8 step approach

The book reference is:

Weiss, J. W. (2012). Organizational Change. San Diego: Bridgepoint Education, Inc.

The citation is (Weiss, 2012)

Kotter's Eight-Step Approach

One of the most widely used planning methods is Kotter's (1996, 1998) eight-stage change process as shown in Figure 2.8. This approach is used as a planning diagnostic and as an implementation method.

Figure 2.8: Kotter's Change Process

Source: National Resource Center (2006), Eight Steps to Transform Your Organization. National Resource Center E-Newsletter, Vest of the Best. Retreived from http://www.ccbest.org/management/eightstepstotransform.htm

Establish a Sense of Urgency

Kotter argued that large change plans generally fail if there is not a sense of urgency created and realized first. The sense of urgency refers to the "pressing importance" of action needed to address critical issues...now (Kotter, 2008). "Critically important means challenges that are central to success or survival, winning or losing" (Kotter, 2008, p. 7). This goes against common knowledge of assuming that planning processes start with either a vision or goal. Not so in Kotter's model. Without an initial sense of urgency, people will not be motivated, according to Kotter. Creating a sense of urgency involves examining markets and competitive realities and identifying and discussing crises, potential crises, or major opportunities.

In the case of the telecommunications company WorldCom, a sense of urgency was created by a crisis the firm faced—one of the most notorious corporate scandals and largest bankruptcies in American history at the turn of this century. Bernard Ebbers, the founder and CEO of WorldCom (which later bought MCI in 1998), borrowed $400 million to pay for an extravagant lifestyle while he and a few officers ran the company into debt while lying to its board of directors and shareholders about the company's declining earnings. The scheme resulted in the fraudulent reporting of more than $11 billion the company did not have. Ebbers was indicted and sentenced to 25 years in prison. MCI WorldCom, as it was called then, filed for bankruptcy and was acquired by Verizon (What is WorldCom, 2010).

The relevance of this story is WorldCom's road to recovery under the former president of Hewlett-Packard and Chairman and CEO of Compaq Computer, Michael Capellas, who was named the new CEO and Chairman in 2002 (Pandey & Pramod, 2006). With a "100 Day Plan" he drafted to move the company from bankruptcy, he set a tone of urgency by accepting the resignation of the majority of WorldCom board members, and he followed with a press release of his key initiatives for the next 100 days. He emphasized the company's commitment to corporate integrity with employees and the public, then rallied employees with motivational signs posted on MCI facilities in different countries that stated, "Act with an outrageous sense of urgency" and "We have a need for speed" (Hulbert, n.d.). He posted a countdown clock on the company's internal website using the 100 Day Plan's key goals to energize everyone. He also called for the filing of a reorganization plan to be completed. Using strategies that resembled and paralleled Kotter's approach, Capellas and his team formed a plan that worked as shown here.

Form a Powerful Guiding Coalition

According to Kotter, the second stage of planning change is to form a powerful guiding coalition by assembling a group with enough power to lead the change effort and encourage the group to work as a team. The team can consist of top-level officers and/or involve other key influential people in the organization. Capellas accomplished this with a number of officers whom he enlisted in his 100 Day Plan.

Create a Vision

This coalition, according to Kotter, then creates a vision to help direct the change effort. Not only is a vision articulated but strategies for achieving that vision are also laid out. Capellas' vision was to convince employees that the company had a future and that the workforce could determine the company's destiny—despite all the external forces crushing it at the time (Hulbert, n.d.). Also, beyond the short-term focus of escaping from bankruptcy, "Capellas anchored his 100 Day Plan in a longer-term picture of what MCI would become: a company that would usher in major IT advances through its Internet Protocol (IP) network, focusing greater attention on business customers and less on consumer markets" (Hulbert, n.d.).

Communicate the Vision

Kotter also stated that the coalition must take charge to communicate the vision that involves using every vehicle possible to ensure that employees understand the new vision and strategies. Communication also involves teaching new behaviors that the guiding coalition models and exemplifies in their own behaviors. Capellas supported and assisted employees in comprehending the hurdles that confronted the telecom industry. He let them know that they were all in this business for the long term. In addition to communicating with individual employees about the vision, Capellas met with most of the company's major business customers, conducted an all-employee broadcast/webcast, and led town-hall meetings in six of MCI's major facilities after being in the position for 30 days (Hulbert, n.d.). Capellas used a communications team to help out, but he set the tone and the message for change.

Empower Others to Act on the Vision

Kotter noted that it was important to get rid of obstacles to change by changing systems or structures that seriously undermine the vision and to thereby encourage risk-taking and nontraditional ideas, activities, and actions by personnel. Capellas used the communication strategy to involve and get top-level officers of the company, along with employees, motivated and informed to implement the vision—activities that former CEO Ebbers would never have dreamed of. For example, Capellas mounted the following information sharing campaign: He had 8 conference calls to all MCI employees at the level of director and above; 7 worldwide all-employee broadcast/webcasts that he conducted with his management team; he led 25 all-employee "town hall meetings," at the MCI headquarters building; and called 6 quarterly face-to-face, two-day meetings with MCI's top 80 executives to review MCI's business and progress toward emergence from Chapter 11 bankruptcy (Hulbert, n.d.). Knowledge is often power, and so by Capella disseminating the vision and strategy of the company to all employees, he was summoning the power of each individual to contribute in their own unique ways.

Empowering employees is a vital part of any change process.

Plan for and Create Short-Term Wins

Next, Kotter argues that it is necessary to plan for and create short-term wins which involves the need to create visible performance improvements. Once these improvements are created, it is important to recognize and reward employees involved in the improvements. Capellas filed the company's reorganization plan and secured support for it from 90% of MCI's creditors. He recruited and installed a new management team; developed a new business code of conduct with a "zero tolerance" policy for ethics violations; expanded the company's flagship consumer product, The Neighborhood, to all of the contiguous 48 states, retaining the company's top 300 business customers; and developed the company's three-year business plan (Hulbert, n.d.).

Capellas then intentionally met four key milestones in his plan that showed stakeholders his turnaround vision was working: Capellas produced his cost-reduction plan to the public as his first milestone on February 3, 2003; for his second milestone he announced his financial assessment of the company showing the strength of the firm on March 13, 2003; for his third milestone on March 17, 2003, he announced his achievement of two MCI flagship products that were available in 48 states; and then on March 26, 2003, Capellas declared profitability for the month of January (Pandey and Pramod, 2006).

Consolidate Improvements and Produce More Change

After planning and celebrating short-term wins, Kotter states that change leaders must then consolidate improvements and produce still more change. They can do this by using increased credibility to change systems, structures, and policies that don't fit together or with the new vision. They can also hire, promote, and develop employees who can implement the vision and reinvigorate the process. MCI, under Capellas' leadership, designed and rolled out a worldwide employee ethics training program. In addition, the company's financial controls and in-house finance team were rebuilt; 1,500 finance professionals (inside and outside MCI) reconstructed 10 years of financial history in order to provide three years of audited financial data to the SEC; a new CFO, General Counsel, and Chief Ethics Officer were added to the nine-person management team along with seven new board of directors members; corporate governance reforms were implemented along with one of the largest corporate ethics programs ever designed to train 50,000 employees worldwide; and the company's business was restructured around four customer-facing groups that included a new P&L (profit and loss statement for the entire company) break-out system for the entire organization (Hulbert, n.d.).

The successor to Steve Jobs at Apple, Tim Cook, has a difficult task in trying to compete with the legacy of Jobs as well as continue to evolve Apple to stay strong and competitive moving forward.

Institutionalize New Approaches in the Culture

Finally it is important to anchor and institutionalize new approaches in the culture. This is accomplished by increasing performance through customer and productivity-related behaviors. Also by articulating and reinforcing the connections between the new behaviors and organizational success, change leaders and managers embed the changes in the new culture. On April 14, 2003, WorldCom announced the completion of its 100 Days Plan and a change of its name from WorldCom back to MCI (Pandey and Pramod, 2006, p. 146).

Finally, as Figure 2.8 shows, Kotter argues that by developing the means to ensure leadership development and succession, the current leaders help sustain critical changes. Capellas left as CEO when Verizon merged with MCI in 2006. Leadership succession planning is not easy. Capellas was hired to move WorldCom out of bankruptcy and to save the company. He succeeded. When Verizon stepped in, it was a completely new chapter for MCI.

So, according to Kotter, the need to "anchor and institutionalize" effective changes in an organization through succession planning (i.e., setting in place the next CEO and other leaders) is a worthy goal. When a strong leader leads an organization through an effective transformational change but fails to select, groom, and ready a successor to take his or her place, those changes the organization makes may not be sustained. However, finding a strong successor is easier said than done in practice, especially for those leaders who must follow superstars like Steve Jobs and Jack Welch. For example, Welch passed GE's leadership to Jeff Immelt who over the past two decades has more critics than admirers. With one of the worst U.S. economies in history, Immelt has not been able to keep up with the performance levels that Welch accomplished—the company's stock has fallen by half the amount that was obtained during Welch's tenure (CNNMoney.com, 2011). Tim Cook, Steve Jobs' successor, will also likely experience difficult times in creating and sustaining the innovations Jobs created. Anchoring and institutionalizing effective transformational changes in organizations is, then, a difficult task.

Appreciative Inquiry Model

A very different and interesting approach to change from the Kotter model is the Appreciative Inquiry (AI) process. Unlike traditional problem-solving approaches, AI engages people across the organization in creating positive change that focuses on learning from success (Cooperrider Whitney, & Stavros, 2003).

Appreciative Inquiry is the cooperative search for the best in people, their organizations, and the world around them. It involves systematic discovery of what gives a system 'life' when it is most effective and capable in economic, ecological, and human terms. AI involves the art and practice of asking questions that strengthen a system's capacity to heighten positive potential. (Cooperrider & Whitney, 1999, p. 5)

AI is a popularly used method in all types of organizations—profit, not-for-profit, governments, educational institutions, hospitals, and large private and publicly traded corporations internationally. We discuss the methods first before turning to a review of the approach in theory and practice.

AI starts by asking, "What is possible? What do we wish to achieve?" The approach applies at any level: individual, group, department, division, or for the entire organization. At the organizational level, AI starts by involving a large group of individuals that includes leaders, employees, members external to the organization (e.g., customers, partners, suppliers), and then moves across groups with designated individuals in each group recording main insights to be combined and analyzed. Figure 2.9 depicts the overall model. We explain the process from each of the four phases, or the four "Ds": discovery, dream, design, and delivery.

Figure 2.9: Appreciative Inquiry 4-D Model

Source: Based on Cooperrider, D. & Whitney, D. (1999). Appreciative Inquiry: Collaborating for Change. In Holman, P. & Devane, T. (Eds.). The change handbook: Group methods for shaping the future (p. 5). Williston, VT: Berrett-Koehler.

Discovery Phase

The discovery phase is purposed to mobilize a systemic inquiry into the positive change core (Cooperrider & Whitney, 1999). Each individual in each group (8–12 people) is interviewed and interviews others on the selected topic or question of positive inquiry that is grounded on "the best of what exists." Selecting the topic starts the adventure into the process and requires searching for positive statements of what is desired by the organization. The topic represents what the organization wants to discover and/or learn and what will evoke dialogue about a desired future, or what people want to see develop in their organization (Stevenson, n.d.).

Examples of topical questions with regard to attorney/employee satisfaction in law firms are: "What situations or circumstances created your loyalty to this firm? Describe a situation in which you felt that you received exceptional mentoring. How are you best mentored? Describe a situation in which you feel that you were best supported by the firm. Describe your most meaningful experience of pro bono work" (Clark, 2004). The results of the discussions and reflections are recorded and serve as a resource during the next phase.

Dream Phase

In the dream phase, participants envision the organization's greatest potential for positive influence and impact on the world, not only on their organization. Participants share dreams through stories, recollections, and reflections collected during the interviews. The intent during this phase is to energize the participants and their insights through a mutually shared learning process. Possibilities and new ideas emerge about the topic as participants are encouraged to dream big.

Design Phase

During the design phase, each individual and the group begins to craft an organization to enact positive change. The design phase bridges the best of "what is" the present state within the organization towards a speculative or intuitive "what might be" future state. "Provocative propositions" are created and shared about the organization and about the future, which is stated as if it was reality. This phase creates a platform and basis to develop the idealized state derived from the first two phases of the process. Actual organizational dimensions are discussed with concrete characterizations in terms of the leadership, culture, strategy, shared values, business practices, social responsibility, competencies, stakeholder relations, and desired results in financial, diversity, or other areas (Stevenson, n.d.).

Destiny Phase

Finally, the destiny phase involves an invitation to action inspired from the other phases of discovery, dream, and design. During this phase groups publicly declare intended actions and ask for support to consider next steps. Self-selected groups are organized to move the organization forward with implementation considerations.

The AI Approach in Theory and Practice

Kinni (2003), in the Harvard Management Update, summarized two successful cases that used AI. These cases are representative of the strengths of the approach. The Waterbury, Vermont-based Green Mountain Coffee Roasters (GMCR) is a $100 million specialty coffee company. Founded in 1981 by CEO Bob Stiller, GMCR had by 2000 tripled its sales force and doubled the plant size. It selected the use of the AI approach to ". . . capture the economies of its new scale. If it could not do so, the company might find itself sinking under its own significantly increased weight" (Kinni, 2003, p. 1).

Green Mountain Coffee used the AI approach with great success. The company continues to change and expand.

The company organized formal AI sessions that involved 200 people, or half its employees, to focus on raising productivity. The CEO believed that taking a positive approach would tend to lead to a positive effect. During the process, the company discussed its major business processes—procure-to-pay, order-to-cash, plan-to-produce, and market-to-sell productivity. The former CFO, Bob Britt, reported that "We identified the one best path in each process and asked, 'Why don't we do this with everything?'" (Kinni, 2003 , p. 1). By focusing on the positive—using the 4-D method shown in Figure 2.9—the CEO reported that the initiative resulted in changing purchase orders for all buying activities, which in turn reduced competitive bid costs and processing payables. Cash flow was increased by optimizing the order entry and delivery systems, which sped up the receipt of revenues.

The Santa Ana Star Casino in Bernalillo, New Mexico, provides another example. The general manager John Cwiklik used AI to financially turn the organization around. The establishment opened in 1993 and had the largest market share in the region until competition arrived. And even with a $60 million facility expansion, the casino was in fourth place (Kinni, 2003, p. 1). Problems appeared in the form of poor customer service and lack of employee attention and engagement with customers, few people smiled or talked. As Cwiklik stated, "There was also a feeling on the employees' part that management didn't care about them, didn't want to talk to them" (Kinni, 2003, p. 1).

The general manager engaged the entire 820-member staff in an AI consultation focused on delivering a superior service experience to customers. However, when the casino was pressured to lay off 250 employees in October 2002, many developed a mindset that the AI effort played an unexpected role. Cwiklik stated, "We had to do it to save the business but we wanted to do it in an appreciative way" (Kinni, 2003 , p. 1). In an effort to use best practices, the casino achieved it goals and gave a generous severance and outplacement package to permanent employees.

The general manager again turned to AI consultants in December 2002 and in January 2003, with the aim of repositioning the business as "The Hometown Casino" to bring in local customers. Cwiklik stated, "We did an AI in our table-games department and in our slots department. We asked employees how to become this new hometown casino, and we took their ideas and implemented them in our marketing and operations" (Kinni, 2003 , p. 1) . One result, Cwiklik noted, was a $10 million turnaround in operating profits in fiscal year 2003. He stated, "AI has been instrumental in making our numbers a lot better" (Kinni, 2003 , p. 1).

Effectiveness and Questions about the Approach

Case studies, anecdotal evidence, and testimony demonstrate that AI as a transformational change method has been successful at the individual, group, community, corporation, and national levels (Browne & Jain, 2002; Kelm, 2005; Cooperrider, Whitney, & Stavros, 2008). Still, some scholars argue for more empirical, longitudinal, and comparative studies to address such questions as: How long lasting are the effects of an AI consultancy? Does this method fit with a particular cultural or managerial orientation, that is, could the failure of an AI project be attributed to a particular consultative style, facilitator skills, or cultural context? Also, under what conditions would this method be considered an effective change process? (Bushe, 2010, 2011). These unanswered questions are fair and can be applied to any and all change methods. In the meantime, AI remains a respected and major change approach among the many that are available.