Business Writer-Discussion Assignment Part 1

Is change management obsolete?

Christopher G. Worley *, Susan A. Mohrman

Center for Effective Organizations, University of Southern California, 3415 S. Figueroa St., DCC 200, Los

Angeles, CA 90089, United States

Too many articles about organization change begin with the

ominous: 70 percent of large-scale change efforts fail to meet

their objectives. The source of this finding may be ambiguous,

but its implication is clear: managing change in large organiza-

tions is hard. However, instead of standing back and asking the

double loop learning ‘‘is change management the right

approach?’’ question, they engage in single loop revisions of

practices, tools, or processes that are intended to drastically

increase the odds of success. Unfortunately, this may be the

practical equivalent of making a better buggy whip.

That is because in today’s world, if you ask managers

about the nature of their environmental and marketplace

demands, you are likely to get answers like ‘‘chaotic, uncer-

tain, constantly changing, disruptive, and complex.’’ The

leap in complexity, connectivity, interdependency, and

speed, compared to 20 or 30 years ago, has created an

environment that is radically different and requires new

approaches to change.

Undaunted, and in the face of a steady stream of diverse

and overlapping change requirements and uncertainty, orga-

nizations continue to employ traditional change models.

These depend on top-down executive leadership and focus,

detailed risk analysis and mitigation, carefully planned and

controlled communication, play-books that are ‘‘rolled out,’’

tools and scripts to ensure common understanding, training

people how to behave differently, and transition structures

to govern the execution of work streams according to Gantt

charts and detailed plans.

Our purpose is to provide an alternative conceptualization

of the change process and organizational capabilities needed

to effectively adapt and co-evolve with a rapidly changing

environment that is presenting a never-ending cascade of

new challenges. Like others, we call this state of affairs the

‘‘new normal.’’ We begin by describing and comparing the

‘‘old normal’’ environment with the ‘‘new normal’’ and

deriving the implications for change. We then describe the

‘‘engage and learn’’ model — based on our observations,

research, and practice in organization design and agility at

USC’s Center for Effective Organizations — as a new way of

thinking about organization change that complements

today’s challenges and the organization designs being imple-

mented. Finally, we demonstrate the model through the

Cambia Health Solutions case.

THE ‘‘OLD NORMAL’’

For decades, organizations have co-evolved with advances in

technology, the emergence of a global economy, changes in

societal expectations, and market shifts. We know in hind-

sight that, until recently, these environmental changes could

be described in terms of a ‘‘punctuated equilibrium.’’ That is,

any particular aspect of the environment tended to change

slowly and incrementally for a number of years and then

manifest relatively short bursts of radical advancement.

In the old normal, organization change tended to follow

this same pattern. Within and across industries, periodic

transformational episodes challenged organizations to

develop new capabilities, ways of doing work, managing

people, and organizing. For example, cumulative advances

in our understanding of human motivation and organiza-

tional behavior along with societal and governmental con-

cern for workers’ rights and well-being resulted in radical

shifts in human resource practices and high involvement

work systems. A long history of incremental increases in

efficiency were transformed into large improvements in

both productivity and employee outcomes. Economic and

Organizational Dynamics (2014) 43, 214—224

* Corresponding author. Tel.: +1 213 740 9814.

E-mail address: [email protected] (C.G. Worley).

Available online at www.sciencedirect.com

ScienceDirect

jo ur n al h o mep ag e: www .elsevier .co m /loc ate/o r gd yn

http://dx.doi.org/10.1016/j.orgdyn.2014.08.008

0090-2616/# 2014 Elsevier Inc. All rights reserved.

technical changes led to the sudden emergence of the global

corporation. After years of country-based economies, the

number of multinational corporations utilizing capabilities

for managing information, resources, and talent on a world-

wide basis increased dramatically. Finally, the ability to

collect, share, and analyze vast quantities of information

while simultaneously enabling customization have created

new business models, management practices, and go-to-

market tactics.

Theories of change in the old normal

Researchers studying organization change in the old normal

developed two types of models. The first type, known as

change process theories or theories of change, describe the

variables that trigger change, the variables that could affect

the pace and effectiveness of the change process, how the

variables cause the change, and the expected outcomes of

the change effort.

One of the most well-known theories of change is Larry

Greiner’s classic 1972 Harvard Business Review article, ‘‘Evo-

lution and Revolution as Organizations Grow.’’ He was inter-

ested in the stages of growth, from start-up through maturity

and increased complexity, and the need to introduce the

capabilities to manage, perform, coordinate, and collabo-

rate as organizations became larger and older. He observed

that corporations go through a predictable sequence of crises

that lead to ‘‘revolutions’’ in the way they organize and

operate. Organizational solutions or strategies applied to

achieve growth in the current period became the primary

source of problems to be solved or capabilities to be devel-

oped in a future period. For example, Hewlett-Packard Co.,

Philips, and many other organizations grew successfully

because of a decentralized product or geographic based

model but faltered when the need for coordination across

products or regions became important. Only when the pro-

blems of decentralization — the same approach that had

previously driven success — were addressed, and the cap-

ability for cross-organizational coordination was developed

did these organizations resume growth.

Researchers eventually began to view fundamental

change as triggered by factors both internal and external

to the organization, and not simply the inevitable result of

growth and age. Michael Tushman and Elaine Romanelli,

among others, argued that a set of interrelated strategic,

power, organizational, and cultural commitments became

self-reinforcing and change resistant. In the presence of

significant events, such as technological changes, executive

succession, or industry life cycle transitions, a revolution was

necessary to reconfigure the commitments. The ‘‘punctuated

equilibrium’’ model simply proposes that organization adap-

tation occurs through relatively long periods of convergence

on a particular strategy that are interrupted by relatively

short periods of fundamental change or transformation.

Fundamental change came to be understood as deep and

pervasive. It affected the cultural patterns and behaviors in

the organization, and required significant alterations to most

of the sub-systems in the organization. Scholars and practi-

tioners considered transformational change a messy nuisance

to be avoided entirely if possible; it literally put the reliable

delivery of products and services at risk and threatened the

performance capabilities of the organization.

If and when organizations needed to transform them-

selves, they would typically rent the change management

capability from consultants. There was no need to pay for

internal transformational change expertise that was rarely

used. Companies that did staff up with organizational effec-

tiveness consultants during periods of transformation often

eliminated these departments once the pressing need for

transformation subsided.

Implementation theories in the old normal

The second type of change theory focuses on changing, and in

particular on the implementation of change. Implementation

theory research focuses on the activities change agents

should perform to insure the success of a change effort.

These theories involve steps like entry and contracting,

diagnosing, planning, intervention, and evaluation. Imple-

mentation theories provide guidance to change agents

regarding the necessary activities to bring about change

successfully in organizational systems.

Importantly, the punctuated equilibrium model suggests

that organization life is dominated by stability and incre-

mental change, not transformation. During periods of con-

vergence, the environment’s demand for new solutions,

strategies, and capabilities is relatively benign, and oriented

toward increased efficiency, reliability, predictability, and

growth within an existing strategy and operating logic.

The predominant implementation theories used today

were generated to help companies during these periods of

relative calm. They were aimed at refining the adopted

business strategies and the capabilities and behaviors

required to make them a reality. Implementation could be

incremental, gradual, focused, and controlled (i.e., ‘‘man-

aged’’) through carefully architected processes of design and

implementation. These change models worked well as long as

fundamental change was episodic and infrequent.

Two of the most common implementation theories are

Lewin’s change model and the positive model. These models

and their variants have received widespread attention and

provide an important historical benchmark for our proposed

engage and learn model.

Lewin’s Change Model. Kurt Lewin conceived of change as

modification of the forces keeping a system stable. A parti-

cular set of behaviors or outcomes at any moment in time was

the result of two opposing forces: those striving to maintain

the status quo and those pushing for change. When both sets

of forces were about equal, current behaviors or outcomes

were maintained in what Lewin termed a state of ‘‘quasi-

stationary equilibrium.’’ To change that state, the organiza-

tion could increase the forces pushing for change, decrease

the forces maintaining the current state, or apply some

combination of both. Lewin suggested that decreasing the

forces maintaining the status quo produced less tension and

therefore was a more effective change strategy than increas-

ing the forces for change. Such thinking has led to a number

of theories and tools for lowering ‘‘resistance to change.’’

Lewin’s implementation theory consisted of three steps.

The unfreezing process involved preparing the organization for

change, often through processes of ‘‘psychological disconfir-

mation.’’ By introducing information that shows discrepancies

between behaviors desired by organization members and

Is change management obsolete? 215

those behaviors currently exhibited, members could be moti-

vated to engage in change activities. Today, we often talk in

terms of ‘‘burning platforms’’ or recognizing disruptions.

The moving process shifts the behavior of the organiza-

tion, department, or individual. It involves intervening in the

system to develop new behaviors, values, and attitudes

through the development of new skills and competencies

or changes in organizational structures and processes.

Finally, refreezing stabilizes the organization in a new state

of equilibrium. It is frequently accomplished through the use

of supporting mechanisms, such as organizational rewards,

that reinforce the new organizational state.

Kotter’s eight-stage process, General Electric Co.’s (GE’s)

change acceleration process, Prosci’s ADKAR model, and

other popular change management models can be mapped

onto Lewin’s phases. For example, establishing a sense of

urgency, creating the guiding coalition, developing a vision

and strategy, and communicating the change vision are key

steps in Kotter’s model that reflect the unfreezing process.

Empowering broad-based action and generating short-term

wins are part of moving. Similarly, awareness and desire (A

and D in the ADKAR model) reflect unfreezing, knowledge and

ability reflect moving, and reinforcement reflects refreezing.

Action research extended this model by suggesting that

change was more cyclical than that implied by the refreezing

stage but still held to the basic change logic.

The Positive Model. A second change model was popular-

ized in the 1980s and 1990s and represented an important

theoretical — but not practical — departure from Lewin’s

model. The positive approach to change reflected the grow-

ing ‘‘positive organizational scholarship’’ movement in the

social sciences and the notion that organizations are socially

constructed. That is, organization members’ shared experi-

ences and interactions influence how they perceive the

organization and behave in it. It also builds on the notion

that people tend to act in ways that make their expectations

occur. Thus, positive and shared expectations about the

organization can create an anticipation that energizes and

directs behavior toward making those beliefs happen.

The positive model has been applied to planned change

primarily through a process called appreciative inquiry (AI),

an intervention that encourages the development of shared

meaning and a shared positive orientation to how change is

conceived and managed. AI often follows a four-step process

of discover, dream, design, and destiny. It promotes broad

member involvement in discovering the organization’s posi-

tive core attitudes and systems and dreaming about a shared

vision of its positive potential. That shared appreciation

provides a powerful and guiding image of what the organiza-

tion could be. Designing involves developing the action plans

that will diffuse and strengthen the positive behaviors, and

destiny describes processes for making the vision real.

The theoretical shift from a focus on problems to an

appreciation of strengths and shared vision, however, did

not lead to important differences in the change process. Most

AI processes still reflect the unfreeze—move—refreeze

approach. Discovering and dreaming unfreeze the organiza-

tion, designing increases the number of positive behaviors,

and pursuing the organization’s destiny is about refreezing

around a particular vision or design. It does, however, greatly

increase focus on achieving participation and the develop-

ment of shared understanding during a change process.

Conclusion

Under ‘‘old normal’’ conditions, it is not difficult to see how

and why these traditional implementation theories or models

of change management were appropriate. They fit with the

nature and pace of environmental change reflected in the

punctuated equilibrium view of environmental and organiza-

tional change. In keeping with the belief that organization

change was mostly incremental and occurred within an

existing strategy, these change processes:

� Tended to have clear beginnings and endings; starts and

finishes.

� Were initiated by senior executives to refine and converge

on a successful strategy.

� Focused on particular systems in service of sustaining a

competitive advantage.

The implementation theories described above support a

clear focus, define clear boundaries and scope, allow a high

degree of control, and help people make sense of change.

They work effectively when there is clear alignment to a

known strategy.

THE EMERGENCE OF A ‘‘NEW NORMAL’’

More and more, managers and scholars are recognizing that

environmental change is no longer a series of disruptions

spaced by periods of relative calm. Strategy researchers,

for example, have been focusing on the decreasing longevity

of competitive advantages and how quickly established firms

can disappear. A 2014 i4cp study reported that more than

64 percent of firms indicated that they had experienced a

disruptive change in the last 24 months. Disruptions of various

sorts are happening more or less constantly. Because organiza-

tions have become more complex and interdependent, a

disruption anywhere in the system may be felt everywhere

and by everyone.

For many companies there are no more periods of calm

and incremental change. Organizations need to move from

one fundamental change to another, continuously incorpor-

ating new capabilities in response to the complexity of their

environments. Organizations are being asked to: (1) drive

performance today while changing their business models for

tomorrow; (2) leverage their current advantaged capabilities

and build whole new capability sets; (3) optimize their

current product/service portfolios and offer customized

solutions; and (4) minimize their current carbon footprint

and adopt sustainable practices by making existing processes

more efficient and by introducing disruptive innovations and

fundamentally different ways of operating.

Unfortunately, scholars have not provided organizations

and the managers who run them with the frameworks to handle

the pressure for more frequent fundamental change. When

cases of fundamental change are published, there is nary a

mention of the traditional change models. Instead, transfor-

mational change is usually attributed to effective leadership.

Case studies of the transformations at IBM, Southwest Airlines,

Herman Miller, and ABB focus on the roles of Gerstner, Kelleher,

DePree, and Barnevik; they do not highlight the frameworks of

Lewin, Kotter, Conner, Cooperrider, Beckhard, or Burke.

216 C.G. Worley, S.A. Mohrman

When traditional change models are applied to transfor-

mational efforts, the change process struggles and repre-

sents a primary source of the oft-quoted 70 percent failure

rate statistic. When the speed and pervasiveness of change

are high, when the organization is reacting to a stream of

environmental demands, and where changes in the organiza-

tion’s culture may be required to develop new capabilities,

implementation theories do not provide sufficient guidance,

tools, or examples. This leads to the conclusion that our

traditional models of change management may be obsolete.

In the new normal, there is no punctuated equilibrium.

Companies must address both incremental and fundamental,

simple and complex, shallow and deep, first-order and second-

order, and executional and transformational change simulta-

neously and repeatedly. What follows are the foundational

concepts for a new conceptualization of organization change.

A NEW THEORY OF CHANGING

Our research in organizations — primarily related to the

implementation of new designs and the pursuit of organization

agility — has led us to a new theory of changing. This is not a

‘‘change management’’ model; that implies way too much

control over the process. Rather, it is a descriptive model of

changing along with a set of organizational change routines —

the recurring processes that characterize an organization —

that allow an organization to change itself continuously. The

‘‘engage and learn’’ model is shown in Exhibit 1.

Each of the four activities or change routines in the model

derives from an understanding of the requirements for orga-

nization effectiveness in a volatile, uncertain, and disruptive

world. They are no less relevant in a relatively stable envir-

onment:

� First, organization members must be aware of the issues,

challenges, and history of the organization. Organizations

need to be good at perceiving environmental trends and

being ‘‘pre-adapted’’ for disruption through the continual

consideration of scenarios, options, and prior change

efforts. As the pace of environmental change and disrup-

tion increases, organizations must spend increasing

amounts of time and energy in being vigilant.

� Second, there is an increasing appreciation for the impor-

tance of design in shaping behavior. Solution-based, global,

and other complex strategies require more coordination

and collaboration than typical strategies in the old normal.

Paradoxically, rapid response to opportunities and chal-

lenges require the opposite capability: to operate quickly

in self-contained pods that may pull from but operate

independently of the organization’s core logic. Design ac-

tivities are focused on flexibly managing a loosely con-

nected and dynamic portfolio of recurring and emergent

collaborations among stakeholders. It is also concerned

with the development of capabilities that will differentiate

the organization in the marketplace.

� Third, tailoring is about creating targeted, specific, high

impact interventions that ‘‘perturb’’ the system and set

the conditions for self-organizing. Broad, overly pro-

grammed implementation processes that may have been

successful in the old normal do not work. Even well

designed and defined TQM (total quality management)

and six sigma processes cannot be ‘‘cut and pasted’’ into

the organization without tailoring. Far from seeking uni-

formity, effective change in a rapidly evolving environ-

ment configures the organization’s unique, valuable, and

difficult-to-replicate resources to allow the organization

to learn from and build on diversity.

� Finally, monitoring involves inquiring into the impact of

organization change and development on desired out-

comes, understanding the organization’s progress in

achieving its strategy, and making rapid adjustments

based on what is learned. This process is central to the

organization’s capacity to detect error and learn from

success in today’s environment, where changes have to be

made quickly, where there are many changes going on

Exhibit 1 The Engage and Learn Model.

Is change management obsolete? 217

simultaneously in diverse parts of the organization, and

where tight control is not possible or desirable.

There are no ‘‘arrows’’ in the model. There is no par-

ticular prescribed sequence or starting point; the model

can be entered anywhere. All of these routines are hap-

pening at once, in various parts of the organization and in

loosely coupled ways. Change can begin with monitoring or

tailoring just as easily as with awareness or design. Simul-

taneous, asynchronous, and multi-faceted change is being

carried out in different parts of the organization. Change of

the magnitude, speed, and diversity required today cannot

be carried out without considerable emergent change and

self-regulation through the organization. Because of the

complexity and the interdependencies in the system, an

important change challenge is to catalyze sufficient infor-

mation exchanges across the system. This allows interde-

pendent change activities to adjust to and influence one

another.

The center of the model describes two continuous indi-

vidual modes of operating, or motivations that link people

throughout the organization to the various change routines

and enable them to help make change happen: engagement

and learning. Any change agent’s first motivation — and we do

not assume that a change agent comes from any specialized

group or represents a formal hierarchical leader — is engage-

ment. Change agents engage in awareness of the issues facing

the organization. They are plugged into the relevant issues

happening in the organization’s environment, the business,

and its people, in order to orient their activities to be

relevant to stakeholders. They must also understand how

organization design elements govern and drive behavior in

the organization and be able to conceive of alternative

designs to elicit and reinforce new behaviors.

Change agents need to engage in activities that tailor

selected change interventions and designs to operate effec-

tively within the culture and identity of the organization, its

strategy, and its resources. In today’s complex and diverse

global organizations, sensitivity to different sub-cultures and

market contexts is required to avoid trying to fit round pegs

into square holes. Tailoring recognizes that each organiza-

tion’s situation is unique and must be accounted for when

implementing change. Finally, change is likely to be fast and

iterative, in keeping with the ‘‘engage and learn’’ concep-

tualization.

Monitoring activities involve the rapid collection and

interpretation of appropriate data to understand whether

innovations and interventions are having the intended impact

and provide change agents with opportunities to continue to

hone the capabilities of the organization.

Awareness of the broad and specific contexts of an orga-

nization, the ability to diagnose the sources of behavior from

a design perspective and to tailor high impact interventions,

and the skills to monitor a change’s impact motivate an

important and probably nonlinear cycle of activity. Such a

perspective on change recognizes its ongoing nature, and

that change agents must be better at each activity over time.

The second motivation is learning; it is the outcome

of intentional engagement. Through participation in

repeated cycles of awareness, design, tailoring, and mon-

itoring, change agents learn. As test and learn routines are

carried out continuously and simultaneously throughout

the organization to address many different challenges

and purposes, transparency and cross-organizational learn-

ing form a foundation for the development of a system-

wide change capability. This capability depends not only

on knowledgeable individuals, but also on collective pro-

cesses that are core routines of how the organization

operates.

Learning allows each subsequent cycle of engagement

activities to be more efficient and effective as people

throughout the organization become proficient at changing.

This requires systems and processes that support learning,

such as after action reviews, reflection and discussion, doc-

umentation, and transparent sharing of information. Next,

we describe the Cambia Health Solutions case to illustrate

the model.

CAMBIA HEALTH SOLUTIONS

Few environments have undergone as much upheaval and

public scrutiny over the past 30 years as the health care

industry. Over that time, health care costs ballooned,

increasing from 8.9 percent of GDP (gross domestic product)

in 1980 to 17.4 percent 30 years later, and yet our health care

outcomes rank among the worst in the OECD (Organization for

Economic Cooperation and Development) countries.

Cambia Health Solutions’ core business is Regence, a 90-

year-old Blue Cross-Blue Shield insurance affiliate in the

Pacific Northwest. As a member of a highly regulated indus-

try, it had developed a conservative culture embedded in a

hierarchical, command-and-control organization structure.

In the early 2000s, and in light of the severe pressures on the

industry, it began thinking about its mission and purpose.

In 2004, Regence’s board and senior leaders, led by CEO

Mark Ganz, anticipated many of the environmental changes

that were to come as they established a new corporate vision.

An emotional and tight ‘‘are we part of the problem or part of

the solution?’’ dialogue among a few executives produced a

new purpose. It was dubbed ‘‘The Cause: To serve as a

catalyst in transforming health care, creating a person-

focused and economically sustainable system.’’ Over the

next few years, the organization talked about the implica-

tions of The Cause and how the organization should go about

pursuing it.

The Patient Protection and Affordable Care Act (PPACA) of

2010 (aka ‘‘Obamacare’’) was a costly, divisive, and disrup-

tive change to the industry that brought a whole new set of

regulatory changes. Organizations in the healthcare eco-

system began to explore and introduce new approaches, thus

starting the process of fundamentally re-crafting the industry

and the relations among the involved parties.

In that context, Cambia was ready. Its leadership team

conceived a significant reorganization and put a stake in the

ground about how The Cause was going to be implemented. A

parent holding company would house Regence, the tradi-

tional insurance business, and Direct Health Solutions (DHS).

DHS was a newly created incubator business unit charged

with developing or investing in innovative products and

services, such as other lines of insurance, alternative forms

of health care access, and freestanding health and wellness

solutions. Both the insurance and the DHS organizations

focused on serving The Cause.

218 C.G. Worley, S.A. Mohrman

Cambia, a sponsor company of the Center for Effective

Organizations at USC, was aware of our research into orga-

nizational agility. In late 2010, they asked for some help with

culture change to ensure that their investments would make

them more fit for the future.

An agility assessment, consisting of a broadly adminis-

tered survey coupled with structured management inter-

views, was conducted in the spring of 2011. There was a

strong sense of shared purpose, captured by The Cause, and a

belief that the new structure reflected that purpose. There

was also consensus that Cambia was a values-driven company

and that its non-profit status helped their traditional insur-

ance business emphasize a strong ‘‘member focus.’’

The change in strategy and restructuring also led to

tensions in the organization. The Cause, by itself, was an

insufficient statement of strategy. DHS’ investments, which

were expected to achieve a higher rate of return than the

insurance business, suggested to some that economic per-

formance had become Cambia’s driving focus, to the detri-

ment of member satisfaction. Moreover, the management

attention given to DHS left some people in Regence Health

feeling like the emphasis had suddenly shifted away from

the company they had built. Many people feared that The

Cause was too grand a mission for employees to embrace

and too bold for an organization with Cambia’s limited

capabilities.

Innovation and change capabilities, essential to The

Cause, were also a problem. Diagnostic interviews revealed

a deep frustration that it was ‘‘hard to get things done’’ at

Cambia. Goal setting, information flows, and decision-mak-

ing reflecting the hierarchical silos of the core business did

not support a strategy that required risk-taking in the

service of new product and program development. Man-

agers did not understand how their individual goals con-

nected to the strategy, were not held accountable for

outcomes, and did not experience either positive or nega-

tive consequences for their performance. A lack of empow-

erment and accountability meant that decisions were

pushed up for resolution.

Cambia’s CEO understood that these issues threatened its

ability to execute the strategy. He commissioned the VP of HR

to set up a design team, review the findings of the assess-

ment, and develop a change strategy to address them.

The design team came to recognize that if change was to

become a way of life at Cambia, the change process could not

be a new ‘‘program’’ or ‘‘project.’’ Their approach was to

effect change by looking systemically at the organization and

focusing on the system or systems most likely to change the

‘‘rules of engagement.’’ They would act as ‘‘orchestrators,’’

understanding the pros and cons of a chosen system, making

deliberate and powerful changes to it in alignment with The

Cause and the uncertain environment they were facing, and

then continuously steering alignment and reform as neces-

sary. Instead of announcing a new innovation process, they

would work within an existing ‘‘Innovation Force’’ unit to

adapt insurance or DHS systems to unleash the organization’s

creativity. Change would be significant and complex; evolu-

tionary where it could be and discontinuous where it needed

to be.

Ultimately, the design team commissioned four task

forces, each composed of design team members and line

leaders, to:

� Improve the process for setting and communicating orga-

nizational objectives.

� Revise the human capital and performance management

processes.

� Design and implement an enterprise-wide change man-

agement process.

� Explore in greater detail the reasons why it ‘‘was hard to

get stuff done’’ at Cambia and propose solutions.

The objective setting and communication task force and

the human capital and performance management task

force are good examples of the approach. Cambia’s tradi-

tional annual strategy, goal setting, appraisal, and salary

change events did not fit the requirements of success in

either the DHS or insurance business. To build more respon-

sive management practices in alignment with The Cause

and the values, the task forces instituted a shift to quar-

terly objective setting and performance reviews that sup-

ported the pace of envisioned change. Here they learned

from a system being used by a small number of Cambia

leaders who found this shorter-cycle process effective for

both business results and personal development. The

‘‘quarterly conversations’’ included both what the objec-

tives were and whether or not they were achieved, and how

achievement of the objectives reflected the desired orga-

nizational values. A key component of these conversations

was validating that the objectives currently being worked

on were still the right ones and retaining the option to stop

working on them, start new ones, or continue on the

course. Because of the broad involvement of line leaders, because

they were essentially re-purposing currently used and tested

systems to better support The Cause and agility, and because

the proposed process was known by many, implementation

proceeded quickly with only minimal communication and

management support. The task force presented the proposed

changes at Cambia’s annual senior leadership summit, and

leaders were asked to make the initial changes within the

existing cycle. Implementation coaches, including the CEO as

a coach for his direct reports, were asked to oversee the

implementation of the process, remove roadblocks, and hold

leaders accountable to put the new process in place. In the

first cycle, 90 percent of leaders had submitted their quar-

terly objectives.

The other task forces also made progress.

� The change management task force developed a shared

model and process, not unlike traditional models, that was

piloted in several groups and approved by the Cambia

Leadership Team. There was a strong belief that this was

an important contribution to the organization’s overall

change capability since its ‘‘change muscle’’ was so weak

to begin with, and because the leaders envisioned a future

characterized by many simultaneous changes, large and

small. Moreover, a common model and language would lay

the foundation for the coordination that was expected

between DHS and the insurance business. Task force

members and others trained in the process served as

sponsors who worked with business managers to teach

them the model and apply it to ongoing changes in their

units. An embedded and shared way of thinking about

change was taking place.

Is change management obsolete? 219

� The ‘‘hard to get stuff done’’ task force surfaced impor-

tant challenges for the design team. Their analysis sug-

gested that effective execution was associated with

people in leadership positions who could ‘‘make it hap-

pen,’’ find ‘‘work-arounds,’’ and ‘‘bust through the bu-

reaucracy.’’ This old normal view of leadership

effectiveness was reinforced when the CEO made changes

to several key positions. The new leaders visibly em-

braced the proposed changes in strategy and operating

philosophy, possessed the transformational skills the or-

ganization needed, and displayed leadership styles that

were aligned to The Cause and the values. Moreover,

those leaders began to hire people like themselves, thus

multiplying the number of leaders with these needed

skills. The tentative conclusion — and implication for

action — was that change was a function of getting the

right person into key roles. This conclusion was later

challenged and modified.

At the same time as the task forces were working, a host of

emergent changes in structures and management processes

were encouraged by the design team. For example, the IT

(information technology), HR, and other units went through

redesigns that were shaped by The Cause and the organiza-

tion’s values, and that offered many opportunities to inten-

tionally build change capability into the organization. In

addition, the CEO restructured the senior leadership team

that was generally seen as too large, too unfocused in its

purpose, and misaligned in terms of its decision rights. The

CEO replaced the group with four management forums, each

with clear membership, decision rights, and alignment to The

Cause, thereby greatly increasing the speed with which

decisions were made. This was especially important for

the DHS organization. It now had its own management struc-

ture and was able to craft strategies and systems that

supported its purposes separately from the insurance busi-

ness. Finally, the CFO (chief financial officer) replaced the

annual budgeting cycle with a set of quarterly investment

reviews that aligned to the quarterly objectives and perfor-

mance conversations.

The confluence of these emergent design changes and

the ‘‘hard to get stuff done’’ task force findings created a

key learning for the design team: that good leadership

alone could not sustain success. Good leadership and

good organization design (or the lack of either one) made

work and achieving results easy or hard. The design team

recognized that they needed to focus on designing and

implementing a whole system in which it was easy to get

things done. It was an important learning — one that has

diffused through the organization — and led to a greater

orientation to continually review the organization to make

sure it stays aligned with Cambia’s direction in its fast

paced environment.

Cambia assessed its progress at both the one-year and

two-and-a-half year mark. In year one, interviews with key

stakeholders, design team members, and senior executives

supported the change strategy and suggested several

enhancements. After two-and-a-half years, a resurvey of

the organization’s leadership found significant improvements

in all dimensions of design and agility, including leaders’

ratings of the extent to which the culture was more

‘‘change-friendly.’’ In addition, respondents reported

increased frequencies of behaviors that were considered

key to The Cause and the organization’s values and the

DHS organization had started or partnered with others to

create more than 15 organizations.

ANALYSIS OF THE CAMBIA CHANGE EFFORT

The Cambia case reflects and confirms the activities and

dynamics of the ‘‘engage and learn’’ model. The company

established many of the change routines that would be a

foundation for its change capability through time: processes

for continually engaging people throughout the organization

in developing new approaches and learning from them. Work-

ing far from the traditional, linear models, it reflects a non-

linear flow of the core activities that constitute organiza-

tional change capabilities: gaining awareness, designing,

tailoring, and monitoring.

Prior to the declaration of The Cause, Cambia’s leader-

ship team was in the center of the conversation regarding

healthcare reform and developed an increasingly deep

awareness of the various storms that were brewing in the

industry. Insurance premiums were rising and they were

under specific pressures to show value/benefit commensu-

rate with the increases. The Cause was an important if

incomplete tailoring of Cambia’s strategy, and the process

of generating it greatly increased awareness of the changing

environment and understanding of the adaptation challenge

facing the company and the industry. At the top of most

design frameworks, strategy sets the tone for all other

design choices. Ganz, his board, and a few executives

actively engaged in a foresighted design activity that gave

Cambia the luxury of time. They could think about its

implications well ahead of the pressures brought on by

the PPACA.

The deep awareness and anticipation of inevitably dis-

ruptive change provided the impetus for a fundamental

strategic and organizational change at Cambia. Its reorga-

nization into the core health insurance business and the

exploratory direct health solutions business was, and

still is, an important strategic bet. It set the stage to

build ambidexterity by engaging in two parallel but diverse

directions: (1) aggressively changing the capabilities of

the core business; and (2) building a second business

so that Cambia could help shape and derive value from

the disruptive technologies and innovations that were

beginning to reshape healthcare, albeit in emergent direc-

tions.

Cambia, as many other organizations, found itself swim-

ming in a sea of change and uncertainty, and having to

continually transform itself. This is the essence of the

new normal, and the reason why transformation can no

longer be conceived of as an episode with a beginning and

an end.

With the many simultaneous tentacles of organization

change interacting with the many changes and opportunities

being sensed in the environment, the system needed a way

to guide and catalyze change, and to seek needed alignment

and diversity of initiatives and approaches. Cambia’s design

team was a structured way to teach and diffuse knowledge of

design and change to the organization, to approach change

incrementally, build on small successes to gain momentum,

220 C.G. Worley, S.A. Mohrman

involve a large number of people in planning and

implementing the change, and decentralize much of the

implementation. The design team monitored progress

against The Cause, reviewed the progress of initiatives,

and determined whether they were adding sufficient value

to continue or if new initiatives should be started because

something important was missing. In many ways, calling the

group a ‘‘design’’ team was a misnomer. They were and are

much more like a steering team or, in their terms, an

‘‘orchestrator.’’

Cambia accelerated change by focusing on the design of

the organization in order to build in change capability–—not

just by betting the success of a transformation on the new

structure or depending on leaders to make big splashes that

could not be sustained. No one change was made in isolation;

every change was made with a cross-functional team and a

member of the design team so that the changes were made in

parallel and as a system, and every change was made in

alignment with The Cause and the values the organization

was trying to instill.

Cambia used an agility assessment to ascertain whether it

was fit for the dynamic future it faced, and to monitor

whether the changes it was making were working and pro-

gress was being made. This future orientation is inherent in

the engage and learn model. Yet Cambia also worked to make

the capacity to design and implement very specific organiza-

tional systems and structures a routine capability, knowing

that design and redesign would be a big part of their future

success. By building this capability through the organization,

it ensured the engagement needed to tailor approaches to

the specific contexts faced by different parts of the organi-

zation and the diversity required to be successfully

embedded in an evolving healthcare ecosystem.

The two-and-a-half year assessment monitored progress,

and showed important and impressive improvements. While

there is always a temptation to declare victory, almost every

Cambia leader emphasized, ‘‘we have come a long way, and

there’s still a long way to go.’’ Cambia exemplifies the new

engage and learn approach to organization change. Based on

their belief that change is a long-term, never-ending journey

with uncertain but most certainly temporary destinations,

Cambia has made significant changes in the way it operates

and has laid the foundation for becoming an innovator in the

health care industry. This foundation will support the on-

going journey.

CONCLUSION

Understanding and ‘‘managing’’ change is the topic for our

time. The traditional models of change management that

served organizations well during the old normal are no longer

sufficient to guide them through the types of changes they

are facing today. The new normal calls for different theories

of change and changing. The engage and learn model

addresses three important and different demands of the

new normal.

First, change in the old normal was a project to be

managed or a transformation event to be endured. In the

new normal, change is an interacting flow of routines and

cycles. When change is a project or event, it is natural to ask

‘‘when will it be over?’’ In the new normal, fundamental

change never ends, and it is better viewed as something to be

catalyzed and steered. The trappings of certainty that come

from viewing change as an event should give way to testing

and learning and continually adapting. The engage and learn

model views change as a function of complexity, uncertainty,

and learning, not of executing a detailed plan. It argues that

change does not happen in transformational bursts but

through routines that keep the organization focused on

results and change at the same time. Change routines

become core elements of how an organization operates.

Second, change in the old normal was implemented

through the hierarchy and depended on top management

support. In the new normal, change will be implemented

through networks because the people with the knowledge of

what needs to change are often far removed from the C-

suite. The organization must acknowledge the pervasiveness

of change by insisting that both formal and informal leaders

become competent change agents and by creating networks

that support learning across the organization.

Organization members and units will be asked to utilize

new technology to develop and try out new approaches, learn

what works, implement it, and share those learnings with

others. It is their activities that make this engage-and-learn

process a routine throughout the organization. Only by mak-

ing change leadership part of everyone’s job can the orga-

nization change and learn quickly enough to adapt.

Specialized change management roles will shift the planning

and managing of change to helping organization leaders build

change capabilities, providing deep knowledge and guidance

about the elements of the engage and learn activities, and

creating connections for sharing and learning.

Third, change in the old normal typically leveraged

sequential activities designed to improve particular subsys-

tems in service of a stable competitive advantage. In the new

normal, change is viewed as the source of effectiveness and

embedded in agile designs. The engage and learn model vests

the change process in the flow of organizing and in the roles

and competencies of employees throughout the organiza-

tion. Change is happening all the time, at different speeds,

and in different parts of the organization.

These changes must be viewed in a coordinated fashion to

allow the organization to act as a system rather than as

distinct parts. An organization change capability is not some-

thing to be rented, and change is not something that a

specialized group does to an organization. Rather, people

throughout the organization are asked to figure out, in a

coordinated way, how to make their units and their interfaces

work better, not as a special improvement activity, but as an

embedded aspect of the work system. They will be asked to

create the kind of organizations that support current and

emerging strategies and that fit the demands of a changing

environment.

This new view of change does not eliminate the value of

traditional change perspectives. Traditional change manage-

ment models are just one arrow in a rich and diverse quiver of

approaches that will characterize the new normal. Adjusting

to the stream of pressures and opportunities faced by orga-

nizations will consist of a variety of change activities, some of

which are best conceptualized and dealt with through a

sequential process of unfreezing, moving, and refreezing

on new practices and work systems. But even these tradi-

tional theories of change and changing must adapt and give

Is change management obsolete? 221

way to new models of change based on complexity, engage-

ment, and learning. They will have to be accelerated and

flexible, and they will have to be supplemented by a broad

orientation to rapid learning and adjustment. This orienta-

tion, in essence, is the antidote to change resistance.

Derived from the years of CEO research in organization

design, organizational agility, organization development and

change, and human resource management, the ‘‘engage and

learn’’ model is offered as our best chance of bringing the

organization’s capacity for change into alignment with the

new realities of our time.

222 C.G. Worley, S.A. Mohrman

SELECTED BIBLIOGRAPHY

The theories of change arguments are drawn from W. Bennis,

Changing Organizations (New York: McGraw-Hill, 1966) and J.

Porras and P. Robertson, Organization development theory: a

typology and evaluation, in Research in Organizational

Change and Development, vol. 1, R. Woodman and W. Pas-

more (eds.) (Greenwich, Conn.: JAI Press, 1987), 1—57.

The punctuated equilibrium model has been studied fairly

extensively and some good references on the subject include:

L. E. Greiner, Evolution and revolution as organizations grow,

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Anderson, Technological discontinuities and organization

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The most common source of Lewin’s theories is K. Lewin,

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ADKAR: A Model for Change in Business, Government and the

Community (Loveland, CO: Learning Centre Publications,

2006); a description of GE’s Change Acceleration Process

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putting the learning organization to work, (Boston: Harvard

Business School Press, 2000); K. McArdle and P. Reason, Action

research and organization development, in T. Cummings (ed.),

Handbook of Organization Development (Los Angeles, Sage

Publications, 2008) 123—136.

The positive model of change is described in K. Cameron,

J. Dutton, and R. Quinn (eds.), Positive organizational scho-

larship: foundations of a new discipline (New York: Berrett-

Kohler, 2003) and D. Cooperrider, Positive image, positive

action: the affirmative basis for organizing, in Appreciative

Management and Leadership, S. Srivastva, D. Cooperrider,

and Associates (eds.) (San Francisco: Jossey-Bass, 1990). For

those interested in a primer on social constructionism, see P.

Berger and T. Luckman, The social construction of reality

(New York: Anchor Books, 1967); K. Gergen, The social con-

structionist movement in modern psychology, American Psy-

chologist, 1985, 40, 266—275.

The strategy literature has been exploring changing defi-

nitions of competitive advantage, and two articles that

we’ve found enlightening are: C. I. Stubbart and M. B. Knight,

The case of the disappearing firms: empirical evidence and

implications, Journal of Organizational Behavior, 2006,

27(1), 79—100; and R. D’Aveni, G. Dagnino, and K. Smith,

The age of temporary advantage, Strategic Management

Journal, 2010, 31(3), 1371—1385.

The concept of being ‘‘pre-adapted’’ for change comes

from the study by R. Garud, J. Gehman, and A. Kumaras-

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lessons from 3 M corporation, Organization Studies, 2011, 32,

737—767. 3 M spent considerable time documenting their

failures. The failures were often not an issue of bad technol-

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the environment changed and the time was right, the orga-

nization was able to respond quickly because of the ability to

dip into an existing knowledge base. 3M’s failures really

became options on the shelf.

The results of the i4cp study mentioned in the article can

be found at http://www.i4cp.com/trendwatchers/2014/04/

16/from-march-madness-to-market-madness-building-agile-

workforce-planning-and-analytics-capability.

CEO research — books and articles — that have contrib-

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include: E. E. Lawler and C. G. Worley, Built to Change (San

Francisco: Jossey-Bass, 2006); C. G. Worley, T. D. Williams,

and E. E. Lawler III, The Agility Factor: Building Adaptable

Organizations for Superior Performance (San Francisco:

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M. Jr. Mohrman, Changing the organization through time:

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lence, 2008, 25(10), 5.

Christopher G. Worley is a senior research scientist at the Center for Effective Organizations at the Marshall

School of Business at the University of Southern California. He is a recognized leader in the field of organization

development and design. Prior to coming to CEO, he was director of the Master of Science in Organization (MSOD)

program at Pepperdine University and remains a primary faculty member in that program. His most recent

books include The Agility Factor, Organizing for Sustainability: Leading through Networks & Partnerships,

Organization Development and Change (10th edition), Management Reset, and Built to Change. Email:

[email protected].

Is change management obsolete? 223

Susan A. Mohrman is a senior research scientist at the Center for Effective Organizations in the Marshall School of

Business at the University of Southern California. She researches and publishes in professional journals and books

on the topics of: (1) organization design for the global knowledge economy; (2) organization development,

learning, and change; (3) high technology organizations; (4) the design of teams and other lateral approaches to

organizing; (5) design for growth; and (6) the design of sustainable business systems. Mohrman has been involved as

a consultant or researcher to a wide variety of organizations instituting innovative management systems and

organizational designs. She is faculty director of the Certificate Program in Organization Design at the Center for

Effective Organizations. Email: [email protected].

224 C.G. Worley, S.A. Mohrman