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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  • In an HBS Note (Leading Change), you have propounded a conceptual formula that incorporates the critical dimensions of change that must be taken into consideration by managers.

    Amount of Change = (Dissatisfaction X Model X Success) > Cost of Change What is this model all about? What are its practical implications?
    This formula (first presented in my book Organization Change and Development: A Systems View, Goodyear Publishing, 1980) attempts to capture the three ingredients of change that must be developed by change leaders if they expect to succeed in creating

    sustained change. Dissatisfaction (D)with the status quo (we are not as effective as we need to be, our organization is not functioning well and/or our employees are not committed) is essential if the energy and motivation to change is to be released among employees. The first task of leaders is to "create dissatisfaction with the status quo." That can be done by highlighting current or potential performance problems, making manifest and discussible concerns by customers and shareholders and enabling lower level to speak truth to power (Our research shows that lower levels know what the problems are but cannot discuss them with senior people due to the fear created by hierarchy).

    Leaders must also develop a strategic and orgnaizational model (M) of the future state. How will be organized? What values will drive behavior? What psychological contract will we create that will govern the relationship between employees and the firm? To create D and M, leaders must create a process (P) of employee engagement that will reveal barriers to effectiveness and raise dissatisfaction (D). Such a process must enable the senior team in partnership with its employees to craft a new systemic orgnaizational solution (M).

    These three ingredients (D, M and P) must be strong enough to overcome the resistances that will come as managers and employees realize that implementation of a new model will result in losses—losses in power, esteem, competence, relationship, rewards, security and identity (who am I and who are we as a firm). The prospect of losses is the cost (C ) of change.

    As a practical manner, the formula suggests that leaders have to spend a lot of time in the front end of the change process developing "D" and readiness to change. By doing this, top change initiative will not become failed programs (see earlier discussion for why initiatives fail). They must also develop a process (P) of engagement with employees (task forces and project teams) that will yield jointly crafted solutions (M). Leaders who heed the lessons of the change formula will not spend millions of dollars on consulting firms. These firms develop a new strategic and organizational model (M) for the organization and through "change management" (see my own earlier criticism of this term) find ways to educate and persuade employees that these externally generated solutions are the right ones. This is not engagement. Moreover, consultants do not know the business and organization and are therefore, likely to suggest changes that cannot be implemented.

  • Let's now for a moment look at resistance to change. Why is it that organizations (as artificial persons) and individuals resist change? What are the stumbling blocks for change initiatives? What do you think the companies should do to get them out of their "comfort zones" or shells and start looking at better tomorrows?
    As discussed in my answer to question 14, resistance occurs because people fear they will lose something the cost of change. It is the fear of losses that creates emotional resistance to change. If change did not lead to anxiety over losses, there would not be resistance. The essence of all effective change is to help people accept losses for the INTERVIEW 8 greater good (the success of the enterprise, the enactment of a meaningful mission and long term security). This is the process of developing a strong D and a powerful M that people come to believe will ensure success in coping with the competitive environment. In my experience and research, it is senior management that has most to lose power, status, rewards and challenge to their strategic and managerial assumptions. In most instances, people at lower levels are eager to see change in the system, though they may later confront the implications for them. They typically have less to lose. That is why the Strategic Fitness Process (See Beer and Eisenstat, How to Have An Honest Conversation About Your Business Strategy, HBR, February 2004) we have developed is structured to enable truth to speak to power. Our research shows that urgency to change is ignited when the truth is put on the table and made discussible and when that truth is delivered by lower level on whom management knows they must rely to succeed.

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

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