategy has, perhaps, been most vociferously cham-
pioned by Peters and Waterman (1982), but has also received strong support from
academic researchers (Goold et al, 1994). The result of this is that there has been an
increasing tendency to devolve responsibility for strategy from the corporate to the
business level.
242   Chapter 7 · Applying strategy


          ■ Business level strategy
               Whilst corporate level strategies are mainly concerned with managing diversified
               enterprises whose activities span a number of different areas, business level strategies
               relate to the different ways that an individual business unit can compete in its chosen
               market(s). However, it must be remembered that business level strategies are chosen
               and deployed within the framework of an overall corporate strategy and not in isola-
               tion from it, though the degree of freedom allowed to individual business units in this
               respect will vary from organisation to organisation (Johnson and Scholes, 2002). To
               this end, the strategic concerns of managers at the business level tend to be, as Hax
               and Majluf (1996: 46) note:

                 ... the mission of the business, the attractiveness of the industry in which the business
                 belongs, and the competitive position of the business unit within the industry. These are the
                 inputs that determine the strategic agenda of a business and lead to the formulation and
                 implementation of its strategy.


               Just as at the corporate level, the available business level strategies are many and
               varied. Rather than attempt to describe them all, we shall examine the main variants
               by addressing Porter’s (1980, 1985) work in this area.
                  Porter (1985: 11) argues that there are only two ‘basic types of competitive advan-
               tage a firm can possess: low cost or differentiation’. He adds to these the ‘scope’ of
               the business (i.e. the range of its markets) to create ‘three generic strategies for achiev-
               ing above average performance’. As mentioned earlier, these are cost leadership,
               product differentiation and specialisation by focus.

               Cost leadership
               The aim of this strategy is to achieve overall lower costs than one’s competitors, with-
               out reducing comparable product quality. To do this requires a high volume of sales
               in order to allow organisations to structure themselves in such a way that they can
               achieve economies of scale. This strategy, to quote Porter (1980: 15), requires the:

                 ... aggressive construction of efficient scale facilities, vigorous pursuit of cost reductions
                 from experience, tight cost and overhead control, avoidance of marginal customer accounts,
                 and cost minimisation in areas like R&D, services, sales force and so on.


               Product differentiation
               This strategy attempts to achieve industry-wide recognition of different and superior
               products and services compared to those of other suppliers. This recognition can be
               accomplished through the design of special brand images, technology features, cus-
               tomer service or higher quality, all of which have implications for the structure and
               operation of companies. Achieving differentiation is likely to result in insulation
               against competitive rivalry due to securing customer loyalty. The resultant competitive
               advantage also leads to increased returns, sometimes through making customers less
               sensitive to high product price.
Levels of strategy   243

Specialisation by focus
In this case the strategy is concerned with selecting (focusing upon) only certain mar-
kets, products or geographical areas in which to compete. Porter argues that by
focusing in this way, it becomes feasible for a firm to dominate its chosen area(s). The
method of achieving domination could either be through cost advantage or product
differentiation. According to Porter (1980: 15), however, such niche markets must
have certain characteristics which separate them out from the market in general:

 ... the target segment must either have buyers with unusual needs or else the production and
 delivery system that best serves the target must differ from that of the other industry segments.

If the niche market grows, or is incorporated, into a larger market, then market domi-
nance is unlikely to be retained. In such circumstances, the previously dominant
organisation will find itself having to compete for market share with others. In effect,
the rules of the game will have changed and a different strategy is required – either
attempting to gain cost leadership across the entire market, or adopting a product dif-
ferentiation policy that neutralises other competitors’ cost advantage.

Porter’s assertion concerning these three strategies is that they are distinct and cannot be
mixed. That is to say, it is not possible to pursue successfully a cost leadership strategy
and a product differentiation strategy at the same time because each requires different
organisational arrangements to be successful. Also, if a firm does not achieve cost lead-
ership, product differentiation or specialisation in its products, services or market, it is
bound to produce low profitability and have below-average performance. Porter (1980:
41) refers to these sorts of firms as ‘stuck in the middle’ because they lack:

 … the market share, capital investment, and resolve to play the low cost game, the industry-
 wide differentiation necessary to obviate the need for a low cost position, or the focus to
 create differentiation or low cost in a more limited sphere.

Nevertheless, influential though Porter’s work is, there are many who disagree with
him on this point (Mintzberg et al, 1998a). Hlavacka et al (2001), in a study of public
and private hospitals in the Slovak Republic, found that those which pursued a ‘stuck
in the middle’ strategy had the best performance. An earlier study by Dess and Davis
(1984) also questioned Porter’s view. They found evidence to show that businesses
with both a low cost and a high differentiation position can be very successful.
   Miller (1992) challenged Porter’s assertion that firms should pursue only one strat-
egy. He points out that such strategic specialisation can lead to inflexibility and
narrow an organisation’s vision. In addition, Gilbert and Strebel (1992) point to the
success of ‘outpacing’ strategies. This is where firms enter a market as low-cost pro-
ducers and then, once established, differentiate to capture a larger slice of the market.
This was the approach, i.e. moving from one successful form of strategy to another,
used by Japanese companies to capture Western markets in the 1970s and 1980s
(Johnson and Scholes, 2002). In so doing, Japanese firms used a Strategic Conflict
approach, but this was underpinned by their commitment to building and developing
their core competences. Therefore, though Porter’s work has tended to dominate the
practice of strategic management in Western firms, both the Resource-Based and
244   Chapter 7 · Applying strategy

               Strategic Conflict models have shown their worth. Nevertheless, regardless of which
               business level approach to strategy organisations have followed, prompted by the suc-
               cess of Japanese companies, there has been a growing interest in the importance of
               functional level strategy (Hax and Majluf, 1996; Schonberger, 1982).


          ■ Functional level strategies
               The main functional level strategies concern marketing, finance, R&D, technology,
               human resources, manufacturing/operations and purchasing. Of the three levels of
               strategic decision-making, the functional level has probably been the most neglected
               by Western organisations. This is for three reasons. Firstly, the concentration at both
               the corporate and business levels on the external world, i.e. the market, led to a lack
               of interest in the internal operation of organisations. The assumption was that the
               internal world was malleable, and could and should adjust to the priorities set by cor-
               porate and business strategists (Schonberger, 1982). Secondly, key elements of
               functional level strategy, especially concerning finance, marketing, R&D and technol-
               ogy, were in effect determined and constrained by corporate strategists. Indeed, in
               many organisations, even the human resource strategy was determined at the corpo-
               rate level. Finally, even though the 1980s saw a renewed interest in functional level
               strategy, this tended to be one-sided, stressing soft, personnel-type issues. As discussed
               in Chapter 3, in seeking to understand and emulate Japanese success, Western
               researchers created the 7 S Framework: strategy, structure, systems, staff, style, shared
               values, and skills (Peters and Waterman, 1982; Pascale and Athos, 1982). Though
               acknowledging that the Japanese were strong in and integrated all the seven Ss, the
               tendency in the West was to stress the so-called soft Ss: staff, style, shared values and
               skills. This not only continued to neglect areas such as manufacturing/operations and
               purchasing, but also, in so doing, failed to produce the sort of integrated corporate,
               business and functional level strategies that were seen as lying at the core of Japanese
               competitiveness. Once again, this highlights the difficulty that Western strategy prac-
               titioners, consultants and theorists have with creating an approach to strategy that
               goes beyond focusing on particular aspects and takes an all-encompassing view
               (Mintzberg et al, 1998a).
                   In examining the corporate, business and functional levels, it can be seen that there
               are only a limited number of forms of strategy that organisations tend to adopt and
               which flow from the Competitive Forces, Strategic Conflict and Resource-Based
               models of strategy discussed earlier. However, the appropriateness of any of these for
               a particular organisation is, as maintained in Chapter 6, related to the nature of the
               societal, sector, environmental and organisational constraints it faces. These include
               the stage of product–market evolution, the competitive position the firm has, the
               competitive position it seeks, the business strategies being used by rival firms, the
               internal resources and distinctive competences at a firm’s disposal, the prevailing
               market threats and opportunities, the type and vigour of competition, customer
               needs, and the conditions that financial institutions place on capital availability, to
               mention only the more obvious ones (Hax and Majluf, 1996; Johnson and Scholes,
               1993; Koch, 1995; Thompson and Strickland, 1983). In addition, it must be
               acknowledged that generic strategies will always give rise to a host of variants and,
               therefore, at any one time the choice of the most suitable strategy will be a highly
Levels of strategy    245

   complex task. Indeed, this is what one would expect. If choosing and implementing
   strategy was easy, then all firms would be successful. But, given that success is usually
   measured in relative terms, by definition not everyone can be successful; therefore,
   strategy formulation will and must remain fraught with danger and complexity.
      A major point to note, though, is that almost without exception, whatever form of
   strategy is adopted, it will require the organisation to achieve a fit between its exter-
   nal environment and internal structures, culture and practices. Contrary to the views
   of earlier writers on strategy (such as Ansoff, 1965), if organisations are driven by
   their external environment, internal arrangements may, and probably do, need to
   change, often radically, in order to achieve the desired market-place objectives. This
   once again emphasises the importance of functional level strategy and shows why it
   should not be treated as a lesser issue. Nevertheless, it should also be borne in mind,
   as argued in previous chapters, that the possibility does exist for organisations to
   shape the external environment to fit in with their internal arrangements. The fact
   that many do not, may say more about the type of organisation they are than the con-
   straints they face.


■ Types of organisation
   Miles and Snow (1978) developed an important variant of the argument on types of
   strategy. Rather than attempting to classify the types or levels of strategy that organi-
   sations can adopt, they classify the organisations themselves as strategic types, based
   on the rate at which an organisation changes its products or markets. Miles and Snow
   identified four strategic types (see Exhibit 7.4).


     Exhibit 7.4         Classification of strategic types

     ■   Defenders. These seek internal stability and efficiency by producing only a limited set of
         products, directed at a narrow but relatively stable segment of the overall market, which
         they defend aggressively. Such organisations are characterised by tight control, extensive
         division of labour and a high degree of formalisation and centralisation.
     ■   Prospectors. These are almost the opposite of defenders. They aim for internal flexibility
         in order to develop and exploit new products and markets. To operate effectively in a
         dynamic environment they have a loose structure, low division of labour and formalisa-
         tion, and a high degree of decentralisation.
     ■   Analysers. These types of organisation seek to capitalise on the best of both the preced-
         ing types. They aim to minimise risk and maximise profit. They move into new markets
         only after viability has been proved by prospectors. Their internal arrangements are char-
         acterised by moderately centralised control; with tight control over current activities but
         looser controls over new undertakings.
     ■   Reactors. This is a residual strategy. These types of organisation exhibit inconsistent and
         unstable patterns caused by pursuing one of the other three strategies erratically. In gen-
         eral, reactors respond inappropriately, perform poorly, and lack the confidence to commit
         themselves fully to a specific strategy for the future.
     Source: Miles and Snow (1978)
246   Chapter 7 · Applying strategy

                  Though Miles and Snow’s classification has received empirical support from some
               researchers (e.g. Shortell and Zajac, 1990), others have questioned its applicability
               across industries (e.g. Hambrick, 1983). Notwithstanding this, as Waldersee and
               Sheather (1996) point out, there are some similarities between Miles and Snow’s
               work and Porter’s work. They argue that successful firms pursue one of two basic
               types of strategy – innovative or stability.
                  Organisations pursuing innovative strategies, which embrace both Porter’s product
               differentiators and Miles and Snow’s prospectors, seek to achieve success through
               reducing price competition by offering products and services that are considered
               unique in terms of their design, brand image and features. On the other hand, organi-
               sations pursuing stability strategies, which embrace Porter’s cost leaders and Miles
               and Snow’s defenders, seek to achieve success by locating and maintaining secured
               niches in stable product areas where they can produce higher-quality or lower-price
               products than their competitors.
                  Covin (1991) agrees with the proposition that successful organisations pursue one
               of two forms of strategy, though he labels them entrepreneurial and conservative. The
               former falls within Waldersee and Sheather’s innovative category, whilst the latter
               falls within their stability category. Covin argues that the strategy an organisation
               adopts reflects its basic nature (i.e. its culture). Therefore, for Covin, the selection and
               pursuit of strategy is driven by managerial style and organisational culture. However,
               Waldersee and Sheather dispute this. Their work sought to examine the relationship
               between strategy and managerial style, and whether one drove the other. Their con-
               clusion, which was tentative, was that different types of strategy may predispose
               managers to act in different ways (i.e. managerial style follows strategy type) rather
               than managers’ styles predisposing them to a particular type of strategy. Yet, recalling
               Chapter 6’s discussion of strategy and the constraints on managerial choice, it could
               be argued that these writers are taking too narrow and deterministic a view. It might
               well be that, depending on the constraints faced by managers and their perceptions of
               these, in some situations strategy does require managers to adopt a particular style of
               working, whilst in other situations managerial style does influence the nature of the
               strategy adopted. This discussion of the relationship between managerial style and
               organisational context will be returned to in the concluding chapter of this book.
                  Before moving on to examine the strategic tools that organisations have at their
               disposal, it is important to remember that the concept of strategy (whether at the
               functional, business or corporate level) is contentious. There are many influential
               writers who do not believe in strategy as a conscious and planned process (e.g.
               Mintzberg, 1994; Pettigrew, 1985; and Stacey, 2003). This does not invalidate corpo-
               rate, business or functional strategies per se, but it does mean that they occupy a
               problematic and contested terrain.


Strategic planning tools
               This section briefly reviews the main tools that organisations use to select and con-
               struct their strategies. By and large, these tools tend to have either a quantitative or a
               qualitative bias. In the past, and to a major extent even now, it was the quantitative
               tools (mathematical models) that tended to dominate. This is largely a reflection of
Strategic planning tools   247

  the types of strategy organisations adopt, and a (not unrelated) preference for quan-
  tification, especially in the financial arena, in the USA, where many of the leading
  tools of and approaches to strategy originated (Grant, 1991b; Hax and Majluf, 1996;
  Moore, 1992). It should be noted, though, that other leading industrial nations, espe-
  cially Germany and Japan, place less reliance on financial and other quantitative
  measures in determining strategy (Carr et al, 1991; Whittington, 1993). For example,
  the Japanese electronics giant, NEC, never uses discounted cash flow; and though
  Toyota does calculate cash flows, it does not take account of them for decision-
  making purposes (Williams et al, 1991). Nevertheless, even in the USA and the UK
  where financial considerations appear paramount, there has been a movement away
  from the sole reliance on quantitative techniques, and a growing interest in softer,
  qualitative tools such as scenario/vision-building (Fleisher and Bensoussan, 2003;
  Joyce and Woods, 2001; Rigby, 2001). In part, this interest in more qualitative tech-
  niques is a result of the perceived failure, especially in the face of Japanese
  competition, of more quantitative approaches favoured by proponents of the
  Positioning school to deliver a genuine and sustainable competitive advantage. This
  interest in qualitative techniques has also received a boost from the growing interest
  in the Strategic Conflict and Resource-Based approaches to strategy. In addition, it
  forms part of, and has been given impetus by, the move away from quantification and
  towards the use of more qualitative techniques in organisation theory in general.
     As one would expect, there are an enormous range and number of tools and tech-
  niques available to the strategist. However, perhaps the ones that have attracted most
  attention are, in chronological order:
  1 the PIMS (Profit Impact on Marketing Strategy) model;
  2 the Growth-Share Matrix;
  3 the Scenario construction approach.
  The first two focus on corporate and business level strategies and are biased towards
  large organisations that have an established and significant presence in the markets
  they serve. The third, though, has no such restrictions or biases and can be applied to
  a wide range of situations.


■ PIMS
  The PIMS (Profit Impact on Marketing Strategy) programme was launched in 1972
  and derived from research by Sidney Schoeffler. This was put into practice by General
  Electric, who wanted to analyse their operations with the aim of identifying those fac-
  tors determining business success (Schoeffler, 1980). In 1975, Schoeffler founded the
  Strategic Planning Institute (SPI), which is linked to Harvard Business School, to pro-
  vide a permanent base for the PIMS work. Since then, PIMS has grown to become the
  largest privately owned database in the world, comprising over 200 major corpora-
  tions and some 2,600 individual business units (McNamee, 1985; Moore, 1992).
     The rationale underlying the PIMS model is that certain characteristics of a busi-
  ness and its markets determine profitability. Consequently, understanding these
  characteristics and acting upon them will aid a company to become more profitable.
  The model is based upon the belief that there are three major factors which determine
  a business unit’s performance: its strategy, its competitive position, and the
248   Chapter 7 · Applying strategy

               market/industry characteristics of the field in which it competes (Moore, 1992).
               Underpinning the model are two key assumptions. The first is that all business situa-
               tions are basically alike and obey the same laws of the market place (Schoeffler,
               1980). The second is that the future will resemble the past, i.e. if certain linkages
               between strategy and performance resulted in profitability in the past, they will do so
               again in the future (Buzzell and Gale, 1987).
                  PIMS operates as a form of club. It collects information from its member compa-
               nies relating to such factors as market share, profitability, product quality and
               investment. This information is fed into the PIMS database and is then used to pro-
               vide individual members with answers to questions such as:
               ■   What profit rate is ‘normal’ for a given business?
               ■   What strategic changes are likely to improve performance?
               ■   What are the likely effects on profitability, cash flow, etc., of adopting a particular
                   strategy?
                  There has been much discussion as to the success of the PIMS. Certainly, some of
               its users, as well as academic observers, regard it as having only a limited use (Ford,
               1981; Mitroff and Mason, 1981). The main criticisms levelled against PIMS are as
               follows:
               ■   It is flawed because it uses historic data, without consideration for future changes.
                   The argument is that, as organisations operate in a dynamic environment, to use
                   the past to predict the future can be a dangerous exercise. Indeed, PIMS seems to
                   be useful only in a stable environment, where companies stick to doing what they
                   know best. It is even questioned whether PIMS can be regarded as a tool for policy
                   in a strategic sense, since it can be argued that the ‘variables’ it so relies on, such as
                   market share, are performance variables, not strategic ones (Abell, 1977).
               ■   It is highly analytical, but very limited in solving problems. In addition, because
                   PIMS has to use a very large database for its analysis, it is argued that this creates a
                   major problem for managers in terms of absorbing all the data generated. In turn,
                   since the statistical errors in its output are rarely openly discussed, there is a ten-
                   dency for managers not to question its findings because ‘the computer is always
                   right’ (Andrews, 1980).
               ■   Its most famous, and contentious, assertion that profitability is closely linked to
                   market share, and that an improvement in market share can be associated with a
                   proportionate increase in return on investment, is of dubious validity. As Smith
                   (1985) maintains, it could equally be argued that both are due to common factors,
                   such as low costs and good management. It is also said to be responsible for incul-
                   cating in managers and consultants a belief that low market share businesses are
                   bad and must either increase their market share or withdraw from the industry in
                   question, regardless of profitability (McKiernan, 1992).
               ■   Most of the factors that govern the forecasts of the model are beyond the control
                   of individual companies. Therefore, since PIMS relies heavily on this data, what-
                   ever conclusions it reaches about the fate of a company are final. It is neither
                   comforting nor particularly useful to be told that you cannot do anything to turn a
                   negative forecast around, because the factors responsible are out of your hands
                   (Anderson and Paine, 1978).
Strategic planning tools   249

  ■   It assumes that a rather large set of quantitative variables, primarily of a financial
      nature, are sufficient to capture the state of a business and from this determine a
      realistic strategy (Naylor, 1981). Also, as Mintzberg et al (1998a: 99) comment,
      ‘ ... finding a correlation between variables ... is one thing; assuming a causation,
      and turning that into an imperative, is quite another.’
  ■   It is based on the premise that business problems are orderly or well-structured.
      PIMS thus assumes that the determination or classification of the level of the
      organisation or business unit, the customer group, the competition, the market and
      the product line to which the analysis applies are all either well-known or well-
      specified. It is, therefore, not equipped to handle imprecise, let alone conflicting,
      definitions of business problems (Koch, 1995; Naylor, 1981).
     In summary, the main criticisms of PIMS are that it is too mechanistic, overly com-
  plex, based on unreliable data, and cannot cope adequately with dynamic and
  unpredictable environments. Yet, despite the criticisms levelled against it, many
  researchers still believe that PIMS is a useful tool (Chang, 1997; Johnson and Scholes,
  2002; Thompson, 1996). The PIMS method has also been praised for the insight it
  has given into the true nature of the relationships between strategic variables such as
  profit and market share. Obviously, managers deal with these variables and their rela-
  tionships on a daily basis, but attempts at conceptualising these relationships had
  been lacking until the advent of the PIMS research programme (Anderson and Paine,
  1978; Ford, 1981; Mitroff and Mason, 1981).
     This is not, however, to minimise the shortcomings of the PIMS model. It is biased
  towards, and contains data almost exclusively provided by, large and well-established
  corporations who already occupy significant positions in their markets. Therefore, as
  Mintzberg et al (1998a: 99) observe, its emphasis is on ‘being there’ or ‘staying there’
  rather than ‘getting there’. It follows that its prescriptions may have little relevance
  for new, small or innovative businesses seeking to enter new markets.


■ The Growth-Share Matrix
  This was the brainchild of the Boston Consulting Group (BCG) in the USA and is
  arguably the most famous strategic tool ever developed (Koch, 1995). BCG was
  formed in 1963 by Bruce Henderson, and it is generally considered to be the pioneer
  of business strategy analysis. The Growth-Share Matrix, or ‘Boston Box’ as it is collo-
  quially referred to, arose from two concepts developed by BCG: the experience curve
  and the sustainable growth formula (McKiernan, 1992).
     The experience curve, which Henderson claims to have discovered in the 1960s,
  suggests that ‘as the cumulative production of a product doubles, the cost of produc-
  ing it seems to decrease by a constant percentage (usually 10 to 30 per cent)’
  (Mintzberg et al, 1998a: 97). From this, BCG concluded that if costs fall in relation to
  production volume (i.e. experience), then cost must also be a function of market
  share. Therefore, the company with the largest market share should also have the
  greatest competitive advantage and, it follows, the highest profit margin.
     The sustainable growth formula, which was developed by BCG in the early 1970s,
  is based on the relationship between growth, investment and returns. It maintains
  that companies with the highest rate of returns on investments can, theoretically,
  grow the fastest (McKiernan, 1992).
250   Chapter 7 · Applying strategy

                  It was bringing together these two concepts (that the company with the highest
               returns can grow the fastest and that the company with the highest market share
               should have the highest profit margin) that created the basis for the Growth-Share
               Matrix. The matrix is based on the assumption that all except the smallest and sim-
               plest organisations are composed of more than one business. The collection of
               businesses within an organisation is termed its business portfolio. Using pictorial
               analogies (see Figure 7.2), it posits that businesses in an organisation’s portfolio can
               be classified into stars, cash-cows, dogs and problem children (Smith, 1985).
               ■   Stars are business units, industries or products with high growth and high market
                   share. Because of this, stars are assumed to use and generate large amounts of cash.
                   It is argued that as they, generally, represent the best profit and investment oppor-
                   tunities, then the best strategy for stars, usually, is to make the necessary
                   investments to maintain or improve their competitive position.
               ■   Cash-cows are defined as former stars whose rate of market growth is in decline. They
                   were once market leaders, during the early days when the market was rapidly grow-
                   ing, and have maintained that position as the growth tapered off. They are regarded as
                   businesses with low growth but high market share. Because they are entrenched in the
                   market, they have lower costs and make higher profits than their competitors. These
                   businesses are cash-rich; therefore the appropriate strategy for such businesses is to
                   ‘milk’ them in order to develop the rest of the organisation’s portfolio.
               ■   Dogs are businesses that have low market share and which operate in markets with
                   low growth potential. Low market share normally implies poor profit, and because
                   the market growth is low, investment to increase market share is frequently prohib-
                   itive. Also, in such situations, the cash required to maintain a competitive position



                                      High




                                  Market
                                growth rate
                                                                            ?
                                      Low


                                              High            Relative                Low
                                                             market share



               Figure 7.2 BCG Growth-Share Matrix
Strategic planning tools   251

    often exceeds the cash generated. Thus, dogs often become cash traps. It follows
    from this that, generally, the best strategy is for dogs to be sold off.
■   Problem children or question marks, as they are sometimes labelled, are regarded
    as having a high growth rate and low market share. They have high cash require-
    ments to keep them on course, but their profitability is low because of their low
    market share. They are so named because, most of the time, the appropriate strat-
    egy to adopt is not clear. With their high growth rate, it might be possible to turn
    them into stars, by further investment. On the other hand, because of the uncer-
    tainty that surrounds this type of business, the best strategy might be to sell them
    off altogether.
   The originators of the Growth-Share Matrix see it as a dynamic tool for assessing
and planning market and business developments. For example, the matrix predicts
that as growth in their industries slows down, the original stars will move into the
position of cash-cows, as long as they keep maintaining their high market share; oth-
erwise they will become dogs. It also claims to predict how cash-cows and dogs will
develop as their markets change. Therefore, the Growth-Share Matrix can be used to
forecast the development of a business portfolio over a period of time. There are two
basic assumptions underlying the matrix: firstly, that those industries, products or
businesses that have a high growth rate can be differentiated from those that have a
low growth rate; and secondly, that those that have a high competitive
position/market share can be differentiated from those that have a low competitive
position/market share. Based on these assumptions, the matrix classifies business
units or activities according to the growth rate of the industry of which they are part
and by their market share (Koch, 1995; McKiernan, 1992; Moore, 1992).
   The matrix was widely and rapidly adopted by American corporations in the
1970s. This was for two reasons: firstly, the matrix’s simplicity and ease of construc-
tion; and secondly, because most large corporations were busy splitting their
organisation into strategic business units focusing on particular industries and prod-
ucts. The corporate centres were looking for a simple means of categorising and
directing the activities of these units, and the matrix was seen by them as an ideal tool
for this purpose. McKiernan (1992), however, argues that its advantages go far
beyond merely its simplicity and ease of construction. He maintains that it aids strate-
gic planning, balancing cash flow between businesses, investment decisions, and
competitive benchmarking.
   Nevertheless, as many commentators note, over the years, the Growth-Share
Matrix has attracted its fair share of criticisms as well as praise (Koch, 1995;
McKiernan, 1992; Mintzberg et al, 1998a). One of the obvious objections to the
matrix is the labels it employs for the classification of businesses. Andrews (1980)
described these labels as a ‘vulgar and destructive vocabulary’. There are, however,
other more substantial criticisms concerning the assumptions underlying, and the
operation of, the ‘Boston Box’ (Johnson and Scholes, 2002). The main one is that the
uniqueness of an organisation and its problems may not be adequately captured by
this or any other tight classification scheme (Hax and Majluf, 1996). This is reflected
in the views of Mitroff and Mason (1981), who argue that the critical assumptions
underlying the matrix are tautologous and simplistic, e.g. the classification scheme
applies to all businesses, because all businesses can be classified as one of the four
252   Chapter 7 · Applying strategy

               basic types, or the classification scheme is relevant to all businesses, meaning that all
               businesses should be able to be classified as one of the four types.
                   Researchers have also drawn attention to the difficulty in defining and measuring
               the major variables, such as growth, market share and profitability, on which the
               matrix relies (Hax and Majluf, 1982; Hax and Nicholson, 1983; Johnson and
               Scholes, 2002). Hax and Nicholson (1983) also question whether market share really
               is the major factor determining profitability, and whether industry growth is really the
               only variable that fully explains growth opportunities? These reservations are echoed
               by Smith (1985). A further concern is that the matrix assumes that a good portfolio
               analysis should identify the competitive strengths and the industry attractiveness of
               each business unit. Alternatives to the Growth-Share Matrix, however, reject this
               assertion. Instead they start by assuming that these two dimensions cannot be
               revealed by a single measurement, but require a wider set of critical factors for reli-
               able positioning of the business units (Hax and Majluf, 1982; Hofer and Schendel,
               1978). Another reservation, expressed by Fawn and Cox (1985), is the difficulty of
               defining what constitutes a single business.
                   One of the most telling criticisms is that many of the companies who have used the
               matrix found, to their alarm, that all their component businesses were classed as dogs
               even though these businesses were actually profitable!
                   Perhaps the key and most common criticism relates to the way the matrix, and
               other similar tools, have been used. As Hax and Majluf (1996: 313) observe:

                 ... matrices tend to trivialise strategic thinking by converting it into simplistic and mechanis-
                 tic exercises, whose final message is dubious at best. Also the matrix methodology has
                 tended to take strategic analysis and, subsequently, strategic thinking away from managers
                 and into the realms of planning departments.


               In the face of such criticisms, a number of modifications were made to the original
               Growth-Share Matrix. General Electric, for example, in association with management
               consultants McKinsey, developed the nine-box GE Business Screen Matrix, instead of
               the original four-way classification (Hax and Nicholson, 1983). A similar system
               called the Directional Policy Matrix (DPM) was also developed by Shell Chemicals in
               the UK (Hussey, 1978). Many other organisations, in their turn, developed or
               employed similar schemes to meet their organisational needs (Koch, 1995;
               McKiernan, 1992; Patel and Younger, 1978). Nevertheless, portfolio models all seem
               to attract similar criticisms to those levelled at the Growth-Share Matrix (Fleisher and
               Bensoussan, 2003; Mintzberg et al, 1998a; Turner, 1990).
                  Regardless of the merits of these criticisms, even its proponents would not dispute
               that, like PIMS, the Growth-Share Matrix is primarily suited to well-structured plan-
               ning problems in which the basic definition of a business unit, product or competition
               is not an issue (Bowman and Asch, 1985). Unfortunately, because of the uncertain
               and rapidly-changing nature of business today, such situations are becoming less and
               less common. This, to an extent, may account for the increase in the popularity of the
               next approach.
Strategic planning tools   253

■ The scenario/vision-building approach
  As a way of overcoming some of the criticisms of the above quantitative approaches,
  scenario-building techniques emerged in the 1970s. The use of scenarios is based on
  the assumption that, in a rapidly-changing and uncertain world, if you cannot predict
  the future, then by considering a range of possible futures, an organisation’s strategic
  horizons can be broadened, managers can be opened up to new ideas and, perhaps,
  the right future can even be identified (Ringland, 1998). Scenarios allow organisa-
  tions to exercise strategic choice in terms of whether to try shaping the future,
  adapting to the future or keeping their options open by investing in a range of prod-
  ucts, technologies and markets (Courtney et al, 1997). Johnson and Scholes (2002:
  107) define a scenario as:

    … a detailed and plausible view of how the business environment of an organisation might
    develop in the future based on groupings of key environmental influences and drivers of
    change about which there is a high level of uncertainty.

  The rationale for the scenario approach is that it allows an organisation to carry out
  an intensive examination of its own unique and complex circumstances and needs,
  rather than attempting to fit itself to standard strategic planning tools such as PIMS
  and the Growth-Share Matrix (Linneman and Klein, 1979).
     Kahn and Weiner (1978) define a scenario as a hypothetical sequence of events con-
  structed for the purpose of focusing attention on causal processes and decision points.
  For them, the purpose of scenarios is to display, in as dramatic and persuasive a fash-
  ion as possible, a number of possibilities for the future. To Norse (1979), scenarios are
  a means of improving our understanding of the long-term global, regional or national
  consequences of existing or potential trends or policies and their interaction.
  Essentially, therefore, building scenarios can be regarded as making different pictures
  of an uncertain future (business or otherwise) through the construction of case studies,
  either quantitatively or qualitatively (McNulty, 1977). The quantitative variant of
  scenario-building, sometimes called the hard method, uses mathematics, models and
  computers to make pictures of the future, through the production of a vast array of
  numbers and figures. The main approach, however, is the qualitative, or soft, method,
  which is essentially intuitive and descriptive; it is based on the resources of the human
  mind and derived from the methods of psychology and sociology (Joyce and Woods,
  2001; Ringland, 1998).
     The two main scenario-building approaches that have become well-established are
  the Delphi method and the Cross Impact method. However, in recent years, a third
  approach has become increasingly influential: vision-building. Though this bears
  some relation to other scenario-building techniques, it comes from a different tradi-
  tion. The scenario approach and especially vision-building have some similarities with
  the postmodernist view that organisations exist in and represent multiple realities
  which compete with each other for supremacy (Joyce and Woods, 2001). From the
  postmodernist perspective, organisations have the ability to create their own reality
  and, therefore, both scenario- and vision-building can be viewed as processes that
  assist organisations, or the dominant group within an organisation, to select or con-
  struct the reality that most suits their needs. However, scenario- and vision-building
254   Chapter 7 · Applying strategy

               are also compatible with the Realist and Complexity approaches described in Chapter
               4. For realists, scenarios could provide a way of separating real constraints from the
               plethora of different perspectives that surround them; whereas for adherents of com-
               plexity, they can be used to locate the ‘edge of chaos’ and the order-generating rules
               necessary to maintain an organisation in this position.
                  One of the main functions of scenario-type approaches is that they enable organisa-
               tions to question the very foundations of their existence, to examine the usefulness of
               their values and norms. Instead of asking how they can improve what they are doing,
               they begin to ask: Why are we doing this at all? What alternatives are there? This ques-
               tioning of basic assumptions is something that is alien to the quantitative tools
               discussed above, especially given that most managers do not understand the assump-
               tions built into such models in the first place. Indeed, quantitative models appear to
               remove the necessity for managers to think by providing them with ‘answers’ rather
               than information on which to base their own decisions (Hax and Majluf, 1996). The
               three main qualitative approaches, on the other hand, are designed specifically to make
               managers think radically about their organisation, its purpose and its future.

               The Delphi method
               This uses a panel of experts, who are interrogated about a number of future issues
               within their area of expertise. In the classic application, the interrogation is conducted
               under conditions whereby each respondent is unknown to the others, in order to avoid
               effects of authority and the development of a consensual bandwagon. After the initial
               round of interrogations, the results are reported to the panel and another round of
               interrogations is conducted. Several rounds may be carried out in this manner.
                  Results produced from these interrogations may be amenable to statistical treat-
               ment with a view to yielding numbers, dates and ranges from them. At the end of the
               process, depending on whether a quantitative or qualitative approach is taken, either
               a detailed numerical forecast of the future is obtained, or a more descriptive and
               richer picture. In both cases, the central tendencies of majority opinion and the range
               of minority disagreements will also be included (McNulty, 1977; Zentner, 1982).

               The Cross Impact method
               This is a variation to the Delphi method. It uses essentially the same interrogation
               method as the Delphi, i.e. a panel of experts; the difference, however, lies in what they
               are asked to do. The Delphi requires the experts to identify a number of future issues
               that they think will affect the organisation or business within their area of expertise.
               The Cross Impact method, on the other hand, asks its panel of experts to assign sub-
               jective probabilities and time priorities to a list of potential future events and
               developments supplied by the organisation. The emphasis is on identifying reinforcing
               or inhibiting events and trends, to uncover relationships and to indicate the impor-
               tance of specific events. The accruing data from this exercise are used to create yield
               curves of the probabilities for each event as a function of time (Lanford, 1972).

               Vision-building
               As regular surveys by Bain & Co have shown, over the last decade vision-building has
               established itself as one of the key management tools (Rigby, 2001). Whilst it cer-
               tainly bears a resemblance to the other scenario-building techniques, it is influenced
Strategic planning tools   255

more by Japanese management practices than by those in the West (Collins and
Porras, 1991; Hamel and Prahalad, 1989). Though it is one of the most popular man-
agement tools, it is perhaps also one of the least understood and idiosyncratic
(Cummings and Worley, 2001; Stacey, 1992). This is perhaps because it is a much less
structured approach than the other two scenario-building techniques, and relies more
on a company’s own management. According to research by Collins and Porras
(1997), compelling visions have two components: (a) a core ideology which describes
the organisation’s core values and purpose; and (b) a strong and bold vision of the
organisation’s future which identifies specific goals and changes. The major elements
of vision-building are as follows:
■   the conception by a company’s senior management team of an ‘ideal’ future state
    for their organisation;
■   the identification of the organisation’s mission, its rationale for existence;
■   a clear statement of desired outcomes and the desired conditions and competences
    needed to achieve these.
   Vision-building is an iterative process that is designed to move from the general
(the vision) to the specific (desired outcomes and conditions), and back again. By
going round the loop in this manner, according to Cummings and Huse (1989), an
ambitious yet attainable future can be constructed and pursued. This owes much to
the Japanese, who pioneered the concept of strategic intent on which vision-building
is based. The work of Hamel and Prahalad (1989) is of particular importance in this
respect. They argued that the strategic approach of Japanese companies is markedly
different to that of their Western counterparts. Rather than attempting to lay down a
detailed plan in advance, Japanese companies operate within a long-term framework
of strategic intent. They create a vision of their desired future – their ‘intent’ – which
they then pursue in a relentless but flexible manner. Hamel and Prahalad quote exam-
ples of leading Japanese companies who, in the 1960s, when they were insignificant
in world terms, set out to dominate their markets. Honda’s strategic intent was to be
the ‘Second Ford’, Komatsu’s to ‘Encircle Caterpillar’ and Canon’s to ‘Beat Xerox’.
These companies then mobilised their resources towards achieving their individual
strategic intent. In this, the prime resource they deployed was the commitment, inge-
nuity and flexibility of their workforces.
   Like all approaches to strategic planning, these scenario/vision-building approaches
have many criticisms (Cummings and Worley, 2001; Fleisher and Bensoussan, 2003;
Joyce and Woods, 2002; Keshavan and Rakesh, 1979; Porter, 1985; Wack, 1985;
Whittington, 1993), the main ones being:
■   They are prone to subjectivity and bias. The fact that any five management special-
    ists can interpret the same situation in totally different ways is an oft-quoted
    example of this type of criticism.
■   They can encourage retrospection. People’s ideas of the future are informed by
    their knowledge and experience of the past. Since experience is not always the best
    teacher, scenarios and visions may be based on false assumptions.
■   Participants can be strongly influenced in their preference of scenario by their own
    sectional and personal interests.
■   The process cannot be carried out by novices and can, therefore, be time-consum-
    ing and expensive in terms of senior management time and outside experts.
256   Chapter 7 · Applying strategy

               ■   There is much debate about how many scenarios to construct and how they should
                   be used.
               ■   The more radical the vision or scenario, the more difficult it will be to get man-
                   agers and others to commit to them.
               ■   Visions often require strong visionary leaders, which are in short supply.
               Despite these criticisms, the use of scenarios and visions now forms an important part
               of the managerial tool box (Collins and Porras, 1997; Cummings and Worley, 2001;
               Leemhuis, 1990; Malaska et al, 1984; Smith, 1985).
                  Therefore, to summarise, there are a wide range of strategic planning tools and
               techniques available to organisations. In reviewing the main quantitative and qualita-
               tive ones, it can be seen that none are without their weaknesses. However, in tandem
               with the increased use of less prescriptive and more qualitative models of strategy,
               more qualitative tools and techniques are increasing in popularity.


Conclusions
               Just as the aim of Chapter 6 was to examine the main approaches to understanding
               strategy, the aim of this chapter has been to examine the main approaches to applying
               strategy. The chapter began by describing the three main models of strategy which
               organisations have tended to utilise over the last 20 years: the Competitive Forces
               model; the Resource-Based model; and the Strategic Conflict model. This was fol-
               lowed by an examination of the different organisational levels at which strategy is
               applied and the main forms of strategic planning tools on offer.
                  What the examination of these areas has shown is that, in the West at least, it is the
               approaches, tools and techniques of the Prescriptive stream of strategy that organisa-
               tions have tended to favour. The continuing prominence of the Positioning school,
               through the work of Michael Porter, clearly demonstrates the enduring influence of
               the Prescriptive stream. This of course should not be surprising. After all, the liveli-
               hood of those who comprise the Prescriptive stream, whether they be consultants,
               consultancies, business schools or academics, is dependent to a large extent upon cre-
               ating a market for its strategic planning products. It is also, probably, the case that
               when leading consultancies, business schools and large corporations are all arguing
               for a particular approach, there is enormous pressure on managers elsewhere to
               follow. To paraphrase the old slogan that ‘no one ever got fired for buying IBM’, one
               could also say, ‘no one ever got fired for calling in the Boston Consultancy Group or
               Michael Porter’.
                  Yet, as this chapter has also shown, the Resource-Based model and the Strategic
               Conflict model have been growing in importance in the last 15 years. Both tend to be
               located in and draw support from the Analytical stream of strategy. The Strategic
               Conflict model has its roots in the perspective of strategy as a battle between warring
               organisations. As explained, however, its renewed prominence has come both from
               practical concerns about the applicability of the Competitive Forces model, and from
               new theoretical insights from areas such as game theory. The Resource-Based
               approach, on the other hand, owes much to those, such as Prahalad and Hamel
               (1990), who have sought to understand and explain the Japanese approach to strat-
               egy. In both cases it can be seen that strategy is conceived of as an emergent rather
Test your learning   257

        than a planned process. Therefore, though the Prescriptive stream of strategy is still
        extremely influential in determining how managers develop and implement strategies,
        the influence of the Analytical stream is also growing.
           To return, however, to the argument developed in Chapter 6, it would be wrong to
        fall into the trap of seeing the Analytical stream as being the ‘right’ way to apply strat-
        egy and the Prescriptive as the ‘wrong’ way, or vice versa. Instead, it may be that
        approaches from both the Prescriptive and Analytical streams have much to offer
        organisations, depending on their circumstances or constraints. For organisations with
        a dominant position in a relatively stable market, an approach from the Prescriptive
        stream, such as the Competitive Forces model, may be suitable. Likewise for organisa-
        tions seeking to enter new markets or grow their business over a long time-frame, an
        approach from the Analytical stream, such as the Resource-Based model, has much to
        commend it. Similarly, in evenly-balanced competitive situations, the Strategic Conflict
        model may be more appropriate. This is not, though, to propose a Contingency model
        of strategy. Rather, as was argued in Chapter 6, what is being suggested is that organi-
        sations have a choice; they can seek to influence or mould the constraints they face in
        order to make them more amenable to the type or model of strategy they wish to
        pursue. Therefore, as indicated earlier in this chapter when looking at the work of
        Miles and Snow (1978), the approach to strategy an organisation adopts may have less
        to do with the merits of the different models on offer and more to do with the type of
        organisation it is and the orientation of its managers.
           Nevertheless, choosing the type or model of strategy to pursue is one thing; imple-
        menting it is an entirely different matter. This is especially so if one recognises that the
        Prescriptive and Analytical streams of strategy have distinctly different, indeed almost
        opposite, perspectives on implementation. For the former, implementation flows from
        the organisation’s strategic plan. For the latter, the strategy emerges from and is given
        shape by the actions and decisions organisations make on a day-to-day basis to
        change and adapt themselves to their circumstances. But no matter which model of
        strategy one subscribes to, it is only when organisations implement changes that
        strategies come alive. This highlights the crucial importance of organisational change.
        Consequently, just as this chapter and the previous one have reviewed the main argu-
        ments with regard to strategy, so the next two chapters will review the strengths,
        weaknesses and implications of the main approaches to change management.


Test your learning

      ■ Short answer questions
        1 What is the Competitive Forces model of strategy?

        2 Define the Strategic Conflict model of strategy.

        3 Briefly discuss the case for the Resource-Based model of strategy.

        4 What are the three levels of strategic decision-making in organisations?

        5 Give Miles and Snow’s four strategic types of organisations.
258   Chapter 7 · Applying strategy

               6 Describe the Growth-Share Matrix.

               7 What is scenario construction?

               8 Briefly discuss the implications for organisational change of the following: (a) the PIMS
                 model and (b) vision-building.



          ■ Essay questions
               1 Contrast and compare the strengths and weaknesses of quantitative and qualitative
                 strategic planning tools.

               2 To what extent can vision-building be seen as a realist approach?




                 Suggested further reading
               There are a vast number of books on strategy but, unfortunately, no one book covers all the
               main tools and techniques. However, the following three books, whilst leaning towards the
               Prescriptive approach, do cover the main strategic planning methods, techniques and processes.

               1 Fleisher, CS and Bensoussan, BE (2003) Strategic and Competitive Analysis: Methods and
                 Techniques for Analysing Business Competition. Prentice Hall: Upper Saddle River,
                 NJ, USA.
               2 Hax, CA and Majluf, NS (1996) The Strategy Concept and Process (2nd edition). Prentice
                 Hall: Upper Saddle River, NJ, USA.
               3 Joyce, P and Woods, A (2001) Strategic Management: A Fresh Approach to Developing
                 Skills, Knowledge and Creativity. Kogan Page: London.
Chapter 8

Approaches to change
management


 Learning objectives
 After studying this chapter, you should be able to:
 ■   describe the main theoretical foundations of change management;
 ■   discuss the contribution of Kurt Lewin to managing change;
 ■   state the core elements of Lewin's Planned approach to change;
 ■   show how Planned change has evolved under the Organization Development
     movement;
 ■   understand the key differences between Lewin's view of Planned change and
     that promoted by Organization Development;
 ■   appreciate the benefits of the Planned approach to change;
 ■   list the main criticisms of Planned change;
 ■   describe the incremental, punctuated-equilibrium and continuous
     transformation models of change.
260   Chapter 8 · Approaches to change management


 Exhibit 8.1        The importance of theory

 Less means more in engineering                                                                                              FT

 The problem facing diesel engine specialist Royston         focus on a single task. ‘We could tell straightaway it was
 Marine was clear: it had to increase its production by      going to work,’ says diesel fitter Vaughn Blake. ‘The
 seven times, immediately, to meet a sudden order            parts were all there, so it was much quicker.’
 from a valued customer, the British Army, for the                Having previously refurbished one engine a week
 refurbishment of scores of engines.                         for the army, Royston was suddenly able to finish
     The solution, thought Royston managing director         more than one a day – without a nightshift and
 Tom Wilkinson, was equally clear – introduce round-         while fulfilling other orders.
 the-clock working, with every engineer working on as             Mr Wilkinson is full of praise for Mr Callin and his
 many engines at once as possible.                           manager, Karl McCracken, who worked with him to
     He knew, however, that skill shortages and the          help the company.
 need to fulfil other orders limited his room for                 For Mr Wilkinson it was the pair’s practical, rather
 manoeuvre. ‘The guys couldn’t work 700 per cent             than academic, credentials that mattered: ‘There
 harder, they would be carried out on stretchers,’ he        were no tutorials, no delay. What we would have
 says. So he was modest – or anxious – enough to             done without them, I don’t know.’ In fact, there is
 seek a fresh perspective from William Callin of the         plenty of management theory underpinning Mr
 Agility Project, a consultancy based at Durham              Callin’s miracle.
 University’s School of Engineering.                              Embedding ‘living lean’ practices, Mr Callin says,
     In a three-hour discussion in Royston’s board-          means people must adopt new methods with suffi-
 room in Newcastle upon Tyne, Mr Callin bluntly told         cient belief to stick to them when they hit problems.
 Mr Wilkinson that his plan for fulfilling the order was     ‘When it is going badly, that’s exactly when you want
 wrong. He made him a bold offer: ‘Give me the pro-          it,’ Mr Callin says. ‘It is showing you your problems.’
 duction line tomorrow for 24 hours and I’ll show you             Lean manufacturing principles are far from new:
 what to do.’                                                the ‘elimination of waste’ theory underpinning Mr
     Given the challenge facing him, and Mr Callin’s         Callin’s Royston work was developed by Toyota 50
 record as an automotive engineer, Mr Wilkinson              years ago. The Agility Project engineers appreciate
 agreed. By lunchtime the next day, Mr Callin had            that radical change is never easy.
 proved to Royston’s management that, in manufac-                 ’You are getting into the way people believe the
 turing at any rate, less really can mean more.              world is,’ says Mr McCracken. ‘That takes a long
     Instead of having lots of engines at each stage of      time.’ And with so many acute pressures on manu-
 the process – stripping, assessing, cleaning, rebuilding,   facturing managers, it is hardly surprising, says Mr
 painting and testing – Mr Callin suggested having only      Callin, that many are nervous of changing methods.
 one engine at each stage, a ‘one-piece flow’ approach.           But, he suggests, some managers’ hostility to
     This contradicted Mr Wilkinson’s instincts but he       what they see as ‘theory’ is misplaced. What is batch
 could see the virtue in a method of working that was        production, he asks, but the practical implementation
 not ‘10 per cent doing the assembly and 90 per cent         of an old theory?
 looking for the nut’. His employees also warmed to the           ‘Everything,’ he argues, ‘is theory.’
 grand prix pit-stop approach, where a team of workers       Source: Chris Tighe, Financial Times, 17 October 2002, p. 15.




                Introduction
               This chapter follows on from the discussion of approaches to strategy in the two pre-
               vious chapters. Chapters 6 and 7 were essentially concerned with approaches to
               determining and charting an organisation’s strategic direction. Underpinning both
               chapters was the division between the Prescriptive stream of strategy, whose members
Theoretical foundations   261

        seek to tell organisations how they should formulate strategy, and the Analytical
        stream of strategy, whose members seek to understand what organisations actually do
        to formulate strategy. The former tend to see strategy as a formal, rational and pre-
        planned process. The latter tend to see strategy as a more messy, less rational,
        emergent process. Therefore, for the Prescriptive stream, organisational change flows
        from, and is concerned with implementing, an organisation’s predetermined strategy.
        For the Analytical stream, organisational change is not an outcome of strategy but the
        process by which it is created and given form. For both streams, change management
        is vitally important, whether it be for strategy implementation or development.
           Consequently, this and the next two chapters will focus on the approaches to plan-
        ning and implementing the changes required to achieve, or shape, strategic objectives.
        As the example in Exhibit 8.1 shows, even relatively small change projects require
        people to discard long-held beliefs; they also need to be robust enough to prevent
        regression when times get tough. For these reasons, they need to be based on sound
        and appropriate theory. The chapter begins by describing the theoretical foundations
        of change management. In particular, it is shown that the three main schools of
        thought that underpin approaches to change management can be distinguished by
        their respective concentration on individual, group and organisation-wide issues. This
        leads on to an examination of the Planned approach, which was developed by Kurt
        Lewin in the 1940s. This approach dominated both the theory and practice of change
        management from then until the 1980s, when it met with increasing levels of criti-
        cism, especially from those questioning its suitability for organisations operating in
        dynamic and unpredictable environments. This is followed by a description of the
        Incremental, Punctuated equilibrium and continuous transformation models of
        change. The chapter concludes by arguing that, though some of the criticism may be
        unjustified, the Planned approach does appear to be more suited to incremental
        change rather than larger-scale and more radical change initiatives.


Theoretical foundations
        Change management is not a distinct discipline with rigid and clearly-defined bound-
        aries. Rather, the theory and practice of change management draws on a number of
        social science disciplines and traditions. Though this is one of its strengths, it does
        make the task of tracing its origins and defining its core concepts more difficult than
        might otherwise be the case.
           The task is complicated further by the simple fact that the social sciences them-
        selves are interwoven. As an example, theories of management education and
        learning, which help us to understand the behaviour of those who manage change,
        cannot be fully discussed without reference to theories of child and adult psychology.
        Neither can these be discussed without touching on theories of knowledge (epistemol-
        ogy), which is itself a veritable philosophical minefield.
           The challenge, then, is to range wide enough to capture the theoretical foundations
        of change management, without straying so far into its related disciplines that clarity
        and understanding suffer. In order to achieve this delicate balance, the examination
        will be limited to the three schools of thought that form the central planks on which
        change management theory stands:
262   Chapter 8 · Approaches to change management

              ■    the Individual Perspective school;
              ■    the Group Dynamics school;
              ■    the Open Systems school.


          ■ The Individual Perspective school
              The supporters of this school are split into two camps: the Behaviourists and the
              Gestalt-Field psychologists. The former view behaviour as resulting from an individ-
              ual’s interaction with their environment. Gestalt-Field psychologists, on the other
              hand, believe that this is only a partial explanation. Instead, they argue that an indi-
              vidual’s behaviour is the product of environment and reason.
                 In Behaviourist theory, all behaviour is learned; the individual is the passive recipi-
              ent of external and objective data. Among the earliest to work in the field of
              conditioning of behaviour was Pavlov (1927). In an experiment that has now passed
              into folklore, he discovered that a dog could be ‘taught’ to salivate at the ringing of a
              bell, by conditioning the dog to associate the sound of the bell with food. Arising
              from this, one of the basic principles of the Behaviourists is that human actions are
              conditioned by their expected consequences. Behaviour that is rewarded tends to be
              repeated, and behaviour that is ignored tends not to be. Therefore, in order to change
              behaviour, it is necessary to change the conditions that cause it (Skinner, 1974).
                 In practice, behaviour modification involves the manipulation of reinforcing stim-
              uli so as to reward desired activity. The aim is to reward immediately all instances of
              the wanted behaviour, but to ignore all instances of the unwanted behaviour (because
              even negative recognition can act as a reinforcer). This is based on the principle of
              extinction; a behaviour will stop eventually if it is not rewarded (Lovell, 1980). Not
              surprisingly, given the period when it emerged, the Behaviourist approach mirrors in
              many respects that of the Classical school, portraying humans as cogs in a machine,
              who respond solely to external stimuli.
                 For Gestalt-Field theorists, learning is a process of gaining or changing insights,
              outlooks, expectations or thought patterns. In explaining an individual’s behaviour,
              this group takes into account not only a person’s actions and the responses these
              elicit, but also the interpretation the individual places on these. As French and Bell
              (1984: 140) explain:

                  Gestalt therapy is based on the belief that persons function as whole, total organisms. And
                  each person possesses positive and negative characteristics that must be ‘owned up to’ and
                  permitted expression. People get into trouble when they get fragmented, when they do not
                  accept their total selves … Basically, one must come to terms with oneself, … must stop
                  blocking off awareness, authenticity, and the like by dysfunctional behaviours.


              Therefore, from the Gestalt-Field perspective, behaviour is not just a product of exter-
              nal stimuli; rather it arises from how the individual uses reason to interpret these
              stimuli. Consequently, the Gestalt-Field proponents seek to help individual members
              of an organisation change their understanding of themselves and the situation in
              question, which in turn, they believe, will lead to changes in behaviour (Smith et al,
              1982). The Behaviourists, on the other hand, seek to achieve organisational change
              solely by modifying the external stimuli acting upon the individual.
Theoretical foundations   263

     Both groups in the Individual Perspective school have proved influential in the
  management of change; indeed, some writers even advocate using them in tandem.
  This is certainly the case with advocates of the Culture–Excellence school, who rec-
  ommend the use of both strong individual incentives (external stimuli) and discussion,
  involvement and debate (internal reflection) in order to bring about organisational
  change (see Chapter 3).
     This combining of extrinsic and intrinsic motivators owes much to the work of the
  Human Relations movement, which (especially through the work of Maslow, 1943)
  stresses the need for both forms of stimuli in order to influence human behaviour.
  Though acknowledging the role of the individual, however, the Human Relations
  movement also draws attention to the importance of social groups in organisations,
  as do the Group Dynamics school.


■ The Group Dynamics school
  As a component of change theory, this school has the longest history (Schein, 1969)
  and, as will be shown later in this chapter, it originated with the work of Kurt Lewin.
  Its emphasis is on bringing about organisational change through teams or work
  groups, rather than individuals (Bernstein, 1968). The rationale behind this, accord-
  ing to Lewin (1947a, 1947b), is that because people in organisations work in groups,
  individual behaviour must be seen, modified or changed in the light of groups’ pre-
  vailing practices and norms.
     Lewin (1947a, 1947b) postulated that group behaviour is an intricate set of symbolic
  interactions and forces that not only affect group structures, but also modify individual
  behaviour. Therefore, he argued that individual behaviour is a function of the group
  environment or ‘field’, as he termed it. This field produces forces, tensions, emanating
  from group pressures on each of its members. An individual’s behaviour at any given
  time, according to Lewin, is an interplay between the intensity and valence (whether the
  force is positive or negative) of the forces impinging on the person. Because of this, he
  asserted that a group is never in a ‘steady state of equilibrium’, but is in a continuous
  process of mutual adaptation which he termed ‘quasi-stationary equilibrium’.
     To bring about change, therefore, it is useless to concentrate on changing the
  behaviour of individuals, according to the Group Dynamics school. The individual in
  isolation is constrained by group pressures to conform. The focus of change must be
  at the group level and should concentrate on influencing and changing the group’s
  norms, roles and values (Cummings and Huse, 1989; French and Bell, 1984; Smith et
  al, 1982).
     Norms are rules or standards that define what people should do, think or feel in a
  given situation. For the Group Dynamics school, what is important in analysing
  group norms is the difference between implicit and explicit norms. Explicit norms are
  formal, written rules which are known by, and applicable to, all. Implicit norms are
  informal and unwritten, and individuals may not even be consciously aware of them.
  Nevertheless, implicit norms have been identified as playing a vital role in dictating
  the actions of group members.
     Roles are patterns of behaviour to which individuals and groups are expected to
  conform. In organisational terms, roles are formally defined by job descriptions and
  performance targets, though in practice they are also strongly influenced by norms
264   Chapter 8 · Approaches to change management

              and values as well. Even in their work life, individuals rarely have only one role. For
              example, a production manager may also be secretary of the company’s social club, a
              clerical officer may also be a shop steward, and a supervisor may also be the com-
              pany’s safety representative. A similar situation exists for groups. A group’s main role
              may be to perform a particular activity or service, but it might also be expected to
              pursue continuous development, maintain and develop its skills, and act as a reposi-
              tory of expert knowledge for others in the organisation. Clearly, where members of a
              group and the group itself are required to conform to a number of different roles, the
              scope for role conflict or role ambiguity is ever-present. Unless roles are both clearly
              defined and compatible, the result can be sub-optimal for the individual (in terms of
              stress) and for the group (in terms of lack of cohesion and poor performance).
                  Values are ideas and beliefs that individuals and groups hold about what is right
              and wrong. Values refer not so much to what people do or think or feel in a given sit-
              uation; instead they relate to the broader principles that lie behind these. Values are a
              more problematic concept than either norms or roles. Norms and roles can, with dili-
              gence, be more or less accurately determined. Values, on the other hand, are more
              difficult to determine because group members are not always consciously aware of, or
              can easily articulate, the values that influence their behaviour. Therefore, questioning
              people and observing their actions is unlikely to produce a true picture of group
              values. Nevertheless, the concept itself is seen as very important in determining, and
              changing, patterns of behaviour.
                  The Group Dynamics school has proved to be very influential in developing both
              the theory and practice of change management. This can be seen by the very fact that
              it is now usual for organisations to view themselves as comprising groups and teams,
              rather than merely collections of individuals (Mullins, 1989).
                  As French and Bell (1984: 127–9) pointed out, the importance given to teams is
              reflected in the fact that:

               ... the most important single group of interventions in OD [Organization Development] are
               team-building activities, the goals of which are the improved and increased effectiveness of
               various teams within the organization. … The … team-building meeting has the goal of
               improving the team’s effectiveness through better management of task demands, relationship
               demands, and group processes. … [The team] analyzes its way of doing things, and attempts
               to develop strategies to improve its operation.


              In so doing, norms, roles and values are examined, challenged and, where necessary,
              changed.
                 Nevertheless, despite the emphasis that many place on groups within organisations,
              others argue that the correct approach is one that deals with an organisation as a whole.


          ■ The Open Systems school
              Having examined approaches to change that emphasise the importance of groups and
              individuals, we now come to one whose primary point of reference is the organisation
              in its entirety. The Open Systems school (as mentioned in Chapter 2) sees organisa-
              tions as composed of a number of interconnected sub-systems. It follows that any
              change to one part of the system will have an impact on other parts of the system,
Theoretical foundations   265

and, in turn, on its overall performance (Scott, 1987). The Open Systems school’s
approach to change is based on a method of describing and evaluating these sub-
systems, in order to determine how they need to be changed so as to improve the
overall functioning of the organisation.
   This school does not just see organisations as systems in isolation, however; they
are ‘open’ systems. Organisations are seen as open in two respects. Firstly, they are
open to, and interact with, their external environment. Secondly, they are open inter-
nally: the various sub-systems interact with each other. Therefore, internal changes in
one area affect other areas, and in turn have an impact on the external environment,
and vice versa (Buckley, 1968).
   The objective of the Open Systems approach is to structure the functions of a busi-
ness in such a manner that, through clearly-defined lines of coordination and
interdependence, the overall business objectives are collectively pursued. The empha-
sis is on achieving overall synergy, rather than on optimising the performance of any
one individual part per se (Mullins, 1989).
   Miller (1967) argues that there are four principal organisational sub-systems:
■   The organisational goals and values sub-system. This comprises the organisation’s
    stated objectives and the values it wishes to promote in order to attain them. To
    operate effectively, the organisation has to ensure that its goals and values are com-
    patible not only with each other, but also with its external and internal
    environments.
■   The technical sub-system. This is the specific combination of knowledge, tech-
    niques and technologies which an organisation requires in order to function. Once
    again, the concern here is with the compatibility and appropriateness of these in
    relation to an organisation’s particular circumstances.
■   The psychosocial sub-system. This is also variously referred to as organisational
    climate and organisational culture. In essence, it is the fabric of role relationships,
    values and norms that binds people together and makes them citizens of a particu-
    lar miniature society (the organisation). It is influenced by an organisation’s
    environment, history and employees, as well as its tasks, technology and structures.
    If the psychosocial sub-system is weak, fragmented or inappropriate, then instead
    of binding the organisation together, it may have the opposite effect.
■   The managerial sub-system. This spans the entire organisation. It is responsible for
    relating an organisation to its environment, setting goals, determining values,
    developing comprehensive strategic and operational plans, designing structure and
    establishing control processes. It is this sub-system that has the responsibility for
    consciously directing an organisation and ensuring that it attains its objectives. If
    the managerial sub-system fails, so does the rest of an organisation.
   The Open Systems school is concerned with understanding organisations in their
entirety; therefore, it attempts to take a holistic rather than a particularistic perspec-
tive. This is reflected in its approach to change. According to Burke (1980), this is
informed by three factors:
1 Sub-systems are interdependent. If alterations are made to one part of an organisa-
  tion without taking account of its dependence or impact on the rest of the
  organisation, the outcome may be sub-optimal.
266   Chapter 8 · Approaches to change management

              2 Training, as a mechanism for change, is unlikely to succeed on its own. This is
                because it concentrates on the individual and not the organisational level. As Burke
                (1980: 75) argues, ‘although training may lead to individual change and in some
                cases to small group change, there is scant evidence that attempting to change the
                individual will in turn change the organisation’.
              3 In order to be successful, organisations have to tap and direct the energy and talent of
                their workforce. This requires the removal of obstacles which prevent this, and the
                provision of positive reinforcement which promotes it. Given that this is likely to
                require changes to such things as norms, reward systems and work structures, it must
                be approached from an organisational, rather than individual or group, perspective.
                 Though the Open Systems perspective has attracted much praise, attention has also
              been drawn to its alleged shortcomings. Butler (1985: 345), for example, while hail-
              ing it as a major step forward in understanding organisational change, points out
              that, ‘Social systems are extremely dynamic and complex entities that often defy
              descriptions and analysis. Therefore, one can easily get lost in attempting to sort out
              all the cause-and-effect relationships.’ Beach (1980: 138), in a similar vein, argues
              that Open Systems theory:

               ... does not comprise a consistent, articulated, coherent theory. Much of it constitutes a high
               level of abstraction. To be really useful to the professional practice of management, its
               spokesmen and leaders must move to a more concrete and operationally useful range.

              Despite these criticisms, the level of support for this approach, from eminent theorists
              such as Burns and Stalker (1961), Joan Woodward (1965) and Lawrence and Lorsch
              (1967), is formidable. This is why, as explained in Chapter 2, it has proved so influential.


          ■ Summary
              In looking at the three schools that form the central planks of change management
              theory, three major points stand out. Firstly, with the exception of the Behaviourists, not
              only do these schools of thought stand, generally, in sharp contrast to the mechanistic
              approach of the Classical school towards organisations and people, but also, in their
              approach to individuals, groups and organisations as a whole, form a link to the emerg-
              ing organisational paradigms that were discussed in Chapter 3. Indeed, it might be
              possible to go further and say that these three schools provide many of the core concepts
              of the new paradigms, especially in respect to teamwork and organisational learning. If
              this is so, the claim (by Kanter, 1989; Senge, 1990; and others) that these new forms of
              organisation are a radical break with the past may have to be reconsidered.
                  Secondly, the three theoretical perspectives on change focus on different aspects of
              organisational life and, therefore, each has different implications for what change
              takes place and how it is managed. It follows that any approach to managing change
              should be judged by whether or not it is applicable to all or only some of the types of
              change covered by the Individual, Group and Systems schools.
                  Thirdly, though each school puts itself forward as the most effective, if not the
              only, approach to change, they are not necessarily in conflict or competition. Indeed,
              it could well be argued that they are complementary approaches. The key task, which
              will be examined in more detail later in this and the next two chapters, is to identify
The Planned approach to organisational change   267

        the circumstances in which each is appropriate: does the problem or the objective of
        change lie at the level of the organisation, group or individual? Can any of these
        levels be tackled in isolation from the others?
           The Open Systems perspective may be correct: change at one level or in one area
        should take into account the effect it will have elsewhere in the organisation.
        However, whether the perspective adopted is organisation-wide, or limited to groups
        and individuals, in the final analysis, what is it that is being changed? The answer,
        surely, is the behaviour of individuals and groups, because organisations are, as the
        proponents of these perspectives admit, social systems. To change anything requires
        the cooperation and consent, or at least acquiescence, of the groups and individuals
        who make up an organisation, for it is only through their behaviour that the struc-
        tures, technologies, systems and procedures of an organisation move from being
        abstract concepts to concrete realities. This is made even plainer in the remainder of
        this chapter and in the next two chapters, where we examine the main approaches to
        managing organisational change.


The Planned approach to organisational change
        Change has always been a feature of organisational life, though many argue that the
        frequency and magnitude of change are greater now than ever before. Planned change
        is a term first coined by Kurt Lewin to distinguish change that was consciously
        embarked upon and planned by an organisation, as averse to types of change that
        might come about by accident, by impulse or that might be forced on an organisation
        (Marrow, 1969). However, just as the practice of change management is dependent
        on a number of factors, not least the particular school of thought involved, so, not
        surprisingly, even amongst those advocating Planned change, a variety of different
        models of change management have arisen over the years. Though these were devised
        to meet the needs of particular organisations, or arose from a specific school of
        thought, nevertheless, the Planned approach to change is now most closely associated
        with the practice of Organization Development (OD) and indeed lies at its core.
        According to French and Bell (1995: 1–2):

         Organization development is a unique organizational improvement strategy that emerged in
         the late 1950s and early 1960s. … [It] has evolved into an integrated framework of theories
         and practices capable of solving or helping to solve most of the important problems con-
         fronting the human side of organizations. Organization development is about people and
         organizations and people in organizations and how they function. OD is also about planned
         change, that is getting individuals, teams and organizations to function better. Planned
         change involves common sense, hard work applied diligently over time, a systematic, goal-
         oriented approach, and valid knowledge about organizational dynamics and how to change
         them. Valid knowledge derives from the behavioral sciences such as psychology, social psy-
         chology, sociology, anthropology, systems theory, and the practice of management.


           Underpinning OD is a set of values, assumptions and ethics that emphasise its
        humanistic orientation and its commitment to organisational effectiveness. These
        values have been articulated by many writers over the years (Conner, 1977; Gellerman
268   Chapter 8 · Approaches to change management

              et al, 1990; Warwick and Thompson, 1980). One of the earliest attempts was by
              French and Bell (1973), who proposed four core values for OD (see Exhibit 8.2).

                   Exhibit 8.2           French and Bell’s core values of OD

                   ■   The belief that the needs and aspirations of human beings provide the prime reasons
                       for the existence of organisations within society.
                   ■   Change agents believe that organisational prioritisation is a legitimate part of
                       organisational culture.
                   ■   Change agents are committed to increased organisational effectiveness.
                   ■   OD places a high value on the democratisation of organisations through power equalisation.
                   Source: French and Bell (1973)




                 In a survey of OD practitioners, Hurley et al (1992) found these values were clearly
              reflected in the five main approaches they used in their work:
              1    empowering employees to act;
              2    creating openness in communications;
              3    facilitating ownership of the change process and its outcomes;
              4    the promotion of a culture of collaboration; and
              5    the promotion of continuous learning.
                 Within the OD field, there are a number of major theorists and practitioners who
              have contributed their own models and techniques to its advancement (e.g. Argyris,
              1962; Beckhard, 1969; Blake and Mouton, 1976; French and Bell, 1973). OD also
              shares some common concepts with, and sits easily alongside, the Human Relations
              movement. Indeed, Douglas McGregor, a key figure in the Human Relations move-
              ment, also played a significant role in the early stages of OD (see McGregor, 1967).
              However, despite this, there is general agreement that the OD movement grew out of,
              and became the standard bearer for, Kurt Lewin’s pioneering work on behavioural
              science in general, and his development of Action Research and Planned change in
              particular (Cummings and Worley, 1997).


          ■ Kurt Lewin and Planned change
              Though there has been an increasing tendency in recent years to play down the signif-
              icance of his work for contemporary organisations, few social scientists can have
              received the level of praise and admiration that has been heaped upon Kurt Lewin
              (Ash, 1992; Bargal et al, 1992; Dent and Goldberg, 1999; Dickens and Watkins,
              1999; Tobach, 1994). As Edgar Schein (1988: 239) enthusiastically commented:

                  There is little question that the intellectual father of contemporary theories of applied
                  behavioural science, action research and planned change is Kurt Lewin. His seminal work
                  on leadership style and the experiments on planned change which took place in World War
                  II in an effort to change consumer behaviour launched a whole generation of research in
                  group dynamics and the implementation of change programs.
The Planned approach to organisational change   269

   For most of his life, Lewin’s main preoccupation was the resolution of social conflict
and, in particular, the problems of minority or disadvantaged groups. Underpinning this
preoccupation was a strong belief that only the permeation of democratic values into all
facets of society could prevent the worst extremes of social conflict. As his wife wrote in
the Preface to a volume of his collected work published after his death:

 Kurt Lewin was so constantly and predominantly preoccupied with the task of advancing
 the conceptual representation of the social-psychological world, and at the same time he was
 so filled with the urgent desire to use his theoretical insight for the building of a better
 world, that it is difficult to decide which of these two sources of motivation flowed with
 greater energy or vigour.                                                     (Lewin, 1948b)


   To a large extent, his interests and beliefs stemmed from his background as a
German Jew. Lewin was born in 1890 and, for a Jew growing up in Germany, at this
time, officially-approved anti-Semitism was a fact of life. Few Jews could expect to
achieve a responsible post in the civil service or universities. Despite this, Lewin was
awarded a doctorate at the University of Berlin in 1916 and went on to teach there.
Though he was never awarded tenured status, Lewin achieved a growing international
reputation in the 1920s as a leader in his field (Lewin, 1992). However, with the rise of
the Nazi Party, Lewin recognised that the position of Jews in Germany was increas-
ingly threatened. The election of Hitler as Chancellor in 1933 was the final straw for
him; he resigned from the University and moved to America (Marrow, 1969).
   In America, Lewin found a job first as a ‘refugee scholar’ at Cornell University and
then, from 1935–1945, at the University of Iowa. Here he was to embark on an ambi-
tious programme of research, which covered topics such as child-parent relations,
conflict in marriage, styles of leadership, worker motivation and performance, conflict
in industry, group problem-solving, communication and attitude change, racism, anti-
Semitism, anti-racism, discrimination and prejudice, integration–segregation, peace,
war and poverty (Bargal et al, 1992; Cartwright, 1952; Lewin, 1948a). As Cooke
(1999) notes, given the prevalence of racism and anti-Semitism in America at the time,
much of this work, especially his increasingly public advocacy in support of disadvan-
taged groups, put Lewin on the political left.
   During the years of the Second World War, Lewin did much work for the American
war effort. This included studies of the morale of front-line troops and psychological war-
fare, and his famous study aimed at persuading American housewives to buy cheaper cuts
of meat (Lewin, 1943a; Marrow, 1969). He was also much in demand as a speaker on
minority and inter-group relations (Smith, 2001). These activities chimed with one of his
central preoccupations, which was how Germany’s authoritarian and racist culture could
be replaced with one imbued with democratic values. He saw democracy, and the spread
of democratic values throughout society, as the central bastion against authoritarianism
and despotism. That he viewed the establishment of democracy as a major task, and
avoided simplistic and structural recipes, can be gleaned from the following extracts from
his article on ‘The Special Case of Germany’ (Lewin, 1943b):

 ... Nazi culture ... is deeply rooted, particularly in the youth on whom the future depends. It
 is a culture which is centred around power as the supreme value and which denounces jus-
 tice and equality ...                                                                   (p. 43)
270   Chapter 8 · Approaches to change management


               To be stable, a cultural change has to penetrate all aspects of a nation’s life. The change must,
               in short, be a change in the ‘cultural atmosphere,’ not merely a change of a single item.
                                                                                                          (p. 46)

               Change in culture requires the change of leadership forms in every walk of life. At the start,
               particularly important is leadership in those social areas which are fundamental from the
               point of view of power.                                                               (p. 55)


                 With the end of the War, Lewin established the Research Center for Group
              Dynamics at the Massachusetts Institute of Technology. The aim of the Center was to
              investigate all aspects of group behaviour, especially how it could be changed. At the
              same time, he was also chief architect of the Commission on Community
              Interrelations (CCI). Founded and funded by the American Jewish Congress, its aim
              was the eradication of discrimination against all minority groups. As Lewin wrote at
              the time, ‘We Jews will have to fight for ourselves and we will do so strongly and
              with good conscience. We also know that the fight of the Jews is part of the fight of
              all minorities for democratic equality of rights and opportunities ...’ (quoted in
              Marrow, 1969: 175). In pursuing this objective, Lewin believed that his work on
              Group Dynamics and Action Research would provide the key tools for the CCI.
                 Lewin was also influential in establishing the Tavistock Institute in the UK and its
              Journal, Human Relations (Jaques, 1998; Marrow, 1969). In addition, in 1946, the
              Connecticut State Inter-Racial Commission asked Lewin to help train leaders and con-
              duct research on the most effective means of combating racial and religious prejudice
              in communities. This led to the development of sensitivity training and the creation, in
              1947, of the now famous National Training Laboratories. However, his huge work-
              load took its toll on his health, and on 11 February 1947 he died of a heart attack
              (Lewin, 1992).

              Lewin’s work
              Lewin was a humanitarian who believed that only by resolving social conflict,
              whether it be religious, racial, marital or industrial, could the human condition be
              improved. Lewin believed that the key to resolving social conflict was to facilitate
              learning and so enable individuals to understand and restructure their perceptions of
              the world around them. In this he was much influenced by the Gestalt psychologists
              he had worked with in Berlin (Smith, 2001). A central theme of much of his work is
              the view that ‘... the group to which an individual belongs is the ground for his per-
              ceptions, his feelings and his actions’ (Allport, 1948: vii). Also, despite the fact that
              his work covered many subjects and fields, as Gold (1999: 295) states, ‘It is quite
              clear that Lewin thought of his professional activities as a piece, seamless and inte-
              grated.’ Therefore, though field theory, Group Dynamics, Action Research and the
              Three-Step model of change are often treated as separate themes of his work, Lewin
              saw them as a unified whole with each element supporting and reinforcing the others,
              and all of them necessary to understand and bring about Planned change, whether it
              be at the level of the individual, group, organisation or even society (Bargal and Bar,
              1992; Kippenberger, 1998a, 1998b; Smith, 2001). As Allport (1948: ix) states: ‘All of
              his concepts, whatever root-metaphor they employ, comprise a single well-integrated
              system.’ This can be seen from examining these four aspects of his work in turn.
The Planned approach to organisational change   271

Field theory
This is an approach to understanding group behaviour by trying to map out the total-
ity and complexity of the field in which the behaviour takes place (Back, 1992).
Lewin maintained that to understand any situation it was necessary that: ‘One should
view the present situation – the status quo – as being maintained by certain condi-
tions or forces’ (Lewin, 1943a: 172). Lewin (1947b) postulated that group behaviour
is an intricate set of symbolic interactions and forces that not only affect group struc-
tures, but also modify individual behaviour. Therefore, individual behaviour is a
function of the group environment or ‘field’, as he termed it. Consequently, any
changes in behaviour stem from changes, be they small or large, in the forces within
the field (Lewin, 1947a). Lewin defined a field as ‘a totality of coexisting facts which
are conceived of as mutually interdependent …’ (Lewin, 1946: 240). Lewin believed
that a field was in a continuous state of adaptation and that ‘Change and constancy
are relative concepts; group life is never without change, merely differences in the
amount and type of change exist’ (Lewin, 1947a: 199). This is why Lewin used the
term ‘quasi-stationary equilibrium’ to indicate that, whilst there might be a rhythm
and pattern to the behaviour and processes of a group, these tended to fluctuate con-
stantly owing to changes in the forces or circumstances that impinge on the group.
   Lewin’s view was that if one could identify, plot and establish the potency of these
forces, then it would be possible not only to understand why individuals, groups and
organisations act as they do, but also what forces would need to be diminished or
strengthened in order to bring about change. In the main, Lewin saw behavioural
change as a slow process; however, he did recognise that under certain circumstances,
such as a personal, organisational or societal crisis, the various forces in the field can
shift quickly and radically. In such situations, established routines and behaviours
break down and the status quo is no longer viable; new patterns of activity can rap-
idly emerge and a new equilibrium (or quasi-stationary equilibrium) is formed
(Lewin, 1947a; Kippenberger, 1998a).
   Despite its obvious value as a vehicle for understanding and changing group behav-
iour, with Lewin’s death, the general interest in field theory waned (Back, 1992; Gold,
1992; Hendry, 1996). In recent years, however, with the work of Argyris (1990) and
Hirschhorn (1988) on understanding and overcoming resistance to change, Lewin’s
work on field theory has once again begun to attract interest. According to Hendry
(1996), even critics of Lewin’s work have drawn on field theory to develop their own
models of change (see Pettigrew et al, 1989, 1992). Indeed, parallels have even been
drawn between Lewin’s work and the work of complexity theorists (Kippenberger,
1998a). Back (1992), for example, argued that the formulation and behaviour of
complex systems as described by Chaos and Catastrophe theorists bear striking simi-
larities to Lewin’s conceptualisation of field theory. Nevertheless, field theory is now
probably the least understood element of Lewin’s work, yet, because of its potential
to map the forces impinging on an individual, group or organisation, it underpinned
the other elements of his work.
272   Chapter 8 · Approaches to change management

              Group Dynamics

               … the word ‘dynamics’ … comes from a Greek word meaning force. … ‘group dynamics’
               refers to the forces operating in groups. … it is a study of these forces: what gives rise to
               them, what conditions modify them, what consequences they have, etc.
                                                                                    (Cartwright, 1951: 382)


              Lewin was the first psychologist to write about ‘group dynamics’ and the importance
              of the group in shaping the behaviour of its members (Allport, 1948; Bargal et al,
              1992). Indeed, Lewin’s (1939: 165) definition of a ‘group’ is still generally accepted:
              ‘… it is not the similarity or dissimilarity of individuals that constitutes a group, but
              interdependence of fate.’ As Kippenberger (1998a) notes, Lewin was addressing two
              questions: What is it about the nature and characteristics of a particular group that
              causes it to respond (behave) as it does to the forces which impinge on it, and how can
              these forces be changed in order to elicit a more desirable form of behaviour? It was to
              address these questions that Lewin began to develop the concept of Group Dynamics.
                 Group Dynamics stresses that group behaviour, rather than that of individuals,
              should be the main focus of change (Bernstein, 1968; Dent and Goldberg, 1999).
              Lewin (1947b) maintained that it is fruitless to concentrate on changing the behav-
              iour of individuals because the individual in isolation is constrained by group
              pressures to conform. Consequently, the focus of change must be at the group level
              and should concentrate on factors such as group norms, roles, interactions and social-
              isation processes to create ‘disequilibrium’ and change (Schein, 1988).
                 Lewin’s pioneering work on Group Dynamics not only laid the foundations for our
              understanding of groups (Dent and Goldberg, 1999; Cooke, 1999; French and Bell,
              1984; Marrow, 1969; Schein, 1988) but has also been linked to complexity theories by
              researchers examining self-organising theory and non-linear systems (Tschacher and
              Brunner, 1995). However, understanding the internal dynamics of a group is not suffi-
              cient by itself to bring about change. Lewin also recognised the need to provide a process
              whereby the members could be engaged in and committed to changing their behaviour.
              This led Lewin to develop Action Research and the Three-Step model of change.

              Action Research
              This term was coined by Lewin (1946) in an article entitled ‘Action Research and
              Minority Problems’. Lewin stated in the article:

               In the last year and a half I have had occasion to have contact with a great variety of organi-
               zations, institutions, and individuals who came for help in the field of group relations.
                                                                                           (Lewin, 1946: 201)

              However, though these people exhibited …

               … a great amount of good-will, of readiness to face the problem squarely and really do
               something about it. … These eager people feel themselves to be in a fog. They feel in a fog
               on three counts: 1. What is the present situation? 2. What are the dangers? 3. And most
               importantly of all, what shall we do?                                  (Lewin, 1946: 201)
The Planned approach to organisational change   273

   Lewin conceived of Action Research as a two-pronged process which would allow
groups to address these three questions. Firstly, it emphasises that change requires
action, and is directed at achieving this. Secondly, it recognises that successful action
is based on analysing the situation correctly, identifying all the possible alternative
solutions and choosing the one most appropriate to the situation at hand (Bennett,
1983). To be successful, though, there has also to be a ‘felt-need’. Felt-need is an indi-
vidual’s inner realisation that change is necessary. If felt-need is low in the group or
organisation, introducing change becomes problematic. The theoretical foundations
of Action Research lie in Gestalt psychology, which stresses that change can only suc-
cessfully be achieved by helping individuals to reflect on and gain new insights into
the totality of their situation. Lewin (1946: 206) stated that Action Research ‘… pro-
ceeds in a spiral of steps each of which is composed of a circle of planning, action,
and fact-finding about the results of the action.’ It is an iterative process whereby
research leads to action, and action leads to evaluation and further research. As
Schein (1996: 64) comments, it was Lewin’s view that ‘… one cannot understand an
organization without trying to change it …’. Indeed, Lewin’s view was very much that
the understanding and learning that this process produces for the individuals and
groups concerned, which then feeds into changed behaviour, is more important than
any resulting change as such (Lewin, 1946).
   To this end, Action Research draws on Lewin’s work on field theory to identify the
forces that focus on the group to which the individual belongs. It also draws on
Group Dynamics to understand why group members behave in the way they do when
subjected to these forces. Lewin stressed that the routines and patterns of behaviour
in a group are more than just the outcome of opposing forces in a forcefield. They
have a value in themselves and have a positive role to play in enforcing group norms
(Lewin, 1947a). Action Research stresses that for change to be effective, it must take
place at the group level, and must be a participative and collaborative process which
involves all of those concerned (Allport, 1948; Bargal et al, 1992; French and Bell,
1984; Lewin, 1947b).
   Lewin’s first Action Research project was to investigate and reduce violence
between Catholic and Jewish teenage gangs. This was quickly followed by a project
to integrate black and white sales staff in New York department stores (Marrow,
1969). However, Action Research was also adopted by the Tavistock Institute in
Britain, and used to improve managerial competence and efficiency in the newly-
nationalised coal industry. Since then it has acquired strong adherents throughout the
world (Dickens and Watkins, 1999; Eden and Huxham, 1996; Elden and Chisholm,
1993). However, Lewin (1947a: 228) was concerned that:

 A change towards a higher level of group performance is frequently short lived; after a ‘shot
 in the arm,’ group life soon returns to the previous level. This indicates that it does not suf-
 fice to define the objective of a planned change in group performance as the reaching of a
 different level. Permanency at the new level, or permanency for a desired period, should be
 included in the objective.



It was for this reason that he developed his Three-Step model of change.
274   Chapter 8 · Approaches to change management

              Three-Step model
              This is often cited as Lewin’s key contribution to organisational change. It needs to be
              recognised, however, that when he developed his Three-Step model Lewin was not
              thinking only of organisational issues. Nor did he intend it to be seen separately from
              the other three elements which comprise his Planned approach to change (i.e. field
              theory, Group Dynamics and Action Research). Rather Lewin saw the four concepts
              as forming an integrated approach to analysing, understanding and bringing about
              change at the group, organisational and societal levels. A successful change project,
              Lewin (1947a) argued, involved three steps:
              Step 1: Unfreezing. Lewin believed that the stability of human behaviour was based
              on a quasi-stationary equilibrium supported by a complex field of driving and
              restraining forces. He argued that the equilibrium needs to be destabilised (unfrozen)
              before old behaviour can be discarded (unlearnt) and new behaviour successfully
              adopted. Given the type of issues that Lewin was addressing, as one would expect, he
              did not believe that change would be easy or that the same approach could be applied
              in all situations:

               The ‘unfreezing’ of the present level may involve quite different problems in different cases.
               Allport … has described the ‘catharsis’ which seems necessary before prejudice can be
               removed. To break open the shell of complacency and self-righteousness it is sometimes nec-
               essary to bring about an emotional stir up.                             (Lewin, 1947a: 229)



              Enlarging on Lewin’s ideas, Schein (1996: 27) comments that the key to unfreezing
              ‘… was to recognise that change, whether at the individual or group level, was a pro-
              found psychological dynamic process.’ Schein (1996) identifies three processes
              necessary to achieve unfreezing: disconfirmation of the validity of the status quo, the
              induction of guilt or survival anxiety, and creating psychological safety. He argued
              that: ‘… unless sufficient psychological safety is created, the disconfirming informa-
              tion will be denied or in other ways defended against, no survival anxiety will be felt,
              and consequently, no change will take place’ (Schein, 1996: 61). In other words, those
              concerned have to feel safe from loss and humiliation before they can accept the new
              information and reject old behaviours.
              Step 2: Moving. As Schein (1996: 62) notes, unfreezing is not an end in itself; it
              ‘…creates motivation to learn but does not necessarily control or predict the direc-
              tion.’ This echoes Lewin’s view that any attempt to predict or identify a specific
              outcome from Planned change is very difficult because of the complexity of the forces
              concerned. Instead, one should seek to take into account all the forces at work and
              identify and evaluate, on a trial and error basis, all the available options (Lewin,
              1947a). This is, of course, the learning approach promoted by Action Research. It is
              this iterative approach of research, action and more research that enables groups and
              individuals to move from a less acceptable to a more acceptable set of behaviours.
              However, as noted above, Lewin (1947a) recognised that, without reinforcement,
              change could be short-lived.
              Step 3: Refreezing. This is the final step in the Three-Step model. Refreezing seeks to
              stabilise the group at a new quasi-stationary equilibrium in order to ensure that the
The Planned approach to organisational change   275

new behaviours are relatively safe from regression. The main point about refreezing is
that new behaviour must be, to some degree, congruent with the rest of the behav-
iour, personality and environment of the learner or it will simply lead to a new round
of disconfirmation (Schein, 1996). This is why Lewin saw successful change as a
group activity, because unless group norms and routines are also transformed,
changes to individual behaviour will not be sustained. In organisational terms,
refreezing often requires changes to organisational culture, norms, policies and prac-
tices (Cummings and Huse, 1989).
Like other aspects of Lewin’s work, his Three-Step model of change has become unfash-
ionable in the last two decades (Dawson, 1994; Hatch, 1997; Kanter et al, 1992).
Nevertheless, such is its continuing influence that, as Hendry (1996: 624) commented:

 Scratch any account of creating and managing change and the idea that change is a three-
 stage process which necessarily begins with a process of unfreezing will not be far below
 the surface.


Lewin and change: a summary
Lewin was primarily interested in resolving social conflict through behavioural
change, whether this be within organisations or in the wider society. He identified
two requirements for success:
1 To analyse and understand how social groupings were formed, motivated and
  maintained. To do this, he developed both field theory and Group Dynamics.
2 To change the behaviour of social groups. The primary methods he developed for
  achieving this were Action Research and the Three-Step model of change.
   Underpinning Lewin’s work was a strong moral and ethical belief in the impor-
tance of democratic institutions and democratic values in society. Lewin believed that
only by strengthening democratic participation in all aspects of life and being able to
resolve social conflicts could the scourge of despotism, authoritarianism and racism
be effectively countered. Since his death, Lewin’s wider social agenda has been mainly
pursued under the umbrella of Action Research, though in recent years there has been
an increasing interest in applying Action Research to organisations (Darwin et al,
2002; Dickens and Watkins, 1999; McNiff, 2000). It is also in the wider social arena
where Lewin’s Planned approach has been most closely followed. For example, Bargal
and Bar (1992) described how, over a number of years, they used Lewin’s approach to
address the conflict between Arab-Palestinian and Jewish youths in Israel through the
development of inter-group workshops. The workshops were developed around six
principles based on Lewin’s work:

 (a) a recursive process of data collection to determine goals, action to implement goals and
 assessment of the action; (b) feedback of research results to trainers; (c) cooperation between
 researchers and practitioners; (d) research based on the laws of the group’s social life, on
 three stages of change – ‘unfreezing,’ ‘moving,’ and ‘refreezing’ – and on the principles of
 group decision making; (e) consideration of the values, goals and power structures of change
 agents and clients; and (f) use of research to create knowledge and/or solve problems.
                                                                    (Bargal and Bar, 1992: 146)
276   Chapter 8 · Approaches to change management

                 In terms of organisational change, Lewin and his associates had a long and fruitful
              relationship with the Harwood Manufacturing Corporation, where his approach to
              change was developed, applied and refined. Coch and French (1948: 512) observed
              that, at Harwood: ‘From the point of view of factory management, there were two
              purposes to the research: (1) Why do people resist change so strongly? and (2) What
              can be done to overcome this resistance?’ Therefore, in both his wider social agenda
              and his narrower organisational agenda, Lewin sought to address similar issues and
              apply similar concepts. Since his death, it is the organisational side of his work that has
              been given greater prominence by his followers and successors, mainly through the cre-
              ation of the Organization Development (OD) movement (Cummings and Worley,
              1997; French and Bell, 1995). However, whilst attempting to remain true to his partici-
              patory philosophy, and being greatly influenced by Lewin’s work on group dynamics,
              OD tends to equate Planned change with Lewin’s Three-Step model, rather than treat-
              ing it as an integrated package that also requires the use of field theory, Group
              Dynamics and Action Research. As a stand-alone approach to change, the Three-Step
              model is rather underdeveloped, so OD practitioners have sought to develop it further.


          ■ Phases of Planned change
              In attempting to elaborate upon Lewin’s Three-Step model, writers have expanded the
              number of steps or phases. Lippitt et al (1958) developed a seven-phase model of
              Planned change, whilst Cummings and Huse (1989), not to be outdone, produced an
              eight-phase model. As Cummings and Huse (1989: 51) point out, however, ‘the con-
              cept of planned change implies that an organization exists in different states at
              different times and that planned movement can occur from one state to another.’
              Therefore, in order to understand Planned change, it is not sufficient merely to under-
              stand the processes that bring about change; there must also be an appreciation of the
              states that an organisation must pass through in order to move from an unsatisfac-
              tory present state to a more desired future state.
                 Bullock and Batten (1985) developed an integrated, four-phase model of Planned
              change based on a review and synthesis of over 30 models of Planned change (see
              Exhibit 8.3). Their model describes Planned change in terms of two major dimen-
              sions: change phases, which are distinct states an organisation moves through as it
              undertakes Planned change; and change processes, which are the methods used to
              move an organisation from one state to another.
                 According to Cummings and Huse (1989), this model has broad applicability to
              most change situations. It clearly incorporates key aspects of many other change
              models and, especially, it overcomes any confusion between the processes (methods)
              of change and the phases of change – the sequential states that organisations must go
              through to achieve successful change.
                 The focus of Bullock and Batten’s model, just as with Lewin’s, is change at individ-
              ual and group level. However, OD practitioners have recognised, as many others
              have, that ‘Organizations are being reinvented; work tasks are being reengineered; the
              rules of the marketplace are being rewritten; the fundamental nature of organizations
              is changing’, and, therefore, Organization Development has to adapt to these new
              conditions and broaden its focus out beyond individual and group behaviour (French
              and Bell, 1995: 3–4).
The Planned approach to organisational change   277

    Exhibit 8.3       Bullock and Batten’s (1985) four-phase model of Planned change

    1. Exploration phase. In this state an organisation has to explore and decide whether it
       wants to make specific changes in its operations and, if so, commit resources to planning
       the changes. The change processes involved in this phase are becoming aware of the
       need for change; searching for outside assistance (a consultant/facilitator) to assist with
       planning and implementing the changes; and establishing a contract with the consultant
       which defines each party’s responsibilities.
    2. Planning phase. Once the consultant and the organisation have established a contract,
       then the next state, which involves understanding the organisation’s problem or concern,
       begins. The change processes involved in this are collecting information in order to
       establish a correct diagnosis of the problem; establishing change goals and designing the
       appropriate actions to achieve these goals; and persuading key decision-makers to
       approve and support the proposed changes.
    3. Action phase. In this state, an organisation implements the changes derived from the
       planning. The change processes involved are designed to move an organisation from its
       current state to a desired future state, and include establishing appropriate arrangements
       to manage the change process and gaining support for the actions to be taken; and
       evaluating the implementation activities and feeding back the results so that any
       necessary adjustments or refinements can be made.
    4. Integration phase. This state commences once the changes have been successfully
       implemented. It is concerned with consolidating and stabilising the changes so that they
       become part of an organisation’s normal, everyday operation and do not require special
       arrangements or encouragement to maintain them. The change processes involved are
       reinforcing new behaviours through feedback and reward systems and gradually
       decreasing reliance on the consultant; diffusing the successful aspects of the change
       process throughout the organisation; and training managers and employees to monitor
       the changes constantly and to seek to improve upon them.



■ The changing nature of Organization Development
  In the USA at least, OD has become a profession with its own regulatory bodies, to
  which OD practitioners have to belong, its own recognised qualifications, a host of
  approved tools and techniques, and its own ethical code of practice (Cummings and
  Worley, 1997). The members of this profession, whether employed in academic insti-
  tutions, consultancy practices or private and public organisations, exist to provide
  consultancy services. As with any profession or trade, unless they provide their cus-
  tomers with what they want, they will soon go out of business. Therefore, to
  appreciate the current role and approach of Planned change, it is necessary to say
  something of how OD has responded to the changing needs of its customers.
     As stated earlier, Organization Development is a process that applies behavioural
  science knowledge and practices to help organisations achieve greater effectiveness.
  The original focus of OD was on work groups within an organisational setting rather
  than organisations in their entirety, and it was primarily concerned with the human
  processes and systems within organisations. However, as French and Bell (1995) and
  Cummings and Worley (1997) have noted, in recent years there has been a major shift
  of focus within the OD field from the group to the organisation setting, and even
  beyond. Three developments in particular caused it to broaden out its perspective:
278   Chapter 8 · Approaches to change management

              ■   With the rise of the Job Design movement in the 1960s (see Chapter 2), and partic-
                  ularly the advent of Socio-Technical Systems theory, OD practitioners came to
                  recognise that they could not solely concentrate on the work of groups and individ-
                  uals in organisations but that they needed to look at other systems. Gradually, OD
                  has adopted an Open Systems perspective which allows it to look at organisations
                  in their totality and within their environments.
              ■   This organisation-wide perspective has caused OD practitioners to broaden out
                  their perspective in two interrelated ways. Firstly, and not surprisingly, they have
                  developed an interest in managing organisational culture. Given that, when work-
                  ing with groups, OD consultants have always recognised the important of group
                  norms and values, it is a natural progression to translate this into an interest in
                  organisational culture in general. Secondly, they have developed an interest in the
                  concept of organisational learning. Once again, as derived from Lewin’s work, OD
                  practitioners tend to stress that their interventions are as much about learning as
                  change. Therefore, it is a natural extension to move from group learning to organi-
                  sational learning. In both cases, however, these developments have tended to reflect
                  and follow on from a general interest in such issues by organisations and academ-
                  ics rather than necessarily being generated by the OD profession itself.
              ■   The increasing use of organisation-wide approaches to change (e.g. culture change
                  programmes), coupled with increasing turbulence in the environment in which
                  organisations operate, have drawn attention to the need for OD practitioners to
                  become involved in transforming organisations in their totality rather than only
                  focusing on changes to their constituent parts.
              Therefore, as can be seen, OD has attempted to move considerably away from its
              roots in group-based and Planned change and now takes a far more organisation- and
              system-wide perspective on change. This has created something of a dilemma for pro-
              ponents of OD. As Krell (1981) pointed out, much of what can be conceived of as
              traditional OD (e.g. Action Research, t-groups, etc.) had become accepted practice in
              many organisations by the early 1980s. Even some of the newer approaches, such as
              job design and self-managed work teams, have become mainstream practices in many
              organisations (Beer and Walton, 1987). By and large, these tried-and-tested
              approaches still tend to focus on the group level rather than on the wider organisa-
              tion level. However, the more organisation-wide transformational approaches, which
              are seen as crucial to maintaining OD’s relevance for organisations, are less clear, less
              well-developed and less well-accepted (Cummings and Worley, 1997; French and Bell,
              1995). In addition, the more that OD becomes focused on macro issues, the less it can
              keep in touch with and involve all the individuals affected by its change programmes
              and the less able it is to promote its core humanist and democratic values.
                 It would indeed be an irony if at this time, in pursuit of what is perceived as con-
              tinued relevance, OD lost sight of its core values. This is because, as Wooten and
              White (1999) argue, the core values of OD – equality, empowerment, consensus-
              building and horizontal relationships – are ones that are particularly relevant to the
              postmodern organisation. If this is the case, rather than loosening its ties with its tra-
              ditional values in order to retain its relevance, OD should be strengthening them in
              order to create the ‘framework for a postmodern OD science and practice’ (Wooten
              and White, 1999: 17).
The Planned approach to organisational change   279

■ Planned change: summary and criticisms
  Planned change, as developed by Kurt Lewin, comprised four elements: field theory,
  Group Dynamics, Action Research and the Three-Step model. It is an iterative, cycli-
  cal, process involving diagnosis, action and evaluation, and further action and
  evaluation. It is an approach that recognises that once change has taken place, it must
  be self-sustaining (i.e. safe from regression). The original purpose of Planned change
  was to resolve social conflict in society, including conflict within organisations. In
  organisational terms, it has come to focus on improving the effectiveness of the
  human side of the organisation. Central to Planned change in organisations is the
  emphasis placed on the collaborative nature of the change effort: the organisation,
  both managers and recipients of change, and the consultant jointly diagnose the
  organisation’s problem, and jointly plan and design the specific changes.
  Underpinning Planned change and indeed the OD movement is a strong humanist and
  democratic orientation and an emphasis on organisational effectiveness.
     Nevertheless, as OD practitioners have developed Planned change over the years,
  although the emphasis on organisational effectiveness has remained, a difference has
  emerged with regard to the participatory and democratic nature of its approach. This
  is particularly the case with the role of the change consultant. Lewin stressed the need
  to solve problems through social action (dialogue). He believed that successful change
  could only be achieved through the active participation of the change adopter (the
  subject) in understanding the problem, selecting a solution and implementing it.
  Lewin, and the early OD practitioners, saw the change agent as a facilitator, not a
  director or a doer. More important even than the solution to the problem, Lewin
  believed that the consultant’s real task was to develop those involved, and to create a
  learning environment that would allow them to gain new insights into themselves and
  their circumstances. Only through this learning process could people willingly come
  to see the need for and accept change.
     Bullock and Batten’s model, as with other more recent variants of Planned change,
  gives the consultant a more directive and less developmental role. Their model seems
  to place a greater emphasis on the consultant as an equal partner rather than as a
  facilitator; the consultant is as free to direct and do as the others involved. Those
  involved are more dependent on the change agent, not just for his or her skills of
  analysis but also for providing solutions and helping to implement them. Therefore,
  the focus is on what the change agent can do for those involved, rather than on seek-
  ing to enable the subjects to change themselves. This tendency for consultants to have
  a more directive role, and for employees to have a less participatory one, has become
  even more pronounced as OD practitioners have shifted their focus from individuals
  and groups to organisations in their entirety.
     Lewin’s approach to change was greatly influenced by the work of the Gestalt-Field
  theorists, who believe that successful change requires a process of learning. This
  allows those involved to gain or change insights, outlooks, expectations and thought
  patterns. This approach seeks to provide change adopters with an opportunity to
  ‘reason out’ their situation and develop their own solutions (Bigge, 1982). The danger
  with Bullock and Batten’s approach, and certainly later developments in OD, is that
  they appear to be moving more in the Behaviourist direction. As French and Bell
  (1995: 351) observed, from the 1980s onwards, there has been a growing tendency
280   Chapter 8 · Approaches to change management

              for top managers to focus less on people-orientated values and more on ‘the bottom
              line and/or the price of stock … [consequently] some executives have a “slash and
              burn” mentality’. Clearly, this tendency is not conducive to the promotion of demo-
              cratic and humanistic values. Instead, the emphasis is on the consultant as a provider of
              expertise that the organisation lacks. The consultant’s task is not only to facilitate but
              also to provide solutions. The danger in this situation is that the learner (the change
              adopter) becomes a passive recipient of external and, supposedly, objective data: one
              who has to be directed to the ‘correct’ solution. Reason and choice do not enter into
              this particular equation; those involved are shown the solution and motivated, through
              the application of positive reinforcement, to adopt it on a permanent basis (Skinner,
              1974). This appears to be especially the case with the newer, organisation-wide and
              transformational approaches about which even supporters of OD admit there is some
              confusion (Cummings and Worley, 1997).
                 Therefore, the move away from its original focus and area of expertise, i.e. the
              human processes involved in the functioning of individuals and groups in organisations,
              coupled with a more hostile business environment, appear to be eroding the values
              which Lewin and the early pioneers of OD saw as being central to successful change.
                 As might be expected, these developments in OD, as well as newer perspectives on
              organisations, have led many to question not only particular aspects of the Planned
              approach to change but also the utility and practicality of the approach as a whole.
              The main criticisms levelled against the Planned approach to change are, according to
              Burnes and Salauroo (1995) as follows.
                 Firstly, as Wooten and White (1999: 8) observe, ‘Much of the existing OD technol-
              ogy was developed specifically for, and in response to, top-down, autocratic, rigid,
              rule-based organizations operating in a somewhat predictable and controlled environ-
              ment’. Arising from this is the assumption that, as Cummings and Huse (1989: 51)
              pointed out, ‘an organization exists in different states at different times and that
              planned movement can occur from one state to another’. An increasing number of
              writers, however, especially from the complexity perspective, argue that, in the turbu-
              lent and chaotic world in which we live, such assumptions are increasingly tenuous
              and that organisational change is more a continuous and open-ended process than a
              set of discrete and self-contained events (Arndt and Bigelow, 2000; Bechtold, 1997;
              Black, 2000; Brown and Eisenhardt, 1997; Garvin, 1993; Kanter et al, 1997; Peters,
              1997a; Stacey, 2003).
                 Secondly, and on a similar note, a number of writers have criticised the Planned
              approach for its emphasis on incremental and isolated change and its inability to incor-
              porate radical, transformational change (Dawson, 1994; Dunphy and Stace, 1993;
              Harris, 1985; Miller and Friesen, 1984; Schein, 1985; Pettigrew, 1990a, 1990b).
                 Thirdly, the Planned change approach is seen as being based on the assumption
              that common agreement can be reached, and that all the parties involved in a particu-
              lar change project have a willingness and interest in doing so (Dawson, 1994; Hatch,
              1997; Wilson, 1992). This assumption appears to ignore organisational conflict and
              politics, or at least assumes that problem issues can be easily identified and resolved.
              However, given what was said of organisational power, politics and vested interests in
              Chapter 5, such a view is difficult to substantiate. Also, as Stace and Dunphy (1994)
              have shown, there is a wide spectrum of change situations, ranging from fine-tuning
              to corporate transformation, and an equally wide range of ways of managing these,
The frequency and magnitude of organisational change   281

        ranging from collaborative to coercive. Though Planned change may be suitable to
        some of these situations, it is clearly much less applicable to situations where more
        directive approaches may be required, such as when a crisis, requiring rapid and
        major change, does not allow scope for widespread involvement or consultation.
           Fourthly, it assumes that one type of approach to change is suitable for all organi-
        sations, all situations and all times. Dunphy and Stace (1993: 905), on the other
        hand, argue that:

         Turbulent times demand different responses in varied circumstances. So managers and consult-
         ants need a model of change that is essentially a ‘situational’ or ‘contingency model’, one that
         indicates how to vary change strategies to achieve ‘optimum fit’ with the changing environment.

        In supporting and adding to this list of criticisms, many writers have drawn attention
        to the increasing frequency and magnitude of change and, whilst the Planned
        approach may be applicable to incremental change, it is less relevant to larger-scale
        and more radical transformational changes that many organisations have undergone
        or are experiencing (Brown and Eisenhardt, 1997; Hayes, 2002). The same can be
        said in relation to the three schools of thought which provide the heoretical underpin-
        nings of organisational change that were discussed at the beginning of this chapter.
        Planned change is certainly applicable to the individual and group context, but seems
        less appropriate for system-wide change.
           Leading OD advocates, as might be predicted, dispute these criticisms and point to
        the way that Planned change has tried to incorporate issues such as power and poli-
        tics and the need for organisational transformation (Cummings and Worley, 1997;
        French and Bell, 1995). Also, as Burnes (1998b) argues, there is a need to draw a dis-
        tinction between Lewin’s original analytical approach to Planned change and the
        more prescriptive and practitioner-orientated variants that have been developed by
        the OD profession subsequently. In defence of Lewin, Burnes (2004) points out that
        Lewin did not ignore the importance of power and politics, nor did he fail to recog-
        nise that change could be fast and dramatic. In particular, Burnes argues that Lewin
        did not see organisations as stable and changeless entities, but that his view was not
        dissimilar to that of many of his critics. As already mentioned, a number of propo-
        nents of complexity theory have also made similar observations. This is a point which
        will be returned to towards the end of the next chapter. Nevertheless, even taking
        these points into account, it has to be recognised that Lewin never saw Planned
        change as being applicable to all change situations, and it was certainly never meant
        to be used in situations where rapid, coercive and/or wholesale change was required.
        Nevertheless, from the late 1970s onwards, the incremental, small-group view of
        change favoured by Lewin and his supporters began to be replaced by one which saw
        change as being more frequent and of greater magnitude.


The frequency and magnitude of organisational change
        As has been mentioned often in this book, the view which many leading commentators
        take is that organisations are changing at a faster pace and in a more fundamental way
        than ever before (Kanter et al, 1997; Kotter, 1996; Peters, 1997a). These commenta-
        tors judge the present level of organisational change to be unprecedented, although –
282   Chapter 8 · Approaches to change management

              as Chapter 6 noted – the history of the past 200 years could well be characterised as
              successive periods of unprecedented change. Obviously, an appreciation of whether
              organisational change is to be a continuing feature or a one-off event and whether it is
              on a small or large scale play a key role in judging the appropriateness of particular
              approaches to managing change. It is, therefore, important to go beyond the tabloid-
              like headlines thrown up by writers such as Tom Peters and to examine the main
              models of organisational change that are currently being promoted and, also, to recog-
              nise that there are strong disagreements about the nature and pace of change that
              organisations experience. In this respect, there are three current models that are promi-
              nent in the literature.


          ■ The incremental model of change
              Advocates of this view see change as being a process whereby individual parts of an
              organisation deal incrementally and separately with one problem and one goal at a
              time. By managers responding to pressures in their local internal and external envi-
              ronments in this way, over time, their organisations become transformed. As Miller
              and Friesen (1984: 222) state:

               The incrementalist perspective on change has been around a, relatively, long time. It stems
               from the work of Lindblom (1959) and Cyert and March (1963), and was further developed
               by Hedberg et al (1976) and especially Quinn (1980b and 1982). Quinn argues that strate-
               gic change is best viewed as ‘muddling through with purpose,’ using a continuous, evolving
               and consensus building approach.


              As Pettigrew et al (1992: 14) note, ‘The received wisdom therefore is that change will
              take place through successive, limited and negotiated shifts’. Though Quinn (1980b,
              1982) and others have marshalled considerable support for the incrementalist per-
              spective from Western sources, and though Planned change sits very comfortably with
              this view, in recent years the pre-eminent exemplars of incremental change have been
              Japanese companies (Hamel and Prahalad, 1989). As described in Chapter 3,
              Japanese companies have an enviable track record of achieving fierce competitiveness
              through pursuing incremental change year in, year out. Dunphy and Stace (1992) also
              advocated this approach for Western companies, arguing for a form of managed
              incrementalism that avoids both the stagnation engendered by fine-tuning and the
              brutality associated with rapid corporate transformations. However, as Mintzberg
              (1978) argued, though organisations do go through long periods of incremental
              change, these are often interspersed with brief periods of rapid and revolutionary
              change. Indeed, given the turbulence of the last 20 years, some writers have argued
              that it is now the periods of stability which are brief and the revolutionary change
              periods which are long, at least in Western firms (Handy, 1989). Not surprisingly, this
              has led to an increased interest in how organisations move between periods of stabil-
              ity and instability.
The frequency and magnitude of organisational change   283

■ The punctuated equilibrium model of organisational transformation
   This somewhat inelegantly-titled approach to change:

    … depicts organizations as evolving through relatively long periods of stability (equilibrium
    periods) in their basic patterns of activity that are punctuated by relatively short bursts of
    fundamental change (revolutionary periods). Revolutionary periods substantively disrupt
    established activity patterns and install the basis for new equilibrium periods.
                                                             (Romanelli and Tushman, 1994: 1141)

   The punctuated equilibrium model is associated with the work of Miller and Friesen
   (1984), Tushman and Romanelli (1985), and Gersick (1991). The inspiration for this
   model arises from two sources: first, from the challenge to Charles Darwin’s gradual-
   ist model of evolution in the natural sciences: Steven Jay Gould (1989), in particular,
   mounted a case for a punctuated equilibrium model of evolution; and second, from
   the assertion that whilst most organisations do appear to fit the incrementalist model
   of change for a period of time, there does come a point when they go through a
   period of rapid and fundamental change (Gersick, 1991). Though this view began to
   take hold in the 1980s, it is by no means new. In the 1970s, Greiner (1972) observed
   that as organisations grow, they go through long periods of evolutionary change and
   short, sharp bursts of revolutionary change. Indeed, Lewin made a similar observa-
   tion in the 1940s (Lewin, 1947a; Kippenberger, 1998a). However, as even Romanelli
   and Tushman (1994: 1142) admit, ‘Despite the growing prominence and pervasive-
   ness of punctuated equilibrium theory, little research has explored the empirical
   validity of the model’s basic arguments.’ This has led some to reject both the incre-
   mental and punctuated models of change (Brown and Eisenhardt, 1997).


■ The continuous transformation model of change
   The argument put forward by proponents of this model is that, in order to survive,
   organisations must develop the ability to change themselves continuously in a funda-
   mental manner. This is particularly the case in fast-moving sectors such as retail where,
   as Greenwald (1996: 54) notes, ‘If you look at the best retailers out there, they are con-
   stantly reinventing themselves.’ Brown and Eisenhardt (1997: 1) maintain that:

    For firms such as Intel, Wal-Mart, 3M, Hewlett-Packard and Gillette, the ability to change
    rapidly and continuously, especially by developing new products, is not only a core compe-
    tence, it is also at the heart of their cultures. For these firms, change is not the rare, episodic
    phenomenon described by the punctuated equilibrium model but, rather, it is endemic to the
    way these organizations compete. Moreover, in high-velocity industries with short product
    cycles and rapidly-shifting competitive landscapes, the ability to engage in rapid and relent-
    less continuous change is a crucial capability for survival …


      The underpinning rationale for the continuous transformation model is that the
   environment in which organisations operate is changing, and will continue to change,
   rapidly, radically and unpredictably. Only by continuous transformation will organi-
   sations be able to keep aligned with their environment and thus survive. Though this
284   Chapter 8 · Approaches to change management

              view has many adherents, there are two groups who are its main promoters. The first
              is the Culture–Excellence school. This group, especially Tom Peters (1997a, 1997b)
              and Rosabeth Moss Kanter et al (1997), have been arguing for a continuous transfor-
              mation model of change since the early 1980s. However, as noted in Chapter 3, they
              provide little solid empirical evidence to support their view. The second group are
              those who seek to apply complexity theories to organisations. As described in Chapter
              4, complexity theories are concerned with the emergence of order in dynamic non-
              linear systems operating at the edge of chaos: in other words, systems that are
              constantly changing and where the laws of cause and effect appear not to apply
              (Beeson and Davis, 2000; Haigh, 2002; Wheatley, 1992b). Order in such systems man-
              ifests itself in a largely unpredictable fashion, in which patterns of behaviour emerge in
              irregular but similar forms through a process of self-organisation, which is governed
              by a small number of simple order-generating rules (Black, 2000; MacIntosh and
              MacLean, 2001; Tetenbaum, 1998). Many writers have argued that organisations are
              also complex systems which, to survive, need to operate at the edge of chaos and have
              to respond continuously to changes in their environments through just such a process
              of spontaneous self-organising change (Hayles, 2000; Lewis, 1994; Macbeth, 2002;
              MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Stickland, 1998).
                 The problems with this perspective, as Stickland (1998) shows, are that (a) it is not
              clear that one can readily apply theories from the physical sciences to the social sci-
              ences, as is demonstrated by the fact that even proponents of its use in the social
              sciences are equivocal on this point; and (b) there is little strong evidence to support
              the complexity view.
                 Nevertheless, as the next chapter will show, there is growing support for both the
              continuous transformation and punctuated-equilibrium models. In turn this has led to
              a search for what are seen as more appropriate approaches to change than the one
              offered by Lewin and the OD movement.


Conclusions
              This chapter began by examining the theoretical foundations of change management
              and it was argued that in judging the applicability of approaches to managing change,
              one should assess whether they apply to individual, group or system-wide change.
                 The chapter then proceeded to examine the origins and development of the
              Planned approach to change, which dominated the theory and practice of change
              management from the 1940s to the 1980s. It was shown that the foundations of
              Planned change were laid by Kurt Lewin. After his death, however, it was taken up,
              and over time significantly modified, by the Organization Development movement in
              the USA. In terms of organisational change, the Planned approach focused upon
              resolving group conflicts and improving group performance by bringing together
              managers, employees and a change consultant. Through a process of learning, those
              involved gain new insights into their situation and are thus able to identify more
              effective ways of working together. Advocates of Planned change, especially the ear-
              lier ones, believe that group learning and individual development are at least as
              important as the actual change process itself. This, in part, arises from the humanist
              and democratic values that underpin Planned change and which derive from Kurt
              Lewin’s background and beliefs.
Test your learning   285

           Under the auspices of Organization Development, however, the influence of these
        values has lessened. The focus of Planned change has moved from conflict resolution
        to performance enhancement, as Organization Development has grown into a thriv-
        ing consultancy industry aimed almost exclusively at resolving problems within client
        organisations. Therefore, as was the case with the approaches to strategy discussed in
        Chapters 6 and 7, it is possible to draw a distinction between those proponents of
        Planned change, especially Lewin and early OD pioneers, who take an analytical
        approach, and those who take a more prescriptive approach, especially those whose
        livelihood depends upon their selling their services as change consultants.
           In the 1960s and 1970s, Planned change, with its increasing array of tools, tech-
        niques and practitioners, became the dominant approach to managing organisational
        change. From the 1980s onwards, however, Planned change has faced increasing
        levels of criticism, the main ones relating to its perceived inability to cope with radi-
        cal, coercive change situations or ones where power and politics are dominant. In its
        defence, as described earlier, there are proponents of Planned change who would
        argue that these criticisms are not valid, that it is a more flexible and holistic
        approach than its detractors would acknowledge, and that it is capable of incorporat-
        ing transformational change (Cummings and Worley, 2001; French and Bell, 1995;
        McLennan, 1989; Mirvis, 1990). There are also those who believe that many of the
        criticisms of Lewin’s work are misplaced (Burnes, 2004). Nevertheless, partly as a
        consequence of these criticisms of the Planned approach, and partly in the context of
        newer perspectives on change such as the punctuated-equilibrium and continuous
        transformation models, new approaches to change have been gaining ground in
        recent years, one of which in particular has come to dominate the literature. Though
        aspects of it have been given a number of different labels, such as continuous
        improvement or organisational learning, it is more often referred to as the Emergent
        approach to change. The Emergent approach tends to see change as driven from the
        bottom up rather than from the top down; it stresses that change is an open-ended
        and continuous process of adaptation to changing conditions and circumstances; and
        it also sees the process of change as a process of learning, and not just a method of
        changing organisational structures and practices (Dawson, 1994; Mabey and Mayon-
        White, 1993; Wilson, 1992). Therefore, the next chapter will examine the principles
        and merits of the Emergent approach to change.


Test your learning

      ■ Short answer questions
        1 What are the main theoretical foundations of change management?

        2 What are the key differences between the main theoretical foundations of change man-
          agement?

        3 How did Kurt Lewin define the term ‘Planned change’?

        4 How do contemporary OD practitioners define Planned change?
286   Chapter 8 · Approaches to change management

              5    What are the ethical principles which underpin Planned change?

              6 What are the main criticisms of the Planned approach?

              7 Evaluate the validity of the main criticisms of Planned change.

              8 Discuss the implications of the Planned approach for managerial behaviour.



          ■ Essay questions
              1 What was Kurt Lewin’s main contribution to change management?

              2 How has the OD movement sought to update its approach to organisational change? To
                what extent has it been successful?




                  Suggested further reading
              1 Burnes, B (2004) Kurt Lewin and the Planned approach to change: a re-appraisal. Journal of
                Management Studies, 41(6).
                Marrow, AJ (1969) The Practical Theorist: The Life and Work of Kurt Lewin. Teachers
                College Press (1977 edition): New York.
                Taken together, the article and the book provide a comprehensive examination of Lewin’s
                life and work.
              2 Cummings, TG and Worley, CG (2001) Organization Development and Change (7th edi-
                tion). South-Western College Publishing: Mason, OH, USA.
                French, WL and Bell, CH (1995) Organization Development (5th edition). Prentice Hall:
                Englewood Cliffs, NJ, USA.
                These two books provide a comprehensive guide to the origins and practices of OD.
Chapter 9

Developments in change
management
The Emergent approach and beyond



 Learning objectives
 After studying this chapter, you should be able to:
 ■   list the reasons for the decline in popularity of the Planned approach to
     change;
 ■   discuss the main elements of the Emergent approach to change;
 ■   describe the processualist approach to change;
 ■   explain the implications of complexity theories for organisational change;
 ■   state the strengths and weaknesses of the Emergent approach;
 ■   understand how Emergent change can be applied in practice;
 ■   appreciate the role of the change agent.
288   Chapter 9 · Developments in change management


 Exhibit 9.1       Continuous change at Citigroup

 Weill wields his power at Citigroup: revamp represents                                                                     FT
 ongoing structural changes
 Citigroup has proved itself an earnings powerhouse         addressing a more recent concern – the admitted
 since the company was formed by the 1998 merger            failure of Citigroup’s risk management systems to
 between Sandy Weill’s Travelers and John Reed’s            anticipate the severity of the Argentine financial
 Citicorp. However, Citigroup’s announcement this           crisis. The emerging markets group is being disman-
 week of a management reshuffle – the latest in a           tled as part of the latest revamp and Victor Menezes,
 series of such exercises – is a reminder that for all      its leader, is being shifted into a strategic role. At the
 the company’s success, it remains a work in                same time, Mr Weill is making often subtle changes
 progress in a structural sense. The upheaval is not        in the roles of several other executives who occupy
 necessarily a bad thing. Mr Weill, the chairman and        positions just below his in the Citigroup structure.
 chief executive, is famously unsentimental about his       Analysts said the changes were less indicative of a
 businesses and he has shown an ability over the            shift in the balance of power – or the anointment of
 decades to redeploy capital – and executives – to          a successor – than a demonstration of Mr Weill’s
 increase profits. But the repeated changes in the          continuing command. For example, Deryck
 chain of command at Citigroup also underscore the          Maughan, who negotiated the sale of Salomon
 difficulty of running such a vast enterprise and are       Brothers to Travelers in 1997 and has since become
 sure to reinforce anxieties about what will happen to      a close aide to Mr Weill, will be given oversight of all
 the company when Mr Weill, 69, finally leaves. ‘They       five of Citigroup’s international regions. But Mr
 have had several restructurings in a not very long         Maughan’s authority could be tempered by the
 period,’ said Michael Mayo, Prudential Securities          greater global role assigned to the leaders of
 banking analyst. ‘With a firm this complex, I think we     Citigroup’s product lines – Bob Willumstad, con-
 are finding that the need for more management              sumer banking; Michael Carpenter, investment
 reorganisations goes up.’ Making sense of the latest       banking; and Tom Jones, investment management.
 reshuffle is tricky because Mr Weill is doing several      Mr Willumstad, who was named president in January
 things at the same time. Broadly speaking, the             – filling a post that has been left open since Jamie
 revamp represents a fine-tuning of Citigroup’s efforts     Dimon, Mr Weill’s heir apparent, was fired in 1998 –
 to create a workable ‘matrix’ structure – allowing for     will also gain power in some areas and lose it in
 management along product and geographical lines.           others. As a product leader, Mr Willumstad will have
 As arcane as that sounds, it is a crucial issue for Mr     greater global responsibilities. But at the same time
 Weill. A big reason he merged his company with Mr          he will cede authority for finance and human
 Reed’s was to find ways to sell more Travelers prod-       resources to Chuck Prince, Mr Weill’s trusted chief
 ucts outside the US, using Citicorp’s wealth of            operating officer, who is also being given the crucial
 overseas connections. This week’s changes were             job of looking after risk management. At Citigroup, in
 described by Mr Weill as an attempt ‘to create a           other words, the situation is still status quo: Mr Weill
 more open matrix’, giving product executives more          giveth and Mr Weill taketh away.
 global power and pushing geographical managers to
 help identify opportunities. In the process, Mr Weill is   Source: Gary Silverman, Financial Times, 13 June 2002, p. 30.




                Introduction
               As the case of Citigroup shows (see Exhibit 9.1), organisations today are seen less and
               less as stable and enduring institutions, and more and more as ‘work in progress’ sub-
               ject to continuing and continuous change. Chapter 8 described how the Planned
               approach to change dominated the theory and practice of change management from
The case against the Planned approach to organisational change   289

        the late 1940s to the early 1980s. Since then, however, the Emergent approach, which
        starts from the assumption that change is a continuous, open-ended and unpre-
        dictable process of aligning and re-aligning an organisation to its changing
        environment, has taken over from the Planned approach as the dominant approach to
        change. Advocates of Emergent change argue that it is more suitable to the turbulent
        environment in which firms such as Citigroup operate because, unlike the Planned
        approach, it recognises that it is vital for organisations to adapt their internal prac-
        tices and behaviour in real-time to changing external conditions. Furthermore, and
        just as importantly, it sees change as a political process whereby different groups in an
        organisation struggle to protect or enhance their own interests.
           This chapter begins by presenting the case against the Planned approach. It then
        goes on to examine the main arguments for, and characteristics of, Emergent change,
        including those put forward by complexity theorists. This will show that, although
        they do not always agree with each other, the advocates of Emergent change are
        united by the emphasis they place on organisational structure, culture and learning,
        and their perspective on managerial behaviour and the role of power and politics in
        the change process. Following this, the chapter presents the recipes for change put
        forward by proponents of Emergent change. It then goes on to examine the different
        perspectives on and the role of change agents. In summarising the Emergent
        approach, it is argued that, though it has a number of distinct strengths, like Planned
        change it is a flawed and partial approach to change. In conclusion, it is argued that
        despite the large body of literature devoted to the topic of change management, and
        the many tools and techniques available to change agents, there is considerable debate
        and little agreement regarding the most appropriate approach. Though it is clear that
        neither the Emergent approach nor the Planned approach is suitable for all situations
        and circumstances.


The case against the Planned approach to organisational change
        As was shown in Chapter 8, the Planned approach to change has been, and remains,
        highly influential. It is still far and away the best developed, documented and sup-
        ported approach to change. This is because of the custodianship of the Organization
        Development movement in the USA. OD has taken Kurt Lewin’s original concept of
        Planned change and turned it into a thriving consultancy industry with its own stan-
        dards, accreditation procedures and membership (Cummings and Worley, 1997). In
        doing so, Lewin’s conception of Planned change as applying to small-group, human-
        centred change has been extended to include organisation-wide change initiatives. This
        has led to some confusion between Planned (participative) change as promoted by the
        OD movement and Planned (transformational) change as promoted by some elements
        of the strategic planning movement (Beer and Nohria, 2000; Mintzberg et al, 1998).
           This section, following on from the previous chapter, is concerned with the Planned
        approach to change as promoted by Lewin and the OD movement and which, from
        the late 1940s to the early 1980s, was the dominant approach to change, especially in
        the USA. Nevertheless, as shown in Chapter 8, from the early 1980s onwards, it has
        faced increasing levels of criticism as to its appropriateness and efficacy, especially in
        terms of its ability to cope with continuous change, its emphasis on incremental
290   Chapter 9 · Developments in change management

              change, its neglect of organisational conflict and politics, and its advocacy of a ‘one
              best way’ approach to change.
                 It was the rise of Japanese competitiveness and the apparent eclipse of Western
              industry in the late 1970s that precipitated the questioning of existing approaches to
              structuring, managing and changing organisations (e.g. Pascale and Athos, 1982;
              Peters and Waterman, 1982). The proponents of Culture–Excellence were the most
              vociferous critics of the existing order, arguing that Western organisations were
              bureaucratic, inflexible and stifled innovation. Their view of Planned change is, prob-
              ably, best summed up by Kanter et al’s (1992: 10) scathing comment that:

               Lewin’s model was a simple one, with organizational change involving three stages; unfreez-
               ing, changing and refreezing … This quaintly linear and static conception – the organization
               as an ice cube – is so wildly inappropriate that it is difficult to see why it has not only sur-
               vived but prospered. … Suffice it to say here, first, that organizations are never frozen,
               much less refrozen, but are fluid entities with many ‘personalities’. Second, to the extent
               that there are stages, they overlap and interpenetrate one another in important ways.


              In place of Lewin’s ‘wildly inappropriate’ model of change, the Culture–Excellence
              proponents have called, as described in Chapter 3, for organisations to adopt flexible
              cultures that promote innovation and entrepreneurship and encourage bottom-up,
              flexible, continuous and cooperative change. However, Culture–Excellence advocates
              recognised that top-down coercion, and rapid transformation, might also be neces-
              sary to create the conditions in which this type of approach could flourish.
                 At the same time, other new perspectives on organisations, especially concerning
              the role of power and politics in decision-making, were also coming to the fore. As
              Chapter 5 argued, writers such as Jeffrey Pfeffer (1981, 1992) maintained that the
              objectives, and outcomes, of change programmes were more likely to be determined
              by power struggles than by any process of consensus-building or rational decision-
              making. This paved the way for the development of a processual approach to
              organisational change, which highlights the continuous, unpredictable and political
              nature of change (Dawson, 1994; Pettigrew, 1985, 1993; Wilson, 1992). Looking at
              Planned change versus a processual approach, Dawson (1994: 3–4) comments that:

               Although this [Lewin’s] theory has proved useful in understanding planned change under
               relatively stable conditions, with the continuing and dynamic nature of change in today’s
               business world, it no longer makes sense to implement a planned process for ‘freezing’
               changed behaviours. Implementing stability and reinforcing behaviour which conforms to a
               rigid set of procedures for new work arrangements does not meet the growing requirements
               for employee flexibility and structural adaptation to the unfolding and complex nature of
               ongoing change processes. … The processual framework … adopts the view that change is a
               complex and dynamic process which should not be solidified or treated as a series of linear
               events. … central to the development of a processual approach is the need to incorporate an
               analysis of the politics of managing change.
The Emergent approach to change   291

         For the postmodernists (see Alvesson and Deetz, 1996; Foucault, 1983; Gergen,
       1992), power is also a central feature of change, but it arises from the socially-
       constructed nature of organisational life:

        In a socially-constructed world, responsibility for environmental conditions lies with those
        who do the constructing. … This suggests at least two competing scenarios for organiza-
        tional change. First, organization change can be a vehicle of domination for those
        who conspire to enact the world for others … An alternative use of social constructionism is
        to create a democracy of enactment in which the process is made open and available to all
        … such that we create opportunities for freedom and innovation rather than simply for fur-
        ther domination.                                                      (Hatch, 1997: 367–8)


          As can be seen, from the early 1980s, a powerful consensus built up against the
       Planned approach to change. It is a consensus, however, that criticises Planned change
       from very different perspectives: ranging from the free market neo-liberalism of Tom
       Peters to the neo-Marxism of some of the postmodernists. Therefore, they are certainly
       a much less coherent group than the advocates of Planned change and, rather than
       being united by a shared belief, they tend to be distinguished by a common disbelief in
       the efficacy of Planned change. Nevertheless, they do share at least two common
       beliefs: firstly, instead of seeing change as a phenomenon that can be pre-planned and
       has a finite end point, they see change as an ‘emerging’ and ongoing process of organi-
       sational adaptation and transformation. Secondly, they adopt an open systems
       perspective. That is, they see individual organisations as interdependent parts or sub-
       systems of a much larger environment, though they disagree about whether the
       environment is a concrete reality or a socially constructed phenomenon. The environ-
       ment impacts upon and affects the actions and decisions of organisations, but they also
       impact on the environment. Proponents of the Emergent approach see change as
       emerging from the day-to-day actions and decisions of members of an organisation. In
       this sense, change can emerge from attempts by members of organisations to align the
       organisation with its environment, or as the result of different groups battling for dom-
       ination, or even from attempts to construct a new, or challenge an old, social reality.
          Having identified what separates it from the Planned approach to change, we can
       now move on to examine the Emergent approach in more detail.


The Emergent approach to change
       For proponents of the Emergent approach, change is a continuous, dynamic and con-
       tested process that emerges in an unpredictable and unplanned fashion. As Weick
       (2000: 237) states:

        Emergent change consists of ongoing accommodations, adaptations, and alternations that
        produce fundamental change without a priori intentions to do so. Emergent change occurs
        when people reaccomplish routines and when they deal with contingencies, breakdowns,
        and opportunities in everyday work. Much of this change goes unnoticed, because small
        alternations are lumped together as noise in otherwise uneventful inertia ...
292   Chapter 9 · Developments in change management

              The rationale for the Emergent approach stems, according to Hayes (2002: 37), from
              the belief that:

                  … the key decisions about matching the organisation’s resources with opportunities, con-
                  straints and demands in the environment evolve over time and are the outcome of cultural
                  and political processes in organisations.

                 In terms of Emergent change, a process is ‘a sequence of individual and collective
              events, actions, and activities unfolding over time in context’ (Pettigrew, 1997: 338).
              For Wilson (1992), it is the increasingly dynamic and uncertain nature of the business
              environment that undermines the case for Planned change and underlines the appro-
              priateness of the Emergent approach. Wilson (1992) also believes that the Planned
              approach, by attempting to lay down timetables, objectives and methods in advance,
              is too heavily reliant on the role of managers, and assumes (perhaps rashly) that they
              can have a full understanding of the consequences of their actions and that their plans
              will be understood and accepted and can be implemented. In addition, Dawson
              (2003) contends that even in stable situations, change is emergent, messy and unpre-
              dictable. Similarly, Buchanan and Storey (1997: 127) maintain that the main criticism
              of those who advocate Planned change is:

                  ... their attempt to impose an order and a linear sequence to processes that are in reality
                  messy and untidy, and which unfold in an iterative fashion with much backtracking and
                  omission.

                 One of the main strands of the Emergent approach is provided by processual ana-
              lysts, deriving from the work of Andrew Pettigrew (1973, 1979, 1985, 1990a, 1990b,
              1997, 2000). Processualists reject prescriptive, recipe-driven approaches to change and
              are suspicious of single causes or simple explanations of events. Instead, when studying
              change, they focus on the interrelatedness of individuals, groups, organisations and
              society (Dawson, 2003; Pettigrew and Whipp, 1993). In particular, they claim that the
              process of change is a complex and untidy cocktail of rational decision processes, indi-
              vidual perceptions, political struggles and coalition-building (Huczynski and
              Buchanan, 2001). Within this complex and untidy cocktail, processualists recognise
              ‘the importance of planning for change’ and the presence of ‘processes of continuity’;
              they also recognise, however, that these are constrained and influenced by ‘the complex
              untidy and messy nature of change’ (Dawson, 2003: 25). The elaborateness of their
              view of change is shown by Pettigrew (1997: 340) who states that processualists
              pursue their work through five internally-consistent guiding principles, as follows:
              1    embeddedness, studying processes across a number of levels of analysis;
              2    temporal interconnectedness, studying processes in past, present and future time;
              3    a role in explanation for context and action;
              4    a search for holistic rather than linear explanations of process; and
              5    a need to link process analysis to the location and explanation of outcomes.
                 For Pettigrew, change cuts across functions, spans hierarchical divisions, and has
              no neat starting or finishing point; instead it is a ‘complex analytical, political, and
              cultural process of challenging and changing the core beliefs, structure and strategy of
              the firm’ (Pettigrew, 1987: 650).
The Emergent approach to change   293

   The Emergent approach, therefore, stresses the developing and unpredictable
nature of change. It views change as a process that unfolds through the interplay of
multiple variables (context, political processes and consultation) within an organisa-
tion. In contrast to the pre-ordained certainty of Planned change, Dawson (2003) in
particular adopts a processual approach to change that is less prescriptive and more
analytical and, he argues, better able to achieve a broader understanding of the prob-
lems and practice of managing change within a complex environment.
   This processual approach to change is akin to the processual approach to strategy
discussed in Chapter 6. Advocates of Emergent change who adopt this perspective
tend to stress that there can be no simple prescription for managing organisational
transitions successfully, owing to time pressures and situational variables. Neither, as
Dawson (1994: 181–2) argued, can change be represented as ‘the results of objective
rational decision-making on the part of managers. … [nor] as a single reaction to
adverse contingent circumstances’. Therefore, successful change is less dependent on
detailed plans and projections than on reaching an understanding of the complexity
of the issues concerned and identifying the range of available options. Processualists
also stress the central role played by power and politics in initiating and managing
change (Pettigrew, 1997). This point is further emphasised by the postmodernists, for
whom the struggle for power and domination is the central feature of change in
organisations (Hassard, 1993; Hatch, 1997). As Finstad (1998) notes, however, the
difference is that, for the processualists, the political nature of change tends to close
off options, whereas for the postmodernists, the presence of conflicting interests gives
people a range of new possibilities and ideas to choose from.
   Despite their difference in emphasis, proponents of the Emergent approach do
agree that power and politics play an important role in the process of organisational
change. This is a major point of departure between them and proponents of Planned
change. In commenting on the failure to incorporate the political nature of change
into the traditional and more prescriptive literature on change, Hardy (1996) argues
that this ‘aversion’ to discussing power has restricted our understanding of change
and impeded our ability to manage it effectively. Pugh (1993) makes a similar point
by emphasising that organisations are occupational systems and political systems as
well as systems for allocating resources through rational decision-making. He also
argues, however, that members of an organisation operate in all three systems simul-
taneously and, therefore, the rational and occupational systems need to be considered
alongside, and not subordinate to, the political system. This clearly conflicts with the
processualists who see the political system as being paramount.
   Moving on to examine the change process itself, the Emergent perspective rejects
both simple taxonomies of change, and approaches such as TQM and BPR, which
promise success through following a series of laid-down steps and stages (Beer and
Nohria, 2000; Collins, 1998). According to Stace and Dunphy (2001: 5):

 The appealing aspect of the promises held out for these change technologies is that they can
 absolve the manager from the onerous task of critically reviewing the full range of other
 competing approaches or devising a custom-made program. They cut through complexity.
 However, the offer is often illusory, for particular change approaches usually apply to par-
 ticular situations, and simple solutions sometimes ignore the complexity of real life.
294   Chapter 9 · Developments in change management

              Dawson (2003) sees change as:

               … a complex ongoing dynamic in which the politics, substance and context of change all
               interlock and overlap, and in which our understanding of the present and expectations of
               the future can influence our interpretation of past events, which may in turn shape our
               experience of change.


              From this perspective, even when changes are operational, they will need to be con-
              stantly refined and developed in order to maintain their relevance. Genus (1998: 51)
              uses an ‘interpretive’ perspective to explain the messy nature of organisational change,
              arguing that the ‘ … various political, symbolic and structural factors [involved in the
              change process] condition the perceptions of individuals or groups … ’. Finstad’s
              (1998) view of organisational change, whilst being consistent with the perspectives of
              Dawson and Genus, does, however, appear to adopt a realist perspective on change by
              drawing an important distinction between the concrete elements of change, such as
              structures and practices, and the more symbolic elements, such as people’s basic under-
              standings and assumptions about their organisations. He maintains, though, that it is
              the symbolic aspects that dominate the change process rather than the more concrete
              changes. The importance of symbolism and ritual in the change process is also empha-
              sised by Schuyt and Schuijt (1998), who argue that the management of these is not
              only central to achieving successful change, but also plays a crucial role in reducing the
              uncertainty which change generates.
                  It is because change is so complex and multifaceted that Carnall (2003) suggests
              that mastering the challenge of change is not a specialist activity to be facilitated or
              driven by an expert but an increasingly important part of every manager’s role.
              Carnall (2003: 125–6) proposes four core managerial competences that are essential
              for the effective management of change: decision-making; coalition-building; achiev-
              ing action; and maintaining momentum and effort. Stace and Dunphy (2001), on the
              other hand, identify a range of approaches to change and argue that these each
              require different sets of managerial competences. This view fits better with
              McCalman and Paton (1992) who suggest that, to be effective in creating sustainable
              change, managers will need an extensive and systemic understanding of their organi-
              sation’s environment, in order to identify the pressures for change and to ensure that,
              by mobilising the necessary internal resources, their organisation responds in a timely
              and appropriate manner. Similarly, Dawson (1994) claims that change must be linked
              to developments in markets, work organisation, systems of management control and
              the shifting nature of organisational boundaries and relationships. He emphasises
              that, in a dynamic business environment, one-dimensional change interventions are
              likely to generate only short-term results and heighten instability rather than reduce
              it. This is a point emphasised by many other writers (Beer and Nohria, 2000; Graetz
              et al, 2002; Hartley et al, 1997; Senior, 2002).
                  As can be seen, though they do not always openly state it, advocates of Emergent
              change tend to adopt a Contingency perspective, arguing that approaches to change
              need to be tailored to the situation of the individual organisation. Implicit in their argu-
              ment is the assumption that if organisations operated in more stable and predictable
              environments, the need for change would be less and it might be possible to conceive of
              it as a process of moving from one relatively stable state to another. Consequently, for
The Emergent approach to change   295

advocates of Emergent change, it is the uncertainty of the environment that makes
Planned change inappropriate and Emergent change more pertinent. This is a point
emphasised by Stickland (1998: 14), who draws on systems theory to emphasise the
way that organisations are separate from but connected to their environment:

 A system has an identity that sets it apart from its environment and is capable of preserving
 that identity within a given range of environmental scenarios. Systems exist within a hierar-
 chy of other systems. They contain subsystems and exist within some wider system. All are
 interconnected ...

From this systems perspective, Stickland (1998: 76) raises a question that many of
those studying organisational change appear not to acknowledge: ‘To what extent
does the environment drive changes within a system [i.e. organisation] and to what
extent is the system in control of its own change processes?’ Finstad (1998: 721) puts
this issue in a wider context by arguing that ‘the organization is … the creator of its
environment and the environment is the creator of the organization.’ Though this has
a postmodernist sound to it, realists would also recognise that organisations do con-
tribute to the creation or the maintenance of their environment, but they see this as a
long-term and largely unconscious process.
   This reciprocal relationship between an organisation and its environment clearly
has profound implications for how organisations conceptualise and manage change.
It also serves to emphasise that a key competence for organisations is the ability to
scan the external environment in order to identify and assess the impact of trends and
discontinuities (Graetz et al, 2002; McCalman and Paton, 1992; Pettigrew and
Whipp, 1993). This involves exploring the full range of external variables, including
markets and customers, shareholders, legal requirements, the economy, suppliers,
technology, and social trends. This activity is made more difficult by the changing and
arbitrary nature of organisation boundaries: customers can also be competitors; sup-
pliers may become partners; and employees can be transformed into customers,
suppliers or even competitors for scarce resources.
   To cope with this complexity and uncertainty, Pettigrew and Whipp (1993) main-
tain that organisations need to become open learning systems, with strategy
development and change emerging from the way the company as a whole acquires,
interprets and processes information about its environment. Carnall (2003) and
Hayes (2002) take a similar view, arguing that an organisation’s survival and growth
depend on identifying environmental and market changes quickly, and responding
opportunistically. This is in line with the discussion on organisational learning cov-
ered in Chapter 3. However, as Benjamin and Mabey (1993: 181) point out:

 ... while the primary stimulus for change remains those forces in the external environment,
 the primary motivator for how change is accomplished resides with the people within
 the organization.

  Changes in the external environment, therefore, require organisations to make
choices over how and when to respond. Such responses, the supporters of the
Emergent approach state, should promote, throughout the organisation, an extensive
and deep understanding of strategy, structure, systems, people, style and culture, and
296   Chapter 9 · Developments in change management

              how these can function either as sources of inertia that can block change, or alterna-
              tively, as levers to encourage an effective change process (Dawson, 2003; Pettigrew,
              1997; Wilson, 1992). A concomitant development is the adoption of a ‘bottom-up’
              rather than ‘top-down’ approach to initiating and implementing change. After all,
              there is little point in encouraging staff to identify change opportunities unless they
              are also encouraged to implement them. The case in favour of this move is based on
              the view that the pace of environmental change is so rapid and complex that it is
              impossible for a small number of senior managers effectively to identify, plan and
              implement the necessary organisational responses. The responsibility for organisa-
              tional change is therefore of necessity becoming more devolved. As described in
              Chapter 2, this is very much what the advocates of Contingency theory would expect
              in such a situation.
                 Nevertheless, the need for a bottom-up approach does not just arise from external
              pressures. As Stickland (1998: 93) notes, organisations are continually experiencing
              ‘natural changes’, i.e. the unintended consequences of deliberate decisions and actions:

               Within any organisation at a given point in time there are a number of continual shifts and
               changes playing out at various levels. These are not planned changes with a defined begin-
               ning and end, but rather reflect the natural dynamics which take place internally.

              Such events may present organisations with unexpected and unlooked for opportuni-
              ties, such as new product ideas, but may also present unwelcome threats, such as the
              departure of key staff. Given that such changes are continually happening at all levels
              and across all functions, organisations would quickly become paralysed if it was left
              solely to senior managers to identify and resolve them. Therefore, if they are to be
              dealt with speedily, these local problems or opportunities have to be dealt with
              locally. As Senior (2002) comments, this requires organisations to empower their
              employees to make changes at a local level. This follows from Mintzberg’s (1994)
              assertion that it is from these local and bottom-up actions that the direction of the
              organisation emerges and is given shape.
                 Therefore, a bottom-up approach requires a major change in the role of senior
              managers. Instead of controlling employees, they have to empower people. Instead of
              directing and controlling change, they have to ensure that the organisation’s members
              are receptive to, and have the necessary skills, motivation and power to take charge
              of, the change process. There is a distinction here between those who take a narrow
              view of empowerment, seeing it mainly as devolving some limited managerial respon-
              sibility, and those, à la Lewin, who see it as an emancipatory process that aims to
              create genuine organisational democracy, though it must be pointed out that even the
              former has a poor track record of success (Eccles, 1993; Foegen, 1999; Graetz et al,
              2002; Huczynski and Buchanan, 2001; Lawler et al, 1998; Lee, 1999; Pfeffer, 1996;
              Stohl and Cheney, 2001; Wetlaufer, 1999). Nor is this just an issue of managers
              changing. Wilson (1992) believes that to achieve effective empowerment, senior man-
              agers must not only change the way they perceive and interpret the world, but achieve
              a similar transformation amongst everyone else in the organisation as well. Pettigrew
              and Whipp (1993) contend that the degree to which organisations can achieve such a
              difficult task, and create a climate receptive to change, is dependent on four condi-
              tioning factors:
The Emergent approach to change   297

■   the extent to which key players in the organisation are prepared to champion
    methods for gathering and assessing information on the organisation’s position
    that increase openness;
■   the degree to which such information-gathering occurs and how effectively it is
    integrated with central business operations;
■   the extent to which environmental pressures are recognised;
■   the structural and cultural characteristics of the organisation.
   As was described in Chapter 4, a wide range of organisational theorists and practi-
tioners have argued that organisations are complex, non-linear systems in which change
emerges through a process of spontaneous self-organisation, which is underpinned by a
set of simple order-generating rules (Arndt and Bigelow, 2000; Bechtold, 1997; Black,
2000; Fitzgerald, 2002a; MacIntosh and MacLean, 2001; Stacey, 2003). The concept of
self-organisation, as well as its implications for organisations, is very similar to the con-
cept of Emergent change, especially in terms of the link between the emergent or
self-organising nature of change and the need for greater organisational democracy.
   Complexity theorists argue that the best-run companies survive because they operate
at the edge of chaos by relentlessly pursuing a path of continuous innovation brought
about by a process that resembles self-organisation in nature (Brown and Eisenhardt,
1997; Frederick, 1998; Jenner, 1998). However, Beeson and Davis (2000) make the
point that whilst it might be fruitful to see organisations as non-linear systems, to do so
will require a fundamental shift in the role of management. Like many others (e.g. Boje,
2000; Stacey et al, 2002; Sullivan, 1998; Tetenbaum, 1998; Wheatley, 1992b), they
point out that self-organising principles explicitly reject cause-and-effect, top-down,
command-and-control styles of management. Brodbeck (2002) suggests that the belief
by managers that order and control are essential to achieve their objectives should be
rejected. For Tetenbaum (1998), the move to self-organisation will require managers to
destabilise their organisations and develop the skill of managing order and disorder at
the same time. Managers will need to encourage experimentation, divergent views, even
allow rule-breaking, and recognise that ‘… people need the freedom to own their own
power, think innovatively, and operate in new patterns’ (Bechtold, 1997: 198). Beeson
and Davis (2000) echo this point and argue that, in such situations, change becomes an
everyday event undertaken by all in the organisation.
   The implication of this for Bechtold (1997) is that organisations seeking to adopt a
complexity approach will need to have a balanced distribution of power, strong cus-
tomer focus, a strategy of continuous learning and an orientation towards community
service. A further strand in this argument is provided by Kiel (1994), who argues that
because small actions can have large and unpredictable consequences, individual
human activity assumes great importance. Similarly, Jenner (1998) claims that for
self-organisation to work, authority must be delegated to those who have access to
the broadest channels of information that relate to the issue or problem concerned.
Therefore, to all intents and purposes, the complexity approach to change lies firmly
within the Emergent camp.
   As can be seen, the advocates of Emergent change come from a wide variety of
backgrounds and each offers their own distinct view on how organisations should
and should not manage change. As the following section will show, however, there are
some core similarities which link them.
298   Chapter 9 · Developments in change management


          ■ The Emergent approach to successful change
              Though the proponents of the Emergent approach reject the concept of universally-
              applicable rules for change, the guidance they do provide tends to stress five features
              of organisations that either promote or obstruct success: structures, cultures, organi-
              sational learning, managerial behaviour, and power and politics.

              Organisational structure
              This is seen as playing a crucial role in determining where power lies, in defining how
              people relate to each other and in influencing the momentum for change (Carnall,
              2003; Dawson, 2003; Hatch, 1997; Huczynski and Buchanan, 2001; Kotter, 1996).
              Crucially, as Galbraith (2000: 154) notes: ‘The theory of organization has always
              identified some types of [organisational structures] as being more easily changeable
              than others.’ Therefore, an appropriate organisational structure, in both its formal
              and informal elements, can be an important facilitator of change.
                 The case for developing more appropriate organisational structures in order to facil-
              itate change very much follows the arguments of the Contingency theorists (discussed
              in Chapter 2) and the Culture–Excellence school (discussed in Chapter 3), i.e. that
              dynamic and chaotic environments require organisations to adopt more flexible, less
              hierarchical structures. Those favouring an Emergent approach to change point out
              that the 1990s witnessed a general tendency to create flatter organisational structures
              in order to increase responsiveness by devolving authority and responsibility (Senior,
              2003). As Kotter (1996: 169) remarks, the case for such structural changes is that:

               An organization with more delegation, which means a flat hierarchy, is in a far superior
               position to manoeuvre than one with a big, change-resistant lump in the middle.

              A similar point is made by proponents of the complexity approach. For Jenner (1998:
              402), the key issue is that:

               … enterprise must be organized into flexible basic units that permit new organizational struc-
               tures to be identified and to emerge, and which promote efficient exchanges of information.

                In studying innovating organisations, Brown and Eisenhardt (1997: 29) refer to
              such flexible structures as ‘semistructures’, which they claim:

               … are sufficiently rigid so that change can be organized, but not so rigid that it cannot occur.
               … sustaining this semistructured state is challenging because it is a dissipative equilibrium and
               so requires constant managerial vigilance to avoid slipping into pure chaos or pure structure.


              A similar point is made by Galbraith (2000: 155), who refers to the ‘reconfigurable’
              organisation, which:

               … consists of a stable part and a variable part. The stable part consists of ‘homes’ for spe-
               cialists in functions, which also host generalists on rotating assignments. … The variable
               part of the structure consists of integrating mechanisms and networks across the functions.
The Emergent approach to change   299

Brown and Eisenhardt (1997) claim that such structures are essential for ensuring
organisational survival in highly-competitive environments because they facilitate
continuous innovation and improvisation and allow intensive, real-time communica-
tion within a structure of a few, very specific rules.
   A common aspect of these new structures is the move to create customer-centred
organisations with structures that reflect, and are responsive to, different markets
rather than different functions (Galbraith, 2000; Hamel and Prahalad, 1994; Stace
and Dunphy, 2001). Customer responsiveness places greater emphasis on effective
horizontal processes and embodies the concept that, whether one is looking internally
or externally, everyone is someone else’s customer (Dale, 2003; Jenner, 1998).
   One result of attempts to respond rapidly to changing conditions by breaking
down internal and external barriers, disseminating knowledge and developing synergy
across functions is the emergence of network organisations (Morgan, 1997; Wisdom,
2001). Network organisations have been defined in a number of ways and given a
number of names – Handy (1989) refers to them as federal organisations, Robbins
(1997) uses the term virtual organisation, after the Internet on which many of them
either rely or are based, and Senge (2000: 77) writes of ‘living human communities’.
For Cummings and Worley (2001: 291) the purpose of a network-based structure is
that it:

 … manages the diverse, complex, and dynamic relationships among multiple organizations
 or units, each specializing in a particular business function or task.

   Birchall and Lyons (1995) stress that networks can be in a constant state of flux as
they adjust to the changing needs of their dynamic customer base. They also comment
that in some cases, customers are even part of the network. For Snow et al (1993), a
major benefit of network structures is that the semi-autonomous nature of each part
of a network reduces the need for and erodes the power of centrally-managed bureau-
cracies, which, in turn, leads to change and adaptation being driven from the bottom
up rather than from the top down. They further argue that the specialisation and flex-
ibility required to cope with globalisation, intense competition and rapid
technological change, especially the challenge of the Internet, can only be achieved by
loosening the central ties and controls that have characterised organisations in the
past (Genus, 1998; Hardaker and Graham, 2001; Kanter et al, 1997; Kotter, 1996;
Wisdom, 2001). However, is it clear that every organisation will have to adopt such
structural changes in order to survive? The premise that they will have to is based on
the assumption that all organisations experience similar levels of environmental tur-
bulence and cannot do anything other than adapt their internal arrangements to these
external conditions. As argued in previous chapters, there are three flaws to this argu-
ment. Firstly, environmental instability is not uniform; it varies from industry to
industry and organisation to organisation. Secondly, even where instability is present,
organisations can choose to take action to reduce it rather than merely having to
adapt to it. Lastly, as Child’s concept of equifinality discussed in Chapter 6 suggests,
there are a range of internal arrangements that are compatible with external turbu-
lence, of which flattened hierarchies are only one.
300   Chapter 9 · Developments in change management


              Organisational culture
              There can be few people who now doubt the important role culture plays in the life of
              organisations, especially when it comes to change (Allaire and Firsirotu, 1984;
              Brown, 1995; De Witte and van Muijen, 1999; Hirschhorn, 2000). Johnson (1993:
              64) suggested that the strategic management of change is ‘essentially a cultural and
              cognitive phenomenon’ rather than an analytical, rational exercise. Clarke (1994)
              states that the essence of sustainable change is to understand the culture of the organ-
              isation that is to be changed. If proposed changes contradict cultural biases and
              traditions, it is inevitable that they will be difficult to embed in the organisation.
              Kotter (1996) takes a similar view, arguing that for change to be successful it must be
              anchored in the organisation’s culture.
                 Dawson (2003) echoes this theme. He suggests that attempts to realign internal
              behaviours with external conditions require change strategies that are culturally sensi-
              tive. Organisations, he points out, must be aware that the process is lengthy,
              potentially dangerous, and demands considerable reinforcement if culture change is to
              be sustained against the inevitable tendency to regress to old behaviours. Pointing to
              Pirelli’s attempt to implement TQM in two of its Australian plants, Dawson (2003:
              33) comments that:

               Management had a plan and a timeframe for the ‘successful’ management of change, but
               they were not prepared for the very different contextual conditions and local operating cul-
               tures of the two adjacent plants in South Australia. The cultural socio-political aspects of
               change turned out to be far more important and influential than had been anticipated, or
               could be accommodated for, in planning the process of change.


                 Likewise, Pettigrew (1997) stresses that organisational processes are embedded in
              an organisation’s context, of which culture forms an important part. Pettigrew also
              points out that, because of this embeddedness, change can be slow. From the com-
              plexity perspective, Stacey (2003) similarly points to the importance of having an
              appropriate culture and the difficulty involved in changing an existing one.
              Cummings and Worley (2001) likewise recognise that culture can hinder the speed of
              change, especially when it is the culture that needs to change. In such cases, they
              point out, it is necessary to challenge mechanisms that reinforce old or inappropriate
              behaviour, such as reward, recruitment and promotion structures – all areas where
              resistance can be expected. In addition, if these reinforcement mechanisms are com-
              plemented by managerial behaviour which promotes risk aversion and fear of failure,
              it is unlikely to create a climate where people are willing to propose or undertake
              change. Accordingly, as Clarke (1994: 94) suggests, ‘Creating a culture for change
              means that change has to be part of the way we do things around here, it cannot be
              bolted on as an extra.’
                 Therefore, for many proponents of the Emergent approach, an essential factor in
              successful change is for organisations to possess or to be able to develop an appropri-
              ate organisational culture. However, Senior (2002) notes that many writers and
              researchers take a different view. Beer et al (1993), for example, suggest that the most
              effective way to promote change is not by directly attempting to influence organisa-
              tional behaviour or culture. Instead, they advocate restructuring organisations in
The Emergent approach to change   301

order to place people in a new organisational context which imposes new roles, rela-
tionships and responsibilities upon them. This, they believe, forces new attitudes and
behaviours upon people. This view, as discussed in Chapter 3, is also shared by Tom
Peters (1993) who advocates rapid and complete destruction of existing hierarchical
organisation structures as a precursor to behavioural change.
   In Chapter 5 we discussed the difficulty and relevance of achieving cultural change,
by whatever means. It was argued that many writers are highly sceptical about seeing
culture as a promoter of change. This view is, perhaps, best summed up by Wilson
(1992: 91), who claims that:

 ... to effect change in an organization simply by attempting to change its culture assumes an
 unwarranted linear connection between something called organizational culture and perform-
 ance. Not only is this concept of organizational culture multi-faceted, it is also not always
 clear precisely how culture and change are related, if at all, and, if so, in which direction.


Organisational learning
This was examined in Chapter 3. For advocates of the Emergent approach, learning
plays a key role in preparing people for, and allowing them to cope with, change
(Bechtold, 1997; Senge, 2000). Put simply, learning means ‘… the capacity of mem-
bers of an organization to detect and correct errors and to seek new insights that
would enable them to make choices that better produce outcomes that they seek’
(Martin, 2000: 463). A willingness to change often only stems from the feeling that
there is no other option (Argyris, 1999; Pettigrew et al, 1992). Therefore, as Wilson
(1992) suggests, change can be precipitated by encouraging dissatisfaction with cur-
rent systems and procedures or making impending crises real to everyone in the
organisation. Kotter (1996) even advocates engineering a crisis in order to build the
momentum for change. Whatever the spur for change, however, staff are unlikely to
recognise the need for change unless managers create mechanisms which allow them
to become familiar with the company’s performance, market place, customers, com-
petitors, legal requirements, etc. (Fiol and Lyles, 1985; Probst and Buchel, 1997).
Pettigrew and Whipp (1993: 18) also contended that ‘collective learning’ is one of the
main preconditions for sustainable change. They argue that ‘collective learning’
ensures that the full implications of an organisation’s view of its environment can
then inform subsequent actions over the long-term and, in turn, the way in which
future shifts in the environment are tackled.
   Clarke (1994) and Nadler (1993) suggested that individual and organisational learn-
ing stem from effective top-down communication and the promotion of self-development
and confidence. In turn, this encourages the commitment to, and shared ownership of,
the organisation’s vision, actions and decisions that are necessary to respond to the exter-
nal environment and take advantage of the opportunities it offers. Additionally, as Pugh
(1993) points out, in order to generate the need and climate for change, people within
organisations need to be involved in the diagnosis of problems and the development of
solutions. Carnall (2003) takes this argument further, arguing that:

 The effective organization is one which encourages and supports learning from change. This
 means that an open management style, encouraging initiative and risk, is needed.
302   Chapter 9 · Developments in change management

              Likewise, Clarke (1994: 156) maintains that involving staff in change management
              decisions has the effect of ‘stimulating habits of criticism and open debate’, which
              enables them to challenge existing norms and question established practices.
                 Clarke points out that although this can create the opportunity for innovation and
              radical change, challenging the status quo is also akin to challenging managerial judg-
              ment and authority. As Benjamin and Mabey (1993) maintain, though the
              questioning of the status quo is the essence of bottom-up change, it also leads to a
              form of role reversal whereby, rather than managers pressuring staff to change, the
              reverse occurs. Therefore, a new, open management style can result in staff putting
              pressure on managers to address fundamental questions about the purpose and direc-
              tion of the organisation which previously they might have preferred to avoid.
              Consequently, as Easterby-Smith et al (2000) and Tsang (1997) suggest, organisa-
              tional learning is neither an easy nor an uncontentious option for organisations.
              There is also a great diversity of opinion as to what it is and how it can be promoted,
              which makes organisational learning a more difficult concept to apply than many of
              its supporters acknowledge (Burnes et al, 2003).

              Managerial behaviour
              Chapter 1 showed that the traditional view of managers sees them as directing and
              controlling staff, resources and information. It sees managers as being the only ones
              with the expertise, knowledge and legitimate authority to decide how and when
              change should take place. However, the Emergent approach to change, as with the
              Culture–Excellence approach to managing organisations, requires a radical change in
              the role of managers (Dawson, 2003; Kanter et al, 1997; Kotter, 1996; Peters, 1997a;
              Weick, 2000). Instead of directing change from the top, managers are expected to
              operate as facilitators and coaches who, through their ability to span hierarchical,
              functional and organisational boundaries, can bring together and empower teams and
              groups to identify the need for, and achieve, change (Bennis, 2000; Carnall, 2003;
              Mabey and Mayon-White, 1993; Weick, 2000). Crucial to this, according to Kotter
              (1996), is for managers to develop leadership skills. Drawing on the work of Burns
              (1978), Kotter argues that management concerns a set of processes, such as budgeting
              and planning, for ensuring that organisations run smoothly. Leadership, on the other
              hand, is a set of processes for creating or transforming organisations: ‘Leadership
              defines what the future should look like, aligns people with that vision, and inspires
              them to make it happen … ’ (Kotter, 1996: 25).
                 To be effective in this new role, managers require knowledge of and expertise in strat-
              egy formulation, human resource management, marketing/sales and negotiation/conflict
              resolution, and much more (Beer and Nohria, 2000; Clarke, 1994; Hayes, 2002). But
              the key to success, the decisive factor in creating a focused agenda for organisational
              change is, according to many observers, managers’ own behaviour (Graetz et al, 2002;
              Kanter, 1989; Kotter, 1999; Pfeffer, 1996). If managers are to gain the commitment of
              others to change, they must first be prepared to challenge their own assumptions, atti-
              tudes and mindsets so that they develop an understanding of the emotional and
              intellectual processes involved (Buchanan and Boddy, 1992; Burns, 1978; Harrison,
              R, 2002; Sosik and Megerian, 1999).
                 For supporters of the Emergent approach, the essence of change is the move from
              the familiar to the unknown, from the certain to the uncertain (Jones et al, 2000). In
The Emergent approach to change   303

this situation, it is essential for managers to be able to tolerate risk and cope with par-
adox and ambiguity (Weick, 2000; Stacey et al, 2002). Pugh (1993) took the view
that, in a dynamic environment, open and active communication with those partici-
pating in the change process is the key to coping with risk and ambiguity. This very
much follows the view expressed by many that top-down, unilaterally-imposed
change doesn’t work and that bottom-up change, based on devolved responsibility
and genuine empowerment, is the way forward (Brown and Eisenhardt, 1997; Clarke,
1999; Harung et al, 1999; Styhre, 2002). This in turn requires managers to facilitate
open, organisation-wide communication via groups, individuals, and formal and
informal channels (Hayes, 2002; Kanter et al, 1992; Senior, 2002).
   An organisation’s ability to gather, disseminate, analyse and discuss information is
crucial for successful change, from the perspective of the Emergent approach. The
reason for this, as Wilson (1992) argues, is that to effect change successfully, organi-
sations need consciously and proactively to move forward incrementally. Large-scale
change and more formal and integrated approaches to change (such as Total Quality
Management) can quickly lose their sense of purpose and relevance for organisations
operating in dynamic and uncertain environments. However, if organisations move
towards their strategic vision by means of many small-scale, localised incremental
changes, managers must ensure that those concerned, which could potentially be the
entire workforce, have access to and are able to act on all the available information.
Also, by encouraging a collective pooling of knowledge and information in this way, a
better understanding of the pressures and possibilities for change can be achieved,
which should enable managers to improve the quality of strategic decisions (Boddy
and Buchanan, 1992; Quinn, 1993).
   Proponents of complexity take a slightly different view. They reject both small-
scale incremental change and large-scale radical-transformational change in favour of
‘a third kind’ which lies between these two, and which is continuous and based on
self-organisation at the team/group level (Brodbeck, 2002; Brown and Eisenhardt,
1997). To a certain extent, part of this difference is about terminology: how big is
incremental change? Perhaps the issue to concentrate on is that, by and large, there is
general agreement among proponents of emergent change that large-scale, top-down
change programmes, whilst sometimes being necessary, rarely succeed (Beer and
Nohria, 2000). This does not mean that there is not a crucial role for managers in
identifying issues to be addressed or in developing an organisational vision which can
guide Emergent change (Bennis, 2000; Dunphy, 2000). It does mean, however, that
successful change is seen as coming from bottom-up initiatives which emerge from
local responses to issues, threats or opportunities in the environment (Bennis, 2000;
Pettigrew, 2000). It follows that the size of such responses will vary but, because they
are local responses, they can never be large-scale.
   Whatever the scale of the change, however, the potential for resistance will always be
present. Resistance to change can arise from a number of sources, including middle and
senior managers, and for a number of reasons ranging from different perspectives on
what is best for the organisation to sectional or individual self interest (Hayes, 2002;
Huczynski and Buchanan, 2001). To cope effectively with resistance, managers will
need to acquire and develop a range of interpersonal skills that enable them to deal
with individuals and groups who seek to block or manipulate change for their own ben-
efit (Boddy and Buchanan, 1992; Kotter, 1996). Promoting openness, reducing
304   Chapter 9 · Developments in change management

              uncertainty, and encouraging experimentation can be powerful mechanisms for over-
              coming resistance and promoting change (Mabey and Mayon-White, 1993). In this
              respect, Coghlan (1993) and McCalman and Paton (1992) advocated the use of
              Organization Development (OD) tools and techniques (such as transactional analysis,
              teamwork, group problem-solving, role-playing, etc.), which have long been used in
              Planned change programmes. However, there is an enormous and potentially confusing
              array of these; Mayon-White (1993) and Buchanan and Boddy (1992) argue that man-
              agers have a crucial role to play in terms of identifying and applying the appropriate
              ones. The main objective in deploying such tools and techniques is to encourage shared
              learning through teamwork and cooperation. It is this that provides the framework
              and support for the emergence of creative and innovative solutions and encourages a
              sense of involvement, commitment and ownership of the change process (Carnall,
              2003; Kanter et al, 1997; McCalman and Paton, 1992; Peters, 1997a).
                 Nevertheless, it would be naïve to assume that everyone will want to work, or be
              able to function effectively, in such situations. The cognitive and behavioural changes
              necessary for organisational survival may be too large for many people, especially
              managers (Ghoshal and Bartlett, 2000). An important managerial task will, therefore,
              be to identify sources of inertia, assess the skill mix within their organisation and,
              most of all, consider whether their own managerial attitudes and styles are appropri-
              ate. It needs also to be recognised that there are different types of change, and that
              these often require different approaches (Stace and Dunphy, 2001). Proponents of
              Emergent change tend to see the world from one perspective but, as will be discussed
              in Chapter 10, there are other ways of viewing change and other ways of bringing it
              about (Beer and Nohria, 2000).

              Power and politics
              The importance of power and politics in organisational life, especially change situa-
              tions, was explored in Chapter 5. Though the advocates of Emergent change tend to
              view power and politics from differing perspectives, they recognise their importance
              and that they have to be managed if change is to be effective. Dawson (1994: 176), for
              example, concluded that ‘The central argument is that it is important to try and gain
              the support of senior management, local management, supervisors, trade unions and
              workplace employees.’ According to Weick (2000: 236) gaining support requires ‘con-
              siderable linguistic skills to capture and label the flow of events [and] resequence and
              relabel that sequence’. Pettigrew et al (1992: 293) take a similar view, stating that ‘The
              significance of political language at the front end of change processes needs emphasiz-
              ing. Closures can be labelled as redevelopments. Problems can be re-coded into
              opportunities with … broad positive visions being articulated to build early coalitions
              ... ’. Kanter et al (1992: 508) argue that the first step to implementing change is
              coalition-building: ‘ … involve those whose involvement really matters … Specifically,
              seek support from two general groups: (1) power sources and (2) stakeholders.’ In a
              similar vein, Nadler (1993) advocates the need to shape the political dynamics of
              change so that power centres develop that support the change rather than blocking it.
              Senior (2002), drawing on the work of Nadler (1988), proposes four steps that organi-
              sations need to take to manage the political dynamics of change (see Exhibit 9.2).
                  Important though power and politics are in the change process, as Hendry (1996)
              and Pugh (1993) argue, they are not the be-all and end-all of change and it is impor-
The Emergent approach to change     305

    Exhibit 9.2             Managing the political dynamics of change

    Step 1 Ensure or develop the support of key power groups.
    Step 2 Use leader behaviour to generate support for the proposed change.
    Step 3 Use symbols and language to encourage and show support for the change.
    Step 4 Build in stability by using power to ensure that some things remain the same.
    Source: Senior (2002)




  tant not to focus on these to the exclusion of other factors. Nevertheless, the focus
  placed on the political dynamics of change does serve to highlight the need for those
  who manage change to be aware of and control this dimension of the change process.
  To this end, Carnall (2003: 133) offered a model of the political skills that can be
  utilised to manage change (see Table 9.1). As Table 9.1 shows, Carnall identifies three
  basic types of political skill: the ability to utilise resources, such as formal authority
  and information; the aptitude to understand and manage political processes, such as
  negotiation and mobilising support; and the capacity to recognise and engage in the
  various forms of political activity, such as battles over budgets and organisational
  structures. Carnall’s argument is not that one individual will possess all these skills,
  but that those managing change will have to gain the support of those who do.

  Table 9.1 Political skills and the management of change
   Resources                             Process                             Form

   Formal authority                      Negotiation                         Politics of:
   Control of resources                  Influencing                           Budgets
   Control of information                Mobilising support                    Careers
   Control of agenda                     Mobilising bias                       Succession
   Control of access symbols             Use of emotion                        Information
                                         Ceremony and rituals                  Organisational structures
                                         Professional ‘mystery’                Appraisal


     As can be seen, therefore, there are a number of core issues on which the advocates
  of Emergent change share similar views. Having identified the beliefs which distin-
  guish them as a group, it is equally important to understand what advice they offer
  for putting their approach into practice.


■ Recipes for Emergent change
  Pettigrew and Whipp (1993: 6) maintain that there are no universal rules with regard
  to leading change; rather it involves ‘linking action by people at all levels of the busi-
  ness’. However, this has not prevented most of the advocates of Emergent change
  from suggesting sequences of actions which organisations should follow. Pettigrew
  and Whipp (1993), for example, propose a model for successfully managing strategic
  and operational change that involves five interrelated factors (see Exhibit 9.3).
306   Chapter 9 · Developments in change management


                 Exhibit 9.3          Managing change successfully

                 ■   Environmental assessment – organisations, at all levels, need to develop the ability to
                     collect and utilise information about their external and internal environments.
                 ■   Leading change – this requires the creation of a positive climate for change, the
                     identification of future directions and the linking together of action by people at all levels
                     in the organisation.
                 ■   Linking strategic and operational change – this is a two-way process of ensuring that
                     strategic decisions lead to operational changes and that operational changes influence
                     strategic decisions.
                 ■   Human resources as assets and liabilities – just as the pool of knowledge, skills and
                     attitudes possessed by an organisation is crucial to its success, it can also be a threat to
                     the organisation’s success if the combination is inappropriate or managed poorly.
                 ■   Coherence of purpose – this concerns the need to ensure that the decisions and actions
                     that flow from the above four factors complement and reinforce each other.
                 Source: Pettigrew and Whipp (1993)




                 For his part, not to be outdone by Pettigrew and Whipp’s five factors, Dawson (1994:
              179) puts forward 15 ‘major practical guidelines which can be drawn from a processual
              analysis of managing organizational transitions’. These guidelines range from the need to
              maintain an overview of the dynamics and long-term process of change, to the need to
              take a total organisational approach to managing transitions. On the way, he makes the
              case for understanding and communicating the context and objectives of change, and
              ensuring managerial and employee commitment. Wilson (1992: 122) also draws atten-
              tion to the complex and long-term nature of change, writing that:

               This book has deliberately taken a particular stance towards the question of organizational
               change. The argument has largely been against skill-based approaches, ready-made models
               of good organizational practice (for example, the ‘excellence’ models) and reliance upon
               analysing change as primarily the outcome-oriented pursuit of great and charismatic indi-
               viduals. The arguments have, rather, favoured the potency of organizational structures, of
               economic determinism, of institutionalization within which the manager must operate. To
               operate successfully (and in the long term) he or she must understand and learn from the
               wider context or organization. This is not to say that individual skills are unimportant, only
               that they cannot be considered in isolation from the wider factors of strategic change.


                 Unfortunately, the problem with much of the advice for managing change offered
              by advocates of the Emergent approach is that it tends to be too general or cursory in
              nature and thus difficult to apply. It can sometimes also appear almost as an after-
              thought. However, there are those whose work offers much more substantial
              guidance to managers and organisations. Inevitably, as one might expect, these tend
              to come from the prescriptive camp rather than the analytical camp and are more
              concerned with telling organisations what they should do than in providing detailed
              analyses of what they do do. The two leading exponents of change in this respect are
              Rosabeth Moss Kanter and John P Kotter. Kanter’s work has already been discussed
              extensively in Chapter 3, but to recap briefly, as shown in Exhibit 9.4, she proposes
              ‘Ten Commandments for Executing Change’ (Kanter et al, 1992).
The Emergent approach to change   307

  Exhibit 9.4          Ten commandments for executing change

   1. Analyse the organisation and its need for change.
   2. Create a shared vision and a common direction.
   3. Separate from the past.
   4. Create a sense of urgency.
   5. Support a strong leader role.
   6. Line up political sponsorship.
   7. Craft an implementation plan.
   8. Develop enabling structures.
   9. Communicate, involve people and be honest.
  10. Reinforce and institutionalise change.
  Source: Kanter et al (1992: 382 –3)




    Looking at approaches to change, Kanter et al (1992) distinguished between ‘Bold
Strokes’ and ‘Long Marches’. The former relate to major strategic decisions or eco-
nomic initiatives, usually of a structural or technological nature. These, they argue,
can have a clear and rapid impact on an organisation, but they rarely lead to any
long-term change in habits or culture. The Long March approach, on the other hand,
favours a host of relatively small-scale and operationally focused initiatives, each of
which can be quickly implemented but whose full benefits are achieved in the long
term rather than the short term. However, the Long March approach can, over time,
lead to a change of culture. Bold Strokes are initiatives taken by a few senior man-
agers, sometimes only one; they do not rely on the support of the rest of the
organisation for their success. In contrast, the Long March approach requires wide-
spread commitment throughout an organisation. Without the involvement and
commitment of the majority of the workforce, Kanter et al argue, such initiatives
cannot succeed. They do maintain that Bold Strokes and Long Marches can be com-
plementary, rather than alternative, approaches to change; though in practice
companies appear to favour one or the other. Nevertheless, companies may need both
if they are to succeed in transforming themselves.
    Like Kanter, Kotter is a professor at the Harvard Business School and runs his own
highly successful consultancy – Kotter Associates. He is the author of a wide range of
books and articles on management and change, including his highly influential 1995
Harvard Business Review article, ‘Leading change: why transformation efforts fail’.
This article jumped to first place among the thousands of reprints sold by the Review,
which, considering the quality of the articles in its reprint base, is a considerable
achievement. Spurred on by the reception of his views on change, Kotter went on to
write his 1996 book, Leading Change. This elaborates and expands on the ideas in
his Harvard Business Review article. The book begins by identifying eight key errors
that Kotter believes cause transformation efforts to fail (see Exhibit 9.5).
308   Chapter 9 · Developments in change management


                 Exhibit 9.5             Why change initiatives fail

                 Error 1 Allowing too much complacency.
                 Error 2 Failing to create a sufficiently powerful guiding coalition.
                 Error 3 Underestimating the power of vision.
                 Error 4 Undercommunicating the vision by a factor of 10 (or 100 or even 1000).
                 Error 5 Permitting obstacles to block the new vision.
                 Error 6 Failing to create short-term wins.
                 Error 7 Declaring victory too soon.
                 Error 8 Neglecting to anchor changes firmly in the corporate culture.
                 Source: Kotter (1996)




              Kotter (1996: 16) maintains that the consequences of these errors are that:

               – New strategies aren’t implemented well.
               – Acquisitions don’t achieve expected synergies.
               – Reengineering takes too long and costs too much.
               – Downsizing doesn’t get costs under control.
               – Quality programs don’t deliver hoped-for results.


              In order to eliminate these errors and their consequences, the book then proceeds to
              present Kotter’s Eight-Stage Process for successful organisational transformation (see
              Exhibit 9.6).


                 Exhibit 9.6             Kotter’s eight steps to successful change

                 Step 1 Establishing a sense of urgency.
                 Step 2 Creating a guiding coalition.
                 Step 3 Developing a vision and strategy.
                 Step 4 Communicating the change vision.
                 Step 5 Empowering broad-based action.
                 Step 6 Generating short-term wins.
                 Step 7 Consolidating gains and producing more change.
                 Step 8 Anchoring new approaches in the culture.
                 Source: Kotter (1996)




                 Kotter (1996: 23) stresses that his eight stages are a process and not a checklist,
              and that ‘Successful change of any magnitude goes through all eight stages … skip-
              ping even a single step or getting too far ahead without a solid base almost always
              creates problems.’ He also points out that most major change efforts comprise a host
              of small and medium-sized change projects which, at any one point in time, can be at
The Emergent approach to change    309

  different points in the process. Kotter (1996: 24–5) cites the example of a telecommu-
  nications company where:

    The overall effort, designed to significantly increase the firm’s competitive position, took six
    years. By the third year, the transformation was centred in steps 5, 6 and 7. One relatively
    small reengineering project was nearing the end of stage 8. A restructuring of corporate staff
    groups was just beginning with most of the effort in steps 1 and 2. A quality program was
    moving along, but behind schedule, while a few small initiatives hadn’t even been launched
    yet. Early results were visible at six to twelve months, but the biggest payoff didn’t come
    until near the end of the overall effort.


     As can be seen, there is a reassuring similarity between Kanter et al’s Ten
  Commandments and Kotter’s eight-stage process. Taken together, they provide detailed
  guidance for implementing change. However, there is one area where both they and the
  other advocates of the Emergent approach seem strangely imprecise. Though advocates
  of Emergent change place a great deal of emphasis on leadership and the ability to
  manage change, what most of them put to one side is the role of the change agent.
  Indeed, as the next section will show, though there are a number of different models of
  change agency identified in the literature, there is a tendency to assume there is a ‘one
  best’ model or set of skills/competences which fits all situations (Caldwell, 2001, 2003).


■ The role of the change agent
  Whether one is dealing with change at the individual, group or organisational level,
  whether one perceives change as incremental, punctuated or continuous, or whether
  one is viewing it from a Planned or Emergent perspective, change has to be managed;
  someone has to take responsibility for ensuring that change takes place. Whether this
  person is a team leader, facilitator, coach or even a dictator, there is usually one indi-
  vidual who bears the responsibility of being the change agent. The previous chapter
  showed that the concept of the change agent originated with Kurt Lewin and has
  been extensively developed by the OD movement. However, over the last two
  decades, as different perceptions of change have emerged, so different views of the
  role of the change agent can also be perceived. As Caldwell (2003) notes, we have
  seen eulogies to the ‘heroic’ change leader capable of transforming organisations, calls
  for line managers and functional specialists to become change agents, and the growth
  of internal and external management consultants as ‘catalysts’ for change. However,
  rather than clarifying the role and competences of the change agent, these develop-
  ments appear to have made the picture more confused.
     One of the strengths of the Planned approach is that it not only offers a well-
  developed change process, but it also provides a blueprint for the behaviour and
  attributes of change agents who, in turn, are buttressed and supported by a host of
  tools and techniques for analysing organisations and managing change (Cummings
  and Worley, 1997). The Emergent approach, whilst stressing the issue of process,
  takes the view that change is not a specialist activity driven by an expert, but an
  increasingly important part of every manager’s role (Clarke, 1994). The drawback
  with this perspective is that it deflects attention from or even ignores the specialist
  skills necessary to manage the different types of change, whether this is being done by
310   Chapter 9 · Developments in change management

              a manager or by a change specialist. It may also be one reason why, as Hartley et al
              (1997) observe, there has been relatively little empirical research on the roles played
              by change agents. However, Buchanan and Boddy (1992: 27) sought to redress the
              balance by analysing the skills needed to be a successful change agent and, in particu-
              lar, by drawing attention to the change agent’s need to:

               ... support the ‘public performance’ of rationally considered and logically phased and visibly
               participative change with ‘backstage activity’ in the recruitment and maintenance of support
               and in seeking and blocking resistance. … ‘Backstaging’ is concerned with the exercise of
               ‘power skills’, with ‘intervening in political and cultural systems’, with influencing and
               negotiating and selling, and with ‘managing meaning’.


                 Buchanan and Boddy suggest a model of the expertise of the change agent which
              identifies the skills and competences necessary to achieve successful change. Their
              model begins by listing the diagnostic skills required to identify the organisation type;
              change category; personal vulnerability; agenda priorities; and public performance
              and backstage skills. The model then goes on to list 15 competences under five clus-
              ters: goals; roles; communication; negotiation; and managing up. The last two
              elements of their model relate to process outcomes and personal and organisational
              outcomes. What emerges from their work is a picture of the change agent as a highly
              skilled and well-trained political operator who has not only an in-depth knowledge of
              change processes and tools, but also the personal qualities and experience to use them
              both in the open and, especially, behind the scenes. In contrast to this, the Planned
              approach sees the change agent’s role as being mainly an up-front ‘public perform-
              ance’ activity and working with a transparent agenda to help those involved to
              identify the options and make their own choices (French and Bell, 1995).
                 For proponents of Emergent change, the change agent is not a neutral facilitator, but
              an active manager of the change process with his/her own agenda which they seek to
              promote or impose by managing and shaping the perceptions of those concerned
              (Pettigrew, 2000; Weick, 2000). Buchanan and Boddy (1992: 123) also draw attention to
              the social construction of the process of change which, they argue, is a creative activity:

               Expertise does not simply involve the mechanical deployment of diagnostic tools, compe-
               tences and stereotyped solutions, but involves also the innovative and opportunistic
               exploitation of other dimensions of the organizational context.

                 Mirvis (1988) is another who focuses on the crucial role played by innovative and
              creative skills of change agents in achieving successful change. In an article entitled
              ‘Grace, magic and miracles’, Lichtenstein (1997) investigated this side of the change
              agent’s role further by examining the work of three leading change practitioners:
              Peter Senge, William Torbert and Ellen Wingard. In the article, the three consultants
              described their approach to change and the theories which underpin it. They also
              described how, in applying their approaches, it was insufficient just to follow the
              steps laid down. Success required the consultants to overcome major obstacles, and,
              in so doing, to adopt novel and experimental methods. Senge, Torbert and Wingard
              use terms such as ‘grace’, ‘magic’ and ‘miracles’ to describe the moment of break-
              through; the point where serious obstacles were overcome and genuine progress
The Emergent approach to change   311

made. In fact, what they describe is the ability of the change agent to recognise the
need to depart from the ‘script’ and to experiment with the unknown in order to
make progress. Just as Buchanan and Boddy (1992) identified the need for change
agents to be able to present and utilise the rational face of change, whilst being adept
at the less rational ‘backstage’ skills, so Lichtenstein (1997: 407) also concludes that:

 ... there is a logical framework that produces rational actions in the first stages of an
 intervention effort. However, at a critical threshold it is non-linear logic and spontaneous
 felt action – grace, magic and miracles – that actually supports organizational (and per-
 sonal) transformation.


   Drawing on the work of cultural anthropologists, Schuyt and Schuijt (1998) use
the analogy of the change agent as a magician. They point out that magicians, witch
doctors and medicine men in non-Western cultures use symbols and rituals to smooth
the various transitions in life cycles: birth, puberty, marriage and death. In the same
way, Schuyt and Schuijt (1998: 399) pose the following question: are not consultants
and change agents ‘also, in a certain sense, magicians who guide and structure impor-
tant transitions through the use of rituals and symbols?’ These rituals and symbols
have a number of key functions: to establish the change agent’s credentials, to prepare
the participants mentally for change, to guide them through the transition, and to
reinforce the ‘participants’ feeling that they are taking part in a controlled and well-
managed process of change … but ultimately the crux is to reduce the client’s
uncertainty’ (Schuyt and Schuijt, 1998: 405).
   The argument of many in the Emergent school is that the complexity and multi-
level nature of change mean that it cannot be left to a few experts or a few managers
but is the responsibility of everyone in the organisation. However, if this is so, what
skills and competences do they need and how are they to get them? What the work of
Buchanan and Boddy, Lichtenstein, Schuyt and Schuijt, and, indeed, the Organization
Development movement would seem to argue is that the more complex the change
process, the more difficult it is to achieve, and the greater the need to utilise the skills
and experience of a specialist change agent. The conclusion they draw from this is
that there is a ‘one best’ type of change agent who possesses a generic set of high-level
competences that can be employed in any situation.
   Caldwell (2003) takes issue with Buchanan and Boddy et al. Just as Dunphy and
Stace (1993: 905) called for a ‘situational’ or ‘contingency model’ of change, so
Caldwell calls for a contingency model of change agency which recognises that differ-
ent change situations require different types of change agent. From an extensive
literature review, Caldwell identifies four groups of models of change agent (see
Exhibit 9.7). These four different types of change models highlight the difficulty, not
to say impossibility, of attempting to construct a generic change agent who can oper-
ate in any situation.
   The type of change agent identified by Buchanan and Boddy may fit into some of
these models but not all of them. Similarly, the OD type of change agent may fit into
some of these models, but not all of them. What Caldwell has done is to direct aca-
demics and practitioners away from both the ‘it’s everyone’s responsibility’ and the
‘one best way’ schools and towards identifying the behaviours and competences nec-
essary for each type of change situation.
312   Chapter 9 · Developments in change management


                  Exhibit 9.7          Models of change agents

                  ■   Leadership models where change agents are senior managers responsible for identifying
                      and delivering strategic/tranformational change.
                  ■   Management models where change agents are seen as middle-level managers/functional
                      specialists who have responsibility for delivering or supporting specific elements of
                      strategic change programmes or project.
                  ■   Consultancy models where change agents are external or internal consultants who can be
                      called on to operate at any level.
                  ■   Team models where change agents are seen as teams that operate at various levels in
                      an organisation and which are composed of the requisite managers, employees and
                      consultants necessary to accomplish the particular change project set them.
                  Source: Caldwell (2003)




Emergent change: summary and criticisms
              The proponents of Emergent change are a somewhat disparate group who tend to be
              united more by their scepticism regarding Planned change than by a commonly
              agreed alternative. Nevertheless, there does seem to be some agreement regarding the
              main tenets of Emergent change, which are as follows:
              ■   Organisational change is a continuous process of experiment and adaptation aimed
                  at matching an organisation’s capabilities to the needs and dictates of a dynamic
                  and uncertain environment.
              ■   Though this is best achieved through a multitude of (mainly) small- to medium-
                  scale incremental changes, over time these can lead to a major re-configuration and
                  transformation of an organisation.
              ■   Change is a multi-level, cross-organisation process that unfolds in an iterative and
                  messy fashion over a period of years and comprises a series of interlocking projects.
              ■   Change is a political-social process and not an analytical-rational one.
              ■   The role of managers is not to plan or implement change per se, but to create or
                  foster an organisational structure and climate which encourages and sustains
                  experimentation, learning and risk-taking, and to develop a workforce that will
                  take responsibility for identifying the need for change and implementing it.
              ■   Though managers are expected to become facilitators rather than doers, they also
                  have the prime responsibility for developing a collective vision or common purpose
                  that gives direction to their organisation, and within which the appropriateness of
                  any proposed change can be judged.
              ■   The key organisational activities that allow these elements to operate successfully are
                  information-gathering – about the external environment and internal objectives and
                  capabilities; communication – the transmission, analysis and discussion of informa-
                  tion; and learning – the ability to develop new skills, identify appropriate responses
                  and draw knowledge from their own and others’ past and present actions.
                Though not always stated openly, the case for an Emergent approach to change is
              based on the assumption that all organisations operate in a turbulent, dynamic and
              unpredictable environment. Therefore, if the external world is changing in a rapid
Emergent change: summary and criticisms   313

and uncertain way, organisations need to be continuously scanning their environment
in order to respond in a timely and appropriate manner. Because this is a continuous
and open-ended process, the Planned approach to change is inappropriate. To be suc-
cessful, changes need to emerge locally and incrementally in order to respond to
environmental threats and take advantage of opportunities.
   Presented in this manner, there is an apparent coherence and validity to the
Emergent approach. However, it is a fragile coherence and a challengeable validity. As
far as coherence is concerned, some proponents of Emergent change, especially
Pettigrew (1997) and Dawson (2003), clearly approach it from the processual per-
spective on organisations. However, it is not clear that Buchanan and Boddy (1992)
and Wilson (1992) would fully subscribe to this view. In the case of Carnall (2003),
Clarke (1994), Kanter et al (1992) and Kotter (1996), it is clear that they do not take
a processual perspective. They do not doubt the importance of power and politics in
the change process, but for them the issue is one of legitimacy and pragmatism.
Managers and change agents have the legitimate right to introduce changes, but to do
so they must use political skills in a pragmatic way to build support and overcome or
avoid resistance. For the processualists, like the postmodernists, change is about dom-
inant coalitions, and smaller groupings, trying to impose their will on all or part of an
organisation in order to maintain or improve their position. Partly, this is explained
by the fact that some of these writers (especially Dawson, 2003; Pettigrew, 1997;
Wilson, 1992) are attempting to understand and analyse change from a critical per-
spective, whilst others (notably Kanter et al, 1992; Kotter, 1996) are more concerned
with prescribing recipes and checklists for successful change. Therefore, though the
advocates of Emergent change have a number of common bonds, their differing
objectives and perspectives do put a question mark against the coherence of the
Emergent approach.
   An assessment of the validity or general applicability of the Emergent approach to
change depends to a large extent on whether or not one subscribes to the view that all
organisations operate in a dynamic and unpredictable environment to which they have
to adapt continuously. The issue of the nature and uniformity of the environment in
which organisations operate has been discussed extensively in previous chapters. The
conclusion reached was that not all organisations face the same degree of environmen-
tal turbulence and that, in any case, it is possible to manipulate or change
environmental constraints. This does not invalidate the Emergent approach, but it does
indicate that some organisations, by accident or action, may find the Planned
approach to change both appropriate and effective in their particular circumstances.
   Obviously, the above raises questions over the universal applicability of the Emergent
approach; even without reservations regarding its coherence and validity, however, there
would still be serious criticisms of this approach. For example, many of its supporters
seem to advocate the same approach to organisations as the Culture–Excellence school
and are, therefore, open to the same criticisms (see Chapter 3). Given this link to
Culture–Excellence, not surprisingly, a great deal of emphasis is placed on the need for
appropriate organisational cultures. But, as the writers on Emergent change seem to
sway between advocating the need for culture change (Kanter et al, 1992) and advocat-
ing the need to work with existing cultures (Kotter, 1996), it is not clear what they
perceive the role of culture to be. In any case, as is noted in Chapter 5, the whole issue of
the role and the manipulability of organisational culture is a veritable minefield. Indeed,
314   Chapter 9 · Developments in change management

              as mentioned earlier, even Wilson (1992), who supports the Emergent perspective, was
              sceptical about the case for culture. Similar points can be made regarding the ‘learning
              organisation’ approach. As Whittington (1993: 130) commented:

               The danger of the purely ‘learning’ approach to change, therefore, is that … managers [and
               others] may actually recognize the need for change, yet still refuse to ‘learn’ because they
               understand perfectly well the implications for their power and status. Resistance to change
               may not be ‘stupid’ … but based on a very shrewd appreciation of the personal consequences.

                 A variant of this criticism relates to the impact of success on managerial learning.
              Miller (1993: 119) observed that, whilst managers generally start out by attempting
              to learn all they can about their organisation’s environment, over time, as they gain
              experience, they ‘form quite definite opinions of what works and why’ and as a con-
              sequence tend to limit their search for information and knowledge. So experience,
              especially where it is based on success, may actually be a barrier to learning, in that it
              shapes the cognitive structures by which managers, and everyone else, see and inter-
              pret the world. Nystrom and Starbuck (1984: 55) observed:

               What people see, predict, understand, depends on their cognitive structures … [which] man-
               ifest themselves in perceptual frameworks, expectations, world views, plans, goals … myths,
               rituals, symbols … and jargon.


                 This brings us neatly to the topic of the role of managers. Though this will be dis-
              cussed extensively in Chapter 16, for now it should be noted that managers are the
              ones who appear to have to make the greatest change in their behaviour. As the above
              quotations indicate, however, they may neither welcome nor accept such a change,
              especially where it requires them to challenge and change their own beliefs, and
              where it runs counter to their experience of ‘what works and why’. Also, if the possi-
              bility exists (as mentioned above) to manipulate environmental variables and
              constraints rather than having to change their behaviour, managers may perceive this
              as a more attractive or viable option.
                 Though the above reservations regarding the coherence and validity of the
              Emergent approach are fairly serious, there are three further criticisms that are
              equally serious. The first relates to the difference between their approach and the
              Planned approach. The Planned approach is attacked because of its reliance on
              Lewin’s Three-Step model of unfreezing, moving and refreezing. It is argued that in a
              turbulent environment, organisations are in a constant state of change and that,
              therefore, to speak of unfreezing and refreezing is nonsense (Kanter et al, 1992).
              However, if one examines the process of change advocated by, for example, Dawson
              (1994), Kotter (1996) and Pettigrew et al (1992), though they argue to the contrary,
              they do speak of change as a ‘transition’ process with a beginning, middle and end.
              Indeed, Hendry (1996: 624) comments:

               Scratch any account of creating and managing change and the idea that change is a three-
               stage process which necessarily begins with a process of unfreezing will not be far below the
               surface.
Emergent change: summary and criticisms   315

There are others who strongly support Hendry’s view that the Three-Step model has
greater validity and wider usage than its critics acknowledge (Burnes, 2004; Elrod
and Tippett, 2002). It should also be noted that there are a number of Lewin support-
ers amongst proponents of the complexity approach to change (Back, 1992;
Tschacher and Brunner, 1995) and that MacIntosh and MacLean (2001) advocate the
use of the Three-Step approach to identify and change order-generating rules.
   The second criticism concerns the emphasis placed on the political and cultural
aspects of change. Advocates of the Emergent approach have undoubtedly provided a
valuable contribution to our understanding of change by highlighting the neglect of
these important issues in the past. However, they have also been criticised from a
number of perspectives for perhaps going too far the other way. Hendry (1996: 621)
argues that ‘The management of change has become … overfocused on the political
aspects of change’, whilst Collins (1998: 100), voicing concerns of his own and of
other researchers, argues that:

 ... in reacting to the problems and critiques of [the Planned approach], managers and practi-
 tioners have swung from a dependence on under-socialized models and explanations of
 change and instead have become committed to the arguments of, what might be called,
 over-socialized models of change.


This very much fits in with those who take a realist perspective on organisations; they
argue that whilst the social world, including organisations, is a product of human
action, it is not necessarily a product of conscious human design but exists independ-
ently of human beings (Connelly, 2000; Easton, 2000).
   Lastly, though the Emergent approach undoubtedly raises key issues, and offers
valuable insights and guidance, it does not appear to be as universally applicable as
its advocates imply. In Chapter 8, we identified three different perspectives on change:
the individual, group and system perspectives, and three categories of change: incre-
mental, punctuated equilibrium and continuous transformation. The Emergent
approach is specifically founded on the assumption that organisations operate in a
dynamic environment where they have to transform themselves continuously in order
to survive. It is, then, by its own definition, not applicable to organisations operating
in environments which require disjointed incremental, or perhaps even punctuated
equilibrium change programmes. The focus of Emergent change tends to be the
organisation and its major sub-systems and, consequently, it is less suitable for situa-
tions requiring change at the individual and/or group levels. It is also the case that,
both implicitly and explicitly, the Emergent approach advocates cooperative change
rather than coercive or confrontational change, though it sees political manipulation
and the deployment of power as essential to achieving this. However, as Dawson
(2003) notes, it is also clear that there are many situations where managers prefer to
push change through in a rapid and confrontational manner (see Stace and Dunphy,
2001; Edwardes, 1983; Franklin, 1997; Grinyer et al, 1988). Therefore, like Planned
change, Emergent change has much to recommend it but, again like Planned change,
it also has a number of significant shortcomings.
316   Chapter 9 · Developments in change management


Conclusions
              Organisations come in all shapes and sizes, provide a vast variety of products and
              services, and face an enormous array of challenges. Perhaps the only factor common
              to all organisations is change. Organisations never stand still, though the speed and
              magnitude of change does vary from organisation to organisation and over time. It is
              now generally accepted that the ability to manage change effectively is a crucial com-
              ponent of an organisation’s ability to compete successfully. As Chapter 8
              demonstrated, for many years, the Planned approach was considered as the best way
              of managing change. However, as was shown at the beginning of this chapter, from
              the early 1980s onwards, the Planned approach has faced a torrent of criticisms as to
              its suitability in a world of rapid and unpredictable change. In particular, its detrac-
              tors claim that the notion that organisations operate in stable environments and can
              move from one fixed state to another is, to quote Kanter et al (1992: 10), a ‘…
              quaintly linear and static conception … [and] … wildly inappropriate.’ In the light of
              these criticisms of the Planned approach, the chapter went on to describe the
              Emergent approach and make the case for it, being the best way to manage change.
              The Emergent approach sees organisational change as an ongoing process of adapta-
              tion to an unpredictable and ever-changing environment. For proponents of this view,
              change is a messy, unpredictable, open-ended and political affair. In such a situation,
              it is impossible for a few managers at the top of an organisation to identify and
              implement all the changes necessary to keep the organisation aligned with its environ-
              ment. Consequently, successful change is a bottom-up, emergent, response to events.
              However, just as the Planned approach to change can be criticised as limited and
              flawed, similar criticisms can be made of the Emergent approach. In particular, it
              seems less a coherent approach to change and more a label for a collection of
              approaches critical of Planned change. Its proponents appear to disagree about key
              elements of Emergent change such as culture, organisational learning and the role of
              managers. In addition, the Emergent approach is criticised for its over-emphasis on
              the political dimension of change and its view that all organisations operate in a
              dynamic and unpredictable environment. It is also clear that Emergent change is lim-
              ited in terms of both the types of organisational change to which it can be applied,
              and how it can be applied. Therefore, though it has apparent advantages over the
              Planned approach, or rather it is applicable to situations for which Planned change is
              not suitable, an examination of the Emergent approach reveals that there are serious
              question marks over its coherence, validity and general applicability.
                 From this and the previous chapter, it is clear that, even taken together, neither the
              Planned nor Emergent approach cover the broad spectrum of change events organisa-
              tions encounter. Though both Planned and Emergent change have important
              theoretical and practical benefits, their dominance of the change literature appears to
              have led to a neglect of other approaches to change. In order to address this neglect,
              the next chapter will examine the change situations faced by organisations, and will
              construct A Framework for Change that identifies the range of change situations and
              a matching range of approaches to change.
Suggested further reading   317


Test your learning

      ■ Short answer questions
        1 Briefly discuss the Processual approach to change.

        2 List the main attributes of the Emergent approach to change.

        3 How do proponents of the Emergent approach view the nature of the environment in
          which organisations operate?

        4 What are the reasons for considering the complexity approach to change as part of the
          Emergent approach?

        5 From the Emergent perspective, what are the five features of organisations that promote
          or hinder successful change?

        6 List the main criticisms of the Emergent approach.

        7 What are the implications of the Emergent approach for managerial behaviour?



      ■ Essay questions
        1 Discuss and evaluate the following statement: Emergent change does not offer a coher-
          ent alternative to Planned change but merely provides an umbrella for those who
          oppose it.

        2 To what extent and how do Caldwell’s four models of the change agent undermine
          Buchanan and Boddy’s generic model of the expertise of the change agent?




         Suggested further reading
        1 Dawson, P (2003) Organizational Change: A Processual Approach. Routledge: London.
          Patrick Dawson’s book is an excellent guide to the processual approach to change which
          raises some important questions about both Planned and Emergent change.
        2 Kotter, JP (1996) Leading Change. Harvard Business School Press: Boston, MA, USA.
          John Kotter’s work represents the more prescriptive and pragmatic wing of Emergent
          change.
Chapter 10

A framework for change
Approaches and choices




 Learning objectives
 After studying this chapter, you should be able to:
 ■   recognise that, even taken together, the Planned and Emergent approaches
     do not cover all change situations;
 ■   list the range of change situations that organisations face;
 ■   appreciate the variety of approaches to change;
 ■   understand the situations in which the various approaches to change are
     most appropriately used;
 ■   describe how organisations can increase their degree of choice when
     undertaking change.
Introduction   319

Exhibit 10.1      Learning from others

Why companies have much to learn from charities                                                              FT

Conventional wisdom says the voluntary sector has         Again, a voluntary organisation’s objective is to
much to learn from the commercial world. But our          improve the quality of its target groups’ lives, and to
work suggests the opposite: voluntary organisations       provide a worthwhile means for volunteers to partici-
often display precisely those management skills that      pate in the community.
leading companies are struggling to acquire, particu-        Voluntary organisations often cope better with
larly in managing change.                                 change than businesses. We believe this is because
    Both sectors face similar forces for change. In the   they are, as Henry Mintzberg said, ‘pioneers in the
‘market’ for donations, voluntary organisations, just     motivation and productivity of knowledge workers’.
like businesses, face increasing consumer choice.         They are particularly good at:
While competing outlets for discretionary spending
proliferate, the voluntary sector’s income has            ■   Changing, but staying the same. Voluntary organi-
remained more or less static in real terms. This              sations change with the times, but hold on to
intensifies pressure to compete for funds and to              their history. They steep new staff in their tradi-
keep costs down.                                              tions and values, by induction courses and
    Prices, too, are squeezed. Government-funded              apprenticeships. But precedent does not bind
social services, important customers for the voluntary        their people. Useful new practices and ideas
sector, increasingly set prices at the level of the           spread fast by informal networks. The need to do
lowest-cost provider, limiting what voluntary organi-         more with less encourages initiative and creativity.
sations may charge.                                       ■   Thinking big, acting small. A voluntary organisation
    Consumers of charitable and commercial services           may have a nationally or internationally recog-
alike demand continually improving standards.                 nised name but it will often be rooted in local
Stakeholders in both voluntary and commercial                 operations. Fuzzy organisational structures help
organisations want more accountability for perform-           charities to think big and to act small. At first
ance. Donors, end-users, volunteers and members               glance, they may look sclerotic: reporting lines
all require that charitable funds are demonstrably            abound; decisions are often taken by large
well managed, just as shareholders require of corpo-          groups of elected frontline representatives. But
rate capital. And success in a voluntary organisation,        there are benefits. The lack of central executive
as in a business, depends on success in the market            power means local managers can act on their
for talent. Competition to hire the best people is            own initiative.
equally strong.                                           ■   Managing multiple stakeholders. Voluntary organi-
    In society too, charities and businesses see the          sations are used to managing multiple
same emerging trends, though charities seem                   stakeholders with disparate interests. Their tech-
instinctively better at adapting to them.                     niques include involving people from different
    First, all organisations are under pressure from          stakeholder groups in their decision-making
stakeholders to be more socially responsible.                 bodies, and pursuing different objectives to satisfy
Voluntary organisations handle this effectively – after       different groups. They thank stakeholders for their
all, they exist mainly to serve social needs and usu-         interest by such means as personalised marketing
ally involve local communities in delivering services.        or donor receptions. And they listen carefully to
    Second, government regulation has greatly                 stakeholders when setting their goals.
increased during the past 15 years, yet voluntary         ■   Getting everyone to own organisational goals.
services have always been ‘regulated’ by their explicit       Most voluntary organisation staff are unusually
codes of ethical standards. They use compliance               dedicated. That is partly because they are so
with these standards to measure success, in the               committed to the organisation’s goals. Staff com-
absence of a profit motive.                                   mitment to organisational policy is reinforced by
    Third, people are seeking better quality of life –        their membership of frontline forums that take
more meaningful work and increased leisure time.              important policy decisions.
                                                                                                                     ▲
320   Chapter 10 · A framework for change



 Exhibit 10.1 continued
 ■    Making values matter. In voluntary organisations,        Second, the differences between voluntary and
      it is not only what gets done that is important but   private sector organisations are more apparent than
      also how it is done. Staff feel they can challenge    real. Certainly, volunteers are motivated to work for
      senior managers if they fall short of the organisa-   nothing while businesses must pay people to do
      tion’s values.                                        work they otherwise would not do. But ‘wage slaves’,
                                                            too, get personal fulfilment from their work. And if
 Should companies try to emulate the voluntary
                                                            volunteers are demotivated by poor management,
 sector? There are two reasons executives should
                                                            they can quit in an instant. Commercial employees
 take the challenge seriously.
                                                            may not be able to leave so quickly, but the best of
    First, the benefits are real and realisable. Business
 managers already know they can tap extraordinary           them usually can, and will, run frighteningly fast.
 employee motivation in a crisis. How much better to           Businesses and voluntary organisations need
 tap these reserves every day. Businesses could             better capabilities to manage their environments.
 achieve the involvement and commitment to corpo-           Businesses would do well to work with voluntary
 rate values we see in the voluntary sector if they do      organisations, to bring them commercial rigour, but –
 what the voluntary organisations do: for example,          more importantly – to learn their skills in helping
 encourage and reward staff for mentoring, for build-       employees to manage change.
 ing and maintaining institutional knowledge, for           Source: Keith Leslie, Vaughan Lindsay, Helen Mullings and Neville
 tending networks, for creating involving events.           Salkeld, Financial Times, 9 February 1999, p. 16.




                 Introduction
                Since the Industrial Revolution, the conventional wisdom has been that the private
                sector is better at managing and changing organisations than either the public or vol-
                untary sectors. This view is based on the belief that only free-market competition will
                drive organisations and individuals to innovate and change. However, as the article
                by Leslie et al (1999)(Exhibit 10.1) shows, the voluntary sector faces considerable
                competitive and other pressures which require innovative responses. Similarly, as will
                be described in case studies 4 and 10 in Part 3 of this book, the public sector has
                come under increasing pressure over the last 25 years to find new and more cost-
                effective ways to provide services. Therefore, as the Leslie et al article also shows, the
                notion that the private sector is always the leader and the other sectors always the fol-
                lowers when it comes to managing and changing organisations is something of a
                misconception. It must be recognised, however, that different sectors and different
                organisations face widely-differing challenges, and what is appropriate for one organ-
                isation or sector is not necessarily appropriate for another. This is particularly the
                case when considering organisational change. As Stickland (1998: 14) remarks:

                 ... the problem with studying change is that it parades across many subject domains under
                 numerous guises, such as transformation, development, metamorphosis, transmutation, evo-
                 lution, regeneration, innovation, revolution and transition to name but a few.

                  The last two chapters have reviewed the two dominant approaches to managing
                change, identifying their strengths, weaknesses and the situations they are designed to
                address. It has become clear that, even taken together, neither the Planned nor
Varieties of change   321

        Emergent approach covers the broad spectrum of change events that organisations
        encounter. Pettigrew (2000: 245–6) observes that:

         There is a long tradition in the social sciences and in management and organization theory
         of using bipolar modes of thinking: dichotomies, paradoxes, contradictions and dualities. …
         The duality of planned versus emergent change has served us well as an attention director
         but may well now be ready for retirement.

        Though both Planned and Emergent change have important theoretical and practical
        benefits, their dominance of the change literature has led to a neglect of other
        approaches. In order to address this neglect, this chapter will seek to identify the
        range of change situations organisations face and match these to a wider group of
        approaches. This will enable the construction of a framework that will allow different
        change situations to be matched to appropriate approaches to managing change. It
        will then be argued that, by manipulating key variables in this framework, it is possi-
        ble for organisations to have genuine choices in what to change, how to change and
        when to change.


Varieties of change
        As noted in Chapter 8, types of change can be categorised as to whether their primary
        focus applies to individuals, groups, or systems and sub-systems. As far as models of
        change are concerned, once again as noted in Chapter 8, the three main ones are the
        incremental model; the punctuated equilibrium model; and the continuous transforma-
        tion model. Figure 10.1 brings these together to create a change matrix that, as the
        examples illustrate, appears to cover most situations. However, there are other types,
        models and forms of change that expand on, cut across or are not included in this
        matrix. Senior (2002), drawing on the work of Grundy (1993), identifies three categories
        of change: smooth incremental, covering slow, systematic, evolutionary change; bumpy




                                           Incremental   Punctuated   Continuous


                             Individuals                                 Career
                                            Learning     Promotion
                                                                      development

                                                           Team        Changes in
                               Groups        Kaizen       building    composition
                                                                        and tasks

                                              Fine
                               Systems                      BPR         Culture
                                             tuning




        Figure 10.1 Varieties of change
322   Chapter 10 · A framework for change

              incremental, pertaining to periods where the smooth flow of change accelerates; and dis-
              continuous change, which is similar to the punctuated equilibrium model. Kanter et al
              (1992), addressing the issue of transformational change, noted that it can be achieved
              either by a Bold Stroke approach (rapid overall change) or a Long March approach
              (incremental change leading to transformation over an extended period of time).
                 In a similar vein, Beer and Nohria (2000) identify two basic archetypes, or theories
              of change: Theory E, which is similar to Kanter et al’s Bold Stroke, and Theory O,
              which is similar to Kanter et al’s Long March. The main objective of Theory E change
              is to maximise shareholder value. It is applied in situations where an organisation’s
              performance has diminished to such an extent that its main shareholders demand
              major and rapid change to improve the organisation’s financial performance.
              Typically this is a ‘hard’ approach based on downsizing, divestment of non-core or
              low-performing businesses, and the heavy use of financial incentives. Theory O is also
              aimed at improving an organisation’s performance, but this is more a ‘soft’ approach
              based on incrementally developing the organisation’s culture and its human capabili-
              ties, and promoting organisational learning.
                 Beer and Nohria (2000) believe that both of these are valid models of change but
              that both have their flaws. Theory E can achieve short-term financial gains but at the
              cost of denuding an organisation of the human capabilities and organisational culture
              necessary for long-term survival. Theory O, whilst focusing on people and culture,
              falls into the trap of not restructuring to concentrate on core activities, thus failing to
              deliver shareholder value. To achieve the gains of both these approaches, whilst
              avoiding the pitfalls, Beer and Nohria advocate using these in tandem by focusing on
              the rapid restructuring elements of Theory E but following this with the human capa-
              bility development offered by Theory O.
                 Cummings and Worley (2001: 30) identify a ‘continuum ranging from incremental
              changes that involve fine-tuning the organization to quantum changes that entail fun-
              damentally altering how it operates’. Stace and Dunphy (2001), in a like but more
              detailed way, identify a four-stage change continuum that comprises the following:
              fine-tuning, incremental adjustment, modular transformation and corporate transfor-
              mation. Looking at the latter, Stace and Dunphy argue that corporate transformations
              can take four forms: developmental transitions; task-focused transitions; charismatic
              transformations; and turnarounds. For Peters (1989), rapid, disruptive and continu-
              ous change is the only appropriate form of change there is. With echoes of Peters,
              Quinn (1996) differentiates between incremental change, which he sees as leading to
              slow death, or deep, radical change leading to irreversible transformation. Pettigrew
              et al (1992) distinguish between types of change by their scale and importance. Their
              change continuum spans operational change (small-scale, relatively unimportant) and
              strategic change (major and important structural changes). Buchanan and Boddy’s
              (1992) classification is almost the same as Pettigrew et al’s, but they use two dimen-
              sions: incremental change to radical change; and changes that are of central
              importance to the organisation to those that are peripheral to its purpose. Kotter
              (1996) ignores the notion of a continuum of change as such and, instead, argues that
              organisations need to be continuously transforming themselves through a series of
              large and small interlinked change projects spanning different levels and functions
              and having different timescales.
Varieties of change   323

   One could of course extend this review further by including other writers (e.g.
Dawson, 2003; Strickland, 1998; Wilson, 1992); however, the end product would be
the same: change can be viewed as running along a continuum from incremental to
transformational. Incremental or fine-tuning forms of change are geared more to
changing the activities/performance/behaviour/attitudes of individuals and groups,
whereas transformational change is geared towards the processes/structures and cul-
ture of the entire organisation. Obviously, there are differences in how these writers
construe these concepts. Some writers see fine-tuning or incremental change as being
relatively isolated and/or relatively unimportant (i.e. Stace and Dunphy, 2001;
Pettigrew et al, 1992), whilst others see it as being part of an overall plan to trans-
form an organisation (e.g. Kanter et al, 1992; Senior, 1997). In contrast, all seem to
view transformational change as being strategic and important; though there are
those who see it as being a relatively slow process (Kotter, 1996), those who see it as
being a relatively rapid one (Peters, 1989), and those who argue that it can take both
forms (Kanter et al, 1992; Stace and Dunphy, 2001).
   Regardless of these differences, the overall view as shown by Figure 10.2 is that
change can be seen as running along a continuum from small-scale incremental
change to large-scale transformational change. This of course is no surprise; intu-
itively, one would expect change to range from small-scale to large-scale and from
operational to strategic. The important consideration is perhaps not the type of
change but how it should be conceived and managed. Implicit in the arguments of the
Emergent approach is the view that Planned change stands at the left-hand end of this
spectrum and Emergent change at the right-hand end, and that what separates them is
the nature of the environment (see Figure 10.3). Planned change is considered suitable
for (relatively) stable environments, with Emergent change being better suited to more
turbulent environments. As shown in Chapters 7 and 8, however, these two
approaches to change are more limited than their advocates claim. In particular, both
the Planned and Emergent approaches tend to stress the collaborative and consulta-
tive approach to managing change. Stace and Dunphy (2001), however, identify four
approaches to managing change based on the degree to which employees are involved




                       Small scale                      Large scale

                       Incremental                 Transformational



Figure 10.2 Change continuum



                       Stable                             Turbulent
                                     ENVIRONMENT

                       Planned                           Emergent


Figure 10.3 Approaches to change
324   Chapter 10 · A framework for change

              in planning and executing change, as follows: collaborative, consultative, directive
              and coercive. They also argue that consultative and directive approaches tend to dom-
              inate, except where rapid organisational transformations are required, when more
              coercive approaches come into play. Kotter (1996) takes a different view, seeing the
              overall direction of change as being decided by senior managers, but its implementa-
              tion being the responsibility of empowered managers and employees at all levels.
              Boddy and Buchanan (1992) believe that the way in which a change should be man-
              aged will be viewed differently, depending on whether it is central or peripheral to the
              organisation’s purpose. Davenport (1993) expands on these two issues by construct-
              ing a list of five principal factors that influence how a project will be managed: the
              scale of change; the level of uncertainty about the outcome; the breadth of change
              across the organisation; the magnitude of change in terms of attitudes and behaviour;
              and the timescale for implementation. Storey (1992), taking a slightly different tack,
              begins by identifying two key dimensions. The first concerns the degree of collabora-
              tion between the parties concerned: varying from change that is unilaterally
              constructed by management, to change brought about by some form of joint agree-
              ment with those involved. The second dimension concerns the form that change
              takes: ranging from change that is introduced as a complete package, to change com-
              prising a sequence of individual initiatives. From these two dimensions, Storey
              constructs a fourfold typology of change:
              1 Top-down systemic change aimed at transforming the organisation.
              2 Piecemeal initiatives devised and implemented by departments or sections in an
                unconnected fashion.
              3 Bargaining for change where a series of targets are jointly agreed between man-
                agers and workers, but are pursued in a piecemeal fashion.
              4 Systemic jointism where managers and workers agree a total package of changes
                designed to achieve organisational transformation.
                 As with the earlier review of the types of change, to make sense of this review of
              the nature of change and how it should be managed, we need to find a way of cate-
              gorising and tabulating the various viewpoints. However, this is a far from
              straightforward exercise. Stace and Dunphy’s (2001) fourfold categorisation of
              approaches to change, ranging from cooperative to coercive, is useful in that it
              appears to cover most of the managerial approaches on offer. However, it is the cir-
              cumstances in which each of these might best be used that is perhaps of most concern.
              Boddy and Buchanan’s categorisation of central–peripheral is interesting but, in most
              instances, this appears to boil down to an issue of project size. Almost by definition,
              all major projects can be considered as central by virtue of their size and, for a similar
              reason, most smaller projects are, relatively speaking, peripheral. Davenport’s five
              factors are perhaps more useful in helping us to categorise change, especially those
              concerning uncertainty, behaviour and attitudes, and timescale. As we have noted fre-
              quently in this book, uncertainty tends to be present when the environment is
              changing in a rapid and unpredictable fashion. This requires organisations to respond
              quickly; advocates of the Emergent approach believe this is best done by small- to
              medium-scale local or cross-functional or process changes. The ability to do this,
              however, is dependent on having appropriate structures, attitudes and cultures in
              place. If this is not the case, then change will be delayed or not quick enough and, as
A framework for change       325

       Stace and Dunphy (2001) showed, will be likely to require rapid transformational
       change undertaken in a directive or coercive fashion. Nevertheless, both Kanter et al
       (1992) and Beer and Nohria (2000), as well as the review of culture in Chapter 5,
       argue that changes in attitudes and culture cannot be achieved in a rapid and coercive
       manner. That type of approach tends to be effective in changing structures and
       processes, but achieving attitudinal and/or cultural change is a much slower process.


A framework for change
       If we summarise the above views, we can create yet another change continuum. At
       one end is slow change, where the focus is on behavioural and cultural change. At the
       other end of the continuum is rapid change, where the focus is on major changes in
       structures and processes. If we merge this together with Figures 10.2 and 10.3, what
       we get, as Figure 10.4 shows, are four quadrants, each of which has a distinct focus
       in terms of change. The top half of the figure, Quadrants 1 and 2, represents situa-
       tions where organisations operating in a turbulent environment need to make
       large-scale, organisation-wide changes to either their culture or structure. The bottom
       half of the figure, Quadrants 3 and 4, represents situations where organisations oper-
       ating in a stable environment need to make small-scale, piecemeal and localised
       adjustments to attitudes and behaviours or tasks and procedures. As can be seen, the
       left-hand side of the figure, Quadrants 1 and 4, represents situations where the main
       focus of change is the human side of the organisation, i.e. cultural and
       attitudinal/behavioural change. As argued above, these sorts of changes are likely to
       be best achieved through a relatively slow, participative approach, rather than a rapid



                                                Turbulent environment
                                              Large-scale transformation
                   Q1                                                                           Q2

                     Level:    The organisation               Level:    The organisation
                     Focus:    Culture                        Focus:    Structures and processes
                     Approach: Emergent change                Approach: Bold stroke

            Slow transformation                                                      Rapid transformation

               Slow change                                                               Rapid change


                     Level:    Individual/group               Level:    Individual/group
                     Focus:    Attitudes/behaviour            Focus:    Tasks and procedures
                     Approach: Planned change                 Approach: Tayloristic or Kaizen

                   Q4                                                                           Q3
                                              Small-scale transformation
                                                Stable environment


       Figure 10.4 A framework for change
326   Chapter 10 · A framework for change

              and directive or coercive one. The right-hand side of Figure 10.4 represents situations
              where the primary focus is on achieving changes to the technical side of the organisa-
              tion, i.e. structures, processes, tasks and procedures. These types of changes tend to
              be less participative in nature and relatively more rapid in their execution.
                 Taking each of the quadrants in turn: Quadrant 1 identifies situations where the
              culture of an organisation operating in a turbulent environment is no longer appro-
              priate. For such relatively large-scale initiatives, where the main focus is culture
              change at the level of the entire organisation or large parts of it, the Emergent
              approach (e.g. Kanter et al’s Long March), which emphasises both the collaborative
              and political dimensions of change, is likely to be most appropriate. As argued in
              Chapter 5, attempts to change culture through top-down, directive or coercive initia-
              tives are liable to fail. Therefore, where they are to be successful, such forms of
              change are less likely to be consciously embarked on and more likely to ‘emerge’ from
              a host of initiatives that arise in response to changes in the environment, though this
              does not necessarily exclude some elements of deliberation and guidance from senior
              managers. Although the organisation may be operating in a turbulent environment
              and, therefore, individual elements of the cultural change may be rapid, the overall
              cultural transformation is likely to be a slow process.
                 Quadrant 2 relates to situations where the focus is on achieving major changes in
              structures and processes at the level of the entire organisation (e.g. Kanter et al’s Bold
              Stroke). Situations where such changes are required arise for a variety of reasons. It
              may be that an organisation finds itself in serious trouble and needs to respond
              quickly to realign itself with its environment. Alternatively, it may be that an organi-
              sation is not experiencing a crisis, but that it perceives that it will face one unless it
              restructures itself to achieve a better fit with its environment. In such cases, it may not
              be possible or advisable to change the structure slowly or on a piecemeal basis and,
              therefore, a major and rapid reorganisation is necessary. Because it involves the entire
              organisation or major components of it, this is likely to be driven by the centre and to
              be the focus of a political struggle, given that major structural changes are usually
              accompanied by major shifts in the distribution of power. Therefore, the new struc-
              ture will be imposed from the top in a directive or even coercive way, depending on
              the balance between winners and losers.
                 Quadrant 3 presents a different picture. This represents organisations operating in a
              relatively stable environment where changes to the technical side of the organisation tend
              to be relatively small-scale and piecemeal and with few (if any) implications for behav-
              iour and attitudes. Such changes take place at the individual and group level rather than
              at the level of the entire organisation. How these are managed will depend on the culture
              of the organisation. In a traditional, bureaucratic organisation, a Tayloristic approach
              may be adopted, i.e. specialist managers and engineers will identify the ‘best way of
              working’ and impose it. In a more participative culture, such as a Japanese company, a
              more collaborative approach may be appropriate, such as a Kaizen initiative that brings
              together a team comprising workers and specialists. But either is possible and it should
              be possible to achieve either in a relatively speedy fashion.
                 Finally, Quadrant 4 covers relatively small-scale initiatives whose main objective is
              performance improvement through attitudinal and behavioural change at the individ-
              ual and group level. Once again, organisations in this situation tend to be operating
              in a relatively stable environment and, therefore, the Planned approach, with its
A framework for change   327

emphasis on collaboration and participation, is likely to be most appropriate.
However, because such changes focus on behavioural and attitudinal change, they
tend to be relatively slow.
   Of course, it could be argued that, at the organisational level, it is difficult to iden-
tify situations that involve solely cultural changes or involve solely structural changes.
A similar comment could be made with regard to attitudinal/behavioural change and
changes to tasks and procedures at the individual/group level. Such comments are
valid to an extent, but the real issue is to identify the main focus of the change.
Chapter 3 examined the work of the Culture–Excellence approach. Here it was
shown that writers such as Tom Peters and Rosabeth Moss Kanter were arguing for
structural change in order to promote the values and behaviours necessary for organi-
sations to survive in an increasingly complex world. Therefore, though significant
structural changes were recommended, these were part of the process of culture
change and not an end in themselves. John Kotter, as noted in the previous chapter,
advocates the need for organisations to restructure themselves on a continuous basis
in order to meet the challenges of the future. At different times and in different areas,
he believes that this can involve all of the types of change shown in Figure 10.1.
There are also many cases, as Kotter argues, where an organisation already has an
appropriate culture and where changes to its overall structure, and piecemeal changes
to its component parts, are seen as working with and reinforcing the existing organi-
sational culture rather than leading to its replacement.
   Therefore, the question of whether changes can be labelled as mainly structure-ori-
entated or mainly people-orientated is partly a matter of sequencing: what does the
organisation need to do first? It is also partly concerned with the extent to which
environmental turbulence has a uniform effect across an organisation. As shown in
Chapter 2, in the 1960s, James Thompson (1967) identified that different sections of
an organisation, by accident or design, could experience different levels of uncer-
tainty. On this basis, it would be perfectly feasible for some parts of an organisation
to be experiencing relatively low levels of uncertainty and concentrating on small-
scale, piecemeal changes whilst at the same time the overall organisation was going
through a process of rapid transformation.
   Where does this leave us? Drawing on the work of Davenport (1993), we need to
distinguish between initiatives that focus on fundamental attitudinal change and those
aimed at fundamental structural change. As mentioned by Allaire and Firsirotu
(1984) and as argued in Chapter 5, there is a strong relationship between organisa-
tional structures and organisational cultures, and so changes in one may require
corresponding changes in the other. As was also argued earlier, however, it is much
easier and quicker to change structures than to change cultures. Consequently, we
need to take into account the timescale for change. Culture change, to be effective, is
likely to be slow and involves incremental changes to the human side of the organisa-
tion. Also, because of its nature, it is likely to be participative and collaborative.
Rapid change is only likely to be effective or necessary where the main changes are
structural changes, or where the organisation is in such trouble that delay is not an
option. In the case of structured change, this may involve some consultation but is
likely to have a large element of direction from the centre. In the latter case, where
the organisation is in trouble because of the urgency of the situation, change is likely
to be directive and, probably, coercive.
328   Chapter 10 · A framework for change

                 There is one further point that needs to be noted, and that relates to how these var-
              ious approaches can be used in combination. In a manner reminiscent of Mintzberg’s
              (1994) definition of ‘umbrella’ strategies, Pettigrew et al (1992: 297) write of
              instances where change is both ‘intentional and emergent’. Storey (1992) identifies the
              need for change projects whose outlines are decided at corporate level with little or
              no consultation, but whose implementation comprises an interrelated series of change
              initiatives, some or all of which could be the product of local cooperation and consul-
              tation. Kotter (1996) takes a similar perspective. He sees strategic change as
              comprising a series of large and small projects aimed at achieving the same overall
              objectives but which are begun at different times, which can be managed differently
              and which vary in nature. Buchanan and Storey (1997) also hint at this when criticis-
              ing Planned change for attempting to impose order and a linear sequence to processes
              that are untidy, messy, multi-level and multi-function, and that develop in an iterative
              and backtracking manner. This is also identified by Kanter et al (1992) when speak-
              ing of Long Marches and Bold Strokes. They argue that Bold Strokes often have to be
              followed by a whole series of smaller-scale changes over a more extended timescale in
              order to embed the changes brought about by the Bold Stroke. Beer and Nohria
              (2000) are even more explicit in arguing for the use of Theory E and Theory O in
              tandem. Therefore, when considering major change projects, one should not see them
              as being managed solely in a cooperative fashion or solely in a coercive fashion.
              Instead, they may have elements of both but at different levels, at different times and
              managed by different people. They may also, indeed probably will, unfold in an unex-
              pected way which will require rethinking and backtracking from time to time.


A framework for choice
              As can be seen from Figure 10.4, what appears to be on offer is a menu approach to
              change whereby organisations, or more accurately those who manage them, can
              choose the approach which fits their circumstances. This conception of a multiplicity
              of approaches is in line with the call by Dunphy and Stace (1993: 905) for ‘a model of
              change that is essentially a “situational” or “contingency model”, one that indicates
              how to vary strategies to achieve “optimum fit” with the changing environment’. If we
              were to stop at this point, it might be considered that we had indeed made significant
              progress in our understanding of change; yet there would still be one essential question
              outstanding: what about choice? We have identified situations where these various
              approaches seem appropriate or not, but does that mean they cannot be used in other
              situations and does that mean that the context cannot be changed? Supposing organi-
              sations, whose management prefer a cooperative approach, find themselves seriously
              out of alignment with their environment: is their only option rapid and coercive struc-
              tural change? Or, alternatively, where managers prefer a more directive, less
              participative style, are they compelled to adopt a more participative style and culture?
                 These questions revolve around two issues. The first issue concerns the extent to
              which an organisation can influence the forces driving it to change in one direction or
              another. If we accept that the speed and nature of the changes that organisations are
              required to make are dependent upon the nature of the environment in which they are
              operating, then choice will relate to the extent that organisations can influence,
Conclusions   329

       manipulate or recreate their environment to suit their preferred way of working. This
       is a subject that has been examined a number of times so far, especially in Chapters 5
       and 6. The conclusion reached was that organisations could influence their environ-
       ment, either to stabilise or to destabilise it. If this is the case, then the important
       question is not just how organisations can do this, but whether, finding themselves in
       trouble, they have the time to influence their environment?
          This leads on to the second issue: to what extent and for how long can an organi-
       sation operate with structures, practices and cultures that are out of line with its
       environment? The answer to this question revolves around Child’s (1972) concept of
       equifinality. As discussed in Chapter 6, equifinality ‘quite simply means that different
       sorts of internal arrangements are perfectly compatible with identical contextual or
       environmental states’ (Sorge, 1997: 13). This does not imply that any structure is suit-
       able for any environment. What it does suggest, though, is that total alignment
       between structure and environment is not always necessary. The duration for which
       this non-alignment is sustainable will clearly vary with the degree of non-alignment
       and the circumstances of the organisation in question; at the very least, however, it
       does offer organisations the potential to stave off realignment for some time during
       which they can influence or change their circumstances. It follows that Figure 10.4
       depicts not only a framework for change but also a framework for choice.
          In summary, therefore, what we can see, as Pettigrew (2000) suggested, is that the
       debate between Planned change and Emergent change is too narrow. It is too narrow
       in the sense that there are other approaches to change that organisations have avail-
       able to them; in particular, it tends to ignore the more coercive and directive
       approaches to change that, in many organisations, may be more prevalent than more
       cooperative ones. It is also too narrow in the sense that it assumes that change is uni-
       directional, i.e. is driven by the environment. Organisations do have the opportunity
       to make choices about what to change, how to change and when to change. This does
       not mean that all organisations will exercise such choices or that those which do will
       be successful. Nor, as Chapter 6 argued, does it mean that choice is not severely con-
       strained. It does mean, however, that those who do not recognise that choice exists
       may be putting themselves in a worse competitive position than those who do.


Conclusions
       The previous two chapters examined the Planned and Emergent approaches to
       change, which have successively dominated the theory and, to a large extent, the
       practice of organisational change over the past 50 years. Chapter 8 was devoted to
       the Planned approach to change. It was argued that, though elaborated upon and
       supported by a considerable number of very useful tools and techniques, it has
       remained essentially true to Kurt Lewin’s original ‘unfreezing’, ‘moving’ and ‘refreez-
       ing’ approach. In the increasingly dynamic and unpredictable business environment of
       the 1980s, writers began to question the appropriateness of a top-down approach
       that saw the process of change primarily in terms of a ‘beginning, middle and end’
       framework. In place of the Planned approach, as was shown in Chapter 9, the
       Emergent approach began to gain support. With its emphasis on bottom-up and
       open-ended change, it appeared to offer a more appropriate method of accomplishing
330   Chapter 10 · A framework for change

              the stream of adaptations organisations believed they needed to make in order to
              bring themselves back into line with their environment. However, Chapter 9 also
              showed that Emergent change may have as many shortcomings as Planned change.
                 Nevertheless, the two approaches appear to have some striking similarities, espe-
              cially the stress they place on change as being a learning process. They also share a
              common, and major, difficulty, which is that whilst both claim to be universally appli-
              cable, they were developed with particular change situations, organisation types and
              environments in mind. The Planned approach appears to be predicated on the
              assumptions that organisations operate in stable or relatively predictable environ-
              ments, that managers can identify where change is required, that change projects are
              concerned primarily with group attitudes and behaviours, and that change is about
              moving from one fixed point to another fixed point and that the steps or phases in
              between are relatively clear and realisable. The Planned approach also appears to
              assume that organisations, managers and employees are open and frank, they wel-
              come involvement, and are willing to change, or that these attributes can be achieved
              with the application of the appropriate tools and techniques.
                 The Emergent approach, on the other hand, assumes that organisations are open
              and fluid systems that operate in unpredictable and uncertain conditions over which
              they have little control. It further assumes that change is a continuous process of
              adaptation and transformation which, because of its speed and frequency, managers
              can neither fully identify nor effectively control centrally. Therefore, from the
              Emergent perspective, identifying and managing change has to be the responsibility of
              everyone in the organisation. This view portrays managers, who are seen as highly
              competent and adaptable, as capable of changing themselves from outmoded con-
              trollers and coordinators to new-style facilitators and partners; and employees are
              seen as willing to take responsibility for identifying deficiencies and implementing
              change. Above all, and perhaps somewhat contradictorily, change is seen as being a
              political process whereby different groups and individuals strive to protect or enhance
              their power and position. As mentioned earlier, it is on this last point – the overriding
              importance of power and politics in the change process – that postmodernists are
              most in agreement with the Emergent approach and realists most in disagreement.
                 As Chapter 8 showed, the Planned approach has had a considerable impact on
              organisation practice since its inception in the 1940s. However, despite its undoubted
              merits, as argued earlier, it does appear limited in terms of the situations in which it
              can successfully be applied. In particular, the Planned approach has been criticised for
              its lack of suitability to situations requiring large-scale change and/or ones where
              political and power considerations are prevalent. However, as was demonstrated in
              Chapter 9, the Emergent approach, which is seen as being suitable to such situations,
              also has major drawbacks, especially its heavy emphasis on the political dimension of
              change and its contradictory tendency, both implicitly and explicitly, to characterise
              change as a slow and cooperative process. It has also been argued that, even taken
              together, the Planned and Emergent approaches do not cover all change situations. In
              particular, neither approach seems suitable for situations where the primary focus is
              rapid and radical structural change.
                 Instead of portraying the argument regarding the most appropriate approach to
              change as a contest between the merits of the Planned and Emergent approaches, the
Conclusions   331

Framework for Change (Figure 10.4) provides an overview of the range of change sit-
uations organisations face, and the approaches they are offered and the types of
situations in which they can best be applied.
   Though this Contingency-type approach to change appears to have some merit, it
is subject to the same sort of criticisms levelled at Contingency Theory in Chapter 2.
However, this chapter has also argued that, if we adopt the perspective developed in
previous chapters and see the environment and other organisational constraints as
potentially manipulable or subject to managerial choice, many of these criticisms can
be answered and new possibilities opened up. It has to be recognised that there is dis-
pute between the realists and postmodernists as to what can be manipulated and the
degree of choice which exists. However, this is a matter of degree; both acknowledge
the existence of choice. Therefore, some organisations will find that the organisa-
tional adjustments required to accommodate their position on the environment
continuum coincide with the dominant view in the organisation of how it should
operate. In that case, whether the approach to change adopted is Planned or
Emergent, directive or cooperative, it will fit in with both how the organisation
wishes to operate and the needs of the environment. Some organisations will, obvi-
ously, find that the dominant view internally of how they should operate is out of step
with what is required to align or re-align them with their environment. Such organisa-
tions face a number of choices ranging from whether to attempt to change their
structure, culture or style of management to accommodate the environment, or
whether to attempt to manipulate the environment and other constraints so as to
align them more closely with the dominant view within the organisation of how it
should operate. Still further, there will be other organisations who face severe prob-
lems either because they failed to respond quickly enough or in an appropriate
manner to changes in their environment, or because the environment moved too rap-
idly for an incremental approach to respond adequately. Nevertheless, by showing
that a more conducive environment can be brought about, the framework also pro-
vides those who wish to promote more cooperative approaches to change with the
means to argue their case in situations where previously more directive and coercive
measures appeared to be the only option.
   The concept of a Framework for Change that allows approaches to change to be
matched to environmental conditions and organisational constraints is clearly attrac-
tive. The fact that it incorporates the potential for managers, and others, to exercise
some choice or influence over their environment and other constraints allows the
model to move beyond the limitations of mechanistic and rational perspectives on
organisations, and into the heartland of organisational reality. In addition, though not
by accident, it is in harmony with the approach to strategy developed in Chapters 6
and 7.
   Nevertheless, though such a model of change has its attractions, its usefulness
depends on how well it accommodates the reality of organisational life. To investigate
this, the next part of the book (Chapters 11–13) presents ten case studies of strategy
development and change. This is then followed, in Chapter 14, by a comparison of
the case studies with this and the previous four chapters (6, 7, 8 and 9) dealing with
change management and strategy. The intention in Chapter 15 is to present a model
of change management that incorporates both theory and practice.
332   Chapter 10 · A framework for change


Test your learning

          ■ Short answer questions
              1 To what extent can we say that Kanter et al’s (1992) ‘Bold Stroke’ and ‘Long March’
                approaches to change are the same as Beer and Nohria’s (2000) ‘Theory E’ and ‘Theory
                O’ approaches?

              2 Using the headings in Figure 10.1, identify your own ‘varieties of change’.

              3 Describe Storey’s (1992) fourfold typology of change. Give a real-life example of each
                type of change.

              4 What are the main components of the Framework for Change shown in Figure 10.4?

              5 Evaluate the following statement: At the organisation level, change can either be struc-
                ture-orientated or culture-orientated but it cannot be both at the same time.

              6 To what extent and how does Child’s (1972) concept of ‘equifinality’ indicate that organi-
                sations may be able to control the pace at which they change?

              7 Summarise the case presented in Chapters 5 and 6 that organisations can manipulate or
                change the contingencies they face.



          ■ Essay questions
              1 What are the arguments for and against Pettigrew’s (2000: 245–6) comment that: ‘The
                duality of planned versus emergent change has served us well as an attention director
                but may well now be ready for retirement.’

              2 Use the Framework for Change, Figure 10.4, to analyse change in one of the case studies
                in Part 3 of this book or for a case of your own choosing. In particular, identify the type
                of change or changes involved, the selection and suitability of the approach to change
                and the degree to which the approach was aligned with the management style of the
                organisation.




                Suggested further reading
              1 Beer, M and Nohria, N (eds) (2000) Breaking the Code of Change. Harvard Business School
                Press: Boston, MA, USA.
                This edited collection contains contributions by many of the leading thinkers on organisa-
                tional change. It covers the main approaches to change, including the Planned and
                Emergent.
Part Three
Case studies in strategy
development and change
management
Managing change burnes
Chapter 11

Case studies in strategic change



  Learning objectives
  After studying the case studies in this chapter, you should be able to:
  ■   appreciate how small changes can have large impacts on an entire industry;
  ■   understand how real-life organisations develop and implement strategy;
  ■   describe how organisations can reinvent themselves;
  ■   discuss the traps that organisations can fall into when seeking to bring about
      strategic change;
  ■   show how staff can be motivated or demotivated by different approaches to
      strategic change;
  ■   appreciate that managers can exercise considerable choice in terms of their
      organisation’s strategy;
  ■   identify the positive and negative roles played by managers in developing
      and implementing strategy;
  ■   discuss the implications of internationalisation and globalisation on
      organisation strategy.




 Introduction
The five chapters in Part 2 of this book examined approaches to strategy develop-
ment and change management by leading theorists and practitioners. Chapters 6
and 7 described the origins and development of strategic management, showing
how it had moved from being considered as a rational perspective solely concerned
with product–market issues, to a situation where there are radically differing per-
spectives on its purpose, function and efficacy. The quantitative rationality of the
Classical approach is still very much in evidence, but it has been challenged by the
fatalism of the Evolutionists, the pragmatism of the Processualists and the societal
perspective of the Systemicists – though no one now appears to doubt the need to
view organisations in their entirety, rather than being merely concerned with exter-
nal variables. In a similar way, Chapters 8 and 9 described the development of
336   Chapter 11 · Case studies in strategic change

               change management, showing that many theorists and practitioners see it as having
               moved from being a planned, predictable and rational process to one that is inher-
               ently unpredictable and where politics and power have a major role to play. In
               Chapter 10, the concluding chapter of Part 2, however, it was argued that the various
               approaches to strategy development and organisational change all have their draw-
               backs as well as benefits. It was also argued that none of these approaches has
               universal applicability; all are situation-dependent. Successful change, therefore,
               requires organisations to choose the most appropriate approach for their circum-
               stances or, as was emphasised, to change their circumstances to accommodate their
               favoured approach.
                  This chapter presents four case studies that focus on strategic change at the indus-
               try and organisational levels. In particular, the case studies draw attention to the
               challenges that new technologies, especially the Internet, and internationalisation and
               globalisation are having on organisations.
                  Case Study 1 looks not at an individual organisation but at an entire industry – the
               music industry. This shows how rapidly the Internet is transforming the industry and
               the difficulties faced by existing companies in maintaining their competitive position. It
               also shows that there is a deep division between those who see the Internet as another
               way of making money and those who see it as a way of creating sharing communities.
                  Case Study 2 focuses on the disastrous experience of Marconi. This was a company
               that, as GEC, had been primarily focused on the heavy electrical industry, consumer
               goods and defence. At the end of the 1990s, new managers tried to transform it into a
               telecoms equipment company that could take advantage of the Internet age. Within a
               space of two years, most of the old businesses had been sold, billions of pounds were
               borrowed and spent on new telecoms businesses and, when the dotcom bubble burst,
               the company was left virtually bankrupt and its shareholders penniless.
                  Case Study 3 examines the experiences of the Danish hearing-aid manufacturer,
               Oticon, which reinvented itself literally overnight. This is a company singled out as an
               outstanding example of transformational change by no less a person than Tom Peters
               (1992: 206): ‘ … the transition at Oticon to a radically new form of organization has
               been smoother than almost anyone would have imagined’. Unlike Marconi, Oticon’s
               story is one that highlights that visionary leadership can be successful, and that
               organisations can break out of the industry standard approach and, de facto, change
               the rules of the game.
                  Case Study 4 focuses on the privatisation of the Public Power Corporation (PPC)
               of Greece. This shows the various steps that were taken to privatise the company and
               concomitant organisational changes. It also shows the influence of the European
               Union in setting the ground rules for how the company should operate and, in effect,
               how it should be structured.
                  The chapter concludes by discussing the implications of the case studies in the light
               of the constraints on managerial choice identified in Chapter 6. It is argued that
               breaking out of constraints and exercising choice, especially where this challenges the
               status quo, requires special qualities from a manager.
Case Study 1 · The Internet and the P2P Revolution in the music industry             337


Case Study 1

 The Internet and the P2P Revolution in the music industry1

 Background
 Though the creation of music is as old as mankind itself, in its commodity form, as a saleable product,
 it is a relatively recent phenomenon. The market for music began with the sale of sheet music in the
 nineteenth century. In the twentieth century, with the emergence of and demand for recorded music
 in the form of vinyl records, cassettes, CDs, etc., the market expanded enormously to become a
 global industry (Gillett, 1996). Whether in Moscow or Miami, Paris or Peking, London or Lusaka, the
 same records are being listened to and the same companies are supplying them. However, though
 the physical product itself may have changed, the distribution channels and the division of labour
 within the industry have remained relatively stable: artists create music, record labels promote and
 distribute it and the fans consume it. As this case study will show, however, the advent of the Internet,
 and related software developments, is causing a seismic shift in the way music is distributed, and is
 threatening to sweep away the dominance of the big five record labels. The credit or blame, depend-
 ing on whether you are a music industry executive or a music fan, will go to Shawn Fanning. Fanning
 is the classic American computer geek who dropped out of college because he wanted to spend his
 time developing a computer program which would make it easier to find and swap music via the
 Internet. He called the program, and the company he launched, Napster after his school nickname.
 Napster quickly became one of the legends of the Internet. As Alderman (2001a: 4) commented:
     The program launched in June 1999 and took off with unprecedented speed. For many, using Napster
     was an epiphany. One would fire it up, type in a song and instantly be connected with possibly thou-
     sands of other users who had what you wanted. Sure, you could get the studio version of Led
     Zeppelin’s Whole Lotta Love. But if you were on at the right time, you could also get live versions of the
     song recorded in LA in 1977, San Francisco in 1975 or Tokyo in 1972. You might also get the new
     Radiohead or Eminem album weeks before their official release dates. Millions did. Using Napster was
     easier than going to a record store, and easier than ordering records online, and it allowed the discovery
     of music in ways that had not existed before. Record stores, for instance, didn’t give you the opportunity
     to identify the cool people and investigate what else they were listening to. If there was another Napster
     user whose songs you liked, you could check what other music they had on their hard drive and send
     them instant messages. As a bonus, the whole Napster experience (excluding the computer and net
     costs) was free. The industry’s response was incredulity and, initially, inaction.

     As will be described below, there are two competing views of the Internet. One is that it will
 allow companies to increase their service provision and make greater profits. The other is that it will
 allow individuals to create a community of equals where they can exchange ideas, products and
 services on a no-cost, Peer-to-Peer (P2P) basis. With Napster, idea of P2P song-trading took off in a
 big way. The Napster software was very simple to use. You installed it, you placed your favourite
 music files in a folder on your hard disk and then connected to the Internet. Immediately, through
 Napster’s centralised indexing system, MusicShare, you had access to every other Napster user’s
 MP3 files (and they to yours). All the files were automatically catalogued on the Napster server and,
 through its search engine, anyone could connect to anyone else’s drive and download their music.
     What Napster really did was to index and manage distributed data resources. Napster was essen-
 tially an index site. The company compiled a list of Napster software users and the songs they
 possessed and made the list available to other users when they installed the Napster software. A
 user simply searched for the music they wanted and then downloaded it directly from the computer
 1   This case study is based on work carried out with Gary Graham of the Manchester School of Management and Glenn
     Hardaker of Huddersfield University Business School. A fuller version of this case can be found in Graham et al (2002).
338   Chapter 11 · Case studies in strategic change




       on which it was located. The search and download were free to the user, and Napster did not have
       to touch the file.
           What’s the big deal? After all, it is just a computer program. True – but at its height in 2000,
       more than 80 million users per month were treating themselves to free music (Gibson, 2003a).
       Not surprisingly, the industry was not inactive for long. Whilst Napster might seem a cool idea to
       its millions of users, to the big record labels it meant piracy on a scale that could eventually lead
       to their bankruptcy.

       The music industry and the Internet
       Record-making is economically as well as technically a complex process. Like books, films, televi-
       sion and other art forms, music is rarely just a product. Not only is it difficult to identify, develop
       and manage successful artists, the artistic value (and therefore the commercial value) of records
       depends upon their consumers’ aesthetic preferences, which are neither stable nor predictable.
       Just because an artist has sold millions of records in the past does not mean they will in the
       future. The reverse is also the case. Before getting a record contract, even the biggest-selling
       artists, such as the Beatles, have usually been turned down by a number of record companies
       who failed to spot their sales potential. Over the last 50 years or so, the music industry has been
       dominated by five big record labels. Even though they may own or heavily influence the distribu-
       tion and promotional channels for music, such is the competition between artists that only a few
       become successful, and then often only for a short period of time. Therefore, though the record
       labels are often accused of exploiting artists and taking the lion’s share of the profits from their
       work, the labels also have to bear the main financial risks for the 90 per cent of artists who are not
       successful (Alderman, 2001a; Caves, 2001). However, the potent combination of the Internet and
       programs like Napster are changing all that.
           For organisations involved in any form of distribution, the Internet offers the opportunity to
       replace ‘bricks’ with ‘clicks’ and thus improve their competitiveness (profitability) by removing
       stages in the distribution process. For example, developments such as on-line banking, insurance
       and bookshops are already calling into question the need for their high street, physical equiva-
       lents. In terms of the music industry, the ‘clicks’ versus ‘bricks’ issue is particularly acute in that the
       on-line delivery of music is transforming the industry’s supply chain and could lead to the elimina-
       tion of its physical manifestations such as CDs, record shops, etc.
           Therefore, for many organisations, the Internet as a distribution channel is seen as a way of
       improving their profit margins (Mintzberg et al, 1998; Porter, 2001). As mentioned above, however,
       the value-creating, profit-centred model of the Internet was not how it was originally envisaged and
       is not the only way of looking at its potential. The World Wide Web was created in the 1990s by
       British scientists to allow academics and scientists to share knowledge more easily, not as a mecha-
       nism for businesses to make more profits (Alderman, 2001b). Table 11.1 shows that there are two
       very distinct approaches to using the Internet. Approach 1 sees the Internet as a Value System.
       Proponents of this view see it as just another means for organisations and individuals to gain com-
       petitive advantage and pursue profit-making activities. Approach 2 is more in line with the intentions
       of the Internet’s originators. This Network-Based view rejects the idea that profit-making is, or
       should be, the most important motivation of interacting parties in virtual markets. Commenting on
       this, Markus et al (2000: 14) give the example of the ‘virtual open source software movement’ as
       individuals and organisations who are motivated more by altruism, reputation and the personal
       benefit of using and sharing an improved software product than by the pursuit of profit.
Case Study 1 · The Internet and the P2P Revolution in the music industry   339




Table 11.1 Differing perspectives on the Internet
 Approach 1: Value System                                     Approach 2: Network-Based

 Cost and value approaches based on the                       Cooperative perspectives based on
 individual firm as a competitive unit                        multi-firm integration

 Value chain framework                                        Multi-agent modelling
 Virtual value                                                Supply chain networks
 Virtual markets                                              Architecture sharing
 Building a virtual chain                                     B2B hub
 Enterprise technology                                        Virtual communities
 Virtual organisation                                         Open sourcing
 Virtual organising                                           On-line communities
 Virtual integration                                          Vertical nets
 Value webs                                                   Functionality
 Value creation                                               e-Procurement
                                                              P2P exchange
Source: adapted from Graham et al (2002)


    As Table11.1 shows, the terms used by proponents of the competitive, profit-centred, value
system approach to the Internet and those used by proponents of the network-based, cooperative
approach are significantly different. Table 11.1 shows that the key themes for proponents of the
value-system approach tend to be economic and related to value creation (profit-making) at the
organisation level. The network proponents, on the other hand, appear to be much more con-
cerned with using the Internet to develop sharing communities rather than profit-making
organisations. The various initiatives to use the Internet for more cooperative and less profit-cen-
tred activities can be encompassed under the broad heading of a supply chain networks (SCN)
approach. A supply chain network is a series of processes (also called tiers, states or phases)
owned by one or more enterprises in order to promote information-sharing through the construc-
tion of a ‘virtual organisation’ (Strader et al, 1998). The use of P2P technology to swap music files
on the Internet is a classic SCN, and the fact that it might contravene copyright law appears not to
trouble its originators or users one jot.
    It would be an overstatement to see all proponents of the value-system approach as being
solely driven by the profit motive and all proponents of the network approach as being selfless ide-
alists. As Table 11.1 shows, however, there is a distinct tension between those who see the Internet
as just another mechanism for enabling organisations to develop their profit-making activities, and
those who see it as an opportunity to create communities in which sharing rather than profit-
making is the prime rationale for their existence. As will be seen with the following discussion of the
music industry, these very different approaches have significant implications for existing businesses.

The changing nature of the supply chain for music
Prior to the advent of the Internet, the supply chain for popular music comprised three main activi-
ties: the creation of music; the marketing of music; and the distribution of music (Parikh, 1999). It
is the record labels that dominate the supply chain for music rather than the artists who actually
create the music. This is because it is the record labels who control access to, and in some cases
actually own, the major distribution and marketing channels. According to Parikh, it is the dominant
position of the labels that prevents artists from independently distributing their own material, and
340   Chapter 11 · Case studies in strategic change




       it is this dominant position that explains why the labels collect approximately 85–90 per cent of
       the profit from music sales.
           Parikh (1999) also argues that the current structure works against the interests of consumers.
       This is because the number of intermediaries and elements between the artist and the consumer
       make it relatively inefficient. Whilst each stage in the chain adds costs, it is not clear to what extent
       they provide any added value for the consumer. It is this potential to remove cost, without neces-
       sarily removing value to the final consumer, that makes the supply chain for music ripe for
       transformation by the Internet. Mougayar (1998) maintains that one of the key driving forces
       behind the growth of electronic commerce is the potential to reduce both distribution costs and
       value system inefficiencies. He contends that the greater the number of intermediaries between
       those who make a product and those who consume it, the greater the mark-up on the final price
       paid by the consumer. It can, therefore, be assumed that fewer intermediaries would result in a
       reduction of ‘mark-up’ pricing. Consequently, in the case of the music industry, the removal of
       some or all of the intermediaries should result in more of the profits flowing to the artists and less
       costs flowing to consumers.
           As Amazon.com has shown with books, and latterly with music, the Internet does offer the
       potential to remove some layers and elements in the distribution channel for music. As with
       books, the need physically to produce and distribute music, in the form of CDs and cassettes, has
       nevertheless limited the extent to which intermediaries can be eliminated and costs reduced.
       However, the advent of digital technology in the 1980s, which enabled music to be recorded and
       stored digitally in the form of CDs and minidiscs, also allows it to be transmitted digitally via the
       Internet. This development is taking layers out of the supply chain for music, and thus threatening
       the livelihood of those involved in manufacturing and distributing physical products such as CDs.
       But, as such, it does not threaten or challenge the dominance of the record labels, who still retain
       control over production and distribution. By itself, so long as consumers download and pay for
       copyrighted musical content through legitimate online trading organisations, this would not be a
       problem for the record companies. Indeed, the Internet offers enormous scope for the music
       industry to bring music to a wider public, afford niche artists access to their audiences, and distrib-
       ute old, new and unusual music at affordable prices.
           What does threaten the dominance of the labels, however, is the advent of P2P music-swapping
       technologies such as Fanning’s Napster. These developments enable consumers to bypass the
       record labels by swapping music files directly between themselves without any money flowing to
       the record labels. P2P offers enormous scope to music pirates. Music piracy is not new; however,
       according to Magex (2000a) what really scares the music industry is the sheer scale and ease of
       the piracy allowed by the Internet. P2P technologies, in theory and increasingly in practice, make it
       possible to download (i.e. pirate) any piece of music without paying for the privilege of doing so.
           Magex (2000b), relates that Napster users could access between 500,000 and 800,000 indi-
       vidual tracks of music. It is easy to see what scares the music industry about this type of P2P
       swapping of music: in theory, if one person buys a recording and places it on their hard drive, they
       can then make it available, free of charge, to everyone else in the world. This means that there is
       virtually no way to guarantee that record companies, artists, or the distribution chains get paid for
       the music. Certainly, since the advent of programs such as Napster and similar ones, music sales
       have declined significantly (Gibson, 2003a, 2003b). The US music industry’s income fell from
       $14.6bn in 1999 to $12.6bn in 2002. The industry blames Internet piracy for most of this drop in
       sales (Teather, 2003).
Case Study 1 · The Internet and the P2P Revolution in the music industry    341




    Therefore, on the one hand, the Internet offers an enormous potential to reduce the complex-
ity and the cost of music production and distribution by eliminating the need for CD
manufacturers, music shops, transportation, etc. On the other hand, it facilitates piracy on a scale
previously unknown, which threatens to have a significant and adverse impact on the income of
the record labels. The music industry is responding to the challenge of the Internet in two ways.
Firstly, in an attempt to stop Napster and similar organisations from facilitating music-swapping, it
took Napster to court for copyright infringement (Greenberg and Erios, 2001). Though this led to
the closure of Napster, it does not appear to have diminished the growth in music piracy. This is
why the music industry in the US is also threatening to take the individuals who use such music-
swapping facilities to court as well (Teather, 2003).
    The second form of response by the industry has been for the big labels to set up their own
online subscription services for music (Gibson, 2003a, 2003c). However, this in itself is not with-
out perils. For example, it could even aid piracy by making it easier to obtain the ‘first’ copy of a
music file, which can then be passed on to anyone. In addition, in January 2002, a judge, presid-
ing over a case brought by Napster against the Recording Industry of America, gave Napster leave
to explore whether the record labels were working together, i.e. conspiring, to prevent Napster
from licensing music for online distribution (Hammersley, 2002).
    Nevertheless, research undertaken by Hardaker and Graham (2001) concluded that the com-
bination of technological developments, consumer preferences and industry economics means
the record labels have no choice but to adopt a subscription-based, as averse to a product-sales-
based, model for supplying and being paid for music. The subscription-based approach envisages
that, for a monthly fee, customers can download a set number of recordings directly to their PCs,
portable devices, home stereos and even their cars. Therefore, in theory, the music industry can
benefit from and should welcome the technology promoted by Napster and other similar organi-
sations. However, the key practical problem for the music industry is getting people to pay a
subscription for something they can already download for free from the Internet.

Summary
As a means of transforming the supply chain for the purchasing and delivery of products and serv-
ices, the Internet is becoming, and in some industries has already become, a dominant force
(Hardaker and Graham, 2001). As the above discussion shows, the ability of the Internet to remove
cost-adding activities whilst retaining those that add value is enormous. Nor is it just an issue of cost:
the Internet also significantly increases the speed and convenience of doing business, and it allows
consumers much greater access to products and service than ever before. Even distance is no longer
the obstacle that it once was, especially in those industries supplying information-based products. It
does not necessarily follow, however, that those who have been the dominant forces in traditional
supply chains will remain so in the virtual era. The record labels have been the dominant forces in
the supply chain for music for most of the last 100 years. Their preferred option for the virtual music
chain is for them to remain as the intermediary between artists and consumers, retaining control
over the artists who create the music, and distributing music digitally through the Internet on a sub-
scription basis. For the labels, this would have the benefit of eliminating cost-adding activities, such as
CD production and music shops, whilst still allowing them to retain control over value-adding activi-
ties and so ensuring they continue to receive the lion’s share of the profits.
    The emergence of P2P technology, however, represents a second option, one which challenges
the role and dominance of the record labels. As Hammersley (2002: 4) observed: ‘For something
342   Chapter 11 · Case studies in strategic change




       that sounds like so much technology jargon and hype, peer-to-peer technology (P2P) is the fastest
       growing idea in the history of computing.’ With or without the aid of organisations such as Napster,
       P2P technology is available to anyone and everyone on the Internet. It is now possible for anyone
       to swap music files with anyone else in the world without any payment either to the record labels
       or to the recording artists. This may not be a life-and-death issue for the artists who have other
       income streams, who only receive a small percentage of profits from their record sales, and whose
       loyal fans may, in any case, be willing to pay them directly for their music. However, for the labels,
       who take 85–90 per cent of the profits from record sales, it could well signal the end. This sort of
       development is, of course, in line with the more egalitarian, more cooperative view of the Internet
       advocated by supporters of the supply chain network approach. Although this piracy of music is ille-
       gal, given the unregulated nature of the Internet, it may be unstoppable.
           There is a third option, which could also lead to the record labels being bypassed in the virtual
       supply chain: this is that artists could take control over the production and distribution of their own
       music, completely cutting out the ‘middle man’. Many leading artists are highly critical of the role
       of the record labels, believing that it is the labels, through their contractual arrangements, who are
       the real pirates stealing money from the artists (Alderman, 2001a). The Internet offers the oppor-
       tunity for successful, and even not so successful, artists to distribute their music directly to their
       fans. Indeed, some artists have already experimented with this mode of delivery. Whilst this is per-
       fectly legal, it is likely to prove no more popular with the record labels than the P2P option, though
       both artists and fans might welcome it.
           The potential for the Internet to transform the music supply chain has been heralded for a
       number of years (Gillett, 1996). What we can now see is that the potential has become a reality.
       What we can also see is that the Internet is not just cutting out costs and increasing the speed of
       transactions, it is also challenging the traditional power relations in the music industry.
       Underpinning this is the clash of two very different views of the Internet which was discussed ear-
       lier. P2P technology and the possibility of artists using the Internet to distribute their own music,
       either on a no-cost or low-cost basis, fits in well with the network-based view. On the other hand,
       the provision of an Internet subscription service by the record labels fits in more with the value
       systems approach to the Internet. In theory the two are not incompatible, but as the case of the
       music industry shows, in practice they may well be so. Where this will lead is difficult to predict but
       one thing is clear – now the P2P genie is out of the Internet bottle, the music industry will never
       be the same again.
Case Study 2 · The rise and fall of Marconi   343


Case Study 2

 The rise and fall of Marconi
 Background
 There can be few who are not aware of the spectacular crash of Marconi, which, in the space of
 two years, went from a share value of £12.50 to under 2p, a stock market valuation of £35bn to
 just a few million pounds, and a profit of £750m to a loss of some £5.6bn, one of the biggest in
 UK corporate history.
     Marconi grew out of GEC, the giant industrial conglomerate built by Arnold Weinstock. In a
 period when the UK’s industrial competitiveness, and its base, declined, GEC was one of the UK’s
 leading and most successful industrial enterprises. Weinstock, who died in 2002 at the age of 77,
 created GEC and was the UK’s leading industrialist for over 30 years.
     Weinstock graduated from the London School of Economics in 1944. He worked for the admi-
 ralty for three years before moving into property development. In 1954, he joined his father-in-law’s
 firm, Radio and Allied Industries, where he built a strong reputation for his managerial abilities. In
 1961, the firm made a reverse takeover of the larger but struggling GEC. Weinstock became GEC’s
 Managing Director, a post he held for over 30 years until he retired in 1996. In his period as
 Managing Director, he turned GEC into one of the great British success stories, through a combina-
 tion of acquisition and organic growth. In 1961, GEC took over AEI, and in 1968 they bought
 English Electric, the owners of Marconi. GEC’s acquisitions continued into the 1970s and 1980s.
 Under Weinstock, GEC acquired a portfolio of solid, well-regarded and profitable companies, includ-
 ing Hotpoint, Avery, Metropolitan Vickers, Yarrow Shipbuilders and Marconi. GEC’s last purchase
 under Weinstock was the VSEL shipyard at Jarrow, reflecting its commitment to maintaining the
 strength of its defence businesses, which accounted for some 50 per cent of sales and profits.
     Weinstock had a knack for running businesses profitably where others had failed. This was
 down to his famously intimidating management style, which produced profits and, in the early
 years at least, gained him much praise from financial markets. For their time, his methods were
 revolutionary, at least in the UK. He was legendary for tight control of cash and focus on financial
 measures. He moved cash out of the separate GEC businesses and held it in the centre. He drove
 and monitored each business on their financial performance. Budgets became key growth mecha-
 nisms that put managers under enormous pressure to deliver on their forecasts. By ruthlessly
 cutting out overheads, introducing tight financial controls and forcing managers to think intelli-
 gently about their businesses, GEC grew in size and increased shareholder value.
     Throughout his period in charge, GEC profits grew. Indeed, in 1990 –1992, when the UK economy
 was undergoing one of its worst recessions, GEC broke the £1bn profit barrier. Despite this, however, in
 the 1990s, GEC and particularly Weinstock became increasingly unpopular with investors in the City of
 London. GEC was a massive, sprawling industrial conglomerate when these were hugely unfashion-
 able. Driven by academics and consultants such as Tom Peters and Rosabeth Moss Kanter, and
 break-up specialists such as Lord Hanson, managers were told that they had to identify their core busi-
 ness, ‘stick to the knitting’ and sell off non-core activities to release shareholder value. This went against
 Weinstock’s business philosophy. He was not particularly interested in whether there was synergy
 between the various GEC businesses. In GEC, he had created a company composed of businesses
 that were leaders in their fields, made steady and consistent profits and which were, to an extent, insu-
 lated from wilder economic fluctuations. It was anathema to him to sell a business that had a profitable
 future or to buy one that was overpriced or unlikely to perform. In the early 1990s, he looked at many
 companies, but bought few. This approach did not please the markets, which seemed enamoured of
 companies that sold, spent and borrowed. However, the performance of the companies he turned
 down appeared to justify Weinstock’s parsimonious approach (Owen, 2002). It also enabled the com-
 pany to build up a cash stockpile of over £2bn, but strangely enough, this also attracted criticism.
344   Chapter 11 · Case studies in strategic change




          Two of the City of London’s main ways of making money are to lend it or to charge for their
       services in mergers and takeovers. GEC’s stockpile of cash meant it did not need to borrow
       money, and Weinstock’s insistence that he would not buy companies that were either overpriced
       or did not fit into GEC’s portfolio appeared to enrage the City money men. There was also a
       common view in the City that GEC had missed the high-tech boat and that it was stuck in the ‘old
       economy’ when the smart money was moving into the ‘new economy’. Certainly, as Heller
       (2002) commented, there was a downside to Weinstock’s tough financial, risk-averse regime in
       that it appeared to discourage inter-company working in the GEC empire. Though GEC had a toe-
       hold, and sometimes a lot more, in the various technologies and markets that would allow
       companies such as Nokia, Intel and Dell to become giants of the Internet era, it never quite man-
       aged to link them together or develop them enough to establish itself in the new economy.
          Having passed the age of 70, Weinstock was finally pressured into resigning as GEC’s Managing
       Director in 1996 and became its President Emeritus. Under pressure, he recruited George
       Simpson as a replacement. However, he saw this as an interim measure until his son Simon was
       ready to take over. Simon Weinstock’s sudden death in late 1996 changed these plans and
       George Simpson became undisputed head of GEC. Simpson had run and sold both Rover and
       Lucas, was much admired in the City of London, and was considered to have the entrepreneurial
       qualities needed to reinvigorate GEC.
          Whatever criticisms there were of Weinstock in his later years, his legacy was huge. Not only
       had he built an enormously successful industrial conglomerate in a period when British industry
       was in decline but also, as Brummer (2002: 1) commented:
          The fact that Britain is still a leading player in the global power industry, and has a world-class research-
          based defence industry, can largely be attributed to his precocious skills.


       The rise and fall of Marconi
       Simpson bought into the popular view that GEC needed to get out of the old economy, charac-
       terised by its involvement in defence and heavy engineering, and into the new, high-tech world of
       telecoms and the Internet. He believed it also needed to stop being a UK/European company and
       become a global player. As he later said:
          What else were we going to do? The old GEC had had it and everyone told us that focus was what was
          needed. Telecoms was the obvious industry to expand into. (quoted in Harrison, M, 2002: 24)

           He began to bring in his own people, notably John Mayo as Finance Director. Mayo had been
       an investment banker before moving to Zeneca as Finance Director, from where he was recruited
       by Simpson. It was Simpson and Mayo who charted GEC’s push into the new dotcom economy
       through a whirlwind series of sales and acquisitions. The crucial period was 1999 to 2001. In
       1999, GEC divested itself of its defence business to BAe. This halved the size of GEC and sold off
       its most consistently profitable elements. To mark this momentous step, GEC was renamed
       Marconi to signal its intention to become a leading telecoms company, and began a process of
       acquiring new businesses in the then growing international market for high-capacity telecoms net-
       works. Simpson and Mayo believed, like many more, that the future lay with dotcom companies,
       and they wanted a big share of it. Not only did they spend the proceeds from selling businesses
       they did not want and the money that Weinstock bequeathed them, but they borrowed over £4bn
Case Study 2 · The rise and fall of Marconi   345




as well. In the three years up to the middle of 2001, they sold off almost all of Marconi’s non-tele-
coms business, i.e. the vast majority of the old GEC, and purchased over 20 telecoms businesses,
for prices ranging from a few hundred million to a few billion pounds. Mayo stated that:
   The common theme between our [new] core businesses is the ability to securely capture, manage and
   communicate enormous amounts of data. The ‘data wave’ is turning into a tidal wave and we have
   positioned ourselves to ride the wave. (quoted in Gow, 1999c: 25)

At another time, the speed of Marconi’s transformation into a rapidly-growing telecoms equipment
provider might have been a cause for concern. But this was taking place at the height of the
dotcom bubble. It seemed that everyone wanted to have a slice of the telecoms/Internet cake and
was not too concerned how much they paid. Rather than worrying the financial markets, Marconi’s
splurge of buying, selling and borrowing seemed to please them enormously. The share price
soared to £12.50 and Marconi were the darlings of the financial markets. However, this was short-
lived. By late 2000, whilst Simpson and Mayo were still issuing optimistic forecasts of what was to
come, other telecoms companies such as Nortel, Alcatel, Nokia and Ericsson began issuing sales
and profit warnings as the telecoms recession, and the dotcom collapse, began to bite. Almost to
the last, Marconi denied there were any problems, but in July 2001 it asked for its shares to be sus-
pended ahead of a profits warning, a highly unusual move for a FTSE 100 company.
    Though Marconi’s profits warning was clearly going to damage the company’s standing, the
lateness and severity of the warning led to a disastrous fall in the share price, a rapid exit from the
Board of senior staff and the virtual destruction of the company. Indeed, such was the concern for
the way the Board handled the profits warning that the UK’s financial watchdog, the Financial
Services Authority (FSA), conducted a lengthy investigation into it. Its report was issued in April
2003. The FSA pointed out that the company had a legal obligation to keep the market informed
of price-sensitive information in a timely manner, and that, in this instance it had not, and had
therefore broken the FSA’s rules. Treanor and Wray (2003) reconstructed the events leading up to
and just after the profits warning:
   17 May 2001 Marconi says the first six months of 2001 are unlikely to show an improve-
               ment on the previous year’s figures.
   12 June         Trading figures show a 10 per cent decline for April and May. No public state-
                   ment is made.
   21 June         Accounts for April and May show a loss of £180m, £156m more than the
                   previous year. No public statement is made.
   26 June         The financial forecast for the six months to September 2001 show a loss of
                   £47m, as averse to the £320m profits that analysts had predicted. The fore-
                   cast also shows that profits for the year to March 2002 will be £491m as
                   against the predicted £807m. The Board disputes these figures and asks for
                   them to be recalculated. No public statement is made.
   28 June         A Board meeting is called for July 4.
   30 June         The revised financial forecasts are even worse than those presented to the
                   Board on June 26. Full-year profits are projected to be only £272m, and
                   half-year losses have risen to £121m. No public statement is made.
346   Chapter 11 · Case studies in strategic change




          4 July           At 7.40 am, Marconi asks for its shares to be suspended pending a meeting
                           of the Board at 4 pm. At 6.41 pm, the Board issues a statement saying that
                           profits are likely to halve, with sales down 15 per cent.
          5 July           When the markets open, Marconi’s shares fall by nearly 50 per cent. John
                           Mayo tells investors that business will recover in 2002 when the telecom
                           networks ‘will be running so hot they’ll fall over’ and that there will be no
                           change in Marconi’s management. Marconi’s share price continues to col-
                           lapse. At 9.40 pm John Mayo resigns.
           Two months later, George Simpson also resigned. Both men received substantial payoffs. As a
       Leader in the Financial Times (2003: 20) stated, ‘we can only speculate whether more could have
       been saved had directors been quicker to acknowledge that their headlong rush into telecoms obliv-
       ion was flawed.’ Regardless of this, the events of June and July meant that, for Marconi, the dotcom
       bubble had burst with a vengeance. From then on, it was downhill all the way. In May 2002, Marconi
       announced one of the biggest yearly losses in UK corporate history: some £5.6bn. Its share price
       plunged to below 2p (down from £12.50 at its height), making the company in effect bankrupt and
       its shares worthless. It then began a long process of trying to stay alive by negotiating with its creditors.
       In May 2003, Marconi finally agreed a debt restructuring deal with its creditors. In return for writing off
       over 90 per cent of the approximately £4.5bn they were owed, Marconi’s creditors received 99.5 per
       cent of the company’s equity. The refinanced company would be valued at just over £600m. The pre-
       vious shareholders would own just 0.5 per cent, thus reducing the value of their holding to £3m from
       £35bn at its peak, always assuming that anyone would want to buy the shares.

       Summary
       Simpson and Mayo argued that they were taking GEC through a much overdue reinvention.
       However, there is a world of difference between reinventing a company around its core business and
       spending billions to construct a new one from scratch. What Simpson and Mayo did was to sell off
       most of what was GEC and to use the money from the sale, and much more besides, to create a
       new telecoms company that could rival established companies such as Alcatel, Siemens and Lucent.
       Unfortunately for them, their vision of creating a leading telecoms company came at a time when
       the dotcom bubble was about to burst. They made one of the classic business mistakes – they
       bought at the top. In the space of three years they bought some two dozen companies for billions of
       pounds that very quickly became almost worthless as their markets collapsed. The US company Fore
       Industries is a prime example of this. Marconi bought the company for £2.8bn in 1999. In 2002, a
       financial analyst commented that: ‘The business has very little value. If Marconi tried to dispose of it,
       there may even be costs associated with it’ (quoted in Hirst, 2002: 1). Marconi was brought low by
       the combination of massive overcapacity in the industry, a worldwide economic slowdown and the
       enormous financial drain on telecom operators of paying for third-generation mobile phone licences.
       This led Marconi’s customers, especially its biggest customer, BT, to cut their purchasing of telecoms
       equipment quickly and savagely. In effect, Marconi’s market collapsed.
           Simpson and Mayo also made another key mistake. Neither had much experience of the tele-
       coms industry. Simpson had made his reputation on running, and selling, Rover and Lucas, both
       firmly established in the ‘old economy’. Mayo was an investment banker turned finance director.
       They were both deal-makers with little experience of the telecoms industry. As Weinstock com-
       mented, ‘They knew nothing about the business they were in, and nothing about the businesses
       they were buying’ (quoted in Aris, 2002: 8).
Case Study 3 · Oticon – the disorganised organisation    347




     It is difficult to exaggerate the disaster that happened at Marconi. Whatever the criticisms of the old
 GEC, when Weinstock handed over power in 1996, it was a strong and profitable company. The parts
 that were sold off by Simpson and Mayo still appear profitable. On the other hand, by 2002, the new
 Marconi was bankrupt and worthless. When he stepped down, Weinstock was the biggest private
 investor in GEC, with some 45 million shares valued at over £400m. At the time of his death in 2002,
 these were practically worthless. Simpson and Mayo, who were both forced out, received handsome
 payoffs, and appeared not to accept that they bore any personal responsibility for the Marconi deba-
 cle, preferring to cite bad luck, poor timing and other people for the collapse of Marconi (Harrison, M,
 2002; Hirst, 2002). Hardly surprising, therefore, that Weinstock commented: ‘I’d like to string them up
 from a high tree and let them swing there for a long time’ (quoted in Aris, 2002: 8).




Case Study 3


 Oticon – the disorganised organisation2

 Background
 Oticon, a Danish company founded in 1904, was the first hearing instrument company in the
 world. In the 1970s, it was the world’s number one manufacturer of ‘behind the ear’ hearing aids.
 However, as the market for ‘in the ear’ products grew in the 1970s and 1980s, its fortunes plum-
 meted and it lost money and market share. In 1987, so poor was the company’s performance that
 it lost half of its equity. The basic problem was that Oticon was a very traditional, departmentalised
 and slow-moving company. It had a distinguished past but it was a small company operating in a
 global market. Though it had 15 sites around the world and 95 distributorships, the Head Office,
 its largest site by far, only employed 145 people. Yet it was operating in a market which had come
 to be dominated by Siemens, Phillips, Sony, 3M and Panasonic. More importantly, it had the
 wrong products. Oticon manufactured the standard ‘behind the ear’ hearing aid, but customers
 increasingly preferred the ‘in the ear’ variety. Also, Oticon was strong in analogue technology,
 whilst the market and its customers were moving towards digital technology. In addition, though
 the company was strong in the state-subsidised markets of Scandinavia and Northern Europe, it
 was weak in the more buoyant markets of America and the Far East.
     This began to change with the appointment of Lars Kolind as President of the company in
 1988. The fact that he was only the third person to hold this post in the company’s history helps
 to explain its strong attachment to tradition. In his view the company had ‘been sleeping for ten
 years’. In the next two years, he worked hard to turn the situation round through cost-cutting
 measures: he pared the company down, cut staff and increased efficiency, and reduced the price


 2   I am grateful for the help of Ronnie Stronge of Transform People International Communications in preparing this
     case study. Further information on Oticon can be obtained from its website (www.oticon.com).
348   Chapter 11 · Case studies in strategic change




       of a hearing aid by 20 per cent. By 1990, Oticon made a profit of some £16 million on a turnover
       of £400 million with sales growing at 2 per cent per annum. However, the market was growing at
       6 per cent. More importantly, Kolind did not think the company had a future. He had been search-
       ing for a sustainable competitive advantage for Oticon: ‘I looked at technology, audiology. I looked
       at distribution strength. I looked at everything, but there was nothing we could do better than the
       competition’. That he arrived at this view is hardly surprising. When competing against the world’s
       leading electronics companies, it is very difficult to see how a small Danish company could, for
       example, design a better microchip for digital sound processing than Sony.
          Nevertheless, he did not give up. Instead, Kolind resolved to ‘think the unthinkable’. On New
       Year’s Day 1990, the solution came to him:
          Maybe we could design a new way of running a business that could be significantly more creative,
          faster, and more cost-effective than the big players, and maybe that could compensate for our lack of
          technological excellence, our lack of capital, and our general lack of resources.


       The vision – a knowledge-based organisation
       Kolind realised that the industry was totally technology-focused, and that the main thrust was to
       make hearing aids smaller. He, on the other hand, thought this exclusive focus on technology was
       short-sighted. He believed Oticon was not in the hearing-aid business per se; they were in the
       business of ‘making people smile’ – restoring the enjoyment of life that hearing impairment can
       destroy. Making people smile, he reasoned, means not only giving them a wonderful piece of
       technology but actually changing people’s lives for the better. To this end, the company adopted a
       new mission statement:
          To help people with hearing difficulties to live life as they wish, with the hearing they have.

       To achieve this requires a knowledge of people’s lifestyle and how hearing impairment affects this,
       and an understanding of the social stigma associated with hearing impairment and the use of
       hearing aids. He saw that what would allow Oticon to compete and thrive was not selling hearing
       aids, but providing a new holistic approach to customer care – a system that would allow a hear-
       ing clinic to assess hearing loss, to discuss the lifestyle needs of the person concerned, to select
       the appropriate hearing aid, to programme it, and to interpret the feedback from the user in order
       to fine-tune the hearing aid. The intent would be to allow people with hearing difficulties to lead
       the sort of life they wanted in their situation, whether they preferred classical music or rock music,
       whether they worked in a noisy environment or a quiet one, whether sound was central to their
       work or peripheral.
           Kolind had the vision for Oticon’s role in meeting customers’ needs, but he still had to find a way
       of implementing it. He believed the key lay in the mix of expertise necessary to provide each cus-
       tomer with an effective hearing aid: micro-mechanics, microchip design, audiology, psychology,
       marketing, manufacturing, logistics, and all-round service capability. If Oticon were to move away from
       merely making hearing aids and instead provide a total package of support for people with hearing dif-
       ficulties, it would have to develop a whole new concept in hearing-aid service. It would need to
       combine this expertise in a new way and add new areas of expertise to the organisation. In short, they
       would have to move from a technological orientation to a knowledge orientation, from a technology-
       based manufacturing company to a knowledge-based service business. They had to build a learning
       organisation where experts put aside their expertise and work as a team to ‘make people smile’.
Case Study 3 · Oticon – the disorganised organisation    349




    For Kolind, a knowledge-based or learning organisation:
    ... should not work like a machine, it should work like a brain. Brains do not know hierarchies – no boxes –
    no job descriptions; what there is is a very chaotic set of thousands of relationships tangled in with each
    other based on certain knowledge centres, with an interaction which may seem chaotic. It is the reflection
    of the brain into the organisation that creates companies that are able to manage that knowledge process.

Kolind began by redefining his role as CEO. Instead of seeing himself as the captain that steers the
ship, he saw himself as the naval architect who designs it. He believed that it was more important to
design the organisation to act in a clever and responsible way than to control every action. On this
basis, he drafted plans for the company’s future which he first presented in April 1990. He wanted
to create ‘the spaghetti organisation’ – a chaotic tangle of relationships and interactions that would
force the abandonment of preconceived ideas and barriers to innovation and competitiveness.

The strategy
Having identified the vision for the organisation, the next step was to set about fleshing out and
implementing his strategy for change. Beginning with the Head Office, which comprised the finance,
management, marketing and product development functions, he decided to abandon the concept of
a formal organisation; instead he wanted to create a ‘disorganised organisation’. Formal structures, job
descriptions and policies were seen as creating barriers to cooperation, innovation and teamwork
rather than facilitating it. Kolind’s new disorganised organisation would be founded on four principles:
■   Departments and job titles would disappear and all activities would become projects initiated
    and pursued informally by groupings of interested people.
■   Jobs would be redesigned into fluid and unique combinations of functions to suit each
    employee’s needs and capabilities.
■   All vestiges of the formal office would be eradicated and replaced by open space filled with
    workstations that any one could use.
■   Informal, face-to-face dialogue would replace memos as the acceptable mode of communication.
Therefore, Oticon got rid of departments, departmental heads and other managerial and supervi-
sory positions. Job descriptions and titles and anything else that created a barrier between one
member of staff and another were also eliminated. The company wanted to get rid of everything
associated with traditional organisations, including budgets. The intent was to see what happened
when staff were ‘liberated’ to do what they thought best. Kolind wanted everyone in the organisa-
tion, from secretaries to technical experts, to work much more closely together to make things
happen more creatively, faster and more cost-effectively.
    After 15 months of preparation, the change to the new way of working took place at 8 am on
8 August 1991. Two old buildings were abandoned and the Head Office moved into a refurbished
former factory in the northern part of Copenhagen. The heart of the new Head Office was a state-
of-the-art electronic infrastructure, costing nearly £30 million.
    The reason for beginning with the Head Office was relatively simple: this was not just where
the largest percentage of Oticon’s costs were but, more importantly, where the core of its compe-
tence lay. The belief was that if it could get the Head Office functioning effectively, the rest of
Oticon’s somewhat scattered organisation would follow.
    The concept of creating chaos out of organisation and expecting anything other than a disaster
to follow seems far-fetched, if not downright lunatic. Oticon also recognised the dangers in the
350   Chapter 11 · Case studies in strategic change




       course it was embarking upon. The company realised that if success was to follow, above all else,
       there were two elements it needed to get right: direction and human values.

       Direction
       Oticon’s management was convinced that without a clear direction that everyone understood and
       believed in, the company would fragment and collapse into a disorientated mass of individuals
       each pursuing their own course of action. To avoid this, the management and staff openly and at
       length discussed and debated the new strategy for the company, and the implications for how
       Oticon would be structured and operate. Kolind commented that:
          ... the entire staff discussed not only where we were going but why we were doing so, and we created a
          consensus among staff that not only made them know why we were doing it and what we were doing,
          but we also got as far as having everybody think that this fundamentally made a lot of sense … so
          there was consensus on the strategy.

       Human values
       As well as a consensus about the strategy, Oticon realised it also needed to get a ‘fundamental
       consensus about the basic human values’ of its business. After much debate, these were
       summed up in one sentence:
          We build this company on the assumption that we only employ adults, and everything we do will rest
          on that assumption, so we will not treat our staff as children – we will treat them as responsible adults.

       Underlying this simple statement was a view that adults do not have to be told when to come to
       work and go home or that those dealing with, for example, the Japanese market will come in later
       and go home later than those servicing the American market. In a similar way, Oticon’s manage-
       ment believed that staff would not overspend or misspend budgets and, therefore, there was no
       need continually to remind them of this fact or harp on about other company rules or practices.

       Implementing the strategy
       Oticon now operates on a project basis. Anyone can start a project, provided they have the per-
       mission of one of five senior managers. Some projects are also initiated by management.
       Whomsoever the idea comes from, the main criterion for acceptance is that a project is customer-
       focused. Anyone can join a project, provided they have the agreement of the project leader. The
       basic idea, going back to the concept that Oticon treats everyone as an adult, is that it is the indi-
       vidual’s responsibility to fill their day usefully. If people do not have anything to do, it is their job to
       find something useful to do – either by starting a project or by joining one.
           Kolind’s view of Oticon would send shivers down the spine of most traditional CEOs: ‘Hearing aids
       are not the core of what this company is about. It’s about something more fundamental. It’s about the
       way people perceive work. We give people the freedom to do what they want.’ This is perhaps why, as
       well as the 100 or so ‘authorised’ projects, as Kolind comments, ‘We have a lot of skunk work going on
       that’s not in any official priority.’ There is a saying in Oticon that ‘It’s easier to be forgiven than to get
       permission.’ Basically, this means, ‘If in doubt do it. If it works, fine. If it doesn’t, we forgive you.’
           Communication is at the centre of this new approach to work. Partly this is facilitated by com-
       puter. Each desk has a computer, and these list all the projects ‘on offer’ and the team leader’s
       name along with the tasks involved. Usually the team leader will try and ‘recruit’ the skills he or
       she needs, but individuals are also expected to seek out opportunities as well. There are no
       demarcation lines; if an R&D specialist or a secretary wants to work with a marketing group, then
       all they have to do is have a chat with the project leader in order to sign on.
Case Study 3 · Oticon – the disorganised organisation     351




    The physical embodiment of this new ‘structureless’ structure is the workplace. Gone are indi-
vidual offices, gone are corridors – all the walls were taken out and everyone works in the same
open-plan office. Staff gather where they wish to work. Instead of individual offices, everyone has
a little filing cabinet on wheels. Staff come in each morning, pick up their mobile office and trun-
dle it to where they are working that day. Oticon is also a genuinely ‘paperless office’. All incoming
mail is scanned into the computer and then shredded. The reason for this is simple: Oticon wants
staff to move around from project group to project group as work requires. It does not want this
process hindered by staff having to transport masses of paper as happens in most offices – the
solution is to get rid of the paper.
    This requires everyone to have access to and to be able to use a computer. However, the emphasis
at Oticon is on face-to-face, informal communication (although, for example, e-mail is used but not
extensively). This is why the office is littered with stand-up coffee bars to encourage small, informal (but
short) meetings. Three or four people will meet to discuss an issue or exchange ideas and information
and then return to where they are working that day and follow up ideas and suggestions. These are
usually fed straight into the computer and are available to everybody else. There is also an expectation
not only that all information is open to staff in this manner, but that staff actually want to know the infor-
mation. Therefore, rather than putting up barriers or operating on a need-to-know basis, Oticon tries to
be transparent about all aspects of its business, whether it be new products, staff salaries or finance in
general. The view is that the more a person knows, the more valuable they are to the company.
    Staff did not take to this radically new way of working overnight. This is perhaps not surprising.
Staff were not originally recruited for their teamworking and project management skills, and some
found it hard to come to terms with these new arrangements. Nor did they welcome the loss of
routine and clear authority relationships or find the resultant uncertainty easy to adjust to. This was
especially the case with managers for whom the loss of their power base, information monopoly
and status symbols was difficult to accept.
    In addition, under the new arrangement, managers were reclassified as project leaders and had
to compete for the best staff, rather than having their own dedicated subordinates. Some groups
of staff also found it difficult to find a role in the project team environment; for some time, recep-
tionists, for instance, still answered the telephone. It was also some years before this new
approach was adopted outside the Head Office, though the Danish manufacturing operation,
which is on a different site, did show some interest quite early.
    Kolind anticipated resistance and sought to overcome this by involving staff in planning the trans-
formation of the company. Small groups of staff were selected to handle such projects as designing
the new electronic infrastructure, locating a site for the new Head Office and selecting an architect.
Also, all staff were given IT skills training. Indeed, they were all given a home PC and encouraged to
identify their own training needs. One result of this was that staff formed their own PC club to work
together to develop their skills. Despite this, prior to the move to the new building, Kolind found it
necessary to issue an ultimatum to staff: accept the new arrangements or leave.
    Regardless of this carrot and stick approach, the biggest boost to the new arrangements came when
staff could see they actually worked better than the old ones. One immediate benefit was that Oticon
‘found’ that it had already developed the industry’s first automatic, self-adjusting hearing aid in the
1980s. However, owing to technical problems (the solution to which was given a very low priority), lack
of communication between the R&D and sales staff, and a lack of imagination, nobody seemed to
have realised that they had developed a potentially world-beating product. In the transformed Oticon,
this new type of hearing aid quickly resurfaced, the technical problems were rapidly ironed out, and the
352   Chapter 11 · Case studies in strategic change




       MultiFocus hearing aid, as it became known, was launched in late 1991. In the next two years, three
       more powerful variants of the MultiFocus were developed and its size reduced by half.
          To set the seal on this transformation, in December 1994, after a seminar with staff, Oticon
       (1994: 6) published a statement of fundamental human values (see Table 11.2).


       Table 11.2 Oticon’s statement of fundamental human values
        Oticon’s fundamental human values                        How do we implement them?

        We assume that Oticon employees want to take             Whenever possible (especially within a
        responsibility if they get the opportunity.              project), an employee chooses his task, work
                                                                 hours and place of work.

        We assume that Oticon employees want to develop          We make it possible for an employee to
        and grow in their jobs and experience new challenges     assume several tasks at the same time, if he
        within the company.                                      is interested and qualified – possibly with the
                                                                 support of colleagues.

        We assume that Oticon employees want the greatest        This freedom is possible because Oticon has
        possible freedom …                                       the fewest rules practicable, and because we
                                                                 encourage staff to use their common sense
                                                                 instead of slavishly complying with rules.

        We assume that Oticon employees want to have             All levels of management – technical, staff and
        qualified and fair feedback to their work and a salary   project managers – should give honest
        corresponding to their contribution.                     feedback to their employees – negative as
                                                                 well as positive.

        We assume that Oticon employees want to be               At intervals, we offer staff in Oticon shares at
        partners in Oticon, and not adversaries.                 favourable rates so that they benefit
                                                                 financially from the success to which they
                                                                 have contributed.

        We assume that Oticon employees want the security       We make it possible for staff to improve
        that derives from improving themselves in their current themselves in their jobs and assume other
        jobs so that they are able to get another job if they – tasks in the company wherever relevant.
        for one reason or another – should leave Oticon.

        We assume Oticon employees want to be treated as         Oticon’s entire way of operating is based on
        grown-up, independent people.                            this.

        We assume that Oticon’s employees want to                Oticon is an open company where all
        understand how their tasks fit into the context of the   employees have access to as much
        whole company.                                           information as possible.

        We assume that Oticon employees are more                 We have a minimum of titles and no formal
        interested in challenging and exciting tasks than in     career planning. We seek, however, to give
        formal status and titles.                                each employee the possibility of personal
                                                                 and professional development through varied
                                                                 and ever more challenging tasks.
Case Study 3 · Oticon – the disorganised organisation   353




Sustaining and extending change
The changes to – or rather the transformation of – Oticon started at 8 am on 8 August 1991. At
the beginning, all was chaos. It took months before everyone understood their new roles, and for
the organisation to cast off its old ways and begin to operate in the manner Kolind had envisaged.
By 1994, however, the results were impressive:
■   15 new products had been launched (twice as many as the company had previously);
■   new product lead time had been halved;
■   the company’s sales were growing at 20 per cent per year, after a period of 10 years without
    real growth and at a time when the market had begun shrinking by 5 per cent per year;
■   Oticon’s market share increased from 8 per cent in 1990 to 12 per cent in 1993.
Nor did the progress stop there. In 1995, Oticon launched the world’s first digital hearing aid, the
DigiFocus. This is, in effect, a four-gram computer that fits in the ear but has the processing power
of a desk-top machine. Not only was this a technological breakthrough for which Oticon has won
a number of major innovation awards, but it also allowed Oticon to regain its position as one of
the world’s top three hearing aid producers. Also, by 1995 turnover had increased by 100 per
cent on 1990 and profits had increased tenfold.
   For some, this would have been a time to sit back and feel satisfied. Yet Kolind was becoming
increasingly dissatisfied. The launch of the DigiFocus had dominated 1995 and the long-standing
project teams created to develop and launch the product had taken on an air of permanency. He
believed the company was in danger of slipping back into a traditional departmental organisational
form. His response to this was to ‘explode the organisation’.
   In an uncharacteristically directive way, Kolind instructed people and teams to relocate within the
Head Office. Teams devoted to short-term business goals (such as sales, marketing, and customer
service) were moved to the top floor. People working on medium-term projects (upgrading existing
products, for example) and long-term research were put on the second floor. Those dealing with
technology, infrastructure and support were located on the first floor. In Kolind’s words, ‘It was total
chaos. Within three hours, over 100 people had moved.’ He justified this new bout of chaos by argu-
ing that ‘To keep a company alive, one of the jobs of top management is to keep it dis-organised.’
   As can be seen, Oticon went through major and substantial changes in the 1990s; nor were
these solely restricted to its Head Office. In the early 1990s, Oticon began to extend the new
working arrangements to its two factories in Denmark, and laid plans for their extension to its sales
operations throughout the world. By 1997, all of its major subsidiaries in Europe, the USA and the
Pacific Rim had moved into purpose-built offices designed to replicate the arrangements in its
Danish HQ. The intention was to:
    ... set the standard for the knowledge-based sales company of the future … [through the] concept of a
    flat organisation, which stimulates openness, flexibility and informal communication …

   Though Oticon believes that its approach can be replicated in other countries, it is not blind to
cultural differences. The company realised that Denmark, with a culture characterised by equality
and lack of formality, provided fertile ground for its approach to work. Therefore, in extending this
approach to its operations in other countries, Oticon recognised the need for cultural sensitivity.
   In addition to its own organisation, Oticon also developed partnership-style arrangements with
both its component suppliers and the 5000 or so hearing care centres who distribute its products
throughout the world.
354   Chapter 11 · Case studies in strategic change




           Such has been its perceived success that Oticon’s approach has been copied by many other
       organisations in Denmark, including a government ministry.
           In 1998, after 10 years at the head of Oticon, Lars Kolind decided it was time to move on. He
       left the company in a far, far stronger position than it had been when he first arrived. In almost
       every sense, whether financial, technological, structural and most of all philosophical, he trans-
       formed the company. His leaving was very amicable. As he said:
          I am quitting Oticon now because I feel that both the company and I will benefit from a change. There is a
          whole new generation of young people who are ready to run with the ball – and why shouldn’t I let them?

          Kolind’s departure highlights the dilemma of transformational managers: what do you do when
       you have transformed the company? For Oticon, success did not end with Kolind’s departure, nor
       does it appear to have led to any rethinking of his approach to work. Rather the reverse. Oticon is
       now more than ever stressing the wider ethical and social role it wishes to play. As his successor,
       Niels Jacobsen, stated when receiving the prestigious Employee Empowerment Pioneer Award in
       New York in 1998:
          Our goal is to do business in a manner that positively contributes to society in every country where we
          do business. We support the principle that industry has a responsibility for society and that we have a
          collective responsibility to the environment.

       Summary
       Quite obviously, Oticon must be doing something right, but what? The key to its success appears
       to lie in seven factors:
          ■   Changing the rules of the game. Oticon created a vision of where it wanted to be.
              Like Japanese companies such as Cannon and Honda, this was based not only on
              ambition but also on a deep understanding of the nature of the market in which it
              operates. This allowed Oticon to spot the chink in the armour of the big players, and
              in effect to change the rules of the game – recognising that service delivery in total,
              and not technological development in isolation, is what customers really want.
          ■   Moving to a project-type structure that fits the strategy and vision of the business.
          ■   Creating a whole-hearted commitment from everyone to working cooperatively and
              proactively. In effect, there appears to have been a wholesale cultural change at
              Oticon, from the senior management down.
          ■   Creating a learning organisation. The restructuring (or rather, de-structuring) of Oticon
              removed hierarchical, horizontal and cultural barriers to information flows, and created
              a situation where people genuinely want to exchange ideas and learn from each
              other. This is supported by the emphasis on informality, experimentation, innovation
              and risk-taking.
          ■   Leadership. The Oticon story appears to be one of those rare cases of genuine vision-
              ary leadership that transformed an organisation over a relatively short space of time
              and then continued to support, drive and reinforce the transformation.
          ■   Consistent vision. Lars Kolind had a vision of what he wanted Oticon to become. He
              pursued this consistently and with passion. Nor, after the new Oticon had been work-
              ing for some years, and was very successful, did he hesitate to take decisive action
              when he felt that the company was slipping back into old ways.
Case Study 4 · Privatisation and the European Union   355




 ■   Societal values. As has been mentioned previously, Scandinavia has a long history of industrial
     and social democracy. Denmark in particular has led the way with the creation of a strong
     cooperative movement. The changes that have taken place at Oticon appear to be a classic, if
     somewhat extreme, form of Scandinavian industrial democracy. As such, Oticon’s new way of
     working fits in with the societal values espoused by Denmark and other Scandinavian countries.




Case Study 4


 Privatisation and the European Union: the case of the
 Public Power Corporation of Greece3

 Background
 In the three decades from 1945, across the world, there was an enormous increase in the size
 and range of activities undertaken by the public sector. This expansion included traditional public
 service activities, such as health and education, and embraced some traditional private sector
 activities, such as banking and car production. Since the mid-1970s, however, privatisation, not
 nationalisation, has been the order of the day. The contraction of the public sector has also been a
 global phenomenon. Led by right-of-centre governments in the UK and USA, the move to roll
 back the state has been driven by ideological and economic concerns (Hutton, 1995; Osborne
 and Gaebler, 1992; Talbot, 2001). Ideologically it was argued that the competition-based nature of
 the private sector meant that it would always provide services more efficiently and achieve greater
 customer satisfaction than public sector bureaucracies. The economic argument concerned the
 need to cut rising public sector deficits, and the accompanying tax bills, by reducing the size and
 cost of the public sector.
     As the 1980s and 1990s progressed, more and more countries joined the privatisation move-
 ment. From the early 1990s, Greece became one of the most enthusiastic privatisers. In 2000 it
 announced the privatisation of the country’s sole electricity supplier, the Public Power Corporation
 (PPC). The PPC was established in 1950 to provide low-cost electricity to support the expansion
 of the Greek economy. As a state monopoly and the country’s largest employer, it was a prime
 target for privatisation. However, the PPC’s privatisation was driven by the European Union (EU),
 which, with the creation of the European Single Market in 1992, had the responsibility for creating
 a level, competitive, playing field across all EU countries.




 3   This case is based on work carried out with Michael Katsouros and Trefor Jones of the Manchester School of
     Management. A fuller version of this case can be found in Burnes et al (2004).
356   Chapter 11 · Case studies in strategic change




       What is privatisation?
       For such a ubiquitous term, ‘privatisation’ is not easy to define. Peacock (1984) defines it as the
       complete transfer of ownership from the public to the private sector. For Beesley and Littlechild
       (1983), privatisation takes place when a minimum of 50 per cent of an enterprise’s shares are
       sold to the private sector. Talbot (2001) emphasises the transfer of ownership but notes that, in
       the case of ‘natural monopolies’, governments usually retain regulatory control. The need for and
       effectiveness of regulation are contentious issues. Ayres (1995) described privatisation in Brazil as
       a process of converting public monopolies into private oligopolies with no beneficial impact for
       the public.
          Vickers and Yarrow (1991) identified three types of privatisation:
       1 The transfer of state enterprises operating in competitive product markets to the private sector,
         e.g. state-owned car and aircraft companies.
       2 The privatisation of public monopolies such as water and electricity utilities.
       3 The contracting out of in-house services to the private sector, e.g. IT and facilities management.
       An important difference between the first and second types of privatisation is that, with the
       second type, governments frequently retain some rights of control, in the form of regulation. In the
       third case, contracting out, the public sector is even more directly involved, in that it is the cus-
       tomer for the contracted-out service and needs to ensure that it is getting value for money.
       Contracting out, therefore, widens the definition of privatisation to include the transfer of responsi-
       bility for service provision. In the USA, contracting out has tended to be the main form of
       privatisation. The USA has also championed the introduction of what Talbot (2001) refers to as
       ‘market-type mechanisms’ into the public sector. Writing of the UK, he states that:
           Where public services could not be privatised for structural and/or political reasons there were a
           number of attempts to introduce market-type mechanisms (MTMs). These included: internal contracting
           or quasi-contracting … internal markets … competitive sourcing … and ‘market testing’ … MTM
           reforms were designed to introduce some elements of ‘competition’ into public services that would in
           turn, it was assumed, lead to improvements in economy, efficiency, effectiveness and customer serv-
           ices. (Talbot, 2001: 291)

           It was developments such as these that led Adams et al (1996) to offer a much broader defi-
       nition of privatisation, to include an array of actions designed to widen the scope of private sector
       market activity, or the assimilation by the public sector of efficiency-enhancing techniques gener-
       ally employed by the private sector.
       The privatisation of the Public Power Corporation (PPC)4
       The PPC generates 97 per cent of Greece’s electricity needs and is responsible for the transmis-
       sion and distribution of all the country’s electricity. It provides electricity to 6.7 million customers; it
       is the country’s largest employer with 35,000 staff; and had a turnover of €3bn in 2001/2.
       The PPC was created in 1950 when the Greek government nationalised the electricity industry,
       which comprised a wide variety of private companies and municipal entities. The service provided
       by these was unreliable, geographically patchy, expensive and suitable only for domestic lighting
       purposes. The Greek government saw the provision of a country-wide, low-cost and reliable elec-
       tricity supply for both domestic and industrial users as fundamental to economic growth. It

       4   Unless otherwise stated, the statistics given in this section are taken from either the PPC’s website, www.dei.gr, or
           the website of the Greek Regulatory Authority for Energy, www.rae.gr.
Case Study 4 · Privatisation and the European Union   357




established the PPC as a ‘not-for-profit’ organisation whose prime responsibility was to provide an
infrastructure that could meet the growing needs of both domestic and industrial users throughout
Greece, including the remotest villages and far-flung islands.
    Since its creation, the PPC has provided essential support to the development of the industrial,
commercial and service sectors of the economy. Its expansion of electricity generating and distri-
bution facilities not only provided direct employment for large numbers of people, but also aided
the economic and social development of rural as well as urban areas. It also owns and operates
the mines that produce the lignite which fuels 67 per cent of electricity production. In addition, its
use of indigenous lignite and its promotion of renewable energy sources substantially reduced the
need to import expensive oil, thus considerably aiding the country’s balance of payments.
    The PPC was much more than a supplier of electricity: it was an extension of the government’s
economic and social policies. However, the combination of huge capital projects, a large work-
force, and the lowest tariff structure in the EU, meant that the PPC consistently ran up heavy
losses. By the 1990s, political support for loss-making state monopolies had dwindled in Greece,
and the PPC’s position was also being challenged by EU competition policy.

The privatisation process
In the late 1990s, the Greek government began the process of privatising the PPC. This was influ-
enced by a change of political climate within Greece, and driven externally by EU competition
rules. Internally, the PPC found itself operating in an environment which looked to economic liber-
alisation and the free market for economic growth. The Greek government was trying to shrink the
size and cost of the public sector, which included banks, industrial and commercial concerns, and
even the Athens Stock Exchange, because it was considered too big, too costly, overstaffed and
inefficient. Therefore, privatisation became a key policy objective of the Greek government. This
led to three successive waves of privatisation, which by 1999 were generating receipts for the gov-
ernment totalling some 5.5 per cent of GDP (Stournaras, 1999). The first wave of privatisation
covered banks, Duty Free Shops, the Hellenic Telecommunications Organisation and the Athens
Stock Exchange. The second wave included the Corinthian Canal, the Athens Water and Sewerage
Company and the Hellenic Vehicle Industry. The third wave, which began in 1999, involved the
Agricultural Bank, the Commercial Bank, the Hellenic Aerospace Industry and the Public Power
Corporation (PPC). The PPC’s privatisation, however, appears to have been driven more by exter-
nal pressures from the EU than by internal ones.
    With the creation of the EU Single Market in 1992, the European Commission became respon-
sible for harmonising and liberalising markets across the EU, with electricity generation and
distribution being a priority (Barnard and Scott, 2002; Parker, 1998). In 1998, the EU issued a
European Electricity Directive (96/92/EC) designed to guarantee security of supplies; open up
markets to competition; allow large consumers the right to choose their own supplier; prevent
cross subsidies between the different activities of an electricity supplier, e.g. mining, generation,
transmission and distribution; and promote environmentally friendly sources of energy (European
Commission, 1998).
    In 1999, the government passed the Liberalisation Law, which incorporated the Directive into
Greek law. It also provided for third party access to the PPC’s transmission and distribution facilities,
through the creation of the Hellenic Transmission System Operator (HTSO), and the establishment
of the Regulatory Authority for Energy (RAE) responsible for regulating the electricity market.
358   Chapter 11 · Case studies in strategic change




           Though the EU Electricity Directive did not require the Greek government to sell off the PPC,
       the government began the process of transferring the PPC to the private sector. The main stages
       in this process were as follows:
       ■   In November 2000, the Greek government announced that the PPC was to be privatised.
       ■   On 1 January 2001, the PPC was transformed into a société anonyme (i.e. a limited company)
           and became the PPC SA, though the government still owned 100 per cent of the company’s
           issued share capital.
       ■   In December 2001, the PPC was listed on both the Athens and London Stock Exchanges.
       ■   In June and July 2002, 15% of the PPC’s shares were sold.
       These changes evoked a great deal of opposition. There was considerable resistance from the
       PPC’s workforce, who feared that privatisation would lead to job losses for some and worse terms
       and conditions for the rest. Employees also complained about the lack of information. As one
       employee in the Distribution Division stated:
           There is a total absence of communication between management and staff. As no part of the decision-
           making process takes account of the employees’ claims and wishes, employees increasingly feel that
           they have been marginalised by the company’s top management …

       This was echoed by the Employees’ Representative on the Board of Directors:
           It seems that this privatisation process will only benefit a small elite of managers, whilst the majority of
           staff will have no financial or other benefits and, as well as that, we will have to face all the negative con-
           sequences of this privatisation. … resistance to change, even when expressed in a more extreme manner,
           is the only way for our employees to attract the top managers’ attention and be taken more seriously.

          Public opinion was also against the sale of the PPC and other state assets (Financial Times,
       2000). Even the government was split over the privatisation of the PPC. As one senior manager in
       the Generating Division observed:
           Until now, the privatisation process has been a very lengthy process. It has been much longer than it
           was originally intended to be, let alone the fact that it’s not finished yet. The reasons for this delay are
           twofold: first, the lack of strategic vision that characterises those most closely involved with the process
           and second, the internal conflicts among government members about future privatisation scenarios.

       Nevertheless, by July 2002, to all intents and purposes the PPC was operating as a private sector, profit-
       making company. This can be seen from the changes to its organisational structure and orientation.

       The restructuring and reorientation of the PPC
       The creation of the new PPC was accompanied by a redefinition of its mission. Out went the
       notion that it was there to facilitate economic and social developments in Greece; in its place the
       company stated that its objectives were to:
           … maintain leadership in the Greek electricity market, improve the efficiency of its operations, rational-
           ize its capital expenditure and explore growth initiatives. (Public Power Corporation, 2001: 6)

         The first steps towards achieving these objectives involved restructuring the company to
       comply with the Liberalisation Law’s requirement to provide separate accounts for the different
Case Study 4 · Privatisation and the European Union    359




areas of the PPC’s business, and to prevent cross subsidies between them. Restructuring also
involved changes in personnel to ensure that the company was managed by competent staff who
were orientated towards private sector values. As an employee in the Distribution Division com-
mented:
   The organisation had a very convoluted hierarchy in the past. Even promotions, as in every public sector
   company, were based on hierarchical rank rather than individual performance, let alone the fact that the
   only way to survive was never to be responsible for any of your actions … Now it’s the exact opposite.

However, some appear to question whether all managerial posts were filled on the basis of com-
petence and orientation. There had been considerable trade union resistance to the PPC’s
privatisation but, as one Assistant Director commented:
   Many of these [new] General Managers were previously the most opinionated unionists. Suddenly, they
   lost their voice as they got offered prestigious job positions. Indeed, this must be the biggest change in
   the organisation from this privatisation process.

   Restructuring also included job losses and changes in employment conditions and job security.
One of the first acts of the new PPC was to announce that 6,000 jobs would be shed through
natural wastage by 2005 – some 20 per cent of the workforce. A Director of the Generating
Division remarked:
   The company was overstaffed and this was one of our major problems in the past. Today, we cannot
   afford to have three people doing a job which our European peers have one person doing. Thus, we
   are currently pursuing a policy of workforce rationalisation, through a combination of natural wastage
   and restrictions on recruitment …

The Director of Human Resources was very clear where the blame lay for overstaffing:
   Throughout the pre-privatisation period, all previous governments mismanaged our operations and they
   even exploited our company and sacrificed its well-being in order to solicit votes and win the elections,
   by hiring superfluous staff.

The Director of Human Resources believes that there has also been a transformation in the com-
pany’s culture:
   PPC SA has been transformed into a learning organisation, which is now based on values rather than
   rules, whilst its employees behave as knowledge workers, and not as typical civil servants.

However, an employee in the Distribution Division took a different view:
   … the increasing job insecurity and the new entrepreneurial practices inevitably urged employees to
   compete with each other for the sake of their own career development and promotion and always at
   the expense of their colleagues. Therefore, we witnessed the phenomena of fierce internal competition
   and lack of co-operation.

   As part of the restructuring of the PPC, three new subsidiaries were created. Kozen SA will
develop joint ventures with small companies to generate electricity from heat produced as a by-
product of their normal business activities. PPC Renewables SA will enter into joint ventures to
develop renewable, environmentally friendly, energy sources. PPC Telecommunications SA is a joint
venture with Greece’s two largest banks and the Italian company WIND. Its purpose is to create a
new telecoms network capable of winning 17 per cent of the Greek market over the next decade.
   Therefore, the PPC appears to have moved a long way from its role as a public monopoly,
though the Greek government still owns 85 per cent of its shares.
360   Chapter 11 · Case studies in strategic change




       What next for the PPC?
       The PPC’s main objectives over the next few years are to maintain its dominant position in the
       Greek electricity market and to expand into the Balkans and Turkey. To achieve this, it intends to
       form a strategic alliance with a leading EU electricity company to gain their expertise. The govern-
       ment has begun the process of selecting a strategic partner for the PPC with a view to its taking a
       10–15 per cent stake in the company.
           At a later date, the government plans to sell a second tranche of shares (approximately 20 per
       cent) to the strategic partner. However, this will depend on whether the alliance allows the PPC
       successfully to expand its activities and show that it is capable of becoming one of the top five or
       six firms in the European electricity market over the next two decades.
           As can be seen, the PPC has an ambitious, three-pronged strategy. First, in the short-term, it is
       attempting to protect its domestic market through cost-cutting and joint ventures. Second, in the
       medium to long term, with its strategic partner’s expertise, it intends to expand on a regional basis
       and then throughout the rest of the EU. Third, drawing on its transmission and distribution net-
       works and its large customer base, over the next decade, it intends to become a significant player
       in the Greek telecoms sector.
           So far, the PPC appears to be making good progress with its plans. Its new structure, new
       profit-seeking orientation and job cuts seem to be producing significant financial benefits for
       shareholders. After its first year of operating as a private company, the PPC announced that its
       profits had increased by over 50 per cent to _399m. Whether it can maintain this type of per-
       formance over the medium term, or – like other privatised electricity companies – it will find that
       once the easy gains from job cuts have been achieved, the twin pressures of competition and reg-
       ulation will squeeze profits, remains to be seen (Macalister, 1999).

       Summary
       In examining the privatisation of the PPC, there are three issues that seem particularly pertinent:
       the process of privatisation; future plans for the operation of the PPC; and whether or not there
       was an alternative to privatisation. Taking the first of these, the process: as many writers have
       noted, privatisations are not the nice, neat events that their proponents would wish to believe
       (Coram and Burnes, 2001; Parker, 2000; Young, 1990). The PPC’s privatisation evoked argu-
       ments in government, resistance from the trade unions and some concern from the general
       public. To date, only 15 per cent of its shares are in private hands, so privatisation has not been
       particularly rapid. However, like most state monopolies, it had had no experience of operating in a
       competitive market. As Dudley (1999) maintains of such organisations, they have to take charge
       of their own destiny, develop new relationships both internally and externally, satisfy the expecta-
       tions of different stakeholders and develop or acquire new market-orientated skills and
       competencies. Nevertheless, the PPC has been restructured, it is operating as a private sector con-
       cern, it is making significant profits and, more to the point, no one seems to doubt that this is a
       permanent change. Therefore, at least in the short term, the PPC privatisation appears to have
       been successful. However, what about its longer-term prospects?
           In terms of the second issue the PPC has followed a well-trodden privatisation path of restruc-
       turing, cost-cutting and the introduction of commercial practices. This is the relatively easy part of
       privatisation, however: the difficult part comes when competition and regulation start to bite. The
       PPC’s strategy is to defend its existing electricity markets, expand its core electricity business inter-
       nationally and expand its domestic activities into telecoms. The problem with the defensive
Case Study 4 · Privatisation and the European Union    361




strategy is that if it is successful, and the PPC retains its dominant position, the Regulatory
Authority for Energy, driven by the EU, will take action to make life easier for the PPC’s competi-
tors. The purpose of the EU Energy Directive is to open up the market to new entrants in order to
stimulate competition. If this does not happen then, as elsewhere, the Regulator, or the EU, will
change the rules to favour new entrants (Parker, 2003). For example, as in other countries, the
Regulator could break up the company by separating electricity generation from distribution.
    The experience elsewhere is that it is very difficult for utilities to hold on to their dominant posi-
tion and, in the short term at least, markets tend to become fragmented as lots of new players
enter (Parker, 2003). Consequently, the PPC’s defensive strategy may fail and it could be forced
to sell, close or downsize the less profitable areas of its business.
    Nor do the PPC’s expansion plans seem any surer of success. The move into telecoms seems
risky. The telecoms market in Europe is extremely competitive, costly to break into and also highly
regulated (Parker, 2003). The likelihood of a new player succeeding appears to be very small.
Similar points can be made about the PPC’s intentions to become one of the leading electricity
companies across the EU, albeit with a strategic partner. Market liberalisation has made the EU
electricity market a very competitive place inhabited by a plethora of competing companies from
across the globe. Therefore, the PPC and any strategic partner would have to be very good and,
perhaps, very lucky to succeed.
    There is also the point as to whether the Greek government has done the PPC any favours by
privatising it as a single entity rather than breaking it up, as was the case in the UK electricity
industry. Newly-privatised companies tend to lack key managerial competencies necessary to sur-
vive in the private sector. By attempting to be competitive in all of its old activities, as well as
expanding into new businesses domestically and internationally, the PPC’s management may be
spreading itself too thinly.
    This brings us to the last issue, was there an alternative to privatisation? it was the EU’s
European Electricity Directive (96/92/EC) that compelled the government to open up the Greek
electricity market to competition and to restructure the PPC so that it operated on a commercial
basis (European Commission, 1998). The Electricity Directive did not compel the government to
sell the PPC and, indeed, the government intends to retain a 51 per cent stake in the company.
Consequently, if we take the ‘narrow’ definition of privatisation discussed earlier, it has not priva-
tised the PPC because it has not sold the company or even a majority holding in the company.
However, quite evidently, the new PPC is not a state enterprise in which the private sector has a
minority shareholding; it is a private sector company in which the government has a majority
stake, so to all intents and purposes it is now a privatised company. For that reason, it clearly
meets Adams et al’s (1996) ‘broader’ definition of privatisation, i.e. it is a profit-orientated concern
run on commercial lines. Therefore, whilst it can be argued that the Greek government had an
alternative as to whether it chose privatisation according to the narrow or broad interpretation, the
EU Electricity Directive did not allow the government the choice to reject privatisation altogether.
362   Chapter 11 · Case studies in strategic change


Conclusions
               In Parts 1 and 2 of this book, it was argued that the potential exists for managers to
               exercise a wide degree of choice with regard to almost all aspects of their business,
               whether that be products, structures, personnel policies or culture. This potential free-
               dom, however, is constrained by societal, environmental, industry-specific and
               organisational constraints, not to say managerial preferences and competences, many
               of which may conflict with each other.
                  This chapter has demonstrated that organisations do indeed face formidable con-
               straints and pressures on managerial freedom of action. The case study of the music
               industry shows how powerful these are. For the big companies in the industry, it is
               essential that they maintain their control over the production and distribution of
               music, but the Internet has changed the rules of the game in a big way. Music is a
               global business and the Internet offers the potential for record companies to provide a
               quicker, better and cheaper service to their customers. However, because the Internet is
               enabling music piracy on an unprecedented scale, it is also a major threat to the domi-
               nance, or even the existence, of the big record labels. It is not clear how the big record
               labels can or will respond successfully to this industry-wide transformation, but what-
               ever the outcome, managers cannot rely on old ways of working and old ways of
               doing business if they are to survive. The second case study, Marconi, is one where the
               company’s new management believed that they had seen the writing on the wall for the
               old GEC and that the company had to move into the Internet era as a major telecoms
               equipment provider if it was to survive. They were encouraged in this by investors in
               the City of London and the prevailing dotcom euphoria. Senior managers constructed
               and pursued a vision of a brave new telecoms world for the company. The company
               sold off the vast majority of its existing business, changed its name to Marconi, and
               went on a spectacular spending spree which saw both its share price and debts rise
               spectacularly. When the dotcom bubble burst, the company went with it.
                  If Marconi shows the dangers of a company trying to reinvent itself rapidly, the
               Oticon study shows that it is possible for a determined manager to break out of the
               standard patterns of competition that exist in an industry and rewrite the competitive
               rule book to his company’s advantage. This is a company that operates in a global
               market and faces competition from larger and technologically more advanced compa-
               nies. The CEO believed that Oticon could not compete technologically but could
               provide a better service to customers than its competitors. Unlike Marconi, the com-
               pany did not try to reinvent itself by selling its assets and buying new ones. Instead, it
               radically changed its structures, ways of working and culture to unleash the human
               potential of the company, and in so doing regained its competitive edge.
                  The last case study, the privatisation of the PPC, shows two different dimensions of
               internationalisation. On the one hand, the Greek government was heavily influenced
               in its industrial policies by the neo-liberal political and economic agenda that has
               swept through much of the world over the last 20 years or so. This led Greece to
               follow the same privatisation route as many other countries. On the other hand,
               Greece is also a member of the EU and as such is bound by its rules. In this case, the
               liberalisation of the European electricity market forced Greece to restructure its elec-
               tricity industry and open it up to competition. It was the twin pressures of a
               neo-liberal ideology and the EU’s competition rules for the electricity industry that
Conclusions   363

encouraged the privatisation of the PPC and greatly influenced the structure and
operation of the post-privatised PPC.
  The case studies raise a number of important issues regarding strategic change in
general and managerial choice in particular:
■   The particular strategic approach that an organisation (or rather its management)
    adopts is limited by, and to an extent must accommodate, societal, environmental,
    sectoral and organisational constraints. It must also be recognised that, in an
    increasingly globalised world, even apparently small events can have a major
    impact on industries and organisations. In the case of the music industry, the cre-
    ation of a small piece of software by a 19-year-old computer geek has thrown the
    industry into turmoil.
■   Nevertheless, it must also be recognised that because the various societal, environ-
    mental, sectoral and organisational constraints can conflict with each other – can
    pull organisations in different directions, or be manipulated or changed for more
    favourable conditions – managers do have a degree of freedom to adopt a strategic
    approach that is more in keeping with their own interests or beliefs. That is to say,
    under certain conditions and certain circumstances, the world in which they oper-
    ate can be shaped by their views, rather than vice versa. This certainly appears to
    be one interpretation of events at Oticon. The implications of the constraints faced
    by Oticon were that it could no longer compete with its big, technologically
    advanced competitors. Oticon showed that by reinventing itself it could.
■   Marconi, on the other hand, showed the fallacy of believing that anything is possi-
    ble. Indeed, it could be argued that rather than questioning the received wisdom, as
    Oticon did, it appeared to accept it at face value. George Simpson sounded much
    less of a visionary and more of a fatalist when, in justifying his failure, he asked:

     What else were we going to do? The old GEC had had it and everyone told us that focus
     was what was needed. Telecoms was the obvious industry to expand into.
                                                        (quoted in Harrison, M, 2002: 24)


    The privatisation of the PPC is another example of where managers, and politicians,
    appeared to accept that the constraints they faced were immutable, and proceeded
    to work within the perceived rules of the game. This pushed them to adopt a strat-
    egy of holding onto its domestic market, expanding internationally and diversifying
    into other industries. Whilst this might have been the obvious course to take, it is
    also one which others have found very difficult to navigate successfully.
■   A clear vision of the future appears to be an essential attribute for managers seek-
    ing to secure their organisation’s future survival and success. This is certainly
    something that many in the music industry are seeking. However, it has to be cou-
    pled with the strength of character to challenge existing norms and received
    wisdom. The CEO of Oticon had both and succeeded. Senior managers at
    Marconi, arguably, had the strength of character to challenge the Weinstock inheri-
    tance, but their vision for the company’s future was seriously flawed, and the
    outcome was disastrous. As far as the PPC is concerned, only time will tell if they
    were right or wrong not to challenge the received wisdom.
■   As well as a realisable vision, managers also need to win over the rest of the organ-
    isation. In Oticon this took approximately 18 months (though much remained to
364   Chapter 11 · Case studies in strategic change

                   be done after this). Marconi does not appear to have tried to win over staff because
                   the intention was to get rid of most of them. The PPC do appear to have embarked
                   on a programme to win over staff, though how effective this has been is disputed.
               ■   In implementing strategy, it is not necessary to work out all the details in advance,
                   but the first few steps must be clear and consistent with the vision. It also helps if
                   they are seen to succeed! This appears to have been the situation for Oticon and,
                   initially at least, for Marconi and the PPC. Where strategies are radical, as in these
                   three cases, their implementation is usually accompanied by a degree of chaos as
                   old certainties are discarded and new ones have yet to be established. In Oticon’s
                   case, the initial degree of chaos may well have been deliberate. For Marconi, how-
                   ever, the chaos increased and turned into panic as it became clear that its strategy
                   was failing.



Test your learning

          ■ Short answer questions
               1 List the main ways in which it could be said that Shawn Fanning changed the rules of
                 the music industry.

               2 What are the main strategic options facing the big record labels in coping with the chal-
                 lenges posed by the Internet?

               3 What was Marconi’s vision?

               4 In what ways did Marconi’s vision challenge the rules of the game?

               5 Identify three ways in which it could be said that Oticon reinvented itself.

               6 List three ways in which it could be said that Oticon changed its culture.

               7 What were the main pressures faced by the PPC when considering its future?

               8 List three advantages and three dangers of the PPC’s strategy for its future.



          ■ Essay questions
               1 To what extent does the case of the music industry support the arguments of complexity
                 theorists?

               2 In what ways does the Marconi study support the realist perspective on organisations?

               3 Evaluate whether or not the Oticon case study supports the argument for managerial
                 choice.

               4 Is the PPC case an example of Planned or Emergent strategy?
CHAPTER 12

Case studies in changing internal
relationships and attitudes


  Learning objectives
  After studying the case studies in this chapter, you should be able to:
  ■   list the main pressures on organisations for change;
  ■   understand how real-life organisations manage change;
  ■   appreciate that individual change projects can be viewed either as isolated
      and finite events or as one of a stream of events that can, over time, shape
      and reshape an organisation;
  ■   identify different approaches to managing change;
  ■   discuss the strengths, weaknesses and suitability of different approaches to
      change;
  ■   show the respective roles of managers and staff in planning and executing
      change;
  ■   describe how environmental uncertainty influences the process of change;
  ■   understand why employees might resist change and how this can be avoided
      or coped with;
  ■   show how managers can exercise choice in what to change, when to change
      and how to change.




 Introduction
This chapter presents three case studies of organisations who, for varying reasons
of efficiency, effectiveness and competitiveness, attempted to change internal rela-
tionships and attitudes across functions and between hierarchical levels. Drawing
on the arguments developed in Part 2, the case studies examine why and how the
particular decisions relating to change were taken and, especially, whether the
resultant implementation programmes could be described as Planned or Emergent.
   Case Study 5 recounts the attempts by Volvo, over a period of more than 30
years, to break with the assembly-line approach to car production and move to a
more human-centred approach. The study shows that it is unclear to what extent
366   Chapter 12 · Case studies in changing internal relationships and attitudes

               the move to Job Design precepts could be construed as part of a vision or concerted
               strategy for the organisation. Other strategic developments within Volvo were cer-
               tainly in tune with and helped to encourage the move to Job Design. It is nevertheless
               apparent that, both in its conception and execution, the move to reorganise work at
               Volvo was Emergent rather than Planned. Subsequent job redesign initiatives were
               obviously informed by, and built on, what went before to the extent that a general
               orientation towards group work and the creation of more satisfying jobs appears to
               have become embedded in Volvo. The particular form of work reorganisation varied
               from case to case, however, and was heavily influenced by local circumstances and the
               orientation of the parties involved; the same applied to implementation and develop-
               ment. Though much effort went into planning the actual changes, it does not appear
               as though a settled pattern of working arrangements developed on any of the sites.
               Rather, as circumstances changed, and perhaps the balance of forces shifted, so too
               did the actual characteristics of jobs and relationships between groups and individu-
               als, groups and other functions, and groups and management. Therefore, the move to
               Job Design at Volvo, though driven by a general predisposition, can be characterised
               as a process of development, experimentation and learning.
                  The XYZ Construction study, Case Study 6, describes how the company went
               about changing its organisational structure from a hierarchical and functional-based
               one to a flatter, more teamwork-based matrix-style structure. The company adopted a
               participative and open approach to change that set out to build a wide consensus
               around the need for change and type of structure required. Through a series of stages,
               it moved from auditing the readiness for change, planning the change, implementing
               it and evaluating the progress made. Though the development and implementation of
               a new structure at XYZ was not without its difficulties, it was planned and working
               effectively remarkably quickly. As with any major structural change in an organisa-
               tion, there were many possible and actual losers, some of them at a senior level.
               Therefore, the potential for resistance and disruption was high. The participative and
               open nature of the change process, however, coupled with the recognition that change
               was required, and the strong commitment from the top, meant that the process was
               relatively free from disruption by individuals or groups.
                  The XYZ study seems to turn some of the literature on change on its head. As
               shown in Chapter 10, Kanter et al (1992) see structural change (Bold Strokes) as a
               precursor to cultural change (Long Marches). In this instance, however, changes in
               culture and attitudes were achieved prior to the structural change which, in some
               senses, can be seen as a reinforcing mechanism to the cultural and attitudinal changes.
               The explanation for this is relatively simple. When the new Managing Director of
               XYZ took over, he saw the main priority as improving the company’s performance
               through a combination of attitudinal/cultural change and management and staff
               development at all levels. For him, major structural change was not a priority at this
               stage; it could come later. Instead, he embarked on a series of Emergent changes that,
               over time, worked towards his goal of improving the performance of the company. By
               1999, he saw that the company was ready for and needed structural change. Because
               of the nature of the change and the situation in the organisation, the approach
               adopted was Planned rather than Emergent. Therefore, in this instance, as in most,
               the issue of what comes first, Bold Strokes or Long Marches, was primarily a tactical
               one. Similarly, the issue of whether change should be approached in a Planned way or
Introduction   367

not was also tactical. A Planned approach was seen as being the best way to achieve
the necessary improvements at this time given the situation in the company.
   GK Printers, Case Study 7, is now an efficient and forward-looking company, but
is a prime example of an organisation that so nearly ‘snatched defeat from the jaws of
victory’. The company put a great deal of collective effort into turning around its for-
tunes, only to see the gains threatened by inertia and conflict between managers.
Fortunately, it managed to rescue the situation in time, but it could so easily have
been different. In many respects, it is a company where only in a crisis can existing
norms and concepts be challenged and new strategies emerge. The actual implementa-
tion process tended towards Planned rather than Emergent or open-ended change.
GK operates in a changing and highly competitive environment, and though it was
inclined to view change as a one-off activity rather than a process of continuous
improvement, this view has been evolving. GK is also showing that it can be innova-
tive, and has extended the range of its capabilities to develop a lucrative business in
developing and designing websites for its customers.
   The chapter concludes by arguing that in modern organisations, facing uncertain
and changing environments, it is not just strategy that is Emergent but also, in many
cases, the implementation process. This does not invalidate the Planned approach to
change, and certainly not the many tools and techniques associated with it. However,
it does mean that, for change projects which are rather experimental in nature and/or
open-ended, the concept of some form of settled pattern being established, and thus
the process of change being concluded, is not valid.
368   Chapter 12 · Case studies in changing internal relationships and attitudes



      Case Study 5

       Volvo’s approach to Job Design1
       Background
       In Chapter 3, we examined the emergence of new organisational paradigms. In reviewing the
       Culture–Excellence school, the Japanese approach and organisational learning, the emphasis placed
       on team or group work was striking. Though the importance of group work for individual well-being,
       organisational performance and collective learning has been a central feature of the Job Design litera-
       ture for many years (see Chapter 2), its actual influence on work and organisational design in Western
       companies has been relatively small. One of the few exceptions to this has been Volvo, the Swedish
       motor vehicle manufacturer, which has been seen as a leader in innovations in work organisation
       since the 1970s. Indeed, it is probably not an exaggeration to say that in the 1970s, when it began
       moving away from traditional methods of car assembly, Volvo was more famous for its commitment
       to work humanisation than for the actual vehicles it manufactured (Blackler and Brown, 1978).
           As will be described below, Volvo's approach to reorganising vehicle production has evolved
       through a number of distinct phases: the abandonment of the assembly line in favour of group-based
       static assembly; the extension of group roles to include more collective responsibility and some deci-
       sion-making autonomy; and the introduction of self-paced assembly work (Pontusson, 1990). It is
       also worth noting that the process of change was initially entirely management-driven (though the
       unions were involved or consulted on some aspects). The Swedish Co-determination Law, which
       came into effect in 1976, obliged firms to involve unions more but, in this instance, it may also have
       encouraged Volvo to be more radical in extending group work than might otherwise have been the
       case. However, through the 1980s in particular, the trade unions took a more proactive role.
           The move to more flexible forms of work organisation at Volvo went hand-in-hand with its
       move away from corporate bureaucracy and to more decentralised, localised management of its
       various vehicle operations. In addition, the last 30 years have seen repeated attempts at diversifi-
       cation and alliances by Volvo, aimed at spreading the risks and costs of operating in a highly
       cyclical and very capital-intensive industry. In 1993, Pehr Gyllenhammar, Volvo's long-serving Chief
       Executive, attempted to merge Volvo with Renault, the French state-controlled car company. This
       move was defeated by a coalition of shareholders and managers with the result that
       Gyllenhammar resigned from the company. With his departure in 1994, Volvo tried to construct a
       new direction for itself. It began selling off its interests in other industries and businesses in order
       to concentrate on vehicle production (Done, 1994). However, as the wave of takeovers and
       mergers that swept the industry in the 1990s showed, as far as car production is concerned, size
       matters. In 1999, Volvo finally recognised that it did not have the financial resources to operate as
       an independent car company. In what must be one of the industry's great ironies, after rejecting a
       merger with Renault five years earlier, Volvo sold its car division to the Ford Motor Corporation.
           Although Ford's takeover does not invalidate Volvo's unique approach to building cars, it does
       potentially threaten it. Despite the benefits of good design and leading-edge technologies, vehicle pro-
       ducers tend to stand or fall by the effectiveness and efficiency of their assembly operations (Womack
       et al, 1990). Ford's opinion of the efficiency of Volvo's assembly operations will be crucial in determin-
       ing whether the Volvo approach survives or is replaced by more traditional Fordist ways of work. So far,
       both Ford and Volvo appear to have benefited from the takeover. Volvo have been able to produce a
       range of new models that have sold very well, especially in North America, and Volvo is the most prof-
       itable part of Ford’s Premier Automotive Group, which includes Jaguar, Land Rover and Aston Martin.


       1   The term Job Design is explained in Chapter 2. In essence it is the antithesis of Taylorism and involves designing
           work to fit human needs and abilities.
Case Study 5 · Volvo’s approach to Job Design   369




Nor does this seem to have been at the expense of the Volvo culture. As Hans-Olov Olsson, Volvo
Cars Chief Executive, stated: ‘They [Ford] cannot touch the soul of Volvo. They have to protect Volvo’s
Swedishness in product development and managing the business’(quoted in Burt, 2002: 13).
    What this highlights, though, is that Volvo's move to end assembly-line production was not and is
not a marginal activity – it has become embedded in the culture, or to use Olsson’s word, the ‘soul’of
the company. The decision to adopt Job Design at Volvo was and remains driven by management,
regardless of later union and legislative encouragement, though to what extent they foresaw how
extensively it would develop is not known. What is clear is that, in the 1960s, Volvo was as committed
as any car company to the Classical approach to work organisation espoused by Taylor and embodied
in the assembly-line approach to car production devised by Henry Ford. Yet, in the 1970s, it chose to
break away from this industry-standard approach and embark on (what has turned out to be) a long-
term programme of increasingly radical work reorganisation.
    There are two complementary explanations for Volvo's actions. The first is the explanation given
by Pehr Gyllenhammar (1977: 73), until 1994 Volvo's Chief Executive, identifying the need to
reduce labour turnover, which the company believed was caused by boring and monotonous jobs:
   The company has to bear the costs of recruiting labour and training employees. The absenteeism and
   turnover rates also increase the costs for quality control, for maintaining buffer stocks of semifinished
   goods and components, and for adjustments, tools and machinery. Administrative costs go up when a
   company must maintain pools of reserve labour to fill requirements during peak periods of absenteeism.

To flesh Gyllenhammar's explanation out a little, Pontusson (1990) pointed out that Volvo's free-
dom of manoeuvre in tackling its recruitment and retention problems was limited by the labour
market conditions of the time. There was full employment, which made it easier for workers to
move jobs; and very effective wage bargaining by unions, establishing industry and sectoral pay
rates, which made it very difficult for Volvo to offer higher wage rates than other employers. In the
presence of full employment and the absence of wage flexibility, Volvo chose to tackle labour
turnover and absenteeism by attempting to create more satisfying and varied jobs.
   The second explanation was offered by Karlsson (1973). He pointed out that Volvo was one
of Sweden's largest and most successful companies. As such, its actions and practices were
always in the public eye. With the increasing interest in Job Design in Scandinavia in general and
Sweden in particular in the 1960s and 1970s, it was hardly surprising that Volvo's work organisa-
tion methods were the subject of much attention. In particular, Karlsson (1973: 34) pointed out
that the company was heavily criticised for its ‘inhuman principles of organisation’ based ‘entirely
on the scientific management method’.
   So it appears that Volvo's conversion to Job Design was inspired by commercial considerations
relating to the costs of absenteeism and labour turnover, allied to pressure from public opinion in
Sweden for it to embrace a less ‘inhuman’ form of work organisation. Although these appear to be
the principal reasons for Volvo's management embarking on its commitment to Job Design, since
then the process has developed its own momentum, to the extent that (as noted by Auer and
Riegler, 1990: 14): ‘group work is the basic concept for all changes in the organisation of produc-
tion work at Volvo’. This did not come about overnight, without hesitation and backtracking,
however, or in a fully planned and coordinated fashion; rather it has evolved or emerged through
a number of distinct phases.
370   Chapter 12 · Case studies in changing internal relationships and attitudes




       Phases of change
       Volvo's adoption of Job Design principles began over 30 years ago. It has now reached a stage
       where group work has become the standard approach to work design, and assembly-line working
       is not considered appropriate for any new Volvo plant. When dealing with events spanning such a
       long period, it is often difficult to form an accurate picture of what has taken place and why; partic-
       ularly when, as in this case, these events have been played out on different sites by different
       groups of managers and workers. Nevertheless, as Auer and Riegler (1990) and Pontusson
       (1990) pointed out, by examining major change programmes involving large investments in new
       or remodelled plants, it is possible to identify a number of distinct phases in the evolution of
       Volvo's approach to Job Design.
           These phases are related to major investment projects that occurred in the 1970s, 1980s and
       1990s, namely:
       ■   Kalmar – this plant opened in 1974 and was the company's first, and most cited, attempt to
           move away from assembly-line work.
       ■   Torslanda – this is Volvo's main car plant, which, since the late 1970s, has seen a number of increas-
           ingly radical attempts to move away from the traditional assembly-line approach to car production.
       ■   Uddevalla – this new assembly plant opened in 1990, and exemplifies Volvo's decisive break
           with traditional motor industry jobs.
       ■   Gent and Born – the introduction of new cars in these existing plants in the late 1980s allowed
           Volvo the opportunity to introduce the methods developed in its other plants, thus showing
           Volvo's commitment to extending its Job Design philosophy across all areas of its operations.

       Phase one – Kalmar
       Those committed to challenging the ‘inhuman’ approach to work, epitomised by the Classical
       school in general and Henry Ford's moving assembly line in particular, came to look on Volvo's
       Kalmar car plant as a sort of promised land – a blueprint for the future of work. This was not only
       because Kalmar was seen as a model of human-centred work organisation, but also because it
       struck at the very heart of the industry, which, through its use of the moving assembly line with its
       severe division of labour and short cycle times, had taken Taylorist work practices to their ultimate
       extremes. In addition, and just as importantly, it was heralded as a commercial success. Indeed,
       Kalmar was famous throughout the world for its ‘revolutionary’ approach to Job Design even
       before it opened (Blackler and Brown, 1978).
           Perhaps the main reason for the perception that Kalmar was making a decisive break with the
       past was due to the way Volvo approached its design. The original management concept for Kalmar
       attempted to incorporate many of the progressive Job Design ideas circulating in the early 1970s. A
       project team composed of managers, engineers and architects was given responsibility for design-
       ing and building the plant. Each decision of this team had to be approved by a committee that
       included trade union representatives, health and safety experts, doctors and outside Job Design
       experts, including colleagues of Einar Thorsrud, the noted Norwegian work psychologist.
           The ‘revolutionary’ image of Kalmar also owed much to the efficiency of Volvo's own publicity
       machine. This can be seen from statements about the ethos of the plant made by Pehr
       Gyllenhammar, Volvo's former Chief Executive, before it opened:
           The objective of Kalmar will be to arrange auto production in such a way that each employee will be
           able to find meaning and satisfaction in his work.
Case Study 5 · Volvo’s approach to Job Design    371




        This will be a factory which, without any sacrifice of efficiency or the company's financial objectives,
    will give employees opportunities to work in groups, to communicate freely among themselves, to
    switch from one job assignment to another, to vary the pace of their work, to identify with the product,
    to be conscious of a responsibility for quality, and to influence their own working environment.
        When a product is made by people who find meaning in their work, it must inevitably be a product
    of high quality. (All quotes are from Aguren et al, 1984: 13)

   Opened in 1974, Kalmar was Volvo's second largest final assembly plant (the much bigger
Torslanda being the largest). It had been planned for an annual capacity of 30,000 cars with
around 600 employees. In 1976, it produced 22,000 cars but production fell to 17,000 when
demand slumped after the second oil shock in 1977. Production rose again in 1979 but fell back
in 1980, when a four-day week was briefly introduced. In 1985, Kalmar produced 32,500 cars,
representing about 16 per cent of Volvo's Swedish output of cars. In 1988 the plant had around
960 employees (Aguren et al, 1984; Auer and Riegler, 1990).
   The differences between Kalmar and a traditional car plant are that, in the latter, the pace of
work is determined by the moving assembly line, jobs are extremely fragmented and have cycle
times of a few minutes or less, and workers are dedicated to one task only. At Kalmar there was
no assembly line, workers operated in teams, with each team having its own dedicated area of the
factory. Within the team, workers could move between tasks, and each task had a cycle time of
between 20 and 30 minutes. In place of the assembly line, cars were mounted on automated
carriers which moved around the plant and served both as a means of transport and as a work
platform. This arrangement allowed Kalmar originally to operate two alternatives to the moving
assembly line:
■   Straight-line assembly. Work within each team area is split up into four or five work stations
    placed in a series along the production flow. Two team members work at each station, follow-
    ing the carrier through all the stations and carrying out all the necessary assembly operations.
■   Dock assembly. This is where one carrier at a time is guided into the ‘dock’ assembly areas
    where all of the team’s tasks are carried out on the stationary carrier by two or three people.
The main difference between the two approaches is that the first, straight-line assembly, still bears
some relation to the moving assembly line in that the car carriers move automatically from station
to station thus determining the pace of work. In the second approach, the dock system, the car is
stationary all the time giving workers more control over the pace of work. Nevertheless, both
forms revolve around teamwork and offer variety and task completeness.
   There can be very little doubt that, for its time, Kalmar represented a significant break with the
past. There were those, however, who questioned whether the original high hopes for the plant, in
terms of the humanisation of work, had been met. Pontusson (1990) argued that the economic
consequences of fluctuations in output levels led the plant management to retreat from its original
ambitions and, in the latter part of the 1970s, to tighten managerial control over the work process.
It was certainly the case that, compared to its conventional plants, there was no significant
improvement in output. Also, as Berggren (1992: 123) noted, the ability of work teams to change
the pace of work led to some ’mischief', and a team might change the pace of work of another
team ’for fun'. For these reasons, according to Pontusson (1990), dock assembly was abandoned,
and the potential for workers to influence the pace of work by taking automated carriers out of the
main flow was ended.
   Blackler and Brown (1978) argued that, with the abandonment of dock assembly, and despite
longer cycle times, some fundamental elements of the assembly line (i.e. machine-paced work) were
372   Chapter 12 · Case studies in changing internal relationships and attitudes




       maintained. Auer and Riegler (1990) made a similar point. They argued that, over time, changes such
       as new work evaluation methods, the removal of time buffers between stages and the general speed-
       ing up of the carriers (which are controlled by a central computer) intensified the pace of work and
       returned the production process much closer to the assembly-line concept than was originally intended.
          Before it opened, Kalmar was being hailed as a revolution in Job Design. The reality is that
       Kalmar does not appear to have represented the dramatic break with the Fordist–Taylorist produc-
       tion process that many had hoped for (Auer and Riegler, 1990; Blackler and Brown, 1978;
       Pontusson, 1990). This does not mean that Kalmar was a failure, however. Given that Volvo, hith-
       erto very much a traditional car company, were trying to invent a new concept in car assembly, it
       would have been surprising if they had managed to rewrite the rules of car production at the first
       attempt. It must be remembered that, although Kalmar was a social experiment, it was also
       expected to be an economic success. If the social dimension appeared to threaten financial per-
       formance, it was the former rather than the latter that would be sacrificed. The true measure of
       Kalmar's success lies not in the degree to which it achieved its ‘revolutionary’ goal, but in the
       extent to which it encouraged Volvo's management to continue with and accelerate the move
       away from Fordist–Taylorist approaches to work. As Auer and Riegler (1990: 27) concluded,
       despite some disagreement among managers over the effectiveness of the organisation of Kalmar
       plant, there were sufficient supporters for Volvo to proceed with the development of ‘far more pro-
       gressive’ and ‘radical’ attempts to distance itself from the traditional assembly-line approach to car
       production. This is a point also made by Gyllenhammar:
          Volvo Kalmar is no final solution. It is the first step on the road. But much remains to be done in the
          field of work organisation. I could imagine much greater freedom and independence at work. (Quoted
          in Berggren, 1992: 127)

       Nevertheless, in 1992, at the time of a major recession in the European car industry, Kalmar was
       closed.

       Phase two – Torslanda
       As well as Kalmar, the late 1970s and early 1980s saw Volvo experimenting with alternatives to the tra-
       ditional assembly line at a number of plants. In the main, these were small-scale, and tended to
       concentrate on bus or truck production rather than car assembly. From the late 1970s onwards, how-
       ever, a series of increasingly radical attempts were made to transform work organisation at Torslanda,
       Volvo's main car assembly plant. In 1976, at the central assembly plant, Torslanda management experi-
       mented with the use of large, autonomous work groups to assemble an entire car using a
       dock-assembly approach similar to that being attempted at Kalmar. Owing to poor productivity, this was
       abandoned within six months. Management believed that the workforce lacked the necessary skills to
       make such an approach work, whilst the metal workers’ trade union felt the experiment was too risky.
           In 1979/80, with the opening of the TUN facility at Torslanda to assemble the new 700 series
       car, management attempted to revive group-based assembly. The TUN workforce was selected from
       the existing production personnel at Torslanda. The original plan for TUN, initially drawn up without
       union involvement, envisaged car assembly being carried out by autonomous work groups who
       would be responsible for their own quality and pace of work. It was planned that work groups would
       also have responsibility for job rotation, managing material supplies and some maintenance tasks.
           The reality though was somewhat less ambitious than originally conceived. The unions, who –
       when eventually involved – played a larger part in the design of TUN than they had at Kalmar,
Case Study 5 · Volvo’s approach to Job Design   373




were highly sceptical of the original concept and this, together with certain practical difficulties in
trying to mix indirect tasks, such as maintenance and material control, with direct production work,
led to the scaling-down of the original proposals. TUN is still organised around group-based
assembly, and job rotation is still practised, but the pace of work is centrally controlled and workers
no longer perform indirect tasks. Nevertheless, workers at TUN see it as being a clear improve-
ment on the traditional approach to car assembly (Auer and Riegler, 1990).
    In 1986, once again management began to consider major changes to the organisation of
work at Torslanda's central assembly plant. At this time, the plant employed 4,000 workers and
was mainly organised around Fordist–Taylorist principles. This time the trade unions were involved
much earlier and played a more central role. In February 1986, management and unions agreed
on an ‘action plan’ that emphasised the transformation of car assembly into an ‘attractive alterna-
tive’ to the traditional methods of car manufacture. In particular, learning from the earlier failure,
the plan stressed the need for high-quality training and continuing education to allow workers to
gain the skills necessary for effective group work. The action plan appeared to revive many of the
original plans for TUN (including the provision for direct production workers to carry out indirect
tasks). In addition, it envisaged working time being adjusted to employee needs.
    Though the reorganisation of Torslanda is a continuing process, some of the individual sections,
such as motor and axle assembly, have been operating along new lines for some time. The
changes envisaged in the action plan have been introduced, especially those relating to workers
controlling the pace of work and undertaking indirect tasks. Staff turnover and absenteeism is very
low at Torslanda, which reflects both the work environment and the rigorous recruitment methods
designed to select well-educated staff who are team-orientated. It is a very clean plant with good
recreational facilities, such as a gym and swimming pool, and also provides a creche for the chil-
dren of all staff. At Torslanda, upward and downward communication is considered vital, and staff
are encouraged to show initiative through formal and informal discussion groups.
    As might be expected, there have been some difficulties in implementing these new working
arrangements at Torslanda. The main problem appears to relate to trade union attempts to protect
traditional demarcations between direct and indirect tasks and between work groups and supervi-
sors. Maintenance staff still work outside the work group structure, and the foremen's trade union
successfully resisted their partial replacement by rotating team leaders. The metal workers’ union
also wanted to maintain a more hierarchical structure in order to preserve a job ladder between the
shopfloor and management.
    By the late 1990s, the workforce at Torslanda had increased to 5,500 and the plant was produc-
ing 580 vehicles a day. Multi-skilling was a fact of life and, in some parts of the factory, jobs were
rotated every hour. Such was the perceived success of the factory that it was given responsibility for
assembling Volvo's C70 car, which was launched in 1997. Therefore, progress has been made and,
though the final form that Torslanda will take is still uncertain, it does appear to promise a more rad-
ical break with tradition than occurred at Kalmar (Auer and Riegler, 1990; Pontusson, 1990).

Phase three – Uddevalla
This was the first all-new car assembly plant built by Volvo in Sweden since Kalmar. It was
designed to employ 1,000 people and have the capability to produce 40,000 cars per year. Many
observers believe the plant goes far beyond Volvo's previous attempts at Job Design: ‘the only one
[car plant] in the world where workers build cars from start to finish rather than on an assembly
line’ (McIvor, 1995: 37). The design of the plant was the result of a ‘modernisation pact’ between
374   Chapter 12 · Case studies in changing internal relationships and attitudes




       the plant’s management and the metal workers’ union, many of whose extensive demands were
       incorporated into the plant’s design (Auer and Riegler, 1990). In accordance with Sweden's Co-
       determination Law (and Volvo’s practice at Torslanda), the unions were involved in the steering
       group responsible for designing and building the Uddevalla plant. Indeed, three union officials
       worked full-time on the project between 1985 and 1987.
          The completed plant comprised six mini-factories, each containing eight dock assembly areas,
       each with its own autonomous work group. Therefore, in total, there were 48 assembly groups.
       Each work group has ten fully-trained assembly workers, each of whom can, again in theory, per-
       form all the tasks necessary to assemble an entire car. The work groups are responsible for
       determining their own pace of work and internal job rotation. In addition, the groups have respon-
       sibility for maintenance, administration and quality control. The role of group leader rotates among
       the members of each group. The incorporation of so many functions within each group resulted in
       a very flat hierarchy; there are no layers between the groups and the factory managers. To facilitate
       these working arrangements, the process of car assembly had to be re-thought in order to refine
       and simplify it. The plant also adopted an equal opportunities policy that reserved at least 40 per
       cent of production jobs for women and at least 25 per cent for workers over 45 years old.
          The plant is clearly at the leading edge of Job Design, at least as far as the car industry is con-
       cerned. As Karlsson (1996: 11) remarked:
          What was created was an extremely horizontal organisation, but also some vertical integration. This
          included responsibilities for quality and some integration with sales, because in the result-oriented team
          the idea was that the worker should be able to experience what he delivered to the customer. Hence
          the members of the assembly group could meet and talk directly to the customer.

       Nevertheless, as other such initiatives by Volvo have shown, economic and operational concerns
       can lead to its more radical elements, especially self-paced work, being modified over time.
       Indeed, the original plan for the plant very much followed the practices adopted at Kalmar. It was
       only with considerable pressure from the trade unions, and the intervention of Volvo’s top man-
       agement, that more radical ideas were eventually adopted, though even the unions took some
       convincing that machine-paced assembly might be abandoned altogether (Pontusson, 1990).
           Unfortunately, the plant opened at a time when car demand was falling dramatically. Despite
       attempts to keep it open, along with the Kalmar plant, Volvo closed Uddevalla in 1992 in the face
       of mounting losses, and notwithstanding the fact that, in productivity terms, it was the most effi-
       cient of Volvo’s Swedish plants (Cressey, 1996). In 1995, however, the plant was reopened as a
       joint venture. Though operating on a smaller scale than originally envisaged, Uddevalla’s new Chief
       Executive appeared determined to stick to its original Job Design concept (McIvor, 1995).

       Phase four – Gent and Born
       By the late 1980s, Volvo’s approach to Job Design was widely accepted and practised throughout
       the company, especially wherever new developments were taking place. When Volvo’s Gent plant
       was chosen to build the 850 series (known internally as the VEC – Volvo European Car), it was
       natural for Volvo to adopt team-based assembly. The VEC teams operated very much as at the
       Uddevalla plant but with even greater emphasis on continuous improvement. There was also a
       great deal of emphasis on the teams to carry out their own maintenance as well as other support
       tasks. Indeed, so successful was this that Gent became the first plant outside Japan to gain the
       Total Productive Maintenance Award. In 1996, similar developments took place in Volvo’s Dutch
Case Study 5 · Volvo’s approach to Job Design    375




plant at Born. The plant was chosen as the site of a joint venture between Volvo and Mitsubishi
called Nedcar. The objective was to make cars for both companies that share the same chassis,
and have one-third of the parts in common. In essence, it was an attempt to blend Japanese lean
production techniques with Volvo’s Job Design approach. The aim was to achieve world class effi-
ciency, and the plant quickly became one of Europe’s most efficient car plants.
    Both Gent and Born demonstrate Volvo’s ongoing commitment to develop, extend and experi-
ment with alternative forms of Job Design to those used elsewhere in the car industry. As Karlsson
(1996) suggests, Volvo is continually looking for new and different ways to organise production, in
the case of Gent and Born by adopting a lean production philosophy, but ensuring that group
work lies at the heart of any new developments.

Summary
The progress of redesigning jobs at Volvo has been remarkable in comparison with the
Tayloristic–Fordist nature of the company in the 1960s. The fact that it has continued and intensi-
fied over a period of 30 years, and that any organisational changes at Volvo are expected to
revolve around group work, speaks volumes for the degree to which it has become embedded in
the culture of the company. This is not to say that the result is perfect. It must be remembered
that assembling cars and trucks will always be a physically demanding job. Also, Volvo are not an
altruistic organisation; they exist to make a profit, and the way they organise work must reflect and
facilitate this (regardless of pressures from trade unions, government legislation and public opin-
ion). Nevertheless, as Pontusson (1990: 315) observed of Volvo, the ‘stages of workplace reform
involve a cumulative process of innovation, with a trajectory which adds up to a more or less
definitive break with Fordism’. This conclusion, of course, makes the takeover of Volvo’s car divi-
sion by Ford in 1999 all the more ironic.
    Some might also point out that though Volvo have led the way, many other companies have fol-
lowed – including much of the car industry. However, this would be to miss two important points.
Firstly, Volvo’s approach is not a copycat or ‘flavour of the month’ one. Rather, it is long-standing and
still developing approach which appears to be fundamental to the way the company operates.
Secondly, though most other car companies have adopted, to a lesser or greater extent, the
autonomous/semi-autonomous work group concept, especially the Japanese, no one else has
abandoned the assembly line or gives workers the degree of autonomy and control that Volvo do,
especially over the pace of work. Indeed, given the output of the leading car plants, if anything the
pace of work on assembly lines, and rigid control over what assembly workers do, seemed more
intense in the 1990s than in the supposedly bad old days of the 1960s and 1970s (Milner, 1998)
           The changes at Volvo have taken place over an extended timescale, at different sites and
under different conditions and, therefore, have been influenced by a wide range of factors.
Despite the subsequent advent of the Culture–Excellence approach and the Japanese approach,
what has successfully taken place at Volvo is the adoption of practices and principles associated
with the Human Relations school as operationalised by the Job Design movement. The key factors
that appear to have influenced Volvo to adopt this approach are as follows:
■   For sound economic and business reasons, Volvo needed to reduce absenteeism and high
    labour turnover.
■   Full employment and a lack of wage flexibility precluded more traditional ‘stick and carrot’
    measures for dealing with absenteeism and labour turnover. Therefore, Volvo had to look at
376   Chapter 12 · Case studies in changing internal relationships and attitudes




           alternative methods of reducing absenteeism and labour turnover and, instead of trying to alle-
           viate the symptoms, they chose to tackle the boredom and dissatisfaction that gave rise to
           labour problems in the first place. The decision by Volvo’s management to adopt a Job Design
           approach appears to have come about owing to a combination of intense public pressure on
           the company to move to a more human-centred approach to assembly work, and managerial
           preference. It should be noted, though, that Volvo’s management have never been unanimous
           in supporting the more radical aspects of Job Design, as was demonstrated by the disagree-
           ment over the success of Kalmar and the need for senior managers to intervene to ensure a
           more radical approach at Uddevalla.
       ■   The parallel move by Volvo to adopt a strategy of decentralising control to plant level (as averse
           to its previous centralised, bureaucratic control procedures) gave local management some free-
           dom to experiment with new ways of working, and also allowed management to experience
           the lessening of control that they were advocating for workers.
       ■   Though originally the move away from Fordist–Taylorist work practices was entirely manage-
           ment-inspired, trade unions came to play an increasingly active role in encouraging its
           adoption. In this, they were aided by both the Co-determination Law, which came into effect in
           1976, and the generally favourable climate towards Job Design in Sweden. However, as
           Torslanda demonstrated, the trade unions – like Volvo’s management – are capable of exhibit-
           ing conservative tendencies and need to be convinced that some of the more radical elements
           of group work should be adopted.
       ■   Whilst these changes have taken place on different sites and at different times, both manage-
           ment and workers appear to have found a way of capturing the knowledge gained at other
           plants and lessons learnt for future projects. This process of organisational learning appears to
           be fundamental to understanding how Volvo has moved (not always in an easy or deliberate
           fashion) from the limited, though significant, structural changes at Kalmar to the genuine
           expansion of workers’ control seen at Uddevalla. Auer and Riegler (1990: 52), who carried out
           a comprehensive review of work organisation changes at Volvo, commented that:
           Interviews with managers, representatives of trade unions and researchers all confirmed ... Volvo is one of
           the few companies where management, employees, and trade unions have found broad opportunities for
           gathering experience in changing the organisation of work and that the company is a place of learning ...

           Evidently, the case of Volvo’s attempts to move to a radical change in its internal relationships,
       one which passes significantly greater control of production to workers than had hitherto been
       considered wise and efficient, is by no means straightforward. Though the intent was there from
       the start, though we can argue about why the move to Job Design came about, the actual details
       have been subject to a process of pragmatism, revision and trial and error over more than 30
       years. The new approach to work organisation coincided with Volvo’s granting of greater autonomy
       to plant-level managers, the introduction of the Co-determination Law, and considerable public
       support for Job Design in Sweden; clearly, these were all influential in what happened at Volvo. It
       should be remembered, however, that Volvo was, at the time, a large and relatively successful pri-
       vate company. If it had wanted to, it could have chosen another course of action; indeed, Volvo’s
       management itself disagreed about the need for and extent of Job Design. The fact that Volvo
       chose to break the car industry mould at Kalmar, and to keep breaking it at other plants, shows
       that no matter how powerful or dominant a particular paradigm is, alternatives are always possible.
       It is also true that, if the move to new ways of working had not allowed the company to develop
Case Study 6 · XYZ Construction   377




 its competitiveness, the initiative would not have flourished. It may well have been the case that in
 the atmosphere of the 1970s, Volvo was under great pressure from a number of sources to
 develop a more human-centred approach to work. With the easing of this pressure in the 1980s
 and 1990s, however, the company could have chosen quietly to abandon this approach. That it
 did not clearly demonstrates the belief, especially by Volvo’s management, that job redesign
 works. So far, this commitment has survived the Ford takeover; whether it will continue to do so,
 only time will tell.




Case Study 6


 XYZ Construction
 Background
 XYZ Construction employs 500 staff and is part of a European-based multinational enterprise. Its
 main business is the provision of specialist services to major construction projects. As is typical for
 the construction industry, XYZ operates in a highly competitive and at times hostile and aggressive
 environment. Disputes between contractors and subcontractors can become bitter and frequently
 end in litigation, though there have been a number of attempts over the last decade to create
 better relationships. Just as relationships between organisations tended to be hostile, so relation-
 ships within organisations were also less than friendly. Up to 1996, XYZ had been run by an
 autocratic Managing Director who was feared by his colleagues and who treated the company as
 his own personal fiefdom. His style of management was not liked and many felt that it was counter-
 productive but, as one manager commented, ‘You didn’t challenge him, you didn’t put your head
 above the parapet, or he’d make life hell for you’. When he retired, the parent company took the
 view that XYZ was underperforming and that much of this was due to poor management and a lack
 of cooperation within the company. His replacement was appointed with the remit to improve the
 performance of the company and develop its managerial competency. This he did to great effect.
 Over a four-year period, he transformed the operation, culture and structure of the organisation.

 Focusing on people and performance
 The new Managing Director was appointed in 1996. He had trained as an engineer at XYZ but
 had then left and worked for a number of other companies in the construction industry.
 Construction is a close-knit industry, however, and he still knew XYZ and its staff quite well. He
 came with a reputation as an enlightened manager who could deliver performance improve-
 ments. The construction industry was notorious for the antagonistic relations between the main
 contractors and subcontractors such as XYZ, who specialise in one aspect of the construction
 process. The Managing Director recognised, however, that the industry was attempting to change,
 and conflict was being replaced by ‘partnership’ initiatives – contractors and subcontractors work-
 ing in a more cooperative and team-based manner (Burnes and Coram, 1999). The Managing
378   Chapter 12 · Case studies in changing internal relationships and attitudes




       Director also recognised that external partnerships needed internal partnerships and teamworking if
       they were to be successful. In turn this would require a new style of participative management in
       XYZ. Therefore, the Managing Director set out not just to upgrade XYZ’s management but to under-
       take a root and branch overhaul of the company’s operations and culture.
           As a signal of his way of working, as a first step in creating better relationships amongst man-
       agers, he broadened out the Senior Management Team to include key staff who were not
       directors. In what had been a very hierarchical and status conscious company, this was a signifi-
       cant change. The Managing Director knew that the staff in the company, particularly at a senior
       level, were experienced and competent people. He believed it was in the company’s interest to
       retain staff rather than replace them. However, he also believed that they would need to change
       their attitudes and behaviours and upgrade their managerial skills if the company was to achieve
       the changes he believed were necessary. His strategy for transforming the company rested on car-
       rying out two crucial activities in parallel: to introduce new practices and techniques into the
       company in order to provide a better service to customers (and thus improve the company’s over-
       all performance), and to change attitudes and behaviours within the company, especially those of
       managers. He did not see these as being separate activities or programmes: he saw them as
       being linked. New practices, such as customer care and customer partnering, were not mere tech-
       nical exercises. They required behavioural changes and new managerial skills. Therefore, the
       Managing Director wanted to create a change programme whereby any change designed to
       improve the organisation’s performance, whether it be new skills, new techniques or whatever,
       also had to promote and reinforce behavioural and culture change. The converse was also the
       case: any effort designed to change culture or behaviour also had to have the objective of improv-
       ing the organisation’s performance.
           Between 1996 and 2000, the company undertook a series of organisational, management and
       staff development initiatives designed collectively to transform the organisation’s performance and
       culture. The main initiatives are shown in Table 12.1.


       Table 12.1 Key changes at XYZ
         Date                                  Event

         June 1996                             New Managing Director appointed
         August 1996                           Kaizen Phase 1
         October 1996                          Customer Care Programme launched
         March 1997                            Investors in People launched
         April 1997                            Kaizen Phase 2
         September 1997                        Customer Care Programme extended to construction sites
         January 1998                          Construction Supervisors’ new role launched
         June 1998                             New Senior Management Team formed
         November 1998                         Kaizen Phase 3
         March 1999                            Site-based trainers appointed
         June 1999                             XYZ culture redefined
         July 1999                             Leadership and behaviours review
         September 1999                        Begin to develop Team XYZ
         March 2000                            Team XYZ up and running
Case Study 6 · XYZ Construction   379




    The Managing Director’s first initiative was to introduce a small-scale Kaizen programme.
Kaizen is a Japanese technique for achieving small-scale improvements through teamwork (Witzel,
2002). The Managing Director saw his Kaizen initiative as delivering four benefits: it would show
the organisation that improvements could be achieved on a quick low-cost/no-cost basis; it would
promote teamworking; it would give managers confidence to delegate to and empower their staff;
and it would allow both staff and managers to acquire new skills. In a traditional company such as
XYZ, it was not easy to introduce new ideas and new ways of working, especially where managers
might perceive them as a threat. But the Managing Director made it clear he was committed to
this initiative and that it had to work. Over the next few years the Kaizen approach was rolled out
throughout the organisation.
    The next initiative, in October 1996, was a customer care programme. This was designed to
engender a positive view of customers by promoting joint teamworking. In an industry where
antagonism between customers and suppliers (contractor and subcontractors) was the order of
the day, where settling disputes through the courts was almost a standard practice, it was never
going to be easy to promote customer care. The Managing Director knew, however, that the future
of the company depended on working with customers to understand what they wanted and to
give it to them. Once again, this initiative was a combination of organisational change and man-
agement development; but, much more than the Kaizen initiative, it was also central to changing
the culture of the organisation. It began with a few key customers and a few key managers, but
such was its perceived success that a year later it was extended to the actual construction sites.
    Other initiatives were introduced over the next few years, including Investors in People, and a
redesigning of the Construction Supervisors’ role to ensure that the post-holders possessed the
skills, competencies and behaviours necessary to work closely with customers and staff under the
new regime. Once again this was designed to achieve a combination of aims, including changes
to working practices, the upgrading of managerial competency on the construction sites, and the
promotion and development of a more team-based culture in the organisation.
    In 1999, XYZ decided it was time to redefine its culture and change its structure. As a number of
writers have emphasised, structure and culture need to be aligned, but it takes much longer to
change the latter than the former (Allaire and Firsirotu, 1984; Burnes, 1991; Handy, 1993).
However, the company had already made sufficient changes to its behaviour and practices to
believe its culture was very much different from when the Managing Director took over in 1996. It
went through a company-wide process of identifying and redefining its culture. This then led into a
process of reviewing each manager’s leadership abilities and behaviours. With these activities
underway, the scene was set for redrawing the company’s structure in order to promote and reflect
its new ways of working and its developing culture.

Towards Team XYZ
By 1999, the company was a much more cohesive, open and efficient organisation. However, its
basic structure remained the same as when the new Managing Director had taken over. There was
Head Office, which dealt with large, national projects, and five regional offices that dealt with
smaller, local projects. Each of these offices was organised on a functional basis; they each had sep-
arate departments for Finance, Estimation, Design and Engineering. In addition, the Head Office had
a Human Resources function which covered the entire company. This structure gave rise to a
number of problems: rivalry between the Head Office and the regional offices; and rivalry and lack
of communication within the various offices between departments and functions. A particular prob-
lem was the relationship between Estimation and Design in the Head Office. The former were
380   Chapter 12 · Case studies in changing internal relationships and attitudes




       responsible for dealing with customers and setting the price for a job. The cost of a job, however,
       was based on the design provided by the Design Office. Though based in the same building, there
       was friction between the two functions, with each seeking to second-guess the other. The large jobs
       were often very complex and even within the two functions of Estimation and Design there could
       be disputes about the best way to carry out a job. However, there was much more dispute
       between the two functions. Estimation felt that Design sometimes made jobs too complex and
       costly, and Design felt that Estimation did not understand the technical aspects of what they were
       suggesting to customers. This caused problems for Engineering, which was responsible for the
       actual construction process. The engineers sometimes found themselves starting jobs where there
       were still disagreements between Estimation and Design over what had been quoted for and what
       was required. Nevertheless, the general view was that the company was more efficient, better-run
       and a friendlier place than it had been four years earlier.
          In 1999, the Managing Director and his Deputy began to have discussions in the company
       over restructuring. Their basic aim was to remove functional barriers and create a more teamwork-
       based, process-focused organisation. However, they did not underestimate how difficult this would
       be. It would need a complete reorganisation within and between the offices. It would reduce the
       power of the regional managers and amalgamate the Head Office empires of some directors. The
       Managing Director recognised that such changes could and probably would create friction and
       resistance. He also recognised that XYZ lacked the skills to plan and implement such a change.
       He, therefore, brought in a change consultant to assist with the exercise. After discussions with the
       consultant, a five-stage change process was agreed comprising the following activities:
       1   Change readiness audit
       2   Evaluation and planning workshops
       3   Communication
       4   Implementation and team-building
       5   Evaluation

       Stage 1
       The consultant undertook a change readiness audit to identify key issues and concerns which
       needed to be addressed. This consisted of face-to-face interviews with all senior managers, and inter-
       views and discussions with other staff from all levels of the company. It also involved a SWOT 2
       exercise to assess the company’s competitive position. Some 70 people, at all levels, were involved
       in the SWOT. The interviews showed that there was a general recognition of the problems brought
       about by the existing structure, but little agreement about any new structure, and some concern over
       potential loss of status and career opportunities if a flatter, less functional structure was adopted.
       However, the audit also showed that managers and staff alike had faith in and respect for the
       Managing Director. They also felt that the changes that had taken place over the previous three years
       had been positive. In addition, there was a strong sense of self-belief in the company that whatever
       the changes required, they could achieve them. Nevertheless, there was also concern by some indi-
       viduals that changes in structure would affect their career progression or status, especially if the new
       structure involved multi-function teams and reduced the number of departments. The SWOT exercise
       showed that there was considerable agreement that the company had a strong technical base but


       2   See Exhibit 15.1 in Chapter 15 for a description of a SWOT analysis.
Case Study 6 · XYZ Construction    381




concerns about lack of team-working and entrepreneurial flair. In particular, staff in the regional offices
felt that opportunities for new business were being missed. They also felt that their skills were under-
utilised by being devoted to mainly small jobs rather than having an opportunity to participate in the
larger contracts. The finding from the change audit were used to structure and begin the second
stage of the change process, the evaluation and planning workshops.

Stage 2
There were five one-day workshops spread over a two-month period. The purpose of these work-
shops was to establish a set of criteria for evaluating alternative structures, identify what
alternatives existed, test these against the evaluation criteria, select a preferred structure and
develop plans for implementing it. This was seen as an iterative process. Even when the evalua-
tion criteria had been agreed, it was expected that further discussions about alternative structures
and planning would lead to some of these being questioned, challenged and amended. Similarly,
once a preferred structure had been agreed, it could still be amended if the planning process
threw up issues that had not been considered. At the end of each workshop, participants had an
agreed set of actions which they had to undertake, a key one being to go out and discuss what
had emerged from the workshops with their colleagues in the rest of the company. A newsletter
was also issued from each workshop.
    The first two workshops were for the senior management team (SMT) only and the remaining
three for the SMT plus the next layer of managers down, an additional 15 to 20 people. The results of
the audit were presented to the first workshop, which began the process of developing a set of evalu-
ation criteria and generating alternative structures. At the end of Workshop 1, a consensus seemed to
be emerging with regard to a preferred structure. At the end of Workshop 2, it was agreed that the
new structure should be built around the three core activities of the company, which were labelled:
Get Work; Do Work; and Get Paid. It was also agreed that whilst it was important to keep the regional
offices, their staff should be merged into the new structure. In effect, what emerged was a process-ori-
entated flat, matrix structure with staff in the regional offices being responsible both to the Regional
Manager and the Process Manager in Head Office. For the Head Office staff, in the main, their line
manager and process manager would be the same person. As might be expected, this new structure
did not emerge without much discussion, debate and in some cases soul-searching. The SMT also
recognised that this was probably the most radical of the proposals they had looked at, and the one
likely to meet the most resistance both from regional managers, whose power would be much
reduced, and functional specialists in Estimation and Design who would have to be merged to create
the ‘Get Work’ group. In addition, it was clear that some Directors were not happy to see their own
department dismantled and their own position threatened.
    The first of the remaining three workshops was devoted to presenting the proposed structure to the
new participants, testing it and in some cases agreeing to amend it. The remaining two workshops con-
centrated on the details of implementing the new structure. This covered everything from where
people would sit, to whom they would report to, new job descriptions, communication and team-build-
ing. This latter exercise was seen as vital to ensuring that staff in the reorganised structure worked as
teams and cooperated with other teams rather than merely creating another set of functional barriers. It
was at this point that it was agreed that the new structure be named ‘Team XYZ’ to emphasise that the
intention was to create a company where everyone felt they were members of one team. There was
also much discussion and consultation between the Workshops with staff in the rest of the company.
At the end of Stage 2, almost all managers and supervisors in the company and a great number of the
382   Chapter 12 · Case studies in changing internal relationships and attitudes




       workforce had been involved in the process and by November 1999, the company was ready to com-
       municate the new structure both internally and externally (to their parent company and customers).

       Stage 3
       The communication stage was both short and intense. Members of the SMT were given the task of
       visiting all areas of the company and briefing them on the new structure and how it would impact
       on them. Though there were also newsletters and information on the company’s intranet, it was
       these face-to-face briefings with small groups of staff which generated the most debate. They also
       raised some questions, mainly of a detailed nature, which had not been addressed. In general,
       however, the new structure received a positive welcome and the implementation stage then began.

       Stage 4
       The new structure was rolled out over a three-month period. Ideally everything would have changed
       overnight, but the logistics of moving staff around from one group to another, physically altering office
       accommodation, and training managers for their new roles took time. Also, the intention was to ensure
       that all managers and supervisors, including those on sites, went through Team XYZ team-building
       workshops. Although, as expected, there were some hiccups and some unanticipated problems, by the
       end of March 2000 the new structure was fully up and running with remarkably little difficulty.

       Stage 5
       In April, a two-day meeting of all the company’s senior and middle managers was held to evaluate
       the change that had taken place, identify issues that needed to be addressed, and ensure that the
       momentum was maintained and that staff did not fall back into old ways of working. As part of
       this process, each manager was asked to identify two steps that they personally would take to
       develop the new structure further and promote teamworking. These were all written on flip charts
       and pinned to the walls for everyone to see. At the beginning of the two days, there was some-
       thing of an air of exhaustion about the managers; they had been through a period of major
       upheaval and, as one said, ‘We need a period of consolidation’. At the end of the two days, they
       left not only having agreed that the new structure was working remarkably well, but also with a
       whole host of new changes they wanted to make to improve the structure further.

       Summary
       Though the development and implementation of a new structure at XYZ was not without its difficul-
       ties, it was achieved remarkably quickly and with relatively little disruption. There was significant
       potential for those who might lose out from the changes to try to prevent, or at least slow down, their
       implementation. All the regional managers and a number of the directors saw their areas of responsi-
       bility, and thus power, reduced. Many of the functional specialists found themselves operating in
       multi-function teams where their promotion prospects depended less on their technical abilities per
       se and more on their ability to work and manage as a team player. There was also the fact that people
       who did not like each other suddenly found that they were working side by side. One explanation as
       to why the potential dangers to the change process did not emerge is clearly a result of the way it was
       managed. It was an open process that involved a great number of people either directly or indirectly.
       At some point, all the issues that needed to be considered, even personality issues, were brought out
       on the table and discussed, sometimes quite often. There was also a tenacity and momentum to the
       process. It was clear from the start that the Managing Director wanted to see a new structure and
       would not be fobbed off with a sub-optimal compromise. It was also clear from the change audit that
Case Study 7 · GK Printers Limited – changing systems and attitudes     383




 many other people in the company recognised that its structure needed changing, even if they were
 nervous about such a change. In essence, the company was ready for such a change, even if some
 were uncomfortable with the outcome. This of course raises the question: Why were they ready?
            For organisations to work effectively, it is necessary for structure and culture to be aligned,
 but whilst structure can be changed quickly, changing culture is a much slower and less certain
 process (Allaire and Firsirotu, 1984; Handy, 1993). As mentioned in Chapter 10, Kanter et al
 (1992) identify two basic approaches to change: Bold Strokes and Long Marches. The former
 refer to rapid and major structural transformation initiatives. The latter covers slow, incremental
 change programmes that run over a number of years and which are geared to achieving changes
 in culture and behaviour. The received wisdom is that when companies need to transform them-
 selves, they should change their structures first because this is the quickest and easiest change to
 make. They should then embark on a process of developing a culture to support and align with
 the new structure. This is why Kanter et al (1992) note that Bold Strokes often need to be fol-
 lowed by Long Marches in order for organisations to seek to develop a culture and behaviours
 suitable for their new structure. In the case of XYZ, this logic was turned on its head. As Table 12.1
 shows, the Bold Stroke, the new structure, followed the Long March to create a new culture in the
 company, and this is why it could be implemented so quickly, so successfully and with relatively
 little resistance. XYZ already possessed the culture to go along with its new structure. It already
 possessed a management and workforce orientated to working in a team-based environment. The
 new structure was necessary both to formalise and facilitate the new teamworking ethos of the
 organisation, and to reinforce the new culture itself. Therefore, the development and implementa-
 tion of the new structure at XYZ can be seen as much more a case of Planned change rather than
 Emergent change. However, it also needs to be viewed within the context of a series of changes
 that had emerged in XYZ since 1996 as the company, under the leadership of the new Managing
 Director, sought to transform itself.




Case Study 7


 GK Printers Limited – changing systems and attitudes
 Background
 GK Printers Limited is a small, family-run printing business. It was established just after the Second
 World War by the present Managing Director’s father. The company was originally a jobbing print-
 ers; which is to say they would print anything. ‘No job too large or too small’ might well have been
 their motto, although in fact, the mainstay of their business was producing stationery, business
 cards and publicity brochures for local companies.
384   Chapter 12 · Case studies in changing internal relationships and attitudes




           This work was moderately profitable and provided a reasonable living for the owners and their
       workforce, some 20 people. By the beginning of the 1980s, however, this situation was beginning
       to change. Firstly, the recession at this time had a strong negative effect on their traditional cus-
       tomer base, and orders began to fall off dramatically. Secondly, the advent of newer, computerised
       printing techniques, which GK had not adopted, meant that rivals could offer a quicker, cheaper
       and often better-quality service. Thirdly, the advent of small printing bureaux (such as Prontaprint),
       often situated in prime city centre locations, and portraying an up-to-date image, further eroded
       GK’s business. Lastly, it was clear that many of their customers were no longer going to a printer
       directly. Instead, in the image-conscious 1980s, they were putting their work out to graphic
       designers who, having finalised the design, would then subcontract out the printing. In such a situ-
       ation, there was no guarantee that the work from their traditional customers would eventually end
       up with them. It depended upon the preference of the particular graphic designers concerned.
           All these factors combined to threaten the financial viability of GK and, for the first time ever,
       the company lost money. The loss was only small (£20,000), but it came as a major shock to a
       company that had grown used to making a reasonable, if not spectacular, profit. The result of this
       was that the Managing Director and the company’s Printing Manager, along with other members
       of the owning family, formed a ‘crisis committee’ to review the future of the business.

       Phase One: developing a strategy
       It rapidly became clear to the committee that to do nothing was not an option; the result would be to
       go out of business. The two main options considered were whether to sell the business, or, in some
       way, to change it to secure a viable future. Without exception, the crisis committee preferred the second
       option, if only because it was clear that it would be very difficult to find a buyer for the company.
       However, no one was sure what it was that they needed to do to change the fortunes of the business.
           In desperation, almost, they approached a lecturer at the local polytechnic who was a friend of
       the Printing Manager. His suggestion was that one of his business studies students should under-
       take a project to examine the company’s options. This took two months, during which the
       Managing Director and Printing Manager worked closely with the student.
           The student’s final report had a dramatic impact on the company. Its main findings were as follows:
       ■   The printing market was expanding rather than contracting. This was mainly due to companies
           recognising the need to promote themselves more and in a better way than in the past.
       ■   The market expansion was mainly at the higher value-added end of the market, in the area of
           high-class, glossy promotional material.
       ■   The newer print bureaux were not as strong competitors as the company had thought. Their product
           quality was both variable and, at best, no better than GK’s. Also, their costs appeared to be higher.
       ■   GK’s existing customer base would prefer to continue to do business with them, but perceived
           them as old-fashioned, lacking in key capabilities (mainly graphic design), slow, and not particu-
           larly flexible.
       ■   GK’s printing equipment was not capable of producing the higher value-added products that
           customers were increasingly demanding.
       These findings were met with some astonishment and a great deal of relief by the crisis commit-
       tee. Without exception they had steeled themselves for a report that would be doom-laden.
       Instead, they could see that a future did exist, and possibly a very profitable one. But some major
       changes would be required. Before making any decisions, however, the Managing Director and
       Printing Manager insisted that the findings should be discussed with the workforce.
Case Study 7 · GK Printers Limited – changing systems and attitudes     385




    Employee relations were very good in the company and, whilst not being paternalistic, the ten-
dency was to see the company almost as an extended family. The print workers, who made up
the majority of the workforce, were all union members, and two of them were prominent activists
in their local union branch. The workforce knew that a review was taking place; it would have
been almost impossible to keep it from them, given the nature of the company, but in any case
the management had been very open about it. Like the crisis committee, the workforce were
relieved that the findings were more optimistic than many had believed possible. They wanted to
know, however, what the management intended to do to change the company in order to take
advantage of the opportunities that appeared available.
    The Managing Director was slightly taken aback by the workforce’s apparent eagerness for
change; he had expected some resistance, especially from the print workers. Instead, the reverse
was the case: the two union activists were the strongest advocates of new equipment. As one
later said: ‘We knew what was happening elsewhere; skilled workers were being replaced by glori-
fied typists. But we also knew that we needed new equipment. The deal we struck with
management was that we would accept anything they bought, but we would be trained for it and
we would operate it’. Indeed, they went beyond this – they actually told the management what to
buy and from whom.
    On the basis of the report from the student, the management constructed a strategy for rejuve-
nating the company. The strategy had three main elements:
1 The appointment of a Marketing and Design Manager to develop the company’s customer
  base and provide a graphic design capability.
2 Upgrading the company’s image. The above appointment was part of this process, but it also
  involved remodelling the company’s frontage and reception areas, redesigning its stationery
  and creating a company logo.
3 Progressively replacing old printing machines with newer, more capable equipment.
Though the company never formally created a ‘vision’of its future, the Managing Director later said:
   After the student’s report I began to see a picture in my own mind of what I would like the company to
   be. I wanted it to be a one-stop shop for all our customers’ printing needs. In the past, if we could not
   do it ourselves, or if we were too busy, we turned people away. Not any more. If we could not do it, we
   subcontracted, just like the graphic designers. But we would ensure that we could do the money busi-
   ness in-house (the high value-added business) and eventually only subcontract out the cheap stuff.

    Therefore, the company began its transformation by the appointment of a Marketing and Design
Manager and upgrading its image. Initially, it did not buy any new equipment, but took the decision to
subcontract work they could not do until such time as the volume of work necessitated new invest-
ment. This allowed them to turn round the business without having to borrow large sums of money.
    Nevertheless, within 12 months, such was the success of the strategy that the company began
buying new equipment. After that, as the economy grew in the 1980s, the company’s fortunes also
grew. By the late 1980s, GK employed 40 staff (double its previous number) and had quadrupled
its turnover to £4 million. In the process, it had managed to improve its profitability substantially.
    In 1989, however, it grew concerned that the increased volume of business, made more com-
plicated by the need both to design as well as print, and to coordinate their subcontracting
activities, was having an adverse effect on customer service. The main problems were controlling
paperwork (especially orders and invoices), the company’s costing system, and production sched-
uling. Therefore they undertook a review of these activities to see how they could be improved.
Thus began the second phase of the transition of GK into a highly competitive printing company.
386   Chapter 12 · Case studies in changing internal relationships and attitudes




       Phase Two: changing systems
       Reasons for change
       As mentioned above, market, product and operational changes meant that the company needed
       to provide a faster and better service to its customers. While much had been done to achieve this,
       in 1989 it was also realised that better business systems were required, especially in the area of
       costing, invoicing and production control.
          Given that GK is only a small company, it was relatively easy for the Managing Director to bring
       together the six people who were responsible for these activities and, in effect, to state the prob-
       lems and give them the authority to come up with a solution.
          The people concerned agreed to meet for two hours each Friday afternoon to review the
       issues involved and come up with options. They were clear that they did not want to rule anything
       out, but set out instead to identify all the available alternatives, and choose the one that suited
       them and the company best.
          After three weeks they had reached a consensus on the root cause of their problems: they
       were all being asked to do more and more without any additional resources. Not only did this
       mean that backlogs occurred, but also that the greater need to communicate across functions,
       which the company now required, was not taking place.
          Given this analysis, their first inclination was to ask for more staff. They also looked at other
       options, however, the main one being to introduce better systems – ones that reduced duplica-
       tion. This raised the additional question: manual or computer systems?
          Eventually they agreed a number of key objectives that any option must be tested against.
       These were that any new system should provide the following:
       ■   a faster and better response to customers’ requests for quotations;
       ■   speedier invoicing and improved debtor control;
       ■   better record-keeping and a reduction in duplication;
       ■   an increase in productivity of clerical staff;
       ■   better control of production, resulting in reduced lead times, and quicker and more reliable
           service to customers;
       ■   system integration.
       Having decided upon these criteria, the people involved then asked the Printing Manager if he
       would approach his contact at the local polytechnic for assistance. This he did, and once again the
       assistance came in the form of a student project. The student evaluated the company’s existing
       operations and looked at alternatives. Her report stated that it was possible to improve the existing
       systems but that this would not allow them to achieve their objectives. Instead, she advocated
       introducing computer-based systems.
           As they had witnessed the successful introduction of computerised printing equipment during
       recent years, staff were neither overawed nor complacent about computerising their systems. They
       discussed with the local polytechnic how best to approach an evaluation of the benefits of com-
       puter systems, and selection of a system.
           The group then prepared a written report for the Managing Director that detailed their investi-
       gations, their initial objectives, and the advice they had received. Their recommendation was that
       the company should invite a number of computer companies to visit them to discuss their needs.
       A long discussion took place between the Managing Director and the group, which resulted even-
       tually in their report being accepted. However, the Managing Director did add one proviso. This
       was that the group should be responsible for deciding whether to computerise, and, if so, what
Case Study 7 · GK Printers Limited – changing systems and attitudes   387




system to select and from whom to purchase it. The Managing Director said he would sit in on
any negotiations that took place with computer companies, but that he would not take the deci-
sion away from them; rather he would bolster their authority by his presence.
   So a number of computer companies were invited to discuss the company’s requirements with
them. In total, some 20 companies visited them. The upshot of these visits was that the company
became convinced that their needs could best be met by purchasing a computerised business
system that could perform the necessary work and integrate their existing manual systems. However,
the cost of this was likely to be between £20,000 and £30,000, which – for a company of GK’s size
– was significant. The Printing Manager, and others, pointed out that such an amount spent on print-
ing equipment would greatly extend their capabilities. Nevertheless, after much discussion, the
decision was taken to go ahead with the purchase of a computerised business system (CBS).
   Though it took a number of meetings to reach this decision, which was subject to much discus-
sion throughout the company, the final decision was almost unanimous. The reason for this was
that the company was performing well on all fronts except in the areas covered by the proposed
changes. Late and inadequate quotations, poor debtor control and erratic delivery performance
were all causing the company problems. These were not as yet major problems, but could be
expected to get worse as the company expanded.

Introduction and development of CBS
Once the decision had been made, the original group were given the responsibility, as the
Managing Director had earlier stated, for specifying and deciding which equipment to purchase.
Their task was made difficult because, whilst it was clear that standard software packages were
suitable for such tasks as sales ledgers, wages and invoicing, special software would need to be
written to accommodate the company’s production control needs. The CBS steering group, as
they jokingly referred to themselves, spent a number of months identifying and writing a specifica-
tion of their exact requirements from a production control system. They then asked the computer
companies to quote for a CBS on the basis of this specification. However, of the original compa-
nies who had shown interest, only two were prepared to provide the bespoke software the
company required. The company wished to ensure that both the hardware and software were
supplied by the same vendor, not only to avoid any incompatibility problems, but also to have
only one organisation responsible for any problem that might arise. Further discussions took place
with the two companies, during which the software specification was further refined, and eventu-
ally a supplier was chosen. The entire process, from the Managing Director raising the issue, to
actually placing the order, took over a year.
    The computer for running the systems, and the standard packages, were delivered almost
immediately, but it was another six months before the production control package was installed.
This was because it had to be specially written. The company ensured that it closely monitored
the writing of the software and that the final package met the specification. It then took some
three months to bring the production control package on line. During this period, manual records
were still kept in parallel to the computerised system. After this, it took a further three months
before the total CBS package was up and running satisfactorily. Therefore, in total, it took two years
from the inception to the completion of the project. Nevertheless, no one regretted the time
spent. As the Managing Director said:
   If you’d told me at the beginning it would take so long I’d have laughed at you. But now we’ve ended
   up with a system that gives us all we want – and more. It's a system that ‘belongs’ to the people who
   work it – it’s not my system, it’s theirs.
388   Chapter 12 · Case studies in changing internal relationships and attitudes




           Though the company only bought one workstation initially, it had specified that the CBS should
       be capable of networking. This was done with the intention that once the CBS had proved itself,
       further workstations would be acquired. Subsequently, three more workstations were purchased
       and the company also doubled the memory capacity of the system. In total, some £35,000 was
       spent on the CBS.
           As with other aspects of the CBS, the company was careful to ensure that adequate training was pro-
       vided to those who would use the system. Once again, this was made easier because it was the users
       who had selected the system, so they knew what it could do and what training they required. This
       ranged from three days to a week, depending upon the users’ requirement. The training was provided by
       the equipment supplier. Training took place in stages, allowing users to become familiar with one aspect
       of the system before being trained on another aspect of it. Training was provided for clerical staff who
       would use and maintain the system, and also to managers who needed to access it for information.
           Staff appeared to take to the CBS very well. Though initially there was an additional workload
       for them in terms of inputting information into the system, they found that it was better and faster
       than the previous manual system. Their workload was no less than before, but they took satisfac-
       tion from being more effective by using ‘their’ system. Obviously, the system had a knock-on
       effect elsewhere in the company, both in the collection and use of information. This adjustment
       appears to have been accomplished with little or no difficulty.

       The benefits
       The CBS did not transform the fortunes of GK; no single system will do that for any company. In
       the areas covered, however, it made a significant contribution to improving the service GK pro-
       vided to its customers and meeting its own requirements.
          The company believed that computerising its business systems brought the following benefits:
       ■   better and more accurate records;
       ■   quicker access to information;
       ■   better control of resources;
       ■   a speedier and more accurate response to quotation requests;
       ■   higher productivity from clerical staff;
       ■   reduced lead times;
       ■   faster and more reliable deliveries;
       ■   a greater integration of business functions;
       ■   an improvement in staff morale and skills.
       Though this looks like an example of successful technical change, it would be wrong to perceive it
       exclusively in this light. Certainly, that is not how those involved saw it. Rather they believed that the
       main benefit gained was the ability to work together more effectively. The CBS assisted this by
       automating some of the more routine elements of their work, thus allowing them to put their skills
       to better use. However, they are the ones who know what customers and the company require, not
       the CBS. Whether their perception is true or not may not matter: the real issue is that they believed
       it to be so. This clearly had a substantial effect on their effectiveness, self-esteem and morale.

       Reasons for success
       To the outsider, at least, this appears to be an almost textbook case of how to manage change.
       However, the staff involved, whilst clearly pleased with their role, were also not uncritical of their
Case Study 7 · GK Printers Limited – changing systems and attitudes    389




performance. With hindsight, they said that they should have completed the process in a year rather
than two years. They also believed that they should have included additional features in the CBS.
     Whilst these criticisms may be true, they are only so from the vantage point of having gone
through the process of change and having gained confidence and experience from it. They also
reflect a key reason for the success of the process: a willingness to be open and critical about them-
selves and their requirements, and a belief that they all needed to be convinced of what was
required before proceeding.
     Nor should the role played by the Managing Director be undervalued. In a company where – a
few years earlier – change, of any sort, was very rare indeed, it took considerable courage for a
senior manager to delegate authority to users. Indeed, at one point he openly told the group that
‘if you succeed, it’s your success – not mine. If you fail, I carry the can – not you.’ This created the
climate of trust and responsibility that made those involved determined to succeed.
     Nevertheless, it would be remiss not to draw attention to several other factors that contributed
to successful change in this instance:
■   The company had a strategy for its future development (or at least a general view of what it
    wanted to become) and therefore was able to take an overview of all areas of its business in
    relation to future objectives.
■   Because the company was strategy-driven, it was able to establish not only where problems lay
    in the company, but also whether the problems were high, low or medium priority. This meant
    that the company could establish that there was a need to improve business systems and that
    this was the priority.
■   The company did not rush into making a decision about what exactly was the problem, what
    solution to adopt or what equipment to purchase.
■   The company clearly documented its requirements, and identified where standard packages
    were sufficient and where bespoke software was required.
■   It carefully selected a supplier in whom it had confidence and with whom it could work closely.
■   It constructed a timetabled implementation plan with clear objectives for the introduction of the CBS.
■   It ensured that the appropriate training was provided.
    Two further points should be stressed about the introduction of the CBS. Firstly, the company
was attempting to move from being an organisation where change was the exception, to one
where it becomes the norm. In such a situation, it is impossible for change to be controlled exclu-
sively by management or ‘experts’. The sheer volume of work would overwhelm them. Without
devolving the responsibility to those affected, change either would not take place or would be
unsuccessful. Nor would it be possible for senior managers to concentrate on the longer-term
strategic aspects of their business. Therefore, sustaining the changes in managerial behaviour that
promote involvement and team work was essential to GK’s prosperity.
    Secondly, devolving responsibility in this way ensures that those who have to live with the
change take ownership of the process, and are committed to it. It allows those involved to
develop their skills and confidence. It also ensures that once the changes do take place, they
become fully operational as rapidly as possible. It should have the additional advantage that it
encourages those concerned to continue to search for improvements.
          Unfortunately, as business increased, thanks to the changes at GK, there was a tendency to
concentrate on output rather than development, and to revert back to old patterns of behaviour. This
was particularly the case with the Managing Director, who felt that the priority was to meet customers’
requirements rather than to involve other managers in decisions that had always been his responsibility.
390   Chapter 12 · Case studies in changing internal relationships and attitudes




       When an organisation is operating successfully, as GK appeared to be, it is difficult to argue that time
       should be spent improving what already, apparently, works well. Similarly, though teamworking had
       proved its usefulness in facilitating major decisions and changes, it was more difficult for managers,
       especially the Managing Director, to appreciate its effectiveness on a day-to-day basis.
          Therefore, though major organisational changes had taken place at GK, changes in managerial
       behaviour were not sustained. By 1993, it was apparent that the pace of improvement was slow-
       ing down under the pressure of work. This situation continued until the beginning of 1994 when,
       once again, the company recognised that it faced serious problems.

       Phase Three: changing attitudes and behaviour
       Accelerating the pace of change
       Unlike many companies, GK’s business continued to grow throughout the early 1990s. Though its
       existing customers were being hit by the recession, it was winning new business that more than
       compensated for this. Nevertheless, in 1993, GK started to become aware that its customers, old
       and new, were becoming increasingly demanding with regard to price and delivery. In addition, there
       were signs that its competitors were beginning to win back some of the work they had lost to GK.
           By the beginning of 1994 it was clear that GK was losing a significant amount of business. This
       was partly due to increased competition, but mainly it was because its customers, in seeking to
       cut their own costs, were reducing the size and frequency of their orders (though when orders
       were placed, they were often required far faster than previously). This presented a double threat
       to GK. Firstly, the fall in overall volumes was having an adverse effect on turnover and profit.
       Secondly, the reduction in size of individual print runs was having an adverse effect on costs
       because, though the actual volume was smaller, the design, order processing and set-up costs
       remained constant. In effect, as volumes decreased, the cost of each printed item increased. In
       addition, there were worrying signs that some customers were using word-processing packages
       and colour printers to produce their own publicity material instead of going to a printer.
           At a time when its customers were facing severe pressure to cut their costs, GK were faced with
       the dilemma of whether to increase its prices to offset rising costs (and risk customers going else-
       where or developing their own facilities), or to maintain or reduce prices and see its profits plunge.
       This was not a situation unique to GK; practically every company in the UK was experiencing a simi-
       lar dilemma. This knowledge, however, did not make it any less painful or any easier to resolve.
           The knee-jerk reaction of many in the company was, ‘If customers want smaller runs, the price
       goes up’. However, the Managing Director and the other managers in GK came reluctantly to
       accept that, whilst the logic was impeccable, the result could be disastrous. After much seemingly
       futile discussion, it was the Marketing and Design Manager who eventually came up with a sug-
       gestion that, though laughed at initially, later turned out to be the key to GK’s survival. He pointed
       out that to maintain its existing volume of business, and perhaps even increase it, GK needed to
       improve on its already good level of service. In particular, it needed to cut costs in order to cut
       prices and improve the efficiency of its internal operations to cut delivery times. The initial reaction
       to these suggestions was, perhaps predictably, very negative. After all, if volumes decrease, unit
       costs must increase because set-up costs are constant; also, an increase in the number of smaller
       print runs actually extends turnaround times for a similar reason – more set-ups are required. So
       the Marketing and Design Manager was attempting to turn the conventional wisdom regarding
       printing on its head. In addition, in some people’s eyes, he was still a newcomer to GK and conse-
       quently he was believed to lack an in-depth knowledge of the printing industry. Finally, GK had
Case Study 7 · GK Printers Limited – changing systems and attitudes   391




made significant strides in improving efficiency and cutting costs, and there was some doubt as to
the scope for any real improvements in these areas.

A false start
Despite the initial adverse comments, the Managing Director began to wonder if it might be possi-
ble to reduce set-up times and costs. If it could, he reasoned, the company would be able to
attract more business, prevent customers seeking in-house solutions, and undermine their com-
petitors. He considered asking for outside assistance again, but instead asked the Marketing and
Design Manager to put forward some suggestions for reducing costs and set-up times. This was
for two reasons. Firstly, he wanted to give him a chance to prove himself to the rest of the team
who, to an extent, thought he still had to learn the ropes. Secondly, the Managing Director wanted
to demonstrate that they now had the managerial talent to dispense with outside assistance.
    The Marketing and Design Manager quickly responded and within a fortnight presented his pro-
posals to the Managing Director and other senior staff. He began by identifying what he saw as
the main problem the company faced:
1 Though there had been a slight decline in the number of individual orders, the actual reduction in
  the volume of business was much greater because customers were ordering shorter print runs.
2 The result of this was that, whilst office staff, marketing, design, administration, etc., were as
  busy as ever, the print shop was short of work, and it was not unusual to see printers sitting
  reading the paper with nothing else to do.
3 However, though the printers were underworked, this did not provide much scope for reducing
  delivery times, because most of GK’s lead time was accounted for by non-printing activities –
  especially design, which could take anything up to two weeks.
Having laid out what he saw as the problem, the Marketing and Design Manager went on to offer
a solution. He argued that the key to solving the company’s problems lay in speeding up design
time. He pointed out that there was always a backlog of design work ranging from one to two
weeks. Given that everything, even repeat orders, went through design, total lead time could be
anything from three to five weeks. Whilst this was considerably better than in the 1980s, it was no
longer acceptable as customers were cutting stock to a minimum. Many customers were asking to
have their printing back within seven days, sometimes even sooner where promotional material
was concerned. The solution, therefore, he argued, was to have more design staff. If one extra
designer was employed and another design workstation purchased, the Marketing and Design
Manager believed that design lead time could be reduced to two or three days.
   The Managing Director and other managers, especially the Printing Manager, who had been
arguing unsuccessfully for new equipment for some time, were taken aback by this proposal. The
analysis, they believed, was correct but the solution, they felt, was an outrageous piece of oppor-
tunism. The case for more design staff had been raised and rejected in the recent past. The
Marketing and Design Manager’s colleagues felt that he was blatantly using the company’s current
problems to empire-build. Not surprisingly, he vigorously denied this. Nevertheless, the meeting
ended acrimoniously and no decision was taken.
   The Managing Director was particularly infuriated, as he had genuinely been expecting an
acceptable solution to emerge from the meeting. Instead, the friendly working atmosphere he
valued, and which he felt he did much to promote, had been shattered. Nor did he see an easy
way to bring his managers back together to seek a cooperative solution. He was also annoyed
392   Chapter 12 · Case studies in changing internal relationships and attitudes




       because he realised that he had made a mistake in asking only one person to put forward their
       view. Not only would a team have avoided favouring one area rather than another; it would not
       even occur to anyone to make the accusation. Having made the mistake, however, he was not
       sure how to remedy it. If a team was set up to examine the options that did not include the
       Marketing and Design Manager, he would rightly see it as a snub and probably attack any solution
       that was put forward. If he was included, it was likely that he would continue to push his proposal
       and the other managers would react badly. His inclination was to impose a solution and tell every-
       one to get on and implement it. Unfortunately, he did not have a solution to impose.

       Towards a new way of working
       After several weeks of indecision, during which tensions within the management team continued
       to rise, the Managing Director decided once again to seek outside assistance. He approached GK’s
       contact at the local polytechnic and, at length and with some passion, explained the situation.
       However, rather than proffering help, as expected, the lecturer stated that the situation was out-
       side his area of expertise. He explained that there seemed little point in offering a ‘technically
       appropriate’ solution, because relations were so bad in the company that, whatever it was, it
       would be met by hostility from some quarters. He pointed out that the success of earlier interven-
       tions was due to achieving unanimity about both the problem and the solution; at present, this
       was unlikely. He did, though, refer the Managing Director to a colleague at the polytechnic who
       was skilled in team-building. Though the Managing Director was sceptical, the lecturer pointed out
       that, working together, there was enough experience in GK to solve its current dilemma. Therefore,
       the issue was how to bring people together, rather than seeking outside solutions.
           The Managing Director met with the team-builder, who impressed him not only with his general
       demeanour of professionalism but also with the impressive array of organisations he had worked with.
       The team-builder said that the process he used was straightforward. Firstly, all the relevant managers
       had to be involved. Secondly, he would meet each of them individually and then, as a group, would
       take them away from the company for two days to work on the problem. Thirdly, each member of the
       team would have to agree to operate in an open and constructive fashion during the two days. This
       meant not only responding positively to each other’s ideas, but also being honest. Lastly, the team
       would agree to reach a commonly-agreed solution by the end of the two days.
           It was on this basis that the team-building exercise went ahead. Though the GK management later
       admitted that the first day had been decidedly uncomfortable, they also agreed that the two days had
       been a success. The proceedings began with the team-builder reporting on his findings from the indi-
       vidual interviews. Though he did not reveal who said what, in a small organisation such as GK, it was
       relatively easy for managers to make a good guess as to the source of particular comments. This was
       one of the reasons why they found the first day uncomfortable.
           The team-builder's report was split into positive and negative findings. On the positive side, there
       was a strong commitment to making the company a success, and common agreement regarding pri-
       orities for change (primarily, cost reduction and increasing responsiveness to customers). On the
       negative side, there was considerable tension between the managers, especially the Printing
       Manager and the Marketing and Design Manager. Underlying this, however, was the style of the
       Managing Director.
           Though on a number of occasions the Managing Director had used teams to make crucial deci-
       sions and had been prepared to consult widely, this was not his normal mode of operation. He
       tended to make decisions either by himself or in consultation with one other manager. He justified
Case Study 7 · GK Printers Limited – changing systems and attitudes     393




this on the grounds that most decisions were not related to overall policy but to particular areas of the
business. If new printing equipment was to be purchased, then this concerned him and the Printing
Manager. If the issue was customers, then the Marketing and Design Manager would be involved.
Decisions concerning finance were, the Managing Director felt, mainly his responsibility. The counter-
argument to this, identified and articulated by the team-builder, was that it inevitably created suspicion
among managers excluded from decisions, and led to accusations of favouritism. All the managers,
other than the Managing Director, favoured a more open and collective style of management.
    The Managing Director was very upset and said so. He believed he had always acted to pro-
mote teamwork and good relations in the company. To be accused of the reverse came as a
shock. He wanted, he said, to ‘clear the air’ there and then. However, the team-builder suggested,
and agreement was eventually reached, that they should all reflect on what had been said, and
return to the issue at the end of the second day. They then moved on to discuss the immediate
problems facing GK: how to reverse the decline in turnover and profitability. With the delicate
matter of the Managing Director’s approach to decision-making out in the open but put to one
side, everyone seemed happy to focus on these problems. For the rest of day one and most of
day two, they alternated between working in two groups and working as one team. The result was
that they reached an agreement on the way forward which they all accepted.
    The main areas of action were very straightforward:
1 GK should meet with its main customers to identify what their needs were and discuss how
  these could best be met. It was felt that not all of a customer’s requirements were urgent, and
  that what was necessary was to identify those that were and agree that they would be dealt
  with in a speedy fashion.
2 The company’s CBS – computerised business system – was much more efficient than the pre-
  vious manual system, but all orders, large or small, urgent and non-urgent, were dealt with in
  the same manner and at the same speed. The same applied to design: though the actual
  design time varied between orders, they were all scheduled and dealt with in the same fash-
  ion. This meant that they all tended to take between one and two weeks, depending on the
  design office’s workload. It was also a similar story when it came to printing and dispatch:
  everything was in the same queue. It was agreed that the entire process from order intake to
  dispatch be examined, with the intention of either reducing it for all orders, or possibly shorten-
  ing it for specific categories of orders.
These actions were to be carried out by two groups comprising managers and employees from
the areas involved, who would report directly to the management team.
   This then left the thorny issue of the Managing Director’s role. Since the issue had been raised
on the first day, he had spoken to the team-builder and his colleagues informally, and had come
to recognise the strength of feeling on the issue, though he did not fully accept their interpretation
of his actions. Nevertheless, he was prepared to amend his management style. He agreed that
there would be regular management team meetings which would deal with all major decisions.
He also agreed that he would not seek to impose a decision on the team unless the managers
themselves could not reach agreement.

Six months later
The investigation of customer requirements and the order-to-dispatch process resulted in changes
that brought significant improvements in the service GK could offer to its customers, and a reduc-
tion in lead times and costs.
394   Chapter 12 · Case studies in changing internal relationships and attitudes




          The company now offers its customers a choice of lead times and prices: normal – a two-week deliv-
       ery and a 5 per cent reduction on the standard prices; accelerated – a one-week delivery charged at
       standard prices; and urgent – a one working day delivery charged at 10 per cent above standard prices.
          GK was able to achieve these improvements owing to three factors:
       1 Understanding what its customers wanted and were prepared to pay for. In speaking to cus-
         tomers, GK also identified what its competitors were offering in terms of prices and deliveries.
       2 In examining the order-to-dispatch process, GK came to appreciate that there was a large
         amount of wasted time involved that could be eliminated with better cooperation between func-
         tions, especially design and printing, and a greater awareness of the need to reduce lead times.
         In examining the entire process in detail and involving everyone in this, some very glaring exam-
         ples of wasted time emerged. For convenience, incoming orders were processed in batches. So
         an order could sit for two days just waiting to be entered on the system. Similar delays were
         identified in dispatch, with completed orders sitting for one or two days waiting either for collec-
         tion or for GK to make a delivery in that part of the city where the customer was located. As the
         dispatch clerk commented, ‘No one told me it was a problem’. Once staff realised it was a prob-
         lem, there was almost a competition to see who could come up with the best suggestion.
             Most of this did not require additional expenditure, merely better communication and a will-
         ingness to help each other. Reducing set-up time on the printing presses did require some
         modest expenditure, but this led to reductions in set-up times of between 50 and 80 per cent.
         Some small expenditure was also required to modify the computer system to cope with the
         new three-tier delivery price system.
       3 The design office made a number of changes to the way it operated which speeded up its activi-
         ties. Nevertheless, it was recognised that there was also a capacity shortage: they simply had more
         work than they could cope with. Much of the work was simple and did not need a fully-qualified
         designer; and only about 50 per cent of a designer’s time was actually spent on the computer.
         Therefore, it was decided to employ someone else to perform the more simple design tasks.
              At first, GK was going to recruit a new member of staff for this post, but the printers, who
         had always wanted to be involved in design, suggested that they might do this. When the sug-
         gestion was discussed, a number of possibilities opened up, including that simple but urgent
         jobs be given straight to a printer who would undertake the entire design and printing process
         at one go. The actual mechanics of this were difficult to work out, and many practical obstacles
         were apparent, but GK nonetheless decided to undertake a trial with one printer in order to
         identify the difficulties and evaluate the benefits.
       In addition to these changes, the management team, after some initial difficulties (such as identi-
       fying what constituted a major decision), found that working together and having all information
       out in the open reduced the tension, not only between individual managers but between the indi-
       vidual functions as well.

       Going online
       For the most part, GK’s fortunes rose steadily throughout the latter half of the 1990s, despite
       much talk of an imminent recession. They developed strong partnerships with key customers and
       attracted new ones. They acquired a reputation as a forward-looking company that was responsive
       to its customers’ needs. However, they developed one area of their business that grew much
       faster than the rest and which promised much for the future: developing and designing websites
       for its customers.
Case Study 7 · GK Printers Limited – changing systems and attitudes   395




   As with so much of GK’s development, there seemed to be an almost accidental element to its
website business. In the mid-1990s, one of its main customers decided to conduct much of its
business, especially in terms of orders and invoices, electronically. GK had no alternative but to
accommodate this. The Managing Director gave the task of developing electronic communications
to one of the graphic designers who was very keen on computing; not only did he have his own
website, but he had also developed one for his local athletics club.
   Consequently, as well as allowing them to receive and send information electronically, he also
constructed a website for GK. Being a graphic designer, and an enthusiast, what he produced was a
state-of-the-art website that provided an excellent showcase for GK’s capabilities. Almost before
most people in the company realised they had a website, or understood what one was, its cus-
tomers were asking GK to do the same for them. At first, the Managing Director thought that this
was something of a diversion from the company’s main activities. However, when he saw what cus-
tomers were prepared to pay, and he realised that, in essence, it was a logical extension of printing
publicity material, he created a separate department under the graphic designer to develop the
website business. It became the fastest-growing part of GK and by far its most profitable.

Summary
After the first two phases of changes at GK, the company felt it could rightly take pride in how it
had responded to the situation in which it had found itself. Rather than falling into a spiral of
decline, as seemed possible, it had reinvigorated itself. It had introduced new equipment and, ini-
tially at least, developed a new sense of cooperation. However, its own success began to eat away
at some of its gains. The pressures of day-to-day business began to take precedence over both
improvement activities and cooperation. In particular, the Managing Director went back to taking
decisions either without consulting anyone else or only in consultation with the ‘appropriate’ man-
ager. In effect, though the company had maintained the operational changes, it had failed to
maintain behavioural changes, especially those associated with teamwork, cooperation and dele-
gation. Therefore, the first two phases of the company’s turnaround can be characterised by
successful operational changes but less successful behavioural changes.
    The results of the failure to sustain behavioural changes were as follows:
■   GK failed to adopt a continuous improvement approach.
■   Poor coordination and cooperation led to inefficiencies in the processing and dispatch of work.
■   Most importantly, an undercurrent of discontent and fighting for position arose among man-
    agers, which made it difficult to reach agreement about how the organisation should respond
    to its changed circumstances.
For these reasons, the key action in the third phase of the transformation of GK was not any of the
operational changes, but the changes in attitudes among managers and other staff regarding
cooperation, and in particular, the Managing Director’s belated conversion to team-based decision-
making. It was the new element of cooperation that allowed GK successfully to identify what to
change and how to change it. The greater teamwork, and trust, also created the environment that
allowed the company’s website business to be developed by making people more open to new
ideas and less suspicious of others’ motives.
396   Chapter 12 · Case studies in changing internal relationships and attitudes


Conclusions
               In the review of strategy and change management in Chapters 6–10, it was argued that
               whilst approaches to strategy and change needed to be matched to the constraints
               under which an organisation operated, these constraints were themselves amenable to
               change and in any case could conflict with each other. This means that the freedom of
               action or manoeuvre of managers is potentially very significant. It was also argued that
               whilst organisations might have a preference for a particular approach to change, in
               practice they used a variety of approaches, often at the same time. In the three case
               studies we have examined in this chapter, we can see managerial choice in action both
               in what they chose to do and how they chose to do it.
                  In the Volvo study, we can see that managers made a determined and apparently suc-
               cessful attempt to break away from the industry standard approach to car assembly.
               However, in challenging and changing a powerful constraint on their freedom of
               manoeuvre, they were very much in tune with societal, environmental and, at least in
               some instances, their own orientations. Also, there were parallel changes in the struc-
               ture of the organisation towards decentralisation and flexibility, which supported and
               made more appropriate the emergent and open-ended approach to strategy used by
               Volvo. However, Volvo Car’s takeover by Ford does pose a serious challenge to Volvo’s
               approach to work organisation. Given that Volvo’s approach represents a clear and
               decisive break with Fordist methods, it will be interesting to see whether or how the
               two can coexist over the long term.
                  The XYZ study is another case where an organisation made significant changes to
               its culture, operation and structure over a number of years. The impetus for the
               changes came with the appointment of a new Managing Director. The new Managing
               Director, supported by the parent company, saw the need to transform radically how
               XYZ worked if it was to improve its performance. The Managing Director saw that
               the changes he believed were necessary within the company paralleled changes that
               were being attempted across the construction industry as whole. Therefore, to an
               extent, he was trying to align the company to the changing nature of the industry. In
               order to do that, however, he had to overcome significant cultural and structural con-
               straints within the company and saw that the former needed to be tackled before the
               latter could be effectively changed. Therefore, he embarked on a stream of Emergent,
               open-ended and, to an extent, experimental changes aimed at changing the company’s
               culture and improving both managerial and staff competencies. Within this stream of
               Emergent change, however, there was also a significant role for Planned change, as the
               case study shows.
                  The case of GK Printers is somewhat different. It is much more difficult to perceive
               any distinct societal or industry constraints on the organisation. Both environmental and
               organisational constraints were clearly apparent, however, and the changes that took
               place were to a greater or lesser extent aimed at both changing and harmonising these
               constraints. One reason for the internal changes in the company was to tie customers
               closer to the company, and thus reduce the uncertainty present in the environment. As
               with Volvo and XYZ, GK's strategy emerged rather than being pre-planned, but it seems
               to have been much more stop–go than either of the other companies. Also, its approach
               to change appears to be more in line with the Planned approach than the Emergent.
                  Therefore, as far as managerial choice, strategy development and change management
               are concerned, the case studies provide some interesting and thought-provoking insights:
Test your learning   397

        ■   Managerial freedom is clearly constrained but this does not mean that managers
            cannot break out of or change these constraints. In so doing, however, the tendency
            appears to be to resolve or reduce conflict between constraints rather than neces-
            sarily to rewrite the managerial rule book completely.
        ■   The process of strategy development and change management in these cases was
            mainly Emergent, open-ended, and in some instances opportunistic. However, sig-
            nificant examples of Planned change were also evident. In addition, it can be seen
            that managerial conflict and politics played a part in decision-making and, in the
            case of XYZ, the change of Managing Director appeared to be a necessary precon-
            dition for wider organisational changes.
        ■   The case studies show that there is a role for both Planned and Emergent change.
            Planned change as such, however, appears to be less effective than Emergent
            change in achieving sustained organisational transformation over time. Planned
            change programmes tend to have a finite duration and are aimed at achieving a
            particular and specific objective. Emergent change, on the other hand, is open-
            ended both in terms of timescale and objectives.



Test your learning

      ■ Short answer questions
        1 Briefly describe the main reasons for Volvo's original move to Job Design.

        2 What were the trade unions’ main concerns regarding Volvo's move to Job Design?

        3 List the main benefits XYZ expected to gain from changes to its structure.

        4 Identify the main factors which contributed to XYZ’s success in changing its organisa-
          tional structure.

        5 Briefly discuss one example of employee involvement at GK Printers.

        6 Identify three ways in which the managers at GK can be seen to have changed their style
          from autocratic to participative.



      ■ Essay questions
        1 Discuss the following statement: the stages of workplace reform at Volvo involve a
          cumulative process of innovation, with a trajectory which adds up to a more or less
          definitive break with Fordism.

        2 To what extent does the XYZ study show that Emergent and Planned change are comple-
          mentary rather than competing approaches to change?
        3 Does the GK case study represent an example of emergent change, or of ad hoc and
          reactive management?
Chapter 13

Case studies in changing
external relationships


  Learning objectives
  After studying the case studies in this chapter, you should be able to:
  ■   recognise the pressures that have led to the growth in outsourcing by both
      private and public sector organisations;
  ■   understand why private sector organisations find it easier to work more
      closely with their customers and suppliers than do public sector bodies;
  ■   appreciate that changing external relationships can require significant
      changes in internal relationships;
  ■   describe some of the mechanisms used by organisations to bring about
      changes in their external relationships;
  ■   discuss how changes at one level between two firms may not always result in
      changes at other levels;
  ■   show how customers and suppliers can overcome suspicion and achieve
      mutual gains;
  ■   appreciate the need for outsourcing to be viewed as a strategic activity
      requiring strong and consistent management.




 Introduction
The previous two chapters have presented examples of strategies and initiatives
that have resulted in new internal relationships within organisations through struc-
tural, operational, cultural and behavioural change. It is not only the relationships
within organisations that are changing, however, but also the relationships between
organisations. There is a great deal of evidence to show that the outsourcing of
activities previously done in-house is increasingly taking over from vertical integra-
tion as the preferred approach to organising the provision of many goods,
processes and services (Domberger, 1998; Gay and Essinger, 2000; Takac, 1993).
In the private sector, as Chapter 3 showed, the upsurge in outsourcing over the last
20 years has been fuelled by arguments from management gurus and leading aca-
demics that an organisation’s competitive advantage stems from its ability to
Introduction   399

identify, concentrate on and develop its core competences and activities, and out-
source anything that is non-core. In the public sector, the pressure to outsource has
grown alongside the pressure to privatise. As Case Study 4 in Chapter 11 argued, the
rising tide of privatisation over the last 20 years or so has been led by both ideologi-
cal and practical concerns, both of which have focused on reducing the cost of
providing public services through the greater use of market mechanisms.
   In the private sector, the greater emphasis on outsourcing has led companies to
review their relationships with both suppliers and customers in order to develop
closer and more effective links. As Case Studies 8 and 9 in this chapter will show, this
is usually accompanied or preceded by internal changes within either the supplier, the
customer or both. These changes are taking place due to a growing climate of opinion
that customers, suppliers and even rivals working cooperatively have considerable
advantages over the more traditional adversarial relationships (Hines, 1994;
Lamming, 1993; Saunders, 1997). Though this move has been led by the automotive
and electronics industries, the concept has spread into many other sectors as well
(Burnes and New, 1997; Christopher, 1998; New and Burnes, 1998).
   Though there is no universally-agreed definition of customer–supplier partnerships,
Partnership Sourcing Ltd (1991b: 2), the UK body established by government and
industry to promote the concept, appears to have captured its essence by defining it as
a situation:

 … where customers and suppliers develop such a close and long-term relationship that the
 two work together as partners. It isn’t philanthropy: the aim is to secure the best possible
 commercial advantage. The principle is that teamwork is better than combat. If the end-cus-
 tomer is to be best served, then the parties to a deal must work together – and both must win.
 Partnership sourcing works because both parties have an interest in each other’s success.


   The move to more cooperative and stable relationships between customers and
suppliers is not merely a case of adjustments at the organisational interface. Rather, to
be successful, it requires more fundamental changes in both customers and suppliers.
The three case studies in this chapter reveal how such partnerships work in practice
and, in particular, illustrate how the concept requires not only changes in the relation-
ships between organisations but also attitudinal, behavioural and structural changes
within them.
   As Case Study 10 will show, outsourcing is as popular in the public sector as the
private sector. However, whilst in the private sector it is seen as a strategic initiative
designed to allow organisations to become more competitive by concentrating on
their core competences, in the public sector, it is seen more as a cost-cutting measure.
Most public bodies in the UK are now required by law to outsource their activities
where to do so would lead to cost savings. They are also constrained in how they
carry this process out and the sort of relationships they develop with their suppliers.
The result of this is that outsourcing in the public sector is more an operational than
a strategic activity. Nor is outsourcing leading to notable changes in internal relation-
ships or external relationships with suppliers, which still tend more towards the
adversarial than partnership.
   Each of the three studies relates to a different aspect of the partnership process. Case
Study 8 deals with the consequences of Rover’s decision to outsource the assembly of
400   Chapter 13 · Case studies in changing external relationships

               suspension modules to TRW. It demonstrates that such initiatives, through closer opera-
               tional integration, can bring great benefits but that these can be jeopardised if they are
               not also accompanied by closer strategic relationships. Case Study 9 shows that the
               move to develop new relationships is not just driven by customers. In this instance a
               supplier, Speedy Stationers, took the first step. It recognised that, in its case, the partner-
               ship approach was not just a means of providing a better service to its customers; it
               could also be an effective mechanism for securing increased business. The case study
               recounts how Speedy came to this conclusion, the steps it took to convince one of its
               customers to enter into a partnership and to cooperate, and the resulting changes and
               benefits. Case Study 10 looks at the approach to outsourcing of a UK police force, and
               shows the process it is required to undertake to evaluate whether or not its activities
               should be outsourced. It also shows that its relations with suppliers are constrained by
               the outsourcing rules and regulations laid down by government to the extent that it
               appears to be treated as a relatively low-grade administrative activity.
                  The chapter concludes by arguing that though much attention has been given to
               the creation of new internal relationships and structures as a mechanism for coping
               with environmental turbulence and uncertainty, changes in external relationships can
               also play an important role in this process. Consequently, partnerships can help
               organisations to restore, to an extent, a degree of stability and predictability to their
               lives. However, as far as the public sector is concerned, the constraints under which it
               operates may instead mean that outsourcing is creating greater uncertainty rather
               than being used as a means of reducing it.
                  The conclusion also points out that, as the case of PoliceCo shows, it is possible to
               quantify the short-term, narrow cost-cutting benefits of outsourcing; on the other
               hand, as the Rover–TRW case illustrates, it is very difficult for organisations to quan-
               tify in advance the longer-term benefits of developing partnerships. The Rover and
               Speedy examples show that early benefits can also accrue. Therefore, the move to
               new customer–supplier relations is not driven by rational and quantitative decision-
               making. Rather, the move to partnership requires an act of faith based on an
               instinctive and philosophical belief that the old methods do not work and that the
               game requires new rules, rules which cannot be written in advance but which emerge
               as the game unfolds. This, of course, may be why public sector organisations, which
               are rightly obliged to demonstrate openly that their suppliers are providing the best
               value for money, have difficulty in adopting more partnership-based approaches
               to purchasing.
Case Study 8 · Rover–TRW – operational integration     401


Case Study 8

 Rover–TRW – operational integration1

 Background
 This case study concerns the relationship between Rover Group and one of its largest suppliers,
 TRW. The case study focuses on Rover’s decision to outsource the assembly of front suspension
 modules to TRW and the benefits and difficulties which ensued. It shows that outsourcing sub-
 assemblies can bring great operational benefits when managed effectively by both parties, but
 that these may be jeopardised if this cooperation fails to extend to a more strategic level.
     Details of Rover’s history are relatively well known. It should be noted, however, that from the
 early 1980s, Rover was developing more cooperative internal working relationships and that it
 gradually began to extend this approach to its suppliers (see Grove, 1998, for further details).
 Though it has now been split into separate businesses, during the 1990s, TRW was one of the
 world’s largest manufacturing companies. Founded in 1901, and with its Headquarters in
 Cleveland, Ohio, TRW was an American-owned company with a turnover of some $12 billion and
 a workforce in excess of 80,000 people by 1999. TRW was organised into two divisions: Space,
 Avionics, Defence and Communications; and Automotive. The automotive business was the
 largest division, accounting for over 60 per cent of sales and employees.
     TRW Automotive’s European sales were well over $1 billion in 1999. Some 23 per cent of this
 came from its UK business (TRW Steering Systems Ltd) which operated on five sites, the main
 one being at Resolven in Wales, employing 1,400 people and, as its name states, manufactures
 steering systems. Its main customers were Rover, Honda, Nissan, Ford and Volvo. Though TRW
 had a close working relationship with all these companies, it enjoyed a particularly strong and
 long-standing relationship with the Rover Group and was Rover’s second biggest supplier.
     TRW’s steering systems business began supplying the forerunners of Rover over 60 years ago. A
 major milestone in the relationship came in 1959 when it was awarded the contract to supply the
 rack-and-pinion steering for the then revolutionary Mini. This was the first time rack-and-pinion
 steering had been fitted as standard on any mass-produced vehicle. During the 1960s and 1970s,
 British Leyland (as Rover were then called) had its own in-house facility for manufacturing both
 power-assisted and manual rack-and-pinion steering. In 1980, however, this was closed down and
 TRW took over responsibility for supplying all British Leyland’s steering requirements.
     In 1989, this relationship was further strengthened when Rover decided to outsource the
 assembly of front suspension modules, of which the steering gear was the key component. TRW
 was asked to bid for this work, was awarded the contract and began supplying the suspension
 modules in May 1989. In order to meet Rover’s exacting standards, TRW set up a new assembly
 facility located at Frankley, about two miles from Rover’s Longbridge plant.

 The origins of Frankley
 The main reason for Rover’s decision in 1988 to outsource the assembly of front suspension mod-
 ules, and consequently for TRW to establish a new facility at Frankley, was quite straightforward:
 Rover needed the space. The introduction and success of new models meant that Rover no longer
 had the space to carry out this assembly operation at its Longbridge plant. A subsidiary reason was
 that Rover, like most car companies at the time, believed that modular assembly of cars, from

 1 The research on which this case study is based was funded by AT Kearney Ltd and carried out jointly with Dr Steve
   New of Hertford College, Oxford University (see Burnes and New, 1996, for further details.
402   Chapter 13 · Case studies in changing external relationships




       outsourced sub-assemblies, was a strong possibility for the future, and this initiative with TRW gave
       the company the opportunity to assess the benefits of this approach.
          Rover invited TRW and one other existing supplier to put forward proposals for running the new
       facility to assemble front suspension modules. TRW saw this as a major opportunity and
       responded in a very positive way. The main reasons for this were as follows:
       ■   They wanted to continue to supply direct to Rover rather than through another supplier.
       ■   TRW in the USA had (unsuccessfully) bid for a similar initiative with Ford, and could see the bene-
           fits it could bring to the business in terms of future growth and becoming ‘essential’ to the
           customer. In addition, TRW also thought that modular assembly was the future for the car industry.
       Therefore, not only was TRW responsive to Rover’s suggestion, but it could draw on its experience
       with Ford in preparing its proposal. TRW showed Rover the proposal they had put to Ford in the
       United States and prepared a business plan for the new operation. A succession of increasingly
       detailed meetings ensued with both Rover and their (then) partner, Honda.
          Rover moved very quickly in making a decision and awarded the contract to TRW. This was mainly
       because Rover were impressed with TRW’s plans and proposals, but also because they felt that its size
       and resources (of both expertise and money) made it a suitable partner in this instance. An additional
       factor was that TRW’s steering gear was by far the most complex and expensive part of the suspension
       modules.
          Planning and proposing was one thing; getting started was quite another. Rover were working
       to a very tight timetable and needed both the space and the suspension modules for a range of
       new cars it was introducing. One of the conditions of the contract was that TRW had to establish
       an assembly operation within a few miles of the Longbridge Plant. Therefore, in late 1988–early
       1989, TRW found itself pursuing two major activities simultaneously:
       1 developing its own approach to suspension module assembly;
       2 finding a site and recruiting staff for the new facility.

       Developing its own approach to suspension module assembly
       After a rigorous selection process, three supervisors were recruited from TRW’s Cleveden plant to
       run the new operation. One of the supervisors was appointed as manager for the new facility; in
       essence, however, the three were jointly responsible for the new product and new facility, and
       operated very much as a team. This cooperative approach was new to TRW but it was clear that
       everyone needed to work closely together if the project was to be successful. TRW had no previ-
       ous experience of assembling suspension modules and, to a large extent, the manager and two
       supervisors were thrown in at the deep end. As one of the three put it, ‘We were given a bag of
       parts and told to assemble them.’ Initially based at TRW’s main UK site at Resolven, they worked
       closely with an engineer from Rover to learn what Rover’s requirements were in terms of the sus-
       pension modules and then they began to experiment with different approaches to assembly.
           All three had previously been on TRW’s First Line Supervisors course, and the Rover work gave
       them the opportunity to utilise some of the ideas they had learnt. In particular, they chose to adopt
       a ‘greenfield’ approach (starting from scratch) rather than building on existing TRW/Rover practices.
       Despite the tight timetable, they were allowed to experiment, and through a process of trial and
       error began to see how the assembly process could be best organised. The essence of their
       approach was to focus on continuous improvement by developing teams, encouraging initiative
       and ensuring that change was driven by and with the full support of the people on the assembly
Case Study 8 · Rover–TRW – operational integration   403




line. Since it began production in 1989, the Frankley operation has been transformed out of all
recognition. Manual assembly has given way to semi-automation, they have achieved zero
defects, costs and assembly times have been reduced considerably and, regardless of the inher-
ent instability of customer schedules, they always deliver what the customer wants, when it wants
it and in the correct order.

Finding a site and recruiting staff
At the same time that TRW were undertaking trial assemblies at Resolven, it located a site at Frankley,
near Longbridge, that was ideal for their requirements, and the assembly operation was moved there
in May 1989. Though they had tried to recruit from within, the only TRW staff who transferred to
Frankley were the manager and the two supervisors. All the rest (some 30 staff initially) were recruited
locally. The recruitment procedures were very structured and rigorous. They wanted skilled and flexible
staff who would fit into a teamworking environment and who were prepared to contribute ideas and
give commitment. Above all, they wanted to build an operation that was dedicated to meeting the
customer’s requirements fully, no matter how demanding or difficult these might be.
    Though they had the advantage of starting out with a greenfield site and a workforce that had
few preconceptions or restrictions, it also meant that everyone had to be trained from scratch.

Frankley – the early years
Mainly drawing on their own ideas and resources but working hard to understand Rover’s needs,
Frankley began to develop itself into a world-class assembly plant. The Frankley operation started
out with two shifts and eventually moved to three in order to match Rover’s own assembly opera-
tion. In order both to understand the customer’s needs and to develop an effective working
relationship, a great deal of time (by all concerned) was spent at the Rover plant. Indeed, it became
compulsory for all new recruits to Frankley to spend a period working at Rover before taking up
their appointment at Frankley.
    Year on year, Frankley has consistently and diligently reduced costs and lead times, and
improved quality. The essence of its ability to do this revolves around three core principles:
■   understanding what Rover wants and giving it to them;
■   teamwork and involvement;
■   continuous improvement.
    The biggest difficulty Frankley faced was in matching what it produced to Rover’s actual build
requirements. The steering assembly has 39 derivatives, and it is far from easy to ensure that the
mix of derivatives TRW dispatches matches the mix of cars Rover is assembling at any one time.
Rover did and does provide Frankley with a monthly schedule and a ten-day rolling programme
(five days firm and five tentative). This allows TRW to schedule its suppliers. However, the key
information, originally at least, was the mix of cars going into the paint shop (the step immediately
prior to assembly). This provided TRW with only 12 hours’ notice of the model mix that Rover
planned to assemble.
    Initially, therefore, Frankley had to gear itself to working on 12 hours’ notice. Owing to damage
during painting, however, what went into the paintshop was not always what went down the
assembly line. Therefore, in the first year of operation, though Frankley delivered to the pre-paint
shop schedule, it found that what it delivered was not always what Rover was actually assembling.
    In many instances, the customer and supplier would have argued about whose fault this was.
Instead, Frankley and Rover worked to resolve the problem. It was eventually agreed that instead
404   Chapter 13 · Case studies in changing external relationships




       of informing Frankley of the mix that went into the paint shop, they should tell them what undam-
       aged cars came out. This represented a major step forward in terms of Rover trusting its suppliers.
       Rover, like most car companies, had been reluctant to give too much information to its suppliers.
       This was not only because information was seen as power, but also because it would be Rover’s
       line managers who would have to take responsibility if the information was wrong. Nevertheless,
                                                                                1
       Rover did provide the information. It did mean that Frankley only had 4 – hours’ notice of Rover’s
                                                                                2
       requirements rather than the 12 hours previously, but at least the schedule was much more accu-
       rate. Even this was not foolproof, however, and eventually they moved to a system whereby Rover
                                                 1
       would notify them of the build mix just 2 – hours before the parts were required.
                                                 2
           Working in this way does give Frankley exact information on what is required and they now
       know that if they build a particular suspension module it will be used. To get to this position has
       required two major efforts, however:
       ■   building trust between Rover and Frankley, so that both have faith in each other and are pre-
           pared to provide information and make commitments without feeling that either is leaving itself
           open to abuse;
       ■   establishing an assembly operation that is not only capable of building a wide product range in
           an efficient and effective manner, but which can also do so at very short notice. To achieve this
           required a major effort by Frankley staff.
       Though this approach has obvious advantages to Rover, it also has considerable advantages to
       Frankley. Firstly, it means that it must run a lean and efficient operation which operates with a
       ‘right first time’ approach. Secondly, it has no finished stocks and only two days’ worth of compo-
       nent stocks (down from eight days in 1994).
           The Frankley site has clearly developed an approach to assembly and customer satisfaction that
       owes more to Japanese than Western methods. One recent Japanese visitor, however, was heard
       to remark that Frankley was not as good as Japanese plants … it was better!
           TRW has not achieved this overnight, and in some instances has had to modify its initial ideas.
       Originally, TRW looked on the Frankley site merely as an assembly plant. Most of the support serv-
       ices were dealt with by Resolven. Though this made Frankley a very ‘lean’ enterprise, it also meant
       that the lack of on-site, dedicated resources restricted its ability to improve, especially in the areas
       of process improvement and supplier development. Over time, therefore, Frankley came to
       acquire its own support staff rather than having to rely on Resolven.
           The benefits of this are clear in terms of the efficiency of the Frankley assembly operation.
       Though less visible, the benefits of materials management being based at Frankley have also
       been substantial; this was forced on them by the necessity of having to build the same type of
       relationship with its suppliers that it enjoys with Rover. Nevertheless, originally this did not look as
       though it would be necessary.

       Developing suppliers
       Taking over an operation from another company and re-creating it from scratch is never going to
       be easy, but when it also involves managing that company’s suppliers on their behalf, some diffi-
       culty can be anticipated, to say the least. TRW had few illusions that suppliers selected by and
       working for Rover, and who would continue to see Rover as their customer, would welcome being
       managed by an ‘intermediary’. The reality, however, was even more difficult than TRW anticipated.
Case Study 8 · Rover–TRW – operational integration   405




   Though communication and cooperation between TRW and Rover was constructive from the
outset, the one area Rover seemed most reluctant to discuss with TRW was the handover and
management of the other suspension module component suppliers. Consequently, when TRW
began assembling the suspension modules at Frankley, none of the suppliers had been informed
of the change. TRW found that not only had Rover not informed them, but that some companies
did not even know who TRW was. The suppliers still considered themselves as working directly for
Rover, and were more than somewhat resentful of TRW’s new role.
   Initially, TRW managed the suppliers from its main site at Resolven, but it soon became appar-
ent that if the supplier–Frankley interface was to operate effectively, responsibility for suppliers
would have to reside at Frankley. To achieve this, one of the original Frankley supervisors was
made responsible for managing suppliers. His first task was to visit all the suppliers and explain the
new arrangement to them. Though some began to adopt a more cooperative attitude to TRW,
others still tended to ignore it and liaised with Rover instead. However, with Rover’s assistance,
Frankley gradually came to build a working relationship with the Rover-nominated suppliers.
Nevertheless, when it came to know the suppliers better, two issues emerged:
1 Though Frankley was tailoring its production and deliveries to Rover’s assembly programme,
  suppliers still tended to operate on a ‘boom or bust’ basis, i.e. they would deliver too much or
  too little.
2 A number of the suppliers did not meet TRW’s quality standards.
Given that the suppliers were nominated by Rover, TRW was not in a position to change them.
Therefore, it had no alternative but to work with the suppliers to improve them. Frankley set out to
build the same relationship with the suppliers that it was developing with Rover. Initially, presenta-
tions were made to all the suppliers explaining who TRW was, what Rover required of the Frankley
operation, and what Frankley required of the suppliers. This was followed by reviews of each sup-
plier’s performance with action plans being agreed to resolve any problems and concerns. Though
no one would pretend that everything always ran smoothly or that continuous improvement was
not expected, supplier performance became far better than it was in 1989.

The new contract
Up to 1994, the relationship between Rover and TRW continued to improve and there were very
few operational concerns. In 1994, however, Rover began to discuss the replacement of the
200/400 series cars for which Frankley supplied the suspension modules. Though TRW expected
stiff bargaining over the terms of the new contract, it did not expect Rover to question whether
TRW should get the contract or not. From TRW’s perspective, it had more than exceeded Rover’s
expectations when the original contract was awarded in 1989. In the intervening period, however,
there had been a number of intense and not always good-tempered negotiations regarding the
pricing of the contract and TRW had, reluctantly, made a number of downward adjustments to the
original contract price.
    It should also be said, though Rover did not appear to be fully aware of this, that TRW had made
better profits from the Frankley operation than it originally expected. In the main, this was because
Frankley was much more efficient than Rover had been at assembling the suspension modules, the
volume of products was greater than originally assumed, and the overhead charges were generous.
For its part, Rover was more concerned with the latter issue rather than the first two. It felt that
TRW’s costing system exaggerated the true cost of the Frankley operation. TRW’s procedure was to
406   Chapter 13 · Case studies in changing external relationships




       add a management fee to the direct cost of the Frankley operation and so arrive at what they
       believed was a true cost to themselves. Rover, however, disputed the size of this fee and though, as
       mentioned, TRW did reduce the price it originally agreed with Rover, when the contract came up for
       renewal, some senior Rover managers were so concerned at the situation that they wanted to take
       the work back in-house.
          TRW found itself in a position where it had to justify its accountancy system (which was stan-
       dard throughout TRW), and also convince Rover that it could continue to offer it a better service
       than could be achieved by taking the work back in-house. Though the latter was not difficult to do,
       the former took some hard negotiations to achieve. In the end, TRW made a considerable reduc-
       tion in its Frankley management fee and the new contract was awarded to TRW.
          The difficulties did not end there, however. As Rover introduced new vehicles, it redesigned the
       suspension modules, which necessitated changes to component suppliers. As was the case origi-
       nally, Rover would not let TRW enter a dialogue with suppliers until actual assembly began.
       Nevertheless, building on its earlier experience, TRW has become extremely proficient at overcoming
       any resistance amongst new suppliers and is able rapidly to inculcate them in the TRW approach.

       Summary
       The Rover–TRW case study clearly shows that the outsourcing of major sub-assemblies can bring
       important benefits to both customers and suppliers, particularly at an operational level. It also
       shows that the process is far from easy, and that even after many years major misunderstandings
       can occur which can threaten the relationship. The Rover–TRW experience can be judged at two
       levels – operational and strategic. At the operational level, it can be viewed as follows:
       ■   The Frankley staff were given a clear, though by no means simple, task: they had to meet
           Rover’s needs for suspension modules. In so doing, they were allowed, and encouraged, to use
           their own initiative.
       ■   Though Frankley met some initial scepticism from Rover’s assembly staff, whose cooperation
           they needed, it consistently and with real determination set out to identify what Rover needed,
           to establish where the obstacles lay and to overcome these.
       ■   This was neither a one-off effort nor limited to a few managers. Instead, it was a process of
           continuous improvement by all concerned.
       ■   There were three key factors in this: (a) the selection and training of staff; (b) allowing staff to inter-
           face directly with their customer, thus ensuring rapid performance feedback; and (c) establishing a
           ‘greenfield’ mentality, which meant that they all started from scratch and without preconceptions
           regarding how best to organise assembly or the nature of relations with their customer.
       At the strategic level, however, a different picture emerged:
       ■   Though one of the original objectives – albeit of secondary importance – was for both parties to
           assess the benefits of and approach to contracting out major sub-assemblies, this appears to have
           been quickly forgotten. Instead, the initiative came to be seen as a purely operational matter.
       ■   As the relationship developed, it was clear that neither partner had had any real idea of how to
           cost such an operation. Originally, Rover had felt that it had negotiated a good deal because it
           was getting better supplies at lower cost. Likewise, TRW were happy to win the contract and felt
           that it would make a profit because it would be more efficient than Rover.
       ■   Neither party anticipated that the Frankley operation would be able to make the large perform-
           ance improvements that it did. When Rover realised how much more efficient Frankley was
           than it had been itself, however, it began to question the price it was paying. TRW, for its part,
           was extremely pleased by the return on its investment, though reluctant to reduce its prices.
Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd   407




 ■   This led to a series of acrimonious confrontations, culminating in Rover seriously considering
     taking the work back in-house. Fortunately for both parties, the issue was resolved.
     Nevertheless, it demonstrated that though operationally Rover and TRW were working closely
     in partnership, at a more senior level they were not. Yet, if they had been, not only might they
     have avoided much acrimony, but they would also have learned more about how to run such
     collaborations in the future.
    In this instance, it is important to note that neither Rover nor TRW set out to achieve strategic
 and high-level cooperation per se. Rather, Rover were motivated, primarily, by operational consid-
 erations and though TRW did see strategic advantage, its main aim was to maintain first-tier
 supplier status. This may explain why both parties made enormous strides forward in operational
 integration but failed to make similar progress in terms of strategic integration and trust.




Case Study 9


 Speedy Stationers Ltd and UTL (Turbines) Ltd –
 supplier-driven change2
 Background
 In the vast majority of cases, it is customers who take the initiative to change relationships rather
 than suppliers. This is for quite obvious reasons to do with power (it is the customer who has the
 money and who decides what to purchase and from whom) and experience (there are very few
 examples of how suppliers can influence customers). Unlike the Rover study, however, where it
 was the customers who made the first move, this case study deals with organisational change
 driven by a supplier.
    This case examines the development of a partnership between Speedy Stationers Ltd and UTL
 (Turbines) Ltd, whereby the former took responsibility for the provision and in-company manage-
 ment of all UTL’s stationery requirements.
    Speedy Stationers was founded in 1953, and in 1994 had a turnover of roughly £50 million.
 Originally the firm acted just as a wholesaler selling to distributors and retailers. In the mid-1980s,
 almost by accident (an acquaintance of the Managing Director happened to be appointed to the
 same position in UTL), it began dealing directly with a small number of large industrial companies.
 Typically, these companies’ total stationery bill might be over £200,000 per year. However,
 because Speedy did not deal with printed stationery, letterheads, etc., it rarely did more than
 £50,000 worth of business with any of these customers. Nevertheless, the Managing Director,
 whose pet project this was, had high hopes for direct selling.


 2 This case study is based on original research by Dr Steve New of Hertford College, Oxford University.
408   Chapter 13 · Case studies in changing external relationships




           Partly influenced by the possibility of selling directly to large companies, Speedy embarked on
       an expansion programme in the late 1980s that doubled its number of distribution centres from
       three to six. This geographical spreading of risk allowed the company to weather the recession of
       the early 1990s without any significant loss of business – though its profit margins were
       squeezed. Nevertheless, by 1993, senior managers came to recognise that the possibilities of
       continued expansion through the establishment of more distribution centres was limited, as well
       as expensive. Also, selling stationery directly to end users, whilst potentially attractive, had failed to
       live up to its initial promise. This was partly because there was a limited number of companies
       whose stationery bills made it worthwhile dealing with them directly, and partly due to the fact
       that even the ones they did deal with tended to shop around pursuing, in some cases, extremely
       small savings. A continuing bone of contention was also the amount of the Managing Director’s
       time taken up with servicing the direct customers. Orders had originally been won on the basis of
       his contacts, and he felt that they could only be maintained on this basis.

       A strategy emerges
       It was in 1993, after much heated debate, that senior managers took the decision to set up the
       direct sales business as a distinct entity within Speedy. It was given its own manager, and a small
       team of staff was assembled to run the operation. The intention was to allow the rest of the com-
       pany to focus on its core business, the provision of stationery to distributors and retailers, whilst
       giving the direct sales operation one last chance to prove itself. Though this was something of a
       ‘sink or swim’ approach, Speedy was not abandoning direct sales to its fate. As a concession to
       the Managing Director’s strong commitment to direct sales, the person given responsibility for its
       development was a board member who, it was felt, would eventually succeed the present
       Managing Director.
            Before informing its customers of this change, the Direct Sales Division (to give it its official
       title) set about establishing its strategy. Though this was mainly the work of the Director for Direct
       Sales, he was careful to involve all his staff and to ensure the continued support of the Managing
       Director. The strategy that emerged had three objectives:
       ■   to offer a complete stationery service to its existing customers, including printed letterheads,
           forms, etc.;
       ■   to develop partnerships with its customers whereby the Direct Sales Division would supply and
           manage their stationery stock;
       ■   to triple turnover in three years whilst maintaining its profit margin.
       The thinking behind this strategy stemmed from four characteristics of its present business:
       1 The turnover of the direct business was £750,000 (out of Speedy’s total turnover of £50 mil-
         lion) from 15 customers. The profit margin on this business was 7.5 per cent (as opposed to 5
         per cent on Speedy’s main business).
       2 Direct customers were mainly located near its headquarters in Birmingham and therefore could
         easily be serviced by one group of staff. A geographical expansion would be proportionately
         more costly owing to distance.
       3 Speedy only accounted for some 20–25 per cent of direct customers’ stationery requirements,
         because it did not provide printed stationery. Once this was on offer, doubling or tripling busi-
         ness with each customer seemed quite possible.
Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd   409




4 In the early 1990s, the concept of partnerships between suppliers and customers began to
  take off. Already, the wholesale business was discussing managing the inventory for a number
  of medium-sized distributors, so it did not seem totally unfeasible to offer a similar service to
  direct customers – especially if Speedy were likely to be supplying the majority of their sta-
  tionery needs in any case.
    In developing the strategy, it was agreed that the first two priorities were to establish a partner-
ship with a printer, and to identify the first customer to approach regarding partnering. The first
part of this was relatively easy: they approached the printer who had dealt with all Speedy’s own
printing requirements over the past 20 years, and with whom they had a very close relationship
already. The printer readily agreed to the arrangement – apart from anything else, it did not entail
any major cost for them, but did promise additional lucrative business.
    Identifying a customer for partnership was more problematic, but eventually they decided to
approach UTL (Turbines) Ltd. Not only had UTL been Speedy’s first direct customer (thanks to the
relationship between the two Managing Directors), but it was well known that it wanted to
develop partnerships with its suppliers. Therefore, it was decided to make an approach to them.

UTL (Turbines) Ltd
In 1992, UTL spent some £200,000 per annum on stationery, but this was small compared to the
£30 million it spent on buying components for its turbines. It had a very traditional, distrustful and
arms-length approach to purchasing, which it applied to all its purchases. It had at least five suppli-
ers for each commodity and, with some exceptions, it purchased purely on price. Not surprisingly,
it had over 1,500 suppliers, and the main contact most of these had with UTL was in response to
written requests for quotations. Owing to the friendly relations at senior level, Speedy was one of
the few suppliers who ever met purchasing staff.
    The company is part of a large multinational group, and serves markets worldwide. UTL
(Turbines), as its name implies, is the division responsible for the design and manufacture of tur-
bines, which are supplied to a wide range of industrial users.
    Like many manufacturing operations in the UK, the plant had experienced severe reductions in
the number of people employed. From over 1,500 in 1987, the number working at the factory by
1994 had shrunk to about 900. In recent years, purchasing activities had undergone significant
reorganisation. In 1992, two different aspects of the business – export and domestic turbines –
merged their operations. Purchasing was one of the first functional groups to combine, and a new
manager was brought into the company to take charge of the combined department.
    As noted above, the company had a very traditional purchasing orientation. With the creation of
the new purchasing function, however, a number of important changes were introduced to
encourage staff to take a wider view of their role. In particular, the new manager wanted to focus
attention on the total cost of doing business with a particular supplier, rather than just favouring
those who submitted the lowest tender. The manager recognised that he needed to change staff
attitudes towards suppliers, and indeed the Purchasing Department’s view of its role in general. As
a starting point, several innovations were introduced, including a series of lunchtime seminars,
which the manager saw as a vehicle for both team-building and idea generation. The seminar pro-
gramme consisted of outside speakers (including suppliers), presentations from staff in the
department who had been on training courses, and videos.
    When vacancies in the department arose, these were generally filled from outside the company,
with appointments favouring youth and enthusiasm over age and experience. The new manager
410   Chapter 13 · Case studies in changing external relationships




       was keen that the importance of the purchasing group should be recognised in the organisation,
       and wanted to develop a team with a clear professional focus. He believed that the traditional per-
       ceptions of purchasing as merely a bureaucratic support activity had to be challenged.
          As might be imagined, most of the Purchasing Department’s attention was focused on suppli-
       ers of production components. Nor did this change under the new manager; indeed, as far as he
       was concerned, the less he had to do with non-production suppliers the better. It was this that
       gave Speedy Stationers its opportunity for building a partnership with UTL.

       Speedy takes the initiative
       By 1993, the reorganisation and reorientation of UTL’s Purchasing Department was well under
       way. In particular, the seminar series, which at first attracted some adverse comment within the
       company, was proving a key vehicle for introducing new ideas and generating fresh thinking. When
       the Director for Direct Sales at Speedy heard about the seminar programme, he offered to come
       and talk about its new approach to working with customers. The Purchasing Manager was at first
       resistant, as were many of his staff, because this was not the area on which he wished to focus
       attention. Nevertheless, he finally agreed when the Speedy Director told him that the title of his
       presentation would be ‘Contract Out Stationery Management and Reduce Costs by 10 Per Cent’.
          Under the existing system, ordering stationery was a slow, complicated process. When individ-
       ual departments required stationery, a requisition would be raised that was then translated by the
       Purchasing Department into a purchase order. On arrival, items would be inspected – which, for
       stationery, meant that the contents of each delivery would be counted and checked against the
       delivery note and original order. The items would then be booked into the stores, from which they
       could be withdrawn to departmental stores after more paperwork. As there were many stationery
       suppliers, problems with shortages were sometimes difficult to resolve. Each supplier would send
       invoices, which needed to be checked against orders and delivery notes. In addition, there was a
       particular problem with printed stationery; it was not unusual for the wording that the originating
       department thought it had specified to be incorrect when the stationery finally arrived with them.
       Tracing where the fault lay could be a tortuous process, however. It was also the case that depart-
       ments ordered, and kept, far more stationery than they needed in order to avoid shortages. It was
       clear to the Direct Sales Division at Speedy, if not to UTL’s own purchasing staff, that inefficiencies
       were rife, and that a 10 per cent reduction in costs should be achievable.
          Speedy’s proposal for managing all UTL’s stationery needs was to establish two or three sta-
       tionery bunkers in each department, close to the point of use (one for general stationery, e.g.
       photocopying paper; one for specialist items, e.g. printed forms; and one for consumables, e.g.
       pens and pencils, printer cartridges, etc.). These bunkers were to be clearly labelled; the average
       requirement for each type of stationery would be calculated and two week’s worth of inventory
       was to be held in each. Speedy staff would visit weekly and top up the bunkers to the agreed
       level. Each delivery would be signed for by a designated manager for that area and, at the end of
       each month, all the supplies would be consolidated onto a single invoice. None of the incoming
       stationery would go through goods inwards or inspection, and there would be no need to raise
       individual orders. Indeed, the only work required of the Purchasing Department would be to pay
       the monthly invoice.
          Though the Director for Direct Sales presented a very well-argued case, he met with some
       incredulity, not to mention hostility. Some staff thought the plan simply would not work. Others felt
       that UTL would be swindled. Yet another group feared for their jobs if this type of approach spread
       from stationery to other purchased items. Nevertheless, the prospect of getting rid of stationery
Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd   411




purchasing, plus all the complaints it generated, and thus releasing staff for what he considered
more important activities, proved too tempting for UTL’s Purchasing Manager. The estimated 10
per cent saving, and informal encouragement from his Managing Director, also assisted the deci-
sion. In addition, Speedy pointed out that, for the first time, UTL would have accurate and regular
figures for stationery consumption broken down by area and type of stationery.
    Towards the end of 1993, Speedy and UTL signed a two-year contract covering the provision of
all stationery requirements from the beginning of 1994. Though the contract included certain spe-
cific details (especially regarding auditing the new system), it was acknowledged that most of the
mechanics of the arrangements would only emerge as the system was implemented.

Implementing the new system
Under the new system, UTL was divided into 20 separate stationery zones, each with three sta-
tionery bunkers. The initial target was to set up this system for two of these zones from the
beginning of 1994, with the remainder in place by March 1994. Speedy promised a maximum
three-hour response time to resolve problems.
    The new system entails significant reductions in the bureaucracy of supplying stationery, but
also challenges many traditional approaches to buyer–supplier relationships, especially in relation
to trust. Firstly, in the absence of direct checks, UTL has to have complete confidence in the qual-
ity of the products supplied by Speedy and the reliability of its operation. Secondly, UTL has to
trust that Speedy is actually delivering what it is invoicing for. Finally, UTL has to be sure that a
single-source supplier will not exploit its position and introduce opportunistic price rises.
    Managers from different functions within UTL needed to be reassured that the system was going
to work, and that Speedy were capable of providing the new style of service. Presentations were held
at which reservations could be expressed, and the new approach explained. It was not only man-
agers within UTL who had some concerns, however, so did some of the workforce. To set up the
new system, Speedy had up to five staff carrying out the initial analysis and making the arrangements
for the new stocking locations. It became clear that UTL employees were suspicious and wary of
what was going on. A major source of this unease was a fear that a system for delivering items direct
to departments and zones would threaten the jobs of those in the goods inward, the incoming
inspection and stores activities.
    To help overcome these doubts, representatives from all areas concerned, including trade
unions, were included in the series of presentations organised jointly by Speedy and UTL. Many of
the questions raised related to the logic of the planned arrangement from UTL’s point of view, and
the potential vulnerability of being dependent on a single source. Other objections reflected the
more immediate fear about the loss of jobs. Despite his earlier reservations, UTL’s Purchasing
Manager became the main champion for the Speedy initiative. In essence, he pointed to the need
for all UTL employees and resources to focus on improving the competitiveness of their core busi-
ness, rather than ‘messing about trying to find an envelope’. This, together with a promise that no
one’s job was threatened by the initiative, seemed to overcome most of the reservations.
    Despite winning staff over to the new arrangements, the practicalities still had to be worked
out. One of the major obstacles in implementing the new delivery system was the amount of sta-
tionery already held at UTL. The problem was not just the inventory held centrally and in each
department’s own store, but also the large quantities of stationery ‘hidden’ in various locations
around the factory. These had arisen because staff, especially those working on the shopfloor, fre-
quently took more from the stores than they actually needed in order to avoid ‘shortages’.
412   Chapter 13 · Case studies in changing external relationships




           As part of the implementation programme Speedy staff scoured UTL for these ‘private’ sta-
       tionery cupboards. The office of one supervisor on the night shift became known as ‘WH Smith’
       because of the large collection of stationery, much of it years out of date, that was held there. He
       had been unable to draw stationery from the stores at night, and so had assembled his own
       supply. In some cases, the unofficial inventory amounted to a year’s worth of a particular item.
           UTL had estimated that they held about two months’ worth of stationery overall. In order to
       integrate this with the new system, Speedy began sorting this by type into agreed quantities. It
       transpired, however, when all the existing stationery had been accounted for, that in fact existing
       stocks were nearer four months’ worth of inventory. This meant that for the first few months of the
       relationship, Speedy delivered relatively little of its own material, and so had little to invoice for.
       Like many aspects of the new stationery management system, this factor was not covered by the
       written contract; episodes like this were dealt with on the basis of mutual understanding and trust.
           By the end of 1994, the new system was fully up and running. Despite a number of hiccups, the
       change appears to have been much smoother than anyone really imagined possible. Also, both parties
       felt that they had obtained major benefits from the change. The benefits to Speedy were as follows:
       ■   It increased its business with UTL from approximately £50,000 per year to over £200,000, and
           actually improved its profit margin to 8.5 per cent.
       ■   It proved that the new arrangements could work, and had three other customers keen to
           develop similar arrangements.
       For UTL, the benefits were also significant:
       ■   It made a 20 per cent saving on its annual stationery bill – twice as much as anticipated, even
           taking account of using up old stock.
       ■   Consumption of stationery declined significantly in some areas, partly thanks to better stock
           control, and partly owing to a decline in ‘home usage’ – as one manager put it.
       ■   The number of complaints relating to stationery dwindled almost to zero.
       However, UTL managers felt there was a more important, if less quantifiable, benefit, which was
       that managers at UTL (not just in Purchasing) had seen the possibilities for new ways of conduct-
       ing and organising business. In particular, managers now had a more favourable view of the
       prospects for achieving change in the company. As one manager commented:
           We’ve had our eyes opened. No one suspected some of our people would so easily accept such radical
           changes, especially ones driven by a supplier. The improvements we’ve made in handling stationery are
           really secondary to the confidence it’s given us in our ability to manage change and make improvements.

       One clear sign of this new confidence was that UTL began to examine seriously how it could
       develop similar links with other suppliers and its own customers.

       Summary
       Though the new direction proved profitable and effective for both Speedy and UTL, it also has impor-
       tant implications for customer–supplier relations in particular, and change management in general:
       ■   Whilst it has been recognised since the 1960s that customers and suppliers can impact on
           each other’s internal operations, the general view has been that this occurs in an unintended
           and unplanned fashion. What this case study shows is that customers and suppliers can link
           together consciously to change the nature of the environment in which they operate to their
           mutual benefit.
Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd   413




■   The study also shows the serendipitous and unplanned nature of much of business life.
    Speedy only moved into the direct sale of stationery because of a friendship between its
    Managing Director and UTL’s. It was only by chance that Speedy’s decision to extend its opera-
    tions into printed stationery and to develop partnerships occurred at a time when UTL were
    receptive to such an approach. A year earlier, and the approach would undoubtedly have been
    rejected; a year later, and UTL might have moved away from the idea, or might have been busy
    developing partnerships with production suppliers.
■   The manner in which suspicion and resistance were overcome is also worth noting. From the
    start, Speedy approached the project in an open and frank manner – it raised the suggestion of
    a partnership in an open seminar attended by all purchasing staff, and open to all other UTL
    managers. UTL for their part chose to hide nothing from its workforce; both parties took
    account of worries and suspicions, and did their utmost to resolve these before embarking on
    change. Furthermore, UTL gave an assurance that the changed arrangements would not lead to
    any job losses.
■   Another major point is that both parties were prepared to set aside the distrust that permeates
    so many business relationships, and attempt to establish a partnership based on trust.
    Nevertheless, the trust was based on adequate checks and a belief, subsequently proved cor-
    rect, that such an approach was mutually beneficial.
   Since 1994, the contract between Speedy and UTL has been renewed a number of times, and
now runs for a four-year period. The benefits to UTL have been considerable. It has dispensed
with the need to manage its own stationery requirements and, therefore, can concentrate more
effectively on its core business and its core suppliers. In addition, instead of the original 10 per
cent savings it expected, it is now making a 20 per cent saving on stationery costs. Speedy has
also achieved significant benefits by building on its experience with UTL. It has developed similar
relationships with another ten large organisations. The turnover from its Direct Sales Division is
now over £2 million and the profit margin is well in excess of that from its other activities. Since
1998, however, this area of Speedy’s activities has stood still. To develop it further would take a
considerable effort in terms of time and money because, having exhausted the possible cus-
tomers in the Birmingham area, it would need to offer it on a national basis. The current Managing
Director, whose original idea this was, is opposed to this; he believes that the time and money
would be better spent developing other aspects of Speedy’s business. Nevertheless, he is to retire
shortly and is expected to be replaced by the Director of Direct Sales. If this is the case, the
Director is determined that direct sales will be offered on a national basis.
414   Chapter 13 · Case studies in changing external relationships



      Case Study 10

       PoliceCo – outsourcing in the public sector
       Background
       Though outsourcing is one of the fastest-growing and arguably most important areas of business
       activity, there is a tendency to assume that it is predominantly a private sector activity and that that
       is where the expertise lies. This case study will show that outsourcing is at least as prevalent in the
       public sector as it is in the private sector. As Case Study 4 in Chapter 11 argued, the rising tide of
       privatisation over the last 20 years or so has been led by both ideological and practical concerns.
       The former expresses the belief that the competition-based nature of the private sector means it
       will always provide services cheaper and more efficiently than the public sector. In terms of practi-
       cal concerns, the need to cut rising public sector deficits, and the accompanying tax bills, led to a
       search for more cost-effective ways of providing public services. Though these arguments were
       deployed in order to promote privatisation, where this was not feasible, the outsourcing or con-
       tracting out of public services became seen as the alternative. In the USA, with its lack of state
       enterprises, outsourcing, rather than the selling off of state assets, has tended to be the main way
       of transferring activities from the public to the private domain (Osborne and Gaebler, 1992).
       Indeed, as Cant and Jeynes (1998) point out, the US government has been using private compa-
       nies to provide public services since the early 1900s. For this reason, it is the USA that has
       pioneered the introduction of what Talbot (2001) refers to as ‘market-type mechanisms’, such as
       outsourcing and market testing, into the public sector (see Case Study 4 in Chapter 11).
           It is not just the UK that has followed the USA’s lead. Domberger (1998) collected data from the
       USA, UK, France, Germany, Japan and Australia. This shows that in all these countries, the outsourcing
       of public sector activities was a significant and increasing practice. Domberger concluded that out-
       sourcing was permeating the public and private sectors in these countries with equal force, and that in
       both sectors the prevailing belief is that best value is achieved through the use of competitive, market
       solutions for service provision. However, just because something is popular does not mean it is always
       effective. In examining outsourcing studies conducted in the UK and USA, Gay and Essinger (2000)
       found that outsourcing failed to measure up to expectations in some 28 per cent of cases.
           Nevertheless, there is an increasing and significant trend towards outsourcing, in the public sector
       in the UK and many other countries. The motivating factors tend to focus on cost savings and service
       improvements brought about by the involvement of private sector know-how in public sector activi-
       ties. Though there are similarities between the public and private sectors, there are also marked
       differences. Private sector organisations have to deliver a profit for their shareholders but are rela-
       tively unconstrained in how they achieve this. Public sector bodies have to demonstrate that they are
       achieving value for the taxpayers’ money but how they achieve this is constrained by a host of legal
       and policy requirements. Therefore, though it may be the case that the public sector bodies can ben-
       efit by adopting private sector practices, they may be constrained by legal and policy requirements
       from doing so, as the following examination of PoliceCo’s experience of outsourcing will show.

       PoliceCo
       PoliceCo is one of the largest Police Forces in the UK. It has over 6,000 employees and is responsible
       for policing an area of 2,200 square miles with a population of 2.1 million. As with all public bodies in
       the UK, it operates under a legal framework which obliges it to demonstrate in an open and auditable
       manner that, in spending public funds, it is providing value for money (Talbot, 2001). In addition, suc-
       cessive governments have required all police forces to show, usually by market testing, that the services
       provided in-house cannot be provided more cheaply and/or better by the private sector (Johnson and
Case Study 10 · PoliceCo – outsourcing in the public sector   415




Scholes, 2001). This began in 1994 with the introduction of Compulsory Competitive Tendering (CCT)
(Day et al, 1998). CCT required PoliceCo to open up a range of activities to outside competition in
order to test whether or not an outside provider could offer better value for money. If it was shown that
an outsider provider was cheaper, PoliceCo had to outsource the activity, whether it wished to or not.
   CCT was superseded in 1999 by the government’s ‘Best Value’ initiative. According to the Local
Government Act 1999, police authorities are obliged to produce a Best Value Performance Plan
(Doherty and Horne, 2002). This requires local authorities, including police services, to carry out
‘Fundamental Performance Reviews’ of each of their services over a five-year rolling period
(Speller, 2001: 119). These reviews cover the economy, efficiency and effectiveness of the service
provided and seek to address four key questions, which are known as the four ‘Cs’: Challenge,
Compare, Consult and Compete (Speller, 2001).
   As part of the government’s Best Value initiative, PoliceCo’s funding is conditional on achieving
a 2 per cent year-on-year efficiency improvement. This 2 per cent improvement may be achieved
by efficiency savings (achieving the same output with less resources) and efficiency gains (achiev-
ing greater output with the same resources). Therefore, PoliceCo is required by law to test its
in-house service provision against outside competition.
   When CCT was introduced in 1994, catering at PoliceCo had already been outsourced. In sub-
sequent years, other activities were outsourced. These included some parts of IT, finance, human
resources and legal work. The first activity to be outsourced under CCT, however, was building
cleaning. Building cleaning was outsourced for the first time in 1995 under the CCT legislation.
Prior to this, PoliceCo had employed its own cleaners. It was decided that the contract should be
split into four parts. This decision was taken for several reasons, including the size of the geo-
graphical area that PoliceCo covers, to ensure that each supplier would have the capacity to
manage such a contract and also because the CCT legislation required the size of the contract to
be appropriate to the size of the supplier. An additional reason was that PoliceCo believed that
splitting the contract between different suppliers would encourage competition and lead to a
better quality of service.
   European Union legislation obliges PoliceCo to undertake a Europe-wide tender process when
seeking to appoint outside suppliers or contractors. This clearly makes the outsourcing process
longer, more complex and costly than it might be if PoliceCo had a free hand as to the selection
of contractor. Neither the Best Value legislation nor European legislation would have prevented
PoliceCo from submitting a bid to continue running the cleaning services itself. However, PoliceCo
decided not to make an in-house bid because it felt it lacked the administrative structure and bid-
ding expertise to make a successful bid, though it was keen to ensure that its existing employees
were transferred to the new cleaning service providers.
   In awarding the contract, PoliceCo went through a rigorous process of assessing each bidder’s
capability to deliver the contract, including visits to some of their existing customers. Nevertheless,
the final selection was made on the basis of lowest overall cost judged against a tender document
drawn up by PoliceCo. The core of the tender document is a detailed output specification for the
activity concerned. In terms of the cleaning contract, this was a lengthy and difficult document to
draw up because of both the number of sites involved and the difficulty in defining output meas-
ures that could be easily monitored and understood. However, PoliceCo considered that this
approach was necessary to be able to demonstrate whether or not value for money was being
achieved. The contracts were for five years at a fixed price, though there was provision for price
increases arising from factors such as increases in labour costs.
416   Chapter 13 · Case studies in changing external relationships




           The four cleaning contracts were awarded to two separate companies who received two contracts
       each. Once the companies began the contracts, conformance to the specification was monitored
       through regular visits to the various sites and reports from the business managers of the sites. Regular
       meetings are held with the contract companies, which were more frequent at the early stages (even
       on a weekly basis in some cases). This close monitoring helped PoliceCo identify serious problems
       with one of the contractors, and their two contracts were terminated and re-advertised. These con-
       tracts were awarded to the other cleaning contractor, which resulted in their having sole responsibility
       for all cleaning contracts (this company also belongs to the same group as PoliceCo’s catering contrac-
       tor). When a new site was built, however, the cleaning contract for that site was awarded to another
       company. Though this restored a degree of comparison and competition, it also doubled the number
       of companies PoliceCo had to liaise with. When the contracts were re-advertised in 2000/1, the com-
       petitive tendering process resulted in both retaining their existing contracts.

       Evaluating outsourcing at PoliceCo
       When a private sector company decides to outsource an activity, it is relatively free to please itself as
       to what to outsource, who to award the contract to and how it makes the selection, although ulti-
       mately it does have to show that its overall approach to managing the business is providing the
       shareholders with value for money. Public sector bodies such as PoliceCo also have to demonstrate
       that they are delivering value for money, but have to operate under far more stringent rules and regu-
       lations than private sector companies. These rules and regulations specify what they cannot do, what
       they have to do and how they have to do it. If we examine the decision to outsource, the selection of
       the contractor, the contractual arrangement and the way the relationship with the contractor is man-
       aged, we can see how these rules and regulations impact on PoliceCo’s approach to outsourcing.

       The decision to outsource
       PoliceCo was originally obliged by Compulsory Competitive Tendering legislation to put certain activi-
       ties out to tender. In 1999, this was superseded by ‘Best Value’, which obliges PoliceCo to undertake
       a periodic review of all its activities. Where the review indicates that PoliceCo might save money by
       doing so, it has to put that activity out to tender. It is also subject to external audit and inspection to
       ensure that it undertakes this review in the manner prescribed by government legislation.

       Supplier selection
       PoliceCo, like the rest of the public sector in the UK, is obliged by legislation to undertake a rigorous
       and open supplier selection process. This involves drawing up tender documents that clearly specify
       what is required and the form and timetable for tendering and making a decision. PoliceCo is also
       obliged to advertise across the European Union and must, providing the tender specification is met,
       award the contract to the lowest (total cost) bidder. Even where a contractor fails, as in the cleaning
       contract, PoliceCo cannot just pass the work over to another contractor who is performing well; the
       contract must go through the tendering process again. Similarly, even when an existing contractor is
       seen to be performing well, they must still tender against everyone else for any new work and, as
       the cleaning contract for the new site demonstrated, they may not be awarded the contract.
          This is different from how many private sector companies operate. Often they do not advertise
       for suppliers. Instead, they may seek to identify the ‘best in class’ suppliers and approach them
       directly. They may also enter into negotiations with each potential supplier in order to see who can
       offer the best service, rather than asking them to bid against a specific tender document. Even
Case Study 10 · PoliceCo – outsourcing in the public sector   417




when choosing a supplier, issues of cost, etc, may not be paramount – track record and confi-
dence that they can deliver may be seen to be more important. Also, even when a supplier has
been finally selected, this is more likely to signify the beginning of a new stage of negotiations
rather than signalling the end of the process. This forms a contrast with the public sector; because
it is something of a regulatory minefield, PoliceCo and most public sector organisations are reluc-
tant to enter into further negotiations once the tender process has been completed and the
supplier selected. Even during the contract period, in the private sector, developments and
changes will continue. In the public sector, however, once a contract specification has been
agreed, it is very difficult for either partner to change it.

Contractual arrangements
In general, it appears that the public sector tends to offer longer and more formal contracts than
the private sector. The main reason is that public sector contracts are usually of a larger scale. For
example, there are very few private sector organisations that have the number of buildings requir-
ing cleaning that PoliceCo does. Contracts of a large scale imply large set-up costs for the supplier,
which have to be spread over a wider time span in order to make the contract proposition more
economical. In terms of performance monitoring, as is common in the public sector, PoliceCo
decided to use output specification measures for its cleaning contracts. They found, however, that
output specifications can be very difficult to put in writing for such simple tasks as cleaning an
office, and the process can turn out to be very time-consuming. Nevertheless, the downside of
not devoting sufficient time to specifying what is required, as many private companies have found,
is that problems, disagreements and additional costs can arise during the contract period.
    The use of ‘gain-share’ clauses in the outsourcing contract, whereby both parties benefit from
any savings above and beyond those specified in the contract, is common in the private sector. This
is because gain-share clauses are seen as encouraging suppliers to seek improvements that benefit
both themselves and their customers. Public sector organisations tend to be more wary of these,
however, because of the need to demonstrate that value for money is being achieved. If it became
public knowledge that a supplier was achieving gains above and beyond those specified by a con-
tract, this could be portrayed as incompetence, or even corruption, on the part of the public sector
organisation involved.
    A structured and clear procedure for conflict resolution is written into all PoliceCo’s contracts.
Indeed, it does appear that the public sector as a whole does have the best conflict resolution
practices in terms of transparency, structure, consistency and fairness. This is a consequence of
both the legal framework within which the public sector operates and also the need to be aware
of public scrutiny, especially by the media.

Managing the relationship
As far as relationship management is concerned, though PoliceCo personnel speak of adopting a
partnership approach, the use of mechanisms such as competitive tendering, even where a contrac-
tor has performed well, do seem somewhat adversarial. Of course, PoliceCo is obliged by public
sector regulations to behave in this manner. The lack of a genuine partnership orientation may also
be inevitable, given the number of activities it outsources and the uncertainty as to whether a con-
tract will be renewed. In the private sector, companies often use a portfolio approach in dealing with
suppliers. That is to say, they try to place a number of related activities with the same supplier, even
where the supplier may not always offer the lowest price. This allows them to have fewer but more
418   Chapter 13 · Case studies in changing external relationships




       significant relationships to which they can devote more time and resources. It also seems to ensure
       that senior managers are involved in developing and monitoring the relationships and that problems
       which might threaten contract renewal are dealt with effectively. Obviously, public sector regulations
       make it very difficult for PoliceCo to operate portfolio practices. Indeed, public sector purchasing reg-
       ulations seem to have almost the opposite effect, in that they can even result in organisations having
       more than one supplier for the same activity, such as PoliceCo’s cleaning contracts.
          Supplier development is another area that appears to be hampered by public sector regula-
       tions. For PoliceCo, and other public sector organisations, working with suppliers to improve their
       performance can lead to accusations of favouritism in that it might be seen to give the supplier an
       unfair advantage when it comes to re-tendering. Indeed, PoliceCo’s contract for radio maintenance
       deliberately forbids the introduction of new technologies, despite the fact that communication
       technologies are changing rapidly. This is because any new communications technology would
       require different maintenance procedures, which would in turn require changes to, or even the re-
       tendering of, the maintenance contract. Therefore, in the public sector there is a tendency to
       manage by the book and hold suppliers to the contract, rather than working with them to improve
       on what was specified.
          This emphasis on contract monitoring and compliance, rather than performance improvement,
       may account for why, in PoliceCo, outsourcing is seen as an administrative task to be undertaken
       by relatively junior staff rather than a strategic priority involving senior managers.

       Summary
       This case study has shown that outsourcing is a substantial activity in the public sector, driven by
       government regulations that oblige bodies such as PoliceCo to adopt market mechanisms in order
       to reduce the cost of providing public services. These government regulations do not per se force
       PoliceCo and other public bodies to outsource activities. If an activity is to be retained in-house,
       however, the contract has to be won through an open, competitive bidding process which demon-
       strates that the in-house provider offers ‘Best Value’ over external competitors. To do this, however,
       PoliceCo would need to have the skills required to put together such a bid. As was shown with the
       cleaning contract, PoliceCo felt they did not have these skills. Nor is this just an issue of preparing a
       bid document: PoliceCo would have needed to reorganise the cleaning operation into a separate
       cost/profit centre and restructure its management. Faced with this, it was easier to outsource the
       service rather than providing it itself. This does not mean that PoliceCo has not benefited from out-
       sourcing. CCT, and subsequently Best Value, have enabled PoliceCo to outsource many activities to
       which it previously had to devote management time, and left it to concentrate on its core activity of
       law enforcement. However, the way that outsourcing operates in the public sector does mean that
       PoliceCo and other public bodies may not be getting the full benefit of outsourcing, and that, in
       some cases, activities are outsourced that might be better provided in-house. As Erridge and Nondi
       (1994) note, there is a tendency in the public sector for the pursuit of economy, efficiency and
       effectiveness to result in a predominantly cost-cutting approach to outsourcing.
           It does appear that the public sector purchasing requirements do constrain PoliceCo’s ability or
       willingness to adopt some of the practices which are beneficial to private sector companies. For
       example, it would seem to make sense to have one cleaning contractor rather than two, especially
       as the second is only responsible for one facility. Similarly, its radio contract, which prevents the intro-
       duction of new communications technologies, seems to be counter-productive. Likewise, PoliceCo’s
       inability to adopt a portfolio approach to purchasing or to engage in supplier development seems to
Case Study 10 · PoliceCo – outsourcing in the public sector   419




encourage a proliferation of contracts whilst at the same time turning the purchasing activity into a
relatively low-grade administrative task. After all, PoliceCo could have decided to offer cleaning as
one contract rather than four, and it could have linked cleaning to other activities, such as catering,
which the main cleaning company also provides. It felt, however, that splitting contracts would
encourage greater competitiveness. It is not always easy to see whether or not the failure to adopt
such practices is driven by the public sector purchasing requirements or by innate risk aversion.
Certainly, Burnes and Coram (1999) found that even senior public sector managers were very risk-
averse in their dealings with outside contractors. In PoliceCo, this seems even more the case given
the level of managers involved.
    On the other hand, just as the public sector might benefit from some of the practices of the
private sector, so the reverse may also be the case. Certainly, the private sector could learn lessons
from the more structured approach of the public sector in terms of rigorously reviewing which
activities might best be outsourced, the tender process and contract specification. In the private
sector, choosing an activity to outsource often seems a somewhat ad hoc process, often tied to
political concerns. The requirement for public sector bodies to review all their activities in an open,
and auditable, manner means that it is very difficult for poorly-performing ones to hide or be
hidden. Similarly, whilst the private sector’s ability to continue to negotiate and refine a contract
specification after a contract is awarded can be useful, it can also be a sign that the purchaser has
been lazy in the first place. Also, by not having to go out to public tender, a company may miss
the opportunity of attracting an innovative bid for its work. In addition, the public sector does
appear to have a more structured and formal approach to conflict resolution that allows problems
to be dealt with in a fair and effective manner.
    In summary, therefore, it can be seen that outsourcing decisions and practices in the public
sector are driven and constrained by governmental and EU legislation and regulations. The
removal of freedom of action from public bodies in this way appears to turn outsourcing into an
operational rather than a strategic activity. The constraints under which PoliceCo operates may also
reduce its ability to adopt practices from which their private sector organisations derive benefit. In
particular, there is little evidence that the public sector is developing the sort of partnerships with
its suppliers that seem to prove beneficial to organisations in the private sector. On the other
hand, the more structured approach to outsourcing in the public sector may in some aspects be
superior to the approach adopted by many private sector organisations.
420   Chapter 13 · Case studies in changing external relationships


Conclusions
               The three case studies in this chapter amply demonstrate the extent to which both pri-
               vate and public sector organisations are outsourcing significant aspects of their
               activities. Outsourcing appears to be equally prevalent in both sectors, but the
               manner in which it is conducted and the resulting changes, and possibly benefits, are
               different. For the private sector, the purpose of outsourcing is to allow customers to
               concentrate on their core competences. In the public sector, it is seen as a cost-cutting
               measure based on the assumption that, because they operate in a competitive market,
               private-sector companies will always provide a lower-cost service than the public
               sector can. In the private sector, outsourcing is leading to changes in both companies’
               internal and external relationships. Though the move towards closer relationships
               between customers and suppliers clearly makes for a more harmonious atmosphere in
               which to conduct business, this is almost a side-effect and not the main reason for the
               change. Increasingly, companies have come to recognise the need to make major
               improvements in their performance but, as anything up to 70, 80 or even 90 per cent
               of the value of their products comprises bought-in goods and services, this cannot be
               achieved solely on the basis of internal performance improvements. Rather, what is
               required is that their suppliers also improve their business. As Ford found out in the
               car industry, seeking to impose improvements has its limitations. Suppliers have to be
               keen to improve and willing to work with customers. The argument for adopting a
               partnership approach to purchasing in the UK, and other Western countries, was that
               it was one of the cornerstones of Japan’s success and, therefore, must be beneficial
               (Womack et al, 1990).
                   Whilst in the private sector the move to outsourcing can be the beginning of a
               process of sustained and continuing attempts to improve the service provided by the
               supplier, in the public sector, it is almost the end of it. In the public sector there are
               legal, and possibly cultural, barriers to using outsourcing as a strategy for continuous
               improvement. Instead of a close working relationship aimed at service improvement,
               the public sector opts for a formal relationship whose aim is to monitor what is being
               provided and to ensure that the supplier sticks to the letter of the contract.
                   Therefore, as this chapter shows, outsourcing is providing private sector organisa-
               tions with the potential for continuous service improvement through close and
               mutually beneficially relationships, whereas for the public sector it offers a one-off
               opportunity to cut costs. However, it would be unwise to see this as an example of the
               private sector being efficient and the public sector being less so. Rather, the two sectors
               operate under different rules and have different degrees of freedom. PoliceCo is a pub-
               licly-accountable body that has a statutory and regularly-monitored duty to
               demonstrate that it is providing value for money and awarding contracts in a fair and
               open manner. Its freedom of action in choosing a supplier and how it works with that
               supplier is severely constrained by this. Contrast that with Case Study 8, Rover–TRW.
               This showed that close working relationships at an operational level, based on open-
               ness and trust, can bring great benefits to both customers and suppliers. It also
               showed, however, that in a situation where continuous improvements are being made,
               it is sometimes difficult to judge who is benefiting the most financially. Even in the pri-
               vate sector, as this case study shows, this puts a strain on customer–supplier
Conclusions   421

relationships. In the public sector, managers would be severely censured if they
allowed a situation to arise where the suppliers appeared to be making gains above
and beyond what was envisaged in the contract.
   The Rover–TRW case also illustrates the emerging, and to an extent unplanned,
nature of partnership developments. The close operational-level relationship could
not have prospered unless both companies, especially TRW, had not broken with tra-
ditional, Tayloristic, approaches to managing people and allowed their staff the
freedom to experiment with and develop new ways of working.
   Case Study 9, Speedy Stationers, also offers an example which the public sector
would find almost impossible to follow. Normally, it is the customer who takes the
lead in promoting changes in purchasing behaviour. This is for the obvious reason
that the customer is usually the one with the power in the relationship (they can gen-
erally choose where to purchase and on what terms). In this instance, however,
Speedy took the initiative and approached their customer with a suggestion for
change. This was for basic commercial reasons: they needed to win additional busi-
ness and saw partnerships as being the prime vehicle. They believed that the
partnership approach would not only be commercially beneficial but would also give
Speedy a competitive edge over its rivals. Speedy were fortunate in that they were able
to approach a customer responsive to this type of initiative. The process of building
the relationship led to many changes, both at Speedy and particularly in its customer.
Much information only came to light as the new arrangements were developed and
implemented, and it was only by actually putting the new approach into practice that
sceptics could come to appreciate its benefits. For both Speedy and its customer, this
new approach was something of a leap into the unknown which appeared to succeed,
though only time will tell to what extent. It is difficult to see PoliceCo or other public
bodies being legally able, let alone willing, to take such a leap of faith.
   Yet it must not be assumed that PoliceCo did not benefit from its outsourcing
activities. In an era when police forces operate under considerable operational and
financial pressures, and where their activities receive unprecedented media scrutiny, to
be able to concentrate more on direct policing issues and less on managing services
such as cleaning, catering, etc., is clearly a benefit, as are any cost savings that this
brings. Nevertheless, a greater freedom of manoeuvre, and a less risk-averse culture,
might increase the benefits that PoliceCo achieved from outsourcing. From the proce-
dural point of view, it should be recognised that many of PoliceCo’s outsourcing
practices are exemplary and might beneficially be adopted by the private sector.
   As Part 1 of this book showed, we live in an era when all organisations, whether
public, private or voluntary, recognise that they have to change their internal opera-
tions and relationships in order to increase their effectiveness and competitiveness.
What the three case studies in this chapter show is that for private sector organisa-
tions, these improvements do not necessarily stop at their own office or factory door.
Most see the full potential for performance improvement will only be realised when
there are also similar developments within their suppliers and customers, and when
they develop better working relationships with them. For the public sector, what hap-
pens outside their doors, so long as it does not affect their contract with a supplier,
does not appear to be of concern.
   In considering the developing nature of relationships between customers and sup-
pliers, three points stand out from the case studies. The first is that private sector
422   Chapter 13 · Case studies in changing external relationships

               companies are changing the rules of the game; they are challenging the prevailing
               orthodoxy in the UK and the rest of Europe with regard to commercial relationships
               between customers and suppliers. Public sector organisations are working within the
               existing rules and not seeking to challenge them.
                  The second point is that, although the move to greater partnership working is based
               on others’ successful experiences, it nevertheless requires a considerable act of faith by
               the parties concerned. It is not possible in advance to spell out either the exact form of
               the new relationships or the specific measurable benefits they might bring. Yet dissatis-
               faction with traditional relationships, and the potential for commercial advantage,
               have spurred the private sector companies described in this chapter to take such deci-
               sions. As can be seen, the decision to move towards partnerships cannot be judged
               solely on the basis of rational analysis and the pursuit of quantified and clear commer-
               cial objectives. Actually establishing a partnership may constitute a leap in the dark,
               requiring boldness, initiative and trust. It is difficult to see how individual public sector
               bodies could adopt this approach given the constraints under which they work.
                  The last point to note relates to one of the major benefits or consequences of part-
               nerships. One reason why private sector companies are seeking to develop new ways
               of working is to help them to cope with the competitive pressures and uncertainty of
               the modern world. Partnerships appear not only to allow companies to strengthen
               their competitive position, but also to reduce a major source of environmental uncer-
               tainty, by making the actions of customers and suppliers more predictable and
               transparent. This goes against those, such as Tom Peters, who argue for the benefits
               of increasing chaos rather than reducing it. It also shows that one of the major con-
               straints or contingencies organisations face, environmental uncertainty, can be
               managed in such a way that the ability to plan for the future, in terms of product
               development and production, is increased. In the public sector, outsourcing practices
               may be having the opposite affect. They can be destabilising for the public sector
               body because they can give rise to uncertainty about who will be supplying a service
               when a contract comes up for renewal. It can also lead to increased uncertainty for
               their employees, who do not know whether their jobs will be outsourced in future,
               and if so what impact that will have on their employment prospects and terms of
               employment. For suppliers and their employees, the competitive bidding process cre-
               ates even greater levels of uncertainty, because no matter how well they have
               performed, they can always lose a contract if somebody else undercuts their price.
                  As the Contingency Theorists, described in Chapter 2, argued some four decades
               ago, the external environment does affect the internal workings of an organisation,
               but an organisation’s internal arrangements can also affect the environment.
               Therefore, if a turbulent environment leads to changed internal relationships, then
               given that organisations are open systems, we can expect these to be mirrored in
               changed external relationships. So although internal changes are often seen as mecha-
               nisms for coping with environmental uncertainty, the move by suppliers and
               customers in the private sector to develop closer links externally can go one step fur-
               ther, actually reducing uncertainty. Conversely, the public sector’s purchasing
               practices may be having the effect of increasing uncertainty.
Test your learning   423


Test your learning

      ■ Short answer questions
        1 Identify the key reason why Rover developed its partnership with TRW.

        2 List the two main benefits that each party gained from the Rover–TRW partnership.

        3 To what extent can the Speedy case study be seen as supporting the Emergent approach
          to change?

        4 What was the decisive factor in persuading UTL to enter into partnership with Speedy?

        5 What are the main factors behind PoliceCo’s policy of outsourcing?

        6 What are the barriers to PoliceCo adopting a partnership approach to outsourcing?



      ■ Essay questions
        1 To what extent does the Rover–TRW case study show the limitations of continuous
          improvement?

        2 In moving towards partnerships, how did Speedy overcome potential resistance to
          change from both its own staff and those of its customers?

        3 Discuss the following statement: The PoliceCo study shows the limits to which private
          sector practices can be adopted by public sector bodies.
1
Part Four
Managing choice
Managing change burnes
Chapter 14

Managing change
Lessons from theory and practice




  Learning objectives
  After studying this chapter, you should be able to:
  ■   analyse the ten case studies in Part 3 in relation to the following:
      (a) how each organisation's strategy developed;
      (b) the constraints on choice;
      (c) managerial behaviour;
      (d) the way change was managed;
      (e) the approach or approaches to change adopted;
      (f) the objectives pursued;
  ■   describe the main lessons from each of the ten case studies in relation to the
      above issues;
  ■   understand the factors that determine the level of employee involvement
      necessary to bring about successful change;
  ■   appreciate that there are a multiplicity of approaches to change that can be
      used separately, sequentially or in combination.




 Introduction
In the previous three parts of this book, we examined the theory and practice of
how organisations develop and change. From the Industrial Revolution to the pres-
ent day, we can see that the history of organisations is one of change and upheaval.
In the light of this, the idea that organisations have ever operated in a stable state
or a predictable environment, other than for relatively brief periods, is difficult to
sustain. Whether because of economic fluctuations, the development of new prod-
ucts and processes, social and political change or war, organisations and entire
industries tend to face recurrent bouts of upheaval. Some industries still remain
strong, though their products and leading players have changed significantly. One
clear example of this is the computer industry, which has moved from being domi-
nated by IBM’s mainframes to being dominated by Microsoft’s operating systems.
428   Chapter 14 · Managing change

              Other industries though, such as the UK coal industry, have shrunk to a shadow of
              their former size and importance, and appear doomed to be relegated to the role of
              bit player on the industrial stage.
                 Not surprisingly, given the rise and fall of industries and technologies over the last
              two decades, many writers argue that organisations and society at large are in a
              period of rapid and unprecedented change: a period where old certainties no longer
              hold good, and new ones have yet to emerge. An alternative view is that the pace and
              uncertainty of change varies from company to company, industry to industry and
              even country to country. As a consequence, at any one point in time, some organisa-
              tions will be experiencing extreme turbulence whilst others appear to operate in a
              relatively stable environment. However, whether either of these views offers a suitable
              explanation of the stability–turbulence question is perhaps irrelevant. The pertinent
              issue is how organisations can cope with both the environment in which they operate
              and the constraints, challenges and threats they face. In undertaking this task, one
              thing is perfectly clear: the amount and diversity of information and advice on offer is
              certainly greater than ever before.
                 No longer is business analysis and advice confined to a few specialist publishers
              and journals, or locked up in business school libraries. Books, magazines and videos
              on ‘how to’ management can be found in airports and railway stations as well as
              almost any bookshop. Newspapers, radio and television also play their part in popu-
              larising the latest panacea or giving a platform to business gurus or practitioners. In
              addition, the ubiquitous management consultant can always be relied upon to offer
              the latest approach, at a price. Therefore, managers cannot claim to lack advice or
              offers of assistance. The problem, as this book has shown, is that no two approaches
              appear to be exactly the same and in some cases they may almost entirely contradict
              each other. Almost in despair, many managers must ask themselves the simple ques-
              tion: ‘If the experts can’t agree, what hope is there for me?’
                 This question illustrates the powerlessness some managers feel when faced with
              issues that, quite wrongly, appear to have become the territory of the specialist.
              Though there are managers who adopt an almost fatalistic attitude to their situation,
              believing that events are beyond their control, others, fortunately, adopt a more posi-
              tive stance. However, even these managers often give the impression that their job is
              to implement the particular approach to strategy and change that the specialists rec-
              ommend, or which other more successful organisations have adopted. This book has
              sought to argue that this is not only incorrect, but a potentially dangerous notion.
                 Though many ‘experts’ claim some sort of universal applicability for their favoured
              approach or theory, as argued in the first two parts of this book, the reality is that such
              approaches are developed in particular circumstances, at particular times and often
              with particular types of organisations in mind. It follows that a key role for organisa-
              tions and their managers is to understand the approaches on offer, identify their own
              circumstances and needs, and choose the approach that is most appropriate for their
              circumstances. By doing this, in effect, as this book has attempted to show, managers
              can cease to be prisoners of circumstances and experts, and begin to make their own
              choices about the future operation, direction and nature of their organisations.
                 This chapter draws on the review of the literature on organisations, strategy and
              change presented so far in this book to shed light on the ten case studies presented in
              the last three chapters. The chapter begins by reviewing Chapters 6–10 and identify-
Lessons from theory and practice   429

        ing a number of key common points, especially with regard to managerial choice.
        These are then used to examine the case studies presented in Chapters 11–13. This is
        followed by a discussion of the nature of and rationale for employee involvement,
        particularly in cases of rapid transformational change. The chapter concludes by con-
        tending that organisations and theorists need to reject the notion that Planned and
        Emergent approaches to change necessarily stand in opposition to each other, or that
        they cannot be used in tandem. Instead, it is argued that there are a multiplicity of
        approaches to change and that managers have genuine choice in how and when they
        are used, and what to change and when to change it.


Lessons from theory and practice
        Chapters 6–10 began to develop a model of managerial choice and change manage-
        ment. The ten case studies that followed showed how organisations dealt with these
        issues. The case studies will now be compared with the findings from Chapters 6–10.
        First, the five chapters will be briefly reviewed and key issues identified; these issues
        will then be used to examine the case studies. The intention is to combine theory and
        practice in order to lay the basis for the Choice Management–Change Management
        model for understanding and implementing organisational change that is presented in
        Chapter 15.


     ■ Issues from Chapters 6–10
        Chapters 6 and 7 examined the origins and development of approaches to strategy.
        They showed that strategy was originally conceived of as a rational, quantitative
        process concerned with an organisation’s external environment, especially its prod-
        ucts and markets. The key role for managers was to identify trends, establish future
        objectives or targets, and then implement them. It was shown that as the concept of
        organisational strategy developed, a distinction emerged between the Prescriptive
        school of strategy and the Analytical school. The former was and is primarily con-
        cerned with telling managers what they should do and, in the main, promoting a
        planned, quantitative and rational approach to strategy. On the other hand, the
        Analytical school tends to focus on what organisations actually do when formulating
        and implementing strategy, rather than what the experts say they should do. For the
        Analytical school, strategy is a messy, complex, less rational and more emergent affair
        than the picture painted by the Prescriptive school.
           Though over the last 20 years, the Prescriptive school has still tended to dominate
        the practice of strategy, the insights of the Analytical school have had a significant
        impact. In particular, there has been a growing recognition of the importance of intu-
        ition, creativity, and power and politics in shaping an organisation’s strategy. The
        implications of this for managers have been that instead of being required to con-
        struct detailed and elaborate plans for their organisation’s future, they are
        increasingly being seen as primarily responsible for creating a vision or strategic direc-
        tion for their organisations, which is pursued, often in a bottom-up fashion, through
        day-to-day decisions concerning such matters as resource allocation, product/market
        development and a host of, often, small-scale organisational changes. From this
430   Chapter 14 · Managing change

              standpoint, an organisation’s strategy is not set in advance, but emerges from the
              decisions taken at all levels in the organisation. Therefore, as Chapters 6 and 7
              demonstrated, the Analytical school of strategy, as opposed to the Prescriptive school,
              draws no distinction between strategy development and implementation – an organi-
              sation’s decisions are informed by its visions or intent, but the nature and details of
              the strategy they pursue emerge from the decisions they take. Nevertheless, despite
              the growing interest in the Analytical school, more rational and quantitative
              approaches to strategy have not been replaced. Rather, as Chapters 6 and 7 show, the
              situation is that a number of more or less competing perspectives on strategy are now
              available to organisations, particularly the Competitive Forces, Resource-Based and
              Strategic Conflict models.
                 In Chapter 6, it was argued that none of the competing perspectives on strategy
              were necessarily true or false. Instead, they tended to be appropriate to given situa-
              tions. The main elements determining their appropriateness were national
              characteristics, the business environment, industry-specific factors, and the internal
              characteristics of the organisation in question. Rather than arguing that the role of
              managers was merely to choose the appropriate approach to strategy for their organi-
              sation’s circumstances, however, the chapter concluded by arguing that managers could
              choose to amend these circumstances to fit in with their preferred approach to strategy.
                 Chapters 8 and 9 moved from examining strategy to reviewing change manage-
              ment. Chapter 8 began by describing the main theories which underpin approaches to
              change management. These concerned the behaviour and importance of individuals,
              groups and systems within organisations. This was followed by a review of what had
              been the dominant approach to change management – Planned change. The Planned
              approach tends to concentrate on individuals and groups, but has less to say about
              the overall organisation and its environment, though there have been attempts by its
              promoters to rectify this. This approach, as its name implies, regards change very
              much as a conscious process of moving parts of organisations from one relatively
              stable state to another. It is an approach that seeks to improve organisational effec-
              tiveness by changing individual and group beliefs and behaviour through a process of
              participation and learning. The Chapter concluded by looking at three models dealing
              with the pace and nature of organisational change – the Incremental, Punctuated
              Equilibrium and Continuous Change models. These drew attention to the spectrum of
              change events ranging from small-scale, localised ones to large-scale events designed
              to transform or reinvent an organisation in its totality. It was argued that whilst
              Planned change might be suitable in some of these situations, a wider range of
              approaches were required to cover all of them.
                 Alternative, and newer, approaches to change management were assembled and
              reviewed in Chapter 9 under the collective title of the Emergent approach. This
              approach conceives of organisations as operating in a continuous state of flux and
              turbulence. Though its proponents recognise that change can take many forms,
              Emergent change tends to be characterised as a bottom-up, unpredictable, messy and
              politically-driven process. From this perspective, it is argued that the role of managers
              is to develop a climate in which everyone in the organisation has a responsibility for
              identifying the need for and implementing change. The objective is not to achieve a
              fixed outcome but continuously to align and realign the organisation with the chang-
              ing needs of an unpredictable environment. In particular, the Emergent approach
Lessons from theory and practice   431

identifies five features of organisational life that either promote or block change:
structure, culture, organisational learning, managerial behaviour, and power and poli-
tics. The Chapter also showed that though the Emergent approach may have some
advantages over the Planned approach, it has drawbacks and does not cover all
change situations.
   In Chapter 10, it was argued that despite the support for these two approaches,
neither the Planned nor the Emergent approach provided a comprehensive picture of
organisational change. Rather, there are a wide variety of approaches that are suited
to different situations. The suitability of any one approach is determined by a range
of factors, especially the stability, or otherwise, of an organisation’s environment.
From this perspective, as Chapter 10 maintained, a key role for managers is to make
sense of the complexity of their organisation’s situation and choose an approach to
change which best aligns with this. Nevertheless, it was also argued that, though con-
straints such as the nature of the environment in which their organisations operate
place limitations on managers’ freedom of choice, managers can often, but not
always, influence, moderate or alter these constraints to make them better suited to
their and their organisations’ own preferences and needs.
   Therefore, the evidence and arguments from Chapters 6–10 can be summarised:
■   There are a wide and diverse range of change situations, ranging from small-scale
    change to the complete transformation or reinvention of organisations. These are
    not, however, mutually exclusive. They can occur, whether consciously or uncon-
    sciously, simultaneously within the same organisation, though not necessarily to
    achieve the same objectives.
■   Though there are a number of valid and well-supported approaches to strategy
    development and change management available to organisations, there is a ten-
    dency for managers, and academics, to focus on and advocate a limited range.
    Whilst not always explicitly stated, underpinning these approaches to strategy
    development and change management is a Contingency perspective that makes
    assumptions about the degree of stability present in the environment in which
    organisations operate.
■   The dominant view is that managers have to adopt the approach that appears to fit
    in with the constraints, especially environmental ones, they face.
■   An alternative perspective, however, is that it is often, though not always, possible
    for managers to influence these constraints, in effect to change the rules of the
    game, to make them more appropriate to the particular approach to strategy and
    change management which suits them and their organisations.
In order to examine the above points further, the ten case studies from Part 3 will
now be reviewed to see to what extent the experience of real-life organisations sup-
ports or contradicts them. In particular, drawing on Chapters 6–10, for each case
study the following key issues will be explored:
1 Strategy. How was the organisation’s strategy developed?
2 Constraints. What were the constraints the organisation faced, and did the strategy
  seek to work within or influence these?
3 Managerial behaviour. What role did managers play in strategy development and
  change management?
432   Chapter 14 · Managing change

              4 Change management. How were change projects managed and who was involved?
              5 Planned, Emergent or combined change. To what extent can the change projects be
                classed as Planned, Emergent or exhibiting a combination or variety of approaches?
              6 Objectives. Was the focus of strategy development and/or change projects to alter
                individual and group behaviour or to change or reinvent an organisation in
                its entirety?


          ■ Reviewing the case studies – Chapters 11–13
              In examining the 10 case studies against the above six issues, it should be borne in
              mind that Case Studies 1–4 (Chapter 11) deal specifically with strategy development,
              and Case Studies 5–10 (Chapters 12 and 13) concentrate on change management
              projects. Nevertheless, all the case studies, to a lesser or greater extent, contain ele-
              ments of strategy development and all contain elements of change management. With
              that proviso in mind, we can now move to a brief examination of the individual case
              studies. Each case will be reviewed under the six headings listed above.

              Case Study 1: The music industry
              1 Strategy. In this instance we are not considering the actions of one or two compa-
                nies but of an entire industry, and a global one at that. It is an industry that has
                been dominated by the big five record labels for over 50 years. The managers of
                these companies have developed what appears to be a common strategy to ensure
                that their organisations retain their dominant position in the industry. It basically
                revolves around signing the artists who will sell the most recordings, shaping and
                marketing them and their output to maximise sales, and ensuring that the vast pro-
                portion of the revenues generated go to the label rather than the artists or anyone
                else. The advent of the Internet threatens the income and dominance of the big
                labels. It can offer them many advantages in terms of cutting the costs of record
                distribution; however, these may pale into insignificance in terms of the threat
                posed by peer-to-peer music swapping (P2P). Those managing the big labels appear
                be taking a reactive rather than proactive and strategic response to this. They are
                attempting, not very successfully, to use the law to stop the free downloading of
                music whilst at the same time attempting to copy and adapt the Napster approach
                by developing subscription services which charges for the downloading of music.
              2 Constraints. The ease with which the Internet now allows recorded material to be
                pirated is clearly a major constraint on the actions of the record companies. Shawn
                Fanning opened the Pandora’s Box of the Internet and it is difficult to see how the
                big labels can hold on to their iron grip on production and distribution and con-
                tinue to take the lion’s share of the revenues. Though this is partly a case of people
                taking advantage of changes in technology to get free records, it is also about the
                nature of the Internet. In essence it is a clash of philosophies between those who
                see the Internet as a vehicle for making money and those who see it as a way of
                creating communities where sharing takes precedence over profit-making. This
                means that there are many talented and committed computer-literate people who,
                as a matter of principle, are working to make it as easy as possible to access mate-
                rial free via the Internet, regardless of any technological or legal obstacles that are
                put in their way. Nor is this just about the music industry. Piracy is spreading to
Lessons from theory and practice   433

    any industry whose output is in, or can be turned into, a digital format whether this
    be records, films, television or books. Chapter 4 discussed the implications of com-
    plexity theories for organisations. One of the key arguments of complexity theorists
    is that even small changes can transform an entire system, overthrowing existing
    constraints and laws and creating new ones. It could well be that the case of Shawn
    Fanning and the music industry is an example of complexity theories in action.
3   Managerial behaviour. Music industry executives tend to be powerful individuals
    who have risen through the creative side of the industry and who take a hands-on
    role in running their companies. They know the music industry inside out, and
    follow tried-and-tested approaches to developing, promoting and taking profit
    from artists. The situation created by Fanning’s Napster was beyond their experi-
    ence. Their response was reactive rather than strategic. They sought to use the
    courts to stifle Napster and similar bodies, whilst at the same time attempting to
    turn the Napster approach into a subscription-based service. Neither initiative
    appears to have stemmed the rising tide of piracy.
4   Change management. This case study does not deal with change management per
    se. So far, however, the changes that have taken place appear to be in the hands of
    the lawyers and senior managers, and have revolved around stifling and copying
    rather than seeking wider organisational involvement and looking for more cre-
    ative solutions.
5   Planned, Emergent or combined change. Despite the fact that the music industry is
    based on a creative process, much of its past ways of working have tended towards
    the dictatorial and formulaic and have been designed to ensure that the big compa-
    nies retain control over the artists. The P2P revolution has created an
    unprecedented level of uncertainty in the industry, however. It is unlikely that the
    changes that this is bringing about can be managed by a few senior managers
    trying to keep control of the situation. Therefore, the reshaping of the music indus-
    try is likely to arise from a host of local responses and initiatives, many of which
    may come from smaller and more entrepreneurial companies rather than the big
    labels. Indeed, it is not yet clear that the big labels can survive in the new P2P era,
    at least in their present form.
6   Objectives. So far, the main objective of the big labels has remained unchanged;
    they want to retain their dominant position in the industry. They have attempted
    both to stop and to copy the Napster model. In essence, they have tried to change
    the behaviour of those who seek to promote a more community-based approach to
    the Internet by threatening them with the law. In this, they have signally failed. The
    technology that enables piracy now seems to be built into most computers or can
    be purchased or downloaded free from the Internet. Nor have they succeeded in
    their attempt to get consumers to change their behaviour and pay for music
    through Internet subscription services rather than downloading it free. Once people
    discover that they can easily get something for free, it is very difficult to persuade
    them that they should pay for it. Rather than tinkering round the edges, the big
    labels need to ask themselves some very awkward questions about the nature of the
    music industry in future and their role within it.
434   Chapter 14 · Managing change


              Case Study 2: Marconi
              1 Strategy. Though on the face of it, Marconi’s strategy was the product of its CEO,
                George Simpson, and Finance Director, John Mayo, its origins lay in the general
                belief by institutional investors in the City of London that GEC, as it was, had
                missed the Internet/telecoms boat and needed to swim very fast to catch up. It is
                not clear whether either Simpson or Mayo ever questioned this belief. It is clear,
                however, that their entire strategy for selling off most of GEC and going on a tele-
                coms buying spree was based on it.
              2 Constraints. It could be argued that the view of investors that GEC was no longer
                viable was a constraint on the strategy that Simpson and Mayo could adopt.
                Certainly, they chose to align GEC/Marconi’s strategy with this view. There were
                other constraints on the viability of such a strategy that they appeared to ignore,
                however. Firstly, Marconi’s senior managers were seeking to create a global
                Internet/telecoms equipment company rapidly by buying up other companies rather
                than by growing one organically. This is a very risky strategy which has seldom
                been successful in any industry. Secondly, Marconi had put itself in a position
                where it had to buy fast in a booming market, even though questions were already
                being asked about the very high price and viability of dotcom-orientated compa-
                nies. Lastly, it was buying into a sector where the competition was stiff and the
                main customers, the big telecoms companies, were few. Any downturn in the
                market could and did prove disastrous. However, even when its competitors were
                taking action to tackle the prospect of falling demand, Marconi ignored the indica-
                tions and continued to act on the assumption that demand for the products and
                services of its new businesses would grow and grow.
              3 Managerial behaviour. The strategy was developed by Simpson and Mayo, who
                took a very hands-on role in selling the various parts of GEC and stitching together
                the new parts of Marconi. In doing so, they were hailed almost as heroes by insti-
                tutional investors and commentators. What criticism Marconi did receive appeared
                to come from the departing ‘old guard’ of GEC, whose comments could be inter-
                preted as sour grapes.
              4 Change management. The main changes that took place in transforming GEC into
                Marconi were the selling and buying of companies. In both cases, because of the
                pace at which the new Marconi was being created, the transactions seemed almost to
                take the form of an auction rather than the sort of slow and deliberate evaluation
                that the old GEC was used to. To create Marconi, it was necessary to dispose of
                most of the old GEC, which did not fit with the new Internet/telecoms world.
                Therefore, it was a case of selling the old businesses for whatever was the best price
                that could be obtained in order to raise the money to buy new businesses with. The
                same applied when buying. In a booming market, Marconi had to pay the going
                price if it wanted a slice of the action. In the 1970s, when OPEC controlled the
                world’s supply of oil, the then Head of OPEC, Sheihk Yamani, was asked what was a
                fair price for oil, his response was, ‘Anything you can get plus 10%’. This seemed to
                be the attitude of those who owned the companies Marconi was seeking to purchase.
                Having set itself on this path, however, Marconi’s management clearly felt that it had
                no option but to buy at the going rate. Managers appeared to be the prisoners of
                investors and lenders who expected, indeed, demanded, that the company behave in
Lessons from theory and practice   435

  this fashion. Indeed, the more money Marconi borrowed and spent, the higher its
  standing and share price rose, and the more praise its management received.
5 Planned, Emergent or combined change. This case study does not focus on change
  management per se, but on the strategic issues involved in dismantling one company
  and building another. Simpson and Mayo had a vision of turning GEC into a high
  technology Internet/telecoms equipment company. They clearly had a view of what bits
  of GEC they needed to sell off (most of it) and what parts of the telecoms sector they
  needed to buy. Though it could be argued that both sales and purchases were under-
  taken on an opportunistic basis, the strategy itself never wavered or was changed, until
  it failed spectacularly. Therefore, Marconi’s approach to change as such can best be
  described as a top-down structural transformation carried out in a directive manner.
6 Objectives. The intention of Marconi’s strategy was to create an entirely new com-
  pany. Indeed, it seemed to go beyond the concept of transformation, because that
  implies that the old organisation is in some ways being reinvigorated and refo-
  cused. Marconi set out to sell off the old GEC and to purchase a new organisation
  with new staff, new products and markets, and new customers.

Case Study 3: Oticon
1 Strategy. The company’s strategy was developed and driven by one person (its
  then President, Lars Kolind). He created a vision of a service-based organisation
  and pursued it by, in effect, razing the existing organisation to the ground and
  starting again.
2 Constraints. Though there is no clear evidence that existing constraints influenced
  the strategy, the new flexible structure that emerged was certainly compatible with
  Danish norms or expectations regarding job design. As far as industry norms were
  concerned, Oticon was at a disadvantage in that competition was based on the
  technical sophistication of products, and Oticon’s capability in this respect was
  falling behind that of other companies. To counter this disadvantage, Oticon chose
  to rewrite the rules of competition in the industry by moving the focus from tech-
  nology to service. The business environment in which Oticon operated had been
  and still remained very turbulent. Indeed, by attempting to change the basis of
  competition in the industry, Oticon can be seen as adding to rather than reducing
  uncertainty. In terms of organisation characteristics, Lars Kolind was again
  attempting to rewrite the rule book. The existing structure was demolished, its cul-
  ture was challenged and the style of management changed drastically. Kolind
  appeared to face very little overt resistance but, in introducing the changes initially,
  and taking corrective action when he thought they were failing, he did use the
  power of his position in a very directive and, perhaps, coercive manner.
3 Managerial behaviour. The strategy was developed by Oticon’s President and,
  though he explained it to other managers, it is clear that he neither expected nor
  wanted them to modify it. Their role was to support him and to help sell and
  implement the idea, rather than necessarily to be part of the process of its develop-
  ment. However, in helping to sell the new vision to the rest of the organisation,
  both managers and staff changed their views of how the company should be run
  and their roles in it. As a more cooperative atmosphere developed in the company,
  managers moved away from their previous directive style of management and
  developed a more facilitative role.
436   Chapter 14 · Managing change

              4 Change management. The approach taken was to prepare the ground carefully but
                then to change overnight. This part of the approach was, in effect, to use Kanter et
                al’s (1992) phrase, a Bold Stroke. Employees left the company and its old systems
                and practices on a Friday night, and on Monday walked into a completely different
                organisation. What followed, however, was months of chaos as everyone tried to
                work out what they were doing and how they should do it. Nor did Kolind appear
                to wish for more settled internal arrangements to prevail. When he felt that the
                company was in danger of, as Kurt Lewin would say, refreezing, he ‘exploded’ the
                organisation again.
              5 Planned, Emergent or combined change. Though we can see some evidence of
                Planned change in the way that employees were involved in projects, it was the
                Emergent approach to change that was dominant. Lars Kolind had a vision of the
                organisation’s future but the actual details and nature of the change process
                emerged as the company struggled to implement it. Also, change was open-ended
                and, given the nature of the new organisation, it is not clear if it will ever settle
                down into a fixed state. There is also a great emphasis on collective learning, and
                using this learning to keep the company on the move. To use Kanter et al’s (1992)
                analogy, again, it was a Bold Stroke followed by a Long March.
              6 Objectives. The aim was no less than a total transformation or reinvention of the
                organisation in all its aspects, and to move from being a traditionally-structured
                technology-driven organisation to a learning organisation focused on service deliv-
                ery. However, central to this was the need to change the attitudes and behaviour of
                individuals and groups.

              Case Study 4: The Public Power Corporation (PPC) of Greece
              1 Strategy. The PPC’s strategy was created by its Board of Directors in response to
                the Greek government’s decision to privatise it and in the light of the European
                Union Electricity Directive.
              2 Constraints. The main constraint under which the PPC developed and is imple-
                menting its strategy is the EU Electricity Directive. This to a large extent
                determines or constrains the PPC’s structure and behaviour. However, the PPC has
                sought to mitigate this constraint by moving into the electricity markets in other
                countries and by linking up with other providers so that it is not dependent solely
                on the Greek market or its own lack of experience of operating as a commercial
                concern. However, where this international expansion takes it into other EU coun-
                tries, it will still have to abide by EU regulations. Also, the international energy
                market is very competitive. It is also attempting to move into the telecoms business,
                but this is also regulated by the EU and is even more competitive than the electric-
                ity market.
              3 Managerial behaviour. The PPC’s Board seems to have taken the lead in determin-
                ing its strategy. However, it was and still is predominantly owned by the Greek
                government. The Board had to produce a strategy that, on the one hand, met EU
                and Greek government competition laws, and on the other does not threaten the
                government’s income from the PPC nor its eventual price when it is sold.
              4 Change management. The PPC says that it wants to create a participative learning
                organisation based on a committed and skilled workforce imbued with an entre-
Lessons from theory and practice   437

  preneurial culture. However, the changes which have taken place so far appear to
  be structural, both in terms of the reorganisation of the company into a number of
  divisions and the decision to reduce the size of the workforce by some 20 per cent.
  These changes appear to have been decided upon and implemented with little or no
  consultation with the workforce or their representatives. If they are to lead to the
  sort of organisation the PPC says it wants, then this ‘Bold Stroke’ approach will
  need to be succeeded by a ‘Long March’.
5 Planned, Emergent or combined change. The PPC has laid out a clear strategy for
  its future. Its plan is to turn the PPC from a bureaucratic public service into a pri-
  vate, market-orientated company. So far, this plan has been implemented by
  imposition rather than cooperation. If the plan is to be realised, however, the PPC
  needs to change the behaviour of its employees in order to create a more participa-
  tive and proactive organisation. Therefore, imposition will need to give way to
  participation if the necessary behavioural changes are to be achieved. Given the
  various obstacles and constraints it faces, not least the twin threats of regulation
  and competition, future changes and developments at the PPC are more likely to be
  based on an Emergent than a Planned approach to change.
6 Objectives. The PPC’s main objective appears to be to reinvent itself as a highly
  competitive private sector electricity and telecoms company. This will require it
  both to restructure itself, which to a large extent it has achieved, and to develop a
  more entrepreneurial culture, which still seems some way off. The measure of suc-
  cess will be whether or not it can hang onto its dominant position in the Greek
  electricity market. However, this is where there seems to be a contradiction at the
  heart of the PPC’s objectives. If it is successful in holding on to its market share,
  then the various competition regulators at national and EU levels will step in to
  change the rules of the game to reduce the PPC’s dominance, probably by breaking
  up the business. If on the other hand the PPC is not successful, it is likely that it
  will have to sell off the less successful parts of the business, thus breaking itself up.
  Therefore, despite its objective of holding onto a unified electricity business, it is
  not clear how it can do this given the constraints it faces.

Case Study 5: Volvo
1 Strategy. Volvo’s strategy for Job Design was to reorganise its plants to eliminate
  the moving assembly line, and replace it with group-based assembly. The strategy
  originated from a need both to reduce labour turnover and absenteeism, and to
  respond to societal pressures to eliminate dehumanised forms of work organisa-
  tion. However, even when these were no longer an issue, the company continued to
  pursue the move away from assembly-line working. The strategy was driven, and
  continuity provided, by Volvo’s long-serving Chief Executive, Pehr Gyllenhammar.
  However, even after his somewhat acrimonious departure, the commitment to Job
  Design survived, though it is difficult to imagine that, had he stayed,
  Gyllenhammar would have sold Volvo’s car business to Ford with all the risks to
  the Job Design strategy that this implies.
2 Constraints. Though public opinion in Sweden favoured a move away from the
  assembly line, it was and remains the car industry’s established mode of operation.
  Therefore, Volvo was clearly aiming to change industry constraints whilst aligning
438   Chapter 14 · Managing change

                  itself with societal ones. From the perspective of the business environment, Volvo’s
                  move to ‘humanise’ car assembly appeared to bring them much valuable publicity
                  and its approach to building cars was seen as a selling point. In the early years,
                  however, internal constraints and resistance (both attitudinal and technical) acted
                  to limit the radicalness of the initiative. One point to note is that, at least in the
                  early years, there was perhaps more open suspicion and resistance from Volvo’s
                  trade unions than from its managers.
              3   Managerial behaviour. All the change projects involving Job Design were driven by
                  senior managers. Outside experts in Job Design were also involved at the planning
                  stage, and so were trade union representatives, whose enthusiasm grew over the
                  years. Nevertheless, the outcome of successive waves of Job Design was to devolve
                  power from Volvo’s headquarters to the individual plants, and in the plants to give
                  the shopfloor teams more authority and control. This led to the elimination of
                  middle management layers, the creation of a flatter organisation structure and the
                  progressive development of a much more empowered workforce.
              4   Change management. Each project was planned in great detail in advance. This
                  involved not only managers, but also trade union representatives and outside
                  experts. Once in operation, however, the actual arrangements were modified, in
                  order, so it was argued, to meet business needs and cope with operational difficul-
                  ties. In most cases these modifications appear to have reduced the ability of
                  workers to set their own pace of work and to expand their range of activities.
                  Nevertheless, whether in new or existing plants, each change project built on the
                  last, and each project resulted in greater levels of shopfloor control. Central to this
                  was organisational learning: the ability collectively to capture and transmit, from
                  one plant to another, the experience of making radical Job Design work. It is also
                  clear that with each project, the confidence of managers, workers and trade unions
                  that Job Design could work grew.
              5   Planned, Emergent or combined change. Though Volvo’s strategy for Job Design
                  was driven by a clear intent, it was implemented on different sites and in different
                  ways over a considerable period of time using a combination of approaches.
                  Though driven from the top, Volvo sought to involve staff and managers in devel-
                  oping, implementing and amending projects. In terms of the individual Job Design
                  projects, the Volvo case shows that even where changes are planned in detail in
                  advance, the final outcome emerges through a process of iteration, modification
                  and negotiation once the new practices are put into operation. Therefore, it is this
                  combination of Planned and Emergent change, linked to willingness by senior man-
                  agers to experiment and an organisational commitment to continuous
                  improvement for over 30 years, which makes the Volvo experience unique.
              6   Objectives. The objectives were twofold. The first was financial – to reduce absen-
                  teeism and labour turnover. The second was social – to humanise the assembly of
                  cars. These were pursued through a combination of structural and behavioural
                  change, which led to major changes both in the overall shape of the company and
                  in the attitudes of individuals and groups. However, the social objectives were
                  modified, though not superseded, by the need for the company to operate prof-
                  itably in a highly competitive market. Despite the takeover of Volvo’s car division
                  by Ford, the company still appears to be committed to continuing with its human-
                  centred approach to car assembly.
Lessons from theory and practice   439

Case Study 6: XYZ Construction
1 Strategy. It can be seen that XYZ had a relatively clear and consistent strategy that
  aimed to transform the culture, practices and structure of the company. The strategy
  began with and was driven by the new Managing Director. He had come with a
  remit for change from XYZ’s parent company, which believed that it had fallen
  behind the competition and needed to be reinvigorated if it was to survive. In devel-
  oping the strategy, the Managing Director sought to expand the senior management
  team, and win them and the rest of the organisation over to the need for and type of
  change. In this and the strategy itself, he appears to have been very successful.
2 Constraints. The new Managing Director had to contend with two opposing sets of
  constraints. On the one hand, the parent company wanted to see changes that
  would create a more cooperative and team-based organisation that could cope
  better with the changing nature of the construction industry. On the other hand,
  XYZ was a hierarchical company where the previous Managing Director had
  behaved in a dictatorial and heavy-handed fashion that inhibited challenge, cooper-
  ation and change. Also, though the construction industry was attempting to change,
  it was still riddled with conflict and mistrust. Therefore, the new Managing Director
  had to change the company quickly enough to satisfy the parent company but not
  so fast that he failed to win over staff, managers and customers.
3 Managerial behaviour. The strategy and changes were led by the new Managing
  Director, but he was careful from the start to involve managers and staff in identi-
  fying and implementing the changes, thus winning them over. The various changes
  shifted the balance of power in the company and, in particular, the organisational
  restructuring reduced the influence and standing of the Regional Managers and
  some directors. The Managing Director expected that there would be some resist-
  ance to the changes from these and others who might lose out. However, his clear
  support for the changes, the widespread recognition of the need for change, and an
  open and transparent change process where it was difficult for individuals to block
  change, prevented any major obstructions occurring.
4 Change management. Though change was driven from the top, increasing numbers of
  managers and staff became involved in the process of identifying and implementing
  change. In the more open-ended change projects, the responsibility for maintaining
  the momentum was given to staff and lower-level managers. This is not to say that
  senior managers did not take an interest, or did not give the process a shove or tweak
  if they thought it was necessary. The Managing Director recognised that he could not
  be everywhere at once, however, and that if changes were to become embedded
  within the organisation, they had to be owned by those concerned.
5 Planned, Emergent or combined change. Overall, XYZ’s approach to change can
  be characterised as Emergent and in many cases experimental. A series of relatively
  small changes were made that, taken collectively over a period of time, led to a sig-
  nificant change in the culture and operations of XYZ. However, when it came to
  the change of organisational structure, this appeared to be conducted in a more
  Planned fashion. This shows, as argued elsewhere in this book, that organisations
  tend to use a variety of approaches to change depending on what is to be changed
  and the circumstances of the organisation at the time. In this instance, within a pre-
  dominantly emergent strategy, we can see many instances of Emergent change and
  a significant example of Planned change.
440   Chapter 14 · Managing change

              6 Objectives. The objective of the new Managing Director was to reinvigorate the
                company by changing its culture, structure and practices. His first priority, how-
                ever, was to change the behaviour of managers and staff and to develop their
                competence. He was also keenly aware that in doing this he must also improve the
                performance of the company. Therefore, most of the changes which took place had
                two equal objectives: one was to change how managers and staff worked with and
                behaved towards each other and the company’s customers; the other was to
                improve the performance of staff and managers and so offer a better service to cus-
                tomers and achieve an overall improvement to XYZ’s performance. Only when the
                cultural and behavioural changes were embedded in the organisation, and its per-
                formance improved, did the Managing Director begin to focus on the overall
                structure of the company. He saw these structural changes as an important element
                in facilitating the effective working of the company and removing barriers to team-
                working. However, he also felt that without the prior cultural and behavioural
                changes, the structural changes would have little impact.

              Case Study 7: GK Printers
              1 Strategy. GK’s strategy tended to develop in response to potential crises, or latterly
                opportunities, rather than being proactively led by its management. The company,
                mainly on a reactive basis, appears to be reinventing itself as a modern, service-ori-
                entated company by aligning its internal arrangements with the changing needs of
                its environment and customers. However, this was not and is not part of any con-
                scious plan or vision; rather it is being revealed by the pattern of actions the
                organisation has taken over the last decade. Originally, this pattern began to
                emerge through technological changes within GK, but over time it has become
                more pronounced by attitudinal and behavioural change, especially among man-
                agers.
              2 Constraints. External considerations, such as societal pressures, business environ-
                ment and industry-specific factors did not appear to constrain the freedom of
                action of GK’s managers. Indeed, the turbulence and increased competition in the
                external environment seemed to assist GK with its internal changes. GK’s main
                constraints were internal and related to existing attitudes, technology and prac-
                tices. Increasingly, however, as the need arose to develop a more collective
                leadership, it was the directive style of the Managing Director that was seen as a
                key constraint on progress. Nevertheless, his directive style, and his tendency to
                play managers off against each other, gradually changed.
              3 Managerial behaviour. Though originally it was the Managing Director who was
                responsible for strategy development and change, it became clear over time that a
                more collective and cooperative style of management was required if GK was to
                overcome the obstacles it faced and seize the opportunities on offer. Therefore,
                gradually, all the company’s managers became involved in and took responsibility
                for strategy development, and they even devolved responsibility for some change
                projects to staff in the areas concerned.
              4 Change management. A mixture of approaches to managing change projects can be
                seen at GK. In most instances, managers took responsibility for identifying the need
                for change, and in some instances actually directed it. However, with the comput-
Lessons from theory and practice   441

  erised business system, for example, the company left selection and implementation
  to the staff concerned. Also, in terms of the website business, GK allowed a staff
  member who was a web enthusiast to develop this area. This demonstrates how far
  the company has progressed in developing a climate of trust and involvement.
5 Planned, Emergent or combined change. A mixture of both Planned and Emergent
  approaches can be seen at GK. In the early days, the company tried to adopt a
  more Planned approach, especially when introducing new technology. However,
  new developments or improvements to existing arrangements have tended to be
  both open-ended and reactive in nature. Also, the Managing Director has tended to
  oscillate between a directive and a participative approach to change. Overall the
  pattern of change at GK appears to be reactive and Emergent, but within this pat-
  tern there have been certain proactive and Planned elements. Therefore, change at
  GK can be characterised as ad hoc, reactive or opportunistic rather than being part
  of any consistent approach.
6 Objectives. The original aim was to survive. To this end, GK changed its technol-
  ogy and image in order to improve its competitiveness. As events unfolded,
  however, it became clear that the key to competing effectively was to change
  people’s attitudes and behaviour, especially at management level, and create a
  greater commitment to teamwork and collective decision-making. This has created
  a climate where managers and staff are more receptive to new ideas, and respon-
  sive to new opportunities, than before. Therefore, a pattern of change can be seen
  at GK, though it is by no means a well-articulated or even conscious one, which
  seems to be leading in the direction of organisational transformation.

Case Study 8: Rover–TRW
1 Strategy. This particular initiative between Rover and TRW did not form part of a
  strategic plan, or contribute towards a vision. In essence, the objective was an
  operational one, not a strategic one: to outsource the assembly of suspension mod-
  ules owing to lack of space. At TRW, those in charge focused on the steps
  necessary to have the new operation up and running on time, and able to meet
  Rover’s requirements. There was a strategic element to this initiative in that both
  organisations wished to find out more about modular assembly, but this sub-objec-
  tive very quickly vanished from sight.
2 Constraints. The main constraints tended to be attitudinal and organisational. To
  be successful, TRW needed to ensure that staff at the Frankley site had the motiva-
  tion, initiative and ability to develop a new operation remote from the main TRW
  site in Wales. There was also a requirement to build a good working relationship
  with Rover’s assembly line personnel. In organisational terms, a new factory and
  workforce needed to be established, new equipment installed, new practices
  learned and new skills developed. At an operational level, both in terms of the rela-
  tionship and the performance, this worked better than anyone had anticipated.
  However, the persistence of old, less trusting relationships at a more senior level
  between the two companies did threaten the gains made at the operational level.
3 Managerial behaviour. At Frankley, supported by their superiors within TRW, man-
  agers created a genuine atmosphere of cooperation that allowed staff to work closely
  with their counterparts at Rover, and to improve their performance continuously. At
442   Chapter 14 · Managing change

                a more senior level, though, a less cooperative and more guarded atmosphere pre-
                vailed between Rover and TRW.
              4 Change management. Frankley was created from scratch and, once established,
                was committed to continuously improving and developing its performance. From
                the outset, and in contrast to established practices within TRW, the Frankley man-
                agement sought to ensure that everyone was involved in and could contribute to
                change. It was only a small organisation, with some 30 to 40 staff initially, and this
                obviously made it easier to create a team spirit. Nevertheless, the key was the atti-
                tude of the management at Frankley, who set out to involve all staff.
              5 Planned, Emergent or combined change. This was clearly a case where one could
                see both Emergent and Planned change going on side by side. Originally, there was
                a clear set of objectives that Frankley had to achieve and a fixed timescale within
                which to achieve them; these revolved around setting up the new plant and begin-
                ning deliveries to Rover. Beyond that, though, was a process of learning,
                experimentation and development that was central to the major performance
                improvements made by Frankley.
              6 Objectives. The original objectives were basically structural and revolved around
                establishing a new assembly operation capable of meeting Rover’s requirements.
                Though these objectives were met, staff at the Frankley site did not rest on their
                laurels. Instead, motivated by the desire to improve the service to Rover, they set
                themselves, and achieved, ever more ambitious targets.

              Case Study 9: Speedy Stationers
              1 Strategy. To the extent that it had any conscious vision or strategy, it tended to be
                driven by opportunism or force of events rather than necessarily being proactive.
                Each time a major threat or opportunity arose, Speedy examined its options and
                chose the one that appeared to be more favourable to the survival and development
                of its business. Also, as the Direct Sales initiative showed, ‘gut instinct’ rather than
                rational analysis tended to drive decisions.
              2 Constraints. The degree to which external or internal factors affected Speedy’s strat-
                egy is unclear. Certainly, the company did not appear to have faced great restrictions
                on its freedom of manoeuvre. Nor, except in one case, did it appear to have sought
                to change or influence the constraints it faced. The big exception is its attempt to
                develop a partnership approach to customers. In this instance it was attempting to
                change industry practice. Though this met with some resistance internally, it also
                had to overcome a large degree of scepticism in the customer concerned.
              3 Managerial behaviour. It was Speedy’s Managing Director who originally devel-
                oped its partnership strategy. Subsequently, and rather reluctantly, he handed
                responsibility for its continuing development to another director of the company,
                who established his own plans and then convinced his colleagues, and Speedy’s cus-
                tomers, to accept them. Later, however, when it came to convincing his fellow
                directors that they should expand direct sales nationally, he was less successful and
                even the project’s original champion, the Managing Director, rejected the sugges-
                tion. Therefore, overall, though Speedy wanted to promote more cooperative
                relationships with customers, this does not appear to signal any company-wide
                move towards more cooperative working within Speedy.
Lessons from theory and practice   443

4 Change management. The actual implementation of the partnership approach
  required not only the involvement of Speedy’s own staff, but also, as the UTL
  instance shows, cooperation from its customers’ managers and staff at all levels.
  Though there was resistance to the partnership approach in both Speedy and UTL,
  the commitment of senior managers, the involvement of staff, and some early
  gains, helped to overcome this.
5 Planned, Emergent or combined change. The development of the strategy itself, the
  partnership with UTL, and the further expansion of this approach, constituted an
  open-ended process. Initial implementation of the partnership was carefully
  thought through, but from then on the form and content of the changes tended to
  be more ad hoc and reactive. For this reason, the process of change can be seen to
  be Emergent.
6 Objectives. The objective of Speedy’s strategy was to grow its business by develop-
  ing a new type of relationship with its customers. Implementing this led to changes
  within both Speedy, though these tended to be limited to its Direct Sales Division,
  and within the ten customers with whom it developed partnerships. Though some
  of these changes were structural, most changes concerned the attitudes and behav-
  iour of individuals and groups, especially in terms of greater openness and trust.
  There is little evidence, however, that these have led to any wider cultural changes
  within Speedy.

Case Study 10: PoliceCo
1 Strategy. It does not appear that PoliceCo had a strategy for outsourcing or
  thought it necessary to have one. Rather, successive governments had a strategy for
  improving public services by compelling them to adopt the practices, and use the
  services, of the private sector. Government legislation, by introducing Compulsory
  Competitive Tendering (CCT) and Best Value, compelled PoliceCo to market-test
  its activities by putting them out for tender. The way activities were selected and
  the process of asking for tenders and selecting contractors was laid down by gov-
  ernment regulations, and, to an extent, European Union legislation. Therefore, for
  PoliceCo, outsourcing was an administrative issue rather than a strategic choice.
2 Constraints. The main constraint faced by PoliceCo was government legislation.
  This compelled them to act in a certain fashion, i.e. to outsource, whether they
  liked it or not. A secondary constraint was the risk-aversive culture that appears to
  pervade the public sector in terms of awarding contracts and working with suppli-
  ers. For example, PoliceCo could have packaged all its cleaning needs into one
  contract and awarded them to one contractor. However, it felt that by splitting
  them it would reduce risk, and better demonstrate, through competition between
  the contractors, that value for money was being achieved. For similar reasons, it
  chose to go through the full re-tendering process when the contracts came up for
  renewal, even though they might have been able to use a more truncated process
  designed to test whether the existing contractor was still offering Best Value. The
  fact that they did not do either of these is related to the nature of public scrutiny
  under which they operate. They can be held to account locally, nationally and,
  most worryingly for them, through the media. Decisions in terms of the nature,
  duration and renewal of contracts, which would be unremarkable were they taken
444   Chapter 14 · Managing change

                  by a private organisation, can be labelled as incompetence or even potentially cor-
                  rupt if taken by a public service.
              3   Managerial behaviour. The role of senior managers in PoliceCo was simply to
                  ensure that the legislation was complied with. The actual execution of the legisla-
                  tion, the operation of CCT and later Best Value, became a lower-level
                  administrative task.
              4   Change management. As mentioned, outsourcing became treated as an administra-
                  tive, almost routine process in PoliceCo. Where consultations needed to be
                  conducted with staff and trade unions, i.e. when jobs as well as activities were
                  being outsourced, PoliceCo tried to be as helpful as it could in smoothing the tran-
                  sition process and ensuring that staff retained their jobs under the new regime.
                  However, where it was shown that an activity could be provided cheaper from out-
                  side than inside, it was outsourced, and that decision was not negotiable.
              5   Planned, Emergent or combined change. It is difficult to characterise outsourcing at
                  PoliceCo as either Planned or Emergent. It could be argued that because it was
                  responding to outside changes on an incremental basis, i.e. activity by activity,
                  there was an emergent aspect to it. However, it might be better described as a
                  process of administrative coercion.
              6   Objectives. PoliceCo’s main objective was to comply with the legislation in as effi-
                  cient and painless fashion as possible. Though outsourcing has led to significant
                  behavioural changes in private sector organisations, as far as PoliceCo was con-
                  cerned, the main changes were structural. Activities which had previously been
                  performed in-house were transferred to outside bodies, leaving the rest of the
                  organisation unaffected and free to continue with their own activities.
                 Having examined the ten case studies, we are now in a position to discuss the implica-
              tions of the above for the way in which strategy and change are conceived and executed.
              Before doing so, however, there are two interrelated issues raised by the case studies that
              need to be clarified. These concern the degree to which employee involvement is a neces-
              sary factor in successful change, and whether or not wholesale organisational
              transformation, including attitudes and behaviour, can be achieved rapidly.


Employee involvement and organisational transformation
              The received wisdom in the literature on organisational change is that employee
              involvement is crucial to successful change, especially in situations that require attitu-
              dinal and cultural change. However, both the Planned and Emergent perspectives
              stress that this is a slow, learning process. For this reason, it is argued, rapid organisa-
              tional transformations can only be successful if they focus on structural as averse to
              cultural change. This is a conclusion that can certainly be drawn from the literature
              on both Planned and Emergent change. It is also something stressed by Kanter et al
              (1992), who believe that an organisation’s structure can be changed relatively quickly
              through a ‘Bold Stroke’ but that cultural change can only be achieved by a ‘Long
              March’ requiring extensive participation over time. The Oticon study in Chapter 11
              appears to offer a different perspective on culture change, however. This was a case of
              rapid organisational transformation, which was based on a vision imposed on the
Employee involvement and organisational transformation   445

company in a mainly directive fashion by its CEO, but which led to a widespread
change of attitudes and behaviours in the company. This change in organisational cul-
ture both preceded and paved the way for a more participative approach to the
planning, execution and subsequent development of the vision. It was the CEO’s
imposed vision that appeared to bring about the rapid change in attitudes across the
company. The change in attitudes facilitated a more Planned approach that was used
to achieve the rapid structural change. In turn, this was followed by a period of
Emergent change where staff had to develop and adjust to new ways of working with,
and behaving towards, each other.
   Though this shows how Planned and Emergent change can be used in combination,
it still leaves the question of how the change in organisational culture that preceded
these phases at Oticon was achieved rapidly and without the full cooperation and
involvement of the people concerned. In addressing this question, the work of Schmuck
and Miles (1971) is particularly useful. They argue that the level of involvement
required in any change project is dependent on the impact of the change on the people
concerned. Huse (1980) developed this distinction further. Building on earlier work by
Harrison (1970), Huse categorised change interventions along a continuum based on
the ‘depth’ of intervention, ranging from the ‘shallow level’ to the ‘deepest level’. The
greater the depth of the intervention, Huse argues, the more it becomes concerned with
the psychological make-up and personality of the individual, and the greater the need
for the full involvement of individuals if they are to accept the changes.
   The argument, therefore, is that it is necessary to link levels of involvement to the
types of change proposed. The key is that the greater the effect on the individual,
especially in terms of psychological constructs and values, the deeper the level of
involvement required if successful behaviour change is to be achieved. This appears to
explain why in some cases, such as the PPC and PoliceCo, involvement can be dis-
pensed with or minimised, whilst in other cases, such as XYZ, it is vital. It does not,
though, explain why major and rapid attitudinal changes at Oticon were successful
without a great deal of initial involvement.
   In seeking to understand and explain such apparent contradictions, Burnes and
James (1995) draw on the theory of cognitive dissonance. This theory states that people
try to be consistent in both their attitudes and behaviour. When they sense an inconsis-
tency either between two or more attitudes or between their attitudes and behaviour,
people experience dissonance; that is, they feel frustrated and uncomfortable with the
situation, sometimes extremely so (Jones, 1990). Therefore, individuals will seek a
stable state where there is minimum dissonance. This latter point is important. It is
unlikely that dissonance can ever be totally avoided, but where the elements creating the
dissonance are relatively unimportant, the pressure to correct them will be low. Where
the issues involved are perceived by the individual to be significant, however, the pres-
ence of such dissonance will motivate the person concerned to try to reduce the
dissonance and achieve consonance, by changing either their attitudes or behaviour to
bring them into line (Robbins, 1986; Smith et al, 1982). This may involve a process of
cognitive restructuring, which is unlikely to be free from difficulties for the individual
concerned (Mahoney, 1974). However, as Festinger (1957), one of the originators of the
concept, pointed out, in addition to trying to reduce the dissonance, people will actively
avoid situations and information that would be likely to increase the dissonance. Since
the emergence of the theory of cognitive dissonance in the 1950s, it has been developed
and refined (see Cooper and Fazio, 1984; Fazio et al, 1977; Jones, 1990).
446   Chapter 14 · Managing change

                 Applying principles of cognitive dissonance to organisational change, it can be seen
              that, if an organisation embarks on a change project that is decisively out of step with
              the attitudes of those concerned, it will meet with resistance unless those concerned
              change their attitudes. On the other hand, where the level of dissonance occasioned
              by proposed changes is low, attitudinal adjustments will be minor and potential resist-
              ance negligible. Therefore, the level and type of involvement should be geared to the
              level of dissonance that any proposed changes may provoke.
                 Up to this point, cognitive dissonance supports the work of Schmuck and Miles
              (1971) and Huse (1980). However, if we apply the theory to situations, such as
              Oticon’s, where old certainties proved inadequate and the very survival of the organi-
              sation is at stake, a different picture emerges. The crisis (or potential crisis) raises the
              level of dissonance in the organisation as it becomes apparent that existing practices
              are no longer viable and change is required. Not only does this make individuals and
              groups more receptive to radical change, but, in addition, change can be one of the
              main ways of reducing dissonance. At Oticon, fundamental attitudinal change was
              achieved relatively quickly because management and employees recognised the need
              for major change and saw the new vision as their only hope for the company’s sur-
              vival. Arguably, this was the reason why the new vision met with so little resistance at
              Marconi. Therefore, in such instances, the dissonance is occasioned not by the
              change, but by the condition of the organisation leading up to the change. This per-
              spective also helps to explain cases, such as Rover–TRW, GK and UTL, where,
              initially, managers and others were resistant to changes or were only prepared to
              move slowly. In such situations, the absence of a sense of deep crisis prevents existing
              certainties being successfully challenged. Only when more severe threats arise are
              these old certainties challenged, and those involved become more prepared to accept
              and promote radical solutions that had previously been rejected.
                 A similar and complementary explanation for the involvement or non-involvement
              of employees is offered by the notion of the psychological contract. Though this con-
              cept has been around since the 1950s (see for example Argyris, 1960), it was only in
              the 1980s and 1990s that it became widely used by organisation theorists, especially
              in America (Arnold et al, 1998). As Schein (1988: 22–3) explains:

                The notion of a psychological contract implies that there is an unwritten set of expectations
                operating at all times between every member of an organization and the various managers
                and others in that organization. … The psychological contract implies further that each role
                player, that is, employee, also has expectations about such things as salary or pay rate,
                working hours, benefits and privileges … and so on. Many of these expectations are implicit
                and involve the person’s sense of dignity and worth. … Some of the strongest feelings lead-
                ing to labor unrest, strikes, and employee turnover have to do with violations of these
                aspects of the psychological contract, even though the public negotiations are often over the
                more explicit issues of pay, working hours, job security, and so on.


              We can certainly see why the employees of the PPC, who had joined a public sector
              organisation with a public sector ethos, might feel as though their psychological con-
              tract had been violated when they were suddenly told they were to be transferred to
              the private sector – particularly as the change represented a considerable threat to
              their job security. However, why was there not a more adverse reaction from XYZ’s
Conclusions: merging theory and practice   447

        staff or GK’s employees? The reason offered by proponents of the psychological con-
        tract would be that they recognised the need and justification for the changes and
        therefore the legitimacy of the need to change their psychological contracts.
           Consequently, in understanding the employee involvement/non-involvement ques-
        tion, we need to draw on the complementary ideas of levels of involvement, cognitive
        dissonance and the psychological contract. What these show us is that in many cases
        where change is proposed, it is necessary to convince staff, through a process of con-
        structive engagement, of the need to challenge their existing beliefs, behaviours and
        expectations and to renegotiate their ‘contracts’ with the organisation. However, this
        questioning of beliefs, behaviours and expectations can also arise in situations of
        crisis without the need for elaborate involvement techniques, because those concerned
        can see that the old attitudes and ways of behaving have had their day and, unless
        major or radical changes are made, their jobs or even the entire organisation may
        cease to exist.
           Having addressed the issue of employee involvement and organisational transfor-
        mation, we can now move on to present the conclusions drawn from the analysis of
        the case studies.


Conclusions: merging theory and practice
        One should be wary of drawing any firm conclusions about either theory or practice
        from such a small number of case studies. However, the case studies presented in Part
        3 do illustrate a range of change situations, are rich in detail, cover an extended time
        period, and do raise some important issues that it would be unwise to ignore. These
        are as follows.
        Strategy
        Though in some cases this was driven by a clear vision, more often it was triggered by
        perceived opportunities, problems or crises. The actual form of each organisation’s
        strategy emerged from attempts to pursue visions or respond to events. In addition, we
        should note that there were instances where senior managers, individually or collec-
        tively, tried to reinvent their organisations. Whether we refer to this as creating a vision,
        as the Japanese might, or trying to impose a new reality, as the postmodernists might, is
        perhaps irrelevant. What is important is that some managers, as the Oticon and XYZ
        cases show, do have the will and the ability to reshape their organisations and to over-
        come or modify the constraints they face. However, it is also important to note, as the
        Marconi example shows, that a vision by itself is not enough. The vision needs to be
        achievable, though managerial judgement and competence are required to construct an
        achievable vision. Managers also need the skills to implement the vision and, most
        importantly, to ensure that the constraints they face can be modified or overcome.
        Constraints
        As one might expect, the case studies reveal that external and internal constraints do
        affect the degree of choice managers have or perceive themselves to have. In addition,
        the case studies show that managers respond to constraints in a variety of ways. In
        some instances, such as the PPC and PoliceCo, managers take action to change their
        organisations to accommodate external demands and constraints. In other instances,
448   Chapter 14 · Managing change

              such as Volvo, Marconi, XYZ and Speedy, managers sought to influence or change
              the constraints they faced to suit their personal preferences and beliefs. The case stud-
              ies also show that whilst some constraints appear to be amenable to change or
              influence, others, such as those faced by Marconi and PoliceCo, were much more
              resistant. Interestingly, in terms of internal constraints, despite what many writers
              believed, overtly political behaviour did not feature in most of the case studies,
              though there were some power struggles and some political battles. There are a
              number of possible explanations as to why politics did not appear to play a more sig-
              nificant role in most of these cases. These include the presence of dominant
              individuals or coalitions, the widely-recognised need for change in some of the organ-
              isations, which gave legitimacy to managerial initiatives, and the openness and
              transparency of the change process, which was especially the case in XYZ.

              Managerial behaviour
              In most of the instances examined, managers played a central role in initiating or
              developing visions and strategies. The exceptions were the music industry study and
              PoliceCo. In the former, music industry executives still seem unsure how to proceed in
              the new world of the Internet, and in the latter, PoliceCo are treating outsourcing as
              an administrative task rather than a strategic issue. With the exception of these two
              cases, managers played a leading role in implementing strategies or attempting to
              create the conditions for their implementation. In some cases they also led change
              projects. There were, though, instances, as with GK, where managers had to change
              their behaviour or managerial style in order to achieve successful change. In addition,
              there were instances where one of the strategic objectives was to change managerial
              behaviour, such as in XYZ. One crucial point to note is that successful change does
              not appear to be related to a change of manager. Oticon changed CEOs and success-
              fully changed; GEC/Marconi changed Managing Directors and failed miserably;
              whereas GK and Volvo kept their existing Managing Directors and still achieved suc-
              cessful change. Therefore, for an organisation in trouble, though changing senior
              managers may be an easy option, it may not always be a successful one.

              Managing change
              A variety of approaches to change management can be seen in the case studies. These
              range from instances where all the major decisions were taken by one manager, to
              others where staff in the areas concerned led and planned change projects. The gen-
              eral tendency was for managers to involve employees in planning and implementing
              smaller, more short-term projects, often of a technical nature, and in some cases even
              to devolve such responsibility to them. Larger, more strategic and longer-term proj-
              ects, though, especially those concerned with attitudinal or behavioural change, were
              very much initiated and under the control of senior managers. However, as the XYZ
              example showed, this does not mean that there cannot also be widespread managerial
              and employee involvement.

              Planned, Emergent or combined change
              Once again, the picture is mixed. Longer-term and larger projects were usually open-
              ended, with diffuse objectives, and involved large numbers of people; whereas smaller
              projects, where clearer objectives could be set, were inclined to be more tightly con-
Conclusions: merging theory and practice   449

trolled and, in some instances, aligned more with the Planned approach to change.
However, others appeared to be undertaken in a more directive and Tayloristic fash-
ion. Perhaps the main distinction was between those projects aiming to change
attitudes and behaviour, which in general tended to be more participative and flexi-
ble, and those concentrating on structural or technical change, especially at the
operational level, which tended to have clearer objectives and required more fixed
timescales. Nevertheless, some organisations appeared to use a combination of
approaches to change consciously and appropriately, e.g. XYZ, whilst others, such as
GK, tried a variety of different approaches, though not always consciously, appropri-
ately or successfully. Yet again, some of the other organisations tried to stick to one
approach to change even where it did not appear to be working, e.g. Marconi.
   Underpinning the case study companies’ preferences as far as change is concerned
appear to be two dominant factors. The first concerns their preferred or dominant
style of management. The use of a combination of change approaches seems to have
been more prevalent and successful in those companies where there was, or there
developed, a participative style of management. An example is XYZ, who favoured
working cooperatively both internally and externally. This explains not only their
wish to develop team working internally, but also their commitment to developing a
partnership approach to working with their customers. Though XYZ’s approach to
changing its organisational structure can be seen as an example of Planned change,
this needs to be seen within XYZ’s overall style, which favoured the Emergent
approach and which promoted employee involvement and learning. In the cases of
the PPC and PoliceCo, on the other hand, managers preferred a much more com-
mand-and-control, top-down approach with little involvement from staff. Therefore,
their dominant approach to change was mechanistic and directive. Oticon and Volvo,
though, represent different aspects of managerial style again. In these instances, man-
agers set out to change the dominant managerial style of their companies. Initially, in
all the companies, managers began to make these changes by imposition rather than
through employee involvement. Nevertheless, over time, more quickly in some cases
than others, as the changes began to work, a more participative form of management
emerged and there was less need for changes to be imposed from above instead of
emerging from below. Therefore, what we can see is that a variety and combination
of approaches to change were used by the more successful companies.
   The second factor concerns the degree to which organisational change was seen as
a series of one-off events, or a continuous process. In some of the companies, e.g.
GK, each change project arose and was dealt with on its own merit. Indeed, at GK,
each new project seemed to involve reinventing the wheel as far as choosing an
approach to change was concerned. Consequently, and not surprisingly, there were a
number of false starts before an effective approach was chosen. In other companies,
however, e.g. XYZ, where change was considered as – or became – the norm, a bat-
tery of approaches, tools and techniques were developed that could be used as and
when appropriate.
   Therefore, if we take these two factors together, participative managerial style and
the need to see change as a continuous process, they not only account for the success-
ful use of a combination of change techniques but also for the successful outcome to
change projects.
450   Chapter 14 · Managing change


              Objectives
              A variety of objectives could be discerned, ranging from localised structural change to
              organisation-wide cultural change. In most of the cases, however, either at the outset
              or over time, changes to the behaviour and attitudes of individuals and groups came
              to be considered as more important than either technical or structural adjustments.
                 Therefore, we can see that, depending on the circumstances or constraints, strategy
              development and change management can take many forms. In the case studies, there
              are examples of deliberate and conscious attempts to shape strategy as well as more
              unconscious and accidental approaches. We can also see cases where an organisation’s
              strategy or change programme, by design or accident, resulted in the reshaping or
              realignment of the constraints the organisation faced. In terms of change management,
              there were cases where the process of change and the process of strategy development,
              because of their emergent nature, coincided. However, there were also cases where
              Planned change followed on from and was determined by a pre-set strategy.
                 In conclusion, the case studies illustrate the arguments regarding managerial
              choice, strategy and change developed in Part 1 and Part 2. They show that whilst the
              Planned and Emergent approaches to change are important, they are not the be-all
              and end-all of change, or even mutually exclusive. The case studies also show that
              managers can exercise a high degree of choice about what to change, when to change
              it and how to change it. They also show that real and considerable constraints on an
              organisation’s freedom of action do exist, as in Marconi and PoliceCo, which may be
              beyond the managers’ power to change or even mitigate. In addition, it can be seen
              that where decisions are taken in an open manner, when those concerned are gen-
              uinely listened to and involved, and where serious attempts are made to identify and
              resolve reservations and resistance, there is less likelihood that political behaviour,
              individual interests or bias will be able to subvert the process.
                 Having now reviewed the ten case studies in the light of Parts 1–3, the next chapter
              will present the Choice Management–Change Management model for strategy devel-
              opment and organisational change.


Test your learning

          ■ Short answer questions
               1   In what way does the Music Industry study support the case for adopting a complexity
                   approach to organisations?

               2   What are the main implications for vision-building and strategy development that can
                   be drawn from the Marconi study?

               3   What are the key lessons that other companies can learn from the way the relationship
                   between Rover and TRW developed?

               4   In what way can it be said that Speedy Stationers failed to overcome the constraints
                   it faced?
Test your learning   451

   5   List three of the main differences between the behaviour of senior managers within
       Oticon and the behaviour of senior managers in the PPC.

   6   What lessons can be learned by comparing change management at XYZ with that
       at GK?

   7   Discuss the case for seeing Volvo as an example of combined change.

   8   What did Huse (1980) mean by the ‘depth’ of intervention?

   9   What is cognitive dissonance?

  10   What is a psychological contract?



■ Essay questions
  1 Given that its initial approach to change was somewhat autocratic, explain the level of
    cooperation and commitment which Oticon received from its staff.

  2 Compare and contrast the different approaches of Speedy and PoliceCo to outsourcing.

  3 What advice would you offer to the big record labels for coping with the changes being
    brought about by the Internet?
Chapter 15

Organisational change
and managerial choice


  Learning objectives
  After studying this chapter, you should be able to:
  ■   understand the rationale underlying the Choice Management–Change
      Management model;
  ■   discuss the three organisational processes which make up the
      Choice–Change model;
  ■   describe how organisations can manage change effectively;
  ■   identify the range of choices that organisations have when considering
      change;
  ■   appreciate how organisations can influence their circumstances to align them
      with their preferred way of working;
  ■   understand the need for managers to play a proactive role in the change
      process.




 Introduction
From Chapter 14, we can see that whilst organisational change can be a complex,
ambiguous and open-ended phenomenon, it can also be relatively straightforward
with understandable and limited objectives. This in itself is not a new or radical
finding – anyone who works in or studies organisations will have noted that
change comes in a wide variety of shapes and sizes. It was argued in Chapter 10,
however, that in order to cope with the wide variety of types of change, there is a
need for a corresponding variety of approaches to strategy development and
change management.
   This point, the need to match types of change with appropriate approaches to
managing change, is not as prominent in the literature on organisational change
and behaviour as one might expect. As Part 2 showed, despite the widespread
influence of Contingency Theory, the majority of writers and practitioners are
committed to a ‘one best way’ approach to strategy and change. The call by
Dunphy and Stace (1993) for a situational or contextual approach to these issues
Introduction   453

has still been taken up by few others. Though there are writers on strategy, such as
Mintzberg et al (1998a) and Whittington (1993), who identify the various approaches
to strategy, in most cases they tend, eventually, to opt for one as their preferred
approach. This is even more pronounced in the change literature, where there is a
clear distinction between those who support the Planned approach (such as
Cummings and Worley, 1997; French and Bell, 1995) and those who adhere to a
more Emergent approach (such as Kotter, 1996; Pettigrew, 1997; Weick, 2000;
Wilson, 1992).
   Many of those arguing for their own favoured approach to strategy and change do
so, either explicitly or implicitly, on the basis of their perception of the nature of the
environment in which organisations operate. Those arguing for a Planned approach
to strategy and/or change appear to assume that the environment is relatively stable
and predictable. Those who take a more Emergent approach to both seem to operate
on the assumption that the environment is turbulent and unpredictable.
   Furthermore, most writers seem to assume that the principal role of managers and
the ultimate objective of strategy and change is to align or realign an organisation
with its environment. In the preceding chapters, a case has been built for rejecting this
argument and adopting a different stance. Rather than accepting the view that man-
agers are prisoners of the circumstances in which their organisations operate or find
themselves, it was argued that managers can and do exercise a considerable degree of
choice. It was further argued, however, that the scope and nature of the choices man-
agers face and make are constrained by a range of external factors (national
characteristics, the business environment and industry norms) and internal organisa-
tional characteristics (especially structure, culture, politics and managerial style). This
argument goes much further than many by challenging the assumption that managers
are in some way the passive agents of forces beyond their control, but it still leaves
them as prisoners of circumstances – although the prison in this case is much roomier
than many of the writers we have discussed would acknowledge.
   The arguments in Chapters 5, 6 and 10 challenged even this definition of manage-
rial choice, however. It was suggested that many of the constraints on choice are
themselves amenable to managerial actions – in effect, organisations can influence or
change the constraints under which they operate. This possibility was first suggested
when examining Contingency Theory in Chapter 2; it was further developed in subse-
quent chapters and shown to be more than a possibility. In particular, some managers
are even capable of reinventing their organisations or, as the postmodernists would
have it, creating a more preferable reality for them. The ten case studies in Part 3
reveal that, though organisations do try to align and realign themselves with their
environment, they also attempt to influence and restructure the environment and
other constraints in their favour. Sometimes, by accident or design, this results in a
reconfiguration of the accepted rules by which the industry in which they operate
competes; whilst in other instances, it prevents organisations being forced to under-
take more radical internal upheavals.
   In the case of Oticon (Chapter 11), it can be seen that the company deliberately set
out to change the basis on which it competed by reinventing itself as a service-based
rather than a technology-driven organisation. Lacking the technological strength of its
competitors, which was the accepted cornerstone of competition in its industry, it pro-
posed to offer a superior level of service instead. By changing the rules of the game in its
454   Chapter 15 · Organisational change and managerial choice

              industry, Oticon hoped to steal a march on its competitors. In the case of XYZ, the new
              Managing Director sought to change the internal constraints in the company, in terms of
              its culture, management style and structure, in order to improve its performance and
              align it with the changing nature of the construction industry and the desires of its
              parent company. In essence, the new Managing Director was attempting to reinvent the
              company, based on more cooperative internal relationships, in order to create more
              stable relationships with customers and establish a less uncertain external environment.
                 So, as the case studies show, organisations can and do influence and change the
              constraints under which they operate. On the other hand, though, the case studies
              give some support to those, such as proponents of the realist perspective discussed in
              Chapter 4, that there are some types of constraint that are not amenable to change.
              This can be seen from the Marconi example, where no amount of effort on behalf of
              its management could alter the situation that they had borrowed too much money to
              buy overpriced assets at the top of the dotcom boom that, when the demand for tele-
              coms equipment went into freefall, were found to be virtually worthless. Similarly,
              though PoliceCo might have had more room for manoeuvre than they used, there was
              no way that they could change the basic situation that they were forced by govern-
              ment legislation to outsource activities and that this had to be undertaken in a
              prescribed manner.
                 Therefore, we can see that organisations do have considerable scope for changing
              or influencing the constraints they face but that, despite what the postmodernists may
              claim, there are some constraints that appear beyond the scope of individual organi-
              sations or, in the case of the record companies, even entire industries to change.
              Nevertheless, this still leaves most organisations with considerably more freedom of
              choice than many commentators on strategy and change would acknowledge. The
              implications of this wider perspective on managerial choice for the nature and focus
              of change management are, as the above shows, significant. Change management
              need not be seen as a mechanism for achieving a specified and predicted outcome (the
              Planned approach). Nor need it be conceived of as a continuing process of aligning
              and realigning the organisation with its environment (the Emergent approach).
              Instead, as this chapter will show, by linking managerial choice to the management of
              change, organisations can open up a much wider spectrum of options. These range
              from focusing on achieving radical internal change to align an organisation with its
              external constraints, doing the same in an attempt to restructure such constraints, to
              influencing or changing external constraints in order to avoid internal upheavals. In
              such a situation, not only are managers trying to make sense of their situation for
              themselves and others, but they are also seeking to construct a more favourable envi-
              ronment as well.
                 Building on this insight into managerial choice, the next section in this chapter will
              present an overview of the Choice Management–Change Management model for
              understanding and implementing organisational change. This is followed by a detailed
              description of the three components of the model: the choice process, the trajectory
              process, and the change process. The chapter concludes by maintaining that though
              organisations may choose to restructure their internal operations and practices in order
              to align them with the external circumstances they face, they can also choose to change
              or modify external and internal conditions and constraints in order to avoid extensive
              internal upheaval and/or to bring the constraints into line with their preferred modus
The Choice Management–Change Management model       455

       operandi. Whatever choices are made, it is the role of managers consciously to
       explore and identify all the available options, however improbable they seem, rather
       than assuming that they have no, or only limited, choice in the matter.


The Choice Management–Change Management model
       As the Choice Management–Change Management model in Figure 15.1 shows,
       organisational change can be viewed as the product of three interdependent organisa-
       tional processes:
       ■   The choice process – which is concerned with the nature, scope and focus of organ-
           isational decision-making.
       ■   The trajectory process – which relates to an organisation’s past and future direc-
           tion and is seen as the outcome of its vision, purpose and future objectives.
       ■   The change process – which covers approaches to, mechanisms for achieving, and
           outcomes of change.
       These processes are interdependent because, as Figure 15.1 shows, the change process
       is itself an integral part of the trajectory process and this, in turn, is a vital part of the
       choice process. Within each of these processes there are a group of elements, or
       forces, which interact, clash with and influence each other in subtle and complex
       ways. It is this interaction of elements or forces which prevents decision-making and


                          Context




                          Choice
                          Process

                 Focus              Trajectory
                                                      Vision




                                                     Trajectory
                                                      Process

                                        Strategy                  Change
                                                                               Objectives




                                                                                Change
                                                                                Process

                                                                    Planning                People


       Figure 15.1 The Choice Management–Change Management model
456   Chapter 15 · Organisational change and managerial choice

              change management from being a totally, or even predominantly, rational-mechanical
              process, and ensures that they are based on subjective and imperfect judgment.
                 Each of these three processes will now be described, not only to show their com-
              plexity and interdependence, but also to provide a guide to putting the Choice
              Management–Change Management model into practice. For this latter reason, the
              description of the change process, in particular, will dwell on the steps necessary to
              accomplish change successfully.

              The choice process
              The choice process comprises three elements:
              ■   Organisational context
              ■   Focus of choice
              ■   Organisational trajectory

              Organisational context
              One of the standard prescriptions for successful organisations is that they should
              know their own strengths and weaknesses, their customers’ needs and the nature of
              the environment in which they operate. As the case studies show, however, many
              organisations appear only to begin collecting this sort of information when they are
              in trouble. Yet how can organisations hope to understand and appreciate the options
              open to them unless they develop mechanisms for collecting and analysing informa-
              tion on their performance and general situation?
                 No one would suggest that assembling information on past, present and antici-
              pated future performance is easy or that understanding the nature of the constraints
              faced by an organisation is simple. However, there are relatively well-established
              methods for benchmarking an organisation’s performance against a range of internal
              and external comparators (Camp, 1989). There are also a number of tried-and-tested
              tools that organisations can use for gathering information on and evaluating the main
              internal constraints, such as structure, culture, politics and management style, and the
              main external constraints, such as national characteristics, industry and sector norms,
              and the business environment. Exhibits 15.1 and 15.2 show two of the tools most
              widely used by organisations for this purpose, the SWOT analysis and the PESTEL
              framework (Johnson and Scholes, 2002; Lynch, 1997).

                  Exhibit 15.1      SWOT analysis

                  What is a SWOT analysis?                       What does it do?

                  SWOT stands for :                              A SWOT analysis enables managers to identify
                                                                 the key internal and external issues they need
                  Strengths (internal)                           to take into account in order to understand
                  Weaknesses (internal)                          the context in which the organisation oper-
                  Opportunities (external)                       ates. Also, by identifying key issues, it begins
                  Threats (external)                             to focus managers on the areas where they
                                                                 need to make choices, and helps to identify
                                                                 some of the constraints and risks involved.
The Choice Management–Change Management model             457

 Exhibit 15.2         PESTEL framework

  What is the PESTEL framework?                         What does it do?

  PESTEL stands for:                                    The PESTEL framework is a rigorous
                                                        approach to identifying and understanding
  Political                                             the main external environmental factors
  Economic                                              which affect an organisation. As with the
  Sociocultural                                         SWOT analysis, it also plays a role in focusing
  Technological                                         organisations on the choices open to them
  Environmental                                         and the constraints and risks involved in
  Legal                                                 these choices.



   As in the XYZ case study, one advantage of adopting such well-understood tools,
which are easily explained and do not require expert assistance, is that organisations
can use them to promote openness and reduce, though probably not eliminate, politi-
cal behaviour and conflict. Nevertheless, some organisations will find that owing to
the context in which they operate, teamwork, cooperation and openness are very dif-
ficult to achieve without first changing those factors which hinder or prevent these.
Perhaps the prime consideration in this respect is the prevalent style of management.
The issue of management style will be covered in Chapter 16; however, as Exhibit
15.3 shows, different styles of management can have significantly different implica-
tions for the way managers see, run and change their organisations.

 Exhibit 15.3         Styles of management

  Strengths                                            Weaknesses

  Traditionalist management
  ■ Practical common sense                             ■   Makes snap decisions
  ■ Attentive to facts                                 ■   Lacks responsibility for change
  ■ Systems focus                                      ■   Poor at relationships
  ■ Steady worker                                      ■   Concerned with difficulties
  ■ Super dependable
  ■ Realistic about time scales

  Catalyst management
  ■ Charisma and commitment to staff                   ■   Can be drawn into pleasing others
  ■ Communicates well                                  ■   Has difficulties with rules and conventions
  ■ Comfortable with changing environment              ■   May spend too long on issues
  ■ Comfortable with diversity                         ■   Takes over problems and responsibilities

  Visionary management
  ■ Strong on intellectual vision                      ■   May be insensitive to others
  ■ Creative and progressive                           ■   Devalues others who are not intellectual
  ■ Enjoys problem solving                             ■   Expects too much of people
  ■ Outspoken                                          ■   Restless and easily bored
  Source: from Maddock (1999:40), based on Vinnecombe (1987)
458   Chapter 15 · Organisational change and managerial choice

                 Though others can exert pressure, managers are really the only group who can ini-
              tiate change and will rarely (as a group) voluntarily adopt changes which adversely
              affect them. It follows that, faced with a mismatch between their organisation and its
              environment, some managers will seek to achieve realignment by influencing the envi-
              ronment rather than pursuing an internal upheaval that may involve changes in
              management style and personnel.
                 An organisation’s management style will also influence how and by whom infor-
              mation is gathered and discussed. If an accurate picture of an organisation’s context is
              to be constructed, it will require the involvement of a wide range of people. Not only
              should this provide a robust basis for decision-making, it can also develop a sense of
              teamwork, cooperation and mutual understanding amongst those concerned. If only a
              few managers are involved, however, it is likely to result in a skewed and biased pic-
              ture of the organisation. Nevertheless, it should also be recognised that no matter
              how rigorously information is collected, analysed and argued over, there will always
              be a large element of subjectivity in this process. This is why, as a number of writers
              have commented, one of the key tasks managers perform is ‘sensemaking’ (Weick,
              1995). As Weick (1995: 13) commented:

                … sensemaking is about the ways people generate what they interpret. Jury deliberations,
                for example, result in a verdict. Once jurors have that verdict in hand, they look back to
                construct a plausible account of how they got there.

                 For managers in organisations, sensemaking is about understanding, interpreting and
              explaining, making sense of, their organisation’s world for themselves and others in such
              a way that it provides a rationale and justification for past, present and future actions.
              Sensemaking is also the process by which managers attempt or can attempt to impose
              their view of reality on others. The Oticon case is a prime example of where a CEO first
              made sense of the world for himself and then imposed this sense on others in such a way
              that it allowed the organisation to move successfully forward. Marconi is another exam-
              ple where a senior manager attempted to impose his ‘sense’ on others in order to justify
              and guide actions. In this case, however, the outcome was far from successful.

              Focus of choice
              Many organisations can find themselves in a situation where they appear to be con-
              stantly reacting to events and indulging in ‘fire-fighting’ rather than being proactive.
              Certainly, this seems to be the current position in the music industry. One of the bene-
              fits of sensemaking, as successful organisations show, is that it allows managers to
              identify and focus their attention on the narrow range of short-, medium- and long-
              term issues that are generally agreed to be crucial to the organisation’s success. Some
              of these will relate to the organisation’s performance, whilst others may be more con-
              cerned with building or developing particular competences or technologies. In some
              cases, the issues may be of passing interest only, whilst in other cases they may be fun-
              damental to the organisation’s survival. Certainly, in most instances, organisations
              will in one way or another focus on aligning themselves with or even influencing or
              changing the constraints under which they operate.
                 How an organisation decides upon which issues to focus, and whether this is done
              in a concerted way (as at XYZ), or in a way which allows different groups and indi-
              viduals to pursue their own agenda, is a fundamental factor in any organisation’s
The Choice Management–Change Management model     459

decision-making process. Certainly, the received wisdom is that a concerted and
coordinated approach, which focuses upon a small number of issues at any one time,
is more effective than a fragmented one (Kay, 1993; Senge, 1990). It is interesting to
note that Weick (1995) appears to consider the Japanese approach to decision-
making as an example of sensemaking in action. This may explain why Japanese
organisations are particularly good at identifying the key aspects of their strategy on
which they need to focus. The particular technique they use is called Hoshin Kanri
(see Exhibit 15.4). Hoshin Kanri, or Policy Deployment as it is often termed in the
West, was developed in Japan to communicate a company’s policy, goals and objec-
tives throughout its hierarchy in a structured and consistent fashion (Lee and Dale,
2003). Its main benefit is that it focuses attention on key activities for success. It is a
process that is undertaken annually to ensure that everyone on the company is con-
scious of and addressing the same objectives and that these inform actions and
decision-making at all levels in the organisation (Akao, 1991).

  Exhibit 15.4          Hoshin Kanri

  The word hoshin can be broken into two parts. The literal translation of ho is direction. The
  literal translation of shin is needle, so the word hoshin could translate into direction needle
  or the English equivalent of compass. The word kanri can also be broken into two parts. The
  first part, kan, translates into control or channeling. The second part, ri, translates into reason
  or logic. Taken altogether, hoshin kanri means management and control of the organization’s
  direction needle or focus.
  Source: Total Quality Engineering Inc (2003)




Organisational trajectory
An organisation’s trajectory or direction is shaped by its past actions and future
objectives and strategies. As such it provides a guide or framework within which to
judge the acceptability, relevance or urgency of issues, concerns and proposed actions.
The trajectory process encompasses the determination of and interplay between an
organisation’s vision, strategies and approach to change. This can be seen from
Volvo’s strong commitment to Job Design, which has arisen from the interplay of
events over more than 30 years. Any attempt by Ford to reverse this commitment
would surely face strong opposition at all levels in Volvo.
   Nevertheless, the concept of trajectory comprises not only an organisation’s
‘memory’ of past events but also its intent in terms of future ones. For some organisa-
tions, such as Volvo with its commitment to Job Design, the trajectory will be clear
and unambiguous, unless there is some major disturbance which throws into question
past practice. In others, making sense of past events and agreeing proposals for future
actions will be the subject of dispute and uncertainty. Certainly, since its crash, one
might assume that there has been much rewriting of history in the Marconi board-
room, especially with regard to the supposed failure of GEC and the attractiveness of
telecoms. In the light of the reappraisal of its past, one might also assume that
Marconi would be faced with serious disagreements about how it should proceed in
the future; if it cannot go back to the days of GEC, and if becoming a telecoms giant
is no longer viable, where does it go?
460   Chapter 15 · Organisational change and managerial choice

                 It will also be the case that some organisations will deliberately and consciously
              attempt to plot their trajectory in minute detail, such as PoliceCo, whilst others, such
              as Oticon, may adopt a more global and distant set of objectives from which their
              trajectory emerges. Whatever the approach, as Mintzberg (1994: 25) observes:

                … few, if any, strategies can be purely deliberate, and few can be purely emergent. One sug-
                gests no learning, the other, no control. All real-world strategies need to mix these in some
                way – to attempt to control without stopping the learning.

              Therefore, an organisation’s trajectory can be seen as a blend of, or clash between,
              the deliberate and emergent elements of its strategy. Whether or not this blend or
              clash produces the intended or expected outcomes for the organisation appears to
              depend partly on the quality of its sensemaking and partly on the degree of control it
              can exert, or chooses to exert, over events. Furthermore, as the case studies show, it is
              also dependent on an organisation’s ability to learn from, deal with and take advan-
              tage of unexpected events as they emerge. For Oticon, TRW and above all Volvo, the
              ability to learn and successfully move on was crucial. For Marconi, the inability to do
              so was disastrous. Therefore, it is the interplay between the interpretation of past
              actions and future intent coupled to the ability of organisations to shape developing
              events to their advantage that makes decision-making so complex.
                 Each of the three elements of the choice process, context, focus and trajectory, is
              complex in itself, but they also interact with each other in an intricate and unpre-
              dictable way. An organisation’s trajectory, whether it is seen as successful or not, can
              influence both the focus of its decision-making, and the context within which the
              organisation operates. Likewise, the context provides a framework within which the
              trajectory is developed. Similarly, the focus of choice will influence which aspect of
              the organisation’s context its trajectory will be directed towards, not only in the short
              term but also in the medium and long term.
                 The case studies show that decision-making is a complex and multifaceted process.
              One reason for this is the type of decisions that have to be addressed when organisa-
              tions deal with major questions. Decisions can be classed on a spectrum that runs
              from ‘bounded’ to ‘unbounded’. Bounded decisions are usually small, have relatively
              easily-defined parameters, and tend to be relatively separable from the environment
              or context in which they arise. Unbounded decisions usually concern large and impor-
              tant issues, have difficult-to-define parameters, are ambiguous and are intertwined
              with other issues and factors in the environment or context in which they arise
              (Rollinson, 2002). Obviously, most, if not all, of the major strategic issues an organi-
              sation has to address tend to lie at the unbounded rather than bounded end of the
              spectrum. Given the unbounded nature of such decisions, it is not surprising, as
              models of decision-making described in Exhibit 15.5 show, that managers tend to
              adopt a less rational and more haphazard approach to decision-making than they
              themselves would often openly acknowledge. However, as the case studies revealed,
              and as writers have pointed out for many years, there is a tendency for managers to
              ‘muddle through’ rather than attempt an exhaustive and exhausting examination of
              all the available options (Lindblom, 1968). Nor is it surprising that some managers
              prefer ‘fire-fighting’ to tackling fundamental issues (Burnes, 1991) – at least the objec-
              tive is immediate and clear, and a favourable outcome can be achieved (though it is
              usually short-lived).
The Choice Management–Change Management model          461

Exhibit 15.5         Decision-making models

Model                                        Assumptions

The Rational Choice model of                 ■   Decision-makers have knowledge of all
decision-making                                  possible alternative solutions.
                                             ■   They have complete knowledge of the
                                                 consequences of all these alternatives.
                                             ■   They have a robust set of criteria for
                                                 evaluating these alternatives.
                                             ■   They have unlimited resources, including
                                                 time, money and abilities.
                                             ■   They follow a systematic and orderly
                                                 sequence of decision steps.

The Bounded Rationality model of             ■   Decision-makers do not have complete
decision-making                                  knowledge. They rely on hunches and intuition.
                                             ■   Decision-makers do not have fixed and
                                                 consistent preferences.
                                             ■   Decision-makers do not have unlimited
                                                 resources.
                                             ■   An optimal solution may not exist or even
                                                 be necessary.
                                             ■   Decision-makers do not optimise or seek a
                                                 solution that maximises the expected benefits.
                                             ■   They ‘satisfice’ – they seek a solution or
                                                 decision option which is ‘good enough’
                                                 rather than ideal.
                                             ■   They do follow a systematic and orderly
                                                 sequence of steps.

The Garbage Can model of                     ■   Decisions involve four elements: problems,
decision-making                                  solutions, participants and choice opportunities.
                                             ■   Some decisions will only be made when all
                                                 four elements come together.
                                             ■   Political motives can lead to these elements
                                                 being manipulated.
                                             ■   Decision-making is volume-sensitive –
                                                 managers cannot be everywhere at once or
                                                 deal with all issues at once.
                                             ■   As the number of problems increase,
                                                 decision opportunities decrease.
                                             ■   Novel problems are likely to attract more
                                                 attention than mundane ones.
                                             ■   Decision-makers do not follow an orderly
                                                 sequence of steps.
                                             ■   Chance plays a large part in what decisions get
                                                 made and when.

Source: adapted from Rollinson (2002 )
462   Chapter 15 · Organisational change and managerial choice

                 Appreciating the complexity of decision-making also casts the Japanese ringi
              system (discussed in Chapter 3) in a favourable light. Only by an exhaustive analysis
              of the issue concerned and the options available is the most appropriate decision
              likely to be arrived at. Moreover, the ringi system is usually aided by and carried out
              within the framework of a strong corporate vision and clear strategies for its pursuit,
              which make it easier to identify which decisions and actions are appropriate. By
              embracing decisions within such a framework, Japanese companies ensure that they
              do not have to explore all the available possibilities when taking decisions – merely
              those that are in harmony with their vision/strategy/intent. In this way, the entire
              choice process is simplified and made more achievable. Japanese companies have
              shown themselves to be masters of developing visions and strategies that not only
              make them successful but also, and not incidentally, reduce the uncertainty in their
              environment, alter the basis of competition in their favour, and narrow the focus of
              decision-making (Hamel and Prahalad, 1989). The result is that though the choice
              process remains complex, not only does it have a greater degree of consistency
              between the elements and people involved, but it is also more focused in the range of
              issues and decisions required.
                 Therefore, what can be seen is that whilst the choice process is uncertain, complex
              and time-consuming, there are approaches that do reduce these factors and can make
              the process more transparent and effective. Nevertheless, the degree of transparency
              and the efficacy of the choice process is heavily influenced by an organisation’s ability
              to turn choices into workable strategies and to turn strategies into successful actions.
              The success of these, in their turn, will influence future choices. In order to under-
              stand the choice process further, we shall now examine the trajectory process and
              then go on to examine the change process.

          ■ The trajectory process
              Like the choice process, the trajectory process comprises three elements, namely
              vision, strategy and change.

              Vision
              As described in Chapter 7, many organisations now use scenario-building and ‘vision-
              ing’ techniques. The purpose of these techniques is to generate different
              organisational futures, or realities, in order to select the one that seems most
              favourable or appropriate. The ten case studies in Part 3 showed that not all compa-
              nies have visions, not all visions find favour with the managers and employees who
              have to implement them, and not all visions lead to success. Nevertheless, the concept
              of organisations driving themselves forward by creating an ambitious vision (or intent
              or scenario) of where they wish to be in the long term has become increasingly influ-
              ential over the last 15 years (Cummings and Worley, 2001; Johnson and Scholes,
              2002; Mintzberg et al, 1998a & b), though it has also generated increasing levels of
              cynicism (Collins, 1998; Watson, 1994). The argument, in brief, for this approach is
              that previous attempts to plan the future have either fallen foul of the difficulty of
              accurately translating past trends into future projections, or have not been ambitious
              enough because they have allowed future plans to be constrained by present resources
              (Hamel and Prahalad, 1989). The process of developing an organisation’s vision
              attempts to overcome this by encouraging senior managers to think freely, without
The Choice Management–Change Management model          463

considering present resource constraints, about possible futures for their organisation
in the long term.
   This can produce very ambitious objectives, such as Honda’s declaration in the
1960s (when it was barely more than a motorcycle producer little known outside
Japan) that it wanted ‘to become the second Ford’. As the Marconi case study in
Chapter 11 shows, however, the possession of an ambitious vision is, by itself, no
guarantee of success, though the rigour with which a vision is developed may help to
overcome or avoid some of the more obvious pitfalls. As Exhibit 15.6 shows,
Cummings and Huse (1989) argue that visions comprise four elements: mission;
valued outcomes; valued conditions; and mid-point goals.

 Exhibit 15.6        Constructing a vision

  The four elements of a vision
  1. Mission. This states the organisation’s major strategic purpose or reason for existing. It
     can indicate such factors as products, markets and core competencies.
  2. Valued outcomes. Visions about desired futures often include specific performance and
     human outcomes the organisation would like to achieve. These can include types of
     behaviour and levels of skill as well as more traditional outcomes such as turnover and
     profit. These valued outcomes can serve as goals for the change process and standards
     for assessing progress.
  3. Valued conditions. This element of creating a vision involves specifying what the
     organisation should look like to achieve the valued outcomes. These valued conditions
     help to define a desired future state towards which change activity should move. Valued
     conditions can include issues relating to structure, culture, openness and managerial style
     as well as external issues such as relations with customers and suppliers.
  4. Mid-point goals. Mission and vision statements are by nature quite general and usually
     need to be fleshed out by identifying more concrete mid-point goals. These represent
     desirable organisational conditions but lie between the current state and the desired
     future state. Mid-point goals are clearer and more detailed than desired future states, and
     thus, they provide more concrete and manageable steps and benchmarks for change.

  Source: Cummings and Huse (1989)



   The creation of visions should be an iterative process whereby options are identi-
fied, an initial vision is created, and the gap between this and the present
circumstances is identified. Then the organisation considers its strategic options to
bridge the gap, and in so doing refines the vision itself. This refining process serves
partly to ensure that the vision is discussed widely within the organisation, and to
gain employees’ commitment to its objectives, thus using the vision as a motivating
and guiding force for the organisation. Over time, by this process of revisiting and
refining the vision, loose and intangible ideas become transformed into achievable
medium-term goals that people can relate to and pursue. The process can, and in
some cases does, eventually encompass everyone in the organisation. Nevertheless,
the vision is usually driven, not to say created by, a few senior managers who use the
power of their position and strength of their personalities to get others to accept the
vision as a beneficial and achievable reality.
464   Chapter 15 · Organisational change and managerial choice

                  The organisational vision can best be described as a beacon shining from a faraway
              hillside at night that guides travellers to their destination. Travellers can usually only
              see a few feet ahead but are prevented from getting lost by the beacon. Occasionally
              the traveller will have to make a detour, or sometimes even reverse course, but this is
              done in the certain knowledge that they still know where it is that they are travelling
              to. The concept of the beacon is a useful analogy, in that it highlights one of the main
              differences between vision-building and other forms of long-range planning.
              Normally it is only the leadership of an organisation that has a clear view of where
              the organisation is going in the long term. The vision, like the beacon, should shine
              clearly for everyone in the organisation to see, however, so that they can all know
              where they are heading for, and use it to judge the appropriateness of their actions.
                  By constructing a vision in this manner, the organisation not only has a picture of
              what it wishes to become but also some concrete targets to aim for. In the case of
              Oticon, (Chapter 11), its vision of becoming a knowledge-based organisation sprang
              from the mind of its CEO, Lars Kolind. However, to give it flesh and to be able to
              construct his ‘disorganised organisation’ required the involvement of everyone else in
              the organisation. It was an iterative process of trial and error. Above all, it was a
              process of experimentation. He and they knew how they wanted to operate, what
              they wanted to achieve, but the actual details had to be worked out. Kolind could
              also recognise when things were going wrong, however, and acted to ‘explode the
              organisation’ when he felt that it was becoming too rigid.
                  The Marconi vision, on the other hand, seemed both to start and end with two
              senior managers. The extent to which they required the commitment and understand-
              ing of others, as opposed to their compliance, appears to be small. Also, unlike
              Kolind, they seemed unable to adapt their strategy to save their vision. When the
              downturn in demand for telecoms equipment became evident to other companies,
              who took action to protect themselves, Marconi did not. Instead, it continued its
              strategy of selling profitable companies and borrowing money to buy ones which
              fitted its vision but whose viability declined with the decline in demand for telecoms
              equipment. The point is that visions (and components of visions such as Oticon’s
              Statement of Fundamental Human Values) identify the intent, and mid-point goals are
              then needed to help identify a way forward. As the vision is implemented, these goals
              will periodically have to be renewed and revisited in the light of changing circum-
              stances, usually within the context of the vision, as was the case with Oticon. As the
              Marconi example shows, however, the possibility always exists that changing circum-
              stances, or the process of implementation, can raise serious questions about the
              viability of the vision itself. It is through the development of strategy that visions are
              implemented, brought to life and, if necessary, changed.

              Strategy
              In the context of a vision, strategy can be defined as a coherent or consistent stream
              of actions which an organisation takes or has taken to move towards its vision. This
              stream of actions can be centrally planned and driven, they can be delegated and dis-
              tributed throughout the organisation, and they can be either conscious actions in
              pursuit of the vision, or unconscious or emergent ones resulting from past patterns of
              decisions or resource allocations, or from current responses to problems and opportu-
The Choice Management–Change Management model          465

             nities. In reality, an organisation’s strategy tends to be a combination of, and be pur-
             sued through, a mixture of formal and informal plans and actions.
                As Chapter 7 showed, formal strategies usually cover marketing, product develop-
             ment, manufacturing, personnel, purchasing, finance, information technology and
             quality. The characteristics of conscious strategies are that they generally look five
             years or more ahead, but only contain firm and detailed plans for the next 12 to 18
             months (this is because changing circumstances usually prevent most companies from
             being firm about their intentions for any longer than this). These strategies are put
             together in one strategic plan that is, usually, formally reviewed annually, but is fre-
             quently reviewed informally and when major and unexpected events occur. Because
             the strategies are not ends in themselves, but means to an end (the vision), they are by
             necessity both flexible and pragmatic. They should be constructed and pursued only
             to the extent that they facilitate the pursuit of the vision. Indeed, even when their
             strategies appear to fail, the more successful organisations seem to have an innate
             ability to turn failure into success, as the Microsoft example in Exhibit 15.7 shows.
             Microsoft established MSN in 1995 in order to become an Internet content provider.
             It quickly saw that this was not where its core competences lay, but what it also saw
             was that MSN gave it a direct link to an enormous customer base. The original strat-
             egy of adding content provision to its software activities was abandoned in favour of
             a much more ambitious strategy of delivering its services over the Internet directly to
             customers, something on which Bill Gates says he has ‘bet the company’. It is also
             something that contributes directly to Microsoft’s vision of remaining the world’s
             dominant software company.


Exhibit 15.7      The development of MSN

Microsoft’s direct connection to the customer                                                                  FT

Sometimes it seems that even when Microsoft loses,           1995, the early days of the dotcom boom. It pro-
it wins. … take MSN, the company’s internet portal.          duced content including news and sport, horoscopes,
This unit of Microsoft has lost money ever since it          and e-commerce offers. For a while it looked as if
was set up … But to Microsoft that does not really           Microsoft had serious ambitions in media …
matter. The real point of MSN is not to make money               That phase did not last long. The career of Geoff
at all. Instead, the division serves a peculiar mixture      Sutton, now Managing Director of MSN in the UK,
of purposes including research and development,              illustrates the change of heart. Mr Sutton was origi-
testing the company’s software, advertising its serv-        nally brought into the company in 1997 to run a
ices and even product distribution. What is more,            team of journalists writing news for the portal. In
these capabilities set Microsoft apart from its rivals.      1998, the news team was scrapped and Mr Sutton
    In the next phase of Microsoft’s plans, its .Net         found himself working in a software company.
vision, in which software becomes a service delivered            ’It quickly became apparent that Microsoft should-
over the internet – a vision on which Bill Gates admits      n’t try to be a content player,’ he says. Judy Gibbons,
he has ‘bet the company’ – the site will become even         vice-president of MSN for EMEA, agrees: ‘Microsoft is
more vital. MSN is quietly emerging as the centre-           a software company, that’s what we do, and we
piece of the whole .Net strategy. This is a far cry from     shouldn’t stray away from our core competences.’
the original MSN, named for the Microsoft Network.               With its foray into content, however, Microsoft had
The website was initially set up as a media play in          managed to gather up something very useful: an
                                                                                                                       ▲
466   Chapter 15 · Organisational change and managerial choice



 Exhibit 15.7 continued
 audience. Through MSN, Microsoft found it had a          into a web of services running across a wide variety
 direct line with consumers that it had never experi-     of devices, including PCs, handheld computers,
 enced before. People visited the site regularly, … in    phones, television sets, and even games consoles.
 the process being exposed to Microsoft branding              ’MSN will provide the entry point for consumers
 and services.                                            to .Net services, as you will be able to go up to the
    Today, MSN is one of the world’s top three inter-     site and sign on and get access to all the pieces you
 net destinations, along with yahoo and AOL,              want,’ says Ms Gibbons.
 receiving some 270m visitors a month, while its              Microsoft estimates that the market for such serv-
 Hotmail has 110m users.                                  ices could run into trillions of dollars by 2010, in
    Once this kind of connection with customers was       what it terms the ‘digital decade’.
 in place, all kinds of things became possible.               No other internet portal can yet offer anything
 Microsoft could start marketing services to its cus-     similar. And no other software company boasts its
 tomers direct. It could even start giving them           own internet portal through which to dispense rival
 software direct, over the internet.                      versions of these web services. The huge MSN user
    This interactive and instant relationship with        base forms a ready-made audience to which
 customers even gave Microsoft a testing ground for       Microsoft can market its services with ease. The fact
 new software products, as people could be asked          that all the visitors attracted to the portal by this range
 to download beta software, software still in the         of services can be ‘monetised’ by charging advertisers
 process of development, from the site for comments       to market them is just the icing on the cake. If MSN
 and suggestions.                                         can reach break-even from these advertising dollars,
    The .Net strategy neatly takes advantage of all       so much the better, if not, it scarcely matters.
 these aspects of Microsoft’s portal. … Users will plug   Source: Fiona Harvey, Financial Times, 31 December 2001, p. 7.




                 Therefore, in pursuit of its vision, an organisation can have a central strategy and a
              number of sub-strategies and, influenced by the vision and circumstances, a general
              awareness of the need to act or respond in a particular way to opportunities and
              threats, or successes and failures. From this perspective, one way of viewing strategy
              is to see it as a series of links in a chain which stretch from the present to the indeter-
              minate future where the vision lies. Each link in the chain represents particular
              strategies or groups of decisions that organisations pursue to move themselves for-
              ward, in the light of both their eventual target and the prevailing circumstances of the
              time. The links (strategies) are continually having to be forged and reforged (to use
              Mintzberg’s, 1987, term, ‘crafted’) over time as events develop and circumstances
              change. For Microsoft, MSN was a link forged for one purpose which became
              reforged for another purpose but with the same end in sight: to bolster Microsoft’s
              dominance of the software market. So an organisation’s strategy is likely to comprise
              both pre-defined and emergent elements – the exact balance being determined by the
              circumstances of the particular organisation in question rather than any intrinsic
              merit of either the planning or emergent approaches to strategy.
                 One final point: it follows from this that organisations do not need to be able to
              see all the links in the strategic chain: merely those that will guide them over the next
              few years. Nor do they need to dictate centrally or identify in detail what should be
              done and when. Instead, they need to establish both a climate of understanding and a
              general willingness to pursue certain courses of action, as the opportunity arises or
The Choice Management–Change Management model   467

  circumstances necessitate. It is only when a course of action is pursued, however, that
  organisations begin to change and move towards their vision.

  Change
  Just as an organisation’s trajectory is both an important element of the choice process
  and a process in its own right, the same applies to change. The change process will be
  discussed below, but in the context of the trajectory process it is necessary to note
  that, though visions and strategies can be crucial in shaping the life of organisations,
  it is only when some facet of the organisation is changed or changes that visions and
  strategies advance from being mere possibilities to become reality. This is also a two-
  way street. On the one hand, visions and strategies shape and direct change. They
  indicate what needs to change and where. They also create the conditions and climate
  within which change takes place. On the other hand, because visions and strategies
  only become reality through the actions of the organisation, it is these changes, these
  actions which shape visions and strategies.
      In summary, we can see that the trajectory process, whilst playing a key role in
  shaping choice, is also itself a complex process comprising vision, strategy and
  change. Though it is difficult to conceive of any organisation that does not possess
  some elements of all three, the degree to which they are held in common or are con-
  sistent with each other or are part of a conscious effort clearly varies. Partly this
  relates to the circumstances of the organisation. Under conditions of stability and pre-
  dictability, even without prompting from senior managers, it is much easier for people
  to develop a common view of how an organisation should operate, what its future
  should be and what changes need to be made. In rapidly-changing circumstances,
  however, where certainties and fixed points of reference are few and far between, a
  common understanding is unlikely to arise automatically. Where a common under-
  standing does exist, in such situations, it is likely to be outmoded and inappropriate.
  This is why senior managers more and more are trying consciously to use visions to
  create a common cause. They want to reduce uncertainty, make sense of what is hap-
  pening, and create a broad understanding of what needs doing, and how. For many
  organisations, the merit of this approach is not only that it makes change easier, but
  that it also allows staff to judge for themselves what changes need to be made and
  what approach to adopt. In order to explore this further, we can now examine the
  change process itself.


■ The change process
  Change can be viewed as a one-off event, an exception to the normal running of an
  organisation and, therefore, something to be dealt on an issue-by-issue basis as it
  arises. On the other hand, some organisations see change not as an exception but as a
  norm, a continuous process that forms part of the organisation’s day-to-day activities.
  As the case studies in Part 3 illustrated, where change is seen as the exception, such as
  in GK, organisations tend to have difficulty in choosing the most appropriate
  approach and there also tends to be no structured, or even informal, procedure for
  capturing the lessons from one change project and making them available for future
  projects. Each change is seen as a unique event, and seems to involve an element of
  reinventing the wheel as the organisation struggles to determine how best to deal with
  it. However, in organisations where change is seen as a continuous process, such as
468   Chapter 15 · Organisational change and managerial choice

              Oticon, they appear to be able not only to treat each project as a learning opportu-
              nity, but to capture this learning and pass it on. This allows them to select the most
              appropriate approach for each situation. In such organisations, not only is change
              seen as an everyday event, but the management of it is also seen as a core capability
              that needs to be developed and in which all staff need to become competent.
                 The change process itself, like the choice and trajectory processes, comprises three
              interlinked elements:
              ■   Objectives and outcomes
              ■   Planning the change
              ■   People

              Objectives and outcomes
              There is now much evidence and a general acceptance, at least amongst those studying
              it, that a high proportion of change efforts end in failure (Beer and Nohria, 2000;
              Burnes, 2003; Huczynski and Buchanan, 2001). Though there are numerous reasons
              for this, Burnes and Weekes (1989) found that, in many cases, change projects failed
              because their original objectives or desired outcomes were ill-thought-out and inconsis-
              tent. In addition, as noted in Chapter 5, organisational change, because it often affects
              the distribution of power and resources in an organisation, is an inherently political
              process which can be driven by sectional interests rather than organisational needs.
                  Though it is difficult to envisage a situation where political interests are not pres-
              ent, Burnes (1988) suggested an approach to assessing the need for and type of
              change that attempts to make the process of establishing objectives and outcomes
              more rigorous and open. Openness and rigour not only make it harder to disguise
              political considerations, they also allow assumptions regarding the merits (or lack of
              them) of particular options to be tested. Burnes’ approach has four elements – the
              trigger, the remit, the assessment team and the assessment.

              The trigger
              Organisations should only investigate change (other than relatively minor projects
              that can be easily accommodated) for one of the following reasons:
              ■   The company’s vision/strategy highlights the need for change or improved performance.
              ■   Current performance or operation indicates that severe problems or concerns exist.
              ■   Suggestions or opportunities arise (either from the area concerned or elsewhere)
                  that potentially offer significant benefits to the organisation.
              If one or more of the above arises, then this should trigger the organisation to assess
              the case for change, which leads to the next phase.

              The remit
              This should state clearly the reasons for the assessment, its objectives and timescale,
              and who should be involved and consulted. The remit should stress the need to focus
              as much on the people aspects as the technical considerations involved. In addition, it
              must make clear that those who will carry out the assessment must look at all options
              rather than merely considering one or two alternatives. Organisations need to be clear
              who draws up such remits and who has the final say on the assessment team’s recom-
The Choice Management–Change Management model     469

mendations. As was shown by Burnes and Weekes (1989), this responsibility is often
unclear. In traditional organisations, this responsibility would lie with senior man-
agers. In many of today’s organisations, the responsibility for such activities is
devolved. There is usually a requirement to inform senior managers of change, how-
ever, and certain types of major change remain the responsibility of senior managers.
Also, where change affects more than one area or activity, coordination between areas
will be essential. The important point is that there must be clarity and agreement
about who has the responsibility and authority to initiate change before an assess-
ment begins.

The assessment team
This is the body who will assess the need for change. In most cases, this should be a
multi-disciplinary team consisting of representatives from the area affected (both
managers and staff), specialist staff (e.g. finance, technical and personnel), and, where
appropriate, a change specialist, either an internal facilitator or external consultant
who is a specialist in organisational change. It may also require the involvement of
senior managers.

The assessment
The first task of the assessment team is to review and if necessary clarify or amend its
remit. Only then can it begin the assessment, which should comprise the following
four steps:
1 Clarification of the problem or opportunity. This is achieved by gathering informa-
  tion, especially from those involved. In some situations it might be found that the
  problem or opportunity is redefined, or does not exist, or can be dealt with easily
  by those most closely concerned. If so, this is reported back and probably no fur-
  ther action needs to be taken. If the clarification reveals that a significant problem
  or opportunity does exist, however, then the remaining steps need to be completed.
2 Investigate alternative solutions. A wide-ranging examination should take place to
  establish the range of possible solutions. These should be tested against an agreed
  list of criteria covering costs and benefits, in order to eliminate those solutions that
  are clearly inapplicable and to highlight those that appear to offer the greatest bene-
  fit. Companies will usually seek to define benefits in monetary terms. It should be
  recognised, however, that not all changes, particularly those of a behavioural or
  strategic nature, can be assessed on purely financial criteria, e.g. Oticon’s restructur-
  ing and XYZ’s move to teamworking. In any case, changes rarely have single
  benefits. For example, a change in technology that brings financial benefits may also
  offer opportunities to increase teamworking and to develop the skill and knowledge
  base of the organisation. Therefore, organisations need to develop ways of defining
  and assessing non-monetary benefits. Also, where there are benefits there are usually
  disbenefits. Where new skills are gained, old ones are discarded. For example, a
  partnership approach to customer–supplier relations can lead to a loss of negotiat-
  ing and bargaining skills; greater teamworking can undermine the authority of line
  managers and middle managers. If such disbenefits are to result from change, it is
  better to recognise this in advance and prepare for them rather than finding out
  later when the damage is done. This then leads on to the next step.
470   Chapter 15 · Organisational change and managerial choice

              3 Feedback. The definition of the problem or opportunity and the range of possible
                solutions should be discussed with interested or affected parties, particularly those
                from whom information was collected in the first place. This helps to counter the
                tendency to fit solutions to problems, i.e. it makes it more difficult for people to
                promote their favoured solution regardless of its suitability. It also helps to prepare
                people for any changes that do take place. In addition, the response to feedback
                can provide an important source of information on the advantages and disadvan-
                tages of the possible solutions on offer and, thus, it helps to establish the criteria
                for selecting the preferred solution or solutions.
              4 Recommendations and decision. The team should present their recommendations
                in a form that clearly defines the problem/opportunity, identifies the range of solu-
                tions, establishes the criteria for selection and makes recommendations. These
                recommendations should include not only the type of change, but also the mechan-
                ics and timescale for making such changes and the resource implications, as well as
                performance targets for the new operation.
                  This then leaves those responsible for making the final decision in a position to
              assess, modify, defer or reject the assessment team’s recommendations in the light of
              the vision and strategic objectives of the organisation. Indeed, some change pro-
              grammes and projects are so complex that it is only possible to judge their worth in
              relation to an organisation’s long-term intent. For example, in the 1990s, one of the
              UK’s largest biscuit makers established an assessment team to determine whether the
              company should build a new factory solely dedicated to the production of chocolate
              biscuits (the biggest growth area for the company). The team recommended that one
              should be built next door to an existing factory in the north of England. The Board
              accepted the recommendation for the new factory but decided, because of its long-
              term ambitions to develop in Europe, to locate the new factory in France. Though
              this decision could be justified as being in the long-term interests of the company,
              such decisions are more an act of faith than a racing certainty, though managers may
              choose to present them as closer to the latter in order to garner support. Nevertheless,
              if the decision is to proceed with the proposed changes, then it becomes necessary to
              begin planning the implementation process.

              Planning the change
              Whether the need for change arises from an organisation’s strategy or emerges in
              some other way, once it has been established that it should take place and what form
              it should take, it is then necessary to plan how this will be achieved and then to
              implement the plan. As argued in Chapter 10, there are many different approaches to
              change, and their appropriateness depends on what is to be changed. As the case
              studies in Part 3 showed, small-scale and relatively technical or structural changes can
              usually be planned and executed relatively quickly, and may not require extensive
              consultation with or the involvement of all the staff affected. Similarly, changes which
              are isolated to one part of the organisation and seen as ‘inevitable’, may also be rela-
              tively straightforward, as was the case at PoliceCo. However, unless the need for
              radical change is already accepted, as it was at Oticon, it can be dangerous to adopt a
              rapid-change/low-involvement approach to larger-scale changes, particularly where
              people’s attitudes and behaviours are the prime object of the change process.
              Therefore, as the XYZ case shows, planning and execution, and consequent develop-
              ment, in such cases can be extensive, span hierarchical levels and horizontal processes
The Choice Management–Change Management model        471

and include a high degree of ambiguity. For these reasons, the success of large-scale
changes will depend, to a significant extent, on the involvement and commitment of
all those concerned with and affected by them. The range of change situations and
approaches, therefore, needs to be borne in mind when considering the following six
interrelated activities that make up the planning and change process:
1 Establishing a change management team. To maintain continuity, the team should
  include some, if not all, of those responsible for the original assessment of the need
  for change. However, it will usually also have a greater user input, especially at the
  implementation stage. When the Labour government was first elected in the UK in
  1997, the Inland Revenue was asked to undertake a review as to whether the
  Contributions Agency, then a semi-autonomous body, should become part of the
  Inland Revenue. The man who led the assessment team, and who recommended
  that the Contributions Agency should become part of the Inland Revenue, was also
  made responsible for leading the change management team. In the case of XYZ, all
  the original assessment team became members of the change management team,
  along with a much wider spectrum of middle and line managers. For large change
  projects, it is usual to establish sub-groups responsible for discrete elements of the
  change programme. These will generally comprise those most closely affected by
  the changes, both managers and others. Their role is to handle the day-to-day
  implementation issues. It must be recognised that all the people in the change man-
  agement team, and its sub-groups, are in effect ‘change agents’. Nevertheless, as
  was the case at XYZ, change specialists should also be involved, i.e. people whose
  primary input is their experience in managing change. As was discussed in Chapter
  9, the role of change agents is not just a technical one concerned with establishing
  plans and ordering their implementation. Change agents need a wide range of
  skills, not least of which is what Buchanan and Boddy (1992: 27) refer to as the
  ability to deploy ‘backstage activity’:

    ‘Backstaging’ is concerned with the exercise of ‘power skills’, with ‘intervening in politi-
    cal and cultural systems’, with influencing and negotiating and selling, and with
    ‘managing meaning’.

  Change agents also need the ability to deal with the unexpected. ‘Expect the unex-
  pected’ might well be the motto of most change agents. In discussing the role of
  change agents in Chapter 9, the article on ‘Grace, magic and miracles’ by
  Lichtenstein (1997) was cited. This showed that whilst a structured approach to
  change is necessary, it is often, by itself, not sufficient to ensure success. Success,
  Lichtenstein (1997: 393) argued, also requires change agents to have the ability
  and experience to recognise and take advantage of ‘intuitive, unexpected, and
  serendipitous’ situations. Therefore in choosing members of the change manage-
  ment team, it is necessary to have the right blend of skills for the change being
  undertaken, including the ability to deal with the unexpected.
2 Management structures. Because larger change projects, especially organisational
  transitions, are wide-ranging, have multiple objectives and can involve a high
  degree of uncertainty, existing control and reporting systems are unlikely to be ade-
  quate for managing them. For example, the more that a change project challenges
  existing power relations and resource allocation procedures, the more it is likely to
472   Chapter 15 · Organisational change and managerial choice

                encounter managerial resistance. In such cases, unless the change management
                team has a direct line to, and the public support of, senior managers or the CEO,
                the change process is likely to become bogged down or even abandoned. For exam-
                ple, one of the main reasons why Regional Managers did not block the
                organisational changes at XYZ was because the Managing Director was closely
                involved in the change process. He was aware that the Regional Managers might
                try to block changes that threatened their interests and standing, and he was pre-
                pared to take action if they did so, and he made sure the Regional Managers knew
                this. Where senior managers are less directly involved, effective reporting and man-
                agement structures need to be put in place in advance in order to provide direction,
                support, resources, and where necessary decisive interventions.
              3 Activity planning. Beckhard and Harris (1987: 70–1) refer to this as a process of
                ‘getting from here to there’. They state that: ‘The activity plan is the road map for
                the change effort, so it is critical that it is realistic, effective and clear. Exhibit 15.8
                describes Beckhard and Harris’s five key characteristics of an effective activity plan.
                Activity planning involves constructing a schedule for the change programme,
                citing the main activities and events that must occur if the transition is to be suc-
                cessful. It must be recognised, however, that not all the elements of a large change
                programme can be planned in detail in advance. Such programmes are by their
                nature multi-level, multi-stage, can stretch over an extended time-frame, and can
                involve elements of backtracking and rethinking. However, as a change programme
                proceeds, it becomes possible for successive levels and stages to become clearer and
                for plans to become more detailed. It follows that, in order to stay on course, activ-
                ity planning should clearly identify and integrate key change events and stages and
                ensure they are linked to the organisation’s change goals and priorities. Activity
                planning should also gain top management approval, should be cost-effective, and
                should remain adaptable as feedback is received during the change process.
                Activity planning therefore comprises the final and intermediate objectives, and
                ensures that where and when possible these are tied to a specific timetable in order
                to avoid uncertainty amongst those who have to carry out the changes.


                    Exhibit 15.8          Activity planning

                     The five characteristics of an effective activity plan
                     ■   Relevance – activities are clearly linked to the change goals and priorities
                     ■   Specificity – activities are clearly identified rather than broadly generalized
                     ■   Integration – the parts are closely connected
                     ■   Chronology – there is a logical sequence of events
                     ■   Adaptability – there are contingency plans for adjusting to unexpected forces

                     Source: Beckhard and Harris (1987: 72)




              4 Commitment planning. This activity involves identifying key people and groups
                whose commitment is needed, and deciding how to gain their support. Beckhard
                and Harris (1987: 92) observe that, ‘… in any complex change process, there is a
The Choice Management–Change Management model                    473

critical mass of individuals or groups whose active commitment is necessary to pro-
vide the energy for change to occur.’ Designating someone as a key person is
concerned less with their nominal position or level of authority in an organisation
than with their ability to block or promote particular changes. This may be
because they have power to dispense or withhold specific resources or information,
or because, as Exhibit 15.9 shows, others look to them for guidance or leadership,
even though they may have no formal role in this respect.

 Exhibit 15.9         The importance of commitment

  Getting rid of the bonus
  Northern Engineering is a very efficient and progressive manufacturing company which
  has successfully introduced many Japanese techniques for improving its business.
  However, it did operate a shopfloor bonus system based on individual output. It recog-
  nised that this was detrimental to quality but felt that the workforce would strongly resist
  any effort to change it. Eventually though, the company decided it would offer the work-
  force a very tempting financial package to buy out the bonus. The Operations Director was
  the man responsible for selling the idea to the workforce. He did this through a series of
  presentations, to each of the company’s three shifts.
     The group he was most concerned about were the night shift. These were the people
  he seldom met and who had shown the least commitment to change in the past.
     The Operations Director described his experience with the night shift:
    They work ten while six, four nights a week. I went to brief them at the beginning of their shift. The pres-
    entation took about 20 minutes and then I opened it up for questions. All through my presentation, this
    big bloke on the front row had been staring at me with a disgruntled look on his face. When I finished
    he stood up and everybody looked at him in an expectant fashion. When he began talking, I thought,
    ‘I’m sunk’. He said, ‘It’s the same as usual. You only see the bosses when they want to take something
    off you.’ Others on the shift nodded in agreement at this. He then went on, ‘Once they take the bonus
    off us, we won’t get it back. Some might be OK, but others’ll lose money. But, this is not a bad com-
    pany, so I think we should give them a chance.’ He sat down, nobody else said anything, and it was
    agreed, the bonus would go. I was totally flummoxed. The bloke’s body language, his tone, his first
    words, all indicated that he was against it. I was very, very lucky; if he’d gone against the idea, I could
    see that everybody would have gone with him. What I learned that night was a very valuable lesson.
    The next time I have to talk to the night shift, I’ll get hold of that bloke first and win him over.




   The case of the PPC in Chapter 11 is an example of where the organisation does
not appear to have recognised the importance of commitment planning, whereas
the case of XYZ in Chapter 12 is an example of where the company recognised it
needed to gain the commitment of key staff in planning and implementing change.
   Exhibit 15.10 shows the main steps in developing a commitment plan. Beckhard
and Harris (1987) note, however, that even where the commitment of an individual
or group is necessary, it is not necessary to gain the same level of commitment from
all. They identify three kinds of commitment:
Let it happen – i.e. do not obstruct the change.
Help it happen – i.e. participate in the change process.
Make it happen – i.e. drive the change.
474   Chapter 15 · Organisational change and managerial choice


                   Exhibit 15.10         Commitment planning

                    A commitment plan is a strategy, described in a series of action steps, devised to secure
                    the support of those [individuals and groups] which are vital to the change effort. The
                    steps in developing a commitment plan are:
                    1.   Identify target individuals or groups whose commitment is necessary.
                    2.   Define the critical mass needed to ensure the effectiveness of the change.
                    3.   Develop a plan for getting the commitment of the critical mass.
                    4.   Develop a monitoring system to assess the progress.

                    Source: Beckhard and Harris (1987: 93)




                For most kinds of change, success depends on winning the commitment of key
                staff. Without this support, it will be impossible to mobilise the energy necessary to
                start the change process and keep it moving to a successful conclusion. However,
                whilst most managers, with some encouragement, might be able to identify the crit-
                ical mass, many would lack the skills and motivation to win them over. This is why
                the participation of experienced change agents, with the necessary ‘backstage’
                expertise, is crucial to the change process.
              5 Audits and post-audits. It is important to monitor progress and see to what extent
                objectives are being met. This allows plans to be modified in the light of experi-
                ence. It also allows for opportunities to improve on the original objective to be
                identified or created. The more uncertain and unclear the change process, the
                greater the need for periodic review. After the change, or when a particular mile-
                stone has been passed, a post-audit should be carried out (a) to establish that the
                objectives have really been met, and (b) to ascertain what lessons can be learned
                for future projects. In addition, periodic reviews give senior managers the chance to
                praise, support and encourage those carrying out the change.
                    Though the auditing process sounds straightforward, it rarely is. Large projects,
                in particular, are collections of a number of relatively smaller sub-projects and, as
                Kotter (1996: 25) remarks, ‘Because we are talking about multiple steps and multi-
                ple projects, the end result is often complex, dynamic, messy, and scary.’ These
                ‘multiple projects’ start at different times and operate at different levels and in dif-
                ferent areas of an organisation. Some of these sub-projects will run concurrently,
                some consecutively and a few may even be largely free-standing. By their nature,
                they will also be geared to different sub-objectives, which may need to be moni-
                tored and measured in different ways. Seen in this way, it becomes easier to
                understand why conducting audits and post-audits, and even day-to-day monitor-
                ing of progress, can be exceedingly difficult but is also exceedingly necessary. Nor
                is the post-audit the end of the line: a chance for people to rest on their laurels. It
                can be another opportunity for improvement. The post-audit at XYZ, as shown in
                Chapter 12, was turned into an opportunity for continuing to drive the change
                process forward, by the simple expedient of asking each manager to identify two
                initiatives they would personally take to reinforce and enhance the benefits from
                the company’s new organisational structure. This is an example of what Kotter
                (1996: 21) refers to as ‘consolidating gains and producing more change.’
The Choice Management–Change Management model   475

6 Training and development. This is a key part of any change project and takes a
  number of forms. The obvious one is in relation to new skills and competences that
  might be necessary. Furthermore, as the case studies show, training and develop-
  ment can have a number of other purposes. They may aim to give staff the skills to
  undertake the change themselves. It may be the intention to leave them with the
  ability to pursue continuous improvement, once the change has been substantially
  achieved, or training and development may be intended to make them aware of the
  need for change and to win them over. Also, there is a need to give general aware-
  ness training to those in the organisation who might be indirectly affected. Even
  where the primary objective is to enhance skills, training can also contribute to
  other objectives, such as culture change, by structuring it in such a way that train-
  ing promotes teamworking or inter-departmental cooperation. To ensure that the
  various types of training are targeted at the right people or groups, a training pro-
  gramme – starting before implementation and continuing after completion – should
  be established, showing who needs training, the form of the training and when it
  will take place. Looking wider than just individual change projects and pro-
  grammes, as Burnes (2003) has argued, there are many benefits to formally linking
  an organisation’s overall management and staff development programme with its
  various change initiatives. Burnes comments that many of the skills and compe-
  tences that organisations wish to develop in staff and managers are the same ones
  necessary for bringing about successful change. Therefore, management and staff
  development programmes can provide the human resources necessary for manag-
  ing change, and change projects can provide the real learning opportunities that
  staff and managers need to develop their skills and competences. The link between
  management development and change will be returned to in Chapter 16.
There is often a tendency to portray the planning element of change as a technical
exercise involved with timetabling and resource allocation. Though planning change
is in some ways a ‘technical’ issue, as the above six activities show, it is also very
much a people issue. The success of any change effort is always likely to hinge on an
organisation’s ability to involve and motivate the people concerned and those whose
support is necessary.

People
Chapter 10 showed that organisational change takes many forms. It can be of a pre-
dominantly structural or technical nature which requires little of individuals in terms
of behavioural or attitudinal change. On the other hand, as the case studies in Part 3
have shown, increasingly the objective of change is to modify the attitudes and behav-
iours of individuals and groups, sometimes radically so. People are being required to
reconsider their attitudes towards how work is performed, how they behave towards
their colleagues internally, and their attitudes to their counterparts externally.
Whatever form it takes, however, if it is to be successful, there are three people-
related activities that need to be undertaken: creating a willingness to change;
involving people; and sustaining the momentum.

Creating a willingness to change
Even where change is purely of a technical or structural form, there has to be willing-
ness amongst those concerned to change: to accept the new arrangements. In an ideal
476   Chapter 15 · Organisational change and managerial choice

              world, organisations would want everyone to buy into a change project. However, as
              mentioned above, the important issue is to win over what Beckhard and Harris
              (1987: 92) refer to as the ‘critical mass of individuals or groups whose active commit-
              ment is necessary to provide the energy for change to occur.’ There are organisations
              who have put, and are continuing to put, a great deal of effort into creating a climate
              where change is accepted as the norm and the critical mass is already present or needs
              little effort to assemble. As described in Chapters 11 and 12, Oticon and XYZ are
              examples of this. Most organisations, however, are still at the stage where they have
              to convince staff of the need for change. This is especially the case in those organisa-
              tions, such as GK in Chapter 12, where each change project is perceived to be a
              one-off event, almost an exception to the ‘normal’ flow of organisational life.
                  For many people, organisational change involves moving from the known to the
              unknown, with the possibility of loss as well as gain. In such situations, it is often the
              case that those who fear they will lose out will vociferously oppose any change, whilst
              those who believe they will gain from the change will keep quiet for fear of antagonising
              the losers. This was a point most famously made by Niccolo Machiavelli (1515: Vl–1):

                And it ought to be remembered that there is nothing more difficult to take in hand, more
                perilous to conduct, or more uncertain in its success, than to take the lead in the introduc-
                tion of a new order of things. Because the innovator has for enemies all those who have
                done well under the old conditions, and lukewarm defenders in those who may do well
                under the new.


                 Organisations, therefore, in seeking to create a willingness and a readiness for
              change, need to be aware that stressing the positive aspects of any proposed change
              may have much less impact than they might imagine. This point was recognised by
              Lewin (1947a) when he argued that the status quo needs to be destabilised before old
              behaviour can be discarded (unlearnt) and new behaviour successfully adopted. He
              referred to this process as ‘unfreezing’ (see Chapter 8). Drawing on his work on Field
              Theory, Lewin recognised that the status quo occurred when the forces for change
              and the forces for stability were equal (see Figure 15.2). To bring about change, one
              had to increase the strength of the former and reduce that of the latter. Like
              Machiavelli, however, he also recognised that making proposed changes seem attrac-
              tive had less effect on increasing the pressure for change than making the current
              situation less attractive, i.e. it is often easier to create a readiness for change by




                                                              The
                                          Forces for                       Forces for
                                                             status
                                           change                           stability
                                                              quo




              Figure 15.2 Maintaining the status quo
The Choice Management–Change Management model       477

making people dissatisfied with their current situation, and thus prepared to consider
alternatives, than to try to paint a rosy picture of the future. Kotter (1996: 36) echoed
this point when he stated that: ‘Establishing a sense of urgency is crucial to gaining
needed cooperation’. For Kotter (1996: 42):

 Increasing urgency demands that you remove sources of complacency or minimize their
 impact: for instance, eliminating such signs of excess as a big corporate air force; setting
 higher standards both formally in the planning process and informally in day-to-day interac-
 tions; changing internal measurement systems that focus on the wrong indexes; vastly
 increasing the amount of external performance feedback everyone gets; rewarding both
 honest talk in meetings and people who are willing to confront problems; and stopping
 baseless happy talk from the top.


   In order to create a willingness for change, a sense of urgency, a feeling of dissatis-
faction with the present, there are four steps an organisation needs to take:
1 Make people aware of the pressures for change. The organisation should inform
  employees on a continuous basis of its plans for the future, the competitive/market
  pressures it faces, customer requirements and the performance of its key competi-
  tors. This should be a participative process where staff have opportunity to
  question, make comments and make suggestions. Many companies now encourage
  staff at all levels to spend time meeting and working with customers. Customers
  are also increasingly being invited to come and give direct feedback to staff and
  managers. The aim is to make staff aware of what customers want and do not
  want and, particularly, to highlight the organisation’s shortcomings. This seems to
  be a development that is common to both private and public sector organisations
  (Crawford et al, 2003; Kotter, 1996). Obviously, promoting the vision and explain-
  ing the strategic plan are also vital components in this. Through this approach,
  members of the organisation come to appreciate that change is not only inevitable,
  but is being undertaken to safeguard rather than threaten their future. It is also
  necessary to use informal as well as formal channels of communication. In any
  organisation, department or team there are individuals who are opinion-formers:
  people to whom others look for guidance. They may not hold any position of
  power or authority but, as the example in Exhibit 15.9 shows, they do have influ-
  ence. Therefore, to get the message across successfully, managers must identify who
  these people are and seek to ensure that they not only understand the message
  being transmitted, but will also pass a favourable judgment on it.
2 Give regular feedback on the performance of individual processes and areas of
  activity within the organisation. This allows a company to draw attention to any
  discrepancy between actual performance and desired present and future perform-
  ance. The feedback has to be in a form that people can relate to and act on. Telling
  a team that it is losing money is less useful than giving them feedback on produc-
  tivity and quality. Feedback also has to be timely. Discussing yesterday’s
  performance is useful in getting staff to identify and address problems; discussing
  last year’s performance is rarely so. Also, giving people the skills and authority to
  undertake improvement activities, as XYZ did with its Kaizen initiatives, is likely
  to make people more receptive to feedback because they can do something to
478   Chapter 15 · Organisational change and managerial choice

                improve the situation. In addition, it makes a difference who provides and delivers
                the feedback. A quarterly or annual meeting led by the CEO may have little impact.
                However, as mentioned above, direct and timely feedback from customers and prod-
                uct and service users, whether internal or external, is likely to have a much greater
                impact. Once again, the form of this and the recipient’s ability to act upon it is also
                important. Feedback can encourage those concerned to begin to think about how
                their performance can be improved, and prepare them for the need for change. In
                looking at the case study companies, it is noticeable that there was a greater readi-
                ness to change in those organisations where management was open about its
                objectives and the company’s or function’s current performance than in those organ-
                isations where information was guarded. This can clearly be seen in Oticon, XYZ
                and TRW. Conversely, in the PPC, suspicion over the organisation’s objectives led to
                resistance to change. In GK, suspicion over the objectives of some individuals led to
                resistance to change. Therefore, openness helps people to understand the need for
                change, which is an essential step on the road to achieving change.
              3 Understand people’s fears and concerns. One of the major mistakes companies can
                make when introducing change is to fail to recognise, and deal with, the real and
                legitimate fears of the managers and staff. Though people’s concerns tend to focus on
                the proposed change, they will also be strongly influenced by the outcome of previ-
                ous change initiatives. In the case of Volvo and XYZ, where past changes had been
                successful, this appeared to act to reduce concerns. In the case of the PPC, however,
                the employees’ experience of privatisation is likely to increase fears and suspicion in
                the future. This is partly to do with the fact that they saw privatisation as threatening
                their jobs and careers, which it did, but also to do with the way it was managed: they
                felt that they were not consulted or informed about changes. This led to a lack of
                cooperation from staff and trade unions. Similarly, the failure by senior managers at
                TRW to recognise or anticipate the concerns of their counterparts at Rover created a
                history of mistrust between the two companies that nearly led to the termination of a
                highly beneficial alliance. The new Managing Director at XYZ, on the other hand,
                understood that people had to be won over and their concerns addressed. This
                appears to be a key lesson that can be drawn from the success achieved by XYZ in
                introducing its many change initiatives. Organisations need to recognise that change
                does create uncertainty and that some individuals and groups may resist, or may not
                fully cooperate with it, if they fear the consequences. In this respect, resistance can be
                seen as a signal that there is something wrong with the change process or its objec-
                tives rather than with those who are opposing or questioning it. From this
                perspective, resistance can be viewed as positive: it reminds the organisation that it
                has not considered all the consequences of its actions, and forces it to review its
                plans. It follows that those championing change need to pay special attention to the
                potential for resistance, both in terms of the adverse consequences it can bring and
                the underlying problems it may indicate. They also need to pay close attention to the
                organisation’s past history of change and the extent to which this reduces or
                enhances people’s fears and concerns.
              4 Publicise successful change. In order to reduce fears and create a positive attitude
                towards change, companies should publicise the projects that are seen as models of
                how to undertake change, and the positive effects change can have for employees.
                This does not mean that mistakes should be hidden or poor outcomes ignored;
                these should be examined, explained and lessons learned. Staff should, however, be
The Choice Management–Change Management model   479

  encouraged to expect and set credible and positive outcomes for change pro-
  grammes. Once again, the experience of the case study companies illustrates this
  point. At Volvo, there have now been three decades of successful change, which
  have produced a positive attitude amongst employees and managers alike. It is also
  change that has been well publicised both inside and outside the company, and has
  been praised by independent academics who have examined it. Staff and managers
  can see the effects of Volvo’s commitment to Job Design; they can see that Job
  Design has led to improvements for all concerned. Therefore, the wide publicity
  given to, and the rigorous examination of, its past Job Design initiatives have
  helped Volvo to reduce their employees’ fears of future changes. The Rover–TRW
  partnership described in Chapter 12 is an example of successful change that was
  not well publicised. The later problems with Rover’s senior managers could have
  been avoided if TRW and Rover’s operational managers had explained to their
  senior colleagues what they were doing and why. This would have allowed issues
  to be explored and a positive attitude developed.
   As the above four steps show, in order to create a willingness for change, an effec-
tive two-way flow of information is vital. Even where this is the case, however,
organisations should not take for granted the willingness of staff and managers to
undertake every change that is proposed. It is noticeable that even after XYZ had
spent a number of years creating a willingness and readiness for change, it undertook
a change readiness audit before embarking on the project to change its organisation
structure. Not only did this allow it to estimate the degree of readiness for change,
but it also formed part of the second people-related activity, involving people in the
change project.

Involving people
Chapter 14 reviewed the three main theories that underpin our understanding of
employee involvement, i.e. cognitive dissonance, the ‘depth’ of intervention and the
psychological contract. In summary, the argument from these theories is that the more
a change challenges a person or group’s existing norms of behaviour, beliefs or
assumptions, the more resistance it is likely to meet. It follows from this that the
appropriateness of an involvement strategy needs to be judged less by the type of
change being considered and more by how people will react to it. Changes that may
readily be accepted in some organisations may be strongly resisted in others.
Likewise, some major changes may meet with much less reaction than much smaller
ones. For example, over the last decade it has become the norm for staff in public
services to give their name on the telephone and wear name badges when meeting
members of the public. Previously, staff were not encouraged to give their name or to
wear a name badge. When this was first introduced, it met with a level of hostility
from staff that appeared to be greatly out of proportion to what was being suggested.
The reason for this was that many staff felt threatened, exposed to public scrutiny, by
having to give their name.
   In developing an involvement strategy, it is also important to remember Beckhard
and Harris’ (1987) advice regarding levels of commitment. They argued that the key
objective was for organisations to gain the active support of the critical mass of
people necessary to bring about the change. This is not all, or even necessarily a
majority, of those affected. Nor is the same level of support necessary from all of the
480   Chapter 15 · Organisational change and managerial choice

              critical mass. Instead it can be split into three groups: those who let it happen, those
              who help it to happen and those who make it happen.
                 In addition, an involvement strategy needs to take account of the size and duration
              of the proposed change project. Though some change projects can be short-lived and,
              possibly, easily achieved, many are not. In some cases, achieving a successful change
              can be a long and complex task. There will be difficult obstacles to overcome, not all
              of which can be anticipated in advance. To gain and maintain the active involvement
              of the critical mass, and to develop the momentum necessary to ensure that the proj-
              ect is successful, is not a one-off occurrence but an ongoing activity stretching over
              the lifetime of the change project. There are two main activities that help secure and
              maintain this level of involvement:
              ■   Communication. As well as being key to gaining people’s involvement, communi-
                  cation is an essential element of all the above change activities. In terms of
                  involvement, the establishment of a regular and effective communications process
                  can significantly reduce people’s levels of uncertainty. In turn, this eliminates one of
                  the major obstacles to people’s willingness to get involved in the change process.
                  The purpose of communication is not just to inform staff that change is being con-
                  sidered, but by drawing them into the discussions and debates about the need for
                  and form of the change, and allowing them the freedom to discuss the issues
                  involved openly, to get them to convince themselves of the need for change. The
                  evidence that this is one of the most effective ways of gaining support goes back to
                  the work of Kurt Lewin in the 1940s (Lewin, 1999a). During the Second World
                  War, he was asked by the American government to find an effective way of getting
                  people to change their eating habits. Through a series of now classic experiments,
                  he demonstrated that the most effective method of convincing people to change
                  their behaviour was by providing groups with information for them to evaluate
                  and discuss, and letting the group come to its own decision. Once the decision had
                  been made by the group, it exerted a strong pressure on all the individuals con-
                  cerned to adhere to the group’s decision.
                     Communication should be a regular rather than a one-off exercise. Nor should it
                  be pursued through one or two channels, such as newsletters or team briefings. As
                  mentioned above when discussing the need to make people aware of the need for
                  change, organisations have a wide range of formal and informal channels for com-
                  munication. They should consciously use all of these. As a rule of thumb, it should
                  be recognised that, whilst people are often willing to believe the wildest rumour
                  from unofficial sources, anything from management has to be stated at least six
                  times in six different ways before people start giving it credence.
                     In some cases, where all those concerned become directly involved in the change
                  process, communication is less of an issue. An example of this is the first phase of
                  change at GK Printers, where all those affected were involved. Another example
                  was Speedy’s Stationery Management initiative. However, the small size of the
                  groups concerned in these instances makes them something of an exception. In
                  most cases, it is impractical to give everyone this level of involvement; therefore, as
                  at XYZ and Volvo, it is important to communicate proposals from the outset. This
                  involves not only providing information, but also listening to the response and
                  taking it seriously. This has a number of benefits. The change management team will
The Choice Management–Change Management model   481

    very quickly pick up any worries and concerns and can respond to these; they will
    also be made aware of aspects that need to be taken into consideration which have
    been overlooked; and assumptions that have been made will be tested and some-
    times challenged. In addition, this will assist in identifying issues, individuals and
    groups who might obstruct change. In terms of the three target groups for commit-
    ment, i.e. those who let it happen, those who help it to happen and those who make
    it happen, communication can secure the commitment of the first but, by itself, is
    unlikely to secure the commitment of the other two groups. Their commitment will
    come through and be tested by their involvement in the change process.
■   Getting people involved. One of the most vital initiatives an organisation can take
    with staff is not to treat them as objects of, or obstacles to, change, but to involve
    them in it and make them responsible for it. There are good examples of this in
    Oticon, XYZ, GK, TRW and Speedy. Particularly where large-scale projects are
    concerned, not everyone can be involved in all aspects of planning and execution.
    However, as mentioned above, it is important to identify and enrol those whose
    assistance is necessary and those who are essential to make change happen. This
    should be the main criterion for selecting who will be involved. Obviously, where it
    is possible, it is a good idea to ensure that all those most closely affected are
    involved in some, if not all, aspects. Similarly, again where possible, responsibility
    for aspects of the change project should be given to those who will be directly
    affected by the result. In many cases, however, the numbers involved will prevent
    all those affected being involved and, consequently, managers will need to select
    those to involve. Sometimes, volunteers will be asked for. Sometimes, people who
    are perceived to have ‘the right attitude’ will be chosen. On the other hand, as the
    GK case showed, the presence of sceptics, people prepared to challenge assump-
    tions and ask awkward questions, can be useful. This not only ensures that
    awkward questions are asked but can also, if the sceptic is won over, create a pow-
    erful advocate for the change. Likewise, it is useful to consider involving key
    opinion-formers: people to whom their colleagues look for guidance.
  As the above shows, communication and involvement are essential to gaining
people’s understanding of the need for change. Change can be a slow and difficult
process, however, and commitment can diminish unless steps are taken to maintain it.
This leads on to the third and last people-related activity, sustaining the momentum.

Sustaining the momentum
Even in the best-run organisations, it sometimes happens that initial enthusiasm for
change wanes and, in the face of the normal day-to-day pressures to meet customer
needs, progress becomes slower and can grind to a halt. When the CEO in Oticon
thought that its change effort was running out of steam, he ‘exploded the organisa-
tion’ in order to breathe fresh life into the change process. In some less well-run
organisations, however, the momentum may not even be present in the beginning. In
such situations, people will return to the methods and types of behaviour with which
they are familiar. Given that momentum does not arise of itself nor continue without
encouragement, organisations need to consider how to build and sustain it. The
points already made above regarding planning and implementation, and especially
involvement, are clearly part of this. In addition, organisations should also:
482   Chapter 15 · Organisational change and managerial choice

              ■   Provide resources for change. Kotter (1996: 35) states that:

                   In an organization with 100 employees, at least two dozen must go far beyond the
                   normal call of duty to produce a significant change. In a firm of 100,000 employees, the
                   same might require 15,000 or more.

                  For a one-off change project of short duration, it might be acceptable to ask staff
                  to ‘go far beyond the normal course of duty’. However, for many organisations, as
                  Part 3 demonstrated, change is a way of life. Also, in many organisations, staff and
                  managers have to work long hours merely to get their normal work done. In cases
                  such as these, and indeed in most cases, it is probably difficult, and certainly
                  unwise, to ask staff to undertake change initiatives without some additional
                  resources, whether these be financial or human. In cases where staff are required to
                  keep up the same level of output during the transition phase, it may require consid-
                  erable additional resources to achieve this. The 1999 case of the UK’s Passport
                  Office, which failed to provide sufficient extra staff during the introduction of a
                  new computer system, is a case in point. Not only did this result in inexcusable
                  delays in issuing passports, but the Passport Office eventually had to provide the
                  extra staff anyway. It is important, therefore, that the need for any extra resources
                  is identified and extra resources allocated, whether for the provision of temporary
                  staff, the training of existing staff, senior management time or whatever. As the
                  example of the Passport Office showed, nothing is guaranteed to be more demoral-
                  ising than having to make changes without some additional resources or support.
              ■   Give support to the change agents. As Buchanan and Boddy (1992) noted, an enor-
                  mous responsibility falls upon the change management team. They have not only
                  to plan and oversee the change project, but also to motivate others and deal with
                  difficulties, sometimes very personal problems. However, just as they have to sup-
                  port others, so too must they receive support themselves. Otherwise they may be
                  the ones who become demoralised and lose their ability to motivate others.
                  Sometimes this can be done by offering them financial rewards, sometimes by the
                  promise of future advancement but often the most effective method is through
                  public praise of the individuals concerned. In Chapter 2, we drew attention to
                  Chester Barnard’s (1938) observation that monetary rewards are often less effective
                  than non-monetary ones, such as praise. This does not mean that monetary
                  rewards should be avoided, but it does mean that too great a reliance on them may
                  be counter productive.
              ■   Develop new competences and skills. This reiterates the point made when dis-
                  cussing ‘planning the change’ above. Change frequently demands new knowledge,
                  skills and competences. Increasingly, managers are having to learn new leadership
                  styles, staff are having to learn to work as teams, and all are expected to be innova-
                  tors and improvers. This requires more than just training and re-training. It may
                  also include on-the-job counselling and coaching. Therefore, organisations need to
                  consider what is required, who requires it and – the difficult part – how to deliver
                  it in a way that encourages rather than threatens staff. XYZ is a good example of a
                  company who recognised that managerial and staff development go hand-in-hand
                  with organisational change. This can be an expensive process, however, both in
                  terms of staff time and the cost of training and development. This, once again,
                  emphasises the need to provide additional resources for change.
The Choice Management–Change Management model     483

■   Reinforce desired behaviour. In organisations, people generally do those things that
    bring rewards or avoid criticism. Consequently, one of the most effective ways of
    sustaining the momentum for change is to reinforce the kinds of behaviour
    required to make it successful. Sometimes this may be monetary, such as increased
    pay or bonuses for particular types of activity or progress. Sometimes it may be
    symbolic, such as Oticon’s tearing down of walls and elimination of personal
    desks. Sometimes it may be through recognition, whereby senior managers openly
    or privately single out individuals or groups for special praise. Such activities are
    particularly important during the early stages of change, when achieving an identi-
    fiable and openly-recognised success helps participants develop a positive attitude
    about the change project. In XYZ, it could be argued that the change in organisa-
    tional structure was a method of reinforcing the behavioural changes that had
    already taken place. Alternatively, it could be said that they reinforced the new
    organisational structure. However one views XYZ, the key point is that the behav-
    ioural changes might have been difficult to sustain without the new structure and,
    certainly, the new structure would have been much less effective without the prior
    behavioural changes.
    In looking at the three interlinked elements that make up the change process –
objectives and outcomes, planning the change, and people – we can see why change is
so complex and why so many initiatives fail. Though there are technical aspects that
must be accomplished, no matter what type of change is involved, it can never be a
purely technical exercise. Establishing objectives involves testing assumptions and
challenging preconceived ideas. It also involves gathering both fact and opinion, and
making judgments about which is the most important. Similarly, planning change
often involves an impressive and daunting array of challenges and activities, some of
which are amenable to straightforward techniques of analysis and decision, many of
which are not. The final element, though, is the most complex: people. People are not
just important because they are often the ‘object’ of change, but also because they are
the ones who have to carry it out. In a real sense, they are the glue that holds it
together. They can influence the choice of objectives and the way change is planned.
In turn, objectives and planning can also affect their willingness to accept or become
involved in change.
    One final point: even after a change project has been ‘completed’, the story does
not end there. As the Japanese have shown, even when change has resulted in a stable
state being achieved, there always remains scope for improvement. Furthermore, as is
clear from the case studies, many change projects are open-ended. Change will con-
tinue to take place. Therefore, both in planning a project and evaluating its outcomes,
it is necessary to identify the open-endedness of it, and the degree to which the final
outcome will require a continuous improvement approach or a continuing change
approach. As mentioned earlier, there is a marked difference, however, between
organisations where change is seen as an everyday occurrence and those where it is
seen as a one-off event. In the latter, it is very difficult to develop the capabilities and
commitment necessary to achieve continuous improvement; whereas in the former,
continuous improvement and continuous change, and the capabilities, skills and com-
mitment required of both, go hand in hand.
484   Chapter 15 · Organisational change and managerial choice


Conclusions
              This chapter has sought to merge the theory and practice of strategy development and
              change management as presented in Chapters 6–14. In doing so, it has also drawn on
              many of the arguments and insights into the behaviour, operation and rationality of
              organisations presented in Chapters 1–5. Based on these 14 chapters, this chapter intro-
              duced and elaborated on the Choice Management–Change Management model for
              understanding and managing organisational change. This comprised three interrelated
              organisational processes: the choice process, the trajectory process and the change
              process (see Figure 15.1). It was argued that not only did this model incorporate and go
              beyond both the Planned and Emergent approaches to strategy and change, but it also
              demonstrated how managers could attempt to change their organisation’s circum-
              stances to fit them to the approach that best suited them and their organisation.
                 It was asserted that the Choice Management–Change Management model incorpo-
              rates the full scope of the various approaches to strategy and change, including the
              Planned and Emergent approaches, and that it also accommodates and explains the
              use of more directive approaches. However, one of the fundamental differences
              between this model and many other approaches to strategy and change is that it
              recognises that managers are active players rather than passive spectators in the devel-
              opment of their own organisations. The model is based on the assumption that not
              only can managers choose to align their organisation with the external conditions and
              constraints it faces, but they can also do the reverse and align these external condi-
              tions and constraints to their preferred way of structuring and running their
              organisation. Whether they choose to attempt to influence, alter or align their organi-
              sation to the circumstances it faces will depend on a range of issues, not least their
              own views about whether they or the organisation are better suited by a stable,
              planned situation or whether more turbulent, emergent conditions are preferable.
                 Though the Choice Management–Change Management model appears to offer sig-
              nificant theoretical avenues for understanding how organisations and managers
              operate, it also offers considerable practical benefits as well. In Chapter 3, we exam-
              ined the Culture–Excellence perspective on organisations. The proponents of this
              view, especially Tom Peters, argue that organisations have no choice but to change
              radically if they are to survive. The Culture–Excellence theory is based on a particular
              view of the environment and other constraints organisations face. Assuming that this
              view is accurate, the Choice Management–Change Management model indicates that
              organisations need not radically restructure themselves, but could seek to influence
              the constraints they face to bring them more in line with their existing organisational
              arrangements. Even if, in the long term, organisations did have to structure them-
              selves along the lines advocated by Peters, Kanter and Handy, they could still seek to
              influence the conditions under which they operated to achieve this over a longer
              timescale than might otherwise be assumed. Indeed, as Chapter 3 revealed, this is just
              the approach the Japanese take. Between the 1950s and the 1980s, Japan’s leading
              organisations transformed themselves. This was achieved by slow and gradual trans-
              formation rather than by rapid shock tactics. Japanese companies achieved this
              gradual transformation by a combination of long-term vision allied to the ability to
              influence and restructure the constraints under which they operate, especially, as
Test your learning   485

        argued by Hamel and Prahalad (1989), their ability to change the rules of competi-
        tion in their particular industries. In so doing, they provide much support for Kanter
        et al’s (1992) view that a Long March is more effective than a Bold Stroke for build-
        ing competitive organisations.
           Therefore, the Choice Management–Change Management model, in conjunction
        with the Change Framework presented in Chapter 10, potentially at least, resolves the
        dispute between proponents of Planned and Emergent approaches to strategy devel-
        opment and change. It also raises fundamental questions, however, about what
        managers can do and what they do do in terms of running and shaping their organi-
        sations. In particular, it raises questions about the way that managers can make sense
        of their situation for themselves and others and, in so doing, construct alternative sce-
        narios or realities for their organisation’s future. Many writers, especially from the
        Culture–Excellence perspective, have made a case for visionary leadership being the
        key to an organisation’s success. Certainly, the transactional, steady-as-she-goes type
        of manager is very much out of favour (Kotter, 1996; Peters, 1997a; Senge, 1990).
        The case for transforming managers, as well as organisations, however, tends to be
        based on a biased view of what managers need to do and, often, only a shallow
        understanding of what they actually do. In order to come to grips with the nature of
        managerial work and the extent to which the Choice Management–Change
        Management model requires a rethink of how managers operate, the concluding
        chapter of this book will examine the role of managers.


Test your learning

      ■ Short answer questions
        1 Briefly describe the choice process.

        2 How might a SWOT or PESTEL analysis help an organisation to understand better the
          context in which it operates?

        3 What are the key features of the trajectory process?

        4 Describe how an organisation might construct a vision for itself.

        5 List the key components of the change process.

        6 What does commitment planning involve?

        7 Discuss the role of the change agent in planning and implementing change.



      ■ Essay questions
        1 Critically evaluate the key linkages between the three processes that make up the Choice
          Management–Change Management model.

        2 Use the Choice–Change model to assess one of the ten case studies from Part 3.
Chapter 16

Management – roles
and responsibilities


 Learning objectives
 After studying this chapter, you should be able to:
 ■   define globalisation and understand the importance of sustainability,
     workforce diversity and business ethics;
 ■   list the key duties of managers;
 ■   understand that much of what managers do is reactive and driven by
     expediency;
 ■   describe the three main perspectives on leadership;
 ■   identify the primary approaches to managerial development and education;
 ■   appreciate the differences between management and leadership and the
     different skills required for each;
 ■   explain the relationship between management, leadership and organisational
     change;
 ■   appreciate the need for managers to identify and examine the full range of
     choices facing them;
 ■   understand the impact of managers' decisions on society as a whole, and
     their wider and longer-term responsibilities.
Introduction     487

Exhibit 16.1      A lesson in leadership

Manage with mother                                                                                                       FT

As a lesson in leadership, the residential course I have   everyone knows that 7pm is bedtime. I have also
been on for the last four months has been quite            come to see that choice is my enemy. To start the day
something. Requiring 24-hour commitment seven              by offering Cheerios, Coco Pops, Frosties or Honey
days a week, it has been more gruelling than the           Nuts is to ask for trouble. I offer Bran Flakes or noth-
toughest Outward Bound exercise. There has been no         ing, and breakfast is faster and smoother as a result.
‘facilitator’ to show the way, nor any schedule at all.         A second problem is the non-executive director I
Instead, I have been assigned a group of four young        have been saddled with. Periodically he will pop in,
people to manage, and left to get on with it.              flagrantly disregard all the rules and then have the
    My group is aged between nought and seven, but         cheek to offer advice in the fond belief that he
despite their young age they have much in common           understands the business.
with top executives. Each is equipped with a tower-             I have also discovered that both rewards and
ing ego, an agenda all of their own and a disturbing       punishments are poor motivational tools. Give a
mixture of friendliness and outright hostility towards     strawberry Chewit to one team member and before
each other. They have awesome will-power, yet are          you know it you find inflation has taken hold and
strikingly incompetent at everyday tasks, needing          you are handing out Chewits as a reward for getting
help with eating, sleeping, crossing roads and so          dressed. Punishments are even worse.
forth. Rational behaviour is also a problem for most            The first time you lose your temper you get
of them; indeed the youngest shows scant sign of           results; but to achieve the same effect on subse-
rationality at all. My task, then, has been similar to     quent occasions requires ever increasing quantities
that facing every leader: how to get a group of diffi-     of violence. Understanding this is one thing. Living by
cult people to work happily together.                      it is another. On bad days I do nothing other than
    A little time spent with my four team members          bribing and bollocking.
and you start to understand why senior managers                 Like most chief executives, I have found that I get
behave as they do. When you have witnessed a               little feedback, and what I do get is inadequate. ‘I
seven and a five-year-old fighting over the sharing of     hate you, you’re poo,’ is not exactly constructive. I
a bedroom, the failure of the merger between Glaxo         am at the top, and it can be lonely up here. Not to
Wellcome and SmithKline Beecham becomes a lot              say stressful. The boss of a big company may lay
easier to comprehend. Sir Richard Sykes and Jan            awake fretting about his share price – being woken
Leschly could not agree on who was going to have           up every three hours by the youngest member may
control of the bedside light nor on where their            be nearly as bad.
favourite teddies were going to go, so it turned out to         So what is the answer? Surprise, surprise, it turns
be impossible for them to share a bedroom after all.       out to be complicated, exhausting and quite impossi-
    My course had hardly begun before I realised that      ble to bring off. You have to be firm, but also nice
command and control was the only way forward. In           and approachable. You need to keep your temper
the corporate world this model has sadly fallen from       and motivate people by making them want to do the
favour. But in my company rules and rigid structures       job in hand.
are essential. As chief executive I make sure that         Source: Lucy Kellaway, Financial Times, 2 March 1998, p.14.




               Introduction
             Lucy Kellaway’s article, Exhibit 16.1, on the similarities between managing children
             and managing organisations will strike a chord with most parents and managers.
             Though written in a way that amuses, it raises serious questions concerning the
             nature of management: How can we control organisations? How can we motivate
488   Chapter 16 · Management – roles and responsibilities

               staff? How can we win over colleagues? The answer, as Kellaway states, ‘ … turns out
               to be complicated, exhausting and quite impossible to bring off’. Not all people have
               the same needs or can be motivated in the same way. Also, people’s needs change over
               time; what motivates them one day may have little effect the next. Neither do organi-
               sations, or their customers, suppliers and competitors, stand still. Faced with the vast
               array of present challenges, organisations must also look to the future. Over the past
               few years, with the advent of a new millennium, many writers and commentators
               have felt the urge to provide us with their views on the future. Sometimes these have a
               postmodern rosy glow about them, whilst often, in the wake of the dotcom collapse,
               they present a gloomy, doomsday picture of the future. As Kellaway’s article indi-
               cates, it is unlikely that the challenges facing managers in the future will get any easier
               but, one thing we do know about attempts to predict the future, as Exhibit 16.2
               shows, is that they usually fall very short of the mark.

                 Exhibit 16.2         Predicting the future

                  This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication.
                  (Western Union internal memo, 1876)

                  Airplanes are interesting toys, but of no military value. (Marshal Foch, 1911)

                  Who the hell wants to hear actors talk? (HM Warner of Warner Brothers, 1927)

                  I think there is a world market for maybe five computers. (Thomas Watson, Chairman IBM, 1943)




                  This is unfortunately no excuse for ignoring the many serious and daunting chal-
               lenges that organisations and those who manage them, not to mention the world at
               large, have to face in the coming decades. The globalisation of world trade may open
               up new markets and create new opportunities, but it also brings with it new competi-
               tors and new uncertainties. The same holds true for scientific advance. The beneficial
               effects of computers are there for all to see, with the range of applications expanding
               daily. However, advances such as genetically modified crops and even genetically
               modified human beings are much more controversial and unpredictable. For most of
               the developed world, the spectre of an increasingly ageing population looms large.
               Then there is the reality of global warming, the dwindling of natural resources, the
               growing gap between rich and poor countries, and the threat to the natural world of
               indiscriminate industrialisation; we are reminded of these almost daily (Dunphy et al,
               2003; Paton et al, 1996).
                  Nevertheless, nothing is inevitable until it actually happens, and even then it may be
               reversed. Individual consumers and pressure groups have some influence, and govern-
               ments can pass laws; but in an age where organisations dominate our lives, where they
               appear to be more powerful then ever before, the role and performance of managers
               will be crucial. Managers will need to recognise that in the future, as in the past, regard-
               less of the particular issues involved, the environment in which their organisations
               operate will continue to change. They will also have to recognise that the appropriate-
               ness of their decisions will be judged by a wider set of criteria and a wider range of
               stakeholders than in the past. At the same time, managers will continue to have to find
Globalisation and the challenge of change   489

        ways of ensuring that their organisation and its environment, and the other constraints
        under which it operates, are, as far as possible, kept aligned. As pointed out in previous
        chapters, this does not mean that each and every organisation has to change rapidly
        and radically, though many will. Instead, managers can seek to influence the constraints
        under which their organisation operates, and the pace and timing of change, to make
        them more favourable to their preferred way of working. However, as in the past, over
        time, both organisations and their environments will change.
            As the case studies in Part 3 have shown, and as most people’s everyday experi-
        ences confirm, change is neither easy nor necessarily always successful. Regardless of
        this, organisations do change, either by design or default, and managers do play a
        crucial role in determining whether the outcome is success or failure. Managers are
        the ones who have the responsibility for ensuring that options are identified, choices
        made and action taken. They are also the ones who have the responsibility for
        making sense, presenting a coherent picture, of the events and developments that
        make up an organisation’s past, present and potential future. Therefore, in concluding
        this book, it is only right that we look at how well or not managers are equipped, or
        can be equipped, for this task.
            The chapter begins by examining the implications of globalisation, especially in
        terms of sustainability, workforce diversity and business ethics. This highlights the
        need for managers not just to acquire appropriate skills and competences but also to
        adopt appropriate behaviours. This leads on to a review of the literature on what
        managers are supposed to do and what they really do. This shows that, despite what
        leading thinkers such as Fayol and Weber believed and advocated, most managers are
        driven by expediency and operate in a responsive mode. The chapter then moves on
        to discuss the importance and nature of leadership in organisations. In particular, it
        seeks to identify the characteristics and contexts that make for effective leadership.
        Arising from this, the leadership role played by managers in the case studies is
        explored. This is followed by an examination of the education and development of
        managers, which leads on to a discussion of the relationship between management,
        leadership and change. The chapter and the book conclude by arguing that managers
        have an important responsibility to identify and exercise choice, when faced with situ-
        ations which require change. Though choice can be determined on a very narrow
        basis of short-term financial return, increasingly managers will have to take into
        account wider organisational and societal factors. Especially important in this respect
        is that managers should be prepared to question trends and advice that seem designed
        to increase organisational and societal instability and fragmentation. The interests of
        society in general and their own organisations in particular may be better served by
        seeking stability rather than promoting instability.


Globalisation and the challenge of change
        Arguably, the biggest single challenge facing managers today is globalisation: the cre-
        ation of a unified world market place. Allied to globalisation, however, are three
        other challenges: how to achieve sustainability in a world of dwindling natural
        resources and increasing environmental pollution; how to manage an increasingly
        diverse workforce; and, at a time when business leaders are considered less trustwor-
        thy than ever before, how to manage ethically.
490   Chapter 16 · Management – roles and responsibilities

                  Trade between different parts of the world has been taking place for thousands of
               years. In the last 20 to 30 years, however, and particularly since the fall of communism
               in Eastern Europe, the integration of the global economy appears to have gone through
               a step change. Whereas in the 1970s and 1980s it was common to talk about interna-
               tional brands such as Coca Cola and McDonald, it is now equally common to speak of
               global, transnational corporations that dominate their industries and gobble up the
               smaller companies. Examples of these include General Electric, Toyota, Mitsubishi,
               Microsoft, Merck, News International, Vodafone and Time Warner. One of the prime
               examples is Ford, which, as well as being a global brand, also owns Mazda in Japan,
               Volvo Cars in Sweden, and Aston Martin, Jaguar and Land Rover in the UK, not to
               mention having joint ventures in the world’s two most populous nations, India and
               China. One obvious manifestation of globalisation is that, in the developed world, we
               take for granted that our supermarkets will be stocked with our favourite foods from
               every part of the world all year round. Nor is globalisation merely an issue for large
               companies; it is affecting smaller organisations as well, whether through the threat of
               increased competition and takeover, or the promise of new markets.
                  Like many hot topics that attract a great deal of attention, it is difficult to find an
               agreed definition of globalisation. For some, it is primarily an economic phenomenon,
               concerned with the integration and convergence of economic systems through the growth
               in international trade, investment and capital flows (Jones, 1995; Deresky, 2000). Others,
               though, see it as a much wider phenomenon involving social, cultural and technological
               exchanges that will ‘… transform our world into the beginnings of a global civilization, a
               new civilization of civilizations, that will blossom through the coming century’ (Schwartz
               and Leyden, 1997: 1). For Giddens (2002), the advent of new communications technolo-
               gies is leading to the ‘death of distance’ and making it possible to share knowledge and
               culture across the globe instantaneously and simultaneously. Some argue that globalisa-
               tion may also be sounding the death knoll of the nation state, as large trading blocks,
               based on Europe, North America and Asia and overseen by the World Trade
               Organisation, take over from the nation state (Deresky, 2000). Reich (1998), in an
               attempt to make sense of these differing perspectives, identifies the four main definitions
               of globalisation: a historical epoch; a confluence of economic phenomena; the hegemony
               of American values; and a technological and social revolution.
                  Despite these different views as to what globalisation is, as Reich (1998) shows,
               there is some agreement amongst commentators as to what is driving it: the intensifi-
               cation of international competition, the fall of communism, economic liberalisation,
               the removal of trade barriers, and the advent of new communication technologies
               such as the Internet. It is these very real developments which make globalisation a key
               issue for managers rather than a passing fad. Globalisation is also a highly con-
               tentious issue which has given rise to a great deal of bitter conflict between those who
               see it as a force for global good and those who see it as the oppression of poor
               nations by rich ones (Economist, 2002; Klein, 2001). To a great extent, much of the
               pro and anti argument revolves around the size and behaviour of the large, transna-
               tional corporations that are coming to dominate the global economy. For example:
               ■   more than half of the 1,000 largest economies in the world are private corporations;
               ■   the sales of Ford and General Motors combined are greater than the combined
                   GDP of sub-Saharan Africa;
Globalisation and the challenge of change   491

   ■    the combined turnover of the six largest Japanese trading companies is almost as
        big as the national incomes of all the nations in Latin America (Globalisation
        Guide.org, 2003).
   For the pro-globalisation camp, this provides the rationale for the creation of global
   institutions such as the World Trade Organisation (WTO) and the World Bank that
   can set the rules for and police such organisations. For the antis, this shows that big
   business is the dominant force in globalisation and the WTO and the World Bank
   exist to do their bidding.
      Regardless of whether one see globalisation as a force for good or ill, organisations
   have to come to terms with the changing nature of domestic and international trade.
   They have to live with a situation where the rules that govern their behaviour are set
   by supra-national bodies such as the EU and WTO. In addition, as mentioned above,
   they need to come to terms with three other issues whose importance has been inten-
   sified by globalisation, namely sustainability, workforce diversity, and business ethics.


■ Sustainability
   Globalisation both derives from and is driving economic development across the
   globe; the greater the level of economic integration across the planet, the greater the
   level of consumption. As we can see around us every day, however, the result of this
   rush for ever greater levels of economic growth and consumption is the dwindling
   and depredation of natural resources, increasing levels of pollution and rapid global
   warming (Paton et al, 1996). As Lines (2002: 126–7) argues:

       The regenerative and assimilative capacities of the biosphere cannot support even the cur-
       rent levels of consumption, much less the manifold increase required to generalize to higher
       standards of living worldwide. Still less can the planet afford an ever-growing human popu-
       lation striving to consume more per-capita.


     It would be good to think that the sustainability of the planet will be secured by
   cooperation between governments. However, as the failure of the USA to sign up to
   the Kyoto Protocol on achieving reductions in the emissions of greenhouse gases
   shows, this does not seem likely. Even if such accords are signed, we also know that
   organisations, driven by market forces, will have a major influence on how they are
   formulated and will have the major responsibility for their implementation. As
   Dunphy and Griffiths (1998: 183) argued in their book The Sustainable Corporation:

       There is a widespread view that governments must solve environmental problems. However,
       the major multinationals outstrip many of the world's national economies in terms of
       wealth and power, and their global coverage allows them to escape the requirements of par-
       ticular governments seeking to place severe environmental restrictions on them. They can
       simply move their operations across national borders. The world's multinationals are in fact
       more powerful than most national governments.


   Nevertheless, Dunphy and Griffiths do believe that it is possible for these large organ-
   isations to change their ways. They point out that those who run organisations live in
   the same world as the rest of us, and, to a large extent, experience the consequences
492   Chapter 16 · Management – roles and responsibilities

               of their actions in the same way everyone else does. Therefore, they argue, managers
               cannot divorce their actions from the wider impact they have on society; nor can they
               ignore the fact that a sustainable future for their organisations requires a sustainable
               future for the world. This presents a major challenge for managers, particularly at the
               senior level. Whilst operating in competitive and hostile markets, they have to marry
               the desire of their shareholders for increased profit with the need to act in the wider
               and longer-term interests of society as a whole. They will not achieve this without
               pressure and support from governments and the force of public opinion. Nor, as
               Dunphy et al (2003) show, will managers be able to create sustainable organisations
               unless they have the change management skills to do so. Dunphy et al argue that both
               incremental and transformational approaches can be used to create sustainable organ-
               isations. However, the appropriateness of either depends on the circumstances of the
               organisation in question. Therefore, the role of managers is not just to lead change
               but to develop the skills necessary to identify which approach to change, is suitable
               for their organisation.
                  Furthermore, as Docherty et al (2002: 12) maintain, sustainability is not just about the
               relationship of organisations to their environment, or the depletion of natural resources:

                Sustainability … encompasses three levels: the individual, the organizational and the socie-
                tal. Sustainability at one level cannot be built on the exploitation of the others. These levels
                are intimately related to the organization's key stakeholders: personnel, customers, owners
                and society. An organization cannot be sustainable by prioritizing the goals and needs of
                some stakeholders at the expense of others … Thus sustainability has a value basis in the
                due considerations and balancing of different stakeholders' legitimate needs and goals.


               Therefore, as Dunphy et al (2003) argue, life cannot be sustained on earth unless we
               create sustainable organisations. However, Docherty et al (2002) point out that creat-
               ing sustainable organisations cannot be achieved unless all stakeholders, including the
               organisation’s own members, are treated in an equitable and ethical manner. This is
               why the issues of workforce diversity and business ethics are so important.


          ■ Workforce diversity
               Jones et al (2000: 166–7) observe that:

                Diversity is dissimilarities – differences – among people due to age, gender, race, ethnicity,
                religion, sexual orientation, socioeconomic background, and capabilities/disabilities …
                Diversity raises important ethical issues and social responsibility issues as well. It is also a
                critical issue for organizations, one that if not handled well can surely bring an organization
                to its knees, especially in our increasing global environment.


               Ever since the Industrial Revolution ushered in the age of the organisation, the work-
               force has become increasingly diverse, though faster in some industries and countries
               than others. Globalisation is intensifying workforce diversity in three key ways. The
               first and most obvious is that the growth of the transnational corporations means
               that, increasingly, companies are being owned and managed by people from different
               countries and cultures. The fact, given above, that Ford runs Volvo in Sweden, Mazda
Globalisation and the challenge of change   493

in Japan and Land Rover in the UK is a typical example. However, there are also many
examples of Japanese and South Korean companies, such as Honda and Hyundai,
establishing factories in Europe and the USA. Companies are also increasingly buying
products and services from overseas. The epitome of German manufacturing, Mercedes
Benz, now purchases car components from India, and many big UK companies, such as
BT and Aviva, have relocated Call Centres to India. The second effect of globalisation
concerns the migration and recruitment of workers from other countries. Richer coun-
tries have always been a magnet for workers from poorer countries. The emigration
from Europe to the USA in the nineteenth century is a case in point. It offered the
potential for a better life for immigrants and met the severe shortage of workers the
USA was experiencing. The last 50 years has seen the mass migration of people from
South America to the USA. In some American cities, Hispanics are now the largest
ethnic grouping and by 2050 will make up some 25 per cent of the population of the
USA (Deresky, 2000). The transportation and communications infrastructures that have
made globalisation possible also make it easier to move from one country to another,
whether legally or illegally, to seek a better life. Also, with globalisation, the need to
move skilled labour from where it is plentiful to where it is scarce, or where it can be
better rewarded, is an increasingly important factor of competitiveness. In recent years,
for example, the UK government has sought to recruit medical staff from across the
world to compensate for staff shortages in the National Health Service.
   The third effect of globalisation on diversity has been to increase the participation
rate of women and minority groups in the workforce. As economies develop, they
require greater amounts of labour. The tendency is first of all to recruit male workers,
and often to give preference to ones from particular groups, whether these be based
on grounds of race, tribe, religion, age or sexual orientation. As demand for labour
grows, other groups are drawn into the workforce. In the twentieth century, for
example, the participation of women in the workforce of most developed countries
probably accounted for the biggest increase in diversity.
   It has always be the case that the USA tends to exemplify workforce diversity.
Jones et al (2000: 167) recommend their readers to consider the following statistics:

 Thirty percent of the residents of New York City were born in foreign countries. 33 percent
 of the residents of San Francisco are Asian, 70 percent of the residents of Washington, D.C.,
 are African-American, and approximately 70 percent of the people currently entering the
 workforce are either women or minorities. Between 1979 and 1992, the number of women
 in the workforce increased at twice the rate of men, and currently 1 out of 10 U.S. workers
 is employed in a company owned by women. … There are many more women and minori-
 ties – including people with disabilities and gays and lesbians – in the workforce than ever
 before, and most experts agree that diversity is steadily increasing.


Cummings and Worley (2001: 429–30) echo this point stating that:

 … contemporary workforce characteristics are radically different from what they were just
 twenty years ago. Employees represent every ethnic background and color; range from
 highly educated to illiterate; vary in age from eighteen to eighty; may appear perfectly
 healthy or may have terminal illness; may be single parents or part of dual-income,
 divorced, same-sex or traditional families; and may be physically or mentally challenged.
494   Chapter 16 · Management – roles and responsibilities

                  Diversity would not be an issue if we all reacted to the same things in the same ways
               and treated everybody else as we would wish to be treated ourselves. In his entertaining
               and enlightening book Blunders in International Business, Ricks (1999) catalogues the
               blunders made by businesses in trying to sell their products in other countries or trying
               to establish businesses in other countries. As he points out (Ricks, 1999: 4):

                Cultural differences are the most significant and troublesome variables encountered by the
                multinational company. The failure of managers to comprehend fully these disparities has
                led to most international business blunders.

               Hofstede (1980, 1990) sought to identify the similarities and differences between
               national cultures and the implications of these for the management of different
               groups (see Chapter 5). From the work of Hofstede and that of other researchers (see
               Trompenaars, 1993, for example) it is clear that approaches which might be effective
               when managing, say, Japanese workers might be considerably less effective when
               managing ones from the USA. Jones et al (2000: 175) comment that:

                When American and Japanese managers interact, for example, the Americans often feel frus-
                trated by what they view as indecisiveness in the Japanese, and the Japanese are often
                frustrated by what they perceive as hasty, shortsighted decision making by the Americans.

                  Managing diversity is not just about how to manage effectively relationships
               between people with different national cultures. Managing diversity is also concerned
               with developing appropriate approaches to managing differences in gender, age, abili-
               ties, sexuality, ethnicity, etc. For instance, in the West, it is argued that male and
               female workers have different strengths and weaknesses and different preferences in
               how they prefer to manage and be managed (Maddock, 1999; Thomas, 2003).
               Alimo-Metcalfe (1995a, 1995b) maintains that women tend to be more motivated by
               organisational goals than their male counterparts and more amenable to change.
               Women also appear to have different work-life balance priorities, especially in terms
               of childcare, as BA found to its cost in 2003. An attempt by the airline to impose a
               new clocking-on arrangement on its check-in staff at Heathrow Airport turned out
               disastrously when the predominantly female workforce went on unofficial strike. This
               cost BA some £40 million in lost revenues and an incalculable amount in bad public-
               ity (Harrison, 2003). The company failed to understand its staff’s priorities and
               concerns, as Phillips (2003: 17) comments:

                Currently, shifts are organised three months at a time and women can arrange childcare
                around their working hours. What they fear is a system in which a computer will decide on
                a day-to-day, or hour-to-hour, basis when they should come into work. … BA, and the
                unions too, have been caught on the hop because they failed to understand that, for these
                relatively low-paid, often part-time, women workers, the welfare of children comes first –
                above money.


                  Despite the evidence that women have different preferences and priorities to men,
               studies have shown that if women are to progress up the managerial hierarchy, they
               are expected to conform to male characteristics such as decisiveness, competitiveness
Globalisation and the challenge of change   495

  and playing by the rules (Schein and Mueller, 1992). Workforce diversity is not just
  about gender, however, or even cultural or ethnic differences, as Cummings and
  Worley (2001: 429–30) point out:

   Such a definition is too narrow and focuses attention away from the broad range of issues
   that a diverse workforce poses. Diversity results from people who bring different resources
   and perspectives to the workplace and who have distinctive needs, preferences, expectations
   and lifestyles. Organizations must design human resource systems that account for these dif-
   ferences if they are to attract and retain a productive workforce and if they want to turn
   diversity into a competitive advantage.


  That people who are different are treated less well than those who conform to what-
  ever the prevailing stereotype is in organisations and society is well known. Most
  countries now have laws that seek to prevent or punish discrimination. This of course
  can provide a powerful incentive for organisations to recognise and manage work-
  force diversity. In raising the issue of competitive advantage, however, Cummings and
  Worley draw attention to the positive side of diversity. In a fiercely competitive world
  where markets are expanding and customers are increasingly rejecting standardised
  products and services in favour of ones tailored to their needs, workforce diversity
  can bring substantial benefits. It offers the possibility of more creativity, innovation,
  and flexibility, it provides a heightened sensitivity to different customer groupings and
  a wider pool of talent to draw from. Only by attracting, retaining and motivating
  workers effectively, including recognising and promoting the benefits of diversity, can
  organisations expect to prosper or even survive in an increasingly competitive global
  economy. This means that organisations have to achieve the difficult but essential task
  of treating workers differently because of their diversity but treating them all fairly.
  This is a task that can only be achieved if those in positions of power and authority in
  organisations are also prepared to manage ethically.


■ Business ethics
  It is commonplace, as the following quotations show, for most books on organisa-
  tions and management to make some reference to business ethics:

   Ethics are moral principles or beliefs about what is right or wrong. These beliefs guide
   people in their dealings with other individuals and groups (stakeholders) and provide a basis
   for deciding whether behavior is right and proper.                   (Jones et al, 2000: 183)

   Managers today are usually quite sensitive to issues of social responsibility and ethical
   behavior because of pressure from the public, from interest groups, from legal and govern-
   ment concerns, and from media coverage. It is less clear where to draw the line between
   socially responsible behaviour and the corporation’s other concerns, or between the conflict-
   ing expectations of ethical behaviour among different countries.         (Deresky, 2000: 56)


  There is certainly no shortage of advice about what ethics are or how they should be
  applied to business. The problem, as the last quotation shows, is that, in an increas-
  ingly complex, diverse and competitive world, applying an ethical approach to
496   Chapter 16 · Management – roles and responsibilities

               business is not straightforward. This is why many companies and governments, even
               those who profess to have ethical policies, have difficulty bridging the gap between
               rhetoric and reality, as the following extracts show:

                The [UK] government’s own arms sales department is directly implicated in bribery abroad,
                according to documents obtained by the Guardian. Such bribery has supposedly been out-
                lawed since 2001. Current Ministry of Defence files show that DESO, the defence exports
                services organisation, officially authorises what it calls ‘special commissions’ paid by arms
                firms. Payment arrangements are even written by civil servants into the secret contracts on
                government-to-government arms deals. Firms which pay the bribes, described as ‘common-
                place in certain parts of the world’, are, it is explained, exempt from normal MoD rules
                banning corruption.                                                     (Evans et al, 2003: 1)

                Swiss investigators have joined the US in the biggest bribery investigation ever into foreign
                deals where millions of pounds of apparently legitimate payments by BP, Shell and others
                allegedly ended up in the hands of Kazakhstan officials.                (Macalister, 2003: 1)

                Workers at nine Nike plants in Indonesia have been found to suffer from sexual and verbal
                abuse, lack of medical attention and compulsory overtime. … The company has issued a
                remediation plan to placate its critics. Nike's healthy corporate image has been battered in
                recent years by allegations that it employs underage workers in its Asian factories and asks
                all employees to work long hours for low pay in conditions that would never pass US
                inspections.                                                                  (Left, 2001: 1)

                A chill must have swept through many a City [of London] boardroom yesterday after Louise
                Barton won her appeal in a high-profile sex discrimination case. The case has shone a spot-
                light on the secretive pay structures of investment banks, which are known for paying large
                discretionary bonuses. … Statistics show that women earn on average 19 per cent less per
                hour than men across all professions. But for women working in the City, the disparity can
                be even greater. Typically, those on six-figure salaries earn an average of almost 60 per cent
                less than their male counterparts.                                            (Saigol, 2003: 8)


                  Though these ethical shortcomings can be viewed as examples of corporate man-
               agement valuing the interests of one group of stakeholders above those of other
               groups, that is not the end of the story. The last decade has also shown that in many
               instances, senior and even junior managers have put their own personal interests
               above those of everybody else, even to the extent of breaking the law. There can be
               few people unaware of the Enron scandal, where a number of senior managers con-
               spired to line their own pockets at the expense of everyone else and, in the process,
               ruined the company and destroyed its accountants, Arthur Andersen (Bryce, 2002).
               As Partnoy (2003: 1) observed, however, this was not an isolated incident:

                The 1990s were a decade of persistently rising markets – 10 years of economic expansion,
                with investors pouring record amounts into stocks and pocketing double-digit returns year
                after year. … The decade was peppered with financial debacles, but these faded quickly
                from memory even as they increased in size and complexity. The billion dollar-plus scandals
                included Robert Citron of Orange County, Nick Leeson of Barings and John Meriwether of
                Long-Term Capital Management, but the markets merely hiccoughed and then started going
Globalisation and the challenge of change   497

 up again. When Enron collapsed in late 2001, it shattered some investors' beliefs and took a
 few other stocks down with it. Then Global Crossing and WorldCom declared bankruptcy,
 and dozens of corporate scandals materialised as the leading stock indices lost a quarter of
 their value. … Companies' reported earnings were a fiction and financial reports chock-full
 of disclosures that would shock the average investor if they ever even glanced at them – not
 that anybody ever did.

In the USA, the finger has been pointing very sharply at the practices of Wall Street
analysts who aggressively oversold shares, as Tran (2003: 1) observed:

 ... analysts hoodwinked investors by hyping up the prospects of internet and other hi-tech
 companies, while privately dismissing them. Former star internet analyst Henry Blodget
 once privately described as a ‘piece of shit’ a stock he was publicly touting, according to
 previously disclosed emails.


   According to Teather (2002), the hyping or ‘ramping’ of shares was central to the
operation of Wall Street’s financial institutions and not just limited to a few rogue
analysts. In May 2003, in an attempt to draw a line under the crimes of the boom
years, leading Wall Street financial institutions agreed to pay fines totalling $1.4 bil-
lion (Tran, 2003). Nevertheless, corporate greed was not limited to Wall Street, and
much of it was quite legal. Across America, executive salaries rose dramatically in the
1990s. In 1980, the average CEO salary was 42 times than that of the average
hourly-paid worker, by 1990 it was 85 times greater, but by 2000 it had grown to
531 times greater (AFL-CIO, 2003). A similar phenomenon, though on a lesser scale,
could be seen in the UK where, in the 1990s, basic executive salaries rose four times
faster than inflation, and additional rewards, such as bonuses and share options, far
outstripped even that (Business Notebook, 2003). However, what really seems to
have annoyed UK investors is not that executives are rewarded for success, but that
they also get rewarded for failure. As noted in Chapter 5, amongst FTSE-100 compa-
nies the pay of directors rose 84 per cent in the three years to 2003 but the stock
market value of these companies fell by 50 per cent (Finch and Treanor, 2003). In the
UK, 2003 will go down as the year of the shareholder revolt. At AGM after AGM,
shareholders in leading companies, such as HSBC, Shell and, most spectacularly of
all, GlaxoSmithKline voted in large numbers to reject salary packages that they saw
as too generous or which promised to reward failure (Stewart, 2003). It is no wonder,
therefore, that opinion polls show that the vast majority of people in the UK think
executives are untrustworthy and overpaid (Caulkin, 2003).
   Though in the West the 1990s was the decade when the rich got seriously richer,
for the world’s poorest countries, the reverse was the case. In the 1990s, 54 countries
saw their average income decline, and 21 went backwards in terms of human devel-
opment – a measure of income, life expectancy and literacy; the number of people in
sub-Saharan Africa living on less than $1 a day increased from 47 to 49 per cent, and
in eastern and central Europe it increased from 7 to 20 per cent (Elliott, 2003).
   In public at least, there are two aspects of business ethics that business leaders
agree upon: all businesses should have them, and all businesses have difficulty abiding
by them. Difficult though they are to implement and maintain, if organisations fail to
adopt an ethical approach, the result can be disastrous. Managers can put their own
498   Chapter 16 · Management – roles and responsibilities

               interests above those of shareholders, staff and the law, as the collapse of Enron
               demonstrated. Entire industries can become corrupt, as the Wall Street example
               shows. Above and beyond that, however, we create societies and a world where there
               are increasing divisions between the few ‘haves’ and the many ‘have-nots’.
                  Globalisation is often couched in terms of the competitive challenge it poses for
               individual organisations, i.e. how can an organisation, whether in the public, private
               or voluntary sectors, survive and prosper in a borderless world that is increasingly
               dominated by a few giant, transnational corporations? As the discussion of sustain-
               ability, diversity and ethics shows, however, globalisation also raises crucial questions
               about the role and impact of organisations on and in a global society. These questions
               go beyond traditional business concerns such as profit and loss, value for money or
               market share; they are concerned with fundamental issues of the role of organisations
               in sustaining life on Earth, respect for human diversity and dignity, and the ethical
               rules by which we live. These issues are not new, but globalisation has accentuated
               and brought them to the fore as never before. Governments, international bodies and
               individual organisations have responded by adopting policies that supposedly pro-
               mote responsible and ethical behaviour. All big organisations and many small ones
               now have policies on minimising their environmental impact, promoting and manag-
               ing diversity, and on behaving in an ethical fashion. Nevertheless, the gap between
               ethical rhetoric and the reality of unethical behaviour seems to be getting wider rather
               than narrower. The real challenge for organisations is to change managerial behav-
               iour so that business ethics become business practices. Policies, skills and good
               intentions are clearly not enough. The fundamental point is that managers need to
               behave differently. They need to put the policies and skills into practice. Therefore, in
               examining the role and development of managers in the rest of this chapter, one of the
               key issues to be addressed will be what determines managerial behaviour and how
               can we change it.


The manager’s role
               It has never been easy to define the role of managers, though this has not prevented a
               great number of attempts over the years (see Barnard, 1938; Brewer and Tomlinson,
               1964; Carlson, 1951; Constable and McCormick, 1987; Golding and Currie, 2000;
               Griffin, 2002; Handy et al, 1987; Horne and Lupton, 1965; Kotter, 1982, 1990;
               Mintzberg, 1973, 1975; Nahavandi, 2000; Silverman and Jones, 1976; Sjöstrand,
               1997; Stewart, 1976; Yukl, 2002). As Hales (1986) found when he reviewed many of
               these studies, the information available presents the reader with a confusing and con-
               flicting picture of what managers should do and how they should do it.
                   Definitions of the role of managers have ranged from attempts to list basic tasks:

                [The manager] plans, organises, directs and controls, on proprietors’ or own behalf,
                an industrial, commercial or other undertaking, establishment or organisation, and
                co-ordinates the work of departmental managers or other immediate subordinates.
                                                               (Quoted in Dakin and Hamilton, 1990: 32)
The manager’s role   499

to more ambitious attempts to define the essence of the manager’s role:

 [The manager has the] task of creating a true whole that is larger than the sum of its parts, a
 productive entity that turns out more than the sum of the resources put into it.
                                                                           (Drucker 1985: 53)

Drucker (1985) also likened the manager to the conductor of a symphony orchestra. As
conductor, the manager is the one through whose effort, vision and leadership the vari-
ous instrumental parts, that are so much noise by themselves, become the living whole
of music. In this instance, the manager is also the composer as well as the conductor.
   Handy (1986), on the other hand, likened the manager to a doctor: the manager is
the first recipient of problems. The manager’s role is, therefore, to identify the symp-
toms in any situation; to diagnose the disease or cause of the trouble; to decide how it
might be dealt with, through a strategy for health; and to start the treatment.
   Such analogies are useful in that they create a concrete picture of the manager’s
role, but they can also be misleading. Conducting is an art form; is management an
art form? Or, as Handy’s analogy implies, is it a science in the same way that medi-
cine is a science? As Part 1 of this book showed, the clash between those who see
management as a rational, science-based process, and those who believe it to be more
intuitive and less rational, is not new.
   Duncan (1975) tried to resolve this conflict by taking a holistic view of the job of
the manager. He identifies three distinct levels of management activity: philosophical
(goal formation); scientific (goal accomplishment and evaluation); and art (implemen-
tation of decisions). At the philosophical level in forming goals, the manager –
Duncan argues – is mainly concerned with the effects of the actions and reactions of
other individuals and groups within the wider economic and social context within
which the organisation is set. At this level, managers and their associates formulate
clear and precise strategies that will encompass all envisaged effects that can result
from the set goals, not only on the various pressure groups within its internal and
external environment, but also on competitors and regulatory agencies. It is also at
this level that the ethics of managerial behaviour, values and priorities of the organi-
sation are formulated and established. At the scientific level, management develops
plans, methods and techniques for achieving set goals, and establishes procedures for
monitoring and evaluating progress.
   The art level is concerned with the implementation of decisions; this is the level at
which tactical and administrative decisions are made to deploy the organisation’s
resources and attain the optimum degree of operational efficiency. This level is an ‘art’
because, according to Duncan, there appears to be a particular talent necessary to per-
suade others that management-generated goals and decisions should be accepted.
   Whilst one might not necessarily agree with his definitions, especially in terms of
strategy formulation, Duncan’s three-level approach is extremely useful in that it
shows, as Mullins (1989) argued, that management is both a science and an art. By its
very nature, management is forced to deal with both rational, science-based activities,
such as the design and operation of manufacturing and administrative systems, and
less rational, more intuitive activities, especially those concerning managing and moti-
vating people. The extent to which a manager is involved in any of these activities
will depend on the kind of organisation the manager works for, the type of job the
500   Chapter 16 · Management – roles and responsibilities

               manager has, and – crucially – the manager’s level in the organisation’s hierarchy
               (Hales, 1986). Position in the hierarchy, formally at least, is likely to exert the greatest
               influence on the role given to and expected of a manager. The three main hierarchical
               levels are as follows:
               ■    Top management – the policy-making group responsible for the overall direction of
                    the company.
               ■    Middle management – responsible for the execution and interpretation of policies
                    throughout the organisation and for the successful operation of assigned divisions
                    or departments.
               ■    First level or supervisory management – directly responsible to the middle manage-
                    ment group for ensuring the execution of policies by their subordinates. They are
                    also responsible for the attainment of objectives by the units they control, through
                    practices and procedures approved and issued by top or middle management.
               Superficially, at least, these three categories appear to mirror Duncan’s three levels.
               On a closer examination, however, it becomes more difficult to match them because
               each category can encompass all three levels. This can be seen more clearly by exam-
               ining what it is that managers actually do, as averse to what academics say they
               should do.
                  There have been a number of important studies conducted to determine how man-
               agers spend their time (see for example Brewer and Tomlinson, 1964; Child and Ellis,
               1973; Kotter, 1982). Perhaps the most widely known and replicated work in this area
               is by Mintzberg (1973, 1975). Synthesising his results and the previous research on
               the role of managers, he concluded as follows:
               ■    Although much managerial work is unprogrammed, all managers do have regular,
                    ordinary duties to perform.
               ■    Rather than being systematic, reflective thinkers and planners, managers simply
                    respond to the pressures or demands of their jobs.
               ■    Managerial activities are characterised by brevity, variety and discontinuity.
                 Some 30 years after Mintzberg’s work, Yukl (2002), in reviewing the literature on
               management, came to similar conclusions:
               ■    The content of managerial work is varied and fragmented.
               ■    Many activities are reactive.
               ■    Interactions often involve peers and outsiders.
               ■    Many interactions involve oral communications.
               ■    Decision processes are disorderly and political.
               ■    Most planning is informal and adaptive.
               Yukl (2002: 22) also found that the pace of managerial work was hectic and unrelenting:

                   During the typical workday there is seldom a break in the workload. Managers receive
                   almost continuous requests for information, assistance, direction, and authorization from
                   a large number of people, such as subordinates, peers, superiors, and people outside
                   the organization.
The manager’s role   501

Yukl’s work confirms Mintzberg’s (1973) finding that managers’ jobs are remarkably
similar, and that their work can be described in terms of ten very important roles
that could be categorised under three headings: interpersonal, informational and
decision-making.

Interpersonal roles
One of the most time-consuming and important aspects of most managerial jobs is
to work with, direct and represent people. The three key roles in this respect are as
follows:
■   figurehead – as the formal representative of the organisation;
■   liaison – forming connections with other organisations;
■   leader – in relation to members of a group within the organisation.

Informational roles
Those in managerial positions have unique opportunities to obtain and disseminate
information. The three key roles involved are given below:
■   monitor – as monitors, managers seek, receive and store information that can be
    used to the advantage of the company;
■   disseminator – the manager must broadcast this useful information to the organisa-
    tion;
■   spokesperson – on behalf of the organisation, the manager communicates informa-
    tion to other relevant groups and bodies, both internal and external.

Decision-making roles
One of the main parts of any manager’s job is to take decisions. In this respect, there
are four key roles involved:
■   entrepreneur – looking for ways to improve the operation of the organisation or
    for new product/market opportunities;
■   disturbance-handler – managers must handle crises effectively;
■   resource allocator – responsible for constructing budgets and allocating resources;
■   negotiator – according to Mintzberg, managers spend a great deal of their time as
    negotiators, because only they have the necessary information and the authority to
    carry out this role.
As Yukl (2002) notes, though these roles are common to most managerial jobs, the
emphasis and importance of these roles varies between managers depending on a range
of factors such as organisation size, level of management, level of managerial inde-
pendence, and the stage the organisation had reached in its life cycle. Mintzberg (1975)
argued that the lack of uniformity within managerial jobs can be accounted for by
hierarchical and functional differentiation. He contended that chief executives, for
example, focus considerable attention on external roles, such as liaison, spokesperson
and figurehead, which link the organisation to its environment. At lower levels, work
is more focused, more short-term in outlook, and the characteristics of brevity and
fragmentation are more pronounced. As a result of this, the external managerial roles
are less important, and real-time internal roles (disturbance-handler and negotiator)
502   Chapter 16 · Management – roles and responsibilities

               concerned with daily operating problems and maintaining the work flow become rel-
               atively more important. Furthermore, he argued that interpersonal roles are more
               important to sales managers, that staff managers give more attention to informational
               roles, and production managers focus on decisional roles. Mintzberg’s observations
               have been supported by a number of other studies (Kotter, 1982; Silverman and
               Jones, 1976).
                  Stewart (1976, 1982) drew particular attention to demands, constraints and
               choices in shaping managerial roles:
               ■    Demands – these are the expectations that those in positions of power have for a
                    role holder.
               ■    Constraints – these are factors peculiar to the organisation and its environment
                    that limit a manager’s freedom of manoeuvre.
               ■    Choices – though managers are limited in what they can do by the demands and
                    constraints of their jobs, all managers have a degree of discretion (choice) in what
                    to do and when to do it.
               One key area where managers are called on to make choices is when faced with role
               conflicts. For example, managers are often caught between subordinates’ expectations
               that managers will protect their interests and provide resources, and superiors’ expec-
               tations that managers will act in the best interests of the organisation and minimise
               costs. Another example of conflict between roles is where managers are expected to
               spend considerable time, in their figurehead role, dealing with the external world
               whilst at the same time colleagues expect them to be present internally carrying out
               their leadership role.
                  Nevertheless, despite the presence of conflicts and choices, Hales (1986: 102), in
               reviewing the research on the manager’s role, concluded that:

                   Much of what managers do is, of necessity, an unreflective response to circumstances. The
                   manager is less a slow and methodical decision maker, more a ‘doer’ who has to react rap-
                   idly to problems as they arise, ‘think on his feet’, take decisions in situ and develop a
                   preference for concrete activities. This shows in the pace of managerial work and the short
                   time span of most activities ...


               Therefore, in examining the role of managers, it can be seen that there is a discrep-
               ancy between what the literature says managers should do and what the managers
               actually do. Indeed, as Mintzberg (1975: 49) pointed out, this discrepancy even
               extends to managers’ own observations on their role:

                   If you ask a manager what he does, he will most likely tell you he plans, organizes, co-ordinates
                   and controls. Then watch what he does. Don’t be surprised if you can’t relate what you see to
                   those four words.


                  Important as it is to understand the manager’s role, it is just as important, if not
               more so, to understand what constitutes effectiveness. Despite the very many books and
               articles on management and the role of the managers, most writers seem to shy away
               from defining either organisational or managerial effectiveness. Part 1 of this book
               reviewed organisation theory and behaviour. What this showed is that the promoters of
Management and leadership   503

       these theories, either implicitly or explicitly, state that effectiveness is defined by the
       extent to which managers adopt their ‘one best way’. From this perspective, however,
       effectiveness is something of a moving target; the ‘best way’ for Frederick Taylor is
       not the best way for Douglas McGregor or Tom Peters or Peter Senge. Nahavandi
       (2000: 5) made a similar point when commenting that ‘... leadership effectiveness
       depends on the point of view of the person who is evaluating the leader.’ In an
       attempt to cut through the idea that effectiveness is defined by adherence to a particu-
       lar approach or theory, or lies solely in the eye of the beholder, Burnes (1998: 101)
       defined effectiveness as ‘… the ability or power to have a desired effect …’. In terms
       of managerial effectiveness, this means that an effective manager is one who achieves
       what is required of them, whether that be to transform an organisation or merely to
       ensure that services continue to be delivered on time, at the right cost and to the right
       quality. If this is the definition of managerial effectiveness, the next question is: ‘What
       determines managerial effectiveness?’ Are there key attributes, skills or competences
       that managers need to possess in order to ‘have a desired effect’? As the next section
       will show, there are three main perspectives on what makes an effective manager.


Management and leadership
       Regardless of the difficulty in identifying what managers do or how they should do it,
       there has been a long-held belief that the major factor which distinguishes successful
       organisations from their less successful counterparts is the presence of dynamic and
       effective leadership (Jones et al, 2000). However, as Yukl (2002: 5) observes, ‘… there
       is a continuing controversy about the difference between leadership and manage-
       ment.’ For some writers, such as Nahavandi (2000) – see Table 16.1, management
       and leadership are seen as being distinctly different activities. Nahavandi sees the
       process of management as essentially concerned with achieving stability. On the other
       hand, he sees leadership as essentially being concerned with bringing about change.
       Nahavandi (2000: 13) comments that:

        Whereas leaders have long-term and future-oriented perspectives and provide a vision for
        their followers that looks beyond their immediate surroundings, managers have short-term
        perspectives and focus on routine issues within their own immediate departments or groups.

          Bennis and Namus (1985: 21) take this argument further by associating manage-
       ment and leadership with different types of people: ‘… managers are people who do
       things right and leaders are people who do the right thing’. Though it is conceptually
       appealing to separate people into one of two mutually exclusive types, managers or
       leaders, there is little empirical evidence for this view (Yukl, 2002). It is also a view
       that, in a rapidly-changing world, tends to imply that visionary leaders are superior to
       their stick-in-the-mud managerial counterparts. On the other hand, there are many
       writers who, whilst distinguishing between management processes and leadership
       processes (as in Table 16.1), do not assume that leaders and managers are different
       types of people (Bass, 1990; Hickman, 1990; Mintzberg, 1973; Rost, 1991; Yukl,
       2002). Indeed, Vroom and Jago (1988) specifically argue that managers can and do
       possess both managerial and leadership skills, which they swap between depending
       on the situation.
504   Chapter 16 · Management – roles and responsibilities

               Table 16.1 Management v leadership
                Managers                                         Leaders

                Focus on the present                             Focus on the future
                Maintain status quo and stability                Create change
                Implement policies and procedures                Create a culture based on shared values
                Remain aloof to maintain objectivity             Establish an emotional link with followers
                Use the power of their position                  Use personal power

               Source: adapted from Nahavandi (2000)


                 Though the topic of leadership, its definition, promotion and difference from man-
               agement, has dominated the management literature for over 40 years, it still remains
               an elusive concept. Even in the 1950s, when there had been much less research on the
               subject than now, Bennis (1959: 259) commented:

                Always it seems that the concept of leadership eludes us or turns up in another form to
                taunt us again with its slipperiness and complexity. So we have invented a proliferation of
                terms to deal with it ... and still the concept is not sufficiently defined.

                  Now, at the beginning of the third millennium, we are faced with a greater prolifer-
               ation of articles and books on the subject than ever before, yet the topic appears more
               fragmented and confusing than ever. As Thomas (2003: 25) comments in relation to
               the question ‘What is management?’:

                The inquisitive reader seeking an answer to this question will find not only differences but
                complete contradictions and may well be inclined to beat a hasty retreat …

               Nevertheless, it is possible to divide researchers on leadership and management into
               three main groups: those who focus on the personal characteristics and process of
               leadership; those who concentrate on the leader–follower situation; and those who
               attempt to relate leadership and management styles to the overall organisation con-
               text and climate.


          ■ The personal characteristics–trait approach to effective leadership
               Early investigations into leadership tended to concentrate on such factors as personal
               qualities (intelligence, age, experience), or personality traits (extroversion, domi-
               nance). Consequently, regardless of the task or situation, if a person did not possess
               the appropriate personal attributes, then he or she was deemed unlikely to be a good
               manager. The numerous studies of leadership failed, however, to reveal any consistent
               pattern of traits or characteristics related to leadership (Arnold et al, 1998; Gibb,
               1969; Yukl, 1994).
                  In an effort to breathe new life into this approach, attempts were made to view
               leadership as a process, and the focus moved to examining the interaction between
               leaders and followers, and how leaders influence individuals and groups to pursue the
               achievement of a given goal. This view, that leadership behaviour rather than attrib-
               utes may more effectively predict leadership success, has been advanced in a variety of
Management and leadership   505

approaches. Fleishman (1953, 1969) identified two separate classes of behaviour as
important in determining effective leadership:
1 Consideration – the quality of the interpersonal relationship between the leader
  and his or her subordinates, and in particular the degree to which a leader shows
  trust of subordinates, respect for their ideas and consideration for their feelings.
2 Initiating structure – the degree to which leaders define and structure their own
  and their subordinates’ roles towards achieving set goals. It also covers the extent
  to which a leader directs group activities through planning, communication, infor-
  mation, scheduling, trying out new ideas, and praise and criticism.
   Another related dimension of leadership behaviour that received much attention in
the 1950s and 1960s was participation – whether the leader leans towards an auto-
cratic or democratic style of management. As was noted in Chapters 2 and 8, both
the Human Relations school and proponents of Planned change believed that, in the
aftermath of the Second World War, participation and democracy would prove to be
essential components of organisational effectiveness. It was not a coincidence that
those studying leadership and those studying organisational change should develop
similar views on participation and democracy. Much of the work on leadership at this
time was influenced by a series of ground-breaking studies into leadership styles by
Kurt Lewin, Ronald Lippitt and Ralph White (Marrow, 1969). These studied three
styles of leadership – democratic, autocratic and laissez faire, and found that demo-
cratic leadership produced the best results (Lewin, 1999b; Lippitt and White, 1960).
According to Gastil (1994), there are three key elements of democratic leadership:
■   maximising participation and involvement of group members;
■   empowerment;
■   facilitating group decision-making.
In the 1950s and 1960s, this stress on leadership characteristics gave rise to a number
of ‘universal theories’ of effective leader behaviour – which is to say, researchers
began to argue for a ‘one best way’ approach to leadership (see for example Argyris,
1964; Likert, 1967; McGregor, 1960). These theories postulated that the same style
of leadership is optimal in all situations (Yukl, 1994).
   Perhaps the best known and most influential of these ‘universal theories’ is Blake
and Mouton’s (1969, 1985) Managerial Grid – later re-named the Leadership Grid
(Blake and McCanse, 1991). The Grid has two critical dimensions: concern for
people – similar to consideration; and concern for production – similar to initiating
structure. By examining how these two dimensions interact, in both their strong and
weak states, Blake and Mouton identified five different styles of management, which
they labelled as follows:
■   Team management. This arises from a high concern for people and a high concern
    for production. The objectives are to achieve high levels of both performance and
    job satisfaction by gaining subordinates’ willing commitment to achieving their
    assigned tasks.
■   Country club management. This occurs when concern for production is low but
    concern for people is high. The main concern of this approach is to achieve the
    harmony and well-being of the group in question by satisfying people’s social and
    relationship needs.
506   Chapter 16 · Management – roles and responsibilities

               ■   Middle-of-the-road management. This situation comes about where there is moder-
                   ate concern for production and moderate concern for people. Managers who
                   follow this approach tend to have a ‘live and let live’ philosophy and tend to avoid
                   difficult or contentious issues.
               ■   Task management. This can be defined as a high concern for production but a low
                   concern for people. The objective is to achieve high productivity by planning,
                   organising and directing work in such a way that human considerations are kept to
                   a minimum.
               ■   Impoverished management. This ensues from a low concern for both production
                   and people. This form of managerial behaviour centres on exacting the minimum
                   effort from subordinates in order to achieve the required result.
               Though Blake and Mouton (1985) identify these five styles of management, for them
               the most effective is team management, where leaders are both task- and people-ori-
               entated – the so-called ‘high–high’ leader. They also argue that whilst managers have
               a dominant or preferred style of leadership, many managers are capable of switching
               from one style to another or of combining styles if they encounter a situation where
               their preferred style does not work. In a significant departure from other adherents of
               the personal characteristics approach, Blake and Mouton also argue that a person’s
               dominant style is influenced not only by their personal values and personal history
               but by the nature of the organisation in which they are operating, and chance – the
               types of management situations and styles they have encountered in their career.
                  Despite the wide number of studies seeking to test and elaborate the Managerial
               Grid approach, however, the evidence in support of it, or for any of the universal the-
               ories, is limited (Evans, 1970; Filley et al, 1976; Larson et al, 1976; Wagner, 1994;
               Yukl, 1994, 2002). Because of the difficulty of relating leadership traits and behav-
               iours to effectiveness, many writers turned to investigate the nature of the relationship
               between leaders and their subordinates.


          ■ The leader–follower situation approach to effective leadership
               In response to the inability of researchers to make a convincing case for a ‘one best
               way’ approach to leadership, attention began to focus on identifying the situations in
               which leaders were effective. In particular, researchers began to examine how a
               leader’s behaviour varies between subordinates. This leader–follower approach, or
               leader–member exchange as it is sometimes called, is concerned with how the two
               parties develop an interpersonal relationship over time. It focuses on how the leader
               and the follower influence each other and negotiate the subordinate’s role in the
               organisation. The basic premise of the theory is that a leader develops a different rela-
               tionship with each subordinate. These relationships take one of two forms: the leader
               will develop a close and trusting relationship with a small number of people, and a
               much more distant and formal relationship with the rest. In the first type of relation-
               ship, both parties have high expectations of each other. The leader expects loyalty and
               commitment and the follower expects preferment and advancement. In the more dis-
               tant types of relationship, both parties have relatively low expectations. The leader
               expects the subordinate to comply with rules and perform their allocated duties. In
               turn, the subordinate expects to receive the rate for the job and be treated fairly
               (Graen and Cashman, 1975; Yukl, 2002).
Management and leadership   507

   In examining leader–follower relations, Kerr et al (1974) took the two forms of
leadership behaviour identified by Fleishman (1969) – consideration and initiating
structure – and applied these to a framework that included three situational variables
or contingencies:
1 Subordinate considerations – such as the subordinates’ experience and abilities,
  and their expectations of the leader.
2 Superior considerations – in particular, the amount of influence subordinates have
  over the behaviour of their superiors.
3 Task considerations – including factors such as time urgency, amount of physical
  danger, permissible error rate, presence of external stress, degree of autonomy and
  scope, importance and meaningfulness of work, and degree of ambiguity.
Kerr et al (1974) argued that the effectiveness of the two forms of leadership behav-
iour (consideration and initiating structure) in promoting high levels of performance
from subordinates is moderated by the above three situational variables. For example,
if the task to be performed is characterised by time pressure, subordinates will be
more amenable to a higher level of initiating structure (i.e. direction by superiors) and
there will be a stronger relationship between job satisfaction, performance and initiat-
ing structure. Alternatively, when a task is seen as intrinsically very satisfying to a
subordinate, a leadership style with high consideration will not significantly increase
satisfaction or performance. Support for the central premises of Kerr et al’s (1974)
model has been limited. Research by Schriesheim and Murphy (1976) produced
mixed results. There was evidence that high levels of initiating structure did increase
performance in high-pressure situations and reduce it under low levels of pressure.
Different levels of pressure, however, did not appear to impact on subordinates’ satis-
faction with their superiors. Nor, where tasks were viewed as having higher clarity,
were either consideration-based or initiating structure-based styles significantly
related to satisfaction.
   The most influential situational theory of leadership has been Fiedler’s (1967) Least
Preferred Co-worker (LPC) model. Based on a decade of research, Fiedler argued that
leaders have relatively stable personal characteristics that, in turn, leave them with a
particular set of leadership behaviours which they cannot change. Therefore, there is
no point in trying to train or educate managers to adopt different behaviours towards
their subordinates. Instead, both they and their subordinates have to learn to live with
the leader’s behaviour. For Fiedler, the key personal characteristics involved in leader-
ship concern how positively or not the leader views his or her Least Preferred
Co-worker. Fiedler developed a questionnaire to determine a leader’s LPC measure.
The questionnaire is built around a scale of 16 bi-polar adjectives (e.g.
pleasant–unpleasant, distant–close, efficient–inefficient) that attempts to measure
whether a person is ‘task’ or ‘relationship’ orientated. As Arnold et al (1998) note,
there is some dispute about exactly what a leader’s LPC score means and how it
relates to other leadership dimensions such as consideration and structure. In general,
leaders with a high LPC are often seen as being people- or relationship-orientated,
whilst those with a low LPC are seen as being task-orientated. From his work, Fiedler
concluded that the effectiveness of particular leadership traits or behaviours, as meas-
ured by a high or low LPC score, are moderated by the situation in which they are
deployed. Therefore, it is important to match the leader to the situation (Fiedler and
508   Chapter 16 · Management – roles and responsibilities

               Chemers, 1984). Fiedler identified three key aspects of a work situation, which taken
               together, he argued, determined the effectiveness or not of particular leadership char-
               acteristics. In descending order of importance, these are as follows:
               1 The leader–follower relationship – friendliness and loyalty from subordinates
                 increases the leader’s influence over them.
               2 Task structure – the greater the degree of standardisation, detailed instructions and
                 objective measures of performance, the more favourable the situation for the
                 leader.
               3 The leader’s formal position and power – the more discretion and authority the
                 leader has regarding the reward and punishment of subordinates, the more influ-
                 ence he or she will be able to exert.
               By attributing a high or low score to each of these three aspects, Fielder constructed
               eight (i.e. 2 × 2 × 2) types of work situation. He maintained that the most favourable
               situation is where leader–follower relations are good, the task is well-defined and
               highly structured, and the leader has a high level of formal authority. In contrast, the
               least favourable situation is where leader–follower relations are poor, the task struc-
               ture is ill-defined, and the leader has only a low level of formal authority.
                   Although (or perhaps because) it is the most influential and widely-utilised situa-
               tional theory of leadership, it is also the most widely-criticised. The main criticisms
               are that it lacks empirical support, that it fails to explain how particular leadership
               behaviour affects subordinates’ performance, and that the measures used by Fiedler
               are arbitrary and lack any explicit rationale (Ashour, 1973; Shiflett, 1973; Vecchio,
               1983). Fiedler’s model has also been subjected to the same type of criticism as other
               contingency-situational approaches (see Chapter 2). In particular, critics maintain that
               it ignores a manager’s ability to change or influence factors such as task structure to
               favour their style of leadership. In this respect, a number of writers have pointed out
               that Fiedler treats structure, an important component of his model, as a given,
               whereas in many instances, determining and changing organisation and job structures
               is a major component of a manager’s role (O’Brien and Kabanoff, 1981). In any case,
               as the following shows, there are those who believe that managers can and do change
               their leadership behaviours (Vroom and Jago, 1988).


          ■ The contextual approach to effective leadership
               One of the weaknesses of the leadership literature is, as the above demonstrates, that
               it tends to concentrate on the traits of individual managers and their relations with
               subordinates. The assumption, both explicit and implicit, is that effectiveness is an
               attribute of the individual manager, moderated by the leader–subordinate situation; a
               good manager in one organisation will be a good manager in all organisations. Yet, as
               many writers have observed, a manager’s effectiveness may be determined as much by
               the nature of the organisation in which he or she operates as by the qualities of the
               individual manager (see Burnes, 1991; Griffin, 2002; Hales, 1986; Nahavandi, 2000;
               Sjöstrand, 1997).
                  It is out of and in response to such observations that the contextual approach to
               leadership developed. This approach is a variant of the leader–follower approach to
               leadership; however, instead of concentrating on leadership behaviour, it focuses on
Management and leadership   509

leadership style, and instead of the narrow leader–follower situation, it focuses on the
overall organisation context and climate. In addition, it is the only one of the three
approaches to leadership that incorporates change as a variable. One of the most
influential contingency approaches to leadership was developed by Vroom and Yetton
(1973). This was later extended by Vroom and Jago (1988). In contrast to Fielder,
this approach suggests that leaders can and do change their behaviour from situation
to situation. The theory identifies five styles of leader decision-making, ranging from
the most autocratic to the most democratic. To complement these, Vroom and Jago
(1988) also identified some key features of problem situations that leaders have to
take into account, such as the need to resolve conflict or achieve goal congruence. By
combining leadership styles with problem situations, Vroom and Jago developed a
computer package to help managers to identify how suitable or not their style is for
particular situations. Unfortunately, the package has proved very complex to use,
which has limited its efficacy. Nevertheless, Vroom and Jago have expressed the hope
that knowledge of its general principles may be sufficient for most situations. To this
end, as Arnold et al (1998) note, Vroom and Jago’s model has been used to provide
some general ‘rules of thumb’ for leaders, including advice such as:
■   Where subordinates’ commitment is important, a more participative style of leader-
    ship is better.
■   Where subordinates do not share the organisation’s goals, group decision-making
    should be avoided.
However, advice couched in such general terms is usually too general to be of much
use. Even if they were not so general, these rules of thumb are still subject to being
overridden by factors such as time constraints, organisational policies and the ability
and preferences of managers and subordinates. This is perhaps why other contextual
approaches have also been put forward.
   One of the most interesting and influential of these was developed not by a social
scientist but by a political scientist, James MacGregor Burns, in his 1978 Pulitzer
Prize winning book, Leadership. Burns’ book combines biography, history and politi-
cal theory to produce a major study of the nature of leadership. Primarily, he
identifies two basic organisation states or contexts, convergent and divergent; and
two matching management-leadership styles, transactional management and transfor-
mational leadership. Most writers tend to use the terms management and leadership
interchangeably. Burns was the first to draw a distinction between what he called
transactional management (which focuses on maintaining the status quo) and trans-
formational leadership (which focuses on overthrowing the status quo). However,
Burns was primarily concerned with management and leadership in the political con-
text. Bass (1985, 1995) refined Burns’ concepts and applied them to organisations.
   A convergent state occurs when an organisation is operating under stable condi-
tions; where there are established and accepted goals and a predictable external and
internal environment (Case Study 10, PoliceCo, is an example of an organisation
operating in a convergent state). The most appropriate style of management in such a
situation, it is contended, is transactional. The concept of transactional management
stems from the notion that the manager–subordinate relationship is based on a trans-
action between the two, whereby managers exchange rewards for subordinates’
performance. Transactional managers focus on task completion, goal clarification and
510   Chapter 16 · Management – roles and responsibilities

               optimising the performance of the organisation through incremental changes within
               the confines of existing policy, structures and practices – basically, they seek to work
               within and maintain the status quo (see Table 16.2). Transactional managers motivate
               followers to perform the tasks expected of them by appealing to their self-interest
               through the use of incentives and rewards such as pay and promotion.
                  A divergent state occurs when environmental changes challenge the efficiency and
               appropriateness of an organisation’s established goals, structures and ways of work-
               ing (Case Study 3, Oticon, is an example of an organisation operating in a divergent
               state). The most appropriate style of leadership in this situation, it is argued, is trans-
               formational. Transformational leaders are often portrayed as charismatic or visionary
               individuals who seek to overturn the status quo and bring about radical change (see
               Table 16.2). Transformational leaders use the force of their personality to motivate
               followers to identify with the leader’s vision and to sacrifice their self-interest in
               favour of that of the group or organisation. Transformational leaders seek to gain the
               trust and emotional commitment of their followers by appealing to higher moral and
               ethical values.

               Table 16.2 Management v leadership
                                                    Transactional management              Transformational leadership

                Creating the agenda                 Planning and budgeting:               Establishing direction: developing
                                                    developing a detailed plan of how     a vision that describes a future
                                                    to achieve the results.               state along with a strategy for
                                                                                          getting there.

                People                              Organising and staffing: which        Aligning people: a major
                                                    individual best fits each job and     communication challenge in
                                                    what part of the plan fits            getting people to understand and
                                                    each individual.                      believe the vision.

                Execution                           Controlling and problem-solving:      Motivating and inspiring:
                                                    monitoring results, identifying       satisfying basic human needs
                                                    deviations from the plan and          for achievement, belonging,
                                                    solving the problems.                 recognition, self-esteem, a sense
                                                                                          of control.

                Outcomes                            Produces a degree of predictability   Produces changes – often to a
                                                    and order.                            dramatic degree.

               Source: adapted from Kotter (1990)



               The compatibility between organisational state and leadership style is seen as essential
               for successful leadership. Where the organisation is required to face new challenges
               and develop new ways of adapting to these for the sake of survival, then a purely
               transactional approach would be counter-productive – the phrase ‘fiddling while
               Rome burns’ springs to mind. However, transformational leadership is just as likely
               to be counter-productive during periods where maintenance of the current opera-
               tional systems would be most appropriate.
                  Since its publication in 1978, Burns’ work has been taken up and cited by a wide
               range of organisation theorists who subscribe to the view that managers need to, and
Management and leadership    511

can, match or adapt their style and approach to the circumstances of the organisation
in which they operate (Arnold et al, 1998; Bass, 1985, 1995; Beatty and Lee, 1992;
Burnes and James, 1995; French and Bell, 1995; Gibbons, 1992; Yukl, 1994). As
argued in Chapter 3, however, the late 1970s and early 1980s, the period when Burns’
book was published, was a time of crisis for many Western organisations. It was a
period when organisations and entire industries and sectors were going through mas-
sive changes. Not surprisingly, therefore, there was a tendency for those in the
leadership field to focus on Transformational leadership, and downplay or even deni-
grate Transactional management (Yukl, 2002). However, Bass (1985, 1995), whilst
seeking to develop the concept of the Transformational leader, argued that
Transformational leadership and Transactional management are distinct but not mutu-
ally exclusive processes. Transformational leaders may be more effective at motivating
their followers but, Bass maintains, effective leaders need to have both transforma-
tional and transactional tools in their armouries. In situations where radical change is
required, however, as Alimo-Metcalfe and Alban-Metcalfe (2000: 27) found when
studying leadership in the UK National Health Service (NHS), ‘… the transactional
competencies of managers, while crucial, are simply not sufficient on their own.’ The
argument from Bass (1985, 1995) and Alimo-Metcalfe and Alban-Metcalfe (2000) is
that someone with purely transactional skills would struggle to deal effectively with
the many changes that are an ever-present part of organisational life. On the other
hand, someone with purely transformational skills would not be able to cope with the
day-to-day, routine activities that need to be accomplished even where radical change
is taking place. The key issue, therefore, is to identify the optimum balance of transac-
tional-transformational skills in any given circumstances.
    Kanter (1989) offers a different perspective on the balance issue by maintaining
that good leaders need to incorporate both transactional and transformational char-
acteristics. She argues that archetypal images of managers tend to derive from two
basic models: the ‘corpocrat’ (i.e. the transactional manager) and the ‘cowboy’ (i.e.
the transformational leader). The former is the corporate bureaucrat, the conservative
resource-preserver who lives by, and controls the organisation through, established
and detailed rules. The latter, the ‘cowboy’, is a maverick who challenges the estab-
lished order, who wants to seize every opportunity, question every rule and who
motivates and controls through personal loyalty. However, instead of seeking to relate
the balance of these two sets of characteristics to their appropriate organisational set-
ting, Kanter (1989: 361) argues that, in future, organisations will require managers
who combine the best of both the corpocrat and cowboy:

 Without the bold impulses of the take-action entrepreneurs and their constant questioning
 of the rules, we would miss one of the most potent sources of business revitalization and
 development. But without the discipline and coordination of conventional management, we
 could find waste instead of growth, unnecessary risk instead of revitalization. … Our new
 heroic model [of leadership] should be the athlete who can manage the amazing feat of
 doing more with less, who can juggle the need to both conserve resources and pursue
 growth opportunities. This new kind of business hero avoids the excesses of both the corpo-
 crat and the cowboy. … the business athlete has the strength to balance somewhere in the
 middle, taking the best of the corpocrat’s discipline and the cowboy’s entrepreneurial zeal.
512   Chapter 16 · Management – roles and responsibilities


                 Exhibit 16.3         Characteristics of the business hero

                  Skills and sensibilities of the business athlete
                  1. Learn to operate without the might of the hierarchy.
                  2. Compete in a way that enhances rather than undercuts cooperation.
                  3. Operate with the highest ethical standards.
                  4. Have a dose of humility.
                  5. Develop a process focus.
                  6. Be multifaceted and ambidextrous.
                  7. Gain satisfaction from results.
                  Source: Kanter 1989: 361–4




               As Exhibit 16.3 shows, Kanter maintains that there are seven skills and sensibilities
               that this ‘new heroic’ type of leader needs to possess. Kanter’s model avoids the issue
               of how to determine the optimum balance of transactional and transformational skills
               in a given set of circumstances. Instead, she argues that there is a basic set of transac-
               tional and transformational skills or characteristics that all effective leaders need to
               possess and which can be applied successfully in any situation. In effect, she is
               attempting to turn the leadership debate full circle and make the case for a universal –
               one best way – approach to leadership. Her argument, as mentioned in Chapter 3, is
               basically that all organisations operate in the same turbulent context, face the same
               challenges and, consequently, require the same style of management.
                  Though there are different perspectives on the contextual approach to leadership,
               taken as a whole, the approach does not seek to invalidate either the characteristics or
               situational approaches; rather it tries to incorporate them within and link them to the
               wider organisational context. It explicitly recognises that a manager’s personal charac-
               teristics are an important component of leadership style, and consequently,
               effectiveness. In addition, it acknowledges the crucial importance not just of the rela-
               tionship between leaders and followers, but also of the overall context within which
               this takes place (Yukl, 2002). In particular, as Gibbons (1992: 5) remarked, ‘organiza-
               tional survival and success are dependent on the ability of leader–follower relations to
               resolve the problems of internal integration and external adaptation’. Many writers
               argue, however, that (despite its attractiveness) there is little evidence to support the
               case for the contextual approach to leadership or to show that is a more suitable
               approach to running organisations than either the personal characteristics or leader–fol-
               lower models (Arnold et al, 1998; Hinkin and Tracey, 1999; Yukl, 2002).
                  Just as a review of the role of managers produced a confusing and conflicting pic-
               ture, so too does an examination of the three approaches to leadership. Nevertheless,
               the idea of considering context and style together does fit in, partly at least, with the
               argument developed in the previous parts of this book: namely that there is a need to
               match the approach to change to the context of the organisation. That argument was
               developed further to include the possibility that managers could reverse this process
               and match the organisation’s context to their preferred style of working. However,
Management and leadership    513

one major factor needs to be remembered when considering approaches to manage-
ment: most of the research and writing on leadership is set in Western, and
particularly American, organisations, and addresses their concerns (Alimo-Metcalfe
and Alban-Metcalfe, 2000). Also, the majority of research studies have tended to
focus on male managers and their characteristics (Maddock, 1999; Thomas, 2003).
Therefore, before moving on, we need to return to the issue of diversity raised earlier
when discussing globalisation.
   To recap, Jones et al (2000: 166–7) explain that:

 Diversity is dissimilarities – differences – among people due to age, gender, race, ethnicity,
 religion, sexual orientation, socioeconomic background, and capabilities/disabilities …

Diversity is not just about differences ‘among people’, however, it is also about differ-
ences between people. According to Ricks (1999: 4):

 Cultural differences are the most significant and troublesome variables encountered by the
 multinational company.

   In terms of differences among people, the posited differences in managerial style
between men and women have attracted a great deal of attention (Loden, 1986;
Macdonald et al, 1999; Maddock, 1999; Mullins, 2002; Thomas, 2003). Davies
(1995) for example, found significant differences between masculine and feminine
approaches to management. In particular, she found that the masculine approach
valued self-esteem, abstract thinking, control and loyalty to superiors. The feminine
approach, on the other hand, valued selflessness, contextual thinking, experience and
accommodation. It is findings like these that have led writers such as Alimo-Metcalfe
(1995a, 1995b) to argue that women prefer to use a more transformational style of
leadership whilst men tend to be more transactionally-orientated. Differences in man-
agement style are not just gender-related, however, they can also come about due to
age, ethnicity, religion, or simple differences in personality (Deresky, 2000; Jones et
al, 2000). To complicate the picture, these preferences are not stable between coun-
tries and cultures. Much of the work on gender and management has tended to focus
on the USA and Europe. It is not clear, however, that men and women managers in,
for example, Japan and China have the same style preferences as their Western coun-
terparts. Indeed, as Trompenaars’ (1993) ten-year study of management in 28
countries covering 47 national cultures showed, the differences between countries is
as great as the differences within. His work showed, for example, that managers as a
whole, male and female, in Japan and China tended to fit the characteristics attrib-
uted to women managers in the West. For example, they favoured relationships as
against rules, they promoted interpersonal trust as against contracts, and they tended
to avoid rather than welcome confrontation. This, of course, confirms, Hofstede’s
(1980, 1990) earlier work on cultural differences, which showed that organisational
culture, and the values and behaviours of managers, do vary from country to country.
Arnold et al (1998) maintain that there is also sufficient evidence to show that leader
behaviour is interpreted differently in different cultures. Consequently, managerial
behaviour that might be considered supportive in one society may be seen as threaten-
ing in another. Therefore, we have to be very wary of taking work on managerial
514   Chapter 16 · Management – roles and responsibilities

               styles and behaviour developed in one setting, and assuming it applies to all organisa-
               tions and all societies.
                  The implications of these findings for management and leadership are significant.
               Firstly, there are no universal rules for what is an effective manager or leader. An
               effective manager in one country, company or situation may be less so in others.
               Secondly, therefore, effectiveness is situation-dependent. In judging what is or is not
               an effective approach, managers and leaders need to take into account the nature of
               the organisation and the diversity of its workforce. Lastly, in training and developing
               managers, there is a need to recognise that whilst there are some generic skills, com-
               petences and behaviours, there will also be a need to tailor development programmes
               to the person and their situation. The issue of management development will be
               examined in more detail later. Before doing so, however, we will first examine the
               behaviour of the managers in the ten case studies in Part 3. By establishing whether
               their approach was transactional or transformational and the context convergent or
               divergent, it becomes possible to judge not only the appropriateness of their behav-
               iour in the situation in which they were operating, but also the usefulness of the
               contextual approach to leadership.


Management and leadership in action
               If we examine the case studies in Part 3, we find that managers and the context
               within which they operated varied enormously. Merely analysing what managers did
               in each situation, interesting though it would undoubtedly prove, is likely to generate
               more heat than light. However, using the transactional–transformational and
               convergent–divergent categorisations discussed above allows a clearer picture to
               emerge. Taking the case studies in order:

               The music industry
               For most of the last 50 years, the music industry has operated under a relatively
               stable set of conditions: artists made music, the big labels recorded and distributed it,
               and the consumers paid for it. The big record labels recruited the artists and con-
               trolled them ruthlessly, often dropping them the minute sales dipped, and took the
               lion’s share of the revenues. It was often the case that artists could earn big money for
               the labels and end up penniless themselves. Therefore, the industry existed in a con-
               vergent state and was managed in a transactional manner. The Internet, however,
               with the aid of Shawn Fanning, changed all that. Consumers are finding that they do
               not have to pay for their favourite records; they can download them free from the
               Internet. The power of the big labels is dependent on their controlling distribution
               and collecting the sales revenues. Therefore, the industry is entering unknown terri-
               tory. It is now in a divergent state; the old rules no longer apply, but the new ones
               have not yet emerged. In such a situation, the key players – the labels – have two
               choices: they can either try to re-establish their control by fighting Internet piracy, or
               they can embrace the Internet and seek new and more innovative ways of running the
               industry. At the moment, they have chosen the former, but this seems destined to fail.
               No one has yet found a way of controlling the Internet, and if they did, a new Shawn
               Fanning would come along and find a way round it. Consequently, though the record
Management and leadership in action   515

labels have chosen to tackle a divergent context by continuing with their transactional
approach to management, it seems unlikely to succeed.

Marconi
As GEC, Marconi was a company which had been very successful. When George
Simpson took over, however, there was great concern by the big, city investors that it
had missed out on the Internet/telecoms boom. Arnold Weinstock, in the years lead-
ing up to his retirement, had also recognised the need for change but had pursued this
through joint ventures. Under Weinstock, GEC operated in a mainly convergent con-
text and was managed in a transactional manner. When Simpson took over, he
decided to pursue transformational change through buying and selling companies. In
effect, he wanted to exchange those GEC companies who were operating in the old
economy, the majority of them, for ones operating in the new economy. This he did at
great expense. Unfortunately, the strategy failed and the company, now re-named
Marconi, went bust. When a person who has dominated a company for over 30 years
retires, a period of change and uncertainty will follow. If the retirement coincides with
the emergence of major new technologies, the level of uncertainty will be consider-
able. Therefore, George Simpson took over GEC at a time when it was operating in a
divergent context. He made the assumption, as did the people who controlled the
majority of the company’s shares, that it needed to be transformed. His transforma-
tional style of management was a far cry from that advocated by Kotter (1990),
however, as shown in Table 16.2. He did not attempt to motivate and inspire GEC’s
staff by the power of his vision. Instead, he chose to sell the companies that employed
them. As transformational leadership goes, it appeared to be a very uncreative and
mechanical example. It also proved to be spectacularly unsuccessful.

Oticon
This was a company that was being left behind as the rules of the game in its industry
were being changed by technological advances. In effect, it was a company operating
in an increasingly divergent context but which was run on transactional lines. The
company was transformed by an inspired Chief Executive, Lars Kolind. He was an
archetypical transformational leader who, through his vision and ability to inspire
and motivate others, transformed Oticon. However, it should be noted that, for the
first two years of his appointment, he operated within the same transactional mould
as his predecessors. It was only then that he recognised the limitations of continuing
to attempt to improve incrementally an organisation that was out of step with its
environment and competitors. He did not attempt to sell the company or acquire
other companies. Instead, he changed the internal organisation of the company, not to
align it with the external environment, but in an attempt to change that as well, by
changing the rules of the game in his industry. Kolind’s transformational leadership,
especially his vision of a new Oticon and his ability to inspire others, was clearly
appropriate to the divergent needs of the company.

The PPC
For most of its life, the PPC was a company operating in a convergent context and
managed in a transactional fashion. The decision to privatise the PPC and to turn it
into a commercial concern changed all that. The PPC needed to be transformed both
516   Chapter 16 · Management – roles and responsibilities

               structurally and culturally to adapt to its new environment and strategic objectives.
               The privatisation of the PPC tended to focus on the structural aspects, however, and
               failed to address effectively the cultural dimensions of the change from a public to a
               private company. It appears to be a classic case of a situation requiring transforma-
               tional leadership, tackled by managers who could rearrange the organisation’s
               structure but did not know how to begin winning over and inspiring the human side of
               the organisation. This difficulty was compounded by the fact that staff were hostile to
               and suspicious of the changes. Therefore, like Marconi, it was a case where supposedly
               transformational leadership appeared to lack the creative skills necessary to transform
               the organisation’s culture to match the changes they made to its structure. Whether the
               outcome will be more successful than in Marconi’s case, only time will tell.

               Volvo
               Though there have been considerable changes at Volvo, it is not easy to place either the
               organisation or its leadership on the convergent–divergent, transactional–transformational
               scale. For example, in the early 1970s, Volvo diverged from the expectations of Swedish
               society in using assembly lines, but was very much convergent with the rest of the car
               industry. Similarly, though Volvo transformed the way it assembled cars and made other
               significant structural changes, it does not appear to have reinvented itself in the way that,
               for example, Honda or Toyota did. However, Volvo has transformed its production meth-
               ods, and indeed the ethos of the company, but it has been a very slow transformation –
               very much a ‘Long March’ rather than a ‘Bold Stroke’ approach. For much of this period,
               the company was led by Pehr Gyllenhammar, who was certainly a visionary when it came
               to creating a human-centred approach to car assembly. Unlike Japanese car companies,
               however, he did not try to rewrite the rules for the rest of the industry, though he did see
               the marketing potential of his approach to assembly. Nor, as its sale to Ford showed, did
               this new approach transform Volvo’s fortunes. The reality of the car industry is that the
               small players, like Volvo, find it increasingly difficult to generate the vast amounts of
               money necessary to launch new models. Nevertheless, the Volvo approach to assembly is
               firmly embedded in the company and it will be interesting to see if Ford attempts to
               change it.

               XYZ Construction
               This was a company that had been run along transactional lines by an authoritarian
               figure for a number of years. When he retired, its parent company decided his man-
               agement style was no longer appropriate for a company operating in an industry that
               was trying to develop partnerships between customers and suppliers. In effect, it
               decided that a transactional approach was no longer appropriate in a situation where
               the construction industry was beginning to move away, diverge, from its past prac-
               tices and behaviours. XYZ’s new Managing Director was charged with the task of
               creating a more teamwork-based organisation which could develop effective partner-
               ships with its customers, thus transforming the company. This is exactly what he did.
               Over a period of four years, through a series of often small-scale initiatives, he
               changed the management approach in the company and encouraged a more creative
               and teamwork-based approach to internal and external relationships. This culminated
               with the development of the new organisation structure which formalised the new,
               more cooperative and creative way of working.
Management and leadership in action   517

GK Printers
The company can be characterised as one that was out of step with – diverging from
– its environment. The Managing Director appeared to operate in a transactional
mode, as did most other people in the organisation. He and they were aware, how-
ever, that the company could not survive if it persisted with the old ways of working.
This was not a company where a new Managing Director with a transformational,
style of management was appointed. Rather it was an emergent process where, on an
issue-by-issue basis, both the company and the Managing Director were gradually,
and not always willingly, transformed. Though the initial changes appeared to have
elements of the transformational approach about them, it was only later, when the
organisation came to tackle internal relationships and managerial behaviour, that a
more genuinely transformational approach to the company began to emerge.

Rover–TRW
This was very much a case of operational transformation that was not matched by
significant changes at more senior levels in either organisation. Undoubtedly, the way
that the TRW managers at Frankley established and continuously improved the
assembly operation, and the way they developed a new working relationship with
Rover’s assembly line personnel, was transformational. The behaviour of senior man-
agers in both companies appeared to be very much fixed in a transactional and
antagonistic mode, however, in part at least because the overall climate was more
convergent than divergent. Therefore, this showed that, even within a predominantly
convergent and transactional approach to management, there are occasions where
transformational leadership is required to enable parts of an organisation to respond
effectively to new challenges.

Speedy Stationers
In this case, the company was trying to develop a new business area which needed a
new approach. The way the new business area needed to operate was divergent from
the existing norms in both Speedy and its customers. It could not be run in the trans-
actional way in which other parts of the business operated. Speedy eventually chose
to isolate the new business from its existing activities. This allowed it to pursue a
transformational approach to the new business, whilst allowing its existing business,
which was operating in a more convergent climate, to be managed as before. It also
enabled it to limit the transformation of external relationships to the new business
customers, thereby allowing the different parts of their business to adopt their own
preferred style of management.

PoliceCo
This was a case where the organisation operated in a predominately convergent state
and was managed in a transactional fashion. Though PoliceCo was required to out-
source parts of its operation, this was treated in a routine fashion and managed in a
transactional manner. The pressure to outsource did not undermine or in any way
appear to raise questions about the appropriateness of the convergent context in
which PoliceCo existed. Therefore, this was an example where the management felt
no need to reassess how it operated or whether the organisation needed to change
fundamentally. The decision to embark on outsourcing was handed down from gov-
ernment as a bureaucratic edict that PoliceCo responded to in a like manner.
518   Chapter 16 · Management – roles and responsibilities

               To summarise the evidence from the ten case studies, these show a very diverse range
               of approaches, situations and outcomes. They also show the limitations of attempting
               to apply simple definitions to complex situations. The categorisation of leadership
               types and organisational states are useful in situations where a clear and relatively
               unambiguous picture of events is possible, such as in the case of Oticon, the PPC and
               PoliceCo. In many of the cases, however – Volvo, GK Printers and Rover–TRW – the
               picture is less clear. Elements of divergence exist, but these appear to be limited to cer-
               tain areas of their environment or to change over time. Because of this, managers can
               be required to exhibit both transactional and transformational qualities either at the
               same time or in turn. Certainly, in the case of XYZ, for example, even though the
               new Managing Director was attempting to transform the company, he still had to
               keep it working effectively on a day-to-day basis in an industry that was still predom-
               inantly transactional and with a workforce that was used to an authoritarian style of
               management. As the cases of the PPC and the Music Industry showed, even when
               there are strong pressures and reasons for adopting a new style of management, this
               does not always happen. Also, as was illustrated at GK, even where it does take place,
               it can be slow and painful to achieve. Nor, as was seen in PoliceCo, is it always
               appropriate to adopt a transformational style, even where significant changes are
               occurring. In addition, as the PPC’s attempts to maintain its dominant market posi-
               tion showed, managers sometimes seek to influence their environment to limit the
               need for internal changes and to bring them more into line with their preferred style
               of management.
                  Though the evidence from the case studies fits in with the general literature on
               managers’ activities, which sees these as fragmented, lacking in consistency and reac-
               tive, it gives less support to those leadership theorists who see managers and leaders
               having a preferred approach which is difficult to change. The picture that emerges
               from the case studies is one where effective managers are required to possess and
               utilise a wide range of skills and attributes depending upon the situation and context.
               Effective managers must be capable, often at the same time, of being both transac-
               tional and transformational, given that the environmental pressures and other
               constraints do not appear to affect all parts of an organisation in the same manner
               nor at the same time. In particular, as Thompson (1967) remarked in relation to
               Contingency Theory (see Chapter 2), some organisations do at least seem adept at
               sealing off the productive cores of their organisations from environmental uncertainty
               whilst other functions are more directly affected. The result is that managers can be
               required to adopt distinct approaches towards managing different parts of the same
               organisation. Despite what the contextual approach to leadership maintains regarding
               the ability of managers to change their leadership style, this ‘Jekyll and Hyde’ view of
               management raises important questions about how managers can be prepared and
               developed to cope with a wide variety of situations. These include ones where they
               might have to maintain some parts of their organisation on a transactional basis,
               whilst rebuilding other parts in a transformational style and, at the same time, be
               attempting to influence constraints either to prevent, reduce or even promote the need
               for transformational change. In order to address this question, the next part of this
               chapter will discuss management development.
Management development    519


Management development

    ■ Learning and flexibility
       Like the literature on management and leadership, the case studies give support for the
       notion that different situations require different approaches to change. They also show
       that managers are, sometimes at least, able to change their style of management or lead-
       ership, and even exhibit different styles to different parts of their organisations at the
       same time. This is consistent with the arguments in Chapters 14 and 15 that managers
       can and do adopt both the Planned and Emergent approaches to change management
       either alternately or simultaneously as the situation requires. In addition, the case stud-
       ies show that managers, not necessarily by conscious design, create situations where the
       context in which their organisations operate is changed to suit their preferred or exist-
       ing approach to both management and change. As argued in Chapters 14 and 15,
       changing the situational context can be very important; yet in terms of leadership roles
       and managerial expectations, one of the main findings from the case studies is the
       apparent ability of some managers not only to adapt their style to the particular situa-
       tion, but also to adopt transactional and transformational approaches at the same time.
       The case studies also show, however, that other managers have great difficulty in chang-
       ing their leadership approach or influencing their circumstances.
          In part at least, the argument that there are managers who can change their style of
       leadership runs counter to some of the literature on managerial learning discussed in
       Chapter 9. Miller (1993: 119) argued that as they gain experience, managers ‘form
       quite definite opinions of what works and why’. This view was supported by earlier
       work from Nystrom and Starbuck (1984) who maintained that managers interpret
       the world through their own perceptions and expectations, which are built up over
       time. Yet, as the Oticon case study illustrated, some managers do seem capable under
       certain conditions – especially when faced with a crisis – of restructuring their mental
       models of how the world is and how they should respond. In Chapter 14, the con-
       cepts of Cognitive Dissonance, Depth of Intervention and the Psychological Contract
       were used to explain why it was that people could, in crisis situations, change deeply-
       held attitudes very quickly. This ‘crisis mode’ only partly helps to explain, however,
       how some managers, when faced with change situations, appear capable of switching
       from a transactional approach to a transformational one as the circumstances
       demand or, indeed, become capable of adopting both at the same time.
          The work of Mintzberg (1976) offers some clues as to how managers might accom-
       plish this mental juggling act. In studying brain functions and successful managers, he
       concluded that effective and proficient managers are ‘whole thinkers’ – they use both
       the left and the right hemispheres of their brain. That is, they can combine a
       rational–analytical approach to management with creativity and lateral thinking.
       Mintzberg argued, however, that, in general, Western managers tend to think on the
       left side of their brain – they tend to adopt a rational–analytical approach.
       Interestingly, this is compatible not only with a transactional approach to manage-
       ment, but also with a rational–planned approach to strategy and the directive
       approach to change.
520   Chapter 16 · Management – roles and responsibilities

                  In contrast, Nonaka (1991) argued that one of the great strengths of Japanese com-
               panies is their belief that creating new knowledge depends more on tapping the tacit
               and often subjective insights and intuitions of all their employees, whether managers
               or not. He maintains that traditional Western management, on the other hand, sees
               organisations as information processing machines with the only useful knowledge
               being formal, scientific, quantifiable and rational. He contends that such a perspective
               limits the creation of new knowledge which, in turn, makes it difficult for organisa-
               tions to respond to changing and new situations. Nonaka argues that new knowledge
               always begins with the individual. One of the main foundations of the success of
               Japanese companies is, he states, managers’ ability to gather and combine the insights
               and intuitions of individual employees and use them for the benefit of the entire
               organisation. The tendency of Japanese managers to use softer, more creative
               approaches and to involve staff in decision-making was also noted in Chapters 3, 6
               and 7 when discussing approaches to management and strategy.
                  The case studies, and the success of many Western firms, particularly those con-
               cerned with creative processes (such as software development) and the performing
               arts (such as film-making), show that it is not inevitable that Western managers
               should operate solely in a rational–analytical mode. Nevertheless, as Hofstede’s
               (1980, 1990) and Trompenaars’ (1993) work on national cultures reveals, there is a
               predisposition in Western societies towards more rational–analytical ways of work-
               ing, whereas in Japan and China managers tend to use more subjective
               decision-making processes. Also, as Miller (1993) points out, a manager’s view of the
               world and what works is shaped by his or her previous work experience. If this has
               been in organisations that have operated on traditional Western principles, which are
               structured in a Classical way and give credence only to formal and scientific knowl-
               edge, then they undoubtedly will tend to operate on the left side of the brain. This
               does not mean that such managers cannot develop or access the right side of their
               brain, but it does mean it is unlikely to come about accidentally or without strong
               encouragement from the organisations in which they work. To this end, many organi-
               sations are seeking to construct management development programmes designed to
               broaden the outlook and develop the creative, inductive and questioning side of their
               managers’ personalities (Harrison, R, 2002). However, this is unlikely to be achieved
               through traditional management development programmes, which offer standard
               packages delivered in classroom situations, because of their low success rate (Burnes,
               2003; Lessem, 1998; Mullins, 2002; Mumford et al, 2000). If management develop-
               ment programmes are to be effective, in future, as Harrison, R (2002) contends on
               behalf of the UK’s Chartered Institute of Training and Development (CIPD), they will
               have to be tailored to both the needs of the individual manager and the strategic
               objectives of their organisation.
                  In     respect    of    developing     managers’        creativity,  Kirton’s     (1989)
               Adaptation–Innovation theory, and subsequent work by Talbot (1993, 1997), provide
               useful insights. Kirton maintains that not only do people exhibit different degrees of
               creativity, but that they also express their creativity in different ways, along a spectrum
               which runs from adaptors to innovators. Those who tend towards the adaptor end of
               the spectrum prefer to work within the existing system to improve things. Adaptors are
               efficient, tend to conform to existing norms and like to deal with only a few ideas at a
               time. Innovators tend to ignore or challenge the system and to come up with radical
Management development        521

proposals for change. Figure 16.1 shows how Kirton’s ideas relate to transactional
management and transformational leadership. As can be seen, transactional managers
tend to have lower levels of creativity because they are dealing with changes at the
group level, whereas transformational leaders need higher levels of creativity because
they are involved in transformational activities at the organisation level.
   However, as Figure 16.1 also shows, even within the transformational dimension of
leadership, there will be situations which require a more adaptive approach, such as
structural rather than cultural change. Similarly, transactional managers may be faced
with situations where more innovative than adaptive solutions are required, such as
when dealing with behavioural issues as averse to technical ones. Regardless of their
levels of creativity, some managers may find it easier than others to switch between
innovative and adaptive behaviour. There may also be many managers who can exhibit
varying levels of creativity as the situation demands. This may be the reason why some
people, as demonstrated by our case studies and the leadership literature, can change
their style of leadership or even adopt different styles at the same time. The story does
not end there. Talbot (1997) demonstrated that, regardless of the level of creativity a
person possesses or where they are located on the adaptor–innovator spectrum, there
are proven tools and techniques for increasing their level of creativity and flexibility.
By so doing, transactional managers may find it easier to operate in a more transfor-
mational and innovative mode, or move between both as circumstances necessitate.
Talbot (1993) also points out, though, that such tools and techniques can only over-
come barriers to creativity that lie within the individual. Other barriers, he argues,
such as the attitudes and behaviours of superiors and colleagues, and the way the
organisation operates, can also block individual creativity. Therefore, in management
development, as with so many other aspects of organisational life, we cannot consider
the individual in isolation from the rest of the organisation.




                                      Transformational leadership
                                       Creativity – relatively high
            Q1                                                                             Q2

              Organisation-wide culture change             Large-scale structural change


         Innovation                                                                    Adaptation




                 Changes to group behaviour                   Changes to group tasks

            Q4                                                                             Q3
                                       Creativity – relatively low
                                      Transactional management



Figure 16.1 Leadership, management and change
522   Chapter 16 · Management – roles and responsibilities


          ■ The management development process
               Under different names, management training and education has been around since the
               Industrial Revolution. In the nineteenth century, it tended to be geared towards giving
               managers specific skills such as engineering, production control, etc., either through
               on-the-job training or self-help societies. In the twentieth century, more and more,
               employers took on the job of specifying and providing formal management training,
               but it still tended to be geared towards giving managers specific skills. Over the last
               20 years or so, there has been a significant change in emphasis. Management develop-
               ment programmes are increasingly seeking to change managerial behaviour, especially
               to promote leadership and creativity, and to align managers’ behaviour with the
               longer-term strategic objectives of their organisations and with society’s wider social
               and ethical considerations (Harrison, R, 2002). Though management development is
               big business in all advanced countries, there is no universally-agreed definition of
               what it is. The following quotations give a flavour of the range of definitions on offer:

                … a conscious and systematic decision-action process to control the development of manage-
                rial resources in the organisation for the achievement of organisational goals and strategies.
                                                                                          (Ashton et al, 1975: 5)

                ... that function which from deep understanding of business goals and organisational
                requirements, undertakes: (a) to forecast needs, skill mixes and profiles for many positions
                and levels; (b) to design and recommend the professional, career and personal development
                programmes necessary to ensure competence; (c) to move from the concept of ‘management’
                to the concept of ‘managing’.                                           (Beckhard, 1985: 22)

                ... an attempt to improve managerial effectiveness through a planned and deliberate learning
                process.                                                    (Quoted in Mumford, 1987: 29)

                Management development is concerned not only with improving the effectiveness of individ-
                ual managers but also with an improvement in management performance as a whole and
                organisational effectiveness.                                       Mullins (2002: 845)

                  In an age where organisations are often required to change rapidly and radically,
               management education and development is taken seriously in most advanced coun-
               tries and entry into a managerial job often requires formal, university-level
               qualifications (Arnold et al, 1998; Jones et al, 2000; Lippitt, 1982; Marsh, 1986;
               Morgan, 1988; Mullins, 2002; Pearson, 1987; Storey, 1989). The nature of manage-
               ment development varies between countries, however (Keuning, 1998). In Japan, for
               example, it tends to be a very competitive process which begins by recruiting elite
               cohorts who have usually studied law or engineering at a top university. In Germany,
               there is a greater emphasis on a formal apprenticeship system which develops man-
               agers through a career path that often involves the attainment of higher degrees.
               France, like Japan, tends to be very elitist and managers are expected to have studied
               for a degree in business or law at one of the Grandes Ecoles (Harrison, R, 2002).
                  In the UK, management education tends to be more ad hoc and less well-regarded,
               even in large organisations. UK companies also spend a much lower percentage of
               their turnover promoting education and training than their counterparts in France,
Management development   523

Germany, Japan and the USA (Harrison, R, 2002; Keuning, 1998). This is probably
why a number of studies revealed in the 1980s that the UK was particularly poor at
providing the type of formal and structured education necessary for nurturing mana-
gerial creativity (Constable and McCormick, 1987). Partly in response to these
findings, the 1980s and 1990s saw a growing interest in management development by
government and organisations (OECD, 1996; Sissons and Storey, 1988; Storey, 1989,
1990; Worrall and Cooper, 1997, 1998). However, a 1997 survey of 258 chief execu-
tives carried out for the Sunday Times found that UK managers did not have the skills
to obtain the full potential from their businesses (Hannagan, 2002). Likewise, the
government sees poor management as the reason why UK productivity lags behind
that of the US by 42 per cent, France by 14 per cent and Germany by 7 per cent
(Paton, 2003). This continuing lack of management skills appears to be the main
reason why the UK government has abandoned most of the management training and
development schemes its predecessors launched in the 1980s and 1990s, such as the
Management Charter Initiative, and in 2002 established a new body, the Council for
Excellence in Management and Leadership. Certainly, the Council itself has con-
cluded that most management and business leadership programmes are
‘dysfunctional’ and that the lack of appropriate leadership skills is detrimental to the
UK’s economic performance (Paton, 2003).
   Regardless of the encouragement or not of governments, it is individual organisa-
tions who initiate such programmes. Given that organisations are different and face
different challenges, if management development programmes are to be successful in
producing effective managers and improving the performance of organisations, then it
is self-evident not only that they will vary from company to company, but also that
they will need to vary from individual to individual. Harrison, R (2002: 348) claims
that, despite the differences between organisations, an effective management develop-
ment process (MDP) has six basic features:
■   a clear MDP mission, linked to the organisation’s business strategy;
■   specific programme objectives that relate to the external challenges that the organi-
    sation is facing;
■   a focus on major internal organisational issues;
■   programmes tailored to organisational and individual needs;
■   the systematic assessment of management development needs, aims and outputs;
■   a professional business-led approach to MDP.
   Harrison’s six basic features of an effective MDP represent a clear break with the
standard management development programmes of the past that companies required
all their managers to pursue, regardless of their individual needs, and which appear to
have served them and their managers poorly (Arnold et al, 1998; Burnes, 2003;
Mangham Working Party, 1987; Sissons, 1989; Storey, 1989; Thornberry, 1987; Yukl,
2002). The two main problems with such standard offerings is that, firstly, they tend
to develop managers within an existing behaviour pattern and set of expectations.
Therefore, traditional organisations will tend to continue to produce transactional
managers, regardless of the presence or absence of formal training and education pro-
grammes. The second problem is that they fail to address the needs of individual
managers. Whilst they might meet a manager’s training requirements in terms of tech-
nical skills (such as accountancy, engineering, etc.), they rarely address how they could
develop the attitudes and behaviours necessary to be an effective manager.
524   Chapter 16 · Management – roles and responsibilities

                  Though formal, classroom-based qualifications such as Management Diplomas and
               MBAs are still seen as having an important role in most management development
               programmes, they are now being balanced with more individual and experientially-
               based approaches. These approaches include the use of assessment and assessment
               centres, coaching and mentoring, self-development and, increasingly, Action Learning.
               Though such approaches have been around for a long time, their potential contribu-
               tion to management development has been ignored (Burgoyne and Germaine, 1984;
               Harrison, R, 2002; Long, 1986; Mullins, 2002; Newstrom, 1985; Pedler, 1996;
               Stuart, 1986; Wilkinson and Orth, 1986; Willbur, 1987). More recently, with a
               greater emphasis being placed on individual development, especially in terms of align-
               ing behaviour with the needs of the organisation and society, these techniques are
               finding increasing favour.


          ■ Changing managerial behaviour
               In terms of challenging and changing managerial attitudes and behaviours, the use of
               Action Learning is particularly interesting. It was developed in the 1940s in the UK
               by Reg Revans and is based on small groups of managers tackling a set problem or
               case study. As Pedler (1996: 9) states:

                Action Learning is a method of problem solving and learning in groups to bring about
                change for individual, teams and organisations. It works to build relationships which help
                any organisation improve existing operations and learn and innovate for the future.

               The aim is not only that managers learn how to approach problems together, but also
               that they learn about themselves and challenge the appropriateness of their own atti-
               tudes and behaviours. As Revans commented:

                The central idea of this approach … is today that of the set, or small group of comrades in
                adversity, striving to learn with and from each other as they confess failures and expand on
                victories.                                                    (Quoted in Crainer, 1996: 195)


                  Though Revans’ ideas were out of fashion for many years, his emphasis on team-
               working and the power of groups to solve their own problems, linked with the potential
               for self-reflection and development, is making it an increasingly popular approach
               (Mullins, 2002). Contemporary approaches to Action Learning tend to be based on
               Kolb’s cycle of experiential learning (Experience–Understanding–Planning–Action) with
               sets or groups being guided by a facilitator who acts as a catalyst for ideas (Darwin et
               al, 2002). Also, as its name implies, Action Learning has strong similarities with and
               can be seen as a derivation of Lewin’s Action Research (McLaughlin and Thorpe,
               1993). Action Research is one of the four elements of Lewin’s Planned approach to
               change (see Chapter 8). Like Action Research, Action Learning places a heavy emphasis
               on self-reflection, behavioural change and learning. Whilst the latter tends to focus on
               developing the individual, however, Action Research focuses more on change at the
               group level. Nevertheless, Revans’ statement that ‘there is no learning without action
               and no (sober and deliberate) action without learning’ (quoted in Pedler, 1996: 15)
               could have been written by Lewin.
Management development   525

    Burnes (2003) links Action Learning with organisational change. He argues that
change projects can double as Action Learning projects, and vice versa. Burnes main-
tains that there are clearly situations and times when organisational change and
management development go hand-in-hand. These are not situations where it is either
necessary or desirable for the objectives of one to become subservient to the other, or
to be compromised by the needs of the other. Rather these are genuinely situations
where the need to change an organisation and the need to develop managers are
mutually supportive. Unfortunately, as Crainer (1998: 259) comments, though Action
Learning is attracting much attention, its complexity makes it a ‘daunting prospect’.
Given that organisational change projects can, in themselves, be a ‘daunting
prospect’, it is perhaps not surprising that many organisations choose not to link
them to management development initiatives. Nevertheless, the benefits, Burnes
argues, may be considerable.
    As with all general developments, this move away from formal, off-the-job training
programmes to more personalised and experiential, on-the-job programmes needs to
be viewed critically. Storey (1989), in a major review of the management development
literature, argued that drawing a distinction between on-the-job and off-the-job train-
ing may miss the main issue. This is the requirement to assess the development and
training needs of individual managers accurately and to provide programmes that
allow managers to develop a much more critical and intuitive approach to their situa-
tion. Argyris (1991) argues, however, that one of the main barriers to developing
more critical and intuitive approaches is that, within the narrow confines of transac-
tional behaviour, many managers do operate effectively, even though, looking at the
wider picture, their organisation may be in trouble. This is akin to Peters and
Waterman’s (1982) concept of ‘irrational rationality’ – managers applying the ‘right’
solution even when the situation means that it is no longer appropriate. Argyris
believes that managers need to experience failure or recognise the inappropriateness
of their behaviour before they can begin questioning their assumptions and practices,
and develop their ability to be critical and creative. Senge (1990) contends that the
most important factor in developing such a questioning approach and achieving
organisational success is the ability to comprehend in a critical way the overall organ-
isational context. This takes us back to the point made by Talbot (1993, 1997), cited
earlier, that it is insufficient to develop managers if the organisation as a whole –
people, values and systems – does not also change, or perceive the need for change.
The case studies in Part 3 support this argument. As was shown in Oticon and XYZ
in particular, it was the need for transformational change that forced or enabled man-
agers to break out of the transactional mould and think critically and creatively about
solutions to the problems their organisations faced.
    Therefore, whilst management development has increasingly come to be seen as a
process that must address the needs of the individual managers, it must not lose sight
of the need to develop management as a whole in organisations. Nowhere is this
more apparent than when we look at the areas discussed earlier in this chapter cover-
ing sustainability, diversity and ethics. These are areas where organisations have failed
significantly in the past, whether it be in terms of environmental depredations, racial
and sexual discrimination and stereotyping, or the illegal ‘ramping’ of shares on Wall
Street. Organisations often put such transgressions down to the failure of an individ-
ual or group to follow the organisation’s guidelines and policies. The regular
526   Chapter 16 · Management – roles and responsibilities

               occurrence of illegal and unethical practices in business tends to show that these are a
               failure of management as a group in organisations, however, rather than the failure of
               individual managers.
                  Though it is necessary for individual managers to address issues of sustainability,
               diversity and ethics as part of their personal development, by itself this it is not suffi-
               cient. If organisations and those in them are to behave differently, it is also necessary
               that the management of an organisation as a whole should address these issues as
               part of its development. The question, of course, is how can this be done? If organisa-
               tions are capable of systematically side-stepping the policies and guidelines that they
               have developed, how can a management development programme make them face up
               to the issues? One answer might be to utilise Action Learning where managers ‘learn
               with and from each other as they confess failures’. Action Learning has a number of
               drawbacks, however, not least that its focus is on developing individual managers,
               albeit in a group setting (McGill and Beaty, 1995). It does not appear to be appropri-
               ate to situations where behavioural change and reflection needs to take place at the
               group rather than the individual level. Nor does it appear suitable for situations
               where the issue is the effectiveness of management at the organisational level, rather
               than the individual level.
                  There is an approach that was specifically established to enable groups to address
               the appropriateness of their behaviour, especially in terms of discriminatory activity,
               and which also has a strong ethical basis. It is, of course, Planned change as formu-
               lated by Kurt Lewin. Planned change was designed to enable groups, in this case
               management groups in an organisation, to understand the factors which make them
               act as they do, and to develop effective ways to change them and ‘freeze’ or institu-
               tionalise those changes. As described in Chapter 8, Planned change has four elements:
               field theory, Group Dynamics, Action Learning and the Three-Step approach to
               change. His critics maintain that Lewin’s approach is not suitable for large-scale,
               rapid and coercive change situations, or situations where the focus is on structural
               rather than behavioural change. However, both Lewin’s own work, and that of his
               successors, have shown that it is a highly effective process for achieving sustained
               behavioural changes in groups. It has been applied to a wide variety of situations,
               including the food habits of American housewives, teenage inter-racial gang warfare
               in American cities, conflict between Palestinians and Israelis, and management behav-
               iour in organisations (Bargal and Bar, 1992; Cummings and Worley, 2001; Gold,
               1999; Lewin, 1947a; Marrow, 1969). Lewin’s approach to change was specifically
               developed to bring about changes in group behaviour, and it has had considerable
               success in achieving this in the years since his death (Day et al, 2002; French and Bell,
               1995; Harvey and Brown, 2001; McNiff, 2000; Wheelan et al, 1990). Therefore, as
               an approach to tackling the failures of management as a group in an organisation,
               Planned change has a lot to recommend it. This does not undermine the case for other
               approaches which address the needs of managers as individuals, but does recognise
               that individual behaviour and effectiveness cannot be separated from group behav-
               iour and effectiveness. Indeed, it may be one of the ironies of management
               development that, in order to equip managers to meet the challenges of the twenty-
               first century, it has to look back to the work of Kurt Lewin.
Management, leadership and change   527

     ■ Summary
       From the above examination of managerial learning, seven factors can be discerned as
       important in the ability of managers to operate effectively:
       1 The managers’ past experience, and whether this has reinforced their beliefs or,
         instead, led them to question their appropriateness.
       2 The level of creativity of the manager. Does the manager have a preference for
         transactional management or transformational leadership, and to what degree can
         they move between the two?
       3 His or her cognitive style: are they adaptors or innovators? Are they ‘whole
         thinkers’ or are they more left hemisphere–rational thinkers or right hemisphere–
         creative thinkers?
       4 The managers’ ability to perceive the whole picture. Can they see the organisation
         in its context? In particular, do they understand the choices available in terms of
         changing the organisation itself, its context, and their own approach to leadership,
         strategy and change?
       5 The organisational context: is it amenable, or can it be made amenable, to a more
         critical, creative and ethical style of leadership?
       6 The organisation’s management team: does it have a commitment to promoting
         sustainability, diversity and ethical behaviour, and are the senior managers commit-
         ted to ensuring that its statement and policies in these areas are implemented
         through the day-to-day actions of all its members?
       7 The organisation’s management development process: is it effective? Is it geared
         to developing individual managers and the management cadre of the organisation
         as a whole?
          As far as the UK is concerned, as surveys by Worrall and Cooper (1997, 1998)
       found, the 1990s saw a considerable increase in the provision of education and train-
       ing for managers. This was driven by a number of factors: individuals seeing the need
       to maintain their marketability; organisations recognising the importance to them of
       well-trained managers; and successive governments identifying the link between good
       management and the overall health of the UK economy. Nevertheless, Worrall and
       Cooper also found that some 20 per cent of managers still receive no formal training
       for their role. Furthermore, they found that many managers question the appropriate-
       ness of the training they do receive and feel the quantity is insufficient; in addition,
       the increasing pressure of work, and their longer working hours, are reducing their
       ability to take advantage of and apply the training and education that is available.


Management, leadership and change
       The literature on management and leadership goes back many hundreds of years.
       Indeed, if one takes the view of some writers that The Art of Warfare by Sun Tzu,
       which was written in China around 400 BC, is pertinent to managing today’s organi-
       sations, then the study of management goes back thousands of years (Michaelson,
       2001). As was shown in Chapter 1, however, to all intents and purposes the system-
       atic study of management can be said to have begun with the work of Frederick
528   Chapter 16 · Management – roles and responsibilities

               Taylor at the beginning of the twentieth century. Since then, there have been more
               books and articles on management than anyone can possibly count. These have
               thrown up a plethora of theories, studies and terminology which, as Thomas (2003)
               comments, has probably caused more confusion than clarification. In this chapter, we
               have tried, as Karl Weick (see Chapter 15) might put it, to make sense of the litera-
               ture on management. This ‘sensemaking’ began with an examination of the challenges
               posed to management by globalisation, especially in terms of sustainability, diversity
               and ethics. This was followed by a review of the literature on the manager’s role
               which drew attention to the three main theories on leadership, i.e. the personal char-
               acteristics approach, the leader–follower approach, and the contextual approach.
               Next came a brief description of management and leadership in the ten case study
               companies described in Part 3. Finally, we investigated the role played by, or that
               could be played by, management development in shaping the behaviour of managers
               and leaders both at the individual and group levels. This attempt to make sense of
               management and the literature on management has shown the following:
               ■   The incredible variety and complexity of the role of people who hold the title
                   ‘manager’. The title is applied to people in a wide range of hierarchical levels and
                   functional specialisms. These ‘managers’ are presented with a myriad of responsi-
                   bilities and challenges, ranging from the mundane, but vital, everyday tasks
                   required to ensure that organisations operate efficiently, to the rarer and far more
                   spectacular need to transform and reinvent organisations.
               ■   The wide range of factors that impinge on managerial effectiveness, including man-
                   agers’ own personalities, those of their followers, superiors and peers, and the
                   wider organisational context and objectives in which they operate.
               ■   The ability or potential of managers to increase their level of creativity and change
                   their style of management from transactional to transformational, and back, as sit-
                   uations require.
               ■   The recognition that management development has a key role to play not only in
                   developing individual creativity but also in changing the ethical behaviour of man-
                   agement as a group in organisations.
                  What conclusions can we draw from this review for the relationship between man-
               agement, leadership and change in organisations? The first is that there does seem to
               be some terminological agreement, as shown in Tables 16.1 and 16.2, as to the differ-
               ences between management and leadership. Management is about the present, it is
               about maintaining the status quo, and it is about objectivity and aloofness.
               Leadership is about the future, it is about change and it is about values and emotions.
               However, whilst management and leadership may be different, this does not mean
               that managers and leaders are or should be different people. This chapter has shown
               that most management and leadership roles require a mixture of transactional and
               transformational skills. In an ideal world, managers would be able to adjust the bal-
               ance of transactional and transformational skills they deploy to the organisation’s
               requirements at anyone time. In our less than ideal world, the balance is likely to be
               static rather than dynamic, and usually determined by the background, experience
               and personality of the individual manager. Nevertheless, it would be difficult to think
               of a manager who never had to deal with organisational change, even on a small
               scale, and who, therefore, did not possess some transformational skills. Similarly, it
Management, leadership and change      529

would also be difficult to think of a leader who, regardless of the size of the changes
they were responsible for, did not have to possess some of the transactional skills nec-
essary for ensuring that an organisation continued to satisfy its stakeholders.
Therefore, the balance of management–leadership/transactional–transformational
skills an individual needs to possess at any one time is related to the degree of change
or stability they encounter.
   The second conclusion we can draw, as Figure 16.1 showed, is that management and
leadership focus on different types of change. Management tends to focus on small-
scale, localised changes, whilst leadership tends to focus on more radical,
organisation-wide changes. The former tend to require only low levels of creativity,
whilst the latter require high levels. Even within these different types of change, how-
ever, there are some forms of change that appear to be more innovative and others more
adaptive. Consequently, the ability of managers and leaders to deal effectively with dif-
ferent change situations will be related to the level of creativity they possess and the
degree to which their creativity expresses itself in an innovative or adaptive manner.
   Having drawn these two conclusions, we are now in a position to relate
approaches to management and leadership to approaches to managing change. In
Chapter 10, we developed a Framework for Change (see Figure 10.4). This related
the types of changes organisations experienced, such as cultural or structural change,
to the most appropriate approach to change, e.g. Emergent, Planned, etc. If we merge
Figure 10.4 from Chapter 10 with Figure 16.1 from this chapter, we can construct a
Framework for Management, Leadership and Change (see Figure 16.2).



                                         Turbulent environment
                                       Large-scale transformation
                                       Transformational leadership
                                              Creativity high
            Q1                                                                           Q2

              Level:    The organisation               Level:    The organisation
              Focus:    Culture                        Focus:    Structures and processes
              Approach: Emergent change                Approach: Bold Stroke

     Slow transformation                                                      Rapid transformation
  Innovation                                                                               Adaptation
        Slow change                                                               Rapid change

              Level:    Individual/group               Level:    Individual/group
              Focus:    Attitudes/behaviour            Focus:    Tasks and procedures
              Approach: Planned change                 Approach: Tayloristic or Kaizen

            Q4                                                                           Q3
                                             Creativity low
                                       Transactional management
                                           Small-scale change
                                           Stable environment


Figure 16.2 A framework for management, leadership and change
530   Chapter 16 · Management – roles and responsibilities

                  The four quadrants in Figure 16.2 show what form of management or leadership is
               best suited to each form of change and each approach to change management. For
               example, quadrant 3 shows that where changes to tasks and procedures are con-
               cerned, these can be achieved either by a Tayloristic or Kaizen approach and managed
               in a transactional manner which requires only a low level of adaptive creativity.
               Quadrant 1, on the other hand, presents a much more complex picture. It shows that
               where an organisation wishes to change its culture, this is best achieved by an
               Emergent approach to change led by someone with a transformational approach to
               leadership and who exhibits a high degree of innovation. Remembering, however,
               that Emergent change can encompasses a wide range of change initiatives spread over
               a period of time, which can include Planned change and Bold Strokes, such transfor-
               mational leaders may also need to possess adaptive and transactional skills, or be able
               to call on others who possess such skills.
                  Figure 16.2 also allows us to understand better the obstacles and approaches to
               dealing effectively with issues of sustainability, diversity and ethics. As was shown in
               examining globalisation earlier in this chapter, these are issues that organisations are
               aware of and, at least in large organisations, have policies and procedures to address.
               Possessing the ability to put these policies and procedures into practice is a different
               matter, however. These are issues that, for most organisations, require a major change
               of culture, especially by management and leadership at all levels. If sustainability,
               diversity and ethics are treated merely as structural or policy issues, as in quadrant 2,
               this is unlikely to lead to any permanent or sustained changes in attitudes and behav-
               iour. Similarly, if they are seen as issues that are primarily about individual behaviour
               and attitudes, as in quadrant 2, there is unlikely to be an organisation-wide and last-
               ing change to the way that managers and leaders behave. If ethics, diversity and
               sustainability are treated as issues that need to be embedded in an organisation’s cul-
               ture, however, and if the required changes are managed and led as shown in quadrant
               1, then changes in attitudes and behaviour at the overall level are likely to be achieved
               and maintained.


Summary and conclusions
               In reading some of the literature on strategy and change, one might be forgiven for
               asking whether managers and what they do matter at all. If strategy is Emergent, often
               unrelated to conscious decisions, does an important role exist for managers? Or if, as
               the evolutionary perspective on strategy would have it, luck plays a greater part in suc-
               cess than conscious action, does the quality of the manager matter? However, as this
               chapter has shown, the way an organisation is managed and led can have profound
               implications not only for the organisation and its members but for society as whole.
                  On the negative side, managers can act to hold back organisations, prevent benefi-
               cial change and create a climate of blame and wrong-doing where in-fighting and
               discrimination are tolerated or even promoted. On the positive side, managers can
               identify opportunities for progress, promote ethical behaviour, recognise the opportu-
               nities that diversity brings, and create sustainable organisations which achieve
               harmony with their environment. Good managers and leaders can create the condi-
               tions for growth and prosperity. Effective managers are, therefore, for very positive
Summary and conclusions   531

reasons, important to an organisation. However, they do not operate in isolation or
have a totally free rein.
   The Chief Executives of Oticon and Marconi both wanted to transform their
organisations. They both developed ambitious visions for their organisation’s future.
The Chief Executive of Oticon sought organisation-wide approval and support for his
vision. All Oticon’s employees were involved in developing and implementing the
strategy to realise the vision. It was a vision that was seen as benefiting all Oticon’s
employees. It was a vision which succeeded. The vision for the new Marconi, on the
other hand, was not seen as benefiting its employees, nor were they involved in devel-
oping or implementing it. With hindsight, the vision was badly flawed and it failed
disastrously. There is a strand in the management literature which equates organisa-
tional success with strong, clear-sighted and charismatic leadership (Thomas, 2003).
Certainly, there are leaders, such as Jack Welch in his time at General Electric, Pehr
Gyllenhammar before his departure from Volvo, Richard Branson at Virgin, Bill
Gates at Microsoft or Rupert Murdoch at News International, who through sheer
force of personality dominated and transformed organisations. There are also others
who have ruined their organisations. The successful charismatic leader appears to be
in the minority. In any case, as the Arnold Weinstock example at GEC-Marconi
shows, successful leaders may outstay their welcome, or radical surgery to fit their
organisations for the future may become overdue.
   Most managers, even of very large corporations, have to rely far less on their per-
sonality, important though this may be, and far more on their business knowledge,
skills, creativity and experience. They are also called upon to perform a wide range of
duties and activities. Though the theories and approaches to strategy and change
appear to paint managers as either directing change or facilitating it, and the leader-
ship literature tends to dwell on whether they are transactional or transformational
managers, the reality is that they are often required to be all of these things, depend-
ing on the circumstances. As Figure 16.2 shows, in bringing about organisational
change, there will be occasions when managers and leaders will need to devolve
responsibility to subordinates; sometimes, though, they will need to encourage and
support change projects; and, in other instances, they will have to lead the process
themselves. Although the approach adopted will depend to a certain extent upon the
size and importance of the change project, the timescale involved and the state of the
organisation, in the final analysis it will rely on managerial judgment to make the
appropriate choice. Changing organisations is a complex process fraught with more
opportunities for failure than success. If managers are to accomplish and keep accom-
plishing this task, as this book has argued, they have to be aware of the choices and
approaches available and be willing themselves to change their beliefs and attitudes.
   Despite the views of some writers, there can never be any general recipes or formu-
las for organisational success. The vast variety of organisations, each with its own
differing constraints and pressures, makes that impossible. What there is, however, is
a large body of theories and associated advice which organisations can draw upon to
assist them. As the quotation by George Box at the beginning of this book states: ‘All
models are wrong, some models are useful’. This book has shown that there is no
such thing as an uncontested theory – all have their drawbacks. In particular, most
tend to be situation-specific, even if they do not acknowledge this. Managers and
organisations need to treat theories with a degree of scepticism. They also need to
532   Chapter 16 · Management – roles and responsibilities

               realise, however, that if they can identify the main theories for running and changing
               organisations, and they do understand the context in which they operate, they are in
               a position to identify choices and make changes.
                  Sometimes managers may choose or be required by circumstances to change their
               organisations radically and quickly; sometimes they may choose to influence the con-
               text to promote or reduce the need for such changes. In other cases, change may take
               place more slowly and over a long period, as both organisation and context are
               shaped and changed. The key factor in all this is to make conscious decisions rather
               than rely on untested assumptions. This will require those who manage and lead
               organisations to question and challenge their own and other people’s assumptions. It
               will also require them to gather and be open to a wide variety of information – as
               Chapter 3 showed, the experience of more and more successful companies is that
               learning should be an organisation-wide and continuous process, rather than one lim-
               ited to a few like-minded individuals at one point in time.
                  Even where choices are identified, managers should not assume that exercising
               choice is easy or that the results will be beneficial for all concerned, including them-
               selves. For this reason, managers have a responsibility in making and implementing
               choices to consider the implications in the widest context: not just for themselves, not
               just for their organisation, but for society as well. In the West, especially the UK and
               USA, there is a tendency to think mainly in terms of short-term profitability, and
               ignore the longer-term organisational and social consequences of actions. We can see
               this in the context of the Classical school, whose concentration on narrow issues of
               control and efficiency leads to the creation of jobs that are both physically strenuous
               and mind-numbingly boring. The adverse consequences of organisation theory are
               not limited to the Classical school, however; in many ways, the policies and
               approaches advocated by the Culture–Excellence school could be considered even
               worse. Though both Handy (1997) and, to a lesser extent, Kanter (1997) are con-
               cerned about the impact of fragmented organisations and insecure jobs on society at
               large and family life in particular, neither appears to believe that these can be avoided.
                  Yet the consequences of this approach in creating instability and unpredictability in
               the job market are disastrous. As was noted in Chapter 3, the 1990s saw the UK
               become more socially divided than at any time since the Second World War, with
               some 60 per cent of the population either marginalised or living in very insecure cir-
               cumstances (Hutton, 1995; Saul, 1997; White, 1999). Increasingly the rich are
               choosing to live behind security fences in elite communities (Arnot, 2002). The situa-
               tion is even worse in the USA where the tendency for the better-off to retreat into
               walled compounds patrolled by armed guards is widespread and long-established
               (Dunphy and Griffiths, 1998; Elliott, 1997; Reich, 1997). Nevertheless, as the discus-
               sion on globalisation showed, in a borderless world, it will be impossible to escape
               the consequences of environmental depredation, a lack of business ethics and discrim-
               inatory behaviour merely by building walls. If this seems a somewhat apocalyptic
               vision, then bear in mind the reality of global warming. Bear in mind the millions of
               people who lost their savings and pensions in the dotcom boom. Also bear in mind
               that one of the most fashionable American gurus of the late 1990s, William Bridges,
               advocated the jobless organisation. He believes that there should no longer be any
               permanent jobs, not even for managers. Instead, he wants to see the labour force
               form one enormous pool of labour waiting for temporary employment – the just-in-
Summary and conclusions   533

time workforce to complement the just-in-time organisation (Bridges, 1996, 1998;
Golzen, 1995). In support of his view that jobless organisations are the future, he
points out that General Motors is no longer the largest employer in the USA; instead,
it is the temporary employment agency, Manpower.
    Some would argue that these developments are only the inevitable consequence of
capitalism (Collins, 1998). However, as Crouch and Streeck (1997) and Whitley
(1998) demonstrated, capitalism comes in many forms and guises. The fragmentation
and insecurity of the labour market that was a growing characteristic of the USA and
UK in the 1980s and 1990s was much less pronounced in some other countries. This
was especially the case in those nations that, historically, had seen the objectives of
individual organisations as subservient to national interests. In the 1990s for exam-
ple, despite economic problems associated with reunification, Germany still had an
enviable record of attempting to prevent job losses and reduce job insecurity, as did
the Scandinavian states and Japan.
    This, of course, emphasises that national governments as well as individual organi-
sations have a major contribution to make when considering the wider context and
implications of managers’ decisions. In the West, led by the USA and UK, the last 20
years have seen an increasing move towards deregulation, privatisation and the intro-
duction of market forces into the operation of the public sector. Whatever the merits
of these policies in terms of efficiency, and they are debatable (Flynn, 1993; Ferlie et
al, 1996), no one can doubt that they acted to increase instability both in the econ-
omy at large and in public sector bodies, as the cases of the Greek Public Power
Corporation and PoliceCo showed. Whether such changes will eventually lead to a
better deal for consumers or not is obviously an issue, but so is the effect on the social
fabric. Post-1945, all Western governments used their public sectors both to provide
services and as a means of creating employment and maintaining economic and social
stability. These latter functions have now been abandoned in many countries, and the
resulting insecurity is evident for all to see.
    The point of mentioning this is not merely to show concern, but to argue that it
need not be the case. The Culture–Excellence concept is only one of many approaches
to running organisations. All have their downside, but not all result in job cuts and
labour market instability. One alternative is for managers to choose to adopt
approaches that reduce instability in their environment, rather than to implement
policies that increase the use of short-term contracts, part-time and casual working. If
followed widely, this would have two effects. Firstly, the result of many organisations
seeking stability would be to reduce the overall level of turbulence in the environ-
ment. This is because, as Stickland (1998) maintains, organisations and their
environment are not separate entities, but part of the same system. If organisations
become more stable, so too does the environment. If organisations become more sus-
tainable, so does the planet. Similarly, if, as recommended by Tom Peters,
organisations adopt internal chaos to cope with external chaos, this merely acts to
increase the overall turbulence in the system; in effect, a vicious spiral of increasing
chaos is created which, instead of poising an organisation at the ‘edge of chaos’, may
tear it apart. Also, if organisations focus solely on narrow profitability, environmental
and ethical problems will grow. The second consequence of organisations seeking sta-
bility is that it increases the stability in society – jobs and communities become more
stable and more sustainable.
534   Chapter 16 · Management – roles and responsibilities

                  Therefore, as a final note: organisations face many challenges and choices. Some
               organisations will find that their room for manoeuvre is very limited. Others may find
               that there is considerable scope for discretion. It is the role of managers and leaders to
               ensure that all available options and choices are identified, and that the choices made
               take account of both the short- and long-term interests of all their stakeholders –
               whether these be shareholders, employees, the managers themselves or the community
               at large. The worst managers may not be those who make poor choices; it may be
               those who fail to recognise that there are choices to be made.


Test your learning

          ■ Short answer questions
                1   What is globalisation?

                2   What is the link between sustainability, workforce diversity and ethics?

                3   Describe Duncan’s (1975) three levels of management.

                4   Briefly discuss Mintzberg’s (1973, 1975) description of managerial roles.

                5   What is the personal characteristics approach to leadership?

                6   State the key features of the leader–follower approach to leadership.

                7   Describe the contextual approach to leadership.

                8   How does Kirton’s (1989) Adaptation–Innovation theory help us to understand mana-
                    gerial behaviour?

                9   Describe two approaches to managerial development.

               10   What is the difference between management and leadership?

               11   How do management and leadership relate to organisational change?

               12   List three ways in which managers’ decisions can have a wider impact on society.



          ■ Essay questions
               1 How can the Framework for Management, Leadership and Change (Figure 16.2) be
                 used to guide organisational change? Illustrate your answer with reference to one of the
                 case studies in Part 3 or by using an organisation of your choice.

               2 How can the concept of managerial choice help managers to reconcile the needs of their
                 organisation with the wider needs of society?
Suggested further reading   535


 Suggested further reading
1 Yukl, G (2002) Leadership in Organizations (5th edition). Prentice Hall: Upper Saddle
  River, NJ, USA.
  Gary Yukl’s book is an excellent guide to the literature and research on management and
  leadership.
2 Deresky, H (2002) International Management: Managing Across Borders and Culture (3rd
  edition). Prentice Hall: Upper Saddle River, NJ, USA.
  This book provides a well-researched and well-written guide to international management.
  It is especially strong in the areas of culture, diversity and ethics.
3 Dunphy, D, Griffiths, A and Benn, S (2003) Organizational Change for Corporate
  Sustainability. Routledge: London.
  This is an important book which does not just make the case for creating sustainable organi-
  sations but also provides illustrations of and guidance on managing the changes necessary to
  achieve this.
1
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1
Glossary



Action Learning This approach to management          organisations actually formulate strategy and
development was devised in the 1940s in the UK       manage change than prescribing how they
by Reg Revans and involves small groups of           should conduct these activities (see Prescriptive
managers tackling a set problem or case study.       stream).
The aim is not only that managers learn how to       Artifacts At the highest level of cultural
approach problems together, but also that they       awareness are the artifacts and creations that
learn about themselves and challenge the             are visible manifestations of the other levels of
appropriateness of their own attitudes and           culture. These include observable behaviours of
behaviours.                                          members, as well as the structures, systems,
Action Research This is an approach to change        procedures, rules and physical aspects of the
which, first, emphasises that change requires        organisation (see organisational culture).
action, and is directed at achieving this; and       Aston Group The work of this Group
second, it recognises that successful action is      constitutes one of the key building blocks of
based on analysing the situation correctly,          Contingency Theory. Working in the 1960s,
identifying all the possible alternative solutions   they found that size was the most powerful
and choosing the one most appropriate to the         predictor of specialisation, use of procedures
situation at hand. It is one of the four elements    and reliance on paperwork. In effect, what they
of Lewin’s Planned approach to change (see           found was that the larger the organisation, the
Planned change).                                     more likely it was to adopt (and need) a
Activity planning This involves constructing a       mechanistic (bureaucratic) structure. The
schedule or ‘road map’ for a change programme,       reverse was also found: the smaller the
citing the main activities and events that must      organisation, the more likely it was to adopt
occur if the change is to be successful.             (and need) an organic (flexible) structure.
Adaptation–Innovation theory This maintains          Audits and post-audits During and after a
not only that people exhibit different degrees of    change initiative, an audit or a post-audit
creativity, but also that they express their         should be carried out (a) to establish that the
creativity in different ways, along a spectrum       objectives have really been met, and (b) to
which runs from adaptors to innovators. Those        ascertain what lessons can be learned for future
who tend towards the adaptor end of the              projects.
spectrum prefer to work within the existing          Authority In organisational terms, authority is
system to improve things. Innovators tend to         the right to act, or command others to act,
ignore or challenge the system and to come up        toward the attainment of organisational goals.
with radical proposals for change.                   The right to act is given legitimacy by the
Analytical stream This phrase is used to             authority figure’s position in the organisation.
describe writers on strategy and change who          Therefore, the level of authority a person
are more interested in understanding how             possesses is related to their job.
596   Glossary

Autonomy This is the ability or requirement of       Bold Strokes These are major strategic or
individuals, groups and organisations to act         economic initiatives, e.g. restructuring an
independently and proactively, and without           organisation. They can have a clear and rapid
seeking the permission of higher authority,          impact on an organisation’s performance, but
when pursuing organisational goals. Peters and       they rarely lead to any long-term change in
Waterman link it to entrepreneurship and it is       habits or culture. Bold Strokes are initiatives
seen as an essential attribute of excellent          taken by a few senior managers, sometimes only
organisations (see Culture–Excellence                one; they do not rely on the support of the rest
approach).                                           of the organisation for their success (see Long
Backstaging This is concerned with the exercise      Marches; Culture–Excellence approach).
of power skills during the change process. In        Boston Consulting Group see Growth-Share
particular, it involves influencing the recipients   Matrix.
of change to accept it. Buchanan and Boddy           Bottom-up change This is the opposite of top-
(1992) see this as being an essential skill of a     down change. Instead of change being driven by
change agent.                                        a few senior managers from the top, this
Basic assumptions These are seen as one of           approach sees change as coming from bottom-
the core components of organisational culture.       up initiatives which emerge from local responses
They operate at the deepest level of cultural        to issues, threats or opportunities in the
awareness and are unconscious, taken-for-            environment. The size of such responses will
granted assumptions about how organisational         vary but, because they are local responses, they
problems should be solved, as well as about the      can never be large-scale (see Emergent change).
nature of human beings, human activity and           BPR See Business Process Re-Engineering.
human relationships.
                                                     Bureaucracy This form of organisational structure
Behaviourist psychology This maintains that          is characterised by the division of labour, a clear
all human behaviour is learned and that the          hierarchical authority structure, formal and
individual is the passive recipient of external      unbiased selection procedures, employment
and objective data. One of the basic principles      decisions based on merit, career tracks for
of the Behaviourists is that human actions are       employees, detailed rules and regulations,
conditioned by their expected consequences.          impersonal relationships, and a distinct separation
Behaviour that is rewarded tends to be repeated,     of members’ organisational and personal lives. It is
and behaviour that is ignored tends not to be.       one of the core elements of the Classical approach
Therefore, in order to change behaviour, it is       to organisations and corresponds with the
necessary to change the conditions that cause it.    mechanistic structure identified by Contingency
Benchmarking This is the term given to the           theorists (see Contingency Theory).
process of comparing an organisation’s               Business ethics These are moral principles or
performance, or the performance of part of an        beliefs about what is right or wrong. These
organisation, e.g. a product or service, against a   beliefs guide managers and others in
range of internal and external comparators.          organisations in their dealings with other
Bias for action This is one of Peters and            individuals, groups and organisations, and
Waterman’s eight key attributes of excellent         provide a basis for deciding whether behaviour
companies. Even though such companies may            is socially responsible.
have an analytical approach to problems, they        Business Process Re-Engineering (BPR) This is an
are predisposed towards taking rapid and             approach that aims to achieve a radical rethinking
appropriate action rather than getting bogged        and redesign of organisational processes in order
down in analysis (see Culture–Excellence             to significantly improve key performance
approach).                                           measures, such as quality, cost and delivery.
Glossary   597

Cash-cows These are companies whose rate of           horizontal and hierarchical division of labour,
market growth is in decline but which still           the minimisation of human skills and discretion,
achieve significant cash surpluses. They became       and the attempt to construe organisations as
market leaders, during the early days when            rational-scientific entities. It comprises the work
the market was rapidly growing, and have              of Frederick Taylor (see Scientific Management),
maintained that position as the growth tapered        Henri Fayol (see principles of organisation) and
off. They are regarded as businesses with low         Max Weber (see bureaucracy).
growth but high market share (see Growth-             Classical approach to strategy This is the oldest
Share Matrix).                                        and most influential approach to strategy. It
Causal mechanisms According to the realist            portrays strategy as a rational process, based
perspective, these are the (usually hidden)           on analysis and quantification, and aimed at
processes or pathways through which an                achieving the maximum level of profit for
outcome is caused to be brought about. An             an organisation.
example of a causal mechanism is the process          Closed systems This is a view of organisations
by which a rise in interest rates leads to a fall     which sees them as being relatively unaffected
in house prices. In this case, the causal             by events outside their boundaries. It considers
mechanism linking cause to effect involves            organisations to be closed, changeless entities.
decisions by each individual house purchaser          Once organisations have structured themselves
about the mortgage repayments they can and            in accordance with the correct precepts, then,
cannot afford. It is the aggregate behaviour of       regardless of external or even internal
these individuals that leads to the overall fall in   developments, no further changes are necessary
house prices (see realism).                           or desirable (see Open Systems school).
Causal powers These are the capabilities or           Coercive power The use of threats, sanctions or
potential for systems and mechanisms to act in a      force to gain compliance.
particular way, or to be capable of acting in a
particular way (see realism).                         Cognitive dissonance This theory states that
                                                      people try to be consistent in both their
Change agents These are the people responsible        attitudes and behaviour. When they sense an
for directing, organising and facilitating change
                                                      inconsistency either between two or more
in organisations (see backstaging).
                                                      attitudes or between their attitudes and
Chaordic This term was coined by Hock                 behaviour, people experience dissonance; that is,
(1999) to describe organisations which are            they feel frustrated and uncomfortable with the
poised between order and chaos (see edge of           situation, sometimes extremely so.
chaos; complexity theories).
                                                      Competitive Forces model This is an approach
Chaos For complexity theorists, chaos                 to strategy which stresses the need to align the
describes a complex, unpredictable, and orderly       organisation with its environment, the key
disorder in which patterns of behaviour unfold        aspect of which is the industry or industries in
in irregular but similar forms (see edge of chaos;    which it competes. Proponents of this view
complexity theories).                                 believe that industry structure strongly
Chaos Theory This is one of the main complexity       influences the competitive rules of the game as
theories. It seeks to construct mathematical          well as the range of strategies open to the
models of systems at the macro level (i.e. whole      organisation. This model is most closely
systems and populations). It portrays natural         associated with the work of Michael Porter
systems as both non-linear and self-organising.       (1980, 1985).
Classical approach to organisations This              Complexity theories These are concerned with
approach to organisations is characterised by the     how order is created in dynamic non-linear
598   Glossary

systems. In particular, those applying this          experts to assign subjective probabilities and
approach to organisations maintain that              time priorities to a list of potential future events
successful organisations need to operate at the      and developments supplied by an organisation.
‘edge of chaos’ and can only maintain this           Culture see organisational culture.
position by the presence of appropriate
                                                     Culture–Excellence approach Based on the work
order-generating rules.
                                                     of Peters and Waterman, Kanter and Handy, this
Contextual approach to leadership This is an         maintains that an organisation’s performance
approach which argues that effective leadership is   (excellence) is determined by the possession of an
situation-dependent, i.e. a manager’s performance    appropriate, strong and clearly articulated
will depend on his or her personal characteristics   culture. It is culture which ensures that the
and the overall context within which they            members of the organisation focus on those
operate (see transactional management and            activities which lead to effective performance.
convergent state, and transformational leadership    Delphi method This is a scenario-building
and divergent state).                                technique which uses a panel of experts, who,
Contingency Theory This maintains that the           independently of each other, are interrogated
structures and practices of an organisation, and     about a number of future issues within their
therefore its performance, are dependent (i.e.       area of expertise.
contingent) on the circumstances it faces. The       Design school The proponents of this approach
main contingencies – situational variables –         to strategy emphasise the need to achieve a fit
identified by its proponents are environmental       between the internal capabilities of an
uncertainty and dependence, technology and           organisation and the external possibilities it
organisation size (see environment).                 faces. Flowing from this, they place primary
Continuous change This model of change, also         emphasis on the appraisal of an organisation’s
referred as to as the continuous transformation      external and internal situations.
model, is based on the assertion that the            Dissipative structures These are systems that
environment in which organisations operate is        exist in far-from-equilibrium conditions (i.e. are
changing, and will continue to change, rapidly,      in a state of constant fluctuation) and which,
radically and unpredictably. Consequently, only      therefore, use (dissipate) energy. The concept of
by continuous transformation will organisations      dissipative structures is one of the core ideas in
be able to keep aligned with their environment       complexity theories. They are most closely
and thus survive.                                    associated with the work of the Nobel Prize-
Contracting-out See outsourcing.                     winning physicist, Ilya Prigogine (Prigogine and
                                                     Stengers, 1984; Prigogine, 1997).
Control The ability to impose a desired pattern
of activity or behaviour on processes and people     Divergent state This situation occurs when
                                                     environmental changes challenge the efficiency
(see authority and power).
                                                     and appropriateness of an organisation’s
Convergent state This occurs when an                 established goals, structures and ways of
organisation is operating under stable conditions,   working (see contextual approach to leadership
where there are established and accepted goals,      and transformational leadership).
and a predictable external and internal
                                                     Diversity see workforce diversity.
environment (see transactional management).
                                                     Division of labour The hierarchical and
Creativity The ability to produce new, novel or
                                                     horizontal separation of tasks and responsibilities
original ideas and solutions.
                                                     into their component parts so that individuals are
Cross Impact method This is a scenario-              only responsible for a limited set of activities
building technique which asks a panel of             instead of the whole task.
Glossary   599

Dogs These are businesses that have low market       Field theory This is an approach to
share and which operate in markets with low          understanding group behaviour by trying to
growth potential (see Growth-Share Matrix).          map out the totality and complexity of the field
Double-loop learning This process involves           in which the behaviour takes place. It is one of
challenging the appropriateness of an                the four elements of Lewin’s Planned approach
organisation’s basic norms, values, policies and     to change (see Planned change).
operating procedures (see single-loop learning;      Firm-in-sector perspective This view of
triple-loop learning).                               strategy, developed by Child and Smith (1987),
Edge of chaos This is a state where systems are      maintains that the conditions operating in a
constantly poised between order and disorder         sector shape and constrain the strategies which
(see complexity theories).                           organisations in that sector can pursue.
Emergent change This approach to change is           Fordism This is named after Henry Ford’s
based on the assumption that change is a             approach to car assembly. Fordism is seen as the
continuous, open-ended and unpredictable             application of Scientific Management to mass
process of aligning and re-aligning an               production industries through the utilisation of
organisation to its changing environment.            automation, e.g. the moving assembly line.
Empowerment The delegation of power and              Game theory This approach to strategy can be
responsibility to subordinates.                      traced back to the study of war. Game theory
                                                     has two core assumptions: first, that
Entrepreneurship The encouragement and
                                                     competitors are rational and will try to win;
pursuit of innovative ideas, products and
                                                     second, that each competitor is in an
services (see Culture–Excellence approach).
                                                     interdependent relationship with the other
Environment Those forces external to an              competitors. So all competitors are affected by
organisation, such as markets, customers, the        and will react to what other competitors do.
economy, etc., which influence its decisions and
                                                     Generative structures see causal mechanisms.
internal operations.
                                                     Gestalt-Field psychology This sees an
Equifinality This concept, coined by Child
                                                     individual’s behaviour as the product of their
(1972), states that different sorts of internal
                                                     environment and reason. Behaviour arises from
arrangements and structures can be perfectly
                                                     the way in which an individual uses reason to
compatible with identical contextual or              interpret external stimuli. Consequently, to
environmental states. Put simply, this means         change behaviour, an individual must be helped
that there is more than one way for                  to change their understanding of themselves and
organisations to structure themselves in order       the situation in question.
to achieve their goals.
                                                     Globalisation There is a great deal of dispute as to
Esteem needs These reflect a person’s desire to      what this term means. However, at its most basic,
be respected – esteemed – for their achievements     it refers to the worldwide integration of markets
(see hierarchy of needs).                            and cultures, the removal of legal and political
Excellence See Culture–Excellence approach.          barriers to trade, the ‘death of distance’ as a factor
Extrinsic motivators These are material              limiting material and cultural exchanges.
rewards, such as money and promotion,                Group Dynamics This concept refers to the
provided by others (see intrinsic motivators and     forces operating in groups. It is concerned
physiological needs).                                with what gives rise to these forces, their
Felt-need This is an individual’s inner              consequence and how to modify them. Group
realisation that change is necessary. If felt-need   Dynamics stresses that group behaviour, rather
is low in a group or organisation, introducing       than that of individuals, should be the main
change becomes problematic.                          focus of change. It is one of the four elements of
600   Glossary

Lewin’s Planned approach to change (see              needs, and that organisations are cooperative
Planned change).                                     systems which comprise informal structures and
Group Dynamics school As a component of              norms as well as formal ones (see hierarchy of
change theory, this school originated with the       needs and Hawthorne Experiments).
work of Kurt Lewin and has the longest history.      Humanisation of work see Job Design.
Its emphasis is on bringing about organisational     Incremental model of change Advocates of this
change through teams or work groups, rather          view see change as being a process whereby
than individuals.                                    individual parts of an organisation deal
Growth-Share Matrix This is a strategic              incrementally and separately with one problem
planning tool developed by the Boston                and one goal at a time.
Consulting Group. Using pictorial analogies,         Individual Perspective school This school of
it posits that businesses in an organisation’s       thought is concerned with understanding and
portfolio can be classified into stars, cash-cows,   promoting behaviour change in individuals. It is
dogs and problem children.                           split into two camps: the Behaviourists and the
Hawthorne Experiments These were carried out         Gestalt-Field psychologists.
at Western Electric’s Hawthorne Works in             Informal organisations see Human Relations
Chicago in the 1920s and 1930s. As a result of
                                                     approach.
this work, two major propositions were put
forward: that work is a collective, cooperative      Intrinsic motivators These are non-material
activity which is influenced by formal and           rewards, such as praise, satisfaction and
informal aspects of an organisation; and that        recognition which are internal to the individual
humans have a deep need for recognition, security    (see extrinsic motivators, esteem needs and
and belonging, rather than being purely economic     social needs).
beings (see Human Relations approach).               Japanese approach Pascale and Athos (1982)
Hierarchy of needs Developed by Maslow               argue that the effectiveness and uniqueness
(1943), this sees human motivation as based on       of the Japanese approach to management
an ascending order of needs: physiological           comes from their ability to combine ‘soft’
needs; safety needs; social needs; esteem needs      (personnel/industrial relations) elements and
and self-actualisation needs. Only when a lower      ‘hard’ (business/manufacturing) practices
order need has been met, does the next level of      (see 7 S framework).
need begin to motivate an individual.                Job Design Also called work humanisation, and
Hoshin Kanri Also known as policy                    arising from the work of the Human Relations
deployment, this is a Japanese approach to           approach, proponents of this view argue that
communicating a company’s policy, goals and          the fragmentation of jobs promoted by the
objectives throughout its hierarchy in a             Classical approach to organisations creates
structured and consistent fashion in order to        boring, monotonous, meaningless and de-
ensure that its strategic priorities inform          motivating jobs. To reverse this, and to make
decision-making at all levels in the organisation.   jobs interesting and intrinsically motivating,
Human Relations approach This was a reaction         they should be designed to provide variety, task
against the mechanistic view of organisations        completeness and, above all, autonomy.
and the pessimistic view of human nature put         Kaizen This is a Japanese process of
forward in the Classical approach to                 incremental, systematic, gradual, orderly and
organisations. It reintroduces the human             continuous improvement which utilises a range
element into organisational life by contending       of techniques, tools and concepts, such as
that people have emotional as well as economic       quality circles.
Glossary   601

Knowledge power This is power based on the           Modernism This is a term used to describe the
control of unique information that is necessary      values, rationale and institutions that have
for decision-making.                                 dominated Western societies since the Age of
Leadership The process of establishing goals         Enlightenment in the eighteenth century. The
and motivating others to pursue and achieve          essence of modernism is a strong belief in
these goals.                                         progress, economic and scientific rationality, a
                                                     search for the fundamental rules and laws which
Long Marches The Long March approach to
                                                     govern both the natural world and human
change favours relatively small-scale and
                                                     nature, and a commitment to a secular,
operationally-focused initiatives, which are slow
                                                     rationalist and progressive individualism (see
to implement and whose full benefits are
                                                     postmodernism; realism).
achieved in the long term rather than the short
term. The Long March approach can impact on          Moving This is the second step in Lewin’s
culture over time but it does require the            Three-Step model of change. It involves
involvement and commitment of most of the            identifying and evaluating the various types of
organisation (see Bold Strokes).                     change on offer, and implementing the chosen
Long-range planning This is an approach to           one (see unfreezing; refreezing).
strategy based on plotting trends and planning       Non-linear systems This is a term used by
the actions required to achieve the identified       complexity theorists to describe constantly-
growth targets. It is heavily biased towards         changing systems where the laws of cause and
financial targets and budgetary controls.            effect appear not to apply. Order in such
Management The process of planning,                  systems is seen as manifesting itself in a largely
organising and controlling resources and people      unpredictable fashion, in which patterns of
in order to produce goods or provide services.       behaviour emerge in irregular but similar forms
                                                     through a process of self-organisation, which is
Management development This is concerned
                                                     governed by a small number of simple order-
with the training and education of managers so
                                                     generating rules.
as to equip them with the competences and skills
necessary to carry out their duties effectively.     Normative power This describes the allocation
                                                     and manipulation of symbolic rewards, such as
Mechanistic structure This forms one end of
                                                     status symbols, as inducements to obey.
the structure continuum identified by
Contingency theorists, the other end being           Norms These are one of the key components
organic structure. A Mechanistic structure           of culture. They represent unwritten rules of
equates to the bureaucratic-type structure           behaviour which guide how members of an
advocated by the Classical approach to               organisation should behave in particular
organisations (see bureaucracy).                     situations (see organisational culture).
Metaphor This is a linguistic device for             OD (Organization Development) This is an
describing or seeing one type of experience by       approach to change developed in the USA. It is
suggestion that it is similar to something else,     based on the work of Kurt Lewin and, originally
e.g. using the metaphor of a machine to describe     at least, was concerned with improving the
a bureaucratic type of organisational structure.     effectiveness of the human side of the organisation
                                                     through participative change programmes.
Mission statement This states an organisation’s
major strategic purpose or reason for existing. It   ‘One best way’ approach This is a term used to
can indicate such factors as the organisation’s      describe any theory or approach which claims
products, markets and core competences. It is        to be universally superior to all others on offer,
part of an organisation’s vision.                    e.g. the Classical approach to organisations.
602   Glossary

Open-ended change This is a term used                 Paradigm This is a way of looking at and
especially by proponents of Emergent change           interpreting the world; a framework of basic
to indicate that change is a continuous and           assumptions, theories and models that are
unpredictable process which does not have a           commonly and strongly accepted and shared
beginning, middle and end.                            within a particular field of activity at a
Open Systems school Proponents of this view           particular point in time.
see organisations as systems composed of a            Participation This is the process of involving
number of interconnected sub-systems, where           people in decision-making and change activities
any change to one part of the system will have        within organisations.
an impact on other parts of the system, and, in       Person culture The individual and his or her
turn, on its overall performance. Organisations       wishes are the central focus of this form of
are seen as open systems in that they are open        culture. It is associated with a minimalistic
to, and interact with, their external environment     structure, the purpose of which is to assist
(see closed systems).                                 those individuals who choose to work together
Order From a complexity perspective, order            (see organisational culture).
refers to the patterns of behaviour which emerge      Phases of change This is an elaboration of
in irregular but similar forms in non-linear          Planned change based on a four-phase model
systems through a process of self-organisation.       which describes change in terms of two major
Order-generating rules In complex systems, the        dimensions: change phases, which are distinct
emergence of order is seen as being based on the      states through which an organisation moves as
operation of simple order-generating rules            it undertakes Planned change; and change
which permit limited chaos whilst providing           processes, which are the methods used to move
relative order (see Complexity theories).             an organisation from one state to another.
Organic structure This forms one end of the           Physiological needs These relate to hunger,
structure continuum identified by Contingency         thirst, sleep, etc. (see hierarchy of needs).
theorists, the other end being mechanistic            PIMS (Profit Impact on Marketing Strategy)
structure. An organic structure is seen as being      This is a quantitative strategic planning tool
flat, informal, flexible and highly adaptable, i.e.   based upon the belief that there are three major
the reverse of a bureaucratic structure.              factors which determine a business unit’s
Organisation Development: see OD.                     performance: its strategy, its competitive
Organisational culture This is the name given         position, and the market/industry characteristics
to the collection of basic assumptions, values,       of the field in which it competes.
norms and artifacts that are shared by and            Planned change This term was coined by Kurt
influence the behaviour of an organisation’s          Lewin in the 1940s to distinguish change that
members.                                              was consciously embarked upon and planned by
Organizational learning This term describes the       an organisation, as averse to types of change
process of collective, as averse to individual,       that might come about by accident, by impulse
learning in an organisation. Its aim is to            or that might be forced on an organisation.
improve the performance of the organisation by        Lewin’s Planned approach to change consists of
involving everyone in collecting, studying,           four interrelated elements: Field theory, Group
learning from and acting on information.              Dynamics, Action Research and the Three-Step
Outsourcing This is the practice of seeking           model of change.
outside organisations to take over activities and     Politics This describes the efforts of people in
services previously carried out within an             organisations to gain support for or against
organisation, e.g. catering, security and IT.         policies, rules, goals, or other decisions where
Glossary   603

the outcome will have some effect on them.           Privatisation The process of transferring state
Politics is seen as the exercise of power.           assets from the public to the private sector.
Population ecology This concept is borrowed          Problem children Also known as question marks,
from the physical sciences. It is a Darwinist-type   these are units or businesses which have a high
approach that focuses on how organisations           growth rate and low market share. They have
adapt and evolve in order to survive within the      high cash requirements to keep them on course,
general population of organisations to which         but their profitability is low because of their low
they belong.                                         market share. They are so named because, most
Positioning school This approach to strategy is      of the time, the appropriate strategy to adopt is
based on the argument that organisations which       not clear (see Growth-Share Matrix).
enjoy higher profits than their competitors do so    Processual approach to change This approach
because they have achieved advantageous and          sees change as a complex and dynamic process
easily-defended positions in their markets.          which cannot be solidified or treated as a series
Postmodernism This is a loosely-defined              of linear events. In particular, it focuses on the
philosophical movement which, though                 need to analyse the politics of managing change.
originally based in the arts, has become             Processual approach to strategy This
increasingly influential in the social sciences      perspective concentrates on the nature of
over the last 20 years. It is a way of looking at    organisational and market processes. It views
the world that rejects the rationality of            organisations and their members as shifting
modernism and concentrates on the ways in            coalitions of individuals and groups with
which human beings attempt to shape reality          different interests, imperfect knowledge and
and invent their world (see realism).                short attention spans.
Power An individual’s capacity to influence          Profit Impact on Marketing Strategy see PIMS.
decisions, to exert their will and achieve
                                                     Psychological contract This concept is based on
outcomes consistent with their goals and
                                                     the assertion that there is an unwritten set of
priorities.
                                                     expectations operating at all times between every
Power culture This is frequently found in small      member of an organisation and the various
entrepreneurial organisations such as some           managers and others in that organisation.
property, trading and finance companies. It is
                                                     Punctuated equilibrium model This view of
associated with a web structure with one or
                                                     change sees organisations as evolving through
more powerful figures at the centre, wielding
                                                     relatively long periods of stability (equilibrium
control (see organisational culture).
                                                     periods) in their basic patterns of activity that
Prescriptive stream This phrase is used to           are punctuated by relatively short bursts of
describe writers on strategy and change who are      fundamental change (revolutionary periods).
more interested in developing prescriptions for
telling organisations what they should do rather     Question marks see problem children.
than analysing what they actually do (see            Rationality The use of scientific reasoning and
Analytical stream).                                  logical arguments to arrive at decisions.
Principles of organisation: These are a set of       Realism This philosophical perspective asserts
rules governing the running of organisations         that social entities, such as markets, class
developed by Fayol (1949). He claimed that           relations, gender relations, ethnic groupings,
they were universally applicable to all              social rules, etc., exist, are real and can be
organisations. The principles of organisation        discovered. However, whilst it rejects the notion
form one of the core elements of the Classical       of multiple realities, it still acknowledges that
approach to organisations.                           social entities arise though a process of social
604   Glossary

construction. This distinguishes it from both         Scientific Management This is an approach to
modernism and postmodernism.                          work organisation developed by Frederick
Refreezing This is the third step in Lewin’s          Taylor in the early twentieth century. He
Three-Step model of change. It seeks to stabilise     claimed that this approach to designing jobs
new behaviours in order to ensure that they are       and supervising workers is based on the
relatively safe from regression (see unfreezing;      scientific study of work. It emphasises the
moving).                                              division of labour, the removal of workers’
                                                      discretion and the right of management to make
Remunerative power This is the use or promise
                                                      what changes it thinks are necessary for efficient
of material rewards as inducements in order to
                                                      working. It is one of the core elements of the
gain people’s cooperation.
                                                      Classical approach to organisations.
Resource-Based model This approach to strategy
                                                      Scientific-Rational approach This is an
sees competitiveness as coming from the effective
                                                      alternative title used to describe the Classical
deployment of superior or unique resources, such
                                                      approach to organisations.
as equipment, patents, brands and competences,
which allow firms to have lower costs or better       Self-actualisation needs These constitute the
products than their competitors.                      need to achieve one’s full potential. According
                                                      to Maslow (1943), this will vary from person to
Ringi system This is a Japanese approach to
                                                      person, and may differ over time as a person
decision-making which promotes extensive and
                                                      reaches a level of potential previously
open debate over decisions, in order to ensure
                                                      considered unattainable and so goes on to strive
that they fit in with the company’s objectives
                                                      for new heights (see hierarchy of needs).
rather than those of sectional interests.
                                                      Self-organisation This is a term used by
Role A set of observable behaviours associated
with, and expected of, an identifiable position       complexity theorists to describe how order
or job in an organisation.                            emerges and is maintained in complex systems
                                                      (see order-generating rules).
Role culture This type of organisational
culture is appropriate to bureaucracies, and          Semistructures This is a term used by
organisations with mechanistic, rigid structures      Complexity theorists to describe structures which
and narrow jobs. Such cultures stress the             are sufficiently rigid so that change can be
importance of procedures and rules, hierarchical      organised, but not so rigid that it cannot occur.
position and authority, security and                  7 S framework This is a tool for analysing
predictability. In essence, role cultures create      organisational performance and was developed
situations in which those in the organisation         by Tom Peters, Robert Waterman, Richard
stick rigidly to their role.                          Pascale and Anthony Athos when they all
Safety needs The desire for security and              worked at McKinsey in the late 1970s. The 7 Ss
protection against danger (see hierarchy of needs).   comprise four ‘soft’ Ss (staff, style, shared
                                                      values, and skills) and three ‘hard’ Ss (strategy,
Scenario-building This is an approach to
                                                      structure and systems) (see Japanese approach).
strategy development that allows organisations
to construct and test pictures of possible futures    Simple order-generating rules see order-
and to select the one which is most likely to         generating rules.
meet their needs. It is based on the assumption       Single-loop learning This is adaptive learning
that, if you cannot predict the future, then by       which involves detecting and rectifying errors or
considering a range of possible futures, an           exceptions within the scope of the organisation’s
organisation’s strategic horizons can be              existing practices, policies and norms of
broadened, and managers can be receptive to           behaviour (see double-loop learning; triple-loop
new ideas (see vision-building).                      learning; organisational learning).
Glossary   605

Situational variables see Contingency Theory.        Strategy This is a plan of action stating how an
Size see Contingency Theory.                         organisation will achieve its long-term objectives.
Social construction This is an approach              Sustainability This term was originally coined
concerned with the processes by which people         by environmental and ecological campaigners
construct, maintain and change social and            to describe the development of economic, social
organisational reality. It is a term used in         and industrial practices which would contribute
                                                     to sustaining the natural environment. It has
both postmodernism and realism. For
                                                     been extended to include the promotion of
postmodernists, social construction is seen as
                                                     organisational practices that contribute to the
creating a number of competing ‘realities’, none
                                                     health of the planet, the survival of humans
of which possess ultimate truth or reality.
                                                     and other species, the development of a just
Realists, on the other hand, believe in just one
                                                     and humane society, and the creation of work
socially-constructed reality which does exist.
                                                     that brings dignity and self-fulfilment
Social needs The need to belong, to gain love        (Dunphy et al, 2003).
and affection; to be in the company of others,       SWOT analysis This is a strategic planning tool
especially friends (see hierarchy of needs).         which assesses the Strengths, Weaknesses,
Socio-Technical Systems theory This is a             Opportunities and Threats possessed and faced
variant on Job Design which involves a shift         by an organisation.
of focus from the individual job to the              Systems Theory see closed systems and Open
organisation as a whole. It sees organisations as    Systems school.
being composed of interdependent social and
                                                     Task culture This type of organisational culture is
technical systems.
                                                     job- or project-orientated; the onus is on getting
Stars These are business units, industries or        the job in hand (the task) done rather than
products with high growth and high market            prescribing how it should be done. Such types of
share. Because of this, stars are assumed to use     culture are appropriate to organisations with
and generate large amounts of cash. However,         organic structures where flexibility and
they are also likely to be very profitable (see      teamworking are encouraged.
Growth-Share Matrix).                                Taylorism see Scientific Management.
Strategic Conflict model This is an approach to      Technology see Contingency Theory.
strategy which harks back to the military
                                                     Theory X This is a management theory
metaphor, and portrays competition as war
                                                     expounded by Douglas McGregor (1960) which
between rival firms. In particular, this model       states that the average person dislikes work and
draws on the work of military strategists, and       will avoid it wherever possible, unless coerced
attempts to apply their military aphorisms to        to do so (see Theory Y).
modern business organisations.
                                                     Theory Y This is a management theory
Strategic intent This is a term which was            expounded by Douglas McGregor (1960) which
originally coined to describe the commitment of      states that most people can view work as being
Japanese managers to create and pursue a vision      as natural as rest or play, they are willing to
of their desired future.                             take responsibility, and are capable of exercising
Strategic management Though often used as a          self-direction and self-control (see Theory X).
generic term to describe the process by which        Three-Step model This model of change was
managers identify and implement their                developed by Kurt Lewin and sees change as going
organisation’s strategy, it was originally applied   through three stages: unfreezing, moving and
only to quantitative, mathematical approaches        refreezing. It is one of the four elements of Lewin’s
to strategy.                                         Planned approach to change (see Planned change).
606   Glossary

Total Quality Management (TQM) This was                 Unfreezing This is the first step in Lewin’s
developed in Japan and is the systematic                Three-Step model of change. It seeks to
application of quality management principles            destabilise (unfreeze) the complex field of
to all aspects of an organisation’s activities,         driving and restraining forces which prevent
including customers and suppliers, and their            human behaviour from changing (see moving
integration with key business processes.                and (refreezing).
Transformational leadership This approach               Values These are one of the key components of
portrays leaders as charismatic or visionary            culture. They relate to how things ought to be
individuals who seek to overturn the status quo         done in an organisation; they tell members
and bring about radical change. Such leaders            what is important in the organisation (see
use the force of their personality to motivate          organisational culture).
followers to identify with the leader’s vision and
                                                        Vision This is a view of an organisation’s
to sacrifice their self-interest in favour of that of
                                                        desired future state. It generally has two
the group or organisation. Transformational
                                                        components: a description of the organisation’s
leadership is seen as being appropriate to
                                                        core values and purpose; and a strong and bold
divergent states (see contextual approach to
leadership and transactional management).               picture of the organisation’s future which
                                                        identifies specific goals and actions (see vision-
Transactional management This approach
                                                        building).
stems from the notion that the manager-
subordinate relationship is based on a                  Vision-building This is the process of creating a
transaction between the two, whereby managers           vision. It is an iterative process which involves
exchange rewards for subordinates’                      the conception by a company’s senior
performance. Transactional managers focus on            management team of an ‘ideal’ future state for
task completion, goal clarification and                 their organisation; the identification of the
optimising the performance of the organisation          organisation’s mission, its rationale for
through incremental changes within the confines         existence; and a clear statement of desired
of existing policy, structures and practices –          outcomes and the desired conditions and
basically, they seek to work within and maintain        competences needed to achieve these.
the status quo. This approach to management is          Workforce diversity This term refers to the
seen as being appropriate in Convergent states          dissimilarities – differences – among an
(see contextual approach to leadership;                 organisation’s workforce owing to age, gender,
Transformational leadership).                           race, ethnicity, religion, sexual orientation,
Triple-loop learning This involves questioning          nationality, socio-economic background,
the rationale for the organisation and, in the          capabilities/disabilities, etc. It draws attention to
light of this, radically transforming it (see           the need to take account of these differences
single-loop learning; double-loop learning;             when seeking to recruit, retain and motivate
organisational learning).                               staff. In particularly, it identifies the need to
Uncertainty This relates to the degree of doubt,        treat different groups differently if an
unpredictability and ambiguity that exists in           organisation is to treat all its employees in an
any situation.                                          ethical and fair manner.
1




                     Index



Note: Emboldened page numbers signify     analysers 245                             Ashour, A.S. 508
       glossary entries.                  analysis 76                               Ashton, D. 522
Abegglen, J. 116, 122                     Analytical stream 6, 214–19, 595          Ashton, T.S. 14
Abell, D.F. 248                               applying strategy 233, 237–8, 257     Ashworth, W. 20
Abell, P. 80                                  approaches to change management       Asia 27, 149, 175, 490
Abodaher, D. 80                                      261                            assertiveness 186
Ackroyd, S. 87, 117, 122, 126, 154, 155       approaches to strategy 219, 220       assessment 469–70
action, bias for 90                           managing change 429–30                assumptions, basic 172, 595
Action Learning 524, 525, 526, 595        Anderson, C. 248, 249                     Aston group 69, 77–8, 490, 595
action phrase 277                         Andretti, M. 95                           AT Kearney 3, 4
Action Research 524, 595                  Andrews, K.R. 208, 211, 214, 248, 251     Athos, A.G. 196, 216, 244, 290, 600,
    change management, approaches to      Ansoff, H.I. 208, 210, 211, 214, 215,               604
           268, 270, 272–3, 274, 275,                220, 245                       attitudes 172
           276, 278, 279                  AOL 2                                     audits 474, 595
activity planning 472, 595                Appignanesi, R. 146, 150, 151, 152        Auer, P. 67, 369–70, 371, 372, 373,
Adams, C. 356, 361                        Apple 173, 196                            374, 376
Adaptation-Innovation theory 520, 595     applying strategy 232–58                  Australia 175, 300, 414
adaptive view 212                             levels of strategy 238–46             Austria 22, 175
Adhocracy 173                                 strategic planning tools 246–56       authority 41, 44, 186, 595
AEI 343                                       types of strategies 234–8             autonomy 90–2, 596
Africa 175                                approaches to change management           Aviva 493
Aglietta, M. 66
                                                     259–86                         Ayres, R. 356
Aguren, S. 371
                                              organisational change, frequency
Ahmed, P.K. 128, 133
                                                     and magnitude of 281–4         BA 494
Aitken, H. 38
                                              Planned approach 267–81               Babbage, C. 16, 17–18, 49
Akao, Y. 459
                                              theoretical foundations 261–7         Bachman, J.G. 189
Alban-Metcalfe, R. 511, 513
                                          Argenti, J. 214, 240                      Back, K.W. 271, 315
Albrow, M. 44, 169
                                          Argentina 27                              backstaging 596
Alcatel 345, 346
                                          Argyris, C. 51, 79, 148, 227–8, 268,      Badham, R. 113, 137, 183, 184, 191,
Alderman, J. 337, 338, 342
                                                     271, 301, 446, 505, 525                   192, 193
Alimo-Metcalfe, B. 494, 511, 513
Allaire, Y. 138, 224, 226, 300, 327,          new paradigms 87, 117, 126, 127,      Bain & Co 233, 254
           379, 383                                  128, 129, 130, 133             Balanced Scorecard 167
    culture, power, politics and choice   Aris, S. 346, 347                         Bank of Tokyo 136
           169, 176, 195                  Arndt, M. 157, 158, 159, 162, 280, 297    Bar, H. 270, 275, 526
    developments in organisation          Arnold, J. 66, 69, 113, 446               bargaining 186, 324
           theory 79, 80, 81                  management – roles and                Bargal, D. 268, 269, 270, 272, 273,
Allen, F.R. 169                                      responsibilities 504, 507,                275, 526
Allen, R.W. 187, 188, 191                            509, 511, 512, 513, 522, 523   Barnard, C. 55, 60–1, 62, 357, 482,
Allport, G.W. 270, 272, 273, 274          Arnot, C. 532                                        498
Alvesson, M. 145, 150, 152, 281           Aronowitz, S. 153                         Barratt, E.S. 176
Amazon.com 340                            art management activity 499               Barrie, C. 122, 123, 124, 190
American Telephone and Telegraph          Arthur Andersen 496                       Barth, C. 38
    Company 58                            artifacts 172, 595                        Bartlett, C.A. 304
American Tobacco 1                        Asch, D. 240, 252                         Barton, L. 496
Amin, A. 145                              Ash, M.G. 268                             Bass, B.M. 503, 509, 511
Amit, R. 236                              Ashforth, B.E. 228                        Bateson, G. 129, 130
1




608 Index

Batten, D. 276, 279                          change management, developments        Buchanan, D. 4, 80, 324, 328, 332,
Batten, J.D. 187                                     in 302, 303, 304, 310, 311,              468, 471, 482, 596
Baudrillard, J. 146                                  313                               change management, developments
Beach, S.D. 266                           Boeing 226                                          in 292, 296, 298, 302, 303,
Beatty, C.A. 226, 511                     Boje, D.M. 159, 297                                 304, 310, 311, 313
Beaty, L. 526                             Bold Strokes 596                             culture, power, politics and choice
Bechtold, B.L. 157, 159, 160, 161,           developments in change                           176, 183, 184, 189, 191,
           162, 164, 217, 280, 297, 301              management 307                           192, 193
Beckhard, R. 268, 472–4, 476, 479, 522       framework for change 322, 326, 328        new paradigms 88, 113, 132, 137
Bedeaux system 54                            internal relationships and attitudes   Buchel, B. 87, 127, 128, 129, 131,
Beer, M. 3, 278, 322, 325, 328, 468                  366, 383                                 133, 135, 139, 301
    change management, developments          management – roles and                 Buckingham, L. 190
           in 289, 293, 294, 300, 302,               responsibilities 516, 530      Buckley, P.J. 122
           303, 304                          managing change 436, 437, 444          Buckley, R. 116
Beesley, M.E. 356                            new paradigms 101–2, 138               Buckley, W. 265
Beeson, I. 157, 159, 160, 162, 284,          organisational change and              Buddhism 84
           297                                       managerial choice 485          Buffet, W. 2
Behaviourists 262, 266, 279, 596          bonding 119                               Bullock, R.J. 276, 279
Belgium 20, 175                           Borchardt, K. 21                          bumpy change 321–2
beliefs 172                               Boston Box see growth-share matrix        Burawoy, M. 79
Bell, C.H. 310, 453, 511, 526             Boston Consulting Group 215, 249,         bureaucracy 43–7, 596
    change management, approaches to                 256                               demise of 64–5
           262, 263, 264, 267, 268,       bottom-up change 596                      Burgess, M. 115, 117, 118
           272, 273, 276, 277, 278,       Boulton, M. 17, 49                        Burgoyne, J. 87, 127, 129, 130, 134,
           279, 281, 285                  boundaries, opening of 97–8                         524
Bell, D. 65, 86                           bounded rationality model 461             Burke, W. 265, 266
Bell Laboratories 84                      Bower, T. 196                             Burnes, B. 3, 49, 445, 460, 468, 469,
benchmarking 596                          Bowles, M. 169                                      475, 511
Benjamin, G. 295, 302                     Bowman, C. 240, 252                          case studies in external
Bennett, R. 273                           Box, G. 1, 4, 531                                   relationships 399, 401, 419
Bennis, W.G. 51, 64–5, 69, 77, 219,       Boydell, T. 87, 129                          case studies in internal relationships
           302, 303, 503, 504             BP 496                                              and attitudes 376–7, 379
Bensoussan, B.E. 235, 237, 239, 247,      Bracker, J. 207, 208                         case studies in strategic change
           252, 255                       Brandenburger, A.M. 237                             355, 360
Berggren, C. 371, 372                     Branson, R. 531                              change management, approaches to
                                                                                              280, 281, 285
Bernstein, L. 263, 272                    Bratton, J. 137
                                                                                       change management, developments
Bessant, J. 3, 79                         Brazil 356
                                                                                              in 302, 315
Best Value 198, 415, 416, 418, 443–4      Breslin, J. 4
                                                                                       culture, power, politics and choice
bet-your-company cultures 173             Brewer, E. 498, 500                                 176, 198
Bethlehem Steel Company 35–6, 37          Bridges, W. 532–3                            developments in organisation
Beyer, J.M. 171                           Brindle, D. 3, 114                                  theory 55, 70, 78, 81
Bhaskar, R. 154, 156                      Brittain, V. 114                             management – roles and
Biberman, J. 147                          Brodbeck, P.W. 160, 162, 297, 303                   responsibilities 503, 508,
Big Bang approach 138                     Brown, A. 169, 170, 171, 173, 176,                  520, 523, 525
Big Government 56                                    177, 178, 179, 181, 182,          new paradigms 133, 134, 135
Bigelow, B. 157, 158, 159, 162, 280,                 183, 300                          strategy, approaches to 225, 226
           297                            Brown, C.A. 368, 370, 371, 372            Burns, J.M. 226, 302, 509, 510
Bigge, L.M. 279                           Brown, D.H. 220                           Burns, T. 71, 72, 73, 74, 77, 134, 174,
Birchall, D. 299                          Brown, D.R. 526                                     266
Black, J.A. 157, 159, 162, 280, 284,      Brown, S.L. 158, 159, 160, 161, 217       Burrell, G. 85, 146, 153
           296                               change management, developments        Burt, T. 369
Blackler, F. 134, 368, 370, 371, 372                 in 280, 281, 283, 297, 298,    Burton, F. 1
Blake, R.R. 169, 268, 505–6                          299, 303                       business
Blake, V. 260                             Bruland, K. 16, 17, 18                       environment 225–6
Blau, P.M. 72, 77                         Brummer, A. 196, 344                         ethics 495–8, 596
Blodget, H. 497                           Brunner, E.J. 272, 315                       level 238, 242–4
BMW 86, 189                               Bryant, A. 4                                 practices and work systems 120–2
Boddy, D. 176, 177, 192, 324, 332,        Bryce, R. 496                             Business Process Re-engineering 3–4,
           471, 482, 596                  BT 346, 493                                         293, 596
1




                                                                                                          Index    609

Butler, R. 80, 227                          rapid and unexpected 65              Citron, R. 496
Butler, V.G. 266                            see also framework for change;       clan 173
Buzzell, R.D. 248                               globalisation and challenge of   Clark, R.C. 125
Byars, L.L. 240                                 change; incremental change       Clarke, L. 300, 301, 302, 309, 313
Bywater, P.L.C. 3, 4                    changing external relationships, case    Clarke, M. 160, 303
                                                    studies in 398–422           Classical school 6, 138, 197, 335, 597
Cadbury 195, 218                            PoliceCo 414–19                         approaches to change management
Calás, M. 146                               Rover-TRW 401–7                                 262, 266
Caldwell, R. 309, 311, 312                  Speedy Stationers and UTL               approaches to strategy 205, 208,
Callin, W. 260                                      (Turbines) 407–13                       221, 222, 223, 225, 226,
Callinicos, A. 153                      changing organisational culture                     227, 228, 229
Camp, R.C. 456                              arguments in favour 176–80              critical perspectives on
Canada 175                                  conflicts and choices 182–3                 organisation theory 143, 147,
Canon 236, 255                              reservations 180–2                              150, 163
Cant, M. 414                            chaordic 597                                developments in organisation
Canter, R.R. 56, 65, 69                 chaos 158, 271, 597, 599                            theory 54–6, 60–1, 64–5,
careers 100                                 theory 597                                      67–70, 72, 74–5, 78, 80–1
Carew, A. 38, 54                        Chapman, S.D. 16, 18                        internal relationships and attitudes
Carlson, S. 498                         charismatic authority 44                            369, 370
Carnall, C.A. 294, 295, 298, 301,       Chartered Institute of Training and         management – roles and
           302, 304, 305, 313                       Development 520                         responsibilities 520, 532
Carnegie, D. 32                         Chassagne, S. 16, 18                        trial and error and Scientific
Carpenter, M. 288                       Chawla, S. 127, 134                                 Management 13, 39, 40, 41,
Carr, C. 247                            Chemers, M.M. 507–8                                 48–9, 51
Carroll, D.T. 112                       Cheney, G. 162, 296                         see also organisation theory:
Carroll, G.R. 217                       Chief Executive Officers 114                    Classical approach
Cartwright, D. 269, 272                 Child, J. 134, 195, 220, 221, 235,       Clegg, C.W. 80, 149
Carvel, J. 101                                      299, 329, 500, 599           closed systems 597
case studies see changing external          developments in organisation         coalition 186
   relationships; internal                          theory 63, 70, 71, 72, 76,   Coca-Cola 238, 490
   relationships and attitudes;                     77, 78, 79                   Coch, L. 276
   strategic change                         strategy, approaches to 210,         Coe, T. 2
cash-cows 250, 597                                  218–19, 222, 224, 235        coercive power 188, 597
Cashman, J.F. 506                       China 134, 490, 513, 520                 Coghlan, D. 304
Cassidy, J. 2                           Chisholm, R.F. 273                       Cognitive Dissonance 519, 597
Catastrophe 271                         choice 193–6, 220–8, 328–9, 502          Cohen, M.D. 228
categorisation 76                           process 455                          Cole, R.E. 117, 122
Caulkin, S. 497                         see also choice-management-change        Collier, A. 154
causal mechanism 597                                management model             Collins, D. 85, 293, 315, 462, 533
causal powers 597                       choice-management-change                 Collins, J. 255, 256
Caves, R. 338                                       management model 7, 450,     combination strategy 241
CeBIT 142                                           454, 455–83, 484, 485        combined change 432, 435–9, 441–4
                                                                                 command 42
Cellan-Jones, R. 2                          change process 467–83
                                                                                 commerce and factories 14–33
centralisation 42                               assessment 469–70
                                                                                    employers and employees,
Centre for Working Life see Institute           objectives and outcomes 468
                                                                                            relationship between 15–16
           for Work Life Research               people 475–83
                                                                                    France 23–5
challenge of change see globalisation           planning change 470–5
                                                                                    Germany 21–3
           and challenge of change              remit 468–9
                                                                                    industrialisation and organisation
Chamberlin, E.H. 236                            trigger 468
                                                                                            of work 17–19
Champy, J. 1, 4                             choice process 456                      Scandinavia 25–31
Chandler, A.D. 207, 208, 211                focus of choice 458–9                   United States 31–3
Chang, T.-L. 249                            organisational context 456–8         commitment planning 472–4
change 467                                  organisational trajectory 459–62     communication 91–2, 480–1
   agents 597                               trajectory process 462–7             company welfarism 119
management 128–9, 432–44 passim         Christopher, M. 399                      Competitive Forces 215, 234–6, 238,
       team 471                         Chrysler 1                                          241, 244, 430, 597
       see alsoapproaches to change     Cipolla, C. 20                              applying strategy 256, 257
           management                   Citicorp 2                               complexity perspective 157–63, 254,
   process 455                          Citigroup 288, 289                                  597–8
1




610 Index

compromise 191                            core workers 104–5, 149                        excellence, search for 88–95
Compulsory Competitive Tendering          corporate level 238                            framework for change 327
           198, 414–15, 416, 418, 443–4       strategy 240–3                             internal relationships and attitudes
Confucianism 118                          cost leadership 235, 242                              368, 375
Congress of Vienna (1815) 21              Coulson-Thomas, C. 2                           management – roles and
Connelly, J. 155, 156, 315                Council for Excellence in Management                  responsibilities 532, 533
Conner, P.E. 267                                      and Leadership 523                 new paradigms 87, 94, 103, 118,
Constable, J. 498, 523                    country club management 505                           126, 129, 131, 135–9
constraints 220–8, 431–43 passim,         Coupland, D. 135                               organisational change and
           447–8, 502                     Courtney, H. 253                                      managerial choice 484, 485
contextual approach 508–14, 598           Covin, J.G. 246                                post-entrepreneurial model 95–103
Contingency approach 6, 70–80, 598        Cowe, R. 196, 226                           Cummings, T.G. 3, 129, 130–1, 255,
   applying strategy 235                  Cox, B. 252                                           256, 322, 453, 462, 463
   approaches to strategy 205, 218,       Crainer, S. 88, 122, 524, 525                  change management, approaches to
           223, 226                       Crawford, M. 477                                      263, 268, 275, 276, 277,
   Aston group 77–8                           creativity 598                                    278, 280, 281, 285
   choice 197                             Cressey, P. 374                                change management, developments
   critical perspectives on               critical perspectives on organisation                 in 289, 299, 300, 309
       organisation theory 143, 146,      theory 141–65                                  culture, power, politics and choice 73,
           151                                complexity perspective 157–63                     170, 172, 177, 178, 180, 181
   criticisms 78–80                           postmodern perspective 144–54              management – roles and
   developments in change                     realist perspective 154–7                         responsibilities 493, 495, 526
           management 293, 296, 298       critical success factors 167                customers 90
   developments in organisation           Crombie, A.D. 169, 170                      Cuthbert, N. 41
           theory 55, 56, 76, 80, 81      Crosby, P.B. 4                              Cyert, R.M. 183, 195, 282
   environment 73–4                       cross impact method 253, 254, 598
   environment, importance of 72          Crossan, M.M. 126                           Daft, R.L. 148
   environmental uncertainty and          Crouch, C. 533                              Daimler-Benz 1
           dependence 74–5                Crozier, M. 50                              Dakin, S.R. 498
   external relationships 422             Cruise O’Brien, R. 4                        Dale, B.G. 3, 4, 87, 117, 121, 299, 459
   framework for change 331               cultural perspective 169–83                 Darwin, C. 217, 283
   management – roles and                     changing organisational culture:        Darwin, J. 275, 524
           responsibilities 518                       arguments in favour 176–80      Dastmalchian, A. 79
   managing change 431                        changing organisational culture:        Davenport, T.H. 324, 327
   new paradigms 134, 138                             conflicts and choices 182–3     Davies, C. 513
   organisational change and                  changing organisational culture:        Davis, C. 157, 159, 160, 162, 284, 297
           managerial choice 452, 453                 reservations 180–2              Davis, E. 79
   technology 75–7                            organisational culture, definition of   Davis, J.A. 19, 21
   trial and error and Scientific                     169–76                          Davis, L.E. 56, 65, 66, 69
           Management 51                  culture 128, 224                            Davis, P.S. 243
Continuous Change model 430, 598          culture, power, politics and choice         Davis, R. 55
continuous transformation model of                    166–99                          Davis, S. 170, 179–80
           change 283–4                       choice 193–6                            Davis, T.R.V. 180
contractual fringe 105, 149                   cultural perspective 169–83             Dawkins, W. 125
control 42, 598                               power-politics perspective 183–92       Dawson, P. 184, 193, 275, 280, 285,
convergent state 226, 509, 598            culture-excellence approach 6,                        323, 453
Cooke, B. 269, 272                                    88–115, 168, 598                   change management, developments
Cool, K. 236                                  approaches to change management                   in 290, 292–4, 296, 298,
Coombs, R. 4                                          263, 284                                  300, 302, 304, 306, 313–15
Cooper, C.L. 2, 3, 4, 87, 121, 142,           choice 197                              Day, C. 526
           523, 526                           critical perspectives on organisation   Day, J. 415
Cooper, J. 134, 445                                   theory 143, 144, 151, 163       De Geus, A. 84
Cooper, R. 146                            culture-excellence approach                 De Witte, K. 300
cooperative systems 60–1                      criticisms 110–15                       Deal, T. 169, 171, 173, 176
coordination 42                               cultural perspective 169, 176, 182      decision-making models 461
Copernicus 85, 86                             developments in change management       Deetz, S. 145, 150, 152, 281
Copley, F.B. 37                                       290, 298, 302, 313              defenders 245
Coram, R. 360, 376–7, 419                     emerging future organisations           Deighton, N. 142
Corbett, G. 191                                       103–10                          Dell 344
1




                                                                                                               Index    611

Delphi method 253, 254, 598                change management, developments              organisational structure 298–9
demands 502                                      in 293, 294, 299, 303, 304,            power and politics 304–5
Deming, W.E. 84, 116, 121                        311, 315                               recipes for change 305–9
Denmark 20, 25, 27–8, 29, 30, 31, 48       management – roles and                   emerging future organisations 103–10
    strategic change 353, 354, 355               responsibilities 488, 491,             federal organisation 106–7
Dent, E.B. 268, 272                              492, 532                               Shamrock organisation 104–6
Depth of Intervention 519                Dyson 224                                      triple I organisation 107–10
Deresky, H. 134, 142, 175, 490, 493,                                                employee involvement 444–7
           495, 513                      E-Plus 142                                 employers and employees, relationship
Derrida, J. 146, 148, 153                East Asia 149                                          between 15–16
Design school 210–11, 214, 215, 222,     Easterby-Smith, M. 128, 129, 133,          empowerment 599
           598                                       139, 302                       Engels, F. 16
    see also Job Design                  Eastern and Central Europe 2, 114,         English Electric 343
Dess, G.G. 243                                       490, 497                       Enlightenment 146–7
development 475                          Easton, G. 154, 155, 156, 315              Enron 497, 498
developments in change management        Eccles, T. 162, 296                        enterprise (single company) unions 119
           287–317                       Economic Man 60                            entrepreneur 501
    Emergent approach 291–312            Economist Intelligence Unit 126            entrepreneurship 90–2, 98, 599
    Planned approach to organisational   Eden, C. 273                               environment 72, 73–4, 599
           change 289–91                 edge of chaos 158, 599                     environmental assessment 306
Diageo 2                                 education 119                              environmental uncertainty and
Dickens, C. 16                           Edwardes, M. 80, 315                                   dependence 71, 74–5
Dickens, L. 268, 273, 275                Egan, G. 178                               equifinality 599
Dickson, W.J. 59, 69                     Eisenhardt, K.M. 158, 159, 160, 161,       Equilibrium model 430
differentiation 73                                   217                            equity 42
Directional Policy Matrix 252                change management, developments        Erickson, J. 135
discipline 41                                        in 280, 281, 283, 297, 298,    Ericsson 345
discontinuous change 322                             299, 303                       Erios, L. 341
disseminator 501                         Elden, M. 273                              Erridge, A. 418
dissipative structures 598               Eldridge, J.E.T. 169, 170                  esprit de corps 42
disturbance-handler 501                  Elliot, K. 209                             Essinger, J. 398, 414
divergent state 226, 510, 598            Elliott, L. 114, 115, 497, 532             esteem needs 62, 599
diversity 65                             Ellis, T. 500                              Etzioni, A. 188, 189
division of labour 598                   Elrod II, P.D. 315                         Europe 1, 2, 4
division of work 41                      Emergent approach 6, 291–312,                  applying strategy 241
Dixit, A. 237                                        448–9, 599                         critical perspectives on organisation
Dobson, P. 177, 178, 180                     approaches to change management                    theory 142, 151
Docherty, P. 492                                     285                                developments in organisation
dogs 250–1, 599                              approaches to strategy 216                         theory 54, 56, 65, 67, 68, 73
Dohert, T.L. 415                             change agent, role of 309–12               external relationships 415, 422
Dolvik, J.E. 25, 29                          criticisms 312–15                          internal relationships and attitudes
Domberger, S. 398, 414                       developments in change                             377
Done, K. 190, 398                                    management 289, 316                management – roles and
Donkin, R. 167, 168                          framework for change 321, 323,                     responsibilities 490, 493, 513
                                                     326, 329–30, 331                   new paradigms 88, 97
Donovan, P. 190
                                             internal relationships and attitudes       organisational change and
double-loop learning 130, 599
                                                     365, 366, 367, 383, 396, 397               managerial choice 470
Drennan, D. 170
                                             management – roles and                     strategic change 344, 347, 353
Drory, A. 184, 185, 187, 191
                                                     responsibilities 519, 530          trial and error and Scientific
Drucker, P.F. 240, 499                       managerial behaviour 302–4                         Management 13–14, 16–18,
Dudley, G. 360                               managing change 430–3, 435–9,                      20, 24–7, 29–33, 38, 43, 46–7
Dukakis, M.S. 102                                    441–5, 449–50                      see also Eastern and Central
Duncan, W.J. 499, 500                        new paradigms 115                                  Europe; European
Dunham, A.L. 23                              organisational change and              European Commission 357
Dunphy, D.D. 3, 66, 68, 114, 115,                    managerial choice 453, 454,    European Electricity Directive (96/92/EC)
           280–1, 282, 452, 605                      484, 485                                   357, 358, 361, 436
    change, a framework for 322, 323,        organisational culture 300–1           European Energy Directive 361
           324, 328                          organisational learning 301–2          European Single Market 355, 356
1




612 Index

European Union 336, 416, 419, 491          Fleetwood, S. 154, 155                       Froebel, F. 145
Evans, M.G. 506                            Fleisher, C.S. 235, 237, 239, 247, 252,      Frost, P.J. 191
Evans, R. 496                                          255                              Fruin, W.M. 117, 137, 196
Evolutionary approach 221, 222, 223,       Fleishman, E.A. 505, 507                     functional level 238
          225, 226, 229, 335               flexibility 519–21                              strategy 244–5
excellence, search for 88–95               flexible labour force 105, 149               future organisations see emerging
   action, bias for 90                     Flynn, J. 177, 198, 533                                 future organisations
   autonomy and entrepreneurship           Foch, M. 488
          90–2                             Foegen, J.H. 162, 296                        Gaebler, T. 355, 414
   customers 90                            Fohlen, C. 23                                Galagan, P.A. 209, 228
   hands-on and value-driven 92            Ford, H. 38, 58, 84, 369–70, 599             Galbraith, J.R. 298, 299
   productivity through people 92          Ford Motors 97, 190, 368–9, 396              Gale, B.T. 248
   simple form, lean staff 93                  external relationships 401, 402          game theory 599
   simultaneous loose-tight properties         management – roles and                   Gandz, J. 183, 185
          93–5                                         responsibilities 490, 492, 516   Gantt, H. 38
executing champion 91                          managing change 437, 438                 Garbage Can model 228, 461
exploration phase 277                          organisational change and                Gardner, J. 192
external relationships see changing                    managerial choice 459, 463       Garratt, B. 134
external relationships                     Ford, T.M. 248, 249                          Garratt, C. 146, 150, 151, 152
extrinsic motivators 599                   Fordist/Fordism 145, 147, 372–3,             Garvin, D.A. 128, 280
Ezzamel, M. 2                                          375, 376, 396, 599               Gastil, J. 505
                                           Fore Industries 346                          Gates, B. 114, 465, 531
factories see commerce and factories       formal alliances 191                         Gay, C.L. 398, 414
Fahy, J. 236                               Foucault, M. 146, 150, 153, 291              GEC 434, 448, 459
Fanning, S. 337, 433, 514                  four Cs 415                                     case studies in strategic change
Far East 347                               four ‘soft’ Ss 89, 118, 244                             336, 343, 344, 345, 346, 362
Farrell, D. 187                            Fox, J.M. 147, 208                              culture, power, politics and choice
Fawn, J. 252                               framework for change 318–32, 485                        173, 196
Fayol, H. 60, 489, 597, 603                    framework for choice 328–9                  management – roles and
    trial and error and science and            varieties of change 321–5                           responsibilities 515, 531
management 13, 34, 40–5, 47–51             France 23–5                                  Gell-Mann, M. 159
Fazio, R.H. 445                                critical perspectives on organisation    Gellerman, W. 267
Featherstone, M. 146, 152, 153                         theory 146                       General Electric 196, 209, 247, 252,
federal organisation 106–7                     cultural perspective 175                            490, 531
felt-need 599                                  external relationships 414                  Business Screen Matrix 252
Ferguson, C.H. 136                             French Revolution 23, 24                 General Motors 94, 97, 145, 224,
Ferlie, E. 198, 533                            management – roles and                              490, 533
Ferner, A. 25                                          responsibilities 522, 523        Gent, C. 196
Festinger, L. 445                              organisational change and                Genus, A. 294, 299
Fiedler, F.E. 507–8, 509                               managerial choice 470            Gephart, R.P. 148
Field Theory 270, 273, 274, 275, 276,          trial and error and Scientific           Gergen, K.J. 146, 147, 148, 150, 291
            279, 476, 526, 599                         Management 13–14, 16, 18,        Germaine, C. 524
figurehead 501                                         20, 25–30, 32, 34, 41, 43,       Germany 21–3, 175, 247, 414
Filby, I. 181                                          46, 48                              approaches to strategy 224, 225
Filley, A.C. 506                           Franklin, B. 315                                developments in organisation
Financial Services Authority 345           Frederick, W.C. 158, 159, 161, 297                      theory 56, 67
Finch, J. 168, 190, 191, 497               Freeman, C. 86                                  management – roles and
Finstad, N. 293, 294, 295                  Freeman, J. 217, 237                                    responsibilities 522, 523, 533
Fiol, M.C. 128, 301                        French, J.R.P. Jr 276                           new paradigms 86, 116
firm-in-sector perspective 599             French, W.L. 310, 453, 511, 526                 trial and error and Scientific
Firsirotu, M.E. 138, 169, 176, 195,            change management, approaches to                    Management 13–14, 16,
            224, 226, 300, 327, 379, 383               262, 263, 264, 267, 268,                    18–20, 24–8, 30–2, 34, 45–8
    developments in organisation                       272, 273, 276, 277, 278,         Gersick, C.J.G. 283
            theory 79, 80, 81                          279, 281, 285                    Gestalt psychology 262, 270, 273,
first level management 500                 Fried, Y. 228                                           279, 599
Fisher, L. 69                              Friedman, G. 66                              Ghamawat, P. 237
Fitton, R. 18                              friendliness 186                             Ghoshal, S. 304
Fitzgerald, L.A. 157, 158, 159, 297        Friesen, P.H. 280, 282, 283                  Gibb, C.A. 504
five forces framework 234–5                Frith, M. 101                                Gibbons, J. 465–6
1




                                                                                                                Index    613

Gibbons, P.T. 226, 511, 512               Greenberg, P. 341                           Harrigan, R.K. 241
Gibson, J.L. 186                          Greenwald, J. 283                           Harris, P.R. 280
Gibson, O. 338, 340, 341                  Greiner, L. 283                             Harris, R.T. 472–4, 476, 479
Giddens, A. 142, 155, 490                 Griffin, D. 160, 498, 508                   Harrison, M. 344, 347, 363, 494
Gilbert, R.J. 237                         Griffiths, A. 66, 68, 114, 115, 491,        Harrison, R. 173, 302, 445, 520,
Gilbert, X. 243                                      532                                         522–3, 524
Gilbreth, F.B. 34, 38–9, 40, 41, 48, 58   Grinyer, P.H. 315                           Hartley, J. 294, 310
Gilbreth, L.M. 34, 38–9, 40, 41, 48, 58   Groger, R. 142                              Harukiyo, H. 123, 124
Gillespie, R. 57, 58–9                    group dynamics 263–4, 270, 272–6,           Harung, H.S. 160, 303
Gillett, C. 337, 342                                 278–9, 526, 599–600              Harvard Business School 208, 247
Gillette 283                              Group school 266                            harvesting strategy 241
Gillies, C. 209, 227, 228                 Grove, G. 401                               Harvey, D. 526
Gittings, J. 114                          growth strategy 240                         Harvey, F. 466
GK Printers 383–95, 440–1, 517, 518       growth-share matrix 249–52, 253, 600        Hassard, J. 86, 146, 147, 152, 153,
   changing attitudes and behaviours      Grundy, T. 321                                         178, 179, 293
           390–5                          Guatto, T. 126                              Hatch, M.J. 179, 181, 182, 210, 225
   changing systems 386–90                Guest, R.H. 65, 66                              management, developments in
   internal relationships and attitudes   Guinness 2                                             275, 280, 291, 293, 298
           367, 396                       Gurrie, D. 498                                 critical perspectives on organisation
   managing change 446, 447, 448,         Gyllenhammar, P.G. 189–90, 368,                        theory 142, 146, 148,
           449                                       369, 370, 372, 437, 516, 531                149–50, 151, 152
   organisational change and                                                          Haupt, H. 207
           managerial choice 467, 476,    Habakkuk, H.J. 31                           Hawthorne experiments 57–60, 62,
           478, 480, 481                  Habermas, J. 153                                       69, 79, 116, 600
   strategy development 384–5             Hackman, J.R. 65, 66                        Hax, C.A. 209, 242, 244, 247, 251,
GKN 224                                   Haigh, C. 157, 284                                     252, 254, 326–7
Glaxo 2, 190                              Hales, C.P. 498, 500, 502, 508              Hayes, D.C. 191
                                                                                      Hayes, J. 281, 292, 295, 302, 303
Glaxo Wellcome 487                        Halifax building society 136
                                                                                      Hayles, K.N. 157, 162, 284
GlaxoSmithKline 497                       Hall, D.T. 69
                                                                                      Haywood, B. 3
Gleick, J. 157                            Hall, R. 236
                                                                                      Hedberg, B. 133, 282
Global Crossing 497                       Hambrick, D.C. 246
                                                                                      Hedlund, G. 87, 127, 134
globalisation and challenge of change     Hamel, G. 80, 120, 236, 255, 256,
                                                                                      Heller, R. 344
           489–98, 599                               282, 299, 462, 485
                                                                                      Henderson, B. 249
   business ethics 495–8                     strategy, approaches to 214, 216,
                                                                                      Hendry, C. 79, 80, 195, 271, 275,
   sustainability 491–2                              222, 224, 228
                                                                                                 304, 314–15
   workforce diversity 492–5              Hamilton, R.T. 498
                                                                                      heroes 172
Glueck, W.F. 241                          Hammer, M. 1, 4
                                                                                      Herzberg, F. 66
godfather 91                              Hammersley, B. 341–2
                                                                                      Hesketh, J.L. 170
Gold, K.A. 170                            hands-on 92
                                                                                      Hewlett-Packard 283
Gold, M. 270, 271, 526                    Handy, C. 76, 282, 299, 379, 383,           Hickman, C.F. 503
Goldberg, S.G. 268, 272                              484, 598                         Hickson, D.J. 71, 79, 80
Golding, D. 498                              critical perspectives on organisation    hierarchy 173
Golzen, G. 533                                       theory 142, 149, 151, 161           of needs 61–3, 600
Goodmeasure Inc. 95                          culture, power, politics and choice      higher authority 186
Goodwin, B. 157                                      173–4, 175, 176, 177, 183,       Hines, P. 126, 399
Goold, M. 241                                        184                              Hinkin, T.R. 512
Gordon, G. 178                               management – roles and                   Hirschhorn, L. 271, 300
Gould, S.J. 283                                      responsibilities 498, 499, 532   Hirst, C. 346, 347
Gow, D. 189                                  new paradigms 85, 87, 88,                Hlavacka, S. 243
Graen, G.B. 506                                      103–10, 111, 113, 114, 138       Ho, D.Y.F. 134, 175
Graetz, F. 294, 295, 296, 302             Hannagan, T. 523                            Hobsbawm, E.J. 15, 146
Graham, G. 142, 299, 337, 339, 341        Hannam, R. 87, 120, 121, 126                Hock, D. 94, 158, 159, 597
GrandMet 2                                Hannan, M.T. 217, 237                       Hofer, C.H. 252
Grant, A. 40                              Hanson, Lord 343                            Hofstede, G. 122, 134, 171–2, 175,
Grant, G.M. 216, 228, 247                 Hanson, P. 4                                           224, 494, 513, 520
grasp 39                                  Harbour Report 126                          Hohenzollern dynasty 22
Great Depression 56, 68                   Hardaker, G. 142, 299, 337, 341             Holden, N. 115, 117, 118
Greece see Public Power Corporation       Hardy, C. 293                               Honda 255, 401, 463, 493, 516
           of Greece                      Harré, R. 154, 155                             new paradigms 87, 97, 125, 126
1




614 Index

Hoogerwerf, E.C. 162                      impoverished management 506                  approaches to strategy 216, 219,
Hook, G.D. 123, 124                       Inagami, T. 121, 123                                 220, 222
Horne, J.H. 498                           incremental change 212, 321–2                business practices and work
Horne, T. 415                                 model 282, 430, 600                              systems 120
Horsley, W. 116                           India 490, 493                               choice 197
Hoshino, Y. 116                           Individual Perspective 262–3, 266, 600       critical perspectives on organisation
Hoskin, K. 207                            Indonesia 496                                        theory 143, 144, 151, 155,
Howarth, C. 3                             Industrial Democracy Project 67                      163
HSBC 497                                  Industrial Revolution 6, 12, 64              criticisms 125–6
Huber, G.P. 80, 128                           management – roles and                   cultural perspective 174
Huczynski, A. 4, 189, 292, 296, 298,                  responsibilities 492, 522        developments in change
          303, 468                            new paradigms 111, 114                           management 290
  new paradigms 87, 88, 95, 132               trial and error and Scientific           framework for change 326
Hughes, M. 136, 192                                   Management 13, 14, 15            future issues 122–4
Hull, R. 4                                Industrial Society 111, 177                  internal relationships and attitudes
Human Relations approach 6, 55–69,        industrialisation 17–19                              375
          600                             information systems 131                      management – roles and
  approaches to change management         initiative 42                                        responsibilities 494, 520
          263, 267–8                      innovation 98                                new paradigms 87, 129, 131,
  approaches to strategy 205, 208         Institute for Work Life Research 67                  135–6, 137, 138, 139
  bureaucracy, demise of 64–5             integration 73                               organisational change and managerial
  choice 197                                  phase 277                                        choice 459, 483, 484
  cooperative systems 60–1                Intel 283, 344                               personnel issues 118–20
  critical perspectives on                internal labour markets 119                  power-politics perspective 196
      organisation theory 143, 151        internal relationships and attitudes,     Jenner, R.A. 158, 160, 161, 297, 298,
  criticisms 67–9                             case studies in 365–97                           299
  developments in organisation                GK Printers 383–95                    Jenster, P. 235
                                                                                    Jeynes, L. 414
          theory 70, 72, 74, 78, 80, 81       Volvo 368–77
                                                                                    Job Design 65–7, 278, 600
  Hawthorne experiments 57–60                 XYZ Construction 377–83
                                                                                       internal relationships and attitudes
  hierarchy of needs 61–3                 Internet 337–42
                                                                                               366, 368–77
  internal relationships and attitudes    interpretative view 212
                                                                                       managing change 437, 438
          375                             intrinsic motivators 600
                                                                                       organisational change and
  job design 65–7                         irrational rationality 89
                                                                                               managerial choice 459, 479
  management – roles and                  Ishizuna, Y. 137, 138, 196
                                                                                    job enlargement 66
          responsibilities 505            Italy 19, 145, 149, 175
                                                                                    job enrichment 66
  new paradigms 116, 135, 138             Ivancevich, J. 189
                                                                                    job security 100
  Theory X-Theory Y 63–4
                                                                                    Jobs, S. 196
  trial and error and Scientific          Jackson, S.E. 142
                                                                                    Johnson, G. 206, 212, 213, 214, 300,
          Management 51                   Jacobsen, N. 354
                                                                                               414, 456, 462
human resources 131, 306                  Jacques, E. 170, 270                         strategy, application of 234, 235,
Humanisation of Working Life              Jago, A.G. 503, 509                                  239, 242, 243, 244, 249,
          Programme 67                    Jaguar 490                                           251, 252, 253
Hunger, D.J. 240                          James, H. 226, 445, 511                   Johnson, R. 85
Hunter, J.E. 115, 116                     Japan 3, 54, 149, 350, 420                Jones, E.E. 445
Hurley, R.F. 268                             applying strategy 235, 236, 247        Jones, G.R. 134, 302, 492, 493, 494,
Huse, E.F. 255, 445, 446, 463                approaches to strategy 224, 225        495, 503, 513, 522
  change management, approaches to           cultural perspective 169, 175          Jones, J. 498
          263, 275, 276, 280                 management – roles and                 Jones, R.J.B. 490
  culture, power, politics and choice                responsibilities 491, 493,     Jones, T. 288, 355
          73, 170, 172, 180                          513, 522, 523, 533             Jopling, D. 220
Hussey, D. 235, 252                          new paradigms 85–6, 88, 95, 97,        Jorberg, L. 26, 28–9, 30
Hutton, W. 114, 355, 532                             103, 111, 121, 124, 127, 134   Joyce, P. 227, 228, 234, 239, 247,
Huxham, C. 273                               trial and error and Scientific                    253, 255
Hyman, R. 25                                         Management 19, 38              Junkerdom 21
Hyundai 493                                  see also Japanese approach             Juran, J.M. 84, 116, 121
                                          Japanese approach 6, 115–26, 600          Just-in-Time 117, 120–1
IBM 94, 175, 226, 256, 427                   applying strategy 243, 244, 255, 256
ICI 195, 218                                 approaches to change management        Kabanoff, B. 508
image building 191                                   282                            Kahn, H. 253
1




                                                                                                                Index   615

Kaizen 84, 121, 139, 379, 477, 530,         Komatsu 255                              Least Preferred Co-worker (LPC) 507
           600                              Korean War 116                           Lee, G.L. 226, 511
Kalleberg, A.L. 125                         Kotler, P. 241                           Lee, J. 18
Kamata, S. 125, 126, 137                    Kotter, J. 3, 137, 161, 281              Lee, M. 162, 296
Kanter, R.M. 3, 185, 206, 343,                 change, a framework for 322, 323,     Lee, R.G. 459
           511–12, 532, 598                            324, 327, 328                 Leeds building society 136
   case studies in internal relationships      change management, developments       Leemhuis, J.P. 256
           and attitudes 366, 383                      in 298, 299, 300, 301, 302,   Leeson, N. 496
   change, a framework for 322, 323,                   303, 306–9, 313, 314          Left, S. 496
           325, 326, 327, 328                  management – roles and                legitimacy 187–92
   change management, approaches to                    responsibilities 498, 500,    Leifer, R. 80
           266, 275, 280, 281, 284                     502, 510, 515                 Lenin, V.I. 38
   change management, developments             organisational change and             Leontiades, M. 240
           in 290, 299, 302, 303, 304,                 managerial choice 453, 474,   Leschley, J. 190
           306–7, 309, 313, 314, 316                   477, 482, 485                 Leslie, K. 320
   culture, power, politics and choice      Kotter, J.P. 170                         Lessem, R. 4, 520
           142, 151, 161                    Kraft, C. 169                            Levine, A.L. 32
   managing change 436, 444                 Krell, T.C. 278                          Lewin, K. 1, 329, 595, 599, 600, 601,
   new paradigms 87, 88, 95–8, 102,         Kreps, D.M. 237                                     602, 604, 605, 606
           103–4, 108, 110, 111, 113,       Kriedt, P. 18                                change management, approaches to
           114, 137, 138                    Kuhn, T.S. 85                                       261, 263, 267, 268–76, 279,
   organisational change and                Kumar, K. 156                                       280, 281, 283, 284–5
           managerial choice 484, 485       Kunda, G. 182                                change management, developments in
Kaoru, I. 84                                Kyoto Protocol 491                                  289, 290, 296, 309, 314, 315
Kaplan, P.J. 2, 167                                                                      management – roles and
Karlsson, C. 374, 375                       Laage-Hellman, J. 15, 117, 120, 122,                responsibilities 505, 524, 526
Karlsson, L.E. 369                                     125, 127                          organisational change and
Karwowski, W. 121                           Lacey, R. 38                                        managerial choice 476, 480
Katsouros, M. 355                           Laird, L. 190, 196                       Lewis, R. 157, 158, 159, 160, 284
Kauffman, S.A. 158                          Lamming, R. 121, 126, 399                Leyden, P. 490
Kawakita, T. 124                            Land Rover 490, 493                      liaison 501
Kay, J. 210, 216, 217, 236, 459             Landsberger, H.A. 69                     Liberalisation Law 357, 358
Kazunori, O. 126                            Lanford, H.W. 254                        Lichtenstein, B.M. 310, 311, 471
Kellaway, L. 112, 487–8                     large batch (mass) production 76         lifetime employment 118–19
Kelly, J.E. 3, 33, 49, 66, 69               Larson, L.L. 506                         Likert, R. 65, 505
Kemp, T. 14, 20, 21, 22, 24                 Latin America 491                        Lincoln, J.R. 125
Kempner, T. 38                              Laudon, K. 145                           Lindblom, C.E. 183, 282, 460
Kennedy, A. 169, 171, 173, 176              Lawler, E.E. 66, 69, 112, 162, 296       Lindsay, V. 320
Kennedy, C. 87                              Lawrence, P. 71, 73–4, 80, 209, 266      Lines, W.L. 491
Kerr, C. 69                                 Lawson, H. 148                           Linneman, R.E. 253
Kerr, S. 507                                leader 501                               Linstead, S. 146–7, 148
Keshavan, K. 255                                see also leadership                  Lippitt, G. 522
Keuning, D. 169, 176, 522, 523              leadership 131, 503–18, 601              Lippitt, R. 276, 505
key performance indicators 167                  and change 527–30                    Litschert, R. 213–14
Keynes, J.M. 5                                  contextual approach 508–14           Little, R. 240
Keys, J.B. 117                                  cost 235, 242                        Littlechild, S.C. 356
Kidd, P. 121                                    grid 406, 505                        Littler, C.R. 50
Kiel, L.D. 161, 297                             leader-follower situation approach   Local Government Act (1999) 415
Kipnis, D. 186, 187                                    506–8                         Locke, E.A. 186
Kippenberger, T. 270, 271, 272, 283             personal characteristics-trait       Locke, E.W. 34, 50
Kirton, M.J. 520–1                              approach 504–6                       Loden, M. 513
Kjellberg, A. 25, 29                            transformational 606                 Long March 307, 485, 516, 601
Klein, H.E. 253                             Leadership, Organisation and Co-             framework for change 322, 326, 328
knowledge power 189, 601                               determination Programme 67        internal relationships and attitudes
Koch, R. 210, 241, 244, 249, 251, 252       lean staff 93                                       366, 383
Kodz, J. 101                                Learned, E.P. 236                            managing change 436, 437, 444
Koji, O. 123                                learning 130, 131, 519–21, 599, 604,         new paradigms 101–2, 138
Kolind, L. 347–51, 353–4, 435–6,                       606                           Long, P. 524
           464, 515                             see also organisational learning     long-range planning 208–10, 601
1




616 Index

Lonrho 190, 196                             development 519–27                     Martin, J. 149, 170–1
Lorenz, E. 157                                  learning and flexibility 519–21    Martin, R. 301
Lorsch, J.W. 71, 73–4, 80, 170, 266             process 522–4                      Masayoshi, I. 123
Lovell, R. 262                              globalisation and challenge of         Masayuki, M. 123
Lucent 346                                          change 489–98                  Maslow, A.H. 61–3, 64, 65, 66, 69,
Lupton, T. 498                              leadership 503–18                                 263, 600, 604
Luthans, F. 125, 180                        leadership and change 527–30           Mason, R.O. 248, 249, 251
Lyles, M.A. 128, 301                        role of manager 498–503                Massie, J.L. 50
Lynch, R. 239, 456                              decision-making roles 501–3        material support 91
Lyon, D. 153                                    informational roles 501            Mathias, P. 14, 21
Lyons, L. 299                             Management Charter Initiative 523        Maughan, D. 288
Lyotard, J.-F. 146, 153                   management development process 523       Maxwell, R. 196
                                          management structures 471–2              Mayes, B.T. 187, 188
Mabey, C. 285, 295, 302, 304              managerial behaviour 65, 302–4, 431,     Mayo, E. 51, 55, 57–60, 61, 67, 69
Macalister, T. 360, 496                             433–6, 438–42, 444, 448        Mayo, J. 344–5, 346, 347, 434
MacArthur, D. 121                         managerial choice see organisational     Mayo, M. 288
Macbeth, D.K. 157, 284                              change and managerial choice   Mayon-White, B. 285, 302, 304
McCalman, J. 294, 295, 304                Managerial Grid 406, 505                 Mazda 490, 492
McCormick, R. 498, 523                    managerial sub-system 265                Mechanistic structure 72, 73, 601
McCracken, K. 3, 260                      managing change 427–51                   Meek, V.L. 181, 182
Macdonald, M. 513                           employee involvement and               Megerian, L.E. 302
McDonald, S. 134                                    organisational                 mental models 129
McDonald’s 173, 490                                 transformation 444–7           Mercedes 86, 493
McGann, J. 4                                GK Printers 440–1                      Merck 490
McGill 526                                  issues 429–32                          Meriwether, J. 496
McGrath, M.R. 173                           Marconi 434–5                          metaphor 601
McGregor, D. 63–4, 81, 117, 268,            merging theory and practice            Meyer, M.W. 181
         503, 505, 605                              447–50                         Meyerson, D. 149
Machiavelli, N. 476                         music industry 432–3                   Michaelson, G.A. 237, 527
MacIntosh, R. 157, 159, 160–1, 217,         Oticon 435–6                           Microsoft 114, 173, 226, 238, 465–6,
         284, 297, 315                      PoliceCo 443–4                                    490, 531
McIvor, G. 373, 374                         Public Power Corporation of            Middle East 175
McKenna, S. 117                                     Greece 436–7                   middle management 500
                                            Rover-TRW 441–2                        middle-of-the-road management 506
McKiernan, P. 208, 209, 248, 249,
                                            Speedy Stationers 442–3                Midvale Steel Company 34–5
         251, 252
                                            Volvo 437–8                            Miewald, R.D. 69
McKinsey 7 S Framework 89, 118
                                            XYZ Construction 439–40                Milburn, A. 101
McKinsey and Company 89, 252
                                          Manicas, P. 155                          Miles, M. 445, 446
McLaughlin, H. 524
                                          Mannari, H. 122                          Miles, R.E. 214, 245–6, 257
MacLean, D. 157, 159, 160–1, 217,
                                          Mansfield, R. 79                         Milgrom, P. 237
         284, 297, 315
                                          Mantoux, P. 16                           Mill, J. 4
McLennan, R. 137, 285                     March, J.G. 183, 195, 282
McMillan, J. 116                                                                   Miller, D. 235, 243, 280, 282, 283,
                                          Marconi 343–7, 434–5, 515                           519, 520
McNamara, R. 208                            management – roles and
McNamee, B.P. 247                                                                  Miller, E. 265
                                                    responsibilities 516, 531      Miller, T.R. 117
McNiff, J. 275, 526                         managing change 446, 447, 448,
McNulty, C.A.R. 253, 254                                                           Milner, M. 375
                                                    449, 450                       Milward, A. 25, 27, 29
Madden, E.H. 155                            organisational change and              Minett, S. 137
Maddock, S. 457, 494, 513                           managerial choice 454, 459,    Ministry of International Trade and
Mahoney, M.J. 445                                   460, 463, 464                             Industry 122
maintenance strategy 240                    strategic change 336, 362, 363, 364    Mink, O.G. 85
Maitland, A. 233                          Marczewski, J. 23                        Mintzberg, H. 5, 71, 80, 135, 209,
Majluf, N.S. 209, 242, 244, 247, 251,     Marglin, S.A. 15                                    235, 237, 317, 319, 338
         252, 254, 326–7                  market 173                                  change management, developments
Malaska, P. 256                           Markus, L.M. 338                                    in 282, 289, 296
Mallory, G. 183                           Marrow, A.J. 267, 269, 270, 272,            culture, power, politics and choice
management – roles and responsibilities             273, 505, 526                             183, 184, 186, 188
         486–534, 601                     Marsh, N. 522                            management – roles and
  changing managerial behaviour           Marsh, R.M. 122                                     responsibilities 498, 500–1,
         524–6                            Marshall Plan 38, 54                                502, 503, 519
1




                                                                                                            Index   617

   organisational change and             Naoi, A. 125                             Oil Producing and Exporting
           managerial choice 453, 460,   Napoleon III 24                                      Countries 434
           462, 466                      Napster 337–8, 340–1, 432, 433           oil shocks 86
   strategy, application of 239, 243,    National Health Service 225, 493,        Okaka, K. 125
           244, 246, 249, 251, 252                 511                            Oldham, G.R. 65
   strategy, approaches to 204–5,           Internal Market 198                   Oliver, N. 117, 126
           206, 210, 211–12, 213, 214,   Naylor, T.H. 213, 249                    Olsson, H.-O. 369
           215–16                        NEC 247                                  one best way 126, 601
Mirieux, Y.U.H. 181                      negotiator 501                           Open Systems 205, 211, 264–6, 267,
Mirror Group Newspapers 196              Nelson, R.R. 228                                     278, 602
Mirvis, P. 285, 310                      neo-Fordism 145, 146                     open-ended change 602
Mirza, H. 122                            neo-Marxism 291                          order 42, 158, 602
mission statement 601                    neo-Taylorism 145                            -generating rules 159, 602
Misumi, J. 115, 117, 120, 121, 122,      Netherlands 27, 175                      O’Reilly, C. 176
           125, 138                      networking 191                           Organic structure 72, 602
Mitroff I.I. 248, 249, 251               New, C. 3, 407                           organisation 42
Mitsubishi 375, 490                      New Deal 56                                  characteristics 226–8
   Bank 136                              New Factories Programme 67                   development 264, 267–8, 276,
modernism 144–50, 601                    New Golden Rule 186                                  279, 280, 281, 284, 285, 601
Mohr, N. 142                             New, S. 399, 401                                 in change management 304,
momentum 481–3                           new ventures internally 98                           309, 311
monitor 501                              New Zealand 175                                  changing nature of 277–8
Moore, J.I. 220, 247–8, 251              Newbury, D.M.G. 237                          principles 40–3
Morgan, G. 12, 80, 213, 217, 225,        News International 196, 490, 531             theory
           227, 299, 522                 Newstrom, J. 524                                 Classical approach 33–47
   critical perspectives on              Next Steps 198                                   bureaucracy 43–7
   organisation theory 148, 157, 159,    Nicholson, E. 213–14                             motion study 39–40
           160, 162                      Nicholson, S.M. 252                              organisation, principles of 40–3
   culture, power, politics and choice   Nike 496                                         scientific management 34–8
           184, 191–2, 193, 196          Nippon Electric Company 116                  developments 53–82
   new paradigms 85, 115, 121, 126,      Nissan 87, 98, 116, 126, 196, 401                Contingency approach 70–80
           137                           Nohria, N. 3, 322, 325, 328, 468                 Human Relations approach
motion study 39–40                          change management, developments in                55–69
Mougayar, W. 340                                   289, 293, 294, 302, 303, 304           see also critical perspectives
Mouton, J.S. 169, 268, 505–6             Nokia 344, 345                               of work 17–19
moving 274, 601                          non-linear systems 601                       see also organisational
MSN 465, 466                             Nonaka, I. 87, 127, 134, 175, 520        organisational
Mueller, R. 495                          Nondi, R. 418                                change, frequency and magnitude
Mullings, H. 320                         Nord, W. 178                                         of 281–4
Mullins, L. 41, 50, 184, 264, 265        Nordic model 25, 28                          change and managerial choice
   developments in organisation          normative power 189, 601                             452–85
           theory 60, 70, 72, 79         norms 172, 224, 263, 601                         choice-management-change
   management – roles and                Norrie, J. 1                                         management model 455–83
           responsibilities 499, 513,    Norse, D. 253                                context 456–8
           520, 522, 524                 Nortel 345                                   culture 131, 300–1, 602
Mumford, A. 520, 522                     North America 368, 490                           definition 169–76
Murdoch, R. 196, 230, 531                   see also Canada; United States                see also changing organisational
Murphy, C.J. 507                         Norton, D. 167                                       culture
Murray, F. 193, 195                      Norway 25, 26, 27, 28–31, 67                 goals sub-system 265
Murray, V.V. 183, 185                    Nougaim, K.E. 69                             learning 126–35, 182, 197, 301–2,
music industry 337–42, 432–3,            Nystrom, P.C. 314, 519                               602
           514–15, 518                                                                    criticisms 132–5
Myers, C.S. 55                           O Germany 142                                    definition 127–31
                                         objectives 224, 432–3, 435–8, 440–4              new paradigms 87
Nadler, D.A. 301, 304                    O’Brien, G.E. 508                            structure 298–9
Nadoworthy, M. 40                        Occupation Administration: Civilian          trajectory 459–62
Nahavandi, A. 498, 503, 504, 508                   Communications Section 116         transformation 444–7
Nalebuff, B.J. 237                       Ohmae, K. 228                            Orth, D.C. 524
Nanus, B. 219, 503                       Ohmi, N. 124, 125                        Osborne, D. 355, 414
1




618 Index

Oticon 347–55, 435–6, 515                person culture 173–4, 602                    plan 39, 211–12
   management – roles and                personal characteristics-trait               Planned approach 6, 267–81, 448–9,
          responsibilities 510, 518,         approach 504–6                                      602
          519, 525, 531                  personal mastery 129                            approaches to change management
   managing change 444–5, 446, 447,      personnel issues 42, 93, 100–3,                         261, 274, 275, 276, 277,
          448, 449                                   118–20, 492–5, 507, 606                     278, 280–1, 282, 284, 285
   organisational change and             perspective 211–12                              approaches to strategy 210–11,
          managerial choice 453–4,       PESTEL framework 456                                    214, 215, 222
          458, 460, 464, 468–70, 476,    Peters, T. 290, 336, 343, 422, 484,             criticisms 279–81
          478, 481, 483                              485, 596, 598, 604                  developments in change
   strategic change 336, 362, 363, 364       change, a framework for 322, 323,                   management 288, 292–3,
Ouchi, W. 85, 117, 118, 125, 127                     327                                         295, 309, 312, 313, 314,
Outhwaite, W. 154, 156                       change management, approaches to                    315–16
outsourcing 602                                      280, 281–2, 284                     framework for change 321, 323,
Ovum 142                                     change management, developments                     326, 329–30, 331
Owen, G. 343                                         in 291, 301, 302, 304               internal relationships and attitudes
                                             critical perspectives on organisation               365, 366–7, 383, 396, 397
P2P (peer-to-peer) 337–42, 432, 433                  theory 142, 151, 161                Lewin, K. and planned change
Paine, F. 248, 249                           culture, power, politics and choice                 268–76
Panasonic 347                                        169, 171, 178                           Action Research 272–3
Pang, K. 117, 126                            management – roles and                          field theory 271
paradigms, new 83–140, 602                           responsibilities 503, 525, 533          group dynamics 272
    culture-excellence approach 88–115       new paradigms 11, 84, 87, 88–95,                three-step model 274–5
    Japanese approach 115–26                         96, 98, 101, 102, 103, 104,         management – roles and
    organisational learning 126–35                   108, 110, 112, 113, 114,                    responsibilities 505, 519,
paralysis through analysis 89                        118, 133, 137, 138                          526, 530
Pareto, V. 60                                strategy, application of 236, 241, 244      managing change 430–3, 435–9,
Parikh, M. 339, 340                          strategy, approaches to 206, 211,                   441–5, 449–50
Parker, D. 357, 361                                  229                                 organisation development,
Parker, M. 152, 360                      Petersen, J.C. 187                                      changing nature of 277–8
Parsons, T. 50, 60                       Pettigrew, A.M. 246, 271, 280, 282, 453         organisational change and
participation 602                            change, a framework for 321, 322,                   managerial choice 453, 454,
Partnership Sourcing Ltd 399                         323, 327, 329                               484, 485
Partnoy, F. 496                              change management, developments             planned change, phases of 276–7
Pascale, R.T. 137, 188, 196, 216, 244,               in 290, 292, 293, 295, 296,         to organisational change 289–91
           290, 600, 604                             300, 301, 303, 304, 305–6,       planning 42
    new paradigms 87, 89, 117, 118,                  310, 313, 314                       long-term 120
           122, 125, 126, 127                culture, power, politics and choice         phase 277
passage, rites of 171                                184, 187, 194–5                  ploy 211–12
Patel, P. 252                                strategy, approaches to 210, 214,        PoliceCo 414–19, 443–4, 517–18
Paton, N. 523                                        217, 218–19, 222                    external relationships 400, 420, 421
Paton, R. 294, 295, 304, 488, 491        Pfeffer, J. 80, 113, 134, 137, 162,             management – roles and
pattern 211–12                                       227, 290, 296, 302                          responsibilities 509, 518, 533
Pavlov, J.P. 262                             culture, power, politics and choice         managing change 445, 447, 448,
Pavtke 127                                           183, 184, 185–6, 187, 188,                  449, 450
Peacock, A. 356                                      191, 192, 193                       organisational change and managerial
Pearson, A.E. 241, 522                   phases of change 602                                    choice 454, 460, 470
Pedler, M. 87, 129, 524                  Phillips 347                                 Policy Deployment (Hoshin Kanri)
Pelling, H. 16, 32                       Phillips, A. 494                                        459, 600
Penrose, E. 236                          philosophical management activity            politics 127–8, 304–5, 602–3
people 127, 475–83                                   499                                 see also culture, power, politics and
    involvement 479–81                   physical support 91                                     choice
    momentum 481–3                       physiological needs 62, 602                  Pollard, S. 15, 16, 19
    willingness to change 475–9          piecemeal initiatives 324                    Pontusson, J. 368, 369–70, 371, 372,
People, Data, Working Life               Pilling, D. 123                                         373, 374, 375
           Programme 67                  PIMS 247–9, 252, 253, 602                    pooled interdependence 74
Pepsi 238                                Piore, M. 145                                population ecology 603
Perez, C. 86                             Pirelli 300                                  Porras, J.I. 255, 256
Perrow, C. 71, 76–7, 80, 192             Pischetsrieder, B. 189                       Porter, L.W. 187
1




                                                                                                           Index   619

Porter, M. 338, 597                        productivity through people 92         Resource-Based approach 234, 236–7,
   strategy, application of 234–5,         Proper Selfishness 110                             430, 604
           237–8, 241, 242–3, 246,         prospectors 245                            applying strategy 241, 243, 244,
           255, 256                        Protestantism 49                                   247, 256, 257
   strategy, approaches to 204, 206,       Protzman, C. 116                       responsibility 41
           209, 215                        Pruijt, H.D. 66–7                      restructuring 96–7
portfolio extension 240                    Prussia 20, 21, 22, 23                 retrenchment strategy 240
Porthuis, A.-N. 162                        Psychological Contract 519, 603        Revans, R. 524, 595
position 211–12                            psychosocial sub-system 265            Revolutionary Assemblies 23
Positioning school 215, 222, 227,          Public Power Corporation of Greece     reward systems 98–9, 119
           234, 235, 238, 241, 247,                  355–61, 436–7, 515–16        Reynolds, C.W. 159
           256, 603                           management – roles and              Ricks, D.A. 494, 513
post-audits 474, 595                                 responsibilities 518, 533    Riegler, C. 67, 369–70, 371, 372, 373,
post-entrepreneurial model 95–8               managing change 445, 446, 447,      374, 376
   consequences of 98–103                            449                          Rigby, D. 209, 227, 228, 247, 254
post-Fordism 145, 146, 149                    organisational change and           ringi 121, 227, 462, 604
Postan, M. 31                                        managerial choice 473, 478   Ringland, G. 253
postmodern perspective 144–54, 603            strategic change 336, 362–3, 364    rites 171
   implications for organisations 150–2    Pugh, D.S. 69, 71, 72, 77, 79, 293,    rituals 172
   modernism to postmodernism                        301, 303, 304                Robbins, S.P. 50, 113, 137, 299, 445
           144–50                          punctuated equilibrium model of            culture, power, politics and choice
   reservations 152–4                                organisational
                                                                                              183, 184, 185–6, 187, 189,
power 304–5, 603                                     transformation 283, 603
                                                                                              192, 193, 194, 195
   coercive 188, 597                       Punctuated model 430
                                                                                      developments in organisation
   culture 173, 603
                                                                                              theory 60, 70, 71, 75, 77,
   see also culture, power, politics and   quality 121–2
                                                                                              79, 80
           choice; power-politics             see also Total Quality Management
                                                                                  Roberts, J. 237
perspective                                Quality of Working Life programmes
                                                                                  Robins, K. 145
power-politics perspective 183–92                    67
                                                                                  Roethlisberger, F. 59, 69
   definition 185–7                        question marks 251
                                                                                  Rogers, R. 103
   legitimacy 187–92                       questioning, rites of 171
                                                                                  role 263–4, 604
   political behaviour in organisations    Quinn, J.B. 5, 209, 214, 282, 303
           183–5                           Quinn, R.E. 173, 322                       culture 173, 604
practices 224                                                                     Roll, E. 17
Prahalad, C.K. 80, 120, 236, 255,          Rafferty, K. 136                       Rollinson, D. 184, 189, 460, 461
           256, 282, 299, 462, 485         Railtrack 191                          Rolls Royce 1
   strategy, approaches to 214, 216,       Rakesh, K.S. 255                       Romanelli, E. 282
           222, 224, 228                   rational choice model 461              Romm, T. 184, 185, 187, 191
Prescriptive stream 6, 214–19, 603         rational-legal authority 44            Roosevelt, F.D. 56
   applying strategy 233, 234, 237,        rationalistic view 212, 603            Rose, M. 54, 55, 57, 58, 60, 63, 67,
           256, 257                        reactors 245                                       68, 69, 134
   approaches to strategy 219, 220,        Realist approach 154–7, 254, 603–4         trial and error and science and
           228                             reason 186                                         management 33, 34, 37, 38,
   managing change 429–30                  reciprocal interdependence 75                      49
Prigogine, I. 157, 598                     Reed, J. 288                           Rosenzweig, P.M. 134, 175
Prince, C. 288                             Reed, M. 85, 155, 156, 192             Rost, J.C. 503
principles of organisation 603             refreezing 274–5, 604                  Rover-TRW 97, 401–7, 441–2, 446,
privatisation 603                          Reich, R. 114, 115, 532                            517, 518
   see also Public Power Corporation       Reich, S. 490                              external relationships 399–400,
           of Greece                       Reitzle, W. 189                                    420–1
problem children 251, 603                  release 39                                 organisational change and
Probst, G. 87, 127, 128, 129, 131,         remits 468–9                                       managerial choice 460, 478,
           133, 135, 139, 301              remuneration 42                                    479, 481
process culture 173                        remunerative power 189, 604            Rowland, T. 190, 196
process production 76                      Renault 190, 196, 368                  Rowntree, S. 16
Processual approach 221, 222, 223,         Renesch, J. 127, 134                   Royston Marine 260
           225, 226, 230, 335, 603         renewal, rites of 171                  rule manipulation 191
product champion 91                        Rescher, N. 157                        Rumelt, R.P. 236
product differentiation 235, 242           resource allocator 501                 Russia 20, 38, 54, 86
1




620 Index

Saatchi & Saatchi 190                     Schwartz, P. 490                         Sissons, K. 523
Sabel, C. 145                             science of management see trial and      size 65, 71–2, 77–8
safety needs 62, 604                      error and science of management          Sjöstrand, S.V. 498, 508
Saigol, L. 496                            Scientific Management 34–8, 54, 55,      Skinner, B.F. 262, 280
Sakai, K. 137                                         58, 65, 116, 499, 604        Sloan, A.P. 80
Sakichi, T. 84                            Scientific-Rational approach 33, 604     Slovak Republic 243
Sako, M. 115, 117, 123, 124, 125,         Scott, J. 357                            small batch (unit) production 76
           127                            Scott, W.R. 33, 35, 60, 70, 72, 75,      Smiles, S. 84
Salaman, G. 79, 80, 180, 182                          211, 265                     Smircich, L. 146
Salauroo, M. 198, 225, 280                Secord, P.F. 155                         Smith, A. 17, 18, 19, 33, 40, 49, 78,
Saldersee, R. 246                         Seike, A. 123                                       167, 211
Salkeld, N. 320                           selective information 191                Smith, C. 195, 235, 599
sanctions 186                             self-actualisation needs 62, 604             strategy, approaches to 210,
Sander, M. 142                            Self-Help 84                                        218–19, 222, 224, 235
Sarasohn, H. 116                          self-organisation 604                    Smith, J.G. 248, 250, 252, 256
Sathe, V. 176                             Selznick, P. 60, 79                      Smith, J.H. 57, 58, 69
Sato, H. 115, 117, 123, 124, 125, 127     semistructures 604                       Smith, M. 19, 63, 76, 262, 263, 269,
Saul, J.R. 114, 532                       Senge, P.M. 266, 299, 301, 310, 459,                270, 445
Saul, S.B. 25, 27, 29                                 485, 503, 525                Smith, P.B. 115, 117, 120, 121, 122,
Saunders, M. 399                              new paradigms 84, 87, 129, 130                  125, 138
Sayer, A. 145, 154                        Senior, B. 294, 296, 298, 300, 303,      Smith, S. 3
scalar chain 42                                       304, 321, 323                Smith, T. 145, 147
Scandinavia 25–31, 48, 175                seniority-based promotion 119            Smithers, R. 190
   developments in organisation           sequential interdependence 75            SmithKline Beecham 2, 190, 487
           theory 56                      7 S Framework 244, 604                   smooth change 321
   internal relationships and attitudes   Shamrock organisation 104–6, 107,        Snow, C. 214, 245–6, 257, 299
           369                                        111, 149                     social construction 605
   management – roles and                 Shapiro, C. 225, 237                     Social Darwinism 49
           responsibilities 533           shared visions 129                       Social Man 60
   strategic change 347, 355              Sharifi, S. 178, 179                     social needs 62, 605
scapegoating 191                          Sharp 116                                Society for the Promotion of
scenario/vision-building approach         Sheahan, J. 24                           Scientific Management 38
           253–6, 604                     Sheather, S. 246                         socio-technical systems theory 66,
Schein, E.H. 113, 138, 263, 268, 272,     Sheldrake, J. 57, 58, 60, 69, 86, 116,              278, 605
           273, 274–5, 280, 446                       117, 138                     Sony 347
   culture, power, politics and choice        trial and error and science and      Sorge, A. 218, 220, 329
           172, 176, 179, 180, 182                    management 34, 35, 38, 39,   Sosik, J.J. 302
Schein, V.E. 495                                      43, 44                       South Korea 493
Schendel, D. 236, 252                     Shell 496, 497                           Spain 175
Schilit, W.K. 186                             Chemicals 252                        specialisation by focus 235, 243–4
Schmalensee, R. 237                       Sheridan, K. 115, 116                    Speedy Stationers 407–13, 442–3, 517
Schmuck, R. 445, 446                      Shewhart, W. 84                              external relationships 400, 421
Schoeffler, S. 247, 248                   Shiflett, S.C. 508                           managing change 448
Schoemaker, P.J. 236                      Shigeo, S. 84                                organisational change and
Schoenherr, R.A. 77                       Shirai, T. 122, 123, 124                            managerial choice 480, 481
Scholes, K 206, 214, 414, 456, 462        Short, J.E. 4                            Speller, S. 415
   strategy, application of 234, 235,     Shortell, S. 246                         Spiller, K. 142, 143
           239, 242, 243, 244, 249,       Siemens 346, 347                         spokesperson 501
           251, 252, 253                  Silverman, D. 169, 498                   stability strategy 240
Schon, D. 127, 130, 133, 148, 227–8       Silverman, G. 288                        Stace, D.A. 3, 280–1, 282, 322, 323,
Schonberger, R.J. 87, 115, 121, 126,      Simon, H.A. 50, 60, 70, 183, 502                    324, 328, 452
           244                            simple form 93                               change management, developments
Schooler, C. 125                          Simpson, G. 344, 345, 346, 347, 363,                in 293, 294, 299, 304, 311,
Schriesheim, C.A. 507                                 434, 515                                315
Schuijt, J.J.M. 294, 311                  simultaneous loose-tight properties      Stacey, R. 210, 217, 228, 246, 255,
Schumacher, E.F. 65                                   93–5                                    280
Schuyt, T.N.M. 294, 311                   single-loop learning 130, 604                change management, developments
Schwartz, H. 170, 179–80                  Sirower, M. 2                                       in 297, 300, 303
1




                                                                                                                  Index    621

    critical perspectives on organisation   Strickland, A.J. 240, 244                      trial and error and science and
            theory 156, 157, 158, 159,      structure 131                                          management 12, 13, 34–8,
            160, 161, 162, 163              Stuart, R. 524                                         39, 40, 41, 42–3, 44, 45, 47,
Stalk, G. 116, 216                          Styhre, A. 157, 160, 161, 303                          48, 49, 50, 51
Stalker, G.M. 71, 72, 73, 74, 77, 134,      sub-Saharan Africa 114, 490, 497           Taylor Society 38
            174, 266                        subordination 42, 507                      Taylorist/Taylorism 37, 66, 67, 145,
Standard Oil 1                              Sugeno, K. 124, 125                                    147, 182
Star, J. 79                                 Sullivan, J. 117, 159, 175                     external relationships 421
Starbuck, W.H. 145, 314, 519                Sullivan, T.J. 297                             framework for change 326
stars 250, 605                              Sun Tzu 237, 527                               internal relationships and attitudes
Stata, R. 126, 128                          superior considerations 507                            372–3, 375, 376
statistical process control 121             supervisory management 500                     management – roles and
statistical quality control 84              supply chain networks 339                      responsibilities 530
Steiner, G.A. 214                           sustainability 491–2                           managing change 449
Stengers, I. 157, 598                       Sutherland, E. 181                         team learning 129
Stewart, H. 497                             Suttle, J.L. 69                            team management 505
Stewart, R. 498, 502                        Sutton, G. 465                             teamwork 119
Stickland, F. 3, 157, 162, 163, 284,        Suwa, Y. 124, 125                          Teather, D. 340, 341, 497
            295, 296, 320, 323, 533         Swab, J.L. 187                             technical sub-system 265
Stokland, D. 25, 29                         Sweden 25, 26–7, 28, 29, 30, 31            technology 71, 75–7
Stolh, C. 162, 296                              Co-determination Law 67, 368,          Teece, D.J. 215, 225, 227, 228, 234,
Storey, J. 292, 324, 328, 522, 523,                    374, 376                                    238
            525                                 Development Programme 67               tenure of personnel 42
Stournaras, Y. 357                              developments in organisation           Terry, P.T. 79
Strader 339                                            theory 67                       Tetenbaum, T.J. 157, 158, 159, 160,
strategic                                       internal relationships and attitudes               162, 284, 297
    alliances 97–8                                     369                             Theory E 322, 328
    business units 209                          managing change 437                    Theory O 322, 328
    change case studies 335–64              Switzerland 175, 496                       Theory X-Theory Y 63–4, 81, 605
        Internet, P2P and music industry    SWOT analysis 211, 237, 380, 456,          Thickett, M. 39
            337–42                                     605                             Thomas, A.B. 175, 494, 504, 513,
        Marconi 343–7                       Sykes, Sir R. 190, 487                                 528, 531
        Oticon 347–55                       symbols 172                                    new paradigms 123, 124, 125,
        Public Power Corporation of         synergies 96–7                                         126, 134
            Greece 355–61                   Systemic approach 335                      Thompkins, J.M. 137, 187
    conflict 234, 237–8, 241, 243,              approaches to strategy 221–2, 223,     Thompson, A.A. Jr 240, 244
            244, 430, 605                              224, 225, 226                   Thompson, J. 71, 74–5, 80, 133, 268,
    applying strategy 236, 238, 247,        systemic jointism 324                                  327, 518
            256, 257                        Systems school 266                         Thompson, M. 249
    intent 605                              systems thinking 129                       Thorberry, N.E. 523
    management 605                                                                     Thorpe, R. 524
    planning institutes 247                 T-Mobile 142                               Thorsrud, E. 67, 370
    planning tools 246–56                   Taiichi, O. 84                             3M 283, 347
        growth-share matrix 249–52          Takac 398                                  three-step model 314–15, 526, 605
        PIMS 247–9                          Talbot, C. 355, 356, 414                       management, approaches to 270,
        scenario/vision-building            Talbot, R. 520–1, 525                                  272, 273, 274–5, 276, 279
            approach 253–6                  task                                       Tighe, C. 260
    strategy 431–2, 435–7, 439–43,             considerations 507                      Tillett, A. 15
            447, 464–7, 605                    culture 173, 605                        Time Warner 2, 490
    approaches to 203–30                       management 506                          timeliness 120–1
        choices and constraints 220–8       Tavistock Institute 67                     Tippett, D.D. 315
        definition 210–14                   Taylor, F.W. 163, 369, 503, 527–8,         Tobach, E. 268
        long-range planning 208–10                    597, 604                         Toffler, A. 65
        origins 207–8                          culture, power, politics and choice     Tom Peters Group 94
        Prescriptive and Analytical                   167, 182, 197                    Tomaney, J. 145, 147
            stream 214–19                      developments in organisation            Tomlinson, J.W.C. 498, 500
    see also applying strategy; strategic             theory 54, 55, 58, 59, 61,       top management 500
Strebel, P. 243                                       62, 65, 66                       top-down systemic change 324
Streeck, W. 66, 533                            new paradigms 116, 135                  Torbert, W. 310
1




622 Index

Total Quality Management 3–4, 81,        choice 198                             UTL Turbines 407–13, 442–3, 446
           606                           critical perspectives on               Uttal, B. 178, 181
    developments in change               organisation theory 146
           management 293, 300, 303      cultural perspective 175, 177          value-driven 92
    new paradigms 84, 121, 136           developments in organisation           values 172, 264, 606
tough guy, macho culture 173                     theory 55, 67, 72, 75, 79          sub-system 265
Toyota 145, 224, 236, 247, 490, 516      external relationships 399, 400,       Van Maanen, J. 182
    new paradigms 84, 87, 125, 126               414, 416, 420, 422             van Muijen, J.J. 300
Tracey, J.B. 512                         management – roles and                 variability 76
Trade 114                                        responsibilities 496, 497,     Vecchio, R.P. 508
traditional authority 44                         522, 523, 524, 527, 532, 533   Venkatraman, N. 4
training 119, 475                        managing change 428                    Vickers, J. 356
trajectory process 455, 462–7            new paradigms 87, 98, 101,             Victorian Age 64
Tran, M. 497                                     103–4, 110–11, 114, 120,       Vinnecombe, S. 457
Tranfield, D. 3                                  126, 129, 136, 139             Virgin 240, 531
transactional                            organisational change and              Visa 159
    management 511, 606                          managerial choice 470, 471         Network 94
    state 509–10                         power-politics perspective 190         vision 462–4, 606
    style 226                            strategic change 343, 344, 346,            -building 254–6, 606
transformational                                 355, 356, 361                  Vodafone 142, 196, 240, 490
    leadership 606                       trial and error and Scientific         Volkswagen 1
    state 510–11                                 Management 12–13, 16–32        Volvo 2, 368–77, 437–8, 516
    style 226                                    passim, 46, 47, 48                 developments in organisation
Travellers 2                          United States 1, 4, 31–3                             theory 66
Traynor, I. 189                          applying strategy 234, 235, 241,           external relationships 401
Treanor, J. 168, 190, 191, 345, 497              247                                Gent and Born 374–5
trial and error and science of           approaches to change management            internal relationships and attitudes
                                                                                           365, 366, 396
    management 11–51                             277, 284
                                                                                    Kalmar 370–2
    commerce and factories 14–33         approaches to strategy 207–8, 209,
                                                                                    management – roles and
    organisation theory: Classical               211, 224, 228
                                                                                           responsibilities 490, 492,
    approach 33–47                       Congress 55
                                                                                           518, 531
Trice, H.M. 171                          cultural perspective 169, 171, 174,
                                                                                    managing change 448, 449
triggers 468                                     175
                                                                                    organisational change and
triple I organisation 107–10             developments in change
                                                                                           managerial choice 459, 460,
triple-loop learning 130, 606                    management 289
                                                                                           478, 479, 480
Trist, E.L. 65, 66, 69, 79               developments in organisation
                                                                                    phases of change 370
Trompenaars, F. 134, 175, 494, 513,              theory 54, 55, 56, 65, 67,
                                                                                    power-politics perspective 190
           520                                   68, 72, 73, 76
                                                                                    Torslanda 372–3
TRW see Rover-TRW                        external relationships 402, 414
                                                                                    Uddevalla 373–4
Tsang, E.W.K. 127, 128, 129, 133,        management – roles and                 von Clausewitz, C. 237
           134, 139, 302                         responsibilities 491, 493,     Voss, C. 3, 4
Tschacher, W. 272, 315                           494, 496, 497, 513, 523,       Vroom, V.H. 503, 508, 509
Tsoukas, H. 154, 155, 156                        532, 533
Turnbull, P. 87, 126                     managing change 446                    Wack, P. 255
Turner, B. 169, 170                      new paradigms 84–8, 94–6, 101,         Wadsworth, A. 18
Turner, D. 3                                     110, 114–18, 120–3, 129,       Wagner, J.A. 506
Turner, I. 224, 252                              134, 136, 139                  Wakisata, A. 123, 124, 125
Tushman, M.L. 282                        power-politics perspective 192         Wal-Mart 283
types of organisation 245–6              strategic change 341, 347, 353,        Wall, T.D. 66
                                                 355, 356                       Wallace, J. 135
Udy, S.H. Jr 50                          trial and error and Scientific         Walton, R.E. 278
UMIST 7                                  Management 13–14, 16–17,               Wang, C.L. 128, 133
UMTS 142                                         19–20, 23, 25, 30, 34, 37–8,   Warner, H.M. 488
uncertainty 606                                  40–1, 43, 46–8                 Warner, M. 1, 79
unfreezing 274, 606                   unity of command 42                       Warr, P. 65
United Kingdom 2–3, 4                 unity of direction 42                     Warwick, D.P. 268
   applying strategy 247              Urabe, K. 116, 122                        Wastell, D.G. 4
   approaches to strategy 224, 226,   Ure, A. 16, 18, 49                        Waterman, R.H. 161, 229, 290, 525,
          227, 230                    Urwick, L. 43                                       596, 598, 604
1




                                                                                                           Index   623

  culture, power, politics and choice    Whitley, R. 533                         Worley, C.G. 3, 129, 130–1, 255, 256,
          169, 171, 178                  Whittington, R. 155, 156, 210, 221–2,             322, 453, 462
  new paradigms 84, 87, 88–95, 96,                 227, 247, 255, 314, 453         change management, approaches to
          98, 101, 104, 108, 112, 114,   Whitty, M. 147                                    268, 276, 277, 278, 280,
          118, 137                       Whyte, J. 4, 162                                  281, 285
  strategy, application of 236, 241,     Whyte, W.H. 69                            change management, developments
          244                            Wickens, P. 98, 118, 122                          in 289, 299, 300, 309
Watkins, K. 268, 273, 275                Wilkinson, A. 121                         culture, power, politics and choice
Watson, G. 114, 462                      Wilkinson, H.E. 524                               177, 178, 180, 181
Watson, T. 111, 147, 182, 217, 488       Wilkinson, T. 260                         management – roles and
Watt, J. 17, 49                          Willbur, J. 524                                   responsibilities 493, 495, 526
Watts, J. 123                            Willcocks, S.G. 137, 184                Worrall, L. 2, 4, 523, 526
Weber, M. 60, 64, 71, 77, 150–1, 489,    Williams, K. 86, 145, 247               Wray, R. 345
          597                            Williamson, O. 218                      Wren, D. 116
  trial and error and science and        Willmott, H. 181, 182                   wrong-headed analysis 89
  management 13–14, 34, 43–7, 48,        Willumstad, B. 288
          49, 50, 51                     Wilson, D.C. 112, 113, 138, 169,        XYZ Construction 377–83, 439–40,
Wedgwood 15, 17                                    175, 285                               516
Wedgwood, J. 17, 33, 49                     change management, developments        internal relationships and attitudes
Weekes, B. 3, 81, 468, 469                         in 290, 292, 296, 301, 303,            366, 396, 397
Weick, K.E. 218, 225, 453, 458, 459,               306, 313, 314                   management – roles and
          528                            Wilson, R. 237                            responsibilities 518, 525
  change management, developments        Wingard, E. 310                           managing change 445, 446–7, 448,
          in 291, 302, 303, 304, 310     Winter, S.G. 228                                 449
Weill, S. 288                            Wisdom, J. 280, 299, 323, 453             organisational change and
Weiner, A. 253                           Witcher, B. 4, 162                               managerial choice 454,
Weinstock, A. 173, 196, 343, 344,        Witzel, M. 84, 204, 205, 379                     457–8, 469–74, 476–83
          345, 346, 347, 363, 515, 531   Womack, J.P. 120, 121, 236, 368, 420
Weinstock, S. 344                        Wood, S. 79, 120                        Yamani, Sheikh 434
Welch, J. 196, 210, 531                  Woods, A. 227, 228, 234, 239, 247,      Yarrow, G. 356
Wernerfelt, B. 236                                 253, 255                      Yetton, P.W. 508, 509
West Indies 27                           Woodward, J. 71, 75–6, 77, 79, 134,     Young, H. 360
West, P. 127                                       266                           Younger, M. 252
Western Electric 57–8, 59, 60, 61, 116   Wooten, K.C. 278, 280                   Yukl, G. 498, 500–1, 503, 504, 505,
Wetlaufer, S. 162, 296                   Work Environment Fund 67                          506, 511, 512, 523
Wheatley, M.J. 157, 159, 160, 284, 297   Work Humanisation 67                    Yutaka, N. 126
Wheelan, S.A. 526                        Work Research Unit 67
Wheelen, T.L. 240                        work systems 120–2                      Zairi, M. 4, 162
Whipp, R. 292, 295, 296, 301, 305–6      Work and Technology Programme 67        Zajac, E. 246
Whitaker, A. 86, 145                     work-hard/play hard culture 173         Zaleznik, A. 184
White, L.P. 278, 280                     workers’ lifestyle 100–3                Zentner, R.D. 254
White, M. 114, 532                       workforce diversity 492–5, 606          Zinn, H. 32
White, R. 505                            World Bank 491                          Zollverein (customs union) 22
Whitehill, A.M. 87, 115, 116, 120,       World Trade Organisation 490, 491       Zucker, L.G. 181
          125, 127, 196                  WorldCom 2, 497                         Zwerman, W.L. 71

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Managing change burnes

  • 3. We work with leading authors to develop the strongest educational materials in management, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times/Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing, please visit us on the World Wide Web at: www.pearsoned.co.uk
  • 4. Managing Change A Strategic Approach to Organisational Dynamics Fourth Edition Bernard Burnes
  • 5. Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published under the Pitman imprint 1992 Second edition published under the Pitman imprint 1996 Third edition published 2000 Fourth edition published 2004 © Bernard Burnes 1992, 1996 © Pearson Education Limited 2000, 2004 The right of Bernard Burnes to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP. ISBN 0 273 68336 5 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 08 07 06 05 04 Typeset in Sabon 10/12.5 by 30 Printed by Ashford Colour Press Ltd, Gosport The publisher’s policy is to use paper manufactured from sustainable forests.
  • 6. To Sue, Duncan, Stuart and Hobbes
  • 7. 1
  • 8. Contents Acknowledgements xi 4 Critical perspectives on organisation Introduction 1 theory 141 Postmodernism, realism and complexity 141 Part One Learning objectives 141 The rise and fall of the rational organisation Introduction 142 The postmodern perspective 144 1 From trial and error to the science of The realist perspective 154 management 11 The complexity perspective 157 The rise of organisation theory 11 Conclusions 163 Learning objectives 11 Test your learning 164 Introduction 12 Suggested further reading 165 The rise of commerce and the birth of the factory 14 5 Culture, power, politics and choice 166 Organisation theory: the Classical Learning objectives 166 approach 33 Introduction 167 Conclusions 47 The cultural perspective 169 Test your learning 51 The power–politics perspective 183 Suggested further reading 52 Managing and changing organisations: bringing back choice 193 2 Developments in organisation theory 53 Conclusions 197 From certainty to contingency 53 Test your learning 199 Suggested further reading 199 Learning objectives 53 Introduction 54 The Human Relations approach 55 Part Two The Contingency Theory approach 70 Strategy development and change Conclusions 80 management: past, present and future Test your learning 82 Suggested further reading 82 6 Approaches to strategy 203 Managerial choice and constraints 203 3 In search of new paradigms 83 Learning objectives 203 Learning objectives 83 Introduction 205 Introduction 84 Understanding strategy: origins, definitions The Culture–Excellence approach 88 and approaches 207 The Japanese approach to management 115 Understanding strategy: choices and Organisational learning 126 constraints 220 Conclusions 135 Conclusions 228 Test your learning 139 Test your learning 230 Suggested further reading 140 Suggested further reading 231
  • 9. viii Contents 7 Applying strategy 232 Part Three Models, levels and tools 232 Case studies in strategy development and Learning objectives 232 change management Introduction 233 Types of strategies 234 11 Case studies in strategic change 335 Levels of strategy 238 Learning objectives 335 Strategic planning tools 246 Introduction 335 Conclusions 256 Case Study 1: The Internet and the P2P Test your learning 257 Revolution in the music industry 337 Suggested further reading 258 Case Study 2: The rise and fall of Marconi 343 8 Approaches to change management 259 Case Study 3: Oticon – the disorganised Learning objectives 259 organisation 347 Introduction 260 Case Study 4: Privatisation and the European Theoretical foundations 261 Union: the case of the Public Power The Planned approach to organisational Corporation of Greece 355 change 267 Conclusions 362 The frequency and magnitude of Test your learning 364 organisational change 281 Conclusions 284 12 Case studies in changing internal Test your learning 285 relationships and attitudes 365 Suggested further reading 286 Learning objectives 365 Introduction 365 9 Developments in change management 287 Case Study 5: Volvo's approach to Job The Emergent approach and beyond 287 Design 368 Learning objectives 287 Case Study 6: XYZ Construction 377 Introduction 288 Case Study 7: GK Printers Limited – changing The case against the Planned approach to systems and attitudes 383 organisational change 289 Conclusions 396 The Emergent approach to change 291 Test your learning 397 Emergent change: summary and criticisms 312 13 Case studies in changing external Conclusions 316 relationships 398 Test your learning 317 Learning objectives 398 Suggested further reading 317 Introduction 398 Case Study 8: Rover–TRW – operational 10 A framework for change 318 integration 401 Case Study 9: Speedy Stationers Ltd and UTL Approaches and choices 318 (Turbines) Ltd – supplier-driven change 407 Learning objectives 318 Case Study 10: PoliceCo – outsourcing in the Introduction 320 public sector 414 Varieties of change 321 Conclusions 420 A framework for change 325 Test your learning 423 A framework for choice 328 Conclusions 329 Test your learning 332 Suggested further reading 332
  • 10. Contents ix Part Four Globalisation and the challenge of change 489 Managing choice The manager's role 498 Management and leadership 503 14 Managing change 427 Management and leadership in action 514 Managerial development 519 Lessons from theory and practice 427 Management, leadership and change 527 Learning objectives 427 Summary and conclusions 530 Introduction 427 Test your learning 534 Lessons from theory and practice 429 Suggested further reading 535 Employee involvement and organisational transformation 444 Bibliography 537 Conclusions: merging theory and practice 447 Glossary 595 Test your learning 450 Index 607 15 Organisational change and managerial For Lecturers: choice 452 Learning objectives 452 ● A secure, password-protected site with Introduction 452 teaching material The Choice Management–Change ● Complete, downloadable Instructor’s Management model 455 Manual Conclusions 484 ● PowerPoint slides that can be downloaded Test your learning 485 and used as OHTs 16 Management – roles and responsibilities 486 Learning objectives 486 Introduction 487
  • 11. 1
  • 12. Acknowledgements The fourth edition of this book, like the previous three, would not have been possible without the generous encouragement and assistance of a large number of people, especially my colleagues and students at UMIST. Space does not permit me to name them all, but I am nevertheless extremely grateful to them, one and all. In addition, Pearson Education deserve many thanks for their encouragement and patience. However, and mostly, I am irredeemably indebted to my wife, Sue. Her painstaking reading and editing of draft after draft of this book have improved it beyond recogni- tion. It is not too much to say that she deserves as much credit as I do for what is good about this book. Nevertheless, despite all the help and assistance I have received, any faults or short- comings in the final product are mine and mine alone.
  • 13. Publisher’s Acknowledgements We are grateful to the Financial Times Limited for permission to reprint the following material: The sustainable business: continuous search for improvement, © Financial Times, 19 August 2002; Realism replaces grand visions, © Financial Times, 12 March 2003; How to preserve the soul of management: The increasing sophistication of measure- ment techniques threatens to reduce executives to robots, © Financial Times, 19 September 2002; The master strategist: Michael Porter, © Financial Times, 15 August 2003; The great iconoclast: Henry Mintzberg, © Financial Times, 5 August 2003; Managers resort to old tools in a crisis, © Financial Times, 18 July 2001; Less means more in engineering, © Financial Times, 17 October 2002; Weill wields his power at Citigroup: revamp represents ongoing structural changes, © Financial Times, 13 June 2002; Microsoft’s direct connection to the customer, © Financial Times, 31 December 2001; Manage with mother, © Financial Times, 2 March 1998. We are grateful to the following for permission to use copyright material: Figure 5.1 from Organization Development and Change, 4th edition, by Cummings/Huse. © 1989, reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215 Figure 7.1 reprinted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter, © 1985, 1998 by Michael E. Porter. All rights reserved. ‘Why companies have much to learn from charities’ by Keith Leslie, Vaughan Lindsay, Helen Mullings and Neville Salkeld, reprinted by permission of McKinsey & Company. Keith Leslie is a consultant and Helen Mullings is a profes- sional development manager with McKinsey & Company. In some instances we have been unable to trace the owners of copyright material and we would appreciate any information that would enable us to do so.
  • 14. Introduction There is nothing so practical as a good theory. (Kurt Lewin)1 All models are wrong, some models are useful. (George Box)2 It has become the accepted view that, for society at large, the magnitude, speed, unpredictability and impact of change are greater than ever before. Certainly, over the last 20 years especially, new products, processes and services have appeared at an ever-increasing rate. Local markets have become global markets. Protected or semi- protected markets and industries have been opened up to fierce competition. Public bureaucracies and monopolies have either been transferred to the private sector or have themselves adopted much more market-orientated practices. Most commenta- tors appear to share Hammer and Champy’s (1993: 23) view that ‘… change has become both pervasive and persistent. It is normality.’ In the last decade, and perhaps especially since the third edition of this book was published in 2000, organisations appear to have gone though a whirlwind of change. In the 1990s, there was a takeover and merger boom of unprecedented proportions (Burton et al, 1996; The Economist, 1998). Indeed, on a single day in 1997, Western Europe saw some $130 billion of mergers and acquisitions, whereas the entire total for the previous year was only $250 billion. In America, Warner (1997: 3) com- mented that: To find a similar period of economic change and merger frenzy, you might need to go back all the way to the 1890s … Out of it were born such companies as Standard Oil and American Tobacco, the very prototypes of the vertically integrated modern corporation. This period leading up to the millennium is usually referred to as the dotcom boom. It is easy to see why this should be so given the rise of the Internet, the publicity given to dotcom companies and, with hindsight, ridiculously-inflated prices paid for any business that had the suffix .com. Moreover, as Warner indicated, the boom touched almost every sector of the global economy, not just Internet-associated businesses. For example, even in the epitome of the ‘old economy’, the motor industry, merger fever was rife. The coming together of Daimler-Benz and Chrysler in 1998 created the fifth largest vehicle company in the world, with a turnover of $130 billion. In the same year, the takeover of Rolls Royce by Volkswagen was another step in its attempt to transform itself into a global company, whereas Ford continued to gobble up smaller 1 Lewin (1943/4: 169). 2 Quoted in Norrie (1993).
  • 15. 2 Introduction companies, such as Volvo, in order to maintain its global position. In the financial sector, the $160 billion merger of Citicorp and Travellers in 1998 was just the largest example of a positive frenzy of merger activity. In the UK, the de-mutualisation of building societies and their takeover by larger financial institutions was another exam- ple of the same forces at work. Similarly, in the rest of the European financial services industry, in advance of the Euro, cross-border mergers were especially prevalent. The ‘urge to merge’ seemed present in all industries; Guinness and GrandMet came together to form Diageo, one of the world’s largest food and drink companies, and the on–off merger of Glaxo and SmithKline Beecham, which finally materialised in 2000, showed that the pharmaceutical industry was not immune to the lure of merger. Though led by the dotcom boom, each merger or acquisition had its own rationale. The underlying motives appear to have been a combination of the forces of globalisa- tion, technological advances, trade liberalisation and changes of governments, especially in Eastern Europe, all of which were reshaping entire industries. However, even faster than the dotcom bubble had risen, it burst with devastating consequences. Ironically, what seemed to signal its demise was the merger between the Internet com- pany AOL and the film, TV and publishing company Time Warner. This deal, hailed as the triumph of the new economy over the old, created a company which was ini- tially valued at $327 billon. Within a week of the announcement of the merger in January 2000, AOL’s value fell by $25 billion and continued to fall. By the time the deal was finally closed, the value of the combined company had fallen from $327 bil- lion to $106 billion (Sirower, 2003). The fall of the rest of the dotcom sector was in many cases, especially the WorldCom scandal, even more spectacular, with many companies disappearing altogether. Most commentators now believe that the dotcom boom was really a ‘dotcon’ boom, with the rise in share prices being driven by froth, lies and illegality (Cassidy, 2002; Cellan-Jones, 2003; Kaplan, 2002). It was the col- lapse and exposure of companies in the dotcom and other sectors whose value had risen spectacularly only to fall spectacularly that led the American investment guru, Warren Buffet, to make his now famous remark that ‘It’s only when the tide goes out that you see who has been swimming with their trunks off.’ Organisational change is not just limited to companies involved in mergers and acquisitions. In the UK for example, in the 1990s, survey after survey showed that organisations of all sizes and in all sectors were undertaking a wide variety of change initiatives. These included restructuring, delayering, the introduction of new products and services, outsourcing and, especially, culture change programmes (Coulson- Thomas and Coe, 1991; Ezzamel et al, 1994; Industrial Society, 1997; Worrall and Cooper, 1997, 1998). The point of this brief review is not to chronicle the rise and fall of the dotcom boom, but to show that over even short periods of time, organisations have to cope with very different types of challenges. These range from rapid growth, mergers and acquisitions, and the emergence of new technologies and new competitors, to falling markets, depressed economies, de-mergers and consolidations, and the collapse of some customers, suppliers and competitors. However, it would be wrong to portray these events as affecting all organisations equally. Just as the dotcom companies were most affected by the dotcom boom and bust, just so there were organisations and industries who were relatively unaffected by either the boom or the bust, such as agri- culture and mining. Similarly, the public sector tends to be much less affected by the
  • 16. Introduction 3 pace and magnitude of economic fluctuations than the private sector. In the UK, for example, whilst the rest of the economy has been relatively stagnant, the public sector has continued to grow significantly (Turner, 2003). So, although many claim we are living through a period of unprecedented and unpredictable change, not everyone is affected to the same degree. Indeed, as Chapter 1 will show, the history of the past 200 years could well be characterised as successive periods of unprecedented change. In fact, given that it was the ancient Greeks who coined the phrase ‘change is the only constant’, we should perhaps remember that the history of the human race is one of massive change and dislocation. Each generation seems to yearn for some golden past that has been swept away by progress, and each generation, building on past knowledge, develops new ways of coping with and man- aging change. Therefore, perhaps we should be less concerned with the overall level of change and instead be asking: how can each organisation best cope with the degree of turbulence it faces? Though change management would not be considered particularly important if products and markets were stable and organisational change was rare, it would be considered even less of an issue if it were easily managed and success could be guaran- teed. Alas, there is substantial evidence that this is not the case. The literature abounds with examples of change projects that have gone wrong, some disastrously so (see Brindle, 1998a; Burnes and Weekes, 1989; Bywater, 1997; Cummings and Worley, 1997; Howarth, 1988; Kanter et al, 1992; Kelly, 1982a, 1982b; Kotter, 1996; Stace and Dunphy, 1994; Stickland, 1998). Indeed, two of the most respected commentators in the field of organisational change, Beer and Nohria (2000), claim that nearly two- thirds of change efforts fail. Though this seems a staggeringly high failure rate, studies of particular types of change initiatives do appear to come to similar conclusions. Unlike a company’s turnover, an industry’s performance or a nation’s gross national product, no one gathers statistics on how successful organisations are at managing change. Nevertheless, over the years, particular types of change initiative have attracted sufficient attention for it to be possible to gauge the degree of success achieved in implementing them. There are three types of organisational change which, because of their perceived importance, have received considerable attention: the intro- duction of new technology in the 1980s; the adoption of Total Quality Management (TQM) over the last 20 years; and, in the last 15 years, the application of Business Process Re-engineering (BPR). The micro-electronics revolution of the 1980s, which saw the rapid expansion of computers and computer-based processes into most areas of organisational life, was the subject of a great many studies. These found that the failure rate of new technol- ogy change projects was anywhere between 40 per cent and 70 per cent (AT Kearney, 1989; Bessant and Haywood, 1985; McKracken, 1986; New, 1989; Smith and Tranfield, 1987; Voss, 1985). Nor do the problems in this area appear to be teething troubles limited to the 1980s. In 1998, the UK government had to admit that its £170 million programme to replace the computer system that holds the National Insurance records of everyone in the country was in such a mess that the system had collapsed, throwing its social security system into turmoil (Brindle, 1998a, 1999). The move by European organisations to adopt Total Quality Management began in the mid-1980s (Dale and Cooper, 1992). Although TQM appears to be central to the success of Japanese companies, the experience of Western companies has been
  • 17. 4 Introduction that it is difficult to introduce and sustain. Indeed, one of the founders of the TQM movement, Philip Crosby (1979), claimed that over 90 per cent of TQM initiatives by American organisations fail. Though a 90 per cent failure rate seems incredibly high, studies of the adoption of TQM by companies in the UK and other European coun- tries show that they have experienced a failure rate of 80 per cent or more (AT Kearney, 1992; Cruise O’Brien and Voss, 1992; Dale, 1999; Economist Intelligence Unit, 1992; Whyte and Witcher, 1992; Witcher, 1993; Zairi et al, 1994). Business Process Re-Engineering was hailed as ‘the biggest business innovation of the 1990s’ (Mill, 1994: 26). Though less well documented than either new technology or TQM, Wastell et al (1994: 37) concluded from the available evidence that ‘BPR initia- tives have typically achieved much less than they promised’. Other studies of BPR have come to similar conclusions (Coombs and Hull, 1994; Lessem, 1998; Short and Venkatraman, 1992). More specifically, Bryant (1998) cites a reported failure rate for BPR initiatives of 80 per cent, Breslin and McGann (1998) put the failure rate at 60 per cent, whilst Bywater (1997) puts the figure at 70 per cent. Even the founding father of BPR – Michael Hammer – acknowledges that in up to 70 per cent of cases it leaves organisations worse off rather than better off (Hammer and Champy, 1993). Indeed, such was the perceived failure of BPR that, according to Huczynski and Buchanan (2001: 559), by the mid-1990s, many commentators ‘were claiming that the approach had been discredited’. Therefore, even these three types of well-established change initiatives, for which a great deal of information, advice and assistance is available, are no guarantee of suc- cess. This is perhaps why managers consistently identify the difficulty of managing change as one of the key obstacles to the increased competitiveness of their organisa- tions (Hanson, 1993; Industrial Society, 1997; Worrall and Cooper, 1997). To many, this must seem paradoxical. On the one hand, there is now more advice on how to manage change than ever before. On the other hand, the failure rate of change initiatives is astronomical. The two quotations at the beginning of this Introduction hold the key to this paradox. What almost everyone would like is a clear and practical change theory that explains what changes organisations need to make and how they should make them. Unfortunately, what is available is a wide range of confusing and contradictory theories, approaches and recipes. Many of these are well- thought-out and grounded in both theory and practice; others, unfortunately, seem disconnected from either theory or reality. Also, though change theory requires an interdisciplinary perspective, each of the major approaches tends to view organisa- tions from the disciplinary angle of their originators – whether it be psychology, sociology, economics, or whatever – which can result in an incomplete and biased pic- ture. So, regardless of what their proponents may claim, we do not possess at present an approach to change that is theoretically holistic, universally applicable, and which can be practically applied. Nevertheless, we do know that, to paraphrase George Box, whilst all change theories are partial, some theories are useful. This means that for those wishing to understand or implement change, the prime task is not to seek out an all-embracing theory but to understand the strengths and weaknesses of each approach and the situations in which each can best be applied. There can be few who now doubt the importance to an organisation of the ability to identify where it needs to be in the future, and how to accomplish the changes nec- essary to get there – although there is a great deal of dispute about how difficult or
  • 18. Introduction 5 possible this is. Some might assume that managers do not need to understand organi- sation theory, strategy theory, change theory or any other theory in order to manage and change their organisations, but this would be to underestimate the extent to which managers and others in organisations are influenced, assisted or potentially misled by theory. Increasingly, managers are exhorted to adopt the teachings of the latest management guru. Nevertheless, as Part 1 will demonstrate, and as Mintzberg and Quinn (1991: xii) observed: One can, however, suffer not just from an absence of theories, but also from being domi- nated by them without realizing it. To paraphrase the words of John Maynard Keynes, most ‘practical men’ are the slaves of some defunct theorist. Whether we realize it or not, our behavior is guided by the systems of ideas that we have internalized over the years. Much can be learned by bringing these out into the open, examining them more carefully, and comparing them with alternative ways to view the world – including ones based on system- atic study (that is, research). These ‘systems of ideas’, or organisation theories as they are more commonly called, are crucial to change management in two respects. First, they provide models of how organisations should be structured and managed. Second, they provide guidelines for judging and prescribing the behaviour and effectiveness of individuals and groups in an organisation. To understand why and how to change organisations, it is first necessary to under- stand their structures, management and behaviour. As Mintzberg and Quinn indicate, it is clear that in many organisations there is no clear understanding of these theories. It follows that choices with regard to the appropriateness of particular structures and practices, the way they are chosen and implemented, are founded on limited knowl- edge and perhaps false assumptions. Change cannot hope to be fully successful under these circumstances. On the contrary, a full understanding of these theories is neces- sary if informed choices are to be made when instigating and implementing change. For this reason, these will be examined critically in relation to each other, and also in comparison with how organisations actually operate, as opposed to how theorists suppose them to. The aim is not to provide a ‘hands-on’ practical guide to organisa- tional change – though readers should find this book useful in that respect as well. Rather the aim is to provide an understanding of the theories and approaches to change that are on offer, to indicate their usefulness and drawbacks, and to enable the reader to choose for her- or himself which ‘models are useful’ and when. The central purpose of this book, then, is to aid this search for understanding both by describing and discussing the key approaches to and theories of organisational change, and by setting these within the broader framework of the development, oper- ation and behaviour of organisations and those who populate them. The intention is to allow those who study and carry out organisational change to make their own judgments about the benefits, applicability and usefulness of the approaches on offer. Therefore, the key themes underpinning the book are as follows: ■ There is a need to understand the wider theoretical and historical context within which organisations operate and the pressures and options they face for change. ■ Organisational change cannot be separated from organisational strategy, and vice versa.
  • 19. 6 Introduction ■ Organisations are not rational entities per se, though those who manage them strive to present their deliberations and decisions as being based on logic and rationality. ■ There is a strong tendency to present the various approaches to change as being limited in number and mutually exclusive. However, in practice, the range of approaches is wide, and they can be and often are used either sequentially or in combination. ■ The appropriateness of each of the available approaches is dependent upon the type of change being considered and the constraints under which the organisation operates, although these constraints and objectives can themselves be changed to make them more amenable to an organisation's preferred approach to change or style of management. ■ Organisations and managers can and do exercise a wide degree of choice in what they change, when they change and how they change. The book is organised into four parts. Part 1: The rise and fall of the rational organisation provides a comprehensive review of organisation theory and behaviour. Chapter 1 deals with the development of organisations from the Industrial Revolution through to the early years of the twenti- eth century, when the first fully-fledged organisation theory, the Classical approach, appeared. This is followed in Chapter 2 with reviews of the next two organisation theories to appear: the Human Relations approach and Contingency Theory. Chapter 3 examines and compares the three main and most influential contemporary approaches to structuring and managing organisations: the Culture–Excellence and organisational learning approaches, primarily developed in the West, and the Japanese approach. Chapter 4 sets the review of organisational theories in a wider context by reviewing the postmodern, realist and complexity perspectives on organi- sations. Chapter 5 examines the importance and implications of culture, power and politics. Chapter 5, and Part 1, conclude that, by accident and design, organisation theories attempt to remove choice from organisations by specifying what they need to do in order to be successful. However, the review of culture, power and politics, together with evidence from the earlier chapters, shows that managers do have a wider scope for shaping decisions than much of the organisation literature suggests. This theme of managerial choice is continued in Part 2. Part 2: Strategy development and change management: past, present and future com- prises five chapters, examining the literature on strategic management and change management. Chapters 6 and 7 examine the dominant approaches to strategy, and the main tools and techniques available to organisations for its development and imple- mentation. In particular, these two chapters draw attention to the differences between the Prescriptive and Analytical schools of strategy, and they highlight the importance of the relationship between organisational strategy and organisational change. Chapters 8 and 9 review the two dominant approaches to organisational change: the Planned approach and the Emergent approach. These chapters show that both approaches have their strengths and weaknesses, and that neither separately nor in combination do these approaches cover all change situations. Chapter 10 goes beyond the Planned and Emergent approaches to develop a Framework for Change that relates the various change situations organisations face to the range of
  • 20. Introduction 7 approaches to managing change on offer. Chapter 10 concludes Part 2 by arguing that, though organisations face significant constraints on their freedom of choice, these constraints can be influenced and changed in order to allow organisations to choose the particular approach to strategy and change that best suits them. Part 3: Case studies in strategy development and change management comprises three case study chapters. The ten studies they contain are all of real organisations, though in some cases their names and some of the details that would identify them have been changed to protect confidentiality. Nevertheless, the situations described are drawn from real life and show the opportunities, difficulties and constraints faced in devel- oping strategy and implementing change. Part 4: Managing choice comprises the concluding three chapters of the book. Chapter 14 combines the insights and perspectives from Parts 1 and 2 to analyse the ten case studies presented in Part 3. From this, the chapter identifies key lessons for the theory and practice of organisational change and paves the way for the Choice Management–Change Management model of organisational change presented in Chapter 15. This model, which comprises three interlinked processes – choice, trajec- tory and change – provides an understanding of how managers and organisations can and do exercise choice and manage change. Given the importance attached to the role of managers in developing strategy and managing change, Chapter 16 reviews what managers do and how they do it. In particular, the role of leadership and management development is examined and related to approaches to change management. The chapter and the book conclude that if, as argued, managers have considerable choice over what to change and how to change it, then this lays a considerable responsibility on their shoulders. How organisations change and develop has enormous conse- quences, not just for their employees and owners but for society at large. In order to minimise social fragmentation and exclusion, and the destruction of the natural envi- ronment, managers need to act in the broader interests of all their stakeholders – employees, shareholders, themselves and the wider community. ■ The fourth edition Since the publication of the third edition of this book, I have received many helpful comments and suggestions for improving and developing this book both from my own students and colleagues at UMIST and from readers and users elsewhere. I am very grateful for these and have tried to utilise them in preparing this fourth edition. In par- ticular, this edition reflects the growing influence of the Internet and globalisation on organisations, includes material on realism and complexity theories to counterbalance the postmodernist perspective, the linkage between approaches to change and approaches to management has been made more explicit, five new case studies have been provided, and there is more practical guidance on managing change. Whilst retaining a similar structure and approach to the third edition, this edition has been expanded from 14 to 16 chapters, and all the chapters been updated and revised, some substantially so. The main changes from the third edition are as follows: ■ Part 1 has been expanded from four to five chapters. Chapter 4 now concentrates on competing perspectives on organisations, namely the postmodern, realist and complexity perspectives. The new Chapter 5 contains an expanded review of cul- ture, power, politics and choice.
  • 21. 8 Introduction ■ Part 2 has also been increased four to five chapters. This has enabled the revision and separation of the two chapters on Planned and Emergent change, Chapters 8 and 9, from the new Chapter 10 which develops and presents the Framework for Change, which has itself been revised and expanded. ■ Part 3 includes five new case studies: three in Chapter 11, and one each in Chapters 12 and 13. ■ Chapter 15 has been lengthened to provide more practical guidance on managing change. ■ The last chapter, now Chapter 16, has been expanded to incorporate a discussion of globalisation, and a better linkage between management styles and varieties of organisational change. ■ Last but not least, a glossary of terms has been added to the book to explain less familiar words and phrases.
  • 22. Part One The rise and fall of the rational organisation
  • 24. Chapter 1 From trial and error to the science of management The rise of organisation theory Learning objectives After studying this chapter, you should be able to: ■ understand the development of work organisation from the Industrial Revolution until the end of the nineteenth century; ■ appreciate the reasons for the antagonistic relations between labour and employers in the nineteenth century; ■ discuss the different roles played by technology and people in the development of the factory system; ■ describe the main features of the Classical approach; ■ understand why the Classical approach developed as it did in the USA, France and Germany; ■ discuss the differences and similarities between the work of Taylor, Fayol and Weber; ■ list the main advantages and disadvantages of the Classical approach to structuring organisations and designing jobs; ■ describe the key features of the Classical approach to organisational change.
  • 25. 12 Chapter 1 · From trial and error to the science of management Exhibit 1.1 The case of Scientific Management Fundamentals of Scientific Management The principal object of management should be to to state this fact should be unnecessary. And yet secure the maximum prosperity for the employer, cou- there is no question that, throughout the industrial pled with the maximum prosperity for each employé. world, a large part of the organization of employers, The words ‘maximum prosperity’ are used, in their as well as employés, is for war rather than for peace, broad sense, to mean not only large dividends for the and that perhaps the majority on either side do not company or owner, but the development of every believe that it is possible so to arrange their mutual branch of the business to its highest state of excel- relations that their interests become identical. lence, so that the prosperity may be permanent. The majority of these men believe that the fun- In the same way maximum prosperity for each damental interests of employés and employers are employé means not only higher wages than are usu- necessarily antagonistic. Scientific management, on ally received by men of his class, but, of more the contrary, has for its very foundation the firm importance still, it also means the development of conviction that the true interests of the two are one each man to his state of maximum efficiency, so that and the same; that prosperity for the employer he may be able to do, generally speaking, the high- cannot exist through a long term of years unless it est grade of work for which his natural abilities fit is accompanied by prosperity for the employé, and him, and it further means giving him, when possible, vice versa; and that it is possible to give the work- this class of work to do. man what he most wants – high wages – and the It would seem to be so self-evident that maxi- employer what he wants – a low labor cost – for mum prosperity for the employer, coupled with his manufactures. maximum prosperity for the employé, ought to be Source: Frederick Winslow Taylor, The Principles of Scientific the two leading objects of management, that even Management, 1911, p. 1. Introduction In Britain and the rest of the industrial world today, it is almost impossible to imagine life without the plethora of organisations that comprise and make possible our every- day life. Yet organisations in their modern form – indeed, in almost any form – were virtually unknown before the Industrial Revolution, 200 years ago. In the intervening period, as Morgan (1986) remarked, we have developed into an ‘organizational soci- ety’. However, not only have organisations, in their many shapes, sizes and manifestations, come to reach into every facet of our lives, but they have also acquired an equally diverse range of theories, nostrums and semi-sacrosanct beliefs about how they should be structured, managed and changed. This chapter sets out to explore and discuss the origins of organisations, from the Industrial Revolution to the early years of the twentieth century, when the first detailed and comprehensive organisation theory emerged. As Exhibit 1.1 shows, two of the overarching and complementary characteristics of this period were the conflict between workers and managers, and the search for a systematic, scientific, and above all efficient approach to running organisations. The key themes of this chapter are as follows: ■ Although industrialisation was primarily concerned with the move from a subsis- tence economy to a money-market economy, the main enabling mechanism for this was the creation of the factory system.
  • 26. Introduction 13 ■ The pattern and purpose of industrialisation varied from country to country. Whilst in Britain and the USA it was very much driven by individuals seeking profit maximisation, in mainland Europe a different approach can be seen. In Germany in particular, but also in France, industrialisation was largely state-sponsored, and aimed more to further the economic and military objectives of the state than to increase the profit-making capacity of individuals. ■ The development of organisation theory was synonymous with the need by man- agers to legitimate and enhance their authority to initiate change. The chapter begins by showing how the rapid expansion of national and interna- tional commercial activity created the conditions for the British Industrial Revolution, from which emerged the factory system, the precursor of all modern organisations. It is argued that the driving force behind this development was the merchant class. It will also be stressed that two key features of the early factory system were its ad hoc, trial-and-error nature, and the antagonistic relationship between owners and employ- ees, or – to use the terminology of the times – masters and servants. The chapter then goes on to show that British industrial practices, methods and technologies were ‘exported’ to other European countries and the USA, with similar results in terms of employer–employee relations. As the nineteenth century pro- gressed, and organisations grew in number and size, trial and error increasingly gave way to more considered and consistent approaches to work organisation. This devel- opment was especially pronounced in the USA and continental Europe, as industrial leadership moved away from Britain and towards these areas. What emerged, separately, were three different but complementary attempts by Frederick Taylor in the USA, Henri Fayol in France and Max Weber in Germany to replace the ad hoc, rule-of-thumb approach to organisations with a universally appli- cable blueprint or theory for how they should operate. These three approaches, each focusing on different organisational aspects, coalesced into what later became known as the Classical school of organisation theory. This approach to organisations is char- acterised by the horizontal and hierarchical division of labour, the minimisation of human skills and discretion, and the attempt to construe organisations as rational-sci- entific entities. It is argued that one of the key objectives of the Classical school, especially the Scientific Management component, was to legitimise the managerial right to plan and implement change by showing that it was the only group able to analyse the work situation scientifically and rationally, and to devise the most appro- priate and efficient methods of operation. The chapter concludes by arguing that the Classical approach, whilst being a sig- nificant advance on what went before, was badly flawed. In particular, its view of human nature and motivation was not only inaccurate, but also alienated workers from and made them resentful of the organisations that employed them. However, the precepts of the Classical school were not solely aimed at constraining workers’ ability to make and block change; in addition, by laying down hard and fast rules of what was and was not best practice, they constrained management’s freedom of action, thus alienating many managers as well as workers. With hindsight, the attempt by Taylor, Fayol and Weber each in their own way to formulate a system of reciprocal obligations between managers and workers appears to be less a decisive break with the past and more an attempt to recast feudalism in a
  • 27. 14 Chapter 1 · From trial and error to the science of management more scientific-rational framework. Certainly, in the late nineteenth century, French, German and American managers of European descent did share a recent and common feudal heritage which might make them well-disposed towards a system that substi- tuted a code of joint obligation in place of management–worker conflict. Indeed, in Germany the rise of bureaucracy that Weber described was itself a direct product of the Prussian feudal tradition. However, though many managers undoubtedly did long for and believe in an – albeit mythical – age when workers readily did as they were told, this ignored the fact that most American immigrants left Europe to escape just such a system, whilst French workers took pride in the belief that their Revolution had ended feudal despotism. Only in Germany was it possible to say that the feudal tradition remained strong, though not unopposed. The rise of commerce and the birth of the factory The pivotal event that shaped the world into the form we now see around us was the British Industrial Revolution, which began in the late eighteenth century. Before it, most societies were based on small-scale, self-sufficient agricultural production, with the vast majority of the population, some 80–90 per cent, living in the countryside. By the end of the nineteenth century, after the Industrial Revolution had run its course, the reverse became the case, in the leading industrialised countries at least, with most people living in urban centres and depending on industrial and commercial activities for their livelihood (Landes, 1969). Britain was the pioneer industrial country; it was the model that other European nations and the USA sought to emulate in their attempts to transform traditional agrarian economies into urban societies based on science and technology (Kemp, 1979). The key development of the Industrial Revolution towards this process of soci- etal transformation was the creation of the factory system. It was this that gave the impetus to and created the model for all that was to follow. As Weber (1928: 302) pointed out, the factory’s distinguishing characteristic was ‘... in general … not the implements of work applied but the concentration of ownership of workplace, means of work, source of power and raw materials in one and the same hand, that of the entrepreneur’. Or, to put it another way, it was the way the entrepreneur ‘organised’ the elements of production that distinguished it from what went before. This tells us what changed, but it does not explain why or how in a few score years organisations came to dominate our lives. To answer this, it is necessary to appreciate the great surge of economic activity – especially the international trade in textile products – that arose in the seventeenth and eighteenth centuries. This trade gave an enormous impetus to textile production in Britain, which in turn had a knock-on effect in all other spheres of economic activity (Mathias, 1969). Before and during the early part of the British Industrial Revolution, textile produc- tion was carried out as an agricultural by-occupation based on family units. However, as demand increased in the eighteenth century, some ‘men and women [became] spe- cialist spinners or weavers, thinking first of wool, treating work on the land as, at most, a by-occupation’ (Ashton, 1948: 23). Allied to this, a new mechanism sprang up to link producer and consumer: the ‘putting-out’ system, whereby a large merchant would ‘put out’ work to a number of independent domestic producers.
  • 28. The rise of commerce and the birth of the factory 15 The advantage to the merchant was threefold: it was cheap – there were few over- heads; it was flexible – production could be easily expanded or contracted; and it avoided the difficulties involved in directly employing a workforce. However, as demand continued to increase in the late eighteenth century, this system became more complex and more costly, and eventually it became too cumbersome (Pollard, 1965). The chain of intermediaries linking producer to consumer became increasingly diffi- cult for the large merchant to control. There were many problems with the putting-out mechanism: dishonesty (on both sides) was rife; deliveries were late; and quality often poor. Laws attempting to control producers could do nothing to rectify the fundamental weaknesses in the system. The incompatibility between the large and complex organisation of distribution and the multitude of tiny domestic workshop units, unsupervised and unsupervisable, was bound to set up tensions and drive mer- chants to seek new ways of production – ways whereby they could establish their own managerial control over the production process (Pollard, 1965). There was also an incompatibility between different cultures. For the merchant, the expansion of markets was a chance to maximise profits in order to live in the grand style. For the rural domestic producer, involved in long hours of back-breaking work, it created the conditions for increased leisure. As Marglin (1976: 35) commented: ‘... wages rose and workers insisted on taking out a portion of their gains in the form of greater leisure. However sensible this may have been from their own point of view, it is no way for an enterprising capitalist to get ahead.’ Therefore, it was the merchant who began the move towards the factory system – not because the merchant had an innate desire to run factories or exercise direct control over labour, but in order to take full advantage of expanding market opportunities to reap ever greater rewards. Nevertheless, there was no headlong rush to create a new economic order overnight. The earliest factories, if that is not too grand a word for them, were small, unpowered weaving or spinning sheds that used existing technology and methods. A few very large factories – such as Wedgwood’s Etruria Works in Stoke-on-Trent – were estab- lished, but these were the rare exceptions. Indeed, in 1780, the investment in fixed equipment and stock in the textile industry, which was the leading edge of the Industrial Revolution, was only £10 per worker, and the average factory employed no more than 10 or 12 people. By 1830, when the textile industry had grown to employ 100,000 people and the average factory size was 137, the investment in fixed equip- ment and stock had only increased to £15 per worker, and 50 per cent of the workforce were still home-based (Hobsbawm, 1968; Pollard, 1965; Tillett, 1970). Given this situation, it is hardly surprising that capital investment was quickly recov- ered and that it was running expenses, mainly wages and raw materials, which formed the bulk of manufacturing costs. It is this, and the original motive for moving to the factory system in the first place (to have greater control over labour), which explains the prevailing attitude of employers towards labour in the nineteenth century. ■ The relationship between employers and employees British employers based their attitude towards employees on two basic propositions: 1 Labour is unreliable, lazy and will only work when tightly controlled and closely supervised.
  • 29. 16 Chapter 1 · From trial and error to the science of management 2 The main controllable business cost is labour; therefore the key to increased profits is to make it cheaper, and/or increase its productivity, by getting employees to work harder, or for longer hours, for the same, or less, money. In this respect, as contemporary writers such as Charles Babbage (1835) and Andrew Ure (1835) observed, workers’ skill was seen as at best an inconvenience and at worst a threat, because it could be scarce, costly and allow workers a strong bargaining position. As might be expected, employers’ hostility was reciprocated by labour. Workers exhibited a strong dislike for, and reluctance to become part of, the factory system. As Pollard (1965) noted, this was for three main reasons: 1 It involved a wholesale change of culture and environment and the destruction of small, tightly knit communities in which they lived. Hard though the life of cottage industry was, it had given workers a measure of independence and some control over what they did, when they did it and how. 2 The discipline of the factory was harsh and unremitting with men, women and small children all expected to work long hours, often seven days a week, in appalling conditions. 3 Given the lack of alternative organisational forms on which to establish factory life, employers often modelled them on workhouses or prisons. Indeed, to square the circle, some workhouses and prisons turned themselves into factories and their inmates into little more than slaves. Thus factories acquired the same stigma as was attached to prisons and workhouses. Therefore, the antagonism that existed between owners and workers was based on a genuine clash of interests – one which has echoed through the industrial world ever since. If this picture of the factory system in the nineteenth century seems bleak to us, it is nevertheless accurate, as is shown in the work of its proponents such as Charles Babbage and Andrew Ure, social reformers such as Seebohm Rowntree, political activists such as Frederick Engels and contemporary novelists such as Charles Dickens. Nor was this aspect of industrialisation restricted to Britain. Studies of other European countries and the USA have shown similar tensions, sometimes even more violent, between the old and the new methods of working, and between employers and employees (Bruland, 1989; Chapman and Chassagne, 1981; Mantoux, 1964; Pelling, 1960). In defence of the factory owners, who must take responsibility for what emerged, it should be said that their own experience was limited and there were no textbooks to guide them. That they should ‘copy’ what models existed reflected both the common view of labour amongst the owning classes, and a lack of alternative organisational forms on which to base the emergent factory system. As other nations industrialised, notably Germany, France and the United States, they too adopted similar organisa- tional forms and espoused similar attitudes towards labour. Partly this was because they were seeking to emulate Britain’s success by copying her approach. It was also because these societies, like Great Britain, were riven by hierarchical and horizontal divisions that were inevitably reproduced in the workplace.
  • 30. The rise of commerce and the birth of the factory 17 ■ Industrialisation and the organisation of work The system of organising work that came to characterise industrial life in Britain and most of continental Europe, and even the USA, by the end of the nineteenth century was based on the hierarchical and horizontal division of labour. Though this repre- sented a significant break with the past in terms of how work had previously been organised, it was not out of step with the social stratification of European society nor with feudal traditions of obedience. The articulation and propagation of the principle of the division of labour owed much to the work of Adam Smith. In his book The Wealth of Nations, published in 1776, Smith used the now famous example of pin- making to illustrate what he saw as the advantages of the division of labour. He pointed out that a pin could be made entirely by one person doing everything, or by a number of people each specialising in one aspect of its production. For three reasons, he believed the latter was more efficient: 1 A worker who constantly performs one simple task will quickly acquire greater dexterity than one who performs a variety of tasks. 2 It avoids the loss of time necessitated by one person moving from one task to another. 3 The concentration of attention on one special task leads to the invention of machines that aid the productivity of labour and allow one person to do the work previously performed by many. Smith’s ideas were given flesh and form in Britain by pioneering factory owners such as Josiah Wedgwood, and Matthew Boulton and James Watt. At his Etruria pot- tery works, Wedgwood developed a production system that split the work process down into separate departments, each with its own specialist supervisor. Work was organised almost on a flow-line basis with the skill involved in each operation reduced to a minimum in order, in Wedgwood’s own words, ‘to make machines of men as cannot err’ (quoted in Tillett, 1970: 37). Matthew Boulton and James Watt developed a similar approach at their Soho Works in Birmingham in the 1770s. They also kept detailed production records, a practice virtually unknown at the time (Roll, 1930). Wedgwood, Boulton, Watt and a few others were the architects of the factory system. By their organisation of work on and off the shopfloor, they created models that later managers would copy and adapt to their own needs and circumstances. This approach to the organisation and control of work spread outwards from Britain. As Bruland (1989: 165) observed: There was a fairly direct international diffusion of these changes from Britain, the originat- ing economy: British workers, in most parts of Europe, played a significant role in spreading the new work systems, in training local workers, and in the adaptation of the work force to the new rhythms of work. As the nineteenth century progressed, this approach to work organisation became more developed and systematised. Charles Babbage (1835) developed a method of applying the division of labour principle to the detailed analysis of any job. He emphasised the need for and advantage of dividing tasks between and within mental and manual labour. He envisaged three ‘classes’ employed in the work process: the
  • 31. 18 Chapter 1 · From trial and error to the science of management entrepreneur and his technical specialists who would design machines and plan the form of work organisation; operative engineers and managers who would be respon- sible for executing such plans and designs, based on only partial knowledge of the processes involved; and the mass of employees, needing only a low level of skill, who would undertake the actual work. Thus, in Babbage’s (1835: vii) view: ... the master manufacturer, by dividing the work to be executed into different processes, each requiring different degrees of skill or force, can purchase exactly the precise quality of both which is necessary for each process ... Though coming from separate traditions, Smith’s work was also in tune with the Prussian bureaucratic school, and undoubtedly the efficient organisation of German industry in the late nineteenth century owes much to a combination of the two approaches. The pioneers of these developments in work organisation, whether in Britain, Germany or other European countries, tended to be strict disciplinarians who used their personal authority to impose the new working arrangements on a usually reluc- tant workforce (Chapman and Chassagne, 1981). Therefore, change tended to be managed by imposition and force rather than negotiation and agreement. Nor is it surprising that it should be so. In the main these were countries which had been, in the recent past, feudal economies dominated by warrior elites. In Germany, this was still the case. Even where, as in France, there had been a decisive break with the past, this seems merely to have reinforced rather than removed patterns of social rigidity and authoritarianism. In such situations, resistance to or questioning of change was unlikely to be met by understanding or tolerance. Predictably, there was strong resistance, both active and passive, to the introduction of new working patterns and methods (Kriedte et al, 1981). Though this resistance could and did take the form of physical violence against factories and equipment, a more frequent manifestation was high labour turnover. One of the largest Manchester cotton spinning firms, McConnell and Kennedy, had an average turnover in the early nineteenth century of 100 per cent per year, a high but not uncommon rate (Fitton and Wadsworth, 1958; Pollard, 1965). A similar situation existed in other European countries. In Germany, for example, employers ‘were generally satisfied if they achieved partial success in creating a stable core of skilled workers … Turnover was the most persistent labour problem con- fronting employers’ (Lee, 1978: 460). This situation clearly gave those workers whose skills were most in demand a significant bargaining position, which allowed them to raise their wages and determine the pace of work. However, it also acted as a spur to employers to seek methods of reducing their reliance on skilled labour (Bruland, 1989). One of the main ways that entrepreneurs responded was through technologi- cal developments aimed at replacing or reducing employers’ reliance on skilled labour. A contemporary observer of the nineteenth century industrial scene, Andrew Ure (1836: viii–ix), drew special attention to the role that technology could play in this process: By developing machines ... which require only unskilled instead of skilled labour, the cost of labour can be reduced [and] the bargaining position of the worker reduced.
  • 32. The rise of commerce and the birth of the factory 19 It becomes clear why workers not only opposed the advent of the factory system but also, even when it became established, continued to oppose strongly changes in work practices and the introduction of new equipment. Even in the present day, where change tends to be preceded by consultation and its beneficial effects are stressed, there is still a tendency for those concerned to feel apprehensive of, if not downright resistant towards, change (Smith et al, 1982). Therefore, in a harsher and more authoritarian age, where organisational and technological change was seen as a weapon in the battle for control of the workplace, it is not surprising that change management should be achieved by imposition and coercion, and occasion the response that it did. Nevertheless, despite the increasing opposition of ‘organised’ labour, the work practices associated with the factory system gradually permeated every aspect of industrial and commercial life, albeit only on a piecemeal basis. Even by the end of the nineteenth century, there was no unified or accepted approach that managers could apply to organisations in their entirety, though in Germany the application of the Prussian bureaucratic model allied to the approach to industrial organisation of Adam Smith was proving influential. Yet the developing factory system could not shake off the legacy of its origins or ignore the continuing battle between labour and management over control, rewards and skill. As the following shows, this was as much the case in continental Europe and the USA as it was in Britain. ■ Europe The history of Europe since 1800, at least in economic terms, is essentially the history of industrialisation, of structural change through which industrial sectors grew and non-agricultural sectors came for the first time to dominate economic life. In general, for most of the nineteenth century, continental Europe lagged behind Britain in terms of industrial development. However, just as Britain was something of a patchwork quilt in terms of the pace of development of individual industries and regions, so too was the rest of Europe (Davis, 1989). As Pollard (1981) explained, European indus- trialisation developed from a few core regions. In Britain, southern Lancashire, the West Riding of Yorkshire, and that part of the West Midlands called the Black Country were the engines of growth. In northern Europe, the area between the Scheldt, the Meuse and the Rhine rivers had a special role to play, whilst to the east, Silesia, Bohemia and Moravia became leading centres of industrial progress. In the south, it was northern Italy and Catalonia that led the way. Nevertheless, though mainland Europe did have its pockets of progress, industriali- sation did not spread from these at the same rate nor in the same manner as it had in Britain. The most outstanding feature of British industrialisation was its self- generating or autonomous nature. Nowhere else could these conditions be exactly reproduced. To use an analogy, once the wheel has been invented, others cannot rein- vent it. What they can do is adopt it and adapt it to their needs and circumstances. Therefore, Britain became a model to be consciously followed. In the same way that Japan became a focus for study, discussion and emulation by Westerners in the 1980s, so Britain was similarly regarded in the early nineteenth century. Regular visits were made by foreign governments and private entrepreneurs to discover and copy British methods and technologies. In some instances, British investors, entrepreneurs
  • 33. 20 Chapter 1 · From trial and error to the science of management and inventors were encouraged by the governments of France, Germany and other European states to help develop their economies – all with the aim of reproducing and overtaking Britain’s industrial lead. For some, especially Germany and France, the process of industrialisation was less a matter of material progress by organisations and individuals pursuing profit max- imisation, and more concerned with the maintenance of their position in the world. Just as they sought to challenge Britain’s military might, so they sought to emulate her industrial power. They could not and would not let Britain dominate the world with- out a struggle. Therefore, though the advent of industrial capitalism was in all countries characterised by the rise of a class of industrialists who aggressively sought to maximise their own wealth, the context in which this occurred varied from country to country. In Britain and the USA, the context favoured individual entrepreneurs pursuing their own self-interest. In Germany, and to a lesser extent France, industrialisation was sponsored by the state and for the state. The prime motive was to build the economic and military might of the state rather than the wealth of the individual. Where these were compatible, the state was happy to maintain a watching brief. However, where free enterprise and competition were seen as counter-productive to the objectives of the state, it intervened to reduce competition either through the creation of cartels and monopolies, or by state ownership/funding, as was the case with much of the European railway system. In Denmark, on the other hand, the operation of the market was constrained not by the state but by the creation of cooperatives, which allowed small-scale farming and business, and the way of life they represented, to survive where in other countries such enterprises were overwhelmed by larger competitors. Therefore, though other countries used Britain as a model and benchmark, the actual process of industrialisation in each depended upon the unique political, social and economic circumstances that prevailed there. In some cases these gave primacy to profit maximisation, in others the interests of the state held sway, whilst in further cases sectional interests successfully challenged the power of the market. Consequently, influential though the British example was, once the necessary technique, capital and enterprise were introduced abroad and any element of conscious emulation had worn off, the industrialisation assumed a different character (Kemp, 1979). The continental countries did not and could not simply duplicate British experience. There were, however, some fundamental similarities. All European societies, to a lesser or greater extent, were structured on a hierarchical basis, with those in posi- tions of power strongly influenced in their view of the rest of society by feudal traditions of subservience and obedience. This was as much the case in post-revolu- tionary France as in Britain, and even more so in Prussia and Russia. It follows that the organisational forms and labour relations that characterised the emerging factory system in Britain found fertile ground elsewhere in Europe (Cipolla, 1973). Despite this, other countries did not copy Britain unthinkingly or on a wholesale basis. As latecomers, they could, especially with the encouragement of the state, leapfrog some of the stages of industrialisation, which was one of their principal advantages, but they could not close the gap between themselves and Britain overnight. Ashworth (1987) commented that even as late as 1850, apart from Belgium, Europe had little mechanised industry to speak of; however, 50 years later, Germany had overtaken Britain as the leading industrial nation, and other nations
  • 34. The rise of commerce and the birth of the factory 21 were also poised to do so. The reasons for this are many and complex, involving social and political as well as economic factors (Mathias and Davis, 1989). A brief look at industrial development in Germany, France and Scandinavia illustrates this. Germany Within the space of a generation in the middle years of the nineteenth century, Germany was transformed from a collection of economically backward states form- ing a political patchwork in central Europe into a unified empire, driven forward by a rapidly expanding, technologically driven industrial base (Kemp, 1979). Germany’s progress was so rapid that, though it industrialised much later, by the end of the nine- teenth century it had overtaken Britain as the world’s premier industrial nation. This transformation, accompanied as it was by the deliberate resort to military force as an instrument of national policy, and an atmosphere of fierce nationalism, represented an event of major historical significance (Borchardt, 1973). The two key factors that were primarily responsible for the nature and pace of German industrial development were the geographical and political conditions of the country, and the fact that German industrialisation was state-promoted rather than market-driven. To look first at geography and politics: not until the late nineteenth century did Germany possess an integrated territory with an economic and administrative centre. Up to the nineteenth century, Germany was a collection of feudal fiefdoms that often warred with each other, rather than a unified nation. In 1789, ‘Germany’ comprised some 314 independent territories each with their own rulers, internal markets, cus- toms barriers, currencies and trading monopolies. This internal fragmentation, as much as anything else, was probably the key obstacle to industrial progress. This did not change until the Congress of Vienna in 1815, which reduced the number of German states to 39. Each individual state then began to remove internal customs barriers and develop better communications systems, which opened the way for greater economic cooperation with other states. However, unlike other countries, economic progress was neither driven nor accom- panied by a democratisation of society. German society in the nineteenth century remained dominated by a feudal hierarchy. This was characterised by Prussian ‘Junkerdom’ with its military traditions and ambitions, and its autocratic behaviour. Unlike their counterparts in other countries, the German nobility were not diminished by industrial progress; rather they managed to seize the reins of commercial power to bolster their position. This was due, in many instances, to their retention of regional monopolies over trade, industry and the supply of labour. This leads on to the second key feature of German industrialisation – the fact that it was state-promoted rather than free-market driven. The drive for industrialisation, especially in Prussia, which came to dominate the rest of Germany, was not primarily motivated by economic reasons. Rather, industrialisation was seen as the process of building a strong and powerful state in which the old nobility continued to dominate. Therefore, for Germany, the fact that industrialisation was accompanied by the devel- opment of a strong military machine and the continued dominance of the Prussian Junkers was not an unfortunate coincidence, but its major objective. Industrial progress in Britain exerted a strong influence on Germany. This was partly because it provided a model to emulate, but mainly because Germany saw
  • 35. 22 Chapter 1 · From trial and error to the science of management industrial power and military power as two sides of the same coin. Unless Germany could catch up with and overtake Britain’s industrial lead, Germany felt that it would be relegated to the status of a second-class state. The transformation of Germany into an industrial superpower owed much to the role played by Prussia. From the early nineteenth century onwards, Prussia used its economic and military position as the most powerful German state to subdue the other German states and exclude possible rivals, especially Austria. The prime weapon in the Prussian arsenal was the creation of an all-German customs union (the Zollverein). Because of its size, Prussia could determine the rules for the Zollverein and, whenever and wherever it was extended, could ensure it was to Prussian advantage. The customs union, because it opened up trade, also gave a boost to the develop- ment of better transportation and communication links, especially railway building (though the latter really took off once the Prussian military came to appreciate its strategic significance for the rapid transit of troops and materials). It seems very clear that, more than the emergence of any one industry, it was the creation of a single market and the boost to consumption that this brought about which was the key factor in Germany’s economic progress in the nineteenth century (Kemp, 1979). By 1834, practically all of Germany was included within the customs union and, though it did not come about until 1871, this provided the essential precondition for political unification. The fact that both political and economic unification were driven by and dominated by Prussia gave German industrialisation its unique charac- ter. The new German state that was established in 1871, for all its acceptance of universal suffrage and a national parliament, remained an autocracy ruled by the Hohenzollern dynasty, which still rested on the support of the traditional landed nobility of eastern Germany. It incorporated the bureaucratic and militarist traditions of the old Prussia and remained profoundly conservative. Indeed, it was the adoption of the Prussian bureaucratic model by both state and industry, combined with close links between both, which gave German industry its unique character. Unlike Britain, where the majority of firms remained relatively small and business operated in an ad hoc fashion, with each company pursuing its own interests, in Germany large, bureaucratically structured organisations became the norm. In addition, the state did not hesitate to intervene directly, for example when it nationalised the railways, if it believed the private sector could not or would not serve the national interest. Given that the state saw German industry as almost an extension of government, it is not surprising that it sought to bolster managerial authority and restrict workers’ rights. This also very much reflected the Prussian autocratic tradition of expecting and enforcing obedience from those lower down the social order. Therefore, in most – though not all – enterprises, employers took the view that they had a right to treat their workers however they pleased. A German employer regarded himself as a patri- arch, as the master in his own house in pre-industrial terms, with total responsibility for the whole social organism of his enterprise and generally well beyond this. This type of self-esteem made German employers particularly unyielding in any situation of conflict. One consequence of this was that the industrial and political climate became increasingly radical after the political and economic unification of Germany in 1871, though to no great effect. This period also saw the rapid development of the German
  • 36. The rise of commerce and the birth of the factory 23 economy. In 1870, the leading British enterprises were much bigger than their largest German competitors; by 1900, this position had been reversed. In many cases this was the result of governmental and banking encouragement to move to vertical inte- gration. Also, cartels and monopolies, frowned upon elsewhere, received official endorsement in Germany, which allowed more orderly growth and longer-term investment decisions than might otherwise have been the case. By the end of the nineteenth century the German economy had outstripped its British counterpart, but had not succeeded in avoiding either the same debilitating con- flict between employers and employees, or the rise of political groups and parties which challenged the nature and purpose of capitalism. However, the influence of the Prussian autocratic tradition, the development of a strong bureaucratic approach within both private and public sector organisations, and the close relationship between industry and state, meant that industrial and political resistance was met by a unified and implacable alliance between employers and government. Though prepared to use welfare provisions, sickness benefit, old age pensions, etc., to reduce social tensions, the state was not prepared to cede one iota of industrial or political authority. France As in Germany, the process of industrialisation in France was driven by the desire to emulate Britain, rather than by any form of ‘spontaneous combustion’. However, despite having the advantage of much earlier state encouragement than Germany, France’s industrial revolution was late in starting and did not reach maturity until towards the end of the nineteenth century (Dunham, 1955; Fohlen, 1973). The slow and late development of industry in France appears to have been caused by two key factors: political change and agrarian stagnation, both of which were inextricably linked with the French Revolution of 1789. In the eighteenth century, little separated France and Britain in industrial terms. With much encouragement from the monarchy, French industry adopted British machines and equipment. British entrepreneurs and inventors were even persuaded to establish factories in France. During the last years before the French Revolution, the King paid great attention to the economy. A twin-track approach to industrial devel- opment was instituted. On the one hand, much state aid and encouragement were poured into industry; whilst on the other hand, there was the suppression of every obstacle to individual entrepreneurship, whether they be the privileges of the craft guilds or the ancient rights of the aristocracy. Though these initiatives gave a significant boost to industrialisation, progress was halted, and even reversed, by the French Revolution in 1789 (Marczewski, 1963). To an extent this is surprising, given that those who dominated the Revolutionary Assemblies were men of property and substance, though drawn from the law and professions rather than the business world. They believed in upholding property rights, abolishing hereditary privilege and vested interests, and providing a favourable climate for entrepreneurship. They also introduced laws that placed employees in an inferior legal position to their employers and which prohibited them from combining for the purpose of bargaining. Nevertheless, the benefits of these to entrepreneurs were outweighed by other consequences of the Revolution. Foremost amongst these was the loss of France’s colonial empire, together with its isolation, by the British naval blockade, from key markets such as the United States. The result was not only
  • 37. 24 Chapter 1 · From trial and error to the science of management that France lost crucial imports and exports, but also that it was cut off from the prime source of technical and organisational innovation, Britain. It was not until the final defeat of Napoleon in 1815 that France was once again able to concentrate on developing its economy rather than fighting wars. As before, the state took a lead in encouraging economic development, notably through the develop- ment of roads, canals and, later, railways. It also sought to stimulate the domestic economy by introducing import controls. However, this seems only to have allowed industry to keep outdated methods and equipment and maintain higher prices longer than might have been the case if it had not operated in a protected market. Only after 1850, with the upsurge in economic activity across Europe and the coming to power of Napoleon III, does the French economy really seem to have taken off. The other main factor which held back industrialisation was the backward state of agriculture. The peasantry were already developing as an important group even before the French Revolution. However, the price they exacted for supporting the Revolution, the ownership of the majority of agricultural land, made them a powerful but reactionary force to which all sections of the property-owning classes had to pay attention. The consequences of this for industrialisation were twofold. First, the agri- cultural sector, unlike its counterparts Britain and Germany, remained self-sufficient and inefficient for most of the nineteenth century. As such, it was incapable of gener- ating either wealth for investing in industry or demand for manufactured goods produced by industry. Second, by depressing the rate of population growth, it pre- vented the mass population exodus from the countryside to the towns and thus starved industry of a ready supply of cheap labour. This situation was further exacer- bated by the continuing opportunities for home work which, by supplementing agricultural incomes, extended the viability of rural life longer than might otherwise be the case. Nevertheless, the continued existence of a large rural population, even up to the dawn of the twentieth century, was not just a product of land ownership and the pres- ence of home work. It also owed a great deal to the presence of import barriers which allowed peasants to maintain, in comparison with their British counterparts, ineffi- cient production methods, and reduced the need either to borrow money for new equipment or to sell plots that were too small to be viable. Import barriers also produced a strong bond of self-interest between peasants and factory owners, both of whom saw free trade as a threat to their way of life. As one observer commented, ‘Competition was always possible in France, it simply did not happen to be a preferred form of conduct’ (Sheahan, 1969: 25). For industrialists, the result was similar. The absence of foreign competition, allied to low levels of domestic demand, allowed the typical business to remain family- owned, and also relatively small. Finance for industrial expansion was raised from family members rather than financial institutions, which in turn restricted the size of the banking sector. Indeed, such was the shortage of domestically generated capital and risk-orientated entrepreneurs that the building of railways, so vital to the devel- opment of the French economy, could not have taken place without foreign capital and state support (Kemp, 1979). Therefore, unlike Britain, industrialisation in France was never driven by, or resulted in, individual enterprise or profit maximisation. For the state, the objective was a strong France. For the peasant and small entrepreneur, the objective was to
  • 38. The rise of commerce and the birth of the factory 25 make a reasonable living in the context of the rural and urban cultures they sup- ported and valued. Scandinavia Having looked at how the three largest and most advanced European countries – Britain, Germany and France – industrialised, we shall now move on to examine how three of the smaller states – Sweden, Denmark and Norway – responded to the chal- lenge of industrialisation. In 1800, the total population of these three countries was just over four million people: Sweden, 2.35 million; Denmark, 0.93 million; and Norway, 0.88 million. By 1910, it was still less than 11 million: Sweden, 5.5 million; Denmark, 2.8 million; and Norway, 2.4 million. The historical links between these countries were very close, and up to the First World War they operated a monetary union. Although, owing to their seafaring traditions, each had occupied a position of importance on the international stage, by the mid-nineteenth century the standing of all three countries had declined. In fact, Norway and Sweden had become two of the poorest countries in Europe, which was a prime reason for the large-scale emigration from these countries to the USA in the nineteenth century (Milward and Saul, 1973). Despite growing pockets of industrial production, in the nineteenth century their domestic economies were weak, and all three countries depended heavily on export- ing the products of their agricultural, mining and forestry industries to their more industrialised neighbours, especially Britain. That they were able to adapt their export efforts to the changing demands of the international economy bears witness to the entrepreneurial skills of these countries. However, political, economic and social developments in these three countries in the nineteenth century, particularly in Denmark, laid the foundations for the creation of the ‘Nordic model’ of industrial relations, which emerged in the 1930s. This arose from the so-called ‘historic compromise’ between capital and labour, which extended cooperation between employers and social democratic governments over national economic policy into the industrial relations field. At a national level, it was agreed that the efforts of social democratic governments to bring about economic growth would not challenge the capitalist nature of production. Trade unions accepted this approach in exchange for basic trade union rights. This paved the way for an end to lock-outs and other such tactics by employers, and the creation of government- backed approaches to industrial democracy and further extensions of workers’ rights (Dolvik and Stokland, 1992; Ferner and Hyman, 1992; Kjellberg, 1992). These developments happened at different times and at a different pace in each country. Denmark led the way in the late nineteenth century, and Norway and Sweden followed a decade later, though the ‘Nordic model’ did not really establish itself fully until the 1930s and 1940s. However, the close ties between these three countries meant that political and industrial developments in one affected the other two. Hence the phrase ‘Nordic model’ was coined to describe similarities between the tripartite approaches adopted by government, employers and trade unions in each country, and the fact that these were distinct from practices elsewhere in Europe (or the rest of the world for that matter). However, for the moment, we are more con- cerned with the process of industrialisation in the nineteenth century and how this paved the way for these later developments.
  • 39. 26 Chapter 1 · From trial and error to the science of management For Sweden, the nineteenth century brought a rapidly rising population, which was matched by an increasingly productive agricultural sector that not only fully met domestic needs, but also developed a strong export market in grain, especially to Britain. The productivity of agriculture reflected the growing flexibility and commer- cialisation of this sector, facilitated by a series of gradual and peaceful rural reforms. The iron trade also occupied an important position in the Swedish economy for much of the nineteenth century. This was due in no small part to its ability to adopt technological innovations, mainly from Britain, and the ability of Swedish iron- masters to seek out new international markets. By the end of the century, this had led to fewer but larger units of production, and the industry began to reflect the struc- tures and methods of the leading European producers. Despite the growth of agriculture and iron production, the most spectacular ele- ment in the growth of the Swedish economy was the boom in timber exports (Jorberg, 1973). Up to the 1830s, Swedish exports were only a fraction of those of Norway. However, the increasing urbanisation of Britain, and growing demand for timber from France and Germany, transformed the pattern of demand and supply. By the 1860s, softwood accounted for 40 per cent of all Sweden’s exports, a situation that lasted well into the 1880s. With over 20 million hectares of productive forest, Sweden possessed the largest such area in Europe, after Russia. The growth in markets was matched by the intro- duction of new methods and techniques, especially the use of steam engines and fine-bladed saws at the mills. The transfer of land ownership from the state to the pri- vate sector, in the early nineteenth century, also aided the development of the timber industry by allowing entrepreneurs to obtain timber rights often at ridiculously low prices, sometimes for no more than a sack of flour. Such a situation attracted many ruthless entrepreneurs whose regard for reforestation and conservation was negligible. This combination of high demand, cheap wood and ruthless entrepreneurs created the conditions for a very sharp boom in timber exports, at least in the short term. Although after 1875 the state reversed its policy and began to reacquire forests, the timber companies also began to buy farmland, with its attendant forest rights. Gradually, the industry came to be dominated by a few large companies, some of which were foreign-owned. However, this concentration of ownership did make it easier for the state to oblige producers to take a more responsible approach to conser- vation and reforestation. Given the dominance of the forestry industry, which relied almost exclusively on waterways for transportation, it is not perhaps surprising that railways came late to Sweden – not until the 1850s. It is also not surprising, given this situation, that it was government push rather than demand pull which gave the impetus to the Swedish railway system. Remarkably, by 1914, Sweden had 25 km of railway per 1000 inhabi- tants, twice that of any other European country. It also had a thriving industry producing rolling stock and engines for both the domestic and export markets (Jorberg, 1973). Nevertheless, in 1870, industry and handicrafts only employed 15 per cent of the population. There were no industrial centres to rival those of Britain, Germany and France. Even the iron districts were small separate communities. However, after 1870, there was a rapid expansion of the Swedish industrial base, so much so that in the 40 years up to 1914, the Swedish economy grew faster than any other in Europe. Even
  • 40. The rise of commerce and the birth of the factory 27 so, to put this picture into perspective, it should be noted that all the workers involved in Swedish engineering exports in 1912 totalled no more than those to be found in one large German railway works. For a small country, dependent on its natural resources, Sweden’s progress was sig- nificant. There were a number of reasons for this. First, changes in the eighteenth century had removed barriers to social mobility and created the conditions for the emergence of entrepreneurs. Second, these entrepreneurs showed an unrivalled ability to exploit Sweden’s natural resources and take advantage of developing export mar- kets. An additional factor was the high quality of the Swedish educational system. This provided an educated workforce able to adapt to changing industries, technolo- gies and products. Therefore, though it would be wrong to underestimate the great asset of Sweden’s natural resources, neither should one forget the contribution made by human capital. The combination of a less hierarchical society than elsewhere in Europe and a well-educated and skilled workforce clearly paved the way for the advent of the social democratic approach to society which became the hallmark of Sweden in the twentieth century. On the other hand, it would be misleading to forget that, as elsewhere in Europe, industrialisation was a harsh process. Entrepreneurs could be very rapacious, and much of the technology and many of the methods they employed were imported from the more advanced nations, especially Britain. Consequently, though the Swedish gov- ernment tended to be more keen to intervene than was the case in Britain, industrialisation was accompanied by the same sort of clashes between capital and labour, and the growing incompatibility between an agricultural economy based on self-sufficiency and a capitalist economy based on money. By the end of the nineteenth century, Sweden had developed a small industrial base, by comparison with Britain, Germany and France, but one that was flexible and competitive. However, the organisation of labour and the technology deployed tended to be imported from the bigger industrial nations. It imported the poor labour rela- tions that existed elsewhere as well. Though Sweden’s industrial base was modest by international standards, it was in advance of that of Denmark and Norway (Jorberg, 1973). For Denmark, as for Sweden, it was changes to agricultural production that gave a large boost to the econ- omy in the nineteenth century. Traditionally, Denmark had relied on the export of two commodities, grain and cattle (though, in the eighteenth and the first half of the nineteenth centuries, its econ- omy also benefited considerably from its colonial possessions in Asia and the West Indies, particularly in terms of sugar production and the slave trade). Trade in the former grew rapidly in the nineteenth century. However, much of the grain was pro- duced on marginal land, which was no longer economically viable after the collapse of world grain prices in the 1870s. After the early 1880s, imports outstripped exports. On the other hand, the keeping of livestock and dairy produce showed a remarkable growth throughout the century. By the end of the nineteenth century, Denmark had a thriving export trade in butter and beef. By 1913, Denmark exported 80 per cent of its butter production, mainly to Britain where it had 40 per cent of the market; in that year, only Holland and Argentina exported more live cattle than Denmark. The latter part of the nineteenth century and the early twentieth century also saw a twelvefold rise in the production and export of pork (Milward and Saul, 1973).
  • 41. 28 Chapter 1 · From trial and error to the science of management One hindrance to the export of pork was the incompatibility between the large scale of the export market and the numerous small producers. However, this was overcome in the 1880s with the establishment of the first cooperative bacon factory. By 1914, 53 per cent of pig breeders were supplying to cooperatives. The idea of cooperatives to buy, process and sell produce had grown up in the dairy industry, and was later taken up by egg producers as well as pig breeders. Similar organisations were also used to purchase bulk feedstuffs and fertilisers. The impetus behind the development of cooperatives was the smaller farmers’ fear of being exploited by their larger colleagues, who could afford to purchase the latest technology exclusively for their own use (Jorberg, 1973). Therefore, unlike most other European countries, Denmark found a method of making small-scale farming production compatible with large-scale international demand. Nor were these cooperatives purely economic and technical organisations. Though this was their primary purpose, they also had a social and political role, and were anti-landowner. The growth of cooperatives along with their attendant ‘folk high schools’ was crucial, not only in educating farmers, but also in uniting them as an effective political force. Indeed, the party of small farmers, in alliance with the social democrats, headed governments from 1909 to 1910 and from 1913 to 1920. Not only does this show the political influence and socialist leanings of the coopera- tive movement, but it explains the emergence of the ‘Nordic model’ in Denmark some 20 years earlier than in the other two Scandinavian countries. The development of co- operatives was also one of the main reasons why there was no reduction in the numbers employed in Danish agriculture in the nineteenth century. Though in some ways Denmark had a relatively thriving economy, its industrial base was, even relative to its size, on a more modest scale than in Britain, France or Germany. As an example, by 1911, the Danish cotton industry employed only 3,282 people, no more than one big mill in Britain. In total, there were only 108,000 work- ers employed in factories at this time. In contrast, there was a tremendous growth in the service sector, not just in trans- port and communications, but also in financial and trading services. These latter tended to be concentrated in Copenhagen, where by 1910 half the country’s popula- tion lived. By 1911, service activities accounted for 36 per cent of the occupied population, as averse to 32 per cent in Norway and 19 per cent in Sweden. One of the remarkable features of Danish industrialisation in the nineteenth cen- tury was the degree to which it preserved rather than destroyed the peasant and craft traditions. In agriculture, this was mainly due to the rise of cooperatives for process- ing and selling produce. In industry, the need to cater mainly for a small and discerning home market, allied to a well-educated workforce, kept alive the craft tra- dition, and – for most of the nineteenth century – the guild system. Even in 1914, 84 per cent of Danish workers were still in establishments employing five or less people. By contrast, in Sweden in 1912, only 24 per cent of workers were in establishments employing 10 or less people. Therefore, if Denmark was less industrially advanced than some bigger European countries, it could however claim to have avoided the clash of cultures and the rise of industrial conflict that characterised the industrial revolution elsewhere in Europe. Just as the process of industrialisation differed considerably between Sweden and Denmark, so was also the case with Norway. Like the other two countries, it was
  • 42. The rise of commerce and the birth of the factory 29 dependent on exports, but in Norway these were service-based rather than product- based. Shipping was its chief earner. In 1880, shipping accounted for 45 per cent of all exports. Its links with Sweden and Denmark tended to be political rather than economic. Up to 1814, it was part of the Kingdom of Denmark, and in that year the King of Sweden also became the King of Norway. However, Denmark sided with France during the Napoleonic Wars and as a consequence of Napoleon’s defeat lost the sov- ereignty of Norway to Sweden. Norway was given its own parliament and constitution, though its political and economic ties with Sweden were considerable until it achieved full independence in 1905. Of the three Scandinavian countries, Norway was slowest to industrialise and, unlike the other two, this was neither preceded nor accompanied by the modernisa- tion of agriculture. Nor was the stimulus to industrialisation generated internally. Rather, when industry really began to flourish, just before the First World War, it was brought about by an influx of foreign capital wishing to take advantage of Norway’s potential for cheap hydroelectricity. However, up to this point, Norway had made few steps towards becoming an industrial economy. In agriculture, Norway was held back by a combination of poor soils, difficult climate and extremely inefficient internal communications. Indeed, a marked feature of the Norwegian economy was the very poor contact and bad com- munications between various regions within the country, no doubt a consequence of the mountainous terrain, which meant that it was often easier to import goods from abroad rather than to move them from one part of Norway to another (Jorberg, 1973). This led to a dual economy: the increasingly prosperous urban areas which grew rich on the export of goods and services, and a subsistence agricultural economy in the countryside. Accordingly, the towns prospered and the countryside stagnated with small peasant farmers tending to be the agricultural norm into the twentieth century. At the end of the nineteenth century, such was the low level of productivity of Norwegian agricul- ture that butter exports, worth 3.3 million Kr, were dwarfed by imports of grain and animal feedstuffs worth 83 million Kr. Norway had no other food exports of impor- tance, except for fish (Milward and Saul, 1973). On the other hand, Norway was mercifully free of the social rigidity of many other European countries where the nobility stood at the top of the social pyramid. Instead, uniquely, merchants and gentlemen farmers formed the top layers of society, serfdom was rare, and there was a lack of the social injustice that seemed inevitably to accom- pany industrialisation in the more advanced countries. This may account for the willingness of employers and trade unions, particularly in the metal industries, to favour cooperation over conflict from the early 1900s (Dolvik and Stokland, 1992; Kjellberg, 1992). The staple industries of the Norwegian economy in the nineteenth century were fishing, timber and shipping, along with a shipbuilding industry that was a product of all three. In the early years of the century, it also exported iron, but this trade was vir- tually killed by British and Swedish competition after Danish trade protection was abolished in 1814. The main employers were shipping, where some 33,000 were employed in the merchant marine in 1860, and fishing, both of which had only weak links to the rest of the economy. There was also a small, fragmented, engineering
  • 43. 30 Chapter 1 · From trial and error to the science of management industry, which in 1850 only comprised 12 factories employing a total of 200 work- ers. From the 1840s there was a rapid growth in the textile sector. Even so, in 1860 this still only accounted for 3,000 workers out of a total of just under 20,000 indus- trial workers. The biggest industrial sector was forestry, employing almost one in three workers (Jorberg, 1973). Therefore, because of its small population size, the lack of demand from the coun- tryside, and the reliance of the towns on exports for their prosperity, Norway’s industrial expansion was linked very closely to the export trades. When exports boomed, domestic demand increased; when exports fell, so did domestic demand. In addition, because its industrial sector was small, Norway found it difficult to generate capital domestically. As an example, in 1870, half of the mining industry was foreign- owned. However, with the development of closer economic links with Sweden in 1873, the market for Norwegian industry was expanded considerably. Developing quite separately from the rest of the economy, the real growth industry of the nineteenth century was shipping. Shipping emerged during the eighteenth cen- tury as a subsidiary of the timber trade, but in the nineteenth century it developed entirely independently of Norway’s own transport needs. Instead, it catered to the needs of other countries, especially Britain and Denmark and their colonies. It owed its existence to the country’s shipbuilding tradition, the availability of local timber and the ready supply of cheap labour. From 1850, the industry grew rapidly, growing fivefold in the years up to 1880, by which time it was the third largest in the world, greater even than that of France and Germany. However, after 1900, the industry declined, owing to a fall in freight rates and to the advent of steam-powered vessels. The industry was very fragmented, which meant that raising capital was difficult. Though this was not a problem with the small, wooden ships that had been the back- bone of the industry, it became one with the need for larger, much more expensive, steam-powered vessels. Also, Norway lacked both the raw materials, iron and steel, and the skills to build steam ships. Indeed, in the immediate pre-war years, only 20 per cent of the industry’s requirements were met from home production. Even so, in 1914, the Norwegian shipping industry was the fourth largest in the world behind Britain, the USA and Germany, though there were signs that it was in decline. The advent of hydroelectric power at the end of the nineteenth century did, how- ever, make a significant difference to Norway’s industrial development. Once the technology had been established, no country in Europe was better placed to exploit it than Norway, with its plentiful supply of waterfalls. However, to turn this into a real- ity required both capital and a use for the resultant cheap electricity. Both of these were to come from abroad. By 1914, hydroelectric power, financed by foreign capital, was used to produce synthetic fertiliser and aluminium. The attraction for foreign investors was cheap power. Almost all of the output was sold abroad, much of it without further processing. These developments had a significant impact in terms of increasing Norway’s foreign earnings. The result was that some 14 per cent of the industrial labour force was directly employed by foreign firms by 1909, with consid- erable numbers being indirectly employed. These workers tended to be concentrated in the more capital-intensive industries and larger workplaces. This led to a law being passed which limited foreign ownership of Norwegian industry. In many respects, with the stagnation of timber and shipping, the advent of modern chemical and metal industries was highly desirable. In another respect,
  • 44. The rise of commerce and the birth of the factory 31 though, they also showed the weakness of Norwegian industrialisation. Both these industries were heavily dependent on foreign capital; both were capital- as opposed to labour-intensive; and neither developed or needed a local supply or distribution net- work. Therefore, neither really impacted greatly, at least in the pre-war period, on the wider Norwegian economy. For this reason, in relation to its Scandinavian neighbours, Norway remained a relatively poor country, which certainly accounted for the large waves of emigration it experienced in the nineteenth and early twentieth centuries. In relation to political democracy and educational provision, though, particularly for women, it was in advance of most other European countries before 1914. Considering these three Scandinavian countries as a whole, the picture of industri- alisation by the early twentieth century was very mixed. Sweden was probably the most advanced, with Denmark not far behind but Norway trailing some- what. However, because of population size, natural resources and history, none had developed an industrial base capable of competing with those of the leading European countries. As elsewhere in Europe, all three tended to import methods and technologies from the more advanced countries, especially Britain. It would appear that the process of industrialisation, where it was reliant on foreign capital and methods, tended to reproduce the British experience of poor labour relations. However, particularly in Denmark, there were signs that different organisational forms allied to existing social structures and expectations, together with the growth of social democracy, held out the promise of avoiding the vicious employer–employee clashes experienced elsewhere. Nevertheless, in Europe as a whole, for the most part, those who created and con- trolled the large business organisations that were becoming the norm still had to rely on their own experience and judgment, but with growing frustration over their inabil- ity to control and organise these bodies fully and effectively. There was also a realisation amongst some that, whilst change was inevitable, they lacked an effective and, as far as their employees were concerned, acceptable way of managing it. Therefore, by the end of the nineteenth century, there was a growing awareness of the need to develop an approach to organising work that was more systematic and less harsh and arbitrary than what had gone before. Although this was already, to an extent, taking place in Germany with the rise of bureaucracy, the USA was the coun- try where the most conscious and consistent search was being pursued for a comprehensive theory of how to structure and run organisations. ■ The USA In the USA, for a number of reasons, the need for a workable, overall approach to organisational design and control, which legitimised the authority of managers to ini- tiate change, was perhaps more acute than anywhere else. The USA had industrialised far more rapidly and on a larger scale than any other nation. Only in the 1860s, after the Civil War, did the USA begin to industrialise in earnest, but by 1914 it had become the premier industrial nation, with the highest per capita income in the world. In the period 1860 to 1914, employment in manufacturing rose from 1.3 mil- lion to 6.6 million, and the population as a whole rose from 31 million to 91 million (Habakkuk and Postan, 1965). The USA at this time was still very much influenced
  • 45. 32 Chapter 1 · From trial and error to the science of management by Europe, and initially at least adopted similar approaches and methods in organis- ing and running industry. However, the size of the typical American organisation quickly grew much larger than those in Europe. Whilst the average British and French business was still the small, family-owned firm, in the USA it was the monopoly, which dominated an entire industry, or the conglomerate, which had substantial hold- ings in several industries. As an example, in 1900 Dale Carnegie sold his steel company for the enormous sum of $419 million to a group of financiers. They merged it with other steel concerns to create a monopoly steel producer employing 200,000 workers and valued at $1.3 billion. This was at a time when the British steel industry, which had led the world, comprised 100 blast furnaces owned by 95 sepa- rate companies. As might be imagined, the numbers of Americans employed in factories and offices grew rapidly – almost tripling between 1880 and 1910 (Levine, 1967; Zinn, 1980). The rocketing increase in demand for labour could not be met by the indigenous pop- ulation alone and was fuelled by successive waves of immigration. Whilst solving one problem – the shortage of labour – this created others. The culture shock of industrial work, a foreign language, and problems of housing and social integration created enormous pressures in American society. Alongside this was the arbitrary and ruthless discipline of the factory system, where workers were treated as so much industrial cannon fodder. It was a time of rapid social, technological and organisational change: a time where entrepreneurs did not so much expect to manage change as to impose it, and those who could not or would not accept this situation were treated harshly. Consequently, most industries found themselves sitting on a pressure cooker which could, and frequently did, explode in unexpected and violent ways. If management–labour relations were poor in most European countries, they were far worse in the USA (Pelling, 1960). The American approach to industrial development owed little to government aid or encouragement, and much to individual entrepreneurship. For this reason American entrepreneurs had much more in common with the free market approach to industrial expansion of their British counterparts than to the state-sponsored traditions of Germany or France. Therefore, the German approach to industrial organisation, bureaucracy, which might seem appropriate given the size of American companies, was not attractive. In any case, it tended to operate best in situations where growth and demand was stable or predictable, which in Germany the government tried to facilitate. However, American growth patterns were volatile and unpredictable. Consequently, there was great pressure to find organisational arrangements that would allow employers to control and organise their employees in a manner that reduced conflict, was cost-effective, and was applicable to the American environment and philosophy. It was also becoming recognised that it was not sufficient just to develop a more systematic approach to the organisation of work; there was also a need to develop an approach to managing change that would persuade workers to accept rather than reject or resist the introduction of new methods, techniques and technologies. Therefore, with the spirit of endeavour, determination and confidence that seemed so much a part of the American character at this time, managers and engineers set out to remedy this situation. Though similar developments were taking place in Europe, they lacked the intensity, commitment and scale of events in the USA. This is no doubt why one of the earliest and most enduring approaches to
  • 46. Organisation theory: the Classical approach 33 organisation theory emerged in the USA, and why the USA has continued to domi- nate the development of organisation theory. Organisation theory: the Classical approach As can be seen, at the end of the nineteenth century there was a clear need to replace the rule-of-thumb approach to organisational design and management with a more consistent and organisation-wide approach. This was not because of an academic interest in the functioning of organisations, though this was present, but in order to improve their performance, enhance their competitiveness and – an increasing con- cern at the time – to sustain and legitimate managerial authority. This was certainly the case in the USA, where explosive growth and a workforce suffering from culture shock had created dangerous social pressures that questioned the legitimacy of mana- gerial power, and even the capitalist system itself. This was also true in Europe: although Europe industrialised earlier, it was not only having to come to grips with the increase in size and complexity of business life, but it was also facing consider- able, and unexpected, competitive pressure from the United States. Nevertheless, these difficulties could not quench the innate optimism of the age. It was a time, much more than now, when people dealt in certainties and universal truths. There was a feeling of confidence that any goal, whether it be taming nature or discerning the best way to run business, could be achieved by the twin power of scien- tific study and practical experience. All over the industrialised world, groups of managers and technical specialists were forming their own learned societies to exchange experiences, to discuss common problems, and to seek out in a scientific and rational fashion the solution to all organisational ills: to discover ‘the one best way’. Out of these endeavours emerged what was later termed the Classical approach to organisational design and management. As the name suggests, it was an approach that drew heavily on what had gone before; taking from writers such as Adam Smith and practitioners such as Josiah Wedgwood and leavening their ideas with contempo- rary experience, views and experiments. This approach, reflecting the age in which it emerged, portrays organisations as machines, and those in them as mere parts which respond to the correct stimulus and whose actions are based on scientific principles. The emphasis was on achieving efficiency in internal functions; seeing organisations as closed and changeless entities unaffected by the outside world. Though this approach first originated in the early part of this century, its influence on managerial practices and assumptions is still strong today, but its credibility amongst academics has waned (Kelly, 1982a, 1982b; Rose, 1988; Scott, 1987). The Classical approach, or the Scientific-Rational approach as it is sometimes called, whilst not being homogeneous, is characterised by three common propositions: ■ Organisations are rational entities – they are collectivities of individuals focused on the achievement of relatively specific goals through their organisation into highly formalised, differentiated and efficient structures. ■ The design of organisations is a science – through experience, observation and experiment, it has been established that there is one best universal organisational form for all bodies. This is based on the hierarchical and horizontal division of labour and functions, whereby organisations are conceived of as machines which,
  • 47. 34 Chapter 1 · From trial and error to the science of management once set in motion, inexorably and efficiently will pursue and achieve their pre- selected goals. ■ People are economic beings – they are solely motivated by money. This instrumental orientation means that they will try to achieve the maximum reward for the mini- mum work, and will use whatever bargaining power their skills or knowledge allow to this end. Therefore, jobs must be designed and structured in such a way as to minimise an individual’s skill and discretion, and to maximise management control. The key figures in the development of the Classical approach were Frederick Taylor (1856–1915) and two of his main promoters, the pioneers of motion study, Frank and Lillian Gilbreth (1868–1924 and 1878–1972 respectively) in the USA, Henri Fayol (1841–1925) in France and Max Weber (1864–1920) in Germany. All were writing in the first two decades of the twentieth century, though Weber’s work was not generally available in English until the 1940s. Below is an outline of their work. ■ Frederick Taylor’s Scientific Management Frederick Winslow Taylor was born into a prosperous Quaker-Puritan family in Germantown, Pennsylvania in 1856. Although he passed the entrance exam for Harvard Law School, instead of becoming a lawyer as his family wished, in 1874 he took a manual job in an engineering company and became a skilled pattern maker and machinist. In 1878, he joined the Midvale Steel Company as a labourer, but even- tually rose to become its Chief Engineer. Having had enough of working for other people, in 1893 he set up his own consultancy (Sheldrake, 1996). Taylor was an accomplished and talented engineer, and became a leading authority on metal cutting and a successful inventor; however, it is for his contribution to work organisation that he is most famous (or infamous). Taylor was a highly controversial figure during his lifetime and still remains so more than 80 years after his death. This was partly because his theory of management was a direct challenge to both workers and managers. However, a large part of the hostility he generated during his lifetime was due to his own character. Rose (1988: 23) stated that ‘Taylor was a notorious neurotic – many would not hesitate to write crank; and there is even a case for upgrading the diagnosis to maniac.’ He was cer- tainly a zealot when it came to promoting his own ideas, and would brook no challenge to them, whether from workers or management. Not surprisingly, though he attracted devoted followers, he also engendered fierce dislike. Through his experience as a shopfloor worker, manager and consultant, Taylor made a major contribution to the development of managerial theory and practice in the twentieth century (Locke, 1982; Rose, 1988). Yet his original attempts to improve productivity (or, as he put it, to stamp out ‘soldiering’) were less than successful. Not only was his use of sacking, blacklisting and victimisation counter-productive, but also the bitterness that this provoked haunted him for the rest of his life. It was his failure to achieve change by, as Rose (1988: 37) termed it, ‘managerial thuggery’ that led him to seek an alternative method of change management that the workers, and management, would accept because they could see that it was rational and fair. Thereafter, his prime preoccupation became the pursuit and promotion of a scientific approach to management.
  • 48. Organisation theory: the Classical approach 35 Drawing on his work at the Midvale Steel Company and the Bethlehem Steel Company, Taylor constructed a general ideology of efficiency. It was only in 1911, when a group of his supporters met to discuss how better to promote his work, that the term ‘Scientific Management’ was first used to describe his approach to work organisation (Sheldrake, 1996). Though initially sceptical, Taylor embraced the term and there can be little doubt that the publication, in the same year, of his Principles of Scientific Management laid the foundation stone for the development of organisation and management theory. Taylor’s primary focus was on the design and analysis of individual tasks; this process inevitably led to changes in the overall struc- ture of organisations. Such was the impact of his work that it created a blueprint for, and legitimated, the activities of managers and their support staff. In so doing, he helped to create the plethora of functions and departments which characterise many modern organisations. Before Taylor, the average manager tended to operate in an idiosyncratic and arbi- trary manner with little or no specialist support. Taylor saw this as being at the root of much industrial unrest and workers’ mistrust of management. Though criticised for his anti-labour postures, Taylor was also highly critical of management behaviour, which may account for this group’s initial lack of enthusiasm for his ideas (Scott, 1987). After Taylor, managers were left with a ‘scientific’ blueprint for analysing work and applying his ‘one best way’ principle to each job in order to gain ‘a fair day’s work for a fair day’s pay’. These last two phrases sum up Taylor’s basic beliefs: ■ It is possible and desirable to establish, through methodical study and the applica- tion of scientific principles, the one best way of carrying out any job. Once established, the way must be implemented totally and made to operate consistently. ■ Human beings are predisposed to seek the maximum reward for the minimum effort, which Taylor referred to as ‘soldiering’. To overcome this, managers must lay down in detail what each worker should do, step by step; ensure through close supervision that the instructions are adhered to; and, to give positive motivation, link pay to performance. Taylor incorporated those beliefs into his precepts for Scientific Management, com- prising three core elements: the systematic collection of knowledge about the work process by managers; the removal or reduction of workers’ discretion and control over what they do; and the laying down of standard procedures and times for carry- ing out each job. The starting point is the gathering of knowledge: The managers assume ... the burden of gathering together all the traditional knowledge which in the past has been possessed by the workman and then of classifying, tabulating and reducing this knowledge to rules, laws and formulae ... (Taylor, 1911a: 15) This lays the groundwork for the second stage: increased management control. As long as workers possess a monopoly of knowledge about the work process, increased con- trol is impossible. But once the knowledge is also possessed by managers, it becomes possible not only to establish what workers actually do with their time, but also by ‘reducing this knowledge to rules, laws and formulae’, to decrease the knowledge that
  • 49. 36 Chapter 1 · From trial and error to the science of management workers need to carry out a given task. It also, importantly, paves the way for the division of labour. The last stage is that ‘All possible brain work should be removed from the shop and centred in the planning … department ...’ (Taylor, 1911b: 98–9). The divorce of conception from execution removes control from the worker, who no longer has dis- cretion as to how tasks are carried out. Perhaps the most prominent single element in modern scientific management is the task idea. The work of every workman is fully planned out by management ... and each man receives in most cases complete written instructions, describing in detail the task which he is to accomplish, as well as the means to be used in doing the work. ... This task specifies not only what is to be done but how it is to be done and the exact time allowed for doing it. (Taylor, 1911a: 39) Allied to this last element was Taylor’s approach to worker selection and motivation. Taylor carried out many experiments to identify and reward workers. He believed that organisations should only employ ‘first class men’ and they would only get the best results if they were paid by results. As he commented on his time as a consultant at the Bethlehem Steel Company (Taylor, 1911a: 18–21): The Bethlehem Steel Company had five blast furnaces, the product of which had been han- dled by a pig-iron gang for many years. This gang consisted, at this time, of about 75 men. ... Our first step was the scientific selection of the ... proper workman to begin with. We therefore carefully watched and studied these 75 men for three or four days ... A careful study was then made of each of these men. We looked up their history as far back as practi- cable and thorough inquiries were made as to the character, habits, and ambitions of each of them. Finally, we selected [Schmidt] …] as the most likely man to start with. ... Schmidt started to work, and all day long, and at regular intervals, was told by the man who stood over him with a watch, ‘Now pick up a pig and walk. Now sit down and rest. Now walk – now rest,’ etc. He worked when he was told to work, and rested when he was told to rest ... And throughout this time he averaged a little more than $1.85 per day, whereas before he had never received over $1.15 per day ... One man after another was picked out and trained to handle pig iron ... receiving 60 per cent more wages than other workmen around them. The ‘task idea’ allied to Taylor’s approach to selecting and rewarding workers completes the process of gaining control over workers by managers. The workers become ‘human machines’, told what to do, when to do it and how long to take. But, more than this, it allows new types of work organisation to be developed, and new work processes and equipment introduced; thus workers move from having a monop- oly of knowledge and control over their work to a position where the knowledge they have of the work process is minimal, and their control vastly reduced. The result is not only a reduction in the skills required and the wages paid, but also the creation of jobs that are so narrow and tightly specified that the period needed to train someone to do them is greatly reduced. This removes the last bargaining counter of labour: scarcity of skill. According to Taylor, this transforms not only workers’ jobs but also managers’ jobs:
  • 50. Organisation theory: the Classical approach 37 The man at the head of the business under scientific management is governed by rules and laws ... just as the workman is, and the standards which have been developed are equitable. (Taylor, 1911b: 189) Taylor stated that the ‘scientific’ basis and equal applicability of his methods meant they were neutral between labour and management; therefore they legitimated mana- gerial action to analyse and change work methods, because managers are merely applying science to determine the best method of work. As Exhibit 1.1 shows, he claimed that his approach benefited both the worker and the company. The worker was enabled and encouraged to work to his maximum performance and be rewarded with a high rate of pay, whilst the company benefited from a high rate of output: It is absolutely necessary, then, when workmen are daily given a task which calls for a high rate of speed on their part, that they should also be insured the necessary high rate of pay whenever they are successful. This involves not only fixing for each man his daily task, but also paying him a large bonus, or premium, each time that he succeeds in doing his task in the given time ... . The remarkable and almost uniformly good results from the correct application of the task and the bonus must be seen to be appreciated. (Taylor, 1911a: 63) Though seen as something of an anti-trade unionist, which he probably was, as the above implies, he was also strongly critical of management. He believed that many of the problems organisations faced in implementing change were due to the arbitrary and inconsistent approach of managers. In fact, though trade unions were very suspi- cious of Scientific Management in general and Taylor in particular, managers seemed even more antagonistic. Indeed, after his death, Taylor’s acolytes spent much time in the 1920s wooing the American unions with a considerable degree of success; they never achieved the same success with management (Rose, 1988). The main reason for this was that, though managers were anxious to find an approach that would curtail labour resistance to change and improve productivity, they were not prepared to sub- ject themselves to a similar degree of discipline. As Taylor’s biographer, Copley (1923: 146) stated in relation to managerial resist- ance to Scientific Management at the Bethlehem Steel Company: Let us consider what Taylor was contending for. It was essentially this: that the government of the Bethlehem Steel Company cease to be capricious, arbitrary and despotic; that every man in the establishment, high and low, submit himself to law [i.e. that managers should obey the principles of Scientific Management]. Taylor believed passionately in the need to reform managerial authority: to base it on competence rather than the power to hire and fire. However, it is one thing to ask one’s subordinates to change their ways and accept new rules and methods; it is another thing entirely for management to acknowledge that they too need to change, and change radi- cally. No wonder that Taylor met managerial as well as worker resistance. Nevertheless, even though managers resisted the full implementation of Taylorism, the new and rapidly expanding breed of industrial engineers, charged with developing and implementing new methods, techniques and technologies, found in Taylor and his contemporaries’ work a blueprint for transforming the workplace and increasing their
  • 51. 38 Chapter 1 · From trial and error to the science of management control and status. One consequence of this, brought about by the use of job cards and other forms of work recording and analysis systems, was a massive increase in the amount of paperwork that needed to be processed. Managers complained about the growth of ‘industrial bureaucracy’, but the benefits it brought by enabling average times and costs, etc., to be calculated easily outweighed the increase in clerical costs. Nowhere was this demonstrated more dramatically than at Henry Ford’s Highland Park plant – the home of the world’s first mass-produced motor car, the Model T Ford. From 1909/10, when 18,664 Model Ts were sold, sales and production doubled year-on-year. However, every increase in production required a commensurate increase in the plant’s workforce. In 1911/12, the plant produced 78,440 Model Ts with 6,867 employees. The next year production doubled and the number of employ- ees doubled. Not surprisingly, Ford was desperate for ways of increasing employee productivity. The solution he adopted was to redesign the assembly operation around Scientific Management principles, and then couple this with the introduction of the moving assembly line. This allowed Ford once again to double production, but this time the workforce actually decreased (Lacey, 1986). So the 1910s saw the birth of the twin, and very much related, neologisms that both dominated and revolutionised industrial life for much of the twentieth century – Taylorism and Fordism. Throughout the 1920s, the adoption of Scientific Management grew in America, though rarely in the full form laid down by Taylor. It was also introduced on a very limited basis into Europe, but met with much scepticism from managers and hostility from workers (Rose, 1988). Only in Russia did there seem any great enthusiasm for it. Indeed, Lenin saw Scientific Management combined with common ownership as the prime basis for Russian industrialisation: ‘We must organize in Russia the study and teaching of the Taylor system and systematically try it out and adapt it to our own ends’ (Lenin, 1918: 25). Taylor’s work also attracted some interest in Japan. However, it was not until after the Second World War, through the auspices of the Marshall Plan for rebuilding Europe’s war-torn economies, that Scientific Management was promoted and adopted on any significant scale outside America. Ironically, the contribution of American trade unions, through their role in the Marshall Plan, was crucial in promoting Scientific Management in European enter- prises (Carew, 1987). Taylor claimed that his system was innovative and unique, which indeed it was in terms of the way he synthesised and systematised a host of previously disparate prac- tices and presented them as scientific and neutral (Aitken, 1960; Rose, 1988). Yet in reality, it can be seen that Taylor drew on many of the management practices and negative attitudes towards labour that were prevalent during the nineteenth century. He was also heavily indebted to many contemporaries and associates who helped develop the work study techniques necessary to implement Scientific Management, especially Henry Gantt and Carl Barth, who worked closely with him (Kempner, 1970; Sheldrake, 1996). Perhaps his greatest debt was to Frank and Lillian Gilbreth. As well as being the pioneers of motion study, they were the driving force in establish- ing the Society for the Promotion of Scientific Management, which was later renamed the Taylor Society, and did much to promote Taylor’s work both before and after his death in 1915 (Rose, 1988; Sheldrake, 1996).
  • 52. Organisation theory: the Classical approach 39 ■ The Gilbreths and motion study Much of modern work study (a central element of the Classical approach) owes its ori- gins to the methods and techniques of motion study developed in the first quarter of the twentieth century by Frank and Lillian Gilbreth (see Gilbreth and Gilbreth, 1914). Their work on motion study was initiated by Frank Gilbreth, who was a contempo- rary of Taylor’s. In many respects their careers were similar. Taylor, turning his back on Harvard Law School, began his career on the shopfloor and later rose to eminence as a manager and management consultant. Frank Gilbreth, after passing the entrance exam for but declining to enter the Massachusetts Institute of Technology, rose from being a bricklayer to running his own construction and consultancy companies. He was also, along with his wife, a leading campaigner for Scientific Management. Although the development and promotion of motion study was begun by her hus- band, there is no doubt that Lillian Moller Gilbreth was an equal partner. Despite contemporary prejudices against women and education, she obtained Bachelor’s and Master’s degrees in English. She was only denied a doctorate in psychology by the University of California because family commitments prevented her, after her thesis had been approved, from spending the post-thesis year on campus that the regula- tions required (Sheldrake, 1996; Thickett, 1970). In justifying their work, Frank Gilbreth stated in his 1909 book on bricklaying that motion study: ... will cut down production costs and increase the efficiency and wages of the workman ... To be pre-eminently successful: (a) a mechanic must know his trade; (b) he must be quick motioned; and (c) he must use the fewest possible motions to accomplish the desired results. (Quoted in Sheldrake, 1996: 28) The Gilbreths developed a number of procedures for breaking work down into its constituent components. Flow process charts were used which split human motion into five basic elements: operations, transportation, inspection, storage and delay. Arising out of this, they developed a method of minutely analysing tasks which broke handwork into 17 basic elements. Examples of these are as follows: Grasp Begins when hand or body member touches an object. Consists of gaining con- trol of an object. Release Begins when hand or body member begins to relax control of object. Consists of letting go of an object. Plan Begins when hand or body members are idle or making random movements while worker decides on course of action. Consists of determining a course of action. Ends when course of action is determined. The purpose of this microanalysis was not only to establish what was done, but also to discover if a better method of performing the task in question could be developed. In this respect, they did much original work in establishing the distinction between necessary and unnecessary movements. The latter were to be eliminated immediately and the former further analysed in more detail to see if they could be improved, com- bined or replaced by special equipment.
  • 53. 40 Chapter 1 · From trial and error to the science of management If this sounds remarkably similar to Adam Smith’s observations on pin-making, mentioned earlier, this is no accident. The Classical approach is descended from Smith through the nineteenth century pioneers of work organisation. Though remarkable in the level of minute detail to which they reduced the motions individuals make when undertaking manual tasks, the Gilbreths were only, as they saw it, taking Smith’s maxims to their logical conclusion. If in the process they give the impression of deal- ing more with machines than people, that too is no accident. Like others who propounded the Classical approach, they viewed organisations and workers very much as machines. The work study methods developed by the Gilbreths and their successors are still widely used today, not just in manufacturing industries, but in all areas of life from hospitals to computer programming (Grant, 1983). The Gilbreths were also concerned that, having established the best way to carry out a task, this should not be undermined by selecting the wrong person to carry it out or by creating the wrong environment. Therefore, they set about analysing employee selection and establishing environmental criteria with the same determina- tion they had applied to analysing work performance. However, in neither case could they achieve the same microanalysis that characterised their work study technique; what finally emerged were effectively opinions based on their own ‘experience’, rather than being the product of experiment and observation. The Gilbreths, like Taylor, were devoted to one objective – to discover the best method of doing any job. The difference was that whereas Taylor was concerned with reducing the time taken to perform a task, the Gilbreths were more concerned with reducing the motions taken to accomplish the task. Though this differing emphasis did lead to some friction with Taylor (Nadworthy, 1957), they were, none the less, among his main promoters and saw their efforts as complementary to, and aimed at enhancing, Scientific Management. The fact that work study is now often labelled ‘time and motion’ study perhaps shows this. Like Taylor, they saw themselves as cre- ating a neutral system that benefited both labour and management. They felt that any increase in boredom or monotony brought about by their methods would be compen- sated for by workers’ opportunities to earn more money. While the Gilbreths and Taylor devoted their efforts to improving the productivity of individual workers, there were others who took a wider but complementary perspective. ■ Henri Fayol and the principles of organisation Born in 1841 and educated at the lycée in Lyon and the National School of Mines in St Etienne, Fayol was promoting his ideas in France at the same time as Taylor was propounding his views on Scientific Management in the USA. He began his working life as a mining engineer in 1860 and, in 1888, was appointed Managing Director of an ailing mining company, which he quickly turned into a much-admired and finan- cially strong enterprise. He retired as Managing Director in 1918, though he stayed on the Board until his death in 1925. In his ‘retirement’ he founded the Centre d’Etudes Administratives, whose role was to propagate Fayol’s ideas through manage- ment education. He chaired weekly meetings of prominent industrialists, writers, government officials, philosophers and members of the military. This direct contact with opinion-formers and decision-makers is undoubtedly one of the main reasons
  • 54. Organisation theory: the Classical approach 41 why the Centre had such a profound influence on the practice and theory of manage- ment in both the public and private sectors in France. Fayol did not draw his views on organisations solely from his own experience as a manager. His education at one of the grandes écoles, and his subsequent career as an executive of a large mining company, placed him among the elite of senior admin- istrators in business, government and the armed forces. Therefore, though he spent his working life in the coal mining industry, his practical knowledge of business was informed by and fits within the intellectual and administrative traditions of French society. His working life, in the late nineteenth and early twentieth centuries, coincided with a period of rapid industrialisation in France. It was a time when industrial unrest was rife, with frequent strikes by railway workers, miners and civil servants. As was the case in the USA, in this period of rapid growth and change, there was an unwrit- ten consensus that French business and government needed a theory of management, no matter how basic (Cuthbert, 1970). Unlike Taylor and the Gilbreths, however, Fayol’s focus was on efficiency at the organisational level rather than the task level: top down rather than bottom up (Fayol, 1949). Though this clearly reflects Fayol’s own practical experience, it also shows the combined influence of the French intellec- tual tradition, with its preference for addressing philosophies rather than practicalities, and the administrative tradition, which sought to identify and lay down general rules and restrictions applicable to all situations. Given his background, it is not surprising that Fayol was more concerned with general rather than departmental or supervisory management, and with overall organisational control as averse to the details of tasks. This does not, however, place him in opposition to Taylor. Rather the combination of Taylor’s work at the task level and Fayol’s at the organisational level make their views complementary rather than contradictory. In addition, both emphasised strongly the need for professionally edu- cated managers who would ‘follow the rule’ rather than acting in an arbitrary or ad hoc fashion. As the following shows, Fayol (like all the Classical school) was concerned with devel- oping a universal approach to management that was applicable to any organisation: There is no one doctrine of administration for business and another for affairs of state; administrative doctrine is universal. Principles and general rules which hold good for busi- ness hold good for the state too, and the reverse applies. (Quoted in Cuthbert, 1970: 111) Therefore, in business, public administration, or indeed any form of organisation, the same universal principles apply. According to Fayol, these are as follows (quoted in Mullins, 1989: 202–3): 1 Division of work. The object is to produce more and better work from the same effort, through the advantages of specialisation. 2 Authority and responsibility. Wherever authority is exercised, responsibility arises. The application of sanctions is needed to encourage useful actions and to discourage their opposite. 3 Discipline. This is essential for the efficient operation of the organisation. Discipline is in essence the outward mark of respect for agreements between the organisation and its members.
  • 55. 42 Chapter 1 · From trial and error to the science of management 4 Unity of command. In any action, any employee should receive orders from one superior only; dual command is a perpetual source of conflicts. 5 Unity of direction. In order to coordinate and focus effort, there should be one leader and one plan for any group of activities with the same objective. 6 Subordination of individual or group interests. The interest of the organisation should take precedence over individual or group interests. 7 Remuneration of personnel. Methods of payment should be fair, encourage keen- ness by rewarding well-directed effort, but not lead to over-payment. 8 Centralisation. The degree of centralisation is a question of proportion and will vary in particular organisations. 9 Scalar chain. This is the chain of superiors from the ultimate authority to the lowest ranks. Respect for line authority must be reconciled with activities that require urgent action, and with the need to provide for some measure of initiative at all levels of authority. 10 Order. This includes material order and social order. The object of material order is avoidance of loss. There should be an appointed place for each thing, and each thing should be in its appointed place. Social order requires good organisation and good selection. 11 Equity. There needs to be fairness in dealing with employees throughout all levels of the scalar chain. 12 Stability of tenure of personnel. Generally, prosperous organisations have a stable managerial team. 13 Initiative. This represents a source of strength for the organisation and should be encouraged and developed. 14 Esprit de corps. This should be fostered, as harmony and unity among members of the organisation are a great strength in the organisation. According to Fayol (1949), it is the prime responsibility of management to enact these principles. Consequently, in order to achieve this, he prescribed the main duties of management as follows: ■ Planning – examining the future, deciding what needs to be done and developing a plan of action. ■ Organising – bringing together the resources, human and material, and developing the structure to carry out the activities of the organisation. ■ Command – ensuring that all employees perform their jobs well and in the best interests of the organisation. ■ Coordination – verifying that the activities of the organisation work harmoniously together to achieve its goals. ■ Control – establishing that plans, instructions and commands are correctly carried out. Fayol was a gifted and highly successful businessman who attributed his success to the application of his principles rather than personal ability. Certainly, he was one of the pioneers of management theory, and many of his principles are still taught and practised today. However, part of the success of his work lay in the fact that he was writing for a receptive audience, and at a time when management practice and ideas were becoming international currency. Just as Taylor’s system arose at the time when
  • 56. Organisation theory: the Classical approach 43 a need for a management theory had grown amongst the business community in the USA, so Fayol’s was aimed at a similar demand in France, where the business commu- nity was developing rapidly but in an unplanned way. Unlike Taylor, though, he attempted neither to denigrate trade unions openly nor to castigate managers. Nor did he share with Taylor a belief that the interests of man- agers and workers were necessarily the same or ultimately reconcilable. He did, however, believe that much industrial unrest could be eliminated by fairer, more con- sistent, and firmer management, particularly where this reduced the need for trade unions or their ability to organise. He also believed in the need to educate and train managers. His views were not seen as a direct attack on existing managers; rather, they were in harmony with the approach taken by managers in the larger private enterprises and those operating in government and the armed services. This is not sur- prising because, by and large, they and Fayol were educated in the grandes écoles and shared a common intellectual approach. In addition, Fayol did not generally try to impose his ideas directly on individual organisations. Instead, he preferred to influ- ence managers indirectly through a process of education. In the light of the reaction in America to Taylor’s attitude, many would consider this a wise move. Though there were attempts in France to promote ‘Fayolisme’ in opposition to Taylorism, Fayol rejected this, preferring to see them as complementary (Sheldrake, 1996). As Urwick (1949: 9–10) commented in the Introduction to the English version of Fayol’s book on General and Industrial Management: The work of Taylor and Fayol was, of course, essentially complementary. They both realized that the problem of personnel and its management at all levels is the key to industrial suc- cess. Both applied scientific method to this problem. That Taylor worked primarily at the operative level, from the bottom of the industrial hierarchy upwards, while Fayol concen- trated on the managing director and worked downwards, was merely a reflection of their very different careers. The USA and France were not the only countries where developments in manage- ment practice and thought were being studied and documented. In Germany, at this time, Max Weber was charting the growth and merits of bureaucracy. ■ Max Weber on bureaucracy Weber was born in 1864 into a well-to-do Prussian family. He pursued an academic career, obtaining a doctorate in 1889. In 1894, he was appointed Professor of Political Economy at the University of Freiburg, and in 1896 he accepted the Chair in Economics at Heidelberg. Unfortunately, in 1897, he suffered a mental breakdown, which plagued him for many years. He resigned from his university post and spent much of his time travelling in Europe and the USA. He also moved the focus of his academic studies from economics to sociology. Weber was an ardent German nationalist, and, at the age of 50, he volunteered for military service in the First World War. Until his honourable discharge in 1915, he was responsible for establishing and running nine military hospitals. Despite this, he was a fierce and open critic of the Kaiser, whom he accused of being a dilettante hiding behind the divine right of kings. He believed that Germany’s problems at home
  • 57. 44 Chapter 1 · From trial and error to the science of management and abroad could only be solved if the monarchy were replaced with a constitutional democracy. After the war, he became a member of the Commission that drew up the Constitution for the Weimar Republic, and once again took up university teaching, this time in Munich. Unfortunately, when he died in 1920, most of his work was unpublished and his papers were in a state of chaos. It was not until the 1930s that his work began to be organised and published, and it was the 1940s before his work on bureaucracy was published in English (Sheldrake, 1996; Weber, 1948). There is a considerable affinity between Weber’s work on bureaucracy and Fayol’s work on the principles of management. Both were concerned with the overall struc- turing of organisations, and the principles which guide senior managers in this task. Though a contemporary of Fayol and Taylor, it is unlikely that they were aware of his work on bureaucracy, though the reverse is possible (that he may have been aware of their work). However, unlike Taylor and Fayol, Weber was never a practising manager. His observations on administrative structures and organisational effectiveness arose from his study of the development of Western civilisation. From this, Weber concluded that the rise of civilisation was a story of power and domination. He noted (Weber, 1948) that each social epoch was characterised by a different form of political rule, and that for a ruling elite to sustain its power and dominance, it was essential for them both to gain legitimacy and to develop an administrative apparatus to enforce and support their authority. Weber (1947: 328) identified what he called ‘three pure types of legitimate authority’: 1 Rational-legal – resting on a belief in the ‘legality’ of patterns of normative rule, and the right of those elevated to authority under such rules to issue commands. 2 Traditional – resting on an established belief in the sanctity of immemorial tradi- tions and the legitimacy of those exercising authority under them. 3 Charismatic – resting on devotion to the specific and exceptional sanctity, heroism or exemplary character of an individual person, and of the normative patterns or order revealed or ordained by them. For Weber, legitimacy is central to almost all systems of authority. He argued that there are five concepts on which rational-legal authority is based. According to Albrow (1970: 43), these are as follows: 1 That a legal code can be established which can claim obedience from members of the organisation. 2 That the law is a system of abstract rules which are applied in particular cases, and that administration looks after the interests of the organisation within the limits of the law. 3 That the man exercising authority also obeys this impersonal law. 4 That only qua [in the capacity of] member does the member obey the law. 5 That obedience is due not to the person who holds authority but to the impersonal order that has granted him his position. Weber argued that, in the context of the rational-legal authority structures which prevailed in Western societies in the early twentieth century, the bureaucratic approach to organisation was the most appropriate and efficient. Under bureaucracy, laws, rules, procedures and predefined routines are dominant and not subject to the
  • 58. Organisation theory: the Classical approach 45 vagaries and preferences of individuals. They give form to a clearly defined system of administration – whether it be public administration, such as a government depart- ment dealing with pensions and social security payments, or private administration, such as an insurance company – where the execution of routine, pre-programmed procedures is all-important. Weber considered this approach to be both appropriate, because it was the ideal tool for a centralised administration where the legitimacy of those in power was underpinned by the rule of law, and efficient, because the bureau- cratic approach mechanises the process of administration in the same way that machines automate the production process in factories. Weber frequently asserted that the development of bureaucracy eliminates human fallibility: Its [bureaucracy’s] specific nature, which is welcomed by capitalism, develops the more per- fectly the more bureaucracy is ‘dehumanised’, the more completely it succeeds in eliminating from official business, love, hatred, and all purely personal, irrational and emotional ele- ments which escape calculation. (Weber, 1948: 215–16) Bureaucracy is characterised by the division of labour, a clear hierarchical authority structure, formal and unbiased selection procedures, employment decisions based on merit, career tracks for employees, detailed rules and regulations, impersonal relation- ships, and a distinct separation of members’ organisational and personal lives. It must, however, be borne in mind that Weber’s bureaucratic model (or ‘ideal’ organisa- tion), though inspired by developments in Germany at the time, was a hypothetical rather than a factual description of how most organisations were structured. It was his view of the characteristics that organisations should exhibit in modern societies based on rationality and law. How Weber saw these organisational characteristics supporting and reproducing rational-legal authority is best seen by contrasting them with the traditional administrative forms based on patronage (see Table 1.1) (Weber, 1947 and 1948). For Weber, therefore, bureaucracy provided a rational-legal form of organisation which distinguished itself from, and eradicated the faults and unfairness of, previous administrative forms by its mechanical adherence to set rules, procedures and pat- terns of authority. It removed the system of patronage and eliminated human variability, replacing it by the rule of law. In Weber’s view, the principles of bureau- cracy, especially the legitimation of authority and the subordination of all in the organisation to the same rules and procedures, were universally applicable to all organisations, big or small, public or private, industrial or commercial. It can be seen that Weber’s belief in the standardisation of, and obedience by all to, rules and procedures is the counterpart of the standardisation of production tech- niques advocated by Taylor and akin to the principles of administrative management prescribed by Fayol. Also, just as the work of Taylor and Fayol can be understood as representing a combination of their backgrounds and the state of the societies in which they lived, so is this the case with Weber. The Prussian bureaucratic tradition dominated both the public, and to a large extent, the private sectors in Germany. It was seen by the ruling elite as the ideal method for ensuring that the objectives of the state and the objectives of individual enterprises were adhered to. It also fitted in with the Prussian militaristic tradition of unquestioning obedience to superiors, which was
  • 59. 46 Chapter 1 · From trial and error to the science of management Table 1.1 Comparison of Weber’s concept of rational-legal authority with traditional authority Characteristics of rational-legal authority Characteristics of traditional authority Areas of jurisdiction are clearly specified: the regular The allocation of labour is not defined, but depends activities required of personnel are allocated in a fixed way on assignments made by the leader, which can be as official duties. changed at any time. The organisation of offices follows the principle of hierarchy: Authority relations are diffuse, being based on each lower office is controlled and supervised by a higher one. personal loyalty, and are not ordered into clear However, the scope of authority of superiors over subordinates hierarchies. is circumscribed, and lower offices enjoy a right of appeal. An intentionally established system of abstract rules governs General rules of administration either do not exist or official decisions and actions. These rules are relatively stable are vaguely stated, ill-defined, and subject to change and exhaustive, and can be learned. Decisions are recorded at the whim of the leader. No attempt is made to in permanent files. keep permanent records of transactions. The ‘means of production or administration’ (e.g. tools and There is no separation of a ruler’s personal equipment or rights and privileges) belong to the office, household business from the larger ‘public’ business not the office-holder, and may not be appropriated. Personal under their direction. property is clearly separated from official property, and working space from living quarters. Officials are personally free, selected on the basis of technical Officials are often selected from among those who qualifications, appointed to office (not elected), and are personally dependent on the leader, e.g. slaves, recompensed by salary. serfs and relatives. Selection is governed by arbitrary criteria, and remuneration often takes the form of benefices – rights granted to individuals that, for instance, allow them access to the ruler’s stores, or give them grants of land from which they can appropriate the fees or taxes. Benefices, like fiefs in feudalistic systems, may become hereditary and sometimes are bought and sold. Employment by the organisation constitutes a career for Officials serve at the pleasure of the leader, and so officials. An official is a full-time employee and looks forward lack clear expectations about the future and security to a lifelong career in the agency. After a trial period, he or of tenure. she gains tenure of position and is protected against arbitrary dismissal. a prevalent view in both public and private organisations. It must be remembered, of course, that the state and private enterprises in Germany were not primarily obsessed with profitability or individual aggrandisement. The key objective was to build Germany as the premier military and industrial power in Europe. Competition at the level of the individual or the individual enterprise was a concept that carried much less force in Germany, and even France, than in the USA or Britain. German industry and government were more concerned with ensuring that all sections of the country pulled in the same direction. Where competition threatened this, it was elim- inated by the state, either by direct intervention, such as nationalisation of the railways, or by indirect intervention, through the formation of cartels and monopo- lies. In carrying out this grand plan for German development, bureaucracy was found to be the ideal tool.
  • 60. Conclusions 47 In Germany, the advent of the First World War highlighted the incompatibility between industrial bureaucracies based on the rule of law, and a government run on autocratic lines for militaristic ends. Weber argued that the rule of law applied not only to the operation of organisations but also, and more importantly, to the running of society. If society was not based on the rule of law, if democratically elected gov- ernments did not hold power, then the authority of those who ruled must be called into question. This was the basis of Weber’s attacks on the Kaiser and the military during the First World War. He believed that, in the modern age, rational-legal authority, based on democratically elected governments and laws governing property rights, was the best and most effective way for society and organisations to be gov- erned. For Weber, the rise of bureaucracy and the rise of liberal democracy went hand in hand. As can be seen, bureaucracy did not need a Taylor or a Fayol to develop or pro- mote it; it already existed, was accepted by management, and was prospering, in Germany and other advanced countries, especially in the public sector. What Weber did was to give it intellectual respectability by arguing that it was particularly suited to the needs of (what he saw as) the rational, secular and increasingly democratic societies that were becoming the norm in the Western world. The appeal of bureaucracy, to governments and large organisations at least, can be seen in the way that bureaucracy is an ever-present and pervasive feature of modern life. However, it would be misleading to give the impression that its development in Germany, or elsewhere, was uncontentious. In Germany, in the early years of the twentieth century, it tended to be the purpose and consequences of bureaucracy rather than its principles that were attacked. At an overall political level, the growth of radi- cal parties of the left reflected growing concerns over Germany’s military aims and the state’s concomitant close links with business, and in particular its perceived pref- erence for aiding capital rather than labour. At the level of the individual enterprise, the growth of militant trade unions, often linked to the parties of the left, reflected the growing frustration of workers who resented the autocratic approach of manage- ment and its resistance to collective bargaining. Conclusions It is not an inevitable fact of life that modern societies are characterised by organisa- tions, of all shapes and sizes; this is the product of a particular combination of circumstances. The rise of capitalism in Britain and other European countries in the seventeenth and eighteenth centuries created new opportunities and new problems that could not be accommodated under the old order. The result was a move away from self-sufficient, autonomous, individual units to collective units of production controlled by an entrepreneur. It was entrepreneurs who, in pursuit of ever greater profits, created the factory system in Britain which became the basis of modern organisational life. The central features of the factory system were autocratic control, division of labour, and antagonistic relations between management and labour. Though starting at different times and moving at their own pace, most European countries, followed by the USA, adopted and adapted the British approach to indus- trial organisation. However, as the nineteenth century progressed, the nature of
  • 61. 48 Chapter 1 · From trial and error to the science of management industrialisation began to vary from country to country, reflecting the unique circum- stances and needs of the host society. In Germany, the objectives of the state determined that large-scale public and private bureaucracies became the norm. In France, the state also played a role in shaping industrialisation, but in this case it was to perpetuate small-scale, inefficient business and agricultural operations. In both countries, individual pursuit of profit maximisation was less important than in either Britain or the USA. In Scandinavia, especially Denmark, the emergence of a more col- lective and less ruthless approach to industrialisation could be discerned. Nevertheless, in the transition from a subsistence economy to a money economy, one clear image stands out above all else: the antagonism between employers and employees. The factory did not emerge because it was a more efficient means of pro- duction per se; it emerged because it offered entrepreneurs a more effective means of controlling labour. This meant that the factory was also a battleground, with employ- ers seeking to impose new conditions and technologies, and workers – when they could – attempting to resist change. As the nineteenth century progressed, managers became increasingly aware of the shortcomings of their ad hoc and inconsistent responses to new challenges and oppor- tunities, and the counter-productive nature of resistance to change. The need for a more coherent approach to structuring and running organisations was required: one that legitimated managerial authority, especially to initiate change. This crystallised into the Classical approach. Though writing in different countries and from different perspectives, the propo- nents of what later came to be known as the Classical approach all adopted a similar perspective towards what they saw as one of the main issues for modern societies: how to create organisations that efficiently and effectively pursue their objectives. Taylor, supported by the work of the Gilbreths and others, concentrated very much on the operational level, arguing for his ‘scientific’ method of analysing, designing and managing jobs. However, his insistence on the consistent and unbiased applica- tion of scientific principles, and the emphasis he placed on all members of an organisation obeying rules and procedures, were as much a challenge to managerial beliefs and behaviour as they were to the beliefs and behaviour of shopfloor workers. Fayol, in contrast, was concerned less with operational issues and more with the over- all administration and control of organisations. Therefore, to an extent, his could be called a top-down approach, whilst Taylor was working from the bottom up. Weber sought to put organisations in a wider historical and societal context, bringing together both the detailed tasks to be carried out in organisations and the general principles governing them. Though Taylor’s approach required a radical change in managerial behaviour and a significant increase in organisational bureaucracy, the objective of his system was to improve the productivity and efficiency with which manual workers carried out the tasks ordained for them by management. Everything else was, as Taylor would have put it, the outcome of pursuing this objective to its logical conclusion. The need to provide managers with rules and systems for running the entire enterprise, and not just that part of it dealing with manual labour, was a means of achieving his objective rather than a prime aim. This is where the work of Fayol and Weber has proved so crucial: together with Taylor’s work, it comprises a system for running an entire busi- ness in a coherent, standardised and consistent fashion.
  • 62. Conclusions 49 Therefore, taken together, their views are, broadly, complementary, and reflect an approach to organisations and people based upon a number of basic assumptions: ■ There is a ‘one best way’ for all organisations to be structured and operate. ■ This approach is founded on the rule of law and legitimate managerial authority. ■ Organisations are rational entities: collectivities consistently and effectively pursu- ing rational goals. ■ People are motivated to work solely by financial reward. ■ Human fallibility and emotions, at all levels in the organisation, should be elimi- nated because they threaten the consistent application of the rule of law and the efficient pursuit of goals. ■ For this reason, the most appropriate form of job design is achieved through the use of the hierarchical and horizontal division of labour to create narrowly focused jobs encased in tight standardised procedures and rules, which remove discretion, dictate what job-holders do and how they do it, and which allow their work to be closely monitored and controlled by their direct superiors. Seen in the context of the early twentieth century, when there appeared to be a sub- stantial questioning of – and challenge to – managerial authority by workers, the Classical approach had many merits: not least in its attempt to replace arbitrary and capricious management with rules and procedures that apply equally to everyone in the organisation. Similarly, it is important to see this work in terms of what went before. Weber explicitly drew on history to support his views; the historical debts of Taylor and Fayol, though not openly acknowledged in their work, are clearly there. From Smith, through Wedgwood, Boulton and Watt, Babbage and Ure can be traced key elements of the Classical approach: the division of labour, the distrust of human variability, the need for written rules, procedures and records, and the need for rational and consis- tent management and objectives. Parallel to these are key themes that run through other aspects of nineteenth century life: the search for the rational, scientific, univer- sal principles that govern the natural world, the belief in the Protestant work ethic, the emergence of Social Darwinism, the greater democratisation of societies, and the gradual reduction of laws favouring one class or group over another. All these strands coalesced – not always neatly – in the Classical approach, creating (in retrospect) the first real and consistent attempt at a theory, a set of guidelines, for constructing, managing and changing organisations. However, given that it grew out of and was designed to meet particular circumstances, so its appropriateness began to be questioned and criticised as these circumstances changed. Taylor and his adherents have been criticised both for their lack of scientific rigour and for their one-dimensional view of human motivation (Burnes, 1989; Kelly, 1982a, 1982b). Indeed, as Rose (1988) argued, Taylor portrayed human beings as ‘greedy robots’: indifferent to fatigue, boredom, loneliness and pain, driven solely by mone- tary incentive. For Taylor, material incentives are the only effective incentives to work. For this reason, he opposed everything else in the workplace that, in his opin- ion, undermined managers’ attempts to introduce individual incentive systems, whether it be friendships, group loyalty, trade unions, or whatever. Taylor has also been attacked for over-emphasising the merits of the division of labour. The critics’ argument is that the creation of jobs which have little intrinsic satisfaction leads to poor morale, low motivation and alienation. Indeed, such are the forces aligned
  • 63. 50 Chapter 1 · From trial and error to the science of management against Scientific Management that it is difficult to find a facet of it that has not been attacked (Littler, 1978; Locke, 1982). Fayol has been attacked on three fronts: first, that his principles are mere truisms; second, that they are based on questionable premises; and third, that the principles occur in pairs or clusters of contradictory statements (Massie, 1965; Simon, 1957). In addition, Fayol, like Taylor, can be construed as being against trade unions. Certainly, he believed in the pre-eminence of management and its right to make changes how and when it wanted, so long as these were based on his general principles. He also believed, unlike Taylor, that management and labour were fundamentally in conflict. Therefore, his recommendations were partly aimed at eliminating the conditions in which trade unions can flourish, in the interests of his overall aim of establishing the legitimacy of managers to manage. Weber’s arguments for bureaucracy have also received criticism. For instance, Udy (1959) questioned Weber’s assertion that bureaucracies are necessarily rational, whilst Parsons (1947) suggested that Weber puts forward contradictory arguments for the basis of authority within bureaucracies. Robbins (1987) pointed out that bureaucracy is most frequently attacked for encouraging goal displacement: ■ Rules become ends in themselves rather than means to the ends they were designed to achieve. ■ Specialisation and differentiation create sub-units with different goals which then become primary to the sub-unit members. Not only does this lead to conflict between sub-units, but the accomplishment of sub-unit goals becomes more impor- tant than achieving the organisation’s overall goals. ■ Rules and regulations become interpreted as setting minimum standards of per- formance rather than identifying unacceptable behaviour. Staff can become apathetic and merely perform the bare minimum of work. ■ The unthinking and rigid application of standardised rules and procedures can lead to their being applied in inappropriate situations, with dysfunctional consequences. Robbins (1987) also pointed out that bureaucracy can alienate both employees and customers or clients. For the former, being treated as mere cogs in a machine leads to a sense of powerlessness and irrelevance. For the latter, being presented with a rigid and faceless organisation, which appears to serve its own ends rather than those of its customers or clients, can be frustrating and, when the provision of welfare services is involved, even heartbreaking. Mullins (1993) also pointed out that bureaucracy is often associated with secrecy and attempts to prevent legitimate public access to vital information on the performance of government and large organisations. Weber’s work on bureaucracy has also received criticism because of his lack of attention to informal and social processes, in particular the way that individuals and groups can and do struggle to promote their own interests and goals above those of others in the organisation (Crozier, 1964). It should also be noted that, though broadly complementary, the approaches of Taylor, Fayol and Weber were developed separately and with different objectives in mind. There are, consequently, tensions and inconsistencies between them. Fayol stresses the importance of esprit de corps and individual initiative. Taylor and Weber would find the former irrelevant and the latter dangerous. Likewise, the unchanging rigidity of bureaucracy, as portrayed by Weber, leaves little scope for the continuous
  • 64. Test your learning 51 search for improvement in methods and productivity advocated by Taylor and Fayol. Taylor’s advocacy of functional supervision, which in effect meant a worker being responsible to different supervisors for different aspects of his/her job (some four or five supervisors in total), would have been viewed as a threat to discipline and good order by both Weber and Fayol, who were fierce advocates of unity of command – each worker should receive orders from one superior only. One of the main criticisms of the Classical approach as a whole is that its view of people is negative. Bennis (1959: 263) called the Classical perspective one of ‘organi- sations without people’ because it is founded on the belief that people can be reduced to the level of cogs in a machine. It can also be argued that, in any case, it is impossi- ble to remove the element of human variability from the running of organisations and that attempts to do so are counter-productive. Rather than making people work more efficiently in pursuit of organisational goals, it alienates them from their work and makes them resentful of it (Mayo, 1933). This is a point developed by Argyris (1964), who argued that the Classical approach restricts the psychological growth of individ- uals and causes feelings of failure, frustration and conflict. Instead, he believes that the organisational environment should provide a significant degree of individual responsibility and self-control; commitment to the goals of the organisation; produc- tiveness and work; and an opportunity for individuals to apply their full abilities. These developed as central issues for the proponents of the Human Relations approach, which emerged in the 1930s as a reaction to the ‘de-humanised’ Classical approach. This, together with Contingency Theory – the third approach to organisa- tions to emerge in the twentieth century – will be discussed in the next chapter. Test your learning ■ Short answer questions 1 What was Adam Smith’s main contribution to the development of work organisation? 2 What was the putting-out system? 3 What was the main impetus for the move to the factory system? 4 What are the key tenets of Scientific Management? 5 According to Fayol, what are the prime functions of a manager? 6 What was Weber’s main justification for advocating bureaucracy? 7 What are the implications for organisational change of the Classical approach? ■ Essay questions 1 To what extent can the move to the factory system be seen as a clash of cultures as averse to a clash of economic systems? 2 Evaluate the case for seeing the work of Taylor, Fayol and Weber as forming a coherent school of thought.
  • 65. 52 Chapter 1 · From trial and error to the science of management Suggested further reading 1 Wilson, JF (1995) British Business History, 1720–1994. Manchester University Press: Manchester. Despite its title, this book neither confines itself to British history nor examines business in a narrow sense. Amongst other things, John Wilson’s book provides an excellent review of the development of management in Britain, Germany, Japan and the USA from the early days of the Industrial Revolution. 2 Pollard, S (1965) The Genesis of Modern Management. Pelican: Harmondsworth. Though published over 30 years ago, Sydney Pollard’s book still provides one of the best descriptions of the development of management, and the reaction of labour, in the eigh- teenth and nineteenth centuries. 3 Rose, M (1988) Industrial Behaviour. Penguin: Harmondsworth. Michael Rose’s book provides a well-researched and thorough account of the rise and devel- opment of Scientific Management. 4 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International Thompson Business Press: London. Michael Sheldrake gives an excellent summary of the lives and contributions of Taylor, Fayol and Weber. 5 Taylor, FW (1911) The Principles of Scientific Management. Dover (1998 edition): New York, NY, USA. This is perhaps the most cited, if least read, of all management books. However, as it num- bers only 76 pages and is couched in quite accessible language, it is well worth reading.
  • 66. Chapter 2 Developments in organisation theory From certainty to contingency Learning objectives After studying this chapter, you should be able to: ■ understand the reasons for the emergence of the Human Relations approach; ■ identify the key features and key proponents of the Human Relations approach; ■ list the advantages and disadvantages of the Human Relations approach; ■ describe the differences between the Human Relations approach and the Classical approach to organisational design; ■ discuss the reasons for the emergence and popularity of Contingency Theory; ■ identify the key features and key proponents of Contingency Theory; ■ state the advantages and disadvantages of Contingency Theory; ■ appreciate how Contingency Theory seeks to incorporate both the Classical and Human Relations approaches; ■ recognise the implications for organisational change of the Human Relations approach and Contingency Theory.
  • 67. 54 Chapter 2 · Developments in organisation theory Exhibit 2.1 Organisations as cooperative systems Functions of organizations An organization is a system of cooperative human organization economy. ... The individual economy ... activities the functions of which are (1) the creation, consists on one side of the power of the individual ... (2) the transformation, and (3) the exchange of utili- to do work (physical acts, attention, thought); and on ties. It is able to accomplish these functions by the other side the utilities ascribed by him to (1) creating a cooperative system, of which the organiza- material satisfactions, (2) other satisfactions which we tion is both a nucleus and subsidiary system, which shall here call social satisfactions. has also as components physical systems, personal The economy of the individual is constantly systems (individuals and collections of individuals), changing, because of (1) physiological needs, (2) and social systems (other organizations). Accordingly, exchanges made with others, (3) the creation of his from the viewpoint of creation, transformation, and own utilities, and (4) other changes in his state of exchange of utilities, the cooperative system embraces mind, that is, his values or appraisal of utilities, physi- four different kinds of economies which may be dis- cal and social. tinguished as (a) a material economy; (b) a social Source: Chester Barnard, The Functions of the Executive, 1938, economy; (c) the individual economies; and (d) the pp. 240–2. Introduction The emergence of the Classical approach was one of the most significant events in the history of organisation theory and practice. From the 1920s until the 1960s, in the public sector, and in large private sector concerns, bureaucracy was unquestionably seen as the ‘one best way’. The other key element of the Classical approach, Scientific Management, was less well received. In the USA, the death of the irascible Taylor did much to overcome the early opposition to Scientific Management, especially among trade union leaders. It was enthusiastically taken up by capitalists in Japan and com- munists in Russia, though it met with stiff resistance in other European countries. In the 1930s, Scientific Management and a streamlined version, the Bedeaux system, were rejected by both unions and management in a large number of European coun- tries, though after the Second World War, it was heavily promoted as part of the Marshall Plan for the rebuilding of Europe (Carew, 1987; Rose, 1988). Despite its growing dominance, from the 1930s, the Classical approach began to encounter both intellectual and practical opposition. This is shown clearly in Exhibit 2.1, which makes three assertions about the nature of organisations and individuals which strike at the very heart of the Classical approach: 1 Organisations are not machines but cooperative systems. To operate effectively and efficiently, they require the active cooperation of workers and not just their passive obedience. 2 People are motivated by a range of rewards, including social esteem, not just mone- tary ones. 3 Motivating factors change over time; what motivates a person one day may be ineffectual the next.
  • 68. The Human Relations approach 55 To add insult to injury, many of these assertions, including Exhibit 2.1, came from practising managers rather than ‘unworldly’ academics. Therefore, although the Classical school could claim much success, especially in the USA, there was also a rising tide of conflicting evidence. This could have led to the devel- opment and strengthening of the Classical approach, and clearly this did happen to an extent (see the work of Ralph Davis, 1928, on rational planning). However, as this chap- ter will show, what emerged were two new approaches to organisations: the Human Relations approach, which originated in the 1930s and in which Chester Barnard was a key figure, and the Contingency approach, which was developed in the 1960s. The first half of this chapter describes the Human Relations approach. This approach was a reaction against the mechanistic view of organisations and the pes- simistic view of human nature put forward in the Classical approach. It attempted to reintroduce the human element into organisational life, and claim for itself the title of the ‘one best way’. In particular, it contended that people have emotional as well as economic needs, and that organisations are cooperative systems that comprise infor- mal structures and norms as well as formal ones. This left managers with something of a dilemma: which ‘one best way’ should they adopt, the Classical or Human Relations approach. As the second half of this chapter will show, it was in response to this dilemma that Contingency Theory developed in the 1960s. Contingency Theory began by question- ing and rejecting the idea that there is a ‘one best way’ for all organisations. Instead, it argued for a ‘one best way’ for each organisation. It did not, therefore, reject the Classical approach and the Human Relations approach; instead it maintained that the structures and practices of an organisation are dependent (i.e. contingent) on the cir- cumstances it faces. The main contingencies it proposed were environmental uncertainty and dependence, technology and organisation size. After discussing the merits and drawbacks of the Human Relations approach and Contingency Theory, the chapter concludes that neither appears to be the solution to all known organisa- tional ills that their proponents claim. In particular, it is argued that both fail to reflect and explain the complexities of day-to-day organisational life. The Human Relations approach Even while the Classical approach was still struggling to establish itself, the seeds of a new approach to organisational design were already being sown. The origins of what later became known as the Human Relations approach can be traced to studies on work fatigue carried out in Britain during the First World War and work in the USA, at the same time, on employee selection, which gave new insights into employee moti- vation (Burnes, 1989). This work was developed and extended in the 1920s by Myers (1934) in Britain and Mayo (1933) in the USA, providing new perspectives on organi- sational life. These studies gave substance to a growing suspicion that the Classical view of organisations as being peopled by human robots motivated by money was badly flawed. Indeed, in 1915, the United States Congress took a stand against the use of Taylor’s techniques in their establishments – although Scientific Management was becoming more accepted in private industry and was beginning to cross national boundaries, not always successfully (Rose, 1988). Similarly, though the growth of
  • 69. 56 Chapter 2 · Developments in organisation theory bureaucracy was gathering pace, so too was people’s antagonism towards faceless, machine-like organisations where employees and customers alike lost their individual- ity and became numbers. In addition, as Davis and Canter (1955) argued, it is necessary to recognise that jobs and work organisation are social inventions put together to suit the specific needs and to reflect the culture, ideology and the governing concept or ethos of the time. Therefore, to understand the emergence of the Human Relations movement, it is necessary to be aware of the changes taking place in Western society prior to and just after the Second World War. In the 1930s, in many countries, there was the emergence of a more collectivist ethos than had previously been the case. In the USA, this was brought about by the reaction to the Depression of the 1920s and 1930s. The election of FD Roosevelt and the advent of his ‘New Deal’ introduced a new element of collective provision and concern into a previously highly individualistic nation. It also heralded the advent of ‘Big Government’ in the USA. In Europe, this collectivist ethos led to greater social concern; collective provision was led by the Scandinavian countries, and reflected the election of social democratic governments and a general mood of cooperation rather than conflict in industry in these countries. Similar developments also became the cor- nerstone of the rebuilding of Western Germany after the end of the Second World War. The legacy of the collective effort needed to win the war was also evident in the UK with the construction of the Welfare State. It was in the USA in the 1930s and 1940s that substantial evidence first emerged in print which challenged the Classical view of organisations and allowed the Human Relations approach to stand alongside, if not quite supersede, it. The main precepts of the Human Relations approach were almost diametrically opposed to those of the Classical approach. In particular, it argued the following points: ■ People are emotional rather than economic-rational beings. Human needs are far more diverse and complex than the one-dimensional image that Taylor and his fellow travellers conceded. People’s emotional and social needs can have more influence on their behaviour at work than financial incentives. ■ Organisations are cooperative, social systems rather than mechanical ones. People seek to meet their emotional needs through the formation of informal but influen- tial workplace social groups. ■ Organisations are composed of informal structures, rules and norms as well as formal practices and procedures. These informal rules, patterns of behaviour and communication, norms and friendships are created by people to meet their own emotional needs. Because of this, they can have more influence on individual behaviour and performance, and ultimately on overall organisational performance, than the formal structure and control mechanisms laid down by management. For these reasons, organisations can never be the predictable, well-oiled machines envis- aged by the Classical approach. Therefore, in most respects, the Human Relations approach represents a distinct break from the ideas of the Classical school. However, in two important ways, similarities exist. The first is their shared belief in organisations as closed, changeless entities. Once organisations have structured themselves in accordance with the correct precepts, then, regardless of external or even internal developments, no further changes are necessary or desirable. This leads on to the second similarity: pro-
  • 70. The Human Relations approach 57 ponents of both believed they had discovered the ‘one best way’; regardless of the type, nature or size of organisation, their precepts were the correct ones. With that in mind, we can now begin to examine in detail the case for Human Relations. Despite the work of precursors, no one doubts that the Human Relations approach began in earnest with the famous Hawthorne Experiments. ■ Elton Mayo (1880–1949) and the Hawthorne Experiments Elton Mayo was born in Adelaide, Australia in 1880. He had a somewhat chequered career. He failed three times to qualify as a medical doctor, and eventually became a lecturer in logic, psychology and ethics at the University of Queensland in 1911. There he developed a strong interest in the political problems of industrial society, and a life- long commitment to achieving social and industrial harmony. However, he was never very happy at Queensland and, in 1922, he emigrated to America. There, Mayo was fortunate in that his ideas on resolving industrial conflict attracted the attention of the Laura Spelman Rockefeller Memorial Foundation, which funded his entire career at the Harvard Business School. In effect, this meant that Mayo could pursue his own research without let or hindrance from university authorities. This was a major factor in the single-mindedness and success with which he undertook his work. Elton Mayo is considered by many as the founder and leading light of the Human Relations movement. On his retirement as Professor of Industrial Research at Harvard Business School in 1947, Mayo was one of the most celebrated social scientists of the age. In praise of his achievements, the business magazine Fortune wrote of him: Scientist and practical clinician, Mayo speaks with a rare authority that has commanded attention in factories as well as Universities. His erudition extends through psychology, soci- ology, physiology, medicine and economics, and his experience comes from a lifelong first-hand study of industry. (Quoted in Smith, 1998: 222) Much of his fame rested on the ‘Hawthorne Experiments’ carried out at Western Electric’s Hawthorne Works in Chicago in the 1920s and 1930s. However, within 10 years of his departure from Harvard, his reputation was in tatters: his expertise as a researcher was seriously questioned, his work was criticised for being too ‘manageri- alist’ and, perhaps most importantly, his contribution to the Hawthorne Experiments was considered as no more than a public relations exercise for Western Electric (Rose, 1988; Sheldrake, 1996; Smith, 1998). The Hawthorne Experiments, as Gillespie (1991: 1) commented: ... are still among the most frequently cited and most controversial experiments in the social sciences ... They are acclaimed as a landmark study in both sociology and psychology ... Surveys in the key developments in organization and management theory consistently note the seminal contribution of the experiments to their field. Yet, for most of the 80 years since the Hawthorne Experiments were initiated, it has been difficult to identify Mayo’s exact role (Smith, 1987). That the name of Elton Mayo is inextricably linked with the Hawthorne Experiments is undeniable. That Mayo publicised and was given credit for masterminding these is also undeniable. Until recently, though, key questions have remained unanswered: did Mayo design
  • 71. 58 Chapter 2 · Developments in organisation theory and implement the experiments himself? What was the role of his colleagues at Harvard? How frequently did he visit the Hawthorne Works? Now, with the avail- ability of family records and other archival material, Smith (1998) claims to have answered Mayo’s detractors and to have re-established him both as the key figure in the Hawthorne Experiments and as the dominant figure in the Human Relations movement. Nevertheless, given the vehemence of Mayo’s critics (Rose, 1988), one suspects that the debate over the ‘Mayo mystique’ is not yet over. Despite the difficulty in separating out the myth from the man, we should not let that undermine the significance of the Hawthorne work or what we know of Mayo and his colleagues’ contribution, even if we cannot clearly identify who did what. The Hawthorne programme was originally devised by Western Electric’s own industrial engineers in 1924. Western Electric was the manufacturing division of the American Telephone and Telegraph Company. The Hawthorne Works, which at the time employed some 30,000 people, was considered a prime example of the application of the mass production techniques and work organisation methods advocated by Frederick Taylor and Henry Ford. However, this was tempered by the company’s per- sonnel and welfare policies which provided pension, sickness and disability benefits, a share purchase plan, medical treatment, extensive recreational facilities and a system of worker representation. This example of ‘welfare capitalism’ had the twin aims of reducing worker dissatisfaction and resisting trade union influence (Sheldrake, 1996). The first phase of the Hawthorne Experiments, which lasted on and off until 1927, was the Hawthorne Illumination Tests (HIT), which were designed to examine the effects of various levels of lighting on workers’ productivity. The engineers established control and experimental groups: the latter were subject to different levels of illumi- nation as they carried out their work whilst the lighting of the control group was left unchanged. At the outset this looked like a standard Scientific Management experi- ment in the mould of Taylor and the Gilbreths. What the engineers were expecting was a set of unambiguous results that would allow them to establish the ‘one best’ level of illumination. This did not happen and, instead, data began to emerge that challenged the very basis of Scientific Management. The engineers had expected the performance of the experimental group to vary with increases and decreases in illumination and for an optimum level to be estab- lished, but as the illumination was varied, so output continued to increase. Indeed, output only decreased in the experimental group when the lighting became so dim that it was difficult to see. More puzzling still, output in the control group, where no changes were made, also increased. In 1927 the company began the second phase of the Hawthorne Experiments. Building on the HIT work, the company wanted to establish the effects on productiv- ity of increased rest periods, a shorter working day, a reduced working week, free refreshments, changes to payment systems, better and friendlier communication, and a relaxation in the customary discipline usually imposed by first line supervisors. The first group to be involved were six women in the Relay Assembly Test Room (RATR). As Gillespie (1991: 59) noted: [Their] privileged status and a modicum of control over work days brought about a strong identification with the test room among the workers ... With the introduction of refresh- ments during the morning rest period, the women’s status soared higher still.
  • 72. The Human Relations approach 59 By 1929, productivity in the RATR group had increased by some 30 per cent. In the interim, the company also initiated a further series of experiments in which, from 1928 onwards, Elton Mayo and his colleagues were closely involved. In the years that followed, successive groups of workers were subjected to changes in hours, payment systems, rest periods, etc. The subsequent changes in output, and the reasons put for- ward for these, undermined many of the assumptions regarding organisations and human behaviour previously perceived as sacrosanct (Mayo, 1933; Roethlisberger and Dickson, 1938). The experiments were monitored continuously; from this work, Mayo and his col- leagues concluded that it was not the changes in working conditions that affected output, but the fact that those workers involved had been singled out for special attention. This acted to increase their morale and make them want to perform better. It was the very fact that they were being studied which produced the increased per- formance; this later became known as the ‘Hawthorne Effect’. This accounted for the improved performance by the original HIT control group, even with no changes to the lighting in their area: they also felt ‘special’ because they were being studied. These findings led Mayo and his group to move the focus of their work away from the reaction of individual workers to changes in their working conditions. Instead, they began to investigate the role and behaviour of the ‘informal’ groups that workers themselves established, and the norms and attitudes of these groups. As a result of this work, Mayo and his colleagues put forward two major proposi- tions that came to form the core of the Human Relations approach. The first related to the importance of informal groups within the formal structure of organisations. The Western Electric studies demonstrated the need to see the work process as a col- lective, cooperative activity as opposed to an individual, isolated one. The studies showed in particular the important effect that the informal, primary work group has on performance. These groups tend to develop their own norms, values and attitudes that enable them to exert strong social, peer group pressure on individuals within the group to conform to group norms, whether this be in relation to the pace of work or attitudes towards other groups and supervisors. Taylor, years before, had also noted the pressure that groups of workers could exert over their members to make them conform; however, he believed that this was abnormal behaviour which could be remedied by tight managerial control. What the Western Electric studies demon- strated was that far from being abnormal, such behaviour was perfectly normal. The second proposition put forward by Mayo and his colleagues was that humans have a deep need for recognition, security and belonging. Rather than being purely economic beings, it was argued that the Hawthorne Experiments demonstrated that workers’ performance and attitudes could be influenced more by their need for recognition and security, and also by the feeling of belonging engendered by infor- mal groups. This latter point in particular reflected, in Mayo’s view, a deep-seated desire by humans as social beings for intimacy, consistency and predictability. Where these social certainties were lacking, workers would deliberately seek to manufacture them by creating their own informal work groups. Therefore, rather than seeking to eradicate or undermine the workings of these informal groups, as Taylor had advo- cated, the Western Electric studies showed that management needed to gain the collaboration and cooperation of such groups if they were to get the best perform- ance from workers.
  • 73. 60 Chapter 2 · Developments in organisation theory It is generally agreed (Mullins, 1989; Rose, 1988) that the Western Electric studies had a dramatic effect on management and organisation theory. The studies ushered in an era where the Economic Man of the Classical approach was supplanted by Social Man. It was no longer possible for managers to ignore the effects of organisational structures and job design on work groups, employee attitudes and management– worker relations. The crucial issue became one of social relationships – Human Relations – in the workplace. In future, the focus of good management practice would shift to the importance of leadership and communication in order to win over employees. As the 1930s and 1940s progressed, other work began to emerge which both substantiated and broadened those findings. ■ Chester Barnard (1886–1961) and cooperative systems Chester Barnard was born in Malden, Massachusetts in 1886. On leaving school, he became a piano tuner, but later attended Harvard University where he studied econom- ics. On leaving university, he went to work for the American Telephone and Telegraph Company, in whose subsidiary, Western Electric, the Hawthorne studies were carried out. He was initially employed as a statistician, but quickly rose to hold a number of senior executive positions including, by the age of 41, becoming President of the New Jersey Bell Telephone Company. He also established his credentials as a prolific writer and lecturer with strong links to a number of universities, including Harvard. On retir- ing in 1948, he became President of the Rockefeller Foundation. Barnard is best known for his book The Functions of the Executive (1938), which has a comparable place in the Human Relations literature to that of Fayol’s work in the literature of the Classical school. In this work, Barnard put forward the idea of organisations as cooperative systems. In so doing, this gave him a double claim to fame: not only did he draw attention to the cooperative nature of organisational life, but he was also one of the first to treat organisations as systems rather than machines. He was in frequent touch with Mayo and his colleagues at Harvard, and closely followed their work at Western Electric. Therefore, although The Functions of the Executive was a personal and idiosyncratic work, reflecting Barnard’s own dis- tinct views and opinions, it was far from being bereft of academic substance. Indeed, his book was the first systematic attempt in English (Weber’s work on bureaucracy was still not translated into English at this time) to outline a theory of organisations as a whole. In this respect, Barnard can claim both to have made a substantial contri- bution to the Human Relations approach and to have laid the ground work for subsequent writers such as Selznick and Simon (Robbins, 1987; Scott, 1987). Barnard had close links with Harvard Business School and, along with Elton Mayo, Talcott Parsons (who first translated Weber’s work into English) and Joseph Schumpeter, was a member of the Harvard Pareto Circle. This group was established to discuss and promote the work of the Italian sociologist Vilfredo Pareto, whose writ- ing placed great emphasis on social systems and social equilibrium (Sheldrake, 1996). The influence of Pareto’s social systems view can be seen in Barnard’s depiction of organisations as cooperative systems. An organisation is a cooperative system, he argued, because without the willingness of its members to make contributions to and to pursue its goals, it cannot operate effectively. Like others who espoused the Human Relations approach, he believed cooperation could not be achieved solely by mone-
  • 74. The Human Relations approach 61 tary incentives. Instead, he advocated a mixture of monetary and non-monetary inducements. Similarly, cooperation by itself would not be effective unless an organi- sation also possessed a common purpose: clear and realistic goals and objectives that the organisation’s members could understand, relate to and pursue. Establishing this common purpose, in Barnard’s opinion, had to be the responsibility of those at the top of the organisation, but achieving it required the cooperation of those at the bottom, and all levels in between. This leads to another of Barnard’s assertions: the flow of authority is not from the top down but from the bottom up. He defined authority not as a property of management but as a response by subordinates to supe- riors. If subordinates did not respond willingly and appropriately, then no authority existed. In this example, as in many others, he both reflected the influence of and sup- ported the findings of the Western Electric studies, which drew attention to the ability of workers through social groupings to facilitate or frustrate the will of management. In order to avoid a negative response from workers, Barnard advocated systematic and purposeful communication. He saw communication, through both formal and informal structures, as being the key function of the executive. Indeed, he portrayed the organisation as a purposeful, coordinated system of communications linking all participants in a manner that not only encouraged the pursuit of the organisation’s common purpose, but also legitimated the premises on which it was based. However, he argued that this does not happen automatically or accidentally; it is the product of effective leadership. This is why Barnard stressed the key role of the executive in lead- ing the organisation by facilitating communication and motivating subordinates to high levels of performance; such developments could only come from the top. He also saw the executive as having a role in shaping and reinforcing the organisation’s value systems or, as modern writers would put it, its culture. Given the emphasis placed by Barnard on the setting and pursuit of clear objec- tives, and in his approach in general, there is a degree of overlap with the work of the Classical School. However, what significantly distinguishes him from them is his insis- tence on the non-rational, informal, interpersonal, and indeed moral basis of organisational life. His view of effective leadership also distinguishes him from the Classical school. Rather than seeing leadership as dependent on position, Barnard argued that successful leadership arose from the interplay between the individual leader, the followers and the context. Above all, Barnard rejected the idea of material incentives being the only incentives to make people work purposefully. Indeed, he saw them as being ‘weak incentives’ that needed to be supported by other psychological and sociological motivators if organisations were to be successful in achieving their common purpose. In thus chal- lenging the effectiveness of material incentives, he was to receive substantial support a few years later from a more academic source. ■ Abraham Maslow’s (1908–1970) hierarchy of needs Abraham Maslow was born in Brooklyn, New York in 1908. He trained as a psy- chologist at the University of Wisconsin and, apart from a brief period working in the family business, spent his working life in academia. Maslow was one of the first to differentiate between and classify different types of human need. For Taylor and his adherents, there was only one form of need: material/monetary need. Mayo et al and
  • 75. 62 Chapter 2 · Developments in organisation theory Barnard took a different view; they drew a distinction between material and non-material needs, but made no distinction within these two categories. Maslow (1943) identified five distinct forms of human need which he placed in a hierarchical order. He argued that, beginning at the lowest level, a person had to satisfy substantially the needs at one level before they could move up the hierarchy and concentrate on ‘higher order’ needs. In ascending order, the five levels in Maslow’s hierarchy of needs are: ■ Physiological needs – hunger, thirst, sleep, etc.; only when these basic needs have been satisfied do other needs begin to emerge. ■ Safety needs – the desire for security and protection against danger. ■ Social needs – the need to belong, to gain love and affection; to be in the company of others, especially friends. ■ Esteem needs – these reflect a person’s desire to be respected – esteemed – for their achievements. ■ Self-actualisation needs – self-actualisation is the need to achieve one’s full potential. According to Maslow, this will vary from person to person and, indeed, may differ over time, as a person reaches a level of potential previously considered unattainable and so goes on to strive for new heights. For these reasons, self-actualisation is a con- tinuously evolving process throughout a person’s lifetime. Maslow (1943: 383) recognised that there were weaknesses in his theory of needs: ‘Since, in our society, basically-satisfied people are the exception, we do not know much about self-actualisation, either experimentally or clinically.’ He accepted that the strength of the hierarchy might differ with individual circumstances – some people’s aspirations may be so deadened by their experiences that they would be satis- fied by having enough to eat. He also saw that cultural differences between societies could have an impact on the extent and order of needs. Nevertheless, he did believe that his theory was generally applicable and that where people’s higher aspirations were thwarted or unmet, the result was likely to be frustration and de-motivation. Though not designed specifically for organisational analysis, but rather in the con- text of life in general, it can be seen why Maslow’s work was so readily accepted by proponents of the Human Relations approach. For them, it explained why in some situations Tayloristic incentives were effective, whilst in other situations, such as the Hawthorne Experiments, other factors proved more important. Applying Maslow’s hierarchy of needs to human behaviour in organisations, it can be seen that people will first of all be motivated by the desire to satisfy physiological needs through monetary rewards. Once those have been substantially satisfied, how- ever, workers will seek to satisfy – be motivated by – their safety needs, such as job security and welfare benefits. In a similar fashion, once safety needs are substantially met, these will fade into the background and social needs will come to the fore; people will want to be accepted as part of a group, to share common intents and aspirations with the group, to experience the bonds of friendship and loyalty. Clearly, these social needs played an important role in the Hawthorne Experiments, as did esteem needs. After social and esteem needs are substantially met, finally self-actualisation needs come to the fore. However, as mentioned above, the need for self-actualisation never wanes but tends to act as a continuing spur to further achievements. Clearly, Maslow’s work cannot be transferred fully into the organisational setting, given that the constraints on freedom of action imposed by most jobs do not allow
  • 76. The Human Relations approach 63 individuals to approach, let alone attain, self-actualisation (Rose, 1988). Even very basic physiological needs are beyond the reach of many millions of people in the world. Nevertheless, in pointing to the negative effects of thwarting an individual’s aspirations, and in distinguishing between types of intrinsic (non-material) and extrin- sic (material) motivators, and arguing that, at any one time, it is the unmet needs which act as positive motivators, Maslow has had an enormous impact on job design and research (see Child, 1984; Smith et al, 1982). The influence of Maslow’s theory of needs can be seen in the work of other exponents of Human Relations, especially Douglas McGregor. ■ Douglas McGregor (1906–1964) and Theory X–Theory Y Douglas McGregor was born in 1906. He received his doctorate in psychology from Harvard, and spent much of his working life at the Massachusetts Institute of Technology where, from 1954 until his death in 1964, he was the first Sloan Fellows Professor. McGregor is one of the most widely cited Human Relations writers. He developed his views from his personal experience and observations as an academic, consultant and university administrator rather than from empirical research. In his book The Human Side of Enterprise (1960), McGregor argued that decisions taken by top managers on the best way to manage people were based on their assumptions about human nature. McGregor maintained that there are basically two commonly-held views of human nature: a negative view – Theory X; and a positive view – Theory Y. He believed that managers’ behaviour towards their subordinates was based upon one or other of these views, both of which consist of a certain group- ing of assumptions about human behaviour. Theory X, which he believed dominated the literature and practice of management, consists of the following assumptions: ■ The average person dislikes work and will avoid it wherever possible. ■ Employees must be coerced, controlled or threatened with punishment if they are to perform as required. ■ Most people try to avoid responsibility and will seek formal direction whenever possible. ■ Workers place security above other factors relating to employment and will display little ambition. Theory Y, on the other hand, comprises a group of assumptions that give a much more positive view of human nature: ■ Most people can view work as being as natural as rest or play. ■ Workers are capable of exercising self-direction and self-control. ■ The average person will accept and even seek responsibility if they are committed to the objectives being pursued. ■ Ingenuity, imagination, creativity and the ability to make good decisions are widely dispersed throughout the population and are not peculiar to managers. Theory X and Theory Y are not statements about what people are actually like, but rather the general assumptions that managers, and the rest of us, hold about what people are like. The fact that such views may not have a base in reality is irrelevant if
  • 77. 64 Chapter 2 · Developments in organisation theory managers act as though they are true. Managers who adhere to Theory X will use a combination of stick and carrot methods to control their subordinates, and will con- struct organisations that restrict the individual’s ability to exercise skill, discretion and control over their work. Those managers who adhere to Theory Y will adopt a more open and flexible style of management. They will create jobs that encourage workers to contribute towards organisational goals and allow them to exercise skill and responsibility, and where the emphasis will be on non-material incentives. Obviously, Theory X is akin to the Classical view of human nature and organisa- tional design, whereas Theory Y falls more in the Human Relations tradition. Though McGregor favoured Theory Y, he recognised that it could not be fully validated. Instead, he saw Theory Y as a challenge to the orthodoxy of Theory X and, as he put it (McGregor, 1960: 53), as an ‘invitation to innovate’. He argued that there was nothing inevitable about which approach to adopt. The choice lies with managers; those who adhere to Theory X will create a situation where workers are only able and willing to pursue material needs (as Maslow observed). Such workers will be nei- ther prepared nor in a position to contribute to the wider aims and objectives of the organisation that employs them. Managers who follow Theory Y precepts are likely to receive an entirely different response from their employees; workers will identify more clearly with the general interests of the organisation, and be more able and more willing to contribute to their achievement. Though stressing the element of choice, McGregor, along with other Human Relations adherents, believed that changes in the nature of modern societies meant that organisations were moving, and should move, more in the direction of Theory Y. ■ Warren Bennis (1925–) and the death of bureaucracy By the 1950s and 1960s, the Human Relations approach and the values it espoused were in the ascendancy. One clear sign of this was the widely-held view in the 1960s that bureaucracy was dying and being replaced by more flexible, people-centred organisations that allowed and encouraged personal growth and development. One of the main exponents of this view is Warren Bennis. Warren Bennis trained as an industrial psychologist and held a number of senior academic appointments, including Professor of Management at the University of Southern California. He is now best known for his work on leadership, and has acted as an adviser to four US presidents. In terms of the Human Relations movement, Bennis (1966) is credited with coining the phrase and making the case for ‘the death of bureaucracy’. Bennis argued that every age develops an organisational form appro- priate to its time. Bureaucracy was, in his view, appropriate for the first two-thirds of the twentieth century but not beyond that. He believed that bureaucracy emerged because its order, precision and impersonal nature was the correct antidote for the personal subjugation, cruelty, nepotism and capriciousness that passed for manage- ment during the Industrial Revolution. Bureaucracy, he stated, emerged as a creative and wholesome response to the needs and values of the Victorian Age. Up to this point, there is little to distinguish Bennis from Weber; however, he then went on to argue that the Victorian Age, and its needs, were dead and that new conditions were emerging to which bureaucracy was no longer suited. These conditions were:
  • 78. The Human Relations approach 65 ■ Rapid and unexpected change – bureaucracy’s strength lies in its ability to manage efficiently the routine and predictable; however, its pre-programmed rules and inflexibility make it unsuitable for the rapidly changing modern world. ■ Growth in size – as organisations become larger, then bureaucratic structures become more complex and unwieldy, and less efficient. ■ Increasing diversity – rapid growth, quick change and an increase in specialisation create the need for people with diverse and highly specialised skills; these specialists cannot easily or effectively be fitted within the standardised, pyramid structure of bureaucratic organisations. ■ Change in managerial behaviour – the increasing adoption of the Human Relations approach by managers challenges the simplistic view of human nature put forward by the Classical school, which underpins bureaucracy. If coercion and threats administered in a depersonalised, mechanistic fashion are counter-productive as a way of controlling people in organisations, then the case for bureaucracy is severely diminished. For Bennis and others such as Daniel Bell (1973), Alvin Toffler (1970) and EF Schumacher (1973), bureaucracy was rightly dying and being replaced by more diverse, flexible structures which could cope with the needs of the modern world. ■ Job Design: operationalising Human Relations Though intellectually strong, the Human Relations school remained operationally weak up to the 1950s and 1960s because, unlike the Classical school, it lacked a clear set of operational definitions and guidelines that allowed organisations to understand and implement it in the same way that they could with Scientific Management or bureaucracy. The advent of the Job Design movement in both the USA and Europe rectified this. In the last 50 years, Job Design, or work humanisation as it has also been called, has become a powerful technique for rolling back the worst excesses of the Classical school, especially in the area of manual work, where Scientific Management and its clones have had such an impact. It was in America in the 1950s that Davis and Canter (1955), influenced by the work of the Human Relations school, questioned the Tayloristic basis of job design and work organisation. They suggested that it would be possible to design jobs that satisfied not only human needs but also organi- sational ones as well. They argued that increased job satisfaction and increased organisational performance went hand in hand. Since then many other writers, espe- cially in Europe, have contributed to the development of Job Design theory (Davis et al, 1955; Guest, 1957; Hackman and Oldham, 1980; Likert, 1961; Trist et al, 1963; Warr, 1987). Job Design is a direct attack on the precepts of the Classical approach. Whereas Taylorist tradition seeks to fit people to rigidly defined and controlled jobs, Job Design theorists argue that jobs can and should be fitted to human needs. The basic tenets of Job Design are relatively straightforward and follow on from the work of the proponents of the Human Relations approach, especially Maslow. It is argued that the Classical approach to jobs, with its emphasis on fragmenting jobs and reduc- ing workers’ autonomy and discretion, is counter-productive to both individual
  • 79. 66 Chapter 2 · Developments in organisation theory fulfilment and organisational performance. This is because boring, monotonous and meaningless jobs lead to poor mental health and feelings of dissatisfaction. In turn, this can result in lack of motivation, absenteeism, labour turnover and even industrial unrest (Arnold et al, 1998). The solution to these problems follows from the analysis. If Tayloristic trends in job design are counter-productive, then they should be reversed and ‘variety, task completeness and, above all, autonomy’ should be built into jobs (Wall et al, 1984: 15). Such a move would promote workers’ mental health and job satisfaction, bring- ing in turn increased motivation and performance. Just as Taylor believed his approach would benefit both workers and management, so too do the proponents of Job Design; the difference is that the benefit to the worker is personal fulfilment rather than increased wages, though in both systems the benefit to management is increased productivity (Friedman, 1961; Hackman and Lawler, 1971; Herzberg et al, 1959; Kelly, 1982a, 1982b). In practice, there are three main variants of Job Design: ■ Job enlargement, which concentrates on increasing work variety by combining pre- viously fragmented tasks together, or by rotating people between different types of work (Guest, 1957). ■ Job enrichment, which concentrates on increasing workers’ control over what they do by rearranging work so that some of the responsibilities previously borne by supervisors and support staff are given to individuals or, more often, semi- autonomous work groups (Herzberg, 1968). ■ Socio-Technical Systems theory, which is a variant on Job Design involving a shift of focus from the individual job to the organisation as a whole. Socio-Technical Systems theory sees organisations as being composed of interdependent social and technical systems. The theory argues that there is little point in reorganising the social system in isolation from the technology being used, and that the level of performance achieved is dependent on the degree of fit between the two. This view sees technol- ogy as acting as a limitation on the scope for redesigning individual jobs (Davis, 1979; Dunphy and Griffiths, 1998; Trist et al, 1963). It follows, therefore, that Job Design must go hand-in-hand with technological change if it is to be successful. Job Design emerged and attracted so much attention in the 1950s and 1960s for three main reasons: 1 The first flows from the work of Maslow (1943). As workers have become better educated and more affluent, their higher order needs such as self-actualisation have come to the fore. This means that in order to obtain the best performance from workers, jobs have to be designed to meet their psychological as well as their finan- cial needs (Kelly, 1982b). 2 As markets have become more global, more competitive and more volatile, organi- sations need to be more responsive to the needs of their customers. This requires workers to be more flexible, possess a greater range of skills, and be able to work as part of a team rather than on an individual basis (Aglietta, 1979; Streeck, 1987). 3 Low unemployment in the 1950s, 1960s and 1970s led to high rates of labour turnover and absenteeism and endemic industrial unrest in industries and organisa- tions with poor job design (Pruijt, 1997). This was certainly a major reason for Volvo’s adoption of Job Design in the 1970s (see Chapter 12).
  • 80. The Human Relations approach 67 Since the 1950s, the USA and most European countries have initiated some form of officially sponsored ‘Work Humanisation’ programme. Not surprisingly, Norway and Sweden, with their traditions of industrial cooperation and democracy, and what was West Germany, with its post-war commitment to industrial consensus and worker rights, led the way in terms of financial and legal backing. Norway initiated the process with its Industrial Democracy Project (1962–1975). Sweden has probably been the most consistent, however, establishing the Work Environment Fund in 1972, with a budget of SEK 500 million per year, and creating the New Factories Programme at the same time. In 1976 it enacted the Co-determination Act, which ensures that trade unions have a right to be consulted on all major changes in work- ing conditions. In 1977, the Swedish government created the Centre For Working Life (later the Institute For Work Life Research) to initiate and promote work humanisa- tion. In the 1980s, it initiated the Swedish Development Programme (1982–1987), the Leadership, Organisation and Co-determination Programme (1985–1990), and the People, Data, Working Life Programme (1987–1992). Germany has seen a similarly consistent approach with the Humanisation of Working Life Programme (1974–1989) and the Work and Technology Programme (1989–). Germany also pro- vided subsidies (around DM 100 million per year) to encourage the adoption of Job Design practices (Pruijt, 1997). Some of the Job Design initiatives in these countries were inspired by Norwegian researchers such as Einar Thorsrud, who propagated the concept of semi-autonomous work groups. Others derived from the work on the socio-technical systems approach carried out by the Tavistock Institute in London (Auer and Riegler, 1990). In the UK, however, despite the presence of the Tavistock Institute and the establishment of the Work Research Unit in 1974, official backing has been noticeably lukewarm. Indeed, even the modest expenditure devoted to the Work Research Unit was cut back consid- erably in the 1980s, and the Unit has now been disbanded. Successive UK governments now seem to share the American view that ‘Quality of Working Life’ programmes are the purview of individual organisations rather than something to be promoted by government. To a great degree, the popularity of Job Design seems to have fluctuated with employment levels. In the full-employment era of the 1950s and 1960s, governments and employers in the West seemed relatively receptive to it. With the recessions of the 1970s and 1980s, however, interest fell away in most countries. The exceptions were Sweden and Germany, both countries where unemployment remained relatively low in the 1970s and 1980s. Despite this, there can be little doubt that Job Design pre- cepts have permeated Western society on a significant scale, and provide the main operational alternative to the Classical approach; as Pruijt (1997) noted, however, Tayloristic work practices have proved far more persistent than the proponents of Job Design had expected. ■ The Human Relations approach: summary and criticisms Though many tend to associate the Human Relations movement exclusively with the work of Mayo, the above shows that it is a much more diverse school of thought. Indeed, some have argued that to call it a school owes more to academic convenience than to reality (Rose, 1988). Nevertheless, there are continuing and overlapping
  • 81. 68 Chapter 2 · Developments in organisation theory themes in the work of the writers cited above which strongly bond them together. The first, and most obvious, is their almost total rejection of the Classical movement’s mechanistic-rational approach towards people and organisation structures. As Dunphy and Griffiths (1998: 21) noted: In particular, they attacked the notion of employees as interchangeable parts, stressing that individual employees had different motivations; that the specialisation of labour and deskilling had created widespread alienation and demotivation; and that excessive supervi- sion had crushed employee initiative. The second and more fundamental feature is that whilst approaching the issues involved from different perspectives and emphasising separate aspects, they create an organisational model that possesses both coherence and plausibility. The Human Relations model stresses three core elements: ■ leadership and communication; ■ intrinsic job motivation (as well as extrinsic rewards); ■ organisation structures and practices which facilitate flexibility and involvement. These elements are underpinned by two central propositions: ■ Organisations are complex social systems, with both formal and informal social structures, and are not mechanical contrivances. Therefore, they cannot effectively be controlled by close supervision, rigid rules and purely economic incentives. ■ Human beings have emotional as well as economic needs. Organisation and job structures need to be designed in such a way as to enable workers to meet both their material and non-material needs. Only in this way will workers perform effi- ciently and effectively in the best interests of the organisation. It is not difficult to see why the Human Relations approach proved popular. In a period when many people were becoming increasingly worried about the growth of impersonal bureaucracies, it provided an attractive alternative. It is an approach that stresses that human beings are not mere cogs in a machine but that they have emo- tional needs: humans want to ‘belong’, achieve recognition, and develop and fulfil their potential. As mentioned earlier, the Depression of the 1930s and the Second World War and its aftermath created, in the USA and Europe, a greater sense of col- lectivism and community than had hitherto been the case; another reason why the Human Relations doctrine found such a ready audience. Also, implicitly, it offers an approach to change management that has a surprisingly modern ring to it. The stress on organisations having clear objectives, effective communication systems and pro- active leadership, coupled with the need to obtain the willing cooperation of employees, are central to many modern approaches to change management. Despite its attractiveness and plausibility, a substantial and often vitriolic body of opinion came to be ranged against the Human Relations approach in the 1950s and 1960s (Rose, 1988). Economists rejected the argument that non-material incentives have a potentially stronger motivating influence than material incentives. The empha- sis placed by the proponents of Human Relations on people’s need for ‘togetherness’ and ‘belonging’ was seen by some as a denial of individualism. Others thought that it belittled workers and portrayed them as irrational beings who, given the chance,
  • 82. The Human Relations approach 69 would cling to management as a baby clings to its mother. It was also attacked from both a management and a trade union viewpoint. Some of the former felt that its sup- posedly powerful manipulative techniques were either useless or inoperable; whilst representatives of the latter saw Human Relations as a vehicle for manipulating labour, and undermining – or attempting to eliminate – trade unions. Sociologists crit- icised it for attempting a sociological analysis of organisations without taking into account the larger society within which each organisation exists (Kerr and Fisher, 1957; Landsberger, 1958; Rose, 1988; Whyte, 1960). Many of the criticisms were clearly directed at the work of Mayo and his col- leagues, including inconsistencies between them. Landsberger (1958), for example, was one of the first to point out the difference between Mayo’s (1933) interpretations of the Hawthorne Experiments and those of his colleagues, Roethlisberger and Dickson (1938), though Smith (1998) disputes this and many of the other criticisms of Mayo. However, by no means were all the criticisms levelled at Mayo and his col- leagues. Maslow’s work, a key theoretical cornerstone of the Human Relations approach, was found to lack empirical substance when researchers attempted to vali- date it, and certainly later theories of motivation seem to adopt a different approach (Arnold et al, 1998; Hall and Nougaim, 1968; Lawler and Suttle, 1972; Sheldrake, 1996). Similarly, Bennis’s views were attacked. The Aston Studies in the 1960s (Pugh et al, 1969a, 1969b) showed that bureaucracy was growing rather than declining. Also, Miewald (1970) argued that Bennis did not understand the nature of bureau- cracy; in his view, far from being rigid, it could and did adapt to changing and dynamic environments. Kelly (1982b) also attacked the proposition that increased job satisfaction leads to increased performance. There is one further criticism of the Human Relations approach, one that it shares with the Classical approach: it claims for itself the title of the ‘one best way’. Yet, the question was posed, how can any approach claim that there is only one method of structuring and managing organisations, and that it holds good for all organisations and for all time? Indeed, the seed of this criticism can be found in Bennis’s (1966) work, where he argued that organisations in the last third of the twentieth century would experience rapid and unexpected change, continue to increase in size – with the problems of complexity which this brings, and become more diverse and spe- cialised. Clearly, whilst not explicitly advocating it, Bennis was making the case for an approach to organisations that recognised not only that they face different situations but also that these are not stable over time. Similarly, Trist et al’s (1963) argument regarding the need to fit social systems to technical ones can also be seen as making a case for a situationalist approach to job design. Indeed, the most telling argument against the ‘one best way’ approach is that presented by Davis and Canter (1955), mentioned earlier. If jobs and work organisation are social inventions designed to meet the needs of societies and organisations at particular points in time, then there can never be a one best way for all organisations and for all times. What is needed, instead, is an approach that links approaches to work design to the particular context to which they are best suited. In the 1960s and 1970s, such an approach emerged.
  • 83. 70 Chapter 2 · Developments in organisation theory The Contingency Theory approach Contingency Theory emerged in the 1960s out of a number of now classic studies of organisation structure and management (see Child, 1984; Mullins, 1989; Scott, 1987). Since the 1970s, it has proved – as a theory at least – to be more influential than either the Classical or Human Relations approach. In essence, Contingency Theory is a rejection of the ‘one best way’ approach previously sought by managers and propounded by academics. In its place is substituted the view that the structure and operation of an organisation is dependent (‘contingent’) on the situational vari- ables it faces – the main ones being environment, technology and size (Burnes, 1989). It follows from this that no two organisations will face exactly the same contingen- cies; therefore, as their situations are different, so too should their structures and operations be different. Consequently the ‘one best way’ for all organisations is replaced by the ‘one best way’ for each organisation. One of the clear distinctions between Contingency Theory and its predecessors was pointed out by Scott (1987: 23): The previous definitions tend to view the organisation as a closed system, separate from its environment and comprising a set of stable and easily identified participants. However, organisations are not closed systems, sealed off from their environments but are open to and dependent on flows of personnel and resources from outside. As Robbins (1987) noted, there is wide agreement that the systems approach offers important insights into the working of an organisation. Systems theory is not new: it has been used in the natural and physical sciences for years. However, its application to business organisation only really emerged in the 1960s. The systems approach views the organisation both as a whole, and as part of a larger environment. The idea is that any part of an organisation’s activities affects all other parts. Organisations, rather than being closed (as previous theories assumed), are viewed as open systems operating within a wider environment and having multiple channels of interaction (Mullins, 1993). Therefore, organisations are not in complete control of their own fate; they can be, and often are, affected by the environment in which they operate, and this can and does vary from organisation to organisation. One of the earliest writers to lay the groundwork for Contingency Theorists was Herbert Simon. Writing in the 1940s (Simon, 1957), he criticised existing approaches as providing managers with nothing more than proverbs or lists of ‘good practice’ based on scant ideas, many of which contradicted each other. He argued that organi- sation theory needed to go beyond superficial and over-simplified precepts, and instead study the conditions under which competing principles could be applied. Nevertheless, it was not until the 1960s that a considered approach emerged, which broke with the Classical and Human Relations movements’ attempts to estab- lish a universal approach suitable to all organisations. The former had concentrated on the formal structure and technical requirements of organisations, and had attempted to establish sets of general principles. The latter, the Human Relations movement, focused on the informal aspects of organisations and the psychological and social needs of their employees. As with the Classical approach, this produced
  • 84. The Contingency Theory approach 71 lists of good practice and desired objectives, but it lacked precise guidance on how these should be applied. Contingency Theorists adopted a different perspective, based on the premise that organisations are open systems whose internal operation and effectiveness is depend- ent upon the particular situational variables they face at any one time, and that these vary from organisation to organisation. This is consistent with evidence that not all organisations – or even all successful ones – have the same structure, and that even within organisations, different structural forms can be observed (Mintzberg, 1979). Though many situational variables, such as the age of the organisation and its history, have been put forward as influential in determining structure, it is generally agreed that the three most important contingencies are: ■ Environmental uncertainty and dependence. It is argued that the management of any organisation is undertaken in circumstances of uncertainty and dependence, both of which change over time. Uncertainty arises because of our inability ever to understand and control events fully, especially the actions of others, whether outside or inside an organisation. Because of this, forecasting is an inexact and hazardous enterprise. Similarly, the dependence of management upon the goodwill and support of others, whether they be internal or external groupings, makes an organisation vulnerable, and may in some circumstances even threaten its very existence. Levels of uncertainty and dependence will vary, but can never be totally eliminated, and must therefore be taken into account – treated as a contingency – when designing organisational structures and procedures (Burns and Stalker, 1961; Child, 1984; Lawrence and Lorsch, 1967; Pugh, 1984; Robbins, 1987; Thompson, 1967). ■ Technology. The argument for technology being a key variable follows similar lines to that of environment. Organisations creating and providing different products and services use different technologies. Indeed, even those producing similar prod- ucts may use differing techniques. Given that these technologies can vary from the large and expensive, such as a car assembly line, to the relatively small and cheap, such as a personal computer, the form of organisation necessary to ensure their efficient operation will also vary. If so, there is a need to treat technology as a con- tingent variable when structuring organisations. There are distinct variants of the case for technology, however, which reflect the different definitions of technology that theorists and researchers have employed. The two best-developed approaches are found in Woodward’s (1965, 1970) studies of ‘operations technology’ and Perrow’s (1967, 1970) analysis of ‘materials technology’. The former refer to the equipping and sequencing of activities in an organisation’s work flow, whilst the latter refer to the characteristics of the physical and informational materials used. Woodward’s work tends to relate more to manufacturing organisations, whereas Perrow’s is more generally applicable (Hickson et al, 1969; Thompson, 1967; Zwerman, 1970). ■ Size. Some would argue that this is not just a key variable but the key variable. The case for size being a significant variable when designing organisations has a long antecedence within organisation theory, being first cited by Weber in the early part of the twentieth century when making the case for bureaucracy (Weber, 1947). The basic case is quite straightforward. It is argued that the structure and practices nec- essary for the efficient and effective operations of small organisations are not
  • 85. 72 Chapter 2 · Developments in organisation theory suitable for larger ones. For small organisations, centralised and personalised forms of control are claimed to be appropriate, but as organisations grow in size, more decentralised and impersonal structures and practices become more relevant (Blau, 1970; Mullins, 1989; Pugh et al, 1969a, 1989b; Scott, 1987). The main figures in developing and establishing Contingency Theory were academics in Britain and the USA, among whom the pioneers were Burns and Stalker. ■ Tom Burns and George Macpherson Stalker: the importance of environment The first major study to establish a relationship between organisations’ environment and their structure was carried out by Burns and Stalker (1961) in Britain. They examined 20 firms in a variety of industries in order to assess how their structures responded to the environment in which they operated. Their findings were to have a major impact on organisation theory, and provide concrete evidence for rejecting a universal, ‘one best way’ approach to organisational structure and practice. They identified five different types of environment, based upon the level of uncertainty that was present, ranging from ‘stable’ to ‘least predictable’. They also identified two basic or ideal forms of structure: ‘Mechanistic’ and ‘Organic’. Their data showed that Mechanistic structures were more effective in stable environments, whilst Organic ones were better suited to less stable, less predictable environments. The Mechanistic structure, which is akin to the Classical approach, has the follow- ing characteristics: ■ the specialisation of tasks; ■ closely defined duties, responsibilities and technical methods; ■ a clear hierarchical structure with insistence on loyalty to the organisation and obe- dience to superiors. In contrast, the Organic form, which has some resemblance to the Human Relations approach, is characterised by: ■ much greater flexibility; ■ adjustment and continual redefinition of tasks; ■ a network structure of control, authority and communication; ■ lateral consultation based on information and advice rather than instructions and decisions; ■ commitment to the work group and its tasks; ■ importance and prestige being determined by an individual’s contribution to the tasks of their work group rather than their position in the hierarchy. As can be seen, Burns and Stalker neither reject nor accept what went before. Instead, they argued that both the Classical approach and the Human Relations approach can be appropriate, but that this depends on the nature of the environment in which the organi- sation is operating. In this respect, they not only built on the past rather than rejecting it, but also restored some responsibility to managers. Instead of being called on to adopt blindly the orthodoxy with regard to structure, managers would in future have to assess their organisation and its needs, and then adopt the structure and practices suitable to its situation (Child, 1984; Mullins, 1989; Scott, 1987).
  • 86. The Contingency Theory approach 73 ■ Paul Lawrence and Jay Lorsch: the case for environment continued Burns and Stalker’s findings on the relationship between organisational environment and structure were examined and developed by a number of researchers in Europe and the USA. One of the most significant pieces of work was that carried out by Lawrence and Lorsch (1967) in the USA. Their work went beyond that of Burns and Stalker, in that they were interested not only in the relationship between environment and a company’s overall structure, but also how individual departments within com- panies responded to, and organised themselves to cope with, aspects of the external environment that were of particular significance to them. They undertook a study of six firms in the plastics industry, followed by a further study of two firms in the con- tainer industry and two in the consumer foods industry. The structure of each of the firms was analysed in terms of its degree of ‘differentiation’ and ‘integration’. Differentiation refers to the degree to which managers and staff in their own func- tional departments see themselves as separate and have distinct practices, procedures and structures from others in the organisation. Integration refers to the level and form of collaboration that is necessary between departments in order to achieve their indi- vidual objectives within the environment in which the firm operates. Therefore, differentiation is the degree to which departments are distinct from each other, whilst integration refers to the degree to which they have common structures, procedures, practices and objectives at the operational level. Generally, the greater the interde- pendence among departments, the more integration is needed to coordinate their efforts in the best interests of the organisation as a whole; this may not always be easy to achieve, however. In a rapidly changing environment, the conditions faced by individual departments may differ greatly, and a high degree of differentiation may be necessary. In such a situation, the need for integration is also likely to be great, but the diversity and volatility of the environment are likely to make this difficult to achieve (Cummings and Huse, 1989). In their study of the plastics industry, Lawrence and Lorsch (1967) found clear dif- ferentiation between key departments such as research, production and sales. Research departments were more concerned with long-term issues and were under pressure to produce new ideas and innovations. These departments, in Burns and Stalker’s terminology, tended to adopt an Organic form of structure. Production departments on the other hand were, for obvious reasons, concerned with short-term performance targets relating to output, costs, quality and delivery. Such departments tended to operate in a fairly stable environment and had Mechanistic structures. Sales departments tended to fall in between research and production in terms of environ- ment and structure. They operated in a moderately stable environment and were concerned more with getting production to meet deliveries than with long-term issues. Whilst highlighting the degree of differentiation between key departments, the study also found that the degree of integration was critical to a firm’s overall perform- ance. Indeed, the two most successful firms in their sample were not only amongst the most highly differentiated, but also had the highest degree of integration. These find- ings were confirmed by their studies of the container and consumer foods industries, which showed that differentiation and integration in successful companies varies with the demands of the environment in which they operate. The more diverse and dynamic the environment, the more the successful organisation will be differentiated
  • 87. 74 Chapter 2 · Developments in organisation theory and highly integrated. In a more stable environment, the pressure for differentiation is less, but the need for integration remains. Therefore, Lawrence and Lorsch found that the most effective organisations had an appropriate fit between the design and coordi- nation of departments and the amount of environmental uncertainty they faced. The most successful firms, however, were the ones that, whilst operating in an environ- ment that required a high level of differentiation, also managed to achieve a high level of integration. Clearly, in a situation where departments have dissimilar structures, practices and procedures, achieving integration is not easy or conflict-free. Indeed, in such situa- tions, organisational politics can be rife. Lawrence and Lorsch found that the effective firms avoided such a situation by openly confronting conflict, and by working prob- lems through in the context of the overall needs of the organisation. In addition, in firms that dealt successfully with conflict, the success of those responsible for achiev- ing integration was based mainly on their knowledge and competence rather than their formal position. This was because their colleagues in the different departments respected and responded to their perceived understanding of the issues involved. It follows that to achieve high levels of integration and differentiation, an organisation cannot rely solely on the formal managerial hierarchy. This must be supplemented with liaison positions, task forces and teams, and other integrating mechanisms. As with Burns and Stalker, Lawrence and Lorsch did not reject the Classical and Human Relations approaches per se, but instead saw them as alternative options, depending on the environment in which an organisation operates. In looking at the internal operations of organisations in this way, Lawrence and Lorsch raised the issue of dependence as well as uncertainty. This was a subject that James Thompson tack- led in greater depth. ■ James Thompson: environmental uncertainty and dependence Thompson’s (1967) influential work took the environmental perspective forward in three important ways. The first was to argue that although organisations are not rational entities, they strive to be so because it is in the interests of those who design and manage the organisation that its work be carried out as effectively and efficiently as possible. In order to achieve this, organisations attempt to insulate their productive core from the uncertainty of the environment. However, it is not possible to seal off all, or perhaps even any, parts of an organisation, given that it must be open to and interact with its environment if it is to secure resources and sell its products. This leads on to Thompson’s second major contribution: different levels of an organisation may exhibit, and need, different structures and operate on a more rational or less rational basis. Thompson’s third contribution was to recognise that organisational effectiveness was contingent not only on the level of external environmental uncer- tainty, but also on the degree of internal dependence present. This echoes Lawrence and Lorsch’s argument for integration and differentiation; however, Thompson made this point much more explicitly and related it to different structural forms. He formu- lated a three-type classification in relation to internal dependence: ■ Pooled interdependence – where each part of an organisation operates in a rela- tively autonomous manner, but by fulfilling their individual purposes they enable the organisation as a whole to function effectively.
  • 88. The Contingency Theory approach 75 ■ Sequential interdependence – where the outputs from one part of an organisation constitute the inputs for other parts of the system. ■ Reciprocal interdependence – where overall effectiveness requires direct interaction between an organisation’s separate parts. Thompson went on to argue that the type of interdependence could be related to the degree of complexity present: simple organisations rely on pooled interdependence; more complex organisations demonstrate both pooled and sequential interdependence; and in the most complex organisations, all three forms of interdependence may be present. Thompson envisaged that each form of interdependence would require dis- tinct methods for coordinating activities. Pooled interdependence would be characterised by standardisation through the use of rules and procedures. Sequential interdependence would require the use of detailed plans and written agreements, whilst reciprocal interdependence would achieve coordination by means of personal contact and informal agreements between members of those parts of the organisation involved. Therefore, in a nutshell, Thompson’s main arguments are as follows: ■ Different sections of an organisation will be characterised by varying levels of com- plexity, rationality and formalisation, depending on the extent to which managers can shield them from the level of uncertainty present in the environment. ■ The higher both the overall level of uncertainty and that faced by each area of an organisation, the greater will be the dependence of one area on another. ■ As this interdependence increases, coordination through standardised procedures and planning mechanisms will become less effective and the need for more personal contact and informal interaction will grow. ■ The more that coordination is achieved through mutual reciprocity in this manner, the less rational will be the operation of the organisation. Thompson’s work is of seminal importance in the development of organisation theory, not only because of the case he made for linking external uncertainty to inter- nal dependence, but also, as a number of writers have observed (see Robbins, 1987; Scott, 1987), because of the attention he drew to the fact that technology can influ- ence organisation structures as well as environmental factors. Thompson’s contribution in this respect lay in creating a classification scheme for technology, and arguing that technology determines the selection of the specific structural arrange- ments for reducing the effect of uncertainty on the various functions of an organisation. The issue of technology and structure had been raised earlier in a major study by Joan Woodward published in 1965. ■ Joan Woodward: the case for technology In the 1960s, Joan Woodward carried out a major study of 100 UK manufacturing firms in south-east Essex, in order to establish the validity of the claims made by advocates of the Classical approach that the adoption of a bureaucratic-mechanistic structure was essential for organisational success (Woodward, 1965, 1970). After much work, Woodward concluded that no such correlation existed; what she found, however, was that the more successful companies adopted an organisational form that varied according to their main production technology. By technology, Woodward
  • 89. 76 Chapter 2 · Developments in organisation theory meant not only the machinery being used, but also the way it was organised, operated and integrated into a distinct production process. From her sample, she identified three distinct types of production technology, ranging from least to most complex: ■ Small batch (or unit) production – where customers’ requirements were for one-off or small-volume specialist products. ■ Large batch (or mass) production – where standardised products were made in large numbers to meet a forecast demand. ■ Process production – where production was in a continuous flow, such as an oil refinery. When the firms were grouped in this manner, a pattern emerged that showed that though they apparently differed considerably in terms of their organisational struc- ture, many of the variations for the more successful firms could be explained by reference to the technology employed. Among firms engaged in small batch produc- tion, the most appropriate structure appeared to be one with relatively few hierarchical levels and wide middle management spans of control. Woodward noted that technology became more complex as firms moved from small batch to large batch and finally process production. In turn, structures became taller and more nar- rowly based, with smaller middle management and larger chief executive spans of control. Within each category of technology, the best-performing companies were those closest to the median in the type of structure adopted. Therefore, Woodward’s work clearly established a link between technology, structure and success which ran counter to the notion that there was a ‘one best way’ for all organisations. Though qualified by later studies (see Child, 1984; Handy, 1986; Smith et al, 1982), Woodward’s research remains a milestone in the development of Contingency Theory. In particular, she demonstrated the need to take into account technological variables in designing organisations, especially in relation to spans of control. Nevertheless, a major drawback of her work was the difficulty of applying it to non- manufacturing companies. This was remedied by the work of Charles Perrow. ■ Charles Perrow: the case for technology continued In the USA, Charles Perrow (1967, 1970) extended Joan Woodward’s work on technology and organisation structure by drawing attention to two major dimensions of technology: ■ the extent to which the work being carried out is variable or predictable; ■ the extent to which the technology can be analysed and categorised. The first, variability, refers to the incidence of exceptional or unpredictable occur- rences, and the extent to which these problems are familiar and can be easily dealt with, or are unique and difficult to solve. For example, an oil refinery should experi- ence few non-routine occurrences, whilst an advertising agency will encounter many unpredictable and exceptional occurrences. The second major dimension, analysis and categorisation, refers to the extent to which the individual task functions can be broken down and tightly specified, and also whether problems can be solved by recourse to recognised, routine procedures or if non-routine procedures have to be invoked. Bringing these two major dimensions of technology together, Perrow con-
  • 90. The Contingency Theory approach 77 structed a technology continuum ranging from routine to non-routine. With the latter, there are a large number of exceptional occurrences requiring difficult and varied problem-solving techniques to overcome them. Routine technology, on the other hand, throws up few problems, which can be dealt with by recourse to standard, simple techniques. Perrow argued that by classifying organisations according to their technology and predictability (routine to non-routine) of work tasks, it is then possible to identify the most effective form of structure in any given situation or for any activity. Perrow’s routine–non-routine continuum can be equated with Burns and Stalker’s mechanistic and organic dimensions for organisation structures. In routine situations, where few problems arise and those that do are easily dealt with, a mechanistic structure is more effective because of the stable and predictable nature of the situation. In a dynamic and unpredictable situation, however, a more flexible, organic form of structure will be more effective in dealing with the non-routine and difficult problems that occur. By formulating his work in this manner (i.e. by combining technology and predictability) it became possible to apply it to non-manufacturing situations. Therefore, Perrow’s work both reinforced and extended Woodward’s case for recognising technology as a key situational variable to be taken into account when designing organisations. Nevertheless, whilst Perrow was developing his ideas, a further group of researchers were making the case for yet another ‘key’ contingency – size. ■ The Aston Group: the case for size Though there are many proponents of the case for organisational size being a key contingency (see Child, 1984; Robbins, 1987), perhaps the earliest and most ardent were a group of British researchers based at the University of Aston in Birmingham (who became known as the Aston Group). In the 1960s, they carried out a series of studies to examine and identify the relationship between different forms of organisa- tional structures and their determinants (see Pugh et al, 1969a, 1969b). The Aston Group began in the early 1960s by examining a sample of 87 companies, and, as the work developed, further samples were added to their eventually very impressive data- base. In analysing their results, the Aston Group found that size was the most powerful predictor of specialisation, use of procedures and reliance on paperwork. In effect, what they found was that the larger the organisation, the more likely it was to adopt (and need) a mechanistic (bureaucratic) structure. The reverse was also found: the smaller the organisation, the more likely it was to adopt (and need) an organic (flexible) structure. This was clearly a major finding. Not only did it support (at least in terms of larger organisations) Weber’s earlier work on bureaucracy, but it also struck a blow against those, such as Bennis, who saw bureaucracy as dysfunctional and dying. The work of the Aston Group, along with that of others such as Blau and Schoenherr (1971), who also argued that size is the most important condition affecting the structure of organi- sations, gave bureaucracy if not a new lease of life then, at least, a new lease of respectability. Bureaucracy, according to the Aston results, was both efficient and effective, at least for larger organisations; and, given the tendency for the average size of private-sector companies and public bodies to increase throughout the twentieth century, its applicability would grow.
  • 91. 78 Chapter 2 · Developments in organisation theory There are two explanations for the relationship between size and bureaucracy, both of which have similar implications for organisational efficiency and effectiveness. The first argues that increased size offers greater opportunities for specialisation – the Adam Smith argument, in effect. This will manifest itself in terms of greater structural differentiation and a high degree of uniformity amongst sub-units. In the first instance, this will make managerial coordination more difficult, especially with the emergence of functional autonomy. To counter this, senior managers will move to impose a system of impersonal controls through the use of formal procedures, stan- dardised reporting and control systems, the written recording of information, etc. The second argument reaches similar conclusions, by pointing out that the difficulty of directing ever larger numbers of staff makes it highly inefficient to continue to use a personalised, centralised style of management. Instead a more decentralised system, using impersonal control mechanisms, has to be adopted. The introduction of such a system inevitably leads to the expansion of the administrative core (the bureaucracy) in organisations (Child, 1984). As with all the Contingency theorists, those who argued for size as the key situational variable were not attempting to reinvent the ‘one best way’ approach for all organisa- tions. Rather they were rejecting it in favour of an approach that saw organisational performance as dependent upon the appropriateness of the organisation’s structure for its size. Therefore, like all the Contingency theorists, the Aston school adopted an approach which stressed that there is a ‘one best way’ for each organisation. ■ Contingency Theory: summary and criticisms The Contingency approach can be considered much more a cohesive school of thought than either the Classical or Human Relations approaches. It has three unify- ing themes: ■ organisations are open systems; ■ structure, and therefore performance, is dependent upon the particular circum- stances, situational variables, faced by each organisation; ■ there is no ‘one best way’ for all organisations. The attractions of Contingency Theory are obvious. First, it was in tune with the times in which it emerged – the 1960s and 1970s. This was a period of rapid eco- nomic and technological change, with a tendency towards much larger organisations, and a significant increase in domestic and international competition. In this situation, Contingency Theory offered a plausible explanation of not only why these events were causing problems for organisations, but also how to resolve them (Burnes, 1989). Second, on the surface at least, it was simpler to understand and apply than the Human Relations approach. Finally, whilst rejecting the Classical approach, it was, in the main, a rational approach, based on matching known structural options to identifiable contingencies – size, technology and environment. The approach to change management offered by Contingency Theory was, it fol- lows, similar to that of the Classical school. In a rational fashion, managers should collect and analyse data on the situational variables the organisation faces and match these to the appropriate structural option. The theory then implies that for employ- ees, faced with a plan for change based on such a ‘scientific’ approach, the only rational course of action is to accept the validity of the situation and cooperate with
  • 92. The Contingency Theory approach 79 managers to achieve the required structural changes. However, it is at this point – the attempt to apply Contingency Theory rationally and mechanically – that problems and drawbacks emerge which give rise to a number of major criticisms of this approach, the main ones being as follows: ■ Difficulty arises in relating structure to performance. A number of writers have pointed out that there is no agreed definition of ‘good performance’, and it therefore becomes difficult to show that linking structure to situational variables brings the benefits claimed (Hendry, 1979, 1980; Mansfield, 1984; Terry, 1976). Indeed, there are a wide range of factors other than structure which can influence performance, not least of which is luck. Davis and Star (1993) showed that seven of the twelve most profitable firms in the world are pharmaceutical companies, and that three of these are producers of anti-ulcer drugs. They conclude that the profitability of the pharmaceutical sector is attributable less to the nature of these organisations than to governments’ over-generosity – clearly a case of an industry that is in the right place at the right time. ■ Despite the length of time that Contingency Theory has been in circulation, there is still no agreed or unchallenged definition of the three key situational variables – environment, technology and size. The literature gives a wide and conflicting range of definitions of these, making it difficult not only to establish a link between them and structure, but also to apply the theory (Dastmalchian, 1984; Mullins, 1989; Pugh and Hickson, 1976; Robbins, 1987; Warner, 1984; Wood, 1979). ■ Whilst, as argued above, a relationship has been established between size and structure, it has proved difficult to show that this relationship has an appreciable impact on performance. Some researchers have suggested that the link between size and structure relates to preferred systems of control, which may have more to do with the political and cultural nature of organisations than any attempt to improve performance (Allaire and Firsirotu, 1984; Child, 1984; Mansfield, 1984; Pugh and Hickson, 1976; Salaman, 1979). ■ In examining the link between structure and contingencies, researchers use the organisation’s formal organisational structure for comparison purposes. Yet, as the Hawthorne Experiments showed, the actual operation of an organisation may depend more on the informal structures created by workers than the formal ones laid down by management. This was a point made by Woodward (1965) in her study of technology and structure. She noted that organisation charts failed to show important relationships that, taken together, can have a significant impact on performance (Argyris, 1973; Burawoy, 1979; Selznick, 1948). ■ Structure and associated practices and policies may be strongly influenced by exter- nal forces (Mullins, 1993). In the UK, privatised utilities are subject to regulation and face restrictions that have a significant influence on how they are structured and operate. Similarly, in the UK, financial service organisations are required to establish ‘Chinese walls’ between different parts of their business to avoid market- sensitive information being passed from one area to another. ■ Rather than managers being the virtual prisoners of organisational contingencies when making decisions regarding structure, the reverse may be the case. Managers may have a significant degree of choice and influence over not only structure but also the situational variables. Whether this is called ‘strategic choice’ (Child, 1972), ‘organisational choice’ (Trist et al, 1963) or ‘design space’ (Bessant, 1983), the meaning is the same: those senior managers responsible for such decisions can
  • 93. 80 Chapter 2 · Developments in organisation theory exercise a high degree of freedom in selecting and influencing the technology to be used, the environment in which they operate and even the size of the organisation. Indeed, one of the architects of the technology-structure hypothesis, Charles Perrow, later claimed that technology is chosen and designed to maintain and rein- force existing structures and power relations within organisations rather than the reverse (Perrow, 1983). Other writers made the case for size and environment being manipulated in similar ways (Abell, 1975; Clegg, 1984; Hendry, 1979; Leifer and Huber, 1977; Lorsch, 1970). ■ It is assumed that organisations pursue clear-cut, well-thought-out, stable and com- patible objectives that can be fitted into a Contingency perspective. Researchers and practising managers argue that this is not the case, however – in fact, even two of the proponents of Contingency Theory, Lawrence and Lorsch (1967), high- lighted the presence and danger of conflicting objectives. In reality, objectives are often unclear, and organisations may pursue a number of conflicting goals at the same time. Clearly, the objectives of an organisation will impact on its situation and its structure. If these objectives are arbitrary, conflicting or open to managerial whim, it becomes difficult to apply a Contingency approach (Abodaher, 1986; Edwardes, 1983; Hamel and Prahalad, 1989; Mintzberg, 1987; Sloan, 1986). ■ The last criticism is that Contingency Theory is too mechanistic and deterministic, and ignores the complexity of organisational life. As argued by the Human Relations school, organisations are by no means the rational entities many would like to believe (a point also made by Thompson (1967) in his support of Contingency Theory). There is a need to see organisations as social systems, with all the cultural and political issues that this raises. In this view, structure is the product of power struggles between individuals and groups within the organisation, each arguing and fighting for their own perspective and position (Allaire and Firsirotu, 1984; Buchanan, 1984; Hickson and Butler, 1982; Morgan, 1986; Pfeffer, 1981; Robbins, 1987; Salaman, 1979). Therefore, despite its attractiveness, Contingency Theory, like the Classical and Human Relations approaches, fails to provide a convincing explanation for the way in which organisations do and should operate. Conclusions For organisations, if not for academics, the key purpose of any organisation theory or approach is to help them analyse and rectify the weaknesses and problems of their current situation, and to assist them in bringing about the changes necessary to achieve their future objectives. Over the past 100 years, the design and management of organisations has moved from an ad hoc process based on – at best – guesswork, to one that is highly complex and informed by a host of practical and theoretical con- siderations. To the uninitiated, it might appear that this has made running organisations an easier and more certain process; yet a close examination of most organisations will reveal that this is far from being the case. Not only are organisa- tions, in general, larger and more complex than in the past, but also the practical and theoretical reference points on which managers can draw are diverse and give con- flicting and confusing signals.
  • 94. Conclusions 81 Not surprisingly in such a situation, many managers look for simple, foolproof solutions: often ones that, as Douglas McGregor noted, appeal to their own basic ori- entation – whether that be Theory X or Theory Y. This is one of the reasons why the Classical approach, with its deep roots in the Industrial Revolution and its straight- forward mechanical approach to organisations and their members, has proved so enduring – despite strong evidence of its lack of suitability in many situations. This search for simple, often quick-fix, solutions to the problems of organisational life has been manifested in many ways in the last two decades, not least the emergence of a series of ‘panaceas’ such as new technology, human resources management, Total Quality Management, culture change, etc. This is not to deny the benefits these can bring but, taken on their own, at best they encourage a fragmented approach, and at worst they create an atmosphere of resignation within organisations as one ‘flavour of the month’ is succeeded by yet another, and none is given the time necessary to prove itself. Clearly, in such situations, without an overall, long-term plan, the result of these various ‘solutions’ is to make the situation worse rather than better (Burnes, 1991; Burnes and Weekes, 1989). Organisations clearly need to reject a short-term piecemeal approach, and instead see themselves in their totality and adopt a consistent and long-term approach. But which approach should they choose? We have seen in this and the previous chapter that well-thought-out and well-supported cases exist for a number of different approaches, but each has its drawbacks and critics. It may well be that each is capa- ble of assisting organisations to analyse and understand the strengths and weaknesses of their present situation. Whether they can provide more effective organisational arrangements for the future is more debatable, however. Similarly, it is not obvious how organisations should actually achieve the process of transformation. The Human Relations movement offers pertinent advice with regard to having clear objectives, good communication and leadership, but is less forthcoming on how change objectives should be set, and the concomitant changes planned and imple- mented. Contingency Theory though does give a procedure for setting objectives. It stresses the need to identify and analyse the situational variables an organisation faces in order to choose the most appropriate structure. However, it is also silent on the issues of planning and implementation, other than to imply that rational workers will accept rational propositions for change. In addition, even if organisations do manage to implement the recommendations of the Human Relations or Contingency advo- cates, it is not clear what degree of benefit they would derive from this, given the criticisms of these approaches. In short, neither of the approaches discussed in this chapter appears to be the solu- tion to all known organisational ills that their proponents seem to claim. They fail to reflect and explain the complexities of day-to-day organisational life that we all expe- rience. In particular, the issue of organisational culture (Allaire and Firsirotu, 1984) gets short shrift; yet, over the last two decades, its importance as both a promoter of and a barrier to organisational competitiveness has become apparent. Nor do they appear to take account of national differences and preferences, or for that matter pay regard to many of the wider societal factors that now impact on our lives, such as the need to show greater social responsibility, whether it be in the area of ‘green’ issues or equal opportunities. Yet, it is clear that enormous changes are already taking place in the world, and others may be necessary if some of the worst predictions for the future
  • 95. 82 Chapter 2 · Developments in organisation theory are to be avoided. The next chapter describes three new perspectives on organisa- tional life that, as the old approaches are perceived as inadequate, have become increasingly influential. Test your learning ■ Short answer questions 1 What were the main findings of the Hawthorne Experiments? 2 Describe Maslow’s hierarchy of needs. 3 Briefly discuss Theory X and Theory Y. 4 State Bennis’ reasons for declaring the ‘Death of Bureaucracy’. 5 Define the term ‘contingency’ as used by Burns and Stalker. 6 What are the respective attributes of Mechanistic and Organic structures? 7 How did Perrow define technology? 8 According to the Aston Group, size is the key contingency; state their case for this assertion. 9 For each of the following, briefly state its implications for organisational change: (a) Human Relations and (b) Contingency Theory. ■ Essay questions 1 In what ways can the Human Relations approach be said to be superior to the Classical approach? 2 In what manner can Contingency Theory be said to incorporate both the Classical and Human Relations approaches? Suggested further reading 1 Rose, M (1988) Industrial Behaviour. Penguin: Harmondsworth. Michael Rose gives an invaluable account of the development of the Human Relations movement and provides an interesting review of the work of Joan Woodward and the Aston Group. 2 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International Thompson Business Press: London. Michael Sheldrake also provides an excellent review of the lives and work of the key figures in the Human Relations movement. 3 Hendry, C (1979) Contingency Theory in practice, I. Personnel Review, 8(4), 39–44. Hendry, C (1980) Contingency Theory in practice, II. Personnel Review, 9(1), 5–11. Wood, S (1979) A reappraisal of the contingency approach to organization. Journal of Management Studies, 16, 334–54. Taken together, these three articles provide an excellent review of Contingency Theory.
  • 96. Chapter 3 In search of new paradigms Learning objectives After studying this chapter, you should be able to: ■ understand the reasons for the emergence of new organisational paradigms in the 1980s and 1990s; ■ describe the principal features of the Culture–Excellence approach; ■ list the core advantages and disadvantages of the Culture–Excellence approach; ■ describe the central elements of the Japanese approach to management; ■ understand the key advantages and disadvantages of the Japanese approach; ■ discuss the main features of organisational learning; ■ appreciate the chief advantages and disadvantages of organisational learning; ■ compare the similarities and differences between Culture–Excellence, organisational learning and Japanese management; ■ appreciate the implications for organisational change of these three paradigms.
  • 97. 84 Chapter 3 · In search of new paradigms Exhibit 3.1 Continuous improvement The sustainable business: continuous search for improvement FT Kaizen is a Japanese word usually translated as ‘con- popularised in Japan by the quality guru, Ishikawa tinuous improvement’. It is an important component Kaoru, and were eagerly adopted by many compa- of Japanese management techniques such as Total nies, Toyota among them. Quality Management (TQM), and was central to the Kaizen, as Sakichi said, is about constantly looking acclaimed Toyota Production System, developed for improvement, not just on the shopfloor but under the guidance of engineers such as Ohno across the company. Here an important defect in Taiichi and Shingo Shigeo in the three decades fol- Western understanding of the concept emerges. lowing the second world war. In the 1980s the Many Western managers continue to believe that concept was imported (some would say re- kaizen and, more generally, TQM, are primarily pro- imported) into the US and other Western countries, duction techniques; they have nothing to do with where it remains a widely discussed – if seldom fully other areas. But TQM as developed at Toyota was implemented – philosophy. all-embracing, including every department in the Kaizen was probably best expressed by an early company. Ultimately, as Tom Peters and Robert head of Toyota, Toyoda Sakichi (1867–1930), who Waterman noted in In Search of Excellence, the declared that no process could ever be declared per- quest for continuous improvement should dominate fect and there was always room for improvement. the mindset of managers and workers alike. They Sakichi was a deep thinker, influenced not only by need to search for improvement everywhere, and to Buddhist philosophy but also by Self-Help, the do so, they must learn as much as they can about manual written by the Victorian entrepreneur, their work and the environment in which it is done. Samuel Smiles, which was hugely popular around So the concept of the ‘learning organisation’ was the world. Both these influences suggested to born; a decade later, it had been worked out in Sakichi that while perfection would always remain detail by gurus such as Peter Senge and Arie de out of reach, in the process of striving for it, consid- Geus. The two concepts, the learning organisation erable good would result. and kaizen, can thus be seen as closely linked. Kaizen was introduced as a driving philosophy The learning organisation searches continuously behind improvements in both product and process, for new knowledge from which value can be cre- and ultimately it became embraced within the larger ated. Kaizen provides value through constant concept of TQM. In the former area, the early 1950s improvements in product and process quality, saw the introduction of American methods of statisti- adding value for the company and its customers. cal quality control (SQC), originally developed by Walter Shewhart at Bell Laboratories and introduced Now more than 50 years old, kaizen is coming back into Japan by two legendary figures, Joseph Juran into fashion. and W Edwards Deming. SQC techniques were also Source: Morgen Witzel, Financial Times, 19 August 2002, p. 9. Introduction Organisations have come a long way from the days when Henry Ford could famously declare: ‘A customer can have a car of any colour he wants, so long as it is black’ (Witzel, 2003a: 113). Nowadays, the boot is on the other foot; it is a case of con- sumers dictating to organisations that they should meet their ever-changing tastes, and woe betide the company that fails to meet them. This is why, as Exhibit 3.1 illus- trates, so much attention is now paid to continuous improvement. Indeed, such has been the change in attitudes in the past two decades that many now speak of organi- sations as having gone through a paradigm shift. If this is so, what do we mean by a
  • 98. Introduction 85 paradigm shift and what brought it about? Although he did not invent the word, it was the American philosopher of science Thomas Kuhn (1962) who, in his book The Structure of Scientific Revolutions, gave a new importance to the notion of ‘para- digms’. He defined a paradigm as a universally-recognised scientific achievement that over a period of time provides model problems and solutions to a community of prac- titioners. Kuhn was interested in how new ideas and frameworks for carrying out scientific work (i.e. paradigms) supplant old ones in the physical sciences. However, from the late 1960s onwards, a growing body of social scientists adopted the Kuhnian approach to their own disciplines with great enthusiasm. In the intervening period, as Burrell (1997) noted, new, varying, competing and controversial definitions of the term have been put forward. As far as its applicability to organisations is con- cerned, a paradigm can be defined as a way of looking at and interpreting the world; a framework of basic assumptions, theories and models that are commonly and strongly accepted and shared within a particular field of activity at a particular point in time (Collins, 1998; Mink, 1992; Reed, 1992). However, as situations change and people’s perceptions change, existing paradigms lose their relevance and new ones emerge. As Handy (1986: 389) noted: When Copernicus suggested that the earth was not at the centre of the universe he was, though he knew it not, a paradigm revolutionary. But it was the minds of men that changed, not the motions of the planets, and the way in which they now viewed that same universe had a profound effect on their beliefs, values and behaviour. In the previous two chapters we have discussed the paradigms that, in the West at least, have emerged and become common currency in the field of management and organisation theory. Though these paradigms have their adherents as well as critics, increasingly managers have experienced real difficulties in achieving competitive suc- cess when applying them in today’s turbulent, complex and diverse business world. In consequence, especially over the last two decades, both academics and practitioners have been searching for new recipes for organisational success. It was in the USA that the search for new paradigms first became apparent. It was the rise of Japanese industrial and economic might that forced American businesses to question what they did and how they did it, as Morgan (1986: 111) observed: During the 1960s the confidence and impact of American management and industry seemed supreme. Gradually, but with increasing force, through the 1970s the performance of Japanese automobile, electronic, and other manufacturing industries began to change all this. Japan began to take command of international markets ... The productivity gap between Japanese and American companies was starkly high- lighted in a Harvard Business Review article by Johnson and Ouchi (1974). The authors claimed that Japanese workers, assembling the same product using the same technology, were some 15 per cent more productive than their American counterparts. For an American audience this was a shocking statement, confirming the worst fears of a decline in the USA’s competitive edge over the rest of the world. Since the Second World War American manufacturers had grown accustomed to out-producing and out-performing every ▲
  • 99. 86 Chapter 3 · In search of new paradigms foreign competitor. The era of the Cold War had led Americans to believe that the only danger to their general security sprang from communism and specifically the Soviet Union. The notion that their comprehensively vanquished enemies and strategic clients, the Japanese, might be poised to overhaul them technically and even economically was unpalat- able, even unbelievable. (Sheldrake, 1996: 185) It was not only the USA that took fright; in the 1970s and 1980s, all over the Western world, businesses and governments too woke up to the Japanese challenge. Even West Germany, which prided itself on producing well-engineered and high-qual- ity products such as BMW and Mercedes cars, found that the Japanese were producing cars such as the Lexus that were not only half the price, but also better- engineered and of far superior quality (Williams et al, 1991). Nor was it just the Japanese challenge that frightened the West. The 1970s also saw the return of unemployment and inflation, both assumed to have been elimi- nated, and the occurrence of the two ‘oil shocks’, which highlighted most Western nations’ precarious reliance on imported energy. Therefore, old certainties were being challenged and new orthodoxies began to arise. Rather like Copernicus, Japan made the West see the world, and its place in it, from a new perspective. Organisations have become increasingly aware that in the last 20 years or so, the world has turned on its axis. The days of the mass production of standardised prod- ucts appear to be over; the key words for the future are variety, flexibility and customisation. As Perez (1983) and Freeman (1988) argued, a new techno-economic rationale is emerging. This new rationale has three main features: ■ A shift towards information-intensive rather than energy- or materials-intensive products. ■ A change from dedicated mass production systems towards more flexible systems that can accommodate a wider range of products, smaller batches and more frequent design changes – ‘economies of scale’ are being replaced by ‘economies of scope’. ■ A move towards the greater integration of processes and systems within companies and between suppliers and customers, which permits a more rapid response to market and customer requirements. These developments have been given a variety of names. In the 1970s, Daniel Bell (1973) heralded ‘The Coming of Post-Industrial Society’. In the 1980s, other writers spoke of the ‘post-Fordist’ or ‘post-Taylorist’ era (Whitaker, 1992). Increasingly, in the 1990s, the term ‘postmodernism’ was used to describe the changes taking place in the world in general and organisations in particular (Hassard, 1993). These terms, particularly the debate around postmodernism and its alternatives, will be discussed in Chapter 4. For now, however, what we need to recognise is that it is not necessarily that the nature of organisations themselves has changed fundamentally, though signif- icant changes in size, technology and complexity have certainly taken place. It is rather that, like those who listened to Copernicus, we are seeing their role in the established order from a different perspective and beginning to see new possibilities and new challenges. It is the emergence of these new possibilities and challenges that has motivated Western organisations to undertake a fundamental reassessment of their objectives and operations, rather than a mere change in fashion or managerial whim – though this is
  • 100. Introduction 87 obviously present as well (Huczynski, 1993; Kennedy, 1994). In effect, what we can see from the beginning of the 1980s is the emergence of a paradigm shift, or, to be more accurate, the search for new, more appropriate paradigms. It seemed as if the changes taking place in the business environment were so enormous and rapid that existing par- adigms, whatever their past merits, were breaking down and new ones emerging. In this chapter, we examine the three proto-paradigms that have come to dominate Western managerial thinking and writing over the last two decades: the Culture–Excellence approach, the Japanese Management approach and the Organisational Learning approach. As Exhibit 3.1 shows, there is a tendency to link them together or treat them as though they are largely the same. As this chapter will show, however, they are distinct approaches to running organisations with different origins and differing implications for management. Culture–Excellence arose as an attempt to counter Japanese competitiveness by drawing on and re-shaping the American and British traditions of individualism and free market liberalism. It emerged in the early 1980s, and its principal exponents (Tom Peters and Robert Waterman, 1982; Rosabeth Moss Kanter, 1989; and Charles Handy, 1989) have attempted both to predict and to promote the ways in which successful (excellent) companies will and should operate in the future. The Japanese Management paradigm is a very different animal. It has been devel- oped in Japan over the last 50 years, and not only is it being extensively practised there, but, at least until recently, its success was not disputed. Because of the success of the Japanese economy and Japanese companies in the 1960s, 1970s and 1980s, the Japanese approach attracted much interest in the West – a classic case of ‘if you can’t beat them, join them’. This was especially the case in the UK, where Japanese inward investment (by household names such as Honda, Nissan and Toyota) generated a great deal of debate regarding the impact and merits of ‘Japanisation’ (Ackroyd et al, 1988; Dale and Cooper, 1992; Hannam, 1993; Turnbull, 1986; Whitehill, 1991). This was also the case in the USA, where Japan and Japanese methods were seen, in turn, as either a threat or a lifeline to American industrial pre-eminence (Kanter et al, 1992; Pascale and Athos, 1982; Peters, 1993; Schonberger, 1982). The third approach, organisational learning, came to the fore in the early 1990s. Leading management thinkers, in particular Chris Argyris (1992), have been inter- ested in organisational learning for over 40 years. However, it is only in the last 15 years that the concept has become popularised as an engine for organisational competitiveness through the work of Senge (1990) in the USA and Pedler, Boydell and Burgoyne (1989) in the UK. One of the key benefits claimed for organisational learn- ing is that it is a universal approach which draws on and is consistent with both Western and Japanese organisational traditions (Hedlund and Nonaka, 1993; Probst and Buchel, 1997). Though the Culture–Excellence and Japanese approaches have some similarities, for example the resemblance between the Japanese passion for quality and the Culture–Excellence school’s fervent advocacy of the pursuit of excellence, the two also have significant differences, as will be shown. Whilst the Japanese approach has clearly influenced the Culture–Excellence thinkers, the influence of the latter in Japan has been small. The two may be competing approaches in the West, but certainly not in Japan. Nevertheless, both are dynamic and developing paradigms, with some common elements, and consequently a merging or a blending of the two in the West
  • 101. 88 Chapter 3 · In search of new paradigms is not beyond all possibilities. The organisational learning approach, though it draws on both Western and Japanese organisational traditions, is by no means an attempt to fuse or merge the Culture–Excellence and Japanese approaches. Instead, it represents yet another attempt to provide Western countries, particularly the USA, with an approach to managing organisations that will allow them in the twenty-first century to enjoy the sort of dominance they enjoyed for much of the twentieth century. Nevertheless, it will be argued in the conclusion to this chapter that, although these three proto-paradigms offer new possibilities, they also raise familiar controversies, not least regarding the role and treatment of people. Therefore, as the following dis- cussion of the three approaches will show, whilst attempting to become new paradigms, they still have to answer old questions. The Culture–Excellence approach Though predominantly a North American perspective, the Culture–Excellence approach has also found its adherents in Europe. Therefore, the examination of this approach will draw on the work of key writers from both sides of the Atlantic, namely Tom Peters and Robert Waterman, Rosabeth Moss Kanter and Charles Handy. The writers are all practising and internationally-recognised management con- sultants; Handy and Kanter are distinguished academics as well. Consequently, though their work is attempting to predict and promote the way firms will or should operate in the future, it is firmly based on what they believe the best companies are doing now or planning to do in the future. These three perspectives formed the spearhead of the movement that simultane- ously charted and created the new organisational forms that have begun to appear over the last 20 years. Their work – though both complementary and distinct – is of profound influence in shaping our understanding of what the future holds in the field of management. This work will now be examined in detail, starting with the American perspectives of Peters and Waterman, and Kanter, and concluding with Handy’s British perspective. ■ Tom Peters and Robert Waterman’s search for excellence Tom Peters has been, arguably, the most influential management consultant of the last two decades. His books sell in millions, his seminars fill auditoriums, and his newspa- per column is syndicated across the world. He is also said to be one of the highest-paid management consultants in the world, reputedly charging some US$25,000 per seminar back in 1987 (Huczynski, 1993). He catapulted to inter- national fame when he co-authored, along with Robert Waterman, In Search of Excellence: Lessons from America’s Best-Run Companies (Peters and Waterman, 1982), which is the best-selling management book of all time. It is difficult to overes- timate the impact this book has had. At a time when Western economies were on the rocks and Japanese companies appeared to be sweeping all before them, In Search of Excellence seemed to offer a way, perhaps the only way, for Western companies to regain their competitiveness (Crainer, 1995).
  • 102. The Culture–Excellence approach 89 Exhibit 3.2 The 7 S framework Strategy: plan or course of action for the allocation of scarce resources in order to achieve specified goals. Structure: the main features of the organisation chart and how the various parts of an organisation are linked. Systems: the organisation’s formalised procedures and processes. Staff: the composition of the workforce, i.e. engineers, managers, etc. Style: the behaviour of key managers and also the cultural style of the organisation. Shared values: the guiding concepts and meanings that infuse the organisation’s members. Skills: the distinctive capabilities possessed by individuals, groups and the organisation as whole. Source: Peters and Waterman (1982) The origins of the book lie in a major study of the determinants of organisational excellence, which Peters and Waterman carried out when working for the manage- ment consultants McKinsey and Company. They used the now-famous McKinsey 7 S Framework (see Exhibit 3.2), which they had developed jointly with Richard Pascale and Anthony Athos, to study 62 of America’s most successful companies. Peters and Waterman concluded that it was the four ‘soft’ Ss (staff, style, shared values and skills) that held the key to business success. In stressing the ‘soft’ Ss, they challenged the rational theories of management described in previous chapters. They argue that the rational approach is flawed because it leads to the following: ■ Wrong-headed analysis – situation or information analysis that is considered too complex and unwieldy to be useful. This is analysis that strives to be precise about the inherently unknowable. ■ Paralysis through analysis – the application of the rational model to such an extent that action stops and planning runs riot. ■ Irrational rationality – where rational management techniques identify the ‘right’ answer irrespective of its applicability to the situation in question. In the light of these criticisms, Peters and Waterman argue that the analytical tools that characterise the rational approach should only be used as an aid to, rather than a substitute for, human judgment. They believe that it is the freedom given to managers and employees to challenge the orthodox and to experiment with different solutions which distinguishes the excellent companies from the also-rans. In place of the rational approach, Peters and Waterman argue that there are eight key attributes that organisations need to demonstrate if they are to achieve excellence: 1 A bias for action. 2 Close to the customer. 3 Autonomy and entrepreneurship. 4 Productivity through people. 5 Hands-on, value-driven. 6 Stick to the knitting.
  • 103. 90 Chapter 3 · In search of new paradigms 7 Simple form, lean staff. 8 Simultaneous loose–tight properties. These are discussed in more detail below. 1 A bias for action One of the main identifiable attributes of excellent companies is their bias for action. Even though they may be analytical in approach, they also favour methods that encourage rapid and appropriate response. One of the methods devised for achieving quick action is what Peters and Waterman term ‘chunking’. Chunking is an approach whereby a problem that arises in the organisation is first made manageable (i.e. broken into ‘chunks’) and then tackled by a small group of staff brought together specifically for that purpose. The main reason for the use of such groups, variously called project teams, task forces or quality circles, is to facilitate organisational fluid- ity and to encourage action. Key characteristics of these groups are as follows: ■ They usually comprise no more than ten members. ■ They are voluntarily constituted. ■ The life of the group is usually between three and six months. ■ The reporting level and seniority of the membership is appropriate to the impor- tance of the problem to be dealt with. ■ The documentation of the group’s proceedings is scant and very informal. ■ These groups take on a limited set of objectives, which are usually determined, monitored, evaluated and reviewed by themselves. Chunking is merely one example of the bias for action that exists in excellent com- panies and reflects their willingness to innovate and experiment. These companies’ philosophy for action is simple: ‘Do it, fix it, try it.’ Therefore, excellent companies are characterised by small, ad hoc teams applied to solving designated problems which have first been reduced to manageable proportions. Achieving smallness is the key, even though the subject or task may be large. Smallness induces manageability and a sense of understanding, and allows a feeling of ownership. 2 Close to the customer Excellent companies really do get close to the customer, while others merely talk about it. The customer dictates product, quantity, quality and service. The best organ- isations are alleged to go to extreme lengths to achieve quality, service and reliability. There is no part of the business that is closed to customers. In fact, many of the excel- lent companies claim to get their best ideas for new products from listening intently and regularly to their customers. The excellent companies are more ‘driven by their direct orientation to the customers rather than by technology or by a desire to be the low-cost producer. They seem to focus more on the revenue-generation side of their services’ (Peters and Waterman, 1982: 197). 3 Autonomy and entrepreneurship Perhaps the most important element of excellent companies is their ‘ability to be big and yet to act small at the same time. A concomitant essential apparently is that they encourage the entrepreneurial spirit among their people, because they push autonomy
  • 104. The Culture–Excellence approach 91 markedly far down the line’ (Peters and Waterman, 1982: 201). Product champions are allowed to come forward, grow and flourish. Such a champion is not a blue-sky dreamer, or an intellectual giant. The champion might even be an ideal thief. But above all, the champion is the pragmatist; the one who latches on to someone else’s idea, and doggedly brings something concrete and tangible out of it. In fostering such attitudes, the excellent companies have what they label ‘champi- oning systems’, consisting of the following: ■ The product champion – a zealot or fanatic who believes in a product. ■ A successful executing champion – one who has been through the process of cham- pioning a product before. ■ The godfather – typically, an ageing leader who provides the role model for champions. The essence of this system is to foster, promote and sustain the budding entrepreneur. It is claimed that the three elements of the championing system are essential to its operation and credibility. Another key part of this system is that, in some companies, product champions tend to be allocated their own ‘suboptional divisions’. These are similar to small, independent businesses and comprise independent new venture teams, run by champi- ons with the full and total support of senior management. The suboptional division is independent in that it is responsible for its own accounting, personnel activities, qual- ity assurance and support for its product in the field. To encourage entrepreneurship further, teams, groups and divisions are highly encouraged by the companies’ reward structures to compete amongst themselves for new projects. Autonomy and entrepreneurship are also encouraged by the type of no-holds- barred communications procedures adopted by excellent companies. These exhibit the following characteristics: ■ Communication is informal – even though there are lots of meetings going on at any one time, most meetings are informal and comprise staff from different disci- plines gathering to talk about and solve problems. ■ The communication system is given both physical and material support – black- boards, flip-charts and small tables that foster informal small group discussions are everywhere. The aim is to encourage people to talk about the organisation: what needs changing; what is going on; and how to improve things around the place. There are also people, variously described as dreamers, heretics, gadflies, mavericks or geniuses, whose sole purpose is to spur the system to innovate. Their job is to institutionalise innovation by initiating and encouraging experimentation. They can also call on staff in other divisions of the organisation to assist them in this process, as well as having financial resources at their disposal. ■ Communication is intensive – given the freedom, the encouragement and the sup- port (financial, moral and physical) in the organisations, it is no wonder that the level of communication between and amongst workers is not only informal and spontaneous but also intense. This is borne out by the common occurrence of meetings without agendas and minutes. Also, when presentations are made in these meetings, questioning of the proposal is unabashed and discussion is free and open. Those present are expected to be fully involved in such meetings and there are no ‘sacred cows’ that cannot be questioned.
  • 105. 92 Chapter 3 · In search of new paradigms This intense communication system also acts as a remarkably tight control system, in that people are always checking on each other to see how each is faring. This arises out of a genuine desire to keep abreast of developments in the organisation rather than any untoward motive. One result of this is that teams are more prudent in their financial expenditure on projects. Another is that the sea of inquisitors act as ‘idea generators’, thereby ensuring that teams are not dependent entirely on their own devices to innovate and solve problems. This usually also ensures that all options are considered before a final decision is made. The concomitant result of this fostering of creativity is that senior management is more tolerant of failure, knowing full well that champions have to make many tries, and consequently suffer some failures, in the process of creating successful innovations. 4 Productivity through people A cherished principle of the excellent companies is that they treat their workers with respect and dignity; they refer to them as partners. This is because people, rather than systems or machines, are seen as the primary source of quality and productivity gains. Therefore, there is ‘tough-minded respect for the individual and the willingness to train him, to set reasonable and clear expectations for him, and to grant him practical autonomy to step out and contribute directly to his job’ (Peters and Waterman, 1982: 239). There is a closeness and family feeling in such companies; indeed many of the ‘partners’ see the organisation as an extended family. The slogans of such companies tend to reflect this view of people: ‘respect the individual’, ‘make people winners’, ‘let them stand out’, ‘treat people as adults’. 5 Hands-on, value-driven Excellent companies are value-driven; they are clear about what they stand for and take the process of value-shaping seriously. There is an implicit belief that everyone in the organisation, from the top to the bottom, should be driven by the values of the organisation; hence the great effort, time and money spent to inspire people by and inculcate them with these values: ... these values are almost always stated in qualitative, rather than quantitative, terms. When financial objectives are mentioned, they are almost always ambitious but never precise. Furthermore, financial and strategic objectives are never stated alone. They are always dis- cussed in the context of the other things the company expects to do well. The idea that profit is a natural by-product of doing something well, and not an end in itself, is almost always universal. (Peters and Waterman, 1982: 284) Implanting these values is a primary responsibility of the individual members of the management team. They set the tone by leading from the front. Coherence and homo- geneity must, however, first be created among senior management by regular meetings (both formal and informal). The outcome of this is that management speak with one voice. They are passionate in preaching the organisation’s values. They unleash excitement, not in their offices, but mainly on the shopfloor where the workers are. Inculcating these values, however, is a laborious process and persistence is vital in achieving the desired goal.
  • 106. The Culture–Excellence approach 93 6 Stick to the knitting Acquisition or internal diversification for its own sake is not one of the characteristics of excellent companies. They must stick to the knitting – do what they know best. But when they do acquire, they do it in an experimental fashion, by first ‘dipping a toe in the water’. If the water does not feel good, they get out fast. Acquisitions are always in fields related to their core activities and they never acquire any business that they do not know how to run. As a general rule, they ‘move out mainly through internally generated diversification, one manageable step at a time’ (Peters and Waterman, 1982: 279). 7 Simple form, lean staff A guiding principle in excellent companies is to keep things simple and small. Structurally, the most common form is the ‘product division’. This form, which is rarely changed, provides the essential touchstone that everybody understands and from which the complexities of day-to-day life can be approached. Since the use of teams, groups and task forces for specific projects is a common stock-in-trade of these companies, most changes in structure are made at the edges, such as by allocating one or two people to an ad hoc team. By adopting this approach, the basic structure is left in place, while all other things revolve and change around it. This gives these organi- sations great flexibility but still enables them to keep their structures simple, divisionalised and autonomous. Such simple structures only require a small, lean staff at the corporate and middle management levels. This results in there being fewer administrators and more doers: ‘ ... it is not uncommon to find a corporate staff of fewer than 100 people running a multi-billion-dollar enterprise’ (Peters and Waterman, 1982: 15). Therefore, in excel- lent companies, flat structures, with few layers, and slimmed-down bureaucracies – which together allow flexibility and rapid communication – are the order of the day. 8 Simultaneous loose–tight properties This is the ‘firm and free’ principle. On the one hand, it allows the excellent companies to control everything tightly, whilst on the other hand allowing and indeed encourag- ing individual innovation, autonomy and entrepreneurship. These properties are jointly achieved through the organisation’s culture – its shared values and beliefs. By sharing the same values, self-control and self-respect result in each person becoming their own, and everyone else’s, supervisor. The individual members of the organisation know they have the freedom, and are encouraged, to experiment and innovate. They also know that their actions will be scrutinised and judged, however, with the utmost attention paid to the impact they have on product quality, targets and, above all, the customer. The focus is on building and expanding the frontiers of the business. The ultimate goal is to be the best company, and in the final analysis, this is the benchmark against which the discipline and flexibility of the individual will be measured. Therefore, Peters and Waterman maintain that the main attributes of excellent companies are flat, anti-hierarchical structures; innovation and entrepreneurship; small corporate and middle management staffs; reward systems based on contribution rather than position or length of service; brain power rather than muscle power; and strong, flexible cultures.
  • 107. 94 Chapter 3 · In search of new paradigms Peters and Waterman’s vision of the organisation of the future, based on their study of leading American companies, has proved extremely influential, not only in the business world but in academia as well. This is not to say (as will be shown later) that they are without their critics; however, there is little doubt that they laid the groundwork, especially in highlighting the important role played by culture, for other leading thinkers whose work draws on and gels with theirs. Their vision of the future has not stood still. Peters formed his own consultancy, The Tom Peters Group, and has used this as a vehicle for developing and implementing the Culture–Excellence approach. Though not fundamentally changing his view of the need for excellent organisations, in Thriving on Chaos (Peters, 1989) he argued that none existed in the USA. In Liberation Management (Peters, 1993), he placed more emphasis on the need to break organisations into smaller, more independent, more flexible units. Only by doing this, he argued, would managers be ‘liberated’, and thus able to achieve their – and their organisation’s – full potential. In this book, Peters maintains that the age of the large corporations such as IBM and General Motors is over. He sees such companies as outmoded and uncompetitive dinosaurs, which are doomed to extinction unless they change rapidly and irreversibly. Peters argues that only rapid structural change can create the conditions for entrepreneurial cultures to emerge that both liberate managers and empower workers. Indeed, this book is noth- ing short of an out-and-out attack on the very existence of corporate America. The Circle of Innovation: You Can’t Shrink Your Way to Greatness (Peters, 1997a) is perhaps his most iconoclastic book. Even the format of the book is different from what has gone before. Indeed, its use of a multitude of different images, font types and font sizes and, in some cases, almost surreal page layouts, makes it more like a pop video than a traditional book. The message could not be clearer: just as this book is innovative in its format, so organisations must be innovative if they are to survive. His attack on present and past organisational practices, stability and any sense of per- manence is keener and more vitriolic than ever. Professionalism, rules, balance, propriety, logic and consensus are all outmoded concepts, he argues. Peters (1997a: 76) quotes Dee Hock, founder of the Visa Network, who said: ‘The problem is never how to get new, innovative thoughts into your mind, but how to get the old ones out.’ For Peters, organisational forgetting is far more important than organisational learn- ing. Future success, he argues, is not related to what an organisation has done in the past, nor what is bringing it success now, but how innovative they will be in identify- ing new products, services and markets. He makes a strong, almost messianic, plea for organisations to centre themselves on innovation. Peters argues that innovation demands obsession, tension, being provocative, and having no market peers looking over your shoulder. As firms achieve parity in terms of quality and costs, he believes that only a constant commitment to being different, to continuous innovation, will allow companies to differentiate themselves from their competitors. Just as quality was seen as everyone’s job in the 1980s, so Peters maintains that innovation must also become everyone’s job now. In terms of structure, organisations must adopt a net- work or even a virtual structure, where small groups and even individuals have the freedom to self-manage themselves, to make connections and break connections as they see fit. Indeed, the subtitle of this book could well be ‘Anarchy Rules!’ Whereas in In Search of Excellence, he and Robert Waterman put forward their eight attributes of excellence, this book is structured around his 15 points on The Circle of Innovation, which are:
  • 108. The Culture–Excellence approach 95 ■ Distance is dead. ■ Destruction is cool. ■ You can’t live without an eraser. ■ We are all Michelangelos. ■ Welcome to the white-collar revolution. ■ All values come from the professional services. ■ The intermediary is doomed. ■ The system is the solution. ■ Create waves of lust. ■ Tommy Hilfiger knows. ■ Become a connoisseur of talent. ■ It’s a woman’s world. ■ Little things are the only things. ■ Love all, serve all. ■ We’re here to live life out loud. Trying to follow Peters’ train of thought through his various books is like trying to catch mist – just when you think you have got it, it slips through your hands. Indeed, Peters (1997a: xv) takes pride in his inconsistency: ‘“They” call me inconsistent. I consider that a badge of honor.’ Originally he saw the pursuit of ‘excellence’ as the only way to save corporate America from annihilation by its Japanese competitors (and thus maintaining the USA as the premier industrial nation). Then, in Liberation Management, Peters (1993) argued that corporate America needed to be destroyed in order for America to survive. The message from The Circle of Innovation is that, with the business world in a permanent state of chaos, the only way for any organisation to survive is by constantly reinventing itself through a ceaseless process of innovation and change. Nevertheless, though he offers some new tools and techniques, and the tone of his work has become more strident and zealot-like over the years, in essence he is still promoting the concepts first developed in In Search of Excellence. The market is not simply the final arbiter of success, but the only arbiter. Meeting the ever-increasing appetite for instant gratification is the only way to survive. Innovation, i.e. autonomy and entrepreneurship, is now the prime attribute of excellence and the only guarantee of success. Peters’ (1997a: 493) view of how organisations should be run is, perhaps, best summed up by a quotation he cites from the racing driver Mario Andretti: ‘If things seem under control, you’re just not going fast enough.’ ■ Rosabeth Moss Kanter’s post-entrepreneurial model Kanter is one of America’s leading management thinkers. As well as being a professor at the Harvard Business School and a former editor of the Harvard Business Review, she is also a leading and influential management consultant with her own company, Goodmeasure Inc., reputedly charging some $17,000 per hour for her services in 1987 (Huczynski, 1993). Her early work concerned Utopian communities, such as the Shakers, but she then went on to study business organisations. Kanter first came to prominence with her (1977) book, Men and Women of the Corporation. This was an intensive examination of corporate America, which she saw as bureaucratic,
  • 109. 96 Chapter 3 · In search of new paradigms unimaginative and uninspiring. In her next book, The Change Masters (Kanter, 1983), she offered her personal recipe for overcoming what she saw as the malaise and lack of competitiveness of the USA. The book painted corporate America as being in transition; it recognised that the corporatism of the past no longer worked, but was not sure where the future lay. Kanter (1983) argued that it lay in American and not Japanese ideas, and particularly in unleashing individual dynamism through empowerment and greater employee involvement. Though her earlier books were clearly in tune with Peters and Waterman’s work, it is Kanter’s (1989) When Giants Learn To Dance: Mastering the Challenges of Strategy, Management, and Careers in the 1990s that most complements and develops their work by attempting to define what organisations need to be like in the future if they are to be successful. Kanter called for a revolution in business management to create what she termed post-entrepreneurial organisations. She used this term: ... because it takes entrepreneurship a step further, applying entrepreneurial principles to the traditional corporation, creating a marriage between entrepreneurial creativity and corpo- rate discipline, cooperation, and teamwork. (Kanter, 1989: 9–10) Kanter maintained that: If the new game of business is indeed like Alice-in-Wonderland croquet, then winning it requires faster action, more creative manoeuvring, more flexibility, and closer partnerships with employees and customers than was typical in the traditional corporate bureaucracy. It requires more agile, limber management that pursues opportunity without being bogged down by cumbersome structures or weighty procedures that impede action. Corporate giants, in short, must learn how to dance. (Kanter, 1989: 20) She argues that today’s corporate elephants need to learn to dance as nimbly and speedily as mice if they are to survive in our increasingly competitive and rapidly- changing world. Companies must constantly be alert and on their guard, and keep abreast of their competitors’ intentions. By evaluating the response of modern organi- sations to the demands placed upon them, Kanter produced her post-entrepreneurial model of how the organisation of the future should operate. She sees post-entrepre- neurial organisations as pursuing three main strategies: 1 Restructuring to find synergies. 2 Opening boundaries to form strategic alliances. 3 Creating new ventures from within: encouraging innovation and entrepreneurship. These are detailed below. 1 Restructuring to find synergies Synergy occurs where the whole adds up to more than the sum of its constituent parts. In an age where resources are scarce, one of the priorities of organisations is to make every part of the business add value to the whole. The essence of this approach is to identify and concentrate on the core business areas and to remove all obstacles and impediments to their efficient and effective operation. Therefore, all non-core activities are eliminated, and authority is devolved to the appropriate levels of the
  • 110. The Culture–Excellence approach 97 business: those in the front line. In practice this means selling off a company’s non- core activities and ensuring that what remains, especially at the corporate and middle management levels, is lean and efficient. Nevertheless, it is not sufficient merely to have a strategy of reducing the size of the organisational bureaucracy. Companies must also ensure that the essential tasks that these people previously carried out are still undertaken. This can be accomplished in a number of ways, such as the use of computers to carry out monitoring and information-gathering; devolving greater responsibility and power down to individual business units; and contracting out serv- ices and tasks previously carried out in-house. The result is to create flatter, more responsive and less complex organisations that have a greater degree of focus than in the past. Kanter argues that such radical changes need to be well planned, however, and executed with care and in a way that ensures that employee motivation is increased, not eliminated. 2 Opening boundaries to form strategic alliances With the slimming-down of the organisation and the contracting-out of some of its functions, there arises the need to pool resources with other organisations; to band together to exploit opportunities and to share ideas and information. These alliances take three forms: service alliances, opportunistic alliances and stakeholder alliances. The first, a service alliance, is where two or more organisations form a cross- company consortium to undertake a special project with a limited lifespan. Such alliances are usually considered when the resources of the various partners are insuffi- cient to allow them to undertake the project by themselves. For this reason, and not surprisingly, many such alliances involve research and development (R&D) projects. The collaboration between Ford and General Motors on research into the develop- ment of new materials for making cars is an example of this. This approach allows organisations to mobilise resources, often on a large scale, whilst limiting their expo- sure and protecting their independence. It is the limited purpose of the consortium that makes it possible even for competitors to join together for their mutual benefit. The second form, an opportunistic alliance, comprises a joint venture whose aim is to take advantage of a particular opportunity that has arisen: ‘ ... the two principal advantages behind this kind of alliance are competence-enhancing ones: technology transfer or market access or both’ (Kanter, 1989: 126). An example of such an alliance was the link-up between the Rover Group and Honda Motors; the former gained access to Japanese know-how, whilst the latter gained greater access to the European market. However, as Kanter (1989: 126) pointed out, such alliances are not always equally beneficial: ‘ ... once one of the partners has gained experience with the competence of the other, the alliance is vulnerable to dissolution – the opportunity can now be pursued without the partner.’ The third form, a stakeholder alliance, unlike the previous two, is seen as a continu- ing, almost permanent partnership between an organisation and its key stakeholders, generally considered to be its employees, customers and suppliers. There is a growing awareness among employees, trade unions and management of the need to see each other as partners in the same enterprise rather than rivals. A similar case is made for treating customers and suppliers as partners too. The main reason for the organisation to exist is to serve its customers; therefore, there is a need to keep close to them, not only to be aware of their present concerns and future needs, but also to gain ideas
  • 111. 98 Chapter 3 · In search of new paradigms regarding potential joint product development. In the same way, the organisation relies on its suppliers, who will in any case want to get closer to them as their customers. Stakeholder alliances have gained a growing band of adherents in Britain in recent years, especially, though not exclusively, amongst Japanese companies such as Nissan Motors (Partnership Sourcing Ltd, 1991a; Wickens, 1987). As Kanter points out, major innova- tions in technology and organisational systems require longer-term investments. Companies can only enter into such investments if they are secure in the knowledge that their key stakeholders are themselves committed to the same aims and approach. The result of these alliances is that structures and positions within organisations will change, sometimes quite dramatically. This is especially the case amongst senior and line managers, but even previously protected groups – such as R&D specialists – will also see their roles and responsibilities change. They will have to work more closely not only with colleagues internally, but also with external groupings. 3 Creating new ventures from within – encouraging innovation and entrepreneurship Traditional organisations face a difficult balancing act between gaining the full bene- fits from existing mainstream business, and, at the same time, creating new activities that will become the mainstream business of the future. Kanter argues that there is a feeling in many traditional companies that opportunities are being missed owing to their inability to give staff the flexibility to pursue new ideas and develop new prod- ucts. The job of creating new products or ventures used to be the sole domain of the strategic planners or the R&D departments. However, in the post-entrepreneurial organisation, this will no longer be the case: innovation will move from these spe- cialised domains to the centre stage. As the case studies in Part 3 will show, some organisations are deliberately forming new, independent units or entirely restructuring themselves to nurture innovation and entrepreneurship. New cultures are being cre- ated which encourage and aid innovation, and old barriers and restrictions are being eradicated. As a result of such changes, the innovative potential of employees is being tapped, and a proliferation of new ideas, products and ways of working is emerging. ■ The consequences of the post-entrepreneurial model There is no doubt that the post-entrepreneurial model carries profound implications for both organisations and their employees. However, Kanter, unlike Peters and Waterman, does not see these new developments as being an unalloyed blessing, espe- cially in the case of employees. In particular, she draws attention to three areas where the changes will have a major impact on employees: reward systems; career paths and job security; and lifestyle. Reward systems Employers and employees will increasingly come to look for new and more appropriate ways of rewarding and being rewarded. Indeed, with the advent of performance-related pay, in both the private and public sectors, there is already a gradual change from deter- mining pay on the basis of a person’s position and seniority to basing it on their contribution to the organisation. These changes are being driven by four main con- cerns: cost, equity, productivity and entrepreneurial pressure (see Exhibit 3.3).
  • 112. The Culture–Excellence approach 99 Exhibit 3.3 Drivers for changes to reward systems Cost – the concern is that the present system is too expensive for companies that must conserve resources to be competitive. Equity – organisations are concerned to ensure that employees are fairly rewarded for their efforts. Productivity – organisations want to adopt reward systems that motivate high performance from employees. Entrepreneurial pressure – companies are aware that the present system does not always adequately reward entrepreneurs for their efforts. Source: taken from Kanter (1989) These concerns are being approached through the application of three different, though not necessarily mutually exclusive, payment methods. The first is profit-sharing, whereby the pay of the employee is pegged to a company’s performance. This means that salaries are not fixed but instead are related, by the use of a predetermined for- mula, to the profit of the organisation over a given period of time, usually the previous financial year. The second method is the use of individual performance bonuses, which are paid on top of basic salary and are related to a predetermined performance target. This method has the advantage of enabling individuals to establish a direct correlation between their personal effort and the bonus payment they receive. Though this method is not new, the sums involved are – sometimes as much as twice basic salary. The last is the venture returns method, which represents perhaps the most radical break with the past. This is a scheme whereby entrepreneurs and inventors within an organisation are given the opportunity to earn returns based on the performance, in the market place, of the particular products or services for which they are responsible. Through this mecha- nism, the entrepreneur or inventor remains within the corporate fold but is paid on a similar basis to the owner of a small, independent business. The advantage is that they get the personal satisfaction and reward of running their ‘own’ business, whilst the larger organisation benefits from having highly-motivated and innovative people in charge of part of its operations. The picture created by new reward systems is not, of course, totally rosy. Where there are winners, there may also be losers; not everyone will have the opportunity or drive to be an entrepreneur, or will be in a position that lends itself to some form of bonus system. Also, many people who currently benefit from reward systems based on seniority and position may find they lose out. Older workers, established in organ- isations and well down their chosen career path, could be particularly adversely affected by such changes. In addition, such payment systems may be divisive and create conflict. Kanter stresses the need for teamwork, yet a situation where some members of the team are receiving high bonuses is bound to create tensions which undermine cooperation and collaboration. It may be that profit-sharing schemes, which encompass everyone in the organisation, overcome this threat to teamworking, but if everyone receives the same share of the profits irrespective of their individual contribution, the motivating effect is likely to be diminished. The result of these vari- ous approaches to pay could be minimal in terms of motivation, or could even be demotivating and indeed drive out the most experienced people in the organisation.
  • 113. 100 Chapter 3 · In search of new paradigms Careers and job security As organisations have become slimmer and more tasks are contracted out, organisa- tion structures are becoming flatter as entire layers of hierarchy are dispensed with. The resultant effect threatens the demise of traditional forms of career path. Kanter argues that the idea of staying with one organisation and climbing the corporate career ladder is being replaced by hopping from job to job, not necessarily in the same organisation. Therefore, instead of people relying on organisations to give shape to their career, in future the onus will be on individuals to map out and pursue their own chosen route. This change is also affecting skill development in organisations. It will no longer be sufficient just to be skilled in a particular job or specialism, because these will cer- tainly change over time or even entirely disappear. Increasingly, individuals are finding that the concept of job security is being replaced by ‘employability security’ – the ability to adapt and enhance one’s skills so as to be able to perform well in differ- ent types of jobs and organisations. Careers, therefore, are being shaped by professional and entrepreneurial principles: the ability to develop and market one’s own skills and ideas, rather than by the sequence of jobs provided by one company. People will join organisations or accept particular jobs not, as in the past, because of job security or career progression, but in order to develop their skills, add to their knowledge and enhance their future employability. Kanter argues that: ... what people are increasingly working to acquire is the capital of their own individual rep- utation instead of the organisational capital that comes from learning one system well and meeting its idiosyncratic requirements. For many managers, it might be more important, for example, to acquire or demonstrate a talent that a future employer or financial investor might value than to get to know the right people several layers above in the corporation where they currently work. (Kanter, 1989: 324) Having painted this picture, it must also be acknowledged that there are contradic- tions and dilemmas that need to be resolved. What is being created are organisations and cultures that facilitate innovation and entrepreneurship, and change and flexibil- ity. These will be organisations where employability and loyalty are transient concepts and what matters, almost exclusively, is the individual’s present performance rather than their past or potential future contribution. The two main dilemmas from the organisational perspective are, therefore, how to reconcile the above with their stated objective of treating employees as long-term partners, and how to motivate employees to work in the organisation’s interest rather than their own interest. This is an espe- cially pointed dilemma in the case of the champions and entrepreneurs on whom it is argued the future of organisations depends. This is because it is this group of highly marketable individuals who are most likely to see their careers in terms of many dif- ferent jobs and organisations. Workers’ lifestyle There are now many organisations where people have been given greater freedom to innovate and experiment, where there are strong financial rewards for increased per- formance levels and where people are given greater control over their area of the
  • 114. The Culture–Excellence approach 101 business. There is little doubt that in such situations people are expected, and indeed wish, to work longer hours and centre what social life they have around their work. Indeed, there is now much evidence that in most developed countries people are working longer hours then they did a decade ago (Kodz et al, 2003). To encourage this, many companies now provide key employees with ‘concierge’ services that do their shopping, find them plumbers, sort out their new car and even find them a new house and arrange the move. The purpose of this is, of course, to allow staff to focus more effectively on their job. Nevertheless, where there are benefits to the organisa- tion, there may also be disbenefits to the individual: The workplace as a centre for social life and the workmate as a candidate for marriage mate is, on one level, a convenience for overloaded people who have absorbing work that leaves little time to pursue a personal life outside. It is also an inevitable consequence of the new workforce demographics. But on another level, the idea is profoundly disturbing. What about the large number of people whose personal lives are not contained within the corridors of the corporation? What about the people with family commitments outside the workplace? (Kanter, 1989: 285) We already know the adverse cost that such work patterns can have on people’s phys- ical and mental health and on their family life. Indeed, there is now a growing tendency among senior managers of both sexes to give up work or move to less well- paid but less demanding jobs (downshifting) in order to spend more time with their families (Carvel, 2002; Frith, 2003). One particularly high-profile example of this in the UK was the decision in 2003 by the Minister of Health, Alan Milburn, to step down in order to spend more time with his children as they grow up. This ‘downshift- ing’ phenomenon may be the reason why Kanter believes unmarried or divorced executives are thought to be preferred to their married counterparts by some compa- nies because it is assumed they can focus more on their job given their lack of home life. Therefore, the line between motivation and exploitation may be a narrow one, and crossing it may benefit neither the individual nor the organisation. Much of Kanter’s work supports the view of Peters and Waterman in terms of the need for and direction of organisational change. Certainly, on the issues of innovation and entrepreneurship, culture and flexibility, and structure and jobs, there is much common ground. To an extent we might expect this, given that they are all writing from an American perspective, and basing their views on the experience and plans of leading American companies. Where they differ, however, is that Kanter takes a much more critical view of these developments. In particular, she draws attention to the contradiction that lies at the heart of the post-entrepreneurial model: are people – their skills, motivation and loyalty – central to the success of the organisation of the future, or are they just another commodity to be obtained and dispensed with as cir- cumstances and their performance require? Like Peters, Kanter has developed her earlier work but in a broader context. In The Challenge of Organizational Change, she and her co-authors (Kanter et al, 1992) turn their attention to the issue of managing change, and propose ‘Ten Commandments for Executing Change’ (see Exhibit 3.4). Looking at approaches to change, Kanter et al (1992) distinguished between ‘Bold Strokes’ and ‘Long Marches’. The former relate to major strategic decisions or
  • 115. 102 Chapter 3 · In search of new paradigms Exhibit 3.4 Ten Commandements for Executing Change 1. Analyse the organisation and its need for change. 2. Create a shared vision and a common direction. 3. Separate from the past. 4. Create a sense of urgency. 5. Support a strong leader role. 6. Line up political sponsorship. 7. Craft an implementation plan. 8. Develop enabling structures. 9. Communicate, involve people and be honest. 10. Reinforce and institutionalise change. Source: Kanter et al (1992: 382–3) economic initiatives. These, they argue, can have a clear and rapid impact on an organisation, but they rarely lead to any long-term change in habits or culture. The Long March approach, on the other hand, favours relatively small-scale and opera- tionally-focused initiatives that are slow to implement and whose full benefits are achieved in the long term rather than the short term. However, the Long March approach can impact on culture over time. Bold Strokes are initiatives taken by a few senior managers, sometimes only one; they do not rely on the support of the rest of the organisation for their success. The Long March approach, however, does. Without the involvement and commitment of the majority of the workforce, such ini- tiatives cannot succeed. Kanter et al argue that these can be complementary, rather than alternative, approaches to change, though in practice companies appear to favour one or the other. Nevertheless, companies may need both the Bold Stroke and the Long March if they are to succeed in transforming themselves. Kanter’s, unlike Peters’, works go far beyond the confines of the individual business enterprise to look at the workings of society as a whole. She co-authored a book, Creating the Future, with Michael Dukakis, the former Governor of Massachusetts (Dukakis and Kanter, 1988) and worked on his failed campaign for the US Presidency. The influence of Dukakis and successive Democrat administrations in Massachusetts can be seen in Kanter’s more recent book World Class: Thriving Locally in the Global Economy (Kanter, 1997). Here she argues that if local communities and regions are to achieve economic security, they must see themselves as competing bodies in a merci- lessly competitive global economy. Kanter paints a picture of the global economy as one where free enterprise reigns supreme and where goods, and many services, can be supplied from anywhere in the world. She points out that in the 1980s and 1990s, both blue- and white-collar American jobs were exported to whichever part of the world offered the lowest labour costs. Though supporting this example of the working of the free-enterprise system as being ultimately to everyone’s benefit, Kanter argues that if local communities and regions are to survive and prosper in such a fierce cli- mate, they must learn how to defend themselves. In particular, she argues for an
  • 116. The Culture–Excellence approach 103 interventionist local state which forms alliances with local private enterprises and manipulates the local economy. By creating a business-friendly taxation system and by the selective use of public expenditure for education and infrastructure projects, it can aim to attract and retain employers, especially large corporations. In Innovation: Breakthrough Thinking at 3M, DuPont, GE, Pfizer, and Rubbermaid (Kanter et al, 1997), Kanter returns to the internal world of the organisation and the tried and tested ground of the Culture–Excellence approach. The core arguments of the book are neatly summed up on the dust jacket, which states that inside you will discover: ■ Why it is impossible to approach innovation from a business school mentality. ■ Why investigations of any cost or size will fail if tied too tightly to current market- place needs. ■ Why managers must learn to operate more intuitively. ■ Why cross-functional teams are more productive than any other organisational configuration. ■ How fostering a competitive internal environment results in a healthy, creative ten- sion and hungry, entrepreneurial employees. These points are fleshed out by drawing upon the practices of the companies in the book’s title and the editors’ own, anecdotal, experiences. In a book whose Foreword is written by Tom Peters, it is not perhaps surprising that many of the arguments mirror those of Peters’ own book on innovation (Peters, 1997a). Indeed, the key thrust of the book is succinctly summed up in a phrase from Tom Peters’ (1997b) Foreword: ‘Tomorrow’s victories will go to the masters of innovation! Period!’ It speaks volumes for the credibility which the Culture–Excellence approach has achieved in the business world that, after nearly two decades, its two leading American proponents are still in agreement about what it takes to achieve success. In the next (and last) section on Culture–Excellence, we will examine the emer- gence of new organisational forms from the perspective of a leading British theorist: Charles Handy. ■ Charles Handy’s emerging future organisations Charles Handy is one of Britain’s leading management thinkers. Indeed, in a 1997 European league table of global management gurus, he was placed third; all the others in the top ten were American (Rogers, 1997). Handy was educated at Oxford University and the Sloan School of Management at the Massachusetts Institute of Technology. He has been an oil executive, an economist and a professor at the London Business School. He has also acted as a consultant to a wide range of organi- sations in business, government, the voluntary sector, education and health. Handy’s first book, Understanding Organizations, which was published in 1976, has become a standard text on management courses and is now in its fourth edition (Handy, 1993). However, the book that brought him to public prominence and where he first began to articulate his views about the future direction of organisations was The Future of Work (Handy, 1984). As with Kanter and Peters, his work was inspired by the rise of Japan and the apparent decline of the West. In particular, he was con- cerned with the high level of unemployment in the UK at that time. Handy argued that
  • 117. 104 Chapter 3 · In search of new paradigms if organisations were to survive and meaningful jobs were to be created for all those who wished to work, then both organisations and individuals would have to change the way they perceived jobs and careers. It was in his book The Age of Unreason (1989) that Handy fully articulated his views on the requirements for organisational success. He argued that profound changes were taking place in organisational life: The world of work is changing because the organisations of work are changing their ways. At the same time, however, the organisations are having to adapt to a changing world of work. It’s a chicken and egg situation. One thing, at least, is clear: organisations in both pri- vate and public sectors face a tougher world – one in which they are judged more harshly than before on their effectiveness and in which there are fewer protective hedges behind which to shelter. (Handy, 1989: 70) He asserted that British companies were fast moving away from the labour-intensive organisations of yesteryear. In future, new knowledge-based structures, run by a few smart people at their core who will control a host of equally smart computerised machines, will be the order of the day. Already, he noted, leading British organisations were increasingly becoming entities that received their added value from the knowledge and the creativity they put in, rather than from the application of muscle power. He contended that fewer, better-motivated people, helped by clever machines, could create much more added value than large groups of unthinking, demotivated ones ever could. Like Peters and Kanter, Handy believes that the emerging future organisations will be smaller, more flexible and less hierarchical. Similarly, he also believes that the new organisations will need to treat people as assets to be developed and motivated, rather than just so much industrial cannon fodder. However, he does not assume that the future will be without diversity in relation to the organisational forms that emerge. Unlike Peters and Waterman, and to a lesser extent Kanter, he recognises that compa- nies will continue to face differing circumstances and will need to respond in different manners. Therefore, instead of trying to re-establish a new ‘one best way’ for all organisations, with all the contradictions that arise from such attempts, Handy identi- fies three generic types of organisation that he argues will dominate in the future: 1 The Shamrock organisation. 2 The Federal organisation. 3 The Triple I organisation. These are detailed below. 1 The Shamrock organisation This form of organisation, like the plant of the same name with three interlocking leaves, is composed of three distinct groups of workers who are treated differently and have different expectations: a small group of specialist ‘core’ workers; a contrac- tual fringe; and a flexible labour force. The core workers are the first leaf, and the main distinguishing feature of the Shamrock form of organisation. These are a group of specialists, professional workers which form the brain, the hub or what we might call the ‘nerve centre’ of the organi- sation. These are people who are seen as being essential to the organisation. It is these few intelligent and articulate personnel in whose hands and heads reside the secrets of
  • 118. The Culture–Excellence approach 105 the organisation. They are both specialists and generalists, in that they run the organi- sation and control the smart machines and computers that have replaced, to a large extent, much of the labour force. This ‘ ... all puts pressure on the core, a pressure which could be summed up by the new equation of half the people, paid twice as much, working three times as effectively’ (Handy, 1989: 118–19). For their well-rewarded jobs, they are expected to be extremely loyal to the organi- sation, and to live and breathe their work. It is their responsibility to drive the organisation forward to ever greater success; to be flexible enough to meet the con- stantly-changing challenge of competitors and the equally changing and sophisticated needs of customers. Core workers operate as colleagues and partners in the organisa- tion, as opposed to superiors and subordinates. In a very real sense, it is their company, and as such they expect to be recognised and rewarded for their roles and achievements, rather than the position they occupy on the organisation’s ladder. It fol- lows that they are managed differently – by consent: asked and not told what to do. The contractual fringe is the second leaf of the Shamrock. A central feature of Shamrock organisations is their smallness in relation to their productive capacity. This is achieved by two methods: firstly, as mentioned above, by the use of machines to replace people; and secondly, by the contracting-out to individuals and other organisa- tions of services and tasks previously done in-house. This leads to the creation of a contractual fringe, who may or may not work exclusively for the company in question. They are contracted to carry out certain tasks, for which they are paid a fee based on results, rather than a wage based on time taken. The arguments put forward in favour of such arrangements are numerous, but tend to boil down to three main ones: ■ It is cheaper – companies only pay for what they get. ■ It makes management easier – why keep the people on the payroll with all the attendant human management problems if it is not necessary? ■ Workload balancing – when business is slack, it is the contractor who bears the impact of the reduced workload. The flexible labour force is the third and fastest-growing leaf of the Shamrock and comprises a pool of part-time workers available for use by organisations. These are people with relevant skills who are not in need of, or who cannot obtain, full-time employment, but who are prepared to work on a part-time basis. Increasingly, among this group of flexible workers are women who left their skilled jobs to raise families, but who are willing to return to work on a part-time basis, while still maintaining their child-rearing commitments. Included in this also is the growing army of young or retired executives, who prefer to hop from one job to another, doing bits and pieces of work on a part-time basis. These workers are some- times referred to as temps (temporaries) or casuals. The growth of this group can be measured by the proliferation of employment agencies, catering solely for these groups, which have been established in the United Kingdom since the early 1980s. However, the flexible workforce never ... have the commitment or ambition of the core. Decent pay and decent conditions are what they want, ... They have jobs not careers and cannot be expected to rejoice in the organisation’s triumphs any more than they can expect to share in the proceeds, nor will they put themselves out for the love of it; more work, in their culture, deserves and demands more money. (Handy, 1989: 80–1)
  • 119. 106 Chapter 3 · In search of new paradigms The picture, therefore, of the Shamrock organisation is one where structure and employment practices allow it to be big in terms of output, whilst being small in terms of the number of direct employees. For the latter reason, it is lean with few hierarchical layers and even less bureaucracy. It achieves this by the application of smart machines and a combination of part-time staff and subcontractors, whose work can be turned on and off as circumstances dictate. However, in a departure from past practice, the people involved may be highly skilled and competent. This also has the advantage of requiring much less office and factory accommodation than more tradi- tionally-organised companies. Other than the core staff, the rest are all scattered in different organisations or their own homes, often linked through sophisticated com- munication systems. Such organisations, with their flexibility and skills, are well-suited to the provision of high-performance products and services to demanding and rapidly-changing mar- kets. The beauty of it all, as Handy argues, is that they do not have to employ all of the people all of the time or even in the same place to get the work done. According to Handy, small is not only beautiful but also increasingly preferable. 2 The federal organisation This is the second type of generic organisation that Handy sees as becoming dominant in the future. He defines this type of organisation as a collection or network of individ- ual organisations allied together under a common flag with some shaped identity. Federations arise for two reasons. The first is that, as Shamrock organisations grow bigger, the core workers begin to find the volume of information available to them to make decisions increasingly difficult to handle. Secondly, they constitute a response to the constantly-changing and competitive environment of the business world. Modern organisations need not only to achieve the flexibility that comes from smallness, but also to be able to command the resources and power of big corporations. As Handy (1989: 110) puts it: It [Federalism] allows individuals to work in organisation villages with the advantages of big city facilities. Organisational cities no longer work unless they are broken down into vil- lages. In their big city mode they cannot cope with the variety needed in their products, their processes, and their people. On the other hand, the villages on their own have not the resources nor the imagination to grow. Some villages, of course, will be content to survive, happy in their niche, but global markets need global products and large confederations to make them or do them. Federalism, therefore, implies the granting of autonomy to Shamrocks. Autonomy requires that Shamrocks are headed by their own separate chief executives, supported by a team of core workers, who take full responsibility for running the company. In such situations the Shamrocks become separate, but related entities, under the umbrella of the Federal Centre. With the devolving of power to the Shamrocks, who still remain in the Federal portfolio, the Federal Centre is left to pursue the business of providing a common platform for the integration of the activities of the Shamrocks. The Federal Centre has the role of generating and collating ideas from the different Shamrocks and making them into concrete, achievable strategic objectives. Therefore, the Federal Centre is concerned mainly with the future; with looking
  • 120. The Culture–Excellence approach 107 forward, generating ideas, and creating scenarios and options of what the future will look like. All this is done with the ultimate aim of moving the organisation forward and keeping it ahead not only of its rivals, but also of its time. Another feature of the Federal organisation is what Handy refers to as the ‘inverted do’nut’. The do’nut is an American doughnut. It is round with a hole in the middle rather than the jam in its British equivalent ... This, however, is an inverted American do’nut, in that it has the hole in the middle filled in and the space on the outside; ... The point of the analogy begins to emerge if you think of your job, or any job. There will be a part of the job which will be clearly defined, and which, if you do not do, you will be seen to have failed. That is the heart, the core, the centre of the do’nut ... [but] ... In any job of any significance the person holding the job is expected not only to do all that is required but in some way to improve on that ... to move into the empty space of the do’nut and begin to fill it up. (Handy, 1989: 102) Through this approach, the Federal organisation seeks to maximise the innovative and creative potential of staff members. It does this by specifying the core job, the target and the quality standard expected of a given product or service. Outside of this specified domain, within the do’nut’s empty space, however, staff members are given enough room and latitude to challenge and question existing ideas, to experiment and to come up with new methods of doing things, and new products or services. The aim is to encourage enquiry and experimentation that lead to higher standards. It follows from this that the essence of leadership under a Federal system is to provide a shared vision for the organisation; one which allows room for those whose lives will be affected by it – either directly or indirectly – to modify it, ponder over it, expand it, accept it and then make it a reality. Leadership in such situations is about providing opportunities for staff to grow and test their potential to the limit. 3 The Triple I organisation This is the third of Handy’s new organisational forms, although in fact it comprises a set of principles rather than a structural model. From the above, it is clear that both Shamrock and Federal organisation types introduce new dimensions into the world of work. Traditional perspectives are being transformed, and the established criteria for judging organisational effectiveness are being re-evaluated. Issues such as the defini- tion of a productive contribution to work, reward systems, managerial skills and many more are being examined in the light of new management ideas. Indeed, according to Handy, we appear to be on the verge of a revolution in management thought and practice. An examination of the attributes of the core workers in both Shamrock and Federal organisations gives an indication of what will constitute the new formula for success and effectiveness in tomorrow’s companies. The core workers, as seen by Handy, use their Intelligence to analyse the available Information to generate Ideas for new prod- ucts and services. Thus we find that Handy’s first two organisational forms contain the seeds to produce his third form, the Triple I – organisations based on Intelligence, Information and Ideas. Since the three Is constitute the prime intellectual capital of the new organisations, clearly the Triple I principle applies most importantly to the core group of workers who are in a position to possess these attributes.
  • 121. 108 Chapter 3 · In search of new paradigms In future, it is argued, the equation for organisational success will be Triple I = AV, where Triple I = Intelligence, Information and Ideas, and AV = Added Value, either in cash or kind. This will be an organisation ‘obsessed with the pursuit of truth, or, in business language, of quality’ (Handy, 1989: 113). This will not depend solely on human ability but will be a combination of smart people and smart machines. Therefore, organisations of the future will increasingly have to (a) invest in smart machines to remain competitive and effective; (b) recruit skilled and smart people to control the machines; and (c) ensure that this group of skilled people is rewarded equitably. For the Triple I organisation to emerge and remain successful, it must keep the skills, knowledge and abilities of its staff up to date. This means that it must become a learning organisation; one that provides a conducive environment for the develop- ment of its intellectual capital. Time and effort must be consciously and officially devoted to learning and study, at all levels of the organisation. The core, especially, must spend more time than their equivalents in more traditional companies on think- ing and study: meeting with other external professionals and experts, going on study tours and listening more to ‘partners’ within the organisation, all with the objective of improving the organisation’s human capital. The new organisations will be dynamic, interactive societies where information is open to all, freely given and freely received. In the Triple I organisation, everyone will be expected to think and learn as well as to do. Nevertheless, it is the core worker from whom most will be demanded. Such people will be increasingly ... expected to have not only the expertise appropriate to his or her particular role, but will also be required to know and understand business, to have the technical skills of analysis and the human skills and the conceptual skills and to keep them up to date. (Handy, 1989: 124) This is one of the key features that make the Triple I organisation unique; it is a hotbed of intellectual discourse, where the prevailing culture is one of consent rather than instruction. Staff are unsupervised in the traditional sense, and instead are trusted to do what is right and given room to experiment with new ideas and con- cepts. Finally, the flexibility of such organisations, and the unpredictability of the environments in which they operate, mean that careers will become more variegated and less permanent. As can be seen, therefore, Handy’s view of the future shape of organisations does not appear dissimilar to that of Kanter, and Peters and Waterman. However, he does depart from their views in at least two crucial respects. Firstly, he explicitly acknowl- edges that not all organisations will adopt the same form or move at the same pace. His three generic forms indicate that organisations will have to exercise choice and judgment in order to match their particular circumstances to the most suitable form. Also, it is clear that he views this as an evolutionary as well as a revolutionary process: companies cannot immediately become a Triple I type of organisation; they have to develop into one over time. Secondly, he explicitly states what is only hinted at by the other writers, namely that in the new organisations where everyone is to be treated as an equal ‘partner’, some will be more equal than others, i.e. the core work- ers will be treated and rewarded in a more preferential manner than the contractual fringe or the flexible labour force.
  • 122. The Culture–Excellence approach 109 Handy does not give specific guidance as to how existing organisations can adapt themselves to take on these new forms, although he does indicate that a lack of empowerment and self-belief amongst individuals in organisations presents a major obstacle to change. However, in an earlier work (Handy, 1986), he does state very clearly that fundamental change is a long-term process and that people tend to react emotionally rather than rationally to change. After the publication of The Age of Unreason, Handy appeared to grow increasingly concerned with the unanticipated consequences of his prescriptions for the world of work. This is made clear in the first paragraph of his 1994 book, The Empty Raincoat: Four years ago, my earlier book, The Age of Unreason, was published. In that book I pre- sented a view of the way work was being reshaped and the effects which the reshaping might have on all our lives. It was, on the whole, an optimistic view. Since then, the world of work has changed very much along the lines which were described in the book. This should be comforting to an author, but I have not found it so. Too many people and institutions have been unsettled by the changes. Capitalism has not proved as flexible as it was supposed to be. Governments have not been all-wise or far-seeing. Life is a struggle for many and a puzzle for most. What is happening in our mature societies is much more fundamental, confusing and dis- tressing than I had expected. (Handy, 1994: 1) In The Empty Raincoat, Handy returns to and restates many of the themes of his ear- lier work, but with two differences. Firstly, he explicitly acknowledges that the types of careers that these new organisational forms will create will have a severely adverse effect on the home life of employees, especially senior managers. They will be called on to be company men and women above all else, including their families. Secondly, there is an almost evangelical feel to the book. This is especially notice- able in the latter section of the book, where Handy argues that the modern world has taken meaning out of people’s lives and that, whilst the pursuit of profit may moti- vate senior managers: Not many in the lower realms of the organisation can get excited by the thought of enrich- ing shareholders. ‘Excellence’ and ‘quality’ are the right sort of words, but they have been tarnished by repetition in too many organisations. (Handy, 1994: 265) This more pessimistic view of the future is still there in his 1997 book, The Hungry Spirit (Handy, 1997: 3): Many of us are, I believe, confused by the world we have created for ourselves in the West ... the new fashion for turning everything into a business, even our own lives, doesn’t seem to be the answer. A hospital, and my life, is more than just a business. What good can it possibly do to pile up riches which you cannot conceivably use, and what is the point of the efficiency needed to create those riches if one third of the world’s workers are now unemployed or under-employed as the ILO calculates? And where will it end, this passion for growth? ... I am angered by the waste of so many people’s lives, dragged down by poverty in the midst of riches. I am concerned by the absence of a more transcendent view of life and the purposes of life, and by the prevalence of the economic myth which colours all we do. Money is the means for life and not the point of it.
  • 123. 110 Chapter 3 · In search of new paradigms In the book, Handy argues that, in the West, people’s spiritual needs have been sac- rificed to the pursuit of their material needs; and he examines the options, and where the responsibility lies, for putting balance back into people’s lives. In particular he is concerned with the distribution of wealth, the role that education can play in giving everyone a good start in life, and how we can look after ourselves whilst having a care for others as well. He even touches on, perhaps, the biggest question of all: ‘What, ultimately, is the real purpose of life?’ (Handy, 1997: 5). In addressing these issues he ranges widely, looking at markets, organisations and the role of business, government and religion. He believes the answer lies in the pursuit of ‘Proper Selfishness’. This is a redefinition of individualism; he sees individuals as moving away from the pursuit of narrow self-interest, and instead realising that it is in their best interests to pursue a fairer society for all. Though he identifies a role for govern- ment and business in creating Proper Selfishness, he believes it is individuals themselves who bear the main responsibility for its achievement. In particular, he draws attention to the role of individual entrepreneurs in changing the world: Entrepreneurs, whether social or commercial, often discover aspects of themselves in the pursuit of something beyond themselves. Such people are not content to let the status quo be the way forward. They itch to make a difference ... Almost accidentally, corporations have become the nursery for frustrated entrepreneurs. They should turn this to a positive account and do it more deliberately, in the hope that they can retain some of the best for themselves, including women, while seeding the community with the others. The workplace has always been the real school for life. Perhaps it just needs to change its curriculum a little to tune in with the new age of personal initiative. (Handy, 1997: 262) Handy calls for a new sense of purpose for individuals, organisations and society. He wants to see a strong ethical approach to business and society, and a recreation of the concept that people exist to help and serve each other as well as themselves. These are sentiments that many of us would probably share but, unfortunately, he fails to show how the unleashing of individual entrepreneurship and the creation of the new organisational forms he advocates will aid this search for meaning. Instead, he asks us to put our faith in the goodness of people and to be optimistic about the future. A recurrent theme in Handy’s work, however, has been the many paradoxes thrown up by contemporary society, especially the presence of dire poverty amidst extreme wealth, and the potential of technology for creating meaningful work compared with the increasing tendency for the quality of life to decline. Therefore, it seems strange that the one paradox that Handy appears to ignore is that the forms of organisations that he advocates may well be creating the poor jobs and poverty he deprecates. ■ Culture–Excellence: summary and criticisms That the Culture–Excellence approach has had a major impact on the thinking of Western businesses, especially in the UK and USA, is beyond question. In Search of Excellence has sold over six million copies, making it the best-selling management book of all time. Largely as a result of its success, its authors, especially Tom Peters, have become successful and influential consultants. Rosabeth Moss Kanter and Charles Handy have likewise achieved the pre-eminence in business circles that they
  • 124. The Culture–Excellence approach 111 had previously only occupied in academia. A look in the business section of any bookshop will show that there are also many more authors who have jumped on the bandwagon. Indeed, barely a day seems to go by without the publication of yet another blockbuster proclaiming that it has discovered the recipe for success. Some of these achieve a degree of prominence in business circles, though many seem to dis- appear without trace. Nevertheless, the fact that publishers keep publishing them, and that in different ways and shapes they repeat and project the Culture–Excellence mes- sage, emphasises the thirst by managers for the message. Nor is it just a case that managers buy them to leave them on the shelf. Over the last two decades, on both sides of the Atlantic, managers have been attempting to re- shape their companies along the Culture–Excellence lines. In 1997, a survey by the Industrial Society showed that in the UK alone some 94 per cent of respondent organ- isations either had recently been through or were going through a culture change programme (Industrial Society, 1997). The reason for its emergence, and for its continuing popularity, was that in a world where old certainties had disappeared, where new and more dangerous competitors seemed to appear every day, it rejected the communal and corporatist approach of the Japanese, and offered instead a recipe for success that was in tune with the free market liberalism, with its stress on individualism, that has dominated much of the West for the last two decades. Nor was it merely a rehash of what had gone before. The Culture–Excellence approach to organisations is significantly different from pre- vious approaches; although we might note that the new forms, especially Handy’s Shamrock type, bear an interesting resemblance to the first budding of organisational life during the Industrial Revolution. The entrepreneurial style of management, the stress on a privileged core of skilled workers, and the contracting-out of whole areas of organisational activities are all hallmarks of the early industrial organisations. However, the big differences between then and now relate to the level of sophistica- tion and complexity of the new organisations that are emerging, the degree of integration of both internal functions and external relationships, the grade of intelli- gence and skill required of all staff, whether they be core or periphery – and, of course, the conditions of employment. For Watson (1986: 66), who coined the term Culture–Excellence school to describe proponents of this approach, there is one fur- ther and crucial difference: [In these new organisations] what brings the activities of the organisational members to focus upon those purposes which lead to effective performance is the existence of a strong and clearly articulated culture. (Watson, 1986: 66) It is this which makes it clear that the Culture–Excellence approach that has been developing over the last two decades is remarkably different from most of the theory and practice that has grown up in the last 100 years. Peters, Kanter and Handy argue that organisations are entering a new age, where familiar themes are taking on different meanings and are being expressed in a new lan- guage. Contrasting the old with the new, they argue that what is important in the new is not muscle power, but brain power: the ability to make intelligent use of information to create ideas that add value and sustain competitiveness. The new organisation is flatter in structure, though it might be more accurate to say that structure is decreasing
  • 125. 112 Chapter 3 · In search of new paradigms in importance and that its role as a directing and controlling mechanism is being taken over by cultures that stress the need for, and facilitate, flexibility and adaptation (though in passing we should note that Peters (1993) also sees the dismembering of hierarchical structures as an important step in creating these new cultures). The Culture–Excellence approach is sounding the death knell of hierarchical organisations and the concept of promotion through the ranks. Careers and skills are taking on new meanings, as are established ideas of reward. In future, it is argued, careers are likely to depend on the individual and his/her ability to remain employable. In turn, the skills needed for ‘employability’ will tend to be generic and broad-based rather than organisation- or function/specialism-specific. Likewise, career paths and promotion will no longer be shaped by the particular employing organisation and its structures and criteria, but will be driven more by individuals creating their own opportunities by taking on new roles and responsibili- ties, either in one organisation or, more likely, by moving from company to company. As for pay, it seems that this will take the form not so much of a wage related to the particular post occupied, but more that of a fee paid for actual performance. On human relations, the message being transmitted is that the new forms of organ- isations will treat their employees in a more responsible and humane fashion than has been the norm. Employees will be seen and treated as ‘partners’, capable of making a substantial contribution to the growth of the organisation. This approach, it is argued, will manifest itself in a tough-minded respect for the individual, who will receive training, be set reasonable and clear objectives, and be given the autonomy to make his/her own contribution to the work of the organisation. The new organisa- tions will seek to develop open, flexible and pragmatic cultures, which help to maintain a learning environment that promotes creativity and entrepreneurship amongst all employees. Another feature of the new organisational forms, it is claimed, will be their ability to grant autonomy and encourage flexibility and initiative whilst at the same time keeping tight control of their operations. Like so much else, this is to be achieved through culture rather than structure, and values rather than rules. Everything is to be monitored closely, not by the watching eye of superiors, but by the creation of a homogeneous environment in which all take an equal responsibility for, and legiti- mate interest in, the work of their colleagues. Clearly, the new organisation forms that are being promoted offer much that is admirable and worth supporting. Equally clearly, their adherents and promoters raise more questions than they answer. To an extent this is inevitable when dealing with something that is emerging rather than an existing and concrete reality. However, as this concept has been around for nearly two decades, this is no longer the case. Therefore, it would be remiss to ignore or gloss over the questions and dilemmas that seem apparent. Many writers have drawn attention to the shortcomings of the Culture–Excellence approach. Carroll (1983) and Lawler (1985) were both scathing about the methodological shortcomings of the research on which Peters and Waterman’s (1982) book was based. Indeed, Peters himself appears to have admitted that he and Waterman ‘faked’ some of the data in order to obtain their results (Kellaway, 2001). This would seem to give additional support to Wilson’s (1992) claim that the book lacks any apparent empirical or theoretical foundations. Though Wilson’s criticisms may seem somewhat exaggerated, it is certainly arguable that the
  • 126. The Culture–Excellence approach 113 Culture–Excellence approach does have serious weaknesses, especially in three areas that are crucial to the operation of organisations: 1 People. There are serious concerns and contradictions regarding the role and behaviour of people in the new organisations. On the one hand, they are pro- claimed as the chief asset of the new organisations. On the other hand, there are clearly different grades of employee, from core to periphery, and these different grades will be treated and rewarded in a markedly dissimilar manner; furthermore, none of the different grades can expect any real job security. The new organisations will only value employees as long as they and their areas perform to the highest of standards. Not only does this pit individual against individual, but also one part of the organisation against another. Whilst healthy competition may enhance organi- sational competitiveness, from what we know of motivation theory (Arnold et al, 1998) it is not clear that the Culture–Excellence approach is that healthy. The Culture–Excellence approach also encourages teamwork, yet the pursuit of individ- ual advancement and reward often leads to conflict rather than cooperation (Schein, 1988). 2 Politics. Though Western companies traditionally either deny the existence of inter- nal struggles or argue that such behaviour is perverse, it is clear that the struggle for resources, power and survival is as great within organisations as it is between them (Buchanan and Badham, 1999; Pfeffer, 1981; Robbins, 1986). As stated above, the recommendations of the Culture–Excellence school would seem to exac- erbate political behaviour by and between individuals and groups, yet in the main they ignore this drawback to their approach, even though it is potentially damag- ing to both organisational and individual performance. 3 Culture. The proponents of Culture–Excellence are advocating a ‘one best way’ (one best culture) approach for all organisations, irrespective of their size, environ- ment and other circumstances. Also, as Wilson (1992) pointed out, it assumes a simple causal relationship between culture and performance. Nevertheless, for the proponents of the Culture–Excellence school, culture is the great cure-all – the cre- ation of a culture of excellence is seen as answering all questions and solving all problems. This assumes that the creation of new cultures will itself be unproblem- atic. However, as the Chapter 5 will show, culture and politics appear to be the Achilles’ heel of approaches to managing organisations. It would also be remiss of us if we ignored the differences between the main propo- nents of Culture–Excellence. Peters is a free market liberal in the classic American mould. He believes that individual and organisational competition untrammelled by government is what makes societies strong. Kanter agrees with most of this, but believes that local communities, working with big business, have a positive role to play in attracting and keeping well-paid jobs for their communities. Handy is also committed to the free market, but has become increasingly concerned with the out- come of his prescriptions. He appears to be turning his back on pure individualism, arguing instead for a less rapacious, more caring capitalism, driven by what he terms ‘Proper Selfishness’ and more concerned with the collective good than individual wealth creation. Though Peters and Kanter may continue to hold to the Culture–Excellence line, it is difficult to see that the direction which Handy is now taking is consistent with it.
  • 127. 114 Chapter 3 · In search of new paradigms There is one final concern that is wider than the Culture–Excellence approach per se or its impact on organisations, but which is reflected in the differences between Peters, Kanter and Handy. The move towards creating segmented workforces of the type described by Handy (1989), and the emphasis on the temporary nature of employment championed by Peters and Waterman (1982) and Kanter (1989), are part of a continuing trend in the West, driven by neo-liberal economic and social policies, towards worsening job security and conditions of service, in order to create a vast pool of under-employed, especially part-time, labour that can be turned on or off as the situation dictates. In the UK in 1993, for example, some 9.7 million workers (38 per cent of all UK workers) were either part-time, temporary, self-employed, on a government training scheme, or unpaid family workers – an increase of 1.25 million since 1986. Similarly, the proportion of men in employment who were part of the flexible workforce rose from 18 per cent in 1981 to 27.5 per cent in 1993 (Watson, 1994). This tallies with Hutton’s (1995) argument that the UK is now more socially divided than at any time since the Industrial Revolution. In particular, he maintains that the UK is a 30/30/40 society – the marginalised, the newly insecure and the advantaged – and that this not only raises the spectre of increased social tensions, but is a positive disadvantage to wealth creation. Hutton’s attack on the adverse effects of neo-liberal market policies is supported by others, notably Saul (1997), who points out that the income gap between the highest- and lowest-paid workers in the UK is greater now than at any time since 1880, when records began. Figures published by the UK government (Brindle, 1998b) show that since 1979, whilst the richest 10 per cent of the popula- tion have seen their incomes grow by 70 per cent in real terms, the bottom 10 per cent of the population have suffered a cut in real income of 9 per cent. In the same period, poverty in the UK has almost tripled. As White (1999) noted, this increase in poverty has had an especially adverse impact on children. In 1979, 1 in 10 children lived in poverty. In 1996/7, the figure was 1 in 3. The reason for this increase appears to be very clear: 32 per cent of children now live in families without a full-time worker. Nor is this bleak picture restricted to the UK. As Dunphy and Griffiths (1998) point out, in 1980, the Chief Executive Officers of the 300 largest US compa- nies had incomes 29 times that of the average manufacturing worker; ten years later, their incomes were 93 times greater. By 2000, the average CEO salary was 531 times greater (AFL-CIO, 2003). Indeed, the founder of Microsoft, Bill Gates, has a personal fortune that is greater than the combined wealth of the 106 million poorest Americans (Elliott and Brittain, 1998). On a world scale, the estimated wealth of the 11 richest individuals is more than the combined GDP of the 49 least developed coun- tries (Trade, 2003). Much of the economic and labour market liberalisation in the 1980s was justified by ‘trickle-down’ economics – the view that as the rich got richer, then some of this wealth would trickle down to the rest of society and, therefore, society as a whole would become wealthier. This clearly does not appear to be the case. Not surprisingly, if one looks at the poorest nations in the world, the situation is much worse, with malnutrition, poverty and disease on the increase (Gittings, 1998). In the 1990s, the number of people in sub-Saharan Africa living on less than $1 a day increased from 47 to 49 per cent, and in eastern and central Europe it increased from 7 to 20 per cent (Elliott, 2003). In the USA, Robert Reich, who was Secretary of Labor in the first Clinton administration, and other leading figures have warned of
  • 128. The Japanese approach to management 115 the dangers of a social chasm opening up between an ever-increasing rich elite, holed up in guarded compounds, and a jobless, impoverished majority (Elliott, 1997; Reich, 1997). Indeed, as a sign of this, there are now more private security guards in the USA than there are publicly-employed police (Dunphy and Griffiths, 1998). Contrast this with the case of Japan, discussed next, where, traditionally, at government and organisation level, full employment has taken precedence over profit and underpinned its voracious appetite for economic expansion (Holden and Burgess, 1994). Despite these concerns and criticisms, Culture–Excellence has become the most influen- tial approach to running organisations in the USA and Europe, as is apparent from the many articles on its merits and case studies of its use that appear regularly in management journals. However, since the 1950s, the Japanese have been developing an alternative approach to structuring and managing organisations that is not only markedly different from the Culture–Excellence one but also has a proven track record of success. The Japanese approach to management The last 50 years have seen the rebirth of Japan. Reduced almost to ashes at the end of the Second World War, by the 1980s Japan had built an industrial empire second to none. Even now, despite its economic ills of the last decade, it is still the second largest economy in the world. As Morgan (1986: 111) stated: With virtually no natural resources, no energy, and over 110 million people crowded in four small mountainous islands, Japan succeeded in achieving the highest growth rate, lowest level of unemployment and, at least in some of the larger and more successful organizations, one of the best-paid and healthiest working populations in the world. Though writers suggested many reasons for Japan’s success, ranging from culture to economic institutions, time and again, its approach to managing organisations was cited as the key factor (Hunter, 1989; Laage-Hellman, 1997; Sako and Sato, 1997; Schonberger, 1982; Smith and Misumi, 1989; Whitehill, 1991). Before proceeding to examine what is meant by the Japanese approach to manage- ment, it is useful briefly to trace Japan’s development as an industrial nation. Up to the middle of the nineteenth century, Japan was an intensely nationalistic society which practised a deliberate policy of isolating itself from the outside world. Therefore, for most of its inhabitants, Japan was the world. It was a feudal country that laid strong emphasis on obligation and deference, and where obedience to authority in general, and to the Emperor in particular, was unquestioned (Sheridan, 1993). For all its deliberate isolation, Japan was a sophisticated and well-educated country with a high degree of literacy. Education was based on a set of Confucian principles which stressed unquestioning obedience to the family; total loyalty to one’s superiors; and reverence for education and self-development. The abiding influence of these can still be seen in Japanese society today, and underpins the strength of Japanese organi- sations (Smith and Misumi, 1989). However, from the mid-nineteenth century, Japan began to experience internal tensions. The feudal aristocracy experienced escalating financial difficulties whilst the merchant class, considered social inferiors, began to prosper. At the same time, it became clear that the growing military might of other
  • 129. 116 Chapter 3 · In search of new paradigms countries posed a potential threat to Japan. In response to these developments, Japan adopted a twin-track policy of economic and military growth, not dissimilar to that being developed in Germany at this time (Hunter, 1989). Missions were dispatched abroad to study and bring technologies and practices back to Japan. On one such visit in 1911, Yukinori Hoshino, a director of the Kojima Bank, became acquainted with the work of Frederick Taylor and obtained permission to translate his work into Japanese. Following this, Taylor’s Scientific Management principles, and allied approaches to work study and production management, were rapidly and enthusiastically adopted by the Japanese (McMillan, 1985). Indeed, such was the impact of Taylor’s work that, according to Wren (1994: 205), it ‘ ... led to a management revolution, replacing the entrepreneur-dominated age’. By the 1920s, Japan had moved from being an agrarian economy to one dominated by industry. Like many Western countries, industrialisation was accompanied by considerable industrial conflict, sometimes violent (Urabe, 1986). However, unlike most Western countries, this was not accompanied by a growing democratisation of society. Instead, democratic tendencies were quashed by a growing coalition between industry and the military that promoted intense nationalism and led, almost inexorably, to Japan’s involvement in the Second World War. After Japan’s defeat, its shattered society was occupied by the USA, which stripped the Emperor of his traditional powers and established a Western-style democracy (Sheridan, 1993; Whitehill, 1991). Given the state of the Japanese economy after the Second World War, the success of its reconstruction is nothing short of miraculous. The Korean War in the 1950s proved a stroke of good fortune for Japan, in that the USA used Japan as an important staging post for troops and supplies. This injected billions of American dollars into Japan’s economy. However, perhaps much more important was America’s contribution to management education in Japan. In the immediate post-war years, Japanese companies acquired a reputation for bitter industrial disputes, shoddy workmanship and poor quality. The main responsibility for tackling these problems lay with American engi- neers working for the Civilian Communications Section of the Occupation Administration (Sheldrake, 1996). Four men in particular have been credited with turning this situation around and creating the basis of Japan’s fearsome reputation for the productivity of its workforce and quality of its products: Charles Protzman, Homer Sarasohn, Joseph Juran and W Edward Deming. Interestingly, the last three of these had all worked at Western Electric’s Hawthorne Works and were, therefore, familiar, though not necessarily always in agreement, with the Human Relations approach. All of them were far removed from the narrow concept of the engineer. They took a wide view of how enterprises should be run and in particular of the need for managers to show leadership and gain the commitment of their workforces. Their approach, which covered business policy and organisation as well as production meth- ods and techniques, was enthusiastically received, adopted and disseminated by the senior managers who attended their courses and lectures. As Horsley and Buckley (1990: 51) noted, Deming, especially, met with enormous success: W E Deming became a legend in Japan. He gave hundreds of lectures ... to eager managers on the vital importance of statistical quality control ... Among his pupils were many who were to become captains of Japanese industry in the 1960s and 1970s, heading firms like Nissan, Sharp and the Nippon Electric Company (NEC). The annual Deming Prize for good management was highly coveted in the 1950s, and is still being awarded today.
  • 130. The Japanese approach to management 117 Nevertheless, despite the economic and technical assistance of the USA, there is little doubt that the main credit for the country’s success can be attributed to the hard work, commitment and intelligence of Japanese managers and workers. Under the umbrella of a supportive economic and political framework, Japanese enterprises overcame their severe industrial relations and quality problems of the 1950s and cre- ated the distinctive and hugely successful Japanese approach to developing and managing their businesses that allowed them to take the world by storm in the 1970s and 1980s (Fruin, 1992; Pascale and Athos, 1982; Sako and Sato, 1997; Sheldrake, 1996; Smith and Misumi, 1989). ■ What is the Japanese approach to management? As one might expect, it is difficult to find an all-embracing definition of the Japanese approach to management that satisfies all commentators or can be found in all Japanese companies. In particular, there are distinct differences between larger and smaller enterprises in Japan, and in the treatment of full-time and part-time, and male and female employees in all enterprises (Cole, 1979; Laage-Hellman, 1997; Sako and Sato, 1997). Indeed, such are these differences that some argue there is either no such thing as a distinctive Japanese approach to management or that, if it does exist, no one has been able to capture it accurately (Dale, 1986; Keys and Miller, 1984; Sullivan, 1983). Nevertheless, the vast majority of observers do seem to agree that it exists and can, broadly, be defined (Abegglen and Stalk, 1984; Ackroyd et al, 1988; Hatvany and Pucik, 1981; Holden and Burgess, 1994; Pascale and Athos, 1982; Smith and Misumi, 1989). Perhaps the most influential work, and still the best-selling book, on Japanese man- agement was William Ouchi’s (1981) Theory Z: How American Business Can Meet the Japanese Challenge. Drawing on the theoretical insights of Douglas McGregor and Chris Argyris, Ouchi argued that Japanese success stemmed from the involve- ment and commitment of the entire workforce. In turn, he argued, this was built upon a set of internally consistent norms, practices and behaviours based on trust and strong personal ties between the individual and the organisation, particularly their immediate work group. Ouchi drew particular attention to practices such as lifetime employment, slow evaluation and promotion and collective decision-making. Many other writers have also tried to capture the essence of Japanese management. McKenna (1988) believes that the key elements are lifetime employment, the sen- iority principle with regard to pay and promotion, and enterprise unionism (this will be explained later). Pang and Oliver (1988) agree with McKenna but also draw atten- tion to training and education, company-based welfare schemes, quality circles and manufacturing methods such as Just-in-Time production. Keys and Miller (1984) point to long-term planning, lifetime employment and collective responsibility as being the hallmarks of Japanese management. Laage-Hellman (1997) emphasises the presence of a consensus-seeking decision-making process, incremental planning through the development of a long-term vision and the use of short-term action plans, passive owners who do not usually interfere with managers, strategies that give prior- ity to long-term growth and survival, and the effective use of external resources through partnerships with suppliers and customers. Other commentators have also come up with similar lists.
  • 131. 118 Chapter 3 · In search of new paradigms One of the most quoted of these is by Pascale and Athos (1982) who used the McKinsey 7 S Framework (see Exhibit 3.2), which they had developed jointly with Tom Peters and Robert Waterman, to analyse Japanese management. Like Peters and Waterman’s Culture–Excellence approach, Pascale and Athos stressed the four ‘soft’ Ss (staff, style, shared values, and skills). This was not to dismiss the ‘hard’ Ss (strategy, structure and systems), but to emphasise that the real difference between Japanese companies and their Western counterparts was that the latter tended to concentrate on the ‘hard’ Ss and ignore the ‘soft’ Ss. Pascale and Athos argued that, in contrast, Japanese companies had developed the ability to combine and blend the ‘soft’ and ‘hard’ Ss to their competitive benefit. Their work differed from other studies of Japanese management at the time by examining the management style of Japanese companies operating in the USA. In a similar vein, Peter Wickens, who was Personnel Director of Nissan Motor Manufacturing (UK) Ltd for over 10 years, also commented on the transfer of Japanese management to the West. In his 1987 book, The Road To Nissan, written when he was still at Nissan, he argued that the Japanese approach can be characterised by three factors: teamwork, quality-consciousness and flexibility. Interestingly, after he left Nissan, Wickens (1995) commented that Ouchi and others tended to miss, or underplay, one very important element of Japanese companies – their very strong control culture, especially in relation to shopfloor workers. The factors identified by the above writers can be separated into two categories: those relating to personnel/industrial relations issues and those relating to business/manufacturing practices. Personnel issues The dedication, commitment and ability of Japanese workers is seen as a major factor in the success of Japanese companies. Though much credit for this has been given to the culture of Japanese society, especially its Confucian tradition of obedience and loyalty, similar levels of motivation have been reproduced in Japanese companies operating in the West (Wickens, 1987), which would imply that other factors are also at work. Chief among these is the crucial role played by the personnel policies preva- lent in many Japanese enterprises, especially the larger ones. The core of the Japanese approach to personnel comprises a combination of practices and policies designed to align their behaviour with, and bind employees to, the organisation, and promote their long-term development and commitment. The principal practices and policies concerned are listed below. 1 Lifetime employment. Many employees are recruited straight from school or uni- versity, and expect, and are expected, to spend the rest of their working lives with the same organisation. This ‘guarantee’, based as it is on an age-old sense of mutual obligation and belonging, creates an intense sense of loyalty to and depend- ence on the organisation. Indeed, Holden and Burgess (1994) observed that whilst a Japanese worker might survive the loss of his family, the collapse of his employ- ing organisation would be unbearable. Therefore, lifetime employment is a central feature of the Japanese approach and supports so much else, including a willing- ness to change and the maintenance of a stable organisational culture. However, the fact that organisations prefer to recruit school or university leavers also makes it difficult for individuals to move between companies once they have accepted an
  • 132. The Japanese approach to management 119 appointment. It follows that if someone is fired, their chances of securing other employment are negligible. 2 Internal labour markets. Most positions are filled from inside the company. This is a corollary to lifetime employment which demonstrates to the employee that satis- factory performance will bring promotion, and it eliminates the potential for tension which can be brought about by the recruitment of outsiders. 3 Seniority-based promotion and reward systems. Employees are ranked and rewarded primarily, but not exclusively, on their length of service, and independent of the precise nature of the job they perform. 4 Teamwork and bonding. Although Japanese employees are made to feel part of the organisation and see it as some sort of extended family, they are first and foremost a member of a particular workgroup or team. The group is not just a collection of individuals; it is constructed and developed in such a way that it comprises a single entity which takes collective responsibility for its performance. Japanese companies use a variety of techniques, both at work and in a social setting, for bonding team members to each other and to the organisation. 5 Enterprise (single company) unions. Unlike the West, Japanese companies tend to allow only one union to represent the interests of the workforce. In addition, Japanese unions tend to be single company or enterprise unions. Indeed, from a Western point of view, they are not so much trade unions as company associations. This is illustrated by the practice of senior managers, at some stage in their careers, being expected to serve as union officials. 6 Training and education. Extensive and continuous training and education form an integral part of Japanese personnel policies. This emphasis on the continuous development of employees, to enable them to carry out their work better and to prepare them for promotion, represents a significant investment by Japanese com- panies in their human capital. Much of the training is done on the job and is always geared to the twin aims of improving organisational performance and indi- vidual development. Though encouraged by the company, employees are expected to take responsibility for their own self-development. 7 Company welfarism. Many Japanese companies provide a wide range of welfare benefits for their employees. These can cover medical treatment, education for chil- dren and even housing. Some of the larger companies are almost mini welfare states in themselves. Many other practices and policies could be added to the list, but these appear to be at the core. They are designed to instill the following in employees: ■ loyalty and gratitude to the company and a commitment to its objectives; ■ a sense of security; ■ a strong commitment to hard work and performance improvement; ■ an atmosphere of cooperation and not conflict; ■ a belief in self-development and improvement. These are the cornerstone of Japanese company life; their presence is the reason why Japanese national culture is often cited as being at the heart of Japan’s ability to com- pete in a world market. These operate within organisation structures which, to Western eyes at least, appear complex, highly formalised and very hierarchical
  • 133. 120 Chapter 3 · In search of new paradigms (Whitehill, 1991). However, these personnel issues cannot be seen in isolation from the working practices that Japanese companies use or the objectives they pursue. It is the combination of the two that makes Japanese companies so effective (Wood, 1991). Without overall direction and the appropriate work systems, even the best skilled and motivated workers are ineffective. This is why Japanese business practices and work systems should receive as much attention as personnel issues. Business practices and work systems The Japanese ability to satisfy customers, and thereby capture markets, by developing and producing products to a higher specification and at a lower cost than their com- petitors, is staggering considering the state of their industry in the 1940s and 1950s. Indeed, even as recently as the 1960s, ‘Made in Japan’ was synonymous with poor quality. What has changed, or rather what has come to fruition, has been the methods they apply to all aspects of business, but especially to manufacturing (Hannam, 1993). The fact that some of these methods have, quite naturally, Japanese names (such as Hoshin Kanri – policy deployment; Genba Kanri – workshop management; Kaizen – continuous improvement; Kanban – a paperless form of scheduling) tends, for the Western audience, to cloak and mystify the core principles and systems being used, and also to disguise how much of these have been adopted from the West. Leaving aside the jargon and terminology, Japanese business practices and work sys- tems can be characterised by three interrelated elements: long-term planning, timeliness and quality. Long-term planning This will be discussed further in Chapters 6 and 7, but for now, in brief, let us say that the timescale on which Japanese enterprises operate is far longer than many of their Western competitors, and their focus on building a strong market position simi- larly contrasts with the short-term profit maximisation objectives prevalent in the USA and UK in particular (Hamel and Prahalad, 1989). Needless to say, this is an enormous advantage when considering investment decisions, whether this be for products, processes or people (Smith and Misumi, 1989). Timeliness The Japanese are seen as having a crucial competitive edge in their ability to develop products and bring them to market faster than their competitors. Part of the explana- tion for this relates to teamwork. Whilst many Western companies are still designing and developing products on a sequential basis (whereby one part of the design is com- pleted before another is begun), the Japanese work in teams to undertake these tasks simultaneously. This form of teamwork extends to working jointly with customers and suppliers as well (Laage-Hellman, 1997). Not only does this cut the overall time required, but it also leads to fewer errors and misunderstandings because all the rele- vant parties are involved (Womack et al, 1990). Another major contribution to the timeliness of the Japanese is a series of practices designed to cut manufacturing lead times. The main one is Just-in-Time production. Under Just-in-Time, parts are sup- plied and used only as and when required. This method reduces stock and work-in-progress and thus reduces cost. However, to achieve this (as proponents of lean/agile manufacturing have stressed) requires everything to be ‘right first time’,
  • 134. The Japanese approach to management 121 otherwise such a system would quickly grind to a halt for lack of usable parts (Kidd and Karwowski, 1994; Lamming, 1993). Therefore, it is necessary to drive waste and inefficiency out of the system, and the key mechanism for achieving this is the Japanese commitment to quality (Dale and Cooper, 1992). Quality The Japanese commitment to quality is now legendary. Their approach owes much to the inspiration of three Americans: MacArthur, Deming and Juran (Wilkinson, 1991). General MacArthur, who (on behalf of the USA) virtually ruled Japan in the early post-war years, encouraged Japanese industry to improve production quality as part of the rebuilding of their shattered industrial base. Deming (1982) showed the Japanese that statistical process control (SPC), and other such techniques, are power- ful methods of controlling quality. Juran (1988) showed the Japanese that quality was determined by all departments in an organisation, and thus set them on the road to developing Total Quality Management. Though imported, the Japanese developed the original concepts considerably. In particular, they introduced the concept of continu- ous improvement – Kaizen. Despite the widespread acceptance of the need for improved quality in the West, the Japanese appear to be the only nation so far capa- ble of diffusing successfully the ideas and practices throughout their industry (Dale and Cooper, 1992; Hannam, 1993; Schonberger, 1982; Womack et al, 1990). In any investigation of the Japanese approach to long-term planning, timeliness and quality, it is necessary to recognise the role played by employees in decision-making. Most discussions of Japanese management emphasise the occurrence of upward influ- ence, particularly through the ringi system. This is a procedure whereby proposals for new policies, procedures or expenditure are circulated throughout the firm for com- ment. The proposal is circulated in written form, and is then sent to all who might be affected if it were to be implemented, in ascending order of seniority. The proposal is modified in line with comments, and only when all agree is it implemented. This joint approach to decision-making is also operated through production councils and qual- ity circles, and covers the planning and scheduling of production, work allocation, changes to production methods, problem-solving, etc. (Inagami, 1988). This system of involving large numbers of people in decision-making is the reason why the Japanese are notorious for the slowness with which they make decisions, and famous for their ability to get it right first time (Hannam, 1993; Smith and Misumi, 1989). Moreover, the ringi system has another equally important benefit, as Morgan (1986: 93) states: The ringi is as much a process for exploring and reaffirming values as it is for setting a direction ... In the American view objectives should be hard and fast and clearly stated for all to see. In the Japanese view they emerge from a more fundamental process of exploring and understanding the values through which a firm is or should be operating. A knowledge of these values, the limits that are to guide actions, defines a set of possible actions. An action chosen from this set may not be the very best, but it will satisfy parameters deemed crucial for success.
  • 135. 122 Chapter 3 · In search of new paradigms One factor only mentioned briefly so far is the importance – or not – of culture to the Japanese approach to management. Certainly, early studies laid great stress on the rela- tionship between Japanese culture and business success (Abegglen, 1958). The argument emerged that it was the nature of Japanese society and its impact on individuals and companies that gave Japan its competitive edge. For this reason, it was argued, the West would never be able to replicate Japanese practices and competitiveness successfully. Indeed, one reason why Pascale and Athos (1982) chose to study Japanese companies operating in America was that Pascale doubted whether American companies could learn much from the Japanese in Japan because their cultures were so different (Crainer, 1995). Obviously, as Hofstede (1980, 1990) showed, national cultures do impinge on organisational practices. However, whether or not this means that such practices cannot successfully be adopted in other societies is another question. A number of studies have undermined the argument for considering the Japanese approach to management to be dependent on Japanese culture. It has been shown that many of the distinctive practices of Japanese companies are relatively new and not embedded in Japanese history, that the role of culture is less influential than other factors, and that the Japanese approach can be successfully replicated outside Japan (Ackroyd et al, 1988; Buckley and Mirza, 1985; Cole, 1979; Marsh and Mannari, 1976; Pascale and Athos, 1982; Smith and Misumi, 1989; Urabe, 1986; Wickens, 1987). ■ The future of the Japanese approach In discussing the distinctive Japanese approach to management, we must not forget the strong reciprocal links between government and business, especially the impor- tance of Japanese industrial policy in stimulating and guiding the country’s economic progress. This is seen most clearly in the close links between business and the Ministry of International Trade and Industry (MITI). As part of its remit to establish Japan as a leading industrial nation, MITI played a crucial role in establishing national programmes in key industries to encourage joint action, to develop the coun- try’s science and technological base, amongst companies and public research institutions. The ultimate goal of these programmes has been to create a strong, com- petitive and world-class industrial base for Japan. These collaborative programmes have not been at the expense of competition between companies; rather they have helped to improve the competitiveness of all the companies both in relation to each other and, importantly, in relation to international rivals (Laage-Hellman, 1997). Nevertheless, despite the competitiveness of Japanese firms and the active support of the Japanese government, the economy has been in decline for the last decade. After successfully coping with the second oil crisis of 1979 and the effects of a rap- idly-appreciating currency in the mid-1980s, Japan enjoyed sustained economic growth until the early 1990s. However, since then the economy has been in pro- tracted recession, though it is now showing some signs of recovery. Unemployment, at over 5.3 per cent in June 2003, was down 1.9 per cent from the historic high of the previous year (Statistics Bureau, 2003). Nevertheless, successive banking and political scandals have undermined the stability of the political and financial system on which Japan’s industrial might was built (Barrie, 1999; Shirai, 1997). This has led to a flurry of political and business reforms, and attempts to introduce Western-style deregula- tion in order to foster competition and cut costs.
  • 136. The Japanese approach to management 123 Many explanations have been put forward for the decline of the Japanese econ- omy. One of the most persuasive is that whilst Japan developed a world-class manufacturing base, this was undermined by a failure to develop the rest of its econ- omy to similar standards (Pilling, 2003). In particular, the service sector, especially retailing, is only half as productive as its US counterparts. Similarly, the Japanese public sector is seen as being far less efficient than its Western equivalents. The bank- ing sector also did the Japanese economy no favours by making vast loans to property companies to purchase over-priced land and buildings, which became worth only a fraction of what they paid for them when the asset bubble burst in the 1990s. This explanation helps to explain why, despite all its economic problems, even in the worst years of the 1990s, Japan’s economy, and its leading industrial companies, generally continued to outperform those of its competitors in the West (Pilling, 2003; Shirai, 1997). Therefore, its economic problems over the last decade do not appear to invali- date the Japanese approach to management as developed in, and applied to, the manufacturing sector. However, low growth, domestic recession, increasing inter- national competition, technological developments that have led to changes in industrial and job structures, and an ageing population have all created pressures to change the Japanese approach to management (Harukiyo and Hook, 1998; Sako and Sato, 1997; Thomas, 2003). In the larger Japanese companies, these pressures have led to structural changes designed to flatten the hierarchy and create greater flexibility (Koji, 1998). In the motor industry, in particular, there has also been a weakening of the previously strong supply chain links, with second- and third-tier suppliers being exposed to greater levels of competition (Masayoshi, 1998). Looking at the Japanese approach to pro- duction systems, here too there have been changes; but these do not seem to have radically changed the main characteristic of the Japanese approach, which has been one of blending mass production with flexibility (Masayuki, 1998). Perhaps the area where the pressures for change have been the greatest is in person- nel practices, especially those relating to lifetime employment, seniority-based promotion and rewards systems, and the treatment of female workers (Sako and Sato, 1997). As far as lifetime employment is concerned, there is some evidence that the eco- nomic, industrial and technological changes of the 1980s and 1990s have had an effect on this (Barrie, 1999). For white-collar workers, especially the older and higher-paid ones, there is evidence that continuous employment within one enterprise is giving way to continuous employment within a group of enterprises (Inagami, 1995; Sako, 1997). In the past, if a worker’s job was eliminated, they would be given another one in the same workplace. Increasingly, the tendency is now to transfer redundant workers to another job within the same group or affiliated group of companies but not necessarily the same workplace. In some cases, this can be hundreds of miles away, and can also involve a reduction in pay (Watts, 1998). However, for blue-collar male workers, where the distinctions between East and West were always the most marked, job secu- rity seems to have improved, if anything. This is because of the falling birth rate, which has also led to an increase in the retirement age from 55 to 60 or even 65 (Seike, 1997). Research has also shown that whilst the use of part-time (mainly women) and contract labour may be increasing, job security in this area is also increasing (Wakisata, 1997). Therefore, overall, it appears that stability of employment may actu- ally be increasing. In terms of lifetime employment, though there have been some
  • 137. 124 Chapter 3 · In search of new paradigms changes to the system, most Japanese managers, as well as workers, do seem to believe it is desirable and feasible to maintain it, especially as it is seen as essential to manager–worker cooperation (Ohmi, 1997; Sako, 1997; Sugeno and Suwa, 1997). As the Finance Director of a large Japanese corporation commented: To secure our employees living life in good shape is one of the corporation’s duties ... We cannot believe in cutting employees to sustain profitability. It is a kind of failed manage- ment philosophy. (Quoted in Barrie, 1999: 13) In the area of the seniority principle, there does seem to be a greater willingness to make changes. There is growing pressure from both employers and unions to consider other criteria, such as ability, as well as seniority when determining pay and promo- tion (Sugeno and Suwa, 1997). In a 1995 survey, two-thirds of responding managers saw the introduction of ability-based reward and promotion systems as a priority in order to create greater flexibility, although very few managers seemed prepared to abandon the seniority principle totally (Kawakita, 1997; Sako, 1997). Also, it must be remembered that though seniority plays an important part in promotion and reward, ability has always been taken into account as well. Therefore, what seems to be being proposed is fine-tuning of the system rather than its dismantling. Significant changes do, however, seem to be taking place with regard to female workers. As in the West, there has been a significant increase in the proportion of women in the workforce in Japan in the last 40 years. In 1960, there were 18.1 mil- lion working women (40.8 per cent of the adult female population); by 1992, this had grown to 26.2 million (75.4 per cent of the adult female population) (Wakisata, 1997). This growth was accompanied by legal changes to promote equal opportuni- ties and practical assistance with child care arrangements. Like men, women have also benefited from greater security of employment. The average length of service of women workers increased from 4.5 years in 1970 to 7.4 years in 1992; the respective figures for men are 8.8 and 12.5 years. In addition, there seems to be a gradual reduc- tion in the very significant gap between male and female rates of pay: in 1970, women earned on average some 50 per cent of male wage levels; by 1992, this had increased to around 60 per cent. However, for female university graduates in their 20s, the figure was over 90 per cent (Wakisata, 1997). Therefore, there have been and remain significant pressures on the Japanese econ- omy, which have led to changes in how companies are structured and run, especially their human resource practices, and in their relations with customers and suppliers (Thomas, 2003). However, these do not seem designed to undermine or alter signifi- cantly the core of the Japanese approach to management (Harukiyo and Hook, 1998). The strong ties that bind workers and Japanese enterprises together and which lie at the heart of the Japanese approach to management have not weakened (Sako and Sato, 1997). As Shirai (1997: xv) commented, ‘ ... it appears from all the indica- tors that the foundations of stable labour–management relations in Japan remain unshaken and intact.’
  • 138. The Japanese approach to management 125 ■ The Japanese approach: summary and criticisms It can be seen, therefore, that there are distinctive practices and policies which have a coherence and can be described as ‘the Japanese approach to management’. However, it is not simply the merits of the individual practices that have given the Japanese their competitive edge. Rather it is that they are devised and adopted in such a way that they are integrated and mutually supportive of each other; in particular, Japanese companies have a unique way of combining hard and soft practices (Laage-Hellman, 1997; Ouchi, 1981; Pascale and Athos, 1982; Sako and Sato, 1997). This is not to say that this approach is universal in Japan or that all elements are present in those companies who do practise it. However, there is sufficient evidence available to justify stating that it is the dominant approach in Japan at the moment, and has been since at least the 1960s. This does not imply that it will not change. Indeed, given that most of these prac- tices have been evolving over the last 50 years, it would be surprising if they did not continue to evolve (Smith and Misumi, 1989; Thomas, 2003; Whitehill, 1991). Already, as described above, there is strong evidence to show that changes are taking place. Even in large companies, such as Toyota and Honda, policies of lifetime employment and the reluctance to recruit staff mid-career are being modified, owing to the need to recruit skills that are in short supply, and because of economic and social pressures. These include especially the pressures for equal opportunities for men and women, the implications of an ageing population, and the need to recruit foreigners (Dawkins, 1993, 1994; Thomas, 1993; Wakisata, 1997). Nevertheless, although the dynamic and innovative nature of Japanese organisa- tions and their passionate devotion to competitiveness are likely to lead to changes in the way organisations are run, it is unlikely that these changes will undermine the core construct of mutual obligation between organisation and employee that lies at the heart of the Japanese system (Ohmi, 1997; Sako, 1997; Sugeno and Suwa, 1997). It also seems more than likely that the changes which are taking place and will take place in the future will enhance, rather than detract from, Japan’s economic strength. The Japanese approach has delivered impressive economic results, but there are those who would question the social cost involved. Japanese workers work longer hours than their Western counterparts, and in addition are expected to participate in many work-related social events (Clark, 1979). There is also considerable evidence to show that Japanese workers are less satisfied with their lot than their Western coun- terparts, especially in relation to working hours and pay (Kamata, 1982; Lincoln and Kalleberg, 1985; Luthans et al, 1985; Naoi and Schooler, 1985; Odaka, 1975). In many respects this is not surprising. From a Western standpoint at least, Japanese companies appear to operate very oppressive and authoritarian regimes that, through the combination of personnel practices and work systems discussed above, together with peer group pressure, leave workers little option but to conform and per- form to very high standards (Kamata, 1982; Smith and Misumi, 1989). This accounts, in part at least, for the common observation that the Japanese are a nation of workaholics. However, there are other serious criticisms of the Japanese approach: ■ Most companies operate a two-tier labour market, whereby a significant minority of the workforce have good conditions and lifetime employment, at the expense of less well-paid and less secure jobs for the majority, especially women. However, there is now some evidence that this is changing, especially for women (Wakisata, 1997).
  • 139. 126 Chapter 3 · In search of new paradigms ■ Even those with lifetime employment are little more than slaves to the corporation because they cannot move to other jobs (Morgan, 1986). ■ The merits of teamwork are only gained thanks to the unremitting peer group pres- sure on individuals continually to improve their performance (Kamata, 1982). ■ The lack of independent trade unions leaves workers defenceless in the face of managerial pressure to work ever harder (Kazunori, 1998; Yutaka, 1998). Whatever the merits or demerits of the Japanese approach, there is little doubt that it has had an enormous impact on organisational performance; consequently, many attempts have been made to introduce ‘Japanisation’ into Western companies (Ackroyd et al, 1988; Hannam, 1993; Pang and Oliver, 1988; Pascale and Athos, 1982; Schonberger, 1982; Thomas, 2003; Turnbull, 1986). Despite some reservations about how well the system might travel, Japanese companies have shown that they can trans- fer their approach to the West. Nissan’s Sunderland car assembly plant in the UK was judged by the Economist Intelligence Unit to be the most productive in Europe for the second year running in 1998, whilst in the same year its Smyrna, Tennessee plant was cited as the most productive in North America by the Harbour Report. On the other hand, transferring the Japanese approach to indigenous Western com- panies appears to have been more problematic. Even the UK car components industry, which, owing to the presence of Nissan, Honda and Toyota, has received more sup- port and encouragement than probably any industry outside Japan, seems to have failed to adopt the Japanese approach successfully (Hines, 1994; Lamming, 1994). This may be a major reason why many companies in the West, whilst not rejecting the lessons of Japanese management per se, are now turning to other approaches to increase their competitiveness, especially organisational learning. Organisational learning Though Culture–Excellence and the Japanese approach continue to exert a powerful influence over Western companies, in the 1990s a third approach to organisational success came forward to challenge them: organisational learning. Despite its new- found popularity in the 1990s, organisational learning was not a new concept. The highly-respected American academic Chris Argyris has been writing about organisa- tional learning for over 40 years (Argyris, 1992). However, there can be no doubt that interest in the concept of organisational learning, or the learning organisation as it is sometimes called, grew considerably in the 1990s. As Crossan and Guatto (1996) noted, there were as many academic papers published on the topic in 1993 as in the whole of the 1980s. Many of these articles are dotted with emotive statements such as ‘ ... the rate at which individuals and organizations learn may become the only sus- tainable competitive advantage ...’ (Stata, 1989: 4). Though statements like this have the power to attract the attention of business leaders, there are really two factors which appear to have moved organisational learning from being a subject for serious academic study to a hot boardroom topic: the pace of change, and the rise of corpo- rate Japan. There is considerable support for the view that the pace of change is accelerating as never before, and that organisations have to chart their way through an increasingly complex environment. Organisations are having to cope with the pressures of globali-
  • 140. Organisational learning 127 sation, changes in technology, the rise of e-commerce, situations where customers and suppliers can be both competitors and allies, and a change in emphasis from quantity to quality and from products to services. To cope with this growing complexity, organisations are recognising the need to acquire and utilise increasing amounts of knowledge if they are to make the changes necessary to remain competitive (Chawla and Renesch, 1995). As Pautzke (1989) stated: Careful cultivation of the capacity to learn in the broadest sense, i.e. the capacity both to acquire knowledge and to develop practical abilities, seems to offer a realistic way of tack- ling the pressing problems of our time. (Quoted in Probst and Buchel, 1997: 5) The second, and perhaps main, factor that has generated such interest in organisa- tional learning is the rise of corporate Japan. In attempting to explain and/or combat Japanese penetration of Western markets, many commentators argued that one of the main strengths of Japanese companies is the speed with which they gather information on markets and competitors, and disseminate and act upon this information internally (Nonaka, 1988; Pascale and Athos, 1982). However, Japanese companies’ ability to learn, adapt and develop also extended to their commitment to continuous improve- ment, in processes as well as products, both internally and jointly with customers and suppliers (Laage-Hellman, 1997; Sako and Sato, 1997). The result, as described earlier in this chapter, is their fearsome reputation for producing the right product, in the right time and at the right price. Underpinning this is an ability to translate a commit- ment to individual learning into organisational learning (Hedlund and Nonaka, 1993; Nonaka, 1988; Ouchi, 1981; Whitehill, 1991). This idea, that the promotion of collec- tive learning is crucial to organisational success, has not only led to the upsurge in interest in organisational learning, but it also provides a bridge between Western and Eastern approaches to managing organisations. For these reasons, Probst and Buchel (1997: 1) argue that ‘Organizational learning offers an alternative paradigm by which systems can change, thus permitting us to redefine the economy and society.’ ■ What is organisational learning? The term ‘organisational learning’ is often used interchangeably with the term ‘learn- ing organisation’. The difference, according to Tsang (1997: 74–5), is that: Organizational learning is a concept used to describe certain types of activity that take place in an organization while the learning organization refers to a particular type of organization in and of itself. Nevertheless, there is a simple relationship between the two – a learning organization is one which is good at organisational learning. In effect, the difference appears to be between ‘becoming’ and ‘being’. Organisational learning describes attempts by organisations to become learning organisations by pro- moting learning in a conscious, systematic and synergistic fashion that involves everyone in the organisation. A learning organisation is the highest state of organisa- tional learning, in which an organisation has achieved the ability to transform itself continuously through the development and involvement of all its members (Argyris and Schon, 1978; Burgoyne et al, 1994; Chawla and Renesch, 1995; West, 1994).
  • 141. 128 Chapter 3 · In search of new paradigms A further, and perhaps more significant, distinction between the two terms relates to those who use them. Argyris (1999: 1) asserts: We divide the literature that pays attention to organizational learning into two main cate- gories: the practice-oriented, prescriptive literature of ‘the learning organization,’ promulgated mainly by consultants and practitioners, and the predominately skeptical scholarly literature of ‘organizational learning’, produced by academics. In fact the term ‘learning organisation’ is used much less now than in the 1980s and 1990s. This appears to be because very few organisations, if any, appear to have achieved learning organisation status (Easterby-Smith, 1997; Probst and Buchel, 1997; Tsang, 1997). For this reason, organisational learning now appears to be the term of choice for both the sceptical and prescriptive camps. Having said that, one of the problems in coming to grips with organisational learn- ing is that its advocates appear to offer a multitude of definitions or models of what it is; for example: Organizational learning is the process by which the organization’s knowledge and value base changes, leading to improved problem-solving ability and capacity for action. (Probst and Buchel, 1997: 15) A learning organization is an organization skilled at creating, acquiring and transferring knowledge, and at modifying behavior to reflect new knowledge and insights. (Garvin, 1993: 80) Organizational learning means the process of improving actions through better knowledge and understanding. (Fiol and Lyles, 1985: 803) An entity learns if, through its processing of information, the range of its potential behaviors is changed. (Huber, 1991: 89) Organizational learning occurs through shared insight, knowledge and mental models and builds on past knowledge and experience, that is, on memory. (Stata, 1989: 64) These are only a sample of the definitions that have been advanced. Indeed, it is prob- ably not an over-exaggeration to say that there are nearly as many definitions of organisational learning as there are writers on the topic (Tsang, 1997). Easterby-Smith (1997) attempts to explain this confusion of definitions by identify- ing the different disciplinary backgrounds of those writing on organisational learning. He argues that most writers come from one of six disciplines: psychology, manage- ment science, sociology, organisation theory, production management and cultural anthropology. Wang and Ahmed (2003) note that it is not just the different discipli- nary backgrounds of the proponents of organisational learning that leads to confusion. They identify five different focuses on the concept, and argue that researchers tend to centre their attention on only one of these. The ‘five focuses on the concept [are]: focus on the collectivity of individual learning; focus on the process or system; focus on culture or metaphor; focus on knowledge management; and focus on continuous improvement …’ (Wang and Ahmed, 2003: 9).
  • 142. Organisational learning 129 Like Argyris (1999), Easterby-Smith (1997) also draws attention to the difference between the long-established contributors to the field, the academic sceptics, who have been attempting to analyse, describe and understand learning processes within organisations, without necessarily wishing to change them (e.g. Argyris, 1992; Bateson, 1972), and the relatively newer entrants, the practitioners and consultants, who are attempting to prescribe what an organisation should do to maximise learning (e.g. Pedler et al, 1989; Senge, 1990). This is a point also made by Tsang (1997), who notes that, up to the 1980s, it was the analytical writers who dominated the field, but in the 1990s, with the upsurge in interest in organisational learning, it was the pre- scriptive writers who came to the fore. Though the variety of disciplinary backgrounds and perspectives of those writing about organisational learning helps to explain the plethora of definitions, it does not help to resolve them. For this reason, as Probst and Buchel (1997) state, there is as yet no comprehensive theory of organi- sational learning. Nevertheless, there is one area where there is growing clarity and agreement: ‘In today’s environments … learning is directed increasingly at transfor- mational change …’ (Cummings and Worley (2001: 520). It is the potential of organisational learning to enable organisations to reinvent themselves in order to compete in the changing and increasingly uncertain and competitive environment that is making it such an attractive proposition for many managers. Although many writers have contributed to the concept of the organisational learn- ing, those who have done most to popularise the concept in the UK are Pedler, Boydell and Burgoyne (1989). However, perhaps the most influential writer of the 1990s was Peter Senge in the US, whose book The Fifth Discipline (1990) caught the imagination of corporate America. Its success motivated a whole host of consultants and academics to follow suit and produce books and articles extolling the virtues of the learning organisation, and the steps necessary to become one (Tsang, 1997). Part of the success of his book lies in the fact that it combines the individualism of the Culture–Excellence approach with the knowledge-generating ability of the Japanese approach. Senge argues that there are five interrelated disciplines that organisations need to foster amongst individuals and groups in order to promote learning and success: 1 Personal mastery – individual growth and learning. 2 Mental models – deeply-ingrained assumptions that affect the way individuals think about people, situations and organisations. 3 Shared visions – the development of a common view of the organisation’s future. 4 Team learning – the shift from individual learning to collective learning. 5 Systems thinking – the ‘Fifth Discipline’ that links the others together and which, he argues, is missing in most organisations: The art of systems thinking lies in being able to recognise increasingly (dynamically) com- plex and subtle structures ... amid the wealth of details, pressures and cross-currents that attend all real management settings. In fact, the essence of mastering systems thinking as a management discipline lies in seeing patterns where others see only events and forces to react to. (Senge, 1990: 73)
  • 143. 130 Chapter 3 · In search of new paradigms In contrast to Senge, who stresses the attributes an organisation needs to possess in order to learn, others stress the learning styles of individuals and organisations. Perhaps the most influential in this area are Argyris and Schon (1978) who, building on the work of Bateson (1972), proposed a three-level evolutionary model of learning: ■ Level I – single-loop learning. This is adaptive learning, which involves detecting and rectifying errors or exceptions within the scope of the organisation’s existing prac- tices, policies and norms of behaviour in order to ensure its objectives are met. Typical examples of this would be the monitoring of quality standards or adherence to sales targets in order to detect and correct variance. However, this would not feed back into the questioning of, or amendment to, the organisation’s original objectives. ■ Level II – double-loop learning. This concerns going beyond correcting variance in standards and targets and, instead, involves challenging the appropriateness of the organisation’s basic norms, values, policies and operating procedures that create these standards and targets in the first place. This is reconstructive learning, which involves reconstructing basic aspects of an organisation’s operations. Typically, this might involve questioning whether some functions should be outsourced rather than continuing to be performed in-house or whether the organisation should adopt a flatter, more open structure to remain aligned with its environment. Out of such changes, new practices, policies and norms of behaviour are generated. ■ Level III – triple-loop learning. This involves questioning the rationale for the organisation and, in the light of this, radically transforming it. A typical example of this might be a traditional manufacturing organisation attempting to reinvent itself as a service company with all the implications for culture, structure and prac- tices that such a move would require. Burgoyne (1995) suggests that the importance of learning at Level III lies as much in its ability to allow an organisation to create and transform its environments as it does in allowing it to transform itself. He also considers that this is reflected in the ability of the organisation to stabilise the context in which it operates and/or its relationship with it. It is at this level that the concept of the learning organisation can fully emerge. Cummings and Worley (2001) argue that there are a number of learning interven- tions designed to help an organisation’s members move from adaptive, Level I, learning to transformative, Level III, learning. These comprise three phases, but Cummings and Worley (2001: 522–4) warn that: Although the phases are described linearly below, in practice they form a recurrent cycle of overlapping learning activities. 1 Discover theories in use and their consequences. This first step involves uncovering mem- bers’ mental models or theories in use and the consequences that follow from behaving and organizing according to them. … 2 Invent and produce more effective theories in use. Based on what is discovered in the first phase of this change process, members invent and produce theories in use that lead to more effective actions and that are more closely aligned with [Level II and Level III] learning. … 3 Continually monitor and improve the learning process. This final phase involves … – learning how to learn. Here learning is directed at the learning process itself and at how well [Level II and Level III] learning characteristics are reflected in it. This includes assess- ing OL strategies and the organizational structures and processes that contribute to them.
  • 144. Organisational learning 131 Cummings and Worley also identify five organisational characteristics that promote organisational learning, as follows: ■ Structure – this needs to be flat and teamwork-based in order to promote network- ing both internally and externally. ■ Information systems – these need to be geared toward the rapid acquisition, pro- cessing and sharing of information. ■ Human resource practices – these need to include appraisal and reward systems which promote the acquisition and sharing of new skills and knowledge. ■ Organisational culture – this needs to be based on values and norms which pro- mote openness, creativity and experimentation in order to support successful learning. ■ Leadership – managers throughout the organisation must lead, promote and be involved in organisational learning. Therefore, as can be seen, Cummings and Worley identify both the phases that organisations need to go through to move from adaptive to transformational learn- ing, and the characteristics which promote organisational learning. Probst and Buchel (1997: 16), on the other hand, take a very different view, claiming that ‘Organizational learning is unique to an institution.’ That is to say that each organisa- tion can and should find its own way to become a learning organisation. They argue that there are at least four different generic approaches: ■ Learning by developing a strategy – shaping the organisation’s future through a participative and practical learning exercise. ■ Learning by developing a structure – developing structural forms, such as matrix and network structures, that promote learning. ■ Learning by developing a culture – the creation of shared values, norms and atti- tudes that promote collective success over individual attainment. ■ Learning by developing human resources – developing staff through participative and group-orientated learning. Despite the diversity and contradictions evident among those promoting the con- cept of organisational learning, one thing is clear: they all see the main purpose of learning as facilitating organisational change. As with the Culture–Excellence and the Japanese approaches, its popularity owes much to its posited beneficial link to organi- sation performance. However, unlike them, it is the only organisation theory whose main purpose is to enable organisations to cope with and promote change. As Probst and Buchel (1997: xi) comment: ... learning is attracting increasing attention both in academic circles and business practice. One of the main reasons for this is the increasing pressure of change on companies … The rate of change accelerates steadily, and companies must find their bearings in an increasingly complex environment. The ability to learn is thus of paramount importance. Companies which do not successfully implement organizational changes, and which fail to cultivate their potential to develop, may soon find themselves amongst the losers. As can be seen, there are considerable arguments in favour of the learning approach; yet, there are also arguments against it.
  • 145. 132 Chapter 3 · In search of new paradigms ■ Organisational learning: summary and criticisms Though there has been a considerable interest in the concept of organisational learn- ing over the past decade, this does not seem to have created the clarity one might have wished for. It is, therefore, difficult to summarise a concept that has been defined in so many different ways and from so many different perspectives. However, there are perhaps five aspects of organisational learning that most writers would agree upon: ■ An organisation’s survival depends on its ability to learn at the same pace as or faster than changes in its environment. ■ Learning must become a collective and not just an individual process. ■ There must be a fundamental shift towards systems (or triple-loop) thinking by an organisation’s members. ■ By adopting organisational learning, an organisation not only acquires the ability to adapt quickly and appropriately to changing circumstances, but it can also transform itself if necessary. ■ As well as the ability to transform itself, an organisation can adapt to, influence and even transform its environment. Presented in this way, it is easy to appreciate the attractiveness of organisational learning. As Huczynski and Buchanan (2001: 135) assert, however, the positive views of organisational learning need to be balanced with the negative ones (see Table 3.1). Table 3.1 Learning organisation positives and negatives Learning organisation positives Learning organisation negatives A rich, multi-dimensional concept affecting A complex and difficult set of practices, difficult many aspects of organisational behaviour to implement systematically An innovative approach to learning, to knowledge An attempt to use dated concepts from change management and to investing in intellectual capital management and learning theory, repackaged as a management consulting project A new set of challenging concepts focusing A new vocabulary for encouraging employee attention on the acquisition and development compliance with management directives in the of individual and corporate knowledge guise of ‘self development’ An innovative approach to organisation, An innovative approach for strengthening management and employee development management control Innovative use of technology to manage A technology-dependent approach that organisational knowledge through databases ignores how people actually develop and use and the Internet or intranets knowledge in organisations Source: from Huczynski and Buchanan (2001: 135) Huczynski and Buchanan are not the only ones to draw attention to the more problematic aspects of organisational learning. The major criticisms of organisational learning can be grouped under six major headings:
  • 146. Organisational learning 133 1 As is apparent from the above review, there is no agreed definition of organisa- tional learning (Burnes et al, 2003; Easterby-Smith, 1997; Probst and Buchel, 1997; Tsang, 1997; Wang and Ahmed, 2003). Even Tom Peters (1993: 385), who might be expected to be attracted to the concept, stated that: ‘Most talk about “learning organisations” is maddeningly abstract or vague – and perpetually falls short on the specifics.’ 2 Despite the volume of publications on the subject, there is a scarcity of rigorous empirical research in the area. As Tsang (1997) pointed out, one of the main rea- sons for this is that many of those writing on organisational learning are practitioners and consultants seeking to prescribe and sell rather than describe or analyse. He argues that, as well as promoting the concept, they are also trying to promote themselves and the organisations they work for. A similar point was also made by Easterby-Smith (1997: 1107): Much of the existing research into learning organizations is based on case studies of organizations that are said to be successful, and these sometimes seem to rely more on public relations than on any rigorous and grounded studies. If this is the situation, then much of the research on organisational learning, and the recommendations and conclusions that flow from it, have to be treated with a degree of scepticism. 3 As Thompson (1995) pointed out, ‘The term organizational learning is actually a misnomer. In fact an organization itself doesn’t learn – people learn.’ It follows that, in most organisations, the achievement of a high level of organisational learn- ing will necessitate a fundamental shift in how individuals learn. This is not just a case of collecting and sharing information in new ways but, crucially, of thinking in new ways (Argyris and Schon, 1978). This requires individuals to undergo diffi- cult and sometimes painful changes involving unlearning old ways of thinking and the redrawing of their cognitive maps – the way they perceive and make sense of the world around them. Many writers have commented on the serious obstacles to achieving such changes (Argyris, 1990; Hedberg, 1981; Probst and Buchel, 1997; Wang and Ahmed, 2003). However, above and beyond these difficulties lies a fur- ther issue. In engineering such changes in an individual’s thought processes, it is not just their perception of the organisation that is being changed, but their percep- tion of the world outside work and how they relate to it and to others around them. What are being tampered with are deep-rooted personality traits and con- structs that are fundamental to an individual’s psychological make-up. In such cases, one has to question not only the extent to which such attempts can ever be successful, but also whether it is even ethically justifiable to try. 4 Probst and Buchel (1997) maintain that organisational learning requires the gener- ation of diversity of opinion and, at the same time, the creation of consensus. They argue that these contradictory tasks can be reconciled and achieved through the development of a collective view of reality. Their view assumes that it is in every- one’s interest to participate in organisational learning and the ensuing changes. Although some writers, especially Argyris (1990) and Easterby-Smith et al (2000) recognise that there are major barriers to organisational learning, the assumption is that these can be overcome. However, as Chapter 1 demonstrated, much of our
  • 147. 134 Chapter 3 · In search of new paradigms organisational experience since the Industrial Revolution has shown that managers view knowledge and control as almost synonymous. To this end, managers have systematically attempted to reduce workers’ knowledge and increase their own (Rose, 1988). As will be discussed further in Chapter 5, organisations are riven by political battles, and the possession and selective use of knowledge is a potent weapon in such situations (Pfeffer, 1981). Beyond that, however, many traditional managers are unlikely to welcome the creation of organisations which encourage openness, and allow subordinates to seek out their own knowledge and question the expertise and authority of their superiors. As Garratt (1999: 205) put it: A few, often senior, people can see the concept as highly challenging and unnerving. They are concerned that existing organisational power balances may be upset by too much ‘transparency’ … Given what we know about resistance to change, given what we know about power and politics in organisations, it is surprising, as Blackler and McDonald (2000) and Coopey and Burgoyne (2000) note, that so little attention has been paid to these issues by those investigating and promoting organisational learning. 5 Though Japanese companies are often held up as exemplars of organisational learning, most theory and practical advice in this area has been developed in the West, especially the US. The proponents of organisational learning argue that the recipes they have developed are applicable to all organisations and cultures; never- theless, many writers have drawn attention to the problem of transferring theories and practices developed in one culture to another (Deresky, 2000; Hedlund and Nonaka, 1993; Hofstede, 1993; Rosenzweig, 1994; Thomas, 2003; Trompenaars, 1993). For example, openness and the encouragement of public debate and criti- cism are seen as an essential part of organisational learning (Chawla and Renesch, 1995). Although US managers might not find this too difficult to accept, it is doubtful whether, for example, Japanese or Chinese managers, with their tradition of preserving face, would find it so easy (Deresky, 2000). Face involves both main- taining one’s own dignity and decorum and, at the same time, not undermining or attacking the dignity and decorum of others. Therefore, Japanese and Chinese managers, and managers from other non-Western countries, might find it very dif- ficult openly to challenge and criticise the behaviour and ideas of others or for others to do this to them (Ho, 1976; Jones et al, 2000; Tsang, 1997). Similarly, as was noted in the previous chapter, proponents of Contingency Theory argued against universal approaches to organisational effectiveness and in favour of a con- text-based approach (Burns and Stalker, 1961; Woodward, 1965; Child, 1984). In particular, they maintain that theories and practices developed with one sort of organisation/situation in mind may be much less effective in a different set of cir- cumstances (Burnes, 1991). 6 Burnes et al (2003) point out that the case for the general adoption of organisational learning is based on the assumption that all organisations operate in a fast-moving and unpredictable environment. In such a situation, the ability to learn and adapt must be possessed by all members of an organisation and not just a few at the top. Burnes et al argue that this may be the case for companies in the IT sector, but other sectors may experience a much lower level of environmental disturbance. Also, they
  • 148. Conclusions 135 maintain, even in fast-moving sectors such as IT, there are companies, such as Microsoft, whose dominant position allows them a degree of predictability and sta- bility (Coupland, 1995; Wallace and Erickson, 1992). In addition, Burnes et al pose the question: if an organisation can develop the ability to transform its environment, what is to stop it creating an environment where organisational learning is unneces- sary? After all, given the many obstacles and barriers to developing and maintaining organisational learning, this would appear an attractive proposition. In conclusion, we can perhaps agree with Probst and Buchel (1997: xi) who warn that: We should be wary of dismissing it [organisational learning] as the latest fad, since the topic of learning is attracting increasing attention both in academic circles and in business practice. However, we can perhaps also agree with Mintzberg et al’s (1998b: 228) double- edged compliment that: … [organisational learning] is all the rage right now, and mostly for good reasons. But it is no panacea for anything. People have to learn, but they also have to get on with doing the regular work efficiently. (Horses wear blinders for good reasons). There can be a time to learn and a time to exploit previous learning … So learning is wonderful, but there can be too much of a wonderful thing! Conclusions This chapter has examined the three main approaches to managing and structuring organisations that have dominated Western thinking and practice over the last two decades. The proponents of all three approaches claim that theirs is a new paradigm that contrasts sharply and favourably with the organisational theories discussed in Chapters 1 and 2. This does not mean there are not some similarities with what has gone before. For example, the Japanese use the industrial engineering concepts devel- oped by Taylor and his contemporaries to study and design jobs. However, the context in which they are deployed (the lack of payment by results, the use of team- work and worker involvement, and above all else, guaranteed jobs) is markedly different. In a similar way, the Culture–Excellence approach can be seen to bear some similarities with the Human Relations movement, especially in its emphasis on leader- ship and communication. However, the emphasis on culture, individual achievement and all-round excellence make it a distinct approach. The same can be said of organi- sational learning, which builds on, but develops in a wider context, past practices for encouraging individual and group learning. There are also points of contact between the three approaches themselves. Organisational learning consciously draws on the methods used by the Japanese to gather and use information speedily. In addition, it stresses, as with Culture–Excellence, the importance of individuals in promoting innovation. However, it also clashes with the other two approaches. Advocates of organisational learning stress that it can enable com- panies to shape and create their environment, whilst supporters of Culture–Excellence stress that organisations have no choice but to adapt to their environment. It is at odds
  • 149. 136 Chapter 3 · In search of new paradigms with the Japanese approach in terms of change. The Japanese favour directed continuous incremental change, whereas the organisational learning approach encourages continuous but often undirected adaptation and also transformational change. There are also points of contact between the Japanese approach and the Culture–Excellence approach (the emphasis on excellence, the importance of culture); but, again, there are marked differences. Lifetime employment and loyalty to the organisation contrast strongly with the stress on the temporary nature of jobs pro- posed by the proponents of Culture–Excellence. As an example, contrast the threat to thousands of jobs posed by the merger of the Halifax and Leeds building societies in the UK (in order to form the UK’s fourth largest bank) with the case of the merger of the Mitsubishi Bank and the Bank of Tokyo in Japan (to form the world’s largest bank), where it was stated that maintaining all jobs was a matter of honour (Hughes, 1995; Rafferty, 1995). Likewise, payment by seniority and payment by performance are significant points of departure (though there is an increasing, but still small-scale, use of performance pay in Japan). It is noticeable as well that neither the Culture–Excellence nor the organisational learning approaches really concern them- selves with the sort of hard, manufacturing/quality practices so common in Japan. Finally, the Culture–Excellence school seem obsessed with downsizing and arguing for smallness. The Japanese, on the other hand, are committed to growth. As Ferguson (1988: 57) remarked, in the 1970s and 1980s the USA was not outperformed by small, nimble organisations, but by ‘high industrial complexes embedded in stable, strategi- cally-co-ordinated alliances often supported by protectionist governments ... ’. On balance, though there are similarities, these three approaches conflict with, rather than complement, each other. The Japanese approach, with its combination of tried and tested, hard and soft techniques, provides a coherent and comprehensive approach to organisations which stresses both innovation and stability. The Culture–Excellence approach tends to emphasise soft techniques, innovation, dynamism and unpredictability, and, particularly, draws attention to the role of cul- ture. Organisational learning, as an attempt to provide a coherent paradigm for organisational competitiveness, is the newest and least concrete of the three. At one level it has affinities with the other two approaches, but its emphasis on learning as the principal source of competitiveness also distinguishes it from them. This does not mean that if Western organisations become more adept at adopting Total Quality Management and other such techniques, and if Japanese companies broaden their use of external labour markets and adopt more flexible structures, the three may not coa- lesce, especially given the common emphasis on learning. At the moment, however, they remain competitors rather than collaborators. Needless to say, none of the three approaches is without its drawbacks or criti- cisms. In particular, there are five concerns that should be highlighted, relating to ‘one best way’, people, politics, culture and change management. One best way The first three chapters of this book have been concerned with approaches to manag- ing and structuring organisations. The one clear message that has emerged so far is to beware of any theory or proposition which claims that it is the ‘one best way’ for all situations and all organisations. Yet all three of the approaches we have discussed in this chapter appear to advocate just that.
  • 150. Conclusions 137 People The Culture–Excellence and the Japanese approaches also leave much to be desired with regard to people. Both approaches rely on a workforce split into a privileged core and a relatively unprivileged periphery. Under both approaches there is a strong emphasis on commitment to the organisation taking precedence over all else, even family life. Therefore, long hours and short holidays are the norm under both sys- tems. The Japanese approach appears to offer more job security, at least for the privileged core. However, the price of this is that competition for jobs in the better organisations begins, quite literally, at birth. To get a job with the best companies, applicants have to have been to the best universities; to enter those, they have to have been at the best schools; and to enter the best schools, they have to have been at the best nurseries (Bratton, 1992; Fruin, 1992). The lack of clarity of the organisational learning concept makes it difficult to be certain what the implications of it are for people. However, it does project an intensity of work and commitment that aligns it with the Culture–Excellence approach. Also, its emphasis on restructuring individu- als’ cognitive processes in order to overcome their resistance to learning is, potentially at least, very worrying. Therefore, taking all three approaches together, one cannot escape the conclusion that the social cost of achieving excellence, in either West or East, is high. Politics The issue of organisational power and politics has received extensive attention over the last 20 years (Buchanan and Badham, 1999; Kotter, 1982; Minett, 1992; Pfeffer, 1981, 1992; Willcocks, 1994) and will be explored in Chapter 5. Given that organisations are social entities and not machines, power struggles and political infighting are inevitable. They may not always be prominent, but tend to come to the fore in situations where resources are scarce or organisations are in transition (Morgan, 1986). It is perhaps here that Peters and Waterman, with their notion of total openness and trust to the extent of employees effectively allowing others to monitor their work, could most easily be accused of being out of touch with reality. There is a tendency in the West to treat politics and conflict as illegitimate; but, as Pascale (1993) and Thompkins (1990) argued, conflict is part and parcel of the creative process, and political skills may be a key competence for managers if they are to be successful leaders and persuaders. To ignore the presence of conflict or underestimate its tenacity is usually a recipe for disas- ter (Kanter et al, 1992; McLennan, 1989; Pfeffer, 1992; Robbins, 1986). However, in the Japanese, organisational learning and Culture–Excellence approaches, little is said on the subject of organisational politics and conflict. As far as the Culture–Excellence and organisational learning perspectives are concerned, there appears to be an assumption that employees working in smaller business units, having greater autonomy and more satisfying jobs, will work with each other, pursu- ing a common purpose. As Chapter 5 will show, this is perhaps an unrealistic expectation. It may well be that in Japanese organisations, with their consensual and open approach to decision-making, strong commitment to organisational goals, high peer group pressure and, for some at least, lifetime employment, conflict is either minimised or channelled into creative directions; though Ishizuna (1990), Kamata (1982) and Sakai (1992) have shown that this is not always the case. However, in the West, with companies reshaping their businesses, where job security is being eroded,
  • 151. 138 Chapter 3 · In search of new paradigms where an individual’s current performance outweighs all other considerations, and where only the fittest and fleetest of foot can expect to survive, it is foolish to deny or underestimate the importance of power and politics or to believe that culture can act as a cure-all. Culture This brings us to the next concern to which these three approaches give rise. Proponents of all three approaches treat culture in a rather simplistic fashion. For the Culture–Excellence school, all problems are resolved through the creation of strong, flexible, pragmatic cultures which promote the values of trust, cooperation and team- work. A similar point can also be made with regard to the creation of a learning culture. In neither approach is there any real discussion or acknowledgement of the difficulties in defining or changing culture, despite much evidence to the contrary (Allaire and Firsirotu, 1984; Schein, 1985; Wilson, 1992). Nor do those who seek to promote the Japanese approach treat the subject of culture any more thoroughly. Either it is portrayed as an immutable feature of Japanese companies which prevents the West from adopting the Japanese approach or, more frequently these days, the Japanese approach is seen as somehow independent of culture (Sheldrake, 1996; Smith and Misumi, 1989). Very few writers acknowledge that Japanese companies, like their Western counterparts, can find themselves with apparently inappropriate cultures that they wish to change (Ishizuna, 1990). Therefore, all three approaches clearly leave themselves open to the accusation that they gloss over the difficulty of changing culture. The role of organisational culture will be examined in Chapter 5. Change management There is one last issue that should be touched on: the management of change. Organisation theories are also theories of change. Most organisation theories claim to show organisations how to identify where they are and where they should be. They also, either explicitly or implicitly, address the issue of change management. For the Classical school, change management is relatively easy: it tells organisa- tions what they should be and, because managers and workers are rational beings, they should accept any concomitant changes because it’s the logical thing to do! A similar approach is adopted by the Contingency Theorists. The Human Relations movement, on the other hand, sees change as more problematic. Organisations are social systems, change is not a rational process, emotions come into play as well. Therefore, persuasion and leadership play a key role in changing organisations. The Culture–Excellence approach has little to say about how change should be achieved, despite acknowledging the radical transformation it is advocating. Peters (1993) advocated a ‘Big Bang’ approach to change: ‘change radically and do it quickly’ seems to be his advice. Handy (1986), on the other hand, seemed to adopt a more gradualist approach to change – big changes over long periods. Kanter et al (1992) advocated a combination of both; they argue that major changes, especially in behav- iour, can only be achieved over time. However, they also believe that dramatic gestures are also necessary to improve performance in the short term. Therefore, their approach to change is a combination of ‘Bold Strokes and Long Marches’. Taken as a whole, the message from the Culture–Excellence school is somewhat mixed and the process and details are lacking, notwithstanding Kanter et al’s (1992) book on change.
  • 152. Test your learning 139 Though organisational learning is explicitly directed at enabling organisations to change, its proponents are vague and inconsistent in specifying how one leads to the other, and particularly how the ultimate goal, of becoming a learning organisation, can be achieved (Probst and Buchel, 1997). Nor is it clear how the plethora of change initiatives generated by learning will lead to effective, coordinated and complemen- tary overall change (Easterby-Smith, 1997; Tsang, 1997). The Japanese approach, however, is more specific. They advocate creating a vision of the future and moving towards it in incremental steps (Kaizen) at all levels of the organisation. The Japanese are extremely able at this process, which has given them a reputation as a nation that makes ambitious long-term plans which are slowly, relent- lessly and successfully achieved. However, it is debatable whether this approach could work in many Western countries. In the USA and UK in particular, competitive pres- sures appear to require radical change over a short timescale, and at the same time there appears to be a built-in aversion to long-term thinking, especially amongst the financial institutions who play a pivotal role in the life of most firms. Therefore, though the organisational learning, Japanese and Culture–Excellence approaches have their strong points, they also have their drawbacks, at least as far as Western companies are concerned. For this reason, none have achieved the same intel- lectual dominance enjoyed by past paradigms, though the Culture–Excellence approach has come to exert a powerful influence on managerial attitudes and behav- iour over the past two decades. However, this lack of a dominant paradigm is not necessarily a cause for despair. Developing paradigms by their very nature will con- tain dilemmas and contradictions that can only be resolved with experience and the passage of time. This is not a case for ignoring them; rather the reverse. The future is not, hopefully, immutable. Managers are not powerless, they do have some freedom of choice and action, and the possibility does exist to influence the future shape of work by promoting the good and avoiding the bad. Parts 2, 3 and 4 of this book will further consider managerial choice and the degree to which organisations are free to shape their own future. Before moving on to this, however, the final two chapters in Part 1 will round off the review of organisation theory by examining, in Chapter 4, the case for and alternatives to the postmodern perspective on organisations and, in Chapter 5, the role of culture, power and politics in constraining and enabling organisational choice. Test your learning ■ Short answer questions 1 What is a paradigm? 2 Why did In Search of Excellence become an instant best-seller when it was first published? 3 List the main tenets of the Culture–Excellence approach. 4 What is a Shamrock organisation? 5 What are the main personnel and business issues that make up Japanese management?
  • 153. 140 Chapter 3 · In search of new paradigms 6 What are seen as the main benefits of the Japanese approach? 7 Define organisational learning. 8 State the key arguments in favour of organisational learning. 9 For each of the following, briefly state its implications for organisational change: (a) Culture–Excellence, (b) the Japanese approach and (c) organisational learning. ■ Essay questions 1 What are the main similarities and differences between the Culture–Excellence approach and Japanese management? 2 What are the core tenets of organisational learning and what difficulties might an organi- sation encounter in introducing it? Suggested further reading 1 Peters, TJ and Waterman, RH (1982) In Search of Excellence: Lessons from America’s Best- Run Companies. Harper and Row: London. In order to capture the essence of Culture–Excellence, there is no better book to read than the one that began it all. 2 Wilson, DC (1992) A Strategy of Change. Routledge: London. David Wilson’s book provides a pithy and critical analysis of the shortcomings of the Culture–Excellence approach. 3 Sheldrake, J (1996) Management Theory: From Taylorism to Japanization. International Thompson Business Press: London. Michael Sheldrake provides a brief but good review of the work of Charles Handy and also of the rise of Japanese management. 4 A more comprehensive and up-to-date review of Japanese management can be found in Sako, M and Sato, H (eds) (1997) Japanese Labour and Management in Transition. Routledge: London. 5 Probst, G and Buchel, B (1997) Organizational Learning. Prentice Hall: London. For a brief, comprehensive and comprehensible look at organisational learning, this book is excellent.
  • 154. Chapter 4 Critical perspectives on organisation theory Postmodernism, realism and complexity Learning objectives After studying this chapter, you should be able to: ■ discuss the contribution of postmodernism to organisational theory; ■ list the strengths and shortcomings of postmodernism with regard to the design and management of organisations; ■ understand the main tenets of the realist perspective; ■ discuss the strengths and weaknesses of the realist perspective for organisations; ■ describe the influence of complexity theories on our understanding of organisations; ■ state the main advantages and disadvantages of the complexity approach to organisations; ■ appreciate the limitations of rational approaches to organisations; ■ comprehend how postmodernism, realism and complexity widen the scope for organisational choice.
  • 155. 142 Chapter 4 · Critical perspectives on organisation theory Exhibit 4.1 Realism replaces grand visions Realism replaces grand visions FT Major innovations have had their day in the tele- ices, and operators must develop strategies now to coms sector – at least for the time being. Mobile capture a share of this market, says Ovum, the IT operators have been forced to become more realis- consultancy. Operators have quickly rethought their tic. This will be apparent at CeBIT, where changes strategies to emphasise the importance of applica- will be small and mainly restricted to the refining of tions over technology; with MMS, they are keen to existing services. offer customers far more ways of spending money ‘We want to make the benefits of new applica- than simply sending photos. tions clear,’ says Rudolf Groger, head of O Germany, In recent years, the mobile industry lost sight of the country’s smallest mobile operator. ‘Content and end-users. ‘They showed their imaginative ideas but customer advantage will be to the fore.’ Technology no one could do anything with them,’ says Nikolaus – especially UMTS, the long-awaited third-generation Mohr, a consultant at Accenture. At CeBIT, they will mobile technology being deployed in Europe – will make sure this time that their offerings are money- be in the background. making rather than just visionary. The collapse in the telecom industry’s fortunes ‘Operators thought they could sell customers after the peak year of 2000 pitched it into a deep technologies like UMTS or Wap,’ says Nigel crisis. Now, cost-saving is the top priority and invest- Deighton, an analyst at Gartner, the IT consultancy. ment budgets have been slashed. ‘They didn’t show people how they could benefit In Germany alone, companies have paid out from them.’ Now, they are concentrating on practical around Euros 50bn for their UMTS licences – but products. Whereas they used to plan years ahead, the technology, which was supposed to produce big the focus is now on customer solutions which can and rapid profits, has not yet overcome its teething be introduced in the next six to 12 months. troubles. UMTS launches have been postponed until Not surprisingly, the need to cut debts has led to the middle or end of this year and sales expectations hugely increased pressure for short-term revenues. have been revised sharply downwards. ‘Companies now want to make money rather than Nevertheless, T-Mobile, Vodafone, E-Plus and O constantly launch new innovations,’ says Marcus are pinning their hopes on new data services, such as Sander, an analyst with Sal. Oppenheim, the German the sending of photos by mobile phone. The small private bank. ‘They have come down to earth. The pictures, of which 3m were sent by camera telephone level of expectations for UMTS has been reduced. in Germany last year, have caught the attention of Everything is taking longer than the operators mobile operators. So-called multimedia messaging thought. The big revenues from UMTS are far in the services (MMS) are aimed at persuading customers future’. Even at the beginning of last year, companies to use their phones more and thus boost turnover. were reluctant to believe this. By 2007, mobile phone users are expected to be spending about Euros 66bn worldwide on data serv- Source: Kristina Spiller, Financial Times, 12 March 2003, p. 2. Introduction It is now commonly believed that our world is changing significantly and that we are entering a new era (Berkeley Thomas, 2003; Cooper and Jackson, 1997; Deresky, 2000; Giddens, 2002; Handy, 1997; Hardaker and Graham, 2002; Hatch, 1997; Kanter et al, 1997; Peters, 1997a). Whether we refer to this development as ‘the Information Age’, ‘the Age of the Internet’, ‘the Age of Innovation’, ‘the Age of Unreason’, ‘Post Industrial Society’, ‘the Postmodern Age’ or ‘Globalisation’, the mes- sage is the same: what worked in the past will not work in the future, and
  • 156. Introduction 143 organisations, like society at large, will have to change in unprecedented and unantic- ipated ways if they are to survive. However, despite all this talk of a brave new world, in the wake of the dotcom collapse, more and more companies are searching for some form of twenty-first century realism and rejecting the grand visions of the 1990s, as Spiller’s article, Exhibit 4.1, illustrates. But, of course, there are many who will argue that their 1990s visions were realistic and that today’s reality is too pedestrian and lacking in ambition. This chapter will examine three critical perspectives on organisa- tion theory with a view to understanding how they view ‘reality’ and the implications of their differing views for organisations. The previous three chapters have described the development of organisations and organisation theory from the Industrial Revolution through to the present day, in order to show the various approaches to and options for designing and running organisations so as to meet the challenges they face. What has emerged is a somewhat confusing picture of theories which claim, each in their own way, to be the answer to all organisational ills, yet which are all open to potentially damning criticisms. All the theories we have examined claim to give practical and coherent advice to managers on how to structure and run their organisations. Yet it is in their limited applicability to the range and complexity of situations found in everyday organisational life that these theories are most open to criticism: ■ The tendency to assume a unitary frame of reference, in which the interests of workers and managers, blue-collar and white-collar staff, and people of different genders, ethnicity and religions either coincide or can be easily reconciled, is a clear shortcoming in all these theories. ■ The belief of the Classical school and the Human Relations movement that contex- tual factors – the external environment, size, technology, etc. – are either irrelevant or easily accommodated is another obvious flaw. ■ The assumption by both the Contingency theorists and the proponents of Culture–Excellence that managers are powerless to change the situational variables they face, and have no choice but to accept the prevailing recipe for success, is not borne out in reality. ■ There is a growing scepticism regarding the ability of rational, objective science to provide an explanation for the many and fundamental changes taking place in organisations and the wider society. ■ One of the most serious drawbacks is that only the Culture–Excellence school, and to a lesser extent the organisational learning and Japanese approaches, give any importance to the role of organisational culture – and even then it is treated in a simplistic fashion. ■ None of the theories give serious consideration to the role of power and politics in influencing decision-making in organisations. Not only does this go against a great deal of research that has been produced over the last 20 years, but it also runs counter to most people’s own experience of organisational life. ■ Lastly, these theories explicitly or implicitly reject the notion of choice. Their basic argument is that organisations need to follow ‘their’ recipe for success or they will fail. Yet, if we look at the population of organisations, we can see a vast variety of approaches to their design and management. Some, for periods of time at least, may seem more successful than others, but most organisations appear capable of surviving whether they adopt the current recipe in full, in part or totally reject it.
  • 157. 144 Chapter 4 · Critical perspectives on organisation theory This, and the following chapter, which is devoted to an examination of culture, power and politics, will address these issues, especially the final three points. This chapter examines three important and critical perspectives on organisations: postmodernism; realism, and complexity. It begins with the examination of postmodernism. This is a loosely-defined philosophical movement which, though originally based in the arts, has become increasingly influential in the social sciences over the last 20 years. It is a way of looking at the world that rejects rationality. Instead, it concentrates on the ways in which human beings attempt to shape reality and invent their world. This is followed by a review of the realist perspective on organisations. Like postmodernism, realism is a philosophical doctrine that was first applied to the arts but has in recent years been taken up by organisation theorists. Also like postmodernists, realists believe that reality is socially-constructed. But, unlike the postmodernists, realists reject the notion of multiple realities. The essence of realism is that there is only one reality and it exists even if we have not yet discovered it. They see both the natural and social worlds as consisting of complex structures which exist even if we are not aware of them or how they influence our behaviour. For realists, events and patterns of events are generated or caused by mechanisms and powers that exist independently of the events they generate. Therefore, realists do not deny the ability of human beings to shape their world, but they see this ability as being limited by an ensemble of real and concrete structures, practices and conventions in society. Contrary to the former two perspectives, the third critical perspective on organisations considered in this chapter, complexity, arose from the natural sciences before being taken up by social scientists. Complexity theories are concerned with how order is created in dynamic non-linear systems. In particular, those applying this approach to organisa- tions maintain that successful organisations need to operate at the ‘edge of chaos’ and can only maintain this position by the presence of appropriate order-generating rules. The chapter concludes by arguing that, whilst these three approaches differ signifi- cantly, what they have in common is that they open up the prospect that organisations have choices in what they do and how they do it. Rather than being the prisoners of organisational theories or contingencies, managers (potentially) have considerable, though by no means unconstrained, freedom of choice over the struc- ture, policies and practices of their organisations, and even over the environment in which they operate. This then leads on, in Chapter 5, to an examination of the role of culture, power and politics in the identification, shaping and pursuit of choices. The postmodern perspective ■ From modernism to postmodernism? As was described in Chapter 3, a sea-change has taken place over the last 20 years in terms of how we view organisations. The Culture–Excellence model, the Japanese approach and organisational learning all have links with the past but they also repre- sent a break with what has gone before. Running alongside these developments and to a large extent giving them a theoretical respectability, albeit mainly an unacknowl- edged one, is the view that we have moved from the modern to the postmodern world.
  • 158. The postmodern perspective 145 For Alvesson and Deetz (1996: 191–2), it was the changing nature of work and competition in the 1980s that forced organisation theorists to question existing and entrenched assumptions about the world: The increased size of organizations, rapid implementation of communication/information technologies, globalisation, changing nature of work, reduction of the working class, less salient class conflicts, professionalization of the workforce, stagnant economies, widespread ecological problems and turbulent markets are all part of the contemporary context demanding a research response. Initially, in the 1980s, much of the debate about the changing nature of the modern world revolved around the posited move from ‘Fordist’ to ‘post-Fordist’ or ‘neo- Fordist’ forms of work organisation. This debate, over the move from mass production to flexible specialisation, initially centred on the work of Piore and Sabel (1984). Their argument was that the age of Taylorism and Fordism, the age of mass production, was dead. Mass production was concerned with the production of stan- dardised goods for stable mass markets using a form of work organisation that was characterised by the intense division of labour, the separation of conception from exe- cution and the substitution of unskilled for skilled labour (Tomaney, 1990). It was argued, however, that the market conditions that allowed Fordism to thrive have passed. The emergence of segmented and highly volatile markets, brought about by changes in consumer tastes and technological innovation, require organisations to be highly flexible in order to succeed in these post-Fordist conditions (Laudon and Starbuck, 1997). According to Piore and Sable (1984), in the present day only decentralised, worker- run firms have the flexibility, skills and commitment to cope with sudden shifts in consumer demands, volatile input prices and rapid changes in technology. They drew on the operation of loose alliances of small firms in Italy to substantiate their case. Though an attractive proposition to some, there does not appear to have been any great movement to create the decentralised worker cooperatives envisaged by Piore and Sable, as Williams et al (1987) showed. Instead, other writers began to argue in favour of the emergence of neo-Taylorist or neo-Fordist organisational forms (Smith, 1994; Whitaker, 1992). Rather than the age of industrial bureaucracy coming to an end, it was argued that it was going through a two-pronged programme of change. On the one hand, computerised automation was linking together machines and processes and thus eliminating labour. On the other hand, where this was not possible, managers were shifting production to low-wage regions of the world (Froebel et al, 1980). As Smith (1994) argues, the problem with this perspective is that though it fits, for example, General Motors, it does not fit Toyota, which has proved by far the more suc- cessful company. Sayer (1989) complains that the post-Fordist literature is confused, riddled with speculation and is selective in its use of evidence. Piore and Sable (1984) in particular have come in for much criticism, especially in relation to what some see as their over-optimistic view of the developing nature of work (Amin and Robins, 1990). Therefore, though their supporters can point to examples of flexible specialisation and post- and neo-Fordism, the explanations they gave for these and the implications they drew from them seem both partial and particularistic (Whitaker, 1992). Indeed, given the breadth and magnitude of the new organisational developments and forms discussed
  • 159. 146 Chapter 4 · Critical perspectives on organisation theory in Chapter 3, terms such as flexible specialisation, post-Fordism and neo-Fordism seem to have only a limited ability to explain the many changes taking place in organ- isational life. Nevertheless, what this debate did was to create a receptivity amongst a wider audience for the work of the postmodernists, who provided a more substantial and complex explanation for the changes taking place in the world around us. Depending on whom one reads, postmodernism is either a relatively new concept or it has been around at least since the 1930s (Appignanesi and Garratt, 1995; Featherstone, 1988a). Certainly, the term became fashionable among young writers, artists and critics in New York in the 1960s. In the 1970s and 1980s, the term became more widely used in architecture, music and the visual and performing arts (Hassard, 1993). However, its adoption by organisation theorists stems from the work of the poststructuralist movement in French philosophy, which emerged in the 1960s. The interest in meaning and interpretation by symbolic-interpretive organisa- tion theorists, drawing on linguistic, semiotic and literary theory, also served to increase interest in postmodernism (Hatch, 1997). In the 1970s and 1980s, it became most closely associated with the work of Jean Baudrillard (1983), Jacques Derrida (1978), Michel Foucault (1977) and Jean-François Lyotard (1984). Researchers in organisation and management studies came relatively late to post- modernism. It was only in the late 1980s, with, for example, the work of Smircich and Calás (1987) and Cooper and Burrell (1988) that postmodernism started to impact on organisation theory. The interest in postmodernism by many social scien- tists and organisation theorists stemmed from their growing belief that existing, modernist, theories, such as the Contingency approach, could no longer account for the changes taking place in the world of work and society in general. In particular, there was an increasing scepticism concerning the ability of rational, objective science to provide absolute and unitary knowledge of the world. In its place, postmodernists argue for a relativist position that emphasises multiple realities, fragmentation and subjectivity (Linstead, 1993). Postmodernism, as the term implies, is something that carries on from, succeeds or takes its frame of reference from modernism. Therefore, it is necessary to understand how the proponents of postmodernism define modernism in order to appreciate their arguments. Modernism is a term used to describe the values, rationale and institu- tions that have dominated Western societies since the Age of Enlightenment in the eighteenth century. This was the period in which European thought, led by France and Great Britain, is seen as making a decisive break with the superstition, ignorance and tradition of the Middle Ages. In its place emerged a strong belief in progress, eco- nomic and scientific rationality, a search for the fundamental rules and laws that govern both the natural world and human nature, and a commitment to a secular, rationalist and progressive individualism (Gergen, 1992; Hassard, 1993). As Hobsbawm (1979: 34) noted, ‘Liberty, equality and (it followed) the fraternity of all men were its slogans.’ Linstead (1993: 99) commented that the Enlightenment: ... produced a commitment to the unfolding of progress through history, the incremental growth of knowledge through science and the resulting inevitable subordination of nature to culture and the control of man.
  • 160. The postmodern perspective 147 Also, as Gergen (1992: 211) stated, modernist ‘presumptions remain vital through- out contemporary culture, and have left an indelible mark on theories of organization from early in the [twentieth] century to the present.’ Modernists, therefore, assume that the world, both social and natural, and its structuring principles, are accessible through the correct (scientific) methods of observation and analysis. In relation to organisational life, the term modernism is used to describe the form of organisation that has dominated both the public and private sectors over the past 100 years (Biberman and Whitty, 1997). In the previous chapters, we have termed this the Classical or bureaucratic model, though others use terms such as Taylorist, Fordist or machine-era paradigm (Fox, 1994; Smith, 1994; Tomaney, 1990). It is an organisa- tional form which, its proponents argue, is based on rationality, logic and the pursuit of scientific rules and principles. Such organisations are characterised by mechanistic and hierarchical structures based on the extreme division of labour, and control sys- tems that suppress people’s emotions and minimise their scope for independent action. Exhibit 4.2 Some features of postmodernism Fragmentation: the breaking up of established structures into fragments. De-differentiation: the blurring or dissolution of established boundaries. Hyper-reality: confusion and mixing of the real with artificial/virtual realities. Chronology: interest in the past and its imitation alongside/instead of the future. Pastiche: the playful mixing of styles of decoration, dress, expression, etc. Anti-foundationalism: rejection of all basics, absolutes, fundamentals, universals, etc. Pluralism: all of the above happening simultaneously! Source: Berkeley Thomas (2003: 214) As can be seen from Exhibit 4.2, postmodernism offers a very different view of the world from that of the modernists. Postmodernism opposes or denies the validity of the Enlightenment’s emphasis on reason, logic and rationality as the foundation of scientific method and the basis for the establishment of truth. Postmodernism chal- lenges the claim of science to establish authoritative or absolute knowledge. Instead, it argues that scientific knowledge is a social construction by the scientific community, and that new scientific paradigms are brought about by changes in the community of scientists rather than scientific discoveries per se (Hassard, 1990). Therefore, for postmodernists, knowledge is relative, not absolute. Postmodernism is, as Watson (1997: 383) states: A way of looking at the world which rejects attempts to build systematic explanations of history and human activity and which, instead, concentrates on the ways in which human beings ‘invent’ their worlds, especially through language and cultural innovations.
  • 161. 148 Chapter 4 · Critical perspectives on organisation theory One of the crucial distinctions between modernists and postmodernists is how they view the nature of language: For the modernist, language was simply a tool for the logical representation of the real ... Within the postmodernist view, language ... gains its meaning and significance through its placement within social interchange. Words fail to make sense (they remain nonsense) until there is at least one other person to give assent to their meaningfulness. (Gergen, 1992: 213–14) Therefore, if language is a social construct, one cannot take the statements, rules and practices of particular groups and organisations at face value. Instead, taking their cue from Derrida (1978), postmodernists often begin their analysis of a situation or event by ‘deconstructing’ the language used. Deconstruction is an approach that seeks to reveal and overturn the assumptions underlying an argument, proposition or theory. Overturning assumptions opens up space for previously unconsidered alter- natives. In the postmodernist approach, alternatives are left open to multiple interpretations, and the acceptance of multiple, fragmented realities is seen to displace the idea of one unitary transcendent reality (Hatch, 1997). Like many others, the postmodernists recognise that the various stakeholders in an organisation each have different perceptions of what the organisation should do and whose views and inter- ests should be paramount. Where they differ, however, is that they do not believe that there is a correct view or that one view has a right to be paramount. Instead, post- modern management and organisation theory, beginning with a process of deconstruction, ‘ ... seeks to reconstruct organizations by restoring a sense of har- mony and balance in our species, our institutions, and our theories’ (Gephart et al, 1996: 364). This leads on to another prevailing theme within postmodernism: self-reflexivity – a critical suspicion of one’s own suppositions. If reality and language are social con- structs, then, so the postmodernist argument goes, to avoid the modernist error of believing they have discovered a fundamental truth or reality, postmodernists must constantly question and be suspicious of their own assumptions, statements and actions (Lawson, 1985). Moving on to the links between postmodernism and organisation theory, the con- cept of self-reflexivity has similarities to Argyris and Schon’s (1978) notion of double- and triple-loop learning, which promotes the questioning and challenging of existing organisational assumptions (see Chapter 3). Other aspects of Argyris’ work also show postmodernist leanings, particularly his questioning of the inner contradictions of research methods (Argyris, 1980). We can also see postmodernist tendencies in Morgan’s (1986) Images of Organizations, in which he treats existing organisation theories as literary metaphors. Moving into the heartland of organisation theory, Linstead (1993) argues that under postmodernism, hierarchies of merit, legitimacy and authority give way to net- works, partnerships and organisational structures of a shifting, fluid and social nature. These are driven by external forces, such as markets or competition, and are ad hoc, short-term, fragmentary and localised. According to Daft (1998), necessity will force postmodern organisations to develop more flexible and decentralised organisation structures with fuzzy boundaries both internally and externally. In such organisations, he believes, leaders will become facilitators who will communicate
  • 162. The postmodern perspective 149 through informal, oral and symbolic channels, control will be exercised through self- regulation, planning and decision-making will be inclusive and egalitarian principles will hold sway. In a similar vein, Clegg (1990) suggests clear distinctions between modernist and postmodernist organisational forms (see Table 4.1). Table 4.1 Comparison of modernist and postmodernist organisational forms Modernist organisations Postmodernist organisations Structure Rigid bureaucracies Flexible networks Consumption Mass markets Niche markets Technology Technological determinism Technological choice Jobs Differentiated, demarcated Highly de-differentiated, and deskilled de-demarcated and multi-skilled Employment relations Centralised and standardised Complex and fragmentary Clegg acknowledges that postmodern forms of organisation are somewhat ill- defined. Nevertheless, he argues that they are associated with developments such as flexible specialisation and post-Fordism, and that examples of postmodern organisa- tions can be found in Japan, Sweden, East Asia and Italy. However, he does point out that whilst they can be associated with progressive developments, such as the exten- sion of industrial democracy in Sweden, they can also be linked to more repressive and elitist developments, such as the segmented labour force policies adopted by Handy’s Shamrock organisation (see Chapter 3). In the Shamrock organisation, there are three classes of employees – core workers, the contractual fringe, and the flexible labour force. Each of these three segments of the organisation’s workforce has very different conditions of employment and is treated and valued very differently. Therefore, for Clegg, and an increasing number of organisation theorists, postmod- ernism has arrived, it is having a major impact on the nature and functioning of organisations, and it will continue to do so. There are two areas of organisational life to which the postmodernists have paid particular attention: culture and power. The postmodern approach to organisational culture rejects both the integrationist perspective, which sees culture as being shared by all members of an organisation, and the differentiation perspective, which sees organisational unity as being broken by coherent and stable subcultures. Instead, it takes a fragmentation perspective, believing that organisational cultures are inconsis- tent, ambiguous, multiplicitous and in a constant state of flux (Martin, 1992; Meyerson and Martin, 1987). Hatch (1997: 231) observes of the postmodern per- spective on culture that: In this view, alliances or coalitions can never stabilize into subcultures and certainly not into unified cultures because discourse and its focal issues are always changing – hence the image of fragmentation.
  • 163. 150 Chapter 4 · Critical perspectives on organisation theory Therefore, for postmodernists, organisational culture is important, and indeed is clearly linked to their interest in symbols and language. However, postmodernists are sceptical of attempts to manipulate and change culture, as Hatch (1997: 235) points out: When you attempt to change organizational culture, while it is true that something will change, generally the changes are unpredictable and sometimes undesirable (e.g., increases in employee cynicism towards cultural change programs) ... Do not think of trying to manage culture. Other people’s meanings and interpretations are highly unmanageable. Where power is concerned, postmodernists take a very different view from most other writers on organisations. They are less concerned with the power that individuals or groups possess, acquire or deploy. Rather they believe that power resides in the combina- tion of linguistic distinctions, ways of reasoning and material practices which make up the body of taken-for-granted knowledge that exists in society and organisations (Alvesson and Deetz, 1996). Perhaps the most influential postmodernist writer on power has been the French philosopher, Michel Foucault (1983). Foucault argues for a strong link between knowledge and power. He believes that knowledge, when it becomes socially legitimised and institutionalised, exerts control over what we think and do. However, there is a power struggle between different bodies of knowledge each fighting for legiti- macy and supremacy. For Foucault, though these bodies of knowledge are seeking to represent reality, at the same time they socially create it. He argues that power moulds everyone, both those who use it and those who are used by it. He maintains that power and knowledge depend on each other, so that an extension of a group’s power is depend- ent upon and accompanied by an extension of its knowledge, and vice versa (Appignanesi and Garratt, 1995). Gergen (1992: 221) takes a similar perspective, arguing that: ... power is inherently a matter of social interdependence, and it is achieved through the social coordination of actions around specified definitions. The postmodernist perspective on power has important implications for how a par- ticular view of reality comes to the fore and is maintained in an organisation. Rather than being the product of an objective and rational process, it is the product of power and politics in an organisation. In some organisations, there does not appear to be a settled and generally agreed view of reality; rather what we see are competing inter- pretations put forward by competing groups and individuals. In other organisations, however, a definite view does appear to be held and does appear to be maintained. This is achieved when a coalition of groups and forces is able to wield power and use political processes to achieve a dominant position over others in the organisation. When this occurs, it is their view of reality which takes shape and comes to be accepted. Therefore, not only is power deployed to legitimate their view of the world, but, in turn, its legitimacy bolsters their power. ■ The implications for organisations What we can see from this review of postmodernism is the influence that both mod- ernism and postmodernism have had on organisational theory and practice in the twentieth century. Clearly, the Classical approach, and especially Weber’s contribution,
  • 164. The postmodern perspective 151 with its emphasis on rationality and scientific knowledge, is very much within the tradi- tion of modernism. Indeed, one can also say that much of the Human Relations literature, with its use of scientific methods to identify the ‘one best way’, and certainly the literature on Contingency Theory would appear to fall squarely into the modernist camp. On the other hand, the Culture–Excellence approach seems much more comfort- able with the rhetoric of postmodernism. Not only does it share a similar view of the current state of the world, i.e. chaotic and unpredictable, but it also shares some of the language. For example, Charles Handy (1989) entitled one of his books The Age of Unreason, whilst Rosabeth Moss Kanter (1989) writes of ‘post-entrepreneurial’ organi- sations. Though Tom Peters does not necessarily use the language of the postmodernists, the essence of his message, and often the way it is delivered, sits comfortably with post- modernism. The same can be said of organisational learning, with its emphasis on knowledge acquisition, rapid change and, most importantly, the ability of organisations to create their own realities (Hatch, 1997). The Japanese approach, with its inclusion of hard and soft elements, on the other hand, seems to contain happily elements of mod- ernism and postmodernism. Indeed, it may be that one of the main criticisms of modernism and postmodernism is that both come from a Western, especially European, intellectual and cultural tradition and, consequently, do not lie easily with other, particu- larly Eastern and Islamic, intellectual and cultural traditions (Appignanesi and Garratt, 1995). Nevertheless, at least in the West, postmodernism does appear to be having a powerful impact on both theory and practice in organisations. In summary, despite the somewhat impenetrable and contradictory nature of the literature, the core of postmodernism concerns the nature of reason and reality. For postmodernists, reason and logic have proved illusory and reality is a social construct. In organisational terms, an organisation, or rather those individuals and groups who dominate it, create their own reality – their own view or views of the world. Whether they see themselves as successful or not, whether they view the world as chaotic, whether they believe they can shape their own future, is to a large part determined not by any objective data or what is happening in their environment as such, but by their own ability to shape their own reality. The extent to which they can impose their view of reality on others both inside and outside will, to a large degree, determine whether they and the organisation are seen as successful or not. Seen in this light, postmodernism has three important implications for the organi- sation theories and practices discussed in the previous three chapters. The first implication concerns the nature of organisational culture. As we saw in Chapter 3, the Culture–Excellence school has been highly influential in bringing the issue of organisation culture to the forefront of management thought and practice over the last two decades. In essence, what they argue is that, in order to achieve excellence, managers need to create a strong, unified and appropriate culture for their organisa- tion. A core component of this approach is to manipulate and use language and symbols to create a new organisational reality. Though acknowledging the impor- tance of culture, and sharing a concern with symbols and language, postmodernists, however, view the results of attempts to manipulate and change culture as generally unpredictable and sometimes undesirable. This is because the outcomes depend upon the multiplicity of meanings and interpretations that others in the organisation put on such attempts, which are inherently unmanageable (Hatch, 1997). The second impli- cation concerns the issue of how a particular view of reality comes to the fore and is
  • 165. 152 Chapter 4 · Critical perspectives on organisation theory maintained in an organisation. The answer for postmodernists concerns the role of power and politics. In some organisations, there does not appear to be a settled and generally agreed view of reality; rather what we see are competing interpretations put forward by competing groups and individuals. In other organisations, however, a defi- nite view does appear to be held and does appear to be maintained. This is achieved when a coalition of groups and forces is able to wield power and use political processes to achieve a dominant position over others in the organisation. When this occurs, it is their view of reality that takes shape and comes to be accepted. The final implication relates to organisational choice. As we saw in the three previous chapters, most organisational theorists and practitioners believe that there is a ‘one best way’ to run organisations. The postmodernist debate, however, has raised significant questions about whether these ‘one best ways’ represent some form of objective knowledge, or whether they are socially-constructed realities which pertain to particular times, coun- tries, industries and organisations. If organisational reality is socially constructed, then, in theory at least, it is open to organisations to construct whatever reality they wish. From this perspective, organisations have a wide degree of choice about what they do, how they do it and where they do it. Nevertheless, despite the attractions of postmod- ernism, and despite its strong impact on organisational theory over the past two decades, there are some serious reservations about its validity and usefulness. ■ Postmodernism – some reservations Perhaps the main reservation and drawback of postmodernism is, as Alvesson and Deetz (1996) point out, the difficulty in defining the concept. In the social sciences, the term has acquired a wide and often conflicting set of definitions, including a social mood, a historical period filled with major social and organisational changes, and a set of philosophical approaches to organisational and other studies (Featherstone, 1988b; Hassard and Parker, 1993). Hatch (1997: 43) believes post- modernism has been defined in so many different ways that: It is impossible to choose a core theory, or a typical set of ideas, to exemplify postmod- ernism – the incredible variety of ideas labelled postmodern defies summarization, and the postmodern value for diversity contradicts the very idea of unifying these different under- standings into a single, all-encompassing explanation. As Appignanesi and Garratt (1995: 4) observe: The confusion is advertised by the ‘post’ prefix to ‘modern’. Postmodernism identifies itself by something it isn’t. It isn’t modern anymore. But in what sense exactly is it post ... – as a result of modernism? – the aftermath of modernism? – the afterbirth of modernism? – the development of modernism? – the denial of modernism? – the rejection of modernism? Postmodern has been used in a mix-and-match of all these meanings.
  • 166. The postmodern perspective 153 The confusion and variety of postmodernism is best summed up by the following list of terms used by postmodern theorists, compiled by Featherstone (1988a: 197): modern postmodern modernity postmodernity modernité postmodernité modernisation postmodernisation modernism postmodernism Not only, as Featherstone shows, do postmodernists attribute different meanings to each of the above terms, but also they do not share common agreement about what the individual terms mean either. Indeed, Burrell (1988: 222) remarked of one of the key influences on the postmodernist debate, Michel Foucault, that: ... it is important to note that Foucault’s iconoclasm takes him into positions which are not readily defensible and his refusal to retain one position for longer than the period between his last book and the next is certainly problematic. As well as the difficulty in defining postmodernism, there are also powerful voices who defend modernism and attack postmodernism as a form of intellectual nihilism or of neo- conservatism (Aronovitz, 1989; Callinicos, 1989). Hassard (1993: 119) states that: The most influential critic of postmodernism, however, is Jürgen Habermas ... [he] argues that theories of postmodernism represent critiques of modernity which have their ideologi- cal roots in irrationalist and counter-Enlightenment perspectives ... Habermas suggests that as many French writers [especially Derrida, Foucault and Lyotard] take their lead from the counter-Enlightenment statements of Nietzsche and Heidegger, this can be interpreted as a disturbing link with fascist thinking ... Habermas wishes to defend robustly ‘a principle of modernism’, which he suggests is an unfinished project that holds great, unfulfilled emanci- patory potential. Lyon (2000) argues that the critics of postmodernism fall into the following three camps: 1 Those who claim there has never been a fully modernist era and claim there cannot, consequently, be a ‘post’ modernist one. 2 Those who maintain that the current developments in society are merely an exten- sion of what has gone before rather than any significant break with the past. 3 Those who accept that the world is entering a new age, but see globalisation (see Chapter 16) and not postmodernism as its defining characteristic. Therefore, a number of serious reservations have been expressed regarding the validity of postmodernism. These include its lack of consistency and clarity, that its proponents misread the current state of the world, that it may be correct but it is not important, and its posited alignment on the far right of the political spectrum. Its proponents accept that the postmodernist message is not always clear and consistent but, in the main, they would reject most of the other criticisms, especially that it is an ideology of the right. On the other hand, there can be little doubt that the postmodernist message has provided some justification and encouragement for the neo-liberal policies, such as
  • 167. 154 Chapter 4 · Critical perspectives on organisation theory privatisation and deregulation, adopted by most Western governments in the last 20 years. Nevertheless, regardless of the merits or not of postmodernism, there are two other non-modernist perspectives on organisations which are also having a significant impact on organisation theory: realism and complexity. The realist perspective ■ What is realism? As the above showed, there appear to be two dominant philosophical perspectives on the social world: the modernist, or positivist, perspective which believes in objective reality, logic and reason, and the postmodernist perspective, which see multiple and competing realities which are socially constructed. In the field of organisations, over the past 20 to 30 years, it is the postmodernist perspective which has come to the fore. However, Ackroyd and Fleetwood (2000a) argue that there is an alternative to both. They point out that there is much substantive research on organisations that is based on neither modernism (positivism) nor postmodernism. This work is based on a long-established seam of social science which strongly maintains that, in order to understand and explain events, it is necessary to take into account both social struc- tures, such as organisations, routines, rules and power, and the meaning that individuals and groups apply to these. Underpinning this work are well-developed philosophical doctrines that are neither modernist nor postmodernist. One of the most important of these is realism, which offers support for a non-modernist and non-postmodernist approach to organisations and management (Ackroyd and Fleetwood, 2000b). The essence of realism, as Easton (2000: 207) notes ‘ … is that there is a reality “out there” waiting to be discovered.’ Since the 1970s, realism has been applied to the social sciences by a number of writers (Bhaskar, 1979, 1986; Collier, 1994; Harré, 1972; Outhwaite, 1987; Sayer, 2000). However, though few have explicitly applied it to management, it does appear to underpin much work in the field of institutional and regulation theory, and there is now a growing interest in its application to the wider issues of management and organisations (Ackroyd and Fleetwood, 2000b). As with postmodernism, the term realism has influenced many areas such as the arts, literature, philosophy and the social sciences, and the term tends to be used differently in each of these areas. However, the core belief of realists is that many entities exist independently of us and our investigation of them. Therefore, unlike postmodernists, realists assert that social entities, such as markets, class relations, gender relations, ethnic groupings, social rules, etc., exist, are real and can be discovered, though this does not mean that dis- covering them will be easy. As Easton (2000: 207) succinctly puts it, ‘We see through a glass darkly but there is something there to see.’ ■ Realism and organisations Tsoukas (2000) states that realist philosophers see both the natural and social worlds as consisting of complex structures that exist independently of our knowledge of them. For realists, events and patterns of events are generated (are caused to be
  • 168. The realist perspective 155 brought about) by causal mechanisms and causal powers that operate independently of the events they generate. Realists seek to identify the generative structures, i.e. the causal mechanisms that bring about events, and to identify their capabilities, i.e. their causal powers (Harré and Madden, 1975; Harré and Secord, 1972). However, though these causal mechanisms possess certain capabilities, causal powers, the actual out- come of their operation will be dependent, i.e. contingent, on circumstances. For example, the Japanese approach to management has the potential to engender team- working and organisational commitment, but whether it will or not depends on a whole host of situational variables, such as the nature of the society in which the organisation operates and the expectations of the employees concerned. Organisations also contain competing and contradictory organising principles, such as class, gender and ethnicity, and they are composed of different groups with their own distinct priori- ties and agendas that can undermine the dominant causal mechanisms (Reed, 2000). Nevertheless, despite the potential of these competing forces and groups to create dis- order, in many cases the interaction between them occurs in such a way that it produces organisational integration, a degree of continuity and stability, and sufficient change to maintain the organisation’s viability (Ackroyd, 2000). In terms of organisations and management, a central issue is the extent to which organisations and their practices are produced by human beings but still exist exter- nally to them and shape their behaviour. Realists are very clear on this point. They argue that whilst the social world, including organisations, is a product of human action, it is not necessarily a product of human design but exists independently of human beings (Connelly, 2000; Easton, 2000). Realists also argue that social phenom- ena can exist without those involved having any knowledge of them. For example, markets only exist in and through human activity, yet there is no necessity that those people involved should be conscious of the part they play in sustaining them. Therefore, realists acknowledge the socially-constructed nature of the world but, unlike postmodernists, do not see the world as being merely a social construction (Ackroyd and Fleetwood, 2000b). This can be seen in terms of the structure and oper- ation of organisations. Realists argue that a structure is a set of simultaneously enabling and constraining rules and resources which shape the interactions of those who work in or have to deal with the organisation. That is to say, a structure can be considered as a causal mechanism which has the potential and capability to act in cer- tain ways, i.e. it has causal powers (Giddens, 1984; Manicas, 1980; Tsoukas, 2000). Consequently, as Tsoukas (1992) observes, just because a person may have friendly relations with a bank manager does not by itself mean that the person will be able to obtain a loan – the key issues are the lending rules of the bank and the creditworthi- ness of the borrower. Organisations may give groups and individuals certain powers but they also prescribe how and when these powers are to be deployed (Whittington, 1989). This does not imply that those concerned know how the rules are generated, the obvious and less obvious ways in which compliance is ensured, or their role in maintaining and developing these rules. Therefore, to continue the banking example, the bank manager knows the lending rules but not necessarily why they are as they are. Also, though he or she is aware of the penalties for non-compliance, they are less likely to be aware of the subtle pressures exerted by cultural norms to behave in cer- tain ways. Yet the lending decision is not a mechanical process. The manager does have the ability to exert judgment and a degree of discretion in what they do.
  • 169. 156 Chapter 4 · Critical perspectives on organisation theory Likewise, the potential borrower can present their case in a more or a less convincing fashion. This is why the causal powers possessed by a causal mechanism are seen as capabilities and not determinants. Whilst causal powers limit what can be done, and whilst they have the potential to bring about (cause) certain actions to occur, whether they do occur or not is dependent on a range of other factors as well, not least human action or inaction. As a result, when studying management and organisations, realists stress the need to give due weight to both people and structure, and the complex interplay between them. They argue that human action is shaped by the simultaneous constraining and enabling nature of an organisation’s structure, which tends to favour certain types of outcome, but that any actual outcome is contingent on the prevailing circumstances (Tsoukas, 1989; Whittington, 1994). In addition, as Kumar (1995) notes, not only do these constraining and enabling forces lie outside the control of those concerned, but those concerned are often unaware of them. Realists seek to understand and explain events by focusing on the mechanisms, structures, powers and relations that bring them about. In seeking an explanation in this way, realists begin by postulating the existence of a possible mechanism and pro- ceed by collecting evidence for or against its existence and evidence of possible alternative mechanisms (Outhwaite, 1987; Reed, 2000). In revealing the mechanisms which bring about events, realists also seek to engender debates about alternative ways of structuring the social world and alternative forms of relationships, be they concerned with class, gender or power. The use of realism in the field of management and organisations is most closely associated with the work of Bhaskar. His argument, Bhaskar (1989: 36), is that noth- ing happens out of nothing: … people do not create society. For it always pre-exists them and is a necessary condition for their activity. Rather society must be regarded as an ensemble of structures, practices and conventions which individuals reproduce and/or transform, but which would not exist unless they did so. Society does not exist independently of human activity … But it is not the product of it … Bhaskar (1986) makes a clear distinction between human action and social structure. He argues that common propositions which are applied to people assume such a dis- tinction: ‘He cashed a cheque’ assumes a banking system, ‘He pleaded guilty’ assumes a legal system (Bhaskar, 1979; Connelly, 2000). The two are mutually influential and interdependent but can be analysed separately, and are fundamentally different in that social structures pre-exist and are sustained and changed through human action, but human action is constrained and enabled by social structures. Realists do not deny that there are multiple perspectives or competing claims about the nature of the social world. They also share with postmodernists a recognition of the role of culture, power and politics in shaping organisational choices. However, they reject the possi- bility that there are multiple realities. Therefore, unlike the postmodernists, they claim that truth exists and what exists can be found, though the finding may be very difficult (Easton, 2000). As Stacey (2003: 7) comments: … realists do not see any inherent limitation on human ability to comprehend reality in its entirety. For them, it is only a matter of time before research progressively uncovers more and more of reality.
  • 170. The complexity perspective 157 Realism is a riposte to both modernism and postmodernism. It attacks the former for placing too much reliance on science, rationality and logic, whilst criticising that latter for rejecting reality in favour of multiple and competing realities. Though it would be unfair to characterise realism as being a half-way house between mod- ernism and postmodernism, it does tend to open itself up to criticism from both camps. The modernists object to the social construction side of the realists’ reality, whilst the postmodernists object to the realists’ claim that there is only one reality and it can be discovered. However, the battle as to which perspective on the world will carry most weight with organisation theorists is not just between postmodernists and realists; over the last decade, a third perspective, complexity, has entered the fray, which, unlike modernism and postmodernism, owes its origins not to philosophy but to the natural sciences. The complexity perspective ■ What is complexity? Over the last decade, an increasing number of academics and practitioners have come to view organisations through the lens of complexity theories, and this is beginning to have a profound impact on views of how organisations should be structured and changed (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Fitzgerald, 2002a; Lewis, 1994; MacIntosh and MacLean, 2001; Morgan, 1997; Stacey, 2003; Tetenbaum, 1998; Wheatley, 1992). Complexity serves as an umbrella term for a number of theories, ideas and research programmes that are derived from many dif- ferent disciplines in the natural sciences (Rescher, 1996; Stacey, 2003; Styhre, 2002). To emphasise the diversity of viewpoints amongst complexity researchers, we will follow Black’s (2000) lead and use the term complexity theories rather than theory. Complexity theories are concerned with the emergence of order in dynamic non- linear systems operating at the edge of chaos, such as weather systems, which are constantly changing and where the laws of cause and effect appear not to apply (Beeson and Davis, 2000; Haigh, 2002; Wheatley, 1992). Order in such systems mani- fests itself in a largely unpredictable fashion, in which patterns of behaviour emerge in irregular but similar forms through a process of self-organisation, which is governed by a small number of simple order-generating rules (Black, 2000; MacIntosh and MacLean, 2001; Tetenbaum, 1998). Many writers have argued that organisations are also complex systems that, to survive, need to operate at the edge of chaos and have to respond continuously to changes in their environments through just such a process of spontaneous self-organising change (Hayles, 2000; Lewis, 1994; Macbeth, 2002; MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Stickland, 1998). Complexity theories stem from attempts by meteorologists, biologists, chemists, physicists and other natural scientists to build mathematical models of systems in nature (Gleick, 1988; Lorenz, 1993; Styhre, 2002). In the process, a number of differ- ent but related theories have emerged, the key ones being chaos theory (Bechtold, 1997; Haigh, 2002; Lorenz, 1979, 1993), dissipative structures theory (Prigogine and Stengers, 1984; Prigogine, 1997), and the theory of complex adaptive systems (Goodwin, 1994; Stacey et al, 2002). The main difference between these three theories,
  • 171. 158 Chapter 4 · Critical perspectives on organisation theory according to Stacey (2003), is that chaos and dissipative structures theories seek to construct mathematical models of systems at the macro level (i.e. whole systems and populations), whilst complex adaptive systems theory attempts to model the same phe- nomena at the micro level by using an agent-based approach. Instead of formulating rules for the whole population, it seeks to formulate rules of interaction for the indi- vidual entities making up a system or population. However, all three see natural systems as both non-linear and self-organising. There are three central concepts that lie at the heart of complexity theories – the nature of chaos and order; the ‘edge of chaos’; and order-generating rules. Chaos and order Chaos is often portrayed as pure randomness, but from the complexity viewpoint, it can be seen as a different form of order (Arndt and Bigelow, 2000; Fitzgerald, 2002b; Frederick; 1998). Fitzgerald (2002a) states that chaos and order are twin attributes of dynamic, non-linear (complex) systems, and, within chaos, a hidden order may be concealed beneath what looks completely random. For complexity theorists, chaos describes a complex, unpredictable, and orderly disorder in which patterns of behav- iour unfold in irregular but similar forms; snowflakes are all different but all have six sides (Tetenbaum, 1998). Stacey (2003) identifies three types of order–disorder: stable equilibrium; explosive instability; and bounded instability. However, only under the last of these, bounded instability, are complex systems seen as having the ability to transform themselves in order to survive. If systems become too stable, they ossify and die. If they become too unstable, as with cancer, they may get out of control and destroy themselves (Frederick, 1998). Edge of chaos Under conditions of ‘bounded instability’, systems are constantly poised on the brink between order and chaos. Elsewhere, Stacey (Stacey et al, 2002) refers to this as a ‘far-from-equilibrium’ state, whilst Hock (1999) uses the term ‘chaordic’. However, the term most commonly used to describe this condition is the ‘edge of chaos’: … complex systems have large numbers of independent yet interacting actors. Rather than ever reaching a stable equilibrium, the most adaptive of these complex systems (e.g., inter- tidal zones) keep changing continuously by remaining at the poetically termed ‘edge of chaos’ that exists between order and disorder. By staying in this intermediate zone, these sys- tems never quite settle into a stable equilibrium but never quite fall apart. Rather, these systems, which stay constantly poised between order and disorder, exhibit the most prolific, complex and continuous change ... (Brown and Eisenhardt, 1997: 29) It is argued that creativity and growth are at their optimal when a complex system operates at the edge of chaos (Frederick, 1998; Jenner, 1998; Kauffman, 1993; Lewis, 1994). It is the presence, or not, of appropriate order-generating rules, which permit self-organisation to take place, that allow some systems to remain at the edge of chaos, whilst others fall over the edge.
  • 172. The complexity perspective 159 Order-generating rules In complex systems, the emergence of order is seen as being based on the operation of simple order-generating rules which permit limited chaos whilst providing relative order (Frederick, 1998; Lewis, 1994; MacIntosh and MacLean, 2001; Reynolds, 1987; Stacey et al, 2002; Wheatley, 1992). As Gell-Mann (1994: 100) puts it: In an astonishing variety of contexts, apparently complex structures or behaviours emerge from systems characterized by very simple rules. These systems are said to be self-organized and their properties are said to be emergent. The grandest example is the universe itself, the full complexity of which emerges from simple rules plus chance. Therefore, the concept of order-generating rules explains how complex, non-linear, self-organising systems manage to maintain themselves at the edge of chaos even under changing environmental conditions. Complex systems have a further trick up their sleeve. Under certain conditions they can even generate new, more appropriate order- generating rules when the old ones can no longer cope with the changes in the system’s environment (Bechtold, 1997; MacIntosh and MacLean, 1999; Wheatley, 1992). ■ The implications for organisations A growing number of academics and practitioners maintain that organisations are complex, non-linear systems, the behaviour of whose members is characterised by spontaneous self-organising underpinned by a set of simple order-generating rules (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Fitzgerald, 2002a; Lewis, 1994; MacIntosh and MacLean, 2001; Morgan, 1997; Stacey, 2003; Tetenbaum, 1998; Wheatley, 1992). Frederick (1998) argues that companies who relentlessly pursue a path of continu- ous innovation succeed because they operate at the edge of chaos, and, indeed, because they inject so much novelty and change into their normal operations, they constantly risk falling over the edge. Brown and Eisenhardt (1997) draw a similar conclusion from their research into innovation in the computer industry. They main- tain that continuous innovation is necessary for survival and that this is brought about by a process that resembles self-organisation in nature. Perhaps the most well-known example of a self-organising organisation is Visa. Visa has grown by 10,000 per cent since 1970, comprises 20,000 financial institu- tions, operates in 200 countries and has over half a billion customers (Hock, 1999). However, as Tetenbaum (1998: 26) notes: … you don’t know where it’s located, how it’s operated, or who owns it. That’s because Visa is decentralised, non-hierarchical, evolving, self-organizing and self-regulating. … it is a chaordic system conceived as an organization solely on the basis of purpose and principle. Its structure evolved from them. If organisations are complex systems, management and change take on a new dimen- sion. Beeson and Davis (2000) make the point that whilst it might be fruitful to see organisations as non-linear systems, to do so will require a fundamental shift in the role of management. Like many others (e.g. Boje, 2000; Stacey et al, 2002; Sullivan, 1998;
  • 173. 160 Chapter 4 · Critical perspectives on organisation theory Tetenbaum, 1998; Wheatley, 1992), they point out that self-organising principles explicitly reject cause and effect, top-down, command-and-control styles of manage- ment. Brodbeck (2002) suggests that the belief by managers that order and control are essential to achieve their objectives needs to be redressed. Morgan (1997) maintains that complexity will require managers to rethink the nature of hierarchy and control, learn the art of managing and changing contexts, promote self-organising processes, and learn how to use small changes to create large effects. For Tetenbaum (1998), the move to self-organisation will require managers to destabilise their organisations and develop the skill of managing order and disorder at the same time. Managers will need to encourage experimentation and divergent views, even allow rule-breaking, and recognise that ‘… people need the freedom to own their own power, think innovatively, and operate in new patterns’ (Bechtold, 1997: 198). For Jenner (1998: 402), the key to achieving this is a flexible, de-centralised structure. Brown and Eisenhardt (1997: 29) refer to such flexible structures as ‘semistruc- tures’, which they maintain ‘ … are sufficiently rigid so that change can be organized, but not so rigid that it cannot occur.’ They claim that organisations can only survive in highly competitive environments by continuously innovating and improvising, which, they argue, relies on intensive, real-time communication within a structure of a few, very specific rules. Beeson and Davis (2000) echo this point and argue that, in such situations, change becomes an everyday event undertaken by all in the organisa- tion. Brown and Eisenhardt (1997: 28) also claim that in the firms they studied: The rate and scale of innovation … was such that the term ‘incremental’ seemed, in retro- spect, stretched. Yet it was not radical innovation [but] … a third kind of process that is neither incremental nor radical and that does not fit the punctuated equilibrium model … Similarly, Brodbeck (2002) draws attention to studies that cast doubt on the effec- tiveness of large-scale change programmes (see Clarke, 1999; Harung et al, 1999). For Styhre (2002), the problem is that such programmes assume that it is possible to predict the outcomes of change and attempt to plan, control and manage it in a rational, top-down, linear fashion. These writers are depicting organisations operating at the edge of chaos and, there- fore, needing to respond continuously to changes in their environments through a process of spontaneous self-organising change in order to survive. However, as in the natural world, this process is driven by order-generating rules that themselves can be subject to transformation in certain situations (Lewis, 1994; MacIntosh and MacLean, 1999, 2001; Stacey, 2003). When this takes place in nature, it is an auto- matic process; in organisations, this is rarely likely to be the case. As Stacey (2003) argues, people are not unthinking molecules; they can and do exercise free will, they can and do pursue their own objectives, they can and do utilise power and political manoeuvring to gain their own ends, and they can and do interpret events in widely- differing ways. Therefore, self-organisation may not occur even when appropriate order-generating rules are present, nor, if such rules cease to be appropriate, can it be assumed that they will automatically be transformed. Instead both will depend on the nature of the organisation (Griffin, 2002). MacIntosh and MacLean (2001) provide evidence of the existence and importance of order-generating rules, based on a case study of a long-established manufacturing
  • 174. The complexity perspective 161 company that had been in decline for over 30 years. This decline appeared to be caused by a combination of inappropriate order-generating rules (such as ‘don’t inno- vate unless it leads to cost reduction’) and a rigid structure that stifled innovation. Once this was recognised, the company evolved more appropriate order-generating rules (such as ‘better, faster, cheaper’) and implemented a new structure that gave greater freedom for self-organisation to its constituent parts. In order for organisations to promote change through self-organisation, a number of writers have argued that organisations need to operate on democratic principles, i.e. their members will have to have the freedom to self-organise. For example, Bechtold (1997) argues that organisations seeking to adopt a complexity approach need a bal- anced distribution of power, strong customer focus, a strategy of continuous learning and an orientation towards community service. A further strand in this argument is provided by Kiel (1994), who argues that because small actions can have large and unpredictable consequences, individual human activity assumes great importance. Jenner (1998) claims that for self-organisation to work, authority must be delegated to those who have access to the broadest channels of information that relate to the issue concerned. Nevertheless, Stacey (2003: 278) sounds a note of caution: This seems to assume that self-organisation is some new form of behaviour rather than a different way of understanding how people have always behaved. The question is whether such self-organising behaviour produces patterns that block or enable change. In considering complexity theories and organisational change, one of the key ques- tions is to ask: ‘What’s new?’ (Frederick, 1998). If we look at what appears to be being said about management, structure, behaviour and change, much of it seems very familiar. Writers from Peters and Waterman (1982) onwards have been arguing that managers need to abandon top-down, command-and-control styles, that organi- sational structures need to be flatter and more flexible, and that greater employee involvement is essential for success (Handy, 1989; Kanter, 1989, 1997; Kanter et al, 1997; Kotter, 1996; Peters, 1989, 1993, 1997). However, as the implications listed in Exhibit 4.3 show, there are three areas where those seeking to apply complexity theo- ries to organisations appear to depart from, or significantly extend, the received wisdom of the last 20 years. Exhibit 4.3 Applying complexity theories to organisations Implication 1 There will be a need for much greater democracy and power equalisation in all aspects of organisational life, instead of just narrow employee participation in change (Bechtold, 1997; Jenner, 1998; Kiel, 1994). Implication 2 Small-scale incremental change and large-scale radical-transformational change will need to be rejected in favour of ‘a third kind’ which lies between these two, and which is continuous and based on self-organisation at the team/group level (Brodbeck, 2002; Brown and Eisenhardt, 1997). Implication 3 In achieving effective change, order-generating rules have the potential to overcome the limitations of rational, linear, top-down, strategy-driven approaches to change (MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Styhre, 2002).
  • 175. 162 Chapter 4 · Critical perspectives on organisation theory The basis for Implication 1 is that unless employees have the freedom to act as they see fit, self-organisation will be blocked and organisations will not be able to achieve continuous and beneficial innovation. The rationale for Implication 2 is that neither small-scale incremental change nor radical transformational change work: instead, innovative activity can only be successfully generated through the ‘third kind’ of change, such as new product and process development brought about by self-organis- ing teams. Implication 3 is based on the argument that because organisations are complex systems, which are radically unpredictable and where even small changes can have massive and unanticipated effects, top-down change cannot deliver the con- tinuous innovation that organisations need in order to survive and prosper. Instead, it is argued that organisations can only achieve continuous innovation if they position themselves at the edge of chaos. This position can only be achieved and maintained through self-organisation, which in turn depends on the possession of appropriate order-generating rules. However, should these rules cease to be appropriate for the organisation’s environment, the process of self-organisation allows new, more appro- priate rules to be generated. Therefore, in a chicken and egg fashion, order-generating rules create the conditions for self-organisation, and self-organisation creates the con- ditions that enable order-generating rules to be transformed (Bechtold, 1997; Hoogerwerf and Poorthuis, 2002; Tetenbaum, 1998). ■ Complexity – some reservations Like postmodernism and realism, complexity has much to commend it. It offers an explanation of the apparent complexity and chaos of modern life and, potentially at least, a way of managing this complexity and chaos. Also, for managers, it is an approach based on ‘hard’ science and not ‘airy fairy’ philosophy. Nevertheless, writ- ers have raised three significant reservations about the application of complexity theories to organisations. Firstly, the complexity approach requires a significant shift towards greater organisational democracy and power equalisation. This appears to go far beyond the more limited, and often failed, attempts to redistribute power through empowerment, flatter organisational structures and quality improvement programmes which have been called for over the last 20 years (Eccles, 1993; Foegen, 1999; Lawler et al, 1998; Lee, 1999; Pfeffer, 1996; Stohl and Cheney, 2001; Wetlaufer, 1999; Whyte and Witcher, 1992; Witcher, 1993; Zairi et al, 1994). Therefore, convincing organisations that they are complex systems is likely to prove far easier than for organisations to achieve the profound internal realignments necessary to implement this concept (Beeson and Davis, 2000; Stacey, 2003). Secondly, in applying complexity theories to organisations, it is important to bear in mind that, even in the natural sciences, there are variants of these and disputes about their implications (Black, 2002; Stacey et al, 2002; Stacey, 2003). As Arndt and Bigelow (2000: 36) observe, they have ‘… caused consternation as well as delight’. Therefore, one needs to be extremely careful not to treat complexity theories as though they are established, unitary, unquestioned and uncontroversial (Stickland, 1998). Lastly, in applying complexity theories to organisations, there appears to be a lack of clarity or explicitness regarding how writers are treating them (Arndt and Bigelow, 2000; Brodbeck, 2002; Hayles, 2000; Morgan, 1997; Stacey et al, 2002; Stacey, 2003). For example, some see them as a metaphorical device which provides a means
  • 176. Conclusions 163 of gaining new insights into organisations, whilst others see them as a way of mathe- matically modelling how and why organisations operate as they do (Stickland, 1998). If the former, then it could be argued that the complexity perspective is just another of the multiple realities so beloved of the postmodernists. If the latter, then its propo- nents will have to show how mathematical modelling techniques can be applied to complex and dynamic human processes in organisations, though there is no indica- tion that anyone has yet attempted to do so (Stacey, 2003). Conclusions In Chapters 1–3, we reviewed the main theories and approaches to structuring and running organisations. These three chapters showed that, over the past 100 years, organisation theory had moved a long way from the mechanical certainties of the Classical school as exemplified by the work of Frederick Taylor. We no longer per- ceive organisations as simple machines, nor of people as cogs, or ‘greedy robots’, in those machines. We now recognise the convoluted nature of organisations and their environments, and the even more convoluted nature of human beings. Contemporary approaches to running organisations have attempted to move away from the mechan- ical certainties of Frederick Taylor and co. by developing theories that focus on, or incorporate, the human–social dimension of organisational life. Consequently, for the Culture–Excellence school, the key issue has been organisational culture; for the Japanese, the key issue has been to blend together the ‘hard’ and ‘soft’ elements of organisational life; whereas for the learning school, the main topic has been to under- stand how humans learn, and how this can be translated from individual learning to collective, organisational learning. Though there are some common elements between all three approaches, there are also major differences. Nevertheless, this has not stopped proponents of all three from seeking to promote their approach as the ‘one best way’. What this chapter has shown is the need to set and understand approaches to run- ning and designing organisations into a wider theoretical frame. None of the three perspectives on organisations reviewed in this chapter were developed specifically with organisations in mind; indeed, their originators might have been somewhat surprised to see this development. Two of them, postmodernism and realism, are based on well- developed philosophical doctrines, and the other, complexity, comes from a great deal of research carried out in a wide variety of disciplines in the natural sciences. All three are inspired by the desire to understand the world around us in its widest context, whether this be art, history, science or why it always seems to rain in Manchester. All three have significant implications for structuring and managing organisations. Postmodernism, with its denial of an absolute reality and promotion of competing, and socially-constructed, multiple realities, offers enormous scope for the emergence of alternative strategies and choices, but it also stresses the importance of culture, power and politics in how the strategies are selected and legitimised, and how choices are made. The realists reject the concept of multiple realities in favour of just one. They do not deny the socially-constructed nature of their reality, though they claim that it is no less real for all that. Nor do they deny that this social construction offers organisations a great deal more scope for choice and manoeuvre than conventional
  • 177. 164 Chapter 4 · Critical perspectives on organisation theory approaches appear to acknowledge. The difference between these two perspectives is that while the postmodernists believe that anything is possible, the realists see organi- sations’ room for manoeuvre and choice as limited by complex structures in both the natural and social worlds which exist even if we are not aware of them. Moving on to the complexity perspective, this sees organisations as complex, self- organising systems that, in order to maximise their innovative capacities, need to operate at the edge of chaos. In order to remain in this position, rather than falling off the edge, they need to develop and maintain appropriate order-generating rules. In order to develop and maintain appropriate order-generating rules, organisations are required to become far more democratic than they are now and allow ‘… people the freedom to own their own power, think innovatively, and operate in new patterns’ (Bechtold, 1997: 198). In effect, choice moves from the few to the many. Though it does appear to be the case that organisations can survive for long periods of time without appropriate rules, complexity theorists maintain that this will reduce the organisation’s innovative capacity and threaten its long-term survival. As can be seen, all of these three critical perspectives have important but different implications for organisational life, and each has fundamental differences with the other two. Nevertheless, there is one very important implication which all three per- spectives share; this is that organisations do have a wide range of options and choices open to them as to how they are structured and operate. This is the case even if one concedes that some postmodernist realities are more dominant than others, that ‘real’ social entities, such as markets, class relations, gender relations, social rules, etc., limit choice, or that eventually organisations need to adopt or develop appropriate order- generating rules. If choice is far wider than most organisation theories acknowledge, this poses questions as to how to identify options, and who will make the decisions as to which ones to choose? In Chapter 3, we drew attention to the importance of cul- ture in shaping organisations and the actions of those in them. Chapter 3 also drew attention to the lack of interest paid to power and politics in running organisations and making decisions. In this chapter, especially in considering postmodernism, we have also drawn attention to the role of culture, power and politics in shaping deci- sions in organisations. In the next chapter, we will return to these issues and show how they impact on the choices made by those who run organisations. Test your learning ■ Short answer questions 1 What is flexible specialisation? 2 Give three definitions of postmodernism. 3 Using Clegg’s (1990) distinction between modernist and postmodernist organisation forms, identify the significant differences between job design under a modernist regime and that under a postmodernist regime. 4 What is realism?
  • 178. Suggested further reading 165 5 What do realists mean by the terms ‘causal mechanism’ and ‘causal powers’? 6 What do complexity theorists mean by the ‘edge of chaos’? 7 What are the implications of the complexity perspective for organisational democracy? 8 For each of the following, briefly state their implications for organisational change: (a) postmodernism, (b) realism and (c) complexity theories. ■ Essay questions 1 What are the implications for organisations of differences between postmodernists and realists in terms of how they view reality? 2 What are ‘simple order-generating rules’, and how might an organisation identify and modify these? Suggested further reading 1 Hatch, MJ (1997) Organization Theory: Modern, Symbolic and Postmodern Perspectives. Oxford University Press: Oxford. Stacey, R D (2003) Strategic Management and Organisational Dynamics: The Challenge of Complexity. FT/Prentice Hall: Harlow. Taken together, these two books provide a good overview of the postmodernist slant on organisations. 2 Ackroyd, S and Fleetwood, S (eds) (2000) Realist Perspectives on Management and Organisations. Routledge: London. This edited collection of essays provide an excellent introduction to realism and how it can be applied to organisations. 3 Black, JA (2000) Fermenting change: exploring complexity and chaos. Journal of Organizational Change Management (Special Edition), 13(6). Fitzgerald, LA (2002) Chaos: applications in organizational change. Journal of Organizational Change Management (Special Edition), 15(4). These two special editions of the Journal of Organizational Change Management offer a thought-provoking and informative overview of complexity theories.
  • 179. Chapter 5 Culture, power, politics and choice Learning objectives After studying this chapter, you should be able to: ■ understand the main tenets of organisational culture; ■ discuss the strengths and weaknesses of the cultural approach to organisations; ■ describe the role of power and politics in organisations; ■ state the main advantages and disadvantages of the power-politics perspective on organisations; ■ understand the scope, methods and limitations for the exercise of choice in terms of organisational design and change.
  • 180. Introduction 167 Exhibit 5.1 The end of choice? How to preserve the soul of management: the increasing FT sophistication of measurement techniques threatens to reduce executives to robots … This week, lulled by the soft-sounding title, I for celebration. But I fear the long-term conse- opened a book called Quest for Balance, the Human quences of this kind of organisation. Element in Performance Management Systems. Isn’t performance management simply a way to Inside were pages of boxes, tables, diagrams and control the work of managers? How will people acronyms constructed around case studies. It is the respond to such controls? If you stifle individual ini- kind of book publishers like to describe as a busi- tiative, character, discrimination and style, you ness tool: an instruction manual for those attempting remove qualities critical to job satisfaction, leaving a to implement Robert Kaplan’s and David Norton’s mechanical process. How many managers will turn Balanced Scorecard (BSC). The idea is to identify their backs on such systems in the belief that there crucial areas of the business – customer satisfaction, has to be a better way of living your work? Pursuit of efficiency improvements has always for example – that are described as critical success underpinned the development of management and factors (CSFs) and measure them. In the case of the organisation of work. Adam Smith was intrigued by customer satisfaction, you could canvass customers, the division of labour in a pin factory. One workman, he count repeat purchases or work out the time it takes noticed, would find it hard to make one pin a day but a to deal with complaints. These measures are group of 10 workmen, dividing the task into separate described as key performance indicators (KPIs). and distinct jobs, could between them make 48,000 It appears that these systems can produce meas- pins in a day. Later Frederick Taylor, the founder of work urable improvements in organisational productivity. I study, believed that his scientific management had dis- am sure they do. It makes a lot of sense to concen- covered the ‘one best way’ of working. trate on the features of a business that create value. So manufacturing was reduced to its bare bones, But what of the people engaged in carrying out the in which a repeated action such as the clockwise turn measurements and the people expected to respond? of a screw became a job in itself. Craftsmanship, If systemisation removes the discretionary powers of artisanship, individuality – even humanity – were aban- managers, we may begin to ask why we should have doned in the search for ever more efficient production. managers at all. Re-engineering and performance management con- When systems and controls are able to measure tinue this tradition. All these improvements are finding such critical areas of performance there is no ‘better ways’ of doing things for the organisation. But reason why front line employees should not what about personal fulfilment, the stuff that feeds our manage themselves and adjust their work habits soul and spirit? accordingly. Surely anything that creates more effi- Source: Richard Donkin, Financial Times, 19 September 2002, cient and effective organisations should be a cause p. 12. Introduction The first three chapters of this book described the main and most influential approaches to running organisations that have emerged in the last 100 years. If they can be said to have one common feature, it is that each of them claim to have discov- ered the ‘one best way’ to run organisations. The result of this ought to be the type of development described in Exhibit 5.1, the reduction or elimination of managerial choice and discretion. If there is a sure-fire way of running organisations, the main
  • 181. 168 Chapter 5 · Culture, power, politics and choice job of senior managers is to see that it is implemented and that no one, especially themselves, deviates from it. If there is a sure-fire recipe for success, then we should see the elimination, or at the very least the downgrading, of senior managerial posts because almost anyone should be capable of implementing the recipe. However, there are three counter-arguments to those who see ‘managerial recipes’ replacing ‘manage- rial resourcefulness’. The first is that, if this is the case, why have executive salaries increased so dramatically on both sides of the Atlantic in the last decade (AFL-CIO, 2003; Finch and Treanor, 2003)? The second is that, if such sure-fire recipes existed, why is there such a wide disparity in organisational success and why do so few, if any, companies manage to achieve long-term prosperity? The third counter-argument was provided by the discussion of postmodernism, realism and complexity in the previous chapter. This is that rather than being the prisoners of circumstances, rather than being hemmed in by successful recipes, rather than rational beings unquestioningly following rational recipes, managers have a surprisingly wide degree of choice and discretions. Even if one rejects the ‘boundless’ view of choice advocated by the postmodernists in favour of the ‘bounded’ view of the realists and complexity theorists, managers are still far from the ‘executive robots’ perceived by Donkin in Exhibit 5.1. However, if the recipes for success are not straitjackets, if managers are not rational beings, if they do have scope for choice, on what do they base their choices? In this chapter, it will be argued that the answer lies in the areas of culture, power and politics. The chapter begins with a review of organisational culture. It is shown that many organisations lack a cohesive culture that bonds them together in a common purpose. However, contrary to the arguments of the Culture–Excellence school, even where strong cultures exist, they may not always be appropriate; they may also be under- mined owing to the absence of clear or uncontested organisational goals. The review of culture concludes that, firstly, although organisational culture may have important implications for organisational performance, there is little agreement about the nature of culture, whether it can be changed or the benefits to be gained from attempting to do so. Secondly, instead of culture being seen as an all-important and malleable deter- minant of performance, organisational life in many cases is dominated by political power battles which may be more influential than culture in shaping key decisions. Consequently, the review of culture leads on to an examination of the nature and role of power and politics in organisations. This view of organisations maintains that they are essentially political entities whose decisions, actions and major developments are influenced and determined by shifting coalitions of individuals attempting to protect or enhance their own interests. In summing up the implications of chapters 4 and 5 for organisations, it is argued that, rather than being the prisoners of organisational theories or contingencies, man- agers (potentially) have considerable, though by no means unconstrained, freedom of choice over the structure, policies and practices of their organisations, and even over the environment in which they operate. In exercising choice, managers are influenced by organisational theories and constraints, but they are also influenced by their con- cern to ensure that the outcome of decisions favours, or at least does not damage, their personal interests. The conclusion to this chapter – and indeed of Part 1 of the book – is that, whether illegitimate or useful, political behaviour is an ever-present part of organisational life, and that such behaviour is particularly prevalent when major change initiatives are being considered or implemented.
  • 182. The cultural perspective 169 The cultural perspective ■ What is organisational culture? As can be seen from the discussion in Chapter 3 of the Culture–Excellence school, and, to a lesser extent, organisational learning and Japanese management, many writ- ers point out that managers and employees do not perform their duties in a value-free vacuum. Their work and the way it is done are governed, directed and tempered by an organisation’s culture – the particular set of values, beliefs, customs and systems that are unique to that organisation. Though Peters and Waterman’s (1982) view that organisational culture is the prime determinant of organisational performance has been highly influential, other writers stress different, but no less important, aspects of culture. Keuning (1998: 46), for example, argues that the two most important func- tions of culture are: ‘To provide relatively fixed patterns for handling and solving problems … [and to] … reduce uncertainty for members of the organization when confronted with new situations.’ Nevertheless, as Wilson (1992) noted, so influential has Peters and Waterman’s view become that culture has come to be seen as the great ‘cure-all’ for the majority of organisational ills. The current fascination of business with organisational culture began in the 1980s with the work of writers such as Allen and Kraft (1982), Deal and Kennedy (1982), and above all Peters and Waterman (1982). Academics, however, had drawn attention to its importance much earlier; as Allaire and Firsirotu (1984) and Albrow (1997) have shown, there was already a substantial academic literature on organisational culture well before the work of Peters and Waterman (see Eldridge and Crombie, 1974; Turner, 1971). Blake and Mouton (1969), for example, were arguing that there was a link between culture and excellence in the late 1960s. For all this, organisa- tional culture remains a highly contentious topic whose implications are far-reaching. Turner (1986) traced the ‘culture craze’ of the 1980s to the decline of standards in manufacturing quality in the USA, and the challenge to its economic supremacy by Japan. He commented that the concept of culture holds out a new way of understand- ing organisations, and has been offered by many writers as an explanation for the spectacular success of Japanese companies in the 1970s and 1980s. Bowles (1989), amongst others, observed that there is an absence of a cohesive culture in advanced economies in the West, and that the potential for creating systems of beliefs and myths within organisations provides the opportunity for promoting both social and organisa- tional cohesion. The case for culture was best summed up by Deal and Kennedy (1982), who argued that culture, rather than structure, strategy or politics, is the prime mover in organisations. Silverman (1970) contended that organisations are societies in miniature and can therefore be expected to show evidence of their own cultural characteristics. However, culture does not spring up automatically and fully-formed from the whims of management. Allaire and Firsirotu (1984) considered it to be the product of a number of different influences: the ambient society’s values and characteristics, the organisation’s history and past leadership, and factors such as industry and technol- ogy. Other writers have constructed similar lists but, as Brown (1995) noted, there does seem to be some dispute over what factors shape organisational culture and
  • 183. 170 Chapter 5 · Culture, power, politics and choice those which are an integral part of it. Drennan (1992), for example, lists company expectations as a factor that shapes culture, but these might just as easily be seen as a reflection of an organisation’s values which, as Cummings and Huse (1989) point out, are a key component of an organisation’s culture. However, the difficulty in dis- tinguishing between the factors that shape culture and those that comprise culture is a reflection, as Cummings and Huse (1989: 421) also point out, of the ‘confusion about what the term culture really means when applied to organizations’. Brown (1995: 6–7) estimated that there are literally hundreds of definitions of culture: samples of these are shown in Exhibit 5.2. Exhibit 5.2 Definitions of culture The culture of the factory is its customary and traditional way of thinking and doing things, which is shared to a greater or lesser degree by all its members and which new members must learn, and at least partially accept, in order to be accepted into service in the firm. (Jacques, 1952: 251) Culture ... is a pattern of beliefs and expectations shared by the organization’s members. These beliefs and expectations produce norms and powerfully shape the behaviour of individuals and groups in the organization. (Schwartz and Davis, 1981: 33) A quality of perceived organizational specialness – that it possesses some unusual quality that distin- guishes it from others in the field. (Gold, 1982: 571–2) By culture I mean the shared beliefs top managers in a company have about how they should manage themselves and other employees, and how they should conduct business(es). (Lorsch, 1986: 95) Culture represents an interdependent set of values and ways of behaving that are common in a commu- nity and that tend to perpetuate themselves, sometimes over long periods of time. (Kotter and Hesketh, 1992: 141) Culture is ‘how things are done around here’. (Drennan, 1992: 3) Whilst there is a similarity between the definitions shown in Exhibit 5.2, there are also some distinct differences: is culture something an organisation is or something it possesses? Does it mainly apply to senior managers or does it embrace everyone in the organisation? Is it a weak or a powerful force? Perhaps the most widely accepted defini- tion is that offered by Eldridge and Crombie (1974: 78), who stated that culture refers: … to the unique configuration of norms, values, beliefs, ways of behaving and so on, that characterise the manner in which groups and individuals combine to get things done. Culture defines how those in the organisation should behave in a given set of circum- stances. It affects all, from the most senior manager to the humblest clerk. Their actions are judged by themselves and others in relation to expected modes of behav- iour. Culture legitimises certain forms of action and proscribes other forms. This view is supported by Turner (1971), who observed that cultural systems contain elements of ‘ought’ which prescribe forms of behaviour or allow behaviour to be judged acceptable or not. Other writers have suggested a wide variety of different aspects of culture as being important in shaping behaviour. Martin et al (1983) pointed to the
  • 184. The cultural perspective 171 role of organisational stories in shaping the actions and expectations of employees. They identified seven basic types of story prevalent in organisations which provide answers to seven fundamental questions of behaviour (see Exhibit 5.3). Exhibit 5.3 Fundamental questions of behaviour in organisations 1. Can employees break the rules? 2. Is the big boss human? 3. Can the little person rise to the top? 4. Will I get fired? 5. Will the organisation help me if I have to move? 6. How will the boss react to mistakes? 7. How will the organisation deal with obstacles? Alongside stories, much attention has been paid to the role of ceremonies, rites and ritu- als in reinforcing behaviour. As Trice and Beyer (1984) found, these include the following: ■ Rites of passage – designed to facilitate and signal a change in status and role through events such as training and induction programmes. ■ Rites of questioning – to allow the status quo to be challenged through the use of, for example, outside consultants. ■ Rites of renewal – to enable the status quo to be updated and renewed through participative initiatives including strategy development, vision building and job redesign programmes. Another common theme in the literature is the role of ‘heroes’. Peters and Waterman (1982) stressed the importance of corporate heroes in shaping the fortunes of their ‘excellent’ companies. Deal and Kennedy (1982) likewise saw the corporate hero as the great motivator, the person everyone looks up to, admires and relies on. Indeed, there is a tendency, not just in the USA, to attribute much of business success to the actions and personality of individuals, such as Pierre du Pont, Henry Heinz, Henry Ford, Alfred Sloan, Toyoda Kiichiro, Matsushita Konosuke, Edward Cadbury and Sir John Harvey-Jones. Current corporate heroes include Richard Branson at Virgin, Bill Gates at Microsoft, Chris Gent at Vodafone, Steve Jobs at Apple, Luc Vandevelde at Marks and Spencer and Jack Welch at General Electric. Brown (1995) compiled a long list of 38 key elements of culture that have been identified by writers in the field, which include organisational climate, metaphors, attitudes, history and basic assumptions. Identifying these separate elements of cul- ture helps us to flesh out and better understand how organisational culture manifests itself and impacts on individual and group behaviour. Nevertheless, as Brown shows, producing lists of elements or focusing on the role of particular elements tends to present a confusing and partial picture of culture. It becomes difficult to determine which are the more and which are the less important elements and, in terms of chang- ing culture, which elements can be easily altered and which are more immutable. To overcome this lack of clarity, there have been a number of attempts to identify and categorise the constituent elements of culture. Hofstede (1990) developed a four-
  • 185. 172 Chapter 5 · Culture, power, politics and choice layered hierarchical model of culture which ranged from values at the deepest level through rituals, heroes and, at the surface level, symbols. In a similar way, Schein (1985) suggested a three-level model, with basic assumptions being at the deepest level, beliefs, values and attitudes at the intermediate level, and artifacts at the surface level. Based on an analysis of the different definitions of culture, Cummings and Huse (1989) produced a composite model of culture, comprising four major elements exist- ing at different levels of awareness (see Figure 5.1). Cummings and Huse (1989: 421) define these four major elements of culture as follows: 1. Basic assumptions. At the deepest level of cultural awareness are unconscious, taken- for-granted assumptions about how organisational problems should be solved ... They represent nonconfrontable and nondebatable assumptions about relating to the environ- ment, as well as about the nature of human nature, human activity and human relationships. [ ... ] 2. Values. The next higher level of awareness includes values about what ought to be in organizations. Values tell members what is important in the organization and what they need to pay attention to. [ ... ] 3. Norms. Just below the surface of cultural awareness are norms guiding how members should behave in particular situations. These represent unwritten rules of behavior. [ ... ] 4. Artifacts. At the highest level of cultural awareness are the artifacts and creations that are visible manifestations of the other levels of cultural elements. These include observable behaviors of members, as well as the structures, systems, procedures, rules, and physical aspects of the organization. Basic assumptions Values Norms Artifacts Figure 5.1 The major elements of culture Source: from Cummings and Huse (1989)
  • 186. The cultural perspective 173 However, while the various hierarchical models of culture elements are useful, we should always remember that, as Brown (1995: 8–9) notes, ‘ ... actual organisational cultures are not as neat and tidy as the models seem to imply’. Where there are cul- tures, there are also usually subcultures; where there is agreement about cultures, there can also be disagreements and counter-cultures; and there can also be significant differences between espoused culture and culture-in-practice. This lack of neatness and tidiness has not prevented numerous attempts to define organisational culture, nor attempts to categorise the various types of culture. Deal and Kennedy (1982) identified four basic types of culture: ■ The Tough Guy, Macho culture, characterised by individualism and risk-taking, e.g. a police force. ■ The Work-Hard/Play-Hard culture, characterised by low risks and quick feedback on performance, e.g. McDonald’s. ■ The Bet-Your-Company culture, characterised by high risks and very long feedback time, e.g. aircraft companies. ■ The Process culture, characterised by low risks and slow feedback, e.g. insurance companies. Quinn and McGrath (1985) developed their own four types of culture: ■ The Market, characterised by rational decision-making and goal-orientated employees, e.g. GEC under Arnold Weinstock. ■ The Adhocracy, characterised by risk-orientated and charismatic leaders and value- driven organisations, e.g. Apple and Microsoft in their early days. ■ The Clan, characterised by participation, consensus and concern for others, e.g. voluntary organisations. ■ The Hierarchy, characterised by hierarchical, rule-based authority that values sta- bility and risk avoidance, e.g. government bureaucracies. Perhaps the best-known typology of culture, and the one which has been around the longest, is that developed by Handy (1979) from Harrison’s (1972) work on ‘organization ideologies’. Handy (1986: 188) observed that ‘There seem to be four main types of culture ... power, role, task and person’. As shown in Exhibit 5.4, he relates each of these to a particular form of organisational structure. Exhibit 5.4 Handy’s four types of culture A power culture, Handy states, is frequently found in small entrepreneurial organisations such as some property, trading and finance companies. Such a culture is associated with a web structure with one or more powerful figures at the centre, wielding control. A role culture is appropriate to bureaucracies, and organisations with mechanistic, rigid structures and narrow jobs. Such cultures stress the importance of procedures and rules, hierarchical position and authority, security and predictability. In essence, role cultures create situations in which those in the organisation stick rigidly to their job description (role), and any unforeseen events are referred to the next layer up in the hierarchy. A task culture, on the other hand, is job- or project-orientated; the onus is on getting the job in hand (the task) done rather than prescribing how it should be done. Such types of culture ▲
  • 187. 174 Chapter 5 · Culture, power, politics and choice Exhibit 5.4 continued are appropriate to organically-structured organisations where flexibility and teamworking are encouraged. Task cultures create situations in which speed of reaction, integration and creativity are more important than adherence to particular rules or procedures, and where position and authority are less important than the individual contribution to the task in hand. A person culture is, he argues, rare. The individual and his or her wishes are the central focus of this form of culture. It is associated with a minimalistic structure, the purpose of which is to assist those individuals who choose to work together. Therefore, a person culture can be characterised as a cluster or galaxy of individual stars. Source: Handy (1986) Handy (1986) believes that role and task cultures tend to predominate in Western organisations. Relating these two types of culture to Burns and Stalker’s (1961) struc- tural continuum, with mechanistic structures at one end and organic at the other, we can see that Handy is in effect seeking to construct a parallel and related cultural con- tinuum, with role cultures at the mechanistic end and task cultures at the organic end (see Figure 5.2). This categorisation certainly accommodates the five Western approaches to organi- sation theory discussed in the previous chapters. However, it is difficult to accommodate Japanese organisations within this framework, as their cultures contain elements of each extreme. As was described in Chapter 3, Japanese companies have very tightly-structured jobs, especially at the lower levels; they are very hierarchical and deferential, whilst at the same time achieving high levels of motivation, initiative and creativity in problem-solving. They tend to be heavily group/team-orientated, with such teams having a great deal of autonomy. This difficulty of where to place Japan highlights one of the main criticisms of the various attempts to categorise culture, which is that they appear to give insufficient weight to the influence of national cultures on the types of organisational culture that predominate in particular countries. Increasingly over the last decade, and to an extent before, strong reservations have been expressed about the ethnocentric nature of organisational theory; the main reservation concerns the generalisability and appli- cability of management theories developed in the West, predominately the USA, to Structure Mechanistic Organic Role Task Culture Figure 5.2 A structure–culture continuum
  • 188. The cultural perspective 175 the very different cultures and societies of Asia, the middle East and Africa (Deresky, 2000; Ho, 1976; Rosenzweig, 1994; Sullivan and Nonaka, 1986; Thomas, 2003; Trompenaars, 1993). Given that the various typologies of organisational culture all come from a Western, and predominantly North American, perspective, this is an especially serious criticism. One of the most comprehensive and influential studies of the differences between national cultures was carried out by Hofstede (1980, 1990). He suggested that national cultures can be clustered along the lines of their similarities across a range of cultural variables, as follows: ■ the prevailing sense of individualism or collectivity in each country; ■ the power distance accepted in each country (the degree of centralisation, auto- cratic leadership and number of levels in the hierarchy); ■ the degree to which uncertainty is tolerated or avoided. Based on these cultural variables, as Exhibit 5.5 shows, Hofstede classified industri- alised countries into four broad clusters. However, his findings have to be treated with some caution as his sample was drawn from just one multi-national company, IBM. Exhibit 5.5 Hofstede’s national clusters 1. Scandinavia (primarily Denmark, Sweden and Norway): these cultures are based upon values of collectivity, consensus and decentralisation. 2. West Germany (prior to unification), Switzerland and Austria: these are grouped together largely as valuing efficiency – the well-oiled machine – and seeking to reduce uncertainty. 3. Great Britain, Canada, the USA, New Zealand, Australia and the Netherlands: these lie somewhere between 1 and 2 but cluster on the value they place on strong individuals and achievers in society. 4. Japan, France, Belgium, Spain and Italy: these are clustered on bureaucratic tendencies – the pyramid structure – favouring a large power distance. Wilson (1992: 90) observed that ‘The similarity of the factors in [Hofstede’s] national culture study to Handy’s (1986) four organizational forms is striking.’ However, whilst one can see that Scandinavia can be classed as exhibiting task culture characteristics, and the group containing West Germany can be seen as exhibiting role culture characteristics, the other two groupings (Great Britain et al and Japan et al) are more difficult to place. Rather than placing Great Britain and the USA in one cat- egory, according to where they are positioned on Hofstede’s dimensions, it might be more accurate to follow Handy’s own lead and say that both task and role cultures are prevalent. This still leaves us with where to place Japan et al. From the point of view of Hofstede’s dimensions, Japan appears to exhibit characteristics of Handy’s role culture. However, as pointed out above, this is only part of the story of Japanese organisational life. The impact of different national cultures on the management of organisations will be returned to in Chapter 16 when discussing globalisation. However, for now, it is important to recognise that Handy’s categorisation of types of culture is very useful, in that it takes us beyond vague generalisations and gives us a picture of differing
  • 189. 176 Chapter 5 · Culture, power, politics and choice cultures. Nonetheless, like the other work discussed, it serves to highlight both the difficulty of defining cultures clearly, and also the profound implications of the cul- tural approach to organisations. These implications fall under four main headings. Firsly, Deal and Kennedy (1982) argued that behaviour, instead of reacting directly to intrinsic and extrinsic motivators, is shaped by shared values, beliefs and assump- tions about the way an organisation should operate, how rewards should be distributed, the conduct of meetings, and even how people should dress. Secondly, if organisations do have their own identities, personalities or cultures, are there particular types of cultural attributes that are peculiar to top-performing organi- sations? As discussed in Chapter 3, the Culture–Excellence school reply to this question with a resounding yes! Thirdly, Sathe (1983) argued that culture guides the actions of an organisation’s members without the need for detailed instructions or long meetings to discuss how to approach particular issues or problems; it also reduces the level of ambiguity and misunderstanding between functions and departments. In effect, it provides a common context and a common purpose for those in the organisation. However, this is only the case when an organisation possesses a strong culture, and where the mem- bers of the organisation have internalised it to the extent that they no longer question the legitimacy or appropriateness of the organisation’s values and beliefs. Fourthly, one of the most important implications is that, as Barratt (1990: 23) claimed, ‘values, beliefs and attitudes are learnt, can be managed and changed and are potentially manipulable by management’. O’Reilly (1989) is one of those who clearly believes this is the case. He argued that it is possible to change or manage a culture by choosing the attitudes and behaviours that are required, identifying the norms or expectations that promote or impede them, and then taking action to create the desired effect. This last implication is particularly contentious, with many writers supporting this view but others arguing strongly against it. ■ Changing organisational culture: the arguments in favour That cultures do change is not in question. No organisation’s culture is static: as the external and internal factors that influence culture change, so culture will change. But given that culture is locked into the beliefs, values and norms of each individual in the organisation, and because these are difficult constructs to alter, this type of organic cultural change will be slow, unless perhaps there is some major shock to the organi- sation (Boddy and Buchanan, 2002; Brown, 1995; Burnes, 1991; Keuning, 1998; Schein, 1985). This in itself may not be problematic for organisations, provided that other factors change in an equally slow fashion. However, the argument put forward by the proponents of Culture–Excellence is that a successful culture is one based on values and assumptions appropriate to the environment in which it operates. In addi- tion, like Handy (1986), Allaire and Firsirotu (1984) argued that, to operate effectively and efficiently, an organisation’s culture needs to match or be appropriate to its structure. Looking at Figure 5.2, we can see that organisations with mechanistic structures are likely to operate effectively and efficiently if they have role cultures. However, given that an organisation’s environment can change rapidly, as can its structure, situations will arise where an organisation’s culture may be out of step with
  • 190. The cultural perspective 177 changes that are taking place in the environment, structure and practices of the organisation. In such a case, a company that moves quickly to replace a mechanistic structure with a more organic structure to cope with increasing uncertainty in its environment, might find that the change does not improve its effectiveness and effi- ciency because it had been unable to change from a role to a task culture with equal speed. As Handy (1986: 188) commented: Experience suggests that a strong culture makes a strong organisation, but does it matter what sort of culture is involved? Yes, it does. Not all cultures suit all purposes or people. Cultures are founded and built over the years by the dominant groups in an organisation. What suits them and the organisation at one stage is not necessarily appropriate for ever – strong though that culture may be. Flynn (1993) described how, with the introduction of a more market-orientated phi- losophy, such a situation arose across organisations in the public sector in the UK. Many similar cases can be found in the private sector (see Boddy, 2002; Brown, 1995; Cummings and Worley, 2001; Dobson, 1988; Industrial Society, 1997). In such situa- tions, rather than facilitating the efficient operation of the organisation, its culture may obstruct it. Therefore, for a variety of reasons, organisations may decide that their existing cul- ture is inappropriate or even detrimental to their competitive needs. In such a situation, many organisations decide to change their culture. A survey of the UK’s 1,000 largest public and private sector organisations, carried out in 1988 by Dobson (1988), revealed that more than 250 of them had been involved in culture change programmes in the preceding five years. A similar survey by the Industrial Society in 1997, covering over 4,000 organisations, found that over 90 per cent of respondents were either going through or had recently gone through a culture change programme (Industrial Society, 1997). The survey found that culture change was promoted through a variety of methods including strategic planning, training, organisation redesign to promote teamwork, and changes to appraisal systems. Based on his 1988 survey, Dobson states that the organisations involved sought to change culture by shaping the beliefs, values and attitudes of employees. Derived from the actions taken by these companies, Dobson identified a four-step approach to culture change: Step 1 – change recruitment, selection and redundancy policies to alter the composi- tion of the workforce so that promotion and employment prospects are dependent on those concerned possessing or displaying the beliefs and values the organisation wishes to promote. Step 2 – reorganise the workforce to ensure that those employees and managers dis- playing the required traits occupy positions of influence. Step 3 – effectively communicate the new values. This is done using a variety of meth- ods such as one-to-one interviews, briefing groups, quality circles, house journals, etc. However, the example of senior managers exhibiting the new beliefs and values is seen as particularly important. Step 4 – change systems, procedures and personnel policies, especially those con- cerned with rewards and appraisal.
  • 191. 178 Chapter 5 · Culture, power, politics and choice Drawing on the work of wide range of researchers, Cummings and Worley (2001) offered their own six ‘practical’ steps for achieving cultural change (see Exhibit 5.6). Though wider in scope in that their approach sets change in a strategic context, the actual mechanics are very similar to those adopted by the organisations Dobson studied. Exhibit 5.6 Guidelines for changing culture 1. Formulate a clear strategic vision. Effective cultural change should start from a clear vision of the firm’s new strategy and of the shared values and behaviour needed to make it work. This vision provides the purpose and direction for cultural change. 2. Display top-management commitment. Cultural change must be managed from the top of the organisation. Senior managers and administrators need to be strongly committed to the new values and the need to create constant pressure for change. 3. Model culture change at the highest level. Senior executives must communicate the new culture through their own actions. Their behaviours need to symbolise the kind of values and behaviours being sought. 4. Modify the organisation to support organisational changes. Cultural change must be accompanied by supporting modifications in organisational structure, human resource systems, information and control systems, and management style. These organisational features can help to orientate people’s behaviours to the new culture. 5. Select and socialise newcomers and terminate deviants. One of the most effective methods for changing culture is to change organisational membership. People can be selected in terms of their fit with the new culture, and provided with an induction clearly indicating desired attitudes and behaviour. Existing staff who cannot adapt to the new ways may have their employment terminated, for example, through early retirement schemes. This is especially important in key leadership positions, where people’s actions can significantly promote or hinder new values and behaviours. 6. Develop ethical and legal sensitivity. Most cultural change programmes attempt to promote values that emphasise employee integrity, control, equitable treatment and job security. However, if one of the key steps in pursuing culture change is to replace existing staff with new recruits, not only can this send out the wrong message to newcomers and the remaining staff but, depending how staff are selected for replacement, it could also contravene employment laws. Therefore, organisations need to be especially aware of these potential ethical and legal pitfalls. Source: adapted from Cummings and Worley (2001: 509–11) Many other writers advocating culture change adopt a similar approach. Some of these, including Peters and Waterman (1982) with their eight steps to excellence, take a very prescriptive line. Others, though, appear to underestimate greatly the difficulty involved in changing culture. An example of this is an article in Management Today (Egan, 1994) which took just four pages to show how organisations could quickly, and with apparent ease, identify and change their cultures. Regardless of how its sup- porters interpret or apply it, however, this type of generic approach to culture has been criticised as being too simplistic, and putting forward recommendations which are far too general to be of use to individual organisations (Brown, 1995; Gordon, 1985; Hassard and Sharifi, 1989; Nord, 1985; Uttal, 1983).
  • 192. The cultural perspective 179 There are other writers who, whilst sharing the belief that culture can be changed, take a more considered view. Brown (1995) warns that organisations must be sure that the problems they wish to address through cultural change are actually caused by the existing culture. He warns that there is a tendency to assume that culture is the root cause of organisational problems, when in fact they might arise from inappropri- ate organisational structure. He also points out that senior managers may use the issue of culture to redirect blame for poor performance away from themselves and onto the rest of the organisation. In addition, Brown warns against taking an overly simplistic view of culture by believing that organisations have a single unitary culture, or by assuming that all employees can be made to share a single purpose or vision. This was also a point made by Hatch (1997) on behalf of the postmodernists. One of the most influential writers on the subject of culture, Schein (1985), takes a similarly cautious view. He warns that before any attempt is made to change an organisation’s culture, it is first necessary to understand the nature of its existing culture and how this is sustained. According to Schein, this can be achieved by analysing the values that govern behaviour, and uncovering the underlying and often unconscious assump- tions that determine how those in the organisation think, feel and react. Difficult though he acknowledges this to be, he argues that it can be achieved by: ■ analysing the process of recruitment and induction for new employees; ■ analysing responses to critical incidents in the organisation’s history, as these are often translated into unwritten, but nevertheless very strong, rules of behaviour; ■ analysing the beliefs, values and assumptions of those who are seen as the guardians and promoters of the organisation’s culture; ■ discussing the findings from the above with staff in the organisation, and paying especial attention to anomalies or puzzling features which have been observed. Schein’s approach, therefore, is to treat the development of culture as an adaptive and tangible learning process. His approach emphasises the way in which an organisation communicates its culture to new recruits. It illustrates how assumptions are translated into values and how values influence behaviour. Schein seeks to understand the mech- anisms used to propagate culture, and how new values and behaviours are learned. Once these mechanisms are revealed, he argues, they can then form the basis of a strategy to change the organisation’s culture. In a synthesis of the literature on organisational culture, Hassard and Sharifi (1989) proposed a similar approach to that advocated by Schein. In particular, they stress two crucial aspects of culture change: Before a major [cultural] change campaign is commenced, senior managers must understand the implications of the new system for their own behaviour: and senior management must be involved in all the main stages preceding change. In change programmes, special attention must be given to the company’s ‘opinion leaders’. (Hassard and Sharifi, 1989: 11) Schwartz and Davis (1981), on the other hand, adopted a different stance with regard to culture. They suggest that, when an organisation is considering any form of change, it should compare the strategic significance (the importance to the organisation’s future) of the change with the cultural resistance that attempts to make the particular change will encounter. They term this the ‘cultural risk’ approach. They offer a step-by-step
  • 193. 180 Chapter 5 · Culture, power, politics and choice method for identifying the degree of cultural risk involved in any particular change project. From this, they argue, it is then possible for an organisation to decide with a degree of certainty whether to ignore the culture, manage round it, attempt to change the culture to fit the strategy, or change the strategy to fit the culture. Although Schwartz and Davis’ method relies heavily on managerial judgement, they maintain that it constitutes a methodical approach to identifying, at an early stage, the potential impact of strategic change on an organisation’s culture, and vice versa. It should, of course, be pointed out that though Schein’s approach and Schwartz and Davis’ approach are different, this does not mean they are in conflict or are not compatible. Indeed, both could be considered as different aspects of the same task: deciding whether culture needs to be changed, and, if it does, in what way. No one should dispute the difficulty of changing an organisation’s culture. The work of Schein (1985), Schwartz and Davis (1981), Cummings and Huse (1989) and Dobson (1988) provides organisations with the guidelines and methods for evaluating the need for and undertaking cultural change. Schein’s work shows how an organisa- tion’s existing culture, and the way it is reinforced, can be revealed. Schwartz and Davis’ work shows how the need for cultural change can be evaluated and the neces- sary changes identified. Finally, the work of Cummings and Huse (1989) and Dobson (1988) shows how cultural change can be implemented. ■ Changing organisational culture: some reservations One of those who sounds a cautious note regarding the feasibility or advisability of cul- ture change is Edgar Schein. Though he believes that culture can be changed, he also argues that there is a negative side to creating (or attempting to create) a strong and cohesive organisational culture (Schein, 1984, 1985). Such shared values, particularly where they have been seen to be consistently successful in the past, make organisations resistant to certain types of change or strategic options, regardless of their merit. Schein, in conversation with Luthans (Luthans, 1989), was also critical of the idea that culture change can be achieved by a top-down, management-led approach. Schein (1989) appears to advocate a contingency or context-specific view of culture. Taking an organi- sational life-cycle approach, he argues that an organisation may need a strong culture in its formative years to hold it together whilst it grows. However, it may reach a stage where it is increasingly differentiated geographically, by function and by division. At this stage, managing culture becomes more a question of knitting together the warring fac- tions and subcultures. In such a case, a strong culture may outlive its usefulness. Salaman (1979) also pointed out that whilst there may be a strong or dominant cul- ture in an organisation, there will also be subcultures, as in society at large. These may be peculiar to the organisation or may cut across organisations. Examples of the latter are groups such as doctors and lawyers who have their own professional cultures which extend beyond the organisations who employ them. Davis (1985) examined the culture of white- and blue-collar lower-level employees. He found that not only do these groups have their own distinctive cultures, but these can often be in conflict with the dominant (managerial) culture of their organisation. Therefore, subcultures exist in a complex and potentially conflicting relationship with the dominant culture. If that dominant culture is seen by some groups to have lost its appropriateness (and thus legitimacy), then potential conflicts can become actual conflicts. The reverse can also be the case; cultural values and methods of operation which one group adopts may be
  • 194. The cultural perspective 181 seen as being out of step with ‘the way we’ve always done things’. This in turn can lead to an undermining of the authority of managers and specialists – endangering the efficient operation of the organisation (Morieux and Sutherland, 1988). Uttal (1983) is another who expressed caution with regard to the difficulties and advisability of culture change. In particular, he observed that even where it is success- ful, the process can take anywhere from 6 to 15 years. Meyer and Zucker (1989) went further, arguing that whilst managing cultural change may result in short-term economic benefits, in the longer term it may result in stagnation and demise. Another difficulty in achieving culture change is that, as Brown (1995: 153) notes: ... most employees in an organisation have a high emotional stake in the current culture. People who have been steeped in the traditions and values of the organisation and whose philosophy of life may well be caught up in the organisation’s cultural assumptions will experience considerable uncertainty, anxiety and pain in the process of change ... Even if there are personal gains to be made from altering the habits of a lifetime these are likely to be seen as potential or theoretical only, as against the certainty of the losses. Therefore, any attempt to change an organisation’s culture is inevitably going to be met with resistance. Sometimes this will be open and organised; often it will be covert and instinctive with people trying to hold on to old ways and protect the old order. Unlike many other forms of change, the main resistance may well come from middle and, especially, senior managers who see their status, power and personal beliefs chal- lenged. This is a point made by Cummings and Worley (2001), who observed that culture change programmes often result in or require the removal of managers from key leadership positions. As can be seen, there are many writers who draw attention to the difficulties inher- ent in attempting culture change; however, there are also writers who believe that culture cannot be changed or managed at all. Meek (1988: 469–70) commented that: Culture as a whole cannot be manipulated, turned on or off, although it needs to be recog- nised that some [organisations] are in a better position than others to intentionally influence aspects of it ... culture should be regarded as something an organisation ‘is’, not something it ‘has’: it is not an independent variable nor can it be created, discovered or destroyed by the whims of management. In a similar vein, Filby and Willmott (1988) also questioned the notion that manage- ment has the capacity to control culture. They point out that this ignores the ways in which an individual’s values and beliefs are conditioned by experience outside the workplace – through exposure to the media, through social activities, as well as through previous occupational activities. Postmodernists, as mentioned in the previ- ous chapter, take a similar view. Hatch (1997: 235) probably speaks for many of them when she gives this advice: Do not think of trying to manage culture. Other people’s meanings and interpretations are highly unmanageable. Think instead of trying to culturally manage your organization, that is, manage your organization with cultural awareness of the multiplicity of meanings that will be made of you and your efforts.
  • 195. 182 Chapter 5 · Culture, power, politics and choice A further reservation expressed by a number of writers relates to the ethical issues raised by attempts to change culture. Van Maanen and Kunda (1989) argued that behind the interest in culture is an attempt by managers to control what employees feel as well as what they say or do. Their argument is that culture is a mechanism for disciplining emotion – a method of guiding the way people are expected to feel. Seen in this light, attempts to change culture can be conceived of as Taylorism of the mind. Frederick Taylor sought to control behaviour by laying down and enforcing strict rules about how work should be carried out. Van Maanen and Kunda in effect argue that culture change programmes attempt to achieve the same end through a form of mind control. Willmott (1995) expresses similar concerns. He believes that the over- riding aim of culture change is to win the ‘hearts and minds’ of employees by achieving control over the ‘employee’s soul’. Watson (1997: 278) concludes that: Employers and managers engaging in these ways with issues of employees’ self-identities and the values through which they judge the rights and wrongs of their daily lives must be a matter of serious concern. To attempt to mould cultures – given that culture in its broad sense provides the roots of human morality, social identity and existential security – is indeed to enter ‘deep and dangerous waters’. ■ Changing organisational culture: conflicts and choices As in so much else to do with organisations, there is no agreement amongst those who study culture as to its nature, purpose or malleability. Certainly, few writers doubt its importance, but beyond that there is little agreement. The result, to quote Brown (1995: 5), is that we are presented with ‘an embarrassment of definitional riches’. The Culture–Excellence proponents argue that there is only one form of cul- ture that matters in today’s environment – strong and flexible – and that organisations should adopt it quickly or face the consequences. The proponents of the Japanese approach to management and the Organisational Learning camp adopt a similar, though less strident, view. Schein (1984, 1985, 1989) agreed that culture is important and that in certain cases a strong culture is desirable. However, in other sit- uations, shared values and strong cultures may have a negative effect by stifling diversity and preventing alternative strategies arising. He also doubts that managers acting in isolation from the rest of an organisation have the ability themselves to change the existing culture or impose a new one. Salaman (1979) also drew attention to the presence and role of subcultures, particularly their potential for creating con- flict. Meek (1988) took the view that culture is not amenable to conscious managerial change programmes at all. The postmodernists adopt a similar view. Though they consider organisational culture to be important, they are sceptical of attempts to manipulate and change culture, believing that the outcomes of such attempts are unpredictable and can alienate rather than motivate employees – remember Hatch’s (1997: 235) warning not even to ‘think of trying to manage culture’. Despite the lack of consensus amongst writers, there are two main conclusions we can draw from the above review of the culture literature. Firstly, in the absence of unambiguous guidelines on organisational culture, managers must make their own choices based on their own circumstances and perceived options as to whether to attempt to change their organisation’s culture.
  • 196. The power–politics perspective 183 Secondly, in the absence of strong or appropriate cultures that bind their members together in a common purpose and legitimate and guide decision-making, managers may find it difficult either to agree amongst themselves or to gain agreement from others in the organisation. As Robbins (1987) argued, in such a situation, there is a tendency for conflict and power battles to take place. Therefore, in understanding how organisations operate and the strengths and weaknesses of the theories we have been discussing in the previous chapters, it is nec- essary to examine the power–politics perspective on organisations. The power–politics perspective ■ Political behaviour in organisations The cultural perspective on organisational life reinforces the argument developed in previous chapters that organisations are not rational entities where everyone sub- scribes to, and helps to achieve, the organisation’s overarching goals. The power–politics perspective puts forward a similar view, arguing that organisations often act irrationally, that their goals and objectives emerge through a process of negotiation and influence, and that they are composed of competing and shifting coalitions of groups and individuals (Brown, 1995; Buchanan and Badham, 1999; Mintzberg et al, 1998; Robbins, 1986, 1987). This perspective began to emerge strongly in the late 1970s and early 1980s, and is especially associated with Jeffrey Pfeffer’s (1981) book Power in Organizations. Before then, as Gandz and Murray (1980) discovered when they reviewed the literature on organisational politics, there was very little general interest in the topic, and very few publications on it. Nevertheless, of the early work in the field, Lindblom’s (1959) work on the ‘science of muddling through’ and Cyert and March’s (1963) book, A Behavioral Theory of the Firm, can be said to have really laid the basis for the later explosion of interest in power and politics in organisations. Writing from the viewpoint of public sector organisations, Lindblom argued that political constraints on policy make a rationalist approach to decision-making impossible. Cyert and March extensively developed Lindblom’s work, showing that private sector firms were no less political entities than public sector organisations. The intention behind their work was to provide a better understanding of decision-making by supplementing existing theories, which tended to focus on market factors, with an examination of the internal operation of the firm. Cyert and March characterise firms as competing and shifting coalitions of multiple and conflicting interests, whose demands and objectives are constantly, but imper- fectly, reconciled and where rationality is limited or bounded by uncertainty over what is wanted and how to achieve it. Under such circumstances, managers ‘satisfice’: rather than searching for the best solution, they select one that is satisfactory and suf- ficient (Simon, 1957). Cyert and March’s work on the political dimension of decision-making and the nature of organisational life now forms part of the received wisdom on organisational behaviour (Mallory, 1997). This is not to refute or marginalise the role of organisa- tional culture. As Handy (1993) observed, the extent to which agreement exists about the tasks an organisation undertakes, how it undertakes them, and the extent to
  • 197. 184 Chapter 5 · Culture, power, politics and choice which members of the organisation are committed to achieving them, will be affected by the strength and the perceived legitimacy or suitability of the organisation’s cul- ture. Willcocks (1994: 31) took the view that diverse interests are part of organisational culture. They include, he argues, ‘for example, the goals, values and expectations of the organizational participants and have been described as cognitive maps or personal agendas’. The importance of the power–politics perspective is that it shows that, even where a strong culture may be present, the cohesiveness, willingness and stability of an organisation’s members is unlikely to be uniform either across an organisation or over time. Rather the degree of cooperation and commitment they exhibit will vary with the degree to which they perceive the goals they are pursuing as broadly consistent with their own interests (Mullins, 1993; Rollinson, 2002). Therefore, as Pfeffer (1978: 11–12) commented: It is difficult to think of situations in which goals are so congruent, or the facts so clear-cut that judgment and compromise are not involved. What is rational from one point of view is irrational from another. Organizations are political systems, coalitions of interests, and rationality is defined only with respect to unitary and consistent ordering of preferences. It might be comforting to believe that individuals and groups within organisations are supportive of each other, that they work in a harmonious and cooperative fashion. Such a non-political perspective portrays employees as always behaving in a manner consistent with the interests of the organisation. In contrast, as Robbins (1986: 283) remarked, ‘a political view can explain much of, what may seem to be, irrational behaviour in organizations. It can help to explain, for instance, why employees with- hold information, restrict output, attempt to “build empires” ... ’. Handy (1986) also observed the tendency for individuals and groups to pursue courses of action that promote their interests, regardless of the organisation’s formal goals and objectives. He notes that where individuals perceive that the actual or pro- posed goals of the organisation or the tasks they are asked to perform are out of step with their own interests, they will seek where possible to bring the two into line. In some cases, individuals and groups may be persuaded to change their perceptions; in others, they may seek to change or influence the goals or tasks. It is this phenomenon of individuals and groups, throughout an organisation, pursuing differing interests, and battling with each other to shape decisions in their favour, that has led many commentators to characterise organisations as political systems (Buchanan and Badham, 1999; Dawson, 2003; Mintzberg et al, 1998; Morgan, 1986; Pettigrew, 1985, 1987; Pfeffer, 1981, 1992). Zaleznik (1970) stated that where there are scarce resources (which is the case in most organisations), the psychology of scarcity and comparison take over. In such sit- uations, possession of resources becomes the focus for comparisons, the basis for self-esteem and, ultimately, the source of power. Such situations will see the emer- gence not only of dominant coalitions but also, Zaleznik argues, of unconscious collusion based on defensive reaction. Therefore, whilst some individuals will perceive their actions as ‘political’ or self-interested, others may act in the same manner, but believe they are pursuing the best interests of the organisation. Drory and Romm (1988) argued that those in managerial positions are less likely than those in non-managerial positions to define (or recognise) their actions as politi-
  • 198. The power–politics perspective 185 cal. This may be explained by the findings from a survey of 428 managers carried out by Gandz and Murray (1980). They found that managers are more involved in politi- cal behaviour, and therefore tend to see it as a typical part of organisational life. If this is the case, it could be argued that the more individuals and groups are involved in political behaviour, the more it becomes the norm, and they become blind to its political nature and see it merely as standard practice. Those less involved in such behaviour, on the other hand, recognise its political nature because it stands out from their normal practices. It is also the case that those lower down the organisation, whilst affected by resource allocation decisions, are less likely, on a regular basis, to be in a position to influence such decisions. For managers, however, arguing for addi- tional resources or allocating existing resources is the normal currency of everyday life. This is reflected in Gandz and Murray’s survey, where 89 per cent of respondents thought that successful executives had to be good politicians. Despite this, over 50 per cent of respondents also thought that organisations would be happier places if they were free of politics, and a similar number thought that political behaviour was detrimental to efficiency. As Kanter (1979) and Pfeffer (1992) note, this ambivalent attitude, i.e. believing that political behaviour is necessary but deploring its use, is rife in organisations. As mentioned in Chapter 4, postmodernists take a very different view of power and politics to that of most other writers on organisations. They are not greatly con- cerned with the way individuals and groups acquire and hold on to power as such. Instead, they focus on the relationship between power and knowledge, and on the way that power is used to promote particular views of reality and to legitimate partic- ular forms of knowledge in organisations. ■ Power and politics: towards a definition Though it is relatively easy to provide simple definitions of power (the possession of position and/or resources) and politics (the deployment of influence/leverage), it is more difficult to distinguish between the two, as was shown by Drory and Romm (1988). They argue that the two concepts are often used interchangeably and that the difference between the two has never been fully settled. Indeed, a brief examination of each shows the difficulty, and perhaps danger, in separating them. First, however, it is also necessary to understand the difference between power and authority. Robbins (1987: 186) drew an important distinction between them: ... we defined authority as the right to act, or command others to act, toward the attainment of organizational goals. Its unique characteristic, we said, was that this right had legitimacy based on the authority figure’s position in the organization. Authority goes with the job. ... When we use the term power we mean an individual’s capacity to influence decisions. ... the ability to influence based on an individual’s legitimate position can affect decisions, but one does not require authority to have such influence. In support of his view, Robbins quotes the example of high-ranking executives’ secre- taries, who may have a great deal of power, by virtue of their ability to influence the flow of information and people to their bosses, but have very little actual authority. Pfeffer (1992), whilst agreeing with this view, points out that power can stem from
  • 199. 186 Chapter 5 · Culture, power, politics and choice three sources: control over information; formal authority to act; and control over resources. However, he believes this latter source of power is particularly important. We must, Pfeffer (1992: 83) argues, recognise the truth of the ‘New Golden Rule: the person with the gold makes the rules.’ On the other hand, Robbins (1987: 194) defines organisational politics as the: ... efforts of organizational members to mobilize support for or against policies, rules, goals, or other decisions in which the outcome will have some effect on them. Politics, therefore, is essentially the exercise of power. Robbins’ argument, then, is that power is the capacity to influence decisions whilst politics is the actual process of exerting this influence. This view, that politics is merely the enactment of power, is held by many writers. Gibson et al (1988: 44), for example, stated that organisational politics comprises ‘those activities used at all levels to acquire, develop or use power and other resources to obtain individual choices when there is uncertainty or disagreement about choices’. This view is also central to Pfeffer’s (1981: 7) widely-accepted definition, that organisational politics: … involves those activities taken within organizations to acquire, develop and use power and other resources to obtain one’s preferred outcome in a situation where there is uncer- tainty or descensus about choices. Pfeffer, like many writers, refers to organisational politics as games. In his major work Power in Organizations (Pfeffer, 1981), he took the view that decisions in organisations are the result of games among players with different perceptions and interests. This was a theme developed by Mintzberg (1983) in his comprehensive review of power and politics in organisations. He lists 13 political games that are common in organisations, the key ones being games to resist authority, games to counter resistance, games to build power bases, games to defeat rivals, and games to change the organisation. Like all games, political ones have particular tactics associated with them. Exhibit 5.7 lists the seven most common ploys used by managers when seeking to influence superiors, equals and subordinates. Exhibit 5.7 Political ploys ■ Reason – facts and information are used selectively to mount seemingly logical or rational arguments. ■ Friendliness – the use of flattery, creation of goodwill, etc., prior to making a request. ■ Coalition – joining forces with others so as to increase one’s own influence. ■ Bargaining – exchanging benefits and favours in order to achieve a particular outcome. ■ Assertiveness – being forceful in making requests and demanding compliance. ■ Higher authority – gaining the support of superiors for a particular course of action. ■ Sanctions – using the promise of rewards or the threat of punishment to force compliance. Source: from Kipnis et al (1980, 1984), Schilit and Locke (1982)
  • 200. The power–politics perspective 187 Robbins (1986) observed that the most popular tactic or ploy is the selective use of reason, regardless of whether the influence was directed upwards or downwards. Although cloaked in reason, arguments and data are deployed in such a way that the outcome favoured by those using the tactic is presented in a more favourable light than the alternatives. Therefore, though reason may be deployed, it is not done so in an unbiased or neutral fashion; it is used as a screen to disguise the real objective of the exercise. In deciding which tactic to use, Kipnis et al (1984) identified four contin- gency variables that affect the manager’s choice: the manager’s relative power; the manager’s objectives in seeking to influence others; the manager’s expectations of the target person’s/group’s willingness to comply; and the organisation’s culture. Having gained a clearer picture of power and politics, we can now move on to examine one of the central issues that arises from this: the distinction between the legitimate and illegitimate use of power and politics. ■ Power, politics and legitimacy Thompkins (1990) firmly believed that the use of politics is a direct contravention of or challenge to the legitimate rules of an organisation. Many, however, see organisa- tional politics as existing in a grey area between prescribed and illegal behaviour (Drory and Romm, 1988). Porter et al (1983) differentiated between three types of organisational behaviours: prescribed, discretionary and illegal. They believe that political behaviour falls within the discretionary rather than the illegal category. The most common view is that the use of politics in organisations can best be described as non-sanctioned or informal or discretionary behaviour, rather than behaviour that is clearly prohibited or illegal (Farrell and Petersen, 1983; Mayes and Allen, 1977). This definition of politics helps to distinguish between the formal and legitimate use of officially-sanctioned power by authorised personnel, and power that is exercised either in an illegitimate manner by authorised personnel or used by non-authorised personnel for their own ends. Most organisations and many writers see political behaviour as dysfunctional (Drory and Romm, 1988). Batten and Swab (1965), Pettigrew (1973) and Porter (1976) believed that political behaviour goes against and undermines formal organi- sational goals and interests. Thompkins (1990), though, argued that political manoeuvring in organisations is due to a failure by senior managers to set and imple- ment coherent and consistent goals and policies in the first place. This results in uncertainties, which in turn lead to conflict between groups and individuals. In such a situation, Thompkins (1990: 24) argues: Management is then left without top level guidance to run company operations. They will, then, by their own nature of survival, over a period of time, make decisions that will perpet- uate their own safety and security. This is the beginning of political power, where legitimate discipline begins to decline and illegitimate discipline begins to strangle the organisation. In short, the tail begins to wag the dog. ‘Politics’ in this form is created by the neglect of top executive management. Pfeffer (1981) took a different view of organisational politics. Rather than political behaviour arising from a lack of clear-cut goals and policies, he suggests that the con- struction of organisational goals is itself a political process. Nevertheless, this does
  • 201. 188 Chapter 5 · Culture, power, politics and choice not always mean that political behaviour is detrimental to organisational effective- ness. Mintzberg (1983) maintains that, when used in moderation, political games can have a healthy effect by keeping the organisation on its toes. Mayes and Allen (1977) took a similar view. Pascale (1993) went further, putting forward the view that con- flict and contention are necessary to save an organisation from complacency and decline. The argument that the use of politics and power are central to the effective running of organisations has been most strongly put by Pfeffer (1992: 337–8) in his book Managing with Power, in which he argues that: Computers don’t get built, cities don’t get rebuilt, and diseases don’t get fought unless advo- cates for change learn how to develop and use power effectively. … In corporations, public agencies, universities, and government, the problem is how to get things done, how to move forward, how to solve the many problems facing organizations of all sizes and all types. Developing and exercising power requires both will and skill. It is the will which often seems to be missing. For Pfeffer, will and skill are exercised through the pursuit of a focused and consis- tent personal agenda which is implemented through a seven-step programme (see Exhibit 5.8). However, Mintzberg (1983) sounds a note of warning. He argues that if too many people pursue their own personal agenda, or if the use of power and poli- tics becomes too aggressive and pervasive, it can turn the whole organisation into a political cauldron and divert it from its main task. Exhibit 5.8 The use of power and politics 1. Decide what your goals are, what you are trying to accomplish. 2. Diagnose patterns of dependence and interdependence; what individuals are influential and important in your achieving your goal? 3. What are their points of view likely to be? How will they feel about what you are trying to do? 4. What are their power bases? Which of them is more influential in the decision? 5. What are your bases of power and influence? What bases of influence can you develop to gain more control over the situation? 6. Which of the various strategies and tactics for exercising power seem most appropriate and are likely to be effective, given the situation you confront? 7. Based on the above, choose a course of action to get something done. Source: from Pfeffer (1992: 29) To an extent, the degree to which the balance between positive and negative bene- fits is tipped one way or the other in an organisation is dependent on the type of power deployed and how it is used. Etzioni (1975) identified three distinct types of power used in organisations: ■ Coercive power – the threat of negative consequences (including physical sanctions or force) should compliance not be forthcoming.
  • 202. The power–politics perspective 189 ■ Remunerative power – the promise of material rewards as inducements to cooperate. ■ Normative power – the allocation and manipulation of symbolic rewards, such as status symbols, as inducements to obey. Robbins (1986) developed this further by identifying not only types of power but also the sources of power. To Etzioni’s three types of power, he adds a fourth: ■ Knowledge power – the control of information. We can say that when an individual in a group or organization controls unique informa- tion, and when that information is needed to make a decision, the individual has knowledge-based power. (Robbins, 1986: 273) Robbins suggests that these four types of power stem from four separate sources: a person’s position in the organisation; personal characteristics; expertise; and the opportunity to influence or control the flow of information. All four types of power can be and are deployed in organisations. The degree to which they will be effective is likely to depend upon the source from which they spring. Coercive power is usually the prerogative of those in senior positions, whilst even quite junior members of an organisation may, in particular circumstances, control or possess information that enables them to exert knowledge power. The interesting point to note is that the use of knowledge power – the selective and biased use of information (often deployed under the guise of reason) – is shown to be effective in gaining willing compli- ance and cooperation from those at whom it is directed. According to Huczynski and Buchanan (2001), however, the favourite influencing strategies are: ■ For influencing up (managers) – the use of reason. ■ For influencing across (co-workers) – the use of friendliness. ■ For influencing down (subordinates) – the use of reason. This appears to fit in well with the view of many observers that the use of remunera- tive and coercive power, i.e. the opposite of reason and friendliness, is often counter-productive because those on the receiving end of such power tend to view it negatively and resent it (Bachman et al, 1968; Ivancevich, 1970; Robbins, 1986; Student, 1968). This is perhaps why the most detrimental outcomes from the deployment of power arise when people feel they are being coerced into a particular course of action that goes against their beliefs or self-interest (Rollinson, 2002). Therefore, irrespective of the source or type of power, it is perhaps the willingness to use it in situations where there will be clear winners and losers, and where the covert activities of warring coali- tions turn into open warfare, that leads to the more dysfunctional and damaging consequences. Such battles, where groups and individuals fight to influence key deci- sions and in so doing bolster their own position, especially where the stakes are high, can end with senior figures either leaving or being forced out of the organisation. This was the case with BMW, where the battle over the future of Rover’s Longbridge plant in the UK led to both Bernd Pischetsrieder, BMW’s Chairman, and his long-time boardroom rival, Wolfgang Reitzle, BMW’s Marketing Director, being forced to resign (Gow, 1999a; Gow and Traynor, 1999). A similar situation occurred with Pehr Gyllenhammar, the man who ran Volvo for more than two decades. His
  • 203. 190 Chapter 5 · Culture, power, politics and choice 1993 attempt to merge Volvo with Renault, the French state-controlled car company, was opposed by a coalition of shareholders and managers, who felt that it was not so much a merger of equals as a takeover by Renault. Both shareholders and managers felt that in such a situation their interests would be damaged, and a very public power struggle ensued, with both sides claiming to act in Volvo’s best interests (Done, 1994). Both these cases could be classed as battles between individuals fighting to maintain their own power. However, the reality was that in both cases major issues concerning the future viability of these organisations were at stake. The irony in Volvo’s case was that six years after rejecting a merger with Renault because it was seen as disadvanta- geous to the company’s interests, the company sold its car division to Ford Motors, whose work practices were seen as the antithesis of all that Volvo held dear. The battle for control of the advertising agency Saatchi & Saatchi, which resulted in the founders leaving, also shows how a power struggle can leave an organisation dam- aged (Barrie, 1995; Donovan, 1995). Another very public example of a power clash was the on–off merger of SmithKline Beecham and Glaxo. In 1998, the two compa- nies announced that they planned to merge and form the largest pharmaceutical company in the world, worth an estimated US$165 billion. However, the merger was quickly called off owing to a rumoured clash between SmithKline’s Chief Executive, Jan Leschley, and Glaxo’s Chairman, Sir Richard Sykes, over who would run the merged company (although given that it later emerged that Mr Leschley’s pay, perks and shares package was worth over £90 million, one can understand why he would be reluctant to step down in favour of Sir Richard Sykes (Buckingham and Finch, 1999)). It was only when Leschley and Sykes both announced their retirements that the merger proceeded. In some cases, such clashes can become endemic and linger on even after the initial cause has long gone. Lonrho is a case in point. After the success- ful battle to oust Tiny Rowland from the company he founded and for so long dominated, Lonrho was split up and sold off. Yet the political battles for control still rumbled on even amongst its demerged parts (Laird, 1998). Clearly, as the above examples show, the deployment of coercive power can be very damaging; however, other forms of power can also have adverse effects, though per- haps in a more insidious fashion. Thus the use of remunerative power by senior managers in the UK is a good example. In the 1990s, executive salaries ran far ahead of inflation, the pay of salaried staff and company profits (Business Notebook, 2003). This caused much controversy, especially in the now privatised, but once public, utili- ties such as gas, electricity and water. In these organisations, executives, the so-called ‘fat cats’, used their power to give themselves extremely generous remuneration pack- ages; whilst at the same time, they cut jobs and wages for many staff elsewhere in their organisations (Smithers, 1995). In general, though, this practice was condoned by both shareholders and governments because the UK economy and UK companies were doing well and those controlling them could argue that they were being rewarded for success. However, the criticisms of fat-cat salaries became more strident and widespread after the economy started to falter. Government, shareholders and trade unions began to sing with one critical voice that those leading companies were being rewarded for failure. Given that amongst FTSE-100 companies the pay of direc- tors rose 84 per cent in the three years to 2003 but the stock market value of these companies fell by 50 per cent, one can understand the outcry (Finch and Treanor, 2003). However, this disgruntlement became even more strident when it was realised
  • 204. The power–politics perspective 191 that some companies were giving big payoffs to executives who appeared to have failed in their jobs, such as Gerald Corbett, who walked away from Railtrack with a payoff of £3.7m (Treanor and Finch, 2003). The issue is not so much whether the way executives distribute rewards in their organisations is fair or not, but the corro- sive effect such a blatant use of power has on employee morale, shareholder support and customer loyalty. These very public manifestations of power battles in organisations represent merely the tip of the iceberg. They illustrate the tendency for such battles to be fought under the banner of ‘the best interests of the organisation’. Political in-fighting, the seeking of allies, the influencing of decisions, and the protection or promotion of one’s own or one’s group’s interests are nearly always justified by recourse to the best interests of the organisation (just as the parties involved in any armed struggle always seem to justify it on the grounds that they have justice on their side). It is not that the partici- pants necessarily believe their own propaganda, though often they do; it is that, without it, they would find it very difficult to justify, to themselves and their allies, the use of blatantly illegitimate tactics such as challenging, undermining or explicitly ignoring their organisation’s official goals and policies. Therefore, in opposing or promoting a particular decision or development, those indulging in even a low level of political behaviour rarely openly declare their own personal interest in the outcome. As Pfeffer (1981) maintained, a major characteristic accompanying political behaviour is the attempt to conceal its true motive. This can be seen from Buchanan and Badham’s (1999: 27–9) list of power tactics shown in Exhibit 5.9. Concealing motives is essential because, as Allen et al (1979), Drory and Romm (1988) and Frost and Hayes (1979) observed, those involved believe that such tactics would be judged unacceptable or illegitimate by others in the organisation and as such resisted. Accordingly, a false but acceptable motive is presented instead. Exhibit 5.9 Power tactics ■ Image building – action that enhances a person’s standing, such as backing the ‘right’ causes. ■ Selective information – withhold unfavourable information from superiors. ■ Scapegoating – blame someone else. ■ Formal alliances – form or join a coalition of the strong. ■ Networking – make friends with those in power. ■ Compromise – be prepared to give in on unimportant issues in order to win on the important ones. ■ Rule manipulation – interpret rules selectively to favour friends and thwart opponents. ■ Other tactics – if all else fails, use dirty tricks such as coercion, undermining the expertise of others, playing one group off against another, and get others to ‘fire the bullet’. Source: Buchanan and Badham (1999: 27–9) The picture of power and politics that emerges from Exhibit 5.9 tends to be a nega- tive one, portraying individuals and groups as using power and politics purely to pursue their own selfish interests. However, others take a more positive view. Morgan (1986)
  • 205. 192 Chapter 5 · Culture, power, politics and choice offered a model of interests, conflicts and power, accepting that diversity of interests can create conflict. In such circumstances, power and influence are, he suggests, the major means of resolving conflict. Buchanan and Boddy (1992) argue that the use of power and politics is a necessary component in the toolkit of those responsible for man- aging change in organisations. Seen in this light, political behaviour can have a positive effect on improving the working of organisations by enabling them to manage change more effectively. Pfeffer (1992), in a similar vein, maintains that the use of power is an important social process that is often required to get things done in interdependent sys- tems. In fact, he maintains that a failure to deploy power and politics is harmful: By pretending that power and influence don’t exist, or at least shouldn’t exist, we contribute to what I and others (such as John Gardner) see as the major problem facing many corpora- tions today, particularly in the United States – the almost trained or produced incapacity of anyone except the highest-level managers to take action and get things accomplished. (Pfeffer (1992: 10) Perhaps Gardner (1990: 57) sums up the issues involved in the power–politics debate most succinctly when, in relation to those who possess and deploy power, he argues that, ‘The significant questions are: What means do they use to gain it? How do they exercise it? To what ends do they exercise it?’ We can see from the above why writers have found it difficult to separate power from politics. Whilst it is possible to examine the potential for power without also examining how power is or might be exercised, for students of organisational life this is rather a sterile endeavour. For the purpose of understanding what makes organisa- tions tick, how decisions are arrived at, why resources are allocated in a particular way and why certain changes are initiated and others not, we have to comprehend both the possession and exercise of power, whether it be by official or political means. Though Robbins rightly draws a distinction between formal authority and the pos- session/deployment of power, we should not fall into the trap of assuming that there is not a close relationship between the two. An examination of the ability to exert influence (power) over key decisions and the possession of position (authority) shows that these tend to lie within dominant coalitions rather than being spread evenly across organisations (see Buchanan and Badham, 1999; Pfeffer, 1978, 1981, 1992; Robbins, 1987). The dominant coalition is the one that has the power to affect struc- ture. The reason why this is so important is that the choice of structure will automatically favour some groups and disadvantage others. A person or group’s posi- tion in the structure will determine such factors as their influence on planning, their choice of technology, the criteria by which they will be evaluated, allocation of rewards, control of information, proximity to senior managers, and their ability to exercise influence on a whole range of decisions (Morgan, 1986; Perrow, 1983; Pfeffer, 1981, 1992; Robbins, 1987). Though the postmodernists would not disagree with this analysis per se, as mentioned earlier, their view of power in organisations is a much broader one. For them, power is the mechanism by which groups in organisa- tions create and reinforce their view of reality. In turn, postmodernists maintain, it is this shaping and construction of reality that, in the main, allows dominant groups in organisations to impose their will on others rather than the use of sanctions and other control mechanisms (Reed and Hughes, 1992).
  • 206. Managing and changing organisations: bringing back choice 193 Managing and changing organisations: bringing back choice In the previous chapter we examined the postmodernist, realist and complexity per- spectives on organisations. The postmodernists argue that reason and logic have had their day, and that organisations are social organisms in which individuals and groups construct their own views of reality based on their own perceptions of the world and their place in it. Realists, whilst accepting the social construction hypothesis, argue that reality does exist and that it imposes limits, though sometimes very broad ones, to what individuals and organisations can do. The proponents of complexity, for their part, see organisations as complex, self-organising systems where, in order to main- tain appropriate order-generating rules, choice and decision-making must move from the few to the many. What Chapter 4 showed, with its review of these three perspec- tives, was that organisations have a great deal more choice and freedom in what they can do and how they can do it than the organisation theories discussed in Chapters 1–3 allowed. In this chapter we have sought to develop this argument further by looking at how choices are made in organisations and on what basis. The chapter began by examin- ing the literature on organisational culture, which revealed that, despite its popularity as a promoter of organisational excellence, culture is difficult to define, change and manipulate. Strong cultures may have a positive effect on organisations, in that they can bond disparate groups together in a common purpose; and weak cultures may have a negative impact, in that individuals and groups can pursue separate and con- flicting objectives. In some situations, however, especially where there is major environmental disruption, the reverse may also be true, with strong cultures being a straitjacket on innovation and weak ones allowing new ideas and new leaders to come to the fore. In such situations, where the organisation’s dominant coalition is split, or is so ossified it cannot entertain change, power and politics come to the fore. As Pfeffer (1992: 337) put it: Computers don’t get built, cities don’t get rebuilt, and diseases don’t get fought unless advo- cates for change learn how to develop and use power effectively. As the examination of the literature on power and politics showed, in cases where a clash of interests and a clash of perspectives is present, where the status quo is being challenged, major decisions about the future direction, structure and operation of an organisation are likely to be dominated by issues of power and politics (Buchanan and Badham, 1999). Murray (1989: 285), reporting on a major study of the introduction and use of information technology, commented that: ... the use of new technology is subject to processes of organizational decision-making and implementation characterized by often conflicting managerial objectives, rationalities and strategies developed through the mobilization of organizational power. Therefore, as far as Buchanan and Badham (1999), Dawson (1994), Morgan (1986), Pfeffer (1992), Robbins (1987) and many others are concerned, the process of organi- sational change is inherently a political one.
  • 207. 194 Chapter 5 · Culture, power, politics and choice Though the postmodern, realist, complexity, cultural and power–politics perspec- tives on organisational life are very different, there are also strong overlaps. In particular, the management of meaning and the creation of legitimacy through the construction and manipulation of symbols is an area of common ground. This can be seen in Pettigrew’s (1987) work on organisational change. He maintains that the process of change is shaped by the interests and commitments of individuals and groups, the forces of bureaucratic momentum, significant changes in the environment, and the manipulation of the structural context around decisions. In particular, Pettigrew (1987: 659) argues: The acts and processes associated with politics as the management of meaning represent conceptually the overlap between a concern with the political and cultural analyses of organizations. A central concept linking political and cultural analyses essential to the understanding of continuity and change is legitimacy. The management of meaning refers to a process of symbol construction and value use designed to create legitimacy for one’s ideas, actions and demands, and to delegitimate the demands of one’s opponents ... [Therefore] structures, cultures and strategies are not just being treated here as neutral, functional con- structs connectable to some system need such as efficiency or adaptability; those constructs are viewed as capable of serving to protect the interests of the dominant groups. ... The con- tent of strategic change is thus ultimately a product of a legitimation process shaped by political/cultural considerations, though often expressed in rational/analytical terms. This view that the choice and use of structure, and other key decisions, is the outcome of a political process rather than the application of rational analysis and decision- making has significant implications for organisation theory. Whilst it does not necessarily invalidate the appropriateness or otherwise of particular approaches, it does mean that managerial aspirations and interests are seen as more important than might otherwise be the case. It also means that, rather than being the prisoners of organisation theory (as some might suppose or hope), managers do have significant scope for the exercise of choice with regard to structure and other organisational characteristics. In his review of the influence of power and politics in organisations, Robbins (1987) noted that no more than 50 to 60 per cent of variability in structure can be explained by strategy, size, technology and environment. He then went on to argue that a substantial portion of the residual variance can be explained by those in posi- tions of power choosing a structure that will, as far as possible, maintain and enhance their control. He points out that proponents of other determinants of structure, such as size, technology, etc., assume that organisations are rational entities: ‘However, for rationality to prevail an organisation must have either a single goal or agreement over the multiple goals. Neither case exists in most organisations’ (Robbins, 1987: 200). Consequently, he argues that structural decisions are not rational. Such decisions arise from a power struggle between special-interest groups or coalitions, each arguing for a structural arrangement that best suits them. Robbins (1987: 200) believes that whilst strategy, size, technology and environment define the minimum level of effec- tiveness and set the parameters within which self-serving decision choices will be made, ‘both technology and environment are chosen. Thus, those in power will select technologies and environments that will facilitate their maintenance of control.’ As
  • 208. Managing and changing organisations: bringing back choice 195 both the realists and complexity advocates argue, however, the extent to which those in power can please themselves has limits. Markets do exist, economies can fall as well as rise and, as the dotcom collapse showed, new technologies do not always deliver on their promise. The power–politics perspective, therefore, does not totally undermine the case against the rational view of management. There is, though, a strong and significant body of literature and evidence that chal- lenges the view of management as rational and neutral implementers of decisions determined by objective data. In particular, the detailed case studies of organisational decision-making and change at ICI and Cadbury Ltd carried out, respectively, by Pettigrew (1985, 1987) and Child and Smith (1987) lend a great deal of weight to the view that management in general, and the management of change in particular, is inherently a political process. Murray (1989) made the telling point that, given the insecurity of many managers’ positions, particularly during periods of major upheaval and change, it is not surprising that managers and other groups attempt to influence decisions in order to protect, enhance or shore up their position in the organisation. Nevertheless, one needs to be wary of ascribing the purpose of all organisational decisions and actions to self-interest. Politics plays a part but, to view Robbin’s (1987) finding from another perspective, so too do strategy, size, technology and envi- ronment. As the realists would argue, these can act as a constraint on the freedom of action of groups and individuals, as can the need to be seen to act in the organisa- tion’s best interests, in line with agreed goals and in a rational manner. Therefore, though the political perspective has become very influential in the last 20 years, it does not explain all actions and all decisions in organisations. We need to see power and politics as an important influence on organisations but not the only influence. Indeed, we need to remember the original objective of Cyert and March’s (1963) work on organisational politics. They sought to show that external factors were not the only factors that affected decision-making in organisations. This is not, of course, the same as saying that external factors do not matter. As Child and Smith (1987) show with their firm-in-sector perspective (see Chapter 6), the external environment does matter. In a whole host of concrete and symbolic ways, it constrains and impinges on organisational decision-making and behaviour. It may well be, as Robbins (1987) commented, that strategy, size, technology and environment only define the minimum level of effectiveness and set the parameters within which deci- sions are taken, but this is still a very important constraint on managers. It is also an important rejoinder to those management theorists who have become, as Hendry (1996: 621) notes, ‘ ... overfocused on the political aspects of the change [decision- making] process’. In summary, therefore, power and politics are amongst the most important factors influencing decision-making in organisations. Indeed, by linking the arguments of Robbins, Pettigrew and Murray regarding managerial choice of structure to the discus- sion on culture, two very interesting points arise. Firstly, it was argued by Allaire and Firsirotu (1984), and others, that culture and structure need to be mutually supportive if an organisation is to operate efficiently and effectively. If, as the power-politics per- spective argues, structure is in part at least the outcome of self-interested choice by the dominant coalition, the degree of congruence between the two may be due more to accident than design. Secondly, it was also argued earlier that organisational culture is the product of long-term social learning in which dominant coalitions play a key role.
  • 209. 196 Chapter 5 · Culture, power, politics and choice This clearly opens up scope for choices over both structure and culture. However, the development of culture and approaches to changing it are long-term processes. Dominant coalitions, on the other hand, change their composition and priorities over time, sometimes over quite short periods of time. Therefore, although it can be argued that the possibility exists for managers to choose both the structure and cul- ture that best suit their own self-interests, this is only likely to result in a balanced and effective structure–culture nexus if the dominant coalition holds sway and is con- sistent in its aims over long periods of time. As many observers have noted, whilst these conditions may exist in some Western companies (e.g. News International under Rupert Murdoch, General Electric under Jack Welch, Vodafone under Chris Gent), these are the exception. In any case, as the departure of Arnold Weinstock from GEC showed (see Chapter 11), such situations often rely on dominant individuals to hold coalitions together; when they go, the dominant coalition falls apart and a new one emerges with a radically different vision for the organisation (Brummer and Cowe, 1998; Brummer, 1999). Sometimes the departure of such individuals can even bring an organisation perilously close to col- lapse, as was the case with GEC when Weinstock stepped down, Apple Computers when Steve Jobs was fired in 1985, and with Tiny Rowland’s forced departure from Lonrho in 1995 (Laird, 1998; Morgan, 1986). Indeed, in some companies, so forceful and coercive is the personality of a dominant individual that their will cannot be questioned, and fundamental problems are only discovered once they depart, as was the case with Robert Maxwell and Mirror Group Newspapers (Bower, 1996). The Japanese experience seems at first glance to follow a similar pattern of domi- nant coalitions relying on one key person for their legitimacy and direction. In their case, however, when such a person departs, the dominant coalition appears to main- tain the unity of purpose (Fruin, 1992; Pascale and Athos, 1982; Whitehill, 1991). Yet even the Japanese are not immune from problems when changing leaders. For example, Nissan’s appointment of a new chief executive in 1985 was followed by an attempt to change its culture in order to overcome what were seen as major mistakes by the previous incumbent (Ishizuna, 1990). This and other changes failed and, in the end, Nissan was, in effect, taken over by the state-owned French car-maker Renault. To sum up, therefore, what we can see is that managers have a degree, arguably a wide degree, of choice or influence over major organisational variables such as struc- ture, technology, environment and perhaps even culture. Despite the arguments of the postmodernists, however, their freedom of action is constrained by a whole host of factors such as market conditions, technological development, organisational goals, policies and performance, their own and other people’s self-interests, and the need to portray their actions as being rational and in the best interests of their organisation. In addition, in a reciprocal way, some of the factors over which they have a degree of choice, such as structure and culture, can also limit managers’ freedom of manoeuvre. These constraints will vary from organisation to organisation at any one time and, within and between organisations, over time but will never be fully absent. Strong though these constraints may be, however, choice will never be totally absent.
  • 210. Conclusions 197 Conclusions In reviewing the main approaches to and perspectives on organisation theory, Part 1 of this book has shown that, by succeeding stages, these have moved from the mechanical-rational outlook of the Classical school to the, arguably, culture-based perspectives of the Culture–Excellence, Japanese and Organisation Learning approaches, passing through the social perspective of the Human Relations school and the rational perspective of the Contingency theorists. They all argue for a ‘one best way’ approach (though the Contingency theorists believed in this for ‘each’ rather than ‘all’ organisations). Because of this approach they all, in effect, seek to remove choice from managers: do as we tell you, or else! Indeed, it was one of the main claims of the Classical school that it removed discretion not only from workers, but also from managers. As Frederick Taylor (1911b: 189) stated: The man at the head of the business under scientific management is governed by rules and laws ... just as the workman is, and the standards which have been developed are equitable. The role of managers, from these perspectives, is to apply rationally the dictates of the particular theory promoted. To do otherwise would be sub-optimal and irrational. By building on the discussions of postmodernism, realism and complexity in Chapter 4, this chapter has sought to move managerial choice back to centre stage. By exploring organisational culture, it was shown that the degree to which culture influences behaviour is dependent upon the presence of clear and consistent organisa- tional goals. If these are not present, which appears to be the case in many companies, conflict and disagreement emerge regardless of the nature of the culture. Similarly, if the environment changes to the extent that existing ways of working are no longer appropriate, once again, conflict and disagreement may emerge. In such sit- uations, it is the political perspective on organisational life that offers the better opportunity for understanding how and why decisions are taken, particular courses of action are embarked upon, and why some changes to the management and struc- ture of the organisation are pursued and others discarded. The examination of organisational politics and power added further weight to the criticisms of the approaches to organisation theory considered in previous chapters, par- ticularly concerning the scope for rational decision-making and choice. To an extent, the key issue was raised when discussing Contingency Theory, namely the question as to whether managers are the prisoners of the situational variables they face, or whether they can influence or change these. Certainly some critics of Contingency Theory argue that managers can, partly at least, influence or choose the contingencies they face. This casts doubts not only on the deterministic nature of Contingency Theory, but also on all organisational theories, because – either openly or implicitly – they are all founded on the notion that organisations face certain immutable conditions that they cannot influ- ence and to which they must therefore adapt. This does not necessarily mean that the various theories and their attendant struc- tures and practices we have discussed so far in this book are invalid, unhelpful or inapplicable. It does, however, mean that it may be possible, within limits, for organi- sations, or rather those who control organisations, to decide upon the structure and
  • 211. 198 Chapter 5 · Culture, power, politics and choice behaviours they want to promote, and then shape the conditions and contingencies to suit these, rather than vice versa. Indeed, as far as the public sector in the UK is con- cerned, this appears to be exactly what governments have done. From 1979 to 1997, successive Conservative governments took the view that they wanted managers in the public sector to be cost-focused and entrepreneurial, and shaped the conditions in which the public sector operates (i.e. its environment) in order to promote those attributes (Ferlie et al, 1996; Flynn, 1993). Following its election in 1997, the ‘New Labour’ government similarly manipulated the public sector environment to influence managerial behaviour. This can be seen in terms of significant alterations to the NHS Internal Market, the replacement of Compulsory Competitive Tendering with the notion of ‘Best Value’ in local government, and the reversal of the previous govern- ment’s policy of contracting out central government activities through the creation of semi-autonomous agencies and the Next Steps initiative (Salauroo and Burnes, 1998). If – contrary to the dictates of most management theories – organisations are not the prisoners of situational variables, as most organisation theories maintain, if those who manage them do have a degree of leeway in what they do, one then has to ask what factors do influence the actions of decision-makers. The review of the power- politics literature showed organisations as shifting coalitions of groups and individuals seeking to promote policies and decisions that enhanced or maintained their position in the organisation. From the literature, a persuasive argument is mounted for seeing politics and power – usually promoted under the cloak of ration- ality, reasonableness and the organisation’s best interests – as a central, though not exclusive, determinant of the way organisations operate. In particular, though political behaviour appears to be an ever-present feature of organisational life, politics comes to the fore when major issues of structural change or resource allocation are concerned. Such decisions have crucial importance for achieving and maintaining power or position, or even – when the chips are down – for keeping one’s job when all around are losing theirs. Therefore, it is surprising that much of organisation theory, which after all is pri- marily concerned with major decisions concerning structure and resource allocation, seems to dismiss or gloss over power and politics. Nevertheless, what is clear from this chapter is that managers, despite the constraints they face, have a far wider scope for shaping decisions than most organisation theories acknowledge, and that the scope for choice and the deployment of political influence is likely to be most pro- nounced when change, particularly major change, is on the managerial agenda. Having examined the merits and drawbacks of the main organisation theories, and in particular having raised the issue of the way in which major decisions are decided upon and implemented, we can now turn our attention in the following chapters to an in-depth examination of change management.
  • 212. Suggested further reading 199 Test your learning ■ Short answer questions 1 What are Cummings and Huse’s four elements of culture? 2 Briefly describe Handy’s four types of culture. 3 List three implications of Hofstede’s work on national cultures for Western approaches to organisation theory. 4 What does the term ‘satisfice’ mean? 5 Give three benefits of Robbins’ addition of knowledge power to Etzioni’s three types of power. 6 Define organisational power. 7 Define organisational politics. 8 For each of the following, briefly state their implications for organisational change: (a) organisational culture and (b) power and politics. ■ Essay questions 1 Discuss the following statement: organisational culture is the prime determinant of organisational performance. 2 Explain the concept of dominant coalitions, and discuss how these can prevent organisa- tions dividing into warring factions with individuals and groups pursuing their own personal agendas. Suggested further reading 1 Brown, A (1995) Organisational Culture. Pitman: London. Andrew Brown’s book gives a useful introduction to the uses and abuses of organisational culture. 2 Pfeffer, J (1992) Managing with Power: Politics and Influence in Organizations. Harvard Business School Press: Boston, MA, USA. This is an entertaining and very useful guide to the power–politics perspective on organisations.
  • 213. 1
  • 214. Part Two Strategy development and change management: past, present and future
  • 216. Chapter 6 Approaches to strategy Managerial choice and constraints Learning objectives After studying this chapter, you should be able to: ■ discuss the origins, development and popularity of organisation strategy; ■ describe the main features of the Prescriptive stream of strategy; ■ list the strengths and weaknesses of the Prescriptive stream; ■ discuss the key elements of the Analytical stream of strategy; ■ state the major advantages and shortcomings of the Analytical stream; ■ understand the key differences between the Prescriptive and the Analytical streams of strategy; ■ describe the constraints faced by organisations and whether these can be manipulated or overcome; ■ appreciate the relationship between strategy and change.
  • 217. 204 Chapter 6 · Approaches to strategy Exhibit 6.1 Michael Porter The master strategist: Michael Porter FT Michael Porter became famous in the 1990s as a The strength of each of these forces varies from consultant on competitiveness to business and gov- industry to industry, but taken together they deter- ernments. In the 1980s, however, he wrote several mine long-term profitability. They help to shape the popular and respected books on business strategy, prices companies can charge, the costs they must introducing basic tools of strategic thinking such as pay for resources and the level of investment that the ‘five forces’ model and the value chain. will be needed to compete. It is for this work on strategy that he is likely to be From the external environment, he turns to the remembered, and his ideas have had a wide impact. company itself. Companies make products and In 1999, Fortune called him the single most impor- deliver them to consumers, but they can also add tant strategist working today, and possibly of all time. value to the basic product in a variety of ways and Prof Porter was born in Ann Arbor, Michigan, in through different functions. 1947. He studied at Princeton and Harvard and Value can be added directly, for example by joined the faculty at Harvard in 1973. He has also giving a product new technology features, or indi- become a highly respected consultant, working with rectly, through measures that allow the company to companies such as DuPont and Shell, and the US, become more efficient. Prof Porter argues that every Canadian, New Zealand and Swedish governments. product follows a critical path through the company, Prof Porter views strategy from the standpoint of from its inception to its delivery as a finished article. economics, and his ideas on how strategy should be At every stage along this path there are opportunities implemented are based on an understanding of to add value. This path he calls the ‘value chain’. competition and other economic forces. Strategy is The value chain is crucial, he says, because it not devised in isolation; a company’s options will demonstrates that the company is more than just always be limited by what is going on around it. the sum of its parts and activities: all activities are His famous ‘five forces’ model shows the con- connected, and what is done at one stage affects straining impact that competition and environment work at other stages. have on strategy. The company needs to examine its value chain The five forces identified by Prof Porter are: the and decide where it can add value most effectively threat of new entrants and the appearance of new to meet competitive pressures in the industry. competitors; the degree of rivalry among existing These concepts can be applied to entire sectors competitors in the market; the bargaining power of and national economies as well as individual compa- buyers; the bargaining power of suppliers; and the nies, and Prof Porter went on to develop his theories threat of substitute products or services that could of national competitiveness in great detail. shrink the market. Source: Morgen Witzel, Financial Times, 15 August 2003, p. 11. Exhibit 6.2 Henry Mintzberg The great iconoclast: Henry Mintzberg FT Henry Mintzberg had been called ‘the great manage- ness strategy, where he exposed the gap between ment iconoclast’ for his willingness to attack academic concepts of strategy and reality. previously sacred concepts in business and manage- Born in Montreal in 1939, Mintzberg studied ment. But his commonsense approach to engineering and worked for Canadian National management problems have won him a broad fol- Railways before obtaining a doctorate from the lowing, particularly among students and working Massachusetts Institute of Technology in 1968. He managers. He is best known for his work on busi- joined the faculty of management at McGill
  • 218. Introduction 205 Exhibit 6.2 continued University, Canada, where he has remained. its own culture and needs, managers’ responses to Mintzberg was interested in defining what managers problems will vary. There may be no one ‘right’ way really do and how they carry out their tasks. He dis- to manage a business. covered a vast body of what he termed ‘managerial These affect strategy. Academic conceptions of folklore’: research studies that considered managers strategy regarded it as the province of top manage- rational beings who made decisions based on care- ment, who consider and make strategic decisions ful analysis of all available information. with detachment. Again, Mintzberg disagrees. In the Experience told Mintzberg that managerial work real world, strategy-making is ad hoc and instinctive, was not like that. Not only was it less structured and not structured and planned. The concept of ‘strategic ordered than assumed but its true nature was also planning’ becomes an oxymoron. hard to define. His observations of managers in Mintzberg sees this approach to strategy as a action confirmed this. He found that decisions were virtue. ‘Emergent strategy’, as he calls it, is strategy made quickly, often on the move, usually based that evolves according to need, constantly adjusted more on intuition and experience than on consid- and adapted. He also speaks of ‘crafting strategy’, a ered analysis. Action was more important than process by which managers develop strategy accord- reflection. Half the daily management tasks he ing to the needs of their organisation and observed took less than 10 minutes each and only environment. Here, strategy creation and implemen- 10 per cent took more than an hour. tation are interdependent. He compares the art of The portrait of the manager and his task that strategy making to pottery and managers to potters emerges from Mintzberg’s work is a sympathetic sitting at a wheel moulding the clay and letting the one. Managers are constantly ‘firefighting’, dealing shape of the object evolve in their hands. with problems under pressure. Rather than the best Successful management is about knowing the busi- possible solution, they seek the best solution that ness – in all its aspects and not just in specialist areas can be implemented given the resources available. – and an ability to manage through discontinuity. And, says Mintzberg, because each organisation has Source: Morgen Witzel, Financial Times, 5 August 2003, p.11. Introduction In Part 1 of this book, we discussed the options open to organisations in terms of their structures, cultures and practices. By examining the development of organisa- tional theory in the 200 years since the Industrial Revolution, we saw that, in the beginning, management was almost exclusively concerned with strict labour discipline and long working hours. The methods used to pursue these were ad hoc, erratic, short-term and usually harsh and unfair. As the period progressed, more structured and consistent approaches came to the fore. Up to the 1960s, it was the Classical and Human Relations approaches that dominated organisational thinking. With the advent of these two approaches, the emphasis moved more to the effectiveness and efficiency of the entire organisation, rather than focusing purely on discipline and hours of work. Both these approaches tended to dwell on internal arrangements and to assume that organisation structures and practices were in some way insulated from the out- side world. The development of Contingency Theory in the 1960s, with its underlying Open Systems perspective, changed all this. The nature of the environment (both internal and external) in which organisations operate emerged as a central factor in
  • 219. 206 Chapter 6 · Approaches to strategy how they should structure themselves. This theme has been continued with the devel- opment of new paradigms in the 1980s and 1990s, and the importance of situational variables, especially environmental turbulence, which organisations face is seen by many as an unchallengeable fact (Kanter et al, 1997; Peters, 1997a). However, as argued in Part 1, the degree to which organisations are the prisoners of these situational variables (as averse to being able to exercise influence and choice) is certainly open to debate. Similarly, as shown in Chapters 4 and 5, the credibility of the rational approach to decision-making has been considerably undermined in the last two decades. The increasing appreciation of the complexity of organisational life has been paralleled by a growing recognition that organisations cannot cope success- fully with the modern world and all its changing aspects purely on an ad hoc and piecemeal basis. Whether decision-makers operate on the basis of rationality or are influenced by personal considerations or organisational cultures, the received wisdom is that for organisations to succeed there must be a consistency and coherence to the decisions taken – which is another way of saying that they must have a strategy (Johnson and Scholes, 1993). Unfortunately, it is easier to say that an organisation needs a strategy than it is to say what that strategy should be or how it should be derived. Perhaps the two most influential writers on strategy over the past 25 years have been Michael Porter and Henry Mintzberg, yet, as Exhibits 6.1 and 6.2 show, their portrayal and understanding of strategy is significantly different. In this chapter, we shall examine the development and shortcomings of the main approaches to strategy that have been put forward in the last 50 years. It will be shown that, since the end of the Second World War, organisations have begun to take a strategic perspective on their activities. They have increasingly sought to take a long-term overview in order to plan for and cope with the vagaries of the future. In many respects, the development of strategic management has tended to mirror the development of organisational theory. In the 1940s and 1950s, the strategy literature only considered one aspect of an organisation’s activities – the external environment. It tended to seek rational, mathematical approaches to planning. With the passing of time, more intuitive and less rational approaches to strategic management have been developed which claim to incorporate the totality of organisational life. The chapter concludes by arguing that, rather than managers being the prisoners of mathematical models and rational approaches to strategy development, they have considerable freedom of action and a wide range of options to choose from. They are not totally free agents, however; their freedom of action is seen as being constrained or shaped by the unique set of organisational, environmental and societal factors faced by their particular organisation. Fortunately, these constraints are not immutable. As argued in Part 1, it is possible for managers to manipulate the situa- tional variables they face with regard to structure. Similarly, managers can exert some influence over strategic constraints and, potentially at least, can select the approach to strategy that best suits their preferences.
  • 220. Understanding strategy: origins, definitions and approaches 207 Understanding strategy: origins, definitions and approaches ■ The origins of strategy It is commonly believed that our concept of strategy has been passed down to us from the ancient Greeks. Bracker (1980: 219) argued that the word strategy comes from the Greek stratego, meaning ‘to plan the destruction of one’s enemies through the effective use of resources’. However, they developed the concept purely in relation to the successful pursuit of victory in war. The concept remained a military one until the nineteenth century, when it began to be applied to the business world, though most writers believe the actual process by which this took place is untraceable (Bracker, 1980; Chandler, 1962). Chandler (1962) put forward the view that the emergence of strategy in civilian organisational life resulted from an awareness of the opportunities and needs – created by changing population, income and technology – to employ existing or expanding resources more profitably. Hoskin (1990) largely agreed with Chandler’s view of the development of modern business strategy since the Industrial Revolution. However, he does take issue with both Chandler and Bracker on two crucial points. Firstly, he argues that the modern concept of organisational strategy bears little resemblance to military strategy, at least as it existed up to the First World War. Secondly, he challenges the view that the ori- gins of business strategy are untraceable. When investigating the emergence of modern strategy he did find a link with the military world, though it was not quite the link that Bracker and Chandler proposed. Like Chandler, Hoskin argues that one of the most significant developments in business management in the nineteenth cen- tury occurred in the running of the US railways. Unlike Chandler, however, Hoskin gives the credit for initiating business strategy to one of the Pennsylvania Railway’s executives, Herman Haupt. He states that Haupt: ... changes the rules of business discourse: the image in which he reconstructs business, on the Pennsylvania Railroad, is that of the proactive, future-oriented organization, which is managed by the numbers ... How does he do so? By importing the practices of writing, examination and grading ... On the Pennsylvania Railroad we find for the first time the full interactive play of grammatocentrism [writing and recording] and calculability [mathemati- cal analysis of the recorded data]. (Hoskin, 1990: 20) This approach created the bedrock on which strategic management grew in the United States, especially after the Second World War. It also ensured that strategic management became a quantitatively-orientated discipline, whose focus was on the use of numerical analysis to forecast market trends in order to plan for the future. Hoskin also points out that Haupt was a graduate of the US military academy at West Point, which pioneered the techniques of ‘writing, examination and grading’ in the military world. From there its graduates, particularly Haupt, took them out into the business world – hence the link between military and civilian management techniques. Thus it is possible to see why strategic management developed in the way it did – as a quantitative, mathematical approach. We can also see that there are links between the military and business world, but that they are not as some have claimed.
  • 221. 208 Chapter 6 · Approaches to strategy Management strategy has not developed from the approach to military campaigns of the ancient Greeks; instead it has adopted and made its own the techniques of record- keeping and analysis that were developed at West Point in order to measure the performance, and suitability for military life, of the US army’s future officer class. The contribution of the American armed forces to this quantitative approach to strategy did not end with West Point or in the nineteenth century. In 1945, with the end of the Second World War, America experienced an extraordinary trading boom. McKiernan (1992) commented that this forced many American companies to rethink their business planning systems. In order to justify and implement the capacity expan- sion necessary to cope with the boom, companies began to abandon short-term, one-year, budgeting cycles in favour of more long-range planning techniques. The development of this strategic approach to planning and investment was given a signif- icant impetus when some of the people involved in the USAAF’s wartime strategic planning activities returned to civilian life – most notable amongst whom was Robert McNamara, who became Chairman of the Ford Motor Company, Secretary of State under John F Kennedy and President of the World Bank (Moore, 1992). Their main vehicle for influencing business was the Harvard Business School’s approach to busi- ness policy teaching, which steadily moved the focus of management away from a preoccupation with internal organisational issues (as proposed by the Classical and Human Relations schools) towards an external orientation. This was best exemplified by the development of two important concepts: marketing, with its emphasis on analysing demand and tailoring products to meet it; and systems theory, with its emphasis not only on the interconnectedness of different parts of an organisation, but also the links between internal and external forces. In the intervening years, first in the USA and later across the Western world, these techniques and approaches have become more widely disseminated and used (Bracker, 1980). Much credit for this must go to three key figures, Kenneth R Andrews, Alfred D Chandler and H Igor Ansoff, for their work in developing and fleshing out the con- cept of strategic management, and especially for demonstrating the importance of product–market mix. Nevertheless, in highlighting the importance of the outside world, and thus breaking managers’ Classical school-inspired fixation with internal structures and practices, they can be criticised for not making the link between the two. So managers moved from believing that internal arrangements alone would bring success to believing that an external, market focus was the key. ■ The rise and fall of long-range planning In order to cope with the new and rapidly-changing technological, economic and organisational developments that followed the end of the Second World War, American organisations, which were at the forefront of these developments, began to adopt long-range planning techniques. This necessitated first defining the organisa- tion’s objectives, then establishing plans in order to achieve those objectives, and finally, allocating resources, through capital budgeting, in line with the plans. A key aim of this process was to reduce the gap that often occurred between the level of demand that a firm expected, and planned for, and the level of demand that actually occurred (Fox, 1975). Therefore, long-range planning was a mechanism for plotting trends and planning the actions required to achieve the identified growth targets, all of
  • 222. Understanding strategy: origins, definitions and approaches 209 which were heavily biased towards financial targets and budgetary controls. However, this process proved incapable of accurately forecasting future demand and the problem of the gap between the level of expected demand and actual demand remained. Long-range planning failed for a variety of internal and external reasons (McKiernan, 1992). Internally, many planning systems involved little more than an extrapolation of past sales trends. Little attention was paid to wider external eco- nomic, technological or social changes, or even changes in the behaviour of competitor firms. Externally, in the 1960s, the relatively comfortable conditions of high market growth gave way to lower levels of growth, which led to increased competition as companies tried to increase, or at least maintain, their market share to compensate for lower growth. One outcome of this was that strategic planners had to adapt to a world where growth was not steady; it could slow down, increase or be interrupted in an unpredictable and violent manner. Also, unforeseen opportunities and threats could and did emerge. Furthermore, it became evident that closing the gap between the plan and what actually occurred was not necessarily the most critical aspect of strategy for- mulation. Indeed, since the early 1970s, volatile markets, over-capacity and resource constraints have taken over as dominant management considerations. Long-range planning techniques could not cope with such environmental turbu- lence which, to say the least, limits forecasting accuracy. In addition, the nature of American business had begun to change. Slower growth and increased competition led to a situation where large single-business firms, which in the past might have dominated a single industry, were being replaced by multinational conglomerates operating in a wide range of increasingly competitive industries and markets. Therefore, rather than managing a single, unified enterprise, corporate managers found themselves managing a diverse portfolio of businesses. In response to the fail- ure of long-range planning and the emergence of conglomerates, in the late 1960s, the concept of strategic management began to emerge. Unlike long-range planning, strategic management focuses on the environmental assumptions that underlie market trends and incorporates the possibility that changes in trends can and do take place, and is not based on the assumption that adequate growth can be assured (Elliot and Lawrence, 1985; Mintzberg and Quinn, 1991). In addition, strategic management focuses more closely on winning market share from competitors, rather than assuming that organisations can rely solely on the expansion of markets for their own growth (Hax and Majluf, 1996). This concept sought to take a broader and more sophisticated view of an organisation’s environment and, initially at least, was closely associated with a number of portfolio planning tech- niques which also emerged in the late 1960s (Hax and Majluf, 1996; McKiernan, 1992). As will be described in Chapter 7, these were developed to assist managers in running large, diversified enterprises operating in complex environments. Much of this work was sponsored and used by large American corporations, such as General Electric, in order to identify the market position and potential of their strategic busi- ness units (SBUs) and to decide on whether to develop, sell or close them down. This ‘positioning’ approach to strategic management, the latest variant of which is Porter’s (1980, 1985) ‘competitive forces model’, dominated the practice of strategic manage- ment from the 1960s onwards, and to a large extent still does (Galagan, 1997; Rigby and Gillies, 2000). It has also led many companies to adopt a harsh, and to an extent unthinking, approach to business success, which is epitomised by the words of Jack
  • 223. 210 Chapter 6 · Approaches to strategy Welch when he was CEO of General Electric: ‘We will run only businesses that are number one or two in their markets’ (quoted in Kay, 1993: 339). Therefore, if busi- nesses are not, or do not have the potential to become, leaders in their field, they are sold off or closed down (Koch, 1995). As Kay (1993), and many others, point out, this approach to strategic management portrays strategy as a rational process whereby managers gather hard, quantitative data on their companies, and from this information come to rational decisions regarding their future. However, from the late 1970s onwards, the rational perspective on strategy has come under increasing attack, not least by the leading management thinker of his generation, Henry Mintzberg (1976, 1978, 1983, 1987, 1994). The main criticisms of the rational approach to strategy are threefold: that hard data are no more reliable, and in some cases less so, than qualitative data; that organisations and managers are not rational entities and do not apply a rational approach to decision-making; and that an organisation’s strategy is as likely to emerge from unplanned actions and their unin- tended consequences over a period of time as it is from any deliberate process of planning and implementation (Child and Smith, 1987; Hatch, 1997; Mintzberg et al, 1998a; Pettigrew et al, 1992; Stacey, 2003; Whittington, 1993). ■ Defining strategy As the above shows, like many other concepts in the field of management, there are many approaches to strategy but none are universally accepted (Stacey, 2003). Indeed, even one of the pioneers of business strategy, Igor Ansoff (1987), warned that strategy is an elusive and somewhat abstract concept. This must be expected when dealing with an area that is constantly developing. Nor should this inhibit the search for a definition, or definitions, because in doing so we can see how the debate on strategy is developing and where the main areas of dispute lie. Rather than leading to clarity, the eclipse of long-range planning merely heralded the arrival of a range of different perspectives on strategy. As early as the 1960s, two schools of thought vied with each other: the Planning school and the Design school (Mintzberg et al, 1998a). The Planning school was based on formal procedures, formal training, formal analysis and a large dose of quantification. Its underlying assumption was that a strategy could be put together and work in the same way as a machine. It led to the creation of strategic planning departments in large organisa- tions, reporting directly to the chief executive; that person’s role – though notionally to be the architect of strategy – was to approve the planners’ plan. The chief propo- nent of the Planning school was Igor Ansoff. Ansoff was a Russian–American engineer, mathematician, military strategist and operations researcher whose Corporate Strategy was published in 1965 to great acclaim (Koch, 1995). In this book he assumes that the purpose of a firm is profit maximisation, and he portrays strategic management as being primarily concerned with the external, rather than internal, concerns of the firm, especially the matching of products to markets (the product–market mix). The book provides managers with a plethora of checklists and charts to enable them to derive objectives, assess synergy between different parts of an organisation, appraise its competence profile and decide how, where and in which way to expand. Nevertheless, as Koch (1995) remarked, from today’s viewpoint, the book, and indeed the precepts of the Planning school as a whole, have not aged well.
  • 224. Understanding strategy: origins, definitions and approaches 211 The Design school, though sharing some common features with the Planning school, adopted a different, less formal and machine-like approach. It proposed a model of strategy that emphasises the need to achieve a fit between the internal capa- bilities of an organisation and the external possibilities it faces. Flowing from this, the Design school places primary emphasis on the appraisal of an organisation’s external and internal situations. To facilitate this, Kenneth R Andrews developed the now- famous SWOT technique – the assessment of the internal Strengths and Weaknesses of the organisation in the light of the Opportunities and Threats posed by the envi- ronment in which it operates (Andrews, 1980). One of the main architects of the Design school was Alfred Chandler. Chandler was one of the most eminent and influ- ential American economic historians of his generation. His main contribution to the Design school is encapsulated in his 1962 book, Strategy and Structure, which was based on a major study of US corporations between 1850 and 1920. In the book, Chandler defined strategy as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. The book also suggested three important precepts for running organisations which challenged the conventional wisdom of the time: firstly, that an organisation’s structure should flow from its strat- egy rather than being determined by some universal ‘one best way’; secondly, that the ‘visible hand of management’ was more important than Adam Smith’s ‘invisible hand of the market’ in meeting customer needs; and thirdly, that large organisations need to decentralise and divisionalise in order to remain competitive. Chandler’s work proved very influential in shaping the strategy debate over the next three decades. Nevertheless, like Ansoff, Chandler has attracted his fair share of criticism, espe- cially with regard to his view that structure should follow strategy. Tom Peters (1993: 148), for example, remarked that, ‘I understand Chandler’s reasoning, but I think he got it exactly wrong. For it is the structure of the organization that determines, over time, the choices that it makes about market attacks’ (i.e. its strategy). The crucial difference between Ansoff and Chandle, and between the Planning and Design approaches, is that the former regards strategy as almost exclusively con- cerned with the relationships between the firm and its environment, whilst Chandler takes a broader view. His definition includes internal as well as external factors. In particular, he sees issues such as organisational structures, production processes and technology as being essentially strategic. The point he makes is that the external and internal cannot be separated, as the Open Systems theorists would be the first to point out (see Scott, 1987). The external affects the internal, and vice versa. Therefore, strategic management must encompass the totality of the organisational domain and must not be restricted to one aspect, such as determining the product–market mix (Andrews, 1980). This brings us a little nearer a definition but still leaves us with a hazy concept. Henry Mintzberg argued that it is necessary to recognise explicitly that there are multi- ple definitions of strategy and that we need to use these to manoeuvre through this difficult field. According to Mintzberg et al (1998b), there are five main and interrelated definitions of strategy: plan, ploy, pattern, position and perspective (see Exhibit 6.3). In a manner that has a postmodernist feel to it, Mintzberg et al (1998b) do not argue that one definition should be preferred to the others. In some senses they can be considered as alternatives or complementary approaches to strategy. Also, they are useful in adding important elements to the discussion of strategy. They draw our
  • 225. 212 Chapter 6 · Approaches to strategy Exhibit 6.3 Mintzberg’s five definitions of strategy ■ Strategy as a plan. According to this view, strategy is some form of consciously-intended course of action which is created ahead of events. This can be either a general strategy or a specific one. If specific, it may also constitute a ploy. ■ Strategy as a ploy. This is where strategy is a manoeuvre to outwit an opponent. An example of this is when a firm threatens to lower its prices substantially to deter new entrants into its market. It is the threat to lower prices that is the consciously-intended course of action, and not any actual plan to do so. ■ Strategy as a pattern. This is where we observe, after the event, that an organisation has acted in a consistent manner over time; i.e. whether consciously or not, the organisation exhibits a consistent pattern of behaviour. We can say from this that an organisation has pursued a particular strategy. This may not be the strategy it intended to pursue, however, but it is the one that has emerged from the action of the organisation. Therefore, though the organisation’s realised strategy could be the product of a conscious and deliberate plan, this is often not the case. ■ Strategy as a position. From this perspective, strategy is about positioning the organisation in order to achieve or maintain a sustainable competitive advantage. Mintzberg et al argue that most organisations try to avoid head-on competition. What they seek to achieve is a position where their competitors cannot or will not challenge them. In this sense, strategy is also seen as a game: groups of players circling each other, each trying to gain the high ground. ■ Strategy as perspective. This definition sees strategy as a somewhat abstract concept that exists primarily in people’s minds. For members of an organisation, the actual details of its strategy, as such, are irrelevant. What is important is that everyone in the organisation shares a common view of its purpose and direction which, whether people are aware of it or not, informs and guides decision-making and actions. Consequently, without the need for detailed plans, the organisation, through a shared understanding, pursues a consistent strategy/purpose. Source: Mintzberg et al (1998b) attention to the distinction between conscious and unconscious strategy, and between emergent and planned strategy. They also highlight the role of the organisation’s col- lective mind in developing and implementing strategy. In a similar way to Mintzberg et al, Johnson (1987) also distinguishes between differ- ent views of the strategic management process. As Exhibit 6.4 shows, he argues that there are three basic views that reflect more general distinctions in the social sciences. Exhibit 6.4 Johnson’s three basic views of strategy ■ The rationalistic view – which sees strategy as the outcome of a series of preplanned actions designed to achieve the stated goals of an organisation in an optimal fashion. ■ The adaptive or incremental view – which sees strategy evolving through an accumula- tion of relatively small changes over time. ■ The interpretative view – which sees strategy as the product of individual and collective attempts to make sense of, i.e. interpret, past events. Source: Johnson (1987)
  • 226. Understanding strategy: origins, definitions and approaches 213 One way of considering these various definitions or views of strategy, following on from Morgan (1986), is as metaphors. Morgan (1986) identified eight influential metaphors that are applied to organisations (see Exhibit 6.5). Exhibit 6.5 Morgan’s organisational metaphors ■ Organisations as machines ■ Organisations as organisms ■ Organisations as brains ■ Organisations as cultures ■ Organisations as political systems ■ Organisations as psychic prisons ■ Organisations as flux and transformations ■ Organisations as instruments of domination Source: Morgan (1986) Morgan (1986: 12–13) comments that: ... our theories and explanations of organizational life are based on metaphors that lead us to see and understand organizations in distinctive yet partial ways. ... By using different metaphors to understand the complex and paradoxical character of organizational life, we are able to manage and design organizations in ways that we may not have thought possible before. In a similar way to Morgan’s use of metaphors, the postmodernist viewpoint, as discussed in Chapter 4, would see the varying definitions of strategy as competing realities which managers attempt to impose on their organisations. Realists would acknowledge that these are different perspectives that do influence organisational strategy, but would also argue that there is a ‘real world out there’ which has to be addressed if strategies are to be successfully realised. Complexity theorists would take a similar view, acknowledging that different perspectives do exist and are influential but claiming that the social world, like the natural world, is governed by order- generating rules which organisations ignore at their peril. Therefore, whilst most would see Mintzberg et al’s and Johnson’s definitions of strategy as metaphors or alternative perspectives, some would also argue that they represent competing reali- ties, whilst others would argue that there is only one reality (though this can and does change with circumstances and time). Nevertheless, the explicit recognition that there are multiple definitions of strategy can help us to make sense of the confusion of terms which litter the literature and which different writers use in different ways. Many writers seem to treat corporate planning, long-range planning, strategic planning and formal planning as synony- mous. However, not all would agree. Naylor (1979), for example, defined strategic planning as long-range planning with a time horizon of three to five years. Litschert and Nicholson (1974) disagreed: they state that strategic and long-term planning are
  • 227. 214 Chapter 6 · Approaches to strategy not synonymous. They argue that strategic planning is a process which involves making a sequence of interrelated decisions aimed at achieving a desirable future environment for an organisation. Andrews (1998: 51), similarly, defined strategy as a: ... pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it is, or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers and communities. What we can see from the above is that, knowingly or not, writers are using different definitions of strategy and thus interpreting particular terms or phrases in the light of their own implicit or explicit definition. Nevertheless, in the use of these various terms, a certain consensus of opinion does emerge with regard to the basic features of strategic management and strategic decisions. Most of the writers would agree with Johnson and Scholes (1993), who described strategy as: ■ concerning the full scope of an organisation’s activities; ■ the process of matching the organisation’s activities to its environment; ■ the process of matching its activities to its resource capability; ■ having major resource implications; ■ affecting operational decisions; ■ being affected by the values and beliefs of those who have power in an organisation; ■ affecting the long-term direction of an organisation. ■ Approaches to strategy: the Prescriptive versus the Analytical stream In defining strategy, especially bearing in mind Mintzberg et al’s (1998b) and Johnson’s (1987) various definitions, there are two further issues which need to be considered: 1 Is strategy a process or the outcome of a process? 2 Is strategy an economic/rational phenomenon or is it an organisational/social phenomenon? Taking these two questions together, it can be seen that there are two parallel, com- peting and, to an extent, interacting streams of ideas. The first, the Prescriptive stream, sees strategy as a controlled, intentional, prescriptive process, based on a rational model of decision-making, which produces complete deliberate strategies (Ansoff, 1965; Argenti, 1974; Steiner, 1969). The second, the Analytical stream, which is more interested in understanding how organisations actually formulate strat- egy rather than prescribing how they should formulate it, argues that it is the outcome of the complex social and political processes involved in organisational deci- sion-making (Hamel and Prahalad, 1989; Miles and Snow, 1978; Mintzberg, 1987; Pettigrew, 1980; Quinn, 1980a). The Prescriptive stream grew out of the long-range planning initiatives of the 1940s and 1950s, and is aimed primarily at the practitioners of strategy. Through the work of the Planning and Design schools, this stream dominated the practice of strategy in
  • 228. Understanding strategy: origins, definitions and approaches 215 the 1960s and 1970s. They not only saw strategy as an economic-rational process, but also considered its options and usefulness as primarily restricted to issues relating to market share and profit maximisation (Ansoff, 1965; Porter, 1980). However, with growing disillusionment amongst academics and practitioners over the ability of this approach to deliver competitiveness, a new variant of this approach came to the fore in the 1980s: the Positioning school. This school is most closely identified with Michael Porter (1980, 1985) whose competitive forces framework reinvigorated the Prescriptive approach and allowed it to maintain its dominance on the practice of strategy in the 1980s and 1990s (Teece et al, 1997). The main difference between the Positioning school and the earlier Planning and Design ones was that: Both the planning and design schools put no limits on the strategies that were possible in any given situation. The positioning school, in contrast, argued that only a few key strate- gies – as positions in the economic market place – are desirable in any given industry: ones that can be defended against existing and future competitors. Ease of defense means that firms which occupy these positions enjoy higher profits ... By thereby dispensing with one key premise of the design school – that strategies have to be unique, tailor-made for each organization – the positioning school was able to create and hone a set of analytical tools dedicated to matching the right strategy to the conditions at hand ... (Mintzberg et al, 1998a: 83) The work of Porter and the Positioning school will be discussed in more detail in Chapter 7. However, for now, the key points to note are that the three schools that comprise the Prescriptive stream have dominated the practice of strategy within organ- isations since the 1960s. The reason for this is threefold. Firstly, its proponents set out deliberately to address the needs of industry and commerce by providing them with a blueprint for strategy formulation and implementation. Secondly, the Prescriptive stream interacted closely with a number of leading consultants, notably the Boston Consultancy Group, and business schools, notably Harvard, to promote their work and tailor it to the needs of organisations. By reinforcing and promoting each other, this triple alliance of researchers, consultants and educators created an iron orthodoxy that organisations, especially large ones, felt they ignored at their peril. Finally, because all three groups in this triple alliance were in effect engaged in a business activity, sell- ing strategy as a product, they were able to invest in promoting and developing their product in a way that others were not. As the following examination of the Analytical stream of strategy will show, though, this did not mean that other important perspec- tives on strategy were not developed or did not achieve acceptance by a wide audience. It did, however, mean that these alternative perspectives have never had the same impact on practice within organisations as those promoted by the Prescriptive stream. The Analytical stream, which began to appear in the 1970s and represents a more sceptical and more academically-orientated face of strategic management, views strat- egy not as a process, but as an outcome of a process. Its proponents’ emphasis is not on the construction of detailed plans, which in any case they believe to be a misdi- rected approach, but on the organisational and social aspects of strategy formation. Their argument is that the capabilities of an organisation, in terms of its structure, systems, technology and management style, restrict the range of strategic options the organisation can pursue. Consequently, in a very real sense, it is the day-to-day
  • 229. 216 Chapter 6 · Approaches to strategy stream of decisions regarding the development of its capabilities that determines an organisation’s strategic direction, rather than the reverse (Mintzberg, 1994). One of the oft-cited examples for this view is that of Japanese management. Pascale and Athos (1982) and Hamel and Prahalad (1989) argued that Japanese busi- ness success is not based on well-thought-out strategies per se, but on strategic intent – the commitment of Japanese managers to create and pursue a vision of their desired future. The vision is then used to bind an organisation together and give it a common purpose to which all can contribute. A key part of this common purpose is the identi- fication and development of the core competences and capabilities necessary for the achievement of the organisation’s vision. This theme has been taken up by other Western writers on strategy. Kay (1993) used the term ‘distinctive capabilities’ rather than ‘core competences’, but is clearly describing the same thing. He argues that a firm’s distinctive capabilities fall under four headings: reputation, architecture (i.e. internal and external structures and link- ages), innovation and strategic assets. Kay believes that an organisation’s competitiveness is dependent not upon any strategic plan as such, but upon the uniqueness and strength of its capabilities. It is these that allow an organisation to take advantage of opportunities and avoid threats, whether foreseeable or not. In a similar way, Stalk et al (1992) used the term ‘core capability’ in referring to an organ- isation’s practices and business routines; and Grant (1991a) proposed a framework for analysing a firm’s competitive advantage in terms of its resources and capabilities. To an extent, the case made by Kay, Stalk et al and Grant is complementary to Mintzberg’s (1987) concept of emergent strategy. Based on the many Western compa- nies he had studied, Mintzberg argued that successful companies do not start out with detailed strategic plans. Instead, their strategies emerge over time from the pattern of decisions they take on key aspects of their activities. Mintzberg et al (1998a: 189–90) draw a distinction between planned or deliberate strategies and emergent ones: Deliberate strategy focuses on control – making sure that managerial intentions are realized in action – while emergent strategy emphasizes learning – coming to understand through the taking of actions what those intentions should be in the first place. ... The concept of emer- gent strategy ... opens the door to strategic learning, because it acknowledges the organization’s capacity to experiment. A single action can be taken, feedback can be received, and the process can continue until the organization converges on the pattern that becomes its strategy. Clearly, there are similarities between the Japanese strategic intent/competence approach, Mintzberg’s and that of Kay and co. However, the Japanese consciously work out their shared vision and consciously pursue it. The Emergent approach, at least in its pure form, lacks the concept of ‘vision’ and doubts the presence of con- scious intent. Mintzberg (1994: 25), though, does recognise that in practice some organisations pursue: ... umbrella strategies: the broad outlines are deliberate while the details are allowed to emerge within them. Thus emergent strategies are not bad and deliberate ones good; effec- tive strategies mix these characteristics in ways that reflect the conditions at hand, notably the ability to predict as well as the need to react to unexpected events.
  • 230. Understanding strategy: origins, definitions and approaches 217 Kay (1993) took a similar view. Whilst doubting the efficacy of corporate vision per se, he does stress that the development of capabilities is, or at least can be, a con- scious and planned process. As mentioned in Chapter 4, complexity theories have had an increasing influence on organisation theorists over the last decade. However, their influence on the strat- egy literature has been limited by the fact that complexity theorists do not appear to share a common view of complexity and organisational strategy. For Stacey (2003: 319–20): Strategy comes to be understood as the evolving patterns of an organisation’s identity. … Strategy as the identity of an organisation is continuously constructed and enacted in the interaction of organisational practice. For MacIntosh and MacLean (2001), strategy also has an emergent dimension to it but, for them, a key feature of strategy is to identify and maintain the appropriateness of the organisation’s order-generating rules. It is the presence of appropriate order- generating rules that allow a consistent, and beneficial, pattern of action to emerge which forms the organisation’s strategy. Bechtold (1997) and Brown and Eisenhardt (1997) stress that the purpose of order-generating rules is to keep an organisation operating at the edge of chaos. For them, the purpose of strategy is to create an organisation where self-organisation can take place. It is the ability to self-organise that they see as being crucial to maintaining/developing appropriate order-generating rules and thus bringing about beneficial change. As with complexity theories, population ecology is borrowed from the physical sci- ences. It is a Darwinist-type approach that focuses on how organisations adapt and evolve in order to survive within the general population of organisations to which they belong (Carroll, 1988; Morgan, 1990). Watson (1997: 273) comments that: One way of considering the relationship of organisations to other organisations in the envi- ronment is to regard them as involved in a process of natural selection: a fight for survival within the ecological system of which they are part. ... They go through both planned and unplanned ‘variations’ in their form, and, largely through processes of competition, the environment ‘selects’ the form which best suits the organisation. Organisations then ‘retain’ the form which best suits their particular ‘niche’ or ‘domain’ ... Population ecologists do not, therefore, challenge the importance of the fit or corre- spondence between an organisation and its environment. They do, though, question the extent to which achieving this is a conscious and planned process. In particular, as Pettigrew et al (1992: 25) maintain: ‘Ecologists are unimpressed by the possibility that managers can turn their organizations round, and instead stress organizational inertia.’ This argument echoes Hannan and Freeman’s (1977: 957) assertion that: ... for wide classes of organizations there are very strong inertial pressures on structure aris- ing from both internal arrangements (for example, internal politics) and from the environment (for example, public legitimation of organizational activity). To claim other- wise is to ignore the most obvious feature of organizational life.
  • 231. 218 Chapter 6 · Approaches to strategy Population ecologists argue that an organisation’s survival, the extent to which it achieves a fit with its environment, depends on a combination of the organisation’s own (planned and unplanned) actions, the activities of other organisations in its field and a strong element of luck (i.e. being in the right place, with the right combination of characteristics and at the right time). The stress on luck or serendipity is also present in the work of writers such as Williamson (1991) and Weick (1979). Weick, in particular, views the world as an essentially ambiguous place in which it is unrealistic, and indeed impossible, to make detailed plans. This is clearly a strong challenge to those who emphasise the need for, and ability of, organisations to pursue environmental match or correspondence. However, Child’s (1972) concept of equifinality takes this challenge even further. Equifinality, as (Sorge, 1997: 13) notes: ... quite simply means that different sorts of internal arrangements are perfectly compatible with identical contextual or environmental states. The principle goes against the idea of a quasi-ideal ‘match’ which is inherent in the principle of correspondence. Whereas corre- spondence [i.e. Contingency] theory suggests that rigid and bureaucratic structures are not a good match for volatile and shifting product markets, equifinality theorists claim that it may very well turn out to be a good match but only if the level and diversity of the workforce is large and organization culture produces motivated and flexible actors. As Mintzberg et al (1998a) note in relation to equifinality, managers need to recog- nise that achieving a successful outcome is more important than imposing the method of achieving it. Pettigrew (1985, 1987) and Child and Smith (1987), through their respective stud- ies of ICI and Cadbury, also offered important insights and perspectives on approaches to strategic management and environmental fit. Pettigrew argues that there is a need for a change theory that sees organisations and how they operate in their entirety, one that recognises the importance and influence of the wider environ- ment and appreciates the dynamic and political nature of strategy development and change. He is critical of theories which assume that organisations are rational entities pursuing agreed goals that reflect their best interests. Instead, he argues that organisa- tions have to be understood in the context of the constraints and possibilities offered by the environment in which they operate and in relation to the self-interests of the individuals and groups that comprise them. Pettigrew, therefore, sees organisations primarily as political systems in which groups and individuals, under the guise of rationality, seek to mobilise support for, and legitimate the pursuit of, strategies and actions that promote or sustain their per- sonal or sectional interests. Particular groups or individuals may achieve a position of dominance, but that dominance is always subject to prevailing intra-organisational and environmental conditions. Therefore, Pettigrew rejects the view that strategy is a rational process of deliberate calculation and analysis. Instead he believes that organi- sational strategy – though often cloaked in rational and analytical terms – is in reality the outcome of a combination of internal political struggles, between groups and indi- viduals seeking to influence policy in their favour, and external environmental pressures and constraints (this argument was examined in more detail in Chapter 5).
  • 232. Understanding strategy: origins, definitions and approaches 219 Child and Smith’s (1987) firm-in-sector perspective has some similarities with Pettigrew’s work; however, they take a more realist perspective, arguing for a stronger determining link between the individual firm and the sector in which it operates, and a lesser role for organisational politics. As shown in Exhibit 6.6, they suggest three areas of firm–sector linkage that shape and constrain the strategies organisations pursue. Exhibit 6.6 Child and Smith’s firm-in-sector perspective 1. The ‘objective conditions’ for success. Though each firm within the sector may pursue a different strategy, these will all tend to focus on or be determined by similar success factors such as customer satisfaction, quality, profitability, etc. 2. The prevailing managerial consensus. Within and across a sector, regardless of the organisation in which they work, managers are likely to develop a common and (implicitly at least) agreed view of how firms should operate, the key factors in their industry and the basis on which they compete with one another. 3. The collaborative networks operating in the sector. These may be with customers, suppliers, outside experts or even competitors. Source: Child and Smith (1987) Child and Smith’s (1987) view draws on economic theories of the firm and suggests that the sector, particularly when strongly competitive, determines the path a firm must take for its future success. Though not denying a role for organisational politics, they claim that, unless the strategic decisions a firm takes are consistent with the con- ditions prevailing in its sector, success may be jeopardised. Therefore, though falling in the Analytical stream, Child and Smith appear to exhibit a greater faith in a rational and linear progression from market sector analysis to strategy formulation and implementation than Pettigrew and many other writers. The Analytical stream also has a number of other variants, most notably those who see the role and personality of leaders as being the key determinants of successful strategy (Bennis and Namus, 1985). Leadership will be touched on later in this chap- ter, and covered more extensively in Chapter 16; nevertheless, merely mentioning here it serves to emphasise the somewhat disparate nature of the Analytical stream of strategy. Proponents of this stream are united by a number of factors such as their attempt to understand rather than prescribe strategy; their orientation, mainly, to an academic rather than a business audience; and their view of organisations as complex social entities operating within dangerous, dynamic and unpredictable environments. On the other hand, the proponents of the elements which make up the Analytical stream are divided by their emphasis on different aspects of strategy, such as politics, the industry sector, the general environment, organisational and national cultures, leadership, etc. They are also divided by their explicit or implicit adherence to post- modernist, realist or complexity perspectives. So, although it is true to say that proponents of the Japanese-inspired strategic intent/competence argument came to the fore in the 1990s, it is also true to say that they are challenged by the proponents of the other elements in this stream who still exert a powerful influence on the debate over strategy. It follows that their differences with each other are as important as their differences with proponents of the Prescriptive stream of strategy.
  • 233. 220 Chapter 6 · Approaches to strategy Understanding strategy: choices and constraints Whilst the above identifies key themes in the debate over organisational strategy, it still presents a somewhat confusing picture. Clearly there is a distinction between those who adhere to the Prescriptive stream of strategy, which arose from the long- range planning approach of the 1940s and 1950s, and the Analytical stream as represented by, amongst others, the strategic intent/competences approach of the 1980s and 1990s. What is not clear, however, is the degree to which a common understanding and perspective exists amongst those collected under the Analytical umbrella. Certainly, a number of writers have tried to argue that a common perspec- tive does exist. Brown and Jopling (1994) believed that the main distinction lies between the writers of the 1950s and 1960s who, they argue, saw strategy as basi- cally concerned with fitting the organisation to its environment, and the writers of the 1980s and 1990s who, they argue, see strategy as focusing on internal issues, mainly to do with the development of core competences. They base their case on a contin- gency perspective. The earlier approach, they argue, was suitable to organisations operating in relatively stable and predictable environments, who had a limited prod- uct range, and where competition was restricted. With the advent of greater competition and more unstable environments, this approach was no longer viable, and firms had to look internally at how they could organise themselves to cope with the new situation. To an extent, this is an attractive analysis. However, though it is true that the earlier writers on strategy – such as Ansoff and company – did concen- trate on product–market mix issues, it is also true that later they came to appreciate the link between the outside and the inside (Moore, 1992). Also, whilst Mintzberg and others have concentrated on internal capabilities, the Japanese approach has been to see the internal and external as two sides of the same coin, which is why they emphasise the importance of the strategic outward-looking vision driving the develop- ment of internal capabilities. Nevertheless, such a simple distinction, based on one dimension of organisational life, cannot resolve the complex differences between and within the Prescriptive and Analytical streams. As Mintzberg et al (1998a) noted, the strategy field is more eclec- tic and more populous, in terms of different approaches, than ever before. In such a situation, attempts to fit writers into two camps, whether they be early and late, external and internal, are bound to fail. The multiple-definition view of strategy argued by Mintzberg et al (1998b), and particularly their proposition that the various definitions of strategy are both competing and complementary, offers another per- spective. Strategy can be considered as either a process or an outcome. It can also be considered as either a rational approach or a political/social phenomenon. The vari- ous approaches to strategy do not reflect some underlying truth; rather they are different approaches that organisations can choose (consciously or not) to adopt, depending on their circumstances, objectives and management. If this is the case, it may be that instead of looking for a theory of or approach to strategy that unifies and encompasses all the others, we should turn the argument on its head and ask, as we did with organisational theory, whether there is a ‘one best way’ for strategy? In approaching this question, it is valuable to return to Child’s (1972) concept of equifinality. As stated earlier, by Sorge (1997: 13), equifinality ‘quite simply means
  • 234. Understanding strategy: choices and constraints 221 that different sorts of internal arrangements are perfectly compatible with identical contextual or environmental states’. To paraphrase this definition, and to stretch the concept a little further than Child might have intended, it could be argued that differ- ent approaches to strategy formulation may be perfectly compatible with positive outcomes. This may especially be the case if one takes account of the growing opin- ion, as expressed in this and the previous chapters, that though organisations are constrained by their circumstances, they do possess the ability to manipulate and influence these circumstances to their own benefit. If this is the case, then, as Mintzberg et al (1998a: 365) maintain, ‘the question is not whether there exists strategic choice, but how much’. To approach this question, we need to attempt to classify the various approaches to strategy in order to establish the degree to which they incorporate or exclude choice. Though the above review of approaches to strategy cannot claim to be all-embracing, it does cover the key protagonists in the area. Whilst it separates the main approaches into two streams, however, it does not provide a classification or taxonomy of the vari- ous approaches. Whittington (1993) attempted to make sense of the many definitions and categories of strategy by identifying four generic approaches to strategy: the Classical, Evolutionary, Processual and Systemic (see Exhibit 6.7). Exhibit 6.7 Whittington’s generic approaches to strategy ■ The Classical approach. This is the oldest and most influential approach to strategy. It portrays strategy as a rational process, based on analysis and quantification, and aimed at achieving the maximum level of profit for an organisation. It argues that, through rigorous analysis and planning, senior managers can predict future market trends and shape the organisation to take advantage of these. ■ The Evolutionary approach. As the name implies, this uses the analogy of biological evolution to describe strategy development. It believes that organisations are at the mercy of the unpredictable and hostile vagaries of the market. Those organisations that survive and prosper do so not because of their ability to plan and predict, which is impossible, but because they have been lucky enough to hit on a winning formula. From this perspec- tive, successful strategies cannot be planned, but emerge from the decisions managers take to align and realign their organisations to the changing environmental conditions. ■ The Processual approach. This perspective concentrates on the nature of organisational and market processes. It views organisations and their members as shifting coalitions of individuals and groups with different interests, imperfect knowledge and short attention spans. Markets are similarly capricious and imperfect but, because of this, do not require organisations to achieve a perfect fit with their environment in order to prosper and sur- vive. Strategy under these conditions is portrayed as a pragmatic process of trial and error, aimed at achieving a compromise between the needs of the market and the objectives of the warring factions within the organisation. ■ The Systemic approach. This approach sees strategy as linked to dominant features of the local social system within which it takes place. The core argument of this perspective is that strategy can be a deliberate process, and planning and predictability are possible, but only if the conditions within the host society are favourable. Therefore, to an extent, this is a contingency approach to strategy which can accommodate situations where firms do not seek to maximise profit or bow to market pressures. If the conditions within the ▲
  • 235. 222 Chapter 6 · Approaches to strategy Exhibit 6.7 continued host society are supportive, markets can be manipulated, financial considerations can become a secondary issue, and stability and predictability can be achieved. Also, under such conditions, the objectives managers seek to pursue may be related more to their social background, degree of patriotism or even professional pride, than to profit maximisation. Therefore, from the Systemic perspective, the strategy an organisation adopts and the interests managers pursue reflect the nature of the particular social system within which it operates. Source: Whittington (1993) Whittington’s categorisation of generic approaches to strategy is extremely useful in making sense of the plethora of approaches on offer. As one would expect, it is not perfect; some writers, such as Mintzberg, could fall under more than one heading, whilst others, like Child and Smith, are difficult to locate. Nevertheless, the Classical approach, with its modernist leanings, would clearly incorporate the work of the Planning, Design and Positioning school and the early Western writers on strategy. The Evolutionary approach has links with both the work of the complexity theorists and population ecologists; Mintzberg’s (1994) work on emergent strategy might also fall under this heading. The Processual approach could also cover Mintzberg’s work, certainly includes Pettigrew’s (1985, 1987) work on organisational politics and sits reasonably comfortably with the postmodernists. The Systemic perspective, which has a realist tinge to it, clearly owes much to the Japanese approach to strategy as described by Hamel and Prahalad (1989). Whittington (1993) also categorises these four approaches to strategy in terms of how they view outcomes and processes. He argues that the Classical and Evolutionary approaches see profit maximisation as the natural outcome of strategy. The Systemic and Processual approaches, on the other hand, believe other outcomes are both possible and acceptable, such as stability, environmental responsibility or maintenance of an organisation’s dominant coalition. With regard to processes, the groupings change. Here the Classical and Systemic both agree that strategy can be a deliberate process. The Evolutionists and Processualists, though, see strategy as emerging from processes governed by chance and confusion. Whittington’s four categories of strategy can be summarised as follows: ■ Classicists see strategy as a rational process of long-term planning aimed at max- imising profit. ■ Evolutionists also believe that the purpose of strategy is profit maximisation, but regard the future as too volatile and unpredictable to allow effective planning. Instead, they advise organisations to focus on maximising chances of survival today. ■ The Processualists are equally sceptical of long-range planning, and see strategy as an emergent process of learning and adaptation. ■ The Systemic perspective argues that the nature and aims of strategy are dependent upon the particular social context in which the organisation operates.
  • 236. Understanding strategy: choices and constraints 223 To an extent, the four approaches to strategy have some similarity to the Western approaches to organisation theory discussed in Part 1. The Classical, Evolutionary and Processual approaches are clearly ‘one best way’ or ‘only possible way’ approaches, whereas the Systemic approach offers a Contingency perspective on strat- egy. They also share some common ground with organisation theory on the issue of rationality. The Classical and Systemic approaches argue that strategy is or can be rational and intentional in its development and objectives. The Processualists believe that it is rational in neither aspect; the Evolutionists take a similar view of process, but appear to adopt a rational perspective on outcomes, in that profit maximisation is seen as the only outcome that guarantees survival. In their view of the scope for managerial choice and judgment, three of these four approaches to strategy do appear to be more permissive than organisation theory. Clearly, the Classical strategy theorists leave little scope for either: their instruction seems to be to follow the textbook in terms of outcomes and processes or else. However, both the Evolutionists and the Processualists emphasise the need for man- agers to be fleet of foot and percipient in making key decisions responding to opportunities or threats; although the Evolutionists (rather like Napoleon in his view of generals) appear to believe that, at the end of the day, a lucky manager may be more desirable than an able one. For advocates of the Systemic approach, choice and judgment are important, but tend to be constrained by the limits and objectives of the society in which they are located. It would appear, therefore, that managerial choice, preference and judgment, for all but the Classicists, do have a role to play in determining not just an organisation’s strategy, but also the particular approach to strategy it adopts. In our examination of the strategy literature, however, it is clear that choice is constrained and can only be exercised within limits (from some perspectives, very narrow limits indeed). As Figure 6.1 shows, these limits or constraints, which are suggested by or inferred from the lit- erature, can be classified under four headings. Business environment Managerial National Industry/sector choice characteristics Organisational characteristics Figure 6.1 Constraints on managerial choice
  • 237. 224 Chapter 6 · Approaches to strategy National objectives, practices and cultures The case for country-specific constraints very much follows the argument of the Systemic perspective on strategy. This view sees the operation of organisations as strongly influenced by the social system in which they operate. In some cases, such as in Japan and Germany, patriotism, national pride and a collectivist ethos have created a business environment that supports the pursuit of long-term national objectives. This is reflected in the behaviour of individual firms and financial institutions that favour stable growth over the medium to long term, rather than short-term profit maximisation. In Britain and the USA, on the other hand, the climate is far more sup- portive of individual endeavour and short-term profit maximisation rather than the national interest per se. The difference between these two approaches is neatly summed up in the old saying that ‘What’s good for General Motors is good for America’. The Japanese would, of course, transpose this to read ‘What is good for Japan is good for Toyota’. This view also draws support from Hofstede’s (1980, 1990) work on national cul- tures discussed in Chapter 5. The implication, therefore, is that organisations ignore national norms at their peril: the pursuit of short-term profit maximisation in Japan and Germany is likely to be as difficult, and perhaps as counter-productive, as the pursuit of a long-term strategy of growing market share, which ignores short-term profitability, would be in the UK or the USA. Nevertheless, these constraints are open to manipulation and avoidance. The move by many British companies – Dyson, GKN, etc. – to manufacture outside the UK and/or to form international alliances is an example of this, as is the Japanese trend to establish manufacturing plants in the USA and Europe in order to avoid high production costs on the one hand and import quotas on the other. Another example is the lobbying of governments and national and international bodies for changes in laws and regulations that particular organisa- tions or industries see as operating against their interests. Industry and sector practices and norms This follows from Child and Smith’s (1987) firm-in-sector perspective. As discussed earlier, they believe that the objective conditions operating in a sector, managers’ understanding of the dynamics of the sector, and the nature and degree of inter-firm collaboration all combine to determine the path a firm must take for its future suc- cess. This is especially the case where the sector is highly competitive. In effect, Child and Smith’s argument is that firms must stick to the rules of engagement in their sector or perish. However, they do concede that, where competition is less intense, then managers have a greater degree of freedom with regard to the selection of strat- egy. Indeed, the low level of competition may explain how Japanese companies were able to change the rules of engagement to their advantage in many industries in the 1960s and 1970s (Hamel and Prahalad, 1989); although it is also the case that Japanese companies pay less attention to today’s sectoral constraints than to re- shaping the rules of the game to create competitive conditions more favourable to themselves (Turner, 1990). Another method of overcoming sectoral constraints and conditions is, as illustrated by Allaire and Firsirotu (1989), by diversifying into new products and different sectors.
  • 238. Understanding strategy: choices and constraints 225 Business environment For nearly all the approaches to strategy that we have discussed, their proponents assume, explicitly or implicitly, that they are operating in a particular type of environ- ment. The Classical approach to strategy is clearly predicated on the existence of a relatively stable and predictable environment. If this exists, then predicting the future and planning accordingly is a much less hazardous exercise than would otherwise be the case. The Systemic view also seems to assume a degree of environmental stability. As the history of Japan and Germany show, however, stability needs to be actively promoted by government–industry cooperation rather than relying on the invisible, and often volatile, hand of the market. For Processualists, and even more so for Evolutionists, the environment is a hostile, unpredictable and uncertain place. Planning is almost impossible, and success comes either from continuously adapting to changes in the environment, or from being in the right place at the right time. For three of these perspectives, the environment is a given, even if they disagree about exactly what is given. However, for those advocating a Systemic approach, the environment is not a given: it can be changed. As this chapter and Part 1 have argued, there is now a considerable body of evidence from a number of different perspectives to this effect (Hatch, 1997; Morgan, 1986). Shapiro (1989) utilises the tools of game theory to show how firms influence the behaviour and actions of their competitors, and in so doing change the environment in which they operate. In a similar way, Teece et al (1997) argue that investments in production capacity, R&D and advertis- ing can all be used to alter an organisation’s environment favourably. Weick (1979) takes a different perspective. He argues that the world is so complex and ambiguous that an organisation cannot possibly ‘know’ its environment. Instead, organisations have to ‘enact’ their environment; that is to say, they have to develop and act upon their own interpretation of their environment. This is very similar to the learning organisation and postmodernist perspectives, as discussed in Chapters 3 and 4, that organisations have the ability to ‘invent’ their own reality. The implication from these different perspectives is that though many companies may have to adjust their strate- gic approach to environmental conditions, some companies may be able to do the reverse. The UK National Health Service is a good example of this. As Burnes and Salauroo (1995) noted, the NHS operated prior to 1990 as a typical government bureaucracy. The government allocated resources and gave policy direction, whilst the NHS centrally planned how resources would be allocated and policies operationalised (i.e. the Classical approach to strategy). This meant that there was considerable sta- bility and predictability in its environment. However, the government of the day wanted the NHS to operate in a more cost-conscious and entrepreneurial mode. To facilitate and encourage this, it changed the way funds were provided and distributed. Rather than funds being given as of right to service providers (e.g. hospitals), they were reallocated to service purchasers (e.g. local doctors) who could decide what to buy and from whom. This creation of a market for the provision of medical services destabilised the environment and made planning and prediction very hazardous exer- cises (thus making an Evolutionary or Processual approach to strategy more relevant). However, with a change of government in 1997, the pendulum began to swing back. Whilst wishing to retain some of the perceived benefits of a market system, the new government announced that it would modify the purchaser–provider system to create greater stability (Salauroo and Burnes, 1998).
  • 239. 226 Chapter 6 · Approaches to strategy Normally, attempts at manipulating the environment aim to reduce uncertainty, or at least cope with rather than increase, it. Allaire and Firsirotu (1989) identified three ways of coping with uncertainty. The first of these is through predicting and planning (the Classical approach). The second is to restructure for flexibility (the Contingency approach). The third, however, is to manipulate or control the environment. Allaire and Firsirotu cite the examples of Boeing and IBM, who created and subsequently dominated their environments. Another major approach they identify is the use of cooperative strategies – collusion, market-sharing and other methods of reducing competition. An example of this in the UK was the agreement by the main companies in the milk industry to ‘carve up the country so they stop competing with each other’ for doorstep sales (Cowe, 1995: 40). Perhaps the most famous recent example is Microsoft’s attempt to dominate the market for Internet products by providing its web browser ‘free’ to everyone who bought its Windows operating system. Therefore, as can be seen, there is certainly sufficient evidence to show that it is possible to change, control or manipulate the environment in which an organisation operates, and thus either necessitate or make possible a particular approach to strategy. Organisation characteristics Obviously, there are many organisation characteristics that act to constrain or facili- tate managerial choice. However, there do appear to be four that have particular importance: structure, culture, politics and managerial style. Apart from the latter, these have been reviewed extensively in Chapters 3 and 4 and can be discussed rela- tively briefly. An organisation’s structure and culture have clear implications for managerial choice in the area of strategy. Organisations with organic structures and task cultures are likely to be resistant to or incapable of operating a Classical form of strategy. Similarly, organisations with mechanistic structures and role cultures are likely to have a somewhat hostile attitude towards Processual or Evolutionary approaches to strategy. Moving on to the issue of organisational politics: where deci- sions are heavily influenced by individual and/or group self-interest, as averse to organisational objectives, it is unlikely that a Classical or Systemic approach to strat- egy would be successful. A Processual or Evolutionary approach, though, would have clear applicability. There remains the subject of managerial or leadership style. There has been consid- erable interest in recent years in applying Burns’ (1978) pioneering work on political leadership to leadership in organisations (Burnes and James, 1995; Beatty and Lee, 1992; and Gibbons, 1992). Burns identified two basic organisational states: conver- gent – a stable state; and divergent – where predictability and stability are absent. For each of these states, he argued, there is an appropriate managerial style. Convergent states require managers with a transactional style – ones who are good at optimising the performance of the organisation within the confines of existing policy. Divergent states, however, require managers with a transformational style – ones who challenge the status quo and create new visions. It follows from this that transactional man- agers will prefer approaches to strategy that stress continuity and predictability (i.e. the Classical or, in some circumstances, Systemic approach), whilst transformational managers will be more comfortable with a Processual or Evolutionary type of approach. Managerial style will be further discussed in Chapter 16.
  • 240. Understanding strategy: choices and constraints 227 As was the case with the other three forms of constraint, organisational characteris- tics can be amended. The debate on structure and culture has been well covered already, but the level of political behaviour is also open to change. As Pfeffer (1981, 1992) showed, though political behaviour is never absent from organisations, there are situations where it is likely to be more prevalent. In particular, political behaviour is likely to be most evident where major structural changes are taking place that affect the power distribution in organisations. By recognising that this is the case, by taking steps to reduce ambiguity and by trying to increase the transparency and openness of the decision-making process, the ability of individuals to pursue their own interests can be reduced. This is demonstrated by the Japanese ringi system, which promotes exten- sive and open debate over decisions in order to ensure that they fit in with the company’s objectives rather than those of sectional interests. As far as changing mana- gerial styles is concerned, although there is evidence that these are shaped and changed by the organisations in which managers work, there is also considerable evidence that senior managers tend to change organisations to fit their style (Morgan, 1986). ■ Choices and constraints: summary It should be borne in mind that the particular mix of these four forms of constraint will vary from organisation to organisation, even where these operate in the same country and industry. Also, it needs to be recognised that these constraints are as likely to conflict with each other as they are to complement each other: for example, car companies operating in the UK may find that the culture of the UK’s financial institutions favours short-term profit maximisation, whilst the car industry appears to require long-term investment in building market share. This may be one reason why the UK motor industry is now mostly foreign-owned. In addition, it should be noted that whilst managers are not obliged to take account of the constraints they face, they may well pay a price for this in terms of the performance of their organisation. Successful firms are likely to be ones whose managers are aware of, and can balance, the various constraints they face. This obviously raises the issue of managerial ability and competence, an issue we shall explore in some depth in Chapter 16. Therefore, the key point to recognise from the above review is that the type of strategic approach adopted is a matter of managerial choice, but that choice is con- strained by a variety of organisational, environmental, sectoral and national factors, as are the outcomes which flow from it. As was argued in Part 1, organisations and managers may be able to influence or change the constraints they face. Therefore, by recognising, as Figure 6.1 shows, that there are real constraints on managerial choice, one is acknowledging that both the realist and complexity perspectives on organisa- tions have much to offer. However, by recognising that some constraints can be consciously manipulated or influenced and changed, one is also acknowledging that the postmodernist’s arguments should not be lightly dismissed. Nevertheless, both the case for managerial choice and the argument for manipulat- ing constraints need to be taken with a pinch of salt. The fact of the matter is that in the West, as noted by many writers, the Classical approach to strategy, latterly through the work of the Positioning school, is still dominant (Joyce and Woods, 2001; Rigby and Gillies, 2000; Teece et al, 1997; Whittington, 1993). Also, as noted in Chapter 5, there is a tendency for decision-makers to ‘satisfice’. That is to say, rather than under-
  • 241. 228 Chapter 6 · Approaches to strategy taking an extensive examination of the issues involved and searching for all the possi- ble solutions, decision-makers tend to accept the first satisfactory solution to a problem (Butler, 1997). This equates to Argyris and Schon’s (1978) concept of single- loop learning (see Chapter 3). It is also similar to Cohen et al’s (1972) comment that decisions are often not taken but happen. They suggest that decisions occur when four independent streams meet: problems, solutions, participants and choice opportunities – the so-called Garbage Can model of decision-making. They argue that when a problem becomes severe it demands attention. Solutions, on the other hand, are answers look- ing for a problem. Participants are the people in the organisation possessing problems and/or solutions, while choice opportunities are occasions when organisations are required to make a decision. When these four elements come together, decisions occur. Seen in this way, decision-making is not conscious, rational or systematic; on the con- trary, decisions are haphazard, accidental and unplanned. From a slightly different perspective, Nelson and Winter (1982) argue that in many cases decision-making is an unconscious and automatic process, based on a repertoire that individuals develop over time of responses to particular situations. This is similar to Ashforth and Fried’s (1988) observation that there is a tendency in some organisations for behaviour to become almost mindless – employees and managers, as a result of organisational socialisation and experience, respond automatically to events in a programmed way. Consequently, though the potential for choice exists, the reality is that many managers appear not to exercise it, preferring instead to stick to tried-and-tested, routine, ortho- dox, textbook approaches – regardless of their suitability. Yet, it is important to note that, in the academic world, the weight of the argument appears to be shifting from seeing strategy as a rational, mathematical process, to seeing it as the outcome of the ability of an organisation’s management to utilise its strengths and competencies in the competitive pursuit of success. There are some writ- ers, however, who believe the reverse is true of the business world, and that more and more firms are opting for rational decision-making approaches to strategy based on value-maximising financial techniques and quantitative analysis of market positions (Grant, 1991b; Teece et al, 1997). Whatever the truth or otherwise of this view, the main strategies favoured by organisations – as the following chapter will show – are still, though no longer exclusively, market- and quantitatively-orientated, and certainly give greater credence to rational decision-making than to more qualitative approaches. Conclusions Strategic planning or management has moved in and out of fashion over the years and is once again firmly back in fashion (Galagan, 1997; Joyce and Woods, 2001; Rigby and Gillies, 2000). It has developed considerably since it began to be widely used in America in the 1950s and 1960s. No longer is strategy purely about the exter- nal world, no longer is it solely seen as a rational, quantitative process. Neither is it any longer seen as a process that is geared towards predicting the future, but instead it seeks to shape or create the future (Joyce and Woods, 2001). Indeed, writers and practitioners from different backgrounds and countries, such as Hamel and Prahalad (1994), Mintzberg et al (1998b), Ohmae (1986) and Stacey (2003), have argued that it is not a process at all, but the outcome of a process: an outcome that is shaped not by mathematical models but by human creativity.
  • 242. Conclusions 229 The move towards this new, more emergent, perspective on strategy has been brought about by the mounting criticisms against the Classical or Prescriptive approach to strategy. The main criticisms are that it is mechanistic, inflexible, and reliant on quantitative tools and techniques of dubious validity. The result is that organisations who attempt to construct strategies using the Classical approach fall foul of what Peters and Waterman (1982) described as ‘Paralysis Through Analysis’ and ‘Irrational Rationality’. In effect, organisations contort themselves in a vain attempt to make the real world fit the constraints and limitations of their mathemati- cal models, rather than vice versa. The alternative view, and one that is gaining adherents, is that organisations should move away from exclusive reliance on mathematical models. Instead, human creativ- ity should be brought into play. Senior managers should create a vision of the organisation’s future – establish its strategic intent. This should then be pursued relentlessly by the organisation. In the process of doing so, the strategy emerges from the decisions that are taken with regard to resource allocation, organisation structure and the other key areas of operation. From different perspectives, a number of writers have come to the same conclusion. For successful companies, strategy does not appear to be a preconceived and detailed set of steps for achieving a coherent package of concrete goals within a given timescale. Neither does it seem to be a rational process that is amenable to mathematical modelling. Rather, it is the outcome of a process of decision-making and resource allocation that is embarked upon in pursuit of a vision (though even here there is disagreement about how conscious this process is). Such an approach is inherently irrational, inherently unplannable – it cannot be modelled or quantified, though it can and must be pursued with rigour and determi- nation. Needless to say, just as the rational approach to strategy sat easily with a modernist perspective, so the irrational approach sits better with the postmodernist view of the world. In this chapter, we have suggested a third approach, one which sides with neither the quantitative nor qualitative schools of thought. Instead, it has been argued that the approach to strategy that organisations adopt is or can be the outcome of mana- gerial choice and preference. However, choice in this respect, as in most others, is constrained. The key constraints identified were societal, sectoral, environmental and organisational. Whilst on the face of it this appears to impose severe limitations on the degree of freedom managers have with regard to the choice of strategy, it was also argued that managers can influence or manipulate the constraints they face in order to create their own preferred organisational reality. Therefore, though being very much in the realist and complexity camps, it does not totally reject the postmodernist view either. This follows on from Part 1, where it was claimed that managers are not the passive creatures portrayed by much of organisation theory. Instead of having to adapt their organisations to the circumstances in which they find themselves, they can attempt to amend or even reinvent the circumstances. So, managers in organisations faced by a dynamic and unpredictable environment could seek to change markets and/or prod- ucts, influence the behaviour of competitors, or change customers’ perceptions, in order to reduce uncertainty and increase predictability. By so doing, an organisation could still function efficiently at the more mechanistic end of the mechanistic–organic spectrum, if that was the type of structure preferred by its managers.
  • 243. 230 Chapter 6 · Approaches to strategy This argument would seem equally applicable to the constraints managers face when choosing an approach to strategy. Some managers might prefer an Evolutionary or Processual approach to strategy, either because it suits their own temperament or because they believe that a hostile and turbulent environment suits them better than their competitors (the move by Rupert Murdoch’s newspapers in the UK in the 1990s to start a price-cutting war was an example of this). On the other hand, constraints might be manipulated or changed for ideological reasons, such as the attempt by most Western governments to privatise or introduce market forces into the public sector. The point is that the possibility does exist for managers to choose not only the approach to strategy but also, to an extent at least, the constraints they face. To choose an approach to strategy is one thing; to apply it is an entirely different matter. As Mintzberg et al (1998a and b) observe, whether one takes the view that strategy drives change or that it emerges from the changes an organisation makes, the two are inseparable. Therefore, just as this chapter has reviewed the main arguments with regard to strategy, so the remaining chapters in Part 2 will review the strengths and weaknesses of the main approaches to applying strategy and implementing change. Test your learning ■ Short answer questions 1 What does Hoskin (1990) see as being the origins of modern business strategy? 2 Define long-range planning. 3 What technique did the Design school develop for assessing an organisation’s potential? 4 How do Johnson and Scholes (1993) define strategy? 5 What is the Prescriptive school of strategy? 6 What is the Analytical school of strategy? 7 What is emergent strategy? 8 What is an umbrella strategy? 9 What are the main constraints on organisational choice? 10 Describe the relationship between organisational strategy and organisational change. ■ Essay questions 1 How do Whittington’s four generic approaches to strategy relate to the Prescriptive and Analytical schools of strategy? 2 Discuss the following statement: strategy development and implementation can never be a rational process.
  • 244. Suggested further reading 231 Suggested further reading 1 Mintzberg, H, Ahlstrand, B and Lampel, J (1998) Strategy Safari. Prentice Hall: Hemel Hempstead. Almost anything with Henry Mintzberg’s name on it is worth reading and this book is no exception. It provides a succinct and pertinent review of the main perspectives on strategy. 2 Whittington, R (2001) What is Strategy and Does it Matter? (2nd edition). Thomson Learning: London. In this short and eminently readable book, Richard Whittington challenges much of the orthodox thinking on strategy.
  • 245. Chapter 7 Applying strategy Models, levels and tools Learning objectives After studying this chapter, you should be able to: ■ describe the three basic approaches to strategy that organisations can adopt; ■ discuss the three levels of strategic decision-making in organisations; ■ list the main strategic planning tools; ■ state the strengths and weaknesses of quantitative tools; ■ list the advantages and disadvantages of qualitative tools; ■ understand why quantitative tools have tended to be preferred to more qualitative ones; ■ appreciate the growing interest in vision-building techniques; ■ identify the implications for organisational change of both quantitative and qualitative tools and techniques.
  • 246. Introduction 233 Exhibit 7.1 Strategy development tools Managers resort to old tools in a crisis FT Many executives around the world have abandoned valuable clients, was abandoned by 18 per cent of ‘new economy’ management tools such as corporate users. The figures compared with an average 11 per venturing in favour of tried-and-tested methods to cent defection rate from the 25 management tools navigate the economic downturn, according to a considered by the survey. Only a third or fewer survey by Bain & Co, the strategy consultancy. Bain’s respondents adopted these new economy tools annual ‘management tools’ survey, involving senior during the year. Managers reported finding the tools executives from 451 companies in 22 countries, difficult to implement. With corporate venturing, they found dissatisfaction was highest with formerly trendy said their companies had trouble mastering the tools that had been seen as offering a path to rapid required venture capital disciplines, including making growth. Forty-two per cent of users last year aban- a quick exit from failing ventures. The most com- doned corporate venturing – the creation of new monly used tools last year were strategic planning, businesses using venture capital methods. Thirty-nine mission and vision statements … although 77 per per cent dropped ‘market disruption analysis’, used to cent of respondents said most tools promised more identify where to launch businesses in competition than they delivered. with outside start-ups. Customer relationship man- agement, using the internet to identify and retain Source: Alison Maitland, Financial Times, 18 July 2001, p. 10. Introduction This chapter begins where the previous one ended. Chapter 6 reviewed the main per- spectives on strategy. In seeking to understand and define strategy formulation, it identified two streams of thought, the Prescriptive and the Analytical. As the name implies, the Prescriptive stream comprises approaches that seek to ‘prescribe’ how organisations should undertake strategy but, in so doing, tends to ignore or downplay the irrational and highly convoluted nature of organisational life. The Analytical stream, on the other hand, rather than telling organisations how they should build strategy, seeks to analyse – to understand and describe – the complexity and range of forces that affect how organisations actually do build strategy. This divergence is reflected in their respective views of strategy. The Prescriptive stream, which was the first on the scene and is very much practitioner-orientated, sees strategy formulation as an economic-rational process based on mathematical models. The Analytical stream, which began to appear in the 1970s, represents the more reflexive and more academically-orientated face of strategy. It views strategy not as a process, but as an outcome of a process. Its proponents’ emphasis is not on the construction of detailed plans, which in any case they believe to be an unworkable approach, but on the organisational, social and political aspects of strategy formulation. The two streams represent markedly different perspectives on strategy formulation, and whilst the Analytical stream has tended to win the academic arguments over the last 20 years, the Prescriptive one has had considerably more impact and influence on the practice of strategy. Nevertheless, as the survey by Bain & Co (Exhibit 7.1) shows, though management tools come and go, the use of mission and vision statements has now joined the more quantitatively-orientated strategic planning tools favoured by the
  • 247. 234 Chapter 7 · Applying strategy majority of companies, though most managers appear to have a healthy scepticism about what can be achieved by either quantitative or qualitative tools. This chapter begins by examining the three basic types or models of strategy that organisations can adopt: the Competitive Forces model; the Resource-Based model; and the Strategic Conflict model. The chapter then moves on to look at the three levels of strategic decision-making in organisations: corporate, business and func- tional. This is followed by a review of the main strategic planning tools. The chapter ends by arguing that one of the principal reasons for the dominance of prescriptive approaches to strategy has been the alliance between leading consultan- cies and business schools in America to develop, market and update these. In so doing, the Prescriptive school has established itself as the orthodox, safe and practical approach to strategy formulation. Nevertheless, with the take-up of more analyti- cally-based types of strategy, this is beginning to change. As Chapter 6 maintained, the model or type of strategy an organisation should adopt, and the associated plan- ning tools that accompany it, are dependent upon the constraints the organisation faces. However, organisations do not have to fit themselves and their strategies to these constraints. Rather, they have a choice; they can seek to influence or mould the constraints they face in order to make them more amenable to the type or model of strategy they wish to pursue. Therefore, the approach to strategy an organisation adopts may have less to do with the merits of the different models on offer and more to do with the type of organisation it is and the orientation of its managers. Types of strategies As the previous chapter demonstrated, there is a wide, and often confusing, variety of approaches to strategy development that organisations can adopt. It follows that the same comment can be made with regard to the types of strategy that organisations do actually adopt in order to achieve competitive advantage over their rivals (Johnson and Scholes, 2002; Joyce and Woods, 2001). However, Teece et al (1997) argue that, in the main, there are only three basic types or models of strategy that organisations do adopt in practice, which are as follows. ■ The Competitive Forces model This stems from the Positioning school and, since its inception in the 1980s, has become the dominant approach to strategy. The central tenet of this approach is the need to align the organisation with its environment, the key aspect of which is the industry or industries in which it competes. Proponents of this view believe that industry structure strongly influences the competitive rules of the game as well as the range of strategies open to the organisation. This model is most closely associated with the work of Michael Porter (1980, 1985) and his ‘five forces’ framework (see Figure 7.1). Porter argues that it is these five industry-level competitive forces, the bargaining power of buyers and sellers, the threat of potential substitute products and new entrants, and rivalry among existing competitors, that determine the inherent profit potential of an industry. Consequently, he argues, these are the main factors which an
  • 248. Types of strategies 235 Threat of potential new entrants Threat of substitute Competition among Bargaining power products existing companies of buyers Bargaining power of suppliers Figure 7.1 Porter’s five competitive forces organisation needs to take into account when developing its strategy. For Porter (1985: 47), strategy is concerned with ‘… positioning a business to maximise the value of the capabilities that distinguish it from its competitors.’ Porter (1980) main- tains that there are only three basic generic strategies a firm can adopt in order to outperform competitors: cost leadership, product differentiation and specialisation by focus (these are discussed in more detail below). Porter believes that a firm’s ability to increase its profits is dependent on its ability to influence the competitive forces in the industry or to change its market position in relation to competitors and suppliers. This approach obviously has links to Contingency Theory (see Chapter 2), given that it is based on a systematic empirical search for relationships between external condi- tions and internal strategies. In addition, because of its focus on the importance of sector and industry factors, it has an affinity with Child and Smith’s (1987) firm-in- sector perspective discussed in Chapter 6. There is little doubt that the Positioning school in general, and Porter’s work in particular, has had a huge influence on the practice of strategy within organisations (Hussey and Jenster, 1999; Johnson and Scholes, 2002). However, as one would expect, it has also attracted considerable criticism. Miller (1992) criticised it as too narrow and inflexible, and thus likely to leave organisations vulnerable if social, tech- nological or economic developments lead, as can happen, to rapid changes in the market place. Mintzberg et al (1998a) noted that the Positioning school’s assumption of rationality ignores the political nature of organisations; that it is biased towards big business, where market power is greatest, and therefore has little to say to small and medium-sized enterprises; and that its dependence on analysis and calculation impedes both learning and creativity. For Fleisher and Bensoussan (2003), the key weaknesses of Porter’s approach are its lack of explicit recognition of the importance of socio-political factors, its lack of a longitudinal focus and that it underestimates the importance of core competences. A further and telling criticism is that the big competitive battles of the last 30 years, especially between Japanese and American firms, tend not to have been won by those who have identified and defended their
  • 249. 236 Chapter 7 · Applying strategy market position, but by those, such as Toyota and Cannon, who have used their unique resources to change the rules of the game itself (Hamel and Prahalad, 1989, 1994). For these reasons, the last decade has seen a growing interest in both the Resource-Based and Strategic Conflict models of strategy. ■ The Resource-Based model In terms of achieving competitive advantage, the Resource-Based view sees above- average profitability as coming from the effective deployment of superior or unique resources that allow firms to have lower costs or better products, rather than from tactical manoeuvring or product market positioning (Fahy, 2000). Such resources include tangible assets, such as plant and equipment; intangible assets, such as patents and brands; and capabilities, such as the skills, knowledge and aptitudes of individu- als and groups (Amit and Schoemaker, 1993; Hall, 1993; Wernerfelt, 1995). The resource-based perspective grew from the work of economists who, in seeking to identify the factors which gave rise to imperfect competition and super-normal prof- its, drew attention to differences between firms in terms of technical know-how, patents, trademarks, brand awareness and managerial ability (Chamberlin, 1933; Learned et al, 1965; Penrose, 1959). Consequently, proponents of the Resource-Based view see firms as being heterogeneous in respect of their resources, i.e. no two firms possess exactly the same combination of these. However, this view really came to the fore in the 1980s and 1990s as an explanation for the rise of corporate Japan. It was out of research into the competitiveness of Japanese firms that Prahalad and Hamel (1990) produced their article, The Core Competence of the Corporation. In it, they argue that real competitive advantage comes from the ability to build at lower cost and more speedily than competitors those core competences that spawn unanticipated products. They also argue that senior managers should spend a significant proportion of their time developing a corporation-wide architecture for establishing objectives for competence-building. The influential study of the car industry by Womack et al (1990), The Machine That Changed The World, came to a similar view of Japanese competitiveness. Support for this perspective has also come from a number of studies of Western firms. Cool and Schendel (1988) showed that there are systematic and sig- nificant performance differences among firms in the same industry sectors. Rumelt (1991) showed that intra-industry profit differentials are greater than inter-industry differentials. Kay’s (1993) work on strategy also comes to the conclusion that an organisation’s success comes from developing distinctive capabilities. Hax and Majluf (1996: 10) state that: The essence of the resource-based model ... [is] that competitive advantage is created when resources and capabilities that are owned exclusively by the firm are applied to developing unique competencies. Moreover, the resulting advantage can be sustained due to the lack of substitution and imitation capabilities by the firm’s competitors. The influence of the resource-based view has grown considerably over the last decade (Fahy, 2000). It is now the received wisdom that organisations should, in Peters and Waterman’s (1982) phrase, ‘stick to the knitting’ and discard activities that are not part of their core business and which do not build on their core competences (Hax
  • 250. Types of strategies 237 and Majluf, 1996). Nevertheless, there are criticisms which have been raised against this view of strategy, including the lack of empirical support, complex and ambiguous definitions of resources and that it is merely a rehash of the SWOT analysis (Fleisher and Bensoussan, 2003). In addition, because resources cannot easily or quickly be acquired or developed, in the short run, firms are stuck with the ones they possess. Therefore, depending on the circumstances, and how they change, these firm-specific assets can be either a boon or a curse. Perhaps the main criticism of this approach comes from population ecologists who argue that, because these competences take so long to develop and environments change so quickly, any beneficial match between an organisation’s competences and its environment is more likely to be accidental or for- tuitous rather than the result of deliberate or foresightful actions by managers (Hannan and Freeman, 1988). This is perhaps why there has also been a growing interest in the Strategic Conflict model, that draws attention to the dynamic nature of organisational strategy. ■ The Strategic Conflict model This model harks back to the military metaphor, and portrays competition as war between rival firms. In particular, there is a tendency to draw on the work of military strategists such as von Clausewitz (von Clausewitz et al, 2001) and Sun Tzu (Michaelson, 2001) and attempt to apply their military aphorisms to modern business organisations (Mintzberg et al, 1998a). Sayings such as, ‘No battle plan ever survived the first encounter with the enemy’ are used to illustrate not just the dynamic nature of strategy but also the need to respond to competitors who do not always behave as anticipated. In its current manifestation, it came to prominence with the publication of Carl Shapiro’s (1989) article, The Theory of Business Strategy. Central to this approach is the view that a firm can achieve increased profits by influencing the actions and behaviour of its rivals and thus, in effect, manipulate the market environ- ment. This can be done in a number of ways, such as by investment in capacity (Dixit, 1980), R&D (Gilbert and Newberry, 1982) and advertising (Schmalensee, 1983). However, such moves will have little impact if they can be easily undone; therefore, to be effective, they require irreversible commitment. Also, it is argued, these various manoeuvres are crucially dependent on what one firm thinks another firm will do in a particular situation. Therefore, the model incor- porates the role of strategic signalling as an important mechanism for influencing or intimidating rivals. This includes such practices as predatory pricing (Kreps and Wilson, 1982) and limit pricing (Milgrom and Roberts, 1982). In addition, more recently, the model has come to embrace issues relating to the role of commitment and reputation (Ghemawat, 1991) and the simultaneous use of competition and cooperation (Brandenburger and Nalebuff, 1996). Therefore, from the strategic conflict perspective, an organisation’s ability to increase its profits is dependent on its ability to outwit, out-bluff and out-manoeuvre its rivals. This approach also draws on game theory to understand the nature of com- petitive interaction between rival firms. Game theory has allowed established intuitive arguments concerning various types of business tactics and strategy (e.g. predatory pricing) to be explained and formalised. In terms of the Prescriptive and Analytical streams of strategy, although Porter (1980) acknowledges the benefits of strategic
  • 251. 238 Chapter 7 · Applying strategy manoeuvring, it does not fit in with his or the rest of the Positioning school’s work. Instead, its emphasis on quick-wittedness, gut instinct and the more emotional ele- ments of decision-making means it sits better with the Analytical stream. Given that conflict-based strategies do not take account of the wide range of external and internal factors which also contribute to an organisation’s competitiveness, its use- fulness may well be limited. As Teece et al (1997) noted, strategic conflict is likely to be more appropriate in situations where there is an even balance between rivals in an industry (e.g. Coca-Cola and Pepsi) rather than in situations where one organisation has a substantial competitive advantage over its rivals (e.g. Microsoft). In these latter situations, it is perhaps the Resource-Based model of strategy that is of most interest. These three types or models of strategy are all currently fashionable, though Porter and the Positioning school are the more dominant. They are, however, very different in their emphasis and timescales. The Strategic Conflict model is very much about out-manoeuvring the opposition, and tends to have a short-term focus, although a number of its tactics do have longer-term implications. The Competitive Forces model is concerned with identifying and occupying a defensible market position, and thereby achieving higher profits than others in the industry. This tends to have a medium-term focus. The Resource-Based model has a much longer-term focus than either of the other two. Its proponents believe that organisations need to build strategic compe- tences that, almost through a process of serendipity, will allow it to meet future and unanticipated market needs. Levels of strategy It is easier to see how the three types of strategy above are applied in practice by examining the three levels of strategic decision-making in organisations: corporate, business and functional (see Exhibit 7.2). Exhibit 7.2 Levels of strategic decision-making ■ The corporate level. Strategy at this level concerns the direction, composition and co-ordination of the various businesses and activities that comprise a large and diversified organisation, such as Rupert Murdoch’s News International or Richard Branson’s Virgin empire. ■ The business level. Strategy at this level relates to the operation and direction of each of the individual businesses within a group of companies, such as Nissan’s car assembly plant at Sunderland. ■ The functional level. Strategy at this level concerns individual business functions and processes such as finance, marketing, manufacturing, technology and human resources. Each of these three levels has its own distinct strategic concerns and each can draw on a different battery of strategic tools, techniques and approaches to aid them. Nevertheless, it is important to remember that they are interrelated. Traditionally, it has been assumed that the corporate level sets the direction for each of its constituent businesses and, in turn, these set the direction for their various functions. Though this
  • 252. Levels of strategy 239 is true for some organisations, it is now recognised that these three levels interact in an iterative and dynamic fashion (Johnson and Scholes, 2002; Lynch, 1997). Therefore, as Mintzberg (1994) argues, just as business level and functional level strategy can be seen as being imposed or driven by corporate level decisions, so cor- porate level strategy can be seen as emerging from, or being shaped by, functional level and business level decisions and actions. Consequently, it follows that although there are strategies at the corporate level that have their counterparts at the business and the functional levels, it would be wrong to assume that this is always a product of a top-down rather than a bottom-up process. Moving on to look at these three levels in more detail: at the corporate level, strat- egy is said to deal with the ‘game plan’ for managing diversified enterprises whose activities cut across a number of different areas of business (Fleisher and Bensoussan, 2003). It concerns itself with the questions listed in Exhibit 7.3. Exhibit 7.3 Corporate strategy questions ■ What is the mission of the organisation? ■ What are its unique attributes? ■ How should the business portfolio be managed? ■ Which existing businesses should be disposed of and which new ones acquired? ■ What priority and role should be given to each of the businesses in the current portfolio? The central strategic concerns at the individual business level are: ■ How should the firm position itself to compete in distinct, identifiable and strategically relevant markets? ■ Which types of products should it offer to which groups of customers? ■ How should the firm structure and manage the internal aspects of the business in support of its chosen competitive approach? Functional level strategy concerns itself with the following issues: ■ How can the strategies formulated at the corporate and business levels be translated into concrete operational terms in such a way that the individual organisational functions and processes (marketing, R&D, manufacturing, personnel, finance, etc.) can pursue and achieve them? ■ How should the individual functions and processes of the business organise themselves in order not only to achieve their own aims, but also to ensure that they integrate with the rest of the business to create synergy? Given the different concerns of these three levels, it is easy to appreciate the need to integrate the strategies and structures at these three levels. Otherwise, for example, the corporate level may pursue a strategy of diversification whilst the individual businesses are busy concentrating their efforts on fewer products and markets. However, it is also easy to appreciate why in practice it is so difficult for large diversified organisations to identify and pursue a consistent strategy through all areas of their activities (Joyce and Woods, 2001; Lynch, 1997). As argued in the last chapter, strategy formulation and
  • 253. 240 Chapter 7 · Applying strategy implementation is not a mechanical process that begins at the corporate level and moves in a linear and logical fashion through to the functional level. Strategy formula- tion is inherently iterative, and aims to optimise the operation of the organisation in its entirety rather than maximising the product of any one particular part. These issues, and the main differences in scope and focus of the individual levels, can clearly be seen by a brief examination of the types of strategy that are pursued at the corporate, busi- ness and functional levels. ■ Corporate level strategy Broadly speaking, there are six basic forms of strategy that organisations pursue at this level: ■ Stability strategy (also known as maintenance strategy). As its name implies, strate- gies under this heading are designed to keep organisations quiet and stable. They are most frequently found in successful organisations, operating in medium-attractive- ness industries, which are faced with unpredictable circumstances outside the range of their normal business experience. Because of their markets and products, such organisations believe they have no need to make sudden changes and have the time and position to allow events to unfold before making any response (Wheelen and Hunger, 1989). A typical example would be an established mortgage lender whose business would both necessitate and allow it to take a longer-term perspective. ■ Growth strategy. This is possibly the most common form of all corporate strate- gies, and involves either concentrating on dominating one industry (e.g.Vodafone) or growing by diversification across a number of industries (e.g. Virgin). As a number of writers have suggested (see Argenti, 1974; Byars, 1984), its basic attrac- tion is twofold. Firstly, it is claimed that there is a strong and proportional correlation between increased turnover and increased profit. Secondly, the per- formance of senior managers tends to be measured in terms of the annual increase in turnover and profit. There are those, however, who point out that increases in turnover are not necessarily matched by increases in profits and that, given the need to invest to achieve growth in turnover, growth may actually weaken a com- pany’s financial health (Byars, 1984; Drucker, 1974). ■ Portfolio extension. This is another variant of the growth strategy, but is achieved through mergers, joint ventures or acquisitions, rather than through internally-gen- erated organic growth. The first two of these, mergers and joint ventures, allow growth or development to take place, without the organisations involved having to invest the level of resources that would be necessary if they were operating in isola- tion. The latter, acquisition, is usually resource-intensive but brings immediate gains in the form of an established and, hopefully, profitable business (Byars, 1984; Little, 1984; Leontiades, 1986). ■ Retrenchment strategy. This strategy is usually only embarked upon when an organisation is in trouble or, because of adverse market conditions, sees trouble ahead. It usually involves a process of downsizing, i.e. cutting back on numbers employed and activities undertaken. In some situations this may lead to selling off the entire enterprise. The general aim, however, is to cut back in order to match expenditure to projected income, and refocus the organisation so as to be able once again to attain prosperity in the future (Bowman and Asch, 1985; Thompson and Strickland, 1983).
  • 254. Levels of strategy 241 ■ Harvesting strategy. This involves reducing investment in a business or area of activity in order to reduce costs, improve cashflow and capitalise on whatever residual competences or areas of advantage still remain. This approach can be implemented at different rates depending on the urgency of the situation. Slow har- vesting means to reduce financial support at such a slow rate that it almost appears to be a maintenance strategy; at the other extreme, fast harvesting can result in budgets being cut at such a rate that it seems almost indistinguishable from liquida- tion (Harrigan, 1980; Kotler, 1978; Porter, 1980). ■ Combination strategy. The above strategies are not mutually exclusive, and can be linked together in whatever combination seems appropriate given the circum- stances of the organisation in question. Combination strategies, however, are clearly more appropriate, or at least more necessary, in large multi-divisional organisations where the circumstances faced by the different activities are likely to vary. Therefore, in such situations, organisations may experience a constant flurry of change, where some parts are being run down and/or disposed of whilst new units are being acquired and other areas of the business rapidly expanded (Glueck, 1978; Pearson, 1977). The above list is not exhaustive, nor can it be, given that each organisation is free to develop its own strategic variant in relation to its own circumstances. As argued in Chapter 6, it is the circumstances of the particular organisation in question that should dictate the type of strategy adopted by its managers, rather than any attempt to copy what has been successful elsewhere. Though Porter’s Competitive Forces model can be applicable to all these forms of strategy, the Strategic Conflict and Resource-Based models appear to be applicable more to situations where growth is being pursued or where companies have a strong market position. Nevertheless, it needs to be remembered that it is the precepts and assumptions of Porter and the Positioning school which still dominates the practice of strategy. A further point to note is that all except the first, maintenance strategy, imply fundamental restructuring of the internal operations of the organisation. In such situations, there are likely to be winners and losers, and managers may be more concerned with preserving their jobs and power than choosing the best strategy for the organisation (Mintzberg, 1994). Nevertheless, in both America and Europe, over the last 20 years, the tide has been turning against corporate strategy, or rather against the large corporate centres responsible for developing corporate strategy and which wielded so much power in the 1970s and 1980s. The case against them is summed up by Koch (1995: 78) who maintains that: Anything other than a minimal [corporate] Centre can only be justified if the Centre adds more value than it costs and subtracts from the business. ... Yet it should be clear that ... independent of their cost, most corporate Centres destroy more value than they add. This negative view of corporate strategy has, perhaps, been most vociferously cham- pioned by Peters and Waterman (1982), but has also received strong support from academic researchers (Goold et al, 1994). The result of this is that there has been an increasing tendency to devolve responsibility for strategy from the corporate to the business level.
  • 255. 242 Chapter 7 · Applying strategy ■ Business level strategy Whilst corporate level strategies are mainly concerned with managing diversified enterprises whose activities span a number of different areas, business level strategies relate to the different ways that an individual business unit can compete in its chosen market(s). However, it must be remembered that business level strategies are chosen and deployed within the framework of an overall corporate strategy and not in isola- tion from it, though the degree of freedom allowed to individual business units in this respect will vary from organisation to organisation (Johnson and Scholes, 2002). To this end, the strategic concerns of managers at the business level tend to be, as Hax and Majluf (1996: 46) note: ... the mission of the business, the attractiveness of the industry in which the business belongs, and the competitive position of the business unit within the industry. These are the inputs that determine the strategic agenda of a business and lead to the formulation and implementation of its strategy. Just as at the corporate level, the available business level strategies are many and varied. Rather than attempt to describe them all, we shall examine the main variants by addressing Porter’s (1980, 1985) work in this area. Porter (1985: 11) argues that there are only two ‘basic types of competitive advan- tage a firm can possess: low cost or differentiation’. He adds to these the ‘scope’ of the business (i.e. the range of its markets) to create ‘three generic strategies for achiev- ing above average performance’. As mentioned earlier, these are cost leadership, product differentiation and specialisation by focus. Cost leadership The aim of this strategy is to achieve overall lower costs than one’s competitors, with- out reducing comparable product quality. To do this requires a high volume of sales in order to allow organisations to structure themselves in such a way that they can achieve economies of scale. This strategy, to quote Porter (1980: 15), requires the: ... aggressive construction of efficient scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimisation in areas like R&D, services, sales force and so on. Product differentiation This strategy attempts to achieve industry-wide recognition of different and superior products and services compared to those of other suppliers. This recognition can be accomplished through the design of special brand images, technology features, cus- tomer service or higher quality, all of which have implications for the structure and operation of companies. Achieving differentiation is likely to result in insulation against competitive rivalry due to securing customer loyalty. The resultant competitive advantage also leads to increased returns, sometimes through making customers less sensitive to high product price.
  • 256. Levels of strategy 243 Specialisation by focus In this case the strategy is concerned with selecting (focusing upon) only certain mar- kets, products or geographical areas in which to compete. Porter argues that by focusing in this way, it becomes feasible for a firm to dominate its chosen area(s). The method of achieving domination could either be through cost advantage or product differentiation. According to Porter (1980: 15), however, such niche markets must have certain characteristics which separate them out from the market in general: ... the target segment must either have buyers with unusual needs or else the production and delivery system that best serves the target must differ from that of the other industry segments. If the niche market grows, or is incorporated, into a larger market, then market domi- nance is unlikely to be retained. In such circumstances, the previously dominant organisation will find itself having to compete for market share with others. In effect, the rules of the game will have changed and a different strategy is required – either attempting to gain cost leadership across the entire market, or adopting a product dif- ferentiation policy that neutralises other competitors’ cost advantage. Porter’s assertion concerning these three strategies is that they are distinct and cannot be mixed. That is to say, it is not possible to pursue successfully a cost leadership strategy and a product differentiation strategy at the same time because each requires different organisational arrangements to be successful. Also, if a firm does not achieve cost lead- ership, product differentiation or specialisation in its products, services or market, it is bound to produce low profitability and have below-average performance. Porter (1980: 41) refers to these sorts of firms as ‘stuck in the middle’ because they lack: … the market share, capital investment, and resolve to play the low cost game, the industry- wide differentiation necessary to obviate the need for a low cost position, or the focus to create differentiation or low cost in a more limited sphere. Nevertheless, influential though Porter’s work is, there are many who disagree with him on this point (Mintzberg et al, 1998a). Hlavacka et al (2001), in a study of public and private hospitals in the Slovak Republic, found that those which pursued a ‘stuck in the middle’ strategy had the best performance. An earlier study by Dess and Davis (1984) also questioned Porter’s view. They found evidence to show that businesses with both a low cost and a high differentiation position can be very successful. Miller (1992) challenged Porter’s assertion that firms should pursue only one strat- egy. He points out that such strategic specialisation can lead to inflexibility and narrow an organisation’s vision. In addition, Gilbert and Strebel (1992) point to the success of ‘outpacing’ strategies. This is where firms enter a market as low-cost pro- ducers and then, once established, differentiate to capture a larger slice of the market. This was the approach, i.e. moving from one successful form of strategy to another, used by Japanese companies to capture Western markets in the 1970s and 1980s (Johnson and Scholes, 2002). In so doing, Japanese firms used a Strategic Conflict approach, but this was underpinned by their commitment to building and developing their core competences. Therefore, though Porter’s work has tended to dominate the practice of strategic management in Western firms, both the Resource-Based and
  • 257. 244 Chapter 7 · Applying strategy Strategic Conflict models have shown their worth. Nevertheless, regardless of which business level approach to strategy organisations have followed, prompted by the suc- cess of Japanese companies, there has been a growing interest in the importance of functional level strategy (Hax and Majluf, 1996; Schonberger, 1982). ■ Functional level strategies The main functional level strategies concern marketing, finance, R&D, technology, human resources, manufacturing/operations and purchasing. Of the three levels of strategic decision-making, the functional level has probably been the most neglected by Western organisations. This is for three reasons. Firstly, the concentration at both the corporate and business levels on the external world, i.e. the market, led to a lack of interest in the internal operation of organisations. The assumption was that the internal world was malleable, and could and should adjust to the priorities set by cor- porate and business strategists (Schonberger, 1982). Secondly, key elements of functional level strategy, especially concerning finance, marketing, R&D and technol- ogy, were in effect determined and constrained by corporate strategists. Indeed, in many organisations, even the human resource strategy was determined at the corpo- rate level. Finally, even though the 1980s saw a renewed interest in functional level strategy, this tended to be one-sided, stressing soft, personnel-type issues. As discussed in Chapter 3, in seeking to understand and emulate Japanese success, Western researchers created the 7 S Framework: strategy, structure, systems, staff, style, shared values, and skills (Peters and Waterman, 1982; Pascale and Athos, 1982). Though acknowledging that the Japanese were strong in and integrated all the seven Ss, the tendency in the West was to stress the so-called soft Ss: staff, style, shared values and skills. This not only continued to neglect areas such as manufacturing/operations and purchasing, but also, in so doing, failed to produce the sort of integrated corporate, business and functional level strategies that were seen as lying at the core of Japanese competitiveness. Once again, this highlights the difficulty that Western strategy prac- titioners, consultants and theorists have with creating an approach to strategy that goes beyond focusing on particular aspects and takes an all-encompassing view (Mintzberg et al, 1998a). In examining the corporate, business and functional levels, it can be seen that there are only a limited number of forms of strategy that organisations tend to adopt and which flow from the Competitive Forces, Strategic Conflict and Resource-Based models of strategy discussed earlier. However, the appropriateness of any of these for a particular organisation is, as maintained in Chapter 6, related to the nature of the societal, sector, environmental and organisational constraints it faces. These include the stage of product–market evolution, the competitive position the firm has, the competitive position it seeks, the business strategies being used by rival firms, the internal resources and distinctive competences at a firm’s disposal, the prevailing market threats and opportunities, the type and vigour of competition, customer needs, and the conditions that financial institutions place on capital availability, to mention only the more obvious ones (Hax and Majluf, 1996; Johnson and Scholes, 1993; Koch, 1995; Thompson and Strickland, 1983). In addition, it must be acknowledged that generic strategies will always give rise to a host of variants and, therefore, at any one time the choice of the most suitable strategy will be a highly
  • 258. Levels of strategy 245 complex task. Indeed, this is what one would expect. If choosing and implementing strategy was easy, then all firms would be successful. But, given that success is usually measured in relative terms, by definition not everyone can be successful; therefore, strategy formulation will and must remain fraught with danger and complexity. A major point to note, though, is that almost without exception, whatever form of strategy is adopted, it will require the organisation to achieve a fit between its exter- nal environment and internal structures, culture and practices. Contrary to the views of earlier writers on strategy (such as Ansoff, 1965), if organisations are driven by their external environment, internal arrangements may, and probably do, need to change, often radically, in order to achieve the desired market-place objectives. This once again emphasises the importance of functional level strategy and shows why it should not be treated as a lesser issue. Nevertheless, it should also be borne in mind, as argued in previous chapters, that the possibility does exist for organisations to shape the external environment to fit in with their internal arrangements. The fact that many do not, may say more about the type of organisation they are than the con- straints they face. ■ Types of organisation Miles and Snow (1978) developed an important variant of the argument on types of strategy. Rather than attempting to classify the types or levels of strategy that organi- sations can adopt, they classify the organisations themselves as strategic types, based on the rate at which an organisation changes its products or markets. Miles and Snow identified four strategic types (see Exhibit 7.4). Exhibit 7.4 Classification of strategic types ■ Defenders. These seek internal stability and efficiency by producing only a limited set of products, directed at a narrow but relatively stable segment of the overall market, which they defend aggressively. Such organisations are characterised by tight control, extensive division of labour and a high degree of formalisation and centralisation. ■ Prospectors. These are almost the opposite of defenders. They aim for internal flexibility in order to develop and exploit new products and markets. To operate effectively in a dynamic environment they have a loose structure, low division of labour and formalisa- tion, and a high degree of decentralisation. ■ Analysers. These types of organisation seek to capitalise on the best of both the preced- ing types. They aim to minimise risk and maximise profit. They move into new markets only after viability has been proved by prospectors. Their internal arrangements are char- acterised by moderately centralised control; with tight control over current activities but looser controls over new undertakings. ■ Reactors. This is a residual strategy. These types of organisation exhibit inconsistent and unstable patterns caused by pursuing one of the other three strategies erratically. In gen- eral, reactors respond inappropriately, perform poorly, and lack the confidence to commit themselves fully to a specific strategy for the future. Source: Miles and Snow (1978)
  • 259. 246 Chapter 7 · Applying strategy Though Miles and Snow’s classification has received empirical support from some researchers (e.g. Shortell and Zajac, 1990), others have questioned its applicability across industries (e.g. Hambrick, 1983). Notwithstanding this, as Waldersee and Sheather (1996) point out, there are some similarities between Miles and Snow’s work and Porter’s work. They argue that successful firms pursue one of two basic types of strategy – innovative or stability. Organisations pursuing innovative strategies, which embrace both Porter’s product differentiators and Miles and Snow’s prospectors, seek to achieve success through reducing price competition by offering products and services that are considered unique in terms of their design, brand image and features. On the other hand, organi- sations pursuing stability strategies, which embrace Porter’s cost leaders and Miles and Snow’s defenders, seek to achieve success by locating and maintaining secured niches in stable product areas where they can produce higher-quality or lower-price products than their competitors. Covin (1991) agrees with the proposition that successful organisations pursue one of two forms of strategy, though he labels them entrepreneurial and conservative. The former falls within Waldersee and Sheather’s innovative category, whilst the latter falls within their stability category. Covin argues that the strategy an organisation adopts reflects its basic nature (i.e. its culture). Therefore, for Covin, the selection and pursuit of strategy is driven by managerial style and organisational culture. However, Waldersee and Sheather dispute this. Their work sought to examine the relationship between strategy and managerial style, and whether one drove the other. Their con- clusion, which was tentative, was that different types of strategy may predispose managers to act in different ways (i.e. managerial style follows strategy type) rather than managers’ styles predisposing them to a particular type of strategy. Yet, recalling Chapter 6’s discussion of strategy and the constraints on managerial choice, it could be argued that these writers are taking too narrow and deterministic a view. It might well be that, depending on the constraints faced by managers and their perceptions of these, in some situations strategy does require managers to adopt a particular style of working, whilst in other situations managerial style does influence the nature of the strategy adopted. This discussion of the relationship between managerial style and organisational context will be returned to in the concluding chapter of this book. Before moving on to examine the strategic tools that organisations have at their disposal, it is important to remember that the concept of strategy (whether at the functional, business or corporate level) is contentious. There are many influential writers who do not believe in strategy as a conscious and planned process (e.g. Mintzberg, 1994; Pettigrew, 1985; and Stacey, 2003). This does not invalidate corpo- rate, business or functional strategies per se, but it does mean that they occupy a problematic and contested terrain. Strategic planning tools This section briefly reviews the main tools that organisations use to select and con- struct their strategies. By and large, these tools tend to have either a quantitative or a qualitative bias. In the past, and to a major extent even now, it was the quantitative tools (mathematical models) that tended to dominate. This is largely a reflection of
  • 260. Strategic planning tools 247 the types of strategy organisations adopt, and a (not unrelated) preference for quan- tification, especially in the financial arena, in the USA, where many of the leading tools of and approaches to strategy originated (Grant, 1991b; Hax and Majluf, 1996; Moore, 1992). It should be noted, though, that other leading industrial nations, espe- cially Germany and Japan, place less reliance on financial and other quantitative measures in determining strategy (Carr et al, 1991; Whittington, 1993). For example, the Japanese electronics giant, NEC, never uses discounted cash flow; and though Toyota does calculate cash flows, it does not take account of them for decision- making purposes (Williams et al, 1991). Nevertheless, even in the USA and the UK where financial considerations appear paramount, there has been a movement away from the sole reliance on quantitative techniques, and a growing interest in softer, qualitative tools such as scenario/vision-building (Fleisher and Bensoussan, 2003; Joyce and Woods, 2001; Rigby, 2001). In part, this interest in more qualitative tech- niques is a result of the perceived failure, especially in the face of Japanese competition, of more quantitative approaches favoured by proponents of the Positioning school to deliver a genuine and sustainable competitive advantage. This interest in qualitative techniques has also received a boost from the growing interest in the Strategic Conflict and Resource-Based approaches to strategy. In addition, it forms part of, and has been given impetus by, the move away from quantification and towards the use of more qualitative techniques in organisation theory in general. As one would expect, there are an enormous range and number of tools and tech- niques available to the strategist. However, perhaps the ones that have attracted most attention are, in chronological order: 1 the PIMS (Profit Impact on Marketing Strategy) model; 2 the Growth-Share Matrix; 3 the Scenario construction approach. The first two focus on corporate and business level strategies and are biased towards large organisations that have an established and significant presence in the markets they serve. The third, though, has no such restrictions or biases and can be applied to a wide range of situations. ■ PIMS The PIMS (Profit Impact on Marketing Strategy) programme was launched in 1972 and derived from research by Sidney Schoeffler. This was put into practice by General Electric, who wanted to analyse their operations with the aim of identifying those fac- tors determining business success (Schoeffler, 1980). In 1975, Schoeffler founded the Strategic Planning Institute (SPI), which is linked to Harvard Business School, to pro- vide a permanent base for the PIMS work. Since then, PIMS has grown to become the largest privately owned database in the world, comprising over 200 major corpora- tions and some 2,600 individual business units (McNamee, 1985; Moore, 1992). The rationale underlying the PIMS model is that certain characteristics of a busi- ness and its markets determine profitability. Consequently, understanding these characteristics and acting upon them will aid a company to become more profitable. The model is based upon the belief that there are three major factors which determine a business unit’s performance: its strategy, its competitive position, and the
  • 261. 248 Chapter 7 · Applying strategy market/industry characteristics of the field in which it competes (Moore, 1992). Underpinning the model are two key assumptions. The first is that all business situa- tions are basically alike and obey the same laws of the market place (Schoeffler, 1980). The second is that the future will resemble the past, i.e. if certain linkages between strategy and performance resulted in profitability in the past, they will do so again in the future (Buzzell and Gale, 1987). PIMS operates as a form of club. It collects information from its member compa- nies relating to such factors as market share, profitability, product quality and investment. This information is fed into the PIMS database and is then used to pro- vide individual members with answers to questions such as: ■ What profit rate is ‘normal’ for a given business? ■ What strategic changes are likely to improve performance? ■ What are the likely effects on profitability, cash flow, etc., of adopting a particular strategy? There has been much discussion as to the success of the PIMS. Certainly, some of its users, as well as academic observers, regard it as having only a limited use (Ford, 1981; Mitroff and Mason, 1981). The main criticisms levelled against PIMS are as follows: ■ It is flawed because it uses historic data, without consideration for future changes. The argument is that, as organisations operate in a dynamic environment, to use the past to predict the future can be a dangerous exercise. Indeed, PIMS seems to be useful only in a stable environment, where companies stick to doing what they know best. It is even questioned whether PIMS can be regarded as a tool for policy in a strategic sense, since it can be argued that the ‘variables’ it so relies on, such as market share, are performance variables, not strategic ones (Abell, 1977). ■ It is highly analytical, but very limited in solving problems. In addition, because PIMS has to use a very large database for its analysis, it is argued that this creates a major problem for managers in terms of absorbing all the data generated. In turn, since the statistical errors in its output are rarely openly discussed, there is a ten- dency for managers not to question its findings because ‘the computer is always right’ (Andrews, 1980). ■ Its most famous, and contentious, assertion that profitability is closely linked to market share, and that an improvement in market share can be associated with a proportionate increase in return on investment, is of dubious validity. As Smith (1985) maintains, it could equally be argued that both are due to common factors, such as low costs and good management. It is also said to be responsible for incul- cating in managers and consultants a belief that low market share businesses are bad and must either increase their market share or withdraw from the industry in question, regardless of profitability (McKiernan, 1992). ■ Most of the factors that govern the forecasts of the model are beyond the control of individual companies. Therefore, since PIMS relies heavily on this data, what- ever conclusions it reaches about the fate of a company are final. It is neither comforting nor particularly useful to be told that you cannot do anything to turn a negative forecast around, because the factors responsible are out of your hands (Anderson and Paine, 1978).
  • 262. Strategic planning tools 249 ■ It assumes that a rather large set of quantitative variables, primarily of a financial nature, are sufficient to capture the state of a business and from this determine a realistic strategy (Naylor, 1981). Also, as Mintzberg et al (1998a: 99) comment, ‘ ... finding a correlation between variables ... is one thing; assuming a causation, and turning that into an imperative, is quite another.’ ■ It is based on the premise that business problems are orderly or well-structured. PIMS thus assumes that the determination or classification of the level of the organisation or business unit, the customer group, the competition, the market and the product line to which the analysis applies are all either well-known or well- specified. It is, therefore, not equipped to handle imprecise, let alone conflicting, definitions of business problems (Koch, 1995; Naylor, 1981). In summary, the main criticisms of PIMS are that it is too mechanistic, overly com- plex, based on unreliable data, and cannot cope adequately with dynamic and unpredictable environments. Yet, despite the criticisms levelled against it, many researchers still believe that PIMS is a useful tool (Chang, 1997; Johnson and Scholes, 2002; Thompson, 1996). The PIMS method has also been praised for the insight it has given into the true nature of the relationships between strategic variables such as profit and market share. Obviously, managers deal with these variables and their rela- tionships on a daily basis, but attempts at conceptualising these relationships had been lacking until the advent of the PIMS research programme (Anderson and Paine, 1978; Ford, 1981; Mitroff and Mason, 1981). This is not, however, to minimise the shortcomings of the PIMS model. It is biased towards, and contains data almost exclusively provided by, large and well-established corporations who already occupy significant positions in their markets. Therefore, as Mintzberg et al (1998a: 99) observe, its emphasis is on ‘being there’ or ‘staying there’ rather than ‘getting there’. It follows that its prescriptions may have little relevance for new, small or innovative businesses seeking to enter new markets. ■ The Growth-Share Matrix This was the brainchild of the Boston Consulting Group (BCG) in the USA and is arguably the most famous strategic tool ever developed (Koch, 1995). BCG was formed in 1963 by Bruce Henderson, and it is generally considered to be the pioneer of business strategy analysis. The Growth-Share Matrix, or ‘Boston Box’ as it is collo- quially referred to, arose from two concepts developed by BCG: the experience curve and the sustainable growth formula (McKiernan, 1992). The experience curve, which Henderson claims to have discovered in the 1960s, suggests that ‘as the cumulative production of a product doubles, the cost of produc- ing it seems to decrease by a constant percentage (usually 10 to 30 per cent)’ (Mintzberg et al, 1998a: 97). From this, BCG concluded that if costs fall in relation to production volume (i.e. experience), then cost must also be a function of market share. Therefore, the company with the largest market share should also have the greatest competitive advantage and, it follows, the highest profit margin. The sustainable growth formula, which was developed by BCG in the early 1970s, is based on the relationship between growth, investment and returns. It maintains that companies with the highest rate of returns on investments can, theoretically, grow the fastest (McKiernan, 1992).
  • 263. 250 Chapter 7 · Applying strategy It was bringing together these two concepts (that the company with the highest returns can grow the fastest and that the company with the highest market share should have the highest profit margin) that created the basis for the Growth-Share Matrix. The matrix is based on the assumption that all except the smallest and sim- plest organisations are composed of more than one business. The collection of businesses within an organisation is termed its business portfolio. Using pictorial analogies (see Figure 7.2), it posits that businesses in an organisation’s portfolio can be classified into stars, cash-cows, dogs and problem children (Smith, 1985). ■ Stars are business units, industries or products with high growth and high market share. Because of this, stars are assumed to use and generate large amounts of cash. It is argued that as they, generally, represent the best profit and investment oppor- tunities, then the best strategy for stars, usually, is to make the necessary investments to maintain or improve their competitive position. ■ Cash-cows are defined as former stars whose rate of market growth is in decline. They were once market leaders, during the early days when the market was rapidly grow- ing, and have maintained that position as the growth tapered off. They are regarded as businesses with low growth but high market share. Because they are entrenched in the market, they have lower costs and make higher profits than their competitors. These businesses are cash-rich; therefore the appropriate strategy for such businesses is to ‘milk’ them in order to develop the rest of the organisation’s portfolio. ■ Dogs are businesses that have low market share and which operate in markets with low growth potential. Low market share normally implies poor profit, and because the market growth is low, investment to increase market share is frequently prohib- itive. Also, in such situations, the cash required to maintain a competitive position High Market growth rate ? Low High Relative Low market share Figure 7.2 BCG Growth-Share Matrix
  • 264. Strategic planning tools 251 often exceeds the cash generated. Thus, dogs often become cash traps. It follows from this that, generally, the best strategy is for dogs to be sold off. ■ Problem children or question marks, as they are sometimes labelled, are regarded as having a high growth rate and low market share. They have high cash require- ments to keep them on course, but their profitability is low because of their low market share. They are so named because, most of the time, the appropriate strat- egy to adopt is not clear. With their high growth rate, it might be possible to turn them into stars, by further investment. On the other hand, because of the uncer- tainty that surrounds this type of business, the best strategy might be to sell them off altogether. The originators of the Growth-Share Matrix see it as a dynamic tool for assessing and planning market and business developments. For example, the matrix predicts that as growth in their industries slows down, the original stars will move into the position of cash-cows, as long as they keep maintaining their high market share; oth- erwise they will become dogs. It also claims to predict how cash-cows and dogs will develop as their markets change. Therefore, the Growth-Share Matrix can be used to forecast the development of a business portfolio over a period of time. There are two basic assumptions underlying the matrix: firstly, that those industries, products or businesses that have a high growth rate can be differentiated from those that have a low growth rate; and secondly, that those that have a high competitive position/market share can be differentiated from those that have a low competitive position/market share. Based on these assumptions, the matrix classifies business units or activities according to the growth rate of the industry of which they are part and by their market share (Koch, 1995; McKiernan, 1992; Moore, 1992). The matrix was widely and rapidly adopted by American corporations in the 1970s. This was for two reasons: firstly, the matrix’s simplicity and ease of construc- tion; and secondly, because most large corporations were busy splitting their organisation into strategic business units focusing on particular industries and prod- ucts. The corporate centres were looking for a simple means of categorising and directing the activities of these units, and the matrix was seen by them as an ideal tool for this purpose. McKiernan (1992), however, argues that its advantages go far beyond merely its simplicity and ease of construction. He maintains that it aids strate- gic planning, balancing cash flow between businesses, investment decisions, and competitive benchmarking. Nevertheless, as many commentators note, over the years, the Growth-Share Matrix has attracted its fair share of criticisms as well as praise (Koch, 1995; McKiernan, 1992; Mintzberg et al, 1998a). One of the obvious objections to the matrix is the labels it employs for the classification of businesses. Andrews (1980) described these labels as a ‘vulgar and destructive vocabulary’. There are, however, other more substantial criticisms concerning the assumptions underlying, and the operation of, the ‘Boston Box’ (Johnson and Scholes, 2002). The main one is that the uniqueness of an organisation and its problems may not be adequately captured by this or any other tight classification scheme (Hax and Majluf, 1996). This is reflected in the views of Mitroff and Mason (1981), who argue that the critical assumptions underlying the matrix are tautologous and simplistic, e.g. the classification scheme applies to all businesses, because all businesses can be classified as one of the four
  • 265. 252 Chapter 7 · Applying strategy basic types, or the classification scheme is relevant to all businesses, meaning that all businesses should be able to be classified as one of the four types. Researchers have also drawn attention to the difficulty in defining and measuring the major variables, such as growth, market share and profitability, on which the matrix relies (Hax and Majluf, 1982; Hax and Nicholson, 1983; Johnson and Scholes, 2002). Hax and Nicholson (1983) also question whether market share really is the major factor determining profitability, and whether industry growth is really the only variable that fully explains growth opportunities? These reservations are echoed by Smith (1985). A further concern is that the matrix assumes that a good portfolio analysis should identify the competitive strengths and the industry attractiveness of each business unit. Alternatives to the Growth-Share Matrix, however, reject this assertion. Instead they start by assuming that these two dimensions cannot be revealed by a single measurement, but require a wider set of critical factors for reli- able positioning of the business units (Hax and Majluf, 1982; Hofer and Schendel, 1978). Another reservation, expressed by Fawn and Cox (1985), is the difficulty of defining what constitutes a single business. One of the most telling criticisms is that many of the companies who have used the matrix found, to their alarm, that all their component businesses were classed as dogs even though these businesses were actually profitable! Perhaps the key and most common criticism relates to the way the matrix, and other similar tools, have been used. As Hax and Majluf (1996: 313) observe: ... matrices tend to trivialise strategic thinking by converting it into simplistic and mechanis- tic exercises, whose final message is dubious at best. Also the matrix methodology has tended to take strategic analysis and, subsequently, strategic thinking away from managers and into the realms of planning departments. In the face of such criticisms, a number of modifications were made to the original Growth-Share Matrix. General Electric, for example, in association with management consultants McKinsey, developed the nine-box GE Business Screen Matrix, instead of the original four-way classification (Hax and Nicholson, 1983). A similar system called the Directional Policy Matrix (DPM) was also developed by Shell Chemicals in the UK (Hussey, 1978). Many other organisations, in their turn, developed or employed similar schemes to meet their organisational needs (Koch, 1995; McKiernan, 1992; Patel and Younger, 1978). Nevertheless, portfolio models all seem to attract similar criticisms to those levelled at the Growth-Share Matrix (Fleisher and Bensoussan, 2003; Mintzberg et al, 1998a; Turner, 1990). Regardless of the merits of these criticisms, even its proponents would not dispute that, like PIMS, the Growth-Share Matrix is primarily suited to well-structured plan- ning problems in which the basic definition of a business unit, product or competition is not an issue (Bowman and Asch, 1985). Unfortunately, because of the uncertain and rapidly-changing nature of business today, such situations are becoming less and less common. This, to an extent, may account for the increase in the popularity of the next approach.
  • 266. Strategic planning tools 253 ■ The scenario/vision-building approach As a way of overcoming some of the criticisms of the above quantitative approaches, scenario-building techniques emerged in the 1970s. The use of scenarios is based on the assumption that, in a rapidly-changing and uncertain world, if you cannot predict the future, then by considering a range of possible futures, an organisation’s strategic horizons can be broadened, managers can be opened up to new ideas and, perhaps, the right future can even be identified (Ringland, 1998). Scenarios allow organisa- tions to exercise strategic choice in terms of whether to try shaping the future, adapting to the future or keeping their options open by investing in a range of prod- ucts, technologies and markets (Courtney et al, 1997). Johnson and Scholes (2002: 107) define a scenario as: … a detailed and plausible view of how the business environment of an organisation might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty. The rationale for the scenario approach is that it allows an organisation to carry out an intensive examination of its own unique and complex circumstances and needs, rather than attempting to fit itself to standard strategic planning tools such as PIMS and the Growth-Share Matrix (Linneman and Klein, 1979). Kahn and Weiner (1978) define a scenario as a hypothetical sequence of events con- structed for the purpose of focusing attention on causal processes and decision points. For them, the purpose of scenarios is to display, in as dramatic and persuasive a fash- ion as possible, a number of possibilities for the future. To Norse (1979), scenarios are a means of improving our understanding of the long-term global, regional or national consequences of existing or potential trends or policies and their interaction. Essentially, therefore, building scenarios can be regarded as making different pictures of an uncertain future (business or otherwise) through the construction of case studies, either quantitatively or qualitatively (McNulty, 1977). The quantitative variant of scenario-building, sometimes called the hard method, uses mathematics, models and computers to make pictures of the future, through the production of a vast array of numbers and figures. The main approach, however, is the qualitative, or soft, method, which is essentially intuitive and descriptive; it is based on the resources of the human mind and derived from the methods of psychology and sociology (Joyce and Woods, 2001; Ringland, 1998). The two main scenario-building approaches that have become well-established are the Delphi method and the Cross Impact method. However, in recent years, a third approach has become increasingly influential: vision-building. Though this bears some relation to other scenario-building techniques, it comes from a different tradi- tion. The scenario approach and especially vision-building have some similarities with the postmodernist view that organisations exist in and represent multiple realities which compete with each other for supremacy (Joyce and Woods, 2001). From the postmodernist perspective, organisations have the ability to create their own reality and, therefore, both scenario- and vision-building can be viewed as processes that assist organisations, or the dominant group within an organisation, to select or con- struct the reality that most suits their needs. However, scenario- and vision-building
  • 267. 254 Chapter 7 · Applying strategy are also compatible with the Realist and Complexity approaches described in Chapter 4. For realists, scenarios could provide a way of separating real constraints from the plethora of different perspectives that surround them; whereas for adherents of com- plexity, they can be used to locate the ‘edge of chaos’ and the order-generating rules necessary to maintain an organisation in this position. One of the main functions of scenario-type approaches is that they enable organisa- tions to question the very foundations of their existence, to examine the usefulness of their values and norms. Instead of asking how they can improve what they are doing, they begin to ask: Why are we doing this at all? What alternatives are there? This ques- tioning of basic assumptions is something that is alien to the quantitative tools discussed above, especially given that most managers do not understand the assump- tions built into such models in the first place. Indeed, quantitative models appear to remove the necessity for managers to think by providing them with ‘answers’ rather than information on which to base their own decisions (Hax and Majluf, 1996). The three main qualitative approaches, on the other hand, are designed specifically to make managers think radically about their organisation, its purpose and its future. The Delphi method This uses a panel of experts, who are interrogated about a number of future issues within their area of expertise. In the classic application, the interrogation is conducted under conditions whereby each respondent is unknown to the others, in order to avoid effects of authority and the development of a consensual bandwagon. After the initial round of interrogations, the results are reported to the panel and another round of interrogations is conducted. Several rounds may be carried out in this manner. Results produced from these interrogations may be amenable to statistical treat- ment with a view to yielding numbers, dates and ranges from them. At the end of the process, depending on whether a quantitative or qualitative approach is taken, either a detailed numerical forecast of the future is obtained, or a more descriptive and richer picture. In both cases, the central tendencies of majority opinion and the range of minority disagreements will also be included (McNulty, 1977; Zentner, 1982). The Cross Impact method This is a variation to the Delphi method. It uses essentially the same interrogation method as the Delphi, i.e. a panel of experts; the difference, however, lies in what they are asked to do. The Delphi requires the experts to identify a number of future issues that they think will affect the organisation or business within their area of expertise. The Cross Impact method, on the other hand, asks its panel of experts to assign sub- jective probabilities and time priorities to a list of potential future events and developments supplied by the organisation. The emphasis is on identifying reinforcing or inhibiting events and trends, to uncover relationships and to indicate the impor- tance of specific events. The accruing data from this exercise are used to create yield curves of the probabilities for each event as a function of time (Lanford, 1972). Vision-building As regular surveys by Bain & Co have shown, over the last decade vision-building has established itself as one of the key management tools (Rigby, 2001). Whilst it cer- tainly bears a resemblance to the other scenario-building techniques, it is influenced
  • 268. Strategic planning tools 255 more by Japanese management practices than by those in the West (Collins and Porras, 1991; Hamel and Prahalad, 1989). Though it is one of the most popular man- agement tools, it is perhaps also one of the least understood and idiosyncratic (Cummings and Worley, 2001; Stacey, 1992). This is perhaps because it is a much less structured approach than the other two scenario-building techniques, and relies more on a company’s own management. According to research by Collins and Porras (1997), compelling visions have two components: (a) a core ideology which describes the organisation’s core values and purpose; and (b) a strong and bold vision of the organisation’s future which identifies specific goals and changes. The major elements of vision-building are as follows: ■ the conception by a company’s senior management team of an ‘ideal’ future state for their organisation; ■ the identification of the organisation’s mission, its rationale for existence; ■ a clear statement of desired outcomes and the desired conditions and competences needed to achieve these. Vision-building is an iterative process that is designed to move from the general (the vision) to the specific (desired outcomes and conditions), and back again. By going round the loop in this manner, according to Cummings and Huse (1989), an ambitious yet attainable future can be constructed and pursued. This owes much to the Japanese, who pioneered the concept of strategic intent on which vision-building is based. The work of Hamel and Prahalad (1989) is of particular importance in this respect. They argued that the strategic approach of Japanese companies is markedly different to that of their Western counterparts. Rather than attempting to lay down a detailed plan in advance, Japanese companies operate within a long-term framework of strategic intent. They create a vision of their desired future – their ‘intent’ – which they then pursue in a relentless but flexible manner. Hamel and Prahalad quote exam- ples of leading Japanese companies who, in the 1960s, when they were insignificant in world terms, set out to dominate their markets. Honda’s strategic intent was to be the ‘Second Ford’, Komatsu’s to ‘Encircle Caterpillar’ and Canon’s to ‘Beat Xerox’. These companies then mobilised their resources towards achieving their individual strategic intent. In this, the prime resource they deployed was the commitment, inge- nuity and flexibility of their workforces. Like all approaches to strategic planning, these scenario/vision-building approaches have many criticisms (Cummings and Worley, 2001; Fleisher and Bensoussan, 2003; Joyce and Woods, 2002; Keshavan and Rakesh, 1979; Porter, 1985; Wack, 1985; Whittington, 1993), the main ones being: ■ They are prone to subjectivity and bias. The fact that any five management special- ists can interpret the same situation in totally different ways is an oft-quoted example of this type of criticism. ■ They can encourage retrospection. People’s ideas of the future are informed by their knowledge and experience of the past. Since experience is not always the best teacher, scenarios and visions may be based on false assumptions. ■ Participants can be strongly influenced in their preference of scenario by their own sectional and personal interests. ■ The process cannot be carried out by novices and can, therefore, be time-consum- ing and expensive in terms of senior management time and outside experts.
  • 269. 256 Chapter 7 · Applying strategy ■ There is much debate about how many scenarios to construct and how they should be used. ■ The more radical the vision or scenario, the more difficult it will be to get man- agers and others to commit to them. ■ Visions often require strong visionary leaders, which are in short supply. Despite these criticisms, the use of scenarios and visions now forms an important part of the managerial tool box (Collins and Porras, 1997; Cummings and Worley, 2001; Leemhuis, 1990; Malaska et al, 1984; Smith, 1985). Therefore, to summarise, there are a wide range of strategic planning tools and techniques available to organisations. In reviewing the main quantitative and qualita- tive ones, it can be seen that none are without their weaknesses. However, in tandem with the increased use of less prescriptive and more qualitative models of strategy, more qualitative tools and techniques are increasing in popularity. Conclusions Just as the aim of Chapter 6 was to examine the main approaches to understanding strategy, the aim of this chapter has been to examine the main approaches to applying strategy. The chapter began by describing the three main models of strategy which organisations have tended to utilise over the last 20 years: the Competitive Forces model; the Resource-Based model; and the Strategic Conflict model. This was fol- lowed by an examination of the different organisational levels at which strategy is applied and the main forms of strategic planning tools on offer. What the examination of these areas has shown is that, in the West at least, it is the approaches, tools and techniques of the Prescriptive stream of strategy that organisa- tions have tended to favour. The continuing prominence of the Positioning school, through the work of Michael Porter, clearly demonstrates the enduring influence of the Prescriptive stream. This of course should not be surprising. After all, the liveli- hood of those who comprise the Prescriptive stream, whether they be consultants, consultancies, business schools or academics, is dependent to a large extent upon cre- ating a market for its strategic planning products. It is also, probably, the case that when leading consultancies, business schools and large corporations are all arguing for a particular approach, there is enormous pressure on managers elsewhere to follow. To paraphrase the old slogan that ‘no one ever got fired for buying IBM’, one could also say, ‘no one ever got fired for calling in the Boston Consultancy Group or Michael Porter’. Yet, as this chapter has also shown, the Resource-Based model and the Strategic Conflict model have been growing in importance in the last 15 years. Both tend to be located in and draw support from the Analytical stream of strategy. The Strategic Conflict model has its roots in the perspective of strategy as a battle between warring organisations. As explained, however, its renewed prominence has come both from practical concerns about the applicability of the Competitive Forces model, and from new theoretical insights from areas such as game theory. The Resource-Based approach, on the other hand, owes much to those, such as Prahalad and Hamel (1990), who have sought to understand and explain the Japanese approach to strat- egy. In both cases it can be seen that strategy is conceived of as an emergent rather
  • 270. Test your learning 257 than a planned process. Therefore, though the Prescriptive stream of strategy is still extremely influential in determining how managers develop and implement strategies, the influence of the Analytical stream is also growing. To return, however, to the argument developed in Chapter 6, it would be wrong to fall into the trap of seeing the Analytical stream as being the ‘right’ way to apply strat- egy and the Prescriptive as the ‘wrong’ way, or vice versa. Instead, it may be that approaches from both the Prescriptive and Analytical streams have much to offer organisations, depending on their circumstances or constraints. For organisations with a dominant position in a relatively stable market, an approach from the Prescriptive stream, such as the Competitive Forces model, may be suitable. Likewise for organisa- tions seeking to enter new markets or grow their business over a long time-frame, an approach from the Analytical stream, such as the Resource-Based model, has much to commend it. Similarly, in evenly-balanced competitive situations, the Strategic Conflict model may be more appropriate. This is not, though, to propose a Contingency model of strategy. Rather, as was argued in Chapter 6, what is being suggested is that organi- sations have a choice; they can seek to influence or mould the constraints they face in order to make them more amenable to the type or model of strategy they wish to pursue. Therefore, as indicated earlier in this chapter when looking at the work of Miles and Snow (1978), the approach to strategy an organisation adopts may have less to do with the merits of the different models on offer and more to do with the type of organisation it is and the orientation of its managers. Nevertheless, choosing the type or model of strategy to pursue is one thing; imple- menting it is an entirely different matter. This is especially so if one recognises that the Prescriptive and Analytical streams of strategy have distinctly different, indeed almost opposite, perspectives on implementation. For the former, implementation flows from the organisation’s strategic plan. For the latter, the strategy emerges from and is given shape by the actions and decisions organisations make on a day-to-day basis to change and adapt themselves to their circumstances. But no matter which model of strategy one subscribes to, it is only when organisations implement changes that strategies come alive. This highlights the crucial importance of organisational change. Consequently, just as this chapter and the previous one have reviewed the main argu- ments with regard to strategy, so the next two chapters will review the strengths, weaknesses and implications of the main approaches to change management. Test your learning ■ Short answer questions 1 What is the Competitive Forces model of strategy? 2 Define the Strategic Conflict model of strategy. 3 Briefly discuss the case for the Resource-Based model of strategy. 4 What are the three levels of strategic decision-making in organisations? 5 Give Miles and Snow’s four strategic types of organisations.
  • 271. 258 Chapter 7 · Applying strategy 6 Describe the Growth-Share Matrix. 7 What is scenario construction? 8 Briefly discuss the implications for organisational change of the following: (a) the PIMS model and (b) vision-building. ■ Essay questions 1 Contrast and compare the strengths and weaknesses of quantitative and qualitative strategic planning tools. 2 To what extent can vision-building be seen as a realist approach? Suggested further reading There are a vast number of books on strategy but, unfortunately, no one book covers all the main tools and techniques. However, the following three books, whilst leaning towards the Prescriptive approach, do cover the main strategic planning methods, techniques and processes. 1 Fleisher, CS and Bensoussan, BE (2003) Strategic and Competitive Analysis: Methods and Techniques for Analysing Business Competition. Prentice Hall: Upper Saddle River, NJ, USA. 2 Hax, CA and Majluf, NS (1996) The Strategy Concept and Process (2nd edition). Prentice Hall: Upper Saddle River, NJ, USA. 3 Joyce, P and Woods, A (2001) Strategic Management: A Fresh Approach to Developing Skills, Knowledge and Creativity. Kogan Page: London.
  • 272. Chapter 8 Approaches to change management Learning objectives After studying this chapter, you should be able to: ■ describe the main theoretical foundations of change management; ■ discuss the contribution of Kurt Lewin to managing change; ■ state the core elements of Lewin's Planned approach to change; ■ show how Planned change has evolved under the Organization Development movement; ■ understand the key differences between Lewin's view of Planned change and that promoted by Organization Development; ■ appreciate the benefits of the Planned approach to change; ■ list the main criticisms of Planned change; ■ describe the incremental, punctuated-equilibrium and continuous transformation models of change.
  • 273. 260 Chapter 8 · Approaches to change management Exhibit 8.1 The importance of theory Less means more in engineering FT The problem facing diesel engine specialist Royston focus on a single task. ‘We could tell straightaway it was Marine was clear: it had to increase its production by going to work,’ says diesel fitter Vaughn Blake. ‘The seven times, immediately, to meet a sudden order parts were all there, so it was much quicker.’ from a valued customer, the British Army, for the Having previously refurbished one engine a week refurbishment of scores of engines. for the army, Royston was suddenly able to finish The solution, thought Royston managing director more than one a day – without a nightshift and Tom Wilkinson, was equally clear – introduce round- while fulfilling other orders. the-clock working, with every engineer working on as Mr Wilkinson is full of praise for Mr Callin and his many engines at once as possible. manager, Karl McCracken, who worked with him to He knew, however, that skill shortages and the help the company. need to fulfil other orders limited his room for For Mr Wilkinson it was the pair’s practical, rather manoeuvre. ‘The guys couldn’t work 700 per cent than academic, credentials that mattered: ‘There harder, they would be carried out on stretchers,’ he were no tutorials, no delay. What we would have says. So he was modest – or anxious – enough to done without them, I don’t know.’ In fact, there is seek a fresh perspective from William Callin of the plenty of management theory underpinning Mr Agility Project, a consultancy based at Durham Callin’s miracle. University’s School of Engineering. Embedding ‘living lean’ practices, Mr Callin says, In a three-hour discussion in Royston’s board- means people must adopt new methods with suffi- room in Newcastle upon Tyne, Mr Callin bluntly told cient belief to stick to them when they hit problems. Mr Wilkinson that his plan for fulfilling the order was ‘When it is going badly, that’s exactly when you want wrong. He made him a bold offer: ‘Give me the pro- it,’ Mr Callin says. ‘It is showing you your problems.’ duction line tomorrow for 24 hours and I’ll show you Lean manufacturing principles are far from new: what to do.’ the ‘elimination of waste’ theory underpinning Mr Given the challenge facing him, and Mr Callin’s Callin’s Royston work was developed by Toyota 50 record as an automotive engineer, Mr Wilkinson years ago. The Agility Project engineers appreciate agreed. By lunchtime the next day, Mr Callin had that radical change is never easy. proved to Royston’s management that, in manufac- ’You are getting into the way people believe the turing at any rate, less really can mean more. world is,’ says Mr McCracken. ‘That takes a long Instead of having lots of engines at each stage of time.’ And with so many acute pressures on manu- the process – stripping, assessing, cleaning, rebuilding, facturing managers, it is hardly surprising, says Mr painting and testing – Mr Callin suggested having only Callin, that many are nervous of changing methods. one engine at each stage, a ‘one-piece flow’ approach. But, he suggests, some managers’ hostility to This contradicted Mr Wilkinson’s instincts but he what they see as ‘theory’ is misplaced. What is batch could see the virtue in a method of working that was production, he asks, but the practical implementation not ‘10 per cent doing the assembly and 90 per cent of an old theory? looking for the nut’. His employees also warmed to the ‘Everything,’ he argues, ‘is theory.’ grand prix pit-stop approach, where a team of workers Source: Chris Tighe, Financial Times, 17 October 2002, p. 15. Introduction This chapter follows on from the discussion of approaches to strategy in the two pre- vious chapters. Chapters 6 and 7 were essentially concerned with approaches to determining and charting an organisation’s strategic direction. Underpinning both chapters was the division between the Prescriptive stream of strategy, whose members
  • 274. Theoretical foundations 261 seek to tell organisations how they should formulate strategy, and the Analytical stream of strategy, whose members seek to understand what organisations actually do to formulate strategy. The former tend to see strategy as a formal, rational and pre- planned process. The latter tend to see strategy as a more messy, less rational, emergent process. Therefore, for the Prescriptive stream, organisational change flows from, and is concerned with implementing, an organisation’s predetermined strategy. For the Analytical stream, organisational change is not an outcome of strategy but the process by which it is created and given form. For both streams, change management is vitally important, whether it be for strategy implementation or development. Consequently, this and the next two chapters will focus on the approaches to plan- ning and implementing the changes required to achieve, or shape, strategic objectives. As the example in Exhibit 8.1 shows, even relatively small change projects require people to discard long-held beliefs; they also need to be robust enough to prevent regression when times get tough. For these reasons, they need to be based on sound and appropriate theory. The chapter begins by describing the theoretical foundations of change management. In particular, it is shown that the three main schools of thought that underpin approaches to change management can be distinguished by their respective concentration on individual, group and organisation-wide issues. This leads on to an examination of the Planned approach, which was developed by Kurt Lewin in the 1940s. This approach dominated both the theory and practice of change management from then until the 1980s, when it met with increasing levels of criti- cism, especially from those questioning its suitability for organisations operating in dynamic and unpredictable environments. This is followed by a description of the Incremental, Punctuated equilibrium and continuous transformation models of change. The chapter concludes by arguing that, though some of the criticism may be unjustified, the Planned approach does appear to be more suited to incremental change rather than larger-scale and more radical change initiatives. Theoretical foundations Change management is not a distinct discipline with rigid and clearly-defined bound- aries. Rather, the theory and practice of change management draws on a number of social science disciplines and traditions. Though this is one of its strengths, it does make the task of tracing its origins and defining its core concepts more difficult than might otherwise be the case. The task is complicated further by the simple fact that the social sciences them- selves are interwoven. As an example, theories of management education and learning, which help us to understand the behaviour of those who manage change, cannot be fully discussed without reference to theories of child and adult psychology. Neither can these be discussed without touching on theories of knowledge (epistemol- ogy), which is itself a veritable philosophical minefield. The challenge, then, is to range wide enough to capture the theoretical foundations of change management, without straying so far into its related disciplines that clarity and understanding suffer. In order to achieve this delicate balance, the examination will be limited to the three schools of thought that form the central planks on which change management theory stands:
  • 275. 262 Chapter 8 · Approaches to change management ■ the Individual Perspective school; ■ the Group Dynamics school; ■ the Open Systems school. ■ The Individual Perspective school The supporters of this school are split into two camps: the Behaviourists and the Gestalt-Field psychologists. The former view behaviour as resulting from an individ- ual’s interaction with their environment. Gestalt-Field psychologists, on the other hand, believe that this is only a partial explanation. Instead, they argue that an indi- vidual’s behaviour is the product of environment and reason. In Behaviourist theory, all behaviour is learned; the individual is the passive recipi- ent of external and objective data. Among the earliest to work in the field of conditioning of behaviour was Pavlov (1927). In an experiment that has now passed into folklore, he discovered that a dog could be ‘taught’ to salivate at the ringing of a bell, by conditioning the dog to associate the sound of the bell with food. Arising from this, one of the basic principles of the Behaviourists is that human actions are conditioned by their expected consequences. Behaviour that is rewarded tends to be repeated, and behaviour that is ignored tends not to be. Therefore, in order to change behaviour, it is necessary to change the conditions that cause it (Skinner, 1974). In practice, behaviour modification involves the manipulation of reinforcing stim- uli so as to reward desired activity. The aim is to reward immediately all instances of the wanted behaviour, but to ignore all instances of the unwanted behaviour (because even negative recognition can act as a reinforcer). This is based on the principle of extinction; a behaviour will stop eventually if it is not rewarded (Lovell, 1980). Not surprisingly, given the period when it emerged, the Behaviourist approach mirrors in many respects that of the Classical school, portraying humans as cogs in a machine, who respond solely to external stimuli. For Gestalt-Field theorists, learning is a process of gaining or changing insights, outlooks, expectations or thought patterns. In explaining an individual’s behaviour, this group takes into account not only a person’s actions and the responses these elicit, but also the interpretation the individual places on these. As French and Bell (1984: 140) explain: Gestalt therapy is based on the belief that persons function as whole, total organisms. And each person possesses positive and negative characteristics that must be ‘owned up to’ and permitted expression. People get into trouble when they get fragmented, when they do not accept their total selves … Basically, one must come to terms with oneself, … must stop blocking off awareness, authenticity, and the like by dysfunctional behaviours. Therefore, from the Gestalt-Field perspective, behaviour is not just a product of exter- nal stimuli; rather it arises from how the individual uses reason to interpret these stimuli. Consequently, the Gestalt-Field proponents seek to help individual members of an organisation change their understanding of themselves and the situation in question, which in turn, they believe, will lead to changes in behaviour (Smith et al, 1982). The Behaviourists, on the other hand, seek to achieve organisational change solely by modifying the external stimuli acting upon the individual.
  • 276. Theoretical foundations 263 Both groups in the Individual Perspective school have proved influential in the management of change; indeed, some writers even advocate using them in tandem. This is certainly the case with advocates of the Culture–Excellence school, who rec- ommend the use of both strong individual incentives (external stimuli) and discussion, involvement and debate (internal reflection) in order to bring about organisational change (see Chapter 3). This combining of extrinsic and intrinsic motivators owes much to the work of the Human Relations movement, which (especially through the work of Maslow, 1943) stresses the need for both forms of stimuli in order to influence human behaviour. Though acknowledging the role of the individual, however, the Human Relations movement also draws attention to the importance of social groups in organisations, as do the Group Dynamics school. ■ The Group Dynamics school As a component of change theory, this school has the longest history (Schein, 1969) and, as will be shown later in this chapter, it originated with the work of Kurt Lewin. Its emphasis is on bringing about organisational change through teams or work groups, rather than individuals (Bernstein, 1968). The rationale behind this, accord- ing to Lewin (1947a, 1947b), is that because people in organisations work in groups, individual behaviour must be seen, modified or changed in the light of groups’ pre- vailing practices and norms. Lewin (1947a, 1947b) postulated that group behaviour is an intricate set of symbolic interactions and forces that not only affect group structures, but also modify individual behaviour. Therefore, he argued that individual behaviour is a function of the group environment or ‘field’, as he termed it. This field produces forces, tensions, emanating from group pressures on each of its members. An individual’s behaviour at any given time, according to Lewin, is an interplay between the intensity and valence (whether the force is positive or negative) of the forces impinging on the person. Because of this, he asserted that a group is never in a ‘steady state of equilibrium’, but is in a continuous process of mutual adaptation which he termed ‘quasi-stationary equilibrium’. To bring about change, therefore, it is useless to concentrate on changing the behaviour of individuals, according to the Group Dynamics school. The individual in isolation is constrained by group pressures to conform. The focus of change must be at the group level and should concentrate on influencing and changing the group’s norms, roles and values (Cummings and Huse, 1989; French and Bell, 1984; Smith et al, 1982). Norms are rules or standards that define what people should do, think or feel in a given situation. For the Group Dynamics school, what is important in analysing group norms is the difference between implicit and explicit norms. Explicit norms are formal, written rules which are known by, and applicable to, all. Implicit norms are informal and unwritten, and individuals may not even be consciously aware of them. Nevertheless, implicit norms have been identified as playing a vital role in dictating the actions of group members. Roles are patterns of behaviour to which individuals and groups are expected to conform. In organisational terms, roles are formally defined by job descriptions and performance targets, though in practice they are also strongly influenced by norms
  • 277. 264 Chapter 8 · Approaches to change management and values as well. Even in their work life, individuals rarely have only one role. For example, a production manager may also be secretary of the company’s social club, a clerical officer may also be a shop steward, and a supervisor may also be the com- pany’s safety representative. A similar situation exists for groups. A group’s main role may be to perform a particular activity or service, but it might also be expected to pursue continuous development, maintain and develop its skills, and act as a reposi- tory of expert knowledge for others in the organisation. Clearly, where members of a group and the group itself are required to conform to a number of different roles, the scope for role conflict or role ambiguity is ever-present. Unless roles are both clearly defined and compatible, the result can be sub-optimal for the individual (in terms of stress) and for the group (in terms of lack of cohesion and poor performance). Values are ideas and beliefs that individuals and groups hold about what is right and wrong. Values refer not so much to what people do or think or feel in a given sit- uation; instead they relate to the broader principles that lie behind these. Values are a more problematic concept than either norms or roles. Norms and roles can, with dili- gence, be more or less accurately determined. Values, on the other hand, are more difficult to determine because group members are not always consciously aware of, or can easily articulate, the values that influence their behaviour. Therefore, questioning people and observing their actions is unlikely to produce a true picture of group values. Nevertheless, the concept itself is seen as very important in determining, and changing, patterns of behaviour. The Group Dynamics school has proved to be very influential in developing both the theory and practice of change management. This can be seen by the very fact that it is now usual for organisations to view themselves as comprising groups and teams, rather than merely collections of individuals (Mullins, 1989). As French and Bell (1984: 127–9) pointed out, the importance given to teams is reflected in the fact that: ... the most important single group of interventions in OD [Organization Development] are team-building activities, the goals of which are the improved and increased effectiveness of various teams within the organization. … The … team-building meeting has the goal of improving the team’s effectiveness through better management of task demands, relationship demands, and group processes. … [The team] analyzes its way of doing things, and attempts to develop strategies to improve its operation. In so doing, norms, roles and values are examined, challenged and, where necessary, changed. Nevertheless, despite the emphasis that many place on groups within organisations, others argue that the correct approach is one that deals with an organisation as a whole. ■ The Open Systems school Having examined approaches to change that emphasise the importance of groups and individuals, we now come to one whose primary point of reference is the organisation in its entirety. The Open Systems school (as mentioned in Chapter 2) sees organisa- tions as composed of a number of interconnected sub-systems. It follows that any change to one part of the system will have an impact on other parts of the system,
  • 278. Theoretical foundations 265 and, in turn, on its overall performance (Scott, 1987). The Open Systems school’s approach to change is based on a method of describing and evaluating these sub- systems, in order to determine how they need to be changed so as to improve the overall functioning of the organisation. This school does not just see organisations as systems in isolation, however; they are ‘open’ systems. Organisations are seen as open in two respects. Firstly, they are open to, and interact with, their external environment. Secondly, they are open inter- nally: the various sub-systems interact with each other. Therefore, internal changes in one area affect other areas, and in turn have an impact on the external environment, and vice versa (Buckley, 1968). The objective of the Open Systems approach is to structure the functions of a busi- ness in such a manner that, through clearly-defined lines of coordination and interdependence, the overall business objectives are collectively pursued. The empha- sis is on achieving overall synergy, rather than on optimising the performance of any one individual part per se (Mullins, 1989). Miller (1967) argues that there are four principal organisational sub-systems: ■ The organisational goals and values sub-system. This comprises the organisation’s stated objectives and the values it wishes to promote in order to attain them. To operate effectively, the organisation has to ensure that its goals and values are com- patible not only with each other, but also with its external and internal environments. ■ The technical sub-system. This is the specific combination of knowledge, tech- niques and technologies which an organisation requires in order to function. Once again, the concern here is with the compatibility and appropriateness of these in relation to an organisation’s particular circumstances. ■ The psychosocial sub-system. This is also variously referred to as organisational climate and organisational culture. In essence, it is the fabric of role relationships, values and norms that binds people together and makes them citizens of a particu- lar miniature society (the organisation). It is influenced by an organisation’s environment, history and employees, as well as its tasks, technology and structures. If the psychosocial sub-system is weak, fragmented or inappropriate, then instead of binding the organisation together, it may have the opposite effect. ■ The managerial sub-system. This spans the entire organisation. It is responsible for relating an organisation to its environment, setting goals, determining values, developing comprehensive strategic and operational plans, designing structure and establishing control processes. It is this sub-system that has the responsibility for consciously directing an organisation and ensuring that it attains its objectives. If the managerial sub-system fails, so does the rest of an organisation. The Open Systems school is concerned with understanding organisations in their entirety; therefore, it attempts to take a holistic rather than a particularistic perspec- tive. This is reflected in its approach to change. According to Burke (1980), this is informed by three factors: 1 Sub-systems are interdependent. If alterations are made to one part of an organisa- tion without taking account of its dependence or impact on the rest of the organisation, the outcome may be sub-optimal.
  • 279. 266 Chapter 8 · Approaches to change management 2 Training, as a mechanism for change, is unlikely to succeed on its own. This is because it concentrates on the individual and not the organisational level. As Burke (1980: 75) argues, ‘although training may lead to individual change and in some cases to small group change, there is scant evidence that attempting to change the individual will in turn change the organisation’. 3 In order to be successful, organisations have to tap and direct the energy and talent of their workforce. This requires the removal of obstacles which prevent this, and the provision of positive reinforcement which promotes it. Given that this is likely to require changes to such things as norms, reward systems and work structures, it must be approached from an organisational, rather than individual or group, perspective. Though the Open Systems perspective has attracted much praise, attention has also been drawn to its alleged shortcomings. Butler (1985: 345), for example, while hail- ing it as a major step forward in understanding organisational change, points out that, ‘Social systems are extremely dynamic and complex entities that often defy descriptions and analysis. Therefore, one can easily get lost in attempting to sort out all the cause-and-effect relationships.’ Beach (1980: 138), in a similar vein, argues that Open Systems theory: ... does not comprise a consistent, articulated, coherent theory. Much of it constitutes a high level of abstraction. To be really useful to the professional practice of management, its spokesmen and leaders must move to a more concrete and operationally useful range. Despite these criticisms, the level of support for this approach, from eminent theorists such as Burns and Stalker (1961), Joan Woodward (1965) and Lawrence and Lorsch (1967), is formidable. This is why, as explained in Chapter 2, it has proved so influential. ■ Summary In looking at the three schools that form the central planks of change management theory, three major points stand out. Firstly, with the exception of the Behaviourists, not only do these schools of thought stand, generally, in sharp contrast to the mechanistic approach of the Classical school towards organisations and people, but also, in their approach to individuals, groups and organisations as a whole, form a link to the emerg- ing organisational paradigms that were discussed in Chapter 3. Indeed, it might be possible to go further and say that these three schools provide many of the core concepts of the new paradigms, especially in respect to teamwork and organisational learning. If this is so, the claim (by Kanter, 1989; Senge, 1990; and others) that these new forms of organisation are a radical break with the past may have to be reconsidered. Secondly, the three theoretical perspectives on change focus on different aspects of organisational life and, therefore, each has different implications for what change takes place and how it is managed. It follows that any approach to managing change should be judged by whether or not it is applicable to all or only some of the types of change covered by the Individual, Group and Systems schools. Thirdly, though each school puts itself forward as the most effective, if not the only, approach to change, they are not necessarily in conflict or competition. Indeed, it could well be argued that they are complementary approaches. The key task, which will be examined in more detail later in this and the next two chapters, is to identify
  • 280. The Planned approach to organisational change 267 the circumstances in which each is appropriate: does the problem or the objective of change lie at the level of the organisation, group or individual? Can any of these levels be tackled in isolation from the others? The Open Systems perspective may be correct: change at one level or in one area should take into account the effect it will have elsewhere in the organisation. However, whether the perspective adopted is organisation-wide, or limited to groups and individuals, in the final analysis, what is it that is being changed? The answer, surely, is the behaviour of individuals and groups, because organisations are, as the proponents of these perspectives admit, social systems. To change anything requires the cooperation and consent, or at least acquiescence, of the groups and individuals who make up an organisation, for it is only through their behaviour that the struc- tures, technologies, systems and procedures of an organisation move from being abstract concepts to concrete realities. This is made even plainer in the remainder of this chapter and in the next two chapters, where we examine the main approaches to managing organisational change. The Planned approach to organisational change Change has always been a feature of organisational life, though many argue that the frequency and magnitude of change are greater now than ever before. Planned change is a term first coined by Kurt Lewin to distinguish change that was consciously embarked upon and planned by an organisation, as averse to types of change that might come about by accident, by impulse or that might be forced on an organisation (Marrow, 1969). However, just as the practice of change management is dependent on a number of factors, not least the particular school of thought involved, so, not surprisingly, even amongst those advocating Planned change, a variety of different models of change management have arisen over the years. Though these were devised to meet the needs of particular organisations, or arose from a specific school of thought, nevertheless, the Planned approach to change is now most closely associated with the practice of Organization Development (OD) and indeed lies at its core. According to French and Bell (1995: 1–2): Organization development is a unique organizational improvement strategy that emerged in the late 1950s and early 1960s. … [It] has evolved into an integrated framework of theories and practices capable of solving or helping to solve most of the important problems con- fronting the human side of organizations. Organization development is about people and organizations and people in organizations and how they function. OD is also about planned change, that is getting individuals, teams and organizations to function better. Planned change involves common sense, hard work applied diligently over time, a systematic, goal- oriented approach, and valid knowledge about organizational dynamics and how to change them. Valid knowledge derives from the behavioral sciences such as psychology, social psy- chology, sociology, anthropology, systems theory, and the practice of management. Underpinning OD is a set of values, assumptions and ethics that emphasise its humanistic orientation and its commitment to organisational effectiveness. These values have been articulated by many writers over the years (Conner, 1977; Gellerman
  • 281. 268 Chapter 8 · Approaches to change management et al, 1990; Warwick and Thompson, 1980). One of the earliest attempts was by French and Bell (1973), who proposed four core values for OD (see Exhibit 8.2). Exhibit 8.2 French and Bell’s core values of OD ■ The belief that the needs and aspirations of human beings provide the prime reasons for the existence of organisations within society. ■ Change agents believe that organisational prioritisation is a legitimate part of organisational culture. ■ Change agents are committed to increased organisational effectiveness. ■ OD places a high value on the democratisation of organisations through power equalisation. Source: French and Bell (1973) In a survey of OD practitioners, Hurley et al (1992) found these values were clearly reflected in the five main approaches they used in their work: 1 empowering employees to act; 2 creating openness in communications; 3 facilitating ownership of the change process and its outcomes; 4 the promotion of a culture of collaboration; and 5 the promotion of continuous learning. Within the OD field, there are a number of major theorists and practitioners who have contributed their own models and techniques to its advancement (e.g. Argyris, 1962; Beckhard, 1969; Blake and Mouton, 1976; French and Bell, 1973). OD also shares some common concepts with, and sits easily alongside, the Human Relations movement. Indeed, Douglas McGregor, a key figure in the Human Relations move- ment, also played a significant role in the early stages of OD (see McGregor, 1967). However, despite this, there is general agreement that the OD movement grew out of, and became the standard bearer for, Kurt Lewin’s pioneering work on behavioural science in general, and his development of Action Research and Planned change in particular (Cummings and Worley, 1997). ■ Kurt Lewin and Planned change Though there has been an increasing tendency in recent years to play down the signif- icance of his work for contemporary organisations, few social scientists can have received the level of praise and admiration that has been heaped upon Kurt Lewin (Ash, 1992; Bargal et al, 1992; Dent and Goldberg, 1999; Dickens and Watkins, 1999; Tobach, 1994). As Edgar Schein (1988: 239) enthusiastically commented: There is little question that the intellectual father of contemporary theories of applied behavioural science, action research and planned change is Kurt Lewin. His seminal work on leadership style and the experiments on planned change which took place in World War II in an effort to change consumer behaviour launched a whole generation of research in group dynamics and the implementation of change programs.
  • 282. The Planned approach to organisational change 269 For most of his life, Lewin’s main preoccupation was the resolution of social conflict and, in particular, the problems of minority or disadvantaged groups. Underpinning this preoccupation was a strong belief that only the permeation of democratic values into all facets of society could prevent the worst extremes of social conflict. As his wife wrote in the Preface to a volume of his collected work published after his death: Kurt Lewin was so constantly and predominantly preoccupied with the task of advancing the conceptual representation of the social-psychological world, and at the same time he was so filled with the urgent desire to use his theoretical insight for the building of a better world, that it is difficult to decide which of these two sources of motivation flowed with greater energy or vigour. (Lewin, 1948b) To a large extent, his interests and beliefs stemmed from his background as a German Jew. Lewin was born in 1890 and, for a Jew growing up in Germany, at this time, officially-approved anti-Semitism was a fact of life. Few Jews could expect to achieve a responsible post in the civil service or universities. Despite this, Lewin was awarded a doctorate at the University of Berlin in 1916 and went on to teach there. Though he was never awarded tenured status, Lewin achieved a growing international reputation in the 1920s as a leader in his field (Lewin, 1992). However, with the rise of the Nazi Party, Lewin recognised that the position of Jews in Germany was increas- ingly threatened. The election of Hitler as Chancellor in 1933 was the final straw for him; he resigned from the University and moved to America (Marrow, 1969). In America, Lewin found a job first as a ‘refugee scholar’ at Cornell University and then, from 1935–1945, at the University of Iowa. Here he was to embark on an ambi- tious programme of research, which covered topics such as child-parent relations, conflict in marriage, styles of leadership, worker motivation and performance, conflict in industry, group problem-solving, communication and attitude change, racism, anti- Semitism, anti-racism, discrimination and prejudice, integration–segregation, peace, war and poverty (Bargal et al, 1992; Cartwright, 1952; Lewin, 1948a). As Cooke (1999) notes, given the prevalence of racism and anti-Semitism in America at the time, much of this work, especially his increasingly public advocacy in support of disadvan- taged groups, put Lewin on the political left. During the years of the Second World War, Lewin did much work for the American war effort. This included studies of the morale of front-line troops and psychological war- fare, and his famous study aimed at persuading American housewives to buy cheaper cuts of meat (Lewin, 1943a; Marrow, 1969). He was also much in demand as a speaker on minority and inter-group relations (Smith, 2001). These activities chimed with one of his central preoccupations, which was how Germany’s authoritarian and racist culture could be replaced with one imbued with democratic values. He saw democracy, and the spread of democratic values throughout society, as the central bastion against authoritarianism and despotism. That he viewed the establishment of democracy as a major task, and avoided simplistic and structural recipes, can be gleaned from the following extracts from his article on ‘The Special Case of Germany’ (Lewin, 1943b): ... Nazi culture ... is deeply rooted, particularly in the youth on whom the future depends. It is a culture which is centred around power as the supreme value and which denounces jus- tice and equality ... (p. 43)
  • 283. 270 Chapter 8 · Approaches to change management To be stable, a cultural change has to penetrate all aspects of a nation’s life. The change must, in short, be a change in the ‘cultural atmosphere,’ not merely a change of a single item. (p. 46) Change in culture requires the change of leadership forms in every walk of life. At the start, particularly important is leadership in those social areas which are fundamental from the point of view of power. (p. 55) With the end of the War, Lewin established the Research Center for Group Dynamics at the Massachusetts Institute of Technology. The aim of the Center was to investigate all aspects of group behaviour, especially how it could be changed. At the same time, he was also chief architect of the Commission on Community Interrelations (CCI). Founded and funded by the American Jewish Congress, its aim was the eradication of discrimination against all minority groups. As Lewin wrote at the time, ‘We Jews will have to fight for ourselves and we will do so strongly and with good conscience. We also know that the fight of the Jews is part of the fight of all minorities for democratic equality of rights and opportunities ...’ (quoted in Marrow, 1969: 175). In pursuing this objective, Lewin believed that his work on Group Dynamics and Action Research would provide the key tools for the CCI. Lewin was also influential in establishing the Tavistock Institute in the UK and its Journal, Human Relations (Jaques, 1998; Marrow, 1969). In addition, in 1946, the Connecticut State Inter-Racial Commission asked Lewin to help train leaders and con- duct research on the most effective means of combating racial and religious prejudice in communities. This led to the development of sensitivity training and the creation, in 1947, of the now famous National Training Laboratories. However, his huge work- load took its toll on his health, and on 11 February 1947 he died of a heart attack (Lewin, 1992). Lewin’s work Lewin was a humanitarian who believed that only by resolving social conflict, whether it be religious, racial, marital or industrial, could the human condition be improved. Lewin believed that the key to resolving social conflict was to facilitate learning and so enable individuals to understand and restructure their perceptions of the world around them. In this he was much influenced by the Gestalt psychologists he had worked with in Berlin (Smith, 2001). A central theme of much of his work is the view that ‘... the group to which an individual belongs is the ground for his per- ceptions, his feelings and his actions’ (Allport, 1948: vii). Also, despite the fact that his work covered many subjects and fields, as Gold (1999: 295) states, ‘It is quite clear that Lewin thought of his professional activities as a piece, seamless and inte- grated.’ Therefore, though field theory, Group Dynamics, Action Research and the Three-Step model of change are often treated as separate themes of his work, Lewin saw them as a unified whole with each element supporting and reinforcing the others, and all of them necessary to understand and bring about Planned change, whether it be at the level of the individual, group, organisation or even society (Bargal and Bar, 1992; Kippenberger, 1998a, 1998b; Smith, 2001). As Allport (1948: ix) states: ‘All of his concepts, whatever root-metaphor they employ, comprise a single well-integrated system.’ This can be seen from examining these four aspects of his work in turn.
  • 284. The Planned approach to organisational change 271 Field theory This is an approach to understanding group behaviour by trying to map out the total- ity and complexity of the field in which the behaviour takes place (Back, 1992). Lewin maintained that to understand any situation it was necessary that: ‘One should view the present situation – the status quo – as being maintained by certain condi- tions or forces’ (Lewin, 1943a: 172). Lewin (1947b) postulated that group behaviour is an intricate set of symbolic interactions and forces that not only affect group struc- tures, but also modify individual behaviour. Therefore, individual behaviour is a function of the group environment or ‘field’, as he termed it. Consequently, any changes in behaviour stem from changes, be they small or large, in the forces within the field (Lewin, 1947a). Lewin defined a field as ‘a totality of coexisting facts which are conceived of as mutually interdependent …’ (Lewin, 1946: 240). Lewin believed that a field was in a continuous state of adaptation and that ‘Change and constancy are relative concepts; group life is never without change, merely differences in the amount and type of change exist’ (Lewin, 1947a: 199). This is why Lewin used the term ‘quasi-stationary equilibrium’ to indicate that, whilst there might be a rhythm and pattern to the behaviour and processes of a group, these tended to fluctuate con- stantly owing to changes in the forces or circumstances that impinge on the group. Lewin’s view was that if one could identify, plot and establish the potency of these forces, then it would be possible not only to understand why individuals, groups and organisations act as they do, but also what forces would need to be diminished or strengthened in order to bring about change. In the main, Lewin saw behavioural change as a slow process; however, he did recognise that under certain circumstances, such as a personal, organisational or societal crisis, the various forces in the field can shift quickly and radically. In such situations, established routines and behaviours break down and the status quo is no longer viable; new patterns of activity can rap- idly emerge and a new equilibrium (or quasi-stationary equilibrium) is formed (Lewin, 1947a; Kippenberger, 1998a). Despite its obvious value as a vehicle for understanding and changing group behav- iour, with Lewin’s death, the general interest in field theory waned (Back, 1992; Gold, 1992; Hendry, 1996). In recent years, however, with the work of Argyris (1990) and Hirschhorn (1988) on understanding and overcoming resistance to change, Lewin’s work on field theory has once again begun to attract interest. According to Hendry (1996), even critics of Lewin’s work have drawn on field theory to develop their own models of change (see Pettigrew et al, 1989, 1992). Indeed, parallels have even been drawn between Lewin’s work and the work of complexity theorists (Kippenberger, 1998a). Back (1992), for example, argued that the formulation and behaviour of complex systems as described by Chaos and Catastrophe theorists bear striking simi- larities to Lewin’s conceptualisation of field theory. Nevertheless, field theory is now probably the least understood element of Lewin’s work, yet, because of its potential to map the forces impinging on an individual, group or organisation, it underpinned the other elements of his work.
  • 285. 272 Chapter 8 · Approaches to change management Group Dynamics … the word ‘dynamics’ … comes from a Greek word meaning force. … ‘group dynamics’ refers to the forces operating in groups. … it is a study of these forces: what gives rise to them, what conditions modify them, what consequences they have, etc. (Cartwright, 1951: 382) Lewin was the first psychologist to write about ‘group dynamics’ and the importance of the group in shaping the behaviour of its members (Allport, 1948; Bargal et al, 1992). Indeed, Lewin’s (1939: 165) definition of a ‘group’ is still generally accepted: ‘… it is not the similarity or dissimilarity of individuals that constitutes a group, but interdependence of fate.’ As Kippenberger (1998a) notes, Lewin was addressing two questions: What is it about the nature and characteristics of a particular group that causes it to respond (behave) as it does to the forces which impinge on it, and how can these forces be changed in order to elicit a more desirable form of behaviour? It was to address these questions that Lewin began to develop the concept of Group Dynamics. Group Dynamics stresses that group behaviour, rather than that of individuals, should be the main focus of change (Bernstein, 1968; Dent and Goldberg, 1999). Lewin (1947b) maintained that it is fruitless to concentrate on changing the behav- iour of individuals because the individual in isolation is constrained by group pressures to conform. Consequently, the focus of change must be at the group level and should concentrate on factors such as group norms, roles, interactions and social- isation processes to create ‘disequilibrium’ and change (Schein, 1988). Lewin’s pioneering work on Group Dynamics not only laid the foundations for our understanding of groups (Dent and Goldberg, 1999; Cooke, 1999; French and Bell, 1984; Marrow, 1969; Schein, 1988) but has also been linked to complexity theories by researchers examining self-organising theory and non-linear systems (Tschacher and Brunner, 1995). However, understanding the internal dynamics of a group is not suffi- cient by itself to bring about change. Lewin also recognised the need to provide a process whereby the members could be engaged in and committed to changing their behaviour. This led Lewin to develop Action Research and the Three-Step model of change. Action Research This term was coined by Lewin (1946) in an article entitled ‘Action Research and Minority Problems’. Lewin stated in the article: In the last year and a half I have had occasion to have contact with a great variety of organi- zations, institutions, and individuals who came for help in the field of group relations. (Lewin, 1946: 201) However, though these people exhibited … … a great amount of good-will, of readiness to face the problem squarely and really do something about it. … These eager people feel themselves to be in a fog. They feel in a fog on three counts: 1. What is the present situation? 2. What are the dangers? 3. And most importantly of all, what shall we do? (Lewin, 1946: 201)
  • 286. The Planned approach to organisational change 273 Lewin conceived of Action Research as a two-pronged process which would allow groups to address these three questions. Firstly, it emphasises that change requires action, and is directed at achieving this. Secondly, it recognises that successful action is based on analysing the situation correctly, identifying all the possible alternative solutions and choosing the one most appropriate to the situation at hand (Bennett, 1983). To be successful, though, there has also to be a ‘felt-need’. Felt-need is an indi- vidual’s inner realisation that change is necessary. If felt-need is low in the group or organisation, introducing change becomes problematic. The theoretical foundations of Action Research lie in Gestalt psychology, which stresses that change can only suc- cessfully be achieved by helping individuals to reflect on and gain new insights into the totality of their situation. Lewin (1946: 206) stated that Action Research ‘… pro- ceeds in a spiral of steps each of which is composed of a circle of planning, action, and fact-finding about the results of the action.’ It is an iterative process whereby research leads to action, and action leads to evaluation and further research. As Schein (1996: 64) comments, it was Lewin’s view that ‘… one cannot understand an organization without trying to change it …’. Indeed, Lewin’s view was very much that the understanding and learning that this process produces for the individuals and groups concerned, which then feeds into changed behaviour, is more important than any resulting change as such (Lewin, 1946). To this end, Action Research draws on Lewin’s work on field theory to identify the forces that focus on the group to which the individual belongs. It also draws on Group Dynamics to understand why group members behave in the way they do when subjected to these forces. Lewin stressed that the routines and patterns of behaviour in a group are more than just the outcome of opposing forces in a forcefield. They have a value in themselves and have a positive role to play in enforcing group norms (Lewin, 1947a). Action Research stresses that for change to be effective, it must take place at the group level, and must be a participative and collaborative process which involves all of those concerned (Allport, 1948; Bargal et al, 1992; French and Bell, 1984; Lewin, 1947b). Lewin’s first Action Research project was to investigate and reduce violence between Catholic and Jewish teenage gangs. This was quickly followed by a project to integrate black and white sales staff in New York department stores (Marrow, 1969). However, Action Research was also adopted by the Tavistock Institute in Britain, and used to improve managerial competence and efficiency in the newly- nationalised coal industry. Since then it has acquired strong adherents throughout the world (Dickens and Watkins, 1999; Eden and Huxham, 1996; Elden and Chisholm, 1993). However, Lewin (1947a: 228) was concerned that: A change towards a higher level of group performance is frequently short lived; after a ‘shot in the arm,’ group life soon returns to the previous level. This indicates that it does not suf- fice to define the objective of a planned change in group performance as the reaching of a different level. Permanency at the new level, or permanency for a desired period, should be included in the objective. It was for this reason that he developed his Three-Step model of change.
  • 287. 274 Chapter 8 · Approaches to change management Three-Step model This is often cited as Lewin’s key contribution to organisational change. It needs to be recognised, however, that when he developed his Three-Step model Lewin was not thinking only of organisational issues. Nor did he intend it to be seen separately from the other three elements which comprise his Planned approach to change (i.e. field theory, Group Dynamics and Action Research). Rather Lewin saw the four concepts as forming an integrated approach to analysing, understanding and bringing about change at the group, organisational and societal levels. A successful change project, Lewin (1947a) argued, involved three steps: Step 1: Unfreezing. Lewin believed that the stability of human behaviour was based on a quasi-stationary equilibrium supported by a complex field of driving and restraining forces. He argued that the equilibrium needs to be destabilised (unfrozen) before old behaviour can be discarded (unlearnt) and new behaviour successfully adopted. Given the type of issues that Lewin was addressing, as one would expect, he did not believe that change would be easy or that the same approach could be applied in all situations: The ‘unfreezing’ of the present level may involve quite different problems in different cases. Allport … has described the ‘catharsis’ which seems necessary before prejudice can be removed. To break open the shell of complacency and self-righteousness it is sometimes nec- essary to bring about an emotional stir up. (Lewin, 1947a: 229) Enlarging on Lewin’s ideas, Schein (1996: 27) comments that the key to unfreezing ‘… was to recognise that change, whether at the individual or group level, was a pro- found psychological dynamic process.’ Schein (1996) identifies three processes necessary to achieve unfreezing: disconfirmation of the validity of the status quo, the induction of guilt or survival anxiety, and creating psychological safety. He argued that: ‘… unless sufficient psychological safety is created, the disconfirming informa- tion will be denied or in other ways defended against, no survival anxiety will be felt, and consequently, no change will take place’ (Schein, 1996: 61). In other words, those concerned have to feel safe from loss and humiliation before they can accept the new information and reject old behaviours. Step 2: Moving. As Schein (1996: 62) notes, unfreezing is not an end in itself; it ‘…creates motivation to learn but does not necessarily control or predict the direc- tion.’ This echoes Lewin’s view that any attempt to predict or identify a specific outcome from Planned change is very difficult because of the complexity of the forces concerned. Instead, one should seek to take into account all the forces at work and identify and evaluate, on a trial and error basis, all the available options (Lewin, 1947a). This is, of course, the learning approach promoted by Action Research. It is this iterative approach of research, action and more research that enables groups and individuals to move from a less acceptable to a more acceptable set of behaviours. However, as noted above, Lewin (1947a) recognised that, without reinforcement, change could be short-lived. Step 3: Refreezing. This is the final step in the Three-Step model. Refreezing seeks to stabilise the group at a new quasi-stationary equilibrium in order to ensure that the
  • 288. The Planned approach to organisational change 275 new behaviours are relatively safe from regression. The main point about refreezing is that new behaviour must be, to some degree, congruent with the rest of the behav- iour, personality and environment of the learner or it will simply lead to a new round of disconfirmation (Schein, 1996). This is why Lewin saw successful change as a group activity, because unless group norms and routines are also transformed, changes to individual behaviour will not be sustained. In organisational terms, refreezing often requires changes to organisational culture, norms, policies and prac- tices (Cummings and Huse, 1989). Like other aspects of Lewin’s work, his Three-Step model of change has become unfash- ionable in the last two decades (Dawson, 1994; Hatch, 1997; Kanter et al, 1992). Nevertheless, such is its continuing influence that, as Hendry (1996: 624) commented: Scratch any account of creating and managing change and the idea that change is a three- stage process which necessarily begins with a process of unfreezing will not be far below the surface. Lewin and change: a summary Lewin was primarily interested in resolving social conflict through behavioural change, whether this be within organisations or in the wider society. He identified two requirements for success: 1 To analyse and understand how social groupings were formed, motivated and maintained. To do this, he developed both field theory and Group Dynamics. 2 To change the behaviour of social groups. The primary methods he developed for achieving this were Action Research and the Three-Step model of change. Underpinning Lewin’s work was a strong moral and ethical belief in the impor- tance of democratic institutions and democratic values in society. Lewin believed that only by strengthening democratic participation in all aspects of life and being able to resolve social conflicts could the scourge of despotism, authoritarianism and racism be effectively countered. Since his death, Lewin’s wider social agenda has been mainly pursued under the umbrella of Action Research, though in recent years there has been an increasing interest in applying Action Research to organisations (Darwin et al, 2002; Dickens and Watkins, 1999; McNiff, 2000). It is also in the wider social arena where Lewin’s Planned approach has been most closely followed. For example, Bargal and Bar (1992) described how, over a number of years, they used Lewin’s approach to address the conflict between Arab-Palestinian and Jewish youths in Israel through the development of inter-group workshops. The workshops were developed around six principles based on Lewin’s work: (a) a recursive process of data collection to determine goals, action to implement goals and assessment of the action; (b) feedback of research results to trainers; (c) cooperation between researchers and practitioners; (d) research based on the laws of the group’s social life, on three stages of change – ‘unfreezing,’ ‘moving,’ and ‘refreezing’ – and on the principles of group decision making; (e) consideration of the values, goals and power structures of change agents and clients; and (f) use of research to create knowledge and/or solve problems. (Bargal and Bar, 1992: 146)
  • 289. 276 Chapter 8 · Approaches to change management In terms of organisational change, Lewin and his associates had a long and fruitful relationship with the Harwood Manufacturing Corporation, where his approach to change was developed, applied and refined. Coch and French (1948: 512) observed that, at Harwood: ‘From the point of view of factory management, there were two purposes to the research: (1) Why do people resist change so strongly? and (2) What can be done to overcome this resistance?’ Therefore, in both his wider social agenda and his narrower organisational agenda, Lewin sought to address similar issues and apply similar concepts. Since his death, it is the organisational side of his work that has been given greater prominence by his followers and successors, mainly through the cre- ation of the Organization Development (OD) movement (Cummings and Worley, 1997; French and Bell, 1995). However, whilst attempting to remain true to his partici- patory philosophy, and being greatly influenced by Lewin’s work on group dynamics, OD tends to equate Planned change with Lewin’s Three-Step model, rather than treat- ing it as an integrated package that also requires the use of field theory, Group Dynamics and Action Research. As a stand-alone approach to change, the Three-Step model is rather underdeveloped, so OD practitioners have sought to develop it further. ■ Phases of Planned change In attempting to elaborate upon Lewin’s Three-Step model, writers have expanded the number of steps or phases. Lippitt et al (1958) developed a seven-phase model of Planned change, whilst Cummings and Huse (1989), not to be outdone, produced an eight-phase model. As Cummings and Huse (1989: 51) point out, however, ‘the con- cept of planned change implies that an organization exists in different states at different times and that planned movement can occur from one state to another.’ Therefore, in order to understand Planned change, it is not sufficient merely to under- stand the processes that bring about change; there must also be an appreciation of the states that an organisation must pass through in order to move from an unsatisfac- tory present state to a more desired future state. Bullock and Batten (1985) developed an integrated, four-phase model of Planned change based on a review and synthesis of over 30 models of Planned change (see Exhibit 8.3). Their model describes Planned change in terms of two major dimen- sions: change phases, which are distinct states an organisation moves through as it undertakes Planned change; and change processes, which are the methods used to move an organisation from one state to another. According to Cummings and Huse (1989), this model has broad applicability to most change situations. It clearly incorporates key aspects of many other change models and, especially, it overcomes any confusion between the processes (methods) of change and the phases of change – the sequential states that organisations must go through to achieve successful change. The focus of Bullock and Batten’s model, just as with Lewin’s, is change at individ- ual and group level. However, OD practitioners have recognised, as many others have, that ‘Organizations are being reinvented; work tasks are being reengineered; the rules of the marketplace are being rewritten; the fundamental nature of organizations is changing’, and, therefore, Organization Development has to adapt to these new conditions and broaden its focus out beyond individual and group behaviour (French and Bell, 1995: 3–4).
  • 290. The Planned approach to organisational change 277 Exhibit 8.3 Bullock and Batten’s (1985) four-phase model of Planned change 1. Exploration phase. In this state an organisation has to explore and decide whether it wants to make specific changes in its operations and, if so, commit resources to planning the changes. The change processes involved in this phase are becoming aware of the need for change; searching for outside assistance (a consultant/facilitator) to assist with planning and implementing the changes; and establishing a contract with the consultant which defines each party’s responsibilities. 2. Planning phase. Once the consultant and the organisation have established a contract, then the next state, which involves understanding the organisation’s problem or concern, begins. The change processes involved in this are collecting information in order to establish a correct diagnosis of the problem; establishing change goals and designing the appropriate actions to achieve these goals; and persuading key decision-makers to approve and support the proposed changes. 3. Action phase. In this state, an organisation implements the changes derived from the planning. The change processes involved are designed to move an organisation from its current state to a desired future state, and include establishing appropriate arrangements to manage the change process and gaining support for the actions to be taken; and evaluating the implementation activities and feeding back the results so that any necessary adjustments or refinements can be made. 4. Integration phase. This state commences once the changes have been successfully implemented. It is concerned with consolidating and stabilising the changes so that they become part of an organisation’s normal, everyday operation and do not require special arrangements or encouragement to maintain them. The change processes involved are reinforcing new behaviours through feedback and reward systems and gradually decreasing reliance on the consultant; diffusing the successful aspects of the change process throughout the organisation; and training managers and employees to monitor the changes constantly and to seek to improve upon them. ■ The changing nature of Organization Development In the USA at least, OD has become a profession with its own regulatory bodies, to which OD practitioners have to belong, its own recognised qualifications, a host of approved tools and techniques, and its own ethical code of practice (Cummings and Worley, 1997). The members of this profession, whether employed in academic insti- tutions, consultancy practices or private and public organisations, exist to provide consultancy services. As with any profession or trade, unless they provide their cus- tomers with what they want, they will soon go out of business. Therefore, to appreciate the current role and approach of Planned change, it is necessary to say something of how OD has responded to the changing needs of its customers. As stated earlier, Organization Development is a process that applies behavioural science knowledge and practices to help organisations achieve greater effectiveness. The original focus of OD was on work groups within an organisational setting rather than organisations in their entirety, and it was primarily concerned with the human processes and systems within organisations. However, as French and Bell (1995) and Cummings and Worley (1997) have noted, in recent years there has been a major shift of focus within the OD field from the group to the organisation setting, and even beyond. Three developments in particular caused it to broaden out its perspective:
  • 291. 278 Chapter 8 · Approaches to change management ■ With the rise of the Job Design movement in the 1960s (see Chapter 2), and partic- ularly the advent of Socio-Technical Systems theory, OD practitioners came to recognise that they could not solely concentrate on the work of groups and individ- uals in organisations but that they needed to look at other systems. Gradually, OD has adopted an Open Systems perspective which allows it to look at organisations in their totality and within their environments. ■ This organisation-wide perspective has caused OD practitioners to broaden out their perspective in two interrelated ways. Firstly, and not surprisingly, they have developed an interest in managing organisational culture. Given that, when work- ing with groups, OD consultants have always recognised the important of group norms and values, it is a natural progression to translate this into an interest in organisational culture in general. Secondly, they have developed an interest in the concept of organisational learning. Once again, as derived from Lewin’s work, OD practitioners tend to stress that their interventions are as much about learning as change. Therefore, it is a natural extension to move from group learning to organi- sational learning. In both cases, however, these developments have tended to reflect and follow on from a general interest in such issues by organisations and academ- ics rather than necessarily being generated by the OD profession itself. ■ The increasing use of organisation-wide approaches to change (e.g. culture change programmes), coupled with increasing turbulence in the environment in which organisations operate, have drawn attention to the need for OD practitioners to become involved in transforming organisations in their totality rather than only focusing on changes to their constituent parts. Therefore, as can be seen, OD has attempted to move considerably away from its roots in group-based and Planned change and now takes a far more organisation- and system-wide perspective on change. This has created something of a dilemma for pro- ponents of OD. As Krell (1981) pointed out, much of what can be conceived of as traditional OD (e.g. Action Research, t-groups, etc.) had become accepted practice in many organisations by the early 1980s. Even some of the newer approaches, such as job design and self-managed work teams, have become mainstream practices in many organisations (Beer and Walton, 1987). By and large, these tried-and-tested approaches still tend to focus on the group level rather than on the wider organisa- tion level. However, the more organisation-wide transformational approaches, which are seen as crucial to maintaining OD’s relevance for organisations, are less clear, less well-developed and less well-accepted (Cummings and Worley, 1997; French and Bell, 1995). In addition, the more that OD becomes focused on macro issues, the less it can keep in touch with and involve all the individuals affected by its change programmes and the less able it is to promote its core humanist and democratic values. It would indeed be an irony if at this time, in pursuit of what is perceived as con- tinued relevance, OD lost sight of its core values. This is because, as Wooten and White (1999) argue, the core values of OD – equality, empowerment, consensus- building and horizontal relationships – are ones that are particularly relevant to the postmodern organisation. If this is the case, rather than loosening its ties with its tra- ditional values in order to retain its relevance, OD should be strengthening them in order to create the ‘framework for a postmodern OD science and practice’ (Wooten and White, 1999: 17).
  • 292. The Planned approach to organisational change 279 ■ Planned change: summary and criticisms Planned change, as developed by Kurt Lewin, comprised four elements: field theory, Group Dynamics, Action Research and the Three-Step model. It is an iterative, cycli- cal, process involving diagnosis, action and evaluation, and further action and evaluation. It is an approach that recognises that once change has taken place, it must be self-sustaining (i.e. safe from regression). The original purpose of Planned change was to resolve social conflict in society, including conflict within organisations. In organisational terms, it has come to focus on improving the effectiveness of the human side of the organisation. Central to Planned change in organisations is the emphasis placed on the collaborative nature of the change effort: the organisation, both managers and recipients of change, and the consultant jointly diagnose the organisation’s problem, and jointly plan and design the specific changes. Underpinning Planned change and indeed the OD movement is a strong humanist and democratic orientation and an emphasis on organisational effectiveness. Nevertheless, as OD practitioners have developed Planned change over the years, although the emphasis on organisational effectiveness has remained, a difference has emerged with regard to the participatory and democratic nature of its approach. This is particularly the case with the role of the change consultant. Lewin stressed the need to solve problems through social action (dialogue). He believed that successful change could only be achieved through the active participation of the change adopter (the subject) in understanding the problem, selecting a solution and implementing it. Lewin, and the early OD practitioners, saw the change agent as a facilitator, not a director or a doer. More important even than the solution to the problem, Lewin believed that the consultant’s real task was to develop those involved, and to create a learning environment that would allow them to gain new insights into themselves and their circumstances. Only through this learning process could people willingly come to see the need for and accept change. Bullock and Batten’s model, as with other more recent variants of Planned change, gives the consultant a more directive and less developmental role. Their model seems to place a greater emphasis on the consultant as an equal partner rather than as a facilitator; the consultant is as free to direct and do as the others involved. Those involved are more dependent on the change agent, not just for his or her skills of analysis but also for providing solutions and helping to implement them. Therefore, the focus is on what the change agent can do for those involved, rather than on seek- ing to enable the subjects to change themselves. This tendency for consultants to have a more directive role, and for employees to have a less participatory one, has become even more pronounced as OD practitioners have shifted their focus from individuals and groups to organisations in their entirety. Lewin’s approach to change was greatly influenced by the work of the Gestalt-Field theorists, who believe that successful change requires a process of learning. This allows those involved to gain or change insights, outlooks, expectations and thought patterns. This approach seeks to provide change adopters with an opportunity to ‘reason out’ their situation and develop their own solutions (Bigge, 1982). The danger with Bullock and Batten’s approach, and certainly later developments in OD, is that they appear to be moving more in the Behaviourist direction. As French and Bell (1995: 351) observed, from the 1980s onwards, there has been a growing tendency
  • 293. 280 Chapter 8 · Approaches to change management for top managers to focus less on people-orientated values and more on ‘the bottom line and/or the price of stock … [consequently] some executives have a “slash and burn” mentality’. Clearly, this tendency is not conducive to the promotion of demo- cratic and humanistic values. Instead, the emphasis is on the consultant as a provider of expertise that the organisation lacks. The consultant’s task is not only to facilitate but also to provide solutions. The danger in this situation is that the learner (the change adopter) becomes a passive recipient of external and, supposedly, objective data: one who has to be directed to the ‘correct’ solution. Reason and choice do not enter into this particular equation; those involved are shown the solution and motivated, through the application of positive reinforcement, to adopt it on a permanent basis (Skinner, 1974). This appears to be especially the case with the newer, organisation-wide and transformational approaches about which even supporters of OD admit there is some confusion (Cummings and Worley, 1997). Therefore, the move away from its original focus and area of expertise, i.e. the human processes involved in the functioning of individuals and groups in organisations, coupled with a more hostile business environment, appear to be eroding the values which Lewin and the early pioneers of OD saw as being central to successful change. As might be expected, these developments in OD, as well as newer perspectives on organisations, have led many to question not only particular aspects of the Planned approach to change but also the utility and practicality of the approach as a whole. The main criticisms levelled against the Planned approach to change are, according to Burnes and Salauroo (1995) as follows. Firstly, as Wooten and White (1999: 8) observe, ‘Much of the existing OD technol- ogy was developed specifically for, and in response to, top-down, autocratic, rigid, rule-based organizations operating in a somewhat predictable and controlled environ- ment’. Arising from this is the assumption that, as Cummings and Huse (1989: 51) pointed out, ‘an organization exists in different states at different times and that planned movement can occur from one state to another’. An increasing number of writers, however, especially from the complexity perspective, argue that, in the turbu- lent and chaotic world in which we live, such assumptions are increasingly tenuous and that organisational change is more a continuous and open-ended process than a set of discrete and self-contained events (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Brown and Eisenhardt, 1997; Garvin, 1993; Kanter et al, 1997; Peters, 1997a; Stacey, 2003). Secondly, and on a similar note, a number of writers have criticised the Planned approach for its emphasis on incremental and isolated change and its inability to incor- porate radical, transformational change (Dawson, 1994; Dunphy and Stace, 1993; Harris, 1985; Miller and Friesen, 1984; Schein, 1985; Pettigrew, 1990a, 1990b). Thirdly, the Planned change approach is seen as being based on the assumption that common agreement can be reached, and that all the parties involved in a particu- lar change project have a willingness and interest in doing so (Dawson, 1994; Hatch, 1997; Wilson, 1992). This assumption appears to ignore organisational conflict and politics, or at least assumes that problem issues can be easily identified and resolved. However, given what was said of organisational power, politics and vested interests in Chapter 5, such a view is difficult to substantiate. Also, as Stace and Dunphy (1994) have shown, there is a wide spectrum of change situations, ranging from fine-tuning to corporate transformation, and an equally wide range of ways of managing these,
  • 294. The frequency and magnitude of organisational change 281 ranging from collaborative to coercive. Though Planned change may be suitable to some of these situations, it is clearly much less applicable to situations where more directive approaches may be required, such as when a crisis, requiring rapid and major change, does not allow scope for widespread involvement or consultation. Fourthly, it assumes that one type of approach to change is suitable for all organi- sations, all situations and all times. Dunphy and Stace (1993: 905), on the other hand, argue that: Turbulent times demand different responses in varied circumstances. So managers and consult- ants need a model of change that is essentially a ‘situational’ or ‘contingency model’, one that indicates how to vary change strategies to achieve ‘optimum fit’ with the changing environment. In supporting and adding to this list of criticisms, many writers have drawn attention to the increasing frequency and magnitude of change and, whilst the Planned approach may be applicable to incremental change, it is less relevant to larger-scale and more radical transformational changes that many organisations have undergone or are experiencing (Brown and Eisenhardt, 1997; Hayes, 2002). The same can be said in relation to the three schools of thought which provide the heoretical underpin- nings of organisational change that were discussed at the beginning of this chapter. Planned change is certainly applicable to the individual and group context, but seems less appropriate for system-wide change. Leading OD advocates, as might be predicted, dispute these criticisms and point to the way that Planned change has tried to incorporate issues such as power and poli- tics and the need for organisational transformation (Cummings and Worley, 1997; French and Bell, 1995). Also, as Burnes (1998b) argues, there is a need to draw a dis- tinction between Lewin’s original analytical approach to Planned change and the more prescriptive and practitioner-orientated variants that have been developed by the OD profession subsequently. In defence of Lewin, Burnes (2004) points out that Lewin did not ignore the importance of power and politics, nor did he fail to recog- nise that change could be fast and dramatic. In particular, Burnes argues that Lewin did not see organisations as stable and changeless entities, but that his view was not dissimilar to that of many of his critics. As already mentioned, a number of propo- nents of complexity theory have also made similar observations. This is a point which will be returned to towards the end of the next chapter. Nevertheless, even taking these points into account, it has to be recognised that Lewin never saw Planned change as being applicable to all change situations, and it was certainly never meant to be used in situations where rapid, coercive and/or wholesale change was required. Nevertheless, from the late 1970s onwards, the incremental, small-group view of change favoured by Lewin and his supporters began to be replaced by one which saw change as being more frequent and of greater magnitude. The frequency and magnitude of organisational change As has been mentioned often in this book, the view which many leading commentators take is that organisations are changing at a faster pace and in a more fundamental way than ever before (Kanter et al, 1997; Kotter, 1996; Peters, 1997a). These commenta- tors judge the present level of organisational change to be unprecedented, although –
  • 295. 282 Chapter 8 · Approaches to change management as Chapter 6 noted – the history of the past 200 years could well be characterised as successive periods of unprecedented change. Obviously, an appreciation of whether organisational change is to be a continuing feature or a one-off event and whether it is on a small or large scale play a key role in judging the appropriateness of particular approaches to managing change. It is, therefore, important to go beyond the tabloid- like headlines thrown up by writers such as Tom Peters and to examine the main models of organisational change that are currently being promoted and, also, to recog- nise that there are strong disagreements about the nature and pace of change that organisations experience. In this respect, there are three current models that are promi- nent in the literature. ■ The incremental model of change Advocates of this view see change as being a process whereby individual parts of an organisation deal incrementally and separately with one problem and one goal at a time. By managers responding to pressures in their local internal and external envi- ronments in this way, over time, their organisations become transformed. As Miller and Friesen (1984: 222) state: The incrementalist perspective on change has been around a, relatively, long time. It stems from the work of Lindblom (1959) and Cyert and March (1963), and was further developed by Hedberg et al (1976) and especially Quinn (1980b and 1982). Quinn argues that strate- gic change is best viewed as ‘muddling through with purpose,’ using a continuous, evolving and consensus building approach. As Pettigrew et al (1992: 14) note, ‘The received wisdom therefore is that change will take place through successive, limited and negotiated shifts’. Though Quinn (1980b, 1982) and others have marshalled considerable support for the incrementalist per- spective from Western sources, and though Planned change sits very comfortably with this view, in recent years the pre-eminent exemplars of incremental change have been Japanese companies (Hamel and Prahalad, 1989). As described in Chapter 3, Japanese companies have an enviable track record of achieving fierce competitiveness through pursuing incremental change year in, year out. Dunphy and Stace (1992) also advocated this approach for Western companies, arguing for a form of managed incrementalism that avoids both the stagnation engendered by fine-tuning and the brutality associated with rapid corporate transformations. However, as Mintzberg (1978) argued, though organisations do go through long periods of incremental change, these are often interspersed with brief periods of rapid and revolutionary change. Indeed, given the turbulence of the last 20 years, some writers have argued that it is now the periods of stability which are brief and the revolutionary change periods which are long, at least in Western firms (Handy, 1989). Not surprisingly, this has led to an increased interest in how organisations move between periods of stabil- ity and instability.
  • 296. The frequency and magnitude of organisational change 283 ■ The punctuated equilibrium model of organisational transformation This somewhat inelegantly-titled approach to change: … depicts organizations as evolving through relatively long periods of stability (equilibrium periods) in their basic patterns of activity that are punctuated by relatively short bursts of fundamental change (revolutionary periods). Revolutionary periods substantively disrupt established activity patterns and install the basis for new equilibrium periods. (Romanelli and Tushman, 1994: 1141) The punctuated equilibrium model is associated with the work of Miller and Friesen (1984), Tushman and Romanelli (1985), and Gersick (1991). The inspiration for this model arises from two sources: first, from the challenge to Charles Darwin’s gradual- ist model of evolution in the natural sciences: Steven Jay Gould (1989), in particular, mounted a case for a punctuated equilibrium model of evolution; and second, from the assertion that whilst most organisations do appear to fit the incrementalist model of change for a period of time, there does come a point when they go through a period of rapid and fundamental change (Gersick, 1991). Though this view began to take hold in the 1980s, it is by no means new. In the 1970s, Greiner (1972) observed that as organisations grow, they go through long periods of evolutionary change and short, sharp bursts of revolutionary change. Indeed, Lewin made a similar observa- tion in the 1940s (Lewin, 1947a; Kippenberger, 1998a). However, as even Romanelli and Tushman (1994: 1142) admit, ‘Despite the growing prominence and pervasive- ness of punctuated equilibrium theory, little research has explored the empirical validity of the model’s basic arguments.’ This has led some to reject both the incre- mental and punctuated models of change (Brown and Eisenhardt, 1997). ■ The continuous transformation model of change The argument put forward by proponents of this model is that, in order to survive, organisations must develop the ability to change themselves continuously in a funda- mental manner. This is particularly the case in fast-moving sectors such as retail where, as Greenwald (1996: 54) notes, ‘If you look at the best retailers out there, they are con- stantly reinventing themselves.’ Brown and Eisenhardt (1997: 1) maintain that: For firms such as Intel, Wal-Mart, 3M, Hewlett-Packard and Gillette, the ability to change rapidly and continuously, especially by developing new products, is not only a core compe- tence, it is also at the heart of their cultures. For these firms, change is not the rare, episodic phenomenon described by the punctuated equilibrium model but, rather, it is endemic to the way these organizations compete. Moreover, in high-velocity industries with short product cycles and rapidly-shifting competitive landscapes, the ability to engage in rapid and relent- less continuous change is a crucial capability for survival … The underpinning rationale for the continuous transformation model is that the environment in which organisations operate is changing, and will continue to change, rapidly, radically and unpredictably. Only by continuous transformation will organi- sations be able to keep aligned with their environment and thus survive. Though this
  • 297. 284 Chapter 8 · Approaches to change management view has many adherents, there are two groups who are its main promoters. The first is the Culture–Excellence school. This group, especially Tom Peters (1997a, 1997b) and Rosabeth Moss Kanter et al (1997), have been arguing for a continuous transfor- mation model of change since the early 1980s. However, as noted in Chapter 3, they provide little solid empirical evidence to support their view. The second group are those who seek to apply complexity theories to organisations. As described in Chapter 4, complexity theories are concerned with the emergence of order in dynamic non- linear systems operating at the edge of chaos: in other words, systems that are constantly changing and where the laws of cause and effect appear not to apply (Beeson and Davis, 2000; Haigh, 2002; Wheatley, 1992b). Order in such systems man- ifests itself in a largely unpredictable fashion, in which patterns of behaviour emerge in irregular but similar forms through a process of self-organisation, which is governed by a small number of simple order-generating rules (Black, 2000; MacIntosh and MacLean, 2001; Tetenbaum, 1998). Many writers have argued that organisations are also complex systems which, to survive, need to operate at the edge of chaos and have to respond continuously to changes in their environments through just such a process of spontaneous self-organising change (Hayles, 2000; Lewis, 1994; Macbeth, 2002; MacIntosh and MacLean, 1999, 2001; Stacey, 2003; Stickland, 1998). The problems with this perspective, as Stickland (1998) shows, are that (a) it is not clear that one can readily apply theories from the physical sciences to the social sci- ences, as is demonstrated by the fact that even proponents of its use in the social sciences are equivocal on this point; and (b) there is little strong evidence to support the complexity view. Nevertheless, as the next chapter will show, there is growing support for both the continuous transformation and punctuated-equilibrium models. In turn this has led to a search for what are seen as more appropriate approaches to change than the one offered by Lewin and the OD movement. Conclusions This chapter began by examining the theoretical foundations of change management and it was argued that in judging the applicability of approaches to managing change, one should assess whether they apply to individual, group or system-wide change. The chapter then proceeded to examine the origins and development of the Planned approach to change, which dominated the theory and practice of change management from the 1940s to the 1980s. It was shown that the foundations of Planned change were laid by Kurt Lewin. After his death, however, it was taken up, and over time significantly modified, by the Organization Development movement in the USA. In terms of organisational change, the Planned approach focused upon resolving group conflicts and improving group performance by bringing together managers, employees and a change consultant. Through a process of learning, those involved gain new insights into their situation and are thus able to identify more effective ways of working together. Advocates of Planned change, especially the ear- lier ones, believe that group learning and individual development are at least as important as the actual change process itself. This, in part, arises from the humanist and democratic values that underpin Planned change and which derive from Kurt Lewin’s background and beliefs.
  • 298. Test your learning 285 Under the auspices of Organization Development, however, the influence of these values has lessened. The focus of Planned change has moved from conflict resolution to performance enhancement, as Organization Development has grown into a thriv- ing consultancy industry aimed almost exclusively at resolving problems within client organisations. Therefore, as was the case with the approaches to strategy discussed in Chapters 6 and 7, it is possible to draw a distinction between those proponents of Planned change, especially Lewin and early OD pioneers, who take an analytical approach, and those who take a more prescriptive approach, especially those whose livelihood depends upon their selling their services as change consultants. In the 1960s and 1970s, Planned change, with its increasing array of tools, tech- niques and practitioners, became the dominant approach to managing organisational change. From the 1980s onwards, however, Planned change has faced increasing levels of criticism, the main ones relating to its perceived inability to cope with radi- cal, coercive change situations or ones where power and politics are dominant. In its defence, as described earlier, there are proponents of Planned change who would argue that these criticisms are not valid, that it is a more flexible and holistic approach than its detractors would acknowledge, and that it is capable of incorporat- ing transformational change (Cummings and Worley, 2001; French and Bell, 1995; McLennan, 1989; Mirvis, 1990). There are also those who believe that many of the criticisms of Lewin’s work are misplaced (Burnes, 2004). Nevertheless, partly as a consequence of these criticisms of the Planned approach, and partly in the context of newer perspectives on change such as the punctuated-equilibrium and continuous transformation models, new approaches to change have been gaining ground in recent years, one of which in particular has come to dominate the literature. Though aspects of it have been given a number of different labels, such as continuous improvement or organisational learning, it is more often referred to as the Emergent approach to change. The Emergent approach tends to see change as driven from the bottom up rather than from the top down; it stresses that change is an open-ended and continuous process of adaptation to changing conditions and circumstances; and it also sees the process of change as a process of learning, and not just a method of changing organisational structures and practices (Dawson, 1994; Mabey and Mayon- White, 1993; Wilson, 1992). Therefore, the next chapter will examine the principles and merits of the Emergent approach to change. Test your learning ■ Short answer questions 1 What are the main theoretical foundations of change management? 2 What are the key differences between the main theoretical foundations of change man- agement? 3 How did Kurt Lewin define the term ‘Planned change’? 4 How do contemporary OD practitioners define Planned change?
  • 299. 286 Chapter 8 · Approaches to change management 5 What are the ethical principles which underpin Planned change? 6 What are the main criticisms of the Planned approach? 7 Evaluate the validity of the main criticisms of Planned change. 8 Discuss the implications of the Planned approach for managerial behaviour. ■ Essay questions 1 What was Kurt Lewin’s main contribution to change management? 2 How has the OD movement sought to update its approach to organisational change? To what extent has it been successful? Suggested further reading 1 Burnes, B (2004) Kurt Lewin and the Planned approach to change: a re-appraisal. Journal of Management Studies, 41(6). Marrow, AJ (1969) The Practical Theorist: The Life and Work of Kurt Lewin. Teachers College Press (1977 edition): New York. Taken together, the article and the book provide a comprehensive examination of Lewin’s life and work. 2 Cummings, TG and Worley, CG (2001) Organization Development and Change (7th edi- tion). South-Western College Publishing: Mason, OH, USA. French, WL and Bell, CH (1995) Organization Development (5th edition). Prentice Hall: Englewood Cliffs, NJ, USA. These two books provide a comprehensive guide to the origins and practices of OD.
  • 300. Chapter 9 Developments in change management The Emergent approach and beyond Learning objectives After studying this chapter, you should be able to: ■ list the reasons for the decline in popularity of the Planned approach to change; ■ discuss the main elements of the Emergent approach to change; ■ describe the processualist approach to change; ■ explain the implications of complexity theories for organisational change; ■ state the strengths and weaknesses of the Emergent approach; ■ understand how Emergent change can be applied in practice; ■ appreciate the role of the change agent.
  • 301. 288 Chapter 9 · Developments in change management Exhibit 9.1 Continuous change at Citigroup Weill wields his power at Citigroup: revamp represents FT ongoing structural changes Citigroup has proved itself an earnings powerhouse addressing a more recent concern – the admitted since the company was formed by the 1998 merger failure of Citigroup’s risk management systems to between Sandy Weill’s Travelers and John Reed’s anticipate the severity of the Argentine financial Citicorp. However, Citigroup’s announcement this crisis. The emerging markets group is being disman- week of a management reshuffle – the latest in a tled as part of the latest revamp and Victor Menezes, series of such exercises – is a reminder that for all its leader, is being shifted into a strategic role. At the the company’s success, it remains a work in same time, Mr Weill is making often subtle changes progress in a structural sense. The upheaval is not in the roles of several other executives who occupy necessarily a bad thing. Mr Weill, the chairman and positions just below his in the Citigroup structure. chief executive, is famously unsentimental about his Analysts said the changes were less indicative of a businesses and he has shown an ability over the shift in the balance of power – or the anointment of decades to redeploy capital – and executives – to a successor – than a demonstration of Mr Weill’s increase profits. But the repeated changes in the continuing command. For example, Deryck chain of command at Citigroup also underscore the Maughan, who negotiated the sale of Salomon difficulty of running such a vast enterprise and are Brothers to Travelers in 1997 and has since become sure to reinforce anxieties about what will happen to a close aide to Mr Weill, will be given oversight of all the company when Mr Weill, 69, finally leaves. ‘They five of Citigroup’s international regions. But Mr have had several restructurings in a not very long Maughan’s authority could be tempered by the period,’ said Michael Mayo, Prudential Securities greater global role assigned to the leaders of banking analyst. ‘With a firm this complex, I think we Citigroup’s product lines – Bob Willumstad, con- are finding that the need for more management sumer banking; Michael Carpenter, investment reorganisations goes up.’ Making sense of the latest banking; and Tom Jones, investment management. reshuffle is tricky because Mr Weill is doing several Mr Willumstad, who was named president in January things at the same time. Broadly speaking, the – filling a post that has been left open since Jamie revamp represents a fine-tuning of Citigroup’s efforts Dimon, Mr Weill’s heir apparent, was fired in 1998 – to create a workable ‘matrix’ structure – allowing for will also gain power in some areas and lose it in management along product and geographical lines. others. As a product leader, Mr Willumstad will have As arcane as that sounds, it is a crucial issue for Mr greater global responsibilities. But at the same time Weill. A big reason he merged his company with Mr he will cede authority for finance and human Reed’s was to find ways to sell more Travelers prod- resources to Chuck Prince, Mr Weill’s trusted chief ucts outside the US, using Citicorp’s wealth of operating officer, who is also being given the crucial overseas connections. This week’s changes were job of looking after risk management. At Citigroup, in described by Mr Weill as an attempt ‘to create a other words, the situation is still status quo: Mr Weill more open matrix’, giving product executives more giveth and Mr Weill taketh away. global power and pushing geographical managers to help identify opportunities. In the process, Mr Weill is Source: Gary Silverman, Financial Times, 13 June 2002, p. 30. Introduction As the case of Citigroup shows (see Exhibit 9.1), organisations today are seen less and less as stable and enduring institutions, and more and more as ‘work in progress’ sub- ject to continuing and continuous change. Chapter 8 described how the Planned approach to change dominated the theory and practice of change management from
  • 302. The case against the Planned approach to organisational change 289 the late 1940s to the early 1980s. Since then, however, the Emergent approach, which starts from the assumption that change is a continuous, open-ended and unpre- dictable process of aligning and re-aligning an organisation to its changing environment, has taken over from the Planned approach as the dominant approach to change. Advocates of Emergent change argue that it is more suitable to the turbulent environment in which firms such as Citigroup operate because, unlike the Planned approach, it recognises that it is vital for organisations to adapt their internal prac- tices and behaviour in real-time to changing external conditions. Furthermore, and just as importantly, it sees change as a political process whereby different groups in an organisation struggle to protect or enhance their own interests. This chapter begins by presenting the case against the Planned approach. It then goes on to examine the main arguments for, and characteristics of, Emergent change, including those put forward by complexity theorists. This will show that, although they do not always agree with each other, the advocates of Emergent change are united by the emphasis they place on organisational structure, culture and learning, and their perspective on managerial behaviour and the role of power and politics in the change process. Following this, the chapter presents the recipes for change put forward by proponents of Emergent change. It then goes on to examine the different perspectives on and the role of change agents. In summarising the Emergent approach, it is argued that, though it has a number of distinct strengths, like Planned change it is a flawed and partial approach to change. In conclusion, it is argued that despite the large body of literature devoted to the topic of change management, and the many tools and techniques available to change agents, there is considerable debate and little agreement regarding the most appropriate approach. Though it is clear that neither the Emergent approach nor the Planned approach is suitable for all situations and circumstances. The case against the Planned approach to organisational change As was shown in Chapter 8, the Planned approach to change has been, and remains, highly influential. It is still far and away the best developed, documented and sup- ported approach to change. This is because of the custodianship of the Organization Development movement in the USA. OD has taken Kurt Lewin’s original concept of Planned change and turned it into a thriving consultancy industry with its own stan- dards, accreditation procedures and membership (Cummings and Worley, 1997). In doing so, Lewin’s conception of Planned change as applying to small-group, human- centred change has been extended to include organisation-wide change initiatives. This has led to some confusion between Planned (participative) change as promoted by the OD movement and Planned (transformational) change as promoted by some elements of the strategic planning movement (Beer and Nohria, 2000; Mintzberg et al, 1998). This section, following on from the previous chapter, is concerned with the Planned approach to change as promoted by Lewin and the OD movement and which, from the late 1940s to the early 1980s, was the dominant approach to change, especially in the USA. Nevertheless, as shown in Chapter 8, from the early 1980s onwards, it has faced increasing levels of criticism as to its appropriateness and efficacy, especially in terms of its ability to cope with continuous change, its emphasis on incremental
  • 303. 290 Chapter 9 · Developments in change management change, its neglect of organisational conflict and politics, and its advocacy of a ‘one best way’ approach to change. It was the rise of Japanese competitiveness and the apparent eclipse of Western industry in the late 1970s that precipitated the questioning of existing approaches to structuring, managing and changing organisations (e.g. Pascale and Athos, 1982; Peters and Waterman, 1982). The proponents of Culture–Excellence were the most vociferous critics of the existing order, arguing that Western organisations were bureaucratic, inflexible and stifled innovation. Their view of Planned change is, prob- ably, best summed up by Kanter et al’s (1992: 10) scathing comment that: Lewin’s model was a simple one, with organizational change involving three stages; unfreez- ing, changing and refreezing … This quaintly linear and static conception – the organization as an ice cube – is so wildly inappropriate that it is difficult to see why it has not only sur- vived but prospered. … Suffice it to say here, first, that organizations are never frozen, much less refrozen, but are fluid entities with many ‘personalities’. Second, to the extent that there are stages, they overlap and interpenetrate one another in important ways. In place of Lewin’s ‘wildly inappropriate’ model of change, the Culture–Excellence proponents have called, as described in Chapter 3, for organisations to adopt flexible cultures that promote innovation and entrepreneurship and encourage bottom-up, flexible, continuous and cooperative change. However, Culture–Excellence advocates recognised that top-down coercion, and rapid transformation, might also be neces- sary to create the conditions in which this type of approach could flourish. At the same time, other new perspectives on organisations, especially concerning the role of power and politics in decision-making, were also coming to the fore. As Chapter 5 argued, writers such as Jeffrey Pfeffer (1981, 1992) maintained that the objectives, and outcomes, of change programmes were more likely to be determined by power struggles than by any process of consensus-building or rational decision- making. This paved the way for the development of a processual approach to organisational change, which highlights the continuous, unpredictable and political nature of change (Dawson, 1994; Pettigrew, 1985, 1993; Wilson, 1992). Looking at Planned change versus a processual approach, Dawson (1994: 3–4) comments that: Although this [Lewin’s] theory has proved useful in understanding planned change under relatively stable conditions, with the continuing and dynamic nature of change in today’s business world, it no longer makes sense to implement a planned process for ‘freezing’ changed behaviours. Implementing stability and reinforcing behaviour which conforms to a rigid set of procedures for new work arrangements does not meet the growing requirements for employee flexibility and structural adaptation to the unfolding and complex nature of ongoing change processes. … The processual framework … adopts the view that change is a complex and dynamic process which should not be solidified or treated as a series of linear events. … central to the development of a processual approach is the need to incorporate an analysis of the politics of managing change.
  • 304. The Emergent approach to change 291 For the postmodernists (see Alvesson and Deetz, 1996; Foucault, 1983; Gergen, 1992), power is also a central feature of change, but it arises from the socially- constructed nature of organisational life: In a socially-constructed world, responsibility for environmental conditions lies with those who do the constructing. … This suggests at least two competing scenarios for organiza- tional change. First, organization change can be a vehicle of domination for those who conspire to enact the world for others … An alternative use of social constructionism is to create a democracy of enactment in which the process is made open and available to all … such that we create opportunities for freedom and innovation rather than simply for fur- ther domination. (Hatch, 1997: 367–8) As can be seen, from the early 1980s, a powerful consensus built up against the Planned approach to change. It is a consensus, however, that criticises Planned change from very different perspectives: ranging from the free market neo-liberalism of Tom Peters to the neo-Marxism of some of the postmodernists. Therefore, they are certainly a much less coherent group than the advocates of Planned change and, rather than being united by a shared belief, they tend to be distinguished by a common disbelief in the efficacy of Planned change. Nevertheless, they do share at least two common beliefs: firstly, instead of seeing change as a phenomenon that can be pre-planned and has a finite end point, they see change as an ‘emerging’ and ongoing process of organi- sational adaptation and transformation. Secondly, they adopt an open systems perspective. That is, they see individual organisations as interdependent parts or sub- systems of a much larger environment, though they disagree about whether the environment is a concrete reality or a socially constructed phenomenon. The environ- ment impacts upon and affects the actions and decisions of organisations, but they also impact on the environment. Proponents of the Emergent approach see change as emerging from the day-to-day actions and decisions of members of an organisation. In this sense, change can emerge from attempts by members of organisations to align the organisation with its environment, or as the result of different groups battling for dom- ination, or even from attempts to construct a new, or challenge an old, social reality. Having identified what separates it from the Planned approach to change, we can now move on to examine the Emergent approach in more detail. The Emergent approach to change For proponents of the Emergent approach, change is a continuous, dynamic and con- tested process that emerges in an unpredictable and unplanned fashion. As Weick (2000: 237) states: Emergent change consists of ongoing accommodations, adaptations, and alternations that produce fundamental change without a priori intentions to do so. Emergent change occurs when people reaccomplish routines and when they deal with contingencies, breakdowns, and opportunities in everyday work. Much of this change goes unnoticed, because small alternations are lumped together as noise in otherwise uneventful inertia ...
  • 305. 292 Chapter 9 · Developments in change management The rationale for the Emergent approach stems, according to Hayes (2002: 37), from the belief that: … the key decisions about matching the organisation’s resources with opportunities, con- straints and demands in the environment evolve over time and are the outcome of cultural and political processes in organisations. In terms of Emergent change, a process is ‘a sequence of individual and collective events, actions, and activities unfolding over time in context’ (Pettigrew, 1997: 338). For Wilson (1992), it is the increasingly dynamic and uncertain nature of the business environment that undermines the case for Planned change and underlines the appro- priateness of the Emergent approach. Wilson (1992) also believes that the Planned approach, by attempting to lay down timetables, objectives and methods in advance, is too heavily reliant on the role of managers, and assumes (perhaps rashly) that they can have a full understanding of the consequences of their actions and that their plans will be understood and accepted and can be implemented. In addition, Dawson (2003) contends that even in stable situations, change is emergent, messy and unpre- dictable. Similarly, Buchanan and Storey (1997: 127) maintain that the main criticism of those who advocate Planned change is: ... their attempt to impose an order and a linear sequence to processes that are in reality messy and untidy, and which unfold in an iterative fashion with much backtracking and omission. One of the main strands of the Emergent approach is provided by processual ana- lysts, deriving from the work of Andrew Pettigrew (1973, 1979, 1985, 1990a, 1990b, 1997, 2000). Processualists reject prescriptive, recipe-driven approaches to change and are suspicious of single causes or simple explanations of events. Instead, when studying change, they focus on the interrelatedness of individuals, groups, organisations and society (Dawson, 2003; Pettigrew and Whipp, 1993). In particular, they claim that the process of change is a complex and untidy cocktail of rational decision processes, indi- vidual perceptions, political struggles and coalition-building (Huczynski and Buchanan, 2001). Within this complex and untidy cocktail, processualists recognise ‘the importance of planning for change’ and the presence of ‘processes of continuity’; they also recognise, however, that these are constrained and influenced by ‘the complex untidy and messy nature of change’ (Dawson, 2003: 25). The elaborateness of their view of change is shown by Pettigrew (1997: 340) who states that processualists pursue their work through five internally-consistent guiding principles, as follows: 1 embeddedness, studying processes across a number of levels of analysis; 2 temporal interconnectedness, studying processes in past, present and future time; 3 a role in explanation for context and action; 4 a search for holistic rather than linear explanations of process; and 5 a need to link process analysis to the location and explanation of outcomes. For Pettigrew, change cuts across functions, spans hierarchical divisions, and has no neat starting or finishing point; instead it is a ‘complex analytical, political, and cultural process of challenging and changing the core beliefs, structure and strategy of the firm’ (Pettigrew, 1987: 650).
  • 306. The Emergent approach to change 293 The Emergent approach, therefore, stresses the developing and unpredictable nature of change. It views change as a process that unfolds through the interplay of multiple variables (context, political processes and consultation) within an organisa- tion. In contrast to the pre-ordained certainty of Planned change, Dawson (2003) in particular adopts a processual approach to change that is less prescriptive and more analytical and, he argues, better able to achieve a broader understanding of the prob- lems and practice of managing change within a complex environment. This processual approach to change is akin to the processual approach to strategy discussed in Chapter 6. Advocates of Emergent change who adopt this perspective tend to stress that there can be no simple prescription for managing organisational transitions successfully, owing to time pressures and situational variables. Neither, as Dawson (1994: 181–2) argued, can change be represented as ‘the results of objective rational decision-making on the part of managers. … [nor] as a single reaction to adverse contingent circumstances’. Therefore, successful change is less dependent on detailed plans and projections than on reaching an understanding of the complexity of the issues concerned and identifying the range of available options. Processualists also stress the central role played by power and politics in initiating and managing change (Pettigrew, 1997). This point is further emphasised by the postmodernists, for whom the struggle for power and domination is the central feature of change in organisations (Hassard, 1993; Hatch, 1997). As Finstad (1998) notes, however, the difference is that, for the processualists, the political nature of change tends to close off options, whereas for the postmodernists, the presence of conflicting interests gives people a range of new possibilities and ideas to choose from. Despite their difference in emphasis, proponents of the Emergent approach do agree that power and politics play an important role in the process of organisational change. This is a major point of departure between them and proponents of Planned change. In commenting on the failure to incorporate the political nature of change into the traditional and more prescriptive literature on change, Hardy (1996) argues that this ‘aversion’ to discussing power has restricted our understanding of change and impeded our ability to manage it effectively. Pugh (1993) makes a similar point by emphasising that organisations are occupational systems and political systems as well as systems for allocating resources through rational decision-making. He also argues, however, that members of an organisation operate in all three systems simul- taneously and, therefore, the rational and occupational systems need to be considered alongside, and not subordinate to, the political system. This clearly conflicts with the processualists who see the political system as being paramount. Moving on to examine the change process itself, the Emergent perspective rejects both simple taxonomies of change, and approaches such as TQM and BPR, which promise success through following a series of laid-down steps and stages (Beer and Nohria, 2000; Collins, 1998). According to Stace and Dunphy (2001: 5): The appealing aspect of the promises held out for these change technologies is that they can absolve the manager from the onerous task of critically reviewing the full range of other competing approaches or devising a custom-made program. They cut through complexity. However, the offer is often illusory, for particular change approaches usually apply to par- ticular situations, and simple solutions sometimes ignore the complexity of real life.
  • 307. 294 Chapter 9 · Developments in change management Dawson (2003) sees change as: … a complex ongoing dynamic in which the politics, substance and context of change all interlock and overlap, and in which our understanding of the present and expectations of the future can influence our interpretation of past events, which may in turn shape our experience of change. From this perspective, even when changes are operational, they will need to be con- stantly refined and developed in order to maintain their relevance. Genus (1998: 51) uses an ‘interpretive’ perspective to explain the messy nature of organisational change, arguing that the ‘ … various political, symbolic and structural factors [involved in the change process] condition the perceptions of individuals or groups … ’. Finstad’s (1998) view of organisational change, whilst being consistent with the perspectives of Dawson and Genus, does, however, appear to adopt a realist perspective on change by drawing an important distinction between the concrete elements of change, such as structures and practices, and the more symbolic elements, such as people’s basic under- standings and assumptions about their organisations. He maintains, though, that it is the symbolic aspects that dominate the change process rather than the more concrete changes. The importance of symbolism and ritual in the change process is also empha- sised by Schuyt and Schuijt (1998), who argue that the management of these is not only central to achieving successful change, but also plays a crucial role in reducing the uncertainty which change generates. It is because change is so complex and multifaceted that Carnall (2003) suggests that mastering the challenge of change is not a specialist activity to be facilitated or driven by an expert but an increasingly important part of every manager’s role. Carnall (2003: 125–6) proposes four core managerial competences that are essential for the effective management of change: decision-making; coalition-building; achiev- ing action; and maintaining momentum and effort. Stace and Dunphy (2001), on the other hand, identify a range of approaches to change and argue that these each require different sets of managerial competences. This view fits better with McCalman and Paton (1992) who suggest that, to be effective in creating sustainable change, managers will need an extensive and systemic understanding of their organi- sation’s environment, in order to identify the pressures for change and to ensure that, by mobilising the necessary internal resources, their organisation responds in a timely and appropriate manner. Similarly, Dawson (1994) claims that change must be linked to developments in markets, work organisation, systems of management control and the shifting nature of organisational boundaries and relationships. He emphasises that, in a dynamic business environment, one-dimensional change interventions are likely to generate only short-term results and heighten instability rather than reduce it. This is a point emphasised by many other writers (Beer and Nohria, 2000; Graetz et al, 2002; Hartley et al, 1997; Senior, 2002). As can be seen, though they do not always openly state it, advocates of Emergent change tend to adopt a Contingency perspective, arguing that approaches to change need to be tailored to the situation of the individual organisation. Implicit in their argu- ment is the assumption that if organisations operated in more stable and predictable environments, the need for change would be less and it might be possible to conceive of it as a process of moving from one relatively stable state to another. Consequently, for
  • 308. The Emergent approach to change 295 advocates of Emergent change, it is the uncertainty of the environment that makes Planned change inappropriate and Emergent change more pertinent. This is a point emphasised by Stickland (1998: 14), who draws on systems theory to emphasise the way that organisations are separate from but connected to their environment: A system has an identity that sets it apart from its environment and is capable of preserving that identity within a given range of environmental scenarios. Systems exist within a hierar- chy of other systems. They contain subsystems and exist within some wider system. All are interconnected ... From this systems perspective, Stickland (1998: 76) raises a question that many of those studying organisational change appear not to acknowledge: ‘To what extent does the environment drive changes within a system [i.e. organisation] and to what extent is the system in control of its own change processes?’ Finstad (1998: 721) puts this issue in a wider context by arguing that ‘the organization is … the creator of its environment and the environment is the creator of the organization.’ Though this has a postmodernist sound to it, realists would also recognise that organisations do con- tribute to the creation or the maintenance of their environment, but they see this as a long-term and largely unconscious process. This reciprocal relationship between an organisation and its environment clearly has profound implications for how organisations conceptualise and manage change. It also serves to emphasise that a key competence for organisations is the ability to scan the external environment in order to identify and assess the impact of trends and discontinuities (Graetz et al, 2002; McCalman and Paton, 1992; Pettigrew and Whipp, 1993). This involves exploring the full range of external variables, including markets and customers, shareholders, legal requirements, the economy, suppliers, technology, and social trends. This activity is made more difficult by the changing and arbitrary nature of organisation boundaries: customers can also be competitors; sup- pliers may become partners; and employees can be transformed into customers, suppliers or even competitors for scarce resources. To cope with this complexity and uncertainty, Pettigrew and Whipp (1993) main- tain that organisations need to become open learning systems, with strategy development and change emerging from the way the company as a whole acquires, interprets and processes information about its environment. Carnall (2003) and Hayes (2002) take a similar view, arguing that an organisation’s survival and growth depend on identifying environmental and market changes quickly, and responding opportunistically. This is in line with the discussion on organisational learning cov- ered in Chapter 3. However, as Benjamin and Mabey (1993: 181) point out: ... while the primary stimulus for change remains those forces in the external environment, the primary motivator for how change is accomplished resides with the people within the organization. Changes in the external environment, therefore, require organisations to make choices over how and when to respond. Such responses, the supporters of the Emergent approach state, should promote, throughout the organisation, an extensive and deep understanding of strategy, structure, systems, people, style and culture, and
  • 309. 296 Chapter 9 · Developments in change management how these can function either as sources of inertia that can block change, or alterna- tively, as levers to encourage an effective change process (Dawson, 2003; Pettigrew, 1997; Wilson, 1992). A concomitant development is the adoption of a ‘bottom-up’ rather than ‘top-down’ approach to initiating and implementing change. After all, there is little point in encouraging staff to identify change opportunities unless they are also encouraged to implement them. The case in favour of this move is based on the view that the pace of environmental change is so rapid and complex that it is impossible for a small number of senior managers effectively to identify, plan and implement the necessary organisational responses. The responsibility for organisa- tional change is therefore of necessity becoming more devolved. As described in Chapter 2, this is very much what the advocates of Contingency theory would expect in such a situation. Nevertheless, the need for a bottom-up approach does not just arise from external pressures. As Stickland (1998: 93) notes, organisations are continually experiencing ‘natural changes’, i.e. the unintended consequences of deliberate decisions and actions: Within any organisation at a given point in time there are a number of continual shifts and changes playing out at various levels. These are not planned changes with a defined begin- ning and end, but rather reflect the natural dynamics which take place internally. Such events may present organisations with unexpected and unlooked for opportuni- ties, such as new product ideas, but may also present unwelcome threats, such as the departure of key staff. Given that such changes are continually happening at all levels and across all functions, organisations would quickly become paralysed if it was left solely to senior managers to identify and resolve them. Therefore, if they are to be dealt with speedily, these local problems or opportunities have to be dealt with locally. As Senior (2002) comments, this requires organisations to empower their employees to make changes at a local level. This follows from Mintzberg’s (1994) assertion that it is from these local and bottom-up actions that the direction of the organisation emerges and is given shape. Therefore, a bottom-up approach requires a major change in the role of senior managers. Instead of controlling employees, they have to empower people. Instead of directing and controlling change, they have to ensure that the organisation’s members are receptive to, and have the necessary skills, motivation and power to take charge of, the change process. There is a distinction here between those who take a narrow view of empowerment, seeing it mainly as devolving some limited managerial respon- sibility, and those, à la Lewin, who see it as an emancipatory process that aims to create genuine organisational democracy, though it must be pointed out that even the former has a poor track record of success (Eccles, 1993; Foegen, 1999; Graetz et al, 2002; Huczynski and Buchanan, 2001; Lawler et al, 1998; Lee, 1999; Pfeffer, 1996; Stohl and Cheney, 2001; Wetlaufer, 1999). Nor is this just an issue of managers changing. Wilson (1992) believes that to achieve effective empowerment, senior man- agers must not only change the way they perceive and interpret the world, but achieve a similar transformation amongst everyone else in the organisation as well. Pettigrew and Whipp (1993) contend that the degree to which organisations can achieve such a difficult task, and create a climate receptive to change, is dependent on four condi- tioning factors:
  • 310. The Emergent approach to change 297 ■ the extent to which key players in the organisation are prepared to champion methods for gathering and assessing information on the organisation’s position that increase openness; ■ the degree to which such information-gathering occurs and how effectively it is integrated with central business operations; ■ the extent to which environmental pressures are recognised; ■ the structural and cultural characteristics of the organisation. As was described in Chapter 4, a wide range of organisational theorists and practi- tioners have argued that organisations are complex, non-linear systems in which change emerges through a process of spontaneous self-organisation, which is underpinned by a set of simple order-generating rules (Arndt and Bigelow, 2000; Bechtold, 1997; Black, 2000; Fitzgerald, 2002a; MacIntosh and MacLean, 2001; Stacey, 2003). The concept of self-organisation, as well as its implications for organisations, is very similar to the con- cept of Emergent change, especially in terms of the link between the emergent or self-organising nature of change and the need for greater organisational democracy. Complexity theorists argue that the best-run companies survive because they operate at the edge of chaos by relentlessly pursuing a path of continuous innovation brought about by a process that resembles self-organisation in nature (Brown and Eisenhardt, 1997; Frederick, 1998; Jenner, 1998). However, Beeson and Davis (2000) make the point that whilst it might be fruitful to see organisations as non-linear systems, to do so will require a fundamental shift in the role of management. Like many others (e.g. Boje, 2000; Stacey et al, 2002; Sullivan, 1998; Tetenbaum, 1998; Wheatley, 1992b), they point out that self-organising principles explicitly reject cause-and-effect, top-down, command-and-control styles of management. Brodbeck (2002) suggests that the belief by managers that order and control are essential to achieve their objectives should be rejected. For Tetenbaum (1998), the move to self-organisation will require managers to destabilise their organisations and develop the skill of managing order and disorder at the same time. Managers will need to encourage experimentation, divergent views, even allow rule-breaking, and recognise that ‘… people need the freedom to own their own power, think innovatively, and operate in new patterns’ (Bechtold, 1997: 198). Beeson and Davis (2000) echo this point and argue that, in such situations, change becomes an everyday event undertaken by all in the organisation. The implication of this for Bechtold (1997) is that organisations seeking to adopt a complexity approach will need to have a balanced distribution of power, strong cus- tomer focus, a strategy of continuous learning and an orientation towards community service. A further strand in this argument is provided by Kiel (1994), who argues that because small actions can have large and unpredictable consequences, individual human activity assumes great importance. Similarly, Jenner (1998) claims that for self-organisation to work, authority must be delegated to those who have access to the broadest channels of information that relate to the issue or problem concerned. Therefore, to all intents and purposes, the complexity approach to change lies firmly within the Emergent camp. As can be seen, the advocates of Emergent change come from a wide variety of backgrounds and each offers their own distinct view on how organisations should and should not manage change. As the following section will show, however, there are some core similarities which link them.
  • 311. 298 Chapter 9 · Developments in change management ■ The Emergent approach to successful change Though the proponents of the Emergent approach reject the concept of universally- applicable rules for change, the guidance they do provide tends to stress five features of organisations that either promote or obstruct success: structures, cultures, organi- sational learning, managerial behaviour, and power and politics. Organisational structure This is seen as playing a crucial role in determining where power lies, in defining how people relate to each other and in influencing the momentum for change (Carnall, 2003; Dawson, 2003; Hatch, 1997; Huczynski and Buchanan, 2001; Kotter, 1996). Crucially, as Galbraith (2000: 154) notes: ‘The theory of organization has always identified some types of [organisational structures] as being more easily changeable than others.’ Therefore, an appropriate organisational structure, in both its formal and informal elements, can be an important facilitator of change. The case for developing more appropriate organisational structures in order to facil- itate change very much follows the arguments of the Contingency theorists (discussed in Chapter 2) and the Culture–Excellence school (discussed in Chapter 3), i.e. that dynamic and chaotic environments require organisations to adopt more flexible, less hierarchical structures. Those favouring an Emergent approach to change point out that the 1990s witnessed a general tendency to create flatter organisational structures in order to increase responsiveness by devolving authority and responsibility (Senior, 2003). As Kotter (1996: 169) remarks, the case for such structural changes is that: An organization with more delegation, which means a flat hierarchy, is in a far superior position to manoeuvre than one with a big, change-resistant lump in the middle. A similar point is made by proponents of the complexity approach. For Jenner (1998: 402), the key issue is that: … enterprise must be organized into flexible basic units that permit new organizational struc- tures to be identified and to emerge, and which promote efficient exchanges of information. In studying innovating organisations, Brown and Eisenhardt (1997: 29) refer to such flexible structures as ‘semistructures’, which they claim: … are sufficiently rigid so that change can be organized, but not so rigid that it cannot occur. … sustaining this semistructured state is challenging because it is a dissipative equilibrium and so requires constant managerial vigilance to avoid slipping into pure chaos or pure structure. A similar point is made by Galbraith (2000: 155), who refers to the ‘reconfigurable’ organisation, which: … consists of a stable part and a variable part. The stable part consists of ‘homes’ for spe- cialists in functions, which also host generalists on rotating assignments. … The variable part of the structure consists of integrating mechanisms and networks across the functions.
  • 312. The Emergent approach to change 299 Brown and Eisenhardt (1997) claim that such structures are essential for ensuring organisational survival in highly-competitive environments because they facilitate continuous innovation and improvisation and allow intensive, real-time communica- tion within a structure of a few, very specific rules. A common aspect of these new structures is the move to create customer-centred organisations with structures that reflect, and are responsive to, different markets rather than different functions (Galbraith, 2000; Hamel and Prahalad, 1994; Stace and Dunphy, 2001). Customer responsiveness places greater emphasis on effective horizontal processes and embodies the concept that, whether one is looking internally or externally, everyone is someone else’s customer (Dale, 2003; Jenner, 1998). One result of attempts to respond rapidly to changing conditions by breaking down internal and external barriers, disseminating knowledge and developing synergy across functions is the emergence of network organisations (Morgan, 1997; Wisdom, 2001). Network organisations have been defined in a number of ways and given a number of names – Handy (1989) refers to them as federal organisations, Robbins (1997) uses the term virtual organisation, after the Internet on which many of them either rely or are based, and Senge (2000: 77) writes of ‘living human communities’. For Cummings and Worley (2001: 291) the purpose of a network-based structure is that it: … manages the diverse, complex, and dynamic relationships among multiple organizations or units, each specializing in a particular business function or task. Birchall and Lyons (1995) stress that networks can be in a constant state of flux as they adjust to the changing needs of their dynamic customer base. They also comment that in some cases, customers are even part of the network. For Snow et al (1993), a major benefit of network structures is that the semi-autonomous nature of each part of a network reduces the need for and erodes the power of centrally-managed bureau- cracies, which, in turn, leads to change and adaptation being driven from the bottom up rather than from the top down. They further argue that the specialisation and flex- ibility required to cope with globalisation, intense competition and rapid technological change, especially the challenge of the Internet, can only be achieved by loosening the central ties and controls that have characterised organisations in the past (Genus, 1998; Hardaker and Graham, 2001; Kanter et al, 1997; Kotter, 1996; Wisdom, 2001). However, is it clear that every organisation will have to adopt such structural changes in order to survive? The premise that they will have to is based on the assumption that all organisations experience similar levels of environmental tur- bulence and cannot do anything other than adapt their internal arrangements to these external conditions. As argued in previous chapters, there are three flaws to this argu- ment. Firstly, environmental instability is not uniform; it varies from industry to industry and organisation to organisation. Secondly, even where instability is present, organisations can choose to take action to reduce it rather than merely having to adapt to it. Lastly, as Child’s concept of equifinality discussed in Chapter 6 suggests, there are a range of internal arrangements that are compatible with external turbu- lence, of which flattened hierarchies are only one.
  • 313. 300 Chapter 9 · Developments in change management Organisational culture There can be few people who now doubt the important role culture plays in the life of organisations, especially when it comes to change (Allaire and Firsirotu, 1984; Brown, 1995; De Witte and van Muijen, 1999; Hirschhorn, 2000). Johnson (1993: 64) suggested that the strategic management of change is ‘essentially a cultural and cognitive phenomenon’ rather than an analytical, rational exercise. Clarke (1994) states that the essence of sustainable change is to understand the culture of the organ- isation that is to be changed. If proposed changes contradict cultural biases and traditions, it is inevitable that they will be difficult to embed in the organisation. Kotter (1996) takes a similar view, arguing that for change to be successful it must be anchored in the organisation’s culture. Dawson (2003) echoes this theme. He suggests that attempts to realign internal behaviours with external conditions require change strategies that are culturally sensi- tive. Organisations, he points out, must be aware that the process is lengthy, potentially dangerous, and demands considerable reinforcement if culture change is to be sustained against the inevitable tendency to regress to old behaviours. Pointing to Pirelli’s attempt to implement TQM in two of its Australian plants, Dawson (2003: 33) comments that: Management had a plan and a timeframe for the ‘successful’ management of change, but they were not prepared for the very different contextual conditions and local operating cul- tures of the two adjacent plants in South Australia. The cultural socio-political aspects of change turned out to be far more important and influential than had been anticipated, or could be accommodated for, in planning the process of change. Likewise, Pettigrew (1997) stresses that organisational processes are embedded in an organisation’s context, of which culture forms an important part. Pettigrew also points out that, because of this embeddedness, change can be slow. From the com- plexity perspective, Stacey (2003) similarly points to the importance of having an appropriate culture and the difficulty involved in changing an existing one. Cummings and Worley (2001) likewise recognise that culture can hinder the speed of change, especially when it is the culture that needs to change. In such cases, they point out, it is necessary to challenge mechanisms that reinforce old or inappropriate behaviour, such as reward, recruitment and promotion structures – all areas where resistance can be expected. In addition, if these reinforcement mechanisms are com- plemented by managerial behaviour which promotes risk aversion and fear of failure, it is unlikely to create a climate where people are willing to propose or undertake change. Accordingly, as Clarke (1994: 94) suggests, ‘Creating a culture for change means that change has to be part of the way we do things around here, it cannot be bolted on as an extra.’ Therefore, for many proponents of the Emergent approach, an essential factor in successful change is for organisations to possess or to be able to develop an appropri- ate organisational culture. However, Senior (2002) notes that many writers and researchers take a different view. Beer et al (1993), for example, suggest that the most effective way to promote change is not by directly attempting to influence organisa- tional behaviour or culture. Instead, they advocate restructuring organisations in
  • 314. The Emergent approach to change 301 order to place people in a new organisational context which imposes new roles, rela- tionships and responsibilities upon them. This, they believe, forces new attitudes and behaviours upon people. This view, as discussed in Chapter 3, is also shared by Tom Peters (1993) who advocates rapid and complete destruction of existing hierarchical organisation structures as a precursor to behavioural change. In Chapter 5 we discussed the difficulty and relevance of achieving cultural change, by whatever means. It was argued that many writers are highly sceptical about seeing culture as a promoter of change. This view is, perhaps, best summed up by Wilson (1992: 91), who claims that: ... to effect change in an organization simply by attempting to change its culture assumes an unwarranted linear connection between something called organizational culture and perform- ance. Not only is this concept of organizational culture multi-faceted, it is also not always clear precisely how culture and change are related, if at all, and, if so, in which direction. Organisational learning This was examined in Chapter 3. For advocates of the Emergent approach, learning plays a key role in preparing people for, and allowing them to cope with, change (Bechtold, 1997; Senge, 2000). Put simply, learning means ‘… the capacity of mem- bers of an organization to detect and correct errors and to seek new insights that would enable them to make choices that better produce outcomes that they seek’ (Martin, 2000: 463). A willingness to change often only stems from the feeling that there is no other option (Argyris, 1999; Pettigrew et al, 1992). Therefore, as Wilson (1992) suggests, change can be precipitated by encouraging dissatisfaction with cur- rent systems and procedures or making impending crises real to everyone in the organisation. Kotter (1996) even advocates engineering a crisis in order to build the momentum for change. Whatever the spur for change, however, staff are unlikely to recognise the need for change unless managers create mechanisms which allow them to become familiar with the company’s performance, market place, customers, com- petitors, legal requirements, etc. (Fiol and Lyles, 1985; Probst and Buchel, 1997). Pettigrew and Whipp (1993: 18) also contended that ‘collective learning’ is one of the main preconditions for sustainable change. They argue that ‘collective learning’ ensures that the full implications of an organisation’s view of its environment can then inform subsequent actions over the long-term and, in turn, the way in which future shifts in the environment are tackled. Clarke (1994) and Nadler (1993) suggested that individual and organisational learn- ing stem from effective top-down communication and the promotion of self-development and confidence. In turn, this encourages the commitment to, and shared ownership of, the organisation’s vision, actions and decisions that are necessary to respond to the exter- nal environment and take advantage of the opportunities it offers. Additionally, as Pugh (1993) points out, in order to generate the need and climate for change, people within organisations need to be involved in the diagnosis of problems and the development of solutions. Carnall (2003) takes this argument further, arguing that: The effective organization is one which encourages and supports learning from change. This means that an open management style, encouraging initiative and risk, is needed.
  • 315. 302 Chapter 9 · Developments in change management Likewise, Clarke (1994: 156) maintains that involving staff in change management decisions has the effect of ‘stimulating habits of criticism and open debate’, which enables them to challenge existing norms and question established practices. Clarke points out that although this can create the opportunity for innovation and radical change, challenging the status quo is also akin to challenging managerial judg- ment and authority. As Benjamin and Mabey (1993) maintain, though the questioning of the status quo is the essence of bottom-up change, it also leads to a form of role reversal whereby, rather than managers pressuring staff to change, the reverse occurs. Therefore, a new, open management style can result in staff putting pressure on managers to address fundamental questions about the purpose and direc- tion of the organisation which previously they might have preferred to avoid. Consequently, as Easterby-Smith et al (2000) and Tsang (1997) suggest, organisa- tional learning is neither an easy nor an uncontentious option for organisations. There is also a great diversity of opinion as to what it is and how it can be promoted, which makes organisational learning a more difficult concept to apply than many of its supporters acknowledge (Burnes et al, 2003). Managerial behaviour Chapter 1 showed that the traditional view of managers sees them as directing and controlling staff, resources and information. It sees managers as being the only ones with the expertise, knowledge and legitimate authority to decide how and when change should take place. However, the Emergent approach to change, as with the Culture–Excellence approach to managing organisations, requires a radical change in the role of managers (Dawson, 2003; Kanter et al, 1997; Kotter, 1996; Peters, 1997a; Weick, 2000). Instead of directing change from the top, managers are expected to operate as facilitators and coaches who, through their ability to span hierarchical, functional and organisational boundaries, can bring together and empower teams and groups to identify the need for, and achieve, change (Bennis, 2000; Carnall, 2003; Mabey and Mayon-White, 1993; Weick, 2000). Crucial to this, according to Kotter (1996), is for managers to develop leadership skills. Drawing on the work of Burns (1978), Kotter argues that management concerns a set of processes, such as budgeting and planning, for ensuring that organisations run smoothly. Leadership, on the other hand, is a set of processes for creating or transforming organisations: ‘Leadership defines what the future should look like, aligns people with that vision, and inspires them to make it happen … ’ (Kotter, 1996: 25). To be effective in this new role, managers require knowledge of and expertise in strat- egy formulation, human resource management, marketing/sales and negotiation/conflict resolution, and much more (Beer and Nohria, 2000; Clarke, 1994; Hayes, 2002). But the key to success, the decisive factor in creating a focused agenda for organisational change is, according to many observers, managers’ own behaviour (Graetz et al, 2002; Kanter, 1989; Kotter, 1999; Pfeffer, 1996). If managers are to gain the commitment of others to change, they must first be prepared to challenge their own assumptions, atti- tudes and mindsets so that they develop an understanding of the emotional and intellectual processes involved (Buchanan and Boddy, 1992; Burns, 1978; Harrison, R, 2002; Sosik and Megerian, 1999). For supporters of the Emergent approach, the essence of change is the move from the familiar to the unknown, from the certain to the uncertain (Jones et al, 2000). In
  • 316. The Emergent approach to change 303 this situation, it is essential for managers to be able to tolerate risk and cope with par- adox and ambiguity (Weick, 2000; Stacey et al, 2002). Pugh (1993) took the view that, in a dynamic environment, open and active communication with those partici- pating in the change process is the key to coping with risk and ambiguity. This very much follows the view expressed by many that top-down, unilaterally-imposed change doesn’t work and that bottom-up change, based on devolved responsibility and genuine empowerment, is the way forward (Brown and Eisenhardt, 1997; Clarke, 1999; Harung et al, 1999; Styhre, 2002). This in turn requires managers to facilitate open, organisation-wide communication via groups, individuals, and formal and informal channels (Hayes, 2002; Kanter et al, 1992; Senior, 2002). An organisation’s ability to gather, disseminate, analyse and discuss information is crucial for successful change, from the perspective of the Emergent approach. The reason for this, as Wilson (1992) argues, is that to effect change successfully, organi- sations need consciously and proactively to move forward incrementally. Large-scale change and more formal and integrated approaches to change (such as Total Quality Management) can quickly lose their sense of purpose and relevance for organisations operating in dynamic and uncertain environments. However, if organisations move towards their strategic vision by means of many small-scale, localised incremental changes, managers must ensure that those concerned, which could potentially be the entire workforce, have access to and are able to act on all the available information. Also, by encouraging a collective pooling of knowledge and information in this way, a better understanding of the pressures and possibilities for change can be achieved, which should enable managers to improve the quality of strategic decisions (Boddy and Buchanan, 1992; Quinn, 1993). Proponents of complexity take a slightly different view. They reject both small- scale incremental change and large-scale radical-transformational change in favour of ‘a third kind’ which lies between these two, and which is continuous and based on self-organisation at the team/group level (Brodbeck, 2002; Brown and Eisenhardt, 1997). To a certain extent, part of this difference is about terminology: how big is incremental change? Perhaps the issue to concentrate on is that, by and large, there is general agreement among proponents of emergent change that large-scale, top-down change programmes, whilst sometimes being necessary, rarely succeed (Beer and Nohria, 2000). This does not mean that there is not a crucial role for managers in identifying issues to be addressed or in developing an organisational vision which can guide Emergent change (Bennis, 2000; Dunphy, 2000). It does mean, however, that successful change is seen as coming from bottom-up initiatives which emerge from local responses to issues, threats or opportunities in the environment (Bennis, 2000; Pettigrew, 2000). It follows that the size of such responses will vary but, because they are local responses, they can never be large-scale. Whatever the scale of the change, however, the potential for resistance will always be present. Resistance to change can arise from a number of sources, including middle and senior managers, and for a number of reasons ranging from different perspectives on what is best for the organisation to sectional or individual self interest (Hayes, 2002; Huczynski and Buchanan, 2001). To cope effectively with resistance, managers will need to acquire and develop a range of interpersonal skills that enable them to deal with individuals and groups who seek to block or manipulate change for their own ben- efit (Boddy and Buchanan, 1992; Kotter, 1996). Promoting openness, reducing
  • 317. 304 Chapter 9 · Developments in change management uncertainty, and encouraging experimentation can be powerful mechanisms for over- coming resistance and promoting change (Mabey and Mayon-White, 1993). In this respect, Coghlan (1993) and McCalman and Paton (1992) advocated the use of Organization Development (OD) tools and techniques (such as transactional analysis, teamwork, group problem-solving, role-playing, etc.), which have long been used in Planned change programmes. However, there is an enormous and potentially confusing array of these; Mayon-White (1993) and Buchanan and Boddy (1992) argue that man- agers have a crucial role to play in terms of identifying and applying the appropriate ones. The main objective in deploying such tools and techniques is to encourage shared learning through teamwork and cooperation. It is this that provides the framework and support for the emergence of creative and innovative solutions and encourages a sense of involvement, commitment and ownership of the change process (Carnall, 2003; Kanter et al, 1997; McCalman and Paton, 1992; Peters, 1997a). Nevertheless, it would be naïve to assume that everyone will want to work, or be able to function effectively, in such situations. The cognitive and behavioural changes necessary for organisational survival may be too large for many people, especially managers (Ghoshal and Bartlett, 2000). An important managerial task will, therefore, be to identify sources of inertia, assess the skill mix within their organisation and, most of all, consider whether their own managerial attitudes and styles are appropri- ate. It needs also to be recognised that there are different types of change, and that these often require different approaches (Stace and Dunphy, 2001). Proponents of Emergent change tend to see the world from one perspective but, as will be discussed in Chapter 10, there are other ways of viewing change and other ways of bringing it about (Beer and Nohria, 2000). Power and politics The importance of power and politics in organisational life, especially change situa- tions, was explored in Chapter 5. Though the advocates of Emergent change tend to view power and politics from differing perspectives, they recognise their importance and that they have to be managed if change is to be effective. Dawson (1994: 176), for example, concluded that ‘The central argument is that it is important to try and gain the support of senior management, local management, supervisors, trade unions and workplace employees.’ According to Weick (2000: 236) gaining support requires ‘con- siderable linguistic skills to capture and label the flow of events [and] resequence and relabel that sequence’. Pettigrew et al (1992: 293) take a similar view, stating that ‘The significance of political language at the front end of change processes needs emphasiz- ing. Closures can be labelled as redevelopments. Problems can be re-coded into opportunities with … broad positive visions being articulated to build early coalitions ... ’. Kanter et al (1992: 508) argue that the first step to implementing change is coalition-building: ‘ … involve those whose involvement really matters … Specifically, seek support from two general groups: (1) power sources and (2) stakeholders.’ In a similar vein, Nadler (1993) advocates the need to shape the political dynamics of change so that power centres develop that support the change rather than blocking it. Senior (2002), drawing on the work of Nadler (1988), proposes four steps that organi- sations need to take to manage the political dynamics of change (see Exhibit 9.2). Important though power and politics are in the change process, as Hendry (1996) and Pugh (1993) argue, they are not the be-all and end-all of change and it is impor-
  • 318. The Emergent approach to change 305 Exhibit 9.2 Managing the political dynamics of change Step 1 Ensure or develop the support of key power groups. Step 2 Use leader behaviour to generate support for the proposed change. Step 3 Use symbols and language to encourage and show support for the change. Step 4 Build in stability by using power to ensure that some things remain the same. Source: Senior (2002) tant not to focus on these to the exclusion of other factors. Nevertheless, the focus placed on the political dynamics of change does serve to highlight the need for those who manage change to be aware of and control this dimension of the change process. To this end, Carnall (2003: 133) offered a model of the political skills that can be utilised to manage change (see Table 9.1). As Table 9.1 shows, Carnall identifies three basic types of political skill: the ability to utilise resources, such as formal authority and information; the aptitude to understand and manage political processes, such as negotiation and mobilising support; and the capacity to recognise and engage in the various forms of political activity, such as battles over budgets and organisational structures. Carnall’s argument is not that one individual will possess all these skills, but that those managing change will have to gain the support of those who do. Table 9.1 Political skills and the management of change Resources Process Form Formal authority Negotiation Politics of: Control of resources Influencing Budgets Control of information Mobilising support Careers Control of agenda Mobilising bias Succession Control of access symbols Use of emotion Information Ceremony and rituals Organisational structures Professional ‘mystery’ Appraisal As can be seen, therefore, there are a number of core issues on which the advocates of Emergent change share similar views. Having identified the beliefs which distin- guish them as a group, it is equally important to understand what advice they offer for putting their approach into practice. ■ Recipes for Emergent change Pettigrew and Whipp (1993: 6) maintain that there are no universal rules with regard to leading change; rather it involves ‘linking action by people at all levels of the busi- ness’. However, this has not prevented most of the advocates of Emergent change from suggesting sequences of actions which organisations should follow. Pettigrew and Whipp (1993), for example, propose a model for successfully managing strategic and operational change that involves five interrelated factors (see Exhibit 9.3).
  • 319. 306 Chapter 9 · Developments in change management Exhibit 9.3 Managing change successfully ■ Environmental assessment – organisations, at all levels, need to develop the ability to collect and utilise information about their external and internal environments. ■ Leading change – this requires the creation of a positive climate for change, the identification of future directions and the linking together of action by people at all levels in the organisation. ■ Linking strategic and operational change – this is a two-way process of ensuring that strategic decisions lead to operational changes and that operational changes influence strategic decisions. ■ Human resources as assets and liabilities – just as the pool of knowledge, skills and attitudes possessed by an organisation is crucial to its success, it can also be a threat to the organisation’s success if the combination is inappropriate or managed poorly. ■ Coherence of purpose – this concerns the need to ensure that the decisions and actions that flow from the above four factors complement and reinforce each other. Source: Pettigrew and Whipp (1993) For his part, not to be outdone by Pettigrew and Whipp’s five factors, Dawson (1994: 179) puts forward 15 ‘major practical guidelines which can be drawn from a processual analysis of managing organizational transitions’. These guidelines range from the need to maintain an overview of the dynamics and long-term process of change, to the need to take a total organisational approach to managing transitions. On the way, he makes the case for understanding and communicating the context and objectives of change, and ensuring managerial and employee commitment. Wilson (1992: 122) also draws atten- tion to the complex and long-term nature of change, writing that: This book has deliberately taken a particular stance towards the question of organizational change. The argument has largely been against skill-based approaches, ready-made models of good organizational practice (for example, the ‘excellence’ models) and reliance upon analysing change as primarily the outcome-oriented pursuit of great and charismatic indi- viduals. The arguments have, rather, favoured the potency of organizational structures, of economic determinism, of institutionalization within which the manager must operate. To operate successfully (and in the long term) he or she must understand and learn from the wider context or organization. This is not to say that individual skills are unimportant, only that they cannot be considered in isolation from the wider factors of strategic change. Unfortunately, the problem with much of the advice for managing change offered by advocates of the Emergent approach is that it tends to be too general or cursory in nature and thus difficult to apply. It can sometimes also appear almost as an after- thought. However, there are those whose work offers much more substantial guidance to managers and organisations. Inevitably, as one might expect, these tend to come from the prescriptive camp rather than the analytical camp and are more concerned with telling organisations what they should do than in providing detailed analyses of what they do do. The two leading exponents of change in this respect are Rosabeth Moss Kanter and John P Kotter. Kanter’s work has already been discussed extensively in Chapter 3, but to recap briefly, as shown in Exhibit 9.4, she proposes ‘Ten Commandments for Executing Change’ (Kanter et al, 1992).
  • 320. The Emergent approach to change 307 Exhibit 9.4 Ten commandments for executing change 1. Analyse the organisation and its need for change. 2. Create a shared vision and a common direction. 3. Separate from the past. 4. Create a sense of urgency. 5. Support a strong leader role. 6. Line up political sponsorship. 7. Craft an implementation plan. 8. Develop enabling structures. 9. Communicate, involve people and be honest. 10. Reinforce and institutionalise change. Source: Kanter et al (1992: 382 –3) Looking at approaches to change, Kanter et al (1992) distinguished between ‘Bold Strokes’ and ‘Long Marches’. The former relate to major strategic decisions or eco- nomic initiatives, usually of a structural or technological nature. These, they argue, can have a clear and rapid impact on an organisation, but they rarely lead to any long-term change in habits or culture. The Long March approach, on the other hand, favours a host of relatively small-scale and operationally focused initiatives, each of which can be quickly implemented but whose full benefits are achieved in the long term rather than the short term. However, the Long March approach can, over time, lead to a change of culture. Bold Strokes are initiatives taken by a few senior man- agers, sometimes only one; they do not rely on the support of the rest of the organisation for their success. In contrast, the Long March approach requires wide- spread commitment throughout an organisation. Without the involvement and commitment of the majority of the workforce, Kanter et al argue, such initiatives cannot succeed. They do maintain that Bold Strokes and Long Marches can be com- plementary, rather than alternative, approaches to change; though in practice companies appear to favour one or the other. Nevertheless, companies may need both if they are to succeed in transforming themselves. Like Kanter, Kotter is a professor at the Harvard Business School and runs his own highly successful consultancy – Kotter Associates. He is the author of a wide range of books and articles on management and change, including his highly influential 1995 Harvard Business Review article, ‘Leading change: why transformation efforts fail’. This article jumped to first place among the thousands of reprints sold by the Review, which, considering the quality of the articles in its reprint base, is a considerable achievement. Spurred on by the reception of his views on change, Kotter went on to write his 1996 book, Leading Change. This elaborates and expands on the ideas in his Harvard Business Review article. The book begins by identifying eight key errors that Kotter believes cause transformation efforts to fail (see Exhibit 9.5).
  • 321. 308 Chapter 9 · Developments in change management Exhibit 9.5 Why change initiatives fail Error 1 Allowing too much complacency. Error 2 Failing to create a sufficiently powerful guiding coalition. Error 3 Underestimating the power of vision. Error 4 Undercommunicating the vision by a factor of 10 (or 100 or even 1000). Error 5 Permitting obstacles to block the new vision. Error 6 Failing to create short-term wins. Error 7 Declaring victory too soon. Error 8 Neglecting to anchor changes firmly in the corporate culture. Source: Kotter (1996) Kotter (1996: 16) maintains that the consequences of these errors are that: – New strategies aren’t implemented well. – Acquisitions don’t achieve expected synergies. – Reengineering takes too long and costs too much. – Downsizing doesn’t get costs under control. – Quality programs don’t deliver hoped-for results. In order to eliminate these errors and their consequences, the book then proceeds to present Kotter’s Eight-Stage Process for successful organisational transformation (see Exhibit 9.6). Exhibit 9.6 Kotter’s eight steps to successful change Step 1 Establishing a sense of urgency. Step 2 Creating a guiding coalition. Step 3 Developing a vision and strategy. Step 4 Communicating the change vision. Step 5 Empowering broad-based action. Step 6 Generating short-term wins. Step 7 Consolidating gains and producing more change. Step 8 Anchoring new approaches in the culture. Source: Kotter (1996) Kotter (1996: 23) stresses that his eight stages are a process and not a checklist, and that ‘Successful change of any magnitude goes through all eight stages … skip- ping even a single step or getting too far ahead without a solid base almost always creates problems.’ He also points out that most major change efforts comprise a host of small and medium-sized change projects which, at any one point in time, can be at
  • 322. The Emergent approach to change 309 different points in the process. Kotter (1996: 24–5) cites the example of a telecommu- nications company where: The overall effort, designed to significantly increase the firm’s competitive position, took six years. By the third year, the transformation was centred in steps 5, 6 and 7. One relatively small reengineering project was nearing the end of stage 8. A restructuring of corporate staff groups was just beginning with most of the effort in steps 1 and 2. A quality program was moving along, but behind schedule, while a few small initiatives hadn’t even been launched yet. Early results were visible at six to twelve months, but the biggest payoff didn’t come until near the end of the overall effort. As can be seen, there is a reassuring similarity between Kanter et al’s Ten Commandments and Kotter’s eight-stage process. Taken together, they provide detailed guidance for implementing change. However, there is one area where both they and the other advocates of the Emergent approach seem strangely imprecise. Though advocates of Emergent change place a great deal of emphasis on leadership and the ability to manage change, what most of them put to one side is the role of the change agent. Indeed, as the next section will show, though there are a number of different models of change agency identified in the literature, there is a tendency to assume there is a ‘one best’ model or set of skills/competences which fits all situations (Caldwell, 2001, 2003). ■ The role of the change agent Whether one is dealing with change at the individual, group or organisational level, whether one perceives change as incremental, punctuated or continuous, or whether one is viewing it from a Planned or Emergent perspective, change has to be managed; someone has to take responsibility for ensuring that change takes place. Whether this person is a team leader, facilitator, coach or even a dictator, there is usually one indi- vidual who bears the responsibility of being the change agent. The previous chapter showed that the concept of the change agent originated with Kurt Lewin and has been extensively developed by the OD movement. However, over the last two decades, as different perceptions of change have emerged, so different views of the role of the change agent can also be perceived. As Caldwell (2003) notes, we have seen eulogies to the ‘heroic’ change leader capable of transforming organisations, calls for line managers and functional specialists to become change agents, and the growth of internal and external management consultants as ‘catalysts’ for change. However, rather than clarifying the role and competences of the change agent, these develop- ments appear to have made the picture more confused. One of the strengths of the Planned approach is that it not only offers a well- developed change process, but it also provides a blueprint for the behaviour and attributes of change agents who, in turn, are buttressed and supported by a host of tools and techniques for analysing organisations and managing change (Cummings and Worley, 1997). The Emergent approach, whilst stressing the issue of process, takes the view that change is not a specialist activity driven by an expert, but an increasingly important part of every manager’s role (Clarke, 1994). The drawback with this perspective is that it deflects attention from or even ignores the specialist skills necessary to manage the different types of change, whether this is being done by
  • 323. 310 Chapter 9 · Developments in change management a manager or by a change specialist. It may also be one reason why, as Hartley et al (1997) observe, there has been relatively little empirical research on the roles played by change agents. However, Buchanan and Boddy (1992: 27) sought to redress the balance by analysing the skills needed to be a successful change agent and, in particu- lar, by drawing attention to the change agent’s need to: ... support the ‘public performance’ of rationally considered and logically phased and visibly participative change with ‘backstage activity’ in the recruitment and maintenance of support and in seeking and blocking resistance. … ‘Backstaging’ is concerned with the exercise of ‘power skills’, with ‘intervening in political and cultural systems’, with influencing and negotiating and selling, and with ‘managing meaning’. Buchanan and Boddy suggest a model of the expertise of the change agent which identifies the skills and competences necessary to achieve successful change. Their model begins by listing the diagnostic skills required to identify the organisation type; change category; personal vulnerability; agenda priorities; and public performance and backstage skills. The model then goes on to list 15 competences under five clus- ters: goals; roles; communication; negotiation; and managing up. The last two elements of their model relate to process outcomes and personal and organisational outcomes. What emerges from their work is a picture of the change agent as a highly skilled and well-trained political operator who has not only an in-depth knowledge of change processes and tools, but also the personal qualities and experience to use them both in the open and, especially, behind the scenes. In contrast to this, the Planned approach sees the change agent’s role as being mainly an up-front ‘public perform- ance’ activity and working with a transparent agenda to help those involved to identify the options and make their own choices (French and Bell, 1995). For proponents of Emergent change, the change agent is not a neutral facilitator, but an active manager of the change process with his/her own agenda which they seek to promote or impose by managing and shaping the perceptions of those concerned (Pettigrew, 2000; Weick, 2000). Buchanan and Boddy (1992: 123) also draw attention to the social construction of the process of change which, they argue, is a creative activity: Expertise does not simply involve the mechanical deployment of diagnostic tools, compe- tences and stereotyped solutions, but involves also the innovative and opportunistic exploitation of other dimensions of the organizational context. Mirvis (1988) is another who focuses on the crucial role played by innovative and creative skills of change agents in achieving successful change. In an article entitled ‘Grace, magic and miracles’, Lichtenstein (1997) investigated this side of the change agent’s role further by examining the work of three leading change practitioners: Peter Senge, William Torbert and Ellen Wingard. In the article, the three consultants described their approach to change and the theories which underpin it. They also described how, in applying their approaches, it was insufficient just to follow the steps laid down. Success required the consultants to overcome major obstacles, and, in so doing, to adopt novel and experimental methods. Senge, Torbert and Wingard use terms such as ‘grace’, ‘magic’ and ‘miracles’ to describe the moment of break- through; the point where serious obstacles were overcome and genuine progress
  • 324. The Emergent approach to change 311 made. In fact, what they describe is the ability of the change agent to recognise the need to depart from the ‘script’ and to experiment with the unknown in order to make progress. Just as Buchanan and Boddy (1992) identified the need for change agents to be able to present and utilise the rational face of change, whilst being adept at the less rational ‘backstage’ skills, so Lichtenstein (1997: 407) also concludes that: ... there is a logical framework that produces rational actions in the first stages of an intervention effort. However, at a critical threshold it is non-linear logic and spontaneous felt action – grace, magic and miracles – that actually supports organizational (and per- sonal) transformation. Drawing on the work of cultural anthropologists, Schuyt and Schuijt (1998) use the analogy of the change agent as a magician. They point out that magicians, witch doctors and medicine men in non-Western cultures use symbols and rituals to smooth the various transitions in life cycles: birth, puberty, marriage and death. In the same way, Schuyt and Schuijt (1998: 399) pose the following question: are not consultants and change agents ‘also, in a certain sense, magicians who guide and structure impor- tant transitions through the use of rituals and symbols?’ These rituals and symbols have a number of key functions: to establish the change agent’s credentials, to prepare the participants mentally for change, to guide them through the transition, and to reinforce the ‘participants’ feeling that they are taking part in a controlled and well- managed process of change … but ultimately the crux is to reduce the client’s uncertainty’ (Schuyt and Schuijt, 1998: 405). The argument of many in the Emergent school is that the complexity and multi- level nature of change mean that it cannot be left to a few experts or a few managers but is the responsibility of everyone in the organisation. However, if this is so, what skills and competences do they need and how are they to get them? What the work of Buchanan and Boddy, Lichtenstein, Schuyt and Schuijt, and, indeed, the Organization Development movement would seem to argue is that the more complex the change process, the more difficult it is to achieve, and the greater the need to utilise the skills and experience of a specialist change agent. The conclusion they draw from this is that there is a ‘one best’ type of change agent who possesses a generic set of high-level competences that can be employed in any situation. Caldwell (2003) takes issue with Buchanan and Boddy et al. Just as Dunphy and Stace (1993: 905) called for a ‘situational’ or ‘contingency model’ of change, so Caldwell calls for a contingency model of change agency which recognises that differ- ent change situations require different types of change agent. From an extensive literature review, Caldwell identifies four groups of models of change agent (see Exhibit 9.7). These four different types of change models highlight the difficulty, not to say impossibility, of attempting to construct a generic change agent who can oper- ate in any situation. The type of change agent identified by Buchanan and Boddy may fit into some of these models but not all of them. Similarly, the OD type of change agent may fit into some of these models, but not all of them. What Caldwell has done is to direct aca- demics and practitioners away from both the ‘it’s everyone’s responsibility’ and the ‘one best way’ schools and towards identifying the behaviours and competences nec- essary for each type of change situation.
  • 325. 312 Chapter 9 · Developments in change management Exhibit 9.7 Models of change agents ■ Leadership models where change agents are senior managers responsible for identifying and delivering strategic/tranformational change. ■ Management models where change agents are seen as middle-level managers/functional specialists who have responsibility for delivering or supporting specific elements of strategic change programmes or project. ■ Consultancy models where change agents are external or internal consultants who can be called on to operate at any level. ■ Team models where change agents are seen as teams that operate at various levels in an organisation and which are composed of the requisite managers, employees and consultants necessary to accomplish the particular change project set them. Source: Caldwell (2003) Emergent change: summary and criticisms The proponents of Emergent change are a somewhat disparate group who tend to be united more by their scepticism regarding Planned change than by a commonly agreed alternative. Nevertheless, there does seem to be some agreement regarding the main tenets of Emergent change, which are as follows: ■ Organisational change is a continuous process of experiment and adaptation aimed at matching an organisation’s capabilities to the needs and dictates of a dynamic and uncertain environment. ■ Though this is best achieved through a multitude of (mainly) small- to medium- scale incremental changes, over time these can lead to a major re-configuration and transformation of an organisation. ■ Change is a multi-level, cross-organisation process that unfolds in an iterative and messy fashion over a period of years and comprises a series of interlocking projects. ■ Change is a political-social process and not an analytical-rational one. ■ The role of managers is not to plan or implement change per se, but to create or foster an organisational structure and climate which encourages and sustains experimentation, learning and risk-taking, and to develop a workforce that will take responsibility for identifying the need for change and implementing it. ■ Though managers are expected to become facilitators rather than doers, they also have the prime responsibility for developing a collective vision or common purpose that gives direction to their organisation, and within which the appropriateness of any proposed change can be judged. ■ The key organisational activities that allow these elements to operate successfully are information-gathering – about the external environment and internal objectives and capabilities; communication – the transmission, analysis and discussion of informa- tion; and learning – the ability to develop new skills, identify appropriate responses and draw knowledge from their own and others’ past and present actions. Though not always stated openly, the case for an Emergent approach to change is based on the assumption that all organisations operate in a turbulent, dynamic and unpredictable environment. Therefore, if the external world is changing in a rapid
  • 326. Emergent change: summary and criticisms 313 and uncertain way, organisations need to be continuously scanning their environment in order to respond in a timely and appropriate manner. Because this is a continuous and open-ended process, the Planned approach to change is inappropriate. To be suc- cessful, changes need to emerge locally and incrementally in order to respond to environmental threats and take advantage of opportunities. Presented in this manner, there is an apparent coherence and validity to the Emergent approach. However, it is a fragile coherence and a challengeable validity. As far as coherence is concerned, some proponents of Emergent change, especially Pettigrew (1997) and Dawson (2003), clearly approach it from the processual per- spective on organisations. However, it is not clear that Buchanan and Boddy (1992) and Wilson (1992) would fully subscribe to this view. In the case of Carnall (2003), Clarke (1994), Kanter et al (1992) and Kotter (1996), it is clear that they do not take a processual perspective. They do not doubt the importance of power and politics in the change process, but for them the issue is one of legitimacy and pragmatism. Managers and change agents have the legitimate right to introduce changes, but to do so they must use political skills in a pragmatic way to build support and overcome or avoid resistance. For the processualists, like the postmodernists, change is about dom- inant coalitions, and smaller groupings, trying to impose their will on all or part of an organisation in order to maintain or improve their position. Partly, this is explained by the fact that some of these writers (especially Dawson, 2003; Pettigrew, 1997; Wilson, 1992) are attempting to understand and analyse change from a critical per- spective, whilst others (notably Kanter et al, 1992; Kotter, 1996) are more concerned with prescribing recipes and checklists for successful change. Therefore, though the advocates of Emergent change have a number of common bonds, their differing objectives and perspectives do put a question mark against the coherence of the Emergent approach. An assessment of the validity or general applicability of the Emergent approach to change depends to a large extent on whether or not one subscribes to the view that all organisations operate in a dynamic and unpredictable environment to which they have to adapt continuously. The issue of the nature and uniformity of the environment in which organisations operate has been discussed extensively in previous chapters. The conclusion reached was that not all organisations face the same degree of environmen- tal turbulence and that, in any case, it is possible to manipulate or change environmental constraints. This does not invalidate the Emergent approach, but it does indicate that some organisations, by accident or action, may find the Planned approach to change both appropriate and effective in their particular circumstances. Obviously, the above raises questions over the universal applicability of the Emergent approach; even without reservations regarding its coherence and validity, however, there would still be serious criticisms of this approach. For example, many of its supporters seem to advocate the same approach to organisations as the Culture–Excellence school and are, therefore, open to the same criticisms (see Chapter 3). Given this link to Culture–Excellence, not surprisingly, a great deal of emphasis is placed on the need for appropriate organisational cultures. But, as the writers on Emergent change seem to sway between advocating the need for culture change (Kanter et al, 1992) and advocat- ing the need to work with existing cultures (Kotter, 1996), it is not clear what they perceive the role of culture to be. In any case, as is noted in Chapter 5, the whole issue of the role and the manipulability of organisational culture is a veritable minefield. Indeed,
  • 327. 314 Chapter 9 · Developments in change management as mentioned earlier, even Wilson (1992), who supports the Emergent perspective, was sceptical about the case for culture. Similar points can be made regarding the ‘learning organisation’ approach. As Whittington (1993: 130) commented: The danger of the purely ‘learning’ approach to change, therefore, is that … managers [and others] may actually recognize the need for change, yet still refuse to ‘learn’ because they understand perfectly well the implications for their power and status. Resistance to change may not be ‘stupid’ … but based on a very shrewd appreciation of the personal consequences. A variant of this criticism relates to the impact of success on managerial learning. Miller (1993: 119) observed that, whilst managers generally start out by attempting to learn all they can about their organisation’s environment, over time, as they gain experience, they ‘form quite definite opinions of what works and why’ and as a con- sequence tend to limit their search for information and knowledge. So experience, especially where it is based on success, may actually be a barrier to learning, in that it shapes the cognitive structures by which managers, and everyone else, see and inter- pret the world. Nystrom and Starbuck (1984: 55) observed: What people see, predict, understand, depends on their cognitive structures … [which] man- ifest themselves in perceptual frameworks, expectations, world views, plans, goals … myths, rituals, symbols … and jargon. This brings us neatly to the topic of the role of managers. Though this will be dis- cussed extensively in Chapter 16, for now it should be noted that managers are the ones who appear to have to make the greatest change in their behaviour. As the above quotations indicate, however, they may neither welcome nor accept such a change, especially where it requires them to challenge and change their own beliefs, and where it runs counter to their experience of ‘what works and why’. Also, if the possi- bility exists (as mentioned above) to manipulate environmental variables and constraints rather than having to change their behaviour, managers may perceive this as a more attractive or viable option. Though the above reservations regarding the coherence and validity of the Emergent approach are fairly serious, there are three further criticisms that are equally serious. The first relates to the difference between their approach and the Planned approach. The Planned approach is attacked because of its reliance on Lewin’s Three-Step model of unfreezing, moving and refreezing. It is argued that in a turbulent environment, organisations are in a constant state of change and that, therefore, to speak of unfreezing and refreezing is nonsense (Kanter et al, 1992). However, if one examines the process of change advocated by, for example, Dawson (1994), Kotter (1996) and Pettigrew et al (1992), though they argue to the contrary, they do speak of change as a ‘transition’ process with a beginning, middle and end. Indeed, Hendry (1996: 624) comments: Scratch any account of creating and managing change and the idea that change is a three- stage process which necessarily begins with a process of unfreezing will not be far below the surface.
  • 328. Emergent change: summary and criticisms 315 There are others who strongly support Hendry’s view that the Three-Step model has greater validity and wider usage than its critics acknowledge (Burnes, 2004; Elrod and Tippett, 2002). It should also be noted that there are a number of Lewin support- ers amongst proponents of the complexity approach to change (Back, 1992; Tschacher and Brunner, 1995) and that MacIntosh and MacLean (2001) advocate the use of the Three-Step approach to identify and change order-generating rules. The second criticism concerns the emphasis placed on the political and cultural aspects of change. Advocates of the Emergent approach have undoubtedly provided a valuable contribution to our understanding of change by highlighting the neglect of these important issues in the past. However, they have also been criticised from a number of perspectives for perhaps going too far the other way. Hendry (1996: 621) argues that ‘The management of change has become … overfocused on the political aspects of change’, whilst Collins (1998: 100), voicing concerns of his own and of other researchers, argues that: ... in reacting to the problems and critiques of [the Planned approach], managers and practi- tioners have swung from a dependence on under-socialized models and explanations of change and instead have become committed to the arguments of, what might be called, over-socialized models of change. This very much fits in with those who take a realist perspective on organisations; they argue that whilst the social world, including organisations, is a product of human action, it is not necessarily a product of conscious human design but exists independ- ently of human beings (Connelly, 2000; Easton, 2000). Lastly, though the Emergent approach undoubtedly raises key issues, and offers valuable insights and guidance, it does not appear to be as universally applicable as its advocates imply. In Chapter 8, we identified three different perspectives on change: the individual, group and system perspectives, and three categories of change: incre- mental, punctuated equilibrium and continuous transformation. The Emergent approach is specifically founded on the assumption that organisations operate in a dynamic environment where they have to transform themselves continuously in order to survive. It is, then, by its own definition, not applicable to organisations operating in environments which require disjointed incremental, or perhaps even punctuated equilibrium change programmes. The focus of Emergent change tends to be the organisation and its major sub-systems and, consequently, it is less suitable for situa- tions requiring change at the individual and/or group levels. It is also the case that, both implicitly and explicitly, the Emergent approach advocates cooperative change rather than coercive or confrontational change, though it sees political manipulation and the deployment of power as essential to achieving this. However, as Dawson (2003) notes, it is also clear that there are many situations where managers prefer to push change through in a rapid and confrontational manner (see Stace and Dunphy, 2001; Edwardes, 1983; Franklin, 1997; Grinyer et al, 1988). Therefore, like Planned change, Emergent change has much to recommend it but, again like Planned change, it also has a number of significant shortcomings.
  • 329. 316 Chapter 9 · Developments in change management Conclusions Organisations come in all shapes and sizes, provide a vast variety of products and services, and face an enormous array of challenges. Perhaps the only factor common to all organisations is change. Organisations never stand still, though the speed and magnitude of change does vary from organisation to organisation and over time. It is now generally accepted that the ability to manage change effectively is a crucial com- ponent of an organisation’s ability to compete successfully. As Chapter 8 demonstrated, for many years, the Planned approach was considered as the best way of managing change. However, as was shown at the beginning of this chapter, from the early 1980s onwards, the Planned approach has faced a torrent of criticisms as to its suitability in a world of rapid and unpredictable change. In particular, its detrac- tors claim that the notion that organisations operate in stable environments and can move from one fixed state to another is, to quote Kanter et al (1992: 10), a ‘… quaintly linear and static conception … [and] … wildly inappropriate.’ In the light of these criticisms of the Planned approach, the chapter went on to describe the Emergent approach and make the case for it, being the best way to manage change. The Emergent approach sees organisational change as an ongoing process of adapta- tion to an unpredictable and ever-changing environment. For proponents of this view, change is a messy, unpredictable, open-ended and political affair. In such a situation, it is impossible for a few managers at the top of an organisation to identify and implement all the changes necessary to keep the organisation aligned with its environ- ment. Consequently, successful change is a bottom-up, emergent, response to events. However, just as the Planned approach to change can be criticised as limited and flawed, similar criticisms can be made of the Emergent approach. In particular, it seems less a coherent approach to change and more a label for a collection of approaches critical of Planned change. Its proponents appear to disagree about key elements of Emergent change such as culture, organisational learning and the role of managers. In addition, the Emergent approach is criticised for its over-emphasis on the political dimension of change and its view that all organisations operate in a dynamic and unpredictable environment. It is also clear that Emergent change is lim- ited in terms of both the types of organisational change to which it can be applied, and how it can be applied. Therefore, though it has apparent advantages over the Planned approach, or rather it is applicable to situations for which Planned change is not suitable, an examination of the Emergent approach reveals that there are serious question marks over its coherence, validity and general applicability. From this and the previous chapter, it is clear that, even taken together, neither the Planned nor Emergent approach cover the broad spectrum of change events organisa- tions encounter. Though both Planned and Emergent change have important theoretical and practical benefits, their dominance of the change literature appears to have led to a neglect of other approaches to change. In order to address this neglect, the next chapter will examine the change situations faced by organisations, and will construct A Framework for Change that identifies the range of change situations and a matching range of approaches to change.
  • 330. Suggested further reading 317 Test your learning ■ Short answer questions 1 Briefly discuss the Processual approach to change. 2 List the main attributes of the Emergent approach to change. 3 How do proponents of the Emergent approach view the nature of the environment in which organisations operate? 4 What are the reasons for considering the complexity approach to change as part of the Emergent approach? 5 From the Emergent perspective, what are the five features of organisations that promote or hinder successful change? 6 List the main criticisms of the Emergent approach. 7 What are the implications of the Emergent approach for managerial behaviour? ■ Essay questions 1 Discuss and evaluate the following statement: Emergent change does not offer a coher- ent alternative to Planned change but merely provides an umbrella for those who oppose it. 2 To what extent and how do Caldwell’s four models of the change agent undermine Buchanan and Boddy’s generic model of the expertise of the change agent? Suggested further reading 1 Dawson, P (2003) Organizational Change: A Processual Approach. Routledge: London. Patrick Dawson’s book is an excellent guide to the processual approach to change which raises some important questions about both Planned and Emergent change. 2 Kotter, JP (1996) Leading Change. Harvard Business School Press: Boston, MA, USA. John Kotter’s work represents the more prescriptive and pragmatic wing of Emergent change.
  • 331. Chapter 10 A framework for change Approaches and choices Learning objectives After studying this chapter, you should be able to: ■ recognise that, even taken together, the Planned and Emergent approaches do not cover all change situations; ■ list the range of change situations that organisations face; ■ appreciate the variety of approaches to change; ■ understand the situations in which the various approaches to change are most appropriately used; ■ describe how organisations can increase their degree of choice when undertaking change.
  • 332. Introduction 319 Exhibit 10.1 Learning from others Why companies have much to learn from charities FT Conventional wisdom says the voluntary sector has Again, a voluntary organisation’s objective is to much to learn from the commercial world. But our improve the quality of its target groups’ lives, and to work suggests the opposite: voluntary organisations provide a worthwhile means for volunteers to partici- often display precisely those management skills that pate in the community. leading companies are struggling to acquire, particu- Voluntary organisations often cope better with larly in managing change. change than businesses. We believe this is because Both sectors face similar forces for change. In the they are, as Henry Mintzberg said, ‘pioneers in the ‘market’ for donations, voluntary organisations, just motivation and productivity of knowledge workers’. like businesses, face increasing consumer choice. They are particularly good at: While competing outlets for discretionary spending proliferate, the voluntary sector’s income has ■ Changing, but staying the same. Voluntary organi- remained more or less static in real terms. This sations change with the times, but hold on to intensifies pressure to compete for funds and to their history. They steep new staff in their tradi- keep costs down. tions and values, by induction courses and Prices, too, are squeezed. Government-funded apprenticeships. But precedent does not bind social services, important customers for the voluntary their people. Useful new practices and ideas sector, increasingly set prices at the level of the spread fast by informal networks. The need to do lowest-cost provider, limiting what voluntary organi- more with less encourages initiative and creativity. sations may charge. ■ Thinking big, acting small. A voluntary organisation Consumers of charitable and commercial services may have a nationally or internationally recog- alike demand continually improving standards. nised name but it will often be rooted in local Stakeholders in both voluntary and commercial operations. Fuzzy organisational structures help organisations want more accountability for perform- charities to think big and to act small. At first ance. Donors, end-users, volunteers and members glance, they may look sclerotic: reporting lines all require that charitable funds are demonstrably abound; decisions are often taken by large well managed, just as shareholders require of corpo- groups of elected frontline representatives. But rate capital. And success in a voluntary organisation, there are benefits. The lack of central executive as in a business, depends on success in the market power means local managers can act on their for talent. Competition to hire the best people is own initiative. equally strong. ■ Managing multiple stakeholders. Voluntary organi- In society too, charities and businesses see the sations are used to managing multiple same emerging trends, though charities seem stakeholders with disparate interests. Their tech- instinctively better at adapting to them. niques include involving people from different First, all organisations are under pressure from stakeholder groups in their decision-making stakeholders to be more socially responsible. bodies, and pursuing different objectives to satisfy Voluntary organisations handle this effectively – after different groups. They thank stakeholders for their all, they exist mainly to serve social needs and usu- interest by such means as personalised marketing ally involve local communities in delivering services. or donor receptions. And they listen carefully to Second, government regulation has greatly stakeholders when setting their goals. increased during the past 15 years, yet voluntary ■ Getting everyone to own organisational goals. services have always been ‘regulated’ by their explicit Most voluntary organisation staff are unusually codes of ethical standards. They use compliance dedicated. That is partly because they are so with these standards to measure success, in the committed to the organisation’s goals. Staff com- absence of a profit motive. mitment to organisational policy is reinforced by Third, people are seeking better quality of life – their membership of frontline forums that take more meaningful work and increased leisure time. important policy decisions. ▲
  • 333. 320 Chapter 10 · A framework for change Exhibit 10.1 continued ■ Making values matter. In voluntary organisations, Second, the differences between voluntary and it is not only what gets done that is important but private sector organisations are more apparent than also how it is done. Staff feel they can challenge real. Certainly, volunteers are motivated to work for senior managers if they fall short of the organisa- nothing while businesses must pay people to do tion’s values. work they otherwise would not do. But ‘wage slaves’, too, get personal fulfilment from their work. And if Should companies try to emulate the voluntary volunteers are demotivated by poor management, sector? There are two reasons executives should they can quit in an instant. Commercial employees take the challenge seriously. may not be able to leave so quickly, but the best of First, the benefits are real and realisable. Business managers already know they can tap extraordinary them usually can, and will, run frighteningly fast. employee motivation in a crisis. How much better to Businesses and voluntary organisations need tap these reserves every day. Businesses could better capabilities to manage their environments. achieve the involvement and commitment to corpo- Businesses would do well to work with voluntary rate values we see in the voluntary sector if they do organisations, to bring them commercial rigour, but – what the voluntary organisations do: for example, more importantly – to learn their skills in helping encourage and reward staff for mentoring, for build- employees to manage change. ing and maintaining institutional knowledge, for Source: Keith Leslie, Vaughan Lindsay, Helen Mullings and Neville tending networks, for creating involving events. Salkeld, Financial Times, 9 February 1999, p. 16. Introduction Since the Industrial Revolution, the conventional wisdom has been that the private sector is better at managing and changing organisations than either the public or vol- untary sectors. This view is based on the belief that only free-market competition will drive organisations and individuals to innovate and change. However, as the article by Leslie et al (1999)(Exhibit 10.1) shows, the voluntary sector faces considerable competitive and other pressures which require innovative responses. Similarly, as will be described in case studies 4 and 10 in Part 3 of this book, the public sector has come under increasing pressure over the last 25 years to find new and more cost- effective ways to provide services. Therefore, as the Leslie et al article also shows, the notion that the private sector is always the leader and the other sectors always the fol- lowers when it comes to managing and changing organisations is something of a misconception. It must be recognised, however, that different sectors and different organisations face widely-differing challenges, and what is appropriate for one organ- isation or sector is not necessarily appropriate for another. This is particularly the case when considering organisational change. As Stickland (1998: 14) remarks: ... the problem with studying change is that it parades across many subject domains under numerous guises, such as transformation, development, metamorphosis, transmutation, evo- lution, regeneration, innovation, revolution and transition to name but a few. The last two chapters have reviewed the two dominant approaches to managing change, identifying their strengths, weaknesses and the situations they are designed to address. It has become clear that, even taken together, neither the Planned nor
  • 334. Varieties of change 321 Emergent approach covers the broad spectrum of change events that organisations encounter. Pettigrew (2000: 245–6) observes that: There is a long tradition in the social sciences and in management and organization theory of using bipolar modes of thinking: dichotomies, paradoxes, contradictions and dualities. … The duality of planned versus emergent change has served us well as an attention director but may well now be ready for retirement. Though both Planned and Emergent change have important theoretical and practical benefits, their dominance of the change literature has led to a neglect of other approaches. In order to address this neglect, this chapter will seek to identify the range of change situations organisations face and match these to a wider group of approaches. This will enable the construction of a framework that will allow different change situations to be matched to appropriate approaches to managing change. It will then be argued that, by manipulating key variables in this framework, it is possi- ble for organisations to have genuine choices in what to change, how to change and when to change. Varieties of change As noted in Chapter 8, types of change can be categorised as to whether their primary focus applies to individuals, groups, or systems and sub-systems. As far as models of change are concerned, once again as noted in Chapter 8, the three main ones are the incremental model; the punctuated equilibrium model; and the continuous transforma- tion model. Figure 10.1 brings these together to create a change matrix that, as the examples illustrate, appears to cover most situations. However, there are other types, models and forms of change that expand on, cut across or are not included in this matrix. Senior (2002), drawing on the work of Grundy (1993), identifies three categories of change: smooth incremental, covering slow, systematic, evolutionary change; bumpy Incremental Punctuated Continuous Individuals Career Learning Promotion development Team Changes in Groups Kaizen building composition and tasks Fine Systems BPR Culture tuning Figure 10.1 Varieties of change
  • 335. 322 Chapter 10 · A framework for change incremental, pertaining to periods where the smooth flow of change accelerates; and dis- continuous change, which is similar to the punctuated equilibrium model. Kanter et al (1992), addressing the issue of transformational change, noted that it can be achieved either by a Bold Stroke approach (rapid overall change) or a Long March approach (incremental change leading to transformation over an extended period of time). In a similar vein, Beer and Nohria (2000) identify two basic archetypes, or theories of change: Theory E, which is similar to Kanter et al’s Bold Stroke, and Theory O, which is similar to Kanter et al’s Long March. The main objective of Theory E change is to maximise shareholder value. It is applied in situations where an organisation’s performance has diminished to such an extent that its main shareholders demand major and rapid change to improve the organisation’s financial performance. Typically this is a ‘hard’ approach based on downsizing, divestment of non-core or low-performing businesses, and the heavy use of financial incentives. Theory O is also aimed at improving an organisation’s performance, but this is more a ‘soft’ approach based on incrementally developing the organisation’s culture and its human capabili- ties, and promoting organisational learning. Beer and Nohria (2000) believe that both of these are valid models of change but that both have their flaws. Theory E can achieve short-term financial gains but at the cost of denuding an organisation of the human capabilities and organisational culture necessary for long-term survival. Theory O, whilst focusing on people and culture, falls into the trap of not restructuring to concentrate on core activities, thus failing to deliver shareholder value. To achieve the gains of both these approaches, whilst avoiding the pitfalls, Beer and Nohria advocate using these in tandem by focusing on the rapid restructuring elements of Theory E but following this with the human capa- bility development offered by Theory O. Cummings and Worley (2001: 30) identify a ‘continuum ranging from incremental changes that involve fine-tuning the organization to quantum changes that entail fun- damentally altering how it operates’. Stace and Dunphy (2001), in a like but more detailed way, identify a four-stage change continuum that comprises the following: fine-tuning, incremental adjustment, modular transformation and corporate transfor- mation. Looking at the latter, Stace and Dunphy argue that corporate transformations can take four forms: developmental transitions; task-focused transitions; charismatic transformations; and turnarounds. For Peters (1989), rapid, disruptive and continu- ous change is the only appropriate form of change there is. With echoes of Peters, Quinn (1996) differentiates between incremental change, which he sees as leading to slow death, or deep, radical change leading to irreversible transformation. Pettigrew et al (1992) distinguish between types of change by their scale and importance. Their change continuum spans operational change (small-scale, relatively unimportant) and strategic change (major and important structural changes). Buchanan and Boddy’s (1992) classification is almost the same as Pettigrew et al’s, but they use two dimen- sions: incremental change to radical change; and changes that are of central importance to the organisation to those that are peripheral to its purpose. Kotter (1996) ignores the notion of a continuum of change as such and, instead, argues that organisations need to be continuously transforming themselves through a series of large and small interlinked change projects spanning different levels and functions and having different timescales.
  • 336. Varieties of change 323 One could of course extend this review further by including other writers (e.g. Dawson, 2003; Strickland, 1998; Wilson, 1992); however, the end product would be the same: change can be viewed as running along a continuum from incremental to transformational. Incremental or fine-tuning forms of change are geared more to changing the activities/performance/behaviour/attitudes of individuals and groups, whereas transformational change is geared towards the processes/structures and cul- ture of the entire organisation. Obviously, there are differences in how these writers construe these concepts. Some writers see fine-tuning or incremental change as being relatively isolated and/or relatively unimportant (i.e. Stace and Dunphy, 2001; Pettigrew et al, 1992), whilst others see it as being part of an overall plan to trans- form an organisation (e.g. Kanter et al, 1992; Senior, 1997). In contrast, all seem to view transformational change as being strategic and important; though there are those who see it as being a relatively slow process (Kotter, 1996), those who see it as being a relatively rapid one (Peters, 1989), and those who argue that it can take both forms (Kanter et al, 1992; Stace and Dunphy, 2001). Regardless of these differences, the overall view as shown by Figure 10.2 is that change can be seen as running along a continuum from small-scale incremental change to large-scale transformational change. This of course is no surprise; intu- itively, one would expect change to range from small-scale to large-scale and from operational to strategic. The important consideration is perhaps not the type of change but how it should be conceived and managed. Implicit in the arguments of the Emergent approach is the view that Planned change stands at the left-hand end of this spectrum and Emergent change at the right-hand end, and that what separates them is the nature of the environment (see Figure 10.3). Planned change is considered suitable for (relatively) stable environments, with Emergent change being better suited to more turbulent environments. As shown in Chapters 7 and 8, however, these two approaches to change are more limited than their advocates claim. In particular, both the Planned and Emergent approaches tend to stress the collaborative and consulta- tive approach to managing change. Stace and Dunphy (2001), however, identify four approaches to managing change based on the degree to which employees are involved Small scale Large scale Incremental Transformational Figure 10.2 Change continuum Stable Turbulent ENVIRONMENT Planned Emergent Figure 10.3 Approaches to change
  • 337. 324 Chapter 10 · A framework for change in planning and executing change, as follows: collaborative, consultative, directive and coercive. They also argue that consultative and directive approaches tend to dom- inate, except where rapid organisational transformations are required, when more coercive approaches come into play. Kotter (1996) takes a different view, seeing the overall direction of change as being decided by senior managers, but its implementa- tion being the responsibility of empowered managers and employees at all levels. Boddy and Buchanan (1992) believe that the way in which a change should be man- aged will be viewed differently, depending on whether it is central or peripheral to the organisation’s purpose. Davenport (1993) expands on these two issues by construct- ing a list of five principal factors that influence how a project will be managed: the scale of change; the level of uncertainty about the outcome; the breadth of change across the organisation; the magnitude of change in terms of attitudes and behaviour; and the timescale for implementation. Storey (1992), taking a slightly different tack, begins by identifying two key dimensions. The first concerns the degree of collabora- tion between the parties concerned: varying from change that is unilaterally constructed by management, to change brought about by some form of joint agree- ment with those involved. The second dimension concerns the form that change takes: ranging from change that is introduced as a complete package, to change com- prising a sequence of individual initiatives. From these two dimensions, Storey constructs a fourfold typology of change: 1 Top-down systemic change aimed at transforming the organisation. 2 Piecemeal initiatives devised and implemented by departments or sections in an unconnected fashion. 3 Bargaining for change where a series of targets are jointly agreed between man- agers and workers, but are pursued in a piecemeal fashion. 4 Systemic jointism where managers and workers agree a total package of changes designed to achieve organisational transformation. As with the earlier review of the types of change, to make sense of this review of the nature of change and how it should be managed, we need to find a way of cate- gorising and tabulating the various viewpoints. However, this is a far from straightforward exercise. Stace and Dunphy’s (2001) fourfold categorisation of approaches to change, ranging from cooperative to coercive, is useful in that it appears to cover most of the managerial approaches on offer. However, it is the cir- cumstances in which each of these might best be used that is perhaps of most concern. Boddy and Buchanan’s categorisation of central–peripheral is interesting but, in most instances, this appears to boil down to an issue of project size. Almost by definition, all major projects can be considered as central by virtue of their size and, for a similar reason, most smaller projects are, relatively speaking, peripheral. Davenport’s five factors are perhaps more useful in helping us to categorise change, especially those concerning uncertainty, behaviour and attitudes, and timescale. As we have noted fre- quently in this book, uncertainty tends to be present when the environment is changing in a rapid and unpredictable fashion. This requires organisations to respond quickly; advocates of the Emergent approach believe this is best done by small- to medium-scale local or cross-functional or process changes. The ability to do this, however, is dependent on having appropriate structures, attitudes and cultures in place. If this is not the case, then change will be delayed or not quick enough and, as
  • 338. A framework for change 325 Stace and Dunphy (2001) showed, will be likely to require rapid transformational change undertaken in a directive or coercive fashion. Nevertheless, both Kanter et al (1992) and Beer and Nohria (2000), as well as the review of culture in Chapter 5, argue that changes in attitudes and culture cannot be achieved in a rapid and coercive manner. That type of approach tends to be effective in changing structures and processes, but achieving attitudinal and/or cultural change is a much slower process. A framework for change If we summarise the above views, we can create yet another change continuum. At one end is slow change, where the focus is on behavioural and cultural change. At the other end of the continuum is rapid change, where the focus is on major changes in structures and processes. If we merge this together with Figures 10.2 and 10.3, what we get, as Figure 10.4 shows, are four quadrants, each of which has a distinct focus in terms of change. The top half of the figure, Quadrants 1 and 2, represents situa- tions where organisations operating in a turbulent environment need to make large-scale, organisation-wide changes to either their culture or structure. The bottom half of the figure, Quadrants 3 and 4, represents situations where organisations oper- ating in a stable environment need to make small-scale, piecemeal and localised adjustments to attitudes and behaviours or tasks and procedures. As can be seen, the left-hand side of the figure, Quadrants 1 and 4, represents situations where the main focus of change is the human side of the organisation, i.e. cultural and attitudinal/behavioural change. As argued above, these sorts of changes are likely to be best achieved through a relatively slow, participative approach, rather than a rapid Turbulent environment Large-scale transformation Q1 Q2 Level: The organisation Level: The organisation Focus: Culture Focus: Structures and processes Approach: Emergent change Approach: Bold stroke Slow transformation Rapid transformation Slow change Rapid change Level: Individual/group Level: Individual/group Focus: Attitudes/behaviour Focus: Tasks and procedures Approach: Planned change Approach: Tayloristic or Kaizen Q4 Q3 Small-scale transformation Stable environment Figure 10.4 A framework for change
  • 339. 326 Chapter 10 · A framework for change and directive or coercive one. The right-hand side of Figure 10.4 represents situations where the primary focus is on achieving changes to the technical side of the organisa- tion, i.e. structures, processes, tasks and procedures. These types of changes tend to be less participative in nature and relatively more rapid in their execution. Taking each of the quadrants in turn: Quadrant 1 identifies situations where the culture of an organisation operating in a turbulent environment is no longer appro- priate. For such relatively large-scale initiatives, where the main focus is culture change at the level of the entire organisation or large parts of it, the Emergent approach (e.g. Kanter et al’s Long March), which emphasises both the collaborative and political dimensions of change, is likely to be most appropriate. As argued in Chapter 5, attempts to change culture through top-down, directive or coercive initia- tives are liable to fail. Therefore, where they are to be successful, such forms of change are less likely to be consciously embarked on and more likely to ‘emerge’ from a host of initiatives that arise in response to changes in the environment, though this does not necessarily exclude some elements of deliberation and guidance from senior managers. Although the organisation may be operating in a turbulent environment and, therefore, individual elements of the cultural change may be rapid, the overall cultural transformation is likely to be a slow process. Quadrant 2 relates to situations where the focus is on achieving major changes in structures and processes at the level of the entire organisation (e.g. Kanter et al’s Bold Stroke). Situations where such changes are required arise for a variety of reasons. It may be that an organisation finds itself in serious trouble and needs to respond quickly to realign itself with its environment. Alternatively, it may be that an organi- sation is not experiencing a crisis, but that it perceives that it will face one unless it restructures itself to achieve a better fit with its environment. In such cases, it may not be possible or advisable to change the structure slowly or on a piecemeal basis and, therefore, a major and rapid reorganisation is necessary. Because it involves the entire organisation or major components of it, this is likely to be driven by the centre and to be the focus of a political struggle, given that major structural changes are usually accompanied by major shifts in the distribution of power. Therefore, the new struc- ture will be imposed from the top in a directive or even coercive way, depending on the balance between winners and losers. Quadrant 3 presents a different picture. This represents organisations operating in a relatively stable environment where changes to the technical side of the organisation tend to be relatively small-scale and piecemeal and with few (if any) implications for behav- iour and attitudes. Such changes take place at the individual and group level rather than at the level of the entire organisation. How these are managed will depend on the culture of the organisation. In a traditional, bureaucratic organisation, a Tayloristic approach may be adopted, i.e. specialist managers and engineers will identify the ‘best way of working’ and impose it. In a more participative culture, such as a Japanese company, a more collaborative approach may be appropriate, such as a Kaizen initiative that brings together a team comprising workers and specialists. But either is possible and it should be possible to achieve either in a relatively speedy fashion. Finally, Quadrant 4 covers relatively small-scale initiatives whose main objective is performance improvement through attitudinal and behavioural change at the individ- ual and group level. Once again, organisations in this situation tend to be operating in a relatively stable environment and, therefore, the Planned approach, with its
  • 340. A framework for change 327 emphasis on collaboration and participation, is likely to be most appropriate. However, because such changes focus on behavioural and attitudinal change, they tend to be relatively slow. Of course, it could be argued that, at the organisational level, it is difficult to iden- tify situations that involve solely cultural changes or involve solely structural changes. A similar comment could be made with regard to attitudinal/behavioural change and changes to tasks and procedures at the individual/group level. Such comments are valid to an extent, but the real issue is to identify the main focus of the change. Chapter 3 examined the work of the Culture–Excellence approach. Here it was shown that writers such as Tom Peters and Rosabeth Moss Kanter were arguing for structural change in order to promote the values and behaviours necessary for organi- sations to survive in an increasingly complex world. Therefore, though significant structural changes were recommended, these were part of the process of culture change and not an end in themselves. John Kotter, as noted in the previous chapter, advocates the need for organisations to restructure themselves on a continuous basis in order to meet the challenges of the future. At different times and in different areas, he believes that this can involve all of the types of change shown in Figure 10.1. There are also many cases, as Kotter argues, where an organisation already has an appropriate culture and where changes to its overall structure, and piecemeal changes to its component parts, are seen as working with and reinforcing the existing organi- sational culture rather than leading to its replacement. Therefore, the question of whether changes can be labelled as mainly structure-ori- entated or mainly people-orientated is partly a matter of sequencing: what does the organisation need to do first? It is also partly concerned with the extent to which environmental turbulence has a uniform effect across an organisation. As shown in Chapter 2, in the 1960s, James Thompson (1967) identified that different sections of an organisation, by accident or design, could experience different levels of uncer- tainty. On this basis, it would be perfectly feasible for some parts of an organisation to be experiencing relatively low levels of uncertainty and concentrating on small- scale, piecemeal changes whilst at the same time the overall organisation was going through a process of rapid transformation. Where does this leave us? Drawing on the work of Davenport (1993), we need to distinguish between initiatives that focus on fundamental attitudinal change and those aimed at fundamental structural change. As mentioned by Allaire and Firsirotu (1984) and as argued in Chapter 5, there is a strong relationship between organisa- tional structures and organisational cultures, and so changes in one may require corresponding changes in the other. As was also argued earlier, however, it is much easier and quicker to change structures than to change cultures. Consequently, we need to take into account the timescale for change. Culture change, to be effective, is likely to be slow and involves incremental changes to the human side of the organisa- tion. Also, because of its nature, it is likely to be participative and collaborative. Rapid change is only likely to be effective or necessary where the main changes are structural changes, or where the organisation is in such trouble that delay is not an option. In the case of structured change, this may involve some consultation but is likely to have a large element of direction from the centre. In the latter case, where the organisation is in trouble because of the urgency of the situation, change is likely to be directive and, probably, coercive.
  • 341. 328 Chapter 10 · A framework for change There is one further point that needs to be noted, and that relates to how these var- ious approaches can be used in combination. In a manner reminiscent of Mintzberg’s (1994) definition of ‘umbrella’ strategies, Pettigrew et al (1992: 297) write of instances where change is both ‘intentional and emergent’. Storey (1992) identifies the need for change projects whose outlines are decided at corporate level with little or no consultation, but whose implementation comprises an interrelated series of change initiatives, some or all of which could be the product of local cooperation and consul- tation. Kotter (1996) takes a similar perspective. He sees strategic change as comprising a series of large and small projects aimed at achieving the same overall objectives but which are begun at different times, which can be managed differently and which vary in nature. Buchanan and Storey (1997) also hint at this when criticis- ing Planned change for attempting to impose order and a linear sequence to processes that are untidy, messy, multi-level and multi-function, and that develop in an iterative and backtracking manner. This is also identified by Kanter et al (1992) when speak- ing of Long Marches and Bold Strokes. They argue that Bold Strokes often have to be followed by a whole series of smaller-scale changes over a more extended timescale in order to embed the changes brought about by the Bold Stroke. Beer and Nohria (2000) are even more explicit in arguing for the use of Theory E and Theory O in tandem. Therefore, when considering major change projects, one should not see them as being managed solely in a cooperative fashion or solely in a coercive fashion. Instead, they may have elements of both but at different levels, at different times and managed by different people. They may also, indeed probably will, unfold in an unex- pected way which will require rethinking and backtracking from time to time. A framework for choice As can be seen from Figure 10.4, what appears to be on offer is a menu approach to change whereby organisations, or more accurately those who manage them, can choose the approach which fits their circumstances. This conception of a multiplicity of approaches is in line with the call by Dunphy and Stace (1993: 905) for ‘a model of change that is essentially a “situational” or “contingency model”, one that indicates how to vary strategies to achieve “optimum fit” with the changing environment’. If we were to stop at this point, it might be considered that we had indeed made significant progress in our understanding of change; yet there would still be one essential question outstanding: what about choice? We have identified situations where these various approaches seem appropriate or not, but does that mean they cannot be used in other situations and does that mean that the context cannot be changed? Supposing organi- sations, whose management prefer a cooperative approach, find themselves seriously out of alignment with their environment: is their only option rapid and coercive struc- tural change? Or, alternatively, where managers prefer a more directive, less participative style, are they compelled to adopt a more participative style and culture? These questions revolve around two issues. The first issue concerns the extent to which an organisation can influence the forces driving it to change in one direction or another. If we accept that the speed and nature of the changes that organisations are required to make are dependent upon the nature of the environment in which they are operating, then choice will relate to the extent that organisations can influence,
  • 342. Conclusions 329 manipulate or recreate their environment to suit their preferred way of working. This is a subject that has been examined a number of times so far, especially in Chapters 5 and 6. The conclusion reached was that organisations could influence their environ- ment, either to stabilise or to destabilise it. If this is the case, then the important question is not just how organisations can do this, but whether, finding themselves in trouble, they have the time to influence their environment? This leads on to the second issue: to what extent and for how long can an organi- sation operate with structures, practices and cultures that are out of line with its environment? The answer to this question revolves around Child’s (1972) concept of equifinality. As discussed in Chapter 6, equifinality ‘quite simply means that different sorts of internal arrangements are perfectly compatible with identical contextual or environmental states’ (Sorge, 1997: 13). This does not imply that any structure is suit- able for any environment. What it does suggest, though, is that total alignment between structure and environment is not always necessary. The duration for which this non-alignment is sustainable will clearly vary with the degree of non-alignment and the circumstances of the organisation in question; at the very least, however, it does offer organisations the potential to stave off realignment for some time during which they can influence or change their circumstances. It follows that Figure 10.4 depicts not only a framework for change but also a framework for choice. In summary, therefore, what we can see, as Pettigrew (2000) suggested, is that the debate between Planned change and Emergent change is too narrow. It is too narrow in the sense that there are other approaches to change that organisations have avail- able to them; in particular, it tends to ignore the more coercive and directive approaches to change that, in many organisations, may be more prevalent than more cooperative ones. It is also too narrow in the sense that it assumes that change is uni- directional, i.e. is driven by the environment. Organisations do have the opportunity to make choices about what to change, how to change and when to change. This does not mean that all organisations will exercise such choices or that those which do will be successful. Nor, as Chapter 6 argued, does it mean that choice is not severely con- strained. It does mean, however, that those who do not recognise that choice exists may be putting themselves in a worse competitive position than those who do. Conclusions The previous two chapters examined the Planned and Emergent approaches to change, which have successively dominated the theory and, to a large extent, the practice of organisational change over the past 50 years. Chapter 8 was devoted to the Planned approach to change. It was argued that, though elaborated upon and supported by a considerable number of very useful tools and techniques, it has remained essentially true to Kurt Lewin’s original ‘unfreezing’, ‘moving’ and ‘refreez- ing’ approach. In the increasingly dynamic and unpredictable business environment of the 1980s, writers began to question the appropriateness of a top-down approach that saw the process of change primarily in terms of a ‘beginning, middle and end’ framework. In place of the Planned approach, as was shown in Chapter 9, the Emergent approach began to gain support. With its emphasis on bottom-up and open-ended change, it appeared to offer a more appropriate method of accomplishing
  • 343. 330 Chapter 10 · A framework for change the stream of adaptations organisations believed they needed to make in order to bring themselves back into line with their environment. However, Chapter 9 also showed that Emergent change may have as many shortcomings as Planned change. Nevertheless, the two approaches appear to have some striking similarities, espe- cially the stress they place on change as being a learning process. They also share a common, and major, difficulty, which is that whilst both claim to be universally appli- cable, they were developed with particular change situations, organisation types and environments in mind. The Planned approach appears to be predicated on the assumptions that organisations operate in stable or relatively predictable environ- ments, that managers can identify where change is required, that change projects are concerned primarily with group attitudes and behaviours, and that change is about moving from one fixed point to another fixed point and that the steps or phases in between are relatively clear and realisable. The Planned approach also appears to assume that organisations, managers and employees are open and frank, they wel- come involvement, and are willing to change, or that these attributes can be achieved with the application of the appropriate tools and techniques. The Emergent approach, on the other hand, assumes that organisations are open and fluid systems that operate in unpredictable and uncertain conditions over which they have little control. It further assumes that change is a continuous process of adaptation and transformation which, because of its speed and frequency, managers can neither fully identify nor effectively control centrally. Therefore, from the Emergent perspective, identifying and managing change has to be the responsibility of everyone in the organisation. This view portrays managers, who are seen as highly competent and adaptable, as capable of changing themselves from outmoded con- trollers and coordinators to new-style facilitators and partners; and employees are seen as willing to take responsibility for identifying deficiencies and implementing change. Above all, and perhaps somewhat contradictorily, change is seen as being a political process whereby different groups and individuals strive to protect or enhance their power and position. As mentioned earlier, it is on this last point – the overriding importance of power and politics in the change process – that postmodernists are most in agreement with the Emergent approach and realists most in disagreement. As Chapter 8 showed, the Planned approach has had a considerable impact on organisation practice since its inception in the 1940s. However, despite its undoubted merits, as argued earlier, it does appear limited in terms of the situations in which it can successfully be applied. In particular, the Planned approach has been criticised for its lack of suitability to situations requiring large-scale change and/or ones where political and power considerations are prevalent. However, as was demonstrated in Chapter 9, the Emergent approach, which is seen as being suitable to such situations, also has major drawbacks, especially its heavy emphasis on the political dimension of change and its contradictory tendency, both implicitly and explicitly, to characterise change as a slow and cooperative process. It has also been argued that, even taken together, the Planned and Emergent approaches do not cover all change situations. In particular, neither approach seems suitable for situations where the primary focus is rapid and radical structural change. Instead of portraying the argument regarding the most appropriate approach to change as a contest between the merits of the Planned and Emergent approaches, the
  • 344. Conclusions 331 Framework for Change (Figure 10.4) provides an overview of the range of change sit- uations organisations face, and the approaches they are offered and the types of situations in which they can best be applied. Though this Contingency-type approach to change appears to have some merit, it is subject to the same sort of criticisms levelled at Contingency Theory in Chapter 2. However, this chapter has also argued that, if we adopt the perspective developed in previous chapters and see the environment and other organisational constraints as potentially manipulable or subject to managerial choice, many of these criticisms can be answered and new possibilities opened up. It has to be recognised that there is dis- pute between the realists and postmodernists as to what can be manipulated and the degree of choice which exists. However, this is a matter of degree; both acknowledge the existence of choice. Therefore, some organisations will find that the organisa- tional adjustments required to accommodate their position on the environment continuum coincide with the dominant view in the organisation of how it should operate. In that case, whether the approach to change adopted is Planned or Emergent, directive or cooperative, it will fit in with both how the organisation wishes to operate and the needs of the environment. Some organisations will, obvi- ously, find that the dominant view internally of how they should operate is out of step with what is required to align or re-align them with their environment. Such organisa- tions face a number of choices ranging from whether to attempt to change their structure, culture or style of management to accommodate the environment, or whether to attempt to manipulate the environment and other constraints so as to align them more closely with the dominant view within the organisation of how it should operate. Still further, there will be other organisations who face severe prob- lems either because they failed to respond quickly enough or in an appropriate manner to changes in their environment, or because the environment moved too rap- idly for an incremental approach to respond adequately. Nevertheless, by showing that a more conducive environment can be brought about, the framework also pro- vides those who wish to promote more cooperative approaches to change with the means to argue their case in situations where previously more directive and coercive measures appeared to be the only option. The concept of a Framework for Change that allows approaches to change to be matched to environmental conditions and organisational constraints is clearly attrac- tive. The fact that it incorporates the potential for managers, and others, to exercise some choice or influence over their environment and other constraints allows the model to move beyond the limitations of mechanistic and rational perspectives on organisations, and into the heartland of organisational reality. In addition, though not by accident, it is in harmony with the approach to strategy developed in Chapters 6 and 7. Nevertheless, though such a model of change has its attractions, its usefulness depends on how well it accommodates the reality of organisational life. To investigate this, the next part of the book (Chapters 11–13) presents ten case studies of strategy development and change. This is then followed, in Chapter 14, by a comparison of the case studies with this and the previous four chapters (6, 7, 8 and 9) dealing with change management and strategy. The intention in Chapter 15 is to present a model of change management that incorporates both theory and practice.
  • 345. 332 Chapter 10 · A framework for change Test your learning ■ Short answer questions 1 To what extent can we say that Kanter et al’s (1992) ‘Bold Stroke’ and ‘Long March’ approaches to change are the same as Beer and Nohria’s (2000) ‘Theory E’ and ‘Theory O’ approaches? 2 Using the headings in Figure 10.1, identify your own ‘varieties of change’. 3 Describe Storey’s (1992) fourfold typology of change. Give a real-life example of each type of change. 4 What are the main components of the Framework for Change shown in Figure 10.4? 5 Evaluate the following statement: At the organisation level, change can either be struc- ture-orientated or culture-orientated but it cannot be both at the same time. 6 To what extent and how does Child’s (1972) concept of ‘equifinality’ indicate that organi- sations may be able to control the pace at which they change? 7 Summarise the case presented in Chapters 5 and 6 that organisations can manipulate or change the contingencies they face. ■ Essay questions 1 What are the arguments for and against Pettigrew’s (2000: 245–6) comment that: ‘The duality of planned versus emergent change has served us well as an attention director but may well now be ready for retirement.’ 2 Use the Framework for Change, Figure 10.4, to analyse change in one of the case studies in Part 3 of this book or for a case of your own choosing. In particular, identify the type of change or changes involved, the selection and suitability of the approach to change and the degree to which the approach was aligned with the management style of the organisation. Suggested further reading 1 Beer, M and Nohria, N (eds) (2000) Breaking the Code of Change. Harvard Business School Press: Boston, MA, USA. This edited collection contains contributions by many of the leading thinkers on organisa- tional change. It covers the main approaches to change, including the Planned and Emergent.
  • 346. Part Three Case studies in strategy development and change management
  • 348. Chapter 11 Case studies in strategic change Learning objectives After studying the case studies in this chapter, you should be able to: ■ appreciate how small changes can have large impacts on an entire industry; ■ understand how real-life organisations develop and implement strategy; ■ describe how organisations can reinvent themselves; ■ discuss the traps that organisations can fall into when seeking to bring about strategic change; ■ show how staff can be motivated or demotivated by different approaches to strategic change; ■ appreciate that managers can exercise considerable choice in terms of their organisation’s strategy; ■ identify the positive and negative roles played by managers in developing and implementing strategy; ■ discuss the implications of internationalisation and globalisation on organisation strategy. Introduction The five chapters in Part 2 of this book examined approaches to strategy develop- ment and change management by leading theorists and practitioners. Chapters 6 and 7 described the origins and development of strategic management, showing how it had moved from being considered as a rational perspective solely concerned with product–market issues, to a situation where there are radically differing per- spectives on its purpose, function and efficacy. The quantitative rationality of the Classical approach is still very much in evidence, but it has been challenged by the fatalism of the Evolutionists, the pragmatism of the Processualists and the societal perspective of the Systemicists – though no one now appears to doubt the need to view organisations in their entirety, rather than being merely concerned with exter- nal variables. In a similar way, Chapters 8 and 9 described the development of
  • 349. 336 Chapter 11 · Case studies in strategic change change management, showing that many theorists and practitioners see it as having moved from being a planned, predictable and rational process to one that is inher- ently unpredictable and where politics and power have a major role to play. In Chapter 10, the concluding chapter of Part 2, however, it was argued that the various approaches to strategy development and organisational change all have their draw- backs as well as benefits. It was also argued that none of these approaches has universal applicability; all are situation-dependent. Successful change, therefore, requires organisations to choose the most appropriate approach for their circum- stances or, as was emphasised, to change their circumstances to accommodate their favoured approach. This chapter presents four case studies that focus on strategic change at the indus- try and organisational levels. In particular, the case studies draw attention to the challenges that new technologies, especially the Internet, and internationalisation and globalisation are having on organisations. Case Study 1 looks not at an individual organisation but at an entire industry – the music industry. This shows how rapidly the Internet is transforming the industry and the difficulties faced by existing companies in maintaining their competitive position. It also shows that there is a deep division between those who see the Internet as another way of making money and those who see it as a way of creating sharing communities. Case Study 2 focuses on the disastrous experience of Marconi. This was a company that, as GEC, had been primarily focused on the heavy electrical industry, consumer goods and defence. At the end of the 1990s, new managers tried to transform it into a telecoms equipment company that could take advantage of the Internet age. Within a space of two years, most of the old businesses had been sold, billions of pounds were borrowed and spent on new telecoms businesses and, when the dotcom bubble burst, the company was left virtually bankrupt and its shareholders penniless. Case Study 3 examines the experiences of the Danish hearing-aid manufacturer, Oticon, which reinvented itself literally overnight. This is a company singled out as an outstanding example of transformational change by no less a person than Tom Peters (1992: 206): ‘ … the transition at Oticon to a radically new form of organization has been smoother than almost anyone would have imagined’. Unlike Marconi, Oticon’s story is one that highlights that visionary leadership can be successful, and that organisations can break out of the industry standard approach and, de facto, change the rules of the game. Case Study 4 focuses on the privatisation of the Public Power Corporation (PPC) of Greece. This shows the various steps that were taken to privatise the company and concomitant organisational changes. It also shows the influence of the European Union in setting the ground rules for how the company should operate and, in effect, how it should be structured. The chapter concludes by discussing the implications of the case studies in the light of the constraints on managerial choice identified in Chapter 6. It is argued that breaking out of constraints and exercising choice, especially where this challenges the status quo, requires special qualities from a manager.
  • 350. Case Study 1 · The Internet and the P2P Revolution in the music industry 337 Case Study 1 The Internet and the P2P Revolution in the music industry1 Background Though the creation of music is as old as mankind itself, in its commodity form, as a saleable product, it is a relatively recent phenomenon. The market for music began with the sale of sheet music in the nineteenth century. In the twentieth century, with the emergence of and demand for recorded music in the form of vinyl records, cassettes, CDs, etc., the market expanded enormously to become a global industry (Gillett, 1996). Whether in Moscow or Miami, Paris or Peking, London or Lusaka, the same records are being listened to and the same companies are supplying them. However, though the physical product itself may have changed, the distribution channels and the division of labour within the industry have remained relatively stable: artists create music, record labels promote and distribute it and the fans consume it. As this case study will show, however, the advent of the Internet, and related software developments, is causing a seismic shift in the way music is distributed, and is threatening to sweep away the dominance of the big five record labels. The credit or blame, depend- ing on whether you are a music industry executive or a music fan, will go to Shawn Fanning. Fanning is the classic American computer geek who dropped out of college because he wanted to spend his time developing a computer program which would make it easier to find and swap music via the Internet. He called the program, and the company he launched, Napster after his school nickname. Napster quickly became one of the legends of the Internet. As Alderman (2001a: 4) commented: The program launched in June 1999 and took off with unprecedented speed. For many, using Napster was an epiphany. One would fire it up, type in a song and instantly be connected with possibly thou- sands of other users who had what you wanted. Sure, you could get the studio version of Led Zeppelin’s Whole Lotta Love. But if you were on at the right time, you could also get live versions of the song recorded in LA in 1977, San Francisco in 1975 or Tokyo in 1972. You might also get the new Radiohead or Eminem album weeks before their official release dates. Millions did. Using Napster was easier than going to a record store, and easier than ordering records online, and it allowed the discovery of music in ways that had not existed before. Record stores, for instance, didn’t give you the opportunity to identify the cool people and investigate what else they were listening to. If there was another Napster user whose songs you liked, you could check what other music they had on their hard drive and send them instant messages. As a bonus, the whole Napster experience (excluding the computer and net costs) was free. The industry’s response was incredulity and, initially, inaction. As will be described below, there are two competing views of the Internet. One is that it will allow companies to increase their service provision and make greater profits. The other is that it will allow individuals to create a community of equals where they can exchange ideas, products and services on a no-cost, Peer-to-Peer (P2P) basis. With Napster, idea of P2P song-trading took off in a big way. The Napster software was very simple to use. You installed it, you placed your favourite music files in a folder on your hard disk and then connected to the Internet. Immediately, through Napster’s centralised indexing system, MusicShare, you had access to every other Napster user’s MP3 files (and they to yours). All the files were automatically catalogued on the Napster server and, through its search engine, anyone could connect to anyone else’s drive and download their music. What Napster really did was to index and manage distributed data resources. Napster was essen- tially an index site. The company compiled a list of Napster software users and the songs they possessed and made the list available to other users when they installed the Napster software. A user simply searched for the music they wanted and then downloaded it directly from the computer 1 This case study is based on work carried out with Gary Graham of the Manchester School of Management and Glenn Hardaker of Huddersfield University Business School. A fuller version of this case can be found in Graham et al (2002).
  • 351. 338 Chapter 11 · Case studies in strategic change on which it was located. The search and download were free to the user, and Napster did not have to touch the file. What’s the big deal? After all, it is just a computer program. True – but at its height in 2000, more than 80 million users per month were treating themselves to free music (Gibson, 2003a). Not surprisingly, the industry was not inactive for long. Whilst Napster might seem a cool idea to its millions of users, to the big record labels it meant piracy on a scale that could eventually lead to their bankruptcy. The music industry and the Internet Record-making is economically as well as technically a complex process. Like books, films, televi- sion and other art forms, music is rarely just a product. Not only is it difficult to identify, develop and manage successful artists, the artistic value (and therefore the commercial value) of records depends upon their consumers’ aesthetic preferences, which are neither stable nor predictable. Just because an artist has sold millions of records in the past does not mean they will in the future. The reverse is also the case. Before getting a record contract, even the biggest-selling artists, such as the Beatles, have usually been turned down by a number of record companies who failed to spot their sales potential. Over the last 50 years or so, the music industry has been dominated by five big record labels. Even though they may own or heavily influence the distribu- tion and promotional channels for music, such is the competition between artists that only a few become successful, and then often only for a short period of time. Therefore, though the record labels are often accused of exploiting artists and taking the lion’s share of the profits from their work, the labels also have to bear the main financial risks for the 90 per cent of artists who are not successful (Alderman, 2001a; Caves, 2001). However, the potent combination of the Internet and programs like Napster are changing all that. For organisations involved in any form of distribution, the Internet offers the opportunity to replace ‘bricks’ with ‘clicks’ and thus improve their competitiveness (profitability) by removing stages in the distribution process. For example, developments such as on-line banking, insurance and bookshops are already calling into question the need for their high street, physical equiva- lents. In terms of the music industry, the ‘clicks’ versus ‘bricks’ issue is particularly acute in that the on-line delivery of music is transforming the industry’s supply chain and could lead to the elimina- tion of its physical manifestations such as CDs, record shops, etc. Therefore, for many organisations, the Internet as a distribution channel is seen as a way of improving their profit margins (Mintzberg et al, 1998; Porter, 2001). As mentioned above, however, the value-creating, profit-centred model of the Internet was not how it was originally envisaged and is not the only way of looking at its potential. The World Wide Web was created in the 1990s by British scientists to allow academics and scientists to share knowledge more easily, not as a mecha- nism for businesses to make more profits (Alderman, 2001b). Table 11.1 shows that there are two very distinct approaches to using the Internet. Approach 1 sees the Internet as a Value System. Proponents of this view see it as just another means for organisations and individuals to gain com- petitive advantage and pursue profit-making activities. Approach 2 is more in line with the intentions of the Internet’s originators. This Network-Based view rejects the idea that profit-making is, or should be, the most important motivation of interacting parties in virtual markets. Commenting on this, Markus et al (2000: 14) give the example of the ‘virtual open source software movement’ as individuals and organisations who are motivated more by altruism, reputation and the personal benefit of using and sharing an improved software product than by the pursuit of profit.
  • 352. Case Study 1 · The Internet and the P2P Revolution in the music industry 339 Table 11.1 Differing perspectives on the Internet Approach 1: Value System Approach 2: Network-Based Cost and value approaches based on the Cooperative perspectives based on individual firm as a competitive unit multi-firm integration Value chain framework Multi-agent modelling Virtual value Supply chain networks Virtual markets Architecture sharing Building a virtual chain B2B hub Enterprise technology Virtual communities Virtual organisation Open sourcing Virtual organising On-line communities Virtual integration Vertical nets Value webs Functionality Value creation e-Procurement P2P exchange Source: adapted from Graham et al (2002) As Table11.1 shows, the terms used by proponents of the competitive, profit-centred, value system approach to the Internet and those used by proponents of the network-based, cooperative approach are significantly different. Table 11.1 shows that the key themes for proponents of the value-system approach tend to be economic and related to value creation (profit-making) at the organisation level. The network proponents, on the other hand, appear to be much more con- cerned with using the Internet to develop sharing communities rather than profit-making organisations. The various initiatives to use the Internet for more cooperative and less profit-cen- tred activities can be encompassed under the broad heading of a supply chain networks (SCN) approach. A supply chain network is a series of processes (also called tiers, states or phases) owned by one or more enterprises in order to promote information-sharing through the construc- tion of a ‘virtual organisation’ (Strader et al, 1998). The use of P2P technology to swap music files on the Internet is a classic SCN, and the fact that it might contravene copyright law appears not to trouble its originators or users one jot. It would be an overstatement to see all proponents of the value-system approach as being solely driven by the profit motive and all proponents of the network approach as being selfless ide- alists. As Table 11.1 shows, however, there is a distinct tension between those who see the Internet as just another mechanism for enabling organisations to develop their profit-making activities, and those who see it as an opportunity to create communities in which sharing rather than profit- making is the prime rationale for their existence. As will be seen with the following discussion of the music industry, these very different approaches have significant implications for existing businesses. The changing nature of the supply chain for music Prior to the advent of the Internet, the supply chain for popular music comprised three main activi- ties: the creation of music; the marketing of music; and the distribution of music (Parikh, 1999). It is the record labels that dominate the supply chain for music rather than the artists who actually create the music. This is because it is the record labels who control access to, and in some cases actually own, the major distribution and marketing channels. According to Parikh, it is the dominant position of the labels that prevents artists from independently distributing their own material, and
  • 353. 340 Chapter 11 · Case studies in strategic change it is this dominant position that explains why the labels collect approximately 85–90 per cent of the profit from music sales. Parikh (1999) also argues that the current structure works against the interests of consumers. This is because the number of intermediaries and elements between the artist and the consumer make it relatively inefficient. Whilst each stage in the chain adds costs, it is not clear to what extent they provide any added value for the consumer. It is this potential to remove cost, without neces- sarily removing value to the final consumer, that makes the supply chain for music ripe for transformation by the Internet. Mougayar (1998) maintains that one of the key driving forces behind the growth of electronic commerce is the potential to reduce both distribution costs and value system inefficiencies. He contends that the greater the number of intermediaries between those who make a product and those who consume it, the greater the mark-up on the final price paid by the consumer. It can, therefore, be assumed that fewer intermediaries would result in a reduction of ‘mark-up’ pricing. Consequently, in the case of the music industry, the removal of some or all of the intermediaries should result in more of the profits flowing to the artists and less costs flowing to consumers. As Amazon.com has shown with books, and latterly with music, the Internet does offer the potential to remove some layers and elements in the distribution channel for music. As with books, the need physically to produce and distribute music, in the form of CDs and cassettes, has nevertheless limited the extent to which intermediaries can be eliminated and costs reduced. However, the advent of digital technology in the 1980s, which enabled music to be recorded and stored digitally in the form of CDs and minidiscs, also allows it to be transmitted digitally via the Internet. This development is taking layers out of the supply chain for music, and thus threatening the livelihood of those involved in manufacturing and distributing physical products such as CDs. But, as such, it does not threaten or challenge the dominance of the record labels, who still retain control over production and distribution. By itself, so long as consumers download and pay for copyrighted musical content through legitimate online trading organisations, this would not be a problem for the record companies. Indeed, the Internet offers enormous scope for the music industry to bring music to a wider public, afford niche artists access to their audiences, and distrib- ute old, new and unusual music at affordable prices. What does threaten the dominance of the labels, however, is the advent of P2P music-swapping technologies such as Fanning’s Napster. These developments enable consumers to bypass the record labels by swapping music files directly between themselves without any money flowing to the record labels. P2P offers enormous scope to music pirates. Music piracy is not new; however, according to Magex (2000a) what really scares the music industry is the sheer scale and ease of the piracy allowed by the Internet. P2P technologies, in theory and increasingly in practice, make it possible to download (i.e. pirate) any piece of music without paying for the privilege of doing so. Magex (2000b), relates that Napster users could access between 500,000 and 800,000 indi- vidual tracks of music. It is easy to see what scares the music industry about this type of P2P swapping of music: in theory, if one person buys a recording and places it on their hard drive, they can then make it available, free of charge, to everyone else in the world. This means that there is virtually no way to guarantee that record companies, artists, or the distribution chains get paid for the music. Certainly, since the advent of programs such as Napster and similar ones, music sales have declined significantly (Gibson, 2003a, 2003b). The US music industry’s income fell from $14.6bn in 1999 to $12.6bn in 2002. The industry blames Internet piracy for most of this drop in sales (Teather, 2003).
  • 354. Case Study 1 · The Internet and the P2P Revolution in the music industry 341 Therefore, on the one hand, the Internet offers an enormous potential to reduce the complex- ity and the cost of music production and distribution by eliminating the need for CD manufacturers, music shops, transportation, etc. On the other hand, it facilitates piracy on a scale previously unknown, which threatens to have a significant and adverse impact on the income of the record labels. The music industry is responding to the challenge of the Internet in two ways. Firstly, in an attempt to stop Napster and similar organisations from facilitating music-swapping, it took Napster to court for copyright infringement (Greenberg and Erios, 2001). Though this led to the closure of Napster, it does not appear to have diminished the growth in music piracy. This is why the music industry in the US is also threatening to take the individuals who use such music- swapping facilities to court as well (Teather, 2003). The second form of response by the industry has been for the big labels to set up their own online subscription services for music (Gibson, 2003a, 2003c). However, this in itself is not with- out perils. For example, it could even aid piracy by making it easier to obtain the ‘first’ copy of a music file, which can then be passed on to anyone. In addition, in January 2002, a judge, presid- ing over a case brought by Napster against the Recording Industry of America, gave Napster leave to explore whether the record labels were working together, i.e. conspiring, to prevent Napster from licensing music for online distribution (Hammersley, 2002). Nevertheless, research undertaken by Hardaker and Graham (2001) concluded that the com- bination of technological developments, consumer preferences and industry economics means the record labels have no choice but to adopt a subscription-based, as averse to a product-sales- based, model for supplying and being paid for music. The subscription-based approach envisages that, for a monthly fee, customers can download a set number of recordings directly to their PCs, portable devices, home stereos and even their cars. Therefore, in theory, the music industry can benefit from and should welcome the technology promoted by Napster and other similar organi- sations. However, the key practical problem for the music industry is getting people to pay a subscription for something they can already download for free from the Internet. Summary As a means of transforming the supply chain for the purchasing and delivery of products and serv- ices, the Internet is becoming, and in some industries has already become, a dominant force (Hardaker and Graham, 2001). As the above discussion shows, the ability of the Internet to remove cost-adding activities whilst retaining those that add value is enormous. Nor is it just an issue of cost: the Internet also significantly increases the speed and convenience of doing business, and it allows consumers much greater access to products and service than ever before. Even distance is no longer the obstacle that it once was, especially in those industries supplying information-based products. It does not necessarily follow, however, that those who have been the dominant forces in traditional supply chains will remain so in the virtual era. The record labels have been the dominant forces in the supply chain for music for most of the last 100 years. Their preferred option for the virtual music chain is for them to remain as the intermediary between artists and consumers, retaining control over the artists who create the music, and distributing music digitally through the Internet on a sub- scription basis. For the labels, this would have the benefit of eliminating cost-adding activities, such as CD production and music shops, whilst still allowing them to retain control over value-adding activi- ties and so ensuring they continue to receive the lion’s share of the profits. The emergence of P2P technology, however, represents a second option, one which challenges the role and dominance of the record labels. As Hammersley (2002: 4) observed: ‘For something
  • 355. 342 Chapter 11 · Case studies in strategic change that sounds like so much technology jargon and hype, peer-to-peer technology (P2P) is the fastest growing idea in the history of computing.’ With or without the aid of organisations such as Napster, P2P technology is available to anyone and everyone on the Internet. It is now possible for anyone to swap music files with anyone else in the world without any payment either to the record labels or to the recording artists. This may not be a life-and-death issue for the artists who have other income streams, who only receive a small percentage of profits from their record sales, and whose loyal fans may, in any case, be willing to pay them directly for their music. However, for the labels, who take 85–90 per cent of the profits from record sales, it could well signal the end. This sort of development is, of course, in line with the more egalitarian, more cooperative view of the Internet advocated by supporters of the supply chain network approach. Although this piracy of music is ille- gal, given the unregulated nature of the Internet, it may be unstoppable. There is a third option, which could also lead to the record labels being bypassed in the virtual supply chain: this is that artists could take control over the production and distribution of their own music, completely cutting out the ‘middle man’. Many leading artists are highly critical of the role of the record labels, believing that it is the labels, through their contractual arrangements, who are the real pirates stealing money from the artists (Alderman, 2001a). The Internet offers the oppor- tunity for successful, and even not so successful, artists to distribute their music directly to their fans. Indeed, some artists have already experimented with this mode of delivery. Whilst this is per- fectly legal, it is likely to prove no more popular with the record labels than the P2P option, though both artists and fans might welcome it. The potential for the Internet to transform the music supply chain has been heralded for a number of years (Gillett, 1996). What we can now see is that the potential has become a reality. What we can also see is that the Internet is not just cutting out costs and increasing the speed of transactions, it is also challenging the traditional power relations in the music industry. Underpinning this is the clash of two very different views of the Internet which was discussed ear- lier. P2P technology and the possibility of artists using the Internet to distribute their own music, either on a no-cost or low-cost basis, fits in well with the network-based view. On the other hand, the provision of an Internet subscription service by the record labels fits in more with the value systems approach to the Internet. In theory the two are not incompatible, but as the case of the music industry shows, in practice they may well be so. Where this will lead is difficult to predict but one thing is clear – now the P2P genie is out of the Internet bottle, the music industry will never be the same again.
  • 356. Case Study 2 · The rise and fall of Marconi 343 Case Study 2 The rise and fall of Marconi Background There can be few who are not aware of the spectacular crash of Marconi, which, in the space of two years, went from a share value of £12.50 to under 2p, a stock market valuation of £35bn to just a few million pounds, and a profit of £750m to a loss of some £5.6bn, one of the biggest in UK corporate history. Marconi grew out of GEC, the giant industrial conglomerate built by Arnold Weinstock. In a period when the UK’s industrial competitiveness, and its base, declined, GEC was one of the UK’s leading and most successful industrial enterprises. Weinstock, who died in 2002 at the age of 77, created GEC and was the UK’s leading industrialist for over 30 years. Weinstock graduated from the London School of Economics in 1944. He worked for the admi- ralty for three years before moving into property development. In 1954, he joined his father-in-law’s firm, Radio and Allied Industries, where he built a strong reputation for his managerial abilities. In 1961, the firm made a reverse takeover of the larger but struggling GEC. Weinstock became GEC’s Managing Director, a post he held for over 30 years until he retired in 1996. In his period as Managing Director, he turned GEC into one of the great British success stories, through a combina- tion of acquisition and organic growth. In 1961, GEC took over AEI, and in 1968 they bought English Electric, the owners of Marconi. GEC’s acquisitions continued into the 1970s and 1980s. Under Weinstock, GEC acquired a portfolio of solid, well-regarded and profitable companies, includ- ing Hotpoint, Avery, Metropolitan Vickers, Yarrow Shipbuilders and Marconi. GEC’s last purchase under Weinstock was the VSEL shipyard at Jarrow, reflecting its commitment to maintaining the strength of its defence businesses, which accounted for some 50 per cent of sales and profits. Weinstock had a knack for running businesses profitably where others had failed. This was down to his famously intimidating management style, which produced profits and, in the early years at least, gained him much praise from financial markets. For their time, his methods were revolutionary, at least in the UK. He was legendary for tight control of cash and focus on financial measures. He moved cash out of the separate GEC businesses and held it in the centre. He drove and monitored each business on their financial performance. Budgets became key growth mecha- nisms that put managers under enormous pressure to deliver on their forecasts. By ruthlessly cutting out overheads, introducing tight financial controls and forcing managers to think intelli- gently about their businesses, GEC grew in size and increased shareholder value. Throughout his period in charge, GEC profits grew. Indeed, in 1990 –1992, when the UK economy was undergoing one of its worst recessions, GEC broke the £1bn profit barrier. Despite this, however, in the 1990s, GEC and particularly Weinstock became increasingly unpopular with investors in the City of London. GEC was a massive, sprawling industrial conglomerate when these were hugely unfashion- able. Driven by academics and consultants such as Tom Peters and Rosabeth Moss Kanter, and break-up specialists such as Lord Hanson, managers were told that they had to identify their core busi- ness, ‘stick to the knitting’ and sell off non-core activities to release shareholder value. This went against Weinstock’s business philosophy. He was not particularly interested in whether there was synergy between the various GEC businesses. In GEC, he had created a company composed of businesses that were leaders in their fields, made steady and consistent profits and which were, to an extent, insu- lated from wilder economic fluctuations. It was anathema to him to sell a business that had a profitable future or to buy one that was overpriced or unlikely to perform. In the early 1990s, he looked at many companies, but bought few. This approach did not please the markets, which seemed enamoured of companies that sold, spent and borrowed. However, the performance of the companies he turned down appeared to justify Weinstock’s parsimonious approach (Owen, 2002). It also enabled the com- pany to build up a cash stockpile of over £2bn, but strangely enough, this also attracted criticism.
  • 357. 344 Chapter 11 · Case studies in strategic change Two of the City of London’s main ways of making money are to lend it or to charge for their services in mergers and takeovers. GEC’s stockpile of cash meant it did not need to borrow money, and Weinstock’s insistence that he would not buy companies that were either overpriced or did not fit into GEC’s portfolio appeared to enrage the City money men. There was also a common view in the City that GEC had missed the high-tech boat and that it was stuck in the ‘old economy’ when the smart money was moving into the ‘new economy’. Certainly, as Heller (2002) commented, there was a downside to Weinstock’s tough financial, risk-averse regime in that it appeared to discourage inter-company working in the GEC empire. Though GEC had a toe- hold, and sometimes a lot more, in the various technologies and markets that would allow companies such as Nokia, Intel and Dell to become giants of the Internet era, it never quite man- aged to link them together or develop them enough to establish itself in the new economy. Having passed the age of 70, Weinstock was finally pressured into resigning as GEC’s Managing Director in 1996 and became its President Emeritus. Under pressure, he recruited George Simpson as a replacement. However, he saw this as an interim measure until his son Simon was ready to take over. Simon Weinstock’s sudden death in late 1996 changed these plans and George Simpson became undisputed head of GEC. Simpson had run and sold both Rover and Lucas, was much admired in the City of London, and was considered to have the entrepreneurial qualities needed to reinvigorate GEC. Whatever criticisms there were of Weinstock in his later years, his legacy was huge. Not only had he built an enormously successful industrial conglomerate in a period when British industry was in decline but also, as Brummer (2002: 1) commented: The fact that Britain is still a leading player in the global power industry, and has a world-class research- based defence industry, can largely be attributed to his precocious skills. The rise and fall of Marconi Simpson bought into the popular view that GEC needed to get out of the old economy, charac- terised by its involvement in defence and heavy engineering, and into the new, high-tech world of telecoms and the Internet. He believed it also needed to stop being a UK/European company and become a global player. As he later said: What else were we going to do? The old GEC had had it and everyone told us that focus was what was needed. Telecoms was the obvious industry to expand into. (quoted in Harrison, M, 2002: 24) He began to bring in his own people, notably John Mayo as Finance Director. Mayo had been an investment banker before moving to Zeneca as Finance Director, from where he was recruited by Simpson. It was Simpson and Mayo who charted GEC’s push into the new dotcom economy through a whirlwind series of sales and acquisitions. The crucial period was 1999 to 2001. In 1999, GEC divested itself of its defence business to BAe. This halved the size of GEC and sold off its most consistently profitable elements. To mark this momentous step, GEC was renamed Marconi to signal its intention to become a leading telecoms company, and began a process of acquiring new businesses in the then growing international market for high-capacity telecoms net- works. Simpson and Mayo believed, like many more, that the future lay with dotcom companies, and they wanted a big share of it. Not only did they spend the proceeds from selling businesses they did not want and the money that Weinstock bequeathed them, but they borrowed over £4bn
  • 358. Case Study 2 · The rise and fall of Marconi 345 as well. In the three years up to the middle of 2001, they sold off almost all of Marconi’s non-tele- coms business, i.e. the vast majority of the old GEC, and purchased over 20 telecoms businesses, for prices ranging from a few hundred million to a few billion pounds. Mayo stated that: The common theme between our [new] core businesses is the ability to securely capture, manage and communicate enormous amounts of data. The ‘data wave’ is turning into a tidal wave and we have positioned ourselves to ride the wave. (quoted in Gow, 1999c: 25) At another time, the speed of Marconi’s transformation into a rapidly-growing telecoms equipment provider might have been a cause for concern. But this was taking place at the height of the dotcom bubble. It seemed that everyone wanted to have a slice of the telecoms/Internet cake and was not too concerned how much they paid. Rather than worrying the financial markets, Marconi’s splurge of buying, selling and borrowing seemed to please them enormously. The share price soared to £12.50 and Marconi were the darlings of the financial markets. However, this was short- lived. By late 2000, whilst Simpson and Mayo were still issuing optimistic forecasts of what was to come, other telecoms companies such as Nortel, Alcatel, Nokia and Ericsson began issuing sales and profit warnings as the telecoms recession, and the dotcom collapse, began to bite. Almost to the last, Marconi denied there were any problems, but in July 2001 it asked for its shares to be sus- pended ahead of a profits warning, a highly unusual move for a FTSE 100 company. Though Marconi’s profits warning was clearly going to damage the company’s standing, the lateness and severity of the warning led to a disastrous fall in the share price, a rapid exit from the Board of senior staff and the virtual destruction of the company. Indeed, such was the concern for the way the Board handled the profits warning that the UK’s financial watchdog, the Financial Services Authority (FSA), conducted a lengthy investigation into it. Its report was issued in April 2003. The FSA pointed out that the company had a legal obligation to keep the market informed of price-sensitive information in a timely manner, and that, in this instance it had not, and had therefore broken the FSA’s rules. Treanor and Wray (2003) reconstructed the events leading up to and just after the profits warning: 17 May 2001 Marconi says the first six months of 2001 are unlikely to show an improve- ment on the previous year’s figures. 12 June Trading figures show a 10 per cent decline for April and May. No public state- ment is made. 21 June Accounts for April and May show a loss of £180m, £156m more than the previous year. No public statement is made. 26 June The financial forecast for the six months to September 2001 show a loss of £47m, as averse to the £320m profits that analysts had predicted. The fore- cast also shows that profits for the year to March 2002 will be £491m as against the predicted £807m. The Board disputes these figures and asks for them to be recalculated. No public statement is made. 28 June A Board meeting is called for July 4. 30 June The revised financial forecasts are even worse than those presented to the Board on June 26. Full-year profits are projected to be only £272m, and half-year losses have risen to £121m. No public statement is made.
  • 359. 346 Chapter 11 · Case studies in strategic change 4 July At 7.40 am, Marconi asks for its shares to be suspended pending a meeting of the Board at 4 pm. At 6.41 pm, the Board issues a statement saying that profits are likely to halve, with sales down 15 per cent. 5 July When the markets open, Marconi’s shares fall by nearly 50 per cent. John Mayo tells investors that business will recover in 2002 when the telecom networks ‘will be running so hot they’ll fall over’ and that there will be no change in Marconi’s management. Marconi’s share price continues to col- lapse. At 9.40 pm John Mayo resigns. Two months later, George Simpson also resigned. Both men received substantial payoffs. As a Leader in the Financial Times (2003: 20) stated, ‘we can only speculate whether more could have been saved had directors been quicker to acknowledge that their headlong rush into telecoms obliv- ion was flawed.’ Regardless of this, the events of June and July meant that, for Marconi, the dotcom bubble had burst with a vengeance. From then on, it was downhill all the way. In May 2002, Marconi announced one of the biggest yearly losses in UK corporate history: some £5.6bn. Its share price plunged to below 2p (down from £12.50 at its height), making the company in effect bankrupt and its shares worthless. It then began a long process of trying to stay alive by negotiating with its creditors. In May 2003, Marconi finally agreed a debt restructuring deal with its creditors. In return for writing off over 90 per cent of the approximately £4.5bn they were owed, Marconi’s creditors received 99.5 per cent of the company’s equity. The refinanced company would be valued at just over £600m. The pre- vious shareholders would own just 0.5 per cent, thus reducing the value of their holding to £3m from £35bn at its peak, always assuming that anyone would want to buy the shares. Summary Simpson and Mayo argued that they were taking GEC through a much overdue reinvention. However, there is a world of difference between reinventing a company around its core business and spending billions to construct a new one from scratch. What Simpson and Mayo did was to sell off most of what was GEC and to use the money from the sale, and much more besides, to create a new telecoms company that could rival established companies such as Alcatel, Siemens and Lucent. Unfortunately for them, their vision of creating a leading telecoms company came at a time when the dotcom bubble was about to burst. They made one of the classic business mistakes – they bought at the top. In the space of three years they bought some two dozen companies for billions of pounds that very quickly became almost worthless as their markets collapsed. The US company Fore Industries is a prime example of this. Marconi bought the company for £2.8bn in 1999. In 2002, a financial analyst commented that: ‘The business has very little value. If Marconi tried to dispose of it, there may even be costs associated with it’ (quoted in Hirst, 2002: 1). Marconi was brought low by the combination of massive overcapacity in the industry, a worldwide economic slowdown and the enormous financial drain on telecom operators of paying for third-generation mobile phone licences. This led Marconi’s customers, especially its biggest customer, BT, to cut their purchasing of telecoms equipment quickly and savagely. In effect, Marconi’s market collapsed. Simpson and Mayo also made another key mistake. Neither had much experience of the tele- coms industry. Simpson had made his reputation on running, and selling, Rover and Lucas, both firmly established in the ‘old economy’. Mayo was an investment banker turned finance director. They were both deal-makers with little experience of the telecoms industry. As Weinstock com- mented, ‘They knew nothing about the business they were in, and nothing about the businesses they were buying’ (quoted in Aris, 2002: 8).
  • 360. Case Study 3 · Oticon – the disorganised organisation 347 It is difficult to exaggerate the disaster that happened at Marconi. Whatever the criticisms of the old GEC, when Weinstock handed over power in 1996, it was a strong and profitable company. The parts that were sold off by Simpson and Mayo still appear profitable. On the other hand, by 2002, the new Marconi was bankrupt and worthless. When he stepped down, Weinstock was the biggest private investor in GEC, with some 45 million shares valued at over £400m. At the time of his death in 2002, these were practically worthless. Simpson and Mayo, who were both forced out, received handsome payoffs, and appeared not to accept that they bore any personal responsibility for the Marconi deba- cle, preferring to cite bad luck, poor timing and other people for the collapse of Marconi (Harrison, M, 2002; Hirst, 2002). Hardly surprising, therefore, that Weinstock commented: ‘I’d like to string them up from a high tree and let them swing there for a long time’ (quoted in Aris, 2002: 8). Case Study 3 Oticon – the disorganised organisation2 Background Oticon, a Danish company founded in 1904, was the first hearing instrument company in the world. In the 1970s, it was the world’s number one manufacturer of ‘behind the ear’ hearing aids. However, as the market for ‘in the ear’ products grew in the 1970s and 1980s, its fortunes plum- meted and it lost money and market share. In 1987, so poor was the company’s performance that it lost half of its equity. The basic problem was that Oticon was a very traditional, departmentalised and slow-moving company. It had a distinguished past but it was a small company operating in a global market. Though it had 15 sites around the world and 95 distributorships, the Head Office, its largest site by far, only employed 145 people. Yet it was operating in a market which had come to be dominated by Siemens, Phillips, Sony, 3M and Panasonic. More importantly, it had the wrong products. Oticon manufactured the standard ‘behind the ear’ hearing aid, but customers increasingly preferred the ‘in the ear’ variety. Also, Oticon was strong in analogue technology, whilst the market and its customers were moving towards digital technology. In addition, though the company was strong in the state-subsidised markets of Scandinavia and Northern Europe, it was weak in the more buoyant markets of America and the Far East. This began to change with the appointment of Lars Kolind as President of the company in 1988. The fact that he was only the third person to hold this post in the company’s history helps to explain its strong attachment to tradition. In his view the company had ‘been sleeping for ten years’. In the next two years, he worked hard to turn the situation round through cost-cutting measures: he pared the company down, cut staff and increased efficiency, and reduced the price 2 I am grateful for the help of Ronnie Stronge of Transform People International Communications in preparing this case study. Further information on Oticon can be obtained from its website (www.oticon.com).
  • 361. 348 Chapter 11 · Case studies in strategic change of a hearing aid by 20 per cent. By 1990, Oticon made a profit of some £16 million on a turnover of £400 million with sales growing at 2 per cent per annum. However, the market was growing at 6 per cent. More importantly, Kolind did not think the company had a future. He had been search- ing for a sustainable competitive advantage for Oticon: ‘I looked at technology, audiology. I looked at distribution strength. I looked at everything, but there was nothing we could do better than the competition’. That he arrived at this view is hardly surprising. When competing against the world’s leading electronics companies, it is very difficult to see how a small Danish company could, for example, design a better microchip for digital sound processing than Sony. Nevertheless, he did not give up. Instead, Kolind resolved to ‘think the unthinkable’. On New Year’s Day 1990, the solution came to him: Maybe we could design a new way of running a business that could be significantly more creative, faster, and more cost-effective than the big players, and maybe that could compensate for our lack of technological excellence, our lack of capital, and our general lack of resources. The vision – a knowledge-based organisation Kolind realised that the industry was totally technology-focused, and that the main thrust was to make hearing aids smaller. He, on the other hand, thought this exclusive focus on technology was short-sighted. He believed Oticon was not in the hearing-aid business per se; they were in the business of ‘making people smile’ – restoring the enjoyment of life that hearing impairment can destroy. Making people smile, he reasoned, means not only giving them a wonderful piece of technology but actually changing people’s lives for the better. To this end, the company adopted a new mission statement: To help people with hearing difficulties to live life as they wish, with the hearing they have. To achieve this requires a knowledge of people’s lifestyle and how hearing impairment affects this, and an understanding of the social stigma associated with hearing impairment and the use of hearing aids. He saw that what would allow Oticon to compete and thrive was not selling hearing aids, but providing a new holistic approach to customer care – a system that would allow a hear- ing clinic to assess hearing loss, to discuss the lifestyle needs of the person concerned, to select the appropriate hearing aid, to programme it, and to interpret the feedback from the user in order to fine-tune the hearing aid. The intent would be to allow people with hearing difficulties to lead the sort of life they wanted in their situation, whether they preferred classical music or rock music, whether they worked in a noisy environment or a quiet one, whether sound was central to their work or peripheral. Kolind had the vision for Oticon’s role in meeting customers’ needs, but he still had to find a way of implementing it. He believed the key lay in the mix of expertise necessary to provide each cus- tomer with an effective hearing aid: micro-mechanics, microchip design, audiology, psychology, marketing, manufacturing, logistics, and all-round service capability. If Oticon were to move away from merely making hearing aids and instead provide a total package of support for people with hearing dif- ficulties, it would have to develop a whole new concept in hearing-aid service. It would need to combine this expertise in a new way and add new areas of expertise to the organisation. In short, they would have to move from a technological orientation to a knowledge orientation, from a technology- based manufacturing company to a knowledge-based service business. They had to build a learning organisation where experts put aside their expertise and work as a team to ‘make people smile’.
  • 362. Case Study 3 · Oticon – the disorganised organisation 349 For Kolind, a knowledge-based or learning organisation: ... should not work like a machine, it should work like a brain. Brains do not know hierarchies – no boxes – no job descriptions; what there is is a very chaotic set of thousands of relationships tangled in with each other based on certain knowledge centres, with an interaction which may seem chaotic. It is the reflection of the brain into the organisation that creates companies that are able to manage that knowledge process. Kolind began by redefining his role as CEO. Instead of seeing himself as the captain that steers the ship, he saw himself as the naval architect who designs it. He believed that it was more important to design the organisation to act in a clever and responsible way than to control every action. On this basis, he drafted plans for the company’s future which he first presented in April 1990. He wanted to create ‘the spaghetti organisation’ – a chaotic tangle of relationships and interactions that would force the abandonment of preconceived ideas and barriers to innovation and competitiveness. The strategy Having identified the vision for the organisation, the next step was to set about fleshing out and implementing his strategy for change. Beginning with the Head Office, which comprised the finance, management, marketing and product development functions, he decided to abandon the concept of a formal organisation; instead he wanted to create a ‘disorganised organisation’. Formal structures, job descriptions and policies were seen as creating barriers to cooperation, innovation and teamwork rather than facilitating it. Kolind’s new disorganised organisation would be founded on four principles: ■ Departments and job titles would disappear and all activities would become projects initiated and pursued informally by groupings of interested people. ■ Jobs would be redesigned into fluid and unique combinations of functions to suit each employee’s needs and capabilities. ■ All vestiges of the formal office would be eradicated and replaced by open space filled with workstations that any one could use. ■ Informal, face-to-face dialogue would replace memos as the acceptable mode of communication. Therefore, Oticon got rid of departments, departmental heads and other managerial and supervi- sory positions. Job descriptions and titles and anything else that created a barrier between one member of staff and another were also eliminated. The company wanted to get rid of everything associated with traditional organisations, including budgets. The intent was to see what happened when staff were ‘liberated’ to do what they thought best. Kolind wanted everyone in the organisa- tion, from secretaries to technical experts, to work much more closely together to make things happen more creatively, faster and more cost-effectively. After 15 months of preparation, the change to the new way of working took place at 8 am on 8 August 1991. Two old buildings were abandoned and the Head Office moved into a refurbished former factory in the northern part of Copenhagen. The heart of the new Head Office was a state- of-the-art electronic infrastructure, costing nearly £30 million. The reason for beginning with the Head Office was relatively simple: this was not just where the largest percentage of Oticon’s costs were but, more importantly, where the core of its compe- tence lay. The belief was that if it could get the Head Office functioning effectively, the rest of Oticon’s somewhat scattered organisation would follow. The concept of creating chaos out of organisation and expecting anything other than a disaster to follow seems far-fetched, if not downright lunatic. Oticon also recognised the dangers in the
  • 363. 350 Chapter 11 · Case studies in strategic change course it was embarking upon. The company realised that if success was to follow, above all else, there were two elements it needed to get right: direction and human values. Direction Oticon’s management was convinced that without a clear direction that everyone understood and believed in, the company would fragment and collapse into a disorientated mass of individuals each pursuing their own course of action. To avoid this, the management and staff openly and at length discussed and debated the new strategy for the company, and the implications for how Oticon would be structured and operate. Kolind commented that: ... the entire staff discussed not only where we were going but why we were doing so, and we created a consensus among staff that not only made them know why we were doing it and what we were doing, but we also got as far as having everybody think that this fundamentally made a lot of sense … so there was consensus on the strategy. Human values As well as a consensus about the strategy, Oticon realised it also needed to get a ‘fundamental consensus about the basic human values’ of its business. After much debate, these were summed up in one sentence: We build this company on the assumption that we only employ adults, and everything we do will rest on that assumption, so we will not treat our staff as children – we will treat them as responsible adults. Underlying this simple statement was a view that adults do not have to be told when to come to work and go home or that those dealing with, for example, the Japanese market will come in later and go home later than those servicing the American market. In a similar way, Oticon’s manage- ment believed that staff would not overspend or misspend budgets and, therefore, there was no need continually to remind them of this fact or harp on about other company rules or practices. Implementing the strategy Oticon now operates on a project basis. Anyone can start a project, provided they have the per- mission of one of five senior managers. Some projects are also initiated by management. Whomsoever the idea comes from, the main criterion for acceptance is that a project is customer- focused. Anyone can join a project, provided they have the agreement of the project leader. The basic idea, going back to the concept that Oticon treats everyone as an adult, is that it is the indi- vidual’s responsibility to fill their day usefully. If people do not have anything to do, it is their job to find something useful to do – either by starting a project or by joining one. Kolind’s view of Oticon would send shivers down the spine of most traditional CEOs: ‘Hearing aids are not the core of what this company is about. It’s about something more fundamental. It’s about the way people perceive work. We give people the freedom to do what they want.’ This is perhaps why, as well as the 100 or so ‘authorised’ projects, as Kolind comments, ‘We have a lot of skunk work going on that’s not in any official priority.’ There is a saying in Oticon that ‘It’s easier to be forgiven than to get permission.’ Basically, this means, ‘If in doubt do it. If it works, fine. If it doesn’t, we forgive you.’ Communication is at the centre of this new approach to work. Partly this is facilitated by com- puter. Each desk has a computer, and these list all the projects ‘on offer’ and the team leader’s name along with the tasks involved. Usually the team leader will try and ‘recruit’ the skills he or she needs, but individuals are also expected to seek out opportunities as well. There are no demarcation lines; if an R&D specialist or a secretary wants to work with a marketing group, then all they have to do is have a chat with the project leader in order to sign on.
  • 364. Case Study 3 · Oticon – the disorganised organisation 351 The physical embodiment of this new ‘structureless’ structure is the workplace. Gone are indi- vidual offices, gone are corridors – all the walls were taken out and everyone works in the same open-plan office. Staff gather where they wish to work. Instead of individual offices, everyone has a little filing cabinet on wheels. Staff come in each morning, pick up their mobile office and trun- dle it to where they are working that day. Oticon is also a genuinely ‘paperless office’. All incoming mail is scanned into the computer and then shredded. The reason for this is simple: Oticon wants staff to move around from project group to project group as work requires. It does not want this process hindered by staff having to transport masses of paper as happens in most offices – the solution is to get rid of the paper. This requires everyone to have access to and to be able to use a computer. However, the emphasis at Oticon is on face-to-face, informal communication (although, for example, e-mail is used but not extensively). This is why the office is littered with stand-up coffee bars to encourage small, informal (but short) meetings. Three or four people will meet to discuss an issue or exchange ideas and information and then return to where they are working that day and follow up ideas and suggestions. These are usually fed straight into the computer and are available to everybody else. There is also an expectation not only that all information is open to staff in this manner, but that staff actually want to know the infor- mation. Therefore, rather than putting up barriers or operating on a need-to-know basis, Oticon tries to be transparent about all aspects of its business, whether it be new products, staff salaries or finance in general. The view is that the more a person knows, the more valuable they are to the company. Staff did not take to this radically new way of working overnight. This is perhaps not surprising. Staff were not originally recruited for their teamworking and project management skills, and some found it hard to come to terms with these new arrangements. Nor did they welcome the loss of routine and clear authority relationships or find the resultant uncertainty easy to adjust to. This was especially the case with managers for whom the loss of their power base, information monopoly and status symbols was difficult to accept. In addition, under the new arrangement, managers were reclassified as project leaders and had to compete for the best staff, rather than having their own dedicated subordinates. Some groups of staff also found it difficult to find a role in the project team environment; for some time, recep- tionists, for instance, still answered the telephone. It was also some years before this new approach was adopted outside the Head Office, though the Danish manufacturing operation, which is on a different site, did show some interest quite early. Kolind anticipated resistance and sought to overcome this by involving staff in planning the trans- formation of the company. Small groups of staff were selected to handle such projects as designing the new electronic infrastructure, locating a site for the new Head Office and selecting an architect. Also, all staff were given IT skills training. Indeed, they were all given a home PC and encouraged to identify their own training needs. One result of this was that staff formed their own PC club to work together to develop their skills. Despite this, prior to the move to the new building, Kolind found it necessary to issue an ultimatum to staff: accept the new arrangements or leave. Regardless of this carrot and stick approach, the biggest boost to the new arrangements came when staff could see they actually worked better than the old ones. One immediate benefit was that Oticon ‘found’ that it had already developed the industry’s first automatic, self-adjusting hearing aid in the 1980s. However, owing to technical problems (the solution to which was given a very low priority), lack of communication between the R&D and sales staff, and a lack of imagination, nobody seemed to have realised that they had developed a potentially world-beating product. In the transformed Oticon, this new type of hearing aid quickly resurfaced, the technical problems were rapidly ironed out, and the
  • 365. 352 Chapter 11 · Case studies in strategic change MultiFocus hearing aid, as it became known, was launched in late 1991. In the next two years, three more powerful variants of the MultiFocus were developed and its size reduced by half. To set the seal on this transformation, in December 1994, after a seminar with staff, Oticon (1994: 6) published a statement of fundamental human values (see Table 11.2). Table 11.2 Oticon’s statement of fundamental human values Oticon’s fundamental human values How do we implement them? We assume that Oticon employees want to take Whenever possible (especially within a responsibility if they get the opportunity. project), an employee chooses his task, work hours and place of work. We assume that Oticon employees want to develop We make it possible for an employee to and grow in their jobs and experience new challenges assume several tasks at the same time, if he within the company. is interested and qualified – possibly with the support of colleagues. We assume that Oticon employees want the greatest This freedom is possible because Oticon has possible freedom … the fewest rules practicable, and because we encourage staff to use their common sense instead of slavishly complying with rules. We assume that Oticon employees want to have All levels of management – technical, staff and qualified and fair feedback to their work and a salary project managers – should give honest corresponding to their contribution. feedback to their employees – negative as well as positive. We assume that Oticon employees want to be At intervals, we offer staff in Oticon shares at partners in Oticon, and not adversaries. favourable rates so that they benefit financially from the success to which they have contributed. We assume that Oticon employees want the security We make it possible for staff to improve that derives from improving themselves in their current themselves in their jobs and assume other jobs so that they are able to get another job if they – tasks in the company wherever relevant. for one reason or another – should leave Oticon. We assume Oticon employees want to be treated as Oticon’s entire way of operating is based on grown-up, independent people. this. We assume that Oticon’s employees want to Oticon is an open company where all understand how their tasks fit into the context of the employees have access to as much whole company. information as possible. We assume that Oticon employees are more We have a minimum of titles and no formal interested in challenging and exciting tasks than in career planning. We seek, however, to give formal status and titles. each employee the possibility of personal and professional development through varied and ever more challenging tasks.
  • 366. Case Study 3 · Oticon – the disorganised organisation 353 Sustaining and extending change The changes to – or rather the transformation of – Oticon started at 8 am on 8 August 1991. At the beginning, all was chaos. It took months before everyone understood their new roles, and for the organisation to cast off its old ways and begin to operate in the manner Kolind had envisaged. By 1994, however, the results were impressive: ■ 15 new products had been launched (twice as many as the company had previously); ■ new product lead time had been halved; ■ the company’s sales were growing at 20 per cent per year, after a period of 10 years without real growth and at a time when the market had begun shrinking by 5 per cent per year; ■ Oticon’s market share increased from 8 per cent in 1990 to 12 per cent in 1993. Nor did the progress stop there. In 1995, Oticon launched the world’s first digital hearing aid, the DigiFocus. This is, in effect, a four-gram computer that fits in the ear but has the processing power of a desk-top machine. Not only was this a technological breakthrough for which Oticon has won a number of major innovation awards, but it also allowed Oticon to regain its position as one of the world’s top three hearing aid producers. Also, by 1995 turnover had increased by 100 per cent on 1990 and profits had increased tenfold. For some, this would have been a time to sit back and feel satisfied. Yet Kolind was becoming increasingly dissatisfied. The launch of the DigiFocus had dominated 1995 and the long-standing project teams created to develop and launch the product had taken on an air of permanency. He believed the company was in danger of slipping back into a traditional departmental organisational form. His response to this was to ‘explode the organisation’. In an uncharacteristically directive way, Kolind instructed people and teams to relocate within the Head Office. Teams devoted to short-term business goals (such as sales, marketing, and customer service) were moved to the top floor. People working on medium-term projects (upgrading existing products, for example) and long-term research were put on the second floor. Those dealing with technology, infrastructure and support were located on the first floor. In Kolind’s words, ‘It was total chaos. Within three hours, over 100 people had moved.’ He justified this new bout of chaos by argu- ing that ‘To keep a company alive, one of the jobs of top management is to keep it dis-organised.’ As can be seen, Oticon went through major and substantial changes in the 1990s; nor were these solely restricted to its Head Office. In the early 1990s, Oticon began to extend the new working arrangements to its two factories in Denmark, and laid plans for their extension to its sales operations throughout the world. By 1997, all of its major subsidiaries in Europe, the USA and the Pacific Rim had moved into purpose-built offices designed to replicate the arrangements in its Danish HQ. The intention was to: ... set the standard for the knowledge-based sales company of the future … [through the] concept of a flat organisation, which stimulates openness, flexibility and informal communication … Though Oticon believes that its approach can be replicated in other countries, it is not blind to cultural differences. The company realised that Denmark, with a culture characterised by equality and lack of formality, provided fertile ground for its approach to work. Therefore, in extending this approach to its operations in other countries, Oticon recognised the need for cultural sensitivity. In addition to its own organisation, Oticon also developed partnership-style arrangements with both its component suppliers and the 5000 or so hearing care centres who distribute its products throughout the world.
  • 367. 354 Chapter 11 · Case studies in strategic change Such has been its perceived success that Oticon’s approach has been copied by many other organisations in Denmark, including a government ministry. In 1998, after 10 years at the head of Oticon, Lars Kolind decided it was time to move on. He left the company in a far, far stronger position than it had been when he first arrived. In almost every sense, whether financial, technological, structural and most of all philosophical, he trans- formed the company. His leaving was very amicable. As he said: I am quitting Oticon now because I feel that both the company and I will benefit from a change. There is a whole new generation of young people who are ready to run with the ball – and why shouldn’t I let them? Kolind’s departure highlights the dilemma of transformational managers: what do you do when you have transformed the company? For Oticon, success did not end with Kolind’s departure, nor does it appear to have led to any rethinking of his approach to work. Rather the reverse. Oticon is now more than ever stressing the wider ethical and social role it wishes to play. As his successor, Niels Jacobsen, stated when receiving the prestigious Employee Empowerment Pioneer Award in New York in 1998: Our goal is to do business in a manner that positively contributes to society in every country where we do business. We support the principle that industry has a responsibility for society and that we have a collective responsibility to the environment. Summary Quite obviously, Oticon must be doing something right, but what? The key to its success appears to lie in seven factors: ■ Changing the rules of the game. Oticon created a vision of where it wanted to be. Like Japanese companies such as Cannon and Honda, this was based not only on ambition but also on a deep understanding of the nature of the market in which it operates. This allowed Oticon to spot the chink in the armour of the big players, and in effect to change the rules of the game – recognising that service delivery in total, and not technological development in isolation, is what customers really want. ■ Moving to a project-type structure that fits the strategy and vision of the business. ■ Creating a whole-hearted commitment from everyone to working cooperatively and proactively. In effect, there appears to have been a wholesale cultural change at Oticon, from the senior management down. ■ Creating a learning organisation. The restructuring (or rather, de-structuring) of Oticon removed hierarchical, horizontal and cultural barriers to information flows, and created a situation where people genuinely want to exchange ideas and learn from each other. This is supported by the emphasis on informality, experimentation, innovation and risk-taking. ■ Leadership. The Oticon story appears to be one of those rare cases of genuine vision- ary leadership that transformed an organisation over a relatively short space of time and then continued to support, drive and reinforce the transformation. ■ Consistent vision. Lars Kolind had a vision of what he wanted Oticon to become. He pursued this consistently and with passion. Nor, after the new Oticon had been work- ing for some years, and was very successful, did he hesitate to take decisive action when he felt that the company was slipping back into old ways.
  • 368. Case Study 4 · Privatisation and the European Union 355 ■ Societal values. As has been mentioned previously, Scandinavia has a long history of industrial and social democracy. Denmark in particular has led the way with the creation of a strong cooperative movement. The changes that have taken place at Oticon appear to be a classic, if somewhat extreme, form of Scandinavian industrial democracy. As such, Oticon’s new way of working fits in with the societal values espoused by Denmark and other Scandinavian countries. Case Study 4 Privatisation and the European Union: the case of the Public Power Corporation of Greece3 Background In the three decades from 1945, across the world, there was an enormous increase in the size and range of activities undertaken by the public sector. This expansion included traditional public service activities, such as health and education, and embraced some traditional private sector activities, such as banking and car production. Since the mid-1970s, however, privatisation, not nationalisation, has been the order of the day. The contraction of the public sector has also been a global phenomenon. Led by right-of-centre governments in the UK and USA, the move to roll back the state has been driven by ideological and economic concerns (Hutton, 1995; Osborne and Gaebler, 1992; Talbot, 2001). Ideologically it was argued that the competition-based nature of the private sector meant that it would always provide services more efficiently and achieve greater customer satisfaction than public sector bureaucracies. The economic argument concerned the need to cut rising public sector deficits, and the accompanying tax bills, by reducing the size and cost of the public sector. As the 1980s and 1990s progressed, more and more countries joined the privatisation move- ment. From the early 1990s, Greece became one of the most enthusiastic privatisers. In 2000 it announced the privatisation of the country’s sole electricity supplier, the Public Power Corporation (PPC). The PPC was established in 1950 to provide low-cost electricity to support the expansion of the Greek economy. As a state monopoly and the country’s largest employer, it was a prime target for privatisation. However, the PPC’s privatisation was driven by the European Union (EU), which, with the creation of the European Single Market in 1992, had the responsibility for creating a level, competitive, playing field across all EU countries. 3 This case is based on work carried out with Michael Katsouros and Trefor Jones of the Manchester School of Management. A fuller version of this case can be found in Burnes et al (2004).
  • 369. 356 Chapter 11 · Case studies in strategic change What is privatisation? For such a ubiquitous term, ‘privatisation’ is not easy to define. Peacock (1984) defines it as the complete transfer of ownership from the public to the private sector. For Beesley and Littlechild (1983), privatisation takes place when a minimum of 50 per cent of an enterprise’s shares are sold to the private sector. Talbot (2001) emphasises the transfer of ownership but notes that, in the case of ‘natural monopolies’, governments usually retain regulatory control. The need for and effectiveness of regulation are contentious issues. Ayres (1995) described privatisation in Brazil as a process of converting public monopolies into private oligopolies with no beneficial impact for the public. Vickers and Yarrow (1991) identified three types of privatisation: 1 The transfer of state enterprises operating in competitive product markets to the private sector, e.g. state-owned car and aircraft companies. 2 The privatisation of public monopolies such as water and electricity utilities. 3 The contracting out of in-house services to the private sector, e.g. IT and facilities management. An important difference between the first and second types of privatisation is that, with the second type, governments frequently retain some rights of control, in the form of regulation. In the third case, contracting out, the public sector is even more directly involved, in that it is the cus- tomer for the contracted-out service and needs to ensure that it is getting value for money. Contracting out, therefore, widens the definition of privatisation to include the transfer of responsi- bility for service provision. In the USA, contracting out has tended to be the main form of privatisation. The USA has also championed the introduction of what Talbot (2001) refers to as ‘market-type mechanisms’ into the public sector. Writing of the UK, he states that: Where public services could not be privatised for structural and/or political reasons there were a number of attempts to introduce market-type mechanisms (MTMs). These included: internal contracting or quasi-contracting … internal markets … competitive sourcing … and ‘market testing’ … MTM reforms were designed to introduce some elements of ‘competition’ into public services that would in turn, it was assumed, lead to improvements in economy, efficiency, effectiveness and customer serv- ices. (Talbot, 2001: 291) It was developments such as these that led Adams et al (1996) to offer a much broader defi- nition of privatisation, to include an array of actions designed to widen the scope of private sector market activity, or the assimilation by the public sector of efficiency-enhancing techniques gener- ally employed by the private sector. The privatisation of the Public Power Corporation (PPC)4 The PPC generates 97 per cent of Greece’s electricity needs and is responsible for the transmis- sion and distribution of all the country’s electricity. It provides electricity to 6.7 million customers; it is the country’s largest employer with 35,000 staff; and had a turnover of €3bn in 2001/2. The PPC was created in 1950 when the Greek government nationalised the electricity industry, which comprised a wide variety of private companies and municipal entities. The service provided by these was unreliable, geographically patchy, expensive and suitable only for domestic lighting purposes. The Greek government saw the provision of a country-wide, low-cost and reliable elec- tricity supply for both domestic and industrial users as fundamental to economic growth. It 4 Unless otherwise stated, the statistics given in this section are taken from either the PPC’s website, www.dei.gr, or the website of the Greek Regulatory Authority for Energy, www.rae.gr.
  • 370. Case Study 4 · Privatisation and the European Union 357 established the PPC as a ‘not-for-profit’ organisation whose prime responsibility was to provide an infrastructure that could meet the growing needs of both domestic and industrial users throughout Greece, including the remotest villages and far-flung islands. Since its creation, the PPC has provided essential support to the development of the industrial, commercial and service sectors of the economy. Its expansion of electricity generating and distri- bution facilities not only provided direct employment for large numbers of people, but also aided the economic and social development of rural as well as urban areas. It also owns and operates the mines that produce the lignite which fuels 67 per cent of electricity production. In addition, its use of indigenous lignite and its promotion of renewable energy sources substantially reduced the need to import expensive oil, thus considerably aiding the country’s balance of payments. The PPC was much more than a supplier of electricity: it was an extension of the government’s economic and social policies. However, the combination of huge capital projects, a large work- force, and the lowest tariff structure in the EU, meant that the PPC consistently ran up heavy losses. By the 1990s, political support for loss-making state monopolies had dwindled in Greece, and the PPC’s position was also being challenged by EU competition policy. The privatisation process In the late 1990s, the Greek government began the process of privatising the PPC. This was influ- enced by a change of political climate within Greece, and driven externally by EU competition rules. Internally, the PPC found itself operating in an environment which looked to economic liber- alisation and the free market for economic growth. The Greek government was trying to shrink the size and cost of the public sector, which included banks, industrial and commercial concerns, and even the Athens Stock Exchange, because it was considered too big, too costly, overstaffed and inefficient. Therefore, privatisation became a key policy objective of the Greek government. This led to three successive waves of privatisation, which by 1999 were generating receipts for the gov- ernment totalling some 5.5 per cent of GDP (Stournaras, 1999). The first wave of privatisation covered banks, Duty Free Shops, the Hellenic Telecommunications Organisation and the Athens Stock Exchange. The second wave included the Corinthian Canal, the Athens Water and Sewerage Company and the Hellenic Vehicle Industry. The third wave, which began in 1999, involved the Agricultural Bank, the Commercial Bank, the Hellenic Aerospace Industry and the Public Power Corporation (PPC). The PPC’s privatisation, however, appears to have been driven more by exter- nal pressures from the EU than by internal ones. With the creation of the EU Single Market in 1992, the European Commission became respon- sible for harmonising and liberalising markets across the EU, with electricity generation and distribution being a priority (Barnard and Scott, 2002; Parker, 1998). In 1998, the EU issued a European Electricity Directive (96/92/EC) designed to guarantee security of supplies; open up markets to competition; allow large consumers the right to choose their own supplier; prevent cross subsidies between the different activities of an electricity supplier, e.g. mining, generation, transmission and distribution; and promote environmentally friendly sources of energy (European Commission, 1998). In 1999, the government passed the Liberalisation Law, which incorporated the Directive into Greek law. It also provided for third party access to the PPC’s transmission and distribution facilities, through the creation of the Hellenic Transmission System Operator (HTSO), and the establishment of the Regulatory Authority for Energy (RAE) responsible for regulating the electricity market.
  • 371. 358 Chapter 11 · Case studies in strategic change Though the EU Electricity Directive did not require the Greek government to sell off the PPC, the government began the process of transferring the PPC to the private sector. The main stages in this process were as follows: ■ In November 2000, the Greek government announced that the PPC was to be privatised. ■ On 1 January 2001, the PPC was transformed into a société anonyme (i.e. a limited company) and became the PPC SA, though the government still owned 100 per cent of the company’s issued share capital. ■ In December 2001, the PPC was listed on both the Athens and London Stock Exchanges. ■ In June and July 2002, 15% of the PPC’s shares were sold. These changes evoked a great deal of opposition. There was considerable resistance from the PPC’s workforce, who feared that privatisation would lead to job losses for some and worse terms and conditions for the rest. Employees also complained about the lack of information. As one employee in the Distribution Division stated: There is a total absence of communication between management and staff. As no part of the decision- making process takes account of the employees’ claims and wishes, employees increasingly feel that they have been marginalised by the company’s top management … This was echoed by the Employees’ Representative on the Board of Directors: It seems that this privatisation process will only benefit a small elite of managers, whilst the majority of staff will have no financial or other benefits and, as well as that, we will have to face all the negative con- sequences of this privatisation. … resistance to change, even when expressed in a more extreme manner, is the only way for our employees to attract the top managers’ attention and be taken more seriously. Public opinion was also against the sale of the PPC and other state assets (Financial Times, 2000). Even the government was split over the privatisation of the PPC. As one senior manager in the Generating Division observed: Until now, the privatisation process has been a very lengthy process. It has been much longer than it was originally intended to be, let alone the fact that it’s not finished yet. The reasons for this delay are twofold: first, the lack of strategic vision that characterises those most closely involved with the process and second, the internal conflicts among government members about future privatisation scenarios. Nevertheless, by July 2002, to all intents and purposes the PPC was operating as a private sector, profit- making company. This can be seen from the changes to its organisational structure and orientation. The restructuring and reorientation of the PPC The creation of the new PPC was accompanied by a redefinition of its mission. Out went the notion that it was there to facilitate economic and social developments in Greece; in its place the company stated that its objectives were to: … maintain leadership in the Greek electricity market, improve the efficiency of its operations, rational- ize its capital expenditure and explore growth initiatives. (Public Power Corporation, 2001: 6) The first steps towards achieving these objectives involved restructuring the company to comply with the Liberalisation Law’s requirement to provide separate accounts for the different
  • 372. Case Study 4 · Privatisation and the European Union 359 areas of the PPC’s business, and to prevent cross subsidies between them. Restructuring also involved changes in personnel to ensure that the company was managed by competent staff who were orientated towards private sector values. As an employee in the Distribution Division com- mented: The organisation had a very convoluted hierarchy in the past. Even promotions, as in every public sector company, were based on hierarchical rank rather than individual performance, let alone the fact that the only way to survive was never to be responsible for any of your actions … Now it’s the exact opposite. However, some appear to question whether all managerial posts were filled on the basis of com- petence and orientation. There had been considerable trade union resistance to the PPC’s privatisation but, as one Assistant Director commented: Many of these [new] General Managers were previously the most opinionated unionists. Suddenly, they lost their voice as they got offered prestigious job positions. Indeed, this must be the biggest change in the organisation from this privatisation process. Restructuring also included job losses and changes in employment conditions and job security. One of the first acts of the new PPC was to announce that 6,000 jobs would be shed through natural wastage by 2005 – some 20 per cent of the workforce. A Director of the Generating Division remarked: The company was overstaffed and this was one of our major problems in the past. Today, we cannot afford to have three people doing a job which our European peers have one person doing. Thus, we are currently pursuing a policy of workforce rationalisation, through a combination of natural wastage and restrictions on recruitment … The Director of Human Resources was very clear where the blame lay for overstaffing: Throughout the pre-privatisation period, all previous governments mismanaged our operations and they even exploited our company and sacrificed its well-being in order to solicit votes and win the elections, by hiring superfluous staff. The Director of Human Resources believes that there has also been a transformation in the com- pany’s culture: PPC SA has been transformed into a learning organisation, which is now based on values rather than rules, whilst its employees behave as knowledge workers, and not as typical civil servants. However, an employee in the Distribution Division took a different view: … the increasing job insecurity and the new entrepreneurial practices inevitably urged employees to compete with each other for the sake of their own career development and promotion and always at the expense of their colleagues. Therefore, we witnessed the phenomena of fierce internal competition and lack of co-operation. As part of the restructuring of the PPC, three new subsidiaries were created. Kozen SA will develop joint ventures with small companies to generate electricity from heat produced as a by- product of their normal business activities. PPC Renewables SA will enter into joint ventures to develop renewable, environmentally friendly, energy sources. PPC Telecommunications SA is a joint venture with Greece’s two largest banks and the Italian company WIND. Its purpose is to create a new telecoms network capable of winning 17 per cent of the Greek market over the next decade. Therefore, the PPC appears to have moved a long way from its role as a public monopoly, though the Greek government still owns 85 per cent of its shares.
  • 373. 360 Chapter 11 · Case studies in strategic change What next for the PPC? The PPC’s main objectives over the next few years are to maintain its dominant position in the Greek electricity market and to expand into the Balkans and Turkey. To achieve this, it intends to form a strategic alliance with a leading EU electricity company to gain their expertise. The govern- ment has begun the process of selecting a strategic partner for the PPC with a view to its taking a 10–15 per cent stake in the company. At a later date, the government plans to sell a second tranche of shares (approximately 20 per cent) to the strategic partner. However, this will depend on whether the alliance allows the PPC successfully to expand its activities and show that it is capable of becoming one of the top five or six firms in the European electricity market over the next two decades. As can be seen, the PPC has an ambitious, three-pronged strategy. First, in the short-term, it is attempting to protect its domestic market through cost-cutting and joint ventures. Second, in the medium to long term, with its strategic partner’s expertise, it intends to expand on a regional basis and then throughout the rest of the EU. Third, drawing on its transmission and distribution net- works and its large customer base, over the next decade, it intends to become a significant player in the Greek telecoms sector. So far, the PPC appears to be making good progress with its plans. Its new structure, new profit-seeking orientation and job cuts seem to be producing significant financial benefits for shareholders. After its first year of operating as a private company, the PPC announced that its profits had increased by over 50 per cent to _399m. Whether it can maintain this type of per- formance over the medium term, or – like other privatised electricity companies – it will find that once the easy gains from job cuts have been achieved, the twin pressures of competition and reg- ulation will squeeze profits, remains to be seen (Macalister, 1999). Summary In examining the privatisation of the PPC, there are three issues that seem particularly pertinent: the process of privatisation; future plans for the operation of the PPC; and whether or not there was an alternative to privatisation. Taking the first of these, the process: as many writers have noted, privatisations are not the nice, neat events that their proponents would wish to believe (Coram and Burnes, 2001; Parker, 2000; Young, 1990). The PPC’s privatisation evoked argu- ments in government, resistance from the trade unions and some concern from the general public. To date, only 15 per cent of its shares are in private hands, so privatisation has not been particularly rapid. However, like most state monopolies, it had had no experience of operating in a competitive market. As Dudley (1999) maintains of such organisations, they have to take charge of their own destiny, develop new relationships both internally and externally, satisfy the expecta- tions of different stakeholders and develop or acquire new market-orientated skills and competencies. Nevertheless, the PPC has been restructured, it is operating as a private sector con- cern, it is making significant profits and, more to the point, no one seems to doubt that this is a permanent change. Therefore, at least in the short term, the PPC privatisation appears to have been successful. However, what about its longer-term prospects? In terms of the second issue the PPC has followed a well-trodden privatisation path of restruc- turing, cost-cutting and the introduction of commercial practices. This is the relatively easy part of privatisation, however: the difficult part comes when competition and regulation start to bite. The PPC’s strategy is to defend its existing electricity markets, expand its core electricity business inter- nationally and expand its domestic activities into telecoms. The problem with the defensive
  • 374. Case Study 4 · Privatisation and the European Union 361 strategy is that if it is successful, and the PPC retains its dominant position, the Regulatory Authority for Energy, driven by the EU, will take action to make life easier for the PPC’s competi- tors. The purpose of the EU Energy Directive is to open up the market to new entrants in order to stimulate competition. If this does not happen then, as elsewhere, the Regulator, or the EU, will change the rules to favour new entrants (Parker, 2003). For example, as in other countries, the Regulator could break up the company by separating electricity generation from distribution. The experience elsewhere is that it is very difficult for utilities to hold on to their dominant posi- tion and, in the short term at least, markets tend to become fragmented as lots of new players enter (Parker, 2003). Consequently, the PPC’s defensive strategy may fail and it could be forced to sell, close or downsize the less profitable areas of its business. Nor do the PPC’s expansion plans seem any surer of success. The move into telecoms seems risky. The telecoms market in Europe is extremely competitive, costly to break into and also highly regulated (Parker, 2003). The likelihood of a new player succeeding appears to be very small. Similar points can be made about the PPC’s intentions to become one of the leading electricity companies across the EU, albeit with a strategic partner. Market liberalisation has made the EU electricity market a very competitive place inhabited by a plethora of competing companies from across the globe. Therefore, the PPC and any strategic partner would have to be very good and, perhaps, very lucky to succeed. There is also the point as to whether the Greek government has done the PPC any favours by privatising it as a single entity rather than breaking it up, as was the case in the UK electricity industry. Newly-privatised companies tend to lack key managerial competencies necessary to sur- vive in the private sector. By attempting to be competitive in all of its old activities, as well as expanding into new businesses domestically and internationally, the PPC’s management may be spreading itself too thinly. This brings us to the last issue, was there an alternative to privatisation? it was the EU’s European Electricity Directive (96/92/EC) that compelled the government to open up the Greek electricity market to competition and to restructure the PPC so that it operated on a commercial basis (European Commission, 1998). The Electricity Directive did not compel the government to sell the PPC and, indeed, the government intends to retain a 51 per cent stake in the company. Consequently, if we take the ‘narrow’ definition of privatisation discussed earlier, it has not priva- tised the PPC because it has not sold the company or even a majority holding in the company. However, quite evidently, the new PPC is not a state enterprise in which the private sector has a minority shareholding; it is a private sector company in which the government has a majority stake, so to all intents and purposes it is now a privatised company. For that reason, it clearly meets Adams et al’s (1996) ‘broader’ definition of privatisation, i.e. it is a profit-orientated concern run on commercial lines. Therefore, whilst it can be argued that the Greek government had an alternative as to whether it chose privatisation according to the narrow or broad interpretation, the EU Electricity Directive did not allow the government the choice to reject privatisation altogether.
  • 375. 362 Chapter 11 · Case studies in strategic change Conclusions In Parts 1 and 2 of this book, it was argued that the potential exists for managers to exercise a wide degree of choice with regard to almost all aspects of their business, whether that be products, structures, personnel policies or culture. This potential free- dom, however, is constrained by societal, environmental, industry-specific and organisational constraints, not to say managerial preferences and competences, many of which may conflict with each other. This chapter has demonstrated that organisations do indeed face formidable con- straints and pressures on managerial freedom of action. The case study of the music industry shows how powerful these are. For the big companies in the industry, it is essential that they maintain their control over the production and distribution of music, but the Internet has changed the rules of the game in a big way. Music is a global business and the Internet offers the potential for record companies to provide a quicker, better and cheaper service to their customers. However, because the Internet is enabling music piracy on an unprecedented scale, it is also a major threat to the domi- nance, or even the existence, of the big record labels. It is not clear how the big record labels can or will respond successfully to this industry-wide transformation, but what- ever the outcome, managers cannot rely on old ways of working and old ways of doing business if they are to survive. The second case study, Marconi, is one where the company’s new management believed that they had seen the writing on the wall for the old GEC and that the company had to move into the Internet era as a major telecoms equipment provider if it was to survive. They were encouraged in this by investors in the City of London and the prevailing dotcom euphoria. Senior managers constructed and pursued a vision of a brave new telecoms world for the company. The company sold off the vast majority of its existing business, changed its name to Marconi, and went on a spectacular spending spree which saw both its share price and debts rise spectacularly. When the dotcom bubble burst, the company went with it. If Marconi shows the dangers of a company trying to reinvent itself rapidly, the Oticon study shows that it is possible for a determined manager to break out of the standard patterns of competition that exist in an industry and rewrite the competitive rule book to his company’s advantage. This is a company that operates in a global market and faces competition from larger and technologically more advanced compa- nies. The CEO believed that Oticon could not compete technologically but could provide a better service to customers than its competitors. Unlike Marconi, the com- pany did not try to reinvent itself by selling its assets and buying new ones. Instead, it radically changed its structures, ways of working and culture to unleash the human potential of the company, and in so doing regained its competitive edge. The last case study, the privatisation of the PPC, shows two different dimensions of internationalisation. On the one hand, the Greek government was heavily influenced in its industrial policies by the neo-liberal political and economic agenda that has swept through much of the world over the last 20 years or so. This led Greece to follow the same privatisation route as many other countries. On the other hand, Greece is also a member of the EU and as such is bound by its rules. In this case, the liberalisation of the European electricity market forced Greece to restructure its elec- tricity industry and open it up to competition. It was the twin pressures of a neo-liberal ideology and the EU’s competition rules for the electricity industry that
  • 376. Conclusions 363 encouraged the privatisation of the PPC and greatly influenced the structure and operation of the post-privatised PPC. The case studies raise a number of important issues regarding strategic change in general and managerial choice in particular: ■ The particular strategic approach that an organisation (or rather its management) adopts is limited by, and to an extent must accommodate, societal, environmental, sectoral and organisational constraints. It must also be recognised that, in an increasingly globalised world, even apparently small events can have a major impact on industries and organisations. In the case of the music industry, the cre- ation of a small piece of software by a 19-year-old computer geek has thrown the industry into turmoil. ■ Nevertheless, it must also be recognised that because the various societal, environ- mental, sectoral and organisational constraints can conflict with each other – can pull organisations in different directions, or be manipulated or changed for more favourable conditions – managers do have a degree of freedom to adopt a strategic approach that is more in keeping with their own interests or beliefs. That is to say, under certain conditions and certain circumstances, the world in which they oper- ate can be shaped by their views, rather than vice versa. This certainly appears to be one interpretation of events at Oticon. The implications of the constraints faced by Oticon were that it could no longer compete with its big, technologically advanced competitors. Oticon showed that by reinventing itself it could. ■ Marconi, on the other hand, showed the fallacy of believing that anything is possi- ble. Indeed, it could be argued that rather than questioning the received wisdom, as Oticon did, it appeared to accept it at face value. George Simpson sounded much less of a visionary and more of a fatalist when, in justifying his failure, he asked: What else were we going to do? The old GEC had had it and everyone told us that focus was what was needed. Telecoms was the obvious industry to expand into. (quoted in Harrison, M, 2002: 24) The privatisation of the PPC is another example of where managers, and politicians, appeared to accept that the constraints they faced were immutable, and proceeded to work within the perceived rules of the game. This pushed them to adopt a strat- egy of holding onto its domestic market, expanding internationally and diversifying into other industries. Whilst this might have been the obvious course to take, it is also one which others have found very difficult to navigate successfully. ■ A clear vision of the future appears to be an essential attribute for managers seek- ing to secure their organisation’s future survival and success. This is certainly something that many in the music industry are seeking. However, it has to be cou- pled with the strength of character to challenge existing norms and received wisdom. The CEO of Oticon had both and succeeded. Senior managers at Marconi, arguably, had the strength of character to challenge the Weinstock inheri- tance, but their vision for the company’s future was seriously flawed, and the outcome was disastrous. As far as the PPC is concerned, only time will tell if they were right or wrong not to challenge the received wisdom. ■ As well as a realisable vision, managers also need to win over the rest of the organ- isation. In Oticon this took approximately 18 months (though much remained to
  • 377. 364 Chapter 11 · Case studies in strategic change be done after this). Marconi does not appear to have tried to win over staff because the intention was to get rid of most of them. The PPC do appear to have embarked on a programme to win over staff, though how effective this has been is disputed. ■ In implementing strategy, it is not necessary to work out all the details in advance, but the first few steps must be clear and consistent with the vision. It also helps if they are seen to succeed! This appears to have been the situation for Oticon and, initially at least, for Marconi and the PPC. Where strategies are radical, as in these three cases, their implementation is usually accompanied by a degree of chaos as old certainties are discarded and new ones have yet to be established. In Oticon’s case, the initial degree of chaos may well have been deliberate. For Marconi, how- ever, the chaos increased and turned into panic as it became clear that its strategy was failing. Test your learning ■ Short answer questions 1 List the main ways in which it could be said that Shawn Fanning changed the rules of the music industry. 2 What are the main strategic options facing the big record labels in coping with the chal- lenges posed by the Internet? 3 What was Marconi’s vision? 4 In what ways did Marconi’s vision challenge the rules of the game? 5 Identify three ways in which it could be said that Oticon reinvented itself. 6 List three ways in which it could be said that Oticon changed its culture. 7 What were the main pressures faced by the PPC when considering its future? 8 List three advantages and three dangers of the PPC’s strategy for its future. ■ Essay questions 1 To what extent does the case of the music industry support the arguments of complexity theorists? 2 In what ways does the Marconi study support the realist perspective on organisations? 3 Evaluate whether or not the Oticon case study supports the argument for managerial choice. 4 Is the PPC case an example of Planned or Emergent strategy?
  • 378. CHAPTER 12 Case studies in changing internal relationships and attitudes Learning objectives After studying the case studies in this chapter, you should be able to: ■ list the main pressures on organisations for change; ■ understand how real-life organisations manage change; ■ appreciate that individual change projects can be viewed either as isolated and finite events or as one of a stream of events that can, over time, shape and reshape an organisation; ■ identify different approaches to managing change; ■ discuss the strengths, weaknesses and suitability of different approaches to change; ■ show the respective roles of managers and staff in planning and executing change; ■ describe how environmental uncertainty influences the process of change; ■ understand why employees might resist change and how this can be avoided or coped with; ■ show how managers can exercise choice in what to change, when to change and how to change. Introduction This chapter presents three case studies of organisations who, for varying reasons of efficiency, effectiveness and competitiveness, attempted to change internal rela- tionships and attitudes across functions and between hierarchical levels. Drawing on the arguments developed in Part 2, the case studies examine why and how the particular decisions relating to change were taken and, especially, whether the resultant implementation programmes could be described as Planned or Emergent. Case Study 5 recounts the attempts by Volvo, over a period of more than 30 years, to break with the assembly-line approach to car production and move to a more human-centred approach. The study shows that it is unclear to what extent
  • 379. 366 Chapter 12 · Case studies in changing internal relationships and attitudes the move to Job Design precepts could be construed as part of a vision or concerted strategy for the organisation. Other strategic developments within Volvo were cer- tainly in tune with and helped to encourage the move to Job Design. It is nevertheless apparent that, both in its conception and execution, the move to reorganise work at Volvo was Emergent rather than Planned. Subsequent job redesign initiatives were obviously informed by, and built on, what went before to the extent that a general orientation towards group work and the creation of more satisfying jobs appears to have become embedded in Volvo. The particular form of work reorganisation varied from case to case, however, and was heavily influenced by local circumstances and the orientation of the parties involved; the same applied to implementation and develop- ment. Though much effort went into planning the actual changes, it does not appear as though a settled pattern of working arrangements developed on any of the sites. Rather, as circumstances changed, and perhaps the balance of forces shifted, so too did the actual characteristics of jobs and relationships between groups and individu- als, groups and other functions, and groups and management. Therefore, the move to Job Design at Volvo, though driven by a general predisposition, can be characterised as a process of development, experimentation and learning. The XYZ Construction study, Case Study 6, describes how the company went about changing its organisational structure from a hierarchical and functional-based one to a flatter, more teamwork-based matrix-style structure. The company adopted a participative and open approach to change that set out to build a wide consensus around the need for change and type of structure required. Through a series of stages, it moved from auditing the readiness for change, planning the change, implementing it and evaluating the progress made. Though the development and implementation of a new structure at XYZ was not without its difficulties, it was planned and working effectively remarkably quickly. As with any major structural change in an organisa- tion, there were many possible and actual losers, some of them at a senior level. Therefore, the potential for resistance and disruption was high. The participative and open nature of the change process, however, coupled with the recognition that change was required, and the strong commitment from the top, meant that the process was relatively free from disruption by individuals or groups. The XYZ study seems to turn some of the literature on change on its head. As shown in Chapter 10, Kanter et al (1992) see structural change (Bold Strokes) as a precursor to cultural change (Long Marches). In this instance, however, changes in culture and attitudes were achieved prior to the structural change which, in some senses, can be seen as a reinforcing mechanism to the cultural and attitudinal changes. The explanation for this is relatively simple. When the new Managing Director of XYZ took over, he saw the main priority as improving the company’s performance through a combination of attitudinal/cultural change and management and staff development at all levels. For him, major structural change was not a priority at this stage; it could come later. Instead, he embarked on a series of Emergent changes that, over time, worked towards his goal of improving the performance of the company. By 1999, he saw that the company was ready for and needed structural change. Because of the nature of the change and the situation in the organisation, the approach adopted was Planned rather than Emergent. Therefore, in this instance, as in most, the issue of what comes first, Bold Strokes or Long Marches, was primarily a tactical one. Similarly, the issue of whether change should be approached in a Planned way or
  • 380. Introduction 367 not was also tactical. A Planned approach was seen as being the best way to achieve the necessary improvements at this time given the situation in the company. GK Printers, Case Study 7, is now an efficient and forward-looking company, but is a prime example of an organisation that so nearly ‘snatched defeat from the jaws of victory’. The company put a great deal of collective effort into turning around its for- tunes, only to see the gains threatened by inertia and conflict between managers. Fortunately, it managed to rescue the situation in time, but it could so easily have been different. In many respects, it is a company where only in a crisis can existing norms and concepts be challenged and new strategies emerge. The actual implementa- tion process tended towards Planned rather than Emergent or open-ended change. GK operates in a changing and highly competitive environment, and though it was inclined to view change as a one-off activity rather than a process of continuous improvement, this view has been evolving. GK is also showing that it can be innova- tive, and has extended the range of its capabilities to develop a lucrative business in developing and designing websites for its customers. The chapter concludes by arguing that in modern organisations, facing uncertain and changing environments, it is not just strategy that is Emergent but also, in many cases, the implementation process. This does not invalidate the Planned approach to change, and certainly not the many tools and techniques associated with it. However, it does mean that, for change projects which are rather experimental in nature and/or open-ended, the concept of some form of settled pattern being established, and thus the process of change being concluded, is not valid.
  • 381. 368 Chapter 12 · Case studies in changing internal relationships and attitudes Case Study 5 Volvo’s approach to Job Design1 Background In Chapter 3, we examined the emergence of new organisational paradigms. In reviewing the Culture–Excellence school, the Japanese approach and organisational learning, the emphasis placed on team or group work was striking. Though the importance of group work for individual well-being, organisational performance and collective learning has been a central feature of the Job Design litera- ture for many years (see Chapter 2), its actual influence on work and organisational design in Western companies has been relatively small. One of the few exceptions to this has been Volvo, the Swedish motor vehicle manufacturer, which has been seen as a leader in innovations in work organisation since the 1970s. Indeed, it is probably not an exaggeration to say that in the 1970s, when it began moving away from traditional methods of car assembly, Volvo was more famous for its commitment to work humanisation than for the actual vehicles it manufactured (Blackler and Brown, 1978). As will be described below, Volvo's approach to reorganising vehicle production has evolved through a number of distinct phases: the abandonment of the assembly line in favour of group-based static assembly; the extension of group roles to include more collective responsibility and some deci- sion-making autonomy; and the introduction of self-paced assembly work (Pontusson, 1990). It is also worth noting that the process of change was initially entirely management-driven (though the unions were involved or consulted on some aspects). The Swedish Co-determination Law, which came into effect in 1976, obliged firms to involve unions more but, in this instance, it may also have encouraged Volvo to be more radical in extending group work than might otherwise have been the case. However, through the 1980s in particular, the trade unions took a more proactive role. The move to more flexible forms of work organisation at Volvo went hand-in-hand with its move away from corporate bureaucracy and to more decentralised, localised management of its various vehicle operations. In addition, the last 30 years have seen repeated attempts at diversifi- cation and alliances by Volvo, aimed at spreading the risks and costs of operating in a highly cyclical and very capital-intensive industry. In 1993, Pehr Gyllenhammar, Volvo's long-serving Chief Executive, attempted to merge Volvo with Renault, the French state-controlled car company. This move was defeated by a coalition of shareholders and managers with the result that Gyllenhammar resigned from the company. With his departure in 1994, Volvo tried to construct a new direction for itself. It began selling off its interests in other industries and businesses in order to concentrate on vehicle production (Done, 1994). However, as the wave of takeovers and mergers that swept the industry in the 1990s showed, as far as car production is concerned, size matters. In 1999, Volvo finally recognised that it did not have the financial resources to operate as an independent car company. In what must be one of the industry's great ironies, after rejecting a merger with Renault five years earlier, Volvo sold its car division to the Ford Motor Corporation. Although Ford's takeover does not invalidate Volvo's unique approach to building cars, it does potentially threaten it. Despite the benefits of good design and leading-edge technologies, vehicle pro- ducers tend to stand or fall by the effectiveness and efficiency of their assembly operations (Womack et al, 1990). Ford's opinion of the efficiency of Volvo's assembly operations will be crucial in determin- ing whether the Volvo approach survives or is replaced by more traditional Fordist ways of work. So far, both Ford and Volvo appear to have benefited from the takeover. Volvo have been able to produce a range of new models that have sold very well, especially in North America, and Volvo is the most prof- itable part of Ford’s Premier Automotive Group, which includes Jaguar, Land Rover and Aston Martin. 1 The term Job Design is explained in Chapter 2. In essence it is the antithesis of Taylorism and involves designing work to fit human needs and abilities.
  • 382. Case Study 5 · Volvo’s approach to Job Design 369 Nor does this seem to have been at the expense of the Volvo culture. As Hans-Olov Olsson, Volvo Cars Chief Executive, stated: ‘They [Ford] cannot touch the soul of Volvo. They have to protect Volvo’s Swedishness in product development and managing the business’(quoted in Burt, 2002: 13). What this highlights, though, is that Volvo's move to end assembly-line production was not and is not a marginal activity – it has become embedded in the culture, or to use Olsson’s word, the ‘soul’of the company. The decision to adopt Job Design at Volvo was and remains driven by management, regardless of later union and legislative encouragement, though to what extent they foresaw how extensively it would develop is not known. What is clear is that, in the 1960s, Volvo was as committed as any car company to the Classical approach to work organisation espoused by Taylor and embodied in the assembly-line approach to car production devised by Henry Ford. Yet, in the 1970s, it chose to break away from this industry-standard approach and embark on (what has turned out to be) a long- term programme of increasingly radical work reorganisation. There are two complementary explanations for Volvo's actions. The first is the explanation given by Pehr Gyllenhammar (1977: 73), until 1994 Volvo's Chief Executive, identifying the need to reduce labour turnover, which the company believed was caused by boring and monotonous jobs: The company has to bear the costs of recruiting labour and training employees. The absenteeism and turnover rates also increase the costs for quality control, for maintaining buffer stocks of semifinished goods and components, and for adjustments, tools and machinery. Administrative costs go up when a company must maintain pools of reserve labour to fill requirements during peak periods of absenteeism. To flesh Gyllenhammar's explanation out a little, Pontusson (1990) pointed out that Volvo's free- dom of manoeuvre in tackling its recruitment and retention problems was limited by the labour market conditions of the time. There was full employment, which made it easier for workers to move jobs; and very effective wage bargaining by unions, establishing industry and sectoral pay rates, which made it very difficult for Volvo to offer higher wage rates than other employers. In the presence of full employment and the absence of wage flexibility, Volvo chose to tackle labour turnover and absenteeism by attempting to create more satisfying and varied jobs. The second explanation was offered by Karlsson (1973). He pointed out that Volvo was one of Sweden's largest and most successful companies. As such, its actions and practices were always in the public eye. With the increasing interest in Job Design in Scandinavia in general and Sweden in particular in the 1960s and 1970s, it was hardly surprising that Volvo's work organisa- tion methods were the subject of much attention. In particular, Karlsson (1973: 34) pointed out that the company was heavily criticised for its ‘inhuman principles of organisation’ based ‘entirely on the scientific management method’. So it appears that Volvo's conversion to Job Design was inspired by commercial considerations relating to the costs of absenteeism and labour turnover, allied to pressure from public opinion in Sweden for it to embrace a less ‘inhuman’ form of work organisation. Although these appear to be the principal reasons for Volvo's management embarking on its commitment to Job Design, since then the process has developed its own momentum, to the extent that (as noted by Auer and Riegler, 1990: 14): ‘group work is the basic concept for all changes in the organisation of produc- tion work at Volvo’. This did not come about overnight, without hesitation and backtracking, however, or in a fully planned and coordinated fashion; rather it has evolved or emerged through a number of distinct phases.
  • 383. 370 Chapter 12 · Case studies in changing internal relationships and attitudes Phases of change Volvo's adoption of Job Design principles began over 30 years ago. It has now reached a stage where group work has become the standard approach to work design, and assembly-line working is not considered appropriate for any new Volvo plant. When dealing with events spanning such a long period, it is often difficult to form an accurate picture of what has taken place and why; partic- ularly when, as in this case, these events have been played out on different sites by different groups of managers and workers. Nevertheless, as Auer and Riegler (1990) and Pontusson (1990) pointed out, by examining major change programmes involving large investments in new or remodelled plants, it is possible to identify a number of distinct phases in the evolution of Volvo's approach to Job Design. These phases are related to major investment projects that occurred in the 1970s, 1980s and 1990s, namely: ■ Kalmar – this plant opened in 1974 and was the company's first, and most cited, attempt to move away from assembly-line work. ■ Torslanda – this is Volvo's main car plant, which, since the late 1970s, has seen a number of increas- ingly radical attempts to move away from the traditional assembly-line approach to car production. ■ Uddevalla – this new assembly plant opened in 1990, and exemplifies Volvo's decisive break with traditional motor industry jobs. ■ Gent and Born – the introduction of new cars in these existing plants in the late 1980s allowed Volvo the opportunity to introduce the methods developed in its other plants, thus showing Volvo's commitment to extending its Job Design philosophy across all areas of its operations. Phase one – Kalmar Those committed to challenging the ‘inhuman’ approach to work, epitomised by the Classical school in general and Henry Ford's moving assembly line in particular, came to look on Volvo's Kalmar car plant as a sort of promised land – a blueprint for the future of work. This was not only because Kalmar was seen as a model of human-centred work organisation, but also because it struck at the very heart of the industry, which, through its use of the moving assembly line with its severe division of labour and short cycle times, had taken Taylorist work practices to their ultimate extremes. In addition, and just as importantly, it was heralded as a commercial success. Indeed, Kalmar was famous throughout the world for its ‘revolutionary’ approach to Job Design even before it opened (Blackler and Brown, 1978). Perhaps the main reason for the perception that Kalmar was making a decisive break with the past was due to the way Volvo approached its design. The original management concept for Kalmar attempted to incorporate many of the progressive Job Design ideas circulating in the early 1970s. A project team composed of managers, engineers and architects was given responsibility for design- ing and building the plant. Each decision of this team had to be approved by a committee that included trade union representatives, health and safety experts, doctors and outside Job Design experts, including colleagues of Einar Thorsrud, the noted Norwegian work psychologist. The ‘revolutionary’ image of Kalmar also owed much to the efficiency of Volvo's own publicity machine. This can be seen from statements about the ethos of the plant made by Pehr Gyllenhammar, Volvo's former Chief Executive, before it opened: The objective of Kalmar will be to arrange auto production in such a way that each employee will be able to find meaning and satisfaction in his work.
  • 384. Case Study 5 · Volvo’s approach to Job Design 371 This will be a factory which, without any sacrifice of efficiency or the company's financial objectives, will give employees opportunities to work in groups, to communicate freely among themselves, to switch from one job assignment to another, to vary the pace of their work, to identify with the product, to be conscious of a responsibility for quality, and to influence their own working environment. When a product is made by people who find meaning in their work, it must inevitably be a product of high quality. (All quotes are from Aguren et al, 1984: 13) Opened in 1974, Kalmar was Volvo's second largest final assembly plant (the much bigger Torslanda being the largest). It had been planned for an annual capacity of 30,000 cars with around 600 employees. In 1976, it produced 22,000 cars but production fell to 17,000 when demand slumped after the second oil shock in 1977. Production rose again in 1979 but fell back in 1980, when a four-day week was briefly introduced. In 1985, Kalmar produced 32,500 cars, representing about 16 per cent of Volvo's Swedish output of cars. In 1988 the plant had around 960 employees (Aguren et al, 1984; Auer and Riegler, 1990). The differences between Kalmar and a traditional car plant are that, in the latter, the pace of work is determined by the moving assembly line, jobs are extremely fragmented and have cycle times of a few minutes or less, and workers are dedicated to one task only. At Kalmar there was no assembly line, workers operated in teams, with each team having its own dedicated area of the factory. Within the team, workers could move between tasks, and each task had a cycle time of between 20 and 30 minutes. In place of the assembly line, cars were mounted on automated carriers which moved around the plant and served both as a means of transport and as a work platform. This arrangement allowed Kalmar originally to operate two alternatives to the moving assembly line: ■ Straight-line assembly. Work within each team area is split up into four or five work stations placed in a series along the production flow. Two team members work at each station, follow- ing the carrier through all the stations and carrying out all the necessary assembly operations. ■ Dock assembly. This is where one carrier at a time is guided into the ‘dock’ assembly areas where all of the team’s tasks are carried out on the stationary carrier by two or three people. The main difference between the two approaches is that the first, straight-line assembly, still bears some relation to the moving assembly line in that the car carriers move automatically from station to station thus determining the pace of work. In the second approach, the dock system, the car is stationary all the time giving workers more control over the pace of work. Nevertheless, both forms revolve around teamwork and offer variety and task completeness. There can be very little doubt that, for its time, Kalmar represented a significant break with the past. There were those, however, who questioned whether the original high hopes for the plant, in terms of the humanisation of work, had been met. Pontusson (1990) argued that the economic consequences of fluctuations in output levels led the plant management to retreat from its original ambitions and, in the latter part of the 1970s, to tighten managerial control over the work process. It was certainly the case that, compared to its conventional plants, there was no significant improvement in output. Also, as Berggren (1992: 123) noted, the ability of work teams to change the pace of work led to some ’mischief', and a team might change the pace of work of another team ’for fun'. For these reasons, according to Pontusson (1990), dock assembly was abandoned, and the potential for workers to influence the pace of work by taking automated carriers out of the main flow was ended. Blackler and Brown (1978) argued that, with the abandonment of dock assembly, and despite longer cycle times, some fundamental elements of the assembly line (i.e. machine-paced work) were
  • 385. 372 Chapter 12 · Case studies in changing internal relationships and attitudes maintained. Auer and Riegler (1990) made a similar point. They argued that, over time, changes such as new work evaluation methods, the removal of time buffers between stages and the general speed- ing up of the carriers (which are controlled by a central computer) intensified the pace of work and returned the production process much closer to the assembly-line concept than was originally intended. Before it opened, Kalmar was being hailed as a revolution in Job Design. The reality is that Kalmar does not appear to have represented the dramatic break with the Fordist–Taylorist produc- tion process that many had hoped for (Auer and Riegler, 1990; Blackler and Brown, 1978; Pontusson, 1990). This does not mean that Kalmar was a failure, however. Given that Volvo, hith- erto very much a traditional car company, were trying to invent a new concept in car assembly, it would have been surprising if they had managed to rewrite the rules of car production at the first attempt. It must be remembered that, although Kalmar was a social experiment, it was also expected to be an economic success. If the social dimension appeared to threaten financial per- formance, it was the former rather than the latter that would be sacrificed. The true measure of Kalmar's success lies not in the degree to which it achieved its ‘revolutionary’ goal, but in the extent to which it encouraged Volvo's management to continue with and accelerate the move away from Fordist–Taylorist approaches to work. As Auer and Riegler (1990: 27) concluded, despite some disagreement among managers over the effectiveness of the organisation of Kalmar plant, there were sufficient supporters for Volvo to proceed with the development of ‘far more pro- gressive’ and ‘radical’ attempts to distance itself from the traditional assembly-line approach to car production. This is a point also made by Gyllenhammar: Volvo Kalmar is no final solution. It is the first step on the road. But much remains to be done in the field of work organisation. I could imagine much greater freedom and independence at work. (Quoted in Berggren, 1992: 127) Nevertheless, in 1992, at the time of a major recession in the European car industry, Kalmar was closed. Phase two – Torslanda As well as Kalmar, the late 1970s and early 1980s saw Volvo experimenting with alternatives to the tra- ditional assembly line at a number of plants. In the main, these were small-scale, and tended to concentrate on bus or truck production rather than car assembly. From the late 1970s onwards, how- ever, a series of increasingly radical attempts were made to transform work organisation at Torslanda, Volvo's main car assembly plant. In 1976, at the central assembly plant, Torslanda management experi- mented with the use of large, autonomous work groups to assemble an entire car using a dock-assembly approach similar to that being attempted at Kalmar. Owing to poor productivity, this was abandoned within six months. Management believed that the workforce lacked the necessary skills to make such an approach work, whilst the metal workers’ trade union felt the experiment was too risky. In 1979/80, with the opening of the TUN facility at Torslanda to assemble the new 700 series car, management attempted to revive group-based assembly. The TUN workforce was selected from the existing production personnel at Torslanda. The original plan for TUN, initially drawn up without union involvement, envisaged car assembly being carried out by autonomous work groups who would be responsible for their own quality and pace of work. It was planned that work groups would also have responsibility for job rotation, managing material supplies and some maintenance tasks. The reality though was somewhat less ambitious than originally conceived. The unions, who – when eventually involved – played a larger part in the design of TUN than they had at Kalmar,
  • 386. Case Study 5 · Volvo’s approach to Job Design 373 were highly sceptical of the original concept and this, together with certain practical difficulties in trying to mix indirect tasks, such as maintenance and material control, with direct production work, led to the scaling-down of the original proposals. TUN is still organised around group-based assembly, and job rotation is still practised, but the pace of work is centrally controlled and workers no longer perform indirect tasks. Nevertheless, workers at TUN see it as being a clear improve- ment on the traditional approach to car assembly (Auer and Riegler, 1990). In 1986, once again management began to consider major changes to the organisation of work at Torslanda's central assembly plant. At this time, the plant employed 4,000 workers and was mainly organised around Fordist–Taylorist principles. This time the trade unions were involved much earlier and played a more central role. In February 1986, management and unions agreed on an ‘action plan’ that emphasised the transformation of car assembly into an ‘attractive alterna- tive’ to the traditional methods of car manufacture. In particular, learning from the earlier failure, the plan stressed the need for high-quality training and continuing education to allow workers to gain the skills necessary for effective group work. The action plan appeared to revive many of the original plans for TUN (including the provision for direct production workers to carry out indirect tasks). In addition, it envisaged working time being adjusted to employee needs. Though the reorganisation of Torslanda is a continuing process, some of the individual sections, such as motor and axle assembly, have been operating along new lines for some time. The changes envisaged in the action plan have been introduced, especially those relating to workers controlling the pace of work and undertaking indirect tasks. Staff turnover and absenteeism is very low at Torslanda, which reflects both the work environment and the rigorous recruitment methods designed to select well-educated staff who are team-orientated. It is a very clean plant with good recreational facilities, such as a gym and swimming pool, and also provides a creche for the chil- dren of all staff. At Torslanda, upward and downward communication is considered vital, and staff are encouraged to show initiative through formal and informal discussion groups. As might be expected, there have been some difficulties in implementing these new working arrangements at Torslanda. The main problem appears to relate to trade union attempts to protect traditional demarcations between direct and indirect tasks and between work groups and supervi- sors. Maintenance staff still work outside the work group structure, and the foremen's trade union successfully resisted their partial replacement by rotating team leaders. The metal workers’ union also wanted to maintain a more hierarchical structure in order to preserve a job ladder between the shopfloor and management. By the late 1990s, the workforce at Torslanda had increased to 5,500 and the plant was produc- ing 580 vehicles a day. Multi-skilling was a fact of life and, in some parts of the factory, jobs were rotated every hour. Such was the perceived success of the factory that it was given responsibility for assembling Volvo's C70 car, which was launched in 1997. Therefore, progress has been made and, though the final form that Torslanda will take is still uncertain, it does appear to promise a more rad- ical break with tradition than occurred at Kalmar (Auer and Riegler, 1990; Pontusson, 1990). Phase three – Uddevalla This was the first all-new car assembly plant built by Volvo in Sweden since Kalmar. It was designed to employ 1,000 people and have the capability to produce 40,000 cars per year. Many observers believe the plant goes far beyond Volvo's previous attempts at Job Design: ‘the only one [car plant] in the world where workers build cars from start to finish rather than on an assembly line’ (McIvor, 1995: 37). The design of the plant was the result of a ‘modernisation pact’ between
  • 387. 374 Chapter 12 · Case studies in changing internal relationships and attitudes the plant’s management and the metal workers’ union, many of whose extensive demands were incorporated into the plant’s design (Auer and Riegler, 1990). In accordance with Sweden's Co- determination Law (and Volvo’s practice at Torslanda), the unions were involved in the steering group responsible for designing and building the Uddevalla plant. Indeed, three union officials worked full-time on the project between 1985 and 1987. The completed plant comprised six mini-factories, each containing eight dock assembly areas, each with its own autonomous work group. Therefore, in total, there were 48 assembly groups. Each work group has ten fully-trained assembly workers, each of whom can, again in theory, per- form all the tasks necessary to assemble an entire car. The work groups are responsible for determining their own pace of work and internal job rotation. In addition, the groups have respon- sibility for maintenance, administration and quality control. The role of group leader rotates among the members of each group. The incorporation of so many functions within each group resulted in a very flat hierarchy; there are no layers between the groups and the factory managers. To facilitate these working arrangements, the process of car assembly had to be re-thought in order to refine and simplify it. The plant also adopted an equal opportunities policy that reserved at least 40 per cent of production jobs for women and at least 25 per cent for workers over 45 years old. The plant is clearly at the leading edge of Job Design, at least as far as the car industry is con- cerned. As Karlsson (1996: 11) remarked: What was created was an extremely horizontal organisation, but also some vertical integration. This included responsibilities for quality and some integration with sales, because in the result-oriented team the idea was that the worker should be able to experience what he delivered to the customer. Hence the members of the assembly group could meet and talk directly to the customer. Nevertheless, as other such initiatives by Volvo have shown, economic and operational concerns can lead to its more radical elements, especially self-paced work, being modified over time. Indeed, the original plan for the plant very much followed the practices adopted at Kalmar. It was only with considerable pressure from the trade unions, and the intervention of Volvo’s top man- agement, that more radical ideas were eventually adopted, though even the unions took some convincing that machine-paced assembly might be abandoned altogether (Pontusson, 1990). Unfortunately, the plant opened at a time when car demand was falling dramatically. Despite attempts to keep it open, along with the Kalmar plant, Volvo closed Uddevalla in 1992 in the face of mounting losses, and notwithstanding the fact that, in productivity terms, it was the most effi- cient of Volvo’s Swedish plants (Cressey, 1996). In 1995, however, the plant was reopened as a joint venture. Though operating on a smaller scale than originally envisaged, Uddevalla’s new Chief Executive appeared determined to stick to its original Job Design concept (McIvor, 1995). Phase four – Gent and Born By the late 1980s, Volvo’s approach to Job Design was widely accepted and practised throughout the company, especially wherever new developments were taking place. When Volvo’s Gent plant was chosen to build the 850 series (known internally as the VEC – Volvo European Car), it was natural for Volvo to adopt team-based assembly. The VEC teams operated very much as at the Uddevalla plant but with even greater emphasis on continuous improvement. There was also a great deal of emphasis on the teams to carry out their own maintenance as well as other support tasks. Indeed, so successful was this that Gent became the first plant outside Japan to gain the Total Productive Maintenance Award. In 1996, similar developments took place in Volvo’s Dutch
  • 388. Case Study 5 · Volvo’s approach to Job Design 375 plant at Born. The plant was chosen as the site of a joint venture between Volvo and Mitsubishi called Nedcar. The objective was to make cars for both companies that share the same chassis, and have one-third of the parts in common. In essence, it was an attempt to blend Japanese lean production techniques with Volvo’s Job Design approach. The aim was to achieve world class effi- ciency, and the plant quickly became one of Europe’s most efficient car plants. Both Gent and Born demonstrate Volvo’s ongoing commitment to develop, extend and experi- ment with alternative forms of Job Design to those used elsewhere in the car industry. As Karlsson (1996) suggests, Volvo is continually looking for new and different ways to organise production, in the case of Gent and Born by adopting a lean production philosophy, but ensuring that group work lies at the heart of any new developments. Summary The progress of redesigning jobs at Volvo has been remarkable in comparison with the Tayloristic–Fordist nature of the company in the 1960s. The fact that it has continued and intensi- fied over a period of 30 years, and that any organisational changes at Volvo are expected to revolve around group work, speaks volumes for the degree to which it has become embedded in the culture of the company. This is not to say that the result is perfect. It must be remembered that assembling cars and trucks will always be a physically demanding job. Also, Volvo are not an altruistic organisation; they exist to make a profit, and the way they organise work must reflect and facilitate this (regardless of pressures from trade unions, government legislation and public opin- ion). Nevertheless, as Pontusson (1990: 315) observed of Volvo, the ‘stages of workplace reform involve a cumulative process of innovation, with a trajectory which adds up to a more or less definitive break with Fordism’. This conclusion, of course, makes the takeover of Volvo’s car divi- sion by Ford in 1999 all the more ironic. Some might also point out that though Volvo have led the way, many other companies have fol- lowed – including much of the car industry. However, this would be to miss two important points. Firstly, Volvo’s approach is not a copycat or ‘flavour of the month’ one. Rather, it is long-standing and still developing approach which appears to be fundamental to the way the company operates. Secondly, though most other car companies have adopted, to a lesser or greater extent, the autonomous/semi-autonomous work group concept, especially the Japanese, no one else has abandoned the assembly line or gives workers the degree of autonomy and control that Volvo do, especially over the pace of work. Indeed, given the output of the leading car plants, if anything the pace of work on assembly lines, and rigid control over what assembly workers do, seemed more intense in the 1990s than in the supposedly bad old days of the 1960s and 1970s (Milner, 1998) The changes at Volvo have taken place over an extended timescale, at different sites and under different conditions and, therefore, have been influenced by a wide range of factors. Despite the subsequent advent of the Culture–Excellence approach and the Japanese approach, what has successfully taken place at Volvo is the adoption of practices and principles associated with the Human Relations school as operationalised by the Job Design movement. The key factors that appear to have influenced Volvo to adopt this approach are as follows: ■ For sound economic and business reasons, Volvo needed to reduce absenteeism and high labour turnover. ■ Full employment and a lack of wage flexibility precluded more traditional ‘stick and carrot’ measures for dealing with absenteeism and labour turnover. Therefore, Volvo had to look at
  • 389. 376 Chapter 12 · Case studies in changing internal relationships and attitudes alternative methods of reducing absenteeism and labour turnover and, instead of trying to alle- viate the symptoms, they chose to tackle the boredom and dissatisfaction that gave rise to labour problems in the first place. The decision by Volvo’s management to adopt a Job Design approach appears to have come about owing to a combination of intense public pressure on the company to move to a more human-centred approach to assembly work, and managerial preference. It should be noted, though, that Volvo’s management have never been unanimous in supporting the more radical aspects of Job Design, as was demonstrated by the disagree- ment over the success of Kalmar and the need for senior managers to intervene to ensure a more radical approach at Uddevalla. ■ The parallel move by Volvo to adopt a strategy of decentralising control to plant level (as averse to its previous centralised, bureaucratic control procedures) gave local management some free- dom to experiment with new ways of working, and also allowed management to experience the lessening of control that they were advocating for workers. ■ Though originally the move away from Fordist–Taylorist work practices was entirely manage- ment-inspired, trade unions came to play an increasingly active role in encouraging its adoption. In this, they were aided by both the Co-determination Law, which came into effect in 1976, and the generally favourable climate towards Job Design in Sweden. However, as Torslanda demonstrated, the trade unions – like Volvo’s management – are capable of exhibit- ing conservative tendencies and need to be convinced that some of the more radical elements of group work should be adopted. ■ Whilst these changes have taken place on different sites and at different times, both manage- ment and workers appear to have found a way of capturing the knowledge gained at other plants and lessons learnt for future projects. This process of organisational learning appears to be fundamental to understanding how Volvo has moved (not always in an easy or deliberate fashion) from the limited, though significant, structural changes at Kalmar to the genuine expansion of workers’ control seen at Uddevalla. Auer and Riegler (1990: 52), who carried out a comprehensive review of work organisation changes at Volvo, commented that: Interviews with managers, representatives of trade unions and researchers all confirmed ... Volvo is one of the few companies where management, employees, and trade unions have found broad opportunities for gathering experience in changing the organisation of work and that the company is a place of learning ... Evidently, the case of Volvo’s attempts to move to a radical change in its internal relationships, one which passes significantly greater control of production to workers than had hitherto been considered wise and efficient, is by no means straightforward. Though the intent was there from the start, though we can argue about why the move to Job Design came about, the actual details have been subject to a process of pragmatism, revision and trial and error over more than 30 years. The new approach to work organisation coincided with Volvo’s granting of greater autonomy to plant-level managers, the introduction of the Co-determination Law, and considerable public support for Job Design in Sweden; clearly, these were all influential in what happened at Volvo. It should be remembered, however, that Volvo was, at the time, a large and relatively successful pri- vate company. If it had wanted to, it could have chosen another course of action; indeed, Volvo’s management itself disagreed about the need for and extent of Job Design. The fact that Volvo chose to break the car industry mould at Kalmar, and to keep breaking it at other plants, shows that no matter how powerful or dominant a particular paradigm is, alternatives are always possible. It is also true that, if the move to new ways of working had not allowed the company to develop
  • 390. Case Study 6 · XYZ Construction 377 its competitiveness, the initiative would not have flourished. It may well have been the case that in the atmosphere of the 1970s, Volvo was under great pressure from a number of sources to develop a more human-centred approach to work. With the easing of this pressure in the 1980s and 1990s, however, the company could have chosen quietly to abandon this approach. That it did not clearly demonstrates the belief, especially by Volvo’s management, that job redesign works. So far, this commitment has survived the Ford takeover; whether it will continue to do so, only time will tell. Case Study 6 XYZ Construction Background XYZ Construction employs 500 staff and is part of a European-based multinational enterprise. Its main business is the provision of specialist services to major construction projects. As is typical for the construction industry, XYZ operates in a highly competitive and at times hostile and aggressive environment. Disputes between contractors and subcontractors can become bitter and frequently end in litigation, though there have been a number of attempts over the last decade to create better relationships. Just as relationships between organisations tended to be hostile, so relation- ships within organisations were also less than friendly. Up to 1996, XYZ had been run by an autocratic Managing Director who was feared by his colleagues and who treated the company as his own personal fiefdom. His style of management was not liked and many felt that it was counter- productive but, as one manager commented, ‘You didn’t challenge him, you didn’t put your head above the parapet, or he’d make life hell for you’. When he retired, the parent company took the view that XYZ was underperforming and that much of this was due to poor management and a lack of cooperation within the company. His replacement was appointed with the remit to improve the performance of the company and develop its managerial competency. This he did to great effect. Over a four-year period, he transformed the operation, culture and structure of the organisation. Focusing on people and performance The new Managing Director was appointed in 1996. He had trained as an engineer at XYZ but had then left and worked for a number of other companies in the construction industry. Construction is a close-knit industry, however, and he still knew XYZ and its staff quite well. He came with a reputation as an enlightened manager who could deliver performance improve- ments. The construction industry was notorious for the antagonistic relations between the main contractors and subcontractors such as XYZ, who specialise in one aspect of the construction process. The Managing Director recognised, however, that the industry was attempting to change, and conflict was being replaced by ‘partnership’ initiatives – contractors and subcontractors work- ing in a more cooperative and team-based manner (Burnes and Coram, 1999). The Managing
  • 391. 378 Chapter 12 · Case studies in changing internal relationships and attitudes Director also recognised that external partnerships needed internal partnerships and teamworking if they were to be successful. In turn this would require a new style of participative management in XYZ. Therefore, the Managing Director set out not just to upgrade XYZ’s management but to under- take a root and branch overhaul of the company’s operations and culture. As a signal of his way of working, as a first step in creating better relationships amongst man- agers, he broadened out the Senior Management Team to include key staff who were not directors. In what had been a very hierarchical and status conscious company, this was a signifi- cant change. The Managing Director knew that the staff in the company, particularly at a senior level, were experienced and competent people. He believed it was in the company’s interest to retain staff rather than replace them. However, he also believed that they would need to change their attitudes and behaviours and upgrade their managerial skills if the company was to achieve the changes he believed were necessary. His strategy for transforming the company rested on car- rying out two crucial activities in parallel: to introduce new practices and techniques into the company in order to provide a better service to customers (and thus improve the company’s over- all performance), and to change attitudes and behaviours within the company, especially those of managers. He did not see these as being separate activities or programmes: he saw them as being linked. New practices, such as customer care and customer partnering, were not mere tech- nical exercises. They required behavioural changes and new managerial skills. Therefore, the Managing Director wanted to create a change programme whereby any change designed to improve the organisation’s performance, whether it be new skills, new techniques or whatever, also had to promote and reinforce behavioural and culture change. The converse was also the case: any effort designed to change culture or behaviour also had to have the objective of improv- ing the organisation’s performance. Between 1996 and 2000, the company undertook a series of organisational, management and staff development initiatives designed collectively to transform the organisation’s performance and culture. The main initiatives are shown in Table 12.1. Table 12.1 Key changes at XYZ Date Event June 1996 New Managing Director appointed August 1996 Kaizen Phase 1 October 1996 Customer Care Programme launched March 1997 Investors in People launched April 1997 Kaizen Phase 2 September 1997 Customer Care Programme extended to construction sites January 1998 Construction Supervisors’ new role launched June 1998 New Senior Management Team formed November 1998 Kaizen Phase 3 March 1999 Site-based trainers appointed June 1999 XYZ culture redefined July 1999 Leadership and behaviours review September 1999 Begin to develop Team XYZ March 2000 Team XYZ up and running
  • 392. Case Study 6 · XYZ Construction 379 The Managing Director’s first initiative was to introduce a small-scale Kaizen programme. Kaizen is a Japanese technique for achieving small-scale improvements through teamwork (Witzel, 2002). The Managing Director saw his Kaizen initiative as delivering four benefits: it would show the organisation that improvements could be achieved on a quick low-cost/no-cost basis; it would promote teamworking; it would give managers confidence to delegate to and empower their staff; and it would allow both staff and managers to acquire new skills. In a traditional company such as XYZ, it was not easy to introduce new ideas and new ways of working, especially where managers might perceive them as a threat. But the Managing Director made it clear he was committed to this initiative and that it had to work. Over the next few years the Kaizen approach was rolled out throughout the organisation. The next initiative, in October 1996, was a customer care programme. This was designed to engender a positive view of customers by promoting joint teamworking. In an industry where antagonism between customers and suppliers (contractor and subcontractors) was the order of the day, where settling disputes through the courts was almost a standard practice, it was never going to be easy to promote customer care. The Managing Director knew, however, that the future of the company depended on working with customers to understand what they wanted and to give it to them. Once again, this initiative was a combination of organisational change and man- agement development; but, much more than the Kaizen initiative, it was also central to changing the culture of the organisation. It began with a few key customers and a few key managers, but such was its perceived success that a year later it was extended to the actual construction sites. Other initiatives were introduced over the next few years, including Investors in People, and a redesigning of the Construction Supervisors’ role to ensure that the post-holders possessed the skills, competencies and behaviours necessary to work closely with customers and staff under the new regime. Once again this was designed to achieve a combination of aims, including changes to working practices, the upgrading of managerial competency on the construction sites, and the promotion and development of a more team-based culture in the organisation. In 1999, XYZ decided it was time to redefine its culture and change its structure. As a number of writers have emphasised, structure and culture need to be aligned, but it takes much longer to change the latter than the former (Allaire and Firsirotu, 1984; Burnes, 1991; Handy, 1993). However, the company had already made sufficient changes to its behaviour and practices to believe its culture was very much different from when the Managing Director took over in 1996. It went through a company-wide process of identifying and redefining its culture. This then led into a process of reviewing each manager’s leadership abilities and behaviours. With these activities underway, the scene was set for redrawing the company’s structure in order to promote and reflect its new ways of working and its developing culture. Towards Team XYZ By 1999, the company was a much more cohesive, open and efficient organisation. However, its basic structure remained the same as when the new Managing Director had taken over. There was Head Office, which dealt with large, national projects, and five regional offices that dealt with smaller, local projects. Each of these offices was organised on a functional basis; they each had sep- arate departments for Finance, Estimation, Design and Engineering. In addition, the Head Office had a Human Resources function which covered the entire company. This structure gave rise to a number of problems: rivalry between the Head Office and the regional offices; and rivalry and lack of communication within the various offices between departments and functions. A particular prob- lem was the relationship between Estimation and Design in the Head Office. The former were
  • 393. 380 Chapter 12 · Case studies in changing internal relationships and attitudes responsible for dealing with customers and setting the price for a job. The cost of a job, however, was based on the design provided by the Design Office. Though based in the same building, there was friction between the two functions, with each seeking to second-guess the other. The large jobs were often very complex and even within the two functions of Estimation and Design there could be disputes about the best way to carry out a job. However, there was much more dispute between the two functions. Estimation felt that Design sometimes made jobs too complex and costly, and Design felt that Estimation did not understand the technical aspects of what they were suggesting to customers. This caused problems for Engineering, which was responsible for the actual construction process. The engineers sometimes found themselves starting jobs where there were still disagreements between Estimation and Design over what had been quoted for and what was required. Nevertheless, the general view was that the company was more efficient, better-run and a friendlier place than it had been four years earlier. In 1999, the Managing Director and his Deputy began to have discussions in the company over restructuring. Their basic aim was to remove functional barriers and create a more teamwork- based, process-focused organisation. However, they did not underestimate how difficult this would be. It would need a complete reorganisation within and between the offices. It would reduce the power of the regional managers and amalgamate the Head Office empires of some directors. The Managing Director recognised that such changes could and probably would create friction and resistance. He also recognised that XYZ lacked the skills to plan and implement such a change. He, therefore, brought in a change consultant to assist with the exercise. After discussions with the consultant, a five-stage change process was agreed comprising the following activities: 1 Change readiness audit 2 Evaluation and planning workshops 3 Communication 4 Implementation and team-building 5 Evaluation Stage 1 The consultant undertook a change readiness audit to identify key issues and concerns which needed to be addressed. This consisted of face-to-face interviews with all senior managers, and inter- views and discussions with other staff from all levels of the company. It also involved a SWOT 2 exercise to assess the company’s competitive position. Some 70 people, at all levels, were involved in the SWOT. The interviews showed that there was a general recognition of the problems brought about by the existing structure, but little agreement about any new structure, and some concern over potential loss of status and career opportunities if a flatter, less functional structure was adopted. However, the audit also showed that managers and staff alike had faith in and respect for the Managing Director. They also felt that the changes that had taken place over the previous three years had been positive. In addition, there was a strong sense of self-belief in the company that whatever the changes required, they could achieve them. Nevertheless, there was also concern by some indi- viduals that changes in structure would affect their career progression or status, especially if the new structure involved multi-function teams and reduced the number of departments. The SWOT exercise showed that there was considerable agreement that the company had a strong technical base but 2 See Exhibit 15.1 in Chapter 15 for a description of a SWOT analysis.
  • 394. Case Study 6 · XYZ Construction 381 concerns about lack of team-working and entrepreneurial flair. In particular, staff in the regional offices felt that opportunities for new business were being missed. They also felt that their skills were under- utilised by being devoted to mainly small jobs rather than having an opportunity to participate in the larger contracts. The finding from the change audit were used to structure and begin the second stage of the change process, the evaluation and planning workshops. Stage 2 There were five one-day workshops spread over a two-month period. The purpose of these work- shops was to establish a set of criteria for evaluating alternative structures, identify what alternatives existed, test these against the evaluation criteria, select a preferred structure and develop plans for implementing it. This was seen as an iterative process. Even when the evalua- tion criteria had been agreed, it was expected that further discussions about alternative structures and planning would lead to some of these being questioned, challenged and amended. Similarly, once a preferred structure had been agreed, it could still be amended if the planning process threw up issues that had not been considered. At the end of each workshop, participants had an agreed set of actions which they had to undertake, a key one being to go out and discuss what had emerged from the workshops with their colleagues in the rest of the company. A newsletter was also issued from each workshop. The first two workshops were for the senior management team (SMT) only and the remaining three for the SMT plus the next layer of managers down, an additional 15 to 20 people. The results of the audit were presented to the first workshop, which began the process of developing a set of evalu- ation criteria and generating alternative structures. At the end of Workshop 1, a consensus seemed to be emerging with regard to a preferred structure. At the end of Workshop 2, it was agreed that the new structure should be built around the three core activities of the company, which were labelled: Get Work; Do Work; and Get Paid. It was also agreed that whilst it was important to keep the regional offices, their staff should be merged into the new structure. In effect, what emerged was a process-ori- entated flat, matrix structure with staff in the regional offices being responsible both to the Regional Manager and the Process Manager in Head Office. For the Head Office staff, in the main, their line manager and process manager would be the same person. As might be expected, this new structure did not emerge without much discussion, debate and in some cases soul-searching. The SMT also recognised that this was probably the most radical of the proposals they had looked at, and the one likely to meet the most resistance both from regional managers, whose power would be much reduced, and functional specialists in Estimation and Design who would have to be merged to create the ‘Get Work’ group. In addition, it was clear that some Directors were not happy to see their own department dismantled and their own position threatened. The first of the remaining three workshops was devoted to presenting the proposed structure to the new participants, testing it and in some cases agreeing to amend it. The remaining two workshops con- centrated on the details of implementing the new structure. This covered everything from where people would sit, to whom they would report to, new job descriptions, communication and team-build- ing. This latter exercise was seen as vital to ensuring that staff in the reorganised structure worked as teams and cooperated with other teams rather than merely creating another set of functional barriers. It was at this point that it was agreed that the new structure be named ‘Team XYZ’ to emphasise that the intention was to create a company where everyone felt they were members of one team. There was also much discussion and consultation between the Workshops with staff in the rest of the company. At the end of Stage 2, almost all managers and supervisors in the company and a great number of the
  • 395. 382 Chapter 12 · Case studies in changing internal relationships and attitudes workforce had been involved in the process and by November 1999, the company was ready to com- municate the new structure both internally and externally (to their parent company and customers). Stage 3 The communication stage was both short and intense. Members of the SMT were given the task of visiting all areas of the company and briefing them on the new structure and how it would impact on them. Though there were also newsletters and information on the company’s intranet, it was these face-to-face briefings with small groups of staff which generated the most debate. They also raised some questions, mainly of a detailed nature, which had not been addressed. In general, however, the new structure received a positive welcome and the implementation stage then began. Stage 4 The new structure was rolled out over a three-month period. Ideally everything would have changed overnight, but the logistics of moving staff around from one group to another, physically altering office accommodation, and training managers for their new roles took time. Also, the intention was to ensure that all managers and supervisors, including those on sites, went through Team XYZ team-building workshops. Although, as expected, there were some hiccups and some unanticipated problems, by the end of March 2000 the new structure was fully up and running with remarkably little difficulty. Stage 5 In April, a two-day meeting of all the company’s senior and middle managers was held to evaluate the change that had taken place, identify issues that needed to be addressed, and ensure that the momentum was maintained and that staff did not fall back into old ways of working. As part of this process, each manager was asked to identify two steps that they personally would take to develop the new structure further and promote teamworking. These were all written on flip charts and pinned to the walls for everyone to see. At the beginning of the two days, there was some- thing of an air of exhaustion about the managers; they had been through a period of major upheaval and, as one said, ‘We need a period of consolidation’. At the end of the two days, they left not only having agreed that the new structure was working remarkably well, but also with a whole host of new changes they wanted to make to improve the structure further. Summary Though the development and implementation of a new structure at XYZ was not without its difficul- ties, it was achieved remarkably quickly and with relatively little disruption. There was significant potential for those who might lose out from the changes to try to prevent, or at least slow down, their implementation. All the regional managers and a number of the directors saw their areas of responsi- bility, and thus power, reduced. Many of the functional specialists found themselves operating in multi-function teams where their promotion prospects depended less on their technical abilities per se and more on their ability to work and manage as a team player. There was also the fact that people who did not like each other suddenly found that they were working side by side. One explanation as to why the potential dangers to the change process did not emerge is clearly a result of the way it was managed. It was an open process that involved a great number of people either directly or indirectly. At some point, all the issues that needed to be considered, even personality issues, were brought out on the table and discussed, sometimes quite often. There was also a tenacity and momentum to the process. It was clear from the start that the Managing Director wanted to see a new structure and would not be fobbed off with a sub-optimal compromise. It was also clear from the change audit that
  • 396. Case Study 7 · GK Printers Limited – changing systems and attitudes 383 many other people in the company recognised that its structure needed changing, even if they were nervous about such a change. In essence, the company was ready for such a change, even if some were uncomfortable with the outcome. This of course raises the question: Why were they ready? For organisations to work effectively, it is necessary for structure and culture to be aligned, but whilst structure can be changed quickly, changing culture is a much slower and less certain process (Allaire and Firsirotu, 1984; Handy, 1993). As mentioned in Chapter 10, Kanter et al (1992) identify two basic approaches to change: Bold Strokes and Long Marches. The former refer to rapid and major structural transformation initiatives. The latter covers slow, incremental change programmes that run over a number of years and which are geared to achieving changes in culture and behaviour. The received wisdom is that when companies need to transform them- selves, they should change their structures first because this is the quickest and easiest change to make. They should then embark on a process of developing a culture to support and align with the new structure. This is why Kanter et al (1992) note that Bold Strokes often need to be fol- lowed by Long Marches in order for organisations to seek to develop a culture and behaviours suitable for their new structure. In the case of XYZ, this logic was turned on its head. As Table 12.1 shows, the Bold Stroke, the new structure, followed the Long March to create a new culture in the company, and this is why it could be implemented so quickly, so successfully and with relatively little resistance. XYZ already possessed the culture to go along with its new structure. It already possessed a management and workforce orientated to working in a team-based environment. The new structure was necessary both to formalise and facilitate the new teamworking ethos of the organisation, and to reinforce the new culture itself. Therefore, the development and implementa- tion of the new structure at XYZ can be seen as much more a case of Planned change rather than Emergent change. However, it also needs to be viewed within the context of a series of changes that had emerged in XYZ since 1996 as the company, under the leadership of the new Managing Director, sought to transform itself. Case Study 7 GK Printers Limited – changing systems and attitudes Background GK Printers Limited is a small, family-run printing business. It was established just after the Second World War by the present Managing Director’s father. The company was originally a jobbing print- ers; which is to say they would print anything. ‘No job too large or too small’ might well have been their motto, although in fact, the mainstay of their business was producing stationery, business cards and publicity brochures for local companies.
  • 397. 384 Chapter 12 · Case studies in changing internal relationships and attitudes This work was moderately profitable and provided a reasonable living for the owners and their workforce, some 20 people. By the beginning of the 1980s, however, this situation was beginning to change. Firstly, the recession at this time had a strong negative effect on their traditional cus- tomer base, and orders began to fall off dramatically. Secondly, the advent of newer, computerised printing techniques, which GK had not adopted, meant that rivals could offer a quicker, cheaper and often better-quality service. Thirdly, the advent of small printing bureaux (such as Prontaprint), often situated in prime city centre locations, and portraying an up-to-date image, further eroded GK’s business. Lastly, it was clear that many of their customers were no longer going to a printer directly. Instead, in the image-conscious 1980s, they were putting their work out to graphic designers who, having finalised the design, would then subcontract out the printing. In such a situ- ation, there was no guarantee that the work from their traditional customers would eventually end up with them. It depended upon the preference of the particular graphic designers concerned. All these factors combined to threaten the financial viability of GK and, for the first time ever, the company lost money. The loss was only small (£20,000), but it came as a major shock to a company that had grown used to making a reasonable, if not spectacular, profit. The result of this was that the Managing Director and the company’s Printing Manager, along with other members of the owning family, formed a ‘crisis committee’ to review the future of the business. Phase One: developing a strategy It rapidly became clear to the committee that to do nothing was not an option; the result would be to go out of business. The two main options considered were whether to sell the business, or, in some way, to change it to secure a viable future. Without exception, the crisis committee preferred the second option, if only because it was clear that it would be very difficult to find a buyer for the company. However, no one was sure what it was that they needed to do to change the fortunes of the business. In desperation, almost, they approached a lecturer at the local polytechnic who was a friend of the Printing Manager. His suggestion was that one of his business studies students should under- take a project to examine the company’s options. This took two months, during which the Managing Director and Printing Manager worked closely with the student. The student’s final report had a dramatic impact on the company. Its main findings were as follows: ■ The printing market was expanding rather than contracting. This was mainly due to companies recognising the need to promote themselves more and in a better way than in the past. ■ The market expansion was mainly at the higher value-added end of the market, in the area of high-class, glossy promotional material. ■ The newer print bureaux were not as strong competitors as the company had thought. Their product quality was both variable and, at best, no better than GK’s. Also, their costs appeared to be higher. ■ GK’s existing customer base would prefer to continue to do business with them, but perceived them as old-fashioned, lacking in key capabilities (mainly graphic design), slow, and not particu- larly flexible. ■ GK’s printing equipment was not capable of producing the higher value-added products that customers were increasingly demanding. These findings were met with some astonishment and a great deal of relief by the crisis commit- tee. Without exception they had steeled themselves for a report that would be doom-laden. Instead, they could see that a future did exist, and possibly a very profitable one. But some major changes would be required. Before making any decisions, however, the Managing Director and Printing Manager insisted that the findings should be discussed with the workforce.
  • 398. Case Study 7 · GK Printers Limited – changing systems and attitudes 385 Employee relations were very good in the company and, whilst not being paternalistic, the ten- dency was to see the company almost as an extended family. The print workers, who made up the majority of the workforce, were all union members, and two of them were prominent activists in their local union branch. The workforce knew that a review was taking place; it would have been almost impossible to keep it from them, given the nature of the company, but in any case the management had been very open about it. Like the crisis committee, the workforce were relieved that the findings were more optimistic than many had believed possible. They wanted to know, however, what the management intended to do to change the company in order to take advantage of the opportunities that appeared available. The Managing Director was slightly taken aback by the workforce’s apparent eagerness for change; he had expected some resistance, especially from the print workers. Instead, the reverse was the case: the two union activists were the strongest advocates of new equipment. As one later said: ‘We knew what was happening elsewhere; skilled workers were being replaced by glori- fied typists. But we also knew that we needed new equipment. The deal we struck with management was that we would accept anything they bought, but we would be trained for it and we would operate it’. Indeed, they went beyond this – they actually told the management what to buy and from whom. On the basis of the report from the student, the management constructed a strategy for rejuve- nating the company. The strategy had three main elements: 1 The appointment of a Marketing and Design Manager to develop the company’s customer base and provide a graphic design capability. 2 Upgrading the company’s image. The above appointment was part of this process, but it also involved remodelling the company’s frontage and reception areas, redesigning its stationery and creating a company logo. 3 Progressively replacing old printing machines with newer, more capable equipment. Though the company never formally created a ‘vision’of its future, the Managing Director later said: After the student’s report I began to see a picture in my own mind of what I would like the company to be. I wanted it to be a one-stop shop for all our customers’ printing needs. In the past, if we could not do it ourselves, or if we were too busy, we turned people away. Not any more. If we could not do it, we subcontracted, just like the graphic designers. But we would ensure that we could do the money busi- ness in-house (the high value-added business) and eventually only subcontract out the cheap stuff. Therefore, the company began its transformation by the appointment of a Marketing and Design Manager and upgrading its image. Initially, it did not buy any new equipment, but took the decision to subcontract work they could not do until such time as the volume of work necessitated new invest- ment. This allowed them to turn round the business without having to borrow large sums of money. Nevertheless, within 12 months, such was the success of the strategy that the company began buying new equipment. After that, as the economy grew in the 1980s, the company’s fortunes also grew. By the late 1980s, GK employed 40 staff (double its previous number) and had quadrupled its turnover to £4 million. In the process, it had managed to improve its profitability substantially. In 1989, however, it grew concerned that the increased volume of business, made more com- plicated by the need both to design as well as print, and to coordinate their subcontracting activities, was having an adverse effect on customer service. The main problems were controlling paperwork (especially orders and invoices), the company’s costing system, and production sched- uling. Therefore they undertook a review of these activities to see how they could be improved. Thus began the second phase of the transition of GK into a highly competitive printing company.
  • 399. 386 Chapter 12 · Case studies in changing internal relationships and attitudes Phase Two: changing systems Reasons for change As mentioned above, market, product and operational changes meant that the company needed to provide a faster and better service to its customers. While much had been done to achieve this, in 1989 it was also realised that better business systems were required, especially in the area of costing, invoicing and production control. Given that GK is only a small company, it was relatively easy for the Managing Director to bring together the six people who were responsible for these activities and, in effect, to state the prob- lems and give them the authority to come up with a solution. The people concerned agreed to meet for two hours each Friday afternoon to review the issues involved and come up with options. They were clear that they did not want to rule anything out, but set out instead to identify all the available alternatives, and choose the one that suited them and the company best. After three weeks they had reached a consensus on the root cause of their problems: they were all being asked to do more and more without any additional resources. Not only did this mean that backlogs occurred, but also that the greater need to communicate across functions, which the company now required, was not taking place. Given this analysis, their first inclination was to ask for more staff. They also looked at other options, however, the main one being to introduce better systems – ones that reduced duplica- tion. This raised the additional question: manual or computer systems? Eventually they agreed a number of key objectives that any option must be tested against. These were that any new system should provide the following: ■ a faster and better response to customers’ requests for quotations; ■ speedier invoicing and improved debtor control; ■ better record-keeping and a reduction in duplication; ■ an increase in productivity of clerical staff; ■ better control of production, resulting in reduced lead times, and quicker and more reliable service to customers; ■ system integration. Having decided upon these criteria, the people involved then asked the Printing Manager if he would approach his contact at the local polytechnic for assistance. This he did, and once again the assistance came in the form of a student project. The student evaluated the company’s existing operations and looked at alternatives. Her report stated that it was possible to improve the existing systems but that this would not allow them to achieve their objectives. Instead, she advocated introducing computer-based systems. As they had witnessed the successful introduction of computerised printing equipment during recent years, staff were neither overawed nor complacent about computerising their systems. They discussed with the local polytechnic how best to approach an evaluation of the benefits of com- puter systems, and selection of a system. The group then prepared a written report for the Managing Director that detailed their investi- gations, their initial objectives, and the advice they had received. Their recommendation was that the company should invite a number of computer companies to visit them to discuss their needs. A long discussion took place between the Managing Director and the group, which resulted even- tually in their report being accepted. However, the Managing Director did add one proviso. This was that the group should be responsible for deciding whether to computerise, and, if so, what
  • 400. Case Study 7 · GK Printers Limited – changing systems and attitudes 387 system to select and from whom to purchase it. The Managing Director said he would sit in on any negotiations that took place with computer companies, but that he would not take the deci- sion away from them; rather he would bolster their authority by his presence. So a number of computer companies were invited to discuss the company’s requirements with them. In total, some 20 companies visited them. The upshot of these visits was that the company became convinced that their needs could best be met by purchasing a computerised business system that could perform the necessary work and integrate their existing manual systems. However, the cost of this was likely to be between £20,000 and £30,000, which – for a company of GK’s size – was significant. The Printing Manager, and others, pointed out that such an amount spent on print- ing equipment would greatly extend their capabilities. Nevertheless, after much discussion, the decision was taken to go ahead with the purchase of a computerised business system (CBS). Though it took a number of meetings to reach this decision, which was subject to much discus- sion throughout the company, the final decision was almost unanimous. The reason for this was that the company was performing well on all fronts except in the areas covered by the proposed changes. Late and inadequate quotations, poor debtor control and erratic delivery performance were all causing the company problems. These were not as yet major problems, but could be expected to get worse as the company expanded. Introduction and development of CBS Once the decision had been made, the original group were given the responsibility, as the Managing Director had earlier stated, for specifying and deciding which equipment to purchase. Their task was made difficult because, whilst it was clear that standard software packages were suitable for such tasks as sales ledgers, wages and invoicing, special software would need to be written to accommodate the company’s production control needs. The CBS steering group, as they jokingly referred to themselves, spent a number of months identifying and writing a specifica- tion of their exact requirements from a production control system. They then asked the computer companies to quote for a CBS on the basis of this specification. However, of the original compa- nies who had shown interest, only two were prepared to provide the bespoke software the company required. The company wished to ensure that both the hardware and software were supplied by the same vendor, not only to avoid any incompatibility problems, but also to have only one organisation responsible for any problem that might arise. Further discussions took place with the two companies, during which the software specification was further refined, and eventu- ally a supplier was chosen. The entire process, from the Managing Director raising the issue, to actually placing the order, took over a year. The computer for running the systems, and the standard packages, were delivered almost immediately, but it was another six months before the production control package was installed. This was because it had to be specially written. The company ensured that it closely monitored the writing of the software and that the final package met the specification. It then took some three months to bring the production control package on line. During this period, manual records were still kept in parallel to the computerised system. After this, it took a further three months before the total CBS package was up and running satisfactorily. Therefore, in total, it took two years from the inception to the completion of the project. Nevertheless, no one regretted the time spent. As the Managing Director said: If you’d told me at the beginning it would take so long I’d have laughed at you. But now we’ve ended up with a system that gives us all we want – and more. It's a system that ‘belongs’ to the people who work it – it’s not my system, it’s theirs.
  • 401. 388 Chapter 12 · Case studies in changing internal relationships and attitudes Though the company only bought one workstation initially, it had specified that the CBS should be capable of networking. This was done with the intention that once the CBS had proved itself, further workstations would be acquired. Subsequently, three more workstations were purchased and the company also doubled the memory capacity of the system. In total, some £35,000 was spent on the CBS. As with other aspects of the CBS, the company was careful to ensure that adequate training was pro- vided to those who would use the system. Once again, this was made easier because it was the users who had selected the system, so they knew what it could do and what training they required. This ranged from three days to a week, depending upon the users’ requirement. The training was provided by the equipment supplier. Training took place in stages, allowing users to become familiar with one aspect of the system before being trained on another aspect of it. Training was provided for clerical staff who would use and maintain the system, and also to managers who needed to access it for information. Staff appeared to take to the CBS very well. Though initially there was an additional workload for them in terms of inputting information into the system, they found that it was better and faster than the previous manual system. Their workload was no less than before, but they took satisfac- tion from being more effective by using ‘their’ system. Obviously, the system had a knock-on effect elsewhere in the company, both in the collection and use of information. This adjustment appears to have been accomplished with little or no difficulty. The benefits The CBS did not transform the fortunes of GK; no single system will do that for any company. In the areas covered, however, it made a significant contribution to improving the service GK pro- vided to its customers and meeting its own requirements. The company believed that computerising its business systems brought the following benefits: ■ better and more accurate records; ■ quicker access to information; ■ better control of resources; ■ a speedier and more accurate response to quotation requests; ■ higher productivity from clerical staff; ■ reduced lead times; ■ faster and more reliable deliveries; ■ a greater integration of business functions; ■ an improvement in staff morale and skills. Though this looks like an example of successful technical change, it would be wrong to perceive it exclusively in this light. Certainly, that is not how those involved saw it. Rather they believed that the main benefit gained was the ability to work together more effectively. The CBS assisted this by automating some of the more routine elements of their work, thus allowing them to put their skills to better use. However, they are the ones who know what customers and the company require, not the CBS. Whether their perception is true or not may not matter: the real issue is that they believed it to be so. This clearly had a substantial effect on their effectiveness, self-esteem and morale. Reasons for success To the outsider, at least, this appears to be an almost textbook case of how to manage change. However, the staff involved, whilst clearly pleased with their role, were also not uncritical of their
  • 402. Case Study 7 · GK Printers Limited – changing systems and attitudes 389 performance. With hindsight, they said that they should have completed the process in a year rather than two years. They also believed that they should have included additional features in the CBS. Whilst these criticisms may be true, they are only so from the vantage point of having gone through the process of change and having gained confidence and experience from it. They also reflect a key reason for the success of the process: a willingness to be open and critical about them- selves and their requirements, and a belief that they all needed to be convinced of what was required before proceeding. Nor should the role played by the Managing Director be undervalued. In a company where – a few years earlier – change, of any sort, was very rare indeed, it took considerable courage for a senior manager to delegate authority to users. Indeed, at one point he openly told the group that ‘if you succeed, it’s your success – not mine. If you fail, I carry the can – not you.’ This created the climate of trust and responsibility that made those involved determined to succeed. Nevertheless, it would be remiss not to draw attention to several other factors that contributed to successful change in this instance: ■ The company had a strategy for its future development (or at least a general view of what it wanted to become) and therefore was able to take an overview of all areas of its business in relation to future objectives. ■ Because the company was strategy-driven, it was able to establish not only where problems lay in the company, but also whether the problems were high, low or medium priority. This meant that the company could establish that there was a need to improve business systems and that this was the priority. ■ The company did not rush into making a decision about what exactly was the problem, what solution to adopt or what equipment to purchase. ■ The company clearly documented its requirements, and identified where standard packages were sufficient and where bespoke software was required. ■ It carefully selected a supplier in whom it had confidence and with whom it could work closely. ■ It constructed a timetabled implementation plan with clear objectives for the introduction of the CBS. ■ It ensured that the appropriate training was provided. Two further points should be stressed about the introduction of the CBS. Firstly, the company was attempting to move from being an organisation where change was the exception, to one where it becomes the norm. In such a situation, it is impossible for change to be controlled exclu- sively by management or ‘experts’. The sheer volume of work would overwhelm them. Without devolving the responsibility to those affected, change either would not take place or would be unsuccessful. Nor would it be possible for senior managers to concentrate on the longer-term strategic aspects of their business. Therefore, sustaining the changes in managerial behaviour that promote involvement and team work was essential to GK’s prosperity. Secondly, devolving responsibility in this way ensures that those who have to live with the change take ownership of the process, and are committed to it. It allows those involved to develop their skills and confidence. It also ensures that once the changes do take place, they become fully operational as rapidly as possible. It should have the additional advantage that it encourages those concerned to continue to search for improvements. Unfortunately, as business increased, thanks to the changes at GK, there was a tendency to concentrate on output rather than development, and to revert back to old patterns of behaviour. This was particularly the case with the Managing Director, who felt that the priority was to meet customers’ requirements rather than to involve other managers in decisions that had always been his responsibility.
  • 403. 390 Chapter 12 · Case studies in changing internal relationships and attitudes When an organisation is operating successfully, as GK appeared to be, it is difficult to argue that time should be spent improving what already, apparently, works well. Similarly, though teamworking had proved its usefulness in facilitating major decisions and changes, it was more difficult for managers, especially the Managing Director, to appreciate its effectiveness on a day-to-day basis. Therefore, though major organisational changes had taken place at GK, changes in managerial behaviour were not sustained. By 1993, it was apparent that the pace of improvement was slow- ing down under the pressure of work. This situation continued until the beginning of 1994 when, once again, the company recognised that it faced serious problems. Phase Three: changing attitudes and behaviour Accelerating the pace of change Unlike many companies, GK’s business continued to grow throughout the early 1990s. Though its existing customers were being hit by the recession, it was winning new business that more than compensated for this. Nevertheless, in 1993, GK started to become aware that its customers, old and new, were becoming increasingly demanding with regard to price and delivery. In addition, there were signs that its competitors were beginning to win back some of the work they had lost to GK. By the beginning of 1994 it was clear that GK was losing a significant amount of business. This was partly due to increased competition, but mainly it was because its customers, in seeking to cut their own costs, were reducing the size and frequency of their orders (though when orders were placed, they were often required far faster than previously). This presented a double threat to GK. Firstly, the fall in overall volumes was having an adverse effect on turnover and profit. Secondly, the reduction in size of individual print runs was having an adverse effect on costs because, though the actual volume was smaller, the design, order processing and set-up costs remained constant. In effect, as volumes decreased, the cost of each printed item increased. In addition, there were worrying signs that some customers were using word-processing packages and colour printers to produce their own publicity material instead of going to a printer. At a time when its customers were facing severe pressure to cut their costs, GK were faced with the dilemma of whether to increase its prices to offset rising costs (and risk customers going else- where or developing their own facilities), or to maintain or reduce prices and see its profits plunge. This was not a situation unique to GK; practically every company in the UK was experiencing a simi- lar dilemma. This knowledge, however, did not make it any less painful or any easier to resolve. The knee-jerk reaction of many in the company was, ‘If customers want smaller runs, the price goes up’. However, the Managing Director and the other managers in GK came reluctantly to accept that, whilst the logic was impeccable, the result could be disastrous. After much seemingly futile discussion, it was the Marketing and Design Manager who eventually came up with a sug- gestion that, though laughed at initially, later turned out to be the key to GK’s survival. He pointed out that to maintain its existing volume of business, and perhaps even increase it, GK needed to improve on its already good level of service. In particular, it needed to cut costs in order to cut prices and improve the efficiency of its internal operations to cut delivery times. The initial reaction to these suggestions was, perhaps predictably, very negative. After all, if volumes decrease, unit costs must increase because set-up costs are constant; also, an increase in the number of smaller print runs actually extends turnaround times for a similar reason – more set-ups are required. So the Marketing and Design Manager was attempting to turn the conventional wisdom regarding printing on its head. In addition, in some people’s eyes, he was still a newcomer to GK and conse- quently he was believed to lack an in-depth knowledge of the printing industry. Finally, GK had
  • 404. Case Study 7 · GK Printers Limited – changing systems and attitudes 391 made significant strides in improving efficiency and cutting costs, and there was some doubt as to the scope for any real improvements in these areas. A false start Despite the initial adverse comments, the Managing Director began to wonder if it might be possi- ble to reduce set-up times and costs. If it could, he reasoned, the company would be able to attract more business, prevent customers seeking in-house solutions, and undermine their com- petitors. He considered asking for outside assistance again, but instead asked the Marketing and Design Manager to put forward some suggestions for reducing costs and set-up times. This was for two reasons. Firstly, he wanted to give him a chance to prove himself to the rest of the team who, to an extent, thought he still had to learn the ropes. Secondly, the Managing Director wanted to demonstrate that they now had the managerial talent to dispense with outside assistance. The Marketing and Design Manager quickly responded and within a fortnight presented his pro- posals to the Managing Director and other senior staff. He began by identifying what he saw as the main problem the company faced: 1 Though there had been a slight decline in the number of individual orders, the actual reduction in the volume of business was much greater because customers were ordering shorter print runs. 2 The result of this was that, whilst office staff, marketing, design, administration, etc., were as busy as ever, the print shop was short of work, and it was not unusual to see printers sitting reading the paper with nothing else to do. 3 However, though the printers were underworked, this did not provide much scope for reducing delivery times, because most of GK’s lead time was accounted for by non-printing activities – especially design, which could take anything up to two weeks. Having laid out what he saw as the problem, the Marketing and Design Manager went on to offer a solution. He argued that the key to solving the company’s problems lay in speeding up design time. He pointed out that there was always a backlog of design work ranging from one to two weeks. Given that everything, even repeat orders, went through design, total lead time could be anything from three to five weeks. Whilst this was considerably better than in the 1980s, it was no longer acceptable as customers were cutting stock to a minimum. Many customers were asking to have their printing back within seven days, sometimes even sooner where promotional material was concerned. The solution, therefore, he argued, was to have more design staff. If one extra designer was employed and another design workstation purchased, the Marketing and Design Manager believed that design lead time could be reduced to two or three days. The Managing Director and other managers, especially the Printing Manager, who had been arguing unsuccessfully for new equipment for some time, were taken aback by this proposal. The analysis, they believed, was correct but the solution, they felt, was an outrageous piece of oppor- tunism. The case for more design staff had been raised and rejected in the recent past. The Marketing and Design Manager’s colleagues felt that he was blatantly using the company’s current problems to empire-build. Not surprisingly, he vigorously denied this. Nevertheless, the meeting ended acrimoniously and no decision was taken. The Managing Director was particularly infuriated, as he had genuinely been expecting an acceptable solution to emerge from the meeting. Instead, the friendly working atmosphere he valued, and which he felt he did much to promote, had been shattered. Nor did he see an easy way to bring his managers back together to seek a cooperative solution. He was also annoyed
  • 405. 392 Chapter 12 · Case studies in changing internal relationships and attitudes because he realised that he had made a mistake in asking only one person to put forward their view. Not only would a team have avoided favouring one area rather than another; it would not even occur to anyone to make the accusation. Having made the mistake, however, he was not sure how to remedy it. If a team was set up to examine the options that did not include the Marketing and Design Manager, he would rightly see it as a snub and probably attack any solution that was put forward. If he was included, it was likely that he would continue to push his proposal and the other managers would react badly. His inclination was to impose a solution and tell every- one to get on and implement it. Unfortunately, he did not have a solution to impose. Towards a new way of working After several weeks of indecision, during which tensions within the management team continued to rise, the Managing Director decided once again to seek outside assistance. He approached GK’s contact at the local polytechnic and, at length and with some passion, explained the situation. However, rather than proffering help, as expected, the lecturer stated that the situation was out- side his area of expertise. He explained that there seemed little point in offering a ‘technically appropriate’ solution, because relations were so bad in the company that, whatever it was, it would be met by hostility from some quarters. He pointed out that the success of earlier interven- tions was due to achieving unanimity about both the problem and the solution; at present, this was unlikely. He did, though, refer the Managing Director to a colleague at the polytechnic who was skilled in team-building. Though the Managing Director was sceptical, the lecturer pointed out that, working together, there was enough experience in GK to solve its current dilemma. Therefore, the issue was how to bring people together, rather than seeking outside solutions. The Managing Director met with the team-builder, who impressed him not only with his general demeanour of professionalism but also with the impressive array of organisations he had worked with. The team-builder said that the process he used was straightforward. Firstly, all the relevant managers had to be involved. Secondly, he would meet each of them individually and then, as a group, would take them away from the company for two days to work on the problem. Thirdly, each member of the team would have to agree to operate in an open and constructive fashion during the two days. This meant not only responding positively to each other’s ideas, but also being honest. Lastly, the team would agree to reach a commonly-agreed solution by the end of the two days. It was on this basis that the team-building exercise went ahead. Though the GK management later admitted that the first day had been decidedly uncomfortable, they also agreed that the two days had been a success. The proceedings began with the team-builder reporting on his findings from the indi- vidual interviews. Though he did not reveal who said what, in a small organisation such as GK, it was relatively easy for managers to make a good guess as to the source of particular comments. This was one of the reasons why they found the first day uncomfortable. The team-builder's report was split into positive and negative findings. On the positive side, there was a strong commitment to making the company a success, and common agreement regarding pri- orities for change (primarily, cost reduction and increasing responsiveness to customers). On the negative side, there was considerable tension between the managers, especially the Printing Manager and the Marketing and Design Manager. Underlying this, however, was the style of the Managing Director. Though on a number of occasions the Managing Director had used teams to make crucial deci- sions and had been prepared to consult widely, this was not his normal mode of operation. He tended to make decisions either by himself or in consultation with one other manager. He justified
  • 406. Case Study 7 · GK Printers Limited – changing systems and attitudes 393 this on the grounds that most decisions were not related to overall policy but to particular areas of the business. If new printing equipment was to be purchased, then this concerned him and the Printing Manager. If the issue was customers, then the Marketing and Design Manager would be involved. Decisions concerning finance were, the Managing Director felt, mainly his responsibility. The counter- argument to this, identified and articulated by the team-builder, was that it inevitably created suspicion among managers excluded from decisions, and led to accusations of favouritism. All the managers, other than the Managing Director, favoured a more open and collective style of management. The Managing Director was very upset and said so. He believed he had always acted to pro- mote teamwork and good relations in the company. To be accused of the reverse came as a shock. He wanted, he said, to ‘clear the air’ there and then. However, the team-builder suggested, and agreement was eventually reached, that they should all reflect on what had been said, and return to the issue at the end of the second day. They then moved on to discuss the immediate problems facing GK: how to reverse the decline in turnover and profitability. With the delicate matter of the Managing Director’s approach to decision-making out in the open but put to one side, everyone seemed happy to focus on these problems. For the rest of day one and most of day two, they alternated between working in two groups and working as one team. The result was that they reached an agreement on the way forward which they all accepted. The main areas of action were very straightforward: 1 GK should meet with its main customers to identify what their needs were and discuss how these could best be met. It was felt that not all of a customer’s requirements were urgent, and that what was necessary was to identify those that were and agree that they would be dealt with in a speedy fashion. 2 The company’s CBS – computerised business system – was much more efficient than the pre- vious manual system, but all orders, large or small, urgent and non-urgent, were dealt with in the same manner and at the same speed. The same applied to design: though the actual design time varied between orders, they were all scheduled and dealt with in the same fash- ion. This meant that they all tended to take between one and two weeks, depending on the design office’s workload. It was also a similar story when it came to printing and dispatch: everything was in the same queue. It was agreed that the entire process from order intake to dispatch be examined, with the intention of either reducing it for all orders, or possibly shorten- ing it for specific categories of orders. These actions were to be carried out by two groups comprising managers and employees from the areas involved, who would report directly to the management team. This then left the thorny issue of the Managing Director’s role. Since the issue had been raised on the first day, he had spoken to the team-builder and his colleagues informally, and had come to recognise the strength of feeling on the issue, though he did not fully accept their interpretation of his actions. Nevertheless, he was prepared to amend his management style. He agreed that there would be regular management team meetings which would deal with all major decisions. He also agreed that he would not seek to impose a decision on the team unless the managers themselves could not reach agreement. Six months later The investigation of customer requirements and the order-to-dispatch process resulted in changes that brought significant improvements in the service GK could offer to its customers, and a reduc- tion in lead times and costs.
  • 407. 394 Chapter 12 · Case studies in changing internal relationships and attitudes The company now offers its customers a choice of lead times and prices: normal – a two-week deliv- ery and a 5 per cent reduction on the standard prices; accelerated – a one-week delivery charged at standard prices; and urgent – a one working day delivery charged at 10 per cent above standard prices. GK was able to achieve these improvements owing to three factors: 1 Understanding what its customers wanted and were prepared to pay for. In speaking to cus- tomers, GK also identified what its competitors were offering in terms of prices and deliveries. 2 In examining the order-to-dispatch process, GK came to appreciate that there was a large amount of wasted time involved that could be eliminated with better cooperation between func- tions, especially design and printing, and a greater awareness of the need to reduce lead times. In examining the entire process in detail and involving everyone in this, some very glaring exam- ples of wasted time emerged. For convenience, incoming orders were processed in batches. So an order could sit for two days just waiting to be entered on the system. Similar delays were identified in dispatch, with completed orders sitting for one or two days waiting either for collec- tion or for GK to make a delivery in that part of the city where the customer was located. As the dispatch clerk commented, ‘No one told me it was a problem’. Once staff realised it was a prob- lem, there was almost a competition to see who could come up with the best suggestion. Most of this did not require additional expenditure, merely better communication and a will- ingness to help each other. Reducing set-up time on the printing presses did require some modest expenditure, but this led to reductions in set-up times of between 50 and 80 per cent. Some small expenditure was also required to modify the computer system to cope with the new three-tier delivery price system. 3 The design office made a number of changes to the way it operated which speeded up its activi- ties. Nevertheless, it was recognised that there was also a capacity shortage: they simply had more work than they could cope with. Much of the work was simple and did not need a fully-qualified designer; and only about 50 per cent of a designer’s time was actually spent on the computer. Therefore, it was decided to employ someone else to perform the more simple design tasks. At first, GK was going to recruit a new member of staff for this post, but the printers, who had always wanted to be involved in design, suggested that they might do this. When the sug- gestion was discussed, a number of possibilities opened up, including that simple but urgent jobs be given straight to a printer who would undertake the entire design and printing process at one go. The actual mechanics of this were difficult to work out, and many practical obstacles were apparent, but GK nonetheless decided to undertake a trial with one printer in order to identify the difficulties and evaluate the benefits. In addition to these changes, the management team, after some initial difficulties (such as identi- fying what constituted a major decision), found that working together and having all information out in the open reduced the tension, not only between individual managers but between the indi- vidual functions as well. Going online For the most part, GK’s fortunes rose steadily throughout the latter half of the 1990s, despite much talk of an imminent recession. They developed strong partnerships with key customers and attracted new ones. They acquired a reputation as a forward-looking company that was responsive to its customers’ needs. However, they developed one area of their business that grew much faster than the rest and which promised much for the future: developing and designing websites for its customers.
  • 408. Case Study 7 · GK Printers Limited – changing systems and attitudes 395 As with so much of GK’s development, there seemed to be an almost accidental element to its website business. In the mid-1990s, one of its main customers decided to conduct much of its business, especially in terms of orders and invoices, electronically. GK had no alternative but to accommodate this. The Managing Director gave the task of developing electronic communications to one of the graphic designers who was very keen on computing; not only did he have his own website, but he had also developed one for his local athletics club. Consequently, as well as allowing them to receive and send information electronically, he also constructed a website for GK. Being a graphic designer, and an enthusiast, what he produced was a state-of-the-art website that provided an excellent showcase for GK’s capabilities. Almost before most people in the company realised they had a website, or understood what one was, its cus- tomers were asking GK to do the same for them. At first, the Managing Director thought that this was something of a diversion from the company’s main activities. However, when he saw what cus- tomers were prepared to pay, and he realised that, in essence, it was a logical extension of printing publicity material, he created a separate department under the graphic designer to develop the website business. It became the fastest-growing part of GK and by far its most profitable. Summary After the first two phases of changes at GK, the company felt it could rightly take pride in how it had responded to the situation in which it had found itself. Rather than falling into a spiral of decline, as seemed possible, it had reinvigorated itself. It had introduced new equipment and, ini- tially at least, developed a new sense of cooperation. However, its own success began to eat away at some of its gains. The pressures of day-to-day business began to take precedence over both improvement activities and cooperation. In particular, the Managing Director went back to taking decisions either without consulting anyone else or only in consultation with the ‘appropriate’ man- ager. In effect, though the company had maintained the operational changes, it had failed to maintain behavioural changes, especially those associated with teamwork, cooperation and dele- gation. Therefore, the first two phases of the company’s turnaround can be characterised by successful operational changes but less successful behavioural changes. The results of the failure to sustain behavioural changes were as follows: ■ GK failed to adopt a continuous improvement approach. ■ Poor coordination and cooperation led to inefficiencies in the processing and dispatch of work. ■ Most importantly, an undercurrent of discontent and fighting for position arose among man- agers, which made it difficult to reach agreement about how the organisation should respond to its changed circumstances. For these reasons, the key action in the third phase of the transformation of GK was not any of the operational changes, but the changes in attitudes among managers and other staff regarding cooperation, and in particular, the Managing Director’s belated conversion to team-based decision- making. It was the new element of cooperation that allowed GK successfully to identify what to change and how to change it. The greater teamwork, and trust, also created the environment that allowed the company’s website business to be developed by making people more open to new ideas and less suspicious of others’ motives.
  • 409. 396 Chapter 12 · Case studies in changing internal relationships and attitudes Conclusions In the review of strategy and change management in Chapters 6–10, it was argued that whilst approaches to strategy and change needed to be matched to the constraints under which an organisation operated, these constraints were themselves amenable to change and in any case could conflict with each other. This means that the freedom of action or manoeuvre of managers is potentially very significant. It was also argued that whilst organisations might have a preference for a particular approach to change, in practice they used a variety of approaches, often at the same time. In the three case studies we have examined in this chapter, we can see managerial choice in action both in what they chose to do and how they chose to do it. In the Volvo study, we can see that managers made a determined and apparently suc- cessful attempt to break away from the industry standard approach to car assembly. However, in challenging and changing a powerful constraint on their freedom of manoeuvre, they were very much in tune with societal, environmental and, at least in some instances, their own orientations. Also, there were parallel changes in the struc- ture of the organisation towards decentralisation and flexibility, which supported and made more appropriate the emergent and open-ended approach to strategy used by Volvo. However, Volvo Car’s takeover by Ford does pose a serious challenge to Volvo’s approach to work organisation. Given that Volvo’s approach represents a clear and decisive break with Fordist methods, it will be interesting to see whether or how the two can coexist over the long term. The XYZ study is another case where an organisation made significant changes to its culture, operation and structure over a number of years. The impetus for the changes came with the appointment of a new Managing Director. The new Managing Director, supported by the parent company, saw the need to transform radically how XYZ worked if it was to improve its performance. The Managing Director saw that the changes he believed were necessary within the company paralleled changes that were being attempted across the construction industry as whole. Therefore, to an extent, he was trying to align the company to the changing nature of the industry. In order to do that, however, he had to overcome significant cultural and structural con- straints within the company and saw that the former needed to be tackled before the latter could be effectively changed. Therefore, he embarked on a stream of Emergent, open-ended and, to an extent, experimental changes aimed at changing the company’s culture and improving both managerial and staff competencies. Within this stream of Emergent change, however, there was also a significant role for Planned change, as the case study shows. The case of GK Printers is somewhat different. It is much more difficult to perceive any distinct societal or industry constraints on the organisation. Both environmental and organisational constraints were clearly apparent, however, and the changes that took place were to a greater or lesser extent aimed at both changing and harmonising these constraints. One reason for the internal changes in the company was to tie customers closer to the company, and thus reduce the uncertainty present in the environment. As with Volvo and XYZ, GK's strategy emerged rather than being pre-planned, but it seems to have been much more stop–go than either of the other companies. Also, its approach to change appears to be more in line with the Planned approach than the Emergent. Therefore, as far as managerial choice, strategy development and change management are concerned, the case studies provide some interesting and thought-provoking insights:
  • 410. Test your learning 397 ■ Managerial freedom is clearly constrained but this does not mean that managers cannot break out of or change these constraints. In so doing, however, the tendency appears to be to resolve or reduce conflict between constraints rather than neces- sarily to rewrite the managerial rule book completely. ■ The process of strategy development and change management in these cases was mainly Emergent, open-ended, and in some instances opportunistic. However, sig- nificant examples of Planned change were also evident. In addition, it can be seen that managerial conflict and politics played a part in decision-making and, in the case of XYZ, the change of Managing Director appeared to be a necessary precon- dition for wider organisational changes. ■ The case studies show that there is a role for both Planned and Emergent change. Planned change as such, however, appears to be less effective than Emergent change in achieving sustained organisational transformation over time. Planned change programmes tend to have a finite duration and are aimed at achieving a particular and specific objective. Emergent change, on the other hand, is open- ended both in terms of timescale and objectives. Test your learning ■ Short answer questions 1 Briefly describe the main reasons for Volvo's original move to Job Design. 2 What were the trade unions’ main concerns regarding Volvo's move to Job Design? 3 List the main benefits XYZ expected to gain from changes to its structure. 4 Identify the main factors which contributed to XYZ’s success in changing its organisa- tional structure. 5 Briefly discuss one example of employee involvement at GK Printers. 6 Identify three ways in which the managers at GK can be seen to have changed their style from autocratic to participative. ■ Essay questions 1 Discuss the following statement: the stages of workplace reform at Volvo involve a cumulative process of innovation, with a trajectory which adds up to a more or less definitive break with Fordism. 2 To what extent does the XYZ study show that Emergent and Planned change are comple- mentary rather than competing approaches to change? 3 Does the GK case study represent an example of emergent change, or of ad hoc and reactive management?
  • 411. Chapter 13 Case studies in changing external relationships Learning objectives After studying the case studies in this chapter, you should be able to: ■ recognise the pressures that have led to the growth in outsourcing by both private and public sector organisations; ■ understand why private sector organisations find it easier to work more closely with their customers and suppliers than do public sector bodies; ■ appreciate that changing external relationships can require significant changes in internal relationships; ■ describe some of the mechanisms used by organisations to bring about changes in their external relationships; ■ discuss how changes at one level between two firms may not always result in changes at other levels; ■ show how customers and suppliers can overcome suspicion and achieve mutual gains; ■ appreciate the need for outsourcing to be viewed as a strategic activity requiring strong and consistent management. Introduction The previous two chapters have presented examples of strategies and initiatives that have resulted in new internal relationships within organisations through struc- tural, operational, cultural and behavioural change. It is not only the relationships within organisations that are changing, however, but also the relationships between organisations. There is a great deal of evidence to show that the outsourcing of activities previously done in-house is increasingly taking over from vertical integra- tion as the preferred approach to organising the provision of many goods, processes and services (Domberger, 1998; Gay and Essinger, 2000; Takac, 1993). In the private sector, as Chapter 3 showed, the upsurge in outsourcing over the last 20 years has been fuelled by arguments from management gurus and leading aca- demics that an organisation’s competitive advantage stems from its ability to
  • 412. Introduction 399 identify, concentrate on and develop its core competences and activities, and out- source anything that is non-core. In the public sector, the pressure to outsource has grown alongside the pressure to privatise. As Case Study 4 in Chapter 11 argued, the rising tide of privatisation over the last 20 years or so has been led by both ideologi- cal and practical concerns, both of which have focused on reducing the cost of providing public services through the greater use of market mechanisms. In the private sector, the greater emphasis on outsourcing has led companies to review their relationships with both suppliers and customers in order to develop closer and more effective links. As Case Studies 8 and 9 in this chapter will show, this is usually accompanied or preceded by internal changes within either the supplier, the customer or both. These changes are taking place due to a growing climate of opinion that customers, suppliers and even rivals working cooperatively have considerable advantages over the more traditional adversarial relationships (Hines, 1994; Lamming, 1993; Saunders, 1997). Though this move has been led by the automotive and electronics industries, the concept has spread into many other sectors as well (Burnes and New, 1997; Christopher, 1998; New and Burnes, 1998). Though there is no universally-agreed definition of customer–supplier partnerships, Partnership Sourcing Ltd (1991b: 2), the UK body established by government and industry to promote the concept, appears to have captured its essence by defining it as a situation: … where customers and suppliers develop such a close and long-term relationship that the two work together as partners. It isn’t philanthropy: the aim is to secure the best possible commercial advantage. The principle is that teamwork is better than combat. If the end-cus- tomer is to be best served, then the parties to a deal must work together – and both must win. Partnership sourcing works because both parties have an interest in each other’s success. The move to more cooperative and stable relationships between customers and suppliers is not merely a case of adjustments at the organisational interface. Rather, to be successful, it requires more fundamental changes in both customers and suppliers. The three case studies in this chapter reveal how such partnerships work in practice and, in particular, illustrate how the concept requires not only changes in the relation- ships between organisations but also attitudinal, behavioural and structural changes within them. As Case Study 10 will show, outsourcing is as popular in the public sector as the private sector. However, whilst in the private sector it is seen as a strategic initiative designed to allow organisations to become more competitive by concentrating on their core competences, in the public sector, it is seen more as a cost-cutting measure. Most public bodies in the UK are now required by law to outsource their activities where to do so would lead to cost savings. They are also constrained in how they carry this process out and the sort of relationships they develop with their suppliers. The result of this is that outsourcing in the public sector is more an operational than a strategic activity. Nor is outsourcing leading to notable changes in internal relation- ships or external relationships with suppliers, which still tend more towards the adversarial than partnership. Each of the three studies relates to a different aspect of the partnership process. Case Study 8 deals with the consequences of Rover’s decision to outsource the assembly of
  • 413. 400 Chapter 13 · Case studies in changing external relationships suspension modules to TRW. It demonstrates that such initiatives, through closer opera- tional integration, can bring great benefits but that these can be jeopardised if they are not also accompanied by closer strategic relationships. Case Study 9 shows that the move to develop new relationships is not just driven by customers. In this instance a supplier, Speedy Stationers, took the first step. It recognised that, in its case, the partner- ship approach was not just a means of providing a better service to its customers; it could also be an effective mechanism for securing increased business. The case study recounts how Speedy came to this conclusion, the steps it took to convince one of its customers to enter into a partnership and to cooperate, and the resulting changes and benefits. Case Study 10 looks at the approach to outsourcing of a UK police force, and shows the process it is required to undertake to evaluate whether or not its activities should be outsourced. It also shows that its relations with suppliers are constrained by the outsourcing rules and regulations laid down by government to the extent that it appears to be treated as a relatively low-grade administrative activity. The chapter concludes by arguing that though much attention has been given to the creation of new internal relationships and structures as a mechanism for coping with environmental turbulence and uncertainty, changes in external relationships can also play an important role in this process. Consequently, partnerships can help organisations to restore, to an extent, a degree of stability and predictability to their lives. However, as far as the public sector is concerned, the constraints under which it operates may instead mean that outsourcing is creating greater uncertainty rather than being used as a means of reducing it. The conclusion also points out that, as the case of PoliceCo shows, it is possible to quantify the short-term, narrow cost-cutting benefits of outsourcing; on the other hand, as the Rover–TRW case illustrates, it is very difficult for organisations to quan- tify in advance the longer-term benefits of developing partnerships. The Rover and Speedy examples show that early benefits can also accrue. Therefore, the move to new customer–supplier relations is not driven by rational and quantitative decision- making. Rather, the move to partnership requires an act of faith based on an instinctive and philosophical belief that the old methods do not work and that the game requires new rules, rules which cannot be written in advance but which emerge as the game unfolds. This, of course, may be why public sector organisations, which are rightly obliged to demonstrate openly that their suppliers are providing the best value for money, have difficulty in adopting more partnership-based approaches to purchasing.
  • 414. Case Study 8 · Rover–TRW – operational integration 401 Case Study 8 Rover–TRW – operational integration1 Background This case study concerns the relationship between Rover Group and one of its largest suppliers, TRW. The case study focuses on Rover’s decision to outsource the assembly of front suspension modules to TRW and the benefits and difficulties which ensued. It shows that outsourcing sub- assemblies can bring great operational benefits when managed effectively by both parties, but that these may be jeopardised if this cooperation fails to extend to a more strategic level. Details of Rover’s history are relatively well known. It should be noted, however, that from the early 1980s, Rover was developing more cooperative internal working relationships and that it gradually began to extend this approach to its suppliers (see Grove, 1998, for further details). Though it has now been split into separate businesses, during the 1990s, TRW was one of the world’s largest manufacturing companies. Founded in 1901, and with its Headquarters in Cleveland, Ohio, TRW was an American-owned company with a turnover of some $12 billion and a workforce in excess of 80,000 people by 1999. TRW was organised into two divisions: Space, Avionics, Defence and Communications; and Automotive. The automotive business was the largest division, accounting for over 60 per cent of sales and employees. TRW Automotive’s European sales were well over $1 billion in 1999. Some 23 per cent of this came from its UK business (TRW Steering Systems Ltd) which operated on five sites, the main one being at Resolven in Wales, employing 1,400 people and, as its name states, manufactures steering systems. Its main customers were Rover, Honda, Nissan, Ford and Volvo. Though TRW had a close working relationship with all these companies, it enjoyed a particularly strong and long-standing relationship with the Rover Group and was Rover’s second biggest supplier. TRW’s steering systems business began supplying the forerunners of Rover over 60 years ago. A major milestone in the relationship came in 1959 when it was awarded the contract to supply the rack-and-pinion steering for the then revolutionary Mini. This was the first time rack-and-pinion steering had been fitted as standard on any mass-produced vehicle. During the 1960s and 1970s, British Leyland (as Rover were then called) had its own in-house facility for manufacturing both power-assisted and manual rack-and-pinion steering. In 1980, however, this was closed down and TRW took over responsibility for supplying all British Leyland’s steering requirements. In 1989, this relationship was further strengthened when Rover decided to outsource the assembly of front suspension modules, of which the steering gear was the key component. TRW was asked to bid for this work, was awarded the contract and began supplying the suspension modules in May 1989. In order to meet Rover’s exacting standards, TRW set up a new assembly facility located at Frankley, about two miles from Rover’s Longbridge plant. The origins of Frankley The main reason for Rover’s decision in 1988 to outsource the assembly of front suspension mod- ules, and consequently for TRW to establish a new facility at Frankley, was quite straightforward: Rover needed the space. The introduction and success of new models meant that Rover no longer had the space to carry out this assembly operation at its Longbridge plant. A subsidiary reason was that Rover, like most car companies at the time, believed that modular assembly of cars, from 1 The research on which this case study is based was funded by AT Kearney Ltd and carried out jointly with Dr Steve New of Hertford College, Oxford University (see Burnes and New, 1996, for further details.
  • 415. 402 Chapter 13 · Case studies in changing external relationships outsourced sub-assemblies, was a strong possibility for the future, and this initiative with TRW gave the company the opportunity to assess the benefits of this approach. Rover invited TRW and one other existing supplier to put forward proposals for running the new facility to assemble front suspension modules. TRW saw this as a major opportunity and responded in a very positive way. The main reasons for this were as follows: ■ They wanted to continue to supply direct to Rover rather than through another supplier. ■ TRW in the USA had (unsuccessfully) bid for a similar initiative with Ford, and could see the bene- fits it could bring to the business in terms of future growth and becoming ‘essential’ to the customer. In addition, TRW also thought that modular assembly was the future for the car industry. Therefore, not only was TRW responsive to Rover’s suggestion, but it could draw on its experience with Ford in preparing its proposal. TRW showed Rover the proposal they had put to Ford in the United States and prepared a business plan for the new operation. A succession of increasingly detailed meetings ensued with both Rover and their (then) partner, Honda. Rover moved very quickly in making a decision and awarded the contract to TRW. This was mainly because Rover were impressed with TRW’s plans and proposals, but also because they felt that its size and resources (of both expertise and money) made it a suitable partner in this instance. An additional factor was that TRW’s steering gear was by far the most complex and expensive part of the suspension modules. Planning and proposing was one thing; getting started was quite another. Rover were working to a very tight timetable and needed both the space and the suspension modules for a range of new cars it was introducing. One of the conditions of the contract was that TRW had to establish an assembly operation within a few miles of the Longbridge Plant. Therefore, in late 1988–early 1989, TRW found itself pursuing two major activities simultaneously: 1 developing its own approach to suspension module assembly; 2 finding a site and recruiting staff for the new facility. Developing its own approach to suspension module assembly After a rigorous selection process, three supervisors were recruited from TRW’s Cleveden plant to run the new operation. One of the supervisors was appointed as manager for the new facility; in essence, however, the three were jointly responsible for the new product and new facility, and operated very much as a team. This cooperative approach was new to TRW but it was clear that everyone needed to work closely together if the project was to be successful. TRW had no previ- ous experience of assembling suspension modules and, to a large extent, the manager and two supervisors were thrown in at the deep end. As one of the three put it, ‘We were given a bag of parts and told to assemble them.’ Initially based at TRW’s main UK site at Resolven, they worked closely with an engineer from Rover to learn what Rover’s requirements were in terms of the sus- pension modules and then they began to experiment with different approaches to assembly. All three had previously been on TRW’s First Line Supervisors course, and the Rover work gave them the opportunity to utilise some of the ideas they had learnt. In particular, they chose to adopt a ‘greenfield’ approach (starting from scratch) rather than building on existing TRW/Rover practices. Despite the tight timetable, they were allowed to experiment, and through a process of trial and error began to see how the assembly process could be best organised. The essence of their approach was to focus on continuous improvement by developing teams, encouraging initiative and ensuring that change was driven by and with the full support of the people on the assembly
  • 416. Case Study 8 · Rover–TRW – operational integration 403 line. Since it began production in 1989, the Frankley operation has been transformed out of all recognition. Manual assembly has given way to semi-automation, they have achieved zero defects, costs and assembly times have been reduced considerably and, regardless of the inher- ent instability of customer schedules, they always deliver what the customer wants, when it wants it and in the correct order. Finding a site and recruiting staff At the same time that TRW were undertaking trial assemblies at Resolven, it located a site at Frankley, near Longbridge, that was ideal for their requirements, and the assembly operation was moved there in May 1989. Though they had tried to recruit from within, the only TRW staff who transferred to Frankley were the manager and the two supervisors. All the rest (some 30 staff initially) were recruited locally. The recruitment procedures were very structured and rigorous. They wanted skilled and flexible staff who would fit into a teamworking environment and who were prepared to contribute ideas and give commitment. Above all, they wanted to build an operation that was dedicated to meeting the customer’s requirements fully, no matter how demanding or difficult these might be. Though they had the advantage of starting out with a greenfield site and a workforce that had few preconceptions or restrictions, it also meant that everyone had to be trained from scratch. Frankley – the early years Mainly drawing on their own ideas and resources but working hard to understand Rover’s needs, Frankley began to develop itself into a world-class assembly plant. The Frankley operation started out with two shifts and eventually moved to three in order to match Rover’s own assembly opera- tion. In order both to understand the customer’s needs and to develop an effective working relationship, a great deal of time (by all concerned) was spent at the Rover plant. Indeed, it became compulsory for all new recruits to Frankley to spend a period working at Rover before taking up their appointment at Frankley. Year on year, Frankley has consistently and diligently reduced costs and lead times, and improved quality. The essence of its ability to do this revolves around three core principles: ■ understanding what Rover wants and giving it to them; ■ teamwork and involvement; ■ continuous improvement. The biggest difficulty Frankley faced was in matching what it produced to Rover’s actual build requirements. The steering assembly has 39 derivatives, and it is far from easy to ensure that the mix of derivatives TRW dispatches matches the mix of cars Rover is assembling at any one time. Rover did and does provide Frankley with a monthly schedule and a ten-day rolling programme (five days firm and five tentative). This allows TRW to schedule its suppliers. However, the key information, originally at least, was the mix of cars going into the paint shop (the step immediately prior to assembly). This provided TRW with only 12 hours’ notice of the model mix that Rover planned to assemble. Initially, therefore, Frankley had to gear itself to working on 12 hours’ notice. Owing to damage during painting, however, what went into the paintshop was not always what went down the assembly line. Therefore, in the first year of operation, though Frankley delivered to the pre-paint shop schedule, it found that what it delivered was not always what Rover was actually assembling. In many instances, the customer and supplier would have argued about whose fault this was. Instead, Frankley and Rover worked to resolve the problem. It was eventually agreed that instead
  • 417. 404 Chapter 13 · Case studies in changing external relationships of informing Frankley of the mix that went into the paint shop, they should tell them what undam- aged cars came out. This represented a major step forward in terms of Rover trusting its suppliers. Rover, like most car companies, had been reluctant to give too much information to its suppliers. This was not only because information was seen as power, but also because it would be Rover’s line managers who would have to take responsibility if the information was wrong. Nevertheless, 1 Rover did provide the information. It did mean that Frankley only had 4 – hours’ notice of Rover’s 2 requirements rather than the 12 hours previously, but at least the schedule was much more accu- rate. Even this was not foolproof, however, and eventually they moved to a system whereby Rover 1 would notify them of the build mix just 2 – hours before the parts were required. 2 Working in this way does give Frankley exact information on what is required and they now know that if they build a particular suspension module it will be used. To get to this position has required two major efforts, however: ■ building trust between Rover and Frankley, so that both have faith in each other and are pre- pared to provide information and make commitments without feeling that either is leaving itself open to abuse; ■ establishing an assembly operation that is not only capable of building a wide product range in an efficient and effective manner, but which can also do so at very short notice. To achieve this required a major effort by Frankley staff. Though this approach has obvious advantages to Rover, it also has considerable advantages to Frankley. Firstly, it means that it must run a lean and efficient operation which operates with a ‘right first time’ approach. Secondly, it has no finished stocks and only two days’ worth of compo- nent stocks (down from eight days in 1994). The Frankley site has clearly developed an approach to assembly and customer satisfaction that owes more to Japanese than Western methods. One recent Japanese visitor, however, was heard to remark that Frankley was not as good as Japanese plants … it was better! TRW has not achieved this overnight, and in some instances has had to modify its initial ideas. Originally, TRW looked on the Frankley site merely as an assembly plant. Most of the support serv- ices were dealt with by Resolven. Though this made Frankley a very ‘lean’ enterprise, it also meant that the lack of on-site, dedicated resources restricted its ability to improve, especially in the areas of process improvement and supplier development. Over time, therefore, Frankley came to acquire its own support staff rather than having to rely on Resolven. The benefits of this are clear in terms of the efficiency of the Frankley assembly operation. Though less visible, the benefits of materials management being based at Frankley have also been substantial; this was forced on them by the necessity of having to build the same type of relationship with its suppliers that it enjoys with Rover. Nevertheless, originally this did not look as though it would be necessary. Developing suppliers Taking over an operation from another company and re-creating it from scratch is never going to be easy, but when it also involves managing that company’s suppliers on their behalf, some diffi- culty can be anticipated, to say the least. TRW had few illusions that suppliers selected by and working for Rover, and who would continue to see Rover as their customer, would welcome being managed by an ‘intermediary’. The reality, however, was even more difficult than TRW anticipated.
  • 418. Case Study 8 · Rover–TRW – operational integration 405 Though communication and cooperation between TRW and Rover was constructive from the outset, the one area Rover seemed most reluctant to discuss with TRW was the handover and management of the other suspension module component suppliers. Consequently, when TRW began assembling the suspension modules at Frankley, none of the suppliers had been informed of the change. TRW found that not only had Rover not informed them, but that some companies did not even know who TRW was. The suppliers still considered themselves as working directly for Rover, and were more than somewhat resentful of TRW’s new role. Initially, TRW managed the suppliers from its main site at Resolven, but it soon became appar- ent that if the supplier–Frankley interface was to operate effectively, responsibility for suppliers would have to reside at Frankley. To achieve this, one of the original Frankley supervisors was made responsible for managing suppliers. His first task was to visit all the suppliers and explain the new arrangement to them. Though some began to adopt a more cooperative attitude to TRW, others still tended to ignore it and liaised with Rover instead. However, with Rover’s assistance, Frankley gradually came to build a working relationship with the Rover-nominated suppliers. Nevertheless, when it came to know the suppliers better, two issues emerged: 1 Though Frankley was tailoring its production and deliveries to Rover’s assembly programme, suppliers still tended to operate on a ‘boom or bust’ basis, i.e. they would deliver too much or too little. 2 A number of the suppliers did not meet TRW’s quality standards. Given that the suppliers were nominated by Rover, TRW was not in a position to change them. Therefore, it had no alternative but to work with the suppliers to improve them. Frankley set out to build the same relationship with the suppliers that it was developing with Rover. Initially, presenta- tions were made to all the suppliers explaining who TRW was, what Rover required of the Frankley operation, and what Frankley required of the suppliers. This was followed by reviews of each sup- plier’s performance with action plans being agreed to resolve any problems and concerns. Though no one would pretend that everything always ran smoothly or that continuous improvement was not expected, supplier performance became far better than it was in 1989. The new contract Up to 1994, the relationship between Rover and TRW continued to improve and there were very few operational concerns. In 1994, however, Rover began to discuss the replacement of the 200/400 series cars for which Frankley supplied the suspension modules. Though TRW expected stiff bargaining over the terms of the new contract, it did not expect Rover to question whether TRW should get the contract or not. From TRW’s perspective, it had more than exceeded Rover’s expectations when the original contract was awarded in 1989. In the intervening period, however, there had been a number of intense and not always good-tempered negotiations regarding the pricing of the contract and TRW had, reluctantly, made a number of downward adjustments to the original contract price. It should also be said, though Rover did not appear to be fully aware of this, that TRW had made better profits from the Frankley operation than it originally expected. In the main, this was because Frankley was much more efficient than Rover had been at assembling the suspension modules, the volume of products was greater than originally assumed, and the overhead charges were generous. For its part, Rover was more concerned with the latter issue rather than the first two. It felt that TRW’s costing system exaggerated the true cost of the Frankley operation. TRW’s procedure was to
  • 419. 406 Chapter 13 · Case studies in changing external relationships add a management fee to the direct cost of the Frankley operation and so arrive at what they believed was a true cost to themselves. Rover, however, disputed the size of this fee and though, as mentioned, TRW did reduce the price it originally agreed with Rover, when the contract came up for renewal, some senior Rover managers were so concerned at the situation that they wanted to take the work back in-house. TRW found itself in a position where it had to justify its accountancy system (which was stan- dard throughout TRW), and also convince Rover that it could continue to offer it a better service than could be achieved by taking the work back in-house. Though the latter was not difficult to do, the former took some hard negotiations to achieve. In the end, TRW made a considerable reduc- tion in its Frankley management fee and the new contract was awarded to TRW. The difficulties did not end there, however. As Rover introduced new vehicles, it redesigned the suspension modules, which necessitated changes to component suppliers. As was the case origi- nally, Rover would not let TRW enter a dialogue with suppliers until actual assembly began. Nevertheless, building on its earlier experience, TRW has become extremely proficient at overcoming any resistance amongst new suppliers and is able rapidly to inculcate them in the TRW approach. Summary The Rover–TRW case study clearly shows that the outsourcing of major sub-assemblies can bring important benefits to both customers and suppliers, particularly at an operational level. It also shows that the process is far from easy, and that even after many years major misunderstandings can occur which can threaten the relationship. The Rover–TRW experience can be judged at two levels – operational and strategic. At the operational level, it can be viewed as follows: ■ The Frankley staff were given a clear, though by no means simple, task: they had to meet Rover’s needs for suspension modules. In so doing, they were allowed, and encouraged, to use their own initiative. ■ Though Frankley met some initial scepticism from Rover’s assembly staff, whose cooperation they needed, it consistently and with real determination set out to identify what Rover needed, to establish where the obstacles lay and to overcome these. ■ This was neither a one-off effort nor limited to a few managers. Instead, it was a process of continuous improvement by all concerned. ■ There were three key factors in this: (a) the selection and training of staff; (b) allowing staff to inter- face directly with their customer, thus ensuring rapid performance feedback; and (c) establishing a ‘greenfield’ mentality, which meant that they all started from scratch and without preconceptions regarding how best to organise assembly or the nature of relations with their customer. At the strategic level, however, a different picture emerged: ■ Though one of the original objectives – albeit of secondary importance – was for both parties to assess the benefits of and approach to contracting out major sub-assemblies, this appears to have been quickly forgotten. Instead, the initiative came to be seen as a purely operational matter. ■ As the relationship developed, it was clear that neither partner had had any real idea of how to cost such an operation. Originally, Rover had felt that it had negotiated a good deal because it was getting better supplies at lower cost. Likewise, TRW were happy to win the contract and felt that it would make a profit because it would be more efficient than Rover. ■ Neither party anticipated that the Frankley operation would be able to make the large perform- ance improvements that it did. When Rover realised how much more efficient Frankley was than it had been itself, however, it began to question the price it was paying. TRW, for its part, was extremely pleased by the return on its investment, though reluctant to reduce its prices.
  • 420. Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd 407 ■ This led to a series of acrimonious confrontations, culminating in Rover seriously considering taking the work back in-house. Fortunately for both parties, the issue was resolved. Nevertheless, it demonstrated that though operationally Rover and TRW were working closely in partnership, at a more senior level they were not. Yet, if they had been, not only might they have avoided much acrimony, but they would also have learned more about how to run such collaborations in the future. In this instance, it is important to note that neither Rover nor TRW set out to achieve strategic and high-level cooperation per se. Rather, Rover were motivated, primarily, by operational consid- erations and though TRW did see strategic advantage, its main aim was to maintain first-tier supplier status. This may explain why both parties made enormous strides forward in operational integration but failed to make similar progress in terms of strategic integration and trust. Case Study 9 Speedy Stationers Ltd and UTL (Turbines) Ltd – supplier-driven change2 Background In the vast majority of cases, it is customers who take the initiative to change relationships rather than suppliers. This is for quite obvious reasons to do with power (it is the customer who has the money and who decides what to purchase and from whom) and experience (there are very few examples of how suppliers can influence customers). Unlike the Rover study, however, where it was the customers who made the first move, this case study deals with organisational change driven by a supplier. This case examines the development of a partnership between Speedy Stationers Ltd and UTL (Turbines) Ltd, whereby the former took responsibility for the provision and in-company manage- ment of all UTL’s stationery requirements. Speedy Stationers was founded in 1953, and in 1994 had a turnover of roughly £50 million. Originally the firm acted just as a wholesaler selling to distributors and retailers. In the mid-1980s, almost by accident (an acquaintance of the Managing Director happened to be appointed to the same position in UTL), it began dealing directly with a small number of large industrial companies. Typically, these companies’ total stationery bill might be over £200,000 per year. However, because Speedy did not deal with printed stationery, letterheads, etc., it rarely did more than £50,000 worth of business with any of these customers. Nevertheless, the Managing Director, whose pet project this was, had high hopes for direct selling. 2 This case study is based on original research by Dr Steve New of Hertford College, Oxford University.
  • 421. 408 Chapter 13 · Case studies in changing external relationships Partly influenced by the possibility of selling directly to large companies, Speedy embarked on an expansion programme in the late 1980s that doubled its number of distribution centres from three to six. This geographical spreading of risk allowed the company to weather the recession of the early 1990s without any significant loss of business – though its profit margins were squeezed. Nevertheless, by 1993, senior managers came to recognise that the possibilities of continued expansion through the establishment of more distribution centres was limited, as well as expensive. Also, selling stationery directly to end users, whilst potentially attractive, had failed to live up to its initial promise. This was partly because there was a limited number of companies whose stationery bills made it worthwhile dealing with them directly, and partly due to the fact that even the ones they did deal with tended to shop around pursuing, in some cases, extremely small savings. A continuing bone of contention was also the amount of the Managing Director’s time taken up with servicing the direct customers. Orders had originally been won on the basis of his contacts, and he felt that they could only be maintained on this basis. A strategy emerges It was in 1993, after much heated debate, that senior managers took the decision to set up the direct sales business as a distinct entity within Speedy. It was given its own manager, and a small team of staff was assembled to run the operation. The intention was to allow the rest of the com- pany to focus on its core business, the provision of stationery to distributors and retailers, whilst giving the direct sales operation one last chance to prove itself. Though this was something of a ‘sink or swim’ approach, Speedy was not abandoning direct sales to its fate. As a concession to the Managing Director’s strong commitment to direct sales, the person given responsibility for its development was a board member who, it was felt, would eventually succeed the present Managing Director. Before informing its customers of this change, the Direct Sales Division (to give it its official title) set about establishing its strategy. Though this was mainly the work of the Director for Direct Sales, he was careful to involve all his staff and to ensure the continued support of the Managing Director. The strategy that emerged had three objectives: ■ to offer a complete stationery service to its existing customers, including printed letterheads, forms, etc.; ■ to develop partnerships with its customers whereby the Direct Sales Division would supply and manage their stationery stock; ■ to triple turnover in three years whilst maintaining its profit margin. The thinking behind this strategy stemmed from four characteristics of its present business: 1 The turnover of the direct business was £750,000 (out of Speedy’s total turnover of £50 mil- lion) from 15 customers. The profit margin on this business was 7.5 per cent (as opposed to 5 per cent on Speedy’s main business). 2 Direct customers were mainly located near its headquarters in Birmingham and therefore could easily be serviced by one group of staff. A geographical expansion would be proportionately more costly owing to distance. 3 Speedy only accounted for some 20–25 per cent of direct customers’ stationery requirements, because it did not provide printed stationery. Once this was on offer, doubling or tripling busi- ness with each customer seemed quite possible.
  • 422. Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd 409 4 In the early 1990s, the concept of partnerships between suppliers and customers began to take off. Already, the wholesale business was discussing managing the inventory for a number of medium-sized distributors, so it did not seem totally unfeasible to offer a similar service to direct customers – especially if Speedy were likely to be supplying the majority of their sta- tionery needs in any case. In developing the strategy, it was agreed that the first two priorities were to establish a partner- ship with a printer, and to identify the first customer to approach regarding partnering. The first part of this was relatively easy: they approached the printer who had dealt with all Speedy’s own printing requirements over the past 20 years, and with whom they had a very close relationship already. The printer readily agreed to the arrangement – apart from anything else, it did not entail any major cost for them, but did promise additional lucrative business. Identifying a customer for partnership was more problematic, but eventually they decided to approach UTL (Turbines) Ltd. Not only had UTL been Speedy’s first direct customer (thanks to the relationship between the two Managing Directors), but it was well known that it wanted to develop partnerships with its suppliers. Therefore, it was decided to make an approach to them. UTL (Turbines) Ltd In 1992, UTL spent some £200,000 per annum on stationery, but this was small compared to the £30 million it spent on buying components for its turbines. It had a very traditional, distrustful and arms-length approach to purchasing, which it applied to all its purchases. It had at least five suppli- ers for each commodity and, with some exceptions, it purchased purely on price. Not surprisingly, it had over 1,500 suppliers, and the main contact most of these had with UTL was in response to written requests for quotations. Owing to the friendly relations at senior level, Speedy was one of the few suppliers who ever met purchasing staff. The company is part of a large multinational group, and serves markets worldwide. UTL (Turbines), as its name implies, is the division responsible for the design and manufacture of tur- bines, which are supplied to a wide range of industrial users. Like many manufacturing operations in the UK, the plant had experienced severe reductions in the number of people employed. From over 1,500 in 1987, the number working at the factory by 1994 had shrunk to about 900. In recent years, purchasing activities had undergone significant reorganisation. In 1992, two different aspects of the business – export and domestic turbines – merged their operations. Purchasing was one of the first functional groups to combine, and a new manager was brought into the company to take charge of the combined department. As noted above, the company had a very traditional purchasing orientation. With the creation of the new purchasing function, however, a number of important changes were introduced to encourage staff to take a wider view of their role. In particular, the new manager wanted to focus attention on the total cost of doing business with a particular supplier, rather than just favouring those who submitted the lowest tender. The manager recognised that he needed to change staff attitudes towards suppliers, and indeed the Purchasing Department’s view of its role in general. As a starting point, several innovations were introduced, including a series of lunchtime seminars, which the manager saw as a vehicle for both team-building and idea generation. The seminar pro- gramme consisted of outside speakers (including suppliers), presentations from staff in the department who had been on training courses, and videos. When vacancies in the department arose, these were generally filled from outside the company, with appointments favouring youth and enthusiasm over age and experience. The new manager
  • 423. 410 Chapter 13 · Case studies in changing external relationships was keen that the importance of the purchasing group should be recognised in the organisation, and wanted to develop a team with a clear professional focus. He believed that the traditional per- ceptions of purchasing as merely a bureaucratic support activity had to be challenged. As might be imagined, most of the Purchasing Department’s attention was focused on suppli- ers of production components. Nor did this change under the new manager; indeed, as far as he was concerned, the less he had to do with non-production suppliers the better. It was this that gave Speedy Stationers its opportunity for building a partnership with UTL. Speedy takes the initiative By 1993, the reorganisation and reorientation of UTL’s Purchasing Department was well under way. In particular, the seminar series, which at first attracted some adverse comment within the company, was proving a key vehicle for introducing new ideas and generating fresh thinking. When the Director for Direct Sales at Speedy heard about the seminar programme, he offered to come and talk about its new approach to working with customers. The Purchasing Manager was at first resistant, as were many of his staff, because this was not the area on which he wished to focus attention. Nevertheless, he finally agreed when the Speedy Director told him that the title of his presentation would be ‘Contract Out Stationery Management and Reduce Costs by 10 Per Cent’. Under the existing system, ordering stationery was a slow, complicated process. When individ- ual departments required stationery, a requisition would be raised that was then translated by the Purchasing Department into a purchase order. On arrival, items would be inspected – which, for stationery, meant that the contents of each delivery would be counted and checked against the delivery note and original order. The items would then be booked into the stores, from which they could be withdrawn to departmental stores after more paperwork. As there were many stationery suppliers, problems with shortages were sometimes difficult to resolve. Each supplier would send invoices, which needed to be checked against orders and delivery notes. In addition, there was a particular problem with printed stationery; it was not unusual for the wording that the originating department thought it had specified to be incorrect when the stationery finally arrived with them. Tracing where the fault lay could be a tortuous process, however. It was also the case that depart- ments ordered, and kept, far more stationery than they needed in order to avoid shortages. It was clear to the Direct Sales Division at Speedy, if not to UTL’s own purchasing staff, that inefficiencies were rife, and that a 10 per cent reduction in costs should be achievable. Speedy’s proposal for managing all UTL’s stationery needs was to establish two or three sta- tionery bunkers in each department, close to the point of use (one for general stationery, e.g. photocopying paper; one for specialist items, e.g. printed forms; and one for consumables, e.g. pens and pencils, printer cartridges, etc.). These bunkers were to be clearly labelled; the average requirement for each type of stationery would be calculated and two week’s worth of inventory was to be held in each. Speedy staff would visit weekly and top up the bunkers to the agreed level. Each delivery would be signed for by a designated manager for that area and, at the end of each month, all the supplies would be consolidated onto a single invoice. None of the incoming stationery would go through goods inwards or inspection, and there would be no need to raise individual orders. Indeed, the only work required of the Purchasing Department would be to pay the monthly invoice. Though the Director for Direct Sales presented a very well-argued case, he met with some incredulity, not to mention hostility. Some staff thought the plan simply would not work. Others felt that UTL would be swindled. Yet another group feared for their jobs if this type of approach spread from stationery to other purchased items. Nevertheless, the prospect of getting rid of stationery
  • 424. Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd 411 purchasing, plus all the complaints it generated, and thus releasing staff for what he considered more important activities, proved too tempting for UTL’s Purchasing Manager. The estimated 10 per cent saving, and informal encouragement from his Managing Director, also assisted the deci- sion. In addition, Speedy pointed out that, for the first time, UTL would have accurate and regular figures for stationery consumption broken down by area and type of stationery. Towards the end of 1993, Speedy and UTL signed a two-year contract covering the provision of all stationery requirements from the beginning of 1994. Though the contract included certain spe- cific details (especially regarding auditing the new system), it was acknowledged that most of the mechanics of the arrangements would only emerge as the system was implemented. Implementing the new system Under the new system, UTL was divided into 20 separate stationery zones, each with three sta- tionery bunkers. The initial target was to set up this system for two of these zones from the beginning of 1994, with the remainder in place by March 1994. Speedy promised a maximum three-hour response time to resolve problems. The new system entails significant reductions in the bureaucracy of supplying stationery, but also challenges many traditional approaches to buyer–supplier relationships, especially in relation to trust. Firstly, in the absence of direct checks, UTL has to have complete confidence in the qual- ity of the products supplied by Speedy and the reliability of its operation. Secondly, UTL has to trust that Speedy is actually delivering what it is invoicing for. Finally, UTL has to be sure that a single-source supplier will not exploit its position and introduce opportunistic price rises. Managers from different functions within UTL needed to be reassured that the system was going to work, and that Speedy were capable of providing the new style of service. Presentations were held at which reservations could be expressed, and the new approach explained. It was not only man- agers within UTL who had some concerns, however, so did some of the workforce. To set up the new system, Speedy had up to five staff carrying out the initial analysis and making the arrangements for the new stocking locations. It became clear that UTL employees were suspicious and wary of what was going on. A major source of this unease was a fear that a system for delivering items direct to departments and zones would threaten the jobs of those in the goods inward, the incoming inspection and stores activities. To help overcome these doubts, representatives from all areas concerned, including trade unions, were included in the series of presentations organised jointly by Speedy and UTL. Many of the questions raised related to the logic of the planned arrangement from UTL’s point of view, and the potential vulnerability of being dependent on a single source. Other objections reflected the more immediate fear about the loss of jobs. Despite his earlier reservations, UTL’s Purchasing Manager became the main champion for the Speedy initiative. In essence, he pointed to the need for all UTL employees and resources to focus on improving the competitiveness of their core busi- ness, rather than ‘messing about trying to find an envelope’. This, together with a promise that no one’s job was threatened by the initiative, seemed to overcome most of the reservations. Despite winning staff over to the new arrangements, the practicalities still had to be worked out. One of the major obstacles in implementing the new delivery system was the amount of sta- tionery already held at UTL. The problem was not just the inventory held centrally and in each department’s own store, but also the large quantities of stationery ‘hidden’ in various locations around the factory. These had arisen because staff, especially those working on the shopfloor, fre- quently took more from the stores than they actually needed in order to avoid ‘shortages’.
  • 425. 412 Chapter 13 · Case studies in changing external relationships As part of the implementation programme Speedy staff scoured UTL for these ‘private’ sta- tionery cupboards. The office of one supervisor on the night shift became known as ‘WH Smith’ because of the large collection of stationery, much of it years out of date, that was held there. He had been unable to draw stationery from the stores at night, and so had assembled his own supply. In some cases, the unofficial inventory amounted to a year’s worth of a particular item. UTL had estimated that they held about two months’ worth of stationery overall. In order to integrate this with the new system, Speedy began sorting this by type into agreed quantities. It transpired, however, when all the existing stationery had been accounted for, that in fact existing stocks were nearer four months’ worth of inventory. This meant that for the first few months of the relationship, Speedy delivered relatively little of its own material, and so had little to invoice for. Like many aspects of the new stationery management system, this factor was not covered by the written contract; episodes like this were dealt with on the basis of mutual understanding and trust. By the end of 1994, the new system was fully up and running. Despite a number of hiccups, the change appears to have been much smoother than anyone really imagined possible. Also, both parties felt that they had obtained major benefits from the change. The benefits to Speedy were as follows: ■ It increased its business with UTL from approximately £50,000 per year to over £200,000, and actually improved its profit margin to 8.5 per cent. ■ It proved that the new arrangements could work, and had three other customers keen to develop similar arrangements. For UTL, the benefits were also significant: ■ It made a 20 per cent saving on its annual stationery bill – twice as much as anticipated, even taking account of using up old stock. ■ Consumption of stationery declined significantly in some areas, partly thanks to better stock control, and partly owing to a decline in ‘home usage’ – as one manager put it. ■ The number of complaints relating to stationery dwindled almost to zero. However, UTL managers felt there was a more important, if less quantifiable, benefit, which was that managers at UTL (not just in Purchasing) had seen the possibilities for new ways of conduct- ing and organising business. In particular, managers now had a more favourable view of the prospects for achieving change in the company. As one manager commented: We’ve had our eyes opened. No one suspected some of our people would so easily accept such radical changes, especially ones driven by a supplier. The improvements we’ve made in handling stationery are really secondary to the confidence it’s given us in our ability to manage change and make improvements. One clear sign of this new confidence was that UTL began to examine seriously how it could develop similar links with other suppliers and its own customers. Summary Though the new direction proved profitable and effective for both Speedy and UTL, it also has impor- tant implications for customer–supplier relations in particular, and change management in general: ■ Whilst it has been recognised since the 1960s that customers and suppliers can impact on each other’s internal operations, the general view has been that this occurs in an unintended and unplanned fashion. What this case study shows is that customers and suppliers can link together consciously to change the nature of the environment in which they operate to their mutual benefit.
  • 426. Case Study 9 · Speedy Stationers Ltd and UTL (Turbines) Ltd 413 ■ The study also shows the serendipitous and unplanned nature of much of business life. Speedy only moved into the direct sale of stationery because of a friendship between its Managing Director and UTL’s. It was only by chance that Speedy’s decision to extend its opera- tions into printed stationery and to develop partnerships occurred at a time when UTL were receptive to such an approach. A year earlier, and the approach would undoubtedly have been rejected; a year later, and UTL might have moved away from the idea, or might have been busy developing partnerships with production suppliers. ■ The manner in which suspicion and resistance were overcome is also worth noting. From the start, Speedy approached the project in an open and frank manner – it raised the suggestion of a partnership in an open seminar attended by all purchasing staff, and open to all other UTL managers. UTL for their part chose to hide nothing from its workforce; both parties took account of worries and suspicions, and did their utmost to resolve these before embarking on change. Furthermore, UTL gave an assurance that the changed arrangements would not lead to any job losses. ■ Another major point is that both parties were prepared to set aside the distrust that permeates so many business relationships, and attempt to establish a partnership based on trust. Nevertheless, the trust was based on adequate checks and a belief, subsequently proved cor- rect, that such an approach was mutually beneficial. Since 1994, the contract between Speedy and UTL has been renewed a number of times, and now runs for a four-year period. The benefits to UTL have been considerable. It has dispensed with the need to manage its own stationery requirements and, therefore, can concentrate more effectively on its core business and its core suppliers. In addition, instead of the original 10 per cent savings it expected, it is now making a 20 per cent saving on stationery costs. Speedy has also achieved significant benefits by building on its experience with UTL. It has developed similar relationships with another ten large organisations. The turnover from its Direct Sales Division is now over £2 million and the profit margin is well in excess of that from its other activities. Since 1998, however, this area of Speedy’s activities has stood still. To develop it further would take a considerable effort in terms of time and money because, having exhausted the possible cus- tomers in the Birmingham area, it would need to offer it on a national basis. The current Managing Director, whose original idea this was, is opposed to this; he believes that the time and money would be better spent developing other aspects of Speedy’s business. Nevertheless, he is to retire shortly and is expected to be replaced by the Director of Direct Sales. If this is the case, the Director is determined that direct sales will be offered on a national basis.
  • 427. 414 Chapter 13 · Case studies in changing external relationships Case Study 10 PoliceCo – outsourcing in the public sector Background Though outsourcing is one of the fastest-growing and arguably most important areas of business activity, there is a tendency to assume that it is predominantly a private sector activity and that that is where the expertise lies. This case study will show that outsourcing is at least as prevalent in the public sector as it is in the private sector. As Case Study 4 in Chapter 11 argued, the rising tide of privatisation over the last 20 years or so has been led by both ideological and practical concerns. The former expresses the belief that the competition-based nature of the private sector means it will always provide services cheaper and more efficiently than the public sector. In terms of practi- cal concerns, the need to cut rising public sector deficits, and the accompanying tax bills, led to a search for more cost-effective ways of providing public services. Though these arguments were deployed in order to promote privatisation, where this was not feasible, the outsourcing or con- tracting out of public services became seen as the alternative. In the USA, with its lack of state enterprises, outsourcing, rather than the selling off of state assets, has tended to be the main way of transferring activities from the public to the private domain (Osborne and Gaebler, 1992). Indeed, as Cant and Jeynes (1998) point out, the US government has been using private compa- nies to provide public services since the early 1900s. For this reason, it is the USA that has pioneered the introduction of what Talbot (2001) refers to as ‘market-type mechanisms’, such as outsourcing and market testing, into the public sector (see Case Study 4 in Chapter 11). It is not just the UK that has followed the USA’s lead. Domberger (1998) collected data from the USA, UK, France, Germany, Japan and Australia. This shows that in all these countries, the outsourcing of public sector activities was a significant and increasing practice. Domberger concluded that out- sourcing was permeating the public and private sectors in these countries with equal force, and that in both sectors the prevailing belief is that best value is achieved through the use of competitive, market solutions for service provision. However, just because something is popular does not mean it is always effective. In examining outsourcing studies conducted in the UK and USA, Gay and Essinger (2000) found that outsourcing failed to measure up to expectations in some 28 per cent of cases. Nevertheless, there is an increasing and significant trend towards outsourcing, in the public sector in the UK and many other countries. The motivating factors tend to focus on cost savings and service improvements brought about by the involvement of private sector know-how in public sector activi- ties. Though there are similarities between the public and private sectors, there are also marked differences. Private sector organisations have to deliver a profit for their shareholders but are rela- tively unconstrained in how they achieve this. Public sector bodies have to demonstrate that they are achieving value for the taxpayers’ money but how they achieve this is constrained by a host of legal and policy requirements. Therefore, though it may be the case that the public sector bodies can ben- efit by adopting private sector practices, they may be constrained by legal and policy requirements from doing so, as the following examination of PoliceCo’s experience of outsourcing will show. PoliceCo PoliceCo is one of the largest Police Forces in the UK. It has over 6,000 employees and is responsible for policing an area of 2,200 square miles with a population of 2.1 million. As with all public bodies in the UK, it operates under a legal framework which obliges it to demonstrate in an open and auditable manner that, in spending public funds, it is providing value for money (Talbot, 2001). In addition, suc- cessive governments have required all police forces to show, usually by market testing, that the services provided in-house cannot be provided more cheaply and/or better by the private sector (Johnson and
  • 428. Case Study 10 · PoliceCo – outsourcing in the public sector 415 Scholes, 2001). This began in 1994 with the introduction of Compulsory Competitive Tendering (CCT) (Day et al, 1998). CCT required PoliceCo to open up a range of activities to outside competition in order to test whether or not an outside provider could offer better value for money. If it was shown that an outsider provider was cheaper, PoliceCo had to outsource the activity, whether it wished to or not. CCT was superseded in 1999 by the government’s ‘Best Value’ initiative. According to the Local Government Act 1999, police authorities are obliged to produce a Best Value Performance Plan (Doherty and Horne, 2002). This requires local authorities, including police services, to carry out ‘Fundamental Performance Reviews’ of each of their services over a five-year rolling period (Speller, 2001: 119). These reviews cover the economy, efficiency and effectiveness of the service provided and seek to address four key questions, which are known as the four ‘Cs’: Challenge, Compare, Consult and Compete (Speller, 2001). As part of the government’s Best Value initiative, PoliceCo’s funding is conditional on achieving a 2 per cent year-on-year efficiency improvement. This 2 per cent improvement may be achieved by efficiency savings (achieving the same output with less resources) and efficiency gains (achiev- ing greater output with the same resources). Therefore, PoliceCo is required by law to test its in-house service provision against outside competition. When CCT was introduced in 1994, catering at PoliceCo had already been outsourced. In sub- sequent years, other activities were outsourced. These included some parts of IT, finance, human resources and legal work. The first activity to be outsourced under CCT, however, was building cleaning. Building cleaning was outsourced for the first time in 1995 under the CCT legislation. Prior to this, PoliceCo had employed its own cleaners. It was decided that the contract should be split into four parts. This decision was taken for several reasons, including the size of the geo- graphical area that PoliceCo covers, to ensure that each supplier would have the capacity to manage such a contract and also because the CCT legislation required the size of the contract to be appropriate to the size of the supplier. An additional reason was that PoliceCo believed that splitting the contract between different suppliers would encourage competition and lead to a better quality of service. European Union legislation obliges PoliceCo to undertake a Europe-wide tender process when seeking to appoint outside suppliers or contractors. This clearly makes the outsourcing process longer, more complex and costly than it might be if PoliceCo had a free hand as to the selection of contractor. Neither the Best Value legislation nor European legislation would have prevented PoliceCo from submitting a bid to continue running the cleaning services itself. However, PoliceCo decided not to make an in-house bid because it felt it lacked the administrative structure and bid- ding expertise to make a successful bid, though it was keen to ensure that its existing employees were transferred to the new cleaning service providers. In awarding the contract, PoliceCo went through a rigorous process of assessing each bidder’s capability to deliver the contract, including visits to some of their existing customers. Nevertheless, the final selection was made on the basis of lowest overall cost judged against a tender document drawn up by PoliceCo. The core of the tender document is a detailed output specification for the activity concerned. In terms of the cleaning contract, this was a lengthy and difficult document to draw up because of both the number of sites involved and the difficulty in defining output meas- ures that could be easily monitored and understood. However, PoliceCo considered that this approach was necessary to be able to demonstrate whether or not value for money was being achieved. The contracts were for five years at a fixed price, though there was provision for price increases arising from factors such as increases in labour costs.
  • 429. 416 Chapter 13 · Case studies in changing external relationships The four cleaning contracts were awarded to two separate companies who received two contracts each. Once the companies began the contracts, conformance to the specification was monitored through regular visits to the various sites and reports from the business managers of the sites. Regular meetings are held with the contract companies, which were more frequent at the early stages (even on a weekly basis in some cases). This close monitoring helped PoliceCo identify serious problems with one of the contractors, and their two contracts were terminated and re-advertised. These con- tracts were awarded to the other cleaning contractor, which resulted in their having sole responsibility for all cleaning contracts (this company also belongs to the same group as PoliceCo’s catering contrac- tor). When a new site was built, however, the cleaning contract for that site was awarded to another company. Though this restored a degree of comparison and competition, it also doubled the number of companies PoliceCo had to liaise with. When the contracts were re-advertised in 2000/1, the com- petitive tendering process resulted in both retaining their existing contracts. Evaluating outsourcing at PoliceCo When a private sector company decides to outsource an activity, it is relatively free to please itself as to what to outsource, who to award the contract to and how it makes the selection, although ulti- mately it does have to show that its overall approach to managing the business is providing the shareholders with value for money. Public sector bodies such as PoliceCo also have to demonstrate that they are delivering value for money, but have to operate under far more stringent rules and regu- lations than private sector companies. These rules and regulations specify what they cannot do, what they have to do and how they have to do it. If we examine the decision to outsource, the selection of the contractor, the contractual arrangement and the way the relationship with the contractor is man- aged, we can see how these rules and regulations impact on PoliceCo’s approach to outsourcing. The decision to outsource PoliceCo was originally obliged by Compulsory Competitive Tendering legislation to put certain activi- ties out to tender. In 1999, this was superseded by ‘Best Value’, which obliges PoliceCo to undertake a periodic review of all its activities. Where the review indicates that PoliceCo might save money by doing so, it has to put that activity out to tender. It is also subject to external audit and inspection to ensure that it undertakes this review in the manner prescribed by government legislation. Supplier selection PoliceCo, like the rest of the public sector in the UK, is obliged by legislation to undertake a rigorous and open supplier selection process. This involves drawing up tender documents that clearly specify what is required and the form and timetable for tendering and making a decision. PoliceCo is also obliged to advertise across the European Union and must, providing the tender specification is met, award the contract to the lowest (total cost) bidder. Even where a contractor fails, as in the cleaning contract, PoliceCo cannot just pass the work over to another contractor who is performing well; the contract must go through the tendering process again. Similarly, even when an existing contractor is seen to be performing well, they must still tender against everyone else for any new work and, as the cleaning contract for the new site demonstrated, they may not be awarded the contract. This is different from how many private sector companies operate. Often they do not advertise for suppliers. Instead, they may seek to identify the ‘best in class’ suppliers and approach them directly. They may also enter into negotiations with each potential supplier in order to see who can offer the best service, rather than asking them to bid against a specific tender document. Even
  • 430. Case Study 10 · PoliceCo – outsourcing in the public sector 417 when choosing a supplier, issues of cost, etc, may not be paramount – track record and confi- dence that they can deliver may be seen to be more important. Also, even when a supplier has been finally selected, this is more likely to signify the beginning of a new stage of negotiations rather than signalling the end of the process. This forms a contrast with the public sector; because it is something of a regulatory minefield, PoliceCo and most public sector organisations are reluc- tant to enter into further negotiations once the tender process has been completed and the supplier selected. Even during the contract period, in the private sector, developments and changes will continue. In the public sector, however, once a contract specification has been agreed, it is very difficult for either partner to change it. Contractual arrangements In general, it appears that the public sector tends to offer longer and more formal contracts than the private sector. The main reason is that public sector contracts are usually of a larger scale. For example, there are very few private sector organisations that have the number of buildings requir- ing cleaning that PoliceCo does. Contracts of a large scale imply large set-up costs for the supplier, which have to be spread over a wider time span in order to make the contract proposition more economical. In terms of performance monitoring, as is common in the public sector, PoliceCo decided to use output specification measures for its cleaning contracts. They found, however, that output specifications can be very difficult to put in writing for such simple tasks as cleaning an office, and the process can turn out to be very time-consuming. Nevertheless, the downside of not devoting sufficient time to specifying what is required, as many private companies have found, is that problems, disagreements and additional costs can arise during the contract period. The use of ‘gain-share’ clauses in the outsourcing contract, whereby both parties benefit from any savings above and beyond those specified in the contract, is common in the private sector. This is because gain-share clauses are seen as encouraging suppliers to seek improvements that benefit both themselves and their customers. Public sector organisations tend to be more wary of these, however, because of the need to demonstrate that value for money is being achieved. If it became public knowledge that a supplier was achieving gains above and beyond those specified by a con- tract, this could be portrayed as incompetence, or even corruption, on the part of the public sector organisation involved. A structured and clear procedure for conflict resolution is written into all PoliceCo’s contracts. Indeed, it does appear that the public sector as a whole does have the best conflict resolution practices in terms of transparency, structure, consistency and fairness. This is a consequence of both the legal framework within which the public sector operates and also the need to be aware of public scrutiny, especially by the media. Managing the relationship As far as relationship management is concerned, though PoliceCo personnel speak of adopting a partnership approach, the use of mechanisms such as competitive tendering, even where a contrac- tor has performed well, do seem somewhat adversarial. Of course, PoliceCo is obliged by public sector regulations to behave in this manner. The lack of a genuine partnership orientation may also be inevitable, given the number of activities it outsources and the uncertainty as to whether a con- tract will be renewed. In the private sector, companies often use a portfolio approach in dealing with suppliers. That is to say, they try to place a number of related activities with the same supplier, even where the supplier may not always offer the lowest price. This allows them to have fewer but more
  • 431. 418 Chapter 13 · Case studies in changing external relationships significant relationships to which they can devote more time and resources. It also seems to ensure that senior managers are involved in developing and monitoring the relationships and that problems which might threaten contract renewal are dealt with effectively. Obviously, public sector regulations make it very difficult for PoliceCo to operate portfolio practices. Indeed, public sector purchasing reg- ulations seem to have almost the opposite effect, in that they can even result in organisations having more than one supplier for the same activity, such as PoliceCo’s cleaning contracts. Supplier development is another area that appears to be hampered by public sector regula- tions. For PoliceCo, and other public sector organisations, working with suppliers to improve their performance can lead to accusations of favouritism in that it might be seen to give the supplier an unfair advantage when it comes to re-tendering. Indeed, PoliceCo’s contract for radio maintenance deliberately forbids the introduction of new technologies, despite the fact that communication technologies are changing rapidly. This is because any new communications technology would require different maintenance procedures, which would in turn require changes to, or even the re- tendering of, the maintenance contract. Therefore, in the public sector there is a tendency to manage by the book and hold suppliers to the contract, rather than working with them to improve on what was specified. This emphasis on contract monitoring and compliance, rather than performance improvement, may account for why, in PoliceCo, outsourcing is seen as an administrative task to be undertaken by relatively junior staff rather than a strategic priority involving senior managers. Summary This case study has shown that outsourcing is a substantial activity in the public sector, driven by government regulations that oblige bodies such as PoliceCo to adopt market mechanisms in order to reduce the cost of providing public services. These government regulations do not per se force PoliceCo and other public bodies to outsource activities. If an activity is to be retained in-house, however, the contract has to be won through an open, competitive bidding process which demon- strates that the in-house provider offers ‘Best Value’ over external competitors. To do this, however, PoliceCo would need to have the skills required to put together such a bid. As was shown with the cleaning contract, PoliceCo felt they did not have these skills. Nor is this just an issue of preparing a bid document: PoliceCo would have needed to reorganise the cleaning operation into a separate cost/profit centre and restructure its management. Faced with this, it was easier to outsource the service rather than providing it itself. This does not mean that PoliceCo has not benefited from out- sourcing. CCT, and subsequently Best Value, have enabled PoliceCo to outsource many activities to which it previously had to devote management time, and left it to concentrate on its core activity of law enforcement. However, the way that outsourcing operates in the public sector does mean that PoliceCo and other public bodies may not be getting the full benefit of outsourcing, and that, in some cases, activities are outsourced that might be better provided in-house. As Erridge and Nondi (1994) note, there is a tendency in the public sector for the pursuit of economy, efficiency and effectiveness to result in a predominantly cost-cutting approach to outsourcing. It does appear that the public sector purchasing requirements do constrain PoliceCo’s ability or willingness to adopt some of the practices which are beneficial to private sector companies. For example, it would seem to make sense to have one cleaning contractor rather than two, especially as the second is only responsible for one facility. Similarly, its radio contract, which prevents the intro- duction of new communications technologies, seems to be counter-productive. Likewise, PoliceCo’s inability to adopt a portfolio approach to purchasing or to engage in supplier development seems to
  • 432. Case Study 10 · PoliceCo – outsourcing in the public sector 419 encourage a proliferation of contracts whilst at the same time turning the purchasing activity into a relatively low-grade administrative task. After all, PoliceCo could have decided to offer cleaning as one contract rather than four, and it could have linked cleaning to other activities, such as catering, which the main cleaning company also provides. It felt, however, that splitting contracts would encourage greater competitiveness. It is not always easy to see whether or not the failure to adopt such practices is driven by the public sector purchasing requirements or by innate risk aversion. Certainly, Burnes and Coram (1999) found that even senior public sector managers were very risk- averse in their dealings with outside contractors. In PoliceCo, this seems even more the case given the level of managers involved. On the other hand, just as the public sector might benefit from some of the practices of the private sector, so the reverse may also be the case. Certainly, the private sector could learn lessons from the more structured approach of the public sector in terms of rigorously reviewing which activities might best be outsourced, the tender process and contract specification. In the private sector, choosing an activity to outsource often seems a somewhat ad hoc process, often tied to political concerns. The requirement for public sector bodies to review all their activities in an open, and auditable, manner means that it is very difficult for poorly-performing ones to hide or be hidden. Similarly, whilst the private sector’s ability to continue to negotiate and refine a contract specification after a contract is awarded can be useful, it can also be a sign that the purchaser has been lazy in the first place. Also, by not having to go out to public tender, a company may miss the opportunity of attracting an innovative bid for its work. In addition, the public sector does appear to have a more structured and formal approach to conflict resolution that allows problems to be dealt with in a fair and effective manner. In summary, therefore, it can be seen that outsourcing decisions and practices in the public sector are driven and constrained by governmental and EU legislation and regulations. The removal of freedom of action from public bodies in this way appears to turn outsourcing into an operational rather than a strategic activity. The constraints under which PoliceCo operates may also reduce its ability to adopt practices from which their private sector organisations derive benefit. In particular, there is little evidence that the public sector is developing the sort of partnerships with its suppliers that seem to prove beneficial to organisations in the private sector. On the other hand, the more structured approach to outsourcing in the public sector may in some aspects be superior to the approach adopted by many private sector organisations.
  • 433. 420 Chapter 13 · Case studies in changing external relationships Conclusions The three case studies in this chapter amply demonstrate the extent to which both pri- vate and public sector organisations are outsourcing significant aspects of their activities. Outsourcing appears to be equally prevalent in both sectors, but the manner in which it is conducted and the resulting changes, and possibly benefits, are different. For the private sector, the purpose of outsourcing is to allow customers to concentrate on their core competences. In the public sector, it is seen as a cost-cutting measure based on the assumption that, because they operate in a competitive market, private-sector companies will always provide a lower-cost service than the public sector can. In the private sector, outsourcing is leading to changes in both companies’ internal and external relationships. Though the move towards closer relationships between customers and suppliers clearly makes for a more harmonious atmosphere in which to conduct business, this is almost a side-effect and not the main reason for the change. Increasingly, companies have come to recognise the need to make major improvements in their performance but, as anything up to 70, 80 or even 90 per cent of the value of their products comprises bought-in goods and services, this cannot be achieved solely on the basis of internal performance improvements. Rather, what is required is that their suppliers also improve their business. As Ford found out in the car industry, seeking to impose improvements has its limitations. Suppliers have to be keen to improve and willing to work with customers. The argument for adopting a partnership approach to purchasing in the UK, and other Western countries, was that it was one of the cornerstones of Japan’s success and, therefore, must be beneficial (Womack et al, 1990). Whilst in the private sector the move to outsourcing can be the beginning of a process of sustained and continuing attempts to improve the service provided by the supplier, in the public sector, it is almost the end of it. In the public sector there are legal, and possibly cultural, barriers to using outsourcing as a strategy for continuous improvement. Instead of a close working relationship aimed at service improvement, the public sector opts for a formal relationship whose aim is to monitor what is being provided and to ensure that the supplier sticks to the letter of the contract. Therefore, as this chapter shows, outsourcing is providing private sector organisa- tions with the potential for continuous service improvement through close and mutually beneficially relationships, whereas for the public sector it offers a one-off opportunity to cut costs. However, it would be unwise to see this as an example of the private sector being efficient and the public sector being less so. Rather, the two sectors operate under different rules and have different degrees of freedom. PoliceCo is a pub- licly-accountable body that has a statutory and regularly-monitored duty to demonstrate that it is providing value for money and awarding contracts in a fair and open manner. Its freedom of action in choosing a supplier and how it works with that supplier is severely constrained by this. Contrast that with Case Study 8, Rover–TRW. This showed that close working relationships at an operational level, based on open- ness and trust, can bring great benefits to both customers and suppliers. It also showed, however, that in a situation where continuous improvements are being made, it is sometimes difficult to judge who is benefiting the most financially. Even in the pri- vate sector, as this case study shows, this puts a strain on customer–supplier
  • 434. Conclusions 421 relationships. In the public sector, managers would be severely censured if they allowed a situation to arise where the suppliers appeared to be making gains above and beyond what was envisaged in the contract. The Rover–TRW case also illustrates the emerging, and to an extent unplanned, nature of partnership developments. The close operational-level relationship could not have prospered unless both companies, especially TRW, had not broken with tra- ditional, Tayloristic, approaches to managing people and allowed their staff the freedom to experiment with and develop new ways of working. Case Study 9, Speedy Stationers, also offers an example which the public sector would find almost impossible to follow. Normally, it is the customer who takes the lead in promoting changes in purchasing behaviour. This is for the obvious reason that the customer is usually the one with the power in the relationship (they can gen- erally choose where to purchase and on what terms). In this instance, however, Speedy took the initiative and approached their customer with a suggestion for change. This was for basic commercial reasons: they needed to win additional busi- ness and saw partnerships as being the prime vehicle. They believed that the partnership approach would not only be commercially beneficial but would also give Speedy a competitive edge over its rivals. Speedy were fortunate in that they were able to approach a customer responsive to this type of initiative. The process of building the relationship led to many changes, both at Speedy and particularly in its customer. Much information only came to light as the new arrangements were developed and implemented, and it was only by actually putting the new approach into practice that sceptics could come to appreciate its benefits. For both Speedy and its customer, this new approach was something of a leap into the unknown which appeared to succeed, though only time will tell to what extent. It is difficult to see PoliceCo or other public bodies being legally able, let alone willing, to take such a leap of faith. Yet it must not be assumed that PoliceCo did not benefit from its outsourcing activities. In an era when police forces operate under considerable operational and financial pressures, and where their activities receive unprecedented media scrutiny, to be able to concentrate more on direct policing issues and less on managing services such as cleaning, catering, etc., is clearly a benefit, as are any cost savings that this brings. Nevertheless, a greater freedom of manoeuvre, and a less risk-averse culture, might increase the benefits that PoliceCo achieved from outsourcing. From the proce- dural point of view, it should be recognised that many of PoliceCo’s outsourcing practices are exemplary and might beneficially be adopted by the private sector. As Part 1 of this book showed, we live in an era when all organisations, whether public, private or voluntary, recognise that they have to change their internal opera- tions and relationships in order to increase their effectiveness and competitiveness. What the three case studies in this chapter show is that for private sector organisa- tions, these improvements do not necessarily stop at their own office or factory door. Most see the full potential for performance improvement will only be realised when there are also similar developments within their suppliers and customers, and when they develop better working relationships with them. For the public sector, what hap- pens outside their doors, so long as it does not affect their contract with a supplier, does not appear to be of concern. In considering the developing nature of relationships between customers and sup- pliers, three points stand out from the case studies. The first is that private sector
  • 435. 422 Chapter 13 · Case studies in changing external relationships companies are changing the rules of the game; they are challenging the prevailing orthodoxy in the UK and the rest of Europe with regard to commercial relationships between customers and suppliers. Public sector organisations are working within the existing rules and not seeking to challenge them. The second point is that, although the move to greater partnership working is based on others’ successful experiences, it nevertheless requires a considerable act of faith by the parties concerned. It is not possible in advance to spell out either the exact form of the new relationships or the specific measurable benefits they might bring. Yet dissatis- faction with traditional relationships, and the potential for commercial advantage, have spurred the private sector companies described in this chapter to take such deci- sions. As can be seen, the decision to move towards partnerships cannot be judged solely on the basis of rational analysis and the pursuit of quantified and clear commer- cial objectives. Actually establishing a partnership may constitute a leap in the dark, requiring boldness, initiative and trust. It is difficult to see how individual public sector bodies could adopt this approach given the constraints under which they work. The last point to note relates to one of the major benefits or consequences of part- nerships. One reason why private sector companies are seeking to develop new ways of working is to help them to cope with the competitive pressures and uncertainty of the modern world. Partnerships appear not only to allow companies to strengthen their competitive position, but also to reduce a major source of environmental uncer- tainty, by making the actions of customers and suppliers more predictable and transparent. This goes against those, such as Tom Peters, who argue for the benefits of increasing chaos rather than reducing it. It also shows that one of the major con- straints or contingencies organisations face, environmental uncertainty, can be managed in such a way that the ability to plan for the future, in terms of product development and production, is increased. In the public sector, outsourcing practices may be having the opposite affect. They can be destabilising for the public sector body because they can give rise to uncertainty about who will be supplying a service when a contract comes up for renewal. It can also lead to increased uncertainty for their employees, who do not know whether their jobs will be outsourced in future, and if so what impact that will have on their employment prospects and terms of employment. For suppliers and their employees, the competitive bidding process cre- ates even greater levels of uncertainty, because no matter how well they have performed, they can always lose a contract if somebody else undercuts their price. As the Contingency Theorists, described in Chapter 2, argued some four decades ago, the external environment does affect the internal workings of an organisation, but an organisation’s internal arrangements can also affect the environment. Therefore, if a turbulent environment leads to changed internal relationships, then given that organisations are open systems, we can expect these to be mirrored in changed external relationships. So although internal changes are often seen as mecha- nisms for coping with environmental uncertainty, the move by suppliers and customers in the private sector to develop closer links externally can go one step fur- ther, actually reducing uncertainty. Conversely, the public sector’s purchasing practices may be having the effect of increasing uncertainty.
  • 436. Test your learning 423 Test your learning ■ Short answer questions 1 Identify the key reason why Rover developed its partnership with TRW. 2 List the two main benefits that each party gained from the Rover–TRW partnership. 3 To what extent can the Speedy case study be seen as supporting the Emergent approach to change? 4 What was the decisive factor in persuading UTL to enter into partnership with Speedy? 5 What are the main factors behind PoliceCo’s policy of outsourcing? 6 What are the barriers to PoliceCo adopting a partnership approach to outsourcing? ■ Essay questions 1 To what extent does the Rover–TRW case study show the limitations of continuous improvement? 2 In moving towards partnerships, how did Speedy overcome potential resistance to change from both its own staff and those of its customers? 3 Discuss the following statement: The PoliceCo study shows the limits to which private sector practices can be adopted by public sector bodies.
  • 437. 1
  • 440. Chapter 14 Managing change Lessons from theory and practice Learning objectives After studying this chapter, you should be able to: ■ analyse the ten case studies in Part 3 in relation to the following: (a) how each organisation's strategy developed; (b) the constraints on choice; (c) managerial behaviour; (d) the way change was managed; (e) the approach or approaches to change adopted; (f) the objectives pursued; ■ describe the main lessons from each of the ten case studies in relation to the above issues; ■ understand the factors that determine the level of employee involvement necessary to bring about successful change; ■ appreciate that there are a multiplicity of approaches to change that can be used separately, sequentially or in combination. Introduction In the previous three parts of this book, we examined the theory and practice of how organisations develop and change. From the Industrial Revolution to the pres- ent day, we can see that the history of organisations is one of change and upheaval. In the light of this, the idea that organisations have ever operated in a stable state or a predictable environment, other than for relatively brief periods, is difficult to sustain. Whether because of economic fluctuations, the development of new prod- ucts and processes, social and political change or war, organisations and entire industries tend to face recurrent bouts of upheaval. Some industries still remain strong, though their products and leading players have changed significantly. One clear example of this is the computer industry, which has moved from being domi- nated by IBM’s mainframes to being dominated by Microsoft’s operating systems.
  • 441. 428 Chapter 14 · Managing change Other industries though, such as the UK coal industry, have shrunk to a shadow of their former size and importance, and appear doomed to be relegated to the role of bit player on the industrial stage. Not surprisingly, given the rise and fall of industries and technologies over the last two decades, many writers argue that organisations and society at large are in a period of rapid and unprecedented change: a period where old certainties no longer hold good, and new ones have yet to emerge. An alternative view is that the pace and uncertainty of change varies from company to company, industry to industry and even country to country. As a consequence, at any one point in time, some organisa- tions will be experiencing extreme turbulence whilst others appear to operate in a relatively stable environment. However, whether either of these views offers a suitable explanation of the stability–turbulence question is perhaps irrelevant. The pertinent issue is how organisations can cope with both the environment in which they operate and the constraints, challenges and threats they face. In undertaking this task, one thing is perfectly clear: the amount and diversity of information and advice on offer is certainly greater than ever before. No longer is business analysis and advice confined to a few specialist publishers and journals, or locked up in business school libraries. Books, magazines and videos on ‘how to’ management can be found in airports and railway stations as well as almost any bookshop. Newspapers, radio and television also play their part in popu- larising the latest panacea or giving a platform to business gurus or practitioners. In addition, the ubiquitous management consultant can always be relied upon to offer the latest approach, at a price. Therefore, managers cannot claim to lack advice or offers of assistance. The problem, as this book has shown, is that no two approaches appear to be exactly the same and in some cases they may almost entirely contradict each other. Almost in despair, many managers must ask themselves the simple ques- tion: ‘If the experts can’t agree, what hope is there for me?’ This question illustrates the powerlessness some managers feel when faced with issues that, quite wrongly, appear to have become the territory of the specialist. Though there are managers who adopt an almost fatalistic attitude to their situation, believing that events are beyond their control, others, fortunately, adopt a more posi- tive stance. However, even these managers often give the impression that their job is to implement the particular approach to strategy and change that the specialists rec- ommend, or which other more successful organisations have adopted. This book has sought to argue that this is not only incorrect, but a potentially dangerous notion. Though many ‘experts’ claim some sort of universal applicability for their favoured approach or theory, as argued in the first two parts of this book, the reality is that such approaches are developed in particular circumstances, at particular times and often with particular types of organisations in mind. It follows that a key role for organisa- tions and their managers is to understand the approaches on offer, identify their own circumstances and needs, and choose the approach that is most appropriate for their circumstances. By doing this, in effect, as this book has attempted to show, managers can cease to be prisoners of circumstances and experts, and begin to make their own choices about the future operation, direction and nature of their organisations. This chapter draws on the review of the literature on organisations, strategy and change presented so far in this book to shed light on the ten case studies presented in the last three chapters. The chapter begins by reviewing Chapters 6–10 and identify-
  • 442. Lessons from theory and practice 429 ing a number of key common points, especially with regard to managerial choice. These are then used to examine the case studies presented in Chapters 11–13. This is followed by a discussion of the nature of and rationale for employee involvement, particularly in cases of rapid transformational change. The chapter concludes by con- tending that organisations and theorists need to reject the notion that Planned and Emergent approaches to change necessarily stand in opposition to each other, or that they cannot be used in tandem. Instead, it is argued that there are a multiplicity of approaches to change and that managers have genuine choice in how and when they are used, and what to change and when to change it. Lessons from theory and practice Chapters 6–10 began to develop a model of managerial choice and change manage- ment. The ten case studies that followed showed how organisations dealt with these issues. The case studies will now be compared with the findings from Chapters 6–10. First, the five chapters will be briefly reviewed and key issues identified; these issues will then be used to examine the case studies. The intention is to combine theory and practice in order to lay the basis for the Choice Management–Change Management model for understanding and implementing organisational change that is presented in Chapter 15. ■ Issues from Chapters 6–10 Chapters 6 and 7 examined the origins and development of approaches to strategy. They showed that strategy was originally conceived of as a rational, quantitative process concerned with an organisation’s external environment, especially its prod- ucts and markets. The key role for managers was to identify trends, establish future objectives or targets, and then implement them. It was shown that as the concept of organisational strategy developed, a distinction emerged between the Prescriptive school of strategy and the Analytical school. The former was and is primarily con- cerned with telling managers what they should do and, in the main, promoting a planned, quantitative and rational approach to strategy. On the other hand, the Analytical school tends to focus on what organisations actually do when formulating and implementing strategy, rather than what the experts say they should do. For the Analytical school, strategy is a messy, complex, less rational and more emergent affair than the picture painted by the Prescriptive school. Though over the last 20 years, the Prescriptive school has still tended to dominate the practice of strategy, the insights of the Analytical school have had a significant impact. In particular, there has been a growing recognition of the importance of intu- ition, creativity, and power and politics in shaping an organisation’s strategy. The implications of this for managers have been that instead of being required to con- struct detailed and elaborate plans for their organisation’s future, they are increasingly being seen as primarily responsible for creating a vision or strategic direc- tion for their organisations, which is pursued, often in a bottom-up fashion, through day-to-day decisions concerning such matters as resource allocation, product/market development and a host of, often, small-scale organisational changes. From this
  • 443. 430 Chapter 14 · Managing change standpoint, an organisation’s strategy is not set in advance, but emerges from the decisions taken at all levels in the organisation. Therefore, as Chapters 6 and 7 demonstrated, the Analytical school of strategy, as opposed to the Prescriptive school, draws no distinction between strategy development and implementation – an organi- sation’s decisions are informed by its visions or intent, but the nature and details of the strategy they pursue emerge from the decisions they take. Nevertheless, despite the growing interest in the Analytical school, more rational and quantitative approaches to strategy have not been replaced. Rather, as Chapters 6 and 7 show, the situation is that a number of more or less competing perspectives on strategy are now available to organisations, particularly the Competitive Forces, Resource-Based and Strategic Conflict models. In Chapter 6, it was argued that none of the competing perspectives on strategy were necessarily true or false. Instead, they tended to be appropriate to given situa- tions. The main elements determining their appropriateness were national characteristics, the business environment, industry-specific factors, and the internal characteristics of the organisation in question. Rather than arguing that the role of managers was merely to choose the appropriate approach to strategy for their organi- sation’s circumstances, however, the chapter concluded by arguing that managers could choose to amend these circumstances to fit in with their preferred approach to strategy. Chapters 8 and 9 moved from examining strategy to reviewing change manage- ment. Chapter 8 began by describing the main theories which underpin approaches to change management. These concerned the behaviour and importance of individuals, groups and systems within organisations. This was followed by a review of what had been the dominant approach to change management – Planned change. The Planned approach tends to concentrate on individuals and groups, but has less to say about the overall organisation and its environment, though there have been attempts by its promoters to rectify this. This approach, as its name implies, regards change very much as a conscious process of moving parts of organisations from one relatively stable state to another. It is an approach that seeks to improve organisational effec- tiveness by changing individual and group beliefs and behaviour through a process of participation and learning. The Chapter concluded by looking at three models dealing with the pace and nature of organisational change – the Incremental, Punctuated Equilibrium and Continuous Change models. These drew attention to the spectrum of change events ranging from small-scale, localised ones to large-scale events designed to transform or reinvent an organisation in its totality. It was argued that whilst Planned change might be suitable in some of these situations, a wider range of approaches were required to cover all of them. Alternative, and newer, approaches to change management were assembled and reviewed in Chapter 9 under the collective title of the Emergent approach. This approach conceives of organisations as operating in a continuous state of flux and turbulence. Though its proponents recognise that change can take many forms, Emergent change tends to be characterised as a bottom-up, unpredictable, messy and politically-driven process. From this perspective, it is argued that the role of managers is to develop a climate in which everyone in the organisation has a responsibility for identifying the need for and implementing change. The objective is not to achieve a fixed outcome but continuously to align and realign the organisation with the chang- ing needs of an unpredictable environment. In particular, the Emergent approach
  • 444. Lessons from theory and practice 431 identifies five features of organisational life that either promote or block change: structure, culture, organisational learning, managerial behaviour, and power and poli- tics. The Chapter also showed that though the Emergent approach may have some advantages over the Planned approach, it has drawbacks and does not cover all change situations. In Chapter 10, it was argued that despite the support for these two approaches, neither the Planned nor the Emergent approach provided a comprehensive picture of organisational change. Rather, there are a wide variety of approaches that are suited to different situations. The suitability of any one approach is determined by a range of factors, especially the stability, or otherwise, of an organisation’s environment. From this perspective, as Chapter 10 maintained, a key role for managers is to make sense of the complexity of their organisation’s situation and choose an approach to change which best aligns with this. Nevertheless, it was also argued that, though con- straints such as the nature of the environment in which their organisations operate place limitations on managers’ freedom of choice, managers can often, but not always, influence, moderate or alter these constraints to make them better suited to their and their organisations’ own preferences and needs. Therefore, the evidence and arguments from Chapters 6–10 can be summarised: ■ There are a wide and diverse range of change situations, ranging from small-scale change to the complete transformation or reinvention of organisations. These are not, however, mutually exclusive. They can occur, whether consciously or uncon- sciously, simultaneously within the same organisation, though not necessarily to achieve the same objectives. ■ Though there are a number of valid and well-supported approaches to strategy development and change management available to organisations, there is a ten- dency for managers, and academics, to focus on and advocate a limited range. Whilst not always explicitly stated, underpinning these approaches to strategy development and change management is a Contingency perspective that makes assumptions about the degree of stability present in the environment in which organisations operate. ■ The dominant view is that managers have to adopt the approach that appears to fit in with the constraints, especially environmental ones, they face. ■ An alternative perspective, however, is that it is often, though not always, possible for managers to influence these constraints, in effect to change the rules of the game, to make them more appropriate to the particular approach to strategy and change management which suits them and their organisations. In order to examine the above points further, the ten case studies from Part 3 will now be reviewed to see to what extent the experience of real-life organisations sup- ports or contradicts them. In particular, drawing on Chapters 6–10, for each case study the following key issues will be explored: 1 Strategy. How was the organisation’s strategy developed? 2 Constraints. What were the constraints the organisation faced, and did the strategy seek to work within or influence these? 3 Managerial behaviour. What role did managers play in strategy development and change management?
  • 445. 432 Chapter 14 · Managing change 4 Change management. How were change projects managed and who was involved? 5 Planned, Emergent or combined change. To what extent can the change projects be classed as Planned, Emergent or exhibiting a combination or variety of approaches? 6 Objectives. Was the focus of strategy development and/or change projects to alter individual and group behaviour or to change or reinvent an organisation in its entirety? ■ Reviewing the case studies – Chapters 11–13 In examining the 10 case studies against the above six issues, it should be borne in mind that Case Studies 1–4 (Chapter 11) deal specifically with strategy development, and Case Studies 5–10 (Chapters 12 and 13) concentrate on change management projects. Nevertheless, all the case studies, to a lesser or greater extent, contain ele- ments of strategy development and all contain elements of change management. With that proviso in mind, we can now move to a brief examination of the individual case studies. Each case will be reviewed under the six headings listed above. Case Study 1: The music industry 1 Strategy. In this instance we are not considering the actions of one or two compa- nies but of an entire industry, and a global one at that. It is an industry that has been dominated by the big five record labels for over 50 years. The managers of these companies have developed what appears to be a common strategy to ensure that their organisations retain their dominant position in the industry. It basically revolves around signing the artists who will sell the most recordings, shaping and marketing them and their output to maximise sales, and ensuring that the vast pro- portion of the revenues generated go to the label rather than the artists or anyone else. The advent of the Internet threatens the income and dominance of the big labels. It can offer them many advantages in terms of cutting the costs of record distribution; however, these may pale into insignificance in terms of the threat posed by peer-to-peer music swapping (P2P). Those managing the big labels appear be taking a reactive rather than proactive and strategic response to this. They are attempting, not very successfully, to use the law to stop the free downloading of music whilst at the same time attempting to copy and adapt the Napster approach by developing subscription services which charges for the downloading of music. 2 Constraints. The ease with which the Internet now allows recorded material to be pirated is clearly a major constraint on the actions of the record companies. Shawn Fanning opened the Pandora’s Box of the Internet and it is difficult to see how the big labels can hold on to their iron grip on production and distribution and con- tinue to take the lion’s share of the revenues. Though this is partly a case of people taking advantage of changes in technology to get free records, it is also about the nature of the Internet. In essence it is a clash of philosophies between those who see the Internet as a vehicle for making money and those who see it as a way of creating communities where sharing takes precedence over profit-making. This means that there are many talented and committed computer-literate people who, as a matter of principle, are working to make it as easy as possible to access mate- rial free via the Internet, regardless of any technological or legal obstacles that are put in their way. Nor is this just about the music industry. Piracy is spreading to
  • 446. Lessons from theory and practice 433 any industry whose output is in, or can be turned into, a digital format whether this be records, films, television or books. Chapter 4 discussed the implications of com- plexity theories for organisations. One of the key arguments of complexity theorists is that even small changes can transform an entire system, overthrowing existing constraints and laws and creating new ones. It could well be that the case of Shawn Fanning and the music industry is an example of complexity theories in action. 3 Managerial behaviour. Music industry executives tend to be powerful individuals who have risen through the creative side of the industry and who take a hands-on role in running their companies. They know the music industry inside out, and follow tried-and-tested approaches to developing, promoting and taking profit from artists. The situation created by Fanning’s Napster was beyond their experi- ence. Their response was reactive rather than strategic. They sought to use the courts to stifle Napster and similar bodies, whilst at the same time attempting to turn the Napster approach into a subscription-based service. Neither initiative appears to have stemmed the rising tide of piracy. 4 Change management. This case study does not deal with change management per se. So far, however, the changes that have taken place appear to be in the hands of the lawyers and senior managers, and have revolved around stifling and copying rather than seeking wider organisational involvement and looking for more cre- ative solutions. 5 Planned, Emergent or combined change. Despite the fact that the music industry is based on a creative process, much of its past ways of working have tended towards the dictatorial and formulaic and have been designed to ensure that the big compa- nies retain control over the artists. The P2P revolution has created an unprecedented level of uncertainty in the industry, however. It is unlikely that the changes that this is bringing about can be managed by a few senior managers trying to keep control of the situation. Therefore, the reshaping of the music indus- try is likely to arise from a host of local responses and initiatives, many of which may come from smaller and more entrepreneurial companies rather than the big labels. Indeed, it is not yet clear that the big labels can survive in the new P2P era, at least in their present form. 6 Objectives. So far, the main objective of the big labels has remained unchanged; they want to retain their dominant position in the industry. They have attempted both to stop and to copy the Napster model. In essence, they have tried to change the behaviour of those who seek to promote a more community-based approach to the Internet by threatening them with the law. In this, they have signally failed. The technology that enables piracy now seems to be built into most computers or can be purchased or downloaded free from the Internet. Nor have they succeeded in their attempt to get consumers to change their behaviour and pay for music through Internet subscription services rather than downloading it free. Once people discover that they can easily get something for free, it is very difficult to persuade them that they should pay for it. Rather than tinkering round the edges, the big labels need to ask themselves some very awkward questions about the nature of the music industry in future and their role within it.
  • 447. 434 Chapter 14 · Managing change Case Study 2: Marconi 1 Strategy. Though on the face of it, Marconi’s strategy was the product of its CEO, George Simpson, and Finance Director, John Mayo, its origins lay in the general belief by institutional investors in the City of London that GEC, as it was, had missed the Internet/telecoms boat and needed to swim very fast to catch up. It is not clear whether either Simpson or Mayo ever questioned this belief. It is clear, however, that their entire strategy for selling off most of GEC and going on a tele- coms buying spree was based on it. 2 Constraints. It could be argued that the view of investors that GEC was no longer viable was a constraint on the strategy that Simpson and Mayo could adopt. Certainly, they chose to align GEC/Marconi’s strategy with this view. There were other constraints on the viability of such a strategy that they appeared to ignore, however. Firstly, Marconi’s senior managers were seeking to create a global Internet/telecoms equipment company rapidly by buying up other companies rather than by growing one organically. This is a very risky strategy which has seldom been successful in any industry. Secondly, Marconi had put itself in a position where it had to buy fast in a booming market, even though questions were already being asked about the very high price and viability of dotcom-orientated compa- nies. Lastly, it was buying into a sector where the competition was stiff and the main customers, the big telecoms companies, were few. Any downturn in the market could and did prove disastrous. However, even when its competitors were taking action to tackle the prospect of falling demand, Marconi ignored the indica- tions and continued to act on the assumption that demand for the products and services of its new businesses would grow and grow. 3 Managerial behaviour. The strategy was developed by Simpson and Mayo, who took a very hands-on role in selling the various parts of GEC and stitching together the new parts of Marconi. In doing so, they were hailed almost as heroes by insti- tutional investors and commentators. What criticism Marconi did receive appeared to come from the departing ‘old guard’ of GEC, whose comments could be inter- preted as sour grapes. 4 Change management. The main changes that took place in transforming GEC into Marconi were the selling and buying of companies. In both cases, because of the pace at which the new Marconi was being created, the transactions seemed almost to take the form of an auction rather than the sort of slow and deliberate evaluation that the old GEC was used to. To create Marconi, it was necessary to dispose of most of the old GEC, which did not fit with the new Internet/telecoms world. Therefore, it was a case of selling the old businesses for whatever was the best price that could be obtained in order to raise the money to buy new businesses with. The same applied when buying. In a booming market, Marconi had to pay the going price if it wanted a slice of the action. In the 1970s, when OPEC controlled the world’s supply of oil, the then Head of OPEC, Sheihk Yamani, was asked what was a fair price for oil, his response was, ‘Anything you can get plus 10%’. This seemed to be the attitude of those who owned the companies Marconi was seeking to purchase. Having set itself on this path, however, Marconi’s management clearly felt that it had no option but to buy at the going rate. Managers appeared to be the prisoners of investors and lenders who expected, indeed, demanded, that the company behave in
  • 448. Lessons from theory and practice 435 this fashion. Indeed, the more money Marconi borrowed and spent, the higher its standing and share price rose, and the more praise its management received. 5 Planned, Emergent or combined change. This case study does not focus on change management per se, but on the strategic issues involved in dismantling one company and building another. Simpson and Mayo had a vision of turning GEC into a high technology Internet/telecoms equipment company. They clearly had a view of what bits of GEC they needed to sell off (most of it) and what parts of the telecoms sector they needed to buy. Though it could be argued that both sales and purchases were under- taken on an opportunistic basis, the strategy itself never wavered or was changed, until it failed spectacularly. Therefore, Marconi’s approach to change as such can best be described as a top-down structural transformation carried out in a directive manner. 6 Objectives. The intention of Marconi’s strategy was to create an entirely new com- pany. Indeed, it seemed to go beyond the concept of transformation, because that implies that the old organisation is in some ways being reinvigorated and refo- cused. Marconi set out to sell off the old GEC and to purchase a new organisation with new staff, new products and markets, and new customers. Case Study 3: Oticon 1 Strategy. The company’s strategy was developed and driven by one person (its then President, Lars Kolind). He created a vision of a service-based organisation and pursued it by, in effect, razing the existing organisation to the ground and starting again. 2 Constraints. Though there is no clear evidence that existing constraints influenced the strategy, the new flexible structure that emerged was certainly compatible with Danish norms or expectations regarding job design. As far as industry norms were concerned, Oticon was at a disadvantage in that competition was based on the technical sophistication of products, and Oticon’s capability in this respect was falling behind that of other companies. To counter this disadvantage, Oticon chose to rewrite the rules of competition in the industry by moving the focus from tech- nology to service. The business environment in which Oticon operated had been and still remained very turbulent. Indeed, by attempting to change the basis of competition in the industry, Oticon can be seen as adding to rather than reducing uncertainty. In terms of organisation characteristics, Lars Kolind was again attempting to rewrite the rule book. The existing structure was demolished, its cul- ture was challenged and the style of management changed drastically. Kolind appeared to face very little overt resistance but, in introducing the changes initially, and taking corrective action when he thought they were failing, he did use the power of his position in a very directive and, perhaps, coercive manner. 3 Managerial behaviour. The strategy was developed by Oticon’s President and, though he explained it to other managers, it is clear that he neither expected nor wanted them to modify it. Their role was to support him and to help sell and implement the idea, rather than necessarily to be part of the process of its develop- ment. However, in helping to sell the new vision to the rest of the organisation, both managers and staff changed their views of how the company should be run and their roles in it. As a more cooperative atmosphere developed in the company, managers moved away from their previous directive style of management and developed a more facilitative role.
  • 449. 436 Chapter 14 · Managing change 4 Change management. The approach taken was to prepare the ground carefully but then to change overnight. This part of the approach was, in effect, to use Kanter et al’s (1992) phrase, a Bold Stroke. Employees left the company and its old systems and practices on a Friday night, and on Monday walked into a completely different organisation. What followed, however, was months of chaos as everyone tried to work out what they were doing and how they should do it. Nor did Kolind appear to wish for more settled internal arrangements to prevail. When he felt that the company was in danger of, as Kurt Lewin would say, refreezing, he ‘exploded’ the organisation again. 5 Planned, Emergent or combined change. Though we can see some evidence of Planned change in the way that employees were involved in projects, it was the Emergent approach to change that was dominant. Lars Kolind had a vision of the organisation’s future but the actual details and nature of the change process emerged as the company struggled to implement it. Also, change was open-ended and, given the nature of the new organisation, it is not clear if it will ever settle down into a fixed state. There is also a great emphasis on collective learning, and using this learning to keep the company on the move. To use Kanter et al’s (1992) analogy, again, it was a Bold Stroke followed by a Long March. 6 Objectives. The aim was no less than a total transformation or reinvention of the organisation in all its aspects, and to move from being a traditionally-structured technology-driven organisation to a learning organisation focused on service deliv- ery. However, central to this was the need to change the attitudes and behaviour of individuals and groups. Case Study 4: The Public Power Corporation (PPC) of Greece 1 Strategy. The PPC’s strategy was created by its Board of Directors in response to the Greek government’s decision to privatise it and in the light of the European Union Electricity Directive. 2 Constraints. The main constraint under which the PPC developed and is imple- menting its strategy is the EU Electricity Directive. This to a large extent determines or constrains the PPC’s structure and behaviour. However, the PPC has sought to mitigate this constraint by moving into the electricity markets in other countries and by linking up with other providers so that it is not dependent solely on the Greek market or its own lack of experience of operating as a commercial concern. However, where this international expansion takes it into other EU coun- tries, it will still have to abide by EU regulations. Also, the international energy market is very competitive. It is also attempting to move into the telecoms business, but this is also regulated by the EU and is even more competitive than the electric- ity market. 3 Managerial behaviour. The PPC’s Board seems to have taken the lead in determin- ing its strategy. However, it was and still is predominantly owned by the Greek government. The Board had to produce a strategy that, on the one hand, met EU and Greek government competition laws, and on the other does not threaten the government’s income from the PPC nor its eventual price when it is sold. 4 Change management. The PPC says that it wants to create a participative learning organisation based on a committed and skilled workforce imbued with an entre-
  • 450. Lessons from theory and practice 437 preneurial culture. However, the changes which have taken place so far appear to be structural, both in terms of the reorganisation of the company into a number of divisions and the decision to reduce the size of the workforce by some 20 per cent. These changes appear to have been decided upon and implemented with little or no consultation with the workforce or their representatives. If they are to lead to the sort of organisation the PPC says it wants, then this ‘Bold Stroke’ approach will need to be succeeded by a ‘Long March’. 5 Planned, Emergent or combined change. The PPC has laid out a clear strategy for its future. Its plan is to turn the PPC from a bureaucratic public service into a pri- vate, market-orientated company. So far, this plan has been implemented by imposition rather than cooperation. If the plan is to be realised, however, the PPC needs to change the behaviour of its employees in order to create a more participa- tive and proactive organisation. Therefore, imposition will need to give way to participation if the necessary behavioural changes are to be achieved. Given the various obstacles and constraints it faces, not least the twin threats of regulation and competition, future changes and developments at the PPC are more likely to be based on an Emergent than a Planned approach to change. 6 Objectives. The PPC’s main objective appears to be to reinvent itself as a highly competitive private sector electricity and telecoms company. This will require it both to restructure itself, which to a large extent it has achieved, and to develop a more entrepreneurial culture, which still seems some way off. The measure of suc- cess will be whether or not it can hang onto its dominant position in the Greek electricity market. However, this is where there seems to be a contradiction at the heart of the PPC’s objectives. If it is successful in holding on to its market share, then the various competition regulators at national and EU levels will step in to change the rules of the game to reduce the PPC’s dominance, probably by breaking up the business. If on the other hand the PPC is not successful, it is likely that it will have to sell off the less successful parts of the business, thus breaking itself up. Therefore, despite its objective of holding onto a unified electricity business, it is not clear how it can do this given the constraints it faces. Case Study 5: Volvo 1 Strategy. Volvo’s strategy for Job Design was to reorganise its plants to eliminate the moving assembly line, and replace it with group-based assembly. The strategy originated from a need both to reduce labour turnover and absenteeism, and to respond to societal pressures to eliminate dehumanised forms of work organisa- tion. However, even when these were no longer an issue, the company continued to pursue the move away from assembly-line working. The strategy was driven, and continuity provided, by Volvo’s long-serving Chief Executive, Pehr Gyllenhammar. However, even after his somewhat acrimonious departure, the commitment to Job Design survived, though it is difficult to imagine that, had he stayed, Gyllenhammar would have sold Volvo’s car business to Ford with all the risks to the Job Design strategy that this implies. 2 Constraints. Though public opinion in Sweden favoured a move away from the assembly line, it was and remains the car industry’s established mode of operation. Therefore, Volvo was clearly aiming to change industry constraints whilst aligning
  • 451. 438 Chapter 14 · Managing change itself with societal ones. From the perspective of the business environment, Volvo’s move to ‘humanise’ car assembly appeared to bring them much valuable publicity and its approach to building cars was seen as a selling point. In the early years, however, internal constraints and resistance (both attitudinal and technical) acted to limit the radicalness of the initiative. One point to note is that, at least in the early years, there was perhaps more open suspicion and resistance from Volvo’s trade unions than from its managers. 3 Managerial behaviour. All the change projects involving Job Design were driven by senior managers. Outside experts in Job Design were also involved at the planning stage, and so were trade union representatives, whose enthusiasm grew over the years. Nevertheless, the outcome of successive waves of Job Design was to devolve power from Volvo’s headquarters to the individual plants, and in the plants to give the shopfloor teams more authority and control. This led to the elimination of middle management layers, the creation of a flatter organisation structure and the progressive development of a much more empowered workforce. 4 Change management. Each project was planned in great detail in advance. This involved not only managers, but also trade union representatives and outside experts. Once in operation, however, the actual arrangements were modified, in order, so it was argued, to meet business needs and cope with operational difficul- ties. In most cases these modifications appear to have reduced the ability of workers to set their own pace of work and to expand their range of activities. Nevertheless, whether in new or existing plants, each change project built on the last, and each project resulted in greater levels of shopfloor control. Central to this was organisational learning: the ability collectively to capture and transmit, from one plant to another, the experience of making radical Job Design work. It is also clear that with each project, the confidence of managers, workers and trade unions that Job Design could work grew. 5 Planned, Emergent or combined change. Though Volvo’s strategy for Job Design was driven by a clear intent, it was implemented on different sites and in different ways over a considerable period of time using a combination of approaches. Though driven from the top, Volvo sought to involve staff and managers in devel- oping, implementing and amending projects. In terms of the individual Job Design projects, the Volvo case shows that even where changes are planned in detail in advance, the final outcome emerges through a process of iteration, modification and negotiation once the new practices are put into operation. Therefore, it is this combination of Planned and Emergent change, linked to willingness by senior man- agers to experiment and an organisational commitment to continuous improvement for over 30 years, which makes the Volvo experience unique. 6 Objectives. The objectives were twofold. The first was financial – to reduce absen- teeism and labour turnover. The second was social – to humanise the assembly of cars. These were pursued through a combination of structural and behavioural change, which led to major changes both in the overall shape of the company and in the attitudes of individuals and groups. However, the social objectives were modified, though not superseded, by the need for the company to operate prof- itably in a highly competitive market. Despite the takeover of Volvo’s car division by Ford, the company still appears to be committed to continuing with its human- centred approach to car assembly.
  • 452. Lessons from theory and practice 439 Case Study 6: XYZ Construction 1 Strategy. It can be seen that XYZ had a relatively clear and consistent strategy that aimed to transform the culture, practices and structure of the company. The strategy began with and was driven by the new Managing Director. He had come with a remit for change from XYZ’s parent company, which believed that it had fallen behind the competition and needed to be reinvigorated if it was to survive. In devel- oping the strategy, the Managing Director sought to expand the senior management team, and win them and the rest of the organisation over to the need for and type of change. In this and the strategy itself, he appears to have been very successful. 2 Constraints. The new Managing Director had to contend with two opposing sets of constraints. On the one hand, the parent company wanted to see changes that would create a more cooperative and team-based organisation that could cope better with the changing nature of the construction industry. On the other hand, XYZ was a hierarchical company where the previous Managing Director had behaved in a dictatorial and heavy-handed fashion that inhibited challenge, cooper- ation and change. Also, though the construction industry was attempting to change, it was still riddled with conflict and mistrust. Therefore, the new Managing Director had to change the company quickly enough to satisfy the parent company but not so fast that he failed to win over staff, managers and customers. 3 Managerial behaviour. The strategy and changes were led by the new Managing Director, but he was careful from the start to involve managers and staff in identi- fying and implementing the changes, thus winning them over. The various changes shifted the balance of power in the company and, in particular, the organisational restructuring reduced the influence and standing of the Regional Managers and some directors. The Managing Director expected that there would be some resist- ance to the changes from these and others who might lose out. However, his clear support for the changes, the widespread recognition of the need for change, and an open and transparent change process where it was difficult for individuals to block change, prevented any major obstructions occurring. 4 Change management. Though change was driven from the top, increasing numbers of managers and staff became involved in the process of identifying and implementing change. In the more open-ended change projects, the responsibility for maintaining the momentum was given to staff and lower-level managers. This is not to say that senior managers did not take an interest, or did not give the process a shove or tweak if they thought it was necessary. The Managing Director recognised that he could not be everywhere at once, however, and that if changes were to become embedded within the organisation, they had to be owned by those concerned. 5 Planned, Emergent or combined change. Overall, XYZ’s approach to change can be characterised as Emergent and in many cases experimental. A series of relatively small changes were made that, taken collectively over a period of time, led to a sig- nificant change in the culture and operations of XYZ. However, when it came to the change of organisational structure, this appeared to be conducted in a more Planned fashion. This shows, as argued elsewhere in this book, that organisations tend to use a variety of approaches to change depending on what is to be changed and the circumstances of the organisation at the time. In this instance, within a pre- dominantly emergent strategy, we can see many instances of Emergent change and a significant example of Planned change.
  • 453. 440 Chapter 14 · Managing change 6 Objectives. The objective of the new Managing Director was to reinvigorate the company by changing its culture, structure and practices. His first priority, how- ever, was to change the behaviour of managers and staff and to develop their competence. He was also keenly aware that in doing this he must also improve the performance of the company. Therefore, most of the changes which took place had two equal objectives: one was to change how managers and staff worked with and behaved towards each other and the company’s customers; the other was to improve the performance of staff and managers and so offer a better service to cus- tomers and achieve an overall improvement to XYZ’s performance. Only when the cultural and behavioural changes were embedded in the organisation, and its per- formance improved, did the Managing Director begin to focus on the overall structure of the company. He saw these structural changes as an important element in facilitating the effective working of the company and removing barriers to team- working. However, he also felt that without the prior cultural and behavioural changes, the structural changes would have little impact. Case Study 7: GK Printers 1 Strategy. GK’s strategy tended to develop in response to potential crises, or latterly opportunities, rather than being proactively led by its management. The company, mainly on a reactive basis, appears to be reinventing itself as a modern, service-ori- entated company by aligning its internal arrangements with the changing needs of its environment and customers. However, this was not and is not part of any con- scious plan or vision; rather it is being revealed by the pattern of actions the organisation has taken over the last decade. Originally, this pattern began to emerge through technological changes within GK, but over time it has become more pronounced by attitudinal and behavioural change, especially among man- agers. 2 Constraints. External considerations, such as societal pressures, business environ- ment and industry-specific factors did not appear to constrain the freedom of action of GK’s managers. Indeed, the turbulence and increased competition in the external environment seemed to assist GK with its internal changes. GK’s main constraints were internal and related to existing attitudes, technology and prac- tices. Increasingly, however, as the need arose to develop a more collective leadership, it was the directive style of the Managing Director that was seen as a key constraint on progress. Nevertheless, his directive style, and his tendency to play managers off against each other, gradually changed. 3 Managerial behaviour. Though originally it was the Managing Director who was responsible for strategy development and change, it became clear over time that a more collective and cooperative style of management was required if GK was to overcome the obstacles it faced and seize the opportunities on offer. Therefore, gradually, all the company’s managers became involved in and took responsibility for strategy development, and they even devolved responsibility for some change projects to staff in the areas concerned. 4 Change management. A mixture of approaches to managing change projects can be seen at GK. In most instances, managers took responsibility for identifying the need for change, and in some instances actually directed it. However, with the comput-
  • 454. Lessons from theory and practice 441 erised business system, for example, the company left selection and implementation to the staff concerned. Also, in terms of the website business, GK allowed a staff member who was a web enthusiast to develop this area. This demonstrates how far the company has progressed in developing a climate of trust and involvement. 5 Planned, Emergent or combined change. A mixture of both Planned and Emergent approaches can be seen at GK. In the early days, the company tried to adopt a more Planned approach, especially when introducing new technology. However, new developments or improvements to existing arrangements have tended to be both open-ended and reactive in nature. Also, the Managing Director has tended to oscillate between a directive and a participative approach to change. Overall the pattern of change at GK appears to be reactive and Emergent, but within this pat- tern there have been certain proactive and Planned elements. Therefore, change at GK can be characterised as ad hoc, reactive or opportunistic rather than being part of any consistent approach. 6 Objectives. The original aim was to survive. To this end, GK changed its technol- ogy and image in order to improve its competitiveness. As events unfolded, however, it became clear that the key to competing effectively was to change people’s attitudes and behaviour, especially at management level, and create a greater commitment to teamwork and collective decision-making. This has created a climate where managers and staff are more receptive to new ideas, and respon- sive to new opportunities, than before. Therefore, a pattern of change can be seen at GK, though it is by no means a well-articulated or even conscious one, which seems to be leading in the direction of organisational transformation. Case Study 8: Rover–TRW 1 Strategy. This particular initiative between Rover and TRW did not form part of a strategic plan, or contribute towards a vision. In essence, the objective was an operational one, not a strategic one: to outsource the assembly of suspension mod- ules owing to lack of space. At TRW, those in charge focused on the steps necessary to have the new operation up and running on time, and able to meet Rover’s requirements. There was a strategic element to this initiative in that both organisations wished to find out more about modular assembly, but this sub-objec- tive very quickly vanished from sight. 2 Constraints. The main constraints tended to be attitudinal and organisational. To be successful, TRW needed to ensure that staff at the Frankley site had the motiva- tion, initiative and ability to develop a new operation remote from the main TRW site in Wales. There was also a requirement to build a good working relationship with Rover’s assembly line personnel. In organisational terms, a new factory and workforce needed to be established, new equipment installed, new practices learned and new skills developed. At an operational level, both in terms of the rela- tionship and the performance, this worked better than anyone had anticipated. However, the persistence of old, less trusting relationships at a more senior level between the two companies did threaten the gains made at the operational level. 3 Managerial behaviour. At Frankley, supported by their superiors within TRW, man- agers created a genuine atmosphere of cooperation that allowed staff to work closely with their counterparts at Rover, and to improve their performance continuously. At
  • 455. 442 Chapter 14 · Managing change a more senior level, though, a less cooperative and more guarded atmosphere pre- vailed between Rover and TRW. 4 Change management. Frankley was created from scratch and, once established, was committed to continuously improving and developing its performance. From the outset, and in contrast to established practices within TRW, the Frankley man- agement sought to ensure that everyone was involved in and could contribute to change. It was only a small organisation, with some 30 to 40 staff initially, and this obviously made it easier to create a team spirit. Nevertheless, the key was the atti- tude of the management at Frankley, who set out to involve all staff. 5 Planned, Emergent or combined change. This was clearly a case where one could see both Emergent and Planned change going on side by side. Originally, there was a clear set of objectives that Frankley had to achieve and a fixed timescale within which to achieve them; these revolved around setting up the new plant and begin- ning deliveries to Rover. Beyond that, though, was a process of learning, experimentation and development that was central to the major performance improvements made by Frankley. 6 Objectives. The original objectives were basically structural and revolved around establishing a new assembly operation capable of meeting Rover’s requirements. Though these objectives were met, staff at the Frankley site did not rest on their laurels. Instead, motivated by the desire to improve the service to Rover, they set themselves, and achieved, ever more ambitious targets. Case Study 9: Speedy Stationers 1 Strategy. To the extent that it had any conscious vision or strategy, it tended to be driven by opportunism or force of events rather than necessarily being proactive. Each time a major threat or opportunity arose, Speedy examined its options and chose the one that appeared to be more favourable to the survival and development of its business. Also, as the Direct Sales initiative showed, ‘gut instinct’ rather than rational analysis tended to drive decisions. 2 Constraints. The degree to which external or internal factors affected Speedy’s strat- egy is unclear. Certainly, the company did not appear to have faced great restrictions on its freedom of manoeuvre. Nor, except in one case, did it appear to have sought to change or influence the constraints it faced. The big exception is its attempt to develop a partnership approach to customers. In this instance it was attempting to change industry practice. Though this met with some resistance internally, it also had to overcome a large degree of scepticism in the customer concerned. 3 Managerial behaviour. It was Speedy’s Managing Director who originally devel- oped its partnership strategy. Subsequently, and rather reluctantly, he handed responsibility for its continuing development to another director of the company, who established his own plans and then convinced his colleagues, and Speedy’s cus- tomers, to accept them. Later, however, when it came to convincing his fellow directors that they should expand direct sales nationally, he was less successful and even the project’s original champion, the Managing Director, rejected the sugges- tion. Therefore, overall, though Speedy wanted to promote more cooperative relationships with customers, this does not appear to signal any company-wide move towards more cooperative working within Speedy.
  • 456. Lessons from theory and practice 443 4 Change management. The actual implementation of the partnership approach required not only the involvement of Speedy’s own staff, but also, as the UTL instance shows, cooperation from its customers’ managers and staff at all levels. Though there was resistance to the partnership approach in both Speedy and UTL, the commitment of senior managers, the involvement of staff, and some early gains, helped to overcome this. 5 Planned, Emergent or combined change. The development of the strategy itself, the partnership with UTL, and the further expansion of this approach, constituted an open-ended process. Initial implementation of the partnership was carefully thought through, but from then on the form and content of the changes tended to be more ad hoc and reactive. For this reason, the process of change can be seen to be Emergent. 6 Objectives. The objective of Speedy’s strategy was to grow its business by develop- ing a new type of relationship with its customers. Implementing this led to changes within both Speedy, though these tended to be limited to its Direct Sales Division, and within the ten customers with whom it developed partnerships. Though some of these changes were structural, most changes concerned the attitudes and behav- iour of individuals and groups, especially in terms of greater openness and trust. There is little evidence, however, that these have led to any wider cultural changes within Speedy. Case Study 10: PoliceCo 1 Strategy. It does not appear that PoliceCo had a strategy for outsourcing or thought it necessary to have one. Rather, successive governments had a strategy for improving public services by compelling them to adopt the practices, and use the services, of the private sector. Government legislation, by introducing Compulsory Competitive Tendering (CCT) and Best Value, compelled PoliceCo to market-test its activities by putting them out for tender. The way activities were selected and the process of asking for tenders and selecting contractors was laid down by gov- ernment regulations, and, to an extent, European Union legislation. Therefore, for PoliceCo, outsourcing was an administrative issue rather than a strategic choice. 2 Constraints. The main constraint faced by PoliceCo was government legislation. This compelled them to act in a certain fashion, i.e. to outsource, whether they liked it or not. A secondary constraint was the risk-aversive culture that appears to pervade the public sector in terms of awarding contracts and working with suppli- ers. For example, PoliceCo could have packaged all its cleaning needs into one contract and awarded them to one contractor. However, it felt that by splitting them it would reduce risk, and better demonstrate, through competition between the contractors, that value for money was being achieved. For similar reasons, it chose to go through the full re-tendering process when the contracts came up for renewal, even though they might have been able to use a more truncated process designed to test whether the existing contractor was still offering Best Value. The fact that they did not do either of these is related to the nature of public scrutiny under which they operate. They can be held to account locally, nationally and, most worryingly for them, through the media. Decisions in terms of the nature, duration and renewal of contracts, which would be unremarkable were they taken
  • 457. 444 Chapter 14 · Managing change by a private organisation, can be labelled as incompetence or even potentially cor- rupt if taken by a public service. 3 Managerial behaviour. The role of senior managers in PoliceCo was simply to ensure that the legislation was complied with. The actual execution of the legisla- tion, the operation of CCT and later Best Value, became a lower-level administrative task. 4 Change management. As mentioned, outsourcing became treated as an administra- tive, almost routine process in PoliceCo. Where consultations needed to be conducted with staff and trade unions, i.e. when jobs as well as activities were being outsourced, PoliceCo tried to be as helpful as it could in smoothing the tran- sition process and ensuring that staff retained their jobs under the new regime. However, where it was shown that an activity could be provided cheaper from out- side than inside, it was outsourced, and that decision was not negotiable. 5 Planned, Emergent or combined change. It is difficult to characterise outsourcing at PoliceCo as either Planned or Emergent. It could be argued that because it was responding to outside changes on an incremental basis, i.e. activity by activity, there was an emergent aspect to it. However, it might be better described as a process of administrative coercion. 6 Objectives. PoliceCo’s main objective was to comply with the legislation in as effi- cient and painless fashion as possible. Though outsourcing has led to significant behavioural changes in private sector organisations, as far as PoliceCo was con- cerned, the main changes were structural. Activities which had previously been performed in-house were transferred to outside bodies, leaving the rest of the organisation unaffected and free to continue with their own activities. Having examined the ten case studies, we are now in a position to discuss the implica- tions of the above for the way in which strategy and change are conceived and executed. Before doing so, however, there are two interrelated issues raised by the case studies that need to be clarified. These concern the degree to which employee involvement is a neces- sary factor in successful change, and whether or not wholesale organisational transformation, including attitudes and behaviour, can be achieved rapidly. Employee involvement and organisational transformation The received wisdom in the literature on organisational change is that employee involvement is crucial to successful change, especially in situations that require attitu- dinal and cultural change. However, both the Planned and Emergent perspectives stress that this is a slow, learning process. For this reason, it is argued, rapid organisa- tional transformations can only be successful if they focus on structural as averse to cultural change. This is a conclusion that can certainly be drawn from the literature on both Planned and Emergent change. It is also something stressed by Kanter et al (1992), who believe that an organisation’s structure can be changed relatively quickly through a ‘Bold Stroke’ but that cultural change can only be achieved by a ‘Long March’ requiring extensive participation over time. The Oticon study in Chapter 11 appears to offer a different perspective on culture change, however. This was a case of rapid organisational transformation, which was based on a vision imposed on the
  • 458. Employee involvement and organisational transformation 445 company in a mainly directive fashion by its CEO, but which led to a widespread change of attitudes and behaviours in the company. This change in organisational cul- ture both preceded and paved the way for a more participative approach to the planning, execution and subsequent development of the vision. It was the CEO’s imposed vision that appeared to bring about the rapid change in attitudes across the company. The change in attitudes facilitated a more Planned approach that was used to achieve the rapid structural change. In turn, this was followed by a period of Emergent change where staff had to develop and adjust to new ways of working with, and behaving towards, each other. Though this shows how Planned and Emergent change can be used in combination, it still leaves the question of how the change in organisational culture that preceded these phases at Oticon was achieved rapidly and without the full cooperation and involvement of the people concerned. In addressing this question, the work of Schmuck and Miles (1971) is particularly useful. They argue that the level of involvement required in any change project is dependent on the impact of the change on the people concerned. Huse (1980) developed this distinction further. Building on earlier work by Harrison (1970), Huse categorised change interventions along a continuum based on the ‘depth’ of intervention, ranging from the ‘shallow level’ to the ‘deepest level’. The greater the depth of the intervention, Huse argues, the more it becomes concerned with the psychological make-up and personality of the individual, and the greater the need for the full involvement of individuals if they are to accept the changes. The argument, therefore, is that it is necessary to link levels of involvement to the types of change proposed. The key is that the greater the effect on the individual, especially in terms of psychological constructs and values, the deeper the level of involvement required if successful behaviour change is to be achieved. This appears to explain why in some cases, such as the PPC and PoliceCo, involvement can be dis- pensed with or minimised, whilst in other cases, such as XYZ, it is vital. It does not, though, explain why major and rapid attitudinal changes at Oticon were successful without a great deal of initial involvement. In seeking to understand and explain such apparent contradictions, Burnes and James (1995) draw on the theory of cognitive dissonance. This theory states that people try to be consistent in both their attitudes and behaviour. When they sense an inconsis- tency either between two or more attitudes or between their attitudes and behaviour, people experience dissonance; that is, they feel frustrated and uncomfortable with the situation, sometimes extremely so (Jones, 1990). Therefore, individuals will seek a stable state where there is minimum dissonance. This latter point is important. It is unlikely that dissonance can ever be totally avoided, but where the elements creating the dissonance are relatively unimportant, the pressure to correct them will be low. Where the issues involved are perceived by the individual to be significant, however, the pres- ence of such dissonance will motivate the person concerned to try to reduce the dissonance and achieve consonance, by changing either their attitudes or behaviour to bring them into line (Robbins, 1986; Smith et al, 1982). This may involve a process of cognitive restructuring, which is unlikely to be free from difficulties for the individual concerned (Mahoney, 1974). However, as Festinger (1957), one of the originators of the concept, pointed out, in addition to trying to reduce the dissonance, people will actively avoid situations and information that would be likely to increase the dissonance. Since the emergence of the theory of cognitive dissonance in the 1950s, it has been developed and refined (see Cooper and Fazio, 1984; Fazio et al, 1977; Jones, 1990).
  • 459. 446 Chapter 14 · Managing change Applying principles of cognitive dissonance to organisational change, it can be seen that, if an organisation embarks on a change project that is decisively out of step with the attitudes of those concerned, it will meet with resistance unless those concerned change their attitudes. On the other hand, where the level of dissonance occasioned by proposed changes is low, attitudinal adjustments will be minor and potential resist- ance negligible. Therefore, the level and type of involvement should be geared to the level of dissonance that any proposed changes may provoke. Up to this point, cognitive dissonance supports the work of Schmuck and Miles (1971) and Huse (1980). However, if we apply the theory to situations, such as Oticon’s, where old certainties proved inadequate and the very survival of the organi- sation is at stake, a different picture emerges. The crisis (or potential crisis) raises the level of dissonance in the organisation as it becomes apparent that existing practices are no longer viable and change is required. Not only does this make individuals and groups more receptive to radical change, but, in addition, change can be one of the main ways of reducing dissonance. At Oticon, fundamental attitudinal change was achieved relatively quickly because management and employees recognised the need for major change and saw the new vision as their only hope for the company’s sur- vival. Arguably, this was the reason why the new vision met with so little resistance at Marconi. Therefore, in such instances, the dissonance is occasioned not by the change, but by the condition of the organisation leading up to the change. This per- spective also helps to explain cases, such as Rover–TRW, GK and UTL, where, initially, managers and others were resistant to changes or were only prepared to move slowly. In such situations, the absence of a sense of deep crisis prevents existing certainties being successfully challenged. Only when more severe threats arise are these old certainties challenged, and those involved become more prepared to accept and promote radical solutions that had previously been rejected. A similar and complementary explanation for the involvement or non-involvement of employees is offered by the notion of the psychological contract. Though this con- cept has been around since the 1950s (see for example Argyris, 1960), it was only in the 1980s and 1990s that it became widely used by organisation theorists, especially in America (Arnold et al, 1998). As Schein (1988: 22–3) explains: The notion of a psychological contract implies that there is an unwritten set of expectations operating at all times between every member of an organization and the various managers and others in that organization. … The psychological contract implies further that each role player, that is, employee, also has expectations about such things as salary or pay rate, working hours, benefits and privileges … and so on. Many of these expectations are implicit and involve the person’s sense of dignity and worth. … Some of the strongest feelings lead- ing to labor unrest, strikes, and employee turnover have to do with violations of these aspects of the psychological contract, even though the public negotiations are often over the more explicit issues of pay, working hours, job security, and so on. We can certainly see why the employees of the PPC, who had joined a public sector organisation with a public sector ethos, might feel as though their psychological con- tract had been violated when they were suddenly told they were to be transferred to the private sector – particularly as the change represented a considerable threat to their job security. However, why was there not a more adverse reaction from XYZ’s
  • 460. Conclusions: merging theory and practice 447 staff or GK’s employees? The reason offered by proponents of the psychological con- tract would be that they recognised the need and justification for the changes and therefore the legitimacy of the need to change their psychological contracts. Consequently, in understanding the employee involvement/non-involvement ques- tion, we need to draw on the complementary ideas of levels of involvement, cognitive dissonance and the psychological contract. What these show us is that in many cases where change is proposed, it is necessary to convince staff, through a process of con- structive engagement, of the need to challenge their existing beliefs, behaviours and expectations and to renegotiate their ‘contracts’ with the organisation. However, this questioning of beliefs, behaviours and expectations can also arise in situations of crisis without the need for elaborate involvement techniques, because those concerned can see that the old attitudes and ways of behaving have had their day and, unless major or radical changes are made, their jobs or even the entire organisation may cease to exist. Having addressed the issue of employee involvement and organisational transfor- mation, we can now move on to present the conclusions drawn from the analysis of the case studies. Conclusions: merging theory and practice One should be wary of drawing any firm conclusions about either theory or practice from such a small number of case studies. However, the case studies presented in Part 3 do illustrate a range of change situations, are rich in detail, cover an extended time period, and do raise some important issues that it would be unwise to ignore. These are as follows. Strategy Though in some cases this was driven by a clear vision, more often it was triggered by perceived opportunities, problems or crises. The actual form of each organisation’s strategy emerged from attempts to pursue visions or respond to events. In addition, we should note that there were instances where senior managers, individually or collec- tively, tried to reinvent their organisations. Whether we refer to this as creating a vision, as the Japanese might, or trying to impose a new reality, as the postmodernists might, is perhaps irrelevant. What is important is that some managers, as the Oticon and XYZ cases show, do have the will and the ability to reshape their organisations and to over- come or modify the constraints they face. However, it is also important to note, as the Marconi example shows, that a vision by itself is not enough. The vision needs to be achievable, though managerial judgement and competence are required to construct an achievable vision. Managers also need the skills to implement the vision and, most importantly, to ensure that the constraints they face can be modified or overcome. Constraints As one might expect, the case studies reveal that external and internal constraints do affect the degree of choice managers have or perceive themselves to have. In addition, the case studies show that managers respond to constraints in a variety of ways. In some instances, such as the PPC and PoliceCo, managers take action to change their organisations to accommodate external demands and constraints. In other instances,
  • 461. 448 Chapter 14 · Managing change such as Volvo, Marconi, XYZ and Speedy, managers sought to influence or change the constraints they faced to suit their personal preferences and beliefs. The case stud- ies also show that whilst some constraints appear to be amenable to change or influence, others, such as those faced by Marconi and PoliceCo, were much more resistant. Interestingly, in terms of internal constraints, despite what many writers believed, overtly political behaviour did not feature in most of the case studies, though there were some power struggles and some political battles. There are a number of possible explanations as to why politics did not appear to play a more sig- nificant role in most of these cases. These include the presence of dominant individuals or coalitions, the widely-recognised need for change in some of the organ- isations, which gave legitimacy to managerial initiatives, and the openness and transparency of the change process, which was especially the case in XYZ. Managerial behaviour In most of the instances examined, managers played a central role in initiating or developing visions and strategies. The exceptions were the music industry study and PoliceCo. In the former, music industry executives still seem unsure how to proceed in the new world of the Internet, and in the latter, PoliceCo are treating outsourcing as an administrative task rather than a strategic issue. With the exception of these two cases, managers played a leading role in implementing strategies or attempting to create the conditions for their implementation. In some cases they also led change projects. There were, though, instances, as with GK, where managers had to change their behaviour or managerial style in order to achieve successful change. In addition, there were instances where one of the strategic objectives was to change managerial behaviour, such as in XYZ. One crucial point to note is that successful change does not appear to be related to a change of manager. Oticon changed CEOs and success- fully changed; GEC/Marconi changed Managing Directors and failed miserably; whereas GK and Volvo kept their existing Managing Directors and still achieved suc- cessful change. Therefore, for an organisation in trouble, though changing senior managers may be an easy option, it may not always be a successful one. Managing change A variety of approaches to change management can be seen in the case studies. These range from instances where all the major decisions were taken by one manager, to others where staff in the areas concerned led and planned change projects. The gen- eral tendency was for managers to involve employees in planning and implementing smaller, more short-term projects, often of a technical nature, and in some cases even to devolve such responsibility to them. Larger, more strategic and longer-term proj- ects, though, especially those concerned with attitudinal or behavioural change, were very much initiated and under the control of senior managers. However, as the XYZ example showed, this does not mean that there cannot also be widespread managerial and employee involvement. Planned, Emergent or combined change Once again, the picture is mixed. Longer-term and larger projects were usually open- ended, with diffuse objectives, and involved large numbers of people; whereas smaller projects, where clearer objectives could be set, were inclined to be more tightly con-
  • 462. Conclusions: merging theory and practice 449 trolled and, in some instances, aligned more with the Planned approach to change. However, others appeared to be undertaken in a more directive and Tayloristic fash- ion. Perhaps the main distinction was between those projects aiming to change attitudes and behaviour, which in general tended to be more participative and flexi- ble, and those concentrating on structural or technical change, especially at the operational level, which tended to have clearer objectives and required more fixed timescales. Nevertheless, some organisations appeared to use a combination of approaches to change consciously and appropriately, e.g. XYZ, whilst others, such as GK, tried a variety of different approaches, though not always consciously, appropri- ately or successfully. Yet again, some of the other organisations tried to stick to one approach to change even where it did not appear to be working, e.g. Marconi. Underpinning the case study companies’ preferences as far as change is concerned appear to be two dominant factors. The first concerns their preferred or dominant style of management. The use of a combination of change approaches seems to have been more prevalent and successful in those companies where there was, or there developed, a participative style of management. An example is XYZ, who favoured working cooperatively both internally and externally. This explains not only their wish to develop team working internally, but also their commitment to developing a partnership approach to working with their customers. Though XYZ’s approach to changing its organisational structure can be seen as an example of Planned change, this needs to be seen within XYZ’s overall style, which favoured the Emergent approach and which promoted employee involvement and learning. In the cases of the PPC and PoliceCo, on the other hand, managers preferred a much more com- mand-and-control, top-down approach with little involvement from staff. Therefore, their dominant approach to change was mechanistic and directive. Oticon and Volvo, though, represent different aspects of managerial style again. In these instances, man- agers set out to change the dominant managerial style of their companies. Initially, in all the companies, managers began to make these changes by imposition rather than through employee involvement. Nevertheless, over time, more quickly in some cases than others, as the changes began to work, a more participative form of management emerged and there was less need for changes to be imposed from above instead of emerging from below. Therefore, what we can see is that a variety and combination of approaches to change were used by the more successful companies. The second factor concerns the degree to which organisational change was seen as a series of one-off events, or a continuous process. In some of the companies, e.g. GK, each change project arose and was dealt with on its own merit. Indeed, at GK, each new project seemed to involve reinventing the wheel as far as choosing an approach to change was concerned. Consequently, and not surprisingly, there were a number of false starts before an effective approach was chosen. In other companies, however, e.g. XYZ, where change was considered as – or became – the norm, a bat- tery of approaches, tools and techniques were developed that could be used as and when appropriate. Therefore, if we take these two factors together, participative managerial style and the need to see change as a continuous process, they not only account for the success- ful use of a combination of change techniques but also for the successful outcome to change projects.
  • 463. 450 Chapter 14 · Managing change Objectives A variety of objectives could be discerned, ranging from localised structural change to organisation-wide cultural change. In most of the cases, however, either at the outset or over time, changes to the behaviour and attitudes of individuals and groups came to be considered as more important than either technical or structural adjustments. Therefore, we can see that, depending on the circumstances or constraints, strategy development and change management can take many forms. In the case studies, there are examples of deliberate and conscious attempts to shape strategy as well as more unconscious and accidental approaches. We can also see cases where an organisation’s strategy or change programme, by design or accident, resulted in the reshaping or realignment of the constraints the organisation faced. In terms of change management, there were cases where the process of change and the process of strategy development, because of their emergent nature, coincided. However, there were also cases where Planned change followed on from and was determined by a pre-set strategy. In conclusion, the case studies illustrate the arguments regarding managerial choice, strategy and change developed in Part 1 and Part 2. They show that whilst the Planned and Emergent approaches to change are important, they are not the be-all and end-all of change, or even mutually exclusive. The case studies also show that managers can exercise a high degree of choice about what to change, when to change it and how to change it. They also show that real and considerable constraints on an organisation’s freedom of action do exist, as in Marconi and PoliceCo, which may be beyond the managers’ power to change or even mitigate. In addition, it can be seen that where decisions are taken in an open manner, when those concerned are gen- uinely listened to and involved, and where serious attempts are made to identify and resolve reservations and resistance, there is less likelihood that political behaviour, individual interests or bias will be able to subvert the process. Having now reviewed the ten case studies in the light of Parts 1–3, the next chapter will present the Choice Management–Change Management model for strategy devel- opment and organisational change. Test your learning ■ Short answer questions 1 In what way does the Music Industry study support the case for adopting a complexity approach to organisations? 2 What are the main implications for vision-building and strategy development that can be drawn from the Marconi study? 3 What are the key lessons that other companies can learn from the way the relationship between Rover and TRW developed? 4 In what way can it be said that Speedy Stationers failed to overcome the constraints it faced?
  • 464. Test your learning 451 5 List three of the main differences between the behaviour of senior managers within Oticon and the behaviour of senior managers in the PPC. 6 What lessons can be learned by comparing change management at XYZ with that at GK? 7 Discuss the case for seeing Volvo as an example of combined change. 8 What did Huse (1980) mean by the ‘depth’ of intervention? 9 What is cognitive dissonance? 10 What is a psychological contract? ■ Essay questions 1 Given that its initial approach to change was somewhat autocratic, explain the level of cooperation and commitment which Oticon received from its staff. 2 Compare and contrast the different approaches of Speedy and PoliceCo to outsourcing. 3 What advice would you offer to the big record labels for coping with the changes being brought about by the Internet?
  • 465. Chapter 15 Organisational change and managerial choice Learning objectives After studying this chapter, you should be able to: ■ understand the rationale underlying the Choice Management–Change Management model; ■ discuss the three organisational processes which make up the Choice–Change model; ■ describe how organisations can manage change effectively; ■ identify the range of choices that organisations have when considering change; ■ appreciate how organisations can influence their circumstances to align them with their preferred way of working; ■ understand the need for managers to play a proactive role in the change process. Introduction From Chapter 14, we can see that whilst organisational change can be a complex, ambiguous and open-ended phenomenon, it can also be relatively straightforward with understandable and limited objectives. This in itself is not a new or radical finding – anyone who works in or studies organisations will have noted that change comes in a wide variety of shapes and sizes. It was argued in Chapter 10, however, that in order to cope with the wide variety of types of change, there is a need for a corresponding variety of approaches to strategy development and change management. This point, the need to match types of change with appropriate approaches to managing change, is not as prominent in the literature on organisational change and behaviour as one might expect. As Part 2 showed, despite the widespread influence of Contingency Theory, the majority of writers and practitioners are committed to a ‘one best way’ approach to strategy and change. The call by Dunphy and Stace (1993) for a situational or contextual approach to these issues
  • 466. Introduction 453 has still been taken up by few others. Though there are writers on strategy, such as Mintzberg et al (1998a) and Whittington (1993), who identify the various approaches to strategy, in most cases they tend, eventually, to opt for one as their preferred approach. This is even more pronounced in the change literature, where there is a clear distinction between those who support the Planned approach (such as Cummings and Worley, 1997; French and Bell, 1995) and those who adhere to a more Emergent approach (such as Kotter, 1996; Pettigrew, 1997; Weick, 2000; Wilson, 1992). Many of those arguing for their own favoured approach to strategy and change do so, either explicitly or implicitly, on the basis of their perception of the nature of the environment in which organisations operate. Those arguing for a Planned approach to strategy and/or change appear to assume that the environment is relatively stable and predictable. Those who take a more Emergent approach to both seem to operate on the assumption that the environment is turbulent and unpredictable. Furthermore, most writers seem to assume that the principal role of managers and the ultimate objective of strategy and change is to align or realign an organisation with its environment. In the preceding chapters, a case has been built for rejecting this argument and adopting a different stance. Rather than accepting the view that man- agers are prisoners of the circumstances in which their organisations operate or find themselves, it was argued that managers can and do exercise a considerable degree of choice. It was further argued, however, that the scope and nature of the choices man- agers face and make are constrained by a range of external factors (national characteristics, the business environment and industry norms) and internal organisa- tional characteristics (especially structure, culture, politics and managerial style). This argument goes much further than many by challenging the assumption that managers are in some way the passive agents of forces beyond their control, but it still leaves them as prisoners of circumstances – although the prison in this case is much roomier than many of the writers we have discussed would acknowledge. The arguments in Chapters 5, 6 and 10 challenged even this definition of manage- rial choice, however. It was suggested that many of the constraints on choice are themselves amenable to managerial actions – in effect, organisations can influence or change the constraints under which they operate. This possibility was first suggested when examining Contingency Theory in Chapter 2; it was further developed in subse- quent chapters and shown to be more than a possibility. In particular, some managers are even capable of reinventing their organisations or, as the postmodernists would have it, creating a more preferable reality for them. The ten case studies in Part 3 reveal that, though organisations do try to align and realign themselves with their environment, they also attempt to influence and restructure the environment and other constraints in their favour. Sometimes, by accident or design, this results in a reconfiguration of the accepted rules by which the industry in which they operate competes; whilst in other instances, it prevents organisations being forced to under- take more radical internal upheavals. In the case of Oticon (Chapter 11), it can be seen that the company deliberately set out to change the basis on which it competed by reinventing itself as a service-based rather than a technology-driven organisation. Lacking the technological strength of its competitors, which was the accepted cornerstone of competition in its industry, it pro- posed to offer a superior level of service instead. By changing the rules of the game in its
  • 467. 454 Chapter 15 · Organisational change and managerial choice industry, Oticon hoped to steal a march on its competitors. In the case of XYZ, the new Managing Director sought to change the internal constraints in the company, in terms of its culture, management style and structure, in order to improve its performance and align it with the changing nature of the construction industry and the desires of its parent company. In essence, the new Managing Director was attempting to reinvent the company, based on more cooperative internal relationships, in order to create more stable relationships with customers and establish a less uncertain external environment. So, as the case studies show, organisations can and do influence and change the constraints under which they operate. On the other hand, though, the case studies give some support to those, such as proponents of the realist perspective discussed in Chapter 4, that there are some types of constraint that are not amenable to change. This can be seen from the Marconi example, where no amount of effort on behalf of its management could alter the situation that they had borrowed too much money to buy overpriced assets at the top of the dotcom boom that, when the demand for tele- coms equipment went into freefall, were found to be virtually worthless. Similarly, though PoliceCo might have had more room for manoeuvre than they used, there was no way that they could change the basic situation that they were forced by govern- ment legislation to outsource activities and that this had to be undertaken in a prescribed manner. Therefore, we can see that organisations do have considerable scope for changing or influencing the constraints they face but that, despite what the postmodernists may claim, there are some constraints that appear beyond the scope of individual organi- sations or, in the case of the record companies, even entire industries to change. Nevertheless, this still leaves most organisations with considerably more freedom of choice than many commentators on strategy and change would acknowledge. The implications of this wider perspective on managerial choice for the nature and focus of change management are, as the above shows, significant. Change management need not be seen as a mechanism for achieving a specified and predicted outcome (the Planned approach). Nor need it be conceived of as a continuing process of aligning and realigning the organisation with its environment (the Emergent approach). Instead, as this chapter will show, by linking managerial choice to the management of change, organisations can open up a much wider spectrum of options. These range from focusing on achieving radical internal change to align an organisation with its external constraints, doing the same in an attempt to restructure such constraints, to influencing or changing external constraints in order to avoid internal upheavals. In such a situation, not only are managers trying to make sense of their situation for themselves and others, but they are also seeking to construct a more favourable envi- ronment as well. Building on this insight into managerial choice, the next section in this chapter will present an overview of the Choice Management–Change Management model for understanding and implementing organisational change. This is followed by a detailed description of the three components of the model: the choice process, the trajectory process, and the change process. The chapter concludes by maintaining that though organisations may choose to restructure their internal operations and practices in order to align them with the external circumstances they face, they can also choose to change or modify external and internal conditions and constraints in order to avoid extensive internal upheaval and/or to bring the constraints into line with their preferred modus
  • 468. The Choice Management–Change Management model 455 operandi. Whatever choices are made, it is the role of managers consciously to explore and identify all the available options, however improbable they seem, rather than assuming that they have no, or only limited, choice in the matter. The Choice Management–Change Management model As the Choice Management–Change Management model in Figure 15.1 shows, organisational change can be viewed as the product of three interdependent organisa- tional processes: ■ The choice process – which is concerned with the nature, scope and focus of organ- isational decision-making. ■ The trajectory process – which relates to an organisation’s past and future direc- tion and is seen as the outcome of its vision, purpose and future objectives. ■ The change process – which covers approaches to, mechanisms for achieving, and outcomes of change. These processes are interdependent because, as Figure 15.1 shows, the change process is itself an integral part of the trajectory process and this, in turn, is a vital part of the choice process. Within each of these processes there are a group of elements, or forces, which interact, clash with and influence each other in subtle and complex ways. It is this interaction of elements or forces which prevents decision-making and Context Choice Process Focus Trajectory Vision Trajectory Process Strategy Change Objectives Change Process Planning People Figure 15.1 The Choice Management–Change Management model
  • 469. 456 Chapter 15 · Organisational change and managerial choice change management from being a totally, or even predominantly, rational-mechanical process, and ensures that they are based on subjective and imperfect judgment. Each of these three processes will now be described, not only to show their com- plexity and interdependence, but also to provide a guide to putting the Choice Management–Change Management model into practice. For this latter reason, the description of the change process, in particular, will dwell on the steps necessary to accomplish change successfully. The choice process The choice process comprises three elements: ■ Organisational context ■ Focus of choice ■ Organisational trajectory Organisational context One of the standard prescriptions for successful organisations is that they should know their own strengths and weaknesses, their customers’ needs and the nature of the environment in which they operate. As the case studies show, however, many organisations appear only to begin collecting this sort of information when they are in trouble. Yet how can organisations hope to understand and appreciate the options open to them unless they develop mechanisms for collecting and analysing informa- tion on their performance and general situation? No one would suggest that assembling information on past, present and antici- pated future performance is easy or that understanding the nature of the constraints faced by an organisation is simple. However, there are relatively well-established methods for benchmarking an organisation’s performance against a range of internal and external comparators (Camp, 1989). There are also a number of tried-and-tested tools that organisations can use for gathering information on and evaluating the main internal constraints, such as structure, culture, politics and management style, and the main external constraints, such as national characteristics, industry and sector norms, and the business environment. Exhibits 15.1 and 15.2 show two of the tools most widely used by organisations for this purpose, the SWOT analysis and the PESTEL framework (Johnson and Scholes, 2002; Lynch, 1997). Exhibit 15.1 SWOT analysis What is a SWOT analysis? What does it do? SWOT stands for : A SWOT analysis enables managers to identify the key internal and external issues they need Strengths (internal) to take into account in order to understand Weaknesses (internal) the context in which the organisation oper- Opportunities (external) ates. Also, by identifying key issues, it begins Threats (external) to focus managers on the areas where they need to make choices, and helps to identify some of the constraints and risks involved.
  • 470. The Choice Management–Change Management model 457 Exhibit 15.2 PESTEL framework What is the PESTEL framework? What does it do? PESTEL stands for: The PESTEL framework is a rigorous approach to identifying and understanding Political the main external environmental factors Economic which affect an organisation. As with the Sociocultural SWOT analysis, it also plays a role in focusing Technological organisations on the choices open to them Environmental and the constraints and risks involved in Legal these choices. As in the XYZ case study, one advantage of adopting such well-understood tools, which are easily explained and do not require expert assistance, is that organisations can use them to promote openness and reduce, though probably not eliminate, politi- cal behaviour and conflict. Nevertheless, some organisations will find that owing to the context in which they operate, teamwork, cooperation and openness are very dif- ficult to achieve without first changing those factors which hinder or prevent these. Perhaps the prime consideration in this respect is the prevalent style of management. The issue of management style will be covered in Chapter 16; however, as Exhibit 15.3 shows, different styles of management can have significantly different implica- tions for the way managers see, run and change their organisations. Exhibit 15.3 Styles of management Strengths Weaknesses Traditionalist management ■ Practical common sense ■ Makes snap decisions ■ Attentive to facts ■ Lacks responsibility for change ■ Systems focus ■ Poor at relationships ■ Steady worker ■ Concerned with difficulties ■ Super dependable ■ Realistic about time scales Catalyst management ■ Charisma and commitment to staff ■ Can be drawn into pleasing others ■ Communicates well ■ Has difficulties with rules and conventions ■ Comfortable with changing environment ■ May spend too long on issues ■ Comfortable with diversity ■ Takes over problems and responsibilities Visionary management ■ Strong on intellectual vision ■ May be insensitive to others ■ Creative and progressive ■ Devalues others who are not intellectual ■ Enjoys problem solving ■ Expects too much of people ■ Outspoken ■ Restless and easily bored Source: from Maddock (1999:40), based on Vinnecombe (1987)
  • 471. 458 Chapter 15 · Organisational change and managerial choice Though others can exert pressure, managers are really the only group who can ini- tiate change and will rarely (as a group) voluntarily adopt changes which adversely affect them. It follows that, faced with a mismatch between their organisation and its environment, some managers will seek to achieve realignment by influencing the envi- ronment rather than pursuing an internal upheaval that may involve changes in management style and personnel. An organisation’s management style will also influence how and by whom infor- mation is gathered and discussed. If an accurate picture of an organisation’s context is to be constructed, it will require the involvement of a wide range of people. Not only should this provide a robust basis for decision-making, it can also develop a sense of teamwork, cooperation and mutual understanding amongst those concerned. If only a few managers are involved, however, it is likely to result in a skewed and biased pic- ture of the organisation. Nevertheless, it should also be recognised that no matter how rigorously information is collected, analysed and argued over, there will always be a large element of subjectivity in this process. This is why, as a number of writers have commented, one of the key tasks managers perform is ‘sensemaking’ (Weick, 1995). As Weick (1995: 13) commented: … sensemaking is about the ways people generate what they interpret. Jury deliberations, for example, result in a verdict. Once jurors have that verdict in hand, they look back to construct a plausible account of how they got there. For managers in organisations, sensemaking is about understanding, interpreting and explaining, making sense of, their organisation’s world for themselves and others in such a way that it provides a rationale and justification for past, present and future actions. Sensemaking is also the process by which managers attempt or can attempt to impose their view of reality on others. The Oticon case is a prime example of where a CEO first made sense of the world for himself and then imposed this sense on others in such a way that it allowed the organisation to move successfully forward. Marconi is another exam- ple where a senior manager attempted to impose his ‘sense’ on others in order to justify and guide actions. In this case, however, the outcome was far from successful. Focus of choice Many organisations can find themselves in a situation where they appear to be con- stantly reacting to events and indulging in ‘fire-fighting’ rather than being proactive. Certainly, this seems to be the current position in the music industry. One of the bene- fits of sensemaking, as successful organisations show, is that it allows managers to identify and focus their attention on the narrow range of short-, medium- and long- term issues that are generally agreed to be crucial to the organisation’s success. Some of these will relate to the organisation’s performance, whilst others may be more con- cerned with building or developing particular competences or technologies. In some cases, the issues may be of passing interest only, whilst in other cases they may be fun- damental to the organisation’s survival. Certainly, in most instances, organisations will in one way or another focus on aligning themselves with or even influencing or changing the constraints under which they operate. How an organisation decides upon which issues to focus, and whether this is done in a concerted way (as at XYZ), or in a way which allows different groups and indi- viduals to pursue their own agenda, is a fundamental factor in any organisation’s
  • 472. The Choice Management–Change Management model 459 decision-making process. Certainly, the received wisdom is that a concerted and coordinated approach, which focuses upon a small number of issues at any one time, is more effective than a fragmented one (Kay, 1993; Senge, 1990). It is interesting to note that Weick (1995) appears to consider the Japanese approach to decision- making as an example of sensemaking in action. This may explain why Japanese organisations are particularly good at identifying the key aspects of their strategy on which they need to focus. The particular technique they use is called Hoshin Kanri (see Exhibit 15.4). Hoshin Kanri, or Policy Deployment as it is often termed in the West, was developed in Japan to communicate a company’s policy, goals and objec- tives throughout its hierarchy in a structured and consistent fashion (Lee and Dale, 2003). Its main benefit is that it focuses attention on key activities for success. It is a process that is undertaken annually to ensure that everyone on the company is con- scious of and addressing the same objectives and that these inform actions and decision-making at all levels in the organisation (Akao, 1991). Exhibit 15.4 Hoshin Kanri The word hoshin can be broken into two parts. The literal translation of ho is direction. The literal translation of shin is needle, so the word hoshin could translate into direction needle or the English equivalent of compass. The word kanri can also be broken into two parts. The first part, kan, translates into control or channeling. The second part, ri, translates into reason or logic. Taken altogether, hoshin kanri means management and control of the organization’s direction needle or focus. Source: Total Quality Engineering Inc (2003) Organisational trajectory An organisation’s trajectory or direction is shaped by its past actions and future objectives and strategies. As such it provides a guide or framework within which to judge the acceptability, relevance or urgency of issues, concerns and proposed actions. The trajectory process encompasses the determination of and interplay between an organisation’s vision, strategies and approach to change. This can be seen from Volvo’s strong commitment to Job Design, which has arisen from the interplay of events over more than 30 years. Any attempt by Ford to reverse this commitment would surely face strong opposition at all levels in Volvo. Nevertheless, the concept of trajectory comprises not only an organisation’s ‘memory’ of past events but also its intent in terms of future ones. For some organisa- tions, such as Volvo with its commitment to Job Design, the trajectory will be clear and unambiguous, unless there is some major disturbance which throws into question past practice. In others, making sense of past events and agreeing proposals for future actions will be the subject of dispute and uncertainty. Certainly, since its crash, one might assume that there has been much rewriting of history in the Marconi board- room, especially with regard to the supposed failure of GEC and the attractiveness of telecoms. In the light of the reappraisal of its past, one might also assume that Marconi would be faced with serious disagreements about how it should proceed in the future; if it cannot go back to the days of GEC, and if becoming a telecoms giant is no longer viable, where does it go?
  • 473. 460 Chapter 15 · Organisational change and managerial choice It will also be the case that some organisations will deliberately and consciously attempt to plot their trajectory in minute detail, such as PoliceCo, whilst others, such as Oticon, may adopt a more global and distant set of objectives from which their trajectory emerges. Whatever the approach, as Mintzberg (1994: 25) observes: … few, if any, strategies can be purely deliberate, and few can be purely emergent. One sug- gests no learning, the other, no control. All real-world strategies need to mix these in some way – to attempt to control without stopping the learning. Therefore, an organisation’s trajectory can be seen as a blend of, or clash between, the deliberate and emergent elements of its strategy. Whether or not this blend or clash produces the intended or expected outcomes for the organisation appears to depend partly on the quality of its sensemaking and partly on the degree of control it can exert, or chooses to exert, over events. Furthermore, as the case studies show, it is also dependent on an organisation’s ability to learn from, deal with and take advan- tage of unexpected events as they emerge. For Oticon, TRW and above all Volvo, the ability to learn and successfully move on was crucial. For Marconi, the inability to do so was disastrous. Therefore, it is the interplay between the interpretation of past actions and future intent coupled to the ability of organisations to shape developing events to their advantage that makes decision-making so complex. Each of the three elements of the choice process, context, focus and trajectory, is complex in itself, but they also interact with each other in an intricate and unpre- dictable way. An organisation’s trajectory, whether it is seen as successful or not, can influence both the focus of its decision-making, and the context within which the organisation operates. Likewise, the context provides a framework within which the trajectory is developed. Similarly, the focus of choice will influence which aspect of the organisation’s context its trajectory will be directed towards, not only in the short term but also in the medium and long term. The case studies show that decision-making is a complex and multifaceted process. One reason for this is the type of decisions that have to be addressed when organisa- tions deal with major questions. Decisions can be classed on a spectrum that runs from ‘bounded’ to ‘unbounded’. Bounded decisions are usually small, have relatively easily-defined parameters, and tend to be relatively separable from the environment or context in which they arise. Unbounded decisions usually concern large and impor- tant issues, have difficult-to-define parameters, are ambiguous and are intertwined with other issues and factors in the environment or context in which they arise (Rollinson, 2002). Obviously, most, if not all, of the major strategic issues an organi- sation has to address tend to lie at the unbounded rather than bounded end of the spectrum. Given the unbounded nature of such decisions, it is not surprising, as models of decision-making described in Exhibit 15.5 show, that managers tend to adopt a less rational and more haphazard approach to decision-making than they themselves would often openly acknowledge. However, as the case studies revealed, and as writers have pointed out for many years, there is a tendency for managers to ‘muddle through’ rather than attempt an exhaustive and exhausting examination of all the available options (Lindblom, 1968). Nor is it surprising that some managers prefer ‘fire-fighting’ to tackling fundamental issues (Burnes, 1991) – at least the objec- tive is immediate and clear, and a favourable outcome can be achieved (though it is usually short-lived).
  • 474. The Choice Management–Change Management model 461 Exhibit 15.5 Decision-making models Model Assumptions The Rational Choice model of ■ Decision-makers have knowledge of all decision-making possible alternative solutions. ■ They have complete knowledge of the consequences of all these alternatives. ■ They have a robust set of criteria for evaluating these alternatives. ■ They have unlimited resources, including time, money and abilities. ■ They follow a systematic and orderly sequence of decision steps. The Bounded Rationality model of ■ Decision-makers do not have complete decision-making knowledge. They rely on hunches and intuition. ■ Decision-makers do not have fixed and consistent preferences. ■ Decision-makers do not have unlimited resources. ■ An optimal solution may not exist or even be necessary. ■ Decision-makers do not optimise or seek a solution that maximises the expected benefits. ■ They ‘satisfice’ – they seek a solution or decision option which is ‘good enough’ rather than ideal. ■ They do follow a systematic and orderly sequence of steps. The Garbage Can model of ■ Decisions involve four elements: problems, decision-making solutions, participants and choice opportunities. ■ Some decisions will only be made when all four elements come together. ■ Political motives can lead to these elements being manipulated. ■ Decision-making is volume-sensitive – managers cannot be everywhere at once or deal with all issues at once. ■ As the number of problems increase, decision opportunities decrease. ■ Novel problems are likely to attract more attention than mundane ones. ■ Decision-makers do not follow an orderly sequence of steps. ■ Chance plays a large part in what decisions get made and when. Source: adapted from Rollinson (2002 )
  • 475. 462 Chapter 15 · Organisational change and managerial choice Appreciating the complexity of decision-making also casts the Japanese ringi system (discussed in Chapter 3) in a favourable light. Only by an exhaustive analysis of the issue concerned and the options available is the most appropriate decision likely to be arrived at. Moreover, the ringi system is usually aided by and carried out within the framework of a strong corporate vision and clear strategies for its pursuit, which make it easier to identify which decisions and actions are appropriate. By embracing decisions within such a framework, Japanese companies ensure that they do not have to explore all the available possibilities when taking decisions – merely those that are in harmony with their vision/strategy/intent. In this way, the entire choice process is simplified and made more achievable. Japanese companies have shown themselves to be masters of developing visions and strategies that not only make them successful but also, and not incidentally, reduce the uncertainty in their environment, alter the basis of competition in their favour, and narrow the focus of decision-making (Hamel and Prahalad, 1989). The result is that though the choice process remains complex, not only does it have a greater degree of consistency between the elements and people involved, but it is also more focused in the range of issues and decisions required. Therefore, what can be seen is that whilst the choice process is uncertain, complex and time-consuming, there are approaches that do reduce these factors and can make the process more transparent and effective. Nevertheless, the degree of transparency and the efficacy of the choice process is heavily influenced by an organisation’s ability to turn choices into workable strategies and to turn strategies into successful actions. The success of these, in their turn, will influence future choices. In order to under- stand the choice process further, we shall now examine the trajectory process and then go on to examine the change process. ■ The trajectory process Like the choice process, the trajectory process comprises three elements, namely vision, strategy and change. Vision As described in Chapter 7, many organisations now use scenario-building and ‘vision- ing’ techniques. The purpose of these techniques is to generate different organisational futures, or realities, in order to select the one that seems most favourable or appropriate. The ten case studies in Part 3 showed that not all compa- nies have visions, not all visions find favour with the managers and employees who have to implement them, and not all visions lead to success. Nevertheless, the concept of organisations driving themselves forward by creating an ambitious vision (or intent or scenario) of where they wish to be in the long term has become increasingly influ- ential over the last 15 years (Cummings and Worley, 2001; Johnson and Scholes, 2002; Mintzberg et al, 1998a & b), though it has also generated increasing levels of cynicism (Collins, 1998; Watson, 1994). The argument, in brief, for this approach is that previous attempts to plan the future have either fallen foul of the difficulty of accurately translating past trends into future projections, or have not been ambitious enough because they have allowed future plans to be constrained by present resources (Hamel and Prahalad, 1989). The process of developing an organisation’s vision attempts to overcome this by encouraging senior managers to think freely, without
  • 476. The Choice Management–Change Management model 463 considering present resource constraints, about possible futures for their organisation in the long term. This can produce very ambitious objectives, such as Honda’s declaration in the 1960s (when it was barely more than a motorcycle producer little known outside Japan) that it wanted ‘to become the second Ford’. As the Marconi case study in Chapter 11 shows, however, the possession of an ambitious vision is, by itself, no guarantee of success, though the rigour with which a vision is developed may help to overcome or avoid some of the more obvious pitfalls. As Exhibit 15.6 shows, Cummings and Huse (1989) argue that visions comprise four elements: mission; valued outcomes; valued conditions; and mid-point goals. Exhibit 15.6 Constructing a vision The four elements of a vision 1. Mission. This states the organisation’s major strategic purpose or reason for existing. It can indicate such factors as products, markets and core competencies. 2. Valued outcomes. Visions about desired futures often include specific performance and human outcomes the organisation would like to achieve. These can include types of behaviour and levels of skill as well as more traditional outcomes such as turnover and profit. These valued outcomes can serve as goals for the change process and standards for assessing progress. 3. Valued conditions. This element of creating a vision involves specifying what the organisation should look like to achieve the valued outcomes. These valued conditions help to define a desired future state towards which change activity should move. Valued conditions can include issues relating to structure, culture, openness and managerial style as well as external issues such as relations with customers and suppliers. 4. Mid-point goals. Mission and vision statements are by nature quite general and usually need to be fleshed out by identifying more concrete mid-point goals. These represent desirable organisational conditions but lie between the current state and the desired future state. Mid-point goals are clearer and more detailed than desired future states, and thus, they provide more concrete and manageable steps and benchmarks for change. Source: Cummings and Huse (1989) The creation of visions should be an iterative process whereby options are identi- fied, an initial vision is created, and the gap between this and the present circumstances is identified. Then the organisation considers its strategic options to bridge the gap, and in so doing refines the vision itself. This refining process serves partly to ensure that the vision is discussed widely within the organisation, and to gain employees’ commitment to its objectives, thus using the vision as a motivating and guiding force for the organisation. Over time, by this process of revisiting and refining the vision, loose and intangible ideas become transformed into achievable medium-term goals that people can relate to and pursue. The process can, and in some cases does, eventually encompass everyone in the organisation. Nevertheless, the vision is usually driven, not to say created by, a few senior managers who use the power of their position and strength of their personalities to get others to accept the vision as a beneficial and achievable reality.
  • 477. 464 Chapter 15 · Organisational change and managerial choice The organisational vision can best be described as a beacon shining from a faraway hillside at night that guides travellers to their destination. Travellers can usually only see a few feet ahead but are prevented from getting lost by the beacon. Occasionally the traveller will have to make a detour, or sometimes even reverse course, but this is done in the certain knowledge that they still know where it is that they are travelling to. The concept of the beacon is a useful analogy, in that it highlights one of the main differences between vision-building and other forms of long-range planning. Normally it is only the leadership of an organisation that has a clear view of where the organisation is going in the long term. The vision, like the beacon, should shine clearly for everyone in the organisation to see, however, so that they can all know where they are heading for, and use it to judge the appropriateness of their actions. By constructing a vision in this manner, the organisation not only has a picture of what it wishes to become but also some concrete targets to aim for. In the case of Oticon, (Chapter 11), its vision of becoming a knowledge-based organisation sprang from the mind of its CEO, Lars Kolind. However, to give it flesh and to be able to construct his ‘disorganised organisation’ required the involvement of everyone else in the organisation. It was an iterative process of trial and error. Above all, it was a process of experimentation. He and they knew how they wanted to operate, what they wanted to achieve, but the actual details had to be worked out. Kolind could also recognise when things were going wrong, however, and acted to ‘explode the organisation’ when he felt that it was becoming too rigid. The Marconi vision, on the other hand, seemed both to start and end with two senior managers. The extent to which they required the commitment and understand- ing of others, as opposed to their compliance, appears to be small. Also, unlike Kolind, they seemed unable to adapt their strategy to save their vision. When the downturn in demand for telecoms equipment became evident to other companies, who took action to protect themselves, Marconi did not. Instead, it continued its strategy of selling profitable companies and borrowing money to buy ones which fitted its vision but whose viability declined with the decline in demand for telecoms equipment. The point is that visions (and components of visions such as Oticon’s Statement of Fundamental Human Values) identify the intent, and mid-point goals are then needed to help identify a way forward. As the vision is implemented, these goals will periodically have to be renewed and revisited in the light of changing circum- stances, usually within the context of the vision, as was the case with Oticon. As the Marconi example shows, however, the possibility always exists that changing circum- stances, or the process of implementation, can raise serious questions about the viability of the vision itself. It is through the development of strategy that visions are implemented, brought to life and, if necessary, changed. Strategy In the context of a vision, strategy can be defined as a coherent or consistent stream of actions which an organisation takes or has taken to move towards its vision. This stream of actions can be centrally planned and driven, they can be delegated and dis- tributed throughout the organisation, and they can be either conscious actions in pursuit of the vision, or unconscious or emergent ones resulting from past patterns of decisions or resource allocations, or from current responses to problems and opportu-
  • 478. The Choice Management–Change Management model 465 nities. In reality, an organisation’s strategy tends to be a combination of, and be pur- sued through, a mixture of formal and informal plans and actions. As Chapter 7 showed, formal strategies usually cover marketing, product develop- ment, manufacturing, personnel, purchasing, finance, information technology and quality. The characteristics of conscious strategies are that they generally look five years or more ahead, but only contain firm and detailed plans for the next 12 to 18 months (this is because changing circumstances usually prevent most companies from being firm about their intentions for any longer than this). These strategies are put together in one strategic plan that is, usually, formally reviewed annually, but is fre- quently reviewed informally and when major and unexpected events occur. Because the strategies are not ends in themselves, but means to an end (the vision), they are by necessity both flexible and pragmatic. They should be constructed and pursued only to the extent that they facilitate the pursuit of the vision. Indeed, even when their strategies appear to fail, the more successful organisations seem to have an innate ability to turn failure into success, as the Microsoft example in Exhibit 15.7 shows. Microsoft established MSN in 1995 in order to become an Internet content provider. It quickly saw that this was not where its core competences lay, but what it also saw was that MSN gave it a direct link to an enormous customer base. The original strat- egy of adding content provision to its software activities was abandoned in favour of a much more ambitious strategy of delivering its services over the Internet directly to customers, something on which Bill Gates says he has ‘bet the company’. It is also something that contributes directly to Microsoft’s vision of remaining the world’s dominant software company. Exhibit 15.7 The development of MSN Microsoft’s direct connection to the customer FT Sometimes it seems that even when Microsoft loses, 1995, the early days of the dotcom boom. It pro- it wins. … take MSN, the company’s internet portal. duced content including news and sport, horoscopes, This unit of Microsoft has lost money ever since it and e-commerce offers. For a while it looked as if was set up … But to Microsoft that does not really Microsoft had serious ambitions in media … matter. The real point of MSN is not to make money That phase did not last long. The career of Geoff at all. Instead, the division serves a peculiar mixture Sutton, now Managing Director of MSN in the UK, of purposes including research and development, illustrates the change of heart. Mr Sutton was origi- testing the company’s software, advertising its serv- nally brought into the company in 1997 to run a ices and even product distribution. What is more, team of journalists writing news for the portal. In these capabilities set Microsoft apart from its rivals. 1998, the news team was scrapped and Mr Sutton In the next phase of Microsoft’s plans, its .Net found himself working in a software company. vision, in which software becomes a service delivered ’It quickly became apparent that Microsoft should- over the internet – a vision on which Bill Gates admits n’t try to be a content player,’ he says. Judy Gibbons, he has ‘bet the company’ – the site will become even vice-president of MSN for EMEA, agrees: ‘Microsoft is more vital. MSN is quietly emerging as the centre- a software company, that’s what we do, and we piece of the whole .Net strategy. This is a far cry from shouldn’t stray away from our core competences.’ the original MSN, named for the Microsoft Network. With its foray into content, however, Microsoft had The website was initially set up as a media play in managed to gather up something very useful: an ▲
  • 479. 466 Chapter 15 · Organisational change and managerial choice Exhibit 15.7 continued audience. Through MSN, Microsoft found it had a into a web of services running across a wide variety direct line with consumers that it had never experi- of devices, including PCs, handheld computers, enced before. People visited the site regularly, … in phones, television sets, and even games consoles. the process being exposed to Microsoft branding ’MSN will provide the entry point for consumers and services. to .Net services, as you will be able to go up to the Today, MSN is one of the world’s top three inter- site and sign on and get access to all the pieces you net destinations, along with yahoo and AOL, want,’ says Ms Gibbons. receiving some 270m visitors a month, while its Microsoft estimates that the market for such serv- Hotmail has 110m users. ices could run into trillions of dollars by 2010, in Once this kind of connection with customers was what it terms the ‘digital decade’. in place, all kinds of things became possible. No other internet portal can yet offer anything Microsoft could start marketing services to its cus- similar. And no other software company boasts its tomers direct. It could even start giving them own internet portal through which to dispense rival software direct, over the internet. versions of these web services. The huge MSN user This interactive and instant relationship with base forms a ready-made audience to which customers even gave Microsoft a testing ground for Microsoft can market its services with ease. The fact new software products, as people could be asked that all the visitors attracted to the portal by this range to download beta software, software still in the of services can be ‘monetised’ by charging advertisers process of development, from the site for comments to market them is just the icing on the cake. If MSN and suggestions. can reach break-even from these advertising dollars, The .Net strategy neatly takes advantage of all so much the better, if not, it scarcely matters. these aspects of Microsoft’s portal. … Users will plug Source: Fiona Harvey, Financial Times, 31 December 2001, p. 7. Therefore, in pursuit of its vision, an organisation can have a central strategy and a number of sub-strategies and, influenced by the vision and circumstances, a general awareness of the need to act or respond in a particular way to opportunities and threats, or successes and failures. From this perspective, one way of viewing strategy is to see it as a series of links in a chain which stretch from the present to the indeter- minate future where the vision lies. Each link in the chain represents particular strategies or groups of decisions that organisations pursue to move themselves for- ward, in the light of both their eventual target and the prevailing circumstances of the time. The links (strategies) are continually having to be forged and reforged (to use Mintzberg’s, 1987, term, ‘crafted’) over time as events develop and circumstances change. For Microsoft, MSN was a link forged for one purpose which became reforged for another purpose but with the same end in sight: to bolster Microsoft’s dominance of the software market. So an organisation’s strategy is likely to comprise both pre-defined and emergent elements – the exact balance being determined by the circumstances of the particular organisation in question rather than any intrinsic merit of either the planning or emergent approaches to strategy. One final point: it follows from this that organisations do not need to be able to see all the links in the strategic chain: merely those that will guide them over the next few years. Nor do they need to dictate centrally or identify in detail what should be done and when. Instead, they need to establish both a climate of understanding and a general willingness to pursue certain courses of action, as the opportunity arises or
  • 480. The Choice Management–Change Management model 467 circumstances necessitate. It is only when a course of action is pursued, however, that organisations begin to change and move towards their vision. Change Just as an organisation’s trajectory is both an important element of the choice process and a process in its own right, the same applies to change. The change process will be discussed below, but in the context of the trajectory process it is necessary to note that, though visions and strategies can be crucial in shaping the life of organisations, it is only when some facet of the organisation is changed or changes that visions and strategies advance from being mere possibilities to become reality. This is also a two- way street. On the one hand, visions and strategies shape and direct change. They indicate what needs to change and where. They also create the conditions and climate within which change takes place. On the other hand, because visions and strategies only become reality through the actions of the organisation, it is these changes, these actions which shape visions and strategies. In summary, we can see that the trajectory process, whilst playing a key role in shaping choice, is also itself a complex process comprising vision, strategy and change. Though it is difficult to conceive of any organisation that does not possess some elements of all three, the degree to which they are held in common or are con- sistent with each other or are part of a conscious effort clearly varies. Partly this relates to the circumstances of the organisation. Under conditions of stability and pre- dictability, even without prompting from senior managers, it is much easier for people to develop a common view of how an organisation should operate, what its future should be and what changes need to be made. In rapidly-changing circumstances, however, where certainties and fixed points of reference are few and far between, a common understanding is unlikely to arise automatically. Where a common under- standing does exist, in such situations, it is likely to be outmoded and inappropriate. This is why senior managers more and more are trying consciously to use visions to create a common cause. They want to reduce uncertainty, make sense of what is hap- pening, and create a broad understanding of what needs doing, and how. For many organisations, the merit of this approach is not only that it makes change easier, but that it also allows staff to judge for themselves what changes need to be made and what approach to adopt. In order to explore this further, we can now examine the change process itself. ■ The change process Change can be viewed as a one-off event, an exception to the normal running of an organisation and, therefore, something to be dealt on an issue-by-issue basis as it arises. On the other hand, some organisations see change not as an exception but as a norm, a continuous process that forms part of the organisation’s day-to-day activities. As the case studies in Part 3 illustrated, where change is seen as the exception, such as in GK, organisations tend to have difficulty in choosing the most appropriate approach and there also tends to be no structured, or even informal, procedure for capturing the lessons from one change project and making them available for future projects. Each change is seen as a unique event, and seems to involve an element of reinventing the wheel as the organisation struggles to determine how best to deal with it. However, in organisations where change is seen as a continuous process, such as
  • 481. 468 Chapter 15 · Organisational change and managerial choice Oticon, they appear to be able not only to treat each project as a learning opportu- nity, but to capture this learning and pass it on. This allows them to select the most appropriate approach for each situation. In such organisations, not only is change seen as an everyday event, but the management of it is also seen as a core capability that needs to be developed and in which all staff need to become competent. The change process itself, like the choice and trajectory processes, comprises three interlinked elements: ■ Objectives and outcomes ■ Planning the change ■ People Objectives and outcomes There is now much evidence and a general acceptance, at least amongst those studying it, that a high proportion of change efforts end in failure (Beer and Nohria, 2000; Burnes, 2003; Huczynski and Buchanan, 2001). Though there are numerous reasons for this, Burnes and Weekes (1989) found that, in many cases, change projects failed because their original objectives or desired outcomes were ill-thought-out and inconsis- tent. In addition, as noted in Chapter 5, organisational change, because it often affects the distribution of power and resources in an organisation, is an inherently political process which can be driven by sectional interests rather than organisational needs. Though it is difficult to envisage a situation where political interests are not pres- ent, Burnes (1988) suggested an approach to assessing the need for and type of change that attempts to make the process of establishing objectives and outcomes more rigorous and open. Openness and rigour not only make it harder to disguise political considerations, they also allow assumptions regarding the merits (or lack of them) of particular options to be tested. Burnes’ approach has four elements – the trigger, the remit, the assessment team and the assessment. The trigger Organisations should only investigate change (other than relatively minor projects that can be easily accommodated) for one of the following reasons: ■ The company’s vision/strategy highlights the need for change or improved performance. ■ Current performance or operation indicates that severe problems or concerns exist. ■ Suggestions or opportunities arise (either from the area concerned or elsewhere) that potentially offer significant benefits to the organisation. If one or more of the above arises, then this should trigger the organisation to assess the case for change, which leads to the next phase. The remit This should state clearly the reasons for the assessment, its objectives and timescale, and who should be involved and consulted. The remit should stress the need to focus as much on the people aspects as the technical considerations involved. In addition, it must make clear that those who will carry out the assessment must look at all options rather than merely considering one or two alternatives. Organisations need to be clear who draws up such remits and who has the final say on the assessment team’s recom-
  • 482. The Choice Management–Change Management model 469 mendations. As was shown by Burnes and Weekes (1989), this responsibility is often unclear. In traditional organisations, this responsibility would lie with senior man- agers. In many of today’s organisations, the responsibility for such activities is devolved. There is usually a requirement to inform senior managers of change, how- ever, and certain types of major change remain the responsibility of senior managers. Also, where change affects more than one area or activity, coordination between areas will be essential. The important point is that there must be clarity and agreement about who has the responsibility and authority to initiate change before an assess- ment begins. The assessment team This is the body who will assess the need for change. In most cases, this should be a multi-disciplinary team consisting of representatives from the area affected (both managers and staff), specialist staff (e.g. finance, technical and personnel), and, where appropriate, a change specialist, either an internal facilitator or external consultant who is a specialist in organisational change. It may also require the involvement of senior managers. The assessment The first task of the assessment team is to review and if necessary clarify or amend its remit. Only then can it begin the assessment, which should comprise the following four steps: 1 Clarification of the problem or opportunity. This is achieved by gathering informa- tion, especially from those involved. In some situations it might be found that the problem or opportunity is redefined, or does not exist, or can be dealt with easily by those most closely concerned. If so, this is reported back and probably no fur- ther action needs to be taken. If the clarification reveals that a significant problem or opportunity does exist, however, then the remaining steps need to be completed. 2 Investigate alternative solutions. A wide-ranging examination should take place to establish the range of possible solutions. These should be tested against an agreed list of criteria covering costs and benefits, in order to eliminate those solutions that are clearly inapplicable and to highlight those that appear to offer the greatest bene- fit. Companies will usually seek to define benefits in monetary terms. It should be recognised, however, that not all changes, particularly those of a behavioural or strategic nature, can be assessed on purely financial criteria, e.g. Oticon’s restructur- ing and XYZ’s move to teamworking. In any case, changes rarely have single benefits. For example, a change in technology that brings financial benefits may also offer opportunities to increase teamworking and to develop the skill and knowledge base of the organisation. Therefore, organisations need to develop ways of defining and assessing non-monetary benefits. Also, where there are benefits there are usually disbenefits. Where new skills are gained, old ones are discarded. For example, a partnership approach to customer–supplier relations can lead to a loss of negotiat- ing and bargaining skills; greater teamworking can undermine the authority of line managers and middle managers. If such disbenefits are to result from change, it is better to recognise this in advance and prepare for them rather than finding out later when the damage is done. This then leads on to the next step.
  • 483. 470 Chapter 15 · Organisational change and managerial choice 3 Feedback. The definition of the problem or opportunity and the range of possible solutions should be discussed with interested or affected parties, particularly those from whom information was collected in the first place. This helps to counter the tendency to fit solutions to problems, i.e. it makes it more difficult for people to promote their favoured solution regardless of its suitability. It also helps to prepare people for any changes that do take place. In addition, the response to feedback can provide an important source of information on the advantages and disadvan- tages of the possible solutions on offer and, thus, it helps to establish the criteria for selecting the preferred solution or solutions. 4 Recommendations and decision. The team should present their recommendations in a form that clearly defines the problem/opportunity, identifies the range of solu- tions, establishes the criteria for selection and makes recommendations. These recommendations should include not only the type of change, but also the mechan- ics and timescale for making such changes and the resource implications, as well as performance targets for the new operation. This then leaves those responsible for making the final decision in a position to assess, modify, defer or reject the assessment team’s recommendations in the light of the vision and strategic objectives of the organisation. Indeed, some change pro- grammes and projects are so complex that it is only possible to judge their worth in relation to an organisation’s long-term intent. For example, in the 1990s, one of the UK’s largest biscuit makers established an assessment team to determine whether the company should build a new factory solely dedicated to the production of chocolate biscuits (the biggest growth area for the company). The team recommended that one should be built next door to an existing factory in the north of England. The Board accepted the recommendation for the new factory but decided, because of its long- term ambitions to develop in Europe, to locate the new factory in France. Though this decision could be justified as being in the long-term interests of the company, such decisions are more an act of faith than a racing certainty, though managers may choose to present them as closer to the latter in order to garner support. Nevertheless, if the decision is to proceed with the proposed changes, then it becomes necessary to begin planning the implementation process. Planning the change Whether the need for change arises from an organisation’s strategy or emerges in some other way, once it has been established that it should take place and what form it should take, it is then necessary to plan how this will be achieved and then to implement the plan. As argued in Chapter 10, there are many different approaches to change, and their appropriateness depends on what is to be changed. As the case studies in Part 3 showed, small-scale and relatively technical or structural changes can usually be planned and executed relatively quickly, and may not require extensive consultation with or the involvement of all the staff affected. Similarly, changes which are isolated to one part of the organisation and seen as ‘inevitable’, may also be rela- tively straightforward, as was the case at PoliceCo. However, unless the need for radical change is already accepted, as it was at Oticon, it can be dangerous to adopt a rapid-change/low-involvement approach to larger-scale changes, particularly where people’s attitudes and behaviours are the prime object of the change process. Therefore, as the XYZ case shows, planning and execution, and consequent develop- ment, in such cases can be extensive, span hierarchical levels and horizontal processes
  • 484. The Choice Management–Change Management model 471 and include a high degree of ambiguity. For these reasons, the success of large-scale changes will depend, to a significant extent, on the involvement and commitment of all those concerned with and affected by them. The range of change situations and approaches, therefore, needs to be borne in mind when considering the following six interrelated activities that make up the planning and change process: 1 Establishing a change management team. To maintain continuity, the team should include some, if not all, of those responsible for the original assessment of the need for change. However, it will usually also have a greater user input, especially at the implementation stage. When the Labour government was first elected in the UK in 1997, the Inland Revenue was asked to undertake a review as to whether the Contributions Agency, then a semi-autonomous body, should become part of the Inland Revenue. The man who led the assessment team, and who recommended that the Contributions Agency should become part of the Inland Revenue, was also made responsible for leading the change management team. In the case of XYZ, all the original assessment team became members of the change management team, along with a much wider spectrum of middle and line managers. For large change projects, it is usual to establish sub-groups responsible for discrete elements of the change programme. These will generally comprise those most closely affected by the changes, both managers and others. Their role is to handle the day-to-day implementation issues. It must be recognised that all the people in the change man- agement team, and its sub-groups, are in effect ‘change agents’. Nevertheless, as was the case at XYZ, change specialists should also be involved, i.e. people whose primary input is their experience in managing change. As was discussed in Chapter 9, the role of change agents is not just a technical one concerned with establishing plans and ordering their implementation. Change agents need a wide range of skills, not least of which is what Buchanan and Boddy (1992: 27) refer to as the ability to deploy ‘backstage activity’: ‘Backstaging’ is concerned with the exercise of ‘power skills’, with ‘intervening in politi- cal and cultural systems’, with influencing and negotiating and selling, and with ‘managing meaning’. Change agents also need the ability to deal with the unexpected. ‘Expect the unex- pected’ might well be the motto of most change agents. In discussing the role of change agents in Chapter 9, the article on ‘Grace, magic and miracles’ by Lichtenstein (1997) was cited. This showed that whilst a structured approach to change is necessary, it is often, by itself, not sufficient to ensure success. Success, Lichtenstein (1997: 393) argued, also requires change agents to have the ability and experience to recognise and take advantage of ‘intuitive, unexpected, and serendipitous’ situations. Therefore in choosing members of the change manage- ment team, it is necessary to have the right blend of skills for the change being undertaken, including the ability to deal with the unexpected. 2 Management structures. Because larger change projects, especially organisational transitions, are wide-ranging, have multiple objectives and can involve a high degree of uncertainty, existing control and reporting systems are unlikely to be ade- quate for managing them. For example, the more that a change project challenges existing power relations and resource allocation procedures, the more it is likely to
  • 485. 472 Chapter 15 · Organisational change and managerial choice encounter managerial resistance. In such cases, unless the change management team has a direct line to, and the public support of, senior managers or the CEO, the change process is likely to become bogged down or even abandoned. For exam- ple, one of the main reasons why Regional Managers did not block the organisational changes at XYZ was because the Managing Director was closely involved in the change process. He was aware that the Regional Managers might try to block changes that threatened their interests and standing, and he was pre- pared to take action if they did so, and he made sure the Regional Managers knew this. Where senior managers are less directly involved, effective reporting and man- agement structures need to be put in place in advance in order to provide direction, support, resources, and where necessary decisive interventions. 3 Activity planning. Beckhard and Harris (1987: 70–1) refer to this as a process of ‘getting from here to there’. They state that: ‘The activity plan is the road map for the change effort, so it is critical that it is realistic, effective and clear. Exhibit 15.8 describes Beckhard and Harris’s five key characteristics of an effective activity plan. Activity planning involves constructing a schedule for the change programme, citing the main activities and events that must occur if the transition is to be suc- cessful. It must be recognised, however, that not all the elements of a large change programme can be planned in detail in advance. Such programmes are by their nature multi-level, multi-stage, can stretch over an extended time-frame, and can involve elements of backtracking and rethinking. However, as a change programme proceeds, it becomes possible for successive levels and stages to become clearer and for plans to become more detailed. It follows that, in order to stay on course, activ- ity planning should clearly identify and integrate key change events and stages and ensure they are linked to the organisation’s change goals and priorities. Activity planning should also gain top management approval, should be cost-effective, and should remain adaptable as feedback is received during the change process. Activity planning therefore comprises the final and intermediate objectives, and ensures that where and when possible these are tied to a specific timetable in order to avoid uncertainty amongst those who have to carry out the changes. Exhibit 15.8 Activity planning The five characteristics of an effective activity plan ■ Relevance – activities are clearly linked to the change goals and priorities ■ Specificity – activities are clearly identified rather than broadly generalized ■ Integration – the parts are closely connected ■ Chronology – there is a logical sequence of events ■ Adaptability – there are contingency plans for adjusting to unexpected forces Source: Beckhard and Harris (1987: 72) 4 Commitment planning. This activity involves identifying key people and groups whose commitment is needed, and deciding how to gain their support. Beckhard and Harris (1987: 92) observe that, ‘… in any complex change process, there is a
  • 486. The Choice Management–Change Management model 473 critical mass of individuals or groups whose active commitment is necessary to pro- vide the energy for change to occur.’ Designating someone as a key person is concerned less with their nominal position or level of authority in an organisation than with their ability to block or promote particular changes. This may be because they have power to dispense or withhold specific resources or information, or because, as Exhibit 15.9 shows, others look to them for guidance or leadership, even though they may have no formal role in this respect. Exhibit 15.9 The importance of commitment Getting rid of the bonus Northern Engineering is a very efficient and progressive manufacturing company which has successfully introduced many Japanese techniques for improving its business. However, it did operate a shopfloor bonus system based on individual output. It recog- nised that this was detrimental to quality but felt that the workforce would strongly resist any effort to change it. Eventually though, the company decided it would offer the work- force a very tempting financial package to buy out the bonus. The Operations Director was the man responsible for selling the idea to the workforce. He did this through a series of presentations, to each of the company’s three shifts. The group he was most concerned about were the night shift. These were the people he seldom met and who had shown the least commitment to change in the past. The Operations Director described his experience with the night shift: They work ten while six, four nights a week. I went to brief them at the beginning of their shift. The pres- entation took about 20 minutes and then I opened it up for questions. All through my presentation, this big bloke on the front row had been staring at me with a disgruntled look on his face. When I finished he stood up and everybody looked at him in an expectant fashion. When he began talking, I thought, ‘I’m sunk’. He said, ‘It’s the same as usual. You only see the bosses when they want to take something off you.’ Others on the shift nodded in agreement at this. He then went on, ‘Once they take the bonus off us, we won’t get it back. Some might be OK, but others’ll lose money. But, this is not a bad com- pany, so I think we should give them a chance.’ He sat down, nobody else said anything, and it was agreed, the bonus would go. I was totally flummoxed. The bloke’s body language, his tone, his first words, all indicated that he was against it. I was very, very lucky; if he’d gone against the idea, I could see that everybody would have gone with him. What I learned that night was a very valuable lesson. The next time I have to talk to the night shift, I’ll get hold of that bloke first and win him over. The case of the PPC in Chapter 11 is an example of where the organisation does not appear to have recognised the importance of commitment planning, whereas the case of XYZ in Chapter 12 is an example of where the company recognised it needed to gain the commitment of key staff in planning and implementing change. Exhibit 15.10 shows the main steps in developing a commitment plan. Beckhard and Harris (1987) note, however, that even where the commitment of an individual or group is necessary, it is not necessary to gain the same level of commitment from all. They identify three kinds of commitment: Let it happen – i.e. do not obstruct the change. Help it happen – i.e. participate in the change process. Make it happen – i.e. drive the change.
  • 487. 474 Chapter 15 · Organisational change and managerial choice Exhibit 15.10 Commitment planning A commitment plan is a strategy, described in a series of action steps, devised to secure the support of those [individuals and groups] which are vital to the change effort. The steps in developing a commitment plan are: 1. Identify target individuals or groups whose commitment is necessary. 2. Define the critical mass needed to ensure the effectiveness of the change. 3. Develop a plan for getting the commitment of the critical mass. 4. Develop a monitoring system to assess the progress. Source: Beckhard and Harris (1987: 93) For most kinds of change, success depends on winning the commitment of key staff. Without this support, it will be impossible to mobilise the energy necessary to start the change process and keep it moving to a successful conclusion. However, whilst most managers, with some encouragement, might be able to identify the crit- ical mass, many would lack the skills and motivation to win them over. This is why the participation of experienced change agents, with the necessary ‘backstage’ expertise, is crucial to the change process. 5 Audits and post-audits. It is important to monitor progress and see to what extent objectives are being met. This allows plans to be modified in the light of experi- ence. It also allows for opportunities to improve on the original objective to be identified or created. The more uncertain and unclear the change process, the greater the need for periodic review. After the change, or when a particular mile- stone has been passed, a post-audit should be carried out (a) to establish that the objectives have really been met, and (b) to ascertain what lessons can be learned for future projects. In addition, periodic reviews give senior managers the chance to praise, support and encourage those carrying out the change. Though the auditing process sounds straightforward, it rarely is. Large projects, in particular, are collections of a number of relatively smaller sub-projects and, as Kotter (1996: 25) remarks, ‘Because we are talking about multiple steps and multi- ple projects, the end result is often complex, dynamic, messy, and scary.’ These ‘multiple projects’ start at different times and operate at different levels and in dif- ferent areas of an organisation. Some of these sub-projects will run concurrently, some consecutively and a few may even be largely free-standing. By their nature, they will also be geared to different sub-objectives, which may need to be moni- tored and measured in different ways. Seen in this way, it becomes easier to understand why conducting audits and post-audits, and even day-to-day monitor- ing of progress, can be exceedingly difficult but is also exceedingly necessary. Nor is the post-audit the end of the line: a chance for people to rest on their laurels. It can be another opportunity for improvement. The post-audit at XYZ, as shown in Chapter 12, was turned into an opportunity for continuing to drive the change process forward, by the simple expedient of asking each manager to identify two initiatives they would personally take to reinforce and enhance the benefits from the company’s new organisational structure. This is an example of what Kotter (1996: 21) refers to as ‘consolidating gains and producing more change.’
  • 488. The Choice Management–Change Management model 475 6 Training and development. This is a key part of any change project and takes a number of forms. The obvious one is in relation to new skills and competences that might be necessary. Furthermore, as the case studies show, training and develop- ment can have a number of other purposes. They may aim to give staff the skills to undertake the change themselves. It may be the intention to leave them with the ability to pursue continuous improvement, once the change has been substantially achieved, or training and development may be intended to make them aware of the need for change and to win them over. Also, there is a need to give general aware- ness training to those in the organisation who might be indirectly affected. Even where the primary objective is to enhance skills, training can also contribute to other objectives, such as culture change, by structuring it in such a way that train- ing promotes teamworking or inter-departmental cooperation. To ensure that the various types of training are targeted at the right people or groups, a training pro- gramme – starting before implementation and continuing after completion – should be established, showing who needs training, the form of the training and when it will take place. Looking wider than just individual change projects and pro- grammes, as Burnes (2003) has argued, there are many benefits to formally linking an organisation’s overall management and staff development programme with its various change initiatives. Burnes comments that many of the skills and compe- tences that organisations wish to develop in staff and managers are the same ones necessary for bringing about successful change. Therefore, management and staff development programmes can provide the human resources necessary for manag- ing change, and change projects can provide the real learning opportunities that staff and managers need to develop their skills and competences. The link between management development and change will be returned to in Chapter 16. There is often a tendency to portray the planning element of change as a technical exercise involved with timetabling and resource allocation. Though planning change is in some ways a ‘technical’ issue, as the above six activities show, it is also very much a people issue. The success of any change effort is always likely to hinge on an organisation’s ability to involve and motivate the people concerned and those whose support is necessary. People Chapter 10 showed that organisational change takes many forms. It can be of a pre- dominantly structural or technical nature which requires little of individuals in terms of behavioural or attitudinal change. On the other hand, as the case studies in Part 3 have shown, increasingly the objective of change is to modify the attitudes and behav- iours of individuals and groups, sometimes radically so. People are being required to reconsider their attitudes towards how work is performed, how they behave towards their colleagues internally, and their attitudes to their counterparts externally. Whatever form it takes, however, if it is to be successful, there are three people- related activities that need to be undertaken: creating a willingness to change; involving people; and sustaining the momentum. Creating a willingness to change Even where change is purely of a technical or structural form, there has to be willing- ness amongst those concerned to change: to accept the new arrangements. In an ideal
  • 489. 476 Chapter 15 · Organisational change and managerial choice world, organisations would want everyone to buy into a change project. However, as mentioned above, the important issue is to win over what Beckhard and Harris (1987: 92) refer to as the ‘critical mass of individuals or groups whose active commit- ment is necessary to provide the energy for change to occur.’ There are organisations who have put, and are continuing to put, a great deal of effort into creating a climate where change is accepted as the norm and the critical mass is already present or needs little effort to assemble. As described in Chapters 11 and 12, Oticon and XYZ are examples of this. Most organisations, however, are still at the stage where they have to convince staff of the need for change. This is especially the case in those organisa- tions, such as GK in Chapter 12, where each change project is perceived to be a one-off event, almost an exception to the ‘normal’ flow of organisational life. For many people, organisational change involves moving from the known to the unknown, with the possibility of loss as well as gain. In such situations, it is often the case that those who fear they will lose out will vociferously oppose any change, whilst those who believe they will gain from the change will keep quiet for fear of antagonising the losers. This was a point most famously made by Niccolo Machiavelli (1515: Vl–1): And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduc- tion of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. Organisations, therefore, in seeking to create a willingness and a readiness for change, need to be aware that stressing the positive aspects of any proposed change may have much less impact than they might imagine. This point was recognised by Lewin (1947a) when he argued that the status quo needs to be destabilised before old behaviour can be discarded (unlearnt) and new behaviour successfully adopted. He referred to this process as ‘unfreezing’ (see Chapter 8). Drawing on his work on Field Theory, Lewin recognised that the status quo occurred when the forces for change and the forces for stability were equal (see Figure 15.2). To bring about change, one had to increase the strength of the former and reduce that of the latter. Like Machiavelli, however, he also recognised that making proposed changes seem attrac- tive had less effect on increasing the pressure for change than making the current situation less attractive, i.e. it is often easier to create a readiness for change by The Forces for Forces for status change stability quo Figure 15.2 Maintaining the status quo
  • 490. The Choice Management–Change Management model 477 making people dissatisfied with their current situation, and thus prepared to consider alternatives, than to try to paint a rosy picture of the future. Kotter (1996: 36) echoed this point when he stated that: ‘Establishing a sense of urgency is crucial to gaining needed cooperation’. For Kotter (1996: 42): Increasing urgency demands that you remove sources of complacency or minimize their impact: for instance, eliminating such signs of excess as a big corporate air force; setting higher standards both formally in the planning process and informally in day-to-day interac- tions; changing internal measurement systems that focus on the wrong indexes; vastly increasing the amount of external performance feedback everyone gets; rewarding both honest talk in meetings and people who are willing to confront problems; and stopping baseless happy talk from the top. In order to create a willingness for change, a sense of urgency, a feeling of dissatis- faction with the present, there are four steps an organisation needs to take: 1 Make people aware of the pressures for change. The organisation should inform employees on a continuous basis of its plans for the future, the competitive/market pressures it faces, customer requirements and the performance of its key competi- tors. This should be a participative process where staff have opportunity to question, make comments and make suggestions. Many companies now encourage staff at all levels to spend time meeting and working with customers. Customers are also increasingly being invited to come and give direct feedback to staff and managers. The aim is to make staff aware of what customers want and do not want and, particularly, to highlight the organisation’s shortcomings. This seems to be a development that is common to both private and public sector organisations (Crawford et al, 2003; Kotter, 1996). Obviously, promoting the vision and explain- ing the strategic plan are also vital components in this. Through this approach, members of the organisation come to appreciate that change is not only inevitable, but is being undertaken to safeguard rather than threaten their future. It is also necessary to use informal as well as formal channels of communication. In any organisation, department or team there are individuals who are opinion-formers: people to whom others look for guidance. They may not hold any position of power or authority but, as the example in Exhibit 15.9 shows, they do have influ- ence. Therefore, to get the message across successfully, managers must identify who these people are and seek to ensure that they not only understand the message being transmitted, but will also pass a favourable judgment on it. 2 Give regular feedback on the performance of individual processes and areas of activity within the organisation. This allows a company to draw attention to any discrepancy between actual performance and desired present and future perform- ance. The feedback has to be in a form that people can relate to and act on. Telling a team that it is losing money is less useful than giving them feedback on produc- tivity and quality. Feedback also has to be timely. Discussing yesterday’s performance is useful in getting staff to identify and address problems; discussing last year’s performance is rarely so. Also, giving people the skills and authority to undertake improvement activities, as XYZ did with its Kaizen initiatives, is likely to make people more receptive to feedback because they can do something to
  • 491. 478 Chapter 15 · Organisational change and managerial choice improve the situation. In addition, it makes a difference who provides and delivers the feedback. A quarterly or annual meeting led by the CEO may have little impact. However, as mentioned above, direct and timely feedback from customers and prod- uct and service users, whether internal or external, is likely to have a much greater impact. Once again, the form of this and the recipient’s ability to act upon it is also important. Feedback can encourage those concerned to begin to think about how their performance can be improved, and prepare them for the need for change. In looking at the case study companies, it is noticeable that there was a greater readi- ness to change in those organisations where management was open about its objectives and the company’s or function’s current performance than in those organ- isations where information was guarded. This can clearly be seen in Oticon, XYZ and TRW. Conversely, in the PPC, suspicion over the organisation’s objectives led to resistance to change. In GK, suspicion over the objectives of some individuals led to resistance to change. Therefore, openness helps people to understand the need for change, which is an essential step on the road to achieving change. 3 Understand people’s fears and concerns. One of the major mistakes companies can make when introducing change is to fail to recognise, and deal with, the real and legitimate fears of the managers and staff. Though people’s concerns tend to focus on the proposed change, they will also be strongly influenced by the outcome of previ- ous change initiatives. In the case of Volvo and XYZ, where past changes had been successful, this appeared to act to reduce concerns. In the case of the PPC, however, the employees’ experience of privatisation is likely to increase fears and suspicion in the future. This is partly to do with the fact that they saw privatisation as threatening their jobs and careers, which it did, but also to do with the way it was managed: they felt that they were not consulted or informed about changes. This led to a lack of cooperation from staff and trade unions. Similarly, the failure by senior managers at TRW to recognise or anticipate the concerns of their counterparts at Rover created a history of mistrust between the two companies that nearly led to the termination of a highly beneficial alliance. The new Managing Director at XYZ, on the other hand, understood that people had to be won over and their concerns addressed. This appears to be a key lesson that can be drawn from the success achieved by XYZ in introducing its many change initiatives. Organisations need to recognise that change does create uncertainty and that some individuals and groups may resist, or may not fully cooperate with it, if they fear the consequences. In this respect, resistance can be seen as a signal that there is something wrong with the change process or its objec- tives rather than with those who are opposing or questioning it. From this perspective, resistance can be viewed as positive: it reminds the organisation that it has not considered all the consequences of its actions, and forces it to review its plans. It follows that those championing change need to pay special attention to the potential for resistance, both in terms of the adverse consequences it can bring and the underlying problems it may indicate. They also need to pay close attention to the organisation’s past history of change and the extent to which this reduces or enhances people’s fears and concerns. 4 Publicise successful change. In order to reduce fears and create a positive attitude towards change, companies should publicise the projects that are seen as models of how to undertake change, and the positive effects change can have for employees. This does not mean that mistakes should be hidden or poor outcomes ignored; these should be examined, explained and lessons learned. Staff should, however, be
  • 492. The Choice Management–Change Management model 479 encouraged to expect and set credible and positive outcomes for change pro- grammes. Once again, the experience of the case study companies illustrates this point. At Volvo, there have now been three decades of successful change, which have produced a positive attitude amongst employees and managers alike. It is also change that has been well publicised both inside and outside the company, and has been praised by independent academics who have examined it. Staff and managers can see the effects of Volvo’s commitment to Job Design; they can see that Job Design has led to improvements for all concerned. Therefore, the wide publicity given to, and the rigorous examination of, its past Job Design initiatives have helped Volvo to reduce their employees’ fears of future changes. The Rover–TRW partnership described in Chapter 12 is an example of successful change that was not well publicised. The later problems with Rover’s senior managers could have been avoided if TRW and Rover’s operational managers had explained to their senior colleagues what they were doing and why. This would have allowed issues to be explored and a positive attitude developed. As the above four steps show, in order to create a willingness for change, an effec- tive two-way flow of information is vital. Even where this is the case, however, organisations should not take for granted the willingness of staff and managers to undertake every change that is proposed. It is noticeable that even after XYZ had spent a number of years creating a willingness and readiness for change, it undertook a change readiness audit before embarking on the project to change its organisation structure. Not only did this allow it to estimate the degree of readiness for change, but it also formed part of the second people-related activity, involving people in the change project. Involving people Chapter 14 reviewed the three main theories that underpin our understanding of employee involvement, i.e. cognitive dissonance, the ‘depth’ of intervention and the psychological contract. In summary, the argument from these theories is that the more a change challenges a person or group’s existing norms of behaviour, beliefs or assumptions, the more resistance it is likely to meet. It follows from this that the appropriateness of an involvement strategy needs to be judged less by the type of change being considered and more by how people will react to it. Changes that may readily be accepted in some organisations may be strongly resisted in others. Likewise, some major changes may meet with much less reaction than much smaller ones. For example, over the last decade it has become the norm for staff in public services to give their name on the telephone and wear name badges when meeting members of the public. Previously, staff were not encouraged to give their name or to wear a name badge. When this was first introduced, it met with a level of hostility from staff that appeared to be greatly out of proportion to what was being suggested. The reason for this was that many staff felt threatened, exposed to public scrutiny, by having to give their name. In developing an involvement strategy, it is also important to remember Beckhard and Harris’ (1987) advice regarding levels of commitment. They argued that the key objective was for organisations to gain the active support of the critical mass of people necessary to bring about the change. This is not all, or even necessarily a majority, of those affected. Nor is the same level of support necessary from all of the
  • 493. 480 Chapter 15 · Organisational change and managerial choice critical mass. Instead it can be split into three groups: those who let it happen, those who help it to happen and those who make it happen. In addition, an involvement strategy needs to take account of the size and duration of the proposed change project. Though some change projects can be short-lived and, possibly, easily achieved, many are not. In some cases, achieving a successful change can be a long and complex task. There will be difficult obstacles to overcome, not all of which can be anticipated in advance. To gain and maintain the active involvement of the critical mass, and to develop the momentum necessary to ensure that the proj- ect is successful, is not a one-off occurrence but an ongoing activity stretching over the lifetime of the change project. There are two main activities that help secure and maintain this level of involvement: ■ Communication. As well as being key to gaining people’s involvement, communi- cation is an essential element of all the above change activities. In terms of involvement, the establishment of a regular and effective communications process can significantly reduce people’s levels of uncertainty. In turn, this eliminates one of the major obstacles to people’s willingness to get involved in the change process. The purpose of communication is not just to inform staff that change is being con- sidered, but by drawing them into the discussions and debates about the need for and form of the change, and allowing them the freedom to discuss the issues involved openly, to get them to convince themselves of the need for change. The evidence that this is one of the most effective ways of gaining support goes back to the work of Kurt Lewin in the 1940s (Lewin, 1999a). During the Second World War, he was asked by the American government to find an effective way of getting people to change their eating habits. Through a series of now classic experiments, he demonstrated that the most effective method of convincing people to change their behaviour was by providing groups with information for them to evaluate and discuss, and letting the group come to its own decision. Once the decision had been made by the group, it exerted a strong pressure on all the individuals con- cerned to adhere to the group’s decision. Communication should be a regular rather than a one-off exercise. Nor should it be pursued through one or two channels, such as newsletters or team briefings. As mentioned above when discussing the need to make people aware of the need for change, organisations have a wide range of formal and informal channels for com- munication. They should consciously use all of these. As a rule of thumb, it should be recognised that, whilst people are often willing to believe the wildest rumour from unofficial sources, anything from management has to be stated at least six times in six different ways before people start giving it credence. In some cases, where all those concerned become directly involved in the change process, communication is less of an issue. An example of this is the first phase of change at GK Printers, where all those affected were involved. Another example was Speedy’s Stationery Management initiative. However, the small size of the groups concerned in these instances makes them something of an exception. In most cases, it is impractical to give everyone this level of involvement; therefore, as at XYZ and Volvo, it is important to communicate proposals from the outset. This involves not only providing information, but also listening to the response and taking it seriously. This has a number of benefits. The change management team will
  • 494. The Choice Management–Change Management model 481 very quickly pick up any worries and concerns and can respond to these; they will also be made aware of aspects that need to be taken into consideration which have been overlooked; and assumptions that have been made will be tested and some- times challenged. In addition, this will assist in identifying issues, individuals and groups who might obstruct change. In terms of the three target groups for commit- ment, i.e. those who let it happen, those who help it to happen and those who make it happen, communication can secure the commitment of the first but, by itself, is unlikely to secure the commitment of the other two groups. Their commitment will come through and be tested by their involvement in the change process. ■ Getting people involved. One of the most vital initiatives an organisation can take with staff is not to treat them as objects of, or obstacles to, change, but to involve them in it and make them responsible for it. There are good examples of this in Oticon, XYZ, GK, TRW and Speedy. Particularly where large-scale projects are concerned, not everyone can be involved in all aspects of planning and execution. However, as mentioned above, it is important to identify and enrol those whose assistance is necessary and those who are essential to make change happen. This should be the main criterion for selecting who will be involved. Obviously, where it is possible, it is a good idea to ensure that all those most closely affected are involved in some, if not all, aspects. Similarly, again where possible, responsibility for aspects of the change project should be given to those who will be directly affected by the result. In many cases, however, the numbers involved will prevent all those affected being involved and, consequently, managers will need to select those to involve. Sometimes, volunteers will be asked for. Sometimes, people who are perceived to have ‘the right attitude’ will be chosen. On the other hand, as the GK case showed, the presence of sceptics, people prepared to challenge assump- tions and ask awkward questions, can be useful. This not only ensures that awkward questions are asked but can also, if the sceptic is won over, create a pow- erful advocate for the change. Likewise, it is useful to consider involving key opinion-formers: people to whom their colleagues look for guidance. As the above shows, communication and involvement are essential to gaining people’s understanding of the need for change. Change can be a slow and difficult process, however, and commitment can diminish unless steps are taken to maintain it. This leads on to the third and last people-related activity, sustaining the momentum. Sustaining the momentum Even in the best-run organisations, it sometimes happens that initial enthusiasm for change wanes and, in the face of the normal day-to-day pressures to meet customer needs, progress becomes slower and can grind to a halt. When the CEO in Oticon thought that its change effort was running out of steam, he ‘exploded the organisa- tion’ in order to breathe fresh life into the change process. In some less well-run organisations, however, the momentum may not even be present in the beginning. In such situations, people will return to the methods and types of behaviour with which they are familiar. Given that momentum does not arise of itself nor continue without encouragement, organisations need to consider how to build and sustain it. The points already made above regarding planning and implementation, and especially involvement, are clearly part of this. In addition, organisations should also:
  • 495. 482 Chapter 15 · Organisational change and managerial choice ■ Provide resources for change. Kotter (1996: 35) states that: In an organization with 100 employees, at least two dozen must go far beyond the normal call of duty to produce a significant change. In a firm of 100,000 employees, the same might require 15,000 or more. For a one-off change project of short duration, it might be acceptable to ask staff to ‘go far beyond the normal course of duty’. However, for many organisations, as Part 3 demonstrated, change is a way of life. Also, in many organisations, staff and managers have to work long hours merely to get their normal work done. In cases such as these, and indeed in most cases, it is probably difficult, and certainly unwise, to ask staff to undertake change initiatives without some additional resources, whether these be financial or human. In cases where staff are required to keep up the same level of output during the transition phase, it may require consid- erable additional resources to achieve this. The 1999 case of the UK’s Passport Office, which failed to provide sufficient extra staff during the introduction of a new computer system, is a case in point. Not only did this result in inexcusable delays in issuing passports, but the Passport Office eventually had to provide the extra staff anyway. It is important, therefore, that the need for any extra resources is identified and extra resources allocated, whether for the provision of temporary staff, the training of existing staff, senior management time or whatever. As the example of the Passport Office showed, nothing is guaranteed to be more demoral- ising than having to make changes without some additional resources or support. ■ Give support to the change agents. As Buchanan and Boddy (1992) noted, an enor- mous responsibility falls upon the change management team. They have not only to plan and oversee the change project, but also to motivate others and deal with difficulties, sometimes very personal problems. However, just as they have to sup- port others, so too must they receive support themselves. Otherwise they may be the ones who become demoralised and lose their ability to motivate others. Sometimes this can be done by offering them financial rewards, sometimes by the promise of future advancement but often the most effective method is through public praise of the individuals concerned. In Chapter 2, we drew attention to Chester Barnard’s (1938) observation that monetary rewards are often less effective than non-monetary ones, such as praise. This does not mean that monetary rewards should be avoided, but it does mean that too great a reliance on them may be counter productive. ■ Develop new competences and skills. This reiterates the point made when dis- cussing ‘planning the change’ above. Change frequently demands new knowledge, skills and competences. Increasingly, managers are having to learn new leadership styles, staff are having to learn to work as teams, and all are expected to be innova- tors and improvers. This requires more than just training and re-training. It may also include on-the-job counselling and coaching. Therefore, organisations need to consider what is required, who requires it and – the difficult part – how to deliver it in a way that encourages rather than threatens staff. XYZ is a good example of a company who recognised that managerial and staff development go hand-in-hand with organisational change. This can be an expensive process, however, both in terms of staff time and the cost of training and development. This, once again, emphasises the need to provide additional resources for change.
  • 496. The Choice Management–Change Management model 483 ■ Reinforce desired behaviour. In organisations, people generally do those things that bring rewards or avoid criticism. Consequently, one of the most effective ways of sustaining the momentum for change is to reinforce the kinds of behaviour required to make it successful. Sometimes this may be monetary, such as increased pay or bonuses for particular types of activity or progress. Sometimes it may be symbolic, such as Oticon’s tearing down of walls and elimination of personal desks. Sometimes it may be through recognition, whereby senior managers openly or privately single out individuals or groups for special praise. Such activities are particularly important during the early stages of change, when achieving an identi- fiable and openly-recognised success helps participants develop a positive attitude about the change project. In XYZ, it could be argued that the change in organisa- tional structure was a method of reinforcing the behavioural changes that had already taken place. Alternatively, it could be said that they reinforced the new organisational structure. However one views XYZ, the key point is that the behav- ioural changes might have been difficult to sustain without the new structure and, certainly, the new structure would have been much less effective without the prior behavioural changes. In looking at the three interlinked elements that make up the change process – objectives and outcomes, planning the change, and people – we can see why change is so complex and why so many initiatives fail. Though there are technical aspects that must be accomplished, no matter what type of change is involved, it can never be a purely technical exercise. Establishing objectives involves testing assumptions and challenging preconceived ideas. It also involves gathering both fact and opinion, and making judgments about which is the most important. Similarly, planning change often involves an impressive and daunting array of challenges and activities, some of which are amenable to straightforward techniques of analysis and decision, many of which are not. The final element, though, is the most complex: people. People are not just important because they are often the ‘object’ of change, but also because they are the ones who have to carry it out. In a real sense, they are the glue that holds it together. They can influence the choice of objectives and the way change is planned. In turn, objectives and planning can also affect their willingness to accept or become involved in change. One final point: even after a change project has been ‘completed’, the story does not end there. As the Japanese have shown, even when change has resulted in a stable state being achieved, there always remains scope for improvement. Furthermore, as is clear from the case studies, many change projects are open-ended. Change will con- tinue to take place. Therefore, both in planning a project and evaluating its outcomes, it is necessary to identify the open-endedness of it, and the degree to which the final outcome will require a continuous improvement approach or a continuing change approach. As mentioned earlier, there is a marked difference, however, between organisations where change is seen as an everyday occurrence and those where it is seen as a one-off event. In the latter, it is very difficult to develop the capabilities and commitment necessary to achieve continuous improvement; whereas in the former, continuous improvement and continuous change, and the capabilities, skills and com- mitment required of both, go hand in hand.
  • 497. 484 Chapter 15 · Organisational change and managerial choice Conclusions This chapter has sought to merge the theory and practice of strategy development and change management as presented in Chapters 6–14. In doing so, it has also drawn on many of the arguments and insights into the behaviour, operation and rationality of organisations presented in Chapters 1–5. Based on these 14 chapters, this chapter intro- duced and elaborated on the Choice Management–Change Management model for understanding and managing organisational change. This comprised three interrelated organisational processes: the choice process, the trajectory process and the change process (see Figure 15.1). It was argued that not only did this model incorporate and go beyond both the Planned and Emergent approaches to strategy and change, but it also demonstrated how managers could attempt to change their organisation’s circum- stances to fit them to the approach that best suited them and their organisation. It was asserted that the Choice Management–Change Management model incorpo- rates the full scope of the various approaches to strategy and change, including the Planned and Emergent approaches, and that it also accommodates and explains the use of more directive approaches. However, one of the fundamental differences between this model and many other approaches to strategy and change is that it recognises that managers are active players rather than passive spectators in the devel- opment of their own organisations. The model is based on the assumption that not only can managers choose to align their organisation with the external conditions and constraints it faces, but they can also do the reverse and align these external condi- tions and constraints to their preferred way of structuring and running their organisation. Whether they choose to attempt to influence, alter or align their organi- sation to the circumstances it faces will depend on a range of issues, not least their own views about whether they or the organisation are better suited by a stable, planned situation or whether more turbulent, emergent conditions are preferable. Though the Choice Management–Change Management model appears to offer sig- nificant theoretical avenues for understanding how organisations and managers operate, it also offers considerable practical benefits as well. In Chapter 3, we exam- ined the Culture–Excellence perspective on organisations. The proponents of this view, especially Tom Peters, argue that organisations have no choice but to change radically if they are to survive. The Culture–Excellence theory is based on a particular view of the environment and other constraints organisations face. Assuming that this view is accurate, the Choice Management–Change Management model indicates that organisations need not radically restructure themselves, but could seek to influence the constraints they face to bring them more in line with their existing organisational arrangements. Even if, in the long term, organisations did have to structure them- selves along the lines advocated by Peters, Kanter and Handy, they could still seek to influence the conditions under which they operated to achieve this over a longer timescale than might otherwise be assumed. Indeed, as Chapter 3 revealed, this is just the approach the Japanese take. Between the 1950s and the 1980s, Japan’s leading organisations transformed themselves. This was achieved by slow and gradual trans- formation rather than by rapid shock tactics. Japanese companies achieved this gradual transformation by a combination of long-term vision allied to the ability to influence and restructure the constraints under which they operate, especially, as
  • 498. Test your learning 485 argued by Hamel and Prahalad (1989), their ability to change the rules of competi- tion in their particular industries. In so doing, they provide much support for Kanter et al’s (1992) view that a Long March is more effective than a Bold Stroke for build- ing competitive organisations. Therefore, the Choice Management–Change Management model, in conjunction with the Change Framework presented in Chapter 10, potentially at least, resolves the dispute between proponents of Planned and Emergent approaches to strategy devel- opment and change. It also raises fundamental questions, however, about what managers can do and what they do do in terms of running and shaping their organi- sations. In particular, it raises questions about the way that managers can make sense of their situation for themselves and others and, in so doing, construct alternative sce- narios or realities for their organisation’s future. Many writers, especially from the Culture–Excellence perspective, have made a case for visionary leadership being the key to an organisation’s success. Certainly, the transactional, steady-as-she-goes type of manager is very much out of favour (Kotter, 1996; Peters, 1997a; Senge, 1990). The case for transforming managers, as well as organisations, however, tends to be based on a biased view of what managers need to do and, often, only a shallow understanding of what they actually do. In order to come to grips with the nature of managerial work and the extent to which the Choice Management–Change Management model requires a rethink of how managers operate, the concluding chapter of this book will examine the role of managers. Test your learning ■ Short answer questions 1 Briefly describe the choice process. 2 How might a SWOT or PESTEL analysis help an organisation to understand better the context in which it operates? 3 What are the key features of the trajectory process? 4 Describe how an organisation might construct a vision for itself. 5 List the key components of the change process. 6 What does commitment planning involve? 7 Discuss the role of the change agent in planning and implementing change. ■ Essay questions 1 Critically evaluate the key linkages between the three processes that make up the Choice Management–Change Management model. 2 Use the Choice–Change model to assess one of the ten case studies from Part 3.
  • 499. Chapter 16 Management – roles and responsibilities Learning objectives After studying this chapter, you should be able to: ■ define globalisation and understand the importance of sustainability, workforce diversity and business ethics; ■ list the key duties of managers; ■ understand that much of what managers do is reactive and driven by expediency; ■ describe the three main perspectives on leadership; ■ identify the primary approaches to managerial development and education; ■ appreciate the differences between management and leadership and the different skills required for each; ■ explain the relationship between management, leadership and organisational change; ■ appreciate the need for managers to identify and examine the full range of choices facing them; ■ understand the impact of managers' decisions on society as a whole, and their wider and longer-term responsibilities.
  • 500. Introduction 487 Exhibit 16.1 A lesson in leadership Manage with mother FT As a lesson in leadership, the residential course I have everyone knows that 7pm is bedtime. I have also been on for the last four months has been quite come to see that choice is my enemy. To start the day something. Requiring 24-hour commitment seven by offering Cheerios, Coco Pops, Frosties or Honey days a week, it has been more gruelling than the Nuts is to ask for trouble. I offer Bran Flakes or noth- toughest Outward Bound exercise. There has been no ing, and breakfast is faster and smoother as a result. ‘facilitator’ to show the way, nor any schedule at all. A second problem is the non-executive director I Instead, I have been assigned a group of four young have been saddled with. Periodically he will pop in, people to manage, and left to get on with it. flagrantly disregard all the rules and then have the My group is aged between nought and seven, but cheek to offer advice in the fond belief that he despite their young age they have much in common understands the business. with top executives. Each is equipped with a tower- I have also discovered that both rewards and ing ego, an agenda all of their own and a disturbing punishments are poor motivational tools. Give a mixture of friendliness and outright hostility towards strawberry Chewit to one team member and before each other. They have awesome will-power, yet are you know it you find inflation has taken hold and strikingly incompetent at everyday tasks, needing you are handing out Chewits as a reward for getting help with eating, sleeping, crossing roads and so dressed. Punishments are even worse. forth. Rational behaviour is also a problem for most The first time you lose your temper you get of them; indeed the youngest shows scant sign of results; but to achieve the same effect on subse- rationality at all. My task, then, has been similar to quent occasions requires ever increasing quantities that facing every leader: how to get a group of diffi- of violence. Understanding this is one thing. Living by cult people to work happily together. it is another. On bad days I do nothing other than A little time spent with my four team members bribing and bollocking. and you start to understand why senior managers Like most chief executives, I have found that I get behave as they do. When you have witnessed a little feedback, and what I do get is inadequate. ‘I seven and a five-year-old fighting over the sharing of hate you, you’re poo,’ is not exactly constructive. I a bedroom, the failure of the merger between Glaxo am at the top, and it can be lonely up here. Not to Wellcome and SmithKline Beecham becomes a lot say stressful. The boss of a big company may lay easier to comprehend. Sir Richard Sykes and Jan awake fretting about his share price – being woken Leschly could not agree on who was going to have up every three hours by the youngest member may control of the bedside light nor on where their be nearly as bad. favourite teddies were going to go, so it turned out to So what is the answer? Surprise, surprise, it turns be impossible for them to share a bedroom after all. out to be complicated, exhausting and quite impossi- My course had hardly begun before I realised that ble to bring off. You have to be firm, but also nice command and control was the only way forward. In and approachable. You need to keep your temper the corporate world this model has sadly fallen from and motivate people by making them want to do the favour. But in my company rules and rigid structures job in hand. are essential. As chief executive I make sure that Source: Lucy Kellaway, Financial Times, 2 March 1998, p.14. Introduction Lucy Kellaway’s article, Exhibit 16.1, on the similarities between managing children and managing organisations will strike a chord with most parents and managers. Though written in a way that amuses, it raises serious questions concerning the nature of management: How can we control organisations? How can we motivate
  • 501. 488 Chapter 16 · Management – roles and responsibilities staff? How can we win over colleagues? The answer, as Kellaway states, ‘ … turns out to be complicated, exhausting and quite impossible to bring off’. Not all people have the same needs or can be motivated in the same way. Also, people’s needs change over time; what motivates them one day may have little effect the next. Neither do organi- sations, or their customers, suppliers and competitors, stand still. Faced with the vast array of present challenges, organisations must also look to the future. Over the past few years, with the advent of a new millennium, many writers and commentators have felt the urge to provide us with their views on the future. Sometimes these have a postmodern rosy glow about them, whilst often, in the wake of the dotcom collapse, they present a gloomy, doomsday picture of the future. As Kellaway’s article indi- cates, it is unlikely that the challenges facing managers in the future will get any easier but, one thing we do know about attempts to predict the future, as Exhibit 16.2 shows, is that they usually fall very short of the mark. Exhibit 16.2 Predicting the future This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. (Western Union internal memo, 1876) Airplanes are interesting toys, but of no military value. (Marshal Foch, 1911) Who the hell wants to hear actors talk? (HM Warner of Warner Brothers, 1927) I think there is a world market for maybe five computers. (Thomas Watson, Chairman IBM, 1943) This is unfortunately no excuse for ignoring the many serious and daunting chal- lenges that organisations and those who manage them, not to mention the world at large, have to face in the coming decades. The globalisation of world trade may open up new markets and create new opportunities, but it also brings with it new competi- tors and new uncertainties. The same holds true for scientific advance. The beneficial effects of computers are there for all to see, with the range of applications expanding daily. However, advances such as genetically modified crops and even genetically modified human beings are much more controversial and unpredictable. For most of the developed world, the spectre of an increasingly ageing population looms large. Then there is the reality of global warming, the dwindling of natural resources, the growing gap between rich and poor countries, and the threat to the natural world of indiscriminate industrialisation; we are reminded of these almost daily (Dunphy et al, 2003; Paton et al, 1996). Nevertheless, nothing is inevitable until it actually happens, and even then it may be reversed. Individual consumers and pressure groups have some influence, and govern- ments can pass laws; but in an age where organisations dominate our lives, where they appear to be more powerful then ever before, the role and performance of managers will be crucial. Managers will need to recognise that in the future, as in the past, regard- less of the particular issues involved, the environment in which their organisations operate will continue to change. They will also have to recognise that the appropriate- ness of their decisions will be judged by a wider set of criteria and a wider range of stakeholders than in the past. At the same time, managers will continue to have to find
  • 502. Globalisation and the challenge of change 489 ways of ensuring that their organisation and its environment, and the other constraints under which it operates, are, as far as possible, kept aligned. As pointed out in previous chapters, this does not mean that each and every organisation has to change rapidly and radically, though many will. Instead, managers can seek to influence the constraints under which their organisation operates, and the pace and timing of change, to make them more favourable to their preferred way of working. However, as in the past, over time, both organisations and their environments will change. As the case studies in Part 3 have shown, and as most people’s everyday experi- ences confirm, change is neither easy nor necessarily always successful. Regardless of this, organisations do change, either by design or default, and managers do play a crucial role in determining whether the outcome is success or failure. Managers are the ones who have the responsibility for ensuring that options are identified, choices made and action taken. They are also the ones who have the responsibility for making sense, presenting a coherent picture, of the events and developments that make up an organisation’s past, present and potential future. Therefore, in concluding this book, it is only right that we look at how well or not managers are equipped, or can be equipped, for this task. The chapter begins by examining the implications of globalisation, especially in terms of sustainability, workforce diversity and business ethics. This highlights the need for managers not just to acquire appropriate skills and competences but also to adopt appropriate behaviours. This leads on to a review of the literature on what managers are supposed to do and what they really do. This shows that, despite what leading thinkers such as Fayol and Weber believed and advocated, most managers are driven by expediency and operate in a responsive mode. The chapter then moves on to discuss the importance and nature of leadership in organisations. In particular, it seeks to identify the characteristics and contexts that make for effective leadership. Arising from this, the leadership role played by managers in the case studies is explored. This is followed by an examination of the education and development of managers, which leads on to a discussion of the relationship between management, leadership and change. The chapter and the book conclude by arguing that managers have an important responsibility to identify and exercise choice, when faced with situ- ations which require change. Though choice can be determined on a very narrow basis of short-term financial return, increasingly managers will have to take into account wider organisational and societal factors. Especially important in this respect is that managers should be prepared to question trends and advice that seem designed to increase organisational and societal instability and fragmentation. The interests of society in general and their own organisations in particular may be better served by seeking stability rather than promoting instability. Globalisation and the challenge of change Arguably, the biggest single challenge facing managers today is globalisation: the cre- ation of a unified world market place. Allied to globalisation, however, are three other challenges: how to achieve sustainability in a world of dwindling natural resources and increasing environmental pollution; how to manage an increasingly diverse workforce; and, at a time when business leaders are considered less trustwor- thy than ever before, how to manage ethically.
  • 503. 490 Chapter 16 · Management – roles and responsibilities Trade between different parts of the world has been taking place for thousands of years. In the last 20 to 30 years, however, and particularly since the fall of communism in Eastern Europe, the integration of the global economy appears to have gone through a step change. Whereas in the 1970s and 1980s it was common to talk about interna- tional brands such as Coca Cola and McDonald, it is now equally common to speak of global, transnational corporations that dominate their industries and gobble up the smaller companies. Examples of these include General Electric, Toyota, Mitsubishi, Microsoft, Merck, News International, Vodafone and Time Warner. One of the prime examples is Ford, which, as well as being a global brand, also owns Mazda in Japan, Volvo Cars in Sweden, and Aston Martin, Jaguar and Land Rover in the UK, not to mention having joint ventures in the world’s two most populous nations, India and China. One obvious manifestation of globalisation is that, in the developed world, we take for granted that our supermarkets will be stocked with our favourite foods from every part of the world all year round. Nor is globalisation merely an issue for large companies; it is affecting smaller organisations as well, whether through the threat of increased competition and takeover, or the promise of new markets. Like many hot topics that attract a great deal of attention, it is difficult to find an agreed definition of globalisation. For some, it is primarily an economic phenomenon, concerned with the integration and convergence of economic systems through the growth in international trade, investment and capital flows (Jones, 1995; Deresky, 2000). Others, though, see it as a much wider phenomenon involving social, cultural and technological exchanges that will ‘… transform our world into the beginnings of a global civilization, a new civilization of civilizations, that will blossom through the coming century’ (Schwartz and Leyden, 1997: 1). For Giddens (2002), the advent of new communications technolo- gies is leading to the ‘death of distance’ and making it possible to share knowledge and culture across the globe instantaneously and simultaneously. Some argue that globalisa- tion may also be sounding the death knoll of the nation state, as large trading blocks, based on Europe, North America and Asia and overseen by the World Trade Organisation, take over from the nation state (Deresky, 2000). Reich (1998), in an attempt to make sense of these differing perspectives, identifies the four main definitions of globalisation: a historical epoch; a confluence of economic phenomena; the hegemony of American values; and a technological and social revolution. Despite these different views as to what globalisation is, as Reich (1998) shows, there is some agreement amongst commentators as to what is driving it: the intensifi- cation of international competition, the fall of communism, economic liberalisation, the removal of trade barriers, and the advent of new communication technologies such as the Internet. It is these very real developments which make globalisation a key issue for managers rather than a passing fad. Globalisation is also a highly con- tentious issue which has given rise to a great deal of bitter conflict between those who see it as a force for global good and those who see it as the oppression of poor nations by rich ones (Economist, 2002; Klein, 2001). To a great extent, much of the pro and anti argument revolves around the size and behaviour of the large, transna- tional corporations that are coming to dominate the global economy. For example: ■ more than half of the 1,000 largest economies in the world are private corporations; ■ the sales of Ford and General Motors combined are greater than the combined GDP of sub-Saharan Africa;
  • 504. Globalisation and the challenge of change 491 ■ the combined turnover of the six largest Japanese trading companies is almost as big as the national incomes of all the nations in Latin America (Globalisation Guide.org, 2003). For the pro-globalisation camp, this provides the rationale for the creation of global institutions such as the World Trade Organisation (WTO) and the World Bank that can set the rules for and police such organisations. For the antis, this shows that big business is the dominant force in globalisation and the WTO and the World Bank exist to do their bidding. Regardless of whether one see globalisation as a force for good or ill, organisations have to come to terms with the changing nature of domestic and international trade. They have to live with a situation where the rules that govern their behaviour are set by supra-national bodies such as the EU and WTO. In addition, as mentioned above, they need to come to terms with three other issues whose importance has been inten- sified by globalisation, namely sustainability, workforce diversity, and business ethics. ■ Sustainability Globalisation both derives from and is driving economic development across the globe; the greater the level of economic integration across the planet, the greater the level of consumption. As we can see around us every day, however, the result of this rush for ever greater levels of economic growth and consumption is the dwindling and depredation of natural resources, increasing levels of pollution and rapid global warming (Paton et al, 1996). As Lines (2002: 126–7) argues: The regenerative and assimilative capacities of the biosphere cannot support even the cur- rent levels of consumption, much less the manifold increase required to generalize to higher standards of living worldwide. Still less can the planet afford an ever-growing human popu- lation striving to consume more per-capita. It would be good to think that the sustainability of the planet will be secured by cooperation between governments. However, as the failure of the USA to sign up to the Kyoto Protocol on achieving reductions in the emissions of greenhouse gases shows, this does not seem likely. Even if such accords are signed, we also know that organisations, driven by market forces, will have a major influence on how they are formulated and will have the major responsibility for their implementation. As Dunphy and Griffiths (1998: 183) argued in their book The Sustainable Corporation: There is a widespread view that governments must solve environmental problems. However, the major multinationals outstrip many of the world's national economies in terms of wealth and power, and their global coverage allows them to escape the requirements of par- ticular governments seeking to place severe environmental restrictions on them. They can simply move their operations across national borders. The world's multinationals are in fact more powerful than most national governments. Nevertheless, Dunphy and Griffiths do believe that it is possible for these large organ- isations to change their ways. They point out that those who run organisations live in the same world as the rest of us, and, to a large extent, experience the consequences
  • 505. 492 Chapter 16 · Management – roles and responsibilities of their actions in the same way everyone else does. Therefore, they argue, managers cannot divorce their actions from the wider impact they have on society; nor can they ignore the fact that a sustainable future for their organisations requires a sustainable future for the world. This presents a major challenge for managers, particularly at the senior level. Whilst operating in competitive and hostile markets, they have to marry the desire of their shareholders for increased profit with the need to act in the wider and longer-term interests of society as a whole. They will not achieve this without pressure and support from governments and the force of public opinion. Nor, as Dunphy et al (2003) show, will managers be able to create sustainable organisations unless they have the change management skills to do so. Dunphy et al argue that both incremental and transformational approaches can be used to create sustainable organ- isations. However, the appropriateness of either depends on the circumstances of the organisation in question. Therefore, the role of managers is not just to lead change but to develop the skills necessary to identify which approach to change, is suitable for their organisation. Furthermore, as Docherty et al (2002: 12) maintain, sustainability is not just about the relationship of organisations to their environment, or the depletion of natural resources: Sustainability … encompasses three levels: the individual, the organizational and the socie- tal. Sustainability at one level cannot be built on the exploitation of the others. These levels are intimately related to the organization's key stakeholders: personnel, customers, owners and society. An organization cannot be sustainable by prioritizing the goals and needs of some stakeholders at the expense of others … Thus sustainability has a value basis in the due considerations and balancing of different stakeholders' legitimate needs and goals. Therefore, as Dunphy et al (2003) argue, life cannot be sustained on earth unless we create sustainable organisations. However, Docherty et al (2002) point out that creat- ing sustainable organisations cannot be achieved unless all stakeholders, including the organisation’s own members, are treated in an equitable and ethical manner. This is why the issues of workforce diversity and business ethics are so important. ■ Workforce diversity Jones et al (2000: 166–7) observe that: Diversity is dissimilarities – differences – among people due to age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, and capabilities/disabilities … Diversity raises important ethical issues and social responsibility issues as well. It is also a critical issue for organizations, one that if not handled well can surely bring an organization to its knees, especially in our increasing global environment. Ever since the Industrial Revolution ushered in the age of the organisation, the work- force has become increasingly diverse, though faster in some industries and countries than others. Globalisation is intensifying workforce diversity in three key ways. The first and most obvious is that the growth of the transnational corporations means that, increasingly, companies are being owned and managed by people from different countries and cultures. The fact, given above, that Ford runs Volvo in Sweden, Mazda
  • 506. Globalisation and the challenge of change 493 in Japan and Land Rover in the UK is a typical example. However, there are also many examples of Japanese and South Korean companies, such as Honda and Hyundai, establishing factories in Europe and the USA. Companies are also increasingly buying products and services from overseas. The epitome of German manufacturing, Mercedes Benz, now purchases car components from India, and many big UK companies, such as BT and Aviva, have relocated Call Centres to India. The second effect of globalisation concerns the migration and recruitment of workers from other countries. Richer coun- tries have always been a magnet for workers from poorer countries. The emigration from Europe to the USA in the nineteenth century is a case in point. It offered the potential for a better life for immigrants and met the severe shortage of workers the USA was experiencing. The last 50 years has seen the mass migration of people from South America to the USA. In some American cities, Hispanics are now the largest ethnic grouping and by 2050 will make up some 25 per cent of the population of the USA (Deresky, 2000). The transportation and communications infrastructures that have made globalisation possible also make it easier to move from one country to another, whether legally or illegally, to seek a better life. Also, with globalisation, the need to move skilled labour from where it is plentiful to where it is scarce, or where it can be better rewarded, is an increasingly important factor of competitiveness. In recent years, for example, the UK government has sought to recruit medical staff from across the world to compensate for staff shortages in the National Health Service. The third effect of globalisation on diversity has been to increase the participation rate of women and minority groups in the workforce. As economies develop, they require greater amounts of labour. The tendency is first of all to recruit male workers, and often to give preference to ones from particular groups, whether these be based on grounds of race, tribe, religion, age or sexual orientation. As demand for labour grows, other groups are drawn into the workforce. In the twentieth century, for example, the participation of women in the workforce of most developed countries probably accounted for the biggest increase in diversity. It has always be the case that the USA tends to exemplify workforce diversity. Jones et al (2000: 167) recommend their readers to consider the following statistics: Thirty percent of the residents of New York City were born in foreign countries. 33 percent of the residents of San Francisco are Asian, 70 percent of the residents of Washington, D.C., are African-American, and approximately 70 percent of the people currently entering the workforce are either women or minorities. Between 1979 and 1992, the number of women in the workforce increased at twice the rate of men, and currently 1 out of 10 U.S. workers is employed in a company owned by women. … There are many more women and minori- ties – including people with disabilities and gays and lesbians – in the workforce than ever before, and most experts agree that diversity is steadily increasing. Cummings and Worley (2001: 429–30) echo this point stating that: … contemporary workforce characteristics are radically different from what they were just twenty years ago. Employees represent every ethnic background and color; range from highly educated to illiterate; vary in age from eighteen to eighty; may appear perfectly healthy or may have terminal illness; may be single parents or part of dual-income, divorced, same-sex or traditional families; and may be physically or mentally challenged.
  • 507. 494 Chapter 16 · Management – roles and responsibilities Diversity would not be an issue if we all reacted to the same things in the same ways and treated everybody else as we would wish to be treated ourselves. In his entertaining and enlightening book Blunders in International Business, Ricks (1999) catalogues the blunders made by businesses in trying to sell their products in other countries or trying to establish businesses in other countries. As he points out (Ricks, 1999: 4): Cultural differences are the most significant and troublesome variables encountered by the multinational company. The failure of managers to comprehend fully these disparities has led to most international business blunders. Hofstede (1980, 1990) sought to identify the similarities and differences between national cultures and the implications of these for the management of different groups (see Chapter 5). From the work of Hofstede and that of other researchers (see Trompenaars, 1993, for example) it is clear that approaches which might be effective when managing, say, Japanese workers might be considerably less effective when managing ones from the USA. Jones et al (2000: 175) comment that: When American and Japanese managers interact, for example, the Americans often feel frus- trated by what they view as indecisiveness in the Japanese, and the Japanese are often frustrated by what they perceive as hasty, shortsighted decision making by the Americans. Managing diversity is not just about how to manage effectively relationships between people with different national cultures. Managing diversity is also concerned with developing appropriate approaches to managing differences in gender, age, abili- ties, sexuality, ethnicity, etc. For instance, in the West, it is argued that male and female workers have different strengths and weaknesses and different preferences in how they prefer to manage and be managed (Maddock, 1999; Thomas, 2003). Alimo-Metcalfe (1995a, 1995b) maintains that women tend to be more motivated by organisational goals than their male counterparts and more amenable to change. Women also appear to have different work-life balance priorities, especially in terms of childcare, as BA found to its cost in 2003. An attempt by the airline to impose a new clocking-on arrangement on its check-in staff at Heathrow Airport turned out disastrously when the predominantly female workforce went on unofficial strike. This cost BA some £40 million in lost revenues and an incalculable amount in bad public- ity (Harrison, 2003). The company failed to understand its staff’s priorities and concerns, as Phillips (2003: 17) comments: Currently, shifts are organised three months at a time and women can arrange childcare around their working hours. What they fear is a system in which a computer will decide on a day-to-day, or hour-to-hour, basis when they should come into work. … BA, and the unions too, have been caught on the hop because they failed to understand that, for these relatively low-paid, often part-time, women workers, the welfare of children comes first – above money. Despite the evidence that women have different preferences and priorities to men, studies have shown that if women are to progress up the managerial hierarchy, they are expected to conform to male characteristics such as decisiveness, competitiveness
  • 508. Globalisation and the challenge of change 495 and playing by the rules (Schein and Mueller, 1992). Workforce diversity is not just about gender, however, or even cultural or ethnic differences, as Cummings and Worley (2001: 429–30) point out: Such a definition is too narrow and focuses attention away from the broad range of issues that a diverse workforce poses. Diversity results from people who bring different resources and perspectives to the workplace and who have distinctive needs, preferences, expectations and lifestyles. Organizations must design human resource systems that account for these dif- ferences if they are to attract and retain a productive workforce and if they want to turn diversity into a competitive advantage. That people who are different are treated less well than those who conform to what- ever the prevailing stereotype is in organisations and society is well known. Most countries now have laws that seek to prevent or punish discrimination. This of course can provide a powerful incentive for organisations to recognise and manage work- force diversity. In raising the issue of competitive advantage, however, Cummings and Worley draw attention to the positive side of diversity. In a fiercely competitive world where markets are expanding and customers are increasingly rejecting standardised products and services in favour of ones tailored to their needs, workforce diversity can bring substantial benefits. It offers the possibility of more creativity, innovation, and flexibility, it provides a heightened sensitivity to different customer groupings and a wider pool of talent to draw from. Only by attracting, retaining and motivating workers effectively, including recognising and promoting the benefits of diversity, can organisations expect to prosper or even survive in an increasingly competitive global economy. This means that organisations have to achieve the difficult but essential task of treating workers differently because of their diversity but treating them all fairly. This is a task that can only be achieved if those in positions of power and authority in organisations are also prepared to manage ethically. ■ Business ethics It is commonplace, as the following quotations show, for most books on organisa- tions and management to make some reference to business ethics: Ethics are moral principles or beliefs about what is right or wrong. These beliefs guide people in their dealings with other individuals and groups (stakeholders) and provide a basis for deciding whether behavior is right and proper. (Jones et al, 2000: 183) Managers today are usually quite sensitive to issues of social responsibility and ethical behavior because of pressure from the public, from interest groups, from legal and govern- ment concerns, and from media coverage. It is less clear where to draw the line between socially responsible behaviour and the corporation’s other concerns, or between the conflict- ing expectations of ethical behaviour among different countries. (Deresky, 2000: 56) There is certainly no shortage of advice about what ethics are or how they should be applied to business. The problem, as the last quotation shows, is that, in an increas- ingly complex, diverse and competitive world, applying an ethical approach to
  • 509. 496 Chapter 16 · Management – roles and responsibilities business is not straightforward. This is why many companies and governments, even those who profess to have ethical policies, have difficulty bridging the gap between rhetoric and reality, as the following extracts show: The [UK] government’s own arms sales department is directly implicated in bribery abroad, according to documents obtained by the Guardian. Such bribery has supposedly been out- lawed since 2001. Current Ministry of Defence files show that DESO, the defence exports services organisation, officially authorises what it calls ‘special commissions’ paid by arms firms. Payment arrangements are even written by civil servants into the secret contracts on government-to-government arms deals. Firms which pay the bribes, described as ‘common- place in certain parts of the world’, are, it is explained, exempt from normal MoD rules banning corruption. (Evans et al, 2003: 1) Swiss investigators have joined the US in the biggest bribery investigation ever into foreign deals where millions of pounds of apparently legitimate payments by BP, Shell and others allegedly ended up in the hands of Kazakhstan officials. (Macalister, 2003: 1) Workers at nine Nike plants in Indonesia have been found to suffer from sexual and verbal abuse, lack of medical attention and compulsory overtime. … The company has issued a remediation plan to placate its critics. Nike's healthy corporate image has been battered in recent years by allegations that it employs underage workers in its Asian factories and asks all employees to work long hours for low pay in conditions that would never pass US inspections. (Left, 2001: 1) A chill must have swept through many a City [of London] boardroom yesterday after Louise Barton won her appeal in a high-profile sex discrimination case. The case has shone a spot- light on the secretive pay structures of investment banks, which are known for paying large discretionary bonuses. … Statistics show that women earn on average 19 per cent less per hour than men across all professions. But for women working in the City, the disparity can be even greater. Typically, those on six-figure salaries earn an average of almost 60 per cent less than their male counterparts. (Saigol, 2003: 8) Though these ethical shortcomings can be viewed as examples of corporate man- agement valuing the interests of one group of stakeholders above those of other groups, that is not the end of the story. The last decade has also shown that in many instances, senior and even junior managers have put their own personal interests above those of everybody else, even to the extent of breaking the law. There can be few people unaware of the Enron scandal, where a number of senior managers con- spired to line their own pockets at the expense of everyone else and, in the process, ruined the company and destroyed its accountants, Arthur Andersen (Bryce, 2002). As Partnoy (2003: 1) observed, however, this was not an isolated incident: The 1990s were a decade of persistently rising markets – 10 years of economic expansion, with investors pouring record amounts into stocks and pocketing double-digit returns year after year. … The decade was peppered with financial debacles, but these faded quickly from memory even as they increased in size and complexity. The billion dollar-plus scandals included Robert Citron of Orange County, Nick Leeson of Barings and John Meriwether of Long-Term Capital Management, but the markets merely hiccoughed and then started going
  • 510. Globalisation and the challenge of change 497 up again. When Enron collapsed in late 2001, it shattered some investors' beliefs and took a few other stocks down with it. Then Global Crossing and WorldCom declared bankruptcy, and dozens of corporate scandals materialised as the leading stock indices lost a quarter of their value. … Companies' reported earnings were a fiction and financial reports chock-full of disclosures that would shock the average investor if they ever even glanced at them – not that anybody ever did. In the USA, the finger has been pointing very sharply at the practices of Wall Street analysts who aggressively oversold shares, as Tran (2003: 1) observed: ... analysts hoodwinked investors by hyping up the prospects of internet and other hi-tech companies, while privately dismissing them. Former star internet analyst Henry Blodget once privately described as a ‘piece of shit’ a stock he was publicly touting, according to previously disclosed emails. According to Teather (2002), the hyping or ‘ramping’ of shares was central to the operation of Wall Street’s financial institutions and not just limited to a few rogue analysts. In May 2003, in an attempt to draw a line under the crimes of the boom years, leading Wall Street financial institutions agreed to pay fines totalling $1.4 bil- lion (Tran, 2003). Nevertheless, corporate greed was not limited to Wall Street, and much of it was quite legal. Across America, executive salaries rose dramatically in the 1990s. In 1980, the average CEO salary was 42 times than that of the average hourly-paid worker, by 1990 it was 85 times greater, but by 2000 it had grown to 531 times greater (AFL-CIO, 2003). A similar phenomenon, though on a lesser scale, could be seen in the UK where, in the 1990s, basic executive salaries rose four times faster than inflation, and additional rewards, such as bonuses and share options, far outstripped even that (Business Notebook, 2003). However, what really seems to have annoyed UK investors is not that executives are rewarded for success, but that they also get rewarded for failure. As noted in Chapter 5, amongst FTSE-100 compa- nies the pay of directors rose 84 per cent in the three years to 2003 but the stock market value of these companies fell by 50 per cent (Finch and Treanor, 2003). In the UK, 2003 will go down as the year of the shareholder revolt. At AGM after AGM, shareholders in leading companies, such as HSBC, Shell and, most spectacularly of all, GlaxoSmithKline voted in large numbers to reject salary packages that they saw as too generous or which promised to reward failure (Stewart, 2003). It is no wonder, therefore, that opinion polls show that the vast majority of people in the UK think executives are untrustworthy and overpaid (Caulkin, 2003). Though in the West the 1990s was the decade when the rich got seriously richer, for the world’s poorest countries, the reverse was the case. In the 1990s, 54 countries saw their average income decline, and 21 went backwards in terms of human devel- opment – a measure of income, life expectancy and literacy; the number of people in sub-Saharan Africa living on less than $1 a day increased from 47 to 49 per cent, and in eastern and central Europe it increased from 7 to 20 per cent (Elliott, 2003). In public at least, there are two aspects of business ethics that business leaders agree upon: all businesses should have them, and all businesses have difficulty abiding by them. Difficult though they are to implement and maintain, if organisations fail to adopt an ethical approach, the result can be disastrous. Managers can put their own
  • 511. 498 Chapter 16 · Management – roles and responsibilities interests above those of shareholders, staff and the law, as the collapse of Enron demonstrated. Entire industries can become corrupt, as the Wall Street example shows. Above and beyond that, however, we create societies and a world where there are increasing divisions between the few ‘haves’ and the many ‘have-nots’. Globalisation is often couched in terms of the competitive challenge it poses for individual organisations, i.e. how can an organisation, whether in the public, private or voluntary sectors, survive and prosper in a borderless world that is increasingly dominated by a few giant, transnational corporations? As the discussion of sustain- ability, diversity and ethics shows, however, globalisation also raises crucial questions about the role and impact of organisations on and in a global society. These questions go beyond traditional business concerns such as profit and loss, value for money or market share; they are concerned with fundamental issues of the role of organisations in sustaining life on Earth, respect for human diversity and dignity, and the ethical rules by which we live. These issues are not new, but globalisation has accentuated and brought them to the fore as never before. Governments, international bodies and individual organisations have responded by adopting policies that supposedly pro- mote responsible and ethical behaviour. All big organisations and many small ones now have policies on minimising their environmental impact, promoting and manag- ing diversity, and on behaving in an ethical fashion. Nevertheless, the gap between ethical rhetoric and the reality of unethical behaviour seems to be getting wider rather than narrower. The real challenge for organisations is to change managerial behav- iour so that business ethics become business practices. Policies, skills and good intentions are clearly not enough. The fundamental point is that managers need to behave differently. They need to put the policies and skills into practice. Therefore, in examining the role and development of managers in the rest of this chapter, one of the key issues to be addressed will be what determines managerial behaviour and how can we change it. The manager’s role It has never been easy to define the role of managers, though this has not prevented a great number of attempts over the years (see Barnard, 1938; Brewer and Tomlinson, 1964; Carlson, 1951; Constable and McCormick, 1987; Golding and Currie, 2000; Griffin, 2002; Handy et al, 1987; Horne and Lupton, 1965; Kotter, 1982, 1990; Mintzberg, 1973, 1975; Nahavandi, 2000; Silverman and Jones, 1976; Sjöstrand, 1997; Stewart, 1976; Yukl, 2002). As Hales (1986) found when he reviewed many of these studies, the information available presents the reader with a confusing and con- flicting picture of what managers should do and how they should do it. Definitions of the role of managers have ranged from attempts to list basic tasks: [The manager] plans, organises, directs and controls, on proprietors’ or own behalf, an industrial, commercial or other undertaking, establishment or organisation, and co-ordinates the work of departmental managers or other immediate subordinates. (Quoted in Dakin and Hamilton, 1990: 32)
  • 512. The manager’s role 499 to more ambitious attempts to define the essence of the manager’s role: [The manager has the] task of creating a true whole that is larger than the sum of its parts, a productive entity that turns out more than the sum of the resources put into it. (Drucker 1985: 53) Drucker (1985) also likened the manager to the conductor of a symphony orchestra. As conductor, the manager is the one through whose effort, vision and leadership the vari- ous instrumental parts, that are so much noise by themselves, become the living whole of music. In this instance, the manager is also the composer as well as the conductor. Handy (1986), on the other hand, likened the manager to a doctor: the manager is the first recipient of problems. The manager’s role is, therefore, to identify the symp- toms in any situation; to diagnose the disease or cause of the trouble; to decide how it might be dealt with, through a strategy for health; and to start the treatment. Such analogies are useful in that they create a concrete picture of the manager’s role, but they can also be misleading. Conducting is an art form; is management an art form? Or, as Handy’s analogy implies, is it a science in the same way that medi- cine is a science? As Part 1 of this book showed, the clash between those who see management as a rational, science-based process, and those who believe it to be more intuitive and less rational, is not new. Duncan (1975) tried to resolve this conflict by taking a holistic view of the job of the manager. He identifies three distinct levels of management activity: philosophical (goal formation); scientific (goal accomplishment and evaluation); and art (implemen- tation of decisions). At the philosophical level in forming goals, the manager – Duncan argues – is mainly concerned with the effects of the actions and reactions of other individuals and groups within the wider economic and social context within which the organisation is set. At this level, managers and their associates formulate clear and precise strategies that will encompass all envisaged effects that can result from the set goals, not only on the various pressure groups within its internal and external environment, but also on competitors and regulatory agencies. It is also at this level that the ethics of managerial behaviour, values and priorities of the organi- sation are formulated and established. At the scientific level, management develops plans, methods and techniques for achieving set goals, and establishes procedures for monitoring and evaluating progress. The art level is concerned with the implementation of decisions; this is the level at which tactical and administrative decisions are made to deploy the organisation’s resources and attain the optimum degree of operational efficiency. This level is an ‘art’ because, according to Duncan, there appears to be a particular talent necessary to per- suade others that management-generated goals and decisions should be accepted. Whilst one might not necessarily agree with his definitions, especially in terms of strategy formulation, Duncan’s three-level approach is extremely useful in that it shows, as Mullins (1989) argued, that management is both a science and an art. By its very nature, management is forced to deal with both rational, science-based activities, such as the design and operation of manufacturing and administrative systems, and less rational, more intuitive activities, especially those concerning managing and moti- vating people. The extent to which a manager is involved in any of these activities will depend on the kind of organisation the manager works for, the type of job the
  • 513. 500 Chapter 16 · Management – roles and responsibilities manager has, and – crucially – the manager’s level in the organisation’s hierarchy (Hales, 1986). Position in the hierarchy, formally at least, is likely to exert the greatest influence on the role given to and expected of a manager. The three main hierarchical levels are as follows: ■ Top management – the policy-making group responsible for the overall direction of the company. ■ Middle management – responsible for the execution and interpretation of policies throughout the organisation and for the successful operation of assigned divisions or departments. ■ First level or supervisory management – directly responsible to the middle manage- ment group for ensuring the execution of policies by their subordinates. They are also responsible for the attainment of objectives by the units they control, through practices and procedures approved and issued by top or middle management. Superficially, at least, these three categories appear to mirror Duncan’s three levels. On a closer examination, however, it becomes more difficult to match them because each category can encompass all three levels. This can be seen more clearly by exam- ining what it is that managers actually do, as averse to what academics say they should do. There have been a number of important studies conducted to determine how man- agers spend their time (see for example Brewer and Tomlinson, 1964; Child and Ellis, 1973; Kotter, 1982). Perhaps the most widely known and replicated work in this area is by Mintzberg (1973, 1975). Synthesising his results and the previous research on the role of managers, he concluded as follows: ■ Although much managerial work is unprogrammed, all managers do have regular, ordinary duties to perform. ■ Rather than being systematic, reflective thinkers and planners, managers simply respond to the pressures or demands of their jobs. ■ Managerial activities are characterised by brevity, variety and discontinuity. Some 30 years after Mintzberg’s work, Yukl (2002), in reviewing the literature on management, came to similar conclusions: ■ The content of managerial work is varied and fragmented. ■ Many activities are reactive. ■ Interactions often involve peers and outsiders. ■ Many interactions involve oral communications. ■ Decision processes are disorderly and political. ■ Most planning is informal and adaptive. Yukl (2002: 22) also found that the pace of managerial work was hectic and unrelenting: During the typical workday there is seldom a break in the workload. Managers receive almost continuous requests for information, assistance, direction, and authorization from a large number of people, such as subordinates, peers, superiors, and people outside the organization.
  • 514. The manager’s role 501 Yukl’s work confirms Mintzberg’s (1973) finding that managers’ jobs are remarkably similar, and that their work can be described in terms of ten very important roles that could be categorised under three headings: interpersonal, informational and decision-making. Interpersonal roles One of the most time-consuming and important aspects of most managerial jobs is to work with, direct and represent people. The three key roles in this respect are as follows: ■ figurehead – as the formal representative of the organisation; ■ liaison – forming connections with other organisations; ■ leader – in relation to members of a group within the organisation. Informational roles Those in managerial positions have unique opportunities to obtain and disseminate information. The three key roles involved are given below: ■ monitor – as monitors, managers seek, receive and store information that can be used to the advantage of the company; ■ disseminator – the manager must broadcast this useful information to the organisa- tion; ■ spokesperson – on behalf of the organisation, the manager communicates informa- tion to other relevant groups and bodies, both internal and external. Decision-making roles One of the main parts of any manager’s job is to take decisions. In this respect, there are four key roles involved: ■ entrepreneur – looking for ways to improve the operation of the organisation or for new product/market opportunities; ■ disturbance-handler – managers must handle crises effectively; ■ resource allocator – responsible for constructing budgets and allocating resources; ■ negotiator – according to Mintzberg, managers spend a great deal of their time as negotiators, because only they have the necessary information and the authority to carry out this role. As Yukl (2002) notes, though these roles are common to most managerial jobs, the emphasis and importance of these roles varies between managers depending on a range of factors such as organisation size, level of management, level of managerial inde- pendence, and the stage the organisation had reached in its life cycle. Mintzberg (1975) argued that the lack of uniformity within managerial jobs can be accounted for by hierarchical and functional differentiation. He contended that chief executives, for example, focus considerable attention on external roles, such as liaison, spokesperson and figurehead, which link the organisation to its environment. At lower levels, work is more focused, more short-term in outlook, and the characteristics of brevity and fragmentation are more pronounced. As a result of this, the external managerial roles are less important, and real-time internal roles (disturbance-handler and negotiator)
  • 515. 502 Chapter 16 · Management – roles and responsibilities concerned with daily operating problems and maintaining the work flow become rel- atively more important. Furthermore, he argued that interpersonal roles are more important to sales managers, that staff managers give more attention to informational roles, and production managers focus on decisional roles. Mintzberg’s observations have been supported by a number of other studies (Kotter, 1982; Silverman and Jones, 1976). Stewart (1976, 1982) drew particular attention to demands, constraints and choices in shaping managerial roles: ■ Demands – these are the expectations that those in positions of power have for a role holder. ■ Constraints – these are factors peculiar to the organisation and its environment that limit a manager’s freedom of manoeuvre. ■ Choices – though managers are limited in what they can do by the demands and constraints of their jobs, all managers have a degree of discretion (choice) in what to do and when to do it. One key area where managers are called on to make choices is when faced with role conflicts. For example, managers are often caught between subordinates’ expectations that managers will protect their interests and provide resources, and superiors’ expec- tations that managers will act in the best interests of the organisation and minimise costs. Another example of conflict between roles is where managers are expected to spend considerable time, in their figurehead role, dealing with the external world whilst at the same time colleagues expect them to be present internally carrying out their leadership role. Nevertheless, despite the presence of conflicts and choices, Hales (1986: 102), in reviewing the research on the manager’s role, concluded that: Much of what managers do is, of necessity, an unreflective response to circumstances. The manager is less a slow and methodical decision maker, more a ‘doer’ who has to react rap- idly to problems as they arise, ‘think on his feet’, take decisions in situ and develop a preference for concrete activities. This shows in the pace of managerial work and the short time span of most activities ... Therefore, in examining the role of managers, it can be seen that there is a discrep- ancy between what the literature says managers should do and what the managers actually do. Indeed, as Mintzberg (1975: 49) pointed out, this discrepancy even extends to managers’ own observations on their role: If you ask a manager what he does, he will most likely tell you he plans, organizes, co-ordinates and controls. Then watch what he does. Don’t be surprised if you can’t relate what you see to those four words. Important as it is to understand the manager’s role, it is just as important, if not more so, to understand what constitutes effectiveness. Despite the very many books and articles on management and the role of the managers, most writers seem to shy away from defining either organisational or managerial effectiveness. Part 1 of this book reviewed organisation theory and behaviour. What this showed is that the promoters of
  • 516. Management and leadership 503 these theories, either implicitly or explicitly, state that effectiveness is defined by the extent to which managers adopt their ‘one best way’. From this perspective, however, effectiveness is something of a moving target; the ‘best way’ for Frederick Taylor is not the best way for Douglas McGregor or Tom Peters or Peter Senge. Nahavandi (2000: 5) made a similar point when commenting that ‘... leadership effectiveness depends on the point of view of the person who is evaluating the leader.’ In an attempt to cut through the idea that effectiveness is defined by adherence to a particu- lar approach or theory, or lies solely in the eye of the beholder, Burnes (1998: 101) defined effectiveness as ‘… the ability or power to have a desired effect …’. In terms of managerial effectiveness, this means that an effective manager is one who achieves what is required of them, whether that be to transform an organisation or merely to ensure that services continue to be delivered on time, at the right cost and to the right quality. If this is the definition of managerial effectiveness, the next question is: ‘What determines managerial effectiveness?’ Are there key attributes, skills or competences that managers need to possess in order to ‘have a desired effect’? As the next section will show, there are three main perspectives on what makes an effective manager. Management and leadership Regardless of the difficulty in identifying what managers do or how they should do it, there has been a long-held belief that the major factor which distinguishes successful organisations from their less successful counterparts is the presence of dynamic and effective leadership (Jones et al, 2000). However, as Yukl (2002: 5) observes, ‘… there is a continuing controversy about the difference between leadership and manage- ment.’ For some writers, such as Nahavandi (2000) – see Table 16.1, management and leadership are seen as being distinctly different activities. Nahavandi sees the process of management as essentially concerned with achieving stability. On the other hand, he sees leadership as essentially being concerned with bringing about change. Nahavandi (2000: 13) comments that: Whereas leaders have long-term and future-oriented perspectives and provide a vision for their followers that looks beyond their immediate surroundings, managers have short-term perspectives and focus on routine issues within their own immediate departments or groups. Bennis and Namus (1985: 21) take this argument further by associating manage- ment and leadership with different types of people: ‘… managers are people who do things right and leaders are people who do the right thing’. Though it is conceptually appealing to separate people into one of two mutually exclusive types, managers or leaders, there is little empirical evidence for this view (Yukl, 2002). It is also a view that, in a rapidly-changing world, tends to imply that visionary leaders are superior to their stick-in-the-mud managerial counterparts. On the other hand, there are many writers who, whilst distinguishing between management processes and leadership processes (as in Table 16.1), do not assume that leaders and managers are different types of people (Bass, 1990; Hickman, 1990; Mintzberg, 1973; Rost, 1991; Yukl, 2002). Indeed, Vroom and Jago (1988) specifically argue that managers can and do possess both managerial and leadership skills, which they swap between depending on the situation.
  • 517. 504 Chapter 16 · Management – roles and responsibilities Table 16.1 Management v leadership Managers Leaders Focus on the present Focus on the future Maintain status quo and stability Create change Implement policies and procedures Create a culture based on shared values Remain aloof to maintain objectivity Establish an emotional link with followers Use the power of their position Use personal power Source: adapted from Nahavandi (2000) Though the topic of leadership, its definition, promotion and difference from man- agement, has dominated the management literature for over 40 years, it still remains an elusive concept. Even in the 1950s, when there had been much less research on the subject than now, Bennis (1959: 259) commented: Always it seems that the concept of leadership eludes us or turns up in another form to taunt us again with its slipperiness and complexity. So we have invented a proliferation of terms to deal with it ... and still the concept is not sufficiently defined. Now, at the beginning of the third millennium, we are faced with a greater prolifer- ation of articles and books on the subject than ever before, yet the topic appears more fragmented and confusing than ever. As Thomas (2003: 25) comments in relation to the question ‘What is management?’: The inquisitive reader seeking an answer to this question will find not only differences but complete contradictions and may well be inclined to beat a hasty retreat … Nevertheless, it is possible to divide researchers on leadership and management into three main groups: those who focus on the personal characteristics and process of leadership; those who concentrate on the leader–follower situation; and those who attempt to relate leadership and management styles to the overall organisation con- text and climate. ■ The personal characteristics–trait approach to effective leadership Early investigations into leadership tended to concentrate on such factors as personal qualities (intelligence, age, experience), or personality traits (extroversion, domi- nance). Consequently, regardless of the task or situation, if a person did not possess the appropriate personal attributes, then he or she was deemed unlikely to be a good manager. The numerous studies of leadership failed, however, to reveal any consistent pattern of traits or characteristics related to leadership (Arnold et al, 1998; Gibb, 1969; Yukl, 1994). In an effort to breathe new life into this approach, attempts were made to view leadership as a process, and the focus moved to examining the interaction between leaders and followers, and how leaders influence individuals and groups to pursue the achievement of a given goal. This view, that leadership behaviour rather than attrib- utes may more effectively predict leadership success, has been advanced in a variety of
  • 518. Management and leadership 505 approaches. Fleishman (1953, 1969) identified two separate classes of behaviour as important in determining effective leadership: 1 Consideration – the quality of the interpersonal relationship between the leader and his or her subordinates, and in particular the degree to which a leader shows trust of subordinates, respect for their ideas and consideration for their feelings. 2 Initiating structure – the degree to which leaders define and structure their own and their subordinates’ roles towards achieving set goals. It also covers the extent to which a leader directs group activities through planning, communication, infor- mation, scheduling, trying out new ideas, and praise and criticism. Another related dimension of leadership behaviour that received much attention in the 1950s and 1960s was participation – whether the leader leans towards an auto- cratic or democratic style of management. As was noted in Chapters 2 and 8, both the Human Relations school and proponents of Planned change believed that, in the aftermath of the Second World War, participation and democracy would prove to be essential components of organisational effectiveness. It was not a coincidence that those studying leadership and those studying organisational change should develop similar views on participation and democracy. Much of the work on leadership at this time was influenced by a series of ground-breaking studies into leadership styles by Kurt Lewin, Ronald Lippitt and Ralph White (Marrow, 1969). These studied three styles of leadership – democratic, autocratic and laissez faire, and found that demo- cratic leadership produced the best results (Lewin, 1999b; Lippitt and White, 1960). According to Gastil (1994), there are three key elements of democratic leadership: ■ maximising participation and involvement of group members; ■ empowerment; ■ facilitating group decision-making. In the 1950s and 1960s, this stress on leadership characteristics gave rise to a number of ‘universal theories’ of effective leader behaviour – which is to say, researchers began to argue for a ‘one best way’ approach to leadership (see for example Argyris, 1964; Likert, 1967; McGregor, 1960). These theories postulated that the same style of leadership is optimal in all situations (Yukl, 1994). Perhaps the best known and most influential of these ‘universal theories’ is Blake and Mouton’s (1969, 1985) Managerial Grid – later re-named the Leadership Grid (Blake and McCanse, 1991). The Grid has two critical dimensions: concern for people – similar to consideration; and concern for production – similar to initiating structure. By examining how these two dimensions interact, in both their strong and weak states, Blake and Mouton identified five different styles of management, which they labelled as follows: ■ Team management. This arises from a high concern for people and a high concern for production. The objectives are to achieve high levels of both performance and job satisfaction by gaining subordinates’ willing commitment to achieving their assigned tasks. ■ Country club management. This occurs when concern for production is low but concern for people is high. The main concern of this approach is to achieve the harmony and well-being of the group in question by satisfying people’s social and relationship needs.
  • 519. 506 Chapter 16 · Management – roles and responsibilities ■ Middle-of-the-road management. This situation comes about where there is moder- ate concern for production and moderate concern for people. Managers who follow this approach tend to have a ‘live and let live’ philosophy and tend to avoid difficult or contentious issues. ■ Task management. This can be defined as a high concern for production but a low concern for people. The objective is to achieve high productivity by planning, organising and directing work in such a way that human considerations are kept to a minimum. ■ Impoverished management. This ensues from a low concern for both production and people. This form of managerial behaviour centres on exacting the minimum effort from subordinates in order to achieve the required result. Though Blake and Mouton (1985) identify these five styles of management, for them the most effective is team management, where leaders are both task- and people-ori- entated – the so-called ‘high–high’ leader. They also argue that whilst managers have a dominant or preferred style of leadership, many managers are capable of switching from one style to another or of combining styles if they encounter a situation where their preferred style does not work. In a significant departure from other adherents of the personal characteristics approach, Blake and Mouton also argue that a person’s dominant style is influenced not only by their personal values and personal history but by the nature of the organisation in which they are operating, and chance – the types of management situations and styles they have encountered in their career. Despite the wide number of studies seeking to test and elaborate the Managerial Grid approach, however, the evidence in support of it, or for any of the universal the- ories, is limited (Evans, 1970; Filley et al, 1976; Larson et al, 1976; Wagner, 1994; Yukl, 1994, 2002). Because of the difficulty of relating leadership traits and behav- iours to effectiveness, many writers turned to investigate the nature of the relationship between leaders and their subordinates. ■ The leader–follower situation approach to effective leadership In response to the inability of researchers to make a convincing case for a ‘one best way’ approach to leadership, attention began to focus on identifying the situations in which leaders were effective. In particular, researchers began to examine how a leader’s behaviour varies between subordinates. This leader–follower approach, or leader–member exchange as it is sometimes called, is concerned with how the two parties develop an interpersonal relationship over time. It focuses on how the leader and the follower influence each other and negotiate the subordinate’s role in the organisation. The basic premise of the theory is that a leader develops a different rela- tionship with each subordinate. These relationships take one of two forms: the leader will develop a close and trusting relationship with a small number of people, and a much more distant and formal relationship with the rest. In the first type of relation- ship, both parties have high expectations of each other. The leader expects loyalty and commitment and the follower expects preferment and advancement. In the more dis- tant types of relationship, both parties have relatively low expectations. The leader expects the subordinate to comply with rules and perform their allocated duties. In turn, the subordinate expects to receive the rate for the job and be treated fairly (Graen and Cashman, 1975; Yukl, 2002).
  • 520. Management and leadership 507 In examining leader–follower relations, Kerr et al (1974) took the two forms of leadership behaviour identified by Fleishman (1969) – consideration and initiating structure – and applied these to a framework that included three situational variables or contingencies: 1 Subordinate considerations – such as the subordinates’ experience and abilities, and their expectations of the leader. 2 Superior considerations – in particular, the amount of influence subordinates have over the behaviour of their superiors. 3 Task considerations – including factors such as time urgency, amount of physical danger, permissible error rate, presence of external stress, degree of autonomy and scope, importance and meaningfulness of work, and degree of ambiguity. Kerr et al (1974) argued that the effectiveness of the two forms of leadership behav- iour (consideration and initiating structure) in promoting high levels of performance from subordinates is moderated by the above three situational variables. For example, if the task to be performed is characterised by time pressure, subordinates will be more amenable to a higher level of initiating structure (i.e. direction by superiors) and there will be a stronger relationship between job satisfaction, performance and initiat- ing structure. Alternatively, when a task is seen as intrinsically very satisfying to a subordinate, a leadership style with high consideration will not significantly increase satisfaction or performance. Support for the central premises of Kerr et al’s (1974) model has been limited. Research by Schriesheim and Murphy (1976) produced mixed results. There was evidence that high levels of initiating structure did increase performance in high-pressure situations and reduce it under low levels of pressure. Different levels of pressure, however, did not appear to impact on subordinates’ satis- faction with their superiors. Nor, where tasks were viewed as having higher clarity, were either consideration-based or initiating structure-based styles significantly related to satisfaction. The most influential situational theory of leadership has been Fiedler’s (1967) Least Preferred Co-worker (LPC) model. Based on a decade of research, Fiedler argued that leaders have relatively stable personal characteristics that, in turn, leave them with a particular set of leadership behaviours which they cannot change. Therefore, there is no point in trying to train or educate managers to adopt different behaviours towards their subordinates. Instead, both they and their subordinates have to learn to live with the leader’s behaviour. For Fiedler, the key personal characteristics involved in leader- ship concern how positively or not the leader views his or her Least Preferred Co-worker. Fiedler developed a questionnaire to determine a leader’s LPC measure. The questionnaire is built around a scale of 16 bi-polar adjectives (e.g. pleasant–unpleasant, distant–close, efficient–inefficient) that attempts to measure whether a person is ‘task’ or ‘relationship’ orientated. As Arnold et al (1998) note, there is some dispute about exactly what a leader’s LPC score means and how it relates to other leadership dimensions such as consideration and structure. In general, leaders with a high LPC are often seen as being people- or relationship-orientated, whilst those with a low LPC are seen as being task-orientated. From his work, Fiedler concluded that the effectiveness of particular leadership traits or behaviours, as meas- ured by a high or low LPC score, are moderated by the situation in which they are deployed. Therefore, it is important to match the leader to the situation (Fiedler and
  • 521. 508 Chapter 16 · Management – roles and responsibilities Chemers, 1984). Fiedler identified three key aspects of a work situation, which taken together, he argued, determined the effectiveness or not of particular leadership char- acteristics. In descending order of importance, these are as follows: 1 The leader–follower relationship – friendliness and loyalty from subordinates increases the leader’s influence over them. 2 Task structure – the greater the degree of standardisation, detailed instructions and objective measures of performance, the more favourable the situation for the leader. 3 The leader’s formal position and power – the more discretion and authority the leader has regarding the reward and punishment of subordinates, the more influ- ence he or she will be able to exert. By attributing a high or low score to each of these three aspects, Fielder constructed eight (i.e. 2 × 2 × 2) types of work situation. He maintained that the most favourable situation is where leader–follower relations are good, the task is well-defined and highly structured, and the leader has a high level of formal authority. In contrast, the least favourable situation is where leader–follower relations are poor, the task struc- ture is ill-defined, and the leader has only a low level of formal authority. Although (or perhaps because) it is the most influential and widely-utilised situa- tional theory of leadership, it is also the most widely-criticised. The main criticisms are that it lacks empirical support, that it fails to explain how particular leadership behaviour affects subordinates’ performance, and that the measures used by Fiedler are arbitrary and lack any explicit rationale (Ashour, 1973; Shiflett, 1973; Vecchio, 1983). Fiedler’s model has also been subjected to the same type of criticism as other contingency-situational approaches (see Chapter 2). In particular, critics maintain that it ignores a manager’s ability to change or influence factors such as task structure to favour their style of leadership. In this respect, a number of writers have pointed out that Fiedler treats structure, an important component of his model, as a given, whereas in many instances, determining and changing organisation and job structures is a major component of a manager’s role (O’Brien and Kabanoff, 1981). In any case, as the following shows, there are those who believe that managers can and do change their leadership behaviours (Vroom and Jago, 1988). ■ The contextual approach to effective leadership One of the weaknesses of the leadership literature is, as the above demonstrates, that it tends to concentrate on the traits of individual managers and their relations with subordinates. The assumption, both explicit and implicit, is that effectiveness is an attribute of the individual manager, moderated by the leader–subordinate situation; a good manager in one organisation will be a good manager in all organisations. Yet, as many writers have observed, a manager’s effectiveness may be determined as much by the nature of the organisation in which he or she operates as by the qualities of the individual manager (see Burnes, 1991; Griffin, 2002; Hales, 1986; Nahavandi, 2000; Sjöstrand, 1997). It is out of and in response to such observations that the contextual approach to leadership developed. This approach is a variant of the leader–follower approach to leadership; however, instead of concentrating on leadership behaviour, it focuses on
  • 522. Management and leadership 509 leadership style, and instead of the narrow leader–follower situation, it focuses on the overall organisation context and climate. In addition, it is the only one of the three approaches to leadership that incorporates change as a variable. One of the most influential contingency approaches to leadership was developed by Vroom and Yetton (1973). This was later extended by Vroom and Jago (1988). In contrast to Fielder, this approach suggests that leaders can and do change their behaviour from situation to situation. The theory identifies five styles of leader decision-making, ranging from the most autocratic to the most democratic. To complement these, Vroom and Jago (1988) also identified some key features of problem situations that leaders have to take into account, such as the need to resolve conflict or achieve goal congruence. By combining leadership styles with problem situations, Vroom and Jago developed a computer package to help managers to identify how suitable or not their style is for particular situations. Unfortunately, the package has proved very complex to use, which has limited its efficacy. Nevertheless, Vroom and Jago have expressed the hope that knowledge of its general principles may be sufficient for most situations. To this end, as Arnold et al (1998) note, Vroom and Jago’s model has been used to provide some general ‘rules of thumb’ for leaders, including advice such as: ■ Where subordinates’ commitment is important, a more participative style of leader- ship is better. ■ Where subordinates do not share the organisation’s goals, group decision-making should be avoided. However, advice couched in such general terms is usually too general to be of much use. Even if they were not so general, these rules of thumb are still subject to being overridden by factors such as time constraints, organisational policies and the ability and preferences of managers and subordinates. This is perhaps why other contextual approaches have also been put forward. One of the most interesting and influential of these was developed not by a social scientist but by a political scientist, James MacGregor Burns, in his 1978 Pulitzer Prize winning book, Leadership. Burns’ book combines biography, history and politi- cal theory to produce a major study of the nature of leadership. Primarily, he identifies two basic organisation states or contexts, convergent and divergent; and two matching management-leadership styles, transactional management and transfor- mational leadership. Most writers tend to use the terms management and leadership interchangeably. Burns was the first to draw a distinction between what he called transactional management (which focuses on maintaining the status quo) and trans- formational leadership (which focuses on overthrowing the status quo). However, Burns was primarily concerned with management and leadership in the political con- text. Bass (1985, 1995) refined Burns’ concepts and applied them to organisations. A convergent state occurs when an organisation is operating under stable condi- tions; where there are established and accepted goals and a predictable external and internal environment (Case Study 10, PoliceCo, is an example of an organisation operating in a convergent state). The most appropriate style of management in such a situation, it is contended, is transactional. The concept of transactional management stems from the notion that the manager–subordinate relationship is based on a trans- action between the two, whereby managers exchange rewards for subordinates’ performance. Transactional managers focus on task completion, goal clarification and
  • 523. 510 Chapter 16 · Management – roles and responsibilities optimising the performance of the organisation through incremental changes within the confines of existing policy, structures and practices – basically, they seek to work within and maintain the status quo (see Table 16.2). Transactional managers motivate followers to perform the tasks expected of them by appealing to their self-interest through the use of incentives and rewards such as pay and promotion. A divergent state occurs when environmental changes challenge the efficiency and appropriateness of an organisation’s established goals, structures and ways of work- ing (Case Study 3, Oticon, is an example of an organisation operating in a divergent state). The most appropriate style of leadership in this situation, it is argued, is trans- formational. Transformational leaders are often portrayed as charismatic or visionary individuals who seek to overturn the status quo and bring about radical change (see Table 16.2). Transformational leaders use the force of their personality to motivate followers to identify with the leader’s vision and to sacrifice their self-interest in favour of that of the group or organisation. Transformational leaders seek to gain the trust and emotional commitment of their followers by appealing to higher moral and ethical values. Table 16.2 Management v leadership Transactional management Transformational leadership Creating the agenda Planning and budgeting: Establishing direction: developing developing a detailed plan of how a vision that describes a future to achieve the results. state along with a strategy for getting there. People Organising and staffing: which Aligning people: a major individual best fits each job and communication challenge in what part of the plan fits getting people to understand and each individual. believe the vision. Execution Controlling and problem-solving: Motivating and inspiring: monitoring results, identifying satisfying basic human needs deviations from the plan and for achievement, belonging, solving the problems. recognition, self-esteem, a sense of control. Outcomes Produces a degree of predictability Produces changes – often to a and order. dramatic degree. Source: adapted from Kotter (1990) The compatibility between organisational state and leadership style is seen as essential for successful leadership. Where the organisation is required to face new challenges and develop new ways of adapting to these for the sake of survival, then a purely transactional approach would be counter-productive – the phrase ‘fiddling while Rome burns’ springs to mind. However, transformational leadership is just as likely to be counter-productive during periods where maintenance of the current opera- tional systems would be most appropriate. Since its publication in 1978, Burns’ work has been taken up and cited by a wide range of organisation theorists who subscribe to the view that managers need to, and
  • 524. Management and leadership 511 can, match or adapt their style and approach to the circumstances of the organisation in which they operate (Arnold et al, 1998; Bass, 1985, 1995; Beatty and Lee, 1992; Burnes and James, 1995; French and Bell, 1995; Gibbons, 1992; Yukl, 1994). As argued in Chapter 3, however, the late 1970s and early 1980s, the period when Burns’ book was published, was a time of crisis for many Western organisations. It was a period when organisations and entire industries and sectors were going through mas- sive changes. Not surprisingly, therefore, there was a tendency for those in the leadership field to focus on Transformational leadership, and downplay or even deni- grate Transactional management (Yukl, 2002). However, Bass (1985, 1995), whilst seeking to develop the concept of the Transformational leader, argued that Transformational leadership and Transactional management are distinct but not mutu- ally exclusive processes. Transformational leaders may be more effective at motivating their followers but, Bass maintains, effective leaders need to have both transforma- tional and transactional tools in their armouries. In situations where radical change is required, however, as Alimo-Metcalfe and Alban-Metcalfe (2000: 27) found when studying leadership in the UK National Health Service (NHS), ‘… the transactional competencies of managers, while crucial, are simply not sufficient on their own.’ The argument from Bass (1985, 1995) and Alimo-Metcalfe and Alban-Metcalfe (2000) is that someone with purely transactional skills would struggle to deal effectively with the many changes that are an ever-present part of organisational life. On the other hand, someone with purely transformational skills would not be able to cope with the day-to-day, routine activities that need to be accomplished even where radical change is taking place. The key issue, therefore, is to identify the optimum balance of transac- tional-transformational skills in any given circumstances. Kanter (1989) offers a different perspective on the balance issue by maintaining that good leaders need to incorporate both transactional and transformational char- acteristics. She argues that archetypal images of managers tend to derive from two basic models: the ‘corpocrat’ (i.e. the transactional manager) and the ‘cowboy’ (i.e. the transformational leader). The former is the corporate bureaucrat, the conservative resource-preserver who lives by, and controls the organisation through, established and detailed rules. The latter, the ‘cowboy’, is a maverick who challenges the estab- lished order, who wants to seize every opportunity, question every rule and who motivates and controls through personal loyalty. However, instead of seeking to relate the balance of these two sets of characteristics to their appropriate organisational set- ting, Kanter (1989: 361) argues that, in future, organisations will require managers who combine the best of both the corpocrat and cowboy: Without the bold impulses of the take-action entrepreneurs and their constant questioning of the rules, we would miss one of the most potent sources of business revitalization and development. But without the discipline and coordination of conventional management, we could find waste instead of growth, unnecessary risk instead of revitalization. … Our new heroic model [of leadership] should be the athlete who can manage the amazing feat of doing more with less, who can juggle the need to both conserve resources and pursue growth opportunities. This new kind of business hero avoids the excesses of both the corpo- crat and the cowboy. … the business athlete has the strength to balance somewhere in the middle, taking the best of the corpocrat’s discipline and the cowboy’s entrepreneurial zeal.
  • 525. 512 Chapter 16 · Management – roles and responsibilities Exhibit 16.3 Characteristics of the business hero Skills and sensibilities of the business athlete 1. Learn to operate without the might of the hierarchy. 2. Compete in a way that enhances rather than undercuts cooperation. 3. Operate with the highest ethical standards. 4. Have a dose of humility. 5. Develop a process focus. 6. Be multifaceted and ambidextrous. 7. Gain satisfaction from results. Source: Kanter 1989: 361–4 As Exhibit 16.3 shows, Kanter maintains that there are seven skills and sensibilities that this ‘new heroic’ type of leader needs to possess. Kanter’s model avoids the issue of how to determine the optimum balance of transactional and transformational skills in a given set of circumstances. Instead, she argues that there is a basic set of transac- tional and transformational skills or characteristics that all effective leaders need to possess and which can be applied successfully in any situation. In effect, she is attempting to turn the leadership debate full circle and make the case for a universal – one best way – approach to leadership. Her argument, as mentioned in Chapter 3, is basically that all organisations operate in the same turbulent context, face the same challenges and, consequently, require the same style of management. Though there are different perspectives on the contextual approach to leadership, taken as a whole, the approach does not seek to invalidate either the characteristics or situational approaches; rather it tries to incorporate them within and link them to the wider organisational context. It explicitly recognises that a manager’s personal charac- teristics are an important component of leadership style, and consequently, effectiveness. In addition, it acknowledges the crucial importance not just of the rela- tionship between leaders and followers, but also of the overall context within which this takes place (Yukl, 2002). In particular, as Gibbons (1992: 5) remarked, ‘organiza- tional survival and success are dependent on the ability of leader–follower relations to resolve the problems of internal integration and external adaptation’. Many writers argue, however, that (despite its attractiveness) there is little evidence to support the case for the contextual approach to leadership or to show that is a more suitable approach to running organisations than either the personal characteristics or leader–fol- lower models (Arnold et al, 1998; Hinkin and Tracey, 1999; Yukl, 2002). Just as a review of the role of managers produced a confusing and conflicting pic- ture, so too does an examination of the three approaches to leadership. Nevertheless, the idea of considering context and style together does fit in, partly at least, with the argument developed in the previous parts of this book: namely that there is a need to match the approach to change to the context of the organisation. That argument was developed further to include the possibility that managers could reverse this process and match the organisation’s context to their preferred style of working. However,
  • 526. Management and leadership 513 one major factor needs to be remembered when considering approaches to manage- ment: most of the research and writing on leadership is set in Western, and particularly American, organisations, and addresses their concerns (Alimo-Metcalfe and Alban-Metcalfe, 2000). Also, the majority of research studies have tended to focus on male managers and their characteristics (Maddock, 1999; Thomas, 2003). Therefore, before moving on, we need to return to the issue of diversity raised earlier when discussing globalisation. To recap, Jones et al (2000: 166–7) explain that: Diversity is dissimilarities – differences – among people due to age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, and capabilities/disabilities … Diversity is not just about differences ‘among people’, however, it is also about differ- ences between people. According to Ricks (1999: 4): Cultural differences are the most significant and troublesome variables encountered by the multinational company. In terms of differences among people, the posited differences in managerial style between men and women have attracted a great deal of attention (Loden, 1986; Macdonald et al, 1999; Maddock, 1999; Mullins, 2002; Thomas, 2003). Davies (1995) for example, found significant differences between masculine and feminine approaches to management. In particular, she found that the masculine approach valued self-esteem, abstract thinking, control and loyalty to superiors. The feminine approach, on the other hand, valued selflessness, contextual thinking, experience and accommodation. It is findings like these that have led writers such as Alimo-Metcalfe (1995a, 1995b) to argue that women prefer to use a more transformational style of leadership whilst men tend to be more transactionally-orientated. Differences in man- agement style are not just gender-related, however, they can also come about due to age, ethnicity, religion, or simple differences in personality (Deresky, 2000; Jones et al, 2000). To complicate the picture, these preferences are not stable between coun- tries and cultures. Much of the work on gender and management has tended to focus on the USA and Europe. It is not clear, however, that men and women managers in, for example, Japan and China have the same style preferences as their Western coun- terparts. Indeed, as Trompenaars’ (1993) ten-year study of management in 28 countries covering 47 national cultures showed, the differences between countries is as great as the differences within. His work showed, for example, that managers as a whole, male and female, in Japan and China tended to fit the characteristics attrib- uted to women managers in the West. For example, they favoured relationships as against rules, they promoted interpersonal trust as against contracts, and they tended to avoid rather than welcome confrontation. This, of course, confirms, Hofstede’s (1980, 1990) earlier work on cultural differences, which showed that organisational culture, and the values and behaviours of managers, do vary from country to country. Arnold et al (1998) maintain that there is also sufficient evidence to show that leader behaviour is interpreted differently in different cultures. Consequently, managerial behaviour that might be considered supportive in one society may be seen as threaten- ing in another. Therefore, we have to be very wary of taking work on managerial
  • 527. 514 Chapter 16 · Management – roles and responsibilities styles and behaviour developed in one setting, and assuming it applies to all organisa- tions and all societies. The implications of these findings for management and leadership are significant. Firstly, there are no universal rules for what is an effective manager or leader. An effective manager in one country, company or situation may be less so in others. Secondly, therefore, effectiveness is situation-dependent. In judging what is or is not an effective approach, managers and leaders need to take into account the nature of the organisation and the diversity of its workforce. Lastly, in training and developing managers, there is a need to recognise that whilst there are some generic skills, com- petences and behaviours, there will also be a need to tailor development programmes to the person and their situation. The issue of management development will be examined in more detail later. Before doing so, however, we will first examine the behaviour of the managers in the ten case studies in Part 3. By establishing whether their approach was transactional or transformational and the context convergent or divergent, it becomes possible to judge not only the appropriateness of their behav- iour in the situation in which they were operating, but also the usefulness of the contextual approach to leadership. Management and leadership in action If we examine the case studies in Part 3, we find that managers and the context within which they operated varied enormously. Merely analysing what managers did in each situation, interesting though it would undoubtedly prove, is likely to generate more heat than light. However, using the transactional–transformational and convergent–divergent categorisations discussed above allows a clearer picture to emerge. Taking the case studies in order: The music industry For most of the last 50 years, the music industry has operated under a relatively stable set of conditions: artists made music, the big labels recorded and distributed it, and the consumers paid for it. The big record labels recruited the artists and con- trolled them ruthlessly, often dropping them the minute sales dipped, and took the lion’s share of the revenues. It was often the case that artists could earn big money for the labels and end up penniless themselves. Therefore, the industry existed in a con- vergent state and was managed in a transactional manner. The Internet, however, with the aid of Shawn Fanning, changed all that. Consumers are finding that they do not have to pay for their favourite records; they can download them free from the Internet. The power of the big labels is dependent on their controlling distribution and collecting the sales revenues. Therefore, the industry is entering unknown terri- tory. It is now in a divergent state; the old rules no longer apply, but the new ones have not yet emerged. In such a situation, the key players – the labels – have two choices: they can either try to re-establish their control by fighting Internet piracy, or they can embrace the Internet and seek new and more innovative ways of running the industry. At the moment, they have chosen the former, but this seems destined to fail. No one has yet found a way of controlling the Internet, and if they did, a new Shawn Fanning would come along and find a way round it. Consequently, though the record
  • 528. Management and leadership in action 515 labels have chosen to tackle a divergent context by continuing with their transactional approach to management, it seems unlikely to succeed. Marconi As GEC, Marconi was a company which had been very successful. When George Simpson took over, however, there was great concern by the big, city investors that it had missed out on the Internet/telecoms boom. Arnold Weinstock, in the years lead- ing up to his retirement, had also recognised the need for change but had pursued this through joint ventures. Under Weinstock, GEC operated in a mainly convergent con- text and was managed in a transactional manner. When Simpson took over, he decided to pursue transformational change through buying and selling companies. In effect, he wanted to exchange those GEC companies who were operating in the old economy, the majority of them, for ones operating in the new economy. This he did at great expense. Unfortunately, the strategy failed and the company, now re-named Marconi, went bust. When a person who has dominated a company for over 30 years retires, a period of change and uncertainty will follow. If the retirement coincides with the emergence of major new technologies, the level of uncertainty will be consider- able. Therefore, George Simpson took over GEC at a time when it was operating in a divergent context. He made the assumption, as did the people who controlled the majority of the company’s shares, that it needed to be transformed. His transforma- tional style of management was a far cry from that advocated by Kotter (1990), however, as shown in Table 16.2. He did not attempt to motivate and inspire GEC’s staff by the power of his vision. Instead, he chose to sell the companies that employed them. As transformational leadership goes, it appeared to be a very uncreative and mechanical example. It also proved to be spectacularly unsuccessful. Oticon This was a company that was being left behind as the rules of the game in its industry were being changed by technological advances. In effect, it was a company operating in an increasingly divergent context but which was run on transactional lines. The company was transformed by an inspired Chief Executive, Lars Kolind. He was an archetypical transformational leader who, through his vision and ability to inspire and motivate others, transformed Oticon. However, it should be noted that, for the first two years of his appointment, he operated within the same transactional mould as his predecessors. It was only then that he recognised the limitations of continuing to attempt to improve incrementally an organisation that was out of step with its environment and competitors. He did not attempt to sell the company or acquire other companies. Instead, he changed the internal organisation of the company, not to align it with the external environment, but in an attempt to change that as well, by changing the rules of the game in his industry. Kolind’s transformational leadership, especially his vision of a new Oticon and his ability to inspire others, was clearly appropriate to the divergent needs of the company. The PPC For most of its life, the PPC was a company operating in a convergent context and managed in a transactional fashion. The decision to privatise the PPC and to turn it into a commercial concern changed all that. The PPC needed to be transformed both
  • 529. 516 Chapter 16 · Management – roles and responsibilities structurally and culturally to adapt to its new environment and strategic objectives. The privatisation of the PPC tended to focus on the structural aspects, however, and failed to address effectively the cultural dimensions of the change from a public to a private company. It appears to be a classic case of a situation requiring transforma- tional leadership, tackled by managers who could rearrange the organisation’s structure but did not know how to begin winning over and inspiring the human side of the organisation. This difficulty was compounded by the fact that staff were hostile to and suspicious of the changes. Therefore, like Marconi, it was a case where supposedly transformational leadership appeared to lack the creative skills necessary to transform the organisation’s culture to match the changes they made to its structure. Whether the outcome will be more successful than in Marconi’s case, only time will tell. Volvo Though there have been considerable changes at Volvo, it is not easy to place either the organisation or its leadership on the convergent–divergent, transactional–transformational scale. For example, in the early 1970s, Volvo diverged from the expectations of Swedish society in using assembly lines, but was very much convergent with the rest of the car industry. Similarly, though Volvo transformed the way it assembled cars and made other significant structural changes, it does not appear to have reinvented itself in the way that, for example, Honda or Toyota did. However, Volvo has transformed its production meth- ods, and indeed the ethos of the company, but it has been a very slow transformation – very much a ‘Long March’ rather than a ‘Bold Stroke’ approach. For much of this period, the company was led by Pehr Gyllenhammar, who was certainly a visionary when it came to creating a human-centred approach to car assembly. Unlike Japanese car companies, however, he did not try to rewrite the rules for the rest of the industry, though he did see the marketing potential of his approach to assembly. Nor, as its sale to Ford showed, did this new approach transform Volvo’s fortunes. The reality of the car industry is that the small players, like Volvo, find it increasingly difficult to generate the vast amounts of money necessary to launch new models. Nevertheless, the Volvo approach to assembly is firmly embedded in the company and it will be interesting to see if Ford attempts to change it. XYZ Construction This was a company that had been run along transactional lines by an authoritarian figure for a number of years. When he retired, its parent company decided his man- agement style was no longer appropriate for a company operating in an industry that was trying to develop partnerships between customers and suppliers. In effect, it decided that a transactional approach was no longer appropriate in a situation where the construction industry was beginning to move away, diverge, from its past prac- tices and behaviours. XYZ’s new Managing Director was charged with the task of creating a more teamwork-based organisation which could develop effective partner- ships with its customers, thus transforming the company. This is exactly what he did. Over a period of four years, through a series of often small-scale initiatives, he changed the management approach in the company and encouraged a more creative and teamwork-based approach to internal and external relationships. This culminated with the development of the new organisation structure which formalised the new, more cooperative and creative way of working.
  • 530. Management and leadership in action 517 GK Printers The company can be characterised as one that was out of step with – diverging from – its environment. The Managing Director appeared to operate in a transactional mode, as did most other people in the organisation. He and they were aware, how- ever, that the company could not survive if it persisted with the old ways of working. This was not a company where a new Managing Director with a transformational, style of management was appointed. Rather it was an emergent process where, on an issue-by-issue basis, both the company and the Managing Director were gradually, and not always willingly, transformed. Though the initial changes appeared to have elements of the transformational approach about them, it was only later, when the organisation came to tackle internal relationships and managerial behaviour, that a more genuinely transformational approach to the company began to emerge. Rover–TRW This was very much a case of operational transformation that was not matched by significant changes at more senior levels in either organisation. Undoubtedly, the way that the TRW managers at Frankley established and continuously improved the assembly operation, and the way they developed a new working relationship with Rover’s assembly line personnel, was transformational. The behaviour of senior man- agers in both companies appeared to be very much fixed in a transactional and antagonistic mode, however, in part at least because the overall climate was more convergent than divergent. Therefore, this showed that, even within a predominantly convergent and transactional approach to management, there are occasions where transformational leadership is required to enable parts of an organisation to respond effectively to new challenges. Speedy Stationers In this case, the company was trying to develop a new business area which needed a new approach. The way the new business area needed to operate was divergent from the existing norms in both Speedy and its customers. It could not be run in the trans- actional way in which other parts of the business operated. Speedy eventually chose to isolate the new business from its existing activities. This allowed it to pursue a transformational approach to the new business, whilst allowing its existing business, which was operating in a more convergent climate, to be managed as before. It also enabled it to limit the transformation of external relationships to the new business customers, thereby allowing the different parts of their business to adopt their own preferred style of management. PoliceCo This was a case where the organisation operated in a predominately convergent state and was managed in a transactional fashion. Though PoliceCo was required to out- source parts of its operation, this was treated in a routine fashion and managed in a transactional manner. The pressure to outsource did not undermine or in any way appear to raise questions about the appropriateness of the convergent context in which PoliceCo existed. Therefore, this was an example where the management felt no need to reassess how it operated or whether the organisation needed to change fundamentally. The decision to embark on outsourcing was handed down from gov- ernment as a bureaucratic edict that PoliceCo responded to in a like manner.
  • 531. 518 Chapter 16 · Management – roles and responsibilities To summarise the evidence from the ten case studies, these show a very diverse range of approaches, situations and outcomes. They also show the limitations of attempting to apply simple definitions to complex situations. The categorisation of leadership types and organisational states are useful in situations where a clear and relatively unambiguous picture of events is possible, such as in the case of Oticon, the PPC and PoliceCo. In many of the cases, however – Volvo, GK Printers and Rover–TRW – the picture is less clear. Elements of divergence exist, but these appear to be limited to cer- tain areas of their environment or to change over time. Because of this, managers can be required to exhibit both transactional and transformational qualities either at the same time or in turn. Certainly, in the case of XYZ, for example, even though the new Managing Director was attempting to transform the company, he still had to keep it working effectively on a day-to-day basis in an industry that was still predom- inantly transactional and with a workforce that was used to an authoritarian style of management. As the cases of the PPC and the Music Industry showed, even when there are strong pressures and reasons for adopting a new style of management, this does not always happen. Also, as was illustrated at GK, even where it does take place, it can be slow and painful to achieve. Nor, as was seen in PoliceCo, is it always appropriate to adopt a transformational style, even where significant changes are occurring. In addition, as the PPC’s attempts to maintain its dominant market posi- tion showed, managers sometimes seek to influence their environment to limit the need for internal changes and to bring them more into line with their preferred style of management. Though the evidence from the case studies fits in with the general literature on managers’ activities, which sees these as fragmented, lacking in consistency and reac- tive, it gives less support to those leadership theorists who see managers and leaders having a preferred approach which is difficult to change. The picture that emerges from the case studies is one where effective managers are required to possess and utilise a wide range of skills and attributes depending upon the situation and context. Effective managers must be capable, often at the same time, of being both transac- tional and transformational, given that the environmental pressures and other constraints do not appear to affect all parts of an organisation in the same manner nor at the same time. In particular, as Thompson (1967) remarked in relation to Contingency Theory (see Chapter 2), some organisations do at least seem adept at sealing off the productive cores of their organisations from environmental uncertainty whilst other functions are more directly affected. The result is that managers can be required to adopt distinct approaches towards managing different parts of the same organisation. Despite what the contextual approach to leadership maintains regarding the ability of managers to change their leadership style, this ‘Jekyll and Hyde’ view of management raises important questions about how managers can be prepared and developed to cope with a wide variety of situations. These include ones where they might have to maintain some parts of their organisation on a transactional basis, whilst rebuilding other parts in a transformational style and, at the same time, be attempting to influence constraints either to prevent, reduce or even promote the need for transformational change. In order to address this question, the next part of this chapter will discuss management development.
  • 532. Management development 519 Management development ■ Learning and flexibility Like the literature on management and leadership, the case studies give support for the notion that different situations require different approaches to change. They also show that managers are, sometimes at least, able to change their style of management or lead- ership, and even exhibit different styles to different parts of their organisations at the same time. This is consistent with the arguments in Chapters 14 and 15 that managers can and do adopt both the Planned and Emergent approaches to change management either alternately or simultaneously as the situation requires. In addition, the case stud- ies show that managers, not necessarily by conscious design, create situations where the context in which their organisations operate is changed to suit their preferred or exist- ing approach to both management and change. As argued in Chapters 14 and 15, changing the situational context can be very important; yet in terms of leadership roles and managerial expectations, one of the main findings from the case studies is the apparent ability of some managers not only to adapt their style to the particular situa- tion, but also to adopt transactional and transformational approaches at the same time. The case studies also show, however, that other managers have great difficulty in chang- ing their leadership approach or influencing their circumstances. In part at least, the argument that there are managers who can change their style of leadership runs counter to some of the literature on managerial learning discussed in Chapter 9. Miller (1993: 119) argued that as they gain experience, managers ‘form quite definite opinions of what works and why’. This view was supported by earlier work from Nystrom and Starbuck (1984) who maintained that managers interpret the world through their own perceptions and expectations, which are built up over time. Yet, as the Oticon case study illustrated, some managers do seem capable under certain conditions – especially when faced with a crisis – of restructuring their mental models of how the world is and how they should respond. In Chapter 14, the con- cepts of Cognitive Dissonance, Depth of Intervention and the Psychological Contract were used to explain why it was that people could, in crisis situations, change deeply- held attitudes very quickly. This ‘crisis mode’ only partly helps to explain, however, how some managers, when faced with change situations, appear capable of switching from a transactional approach to a transformational one as the circumstances demand or, indeed, become capable of adopting both at the same time. The work of Mintzberg (1976) offers some clues as to how managers might accom- plish this mental juggling act. In studying brain functions and successful managers, he concluded that effective and proficient managers are ‘whole thinkers’ – they use both the left and the right hemispheres of their brain. That is, they can combine a rational–analytical approach to management with creativity and lateral thinking. Mintzberg argued, however, that, in general, Western managers tend to think on the left side of their brain – they tend to adopt a rational–analytical approach. Interestingly, this is compatible not only with a transactional approach to manage- ment, but also with a rational–planned approach to strategy and the directive approach to change.
  • 533. 520 Chapter 16 · Management – roles and responsibilities In contrast, Nonaka (1991) argued that one of the great strengths of Japanese com- panies is their belief that creating new knowledge depends more on tapping the tacit and often subjective insights and intuitions of all their employees, whether managers or not. He maintains that traditional Western management, on the other hand, sees organisations as information processing machines with the only useful knowledge being formal, scientific, quantifiable and rational. He contends that such a perspective limits the creation of new knowledge which, in turn, makes it difficult for organisa- tions to respond to changing and new situations. Nonaka argues that new knowledge always begins with the individual. One of the main foundations of the success of Japanese companies is, he states, managers’ ability to gather and combine the insights and intuitions of individual employees and use them for the benefit of the entire organisation. The tendency of Japanese managers to use softer, more creative approaches and to involve staff in decision-making was also noted in Chapters 3, 6 and 7 when discussing approaches to management and strategy. The case studies, and the success of many Western firms, particularly those con- cerned with creative processes (such as software development) and the performing arts (such as film-making), show that it is not inevitable that Western managers should operate solely in a rational–analytical mode. Nevertheless, as Hofstede’s (1980, 1990) and Trompenaars’ (1993) work on national cultures reveals, there is a predisposition in Western societies towards more rational–analytical ways of work- ing, whereas in Japan and China managers tend to use more subjective decision-making processes. Also, as Miller (1993) points out, a manager’s view of the world and what works is shaped by his or her previous work experience. If this has been in organisations that have operated on traditional Western principles, which are structured in a Classical way and give credence only to formal and scientific knowl- edge, then they undoubtedly will tend to operate on the left side of the brain. This does not mean that such managers cannot develop or access the right side of their brain, but it does mean it is unlikely to come about accidentally or without strong encouragement from the organisations in which they work. To this end, many organi- sations are seeking to construct management development programmes designed to broaden the outlook and develop the creative, inductive and questioning side of their managers’ personalities (Harrison, R, 2002). However, this is unlikely to be achieved through traditional management development programmes, which offer standard packages delivered in classroom situations, because of their low success rate (Burnes, 2003; Lessem, 1998; Mullins, 2002; Mumford et al, 2000). If management develop- ment programmes are to be effective, in future, as Harrison, R (2002) contends on behalf of the UK’s Chartered Institute of Training and Development (CIPD), they will have to be tailored to both the needs of the individual manager and the strategic objectives of their organisation. In respect of developing managers’ creativity, Kirton’s (1989) Adaptation–Innovation theory, and subsequent work by Talbot (1993, 1997), provide useful insights. Kirton maintains that not only do people exhibit different degrees of creativity, but that they also express their creativity in different ways, along a spectrum which runs from adaptors to innovators. Those who tend towards the adaptor end of the spectrum prefer to work within the existing system to improve things. Adaptors are efficient, tend to conform to existing norms and like to deal with only a few ideas at a time. Innovators tend to ignore or challenge the system and to come up with radical
  • 534. Management development 521 proposals for change. Figure 16.1 shows how Kirton’s ideas relate to transactional management and transformational leadership. As can be seen, transactional managers tend to have lower levels of creativity because they are dealing with changes at the group level, whereas transformational leaders need higher levels of creativity because they are involved in transformational activities at the organisation level. However, as Figure 16.1 also shows, even within the transformational dimension of leadership, there will be situations which require a more adaptive approach, such as structural rather than cultural change. Similarly, transactional managers may be faced with situations where more innovative than adaptive solutions are required, such as when dealing with behavioural issues as averse to technical ones. Regardless of their levels of creativity, some managers may find it easier than others to switch between innovative and adaptive behaviour. There may also be many managers who can exhibit varying levels of creativity as the situation demands. This may be the reason why some people, as demonstrated by our case studies and the leadership literature, can change their style of leadership or even adopt different styles at the same time. The story does not end there. Talbot (1997) demonstrated that, regardless of the level of creativity a person possesses or where they are located on the adaptor–innovator spectrum, there are proven tools and techniques for increasing their level of creativity and flexibility. By so doing, transactional managers may find it easier to operate in a more transfor- mational and innovative mode, or move between both as circumstances necessitate. Talbot (1993) also points out, though, that such tools and techniques can only over- come barriers to creativity that lie within the individual. Other barriers, he argues, such as the attitudes and behaviours of superiors and colleagues, and the way the organisation operates, can also block individual creativity. Therefore, in management development, as with so many other aspects of organisational life, we cannot consider the individual in isolation from the rest of the organisation. Transformational leadership Creativity – relatively high Q1 Q2 Organisation-wide culture change Large-scale structural change Innovation Adaptation Changes to group behaviour Changes to group tasks Q4 Q3 Creativity – relatively low Transactional management Figure 16.1 Leadership, management and change
  • 535. 522 Chapter 16 · Management – roles and responsibilities ■ The management development process Under different names, management training and education has been around since the Industrial Revolution. In the nineteenth century, it tended to be geared towards giving managers specific skills such as engineering, production control, etc., either through on-the-job training or self-help societies. In the twentieth century, more and more, employers took on the job of specifying and providing formal management training, but it still tended to be geared towards giving managers specific skills. Over the last 20 years or so, there has been a significant change in emphasis. Management develop- ment programmes are increasingly seeking to change managerial behaviour, especially to promote leadership and creativity, and to align managers’ behaviour with the longer-term strategic objectives of their organisations and with society’s wider social and ethical considerations (Harrison, R, 2002). Though management development is big business in all advanced countries, there is no universally-agreed definition of what it is. The following quotations give a flavour of the range of definitions on offer: … a conscious and systematic decision-action process to control the development of manage- rial resources in the organisation for the achievement of organisational goals and strategies. (Ashton et al, 1975: 5) ... that function which from deep understanding of business goals and organisational requirements, undertakes: (a) to forecast needs, skill mixes and profiles for many positions and levels; (b) to design and recommend the professional, career and personal development programmes necessary to ensure competence; (c) to move from the concept of ‘management’ to the concept of ‘managing’. (Beckhard, 1985: 22) ... an attempt to improve managerial effectiveness through a planned and deliberate learning process. (Quoted in Mumford, 1987: 29) Management development is concerned not only with improving the effectiveness of individ- ual managers but also with an improvement in management performance as a whole and organisational effectiveness. Mullins (2002: 845) In an age where organisations are often required to change rapidly and radically, management education and development is taken seriously in most advanced coun- tries and entry into a managerial job often requires formal, university-level qualifications (Arnold et al, 1998; Jones et al, 2000; Lippitt, 1982; Marsh, 1986; Morgan, 1988; Mullins, 2002; Pearson, 1987; Storey, 1989). The nature of manage- ment development varies between countries, however (Keuning, 1998). In Japan, for example, it tends to be a very competitive process which begins by recruiting elite cohorts who have usually studied law or engineering at a top university. In Germany, there is a greater emphasis on a formal apprenticeship system which develops man- agers through a career path that often involves the attainment of higher degrees. France, like Japan, tends to be very elitist and managers are expected to have studied for a degree in business or law at one of the Grandes Ecoles (Harrison, R, 2002). In the UK, management education tends to be more ad hoc and less well-regarded, even in large organisations. UK companies also spend a much lower percentage of their turnover promoting education and training than their counterparts in France,
  • 536. Management development 523 Germany, Japan and the USA (Harrison, R, 2002; Keuning, 1998). This is probably why a number of studies revealed in the 1980s that the UK was particularly poor at providing the type of formal and structured education necessary for nurturing mana- gerial creativity (Constable and McCormick, 1987). Partly in response to these findings, the 1980s and 1990s saw a growing interest in management development by government and organisations (OECD, 1996; Sissons and Storey, 1988; Storey, 1989, 1990; Worrall and Cooper, 1997, 1998). However, a 1997 survey of 258 chief execu- tives carried out for the Sunday Times found that UK managers did not have the skills to obtain the full potential from their businesses (Hannagan, 2002). Likewise, the government sees poor management as the reason why UK productivity lags behind that of the US by 42 per cent, France by 14 per cent and Germany by 7 per cent (Paton, 2003). This continuing lack of management skills appears to be the main reason why the UK government has abandoned most of the management training and development schemes its predecessors launched in the 1980s and 1990s, such as the Management Charter Initiative, and in 2002 established a new body, the Council for Excellence in Management and Leadership. Certainly, the Council itself has con- cluded that most management and business leadership programmes are ‘dysfunctional’ and that the lack of appropriate leadership skills is detrimental to the UK’s economic performance (Paton, 2003). Regardless of the encouragement or not of governments, it is individual organisa- tions who initiate such programmes. Given that organisations are different and face different challenges, if management development programmes are to be successful in producing effective managers and improving the performance of organisations, then it is self-evident not only that they will vary from company to company, but also that they will need to vary from individual to individual. Harrison, R (2002: 348) claims that, despite the differences between organisations, an effective management develop- ment process (MDP) has six basic features: ■ a clear MDP mission, linked to the organisation’s business strategy; ■ specific programme objectives that relate to the external challenges that the organi- sation is facing; ■ a focus on major internal organisational issues; ■ programmes tailored to organisational and individual needs; ■ the systematic assessment of management development needs, aims and outputs; ■ a professional business-led approach to MDP. Harrison’s six basic features of an effective MDP represent a clear break with the standard management development programmes of the past that companies required all their managers to pursue, regardless of their individual needs, and which appear to have served them and their managers poorly (Arnold et al, 1998; Burnes, 2003; Mangham Working Party, 1987; Sissons, 1989; Storey, 1989; Thornberry, 1987; Yukl, 2002). The two main problems with such standard offerings is that, firstly, they tend to develop managers within an existing behaviour pattern and set of expectations. Therefore, traditional organisations will tend to continue to produce transactional managers, regardless of the presence or absence of formal training and education pro- grammes. The second problem is that they fail to address the needs of individual managers. Whilst they might meet a manager’s training requirements in terms of tech- nical skills (such as accountancy, engineering, etc.), they rarely address how they could develop the attitudes and behaviours necessary to be an effective manager.
  • 537. 524 Chapter 16 · Management – roles and responsibilities Though formal, classroom-based qualifications such as Management Diplomas and MBAs are still seen as having an important role in most management development programmes, they are now being balanced with more individual and experientially- based approaches. These approaches include the use of assessment and assessment centres, coaching and mentoring, self-development and, increasingly, Action Learning. Though such approaches have been around for a long time, their potential contribu- tion to management development has been ignored (Burgoyne and Germaine, 1984; Harrison, R, 2002; Long, 1986; Mullins, 2002; Newstrom, 1985; Pedler, 1996; Stuart, 1986; Wilkinson and Orth, 1986; Willbur, 1987). More recently, with a greater emphasis being placed on individual development, especially in terms of align- ing behaviour with the needs of the organisation and society, these techniques are finding increasing favour. ■ Changing managerial behaviour In terms of challenging and changing managerial attitudes and behaviours, the use of Action Learning is particularly interesting. It was developed in the 1940s in the UK by Reg Revans and is based on small groups of managers tackling a set problem or case study. As Pedler (1996: 9) states: Action Learning is a method of problem solving and learning in groups to bring about change for individual, teams and organisations. It works to build relationships which help any organisation improve existing operations and learn and innovate for the future. The aim is not only that managers learn how to approach problems together, but also that they learn about themselves and challenge the appropriateness of their own atti- tudes and behaviours. As Revans commented: The central idea of this approach … is today that of the set, or small group of comrades in adversity, striving to learn with and from each other as they confess failures and expand on victories. (Quoted in Crainer, 1996: 195) Though Revans’ ideas were out of fashion for many years, his emphasis on team- working and the power of groups to solve their own problems, linked with the potential for self-reflection and development, is making it an increasingly popular approach (Mullins, 2002). Contemporary approaches to Action Learning tend to be based on Kolb’s cycle of experiential learning (Experience–Understanding–Planning–Action) with sets or groups being guided by a facilitator who acts as a catalyst for ideas (Darwin et al, 2002). Also, as its name implies, Action Learning has strong similarities with and can be seen as a derivation of Lewin’s Action Research (McLaughlin and Thorpe, 1993). Action Research is one of the four elements of Lewin’s Planned approach to change (see Chapter 8). Like Action Research, Action Learning places a heavy emphasis on self-reflection, behavioural change and learning. Whilst the latter tends to focus on developing the individual, however, Action Research focuses more on change at the group level. Nevertheless, Revans’ statement that ‘there is no learning without action and no (sober and deliberate) action without learning’ (quoted in Pedler, 1996: 15) could have been written by Lewin.
  • 538. Management development 525 Burnes (2003) links Action Learning with organisational change. He argues that change projects can double as Action Learning projects, and vice versa. Burnes main- tains that there are clearly situations and times when organisational change and management development go hand-in-hand. These are not situations where it is either necessary or desirable for the objectives of one to become subservient to the other, or to be compromised by the needs of the other. Rather these are genuinely situations where the need to change an organisation and the need to develop managers are mutually supportive. Unfortunately, as Crainer (1998: 259) comments, though Action Learning is attracting much attention, its complexity makes it a ‘daunting prospect’. Given that organisational change projects can, in themselves, be a ‘daunting prospect’, it is perhaps not surprising that many organisations choose not to link them to management development initiatives. Nevertheless, the benefits, Burnes argues, may be considerable. As with all general developments, this move away from formal, off-the-job training programmes to more personalised and experiential, on-the-job programmes needs to be viewed critically. Storey (1989), in a major review of the management development literature, argued that drawing a distinction between on-the-job and off-the-job train- ing may miss the main issue. This is the requirement to assess the development and training needs of individual managers accurately and to provide programmes that allow managers to develop a much more critical and intuitive approach to their situa- tion. Argyris (1991) argues, however, that one of the main barriers to developing more critical and intuitive approaches is that, within the narrow confines of transac- tional behaviour, many managers do operate effectively, even though, looking at the wider picture, their organisation may be in trouble. This is akin to Peters and Waterman’s (1982) concept of ‘irrational rationality’ – managers applying the ‘right’ solution even when the situation means that it is no longer appropriate. Argyris believes that managers need to experience failure or recognise the inappropriateness of their behaviour before they can begin questioning their assumptions and practices, and develop their ability to be critical and creative. Senge (1990) contends that the most important factor in developing such a questioning approach and achieving organisational success is the ability to comprehend in a critical way the overall organ- isational context. This takes us back to the point made by Talbot (1993, 1997), cited earlier, that it is insufficient to develop managers if the organisation as a whole – people, values and systems – does not also change, or perceive the need for change. The case studies in Part 3 support this argument. As was shown in Oticon and XYZ in particular, it was the need for transformational change that forced or enabled man- agers to break out of the transactional mould and think critically and creatively about solutions to the problems their organisations faced. Therefore, whilst management development has increasingly come to be seen as a process that must address the needs of the individual managers, it must not lose sight of the need to develop management as a whole in organisations. Nowhere is this more apparent than when we look at the areas discussed earlier in this chapter cover- ing sustainability, diversity and ethics. These are areas where organisations have failed significantly in the past, whether it be in terms of environmental depredations, racial and sexual discrimination and stereotyping, or the illegal ‘ramping’ of shares on Wall Street. Organisations often put such transgressions down to the failure of an individ- ual or group to follow the organisation’s guidelines and policies. The regular
  • 539. 526 Chapter 16 · Management – roles and responsibilities occurrence of illegal and unethical practices in business tends to show that these are a failure of management as a group in organisations, however, rather than the failure of individual managers. Though it is necessary for individual managers to address issues of sustainability, diversity and ethics as part of their personal development, by itself this it is not suffi- cient. If organisations and those in them are to behave differently, it is also necessary that the management of an organisation as a whole should address these issues as part of its development. The question, of course, is how can this be done? If organisa- tions are capable of systematically side-stepping the policies and guidelines that they have developed, how can a management development programme make them face up to the issues? One answer might be to utilise Action Learning where managers ‘learn with and from each other as they confess failures’. Action Learning has a number of drawbacks, however, not least that its focus is on developing individual managers, albeit in a group setting (McGill and Beaty, 1995). It does not appear to be appropri- ate to situations where behavioural change and reflection needs to take place at the group rather than the individual level. Nor does it appear suitable for situations where the issue is the effectiveness of management at the organisational level, rather than the individual level. There is an approach that was specifically established to enable groups to address the appropriateness of their behaviour, especially in terms of discriminatory activity, and which also has a strong ethical basis. It is, of course, Planned change as formu- lated by Kurt Lewin. Planned change was designed to enable groups, in this case management groups in an organisation, to understand the factors which make them act as they do, and to develop effective ways to change them and ‘freeze’ or institu- tionalise those changes. As described in Chapter 8, Planned change has four elements: field theory, Group Dynamics, Action Learning and the Three-Step approach to change. His critics maintain that Lewin’s approach is not suitable for large-scale, rapid and coercive change situations, or situations where the focus is on structural rather than behavioural change. However, both Lewin’s own work, and that of his successors, have shown that it is a highly effective process for achieving sustained behavioural changes in groups. It has been applied to a wide variety of situations, including the food habits of American housewives, teenage inter-racial gang warfare in American cities, conflict between Palestinians and Israelis, and management behav- iour in organisations (Bargal and Bar, 1992; Cummings and Worley, 2001; Gold, 1999; Lewin, 1947a; Marrow, 1969). Lewin’s approach to change was specifically developed to bring about changes in group behaviour, and it has had considerable success in achieving this in the years since his death (Day et al, 2002; French and Bell, 1995; Harvey and Brown, 2001; McNiff, 2000; Wheelan et al, 1990). Therefore, as an approach to tackling the failures of management as a group in an organisation, Planned change has a lot to recommend it. This does not undermine the case for other approaches which address the needs of managers as individuals, but does recognise that individual behaviour and effectiveness cannot be separated from group behav- iour and effectiveness. Indeed, it may be one of the ironies of management development that, in order to equip managers to meet the challenges of the twenty- first century, it has to look back to the work of Kurt Lewin.
  • 540. Management, leadership and change 527 ■ Summary From the above examination of managerial learning, seven factors can be discerned as important in the ability of managers to operate effectively: 1 The managers’ past experience, and whether this has reinforced their beliefs or, instead, led them to question their appropriateness. 2 The level of creativity of the manager. Does the manager have a preference for transactional management or transformational leadership, and to what degree can they move between the two? 3 His or her cognitive style: are they adaptors or innovators? Are they ‘whole thinkers’ or are they more left hemisphere–rational thinkers or right hemisphere– creative thinkers? 4 The managers’ ability to perceive the whole picture. Can they see the organisation in its context? In particular, do they understand the choices available in terms of changing the organisation itself, its context, and their own approach to leadership, strategy and change? 5 The organisational context: is it amenable, or can it be made amenable, to a more critical, creative and ethical style of leadership? 6 The organisation’s management team: does it have a commitment to promoting sustainability, diversity and ethical behaviour, and are the senior managers commit- ted to ensuring that its statement and policies in these areas are implemented through the day-to-day actions of all its members? 7 The organisation’s management development process: is it effective? Is it geared to developing individual managers and the management cadre of the organisation as a whole? As far as the UK is concerned, as surveys by Worrall and Cooper (1997, 1998) found, the 1990s saw a considerable increase in the provision of education and train- ing for managers. This was driven by a number of factors: individuals seeing the need to maintain their marketability; organisations recognising the importance to them of well-trained managers; and successive governments identifying the link between good management and the overall health of the UK economy. Nevertheless, Worrall and Cooper also found that some 20 per cent of managers still receive no formal training for their role. Furthermore, they found that many managers question the appropriate- ness of the training they do receive and feel the quantity is insufficient; in addition, the increasing pressure of work, and their longer working hours, are reducing their ability to take advantage of and apply the training and education that is available. Management, leadership and change The literature on management and leadership goes back many hundreds of years. Indeed, if one takes the view of some writers that The Art of Warfare by Sun Tzu, which was written in China around 400 BC, is pertinent to managing today’s organi- sations, then the study of management goes back thousands of years (Michaelson, 2001). As was shown in Chapter 1, however, to all intents and purposes the system- atic study of management can be said to have begun with the work of Frederick
  • 541. 528 Chapter 16 · Management – roles and responsibilities Taylor at the beginning of the twentieth century. Since then, there have been more books and articles on management than anyone can possibly count. These have thrown up a plethora of theories, studies and terminology which, as Thomas (2003) comments, has probably caused more confusion than clarification. In this chapter, we have tried, as Karl Weick (see Chapter 15) might put it, to make sense of the litera- ture on management. This ‘sensemaking’ began with an examination of the challenges posed to management by globalisation, especially in terms of sustainability, diversity and ethics. This was followed by a review of the literature on the manager’s role which drew attention to the three main theories on leadership, i.e. the personal char- acteristics approach, the leader–follower approach, and the contextual approach. Next came a brief description of management and leadership in the ten case study companies described in Part 3. Finally, we investigated the role played by, or that could be played by, management development in shaping the behaviour of managers and leaders both at the individual and group levels. This attempt to make sense of management and the literature on management has shown the following: ■ The incredible variety and complexity of the role of people who hold the title ‘manager’. The title is applied to people in a wide range of hierarchical levels and functional specialisms. These ‘managers’ are presented with a myriad of responsi- bilities and challenges, ranging from the mundane, but vital, everyday tasks required to ensure that organisations operate efficiently, to the rarer and far more spectacular need to transform and reinvent organisations. ■ The wide range of factors that impinge on managerial effectiveness, including man- agers’ own personalities, those of their followers, superiors and peers, and the wider organisational context and objectives in which they operate. ■ The ability or potential of managers to increase their level of creativity and change their style of management from transactional to transformational, and back, as sit- uations require. ■ The recognition that management development has a key role to play not only in developing individual creativity but also in changing the ethical behaviour of man- agement as a group in organisations. What conclusions can we draw from this review for the relationship between man- agement, leadership and change in organisations? The first is that there does seem to be some terminological agreement, as shown in Tables 16.1 and 16.2, as to the differ- ences between management and leadership. Management is about the present, it is about maintaining the status quo, and it is about objectivity and aloofness. Leadership is about the future, it is about change and it is about values and emotions. However, whilst management and leadership may be different, this does not mean that managers and leaders are or should be different people. This chapter has shown that most management and leadership roles require a mixture of transactional and transformational skills. In an ideal world, managers would be able to adjust the bal- ance of transactional and transformational skills they deploy to the organisation’s requirements at anyone time. In our less than ideal world, the balance is likely to be static rather than dynamic, and usually determined by the background, experience and personality of the individual manager. Nevertheless, it would be difficult to think of a manager who never had to deal with organisational change, even on a small scale, and who, therefore, did not possess some transformational skills. Similarly, it
  • 542. Management, leadership and change 529 would also be difficult to think of a leader who, regardless of the size of the changes they were responsible for, did not have to possess some of the transactional skills nec- essary for ensuring that an organisation continued to satisfy its stakeholders. Therefore, the balance of management–leadership/transactional–transformational skills an individual needs to possess at any one time is related to the degree of change or stability they encounter. The second conclusion we can draw, as Figure 16.1 showed, is that management and leadership focus on different types of change. Management tends to focus on small- scale, localised changes, whilst leadership tends to focus on more radical, organisation-wide changes. The former tend to require only low levels of creativity, whilst the latter require high levels. Even within these different types of change, how- ever, there are some forms of change that appear to be more innovative and others more adaptive. Consequently, the ability of managers and leaders to deal effectively with dif- ferent change situations will be related to the level of creativity they possess and the degree to which their creativity expresses itself in an innovative or adaptive manner. Having drawn these two conclusions, we are now in a position to relate approaches to management and leadership to approaches to managing change. In Chapter 10, we developed a Framework for Change (see Figure 10.4). This related the types of changes organisations experienced, such as cultural or structural change, to the most appropriate approach to change, e.g. Emergent, Planned, etc. If we merge Figure 10.4 from Chapter 10 with Figure 16.1 from this chapter, we can construct a Framework for Management, Leadership and Change (see Figure 16.2). Turbulent environment Large-scale transformation Transformational leadership Creativity high Q1 Q2 Level: The organisation Level: The organisation Focus: Culture Focus: Structures and processes Approach: Emergent change Approach: Bold Stroke Slow transformation Rapid transformation Innovation Adaptation Slow change Rapid change Level: Individual/group Level: Individual/group Focus: Attitudes/behaviour Focus: Tasks and procedures Approach: Planned change Approach: Tayloristic or Kaizen Q4 Q3 Creativity low Transactional management Small-scale change Stable environment Figure 16.2 A framework for management, leadership and change
  • 543. 530 Chapter 16 · Management – roles and responsibilities The four quadrants in Figure 16.2 show what form of management or leadership is best suited to each form of change and each approach to change management. For example, quadrant 3 shows that where changes to tasks and procedures are con- cerned, these can be achieved either by a Tayloristic or Kaizen approach and managed in a transactional manner which requires only a low level of adaptive creativity. Quadrant 1, on the other hand, presents a much more complex picture. It shows that where an organisation wishes to change its culture, this is best achieved by an Emergent approach to change led by someone with a transformational approach to leadership and who exhibits a high degree of innovation. Remembering, however, that Emergent change can encompasses a wide range of change initiatives spread over a period of time, which can include Planned change and Bold Strokes, such transfor- mational leaders may also need to possess adaptive and transactional skills, or be able to call on others who possess such skills. Figure 16.2 also allows us to understand better the obstacles and approaches to dealing effectively with issues of sustainability, diversity and ethics. As was shown in examining globalisation earlier in this chapter, these are issues that organisations are aware of and, at least in large organisations, have policies and procedures to address. Possessing the ability to put these policies and procedures into practice is a different matter, however. These are issues that, for most organisations, require a major change of culture, especially by management and leadership at all levels. If sustainability, diversity and ethics are treated merely as structural or policy issues, as in quadrant 2, this is unlikely to lead to any permanent or sustained changes in attitudes and behav- iour. Similarly, if they are seen as issues that are primarily about individual behaviour and attitudes, as in quadrant 2, there is unlikely to be an organisation-wide and last- ing change to the way that managers and leaders behave. If ethics, diversity and sustainability are treated as issues that need to be embedded in an organisation’s cul- ture, however, and if the required changes are managed and led as shown in quadrant 1, then changes in attitudes and behaviour at the overall level are likely to be achieved and maintained. Summary and conclusions In reading some of the literature on strategy and change, one might be forgiven for asking whether managers and what they do matter at all. If strategy is Emergent, often unrelated to conscious decisions, does an important role exist for managers? Or if, as the evolutionary perspective on strategy would have it, luck plays a greater part in suc- cess than conscious action, does the quality of the manager matter? However, as this chapter has shown, the way an organisation is managed and led can have profound implications not only for the organisation and its members but for society as whole. On the negative side, managers can act to hold back organisations, prevent benefi- cial change and create a climate of blame and wrong-doing where in-fighting and discrimination are tolerated or even promoted. On the positive side, managers can identify opportunities for progress, promote ethical behaviour, recognise the opportu- nities that diversity brings, and create sustainable organisations which achieve harmony with their environment. Good managers and leaders can create the condi- tions for growth and prosperity. Effective managers are, therefore, for very positive
  • 544. Summary and conclusions 531 reasons, important to an organisation. However, they do not operate in isolation or have a totally free rein. The Chief Executives of Oticon and Marconi both wanted to transform their organisations. They both developed ambitious visions for their organisation’s future. The Chief Executive of Oticon sought organisation-wide approval and support for his vision. All Oticon’s employees were involved in developing and implementing the strategy to realise the vision. It was a vision that was seen as benefiting all Oticon’s employees. It was a vision which succeeded. The vision for the new Marconi, on the other hand, was not seen as benefiting its employees, nor were they involved in devel- oping or implementing it. With hindsight, the vision was badly flawed and it failed disastrously. There is a strand in the management literature which equates organisa- tional success with strong, clear-sighted and charismatic leadership (Thomas, 2003). Certainly, there are leaders, such as Jack Welch in his time at General Electric, Pehr Gyllenhammar before his departure from Volvo, Richard Branson at Virgin, Bill Gates at Microsoft or Rupert Murdoch at News International, who through sheer force of personality dominated and transformed organisations. There are also others who have ruined their organisations. The successful charismatic leader appears to be in the minority. In any case, as the Arnold Weinstock example at GEC-Marconi shows, successful leaders may outstay their welcome, or radical surgery to fit their organisations for the future may become overdue. Most managers, even of very large corporations, have to rely far less on their per- sonality, important though this may be, and far more on their business knowledge, skills, creativity and experience. They are also called upon to perform a wide range of duties and activities. Though the theories and approaches to strategy and change appear to paint managers as either directing change or facilitating it, and the leader- ship literature tends to dwell on whether they are transactional or transformational managers, the reality is that they are often required to be all of these things, depend- ing on the circumstances. As Figure 16.2 shows, in bringing about organisational change, there will be occasions when managers and leaders will need to devolve responsibility to subordinates; sometimes, though, they will need to encourage and support change projects; and, in other instances, they will have to lead the process themselves. Although the approach adopted will depend to a certain extent upon the size and importance of the change project, the timescale involved and the state of the organisation, in the final analysis it will rely on managerial judgment to make the appropriate choice. Changing organisations is a complex process fraught with more opportunities for failure than success. If managers are to accomplish and keep accom- plishing this task, as this book has argued, they have to be aware of the choices and approaches available and be willing themselves to change their beliefs and attitudes. Despite the views of some writers, there can never be any general recipes or formu- las for organisational success. The vast variety of organisations, each with its own differing constraints and pressures, makes that impossible. What there is, however, is a large body of theories and associated advice which organisations can draw upon to assist them. As the quotation by George Box at the beginning of this book states: ‘All models are wrong, some models are useful’. This book has shown that there is no such thing as an uncontested theory – all have their drawbacks. In particular, most tend to be situation-specific, even if they do not acknowledge this. Managers and organisations need to treat theories with a degree of scepticism. They also need to
  • 545. 532 Chapter 16 · Management – roles and responsibilities realise, however, that if they can identify the main theories for running and changing organisations, and they do understand the context in which they operate, they are in a position to identify choices and make changes. Sometimes managers may choose or be required by circumstances to change their organisations radically and quickly; sometimes they may choose to influence the con- text to promote or reduce the need for such changes. In other cases, change may take place more slowly and over a long period, as both organisation and context are shaped and changed. The key factor in all this is to make conscious decisions rather than rely on untested assumptions. This will require those who manage and lead organisations to question and challenge their own and other people’s assumptions. It will also require them to gather and be open to a wide variety of information – as Chapter 3 showed, the experience of more and more successful companies is that learning should be an organisation-wide and continuous process, rather than one lim- ited to a few like-minded individuals at one point in time. Even where choices are identified, managers should not assume that exercising choice is easy or that the results will be beneficial for all concerned, including them- selves. For this reason, managers have a responsibility in making and implementing choices to consider the implications in the widest context: not just for themselves, not just for their organisation, but for society as well. In the West, especially the UK and USA, there is a tendency to think mainly in terms of short-term profitability, and ignore the longer-term organisational and social consequences of actions. We can see this in the context of the Classical school, whose concentration on narrow issues of control and efficiency leads to the creation of jobs that are both physically strenuous and mind-numbingly boring. The adverse consequences of organisation theory are not limited to the Classical school, however; in many ways, the policies and approaches advocated by the Culture–Excellence school could be considered even worse. Though both Handy (1997) and, to a lesser extent, Kanter (1997) are con- cerned about the impact of fragmented organisations and insecure jobs on society at large and family life in particular, neither appears to believe that these can be avoided. Yet the consequences of this approach in creating instability and unpredictability in the job market are disastrous. As was noted in Chapter 3, the 1990s saw the UK become more socially divided than at any time since the Second World War, with some 60 per cent of the population either marginalised or living in very insecure cir- cumstances (Hutton, 1995; Saul, 1997; White, 1999). Increasingly the rich are choosing to live behind security fences in elite communities (Arnot, 2002). The situa- tion is even worse in the USA where the tendency for the better-off to retreat into walled compounds patrolled by armed guards is widespread and long-established (Dunphy and Griffiths, 1998; Elliott, 1997; Reich, 1997). Nevertheless, as the discus- sion on globalisation showed, in a borderless world, it will be impossible to escape the consequences of environmental depredation, a lack of business ethics and discrim- inatory behaviour merely by building walls. If this seems a somewhat apocalyptic vision, then bear in mind the reality of global warming. Bear in mind the millions of people who lost their savings and pensions in the dotcom boom. Also bear in mind that one of the most fashionable American gurus of the late 1990s, William Bridges, advocated the jobless organisation. He believes that there should no longer be any permanent jobs, not even for managers. Instead, he wants to see the labour force form one enormous pool of labour waiting for temporary employment – the just-in-
  • 546. Summary and conclusions 533 time workforce to complement the just-in-time organisation (Bridges, 1996, 1998; Golzen, 1995). In support of his view that jobless organisations are the future, he points out that General Motors is no longer the largest employer in the USA; instead, it is the temporary employment agency, Manpower. Some would argue that these developments are only the inevitable consequence of capitalism (Collins, 1998). However, as Crouch and Streeck (1997) and Whitley (1998) demonstrated, capitalism comes in many forms and guises. The fragmentation and insecurity of the labour market that was a growing characteristic of the USA and UK in the 1980s and 1990s was much less pronounced in some other countries. This was especially the case in those nations that, historically, had seen the objectives of individual organisations as subservient to national interests. In the 1990s for exam- ple, despite economic problems associated with reunification, Germany still had an enviable record of attempting to prevent job losses and reduce job insecurity, as did the Scandinavian states and Japan. This, of course, emphasises that national governments as well as individual organi- sations have a major contribution to make when considering the wider context and implications of managers’ decisions. In the West, led by the USA and UK, the last 20 years have seen an increasing move towards deregulation, privatisation and the intro- duction of market forces into the operation of the public sector. Whatever the merits of these policies in terms of efficiency, and they are debatable (Flynn, 1993; Ferlie et al, 1996), no one can doubt that they acted to increase instability both in the econ- omy at large and in public sector bodies, as the cases of the Greek Public Power Corporation and PoliceCo showed. Whether such changes will eventually lead to a better deal for consumers or not is obviously an issue, but so is the effect on the social fabric. Post-1945, all Western governments used their public sectors both to provide services and as a means of creating employment and maintaining economic and social stability. These latter functions have now been abandoned in many countries, and the resulting insecurity is evident for all to see. The point of mentioning this is not merely to show concern, but to argue that it need not be the case. The Culture–Excellence concept is only one of many approaches to running organisations. All have their downside, but not all result in job cuts and labour market instability. One alternative is for managers to choose to adopt approaches that reduce instability in their environment, rather than to implement policies that increase the use of short-term contracts, part-time and casual working. If followed widely, this would have two effects. Firstly, the result of many organisations seeking stability would be to reduce the overall level of turbulence in the environ- ment. This is because, as Stickland (1998) maintains, organisations and their environment are not separate entities, but part of the same system. If organisations become more stable, so too does the environment. If organisations become more sus- tainable, so does the planet. Similarly, if, as recommended by Tom Peters, organisations adopt internal chaos to cope with external chaos, this merely acts to increase the overall turbulence in the system; in effect, a vicious spiral of increasing chaos is created which, instead of poising an organisation at the ‘edge of chaos’, may tear it apart. Also, if organisations focus solely on narrow profitability, environmental and ethical problems will grow. The second consequence of organisations seeking sta- bility is that it increases the stability in society – jobs and communities become more stable and more sustainable.
  • 547. 534 Chapter 16 · Management – roles and responsibilities Therefore, as a final note: organisations face many challenges and choices. Some organisations will find that their room for manoeuvre is very limited. Others may find that there is considerable scope for discretion. It is the role of managers and leaders to ensure that all available options and choices are identified, and that the choices made take account of both the short- and long-term interests of all their stakeholders – whether these be shareholders, employees, the managers themselves or the community at large. The worst managers may not be those who make poor choices; it may be those who fail to recognise that there are choices to be made. Test your learning ■ Short answer questions 1 What is globalisation? 2 What is the link between sustainability, workforce diversity and ethics? 3 Describe Duncan’s (1975) three levels of management. 4 Briefly discuss Mintzberg’s (1973, 1975) description of managerial roles. 5 What is the personal characteristics approach to leadership? 6 State the key features of the leader–follower approach to leadership. 7 Describe the contextual approach to leadership. 8 How does Kirton’s (1989) Adaptation–Innovation theory help us to understand mana- gerial behaviour? 9 Describe two approaches to managerial development. 10 What is the difference between management and leadership? 11 How do management and leadership relate to organisational change? 12 List three ways in which managers’ decisions can have a wider impact on society. ■ Essay questions 1 How can the Framework for Management, Leadership and Change (Figure 16.2) be used to guide organisational change? Illustrate your answer with reference to one of the case studies in Part 3 or by using an organisation of your choice. 2 How can the concept of managerial choice help managers to reconcile the needs of their organisation with the wider needs of society?
  • 548. Suggested further reading 535 Suggested further reading 1 Yukl, G (2002) Leadership in Organizations (5th edition). Prentice Hall: Upper Saddle River, NJ, USA. Gary Yukl’s book is an excellent guide to the literature and research on management and leadership. 2 Deresky, H (2002) International Management: Managing Across Borders and Culture (3rd edition). Prentice Hall: Upper Saddle River, NJ, USA. This book provides a well-researched and well-written guide to international management. It is especially strong in the areas of culture, diversity and ethics. 3 Dunphy, D, Griffiths, A and Benn, S (2003) Organizational Change for Corporate Sustainability. Routledge: London. This is an important book which does not just make the case for creating sustainable organi- sations but also provides illustrations of and guidance on managing the changes necessary to achieve this.
  • 549. 1
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  • 607. 1
  • 608. Glossary Action Learning This approach to management organisations actually formulate strategy and development was devised in the 1940s in the UK manage change than prescribing how they by Reg Revans and involves small groups of should conduct these activities (see Prescriptive managers tackling a set problem or case study. stream). The aim is not only that managers learn how to Artifacts At the highest level of cultural approach problems together, but also that they awareness are the artifacts and creations that learn about themselves and challenge the are visible manifestations of the other levels of appropriateness of their own attitudes and culture. These include observable behaviours of behaviours. members, as well as the structures, systems, Action Research This is an approach to change procedures, rules and physical aspects of the which, first, emphasises that change requires organisation (see organisational culture). action, and is directed at achieving this; and Aston Group The work of this Group second, it recognises that successful action is constitutes one of the key building blocks of based on analysing the situation correctly, Contingency Theory. Working in the 1960s, identifying all the possible alternative solutions they found that size was the most powerful and choosing the one most appropriate to the predictor of specialisation, use of procedures situation at hand. It is one of the four elements and reliance on paperwork. In effect, what they of Lewin’s Planned approach to change (see found was that the larger the organisation, the Planned change). more likely it was to adopt (and need) a Activity planning This involves constructing a mechanistic (bureaucratic) structure. The schedule or ‘road map’ for a change programme, reverse was also found: the smaller the citing the main activities and events that must organisation, the more likely it was to adopt occur if the change is to be successful. (and need) an organic (flexible) structure. Adaptation–Innovation theory This maintains Audits and post-audits During and after a not only that people exhibit different degrees of change initiative, an audit or a post-audit creativity, but also that they express their should be carried out (a) to establish that the creativity in different ways, along a spectrum objectives have really been met, and (b) to which runs from adaptors to innovators. Those ascertain what lessons can be learned for future who tend towards the adaptor end of the projects. spectrum prefer to work within the existing Authority In organisational terms, authority is system to improve things. Innovators tend to the right to act, or command others to act, ignore or challenge the system and to come up toward the attainment of organisational goals. with radical proposals for change. The right to act is given legitimacy by the Analytical stream This phrase is used to authority figure’s position in the organisation. describe writers on strategy and change who Therefore, the level of authority a person are more interested in understanding how possesses is related to their job.
  • 609. 596 Glossary Autonomy This is the ability or requirement of Bold Strokes These are major strategic or individuals, groups and organisations to act economic initiatives, e.g. restructuring an independently and proactively, and without organisation. They can have a clear and rapid seeking the permission of higher authority, impact on an organisation’s performance, but when pursuing organisational goals. Peters and they rarely lead to any long-term change in Waterman link it to entrepreneurship and it is habits or culture. Bold Strokes are initiatives seen as an essential attribute of excellent taken by a few senior managers, sometimes only organisations (see Culture–Excellence one; they do not rely on the support of the rest approach). of the organisation for their success (see Long Backstaging This is concerned with the exercise Marches; Culture–Excellence approach). of power skills during the change process. In Boston Consulting Group see Growth-Share particular, it involves influencing the recipients Matrix. of change to accept it. Buchanan and Boddy Bottom-up change This is the opposite of top- (1992) see this as being an essential skill of a down change. Instead of change being driven by change agent. a few senior managers from the top, this Basic assumptions These are seen as one of approach sees change as coming from bottom- the core components of organisational culture. up initiatives which emerge from local responses They operate at the deepest level of cultural to issues, threats or opportunities in the awareness and are unconscious, taken-for- environment. The size of such responses will granted assumptions about how organisational vary but, because they are local responses, they problems should be solved, as well as about the can never be large-scale (see Emergent change). nature of human beings, human activity and BPR See Business Process Re-Engineering. human relationships. Bureaucracy This form of organisational structure Behaviourist psychology This maintains that is characterised by the division of labour, a clear all human behaviour is learned and that the hierarchical authority structure, formal and individual is the passive recipient of external unbiased selection procedures, employment and objective data. One of the basic principles decisions based on merit, career tracks for of the Behaviourists is that human actions are employees, detailed rules and regulations, conditioned by their expected consequences. impersonal relationships, and a distinct separation Behaviour that is rewarded tends to be repeated, of members’ organisational and personal lives. It is and behaviour that is ignored tends not to be. one of the core elements of the Classical approach Therefore, in order to change behaviour, it is to organisations and corresponds with the necessary to change the conditions that cause it. mechanistic structure identified by Contingency Benchmarking This is the term given to the theorists (see Contingency Theory). process of comparing an organisation’s Business ethics These are moral principles or performance, or the performance of part of an beliefs about what is right or wrong. These organisation, e.g. a product or service, against a beliefs guide managers and others in range of internal and external comparators. organisations in their dealings with other Bias for action This is one of Peters and individuals, groups and organisations, and Waterman’s eight key attributes of excellent provide a basis for deciding whether behaviour companies. Even though such companies may is socially responsible. have an analytical approach to problems, they Business Process Re-Engineering (BPR) This is an are predisposed towards taking rapid and approach that aims to achieve a radical rethinking appropriate action rather than getting bogged and redesign of organisational processes in order down in analysis (see Culture–Excellence to significantly improve key performance approach). measures, such as quality, cost and delivery.
  • 610. Glossary 597 Cash-cows These are companies whose rate of horizontal and hierarchical division of labour, market growth is in decline but which still the minimisation of human skills and discretion, achieve significant cash surpluses. They became and the attempt to construe organisations as market leaders, during the early days when rational-scientific entities. It comprises the work the market was rapidly growing, and have of Frederick Taylor (see Scientific Management), maintained that position as the growth tapered Henri Fayol (see principles of organisation) and off. They are regarded as businesses with low Max Weber (see bureaucracy). growth but high market share (see Growth- Classical approach to strategy This is the oldest Share Matrix). and most influential approach to strategy. It Causal mechanisms According to the realist portrays strategy as a rational process, based perspective, these are the (usually hidden) on analysis and quantification, and aimed at processes or pathways through which an achieving the maximum level of profit for outcome is caused to be brought about. An an organisation. example of a causal mechanism is the process Closed systems This is a view of organisations by which a rise in interest rates leads to a fall which sees them as being relatively unaffected in house prices. In this case, the causal by events outside their boundaries. It considers mechanism linking cause to effect involves organisations to be closed, changeless entities. decisions by each individual house purchaser Once organisations have structured themselves about the mortgage repayments they can and in accordance with the correct precepts, then, cannot afford. It is the aggregate behaviour of regardless of external or even internal these individuals that leads to the overall fall in developments, no further changes are necessary house prices (see realism). or desirable (see Open Systems school). Causal powers These are the capabilities or Coercive power The use of threats, sanctions or potential for systems and mechanisms to act in a force to gain compliance. particular way, or to be capable of acting in a particular way (see realism). Cognitive dissonance This theory states that people try to be consistent in both their Change agents These are the people responsible attitudes and behaviour. When they sense an for directing, organising and facilitating change inconsistency either between two or more in organisations (see backstaging). attitudes or between their attitudes and Chaordic This term was coined by Hock behaviour, people experience dissonance; that is, (1999) to describe organisations which are they feel frustrated and uncomfortable with the poised between order and chaos (see edge of situation, sometimes extremely so. chaos; complexity theories). Competitive Forces model This is an approach Chaos For complexity theorists, chaos to strategy which stresses the need to align the describes a complex, unpredictable, and orderly organisation with its environment, the key disorder in which patterns of behaviour unfold aspect of which is the industry or industries in in irregular but similar forms (see edge of chaos; which it competes. Proponents of this view complexity theories). believe that industry structure strongly Chaos Theory This is one of the main complexity influences the competitive rules of the game as theories. It seeks to construct mathematical well as the range of strategies open to the models of systems at the macro level (i.e. whole organisation. This model is most closely systems and populations). It portrays natural associated with the work of Michael Porter systems as both non-linear and self-organising. (1980, 1985). Classical approach to organisations This Complexity theories These are concerned with approach to organisations is characterised by the how order is created in dynamic non-linear
  • 611. 598 Glossary systems. In particular, those applying this experts to assign subjective probabilities and approach to organisations maintain that time priorities to a list of potential future events successful organisations need to operate at the and developments supplied by an organisation. ‘edge of chaos’ and can only maintain this Culture see organisational culture. position by the presence of appropriate Culture–Excellence approach Based on the work order-generating rules. of Peters and Waterman, Kanter and Handy, this Contextual approach to leadership This is an maintains that an organisation’s performance approach which argues that effective leadership is (excellence) is determined by the possession of an situation-dependent, i.e. a manager’s performance appropriate, strong and clearly articulated will depend on his or her personal characteristics culture. It is culture which ensures that the and the overall context within which they members of the organisation focus on those operate (see transactional management and activities which lead to effective performance. convergent state, and transformational leadership Delphi method This is a scenario-building and divergent state). technique which uses a panel of experts, who, Contingency Theory This maintains that the independently of each other, are interrogated structures and practices of an organisation, and about a number of future issues within their therefore its performance, are dependent (i.e. area of expertise. contingent) on the circumstances it faces. The Design school The proponents of this approach main contingencies – situational variables – to strategy emphasise the need to achieve a fit identified by its proponents are environmental between the internal capabilities of an uncertainty and dependence, technology and organisation and the external possibilities it organisation size (see environment). faces. Flowing from this, they place primary Continuous change This model of change, also emphasis on the appraisal of an organisation’s referred as to as the continuous transformation external and internal situations. model, is based on the assertion that the Dissipative structures These are systems that environment in which organisations operate is exist in far-from-equilibrium conditions (i.e. are changing, and will continue to change, rapidly, in a state of constant fluctuation) and which, radically and unpredictably. Consequently, only therefore, use (dissipate) energy. The concept of by continuous transformation will organisations dissipative structures is one of the core ideas in be able to keep aligned with their environment complexity theories. They are most closely and thus survive. associated with the work of the Nobel Prize- Contracting-out See outsourcing. winning physicist, Ilya Prigogine (Prigogine and Stengers, 1984; Prigogine, 1997). Control The ability to impose a desired pattern of activity or behaviour on processes and people Divergent state This situation occurs when environmental changes challenge the efficiency (see authority and power). and appropriateness of an organisation’s Convergent state This occurs when an established goals, structures and ways of organisation is operating under stable conditions, working (see contextual approach to leadership where there are established and accepted goals, and transformational leadership). and a predictable external and internal Diversity see workforce diversity. environment (see transactional management). Division of labour The hierarchical and Creativity The ability to produce new, novel or horizontal separation of tasks and responsibilities original ideas and solutions. into their component parts so that individuals are Cross Impact method This is a scenario- only responsible for a limited set of activities building technique which asks a panel of instead of the whole task.
  • 612. Glossary 599 Dogs These are businesses that have low market Field theory This is an approach to share and which operate in markets with low understanding group behaviour by trying to growth potential (see Growth-Share Matrix). map out the totality and complexity of the field Double-loop learning This process involves in which the behaviour takes place. It is one of challenging the appropriateness of an the four elements of Lewin’s Planned approach organisation’s basic norms, values, policies and to change (see Planned change). operating procedures (see single-loop learning; Firm-in-sector perspective This view of triple-loop learning). strategy, developed by Child and Smith (1987), Edge of chaos This is a state where systems are maintains that the conditions operating in a constantly poised between order and disorder sector shape and constrain the strategies which (see complexity theories). organisations in that sector can pursue. Emergent change This approach to change is Fordism This is named after Henry Ford’s based on the assumption that change is a approach to car assembly. Fordism is seen as the continuous, open-ended and unpredictable application of Scientific Management to mass process of aligning and re-aligning an production industries through the utilisation of organisation to its changing environment. automation, e.g. the moving assembly line. Empowerment The delegation of power and Game theory This approach to strategy can be responsibility to subordinates. traced back to the study of war. Game theory has two core assumptions: first, that Entrepreneurship The encouragement and competitors are rational and will try to win; pursuit of innovative ideas, products and second, that each competitor is in an services (see Culture–Excellence approach). interdependent relationship with the other Environment Those forces external to an competitors. So all competitors are affected by organisation, such as markets, customers, the and will react to what other competitors do. economy, etc., which influence its decisions and Generative structures see causal mechanisms. internal operations. Gestalt-Field psychology This sees an Equifinality This concept, coined by Child individual’s behaviour as the product of their (1972), states that different sorts of internal environment and reason. Behaviour arises from arrangements and structures can be perfectly the way in which an individual uses reason to compatible with identical contextual or interpret external stimuli. Consequently, to environmental states. Put simply, this means change behaviour, an individual must be helped that there is more than one way for to change their understanding of themselves and organisations to structure themselves in order the situation in question. to achieve their goals. Globalisation There is a great deal of dispute as to Esteem needs These reflect a person’s desire to what this term means. However, at its most basic, be respected – esteemed – for their achievements it refers to the worldwide integration of markets (see hierarchy of needs). and cultures, the removal of legal and political Excellence See Culture–Excellence approach. barriers to trade, the ‘death of distance’ as a factor Extrinsic motivators These are material limiting material and cultural exchanges. rewards, such as money and promotion, Group Dynamics This concept refers to the provided by others (see intrinsic motivators and forces operating in groups. It is concerned physiological needs). with what gives rise to these forces, their Felt-need This is an individual’s inner consequence and how to modify them. Group realisation that change is necessary. If felt-need Dynamics stresses that group behaviour, rather is low in a group or organisation, introducing than that of individuals, should be the main change becomes problematic. focus of change. It is one of the four elements of
  • 613. 600 Glossary Lewin’s Planned approach to change (see needs, and that organisations are cooperative Planned change). systems which comprise informal structures and Group Dynamics school As a component of norms as well as formal ones (see hierarchy of change theory, this school originated with the needs and Hawthorne Experiments). work of Kurt Lewin and has the longest history. Humanisation of work see Job Design. Its emphasis is on bringing about organisational Incremental model of change Advocates of this change through teams or work groups, rather view see change as being a process whereby than individuals. individual parts of an organisation deal Growth-Share Matrix This is a strategic incrementally and separately with one problem planning tool developed by the Boston and one goal at a time. Consulting Group. Using pictorial analogies, Individual Perspective school This school of it posits that businesses in an organisation’s thought is concerned with understanding and portfolio can be classified into stars, cash-cows, promoting behaviour change in individuals. It is dogs and problem children. split into two camps: the Behaviourists and the Hawthorne Experiments These were carried out Gestalt-Field psychologists. at Western Electric’s Hawthorne Works in Informal organisations see Human Relations Chicago in the 1920s and 1930s. As a result of approach. this work, two major propositions were put forward: that work is a collective, cooperative Intrinsic motivators These are non-material activity which is influenced by formal and rewards, such as praise, satisfaction and informal aspects of an organisation; and that recognition which are internal to the individual humans have a deep need for recognition, security (see extrinsic motivators, esteem needs and and belonging, rather than being purely economic social needs). beings (see Human Relations approach). Japanese approach Pascale and Athos (1982) Hierarchy of needs Developed by Maslow argue that the effectiveness and uniqueness (1943), this sees human motivation as based on of the Japanese approach to management an ascending order of needs: physiological comes from their ability to combine ‘soft’ needs; safety needs; social needs; esteem needs (personnel/industrial relations) elements and and self-actualisation needs. Only when a lower ‘hard’ (business/manufacturing) practices order need has been met, does the next level of (see 7 S framework). need begin to motivate an individual. Job Design Also called work humanisation, and Hoshin Kanri Also known as policy arising from the work of the Human Relations deployment, this is a Japanese approach to approach, proponents of this view argue that communicating a company’s policy, goals and the fragmentation of jobs promoted by the objectives throughout its hierarchy in a Classical approach to organisations creates structured and consistent fashion in order to boring, monotonous, meaningless and de- ensure that its strategic priorities inform motivating jobs. To reverse this, and to make decision-making at all levels in the organisation. jobs interesting and intrinsically motivating, Human Relations approach This was a reaction they should be designed to provide variety, task against the mechanistic view of organisations completeness and, above all, autonomy. and the pessimistic view of human nature put Kaizen This is a Japanese process of forward in the Classical approach to incremental, systematic, gradual, orderly and organisations. It reintroduces the human continuous improvement which utilises a range element into organisational life by contending of techniques, tools and concepts, such as that people have emotional as well as economic quality circles.
  • 614. Glossary 601 Knowledge power This is power based on the Modernism This is a term used to describe the control of unique information that is necessary values, rationale and institutions that have for decision-making. dominated Western societies since the Age of Leadership The process of establishing goals Enlightenment in the eighteenth century. The and motivating others to pursue and achieve essence of modernism is a strong belief in these goals. progress, economic and scientific rationality, a search for the fundamental rules and laws which Long Marches The Long March approach to govern both the natural world and human change favours relatively small-scale and nature, and a commitment to a secular, operationally-focused initiatives, which are slow rationalist and progressive individualism (see to implement and whose full benefits are postmodernism; realism). achieved in the long term rather than the short term. The Long March approach can impact on Moving This is the second step in Lewin’s culture over time but it does require the Three-Step model of change. It involves involvement and commitment of most of the identifying and evaluating the various types of organisation (see Bold Strokes). change on offer, and implementing the chosen Long-range planning This is an approach to one (see unfreezing; refreezing). strategy based on plotting trends and planning Non-linear systems This is a term used by the actions required to achieve the identified complexity theorists to describe constantly- growth targets. It is heavily biased towards changing systems where the laws of cause and financial targets and budgetary controls. effect appear not to apply. Order in such Management The process of planning, systems is seen as manifesting itself in a largely organising and controlling resources and people unpredictable fashion, in which patterns of in order to produce goods or provide services. behaviour emerge in irregular but similar forms through a process of self-organisation, which is Management development This is concerned governed by a small number of simple order- with the training and education of managers so generating rules. as to equip them with the competences and skills necessary to carry out their duties effectively. Normative power This describes the allocation and manipulation of symbolic rewards, such as Mechanistic structure This forms one end of status symbols, as inducements to obey. the structure continuum identified by Contingency theorists, the other end being Norms These are one of the key components organic structure. A Mechanistic structure of culture. They represent unwritten rules of equates to the bureaucratic-type structure behaviour which guide how members of an advocated by the Classical approach to organisation should behave in particular organisations (see bureaucracy). situations (see organisational culture). Metaphor This is a linguistic device for OD (Organization Development) This is an describing or seeing one type of experience by approach to change developed in the USA. It is suggestion that it is similar to something else, based on the work of Kurt Lewin and, originally e.g. using the metaphor of a machine to describe at least, was concerned with improving the a bureaucratic type of organisational structure. effectiveness of the human side of the organisation through participative change programmes. Mission statement This states an organisation’s major strategic purpose or reason for existing. It ‘One best way’ approach This is a term used to can indicate such factors as the organisation’s describe any theory or approach which claims products, markets and core competences. It is to be universally superior to all others on offer, part of an organisation’s vision. e.g. the Classical approach to organisations.
  • 615. 602 Glossary Open-ended change This is a term used Paradigm This is a way of looking at and especially by proponents of Emergent change interpreting the world; a framework of basic to indicate that change is a continuous and assumptions, theories and models that are unpredictable process which does not have a commonly and strongly accepted and shared beginning, middle and end. within a particular field of activity at a Open Systems school Proponents of this view particular point in time. see organisations as systems composed of a Participation This is the process of involving number of interconnected sub-systems, where people in decision-making and change activities any change to one part of the system will have within organisations. an impact on other parts of the system, and, in Person culture The individual and his or her turn, on its overall performance. Organisations wishes are the central focus of this form of are seen as open systems in that they are open culture. It is associated with a minimalistic to, and interact with, their external environment structure, the purpose of which is to assist (see closed systems). those individuals who choose to work together Order From a complexity perspective, order (see organisational culture). refers to the patterns of behaviour which emerge Phases of change This is an elaboration of in irregular but similar forms in non-linear Planned change based on a four-phase model systems through a process of self-organisation. which describes change in terms of two major Order-generating rules In complex systems, the dimensions: change phases, which are distinct emergence of order is seen as being based on the states through which an organisation moves as operation of simple order-generating rules it undertakes Planned change; and change which permit limited chaos whilst providing processes, which are the methods used to move relative order (see Complexity theories). an organisation from one state to another. Organic structure This forms one end of the Physiological needs These relate to hunger, structure continuum identified by Contingency thirst, sleep, etc. (see hierarchy of needs). theorists, the other end being mechanistic PIMS (Profit Impact on Marketing Strategy) structure. An organic structure is seen as being This is a quantitative strategic planning tool flat, informal, flexible and highly adaptable, i.e. based upon the belief that there are three major the reverse of a bureaucratic structure. factors which determine a business unit’s Organisation Development: see OD. performance: its strategy, its competitive Organisational culture This is the name given position, and the market/industry characteristics to the collection of basic assumptions, values, of the field in which it competes. norms and artifacts that are shared by and Planned change This term was coined by Kurt influence the behaviour of an organisation’s Lewin in the 1940s to distinguish change that members. was consciously embarked upon and planned by Organizational learning This term describes the an organisation, as averse to types of change process of collective, as averse to individual, that might come about by accident, by impulse learning in an organisation. Its aim is to or that might be forced on an organisation. improve the performance of the organisation by Lewin’s Planned approach to change consists of involving everyone in collecting, studying, four interrelated elements: Field theory, Group learning from and acting on information. Dynamics, Action Research and the Three-Step Outsourcing This is the practice of seeking model of change. outside organisations to take over activities and Politics This describes the efforts of people in services previously carried out within an organisations to gain support for or against organisation, e.g. catering, security and IT. policies, rules, goals, or other decisions where
  • 616. Glossary 603 the outcome will have some effect on them. Privatisation The process of transferring state Politics is seen as the exercise of power. assets from the public to the private sector. Population ecology This concept is borrowed Problem children Also known as question marks, from the physical sciences. It is a Darwinist-type these are units or businesses which have a high approach that focuses on how organisations growth rate and low market share. They have adapt and evolve in order to survive within the high cash requirements to keep them on course, general population of organisations to which but their profitability is low because of their low they belong. market share. They are so named because, most Positioning school This approach to strategy is of the time, the appropriate strategy to adopt is based on the argument that organisations which not clear (see Growth-Share Matrix). enjoy higher profits than their competitors do so Processual approach to change This approach because they have achieved advantageous and sees change as a complex and dynamic process easily-defended positions in their markets. which cannot be solidified or treated as a series Postmodernism This is a loosely-defined of linear events. In particular, it focuses on the philosophical movement which, though need to analyse the politics of managing change. originally based in the arts, has become Processual approach to strategy This increasingly influential in the social sciences perspective concentrates on the nature of over the last 20 years. It is a way of looking at organisational and market processes. It views the world that rejects the rationality of organisations and their members as shifting modernism and concentrates on the ways in coalitions of individuals and groups with which human beings attempt to shape reality different interests, imperfect knowledge and and invent their world (see realism). short attention spans. Power An individual’s capacity to influence Profit Impact on Marketing Strategy see PIMS. decisions, to exert their will and achieve Psychological contract This concept is based on outcomes consistent with their goals and the assertion that there is an unwritten set of priorities. expectations operating at all times between every Power culture This is frequently found in small member of an organisation and the various entrepreneurial organisations such as some managers and others in that organisation. property, trading and finance companies. It is Punctuated equilibrium model This view of associated with a web structure with one or change sees organisations as evolving through more powerful figures at the centre, wielding relatively long periods of stability (equilibrium control (see organisational culture). periods) in their basic patterns of activity that Prescriptive stream This phrase is used to are punctuated by relatively short bursts of describe writers on strategy and change who are fundamental change (revolutionary periods). more interested in developing prescriptions for telling organisations what they should do rather Question marks see problem children. than analysing what they actually do (see Rationality The use of scientific reasoning and Analytical stream). logical arguments to arrive at decisions. Principles of organisation: These are a set of Realism This philosophical perspective asserts rules governing the running of organisations that social entities, such as markets, class developed by Fayol (1949). He claimed that relations, gender relations, ethnic groupings, they were universally applicable to all social rules, etc., exist, are real and can be organisations. The principles of organisation discovered. However, whilst it rejects the notion form one of the core elements of the Classical of multiple realities, it still acknowledges that approach to organisations. social entities arise though a process of social
  • 617. 604 Glossary construction. This distinguishes it from both Scientific Management This is an approach to modernism and postmodernism. work organisation developed by Frederick Refreezing This is the third step in Lewin’s Taylor in the early twentieth century. He Three-Step model of change. It seeks to stabilise claimed that this approach to designing jobs new behaviours in order to ensure that they are and supervising workers is based on the relatively safe from regression (see unfreezing; scientific study of work. It emphasises the moving). division of labour, the removal of workers’ discretion and the right of management to make Remunerative power This is the use or promise what changes it thinks are necessary for efficient of material rewards as inducements in order to working. It is one of the core elements of the gain people’s cooperation. Classical approach to organisations. Resource-Based model This approach to strategy Scientific-Rational approach This is an sees competitiveness as coming from the effective alternative title used to describe the Classical deployment of superior or unique resources, such approach to organisations. as equipment, patents, brands and competences, which allow firms to have lower costs or better Self-actualisation needs These constitute the products than their competitors. need to achieve one’s full potential. According to Maslow (1943), this will vary from person to Ringi system This is a Japanese approach to person, and may differ over time as a person decision-making which promotes extensive and reaches a level of potential previously open debate over decisions, in order to ensure considered unattainable and so goes on to strive that they fit in with the company’s objectives for new heights (see hierarchy of needs). rather than those of sectional interests. Self-organisation This is a term used by Role A set of observable behaviours associated with, and expected of, an identifiable position complexity theorists to describe how order or job in an organisation. emerges and is maintained in complex systems (see order-generating rules). Role culture This type of organisational culture is appropriate to bureaucracies, and Semistructures This is a term used by organisations with mechanistic, rigid structures Complexity theorists to describe structures which and narrow jobs. Such cultures stress the are sufficiently rigid so that change can be importance of procedures and rules, hierarchical organised, but not so rigid that it cannot occur. position and authority, security and 7 S framework This is a tool for analysing predictability. In essence, role cultures create organisational performance and was developed situations in which those in the organisation by Tom Peters, Robert Waterman, Richard stick rigidly to their role. Pascale and Anthony Athos when they all Safety needs The desire for security and worked at McKinsey in the late 1970s. The 7 Ss protection against danger (see hierarchy of needs). comprise four ‘soft’ Ss (staff, style, shared values, and skills) and three ‘hard’ Ss (strategy, Scenario-building This is an approach to structure and systems) (see Japanese approach). strategy development that allows organisations to construct and test pictures of possible futures Simple order-generating rules see order- and to select the one which is most likely to generating rules. meet their needs. It is based on the assumption Single-loop learning This is adaptive learning that, if you cannot predict the future, then by which involves detecting and rectifying errors or considering a range of possible futures, an exceptions within the scope of the organisation’s organisation’s strategic horizons can be existing practices, policies and norms of broadened, and managers can be receptive to behaviour (see double-loop learning; triple-loop new ideas (see vision-building). learning; organisational learning).
  • 618. Glossary 605 Situational variables see Contingency Theory. Strategy This is a plan of action stating how an Size see Contingency Theory. organisation will achieve its long-term objectives. Social construction This is an approach Sustainability This term was originally coined concerned with the processes by which people by environmental and ecological campaigners construct, maintain and change social and to describe the development of economic, social organisational reality. It is a term used in and industrial practices which would contribute to sustaining the natural environment. It has both postmodernism and realism. For been extended to include the promotion of postmodernists, social construction is seen as organisational practices that contribute to the creating a number of competing ‘realities’, none health of the planet, the survival of humans of which possess ultimate truth or reality. and other species, the development of a just Realists, on the other hand, believe in just one and humane society, and the creation of work socially-constructed reality which does exist. that brings dignity and self-fulfilment Social needs The need to belong, to gain love (Dunphy et al, 2003). and affection; to be in the company of others, SWOT analysis This is a strategic planning tool especially friends (see hierarchy of needs). which assesses the Strengths, Weaknesses, Socio-Technical Systems theory This is a Opportunities and Threats possessed and faced variant on Job Design which involves a shift by an organisation. of focus from the individual job to the Systems Theory see closed systems and Open organisation as a whole. It sees organisations as Systems school. being composed of interdependent social and Task culture This type of organisational culture is technical systems. job- or project-orientated; the onus is on getting Stars These are business units, industries or the job in hand (the task) done rather than products with high growth and high market prescribing how it should be done. Such types of share. Because of this, stars are assumed to use culture are appropriate to organisations with and generate large amounts of cash. However, organic structures where flexibility and they are also likely to be very profitable (see teamworking are encouraged. Growth-Share Matrix). Taylorism see Scientific Management. Strategic Conflict model This is an approach to Technology see Contingency Theory. strategy which harks back to the military Theory X This is a management theory metaphor, and portrays competition as war expounded by Douglas McGregor (1960) which between rival firms. In particular, this model states that the average person dislikes work and draws on the work of military strategists, and will avoid it wherever possible, unless coerced attempts to apply their military aphorisms to to do so (see Theory Y). modern business organisations. Theory Y This is a management theory Strategic intent This is a term which was expounded by Douglas McGregor (1960) which originally coined to describe the commitment of states that most people can view work as being Japanese managers to create and pursue a vision as natural as rest or play, they are willing to of their desired future. take responsibility, and are capable of exercising Strategic management Though often used as a self-direction and self-control (see Theory X). generic term to describe the process by which Three-Step model This model of change was managers identify and implement their developed by Kurt Lewin and sees change as going organisation’s strategy, it was originally applied through three stages: unfreezing, moving and only to quantitative, mathematical approaches refreezing. It is one of the four elements of Lewin’s to strategy. Planned approach to change (see Planned change).
  • 619. 606 Glossary Total Quality Management (TQM) This was Unfreezing This is the first step in Lewin’s developed in Japan and is the systematic Three-Step model of change. It seeks to application of quality management principles destabilise (unfreeze) the complex field of to all aspects of an organisation’s activities, driving and restraining forces which prevent including customers and suppliers, and their human behaviour from changing (see moving integration with key business processes. and (refreezing). Transformational leadership This approach Values These are one of the key components of portrays leaders as charismatic or visionary culture. They relate to how things ought to be individuals who seek to overturn the status quo done in an organisation; they tell members and bring about radical change. Such leaders what is important in the organisation (see use the force of their personality to motivate organisational culture). followers to identify with the leader’s vision and Vision This is a view of an organisation’s to sacrifice their self-interest in favour of that of desired future state. It generally has two the group or organisation. Transformational components: a description of the organisation’s leadership is seen as being appropriate to core values and purpose; and a strong and bold divergent states (see contextual approach to leadership and transactional management). picture of the organisation’s future which identifies specific goals and actions (see vision- Transactional management This approach building). stems from the notion that the manager- subordinate relationship is based on a Vision-building This is the process of creating a transaction between the two, whereby managers vision. It is an iterative process which involves exchange rewards for subordinates’ the conception by a company’s senior performance. Transactional managers focus on management team of an ‘ideal’ future state for task completion, goal clarification and their organisation; the identification of the optimising the performance of the organisation organisation’s mission, its rationale for through incremental changes within the confines existence; and a clear statement of desired of existing policy, structures and practices – outcomes and the desired conditions and basically, they seek to work within and maintain competences needed to achieve these. the status quo. This approach to management is Workforce diversity This term refers to the seen as being appropriate in Convergent states dissimilarities – differences – among an (see contextual approach to leadership; organisation’s workforce owing to age, gender, Transformational leadership). race, ethnicity, religion, sexual orientation, Triple-loop learning This involves questioning nationality, socio-economic background, the rationale for the organisation and, in the capabilities/disabilities, etc. It draws attention to light of this, radically transforming it (see the need to take account of these differences single-loop learning; double-loop learning; when seeking to recruit, retain and motivate organisational learning). staff. In particularly, it identifies the need to Uncertainty This relates to the degree of doubt, treat different groups differently if an unpredictability and ambiguity that exists in organisation is to treat all its employees in an any situation. ethical and fair manner.
  • 620. 1 Index Note: Emboldened page numbers signify analysers 245 Ashour, A.S. 508 glossary entries. analysis 76 Ashton, D. 522 Abegglen, J. 116, 122 Analytical stream 6, 214–19, 595 Ashton, T.S. 14 Abell, D.F. 248 applying strategy 233, 237–8, 257 Ashworth, W. 20 Abell, P. 80 approaches to change management Asia 27, 149, 175, 490 Abodaher, D. 80 261 assertiveness 186 Ackroyd, S. 87, 117, 122, 126, 154, 155 approaches to strategy 219, 220 assessment 469–70 action, bias for 90 managing change 429–30 assumptions, basic 172, 595 Action Learning 524, 525, 526, 595 Anderson, C. 248, 249 Aston group 69, 77–8, 490, 595 action phrase 277 Andretti, M. 95 AT Kearney 3, 4 Action Research 524, 595 Andrews, K.R. 208, 211, 214, 248, 251 Athos, A.G. 196, 216, 244, 290, 600, change management, approaches to Ansoff, H.I. 208, 210, 211, 214, 215, 604 268, 270, 272–3, 274, 275, 220, 245 attitudes 172 276, 278, 279 AOL 2 audits 474, 595 activity planning 472, 595 Appignanesi, R. 146, 150, 151, 152 Auer, P. 67, 369–70, 371, 372, 373, Adams, C. 356, 361 Apple 173, 196 374, 376 Adaptation-Innovation theory 520, 595 applying strategy 232–58 Australia 175, 300, 414 adaptive view 212 levels of strategy 238–46 Austria 22, 175 Adhocracy 173 strategic planning tools 246–56 authority 41, 44, 186, 595 AEI 343 types of strategies 234–8 autonomy 90–2, 596 Africa 175 approaches to change management Aviva 493 Aglietta, M. 66 259–86 Ayres, R. 356 Aguren, S. 371 organisational change, frequency Ahmed, P.K. 128, 133 and magnitude of 281–4 BA 494 Aitken, H. 38 Planned approach 267–81 Babbage, C. 16, 17–18, 49 Akao, Y. 459 theoretical foundations 261–7 Bachman, J.G. 189 Alban-Metcalfe, R. 511, 513 Argenti, J. 214, 240 Back, K.W. 271, 315 Albrow, M. 44, 169 Argentina 27 backstaging 596 Alcatel 345, 346 Argyris, C. 51, 79, 148, 227–8, 268, Badham, R. 113, 137, 183, 184, 191, Alderman, J. 337, 338, 342 271, 301, 446, 505, 525 192, 193 Alimo-Metcalfe, B. 494, 511, 513 Allaire, Y. 138, 224, 226, 300, 327, new paradigms 87, 117, 126, 127, Bain & Co 233, 254 379, 383 128, 129, 130, 133 Balanced Scorecard 167 culture, power, politics and choice Aris, S. 346, 347 Bank of Tokyo 136 169, 176, 195 Arndt, M. 157, 158, 159, 162, 280, 297 Bar, H. 270, 275, 526 developments in organisation Arnold, J. 66, 69, 113, 446 bargaining 186, 324 theory 79, 80, 81 management – roles and Bargal, D. 268, 269, 270, 272, 273, Allen, F.R. 169 responsibilities 504, 507, 275, 526 Allen, R.W. 187, 188, 191 509, 511, 512, 513, 522, 523 Barnard, C. 55, 60–1, 62, 357, 482, Allport, G.W. 270, 272, 273, 274 Arnot, C. 532 498 Alvesson, M. 145, 150, 152, 281 Aronowitz, S. 153 Barratt, E.S. 176 Amazon.com 340 art management activity 499 Barrie, C. 122, 123, 124, 190 American Telephone and Telegraph Arthur Andersen 496 Barth, C. 38 Company 58 artifacts 172, 595 Bartlett, C.A. 304 American Tobacco 1 Asch, D. 240, 252 Barton, L. 496 Amin, A. 145 Ash, M.G. 268 Bass, B.M. 503, 509, 511 Amit, R. 236 Ashforth, B.E. 228 Bateson, G. 129, 130
  • 621. 1 608 Index Batten, D. 276, 279 change management, developments Buchanan, D. 4, 80, 324, 328, 332, Batten, J.D. 187 in 302, 303, 304, 310, 311, 468, 471, 482, 596 Baudrillard, J. 146 313 change management, developments Beach, S.D. 266 Boeing 226 in 292, 296, 298, 302, 303, Beatty, C.A. 226, 511 Boje, D.M. 159, 297 304, 310, 311, 313 Beaty, L. 526 Bold Strokes 596 culture, power, politics and choice Bechtold, B.L. 157, 159, 160, 161, developments in change 176, 183, 184, 189, 191, 162, 164, 217, 280, 297, 301 management 307 192, 193 Beckhard, R. 268, 472–4, 476, 479, 522 framework for change 322, 326, 328 new paradigms 88, 113, 132, 137 Bedeaux system 54 internal relationships and attitudes Buchel, B. 87, 127, 128, 129, 131, Beer, M. 3, 278, 322, 325, 328, 468 366, 383 133, 135, 139, 301 change management, developments management – roles and Buckingham, L. 190 in 289, 293, 294, 300, 302, responsibilities 516, 530 Buckley, P.J. 122 303, 304 managing change 436, 437, 444 Buckley, R. 116 Beesley, M.E. 356 new paradigms 101–2, 138 Buckley, W. 265 Beeson, I. 157, 159, 160, 162, 284, organisational change and Buddhism 84 297 managerial choice 485 Buffet, W. 2 Behaviourists 262, 266, 279, 596 bonding 119 Bullock, R.J. 276, 279 Belgium 20, 175 Borchardt, K. 21 bumpy change 321–2 beliefs 172 Boston Box see growth-share matrix Burawoy, M. 79 Bell, C.H. 310, 453, 511, 526 Boston Consulting Group 215, 249, bureaucracy 43–7, 596 change management, approaches to 256 demise of 64–5 262, 263, 264, 267, 268, bottom-up change 596 Burgess, M. 115, 117, 118 272, 273, 276, 277, 278, Boulton, M. 17, 49 Burgoyne, J. 87, 127, 129, 130, 134, 279, 281, 285 boundaries, opening of 97–8 524 Bell, D. 65, 86 bounded rationality model 461 Burke, W. 265, 266 Bell Laboratories 84 Bower, T. 196 Burnes, B. 3, 49, 445, 460, 468, 469, benchmarking 596 Bowles, M. 169 475, 511 Benjamin, G. 295, 302 Bowman, C. 240, 252 case studies in external Bennett, R. 273 Box, G. 1, 4, 531 relationships 399, 401, 419 Bennis, W.G. 51, 64–5, 69, 77, 219, Boydell, T. 87, 129 case studies in internal relationships 302, 303, 503, 504 BP 496 and attitudes 376–7, 379 Bensoussan, B.E. 235, 237, 239, 247, Bracker, J. 207, 208 case studies in strategic change 252, 255 Brandenburger, A.M. 237 355, 360 Berggren, C. 371, 372 Branson, R. 531 change management, approaches to 280, 281, 285 Bernstein, L. 263, 272 Bratton, J. 137 change management, developments Bessant, J. 3, 79 Brazil 356 in 302, 315 Best Value 198, 415, 416, 418, 443–4 Breslin, J. 4 culture, power, politics and choice bet-your-company cultures 173 Brewer, E. 498, 500 176, 198 Bethlehem Steel Company 35–6, 37 Bridges, W. 532–3 developments in organisation Beyer, J.M. 171 Brindle, D. 3, 114 theory 55, 70, 78, 81 Bhaskar, R. 154, 156 Brittain, V. 114 management – roles and Biberman, J. 147 Brodbeck, P.W. 160, 162, 297, 303 responsibilities 503, 508, Big Bang approach 138 Brown, A. 169, 170, 171, 173, 176, 520, 523, 525 Big Government 56 177, 178, 179, 181, 182, new paradigms 133, 134, 135 Bigelow, B. 157, 158, 159, 162, 280, 183, 300 strategy, approaches to 225, 226 297 Brown, C.A. 368, 370, 371, 372 Burns, J.M. 226, 302, 509, 510 Bigge, L.M. 279 Brown, D.H. 220 Burns, T. 71, 72, 73, 74, 77, 134, 174, Birchall, D. 299 Brown, D.R. 526 266 Black, J.A. 157, 159, 162, 280, 284, Brown, S.L. 158, 159, 160, 161, 217 Burrell, G. 85, 146, 153 296 change management, developments Burt, T. 369 Blackler, F. 134, 368, 370, 371, 372 in 280, 281, 283, 297, 298, Burton, F. 1 Blake, R.R. 169, 268, 505–6 299, 303 business Blake, V. 260 Bruland, K. 16, 17, 18 environment 225–6 Blau, P.M. 72, 77 Brummer, A. 196, 344 ethics 495–8, 596 Blodget, H. 497 Brunner, E.J. 272, 315 level 238, 242–4 BMW 86, 189 Bryant, A. 4 practices and work systems 120–2 Boddy, D. 176, 177, 192, 324, 332, Bryce, R. 496 Business Process Re-engineering 3–4, 471, 482, 596 BT 346, 493 293, 596
  • 622. 1 Index 609 Butler, R. 80, 227 rapid and unexpected 65 Citron, R. 496 Butler, V.G. 266 see also framework for change; clan 173 Buzzell, R.D. 248 globalisation and challenge of Clark, R.C. 125 Byars, L.L. 240 change; incremental change Clarke, L. 300, 301, 302, 309, 313 Bywater, P.L.C. 3, 4 changing external relationships, case Clarke, M. 160, 303 studies in 398–422 Classical school 6, 138, 197, 335, 597 Cadbury 195, 218 PoliceCo 414–19 approaches to change management Calás, M. 146 Rover-TRW 401–7 262, 266 Caldwell, R. 309, 311, 312 Speedy Stationers and UTL approaches to strategy 205, 208, Callin, W. 260 (Turbines) 407–13 221, 222, 223, 225, 226, Callinicos, A. 153 changing organisational culture 227, 228, 229 Camp, R.C. 456 arguments in favour 176–80 critical perspectives on Canada 175 conflicts and choices 182–3 organisation theory 143, 147, Canon 236, 255 reservations 180–2 150, 163 Cant, M. 414 chaordic 597 developments in organisation Canter, R.R. 56, 65, 69 chaos 158, 271, 597, 599 theory 54–6, 60–1, 64–5, careers 100 theory 597 67–70, 72, 74–5, 78, 80–1 Carew, A. 38, 54 Chapman, S.D. 16, 18 internal relationships and attitudes Carlson, S. 498 charismatic authority 44 369, 370 Carnall, C.A. 294, 295, 298, 301, Chartered Institute of Training and management – roles and 302, 304, 305, 313 Development 520 responsibilities 520, 532 Carnegie, D. 32 Chassagne, S. 16, 18 trial and error and Scientific Carpenter, M. 288 Chawla, S. 127, 134 Management 13, 39, 40, 41, Carr, C. 247 Chemers, M.M. 507–8 48–9, 51 Carroll, D.T. 112 Cheney, G. 162, 296 see also organisation theory: Carroll, G.R. 217 Chief Executive Officers 114 Classical approach Cartwright, D. 269, 272 Child, J. 134, 195, 220, 221, 235, Clegg, C.W. 80, 149 Carvel, J. 101 299, 329, 500, 599 closed systems 597 case studies see changing external developments in organisation coalition 186 relationships; internal theory 63, 70, 71, 72, 76, Coca-Cola 238, 490 relationships and attitudes; 77, 78, 79 Coch, L. 276 strategic change strategy, approaches to 210, Coe, T. 2 cash-cows 250, 597 218–19, 222, 224, 235 coercive power 188, 597 Cashman, J.F. 506 China 134, 490, 513, 520 Coghlan, D. 304 Cassidy, J. 2 Chisholm, R.F. 273 Cognitive Dissonance 519, 597 Catastrophe 271 choice 193–6, 220–8, 328–9, 502 Cohen, M.D. 228 categorisation 76 process 455 Cole, R.E. 117, 122 Caulkin, S. 497 see also choice-management-change Collier, A. 154 causal mechanism 597 management model Collins, D. 85, 293, 315, 462, 533 causal powers 597 choice-management-change Collins, J. 255, 256 Caves, R. 338 management model 7, 450, combination strategy 241 CeBIT 142 454, 455–83, 484, 485 combined change 432, 435–9, 441–4 command 42 Cellan-Jones, R. 2 change process 467–83 commerce and factories 14–33 centralisation 42 assessment 469–70 employers and employees, Centre for Working Life see Institute objectives and outcomes 468 relationship between 15–16 for Work Life Research people 475–83 France 23–5 challenge of change see globalisation planning change 470–5 Germany 21–3 and challenge of change remit 468–9 industrialisation and organisation Chamberlin, E.H. 236 trigger 468 of work 17–19 Champy, J. 1, 4 choice process 456 Scandinavia 25–31 Chandler, A.D. 207, 208, 211 focus of choice 458–9 United States 31–3 Chang, T.-L. 249 organisational context 456–8 commitment planning 472–4 change 467 organisational trajectory 459–62 communication 91–2, 480–1 agents 597 trajectory process 462–7 company welfarism 119 management 128–9, 432–44 passim Christopher, M. 399 Competitive Forces 215, 234–6, 238, team 471 Chrysler 1 241, 244, 430, 597 see alsoapproaches to change Cipolla, C. 20 applying strategy 256, 257 management Citicorp 2 complexity perspective 157–63, 254, process 455 Citigroup 288, 289 597–8
  • 623. 1 610 Index compromise 191 core workers 104–5, 149 excellence, search for 88–95 Compulsory Competitive Tendering corporate level 238 framework for change 327 198, 414–15, 416, 418, 443–4 strategy 240–3 internal relationships and attitudes Confucianism 118 cost leadership 235, 242 368, 375 Congress of Vienna (1815) 21 Coulson-Thomas, C. 2 management – roles and Connelly, J. 155, 156, 315 Council for Excellence in Management responsibilities 532, 533 Conner, P.E. 267 and Leadership 523 new paradigms 87, 94, 103, 118, Constable, J. 498, 523 country club management 505 126, 129, 131, 135–9 constraints 220–8, 431–43 passim, Coupland, D. 135 organisational change and 447–8, 502 Courtney, H. 253 managerial choice 484, 485 contextual approach 508–14, 598 Covin, J.G. 246 post-entrepreneurial model 95–103 Contingency approach 6, 70–80, 598 Cowe, R. 196, 226 Cummings, T.G. 3, 129, 130–1, 255, applying strategy 235 Cox, B. 252 256, 322, 453, 462, 463 approaches to strategy 205, 218, Crainer, S. 88, 122, 524, 525 change management, approaches to 223, 226 Crawford, M. 477 263, 268, 275, 276, 277, Aston group 77–8 creativity 598 278, 280, 281, 285 choice 197 Cressey, P. 374 change management, developments critical perspectives on critical perspectives on organisation in 289, 299, 300, 309 organisation theory 143, 146, theory 141–65 culture, power, politics and choice 73, 151 complexity perspective 157–63 170, 172, 177, 178, 180, 181 criticisms 78–80 postmodern perspective 144–54 management – roles and developments in change realist perspective 154–7 responsibilities 493, 495, 526 management 293, 296, 298 critical success factors 167 customers 90 developments in organisation Crombie, A.D. 169, 170 Cuthbert, N. 41 theory 55, 56, 76, 80, 81 Crosby, P.B. 4 Cyert, R.M. 183, 195, 282 environment 73–4 cross impact method 253, 254, 598 environment, importance of 72 Crossan, M.M. 126 Daft, R.L. 148 environmental uncertainty and Crouch, C. 533 Daimler-Benz 1 dependence 74–5 Crozier, M. 50 Dakin, S.R. 498 external relationships 422 Cruise O’Brien, R. 4 Dale, B.G. 3, 4, 87, 117, 121, 299, 459 framework for change 331 cultural perspective 169–83 Darwin, C. 217, 283 management – roles and changing organisational culture: Darwin, J. 275, 524 responsibilities 518 arguments in favour 176–80 Dastmalchian, A. 79 managing change 431 changing organisational culture: Davenport, T.H. 324, 327 new paradigms 134, 138 conflicts and choices 182–3 Davies, C. 513 organisational change and changing organisational culture: Davis, C. 157, 159, 160, 162, 284, 297 managerial choice 452, 453 reservations 180–2 Davis, E. 79 technology 75–7 organisational culture, definition of Davis, J.A. 19, 21 trial and error and Scientific 169–76 Davis, L.E. 56, 65, 66, 69 Management 51 culture 128, 224 Davis, P.S. 243 Continuous Change model 430, 598 culture, power, politics and choice Davis, R. 55 continuous transformation model of 166–99 Davis, S. 170, 179–80 change 283–4 choice 193–6 Davis, T.R.V. 180 contractual fringe 105, 149 cultural perspective 169–83 Dawkins, W. 125 control 42, 598 power-politics perspective 183–92 Dawson, P. 184, 193, 275, 280, 285, convergent state 226, 509, 598 culture-excellence approach 6, 323, 453 Cooke, B. 269, 272 88–115, 168, 598 change management, developments Cool, K. 236 approaches to change management in 290, 292–4, 296, 298, Coombs, R. 4 263, 284 300, 302, 304, 306, 313–15 Cooper, C.L. 2, 3, 4, 87, 121, 142, choice 197 Day, C. 526 523, 526 critical perspectives on organisation Day, J. 415 Cooper, J. 134, 445 theory 143, 144, 151, 163 De Geus, A. 84 Cooper, R. 146 culture-excellence approach De Witte, K. 300 cooperative systems 60–1 criticisms 110–15 Deal, T. 169, 171, 173, 176 coordination 42 cultural perspective 169, 176, 182 decision-making models 461 Copernicus 85, 86 developments in change management Deetz, S. 145, 150, 152, 281 Copley, F.B. 37 290, 298, 302, 313 defenders 245 Coram, R. 360, 376–7, 419 emerging future organisations Deighton, N. 142 Corbett, G. 191 103–10 Dell 344
  • 624. 1 Index 611 Delphi method 253, 254, 598 change management, developments organisational structure 298–9 demands 502 in 293, 294, 299, 303, 304, power and politics 304–5 Deming, W.E. 84, 116, 121 311, 315 recipes for change 305–9 Denmark 20, 25, 27–8, 29, 30, 31, 48 management – roles and emerging future organisations 103–10 strategic change 353, 354, 355 responsibilities 488, 491, federal organisation 106–7 Dent, E.B. 268, 272 492, 532 Shamrock organisation 104–6 Depth of Intervention 519 Dyson 224 triple I organisation 107–10 Deresky, H. 134, 142, 175, 490, 493, employee involvement 444–7 495, 513 E-Plus 142 employers and employees, relationship Derrida, J. 146, 148, 153 East Asia 149 between 15–16 Design school 210–11, 214, 215, 222, Easterby-Smith, M. 128, 129, 133, empowerment 599 598 139, 302 Engels, F. 16 see also Job Design Eastern and Central Europe 2, 114, English Electric 343 Dess, G.G. 243 490, 497 Enlightenment 146–7 development 475 Easton, G. 154, 155, 156, 315 Enron 497, 498 developments in change management Eccles, T. 162, 296 enterprise (single company) unions 119 287–317 Economic Man 60 entrepreneur 501 Emergent approach 291–312 Economist Intelligence Unit 126 entrepreneurship 90–2, 98, 599 Planned approach to organisational Eden, C. 273 environment 72, 73–4, 599 change 289–91 edge of chaos 158, 599 environmental assessment 306 Diageo 2 education 119 environmental uncertainty and Dickens, C. 16 Edwardes, M. 80, 315 dependence 71, 74–5 Dickens, L. 268, 273, 275 Egan, G. 178 equifinality 599 Dickson, W.J. 59, 69 Eisenhardt, K.M. 158, 159, 160, 161, Equilibrium model 430 differentiation 73 217 equity 42 Directional Policy Matrix 252 change management, developments Erickson, J. 135 discipline 41 in 280, 281, 283, 297, 298, Ericsson 345 discontinuous change 322 299, 303 Erios, L. 341 disseminator 501 Elden, M. 273 Erridge, A. 418 dissipative structures 598 Eldridge, J.E.T. 169, 170 esprit de corps 42 disturbance-handler 501 Elliot, K. 209 Essinger, J. 398, 414 divergent state 226, 510, 598 Elliott, L. 114, 115, 497, 532 esteem needs 62, 599 diversity 65 Ellis, T. 500 Etzioni, A. 188, 189 division of labour 598 Elrod II, P.D. 315 Europe 1, 2, 4 division of work 41 Emergent approach 6, 291–312, applying strategy 241 Dixit, A. 237 448–9, 599 critical perspectives on organisation Dobson, P. 177, 178, 180 approaches to change management theory 142, 151 Docherty, P. 492 285 developments in organisation dogs 250–1, 599 approaches to strategy 216 theory 54, 56, 65, 67, 68, 73 Dohert, T.L. 415 change agent, role of 309–12 external relationships 415, 422 Dolvik, J.E. 25, 29 criticisms 312–15 internal relationships and attitudes Domberger, S. 398, 414 developments in change 377 Done, K. 190, 398 management 289, 316 management – roles and Donkin, R. 167, 168 framework for change 321, 323, responsibilities 490, 493, 513 326, 329–30, 331 new paradigms 88, 97 Donovan, P. 190 internal relationships and attitudes organisational change and double-loop learning 130, 599 365, 366, 367, 383, 396, 397 managerial choice 470 Drennan, D. 170 management – roles and strategic change 344, 347, 353 Drory, A. 184, 185, 187, 191 responsibilities 519, 530 trial and error and Scientific Drucker, P.F. 240, 499 managerial behaviour 302–4 Management 13–14, 16–18, Dudley, G. 360 managing change 430–3, 435–9, 20, 24–7, 29–33, 38, 43, 46–7 Dukakis, M.S. 102 441–5, 449–50 see also Eastern and Central Duncan, W.J. 499, 500 new paradigms 115 Europe; European Dunham, A.L. 23 organisational change and European Commission 357 Dunphy, D.D. 3, 66, 68, 114, 115, managerial choice 453, 454, European Electricity Directive (96/92/EC) 280–1, 282, 452, 605 484, 485 357, 358, 361, 436 change, a framework for 322, 323, organisational culture 300–1 European Energy Directive 361 324, 328 organisational learning 301–2 European Single Market 355, 356
  • 625. 1 612 Index European Union 336, 416, 419, 491 Fleetwood, S. 154, 155 Froebel, F. 145 Evans, M.G. 506 Fleisher, C.S. 235, 237, 239, 247, 252, Frost, P.J. 191 Evans, R. 496 255 Fruin, W.M. 117, 137, 196 Evolutionary approach 221, 222, 223, Fleishman, E.A. 505, 507 functional level 238 225, 226, 229, 335 flexibility 519–21 strategy 244–5 excellence, search for 88–95 flexible labour force 105, 149 future organisations see emerging action, bias for 90 Flynn, J. 177, 198, 533 future organisations autonomy and entrepreneurship Foch, M. 488 90–2 Foegen, J.H. 162, 296 Gaebler, T. 355, 414 customers 90 Fohlen, C. 23 Galagan, P.A. 209, 228 hands-on and value-driven 92 Ford, H. 38, 58, 84, 369–70, 599 Galbraith, J.R. 298, 299 productivity through people 92 Ford Motors 97, 190, 368–9, 396 Gale, B.T. 248 simple form, lean staff 93 external relationships 401, 402 game theory 599 simultaneous loose-tight properties management – roles and Gandz, J. 183, 185 93–5 responsibilities 490, 492, 516 Gantt, H. 38 executing champion 91 managing change 437, 438 Garbage Can model 228, 461 exploration phase 277 organisational change and Gardner, J. 192 external relationships see changing managerial choice 459, 463 Garratt, B. 134 external relationships Ford, T.M. 248, 249 Garratt, C. 146, 150, 151, 152 extrinsic motivators 599 Fordist/Fordism 145, 147, 372–3, Garvin, D.A. 128, 280 Ezzamel, M. 2 375, 376, 396, 599 Gastil, J. 505 Fore Industries 346 Gates, B. 114, 465, 531 factories see commerce and factories formal alliances 191 Gay, C.L. 398, 414 Fahy, J. 236 Foucault, M. 146, 150, 153, 291 GEC 434, 448, 459 Fanning, S. 337, 433, 514 four Cs 415 case studies in strategic change Far East 347 four ‘soft’ Ss 89, 118, 244 336, 343, 344, 345, 346, 362 Farrell, D. 187 Fox, J.M. 147, 208 culture, power, politics and choice Fawn, J. 252 framework for change 318–32, 485 173, 196 Fayol, H. 60, 489, 597, 603 framework for choice 328–9 management – roles and trial and error and science and varieties of change 321–5 responsibilities 515, 531 management 13, 34, 40–5, 47–51 France 23–5 Gell-Mann, M. 159 Fazio, R.H. 445 critical perspectives on organisation Gellerman, W. 267 Featherstone, M. 146, 152, 153 theory 146 General Electric 196, 209, 247, 252, federal organisation 106–7 cultural perspective 175 490, 531 felt-need 599 external relationships 414 Business Screen Matrix 252 Ferguson, C.H. 136 French Revolution 23, 24 General Motors 94, 97, 145, 224, Ferlie, E. 198, 533 management – roles and 490, 533 Ferner, A. 25 responsibilities 522, 523 Gent, C. 196 Festinger, L. 445 organisational change and Genus, A. 294, 299 Fiedler, F.E. 507–8, 509 managerial choice 470 Gephart, R.P. 148 Field Theory 270, 273, 274, 275, 276, trial and error and Scientific Gergen, K.J. 146, 147, 148, 150, 291 279, 476, 526, 599 Management 13–14, 16, 18, Germaine, C. 524 figurehead 501 20, 25–30, 32, 34, 41, 43, Germany 21–3, 175, 247, 414 Filby, I. 181 46, 48 approaches to strategy 224, 225 Filley, A.C. 506 Franklin, B. 315 developments in organisation Financial Services Authority 345 Frederick, W.C. 158, 159, 161, 297 theory 56, 67 Finch, J. 168, 190, 191, 497 Freeman, C. 86 management – roles and Finstad, N. 293, 294, 295 Freeman, J. 217, 237 responsibilities 522, 523, 533 Fiol, M.C. 128, 301 French, J.R.P. Jr 276 new paradigms 86, 116 firm-in-sector perspective 599 French, W.L. 310, 453, 511, 526 trial and error and Scientific Firsirotu, M.E. 138, 169, 176, 195, change management, approaches to Management 13–14, 16, 224, 226, 300, 327, 379, 383 262, 263, 264, 267, 268, 18–20, 24–8, 30–2, 34, 45–8 developments in organisation 272, 273, 276, 277, 278, Gersick, C.J.G. 283 theory 79, 80, 81 279, 281, 285 Gestalt psychology 262, 270, 273, first level management 500 Fried, Y. 228 279, 599 Fisher, L. 69 Friedman, G. 66 Ghamawat, P. 237 Fitton, R. 18 friendliness 186 Ghoshal, S. 304 Fitzgerald, L.A. 157, 158, 159, 297 Friesen, P.H. 280, 282, 283 Gibb, C.A. 504 five forces framework 234–5 Frith, M. 101 Gibbons, J. 465–6
  • 626. 1 Index 613 Gibbons, P.T. 226, 511, 512 Greenberg, P. 341 Harrigan, R.K. 241 Gibson, J.L. 186 Greenwald, J. 283 Harris, P.R. 280 Gibson, O. 338, 340, 341 Greiner, L. 283 Harris, R.T. 472–4, 476, 479 Giddens, A. 142, 155, 490 Griffin, D. 160, 498, 508 Harrison, M. 344, 347, 363, 494 Gilbert, R.J. 237 Griffiths, A. 66, 68, 114, 115, 491, Harrison, R. 173, 302, 445, 520, Gilbert, X. 243 532 522–3, 524 Gilbreth, F.B. 34, 38–9, 40, 41, 48, 58 Grinyer, P.H. 315 Hartley, J. 294, 310 Gilbreth, L.M. 34, 38–9, 40, 41, 48, 58 Groger, R. 142 Harukiyo, H. 123, 124 Gillespie, R. 57, 58–9 group dynamics 263–4, 270, 272–6, Harung, H.S. 160, 303 Gillett, C. 337, 342 278–9, 526, 599–600 Harvard Business School 208, 247 Gillette 283 Group school 266 harvesting strategy 241 Gillies, C. 209, 227, 228 Grove, G. 401 Harvey, D. 526 Gittings, J. 114 growth strategy 240 Harvey, F. 466 GK Printers 383–95, 440–1, 517, 518 growth-share matrix 249–52, 253, 600 Hassard, J. 86, 146, 147, 152, 153, changing attitudes and behaviours Grundy, T. 321 178, 179, 293 390–5 Guatto, T. 126 Hatch, M.J. 179, 181, 182, 210, 225 changing systems 386–90 Guest, R.H. 65, 66 management, developments in internal relationships and attitudes Guinness 2 275, 280, 291, 293, 298 367, 396 Gurrie, D. 498 critical perspectives on organisation managing change 446, 447, 448, Gyllenhammar, P.G. 189–90, 368, theory 142, 146, 148, 449 369, 370, 372, 437, 516, 531 149–50, 151, 152 organisational change and Haupt, H. 207 managerial choice 467, 476, Habakkuk, H.J. 31 Hawthorne experiments 57–60, 62, 478, 480, 481 Habermas, J. 153 69, 79, 116, 600 strategy development 384–5 Hackman, J.R. 65, 66 Hax, C.A. 209, 242, 244, 247, 251, GKN 224 Haigh, C. 157, 284 252, 254, 326–7 Glaxo 2, 190 Hales, C.P. 498, 500, 502, 508 Hayes, D.C. 191 Hayes, J. 281, 292, 295, 302, 303 Glaxo Wellcome 487 Halifax building society 136 Hayles, K.N. 157, 162, 284 GlaxoSmithKline 497 Hall, D.T. 69 Haywood, B. 3 Gleick, J. 157 Hall, R. 236 Hedberg, B. 133, 282 Global Crossing 497 Hambrick, D.C. 246 Hedlund, G. 87, 127, 134 globalisation and challenge of change Hamel, G. 80, 120, 236, 255, 256, Heller, R. 344 489–98, 599 282, 299, 462, 485 Henderson, B. 249 business ethics 495–8 strategy, approaches to 214, 216, Hendry, C. 79, 80, 195, 271, 275, sustainability 491–2 222, 224, 228 304, 314–15 workforce diversity 492–5 Hamilton, R.T. 498 heroes 172 Glueck, W.F. 241 Hammer, M. 1, 4 Herzberg, F. 66 godfather 91 Hammersley, B. 341–2 Hesketh, J.L. 170 Gold, K.A. 170 hands-on 92 Hewlett-Packard 283 Gold, M. 270, 271, 526 Handy, C. 76, 282, 299, 379, 383, Hickman, C.F. 503 Goldberg, S.G. 268, 272 484, 598 Hickson, D.J. 71, 79, 80 Golding, D. 498 critical perspectives on organisation hierarchy 173 Golzen, G. 533 theory 142, 149, 151, 161 of needs 61–3, 600 Goodmeasure Inc. 95 culture, power, politics and choice higher authority 186 Goodwin, B. 157 173–4, 175, 176, 177, 183, Hines, P. 126, 399 Goold, M. 241 184 Hinkin, T.R. 512 Gordon, G. 178 management – roles and Hirschhorn, L. 271, 300 Gould, S.J. 283 responsibilities 498, 499, 532 Hirst, C. 346, 347 Gow, D. 189 new paradigms 85, 87, 88, Hlavacka, S. 243 Graen, G.B. 506 103–10, 111, 113, 114, 138 Ho, D.Y.F. 134, 175 Graetz, F. 294, 295, 296, 302 Hannagan, T. 523 Hobsbawm, E.J. 15, 146 Graham, G. 142, 299, 337, 339, 341 Hannam, R. 87, 120, 121, 126 Hock, D. 94, 158, 159, 597 GrandMet 2 Hannan, M.T. 217, 237 Hofer, C.H. 252 Grant, A. 40 Hanson, Lord 343 Hofstede, G. 122, 134, 171–2, 175, Grant, G.M. 216, 228, 247 Hanson, P. 4 224, 494, 513, 520 grasp 39 Harbour Report 126 Hohenzollern dynasty 22 Great Depression 56, 68 Hardaker, G. 142, 299, 337, 341 Holden, N. 115, 117, 118 Greece see Public Power Corporation Hardy, C. 293 Honda 255, 401, 463, 493, 516 of Greece Harré, R. 154, 155 new paradigms 87, 97, 125, 126
  • 627. 1 614 Index Hoogerwerf, E.C. 162 impoverished management 506 approaches to strategy 216, 219, Hook, G.D. 123, 124 Inagami, T. 121, 123 220, 222 Horne, J.H. 498 incremental change 212, 321–2 business practices and work Horne, T. 415 model 282, 430, 600 systems 120 Horsley, W. 116 India 490, 493 choice 197 Hoshino, Y. 116 Individual Perspective 262–3, 266, 600 critical perspectives on organisation Hoskin, K. 207 Indonesia 496 theory 143, 144, 151, 155, Howarth, C. 3 Industrial Democracy Project 67 163 HSBC 497 Industrial Revolution 6, 12, 64 criticisms 125–6 Huber, G.P. 80, 128 management – roles and cultural perspective 174 Huczynski, A. 4, 189, 292, 296, 298, responsibilities 492, 522 developments in change 303, 468 new paradigms 111, 114 management 290 new paradigms 87, 88, 95, 132 trial and error and Scientific framework for change 326 Hughes, M. 136, 192 Management 13, 14, 15 future issues 122–4 Hull, R. 4 Industrial Society 111, 177 internal relationships and attitudes Human Relations approach 6, 55–69, industrialisation 17–19 375 600 information systems 131 management – roles and approaches to change management initiative 42 responsibilities 494, 520 263, 267–8 innovation 98 new paradigms 87, 129, 131, approaches to strategy 205, 208 Institute for Work Life Research 67 135–6, 137, 138, 139 bureaucracy, demise of 64–5 integration 73 organisational change and managerial choice 197 phase 277 choice 459, 483, 484 cooperative systems 60–1 Intel 283, 344 personnel issues 118–20 critical perspectives on internal labour markets 119 power-politics perspective 196 organisation theory 143, 151 internal relationships and attitudes, Jenner, R.A. 158, 160, 161, 297, 298, criticisms 67–9 case studies in 365–97 299 developments in organisation GK Printers 383–95 Jenster, P. 235 Jeynes, L. 414 theory 70, 72, 74, 78, 80, 81 Volvo 368–77 Job Design 65–7, 278, 600 Hawthorne experiments 57–60 XYZ Construction 377–83 internal relationships and attitudes hierarchy of needs 61–3 Internet 337–42 366, 368–77 internal relationships and attitudes interpretative view 212 managing change 437, 438 375 intrinsic motivators 600 organisational change and job design 65–7 irrational rationality 89 managerial choice 459, 479 management – roles and Ishizuna, Y. 137, 138, 196 job enlargement 66 responsibilities 505 Italy 19, 145, 149, 175 job enrichment 66 new paradigms 116, 135, 138 Ivancevich, J. 189 job security 100 Theory X-Theory Y 63–4 Jobs, S. 196 trial and error and Scientific Jackson, S.E. 142 Johnson, G. 206, 212, 213, 214, 300, Management 51 Jacobsen, N. 354 414, 456, 462 human resources 131, 306 Jacques, E. 170, 270 strategy, application of 234, 235, Humanisation of Working Life Jago, A.G. 503, 509 239, 242, 243, 244, 249, Programme 67 Jaguar 490 251, 252, 253 Hunger, D.J. 240 James, H. 226, 445, 511 Johnson, R. 85 Hunter, J.E. 115, 116 Japan 3, 54, 149, 350, 420 Jones, E.E. 445 Hurley, R.F. 268 applying strategy 235, 236, 247 Jones, G.R. 134, 302, 492, 493, 494, Huse, E.F. 255, 445, 446, 463 approaches to strategy 224, 225 495, 503, 513, 522 change management, approaches to cultural perspective 169, 175 Jones, J. 498 263, 275, 276, 280 management – roles and Jones, R.J.B. 490 culture, power, politics and choice responsibilities 491, 493, Jones, T. 288, 355 73, 170, 172, 180 513, 522, 523, 533 Jopling, D. 220 Hussey, D. 235, 252 new paradigms 85–6, 88, 95, 97, Jorberg, L. 26, 28–9, 30 Hutton, W. 114, 355, 532 103, 111, 121, 124, 127, 134 Joyce, P. 227, 228, 234, 239, 247, Huxham, C. 273 trial and error and Scientific 253, 255 Hyman, R. 25 Management 19, 38 Junkerdom 21 Hyundai 493 see also Japanese approach Juran, J.M. 84, 116, 121 Japanese approach 6, 115–26, 600 Just-in-Time 117, 120–1 IBM 94, 175, 226, 256, 427 applying strategy 243, 244, 255, 256 ICI 195, 218 approaches to change management Kabanoff, B. 508 image building 191 282 Kahn, H. 253
  • 628. 1 Index 615 Kaizen 84, 121, 139, 379, 477, 530, Komatsu 255 Least Preferred Co-worker (LPC) 507 600 Korean War 116 Lee, G.L. 226, 511 Kalleberg, A.L. 125 Kotler, P. 241 Lee, J. 18 Kamata, S. 125, 126, 137 Kotter, J. 3, 137, 161, 281 Lee, M. 162, 296 Kanter, R.M. 3, 185, 206, 343, change, a framework for 322, 323, Lee, R.G. 459 511–12, 532, 598 324, 327, 328 Leeds building society 136 case studies in internal relationships change management, developments Leemhuis, J.P. 256 and attitudes 366, 383 in 298, 299, 300, 301, 302, Leeson, N. 496 change, a framework for 322, 323, 303, 306–9, 313, 314 Left, S. 496 325, 326, 327, 328 management – roles and legitimacy 187–92 change management, approaches to responsibilities 498, 500, Leifer, R. 80 266, 275, 280, 281, 284 502, 510, 515 Lenin, V.I. 38 change management, developments organisational change and Leontiades, M. 240 in 290, 299, 302, 303, 304, managerial choice 453, 474, Leschley, J. 190 306–7, 309, 313, 314, 316 477, 482, 485 Leslie, K. 320 culture, power, politics and choice Kotter, J.P. 170 Lessem, R. 4, 520 142, 151, 161 Kraft, C. 169 Levine, A.L. 32 managing change 436, 444 Krell, T.C. 278 Lewin, K. 1, 329, 595, 599, 600, 601, new paradigms 87, 88, 95–8, 102, Kreps, D.M. 237 602, 604, 605, 606 103–4, 108, 110, 111, 113, Kriedt, P. 18 change management, approaches to 114, 137, 138 Kuhn, T.S. 85 261, 263, 267, 268–76, 279, organisational change and Kumar, K. 156 280, 281, 283, 284–5 managerial choice 484, 485 Kunda, G. 182 change management, developments in Kaoru, I. 84 Kyoto Protocol 491 289, 290, 296, 309, 314, 315 Kaplan, P.J. 2, 167 management – roles and Karlsson, C. 374, 375 Laage-Hellman, J. 15, 117, 120, 122, responsibilities 505, 524, 526 Karlsson, L.E. 369 125, 127 organisational change and Karwowski, W. 121 Lacey, R. 38 managerial choice 476, 480 Katsouros, M. 355 Laird, L. 190, 196 Lewis, R. 157, 158, 159, 160, 284 Kauffman, S.A. 158 Lamming, R. 121, 126, 399 Leyden, P. 490 Kawakita, T. 124 Land Rover 490, 493 liaison 501 Kay, J. 210, 216, 217, 236, 459 Landsberger, H.A. 69 Liberalisation Law 357, 358 Kazunori, O. 126 Lanford, H.W. 254 Lichtenstein, B.M. 310, 311, 471 Kellaway, L. 112, 487–8 large batch (mass) production 76 lifetime employment 118–19 Kelly, J.E. 3, 33, 49, 66, 69 Larson, L.L. 506 Likert, R. 65, 505 Kemp, T. 14, 20, 21, 22, 24 Latin America 491 Lincoln, J.R. 125 Kempner, T. 38 Laudon, K. 145 Lindblom, C.E. 183, 282, 460 Kennedy, A. 169, 171, 173, 176 Lawler, E.E. 66, 69, 112, 162, 296 Lindsay, V. 320 Kennedy, C. 87 Lawrence, P. 71, 73–4, 80, 209, 266 Lines, W.L. 491 Kerr, C. 69 Lawson, H. 148 Linneman, R.E. 253 Kerr, S. 507 leader 501 Linstead, S. 146–7, 148 Keshavan, K. 255 see also leadership Lippitt, G. 522 Keuning, D. 169, 176, 522, 523 leadership 131, 503–18, 601 Lippitt, R. 276, 505 key performance indicators 167 and change 527–30 Litschert, R. 213–14 Keynes, J.M. 5 contextual approach 508–14 Little, R. 240 Keys, J.B. 117 cost 235, 242 Littlechild, S.C. 356 Kidd, P. 121 grid 406, 505 Littler, C.R. 50 Kiel, L.D. 161, 297 leader-follower situation approach Local Government Act (1999) 415 Kipnis, D. 186, 187 506–8 Locke, E.A. 186 Kippenberger, T. 270, 271, 272, 283 personal characteristics-trait Locke, E.W. 34, 50 Kirton, M.J. 520–1 approach 504–6 Loden, M. 513 Kjellberg, A. 25, 29 transformational 606 Long March 307, 485, 516, 601 Klein, H.E. 253 Leadership, Organisation and Co- framework for change 322, 326, 328 knowledge power 189, 601 determination Programme 67 internal relationships and attitudes Koch, R. 210, 241, 244, 249, 251, 252 lean staff 93 366, 383 Kodz, J. 101 Learned, E.P. 236 managing change 436, 437, 444 Koji, O. 123 learning 130, 131, 519–21, 599, 604, new paradigms 101–2, 138 Kolind, L. 347–51, 353–4, 435–6, 606 Long, P. 524 464, 515 see also organisational learning long-range planning 208–10, 601
  • 629. 1 616 Index Lonrho 190, 196 development 519–27 Martin, J. 149, 170–1 Lorenz, E. 157 learning and flexibility 519–21 Martin, R. 301 Lorsch, J.W. 71, 73–4, 80, 170, 266 process 522–4 Masayoshi, I. 123 Lovell, R. 262 globalisation and challenge of Masayuki, M. 123 Lucent 346 change 489–98 Maslow, A.H. 61–3, 64, 65, 66, 69, Lupton, T. 498 leadership 503–18 263, 600, 604 Luthans, F. 125, 180 leadership and change 527–30 Mason, R.O. 248, 249, 251 Lyles, M.A. 128, 301 role of manager 498–503 Massie, J.L. 50 Lynch, R. 239, 456 decision-making roles 501–3 material support 91 Lyon, D. 153 informational roles 501 Mathias, P. 14, 21 Lyons, L. 299 Management Charter Initiative 523 Maughan, D. 288 Lyotard, J.-F. 146, 153 management development process 523 Maxwell, R. 196 management structures 471–2 Mayes, B.T. 187, 188 Mabey, C. 285, 295, 302, 304 managerial behaviour 65, 302–4, 431, Mayo, E. 51, 55, 57–60, 61, 67, 69 Macalister, T. 360, 496 433–6, 438–42, 444, 448 Mayo, J. 344–5, 346, 347, 434 MacArthur, D. 121 managerial choice see organisational Mayo, M. 288 Macbeth, D.K. 157, 284 change and managerial choice Mayon-White, B. 285, 302, 304 McCalman, J. 294, 295, 304 Managerial Grid 406, 505 Mazda 490, 492 McCormick, R. 498, 523 managerial sub-system 265 Mechanistic structure 72, 73, 601 McCracken, K. 3, 260 managing change 427–51 Meek, V.L. 181, 182 Macdonald, M. 513 employee involvement and Megerian, L.E. 302 McDonald, S. 134 organisational mental models 129 McDonald’s 173, 490 transformation 444–7 Mercedes 86, 493 McGann, J. 4 GK Printers 440–1 Merck 490 McGill 526 issues 429–32 Meriwether, J. 496 McGrath, M.R. 173 Marconi 434–5 metaphor 601 McGregor, D. 63–4, 81, 117, 268, merging theory and practice Meyer, M.W. 181 503, 505, 605 447–50 Meyerson, D. 149 Machiavelli, N. 476 music industry 432–3 Michaelson, G.A. 237, 527 MacIntosh, R. 157, 159, 160–1, 217, Oticon 435–6 Microsoft 114, 173, 226, 238, 465–6, 284, 297, 315 PoliceCo 443–4 490, 531 McIvor, G. 373, 374 Public Power Corporation of Middle East 175 McKenna, S. 117 Greece 436–7 middle management 500 Rover-TRW 441–2 middle-of-the-road management 506 McKiernan, P. 208, 209, 248, 249, Speedy Stationers 442–3 Midvale Steel Company 34–5 251, 252 Volvo 437–8 Miewald, R.D. 69 McKinsey 7 S Framework 89, 118 XYZ Construction 439–40 Milburn, A. 101 McKinsey and Company 89, 252 Manicas, P. 155 Miles, M. 445, 446 McLaughlin, H. 524 Mannari, H. 122 Miles, R.E. 214, 245–6, 257 MacLean, D. 157, 159, 160–1, 217, Mansfield, R. 79 Milgrom, P. 237 284, 297, 315 Mantoux, P. 16 Mill, J. 4 McLennan, R. 137, 285 March, J.G. 183, 195, 282 McMillan, J. 116 Miller, D. 235, 243, 280, 282, 283, Marconi 343–7, 434–5, 515 519, 520 McNamara, R. 208 management – roles and McNamee, B.P. 247 Miller, E. 265 responsibilities 516, 531 Miller, T.R. 117 McNiff, J. 275, 526 managing change 446, 447, 448, McNulty, C.A.R. 253, 254 Milner, M. 375 449, 450 Milward, A. 25, 27, 29 Madden, E.H. 155 organisational change and Minett, S. 137 Maddock, S. 457, 494, 513 managerial choice 454, 459, Ministry of International Trade and Mahoney, M.J. 445 460, 463, 464 Industry 122 maintenance strategy 240 strategic change 336, 362, 363, 364 Mink, O.G. 85 Maitland, A. 233 Marczewski, J. 23 Mintzberg, H. 5, 71, 80, 135, 209, Majluf, N.S. 209, 242, 244, 247, 251, Marglin, S.A. 15 235, 237, 317, 319, 338 252, 254, 326–7 market 173 change management, developments Malaska, P. 256 Markus, L.M. 338 in 282, 289, 296 Mallory, G. 183 Marrow, A.J. 267, 269, 270, 272, culture, power, politics and choice management – roles and responsibilities 273, 505, 526 183, 184, 186, 188 486–534, 601 Marsh, N. 522 management – roles and changing managerial behaviour Marsh, R.M. 122 responsibilities 498, 500–1, 524–6 Marshall Plan 38, 54 502, 503, 519
  • 630. 1 Index 617 organisational change and Naoi, A. 125 Oil Producing and Exporting managerial choice 453, 460, Napoleon III 24 Countries 434 462, 466 Napster 337–8, 340–1, 432, 433 oil shocks 86 strategy, application of 239, 243, National Health Service 225, 493, Okaka, K. 125 244, 246, 249, 251, 252 511 Oldham, G.R. 65 strategy, approaches to 204–5, Internal Market 198 Oliver, N. 117, 126 206, 210, 211–12, 213, 214, Naylor, T.H. 213, 249 Olsson, H.-O. 369 215–16 NEC 247 one best way 126, 601 Mirieux, Y.U.H. 181 negotiator 501 Open Systems 205, 211, 264–6, 267, Mirror Group Newspapers 196 Nelson, R.R. 228 278, 602 Mirvis, P. 285, 310 neo-Fordism 145, 146 open-ended change 602 Mirza, H. 122 neo-Marxism 291 order 42, 158, 602 mission statement 601 neo-Taylorism 145 -generating rules 159, 602 Misumi, J. 115, 117, 120, 121, 122, Netherlands 27, 175 O’Reilly, C. 176 125, 138 networking 191 Organic structure 72, 602 Mitroff I.I. 248, 249, 251 New, C. 3, 407 organisation 42 Mitsubishi 375, 490 New Deal 56 characteristics 226–8 Bank 136 New Factories Programme 67 development 264, 267–8, 276, modernism 144–50, 601 New Golden Rule 186 279, 280, 281, 284, 285, 601 Mohr, N. 142 New, S. 399, 401 in change management 304, momentum 481–3 new ventures internally 98 309, 311 monitor 501 New Zealand 175 changing nature of 277–8 Moore, J.I. 220, 247–8, 251 Newbury, D.M.G. 237 principles 40–3 Morgan, G. 12, 80, 213, 217, 225, News International 196, 490, 531 theory 227, 299, 522 Newstrom, J. 524 Classical approach 33–47 critical perspectives on Next Steps 198 bureaucracy 43–7 organisation theory 148, 157, 159, Nicholson, E. 213–14 motion study 39–40 160, 162 Nicholson, S.M. 252 organisation, principles of 40–3 culture, power, politics and choice Nike 496 scientific management 34–8 184, 191–2, 193, 196 Nippon Electric Company 116 developments 53–82 new paradigms 85, 115, 121, 126, Nissan 87, 98, 116, 126, 196, 401 Contingency approach 70–80 137 Nohria, N. 3, 322, 325, 328, 468 Human Relations approach motion study 39–40 change management, developments in 55–69 Mougayar, W. 340 289, 293, 294, 302, 303, 304 see also critical perspectives Mouton, J.S. 169, 268, 505–6 Nokia 344, 345 of work 17–19 moving 274, 601 non-linear systems 601 see also organisational MSN 465, 466 Nonaka, I. 87, 127, 134, 175, 520 organisational Mueller, R. 495 Nondi, R. 418 change, frequency and magnitude Mullings, H. 320 Nord, W. 178 of 281–4 Mullins, L. 41, 50, 184, 264, 265 Nordic model 25, 28 change and managerial choice developments in organisation normative power 189, 601 452–85 theory 60, 70, 72, 79 norms 172, 224, 263, 601 choice-management-change management – roles and Norrie, J. 1 management model 455–83 responsibilities 499, 513, Norse, D. 253 context 456–8 520, 522, 524 Nortel 345 culture 131, 300–1, 602 Mumford, A. 520, 522 North America 368, 490 definition 169–76 Murdoch, R. 196, 230, 531 see also Canada; United States see also changing organisational Murphy, C.J. 507 Norton, D. 167 culture Murray, F. 193, 195 Norway 25, 26, 27, 28–31, 67 goals sub-system 265 Murray, V.V. 183, 185 Nougaim, K.E. 69 learning 126–35, 182, 197, 301–2, music industry 337–42, 432–3, Nystrom, P.C. 314, 519 602 514–15, 518 criticisms 132–5 Myers, C.S. 55 O Germany 142 definition 127–31 objectives 224, 432–3, 435–8, 440–4 new paradigms 87 Nadler, D.A. 301, 304 O’Brien, G.E. 508 structure 298–9 Nadoworthy, M. 40 Occupation Administration: Civilian trajectory 459–62 Nahavandi, A. 498, 503, 504, 508 Communications Section 116 transformation 444–7 Nalebuff, B.J. 237 Ohmae, K. 228 Orth, D.C. 524 Nanus, B. 219, 503 Ohmi, N. 124, 125 Osborne, D. 355, 414
  • 631. 1 618 Index Oticon 347–55, 435–6, 515 person culture 173–4, 602 plan 39, 211–12 management – roles and personal characteristics-trait Planned approach 6, 267–81, 448–9, responsibilities 510, 518, approach 504–6 602 519, 525, 531 personal mastery 129 approaches to change management managing change 444–5, 446, 447, personnel issues 42, 93, 100–3, 261, 274, 275, 276, 277, 448, 449 118–20, 492–5, 507, 606 278, 280–1, 282, 284, 285 organisational change and perspective 211–12 approaches to strategy 210–11, managerial choice 453–4, PESTEL framework 456 214, 215, 222 458, 460, 464, 468–70, 476, Peters, T. 290, 336, 343, 422, 484, criticisms 279–81 478, 481, 483 485, 596, 598, 604 developments in change strategic change 336, 362, 363, 364 change, a framework for 322, 323, management 288, 292–3, Ouchi, W. 85, 117, 118, 125, 127 327 295, 309, 312, 313, 314, Outhwaite, W. 154, 156 change management, approaches to 315–16 outsourcing 602 280, 281–2, 284 framework for change 321, 323, Ovum 142 change management, developments 326, 329–30, 331 Owen, G. 343 in 291, 301, 302, 304 internal relationships and attitudes critical perspectives on organisation 365, 366–7, 383, 396, 397 P2P (peer-to-peer) 337–42, 432, 433 theory 142, 151, 161 Lewin, K. and planned change Paine, F. 248, 249 culture, power, politics and choice 268–76 Panasonic 347 169, 171, 178 Action Research 272–3 Pang, K. 117, 126 management – roles and field theory 271 paradigms, new 83–140, 602 responsibilities 503, 525, 533 group dynamics 272 culture-excellence approach 88–115 new paradigms 11, 84, 87, 88–95, three-step model 274–5 Japanese approach 115–26 96, 98, 101, 102, 103, 104, management – roles and organisational learning 126–35 108, 110, 112, 113, 114, responsibilities 505, 519, paralysis through analysis 89 118, 133, 137, 138 526, 530 Pareto, V. 60 strategy, application of 236, 241, 244 managing change 430–3, 435–9, Parikh, M. 339, 340 strategy, approaches to 206, 211, 441–5, 449–50 Parker, D. 357, 361 229 organisation development, Parker, M. 152, 360 Petersen, J.C. 187 changing nature of 277–8 Parsons, T. 50, 60 Pettigrew, A.M. 246, 271, 280, 282, 453 organisational change and participation 602 change, a framework for 321, 322, managerial choice 453, 454, Partnership Sourcing Ltd 399 323, 327, 329 484, 485 Partnoy, F. 496 change management, developments planned change, phases of 276–7 Pascale, R.T. 137, 188, 196, 216, 244, in 290, 292, 293, 295, 296, to organisational change 289–91 290, 600, 604 300, 301, 303, 304, 305–6, planning 42 new paradigms 87, 89, 117, 118, 310, 313, 314 long-term 120 122, 125, 126, 127 culture, power, politics and choice phase 277 passage, rites of 171 184, 187, 194–5 ploy 211–12 Patel, P. 252 strategy, approaches to 210, 214, PoliceCo 414–19, 443–4, 517–18 Paton, N. 523 217, 218–19, 222 external relationships 400, 420, 421 Paton, R. 294, 295, 304, 488, 491 Pfeffer, J. 80, 113, 134, 137, 162, management – roles and pattern 211–12 227, 290, 296, 302 responsibilities 509, 518, 533 Pavlov, J.P. 262 culture, power, politics and choice managing change 445, 447, 448, Pavtke 127 183, 184, 185–6, 187, 188, 449, 450 Peacock, A. 356 191, 192, 193 organisational change and managerial Pearson, A.E. 241, 522 phases of change 602 choice 454, 460, 470 Pedler, M. 87, 129, 524 Phillips 347 Policy Deployment (Hoshin Kanri) Pelling, H. 16, 32 Phillips, A. 494 459, 600 Penrose, E. 236 philosophical management activity politics 127–8, 304–5, 602–3 people 127, 475–83 499 see also culture, power, politics and involvement 479–81 physical support 91 choice momentum 481–3 physiological needs 62, 602 Pollard, S. 15, 16, 19 willingness to change 475–9 piecemeal initiatives 324 Pontusson, J. 368, 369–70, 371, 372, People, Data, Working Life Pilling, D. 123 373, 374, 375 Programme 67 PIMS 247–9, 252, 253, 602 pooled interdependence 74 Pepsi 238 Piore, M. 145 population ecology 603 Perez, C. 86 Pirelli 300 Porras, J.I. 255, 256 Perrow, C. 71, 76–7, 80, 192 Pischetsrieder, B. 189 Porter, L.W. 187
  • 632. 1 Index 619 Porter, M. 338, 597 productivity through people 92 Resource-Based approach 234, 236–7, strategy, application of 234–5, Proper Selfishness 110 430, 604 237–8, 241, 242–3, 246, prospectors 245 applying strategy 241, 243, 244, 255, 256 Protestantism 49 247, 256, 257 strategy, approaches to 204, 206, Protzman, C. 116 responsibility 41 209, 215 Pruijt, H.D. 66–7 restructuring 96–7 portfolio extension 240 Prussia 20, 21, 22, 23 retrenchment strategy 240 Porthuis, A.-N. 162 Psychological Contract 519, 603 Revans, R. 524, 595 position 211–12 psychosocial sub-system 265 Revolutionary Assemblies 23 Positioning school 215, 222, 227, Public Power Corporation of Greece reward systems 98–9, 119 234, 235, 238, 241, 247, 355–61, 436–7, 515–16 Reynolds, C.W. 159 256, 603 management – roles and Ricks, D.A. 494, 513 post-audits 474, 595 responsibilities 518, 533 Riegler, C. 67, 369–70, 371, 372, 373, post-entrepreneurial model 95–8 managing change 445, 446, 447, 374, 376 consequences of 98–103 449 Rigby, D. 209, 227, 228, 247, 254 post-Fordism 145, 146, 149 organisational change and ringi 121, 227, 462, 604 Postan, M. 31 managerial choice 473, 478 Ringland, G. 253 postmodern perspective 144–54, 603 strategic change 336, 362–3, 364 rites 171 implications for organisations 150–2 Pugh, D.S. 69, 71, 72, 77, 79, 293, rituals 172 modernism to postmodernism 301, 303, 304 Robbins, S.P. 50, 113, 137, 299, 445 144–50 punctuated equilibrium model of culture, power, politics and choice reservations 152–4 organisational 183, 184, 185–6, 187, 189, power 304–5, 603 transformation 283, 603 192, 193, 194, 195 coercive 188, 597 Punctuated model 430 developments in organisation culture 173, 603 theory 60, 70, 71, 75, 77, see also culture, power, politics and quality 121–2 79, 80 choice; power-politics see also Total Quality Management Roberts, J. 237 perspective Quality of Working Life programmes Robins, K. 145 power-politics perspective 183–92 67 Roethlisberger, F. 59, 69 definition 185–7 question marks 251 Rogers, R. 103 legitimacy 187–92 questioning, rites of 171 role 263–4, 604 political behaviour in organisations Quinn, J.B. 5, 209, 214, 282, 303 183–5 Quinn, R.E. 173, 322 culture 173, 604 practices 224 Roll, E. 17 Prahalad, C.K. 80, 120, 236, 255, Rafferty, K. 136 Rollinson, D. 184, 189, 460, 461 256, 282, 299, 462, 485 Railtrack 191 Rolls Royce 1 strategy, approaches to 214, 216, Rakesh, K.S. 255 Romanelli, E. 282 222, 224, 228 rational choice model 461 Romm, T. 184, 185, 187, 191 Prescriptive stream 6, 214–19, 603 rational-legal authority 44 Roosevelt, F.D. 56 applying strategy 233, 234, 237, rationalistic view 212, 603 Rose, M. 54, 55, 57, 58, 60, 63, 67, 256, 257 reactors 245 68, 69, 134 approaches to strategy 219, 220, Realist approach 154–7, 254, 603–4 trial and error and science and 228 reason 186 management 33, 34, 37, 38, managing change 429–30 reciprocal interdependence 75 49 Prigogine, I. 157, 598 Reed, J. 288 Rosenzweig, P.M. 134, 175 Prince, C. 288 Reed, M. 85, 155, 156, 192 Rost, J.C. 503 principles of organisation 603 refreezing 274–5, 604 Rover-TRW 97, 401–7, 441–2, 446, privatisation 603 Reich, R. 114, 115, 532 517, 518 see also Public Power Corporation Reich, S. 490 external relationships 399–400, of Greece Reitzle, W. 189 420–1 problem children 251, 603 release 39 organisational change and Probst, G. 87, 127, 128, 129, 131, remits 468–9 managerial choice 460, 478, 133, 135, 139, 301 remuneration 42 479, 481 process culture 173 remunerative power 189, 604 Rowland, T. 190, 196 process production 76 Renault 190, 196, 368 Rowntree, S. 16 Processual approach 221, 222, 223, Renesch, J. 127, 134 Royston Marine 260 225, 226, 230, 335, 603 renewal, rites of 171 rule manipulation 191 product champion 91 Rescher, N. 157 Rumelt, R.P. 236 product differentiation 235, 242 resource allocator 501 Russia 20, 38, 54, 86
  • 633. 1 620 Index Saatchi & Saatchi 190 Schwartz, P. 490 Sissons, K. 523 Sabel, C. 145 science of management see trial and size 65, 71–2, 77–8 safety needs 62, 604 error and science of management Sjöstrand, S.V. 498, 508 Saigol, L. 496 Scientific Management 34–8, 54, 55, Skinner, B.F. 262, 280 Sakai, K. 137 58, 65, 116, 499, 604 Sloan, A.P. 80 Sakichi, T. 84 Scientific-Rational approach 33, 604 Slovak Republic 243 Sako, M. 115, 117, 123, 124, 125, Scott, J. 357 small batch (unit) production 76 127 Scott, W.R. 33, 35, 60, 70, 72, 75, Smiles, S. 84 Salaman, G. 79, 80, 180, 182 211, 265 Smircich, L. 146 Salauroo, M. 198, 225, 280 Secord, P.F. 155 Smith, A. 17, 18, 19, 33, 40, 49, 78, Saldersee, R. 246 Seike, A. 123 167, 211 Salkeld, N. 320 selective information 191 Smith, C. 195, 235, 599 sanctions 186 self-actualisation needs 62, 604 strategy, approaches to 210, Sander, M. 142 Self-Help 84 218–19, 222, 224, 235 Sarasohn, H. 116 self-organisation 604 Smith, J.G. 248, 250, 252, 256 Sathe, V. 176 Selznick, P. 60, 79 Smith, J.H. 57, 58, 69 Sato, H. 115, 117, 123, 124, 125, 127 semistructures 604 Smith, M. 19, 63, 76, 262, 263, 269, Saul, J.R. 114, 532 Senge, P.M. 266, 299, 301, 310, 459, 270, 445 Saul, S.B. 25, 27, 29 485, 503, 525 Smith, P.B. 115, 117, 120, 121, 122, Saunders, M. 399 new paradigms 84, 87, 129, 130 125, 138 Sayer, A. 145, 154 Senior, B. 294, 296, 298, 300, 303, Smith, S. 3 scalar chain 42 304, 321, 323 Smith, T. 145, 147 Scandinavia 25–31, 48, 175 seniority-based promotion 119 Smithers, R. 190 developments in organisation sequential interdependence 75 SmithKline Beecham 2, 190, 487 theory 56 7 S Framework 244, 604 smooth change 321 internal relationships and attitudes Shamrock organisation 104–6, 107, Snow, C. 214, 245–6, 257, 299 369 111, 149 social construction 605 management – roles and Shapiro, C. 225, 237 Social Darwinism 49 responsibilities 533 shared visions 129 Social Man 60 strategic change 347, 355 Sharifi, S. 178, 179 social needs 62, 605 scapegoating 191 Sharp 116 Society for the Promotion of scenario/vision-building approach Sheahan, J. 24 Scientific Management 38 253–6, 604 Sheather, S. 246 socio-technical systems theory 66, Schein, E.H. 113, 138, 263, 268, 272, Sheldrake, J. 57, 58, 60, 69, 86, 116, 278, 605 273, 274–5, 280, 446 117, 138 Sony 347 culture, power, politics and choice trial and error and science and Sorge, A. 218, 220, 329 172, 176, 179, 180, 182 management 34, 35, 38, 39, Sosik, J.J. 302 Schein, V.E. 495 43, 44 South Korea 493 Schendel, D. 236, 252 Shell 496, 497 Spain 175 Schilit, W.K. 186 Chemicals 252 specialisation by focus 235, 243–4 Schmalensee, R. 237 Sheridan, K. 115, 116 Speedy Stationers 407–13, 442–3, 517 Schmuck, R. 445, 446 Shewhart, W. 84 external relationships 400, 421 Schoeffler, S. 247, 248 Shiflett, S.C. 508 managing change 448 Schoemaker, P.J. 236 Shigeo, S. 84 organisational change and Schoenherr, R.A. 77 Shirai, T. 122, 123, 124 managerial choice 480, 481 Scholes, K 206, 214, 414, 456, 462 Short, J.E. 4 Speller, S. 415 strategy, application of 234, 235, Shortell, S. 246 Spiller, K. 142, 143 239, 242, 243, 244, 249, Siemens 346, 347 spokesperson 501 251, 252, 253 Silverman, D. 169, 498 stability strategy 240 Schon, D. 127, 130, 133, 148, 227–8 Silverman, G. 288 Stace, D.A. 3, 280–1, 282, 322, 323, Schonberger, R.J. 87, 115, 121, 126, Simon, H.A. 50, 60, 70, 183, 502 324, 328, 452 244 simple form 93 change management, developments Schooler, C. 125 Simpson, G. 344, 345, 346, 347, 363, in 293, 294, 299, 304, 311, Schriesheim, C.A. 507 434, 515 315 Schuijt, J.J.M. 294, 311 simultaneous loose-tight properties Stacey, R. 210, 217, 228, 246, 255, Schumacher, E.F. 65 93–5 280 Schuyt, T.N.M. 294, 311 single-loop learning 130, 604 change management, developments Schwartz, H. 170, 179–80 Sirower, M. 2 in 297, 300, 303
  • 634. 1 Index 621 critical perspectives on organisation Strickland, A.J. 240, 244 trial and error and science and theory 156, 157, 158, 159, structure 131 management 12, 13, 34–8, 160, 161, 162, 163 Stuart, R. 524 39, 40, 41, 42–3, 44, 45, 47, Stalk, G. 116, 216 Styhre, A. 157, 160, 161, 303 48, 49, 50, 51 Stalker, G.M. 71, 72, 73, 74, 77, 134, sub-Saharan Africa 114, 490, 497 Taylor Society 38 174, 266 subordination 42, 507 Taylorist/Taylorism 37, 66, 67, 145, Standard Oil 1 Sugeno, K. 124, 125 147, 182 Star, J. 79 Sullivan, J. 117, 159, 175 external relationships 421 Starbuck, W.H. 145, 314, 519 Sullivan, T.J. 297 framework for change 326 stars 250, 605 Sun Tzu 237, 527 internal relationships and attitudes Stata, R. 126, 128 superior considerations 507 372–3, 375, 376 statistical process control 121 supervisory management 500 management – roles and statistical quality control 84 supply chain networks 339 responsibilities 530 Steiner, G.A. 214 sustainability 491–2 managing change 449 Stengers, I. 157, 598 Sutherland, E. 181 team learning 129 Stewart, H. 497 Suttle, J.L. 69 team management 505 Stewart, R. 498, 502 Sutton, G. 465 teamwork 119 Stickland, F. 3, 157, 162, 163, 284, Suwa, Y. 124, 125 Teather, D. 340, 341, 497 295, 296, 320, 323, 533 Swab, J.L. 187 technical sub-system 265 Stokland, D. 25, 29 Sweden 25, 26–7, 28, 29, 30, 31 technology 71, 75–7 Stolh, C. 162, 296 Co-determination Law 67, 368, Teece, D.J. 215, 225, 227, 228, 234, Storey, J. 292, 324, 328, 522, 523, 374, 376 238 525 Development Programme 67 tenure of personnel 42 Stournaras, Y. 357 developments in organisation Terry, P.T. 79 Strader 339 theory 67 Tetenbaum, T.J. 157, 158, 159, 160, strategic internal relationships and attitudes 162, 284, 297 alliances 97–8 369 Theory E 322, 328 business units 209 managing change 437 Theory O 322, 328 change case studies 335–64 Switzerland 175, 496 Theory X-Theory Y 63–4, 81, 605 Internet, P2P and music industry SWOT analysis 211, 237, 380, 456, Thickett, M. 39 337–42 605 Thomas, A.B. 175, 494, 504, 513, Marconi 343–7 Sykes, Sir R. 190, 487 528, 531 Oticon 347–55 symbols 172 new paradigms 123, 124, 125, Public Power Corporation of synergies 96–7 126, 134 Greece 355–61 Systemic approach 335 Thompkins, J.M. 137, 187 conflict 234, 237–8, 241, 243, approaches to strategy 221–2, 223, Thompson, A.A. Jr 240, 244 244, 430, 605 224, 225, 226 Thompson, J. 71, 74–5, 80, 133, 268, applying strategy 236, 238, 247, systemic jointism 324 327, 518 256, 257 Systems school 266 Thompson, M. 249 intent 605 systems thinking 129 Thorberry, N.E. 523 management 605 Thorpe, R. 524 planning institutes 247 T-Mobile 142 Thorsrud, E. 67, 370 planning tools 246–56 Taiichi, O. 84 3M 283, 347 growth-share matrix 249–52 Takac 398 three-step model 314–15, 526, 605 PIMS 247–9 Talbot, C. 355, 356, 414 management, approaches to 270, scenario/vision-building Talbot, R. 520–1, 525 272, 273, 274–5, 276, 279 approach 253–6 task Tighe, C. 260 strategy 431–2, 435–7, 439–43, considerations 507 Tillett, A. 15 447, 464–7, 605 culture 173, 605 Time Warner 2, 490 approaches to 203–30 management 506 timeliness 120–1 choices and constraints 220–8 Tavistock Institute 67 Tippett, D.D. 315 definition 210–14 Taylor, F.W. 163, 369, 503, 527–8, Tobach, E. 268 long-range planning 208–10 597, 604 Toffler, A. 65 origins 207–8 culture, power, politics and choice Tom Peters Group 94 Prescriptive and Analytical 167, 182, 197 Tomaney, J. 145, 147 stream 214–19 developments in organisation Tomlinson, J.W.C. 498, 500 see also applying strategy; strategic theory 54, 55, 58, 59, 61, top management 500 Strebel, P. 243 62, 65, 66 top-down systemic change 324 Streeck, W. 66, 533 new paradigms 116, 135 Torbert, W. 310
  • 635. 1 622 Index Total Quality Management 3–4, 81, choice 198 UTL Turbines 407–13, 442–3, 446 606 critical perspectives on Uttal, B. 178, 181 developments in change organisation theory 146 management 293, 300, 303 cultural perspective 175, 177 value-driven 92 new paradigms 84, 121, 136 developments in organisation values 172, 264, 606 tough guy, macho culture 173 theory 55, 67, 72, 75, 79 sub-system 265 Toyota 145, 224, 236, 247, 490, 516 external relationships 399, 400, Van Maanen, J. 182 new paradigms 84, 87, 125, 126 414, 416, 420, 422 van Muijen, J.J. 300 Tracey, J.B. 512 management – roles and variability 76 Trade 114 responsibilities 496, 497, Vecchio, R.P. 508 traditional authority 44 522, 523, 524, 527, 532, 533 Venkatraman, N. 4 training 119, 475 managing change 428 Vickers, J. 356 trajectory process 455, 462–7 new paradigms 87, 98, 101, Victorian Age 64 Tran, M. 497 103–4, 110–11, 114, 120, Vinnecombe, S. 457 Tranfield, D. 3 126, 129, 136, 139 Virgin 240, 531 transactional organisational change and Visa 159 management 511, 606 managerial choice 470, 471 Network 94 state 509–10 power-politics perspective 190 vision 462–4, 606 style 226 strategic change 343, 344, 346, -building 254–6, 606 transformational 355, 356, 361 Vodafone 142, 196, 240, 490 leadership 606 trial and error and Scientific Volkswagen 1 state 510–11 Management 12–13, 16–32 Volvo 2, 368–77, 437–8, 516 style 226 passim, 46, 47, 48 developments in organisation Travellers 2 United States 1, 4, 31–3 theory 66 Traynor, I. 189 applying strategy 234, 235, 241, external relationships 401 Treanor, J. 168, 190, 191, 345, 497 247 Gent and Born 374–5 trial and error and science of approaches to change management internal relationships and attitudes 365, 366, 396 management 11–51 277, 284 Kalmar 370–2 commerce and factories 14–33 approaches to strategy 207–8, 209, management – roles and organisation theory: Classical 211, 224, 228 responsibilities 490, 492, approach 33–47 Congress 55 518, 531 Trice, H.M. 171 cultural perspective 169, 171, 174, managing change 448, 449 triggers 468 175 organisational change and triple I organisation 107–10 developments in change managerial choice 459, 460, triple-loop learning 130, 606 management 289 478, 479, 480 Trist, E.L. 65, 66, 69, 79 developments in organisation phases of change 370 Trompenaars, F. 134, 175, 494, 513, theory 54, 55, 56, 65, 67, power-politics perspective 190 520 68, 72, 73, 76 Torslanda 372–3 TRW see Rover-TRW external relationships 402, 414 Uddevalla 373–4 Tsang, E.W.K. 127, 128, 129, 133, management – roles and von Clausewitz, C. 237 134, 139, 302 responsibilities 491, 493, Voss, C. 3, 4 Tschacher, W. 272, 315 494, 496, 497, 513, 523, Vroom, V.H. 503, 508, 509 Tsoukas, H. 154, 155, 156 532, 533 Turnbull, P. 87, 126 managing change 446 Wack, P. 255 Turner, B. 169, 170 new paradigms 84–8, 94–6, 101, Wadsworth, A. 18 Turner, D. 3 110, 114–18, 120–3, 129, Wagner, J.A. 506 Turner, I. 224, 252 134, 136, 139 Wakisata, A. 123, 124, 125 Tushman, M.L. 282 power-politics perspective 192 Wal-Mart 283 types of organisation 245–6 strategic change 341, 347, 353, Wall, T.D. 66 355, 356 Wallace, J. 135 Udy, S.H. Jr 50 trial and error and Scientific Walton, R.E. 278 UMIST 7 Management 13–14, 16–17, Wang, C.L. 128, 133 UMTS 142 19–20, 23, 25, 30, 34, 37–8, Warner, H.M. 488 uncertainty 606 40–1, 43, 46–8 Warner, M. 1, 79 unfreezing 274, 606 unity of command 42 Warr, P. 65 United Kingdom 2–3, 4 unity of direction 42 Warwick, D.P. 268 applying strategy 247 Urabe, K. 116, 122 Wastell, D.G. 4 approaches to strategy 224, 226, Ure, A. 16, 18, 49 Waterman, R.H. 161, 229, 290, 525, 227, 230 Urwick, L. 43 596, 598, 604
  • 636. 1 Index 623 culture, power, politics and choice Whitley, R. 533 Worley, C.G. 3, 129, 130–1, 255, 256, 169, 171, 178 Whittington, R. 155, 156, 210, 221–2, 322, 453, 462 new paradigms 84, 87, 88–95, 96, 227, 247, 255, 314, 453 change management, approaches to 98, 101, 104, 108, 112, 114, Whitty, M. 147 268, 276, 277, 278, 280, 118, 137 Whyte, J. 4, 162 281, 285 strategy, application of 236, 241, Whyte, W.H. 69 change management, developments 244 Wickens, P. 98, 118, 122 in 289, 299, 300, 309 Watkins, K. 268, 273, 275 Wilkinson, A. 121 culture, power, politics and choice Watson, G. 114, 462 Wilkinson, H.E. 524 177, 178, 180, 181 Watson, T. 111, 147, 182, 217, 488 Wilkinson, T. 260 management – roles and Watt, J. 17, 49 Willbur, J. 524 responsibilities 493, 495, 526 Watts, J. 123 Willcocks, S.G. 137, 184 Worrall, L. 2, 4, 523, 526 Weber, M. 60, 64, 71, 77, 150–1, 489, Williams, K. 86, 145, 247 Wray, R. 345 597 Williamson, O. 218 Wren, D. 116 trial and error and science and Willmott, H. 181, 182 wrong-headed analysis 89 management 13–14, 34, 43–7, 48, Willumstad, B. 288 49, 50, 51 Wilson, D.C. 112, 113, 138, 169, XYZ Construction 377–83, 439–40, Wedgwood 15, 17 175, 285 516 Wedgwood, J. 17, 33, 49 change management, developments internal relationships and attitudes Weekes, B. 3, 81, 468, 469 in 290, 292, 296, 301, 303, 366, 396, 397 Weick, K.E. 218, 225, 453, 458, 459, 306, 313, 314 management – roles and 528 Wilson, R. 237 responsibilities 518, 525 change management, developments Wingard, E. 310 managing change 445, 446–7, 448, in 291, 302, 303, 304, 310 Winter, S.G. 228 449 Weill, S. 288 Wisdom, J. 280, 299, 323, 453 organisational change and Weiner, A. 253 Witcher, B. 4, 162 managerial choice 454, Weinstock, A. 173, 196, 343, 344, Witzel, M. 84, 204, 205, 379 457–8, 469–74, 476–83 345, 346, 347, 363, 515, 531 Womack, J.P. 120, 121, 236, 368, 420 Weinstock, S. 344 Wood, S. 79, 120 Yamani, Sheikh 434 Welch, J. 196, 210, 531 Woods, A. 227, 228, 234, 239, 247, Yarrow, G. 356 Wernerfelt, B. 236 253, 255 Yetton, P.W. 508, 509 West Indies 27 Woodward, J. 71, 75–6, 77, 79, 134, Young, H. 360 West, P. 127 266 Younger, M. 252 Western Electric 57–8, 59, 60, 61, 116 Wooten, K.C. 278, 280 Yukl, G. 498, 500–1, 503, 504, 505, Wetlaufer, S. 162, 296 Work Environment Fund 67 506, 511, 512, 523 Wheatley, M.J. 157, 159, 160, 284, 297 Work Humanisation 67 Yutaka, N. 126 Wheelan, S.A. 526 Work Research Unit 67 Wheelen, T.L. 240 work systems 120–2 Zairi, M. 4, 162 Whipp, R. 292, 295, 296, 301, 305–6 Work and Technology Programme 67 Zajac, E. 246 Whitaker, A. 86, 145 work-hard/play hard culture 173 Zaleznik, A. 184 White, L.P. 278, 280 workers’ lifestyle 100–3 Zentner, R.D. 254 White, M. 114, 532 workforce diversity 492–5, 606 Zinn, H. 32 White, R. 505 World Bank 491 Zollverein (customs union) 22 Whitehill, A.M. 87, 115, 116, 120, World Trade Organisation 490, 491 Zucker, L.G. 181 125, 127, 196 WorldCom 2, 497 Zwerman, W.L. 71