For Appelbaum et al Change today has become synonymous with the conventional organisational practices where because of the turbulent changes in the business environment, organisations have to constantly reevaluate their long term goals (1998, p.289). But such a change is often perceived to be negative and pernicious. On the contrary, an organisation's decision to change is alike to a critical choice, which every mature eagle must make in his lifetime between deciding to perish and opting to survive by undergoing a painful change process. No doubt that the change process can be challenging and laborious, but the life of an eagle enlightens on how it can also lead to a rejuvenation of sorts stimulating elevated success.
This assignment is concerned with such a rejuvenation process that transpired at Ericsson Australia (EA) in the 1990's to make the organisation more customer-oriented and responsive to its competitive environment. The background to the rejuvenation is set out in more detail in the appendix as all aspects of the transformation cannot be considered here. This assignment concentrates specifically on analyzing on how EA revitalized its organisational culture to support its renewed customer-focused business strategy.
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Eldridge and Crombie define culture as the unique composition of norms, values, beliefs and behaviour patterns that influences the working styles of the individuals and groups within the organisation (1974 cited in Burnes and James, 1994, p. 15). Such a culture, which is nurtured over several years, encompasses everything an organisation does right from how it interacts with its external environment to how it delivers products and services to its customers. Clearly bringing about a transformation is such entrenched attitudes and beliefs of an organisation pose a arduous challenge. Hence this assignment, post outlining the trigger for the rejuvenation and analyzing the nature of the rejuvenation by applying the TROPICS and force-field analysis, will assess how EA managed the exigent process of rejuvenating its organisational culture.
Trigger for rejuvenation:
EA's organizational culture was characterized by a traditional bureaucratic management style which encouraged compliancy from its middle management and restricted the flow of communication within its hierarchical structure (Graetz, 1996, p. 306). These factors combined with the dominant engineering and technology business focus and complacent attitude towards customers and external environment caused a reduced focus on customer's unique needs in the business as revealed in a Fishbone cause and effect diagram (shown in figure 1.1).
But it soon became discernible that the principles and systems that the company was built on were no longer adequate for the challenges created by the changes in its external environment. The increased competition caused by the massive deregulation of the Australian telecommunications industry in 1992, combined with the changed expectations of its major customer, Telecom Australia, acted as the triggers for its transformation (Gratez, 1996, p. 306). These triggers, also connoted as compelling 'destabilizing forces' (Kudray and Kleiner, 1997, p. 18), required the organisation to jettison its complacent outlook and become more externally focused on customers and flexible in offering solutions, to maintain its privileged market position. Innovation in business practices was essential for providing the company with a durable competitive advantage. And according to Kanter such a shaping up of an organisation's purpose would require rejuvenation of its culture (1992, p. 286) which otherwise would act as a barrier to adoption of innovative practices.
To assess the impact and enormity of an impending transformation, Paton and McCalman suggest employing a TROPICS test as a useful starting point (2008, p. 25). Applying this TROPICS test identifies some elements of EA's cultural rejuvenation process as hard and mechanistic but overall given its enormous impact on people this rejuvenation process makes way towards the soft end of the change spectrum.
In addition to defining the nature of the transformation facing an organisation, it is also important to examine the forces that are for and against the transformation so as to manage it effectively. Hence applying Lewin's (1947) force-field analysis, it can be deduced that the major restraining forces were the employee perceptions and concerns, that were fostered by a bureaucratic management and engineering focused organisational structure (as shown in figure 1.2). The success of this rejuvenation process hinged on gaining employee commitment that was crucial to creating an imbalance between the restraining and driving forces.
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Supplementing the above analysis, the other critical success factors (shown in figure 1.3) identified for the culture rejuvenation process clearly indicates that the primary focus of the transformation should be centered on the people involved. Thus though Paton and McCalman postulate that a systems-based approach can be applied to analyse the transformations that fall towards the softer end of the change spectrum (2008, p. 107), an Organisational development (OD) model has been selected to analyse the execution and success of the above mentioned rejuvenation process. Whilst there are a number of OD models, a theme that is common to most of them is that they concentrate on the human perspective of an organisational transformation process (Dawson, 2003, p. 31). Hence given the 'unfreezing' (Lewin, 1947, p.34) required in the attitudes and beliefs of the employees at EA, the OD approach is considered to be more appropriate over the mechanistic approach.
Analyzing how the rejuvenation process was managed:
Though the OD approach has been criticized for being time-consuming (Dunphy and Stace, 1988 p.317) it has also been credited as a useful approach to increase the organisational effectiveness (Beckhard, 1969 cited in Dawson, 2003, p. 31). Several themes of the OD approach were relevant to EA' transformational process as indicated by the following analysis.
a) Creation of a shared perspective:
Once a need for transformation has been indentified, several critical steps need to be taken to ensure the effectiveness of the transformation process. And one such step in the critical path to the transformation process, acknowledged by Beer et al, is developing a shared vision across the organisation (1990, p. 162). As, much success of the transformation process is dependent on gaining employee commitment to the new organisational direction, also identified by in a foregoing analysis. While a visible crisis can be a compelling motivator for mobilizing employee commitment, the absence of one can hinder employees from fully grasping or appreciating the reasons for change. It is then the responsibility of the management to create a sense of urgency in the organisation that will instill a uniform 'felt need for change' amongst its people (Tichy and Devanna, 1990).
i) Shared perspective and errors:
Conversely, Kotter reveals that management often fails to create a sense of urgency and instead plunge ahead with the transformation process (1996, p. 4). EA's management too initially suffered from a similar lack of vigilance. The strict timescales for adhering to Telecom Australia (TA)'s tender commitments coupled with the deregulation in the market brought a mounting realization on EA's management that its traditional organisational structure was ill-suited to its dynamic business environment. What was required was an alternative organisational paradigm that would cultivate flexibility and adaptability in the structure and encourage participative and customer centric behaviour. On acknowledging the driving forces for transformation, EA's managing director (MD), also the self-appointed change agent, plunged ahead by restructuring the traditional, hierarchical organisational structure. Moreover, the assumption made was that a structural transformation would alter the behaviour and attitudes of the employees.
However the painful reality was that though the organisation structure incorporated increased customer orientation, the employee behaviours were still aligned to the structures of the past. As the force-field analysis showed, despite the trigger for the transformation creating a growing realization inward the organisation to adopt a more customer-centric outlook, there was employee resistance due to the lack of understanding on how to transition to the new 'customer first' environment (Gratez, 1996, p. 306). Marshall and Conner posit that resistance to transformation is inevitable and hence should be effectively managed (2000, cited in Ahn et al, 2004, p. 115). Regrettably the wave of improvement projects, that were introduced as a consequence to overcome the employee resistance failed to offer a sense a future direction and highlighted EA's failure in articulating a clear need for change to its employees.
Eccles informs that one of the reasons why employees resist transformation is because they fail to understand its rationale (1994 cited in Dawson, 2003, p. 19). Furthermore George and Jones assert that employees habituated to working in a 'mechanistic structure' and displaying certain behaviours lose the initiative to adjust their behaviour to the changing environment (2007 cited in Paton and McCalman, 2008, p. 237). The changes that are enforced upon them disrupt their deeply held values and norms, producing what Burnes and James denote as 'dissonance' (1995, p.16). Realizing that it had 'short-circuited' (Beer et al, 1990) its culture rejuvenation process by euphorically introducing structural changes and fragmented change programs, EA set out to surmount the employee dissonance by creating a shared perception for transformation.
ii) Shared perspective and communication:
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Sherwood enlightens that organisations can create a shared sense of purpose by communicating a vision, which not only describes the goals of the organisation but also the methods for realizing them (1988). Mission and Vision statements are popularly used by organisations for creating such a shared purpose. Whilst vision statements communicate the aspirations of an organisation, mission statements convey its unique purpose and future goals including the attitudes required to achieve those goals (Ireland and Hitt, 1992, p.35). Taking advantage of the benefits offered by these tools, EA management developed a mission and a vision statement that particularly also acknowledged the role of its people in achieving its unique purpose (Gratez, 1996, p. 306). However the purpose of such visionary statements would be lost unless it is communicated throughout the organisation from top to bottom. As emphasized by Dawson communication is vital to steering the transformation in the desired direction and winning the hearts and minds of those likely to be impacted by the transformation (2003). Acting as a catalyst, internal communication can increase the understanding for the transformation amongst the employees thus reducing their resistance (Lippitt, 1997).
Effective utilization of internal communication was noticed in the case of EA. The MD not only conveyed the mission and vision statements throughout the organisation but also, as concurred by Bertsch and Williams, used customer feedback as an effective means to promote legitimacy (1994, p. 13). Disseminating purposeful statements and presenting videotaped interviews with Ericsson customers, who frankly discussed their expectations and the company's shortcomings, helped create a 'natural tension' (Senge, 1990, p.9), which accentuated the gap between the company's present and potential future reality. Thus not only did the EA management select a communication media that was creative and penetrative but also succeeded in generating the much needed sense of urgency for transformation. As a consequence the culture rejuvenation process did follow the OD approach where by creating 'dissatisfaction with the status quo' (Beer and Walton, 1990, p.157, Eisenbach et al, 1999, p.82) it reduced employee resistance and inculcated a felt need for change.
b) Role of the Leadership in rejuvenation:
Charles Darwin predicated that it is not the strongest or the most intelligent species that survive but rather the ones that are most responsive to change (). And such receptivity to change is impossible without the presence of a 'magic leader' (Kanter et al, 1992). Kotter urges that it leadership that formulates the future vision, aligns the organisation with that vision and provides the inspiration to attain the revolutionary goals set out by that vision (1996, p. 25). Without efficacious leadership it would be difficult to overcome the many sources of corporate apathy and motivate actions to significantly alter behaviours. Collins and Porras, however, argue that charismatic and visionary leadership may prove to be pernicious to a company's long term survival (1995, p. 64) as exposed by several corporate scandals. Nonetheless the overwhelming evidence where 70%-90% of successful transformations have been attributed to effective leadership (Kotter, 1996, p. 26) glorifies the importance of leadership. Several aspects of the cultural rejuvenation process at EA mirrored the presence of purposeful and intelligent leadership.
i) Leader as Change agent:
Much like Kotter's assertion that transformations often occur with the inception of a new leader (1996, p. 43) the appointment of a new MD in 1991 also symbolized a new beginning for EA. The forward looking MD was quick to realize that its conservative business systems would fail to achieve demands raised by the turbulent environment and hence deliberately took upon the role of the change agent. Although incongruous with Lippitt's 'golden rule' that a change agent must be an outsider to the organisation (1959) the emergence of a change agent within the organisation as suggested by Kudary and Kleiner (1997), proved to be advantageous for EA. The active involvement of the business chief gave the cultural rejuvenation process the much needed momentum. Moreover it can be argued that since the MD had just recently joined the organisation he could still play the role of an impartial outsider.
Initially in his enthusiasm to revitalize the culture of the organisation, the MD did follow a more text book approach, where he revamped the organisation structure and strategy and introduced a large number of change projects. But not conceiving that foregoing changes would be inadequate in altering the deep entrenched habits and dogmas of the people proved to be 'fallacy of programmatic change' (Beer et al, 1990, p. 159). Nevertheless, as pointed out by Lowell Bryan, for leaders it is not about positively ascertaining the outcome of their new ideas but rather about making them work in practice through a process of trial and error (cited in Barsh, 2008, p. 7).
Learning quickly from his errors, the MD correctly focused on reducing the restraining forces or 'unfreezing' which according to Lewin (1947) is central to managing transformations. However as identified as a critical success factor, lessening these restraining forces depended on gaining senior management commitment. As altering employee behaviours first required the senior managers inculcating the new behaviours (Bertsch and Williams, 1994, p. 21). Thus the MD instigated a master plan where in addition to communicating the organisation mission and vision to the business leaders he also introduced a Leading change program. This program was a medium to furnish the leaders with skills and knowledge required to challenge their existing frame of reference and discard their conservative management style. Details of the leading change program are outlined in the appendix.
ii) Leader and his guiding coalition:
The inclusion of middle level managers along with the senior managers in the transformation process signaled the presence of perceptive leadership at EA. As the middle level manager resistance is often identified as a major barrier to the transformation process (Van Buren and Werner, 1996) it is imperative to include them in the process. Moreover by following the OD approach of implementing the rejuvenation from the top down, the MD acknowledged his limitations in overcoming all employee resistance and spreading the revitalization to all departments. Thus he created a powerful 'guiding coalition' (Kotter, 1996, p.6) in the form of his management team, who acting as messengers and exemplars would cascade the rejuvenation vision and required behaviours to the rest of the organisation.
Wilmot expresses that while it is possible for anyone to lead an organisation only few do it with vision and wisdom (1998). This holds true in the case of the managing director at EA who by adhering to the 'holy trinity' (Paton and McCalman, 2008, p. 43) of the managerial rules wisely navigated the cultural rejuvenation process. The constant focus on the organisational objective, of creating a more customer-responsive enterprise transpired the formulation of the eight dimensions of change, which were inspired from their customer expectations. In addition, to providing the motivation for viewing customers as the main business focus, the dimensions also stressed the importance of a participative, information-sharing and empowered workforce for innovation in quality and products. But the true winning characteristic of the dimensions was that it was personally communicated by the MD to the business leaders. Using this 'hot media' (Bertsch and Williams, 1994, p. 19) over taking a ''black box' (Barrett, 2002, p.220) approach to communication, the MD not only secured his coalition's commitment by displaying the expected new behaviours but also generated a felt need for change.
In order to sustain its market presence, EA needed to build creativity in its customer solutions. But creativity and imagination are not attributes that a leader can command of his employees (Gary Hamel cited in Barsh, 2008, p. 3). Acknowledging this, the leadership at EA came up with the innovative solution of developing and incorporating the sixteen mental tools in the leading change program. Echoing the objectives of the dimensions of change these tools were designed to provide the managers with the necessary skills to transition to the new behaviours. Moreover, by empowering his guiding coalition in selecting the appropriate route to cascade the new behaviours to the workforce, the MD not only imbibed the dimensions of change but also proved that over controlling it is participation and involvement of people that guarantees the success of a transformation process (Kotter, 1996, p. 102).
Did the rejuvenation achieve success and what were its limitations?
Overall the cultural rejuvenation process, which though might not have been an innovative idea, was executed creatively by using the Leading change program and mental change tools as its transformation mechanisms. These mechanisms conjoined with the guiding leaders coalition proved successful in transforming the attitude and behaviour of most EA employees and in safeguarding and developing the market presence of the company. Initially unsuccessful in achieving reforms, the ameliorated customer-focused organisation structure later did along with the mission and vision statements, mental tools, dimensions for change and videotaped customer feedback and expectations, play a pivotal role in constantly reinforcing the need for improved employee values and behaviours. Despite the rejuvenation process achieving success some limitations, as follows, were observed.
In addition, to the importance of reinforcing the rationale for transformation, the change literature also emphasizes the importance of institutionalizing change as a means to avoid regression to old practices (Beer et al, 1990, Tichy and Devanna, 1990, Paton and McCalman, 2008). Sadly EA's rejuvenation process was yet to have claimed to seep the new behaviours in the bloodstream of the organisational culture. Some employee resistance at the operational level was reported, which due to lack of prolonged senior management support was not remedied. Thus constant senior management support can play a significant role in ensuring that the transformation sinks deep into the organisation anatomy.
Secondly in order to ensure deep penetration of the cultural rejuvenation, EA could have also aligned its employee reward system to its customer satisfaction goals. As employees tend to quickly emulate those behaviours that get rewarded: 'What gets rewarded gets repeated' (Bertsch and Williams, 1994, p. 18). Alternatively the leaders could have also taken the brave decision to replace the detractors after providing them ample opportunities to transform. No matter the extent to which an organisation provides reward or other support systems, there will always be some who would refuse to reform (Paton and McCalman, 2008, p. 52).
EA's cultural rejuvenation experience is replete with a number of insightful learning's. Firstly, it illuminates the significance of creating a share perception through communication, to overcome the inevitable employee resistance and to gain their commitment during the transformation process.
Secondly it teaches the valuable lesson of how structural changes, though a useful reminder of the organisational goals, alone cannot inculcate the new behaviours in the organisational workforce. Thirdly it exemplifies the monumental role of innovative and visionary leadership in executing a transformation. A leader by communicating the transformed vision, providing the behavioral change tools, walking the talk and empowering rather than controlling employees can succeed in amassing the support of his guiding coalition, who are ultimately responsible for cascading the vision to rest of the organisation.
Finally whilst the above measures will deliver the desired results, it also imperative to have systems in place to sustain those results so as to get rid of pockets of resistance and to avoid regression to old practices.
Ericsson Australia: Case Study
Falling under the flagship of its parent brand, Ericsson, Ericsson Australia (EA) was established as a local company in 1950's. And of particular interest is the business decisions made in the period of the 1990's which largely contributed to the organisation's overall success. During the 1980's, EA was highly successful in the Australian market primarily due to its relationship to its relationship with Telecom Australia (TA) (now known as Telstra), which accounted for 60% of its business. Limited competition and the absence of excessive pressure to complete TA's bulk orders led to the organisation predominantly focusing on improving its technology expertise. But this business focus was drastically altered when a surge of changes in the external environment meant that the company had to develop a marketing focus fast.
TA's new business relationship with another network system provider, Alcatel combined with the massive deregulation of the Australian telecommunications industry in 1992 not only threatened EA's highly profitable relationship with Telecom but also its position as an industry leader. It dawned on the management of the company that in order to survive in its dynamic business environment it needed to place its customers at the centre of its business and inculcate flexibility, speed and malleability within its organisational design. EA had no time to spare as the commitments it had made to win the Telecom Switch Vendor Selection (SVS) Tender meant that it had institute major changes in the way it conducted its operations. Through its SVS tender, Telecom was interested in how EA would contribute to help its business evolve to a global leader by 1996, how it would collaborate with industry leaders around the world to deliver the best technology to the company. But meeting these customer requirements presented major challenges for the company. To begin with EA's organisation structure supported its technology outlook which was further accentuated by its authoritative traditional management style. The organisation encouraged compliance and nurtured information flows restricted to the top management. Its conservative organisational structures and bureaucratic management practices largely influenced the attitudes and mentality of its workforce.
Though people within the organisation were aware of the changes in the environment and acknowledged the need to become a more customer-friendly organisation they also suffered from a lack of understanding on how to survive in this intensely competitive customer focused environment. Kjell Sorme, the new Managing Director (MD) appointed in 1991 realizing the enormous task that lay ahead of him and responded by instigating several changes in the organisations.
Organisation structure: To start with, the MD restructured the organisation in such a manner that its functional divisions like System design and engineering and factory supply operations now existed to support the various customer divisions in the organisations (as shown in figure 1.4). By making its customer divisions as the 'drivers of business' the company had taken its first steps towards moving shifting its focus solely from engineering and production to customer service. In addition to do away with its conservative hierarchal structure, he dismantled the various departments into smaller business units that created the much needed flexibility in its structure and encouraged participative behaviour by increasing cross-departmental interdependence. Moreover in support to its changed business goals the company also increased recruitment in the areas of marketing, customer support and service growth and reduced the number of employees in the manufacturing division.
Change programs: Though the restructuring lended flexibility to the organisation it hardly altered the entrenched mentality of the people in the organisation. The MD responded to this challenge by introducing approximately twenty-three 'change projects': Value project, Competence development project and Employee involvement project to name a few. However due to the volume and sluggish nature of these projects coupled with the failure to communicate purpose, direction and guidance on how to change, these projects proved to be largely unsuccessful.
New Wave: The failure of the change programs caused the MD to reevaluate his change strategy. He realized that if people in the organisation had no clarity on what changed future goals they needed to work towards or what new skills and competencies they needed in the changed environment, it was pointless telling them to change. Armed with this new wave of insightful perspective the MD set out to rectify his errors by creating and communicating a new mission and vision statement and introducing a leading change program.
a) Mission and Vision statement: The mission statement clearly communicated what the organisation intended to achieve in a manner that could be easily be related by the employees of the company. In not only clearly articulated the reasons for the change but also offered a true picture of the company's current situation and what it needed to achieve in the form of future goals. It also outlined the processes and behaviours that would be crucial to it achieving its goals and how it valued its relationship with both its customers and employees. In addition to the mission statement, a vision statement was also created that articulated the company's aspirations on how it intended to satisfy its customers with the help of its highly skilled workforce (refer to figure 1.5)
b) Leading change program: The intention behind introducing the leading change program was to provide the business leaders the necessary skills and competencies that would not only help them change their behaviour but also change the behaviour of their reporting staff. The leading change program was delivered to a group of 140 individuals comprised of both the senior and middle level management between October 1993 and March 1994. The program structure was split in three parts, first was a three-day residential segment that was followed by a follow-up two months later, and final segment was a review post six months.
The Managing director played a huge role in leading change program where he started each session by directly communicating the dimensions of change to the leadership group. The eight dimensions evolved from the commitments Ericsson had made to win the Telecom SVS Tender and was also meant to guide its relationships with other customers. The dimensions were designed in such a way that they too helped to serve the overall purpose of a behaviour change in the employees. Referring to figure 1.6 some dimensions (1, 2, 4 and 6) served to challenge the current traditional engineering focused mentality of its employees and to provide them with the impetus to view their customers at the centre of the business. Other dimensions (3, 5, 7 and 8) described that in order to bring improvements in quality and productivity the organisation will have to alter its existing work structures and systems and create an environment that would encourages participation, open communications and employee empowerment.
In addition to discussing the dimensions the Managing director also showed the management three videotaped interviews with their customers. In these interviews the Ericsson customers openly shared the shortcoming in their relationship with the company and also discussed their expectations of the company.
Whilst the above clearly conveyed to the leadership team the significance of the future direction the company wished to pursue, and how that direction was going to impact their roles and responsibilities, it was the mental tools used in the program that equipped them with the skills to manage the change. Borrowing from a plethora of organisational change literature the 16 mental tools were designed in sync with objectives of the eight dimensions. These mental tools were delivered in an illustrated fashion with the overall aim of helping the leadership team develop new ways of thinking and also communicate it down the organisational chain in an effective manner. Tools such as 'Think like a customer' (shown in figure 1.7) and 'Move to solution thinking' (shown in figure 1.8) were designed to help employees view their customer's expectation as their top priority and to help them think of more creative solutions respectively.
At the end of the leading change program, every manager within his control area was required to choose an ongoing improvement program that would serve as a catalyst to transfer the new skills and behaviours to their line control using the mental tools. In order to bring about the change the leaders were free to use either the eight dimensions of change or the mission statement or the leading change workshop. The change strategy adopted by them had to be conveyed to the Managing director. And the progress of these strategies was reviewed in the follow-up session held two months later. In the final segment of the program, which was the held six months later, the managers met to identify the outcomes of the improvement programs and challenges faced in the successful implementation of the program.
Though there were challenges in the form of the deep-rooted culture at Ericsson the cultural rejuvenation process achieved significant success and proved to be beneficial for the organisation.