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Interpersonal and Group Process Approaches

learning objectives

Understand the diagnostic issues associated with interpersonal relations and group dynamics interventions.

Illustrate the principles of the process consultation intervention.

Describe the process of third-party conflict resolution.

Discuss and evaluate the core organization development (OD) intervention of team building.

T his chapter discusses change programs related to interpersonal relations and group dynamics. They are among the earliest inter-

ventions devised in OD, they remain very popular, and they have been adapted for use in a variety of worldwide and cross-cultural settings. Interper- sonal and group process approaches are aimed at helping group members assess their interac- tions and devise more effective ways of working. These change programs represent a basic skill requirement for an OD practitioner.

Interpersonal and group process approaches, including process consultation, third-party inter- ventions, and team building, are among the most enduring OD interventions. Process consultation helps group members understand, diagnose, and improve their behaviors. Through process consul- tation, the group should become better able to use its own resources to identify and solve the interpersonal problems that often block work-related problem solving. Third-party interventions focus directly on dysfunctional interpersonal conflict. This approach is used only in special circumstances and only when both parties are willing to engage in the

process of direct confrontation. Team building is aimed both at helping a team perform its tasks better and at satisfying individual needs. Through team-building activities, group goals and norms become clearer. In addition, team members become better able to confront difficulties and problems and to understand the roles of individuals within the team. Among the specialized team- building approaches presented are interventions with ongoing teams and temporary teams such as project teams and task forces.

As the economy has globalized and as organizations in other countries have developed, OD practitioners are applying these fundamental OD interventions more and more. Like other social innovations, however, process consultation, third-party interventions, and team building must be adapted to fit with local cultural values. Traditional OD values, rooted in North American and European cultures, favor openness, directness, and participation. Other country and organization cultures may not favor these same values, requiring adjustments in these interpersonal and group process interventions. For example, third-party

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interventions are less likely in Asia given the “saving face” norms prevalent in that region. Similarly, team- building processes must account for norms of

uncertainty, avoidance, and deference to authority during problem-solving activities or interventions intended to alter group processes.

10-1 Diagnostic Issues in Interpersonal and Group Process Interventions Chapter 5 introduced the diagnostic issues associated with OD interventions. With respect to interpersonal and group process issues, we draw mostly from the concepts involved in group-level diagnosis. The primary inputs to understanding group effective- ness are the organization’s design—its strategy, structure, and culture. For example, if the organization is pursuing an aggressive growth strategy with a functional structure, moderate-to-high levels of conflict may be quite acceptable. As described in Chapter 12, the high levels of expertise that are a strength of functional structures also produce a tendency for conflict. The OD practitioner must diagnose whether the aggressive objec- tives are exacerbating that tendency. Client concerns over the levels of conflict and requests for conflict resolution interventions may be inappropriate. The organization’s design may be a more important driver of conflict than individual skill levels or group functioning problems.

The primary design components of group effectiveness are goal clarity, task struc- ture, composition, group functioning, and performance norms. Each of these design components must be considered in interpersonal and group process interventions. For example, if a group’s goals are not clear, improving their decision-making processes may only allow them to be more effective at solving the wrong problems.

In general, however, individual and group process interventions address the task structures, group functioning, and performance norm elements of the model, and their current characteristics must be diagnosed. Such social processes directly and indirectly affect how work is accomplished. When group process promotes effective interactions, groups are likely to perform tasks successfully.1 Group process includes:

• Communications. One area of interest in all of these interventions is the nature and style of communication, or the process of transmitting and receiving thoughts, facts, and feelings. Communication can be overt—who talks to whom, about what, for how long, and how often. It can include body language, including facial expressions, fidgeting, posture, and hand gestures.2 Communication can also be covert, as when a manager says, “I’m not embarrassed” as his or her face turns scarlet. Covert commu- nication is “hidden” and the process consultant often seeks to find the best way to make the message more explicit.

• The functional roles of group members. The OD practitioner must be keenly aware of the different roles individual members take on in a group. Both upon entering and while remaining in a group, individuals must address and understand the self-identity, influence, and power issues that will satisfy personal needs while working to accom- plish group goals. In addition, group members must take on roles that enhance: (a) task-related activities, such as giving and seeking information, elaborating work processes, and coordinating and evaluating activities; and (b) group-maintenance actions, directed toward holding the group together as a cohesive team, including encouraging, harmonizing, compromising, setting standards, and observing. Many ineffective groups perform little group maintenance, and this is a primary reason for bringing in an OD consultant.

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• Group problem solving and decision making. To be effective, a group must be able to identify problems, examine alternatives, and make decisions. For example, one way of making decisions is to ignore a suggestion, as when one person makes a sug- gestion and someone else offers another before the first has been discussed. A sec- ond method is to give decision-making power to the person in authority. Sometimes decisions are made by minority rule—the leader arrives at a decision and turns for agreement to several people who will comply. Frequently, silence is regarded as con- sent. Decisions can also be made by majority rule, consensus, or unanimous consent. The OD consultant can help the group understand how it makes decisions and the consequences of each decision process, as well as help diagnose which type of deci- sion process may be the most effective in a given situation. Decision by unanimous consent or consensus, for example, may be ideal in some circumstances but too time-consuming or costly in other situations.

• Group norms. Especially if a group of people works together over a period of time, it develops group norms or standards of behavior about what is good or bad, allowed or forbidden, right or wrong. The OD consultant can be very helpful in assisting the group to understand and articulate its own norms and to determine whether those norms are helpful or dysfunctional. By understanding its norms and recognizing which ones are helpful, the group can grow and deal realistically with its environment, make optimum use of its own resources, and learn from its own experiences.3

• The use of leadership and authority. An OD practitioner needs to understand pro- cesses of leadership and how different leadership styles can help or hinder a group’s functioning. In addition, the consultant can help the leader adjust his or her style to fit the situation.

Each interpersonal and group process intervention includes diagnosis as an essential ingredient and is guided by the client’s objectives and understanding of these processes.

10-2 Process Consultation Process consultation (PC) is a general framework for carrying out helping relationships.4

Schein defines process consultation as “the creation of a relationship that permits the client to perceive, understand, and act on the process events that occur in [his or her] internal and external environment in order to improve the situation as defined by the client.”5 The process consultant does not offer expert help in the form of solutions to problems, as in the doctor–patient model. Rather, the process consultant works to help managers, employees, and groups assess and improve human processes, such as commu- nication, interpersonal relations, decision making, and task performance. Schein argues that effective consultants and managers should be good helpers, aiding others in getting things done and in achieving the goals they have set.6 Thus, PC is as much a philosophy as a set of techniques aimed at performing this helping relationship. The philosophy ensures that those who are receiving the help own their problems, gain the skills and expertise to diagnose them, and solve them themselves. PC is an approach to helping people and groups help themselves.

As a philosophy of helping relationships, Schein proposes ten principles to guide the process consultant’s actions.7

• Always try to be helpful. Process consultants must be mindful of their intentions, and each interaction must be oriented toward being helpful.

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• Always stay in touch with the current reality. Each interaction should produce diagnostic information about the current situation. It includes data about the client’s opinions, beliefs, and emotions; the system’s current functioning; and the practi- tioner’s reactions, thoughts, and feelings.

• Access your ignorance. An important source of information about current reality is the practitioner’s understanding of what is known, what is assumed, and what is not known. Process consultants must use themselves as instruments of change.

• Everything you do is an intervention. Any interaction in a consultative relationship generates information as well as consequences. Simply conducting preliminary inter- views with group members, for example, can raise members’ awareness of a situation and help them see it in a new light.

• The client owns the problem and the solution. This is a key principle in all OD practice. Practitioners help clients solve their own problems and learn to manage future change.

• Go with the flow. When process consultants access their own ignorance, they often realize that there is much about the client system and its culture that they do not know. Thus, practitioners must work to understand the client’s motivations and perceptions.

• Timing is crucial. Observations, comments, questions, and other interventions intended to be helpful may work in some circumstances and fail in others. Process consultants must be vigilant to occasions when the client is open (or not open) to suggestions.

• Be constructively opportunistic with confrontive interventions. Although process consultants must be willing to go with the flow, they also must be willing to take appropriate risks. From time to time and in their best judgment, practitioners must learn to take advantage of “teachable moments.” A well-crafted process observation or piece of feedback can provide a group or individual with great insight into their behavior.

• Everything is information; errors will always occur and are the prime source for learning. Process consultants never can know fully the client’s reality and invariably will make mistakes. The consequences of these mistakes, the unexpected and sur- prising reactions, are important data that must be used in the ongoing development of the relationship.

• When in doubt, share the problem. The default intervention in a helping relation- ship is to model openness by sharing the dilemma of what to do next.

10-2a Basic Process Interventions For each of the interpersonal and group processes described above, a variety of interven- tions may be used. In broad terms, these are aimed at making individuals and groups more effective.8

Individual Interventions These interventions are designed primarily to help people be more effective in their communication with others. For example, the process consul- tant can provide feedback to one or more individuals about their overt behaviors during meetings. At the covert or hidden level of communication, feedback can be more per- sonal and is aimed at increasing the individual’s awareness of how their behavior affects others. A useful model for this process has been developed by Luft in what is called the Johari Window.9 Figure 10.1, a diagram of the Johari Window, shows that some personal issues are perceived by both the individual and others. This is the “open” window. In the

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“hidden” window, people are aware of their behavior, motives, and issues, but they con- ceal them from others. People with certain feelings about themselves or others in the work group may not share with others unless they feel safe and protected; by not reveal- ing reactions they feel might be hurtful or impolite, they lessen the degree of communication.

The “blind” window comprises personal issues that are unknown to the individual but that are communicated clearly to others. For example, one manager who made fre- quent business trips invariably told his staff to function as a team and to make decisions in his absence. The staff, however, consistently refused to do this because it was clear to them, and to the process consultant, that the manager was really saying, “Go ahead as a team and make decisions in my absence, but be absolutely certain they are the exact decisions I would make if I were here.” Only after the manager participated in several meetings in which he received feedback was he able to understand that he was sending a double message. Thereafter, he tried both to accept decisions made by others and to use management by objectives (described in Chapter 12) with his staff and with individ- ual managers. Finally, the “unknown” window represents those personal aspects that are unknown to either the individual or others. Because such areas are outside the realm of the process consultant and the group, focus is typically on the other three cells.

The individual interventions described in practice encourage people to be more open with others and to disclose their views, opinions, concerns, and emotions, thus reducing the size of the hidden window. Further, the consultant can help individuals give feedback to others, thus reducing the size of the blind window. Reducing the size of these two windows helps improve the communication process by enlarging the open window, the “self” that is open to both the individual and others. This is a very North American and

FIGURE 10.1

The Johari Window

SOURCE: Adapted from “The Johari Window,” Human Relations Training News 5 (1961): 6–7.

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European notion and using the Johari window in this way may not be appropriate in different cultural and cross-cultural settings.

Before OD practitioners give individual feedback or encourage others to engage in feedback activities, they first must observe relevant events, ask questions to understand the contextual and cultural issues fully, and make certain that the feedback is given to the client in a usable manner.10 The following are guidelines11 for effective feedback in a Western setting:

• The giver and receiver must have consensus on the receiver’s goals. • The giver should emphasize description and appreciation. • The giver should be concrete and specific. • Both giver and receiver must have constructive motives. • The giver should not withhold negative feedback if it is relevant. • The giver should own his or her observations, feelings, and judgments. • Feedback should be timed to when the giver and receiver are ready.

To the best of our knowledge, there are no guidelines for effective feedback in other cultures, and it may be one of the best indicators of a Western bias in OD. Under the assumption that knowing how you are perceived by others is a generally positive con- cept, feedback should be guided by the values of the local country and organization. For example, being “concrete and specific” may be inappropriate for relationship- oriented cultures, and gaining consensus on the receiver’s goals or worrying about the timing of feedback may not be an issue in cultures with strong authoritarian values.

Group Interventions These interventions are aimed at the process, content, or struc- ture of the group. Process interventions sensitize the group to its own internal processes and generate interest in analyzing them. Interventions include comments, questions, or observations about relationships between and among group members; problem solving and decision making; and the identity and purpose of the group. For example, process consultants can help by suggesting that some part of each meeting be reserved for exam- ining how these decisions are made and periodically assessing the feelings of the group’s members. As Schein points out, however, the basic purpose of the process consultant is not to take on the role of expert but to help the group share in its own diagnosis and do a better job in learning to diagnose its own processes: “It is important that the process consultant encourage the group not only to allocate time for diagnosis but to take the lead itself in trying to articulate and understand its own processes.”12 This sound advice helps to make process consultation relevant in different cultural contexts.

Content interventions help the group determine what it works on. They include comments, questions, or observations about group membership; agenda setting, review, and testing procedures; interpersonal issues; and conceptual inputs on task-related topics.

Finally, structural interventions help the group examine the stable and recurring methods it uses to accomplish tasks and deal with external issues. They include com- ments, questions, or observations about inputs, resources, and customers; methods for determining goals, developing strategies, accomplishing work, assigning responsibility, monitoring progress, and addressing problems; and relationships to authority, formal rules, and levels of intimacy.

Application 10.1 presents an example of process consultation at Christian Caring Homes. The focus of the application is the relationship between two senior executives during a succession process but also involves relationships with the organization’s board and top-management team.13

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1 PROCESS CONSULTATION AT CHRISTIANCARING HOMES, INC.

C hristian Caring Homes, Inc. (CCH or “The Homes”) is among the largest multilocation, nonprofit senior care providers. The organi- zation comprises four facilities spread

across two states with a strong community rep- utation dating back 40 years. After 35 years at the helm, the CEO, Winston, decided to retire at age 62. The CCH Board decided that before conducting an external search for Winston’s successor, they would explore the qualifications of three internal candidates. The Board chose CCH’s young CFO, Paul, as Winston’s succes- sor. Paul had several years’ experience as an external auditor and three years within the orga- nization. The Board announced that Winston was “CEO and President” and Paul would be “CEO and President-Elect.”

The Board wanted to ensure that Paul had the proper support to make the transition and that Winston’s well-earned value and respect would be preserved and leveraged. As a result, the Board created a three-member “Transition Steering Committee” consisting of the Board president and two long time board members with experience in management and recruiting. The Committee suggested that the two leaders might benefit from a consultant’s advice over the agreed-upon one-year transition period.

The Steering Committee located and vet- ted a semi-retired, locally based OD consultant, Simon. They introduced him to the leaders for consideration.

In the “get-acquainted” meeting of the steering committee and the two leaders, Simon noted that Winston and Paul appeared congenial. They approved of Simon’s experi- ence and his history of commitments to the region and social service organizations. Simon asked the two leaders what was rewarding about their jobs and what Winston valued about his contribution to the Homes. Winston responded with pride about past accomplish- ments and was supported by his designated successor and the committee. He then took the lead in describing the ongoing challenges that would coincide with the transition.

After the meeting, each leader emailed Simon expressing thanks for his attendance and copied the other. Over the next month, communication between Simon, Paul, and Winston consisted of three exploratory email exchanges and two conference calls (always with both leaders) to address the question: How might Simon be of help?

The two leaders then suggested that Simon make a proposal. They wanted their senior lead- ership team (SLT) to review any possible work- ing arrangement. Simon wrote a short proposal for a four-month “transition process consulta- tion” to explore and advance the handoff between Winston and Paul and the transition of their roles, responsibilities, and relationships with the board and the SLT. At the end of that time, the two leaders could assess the value from the consultation. Simon further recom- mended a retainer arrangement, obviating the concern for open-ended consultant expense.

The SLT discussed the proposal at their next monthly meeting. Winston and Paul together called Simon to report that the SLT had agreed they could proceed with the engagement.

Simon reflected on the work to date. It had taken more than two months to agree to work together. He felt impatient with what appeared to be extreme caution on the part of the top leadership of CCH. He also noted that the two leaders were never apart. They always appeared together at SLT meetings, on calls, or in emails. However, the process seemed interesting and at this point, he “went with the flow,” slow as it was.

Simon attended the next two monthly day- long SLT meetings. He did not participate except when asked for his view. Invariably, he responded with a group process observa- tion that tended to relate to one of three themes that emerged during the meetings:

1. The operations leaders formed subgroups based on the geography where their facili- ties were located.

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2. Routine HR issues absorbed a big chunk of the agenda.

3. Paul often made statements intended to bring a “corporate” point of view.

Simon followed up each meeting with a one- page review of what appeared to be the key issues regarding roles, relationships, and responsibilities related to the transition. In follow-up discussions with Winston and Paul, they expressed different interests. Winston focused on individual facility issues while Paul wondered how he could get the SLT members to take a high-level view of issues facing The Homes as an organizational entity. Simon frequently commented on this differ- ence in approach. He was aware that successfully navigating a transition would involve the whole organization, not just the two top roles, and he shared that awareness.

After two more months, there appeared to be no actions or plans regarding the transition. Simon was surprised when the Board president called him and asked if anything was being done about the “organization structure.” Despite his curiosity about where the subject of organization structure had come from, Simon responded that he saw his agreement as exclusively with the two principals and that they were in the best place to communi- cate progress to the Board and to her. The Board president immediately agreed and was happy to respect the client/consultant boundary.

In his next conference call with Paul and Winston, Simon inquired if there “were any issues around organization structure.”

The question appeared to open up a huge trove of information. As CEO, Winston had 14 direct reports and no Chief Operating Officer role. Simon was told the story of Pinkerton, the previous COO, who had attempted (with the support of an external consultant) to implement a coup through which he would replace Winston. The Board had intervened to fire the autocratic and “conniving” Pinkerton. The position had not been filled for two years. The story supported the conclusion that the CCH executives were reluctant to take strong, independent action and feared being manipulated by consultants. This story of organiza- tional intrigue and power dynamics seemed to explain the caution and politeness that Simon had originally observed.

Simon considered three possible choices for what to do next:

1. Explore directly the lack of substantive action regarding the transition of executive responsi- bilities. Was the implication of the Pinkerton story that the organization did not trust consul- tants? Did they not trust him?

2. Explore the subject of a structural change. Did the leaders see “structure” as a solution and if so, what problem was being solved by a struc- tural change?

3. Explore his observations that the organization had a congenial and compliant attitude and cul- ture. Did the Pinkerton experience result in an organization style that devalued consensus and transparency and favored risk-avoidance?

Simon chose the second option with the fol- lowing hypothesis: If the leaders felt a problem existed because of structure, then following that path of inquiry might reveal obstacles to redistribu- tion of leadership responsibilities—likely necessary following Winston’s departure. It might also expose doubts or distrust in the SLT executive group regarding Paul’s, Winston’s, and Simon’s motivation. Simon concluded that because of their experience with the authoritarian Pinkerton, the SLT members did not raise issues of doubt or distrust. They appeared so tyrannized that Simon later joked that they had been “Pinkerton-ized.”

Following disclosure of the painful history, and while Winston was away at conference, Paul arranged a business dinner with the SLT. He floated the possibility of creating an organization for the Homes that would not include a new COO. He found some support for the idea and shared it with Winston when he returned. The two leaders asked Simon for his reaction and inquired whether he could help with such a change.

Simon was quite surprised at Paul’s move. Paul had openly challenged the assumption that Winston’s laissez-faire style would be continued during the transition period and beyond. For his part, Winston was skeptical that “collective leader- ship from the SLT” would render the COO role unnecessary but accepted it as a way that Paul could “learn the ropes.”

Simon’s first reaction was to jump at the chance to work with structure but realized that

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10-2b Results of Process Consultation Although process consultation is an important part of organization development and has been widely practiced over the past 45 years, a number of difficulties arise in trying to measure performance improvements as a result of process consultation. One problem is that most process consultation is conducted with groups performing mental tasks (e.g., decision making); the outcomes of such tasks are difficult to evaluate. A second difficulty with measuring PC’s effects occurs because in many cases process consultation is

such a move could have unknown implications for a smooth transition. Instead, he chose the oppor- tunity to readdress and possibly advance the tran- sition process by offering an observation and a confronting intervention.

The observation was that the transition between Winston and Paul would necessarily require changes throughout the organization. Working with the proposed structure was one way (an experiment) to anticipate and work through the changes in responsibilities that might bring clarity for the execu- tives constituting the SLT. Simon could help them learn from their work.

The confronting intervention was to send Win- ston and Paul an email with an attachment entitled “The Leader’s First 90 Days,” and a single ques- tion: “When does Paul’s first 90 days begin?”

The email generated numerous intense con- versations between Paul and Winston. The con- cept of “When does the transition of power take place” surfaced the assumptions of the two men. Several differences in philosophy and expectations also surfaced. Winston thought the change would take place in nine months. Paul thought he should have full authority in three months! They also faced choices about what the future CCH organization would look like structurally and stylistically.

Simon saw the two as behaving kindly with each other but not managing the differences. He chose to speak individually with each to help them clarify their concerns and to get their sugges- tions for moving forward. Winston was not clear that the legal transition could take place so soon and had no proposal for what his role would be after the “official turnover.” Paul was anxious to make some changes and did not want Winston to

influence decisions he would have to live with in the long term. Meeting again with the two, Simon asked them to share their concerns and suggest ways for moving forward. They concluded they should describe their situation with the Transition Steering Committee.

Subsequently, Paul, Winston, and Simon met with the Board’s Transition Steering Committee. Simon limited his role to encouraging openness on the part of the two leaders as they shared their thoughts with the committee. Led by the Board president, the committee started to shift from a neutral position to that of supporting Paul’s position, the person they would be working with in determining the future of CCH.

The committee’s dialogue resulted in Paul’s ability to move forward with his own vision and at the same time create a role for Winston as outgo- ing CEO. The committee supported a decision whereby Winston would relinquish the title of “CEO and President” four months earlier than planned. He would take the title of “CEO and President-Emeritus” and serve as mentor to Paul, reporting only to him.

Simon’s four-month “transition process consul- tation” was coming to an end. He requested a review of his engagement. As a result, Paul (in his new CEO role) asked Simon to reengage for another four months. Significantly, Paul took this decision independent of Winston or the SLT, consulting only with the Board president. Simon saw this as a vote of confidence, evidence of a new set of operating assumptions emerging, and an opportunity to sup- port Paul as he took on his broader CEO responsibil- ities, including building a stronger relationship with the CCH Board and the Board president.

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combined with other interventions in an ongoing OD program. Isolating the impact of process consultation from other interventions is challenging.

Kaplan’s review of process-consultation studies underscored the problems of measuring performance effects.14 It examined published studies in three categories: (1) reports in which process intervention is the causal variable but performance is measured inadequately or not at all, (2) reports in which performance is measured but process consultation is not isolated as the independent variable (the case in many instances), and (3) research in which process consultation is isolated as the causal variable and performance is adequately measured. The review suggests that process consultation has positive effects on participants, according to self-reports of greater per- sonal involvement, higher mutual influence, group effectiveness, and similar variables. However, very little, if any, research clearly demonstrates that objective task effectiveness was increased. In most cases, either the field studies did not directly measure perfor- mance or the effect of process intervention was confounded with other variables.

A third problem with assessing the performance effects of process consultation is that much of the relevant research has used people’s perceptions rather than hard perfor- mance measures as the index of success.15 Although much of this research shows positive results, these findings should be interpreted carefully until further research is done using more concrete measures of performance.

10-3 Third-Party Interventions Third-party interventions focus on conflicts arising between two or more people within the same organization. Conflict is inherent in groups and organizations and can arise from a variety of sources, including differences in personality, task orientation, goal interdependence, and perceptions among group members, as well as competition for scarce resources. Tjosvold notes that too little consensus on the definition of conflict has contributed to the perception that conflict is bad. Moreover, when it is defined as opposing interests or divergent goals, it narrows the range of potentially productive interventions. He suggests that conflict is best viewed as “incompatible activities.” Such a definition opens up options for resolution, places responsibility for the conflict with the individuals involved, and allows conflict to be seen in a positive way.16

To emphasize that conflict is neither good nor bad per se is important.17 Conflict can enhance motivation and innovation and lead to greater understanding of ideas and views. On the other hand, it can prevent people from working together constructively, destroying necessary task interactions among group members. Consequently, third- party interventions are used primarily in situations in which conflict significantly dis- rupts necessary task interactions and work relationships among members.

Third-party interventions vary considerably depending on the kind of issues under- lying the conflict. Conflict can arise over substantive issues, such as work methods, pay rates, and conditions of employment, or it can emerge from interpersonal issues, such as personalities and misperceptions. When applied to substantive issues, conflict resolution interventions often involve resolving labor–management disputes through arbitration and mediation. The methods used in such substantive interventions require considerable training and expertise in law and labor relations and generally are not considered part of OD practice. For example, when union and management representatives cannot resolve a joint problem, they can call upon the Federal Mediation and Conciliation Service to help them resolve the conflict. In addition, “alternative dispute resolution” (ADR) practices increasingly are offered in lieu of more expensive and time-consuming court trials18

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and can provide a more structured process of conflict resolution in cultures where direct confrontation is inappropriate. Conflicts also may arise at the boundaries of the organi- zation, such as between suppliers and the company, between a company and a public- policy agency, or between multiple organizations or groups.19

When conflict involves interpersonal issues in developed, Western organizations, however, OD has developed approaches that help control and resolve it. These third- party interventions help the parties interact with each other directly, recognize the per- sonal choices each party is making, and facilitate their diagnosis of the conflict and its resolution. The ability to facilitate conflict resolution is a basic skill in OD and applies to all of the process interventions discussed in this chapter. Consultants, for example, frequently coach clients through a conflict or help organization members resolve inter- personal conflicts that invariably arise during process consultation and team building.

Third-party interventions cannot resolve all interpersonal conflicts in organizations, nor should they. Many times, interpersonal conflicts are not severe or disruptive enough to warrant attention. At other times, they simply may burn themselves out. Evidence also suggests that other methods may be more appropriate under certain conditions. For example, managers tend to control the process and outcomes of conflict resolution actively when they are under heavy time pressures, when the disputants are not expected to work together in the future, and when the resolution of the dispute has a broad impact on the organization.20 Under those conditions, the third party may resolve the conflict unilaterally with little input from the conflicting parties.

10-3a An Episodic Model of Conflict Interpersonal conflict often occurs in iterative, cyclical stages known as “episodes.” An episodic model is shown in Figure 10.2. At times, issues underlying a conflict are latent and do not present any manifest problems for the parties. Then something triggers the conflict and brings it into the open. For example, reports identifying cost overruns or a dissatisfied customer can trigger a violent disagreement or frank confrontation. Because the focus is on resolving the expense or customer problem, the interpersonal conflict remains unresolved and again becomes latent. And again, something triggers the conflict, making it overt, and so the cycle continues with the next conflict episode.

FIGURE 10.2

A Cyclical Model of Interpersonal Conflict

SOURCE: Managing Conflict: Interpersonal Dialogue and Third-Party Roles (Prentice Hall Organizational Development Series), 2nd ed. by Walton, Richard E., ISBN 0201088592. © 1987 Addison-Wesley.

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Conflict has both costs and benefits to the antagonists and to those in contact with them. Unresolved conflict can proliferate and expand. An interpersonal conflict may be concealed under a cause or issue that serves to make the conflict appear more legitimate. Frequently, the overt conflict is only a symptom of a deeper problem.

The episodic model identifies four strategies for conflict resolution. The first three attempt to control the conflict and may be appropriate under a variety of organizational and cultural conditions. Only the last approach tries to change the basic issues underly- ing it.21 The first strategy is to prevent the ignition of conflict by arriving at a clear understanding of the triggering factors and thereafter avoiding or blunting them when the symptoms occur. For example, if conflict between the research and production man- agers is always triggered by new-product introductions, then senior executives can warn them that conflict will not be tolerated during the introduction of the latest new product. However, this approach may not always be functional and may merely drive the conflict underground until it explodes. As a control strategy, however, this method may help to achieve a temporary cooling-off period.

The second control strategy is to set limits on the form of the conflict. Conflict can be constrained by informal gatherings before a formal meeting or by exploration of other options. It also can be limited by setting rules and procedures specifying the conditions under which the parties can interact. For example, a rule can be instituted that union officials can attempt to resolve grievances with management only at weekly grievance meetings.

The third control strategy is to help the parties cope differently with the conse- quences of the conflict. The third-party consultant may work with the people involved to devise coping techniques, such as reducing their dependence on the relationship, ventilating their feelings to friends, and developing additional sources of emotional support. These methods can reduce the costs of the conflict without resolving the under- lying issues.

The fourth method is an attempt to eliminate or to resolve the basic issues causing the conflict. Although this objective seems the most direct and obvious approach, it is often the most difficult to bring about.

10-3b Facilitating the Conflict Resolution Process Walton has identified a number of factors and tactical choices that can facilitate the use of the episodic model in resolving the underlying causes of conflict.22 The following ingredients can help third-party consultants achieve productive dialogue between the dis- putants so that they examine their differences and change their perceptions and beha- viors: mutual motivation to resolve the conflict; equality of power between the parties; coordinated attempts to confront the conflict; relevant phasing of the stages of identify- ing differences and of searching for integrative solutions; open and clear forms of com- munication; and productive levels of tension and stress.

Among the tactical choices identified by Walton are those having to do with diagno- sis, the context of the third-party intervention, and the role of the consultant. One of the tactics in third-party intervention is the gathering of data, usually through preliminary interviewing. Group process observations can also be used. Data gathering provides some understanding of the nature and the type of conflict, the personality and conflict styles of the individuals involved, the issues and attendant pressures, and the partici- pants’ readiness to work together to resolve the conflict.

The context in which the intervention occurs is also important. Consideration of the neutrality of the meeting area, the formality of the setting, the appropriateness of

276 PART 3 HUMAN PROCESS INTERVENTIONS

the time for the meeting (that is, a meeting should not be started until a time has been agreed on to conclude or adjourn), and the careful selection of those who should attend the meeting are all elements of this context.

In addition, the third-party consultant must decide on an appropriate role to assume in resolving conflict. The specific tactic chosen will depend on the diagnosis of the situa- tion. For example, facilitating dialogue of interpersonal issues might include initiating the agenda for the meeting, acting as a referee during the meeting, reflecting and restating the issues and the differing perceptions of the individuals involved, giving feedback and receiving comments on the feedback, helping the individuals diagnose the issues in the conflict, providing suggestions or recommendations, and helping the parties do a better job of diagnosing the underlying problem.

Third-party consultants must develop considerable skill at diagnosis, intervention, and follow-up, and be highly sensitive to their own feelings and to those of others. They must recognize that some tension and conflict are inevitable and that although there can be an optimum amount and degree of conflict, too much conflict can be dysfunctional for both the people involved and the larger organization. The third-party consultant must be sensi- tive to the situation and able to use a number of different intervention strategies and tac- tics when intervention appears to be useful. Finally, he or she must have professional expertise in third-party intervention and must be seen by the parties as neutral or unbiased regarding the issues and outcomes of the conflict resolution.

Application 10.2 describes a third-party intervention at a law firm. The OD consul- tant was brought in by another consultant to help rescue a struggling strategic planning process. The OD consultant initially used structural interventions to simply help the partners get work done but eventually had to utilize more interpersonal process interven- tions to address the personality conflicts.23

10-4 Team Building Team building refers to a broad range of planned activities that help groups improve the way they accomplish tasks, help members enhance their interpersonal and problem- solving skills, and increase team performance.24 Organizations comprise many different types of groups including permanent work groups, temporary project teams, and virtual teams. Team building is an effective approach to improving teamwork and task accom- plishment in such environments. It can help problem-solving groups make maximum use of members’ resources and contributions. It can help members develop a high level of motivation to implement group decisions. Team building also can help groups over- come specific problems, such as apathy and general lack of member interest; loss of pro- ductivity; increasing complaints within the group; confusion about assignments; low participation in meetings; lack of innovation and initiation; increasing complaints from those outside the group about the quality, timeliness, and effectiveness of services and products; and hostility or conflicts among members.

Team building also can facilitate other OD interventions, such as employee involve- ment, work design, restructuring, and strategic change. Those change programs typically are designed by management teams, implemented through various committees and work groups, and result in new teams that need to operate at a high level of effectiveness quickly. Team building can help the groups design high-quality change programs and ensure that the programs are accepted and implemented by organization members. Indeed, most technostructural, human resource management, and strategic interventions depend on some form of team building for effective implementation.

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R oss and Sherwin (R&S) is a 40-year-old, Chicago-based law firm with 65 lawyers and one of the largest specialty intellectual property (IP) firms in the country. Since the

firm’s founding, a single Managing Partner has run the partnership meetings and worked with the firm’s operations director to make adminis- trative decisions about staff and lawyers. Its clear niche and consistently strong results meant that the Managing Partner could spend most of his/her time continuing their law prac- tice. In fact, it was easy to keep your head down and “just practice law” at R&S.

Beginning in 2008, changes in the firm’s strategy and pressure from clients and compe- titors began to challenge the easy-going style of the organization. For example, the recently added IP litigation services required new law- yers with different skill sets. In addition, clients were pressuring the firm to lower hourly rates for basic transactional work, such as trademark and patent applications, and to increase the number of litigation cases under a “contin- gency” arrangement. That is, R&S’s fees would depend on the court’s findings and sig- nificantly increase the firm’s risks compared to the bill-by-the-hour arrangement that had worked for years.

Most of the transactional lawyers had reservations about the contingency work. Although the payoff could be good for the vic- torious inventor and the law firm who repre- sented him, the possibility of sinking a million dollars of billable time into a case with poten- tially no return was terrifying to some. As a result, the firm’s Managing Partner began call- ing for regular meetings to discuss whether to invest in contingency cases and how steeply to discount transactional work. In 2009, the firm lost two partners to competitors and partner income dipped in 2009 and 2010.

By the end of 2010, the partners had agreed on two things: they needed to think more about firm strategy and they needed a new leadership structure. The R&S partners believed that a single managing partner could no longer lead the firm because the two very

different businesses, IP litigation (increasingly contingency work) and IP transactions (hourly work with significant rate pressure) required representation at the highest level. Moreover, Andrew, the Managing Partner since 2000, was eager to retire and fully endorsed the need for new leadership.

In 2011, R&S named its first-ever "Co- managing Partners,” Brad and Ron. Brad is conservative in every way. He is slow to dele- gate and even slower to endorse the litigation group’s growth through contingency work. Ron, on the other hand, is a risk taker in terms of the work he will take on, and in terms of his willingness to pass responsibilities to other lawyers early in their careers.

Brad and Ron also share certain character- istics, however. While they are effective at navigating thorny conversations with clients and adversaries, they have little patience for working through the firm’s internal differences. Both of them will say what people want to hear and then go off and do things as they see fit.

The downside of this common trait showed up in their first action as Comanaging Partners. They agreed to lead the firm through a strategic planning process and hired an exter- nal consultant familiar with law firm strategy to assist. Brad believed that Ron was eager to have a discussion about expansion, including contingency litigation but believed that he was so focused on his own group’s success that he might jeopardize the core business and push risk-averse lawyers into uncomfort- able situations. Ron believed that Brad’s pri- mary interest was in stabilizing the firm and “protecting” the hourly work that “paid the bills,” and worried that Brad saw litigation as a dispensable part of the firm.

However, instead of engaging in a thorough discussion and exchanging views about the mer- its of the different options, they chose to gather input from others. They argued publicly that this was the right thing to do. Privately, they weren’t so much gathering data as they were avoiding one another and an uncomfortable conflict. They walked into their initial all-partners planning

278 PART 3 HUMAN PROCESS INTERVENTIONS

meeting as Comanaging Partners with different agendas and considerable distrust for one another.

Twenty minutes into the meeting, Dan, the firm’s leading transactional practice partner and enemy of any planning process that was unrelated to supporting his work, began his cross- examination of the two new leaders. While Dan had some good questions about where Ron and Brad thought the planning process would lead, he quickly attached his remarks to the supremacy of his own practice, his potential new clients, and that any other investment represented a threat to him and his team. The questions carried a hostile tone and were met with defensiveness by Ron and Brad. Ron was feeling alone and needing to defend the idea of expanding contingency work, and Brad felt attacked by an influential partner in one of his first efforts at firm-wide leadership. The meeting limped along but ended with everyone feeling that nothing was accomplished and wondering how or if Ron and Brad were going to be able to effectively lead the firm.

Ron and Brad each blamed the other for not having a clearer plan and structure for the meeting. They each believed that the others’ misplaced agenda created the opening for Dan to torpedo the proceedings. Again, however, rather than look- ing at and dealing with one another, they turned away from each other and pointed at Dan.

The strategy consultant had seen enough. She could see the conflict derailing the strategy formu- lation process and recommended an OD consul- tant with conflict resolution experience.

As the OD consultant entered the system, Ron and Brad presented their recommendation: “fix” Dan and everything would be ok. Each of them agreed that Dan was a trouble-maker and would remain a challenging presence as they tried to lead the firm. When they did finally drop the sub- ject of Dan and compare visions for the firm, Ron would waive the banner about the importance of growth and balancing hourly work with the poten- tial for big victories, and Brad would dig into his position that too much risk scared transactional lawyers and threatened the stability of the firm. They would quickly get frustrated, shorten the meeting, and go back to what they each did so well—practicing law.

The most detrimental aspect of the unresolved tension between them was the conversations that

took place behind each other’s backs. Ron would worry aloud that Brad did not see an important role for litigation going forward. He described Brad as chummy with his old friends and unwelcoming of anything that threatened his conservative view of the firm. Brad would describe litigation as Ron’s pet project and motivated by their inability to develop hourly work. He told his partners that he didn’t trust that Ron provided all relevant informa- tion about the cases he wanted the firm to invest in. They said they talked more about their conflict to their other partners than they did to one another.

To make the recommendation palatable for Dan, Ron and Brad proposed that the three part- ners work together in a leadership development process. Initially, Dan pretended to be on board with the plan. Soon thereafter, however, it was clear that Dan wanted nothing to do with coaching, leadership development, or help of any kind. Ron and Brad were left looking at each other. Realizing that the firm was, indeed, at a precarious juncture and needed strong leadership from them, the OD consultant proposed, and Ron and Brad agreed to engage in a process designed to help the two of them manage their conflict so that they could develop and implement a strategy for the firm.

The OD consultant’s initial impression was that these two brilliant lawyers rarely, if ever, stopped to think about the impact of their style on others in the firm. Before they could have a constructive dialogue about working together more effectively, Ron and Brad needed some understanding of their own roles in the dysfunc- tional dynamic. The first step was to gather feed- back and help them see how others perceived them.

Ron and Brad each went through a full day of meetings with the consultant to discuss the feed- back, to articulate a vision for the firm, and to describe a collaborative relationship with the other. Over the course of the day, they were each quite articulate about what they wanted to help the firm accomplish, where they found them- selves frustrated, and how each of them viewed the other.

For the first time since their appointment as managing partners, each of them drafted bullet points describing a vision for the firm. The premise of this exercise was that there might be a good amount of common ground; and, if all of the key

CHAPTER 10 INTERPERSONAL AND GROUP PROCESS APPROACHES 279

items were laid out on the table, it might be possi- ble to work through the various interests, see what was attainable, and what they could agree on. Each of the partners also created a set of steps that the two of them could take to develop a more trusting, coordinated relationship as Comana- ging Partners.

After the one-on-one meetings, the OD consul- tant asked that they share with each other their visions for the firm and their own action steps to create collaborative leadership. They were genu- inely surprised by the similarities on the lists. Brad, to Ron’s surprise, did want to expand the firm. He had a different timeline and his view included satellite offices, but he wanted to build. Ron was pleased to see that Brad was not “hun- kering down” and riding things out until his retire- ment. Ron, to Brad’s relief, never envisioned the contingency work consuming more that 20% of the firm’s billable time. This was still a bigger num- ber than Brad would like, but it was a meaningful, reasonable limitation that Ron put forth.

Walking through these and other concrete items on their respective bullet lists, they saw that they were largely wrong in their assumptions about what the other person did or did not want to accomplish as Comanaging Partner. Similarly, walking together through their respective “better collaboration” lists, they saw that they both knew they needed more time with just the two of them together communicating (the norm had been to include the COO, third member of the Executive Committee, in all of their meetings). They realized that they both tended to posture and take exagger- ated positions in front of an audience. They also agreed to be more open and quicker to raise issues and concerns with one another.

The OD consultant had follow-up calls with each of them over the next six months to follow up on commitments that they made to each other based on the two lists. They made significant prog- ress. For example, they developed a contingency work strategy that created a portfolio of cases with different levels of investment. The portfolio would ramp up only as positive verdicts and rewards materialized. This allowed Ron to see that growth was possible depending on the success of his group, and it allowed Brad to see that there were manageable limitations on the risk. They also were successful in carving out some meeting time for

just the two of them. However, they were not suc- cessful in being open with one another and speak- ing up when they had a concern about how they were working together or what the other person was up to.

Despite the forward progress and excellent financial results in six months since engaging in the process, both Ron and Brad remained “worn out,” “exhausted,” “stressed,” and believed they were on thin ice as leaders and with one another. For example, Ron and Brad presided over a part- nership meeting that Dan hijacked in the first 15 minutes. Dan asked pointed questions about a new contingency case. In Ron’s mind, this should have been an easy distraction to dismiss. He and Brad were aligned on the plan related to the intake of contingency work and the partners had signed on. If Brad, the transactional partner of the duo, had simply and clearly told Dan that the new case was accepted pursuant to the agreed-upon sys- tem, the discussion would have ended. However, Brad said nothing and left Ron to defend (with the potential appearance of self-interest) the decision to take the case. Ron felt hung out to dry.

Despite some excellent progress together, the partnership meeting and other similar events trig- gered old patterns and familiar flare-ups. Feeling frustrated, Ron and Brad described the hijacked part- nership meeting in their next session with the OD consultant. The consultant reminded them of the important steps that they had taken together over the previous months and that they had jointly steered the firm out of a difficult business cycle for many law firms in the country. He assured them that a “conflict-free” partnership was not possible and not even the goal. They had gotten to the point where they could remain focused on joint business goals and related tasks despite the occasional flare- ups; however, their relationship needed more resil- ience. They were too quick to doubt one another and to doubt themselves as an effective unit.

Any “team building” to date had been done through the work of managing the firm. Ron and Brad, both doers, related easily to the task- orientation of making lists and checking items off of the list. The consultant had remained focused on structural interventions as well. However, seeing the frustration in both of them, he believed it was time to take a chance and introduce a more explicit relationship-building component to the meetings.

280 PART 3 HUMAN PROCESS INTERVENTIONS

The importance of team building is well established, and its high use is expected to continue in the coming years. Management teams are encountering issues of greater complexity and uncertainty, especially in such fast-paced industries as software and hardware development, entertainment, and health and financial services. Team building can provide the kind of teamwork and problem-solving skills needed to tackle such issues. When the team represents the senior management of an organization, team build- ing can be an important part of establishing a coherent corporate strategy, and can pro- mote the kind of close cooperation needed to implement complex strategies and new forms of governance.25 As manufacturing and service technologies continue to develop—for example, just-in-time inventory systems, lean manufacturing, and service quality concepts—there is increasing pressure on organizations to implement team- based work designs. Team building can assist in the development of group goals and norms that support high productivity and quality of work life.

The globalization of work and organizations implies that people from different cul- tures and geographic locations will increasingly interact over complex management and operational tasks using a variety of information and communication technologies. Team- building activities for these “virtual” and cross-cultural teams have increased substan- tially over the past several years.26 Most team-building processes are based on assump- tions of face-to-face interaction and relationships are built partially on the basis of visual cues. In virtual teams, research suggests that closeness between team members is created through proactive offers of help and support on task-related issues, and maintained through frequent, short, and task-focused communications (often technology mediated). Thus, team-building can help virtual teams to examine cross-cultural issues and their impact on decision making and problem solving, facilitate communication processes where tone and body language clues are absent, and build trust.

Finally, mergers and acquisitions, restructurings, and strategic alliances continue to proliferate. The success of these endeavors depends partly on getting members from different organizations to work together effectively. Team building can facilitate the formation of a unified team with common goals and procedures.

In the OD literature, team building is not clearly differentiated from process consul- tation and group facilitation. This confusion exists because most team building includes

The OD consultant proposed that the partners join him on a stand-up paddle-board outing on the ocean. They had not seen one another looking quite so foolish and despite a couple of mishaps getting out through the surf, they had never before shared much laughter.

The freeing, shared experience created a very different tone for the meeting that followed and the most direct discussion of trust between them. Ron talked about Brad’s silence at the part- ners meeting and Brad talked about his feeling that Ron was less than completely forthcoming about all material facts related to contingency cases he brought into the firm. Brad’s concerns were about

the timing of the information and the level of detail. The comments from each of them came across as confronting, but rather than the usual defensive- ness or steering the conversation to Dan or some- thing else; they both owned up to what they could and should have done differently. The conflict res- olution intervention followed a traditional OD pro- cess. It began with diagnosis, working with the energy of the client, and initially focused on struc- tural and behavioral changes that helped the part- ners get work done. As trust was developed, the consultant was able to suggest other interventions that helped the two partners begin building trust at deeper levels of their relationship.

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process consultation—helping the group diagnose and understand its own internal processes—and facilitation—providing structure to a group’s interactions so that it can focus on an agenda and exchange information. However, process consultation is a more general approach to helping relationships than is team building. Team building focuses explicitly on helping groups perform tasks and solve problems more effectively. Process consultation, on the other hand, is concerned with establishing effective helping relation- ships in organizations while facilitation often represents a substitute for group process. It is seen as key to effective management and consultation and can be applied to any help- ing relationship, from subordinate development to interpersonal relationships to group development. Thus, team building consists of process consultation plus other, more task-oriented interventions.

Team building is applicable in a large number of situations, from starting a new team, to resolving conflicts among members, to revitalizing a complacent team. Dyer has devel- oped a checklist for identifying whether a team-building program is needed and whether the organization is ready to start such a program (Table 10.1).27 If the problem is a struc- tural or technical one, an intergroup issue, an administrative mistake, or a conflict between only two people, team building would not be an appropriate change strategy.

10-4a Team-Building Activities A team is a group of interdependent people who share a common purpose, have common work methods, and hold each other accountable.28 The nature of that interdependence var- ies, creating the following types of teams: groups reporting to the same supervisor, manager, or executive; groups involving people with common organizational goals; temporary groups formed to do a specific, one-time task; groups consisting of people whose work roles are interdependent; and groups whose members have no formal links in the organization but whose collective purpose is to achieve tasks they cannot accomplish alone. Another impor- tant variable in teams is location. When team members are in close proximity, a traditional team exists; when members are geographically dispersed and their interaction is mediated by information technology, a virtual team exists.

Several factors can affect the outcomes of any specific team-building activity: the length of time allocated to the activity, the team’s willingness to look at its processes, the length of time the team has been working together, the cultural backgrounds of team members, and the team’s permanence. Consequently, the results of team-building activities can range from comparatively modest changes in the team’s operating mechan- isms (e.g., meeting more frequently or gathering agenda items from more sources) to much deeper changes (e.g., modifying team members’ behavior patterns or the nature and style of the group’s management, or developing greater openness and trust).

Hackman has proposed that effective teams produce outputs that satisfy external stakeholders, constantly improve their team functioning, and have members that are learning.29 As a result, team-building interventions can be categorized according to their purpose and focus (see Table 10.2). Team-building activities can be oriented toward (1) individual behavior, (2) group behavior, or (3) the group’s integration with its orga- nizational context. They also can be classified according to whether their purpose is (1) diagnostic or (2) improvement. A particular team-building activity can overlap these categories, and, on occasion, a change in one area will have negative results in other areas. For example, a very cohesive team may increase its isolation from other groups, leading to intergroup conflict or other dysfunctional results, which in turn can have a negative impact on the total organization unless the team develops sufficient diagnostic skills to recognize and deal with such problems.

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TABLE 10.1

Team-Building Checklist

I. Problem identification: To what extent is there evidence of the following problems in your work unit?

Low Evidence Some Evidence High Evidence

1. Loss of production or work-unit output 1 2 3 4 5

2. Grievances or complaints within the work unit 1 2 3 4 5

3. Conflicts or hostility between unit members 1 2 3 4 5

4. Confusion about assignments or unclear relationships between people

1 2 3 4 5

5. Lack of clear goals or low commitment to goals 1 2 3 4 5

6. Apathy or general lack of interest or involvement of unit members

1 2 3 4 5

7. Lack of innovation, risk taking, imagination, or taking initiative

1 2 3 4 5

8. Ineffective staff meetings 1 2 3 4 5

9. Problems in working with the boss 1 2 3 4 5

10. Poor communications: people afraid to speak up, not listening to each other, or not talking together

1 2 3 4 5

11. Lack of trust between boss and members or between members

1 2 3 4 5

12. Decisions are made that people do not understand or agree with

1 2 3 4 5

13. Good work is not recognized or rewarded 1 2 3 4 5

14. Lack of encouragement for working together in a better team effort

1 2 3 4 5

Scoring: Add the scores for the 14 items. If your score is between 14 and 28, there is little evidence your unit needs team building. If your score is between 29 and 42, there is some evidence but no immediate pressure, unless two or three items are very high. If your score is between 43 and 56, you should think seriously about planning the team-building program. If your score is over 56, team building should be top priority for your work unit.

II. Are you (or your manager) prepared to start a team-building program? Consider the following statements. To what extent do they apply to you or your department?

Low Medium High

1. You are comfortable in sharing organizational leadership and decision making with subordinates and prefer to work in a participative atmosphere.

1 2 3 4 5

continued

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TABLE 10.1

Team-Building Checklist, (continued )

Low Medium High

2. You see a high degree of interdependence as necessary among functions and workers in order to achieve your goals.

1 2 3 4 5

3. The external environment is highly variable or changing rapidly, and you need the best thinking of all your staff to plan for these conditions.

1 2 3 4 5

4. You feel you need the input of your staff to plan major changes or develop new operating policies and procedures.

1 2 3 4 5

5. You feel that broad consultation among your people as a group in goals, decisions, and problems is necessary on a continuing basis.

1 2 3 4 5

6. Members of your management team are (or can become) compatible with each other and are able to create a collaborative rather than a competitive environment.

1 2 3 4 5

7. Members of your team are located close enough to meet together as needed.

1 2 3 4 5

8. You feel you need to rely on the ability and willingness of subordinates to resolve critical operating problems directly and in the best interest of the company or organization.

1 2 3 4 5

9. Formal communication channels are not sufficient for the timely exchange of essential information, views, and decisions among your team members.

1 2 3 4 5

10. Organization adaptation requires the use of such devices as project management, task forces, or ad hoc problem-solving groups to augment conventional organization structure.

1 2 3 4 5

11. You feel it is important to bring out and deal with critical, albeit sensitive, issues that exist in your team.

1 2 3 4 5

12. You are prepared to look at your own role and performance with your team.

1 2 3 4 5

13. You feel there are operating or interpersonal problems that have remained unsolved too long and need the input from all group members.

1 2 3 4 5

14. You need an opportunity to meet with your people to set goals and develop commitment to these goals.

1 2 3 4 5

Scoring: If your total score is between 50 and 70, you probably are ready to go ahead with the team- building program. If your score is between 35 and 49, you probably should talk the situation over with your team and others to see what would need to be done to get ready for team building. If your score is between 14 and 34, you probably are not prepared to start team building.

SOURCE: W. G. Dyer, Team Building: Issues and Alternatives, 42–46. © 1987. Reprinted by permission of the Estate of W. G. Dyer.

284 PART 3 HUMAN PROCESS INTERVENTIONS

10-4b Interventions Relevant to Individual Behavior People come into groups and organizations with varying needs for achievement, inclu- sion, influence, and belonging. These needs can be supported and nurtured by the team’s structure and process or they can be discouraged. Diagnostic interviews and personal-style instruments can help members to better understand their motivations, preferences, or emotions in the group context. It results in one or more of the members gaining a better understanding of the way inclusion, emotions, control, and power affect problem solving and other group processes, and provide choices about their degree of involvement and commitment. Such activities provide information so that people have a clearer sense of how their needs and wants can or will be supported.

Improvement activities that address an individual’s behavior in a group include coaching, 360-degree feedback, and assistance with conflict. These interventions attempt to alter the group’s ongoing processes by focusing on the behaviors and attitudes of individual members. For example, one team’s typical decision-making process included the leader having several agenda items for discussion. Each of the items, however, had a predetermined set of actions that she wanted the group to take. Most members were frustrated by their inability to influ- ence the conclusions. The team-building process consisted of coaching the team leader and group members about ways to change this process. The leader received feedback about specific examples of her not-so-subtle manipulation to arrive at preconceived decisions and how group members felt about it. At the next meeting, the leader acknowledged the feedback and indicated her willingness to be challenged about such preconceived decisions. Team members expressed their increased willingness to engage in problem-solving discussions, their trust in the leader, and their ability to make the challenge without fear of reprisal.

10-4c Interventions Relevant to the Group’s Behavior The most common focus of team-building activities is behavior related to task perfor- mance and group process. In an effective team, task behavior and group process must be integrated with each other as well as with the needs and wants of the people making

TABLE 10.2

Categories of Team-Building Interventions

Focus of Intervention Individual Behavior Group Behavior

Integration with Organization

Diagnosis Assessment instruments and interview data to understand personal style and motivation

Team surveys, interviews, and observations to understand group operations

Interviews and surveys from internal customers and other group stake- holders to understand group’s role and effectiveness

Improvement Individual coaching and feedback

360-degree feedback Third-party conflict

resolution

Group vision, mission, purpose development

Role clarification and decision rights

Strategic planning and stakeholder mapping

Large group intervention Intergroup conflict

resolution

SOURCE: Adapted from W.G. Dyer, Team Building: Issues and Alternatives, 1987.

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up the group. Diagnostic activities involve gathering data through the use of team sur- veys or, more commonly, through interviews. The nature of the data gathered will vary depending on the purpose of the team-building program, the consultant’s knowledge about the organization and its culture, and the people involved. The consultant already may have obtained a great deal of data by sitting in as a process observer at staff and other meetings. The data gathered also will depend on what other OD efforts have taken place in the organization. By whatever method obtained, however, the data usually include information on leadership styles and behavior; goals, objectives, and decision- making processes; organizational culture, communication patterns, and interpersonal relationships and processes; barriers to effective group functioning; and task and related technical problems. Diagnostic activities often establish a framework within which fur- ther work can be done.

Improvement activities aim to improve the group’s process and functioning. A vari- ety of exercises have been described by different authors.30 They include role clarifica- tion, improving goal clarity and member commitment, modifying or clarifying the decision-making or problem-solving process, changing norms, increasing risk taking and trust, and improving communication.

Application 10.3 presents an example of a team-building meeting involving a top- management team.31 Ask yourself the following questions as you read this case.

• Do you agree with Ted’s and the executive committee’s decision to make the work- shop’s focus task-oriented vs. more interpersonally oriented on the relationships? What do you think of Ted’s choices during the workshop?

• Could an external consultant have followed Ted’s approach and gotten a similar result? What other choices, as an internal consultant, did Ted have?

• What were the benefits and risks associated with Ted’s decision to start working with the directors before engaging the executive committee first?

10-4d Interventions Affecting the Group’s Integration with the Rest of the Organization As a team gains a better understanding of itself and becomes better able to diagnose and solve its own problems, it focuses on its role within the organization. A group’s relation- ship to the larger organizational context is an important aspect of group effectiveness.32

Diagnostic activities usually focus on understanding the group’s organizational role, how its goals support the larger organization, or how the group interacts with other groups by interviewing internal customers and other stakeholders.

Improvement activities involve strategic planning and stakeholder mapping interventions to modify the group’s contribution to the organization, how it acquires resources, or alters its outputs in terms of cost, quality, and quantity. Sometimes, the team may recognize a need for more collaboration with other parts of the organization and may try to establish a project team that crosses the boundaries of existing teams.

As the team becomes more cohesive, it usually exerts a stronger influence on other groups within the organization. This can lead to intergroup conflict and the need for large group interventions or intergroup conflict resolution interventions (Chapter 11). Because that is one area in which team building can have negative effects, the process consultant must help the group understand its role within the larger organization, develop its own diagnostic skills, and examine alternative action plans so that intergroup tensions and conflicts do not expand.

286 PART 3 HUMAN PROCESS INTERVENTIONS

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3 ALIGNING SENIOR TEAMS AT VAYCOT PRODUCTS

V aycot Products (a disguised name) is a pub- licly traded, 28-year-old $750 million medi- cal equipment manufacturer and marketer. Their products include MRI, ultrasound,

and X-ray machines. Corporate performance in 2011 had been dismal, and the organization was under a great deal of pressure to improve results. The organization had missed sales and earnings targets for seven consecutive quar- ters, revenues were down 7%, and growth rates were half the industry average. Vaycot’s board, industry analysts, and a well-known cor- porate raider were vocal with their concerns.

People described Vaycot’s culture as “strong and toxic.” Forty-eight percent of employees were disengaged and 58% were considering leaving the company. A recent sur- vey asked employees to describe the culture, and more than 35% of employees used the terms angry, disrespectful, fear-based, para- lyzed, penalizing, risk-averse, or untrusting. Employees often felt pressured to cut corners or engage in unethical practices to get work done and achieve overly aggressive goals.

The organization was managed by two teams: the executive committee and the oper- ating committee. The executive committee con- sisted of Oscar (the CEO) and eight functional vice presidents. The broader operating commit- tee consisted of the executive team plus the directors who reported to them. Decision mak- ing in these groups was slow to nonexistent because the directors and vice presidents feared being derided in public by the CEO over a wrong decision. Despite being very capable, the vice presidents had learned how to deal with Oscar’s autocratic, volatile, and intimidat- ing leadership style. Most of their time was spent in meetings being told how to do their job or making course corrections to adjust to Oscar’s ever-changing mind.

Not surprisingly, the vice presidents were distracted, demotivated, and disengaged, and the negativity flowed down directly to the directors. The directors were under constant pressure and usually in crisis mode. A small group of directors asked the internal OD

consultant, Ted, for help. Ted knew most of the directors primarily through one-on-one coaching over the years, and he guided a sub- group of the operating committee through a process to increase trust, collaboration, and team effectiveness.

ENTRY AND CONTRACTING

After hearing from several of the directors about how well the process worked, and see- ing firsthand the directors’ improved relation- ships and results, the CFO and the vice presidents of sales and operations approached Ted to see if he would work with the executive committee.

Ted was candid. “I’m hesitant to do it because of Oscar. Based on my interactions with him, I’m concerned that his need for con- trol and resistance to getting feedback will keep him from being a constructive participant.” The vice presidents agreed with Ted’s assessment and asked if he’d work with just them. Ted was reluctant on this point as well. He explained that team building works best when the leader actively participates and is willing to deal with any emergent issues. That left the ball in the vice presidents’ court. They needed to convince their boss to participate and that would require giving Oscar feedback on why they believed a team-based intervention was needed.

As Ted continued the conversations, he came to the conclusion that the only way that the vice presidents could actually influence Oscar was with hard data. He offered to inter- view the vice presidents and then facilitate a meeting where they would deliver the feed- back to Oscar. When the interviews were com- plete, he walked the group through about a dozen findings and insights. After some brief discussion and a few minor revisions, the group confirmed that the conclusions were valid and they agreed unanimously that it was finally time to meet with Oscar.

Ted asked how the feedback meeting should be structured. No one spoke. Despite their promise to follow through and talk to

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Oscar, no one wanted to be in the room when Oscar heard their feedback. Despite Ted’s frustra- tion, he offered to meet with Oscar on their behalf. They still hesitated because they feared the reper- cussions if Oscar were to know who said what. Ted promised anonymity and then got the go ahead to talk to Oscar.

This was a pivot point for Ted. On one hand, he didn’t want to make a career-limiting move by angering Oscar. On the other hand, he feared that all of the good work and progress made by the directors would die on the vine unless someone could convince Oscar to come along. Ted scheduled a time to meet with Oscar and prepared himself for a difficult conversation. Not wanting to overwhelm Oscar, Ted focused on three key messages:

1. Trust your team. Let go of the day-to-day, even if things start to go in the wrong direction. Avoid the temptation to jump in and do your people’s jobs.

2. Facilitate, don’t dominate. Continue to use your style of direct communication to ensure that the right issues are put on the table, but then back off more often to allow your team to add value.

3. Let go and take issues offline when appropri- ate. Know when to let go of an issue and when to include fewer people in the discussion. Especially when you have an issue with a sin- gle individual—no one likes to get yelled at in front of others.

Oscar was clearly irritated by the data and he vented for a few minutes. Ted listened without interrupting. Eventually, they got back on track when Oscar asked what to do next. Ted sug- gested a team-building process to align members of the executive committee. He described the process he used with the operating committee and suggested that the executive committee could go through a similar process. At this point, Oscar was still fuming from the feedback but he asked Ted several detailed questions about how the process would work, what he’d need to do, and what outcomes to expect. Ted answered each question.

Then Oscar asked how much time an off-site would take. Ted knew he’d be pushing it too far if he asked for the full three days he thought were needed. So he proposed two days and Oscar

agreed. Though the feedback session was un- comfortable for both Oscar and Ted, it ended on a high note.

DATA FEEDBACK AND INTERVENTION DESIGN

Ted’s review of the business strategy, organization design (structures, processes, systems, and con- trols), engagement surveys, customer surveys, and exit interviews identified a variety of misfits that could drive the team building. For example, even though customers rated Vaycot high in inno- vation, engagement surveys rated it low. In addi- tion, bonuses were supposed to be tied to performance, yet 94% of people got the full target bonus amount. This didn’t make sense given the organization’s poor financial performance. Another misfit was that leadership effectiveness was highly rated in the engagement survey but it was consis- tently disclosed in the exit surveys as a reason people resigned. Ted viewed this as a symptom of a fear-based culture. As a final step he inter- viewed the vice presidents again individually and asked them to rate the following statements, on a scale of 1 to 5 with 5 being “totally agree”:

• Current roles and accountabilities of all mem- bers of the team are clear.

• The decision-making process is effective and appropriate to the task.

• Team members openly speak their mind with each other.

• The team is effective at resolving conflicts. • Team meetings are productive.

Ted analyzed and organized the data. The interview responses were low, ranging between 1.5–2.25; it was clear that these critical operating factors needed work.

Ted shared the data and his assessment with Oscar and the vice presidents. They were not sur- prised by the low ratings; they had been living in the system every day and were well aware of its poor condition. They validated Ted’s assessment and agreed that they owned the data.

Ted used the data to design a two-day work- shop. He knew designing a set of activities would be a challenge. The relationships among the execu- tive committee members were fragile, and he knew from experience that this group would not tolerate a more personal approach. Oscar had famously

288 PART 3 HUMAN PROCESS INTERVENTIONS

referred to highly interpersonal processes as “tou- chy feely flavor-of-the-month garbage.” As a result, he decided that the design needed to be task- oriented and focused on getting things done.

He reviewed the objectives and workshop agenda with the full executive committee. To keep the group focused on tasks, much of the design addressed the team’s data related to work- ing together to avoid personal grudges and fear from getting in the way. The executive team approved the design and expressed optimism that the off-site would be productive.

WORKSHOP IMPLEMENTATION

The workshop opened with a recap of how the executive committee got to this point. Ted asked everyone to tell a short story about their experi- ence with the process so far. It was a lively conversation—very positive in tone—and everyone spoke. Oscar thanked the group for their hard work and dedication so far in the process. He assured them that he was going to be an active participant in the session.

Next, Ted proposed a set of ground rules, such as “what’s said in the room stays in the room,” “attack issues not people,” and “don’t speak for others.” Everyone agreed to abide by them. Ted reiterated that the objective of the meeting was to address the team’s ability to get work done. “The data show that this team has some signifi- cant interpersonal challenges that need to be addressed, but these are outside of the scope of this workshop.” Most participants expressed a sense of relief and no one objected.

Ted then divided the group into two subgroups and asked one group to list its hopes for the ses- sion on a flipchart. The second group was instructed to list its fears for the session on another flipchart. Each group presented its list and the top three hopes and top three fears were recorded on a new piece of paper and taped to the wall. Ted’s intention in this exercise was to set a baseline of how safe the group members were going to play. This would serve as a point of com- parison later to see if people became more trusting and open as the workshop progressed.

The next exercise facilitated the development of a group purpose statement. Ted asked everyone

to write a sentence that described why they thought the executive committee existed. Then each member read their sentence. Most sen- tences and statements addressed achieving results, allocating resources, and making strategic decisions. Only two statements, however, men- tioned employee or human capital issues, and Ted commented on that output. The group debated whether their role involved employees or not and agreed that there needed to be more con- sideration given to the workforce. The statement of purpose eventually evolved to the point where it included the idea that part of the executive team’s purpose was to help people understand how their work contributes to driving the strategy and assure that recognition and rewards were tied to contributions.

The rest of the first day was spent working on the interview data. They discussed the data asso- ciated with each statement and developed actions to improve the ratings. The discussions were tense and strained at first, but they evolved. Initially, there was a lot of finger pointing and pouting. Ted facilitated these discussions away from the interpersonal issues toward a more productive problem-solving approach based on data and beha- viors. Over time, the team developed a productive rhythm. The day ended with the executive commit- tee agreeing to the following positive statements and to working on the items required to deliver those results.

The current roles/accountabilities of all mem- bers of the team are very clear. • As a group, we need to work better across

functions, clarify the roles of sales vs. mar- ket development vs. marketing, and be more deliberate in setting and communicat- ing top priorities by function

The decision-making process on this team is effective and appropriate to the task. • As a group, we need to take the emotion out

of decision making, create more collaboration around issues and engage in less unilateral decision making, and be clearer about our decision-making process. Who is the decision maker (e.g., function lead, team, CEO) and what style of decision making is appropriate (consensus, majority, unilateral)?

CHAPTER 10 INTERPERSONAL AND GROUP PROCESS APPROACHES 289

Team members are very candid and openly speak their mind with each other. • As a group, we need to increase trust, allow

more time for dialogue to develop, and ask Oscar to play a facilitator role more often

This team is very effective at resolving conflicts. • As a group, we need to use an objective, fact-

based approach to analyze and resolve issues, reduce emotion, and decrease the number of CEO overrides and decreed solutions

Team meetings are very productive. • As a group, we need to do less venting and

going over the same issues time and time again, give more respect and credence to subject-matter experts, and limit atten- dance to the people who need to be there

The second day started with a brief recap of Day 1 and a discussion of the hopes and fears posted on the wall. There was consensus that the group had “played it safe” and identified hopes and fears that were shallow and noncontroversial. For example one of the top three fears was “not getting enough done.” The conversation that ensued was animated; executive team members were more at ease in sharing their deeper hopes and fears.

Oscar was pretty quiet during the exercise until the end. “It seems like dealing with these fears would increase performance significantly, and I have to admit that it appears I am the source of much of it,” said Oscar. As the conversation around Oscar’s role expanded, Ted dropped an activity and introduced the dialogue technique. He described the importance of suspending assump- tions, actively listening, asking and reflecting, and advocating during conversations. The participants took turns practicing dialogue skills and developed a deeper understanding of theirs and Oscar’s roles.

After a period of time, Ted decided to look for common themes and asked, “How did this exercise go, and what topics were covered?” Everyone agreed that the hardest part of dialoging was to listen intently and to not interrupt when another person was speaking. Common topics included that the functions needed to better collaborate and support each other, and that training on conflict resolution and negotiation would be beneficial. The group agreed they had got- ten a lot out of the dialogue module.

The next exercise, “give and get,” was intended to build awareness of interdependencies.

Going around the group two at a time, each pair of executives took turns saying what he or she spe- cifically needed from the other person to be more effective. Then the other person would repeat the request. Together, they either committed to actions or said why they could not. The exercise continued until everyone had gotten/made commit- ments from/to everyone else. The output of the exercise neatly summarized and operationalized the actions listed under the positive statements of group operation from Day 1.

The agenda then called for the development of a short list of enterprise projects to move the orga- nization forward and drive performance. Despite the progress made so far, there was still some risk that Oscar would strong arm the project selection pro- cess. At Ted’s urging, Oscar excluded himself from the exercise. He didn’t want him to influence or limit what the vice presidents came up with. Next Ted asked everyone to come up with a headline to describe what the team needed to do immediately to improve organizational effectiveness.

Topping the list was:

• Shared ownership of common goals, and goal alignment throughout organization

• More collaboration between functions • Increased employee engagement and

productivity

Ted then asked the team to identify two or three large-scale change projects to drive sustain- able high performance. The session concluded with the executive committee endorsing the fol- lowing enterprise projects:

• Cascade goals to link every employee’s daily work to the strategy

• Conduct cross-function “give and get” round- robins to increase trust and collaboration

• Deploy an enterprise change program to improve the culture and increase engagement

At the end of Day 2, Ted wrapped up the ses- sion just as he started it. He asked each participant to tell a story about their workshop experience. Again, it was a lively conversation—very positive in tone—and everyone spoke. Oscar thanked the group for their commitment and work during the two days. He told them that they could count on him to help drive and complete the initiatives that were selected.

290 PART 3 HUMAN PROCESS INTERVENTIONS

10-4e The Manager’s Role in Team Building Ultimately, the manager is responsible for team functioning, although this responsibility obviously must be shared by the group itself. Therefore, it is management’s task to develop a work group that can regularly analyze and diagnose its own effectiveness and work pro- cess. With the team’s involvement, the manager must diagnose the group’s effectiveness and take appropriate actions if it shows signs of operating difficulty or stress.

Boss and McConkie surveyed over 3,500 team-building participants and found that 92% identified the team’s leader as the single most important role in successful team building.33 Many managers, however, have not been trained to perform the data gather- ing, diagnosis, planning, and action necessary to maintain and improve their teams con- tinually. Thus, the issue of who should lead a team-building session is a function of managerial capability. The initial use of an OD consultant usually is advisable if a man- ager is aware of problems, feels that he or she may be part of the problem, and believes that some positive action is needed to improve the operation of the team, but is not sure how to go about it.34

After Oscar left to go to another meeting, the vice presidents lingered to discuss the events of the past two days. They felt relieved and optimistic that things, and most importantly Oscar, would be different going forward. Ted believed that the group was grateful for the outcomes, committed to implementing the initiatives, and thoroughly exhausted. All signs of a good two days’ work by a team of executives that stepped up and changed its mindset and behaviors to commit to making sig- nificant changes in how the business would be run in the future.

RESULTS AND REFLECTION

Following the workshop, teams were formed and chartered, and work began immediately on the three enterprise projects. The executive commit- tee asked Ted to work with them throughout the year and to design and facilitate structured workshops every six months. Gradually, the oper- ating committee, then the managers, and then the rest of the workforce felt the positive impacts of the executive committee’s increased team effectiveness.

Three years later, the numbers told the story of Vaycot’s turn around:

• Beat sales and earnings targets five quarters in a row, and year-to-year sales were up 9%

• Engagement index was up 21 points • Turnover was in line with industry averages

Being a realist, Ted knew that Oscar had not undergone an overall personal transformation—he was still basically the same guy. Oscar’s few key behavior changes were mostly motivated by the realization that he could get a lot more perfor- mance out of his team, and the whole organization, if he changed the way he led. In the end, Oscar became a better leader and, in part, that led to an organizational transformation.

Looking back, Ted would have preferred work- ing with the executive committee first and then the operating committee. However, based on his orga- nizational knowledge and his relationships with sta- keholders, he had decided that there was no harm to be done by building cohesion and momentum with the directors. He had trusting relationships built up through coaching, the subgroup of direc- tors was less encumbered by the fear that held back the vice presidents, and the directors were closer to the workforce and customers and were in a better position to impact the business. Oscar would have surely shut things down before any progress had been made if they started with the executive committee.

The whole experience reminded Ted of his mentor’s advice. “Follow the energy and start where the client is, not where you want them to be.”

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Basically, the role of the OD consultant is to work closely with the manager (and members of the team) to a point at which the manager is capable of engaging in team development activities as a regular and ongoing part of overall managerial responsibili- ties. Assuming that the manager wants and needs a consultant, the two should work together in developing the initial program, keeping in mind that (1) the manager ulti- mately is responsible for all team-building activities, even though the consultant’s resources are available; and (2) the goal of the consultant’s presence is to help the man- ager learn to continue team development processes with minimum consultant help or without the ongoing help of the consultant.

Thus, in the first stages, the consultant might be much more active in data gather- ing, diagnosis, and action planning, particularly if a one- to three-day off-site workshop is considered. In later stages, the consultant takes a much less active role, with the manager becoming more active and serving as both manager and team developer.

10-4f The Results of Team Building The early research on team building’s effectiveness produced inconsistent, but generally positive, results. Several studies reported positive results across a range of variables including feelings, attitudes, and measures of performance.35 Other studies produced less positive outcomes.36

Less powerful research designs, short time frames, and the confounding impact of other interventions occurring in conjunction with team building were the most important explanation for the lack of consistent results.37 For example, one review of 30 studies found that only ten tried to measure changes in performance. Buller and Bell attempted to differ- entiate the effects of team building from the effects of other interventions that occur along with team building.38 Specifically, they tried to separate the effects of team building from the effects of goal setting, an intervention aimed at setting realistic performance goals and developing action plans for achieving them. In a rigorous field experiment, Buller and Bell examined the differential effects of team building and goal setting on productivity measures of underground miners. Their results showed that team building affected the quality of per- formance and goal setting affected the quantity of performance. This differential impact was explained in terms of the nature of the mining task. The task of improving the quality of performance was more complex, unstructured, and interdependent than was the task of achieving quantity. This suggests that team building can improve group performance, par- ticularly on tasks that are complex, unstructured, and interdependent.

More recently, a 2009 meta-analysis of 20 studies representing 579 teams found positive and moderate overall effect sizes; there was a significant tendency for team building to posi- tively influence team outcomes.39 Four team-building activities—goal setting, interpersonal relations, problem solving, and role clarification—and four team outcomes—cognitive, affective, process, and performance—were examined more closely. Goal-setting and role clarification interventions were the most powerful, while affective and process outcomes registered the largest improvements.

Team building, like OD at the organization level, is a process over time, and OD practitioners need to be aware of the full range of reasons teams are effective. Research by Hackman and his colleagues have suggested that too much time may be spent trying to help teams that were designed and launched incorrectly. They argue that one of the most important tasks of the OD practitioner is to be sure that any team gets chartered and started correctly.40 In a related study where the teams’ launching was held

292 PART 3 HUMAN PROCESS INTERVENTIONS

constant, Woolley found that task-focused (as opposed to process-focused) interven- tions given at the midpoint of a team’s lifecycle had the biggest impact on team performance.41

The results of team building in virtual teams is still emerging, but shows that many of the lessons learned from face-to-face team-building practice can be transferred. For example, one lab study found that when communications technologies were augmented to include goal-setting processes, team functioning and team performance improved42

while another lab study of Chinese undergraduates found that a dialogue intervention intended to improve shared mental models among team members was as effective in face-to-face teams as it was in video-conferenced teams.43 Because virtual teams are usually geographically dispersed, they can also take advantage of a variety of asychnro- nous facilitation tools, such as wikis, shared portals, or other groupware.44 Hart and Mcleod found that interpersonal closeness between members of a virtual team is cre- ated when one member proactively helps another member to solve a problem or address a concern, and that the closeness is maintained by frequent, short, but content-oriented (as opposed to process-oriented) messages.45 Gibson and Cohen found that team performance was enhanced by initial face-to-face team-building meet- ings in the start-up stage of a team’s work.46

Finally, Boss has presented considerable evidence to support the effectiveness of per- sonal management interviews (PMIs) in sustaining the long-term effects of off-site team building.47 A PMI is a follow-up intervention that arrests the potential fade-out effects of off-site team building.48 A team leader negotiates roles with each member and then holds regular meetings with each team member to resolve problems and increase personal accountability. Boss and his colleagues have amassed a large, longitudinal data set, mostly in public administration, hospital, and health care settings. When team-building interventions have included PMI activities (compared to those that have not included PMI follow-ups), they have found consistent and sustained improvement in measures of team functioning and operational performance.

SUMMARY

In this chapter, we presented human process interven- tions aimed at interpersonal relations and group dynamics. Among the earliest interventions in OD, these change programs help people gain interpersonal competence, work through interpersonal conflicts, and develop effective groups.

Process consultation is used not only as a way of helping groups become effective but also as a means whereby groups learn to diagnose and solve their own problems and continue to develop their competence and maturity. Important areas of activity include communications, roles of group members, difficulties with problem-solving and decision-making norms, and leadership and authority. The basic difference

between process consultation and third-party inter- vention is that the latter focuses on interpersonal dysfunctions in social relationships between two or more individuals within the same organization and is targeted toward resolving direct conflict between those individuals.

Team building is directed toward improving group effectiveness and the ways in which members of teams work together. Teams may be permanent or temporary or traditional or virtual, but their members have either common organizational aims or work activities. The general process of team building, like process consultation, tries to equip a team to handle its own ongoing problem solving.

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NOTES

1. M. Marks, J. Mathieu, and S. Zaccaro, “A Temporally Based Framework and Taxonomy of Team Processes,” Academy of Management Review 26 (2001): 356–78.

2. J. Fast, Body Language (Philadelphia: Lippincott, M. Evans, 1970).

3. D. Levi, Group Dynamics for Teams (Thousand Oaks, CA: Sage Publications, 2011); N. Clapp, “Work Group Norms: Leverage for Organizational Change, Theory and Application” (undated working paper, Block Petrella Weisbord, Plainfield, NJ); R. Allen and S. Pilnick, “Confronting the Shadow Organization: How to Detect and Defeat Negative Norms,” Organizational Dynamics (Spring 1973): 3–18.

4. E. Schein, Process Consultation Volume II: Lessons for Managers and Consultants (Reading, MA: Addison- Wesley, 1987).

5. E. Schein, Process Consultation Revisited (Reading, MA: Addison-Wesley, 1998), 20.

6. Schein, Process Consultation Volume II, 5–17. 7. Schein, Process Consultation Revisited. 8. Schein, Process Consultation Revisited, 147. 9. J. Luft, “The Johari Window,” Human Relations Training

News 5 (1961): 6–7. 10. C. Seashore, E. Seashore, and G. Weinberg, What Did

You Say? The Art of Giving and Receiving Feedback (Columbia, MD: Bingham House Books, 2001).

11. J. Gibb, “Defensive Communication,” Journal of Commu- nication 11 (1961): 141–48; Schein, Process Consultation Revisited; Seashore, Seashore, and Weinberg, What Did You Say?

12. E. Schein, Process Consultation: Its Role in Organization Development (Reading, MA: Addison-Wesley, 1969), 44.

13. This application was authored and submitted by Charles Hathorn, Principal, Hathorn.org, and his contribution is gratefully acknowledged.

14. R. Kaplan, “The Conspicuous Absence of Evidence That Process Consultation Enhances Task Performance,” Journal of Applied Behavioral Science 15 (1979): 346–60.

15. G. Lippitt, Organizational Renewal (New York: Appleton- Century-Crofts, 1969); C. Argyris, Organization and Innovation (Homewood, IL: Richard D. Irwin, 1965).

16. D. Tjosvold, “Defining Conflict and Making Choices About Its Management,” International Journal of Conflict Management 17 (2006): 87–95.

17. C. K. DeDreu and L. Weingart, “Task versus Relationship Conflict, Team Performance, and Team Member Satisfac- tion: A Meta-analysis,” Journal of Applied Psychology 88 (2003): 741–49.

18. People interested in finding assistance might want to contact the Society of Professionals in Dispute Resolution (SPIDR) at http://www.acrnet.org, or the Straus Institute of Dispute Resolution at http://law.pepperdine.edu/straus.

19. D. Kolb and Associates, When Talk Works: Profiles of Mediators (San Francisco: Jossey-Bass, 1994); R. Saner and L. Yiu, “External Stakeholder Impacts on Third- Party Interventions in Resolving Malignant Conflicts: The Case of a Failed Third-Party Intervention in Cyprus,” International Negotiation 6 (2001): 387–416.

20. H. Prein, “Strategies for Third-Party Intervention,” Human Relations 40 (1987): 699–720; P. Nugent, “Managing Conflict: Third-Party Interventions for Managers,” Academy of Management Executive 16 (2002): 139–54.

21. R. Walton, Managing Conflict: Interpersonal Dialogue and Third-Party Roles, 2nd ed. (Reading, MA: Addison- Wesley, 1987); Nugent, “Managing Conflict.”

22. Walton, Managing Conflict, 83–110. 23. This application was developed by John Childers,

President, Childers and Partners LLC. His contribution is gratefully acknowledged.

24. W. Dyer, W. Dyer, and J. Dyer, Team Building, 4th ed. (San Francisco: Jossey-Bass, 2007).

25. T. Patten, Organizational Development Through Team Building (New York: John Wiley & Sons, 1981), 2; D. Stepchuck, “Strategies for Improving the Effectiveness of Geographically Distributed Work Teams” (unpublished master’s thesis, Pepperdine University, 1994).

26. C. Gibson and S. Cohen, eds., Virtual Teams That Work: Creating Conditions for Virtual Team Effectiveness (San Francisco: Jossey-Bass, 2003); R. Hart and P. Mcleod, “Rethinking Team Building in Geographically Dispersed Teams,” Organizational Dynamics 31 (2003): 352–61; W. Huang, K Wei, R. Watson, and B. Tan, “Supporting Virtual Team-building with a GSS: An Empirical Investi- gation,” Decision Support Systems 34 (2002): 359–67; D. Mancini, “Building Organizational Trust in Virtual Teams,” Journal of Behavioral Studies in Business 2 (May 2010): 1–15; R. Lepsinger and D. DeRosa, Virtual Team Success (San Francisco: Pfeiffer, 2011).

27. W. Dyer, Team Building: Issues and Alternatives, 2nd ed. (Reading, MA: Addison-Wesley, 1987).

28. J. Katzenbach and D. Smith, The Wisdom of Teams (Boston: Harvard Business School Press, 1993).

29. J. Hackman, “The Design of Work Teams,” in The Handbook of Organizational Behavior, ed. J. Lorsch (Englewood Cliffs, NJ: Prentice Hall, 1987): 315–42.

30. Dyer, Team Building; Katzenbach and Smith, Wisdom of Teams; C. Torres, D. Fairbanks, and R. Roe, eds.,

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Teambuilding: The ASTD Trainer’s Sourcebook (New York: McGraw-Hill, 1996); L. Offermann and R. Spiros, “The Science and Practice of Team Development: Improving the Link,” Academy of Management Journal 44 (2001): 376–93; P. Lencioni, Overcoming the Five Dys- functions of a Team (San Francisco: Jossey-Bass, 2005).

31. This application was developed by David Jardin. His con- tribution is gratefully acknowledged.

32. D. Ancona and D. Caldwell, “Bridging the Boundary: External Activity and Performance in Organizational Teams,” Administrative Science Quarterly 37 (1992): 634–65; S. Cohen, “Designing Effective Self-Managing Work Teams” (paper presented at the Theory Sympo- sium on Self-Managed Work Teams, Denton, TX, June 4–5, 1993).

33. R. W. Boss and M. McConkie, “Team Building” in Hand- book of Organization Development, ed. T. Cummings (Thousand Oaks, CA: Sage Publications, 2007).

34. Dyer, Team Building. 35. K. De Meuse and S. Liebowitz, “An Empirical Analysis of

Team-building Research,” Group & Organizational Studies 6 (1981): 357–78; S. Tannenbaum, R. Beard, and E. Salas, “Team Building and Its Influence on Team Effectiveness: An Examination of Conceptual and Empirical Develop- ments,” in Issues, Theory, and Research in Industrial/ Organizational Psychology, ed. K. Kelley (Amsterdam: Elsevier, 1992); G. Neuman, J. Edwards, and N. Raju, “Orga- nizational Development Interventions: A Meta-Analysis of Their Effects on Satisfaction and Other Attitudes,” Personnel Psychology 42 (1989): 461–89; R. Guzzo and M. Dickson, “Teams in Organizations: Recent Research on Performance and Effectiveness,” in Annual Review of Psychology, vol. 47, ed. J. Spence, J. Darley, and J. Foss (Palo Alto, CA: Annual Reviews, 1996): 307–38; J. Porras and P. O. Berg, “The Impact of Organization Development,” Academy of Management Review 3 (April 1978): 249–66; J. Nicholas, “The Comparative Impact of Organization Development Interventions on Hard Criteria Measures,” Academy of Management Review 7 (October 1982): 531–42.

36. D. Eden, “Team Development: A True Field Experiment at Three Levels of Rigor,” Journal of Applied Psychology 70 (1985): 94–100.

37. De Meuse and Liebowitz, “An Empirical Analysis of Team- building Research”; R. Woodman and J. Sherwood, “The Role of Team Development in Organizational Effectiveness: A Critical Review,” Psychological Bulletin 88 (July–Nov. 1980); Eden, “Team Development.”

38. R. Buller and C. Bell Jr., “Effects of Team Building and Goal Setting: A Field Experiment,” Academy of Manage- ment Journal 29 (1986): 305–28.

39. C. Klein, D. DiazGranados, E. Salas, H. Le, C. Burke, R. Lyons, and G. Goodwin, “Does Team Building Work?” Small Group Research 40 (2009): 181–222.

40. Hackman, “The Design of Work Teams”; R. Hackman and R. Wageman, “A Theory of Team Coaching,” Academy of Management Review 30 (2005): 269–87.

41. A. Woolley, “Effects of Intervention Content and Timing on Group Task Performance,” Journal of Applied Behavioral Science 34 (1998): 30–46.

42. Huang, Wei, Watson, and Tan, “Supporting Virtual Team-building with a GSS.”

43. Z. Guo, J. D’Ambra, T. Turner, and H. Zhang, “Improv- ing the Effectiveness of Virtual Teams: A Comparison of Video-Conferencing and Face-to-Face Communication in China,” IEEE Transaction on Professional Communica- tion 52 (March 2009): 1–16.

44. N. Rangarajan and J. Rohrbaugh, “Multiple Roles of Online Facilitation: An Example in Any-Time, Any- Place Meetings,” Group Facilitation 5 (2003): 26–36.

45. Hart and Mcleod, “Rethinking Team Building in Geographically Dispersed Teams.”

46. C. Gibson and S. Cohen, eds., Virtual Teams That Work: Creating Conditions for Virtual Team Effectiveness (San Francisco: Jossey-Bass, 2003).

47. R. W. Boss, “Team Building and the Problem of Regres- sion: The Personal Management Interview as an Inter- vention,” Journal of Applied Behavioral Science 19 (1983): 67–83; R. Boss and M. McConkie, “Creating High Performance Work Teams: Team Building Results from 3,679 Participants,” paper presented at the Eleventh International Conference on Advances in Management, Orlando, FL, March 2004.

48. Ibid.

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learning objectives

Understand the diagnostic issues associated with organization-wide process interventions.

Demonstrate the organization confrontation meeting.

Compare the intergroup relations interventions of microcosm groups and intergroup conflict.

Describe and evaluate the effectiveness of large-group interventions.

I n Chapter 10, we presented interventions aimed at improving interpersonal and group pro- cesses. This chapter describes system-wide

process interventions—change programs directed at increasing the effectiveness of organizational problem solving, visioning and strategy making, and collaboration—for a major subsystem or for an entire organization.

The first type of intervention, the organization confrontation meeting, is among the earliest organization-wide process approaches developed by organization development (OD) practitioners. It helps mobilize the problem-solving resources of a major subsystem or whole organization by encouraging members to identify and confront pressing issues.

The second organization process approach is called intergroup relations. It consists of two interventions: microcosm groups and the intergroup conflict resolution meeting. Both interventions are aimed at diagnosing and addressing important

organization-level processes, such as conflict, the coordination of organizational units, and innovation. The intergroup conflict intervention is specifically oriented toward conflict processes, whereas the microcosm group is a more generic system-wide change strategy.

The third and final system-wide process approach, the large group intervention, has received considerable attention recently and is one of the fastest-growing areas in OD. Large group interventions get a “whole system into the room”1

and create processes that allow a variety of stakeholders to interact simultaneously. A large group intervention can be used to articulate a new organization vision, develop a new strategy, solve cross-functional problems, develop a change strategy, or redesign work, structures, and systems. It is a powerful tool for addressing organizational problems and opportunities and for accelerating the pace of organizational change.

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11-1 Diagnostic Issues in Organization Process Interventions Organization process approaches are driven by diagnostic data collected at the organiza- tion level. In particular, these interventions address issues, problems, and opportunities that occur between or among groups as they try to implement the organization’s strat- egy. The key contextual inputs to the diagnosis are the organization’s environment, in terms of information uncertainty, complexity, resource dependency, and industry struc- ture. The need for organization process interventions often has its genesis in some envi- ronmental change. For example, if there is considerable environmental uncertainty arising from the defection of a number of customers to competitors or, in a nonprofit case, if funding has become more difficult to come by, organization process interventions could be used to understand why these problems are occurring and how to address them. Effective OD practitioners closely watch the organization’s external environment for change pressures.

With respect to the design components of strategy, structure, technology, manage- ment systems, and human resource systems, organization process approaches can be driven by diagnostic data from any of these issues. A broad and aggressive strategy may put pressure on scarce resources, such as specialized talent or specific organization units, or there may be unanticipated problems in establishing key product or service differen- tiators. These issues could be handled by organization process interventions. Alterna- tively, diagnostic data may suggest considerable inefficiency with respect to productivity in the organization (technology design component) as compared to benchmark organiza- tions in the industry. An organization confrontation meeting might be convened to gen- erate new work process innovations or a large group intervention might be designed to involve union leaders, technology vendors, front-line employees, and managers to diag- nose current value-added processes and recommend changes. Increasingly, as organiza- tions see themselves as whole systems, these interventions are being used to address all of these diagnostic categories in broad organization design solutions.

In sum, good OD practitioners link the use of organization process interventions to sound diagnostic data. OD practitioners should be able to clearly articulate a sound business case as to how the environmental pressures or organization design features constraining current effectiveness will be addressed by these interventions.

11-2 Organization Confrontation Meeting The confrontation meeting is an intervention designed to mobilize the resources of the entire organization to identify problems, to set priorities and action targets, and to begin working on identified problems. Originally developed by Beckhard,2 the interven- tion can be used at any time but is particularly useful when the organization is under stress and when there is a gap between the top and the rest of the organization (such as when a new top manager joins the organization). General Electric’s “Work-Out” pro- gram is an example of how the confrontation meeting has been adapted to fit today’s organizations.3 Although the original model involved only managerial and professional people, it has since been used successfully with technicians, clerical personnel, and assembly workers. It has also been applied in a variety of domestic and international set- tings. The process as described helps organizations, even those with conflict avoidance or uncertainty-avoidance values, to address relevant organizational concerns.

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11-2a Application Stages When the diagnosis of the system’s current situation suggests that the organization is facing several unprioritized problems that will require broad coordination, the organiza- tion confrontation meeting typically involves the following steps:

1. A group meeting of all those involved is scheduled and held in an appropriate place. Usually the task is to identify problems related to the work environment and the effectiveness of the organization.

2. Groups are appointed representing all departments of the organization. Thus, each group might have one or more members from sales, purchasing, finance, operations, and quality assurance. For obvious reasons, a subordinate should not be in the same group as his or her boss, and top management should form its own group. Group size can vary from 5 to 15 members, depending on such factors as the size of the organization and available meeting places.

3. The point is stressed that the groups are to be open and honest and to work hard at identifying problems they see in the organization. No one will be criticized for bringing up problems and, in fact, the groups will be judged on their ability to do so.

4. The groups are given an hour or two to identify organization problems. Generally, an OD practitioner goes from group to group, encouraging openness and assisting the groups with their tasks.

5. The groups then reconvene in a central meeting place. Each group reports the pro- blems it has identified and sometimes offers solutions. Because each group hears the reports of all the others, a maximum amount of information is shared.

6. At this point, a master list of problems is created and then broken down into cate- gories. This can be done by the participants, by the person leading the session, or by the manager and his or her staff. It can also be done at the end of a day with the group reconvening at another time, although it is important to maintain momen- tum. This process eliminates duplication and overlap and allows the problems to be separated according to functional or other appropriate areas.

7. Following problem categorization, participants are divided into problem-solving groups whose composition may, and usually does, differ from that of the original problem-identification groups. For example, all operations problems may be handled by people in that subunit. Or task forces representing appropriate cross sections of the organization may be formed.

8. Each group ranks the problems, develops a tactical action plan, and determines an appropriate timetable for completing this phase of the process.

9. Each group then periodically reports its list of priorities and tactical plans of action to management or to the larger group.

10. Schedules for periodic (frequently monthly) follow-up meetings are established and project management resources may be necessary to monitor and support progress. At these sessions, the team leaders report either to top management, to the other team leaders, or to the group as a whole regarding their team’s progress and plans for future action. The formal establishment of such follow-up meetings ensures both continuing action and the modification of priorities and timetables as needed.

Application 11.1 presents the Work-Out process at General Electric Medical Systems business. It shows how the basic framework of a confrontation meeting can be adapted to address organizational problems, such as productivity and employee involvement.4

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1 A WORK-OUT MEETING AT GENERAL ELECTRIC MEDICAL

SYSTEMS BUSINESS

A s part of the large-scale change effort, for- mer CEO Jack Welch and several man- agers at General Electric devised a method for involving many organization

members in the change process. Work-Out is a process for gathering the relevant people to discuss important issues and develop a clear action plan. The program has four goals: to use employees’ knowledge and energy to improve work, to eliminate unnecessary work, to build trust through a process that allows and encourages employees to speak out without being fearful, and to engage in the construction of an organization that is ready to deal with the future.

At GE Medical Systems (GEMS), internal consultants conducted extensive interviews with managers throughout the organization. The interviews revealed considerable dissatis- faction with existing systems, including perfor- mance management (too many measurement processes, not enough focus on customers, unfair reward systems, and unrealistic goals), career development, and organizational cli- mate. Managers were quoted as saying that

I’m frustrated. I simply can’t do the quality of work that I want to do and know how to do. I feel my hands are tied. I have no time. I need help on how to delegate and oper- ate in this new culture.

The goal of downsizing and delayering is correct. The execution stinks. The con- cept is to drop a lot of “less important” work. This just didn’t happen. We still have to know all the details, still have to follow all the old policies and systems.

In addition to the interviews, Jack Welch spent some time at GEMS headquarters listen- ing to and trying to understand the issues fac- ing the organization.

Based on the information compiled, about 50 GEMS employees and managers gathered for a five-day Work-Out session. The partici- pants included the group executive who over- saw the GEMS business, his staff, employee

relations managers, and informal leaders from the key functional areas who were thought to be risk takers and who would challenge the status quo. Most of the work during the week was spent unravelling, evaluating, and reconsidering the structures and processes that governed work at GEMS. Teams of man- agers and employees addressed business problems. Functional groups developed visions of where their operations were headed. An important part of the teams’ work was to engage in “bureaucracy busting” by identifying CRAP (Critical Review APpraisals) in the orga- nization. Groups were asked to list needless approvals, policies, meetings, and reports that stifled productivity. In an effort to increase the intensity of the work and to encourage free thinking, senior managers were not a part of these discussions.

At the end of the week, the senior man- agement team listened to the concerns, propo- sals, and action plans from the different teams. During the presentations, senior GEMS man- agers worked hard to understand the issues, communicate with the organization members, and build trust by sharing information and dis- cussing constraints and opportunities. Most of the proposals focused on ways to reorganize work and improve returns to the organization. According to traditional Work-Out methods, managers must make instant, on-the-spot decisions about each idea in front of the whole group. The three decision choices are (1) approval; (2) rejection with clear reasons; and (3) need more data, with a decision to be made within a month.

The five-day GEMS session ended with individuals and functional teams signing close to a hundred written contracts to implement the new processes and procedures or drop unnecessary work. The contracts were between people, between functional groups, and between levels of management. Other organizational contracts affected all GEMS members. One important outcome of the Work-Out effort at GEMS was a decision to

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11-2b Results of Confrontation Meetings Because organization confrontation meetings often are combined with other approaches, such as survey feedback, determining specific results is difficult. In many cases, the results appear dramatic in mobilizing the total resources of the organization for problem identification and solution. Beckhard cites a number of specific examples in such differ- ent organizations as a food products manufacturer, a military products manufacturer, and a hotel.5 Positive results also were found in a confrontation meeting with 40 profes- sionals in a research and development firm.6

The organization confrontation meeting is a classic and robust approach for mobi- lizing organizational problem solving, especially in times of low performance. Although the results of its use appear impressive, little systematic study of this intervention has been done. For example, although a variety of anecdotal descriptions exist, there has been no published large-sample evaluation of the Work-Out process. There is a clear need for evaluative research.

11-3 Intergroup Relations Interventions The ability to diagnose and understand intergroup relations is important for OD practi- tioners because (1) groups often must work with and through other groups to accom- plish their goals; (2) groups within the organization often create problems and place demands on each other; and (3) the quality of the relationships between groups can affect the degree of organizational effectiveness. Two OD interventions—microcosm groups and intergroup conflict resolution—are described here. A microcosm group uses members from several groups to help solve organization-wide problems. Intergroup issues are explored in this context, and then solutions are implemented in the larger organization. Intergroup conflict resolution helps two groups work out dysfunctional relationships. Together, these approaches help improve intergroup processes and lead to organizational effectiveness.

11-3a Microcosm Groups A microcosm group consists of a small number of individuals who are chosen to reflect and represent the issue being addressed.7 For example, a medium-sized investment firm whose reputation was damaged during the economic crisis was interested in learning about how the firm’s culture may have been a factor. A microcosm group composed of members representing different functions and levels in the organizations was created,

involve suppliers in its internal email network. Through that interaction, GEMS and a key supplier eventually agreed to build new-product prototypes together, and their joint efforts have led to further identification of ways to reduce costs, improve design quality, or decrease cycle times.

Work-Out at GE has been very successful but hard to measure in dollar terms. Since 1988,

hundreds of Work-Outs have been held, and the concept has continued to evolve into best- practice investigations, process mapping, and change-acceleration programs. The Work-Out pro- cess, however, clearly is based on the confronta- tion meeting model, where a large group of people gather to identify issues and plan actions to address problems.

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and the group was tasked with diagnosing the organization’s values-in-use and the orga- nization design features that might have contributed to the firm’s behavior. In addition to addressing organization design and culture problems, microcosm groups have been used to solve communications problems, facilitate merger integration, explore diversity issues, smooth the transition to a new structure, and address dysfunctional political processes.

Microcosm groups work through “parallel processes,” which are the unconscious changes that take place in individuals when two or more groups interact.8 After mem- bers from different groups interact, they often find that the role and interaction pat- terns in their group begin to reflect the roles and dynamics of the larger system they came from. Put simply, groups seem to “infect” and become “infected” by the other groups. The following example given by Alderfer9 helps to clarify how parallel processes work:

An organizational diagnosis team had assigned its members to each of five depart- ments in a small manufacturing company. Members of the team had interviewed each department head and several department members, and had observed depart- ment meetings. The team was preparing to observe their first meeting of department heads and were trying to anticipate the group’s behavior. At first they seemed to have no “rational” basis for predicting the top group’s behavior because they “had no data” from direct observation. They decided to role-play the group meeting they had never seen. Diagnostic team members behaved as they thought the department heads would, and the result was uncanny. Team members found that they easily became engaged with one another in the simulated department-head meeting; emo- tional involvement occurred quickly for all participants. When the team actually was able to observe a department-head meeting, they were amazed at how closely the simulated meeting had approximated the actual session.

In another example, one of the key diagnostic findings from a culture survey at Cambia Health Solutions in Portland, OR, was the ineffectiveness of cross-functional work processes and decision making. As part of the intervention to increase the organi- zation’s agility, cross-functional project teams were set up to design and recommend change processes for four different systems. The cross-functional teams began to display all the dysfunctions of the larger organization, and so helping the teams to work cross- functionally helped to create change processes for the larger organization. The “parallel processes” idea suggests that if a small and representative group can intimately under- stand and solve a complex organizational problem for themselves, they are in a good position to recommend action to address the problem in the larger system.

This example also suggests that organizations use microcosm groups frequently as design teams, task forces, or temporary project teams. However, these groups often are not identified as such and cannot take advantage of the knowledge about parallel pro- cesses that could make them more effective.

Application Stages The process of using a microcosm group to address organization- wide issues involves the following five steps:

1. Identify an issue. This step involves finding a system-wide problem to be addressed. This may result from an organizational diagnosis or may be an idea generated by an organization member or task force. For example, one microcosm group charged with improving organizational communications was started by a division manager. He was concerned that the information provided by those reporting directly to him

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differed from the data he received from informal conversations with people through- out the division.

2. Convene the group. Once an issue is identified, the microcosm group can be formed. The most important convening principle is that group membership needs to reflect the appropriate mix of stakeholders related to the issue. If the issue is orga- nizational diversity, then the group should reflect the issue in terms of race, gender, age, disability, sexual orientation, culture, or other dimension. If the issue is integrat- ing two corporate cultures following a merger, the microcosm group should contain people from both organizations who understand their respective cultures. Building a microcosm group with the right people can be a challenge in worldwide organiza- tions where the problem’s scope crosses business unit or country boundaries. A vir- tual microcosm team may need to be formed, and their work may need to be facilitated through computer-mediated communication technologies, such as tele- conferencing. Following the initial setup, the group itself becomes responsible for determining its membership. It will decide whether to add new members and how to fill vacant positions.

Convening the group also draws attention to the issue and gives the group sta- tus. Members need to be perceived as credible representatives of the problem. This will increase the likelihood that organization members will listen to and follow the suggestions they make.

3. Provide group training. Once the microcosm group is established, training is pro- vided in group problem solving and decision making. Team-building interventions also may be appropriate. Group training focuses on establishing a group mission or charter, working relationships among members, group decision-making norms, and definitions of the problem to be addressed.

From a group process perspective, OD practitioners may need to observe and comment on how the group develops. Because the group is a microcosm of the organization, it will tend, through its own behavior and attitudes, to reflect the prob- lem in the larger organization. For example, if the group is addressing diversity issues in the organization, it is likely to manifest the particular dynamics that raised the issues in the first place. That is, the group may exhibit difficulty communicating across cultures or decision making may exclude or downplay certain group’s inputs. Recognizing, within the group, the problem or issue it was formed to address is the first step toward solving the problem in the larger system.

4. Address the issue. This step involves solving the problem and implementing solu- tions. OD practitioners may help the group diagnose, design, implement, and evaluate changes. A key issue is gaining commitment in the wider organization to implement- ing the group’s solutions. Several factors can facilitate such ownership. First, a com- munication plan should link group activities to the organization. This may include publishing minutes from team meetings; inviting organization members, such as mid- dle managers, union representatives, or hourly workers, into the meetings; and making presentations to different organizational groups. Second, group members need to be visible and accessible to management and labor. This can ensure that the appropriate support and resources are developed for the recommendations. Third, problem- solving processes should include an appropriate level of participation by organization members. Different data collection methods can be used to gain member input and to produce ownership of the problem and solutions.

5. Dissolve the group. The microcosm group can be disbanded following successful implementation of changes. This typically involves writing a final report or holding a final meeting.

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Results of Microcosm Groups The microcosm group intervention derives from an intergroup relations theory developed by Alderfer, who has applied it to communica- tions and race-relations problems. A microcosm group that addressed communica- tions issues improved the way meetings were conducted; developed a job posting, career development, and promotion program; and conducted new-employee orienta- tions.10 In addition, the group assisted in the development, administration, and feed- back of an organization-wide employee opinion survey. Alderfer also reported seven years of longitudinal data on a race-relations advisory group in a large organization.11

Over time, white members showed significant improvements in their race-relations percep- tions; African Americans consistently perceived more evidence of racism in the organiza- tion; and attendance at the meetings varied both over time and by race. In addition to the intragroup data, the case documented several changes in the organization, including the development of a race-relations competency document, the implementation of a race- relations workshop, and the creation of an upward-mobility policy.

The dearth of research on microcosm groups reflects how difficult it is to measure parallel processes and associate them with measures of organizational processes. Given their prevalence in organizations, however, more research on this intervention would be welcome.

11-3b Resolving Intergroup Conflict Unlike the interpersonal conflict interventions discussed in Chapter 10, the intergroup conflict intervention is designed specifically to help two groups or departments within an organization resolve dysfunctional conflicts. Intergroup conflict is neither good nor bad in itself, and in some cases, conflict among departments is necessary and productive for organizations.12 This applies where there is little interdependence among depart- ments and conflict or competition among them can spur higher levels of productivity. For example, organizations structured around different product lines might want to pro- mote competition among the product groups. This might increase each group’s produc- tivity and add to the overall effectiveness of the firm.

In other organizations, especially those with highly interdependent departments, conflict may become dysfunctional.13 Two or more groups may grow polarized, and their continued conflict may result in the development of defensiveness and negative stereotypes of the other group. Polarization can be revealed in such statements as: “Any solution they come up with is wrong,” “We find that nobody in that group will cooperate with us,” or “What do you expect of those idiots?” Particularly when inter- group communication is necessary, the amount and quality of communication usually drops off. Groups begin seeing the others as “the enemy” rather than in positive or even neutral terms. As the amount of communication decreases, the amount of mutual problem solving falls off as well. The tendency increases for one group to sabotage the efforts of the other group, either consciously or unconsciously. The diag- nostic process should be oriented to understanding the history of relationships between the two groups.

Application Stages A basic strategy for improving interdepartmental or intergroup relationships is to change the perceptions (perhaps, more accurately, misperceptions) that the two groups have of each other. One formal approach for accomplishing this, originally described by Blake and his associates, consists of a ten-step procedure.14

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1. A consultant external to the two groups obtains their agreement to work directly on improving intergroup relationships. (The use of an outside consultant is highly recommended because without the moderating influence of such a neutral third party, it is almost impossible for the two groups to interact without becoming dead- locked and polarized in defensive positions.)

2. A time is set for the two groups to meet—preferably away from their normal work situations.

3. The consultant, together with the managers of the two groups, describes the purpose and objectives of the meeting: to develop better mutual relationships, explore the perceptions the groups have of each other, and formulate plans for improving the relationship. The two groups are presented the following or similar questions: “What qualities or attributes best describe our group?” “What qualities or attributes best describe the other group?” and “How do we think the other group will describe us?” Then, the two groups are encouraged to establish norms of openness for feed- back and discussion.

4. The two groups are assigned to separate rooms and asked to write their answers to the three questions. Usually, an outside consultant works with each group to help the members become more open and to encourage them to develop lists that accu- rately reflect their perceptions, both of their own image and of the other group.

5. After completing their lists, the two groups reconvene. A representative from each group presents the written statements. Only the two representatives are allowed to speak. The primary objective at this stage is to make certain that the images, percep- tions, and attitudes are presented as accurately as possible and to avoid the argu- ments that might arise if the two groups openly confront each other. Questions, however, are allowed to ensure that both groups clearly understand the written lists. Justifications, accusations, or other statements are not permitted.

6. When it is clear that the two groups thoroughly understand the content of the lists, they separate again. By this point, a great number of misperceptions and discrepan- cies have been brought to light.

7. The task of the two groups (almost always with a consultant as a process observer) is to analyze and review the reasons for the discrepancies. The emphasis is on solv- ing the problems and reducing the misperceptions. The actual or implicit question is not whether the perception of the other group is right or wrong but rather “How did these perceptions occur? What actions on the part of our group may have contrib- uted to this set of perceptions?”

8. When the two groups have worked through the discrepancies, as well as the areas of common agreement, they meet to share both the identified discrepancies and their problem-solving approaches to those discrepancies. Because the primary focus is on the behavior underlying the perceptions, free, open discussion is encouraged between the two groups, and their joint aim is to develop an overall list of remaining and possible sources of friction and isolation.

9. The two groups are asked to develop specific plans of action for solving specific prob- lems and for improving their relationships.

10. When the two groups have gone as far as possible in formulating action plans, at least one follow-up meeting is scheduled so that the groups can report on actions that have been implemented, identify any further problems that have emerged, and, where necessary, formulate additional action plans.

In addition, to this formal approach to improving interdepartmental or intergroup relationships there are a number of more informal procedures. Beckhard asks each of

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the two groups to develop a list of what irritates or exasperates them about the other group and to predict what they think the other group will say about them.15 Similarly, based on their experience at TRW Systems, Fordyce and Weil developed a modified approach whereby each group builds three lists—one containing “positive feedback” items (those things the group values and likes about the other group), a “bug” list (those things the group dislikes about the other group), and an “empathy” list (predic- tions about what the other group’s list contains).16 When the groups come together, they build a master list of major concerns and unresolved problems, which are assigned priorities and developed into an agenda. When they have completed the task, the subgroups report the results of their discussions to the total group, which then develops a series of action steps for improving the relations between the groups and commits itself to following through. For each action step, specific responsibilities are assigned, and an overall schedule is developed for prompt completion of the action steps.

These different approaches to resolving intergroup conflict form a continuum from behavioral solutions to attitudinal change solutions.17 Behavioral methods are oriented to keeping the relevant parties physically separate and specifying the lim- ited conditions under which interaction will occur. Little attempt is made to under- stand or change how members of each group see the other. Conversely, attitudinal methods, such as exchanging group members or requiring intense interaction with important rewards or opportunities clearly tied to coordination, are directed at changing how each group perceives the other. Here, it is assumed that perceptual distortions and stereotyping underlie the conflict and need to be changed to resolve it.

Most of the OD solutions to intergroup conflict reviewed in this section favor attitu- dinal change strategies. However, such interventions typically require considerably more skill and time than do the behavioral solutions. Changing attitudes is difficult in conflict situations, especially if the attitudes are deep-seated and form an integral part of people’s personalities. Attitudinal change interventions should be reserved for those situations in which behavioral solutions might not work.

Behavioral interventions seem most applicable in situations in which task interde- pendence between the conflicting groups is relatively low and predictable. For example, the task interaction between the production and the maintenance departments might be limited to scheduled periodic maintenance of machines. Here, higher management can physically separate the departments and specify the limited conditions under which they should interact. Where the shared task requires only limited interaction, that inter- action can be programmed and standardized.

Attitudinal change interventions seem necessary when task interdependence between the conflicting groups is high and unpredictable, such as might be found between the research and the production departments during a new-product introduction. Here, the two departments need to work together closely, often at unpredictable times and with novel, complex issues. When conflicts arise because of misperceptions, they must be worked through in terms of people’s perceptions and attitudes. The shared task does not permit physical separation or limited, specific interaction. It is in these highly inter- dependent and unpredictable task situations that the conflict resolution interventions discussed in this section are most appropriate.

Application 11.2 presents an example of intergroup conflict resolved by an attitudi- nal change intervention.18 The method reflects a variation on the traditional process described above and also places the intervention in a planned change context.

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2 IMPROVING INTERGROUP RELATIONSHIPS IN JOHNSON &JOHNSON’S DRUG EVALUATION DEPARTMENT

J ohnson & Johnson (J&J) is one of the world’s largest manufacturers of health care products. The fundamental objective of the company is to provide scientifically

sound, high-quality products and services to help heal the sick, cure disease, and improve the quality of life. In mid-2000, J&J made a strategic decision to merge two research and development organizations in the Pharmaceuti- cals Group. Departments in the Robert Wood Johnson Pharmaceutical Research Institute, headquartered in New Jersey, and the Janssen Research Foundation, headquartered in Belgium, were integrated to create a leading-edge global function called the Drug Evaluation (DE) organization. DE’s purpose is to rapidly generate data that allows J&J to make the best investment decisions about the drug port- folio. In the overall R&D process, the group is the bridge between discovery of new com- pounds and full development of a new drug. As a group, they are responsible for investigat- ing all compounds that may be potential new products and making data-driven decisions in collaboration with the discovery and full- development groups. The highest-quality and highest-potential discovery compounds are quickly and efficiently moved through preclini- cal development and into initial human trials. DE employees experience a genuine and unique opportunity to shape the R&D pipeline in J&J and ultimately influence patient well- being. It is an exciting and challenging place to be in.

Most of the first half of 2001 was spent in merger and integration activity with the groups, while moving compounds through the pipeline. The DE management team has over- all responsibility for the organization and con- sists of the global head of DE and seven direct reports representing chemical pharma- ceuticals, clinical drug evaluation, clinical operations, and portfolio planning and resource management (PPRM), among others.

One of the groups, the PPRM group was a new function created to improve the efficiency

of DE processes. They allowed the DE man- agement team to accurately track compounds as they moved through the process and pro- vided information in a consistent manner across the organization. The group consisted of project champions, portfolio planners, resource managers, and support staff. Project champions were the core of the PPRM group. When a compound is accepted into DE, the project champion leads a project team consist- ing of representatives from the different func- tions. This team is responsible for planning and executing the DE plan for their compound. The project champion works closely with all of the functions to ensure the compound progresses on schedule through the different stages of the process and ultimately on the handoff to full development.

The Clinical Drug Evaluation group was responsible for developing clinical plans that would take the new drug compound into human trials. The group consisted primarily of clinical scientists, M.D.s who were responsible for focusing on the key questions to be identi- fied to achieve DE deliverables. Clinical scien- tists were also responsible for communicating these questions and the results from the clini- cal aspects of the project to the rest of the project team. The quality of the data depends on asking the right questions, so this role is critical to delivering business benefits of the compound.

In the fall of 2001, the DE management team expressed concern that there were many issues surfacing about the nature of the work, roles and responsibilities, and the gen- eral cohesion within DE. This was particularly true with the clinical scientists and the project champions. They worried that a conflict between the schedule-oriented project cham- pions and the quality-oriented clinical specia- lists was hurting department morale. The DE management team asked an OD practitioner to help with understanding and addressing these issues. As part of the process, the prac- titioner conducted diagnostic interviews with

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Results of Intergroup Conflict Interventions Early OD practitioners reported on a number of studies concerning the effects of intergroup conflict resolution. Several researchers have reported positive results in a variety of settings, including union– management relations, an Indian tribal council, government organizations, and for- profit firms.19 The results include attitudinal changes, such as improved perceptions, increased trust, and less stereotyping in addition to improved operational results. For example, Huse found that bringing representatives of different groups together to work on common work-related problems had a marked effect, not only on relationships among a number of different manufacturing groups but also on the quality of the prod- uct, which increased 62%.20

The technology for improving intergroup relations is promising. A greater distinc- tion between attitudinal and behavioral changes needs to be made in planning effective

various members of the PPRM and Clinical Drug Evaluation groups. She found that opinions varied widely as to the nature of the problem and its char- acteristics. For example, some people did not per- ceive a problem, some believed it had nothing to do with the interaction of the project champions and the clinical scientists, and others believed it was a lack of clear roles and responsibilities. Over- all, seven different themes emerged from the data, although no single issue dominated. Faced with this lack of agreement on the issue and its causes, the practitioner, in collaboration with the different groups, proposed a three-day off-site meeting to work through the data and concerns.

The meeting was held in January 2002 in Villars, Switzerland (selected for its neutrality), and consisted of exercises to improve communications and a pro- cess to address intergroup conflict. Members of the PPRM and Clinical Drug Evaluation groups were asked to address the following questions:

• What do we want from you? • What we don’t want from you? • What do we offer/give you? • What we don’t offer/give you?

Each group was asked to discuss and come to consensus about their perceptions of the other group. Reflecting the diagnostic data, there was a lively discussion within each group as perceptions were shared, discussed, and resolved.

When each group presented their results, typi- cal responses included the following: “We want

your expertise;” “We want everyone to be a part of the team;” “We want input, support and agree- ment, adequate time, and frequent interaction.” The groups did not want surprise decisions, delayed or filtered information, and responsibility for another’s job. These themes were consistent across both groups.

The practitioner then opened the floor for a large group discussion of the presentations. Although a variety of issues were discussed and clarified, the groups noticed that they were in 90% agreement. The key issue that needed to be resolved was the decision-making process. The practitioner then facilitated a discussion of how the two groups should make decisions and they agreed on a method to do so.

As a result of the meeting, the two groups reported improved relations and increased trust because of an increased understanding of each other’s perspectives. They developed positive, cooperative attitudes toward the other group, understood how different cultural backgrounds and working styles were contributing to the strained decision-making process, and were able to reach agreement on a variety of important roles and responsibilities. In addition, a few weeks after the meeting, the participants said they realized the importance of setting the time aside to work through the issues. They gained an appreciation for a need to have consistency in methods and tools for the teams. The DE manage- ment team was pleased with the results.

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intergroup interventions. A greater variety of interventions that address the practical dif- ficulties of bringing two groups together is also necessary. Finally, more knowledge is needed about how culture affects intergroup conflict and how interventions need to be adjusted in cross-cultural situations.21 Growing knowledge and theory suggest that conflict can be either functional or dysfunctional, depending on the circumstances. Further research is needed to identify when conflict should be intensified and when it should be reduced.

11-4 Large Group Interventions The third system-wide process intervention is called large group intervention. Such change programs have been referred to variously as “search conferences,” “open-space meetings,” “open-systems planning,” “world cafés,” “future searches,” “decision accelera- tors,” and “Appreciative Inquiry Summits.”22 They focus on issues that affect the whole organization or large segments of it, such as developing new products or services, responding to environmental change, redesigning the organization, or introducing new technology. The defining feature of large group interventions, what differentiates them from confrontation meetings, is the bringing together of large numbers of organization members, often more than a hundred, and a broader range of other stakeholders for a two- to four-day meeting or conference. Here, conference attendees work together to identify and resolve organization-wide problems, to design new approaches to structur- ing and managing the firm, or to propose future directions for the organization. Large group interventions are among the fastest-growing OD applications. They reflect the core values of OD (inclusion, participation, and learning), have been used successfully in large and small organizations, and have been successfully adapted to a variety of cultural contexts.23

Large group interventions can vary on several dimensions, including purpose, size, length, structure, and number. The purpose of these change methods can include creat- ing the future plan and setting direction, redefining work, organization structures, and systems, and planning or solving particular organizational problems.24 Large group inter- ventions have been run with groups of less than 50 to more than 2,000 participants and have lasted between one and five days. Some large group processes are relatively planned and structured; others are more informal. Some interventions involve a single large- group meeting; others include a succession of meetings to accomplish system-wide change in a short period of time.

Despite these differences, most large group interventions have similar conceptual foundations and methods.25 These interventions have evolved over the past 30 years and represent a combination of open-systems thinking, participation and social construc- tion, and self-management. Open-systems thinking, as outlined in Chapter 5, directs attention to how organizations interact with and are shaped by their environments. Proponents of large group interventions suggest that an organization’s current state is the result of the intentional and unintentional interaction among many groups and individuals both inside and outside the organization. Changing the organization’s vision, structure, strategy, or work therefore requires the deliberate, face-to-face coor- dination of these groups.

The participation and social construction assumptions support this open-systems view. The participation assumption suggests that a variety of organization stakeholders must be involved to create an accurate view of the environment and organization. The social construction assumption suggests that only by developing a shared understanding

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of the environment and the organization among these stakeholders can “common ground” be found and coordinated action be possible. Without a broad and shared view, conflicts can arise about what parts of the environment or what actions are most important. Such perceptual disagreements make planning and implementing a coherent strategy difficult.26

Finally, the self-management assumption proposes that large group processes must create the conditions for ownership and commitment. All large group methods attempt to create a rhythm of large group presentations balanced against small-group discussions, exercises, tasks, and dialogues. Through the small-group work, participants work with a variety of stakeholders, build perspective, and become committed to action.

11-4a Application Stages Conducting a large group intervention generally involves preparing for the meeting, con- ducting it, and following up on outcomes. These activities are described below.

Preparing for the Large Group Meeting A design team/microcosm group compris- ing OD practitioners and organization members reflecting the general theme of the con- ference is formed to plan and organize the intervention. The team generally addresses four key ingredients for successful large group interventions: a compelling meeting theme, appropriate participants, relevant tasks to address the theme, and postmeeting follow-through.

1. Compelling meeting theme. Large group interventions require a compelling reason or focal point for change. Although “people problems” can be an important focus, more powerful reasons for large group efforts include managing impending mergers or reorganizations, responding to environmental threats and opportunities, or pro- posing radical organizational changes.27 Drawing on diagnostic data regarding the organization’s current state and the forces pressing for change, senior leaders must communicate and make clear to others the purpose of the large group meeting. Ambiguity about the reason for the intervention can dissipate participants’ energy and commitment to change. For example, a large group meeting that successfully envisioned a hospital’s future organization design was viewed as a failure by a few key managers who thought that the purpose was to cut costs from the hospital’s budget. Their subsequent lack of support stalled the change effort.

2. Appropriate participants. A fundamental goal of large group interventions is to “get the whole system in the room.” This involves inviting as many people as possi- ble who have a stake in the conference theme and who are energized and committed to conceiving and initiating change. Senior managers, suppliers, union leaders, inter- nal and external customers, trade-group representatives, government and regulatory officials, and organization members from a variety of jobs, genders, races, and ages are potential participants.

Recent research on large group interventions suggest that simple representation from different stakeholder groups is not enough to achieve the advantages of having the “whole system in the room.”28 If only one customer attends the meeting, and customers are critical to the conference theme, it is unlikely that the customer “voice” will be fully represented in the meeting deliberations. Planners must ensure that each important stakeholder group has sufficient representation.

3. Relevant tasks to address the conference theme. As described below, a successful large group intervention is dependent on the sequence of tasks performed by the group. These tasks typically are assigned to subgroups that examine the theme and

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draw conclusions for action. Generally, participants rely on their own experience and expertise to address system-wide issues, rather than drawing on resources from outside of the large group meeting. However, newer forms of large group interven- tions, such as the decision accelerator, relax this assumption and provide a means for the group to access information on the Internet or other sources. This ensures that the meeting can be completed within the allotted time and that members can participate fully as important sources of information.

The design team must think clearly about the conference objectives, the expected deliverables, and the sequence of activities, exercises, and conversations that will produce those results. The three generic models described in the next sec- tion are a good starting point. However, with the help of an OD practitioner experi- enced in large group meeting design, a team can be very creative and innovative with respect to the activities performed during the meeting.

Finally, design teams and practitioners must give appropriate attention to the logistics and support required to manage a large group of people. This includes tech- nological issues, such as audio/visual needs, microphones, and other communica- tions concerns, logistical issues, such as moving people from table to table or room to room, note takers, and small-group facilitators, and facilities issues, such as meals, the size of the room, and noise. Many large group interventions do not meet their objectives because of poor planning in this area.

4. Postmeeting follow-through. Abundant evidence suggests that without a clear plan for taking the outputs, action plans, and recommendations from a large group inter- vention, the meeting will just be an “event.” There is little likelihood that change will occur. Given the high expectations that are often generated by this intervention, it is imperative that the design team specify how the outputs from the meeting will be used. This could include clarifying how senior leaders will make decisions about which recommendations to support and fund, how action plans from the conference will be integrated with other ongoing strategic initiatives, or how particular changes will be implemented.

Conducting the Meeting The flow of events in a large group meeting can vary greatly, depending on its purpose and the framework adopted. Most large group pro- cesses, however, fit within three primary frameworks: open-systems methods, open- space methods, and positive methods. These various methods reflect different strategies for dealing with the four key dilemmas of large group interventions:29

1. The dilemma of voice refers to the problem of encouraging participation on the one hand and being overwhelmed if each individual wants to speak. Even when a large group event is relatively small in terms of participants, time would quickly run out if everyone wanted to speak up in the large group.

2. The dilemma of structure refers to how tightly or loosely the meeting should be organized. Some methods, like the open-systems processes described below, can be tightly controlled while others, like the open-space methods, are almost unstruc- tured. The dilemma is not knowing how much structure a particular group prefers, how much they want, or how much anxiety they are experiencing.

3. The egocentric dilemma refers to the problem of people holding on to their own personal views of right or wrong, better or worse. When individuals hold on too tightly, it makes large-group decision making difficult. Similarly, when a large group event overly represents one stakeholder group, that group can dominate the conversation and be less open to alternative points of view.

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4. The dilemma of emotional contagion refers to a group dynamic where many people take on the frustrations or excitement of others. When emotional contagion hap- pens, people unconsciously give up their ownership of a problem, action, or solution and get swept up in the moment. It represents a large group version of “groupthink” and can result in solutions that people, upon reflection, cannot support.

Open-Systems Methods. A variety of large group approaches, such as search confer- ences, open-systems planning, decision accelerators, and real-time strategic change, have their basis in open-systems methods and are among the more structured large group processes. These approaches help organizations assess their environments system- atically and develop strategic responses to them. They help organization members develop a strategic mission for relating to the environment and influencing it in favor- able directions. Open-systems methods begin with a diagnosis of the existing environ- ment and how the organization relates to it. They proceed to develop possible future environments and action plans to bring them about.30 These steps are described below.

1. Map the current environment surrounding the organization. In this step, the dif- ferent domains or parts of the environment are identified and prioritized. This involves listing all external groups directly interacting with the organization, such as customers, suppliers, or government agencies, and ranking them in importance. Participants then are asked to describe each domain’s expectations for the organiza- tion’s behavior.

2. Assess the organization’s responses to environmental expectations. This step asks participants to describe how the organization currently addresses the environmental expectations identified in step 1.

3. Identify the core mission of the organization. This step helps to identify the underlying purpose or core mission of the organization, as derived from how it responds to external demands. Attention is directed at discovering the mission as it is revealed in the organization’s behavior, not as it is pronounced in the organiza- tion’s official statement of purpose. This is accomplished by examining the organiza- tion and environment transactions identified in steps 1 and 2 and then assessing the values that seem to underlie those interactions. These values provide clues about the actual identity or mission of the organization.

4. Create a realistic future scenario of environmental expectations and organization responses. This step asks members to project the organization and its environment into the near future, assuming no real changes in the organization. It asks partici- pants to address the question, “What will happen if the organization continues to operate as it does at present?” Participant responses are combined to develop a likely organization future under the assumption of no change.

5. Create an ideal future scenario of environmental expectations and organization responses. Members are asked to create alternative, desirable futures. This involves going back to steps 1, 2, and 3 and asking what members ideally would like to see happen in the near future in both the environment and the organization. People are encouraged to fantasize about desired futures without worrying about possible constraints.

6. Compare the present with the ideal future and prepare an action plan for reduc- ing the discrepancy. This last step identifies specific actions that will move both the environment and the organization toward the desired future. Planning for appropri- ate interventions typically occurs in three timeframes: tomorrow, six months from now, and two years from now. Participants also decide on a follow-up schedule for sharing the flow of actions and updating the planning process.

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There are a number of variations on this basic model, each of which follows a simi- lar pattern of creating common ground, discussing the issues, and devising an agenda for change. For example, search conferences begin with an exercise called “appreciating the past,” which asks participants to examine the significant events, milestones, and high- lights of the organization’s previous 30 years (or less, in the case of newer organiza- tions).31 It demonstrates that participants share a common history, although they may come from different organizations, departments, age groups, or hierarchical levels.

Once common ground is established, members can discuss the system-wide issue or theme. To promote widespread participation, members typically organize into subgroups of eight to ten people representing as many stakeholder viewpoints as possible. The subgroups may address a general question (for example, “What are the opportunities for new business in our global market?”) or focus on a specific issue (for example, “How can we improve quality and cut costs on a particular product line?”). Subgroup members brainstorm answers to these questions, record them on flipchart paper, and share them with the larger group. The whole group compares responses from the subgroups and identifies common themes. Other methods, such as presentations to the large group, small-group meetings on particular aspects of the conference theme, or spontaneous meetings of interest to the participants, are used to discuss the conference theme and distribute information to members.

The final task of large group meetings based on open-systems methods is creating an agenda for change. Participants are asked to reflect on what they have learned at the meeting and to suggest changes for themselves, their department, and the whole organi- zation. Members from the same department often are grouped together to discuss their proposals and decide on action plans, timetables, and accountabilities. Action items for the total organization are referred to a steering committee that addresses organization- wide policy issues and action plans. At the conclusion of the large group meeting, the departmental subgroups and the steering committee report their conclusions to all parti- cipants and seek initial commitment to change.

Application 11.3 describes the large group decision accelerator process at Alegent Health. The decision accelerator model was used to generate an innovative vision and strategy for the key clinical areas within the health care system. It followed an open- systems model to design and implement its large group meeting.

Open-Space Methods. The second approach to large group interventions attempts to address the four dilemmas by imposing a minimal level of formal structure. Open- space methods temporarily restructure or “self-organize” participants around interests and topics associated with the conference theme. They generally follow these steps:32

1. Set the conditions for self-organizing. In the first step, the OD practitioner or manager responsible for the large group intervention sets the stage by announcing the theme of the session and the norms that will govern it. In addition, participants are informed that the meeting will consist of small-group discussions convened by the participants and addres- sing any topic they believe critical to the theme of the conference. Two sets of norms gov- ern how open-space methods are applied, and although the norms may sound ambiguous, they are critical to establishing the conditions for a successful meeting.

The first set of norms concerns the “Law of Two Feet.” It encourages people to take responsibility for their own behavior—to go to meetings and discussions where they are learning, contributing, or in some way remaining interested. Moving from group to group is legitimized by the roles of “butterflies” and “bumblebees.” Butter- flies attract others into spontaneous conversations and, in fact, may never attend a formal meeting. Bumblebees go from group to group and sprinkle knowledge, information, or new ideas into different meetings.

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a p

p lica

tio n

1 1

3 USING THE DECISION ACCELERATOR TO GENERATE INNOVATIVE STRATEGIES IN ALEGENT’S WOMEN’S

AND CHILDREN’S SERVICE LINE

T he applications in Chapters 4, 6, and 9 described the process of entry, contracting, data collection, and evaluation in a large group intervention at Alegent Health. In

this application, we describe the Women’s and Children’s Right Track Decision Accelerator workshop. It was one of the initial six DAs intended to set a vision and strategy for the clinical service areas within the health system.

The Alegent Health (AH) organization is a large health care system in eastern Nebraska and western Iowa. It has five large hospitals and a variety of outpatient clinics. As part of the change agenda from the new CEO, Wayne Sensor, a Chief Innovation Officer, Ted Schwab, was hired to lead in the development of a transformed health care system. Under a corporate vision that included achieving “world- class leadership in compassionate, faith-based health services that measurably enriches the lives of families we serve through an excep- tional commitment to quality,” Schwab engaged two OD consultants from California, Joel Fadem and Stu Winby. Fadem was a pro- fessor at UCLA who specialized in health care organizations, and Winby was a former internal OD consultant at Hewlett-Packard, where he had innovated on large group interventions dur- ing the HP–Compaq merger (see Application 8.4). Together, Schwab, Fadem, and Winby worked with other members of AH to decide on the use of large group interventions as a way to generate innovative thinking, strategies, and decision making in the organization.

The strategic innovation process was kicked off in June 2005, with six large group “decision accelerators,” one for each of the clinical service lines. A decision accelerator is similar to other large group interventions, espe- cially those based on open-systems thinking. It has two unique attributes that distinguish it from the others. First, a DA is more than a pro- cess; it is a physical space. Alegent Health not only committed to the large group intervention

as a method for innovation, it committed phys- ical resources to maximizing the impact of the work. The organization leased half a floor of an office building in Omaha, gutted the offices, and built a completely flexible facility to sup- port the DA process (see figure here). Each DA space is designed to fit the situation and organization needs, but has several things in common. The primary working space is completely flexible with moveable white boards where small groups record their out- puts and discussions, moveable chairs, and so on. Alegent’s DA space had a unique fea- ture that proved to be a favorite among the participants. All of the walls in the space could be written on with erasable markers. That is, the walls of the room—and there was a lot of wall space—could host planned or impromptu meetings where the group mem- bers could draw what they were thinking.

Second, the DA, like other large group inter- ventions, assumes that by getting the “whole system in the room,” a richer, more complete conversation and better decisions ensue. How- ever, the DA does not assume that “all” of the necessary or available information is in the room and so most DA spaces include some kind of library with Internet-enabled computer terminals and other source documentation (e.g., white papers, articles, books) that might inform the discussion during the DA.

The Women’s and Children’s (W&C) DA was the fourth one conducted at AH. The agenda for the W&C DA was similar to others, but Fadem and Winby worked with the VP in charge of the clinical area, Joan Neuhaus, to modify some of the activities to fit with the challenges, opportunities, and existing features of the W&C service line. For example, Joan wanted the group to address the handling of high-risk pregnancies and deliveries as well as thinking about women’s health issues more broadly. Also as part of the preparation, Steve Houston, who directed the facility, put together

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his team of support staff, including note takers who transcribed large group discussions and report-outs, photographers who captured all small-group outputs, a graphic facilitator who recorded the large group conversations in a visual format, and catering for the meeting. The support staff played a critical role in the success of a DA by knowing the agenda well enough to position the physical facility in advance of any activity so that the participants needed only to focus on the con- tent of the meeting. This included having handouts, instructions, surveys, and other documents pre- pared in advance, which made it possible to handle any immediate requests from the facilitators.

On Day 1, the participants arrived to a light breakfast and were immediately given a task. Using

the white boards that were in front of the large group meeting space, called the theater, each participant in the workshop was to find a marker and to write down the events, forces, trends, and innovations that they knew of or heard about in seven different categories (e.g., technology, medicine/health care, society, the economy, globally, ecologically, and in education). The white boards had been prepared in advance by Houston’s team with the seven catego- ries and with each white board representing a partic- ular time period: 1975–1990, 1991–2005, and 2006– 2020. After about 15 minutes, the participants were asked to find two people they didn’t know and the trio had to share the things they had written down.

Following the environmental scanning activity, an introduction and overview of the agenda took

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place. The CEO welcomed the participants and encouraged them to talk about the things that would make Alegent Health a “world-class” organi- zation. He referred the group to the corporate vision, expressed his commitment to the effort, and said he would be back on the last day to hear their ideas for creating a world-class W&C service line.

The next few activities asked participants, in small groups first and then in large group report- outs, to think about the implications of the environ- mental events on the W&C service line by 2015, what was implied by the “world class” part of the Alegent Health vision, and the implications “world class” had for the W&C clinical area. For each activity, a relevant organizing structure was used. For example, for discussing the implications of “world class” on the W&C clinical area, the groups were broken down into stakeholder categories. How might, for example, patients, the community, or physicians view a world-class W&C service? In each activity, the small groups were composed of multiple stakeholders, including physicians, man- agers/executives from Alegent, patients and fami- lies, community members, and other stakeholders.

Before the day ended, Winby asked the group a question: “If there was one thing that you really want to make sure gets addressed at this meeting to make it a success for you, what would that be?” He had people write their questions on a piece of paper and put it into a box as they were leaving.

During the debrief after the first day, the facil- itators and support team reviewed what went well and any processes that needed to be improved, discussed the energy and interests of the partici- pants, and sorted the “what’s most important” questions into similar themes in preparation for an activity on Day 2.

Day 2 began with a welcome from Neuhaus and then the group went to work. The first activity was to take the work from the Day 1 W&C vision- ing activities and prioritize the different elements. The group was questioned as to what, for them, were the most important dimensions of a world- class W&C service line? In addition, the group

was led through an exercise to determine if there were any technologies or regulatory events that would fundamentally alter the way health care was delivered in this area. The group discussed, for example, the implications of being able to deliver a child that was less than 20 weeks old.

In the next exercise, the facilitators asked the group to address the questions they had asked at the end of Day 1. The questions had been categorized into six areas, including gaps in the community’s health care, women’s health ser- vice offerings, and obstetrics among others. The participants were allowed to sign up to discuss whatever subject interested them. In the report- out of the groups, an important issue that had been simmering throughout Day 1 was surfaced. That is, should high-risk pregnancies and deliveries be centralized to one hospital and what would that imply? The large group debated this subject from a variety of perspectives. In the end, it was agreed that such a move made sense from the world-class perspective, but that it would be difficult to imple- ment and would face much resistance.

The final activity asked the participants to synthesize their discussions and activities into a high-level “horizons map.” That is, for each of the major categories that had been discussed, includ- ing women’s health, obstetrics, child/adolescent medicine, and community health, the group was to lay out the key decisions, milestones, and events that would need to take place over the next 18 months, by 2010, and by 2015 to realize their vision of a world-class W&C clinical area.

On Day 3, the senior leadership team from Ale- gent Health joined the group and listened to a pre- sentation of the horizon map. The graphic facilitator drew the final horizons map with pictures, words, and symbols, and this was used as the outline for the presenters. Following the presentations, the executives asked questions and discussed some of the group’s decisions. In addition, they laid out the “next steps” of the process, including gathering the data from all of the clinical area DAs in order to resource the strategies appropriately.

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The second set of norms is labeled the “Four Principles.” The first principle is “whoever comes is the right people.” It is intended to free people to begin conversa- tions with anyone at any time. It also signals that the quality of a conversation is what’s most important, not who’s involved. The second principle, “Whatever hap- pens is the only thing that could have,” infuses the group with responsibility, encourages participants to be flexible, and prepares them to be surprised. “Whenever it starts is the right time” is the third principle and is aimed at encouraging creativ- ity and following the natural energy in the group. The final principle, “When it’s over, it’s over,” allows people to move on and not feel like they have to meet for a certain time period or satisfy someone else’s requirements.

2. Create the agenda. The second step in open-space interventions is to develop a road map for the remainder of the conference. This is accomplished by asking partici- pants to describe a topic related to the conference theme that they have passion for and interest in discussing. This topic is written on a large note card or “sticky note,” announced to the group, and then posted on the community bulletin board where meeting topics, times, and locations are displayed.33 The person announcing the topic agrees to convene the meeting at the posted time and place and to prepare a short summary of the meeting. This process continues until everyone who wants to define a topic has been given the chance to speak. The final activity in this step asks participants to sign up for as many of the sessions as they have interest in. The open-space meeting begins with the first scheduled sessions.

3. Coordinate activity through information. During an open-space session, there are two ways to coordinate activities. First, each morning and evening a community meeting is held to announce new topics that have emerged for which meeting dates and times have been assigned, or to share observations and learnings. Second, as the different meetings occur, the conveners produce one-page summaries of what happened, who attended, what subjects were discussed, and what recommendations or actions were proposed. Typically, this is done on computer in a room dedicated for this purpose. These summaries are posted near the community bulletin board in an area often labeled “newsroom.” Participants are encouraged to visit the news- room and become familiar with what other groups have been discussing. The sum- maries also can be printed and copied for conference participants.

Positive Methods. The final large group intervention represents a hybrid approach to the four dilemmas. It is distinguished from the other two methods by its use of the posi- tive approach to change described in Chapter 2. In fact, many of the futuring and vision- ing exercises in the open-systems approaches that help guide members in creating “images of potential” toward which the organization can grow and develop are drawn from this approach.34 These methods can increase members’ energy for change and build a broad consensus toward a new future. Like other large group methods, these approaches can help look at a variety of organizational issues; however, their distinguish- ing feature is the “appreciative” framing of issues and the leveraging of the organization’s positive core attributes. The Appreciative Inquiry (AI) Summit approach suggests that human organizing and change should be a relational process of inquiry, grounded in affirmation and appreciation.35 The four steps in an AI summit are as follows:

1. Discover the organization’s positive core. With respect to the purpose of the summit, participants first pair up with another person and conduct an appreciative interview. If the summit is organized to take advantage of a new market opportunity, the questions would generate stories about experiences where a group or organization was most

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successful in being entrepreneurial and swift. If the summit were about addressing poor organization coordination, the questions and stories would be personal experiences where two or more groups worked well together.

Following the interviews, the pairs join up with three other pairs to discuss their answers to the questions. What is it that is common among all these stories? What are the elements of successful entrepreneurship or collaboration, for example? These small-group conversations are then aggregated to create a broad and inclusive list of success factors and other themes associated with these successful experiences.

2. Dream about and envision a more desired and fulfilling future. In this step, par- ticipants use the themes and success factors from the first activity to develop com- pelling images of the future. In this visioning exercise, participants are encouraged to make bold and provocative propositions about what could be in the future. To arrive at a bold vision, small groups share their greatest hopes or act out skits and presen- tations that convey what they believe is possible. Unlike open system or open-space methods, there is very little prioritizing or culling out of the best or more compelling themes. The positive approach believes that breadth and inclusiveness are the most important way to galvanize organization change.

3. Design the structural and systems arrangements that will best reflect and support the vision or dream. Members of the summit identify the design features (strategies, structures, systems, processes) that will need to be in place to make the vision a real- ity. This step allows participants to articulate the dream in concrete terms.

4. Create the specific action plans that will fulfill the organization’s destiny. The primary task of the destiny step is to identify the projects, initiatives, and action plans required to implement the design criteria. Task forces are formed, teams vol- unteer to take on projects, and any governance mechanisms needed to coordinate the effort are created.

Following Up on Meeting Outcomes Follow-up efforts are vital to implementing the action plans from large-scale interventions. These efforts involve communicating the results of the meeting to the rest of the organization, gaining wider commitment to the changes, and structuring the change process. In those cases where all the members of the organization were involved in the large group meeting, implementation can proceed immediately according to the timetable included in the action plans.

11-4b Results of Large Group Interventions The number of case studies describing the methods and results of large group interven- tions has increased dramatically. Such interventions have been conducted at for-profit firms like Allstate Insurance, Hewlett-Packard, Toyota, Boeing, Microsoft, Motorola, Mar- riott, and Rockport, and at such governmental and nongovernmental organizations as Save the Children, World Vision, the City of Carlsbad, California, and the U.S. Department of Agriculture. Large group interventions are increasingly common in other countries, includ- ing Pakistan, South Africa, China, Australia, England, Mexico, and India.36 Despite the proliferation of practice, however, Purser and Griffin lament that “empirical research, such as longitudinal studies, quasi-experimental field studies, and studies of large sample sizes across a wide variety of large-group interventions are severely lacking. Data that is available tends to be anecdotal or single case studies from practitioners and consultants who have a commercial stake in promoting their own methods.”37 Yaeger, Sorensen, and Bengtsson’s review of AI supports this criticism. Of the 34 reported empirical evaluations of the AI Summit approach, all of them were case studies.38

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In response to some of these concerns, Worley, Mohrman, and Nevitt analyzed six large group interventions conducted at Alegent Health in Omaha, Nebraska.39 The six “decision accelerators” were nearly identical in purpose—to develop a new strategy and vision—and in design. They varied only in the composition of the group and the specific theme (e.g., cardiology versus women’s and children’s health) being addressed. The study’s methods—a naturally occurring field experiment and independent measures— allowed the researchers to isolate the relationships among group composition, process, and outcomes and rule out various alternative explanations for the results.

Two conclusions were particularly important. First, the study supported the popular assertion that group composition or “getting the whole system in the room” affected group process, but as noted earlier, the data showed that it was “balanced representation” that was important. When the decision accelerators were populated with relatively equal numbers of organization members, physicians, and community representatives (e.g., patients, government officials, regulatory representatives, and vendors), the large group process was more likely to consider the views of the different stakeholders and consider a wider variety of strategy, vision, and change options. Second, although the study did not support a relationship between group composition and outcomes, it did support the hypothesis that characteristics of the group’s process had important influences on the decision accelerator’s outcomes. In particular, the more “intense” the debate and discus- sion of different issues in the meeting, the more comprehensive, aggressive, and innova- tive was the strategy and vision as described by the participants.

Because large group interventions often set the stage for subsequent OD interven- tions, it is difficult to isolate their specific results from those of the other changes. Anec- dotal evidence from practitioners and case studies suggest that benefits can include increased energy toward organizational change, improved feelings of community, ability to see “outside the box,” increased speed of change, and improved relationships with sta- keholders.40 In addition, several case studies have documented improved business out- comes, such as decreased turnover, absenteeism, and costs.41 Clearly, more systematic research is needed on this important system-wide process intervention.

SUMMARY

This chapter described three types of system-wide process interventions: confrontation meetings, inter- group interventions, and large group interventions. The organization confrontation meeting is a way of mobilizing resources for organizational problem solv- ing and seems especially relevant for organizations undergoing stress. The intergroup relations approaches are designed to help solve a variety of organizational problems. Microcosm groups can be formed to address particular issues and use parallel processes to diffuse group solutions to the organiza- tion. The intergroup conflict resolution approach involves a method for mitigating dysfunctional

conflicts between groups or departments. Conflict can be dysfunctional in situations in which groups must work together. It may, however, promote orga- nizational effectiveness when departments are rela- tively independent of each other. Large group interventions are designed to focus the energy and attention of a “whole system” around organizational processes such as a vision, strategy, organization design, or culture. It is best used when the organiza- tion is about to begin a large-scale change effort or is facing a new situation. These three process interven- tions represent important, time-honored, and success- ful methods of introducing change in organizations.

CHAPTER 11 ORGANIZATION PROCESS APPROACHES 319

NOTES

1. M. Weisbord, Productive Workplaces (San Francisco: Jossey-Bass, 1987).

2. R. Beckhard, “The Confrontation Meeting,” Harvard Business Review 4 (1967): 149–55.

3. B. B. Bunker and B. Alban, Large Group Interventions (San Francisco: Jossey-Bass, 1997); N. Tichy and S. Sherman, Control Your Destiny or Someone Else Will (New York: HarperCollins, 1993).

4. This application was adapted from material in Bunker and Alban, Large Group Interventions; and Tichy and Sherman, Control Your Destiny or Someone Else Will.

5. R. Beckhard, Organization Development: Strategies and Models (Reading, MA: Addison-Wesley, 1969).

6. W. Bennis, Organization Development: Its Nature, Origins, and Prospects (Reading, MA: Addison-Wesley, 1969), 7.

7. C. Alderfer, “An Intergroup Perspective on Group Dynamics,” in Handbook of Organizational Behavior, ed. J. Lorsch (Englewood Cliffs, NJ: Prentice Hall, 1987), 190–222; C. Alderfer, “Improving Organizational Commu- nication Through Long-Term Intergroup Intervention,” Journal of Applied Behavioral Science 13 (1977): 193–210; C. Alderfer, R. Tucker, C. Alderfer, and L. Tucker, “The Race Relations Advisory Group: An Intergroup Interven- tion,” in Organizational Change and Development, vol. 2, ed. W. Pasmore and R. Woodman (Greenwich, CT: JAI Press, 1988), 269–321.

8. Alderfer, “Intergroup Perspective.” 9. Ibid., 210.

10. Alderfer, “Improving Organizational Communication.” 11. Alderfer et al., “The Race Relations Advisory Group.” 12. K. Jehn, “A Multimethod Examination of the Benefits

and Detriments of Intragroup Conflict,” Administrative Science Quarterly 40 (1995): 256–83.

13. D. Tjosvold, “Cooperation Theory and Organizations,” Human Relations 37 (1984): 743–67.

14. R. Blake, H. Shepard, and J. Mouton, Managing Inter- group Conflict in Industry (Houston, TX: Gulf, 1954).

15. Beckhard, Organization Development. 16. J. Fordyce and R. Weil, Managing WITH People

(Reading, MA: Addison-Wesley, 1971). 17. E. Neilson, “Understanding and Managing Intergroup

Conflict,” in Organizational Behavior and Admin- istration, ed. P. Lawrence, L. Barnes, and J. Lorsch (Homewood, IL: Richard D. Irwin, 1976), 291–305.

18. This application was written and submitted by Marianne Tracy, who served as the OD practitioner in this case.

19. Blake, Shepard, and Mouton, Managing Intergroup Conflict in Industry; Bennis, Organization Development; R. Golem- biewski and A. Blumberg, “Confrontation as a Training Design in Complex Organizations: Attitudinal Changes in a Diversified Population of Managers,” Journal of Applied Behavioral Science 3 (1967): 525–47; W. French and C. Bell, Organization Development: Behavioral Science Inter- ventions for Organization Improvement (Englewood Cliffs, NJ: Prentice Hall, 1978); E. Huse and M. Beer, “Eclectic Approach to Organizational Development,” Harvard Busi- ness Review 49 (1971): 103–13; E. Huse, “The Behavioral Scientist in the Shop,” Personnel 44 (May–June 1965): 8–16.

20. Huse, “The Behavioral Scientist in the Shop.” 21. A. Hubbard, “Cultural and Status Differences in Inter-

group Conflict Resolution: A Longitudinal Study of a Middle East Dialogue Group in the United States,” Human Relations 52 (1999): 303–23.

22. Weisbord, Productive Workplaces; M. Weisbord, Discov- ering Common Ground (San Francisco: Berrett-Koehler, 1993); Bunker and Alban, Large Group Interventions; H. Owen, Open Space Technology: A User’s Guide (Potomac, MD: Abbott, 1992); J. Brown, D. Isaacs, and the World Café Community, The World Cafe: Shaping Our Futures Through Conversations That Matter (San Francisco: Berrett-Koehler Publishers, 2005); J. Ludema, D. Whitney, B. Mohr, and T. Griffin, The Appreciative Inquiry Summit (San Francisco: Berrett-Koehler, 2003).

23. P. Holman, T. Devane, and S. Cady, The Change Hand- book, 2nd ed. (San Francisco: Berrett-Kohler, 2007); R. Axelrod, Terms of Engagement: New Ways of Leading and Changing Organizations, 2nd ed. (San Francisco: Berrett-Koehler, 2010); R. Purser and T. Griffin, “Large- group Interventions: Whole Systems Approaches to Organizational Change,” in Handbook of Organization Development, ed. T. Cummings (Thousand Oaks, CA: Sage Publications, 2007); Bunker and Alban, Large Group Interventions.

24. B. Bunker and B. Alban, The Handbook of Large Group Methods (San Francisco: Jossey-Bass, 2006); P. Holman and T. Devane, eds., The Change Handbook: Group Methods for Shaping the Future (San Francisco: Berrett- Koehler, 1999).

25. J. Bartunek, J. Balogun, and B. Do, “Considering Planned Change Anew: Stretching Large Group Interventions Strategically, Emotionally, and Meaningfully,” The Academy of Management Annals 5 (2011): 1–52; Purser and Griffin, “Large Group Interventions.”

26. L. Bourgeois, “Strategic Goals, Perceived Uncertainty, and Economic Performance in Volatile Environments,”

320 PART 3 HUMAN PROCESS INTERVENTIONS

Academy of Management Journal 28 (1985): 548–73; C. West Jr. and C. Schwenk, “Top Management Team Strategic Consensus, Demographic Homogeneity, and Firm Performance: A Report of Resounding Nonfindings,” Academy of Management Journal 17 (1996): 571–76.

27. Weisbord, Productive Workplaces. 28. C. Worley, S. Mohrman, and J. Nevitt, “Large Group

Interventions: An Empirical Field Study of Their Com- position, Process, and Outcomes,” Journal of Applied Behavioral Science 47 (2011): 404–31.

29. Bunker and Alban, Large Group Interventions; Purser and Griffin, “Large Group Interventions.”

30. C. Krone, “Open Systems Redesign,” in Theory and Method in Organization Development: An Evolutionary Process, ed. J. Adams (Arlington, VA: NTL Institute for Applied Behavioral Science, 1974), 364–91; G. Jayaram, “Open Systems Planning,” in The Planning of Change, 3rd ed., ed. W. Bennis, K. Benne, R. Chin, and K. Corey (New York: Holt, Rinehart and Winston, 1976), 275–83; R. Beckhard and R. Harris, Organizational Transitions: Managing Complex Change, 2nd ed. (Reading, MA: Addison-Wesley, 1987); Cummings and Srivastva, Management of Work.

31. Weisbord, Productive Workplaces. 32. Bunker and Alban, Large Group Interventions; Owen,

Open Space Technology; V. Prewitt, "Working in the Café: Lessons in Group Dialogue," The Learning Organization 18 (2011): 189–202.

33. Owen, Open Space Technology. 34. F. Emery and E. Trist, Towards a Social Ecology (New

York: Plenum Publishing, 1973); R. Beckhard and

R. Harris, Organizational Transitions: Managing Complex Change, 2nd ed. (Reading, MA: Addison-Wesley, 1987); R. Lippitt, “Future Before You Plan,” in The NTL Manager’s Handbook (Arlington, VA: NTL Institute, 1983), 38–41.

35. Ludema et al., The Appreciative Inquiry Summit. 36. Weisbord, Discovering Common Ground; Owen, Open

Space Technology; M. Manning and J. DelaCerda, “Build- ing Organizational Change in an Emerging Economy: Whole Systems Change Using Large Group Interventions in Mexico,” in Research in Organization Change and Development, ed. W. Pasmore and R. Woodman (Oxford: JAI Press, 2003), 51–98.

37. Purser and Griffin, “Large Group Interventions.” 38. T. Yaeger, P. Sorensen, and U. Bengtsson, “Assessment of

the State of Appreciative Inquiry: Past, Present, and Future,” in Research in Organization Change and Devel- opment, ed. R. Woodman and W. Pasmore (Oxford: Elsevier, 2005), 297–319.

39. Worley, Mohrman, and Nevitt, “Large Group Inter- ventions.”

40. R. Purser, S. Cabana, M. Emery, and F. Emery, “Search Conferencing: Accelerating Large-Scale Strategic Planning,” in Fast Cycle Organization Development, ed. M. Anderson (Cincinnati, OH: South-Western College Publishing, 2000); D. Coghlan, “The Process of Change through Interlevel Dynamics in a Large-Group Interven- tion for a Religious Organization,” Journal of Applied Behavioral Science 34 (1998): 105–20.

41. See, for example, the case studies on the AI Commons website: http://appreciativeinquiry.case.edu.

CHAPTER 11 ORGANIZATION PROCESS APPROACHES 321

S elected

C a s e s

LINCOLN HOSPITAL: THIRD-PARTY INTERVENTION*

S oon after the election of a new chief of sur- gery, the president of Lincoln Hospital faced a crisis. Lincoln, a 400-bed for-profit hospital in the southwestern United States, was

experiencing severe problems in its operating room (OR). Forty percent of the OR nurses had quit during the previous eight months. Their replacements were significantly less experi- enced, especially in the specialty areas. Fur- thermore, not all could be replaced; when the crisis came to a head, the OR was short seven surgical nurses.

Also, needed equipment often was not avail- able. On several occasions, orthopedic surgeons had already begun surgery before they realized the necessary prosthesis (for example, an artifi- cial hip, finger joint, or knee joint) was not ready, or was the wrong size, or had not even been ordered. Surgery then had to be delayed while equipment was borrowed from a neighboring hospital. Other serious problems also plagued the OR. For example, scheduling problems made life extremely difficult for everyone involved. Anesthesiologists often were unavail- able when they were needed, and habitually tardy surgeons delayed everyone scheduled after them. The nursing shortage exacerbated these difficulties by requiring impossibly tight scheduling; even when the doctors were ready to begin, the scheduled nurses might still be occupied in one of the other ORs.

The surgeons were at odds among them- selves. Over 30 of them were widely regarded as prima donnas who considered their own time more valuable than anyone else’s and would even create emergencies in order to get “prime time” OR slots—for which, as often as not, they were late. Worst of all, how- ever, the doctors and nurses were virtually at war. Specifically, Don, the new chief of sur- gery, was at war with Mary, the veteran OR director; indeed, he had campaigned on a promise to get her fired.

Lincoln’s president was faced with a difficult choice. On the one hand, he needed to satisfy the physicians, who during the tenure of his pre- decessor had become accustomed to getting their way in personnel matters by threatening to take their patients elsewhere. The market was, as the physicians knew, increasingly com- petitive, and the hospital was also faced with escalating costs, changes in government regula- tions, and strict Joint Commission on Accredita- tion of Hospitals standards. Could the president afford to alienate the surgeons by opposing their newly chosen representative—who had a large practice of his own?

On the other hand, could he afford to sacrifice Mary? She had been OR director for 13 years, and he was generally satisfied with her. As he later explained,

Mary is a tough lady, and she can be hard to get along with at times. She also doesn’t smile all that much. But she does a lot of things right. She consistently stays within her budget ….

Furthermore, whereas Don had long been an outspoken critic of the hospital and was gen- erally distrusted by its administrators, Mary was loyal, a strict constructionist who adhered firmly to hospital policies and procedures:

She is supportive of me, of the hospital, and of our interests. She doesn’t let the doctors get away with much. She has been an almost faultless employee for years, in the sense that she comes to work, gets the job done, never complains, and doesn’t make any waves. I really don’t understand the reason for the recent pro- blems. I trust her and want to keep her. It would be extremely difficult to replace her.

The last point was a key one; a sister hos- pital had spent almost three years unsuccess- fully trying to recruit an OR director.

After talking with both nurses and doctors, the president decided not to fire Mary. Instead, he told both Mary and Don that they must resolve their differences. They were to begin

*R. Wayne Boss, University of Colorado; Leslee S. Boss, Organization Research and Development Associates; Mark W. Dundon, Sisters of Providence Hospital.

322 PART 3 HUMAN PROCESS INTERVENTIONS

meeting right away and keep on meeting, however long it took, until they got the OR straightened out.

The results were predictable. Neither party wanted to meet with the other. Mary thought the whole exercise was pointless, and Don saw it as a power struggle that he could not afford to lose. The president, who wanted an observer present, chose Terry, the new executive vice president and chief operating officer. Mary didn’t know Terry very well so she asked that her boss, the vice president of patient services, sit in. Don, who “didn’t trust either Mary or her boss as far as he could throw them,” countered with a request for a second of his own, the vice president for medical services. When the meeting finally occurred, it quickly degenerated into a free-for-all, as Don and Mary exchanged accusations, hotly defended themselves, and interpreted any inter- ventions by the three “observers” as “ taking sides.”

DIAGNOSIS

At this point, Lincoln’s president called me. We negotiated a psychological contract, where the president shared the above historical information, described the problem as he saw it, and identified his expectations of me and for the project. I, in turn, articulated my expectations of the president. We then agreed to take no steps until I had inter- viewed both Don and Mary.

Later that afternoon, Don expressed his anger and frustration with the hospital administration and, most of all, with Mary:

I don’t want to have anything to do with this lady. She is a lousy manager. Her people can’t stand to work with her. We don’t have the equipment or the supplies that we need. The turnover in the OR is outrageous. The best nurses have quit, and their replacements don’t know enough to come in out of the rain.… All we want is to provide quality patient care, and she refuses to let us do that. She doesn’t follow through on things.

He particularly resented Mary’s lack of deference.

Mary’s behavior is so disgraceful it is almost laughable. She shows no respect whatsoever for the physicians.… She thinks she can tell us what to do and order us around; and I am not

going to put up with it any longer. When I agreed to take this job as chief of surgery, I promised my colleagues that I would clean up the mess that has plagued the OR for years. I have a mandate from them to do what- ever is necessary to accomplish that. The docs are sick and tired of being abused, and I am going to deal with this lady head on. If we got rid of her, 95% of our problems would go away. She has just gone too far this time.

In his cooler moments, Don admitted that Mary was only partly to blame for the OR’s prob- lems, but he still insisted she must be fired, if only to prove to the doctors that the hospital administra- tion was concerned about those problems, and that something was being done.

Observation: I am always a bit suspicious about the objectivity of someone who has reached the conclusion that someone must be fired. There is almost always something else that is going on that requires more investigation.

Mary was both angry and bewildered. She saw herself as fair and consistent in dealing with doc- tors and nurses:

Things had gone relatively well until six months ago. At that time, some of the ortho-pods started scheduling surgeries and then canceling them at the last minute, which, in turn, fouled up the schedule for the rest of the doctors. When I called them on it, Don went on a ram- page. He is the leader of the pack, and now he has blood in his eyes. I have tried to talk with him about it, but he won’t listen.

And just as Don’s assessment echoed, in an exaggerated form, the doctors’ perception of Mary as an exceptionally strong-willed woman, Mary’s assessment of Don echoed his reputation among the orthopedic nurses and hospital administrators, who feared and distrusted his quick temper and sharp tongue:

Not only that, but I find his filthy mouth very offensive. I am not going to cooperate with

SELECTED CASES 323

him when he behaves like that. Nobody else talks to me that way and gets away with it. Nobody, I won’t put up with it. As long as he behaves that way, it is a waste of time to meet with him. I am sure that I am doing things that bother him, and I want the OR to run as smoothly as possible. But there is no way we can deal with these problems unless we can sit down and talk about them without being abusive.

Clearly, both Mary and Don had strong needs to control other people’s behavior, while remaining free of control themselves. It is significant that each used the word abuse to describe the other’s behavior. They did respect each other’s technical abilities, but morally, Mary saw Don as “an egotis- tical jerk,” and he saw her as a “rigid, petty tyrant.” Neither trusted the other, thus, each was inclined to misconstrue even unintentionally negative comments—an especially disastrous state of affairs in the gossipy environment at Lincoln, where surgeons, nurses, and administrators were quick to relay, and amplify, the signals of hostility.

It was obvious from these initial interviews that Don and Mary were largely contributing to the OR problems; but it was also obvious that many others had a stake in the outcome of their battle. I therefore went on to interview the surgical head nurses, the vice presidents for patient ser- vices and medical services, the executive vice president, the president, and 25 physicians.

The vice presidents and the surgical head nurses agreed with the president: Mary might not be the hospital’s most personable manager, but she was a good one. Her conservative, tenacious, no-nonsense style had earned the trust of adminis- trators and the respect of OR nurses, as well as some physicians. As one nurse asserted: “Good OR managers are hard to find and certainly Lincoln is far better off with Mary than without her.”

The doctors, in general, supported Don, though some of them had reservations. At one extreme, an anesthesiologist began with a classic disclaimer:

Now, I want you to know that I don’t have any problems with Mary, personally. In fact, I really like her. We have been friends for years, and we get along just great.

Nevertheless, he was convinced the OR prob- lems were “100% Mary’s fault. I have no doubt about that.” Furthermore, although he claimed to be, as an anesthesiologist, “a completely neutral third party in this whole business,” he clearly shared Don’s assumption that Mary’s job as an OR manager was to keep the surgeons happy:

Her people hate her. She is a lousy manager. She just can’t work with the MDs. Surgeons are a rare breed, and there is no changing them. You have got to get someone in there who can work with them and give them what they want.

His conclusion echoed Don’s: “She ought to be fired, if for no other reason than to prove that something is being done to address the problems in the OR.”

Observation: I am always leery of someone who says, “It is all her fault.” When some- one is blamed for 100% of the problem, it usually evidences either denial or a coverup. There may be a completely innocent party in an emotionally charged conflict, but I have never met one. Emotionally charged conflicts are always power struggles, and it takes two parties to play that game.

A less enthusiastic partisan, a surgeon who was a ten-year veteran of the Lincoln OR, was very con- scious of the way expectations such as those expressed by Don and the anesthesiologist were apt to be viewed by others in the medical community:

Quite frankly, I am embarrassed to admit that I am a surgeon in this town; by doing so, I am automatically branded as an egotistical dimwit. With only a few exceptions, those guys are a group of conceited, narcissistic technicians who are so caught up with themselves that they have no clue about what is going on around them. Some of them are bullies, and they push the rest of us around because we don’t have the patient census they do.

His assessment of blame was correspondingly more moderate than the anesthesiologist’s: “A lot

324 PART 3 HUMAN PROCESS INTERVENTIONS

of people would like you to think that this problem is one sided, and that Mary is totally responsible for this mess. But that isn’t true.” And while he supported Don, whom he described as reasonable and willing to listen to logic, his principal wish was to avoid personal involvement: “I am glad he is fighting this battle. I won’t. The thought of getting caught between him and Mary scares me to death.”

This last wish was vividly elaborated by another surgeon, who also highlighted the general perception of Mary as a strong personality:

I don’t mess with Mary at all. I’m not stupid. It’s true that I don’t like some of the things that she does. Sometimes she is just plain ornery. But I also am not willing to take her on. In fact, at this point, I will do whatever she wants, whenever she wants it. If the other docs are smart, they won’t mess with her either. They can talk big in their meetings, but if they have any sense, they won’t mess with that lady. She controls too many of the resources I need to do my job. So far she has been very helpful, and she has gone out of her way to do me some favors. I don’t want to mess that up. I think it is great that Don is willing to take her on, and I wish him success. That way, if she wins, it will be him that gets beat up, not me.

The high turnover among OR nurses was a particularly sore point among the surgeons in gen- eral, whose frustration was explained by Don:

I don’t think the administration has a clue as to how urgent this matter really is. It takes at least five years for a surgical nurse to gain the necessary skills to be useful. In the last two months, we have lost some of the best nurses I have ever worked with in my life. As a result, I had to start the training process all over again. It has seemed like I’ve been working with a group of student nurses! This turnover has cut my productivity by more than 50%.

Most of the doctors blamed the high turnover on the nursing managers’ inability to retain quali- fied personnel, whereas the managers blamed it on the doctors’ verbal abuse. And in fact, a signifi- cant number of doctors were widely regarded by some of their peers as well as by the nurses as

impatient, intolerant perfectionists who demanded far more of others than they did of themselves.

From the extended interviews, it was obvious that while Mary had greater credibility with the hospital administration and Don had more backing from the doctors, each had a certain amount of power over the other’s constituency: Mary con- trolled the surgeons’ working conditions, while Don controlled a significant portion of the hospital’s patient flow. The OR problems could not be resolved without genuine cooperation from both of them—especially from Don, who was outside the formal hierarchy of the hospital and could not be coerced by the president.

I met again privately with each of them to determine whether they were honestly committed to improving their working relationship. Both were skeptical about the possibility of real change but said they were willing to do everything they could to help, as long as their own basic values were not violated. Each defined the kind of help he or she was willing to accept from me and the circum- stances under which that help was to be given.

INTERVENTION

Only at this point did actual third-party facilitation intervention begin. I used a design that included perception sharing, problem identification, con- tracting, and follow-up meetings. At their first for- mal meeting together with me and the three vice presidents who acted as observers, Mary and Don began by writing answers to three questions:

1. What does he or she do well? 2. What do I think I do that bugs him or her? 3. What does he or she do that bugs me?

The very process of writing things down was helpful. It gave them time to get used to this explicitly confrontational situation before either of them had a chance to “pop off” at the other, and it forced an element of rationality into an emotion- ally charged situation. Also, the questions required specific answers concerning behaviors, not subjec- tive generalizations about personalities. Listing specific behaviors made each of them realize that at least some of the things they disliked about the other could be changed.

They then explained these responses orally, in the order shown in Figure 1. Because of their

SELECTED CASES 325

FIGURE 1

Participant Responses to Three Questions in the Third-Party Facilitation Model

1. What does Mary admire about Don and think he does well? • He is very concerned about patient care. • I admire him for his skills as a surgeon. I would have no problem sending a member of

my family to him. • He is interested and wants to work out issues that we have with each other. • He can be very gentle and considerate at times. • He is well respected for his skills by his peers and by the OR nursing staff.

2. What does Don admire about Mary and think that she does well? • She is honest in her work. • She has met my needs in orthopedics in getting us the instruments and equipment

we need. • She has a lot of external pressures on her and she has handled them well. • She deals well with the various groups that are pulling at her: patients, staff,

administration, physicians. • She manages the overall picture very well in the OR.

3. What does Don think he does that bugs Mary? • I am impatient. (Mary agrees) • I am demanding of personnel in surgery, but everyone can’t always get what they want,

when they want it. (Mary disagrees) • She is uncertain as to how much I am willing to support her this coming year.

(Mary agrees) • I am not the best listener. (Mary agrees)

4. What does Mary think she does that bugs Don? • I don’t listen to him. (Don agrees) • I appear defensive at times. (Don agrees) • I respond to some directives in a very detailed manner. (Don agrees)

5. What does Mary do that bugs Don? • She is difficult to communicate with. I can talk to her, but I am not sure that she is listening. • She doesn’t assume the responsibility for some specific problems, such as not being

able to do an operation without a full set of prosthesis available. • She doesn’t effectively manage the personnel that she supervises in OR. Specifically,

there is a great deal of disruption going on. And there are also morale problems, particularly as they relate to their trust of her and her trust of them in the OR.

6. What does Don do that bugs Mary? • He generalizes and is not very specific with examples, even when questioned. • The staff labels him as a whiner, in terms of “nothing is ever right,” his complaining, etc.

This also relates to laying out problems and then walking away. • He sometimes says one thing but means another—and gives mixed messages.

An explanation of this is my asking him how things are going, he says fine, but then I find out that he has problems later in the day.

• I do not feel a full measure of support from him, and that bugs me. • He doesn’t always listen to my concerns.

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mutual hostility, I thought it safer to require that at first they address their remarks only to the third party, not to each other. Each, however, was required to hear the other’s presentation so each would understand the other’s perceptions. And because both were guaranteed an uninterrupted speech, each was more likely to listen to the other. Taking up the positive perceptions first helped. As Don later explained:

I was stunned to hear her say those positive things, particularly the part about me taking care of her family. For a long time, I had seen her as my enemy, and I expected only the worst. I was amazed that she had so much respect for me. As a result, many of my nega- tive feelings for her began to leave. It is really tough to stay angry at someone who says so many nice things about you. I also found that I was much more willing to listen to what I do that bugs her. Somehow, criticism is always easier to take when it is accompanied by something positive.

It also helped that before making any accusa- tions against each other, they were required to examine their own behavior. As Mary acknowl- edged, neither had ever taken the time to figure out specifically how he or she might be causing problems for the other:

It had never really occurred to me that I may be doing something that caused Don to react that way. Vaguely, I suspected that I may be doing something that he didn’t like, but I was hard pressed to identify what it was. I really had to stand back and say to myself, “What is it that I am doing that is making this work- ing relationship go sour?” I had spent so much time concentrating on what he was doing that bugged me that I hadn’t looked at myself.

The oral discussion of this question made it obvious that neither was intentionally causing problems for the other, making both parties less hypersensitive to imaginary insults. Also, because both were much harder on themselves than they were on each other, the milder criticisms they did subsequently direct at each other were not nearly as offensive as they would otherwise have been.

The next step was to identify specific prob- lems for Mary and Don to address. They wrote their responses to question three on a sheet of newsprint, assigning vectors to represent the rela- tive seriousness of the problem. Some of the most serious problems could be resolved immediately; others were going to take longer, but at least Don and Mary now knew what their priorities had to be.

Finally, it became possible for them to agree on specific behavioral changes that might help. Don and Mary each defined what they wanted from the other and negotiated what they them- selves were willing to undertake; I moderated the meeting and wrote down the decisions. (At the end of the meeting, Don, Mary, and the three observers each received a copy of these commitments.) Because Mary and Don were inter- dependent, either could easily have sabotaged the other’s efforts. Therefore, in defining each action item, I reminded them to specify responsibilities for both parties:

• What will Don (Mary) do to resolve this problem?

• What will Mary (Don) do to help the other succeed?

This technique made both parties jointly responsible for resolving each problem and thus changed the whole dynamic of the relationship— from mutual isolation to collaboration, from denial of responsibility to acceptance of responsibility, and from a focus on problems to a focus on solutions.

During the next year, I had four more meetings with Don, Mary, and the three vice presidents. Before each meeting, I interviewed each partici- pant privately. At the beginning of each meeting, the participants gave general reports on what was going on, between Mary and Don and in the OR in general. In particular, I asked the two to list positive events and specific behaviors on each other’s part that they appreciated. They then reviewed the commitments they had made during the previous meeting. In almost every case, both Mary and Don had kept these commitments, thus building a basis of trust for further commitments during the latter part of the meeting. Where they had not kept the commitments, plans were made to ensure follow- through before the next meeting.

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Questions

1. If you had been called by Lincoln’s presi- dent to help resolve the problems described in the case, how would you have carried out the contracting and diagnosis stages? What would you have done dif- ferently than what the OD consultant did?

2. Is third-party intervention an appropriate intervention in this case? Other possible OD interventions?

3. How effective was the third-party inter- vention? Next steps?

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ORGANIZATION*

A irbus, an EADS company, is one of the lead- ing aircraft manufacturers in the world. Its customer focus, commercial know-how, technological leadership, and manufactur-

ing efficiency have propelled it to the forefront of the industry. With revenues of over €38 bil- lion in 2012 and an industry record backlog of 4,682 aircraft valued at over €523 billion, Airbus today consistently captures about half of all commercial airliner orders.

Headquartered in Toulouse, France, Airbus is a truly global enterprise of some 55,000 employees, with fully owned subsidiaries in the United States, China, Japan, and the Middle East; spare parts centers in Hamburg, Frankfurt, Washington, Beijing, Dubai, and Singapore; train- ing centers in Toulouse, Miami, Hamburg, Bangalore, and Beijing; and more than 150 field service offices around the world round out its physical footprint. Airbus also relies on industrial cooperation and partnerships with major compa- nies all over the world, and a network of some 1,600 suppliers in 30 countries.

This case describes the launch of a trans- formation process that has taken root in Airbus’ Information and Communication Technology (ICT) function. ICT is a transnational group of around 1,300 information system professionals located wherever Airbus operates. ICT devel- ops, maintains, and operates—24 hours a day, 365 days a year—every facet of the infor- mation systems that enable Airbus’ core busi- ness processes.

THE CHANGE CHALLENGE

Guus Dekkers joined Airbus as Chief Informa- tion Officer in June 2008. The organization he inherited had been split, integrated, and split again in a series of reorganizations over the pre- vious seven years. Not surprisingly, he faced a change-fatigued and cynical ICT workforce. Moreover, the reorganizations had not produced the results that Airbus top management was

expecting with respect to time, cost, and quality objectives in projects or improved productivity in service delivery.

At the same time, the continuing global financial and economic crisis along with the intense competition in the aircraft manufactur- ing industry resulted in increasing budget pres- sures, growing business demands, changing business models, and increasingly disen- chanted internal customers. The performance of his function needed to improve significantly and fast.

In his first year, Dekkers formed a new executive team with a mix of experienced inter- nal managers, newcomers from outside Airbus, and others from outside the aviation industry. He worked with his new team and a core group of middle managers to define ICT’s new vision, mission, and customer-facing transnational orga- nization (Figure 1). However, he knew that these changes were only the beginning. It could take months, or even years, to formulate and imple- ment the necessary changes.

Dekkers asked Susan Donnan to guide the implementation process as his internal change agent. She had the right background, educa- tion, and experience to facilitate large-scale change in organizations. She joined Dekker’s team in July 2009.

THE CHANGE STRATEGY

Working from her belief that high performance results when all parts of an organization’s design are aligned, Donnan searched for a change methodology that would simultaneously recon- figure design features and engage a critical mass of organizational members at all levels. She had studied large group interventions during her Masters of Science in Organization Develop- ment (MSOD) degree program at Pepperdine University. In addition, through her consulting work, she had experienced a variety of large group interactive events as a participant, a mem- ber of a design team, and a member of a logis- tics team that supported an event. She was convinced that such an intervention should be

*Susan Donnan, Airbus; Roland L. Sullivan, Sullivan Transformation Agents Pte. Ltd.

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a central element of the change methodology. She considered a variety of these large group methods, including the Appreciative Inquiry Summit and Future Search, but was concerned that the current culture would not support such approaches.

In the end, she selected a process known as Whole Systems Transformation (WST), a process developed and refined by Roland Sullivan. Like other large group interventions, it is designed to help leaders engage a large, critical, and represen- tative segment of the organization. It combines best practices in action research, small group dynamics, and large group dynamics. Unlike other large group interventions, it leads with alignment and transformation of the executive team, then transforms a critical mass of the organization, and follows up with efforts to sustain the transforma- tion. In her experience, Donnan knew too well that an aligned leadership team was a critical success factor for transformation. She contracted with Sullivan to provide external consulting support.

INITIATING CHANGE AT ICT

Phase 1: Contracting with the Leadership Team

Like most large organizations, Airbus had adopted a traditional change management approach—top management announced the change and facilitated it through extensive communication. To implement a change strategy that was clearly outside the

organization’s norm, Donnan needed to convince Dekkers and his team that the traditional approach would be too slow and produce incremental change at best.

Her process began by securing executive com- mitment one-step-at-a-time while painting the pic- ture for the whole journey. For example, Donnan presented a roadmap (Figure 2) that outlined the different milestones for the WST process.

She emphasized that transforming the execu- tive team into a group with “one brain, one heart” would be a critical pre-requisite for launching the “transform the ICT critical mass” phase. Commit- ting ICT to such a radically different approach was a leap of faith and a courageous act for the execu- tive team, especially for Dekkers. The executive team knew that they would need to learn and become different leaders to lead the transforma- tion but they were willing to trust Donnan and Sullivan to guide them through the process.

She also recommended—because she knew from previous experience—that the organization needed to put an infrastructure in place to drive and support the transformation process. Figure 3 describes the ICT transformation infrastructure that was agreed to by the ICT executive team to support the change. Finally, she paid special atten- tion to ICT’s Human Resource Business Partners. She was convinced that the HR organization needed to be fully on board if the change was to be successful.

FIGURE 1

The New ICT Organization (~2009)

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FIGURE 2

ICT Transformation Roadmap

FIGURE 3

Whole System Transformation Team Organization

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Phase 2: Transform the Leadership Team

ICT’s transformation process began with a two- and-a-half-day leadership retreat for the executive team in November 2009 that was jointly facilitated by Donnan and Sullivan. The retreat aimed to improve the effectiveness and alignment of the team and to develop “one brain and one heart” so that the team members could speak with “one voice.”

In preparation for the retreat, Donnan and Sullivan conducted ICT manager focus groups and executive team interviews. Executives were asked about the key issues in becoming a higher perform- ing leadership team, helping ICT to become a higher performing function, thrilling internal customers, and deserving the role of a trusted business partner. The focus group and interview data were synthesized into data reports that were shared with the entire team prior to the retreat. Dekkers saw the data as reliable, valid, and rich, and it was used to ensure that the retreat addressed the right topics. Two members of the executive team worked with Donnan and Sullivan to co-design the event, acting as sounding board and providing valuable feedback.

Three important outcomes were achieved dur- ing the retreat:

1. Using the feedback in the data reports, the par- ticipants explored issues of trust within the team and worked on improving their relationship with Dekkers and each other. They exchanged appreciation for each other’s strengths, provided suggestions for improvements, and made requests and offers with each other. As a recently formed executive team, an important practical outcome of this conversation was new team norms and meeting ground rules. In addition, they developed a new annual calendar with dedicated meetings for operational reviews and strategic topics. Together, these deliver- ables had an important and positive impact on the team’s process effectiveness.

2. In addition to working on their relationships and team performance, the executive team visualized and described how ICT would look when its vision, mission, and strategy were fully achieved. They identified the priorities to be addressed to take ICT from where it was to where they wanted it to be: a trusted business partner delighting its internal customers. They

agreed on actions and commitments that they would either personally or collectively perform to implement the ICT strategy. These included defining and refining the operating model, specifying ICT career paths, developing make or buy strategies with respect to ICT activities, building sourcing strategies for the ICT supply chain, and clearly articulating a convergence strategy to simplify the complex portfolio of business applications.

3. A final important outcome was the decision to hold the first two-and-a-half-day ICT summit in February 2010 with a clearly defined purpose and set of outcomes. Two members of the executive team volunteered to be sponsors for the summit. The summit participants would represent a carefully selected, diagonal cross- section or microcosm of ICT with all sub- functions, all locations, and all levels involved. The executive team nominated and empowered a design team of 13 members, representative of the summit participants, to design the event.

Phase 3: Transform a Critical Mass of ICT Members

Between November 2009 and February 2010, Donnan and Sullivan co-facilitated three two- and-a-half-day sessions with the design team to plan the summit. In the beginning, the consultants intentionally allowed the process to be ambiguous. At times, it was a messy and disruptive process, an emotional roller coaster for the team’s mem- bers. However, it was necessary to creating a safe environment where design team members could speak openly and directly about the organiza- tion’s challenges, their fears about the transforma- tion’s success, and their hopes for the future. Several design team members were skeptical of the need for change and did not believe that they would be empowered. To address this issue, exec- utive team members participated in the design sessions at different times, often in two’s or three’s, to show their support, to give their inputs, to answer questions, and to give feedback on the emerging summit design. The design team was surprised and impressed by the alignment in the executive team and how much they acted as one. Over the three-month period, this new group

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formed into a high-performing team. They were motivated and committed to creating an impactful, memorable, and transformative experience for the participants.

With Donnan and Sullivan’s guidance, the team used the following principles to guide the design of the summit:

• The participants should represent a critical mass of the ICT organization, including believ- ers and skeptics of change.

• The design should create a safe place for peo- ple to speak openly and truthfully by ensuring that all small group discussions involved a maximum mix (“max-mix”) of people from dif- ferent levels and sub-functions, and by ensur- ing no one in the group was from the same hierarchy or chain of command. All report- outs would come from the table as a whole so no individual would be exposed.

• Table activities, breakout groups, and plenary sessions should engage each participant’s “whole brain,” both rational and emotional.

• The purpose and outcomes for each activity should be defined clearly for participants.

• Allow the large group to alternate between diver- gent and convergent activities and report-outs.

• Diverse perspectives and the awareness of multiple realities should be generated through divergent activities, such as generating ideas, creating multiple views of today’s frustrations, or visioning tomorrow’s hopes and dreams.

• Make effective, collective, and integrated deci- sions through convergent activities, such as “preferring” (i.e., a voting process) to identify priorities and expert panels to share views from customers or senior management.

• Leverage Beckhard’s change formula to drive change activities in the summit: change is more likely to occur when the dissatisfaction with the status quo, multiplied by the vision of the future, multiplied by the clarification of first steps is greater than the resistance to change.

The design team worked long and hard to define the purpose and outcomes (Figure 4) for the summit. They debated and deliberated until everyone on the team was satisfied. Whenever the team could not agree, they referred back to the summit’s purpose and outcomes and used those as “tiebreakers.”

Eventually, the team designed the summit to take the participants through a process that

FIGURE 4

ICT Summit 2010 Purpose and Outcomes

Purpose:

• The purpose of the summit is to accelerate the continued implementation of our ICT vision and mission by creating a single team with one mind and one voice, fully engaged and committed to change—enabling the success of Airbus.

Tangible Outcomes:

• Identified improvement and concrete actions. • Personal commitment to change (measurable) things. • Communication and involvement plans to involve and engage the rest of the ICT organization. • Formal mechanisms to ensure execution/implementation and measurement of success.

Intangible Outcomes:

• Clear understanding and buy-in of the Vision, Mission and Strategy of ICT. • System wide understanding of operational activities and how we each contribute. • Increased respect and trust. • Change in attitude and mindset. • Commitment to being ICT ambassadors.

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mirrored the roller coaster they had experienced in the event design process. Figure 5 shows the high-level agenda.

The first day of the summit began with a dramatic video that was edited just for this event, featuring the maiden flight of the A380 aircraft. Fol- lowing the video, Fernando Alonso, who was the leader of the flight crew for the maiden voyage, spoke about the importance of trust. He talked pas- sionately about the confidence he had in the A380 aircraft and its expected performance on that first flight. He described what it was like having the world’s attention on them but knowing that the flight crew would not decide to take off unless every team member was ready. He shared that ultimately his trust extended beyond the flight crew to the entire Airbus organization. No one, at any Airbus meeting, had ever spoken about emotions, like trust, as the key to success. Immediately, the participants knew that the summit was to be unlike any other meeting they had ever attended.

At the max-mix tables, participants reflected on the meaning and the implications of Alonso’s talk on trust. They reflected on and celebrated per- sonal, team, and ICT achievements over the last 12 to 18 months. Then, after listening to ICT executive team members describe the vision, mission, and strategy, participants were encouraged to ask clar- ifying questions.

For the first time in their history, participants found themselves having deep and meaningful

conversations sitting face-to-face with their collea- gues, middle managers, and senior managers. The executive team, who were equally distributed among the tables, were coached by the design team to “trust the process.” They were encour- aged to listen, be supportive of diverse ideas, and answer questions directly.

Participants then discussed what was working well and what was not working well, focusing on ICT’s mission, operating model, customers, and people. These strengths and weaknesses were posted around the room and each participant was given green and red dots to identify his/her top three “working” and “not working” focus areas. The top issues for the group quickly emerged and “dotting” has since become a favorite means to arrive at consensus at ICT.

As the last activity of the day, participants were given the opportunity to pose “elephant” questions—something that they had always wanted to ask but were afraid to ask. Next, partici- pants were invited to write down their feedback for the day. Finally, Dekkers closed the day with his reflections. He spontaneously asked participants to use their green “thumbs up” or red “thumbs down” signs to indicate how they felt the summit was going, and he was rewarded with a sea of green and a few red dots sprinkled around.

Participants continued to socialize and network in the evening over drinks and dinner with old friends and new colleagues. Because many of the

FIGURE 5

ICT Summit 2010 High-level Agenda

Day 1 Day 2 Day 3

• Powerful opening • Purpose and outcomes • Building table teams • Achievements • Vision, Mission and Strategy • Whole system working and

not working • Customer view • Elephant questions

generated • CIO reflections

• Feedback from Day 1 • Elephant questions answered • Articulation of success • Barry Oshry’s top/middle/bottom • Intergroup breakouts—

(Exec/Mgrs/Non-mgrs) • Whole system action planning • Breakouts—Transversal action

planning • Elephant questions answered • CIO reflections

• Feedback from Day 2 • Elephant questions

answered • Breakouts—How to

engage rest of ICT • System-wide

communication • Appreciative feedback • Personal commitments • CIO inspirational

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participants came from around the world and worked virtually, the time for personal interaction was appreciated.

The second day of the summit began with the ICT executive team answering honestly some of the “elephant” questions developed by the partici- pants the day before. The participants were both surprised and satisfied with the openness and will- ingness of the executives to answer in a spirit of vulnerability, honesty, and sensitivity.

Working at their tables, participants visualized what success would look like in five years’ time. The sharing of their creative presentations of the “future” was one of the high points of the summit. With vivid pictures of success and knowledge of the top issues, they identified actions needed from the individual, sub-function, and ICT levels to move ICT to where they would like it to be. This was breakthrough work. The day ended with Dekkers’ reflections and participants’ feedback, fol- lowed by social activities and more networking.

The third day of the summit also began with answering additional “elephant” questions from the first day. This was followed by activities to define ways to engage the rest of the ICT organi- zation after the summit. The participants agree on ways to communicate to the rest of the ICT com- munity going forward. After rounds of appreciative feedback at the tables, the summit closed with the ICT executive team making personal commitments on stage in front of all, for which they received a standing ovation.

Phase 4: Implement and Sustain the Change

Immediately after the summit, the 300 participants returned to their offices and acted as ambassadors for change. At the top of the list was the wish to communicate the process and the results of the summit to the rest of the organization. Supported by communication kits and a web-based e-journal with photos and videos provided by Donnan, this occurred in all sub-functions and all locations.

In addition to communication, summit actions were translated into projects and personal objec- tives. Examples of projects included: harmonization and standardization of ICT activities using industry best practices; understanding these activities’ dri- vers and costs and measuring their performance; fighting bureaucracy and streamlining processes;

working with its business partners to drive improve- ments on demand management and prioritization; and developing the competencies and careers of ICT employees.

ICT Executive Team members drove cross- functional or within function transformation in their respective groups. The design team volunteered to stay on as the transformation network. Together with Donnan, they monitored progress and sup- ported the executives in driving implementation of summit actions in their respective functions. Donnan met monthly with the transformation net- work to share insights and best practices.

For the next 12 months, ICT Transformation remained a priority for the executive team.

Many of the transformation projects delivered bottom-line savings and enabled company objec- tives. The ICT organization got measurably better at delivering on its projects, services, and cost pro- mises. Communication up, down, and across ICT improved appreciably.

Last but not least, the collaborative approach to change sent a clear message that transforma- tion could not be successful without the engage- ment of ICT employees. Grass roots initiatives and volunteerism were actively encouraged. People at all levels felt greater empowerment. For example, in multiple locations, people chose to become local change agents and organized local transformation and social events, some of which continue today.

MAINTAINING THE CHANGE MOMENTUM

Following the success of the first ICT summit, the (1) align and transform the executive team, (2) assess and plan the next cycle of change, (3) align and transform a critical mass of organiza- tion members, and (4) implement and sustain change process became institutionalized and has occurred every year since. A new design team and a compelling focus from the leadership team underpins the annual cycle of the process.

For example, the focus for the 2010–2011 cycle was cross-unit or cross-functional breakthroughs involving the leadership population of about 200 ICT managers. The theme of the summit was “Leading as ONE.” The focus of the 2011–2012 cycle was creating an ICT environment that actively encourages agility, innovation, and leadership. Unlike previous summits, the third summit did not focus on

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what was not working or broken; rather it focused on new way of thinking and working. Participants learned about design thinking through a simulated innovation project, explored psychological concepts that contribute to innovative thinking, and applied those concepts to four dynamics in the organization: agility and stability; anticipation and reaction; cus- tomization and standardization; and innovation and standardization.

During the months that followed the 2011–2012 summit, ICT dealt with a difficult business challenge using a collaborative approach that most people agreed would not have been possible three years earlier. It received, together with its customers, five 2012 Awards for Excellence, three of which were in the “Drive Improvement and Innovation” category and one of these won the Top Award of the Year.

In addition, ICT has made the greatest improve- ment in employee engagement in the company over a three-year period as measured by the Gallup Q12. Through productivity improvements, ICT also succeeded in handling 25% in volume growth while maintaining a flat budget in the same period.

ICT’s efforts have made important contribu- tions to implementing its vision, mission, and strat- egy. It has achieved operational excellence, a critical foundation or prerequisite for becoming a trusted business partner. Going forward, the exec- utive team would like to evolve ICT’s way of work- ing: to be better immersed in the business strategy and business processes of its customers, to better anticipate their business needs, to focus sharply on value for Airbus, and to quickly propose and pro- vide right-sized solutions. The journey continues.

LEARNING

Ever since her MSOD days at Pepperdine, Donnan had been searching for ways to facilitate system- wide alignment and to accelerate change. For her, the WST process has been the most effective methodology for achieving both. She reflected on her learning.

• The importance of aligned leadership. Break- throughs in the ICT executive team enabled breakthroughs in ICT as a whole. When leaders speak with one voice, provide a unified direc- tion in vision and strategy, demonstrate a sense of urgency, and walk their talk, it gives

organization members the confidence to act in alignment for the health of the whole. On the other hand, when leaders are not aligned and give conflicting directions, this causes conflicts and confusion that cascades all the way down the organization.

• The critical roles of the event design team. The ICT case would not have been a success without the effective use of the event design team. In addition to bringing in data from across the ICT organization and mirroring the organiza- tion’s current state as part of the design pro- cess, the event design team members took an active role in facilitating different modules in the summit, listening to the participants dur- ing the summit, synthesizing the participants’ daily feedback, and refining the summit design based on their feedback. The teamwork within the team was critical for the smooth execution of the summit.

• The real work of transformation occurs between large group interventions. While many people focus on how a large group event “releases the magic” of a paradigm shift, the real work of transformation occurs after the event or between events in the “implement and sustain change” phase. ICT is part of a global organization that has experi- enced and continues to experience tremen- dous growth and challenge. Managers are typically overloaded just running and delivering today’s business; requests to transform the business for the future are often overwhelm- ing. Moreover, saying “no” to lesser priorities remains difficult for the organization. As a result, finding the resources and time for trans- formation remains a challenge. ICT’s experi- ments with a mix of structured and emergent approaches yielded two major lessons. First, do not launch more actions than the organiza- tion can handle, and second, focus more on cross-functional improvements that optimize overall results rather than local maximization.

• The lead and lag indicators of success. Organization change is a journey that takes time and requires incredible patience. Follow- ing a large group interactive event, the lead indicators of success are team spirit, con- fidence, commitment, relationships, energy,

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trust, inclusiveness, transparency, and align- ment. These are difficult to measure but can be felt, observed, and captured in anecdotal stories. Later, improvement projects lead to more tangible results, such as behavioral and engagement changes. However, only when the improvement projects are successfully implemented can improved business results be seen. These are the lag indictors of suc- cess. Executives and managers must under- stand that the easy-to-measure lag indicators of success will come if they recognize, sup- port, and nurture the difficult-to-measure but equally valuable lead indicators of success. Many change initiatives fail because execu- tives insist on instant results, give up too soon and move onto the next change.

• Transforming how the organization deals with change. The ultimate measure of organi- zation development is the degree to which the ability to change again is enhanced or dimin- ished. Without any doubt, the WST process has helped people in ICT build a change capa- bility. Realizing that transformation is a journey and not a destination, ICT people are no longer paralyzed by change and are more likely to embrace change as an opportunity rather than a threat. They have developed greater capacity and capability to act in aligned ways. In reflecting on the organization’s journey, Dekkers said, “Today, our ICT community is better mobilized and motivated to change.”

• WST needs to be repeated regularly. In today’s complex, chaotic, and uncertain world, an organization’s ability to learn and innovate at

the individual, team, and organizational levels allows the organization to adapt. Change is a constant and the days of returning to stability or business-as-usual are gone. To ensure a sus- tained long-term journey, the WST process must be repeated to regularly restore whole system alignment while adapting to internal and external drivers for change.

In conclusion, each year that the ICT has used the WST process, it became more and more com- petent to self-direct and master its own change process. The organization is becoming better at doing what it says it will do, more respected by its customers, and more agile. ICT people is learn- ing how to learn in real time as an entire function.

Questions

1. What is your analysis and evaluation of the design of this intervention? What large-group intervention theories and models were applied in this case? Do you believe that the interven- tions made a difference in this organization?

• If your analysis is positive, what do you think were the critical intervention features that led to success?

• If your analysis is negative, what changes would you make in the intervention’s design or implementation?

2. What do you think of the summit’s agenda and flow? Do you think the right activities were planned and executed given the objectives of the intervention?

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© Pixmann/Imagezoo/Getty Images

PART 4 TECHNOSTRUCTURAL INTERVENTIONS

12 Restructuring Organizations

13 Employee Involvement

14 Work Design

City of Carlsbad, California: Restructuring the Public Works Department (A)

The Sullivan Hospital System

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learning objectives

Describe the most common organization structures used today and understand their strengths and weaknesses.

Present the process of downsizing.

Describe and evaluate the reengineering intervention.

I n this chapter, we begin to examine techno- structural interventions—change programs focusing on the technology and structure of

organizations. Increasing global competition and rapid technological and environmental changes are forcing organizations to restructure them- selves from rigid bureaucracies to leaner, more flexible designs. These new forms of organi- zing are highly adaptive and innovative, but require more sophisticated managerial capabilities to operate successfully. They often result in fewer managers and employees and in streamlined work flows that break down functional barriers.

Interventions aimed at structural design include moving from more traditional ways of dividing the organization’s overall work, such as functional, divisional, and matrix structures, to more integrative and flexible forms, such as process, customer-centric, and network structures. Diagnostic guidelines help

determine which structure is appropriate for particular organizational environments, technologies, and conditions.

Downsizing seeks to reduce costs and bureaucracy by decreasing the size of the organi- zation. This reduction in personnel can be accomp- lished through layoffs, organization redesign, and outsourcing, which involves moving functions that are not part of the organization’s core competence to outside contractors. Successful downsizing is closely aligned with the organization’s strategy.

Reengineering radically redesigns the organi- zation’s core work processes to give tighter linkage and coordination among the different tasks. This workflow integration results in faster, more responsive task performance. Reengineering often is accomplished with new information technology that permits employees to control and coordinate work processes more effectively.

12-1 Structural Design Organization structure describes how the overall work of the organization is divided into subunits and how these subunits are coordinated for task completion. Based on a contin- gency perspective shown in Figure 12.1, organization structures should be designed to fit with at least four factors: the environment, organization size, technology, and

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organization strategy. Organization effectiveness depends on the extent to which its structure is responsive to these contingencies.1

Organizations traditionally have structured themselves into one of three forms: func- tional departments that are task specialized; self-contained divisional units that are ori- ented to specific products, customers, or regions; or matrix structures that combine both functional specialization and self-containment. Faced with accelerating changes in com- petitive environments and technologies, however, organizations increasingly have rede- signed their structures into more integrative and flexible forms. These more recent innovations include process structures that design subunits around the organization’s core work processes, customer-centric structures that focus attention and resources on specific customers or customer segments, and network-based structures that link the organization to other, interdependent organizations. The advantages, disadvantages, and contingencies of the different structures are described below.

12-1a The Functional Structure The most widely used organizational structure in the world today is the basic functional structure, depicted in Figure 12.2. The organization usually is divided into functional units, such as marketing, operations, research and development, human resources, and finance. This structure is based on early management theories regarding specialization, line and staff relations, span of control, authority, and responsibility.2 The major func- tional units are staffed by specialists from those functions. It is considered easier to man- age specialists if they are grouped together under the same head and if the head of the department has been trained and has experience in that particular function.

Table 12.1 lists the advantages and disadvantages of functional structures. On the positive side, functional structures promote specialization of skills and resources by

FIGURE 12.1

Contingencies Influencing Structural Choices

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grouping people who perform similar work and face similar problems. This grouping facilitates communication within departments and allows specialists to share their expertise through standardized processes. It also enhances career development within the specialty, whether it is accounting, finance, engineering, or sales. The functional

FIGURE 12.2

The Functional Structure

TABLE 12.1

Advantages, Disadvantages, and Contingencies of the Functional Structure

ADVANTAGES

• Promotes and develops technical specialization • Supports flexibility of deployment and reduces duplication of scarce resources • Enhances career development for specialists within large departments • Facilitates communication and performance because superiors share expertise with their subordinates • Supports the development of common processes

DISADVANTAGES

• Emphasizes routine tasks, which encourages short time horizons • Fosters narrow perspectives by managers, not business metrics and broader criteria for decision making • Processes cut across functions, which can make coordination and scheduling difficult (the “white

space” problem) • Obscures accountability for overall outcomes; managers and employees may not have a line of

sight to the business • Difficulty developing general management capability

CONTINGENCIES

• Stable and certain environment • Small- to medium-size • Routine technology, interdependence within functions • Goals of efficiency and technical quality

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structure reduces duplication of services because it makes the best use of people and resources.

On the negative side, functional structures tend to promote routine tasks behaviors with a limited orientation. Department members focus on their own tasks, rather than on the organization’s overall value-added processes. This can lead to conflict across functional departments when each group tries to maximize its own performance without considering the performances of other units. Coordination and scheduling among departments, often called the “white space” problem, can be difficult when each emphasizes its own perspec- tive. As shown in Table 12.1, the functional structure tends to work best in small- to medium-size firms in environments that are relatively stable and certain, although there are exceptions. Cisco Systems claims to be one of the largest functionally organized com- panies in the world. These organizations typically have a small number of products or ser- vices, and coordination across specialized units is relatively easy. This structure also is best suited to routine technologies in which there is interdependence within functions, and to organizational goals emphasizing efficiency and technical quality.

12-1b The Divisional Structure The divisional structure represents a fundamentally different way of organizing. Also known as a product or self-contained-unit structure, it was developed at about the same time by General Motors, Sears, Standard Oil of New Jersey (now ExxonMobil), and DuPont.3 It groups organizational activities on the basis of products, services, custo- mers, or geography. All or most of the resources and functions necessary to accomplish a specific objective are set up as a division headed by a product or division manager. For example, General Electric has plants that specialize in making jet engines and others that produce household appliances. Each plant manager reports to a particular division or product vice president, rather than to a manufacturing vice president. In effect, a large organization may set up smaller (sometimes temporary) special-purpose organizations, each geared to a specific product, service, customer, or region. Many organizations use the divisional structure to expand globally. Samsung Electronics, for example, structures self-contained business units around particular product groups that are responsible for their respective products worldwide. Colgate-Palmolive forms self-contained units around geographic regions with each region responsible for the firm’s products in that area. A typical division structure is shown in Figure 12.3. It is interesting to note that the formal structure within a self-contained unit often is functional in nature.

Table 12.2 lists the advantages and disadvantages of divisional structures. These organizations recognize key interdependencies and coordinate resources toward an over- all outcome. This strong outcome orientation ensures accountability and promotes cohe- sion among those contributing to the self-contained unit. These structures provide employees with opportunities for learning new skills and expanding knowledge because workers can move more easily among the different specialties within the unit. As a result, divisional structures are well suited for developing general managers.

Divisional structures do have certain problems. They may not have enough specialized work to use people’s skills and abilities fully. Specialists may feel isolated from their profes- sional colleagues and may fail to advance in their career specialty. The structures may promote allegiance to a specific product, service, customer, or region rather than to the organization’s objectives. They also place multiple demands on people, thereby creating stress.

The divisional structure works best in conditions almost the opposite of those favoring a functional organization, as shown in Table 12.2. The organization needs to be relatively large to support the duplication of resources assigned to the units. Because each unit is

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FIGURE 12.3

The Divisional Structure

TABLE 12.2

Advantages, Disadvantages, and Contingencies of the Divisional Structure

ADVANTAGES

• Recognizes sources of interdepartmental dependencies, reduces complexity • Fosters an orientation toward divisional outcomes and clients • Allows diversification and expansion of skills and training • Ensures accountability by departmental managers and so promotes delegation of authority and

responsibility • Heightens departmental cohesion and involvement in work

DISADVANTAGES

• May use skills and resources inefficiently: coordination, sharing, and learning across divisions is difficult • Limits career advancement by specialists to movements out of their departments • Impedes specialists’ exposure to others within the same specialties; hard to create common processes • Puts multiple-role demands on people and so creates stress • Line of sight is to business and may promote divisional objectives over organization objectives

CONTINGENCIES

• Unstable and uncertain environments • Large-size • Technological interdependence across functions • Goals of product specialization and innovation

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designed to fit a particular niche, the structure adapts well to uncertain conditions. Divi- sional units also help to coordinate technical interdependencies falling across functions and are suited to goals promoting product or service specialization and innovation.

12-1c The Matrix Structure Some organization development (OD) practitioners have focused on maximizing the strengths and minimizing the weaknesses of both the functional and the divisional struc- tures, and this effort has resulted in the matrix structure.4 It superimposes a lateral structure that focuses on product or project coordination on a vertical functional structure, as shown in Figure 12.4. Matrix structures originally evolved in the aerospace industry where chang- ing customer demands and technological conditions caused managers to focus on lateral relationships between highly specialized functions to develop a flexible and adaptable system of resources and procedures, and to achieve a series of project objectives. Matrix structures now are used widely in manufacturing, service, nonprofit, governmental, and professional organizations.5

Every matrix organization contains three unique and critical roles: the top manager (e.g., President or General Manager), who heads and balances the dual chains of com- mand; the matrix bosses (functional and product or program vice presidents), who share subordinates; and a few “two-boss” managers, who report to the two different

FIGURE 12.4

The Matrix Structure

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matrix leaders and manage workers deployed to the specific product or program. In Figure 12.4, only the Software (SW) Manager and Hardware (HW) Manager have two bosses. The SW and HW team members take their day-to-day direction from the software and hardware managers but belong to the Engineering function.

Each of these roles has its own unique requirements. For example, functional matrix leaders are expected to maximize their respective technical expertise within constraints posed by market realities. Two-boss managers, however, must accomplish work within the demands of supervisors who want to achieve technical sophistication on the one hand, and to meet customer expectations on the other. Thus, a matrix organization has more than its matrix structure. It also must be reinforced by matrix performance man- agement systems that get input from both functional and project bosses, by matrix lead- ership behavior that operates comfortably with lateral decision making, and by a matrix culture that fosters open conflict management and a balance of power.6

Matrix structures, like all organization structures, have both advantages and disad- vantages, as shown in Table 12.3. On the positive side, they enable multiple orientations. Specialized, functional knowledge is integrated with a focus on a particular business or project. New products or projects can be implemented quickly by using people flexibly and by moving between product and functional orientations as circumstances demand. Matrix structures allow functional expertise learned in one business or program to be transferred to another product, program, or business. For many people, matrix structures are motivating and exciting.

TABLE 12.3

Advantages, Disadvantages, and Contingencies of the Matrix Structure

ADVANTAGES

• Emphasizes cross-functional product or program focus and integration of functional excellence • Uses people flexibly, because departments maintain reservoirs of specialists • Permits functional learning to be carried between projects or programs • Recognizes and provides mechanisms for dealing with legitimate, multiple sources of power in the

organization • Can adapt to environmental changes by shifting emphasis between project and functional aspects

DISADVANTAGES

• Can be very difficult to introduce without a preexisting supportive management climate • Conflicts between businesses and functions over methods, resources, priorities is always present • Increases role ambiguity, stress, and anxiety by assigning people to more than one department • Without power balancing between product and functional forms, lowers overall performance • Makes inconsistent demands, which may result in unproductive conflicts and short-term crisis

management • May reward political skills as opposed to technical skills

CONTINGENCIES

• Dual focus on unique product demands and technical specialization • Pressure for high information-processing capacity • Pressure for shared resources

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On the negative side, these structures can be difficult to manage. To implement and maintain them requires heavy managerial costs and support. IT managers must deal with the often conflicting tensions between technical excellence and customer responsiveness. When people are assigned to more than one department, there may be role ambiguity and conflict, and overall performance may be sacrificed if there are power conflicts between functional departments and project structures. People can get confused about how the matrix operates, and that can lead to chaos and inefficiencies. To make matrix structures work, organization members need interpersonal and conflict management skills as well as some tolerance for ambiguity.

As shown in Table 12.3, matrix structures are appropriate under three important conditions.7 First, there must be real outside pressures for a dual focus. For example, a matrix structure works well when there are many customers with unique demands, on the one hand, and strong requirements for technical sophistication, on the other. The OD practitioner must work with management to determine whether there is real pres- sure for a dual focus. Managers often agree, without carefully testing the assumption, that both functional and product orientations are important. Second, a matrix organiza- tion is appropriate when the organization must process a large amount of information. Circumstances requiring such capacity are few and include the following: when external environmental demands change unpredictably; when the organization produces a broad range of products or services, or offers those outputs to a large number of different mar- kets; when the relevant technologies evolve quickly; and when there is reciprocal interde- pendence among the tasks in the organization’s technical core. In each case, there is considerable complexity in decision making and pressure on communication and coordi- nation systems. Third, there must be pressures for shared resources. When customer demands vary greatly and technological requirements are strict, valuable human and physical resources are likely to be scarce. The matrix works well under those conditions because it facilitates the sharing of scarce resources. If any one of the foregoing condi- tions is not met, a matrix organization is likely to fail.

12-1d The Process Structure A relatively new logic for structuring organizations is to form multidisciplinary teams around core processes, such as product development, order fulfillment, sales generation, and customer support.8 As shown in Figure 12.5, process-based structures emphasize lateral rather than vertical relationships.9 All functions necessary to produce a product or service are placed in a common unit usually managed by a role labeled a “process owner.” There are few hierarchical levels, and the senior executive team is relatively small, typically con- sisting of the chief executive officer, the chief operating officer, and the heads of a few key support services such as strategic planning, human resources, and finance.

Process structures eliminate many of the hierarchical and departmental boundaries that can impede task coordination and slow decision making and task performance. They reduce the enormous costs of managing across departments and up and down the hierarchy. Process-based structures enable organizations to focus most of their resources on serving customers, both inside and outside the firm.

The use of process-based structures is growing rapidly in a variety of manufacturing and service companies. Typically referred to as “horizontal,” “boundaryless,” or “team- based” organizations, they are used to enhance customer service at such firms as Ameri- can Express Financial Advisors, Healthways, Johnson & Johnson, 3M, Xerox, and General Electric Capital Services. Although there is no one right way to design process- based structures, the following features characterize this new form of organizing:10

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• Processes drive structure. Process-based structures are organized around the three to five key processes that define the work of the organization. Rather than products or functions, processes define the structure and are governed by a “process owner.” Each process has clear performance goals that drive task execution.

• Work adds value. To increase efficiency, process-based structures simplify and enrich work processes. Work is simplified by eliminating nonessential tasks and reducing layers of management, and it is enriched by combining tasks so that teams perform whole processes.

• Teams are fundamental. Teams are the key organizing feature in a process-based structure. They manage everything from task execution to strategic planning, are typically self-managing, and are responsible for goal achievement.

• Customers define performance. The primary goal of any team in a process-based structure is customer satisfaction. Defining customer expectations and designing team functions to meet those expectations command much of the team’s attention. The organization must value this orientation as the primary path to financial performance.

• Teams are rewarded for performance. Appraisal systems focus on measuring team performance against customer satisfaction and other goals, and then provide real recognition for achievement. Team-based rewards are given as much, if not more, weight than is individual recognition.

FIGURE 12.5

The Process Structure

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• Teams are tightly linked to suppliers and customers. Through designated mem- bers, teams have timely and direct relationships with vendors and customers to understand and respond to emerging concerns.

• Team members are well informed and trained. Successful implementation of a process-based structure requires team members who can work with a broad range of information, including customer and market data, financial information, and per- sonnel and policy matters. Team members also need problem-solving and decision- making skills and abilities to address and implement solutions.

Table 12.4 lists the advantages and disadvantages of process-based structures. The most frequently mentioned advantage is intense focus on meeting customer needs, which can result in dramatic improvements in speed, efficiency, and customer satisfaction. Process-based structures remove layers of management, and consequently information flows more quickly and accurately throughout the organization. Because process teams comprise multiple functional specialties, boundaries between departments are removed, thus affording organization members a broad view of the workflow and a clear line of sight between team performance and organization effectiveness. Process-based structures also are more flexible and adaptable to change than are traditional structures.

TABLE 12.4

Advantages, Disadvantages, and Contingencies of the Process-Based Structure

ADVANTAGES

• Clear line of sight focuses resources on customer satisfaction • Improves speed and efficiency, often dramatically • Responds to environmental change and customer requests rapidly • Strong cross-functional collaboration and integration • Develops broad knowledge and increases ability to see total work flow • Enhances employee involvement • Lowers costs because of less overhead structure

DISADVANTAGES

• Changing to this structure can threaten middle managers and staff specialists • Must learn to balance competing demands for fluidity and efficiency • Can be difficult to supervise multiple functions, requires changes in command-

and-control mindsets • Duplicates scarce resources, sharing learnings can be difficult • Requires new skills and knowledge to manage lateral relationships and teams • May take longer to make decisions in teams and result in internal focus • Can be ineffective if wrong processes are identified

CONTINGENCIES

• Uncertain and changing environments • Moderate- to large-size • Nonroutine and highly interdependent technologies • Customer-oriented goals

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A major disadvantage of process structures is the difficulty of changing to this new organizational form. These structures typically require radical shifts in mindsets, skills, and managerial roles—changes that involve considerable time and resources and can be resisted by functional managers and staff specialists. Managers must learn to balance competing demands for organization fluidity and efficiency.11 Moreover, process-based structures may result in expensive duplication of scarce resources and, if teams are not skilled adequately, an overly internal focus and slower decision making as they struggle to define and reach consensus. Finally, implementing process-based structures relies on properly identifying key processes needed to satisfy customer needs. If critical processes are misidentified or ignored altogether, performance and customer satisfaction are likely to suffer.

Table 12.4 shows that process structures are particularly appropriate for highly uncertain environments where customer demands and market conditions are changing rapidly. They enable organizations to manage nonroutine technologies and coordinate workflows that are highly interdependent. Process-based structures generally appear in medium- to large-size organizations having several products or projects. They focus heavily on customer-oriented goals and are found in both domestic and global organizations.

Application 12.1 describes the process-based structure proposed as part of the struc- tural change process at Healthways Corporation.

12-1e The Customer-Centric Structure Closely related to the process-based structure, the customer-centric structure focuses sub- units on the creation of solutions and the satisfaction of key customers or customer groups.12 As shown in Figure 12.7, these customer or market-facing units are supported by other units that develop new products, manufacture components and products, and manage the supply chain. A variety of organizations, including the Lord Corporation, Dow, IBM, and Citibank, have implemented these complex structures. Also known as front–back organizations, these structures excel at putting customer needs at the top of an organization’s agenda.

Galbraith notes that globalization, e-commerce, and the desire for solutions have greatly enhanced the power of the customer to demand organizational structures that service their needs. These new structures highlight the radical differences between product-focused organizations, like the function or divisional structure, and customer- centric organizations as shown in Table 12.5. In a product-centric organization, the goal is to provide customers with the best product possible and to create value by devel- oping new products and innovative features. Product-centric structures have core struc- tural features that include product groups and teams that are measured by product margins. The most central process is new-product development.

Customer-centric structures have a very different look and feel. In a customer- centric structure, the organization develops the best solution for the customer by offering a customized bundle of products, services, support, and education. Their core structures focus attention and resources on customers with market-facing units organized around large individual customers or customer segment teams that attempt to maximize cus- tomer profit and loss. These core units are supported by sophisticated customer relation- ship management processes and integrating mechanisms that link the market-facing units with the support units.

While any one of these differences may seem obvious, a careful look will show that the product-centric dimensions represent important and deeply rooted assumptions in

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1 HEALTHWAYS’ PROCESS STRUCTURE

H ealthways Corporation (HC) (www. healthways.com) is a provider of specialized disease management services to health plans and hospitals. In fiscal year 2002,

HC had revenues of $122 million. The company, founded in 1981 as American Healthcorp (AMHC), originally owned and managed hospi- tals. In 1984 it offered its first disease manage- ment service focused on diabetes. Under the name Diabetes Treatment Centers of America, it worked with hospitals to create “centers of excellence” to improve hospital volumes and lower costs. After going public in 1991, it offered in 1993 its first diabetes management program to health plans—an entirely new customer seg- ment. This shift in customer base was a key event in the company’s history, and two new disease management programs for cardiac and respiratory diseases were offered in 1998 and 1999, respectively. By 2000, hospital revenues, once 100% of the company’s mix, had dropped to 38% as the health plan business grew.

The organization recognized that its cur- rent structure would not support the expected growth. As part of its structural change effort, the initial organization design and development task force (the ODD group) recommended a process-based organization structure to the senior leadership team. The organization was described in terms of five core processes: understand the market and plan the business, acquire and retain customers, build value solu- tions, deliver solutions and add value, and man- age the business (Figure 12.6).

• The understand-the-market process was responsible for scanning AMHC’s external environment for business opportunities, trends, regulatory changes, and competi- tive intelligence. The process also was responsible for generating new product ideas, based on their environmental scan- ning activities, and for developing and driv- ing the strategic planning process of the organization.

• Based on the outputs of the understand- the-market process, the build-value-solutions process was responsible for translating

business or product opportunities into repro- ducible products. This included more fully developing the business case initially identi- fied by the understand-the-market process, devising performance metrics, developing new products and testing them, and creating marketing materials.

• The acquire-and-retain-customers process involved the sales and marketing organiza- tion. It was responsible for finalizing market- ing materials, identifying new customers, selling and signing contracts, developing relationships with key stakeholders, imple- menting marketing plans, and responding to requests for proposals.

• The deliver-solutions-and-add-value process was responsible for delivering on contrac- tual commitments, managing accounts and upselling, maintaining product integrity, and building delivery capacity.

• In the manage-the-business process, the small corporate headquarters was respon- sible for human resources, financial gover- nance, information technology standards, medical leadership, and corporate image and branding. It was to act as a shared services organization supporting the value-adding process organizations.

Each process was to be staffed with an appropriate mix of functional experts. The opera- tional basis of the new organization was a cross- functional team that could represent the different perspectives at each stage of the business. For example, the acquire-and-retain-customers pro- cess included not only sales and marketing expertise, but also functional expertise in account management, information technology, finance, medical and clinical specialties, and product development. In recommending that a core process be staffed with the appropriate mix of functional expertise, the task force also suggested that the structure within a core process be team-based. The acquire-and- retain-customers process could flexibly organize cross-functional teams to address a specific cus- tomer’s requirements and then recombine resources to pursue a different customer.

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most organizations. Deciding to execute a customer-centric organization is a substantial undertaking.

As shown in Table 12.6, customer-centric structures have important strengths and weaknesses. Customer-centric structures present one face to the customer. Divisional structures, for example, can confuse customers when each division sends its own sales team. When one team is dedicated to a customer or customer group, it develops a deep understanding of the customer’s needs, preferences, and industry trends. This knowledge supports the customization of solutions and helps to build a robust customer-satisfaction capability.

In terms of weaknesses, customer teams can become too inwardly focused and lose sight of the larger organization strategy. This can make it difficult to share learning from successful innovation or customization with the rest of the organization. One of the most important weaknesses of the customer-centric organization is its reliance on lateral

In addition, appropriate metrics for monitoring the effectiveness of each process as well as the relationships between any two processes in the organization were specified. In terms of effective- ness metrics, the key outcome for all processes was customer satisfaction. The acquire-customer process was judged primarily on the extent to which it acquired customers and contracts that the deliver-solutions-and-add-value process believed could be managed. In terms of relationships, any

new business opportunities identified by the understand-the-market process required certain approvals by senior management before being handed off to the build-value-solutions process. This “go-no go” decision assured that the organi- zation had sufficient investment resources to fund new business or product development and that good opportunities, not just a lot of opportunities, were being forwarded to the build-value-solutions process.

FIGURE 12.6

HC’s Proposed Process Structure

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FIGURE 12.7

The Customer-Centric Structure

TABLE 12.5

Comparing Product-Centric with Customer-Centric Structures

Organizational Feature Product-Centric Customer-Centric

Goal Best product for customer Best solution for customer

Source of value New products, new features Customized bundles of products, services, support, education, and consulting

Core structures Product teams, product reviews, product profit centers

Customer teams and segments, customer P&Ls

Core processes New-product process Customer relationship management processes and integration/solutions

SOURCE: Adapted from J. Galbraith, Designing the Customer-centric Organization (San Francisco: Jossey-Bass, 2005).

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mechanisms and relationships. To be effective, a customer-centric organization must have strong lateral capabilities, including information systems, capital allocation pro- cesses, resource prioritization systems, and the like, to integrate the front and back end of the organization. Few organizations have developed this capability. Finally, customer-centric organizations must decide where to put the marketing function. Should marketing be done by the “front” or “back” of the organization? This is a question not easily answered.

Customer-centric organizations work best in large organizations, where there are strong and powerful customer forces in the industry and where technology and market changes are highly complex and uncertain. In addition, as noted above, the organization has to have a certain amount of maturity. It is unlikely that an organization can success- fully implement a customer-centric structure without a strong lateral capability.

12-1f The Network Structure A network structure manages the diverse, complex, and dynamic relationships among multiple organizations or units, each specializing in a particular business function or task.13 Organizations that utilize network structures have been called shamrock organiza- tions and virtual, modular, or cellular corporations.14 Less formally, they have been described as pizza structures, spiderwebs, starbursts, and cluster organizations. Some of the confusion over the definition of a network can be clarified by a typology describing four basic types of networks.15

TABLE 12.6

Advantages, Disadvantages, and Contingencies of the Customer-Centric Structure

ADVANTAGES

• Presents one integrated face to the customer • Generates a deep understanding of customer requirements • Enables organization to customize and tailor solutions for customers • Builds a robust customer response capability

DISADVANTAGES

• Customer teams can be too inwardly focused • Sharing learnings and developing functional skills is difficult • Managing lateral relations between customer-facing and back office units is

difficult because some processes are split apart • Developing common processes in the front and back is problematic • Clarifying the marketing function is problematic

CONTINGENCIES

• Highly complex and uncertain environments • Large organizations • Goals of customer focus and solutions orientation • Highly uncertain technologies

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1. An internal market network exists when a single organization establishes each sub- unit as an independent profit center that is allowed to trade in services and resources with each other as well as with the external market. Asea Brown Boveri’s (ABB) 50 worldwide businesses consist of 1,200 companies organized into 4,500 profit centers that conduct business with each other.

2. A vertical market network is composed of multiple organizations linked to a focal organization that coordinates the movement of resources from raw materials to end consumer. Nike, for example, has its shoes manufactured in different plants around the world and then organizes their distribution through retail outlets.

3. An intermarket network represents alliances among a variety of organizations in dif- ferent markets and is exemplified by the Japanese keiretsu, the Korean chaebol, and the Mexican grupos.

4. An opportunity network is the most advanced form of network structure. It is a tem- porary constellation of organizations brought together to pursue a single purpose. Once accomplished, the network disbands. Li and Fung is a Hong Kong–based trad- ing company that pulls together a variety of specialist supplier organizations to design and manufacture a wide range of products.

These types of networks can be distinguished from one another in terms of whether they are single or multiple organizations, single or multiple industries, and stable or temporary.16 For example, an internal market network is a stable, single-organization, single-industry structure; an opportunity network is a temporary, multiple-organization structure that can span several different industries.

As shown in Figure 12.8, the network structure redraws organizational boundaries and links separate organizations or business units to facilitate task interaction. The essence of networks is the relationships among organizations that perform different aspects of work. In this way, organizations do the things that they do well. For example, a firm that is good at selling products might outsource manufacturing to other organiza- tions that perform that task better than it does. Network organizations use strategic

FIGURE 12.8

The Network Structure

SOURCE: © 1992 by The Regents of the University of California. Reprinted from the California Manage- ment Review Vol. 34, No. 4. By permission of The Regents.

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alliances, joint ventures, research and development consortia, licensing agreements, and wholly owned subsidiaries to design, manufacture, and market advanced products, enter new international markets, and develop new technologies. Companies such as Apple Computer, Benetton, Liz Claiborne, Nike, and Merck have implemented fairly sophisti- cated vertical market and intermarket network structures. Opportunity networks also are commonplace in the construction, fashion, and entertainment industries, as well as in the public sector.17

Network structures typically have the following characteristics:

• Vertical disaggregation. This refers to the breaking up of the organization’s busi- ness functions, such as production, marketing, and distribution, into separate orga- nizations performing specialized work. In the film industry, for example, separate organizations providing transportation, cinematography, special effects, set design, music, actors, and catering all work together under a broker organization, the studio. The particular organizations making up the opportunity network represent an impor- tant factor in determining its success.18 Increasingly, disintermediation, or the replace- ment of whole steps in the value chain by information technology—specifically the Internet—has fueled the development and numbers of network structures.

• Brokers. Networks often are managed by broker organizations or “process orches- trators” that locate and assemble member organizations. The broker may play a cen- tral role and subcontract for needed products or services, or it may specialize in linking equal partners into a network. In the construction industry, the general con- tractor typically assembles and manages drywall, mechanical, electrical, plumbing, and other specialties to erect a building.

• Coordinating mechanisms. Network organizations generally are not controlled by hierarchical arrangements or plans. Rather, coordination of the work in a network falls into three categories: informal relationships, contracts, and market mechanisms. First, coordination patterns can depend heavily on interpersonal relationships among individuals who have a well-developed partnership. Conflicts are resolved through reciprocity; network members recognize that each likely will have to com- promise at some point. Trust is built and nurtured over time by these reciprocal arrangements. Second, coordination can be achieved through formal contracts, such as ownership control, licensing arrangements, or purchase agreements. Finally, market mechanisms, such as spot payments, performance accountability, technology standards, and information systems, ensure that all parties are aware of each other’s activities and can communicate with each other.

Network structures have a number of advantages and disadvantages, as shown in Table 12.7.19 They are highly flexible and adaptable to changing conditions. The ability to form partnerships with different organizations permits the creation of a “best-of-the-best” company to exploit opportunities, often global in nature. They enable each member to exploit its distinctive competence. They can accumulate and apply sufficient resources and expertise to large, complex tasks that single organizations cannot perform. Perhaps most important, network organizations can have synergistic effects whereby members build on each other’s strengths and competencies, creating a whole that exceeds the sum of its parts.

The major problems with network organizations are in managing such complex structures. Galbraith and Kazanjian describe network structures as matrix organizations extending beyond the boundaries of single firms but lacking the ability to appeal to a higher authority to resolve conflicts.20 Thus, matrix skills of managing lateral relations across organizational boundaries are critical to administering network structures. Most organizations, because they are managed hierarchically, can be expected to have

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difficulties managing lateral relations. Other disadvantages of network organizations include the difficulties of motivating organizations to join such structures and of sustain- ing commitment over time. Potential members may not want to give up their autonomy to link with other organizations and, once linked, they may have problems sustaining the benefits of joining together. This is especially true if the network consists of organiza- tions that are not the “best of breed.” Finally, joining a network may expose the organi- zation’s proprietary knowledge and skills to others.

As shown in Table 12.7, network organizations are best suited to highly complex and uncertain environments where multiple competencies and flexible responses are needed. They seem to apply to organizations of all sizes, and they deal with complex tasks or problems involving high interdependencies across organizations. Network struc- tures fit with goals that emphasize organization specialization and innovation.

Application 12.2 describes how Amazon.com’s network structure was configured to align with its strategy and how relationships are managed.21

12-2 Downsizing Downsizing refers to interventions aimed at reducing the size of the organization.22 This typically is accomplished by decreasing the number of employees through layoffs, attri- tion, redeployment, or early retirement or by reducing the number of organizational units or managerial levels through divestiture, outsourcing, reorganization, or delayering.

TABLE 12.7

Advantages, Disadvantages, and Contingencies of the Network-Based Structure

ADVANTAGES

• Enables highly flexible and adaptive response to dynamic environments • Creates a “best-of-the-best” organization to focus resources on customer and

market needs • Enables each organization to leverage a distinctive competency • Permits rapid global expansion • Can produce synergistic results

DISADVANTAGES

• Managing lateral relations across autonomous organizations is difficult • Motivating members to relinquish autonomy to join the network is troublesome • Sustaining membership and benefits can be problematic • May give partners access to proprietary knowledge/technology

CONTINGENCIES

• Highly complex and uncertain environments • Organizations of all sizes • Goals of organizational specialization and innovation • Highly uncertain technologies

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2 AMAZON.COM’S NETWORK STRUCTURE

A mazon.com (www.amazon.com) was launched in mid-1995 as the “Earth’s Big- gest Bookstore.” It offered more than one million titles to online buyers, more than

three times the number offered at traditional bookstores. Since then, it has evolved into a powerful network structure involving both other Internet retailers as well as more tradi- tional retailers, including other bookstores. Amazon also has expanded into information services, offering a variety of network services to firms under the banner Amazon Web Services. At the center of it all is Amazon’s massive website, Amazon.com. By pairing Amazon’s state-of-the-art technology, built-in traffic, and industry-leading fulfillment and customer-service processes with its partners’ products and their own strengths, a complex network of organizations is working together to make everyone more successful.

The company went public in the first quar- ter of 1997 riding the dot.com wave. Its reve- nue grew from $147.8 million in 1997 to over $61 billion in fiscal year 2012 and is predicted to exceed $100 billion in 2015. Despite this impressive sales growth, there has been increasing pressure to deliver profits, which occurred for the first time in fiscal year 2002. From at least one point of view, the develop- ment of Amazon’s network structure is an important reason for this profitability.

From the beginning, Amazon operated as a virtual organization and leveraged its network structure. For example, it developed and oper- ated the Amazon.com website to draw in custo- mers and to learn about creating an effective online customer experience. However, the com- pany owned little or no inventory, warehouses, distribution centers, or customer-service opera- tions. Early on, order fulfillment was left to Ingram Book Distributors, one of the largest book wholesalers, who also contracted out delivery to third-party vendors, such as UPS.

In June of 1998, Amazon began selling CDs, and added DVDs and videos in November 1998. It added electronic products, toys, soft- ware, and video games in 1999, and tools,

health and beauty products, kitchen products, and photo services in 2000. It also expanded internationally starting in 1999, opening up markets in Canada, Europe, and Asia over the next decade. Amazon’s first West Coast distri- bution center was built in 1996 and an East Coast distribution center was added in 1997. In 1999, in anticipation of the Christmas rush, Amazon built five warehouse and distribution facilities and several customer-service centers to improve its order fulfillment capabilities.

Amazon’s initial forays into a broader net- work began in 1999 but were compartmental- ized on the website. Non-Amazon products, such as used books or individuals auctioning off different products, were not allowed to infiltrate Amazon’s millions of book, CD, and DVD pages. Third-party products were put under “tabs” that roughly described the kind of commerce to be conducted, such as the “auction” tab or the “zShops” tab, which contained a variety of ven- dor products. Thus, traditional Amazon products were separated from products offered by others. Continued profit pressure, however, forced the organization to look at relationships differently.

Jeff Bezos, company founder and CEO, stated as follows:

“We realized that what was most important to the marketplace sellers was demand— access to prospective buyers. So, the idea of the “single store” was to give them a level of access equal to our own—listing their goods right alongside ours.”

With the “single store” strategy, Amazon. com transformed itself from an Internet retailer to a platform for commerce. Small businesses and individuals, which used to be in the Auctions or zShops sections, were given the opportunity to place their products on Amazon’s most visited sites. In exchange for this visibility, Amazon developed a contract that included a fee sched- ule and described the responsibilities and activi- ties that each organization would perform. Amazon quickly expanded its network to include partnerships with large companies as well as partially- and fully-owned affiliates, gaining over

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In practice, downsizing generally involves layoffs where a certain number or class of organization members is no longer employed by the organization. Although traditionally associated with lower-level workers, downsizing increasingly has claimed the jobs of staff specialists, middle managers, and senior executives especially during the recent economic turndown.

An important consequence of downsizing has been the rise of the contingent work- force. In companies like Cisco or Motorola, less expensive temporary or permanent part- time workers often are hired by the same organizations that just laid off thousands of employees. A study by the American Management Association found that nearly a third of the 720 firms in the sample had rehired recently terminated employees as inde- pendent contractors or consultants because the downsizings had not been matched by an appropriate reduction in or redesign of the workload.23 Overall cost reduction was achieved by replacing expensive permanent workers with a contingent workforce.

Few corporations or government agencies have escaped the massive downsizing brought on by the recent global recession. In the United States, for example, layoffs reached a yearly peak of over three million workers in 2009; although declining in sub- sequent years, almost 8% of the workforce was unemployed in 2012.24 In addition to lay- offs, organizations have downsized by redeploying workers from one function or job to another. When IBM’s business shifted from hardware to software and services in the 1990s, more than 69,000 people were laid off, yet the size of the total workforce increased by 16,000 employees.25

two million third-party sellers by 2013. It leveraged its state-of-the-art transaction-processing systems and networking capabilities to provide sellers with access to an immense customer base and rapid, low-cost sales and order fulfillment. Driven by a “culture of metrics,” Amazon was able to provide its sellers with access to unprecedented amounts of real-time data on customer product preferences and purchas- ing behavior.

Amazon also engaged in more traditional mar- keting arrangements where the Amazon.com web- site served as a marketing vehicle for other companies. From the Amazon website, users were transferred over to the vendor’s website and Amazon received a fee based on the number of customers exposed to the vendor’s marketing message or on the number of customers referred. Amazon made its first set of partnerships with Drugstore.com, Living.com, and Wine.com among others. As Amazon affiliates, they paid Amazon placement and referral fees for advertising on the Amazon website. This was called the Amazon Commerce Network.

Given the vast scale of the information storage and computing infrastructure needed to run Amazon’s marketplace, Amazon Web Services was launched in 2002 to sell excess infrastructure capacity as well as information services to other companies. This logical extension of Amazon’s network grew rapidly into over 25 proprietary Web-based services that have attracted over 300,000 developer customers, making Amazon the market leader in cloud computing worldwide. Amazon Web Services is expected to have reve- nue of $3.8 billion in 2013 and could be worth up to $30 billion if it were a standalone company.

By excelling at particular aspects of retailing in the Internet environment, Amazon has been able to leverage those competencies into a powerful network of alliances and partnerships. It has been able to expand its business beyond the Internet marketplace to the information services arena. The network structure is one important reason Amazon has been one of the few Internet start- ups to actually post a profit.

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Downsizing is generally a response to at least four major conditions. First, it is asso- ciated increasingly with mergers and acquisitions as redundant jobs are eliminated to gain labor efficiencies. Second, it can result from organization decline caused by loss of revenues and market share and by technological and industrial change. As a result of fuel oil prices, terrorism, and other changes, nearly a quarter of U.S. airline jobs were lost in the first decade of the twentieth century. Third, downsizing can occur when organiza- tions implement one of the new organizational structures described previously. For example, creation of network-based structures often involves outsourcing work that is not essential to the organization’s core competence. Fourth, downsizing can result from beliefs and social pressures that smaller is better.26 In the United States, there is strong conviction that organizations should be leaner and more flexible. Hamel and Prahalad warned, however, that organizations must be careful that downsizing is not a symptom of “corporate anorexia.”27 Organizations may downsize for their own sake and not think about future growth. They may lose key employees who are necessary for future success, cutting into the organization’s core competencies and leaving a legacy of mistrust among members. In such situations, it is questionable whether downsizing is developmental as defined in OD.

12-2a Application Stages Successful downsizing interventions tend to proceed by the following steps:28

1. Clarify the organization’s strategy. As a first step, organization leaders specify cor- porate strategy and communicate clearly how downsizing relates to it. They inform members that downsizing is not a goal in itself, but a restructuring process for achieving strategic objectives. Leaders need to provide visible and consistent support throughout the process. They can provide opportunities for members to voice their concerns, ask questions, and obtain career counseling if necessary.

2. Assess downsizing options and make relevant choices. Once the strategy is clear, the full range of downsizing options can be identified and assessed. Table 12.8 describes three primary downsizing methods: workforce reduction, organization redesign, and systemic change. A specific downsizing strategy may use elements of all three approaches. Workforce reduction is aimed at reducing the number of employees, usually in a relatively short timeframe. It can include attrition, retirement incentives, outplacement services, and layoffs. Organization redesign attempts to restructure the firm to prepare it for the next stage of growth. This is a medium- term approach that can be accomplished by merging organizational units, eliminat- ing management layers, and redesigning tasks. Systemic change is a longer-term option aimed at changing the culture and strategic orientation of the organization. It can involve interventions that alter the responsibilities and work behaviors of everyone in the organization and that promote continual improvement as a way of life in the firm.

Case Construction, a manufacturer of heavy construction equipment, used a variety of methods to downsize in the mid-1990s, including eliminating money- losing product lines; narrowing the breadth of remaining product lines; bringing customers to the company headquarters to get their opinions of new-product design (which surprisingly resulted in maintaining, rather than changing, certain preferred features, thus holding down redesign costs); shifting production to outside vendors; restructuring debt; and spinning off most of its 250 stores. Eventually, these changes led to closing five plants and to payroll reductions of almost 35%.29 The number of

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jobs lost would have been much greater, however, if Case had not implemented a variety of downsizing methods.

Unfortunately, organizations often choose obvious solutions for downsizing, such as layoffs, because they can be implemented quickly. This action produces a climate of fear and defensiveness as members focus on identifying who will be sepa- rated from the organization. Examining a broad range of options and considering the entire organization rather than only certain areas can help allay fears that favor- itism and politics are the bases for downsizing decisions. Moreover, participation of organization members in such decisions can have positive benefits. It can create a sense of urgency for identifying and implementing options to downsizing other than layoffs. Participation can provide members with a clearer understanding of how downsizing will proceed and can increase the likelihood that whatever choices are made are perceived as reasonable and fair.

3. Implement the changes. This stage involves implementing methods for reducing the size of the organization. Several practices characterize successful implementation. First, downsizing is best controlled from the top down. Many difficult decisions are required, and a broad perspective helps to overcome people’s natural instincts to protect their enterprise or function. Second, specific areas of inefficiency and high cost need to be identified and targeted. The morale of the organization can be hurt if areas commonly known to be redundant are left untouched. Third, specific actions should be linked to the organization’s strategy. Organization members need to be

TABLE 12.8

Three Downsizing Tactics

Downsizing Tactic Characteristics Examples

Workforce reduction Aimed at headcount reduction Short-term implementation Fosters a transition

Attrition Transfer and outplacement Retirement incentives Buyout packages Layoffs

Organization redesign Aimed at organization change Moderate-term implementation Fosters transition and, potentially,

transformation

Eliminate functions Merge units Eliminate layers Eliminate products Redesign tasks

Systemic redesign Aimed at culture change Long-term implementation Fosters transformation

Change responsibility Involve all constituents Foster continuous improvement and

innovation Simplification Downsizing: a way of life

SOURCE: K. Cameron, S. Freeman, and A. Mishra, “Best Practices in White-Collar Downsizing: Managing Contradictions,” Academy of Management Executive 5 (1991), 62.

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reminded consistently that restructuring activities are part of a plan to improve the organization’s performance. Finally, communicate frequently using a variety of media. This keeps people informed, lowers their anxiety over the process, and makes it easier for them to focus on their work.

4. Address the needs of survivors and those who leave. Most downsizing eventually involves reduction in the size of the workforce, and it is important to support not only employees who remain with the organization but also those who leave. When layoffs occur, employees are generally asked to take on additional responsibilities and to learn new jobs, often with little or no increase in compensation. This added workload can be stressful, and when combined with anxiety over past layoffs and possible future ones, it can lead to what researchers have labeled the “survivor syndrome.”30 This involves a narrow set of self-absorbed and risk-averse behaviors that can threaten the organization’s survival. Rather than working to ensure the organization’s success, survivors often are preoccupied with whether additional lay- offs will occur, with guilt over receiving pay and benefits while coworkers are strug- gling with termination, and with the uncertainty of career advancement.

Organizations can address these survivor concerns with communication pro- cesses that increase the amount and frequency of information provided. Communi- cation should shift from explanations about who left or why to clarification of where the company is going, including its visions, strategies, and goals. The linkage between employees’ performance and strategic success is emphasized so that remain- ing members feel they are valued. Organizations also can support survivors through training and development activities that prepare them for the new work they are being asked to perform. Senior management can promote greater involvement in decision making, thus reinforcing the message that people are important to the future success and growth of the organization.

Given the negative consequences typically associated with job loss, organizations have developed an array of methods to help employees who have been laid off. These include outplacement counseling, personal and family counseling, severance packages, office support for job searches, relocation services, and job retraining. Each service is intended to assist employees in their transition to another work situation.

5. Follow through with growth plans. This final stage of downsizing involves imple- menting an organization renewal and growth process. Failure to move quickly to implement growth plans is a key determinant of ineffective downsizing.31 For example, a study of 1,020 human resource directors reported that only 44% of the companies that had downsized in the previous five years shared details of their growth plans with employees; only 34% told employees how they would fit into the company’s new strategy.32 Organizations must ensure that employees understand the renewal strategy and their new roles in it. Employees need credible expectations that, although the orga- nization has been through a tough period, their renewed efforts can move it forward.

Application 12.3 describes how the City of Menlo Park, California, successfully responded to a serious fiscal downturn through effective downsizing initiatives.33 It demonstrates how straightforward communication and active engagement with key sta- keholders can inform downsizing decisions, gain commitment to implementing them, and mitigate their negative consequences. The application also shows the complexity of downsizing in the public sector where there are often multiple competing interests and that even a relatively small organization can mount a sophisticated and effective down- sizing intervention.

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3 DOWNSIZING IN MENLO PARK, CALIFORNIA

M enlo Park is a modest-sized city of around 32,000 residents located in the San Francisco Bay area. Like many California municipalities, Menlo Park ex-

perienced challenging fiscal problems well before the global economic crisis erupted in 2008. In 2004–2005, the city had an operat- ing budget of $29.2 million and 230 full- time equivalent (FTE) employees. Over the previous four years, Menlo Park was forced to reduce spending in line with declining revenues. Sales-tax revenue had dropped about 50% in two years (from $12 million to $6 million) and the state of California had diverted local govern- ment revenue to help balance its budget. Worse yet, the city’s costs had been rising significantly primarily because of retiree benefit expenses.

According to Audrey Seymour, the Assis- tant City Manager at the time, Menlo Park moved strategically to remedy these fiscal pro- blems. It trimmed more than $4 million from its annual operating budget and reduced its work- force by about 13%, the equivalent of 30 FTEs. To minimize the negative impact of these changes on the city and its employees, Menlo Park’s elected officials and administrators imple- mented the following downsizing initiatives:

• Involve employees early and often. All- employee forums were used to communi- cate to members and to listen to their reac- tions and suggestions. These meetings helped everyone clearly understand the magnitude and causes of the city’s fiscal problem. Then, action teams were formed in each city department comprised of employees from all levels. The teams were given guidelines and support and asked to devise plans to streamline opera- tions, cut costs, and enhance revenues. The city also used suggestion boxes and the intranet to solicit ideas from employ- ees. To keep everyone abreast of what was occurring, the city manager used both personal and electronic forms of com- munication, frequently holding employee briefings and sending emails. After cuts were implemented, informal debriefing

sessions were held and counselors from the city’s employee assistance program helped employees deal with the impacts of the changes on their lives.

• Work with unions to achieve common goals. Cost cutting started with reducing expenses and eliminating vacant positions, and then moved to filled positions. The city worked closely with union representatives to find ways to avoid layoffs while still reducing the size of the workforce. The union offered several ideas and worked with the city to develop a voluntary separation process that offered employees in service areas targeted for reduction early retirement, enhanced severance, or shorter hours.

• Seek community input. Because the down- sizing efforts would adversely affect city services, Menlo Park started an initiative called “YourCity/YourDecision.” This pro- gram included sending a survey to commu- nity households asking residents to rank order the importance of city services. From a total of 15,500 households, more than 1,000 surveys were returned. As a follow-up to the survey, interactive commu- nity workshops were conducted across the city to gain further input into specific ideas residents would recommend to balance the budget in line with the priorities identified in the survey. In addition, each of the city’s commissions was asked for suggestions to simplify policies and procedures to save money. The feedback from all of these out- reach efforts helped the City Council make tough choices about which services to fund and at what level. The information also guided city staff in developing budget- balancing strategies.

• Keep elected officials in the loop. City administrators held a half-day retreat and a series of meetings with City Council members to discuss the details of the fis- cal problems and to get guidance about high-priority service areas and possible cost reductions. Council members were asked to rate city services and these

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12-2b Results of Downsizing The empirical research on downsizing is mostly negative.34 A review conducted by the National Research Council concluded, “From the research produced thus far, downsizing as a strategy for improvement has proven to be, by and large, a failure.” A number of studies have documented the negative productivity and employee consequences. One survey of 1,005 companies that used downsizing to reduce costs reported that fewer than half of the firms actually met cost targets. Moreover, only 22% of the companies achieved expected productivity gains, and consequently about 80% of the firms needed to rehire some of the same people that they had previously terminated. Fewer than 33% of the companies surveyed reported that profits increased as much as expected, and only 21% achieved satisfactory improvements in shareholder return on investment. Another survey of 1,142 downsized firms found that only about a third achieved productivity goals. In addition, the research points to a number of problems at the individual level, including increased stress and illness, loss of self-esteem, reduced trust and loyalty, and marriage and family disruptions.35

Research on the effects of downsizing on financial performance also shows negative results.36 One study examined an array of financial-performance measures, such as return on sales, assets, and equity, in 210 companies that announced layoffs. It found that increases in financial performance in the first year following the layoff announce- ments were not followed by performance improvements in the next year. In no case did a firm’s financial performance after a layoff announcement match its maximum levels of performance in the year before the announcement. These results suggest that layoffs may result in initial improvements in financial performance, but such gains are temporary and not sustained at even prelayoff levels. In a similar study of 16 firms that wrote off more than 10% of their net worth in a five-year period, stock prices, which averaged 16% below the market average before the layoff announcements, increased on

data, along with the community survey results, were used to determine service-area cuts. Council members also spent time discussing which criteria were most important to consider when weighing potential budget cuts. Follow- up activities included periodic phone calls to Council members to update them on the downsizing process and to answer any ques- tions. This kept members informed in case they had to respond to questions from employ- ees, union leaders, or the press. The city also brought in a panel of experts to give projec- tions on the regional economy, thus providing information about what the fiscal future might hold for Menlo Park. All of these activities made the difficult decision-making process and the adoption of the city budget easier.

As a result of these downsizing initiatives, Menlo Park was able to bring its operations and spending in line with tough fiscal realities. It did this in a way that mitigated damage to community services and to workplace morale. The city was better able to prioritize community services and to allocate funds accordingly. Because the down- sizing process had wide involvement from the union, City Council, the community, and employ- ees, the city gained the necessary guidance and commitment from these stakeholders to make tough decisions and to continue to deliver on core community priorities. In the end, Menlo Park was able to reduce the size of its workforce with- out having to make any layoffs. It was able to trim its operating budget without having to reduce essential community services.

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the day that the restructuring was announced but then began to decline steadily. Two years after the layoff announcements, 10 of the 16 stocks were trading below the market by 17–48%, and 12 of the 16 were below comparable firms in their industries by 5–45%.

These research findings paint a rather bleak picture of the success of downsizing. The results must be interpreted cautiously, however, for three reasons. First, many of the survey-oriented studies received responses from human resources specialists who might have been naturally inclined to view downsizing in a negative light. Second, the studies of financial performance may have included a biased sample of firms. If the companies selected for analysis had been poorly managed, then downsizing alone would have been unlikely to improve financial performance. There is some empirical support for this view because low-performing firms are more likely to engage in downsizing than are high- performing firms.37 Third, disappointing results may be a function of the way downsiz- ing was implemented. A number of organizations, such as Florida Power and Light, General Electric, Motorola, Texas Instruments, Boeing, and Hewlett-Packard, have posted solid financial returns following downsizing.38 A study of 30 downsized firms in the automobile industry showed that those companies that implemented effectively the process described above scored significantly higher on several performance measures than did firms that had no downsizing strategy or that implemented the steps poorly.39

Several studies have suggested that when downsizing programs adopt appropriate OD interventions or apply strategies similar to the process outlined above, they generate more positive individual and organizational results.40 Thus, the success of downsizing efforts may depend as much on how effectively the intervention is applied as on the size of the layoffs or the amount of delayering.

12-3 Reengineering The final restructuring intervention is reengineering—the fundamental rethinking and rad- ical redesign of business processes to achieve dramatic improvements in performance.41

Reengineering transforms how organizations traditionally produce and deliver goods and services. Beginning with the Industrial Revolution, organizations have increasingly frag- mented work into specialized units, each focusing on a limited part of the overall produc- tion process. Although this division of labor has enabled organizations to mass-produce standardized products and services efficiently, it can be overly complicated, difficult to manage, and slow to respond to the rapid and unpredictable changes experienced by many organizations today. Reengineering addresses these problems by breaking down spe- cialized work units into more integrated, cross-functional work processes. This streamlines work processes and makes them more efficient with faster cycle times and better informa- tion handling capabilities. Consequently, work processes are more responsive to changes in competitive conditions, customer demands, product life cycles, and technologies.42 Reengi- neering has been applied to work processes in manufacturing and service industries, in business firms, not-for-profits, and government agencies; and in diverse global settings, such as Australia, India, Ireland, Turkey, and South Africa.

As might be expected, successful reengineering requires an almost revolutionary change in how organizations design their work structures. It identifies and questions the often-unexamined assumptions underlying how organizations perform work and why do they do it in a particular way. This effort typically results in major changes in thinking and work methods—a shift from specialized jobs, tasks, and structures to integrated pro- cesses that deliver value to customers. Such revolutionary change differs considerably from incremental approaches to performance improvement, such as continuous

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improvement and total quality management (Chapter 13), which emphasize small, yet constant, changes in existing work processes. Because reengineering radically alters the status quo, it seeks to produce dramatic increases in organization performance.

Reengineering seeks to leverage the latest developments in information technology to enable significant change in large-scale business processes, such as supply-chain logis- tics.43 It can help organizations break out of traditional ways of thinking about work and embrace entirely new ways of producing and delivering products. For example, the most popular software systems, SAP and PeopleSoft, standardize information flows and help to integrate data on a range of tasks and to link work processes together. On the other hand, many existing information systems do not provide the data needed to operate inte- grated business processes.44 Such legacy systems can make reengineering difficult if not impossible to implement because they do not allow interdependent departments to inter- face with each other; they often require new information to be entered manually into separate computer systems before people in different work areas can access it.

Reengineering has been associated with downsizing. Reengineering can result in pro- duction and delivery processes that require fewer people and fewer layers of manage- ment. Conversely, downsizing may require subsequent reengineering interventions. When downsizing occurs without fundamental changes in how work is performed, the same tasks simply are being performed with a smaller number of people. Thus, expected cost savings may not be realized because lower salaries and fewer benefits are offset by lower productivity.

Reengineering also can be linked to transformation of organization structures and work design. Its focus on work processes helps to break down the vertical orientation of functional and divisional organization structures. Reengineering identifies and assesses core business processes and redesigns work to account for key task interdependencies running through them. That typically results in new jobs or teams that emphasize mul- tifunctional tasks, results-oriented feedback, and employee empowerment— characteristics associated with motivational and sociotechnical approaches to work design (Chapter 14). Regrettably, reengineering initially failed to apply these approaches’ attention to individual differences in people’s reactions to work to its own work-design prescriptions. It advocated enriched work and teams, without consideration for the wealth of research that shows that not all people are motivated to perform such work.45

12-3a Application Stages Early reengineering interventions emphasized identifying which business processes to reengineer and technically assessing the workflow. Efforts that are more recent have extended reengineering practice to address issues of managing change, such as how to deal with resistance to change and how to manage the transition to new work processes.46 The following application steps are included in most reengineering efforts, although the order may change slightly from one situation to another:47

1. Prepare the organization. Reengineering begins with clarification and assessment of the organization’s competitive environment, strategy, and objectives. This effort establishes and communicates the need for reengineering and the strategic direction that the process should follow. For example, preparing for reengineering at the U.S. Veterans Administration (VA) health care system was made easier because everyone agreed the health care delivery process was broken. Veterans’ groups were outspo- ken in their complaints of quality care, the system was publicly ridiculed in the movie The Fourth of July with Tom Cruise, and many patients were figuratively

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“falling through the cracks.” The old way of doing business, reinforced by years of government protection and a long period of peace, seriously saddled the organiza- tion with high costs, old systems, and siloed processes.48 The VA’s leadership, led by Kenneth Kizer, recognized that the keys to the health care system’s success were low costs and customer satisfaction. Consequently, they set dramatic goals of increasing patient visits while holding annual cost per patient steady. Defining these objectives gave the reengineering effort a clear focus.

A final task in preparing the organization is to communicate clearly—through words and deeds—why reengineering is necessary and the direction it will take. The VA’s preparation included not only traditional communications through speeches, newsletters, and meetings, but visible commitments such as reorganizing the pharmacy organization and making substantial technology commitments to an electronic medical record system. Thus, senior executives were careful to communi- cate, both verbally and behaviorally, that they were fully committed to the change effort. Demonstration of such unwavering support seems necessary if organization members are to challenge their traditional thinking about how business should be conducted.

2. Fundamentally rethink the way work gets done. This step lies at the heart of reen- gineering and involves these activities: identifying and analyzing core business pro- cesses, defining their key performance objectives, and designing new processes. These tasks are the real work of reengineering and typically are performed by a cross-functional design team that is given considerable time and resources to accom- plish them.49

a. Identify and analyze core business processes. Core processes are considered essential for strategic success. They include activities that transform inputs into valued outputs. Core processes typically are assessed through development of a process map that identifies the three to five activities required to deliver an organization’s products or services. For a health care system, the core processes include the intake of patients through the primary care physician, inpatient and outpatient services, and medical records and billing.

Analysis of core business processes can include assigning costs to each of the major phases of the workflow to help identify costs that may be hidden in the activities of the production process. Traditional cost-accounting systems do not store data in process terms; they identify costs according to categories of expense, such as salaries, fixed costs, and supplies.50 This method of cost accounting can be misleading and can result in erroneous conclusions about how best to reduce costs. For example, most traditional accounting systems suggest that salaries and fringe benefits account for the largest percentage of total costs—an assessment that supports workforce downsizing as the most effective way to lower costs. An activity-based accounting system often reveals a different picture—that rework, errors, and delays during the workflow are major sources of unnecessary cost.

Business processes also can be assessed in terms of value-added activities— the amount of value contributed to a product or service by a particular step in the process. For example, early in the VA’s process, senior managers learned that only 10% of the patients covered by the VA had a primary care physician. By assigning a primary care physician to each veteran patient, the total cost of care was greatly reduced. Patients saw one physician who could address many issues rather than making multiple visits to a variety of specialists. Conversely, organizations often engage in a variety of process activities that have little or no added value.

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b. Define performance objectives. Challenging performance goals are set in this step. The highest possible level of performance for any particular process is iden- tified, and dramatic goals are set for speed, quality, cost, or other measures of per- formance. These standards can derive from customer requirements or from benchmarks of the best practices of industry leaders. For example, at Andersen Windows, the demand for unique window shapes pushed the number of different products from 28,000 to more than 86,000.51 The pressure on the shop floor for a “batch of one” resulted in 20% of all shipments containing at least one order dis- crepancy. As part of its reengineering effort, Andersen set targets for ease of ordering, manufacturing, and delivery. Each retailer and distributor was sold an interactive, computerized version of Andersen’s catalog that allowed customers to design their own windows. The resulting design is then given a unique “license plate number” and the specifications are sent directly to the factory. Four years later, new sales had tripled at some retail locations, the number of products had increased to 188,000, and fewer than 1 in 200 shipments had a discrepancy.

c. Design new processes. This task involves designing new business processes to achieve breakthrough goals. It often starts with a clean sheet of paper and addresses the question “If we were starting this company today, what is the most effective and efficient way to deliver this product or service?” Each essen- tial process is then designed according to the following guidelines:52

• Begin and end the process with the needs and wants of the customer. • Simplify the current process by combining and eliminating steps. • Use the “best of what is” in the current process. • Attend to both technical and social aspects of the process. • Do not be constrained by past practice. • Identify the critical information required at each step in the process. • Perform activities in their most natural order. • Assume the work gets done right the first time. • Listen to people who do the work.

An important activity that appears in many successful reengineering efforts is implementing “early wins” or “quick hits.” Analysis of existing processes often reveals obvious redundancies and inefficiencies for which appropriate changes may be authorized immediately. These early successes can help gener- ate and sustain momentum in the reengineering effort.

3. Restructure the organization around the new business processes. This last step in reengineering involves changing the organization’s structure to support the new business processes. This endeavor typically results in the kinds of process-based structures that were described earlier in this chapter. Reengineered organizations typically have the following characteristics:53

• Work units change from functional departments to process teams. • Jobs change from simple tasks to multidimensional work. • People’s roles change from controlled to empowered. • The focus of performance measures and compensation shifts from activities to

results. • Organization structures change from hierarchical to flat. • Managers change from supervisors to coaches; executives change from score-

keepers to leaders.

The VA’s experience reflects many of these features. As suggested earlier, the key to a reengineered organization is often its commitment to and development of an

CHAPTER 12 RESTRUCTURING ORGANIZATIONS 367

integrated information system. During the VA’s reengineering, it was an electronic med- ical record system that integrated nearly every step in the patient care process. The fol- lowing examples support how the information system radically transformed the way patient care was delivered:

• A physician gets a computerized reminder that one of his patients in the hospital, a 44-year-old diabetic, is due to have an eye exam. Through the system, the doctor asks the floor nurse to send the patient to the eye clinic on the second floor, where an ophthalmologist administers the test. An alert soon flashes on the doctor’s moni- tor saying the exam has been completed.

• A nurse on a different floor uses the same computer network to make sure she’s giving the right medication to a 60-year-old patient with high blood pressure. With a handheld device, she scans a bar-coded bracelet on her patient’s wrist and then a bar code on the drug bottle. A nearby computer linked to the hospital pharmacy confirms that she’s giving the right drug to the right patient.

• In the Tele-Health unit, a nurse reads the vital statistics of a 57-year-old patient that were sent to her computer via an electronic system that the VA has rigged at the patient’s home. Today the news is worrisome: The patient, who is suffering from heart disease, has gained three pounds overnight, indicating that he’s retaining fluids. After a few quick phone calls to the patient and his doctor, the nurse tells him to double his diuretic medication today. “We caught him before his condition got worse,” she says with satisfaction.

Application 12.4 describes the reengineering efforts at Honeywell’s Industrial Auto- mation and Control business. It highlights the importance of mapping current processes and aligning the rest of the organization to support the change, especially information technology.54

12-3b Results from Reengineering The results from reengineering vary widely. Industry journals and the business press reg- ularly contain accounts of dramatic business outcomes attributable to reengineering. On the other hand, the best-selling book on reengineering reported that as many as 70% of the efforts failed to meet their cost, cycle time, or productivity objectives.55 One study polled 497 companies in the United States and 1,245 companies in Europe, and found that 60% of U.S. firms and 75% of European firms had engaged in at least one reengi- neering project. Eighty-five percent of the firms reported little or no gain from the efforts.56 Despite its popularity, reengineering is only beginning to be evaluated system- atically, and there is little research to help unravel the disparate results.57

One evaluation of business process reengineering examined more than one hundred companies’ efforts.58 In-depth analyses of 20 reengineering projects found that 11 cases had total business-unit cost reductions of less than 5%, whereas six cases had total cost reductions averaging 18%. The primary difference was the scope of the business process selected. Reengineering broad value-added processes significantly affected total business- unit costs; reengineering narrow business processes did not.

Similarly, performance improvements in particular processes were associated strongly with changes in six key levers of behavior, including structure, skills, informa- tion systems, roles, incentives, and shared values. Efforts that addressed all six levers pro- duced average cost reductions in specific processes by 35%; efforts that affected only one or two change levers reduced costs by 19%. Finally, the percentage reduction in total unit costs was associated with committed leadership. Similarly, a survey of 23 “successful”

368 PART 4 TECHNOSTRUCTURAL INTERVENTIONS

a p

p li

ca ti

o n

1 2

4 HONEYWELL IAC’S TOTALPLANT™ REENGINEERINGPROCESS

H oneywell (www.honeywell.com) is a diver- sified technology and manufacturing orga- nization that serves customers worldwide with aerospace products and services;

control technologies for buildings, homes, and industry; automotive products; and specialty materials. Its industrial automation and control (IAC) business unit in Phoenix, Arizona, is responsible for the design, manufacture, and configuration of world-class process control equipment marketed as the TDC 3000X family of systems. IAC’s customer base includes refineries, chemical plants, and paper mills around the world.

In response to declining performance results, IAC management set out to implement an ISO 9000 certified quality program named TotalPlant™ as part of an effort to optimize global customer satisfaction. The objectives of this initiative were reducing defects, minimizing production cycles, and optimizing resource management. The TotalPlant™ initiative was a business process reengineering intervention based upon four principles: process mapping, fail-safing, teamwork, and communication. Cross-functional multiskilled teams were cre- ated and given responsibility for an entire mod- ule or product line. Each team member was then trained in each of the principles and empowered to enact them to create improve- ments within their work groups.

Process mapping is a methodology that converts any business activity into a graphical form. It creates a common visual language that can be used to enhance an employees’ ability to see beyond the boundaries of their work process. It is also the basis of radical change in business processes. As part of the Total- Plant™ initiative, process mapping consisted of eight major stages.

• The first three stages were to select the process to be reviewed, identify all custo- mers, and set the boundaries of the pro- cess. Through consensus decision making, these simple steps kept the participants

focused on the process being mapped. In addition, the team reviewed its composition to ensure that all appropriate functions were represented.

• Fourth, the team developed an “as is” map. This required members to outline and docu- ment the existing process. By creating a visual map the team was able to identify the flow of both the product and the informa- tion related to the process. Cross-functional decision points and dependencies became visually apparent through the process. Fifth, the “as is” map was used by the team to calculate cycle times, the elapsed times between the start of a process and the con- clusion of a process, as well as the distance the product travels during that cycle. Both the mean and the range were calculated for each process cycle time.

• Sixth, the team identified areas of improve- ment that did not require additional costs or resources. Non-value-added steps, extended approval processes, and processes with highly variant cycle times were analyzed and either streamlined or completely elimi- nated. Following this step, the seventh stage was to develop a “should be” map that described the improved process.

• Finally, the eighth step directed the team to develop a process implementation plan, establish confirmation from a steering committee, and then implement it. New goals were established and results tracked for each of the process steps.

The second major component of the Total- Plant™ process was the fail-safing process. Fail- safing is a five-step process intended to create a product that is defect free by identifying and analyzing defects, and understanding their root causes. A root cause has three characteristics: (1) it is defined as being the cause of the defect; (2) it is possible to change the cause; and (3) if eliminated, the defect will be removed or at least significantly reduced. Once the root cause is identified, a set of alternative solutions

CHAPTER 12 RESTRUCTURING ORGANIZATIONS 369

is developed to eliminate the defect in future products. Each alternative is evaluated for ease of implementation, cost, and time to implement.

Once a solution is agreed upon, the team imple- ments the PDCA (Plan, Do, Check, Act) process to move the solution forward. Planning includes devel- oping a full implementation plan, which includes areas impacted, timing, resource requirements, and costs. This becomes a living document outlining the action items needed to implement the change. “Doing” consists of executing against the imple- mentation plan. Once the new process has been implemented, the results are “checked” to ensure that they are in line with the desired results. Finally, the team must “act” to determine the next steps for continuous improvement.

Teamwork was the critical third piece of the TotalPlant™ process. Honeywell realized that the transition to a team environment needed to happen gradually. Through the process mapping and fail- safing process, they gave people real problems to address and systematic tools with which to solve them. With the addition of education and training around teams, these “hard-skill” activities became the fertile soil for team development. As team members were asked to own the whole process, an environment that fosters teamwork was created. Creativity, innovation, and risk taking were rewarded and the values of the organization moved to trust, respect, and empowerment. Managers were trained to support the teams, not to run them, in order to further enrich the team environment.

The final and foundational element of the TotalPlant™ process was communication. Top man- agement’s successful communication of the Total- Plant™ paradigm shift was pivotal to the initiative’s success. Through their everyday actions, top man- agers lived the values of open communication throughout the organization. In addition, teams were given training in conflict resolution, problem solving, and listening skills to enhance the overall effective- ness of communication within the teams. The crea- tion of a positive, open environment became critical to the success of the change initiative. Top manage- ment understood that the environment needed to shift to consistently support teamwork, creativity, and “new thinking.” The major challenges within the process took the form of middle-management resis- tance. The new team concepts made managers, who

had been functional or process experts, move outside their comfort zone by requiring them to look at pro- cesses across functions and to broaden their view of success. Top management was required to move from command and control to a more facilitative and empowering approach to support this type of behavior change.

In addition to the four major components of the TotalPlant™ process, Honeywell made significant changes in the technology strategy to support the business strategy. The information systems group was converted into an information technology shop where all technology was developed in direct support of the ICA business unit and its operations. All systems were fully integrated to optimize the timeliness and accuracy of information.

After three years, performance results indi- cated a reduction in defects of 70%, customer rejects declined by 57%, and there was a 46% reduction in inventory investments. Honeywell’s execution against its vision is what set this busi- ness process reengineering apart from others. Top managers did not just speak the vision, they lived and supported it through active participation in the entire change process. Another critical com- ponent was that the organizational structure was redesigned to align with the new processes and strategies. Top management at Honeywell under- stood that change of this magnitude takes time and therefore was able to set the organization’s expectations accordingly. Additionally, it commit- ted appropriate levels of training and financial resources to make the initiative a success.

The Honeywell case provides some excellent learning for making a reengineering initiative suc- cessful. First, people are the key enablers of change. They must be trained, developed, and rewarded to support the change process. Second, people must be able to question all of their assumptions. Nothing can be sacred as each process is deconstructed and then rebuilt. Third, process mapping provides people with a systematic process for analyzing and improv- ing existing systems and processes. Next, manage- ment must be able to create dissatisfaction with the existing process and allow the teams to own the solution. An environment conducive to change must be created and supported by management’s attitudes and behaviors. This includes active partici- pation at all stages of the process.

370 PART 4 TECHNOSTRUCTURAL INTERVENTIONS

reengineering cases found that they were characterized by a clear vision of the future, specific goals for change, use of information technology, top management’s involvement and commitment, clear milestones and measurements, and the training of participants in process analysis and teamwork.59

SUMMARY

This chapter presented interventions aimed at restruc- turing organizations. Several basic structures, such as the functional, divisional, and matrix structures, domi- nate most organizations. Three newer forms, process- based, customer-centric, and network-based structures, were also described. Each of these structures has corre- sponding strengths and weaknesses, and supportive conditions must be assessed when determining which structure is an appropriate fit with the organization’s environment, strategy, technology, and size.

Two restructuring interventions were described: downsizing and reengineering. Downsizing decreases the size of the organization through workforce reduction or organizational redesign. It generally is associated with

layoffs where a certain number or class of organization member are no longer employed by the organization. Downsizing can contribute to organization development by focusing on the organization’s strategy, using a vari- ety of downsizing tactics, addressing the needs of all organization members, and following through with growth plans. Reengineering involves the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance. It seeks to transform how organizations traditionally produce and deliver goods and services. A typical reengineering project prepares the organization, rethinks the way work gets done, and restructures the organization around the newly designed core processes.

NOTES

1. P. Lawrence and J. Lorsch, Organization and Environment: Managing Differentiation and Integration (Cambridge, MA: Harvard Graduate School of Business, Administration Division of Research, 1967); J. R. Galbraith, Designing Orga- nizations (San Francisco: Jossey-Bass, 2002); J. R. Galbraith,

“Organization Design,” in Handbook of Organization Devel- opment, ed. T. Cummings (Los Angeles, CA: Sage Publications, 2008), 325–52.

2. L. Gulick and L. Urwick, eds., Papers on the Science of Admin- istration (New York: Institute of Public Administration,

However, while support and participation from the top is important, implementation should take place by empowering decision makers at the level where the work is being done. Honeywell also demonstrated that re- engineering must be a business-driven and continuous process. Initiatives like fail-safing demonstrated the need to challenge the status

quo continuously. Stretch goals must be set throughout the process to keep employees motivated. Finally, the most critical component of a successful reengineering initiative is the ability to actively implement and execute against the plan. By keeping its eye on the end goal, Honeywell was able to successfully optimize its customer satisfaction through this process.

CHAPTER 12 RESTRUCTURING ORGANIZATIONS 371

Columbia University, 1937); M. Weber, The Theory of Social and Economic Organization, ed. A. Henderson and T. Parsons (Glencoe, IL: Free Press, 1947).

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372 PART 4 TECHNOSTRUCTURAL INTERVENTIONS

23. J. Laabs, “Has Downsizing Missed Its Mark?” Workforce (April 1999): 30–37.

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28. K. Cameron, S. Freeman, and A. Mishra, “Best Practices in White-Collar Downsizing: Managing Contradictions,” Academy of Management Executive 5 (1991): 57–73; K. Cameron, “Strategies for Successful Organizational Downsizing,” Human Resource Management 33 (1994): 189–212; R. Marshall and L. Lyles, “Planning for a Restructured, Revitalized Organization,” Sloan Manage- ment Review 35 (1994): 81–91; N. Polend, “Downsizing and Organization Development: An Opportunity Missed, but Not Lost” (unpublished senior project, The Union Institute, 1999); A. Mishra, K. Mishra, and G. Spreitzer, “Downsizing the Company without Downsizing Morale,” MIT Sloan Management Review 50 (2009): 39–44.

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42. R. Kaplan and L. Murdock, “Core Process Redesign,” McKinsey Quarterly 2 (1991): 27–43.

43. M. Attaran, “Exploring the Relationship between Infor- mation Technology and Business Process Reengineering,”

CHAPTER 12 RESTRUCTURING ORGANIZATIONS 373

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46. M. Miller, “Customer Service Drives Reengineering Effort,” Personnel Journal 73 (1994): 87–93.

47. Kaplan and Murdock, “Core Process Redesign”; R. Manganelli and M. Klein, The Reengineering Hand- book (New York: AMACOM, 1994); H. Reijers and S. Mansar, “Best Practices in Business Process Redesign: An Overview and Qualitative Evaluation of Successful Redesign Heuristics,” Omega: The International Journal of Management Science 33 (2005): 283–306; N. Eftekhari and P. Akhavan, “Developing a Comprehensive Method- ology for BPR Projects by Employing IT Tools,” Business Process Management Journal 19 (2013): 4–29.

48. D. Stires, “Technology Has Transformed the VA,” Fortune, May 15, 2006, accessed from http://www.fortune .com on August 28, 2007.

49. J. Katzenbach and D. Smith, “The Rules for Managing Cross-Functional Reengineering Teams,” Planning Review (March–April 1993): 12–13; A. Nahavandi and E. Aranda, “Restructuring Teams for the Re-Engineered Organization,” Academy of Management Executive 8 (1994): 58–68.

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51. J. Martin, “Are You as Good as You Think You Are?” Fortune, September 30, 1996, 142–52.

52. Hammer and Champy, Reengineering the Corporation. 53. Ibid. 54. This application was written and submitted by Ann

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374 PART 4 TECHNOSTRUCTURAL INTERVENTIONS