Leadership and Strategic Change PDF

LEADERSHIP AND STRATEGIC CHANGE Davide Genta Advanced Strategic Management 23-24  David Brandon took over as CEO of Domino’s Pizza after a period of little change. → ‘If you are the kind of people and type of organisation that loves change, that believes change is good, chang...

LEADERSHIP AND STRATEGIC CHANGE Davide Genta Advanced Strategic Management 23-24  David Brandon took over as CEO of Domino’s Pizza after a period of little change. → ‘If you are the kind of people and type of organisation that loves change, that believes change is good, change is exciting and embracing change is something that you really want to get good at and want to do, then you are going to love me. If you are the kind of person who wants things always to be the way they have been and you want to sit around and talk about the good old days, then I am not your guy, because truthfully I am here to create better days and that is going to require change’. Harvard’s John Kotter makes this distinction: ‘Management is about coping with complexity... without good management complex enterprises tend to become chaotic... Leadership, by contrast is about coping with change’. Strategic change is inherent in much of this part of the course. Central to strategic change is ensuring that people make a strategy happen. how managers can lead people to effect strategic change? chief executives / senior managers /middle managers too may take leadership roles in change. Leadership and strategy four key premises: Strategy matters Context matters. The approach taken to managing strategic change needs to be context-dependent. →There is no ‘one right way’ of managing strategic change Inertia and resistance to change are likely. Managers report that the major problem in managing change is the tendency of people to hold on to existing ways of doing things. Leadership matters. This does not mean that leadership of change is always and exclusively from the top of an organisation → Leadership of change needs to happen at different levels in an organisation. DIAGNOSING THE CHANGE CONTEXT How change is managed will depend on the magnitude of the challenge faced in trying to effect strategic change. It is therefore useful to consider the type of change required, the wider context in which change is to occur, the specific blockages to change that exist and forces that exist to facilitate the change process. Types of strategic change strategy development is often incremental in nature. It builds on rather than fundamentally changes prior strategy. Fundamental change is less common. Balogun and Hope Hailey develop this insight further to identify four types of strategic change Two axes : (a) the extent of change → change in line with the current business model and within the current culture as a realignment of strategy Or significant culture change/transformational change? (b) the nature of change. → the speed at which it happens. → it is beneficial for change in an organisation to be incremental since this allows time to build on the skills, routines and beliefs of those in the organisation. /But if an organisation faces crisis or needs to change direction fast a ‘big bang’ approach to change might be needed on occasion. Types of change The 4 types 1. Adaptation → change that can be accommodated within the current culture and occur incrementally. It is the most common form of change in organisations. 2. Reconstruction → change that may be rapid and involve a good deal of upheaval in an organisation, but which does not fundamentally change the culture. It could be a turnaround situation where there is need for major structural changes or a major cost-cutting programme to deal with a decline in financial performance or difficult or changing market conditions. 3. Revolution→ change that requires rapid and major strategic as well as culture change. This could be in circumstances where the strategy has been so bounded by the existing culture that, even when environmental or competitive pressures might require fundamental change, the organisation has failed to respond. → circumstances where pressures for change are extreme – for example, a takeover threatens the continued existence of a firm. 4. Evolution→ change in strategy that requires culture change, but over time. → the most challenging type of strategic change since, for many in an organisation, there may be no pressing need for change. The importance of context Leading change in a small entrepreneurial business, where a motivated team is driving change, would be quite different from trying to do so in a major corporation, or perhaps a long-established public-sector organisation, → set routines, formal structures and perhaps a great deal of resistance to change. It is dangerous to assume that leading change effectively in one context is the same as in another. An assumption that approaches to change are readily transferable between contexts may be risky. For example, many government departments in different parts of the world have sought to import change management practices from consultancies or by recruiting managers from commercial enterprises but have often found this problematic. The Change Kaleidoscope Balogun and Hope Hailey’s ‘Change Kaleidoscope’ builds on this point to identify contextual features to take into account in designing change programmes. examples of different approaches to change: The time available for change could differ dramatically. → profit lowering / adapting to slow changing environment The scope →in terms of the breadth of change across an organisation or the depth of culture change required. Preservation of some aspects of an organisation may be needed: in particular capabilities on which changes need to be based. →technical experts A diversity of experience, views and opinions within an organisation may help the change process. Is there capability or experience of managing change in the organisation? Capacity for change in terms of available resources will be significant: change can be costly (financial/management) What is the readiness for change? Is there a felt need for change across the organisation, widespread resistance, or pockets or levels of resistance in some parts of the organisation and readiness in others? Who has the power to effect change? the chief executive/ others in the organisation (stakeholders effect) is one-off change possible? Does the organisation in question have the capacity, capability, readiness and power structures to achieve the scope of change required? For example, in a study of attempts to manage change in hospitals it was found that their governance and organisational structures prevented any clear authority to manage change. This, combined with the resource constraints under which they laboured, meant that major one-off change initiatives were not likely to succeed. In such circumstances, it may be that the context needs to be changed before the strategic change it self can occur. For example, it could be that new managers with experience of leading change need to be introduced to enhance the capability and readiness for change and get the organisation to a point where it is ready to embark on a more significant strategic change programme. Or it may need to be recognised that change has to be managed in stages. The researchers in the hospital study reported above found that change tended to take place by one initiative making limited progress, then stalling, followed by a later one making further advances.  Forcefield analysis A forcefield analysis provides an initial view of change problems that need to be tackled by identifying forces for and against change. It allows some key questions to be asked: What aspects of the current situation would block change, and how can these be overcome? What aspects of the current situation might aid change in the desired direction, and how might these be reinforced? What needs to be introduced or developed to aid change? A forcefield analysis can also be informed by the Change Kaleidoscope Mapping activity systems Stakeholder mapping The culture web The 7-S framework An example Where are we now? Where do we want to be? What will happen if we don’t get there? What are forces or drivers for this change? What are the forces or drivers against this change? What are the strongest forces for and against change? Is change viable? What will be the impact of changing and not changing? Dept. Agriculture and Food, Australia  LEADING STRATEGIC CHANGE: role people play in leading strategic change and how they do it Strategic leadership roles Leadership is the process of influencing an organisation (or group within an organisation) in its efforts towards achieving an aim or goal. Without effective leadership of strategic change the risk is that people in an organisation are unclear about its purpose or lack motivation to deliver it. Strategic leadership is central to strategic change. There are three key roles that are especially significant in terms of leading strategic change: Envisioning future strategy. The effective strategic leader needs to ensure there exists a clear and compelling vision of the future and communicate clearly a strategy to achieve that both internally and to external stakeholders. In the absence of top management doing this, those who attempt to lead change elsewhere in an organisation are likely to construct such a vision themselves. → lead to confusion Aligning the organisation to deliver that strategy. ensuring that people in the organisation are committed to the strategy, motivated to make the changes needed empowered to deliver those changes. leaders build and foster relationships of trust and respect across the organisation. Embodying change. A strategic leader will be seen by others, not least those within the organisation, but also other stakeholders and outside observers, as intimately associated with a future strategy and a strategic change programme. →role model for future strategy Middle managers A top-down approach to managing strategy and strategic change sees middle managers as implementers of top-management strategic plans→ their role is to ensure that resources are allocated and controlled appropriately and to monitor the performance and behaviour of staff. In the context of managing strategic change there are three other roles they play: ‘Sense making’ of strategy. how strategy is explained and made sense of in specific contexts may, intentionally or not, be left to middle managers→ misinterpretation→vital that middle managers understand and feel an ownership of it. crucial relevance bridge between top management and members of the organisation at lower levels, → how they make sense of top-down strategy and how they talk about and explain it to others becomes critically important. → local leadership role. Reinterpretation and adjustment of strategic responses as events unfold (e.g. in terms of relationships with customers, suppliers, the workforce and so on)→middle managers are uniquely qualified because they are in day-to-day contact with the environment→ Advisers to more senior management on what are likely to be blockages and requirements for change. Newcomers and outsiders role in strategic change A new chief executive from outside the organisation may be introduced into a business to enhance the capability for change or to bring a fresh perspective→ turnaround New management from outside the organisation can also increase the diversity of ideas, help break down cultural barriers to change and increase the experience of and capability for change→ successful influence is likely to depend on how much explicit visible backing they have from the chief executive. Consultants →help formulate strategy or to plan the change process/facilitators. The value of consultants is threefold. they do not inherit the cultural baggage of the organisation and can therefore bring a dispassionate view to the process. they may ask questions and undertake analyses which challenge taken-for-granted ways of seeing or doing things. they signal symbolically the importance of a change process, not least because their fees may be of a very high order. Other stakeholders may be key influencers of change. For example, government, investors, customers, suppliers and business analysts all have the potential to act as change agents on organisations. Styles of strategic leadership There is no one best style of strategic leadership. Moreover there is evidence that successful strategic leaders are able to adjust their style of leadership to the context they face. This has become known as ‘situational leadership’. Michael Beer and Nitin Nohria observe that, broadly, there are two approaches to managing change which they describe as ‘Theory E and Theory O’. Theory E and theory O (Michael Beer and Nitin Nohria) Theory E is change based on the pursuit of economic value and is typically associated with the top-down, programmatic use of the ‘hard’ levers of change. The emphasis is on changes of structures and systems, financial incentives, often associated with portfolio changes, downsizing and consequent job layoffs. Theory O is change based on the development of organisational capability. The emphasis here is on culture change, learning and participation in change programmes and experimentation. a combination of the two approaches may be beneficial Sequencing change → start with theory E approaches and move on to theory O approaches. Embracing both approaches simultaneously and being explicit about it to people in the organisation and external stakeholders. Combining direction from the top with participation from below. clarity of overall strategic direction and potential upward spontaneity can be achieved. Using incentives to reinforce change rather than to drive change. Styles of leading change Styles of change leadership Education involves persuading others of the need for and means of strategic change. Four phases of this style of change leadership have been advocated: 1. Convince employees that change is imperative and why the new direction is the right one. Again this emphasises the necessity for clarity of future vision and strategy. 2. Since change is likely to be interpreted differently throughout the organisation, frame the changes in ways relevant to the different groups and functions that have to enact the change and gather feedback on how this is understood and communicated within those groups. 3. Ensure ongoing communication of the progress of change. 4. Reinforce behavioural guidelines in line with the change and reward the achievement of change goals. problems here→reasoned argument in a top-down fashion will overcome perhaps years of embedded assumptions about what ‘really matters’ may be optimistic. →There may be apparent acceptance of change without its actually being delivered. → long time + costly (training) Collaboration in the change process Collaboration in the change process is the involvement of those affected by strategic change in setting the change agenda; for example, in the identification of strategic issues, the strategic decision-making process, the setting of priorities, the planning of strategic change or the drawing up of action plans. involvement can foster a more positive attitude to change people may see the constraints the organisation faces as less significant and feel increased ownership of, and commitment to, a decision or change process. potential problems here too. People may come up with change solutions that are not in line with, or do not achieve the expectations of, top management or key stakeholders. For example, there is the risk that solutions will be found from within the existing culture or that the agenda for change will be negotiated and may therefore be a compromise. A strategic change leader who takes this approach may, therefore, need to retain the ability to intervene in the process, →the risk of demotivating employees who have been involved in the change process. Participation Participation retains the coordination of and authority over processes of change by a strategic leader who delegates elements of the change process. For example, particular stages of change, such as ideas generation, data collection, detailed planning, the development of rationales for change or the identification of critical success factors, may be delegated to project teams or task forces. Change teams may not take full responsibility for the change process, but become involved in it and see their work building towards it. The responsibility for the change is retained by the strategic leader who ensures the monitoring of progress and that change is seen to occur. An advantage is that it involves members of the organisation, in originating ideas,and also in the partial implementation of solutions→ commitment to the change. It may also be that the retention of the agenda and means of change by the strategic leader reduces the possibility of a negotiated compromise and means that more radical change can be achieved. The potential problem is that employees may see this approach as manipulation and become disenchanted and demotivated. Direction Direction involves the use of personal managerial authority to establish a clear strategy and how change will occur. It is top-down management of strategic change where change ‘solutions’ and the means of change are ‘sold’ to others who are tasked with implementing them. The need here is for both clarity of strategic vision and the specifics of a change programme in terms of critical success factors and priorities. The approach may be needed if there is a need for fast change or control over the change agenda (for example to meet the expectations of dominant external stakeholders). The danger is that it can result in explicit resistance to change or people going along with the rhetoric of change whilst passively resisting it. It is also worth noting that even where top management people see themselves adopting participative styles, their subordinates may perceive this as directive and may welcome such direction if they see major change as needed. Coercion Coercion is direction in its most extreme form. It is the imposition of change or the issuing of edicts about change. This is the explicit use of power and may be necessary if the organisation is facing a crisis, for example.