Business Case Studies, Executive Interviews, Michael Beer on Change Management

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Executive Interviews: Interview with Michael Beer on Change Management
June 2007 - By Dr. Nagendra V Chowdary

Michael Beer
Cahners-Rabb Professor of Business Administration,
Emeritus at the Harvard Business School,
Chairman and co-founder of TruePoint a research based consultancy.

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  • You have remarked in Cracking the Code of Change, "Indeed, it is highly unlikely that E would successfully follow O because of the sense of betrayal that would involve". Is it therefore better to sequence the change with Theory E first and Theory O next? Why should it be so?
    The ideal is to employ E and O simultaneously and in a way that they are integrated. By integration, I mean, that E is carried out in a way that develops commitment or at least does not materially reduce it. Practically speaking, E will almost always lead O because, there are economic imperatives the CEO must deal with (loan covenants, short-term earning

    pressures etc.)but in the best case, as illustrated by the ASDA case, E and O strategies are launched very early. There are two reasons why E should not generally follow O. First, if O has been applied consistently over time, the company is likely to have been learning, adapting and changing continuously and will not need E strategies. Second, if E does follow O it is likely to tear the high commitment culture built with O.

  • As the ASDA example (in 'Cracking the Code of Change') shows very correctly, the change agent (the CEO) should be very clear about what he's doing. Therefore, before embarking upon this 'Balancing Act', what precautions need to be taken to achieve the desired results? Should one of those prerequisites be a guaranteed tenure for the CEO (like in the case of GE for instance) so that he could see the initiative through its logical conclusion?
    By definition, an integrated E and O theory strategy for change will be slower than a revolution of the kind Jack Welch produced in the 1980s (downsizing 150,000 employees or more and selling businesses that were not number 1 or 2). Therefore, CEOs who embark on E and O simultaneously will have to create agreements with the board, creditors and key stakeholders that will enable them to have the time they need to build an organization. Archie Norman told shareholders not to expect significant results for three years. When Allan Leighton took over the Royal Post at Tony Blaire's request (after he had left ASDA) he set conditions that gave him freedom to act "Don't call me and don't interfere with my change strategy and the people I hire, regardless of what happens and what you hear". He set the boundaries for an effective change effort and succeeded.

  • Jack Welch also seemed to have combined both Theory E and Theory O. And in most of these cases, change initiatives seem to be signature statements for a legacy rather than making them the DNA for an organization. How should CEOs, therefore, look at change initiatives holistically so that change management becomes a part of organizational philosophy?
    I don't think initiatives such as Six Sigma and Workout were Jack Welch's legacy. These were tools the means to an end. Rather, his legacy is the fundamental transformation from bureaucracy to a high commitment and performance organization with a very different culture than existed in 1980 when he took charge.

  • In Cracking the Code of Change you have observed, "Making way for opposite leadership styles was also an essential ingredient to Norman's – and ASDA's – success". Should this also be I N T E R V I EW 7 looked at as a prerequisite for the Balancing Act? Are you, therefore, suggesting that when companies wish to follow the Balancing Act, they must have two CEOs? (one for 'Theory E' and one for 'Theory O')? However, what happens (and therefore, who should resolve) when the going gets tough between those two people (leaders)?
    Though it is possible for a single individual to have the capacity, personality and skills to balance and integrate E and O, few are able to do this. They need partners who complement their perspective and skills. Those partners (in most successful change efforts there is a very small group of 2 to 4) bring different skills and perspective to the change effort and can make up for the CEO flat sides. However, these members of the team are not CEOs. The CEO has final authority. Norman and Leighton were not both CEOs. But Norman and Leighton and two other members of the top team (not mentioned in the article) comprised what Norman told me was a small and highly dedicated team that acted as one. To do this, CEOs cannot have hubris, must be willing to work in an egalitarian manner with subordinates and create the climate for a fact-based dialogue. The CEO clearly has the final say, but CEOs that rely too often on their final say have not formed an effective team and will not be told by those on the team what they need to hear.

1. Change Management Case Studies
2. ICMR Case Collection
3. Case Study Volumes

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