Managing Change to Add Value to Projects

Transcription

1 Managing Change to Add Value to Projects Dr Loretta O Donnell Academic Director, AGSM Graduate Certificate in Change Management Australian School of Business, UNSW CELM 25 June Managing Change 1

2 Questions Why do people resist change? How can engineers manage resistance to change? How does change management help improve project and organisational outcomes? CELM 25 June Managing Change 2

3 Does change management matter? order on the edge of chaos (Arthur, 1994, 2009; Harvey, 2001). Faced with complexities of this scale and scope, a systems perspective is required to see ripple effects of changing elements in the system. CELM 25 June Managing Change 3

4 Europe s web of debt: New York Times, May 2010, data from Bank of International Settlements CELM 25 June Managing Change 4

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6 Systems thinking and change Change management can be seen as both a science and an art. As change agents, engineers can apply some systems thinking concepts to the process of managing resistance to change, in ways which are sustainable and which enhance performance of the individual and the organisation. In an era where investors and other stakeholders are increasingly interested in understanding the intangible drivers of firm value, it becomes critical for engineers to understand how change can be managed. CELM 25 June Managing Change 6

7 Evolution versus revolution transformational change in project management CELM 25 June Managing Change 7

8 Transforming projects example of evolution Kotter (1995: 61): Establish a sense of urgency; Form a guiding coalition; Create a vision; Communicate the vision; Empower others to act on the vision; Create short-term wins; Consolidate improvements to produce further change; and Institutionalise the new approaches. CELM 25 June Managing Change 8

9 Example of a revolution Barclay Capital acquisition of Lehman Brothers, September ture=related eature=related Lehman failure ripple effects eature=fvw Dick Fuld testimony before Congressional hearings CELM 25 June Managing Change 9

10 Resisting change Why do people resist change? Why did the CEO of Lehman s fail to realise that change was inevitable? Think about a time when you have resisted change at work? Why did you resist change? CELM 25 June Managing Change 10

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13 Change management and sustainability (Dunphy 2000) Human (HS) Ecological (ES) 1 Rejection People as resources to be exploited Environment as free good to be exploited 2 Nonresponsiveness 3 Compliance/ risk reduction Financial and technological factors dominate strategy Legal compliance plus benevolent paternalism Efficiency dominates, free resources wasted Minimise potential obvious liabilities 4 Efficiency Systematic attempt to integrate HR functions Ecological issues systematically reviewed 5 Strategic sustainability 6 Ideological commitment 13 Skills mix, diversity, intellectual & social capital Org. accepts responsibility for knowledge in society Proactive ecological sustainability Active promotion of ecological values

14 Your views on what comes first: profitability or strong change management? Make a stand along the side wall Profitability Strong change management CELM 25 June Managing Change 14

15 Stages of a merger, Devine (2002) 15

16 People are not robots People are not cogs in a machine managing projects means more than allocation of assets Project management means managing people, management systems and corporate cultures. How you handle them makes a difference the intangible processes are important. CELM 25 June Managing Change 16

17 Tangible and Intangible Assets TANGIBLE ASSETS MARKET VALUE INTANGIBLE ASSETS FINANCIAL AND PHYSICAL CAPITAL INTELLECTUAL CAPITAL CUSTOMER CAPITAL ORGANISATIONAL CAPITAL HUMAN CAPITAL Market Valuation = Value of net tangible assets + Value of intangible assets CELM 25 June Managing Change (Mayo, 2001) 17

18 The new economy: 5 distinct asset groups Andersen study (Devine, 2002) 1. Physical assets: land, buildings, equipment & inventory 2. Financial assets: cash, receivables, debt, investments and equity including stock market values 3. Customer assets: various customer relationships and brands, as well as distribution channels 4. Employee assets: a company s workforce, suppliers & alliance partners 5. Organizational assets: leadership, strategy, organizational structure, values, brand, systems & processes, intellectual property, knowledge & innovative ability CELM 25 June Managing Change 18

19 Leadership Matrix (O Donnell and Royal, 2009) Leadership style Change management theme Management systems Stage 1 Primary leadership style: Entrepeneurial leadership Systematic trial and error Innovation of products, services and processes of all management systems Stage 2 Transactional leadership Steady growth Stability of management systems Stage 3 Systems based leadership Divisionalization accelerated complex growth, organically or mergers and Reproduction of systems, rapid execution, clarity of core and non core systems CELM 25 June Managing Change 19

20 Leadership Matrix 2 Leadership style Change management theme Management systems Stage 4 Change agent basis for leadership Realignment of overall business to new conditions Openness to change of management systems, awareness of flexibility and transformational change Stage 5 Visionary leadership for new strategies Organisational sustained success or organisational decline Embedded systems to sustain success alternatively, no embedded systems implies fragmentation, stagnation and failure CELM 25 June Managing Change 20

21 Tools for managing change These tools can help with diagnosing change problems and managing resistance to change. CELM 25 June Managing Change 21

22 Which tools? 1. Force field analysis by stakeholder 2. Resistance to change 3. Fishbone diagram 4. Commitment chart 5. Transforming Process for analysing key stakeholders and their perspectives How to manage resistance? Analyses problems. How to create a critical mass? How to move from the real to the ideal? 22

23 All stakeholders matter CELM 25 June Managing Change 23

24 Force field analysis by stakeholder Which stakeholder? Eg persistence from change agents Eg lack of resources + _ CELM 25 June Managing Change 24 (Lewin, 1951)

25 Managing resistance to change 1 Vision, with a bridge Clear, achievable targets Clear structures to minimise wasted time and effort Appropriate leadership style A leadership team, broadly defined, providing strong role models Systems to reinforce key changes Systems to reinforce leadership, wherever it is. Confidence, internally as well as externally. (McKinsey Global Survey Results, 2006, 2008; Isern, Meany and Wilson, 2009) CELM 25 June Managing Change 25

26 Managing resistance to change 2 Which stakeholder? Kanter, (1983) Why resist change? Description Relevance? Implications? 1. Loss of control Change can be threatening 2. Excess uncertainty Walking off a cliff blindfolded 3. Surprise No groundwork or preparation 4. Difference effect Need to question familiar habits 5. Loss of face Things were done wrong in the past 6. Concerns about future competence Do I have the skills to operate in the new way? Can I do it? 7. Ripple effects Second order effects eg family 8. More work Change requires time, energy 9. Past resentments Surfacing of underlying problems 10. Sometimes the threat is real Winners and losers are created, status is lost and CELM gained. 25 June Managing Change 26

27 Managing resistance to change 3 Where will you start? What resources will you need? What obstacles are you likely to face? How will you overcome them? Timing? Indicators of success (qualitative and quantitative)? CELM 25 June Managing Change 27

28 What s going on? Ask why 5 times Fishbone diagram (Ishikawa) headings will change to reflect individual contexts Which stakeholder? Communication Culture Resources Leadership CELM 25 June Managing Change 28

29 Pick one major heading. What possible solutions? CELM 25 June Managing Change 29

30 X = today O= ideal Commitment chart Who is required to be committed in order to reach critical mass? Which stakeholder? Key Players No commitment Let it happen Help it happen Make it happen Person 1 X O Beckhard and Pritchard 1992 Beckhard and Pritchard 1992 CELM 25 June Managing Change 30

31 Managing commitment to change? Where will you start? What resources will you need? What obstacles are you likely to face? How will you overcome them? Timing? Indicators of success? CELM 25 June Managing Change 31

32 Moving from real to ideal? Transformative statement How do we get from the real to the ideal? Who is responsible? How are we individually accountable for managing change? Are we part of the problem? CELM 25 June Managing Change 32

33 Which stakeholder? CELM 25 June Managing Change 33

34 Selected Extra References Aiken, C. and Keller, S. 2009, The Irrational Side of Change Management, The McKinsey Quarterly, No. 2. P Akerlof, George, A and Robert J Shiller, 2009, Animal Spirits: How Human Psychology Drives the Economy, and why it Matters for Global Capitalism, Princeton University Press, Princeton, New Jersey. Arthur, W. B., 1994, Increasing Returns and Path Dependence in the Economy, Economics, Cognition and Society Series, University of Michigan Press, Ann ArborB eckhard, R. and Pritchard, W Changing the essence: the art of creating and leading fundamental change, Jossey-Bass, San Francisco. Boshear, W. and Albrecht, K Using the Johari Window, University Associates Inc., New York. Belbin, M Management teams: why they succeed or fail, Heinemann, London. Devine, M. (2002) Successful Mergers, Getting the People Issues Right, Ch. 1 The Economist, London D. Dunphy, J. Benviste, A. Griffiths, P. Sutton (2000) Sustainability, The Corporate Challenge of the 21 st Century, Ch. 1. Farkas, M A Note on Team Process, Harvard Business School, 4 October, pp Kanter, R.M The Change Masters: Innovations for Productivity in the American Corporation, Simon and Schuster, New York. Lewin, K Field Theory in Social Science: Selected Theoretical Papers, Harper, New York. Mayo, A. (2001) Measuring Human Capital, Ch. 3 in The Human Value of The Enterprise, Nicholas Brealey Publishing, London. O Donnell L. and Royal C. (2009) Rating Human Capital, The Human Factor Schwarz, N. (2010) Europe s Web of Debt, New York Times, April 30. Sorkin, A.R., 2009, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves, Penguin, New York. Tuckman, B. and Jensen, M Stages of Small Group Development, Group and Organisational Studies, vol. 2. CELM 25 June Managing Change 34

35 Further information Dr Loretta O'Donnell Academic Director AGSM Graduate Certificate in Change Management Australian School of Business UNSW phone: mobile: Web: Web: Or Beatrice Cooney, Team Leader, Recruitment & Admissions AGSM MBA Programs Australian School of Business The University of New South Wales T: , F: , E: b.cooney@agsm.edu.au, CELM 25 June Managing Change 35