Keynote Series Creative Leadership and Cultural Change

Adaptive Learning PTY LTD

Keynote Series – Creative Leadership and Cultural Change

The following material was presented as a keynote at the Liquid Learning Leadership & Change Conference, 16 & 17th March, Menzies Hotel, Sydney, 2005.

Abstract: The role of the 21st century leader is to create change and ensure that their people are ‘change enabled’. The creative leader sees opportunity in change. We can trace the behaviours of leaders and managers throughout key periods in various industries to uncover those who demonstrated creative leadership - the ones who saw a creative opportunity in contrast to those who ‘missed the boat’. In this session we look at examples of entrepreneurship, creative leadership and change to highlight how leaders ‘build’ positive and effective organisational cultures and the issues that they have to deal with in doing so. We also look at the key challenges which lay ahead for Australian ‘change agents’.

On Change and Change Management

Let’s face it. “Change Management” is a hugely complex, ill-defined and frequently misunderstood subject. When applied to organisations, it covers the whole range of magnitudes, from tweaks to quakes: from changing a roster or work policy, to business process reengineering, strategy implementation, to the big daddy of them all - cultural change. The rate and impact of change can be evolutionary (slow & smooth) to revolutionary (rapid & disruptive). Above all, change is personal and contextual. What works in one place, fails in another. Advice from the so-called experts is often contradictory and paradoxical (and this article is no exception). What does appear to be true is, the bigger the change is, the more boundaries it crosses, the more people it touches, the harder it is to do successfully.

My interest is in large scale organisational transformation and why we don’t seem to be able to get this right.

Organisational Change fails more often than not

“Ask almost anyone about the difficulty of creating major change in an organisation and the answer will be ‘very very tough’. Yet most of us still don’t get it. We use the right words, but down deep we underestimate the enormity of the task.” - John Kotter, Leading Change, 1996

If the anecdotal evidence of the last decade and a half is anything to go by, organisational change fails more often than not. I would love to give you chapter and verse to prove this assertion, but the fact is numerical studies of the efficacy of change programmes are few and far between. (Then there’s the small matter of how do we measure ‘change’ and what is ‘success’ anyway.) Not withstanding these concerns, here are some figures to chew over:

 Independent studies by Arthur D. Little and McKinsey & Co. in the early 1990’s found that out of hundreds of corporate Total Quality Management programmes, two-thirds are halted due to failure to deliver the desired results. i  In “The Search for a Simpler Way” (a report about the changing nature of work), the authors suggest that while the way we work has change dramatically over the past decade or two, 60 to 80% of any possible gains have not been realised.ii  Paul Strebel iii and James Champy (co-author of Reengineering the Corporation)iv both put failure of organisations to renovate themselves at between 50 and 70%.  The Standish Group estimated that 80,000 (technological) projects were cancelled in North America, in 1995 alone. The report unconvincingly sought to describe these failures in purely Project Management

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au terms. v The two primary causes were lack of involvement from the right people and poor executive management support.  Fortune Magazine reports that when it comes to mergers and acquisitions, 77% fail to recover the costs of the subsequent integration effort. vi  Closer to home, Turner & Crawford (1992-98) report that from 243 cases of corporate change they studied in Australia, 67% suffered one major set back, 47% two and 29% three. Yet in 88% of the cases the executives felt the changes were necessary and correct, and 92% believed the changes were well within the organisation’s capacity to achieve. In most cases the gap between expectation and success was unacceptably high.  Over 30% of Australian executive leaders expect to be able to change organisations substantially within a 12 month timeframe. vii  John Kotterviii, the doyen of change, weighs in with the suggestion that over half of the one hundred top management driven transformation efforts he studied failed in the initial phases and only a handful could be rated ‘very successful’.

Why Change Fails to Deliver the Expected Results

“As difficult as the strategic challenges might be, they are acted on faster than the organisational transformation needed to sustain them. And however hard it is to change the organisation, it is even harder to change the mindset of senior managers. Hence today’s managers are trying to implement third generation strategies through second generation organisations with first generation managers. “ - Bartlett & Ghoshal, Sloan Management Review, 2002

What conclusions can we derive from this data? That change doesn’t happen - that even after ‘change programmes’ have been introduced, whatever drives success or performance remains unchanged? That people do not like change, therefore they resist it? That change programmes are badly implemented? That executives and senior managers expect too much from the changes they initiate? Or perhaps our beliefs about what ‘change’ is need a substantial overhaul. I suspect the real answer is all of the above, and more.

The obvious next question is: “If organisational change is so spectacularly unsuccessful - why is this so?” The proposed answers to this are as varied as the studies done and the authors commenting on them. Change - even small, technological change is complex. The parameters are many and workplaces differ greatly. It seems that no two change programmes are the same.

What does appear to be true, is that the reasons given for change failure depend more upon the mindset of the commentator than they do the situation. (They reflect on ChangeChange & & Transition Transition the individual beliefs about the process of change and human nature.)

Broadly speaking there are two camps. One, I’ll label ProjectProject Start Start EndEnd time “The Mechanics”, believe change can be engineered, time planned out and managed. Results can be measured and the process can be controlled. (At least eight well respected change experts publishing in the Harvard Business Review in the 1990’s fell into this category.) Ends?Ends? The other group, “The Organics”, think the opposite, that TransitionTransition start? start? change is a complex adaptive process, more to do with what is going on in the head than the physical change at Change as a set of well defined events and as a the coal face. (Of course, you have every flavour in psychological transition between two mental states. between these two extremes.)

“Mechanics” reason this way… If change failed it was because either it was not managed properly, or the people implementing the change were not suitably skilled. The solution in both cases is more knowledge, better competencies and skills resulting in further training and consultants.

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au “Organics” try another tack: They argue, if you do not change people’s minds (feelings and beliefs) there is no real change. Without deep, fundamental change to mindsets, the old habits and practices will reassert themselves (once the heat is off, the supervisor stops looking or when a new fad takes attention away from the current change - its back to behaviour-as-normal.)

It is possible that change interventions fall at both hurdles - poor project management of the physical change and lack of leadership required to enable people to cope with the psychological transition which change triggers.

Resistance to Change

“People do not resist change - they resist BEING changed.” - Dee Hock

I would challenge the common assumption that people fear change. One only needs to look about us to see people accepting and driving change in all parts of their lives. The act of growing up is a study in change - physically, mentally, emotionally and socially. Innovation is making things different and learning is changing what we know and believe. Growth and decay - both mechanisms for change - are natural characteristics of living creatures and humanity is the archetypal ‘complex adaptive system’. In short, two million years of evolution has prepared man for change.

Still, resistance to change rates as the primary reason given by senior management for the failure of change in their organisations.ix Actually, this should come as no surprise. Traditional hierarchical and bureaucratic (“Mechanistic”) organisations were designed at the start of the industrial revolution x to produce a stable output regardless of the quality of worker available (for the most, displaced peasant farmers). For two centuries, these structures have been remarkably resilient, being based on close supervision, enforced rules and policies, clear roles and responsibilities and rigid reporting lines. (They have also been remarkably under-performing and unable to get the best out of talented people.) At the heart of these organisation is a belief (perhaps once true) that workers are unskilled, unknowledgeable and untrustworthy (cf. McGregor’s Theory X xi) - this in turn supports cultural norms of ‘seek praise’ and ‘avoid blame’ which operate to generate compliance and conformity. It then follows that mechanistic organisations are strong in inertia and risk aversion and weak in initiative and devolved accountability. This legacy alone is enough to invoke reaction from a workforce population patently different from that of 200 years ago.

The rank and file workers often have a different slant of the failure of instituted change. Many complain that they were given too little support and direction, or were not consulted about how the change would impact them. While they would admit to resisting changes they neither want nor can understand, the responses of managers to their questioning and intransigence, makes matters worse. The more management uses command and control mechanisms to ensure compliance, the greater is the passive and active resistance to change.

If we accept that each of the views expressed above (executive, worker, mechanistic change and organic transition) hold some grain of truth, then this might explain why change is so difficult, but it also suggests a sensible model for transformational change.

The Challenges of Organisational Transformation

“Losing an illusion makes you wiser than finding a truth.” - Karl Ludwig Borne

It is clear that for the majority of companies to survive in the 21st century, substantial organisational transformation is required. There are however, no silver bullets, no six or seven-steps to cultural change or even consistently reproducible frameworks. Change is messy, personal and contextual. The physical aspects of a change must be well managed and the socio-psychological component (transition) be dealt with sensitively and on its own timeframe. The challenge of transitional change must be engaged (personally and organisationally) on three levels: Intellectually, Emotionally and Culturally - at the end of the transformation, people will be required to think differently, feel differently and act differently.

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au A Model for Understanding Transformational Change While shown step-wise and sequentially in the diagram and explanation below, change is never linear or simple. “Challenges” merge, interact and reinforce. Two steps forward, one step back is the rule; change is a dance. (What you thought previously embedded requires revisiting and the depth of learning and understanding spirals from superficial to deep.) There is a world of difference between ‘knowing’ in the head, ‘really knowing’ in the heart and then doing in a social/cultural context. Self-delusion, denial and misunderstanding dog every step of the way.

UNAWARE Stimulus Information AWARENES knowledge experiential S CHANGE APPLICATI UNDERSTANDING ON ACCEPTAN emotional CE Learning (after D. Kolb, 1970 & T. Lee, 2001 ) Challenge 1: From vaguely unaware to understanding - winning the intellectual argument Starting from the top of the organisation, it is required that leaders appreciate what in the world (market, industry, environment) has fundamentally changed and that this inevitably will necessitate organisational change. (The rate of change internally must match that of the external world for organisations to survive and thrive.) The need for change must be established at this point - the benefits, the logical reasons ‘why’. Traditional managers will require ‘proof’ - data, market trends, expert opinion or an indication that others are in the same boat. At an intellectual level, some dialogue about what the future organisation will look like is required (destination and pathway). Questions surrounding purpose, vision, identity, strategy, culture, leadership capabilities and the effect of change on existing operations will all need to be broached. These discussions must cascade down throughout the organisation and at each level, leaders need to recontextualise the argument to bring meaning and understanding to others. “How will the proposed changes effect me?” will be one of the first questions asked. Traditionalists will want to see a timeframe and plan - at least the outline of the change programme to be initiated. Sticking Points: Difficulty getting this discussion on the agenda (corporate myopia & heads-in-the- sand syndrome), disbelief that the new situation is relevant to us, argument surrounding the validity of the data and conclusions, complacency with existing position (the best time to change is when you don’t have to), token agreement without further commitment. Difficulty in getting a bureaucracy to understand that change and transition are different concepts and that the latter is an emergent phenomena that defies rigid ‘planning’.

Challenge 2: From understanding to accepting - winning the emotional argument Winning people’s minds is one thing but to get their ‘hearts’ involved is an entirely different matter. Intellectually (objectively) we can understand a need, but to get commitment and conviction, subjective faith is required. From “it needs to be changed”, to “I will involve myself in this change”, is a large leap indeed. In effect we must bridge the gap between change is happening “over there, somewhere, sometime, to somebody else” to “it’s here, now and me”! The objective to subjective gap. This stage also involves a developing belief in the capability of the organisation to change - “I, we can change.” Early success of the changes being implemented will enhance this belief. There is no substitute for open and honest discussion about our feelings and fears if we are to create interdependency and a common belief system supporting shared mental models. The collective leadership group will need to role model this by sharing their experiences, learning from each other and developing a collective sense of the meaning of leadership in the new world. Sticking Points: Difficulty in coming to grips that “I” (the leader) will have to change - not just the systems, processes, technology, workers - other things and other people. That it requires personal conviction to

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au make this happen. That I will have to be involved - body & mind. Difficulty for managers to handle the ‘soft’ aspects of change and change transition.

Challenge 3: From accepting to doing - winning the socio-cultural argument

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” - Alvin Toffler

The final barrier is the “knowing-doing” gap in a social context. How do we introduce new behaviours and remove ingrained habits, work patterns and coping mechanisms which have been successful in the past? Here is where the rubber hits the road, where vision and intent to change becomes reality. Where strategy becomes meaningful and concrete action. The translation and implementation of big-picture concepts dreamed up in the boardroom and modified through seemingly endless change committees and groups, must occur at ground level where the work is actually done. This is never easy nor pretty. What is learnt here needs to be fed back into the learning cycle as it brings new awareness, understanding and acceptance. For leaders, the challenge is walking-the-talk on new values - proof to all that changes espoused are actually taking place. Cultural schema may be directed from above, but they are held in the minds and work practices (theories-in-use) of the people. Norming, re-norming, learning, unlearning, relearning, is an iterative process. Sticking Points: The clash between changing for the future and performance now (via the old ways and behaviours). Walking the new talk while still under pressure to perform (most easily done using the old methods that brought success). Lack of patience: one danger is that old ways will be re-established if the “new-world” doesn’t give the expected results quickly enough. Expectation management is a key skill of change leaders.

Overcoming Resistance to Change

“What is essential, and what is peripheral - is basic to all intelligent management of change. At the core of all our resistance to change is the fear that we will lose something of ourselves, something unrecoverable.” - Joe Flower

The model presented above also provides hints to Change Agents in overcoming the natural resistance to change so prevalent in traditional organisations. Resistance is any force that slows or stops progression xii and people resist in response to a physical, perceived or anticipated change in their environment. Resistance is a natural reaction to harmful change. The problem is, this autonomous response is triggered even if our perceptions are askew or the anticipated result does not eventuate. There is always tension between change as an opportunity (to learn and grow) and that possibility that a change might alter some intrinsic part of us on which our identity rests. Resistance to change can therefore be seen as a survival instinct. This is true of both individuals and collectively as organisations.

Intellectual (Cognitive) Resistance: Common sources of intellectualised resistance include:  Lack of clarity and explanation of the change (and especially how the change will effect me / my context)  Lack of information and detail. (“I want to know more about what is going on so I feel secure & can make decisions”)  Lack of exposure to the people who know what is going on and who can interpret the change  Disagreement with what is being changed and how it is being changed. (Management not consulting self- perceived local expert knowledge)

If the source of resistance can be traced here, one solution is more participative dialogue and open, honest and rich (face-to-face) communication about the pros and cons. The search is for relevant data and contextual meaning.xiii

Emotional (Psychological) Resistance:

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au An environment of insecurity and being faced with an uncertain and unknown future can give rise to emotional responses which are neither logical or apparently rational. Typical negative emotional responses to change (or implied change) are:

Anxiety, Frustration, Lassitude, Fear, Loss, Anger, Hopelessness, Despair and Cynicism

Change leaders should be aware that these strong emotional responses originate in the Limbic system through the gateway of the Amygdala. In this state, normal cognitive and physiological processes can be substantially impaired and are not subject to conscious control. Intellectual arguments may fall on literally deaf ears.

If change is perceived as a threat, the body will prepare a fight/flight response, seen as inappropriate in a corporate setting. On the other hand feelings of loss can be subtle but result in passive and active resistance to change. People will not change if this results in a loss of identity or any component perceived to contribute to their concept of “self”. Such predictable losses include: Loss of Familiar Territory, Structure, an Anticipated Future, Meaning and Clarity, Networks and Resources, Direction, Security, Ownership, Control and Predictability, Power or Influence, Friends and Colleagues, Knowledge and Expertise, and of Confidence xiv

If the emotional card is in play (as it will be by all but the most willing of change seekers), change management must include appropriate steps and support mechanisms to aid employees through this transition. (Something similar to the outreach programmes conducted by recruitment agencies for people made redundant.) Most of all people need a safe, compassionate and understanding support network where they can voice their feelings. Knowing others are going through the same thing helps. Particularly effective are senior managers sincerely disclosing their stories and being open as to how they feel about the change on offer.

Cultural (Norms / Beliefs / Values) Resistance: Cultural change is by definition difficult because the existing norms and values are being challenged. The older the belief and the more consistently it is held, the more difficult it is to replace. Behaviours can be changed temporarily but will eventually return to align to the underlying schema. Culture is “how we do things around here”. Replacement of values, schema and beliefs requires considerable effort by culture-creatives (positional managers, respected leaders and influencers) in meticulously rewarding the desired behaviours, coaching, providing feedback and role-modelling the same. It is vitally important for people to see that the executive is actively engaged in the change (walking-the-talk).

It needs to be understood that if the proposed changes are perceived to impact adversely on long-held cultural values (especially those dealing with customer service, quality and relationships) then a (passive) revolt is possible. Changes which threaten to alter the “who is IN and who is OUT” rules of the social group will also be resisted on mass, if these are seen to disenfranchise significant members of the corporate community.

Another source of employee resistance might be the entrenched beliefs about ‘what management is and stands for’. If the prevailing mental model of ‘them’ (the bosses) is negative, then people may resist top-down change on the grounds on not wanting to be dictated to or controlled. People not only respond to what was said, but to who said it and how it was said. (This is especially valid in the Australian corporate context as evidence indicates a somewhat jaundiced view of management by staff xv).

Finally, in low trust environments the intentions of management are up for interpretation. If the company has had a poor record of change (downsizing, job degradation, low consultation) people will naturally think the worst.

Change & Transition Timeframes

A difficult concept for change leaders to accept, especially those W i l l i a m B r i d g e s ’ “ M a r a t h o n E f f e c t ” coming from a managerial or project management background, is that transition to change is personal and occurs on a time n e w frame essentially independent to that of the ‘programmed t b e g i n n i n g n change’. Depending on the nature of the reaction to change, e m individuals will transition rapidly, slowly or not at all. e n e u t r a l g

event a d a p t i v e ll e a r r n n i in n g g time Bridge’s’ “Marathon Effect” diagram explains why different sections of the workplace see change differently. The model proposes that people transition from a period of ‘ending’ (leaving behind the old), through the neutral zone (no mans land), to the ‘new’ beginning where the change has been accepted. How this transition occurs and how long people remain in each phase is governed by their ‘engagement’ in the change (their willingness). Clearly, the architects of the change are fully engaged. Their focus from the start is on the future and the new beginning they are creating. This is in stark contrast to the low-engagement worker who feels rail- roaded by the change and may spent inordinate amounts of time in the “ending” and “transitional” states

The Challenge of Initiating Change

Some of the first questions asked when initiating change are: Where are we now? Where do we want to go (what is our purpose, aspiration and vision)? And how quickly must we achieve this? The answer to these questions then informs the nature of the change programme to be embarked upon. Will incremental change (continuous improvement) suffice or will we need mindset-altering, transformational change.

The table below essentially defines the sort of change your organisation requires to achieve strategic goals. The rule of thumb is that moderate improvement within the columns can be honed through continuous improvement as long as the basic strategic intent is not greatly altered. For example, to achieve Worlds Best Practice in an existing performance culture the focus would be on increased teamwork, a disciplined approach to Key Performance Indicators, measurement and objectives. The introduction of performance appraisal systems, performance-based pay liked to stretch goals and a balanced scorecard approach would all be appropriate. Effectiveness and efficiency however have their limits in a performance culture and in these days of extreme turbulence, something more is required.

The move from a performance culture to a learning or relational one, requires a large paradigm shift. Not only is the strategic focus substantially different, but the cultural norms are incompatible. The “memes” (transmittable fundamental idea and principles) supporting the shaded area below owe their allegiance to the Industrial Revolution while those on the right belong in the so-called Knowledge Era or Information Age. Essentially, we have a difference between Management (maintaining slow steady growth) with directive/monitoring styles and Leadership which is more inspirational and visionary. Transformational change (which requires a change in the mental processes and behaviours of senior managers) is beyond the scope of traditional “Change Management” and requires a sensitive treatment of “transition” as discussed earlier.

To initiate transformational change of this magnitude requires leaders who can remove the intellectual, emotional and cultural barriers and allow the natural, organic processes (inherent in complex adaptive systems) take place.

“If you expect the people who work for you to change, then you must also. And it has to be real change and not just rhetoric. It’s about changing the nature of the organisation, and that can only happen if the person at the top changes” - Gordon Cairnes (CEO Lion Nathan) xvi

Decade: < 1970’s 1980’s 1990’s 1990’s 2000’s > Turbulence : Constant Slow expansion Rapid Acceleration Discontinuous change Management: Leadership : Style: Directive, Controlling Aspirational Inspirational, Visionary commanding Minds & Belief, Can Thinking & doing, Political hearts do mindset Conviction Culture : Administrative Performance Learning Relational Distinctive Environment: Comfortable Challenging Competitive Co-operative Complex Static, Local Uncertain, Global Strategy : More of the Better Smarter Closer Different Same Focus : Rules Goals Knowledge Connections Ideas

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au Value : Compliance Achievement Innovation Service Imagination Organisational Mechanistic, bureaucratic, Organic, living, adaptive, flexible, participative, Model & hierarchical. holistic, systemic, integral. Memes: Material (technology, training, Intangibles (culture, values, personal and skills, continuous improvement, organisational learning, relationships, transition) process, structure, strategy) change change focus. focus (after Ansoff 1998, and Lee 2002 )

The bottom line: Transformation change is top-down. It requires the concerted and active efforts of all leaders within the organisation to work together to be successful. The failures of the past have been failures of leadership to be personally involved and realise the magnitude of the effort in both change and transition.

The final frontier is that of the mind: If you can change your mind, you can change anything !

To be continued…. In part II: The challenge of sustained change Creative Leaders building change enabled organisations Tips for Change Agents

Dr. Ian Metcalfe - Adaptive Learning PTY LTD Melbourne, March, 2005 www.adaptivelearning.com.au (03) 9457 2215 0439 902 215

Sources and further reading: Marcus Buckingham & Curt Coffman (The Gallup Organisation), “First, Break All the Rules”, Simon & Schuster, 1999 Marcus Buckinham & Donald O. Clifton, "Now, Discover Your Strengths", Free Press, 2001 James C. Collins & Jerry L. Porras, "Built to Last - Successful habits of Visionary Companies", 3rd Ed., Random House, 1998 James C. Collins, “From Good to Great - Why Some Companies Make the Leap... and Others Don't”, HarperBusiness, October, 2001 Stan Davis & Christopher Meyer (Ernst & Young Center for Business Innovation), “Blur - the speed of change in the connected economy”, Capstone, 1998 Daniel Denison, Toward a Theory of Organisational Culture and Effectiveness, Organisation Science, Vol.6, No.2, 1995 Daniel Goleman, Richard Boyatzis & Annie McKee, “The New Leaders - Transforming the Art of Leadership into the Science of Results”, Little Brown, 2002H. Igor Ansoff, “The New Corporate Strategy”, Wiley and Sons, N.Y., 1988 Andy Law, “Open Minds - 21st Century Business Lessons and Innovations from St. Luke’s”, Texere, 2001 Edgar H. Schein, “Organisational Culture and Leadership”, 2nd Ed., Jossey-Bass, 1997 Peter M. Senge, “The Fifth Discipline - The Art & Practice of The Learning Organisation”, Random House, 1990 Peter M. Senge et al, "The Dance of Change: The Challenge of Sustaining Momentum in Learning Organisations - A fifth discipline resource book", 2000 Charles Handy, “The Age of Unreason” John P. Kotter, “Leading Change”, Harvard Business School Press, 1996 John P. Kotter and James L. Heskett, “Corporate Culture and Performance”, Free Press, N.Y., 1992 Dee Hock, “Birth of the Chaordic Age”, Berrett-Koehler, 1999 William Bridges, "Jobshift" - http://webcom.com/quantera/llbridges.htm 2000 William Bridges, Managing Transitions: Making the Most of Change, Perseus Books Group 1991 William Bridges and Susan Mitchell “Leading Transition: A New Model for Change”, Leader to leader No. 16 Spring 2000 Nancy J. Barger & Linda K. Kirby “The Challenge of Change in Organisations”,Davies-Black Publishing, Palo Alto, 1995 Chris Argyris, Increasing Leadership Effectiveness. New York: Wiley. 1976). Chris Argyris, On Organizational Learning. Cambridge, MA: Blackwell. 1993). Chris Argyris and D. Schon Theory in Practice. San Francisco: Jossey-Bass. 1974. Chris Argyris, “Reasoning, Learning and Action. Individual and Organizational”, San Francisco: Jossey-Bass. . (1982).

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au Dennis Turner & Michael Crawford), "Change Power", Business & Professional Publishing, 1997 James Champy, “Reengineering the Corporation: A Manifesto for Business Revolution.” Margaret J. Wheatley, "Leadership and the New Science", 2nd Edition, Berrett-Koehler Publishers, 1999 (also see "A Simpler Way", with Myron Kellner-Rogers)

Appendix: Challenges for Creative Leaders / Change Agents in the 21st Century

The following are only a small collection of challenges facing (Australian) organisations and leaders today:

Building Leadership Capability - Increasing overall leadership maturity: We do not have to return to the Karpin report (1995) to see that leadership capabilities in Australia can be improved. The continuing “Eye on Australia” surveyxvii as reported in the April 22nd-28th, 2004 issue of Business Review Weekly indicates quite strongly that “corporate Australia is severely alienating consumers and employees” and that “employees do not trust the companies they work for” seeing them as greedy, dishonest, boring and faceless. Consumers are asking for more commitment to truth & honesty to be shown by businesses and are ‘keyed’ to spot insincerity and falsehoods. Organisations will be penalised for pretending to be what they are not.

Well over 85% of people surveyed said that high performing and successful Australian businesses should be innovative, a good place for employees to work and show demonstrable community involvement. Behind these indicative “straws in the wind” is a basic need for employees to feel valued for their innate creativity and talents, to enjoy the workplace experience and to be part of something bigger than themselves. There is a need to combat the prevailing and reoccurring mental image that workers are only insignificant and replaceable cogs in a huge machine.

With these employee and customer attitudes it is unlikely that the managers of Australian companies will have the trust, respect and goodwill to generate substantial cultural change. It’s a catch-22 situation. Before change is possible, the attitudes need to alter which can only come from a demonstrable change in mindset and behaviour from the leadership group.

The Fallacy of “Technology or Structure or Process, Drives Change”: While systems, frameworks, models, processes, policies and structures, by necessity must be aligned to the cultural values and norms, it is a complete myth that these things in themselves drive change. Technology, for example, is an accelerator (or a brake) but not the pedal itself. Training cannot be used as a substitute for ‘learning’ and despite what people say (“what gets measured gets done”, “you can’t manage what you can’t measure”), measurements are highly overrated in their ability to make a difference to important change. Despite the continued failure of reworking the Organisational Chart as a driver of Organisational Change, this methodology seems to be the most prevalent and the first thing managers try. Unless the underlying principles behind the structure form are altered, this action is simply rearranging the deck chairs on the Titanic.

More Change Myths - People undergoing change upon change get “all-changed-out”. Anecdotal evidence suggests that people get used to the baseline rate of change which exists in the environment - given that the change has personal meaning and ‘real’ basis for existing. Change for change sake and disconnected change will put people under stress and lead to resistance to further change. - Incremental change will lead slowly but surely to transformational change. I have no evidence to suggest a steady as she goes, step by step approach to transformational change works. That doesn’t mean however that every thing a change agent does is big and bold. Quite the contrary, building momentum is the name of the game, introducing new memes to disrupt the status quote and trying lots of things and keeping what works, are part of the change agent toolkit. Malcolm Gladwell’s book, the tipping point, graphically illustrates that we never know where the next big change, new fad or epidemic will come from. - You have to destroy the old ways, burn the bridges and give people no way to return (Cortez, burn the boats). Remember that people have invested many years of psychic income in the way they work - burning that is tantamount to saying their baby is ugly and those were wasted years. Better to acknowledge the past efforts and set people the task of taking the best material into the future with them. - Silver bullets of any description work. This is a complete ‘furphy’. The killer ap and out-of-the-box solutions to complex change simply do not work.

Aligning organisational “systems” to organisational values: If genuine, enacted, values are key to building cultures and doing the right thing, then internal ‘systems’ (processes, policies, structures, reward & recognition schemes, performance reviews and so on) must also be altered to align to these

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au values. Anything less than complete synchronisation gives employees reason to doubt the veracity of leadership commitment to these values.

The top-down challenge for senior leaders is to ensure that what is being paid attention to, what is seen as being important, is what you need it to be. Too many organisation espouse the values of respect, teamwork, service, quality and innovation… but allow workplace processes and interactions to flourish which are based on ‘knowledge for power’, mateship, boasting, status & position drivers, individual gain and technology for technology’s sake. How often are mixed messages sent, such as the common practice of encouraging ‘teamwork’ but condoning individual performance rewards?

Engaging the workforce: “The major challenge for companies over the next twenty years will be the effective development of human assets. That’s not about organisational development. It’s about psychology. About getting one more individual to be more productive, more focused, more fulfilled than he or she was yesterday.” (Marcus Buckingham, 2001) Biggest performance challenge of all, and at the core of cultural change is the removal of the pessimism, cynicism and feelings of helplessness worker have within traditional organisations. There is a real need to allow the true capabilities of people to shine. This requires strong, inspiring and committed leadership focused on building robust, positive and enabling cultures which continually develop people. Leaders will have to become more personal and inspire their people, one by one, day by day, to be more fulfilled, more confident in their abilities and encouraged to reach new levels of performance.

Knowing what is sacred (the purpose - why the company exists) and what can be changed (methods, structures, policies - the how), appears to be a key element in achieving this. Peer coaching of appropriate behaviours is another entry point hinting at a more distributed definition of leadership.

Here are some questions to ponder:  If you cannot sell your product or service to your own employees, where does this leave you?  What does it mean when your own employees don’t agree with where you are going?  If you can’t afford to pander to your employees - can you afford not to?

Knowing when and when not, what and what not, to change: Also known as the Innovator’s Dilemma. The best time to change is when you’re on top and can, but this involves risk. Wait too long and inertia sets in - you may lose the capability to shift gears. (Change too slowly or too late and you will die a death by ‘missed opportunity”, change too quickly or too soon and you risk a death by “mis-adventure”.)

The real issue for organisations is being able to balance the numerous and apparently paradoxical “tensions” which exist:  Knowing what needs to be stable and what must change (most organisations get this wrong)  How much effort to spend on internal and external focuses (you must of course do both)  How to maintain operating capability (which drives current performance) while putting aside resources to build the future (the ability to change in the future, stay adaptive and flexible, must be maintained)  How to keep up with or ahead of the market while creating your own distinctive culture and competitive advantage (do you play by the market’s rules or create your own ‘game’) This later point might be seen as redefining what we mean by competition. Strategist James Moore proposes that we need to end the essentially American obsession with competition and see the global economy as a non-zero-sum market place. Business is best played as a team game and the definition of team is getting bigger and broader every day.

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au Frequently Asked Questions  “How much organisational change is enough change ?” The generic answer to this is - the rate of change within the organisation should conservatively match the rate of change in your external marketplace (customers, competitors, regulators, suppliers). At current global rates of change, a conservative strategy would aim to be in 1st or 2nd place in your niche. The more appetite you have for risk, the more innovative you wish to be, the more change - over and above the average - your strategy would take you. One caveat to this is - your internal rate of change must always be sufficient to maintain ‘change capability’ within your organisation. (For example turnover rates below 5% per annum are probably a death knell to your organisation.)  “Does incremental change (continuous improvement / world’s best practice) ever work. The answer is probably yes, but only in certain circumstances (which haven’t existed for 20 years).  “Can you design an organisational culture?” This is a touchy point - You certainly can try to design and implement a culture by modifying the underlying schema (cultural values and rules), but people being as they are (perverse, fickle, generous - human) what you end up with is some emergent combination of old, new and left-field. People hold the schema in their heads so anything can happen.

About the Author

Dr. Ian Metcalfe Director, Adaptive Learning PTY LTD & Minds At Work Ian is recognised as a leading thinker in the areas of Creative Leadership, Cultural Renewal and Organisational Change. He is a talented academic, an accomplished project leader in the finance and insurance industries, and a senior manager with extensive experience with the implementation of institutional change and organisational learning and development. Ian is also a member of a network of working thinkers known as Minds at Work who provide advice, media commentary, workshop facilitation and keynote speeches on creativity, innovation, problem solving and cultural change to local and international organisations.

As Director and Principal Business Consultant at Adaptive Learning, Ian has worked for many years as a network leader, instructional workshop designer, facilitator, coach, critical friend and organisational change agent. Ian specializes in organisational learning and personal growth through the practical and flexible application of experiential and action learning concepts.

Ian can be contacted at: [email protected] +61 (0)439 902 215, (03) 9457 2215

Open Publication Policy – Public Domain We strongly believe that information that could benefit humanity, society and the environment should be freely shared and distributed. Please feel free to use the material contained in this document in the spirit it is presented. © 2005, copyright Adaptive Learning PTY LTD

Leadership & Change – © 2005 : Adaptive Learning PTY LTD (03) 9457 2215 www.adaptivelearning.com.au i Cf: “The Dance of Change”, Senge et al, pg 6. [Quoting “The Economist”, 18th April issue, 1992] ii “Changing how we work - the search for a simpler way.”, Power user’s edition, The Jensen Group & Northern Illinois College of Business, 1992-1997, www.simplerwork.com iii Paul Strebel, “Why do employees resist change?”, Harvard Business Review May/June, 1996, pgs: 86-92 (Also: 57% of quality-improvement efforts fail to make satisfactory progress - Linda Moran, Jerry Hogeveen, Jan Latham, and Darlene Russ-Eft. “Winning Competitive Advantage”, Zenger Miller, 1994.) iv James Champy, “Reengineering: A Light That Failed.”, Across the Board, Volume 32 #3, March, 1995, pgs 27-31. Michael Hammer and James Champy (An Interview with Hal Lancaster). "Reengineering Authors Reconsider Reengineering.", The Wall Street Journal. January 17, 1995. See also: http://www.dod.mil/comptroller/icenter/learn/reengconcept.htm v The Standish Group “Chaos Report”, 1995. www.standishgroup.com [31% of projects are cancelled before they start. Over 50% will cost twice as much as estimated. Billions of dollars are lost in failures, over-runs and lost opportunity costs.] also: 4 Jim Johnson, "Chaos: The Dollar Drain of IT Failures.", Application Development Trends. January, 1995. vi Anne Fisher, "How to Make a Merger Work", Fortune magazine, January 24, 1994. vii Terry Lee & Associates, Mt. Elisa Business School Executive Leadership Programme, 1999-2004 viii John P. Kotter, “Leading Change: Why Transformation Efforts Fail.”, HBR, March/April, 1995, pg59 ix William Schiemann founder and President of Metrus Consulting Group in "Why Change Fails - A survey of Fortune 500 executives" Across the Board. April, 1992. Schiemann also suggests that failure by the executive leadership to decide on what strategy or direction is also a contributing factor. Rick Maurer (http://www.beyondresistance.com/htm/popups/why.html) cites a Deloitte Consulting survey where 80% of Chief Information Officers surveyed said “that resistance was the main reason why technology projects failed. Not lack of skill or resources, but that soft touchy-feely human reaction of resistance”. x The industrial bosses of the 19th C borrowed from the approach of Fredrick the Great in building peasant armies, which in turn originated in the brutal feudal systems of Europe and Great Britain. xi “The average man is by nature indolent - he works as little as possible. He lacks ambition, dislikes responsibility and prefers to be led. He is inherently self-centered, indifferent to organisational needs and is by nature resistant to change. He is gullible, not very bright, the ready dupe of the charlatan and the demagogue.” - Douglas McGregor, “The Human Side of Enterprise”, McGraw-Hill, 1960 xii Resistance may appear in many forms such as: agreement without action, work-to-rule, malicious compliance, in- your-face arguments and even sabotage. xiii Note: Because the people running the intervention are “in a different (head) space” it is often assumed that people want more information - that the source of uneasiness or resistance is intellectual. This results in more e-mails, brochures, power-point displays, butcher’s paper orgies and planning sessions. These take time and focus away from the softer “touchy-feely” and hidden cultural issues which are more likely to be a problem. xiv Refer to “The Challenge of Change in Organisations” for details. xv See Simon Lloyd, “Eye on Australia: Greedy, Dishonest, Boring, Faceless”, Business Review Weekly April 22nd, 2004 xvi C. Fox, “The Born Again CEO”, Australian Financial Review, Boss Magazine, May 2003, pg 40. xvii