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America’s inertia in implementing the metric system illustrates pervasive and predict- able challenges of change that repeatedly scuttle promising innovations. Organizations spend millions of dollars on change strategies that produce little improvement or make things worse. Mergers sour. Technology falls short of its potential. Vital strategies never

360 Reframing Organizations

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WEBC18 05/26/2017 2:40:48 Page 361

wend their way into practice. In elections, challengers promise change, but winners struggle to deliver on even a fraction of their pledges.

To shrink the gap between change advocates’ intentions and outcomes, a voluminous body of literature has “ourished. The sheer volume of change models, case studies, and prescriptive remedies is overwhelming. Some contain productive insights. Beer and Nohria (2001), for example, compare two distinct change models—a hard, top-down approach that emphasizes shareholder value (Theory E) and a softer, more participative strategy (TheoryO) that targets organizational culture. Kanter, Stein, and Jick’s “Big Three” model (1992) helps managers sort through the interplay of change strategies, implementers, and recipients.

But despite growing knowledge, the same mistakes keep repeating themselves. It’s like reading a stream of books on dieting but never losing weight. The target is never easy to reach, and it often seems that everyone wants things to be different, so long as they don’t have to do anything differently. The key question is: What keeps the innovations that organizations need from taking hold? This chapter opens by examining the innovation process at two different companies. It then moves to a multiframe analysis to show how participation, training, structural realignment, political bargaining, and symbolic rituals of letting go can help achieve more positive outcomes. It concludes with a discussion integrating the frames with Kotter’s in”uential analysis of the stages of change.

THE INNOVATION PROCESS What makes organizational change so dif!cult? When Bain and Company surveyed 250 American companies to determine their experience with making needed changes, they discovered a disturbing trend:

• Only 12 percent achieved what they set out to accomplish

• 38 percent failed by a wide margin, capturing less than half of their original target

• 50 percent settled for a signi!cant shortfall (Bain Insights, 2016)

Comparing two typically “awed change efforts with an atypical success story offers insights.

Six Sigma at 3M Beginning at Motorola in 1986 and later enhanced at General Electric, Six Sigma evolved from a statistical concept to a range of metrics, methods, and management approaches intended to reduce defects and increase quality in products and services (Pande, Neuman,

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and Cavanagh, 2000). It became the new corporate shibboleth in the 1990s after its successful, widespread use at GE. Essentially the approach has two components, one emphasizing metrics and control and the other emphasizing systems design. It has spawned acronyms like DMAIC (de!ne, measure, analyze, improve, and control) and DFSS (design for Six Sigma—by building quality in from the start). GE executives groomed in the Six Sigma way brought the techniques with them when they moved to other corporations. One example was James McNerney, who missed the chance to succeed Jack Welch as GE’s CEO but was snapped up by 3M in 2001 to bring some discipline to a legendary enterprise that seemed to be losing its edge. Pro!t and sales growth had been erratic, and the stock price had languished.

McNerney got people’s attention by slashing eight thousand jobs (11 percent of the workforce), putting teeth in the performance review process, and tightening the free-“owing spending spigot. Thousands of 3M workers trained to earn the Six Sigma title of “Black Belt.” These converts pioneered companywide Six Sigma initiatives such as boosting production by reducing variation and eliminating pointless steps in manufacturing. The Black Belts trained rank-and-!le employees as “Green Belts,” in charge of local Six Sigma initiatives. The Black Belt elite maintained metrics that tracked both overall and “neigh- borhood” efforts to systematize and streamline all aspects of work—including research and development.

In the short run, McNerney’s strategy paid off. Indicators of productivity improved, costs were trimmed, and the stock price soared. But Six Sigma’s standardization began to intrude on 3M’s historical emphasis on innovation. Prior to McNerney’s arrival, new ideas were accorded almost unlimited time and funding to get started. Fifteen percent of employees’ on-the-clock time was devoted to developing groundbreaking products—with little accountability. This approach had given birth to legendary products like Scotch Tape and Post-it notes.

Six Sigma systematized the research and development process. Sketchy, blue-sky projects gave way to scheduled, incremental development. Funds carried an expiration date, and progress through a planned pipeline was measured and charted. Development of new products began to wane. “The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation,” says Vijay Govindarajan, a management professor at Dartmouth. “The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different.”Art Fry, the inventor of the Post-it, agreed: “We all came to the conclusion that there was no way in the world that anything like a Post-it note would ever emerge from this new system” (Hindo, 2007, p. 9).

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With the lethargy ended but the damage done, McNerney left 3M in 2005 to become the new CEO at Boeing. Fry observed, “What’s remarkable is how fast a culture can be torn apart. [McNerney] didn’t kill it, because he wasn’t here long enough. But if he had been here much longer, I think he would have.” George Buckley, McNerney’s successor, observed in retrospect, “Perhaps one of the mistakes that wemade as a company—it’s one of the dangers of Six Sigma—is that when you value sameness more than you value creativity, I think you potentially undermine the heart and soul of a company like 3M” (Hindo, 2007, p. 9).

Benner and Tushman (2015) rely on the 3M case to argue that organizations need the capacity to manage paradox in order to foster both incremental and discontinuous innovation. Process improvements like Six Sigma, along with many other management “panaceas,” may make incremental innovation more ef!cient and reliable but also tend to block break-the-mold innovations. So organizations may become very good at improving existing products or services but fall to more nimble and creative competitors at times of dramatic changes in markets and technology.

Take another example, JC Penney, an American institution where generations of Americans had shopped for almost everything for more than a century. More than a few remember it as “the place your mom dragged you to buy clothes you hated in 1984” (Morran, 2013). By 2011, the !rm was treading water, and CEOMyron Ullman retired after seven years at the helm. Ullman’s initial years had gone well, but the recession of 2008 hit Penney’s middle-income shoppers hard, and the company had been going downhill since.

The board looked for a savior and found him in Ron Johnson, a wunderkind merchant who had worked his magic at two of the most successful retailers in America. He’d made Target hip and led Apple Stores as they became the most pro!table retail outlets on the planet. Johnson moved quickly to create a new, trendier JC Penney. His vision went well beyond changing the system of metrics and measurement or making the company more pro!table. He wanted to graft an entirely new vision of retail merchandising onto ailing old root stock: “. . . to analysts and employees, Johnson was Willy Wonka asking [them] to go with him on a trip through his retail imagination” (Macke, 2013).

Wanting to move fast, Johnson skipped market tests and staged rollouts. “No need,” said Johnson, “we didn’t test at Apple” (Heisler, 2013). Creative new “oor plans divided stores into boutique shops featuring brands like Martha Stewart, Izod, Joe Fresh, and Dockers. Centralized locations provided places for customers to lounge, share a cup of coffee, have their hair done, or grab a quick lunch. Games and other entertainment kept children occupied while customers visited boutique offerings or just “hung out.”

Johnson quickly did away with Penney’s traditional coupons, clearance racks and sales events, part of a model that relied on in”ating prices, then marking them down to create the

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illusion of bargains. Johnson replaced all that with everyday “Fair and Square” prices. To Johnson’s rational way of thinking, this move made perfect sense. But shopping is more of a ritual than rational undertaking:

JCP’s Ron Johnson was . . . clueless about what makes shopping meaningful for women. It’s the thrill of the hunt, not the buying . . . women love to shop and deals are what make the game worth playing. Bargain hunting is now like playing a game—and !nding deeply discounted goods on sale is part of the game (Phillips, quoted in Denning, 2013).

Johnson replaced much of Penney’s leadership with executives from other top retailers. Many, like Johnson, lived in California, far from company headquarters in Plano, Texas. They often looked down on the customers and the JC Penney culture they had inherited. One of Johnson’s recruits, COO Michael Kramer, another Apple alum, told theWall Street Journal, “I hated the JC Penney culture. It was pathetic” (Tuttle, 2013). Inside and outside the company, perceptions grew that Johnson and his crew blamed customers rather than themselves as results went from bad to worse. Traditionally, great merchants, like Costco’s Jim Sinegal or Walmart’s SamWalton, have loved spending time in their stores, chatting up staff and customers, asking questions, and studying everything to stay in touch with their business. Johnson, on the contrary, gave the impression that he wouldn’t shop in one of his own stores and didn’t particularly understand the people who did (Tuttle, 2013).

Johnson substituted broadcasts for store visits. He sent out company-wide video updates every 25 days. Staff gathered in training rooms to hear what the CEO had to say and struggled to make sense of the gap between Johnson’s rosy reports and the chaos they were experiencing !rsthand in the stores. It didn’t help that Johnson liked to broadcast from his home in Palo Alto or from the Ritz-Carlton in Dallas, where he stayed during visits to headquarters. Instead of marking milestones in Johnson’s turnaround effort, the broadcasts deepened a perception that he was out of touch and self-absorbed.

Johnson’s reign at JC Penney lasted 17 months. Customers left, sales plummeted, and losses piled up. A board with few good options sacked Johnson and reappointed Ullman, the man who had left under a cloud less than two years earlier.

The change initiatives at 3M and Penney’s reveal a familiar scenario: New CEO introduces new techniques and scores a short-term victory; political pressures and cultural resistance start to mount; CEO leaves to try again; organization licks its wounds and moves both backward and onward. In short, an optimistic beginning, tumultuous middle, and controversial conclusion.

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