Saturday, April 30, 2005

Why corporate change is hard and failure almost inevitable (Part Two)

Part I

Part III

Previously, I discussed David Maister's book Managing the Professional Services Firm and its applicability to all corporations. In particular, Maister's insight into "expertise" versus "procedures" firms helps explain why corporate change efforts fail so frequently.

Part one also looked at the problems procedures firms have in recognizing that change is necessary. In part two I want to discuss the problems such firms have in making changes happen.

Even after the need for change is recognized, the procedures mindset continues to exact a heavy toll. Since effective solutions depend upon accurate problem diagnosis, the relative lack of this ability hurts many change efforts. In addition, "solutions" which come with ready-made templates are especially appealing to the firm even if they do not really address the central problems.

This helps to explain why "fad surfing" is such a common problem. Where work is defined (implicitly and explicitly) as the implementation of existing templates, change programs will be evaluated in terms of the new templates they offer. However, it is very easy to create a clear, elegant, easy-to-implement template that addresses the wrong problem or ignores areas critical to success.

Since the procedures firm (that is, most companies) depends on standard methodologies, change programs are especially stressful. Once it is recognized that the old methods are failing, there is an interval of ambiguity while new methods are developed and put in place. While creative and expertise firms revel in ambiguity, the same cannot be said for procedures firms. Their success depends on efficiency and consistency and this requires clear guidelines and standard processes. Ambiguity is anathema.

This promotes an urgency toward implementation which often means diagnosis and critical analysis is slighted. A solution today looks better than study that might produce more effective solutions next week. A bias for action is a competitive weapon when change is slow or incremental. It becomes a weakness when fundamental elements of the firm's business model or "theory of the business" are out of date.

The final impediments to effective change grow out of the firm's human resources mindset and practices. First, it frequently give too little thought to selecting the cadre of managers who will carry out the change effort. Remember, the firm's bread and butter is systems, methods, procedures, and templates. They focus their attention on minimum standards and raising the median performance level; they do not have a "star system." As a consequence there is a tendency to populate the key task forces with managers who are interested, amendable and available, not those who have the rare mix of skills to carry out the effort effectively.

However, since this effort is so different from the normal work of the organization, the average manager is not equipped for it in terms of training, inclination, or experience. Stars, of a sort, are needed.

[Reengineering] failure most often results from one underlying problem: The people engaged in the reengineering effort don't know what they are doing.

Hammer and Stanton, The Reengineering Revolution: A Handbook, ( 1995), p. 15.
Unfortunately, the right "stars" often come with baggage. Those attributes that make them strong candidates also work against them politically. They are headstrong, bored by templates, fascinated by ambiguity. They are outsiders. They lack a political base. So the organization opts for good and willing soldiers armed with a change management template.

Just as frequently, firms opt for professional outsiders, also known as consultants. This is also a risky option. Consultants, after all, frequently work in a procedures practice. Hence, they are as prone to use templates as the client and further, usually lack detailed knowledge about the customers and the marketplace of their client. (Yes, it is true that the senior partners are often quite expert, but junior associates do most of the work.) Finally, these outsiders have no real stake in the success of the effort and that affects commitment.

Shapiro quotes two executives from clients who suffered through failed reengineering projects:
Client A: "the consultants drove the process. They did it in an interesting way. They have these 'templates' and their rule is that you can't vary from the templates. That allows a couple of consultants to trigger a huge amount of activity and still claim that they were just 'facilitating' the effort."

Client B: "We're in a fascinating industry. But [the consultants] weren't interested in that at all. All they were interested in was their templates and timetables."

The final human capital problem appears during implementation. Change is hard; putting new methods in place requires leadership. But this is a trait in short supply in procedures practices. As Maister notes:
Rather than inspirational leadership styles, efficiency based practices need managers who are disciplined, organized, and detail oriented. (p.27)
In many ways this is a bleak assessment. It can be criticized (rightly) for relying on theory, generalized observations, and deductive reasoning. A real world example may be in order. I'll do that in part three.

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