Challenge of Organizational Change: How Companies Experience It and Leaders Guide It


This book presents a comprehensive overview and an authoritative model for how and, in some cases how not to, institute change in organizations.

Kanter et al provide analysis of internal/external pressures, and guidelines on when change is necessary/not necessary. With today's climate of downsizing, takeovers, buyouts, and increased competitiveness, approaches to change become a major factor in corporate success/failure. Those in leadership positions, and those with ...

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This book presents a comprehensive overview and an authoritative model for how and, in some cases how not to, institute change in organizations.

Kanter et al provide analysis of internal/external pressures, and guidelines on when change is necessary/not necessary. With today's climate of downsizing, takeovers, buyouts, and increased competitiveness, approaches to change become a major factor in corporate success/failure. Those in leadership positions, and those with an interest in current organizational crises will appreciate this work.

Read More Show Less

Product Details

  • ISBN-13: 9780029169919
  • Publisher: Free Press
  • Publication date: 8/7/1992
  • Edition number: 1
  • Pages: 540
  • Product dimensions: 6.40 (w) x 9.56 (h) x 1.52 (d)

Table of Contents


Part I. Orientation

Chapter 1. The "Big Three" Model of Change

Roadblocks to Progress: The Change Problem
What Is Change?
The Importance of Motion: An Action View of Organizations
The "Big Three" Model: Three Kinds of Motion, Three Forms of Change, Three Roles in the Change Process
Looking Back or Looking Forward?: Multiple Possibilities and the Opportunities for Managers

Part II. Change When?

Chapter 2. Organizations and Environments in Motion: The Nature and Scope of Change Pressures

Environmental Forces: Adaptation and Choice
Life Cycles, "Growth," and Organic Change Pressures
Political Conflicts and Economic Interests: The Struggle for Control
Integrating the Forces
Mastering Emergent Change: Lessons for Leaders

Chapter 3. Fitting or Creating the Environment: "Macro-Evolutionary" Change

Introductory Notes
"Rockport Shoe Company: The Evolution of the Katz Family Business," by James A. Phills, Jr.
"Banc One Corporation: Anticipatory Evolution," by Paul S. Myers and Rosabeth Moss Kanter
"The Sweater Trade, From Hong Kong to New York," by James Lardner
"Keeping Up with the Information: On-line in the Philippines and London," by John Maxwell Hamilton

Chapter 4. Growing and Aging: "Micro-Evolutionary" Change

Introductory Notes
"The Rise and Fall of an Entrepreneur," by Thomas R. Ittleson
Hypergrowth and Transition at Apple Computer:
"Diary of a Middle Manager," by Donna Dubinsky
"Jobs Talks About His Rise and Fall," by Gerald C. Lubenow and Michael Rogers
"John Sculley's Lessons from Inside Apple," by Steven Pearlstein and Lucien Rhodes
"The Big Store: Sears inMaturity," by Donald R. Katz

Chapter 5. Power and Politics: "Revolutionary Change" Introductory Notes

"Power, Greed, and Glory on Wall Street," by Ken Auletta
"Champagne Shoot-out in France," by Keith Wheatley
War and Peace at the Bottom:
"War and Peace: Labor Relations at Two Steelmakers," by Thomas F. O'Boyle and Terence Roth
"Class Consciousness Raising," by Stanley W. Angrist
"Weirton to Seek Cuts in Its Work Force," by Pamela Gaynor

Part lII. Change What?

Chapter 6. Change in Form, Forms of Change

Organizational Identity and Change at the Boundaries
Size, Shape, and Habits: Changing Structure and Culture
The Drama of Control Change: Ownership, Governance, and Stakeholder Voice
A Note on Crisis Management
Managerial Implications of Changes in Organizational Form

Chapter 7. Restructuring and Redefining Boundaries: Identity Change

Introductory Notes
"Reinventing an Italian Chemical Company: Montedison 1986," by Joseph L. Bower, Neil Monnery, and William O. Ingle
"The Human Side of Mergers: The Western-Delta Story," by Cynthia A. Ingols and Paul S. Myers
"The Feudal World of Japanese Manufacturing," by Kuniyasu Sakai

Chapter 8. Shaping Up, Skinnying Down, and Revitalizing: Coordination and "Culture" Change

Introductory Notes
Two CEOs on Change in Form:
"The Logic of Global Business: An Interview with ABB's Percy Barnevik," by William Taylor
"Championing Change: An Interview with Bell Atlantic's Raymond Smith," by Rosabeth Moss Kanter
"Driving Quality at Ford," by Greg Easterbrook
"The Case of the Downsizing Decision," by Barry A. Stein

Chapter 9. Makeover Through Takeover: Control Change

Introductory Notes
"Lucky Stores: Restructuring to Survive the Takeover Threat," by Lisa Richardson and Alistair Williamson
"Lessons from a Middle Market LBO: The Case of O. M. Scott," by George P. Baker and Karen H. Wruck

Part IV. Change How?

Chapter 10. The Challenges of Execution: Roles and Tasks in the Change Process

The Messy Terrain of Change
The Changemakers: Strategists, Implementors, Recipients
Ships Passing in the Day: How Views of Change Differ
Ten Commandments for Executing Change
Charting a Course for Change
Responding to Situational Requirements

Chapter 11. Sensing the Environment, Creating Visions: Change Strategists

Introductory Notes
"Northwest Airlines Confronts Change," by Susan Rosegrant and Todd Jick
Behind the Steering Wheel at General Motors, 1985-90:
"The Innovator," by Cary Reich
"How I Would Turn Around GM," by Ross Perot
"The Painful Reeducation of a Company Man: An Interview with Roger Smith," by Business Monthly
"Advice for G.M.'s Bob Stempel," by Paul Judge
"Bob Galvin and Motorola, Inc.," by Todd Jick and Mary Gentile

Chapter 12. Action Tools and Execution Dilemmas: Change Implementors

Introductory Notes
"The Dilemmas of a Changemaker," by William Shea
"Three in the Middle: The Experience of Making Change at Micro Switch," by Susan Rosegrant and Todd Jick
"Toward a Boundary-less Firm at General Electric," by Mark Potts
"British Air's Profitable Private Life," by Steve Lohr

Chapter 13. Angered or Energized?: Change Recipients

Introductory Notes
"IBM's Blue Mood Employees," by Paul B. Carroll
"Takeover: A Tale of Loss, Change, and Growth," by Dwight Harshbarger
"GE Keeps Those Ideas Coming," by Thomas A. Stewart
"Downsizing: One Manager's Personal Story," by Amy Levy

Part V. Action

Chapter 14. Where to Begin

Why Organizations Succeed: Assessing Change Strategy
When Organizational Change Works: Building the Future Through Understanding the Past
Making It Happen and Making It Stick
Getting Started


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First Chapter

Chapter 1 The "Big Three" Model of Change

The approach of the year 2000, with its millennial label and transformational implications, suggests the possibility of an equally profound change in our economic life and the institutions -- primarily business firms -- that populate it. In fact, even though the number has a highly spurious precision, its symbolism is appropriate. The world is undergoing many major transitions, some of which involve the meaning of business and the character and shape of the organizations that carry it out.

Most striking is the strong convergence of streams of thought and experience alike coming from academic theorists and practicing managers, from avowed free-market partisans and committed social democrats, from regulators and those regulated, from countries as diverse as Singapore and South Africa, the U.S.A. and the former U.S.S.R., Vietnam and Venezuela. This trend -- or more accurately, this tidal wave -- is becoming a universal model for organizations, especially large ones.

This model describes more flexible organizations, adaptable to change, with relatively few levels of formal hierarchy and loose boundaries among functions and units, sensitive and responsive to the environment; concerned with stakeholders of all sorts -- employees, communities, customers, suppliers, and shareholders. These organizations empower people to take action and be entrepreneurial, reward them for contributions and help them gain in skill and "employability." Overall, these are global organizations characterized by internal and external relationships, including joint ventures, alliances, consortia, and partnerships.

There are, of course, differences in detail. Professional firms, service businesses, and manufacturing organizations do not look identical. Japanese keiretsu are not identical with their American industry and market counterparts. Decentralizing the National Health Service in Britain is not the same task as privatizing British Telecom or breaking up AT&T. Nevertheless, much of this is cosmetic; the management principles, operating values, and critical features defining the day-to-day behavior in those organizations are strikingly similar, and even the differences in detail are disappearing over time as global competition intensifies, confronting firms with a close look at others and forcing the routine and continuing transfer of practices from one to another.

Under these circumstances, the question most appropriate for the 1990s is not what the competitive world organization should look like but how to become one. Advice on change methodology is itself a flourishing business. Many people tell managers how to achieve competitiveness, though the recipes, the prescriptions, and, above all, the jargon are different. Some offer technologies for implementing a particular concept, such as total quality control. Others tinker with this organizational feature, fix that one, and educate people, the reward being the promised land of organizational transformation.

This sort of"revitalization" is only one route to corporate transformation. There are also "revolutionaries" who are impatient with the slow pace of reformist change or who distrust the managers guiding it. Throw out the whole thing and start over again, they urge. Overthrow management, change control, shuffle the assets, and the organization can be recreated. But these revolutions and battles for control, however effective in one sense, remain costly and unproven in others. In practice, these notions have also led to some prominent media events, such as Italy's Carlo de Benedetti's battle for Société Générale in Belgium, Sir James Goldsmith's takeover of Crown Zellerbach, or KKR's buyout of RJR Nabisco.

Indeed, corporate takeover specialists present themselves as the shock troops of capitalism, preaching the virtues of their approach. T. Boone Pickens, the erstwhile U.S. raider from Mesa Petroleum, became a brief star on the intellectual lecture circuit, founded The Association for Shareholder Rights, and testified before American Congressional committees. Asher Edelman, another American investor, in spare moments between his attacks on undervalued and underprotected companies, taught a class (called "The Art of War") on corporate finance and control at Columbia Business School; he offered to "make it real" for the students by offering an incentive of $100,000 to anyone who identified a suitable candidate, payable if and when he actually took it over. The school asked him to withdraw the incentive. And a third well-known American raider, Carl Icahn, evidently got tired of being seen "only" as a buyer and seller of companies and, upon acquiring TWA, decided to run it personally. (As it turned out, TWA entered bankruptcy in 1992; he might better have stuck with the paper chase.)

There are many views in between the extremes of reform and revolution, of course. And there are times when each is appropriate. But the danger lurking in many discussions of organizational change is that the whole thing starts to sound much simpler than it is. Too much credit is given to leaders when things go well, and too much blame when they go poorly. Yet, despite decades of very good advice to organizations about change, we are struck by how many failures there are and how much can go wrong. Even though both the reformers and the revolutionaries are, in their own ways, utopians, believing in organizational perfectibility, the sad fact is that, almost universally, organizations change as little as they must, rather than as much as they should.

But perfectibility is, in the final analysis, not an accurate picture, and not simply because our reach exceeds our grasp. It is impossible because of the very nature of organizations, in which successes in one realm inevitably produce problems in another. Organizations, whatever their specific purposes, are also institutions facilitating the production of dilemmas. And that, ultimately, is the best reason to suppose that there will always be a need for management, if not managers.

Organizations present not just one-time problems to be solved, and their problems are certainly not solved once and for all. Permanent success -- a single formula that works forever -- is impossible. After every revolution, even the most successful, the revolutionaries have to address continuing internal issues and the new tasks and problems created by the revolution. In short, even revolutionaries have to understand and accept reform. If these tasks are not addressed effectively, they can even destroy the revolution itself and create counterrevolutions.

The recent astonishing transformations which broke up the Soviet Union and its former East European satellites are a striking case in point. Even though we should be extremely cautious about equating countries and whole social systems with organizations, those events suggest an important lesson for organizational change in general. Changes and their effects are distributed throughout organizations. Some of them are visible, some not. Some are captured in the systems and structures of the organization, others in the minds of members, and still others in external adjustments. Some take effect or cause ripples soon, others need to ripen before they can flower. Thus, our ability to recognize changes may be largely limited to the immediately obvious and therefore superficial ones, while ultimately more powerful factors are hidden from our view. As Chapter 2 makes clear, we may be misled by too narrow or short-term perspectives, or by our personal favorite frame of reference, ignoring long-term forces more slowly transforming an organization, and overlooking counterforces and opposing tendencies.

Roadblocks to Progress: The Change Problem

A new ideal of a focused, innovative, and flexible organization is widely accepted around the world, but it is much more difficult to find practical examples of organizations not born that way that have fully transformed themselves to attain this ideal. Is the flexible twenty-first-century organization model wrong? We don't think so. The problem is one of change -- getting from here to there. Change is more complex than optimistic managers -- or analysts -- think. There are several reasons behind the difficulty of finding exemplars that have transformed their organizations to the new model. Each of those reasons tells us something important about change.

First, it is hard to make changes stick. Many of the most admired role models for new practices have subsequently stopped them. For example, the exciting and innovative approach taken by Pacific Telesis and the Communications Workers of America (Kanter, 1989) has disappeared, a victim of the departure of its champions (a more or less accidental by-product of other changes) and the subsequent bypassing of the union staff. Another example: People Express Airline, a pioneering attempt to create a fundamentally different organizational form consistent with the best available knowledge about teamwork, collapsed and went out of business, a victim (though some would dispute this) of excessive optimism and an insufficient recognition of the values and benefits of traditional bureaucracy. This book is full of examples describing, in all-too-gory detail, the problems of organizational changes launched with the highest of hopes and the best available advice. We see in this more than simply a lack of skill, however.

Some of this may reflect a sociological truism: The originators of innovations are generally not the same as those who take the best advantage of them. What People Express invented but failed to accomplish helped Southwest Airlines build more soundly on Donald Burr's dream. General Motors, which during the late 1960s and early 1970s became famous for some of the most exciting new labor participation ideas (its Tarrytown plant was worldfamous), could not sustain its own initiatives and saw them more effectively implemented by Ford, its arch-rival. In one of those wonderful ironies so characteristic of history, Japanese companies seized these innovations to the detriment of their American and European inventors. This truism about organizational innovations applies equally, and more familiarly, to technical innovations. The mouse, the idea of the graphic interface, and even the PC itself were invented by people at Xerox's Palo Alto Research Center. All were commercialized by other firms.

Second, there are clear limitations to managerial action in making change. One can wonder if deliberate change in complex organizations is possible at all or whether instead the enormous forces in their environments do not simply swamp any attempt to control them. As Chapter 2 will describe, a line of argument and evidence has been marshaled over the last fifteen years or so that sees in the rise and fall of firms the simple and inexorable play of evolutionary dynamics. From this point of view, managers have at best a secondary role in organizational change, Being able merely to carry out the business equivalent of the familiar "You can't fire me; I quit."

There is often an extraordinary disconnection between our theories of change, at least as commonly understood and practiced by managers, and the realities of organizations actually undergoing change. Chapter 10 argues that the eminently sensible advice that constitutes conventional wisdom about managing change often does not work.

There are fundamental limits to the potential for action as a deliberate attempt to change organizations. Not everyone is the chief executive. More than that, even CEOs have to recognize severe constraints on their capacity to make the difference they wish. In general, organizational change cannot be ordered to happen. Conflicts of interest are becoming more and more apparent, and important. In addition to shareholders, other stakeholders with an interest in the organization (e.g., customers, suppliers, employees, or community leaders) are becoming more central, and their legal and operational influence is growing. As one consequence, both the capacity of managers to act and the wisdom of their doing so without consulting others are being reduced. And this issue is particularly important when undertaking major changes, with outcomes that may include power redistribution, possible layoffs, plant closings, and shifts in the very concept of the firm itself.

Large structural changes, such as mergers, acquisitions, restructurings, and takeovers, fail operationally unless they are accompanied by much more involving and fundamentally different grassroots efforts. Indeed, grassroots innovation -- often referred to as bottom-up change -- is often preferred to large-scale top-clown change as a source of enduring results (Kanter, 1983).

Third, attempts to carry out programmatic continuing change through isolated single efforts are likely to fail because of the effects of system context. Organizations are systems, which means that anything more than trivial and surface changes needs to be seen as rooted in myriad features, and ultimately is an expression of the organization's character. Trying to change one component or one subsystem, then, may be akin to the old story of the primitive who acquired a radiator for his hut, kicking it to get heat, which he understood worked elsewhere.

Some -- perhaps many -- of these so-called "new" practices worked because they "grew up" in the organization, sharing a common development environment, or because the conditions at the time were favorable, whether recognized or not. There are many examples. Banc One, one of the most consistently profitable and effective banks in the United States (see Chapter 3), has prospered by creating an innovative organization designed to respond directly to its times and needs. Or take Digital Equipment. Kenneth Olsen, its founder and still its CEO, has presided over a justifiably celebrated global computer firm, in part by the use of structures and processes that, though apparently innovative (and certainly different, at least as compared to more traditional competitors such as IBM), was able to build on the attitudes and expectations held by its employees.

Fourth, the need for change may make it harder to change. Few maxims are more established than "Necessity is the mother of invention," and it is true, as much research has established, that adversity, which often produces a sense of necessity, does promote innovation. However, it is also true that scarce resources offer a much less hospitable climate for their utilization than abundance. Adversity, in short, may generate lots of ideas, but their realization is much less likely.

In business, this translates into the principle that crisis and decline are less likely to enable revitalization, though that is when the need is great, than are growth and success. One change dilemma, then, is that the ability of organizations to change significantly appears when the inclination to change is least. This also suggests that the manager has two very different tasks, which require very different strategies -- solving problems (the task of restoration) and realizing positive visions (the task of transformation).

Finally, some of those best at new practices in one realm may sbow limitations in others. Often, the very same leaders who are able to launch one kind of new practice have tragic flaws that reduce their effectiveness in other important areas. How important is that? It depends, as we shall see. For example during the 1980s, American Airlines, under Robert C. Crandall, was a remarkably effective, organization, avoiding most of the traps in which its competitors were caught. It kept prices and market share up, and put in place a whole series of innovations, for example, in labor relations -- the twotier wage system; in marketing -- the frequent flyer program; and with suppliers -- the Sabre reservation system.

But American's very innovations, and the style of leadership this required, also created potential problems. For example, the two-tier wage scale for pilots led the lower-tier people to seek parity with their top-tier colleagues, thus putting upward cost pressures on the airline. And this, of course, contributed to strained labor relations, when American's pilot union renegotiated its contract. Because of its success, the frequent flyer program created unexpected costs when travelers cashed in. Similarly, the airline's strong leadership, which enabled it to move fast and effectively, now faces the need to decentralize and add flexibility, as size, geographical scope, and global competition increase.

The role models of transformation -- such firms as Xerox, Ford, or Motorola in the United States, or SAS, ICI, and British Air in Europe -- demonstrate that it is a long, slow process requiring constancy of leadership attention and commitment, and that the results are not permanent. They also demonstrate that there are no guarantees, since competition may do better in the interim, for reasons that may transcend any simple explanation. For one thing, macroeconomic, political, and environmental variables matter. Capital markets, currency rates, political shifts, tax policy, resource markets, and technology shape organizational fates as much as managerial actions.

A parable about change illustrates one of the problems in understanding it. The nineteenth-century British writer Charles Lamb wrote a wonderful essay in which he imagined how humanity's discovery of cooking came about. Millions of years ago, Lamb supposed, people lived in large extended families, with domestic animals, in crude houses built of wood and thatch, and open to the elements. One day, with everyone gone, a house caught fire by accident, but the only casualty was a neighborhood pig. When the residents returned, all that was left was a plume of smoke, a pile of ashes, and a wonderful smell. Eventually, some of the people poked in the ashes and burned their fingers touching the carcass of the still hot, incinerated pig. When they put the burned fingers into their mouths to cool off the burn, a delicious taste appeared. They had, says Lamb, discovered cooking. Thereafter, when the people of the village wanted to celebrate, they picked out a house, put a pig inside it, and burned the house down!

We suggest a moral to this tale: If you don't understand why the pig gets cooked, you are going to waste an awful lot of houses.

This is a very good lesson for managers in general, especially in connection with change. In the absence of a powerful and convincing theory, managers will use whatever tactics are familiar rather than move to something new, which, absent such a theory, may well produce more and newer problems than the traditional approach. Better the devil we know...

Today, in light of the challenge of change all around us, the need for a comprehensive understanding of organizational change is clear.

What Is Change?

Language is full of ambiguity; it is at once a source of strength and a source of weakness. Certain words and phrases, however, create special problems. Though they sound specific and are generally treated as if everyone used them identically, they often generate more heat than light. This exactly describes the common experience of people discussing "organizational change."

For centuries philosophers have struggled with definitions of "change," though obviously not in connection with business organizations. For example, there can be few managers today who haven't somewhere been exposed to Heraclitus's famous dictum; "Nothing endures but change." But Heraclitus was emphatically not thinking of deliberate -- that is, what we would call intentional -- change, but rather of the change that is a consequence of the inherent potential for development associated with every entity. And that sort of change is closer to what the psychologist Abraham Maslow called "self-actualization."

To the ancient Greeks, in fact, the idea of deliberate and transforming change -- tampering with the basic character of things -- was, if not actually blasphemy, a sure path to disaster; it is fundamental to their great tragic dramas. In modern Western culture, "change" is a more malleable notion, a means to bend fate to one's own ends, although it is far from clear that this is possible. The Greeks may yet have a point in calling attention to the idea that neither people nor organizations are completely malleable, and we thus need to understand the limits of adaptability. Some things may be achievable, given a starting point; others may not.

The conventional modern idea of change typically assumes that it involves movement between some discrete and rather fixed "states," so that organizational change is a matter of being in State 1 at Time 1 and State 2 at Time 2. Kurt Lewin, a pioneer in the systematic study of planned change (as it became known) in the mid-1940s, developed a now-classic model of change used even by those who never read -- or heard of -- Lewin. This, of course, makes no difference. The economist John Maynard Keynes once noted: "Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some...academic scribbler of a few years back" (Keynes, 1936).

Lewin's model was a simple one, with organizational change involving three stages; unfreezing, changing, and refreezing (Jones, 1968). This quaintly linear and static conception -- the organization as ice cube -- is so wildly inappropriate that it is difficult to see why it has not only survived but prospered, except for one thing. It offers managers a very straightforward way of planning their actions, by simplifying an extraordinarily complex process into a child's formula. Over the course of this book, we hope readers will develop their own much richer and more powerful understanding of organizational change.

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.

Instead, it is more appropriate to view organizational motion as ubiquitous and multidirectional. (See Eccles and Nohria, 1992.) Deliberate change is a matter of grabbing hold of some aspect of the motion and steering it in a particular direction that will be perceived by key players as a new method of operating or as a reason to reorient one's relationship and responsibility to the organization itself, while creating conditions that facilitate and assist that reorientation.

Change involves two very different phenomena. First, it is to some degree in the eyes of the beholder. "Paradigm" theory, as outlined by Thomas Kuhn in his influential book The Structure of Scientific Revolutions (Kuhn, 1962), holds that an accumulation of little-noted, stepwise quantitative increments or small-c "change" (one more of something, then still one more) can suddenly be perceived as a qualitative shift or capital-C "Change," as though entering an entirely new state, with phenomena subsequently reinterpreted in terms of this new paradigm. Something similar occurs in the strategic change process in organizations (Kanter, 1983): the announcement of' "change" is sometimes merely the decision to identify as mainstream a kind of activity that had existed on the organizational periphery all along. Moreover, the point of view of those who think they are creating change as an intentional process will be different from those who are on the receiving end of changes, and historians might reach still another conclusion. Political interests also come into play in the identification and labeling of change. We should always ask who has a stake in declaring something to be "new and different."

Second, organizational change has an empirical side; it is not entirely perceptual. An organization -- any organization -- is defined in its operations by the presence of a set of characteristics associated with enduring patterns of behavior, both of the organization as an entity and of people involved in it. If this were not true, if we could not find patterns, we could not really speak of "an" organization at all. Instead, like the title character in the Argentinian writer Jorge Luis Borges's story "Funes, the Memorious," who is plagued by the inability to see categories or patterns, we would have to regard it as an entirely different object at every moment. This would destroy the fundamental value of any organization, which lies in its capacity to accumulate momentum and exhibit reasonable consistency both over time and with respect to the behavior of its individual members.

This consistent patterned behavior of an organization's members over time constitutes one of its very distinctive and most important features, which we can call its character. This meaning of character needs to be sharply distinguished from the sort that overly anthropomorphizes organizations, for example by declaring that organizations can have a "heart" or a "soul."

It has long been recognized that organizations have great power to shape behavior, not so much by forcing it as by encouraging it. Organizations always make some things easier and some things harder, thus making the former more likely and the latter less likely. This is the work not simply of "culture" -- something in people's heads -- but rather of the formal aspects of the organization, such as its distribution of roles and responsibilities, people's authority to commit resources, existing budget procedures, the physical or geographical arrangement of its space and facilities, differences in information access and availability, and reward and recognition systems. This sort of "character" is rooted in the organization's structure, systems, and culture -- elements that embody the momentum of the organization by "acting on" its members, thereby enabling the organization to maintain a recognizable presence over time.

These are also the same elements that are critical to any enduring change. Changes in character shift the behavior of the whole organization, to one degree or another. Where there is not a change in character, change is cosmetic, temporary, and uncertain in its effects -- it is small-c "change," so to speak. Transformation -- capital-C "Change" -- requires a modification in patterned behavior and therefore is reflected in and rooted in a change in character. An understanding of organizational character and its sources, and of how to modify it, is required for effecting deliberate change. This is precisely why people at all levels, including chief executives, can enunciate new directions yet fail ultimately to make the difference they intend. Organizations cannot simply be "ordered" to change.

What is important about organizations is therefore not the occasional or idiosyncratic event or output, but the patterns that are manifested in those outcomes. Organizationally speaking, anything that is unique is not worth much attention, because it is not organizational behavior. Since by definition it is not going to recur, managers should not waste their time worrying about it, analyzing it, or setting up ways to prevent its future occurrence. What is important is anything that suggests the presence of a pattern of behavior or that could become one. The managerial imperative is very clear. Treat everything as a symptom, seek the underlying pattern, and either reinforce or reduce it. If there is no underlying pattern and no evidence that one is developing, it is not organizationally important.

What then is organizationally important is simply those things that are more or less likely as a routine matter. It is just this capacity of an organization to change the probability of events that gives organizations their power. That capacity, however, is not definitive. Rather, it acts through a bias or a tilt, pressures that can be resisted or overcome in any given case, but that over time and after enough choices are likely to result in a systematic shift away from intended outcomes.

The Importance of Motion: An Action View of Organizations

Our view, then, like that of Heraclitus, stresses continuous flow. Organizations, as we see them, are bundles of activity with common elements that allow activities and people to be grouped and treated as an entity. As activities shift, as new or different units or people are included in activity clusters, what is identified as "the organization" also shifts.

Organizations are always in motion. There is some central thrust or directional tendency -- "keeping the herd roughly moving West," as Tom Peters once put it -- that results from a combination of the trajectory of past events, pushes arising from the environment, and pulls arising from the strategies embraced by the organization's dominant coalition, all within the context of the organization's character. Of course, the activity clusters (task units, divisions, projects, interest groups, alliances, etc.) themselves are also in motion, and their movements at any time may or may not be in step with each other or with the overall direction.

This framework creates situations similar to the "agency" problem in economics (Pratt and Zeckhauser, 1985) -- the problem that occurs when "principals" who own an asset must delegate responsibility for it to "agents" whose stake, interests, and understanding are different. But this framework goes far beyond agency theory in identifying a coordination problem and an implementation problem as well as a delegation problem. These are necessary additions, because organizations consist of multiple stakeholders conducting multiple but overlapping activities, and because even coordinated actions do not automatically produce intended results.

This view of organizations is well suited to the demands of the 1990s. Global economic competition coupled with continuous technological change is hastening the evolution of an organizational model that defines the boundaries of organizations as fluid and permeable. It recognizes that influence over organizational acts comes from many sources and directions, and through many pathways, rather than "down" a "chain of command." It understands the limits of authoritative intentions in the face of an organization's tendency to continue on preexisting paths. Organizational names, legal ownership, and charts with formal reporting relationships thus do not entirely or usefully define the ways action occurs -- or the way change occurs. Intentional "strategic" acts said to represent the organization are only one form of action. There are multiple strategists, and organizational purpose is itself problematic and debatable.

Thus, organizational action in the new model needs to be viewed in terms of clusters of activity sets whose membership, composition, ownership, and goals are constantly changing, and in which projects rather than positions are central. In such an image of an organization, the bonds between actors are more meaningful and ongoing than those of single market transactions but less rigid and immutable than those of positions in authority structures. Action possibilities are neither as fully open as in a market transaction nor as fully constrained and circumscribed as in the classic theory of bureaucracy.

Furthermore, there is great variety in the relationships of individuals to these organizational activity sets. While some people's roles are defined primarily by positions in a hierarchy of authority (e.g., "employees" carrying out predefined tasks through specified procedures), others are defined by the ability to mobilize resources and develop commitment to new tasks (e.g., "corporate entrepreneurs" on the payroll as employees but also receiving additional social, psychic, and/or economic inducements for initiative). Others are defined by market exchanges without the organizational membership bond (e.g., subcontractors and contingent workers). And still others are defined by their dual positions in several hierarchies (e.g., as a contributor to company X in a joint venture or alliance while still "employed by company Y).

More critically, many of these activity sets are themselves only minimally "institutionalized." They do not exist or persist irrespective of the people occupying them. While the named entity under whose auspices activities occur (e.g., Ford Motor Company) may have an existence independent of persons, the limited-purpose associations (project teams) within it may come and go with the initiative and enthusiasm of particular people. For social scientists, this more fluid view of organizations suggests that perhaps network theory or social movement theory is more relevant to the emerging economic world than is bureaucratic theory. At the same time, this also suggests the possibility of formalizing some of these nonhierarchical mechanisms, in their form if not in their details of composition, as "parallel organizations" (Stein and Kanter, 1980).

Viewing an organization as a coalition of interests and a network of activities within a momentum-bearing structure has two implications that are essential for the perspective used in this book. First, change of one sort or another is always occurring, though it may not always be guided by organizational leaders nor be consistent with the purposes of the prinicipal stakeholders. Second, managers concerned with controlling events or guiding change must be aware of both the nature of the networks within and around the organization (so they are able to form or work through coalitions of interests in order to induce multiple activities and interests to coalesce) and the sources and effects of the organization's momentum.

In this sense, "stability" in an organization is an idealization rather than a reality, an epiphenomenon or a quasi-equilibrium. "Stability" is just motion that is so smooth and involves so little conflict or challenge that it appears on the surface that nothing is moving. Or, to use more technical language, "stability" is better thought of as unified motion stemming from a coalescence of interests and activities in an environment of adequate relative consistency and certainty.

Apparent "stability" occurs when resources are abundant and easily obtained; competitors are few and competition is geographically confined by protected markets; technologies are standard and understood; individual and group ambition is constrained (people accept what they have); disasters or system failures are few or are accepted fatalistically; commitments are clear and acceptable to stakeholders; and interests are adequately aligned. General Motors in the United States in the 1950s and 1960s enjoyed this kind of"stability"; so did the telecommunications monopolies in most major countries through the 1970s.

Depart from any of these conditions, as in the globalizing economy of the 1980s, and suddenly the motion is apparent, with change taking center stage. Depart from all of them at once, as seems to be the case in the 1990s, and responding to change, harnessing change, and creating change become the major management challenges.

Consider the situation facing most organizations and their leaders today: Resources are scarcer and are obtained with more difficulty. New technologies arise frequently. Individual and group ambition is given free rein, in ever more countries. Crises are common but assumed to be solvable if only managers are good enough. Commitments -- of customers, employees, or other stakeholders -- are fragile or short-lived because of numerous choices and alternatives. And interests shift and diverge frequently.

How can so much motion be conceptualized and understood, so that leaders can manage it?

The "Big Three" Model: Three Kinds of Motion, Three Forms of Change, Three Roles in the Change Process

To put all this in perspective, it is helpful to focus on three interconnected aspects of organizations: the forces, both external and internal, that set events in motion; the major kinds of change that correspond to each of the external and internal change pressures; and the principal tasks involved in managing the change process.

1. The three kinds of movement:

* The motion of the organization as a whole as it relates to motion in its environment -- change that is macroevolutionary, historical, and typically related to clusters or whole industries.
* The motion of the parts of the organization in relation to one an-other as the organization grows, ages, and progresses through its life cycle -- change that is micro-evolutionary, developmental, and typically related to its size or shape, resulting in coordination issues.
* The jockeying for power and struggle for control among individuals and groups with a stake in the organization to make decisions or enjoy benefits as an expression of their own interests -- change that focuses on political dimensions and involves revolutionary activity.

These three kinds of movement help distinguish three basic forms of change, at roughly corresponding levels of analysis.

2. The three forms of change:

* Identity changes in the relationships between the organization as an entity and its environment: the assets it owns and the markets it approaches, the niches it occupies, the relationships it has to its customers and to the organizations that fund it, supply it, and confer legitimacy on it. These changes are related to macro-evolutionary forces, to the motion in the environment and the organization's own capacity to endure over time as a factor in that environment.

As environmental movement presents pressures and opportunities for change, organizations can subtly change their identities by reformulating their relationships to their environments: changing the businesses in which they operate, the products they offer to the market, the investors who supply capital, and so forth. The most extreme version of identity change is when an organization becomes something entirely different (in its businesses, products, ownership, etc.) in order to allow a portion -- the asset base, the products, some know-how, the employment base, even a tax carryover -- to endure.
* Coordination changes, which involve the internal array of parts -- activity sets -- constituting the organization. These kinds of changes often (though not exclusively) relate to micro-evolutionary dynamics, to the problems of shape and structure that emerge as organizations grow and age.

Of course, the effectiveness of an organization at relating to its environment -- serving markets, securing resources -- also triggers questions of size and shape. But whatever the source of the problem, the need to change the organization's internal configuration, rather than simply to let it evolve, may ultimately result in deliberate reshaping or revitalizing. * Changes in control that stress the political dimension, who is in the dominant coalition, or which interests or set of interests predominates, who owns and governs the organization. This leads to makeover through takeover or other changes triggered by shifts in ownership or governance. Such changes deal with "revolution" and are often dramatically revolutionary in their impact on many aspects of the organization.

The three kinds of movement also correspond roughly to three action roles in the change process, the phases in any particular change sequence, and to traditional organizational levels.

3. The three action roles in the change process:

* Concern for the connection between the organization and its environment, and for the organization's overall direction in light of macro-evolutionary forces, is the province of change strategists. The change strategy role often, though not always, occurs at the beginning of a change sequence, and it is usually, though not always, the responsibility of top leaders.
* Responsibility for the microdynamics of development of the change effort itself, and therefore of its internal organizational structure and coordination as the organization itself moves through its life cycle, lies in the hands of change implementors. The implementation role is often associated with "middles" -- for example, the middle of a change sequence or the middle levels of the organization. Change implementation, as we are using the concept here, involves project management and execution rather than conception.

Of course, strategists can also be implementors; and in the course of implementation, middle managers can find themselves considering macro forces and developing grand strategies or reshaping existing strategies because of the realities of execution. Organizational action is also often smoother and more effective when strategists and implementors overlap, so that the distinctions are less marked. Still, this conceptual distinction points to the difference in perspective and responsibilities that follows from leaders wearing their strategy or implementation hats.
* Generally, toward the end of a change sequence (at least as the "end" is officially conceived), and sometimes at the "bottom" of the organization, are the change recipients, those who are strongly affected by the change and its implementation, but without much opportunity to influence those effects. The reactions of change recipients reflect the political and control dimensions of organizations -- who benefits, which interests are served.

A good deal of the tension that invariably arises in major organizational change programs is the direct result of the disjunction between those directing and implementing change -- both of whom are sufficiently involved to have at least a degree of control over the change -- and those who are powerless, the passive recipients, as it were.

For more effective change efforts, it usually makes sense to include recipients among the implementors and strategists. But again, we want to point to the inherent difference in perspective involved in being at the receiving end of change. Much resistance to change occurs because recipients bring their own interests, goals, and group memberships to the change table. In some cases, often as a result of their perceived powerlessness, recipients form their own formal associations (e.g., unions) to attempt unilaterally to increase their own power in the responding role.

This model is spelled out in detail throughout the book. Each element is examined in conceptual terms and through illustrations drawn from a wide range of companies, industries, and countries, to provide concrete examples of the change dynamics and change dilemmas involved. Our model illuminates the key areas that must be understood in order to master change. It also makes clear why there are so many possibilities for failure at making change. The three kinds of motion might be leading in very different directions. The three action roles not only involve different responsibilities; they also reflect different perspectives and interests that can interfere in any one group's ability to realize its intentions perfectly.

The perspective in this book stresses many of the changes happening to organizations and their members; yet it also helps us understand both the opportunities and the difficulties surrounding planned or intentional change.

Looking Backward or Looking Forward?: Multiple Possibilities and the Opportunities for Managers

This book integrates a wide range of ideas derived from social science theories and our own extensive observations of companies around the world. It looks at change from the perspective of individuals as well as that of organizational systems. By considering the interplay between environment and actor from many angles, we hope to illuminate the opportunities for change mastery -- where some control can be exercised, and where it cannot; what forces must be harnessed, and the ease or difficulty of doing so.

By definition, the events and situations described in the readings have already happened. There is an air of inevitability about such descriptions. As readers, we view them in "20-20 hindsight," and the lessons about what leaders ought to have done seem clear. We can identify patterns and develop theories.

However, although understanding the past is all well and good for academics and analysts, practicing managers have a different need: to gauge and affect the future. The task of management consists in taking action with reasonable assurance that desired consequences will stem from those actions. Management amounts to placing bets; it involves the investment of time, energy, and resources in actions assumed to be reasonably suitable to achieving hoped-for results.

From this perspective, the world looks much less inevitable. Managers spend considerable sums on analyses designed to project, predict, forecast, and model all known variables and complex relationships in the quest for underlying inevitabilities of markets or other trends. But the increased motion of today's activated environment makes analyses of this kind more and more suspect except in narrow, constrained domains.

But managers act anyway, even in the absence of perfect knowledge. Without knowing what must be, as we look backward from history, they consider what can or might be. Managers see multiple possibilities rather than a single inevitable ending.

Our colleague Richard Hackman has pointed to this tension between forward-looks and backward-looks in academic views of organizations. Theorists proposed the concept of "equifinality" to argue that organizations are systems with a purpose, tending to develop in inevitable ways. But this is a conclusion reached from examining endings rather than beginnings. Watching a situation unfold as it is happening, instead of after the fact, makes it clear that it is much harder to predict specific events, that surprises or deviations from expected patterns are common. Situations contain multiple possibilities for action.

Multiple possibility theory is in fact particularly well suited to a view of organizations as activity clusters in constant motion, guided by managers trying to steer. Of course, from a historian's perspective, viewed from far away and over a long period of time, coherence and identity may be more apparent than constant motion. But from the point of view of the actors confronting the situation, the choices are far less clear, the options less structured, the results inevitably more mixed, and the rationales highly arguable.

A reasonable, though slightly cynical, view of the world says: "If life give you lemons, learn to like lemonade." Similarly, if organizational life involves continuous flow, then go with that flow. Understanding all the forces and variables involved in organizational change can help managers place their bets in a world of complex motion and multiple possibilities. Ultimately, despite the limits upon what people can control, it is still up to people to act, and in acting they do more than predict the future, they invent it.

In this book, we hope to help make action more effective. We try to capture the complexity of change and make the challenges and dilemmas comprehensible, so their effects can be better understood. We identify the "disconnects" between theory and practice; the critical points at which a manager's compass goes haywire, and why. We counter utopian views that organizations can be "made perfect." But we also show how dealing with reality can help managers understand opportunities as well as limits. We help them see better how they can do what they can even when they cannot control everything.

We attempt here to add a rich historical and political dimension to the more usual managerial, economic, and behavioral views of organizations, and to further the understanding of the link between micro and macro considerations -- how the intentions of actors relate to the macro-derived possibilities for effective action.

Copyright © 1992 by Rosabeth Moss Kanter, Barry A. Stein and Todd D. Jick

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