John Kotter's primer on the dos and don'ts of organizational change provide a systematic framework to any organization seeking transformation. Kotter explains the processes which he feels are necessary to transform a company. He goes on to say that most of the companies that he has seen fail in this process had skipped one or more steps in the process. Kotter presents these steps as errors companies make while trying to transform:
- Not establishing a sense of urgency. Believing that change will not occur when there is complacency, Kotter prescribes heavy and frequent doses of urgency and provides advice on how to administer these. Says Kotter, "Visible crises can be enormously helpful in catching people's attention and pushing up urgency levels." He sites examples of the a company when the CEO deliberately engineered the largest accounting loss in the history of the company.
- Not creating a powerful guiding coalition. Kotter believes in the team approach and warns that one leader is never enough. "No one individual, even a monarch-like CEO is ever able to develop the right vision, communicate it to large numbers of people, eliminate all the key obstacles, generate short-term wins, lead and manage dozens of change projects, and anchor new approaches deep in the organization's culture."
- Lacking a vision. In this chapter, Kotter provides a concise guide to establishing the kind of vision that provides direction for the change effort and motivation for employees. One company gave out a four inch thick notebook explaining its change efforts but it lacked the clarity and simplicity that a vision statement should have.
- Under communicating the Vision by a factor of Ten. Kotter reminds us that many vehicles of communication can be used to reinforce the change effort, including meetings, newsletters, and memos. The important thing is that communication be focused, clear, and concise.
- Not removing obstacles to the New Vision. Kotter recommends the elimination of all barriers to empowerment and encourages risk taking, the point being that the more people are personally involved in the change, the more extensive and lasting the change will be. Kotter discussed the case of a company which began its transformation efforts with much fanfare. It succeeded in bringing and communicating the clear vision statement but faltered when it came to removing the obstacles that came in the way of the mission statement. In this case it was a senior executive who did not change his attitude and mode of working even though it did not align with the new vision. Since he was the in-charge of the largest division of the company the CEO was not keen on removing him. The net result was the collapse of the whole system.
- Not planning systematically to create short term wins. Kotter reminds us that small, incremental wins are important in keeping the motivation levels high.
- Declaring Victory Too soon. Kotter makes the point that policies and procedures have to be updated to reflect the changes, and that the change effort itself can become a "decade-long process in which hundreds or thousands of people help lead and manage dozens of change projects."
- Not Anchoring Changes in the Corporations culture. Kotter believes that the complete change will stabilize once the corporate culture has fully changed. However, he insists that this occurs only after the transformation process is complete. This is an important lesson, as many feel that a new culture must occur in the first rather than the last stage of the change process. The problems with not anchoring the new culture is that all efforts vanish with one bad appointment, in some cases the retiring CEOs did not object to the board’s decision thinking that the transformation efforts could not be undone by the successors but within two years the transformation started to fade away from the system.
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Companies have started the journey of change because of variety of forces. CEO’s (generally a new head) have seen reasons to transform the organization and they have resorted to some strange methods. From deliberately engineering the largest accounting loss in the company's history to commission first-ever customer satisfaction surveys, knowing full well that the results would be terrible have been some such tools.
SEARS MERCHANDISE’s TRANFORMATION EFFORT:
Sears Merchandise Group under its CEO Arthur C Martinez has seen transformation challenges. Arthur feels that “We are just three years into our changes and about midway through Kotter's taxonomy.”
Discussing the change management process of Kotter, Arthur feels that on three issues, he is in strong agreement with Kotter. First, that transformation is a long-term process. Sears Merchandise Group could not change a 109-year-old business overnight. Second, on the money when he says that companies need a strikingly simple vision. In crafting a vision of what the company wants to be known for, Sears has consulted more than 80,000 of our associates and customers.
The third point is the importance of proper hiring and promotion practices. Arthur says that one of the first priorities after joining Sears was to put together a team of senior managers who, both individually and as a group, would reflect the vision and shared beliefs of Sears and who would take collective ownership for enterprise-wide results.
Martinez also has a few disagreements with Kotter, who he feels made some omissions. Any transformation effort must consider what the customer requires. If the customer is not the architect of the transformation, a company may find that it has reinvented itself but has done little or nothing to improve the customer's lot. This can easily happen when a company's transformation efforts are focused internally. Too much time and energy spent on management processes and not enough on processes relevant to the customer's needs is a recipe for trouble.
The importance of setting ambitious goals for a transformation and measuring progress toward achieving them cannot be ruled out. Such goals cannot be exclusively financial. As an indicator of an organization's ability to satisfy its customers and motivate its employees, financial performance usually lags behind other measurements.
Martinez also feels that Kotter should have emphasized that the ultimate objective of any successful transformation must be to move decision making as close to the customer as possible. It is here that many companies have difficulty making a leap into a new way of thinking. The objection to transformation that is that if the decision making is decentralized prematurely, it will only result in poor decisions being made faster. Additionally, many executives attempting transformation resort to a control mentality, wanting to "fix" process issues before decentralizing authority. The unfortunate aspect of such a position is that the traditional dichotomy between centralization and decentralization is overly simplistic.
Effective transformation efforts, in contrast, centralize low Value-added activities and decentralize customer activities.
In short, any transformation effort must get every employee or associate to craft a statement of beliefs and translate those beliefs into actions that improve the customer's experience with the company.
- Kotter, John P “Leading Change” , Harvard Business Review, 00178012, Jan2007, Vol. 85, Issue 1
- Martinez, Arthur C., “TRANSFORMATION.” Harvard Business Review, 00178012, May/Jun95, Vol. 73, Issue 3
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