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Berrett-Koehler Publishers
Terms of Engagement: New Ways of Leading and Changing Organizations / Edition 2

Terms of Engagement: New Ways of Leading and Changing Organizations / Edition 2

by Richard H. Axelrod
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Product Details

ISBN-13: 9781605094472
Publisher: Berrett-Koehler Publishers
Publication date: 10/11/2010
Edition description: Second Edition
Pages: 288
Product dimensions: 6.10(w) x 9.20(h) x 0.70(d)

About the Author

Richard Axelrod is a founder of and principal in the Axelrod Group, Inc. His clients include Boeing, Coca-Cola, Corning, Ford, Harley-Davidson, Hewlett-Packard, and Kaiser Permanente. He is the coauthor of You Don’t Have to Do It Alone.

Read an Excerpt

Engagement Makes a Difference

We’re about to start a change process, and I think we’re going about it the wrong way.” Hank Queen, soon to become vice president of engineering and product integrity for Boeing Commercial Engineering, and Charlie Bofferding, president of the Society of Professional Engineering Employees in Aerospace, were present for a talk I was giving about the four engagement principles that are core to Terms of Engagement. Boeing was just coming off of the largest white-collar strike in U.S. history, where more than fourteen thousand employees walked off the job, and Charlie had suggested that Hank come and hear what I had to say.

At the break, Hank pulled me aside, and with those words, “We’re about to start a change process, and I think we’re going about it the wrong way,” launched a change process that ultimately affected the entire engineering organization. This process, based on the four principles that make up the new change management, resulted in a 40 percent improvement in employee satisfaction, along with many productivity improvements.

Three years later, the same employees who went on strike voted by a margin of more than 80 percent to renew their contract. Today, new programs, such as the 787 Dreamliner and Multi-Mission Maritime Aircraft, have added six thousand new jobs in Washington state. Production rates for commercial airplanes are increasing, and orders are up.

Every leader faces the eternal question, How do I engage people in the purpose of the enterprise? You might be like Hank, trying to rebuild a culture; or Carol Gray, trying to improve access to health care in Calgary, Alberta; or Jan Mears, trying to implement a global SAP process at Kraft Foods, Inc. Terms of Engagement provides the answer.

In my work with leaders in organizations large and small, I find them grappling with a turbulent environment where rapidly changing technology makes yesterday’s innovative ideas obsolete. Reorganizations happen so fast, it is almost impossible to keep track of the entities’ names. The job you had yesterday is not the job you have today, and it is not the job you will have tomorrow, if you have a job at all. Organizations find themselves existing simultaneously as competitors and partners. Leading in this world requires all of the physical and emotional resources leaders can muster.

Globalization requires organizations to find ways of working that span culture, time, and distance. All of this is taking place in a world where people have more access to information today than in the entire history of civilization, yet they are increasingly lonely, isolated, and disconnected. Extreme wealth and poverty live side by side, while the gap between them increases exponentially. Authoritarianism and violence are rising in a world where people say they want peace.

The changes are so profound and occurring so rapidly that drinking from a fire hose feels like a leisurely cup of tea. Yet this is our reality, and in this world, success belongs to organizations and leaders who respond effectively to this complex, chaotic environment.


In the first edition, I responded to those who said the cost of engagement is too high by asking, “What is the cost of disengagement?” Now we know.

• Disengaged workers cost the economy more than $300 billion a year (Gallup 2010).

• McKinsey & Company, in a global study of successful organizational transformations, identified cocreation, collaboration, and employee engagement as key success indicators (McKinsey & Company 2010).

• Northwestern University found that organizations with engaged employees have customers who use their products more, and increased customer usage leads to higher levels of customer satisfaction (Cozzani and Oakley n.d.).

• ISR, a Chicago-based consulting firm that has one of the largest databases on employee engagement, discovered that engaged organizations are 52 percent more profitable than their disengaged counterparts (MacLeod and Clarke 2009).

• Hewitt Associates has an Employee Engagement and Best Employer Database of fifteen hundred companies. In companies with 60 to 70 percent engaged employees, average total shareholder’s return (TSR) stood at 24.2 percent. In companies with only 49 to 60 percent engaged employees, TSR fell to 9.1 percent. Companies with engagement below 25 percent suffered negative TSR (Wellins, Bernthal, and Phelps 2005).

• A recent poll by Challenger, Gray & Christmas, Inc., found employee engagement to be a top priority for Chicago-based senior HR leaders (Challenger, Gray & Christmas, 2010).


If you look at any major corporation or government entity worldwide, this is what you will see: leaders with an army of consultants creating new organizational directions—the few deciding for the many. Often, leaders and consultants try to soften the blow by creating steering teams and project teams. But most people end up feeling that their voices don’t count. They are left on the outside, wondering what is going to happen. This approach to organizational change is so pervasive that few question it. It’s just what you do.

Four beliefs are the hallmarks of the old change management: the few decide for the many; solutions first, people second; fear builds urgency; and inequality is the norm and life isn’t fair. These beliefs are so ingrained that leaders and consultants do not consider their approach to change as “the old change management.”


Most change management initiatives, while professing the importance of people, forget real human beings are involved. When change management processes identify people as “change targets,” they deny their humanness. Peter Koestenbaum, noted author and philosopher, says, “The essence of being human is the freedom to make choices; there is no escape” (P. Koestenbaum, pers. comm., October 27, 2009). Whether you are trying to create an engaged organization or engage people in the latest business imperative, leaders and those who work with them make choices.

Leaders make choices daily about the principles they follow, the methods they use to bring about change, and the ways they interact with others. Organizational members make choices about whether they will sit on their hands or engage with the organization’s goals. These choices have consequences. Ultimately, they determine whether change will meet with footdragging resistance or wholehearted energy.


Popular theorists like Daryl Conner and John Kotter reinforce the notion of plug and play, order, and predictability. They aren’t the only ones, just well-known theorists who reinforce the old change management.

Conner (1992) popularized the notion of burning platforms as a key ingredient for change: the way to get people to change is to light a fire under them. We’ll see later how neuroscience research is showing how lighting fires may shut people down rather than start them up.

While not advocating burning platforms, Harvard professor John Kotter (1996) wants leaders to create guiding coalitions populated by senior management, which in turn produce strong visions for the organization to follow. These ideas represent the old change management—a series of leader-directed moves where the few decide for the many. In the old change management, leaders seek to create “buy-in” to a predetermined solution. Buy-in turns leaders into salespeople and employees into consumers, thereby creating engagement gaps that increase resistance instead of decreasing it.

Henry Mintzberg, the John Cleghorn Professor of Management Studies at McGill University in Montreal, writes in Harvard Business Review, “Kotter’s approach sounds sensible enough and has probably worked. But how often and for how long? What happens when the driving leader leaves?” (Mintzberg 2009, 2). Mintzberg goes on to say that building community is key to successful organizational change, and I’ll talk more about this in chapter 8.


The new change management is a set of principles and practices that provide people with a voice in change that impacts them. Unfortunately, just as “Coke” is the universal word for soft drinks, “change management” has become the universal term used to describe all organizational change efforts.

Many believe the term “change management” is an oxymoron. I understand that you offend people when you think you can manage them into changing. I have chosen to fight this battle by offering a different way to approach change management. And instead of coining a brand-new term, I’ve chosen to put the word “new” in front of “change management” to symbolize the difference.

Every change process is different. Every organization is different. No matter how much planning you do, there will always be unintended consequences. After all, you are dealing with people, not machines. A principle-based approach to change is not only necessary, it’s practical. The principles and practices of the new change management build a solid foundation for change, and they provide guidance when you don’t know what to do.

Here are the new change management’s principles and practices:


• Widen the circle of involvement

• Connect people to each other

• Create communities for action

• Promote fairness


• Honesty

• Transparency

• Trust

Taken together, these principles and practices create engaged organizations. In an engaged organization,

• People grasp the big picture, fully understanding the dangers and opportunities.

• There is urgency and energy as people align around a common purpose and create new directions.

• Accountability distributes throughout the organization as people come to understand the whole system.

• Collaboration across organizational boundaries increases as people connect to the issues and to each other.

• Broad participation quickly identifies performance gaps and their solutions, improving productivity and customer satisfaction.

• Creativity is sparked when people from all levels and functions, along with customers, suppliers, and important others, contribute their best ideas.

• Capacity for future changes increases as people develop the skills and processes to meet not just the current challenges but future challenges as well.


So what is new in this edition of Terms of Engagement?

• Success stories—in the leaders’ own voices. First, you’ll read new stories from leaders describing results from applying the new change management in organizations large and small. In the first edition, the stories and examples came from our own practice. In this edition, I’ve “widened the circle” by interviewing dozens of leaders outside of our own practice. You will learn from people like Gaetan Morency, Vice President of Global Citizenship at Cirque du Soleil, and Chris, a checkout clerk at Best Buy. You will learn the dramatic results they achieved and what it takes to successfully engage people in change. Most of all, you will learn the importance of honesty, transparency, and trust in today’s world.

• Setting conditions for successful change management. Second, you will learn how everyday conversations and your regular staff meetings can become the fastest-track engagement opportunities there are. I’m using the phrase “everyday” in two different ways: in the sense that you can participate in these conversations daily and in the sense that they are easily accessible.

• New phrasing for a tested concept: “promote fairness!’ Third, I changed the title of the fourth principle from “embrace democratic principles” to “promote fairness.” I did this with a lot of heartburn, but many people have confused the notion of embracing democracy with a political democracy. People from outside the United States often said, “While I support the ideas in this book, I could not talk about embracing democracy in my country as it would be seen as advancing the U.S. political agenda.”

If you want to increase engagement, people must have a voice in issues that impact them; they must sense fairness in what goes on. Employees are often skeptical of leaders’ motives, their own abilities to influence decisions, and the idea that they may actually have to take responsibility for outcomes. The true essence of “embracing democracy” is coming together to discuss issues where everyone has a voice, where information is transparent, and a sense of fairness exists.

• Designing work with engagement built in. Fourth, I’ve added a chapter on work design. It is possible to design work with engagement built in. Engagement increases when your work provides meaning, challenge, autonomy, and feedback. These proven design elements apply whether you are a janitor sweeping the floor, a researcher working in the lab, or the CEO.

• Findings from neuroscience. Fifth, you’ll be introduced to the SCARF model and learn the neuroscience of engagement. You’ll learn how the threat/reward response impacts engagement and how the new change management lights up the innovative, collaborative part of the brain.

• Introductory illustrations. Sixth, each chapter begins with an introductory illustration. This illustration provides easy access to the chapter’s main ideas.

In every chapter, you will meet people and organizations who follow the four engagement principles and use the three engagement practices to create engaged organizations.

Table of Contents

Foreword Peter Block xi

Preface xix

Introduction: Engagement Makes a Difference 1

1 Why Change Management Needs Changing 11

2 Engagement Is the New Change Management 23

3 Six Change Management Myths 37

4 Lead with an Engagement Edge 45

5 Leadership Conversations That Foster Engagement 59

6 Widen the Circle of Involvement 73

7 Connect People to Each Other 93

8 Create Communities for Action 111

9 Promote Fairness 129

10 When Engagement Disengages: Some Words of Caution Before You Begin 143

11 Design Work with Engagement Built In 163

12 How to Start Where You Are 173

Chapter Reviews 189

Resources 199

How to Build Trust 199

A Brief History of the New Change Management 202

Works Cited 207

Acknowledgments 213

Index 219

About The Axelrod Group 225

About The Author 227

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