August 2006
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August 2006 | |
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Designing a Company to be Built to Change
"The dilemma is needing to take action before the need is evident, of building change capability before it looks necessary."
Professor Lawler is the author and co-author of 36 books. His most recent work, Built to Change: How to Achieve Sustained Organizational Effectiveness, co-authored with Christopher G. Worley, is a groundbreaking book that shows how organizations can be "built to change" so they can last and succeed in today's global economy.
The title of your book is Built to Change, a take-off on the title of the bestseller Built to Last. In today's business environment, what is wrong with the premise of books such as that one or In Search of Excellence? In a successful company, there's sort of a built-in assumption a lot of times that once you find the right things to do, you try to stabilize and keep doing those things because they work. Improving execution on those things may blind you to what's going on in the external environment. Too many organizations end up making themselves too difficult to change. There is plenty of evidence that most traditional change models are not very effective. Organizations get designed to defeat the changes, no matter how good the intentions. The built-in stability overwhelms the new initiatives. Your research found that the rate of change among leading companies is no figment of our imagination, that the percentage of new companies in the top 20 of the Fortune 1000 continues to increase. Between 1993 and 2003, for example, 60 percent were new. Are stability and predictability now largely things of the past? Yes, change is not just something obsessed over in the press; there's a very real increase in churn. In some areas, such as the public sector, change is not necessarily as dramatic. But where we the authors concentrate--on large corporations and the global business organizations--the need to be built for change is ever-present. What are the most common blunders established companies make when trying to create a culture of change? The problem is not so much the mistakes they make, but more a Companies get hooked on old technology, on old success stories, on whatever is the current cash cow. This is true for nearly any highly structured organization. By nature they are more concerned about tactical, organization change than in big and bold moves. You say that companies need "to be designed to change and be capable of high-velocity change." Isn't this far easier for a start-up or small business than it is for a large corporation with a long history? Size is one element, but other important elements are age and history of success. The biggest obstacle Gerstner faced at IBM, for example, was past success. Everything he wanted to change, somebody said, "That worked well for us, that's why we have it. Why should we abandon it?" Practices become standard and entrenched. What's recognized and understood by most managers is not the ability to change, but rather the ability to execute. That's what they're used to--execution. You talk a lot about having a core identity and a set of core values. That way change is built around those constants and is therefore not so difficult to implement. Give us some current examples of large companies that are getting it right in that area. Companies that get that right understand "Where we win is by changing, by innovating." Clearly one of them is Google and they are now being mimicked by more and more players in the software space. Ideo the design firm really has change built into its DNA. Yahoo has had some success building that into their culture. The best of all worlds is when everyone is seeing you the same way and the right way. It's ideal when customers believe they can count on you-and when it also is actually true! When the internal and external match, you get a kind of virtuous spiral going. The right people want to work for you. Because the right people work for you, you can meet the changing demands of customers. Customers see that and they keep using you or buying from you. So you're seen as successful from all angles. You say that nobody in a company should have more than two degrees of separation from customers. How does that make a company more able to implement regular change in the organization? The reason that's important is it gives employees throughout the organization a reason to change and provides feedback on that change as it is happening. The other reason is everyone can participate and each person is in touch with what is actually happening in the environment. In order to move with the market demands, people need to get away from the idea of "That's not my job." This is particularly important in the retail world. Whole Foods has been really good in this area. Best Buy has done a pretty good job. One obstacle to radical change at companies is that the "buy-in" is not universal and communication down through the ranks is inadequate. You offer some interesting specific advice to engage the "connectors," the "mavens," and the "salespeople" to promote a culture of change. Tell us how that would work. Unfortunately, there's no objective checklist or technology support for that idea. It's more a matter of good observation and identifying those key people. It ties into that idea of shared leadership, that everything can't be pushed down from the top. A company needs to fill the organization with people who can take on those roles. Capital One, for example, has turned out to be quite agile. They train every employee in change leadership, in change skills. The instruction is consistent throughout the organization. One section of Built to Change is focused on hiring, motivating, and preparing the right kinds of employees, those that are ready to change and are good at adapting to new demands. So why do we see so many more posted job requirements that favor very narrow skill sets and experience over these more important characteristics? Isn't the increased use of software that filters resumes by keywords a detriment to this kind of hiring? Yes, a lot of companies are still operating off the old model. "Let's fill 'the job' so we can execute." They focus on very specific job descriptions rather than hiring people who can adapt and change to evolving demands. One way to change of course, is to churn your workforce, which these companies often need to do to adapt. Another way is to move the existing workforce to where you need to go. The best is probably a combination of the two. But if you don't pay attention to adaptability and a mix of skills when hiring, it's going to be trouble later. You can usually tell pretty quickly whether a candidate is going to be a good change leader or not. If every change-focused company is after this smart "ready to change" type of employee or manager, what implications does this have for the predicted skilled worker shortages in the coming decade? It's a good question. If we mess up the visa issue and fail to train people in science and math, we will have a problem. If we get into this situation, it would be a self-inflicted wound though. We could easily solve it, but the question is whether we have the will and the leadership to solve it. We talk about this wave of retirees coming up, but most people you ask either don't want to retire or can't retire because they haven't saved enough. Even the ones who are able to retire financially still often want to work part-time and make some kind of contribution. By shuffling a few incentives around and getting the visa mix right, we can avoid a skilled worker shortage very easily. You note that "organizations are like careers." Tell us how managers can apply that thinking to their teams. Like a career, an organization needs to keep evolving and changing. For both, the manager needs to set expectations. He or she needs to define how much the organization can do and how much the individual can do. About all the organization can really do in developing an employee's career is provide information, some training, maybe a bit of advice. People are going to have to make a number of risky decisions in their lifetime. What organizations owe those people is information. The key piece of information is making it clear to people how they are going to be assessed and judging them based on those criteria. Many of our readers are current graduate students in technology or business. What advice would you offer them in setting themselves up for a successful long-term career? It sounds a bit trite, but it is still on target to say individuals need to think of themselves as a product, developing themselves as a brand. They need to worry about marketability, about credentials, about work history. People need to ask themselves, "Do I have a sustainable market value?" On thing is for sure: in this environment, you can't rely on any organization to look after you over the long-term. You need to keep demonstrating learning and growth: continued education, certification, learning new software code, developing a new HR competency-whatever is applicable to you and your brand. ### Interview conducted in August 2006 by Timothy Leffel, managing editor. See more about Edward Lawler III at edlawler.com. |
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Edward E. Lawler III is Distinguished Professor of Business at the University of Southern California Marshall School of Business and founder and director of the University's Center for Effective Organizations (CEO). CEO has been recognized by Fortune and other publications as one of the country's leading management research organizations.
matter of not creating a culture of change. Instead, the leaders hope they can execute a change when they recognize a change in the environment, but it's probably too late at that point. The dilemma is needing to take action before the need is evident, of building change capability before it looks necessary. 
